Global Present | Part II

In the year 2010, the global economy, while subject to business fluctuations and issues related to continued globalization and integration, has a growth momentum which is accelerating global scale per capital income convergence, and a rapid ascent in gross world product. An example of the possibilities of rapidly diffusing technology is the enormous growth in the use of cell phones, which now far outnumber land line phones, and are owned by almost two thirds of the global population. While extreme poverty still exists, the occurrence of fatality through starvation has become rare, replaced with the problems of obesity. Issues of quality begin to take precedence over issues of quantity.
The size of the global economy is a matter of estimation, involving guessing the total population, total gross domestic product by the total set of nations, and estimating global assets and liabilities. In the year 2010, a guess would be the global economy is producing about 75 trillion dollars of GWP (gross world product), a combination of global consumption of goods and services, government sector spending, and investment into private and public equipment, structures, and infrastructure. Global estimates are made by the World Bank and the IMF, using different methodologies. The United States economy is about 15 trillion 2010 dollars, about twenty percent or one fifth of the global economy.
The 200 or so nations (the number varies depending on how islands are classified), have a high variation in GDP (gross domestic product). The first figure shows a global map of nations by their total GDP, which shows a world with a growing membership of nations with trillion dollar economies.


In the western hemisphere, these include Canada, the United States, Mexico and Brazil. The larger European economies include Britain, France, Germany, Spain, Italy, and Russia. Trillion dollar Asian economies include India, China, Japan and South Korea. More nations will be added to this list of fourteen in the next five years.
The second figure shows GDP divided by population, or per capita income. This map defines $20,000 per person per year as an advanced economy, a level most people in most nations have not yet reached, although the United States has been above this level for about the last forty years.


The Chinese economy or GDP is now about half the size of the United States, and is catching up at a rate of about seven percent per year. As China has about four times the population of the United States, its per capita income is about one eighth of the USA; still a long way to go to achieve an advanced economy per capita income.
The global average per capita income is just over 10,000 dollars per person, which is similar to where the United States was in the 1940s. Or, it is possible that the years 2010 to 2020 will be akin to the 1950s in the United States, a period of time which saw large scale diffusion of housing, vehicles and other consumer goods.
Economic growth is highly variable across counties, as can be seen in the next four figures. From 2005 to 2006, most nations experienced moderate to fast growth rates.


Countries with slow or negative growth rates tended to have some type of internal conflict disrupting normal economic activity. This would include places like Nepal, Iraq and Chad, all of which suffered from armed insurgencies.
In 2006 to 2007, we see the early indications of a global economic slowdown with the slow growth of France and the United States. This expands rapidly across the globe, to Canada and Mexico, Japan and most of Europe, from 2007 to 2008. The last map shows that economic contraction from 2008 to 2009 expands to most nearly all the western hemisphere, all of Europe, and parts of Africa, Southeast Asia and Oceania.
While the global economic was defined as being in a recession during 2008, much of Africa, Southwest Asia, Southern Asia, East Asia, and Southeast Asia had countries which experienced strong economic growth. As a result of this, the last several years have witnessed a global economic convergence, or a narrowing of per capita income differences due to faster growth in developing counties than those defined as developed. While large differences in absolute income levels means that fundamental shifts of per capita income variation are decades away, the relative changes are robust.

The global economy has a balance sheet consisting of assets, liabilities and net wealth. About half of world’s nearly 300 trillion dollars of assets are contained in roughly two billion housing units, with the other half commercial buildings, institutional structures, public infrastructure and land. The financial half the equation is the wealth in savings and investments, and global aggregate liabilities, a 150 trillion dollar combination of government, corporate and personal debt. About ten percent of gross domestic product is used to pay interest on debt. The global economy works as long as new investment is used to increase the global asset stock (the capital stock where both depreciation is replaced and net capital stock is added).
Future growth is dependent on increases in both the quantity and quality of global assets, whose construction incurs debt financed by economic activity.