The Development of G-20 and G-8 Countries - Term Paper Example

Comparative Case Study of G-20 and G-8 Countries A good understanding of global economic imbalance is fundamental. It would provide the knowledge necessary to fight poverty, all in the name of promoting world peace. Countries can be categorized as third world, developing or G-20 or G-8 countries. Third world countries are characterized by low employment rates, wars, unforgiving levels of corruption, low investor confidence, high consumer levels, poor education and medication, gender inequality and overreliance on foreign aid. On the other hand, G-20 and G-20 Countries are self-reliant. Industrialization is the main source of revenue. They are manufacturing countries and the huge exports provide for the main avenue to acquisition of wealth, power, and high employment rates unlike developing ones which depend on small scale exports of farm produce and other little valued trade related products. However it is worth noting that relative poverty exists between G-20 and G-8 Countries. This relative poverty phenomenon can best be accounted for if we study different macroeconomic indicators. And these are: 1.1Table of Macroeconomic Indicators of the USA 2007 2008 2009 2010 2011 2012 GDP( billion USD) 1390.5 14412.8 14,242.1 14,745.1 15,176.1 15,775.7 GDP/CAPITA(US$) 43914 43384 41506 42391 42732 42883 GDP GROWTH (%) 6 4.9 2.6 4.4 4.4 5.0 GDP PPP(trillions of dollars) 13.21 14.09 14.58 15.03 15.29 13.60 INDUSTRIAL PRODUCER PRICES (2007=100, Seasonally adjusted) 100.0 96.5 85.4 90.1 93.7 97.0 INDUSTRIAL CONSUMER PRICES(1982-84=100, NSA) 207.342 215.383 214.537 218.803 224.94 231.41 TOTAL LABOR FORCE( *1000) 146,047 145,362 139,877 139,064 139,869 143,384 LABOR FORCE PARTICIPATION RATES (%) 66.0 66.0 66.4 64.7 64.1 63.8 INFLATION RATES 2.8 3.8 -0.4 1.6 3.2 2.15 EMPLOYMENT/POPULATION RATIO (%) 63.0 62.2 59.3 58.5 58.4 58.8 UNEMPLOYMENT RATE (%) 4.6 5.8 9.3 9.6 8.9 7.9 REAL GDP 13206.4 13161.9 12873.1 13181.2 13441 13616.2 NATIONAL INCOME( $bn) 12396.4 12609.1 12132.6 12811.4 13358.0 13784.7 By the end of third quarter, the consumer price index CPI for all urban consumers increased to 0.6 % ; it rose 0.4% before seasonal adjustment It had also heightened 0.4%. This CPI increased by from 2.0% compared to the earlier level. The Industrial consumer and producer prices indicate how much the production cost amounted to and how much the consumers had to pay for the produce. The employment rate represents the total number of people working whether on permanent or casual basis. It suggests that over 63% people in the population, men and women have had employment. We got job losers, job seekers who stay out of employment for weeks or months. Some get new jobs and some don’t. The National Income is a summation of all what the employees earned and it denotes the economic status of the USA workers in general. The employment per population represents the total number of employees as a percent of the total population. 1.2 Productivity Statistics. Preliminary third-quarter 2012 measures: percent change from previous quarter. Nonfarm Durable Nondurable Business Business Manufacturing Manufacturing Manufacturing Q to Q Y to Y Q to Q Y to Y Q to Q Y to Y Q to Q Y to Y Q to Q Y to Y ------------------------------------------------------------------------------------------------------ Productivity 1.9 1.5 1.5 1.4 -0.4 1.5 -0.7 3.9 -0.1 -0.8 Output 3.2 3.3 2.7 3.2 -0.6 4.1 -1.0 7.4 0.0 0.5 Hours 1.3 1.8 1.2 1.8 -0.2 2.6 -0.4 3.3 0.1 1.3 Hourly Compensation 1.8 2.6 1.9 2.6 1.2 0.6 0.2 0.1 2.9 1.5 Real hourly Compensation -0.4 0.9 -0.4 0.9 -1.1 -1.1 -2.0 -1.6 0.6 -0.2 Unit labor Costs -0.1 1.1 0.4 1.2 1.5 -0.8 0.9 -3.7 3.0 2.4 The output is huge in manufacturing of nondurables showing that the USA is an industrial country. The statistics show variations but it gives us a clear picture of the nature of productivity activities. This is a good indication of economic dynamics in the USA. 1.3 The Impact of Secession in the Economy Secession is a political crisis which involves a state or a group of states seeking separation and complete sovereignty from the federal or main government. The eleven of the Southern States which were fifteen in number believed that it was within their constitutional right to seek secession in 1806 and 1861. However they were defeated during the American Civil War. Over 600,000 people perished. The Supreme Court declared secession unconstitutional, though the Southern States had concrete reasons for secession. They hated slavery which was legalized in the South. This happened before Abraham Lincoln took office oath. The secession caused people to lose jobs and weakened the Union in terms of military strength, US Foreign Policy. International trade had a downfall too. It also motivated more states to petition secession moves. Currently the state of Texas has forwarded a petition to president Barrack Obama to legalize their its secession intent. History is really repeating itself 2.0Macroeconomic Indicators in China. China is the most populated country in the world .Besides; it is among the leading producing and consuming countries in the world, chiefly of agro-related goods. In the last 3 decades a huge economic transition took has been taking place. Its economy changed from a domestic rigid economy which tended to exclude international trade to a flexible international market economy. China is a huge contributor to the world economy on the ground that its private sector is expanding dynamically. However a major blow to the Chinese economy presents itself by the fact that the number of ultra poor people keeps increasing. Millions of people are jobless. Since China economy is exponentially growing, it is predictable and I believe a selective study of its economic indicators in 2010 is sufficient. 2.1 GDP. Representing the total value of all goods produced and services rendered in China, the GDP is $5878.26 bn. It is based on the current price. This is relatively smaller than the one registered by the USA in 2010, $14,745.1 bn. As early as this we are starting to locate the origin of relative poverty between China and USA. 2.2 GDP Deflator. Defined as the ratio between current price GDP and Constant price GDP is approximately 281.997. It is another method of calculating inflation rates. In the USA it was 111.48 as of 2010, it’s the biggest since 1970. Still this indicator suggests that the rate of inflation in China is greater than the USA. 2.3 GDP per Capita. This is the ratio of current price GDP to total population. $4382.14 is its value in China. The same indicator in the USA in 2010 was $42391. Look at the big difference. It is a reflection of the standard of living of the general population. 2.4 GDP (PPP) in 2010 was $10.11 trillion in China and $ 13.60 trillion. The GDP is based on Purchasing Power Parity with respect to the GDP of the country. To put more emphasis, this explains the relative poverty level between the two countries. 2.5 Rate of unemployment expressed as a percent of labor force was 4.1% in China during the 2010 financial. However the USA recorded a 9.6%. This indicator acts as a mirror to individual wealth and wellbeing. 2.6 The GDP Growth based on constant prices and Chinese currency was 10.3% in 2010 compared to 4.6% in the USA during the same year. This explains the reason China has the world’s leading economic growth. 2.7 GDP based on constant prices in China was $2084.64 Billion. This value is relatively bigger than the one in the USA. 3.0 Economic Base Economic base can be defined as a phenomenon used to assign the basic sector as the prime mover of a nation economy. A basic sector comprises firms which do not rely on the local market only. But some countries have both basic and non-basic sectors. Non-basic sectors possess companies whose products are hugely affected by the local market. 3.1 Economic Base in the USA Most firms situated in the USA are basic sectors. For instance a firm like the Stryker Medical in Indiana manufactures hospital beds that hit the international market and is not reliant on home market only. Lockheed Martin, General Electronics and Boeing manufacture military planes which sell out to the world with ease. 3.2 Economic Base in China China is a basic sector economy. It relies mostly on the manufacture export of affordable products targeting the Third World market. China is also a leading service exporter, majoring in construction and infrastructure. IT has taken advantage of poor road conditions in Africa and its construction firms make billions of dollars annually. Conclusion The Relative poverty between China and America has been explained in details. Though the GDP of the USA is more than China’s it has to be considered that military expenditure in the USA is over $2 trillion but China uses only an estimated $110 billion. This enables China to channel the rest of the money to development projects. Again China is communist and its economic impact is felt all over Africa. China intentionally weakened its currency to improve trade activities with Developing Countries. On the other hand, the USA is capitalist and its major market share is in the Developed Countries. 1.4 billion Population of China is another factor which makes it relatively poor compared to the USA which has a population of around 300 million citizens. References World Bank, International Statistics. 2010. http://www.economywatch.com Bureau of Labor Statistics.2007-2012 http://www.stthom.edu/library. WDR. World Development Report, World Bank ,2011-12. http://www.worldbank.org The Economist 2007-2012. http://www.economist .com HDR. Human Development Report., United Nations Development Program.2011-12. http://www.undp.org Read More