Reinert/Windows on the World Economy, 2005 Windows on the World Economy CHAPTER 1

Reinert/Windows on the World Economy, Introduction Task we take up in this book—discovering the nuances of globalization Will try to explore the world economy and globalization in as balanced a manner as possible  Will help us develop informed views and opinions

Reinert/Windows on the World Economy, International Economics Typically divided into two parts  International trade  International finance This book approaches things a bit differently  Will explore four different windows on the modern world economy International trade International production International finance International development

Reinert/Windows on the World Economy, International Trade Refers to the exchange of merchandise and services among the countries of the world Typically imagined as trade in merchandise  Significant portion of world trade is composed of trade in services Financial services, architectural services, engineering services  Trade in services is about 1/4 the magnitude of trade in merchandise

Reinert/Windows on the World Economy, Figure 1.1 Industrial Production and Exports in the World Economy

Reinert/Windows on the World Economy, International Production Production of a product in multiple countries Can take place through  Contracts International licensing and franchising  Foreign direct investment (FDI) undertaken by multinational enterprises (MNEs) Involves firms based in one country owning at least a controlling interest in firms producing in another country

Reinert/Windows on the World Economy, MNEs Account for approximately ¼ of world gross domestic product (GDP) The sales of foreign affiliates of MNEs now exceed the volume of world trade Are involved in approximately ¾ of all world trade Approximately 1/3 of world trade takes place within MNEs Account for approximately ¾ of worldwide civilian research and development

Reinert/Windows on the World Economy, International Finance Refers to the exchange of assets among countries  Individuals and firms around the world conduct international transactions in Currencies Equities Government bonds Corporate bonds (commercial paper) Real estate Plays increasingly important role in the world economy

Reinert/Windows on the World Economy, Figure 1.2 Annual Exports and Daily Foreign Exchange Market Turnover

Reinert/Windows on the World Economy, International Development Hoped that the processes of international trade, production and finance will contribute to improved levels of welfare and standards of living throughout the world Major issues involved  How we conceptualize levels of welfare or standards of living  How the processes help to determine international development

Reinert/Windows on the World Economy, International Development Measure of these differences in living standards is the human development index (HDI)  Per capita income  Average life expectancy  Average levels of education

Reinert/Windows on the World Economy, Table 1.1: Measures of Living Standards, 2000

Reinert/Windows on the World Economy, Connecting Windows Each offers a view, but each has a frame  Each offers some insight into the world economy An insight that needs to be supplemented by one or more of the other windows

Reinert/Windows on the World Economy, Figure 1.3 Connecting Windows