Discovering connections

1. How would you define global economy, global market?

2. Do you agree that countries should be divided into industrialized and developing? Give your reasons.

3. What international economic organizations do you know? What are their functions?

4. What is globalization? What do you think about it?

READING

Text 1

The author organizes the following reading by considering industrialized nations, newly industrialized nations, developing nations and less developed nations. While reading pay attention to the problems facing different types of countries.

The World’s Economies

Economists classify the world’s economies as: industrial or developed nations (IN); newly industrialized nations (NIC); developing nations or less developed nations (LDC). Each of these types of countries has fairly specific characteristics, and economic issues.

Industrialized nations: Growing and Growing Old

An industrialized economy has a large base of productive capital, sophisticated banking systems and financial markets, a variety of industries producing a broad range of products, and vigorous and varied international trade. Industrialized nations also have well-established systems of government and law, and provide educational opportunities for their people.

Less than 20% of the world’s population live in industrial nations, and they account for about 70% of world output. The countries in the Group of Seven (G-7) have the most industrialized economies. The G-7 are the United States, Canada, Japan, Germany, France, the United Kingdom, and Italy (with Germany, France, the United Kingdom, and Italy comprising Europe’s so-called Big Four). The G-8 includes G-7 plus Russia, which may best be described as an economy in transition.

The entire EU – which also includes Austria, Belgium, Finland, Greece, Ireland, Luxembourg, the Netherlands, Portugal, and Spain – and some European nations outside the EU, such as Switzerland, Sweden, and Denmark, are also industrialized. So are Australia, New Zealand, and Taiwan.

But there is an income inequality, which creates some of the questions these countries face. The term sustainable growth refers to economic growth based on renewable resources and minimal environmental degradation.

However, the threat of terrorism, mainly from Islamic extremists from less developed counties, may well represent the most difficult and dangerous problem for industrialized nations, particularly the United States.

Newly Industrialized Nations: Getting Going

Newly industrialized nations (NICs) have a rapidly growing base of productive capital and rising incomes. Most of these nations have sound governments and banking and financial systems, although they may occasionally be subject to financial or political dislocation. For instance, Brazil is weighed down with international debt and must work hard to control inflation. Pakistan may face political instability and a shaky relationship with neighbouring India.

Newly industrialized nations include Hong Kong, Singapore, Taiwan, and South Korea (which are known as Asia’s “Four Tigers”), Pakistan, Malaysia, Indonesia, Thailand, Mexico, Brazil, Chile, Venezuela, Israel, South Africa, and Hungary.

Less than 5 percent of the world’s population lives in NICs, and they earn less than 5 percent of the world’s income.

The Four Tigers followed a strategy of export-oriented industrialization in which they moved from the status of developing country to that of NIC in the 1970s and 1980s. These nations ambitiously took Japan as a role model, but concentrated on light manufacturing. The World Bank and the International Monetary Fund have held up the Tigers as models for other developing and underdeveloped nations. However, export-oriented growth isn’t possible for every nation, especially when other nations, including China and some industrialized nations, still engage in protectionism.

NICs face a variety of problems, depending on their specific situations. One common issue is financing growth. A number of newly industrialized countries need more sophisticated banking and financial systems, and more stable governments.