INTERNATIONAL BUSINESS

ELVIN HASANOV 145392

DEVELOPMENTS IN WORLD ECONOMY

IN PAST 30 YEARS Keywords; global economy, globalization,

FDI, income, new technologies, internatio

nal trade, Dubai, China's economy.

28.12.2015

IntroductionThe world consists of almost 200 countries. Each country has several cultures, religions, legal systems and economy. All policymakers in most countries have a prevalent objective to improve the living standard the best countrymen. Economic development can be defined as the standard of living. The last 30 years has been an unusually good one for developing countries and their mostly poor people - so good in fact that it has become common place to look upon them as potential rescuers of the world economy. Their economies have become wider at never done before rates, resulting both in a large reduction in extreme poverty and an important expansion of the middle class. India, Korea, China and other East-Asian countries were responsible for the mass of this great performance. Surely, rise of globalization, growing international trade, new technologies, find of new natural resource impact strongly to developments in

world economy. I will explain this paper argument of development in world economy.

Economic development encompasses improvements in a kind of indicators such as life expectancy and poverty rates. Fundamentally, country's economic development is connected to human development, which health, education and other things.

The paper emphasizes two key dynamics helping growth. The first is the development of fundamental capabilities in the create of human capital and institutions. Long-term growth depends on the accumulation of these capabilities—everything from education and health to improved regulatory frameworks and better governance (Acemoglu and Robinson 2012; Allen and others 2013; Behrman and Kohler 2013)

The second structural transformation - rises and enlargement of new industries, move of labor from traditional efficiencies to new ones. On the outside of natural resource, high growth rates are nearly every time the result of rapid structural transformation, especially as industrialization. Poor economies can experience structural transformation even when abilities are low and institutions weak. This process helps East Asian countries in the postwar time.

The past 30 years, Global economy changes rapidly. Especially marked has been the evolution of world economic integration products. Toyota, Pepsi, Viceroy or Marlboro good examples for marks. Korea, Taiwan, China, Hong Kong and Singapore already were growing

extremely rapidly by integrating their new young industrial base with the high-tech industries. Globalization came into being as this diffusion process, created a new kind of catching up after world war two. Especially starting in countries that opened their trade and borders to foreign investment. So that new global industry central around multinational companies could use those countries as bases for global production systems. That process backed by big breakthroughs in technology better transport intermodal transport so-called from ships to the backs of trucks, containerization of trade through the standard twenty-foot containers and of course the advent of modern computer assisted design and manufacturing, the enormous breakthroughs made possible by the Internet and by mobile phone. Revolutionized the ability of companies to engage in global production systems and thereby create globally intergrated companies often with thousands of employees operating in more than 100 countries and the world's multinational companies thereby became the main agent for to continuing transmission of those ripples around the world. Japan was a leader in its own region in this and they develop two wonderful visual

metaphor for this called The Flying Geese model. If we look at these geese information, have a goose flight in front and back are others following the lead. This is how economic development in Asia started it as well with the industrialization first of Japan and then flying in information just behind come Korea, Taiwan, Hong Kong, Singapore, Indonesia, Malaysia, Thailand and Laos, but as the leading country moves from textiles electronics then from electronics to automobiles then from automobiles to advanced information technology.

Specially over the past two decades growth of globalization - the growing trade and financial integration of the world economy. We can see bottom chart that global trade and financial links increased fastly in the past 50 years (percent of global GDP ).

The international financial integration rate change more stunning; the past two decades rises three times. Total global financial assets growth from $250 billion in 1980 to almost $70 trillion in 2010.Also global trade flows has risen.

Foreign Direct Investment in the world economy has increased last 25-20 years. FDI get wider more fastly than world trade. So that, in billions of USD taken from the

United Nations World Investment Report in 2013. The largest gain in foreign direct investment in the USA followed closely by Japan ( 115 billion to almost 100 billion ). As a percentage increase Japan out performs everyone with an increase of more than 400%. Other important performers are South Korea with more than 200% increase in FDI and Hong Kong with a 25% increase.

China stayed put at nearly $85 billion. Russia fell from $57 billion to $52 billion and South Africa decreased from $6 billion to $4 billion. Also Brazil fell down from $35 billion in FDI to negative $3 billion, because investors are taking money out of the country.

We can see graph that how change some countries FDI inflows from 1990 year to 2011.

Technological change has made it a tangible reality. Last 30 years, the world has seen main advances in communication, information processing and transportation technology, including the Internet and World Wibe Web (www).

Luckily, Citylab created a global technology index. First on the list is Finland. Finland happens to be the birthplace of one of the largest mobile phone producers and innovators, Nokia. They also spend 3 and a half

percent of their GDP on technological research and development. This amount to almost 10 billion dollars a year. Finland also one of the best educational systems in the world. Their advancement in biotechnology. Secondly on the list is Japan. Japan well known for its contributions to the technological revolution. Much of this success can be attributed to government allocation and investment during the past 50 years. Today Japan is one of the leading tech innovators,with the second highest number of patents per capita.

Transportation and telecommunication are creating global village and audience. From Mexico to Canada, from London to Tokyo, everyone can watch BBC, CCN, National geography. Expansion of the Internet and WWW (world wide web) are the latest expression of this revolution. In 1990, near one million users were connected to the Internet. In 2004 it growth to about 945 million. By 2005, the number of host computers had rose to 317 million. In USA 60 percent of the population was connected the Internet by 2003. According to Forrester Research , the value of Web-Based transactions hit almost $660 million in 2000. It was predicted to hit $6.8

trillion in 2004, with USA accounting for 47% of all Web-based transactions. Also Internet helping to occur online shopping which people to directly can buy goods or services. Online shopping growth rapidly last 4-6 years. Alibaba ,eBay and Amazon.com are largest of online corporations. In 2012,Asia-Pacific rises their international sales over 30% giving them near $433 billion in revenue. That is a $69 billion difference between the U.S. revenue of $364.66 billion. This is not small number.

Also transportation sector change the past 30 years. Nowadays, we can travel easily, faster and more cheaply than three decades ago. As for instance, a round trip airline ticket from Baku to Moscow in the 1985 was near $1.000,right now costs about $290.

The world population increase from 3 billion in 1965 to 7 billion in 2013,but the development in world economy grew rapidly than the world population. New medical technology, vaccination helped decrease the death rate. In 1960,life expectancy at birth was about 55 years, nowadays a newborn is expected to live near 70 years.

Development in world economy also impact to income in world.

Table 2.1 Median and Average Income in World and Selected Countries, 1988 and 2005Economy Median

incomeAverage income

Ratio

World

1988 846 3,523 4.162005 1,209 3,946 3.26Percentage increase

42.9 12.0 n.a.

United States1988 12,327 14,819 1.202005 15,664 20,001 1.28Percentage increase

27.1 35.0 n.a.

China1988 310 361 1.162005 1,013 1,303 1.29Percentage increase

226.8 260.9 n.a.

Brazil1988 1,901 4,030 2.122005 2,107 3,890 1.85Percentage increase

10.8 –3.5 n.a.

Source; Author's calculations, based on Milanovic 2011.

Note: n.a. = not applicable.

This ratio has fallen importantly since the 1980s.In 1988,the world's median income stood at $846.In 2005,income increase to $1.209.The growth in average world incomes from $3.523 to $3.946.

I want to say brief history development in Dubai. Dubai in the United Arab Emirates is home to the tallest skyscraper in the world. It stands almost 3.000 feet in the air and cost the city more than $1 billion. So how did the Emirates, and Dubai in particular, get so rich?

Historically the UAE has been a prime location for international trade. Situated at the mouth of Persian Gulf, ships sailing around Asia and Africa made frequent stops there. In the late 1960s,large oil deposits were found UAE, beginning a hugely lucrative oil industry. The oil deposits proved to be so vast, that presently they account for a tenth of the world's total oil reserves. Crude oil exports are responsible for almost $400 billion dollars of the UAE's GDP. Reports indicate that in 2010,only around 1% of Dubai's economy was from oil sales. So how is Dubai so wealthy? Dubai has historically productive relationship with the United Kingdom. This relationship granted them access to exclusive western investments and partnerships. In 2000,the international credit boom helped the Emirates solidify their place Middle East as a financial. Foreign investments poured in for ambitious projects like the world's tallest skyscraper,

largest resort and even a series of man-made islands. Since then, tourism, trade and retail has flourished, attracting a large number of visitors and immigrants. Dubai was reported to be the world's 5th most popular tourist destination in 2014.Additionally,there are not corporate taxes, making them an attractive business destination.

We must emphasize development in China last 30 years.Average annual growth rates of the GDP have reached nearly 10 percent in the past 30 years. Chinese has become the fastest growing consumer market in the world today. Between 1978 in 2013 China's gross domestic product increased around 10.55 percent annually leading the country to become an engine economic growth both regionally and worldwide. Chinese government encouraged investing in the stock market and made the prospect more enticing by relaxing borrowing limitations and facilitating investing. This caused widespread investment. So Shanghai market to grow by more than 150%. Also China became the world's largest recipient of foreign direct investment in 2004.

If we estimate 20 years into the future, most forecasts now predict a rapid increase in the share of world output accounted for by developing nations such as Indonesia, Mexico, China, India, Brazil and South Korea, and in proportion decrease in the share enjoyed by rich industrialized countries such as Germany, Great Britain and United States. The World Bank, for example, has

estimated that if current trends continue, by 2020, the Chinese economy able be larger than United States.