Материал: Peculiarities of economic growth in developed countries at the end of XX-beginning of XXI century

Peculiarities of economic growth in developed countries at the end of XX-beginning of XXI century

Federal Agency for EducationState Educational Institution of Higher Professional Education

“Plekhanov Russian University of Economics”of financeof economic theory

On discipline «Macroeconomics»

Topic: Peculiarities of economic growth in developed countries at the end of XX - beginning of XXI century

student of group 2101facultyDaria

2013

Contents

Introduction1. Economic growth and indexes of the industrialized countries

.1 Economic growth: benefits and costs

.2 Characteristics of economic developed countries

.2.1 Total Real GDP

.2.2 GDP/GNP per capita

.2.3 Sectoral structure of the economy

.2.4 The level and quality of life

.2.5 Measures of economic performance2. Classification of developed countries

.1 The definition of economic developed countries

.2 The division of countries

.2.1 “The group of seven”

.2.2 The European Union

.2.3 The organization for economic cooperation and development3. Industrialized countries: distinctive features and its ways of development

.1 The distinctive features of the developed countries

.2 Developed countries at the beginning of XXI century

.3 Development prospects of the developed countries

Introduction

global economy is a complex economic system that is influenced by many factors. The processes taking place in the world economy directly impact on the development of the national economies of individual countries, affecting their economic interests. Therefore it is necessary to know the trends and patterns of development of the world economy. Furthermore, national economies are differ in scope, pace, efficiency, economic development, the type of economic growth, the social structure of the economy, the level of development and the nature of foreign economic relations and other parameters and hence the analysis of the world economy is used the classification of countries according to various criteria.countries are usually combined in the group in the global economy with similar parameters of economic development, the same type of organizational structure of economic management, the general principles of organization of production, the same problems of development. As for the developed countries, they have some common features: the high GDP per capita, the dominance of technical, scientific production and service system, the existence of market open economy.is worth to be noted that the most important part of the global economic system is a group of economically developed countries, which largely determine the state of the world market, main directions of scientific and technological development.aim of this work is to determine the role of developed countries in the functioning of the world economy and the impact of the industrialized countries to the different spheres of humanity such as political, economic, technical, scientific and spiritual., there are some goals which must be completed to achieve the aim of this work:

• to clarify the concept, consider the basic criteria of the developed countries;

• to provide a brief description of economic systems of developed countries;

• to consider ways of influences the developed countries on the world economy and on the other groups of countries;

Chapter 1. Economic growth and indexes of the industrialized countries

.1 Economic growth: benefits and costs

growth is the most important characteristic of social production in all economic systems. Economic growth is determined as the positive change in the level of production of goods and services by a country over a certain period of time. Economic growth means that the solution to the problem of limited resources becomes easier at any given time interval and hence it becomes possible to meet a wider range of human needs. The main aim of the economic growth is to increase the potential and real gross national product (GNP) and to rise the economic power of a nation, country, region. Increase in the capital stock, advances in technology, and improvement in the quality and level of literacy are considered to be the principal causes of economic growth.

Also, there are some types of economic growth. The first type is extensive, where the increase in production occurs due to three factors: capital (funds), labor and material costs (natural raw materials or energy). This is the easiest way to increase the pace of economic development. With it, there is a rapid development of natural resources, and occurs an opportunity to relatively quickly reduce or eliminate unemployment and provide greater employment of labor. The more complex type of economic growth is intensive. Its main distinguishing feature is to increase the efficiency of production factors on the basis of technical progress. Intensive expanded reproduction is more progressive because a crucial role in raising the efficiency of the real conditions of production begins to play the new "engine" - the achievements of science and technology. In this regard, the production of scientific and technical information is developed in the scale of society. Also, cultural and technical level of workers increases.is important to highlight that there are some benefits and costs of economic growth. On the one hand, if economic growth is high, it will lead to a rapid rise in the standard of living. Also, it will help to the economy to achieve the full employment, to put the government in a good position to redistribute income from high income groups to low income groups. However, if there is a high economic growth in the country, it means that people’s incomes rises and they become more concerned with a clean environment. On the other hand, there are some costs of economic growth. The first is the lower standard of living in the short run period. There may be a short-run trade-off between economic growth and the standard of living. Economic growth could increase due to the diversion of resources from the production of consumer goods, such as bread and cakes, to the production of capital goods, such as factories and machinery. If this thing happens, the amount of goods and services available for consumption and hence the standard of living may decrease in the short run period. second cost of economic growth is the generation of demands. Economic growth may generate demands which may make people feel less contented. An increase in national output will lead to an increase in the amount of goods and services available for consumption. However, when people have more to consume, they may want to attain a higher level of consumption. Therefore, if economic growth makes people more materialistic, it may make them feel less contented. The next cost is the environmental. It means that the economic growth may lead to environmental degradation. If the national output is high, we can assume that it will lead to the environmental pollution and hence to the contamination of water and atmosphere. Also, the depletion of non-renewable resources can be a cost of economic growth which will deplete non-renewable resources, which may lead to shortages for future generations, unless alternatives can be found. However, the worsening income inequity is the cost too. growth may worsen income inequity. The government may decrease corporate income tax to attract foreign direct investments to increase economic growth. If this happens, given that corporate income tax is progressive, income inequity will worsen. Also, it can be noted that high economic growth may lead to high structural unemployment. Nevertheless, rapid technological advancement will cause skills and knowledge people to become obsolete at a fast pace which will lead to high structural unemployment. Likewise, high economic growth will cause high import growth which may lead to a persistent balance of payments deficit resulting in adverse consequences such as high imported inflation, falling national income or rising unemployment.conclude, it needs to be mentioned that economic growth is the central economic problem facing all countries. It can help to observe the development of national economies and living standards of the population, the ways of solving the problem of limited resources., economic growth can be both positive and negative indicator of the development of the countries.

.2 Characteristics of economic developed countries

size of the progress of a country can be seen from the successful development of the country. Total Real GDP, income per capita, economic growth, unemployment and population growth rate are partly the indicators to measure the success of development.

.2.1 Total Real GDPGDP is determined as an inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. Gross domestic product is the main indicator used to determine the level and pace of economic development of the country. The increase in GDP is accompanied by an increase in employment and rising living standards, which is reflected in the growth of consumption of goods and services. The increase in GDP is determined by investments, their share in the GDP and the excess of the total amount of investment of the capital consumed in the production process. Periods of economic growth can be replaced by the decline in production, employment, reduction of GDP per capita and living standards, respectively. , if the development over long periods is considered, it is clear that the basis for raising the living standard of the population is the growth of production of goods and services, the GDP and per capita income. The main factors in the growth of GDP are the involvement in the production of additional resources, physical capital and labor, as well as increase productivity of the factors of production as a result of technological progress, the use of more productive technologies and improvement of professional skill workers. The increase in labor force is due to population growth in general and in the working-age population. Simultaneously, educational level, professional training and thus the quality of the labor force are increased. with the growing number of employees, the amount of accumulated industrial buildings, equipment and other assets and working conditions increases. In connection with the irrigation works the number of farmland may slightly increase; geological exploration leads to increased potential for use in the manufacture of mineral deposits. The increase in the use of resources is an important factor in the growth of GDP. However, much of its growth is achieved through scientific and technological progress, which allows to produce new types of products, to improve the quality of traditional products and better use of the resources used. It is necessary to mentioned that Total Real GDP and GDP per capita are in the connection. It means that the higher GDP per capita, the higher Total Real GDP and hence there will be an increase in the standard of living and economic growth.

.2.2 GDP/GNP per capitaNational Product (GNP) per capita is similar to GDP per capita. It is a measurement of a country's economic output per person. However, it's also a measurement of income. It counts all income earned by a country's residents and businesses, regardless of where the money is made. In other words, it includes all investments made by the residents and businesses, whether it's inside or outside its borders. This means it also includes the value of the products made by its businesses, even they are manufactured overseas. GDP per capita is especially useful when there is a need to compare one country to another because it shows the relative performance of the countries. A rise in GDP per capita signals that there is a growth in the economy and tends to translate as an increase in productivity. gross domestic product (GDP) is one of the primary indicators of a country's economic performance. It is calculated by either adding up everyone's income during the period or by adding the value of all final goods and services produced in the country during the year. GDP per capita is sometimes used as an indicator of standard of living as well, with higher per capita GDP being interpreted as having a higher standard of living. GNP per capita shows what part of a country’s GNP each person would have if this GNP were divided equally. Knowing a country’s GNP per capita it is a good first step to understand the country’s economic strengths and needs, as well as the general standard of living enjoyed by the average citizen. A country’s GNP per capita tends to be closely linked with other indicators that measure the social, economic, and environmental well-being of the country and its people. For example, generally people living in countries with higher GNP per capita tend to have longer life expectancies, higher literacy rates, better access to safe water, and lower infant mortality rates. However, there are regional disparities in GDP per capita in some countries such as Estonia and these inequalities are remarkably affected by the sectoral structure of the counties’ economy. Additionally to sectoral structure, the location of a country, measured by the distance between the capital city and counties’ center, has a significant impact on GDP per capita.

.2.3 Sectoral structure of the economystructure of the economy is the most important factor in the development of the country. Every state in the world has a different kind of absolute  and comparative advantage over other countries. The presence of advantages in certain areas is the reason that countries are specialized in the production of certain products. It is logical that, depending on the presence or absence of certain benefits, sectoral structure of the economy is generated. The sectoral structure of the economy is the composition and the ratio of the major economic activities that are carried out within the country. Depending on what activities are dominated, the internal economic structure of the state is formed, as well as its position in the global market. In fact, the sectoral structure of the economy is a major factor in forming the general government as a participant in the global economy. Also, a logical chain of three links can be derived: the availability of natural resources - industry structure - the position in the global market.the impact of the economic structure of the state on its position. For example, the sectoral structure of the Russian economy is built in such a way that it is dominated by mining and heavy industry. Naturally, the advantageous location of natural resources determines the main directions of activity. In turn, the structure of the Russian economy determines its position on the world market as an exporter of oil, gas, metals, and heavy industry, because our country has a great reserves of these natural resources. In turn, Ukraine, which is located near, has substantial agricultural resources - vast areas of high land and hence agriculture and food production is the main leading industries. As a result, Ukraine is standed as a food exporter and importer of energy, and Russia, on the contrary, is imported, and exported the products of Ukrainian energy. Sectoral structure of the economy is classified by two systems: the international classification of branches of economic activity and the classification system of national accounts.to the industrial classification, the sectoral structure of the economy consists of the following elements:

.The primary sector of the economy. It includes such areas of economic activity, as the extraction of raw materials (wood, ores, oil and gas), as well as agriculture. In fact, the primary sector includes all activities, including direct interaction with nature, in which nature gives any resources.

. Secondary sector of the economy which includes all enterprises engaged in processing of raw materials and producing finished products. The secondary sector also includes producers and semi-finished products which later become the "raw material" for the production of the final product.

. Tertiary sector of the economy. It is determined as the sphere of services, or as it is called, the non-production sphere which includes consulting, insurance, banking and securities.by national accounts involves clarification of the contribution to GDP the following sectors:

.The small business sector. 2.Sector of medium and large businesses. 3. State-owned enterprises.to the scientists, an indicator of a highly developed economy is the predominance of its industrial structure of small businesses operating primarily in the service sector. The approach to this standard industry structure is a sign of true favorite way of economic development of the state. According to David Ricardo, English economists, each state in the world has comparison and absolute advantages over other countries. The presence of these benefits in different spheres of life is the reason of the specializing on production of certain products. Logically, if the country is involved in different kinds of production or service sphere, the economy will growth and hence the level and quantity of life will increase too.

.2.4 The level and quality of lifeof the needs, the exhaustion of traditional resources and population growth cause the solution of the main problem: economic growth and economic efficiency. Economic growth is an increase in volume to create useful and, therefore, there is a rise in the living standards of the population. In other words, economic growth is the movement in the development of the national economy, which is characterized by the change of macroeconomic indicators such as gross national product and national income. Also, economic growth implies the achievement of important goals, such as increased life expectancy, reduced disease and injury, increase the level of education and culture, the rationalization of consumption, social stability and overcoming poverty, achieving full employment, protect the environment and improve environmental safety and crime reduction. of life is seen as a set of indicators of overall well-being of people, characterizing the level of material consumption (standard of living), and the consumption of goods that people do not pay. It is necessary to mention that financial security of community, unity with nature, responsibility for future generations and much more things is meant by quality of life. In addition, for the people it is associated with certain goals that they set for their lives, that is, with the efficiency of life, not only for satisfaction with their personal lives, but also with the satisfaction of its position in the country and the world, which affects the health of people. Despite the fact that the economic growth of developed countries requires the improvement of the quality of life of citizens, it is worth to note that an increase in production is accompanied with the use of more natural resources, most of which are non-renewable. Also, for the construction of new factories, offices, considerable areas of forest are being cut down, waste is merged into rivers and the air is polluted. Consequently, the environment is deteriorated and hence health of the population is under attack. Although, a lot of scientists around the world are trying to find solutions to mitigate the impact of innovation on the environment, but, unfortunately, there is virtually no progress.the other hand, economic growth is beneficial for the development of countries. It can be achieved through extensive and intensive development. The essence of the extensive way comes to economic development by increasing involvement in the production of a larger number of workers, raw materials, instruments of labor and land. With the extensive growth the society is tackled important issues such as employment and reduction of unemployment, development of new industries, determination of the direction of the economy in accordance with the needs of the market, the involvement of new territories and resources into the economy, as well as the elimination of regional imbalances, which allows to pull depressed and underdeveloped regions to the national average. The essence of intensive development of the economy is expressed in the way by improving the quality of labor, application of advanced technologies, higher labor productivity. However, the intensive development of the economy allows to use of available resources economically, to improve the competitiveness of national products through the quality improvement and lowering costs of production. Also, implementation of achievements in scientific and technical revolution production is important part of measures of economic performance, increasing the economic growth and hence the standard of living too.

.2.5 Measures of economic performanceindicators are values or characteristics, showing the state of the economy. Their dynamics are given by the statistical range of calculation, usually a weekly, monthly or quarterly value, which helps to find new trends of development in the economy and predict its future. Also, it is necessary to mention that economic efficiency is measured by two types of indicators: one is characterized by the results of per capita output, the other - the ratio of outcomes and costs.most important indicators of the first type are gross national product per capita and national income per capita.to the second type, performance indicators, comparing the results with its production costs are:

) Productivity of social labor . It is determined as the ratio of national income to the number of workers in material production or to the working time spent in material production. This indicator expresses the amount of national income that is generated by an average of one employee of material production, or an average per unit of time in the production of goods. In addition to the productivity of social labor, measures of productivity in key sectors of the economy are calculated in the industry, agriculture, construction and transport.

) Material intensity of national income is defined as the ratio of material costs to national income. Sometimes more specific indicators are calculated: the metal, energy and others. Consumption of materials may also be considered in terms of gross domestic product (instead of national income). It characterizes the level of objects of labor costs per unit of output.

) Capital productivity. It is the ratio of national income (or GDP) to the cost of production assets. It shows the output of the final output per unit of production assets. Sometimes, instead of return on assets can be used indicator of capital intensity, which is the inverse of capital productivity.conclude it is important to highlight that the economic efficiency can be measured with the help of two types of indicators such as effectiveness of output per capita and the ratio of outcomes and costs. In addition, economic efficiency is the state of the economy in which there is no opportunity to change the allocation of resources in the way that the increase of meet the needs of one subject can’t lead to a decrease in the meet needs of the other.

Chapter 2. Developed countries: classification and distinctive features

.1 The definition of economic developed countries

developed countries are defined as a group of independent countries of the modern world with a high standard of living and a dominant position in the world economy. Developed countries tend to have a large stock of produced capital and population, which is mostly engaged in highly specialized activities. 15-16% of the world's population lives in the group of developed countries, but they have also produced three quarters of the gross world product and provide the bulk of economic, scientific and technological potential of the world. Developed countries are also called industrial countries or industrially developed. Furthermore, there are some criteria which are let countries to enter into the group of industrialized countries such as:

• A high level of social and economic development, which is expressed in high levels of Total Real GDP and GDP per capita, and a high standard of living;

• market economic system;

• openness of the economy;

• dominance of the service sector (60%) over industry and agriculture;

• transition from mining and material-intensive industries to the new high-tech and knowledge-intensive sectors in the industry;

• a high level of mechanization and agricultural productivity. Hence, 3-8% of the working population engaged in agriculture in these countries, fully provide their countries with food security and transformed agriculture in the export sector of the economy in most countries in this group.countries by the end of XX century had:

15.9% of the population of the world;

More than half of world GDP;

72.2% of world exports and 74.6% of imports of goods and services., it is important to mention that there was a creation of a large sector of economic knowledge and the industry of knowledge in the developed countries. Moreover, human capital has become a major productivity factor of growth and the development of the industry of knowledge. Its share is up to 80% of their national wealth. However, the leading countries of the world with innovative economy created favorable conditions for the rapid implementation of ideas of scientists and innovators in competitive products and high technology. High investments in human capital provide leadership in science, education, medicine, high technology and in the industry of knowledge.group of countries with developed market economies in the beginning of XXI century includes just under 40 countries which are located in Western Europe, North America, Asia, Australia and Oceania., developed countries form different foundations such as the "Group of Seven", the European Union, the Organization for Economic Cooperation and Development and the North American Free trade Agreement. In addition, these associations are defined the direction of development of the whole of the world economy and the trend of social and economic progress in all countries and regions.

.2 The division of countries

countries are united in organizations that define the parameters of economic, technical, scientific, and spiritual development of other countries and solve various problems of global importance.

2.2.1 “The group of seven”President Valéry Giscard d'Estaing was the organizer of the meeting, which was hold in 1975, where the leaders of the six industrialized countries took part in. A year later, namely in 1976, Canada joined this forum. Thus was formed the international organization called "Group of Seven".

Group of Seven (or G7) is an association of seven leading industrialized countries, which includes the United States, Germany, Japan, Britain, France, Italy and Canada. According to the fact, that G7 consists of only developed countries, it should be noticed that economic growth is high and hence there is an increase in GDP too. The fluctuations in Gross Domestic Product are given in Figure 1.

1. Real GDP in the group of seven. Source: True economics.

the graph, it can be concluded that the rate of Real GDP is quite unstable and fluctuates through the time. In addition, the highest volume and a huge decrease of GDP were in Canada.

Also, the set of developed countries produce two-thirds of the world production. Considering the participating countries individually, it can be noticed that in generally, Canada is taken the first place in production among G7 and that Japan had the huge reduction in output in 2009. An illustration of the output in the group of seven is provided in Figure 2.

2. Level of Output in G7 : OECD

seven great economic powers, through their finance ministers, seek to increase economic growth and stabilize the exchange rate. G7 was established during the oil crisis of the 1970s of the last century as an informal club in order to find economic and political way out of it. This association was aimed to establish the financial and economic ties, to develop and to conduct effective anti-crisis policy, to decline unemployment, to reduce the rate of inflation, to seek all possible ways to overcome the contradictions that arise between countries - participants of G7 and with other states. Also, decisions made at the meetings can be realized through the system of international economic organizations such as the International Monetary Fund (IMF), World Trading Company (WTC), the organization for Economic Cooperation and Development (OECD), as well as through the state institutions of "Seven" .meetings are held several times a year. In addition, its location was designated by countries in turn. Sometimes, representatives of the other countries take part in the convocation of the Group of Seven.

It is also worth to highlight some of the indicators of economic growth in this group of countries. The low rate of unemployment, the high quality of life, the developed mechanical engineering and industrial production, the dominance of the service sector are inherent to this group of countries. Later, at the next summit in 1997, which was held in the United States, Russia joined the organization. Thus a new international institution called the Group of Eight (or G8) began its existence.

.2.2 The European UnionEuropean Union (or EU) is an economic and political unification of 27 European states with a total population of 483.7 million people, and the total area about 4326 square kilometers. It was founded in 1993 after the signing of the Maastricht Treaty in 1992. This agreement provided for the creation of a political, economic and monetary union, the completion of the establishment of the internal market, based on the "four freedoms" - free movement of goods, services, labor force and capital between the EU member states., the EU consisted of 12 combined countries: Belgium, Great Britain, France, Germany, Denmark, Greece, Ireland, Spain, Italy, Luxembourg, Netherlands and Portugal. Also, Austria, Finland and Sweden are entered the organization in 1994. Later, Bulgaria, Hungary, Cyprus, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, Slovenia, Czech Republic and Estonia became a part of the European Union.main objective of the EU is to organize cooperation between EU member states, as well as among their inhabitants. The most important goals of the Union include security guarantees, economic and social development, protection of freedoms, rights and interests of citizens. The European Union recognizes the national identity of the EU Member States, and respect their history, traditions and culture. Strengthening of European integrity, spreading the ideas of peace, improving security in Europe and in the world are the purposes of joint activities in the field of foreign policy and security., the EU has abolished trade barriers, adopted a common currency, and is striving toward convergence of living standards. Internationally, the EU aims to bolster Europe's trade position and its political and economic weight. Because of the great differences in the GDP per capita among member states (from $13,000 to $82,000) and Total Real GDP , in national attitudes toward issues like inflation, debt, and foreign trade, the EU faces difficulties in devising and enforcing common policies. Figure 3 shows the Total Real GDP in the countries-members.

3. GDP of EU. Source: web site: True economics.

Moreover, the EU has some responsibilities and characteristics that distinguish it from other international organizations. This organization has its own autonomous legal system, its own autonomous budget and monetary system, its own nationals and also territory allotted to the member countries of the European Union.those days, the European Union consists of 27 countries. In addition, Iceland, Croatia, Turkey and Macedonia have the status of a candidate in the EU.