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But first, the numbers, taken as ever from our Economic Statistics Database.
The World Economy in 2010 was worth $74.007 trillion in GDP terms,
using the Purchasing Price Parity (PPP) method of valuation. This is expected to
grow to $78.092 trillion in 2011.
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The World Economy
The overall global economy averaged a 3.2 per cent growth rate between
2000 and 2007, suffering a slight dip in 2001 - 2002 thanks to the Dot Com Crash,
but continuing to grow throughout that period. In fact 2004 - 2007 were boom
years. The Emerging Markets, led by the giants of China, India, Russia and Brazil
(the BRIC countries) had been posting 7 per cent - 10 per cent growth rates for
years. Property and stock market booms had brought consistent growth in North
America and Europe. Investment was bringing economic development to much of
the Middle East and Africa, and even Japan was recovering from its deflationary
'Lost Years'.
Economic conditions within these countries play a major role in setting the
economic atmosphere of less well-to-do nations and their economies. In many
aspects, developing and less developed economies depend on the developed
countries for their economic wellbeing.
Theories were even circulating that thanks to the growth of the developing
world, we might enjoy years of unfettered growth, as new markets would go
through successive growth spurts and counter the effects of slowing growth
elsewhere. It was suggested that Asia was 'decoupling' from the US and able to
grow under its own steam thanks to its two 'Awakening Giants'.
Just before the dawn of the 21st century, oil averaged $16 a barrel. By July
2008, less than 10 years later, oil hit a high of $146 a barrel - a stunning rise of
more than 800%. From early 2007 to mid 2008 alone the price has risen more than
threefold from the mid $40s.
During the Oil Crisis of the 1970s, oil spiked at a nominal peak of $38. In
today's prices (adjusted for inflation), that is $106, a figure that we blew past in
early 2008.
With uprisings and revolution sweeping the arab world, we are now back
over $100 at the start of 2011. It seems unlikely they will stay here, despite the
growth of natural gas supplies. As emerging markets drive ever greater resource
demands, a set of Wikileaks documents confirm what many have suspected; that
the Saudis have exaggerated their reserves and Peak Oil has already been reached.
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The World Economy
In fact there is a growing school of thought known as 'Peak Oil' that believes
we have - or will soon - reach peak oil production capabilities. In the 1950s Dr M.
King Hubbert correctly predicted peak oil and decline rates for the mainland US oil
industry. His model came to be known as The Hubbert Peak Theory. It predicts
that world peak oil production will be reached sometime between 2000 and 2010,
and will decline thereafter.
The costs of commodities across the board are being driven up by the 3 billion
inhabitants of the BRIC nations, whose wealth is growing at 8 per cent to 10 per
cent a year, not to mention a further 2 billion or so in the other emerging markets.
As long as supply can't keep up with demand, and with all the cheap money
that is flowing into markets from western central banks, inflation growth is likely.
This could challenge social stability in poorer countries - and could signal
stagflation for the advanced economies.
If they manage to bring real change to their countries, in the form of plural
democracies and greater accountability, the world's political economy could be re-
configured in unexpected ways.
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