Global problems

Globalization has many benefits but is also creating significant global problems.

Short run issues:

• recessions caused by financial crash or banking crisis 
• Many global shocks = short term 
• Other short run occurrences might have long run impacts eg. oil shocks 1970s

Long run issues:

• global poverty
• Inequality in economic development
• depletion of non-renewable resources
• environmental damage and global warming

Globalization increases the inter-connectivity and interdependence of nations. This leads to long run benefits in areas such as economic growth and employment. However, globalization also creates challenges as well as risks.

Types of shock:

• Permanent shocks eg. oil shocks - permanently changes markets
• Temporary shocks eg. terrorist attackspolicy induced shocks eg. inflationary shocks due to rapid increases in the money supply
• asymmetric shocks - effect one areas more than others
• symmetric shocks - effect all areas equally
• demand side shocks - sudden changed in aggregate demand eg. due to huge decrease in consumer confidence
• supply side shocks - created to increasing costs
• financial shocks eg. break down of large credit bank

Brexit as an example of a global shock:

• Brexit will probably just have a short term effect.
• it will have benefits, but also negative impacts on the global economy
• the extent to which it will effect the global economy is still unknown and will depend on the negotiations between nations
• the long term effect of Brexit is still unpredictable

  

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Poverty:
Poverty can be defined in two distinct ways:

1. Absolute Poverty

There are no simple definitions of this as there is a lot of disagreement on the definition of this word. This is a difficult to do.

According to economicsonline.co.uk - The simplest definition of being poor is ‘…being unable to subsist…that is, being unable to eat, drink, have shelter and clothing. A common monetary measure of absolute poverty is ‘..receiving less than $1 a day…’’. (In 2008, the World Bank revised this figure to $1.25 a day, and then again to $1.90 a day in 2015.)

2. Relative Poverty

According to economicsonline.co.uk - It can be argued that poverty can be investigated in a relative way – what is poor in Germany is not the same as what is poor in Bangladesh.

Definitions of relative poverty differ, but the definition of the UK government is typical for developed countries – stating ‘..less than 60% of median income..’.

If we look at international poverty, then, Asia has the highest numbers of poor people due to its large population.

Sub-Saharan Africa has the highest level of poverty, at over 60%.

Human poverty index:

focuses on 3 areas to measure poverty:

• knowledge 
• living standards
• longevity

HPI 1 measured poverty in developing countries

HPI 2 measure poverty in developed countries

HPI – 1.

1. longevity - probability of not living beyond age 40
2. knowledge - checked using adult literacy rate
3. living standard - looked at availability of clean water and whether children are underweight

HPI-2

1. Longevity probability of not living beyond age of 60
2. knowledge - checked how many adults do not have sufficient literacy abilities
3. living standards - how many people live under poverty line 

Development Economics

Economic development are the efforts that seek to improve the economic well-being and quality of life for a community by creating and/or retaining jobs and supporting or growing incomes and the tax base.
There are several indicators which attempt to measure the development of a nation, these are:

The Human Development Index (HDI)

HDI measures the development of a country in 3 areas:

• health - measured by life expectancy
• education - measured by adult literacy and number of years children are enrolled at school
• income per capita

The figures of HDI range from 0 to 1.  0 indicated no development. 1 indicated complete development:

• 0 – 0.49 = low development
• 0.5 – 0.69 = medium development 
• 0.7 to 0.79 = high development 
• more than 0.8 = very high development 

The HDI is a very useful means of comparing the level of development of countries. GDP per capita alone is clearly too narrow an indicator of economic development and fails to indicate other aspects of development, such as enrolment in school and longevity.

Life expectancy

A variety of factors may contribute to differences in life expectancy, including:

• The stability of food supplies
• War
• The incidence of disease and natural disasters

Adult literacy

The percentage of those aged 15 and above who are able to read and write a simple statement on their everyday life.

GDP per capita

GDP per capita is the commonest indicator of material standards of living, and hence is included in the index of development. GDP per capita It is found by measuring Gross Domestic Product in a year, and dividing it by the population.