World economy and

globalization
Project „Joint Degree Study programme
“Technology and Innovation Management“
No. VP1-2.2-ŠMM-07-K-02-087
 Aim of the course unit is to (1/1):
1. Give insighton
• the process of globalisation, its characteristics as well as causes
and effects on world economy;
• the role of corporations, NGOs, governments and multilateral
institutions in shaping world economy;
 Aim of the course unit is to (1/2):
2. Build knowledge of students in
• the current state of world economies with focus on major
economies of the world;
• the nature of world financial markets;
• economic implications in terms of national economic
development and inequality;
 Aim of the course unit is to (1/3):
3. Develop skills of students in
• analysis of economic charaxteristics of globalization and
increased trade flow;
• analysis of economic inequality impacts and effects.
 The main topics
1. Theories of globalization. Economic globalization
2. Globalization characteristics
3. Globalization – causes and effects on world economy
4. Government and the multinational corporations
5. Economic implications – development
6. Economic implications – inequality
7. Financial markets
8. Multilateral organizations
9. The Triad and the BRICs
The introduction to the course
The core essence of globalization is often misunderstood because
the process of globalisation is confusing due to its multifaceted
nature and oftentimes it is being confused with other processes
and misinterpreted. Apart from the complexity of the process of
globalization itself, it is important to point out that the word
“globalization” entered a dictionary (of American English) in 1961
[by the reference of, which is only almost half a century ago.
Nevertheless, the word for globalisation was quickly adopted in
other languages. As the same source states: “…The many examples
include lil ’alam in Arabic, quanquihua in Chinese, mondialisation
in French, globalizatsia in Russian and globalisación in Spanish.
Among the major world languages, only Swahili has not (yet)
acquired a globalization concept, and that exception is perhaps
largely explained by the widespread use of English in elite circles of
the African countries concerned. In minor languages, too, we now
find globalisaatio in Finish, bishwavyapikaran in Nepalese, luan
bo’ot in Timorese, and so on.”
As the phenomenon of global scale globalization has generated a
number of processes that are reflected in literally all spheres of
the development of the civilization: from the blurred geographical
boundaries of markets to the progressive complexity of distributed
network of labor relations, to the progressive convergence of the
production and consumption to the globalization of the power of
multinational corporations, consortia and companies to the
intensification of the struggle for limited resources of raw
materials to the explosive development of the world market in
“intellectual consumption” to the weakening of cultural isolation
of nations to the emergence and use of industry of discursive
power technologies to reduce the role of national elites and
simultaneously to increase the role of transnational elites in the
regulation of global processes.
Thus, the manifestations of globalization are:
§synchronization of customs, fiscal and monetary policies of
countries;
§aggravation of the opposition between global players and
authoritarian and totalitarian regimes;
§consolidation of national monetary systems in certain regions of
the world;
§regionalization of socio-economic processes;
§growing influence on the socio- economic development of
supranational governance structures;
§attracting ever larger amounts of material and financial resources
in the circulation of multinational corporations;
§internationalization and commercialization of natural resources
(primarily in production, transportation and processing of energy
resources).
 Topic 1.
Theories of globalization.
Economic globalization
Short overview:
§ Introductory general information on the topic of the
Workbook.
§ Provides overview on distinguishing manifestations of
globalization in general and in economy in particular.
§ Homework.
§ Reading materials etc.
Aim of the chapter:
§ To learn the theories of globalization,
§ To help students shape their opinion on the process of
globalization in economic sphere.
Learning outcomes: (knowledge and skills learner will possess
after reading the chapter and having done the practical
assignment)
§ Know the theories of globalization,
§ Get a proper understanding on globalization in economy and
the general trends.
“Globalization requires taking a broad contextual and long-term
view.”

Helen Fisher
The author of this Workbook believes that one accurate
definition of globalization was made by Jan Aart Scholte [19] who
refers to globalization as “…the spread of transplanetary – and in
recent times more particularly supraterritorial – connections
between people.” and explains that: “…From this perspective,
globalization involves reductions in barriers to transworld
contacts. People become more able – physically, legally, culturally,
and psychologically – to engage with each other in ‘one world’.”
Since globalization can be perceived as the spread of
transplanetary – and in recent times more particularly
supraterritorial – connections between people, as a summary, it
can be concluded that the main aspects of the theory of
globalization narrow down to the following:
§Global communications systems are gaining an increasing
importance every day, and through this process all nations are
interacting much more frequently and easily, not only at the
governmental level, but also within the citizenry;

(continued in next slide)

§Even though the main communications systems are operating
among the more developed nations, these mechanisms are also
spreading in their use to less developed nations;
§In terms of economic activities, the new technological advances
in communication are becoming more accessible to local and
small businesses. This situation is creating a completely new
environment for carrying out economic transactions, utilizing
productive resources, equipment, trading products, and taking
advantage of “virtual monetary mechanisms”;

(continued in the next slide)

§The concept of minorities within particular nations is being
affected by these new patterns of communication. Despite the
fact that these minorities are not fully integrated into the new
world system of communications, the powerful business and
political elites in each country are a part of this interaction
around the world. Ultimately, the business and political elite
continue to be the decision makers in developing nations;
§Social and economic elements under the influence of the
current phenomenon of globalization are determinant
circumstances which affect the standards of living of every
particular nation.
Overall, main assumptions of the theory of globalization can be
summarized in three principal points:
1. cultural and economic factors are the determining aspect in
every society.
2. under current global conditions, and when we are studying a
particular system -i.e., financial or trade sphere- it is not as
important as previously thought to use the nation-state
category as a unit of analysis.
3. with more standardization in technological advances, more
and more social sectors will be able to connect themselves
with other groups around the world, which implies faster and
easier communications and economic transactions.
 Topic 2.
Globalization characteristics
Short overview:
§ General information to the topic
§ Provides overview on main characteristics of economic
globalization
§ Homework
§ Reading materials etc.
Aim of the chapter:
§ To teach the students globalization characteristics through
different dimensions of globalization
§ To help students shape their opinion on characteristics of
economic globalization.
Learning outcomes: (knowledge and skills learner will possess
after reading the chapter and having done the practical
assignment)
§ Know the key characteristics of economic globalization
§ Get proper understandings on globalization process including
its causes and effects of economy.
“It has been said that arguing against globalization is like arguing
against the laws of gravity.”

Kofi Annan
Thus, we now can define the characteristics of globalization:
1. Liberalization which is manifested in freedom of international
business economic activities (e.g. expanding business, trade,
commerce etc.), free exchange of capital, goods, services and
technologies between countries.
2. Free Trade which is manifested in free trade between
countries and absence of excessive governmental control
over trade.
3. Globalization of Economic Activities which is manifested in
expansion of economic activities onto (bigger number of)
international markets, coordination of national economy and
world economy and the raise of their interconnectedness.
(continued in next slide)
4. Connectivity which is manifested in ever raising
connectedness of different locations with the world by
breaking national boundaries; establishment of linkages
between different countries and nations in all spheres of
globalization (cultural, scientific, technological, economic
etc.).
5. Borderless Globe which is manifested in diminishing national
barriers and creation of inter- connectedness of countries,
territories and regions.
(continued in next slide)
6. A Composite Process characteristic is directly connected with
the previous one & manifested in integration of nation-states
across the globe by common economic, commercial, political,
cultural, scientific and technological ties, which leads to
creation of a new world order with no national boundaries.
7. A Multi-dimensional Process characteristic is manifested in
globalization of economic (opening up of national market),
political (limited powers & functions of state, more rights and
freedoms granted to the individual and private sector),
cultural (exchange of cultural values between societies and
nations), ideological (the spread of liberalism and capitalism)
spheres.
(continued in next slide)
8. A Top-Down process characteristic of globalization is
manifested in predominance of developed countries and the
MNCs (multinational corporations) in globalization processes
that are based on their interests. Technologies, capital,
products and services come from them to developing
countries.
9. Global State vs. Global Civil Society characteristic is
manifested in protests against the harmful effects of
globalization on the vast majority of people all over the
world, particularly in developing countries, protest marches,
demonstrations and meetings have been organized in
different countries.
 Topic 3.
Globalization – causes and effects
on world economy
Short overview:
§ General information the topic
§ Covers major benefits and costs of globalization
§ Provides overview on drivers of globalization
§ Homework
§ Reading materials etc.
Aim of the chapter:
§ To show the connection of causes and effects of globalization
§ To help students shape their opinion on both negative and
positive effects of globalization.
Learning outcomes: (knowledge and skills learner will possess
after reading the chapter and having done the practical
assignment)
§ Know the causes and effects of economic globalization in the
world.
“Globalization has created this interlocking fragility. At no time in
the history of the universe has the cancellation of a Christmas
order in New York meant layoffs in China.”

Nassim Nicholas Taleb

Likewise physical processes, all economic ones also have causes.
Prerequisites of the process of globalization at present are:
§international specialization of production and trade in goods and
services;
§combining of sets of technologically connected production using
the same type of process chains;
§competition for markets in terms of overproduction in
developed countries;
§depletion of the planet’s natural resources and the
intensification of the struggle for their use;
§increased risk of global ecological disaster;
§internationalization of capital;
§information revolution - creation of global information networks.
Negative effects
•strengthening of uneven development of countries in the world
(the polarization of the world);
•increasing domination of stronger economies and the intrusion
of their will;
•increasing vulnerability related to the negative effects of global
economic relations as a result of intensification of the latter;
•concentration of the most of the intellectual and technological
potential of humanity in the post-industrial world;
•concentration of major trade flows within developed countries;
•direction of migration flows from the "third world" into the
developed regions of the world etc.
Positive effects
•dissemination of new information technologies and related
benefits (reducing the time and cost of transactions,
improvement of working and living conditions);
•transition to resource saving technology;
•increased attention to the important global issues of humanity
and others etc.
 Topic 4.
Government and the
multinational corporations
Short overview:
§ General information and terminology to the topic
§ Covers the connectedness of governments and Multinational
Corporations
§ Provides overview on peculiarities of cooperation of
governments and Multinational Corporations
§ Homework
§ Reading materials etc.
Aim of the chapter:
§ To explain the essence of connectedness between
governments and corporations
§ To help students shape their opinion on peculiarities of
cooperation of governments and Multinational Corporations.
Learning outcomes: (knowledge and skills learner will possess
after reading the chapter and having done the practical
assignment)
§ To know how governments and Multinational Corporations
connect with and influence one another.
 “We cannot wait for governments to do it all. Globalization
operates on Internet time. Governments tend to be slow moving
by nature, because they have to build political support for every
step.”

Kofi Annan
MNCs become more rich and more powerful. At the same time,
governments have power too due to the broad scope of their
sphere of influence. And those who have power are in a tight
bunch.
Thus, even though government makes direct influence on
Multinational Corporations through its wide range of trade
regulatory and fiscal instruments and mechanisms (e.g. trade
tariffs, taxes, labeling and product quality standards,
antimonopoly legislation rules etc.), they are also influenced by
corporations.
Such connectedness of government and Multinational
Corporations is obvious. Quite often individuals who are
appointed as ministers, heads, chairmen, and advisors to many
government departments and independent committees in the
government body previously had high corporate positions (mostly
as directors, chairmen or chief executives) and therefore maintain
links to industry even after they take up the duties in the
government sector. This results into direct conflict of interest with
their governmental roles. Such cases are known in European
countries as well as US, where government officials in highest
positions in the country have a strong bond with oil industry.
Another example of corporate influence on government is
lobbying. Despite the common perception of the term, in most
circumstances it remains within legal boundaries: in the form of
party political donations, philanthropy, legitimate business
dealings as well as through funding, part founding or donating
toward the cost of ‘public’ projects.
Likewise, corporations may do favors in return to the government;
like with the help of controlled media or media sources that are
favorable to them, who can shape the public opinion on
government policies and decisions (e.g. the war in Iraq) as well as
on particular politicians. This leads to establishment of symbolic
relationship in which government and representatives of
Multinational Corporations at highest managerial levels sustain
each other’s legitimacy.
 Topic 5.
Economic implications -
development
Short overview:
§ General information and terminology to the topic
§ Provides overview on what causes the economic
implications of development
§ Homework
§ Reading materials etc.
Aim of the chapter:
§ To explain the implications of world economic development
through global issues
§ To help students shape their opinion on economic
implications of development.
Learning outcomes: (knowledge and skills learner will possess
after reading the chapter and having done the practical
assignment)
§ Know the global issues and economic implications of global
development.
“Globalization was a deep trend pushed by technology and right
ideas, as much as anything else.”

Jeffrey Sachs
In fact, all issues of global development make a contribution to
the economic implications of development of the humanity.
Thus, by virtue of globalization, the financial crisis 2007-2008 hit
the real economy and became a global economic crisis, it was
then rapidly transmitted to many developing countries through a
contraction in trade finance and a slowdown in demand affecting
bilateral trade flows. These transmission channels were
particularly visible in sectors composed of global production and
supply chains.
Since most developing countries are greatly dependent on
markets of developed countries, the slump in demand from latter
due to the crisis has had an adverse impact on the former.
Most developing countries are nowadays closely linked to the
global economy by trade and FDI flows. As a consequence of the
crisis, the significant reduction of these flows is starting to
restrain their development perspectives. Developing countries
are currently seriously hurt through falling commodity prices,
demand-driven drops in exports exacerbated by the deficit of
credit and trade finance, capital outflows, declining remittances,
and contracting investment. The prospects are more dire for
export-oriented developing countries, especially those with a
small domestic economy, where the reduction in international
demand is more likely to curtail their exports and raise
unemployment.
These impacts are being combined with the effects of the
ongoing food crisis, volatile energy prices, and the climate
change challenge. Many developing countries are also dependent
on Official Development Assistance (ODA), which may shrink
during the crisis. Potentially, the aggregate of all these effects
could bring millions of people back into poverty, and worsen the
conditions of those presently living in extreme poverty. This
threatens to stall and reverse many years of efforts to achieve
internationally agreed development goals, including the MDGs.
In early 2008, before the financial crisis, the global economy
confronted a sharp surge in food prices, leaving many developing
countries with citizens facing the threat of hunger. The food crisis
arose from a number of factors. Investing in agriculture, including
with increased ODA, will have to be a priority in attaining food
security. Reducing distortions in agricultural trade is another
priority.
Moreover, towards the middle of 2008, energy prices shot up
dramatically and raised concerns about energy security for
development. Since then, energy prices have declined equally
dramatically. The volatility in energy prices has implications on
both net energy exporters and importers, on sources of energy
supply and interface with climate change, and on energy
efficiency measures. The high level of volatility in energy prices
has led to much introspection over the impact on economic
growth and sustainable development in developing countries.
On top of this, there is an ongoing need to address climate
change by reducing greenhouse gases. This requires an increasing
use of more climate-friendly development strategies.
Thus, it is high time to review development strategies that will
make economies more resilient, by addressing the deep-seated
causes of the crises, and by fostering a process of economic
growth and development that is sustainable, spreads the benefits
widely and especially to the poor, and caters for the needs of
future generations. The crisis affecting development may require
rethinking of the whole economic and social paradigm that has
prevailed over the last decades and has nurtured the process of
liberalization and globalization.
 Topic 6.
Economic imlication - inequality
Short overview:
§ General information and terminology to the topic
§ Provides overview on economic implications for inequality in
the world as well as in developed and developing countries
§ Homework
§ Reading materials etc.
Aim of the chapter:
§ To dispel the wrong believes about economic implications for
inequality and whether they are caused by globalization
§ To help students shape their opinion on economic implications
for inequality.
Learning outcomes: (knowledge and skills learner will possess
after reading the chapter and having done the practical
assignment)
§ Get a proper understanding of economic implications for
inequality.
“Where globalization means, as it so often does, that the rich
and powerful now have new means to further enrich and
empower themselves at the cost of the poorer and weaker,
we have a responsibility to protest in the name of universal
freedom.”

Nelson Mandela
The author of the Workbook shares the points stated in the
“Economic Globalization and Political Stability in Developing
Countries” by Nicolas van de Walle under Project on World
Security Rockefeller Brother Fund:

(see next slides)

1. The gap between the poorest and the richest nations is not
getting any smaller, but this results from continuing inability of
the poorest countries to attract FDI. With regards to this a
great role in turning the globalization processes into benefits
for the country is carried out by governments. Domestic factors
like government policies in determining the distribution of
income and assets make a greater influence on growth of
social inequalities in developing countries than the
international economic environment. If done wisely, in
combination with progressive liberalization and linkaging with
world economy, government is able to prevent the inequality
within the country and assure the economic growth from FDI.
2. The growing inequality in developed countries is not related
with their trade with developing countries and is argued,
instead, to be driven largely by recent domestic technological
breakthroughs, notably the new information technologies,
which have lowered the demand for low-skilled labor. Even
though, the causes are yet still being studied by scientists, but
only few of them claim now that economic globalization can be
blamed for the rise of inequality.
3. The growing inequality in developing countries is denied to
occur at all, although, to be fair, the data on income and asset
distribution gathered in those countries is imperfect.
Developing countries are characterized by “substantially
greater variation in inequality across countries at a given time
than at a given time for a given country”. The absolute
numbers of the poor in developing countries have risen
together with the rise of the population. Moreover, the reason
for variation in inequality among developing countries with
similar “output data” so to say and levels of development, is
rather internal factors within each country.
 Topic 7.
Financial markets
Short overview:
§ General information and terminology to the topic
§ Provides overview on globalization of financial markets
§ Homework
§ Reading materials etc.
Aim of the chapter:
§ To analyze the globalization of financial markets
§ To help students shape their opinion on the globalization of
financial markets.
Learning outcomes: (knowledge and skills learner will possess
after reading the chapter and having done the practical
assignment)
§ Get a proper understanding on the nature of financial
markets in the context of globalization.
“Today, the forces of competition, technology, and globalization
have converged to spur innovation and to transform the way
business is done in the securities industry.”

Arthur Levitt
 There are different types of financial markets:

•The Foreign Exchange Market (also known as Forex or FX);

•The Stock Market;
•The Commodities Market;
•The Futures Market;
•Other types of financial markets are Money Markets, Insurance
Markets, Bond Markets, Derivatives Markets and some other.
 The elements of financial globalization are:

•the development of cashless payment systems;

•increase in international capital flows in the form of direct and
portfolio investment;
•evolution of derivatives markets;
•growth of trade in the currency markets;
•formation of regional currency groups;
•integration of international bank capital;
•development of offshore banking business;
•reform of the financial architecture for globalized world.
 Financial market analysts say that the globalization of the
financial system is based on the interaction of the following
phenomena (1/2):
•technical progress that allows to conduct international financial
transactions in real time and significantly reduces the cost for
transport and communication;
•increasing competition: on the one hand, between credit and
financial institutions on financial markets, on the other hand
between financial markets themselves as a result of significant
gap in information technology and telecommunications;
•restructuring of credit and financial institutions through M&As
among them as a consequence of increasing competition
between these institutions;
 Financial market analysts say that the globalization of the
financial system is based on the interaction of the following
phenomena (2/2):
•wide internationalization of business due to the strengthening of
transnational nature of corporations’ activities;
•consolidation of regional integrational unions;
•relaxation of strict control on the implementation of
international agreements relating to the movement of capital of
stock exchanges;
•macroeconomic stabilization and reforms in some developing
countries and countries with transitional economies, have
created favorable climate for foreign investors;
•widespread use of “the principle of the lever” & development of
the process of assets’ securitization in industrialized countries.
 Topic 8.
Multilateral organizations
Short overview:
§ General information on the topic
§ Covers the functioning of such multilateral organisations as
UN, WTO, IMF, World Bank and G20
§ Provides overview on the role of multilateral organisations in
world economy
§ Homework
§ Reading materials etc.
Aim of the chapter:
§ To learn the importance of multilateral organisations in
globalization
§ To help students shape their opinion on the role of
multilateral organisations in world economy.
Learning outcomes: (knowledge and skills learner will possess
after reading the chapter and having done the practical
assignment)
§ Get a proper understanding on the role of multilateral
organisations in world economy.
“NAFTA recognizes the reality of today's economy - globalization
and technology. Our future is not in competing at the low-level
wage job; it is in creating high-wage, new technology jobs based
on our skills and our productivity.”

John F. Kerry
 The most important functions performed by multilateral
organizations, in terms of international economics include (1/3):

A. Promotion - the spread of international experience by

organizing international conferences, gathering and analysis of
statistical and analytical data, their publication and
distribution, etc.
B. Observation - observe the processes taking place in the
member states, with the ability to formulate and disclose the
official point of view on certain issues, the creation of public
opinion and thereby to influence economic policy. The most
typical example of an organization that serves as observant is
the UN, who can urge the country (through resolutions of the
General Assembly) to carry out certain economic policies.
 The most important functions performed by multilateral
organizations, in terms of international economics include (1/3):

C. Supervision - a solid observation is related to the obligations

of countries to report regularly and in the prescribed form
data on their economic situation and to listen to advice on the
basic principles of economic development. Governments that
have signed the statutes carry out the supervision of
international organizations. A typical example is the IMF, the
main function of which is a rigid supervision of economic
policies of member countries and providing international
experience based recommendations for the prevention of the
possible macroeconomic imbalances and choosing the most
effective ways to solve existing problems.
 The most important functions performed by multilateral
organizations, in terms of international economics include (1/3):

D. Regulation - supervision based on forcing countries to

implement the recommendations of the international
community through the development of relevant international
standards and forcing mechanisms for their implementation.
An example is the WTO, in which established certain rules for
international trade &tough anti-dumping and other practices
used against violators of the rules.
"Promotion - observation - supervision - regulation" - all these
functions of multilateral organizations are based on the good
will of their member countries. Despite having common
characteristics, international organizations differ in the
functions and activities.
Thus, the United Nations is an international organization founded
in 1945 after the Second World War by 51 countries committed to
maintaining international peace and security, developing friendly
relations among nations and promoting social progress, better
living standards and human rights.
The work of the United Nations reaches every corner of the
globe. Although best known for peacekeeping, peacebuilding,
conflict prevention and humanitarian assistance, there are many
other ways the United Nations and its System (specialized
agencies, funds and programmes) affect our lives and make the
world a better place.
UN works on a broad range of fundamental issues, from
sustainable development, environment and refugees protection,
disaster relief, counter terrorism, disarmament and non-
proliferation, to promoting democracy, human rights, gender
equality and the advancement of women, governance, economic
and social development and international health, clearing
landmines, expanding food production, and more, in order to
achieve its goals and coordinate efforts for a safer world for this
and future generations.
World Trade Organisation can be looked at in different ways. It is
an organization for trade opening. It is a forum for governments to
negotiate trade agreements. It is a place for them to settle trade
disputes. It operates a system of trade rules. Essentially, the WTO
is a place where member governments try to sort out the trade
problems they face with each other. The WTO is run by its
member governments. All major decisions are made by the
membership as a whole, either by ministers (who usually meet at
least once every two years) or by their ambassadors or delegates
(who meet regularly in Geneva). While the WTO is driven by its
member states, it could not function without its Secretariat to
coordinate the activities.
International monetary relations are characterized by extensive
institutional structure of monetary and financial institutions at
global and regional levels, where the International Monetary
Fund and the World Bank take a central place.
Thus, without complying with generally applicable rules of the
IMF regulations it is practically impossible to develop foreign
trade of the country or to realize the benefits of participation in
international division of labor. IMF foresees strict conditionality of
granting credits and loans to member countries, intervention in
the development and implementation of national economic
programs.
That is why an effective use of its membership in the IMF and
other international financial institutions in the interests of the
national economy is a key objective for every country. At the same
time, it should be noted that the IMF still partly functions as
supranational regulatory body in those countries that borrow
from IMF, since economic reforms program agreed with the
government of a country is IMF's condition for granting loans.
Furthermore, the cooperation with the World Bank Group also
plays an important role in international economic activities. It is
an international organization for development whose aim is to
assist the member countries along their way to economic and
social development.
 The World Bank Group involves five closely associated
institutions:

•The International Bank for Reconstruction and Development,

•The International Development Association,
•The International Finance Corporation,
•The Multilateral Investment Guarantee Agency,
•The International Centre for Settlement of Investment Disputes.

The first two organisations can be considered as main ones in the World Bank Group.
Their key purpose is to facilitate the borrowers in the fight against poverty and
improvement of living standards in countries with medium and low levels of economic
development.
It is also important to mention the Group of Twenty (G20) in the
course of overview on multilateral organisations and
supranational governance of world economy. The G20 is the
premier forum for its members’ international economic
cooperation and decision-making. Its membership comprises 19
countries plus the European Union. Each G20 president invites
several guest countries each year.
The G20 is supported by international organisations, including the
Financial Stability Board, the International Labour Organisation,
the International Monetary Fund, the Organisation for Economic
Co-operation and Development, the United Nations, the World
Bank and the World Trade Organization. These and several other
organisations are invited to attend key G20 meetings. The G20
committed in its Fifth Anniversary Vision Statement to listen
carefully to institutions and countries which are not in the group.
Accordingly, Australia continues to work with non-members to
develop international understanding of the G20’s 2014 agenda, to
promote the agenda's benefits to the global economy and to seek
views and input.
According to the information given on its official website, the Fifth
Anniversary Vision Statement also noted the G20’s intention to
strengthen engagement with the G20’s official engagement
groups, the B20, C20, L20, T20 and Y20, comprising business, civil
society, organized labour, academia and youth.
 Topic 9.
The Triad and the BRICs
Short overview:
§ General information and terminology to the topic
§ Provides overview on the two macro-regional groupings as
the Triad and BRICs and the economic trends within them
§ Homework
§ Reading materials etc.
Aim of the chapter:
§ To learn the two macro-regional groupings as the Triad and
BRICs
§ To help students shape their opinion on the economic trends
within the Triad and BRICs
Learning outcomes: (knowledge and skills learner will possess
after reading the chapter and having done the practical
assignment)
§ Get a proper understanding on development of scientific
thoughts in the field of biophysical economics as a lead up to
the creation of Sustainable Development concept.
“The Industrial Revolution caused a centuries-long shift in power
to the West; globalization is now shifting the balance again.”

Dennis C. Blair
A characteristic feature of the last three decades of XX century was
dynamics and depth of the socio-political processes. International
economic relations system does not only stand aloof from these
processes, but is the integral part, which interacts with them
through a complex system of forward and backward linkages.
Consequently, the degree of the openness of every national
economy is increased together with the economic
interdependence and integrity of the world. As a result of this
trend’s intense actions, now it can be clearly outlined the three
main economic poles of the world.
These three centers are Japan, the USA, and the EU also referred
to as the Triad. They have a strong impact on economic
development at regional and global level. The relationship
between these poles has a noticeable influence on the
development of the international economic relations in other
countries. Understanding these relationships helps to orient in a
complex spectrum of modern international economic relations.
The redistribution of the positions among the three global centers
is a reflection of the important features of modern economic
development and the competition in the global market. None of
the countries today can ensure its complete superiority in all
positions. Taking a leading position in the process immeasurably
depends on the international division of the labor and is possible
only in the certain areas of the world economy.
Generally speaking, in the Triad markets today, companies are
driven by quarterly financial results, while the focus of their
governments is driven by political systems shaped by short
election cycles. At the same time, the outlook and focus of many
BRIC companies and governments is on long-term investment and
positioning for the future.
BRIC is a group of four world economies, the rapidly developing
countries. According to analysts, by 2050 the total economy of the
group will exceed the total size of the economies of the richest
countries of the world.
Analyst Jim O'Neill, author of acronyms BRIC, in one of his reports
emphasized attention on a strange phenomenon: four not similar
countries like Brazil, Russia, India and China for various reasons
have been developing very rapidly. At the same time, the BRIC
countries have 20 % of the world’s economy (for comparison, the
EU countries - only 16%) and about half of world reserves.
Moreover, by 2025 the BRIC will own 40% of the global economy.
To sum, up BRIC countries somehow manage to develop very fast
and can become the powerful force in the world economy.

At the same time, the formation of the BRIC made the situation in
the dividing of the power sources in the world more complex. In
BRIC all four countries have different opinions on the politics and
economy.