The world economy is the sum of the national economies of the world's countries, linked by the international division of labour, trade and flows of capital and technology. It took shape in the late 19th century with the growth of machine industry and transport, and globalisation has since made it an even more integrated system. Exams often ask about country typology, integration groupings, leading producers by industry and the calculation of economic indicators.
§1. The structure of the world economy and types of countries
Key indicators:
GDP (gross domestic product) — the value of all goods and services produced within a country in a year; it shows the size of the economy.
GDP per capita — GDP divided by population; it shows the standard of living and level of development.
In developed countries most of GDP (more than about two-thirds) comes from services — the mark of a "post-industrial" economy; in the least developed countries agriculture's share is high — an "agrarian" economy. Groups of countries:
Developed: the G7 — the USA, Japan, Germany, the UK, France, Italy and Canada; also other Western European countries, Australia, New Zealand, Israel, South Korea, Singapore.
Developing: newly industrialised countries (the "Asian Tigers", Mexico, Brazil), oil exporters (the Persian Gulf), "key" countries (China, India), and the least developed countries (mostly in tropical Africa).
Transition economies — former socialist states, including Uzbekistan.
§2. The international division of labour and integration
The international division of labour is the specialisation of countries in particular goods based on their advantages (natural resources, skilled labour, location) and the exchange of those goods. Examples: Saudi Arabia — oil; Japan — electronics and cars; Brazil — coffee and soya; Australia — iron ore and wool. Economic integration is the convergence and merging of national economies. Stages: free-trade area → customs union → common market → economic and monetary union.
The European Union — the highest level of integration: a single market and, for many members, a single currency, the euro.
USMCA (called NAFTA in 1994–2020) — the USA, Canada, Mexico.
ASEAN — the Association of Southeast Asian Nations (1967).
MERCOSUR — the South American common market (Brazil, Argentina, Uruguay, Paraguay).
The Eurasian Economic Union (2015) — Russia, Kazakhstan, Belarus, Armenia, Kyrgyzstan; Uzbekistan is an observer.
A commodity organisation: OPEC (1960) — the Organization of the Petroleum Exporting Countries.
Transnational corporations (TNCs) are large firms with branches in many countries; a large share of world trade and investment passes through them. The scientific and technological revolution turned science into a direct productive force: electronics, automation, space and biotechnology, the digital economy; the share of knowledge-intensive industries keeps growing.
§3. The geography of industry: leading countries
Oil: the biggest producers are the USA, Saudi Arabia and Russia; the largest reserves are in Venezuela and Saudi Arabia. The main export flow runs from the Persian Gulf to Asia and Europe.
Natural gas: the USA, Russia, Iran, Qatar (liquefied gas exports).
Coal and steel: China leads (almost half of the world's steel); coal — China, India, Indonesia, Australia.
Electricity: China and the USA generate the most; in France most electricity comes from nuclear plants, in Norway almost all from hydropower.
Car manufacturing: China (first in the world), the USA, Japan, Germany, South Korea, India.
Electronics: China, South Korea, Japan, Taiwan, the USA.
Location factors: raw materials (metallurgy), fuel and energy (aluminium near cheap electricity), consumers (food industry), skilled labour and science (high-tech industries), transport (port cities).
§4. Agriculture, transport and international trade
Agriculture:
Wheat: the biggest producers are China, India and Russia; leading exporters include Russia, the USA, Canada and Australia.
Rice: China and India (monsoon Asia); exporters — India, Thailand, Vietnam.
Cotton: India, China, the USA, Brazil, Pakistan; Uzbekistan is a traditional cotton grower.
By freight turnover (tonne-km) sea transport comes first, mostly container and tanker shipping.
The key canals: the Suez (1869) links the Mediterranean and the Red Sea; the Panama (1914) links the Atlantic and Pacific Oceans.
The largest ports are Shanghai, Singapore and Rotterdam (Europe's biggest).
International trade: goods (machinery and equipment form the biggest share) and services (tourism, finance, IT). The largest trading nations are China, the USA and Germany. The trade balance = exports − imports: positive means a surplus, negative a deficit.
Worked example
"A country's GDP is 1.2 trillion dollars and its population is 30 million. Find GDP per capita."
Use the same units: 1.2 trillion = 1,200,000 million.
1 200 000 mn : 30 mn = 40 000.
Answer: 40,000 dollars — a level typical of developed countries.
Worked example
"A country exports 85 billion dollars and imports 110 billion dollars of goods. What is its trade balance?"
85 − 110 = −25 billion dollars.
The result is negative — a trade deficit of 25 billion dollars. If asked for "foreign trade turnover", add: 85 + 110 = 195 billion dollars.
§5. Globalisation and Uzbekistan’s place in the world economy
Globalisation is the growth of flows of goods, services, capital, information and people that merges national economies into a single world market. Its main drivers are cheap sea transport (containers), the internet and digital technology, TNCs and lower trade barriers.
Benefits: access to new markets and technologies, investment inflows, cheaper goods.
Drawbacks: persistent gaps between countries, fast spread of crises (the 2008 financial crisis), competitive pressure on local producers.
The rules of international trade are set by the World Trade Organization (WTO, since 1995; formerly GATT); in finance the International Monetary Fund and the World Bank are important. How strongly a country is tied to the world market is shown by its trade-to-GDP ratio:
Trade-to-GDP ratio = (Exports + Imports) : GDP · 100 %
In small trading countries (Singapore, the Netherlands) it is very high; in countries with a huge domestic market (the USA) it is much lower. Uzbekistan is a transition economy with no access to the sea (it is doubly landlocked). Its leading exports are roughly: gold, natural gas, cotton yarn and textiles, fruit and vegetables, copper and other non-ferrous metals. Its main trading partners are China, Russia, Kazakhstan and Turkey. Uzbekistan is a member of the CIS and the Shanghai Cooperation Organisation, and an observer in the Eurasian Economic Union. Having no sea access raises transport costs, so transport corridors matter (the China–Kyrgyzstan–Uzbekistan railway project, the southern route through Afghanistan).
Worked example
"A country’s GDP is 100 billion dollars, its exports 25 billion and imports 35 billion dollars (hypothetical figures). Find the trade-to-GDP ratio."
Trade turnover: 25 + 35 = 60 billion dollars.
Ratio: 60 : 100 · 100 = 60 %.
In addition, the trade balance is 25 − 35 = −10 billion dollars, i.e. a deficit.
Answer: 60 %.
Check yourself
How do GDP and GDP per capita differ?
Which countries make up the G7?
Which agreement replaced NAFTA and who belongs to it?
What is the main sign of a post-industrial economy?
Which country produces almost half of the world's steel?
Which oceans does the Panama Canal link, and when did it open?
Since which year has the World Trade Organization operated?
GDP is 50 billion dollars, exports 10 billion, imports 15 billion dollars (hypothetical figures). What is the trade-to-GDP ratio?
Common mistakes
Adding China or Russia to the G7.
Mixing up the waters linked by the Suez and Panama canals (Suez — Mediterranean and Red Sea; Panama — Atlantic and Pacific).
Assuming a country with a large GDP is automatically "rich" (look at GDP per capita).
Confusing foreign trade turnover (exports + imports) with the trade balance (exports − imports).
Calling OPEC an integration grouping (it is a commodity organisation).
Using only exports when calculating the trade-to-GDP ratio: the numerator is exports plus imports.