GROSS world product (GWP) reached $87 trillion as the global economy grew at 4.49 percent in 2013, and the International Monetary Fund predicted that GWP will further increase as growths among developing economies may rise to 5 percent in 2014 and 5.25 percent in 2015.
The GWP is the sum of the gross domestic products (GDPs) of all countries. This typically includes levels of consumption, investment, government spending, the cost of imports and the proceeds from exports.
“National progress is often measured almost exclusively by growth in the GDP. Yet, as the global economy inches upward, actual social and environmental well-being lags. Alternative measures for gauging progress are needed to determine true prosperity,” said Worldwatch Institute’s Mark Konold and Jacqueline Espinal in their latest analysis for the research organization’s Vital Signs.
“Because of various transaction costs,” Konold and Espinal said, “economists apply a metric to put purchasing power for countries on an even footing, such as [a] floating rate exchange, tariffs and other barriers. This metric…is called the purchasing-power parity exchange rate.”
GDP is the most widely applicable metric for gauging national progress and well-being. This year’s growth can be traced to the rise of an affluent middle class and the rapid migration of young workers to cities, which encourages more business investments in developing countries.
“Asia and other emerging economies will account for two-thirds of the approximately 370 million people who will have moved to cities by 2015,” Konold and Espinald said, quoting a United Nations (UN) estimate.
Growth was affected by numerous adjustments in macroeconomic policies, high unemployment rates and weak aggregate demand in the majority of the industrial economies in the Organization for Economic Cooperation and Development.
Here are the other issues that Konald and Espinal reported:
“Growing inequality. Even as the global economy picks up, however, social challenges continue to mount. According to the UN Development Program, average household-income inequality in recent decades has risen
in both industrial and developing countries. One billion out of 7.2 billion people live below poverty levels and experience most acutely the dark side of development, such as global climate change, water depletion, food shortages and biodiversity destruction.
“There also continued to be labor shortages, increased globalization, and mismatches between current skill levels and job requirements. Developing countries were faced with a growing pool of willing workers in 2013, but limited access to credit for many small enterprises contributed to a lack of investment and job creation in these markets. In 2013 nearly 202 million people worldwide were unemployed, [representing] a 6-percent unemployment rate.
“Growing consumption. World population is expected to reach 9.6 billion people by 2050, with much of that expansion happening in developing countries. As the world’s population continues to grow, there is legitimate concern about depleting Earth’s resources faster than they can be replenished. The Global Footprint Network, an agency that tracks humanity’s ecological footprint and nature’s capacity to replenish its resources, estimates that the world is consuming resources at the rate of 1.5 planets per year.
“Some studies have argued that the world must replace its growth economy with a steady-state economy, in which production is only replaced, not increased, while the economy continues to develop by improving and renewing its existing resources.
“Measuring true progress. Studies suggest that, although people’s level of happiness increases significantly when societies develop, high levels of uncertainty and social and economic inequality may run counter to this development. Measures such as the Genuine Progress Indicator account for the social, educational, economic and environmental activities that contribute to economic growth, but [these] go unnoticed in current national accounting frameworks.”
Other relevant highlights in the world:
- Although employment rates improved in the United States in 2013, much of the improvement is attributed to fewer people participating in the labor force—mainly newly retired “baby boomers”.
- In the US, baby boomers—individuals born between 1945 and 1965—continued to retire at an approximate rate of 10,000 per day. It is expected that, in retirement, boomers reduce their levels of disposable income, leading to a decrease in economic growth by as much as 0.7 percent.
- In Japan, GDP growth between 2000 and 2013 shrank by 0.6 percentage points annually, due to an aging population retiring from the work force.
- Worldwide, employment rates declined in all regions, except South and East Asia, which continued to experience higher levels of growth through 2013.
Gaelle Gourmelon, the marketing and communications associate at the Worldwatch Institute, told the media that Vital Signs provides business leaders, policymakers and engaged citizens with the latest data and analyses they need to understand critical global trends.
“It is an interactive, subscription-based tool that provides hard data and research-based insights on the sustainability trends that are shaping our future. All of the trends include [a] clear analysis and are placed in [a] historical perspective, allowing you to see where the trend has come from and where it might be headed.”
E-mail: cecilio.arillo@gmail.com.