World

Globally, the 20th century was marked by: (a) two devastating world wars; (b) the Great Depression of the 1930s; (c) the end of vast colonial empires; (d) rapid advances in science and technology, from the first airplane flight at Kitty Hawk, North Carolina (US) to the landing on the moon; (e) the Cold War between the Western alliance and the Warsaw Pact nations; (f) a sharp rise in living standards in North America, Europe, and Japan; (g) increased concerns about the environment, including loss of forests, shortages of energy and water, the decline in biological diversity, and air pollution; (h) the onset of the AIDS epidemic; and (i) the ultimate emergence of the US as the only world superpower.

The planet's population continues to explode: from 1 billion in 1820, to 2 billion in 1930, 3 billion in 1960, 4 billion in 1974, 5 billion in 1987, 6 billion in 1999, and 7 billion in 2012. For the 21st century, the continued exponential growth in science and technology raises both hopes (e.g., advances in medicine) and fears (e.g., development of even more lethal weapons of war).

The surface of the earth is approximately 70.9% water and 29.1% land. The former portion is divided into large water bodies termed oceans. The World Factbook recognizes and describes five oceans, which are in decreasing order of size: the Pacific Ocean, Atlantic Ocean, Indian Ocean, Southern Ocean, and Arctic Ocean.

The land portion is generally divided into several, large, discrete landmasses termed continents. Depending on the convention used, the number of continents can vary from five to seven. The most common classification recognizes seven, which are (from largest to smallest): Asia, Africa, North America, South America, Antarctica, Europe, and Australia.

Asia and Europe are sometimes lumped together into a Eurasian continent resulting in six continents. Alternatively, North and South America are sometimes grouped as simply the Americas, resulting in a continent total of six (or five, if the Eurasia designation is used).

North America is commonly understood to include the island of Greenland, the isles of the Caribbean, and to extend south all the way to the Isthmus of Panama. The easternmost extent of Europe is generally defined as being the Ural Mountains and the Ural River; on the southeast the Caspian Sea;

and on the south the Caucasus Mountains, the Black Sea, and the Mediterranean. Portions of Azerbaijan, Georgia, Kazakhstan, Russia, and Turkey fall within both Europe and Asia, but in every instance the larger section is in Asia. These countries are considered part of both continents. Armenia and Cyprus, which lie completely in Western Asia, are geopolitically European countries.

Asia usually incorporates all the islands of the Philippines, Malaysia, and Indonesia. The islands of the Pacific are often lumped with Australia into a "land mass" termed Oceania or Australasia. Africa's northeast extremity is frequently delimited at the Isthmus of Suez, but for geopolitical purposes, the Egyptian Sinai Peninsula is often included as part of Africa.

Although the above groupings are the most common, different continental dispositions are recognized or taught in certain parts of the world, with some arrangements more heavily based on cultural spheres rather than physical geographic considerations.

The international financial crisis of 2008-09 led to the first global recession since 1946 and presented the world economy with a major new challenge: determining what mix of fiscal and monetary policies to follow to restore growth and jobs, while keeping inflation and debt under control.

The fiscal stimulus packages put in place in 2009-12 required most countries to run budget deficits. Treasuries issued new public debt - totaling $7.6 trillion since 2008 - to pay for the additional expenditures. To keep interest rates low, many central banks monetized that debt, injecting large sums of money into their economies.

When economic activity picks up, central banks will face the difficult task of containing inflation without raising interest rates so high they snuff out further growth. And governments will continue to face the difficult task of spurring current growth and employment without saddling their economies with so much debt that they sacrifice long-term growth and financial stability.

In 2012, many countries pursued more austere economic policies, reducing government spending in order to attack their deficit and debt problems directly. The rate of growth of the world economy slipped from 5.1% in 2010, and 3.7% in 2011, to just 3.3% in 2012. The global budget deficit narrowed to roughly $2.7 trillion, or 3.8% of World GDP. Many central banks also tightened monetary policy;

growth of the global money supply, narrowly defined, slowed from 9.5% in 2010 and 8.7% in 2011, to 6% in 2012. Fiscal and monetary data for 2012 are currently available for 180 countries. Of the 180 countries, 85 pursued expansionary policies, stepping up government spending and expanding their money supply faster than the world average;

47 followed restrictive policies, cutting government spending and holding money growth to less than 6%; and the remaining 48 followed a mix of contrary fiscal and monetary policies, either reducing government spending while accelerating money growth, or boosting spending while curtailing money growth.

These policies significantly affected economic performance. Countries with more expansionary fiscal and monetary policies achieved higher rates of growth, lower unemployment, higher growth of tax revenues, and greater success in curtailing public debt than those countries with more austere policies.

In 2012, the 85 countries that followed a pro-growth approach achieved a median GDP growth rate of 4.9%, compared to just 0.8% for the 47 countries with restrictive fiscal and monetary policies, a difference of more than 4 percentage points. Among the 85, China grew 7.8%, Indonesia 6.0%, Mexico 3.8%, Russia 3.6%, Turkey 3.0%, the United States 2.3%, and Canada 1.9%, while among the 47, Brazil grew 1.3%, Germany 0.9%, France 0.1%, Belgium 0%, Netherlands -0.5%, Spain -1.5%, and Italy -2.3%. World unemployment increased to 9.2% in 2012.

The median for the 47 countries jumped to 11.5%, while the median for the pro-growth countries held steady at 7.3%. Faster GDP growth translated into increased tax revenues. Revenues for the 85 expansionary countries grew at a median rate of 10.8%, whereas tax revenues fell at a median rate of 6.2% for the 47 countries with austere economic policies.

This put increased pressure on many of the 47 to raise public debt. For these countries, the median level of public debt as a share of GDP grew 2.5 percentage points to 57.8%, while the median for the 85 pro-growth countries actually declined marginally. The world recession has suppressed inflation rates - world inflation declined 0.8 percentage points in 2012 to about 4.2%. At the same time, the median inflation rate for the 85 pro-growth countries, at 5.5%, was 2.5 percentage points higher than that for the countries who followed more austere fiscal and monetary policies.

The latter countries also improved their current account balances by shedding imports; current account balances deteriorated for most of the countries that pursued pro-growth policies. Slower growth of world income reduced import demand and, especially, crude oil prices. As a result, world trade grew just 1% in 2012, compared with 18% in 2011.

The world faces several long-standing challenges. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of underemployment, pollution, waste-disposal, epidemics, water-shortages, famine, over-fishing of oceans, deforestation, desertification, and depletion of non-renewable resources.

The nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, services, funds, and technology. The introduction of the euro as the common currency of much of Western Europe in January 1999, while paving the way for an integrated economic powerhouse, poses economic risks because the participating nations have varying levels and rates of growth of income, and hence, differing needs for monetary and fiscal policies.

Especially in Western Europe, governments face the difficult political problem of channeling resources away from welfare programs in order to increase investment and strengthen incentives to seek employment. Because of their own internal problems and priorities, the industrialized countries devote insufficient resources to deal effectively with the poorer areas of the world, which, at least from an economic point of view, are becoming further marginalized.

The terrorist attacks on the US on 11 September 2001 accentuated a growing risk to global prosperity, illustrated, for example, by the reallocation of resources away from investment to anti-terrorist programs.

Despite these challenges, the world economy also shows great promise. Technology has made possible further advances in all fields, from agriculture, to medicine, alternative energy, metallurgy, and transportation. Improved global communications have greatly reduced the costs of international trade, helping the world gain from the international division of labor, raise living standards, and reduce income disparities among nations.

Much of the resilience of the world economy in the aftermath of the financial crisis resulted from government and central bank leaders around the globe working in concert to stem the financial onslaught, knowing well the lessons of past economic failures.