Economic overview World, in 33 editions.

In 1989 1990 the World world economy grew at an estimated 3.0%, somewhat 1.0%, considerably lower than the estimated 3.0% for 1989 and the 3.4% for 1988. The technologically advanced areas--North America, Japan, and Western Europe--together account for 65% 67% of the gross world product (GWP) of $20.3 $20.9 trillion; these developed areas grew in the aggregate at 3.5%. 2.3% in 1990. In contrast, output in the Communist (Second World) countries typically grew at between 0% USSR and 2%, accounting Eastern Europe fell an average of 5.2%; these countries account for 23% 15% of GWP. Experience in the developing countries continued mixed, with the newly industrializing countries economies generally maintaining their rapid growth, and many others struggling with debt, rampant inflation, and inadequate investment. This third group contributed 18% of GWP and grew on average 2.3% in 1990; output in this group is probably understated because of lack of data and the method of calculation used. The year 1989 ended with remarkable 1990 witnessed continued political and economic upheavals in the Communist countries, USSR and Eastern Europe, which presumably will dislocate economic production still further. The are in between systems, lacking both the rough discipline of the command economy and the institutions of the market economy. As for prospects in the 1990s, the addition of nearly 100 million people a year to an already overcrowded globe will exacerbate the problems of pollution, desertification, underemployment, epidemics, and poverty throughout the 1990s. famine.

Real global output--gross output - gross world product (GWP)--rose one-half of 1% (GWP) - rose roughly 2% in 1992,
1993, with results varying widely among regions and countries. Average
growth of
1.5% 1% in the GDP of industrialized countries (62% (57% of GWP in 1992)
1993) and average
growth of 5% 6% in the GDP of less developed countries (30%
(37% of GWP) were partly offset
by a further 15-20% 10% drop in the GDP of
the former Soviet-East European USSR/Eastern Europe area
(now only 8% 6% of GWP). Within the
industrialized world the US posted a 3% growth rate whereas both Japan
and the 12-member European Union (formerly the European Community) had
zero growth. With the notable exception of Japan at 2.5%, unemployment
was typically 6-11% in the industrial world. The United States US accounted for 23% 22%
of GWP in 1992;
the 12-member European Community, which established a single internal market
on 1 January 1993, 1993; Western Europe accounted for another 23%, 22.5%; and Japan
accounted for 10%.
9%. These are the three "economic superpowers" which are
presumably destined to compete
for mastery in international markets on
into the 21st century. In general,
growth in the industrialized countries was sluggish in 1992, with
unemployment typically at 7-11%. As for the less developed countries, China,
India, and the Four Dragons--South Korea, Taiwan, Hong Kong, and
Singapore--posted Singapore--once again posted good records; however, many other
countries, especially in
Africa, suffered bitterly continued to suffer from drought,
rapid population growth, inflation, and civil
strife. The continued plunge Central Europe,
especially Poland, Hungary, and the Czech Republic, made considerable
progress in production moving toward "market-friendly" economies, whereas the 15
ex-Soviet countries typically experienced further declines in practically all output
of 10-15%. Externally, the nation-state, as a bedrock
economic-political institution, is steadily losing control over
international flows of people, goods, funds, and technology.
Internally, the central government in a number of cases is losing
control over resources as separatist regional movements - typically
based on ethnicity - gain momentum, e.g., in the successor states of
the former Soviet Union, in former Yugoslavia, and in India. In
Warsaw Pact economies strained Western Europe, governments face the difficult political and social fabric problem of these
newly independent nations, in particular channeling resources away from welfare programs in Russia. order to increase
investment and strengthen incentives to seek employment. The addition
of nearly
100 million people each year to an already overcrowded globe
is exacerbating
the problems of pollution, desertification,
underemployment, epidemics, and
famine. Because of their own internal
problems, the industrialized countries
have inadequate resources to
deal effectively with the poorer areas of the
world, which, at least
from the economic point of view, are becoming further
marginalized.
(For the specific economic problems of each country, see the
individual country entries in this volume.)

Real Led by recovery in Western Europe and strong performances by
the US, Canada, and key Third World countries, real global output -
gross world product (GWP) - rose roughly 3% in 1994 compared with 2% in 1993.
1993, with results varying Results varied widely among regions and countries. Average
growth of 1%
3% in the GDP of industrialized countries (57% (60% of GWP in
1993) 1994) and
average growth of 6% in the GDP of less developed countries
(37% (34% of
GWP) were partly offset by a further 10% 11% drop in the GDP of
the former
USSR/Eastern Europe area (now only 6% of GWP). Within the
industrialized world the US posted a 3% growth rate whereas both Japan
and the 12-member European Union (formerly the European Community) had
zero growth. With the notable
exception of Japan at 2.5%, 2.9%, unemployment
was typically 6-11% 5%-12% in the
industrial world. The US accounted for 22%
of GWP in 1993; 1994; Western
Europe accounted for 22.5%; another 22%; and Japan
accounted for 9%. 8%. These
are the three "economic superpowers" which are
presumably destined to
compete for mastery in international markets on
into the 21st century.
As for the less developed countries, China,
India, and the Four Dragons--South
Dragons - South Korea, Taiwan, Hong Kong, and
Singapore--once Singapore - once again
posted good records; records of 5% growth or better; however, many other
countries,
especially in Africa, continued to suffer from drought,
rapid
population growth, inflation, and civil strife. Central Europe,
especially Poland, Hungary, and the Czech Republic, Europe made considerable
considerable progress in moving toward "market-friendly" economies,
whereas the 15
ex-Soviet countries (with the notable exceptions of the
three Baltic states) typically experienced further declines in output output,
of 10-15%. sometimes as high as 30%. Externally, the nation-state, as a bedrock
economic-political institution, is steadily losing control over
international flows of people, goods, funds, and technology.
Internally, the central government in a number of cases is losing
control over resources as separatist regional movements - typically
based on ethnicity - gain momentum, e.g., in the successor states of
the former Soviet Union, in the former Yugoslavia, and in India. 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. The addition
of nearly 100 million people each year to an already overcrowded globe
is exacerbating the problems of pollution, desertification,
underemployment, epidemics, and famine. Because of their own internal
problems, the industrialized countries have inadequate resources to
deal effectively with the poorer areas of the world, which, at least
from the economic point of view, are becoming further marginalized.
(For the specific economic problems of each country, see the
individual country entries in this volume.)

Led by recovery in Western Europe and strong performances by
the US, Canada, and key Third World countries, real Real global output -
gross world product (GWP)
- again rose 3% in 1994 compared 1995, with 2% in 1993. the newly industrializing Third World
Results countries setting the pace. And once more, results varied widely
among regions and countries. Average growth of
3% 2.5% in the GDP of
industrialized countries (60% (56% of GWP in 1994) 1995) and
average growth of 6%
5% in the GDP of less developed countries (34% (38% of
GWP) were partly
offset by a further 11% small 1.5% drop in the GDP of the former
USSR/Eastern
Europe area (now only (only 6% of GWP). With the notable
exception of Japan at 2.9%,
3.1%, unemployment was typically 5%-12% 6%-12% in the
industrial world. The
US accounted for 22% of GWP in 1994; 1995; Western
Europe accounted for another 22%;
21%; and Japan accounted for 8%. These
are the three "economic
superpowers" which are presumably destined to
compete for mastery in
international markets on into the 21st century.
As for the less
developed countries, countries: China, India, and the Four
Dragons - South
Korea, Taiwan, Hong Kong, and Singapore - once again
posted records
of 5% growth or better; however, many other countries,
especially in
Africa, continued to suffer from drought, rapid
population growth,
inflation, and civil strife. Central Europe made
considerable continued its progress
in moving toward "market-friendly" economies,
whereas the economies. The 15 ex-Soviet countries (with the notable exceptions of the
three Baltic states) countries typically experienced further declines in output, although
sometimes as high as 30%. considerably less than in 1992-94. Externally, the nation-state, as
a bedrock
economic-political institution, is steadily losing control over
over international flows of people, goods, funds, and technology.
Internally, the central government in a number of cases is losing
control over resources as separatist regional movements - typically
based on ethnicity - gain momentum, e.g., in the successor states of
the former Soviet Union, in the former Yugoslavia, in India, and in India. In
Canada. 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.
The addition
of nearly 100 million people each year to an already
overcrowded globe
is exacerbating the problems of pollution, desertification,
desertification, underemployment, epidemics, and famine. Because of
their own internal
problems, the industrialized countries have
inadequate resources to
deal effectively with the poorer areas of
the world, which, at least
from the economic point of view, are
becoming further marginalized.
(For the specific economic problems of developments
in each country, see the
individual country entries in this volume.)

Real global output - gross world product (GWP)
- again
rose 3% an estimated 3.6% in 1995, 1996, with the newly industrializing Third World
World countries again setting the pace. And once more, results varied widely
widely among regions and countries. Average growth of 2.5% 2.3% in the GDP of
of industrialized countries (56% (55% of GWP in 1995) 1996) and average growth of
5% 6.5% in the GDP of less developed countries (38% (39% of GWP) were partly
offset by a small 1.5% 2% drop in the GDP of the former USSR/Eastern
Europe area
(only 6% of GWP). With the notable exception of Japan at 3%,
3.1%, unemployment was typically 6%-12% in the industrial world. The
US
accounted for 22% 21% of GWP in 1995; 1996; Western Europe accounted for 20%;
21%; and Japan accounted for 8%. These are the three "economic
superpowers"
presumably destined to compete for mastery in
international markets on
into the 21st century. As for the less
developed countries: China,
India, and the Four Dragons - South
Korea, Taiwan, Hong Kong, and
Singapore - once again posted records
of 5% growth or better; however,
many other countries, especially in
Africa, continued to suffer from
drought, rapid population growth,
inflation, and civil strife. Central
Europe continued its and the 15 successor states to the USSR generally made progress
in moving toward "market-friendly" economies. The 15 ex-Soviet
countries typically experienced further declines economies, but output in output, although Russia and
considerably less than in 1992-94. Ukraine continued to fall. Externally, the nation-state, as
a bedrock
economic-political institution, is steadily losing control
over
international flows of people, goods, funds, and technology.
Internally, the central government in a number of cases is losing
control over resources as separatist regional movements - typically
based on ethnicity - gain momentum, e.g., in the successor states of
the former Soviet Union, in the former Yugoslavia, in India, and in
Canada. 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.
The
addition of nearly 100 million people each year to an already
overcrowded globe is exacerbating the problems of pollution,
desertification, underemployment, epidemics, and famine. Because of
their own internal problems, the industrialized countries have
inadequate resources to deal effectively with the poorer areas of
the
world, which, at least from the economic point of view, are
becoming
further marginalized. (For specific economic developments
in each
country, see the individual country entries in this volume.) entries.)

Real global output - gross output-gross world product (GWP) -
rose (GWP)-rose an
estimated 3.6% 4.0% in 1996, with the newly industrializing Third
World countries again setting the pace. And 1997. And, once more, results varied
widely among
regions and countries. Average growth of 2.3% in the GDP
of industrialized countries (55% of GWP in 1996) and average growth of
6.5% in the GDP of less developed countries (39% of GWP) were partly
offset by a 2% drop in the GDP of the former USSR/Eastern Europe area
(only 6% of GWP). With the notable exception of Japan at 3%,
unemployment was typically 6%-12% in its solid 3.8% growth, the industrial world. The US again
accounted for 21% of GWP in 1996; 1997. Western Europe accounted for 20%; grew at 2.5%, not
enough to cut into its high unemployment, and Japan accounted for 8%. These are the three "economic superpowers" another
presumably destined to compete for mastery in international markets on 21% of GWP. Japan's faltering economy grew at only 0.9% with its share
into the 21st century. As of GWP at 8%. The advanced countries as a whole accounted for the less developed countries: China, an
India, estimated 53% of GWP, with overall growth at 3.0%. The 15 former
Soviet republics and the Four Dragons - South Korea, Taiwan, Hong Kong, and
Singapore - once again posted records countries of 5% Eastern Europe posted growth or better; however, of
many other 1.8%, reversing the long downturn that followed the collapse of
communism. Growth varied widely among these countries, especially in Africa, continued to suffer from e.g., Ukraine
drought, rapid population growth, inflation, at a negative 3.2%, Russia at a positive 0.4%, and civil strife. Central the Baltic
Europe countries at a strong 7%. The area as a whole accounted for 5% of
global output. China and the 15 successor states to the USSR generally made progress India, with a combined population of 2.2
in moving toward "market-friendly" economies, but output in Russia billion or 37% of the world total, grew at 8.8% and 5%, respectively.
Ukraine continued (China's official GDP statistics probably are overstated.) The
developing countries as a whole contributed 42% to fall. GWP with an overall
growth rate of 5.7%. Externally, the nation-state, as a bedrock
economic-political institution, is steadily losing control over
international flows of people, goods, funds, and technology.
Internally, the central government in a number of cases is losing
control over resources as separatist regional movements - typically movements-typically
based on ethnicity - gain momentum, e.g., in the successor states of
the former Soviet Union, in the former Yugoslavia, in India, and in
Canada. 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. The
addition of nearly 100 more than 80 million people each year to an already
overcrowded globe is exacerbating the problems of pollution,
desertification, underemployment, epidemics, and famine. Because of
their own internal problems, the industrialized countries have
inadequate resources to deal effectively with the poorer areas of the
world, which, at least from the economic point of view, are becoming
further marginalized. Toward the end of 1997 and on into 1998, serious
financial difficulties in several high-growth East Asia countries cast
a shadow over short-term global economic prospects. The introduction
of the euro as the common currency of much of Western Europe in
January 1999 will pose serious economic risks because of varying
levels of income and cultural and political differences among the
participating nations. (For specific economic developments in each
country, country of the world in 1997, see the individual country entries.)

Real Growth in global output-gross output (gross world product (GWP)-rose an product,
estimated 4.0% GWP) dropped to 2% in 1997. And, once more, results varied widely among 1998 from 4% in 1997 because of continued
regions recession in Japan, severe financial difficulties in other East
Asian countries, and countries. With its solid 3.8% growth, widespread dislocations in the Russian economy.
The US again economy continued its remarkable sustained prosperity,
growing at 3.9% in 1998, and accounted for 21% 22% of GWP in 1997. GWP. Western Europe
Europe's economies grew at roughly 2.5%, not
enough to cut deeply
into its the region's high unemployment, and accounted for another
unemployment; these economies produced 21% of
GWP. Japan's faltering China, the second largest economy grew at only 0.9% with in the world, continued its share
of GWP at 8%. The advanced countries as a whole rapid growth and accounted for an
estimated 53% 11% of GWP, with overall growth at 3.0%. The 15 former GWP. Japan posted a decline of
Soviet republics 2.6% in 1998 and its share in GWP dropped to 7.4%. As usual, the countries of Eastern Europe posted growth of 15
1.8%, reversing successor nations of the long downturn that followed USSR and the collapse of other old Warsaw Pact nations
communism. Growth varied experienced widely among these countries, e.g., Ukraine
at a negative 3.2%, Russia at a positive 0.4%, and the Baltic different rates of growth. Russia's national
countries at a strong 7%. The area as a whole accounted for product dropped by 5% whereas the nations of
global output. China central and India, with a combined population of 2.2 eastern
billion or 37% of the world total, Europe grew at 8.8% and 5%, respectively.
(China's official GDP statistics probably are overstated.) by 3.4% on average. The
developing countries as a whole contributed 42% to GWP with an overall nations varied widely
in their growth rate of 5.7%. results, with many countries facing population
increases that eat up gains in output. Externally, the nation-state,
as a bedrock
economic-political institution, is steadily losing
control over
international flows of people, goods, funds, and technology.
technology. Internally, the central government in a number of cases is losing
finds its control
over resources slipping as separatist regional movements-typically movements--typically
based on ethnicity - gain ethnicity--gain momentum, e.g., in the successor states of
the former Soviet Union, in the former Yugoslavia, in India, and in
Canada. In Western Europe, governments face the difficult political
problem of channeling resources away from welfare programs in order to
to increase investment and strengthen incentives to seek employment. The
The addition of more than 80 million people each year to an already
overcrowded globe is exacerbating the problems of pollution,
desertification, underemployment, epidemics, and famine. Because of
their own internal problems, the industrialized countries have
inadequate resources to deal effectively with the poorer areas of the
the world, which, at least from the economic point of view, are becoming
becoming further marginalized. Toward the end of 1997 and on into In 1998, serious
financial
difficulties in several high-growth East Asia countries cast
a
shadow over short-term global economic prospects. The introduction
of the euro as the common currency of much of Western Europe in
January 1999 will pose poses serious economic risks because of varying
levels
of income and cultural and political differences among the
participating nations. (For specific economic developments in each
country of the world in 1997, 1998, see the individual country entries.)

Growth in global output (gross world product,
GWP) dropped rose to 2% 3% in 1998 1999 from 4% 2% in 1997 because of 1998 despite continued
recession in Japan, severe financial difficulties in other East
Asian countries, and widespread dislocations in the Russian economy.
several transition economies, notably Russia. The US economy continued its remarkable sustained prosperity,
growing at 3.9% 4.1% in 1998, 1999, and accounted for 22% 23% of GWP. Western
Europe's economies grew at roughly 2.5%, 2%, not enough to cut deeply
into the region's high unemployment; these the EU economies produced 21% 20% of
GWP. China, the second largest economy in the world, continued its
rapid strong growth and accounted for 11% 12% of GWP. Japan posted a decline of
2.6% grew at only 0.3% in 1998 and 1999; its share in GWP dropped to 7.4%. is 7%. As usual, the 15
successor nations of the USSR and the other old Warsaw Pact nations
experienced widely different rates of growth. Russia's national
product dropped by 5% whereas the nations of central and eastern
Europe grew by 3.4% on average. The developing nations varied widely
in their growth results, with many countries facing population
increases that eat up gains in output. Externally, the nation-state,
as a bedrock economic-political institution, is steadily losing
control over international flows of people, goods, funds, and
technology. Internally, the central government often finds its control
over resources slipping as separatist regional movements--typically
movements - typically based on ethnicity--gain ethnicity - gain momentum, e.g., in many of the successor states of
the former Soviet Union, in the former Yugoslavia, in India, and in
Canada. 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.
The addition of more than 80 million people each year to an already
overcrowded globe is exacerbating the problems of pollution,
desertification, underemployment, epidemics, and famine. Because of
their own internal problems, problems and priorities, the industrialized countries have
inadequate devote insufficient resources to deal effectively with the poorer areas of
the world, which, at least from the economic point of view, are
becoming further marginalized. In 1998, serious Continued financial
difficulties in several high-growth East Asia countries Asia, Russia, and many African nations cast a
shadow over short-term global economic prospects. The introduction
of the euro as the common currency of much of Western Europe in
January 1999 1999, while strengthening prospects for an integrated economic powerhouse, poses serious economic risks because of varying levels
of income and cultural and political differences among the
participating nations. (For specific economic developments in each
country of the world in 1998, 1999, see the individual country entries.)

Growth in global output (gross world product, GWP) rose to 3% 4.8% in 1999 2000 from 2% 3.5% in 1998 1999, despite continued recession low growth in Japan, severe financial difficulties in other East Asian countries, and widespread dislocations in several transition economies, notably Russia. economies. The US economy continued its remarkable sustained prosperity, growing at 4.1% 5% in 1999, and 2000, although growth slowed in fourth quarter 2000; the US accounted for 23% of GWP. Western Europe's The EU economies grew at roughly 2%, not enough to cut deeply into the region's high unemployment; the EU economies 3.3% and produced 20% of GWP. China, the second largest economy in the world, continued its strong growth and accounted for 12% 10% of GWP. Japan grew at only 0.3% 1.3% in 1999; 2000; its share in GWP is 7%. As usual, the 15 successor nations of the USSR and the other old Warsaw Pact nations experienced widely different rates of growth. The developing nations also varied widely in their growth results, with many countries facing population increases that eat up gains in output. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, and in Canada. 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. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. 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 the economic point of view, are becoming further marginalized. Continued financial difficulties in East Asia, Russia, and many African nations nations, as well as the slowdown in US economic growth, cast a shadow over short-term global economic prospects. prospects; GWP probably will grow at 3-4% in 2001. The introduction of the euro as the common currency of much of Western Europe in January 1999, while strengthening prospects paving the way for an integrated economic powerhouse, poses serious economic risks because of varying levels of income and cultural and political differences among the participating nations. (For specific economic developments in each country of the world in 1999, 2000, see the individual country entries.)

Growth in global output (gross world product, GWP) rose to fell from 4.8% in 2000 from 3.5% in 1999, despite continued low growth in Japan, severe financial difficulties in other East Asian countries, and widespread dislocations to 2.2% in several transition economies. 2001. The US economy continued its remarkable sustained prosperity, growing at 5% in 2000, although growth slowed causes: slowdowns in fourth quarter 2000; the US accounted for 23% economy (21% of GWP. The GWP) and in the 15 EU economies grew at 3.3% (20% of GWP); continued stagnation in the Japanese economy (7.3% of GWP); and produced 20% spillover effects in the less developed regions of GWP. the world. China, the second largest economy in the world, continued world (12% of GWP), proved an exception, continuing its strong growth and accounted for 10% rapid annual growth, officially announced as 7.3% but estimated by many observers as perhaps two percentage points lower. Russia (2.6% of GWP. Japan grew at only 1.3% in 2000; GWP), with 5.2% growth, continued to make uneven progress, its share in GWP is 7%. As usual, GDP per capita still only one-third that of the 15 leading industrial nations. The other 14 successor nations of the USSR and the other old Warsaw Pact nations again experienced widely different rates divergent growth rates; the three Baltic nations were strong performers, in the 5% range of growth. The developing nations also varied in their growth results, with many countries facing population increases that eat up gains in output. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Indonesia, and in Canada. 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. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. 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 the economic point of view, are becoming further marginalized. Continued financial difficulties in East Asia, Russia, and many African nations, as well as the slowdown in US economic growth, cast a shadow over short-term global economic prospects; GWP probably will grow at 3-4% in 2001. 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 serious economic risks because of varying levels of income and cultural and political differences among the participating nations. The terrorist attacks on the US on 11 September 2001 accentuate a further growing risk to global prosperity, illustrated, for example, by the reallocation of resources away from investment to anti-terrorist programs. (For specific economic developments in each country of the world in 2000, 2001, see the individual country entries.)

Growth in global output (gross world product, GWP) fell from 4.8% in 2000 to 2.2% in 2001. 2001 and 2.7% in 2002. The causes: slowdowns sluggishness in the US economy (21% of GWP) and in the 15 EU economies (20% (19% of GWP); continued stagnation in the Japanese economy (7.3% (7.2% of GWP); and spillover effects in the less developed regions of the world. China, the second largest second-largest economy in the world (12% of GWP), proved an exception, continuing its rapid annual growth, officially announced as 7.3% 8% but estimated by many observers as perhaps two percentage points lower. Russia (2.6% of GWP), with 5.2% 4% growth, continued to make uneven progress, its GDP per capita still only one-third that of the leading industrial nations. The other 14 successor nations of the USSR and the other old Warsaw Pact nations again experienced widely divergent growth rates; the three Baltic nations were continued as strong performers, in the 5% range of growth. The developing nations also varied in their growth results, with many countries facing population increases that eat up erode gains in output. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Indonesia, and in Canada. Externally, the central government is losing decision-making powers to international bodies. 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. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. 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 the economic point of view, are becoming further marginalized. 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 of varying levels of income and cultural and political differences among the participating nations. The terrorist attacks on the US on 11 September 2001 accentuate a further growing risk to global prosperity, illustrated, for example, by the reallocation of resources away from investment to anti-terrorist programs. The opening of war in March 2003 between a US-led coalition and Iraq added new uncertainties to global economic prospects. (For specific economic developments in each country of the world in 2001, 2002, see the individual country entries.)

Growth in global Global output (gross world product, GWP) fell from 4.8% in 2000 to 2.2% in 2001 and 2.7% in 2002. The causes: sluggishness in the US economy (21% of GWP) and in the 15 EU economies (19% of GWP); continued stagnation in the Japanese economy (7.2% of GWP); and spillover effects in the less developed regions of the world. China, the second-largest economy rose by 3.7% in the world (12% of GWP), proved an exception, continuing its rapid annual growth, officially announced as 8% but estimated 2003, led by many observers as perhaps two percentage points lower. China (9.1%), India (7.6%), and Russia (2.6% of GWP), with 4% growth, continued to make uneven progress, its GDP per capita still only one-third that of the leading industrial nations. (7.3%). The other 14 successor nations of the USSR and the other old Warsaw Pact nations again experienced widely divergent growth rates; the three Baltic nations continued as strong performers, in the 5% 5%-7% range of growth. Growth results posted by the major industrial countries varied from a loss by Germany (-0.1%) to a strong gain by the United States (3.1%). The developing nations also varied in their growth results, with many countries facing population increases that erode gains in output. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Iraq, in Indonesia, and in Canada. Externally, the central government is losing decision-making powers to international bodies. 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. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. 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 the economic point of view, are becoming further marginalized. 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 of varying levels of income and cultural and political differences among the participating nations. The terrorist attacks on the US on 11 September 2001 accentuate a further growing risk to global prosperity, illustrated, for example, by the reallocation of resources away from investment to anti-terrorist programs. The opening of war in March 2003 between a US-led coalition and Iraq added new uncertainties to global economic prospects. (For specific After the coalition victory, the complex political difficulties and the high economic developments in each country cost of the world establishing domestic order in 2002, see the individual country entries.) Iraq became major global problems that continue into 2004.

Global output rose by 3.7% 4.9% in 2003, 2004, led by China (9.1%), India (7.6%), and Russia (7.3%). (6.7%), and India (6.2%). The other 14 successor nations of the USSR and the other old Warsaw Pact nations again experienced widely divergent growth rates; the three Baltic nations continued as strong performers, in the 5%-7% 7% range of growth. Growth results posted by the major industrial countries varied from a loss by Germany (-0.1%) small gain in Italy (1.3%) to a strong gain by the United States (3.1%). (4.4%). The developing nations also varied in their growth results, with many countries facing population increases that erode gains in output. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Iraq, in Indonesia, and in Canada. Externally, the central government is losing decision-making decisionmaking powers to international bodies. bodies, notably the European Union. 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. The addition of 80 75 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. 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 the an economic point of view, are becoming further marginalized. 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 of varying levels of income and cultural and political differences among the participating nations. The terrorist attacks on the US on 11 September 2001 accentuate a further growing risk to global prosperity, illustrated, for example, by the reallocation of resources away from investment to anti-terrorist programs. The opening of war in March 2003 between a US-led coalition and Iraq added new uncertainties to global economic prospects. After the coalition victory, the complex political difficulties and the high economic cost of establishing domestic order in Iraq became major global problems that continue continued into 2004. 2005.

Global output rose by 4.9% 4.4% in 2004, 2005, led by China (9.1%), Russia (6.7%), and (9.3%), India (6.2%). (7.6%), and Russia (5.9%). The other 14 successor nations of the USSR and the other old Warsaw Pact nations again experienced widely divergent growth rates; the three Baltic nations continued as strong performers, in the 7% range of growth. Growth results posted by the major industrial countries varied from a small no gain in for Italy (1.3%) to a strong gain by the United States (4.4%). (3.5%). The developing nations also varied in their growth results, with many countries facing population increases that erode gains in output. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Iraq, in Indonesia, and in Canada. Externally, the central government is losing decisionmaking powers to international bodies, notably the European Union. EU. 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. The addition of 75 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. 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 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 of varying levels of income and cultural and political differences among the participating nations. The terrorist attacks on the US on 11 September 2001 accentuate accentuated a further growing risk to global prosperity, illustrated, for example, by the reallocation of resources away from investment to anti-terrorist programs. The opening of war in March 2003 between a US-led coalition and Iraq added new uncertainties to global economic prospects. After the coalition victory, the complex political difficulties and the high economic cost of establishing domestic order in Iraq became major global problems that continued into 2005. 2006.

Global output rose by 4.4% 5% in 2005, 2006, led by China (9.3%), (10.5%), India (7.6%), (8.5%), and Russia (5.9%). (6.6%). The other 14 other successor nations of the USSR and the other old Warsaw Pact nations again experienced widely divergent growth rates; the three Baltic nations continued as strong performers, in the 7% 7%-10% range of growth. Growth results posted by the major industrial countries varied from no gain for Italy to a strong gain by the United States (3.5%). (3.4%). The developing nations also varied in their growth results, with many countries facing population increases that erode gains in output. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Iraq, in Indonesia, and in Canada. Externally, the central government is losing decisionmaking powers to international bodies, notably the EU. 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. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. 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 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 of varying levels of income and cultural and political differences among the participating nations. The terrorist attacks on the US on 11 September 2001 accentuated a further growing risk to global prosperity, illustrated, for example, by the reallocation of resources away from investment to anti-terrorist programs. The opening of war in March 2003 between a US-led coalition and Iraq added new uncertainties to global economic prospects. After the coalition victory, the complex political difficulties and the high economic cost of establishing domestic order in Iraq became major global problems that continued into through 2006.

Global output rose by 5% 5.2% in 2006, 2007, led by China (10.5%), (11.4%), India (8.5%), (9.2%), and Russia (6.6%). (8.1%). The 14 other successor nations of the USSR and the other old Warsaw Pact nations again experienced widely divergent growth rates; the three Baltic nations continued as strong performers, in the 7%-10% 8%-10% range of growth. Growth results posted by From 2006 to 2007 growth rates slowed in all the major industrial countries varied from no gain except for Italy to a strong gain by the United States (3.4%). The developing Kingdom (3.1%). Analysts attribute the slowdown to uncertainties in the financial markets and lowered consumer confidence. Worldwide, nations also varied widely in their growth results, with many countries facing population increases that erode gains in output. results. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Iraq, in Indonesia, and in Canada. Externally, the central government is losing decisionmaking powers to international bodies, notably the EU. 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. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. 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 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 of varying levels of income and cultural and political differences among the participating nations. The terrorist attacks on the US on 11 September 2001 accentuated a further growing risk to global prosperity, illustrated, for example, by the reallocation of resources away from investment to anti-terrorist programs. The opening of war in March 2003 between a US-led coalition and Iraq added new uncertainties to global economic prospects. After the initial coalition victory, the complex political difficulties and the high economic cost of establishing domestic order in Iraq became major global problems that continued through 2006. 2007.

Global output rose by 3.8% in 2008, down from 5.2% in 2007, 2007. Among major economies, growth was led by China (11.4%), India (9.2%), and (9.8%), Russia (8.1%). The 14 other successor nations of the USSR (7.4%), and the other old Warsaw Pact India (7.3%). Worldwide, nations again experienced varied widely divergent growth rates; the three Baltic nations continued as strong performers, in the 8%-10% range of growth. From 2006 to 2007 their growth results, with Macau (15%), Azerbaijan (13.2%), and Angola (11.6%), registering the highest. Growth rates slowed in all the major industrial countries except for the United Kingdom (3.1%). Analysts attribute the slowdown to and most developing countries, because of uncertainties in the financial markets and lowered consumer confidence. Worldwide, nations varied widely in their growth results. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Iraq, in Indonesia, and in Canada. Externally, the central government is losing decisionmaking powers to international bodies, notably the EU. 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. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. 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 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 of varying levels of income and cultural and political differences among the participating nations. 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. The opening of war in March 2003 between a US-led coalition and Iraq added new uncertainties to global economic prospects. After the initial coalition victory, the The complex political difficulties and the high economic cost of establishing domestic order in Iraq became major global problems that continued through 2007. 2008.

In 2010, world output - and per capita income - began to recover from the 2008-09 recession, the first global downturn since 1946. Gross World Product (GWP) grew 4.6%, 4.9%, largely on the strength of rebounding exports, which rose about 20% from the level of 2009. Growth was not evenly distributed across countries, however. Lower income countries - those with per capita incomes below $30,000 per year - averaged 6.3% 6.6% growth, while higher income countries - with per capita incomes above $30,000 - averaged just 2.8% 2.9% growth. And countries with current account surpluses averaged 6.0% 6.3% growth, while those with current account deficits averaged just 3.4% growth. Among large economies, China (+10.1%), Taiwan (+8.3%), (+10.8%), India (+8.3%), (+10.4%), China (+10.3%), Brazil (+7.5%), and South Korea (+6.1%) recorded the biggest GDP gains - China also became the world's largest exporter. Continuing uncertainties in mortgage and financial markets resulted in slower growth in Japan (+3.0%), (+3.9%), the US (+2.8%), and the European Union (+1.7%). (+1.8%). In 2010, global unemployment continued to creep upwards, reaching 8.8% - underemployment, especially in the developing world, remained much higher. Global gross fixed investment stabilized at about 23% of GWP, after a significant drop in 2009. World trade appears to be returning to pre-2009 patterns, with current account surpluses or deficits rising for a majority of countries. World external debt, however, dropped again in 2010 - about 5% from the 2009 level, as many countries reduced borrowing. Many, if not most, countries pursued expansionary monetary and fiscal policies. The global money supply, both narrowly and broadly defined, increased roughly 10%, as countries tried to keep interest rates low; the global budget deficit stablilized stabilized at roughly $3.5 trillion, trillion - 5.3% of GDP, as countries tried to rein in spending and slow the rise of public debt.
The international financial crisis of 2008-09 presents the world economy with a major new challenge, together with several long-standing ones. The fiscal stimulus packages put in place in 2009-10 required most countries to run budget deficits - government balances have deteriorated for 14 out of every 15 countries. Treasuries issued new public debt - totaling $5.5 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 the economies. As 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. At the same time, governments will 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.
Long-standing challenges the world faces are several. 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, funds, and technology. Internally, central governments often find their control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Iraq, in Indonesia, and in Canada. Externally, central governments are losing decisionmaking powers to international bodies, most notably the EU. 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 are culturally and politically diverse and have varying levels and rates of growth of income, and hence, differing needs for monetary and fiscal policies. 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. Wars in Iraq and Afghanistan added new uncertainties to global economic prospects.
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 has 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.

The international financial crisis of 2008-09 led to the first downturn in global output since 1946 and presented the world 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. Financial stabilization and stimulus programs that started in 2009-11, combined with lower tax revenues in 2009-10, required most countries to run large budget deficits. Treasuries issued new public debt - totaling $7.6 $9.1 trillion since 2008 - to pay for the additional expenditures. To keep interest rates low, most central banks monetized that debt, injecting large sums of money into their economies - between December 2008 and December 2012 2013 the global money supply increased by more than 31%. 35%. Governments now are faced with 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. And when economic activity picks up, central banks will confront the difficult task of containing inflation without raising interest rates so high they snuff out further growth.
Fiscal and monetary data for 2012 are currently available for 180 countries, which together account for 98.5% of World GDP. Of the 180 countries, 85 pursued unequivocally expansionary policies, boosting government spending while also expanding their money supply relatively rapidly - faster than the world average of 4.1%; 37 followed restrictive fiscal and monetary policies, reducing government spending and holding money growth to less than the 4.1% average; and the remaining 58 followed a mix of counterbalancing fiscal and monetary policies, either reducing government spending while accelerating money growth, or boosting spending while curtailing money growth.
(For more information, see attached spreadsheet,Fiscal and Monetary Data, 2008-2012.)
In 2012, fiscal policy shifted towards greater austerity for a majority of the countries. In an attempt to attack their deficit and debt problems head-on, nearly 5 out of 6 countries slowed the rate of growth of government spending, and 1 in 3 countries actually lowered the level of their expenditures. The global growth rate for government expenditures dropped from 5.9% in 2010 and 10.1% in 2011, to just 1.4% in 2012. Roughly 1 out of 3 central banks tightened monetary policy, decelerating the rate of growth of their money supply, and about 1 out of 7 actually withdrew money from circulation. Growth of the global money supply, as measured by the narrowly defined M1, slowed from 8.7% in 2009 and 10.4% in 2010 to 5.2% in 2011 and 4.1% in 2012.
These policy choices significantly affected economic performance. The global budget deficit narrowed to roughly $2.7 trillion in 2012, or 3.8% of World GDP. But growth of the world economy slipped from 5.1% in 2010 and 3.7% in 2011, to just 3.1% in 2012. And world unemployment increased to 9.2%. 2012, and 2.9% in 2013.
Countries with expansionary fiscal and monetary policies achieved significantly higher rates of growth, lower unemployment, higher growth of tax revenues, and greater success reducing the public debt burden than those countries that chose contractionary 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 37 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 4.0%, Russia 3.4%, Turkey 3.0%, the United States 2.2%, and Canada 1.9%, while among the 37, Brazil grew 1.3%, Germany 0.7%, France 0.1%, Belgium -0.2%, Netherlands -0.5%, Spain -1.4%, and Italy -2.3%. The median unemployment rate for the 37 countries jumped to 11.5%, while the median for the pro-growth countries held steady at 7.3%.
Faster GDP growth and lower unemployment rates translated into increased tax revenues and a lower debt burden. 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 37 countries that chose austere economic policies. Budget balances improved for about half of the 37, but, for most, debt grew faster than GDP, and the median level of their public debt as a share of GDP increased 2.5 percentage points, to 57.8%. On the other hand, budget balances deteriorated for most of the 85 pro-growth countries, but GDP growth outpaced increases in debt, and the median level of public debt as a share of GDP actually declined slightly (-0.1 percentage points).
The world recession has suppressed inflation rates - world inflation declined 1.0 percentage point in 2012 to about 4.0%. 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 that followed more austere fiscal and monetary policies. Overall, the latter countries also improved their current account balances by shedding imports; as a result, current account balances deteriorated for most of the countries that pursued pro-growth policies. Slower growth of world income reduced import demand and crude oil prices fell. Consequently, the dollar value of world trade grew just 1% in 2012, compared with 18% in 2011.
Beyond the current global slowdown, the world faces several long-standing economic challenges. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of 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, has created economic risks because the participating nations have varying income levels and growth rates, and hence, require a different mix of monetary and fiscal policies. Governments, especially in Western Europe, 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 are unable to devote sufficient 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 - the diversion of resources away from capital investments to counter-terrorist programs.
Despite these vexing problems, the world economy also shows great promise. Technology has made possible further advances in a wide range of 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.

The international financial crisis of 2008-09 led to the first downturn in global output since 1946 and presented the world 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. Financial stabilization and stimulus programs that started in 2009-11, combined with lower tax revenues in 2009-10, required most countries to run large budget deficits. Treasuries issued new public debt - totaling $9.1 trillion since 2008 - to pay for the additional expenditures. To keep interest rates low, most central banks monetized that debt, injecting large sums of money into their economies - between December 2008 and December 2013 the global money supply increased by more than 35%. Governments are now faced with 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. When economic activity picks up, central banks will confront the difficult task of containing inflation without raising interest rates so high they snuff out further growth.
Fiscal and monetary data for 2013 are currently available for 180 countries, which together account for 98.5% of World world GDP. Of the 180 countries, 82 pursued unequivocally expansionary policies, boosting government spending while also expanding their money supply relatively rapidly - faster than the world average of 3.1%; 28 followed restrictive fiscal and monetary policies, reducing government spending and holding money growth to less than the 3.1% average; and the remaining 70 followed a mix of counterbalancing fiscal and monetary policies, either reducing government spending while accelerating money growth, or boosting spending while curtailing money growth.
(For more information, see attached spreadsheet,Fiscal and Monetary Data, 2008-2012.)
In 2013, for many countries the drive for fiscal austerity that began in 2011 abated. While 5 out of 6 countries slowed spending in 2012, only 1 in 2 countries slowed spending in 2013. About 1 in 3 countries actually lowered the level of their expenditures. The global growth rate for government expenditures increased from 1.6% in 2012 to 5.1% in 2013, after falling from a 10.1% growth rate in 2011. On the other hand, nearly 2 out of 3 central banks tightened monetary policy in 2013, decelerating the rate of growth of their money supply, compared with only 1 out of 3 in 2012. Roughly 1 of 4 central banks actually withdrew money from circulation, an increase from 1 out of 7 in 2012. Growth of the global money supply, as measured by the narrowly defined M1, slowed from 8.7% in 2009 and 10.4% in 2010 to 5.2% in 2011, 4.6% in 2012, and 3.1% in 2013. Several notable shifts occurred in 2013. By cutting government expenditures and expanding money supplies, the US and Canada moved against the trend in the rest of the world. France reversed course completely. Rather than reducing expenditures and money as it had in 2012, it expanded both. Germany reversed its fiscal policy, sharply expanding federal spending, while continuing to grow the money supply. South Korea shifted monetary policy into high gear, while maintaining a strongly expansionary fiscal policy. Japan, however, continued to pursue austere fiscal and monetary policies.
Austere economic policies have significantly affected economic performance. The global budget deficit narrowed to roughly $2.7 trillion in 2012 and $2.1 trillion in 2013, or 3.8% and 2.5% of World GDP, respectively. But growth of the world economy slipped from 5.1% in 2010 and 3.7% in 2011, to just 3.1% in 2012, and 2.9% in 2013.
Countries with expansionary fiscal and monetary policies achieved significantly higher rates of growth, higher growth of tax revenues, and greater success reducing the public debt burden than those countries that chose contractionary policies. In 2013, the 82 countries that followed a pro-growth approach achieved a median GDP growth rate of 4.7%, compared to 1.7% for the 28 countries with restrictive fiscal and monetary policies, a difference of 3 percentage points. Among the 82, China grew 7.7%, Philippines 6.8%, Malaysia 4.7%, Pakistan and Saudi Arabia 3.6%, Argentina 3.5%, South Korea 2.8%, and Russia 1.3%, while among the 28, Brazil grew 2.3%, Japan 2.0%, South Africa 2.0%, Netherlands -0.8%, Croatia -1.0%, Iran -1.5%, Portugal -1.8%, Greece -3.8%, and Cyprus -8.7%.
Faster GDP growth and lower unemployment rates translated into increased tax revenues and a less cumbersome debt burden. Revenues for the 82 expansionary countries grew at a median rate of 10.7%, whereas tax revenues fell at a median rate of 6.8% for the 28 countries that chose austere economic policies. Budget balances improved for about three-quarters of the 28, but, for most, debt grew faster than GDP, and the median level of their public debt as a share of GDP increased 9.1 percentage points, to 59.2%. On the other hand, budget balances deteriorated for most of the 82 pro-growth countries, but GDP growth outpaced increases in debt, and the median level of public debt as a share of GDP increased just 1.9%, to 39.8%.
The world recession has suppressed inflation rates - world inflation declined 1.0 percentage point in 2012 to about 4.1% and 0.2 percentage point to 3.9% in 2013. In 2013 the median inflation rate for the 82 pro-growth countries was 1.3 percentage points higher than that for the countries that followed more austere fiscal and monetary policies. Overall, the latter countries also improved their current account balances by shedding imports; as a result, current account balances deteriorated for most of the countries that pursued pro-growth policies. Slow growth of world income continued to hold import demand in check and crude oil prices fell. Consequently, the dollar value of world trade grew just 1.3% in 2013.
Beyond the current global slowdown, the world faces several long-standing long standing economic challenges. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of 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, has created economic risks because the participating nations have varying income levels and growth rates, and hence, require a different mix of monetary and fiscal policies. Governments, especially in Western Europe, 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 are unable to devote sufficient 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 - the diversion of resources away from capital investments to counter-terrorism programs.
Despite these vexing problems, the world economy also shows great promise. Technology has made possible further advances in a wide range of 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.