World economy

For other uses, see World Economy (disambiguation).
World GDP per capita between 1500 and 2003
World economy

The world economy or global economy is the economy of all humans in the world, referring to the global economic system, which includes all economic activities conducted both within and between nations, including production, consumption, economic management, work in general, financial transactions and trade of goods and services.[1][2] In some contexts, the two terms are distinct: the "international" or "global economy" is measured separately and distinguished from national economies, while the "world economy" is simply an aggregate of the separate countries' measurements. Beyond the minimum standard concerning value in production, use and exchange, the definitions, representations, models and valuations of the world economy vary widely. It is inseparable from the geography and ecology of planet Earth.

It is common to limit questions of the world economy exclusively to human economic activity, and the world economy is typically judged in monetary terms, even in cases in which there is no efficient market to help valuate certain goods or services, or in cases in which a lack of independent research, genuine data or government cooperation makes calculating figures difficult. Typical examples are illegal drugs and other black market goods, which by any standard are a part of the world economy, but for which there is, by definition, no legal market of any kind.

However, even in cases in which there is a clear and efficient market to establish monetary value, economists do not typically use the current or official exchange rate to translate the monetary units of this market into a single unit for the world economy since exchange rates typically do not closely reflect worldwide value – for example, in cases where the volume or price of transactions is closely regulated by the government.

Rather, market valuations in a local currency are typically translated to a single monetary unit using the idea of purchasing power. This is the method used below, which is used for estimating worldwide economic activity in terms of real United States dollars or euros. However, the world economy can be evaluated and expressed in many more ways. It is unclear, for example, how many of the world's 7.8 billion people (as of March 2020)[3][4] have most of their economic activity reflected in these valuations.

According to Maddison[who?], until the middle of the 19th century, global output was dominated by China and India with Indian subcontinent being the world's largest economy from 1 C.E to 17 C.E. Waves of the Industrial Revolution in Western Europe and Northern America shifted the shares to the Western Hemisphere. As of 2024, the following 20 countries or collectives have reached an economy of at least US$2 trillion by GDP in nominal or PPP terms: Brazil, Canada, China, Egypt, France, Germany, India, Indonesia, Italy, Japan, Mexico, South Korea, Russia, Saudi Arabia, Spain, Turkey, the United Kingdom, the United States, the European Union and the African Union.[5][6]

Despite high levels of government investment, the global economy decreased by 3.4% in 2020 in the midst of the COVID-19 pandemic,[7] an improvement from the World Bank's initial prediction of a 5.2 percent decrease.[8] Cities account for 80% of global GDP, thus they faced the brunt of this decline.[9][10] The world economy increased again in 2021 with an estimated 5.5 percent rebound.[11]

  1. ^ "THE GLOBAL ECONOMY | definition in the Cambridge English Dictionary". dictionary.cambridge.org. Archived from the original on 4 May 2022. Retrieved 20 September 2020.
  2. ^ "World Economy." – Definition. American English Definition of with Pronunciation by Macmillan Dictionary. N.p., n.d. Web. 2 January 2015.
  3. ^ "World Population: 2020 Overview". Archived from the original on 2021-03-09. Retrieved 2020-09-20.
  4. ^ "2020 World Population Data Sheet". Archived from the original on 2020-09-28. Retrieved 2020-09-20.
  5. ^ "World Economic Outlook Database April 2024". www.imf.org. Retrieved 2024-11-09.
  6. ^ "More QE From the Bank of England to Support the UK Economy in 2021". Vant Age Point Trading. Archived from the original on 20 January 2021. Retrieved 25 January 2021.
  7. ^ OECD (March 2021). "OECD Economic Outlook, Interim Report March 2021". Archived from the original on 21 May 2023. Retrieved 21 May 2023.
  8. ^ "The Global Economic Outlook During the COVID-19 Pandemic: A Changed World". World Bank. Archived from the original on 2021-06-09. Retrieved 2021-06-07.
  9. ^ "Cities are the hub of the global green recovery". blogs.worldbank.org. Archived from the original on 2021-06-07. Retrieved 2021-06-07.
  10. ^ "Mayor of Lima sees COVID-19 as spark for an urban hub to the green recovery". European Investment Bank. Archived from the original on 2022-04-08. Retrieved 2021-06-07.
  11. ^ Lucia Quaglietti, Collette Wheeler (11 January 2022). "The Global Economic Outlook in five charts". World Bank. Archived from the original on 21 May 2023. Retrieved 21 May 2023.