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Welcome!

Economic Forces

Dr. Satyendra Singh

Professor, Marketing & International Business

Conference Chair, ABEM Conference

University of Winnipeg, CANADA

s.singh@uwinnipeg.ca

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Economy

Gross National Income (GNI)

Income generated by a nation’s residents from international and domestic activity

Preferred over GDP

GNI/Capita

For comparison of well-being of citizens, market or investment potential

Other economic indicators

Interest, inflation, exchange rate, PPP, BOP, income distribution (GINI Index)…

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Kinds of economy

Formal economy: Visible, recorded, audited…

Informal economy

Underground (Illegal!, USA 10%)

Effects on economy: wage rate, labor supply,

union contract, quality of life…

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Economic development measurement (GNI/Capita), World Bank

Low Income (<$1000)

Lower middle income ($1000-$3000

Upper middle income ($3000-$9000)

Higher income (>$10000)

Canada 🡪 $40,000

India 🡪 $4,000

China🡪 $9,000

Ghana🡪 $3,000

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Levels of economic development

Developed

Nations that are the most technically developed

Newly industrialized economies (NIEs)

The fast-growing upper MIG and HIG economies such as Taiwan, Hong Kong, and Singapore

Newly industrializing countries (NICs)

Brazil, Mexico, Malaysia, Chile and Thailand

Developing

Nations that are less technically developed

Emerging Markets

Transformation from controlled to market economy

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Planned economy to market economy

% of GDP owned by governments

UK: 10% 🡪 4%

China: 80% 🡪 50%

Chie: 75% 🡪 25%

Mexico: 66% 🡪 33%

Planned economy: No competition. Government owns businesses.

Market economy: Governed by market forces ie competition, price, quality

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Wal*Mart economy

$+450b sales

4000 stores

30 countries

Only 40 countries (out of 227) above Wal*Mart

Ghana $40b (ppp 80b)

Manitoba $50b

International businesses have power.

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Purchasing Power Parity (PPP)…

The number of units of a currency required to buy the same amount of goods and services in a domestic market that $1.00 would buy in the U.S.

Helps make comparisons possible across economies

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PPP calculation

If,

1 Lt. Milk US $1.00

1 Lt. Milk India Rs. 20.00

Then, PPP: US $1 = Rs. 20

Reality: US $1 = Rs. 40

ie Rs. is 50% undervalued – artificially?!

However, PPP is based on consumer expenditure on basket of essential goods

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In-class group activity (30 min)

Identify any 5 indicators (non obvious) that would represent an economic force.

Develop a method to measure each indicator (ie force) quantitatively.

Assume USA (or any country you like with justification) as a benchmark and compare the magnitude of the economic forces between USA and any one representative country from each continent including an island.

Please e-mail your findings at drsatsingh@gmail.com and write “your group # and Economic Forces” in the subject line.