EUROPEAN AND INTERNATIONAL

ECONOMIC ENVIRONMENT

UB Bachelor Degree in International Business

Academic Year 2020/2021

Federico Tadei – federico.tadei@ub.edu

Department of Economic History
University of Barcelona
 A Very Atypical Year
1. If you have been sick or in contact with someone
sick in the past 14 days, self-quarantine at home
and do not come to class.

2. If you know of any Covid-19 case, send an email to

covid.economia.empresa@ub.edu.

3. Always wear a mask covering mouth and nose

4. Keep social distance (1.5-2 m)

5. Wash hands
3

Introduction
A new way of looking at the world...

What is this?
Countries sized by total GDP
GDP=Gross Domestic Product

The total value of goods

produced and services provided
in a country during one year.
Countries sized by total population
 GDP per Capita

Total GDP divided by total

population
GDP per capita PPP, in 2020
PPP=Purchasing Power Parity

To take into account the different

costs of living in different countries
What if we add other indicators?

Life expectancy?

Years of Schooling?
 Human Development Index

“The Human Development Index (HDI) is a summary measure

of average achievement in key dimensions of human
development:
• a long and healthy life,
• being knowledgeable,
• and have a decent standard of living.”

Souce: UNDP Human Development Report

http://hdr.undp.org/en/content/human-development-index-hdi
 Huge Differences in Development!
YEAR ? ?
2018

Gross national income (GNI) per capita, PPP $

Expected years of schooling

Life expectancy at birth

Source: UNDP (2019)

http://hdr.undp.org/sites/default/files/hdr2019.pdf
 Huge Differences in Development!
YEAR Norway Niger
2018

Gross national income (GNI) per capita, PPP $ ? ?

Expected years of schooling ? ?

Life expectancy at birth ? ?

Source: UNDP (2019)

http://hdr.undp.org/sites/default/files/hdr2019.pdf
 Huge Differences in Development!
YEAR Norway Niger
2018

Gross national income (GNI) per capita, PPP $ 68,059 ?

Expected years of schooling 18.1 ?

Life expectancy at birth 82.3 ?

Source: UNDP (2019)

http://hdr.undp.org/sites/default/files/hdr2019.pdf
 Huge Differences in Development!
YEAR Norway Niger
2018

Gross national income (GNI) per capita, PPP $ 68,059 912

Expected years of schooling 18.1 6.5

Life expectancy at birth 82.3 62.0

Source: UNDP (2019)

http://hdr.undp.org/sites/default/files/hdr2019.pdf
Why?
19

This Course
 Goal of This Course

The goal of this class is to provide the information and

methodological tools necessary to analyze and interpret the
current global economic context.
 What We Will Do in This Course
Two sections

1. Study which factors can account for economic growth in

the long-run and what can explain the huge differences in
income that we observe today between poor and rich countries;

2. Analyze the historical origins of the current economic

environment in Europe, the Americas, Asia, and Africa.
 Course Outline
1. Fundamental causes of economic growth

1. Introduction: Measuring Standards of Living

2. Proximate Causes of Economic Growth
3. Geography
4. Institutions
5. Culture

2. Brief world history since the 1950s

1. The Golden Age

2. Stagflation
3. Globalization
4. Economic Crisis
5. The Developing World: Latin America & Africa

* If we have time at the end, a few classes on Global

Pandemics
 Type of Assessment

Students can decide whether they want to be evaluated under

continuous or single assessment.

The deadline to withdraw from the continuous assessment is the

day before the final exam.
 Evaluation
Under continuous assessment, grading will be based on:

Two exercises: 30% of the total grade.

Participation: 10% of the grade.

Final exam: 60% of the grade.

Under single assessment (and repeat assessment), grading will

be based on:

Final exam: 100% of the grade

 Two Exercises

First Exercise on “Causes of economic growth” (12/11, due:

19/11)
• Convincing me of “your” economic growth theory

Second Exercise on “Brief world history since the 1950s” (21/12,

due: 7/1)
• Speculating on the economic performance of a country in the
next 20 years

*Do not worry if you cannot attend the day of the exercise
 Participation
Not attendance, but attitude.

Best way of keeping points: paying attention, participating in

discussions, asking questions if something is not clear. There
are no stupid questions…please ask!

Best way of losing points: chatting, for example (two-strikes

rule)

You will not be penalized if you don’t come to class. Come

only if you find it useful (and if you are not sick or have been in
close contact with someone sick, obviously).
 Final Exam

Final exam. It covers all the material. In order to pass the

subject, the minimum grade for the final exam is 4 out of 10.
There will be four questions.

Continuous assessment: You need to answer three of them.

Single assessment (and repeat assessment): you need to

answer all four questions.

The final exam will be on January 27, h. 12-14:30. The re-

evaluation exam (repeat assessment) will be on February 17, h.
12-14:30.
 Readings

A list of relevant readings is provided in the syllabus.

Readings are not compulsory but can help you better understand
the material covered in class.
 Class Schedule

• First semester, 5/10-14/1

• Monday and Thursday, h. 10-12
• Room 2203 or at home (every other week)
30

A Note on Plagiarism
31

What is plagiarism?

Presenting someone else’s work as your own

32

Examples
• Taking ideas without properly citing the source
• Quotations without sources
• Excessive quotations
• Copying from a classmate
• Using work you did for another class (self-
plagiarism)
• ...
33

Consequences ….

Either a failing grade on the assignment or a

failing grade for the entire class, depending on
the gravity.
34

How Not to Plagiarize

DO NOT Present someone else’s work as your own

• Cite (e.g. Author, Year)

• Use your own words
• Limited quotations, clearly identifiable by quotation
marks
• No need to cite if it is common knowledge (e.g.
“Madrid is the capital of Spain”)…but when in
doubt, cite!
35

Quiz 1
ORIGINAL : A common explanation for current African
underdevelopment is the extractive character of
colonial institutions.

YOU WRITE: Smith (2020) argues that a common

explanation for current African underdevelopment is
the extractive character of colonial institutions.

Is this plagiarism?
36

Yes!

Why?
37

You cite the author, but use his same words without
quotations.

FIXED: Smith (2020) argues that “a common

explanation for current African underdevelopment is
the extractive character of colonial institutions”
38

Quiz 2
ORIGINAL : A common explanation for current
African underdevelopment is the extractive
character of colonial institutions.

YOU WRITE: Africa is today underdeveloped

because of extractive colonial institutions.

Is this plagiarism?
39

Yes!

Why?
40

You use your own words, but do not cite the original
author.

FIXED: Africa is today underdeveloped because of

extractive colonial institutions (Smith, 2020).
41

Quiz 3
ORIGINAL : A common explanation for current African
underdevelopment is the extractive character of
colonial institutions.

YOU WRITE: A well-known theory for current African

poverty is the extractiveness of colonial institutions
(Smith, 2020).

Is this plagiarism?
42

Yes!

Why?
43

You use your own words and cite the original

source, but the paraphrasis is too similar.

FIXED: According to leading theories, current

poverty in Africa can be explained by extractive
institutions established during the colonial period
(Smith, 2020).
 PLAN FOR TODAY
1. What is economic growth?

2. Some facts about economic growth

in the long-run

3. Some questions for Part One

What is Economic Growth?
 What is Economic Growth?

Economic growth is the increase over time of

goods and services produced by an economy.

Taken in per capita terms is a proxy for the

productivity evolution in time and space.
 Why should we care?
Productivity growth makes possible to free
resources from basic needs and devote them to
other activities that improve well-being (health,
education, etc.)→

Through historical analysis of economic growth we

can find answers for solving one of the most
important problems of humanity: which factors
reduce poverty? →

→ We are interested in economic growth as a tool

for improving well-being.
How to measure economic growth?

1. Changes in GDP per capita…

 GDP per Capita

The GDP (per capita) is the most used indicator for

economic growth→

→BUT: GDP was not created for measuring

growth or standard of living. It is an activity
indicator.
→ We use GDP because:
 Its availability and frequency.
 We assume that standard of living tend to evolve in the
same way than GDP p.c.
 Main shortcomings of GDP
1) No distinction between goods and evils. “Burn
Paris and you will make GDP grow!”
2) Production is not taken for its contributions to well-
being but for its market value. It is unaware of
income distribution.
3) It doesn’t capture correctly all the production of
goods and services (e.g. non paid-work, voluntary
work, subsistence production, informal economy…).
4) It’s only available for recent times → GDP
historical estimates are based on very few data and
very strong assumptions
What to Do When GDP is not available?

Some alternative options:

1. Wages

2. Heights

3. Life expectancy
 Wages

Some shortcomings of nominal wages as a source on

standards of living:

-Individual labour incomes (not family incomes).

-Nominal incomes (not purchasing power).

We need real wages

Source : Allen (2001), “The Great Divergence in European Prices and Wages…”, EEH
 Heights
Period Place Sample Height(cm)
1830s Sweden Soldiers 172
1710-59 England Convicts 171
1830s England Soldiers 169
1830s North of Italy Soldiers 167
1830s France Soldiers 167
1830s Austria Soldiers 164
1819-39 West Africa Slaves 167
1819-30 Mozambique Slaves 165
1800-29 South of China Convicts 164
1843 South of India Servants 163
1842-44 North of India Servants 161
1883-92 Japan Soldiers 159
Source : Clark (2007), A Farewell to Alms
 Life Expectancy
Place Period Life expectancy at
the birth
Pistoia Middle Age 29
England 1550-99 38
England 1650-99 35
France 1750-89 28
England 1750-99 38
Egypt (rural) 11-257 28
China (Anhui) 1300-1880 28
China (Beijing) 1644-1739 26
China (Liaoning) 1792-1867 26
Japan (rural) 1776-1815 33
Egypt (urban) 11-257 24
London 1750-99 23
Source : Clark (2007), A Farewell to Alms
Some facts about economic growth
in the long-run
 Some facts on...

1. Long-run evolution of standards of living

2. Divergence between countries

World Economic History in One Picture

Source: Clark (2007), A Farewell to Alms.

Great Divergence
Reversal of Fortune Among Former
Colonies
Some questions…
 Why?

Proximate Causes of Economic Growth

Physical capital

Human capital

Technological innovation
 But then…

But then why can some countries accumulate human

and physical capital and create technology and other
countries can't?
 What We Will Do in Part 1

Long-run determinants of economic growth

a) Geography
Climate, agricultural productivity, diseases, natural resources…

a) Culture
Cultural traits, religion, social norms…

a) Institutions
«Rules of the game»: property rights, form of government (democracy or
dictatorship), labor institutions (free workers or slaves), legal systems...
 Some Questions About Geography

1. What are the effects of geography on development?

2. How do environmental shocks shape development?
3. How do diseases shape economic development?
4. Is there a natural resource curse?
 Some Questions About Institutions

1. Which institutions?
2. Do institutions explain the rise of the West?
3. How do colonial institutions shape modern development?
4. How do institutions change?
 Some Questions About Culture

1. How can we define culture?

2. How does culture shape macroeconomic performance?
3. How does culture shape individual economic behavior?
4. How does culture change and persist?