Modern Determinants of Countries’ Economic Power

• Main Author: Oleksii Chugaiev
• Format: Article
• Language: English
• Published: Kyiv National Economic University named after Vadym Hetman 2017-02-01
• Series: International Economic Policy
• Subjects: Economic power of a country; economic power centers; economy size; national income
• Online Access: http://iepjournal.com/journals_eng/26/2017_6_Chuhayev.pdf

The economic power of a country is the ability of all its residents to influence the other subjects of international economic relations by economic means and to withstand external impact. The abstract nature, multidimensionality and complexity of the concept of economic power determine the plurality of methods for its quantitative measurement. The examples of the existing assessments of countries' economic power at the beginning of the 21st century are given based on its key determinants. The methods based on the criteria of GDP, national wealth, trade sphere of influence, multi-component indices and subjective assessments are preferably used. Most assessments show the distribution of economic power between countries in a fairly similar way. However, the methods based on national wealth and its components give a distinct advantage to developed countries, and the methods of subjective assessments in individual countries can show unexpected results. The problematic aspects of the existing methods include the failure to take into account economic dynamics, informal economy, environmental impact, non-periodicity of statistical data publication, coverage of a part of economic entities, one-dimensionality, arbitrary weighting coefficients of factors or duplication of information. We propose the economic power index based on fixed values and dynamics of adjusted net national income. The application of such index made it possible to assess the economic power of the vast majority of countries and a number of integrated entities. The leading countries, i.e. USA and China, were similarly assessed. Taking into account the incomplete integration, the EU takes the third place. The developed countries account for a half of economic power of the world’s countries, the newly industrialized countries — for more than one third, the least developed countries — for less than 1 per cent. The enhancing effect of integrated entities on their key member states was assessed. The advantages and disadvantages of the proposed method of assessment were presented. It has advantages when comparing countries with similar economy size and does not have any significant advantages in relation to the method of GDP when comparing economies of a significantly different sizes. The proposed method points to the relatively larger power of the North American countries, developed countries and East Asian countries as compared to their share in the gross world product.