Production Potential in the World Economy

Abstract

The concept of productive potential in the global economy may seem simple, but a closer examination of its component shows the complexity of this category. For example, it is not clear whether the potential required for production should be understood in a narrow sense (i.e., primarily as factors of production) or in a broad sense (i.e., including production systems in which economic entities operate). The extent to which existing or potential components should be included in the production potential is also not obvious. Should, for example, fertile land not yet involved in the turnover, be included in the production potential? Thus, the term production potential can have as many definitions as many times it is defined. For example, the definition of the World Trade Organization focuses on trade, and the definition of the United Nations Industrial Development Organization focuses on industry. The Human Potential Index of the World Bank and Human Development Index of the United Nations Development Program contain definitions in which human potential occupies a greater place. In the simplest sense, the emphasis on productive capacity can be seen as a systematic approach to problems related to economic progress and poverty reduction in developing countries. The whole range of meanings of this term covers the following definition: production potential is production resources, entrepreneurial opportunities and production links, which together determine the country's ability to produce goods and services and allow it to grow and develop.