(3) structure of economy Flashcards
what is the primary sector of the industry?
- involves activities engaged in the exploitation of natural resources (agriculture, fishing, mining, oil extraction, forestry, grazing, hunting, gathering)
- this sector is declining overall
what is the secondary sector of the industry?
- invovles the processing of raw material in to finished goods (manufacturing)
- this sector is still expanding in some less developed economies and emerging economies, but contracting in most developed countries
what is the tertiary sector of the industry?
-involves production of services of all kinds –> refers to lower level activities largely related to day-to-day needs of people and the usual range of functions found in local communities
what are quaternary services?
- are advanced forms of services which deals with handling and processing of knowledge and information –> producer services
- workers in this sector have specialized knowledge, technical skills or administrative competencies
- with the explosive growth in the demand for and consumption of information-based services, the quaternary sector has replaced all primary and secondary employment as the basis for economic growth
(e. g. insurance, finance, consultancy, legal management, data processing, information retrieval, computer programming, software design, advertising, etc.)
what are quinary services?
- are services that focus on the creation, re-arrangement and interpretation of new and existing ideas; data interpretation and the use and evaluation of new technologies – often referred to as ‘gold-collar’ professions
- involves high level decision making roles or control functions, meant to introduce new knowledge, information and skills into the economy to bring about growth and improvement
(e. g. top business executive of firms, top surgeons, financial and legal consultants, university academicians, cabinet minister, RandD scientists, etc.)
what is globalisation?
reasons for structural and functional changes in the economies
- refers to the integration across national boundaries of markets, finance, technologies and nation states
- has enabled nation-states, TNCs, and individuals to extend their reach across the globe faster, further, deeper and at a lower cost than could ever have imagined
what is informationlisation?
reasons for structural and functional changes in the economies
- refers to increasingly central role of information in production and consumption in the world economy
- the rise of ICT and the development of the Internet are key drivers of this process –? given TNCs the tools for globalising their operations
- have enabled TNCs to fragment their production process (vertical disintegration) to take advantage of varying cost conditions or comparative advantages in different parts of the world
- ICT involves innovation in microprocessors, resulting in the explosive growth of high-power, low-cost computing
- microprocessors enable the processing and storage of high amount of information and its rapid distribution through telecommunication networks
- global communications have been revolutionised by developments in satellite, optical fibre, wireless technologies, the Internet, and the World Wide Web
- these technologies rely on microprocessors to encode, transmit and decode vast amount of information that flows along these electronic highways
- cost of microprocessors continues to fall, while their computing power increases
whats is neoliberisation and economic policy reforms?
reasons for structural and functional changes in the economies
-refers to the liberisation of international trade (WTO, Trading Blocs, or regional FTA) and financial markets
- lowering of trade and investment barriers allow firms to base production at optimal locations, serving the world market from that location with minimal tariff restrictions
- a firm might design a product in one country, source component parts in five countries, assemble the production in yet another country, and then export the finished products around the world
what is tertiarisation/quaternerisation?
reasons for structural and functional changes in the economies
- refers to the ongoing development of the global service economy
- and increasing proportion of GDP and employment in advanced economies is now in service-sector activities, as well as in LDCs
- ICT has facilitated the movement of service products (software, database) from one corner of the world to another over the internet within seconds
- has allowed services to be outsourced from DCs to LDCs which boast skilled but low cost labour
what is financialisation?
reasons for structural and functional changes in the economies
- refers to the growing importance and centrality of financial capital in all geographical regions and industry sectors in the global economy
- increased volume of transnational capital flows due to deregulation of financial markets, loosening of government control over exchange rates
- capital is the easiest factor of production to move around – money can be sent from one part of the world to another almost instantaneously (e.g. e-banking, online transactions, remittances)
- over US$2.3 trillion is noew traded on world finanical markets everyday
- advances in telecommunications and data processing have fostered the internationalisation of financial and business services
- satellite communications systems have made it possible for firms to operate key financial and business services 24 hours a day
what is the liberisation of international trade about? Whta were the two key plaers that contributed to deregulation and trade liberisation?
(neoliberisation and economic policy reforms)
- Before WW2, many nation states erected barriers to international trade and FDI in the form of high tariffs on imports or manufactured goods, to protect domestic markets from international competition
- After WW2, tariffs and other trade barriers were lowered to help increase global trade
-apart from lowered tariffs, trade liberisation also took the form of bilateral investment treaties. A dramatic increase in the number of bilateral investment treaties, designed to protect and promote investment between two countries, also reflects governments’ desire to facilitate FDI
(as of 2000, there were 1800 treaties involving over 600 countries, a 10-times increase from 1980)
- WTO is a multilateral organisation that policies the international trading system
- It brings countries together and obtain agreements to remove tariffs on products
- western countries became less protective over domestic markets and less hostile to both international trade and FDI in production –> more integrated global economy
- Trading Blocs or Regional FTA
- e.g. EU, NAFTA, AFTA
- these inter-governmental associations manage and promote trade activities between member states of specific regions
- member states premise themselves on legally binding agreements which agree to eliminate tariffs and quotas on most goods ad services traded between them and speed up access to each other’s markets
- these facilitate the cross-border movement of goods and services between member states
what is the liberisation of financial markets about?
neoliberisation and economic policy reforms
- banking services provide a god example of the globalisation of financial and business services
- a series of changes in the US since 1970s had both eased the entry of foreign banks in the domestic market and facilitated the expansion of US banks overseas
- in the UK, the so-called “Big-Bang” of October 1986 removed barriers which previously existed between banks and securities houses and allowed the entry of foreign firms into the Stock Exchange
