Economic transition Flashcards
What is GDP?
the total value of goods and services produced by a country in a year
What is GNI?
GDP together with a country’s income received from other countries - profit leakage form countries where TNCs operate
What is GNI per capita?
total GNI of a country divided by the total population
What is Purchasing Power Parity?
- the exchange rate needed to buy the same quantity of products in each country
- they measure the total amount of goods and services that a single unit of a country’s currency can buy in another
what are the top 3 countries by GNI per capita (US$) ?
- Bermuda - 116,540
- Lichtenstein - 116,440
- Switzerland - 90,360
Strengths and Weaknesses of economic indicators of development
Strengths:
- widely established
- US$ means easy comparison
- PPP -> weighting
- primary measure of development - HICs, MICs, LICs, etc.
Weaknesses:
- inequality not measured - differences in regions and distribution by highest to lowest earners not taken into account
- not a social or political development measure
- skewed by resources, tax havens, gambling revenue, etc.
What is HDI?
takes into account life expectancy at birth, expected years of schooling, mean years of schooling and GNI per capita PPP
Annual UN development report containing 191 countries
Groupings: very high/high/medium/low
Comparable between countries and over time
Top 5: Switzerland, Norway, Iceland, Hong Kong, Australia
Bottom 5: Burundi, Central African Republic, Niger, Chad, South Sudan
What is the Physical Quality of Life Index (PQLI)?
the measure of quality of life or wellbeing of a country
PQLI takes into account – basic literacy rate, infant mortality rate and life expectancy at age one
Top 5 countries: Netherlands, Denmark, Switzerland, Luxemburg and Finland
Bottom 5 countries: Iran, Sri Lanka, Venezuela, Bangladesh, Nigeria
What is the Happy Planet Index?
Happy planet index is a measure of sustainable wellbeing, ranking countries by how efficiently they deliver long, happy lives using our limited environmental resources
Gallup world poll is used to measure wellbeing/happiness using a sample of 1000 people however, the accuracy of this can be put into question
HPI takes into account – wellbeing, life expectancy, inequality of outcome and ecological footprint
Top 5 countries – Costa Rica, Vanuatu, Colombia, Switzerland and Ecuador
Bottom 5 Countries – Zimbabwe, Lesotho, Central African Republic, Mongolia and Qatar
What is the Gini Inequality index (Gini coefficient)
- the most commonly used measure of inequality expressed as a percentage
- a value of 0 corresponds to the absence of inequality, so that, having adjusted for household size and comparison, all individuals have the same household income
- a value of 100 corresponds to inequality in its most extreme form, with a single individual having all the income in the economy
- a Lorenz curve allows the index to be compared spatially and temporally
top and bottom 3 of Gini Inequality index
Top:
1. Ukraine
2. Slovenia
3. Iceland
Bottom:
1. South Africa
2. Namibia
3. Botswana
What is Globalisation?
The increasing interconnectedness and interdependence of the world economically, culturally, and politically
What is Global Shift?
the movement of economic activity, particularly in manufacturing, from HICs to NICs and LICs
What is New International Division of Labour (NIDL)?
a change in the geographical pattern of specialisation, with the fragmentation of many production processes across national boundaries – ‘outsourcing’ and ‘offshoring’ signify the importance of this process
What is Globally concentrated production
- all production at a single location
- products are exported to world markets
What is Host Market Production
- each production unit produces a range of products and serves the national market in which it is located
- no sales across national boundaries
- individual plant size limited by the size of the national market
What is Product specialisation for global/regional markets?
- each production nit produces only one product for sale throughout a regional market of several countries
- individual plant size is very large because of scale economies offered by the large regional market
What is Transnational vertical integration?
- either each production unit performs a separate part of a production sequence
- units are linked across national boundaries in a chain like sequence
- the output of one plant is the input of the next plant
- or, each unit performs a separate operation in a production process and ships its output to a final assembly plant in another country
what type of TNC production unit category does Coca-Cola fit into?
Host-market production
Revenue - Cost = __________
Profit
Why do companies want to become a TNC?
- Keeping costs lower through access to cheaper labour
- exploiting new resource locations which will increase the company’s resource availability
- avoiding trade barriers - e.g. Nissan factory in Sunderland
- tapping into more market potential in other world regions which increases revenue
- avoiding strict domestic environmental regulations
- maximising exchange-rate advantage
What are the 4 categories in the A.T. Kearney index of globalisation?
- political engagement
- personal contact
- technological connectivity
- economic integration
- top 3 countries are Singapore, Hong Kong and Netherlands
what are the social impacts of Apple?
Positive:
- In countries where Apple directly employs people, such as the US and the UK, workers are generally paid and treated well which enables them to enjoy a good standard of living
Negatives:
- 64.2% of the workers at Foxconn are from rural villages which creates greater levels of inequality due to the lack of investment in rural areas
- Accusations of poor working conditions, excessive working hours and forced overtime have been made at Foxconn
- In 2018, the guardian reported that many workers were working 70 hours overtime per month, in breach of Chinese law
- In 2010 and 2011 there were several suicides among Foxconn workers as a result of poor conditions
- 43.4% of workers said that they had experienced or seen an accident at the workplace
what are the economic impacts of Apple?
Positives:
- FDI in many different countries which also attracts FDI from other TNCs
- Wide range of jobs both directly and indirectly – 22,000 jobs in Europe – 170,000 through its suppliers in Europe – 350,000 at Foxconn – creates a positive multiplier effect
- Wages are above the minimum wage than other parts of China
Negatives:
- Economic leakages occur as profits from overseas operations are sent back to the USA
- Extremely low wages of £2.20 an hour compared to £27 an hour in the USA means that workers can only have a basic existence – survey in 2012 from Fair Labour Association found that 64.3% of the workers felt that their wages were insufficient to cover their basic needs
- People are concerned about job security as if sales fall or if assembly is sub-contracted to a different company or work becomes automated, thousands will be affected
- Many countries are unhappy with the amount of tax that is paid – accused of tax avoidance – in 2016 ordered to pay 13 billion euros back to Ireland – later rejected by an EU court in 2020 – also agreed to pay 10 years of back taxes to France
Environmental impacts of Apple
Positives:
- A 2017 Greenpeace report on greener electronics graded Apple B and ranked it second out of the 17 world’s leading consumer electronic companies for addressing environmental impacts
- All of Apple’s offices, stores and data are powered by renewable energy sources
- By 2030, all Apple products will be made using 100% renewable energy
- Apple trade-in encourages people to exchange their old devices for credit towards new products
- The use of plastics in packaging has been reduced by 58% in 4 years
- Fibre alternatives made out of mostly recycled materials are being used in some packaging and for shopping bags
- In collaboration with Conservation international, have formed a fund to protect and restore forests, wetlands and grasslands
Negatives:
- Regularly updates and changes the design of their products leads to people wanting to keep up with modern trends and getting rid of devices early, creating electronic waste
- Many products are difficult to repair and upgrade
- In 2017, the guardian reported that they were intentionally designing iPhone so the batteries slowed down with age
- Hazardous chemicals are used in the manufacturing process
- In 2018, the guardian reported that in China, contaminated wastewater from Apple manufacturing plants was being discharged into public drains
- Many elements used in Apple products are mined, such as, Cobalt
- The transport used to distribute Apple products often rely on fossil fuels
Factors explaining the Rapid Economic Growth of China in recent decades
- Labour supply
- wages and unemployment
- Female participation in the workforce
- Political system
- Strong leadership
- Free-market economics
- export-led growth
- SEZs and FDI
- private enterprise
- energy supply
- investment in infrastructure
- economic diversification
- education
- ‘going global’
- location
- raw materials
Characteristics of LDCs
- 10.5% of worlds population
- generate only 0.1% of global income
- In many LDCs, national debt now equals or exceeds GDP
- they have major economic, institutional and human resource problems
Characteristics of NICs
- a good initial level of infrastructure
- A skilled but relatively low cost workforce
- cultural traditions that revere education and achievements
- governments welcoming FDI from TNCs
- distinct advantages in terms of geographical location
what is cumulative causation?
the process whereby a significant increase in economic growth can lead to even more growth as more money circulates in the economy
what are backwash effects?
transmitted to the less developed regions as skilled labour and locally generated capital is attracted away
what are spread effects?
spatially selective and will only benefit parts of the hinterland (less developed regions) with valuable raw materials or other significant advantages
what are the three stages in the cumulative causation theory?
- the pre-industrial stage: when regional differences are minimal
- a period of rapid economic growth characterised by increasing reginal economic divergence
- a stage of regional economic convergence when the significant wealth generated in the most affluent regions spreads to other parts of the country
what is initial advantage?
the critical importance of an early start in economic development
Myrdal vs Hirschmann
- instead of heartland Hirschmann used Core
- instead of hinterland he used periphery
- the core benefited from ‘virtuous circles’ or upward cycles of development, whereas the periphery was impeded by ‘virtuous circles’ or downward cycles
- the term trickle-down was used to describe the spread of growth from core to periphery
- both came to the same conclusions but used different terms
what are the characteristics of poverty in Brazil?
- 70% of the total population living in poverty are city dwellers
- 51% of the poor live in the NE region
- 70.1% in the N region, 59.7% in the CW and 53.5% in the NE region have housing conditions that are inadequate compared to 26.7% in the SE region
