Economic Transition Flashcards
results of the Manaus free trade zone
The Manaus Free Trade Zone employs 125,000 people in nearly 500 industries (2006). Investment from Samsung to Coca Cola.
Honda has one of its biggest factories outside Japan in Manaus and produces more than one million motorbikes a year both for the Brazilian market and for export.
Unemployment at the time was at 5% compared to a national average of 10%.
explain how increased petrol prices contributed to the deindustrialization of Detroit
The gasoline crises of 1973 and 1979 (which saw a global rise in petrol prices)
lead buyers chose smaller, more fuel-efficient cars made by foreign makers politics].
Efforts to revive the city were unfruitful as the motor companies were reluctant to adapt to the changing market as their sales and market share declined.
Automakers laid off thousands of employees and closed plants in the city, further eroding the tax base.
The lack of economic diversification in the area offered the residents no alternative employment opportunities, leaving to a massive reduction in the population of the area and a vicious cycle.
how did the politics of the 1980s contribute to the deindustrialization of Detroit
President Ronald Reagan supported free trade and globalisation.
This meant US motor industry was opened up to foreign importers, eg Japan, who’s vehicles were cheaper and more efficient than the one ‘General Motors’ had been designing.
People stopped buying US produced cars and opted for more appealing Asian models from companies such as Toyota and Honda.
strategy for reducing regional disparities such as
Bolsa Familia
It provides financial aid to poor Brazilian families; if they have children, families must ensure that the children attend school and are vaccinated (long term poverty). Cash transfers (short term poverty)
If they exceed the total of permitted school absences, they are dropped from the program and their funds are suspended.
Bolsa Familia is estimated to cost only 0.5% of Brazilian GDP.
Assessed every 2 years - CADASTRO UNICO (registry of vulnerable populations)
NE 80% on scheme
why is there a difference in international infant mortality rate?
differences in material resources
(with same knowledge)
difference in the efficiency of social institutions and health systems also enable countries with similar resource levels to register differently
aligns well with other indicators of development
centre west brazil regional difference
commercial agriculture ; large industrial park in Annapolis (fertilisers and pharmaceutical)
low population density 9km/2
land can be used for grazing
climate is semi humid aiding agriculture
criticisms of amazon regional management
nearly impossible to implement
enforcement is nonexistent
what is the new international division of labour
a term that reflects the spatial shift of manufacturing industries from advanced capitalist countries to developing countries
reflects a change in the geographical pattern of specialisation with the fragmentation of many production processes across national boundaries
describe the secondary sector of an economy
manufacturing sector
of raw materials from the primary sector to refine and add value
produces a finished usable product
in this stage of production, natural resources are processed or refined for further use
require factories machinery large amounts of energy and lots of waste materials
divided into light industry and heavy industry
eg metal working and smelting automobile production textile production
why might capital, resources and labour move from the core to the periphery because of URBAN-RURAL MIGRATION
on retirement especially of the more affluent who may innovate or when family or community ties attract a young migrant to return home with their skills and savings
eg establishing a new buisness
role of government influencing the growth of tncs
providing sites for infrastructure
eg export processing zones
fiscal advantage
training and education of workforce
different attitudes to labour conditions and pay rates
less stringent or enforced environmental standards or laws
explain the growth of china as an NIC for political reasons
contrast to south korea
non democratic and authoritarian, centralised decision making
SK: democratic with an active opposition
strong leadership, squashing rebellions and making trade unionism impossible
SK: criminal act “obstruction of buisness” opposes and sues trade union officers that engage in strikes
privatisation, economic resurrecting
50% buisness is owner privately
SK: entrepreneurship vs chinese confucianism
One child policy
reduces child rearing increasing worker pool
five year plans (13) increased reaserch and development
Xhongguan in NW Beijing with prestigious universities and 4,000 businesses (motorola, nokia, IBM)
what is the economic core
the most highly developed region in a country with advanced systems of infrastructure and high levels of investment resulting in high average income
what is outsourcing
the subcontracting of manufacturing and other services to low cost locations
this means the TNC can make higher profit margins by minimising costs
e.g. many TNCs outsource the design of software to designers in Mumbai and Bangalore - the Indian version of Silican Valley
criticisms of bolsa familia
The Catholic Church oppose the concept of money transfers to the poor; suggesting they would spend the money on drink or drugs. However, the money is actually spent on (food, school supplies, clothing, shoes)
A common public complaint is that the scheme discourage the search for employment, encouraging laziness. However, the World Bank finds the opposite: work is not impacted; in some cases adults will even work harder because having this safety net encourages them to assume greater risk
Money transfer is subject to corruption
strategy for reducing regional disparities such as
Manaus Free Trade Zone
before - only 1 warehouse in the port of manuas (1951)
The policy intended to populate the area and to promote regional growth by giving incentives to the manufacturing sector to substitute imports.
By providing tax breaks that encourage industrial development in the area, the government has created urban jobs for labourers who might otherwise have been out logging or starting illegal farms
89% less import duty for industry
no tax on industrial products
55-100% less VAT
what are the geophysical factors explaining the growth of China’s NICs
contrast to south korea
natural resources:
coal oil and gas
SK: iron and limestone are less available
21 if 31 regions in china have faced resource shortages
in china domestic prices rise 10% w year resulting in more imports
locational advantage:
south korea, taiwan, japan, hong king on trade routes
90% or china’s international trade passes through sea ports close to consumer markets
there are few delivery delays, there are lower domestic travel costs
describe the primary sector?
The primary sector comprises extractive industries: agriculture, forestry, fishing, and mining and quarrying.
Employment varies from 5% or less in MEDCs (stable), 20–35% in NICs (decreasing) to over 50% in LEDCs.
For example, the LIC Chad has 80% of its total employment is in agriculture;
compared to the HIC USA which now has less than 4% employment in the primary sector.
Some primary products are sold directly to the consumer; but many go to secondary industries for processing.
why may regional economic convergence never be achieved
Hirschman stressed the effect of counter balancing forces, allowing for economic equilibrium to be established. However, this is unlikely, full convergence may not be reached due to the intrinsic and inalienable disadvantages that the periphery may have (location, accessibility, resource base, environment).
Also, governments must balance the need to reduce disparities with attaining continued national economic growth (and meeting other priorities).
why is the primary sector important to LICs?
High percentage of employment
Provides a high sector percentage of national income eg cash crops or oil revenue
Major means of food production and subsistence
Provides raw materials for processing manufacturing and exporting
why does deindustrialisation happen in MEDC
manifestation of the global shift and development of global economy
emergence and growth of : TNCs and global production networks and supply chains
in the search of comparative advantage and profit maximisation, market penetration
it’s cheaper to manufacture process and assemble in NICs than MEDCS
why might capital, resources and labour move from the core to the periphery because of REMITTANCES
as part of the income of rural urban migrant is sent back to support the family
25% if Kerala’s GDP in southern India
how does employment in the primary sector affect a country
employs people - generated income taxes and export earnings
produces products and raw materials for the secondary sector to process refine pack and convert and add value to your
minerals can provide energy notably coal oil gas etc
this can be used to power development and provide energy for homes businesses and industry
attracts investors eg oil companies
feeds and sustains population
characteristics of emerging markets
traditional economy
emerging markets are often in the process of moving from a closed economy to an open market economy
young and growing population
emerging markets often have younger populations that can lead to long term growth by replacing ageing workers
underdeveloped infrastructure
emerging markets are usually in the early stages of building infrastructure
human factors producing social and economic inequality
colonialism
dependency (trade and aid)
criticisms of Minha Casa Minha Vida
only covers metropolitan areas of Brazil, all state capitals population over 50,000
lack of adequate infrastructure and transport links
where does coca cola do research and development
h Coca Cola have their main base for research and development in Atlanta, USA (similar to Nike in Oregon), this is changing.
Coca Cola is intending to expand research and development to Turkey, and in 2009 opened a $90 million development site in Shanghai, China.
o Tax incentives in Turkey
o HQ in America due to intellectual foundation, high skills
what is deindustrialisation
the process of change in an economy hat makes manufacturing decrease in importance and
which shifts an economy from being domination by manufacturing and processing, to being dominated by tertiary and quaternary sectors
heavy to light manufacturing
what is HDI ranks based on which 3 indicies is
Longevity (life expectancy at birth)
Knowledge (66.6% is adult literacy and 33.3% is mean years of schooling)
Income as adjusted to measure real per person income, including purchasing power adjusted to local cost of living
what are the statistical problems of measuring inequality
gender/cultural/intellectual inequalities within an area masques
outdated or inaccurate data
what are the reasons for spatial organisation of TNCs
profit maximisation
minimising costs
market penetration
proximity to customers
in terms of production transport R&D
what is the opposite of resource endowment
resource curse
if a country has one very valuable resource all the efforts of the country are put into the exploitation
potential development of other industries
and if the resource is in the hands of the ruling elite
the profits will not be shared
why is education a good indicator of development ?
quality of education and female literacy are central to development
UN sees it as vital for sustainable development
the world bank concluded that female literacy y is the fundamental achievement for a developing nation to attain
eg strong link between female literacy and infant and child mortality
people who are literate are able to access medical and other information helping them towards a higher quality of life
what is the opposite of locational advantage
landlocked with hostile neighbours
political element
if no access to the sea, countries may face huge payments to allow foods to be transited
or are engaged in regular conflict holding them back
how does coca cola utilise host market production
Coca Cola participates in host market production: the manufacturing of goods close to their intended markets.
Unlike Nike, which is a highly centralised TNC, Coca Cola gives the bottling companies some regional autonomy; executing plans on a local market level.
‘Strategic Business Units’ price, distribute and market Coca Cola according to the circumstances of the area.
For example, advertising locally in native language.
factors causing economic globalisation
economic policy: deregulation, fundamentalist free market governments of Thatcher and Reagan
trade liberalisation under the WTO
the transport and communications revolution has made possible the management of the complicated networks of production and trade
economies opened up of the soviet union china and india
cumulative causation
the process whereby flows of labour commodities and capitals from the periphery are directed towards the advantages core area
why is nature of death a good way of measuring development
standards of living, healthcare and education infrastructures.
a country with a high death rate in cardiovascular disease = high life expectancy/ good social well-being and economic well-being in the country: governments can afford to either provide healthcare services such as the NHS, free of charge, or, aid schemes such as Obama care.
a country with a high level of malaria or typhoid evidently lacks basic medical infrastructure and vaccination services.
enlighten social issues e.g. FGM shows a weak position of women,
road accidents indicate a high level of car ownership
homicide indicate a high level of conflict or drug presence.
explain the social/cultural dimension of globalisation
western culture has diffused to all parts of the world to a considerable degree through TV cinema internet newspapers magazines
cultural transmission is not only a one way process; the popularity of Islam has increased considerably in many western countries as has Asian Latin America and African cuisine
role of government in the growth of NICS
import tariffs
import substitution
export led growth
education and training
why do GDP per person, GNI per person, GNI per person (PPP) and HDI all not account for individual inequality
inequalities between the elite and the poor are prevalent across HIC and LIC countries. However, they are perhaps most pronounced in the poorer parts of the world, where corruption and embezzlement are prominent.
For example, whilst millions of people live in Dharavi outside the city centre, Indian billionaires reside in central Mumbai, featuring the most expensive home in the world.
Additionally, half of DR Congo lives below the poverty line whilst dictator Mobutu used to reside in the Versailles of the Jungle.
explain international education inequalities
development levels
investment in education (schools teachers equipment)
spending priorities
gender
accessibility and remoteness
reasons for non attendance eg child labour or instability
criticisms of Manuas free trade zone
40 percent decrease in production; tens of thousands of jobs have been lost lost over the past few years.
Vulnerable to economic recession and fluctuations in the world market
Outside of Manaus, within the North Eastern reigon there is little more than dirt tracks and rainforest.
in terms of regional development, what is meant by initial advantages
cumulative causation (Myrdal 1957)
the advantages for a region, which once taken, promotes development growth and future benefits over others
each makes that place more attractive to early development elsewhere
eg resources (minerals or fertile soil or agriculture) locational advanTge (natural harbour)
what are the economic reasons that regional disparities can be difficult to overcome?
size of government debt poverty strength of fiscal institutions diversion of funds inflation diversion of funds towards other priorities
meaning of FDI
direct investment into production in a country by a company located in another country
this may include the investment in new plant or facilities; by buying a company in the target country; expanding operations of an existing buisness in that country
social factors that encourage FDI
language; English in Bangalore as a first or second language encourages western firms (especially in communications e.g. call centres) to invest
literacy/ educated workforce; more prevalent for tertiary or quaternary sectors. Banks, law firms etc travel to offer employment to the brightest and the best – be that Oxbridge in the UK, or Ivy League schools in the US.
labour supply (e.g. One Child Policy means women spend less time child rearing); people are prevented from demanding higher wages or better conditions as they are easily replaceable; rural-urban migration ensures an ever greater labour force
work ethic (Chinese Confucian values – the whole is greater than the individual, faith in the greater good). Bangalore Indians willing to work unsociable hours (through the night) in accordance with British standard time.
define debt relief
partial or total forgiveness of money owed by countries to other countries or supranational bodies / multinational groups.
The benefits are for countries (e.g. HIPCs) unable to pay off their debts where further growth may be damaged by indebtedness.
Some debts may be cancelled so removing this constraint on development and possibly facilitating development projects (depending on management of this and of any new lower-cost loans).
why is international division of labour ‘new’
it emerged recently associated with globalisations
what are the politicsl reasons that regional disparities can be difficult to overcome?
presence of vested interests
corruption
what are the economic, physical, political challenges of measuring inequality
economic:
cost of surveys on a national scale, globally
physical:
accessibility (terrain in mountainous, marshy areas, lack of roads),
scale (e.g. megacities, often with informal settlements)
political:
national statistics not collected (LIC countries do not have a formal census; HIC undocumented peoples),
government interference in outcomes (corruption; attempts to boost international standing or FDI)
how can development be measured by politics
human rights IR (trade links and treaties) Voter turnout free fair regular elections corruption index
benefits of economic development based on the secondary sector
adds value to raw materials
export earnings
skills training
external assistance from TNCS
describe how urban decay is an effect of the deindustrialisation of detroit
Parts of Detroit have been described as looking like farmland, urban prairie, and even complete wilderness.
As population of the area decreased, and the effects of economic downturn were felt, buildings were abandoned: as of 2014, 50,000 of the city’s 261,000 structures were abandoned, with over 9,000 structures bearing fire damage.
Vacant buildings have been magnets for the drug trade, arson and other criminal activity.
In January 2013 47 houses in Detroit were listed for $500 or less, with five properties listed for $1.
why does international spatial division of labour occur
globalisation
TNCs seek to remain competitive and maximise profits by minimising costs
there is a shift in the spatial margins of profitability
why is the primary sector of the economy may be important to LICs
provides a high percentage of their employment - 70% of Zambia’s GDP comes from copper mining
Export income can then be spent improving roads, railways, education and technology in order to attract FDI and boost the infrastructure of the country.
major means of food production and the means of subsistence
provides raw materials for processing manufacturing and export. providing raw materials, e.g. for building, manufacturing providing capital for investment.
This is often reliant on a degree of resource endowment combined with good management (constitution democracy) e.g. Zambia’s reserves of gold, silver and uranium, which allowed for the economic diversification of its economy into tourism.
success of manuas free trade zone
The Manaus Free Trade Zone employs 125,000 people in nearly 500 industries (2006).
Investment from Samsung to Coca Cola. Honda has one of its biggest factories outside Japan in Manaus and produces more than one million motorbikes a year both for the Brazilian market and for export.
Unemployment at the time was at 5% compared to a national average of 10%.
explain the nature of the tertiary sector
producer and consumer services
distributaries trades such as retailing wholesaling and transport
the professions and offices
provides links to other sectors eg advertising
why is the primary sector an insecure foundation for economic development
competition in global markets or primary product dependency - Zambia’s copper exports fell in price during the 1973 oil crisis; giving them less money for imports, and less to invest in social services (health, education).
hazardous events eg climactic distruptjon of production - 2010 Iceland volcanic eruption grounded air traffic to a halt; Kenya to lose $3.8 million a day, as 500 tons of flowers spoiled, as they were unable to export it out of the country
resource depletion e.g. minerals extracted without sustainable goals or long term planning. often linked to political instability and so a lack of coordination.
limited potential profit with no processing - limits development potential and ability to diversify in skills, technology and production
explain why the NIDL occurred
production processes are relocated from developed countries (US, European countries, Japan) to developing countries in Asia (such as China, Vietnam, India) and Latin America.
companies search for the cheapest locations to manufacture and assemble components,
so low-cost labor-intensive parts of the manufacturing process are shifted to the developing world where costs are substantially lower.
Companies do so by taking advantage of transportation and communications technology, as well as fragmentation and locational flexibility of production.
From 1953 to the late 1990s, the HIC economies’ share of world manufacturing output declined from 95% to 77%, and the developing economies’ share more than quadrupled
how does regional difference change with economic growth?
pre industrial:
minimal regional difference
rapid economic growth:
increased regional divergence
regional economic convergence:
wealth generated in affluent regions is spread out
MYRDAL
why may regional disparities never truly converge and disappear
the periphery will always have disadvantages
location accessibility resource base environment
government priorities economic growth ; debt ; corruption
role of tertiary sector
provides links between other sectors and their customers
eg advertising banks deliveries
growing in scale and complexity to include telecommunications news tourism film
describe the role of fair trade
prioritising development and responsibility over profits (for the middleman) and low prices (for consumers in MEDCs).
appeals to the ethics and consciences of comparatively wealthy consumers.
works to enhance the income and quality of life of small and medium-scale producers in LEDCs, allowing them both to develop their businesses and to enhance their life, e.g. through training.
over time, why does regional development remain uneven
initial advantage
spread and backwash effects
then lack of regional policy; political instability; hazards; migration
social characteristics of the core (south east) in brazil
education/ skills and standard of living; literacy is 94%, languages other than Portugese are taught on the school silibbus such as English, Spanish, French
0.782 HDI
migration (mainly inward – braindrain from elsewhere in the country in selective migration, or outward migration upon retirement)
describe the tertiary sector of the economy
service sector or service industry
provider to the other two sectors
retail banking and sales are all part of this
does not involve production but rather the support of production that occurs in the primary and secondary sectors
eg retail and wholesale sales transportation and distribution entertainment restaurants tourism banking healthcare banking
why does Coca Cola utilise globally concentrated production
o Reduces transportation costs. The concentrate is only mixed with water and sweetener, 80% of the products volume can be outsourced to others.
o Quality control. Ensuring Coca Cola has the same fundamental standard internationally, with a same basic taste and reduces the likelihood of the recipe being exposed
economic characteristics of the core (south east) brazil
o TNC investment from the motor industry (automobilizaiton of Brazil in the 1960s); growth of Brazilian TNCs such as the aircraft manufacturer Embraer
high population - labour supply
physical factors producing social and economic inequality
ease of life in temperate reaigons compared to areas of drought and climactic hazards eg tropical storms
how do core areas develop
environmental resources locally or within easy access; natural endowment eg coal or iron ore, soil, energy resources
historical initial development - colonialism or relationships with neighbouring countries
social - education
economic/technological - organisation investment and infrastructure; the presence of elite groups and entrepreneurs
political - centre of government
strengths of GDP or PPP as an index
well established colonic measure easy to understand PPP adjment allows valid global comparison data widely available single criteria making it clear
what are backwash effects
part of Myrdals theory
they describe how he core demands drain of the periphery’s
resources (raw materials)
labour (outmigration)
wealth (capital)
this flow happens as cumulative causation takes hold strongly in the core area, encouraging spatial concentration of these elements at the expense of the periphery - negative impact on economic growth
describe how population decline is an affect of detroit’s deindustrialization
Detroit reached its population peak in the 1950 census at over 1.8 million people - the city has lost over 60% of its population.
The white population has decreased in the area, as city neglect increases.
In Livingstone county, (outside Detroit) which is 96% white, the median household income is $73000. In Detroit City, which is 82.7% black, the median household income is $26, 000 and nearly 40% of people live in poverty.
what is the role of the tertiary sector in economic development
The role of the quaternary sector is to ensure further expansion and to generate higher returns.
Research is directed into cutting costs, tapping into markets, producing innovative ideas, new production methods and methods of manufacture.
why did south east brazil have the greatest initial advantage
warm temperature, adequate rainfall and rich terra rossa soils (weathered from lava) provide farming opportunities (beef rice sugar cane fruit coffee)
large deposits of iron ore and bauxite have made mining significant; gold
large deposits of oil and gas offshore - hydroelectric powers from rivers flowing over steep slopes. world second largest hydroelectric dam – Itaipu Dam
Costal location leads a natural harbor to emerge (development of ports; focus of countries infrastructure – the highest railway coverage in the entire country)
Portugese colonialism
key features of the south of brazil in terms of regional inequality
most developed
98% literacy rate
0.831 HDI (highest)
82% urbanised
Coldest climate
Portugese settlers had colonial links to international trade
87% european
political characteristics of the core (south east) brazil
planning/regional policy. The automobilzation of Brazil in the 1960s started in the South East, attracting FDI in the motor industry that continues today – allowing Brazilian TNCs such as Embraer to emerge
Portugese colonialism provided much of the initial infrastructure and attracted Europeans to settle in the South East. Europeans share western culture and language, more attractive for FDI
characteristics of the core that encourage their dominance
environmental
resources or location or accessibility or climate
historical
initial development or colonial legacy
social
education elite groups standard of living migration
economic
investment institutional framework eg banks dominant sectors
political
seat of government or regional policy or planning
describe how poverty is an effect of deindustrialization in detroit
USA Census in 2012 ranked Detroit first among all 71 U.S. cities; the individual rate living below the poverty level is 36.4%.
explain the role of the tertiary sector in economic development
providing links between other sectors and their customers, e.g. advertising, banks, deliveries,
increasing dominance of services over time in the sector model)
Telecommunications, news, tourism, music, film, sport and many other aspects of life in the 21st century are tertiary in nature.
what are the social reasons that regional disparities can be difficult to overcome?
the existence of social elite classes different levels of access to education population pressure ability to communicate in the official language disease
why do GDP per person, GNI per person, GNI per person (PPP) and HDI all not account for regional inequality
Regional inequalities indicate the difference in standard of living between countries, often following rural and urban lines. Rural areas decline, experiencing bashwash effects, whilst urban areas experience cumulative causation and inequalities increase.
For example, London dominates UK GDP due to its large quaternary and tertiary sectors; whilst the declining Northern industrial towns have high unemployment rates.
why may the primary sector limit development in a country
minimal processing of raw materials so little profit
unreliable - demand is variable, environmental catastrophes, controlled prices externally
lack of skills diversity and growth prevent investment in future
why do GDP per person, GNI per person, GNI per person (PPP) and HDI all not account for gender inequality
Although most apparent in less developed countries where women do not have the same fundamental rights, or the same access to education as their male counterparts, a disparity between men and women in HIC countries remain.
Most prominently seen in the wage gap.
environmental factors that encourage FDI
Terrain (flat land, fertile soil, water supply, infrastructural advantage). For example, in South Eastern Brazil, the rich terra rossa soil and attractive climate. Highly graduated mountainous areas provide a hydroelectric opportunity with 10 major dams providing 75% of the South East’s electricity, including the second largest dam in the world. The area has the highest prevalence of railways in the entire country; paved roads in good conditions dating back to the 1960s auto mobilization policy.
locational advantage (90% of China’s international trade passes through its seaports; Singapore’s location along a trade route between Malaysia and India is the second busiest water-way for Asian investment).
Lack of environmental regulation or unenforced environmental regulations. In China Nike can lay out a code of conduct which is down to the local production site to enforce – as the law is not strictly upheld, companies have an informal advantage.
what is the periphery
comprised the parts of country outside the economic core region
level of economic development in the periphery is significantly below that if the core
who loses in globalisation
workers in MEDCs when deindustrialisation occurs
workers in LEDC where hours are long wages are low health and safety are poor
environmental pollution
TNC relocation in search of another low cost location
define new international division of labour
different parts of production are found in different locations or countries
because of relative costs especially labour and profitability
spatial shift of manufacturing processes based on the relative costs of labour through the fragmentation and specialisation of production processes - LEDC and NIC
highly skilled jobs such as R&D in MEDCS
this is assisted by lower transport costs and IT to coordinate aspects of the production process
problems of economic development in secondary sector
environmental degradation
exploitation of labour
global competition
what is the environmental dimension of globalisation?
increasingly economic activity in one country has had an impact on the environments of other nations
the long range transportation of airborne pollutants is they most obvious evidence of this process
global environmental conferences of Rio Di Janeiro (1992); and Johannesburg (2002) - international action brings realistic solutions coordinated
what factors explain global inequalities in development
Globalisation
Environmental
resource endowment ; climate ; accessibility
Economic
finance ; level or stage of development
Social
education
Political
regime ; colonialism ; instability
advantages of GINI coefficient
- Gini coefficients can be used to compare income distributions across different population sectors as well as countries, for example the Gini coefficient for urban areas differs from that of rural areas in many countries
- The Gini coefficient is sufficiently simple that it can be compared across countries and be easily interpreted. GDP statistics are often criticised as they do not represent changes for the whole population, the Gini coefficient demonstrates how income has changed for poor and rich. If the Gini coefficient is rising as well as GDP, poverty may not be improving for the vast majority of the population.
- The Gini coefficient can be used to indicate how the distribution of income has changed within a country over a period of time, thus it is possible to see if inequality is increasing or decreasing.
flow of cumulative causation
establishment of large manufacturing plant
expansion of local job opportunities and population
inflow of buisness & capital to satisfy increased local demand (secondary and tertiary development)
substantial rise in income per person
higher tax base increased local gov spending power
improved physical and cultural infrastructure
CORE DEVELOPS FASTER GROWTH
economic factors that encourage FDI
Tax (China’s SEZ giving special tax incentives to certain areas e.g. Shenzhen which was transformed from a fishing village to a global metropolis: Shenzhen High tech Industrial Park (1996), and attracted international firms Intel and Samsung)
proximity to consumer markets (China has a large captive market in South Korea, Japan, Hong Kong, Taiwan; expanding middle class)
cheap labour (China does not have a minimum wage; workers are paid 10x less than other East Asian countries)
describe the GINI coefficient
Ratio between 0 and 1, expressed as a percentage. A low value indicates a more equal income distribution while a high value shows more unequal income distribution. A Gini coefficient of 0 would mean that everyone in the country had exactly the same income.
political factors that encourage FDI
political stability e.g. South Korea making trade unionism impossible (removing the right to strike under the Criminal Act for “obstruction of business”).
China’s authoritarian government and South Korea’s democratic government both maintain control and squash rebellions.
Impossible in unstable countries e.g. DR Congo with large resource endowment (gold, bauxite, diamond) but war-torn after Mobutu
PROFIT POTENTIAL
explain how regional disparity diverges and converges over time
in an economically undeveloped country the disparity is small
early stages of development: cumulative causation means investment concentrated in the core (multiplier effect) leaving periphery behind
backwash effects: eg selective migration, capital flows etc enhance the disparity
more developed: the disparities decline, spread effect - gov move capital and spend in periphery areas; core suffers from diseconomies - businesses seek better and more cost effective locations in periphery
describe the quaternary sector of the economy
based on knowledge and skill
intellectual of information related positions
activities include education government culture libraries financial consultancy scientific research, information technology
often done in order to cut costs expand markets produce innovative ideas new methods of manufacture and production
in the UK this is 76% of the workforce
north east brazil: periphery
AMAZON RAINFOREST thin soils that are not suitable for agriculture. Subject to seasonal floods
4 people per km2
North fifth of the area’s adults are illiterate, twice the national rate. over 8m of the population live on $40 a month
indigenous tribes and local languages
outmigration - brain drain
largest are in brazil =45%
Lack of infrastructure in the North as highways are scarce. Transport occurs mainly through the river network in the reigon – isolated.
industry is mainly primary = rubber
spread effects = Manaus Free Trade Zone (boom in 70s and 80s, electric companies)
World cup
why does Coca cola operate out of host market production
o Meets the needs of different consumers. The requirements of different consumption patterns are met according to taste, lifestyle income etc. Coca Cola can adapt to this and maximise consumer satisfaction.
For example, adjusting the sweetness (through different amounts of sweetener), in accordance with local tastes and customs. Additionally, Coca Cola makes 2.5L bottes in Mexico, as there is a tradition of large family meal times.
o Adds economic security. Coca Cola is manufactured and integrated locally, and so is not classified as an import – if the government choose to reduce imports to encourage domestic spending, Coca Cola will be unaffected.
what are NICS
varied group of countries thag have developed from being LICs and have experienced the development of their secondary tertiary and quaternary sectors
eg asian tigers singapore hong king taiwan south korea
how can development be measured by education
gender ratio within education
average age leaving school
% of people that graduate uni
% of GDP spent on education
how might the new international division of labour be a disadvantage to a national economy
in a national scale
MEDC deindustralisation, costs of decline and loss of employment
costs rise and companies move away so need to respond with reindustrialisation
how is the core periphery linked
by flows of people labour materials capital etc
north east brazil: backwash effects and natural disadvantage
Brain drain (internal, selective migration): backwash affect Failed government decision making e.g. Forest Code
Lack of access (terrain)
Tropical climate (thin soils; disease e.g. malaria); subject to seasonal floods
Idingenous population creates a language barrier
how can climactic hazards limit development
2011-12 horn of africa famine
affecting ethiopia and somalia
weaken people from hunger and thirst
refuge crisis
valuable resources diverted away from development
describe how crime is an effect of deindustrialisation in detroit
A 2012 Forbes report named Detroit as the most dangerous city in the United States for the fourth year in a row.
70% of crimes are unsolved – attempts to save money
Dozens of violent black street gangs gained control of the city’s large drug trade, which began with the heroin epidemic of the 1970s and grew into the larger crack cocaine epidemic of the 1980s and early 1990s.
According to Detroit officials in 2007, 65 to 70 percent of homicides were drug related.
what conditions discourage FDI
political instability civil war / regime change threats of terrorism protectionism
economic recession debt poor exchange rate financial instability
why might capital, resources and labour move from the core to the periphery because of REGIONAL DEVELOPMENT INITATIVES
spread effects may be natural as economic monies operate in the periphery against the diseconomies in the core;
but in many cases spread has to be helped and governments may attempt to reduce the congestion of the core and increase development of the periphery to overcome regional disparities
this is achieved using schemes and initiatives
improving transport infrastructure
encouraging tourism
establishing growth poles and restricting core growth in the core
via taxation and planning laws
what are spread effects
the movement of economic development and its associated prosperity from the CORE to the PERIPHERY or neighbouring zones (e.g upwards transition - friedmann)
this is done by investment relocating industry development of infrastructure remittances
eg northern powerhouse, HS2 train links
success of Bolsa familia
responsible for about 20% of the drop in inequality in Brazil since 2001.
Reduction in child labour.
Increased ability to eat - Children in public schools receive one free meal a day—two in the poorest areas—so less of their family’s limited income is needed to pay for food: 82.4% reported eating better/increased incomes by 25%.
problems with GDP per capita PPP
crude measure as it has a single criteria, - multiple criteria is a better indicator
only economic,
per person masks inequalities and variation (rural/urban; elite/poor)
inaccuracies in data/ misrepresentation
how can development be measured by health
access infant mortality rate % of GDP spent on healthcare % of hospital beds avalible types of death (eg heart disease or malaria)
physical characteristics of the core (south east) in brazil
Climate and fertile soil allow for productive agriculture (rich terra rossa soil)
Energy-rich (highly gradiated rivers offers opportunities for hydroelectric power, ten major dams including the world second largest hydroelectric dam – Itaipu Dam)
Costal location leads a natural harbor to emerge (development of ports; focus of countries infrastructure – the highest railway coverage in the entire country)
Highest coverage of rail network in the entire country; 1960s government auto mobilization policy lead to paved roads being built; international airports. 97% urban.
steel automobile computer technology and service sector - capital markets and banks
limitations of GDP or PPP as an index
inaccurate data to use ignores other income in GNP economic well-being differs from GDP projection may be questionable multiple criteria indices are often better
what are the advantages of economic activity at a global scale?
sourcing of raw materials and components on a global basis reduces costs via economies of scales
High volume production at low cost countries such as China helps to reduce the rate of inflation in other countries and helps the living standard rise
Collaborative arrangements with international partners can increase efficiency of operations considerably
explain the process of regional disparities, as proposed by Myrdal (1957)
Initially the country is economically undeveloped (pre-industrial stage) and the level of disparity is small.
In the early stages of development there is a tendency, due to cumulative causation, growth is concentrated in the core region, benefitting from the multiplier effect.
Rapid economic growth occurs increasing regional divergence. Hirschman called this virtuous circles or upward spirals.
Backwash effects, e.g. selective migration, (brain drain) capital flows, (FDI) etc., enhance the level of disparity between core and periphery, further increasing regional divergence. Hirschman called this vicious circles or downward spirals.
At the notional mid-point, disparities start to decline (regional economic convergence) as the country becomes more developed, government may have more capital (from greater tax yields) to spread development into peripheral regions.
The core(s) may also suffer from diseconomies of scale, (higher prices of land, helping businesses and entrepreneurs to seek better and more cost- effective locations in peripheral regions.
strategy for reducing regional disparities such as
Amazon Region Protected Ares and Forest Code
1965 Forest Code
law requiring land owners maintain 35-80% of their property under native vegetation
Protected Areas Programme
Aims to create and support a system of well managed protected areas and sustainable natural resource management reserves over a 10 year period; focusing on amazon biome protection
transform existing but neglected parks by bringing them up to effective management standard and establish sustainable use reserves will benefit local communities
how can development be measured by infrastructure
phone coverage signal %
% of road surface covered
% of GDP spent on infrastructure
why might capital, resources and labour move from the core to the periphery because of SPREAD EFFECTS
when spread effects operate
they occur at an interim stage of development when as the core expands,
it reaches the point where diseconomies of scale set in,
and operating in the core becomes difficult and costly
eg as congestion increases, land prices may rise and businesses may decide to decentralise and find peripheral locations attractive
example of regional disparity in literacy
overall 95% vs 88 men are literate
overall 84% vs 63 of women
beyond initial advantage and cumulative causation, what factors explain regional disparities within countries
distance inaccesobility terrain weather language failed investment conflict
key elements of cumulative causation
initial advantages
attraction of labour; capital and materials; innovation
multiplier effect = cumulation
spread effects
emergence of a developed successful core
how do TNCs grow
by buying up foreign firms in mergers and acquisitions
how does cadaster unico aid aid bolsa familia
it is a central registry of poor families in Brazil.
maintains data on each household’s members, income and living space
it allows Brazil to accommodate families without a formal, permanent address, which welfare systems in other countries tend to exclude.
instead, families are asked what type of public space they live close to – e.g. a nearby river – and what type of dwelling they inhabit e.g. abandoned lot or shack.
facts about TNCs in a modern age
60,000 TNCs
they control 25% of the worlds economy
employ 1% of the worlds workforce
e.g. cadbury and oreo are owned by an american food TNC, kraft
factors encouraging the growth of TNCs
the emergence of a global economy as interconnectedness increases facilitated by declining transportation costs (containerisation): TNCs seek to maximise profit and minimise costs
ICT changes, e.g. 24/7 operation, electronic banking - call centres in Bangalore set to english standard time, with a copy of the weather
‘borderless world’ – fewer border restrictions/ increasing openness of once isolationist countries e.g. China and Vietnam embracing free trade, becoming WTO members. increased international migration provided a larger labour force
governments’ policies to attract FDI e.g. Reagen’s embracing of globalisation and removal of protectionist policy, facilitated the rise of Japanese cars in the 1970s/80s
cultural change, e.g. global brands, consumer culture, media role
explain how Coca Cola operates using globally concentrated production
all production occurs at single location and the products are exported out to world markets.
50% of their associates worldwide ae located outside of the US. Coca Cola manufacture their concentrate in America, and bottlers are subcontracted out, buying the concentrate from them.
The bottler then mixes the concentrate with sweetener’s and water, to make the finished product.
Each bottling company has exclusive rights to a region of the world.
Then, bottlers are in charge of distributing the products to their retailers (in contrast to Nike, who subcontracts all stages of production other than design).
why is measuring wellbeing difficult
subjective definition - highly personal character mood
access - remote terrain instability
governance - no national statistics / corruption = misrepresentation of data
data collection - illiteracy langyage issues
describe how the wto encourages trade
WTO encourages trade are by lowering trade barriers
discouraging ‘unfair’ practices, such as export subsidies or ‘dumping’ products cheaply, below cost, to gain market share.
For LEDCs, it involves giving them advice, time to adjust and some special privileges.
explain why GNI (per person), GNI per person (PPP) are all better measures than GDP
GNI would be a more effective measure, as it accounts for income received from other countries. This is all the more significant in the context of the new international division of labour, as increasing numbers of HIC companies outsource and offshore their contracts abroad.
GDP does not account for the PER PERSON between countries. This is problematic as low populated e.g. Netherlands can have a small GDP and a low GDP, but maintain a high GDP per person. By the same token, highly populated countries can have an increased GDP overall, but a low GDP per person e.g. India.
GDP per PPP accounts for difference in costs in living. For example, a dollar in China buys more than it would in the USA.
Fails to account for inflation, making it easily manipulated.
why may regional disparities within s country be difficult to overcome
cost scale attraction and dominance of core harsh environments political interests remoteness
what are the social challenges of measuring inequality
privacy (isolationist governments e.g. North Korea during famine),
truth/lies (LIC countries where bribery/threat invoked),
interpretation (happiness index, well-being – mood on the day, recent political events),
language barriers (especially in rural areas where local dialectics may make communication difficult).
strengths of GNI per person
easy to understand
single criteria = clear
allows global comparison
what are the economic factors explaining the growth of China’s NICs
contrast to south korea
rural urban migration at 500,000 a year - mechanisation of agriculture
wages are at 10x less than other east asian countries
BUT govs empowers areas to attract FDI no min wage
SK: raised minimum wage in 2018 by 16% resulting in 90% job cuts
what things in terms of quality of life are difficult to measure via index
the freedom of speech freedom from oppression environment atat cultural rightness content or belonging pdotition ov women
what are the three stages of economic divergence and convergence
pre industrial stage when regional differences are minimal
a period of rapid economic growth characterised by increasing regional 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
