Economic Transition Flashcards
Low business tax country
Ireland has corporation ax of 12.5%, lowest in EU. UK has 20%. Hence Facebook European HQ.
Apple HQ
based in the USA - due to historical reasons as founders country of origin therefore economically and practically suitable. Also provides a skilled and educated workforce.
Silicon Valley, California - quick flow of ideas and exchange between technology firms = innovation.
Apple R&D
R&D centres in the USA and UK - highly skilled workforce needed for quaternary jobs - UK has best two universities in the world, USA has 31 in top 100 according to 2018 World University Rankings.
Investing in 4 R&D centres in China - improving education in china - 2 universities in top 30. Also to streamline its activities as majority of manufacturing takes place in China.
Apple manufacturing
350 suppliers in China - low wage costs (1/10th of US counterparts) - lower production costs. Large workforce (1.4bn population) - ability to mass produce parts. Weaker regulation on environmental protection and employment rights (average of 12 hour day vs 8 in US) - lower production costs.
42 suppliers in Taiwan even though wage costs are 30% higher than in china. Goof geographical location and size = hub for shipping and low transport costs from factory to port. Stronger regulation of intellectual property - many apples ideas are secretive.
Suppliers in Germany (manufacture phone network - greater quality and reliability of production due to specialisation of firms in germany. Stronger regulation of intellectual property - many apples ideas are secretive.
Impact of apple globally
51% of US households own at least 1 apple product.
Poor working conditions in some of Apple’s suppliers. E.g 2010, 14 suicides at Foxconn - blamed on stress due to poor working conditions. = Damages Apple’s brand image. Apple launched Supplier Responsibility Initiative, in which suppliers must meet apple code of conduct - audits performed to ensure no violations. BUT in 2007 2/3rds of audited suppliers exceeded 60 hour working week limit. Code not enforced.
Outsourcing of labour from USA: 700,000 jobs in asian countries. BUt high skilled jobs remain in USA.
Factors in emergence of NICs
Human resources: large supply of cheap labour that is relatively well educated = encourages FDI = economic growth in manufacturing and service sector. E.g South Korea has a 53 hour average working week. E.g India has a population of 1.3bn in 2016. South Korea has minimum 6 year education since 1960s, BUT up to 100 students per class hence poor quality. Natural Resources: availability of natural resources e.g fossil fuels = encourages FDI from TNCs who seek to explot resources = growth. e.g India has the 4th largest reserves of Coal in the world. Government Policies: Protection of infant industries: high levels of protectionism e.g tariffs and subsidies. Reduces competition as foreign goods more expensive. Hence becomes market in own right once economies of scale and knowledge gained. . E.g South Korea = growth of samsung. Joint ventures: e.g 1980s and 1990s indian firms had joint ventures with japanese firms = hero-honda. Reverse engineering: imported technical goods and broke them down to learn how to make goods = development of technological firms. Used in south korea Removal of protectionist measures: increases FDI as TNCs can trade more easily and cheaply.
Deindustrialisation fact
E.g in the USA and UK the proportion of workers employed in manufacturing has fallen by 50% since the start of the 20th century.
E.g UK 1981 recession caused sharp fall in manufacturing output which was the trigger for long term deindustrialisation.
Spread effects fact
E.g HS2 aims to spread the economic prosperity of core london to peripheral regions such as Birmingham, Leeds and Manchester by providing more reliable and faster transport links between the core and periphery.
Why is east china the core?
It has developed as a global manufacturing hub due to:
Geographical location; proximity to ports and transport routes = suitable for trade. E.g east china sea
Flat, low lying land = suitable for urban development. (in comparison to inhospitable centre and west with foothills lying 500-1000m above sea level)
Large supply of educated human capital. (400 people per km2 vs 10 per km2)
Wester Development Strategy
Began in 1999 updated in 2008.
Encouraged over 200 counties to offer incentives alongside higher government investment in infrastructure and more liberal market policies. (e.g a 2 + 3 tax holiday)
+ve Eastern CHina’s GDP has grown at an average of 11.7% per year between 2000-2008.
-ve: varied rates of development within the region; aims to establish ‘regional development centres’ and 3 economic clusters. Hence concentrated in Chengdu, Sichuan , Chongqing and Xian.
Rise of central China Plan
Began in 2004. Aims to enhance central china’s assets by making agricultural production more scientific and efficient = higher yields. Transport hub connecting N & S and E&W, through high speed railway networks. Exploitation of raw materials e.g coal, and modernisation of industries to encourage urbanisation. (e.g 16% of Anhuis population had left the province to find work on the east coast.)
+ve: resources in central china are undeveloped = potential for development.
+ve GDP in all provinces has increased. E.g Anhui province increased from 481bn RMB in 2004 to 1.5trillion in 2011.
+ve cheaper labour in central china has encouraged FDI. e.g monthy minimum wages in Shanghai = RMB1,450 whereas max monthy wage in central china is RMB 1,160.
-ve: high restrictions due to mountainous landscape = difficult to access. Hence many resources extracted and transported to east. Hence no development. Also lack of FDI due to relative isolation and poor infrastructure compared to east.
Special Economic Zones
First introduced in 1979, located on east coast.
4 SEZ aimed to encourage FDI through tax breaks and reduction in red tape over the building of infrastructure. Cumulative causation and positive multiplier effect to develop whole of east coast.
+ve: in 1980s SEZ attracted 20% of FDI, by 2007 attracted 44%.
+ve: eastern provinces share of China’s GDP has risen to over 50% in 2006, up from 40% in 1980.
+ve: east coast produced 60% of exports and provided 30 million jobs in 2007.
Unstable government and development fact
Somalia is ranked most corrupt country in 2017, by their perceived levels of public sector corruption.
Education and development fact
E.g 19.1% of Niger are considered literate. HDI = 0.353
GDP as a measure of development facts
Uk 6th largest = free health care average schooling = 18 years.
China has 2nd largest economy in the world BUT social wellbeing is poor. E.g Hukou and 1 child policy limiting freedom.
Mexico is 11th largest but poor social wellbeing e.g 6% lack access to improved drinking water, 49% uder poverty line. High cnrime rates 50,000 homicides in 5 years
