MIDTERM 3 Flashcards
Capitalism
An economic system based on private ownership of the means of production and their operation for profit.
Mainstream view of development:
- All economies can develop (become like the west) if they choose to adopt appropriate policies and strategies
- Uneven development is a temporary condition
- Modernization theory
- Underdevelopment can be fixed by the capitalist system and free enterprise
Modernization theory of development
1950’s and 60’s:
idea that all societies can/should/will develop along the same path as that taken by Europe/NA and end up in the same place.
Truth is:
- Formerly colonized countries cannot take the same path because their land and resources have been taken away/exploited
- Colonizing countries had access to all land and resources they wanted
Alternative View of development (held by most economic geographers):
Capitalism creates uneven development over space and time
Unevenness is an inevitable outcome of capitalism
Impossible that capitalism would lead to greater equalities
Capitalism creates inequalities
How is value created?
Labor adds value
Socially produced
Demand & Supply
Transport costs
Symptoms of uneven growth and development
uneven production of goods and services
uneven wealth distribution
urban, regional, national, global inequalities
Half of world’s wealth now in hands of ___ of population
1% of the population
U.S. has ___ of the world’s billionaires
46% of the world’s billionaires
___ million people control ____% of the world’s wealth
32 million people control 41% of the world’s wealth
Economic Structures or systems:
- Peasant economies (subsistence)
- Feudalism / Tribute
- Cooperative or Collectivized
- Capitalism
Use Value
The benefit humans get from having or consuming something
Exchange Value
The monetary worth of a good or a service traded in the market economy
Types of Value
Use Value
Exchange Value
Characteristics of capitalism
- A small group of people own the assets necessary for value creation.
- Value created through labour (human & other-than-human)
- Class system: Human workers sell their labour for wages
- Profit imperative
- Continual growth
- Dynamism, creativity, crisis: Creative destruction
- Uneven development
3 contradictions of capitalism
Growth increases the price of labour, BUT
profit requires labour costs to be minimized
- they try to find technological ways to reduce labour and costs. - reduce wages - lead to crisis of accumulation
Low wages produce low demand for goods,
BUT growth depends on increasing demand.
If wages are low, demand slows down BUT growth depends on increasing demand.
Crisis of over-accumulation
Capitalists have more products than they can sell, or idle machinery that cannot be used to full capacity. An oversupply of goods/id machinery and insufficient demand.
Crisis of over accumulation lead to:
An accumulation of wealth, but on the basis of a work force that cannot afford to buy the products that they create.
Temporary solutions to crises of over accumulation:
sell to new markets (dumping)
reduce wages
more labour saving machinery
Creative Destruction
new growth through destruction of old products + markets and creation of new ones. (through boom and bust cycles)
crisis -> restructuring -> recovery
Four ways in which the capitalist system might restore conditions for profitability:
- Devaluation
- Regulation
- Temporal displacement of capital
- Spatial displacement of capital
DEVALUATION as a way to restore conditions for profitability
The destruction of value in the system:
- devaluation of money (by inflation)
- devaluation of labour (by unemployment)
- devaluation of productive capacity (by wars, military encounters)
REGULATION as a way to restore conditions for profitability:
Macro-economic management which might involve heavy government spending:
- Subsidies
- Stimulus Spending
- Higher labour standards
(Obama’s American Recovery and Reinvestment Act in 209)
TEMPORAL DISPLACEMENT OF CAPITAL as a way to restore conditions for profitability:
This involves switching resources to meet future needs rather than current ones:
- Invest in the future (eg. Infrastructure, loans)
SPATIAL DISPLACEMENT OF CAPITAL as a way to restore conditions for profitability:
This involves opening up new spaces for capital production, new markets or new sources of raw materials.
Capitalism is always seeking its
“Spatial fix”
Indonesia vs. Singapore as an example of uneven development
Indonesia has a wide variety an an abundance of natural resources (mining, forest, agricultural), but it’s per capita income in 2010 was US$4,300.
In neighboring singpaore, a tiny island city-state with no natural resources at all the per capital income in 2010 was US$54,000
Indonesia vs. Singapore vs. Japan as an example of uneven development
Indonesia has a wide variety an an abundance of natural resources (mining, forest, agricultural), but it’s per capita income in 2010 was US$4,300.
Singpaore, a tiny island city-state with no natural resources at all the per capital income in 2010 was US$54,000.
Japan also has little natural resources (oil, arable land, minerals) and it exceeds Indonesia’s per capita income almost nine-fold.
Indonesia vs. Singapore vs. Japan as an example of uneven development
Indonesia has a wide variety an an abundance of natural resources (mining, forest, agricultural), but it’s per capita income in 2010 was US$4,300.
Singpaore, a tiny island city-state with no natural resources at all the per capita income in 2010 was US$54,000.
Japan also has little natural resources (oil, arable land, minerals) and it exceeds Indonesia’s per capita income almost nine-fold.
There is little correlation between a list of the world’s wealthiest nations and a list of those with the _____
greatest resource endowments.
How is capitalism in constant flux?
Regional/global shifts in production
Historic and modern “cores” & peripheries”
Redundancy + obsolescence
New technologies & products
some notable global shifts in production:
Manufacturing (china)
Services (west)
How is capitalism in constant flux?
Regional/global shifts in production
Historic and modern “cores” & peripheries”
Redundancy + obsolescence
New technologies & products
some notable global shifts in production:
Manufacturing (china)
Services (west)
Relocation of manufacturing to Asia + Latin America in the (1970s - 80s)
Manufacturing in 1800s/early 1900s:
Manufacturing concentrated
in NW Europe, N America, Japan
Over time, economic development in a region leads to
wages increase
land prices increases
decreases unemployment
development of trade unions
… ALL OF WHICH REDUCT PROFIT MARGINS.
Meanwhile in other regions, underdevelopment leads to
- high unemployment
- low wages
- absence of trade unions
…. ATTRACTING CAPITAL INVESTMENT DUE TO THE HIGH PROFITS TO BE MADE.
Over time, economic development in a region leads to reduction in profit margins, meanwhile in other regions, underdevelopment leads to attracting capital investment due to the high profits to be made.
It is this movement of capital from one place to the next that creates uneven development.
New International Division of Labour
In the 1960s, TNCs from highly industrialized countries began relocating certain production facilities to “LDCs”.
Main reasons for the new international division of labour
These were mostly labour intensive industries (lower paid jobs that didn’t require special training or eduction)
LDC’s had fewer regulations (labour, environment)
Due to freer movement of goods and capital
Due to improved technology
Other key factors
First wave of development
East Asia - Hong Kong, Singapore, Taiwain
Second wave of development
Malaysia, Indonesia, Thailand
Third wave of development
China and India
Top Global Outsourcing destinations today
- India
- China
- Malaysia
Major global shift in manufacturing and services began in the
1970’s
Economic Globalization:
Deepening and widening of trade and investment flows around the world so that more and more places are integrated into economic processes that operate beyond the scale of the locality, region or state.
