Section 1 Flashcards
What is Economic Internationalization, what is its indicator
extend to which national economies interact with one another through the exchange of goods and services, focus on extension of economic activities across boundaries Indicator= Trade/GDP ratio
Describe Economic Globalization
Set of processes through which economic activities are increasingly interconnected. Functional integration of production activities - global assembly lines
What are the 3 competing explanation/theories in terms of economic globalization
- Hyperglobalizers: Emergence of new world order, decreasing role of the nation sate, “borderless economy”, distance doesn’t matter 2.Skeptics: Economic globalization=overblown, a myth or mislabeling of internalization, nothing new ! 3.Transformationalists: Globalization= non-static, uneven patterns of development, national economic space is not equal territorial borders
What are the first two key phases of international trade ?
- 1500-1800 (early commercial expansion) -Discovery -Mercantilism and protectionism -High values goods 2.1800-WW1 (Rise of colonial economy) -Trade-boom - bulk staples - driven by free trade, migration, innovation
What is new in our global economy
- More of everything -Trade capital flows comparable to 19th century -Two key differences : -type of trade (composition) and capital flows -Market integration- breadth and depth
What are the 20thc drivers of commercial integration
Important changes -Trade reliberalization -Liberation of capital market -GATT/WTO, IMF (international money fund) , trade blocks: EU/NAFTA =international governance -unilateral world to multilateral worlds -Greater degree of connectedness -much more trade
What are consequences of a more global economy
- Loss of domestic control over nation’s own economy (-race to the bottom, competition to attract capital -MNCs and environmental regulations) 2. Increased intra-firm trade (which are tricky to regulate) 3. Job opportunities vs Job losses (relocation of production activities’ who wins, who looses?)
Describe Economic Globalization
1- A set of dynamic, non static processes 2-Both spacial and temporal dimensions i) stretching (expansion of economic activity) ii) intensification (growing magnitude of connectedness) iii) speeding up (increased velocity of transaction) 3-Magnified local-global impacts , unfolds over multiple geographic scales
economic systems are _______
scale independent, they can exist on any scale
Production possibilities frontier implies
-tradeoff -valuation -preferences -opperation costs -economic growth (producing more goods)
Describe economic agents
individuals, coop, firms, any entity making production/consumption decision
Describe economic institutions
Set of norms and rules that govern commerce, trade, production and consumption- all around, they are everywhere guiding us, the world is built on institutions they guide incentives
what are factors of production what are factors endowment
Land, Labor, Capital Natural resources, climate, labor force, capital/technology
Explain private goods and public goods
private goods = excludable, rivalrous public goods= non excludable, non-rivalrous *markets usually emerge from private goods
Scarcity can be _______ or _________ (the types of scarcity)
natural socially constructed
Describe a market
- facilitate exchange -its an institution not a place - Role of market = allocate scarce resource efficiently -ex= how to allocate oil ? have an auction, so a market -types of market = labor, land, commodity, etc
Define the structure of a market
-Government at the centre - 4 actors = resource market (top), product market (bottom) ,businesses (left), households (right)
What are the four types of economy
- Traditional economy = face to face exchange, no “markets”, subsitience focus, social norms guiding exchanges, gifts
- Market Economy = supply and demand, private ownership of resspurces, profit based
- Command Economy= governement own most buisiness, lack of competition, based on population needs
- Mixed Economy = mix of market and command, both pricate and public, governemnt guides ans provides services
Define Political Economy
Study of relationship between economy and political institutions
profit focus ? social focus ?
the variation (which are observed) in interaction influences society
What are the 2 drivers of economic growth
- New ressources (population, natural ressources..)
- Technological Change
Describe GDP
Gross Domestic Product
Market value of goods and services produced withing a country’s border in a year
Does not include intermidient goods (ex electricity)
What is real GDP
- GDP calculated with inflation
what is GNP
Gross National Product
market value of goods and servies produced by national of a given country in a year (nation=citizentship)
Luxembourg example = GDP 1/2, GNP 1 , why ? others countries produce in the country and luxembourg produces more abroad ?
What are the 3 economic sectors
Service
Agriculture
Industrial
Gdp allows to _______ and is very useful to __________
track the development
understand the structure of an economy
What are the problems with GDP (5)
- Does not take into account Informal sector/underground economy (which can be important)
- Does not take into account unpaid work (housework, volunteer, which is a bias against developping countries)
- Does not differietiate Welfare enhancing vs Welfare reducing activities (example: pronatal care VS oil spill clean up)
- Does not capture the distribtuion of income (small groups of ppl capturing all income)
- Comparisons with developping countries (where cost of living is very different)
What are two alternate income measures (ways to adjust the purchasing power basis) , explain them
- PPParity: portays exchange rates and purchasing power– as if it was sold inthe US – allows better comparision– base line = US
- GNI (Gross National Income): alternate measure to GDP/GNO–income received through the goods and services – captures remittance and aid–for large countries, its similar to GDP– Whereas GDP only counts income received from domestic sources, however, GNI includes net income received from abroad
GDP is not a measure of ________ , the relation between GDP and ________ or _______ is not really accurate
quality of living
life expectency
years of school
Growth is _________ for development
necessary but not sufficient
What are the milleniums goals , what does it portrays
to eradicate extreme poverty and hunger;
to achieve universal primary education;
to promote gender equality and empower women;
to reduce child mortality;
to improve maternal health;
to combat HIV/AIDS, malaria, and other diseases;
to ensure environmental sustainability; and
to develop a global partnership for development.
growth is not enough
What are some alternate, new measures of development
- HDI (human development index) = measure capturing education and health and income – measure on 1– easy to map
- GNHI (gross national happiness indez) = objective and subjective index with all sorts of values
- GPI (Genuine progress index)= rethinkink what is progress– takes into account sustainability, ajusted income, seprating welfare and has 24 pieces *GDP can cancel whiel GPI doesnt
How to acess income inequality + what is GINI
- share income
- Lorenz curve (capures distribution with the curve)
GINI : a statistical measure of the degree of variation or inequality represented in a set of values, used especially in analyzing income inequality. G=(a/a+b), so the higher the less equal, the world GINI is 0.56
What are the industrial location key factors (7)
- Acess to input (raw materials, energy) [eg= aluminium production in QC because electricity need + cation= no absolute correlation, japan or congo example]
- Availability of labour (skills, qualifications) [eg= RBC call center in N-B because bilingual]
- Processing costs (land, labor, capital)
- “Pull” of the market (is it important to be close to consumers?)
- Transfer cost of alternative locations
- Institutional and cultural factors (tax..)
- Behavioural consideration (objectives/constraints of decision makers, taking distance out of competition equation) [ex: cluster of fast food because consummer basin]
Describe industrial structure of economies (the 4 types of activities)
i) Primary activity= concerned directly with natural ressources (fishing, mining)
ii) secondary act.= processing or transformation of raw material into manifactured goods
iii) Tertiary act.= sale and exchange of goods and service (Zara, club video)
iiii) Quartenary act.=handling of knowlegde and information (bank)
Describe Light and Heavy industry
Light= shoes, glasses, goods
Heavy= intermidiate good (gonna be transfered again), capital intensive
Describe the major industrial regions in North America + the shift
Roots of industrial revolution in manufacturing belt
Canals, Railroad, transportation network helped with the developpement of the Frost Belt (rust belt?)
Detroit = cars , motors
Boston= formally light manifacture now electronics
New-York=apparel industries, processed food, book publishing
New-Jersey=Pharmaceutical
Chicago=Trains, meat packing
Pittsburgh= steel
Philadelphia, Baltimore= heavy manifacturing (steel, chemicals)
Upstate NY= chemicals, optical devices
Cleveland and Akron = tires
Southern Ontario = cars, steel, chemicals
Montreal= aerospace, aluminium, pulp and paper
//
Shift = frost belt ot sun belt
1960-70s : technology emergence finding new locations (sun belt)
Southern Cali = biggest hub for manifacturing, mixed light and heavy, shift due to Douglas and Lockheed plants, developpemnt of biotech
San Fran= sillicon valey
Seattle- Tacoma= aircraft, computers
Tech. Triangle= Raleigh-Durham-Charlotte software
Texas= computer-electronics
Describe Europe Major Industrial Regions
France: Ile de France= pharma - _Lyon=_Textile- _Nice=_Sophia Antipolis,high tech
Germany: Ruhr-Rhine= steel-_Saxony=_ light manifacture-_Stuttgart=_automobiles
Italy: 3rd Italy= artisanal, clothing, high precision prod. - Golden Triange= classic mix of light and heavy
Spain: Barcelona= hard, light, high tech
Uk: M4 corridor= tech. - Manchester= heavy
Describe Russia Major Industrial Regions
Volga region = relocated industries , steel mineral
Central industrial region (Moscov) = Heavy
Ural region= heavy, forestry, pulp/paper
Kuzbas= secondary
KRASNOYARSK-BAYKAL=?
Far East= port
Describe Japan Major Industrial Regions
Kanto Plains District = heavy
Kansai District = heavy
Kitakyshu District = ship building
Toyama District = pulp/paper
Describe China industrial regions
North-East= Trad. Heavy
Chang= Steel
Northen= food
Guangdong= fastest growing regions in china, SHENZHEN= special economic zone, world’s workshop, developing inland, 1/3 china’s export
Who are the four Asian Tigers
Hong Kong = shipment, finance
Tawain= labour intensive
Singapore = ship, high tech
South Korea = heavy and light tech
Who is the global Triad
North America, Europe and Asia
Europe, North America and East Asia =roughly ____ of manufacturing production
85%
We can see today a shift in the world’s _______
centre of economic gravity
What are the trends overtime in terms of merchandise trade
Trends over time:
Trade growth faster than output growth
Growing interconnectedness
NIEs experienced the strongest trade growth
The rise of China as a world mega-trade
Overtime we can observe (in merchandise trade)
- Europe decline
- North-America slight decline
- Asia huge increase
- South-America straigh line
Describe China’s growth
- Key date = 1978 → Mao’s term end, DENG XIAOPING arrives which leads to opening up of the country slowly then takes off in 1990s
- Huge growth in the 1990
- China has a huge pool of labor attracting industies
During the 20th Century who dominated manufacturing/trade
US
JAPAN
GERMANY
Which countries are growing through time in terms of manufacturing trade
BRICS
CHINA
EAST/SOUTH-EAST ASIA
In terms of annural growth rate, depict south asia and europe
- South-Asia = large current growth
- European high growth in 90s-03s
What are trade deficits and trade surplus
trade deficits = $ exports < $ imports
trade surplus = $ exports > $ imports
Explain the case of Ireland in terms of trade surplus
multinationals located in Europeans headquarters because of low taxes and EU which swells trade
The Netherlands are very important ________ because of its ________ , so its very dependent on_____
trade hub
port
trade flow
Trade activity is very ________, the top __ compose only ____
diffused
4
30%
What does it mean to have a trade deficit ?
Its an intergenerational issue that implies borrowing (by buying bonds or parts ?) in order to maintan high imports which impacts on currency vlaues and can build up, catch up, and end up in crisis
Trade growing ______ than _____
Trade to GDP ration is _____ because of ____
faster
output growth
growing
east-asia and pacific
Describe the networks of world merchandise trade
- E-U flows in internal trade
- US relies on external trade (+trade deficit)
- Asia is pretty interal
- Middle East relies on energy related exports
From 1980 to 2013, GDP and Exports ….
GDP X3
Exports X35
At the micro scale we can see the emergence of ________
world cities ( increasingly connected) as engins of global economy
Describe time space compression
processes that revolutionize the qualities of space and time such the ways in whcih we represents the world in altered
Transportation of goods from point A to point B is accelerated
The use of circulation technologies (joined transportations and communications) to overcome the frictions of space and time
Technological determinations are not _____
the only factor of time space compression
As technology advances ______
rate of _____ a year
the friction decreases
30 minutes shaved off
In the last 20 years, what was the biggest technology advance in terms of time space compression
super container ships
Time space compression is ________ as __________ and _____ from _____
uneven
investement in infrastuctures largest where demand and financial return are greatest
Elastic
from those difference in investment (NY is closer to London than to Denver)
- Describe Canada Pre 19th century
- Describe Canada mid 19th century
- -Part of the periphery
- Staples economu (essential goods, lumber, fur, fish, raw material) - -As US begin to industrialize exports of ressources flow south rather than Europe
- Describe Canada expansion after 19th century
- -1867→ confederation = new nation building policies (encourage east-west trade flows) + new railway road
- WW1 : Rail road = lumber industry develops
- WW2 : ON and QC as key manufacturing disctricts
- 1965→ Canada and US auto pack= elimination of trade tarrifs on cars, trucks and parts , CA-US unique in terms of volume of bilateral trades, “Managed Trade” (not free trade) , developement of Southern Ontario, corporate ownership patterns
- 1970s: Energy Boom in Canada, development of oil industry + rise Japan industrial capacitu
- 1988 : FTA
- 1994 : NAFTA (leads to great economic developpement)
From 81 to 2011, canada ______ GDP and became _______
doubled
much more reliant on exports and imports
______% of Canadas exports go to ______ , we are very ________ on ______
75%
US
dependent
South Export
Canada can see a ______ rate of export in _____
Canada can see a ______ rate of export in _____ , hence _____
The current ______ are _____ to 1930
Because of the ______ the _____ moves at the center of the economy
growth - Asia
decline- West-Europe (hence CETA)
staples- similar
energy boom- west
Discuss the FDI patterns and trade services in Canada
-Flows mostly coming in from North-America (including carabeans because of tax heavens) and Europe
Trade servives in Canada are volatile with a slight deficit but a surplus in knowlege based (insurance, clinical test)
China outsells Canada in US in ______ and its the first time _______
2007
Canada is not #1
Why do countries trade ?
-Differences in factors endowements:
-uneven ressource distribution
- natural/raw material
- climate, terrain
- labour force (quantity + skills)
- capital/tech
- Intra-industry or firm trade :
- Via globally integrated prod activity
- eg: auto-pack, many current transaction across the globe but same firms
-Agglomeration economies (scale, scope)
-tap in the knowledge flows
What are the advantages and gains from trade
-mutual gains from trade when products redistributed according to advantage
Describe Absolute VS Comparative Advantage
Comparative advantage refers to the ability of a party to produce a particular good or service at a lower opportunity cost than another. Even if one country has an absolute advantage in producing all goods, different countries could still have different comparative advantages.
Depict the bread and wine example
slope = ____
slope = opportunity cost
Describe competitive advantage
- Factor conditions
- Demand condition
- Supporting industries
- Firm Strategy
Describe trade in the roman empire
- Very extensice
- Common currency
- Tribute
- Diversity of products
- Well developped
Describe the Medival World
- Changes as the Rome empire collapse = new empires
- High middle ages : manoralism (feudal, lords, serfs), power= church
- Crusades, roads and town = pushing back islamic sate in middle east - moving along old roman roads
- European trade centre= Venice, Genoa (very important for gold, silver, spices through maritime trade)
- The turn to sea leads to further developpement of banks
- Peasant ask for capital rather than product which leads to markets - feudal econ to market excahnge econ
- New Frontier was the town
- Outward looking
- Innovation that develoip the market = crop rotation and plough
- Portugal is the first to experience a pinch, they want to find new places to sell because the are locked in
Depicts the Era of exploration
- 1453 = the fall of constatinople
- Portugal tires to go around the world
- Spain find the Americas (first disapointed because not found much but then sent contest between Spain and Portugal)
- Treatee of Torsedillas separatting the “world in two” , lauched exploration
- By 1522 the world was round
Describe International Trade and Product during the exploration
name the key innovations of that period
name the motivations
Spain ______ from its ______
- exploration, extraction and trade
- much trade = maritime commerce on the coast
- Luxury good trade
- East India companies = first MNC
- Financing trade with credit
- Gold, silver
- Corn and potatoes come to Europe
- Transmition of diseases
- Key innovations : finance and banking (credit, letter of exchange)
ship building (caravelle, maps)
Naval ordinance
Communications
- Motivation = mercantile + church
- Great interest of exploiting ressources
- Profit driven and ideology (christian) driven
- suffered from its wealth
Depict the rise of nation states and mercantilism
- Feudal estates to nation states (trade and monarch working together)
- Wealth of a nation is in the amount of gold/silver they have
MERCANTILISM
- Mercantile trade = related polices
- Win/lose (need to win)
- monopoly
- Gold and silver stolen from conquered land
- Import tarriffs and import substitutions
- Need for a strong navy and military because conflict
Explain the Challenge to mercantilism
Explain the end of mercantilism
Intellectuals (Locke, Smith) =
- wealth of country does not equal silver and gold, it is products of human labor.
- Trade is not a zero-sum game
- Confusing wealth with money : gold and silver cause inflation it does not mean people are wealthier
- Money does not equal gold (their effect on econ is different
*Mercantilism = fighting over scarce ressources, Adams smith argues that labour products are not as finite
//
The end
- Replacing monarch with democracy + emergence of middle class = the end
- Focus from extraction to trade = massive boom in trade, governement change the way trade is done (to their benefit)
Explain the first global century
19th century = trade boom
expansion in 4%/year of international trade and 8%/year GDP
What are the drivers of the trade boom (5)
- Free Trade ( began in 1846 in UK because of corn laws??)
- Industrial Revolution (innovations, increased demand, postive feedback on trade, innovation=surplus=trade=surplus=innovation, endogenous growth)
- Transport and communication innovation (rail, canals (suez, panama), goods/info move quickly)
- International migration (new geog of demand, opportunity for trade)
- Peace (after mercantilism conflicts, win/win trade game)
Explain the Antlantic Triangle + why did fall appart
fell appart because of : 1. ships travels
- Slave abolition
which both led to direct trade
Explain Colonialism
- Discover -> conquest -> colonization
- British East India Company (give a monopoly to trade)
- Gold, Glory and God
- Two majors waves : 1. 16th-19th C = trade developping the colonism
2. 19th-early 20thC = scramble for Africa
What is the economic roles of colonies (4)
- New sources of ressources and revenue (gold, silver, sugar, coffee … + source of taxation)
- New Markets opening for industrial goods ( new markets (oversea, new people to sell goods = trade, wealth building)
- New investment opportunities- vent for surplus (investing in building rails, canals. estates in colonies)
- Safety Valye for excess population (working colonies = path for middle class to further their skills + irish potatoes famine example)
Consequence of Colonialmism
- Adverse effect of indigenous population (diseases + imposition of cultural norms and slavery)
- Economic centering on primary products exports (very specialized = no industrialization = unblanced properity, coffee oligopoly example shaping politcal and social countries)
- Formation of dual society ( land owner and everybody else)
- Urbanization = port cites and railways (unfolding from dual societies, coastal cites become capitals, economy leads to everything in the goal of facilitating trade )
- Transplantation of nation sates (maps and boundaries are artificial/not based on natural borders, institutions and laws (legal system) and school structures and ideologies and brough to colonies- still echoing impact today
Describe the outcome of trade boom
- Economic Growth = GDP increase of 2.4% per year
Europe is better off
Colonies income rise but still issues
- Market Integration = most important
price start to converge, goods/info flowing more n more
3.Income Divergence = Western-Europe GDP is growing after 1820 due to difference in productivity - ** GDP driven by population is transformed to GDP due to means + inequalites
Growth can be present withtout ______
developement
Depict growth and structural change in the 3 era (mercantile, 19th,20th)
- M. Era = gold, povrety is good because exploitation
- 19th = Povrety is bad in England but good in colonies
- 20th = Marshall Plan era, povrety is bad, trying to put countries back on their feet
the ultimate goal of growth , development and fullfillment of basic needs/povrety reduction is
self actualization/freedom and capacity
How do countries develop ? (3)
1. Economic Structural Change
- Exports and imports increase with GDP
- Greater accumulation of capital as GDP rise (savings, greater investment, greater human capital)
- Share of agriculture decreases, rise in service share + angles law (share of money to food doesnt really rise when income rise) +
-increasing in productivity (innovation allow urbanization- efficienty rises as GDP rises)
2.Urbanization
- Economies of agglomeration (industries attracted to place because all ressources are there all together)
- Economies of scale (large factory more productive than small factory)
3. Inequality
-Kuznets curve (A. everybody is poor B. people become better off faster than others C. emergence of middle class, human capital(education, health care) balances out
What are the 4 theories of economic dev.
- Stages of growth ( plane taking off to mature development, need aid to give a push to compensate for the savings gap)
- Two-Sector model (Rural= too many people for productivity VS urban (much more productive leading to innovation) [example = CHINA]
- Dependency Theory (core empovrishes the perifery, dev and under-dev = two side of the same coin) [example = South-America]
- Endogenous growth theory ( LLK + Tech is the answer, the interaction between human capital and tech) [example= precision farming]
Developement theory is ________
playing catch up- all of the 4 are useful in context but no fully accurate
What are the path to Economic Developement (3)
1. Primary Product Export [ex Canada and US which are rich in primary prod (absolute advantage), exploitation of land makes them productive, exporters do well because they bring new ressources which were in demand] focus on economic linkages = link between products and activities - growth in one sector allows growth in another
*isse with Primary Product Export= dependent of price, if fall screwed, too specialized
2. Inward Looking Industrialization (ISI) :
_-_shift from primary product export to manifactures to end up knowlegde intensive
- Produce yourself : infant industry become mature industries investing in linkages
- Protect : tarriffs, quotas, imported stuff very expensive
** Issue = LIMITED LIFE SPAN in theory works well but in reality, resistance to lower protection of infant industry once it works so its usuall good in the short run only + the market is limited (only so many shoes and too expensive to import)
- Export- Oriented Industrialization (EOI)
- Advance by exporting specialisec demanded goods
- Gov. plays key role by fostering activity in specific sectors with - substidies (target for companies, reward, punishement) - manage exchange rate (create affordable exports) - intervining in markets (credit)
** Issue = very expensive , ugly head of protectionism ($$) and vulnerable to the world around
