Unit 10: Global Interdependence Flashcards
Trade
The exchange of goods and services for money. It results from the uneven distribution of resources over the worlds surface
Pre 1500’s trade
Trade began with barter systems and expanded through ancient roots like the Silk Road connecting the exchange of goods
1500’s - 1800’s trade
European empires dominated global trade exploiting colonies for resources and labour. The transatlantic slave trade and triangular trade system shaped economies
1800’s - 1900’s trade
Advances in technology and transportation boosted global trade. Nations shifted to free trade policies while imperial powers continued to control economies
1900’s - present trade
The WTO and trade agreements facilitates international trade. Global supply chains and the rise of MNCs have interconnected economies
Trade in goods and services
Trade in goods involves the exchange of physical, tangible products
Trade in services involves the exchange of intangible activities or enterprise
Trends in trade
There has been a shift from trade dominated by physical goods to services especially in developed economies. Emerging markets have transformed global trade becoming major exporter challenging traditional economic powers. Increased global interconnectivity driven by free trade, technological advancements and MNCs have expended trade networks and diversified markets
Factors affecting global trade
Resource endowment
Comparative advantage
Locational advantage
Investment
Historical factors
Terms of trade
Changes in the global market
Trade agreements
Resource endowment
The natural resources, labor, and capital a country possesses, influencing its trade patterns and economic activities.
Comparative advantage
The ability of a country to produce goods or services at a lower opportunity cost than others, leading to specialization and trade benefits.
Locational advantage
The strategic geographical position of a country, impacting trade efficiency, access to markets, and transportation costs.
Investment
The flow of capital into infrastructure, industries, and technology that enhances production capacity and competitiveness in global trade.
Historical factors
Past events, such as colonialism, trade routes, and economic policies, that shape current trade relationships and dependencies.
Terms of trade
The ratio between a country’s export prices and import prices, affecting trade balance and economic stability.
Changes in global markets
Shifts in demand, supply, consumer preferences, and economic conditions that influence trade flows and competitiveness.
Trade agreements
Formal pacts between countries that reduce trade barriers, such as tariffs and quotas, to facilitate economic cooperation and exchange.
OPEC
An intergovernmental organisation comprising 12 oil producing nations. Founded in 1960 after a US law imposed quotas on Venezuelan and Persian Gulf oil in favour of Canadian and Mexican oil. OPEC countries account for a large proportion of world crude oil reserves
Criticised for the political nature of its decisions. Oil-rich Arab countries have wanted to put pressure on the USA and other Western countries with regard to the Israel-Palestine issue
OPECs objective
To coordinate and unify the petroleum policies of member countries and ensure the stabilisation of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fir return on capital to those investing in the petroleum industry
Endowment of LICs, MICs and HICs
In HICs the wealth has been built to a large extent on the export of raw materials in demand on the world market. MICs and LICs rich in raw materials have been trying to follow the same path. In both cases, wealth from raw materials has been used for economic diversification to produce a more broadly based economy
Results of comparative advantage
Different countries specialise in producing those goods and services for which they are best endowed. Each country will trade a proportion of these goods and services with other nations to obtain goods and services that it needs but for which it is not favourable endowed. Applies to raw materials, manufacturing and services
Some countries now have a global reputation for particular products
Location of market demand and strategic locations
It is advantageous for an exporting countries to be close to the markets for its products as this reduces transport costs along with other advantages gained from spatial proximity. Some countries and cities are strategically located along important trade routes giving them significant advantages in international trade
Investment in LICs and MICs
Some MICs have increased trade by attracting FDI. These low income globalisers have increased their trade to GDP ratios. Many countries have become less rather than more globalised as trade has fallen in relation to national income. In the poorest LICs businesses operate in investment climates that undermine their incentive to invest and grow. Economic, social and political instability deters investment by making future benefits uncertain or undermining the value of assets. Crime and corruption are a risk to investment and increase the cost of business where this is a problem
Colonial ties and trade dependency
Historical relationships are often based on colonial ties and are important for global trade. These ties are weaker than they once were but remain significant. Colonial expansion led to a trading relationship dictated by European countries for their benefit. The colonies played a subordinate role that brought them limited benefits at the expense of distortion of economies. This trade dependency is why poorer tropical countries have a limited share of world trade
Primary-product dependency
If countries rely on the export of commodities that are low in price and need to import items that are high in price they need to export large quantities to afford low volumes of imports. Many poor nations rely on primary products to obtain foreign currency through export. The world market price of primary products is low compared with manufactured products and services. Prices of primary productions are subject to variation making economic and social planning difficult
Terms of trade for LICs and HICs
The manufacturing and service exports rise in price at a predictable rate resulting in a more regular income and less uncertainty. Terms of trade for many LICs are worse now than 20 years ago and many are struggling to get out of poverty. Many LICs also have very high trade deficits
Consequences of trade deficits
Neo-liberal economists say trade deficits are related to economic development and that capital inflows swell investment funds, generating future growth. Marxist economics believe that:
If the expansion of trade benefits MICs and LICs the expansion of trade deficits may bring problems
Trade deficits have to be financed by borrowing money from abroad (increasing debt) or by diverting investment away from important areas of the economy
High trade deficits constrain growth and produce high dependency
Emerging markets
Poor decisions are being made by Western policy makers in contrast with powerful growth figures of BRIC nations. High growth nations are emerging markets
The developed world grew by 2.1% per year from 2000-2010 while emerging markets expanded by 4.2%. In 1990, HICs controlled 64% of the global economy which was 52% in 2009. This has had political consequences with emerging economies exerting more power than they had in international negotiations. Major investors are seeking opportunities in faster growing emerging markets
Foreign exchange reserves
The G7 countries held 17% of the global total of foreign exchange reserves in 2010. The BRICs held 42% in 2010. The West no longer dominates global investment and finance. After a rebound following the 2008 financial crisis, global growth fell every year from 2010-2013. Emerging markets and developing economies will grow faster in the future
Free trade areas
Members abolish tariffs and quotas on trade between themselves but maintain independent restrictions on imports from non-member countries
Customs unions
Besides free trade between member nations, all members are obliged to operate a common external tariff on imports from non-member countries
Common markets
Customs unions that also allow free movement of labour and capital
Economic unions
Organisations that have the characteristics of a common market but also require members to adopt common economic policies on agriculture, transport, industry and regional policy
Regional trade agreements
A trade bloc is a group of countries that share trade agreements between each other to stimulate trade and obtain the benefits of economic cooperations. Regional trade agreements have increased in the last 20 years. In 1990 there were less than 25 and by 1998 there were over 90. These are geographically discriminatory trading arrangements (as described by the UN). Nearly all the WTO’s members belong to a regional pact which all have preferential terms that trade participants enjoy over non-participating countries
WTO concerns
Regional agreements can divert trade inducing a country to import from a member of its trading bloc rather than from a cheaper supplier elsewhere. Regional groups might raise barriers against each other creating protectionist blocs. Regional trade rules may complicate the establishments of new global regulations. International regionalism is rising. Regional agreements dominate the world economy with 67% of all trade and could cause world trade liberalisation to falter
Trade and development
In general, countries with a high level of trade are richer than those with lower levels of trade. Countries that can produce goods and services in demand elsewhere will benefit from strong inflows of foreign currency and from the employment their industries provide. Foreign currency allows a country to purchase from abroads goods and services it either does not produce itself or does not produce in large enough quantities
Free trade
When countries buy and sell goods and services with each other without tariffs or restrictions. This makes it cheaper and easier for businesses to trade across borders, encouraging competition, innovation and lower prices for consumers. Free trade can help economies grow by allowing countries to focus on what they do best but it can also lead to job losses in industries that struggle to compete with cheaper imports. Some governments try to balance free trade with protections for local businesses and workers
The world trade organisation
An international group that sets rules for trade between countries to ensure it flows smoothly and fairly. It helps solve trade disputes between countries when they disagree on tariffs, quotas or other trade barriers. It encourages countries to reduce restrictions on trade making it easier for businesses to buy and sell goods across borders
History of the WTO
Evolved from the General Agreement on Tariffs and Trade which was created in 1947 to reduce trade barriers after WWII
Was officially established on January 1st 1995 replacing GATT to oversee global trade with a stronger legal framework
Over time more countries joined and it expanded beyond goods to include services, intellectual property and dispute resolution
Has faced criticism for favouring richer countries struggling with major disputes and failing to update global trade rules
Benefits of the WTO
Promotes peace
Handles disputes constructively
Simplifies trade rules
Lowers living costs
Increases product variety and quality
Boosts income
Stimulates economic growth and employment
Enhances efficiency and resource allocation
Protects governments from lobbying
Encourages good governance
Challenges of free trade for exporting countries
Many developing countries rely heavily on exports, making them vulnerable to global economic downturns
Free trade can lead to a race to the bottom where businesses keep wages low and working conditions poor to remain competitive
Benefits of free trade for importing countries
Without tariffs, goods become cheaper
Free trade allows access to a wider range of profits and encourages competition which drives innovation
Challenges of free trade for importing countries
Domestic industries can struggle to compete with cheaper imports
Some countries imports more than they export leading to trade imbalances
WTO and wealthy nations
WTOs rules often benefit wealthier nations as they have the resources to negotiate favourable trade deals. While the WTO provides a system for resolving trade disputes wealthier countries tend to win more cases due to their stronger legal teams and economic influence. WTO rules on intellectual property have often favoured MNCs making it harder for developing countries to access affordable medicines and technology
Fairtrade
Aims to provide better trading conditions for farmers and workers in developing countries. It ensures producers receive a fair price for their goods so they can cover the costs of sustainable production and improve their quality of life. Also promotes environmental sustainability and prohibits child labour. Products with the fairtrade label meet strict social, economic and environmental standards
Importance of fairtrade
Many large MNCs dominate global supply chains, pushing prices down and exploiting cheap labour. Small scale producers struggle to compete and many live in poverty. Fairtrade ensures producers receive a fairer share of the profits. It also promotes economic stability in developing countries by providing farmers with a guaranteed minimum price. This allows producers to plan for the future, invest in their businesses and improve local communities
Challenges of fairtrade
Certification fees can be too expensive for small producers
It does not guarantee long term market access as retailers may buy from other cheaper sources
Certified products can be more expensive for consumers, limiting demand
Some large corporations have used Fairtrade as a marketing tool without committing to the ethical trade practices
Fairtrade products
Coffee
Chocolate and cocoa
Bananas
Tea
Cotton
Debt
The money that a country borrows from external sources to finance its trade deficits, development projects or other economic needs. This can come from foreign governments, international organisations or private leaders
Types of international debt
Trade deficit: when a country imports more than it exports it may need to borrow to pay for the excess imports
Sovereign: loans taken by governments from foreign institutions or countries to fund infrastructure, services or development
Private sector: borrowing by businesses within a country to finance international trade and investment
Structural adjustment: loans by international bodies with conditions requiring economic reforms
External debt
The money that a country borrows from foreign sources to fund its spending or development projects. This needs to be paid back with interest usually in foreign currencies
Debt service ratio
A measure of how much of a country’s income or export earning go towards paying off external debt as a percentage. A high ratio means a large part of the earnings are going to debt repayment, limiting its ability to spend elsewhere
Debt service ratio calculation
Debt payments / export earnings x 100%
Debt service ratio figures
Low (<10%): a country with manageable debt which can cover payments without major strain on its economy
Moderate (10-25%): Can manage debt but need to monitor the situation carefully
High (>35%): Under financial pressure struggling to balance repayments with economic growth
Odious debt
A type of government debt that is illegitimate or unjust because it was borrowed for purposes that did not benefit the country’s citizens or was incurred through corrupt or undemocratic actions by a government. It should not be the responsibility of the population to repay because it was taken on without their consent or for personal gain by corrupt leaders
Colonialism and debt
During the colonial era, European powers borrowed to finance projects and colonies were used as collateral. When they gained independence, the colonies inherited the debt even though it was not spent for their benefit. Colonial powers extracted wealth and resources from their colonies but much of this was sent back to the powers leaving the newly independent countries with underdeveloped economies and debt burdens from loans in the colonial period. After independence many former colonies struggled to repay debt incurred by colonial administrations. They were forced to take new loans to cover old debt leading to cycles of borrowing that still affect developing countries, contributing to long term economic struggles
Problems of debt for LEDCs (development)
Many LEDCs spend most of their money paying back loans so there is less available to build schools, hospitals or improve infrastructure. This causes struggles with growth and living conditions
Problems of debt for LEDCs (dependence)
To pay off debts, LEDCs borrow more from other countries or international organisations meaning they have to follow rules set by these lenders like cutting spending on public services making life harder for residents
Problems of debt for LEDCs (vulnerability)
Countries with a lot of debt are more likely to struggle when there are global economic issues so they might not have enough money to pay their debt
Problems of debt for LEDCs (limited growth and jobs)
Debt makes it harder for LEDCs to invest in industries that could create jobs and grow the economy. Without investment it is hard to reduce poverty or raise living standards
Problems of debt for LEDCs (social and political unrest)
When LEDC citizens see the government is spending most of its money on debt they can cause protests and political instability, making it harder for the country to move forward
Debt relief
The process of reducing or eliminating the debt owed by a country typically to international creditors such as foreign governments, banks or institutions like the IMF and the World Bank. Is often granted to heavily indebted poor countries (HIPC) to help them escape the debt trap allowing them to invest in essential services and infrastructure instead of repaying unsustainable loans
Debt cancellation
Writing off all or part of a country’s debt
Debt rescheduling
Extending the repayment period to make payments more manageable
Debt restructuring
Changing the terms of the loan such as reducing interest rates
Debt swaps
Converting debt into investment in development projects
Multilateral debt relief initiative
Launched in 2005 to provide 100% debt cancellation for eligible developing countries that had already completed the HIPC initiative. The goal was to free up resources for poverty reduction and economic development. Led by the IMF, World Bank and African Development Bank. Only countries that completed the HIPC process and met economic and government reforms were eligible. Aimed to boost investment in healthcare, education and infrastructure rather than repaying debt
Arguments for debt relief
Frees up government funds for healthcare, education and infrastructure, improving living conditions
Allows countries to invest in industries, job creation and development projects
Many developing countries debt comes from unfair historical lending, corruption or forced economic policies
Without relief, some nations must keep borrowing just to repay interest
Economic crises can cause political instability, migration and conflict affecting security
Debt repayment money could be better spent on climate change adaptation, food security and social services
Arguments against debt relief
Creates dependency, discouraging governments from making necessary economic reforms
May make countries less attractive to investors if seen as financially unstable
Cancelling debt unfairly punishes responsible lenders and countries that repaid their debts
Debt relief might encourage more reckless borrowing leading to future crises
Could set a bad precedent making other indebted countries demand similar treatment
Some countries misuse debt relief funds due to corruption or poor governance
Relief aid
Emergency aid provided to help people affected by disasters or conflicts including food, water, medical supplies and temporary shelter
Development aid
Long term aid aimed at improving a country’s economic and social development such as funding for education, healthcare and infrastructure
Tied aid
Aid given to a country with conditions attached usually requiring the recipient to spend the funds on goods or services from the donor country
Bilateral aid
Aid given directly from one country’s government to another with strategic or political interests in mind
Multilateral aid
Aid provided by multiple country’s through international organisations
Why countries give aid
Humanitarian: to provide relief in times of crises helping save lives and reduce suffering
Economic: can support trade relations, open new markets and create economic ties
Political: can strengthen diplomatic relations, gain allies or promote stability in regions important to their national interests
Historical: former colonial powers or wealthy nations may feel a duty to support development in poorer countries due to historical ties or global inequality
History of international aid (post WWII)
Began with the Marshall Plan where the US provided financial aid to rebuild Europe. The UN and World Bank were established to support global development
History of international aid (cold war)
Aid was for political influence with the US and USSR using it to gain developing allies. Newly independent African and Asian countries received it to support economies
History of international aid (debt crisis)
Aid shifted towards poverty reduction, healthcare and education. The growing debt crisis led to debt relief initiatives by the IMF and World Bank
History of international aid (modern)
Now focuses on sustainability, climate change and emergency responses. The role of private donors, NGOs and MNO has grown with debates on effectiveness/reliance
Why LICs want foreign aid
Foreign exchange gap (struggle to earn enough from exports to pay for essential imports so aid provides foreign currency to bridge this gap)
Savings gap (LICs have low incomes making it hard for citizens and governments to save enough for investment so aid supports development)
Technical gap (LICs lack skilled workers and advanced technology. Aid provides expertise, training and equipment to boost productivity and growth)
Individual poverty cycle
Poor household
Little food, unclean water, no school
Diseases, infections, no energy and skills to work
Low productivity
Low or no income
Low self esteem, no personal control
High child births, sick elderly, more dependents
Macro level poverty cycle
Low wages
Low savings, education and healthcare
Low investment and levels of human capital
Low economic growth and productivity
Purpose of aid (short and long term)
ST: focuses on immediate relief following disasters or crises like food and water
LT: aims to support sustainable development like improving healthcare and education
Time frame of aid (short and long term)
ST: temporary and provided in emergencies lasting weeks or months
LT: can last years or decades addressing root causes of poverty and underdevelopment
Dependency and sustainability of aid (short and long term)
ST: can create dependency if not managed well as people rely on external support
LT: focuses on self sufficiency helping build stronger economies and governance
Types of aid providers (short and long term)
ST: NGOs and governments in crisis situations
LT: managed by international organisations and national governments
Challenges of aid (short and long term)
ST: difficult to distribute in conflict zones and disaster areas
LT: ineffective if mismanaged or if tied aid forces recipients to buy from donors
Types of bilateral aid
Tied: recipient must spend aid on goods/services from donor
Untied: recipient can use funds freely, choosing suppliers from any country
Project: funds specific project like building schools, hospitals or roads
Programme: supports wider economic or social policies like poverty reduction
Technical: provides experts, training and knowledge to help develop skills
Positives and negatives of aid
Many countries have benefited from international aid
All countries that developed into NICs from LEDCs have received international aid
Development has also been down to other factors
Difficult to be precise about the contribution of aid to development of countries
How aid helps countries
Provides humanitarian relief
Provides external resources for projects that couldn’t happen with internal commercial funding
Helps develop infrastructure in LEDCs
Help develop technical expertise in LEDCs
Can support the delivery of better economic and social policies
Criticisms of aid by left-wing economists
Fails to reach the poorest people and when it does the benefits are short lived
Most foreign aid is tied to the purchase of goods and services from the donor
Use on large capital intensive projects may worsen conditions for poorest people
Can delay the introduction of reforms like the substitution of food aid for land
Can create a culture of dependency which is difficult to break
Criticisms of aid by right wind economists
Encourages the growth of a larger than necessary public sector
Private sector is crowded out by aid funds
Distorts the structure of prices and incentives
Wasted on grandiose projects of little or no benefit to most of the population
The West did not need aid to develop
Top-down approaches to aid
Decisions are made by governments, international organisations or large NGOs
Projects are often large scale
Local communities have little to no input in decision making
Often involves technology and expertise from donor countries
Can be efficient for major development projects but may overlook local needs
Bottom-up approaches to aid
Initiatives are led by local communities, small NGOs or grassroot organisations
Focuses on small scale, sustainable projects
Involves direct participation from local people, ensuring relevance to their needs
Encourages self sufficiency and long term benefits
May take longer to implement but is often more effective in addressing local issues
Microcredit
The Grameen Foundation uses microfinance and innovative technology to fight global poverty and bring opportunities to the poorest people. Banks provide tiny loans and financial services to poor people to start a business. Women are the main beneficiaries. This concept has reached 3.6 million families in 25 countries
Social business
Is the next phase in the battle against poverty. It combines the operation of the free market with a more humane world
International tourism
The commercial organisation and operation of holidays and visits to places of interest
International tourism in 2023 and 2024
An estimated 1.4 billion international
tourists (overnight visitors) were recorded
around the world in 2024, an increase of
11% over 2023, or 140 million more.
Economic factors affecting global tourism
Steadily rising incomes, grows 1.3 times faster than GDP
Decreasing real costs of holidays
Widening range of destinations in middle income range
Heavy marketing of shorter foreign holidays aimed at those who have the time and disposable income to take an additional break
The expansion of budget airlines
Air miles and other retail reward schemes aimed at travel and tourism
Globalisation has increased business travel
Periods of economic recession can reduce tourism
Social factors affecting global tourism
An increase in the average number of days of paid leave
An increasing desire to experience different cultures and landscapes
Raised expectations of international travel with increasing media coverage of holidays, travel and nature
High levels of international migration over the last decade means that more people have relatives and friends living abroad
More people are avoiding certain destinations for ethical reasons
Political factors affecting global tourism
Many governments have invested heavily to encourage tourism
Government backing for major international events
The perceived greater likelihood of terrorist attacks in certain destinations
Government restrictions on tourism
Calls by non governmental organisations to boycott countries
Prime reasons for travel
Leisure (holiday, sport or cultural event, educational trip, pilgrimage)
Business (conference or exhibition, individual meetings)
Visiting friends and relatives (stay with family, meet friends)
Tertiary destination preferences of travel
Climate
Attractions
Festivals and events
Accommodation, restaurants and bars
Transport to the destination and within it
Externalities of travel motivators
Destination security
Exchange rate
FDI in tourism for LICs and MICs
Helps develop hotels, transport and attractions creating jobs and improving local economies
Many foreign owned toursim businesses send profits back to their home countries, limiting benefits for the host nation
Large scale tourism projects may cause deforestation, loss of cultural identity and displacement of local communities
Investment in tourism leads to training programs, improving local workforce skills and increasing employment opportunities
External tourism shocks
Natural disasters
Natural processes
Terrorism
Health scares
Exchange rate fluctuations
Political uncertainties
International image
Increasing competition
Negative social impacts of tourism
The loss of locally owned land as tourism companies buy up large tracts in the most scenic and accessible locations. The abandonment of traditional values and practices. Displacement of people to make way for tourist developments. Abuse of human rights by governments and companies in order to maximise profits. Alcoholism and drug abuse. Crime and prostitution, sometimes involving children. Visitor congestion at key locations hindering the movement of local people. Denying local people access to beaches to provide exclusivity for visitors. The loss of housing for local people are more visitors buy second homes in popular tourist areas. Culture clash after an initially beneficial industry begins to cause irritation. Tourist numbers may exceed the carrying capacity of a destination placing too much of a burden on local resources. Those whose incomes are enhanced by tourism may gain higher status causing changing values and attitudes and bringing conflict to communities. Close ties of extended family often diminish as the economy of the area changes and material wealth becomes more important
Positive social impacts of tourism
Tourism development can increase the range of social facilities for local people. It can lead to greater understanding between people of different cultures. Family ties may be strengthened by visits to relatives living in other regions and countries. It can help develop foreign language skills in host communities. It may encourage migration to major tourist generating countries. A multitude of cultures congregating together for major international events can have a positive global impact
Negative economic impacts of tourism
Economic leakages from LICs and MICs to HICs are at 60-75% with cheap package holidays causing most of the money being paid staying in the country where the holiday was purchased. Tourism is labour-intensive, providing a range of jobs especially for women and young people but most local jobs created are menial, low paid and seasonal. Overseas labour may be brought in to fill middle and senior management positions. Money borrowed to invest in the necessary infrastructure for tourism increases the national debt. At some destinations tourists spend most of their money in their hotels with minimum benefit to the wider community. Tourism might not be the best use for local resources that could in the future create a larger multiplier effect if used by a different economic sector. Locations can become overdependent on tourism. International trade agreements are a major impetus to globalisation and allow the global hotel giants to set up in most countries. Even if governments favour local investors there is little they can do
Positive economic impacts of tourism
Tourism benefits other sectors of the economy providing jobs and income through the supply chain as a result of the multiplier effect because jobs and money multiply due to tourism development. It is an important factor in the balance of payments of many nations. It provides governments with considerable tax revenues. By providing employment in rural areas it can help to reduce rural-urban migration. A major tourism development can act as a growth pole stimulating the economy of the larger region. It can create openings for small businesses in which start-up costs and barriers to entry are generally low. It can support many jobs in the informal sector where money goes directly to local people
Negative environmental impacts of tourism
Newly laid golf courses have taken land away from local communities while consuming large amounts of scarce freshwater. Access to common goods does not naturally limit itself. Air pollution with increased travel contributing to greenhouse gas emissions. Water pollution due to runoff from activities leading to water contamination. Increased waste production polluting natural habitats and harming wildlife. High demands for energy usage which usually comes from non-renewable sources. Construction of tourist facilities leading to land degradation and the destruction or alteration of wetlands and coastlines. Tourism can introduce non-native species which can harm local ecosystems. Coral reef degradation due to snorkeling, diving and boating as well as the use of sunscreens containing harmful chemicals. Some tourism can exploit animals leading to their abuse and disruption. Can displace indigenous communities leading to a loss of knowledge of natural resources
Positive environmental impacts of tourism
Environmental goods are fundamental to the tourist experience so both tourists and the industry should have a vested interest in their preservation. Landscaping and sensitive improvements to the built environment have significantly improve the overall quality of some areas. Tourist revenues can fund the designation and management of protected areas such as national parks and national forests. Income from ecotourism can fund projects to restore degraded ecosystems. Tourist demand for viewing wildlife can create pressure to conserve endangered species. Tourism can help educate visitors about the importance of environmental conservation and sustainability. In areas heavily reliant on tourism there is an incentive to develop better waste management systems. Can encourage the development of eco-friendly transportation. Many tourism companies are increasingly integrating sustainability into their business models by donating to environmental organisations and adopting eco-friendly policies. In areas where agriculture has degraded the environment, tourism can provide an alternative source of income to allow natural resources to recover
Carrying capacity in international tourism
Carrying capacity refers to the ability of a destination to accommodate tourists without causing environmental degradation, economic instability, or social disruption. Physical carrying capacity refers to the maximum number of visitors that an area can physically accommodate before overcrowding occurs. Environmental carrying capacity is the point at which tourism-related activities begin to cause significant ecological damage. Social carrying capacity relates to the impact of tourism on local residents and cultural
heritage.
The multiplier effect in tourism
The tourism multiplier effect occurs when tourist spending stimulates economic activity beyond the direct industry. This includes money spent on accommodation, food, and transport, which supports jobs in construction, agriculture, and retail. However, economic leakage—when
profits go to foreign businesses rather than benefiting local communities—can limit the positive impact.
Balancing tourism growth with sustainability
While tourism drives economic development, unchecked growth can threaten natural and cultural heritage. Sustainable tourism strategies aim to balance growth with environmental
and social responsibility.
Criticisms of the Butler Model
Oversimplification
Lack of flexibility
Ignores external factors
Not always a decline
Vague definitions
Limited modern relevance
Doesn’t consider sustainable tourism
Focuses on physical expansion
Adventure tourism
Emphasis on adventure activities, may occur in a natural setting
Natural area tourism
Nature based tourism and ecotourism as well as part of wildlife and adventure tourism
Wildlife tourism
In semi-captivity or in the wild. Undertaken to view or interact with wildlife. May include elements of adventure tourism and ecotourism
Alternative tourism
Forms of tourism generally characterised by small scale sustainable activities
International tourism in 2024
1.4 billion international tourist arrivals (99% of pre pandemic) and 11% over 2023
Exports from 2024 tourism
Receipts reached $1.6 trillion in 2024 (3% more than 2019)
Average spending is returning to pre pandemic values from $1400 in 2020/2021 to $1100 in 2024 ($1000 pre pandemic)
Total exports from tourism reached $1.9 trillion in 2024 (3% + pre pandemic)
Tourism outlook for 2025
International tourist arrivals are expected to grow 3-5% compared to 2024 assuming a continued recovery of Asia and the Pacific. This also assumes global economic conditions remain favourable, inflation continues to recede and geopolitical conflicts do not escalate. Strong rebound in 2023 (+33% 2022)
Challenges for tourism in 2025
High transport and accommodation costs and other economic factors. Geopolitical risks are the third main factor as well as extreme weather events and staff shortages. Balancing growth and sustainability will be critical in 2025 in the search for sustainable practices and the discovery of lesser known destinations
Tourism trends
Bleisure travel
Automation
Mobile bookings
Personalisation
Tech empowered travel
Sustainable tourism
Active tourism
Transformative travel
Experience tourism
Wellness travel
Longer trips
Staycation
Niche tourism
Refers to products, services or interests that are shared by a small group of people. Niche tourism products and services serve a specialised segment of the industry. Is the opposite of large group tours, all inclusive resorts and overtourism
Trends in niche tourism
Has grown in popularity a lot in recent years due to the ways consumers have changed. People are more sophisticated in their wants and needs. Traditional package tourism no longer suits. People have become more globalised and educated so people want education, culture and adventure which can be accessed through niche tourism provision
Ecotourism
Responsible travel to natural areas that conserves the environment, supports local communities and promotes education and sustainability
Characteristics of ecotourism
Environmental conservation
Sustainability
Local community involvement
Education and awareness
Respect for local cultures
Low impact travel
Wildlife protection
Economic benefits for conservation
Ecotourism accreditations
Global Sustainable Tourism Council
Green Globe
EarthCheck
Travelife
Rainforest Alliance Certification
Criticisms of ecotourism
Environmental damage
Wildlife disturbance
Greenwashing
Cultural disruption
Economic leakage
Overcrowding
High costs
Carbon footprint
