Unit 7 Economic Processes and Development

Unit 7: Economic Processes and Development ● Human Development Index (HDI) ○ Based on 3 factors: ■ Decent Standard of Living ● Gross National Income (GNI) ○ Value of the output of goods made in a country annually with money that leaves and comes in the country ○ Gross Domestic Product (GDP) ■ Similar to GNI but doesn’t count money that leaves and comes in the country ● Purchasing Power Parity (PPP) ○ Cost of living adjustments made to the GNI ■ Long and Healthy Life ● Life expectancy at birth is major indicator ■ Access to knowledge ● Years of schooling is important in order to get access to knowledge in order to develop ○ Average global: 7 years ○ Developing: 6 years ○ Developed 11 years ● Quality of schooling ○ Pupil to teacher ratio ○ Literacy Rates: % of people in the country that can read and write ● Economic Signs of Development ○ Primary Sector: extract materials directly from earth ○ Secondary Sector: manufacturing of products ○ Tertiary Sector: goods and services provided ○ Quaternary Sector: collection, processing, and manipulation of data and capital. Ex- Finance, Insurance ○ Quinary Sector: service sector industries that need a high level of skill and knowledge. Ex - Post Secondary Professor, Scientific Researcher ○ Productivity: value of the product compared with the labor amount needed to make it. ■ Measured by the value added per capita ● Gross value of a product - the costs of materials and energy ● More developed countries are more productive than least developed countries ● Gender Inequality Index (GII) ○ Reproductive Health ■ Maternal Mortality Ratio ○ Labor Force ■ % of women to have full-time jobs outside of the house ■ Highest in developed countries ○ Empowerment ■ Women to accomplish improvements in status ○ Declined in almost all countries since 1990s ○ U.S. is one of the developed countries where the GII has increased ■ Reproductive rights is much lower ● Energy Demand and Supply ○ Supply: the amount of something that producers have for sale ○ Demand: the amount the consumers are willing/able to buy ○ ⅚ world’s energy needs supplied by fossil fuels ○ Demand for energy is in developed countries, they consume about ½ of the world’s country ○ Per capita consumption of energy is almost 3 times greater in developed countries than in developing ○ Energy Supply ■ Energy resources are not distributed properly ● Global Petroleum Distribution ○ Location is at the seafloor and areas that were once under water ● Energy Reserves ○ Proven Reserves ■ Supply of energy that is still in deposits that have been discovered ○ Potential Resources ■ A supply of energy that is undiscovered but thought to exist ● Organization of the Petroleum Exporting Countries (OPEC) ○ Gain more power over their petroleum ○ Members of SW Asia and N Africa ○ Sharp Increase of Oil set by OPEC helped with U.S. losing its dependence on OPEC by ½ ● Alternative Energy Sources ○ Nuclear Energy ■ Fission: Electricity made by splitting uranium atoms in a controlled environment ● Uranium is a nonrenewable resource ■ Radioactive waste is a product of nuclear waste ● Highly lethal ● Must remain isolated from human contact for thousands of years until it loses the radioactivity ■ Provides 14% of world’s electricity ■ ⅔ world’s nuclear power made by North America and Europe ■ High cost for building nuclear power plants and safe storage of radioactive waste ● Renewable Energy Sources ○ Hydroelectric Power ■ Power of converting moving water into electricity ■ Leading source of energy in developed and developing areas ■ Lack of acceptable sites to build a hydroelectric creates a problem to the dependency of them ○ Biomass ■ Energy Sources that can be burned in order to make electricity and heat ● wood , crops, corn ■ Negative factors ● Inefficiency: may need as much as energy to make the crops that they use ● Environmental Concerns: Logging Trees for woods can cause deforestation ○ Wind Energy ■ Small impact on environment ■ More possibility of increased use, as only a little bit has been used ■ Animals might get hurt or injured because windmills are noisy and huge ○ Solar Energy ■ Ultimate Renewable Resource with the application of the sun ■ U.S. gets 1% of the electricity from solar ■ Passive Solar Energy Systems capture energy without using devices ■ Active Solar Energy Systems: Take solar energy and convert it to heat energy or electricity directly or indirectly ● 2 paths to development ○ Self - sufficiency ■ Domestic production of goods encouraged ■ Foreign ownership of businesses is frowned upon ■ Protect their businesses from international competition ■ Most of 20th century ■ Limit import of goods from other places ■ Investments spread mostly equally across all economic sectors and in all regions of a country ○ International Trade ■ Foreign Investment is allowed sometimes ■ Beginning of the late 20th centuries ○ Rostow Model ■ 5 Stages of development ■ Traditional Society ● High % of ppl. Interested in agriculture & high % of national wealth ■ Preconditions for Takeoff ● Elite group initiatives innovative economic activities that leads to an increase in productivity ■ Takeoff ● Rapid Growth made in a limited number of economic activities ● Drive to Maturity ○ Technology spreads from the few takeoff industries to other economic sectors, which starts a quick growth ● Age of Mass Consumption ○ Shift from heavy industry (ex- steel) to consumer goods ● Problems in Self-Sufficiency ○ High prices are made sure of, which results to incentive for businesses to improve the condition of a product or become more efficient ○ Companies protected from international competition aren’t forced to keep up with the rapid developments ● Problems in International Trades ○ Uneven Resource Distribution ○ Increased Dependence from developed countries ○ Market decline bc the developing countries are finding it difficult to sells goods to the world market that are no longer in demand ● International Trade Approach is the one that most countries have taken since late 20th century ○ Trade has increased more quickly than wealth ○ Exposure to demands, needs, preferences of other countries ● 4 Asian Dragons ○ South Korea, Singapore, Taiwan, Hong Kong ○ Were among the first to take the international trade path ● Financial Development ○ Direct Investment by transnational corporations ○ Loans from banks and international organizations ○ Foreign Direct Investment (FDI) ■ Made by foreign company in the economy of another country ■ Major source is transnational corporations ○ Loans ■ International Monetary Fund (IMF) ● Loans to experiencing balance of payments problems that threaten the expansion of international trade ■ IMF, World Bank, and developed countries have the fear that granting and other processes of debts without documents will develop bad habits ● Developed countries ○ Global Economic Crisis in developed countries is because of the bad condition of many banks and other financial buildings ○ Widespread badly in housing costs ● Fair Trade ○ Products are made and traded according to rules that protect workers and small businesses in developing countries ■ Greater % of retail prices goes back to producers because the distributors are not there ○ Immanuel Wallerstein made a worlds-system analysis that brought the world economy together ■ Core: Most control Global Economy ● High Income, technology, high level of educations ● Organization for economic Co-operation and Development (OECD): founded in 1961 to increase economic progress and world trade ● Bring more wealth into the economy ○ BRICS ■ Brazil ■ Russia ■ China ■ South Africa ■ Semi-Periphery: Increased Economic development, 4 dragons ● A buffer between core and periphery ● BRICS ○ MINT ■ Mexico ■ Indonesia ■ Nigeria ■ Turkey ■ Periphery: Dependency on core for resources and technology ● Low levels of education, technology use ● Brings less wealth in the wealth economy ○ PIGS ■ Portugal ■ Italy ■ Greece ■ Spain ● Dependency Theory ○ Political and economic relationships between natives and regions make the development of the less developed areas less ○ Does not improve or make the economy better ● Closing the Gap ○ Reducing the gap in the level of development between developed and developing countries is different based on the variable ■ Infant Mortality Rate ● Narrowed from 17 to 6 per 1000 in developed countries ● Narrowed from 107 to 44 developing countries ■ Life Expectancy ● Not narrowed at all Industry ● Manufacturing of goods in a factory ○ N England and Scotland in late 18th century ● Industrial Revolution ○ Improvements made in technology that made an impact on manufacturing goods ● Industrial Regions ○ Europe ○ North America ○ E Asia (Japan and China) ● Factors ○ Characteristics of land, labor, and capital ■ Situation factors ● The costs that come with transportation from one place ● The further distance means the higher costs, so manufacturer is going to make its factory as close as possible to inputs and markets ● Factory location is near the input ○ Raw Material transportation costs is more than transportation costs of products for consumption ● Bulk- Gaining Industries ○ Production of products that get additional volume and/or weight during production ■ Located near market to lower the costs of transportation ● Ex- machinery ● Single Market Manufacturers ○ Only one or two customers ○ Factories is close range to customers ■ Ex- Buttons, pins, parts of cars ● Perishable Products ○ Located in close range to their markets so the product doesn't spoil quickly through the transportation process ■ Ex- Food products such as milk ■ Site Factors ● Costs from the characteristics of the location ○ Raw Materials ○ Labor amount and cost ○ Processing Costs ○ Markets ○ Transport Costs ○ Govt. Policies ○ Human behaviour ● Where are the markets and resources ● Shifting from most developed countries to least developed countries ● Location Theory ○ Predictions of where a business should be located ■ Based on economic, political, and cultural features ■ Based on energy, transportation, and labor costs ○ Alfred Weber made this theory and was the industrial equivalent to Von Thunen Model ■ Transportation- Where transportation costs are the lowest for materials and products ■ Labor- High labor means less profit ■ Agglomeration- cluster of an industry ● The industries cluster as a mutual benefit, they share everything, resources, buildings which lowers costs ● Type of Transportations ○ They want the lowest cost for transportation type they use ○ If they use the multiple transport types, they can find a break-of-bulk point which is where transportation type can be changed if needed ■ Truck = short-distance ■ Train = longer distances ■ Ship = slow but less cost ■ Air = very expensive but fast Steel Industry ● Changes in main inputs - iron, ore and coal ● Change of importance from factories in closer range to markets instead of inputs ● Mid-19th century through early 20th: steel mills were near inputs ● Mid-20th century and onwards: being near markets becomes more important than inputs Site Factors ● Labor ○ Lowering the costs for labor is important ○ Labor-intensive Industry: High amount of expenses contributed by paying workers ● Capital ○ Borrow funds needed to make new factories or expansion ○ Borrowing has impacted distribution of the industry ● Land ○ Need enough land to make factories and buildings ■ Mostly in suburban and rural locations Air Pollution ● Trace substances at a greater level than average air occurrence ● Delay the return of heat leaving Earth, which results in a raise in temperature ○ Burning fossil fuels releases carbon dioxide ○ Global warming causes melting of ice sheets, rising sea levels, and climate changes ○ Ozone Depletion ■ Ozone layer is a protection against ultraviolet rays coming from the sun ■ Threatened by Chlorofluorocarbons (CFC’s) ○ Damages vegetation and water supply through acid rain ○ A big problem in places where emission source are such as urban areas ● Industries cause solid waste pollution ● Water Pollution ○ Point-source Pollution ■ Enters a body of water at a certain area ■ Smaller and easier to control ■ Manufacturers and sewage systems are main sources of pollution ○ Nonpoint-source Pollution ■ Large, widespread area ■ Agriculture is the source here ● Fertilizers and pesticides spread on fields are carried as runoff to larger bodies of water ● Shifts in the U.S ○ Industrialization has shifted from NE to S and W in the United States ● North Atlantic Free Trade Agreement (NAFTA) takes away most barriers to moving goods in Mexico, U.S, and Canada since 1944 ○ No tariffs ○ Maquiladoras: Plants in Mexico near the U.S. Border ○ Mexico brings the attention of labor-intensive industries because of the low costs for labor and it's closer to the U.S ● Deindustrialization ○ Decline in industrial employment ○ Reinvestment in higher profit areas ■ Sunbelt states and Semi-periphery as well as Periphery ○ Older industrial cities struggle because of this, and are trying to find their economic balance ○ Dominance of older established industries can stop entrepreneurialism Service ● Any activity that grants a human’s want or need and gets money for doing it ○ Found in Settlements ○ Important for profits ○ Wealthy regions usually have more offers for services ● Three Types of Services ○ Consumer Services ■ Give services to consumers who want them and are able to pay them for it ■ Almost ½ of all jobs in the U.S. ■ Retail and wholesale ■ Education Services ■ Health and Social Services ■ Leisure and Hospitality ○ Business Services ■ Help make it easier for other businesses ■ ¼ of all jobs in the U.S. ■ Professional Services ■ Financial Services ■ Transportation Services ○ Public Services ■ Give protection to citizens and businesses ■ 5% of all jobs ■ Federal Government ■ State Government ■ Local Government ● Service Sectors have seen the most employment growth, however it has been negatively impacted as well ● Market Area Analysis ○ Calculate the range ○ Calculate the Threshold ○ Draw the Market Area ● Gravity Model predicts that the best location of a service is connected directly with the # of people and indirectly with the distance people must go to get the service ○ The best will be where traveling distance is the least ● Central Place Theory ○ Helps explain why consumers service follow a pattern based on the size of settlements ○ Central Place ■ Market center for exchange of goods and services by people interested from surrounding area ■ Market Area/ Hinterland ● Area surrounding a service from where the customers are interested ■ Four different levels of market area ● Hamlet (the smallest one) ● Village ● Town ● City (the largest one) ■ Market areas would be shaped as hexagons of different sizes unless there was an interruption by physical features ■ Large areas of flat land barely exist ■ People and wealth are not equally spread ■ People don’t always go to closest service ● Range and Threshold ○ Range is the max. distance people are willing to travel to use it ■ How many other people offer the service? ■ Think of range in terms of time not distance ○ Threshold is the min. number of people needed to support the service ■ Minimum number of people to do what? ■ Why do companies divide up space between stores? ● Business Services ○ World Cities that are at the top of the urban settlement hierarchy ○ Center of the flow of info ○ Where corporation’s headquarters are ○ Some are found in developing countries ■ Offshore Financial Services ● Taxes ● Privacy ■ Business-Processing Outsourcing ● Back-Office functions such as insurance claims, payroll management, transcription works, etc. ○ Economic Base ■ A settlement’s distinctive economic structure comes from basic industries which export to consumers outside of the settlement ■ Non Basic Industry- customers live in the same community ■ A community’s collection of basic industries is what defines its economic base