AMSCO Unit 7 KC#2 (7.5-7.8) Terms 61-121 (copy)

Rostow's Stages of Economic Growth

Is an economic model that focuses on how people live. Suggested that different inputs and levels of investment were required to allow countries to move from one stage to the next.

Stage: Traditional

• Depends upon primary sector activities (farming, fishing, hunting) for subsistence

• Uses limited technology

• Carries out local or regional trading

• Enjoys limited socioeconomic mobility

Stage: Preconditions for Takeoff

• Improves infrastructure (roads,electrical grid, water systems, etc.)

• Improves farming techniques and shifts toward commercial agriculture

• Exports agricultural and raw materials (international trade)

• Diffuses technology more widely

• Starts individual socioeconomic mobility

Stage: Take-off

• Develops major technological innovations

• Starts industrialization and primary sector begins to shrink

• Spreads entrepreneurial mentality

• Begins to urbanize

• Initiates self-sustaining growth

Stage: Drive to Maturity

• Creates new industries while strengthening existing ones.

• Improves energy, transportation, and communication systems.

• Sees economic growth greater than population growth

• Invests in social infrastructure (schools,hospitals, etc.).

Stage: High Mass Consumption

• Spends money on nonessential goods (consumerism)

• Purchases of high-order goods become common

• Desires to create a more egalitarian society

• Supports a strong teriary sector

Criticisms of Rostow's Model

Limited Examples | Role of Exploitation | Bias Toward Progress | Lack of Variation | Lack of Sustainability | Need for Poorer Countries | Narrow Focus

World System Theory (Core-Periphery Model)

uses core semiperiphery and periphery

On a global scale, decisions about where to locate factories, offices, and other businesses shape the wealth and power of countries.

Dependency Model

Countries do not exist in isolation but are part of an intertwined world system in which all countries are dependent on each other.

World System Theory - Core

• Includes the economically advantaged countries of the world

• Includes the headquarters of most large multinational companies and banks

• Focuses on higher-skill, capital-intensive production

• Promotes capital accumulation

• Dominates semiperiphery and periphery economically and politically

• Locates factories and service centers in semiperiphery and periphery countries

•Benefits greatly from international trade

World System Theory - Semi Periphery

"• Includes most middle-income countries, sometimes called emerging economies.

• Provides the core with manufactured goods and services that the core formerly provided for itself.

• Shares characteristics of both core and periphery

World System Theory - Periphery

• Includes the least-developed countries

• Maintains many jobs in low-skill, labor-intensive production and extraction

• Provides the core and semiperiphery with inexpensive raw materials and labor

• Receives jobs but few profits from manufacturing

• Attracts jobs by having weak laws protecting workers and the environment

Compare Rostow (Stages of Economic Growth) and Wallerstein's World System Theory) Models

"Unlike Rostow's model, Wallerstein's model does not suggest that all countries can reach the highest level of development, nor does it explain how countries can improve their position. In contrast, it indicates that the world system will always include a combination of types of countries. But countries can change categories, moving in or out of the core.

Criticisms of Wallerstein's (World System Theory) Model

Little Emphasis on Culture | Emphasis on Industry | Lack of Explanation | Limited Roles

Commodities

raw material such as coffee, cocoa, and oil, that have not undergone any processing.

Commodity Dependence

When more than 60 percent of a countries exports are raw materials.

Trade

occurs when one party desires a good or service that it does not have or cannot produce and another party has the desired good or service with which it is willing to part.

Barter

a system of exchange in which no money changes hands. "This is most common between individuals. (In the book-turned-movie To Kill a Mockingbird, the main character, a lawyer, provides legal services to a poor farmer in exchange for bags of food.)

Comparative Advantage

the ability to produce a good or service at a lower cost than others.

Complimentary

When a country has the income, goods, or services that the another country desires, they have

Free Trade

Policies, or laws, that reduced barriers to trade.

Neoliberal Policies

A set of reforms that reduced government regulations and taxation.

Policies decreasing trade

Pg 487 "Factors decreasing Trade"

Government efforts to promote economic growth (5)

Tax breaks, loans, direct assistance, changes in regulations, tariffs

Trading Blocs

Groups of countries that agree to a common set of trade rules.

Mercosur

A trading bloc that includes several South American countries.

World Trade Organization (WTO)

a global organization. It was created in 1995 to monitor the rules of international trade by providing a forum for negotiating trade deals, settling disputes between its members, supporting the needs of developing countries, and helping companies follow similar international trade policies.

Impacts of economic interdependence

interdependency has strengthened the links among the countries' economies. Growth in one country can result in new economic opportunities in other countries.

International Monetary Fund (IMF)

Created in 1945 to aid countries caught in need of financial assistance. Recognizing how quickly a financial crisis can lead to social and political instability, it promotes economic stability for countries dealing with financial struggles.

Outsourcing

contracting work to noncompany employees or other companies. "Ihe contracted company might be less expensive because it specializes in the work and does it more efficiently.

Offshoring

Companies will locate services or manufacturing in other countries if the costs of doing business are lower and worth the risk of moving some operations overseas

New International Division of Labor

A changed system of employment in the various economic sectors worldwide

( In core countries, people design and develop products for the global market. Tertiary, quaternary, and quinary jobs have increased in the core. • In semiperiphery countries, people often manufacture goods marketed in core countries. Consequently, employment in the secondary sector has increased. Employment in the primary sector has declined. • Periphery countries, such as Bangladesh, Angola, and Papua New Guinea, have large primary sectors and export minerals and resources to core and semi-periphery countries for further processing and consumption. )

Basic vs. Non-Basic Economic Activity

These types of activities generate new wealth for a region and these activities are usually exported from the region. While these activities do not generate new wealth for a region rather these activities are consumed within the region.

Transnational/Multinational Corporations

Businesses that operate in multiple countries

Export Processing Zones (EPZ)

Offer foreign corporations major tax savings, inexpensive labor, fewer environmental regulations, well-serviced industrial sites, and proximity to good transportation networks that allow for easy delivery of raw material and shipping of finished products.

are often near international airports, seaports, or land borders from where the products can be exported easily.

Special Economic Zones (SEZ)

near costal cities near major trade with easy access to international markets that are in China

Maquiladoras

Special Economic Zones that are in Mexico

Free-trade Zones

These are locations where a foreign company can store, warehouse, transfer, or process without additional taxation or duties if goods are exported

Postindustrial Economy

One that no longer employs large numbers of people in factories but has people who provide services and process information.

Assembly Line

In which an item is moved from worker to worker, with each repeatedly performing the same task.

Fordism

The use of assembly lines allowed companies to rapidly produce more standardized products and with less-skilled workers than ever before. This system of mass production, known as

Substitute Principle

in which businesses maximize profit by substituting one factor of production for another, has been applied to the labor force

Post-Fordist

The remaining workers are often trained to do more than one job, so they can rotate among a few different workstations during a day, reducing the risk of injuries.

Economies of scale

by allowing business owners to increase output with improved efficiency. Machines can work 24 hours a day without breaks or vacations, and they produce consistent, high-quality work.

Just-in-Time Delivery

a system in which the inputs in the assembly process arrive at the assembly location when they are needed. system reduces the expensive storage costs of extra inventory— but at the risk of running short on inputs.

Locational Interdependence

Being near similar factories allows businesses to use the same services, such as transportation companies or accounting firms that might specialize in providing service to the industry.

Technopole

is a hub for information-based industry and high-tech manufacturing. The proximity of companies allows for benefits such as the sharing of certain services and attracting highly skilled workers to the area. Often these technopoles are located near universities well known for their computer, mathematics, engineering, science, and entrepreneurial business programs:

Growth Poles (Growth Centers)

The concentration of high-value economic development in this attracts even more economic development.

Spin-off Benefits (Spread Effects)

which are positive economic outcomes beyond the growth pole. For example, farmers that are 100 miles away from a growth pole should have expanded markets in which to sell their produce, resulting in increased sales and profits.

Backwash Effects

negative effects on one region that result from economic growth in another region.

A typical effect is the loss of the highly educated young people from distant communities who migrate to growth poles for employment.

Corporate Parks (Business Parks)

office buildings and other commercial spaces are more likely to be evident on the landscape. Increasingly, these office buildings congregate in

Sustainability

Using the earth's resources without doing permanent damage to the environment

Sustainable Development

is to address problems caused by depletion of natural resources, mass consumption of goods, pollution of air and water, and the impact of climate change.

Ecological Footprint

impact on the environment. One measure of this is how much land is needed to provide one person with resources and to handle the person's garbage.

Causes of pollution

Some, such as volcanic eruptions, are natural events that humans do not influence. • Some are a mixture of natural events and human actions. For example, dust storms occur naturally in some dry regions. However, they are more likely to occur after farmers have removed the deep-rooted natural vegetation that holds soil in place. • Some are completely the result of human actions. For example, people pollute the air when the burn wood, coal, or oil. pollute water when they dump waste from industries or allow farm chemicals to flow into rivers or lakes.

Impact of pollution

Pollution has large impacts on plants, animals, and humans. According to the Global Alliance on Health and Pollution, in 2015, pollution caused 16 percent ofdeaths worldwide. Over 90 percent of these deaths occurred in low- or middle-income countries, and most who died were children. Pollution strains the economies of countries by increasing health care costs and causing people to miss school and work because they are ill or taking care of someone who is.

Efforts to control pollution

The solution was to force every company to reduce emissions. Under pressure from organized citizens, the federal government passed stricter laws on air pollution. With the passage of the Clean Air Act in 1970 and its subsequent amendments, the country reduced the emission of six major types of air pollution by over 70 percent.

Climate change

Concludedd that the rise in temperature contributed to more frequent and more destructive wildfires, hurricanes, floods, and droughts.

Ecotourism

travel to a region by people who are interested in its distinctive and unusual ecosystem. The money spent by this and the jobs created can provide incentives to people to protect these rare areas rather than convert them to agriculture or industry.

Sustainable Development Goals (SDGs)

intended to finish the job that the MDGs (Millennium Development Goals) has begun, but with more awareness of environmental challenges and ways to overcome them. As with the MDGs (Millennium Development Goals), the UN gave countries 15 years to achieve the goals.

Argentina and South Korea - changing economies

Argentina and South Korea have very different economic histories. Argentina was once a wealthy country, but its economy has since declined. South Korea, on the other hand, has experienced rapid economic growth in recent decades.