globalisation

economic growth

the increase over a period in the quantities of goods and services produced in a country, measured year after year

spinning jenny

in 1764 james hargreaves developed the spinning jenny, these innovations gradually spread across western europe during the 19th century and resulted in productivity gains, bringing countries into an era of faster growth

extensive growth (part of economic growth)

proportional to the increase in the quantities of the factors of production

intensive growth (part of economic growth)

linked to the increase of productivity

productivity

a measure of the efficency of a production system

capital productibity

calculated as the ratio between the quantities produced and the capital used to ontain this level of output

measures of productivity

productivity is the ratio of output to a single factor of production, labor or capital

calculating productivity

labour productivity can be calculated either as the ration of y to the number of hours worked (hourly labor productivity) or as the ratio of y to the number of people employed (per capita productivity)

origins of productivity gains

the notion of productivity is at the heart of the economic mechanisms, companies try to be as efficent as possible to produce as much as possible given the factors of production at their disposal

crisis

the process of the reversal of economic activity (quantities of goods and services provided), this leads to a depression which corresponds to a decrease in economic activity

two consecutive quarters

sometimes even a simple slowdown in economic activity is called a crisis if it has negative consequences for workers in the labour market, INSEE calls it a recession if economic activity declines for atleast 2 consecutive quarters

commonly used indicators for economic growth

the average annual growth rate of GDP

productivity gains

companies will try to have high productivity but also increase productivity

results of productivity gains

improvement of organization work, increasing the qualification of workers, extension of the duration of the use of capital, technical progress (new, more efficent production processes (for example), experience effects, motivation of workers

what productivity gains allow you to achieve

increase profits and thus investments, lower prices, increase wages, reduce working hours

export promotion

consists of developing activities that exploit a relative advantage helped by the country

examples of export promotion

cheap labour with the aim of exporting production to the world market based on favourable price competitivness

export substitution stratergy

a high rate of extraversion (ratio of exports to GDP) and is suitable for countries with a small domestic market, export revenues are dedicated to investment effort that will encourage the establishment of activities with higher added value (heavy industry)

import substitution

applied by south american countries since the 1930s, this stratergy is based on the gradual replacement of imported consumer goods on the domestic market by local production, requires protectionism to develop new activities sheltered from international competition

industrializing industries

this stratergy was inspired by the soviet model of priority to heavy industry, it involves developing activities located upstream of the production system (iron and steel, metallurgy, energy production) as they are supposed to have a positive effect on the rest of the economy, developing these activities enables the employment of workers who will form the core of the domesestic market for consumer goods