Unit 7 APHuG
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Steam Engine
Allowed for more factories to operate with assembly lines and machines instead of relying solely on workers completing tasks by hand
Ships could now travel greater distances and faster speeds and no longer needed to rely on the wind
Trains could transport goods and people across large distances faster
USA Transcontinental Railroad allowed for more trade across the country and increased amount of migration of people from coast to coast
Spinning Jenny and Power Loom
Transformed the textile industry
Could spin several spools of thread at once
After Spinning Jenny, Power loom
Could weave clothes and tapestries and allowed for mass production in the industry
Both inventions helped reduce the cost of producing textiles, increased affordability, and increased output
Cottage Industry
Small-Scale business typically operated out of a person’s home
Individuals typically use traditional techniques and tools to produce custom goods by hand
Prevalent Pre-Industrial Revolution
Companies mass producing as a result of industrialization, most cottage industries were put out of service
Primary Sector
Jobs and activities that involve extracting natural resources from the Earth
Farmers, coal miners, fishermen, lumberjacks, etc.
Secondary Sector
Jobs and activities that raw resources to produce or manufacture products of greater value
Use raw materials gathered from the primary sector and manufacture them into products of a greater value
Value-Added Products
Products that have been processes in a way that increases their overall value
Final products can be sold for a higher price than the original raw materials used to make it
Tertiary Sector
Jobs and activities that provide a service for other individuals
Located near consumers and near areas that require that specific service
This is started to change due to advancements in technology
The internet helps deliver services to people worldwide
Lawers, Doctors, Servers, Real Estate Agents, Uber Driver, etc
Quaternary Sector
Jobs and activities that revolve around acquiring, processing, and sharing information
Teachers, Professors, people in finance, insurance, etc.
Quinary Sector
Jobs and activities that revolve around making decisions
CEOs, politicians, senators, the president
Pre-Industrial Economy
Majority of jobs are in the primary sector
Industrial Economy
Jobs in the secondary sector become more dominant
Primary sector jobs drastically decrease a jobs open up in the secondary and tertiary sectors
Post Industrial Society
When deindustrialization occurs
Jobs in the secondary decline and the primary sector continues to decline
Jobs in the tertiary continue to grow and expand
Core Countries
Countries with the most advanced economies and highest standard of living
Typically have a degree of political and economic influence over other countries and regions in the world
Semi-Periphery Countries
Countries that have emerging economies that are industrializing
Located between core and periphery countries in terms of development
Periphery Countries
Countries that still rely heavily on the exportation of raw resources to more economically developed countries
Typically these countries are the least economically developed and have a lower standard of living
Break of Bulk Points
A location where goods are transferred from one mode of transport to another
EX: Ports have cargo ships that unload goods and place them on trucks or trains. These then travel inland to get to a distribution center or to a place where the good will be sold
Transportation Costs
Shipping costs connected to the moving of resources and materials for producing a good and shipping the good throughout the market
Labor Costs
Costs that come from workers producing the product itself
Agglomeration
Clustering of different economic activities and industries in a specific geographic area
Happens because businesses want to reduce their overall costs by taking advantage of larger labor forces, benefiting from existing infrastructure, utilizing different services and knowledge bases in an area
Alfred Weber’s Least Cost Theory
States that production should be located where transportation and labor costs are minimized and where agglomeration are maximized
Bulk-Reducing Good
A product that becomes lighter and easier to transport as production occurs
Have heavy and bulking raw resources that are used in the production of the goof
The final product is often lighter and more maneuverable
More likely to have their production located near the raw resources
Cheaper to send the heavy raw materials a short distance and then the lighter product farther to the market
More likely to located near the heaviest resource
Bulk-Gaining Good
A product that becomes heavier and more difficult to transport as production occurs
Often are made up of resources that are actually lighter and more maneuverable compared to the final product
More likely to have their production occur closer to the market
Decreases the company spends on shipping as they don't have to ship the heavier product as far
Criticisms of Weber’s Least Cost Theory
Oversimplifies the factors that influence location of production
Fails to consider factors such as:
Government policies
Cultural Preferences
Environmental concerns
Formal Economy
Economic activities are recognized by law and are overseen by the government
EX: Doctors, servers, teachers
Set rules, legal protections, and are taxed by the government
Access to traditional financial services such as a bank
Informal Economy
Economic activities and jobs that are not regulated or protected by the government
EX: Street vendors, domestic work, or unregistered small businesses
Do not have access to formal financial services, lack consistent income, and often do not have regulations or legal protection
LDCs typically have a significant amount of jobs and activities located in the informal economy
Gross Domestic Product (GDP)
Consumption + Investment + Government Spending + (Exports - Imports)
Gross National Product (GNP)
The total economic output produced by a country’s residents and businesses, regardless of their location, during a specific period of time
Factors both domestic production and production of country’s citizens who live abroad
Only looking at the production of goods and services by the nationality of the country so any foreign production inside the country’s boundaries would not count for the GNP
Gross National Income GNI
The amount of income generated by a country’s residents and businesses, both domestically and abroad, in a given year
Includes wages, profits, and investments
GNI per Capita
GNI/ Total Pop.
Used to better understand a country’s standard of living
Generally the higher GNI per capita, the more economic opportunities there are in society
Does not factor income inequality, quality of life, or other social aspects
Gender Inequality Index
Measures inequality in
Reproductive health
Empowerment
Labor Market
Higher values indicate more inequality and disparity
Higher economic development typically have a lower GII
Maternal Mortality Rate
A measurement of the number of maternal deaths per 100,000 live births that occur due to pregnancy or childbirth-related complications
Adolescent Fertility Rate
The number of live births per 1,000 women aged 15-19 years old in a specific year
Empowerment
Amount of government positions held by each gender
Amount of secondary and higher education levels obtained by each gender
Labor Marker
Women's participation in the workforce
Human Development Index
An index that is used to measure the social and economic development of a country
Determined by analyzing a country’s life expectancy, expected year of schooling, and gross national income per capita
Microloans
Small loans provided to individuals or small businesses who are typically excluded from traditional banking services
Used to help finance small businesses such as street vendors, subsistence farmers, or small businesses that benefit the local community
Risks
If someone could not pay the loan back, they could become further in debt
Microfiancing
A category of financial services that are for individuals and small businesses who lack abscess to traditional banking services
Often include access to savings account, insurance, or money transfer services
Rostow’s Stages of Economic Growth
Presented five steps through which all countries must pass to become developed.
Rostow: Traditional Society
The economy is mainly subsistence
Majority of the population is in the primary sector
Experiencing slow economic growth, have little specialization, and often lack technology
Rostow: Preconditions for Takeoff
The economy begins to grow due to more investment in infrastructure and education
Productivity increases as new industries emerge
Allow new jobs open up in the secondary sector
The larger secondary sector impacts both political and economic structure of the state as more foreign states become interested in the state and their resources
Rostow: Takeoff
Rapid economic growth occurs
Jobs start to transition out of traditional agricultural base activities into industrialized activities
Increased urbanization as more jobs and opportunities open up in the secondary sector
New technology increases their overall production
States in that stage are often exploited by foreign states as they seek to take advantage of their raw resources and cheap labor
Rostow: Drive to Maturity
When a state begins to specialize and be involved in global trade
Helps diversify the economy and create new opportunities for citizens in the tertiary sector
Shift from secondary to tertiary as economic growth occurs and stabilized
Still see influence in the economy from foreign states however they are becoming more independent and less reliant on the export of their natural resources
Rostow: High Mass Consumption
The economy is fully developed
Society is now producing products that meet society’s basic needs and wants
Majority of jobs are in the tertiary
The state is fairly independent from outside influences
Develop a consumer culture
Criticisms of Rostow
Does not account for outside political and social factors
EX colonialism
Does not account for environmental limitations
Carrying capacity or limited resources
Dependency Theory
A theory that suggests developing countries are dependent on developed countries for their economic growth
Core countries and multinational corporations use their economic power to exploit the semi-periphery and periphery countries
Done by creating unequal trade relationships and investments
LDCs rely on exporting raw materials and low-skilled labor to MDCs
Does not significantly increase their own economic growth
It helps the MDCs get more cheaper goods and services for their citizens
Production goes to foreign states rather than their own
LDCs have a hard time negotiating for better terms because Core Countries and multinational corporations can exploit other LDCs
Wallerstein’s World System Theory
Shows the hierarchy of power and raw resources between MDCs and LDCs
Acknowledges the role that colonialism and imperialism played in shaping the current global system
Colonization and Imperialism led to the mass exploitation of resources and labor around the developing world
Even when decolonization occurred, many of them remained dependent on their colonizing country due the poor systems that were created while they were being ruled
Criticisms of Wallerstein’s World System Theory
Fails to account for non governmental organizations that offer micro financing for individuals in developing countries
Fails to consider other programs such as micro loans that seek to support individuals in the semi-periphery and periphery allowing them to become independent and self-reliant
Commodity Dependence
When a country has more than 60% of its total exports made up of just commodities
These countries are vulnerable to price changes that happen to the price of the commodities they export
See less economic development in other industries because their economy is centered around just a few commodities
Globalization
The process by which countries, economies, cultures, businesses, and people become interconnected and interdependent on one another
Capital Investments
The funds or resources that a company or individual put into an activity, project, or business with expectation of generating future profits
Complementarity Index Score
A measure used in economics and trade to assess the compatibility between the products and services that two countries produce and trade with each other
Compares export patterns of a country and import patterns of another country
Higher score indicates a more favorable trade relationship
0-100
Comparative Advantage
The ability of a country, individual, or organization to produce a good or service at a lower opportunity cost than another country, individual, or organization
If they specialize at what they are good at, they can be more efficient
When they then participate in the global economy, they can get the goods/services they lack and sell their specialized good/service for more
Countries maximize their efficiency when they recognize their strengths and weaknesses
Tariffs
A tax or a duty imposed by a government on goods and services that are imported into the country
Trade Deficit
A situation where a country imports more goods and services than it exports
Occurs when a country spends more on imports than it earns on its exports
Some economists like Freeman argue that trade deficits are natural and tariffs distort the price of the market and prevent the market from efficiently using its resources
Neoliberalism
An economic and political ideology that emphasizes individual freedom over government control, free markets, and free trade
Policies often focus on
Private ownership
Free Trade
Individual freedom over government controlled businesses
International Monetary Fund (IMF)
Three Critical Missions
Furthering international monetary cooperation
Encouraging the expansion of trade and economic growth
Discouraging policies that would harm prosperity
Wants to provide sustainable economic growth for countries around the world through trade and commerce
Mercosur
Composes of South American Countries
Main objective is to promote a common space that generates businesses and investment opportunities through the competitive integration of national economies into the international market.
European Union
Both political and economic union of states primarily located in Europe
Created with the goal of promoting peace, stability, and economic prosperity
Overall goals
Establish an international market
Achieve sustainable development based on the balance economic growth and price stability and a highly competitive market economy with full employment and social progress
Enhance economic, social, and territorial cohesion and solidarity among EU countries
Establish an economic and monetary union whose currency is the euro
OPEC
Objective is to coordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers.
Goes against a free market system and competition by using its control over oil production to influence the global supply of oil and ultimately the price of oil
Restricts competition and could artificially inflate prices
Does use some neoliberal policies such as efficiently using resources, allowing for stabilization to occur in oil prices, and by promoting stable economic growth for all oil producing countries in the organization
Free Trade
International trade where there are no restrictions or barriers that increase the cost of trade or prevent trade from occurring
Criticisms of Neoliberal Policies
Prioritize the needs of whealtheir corporations and states over developing regions which often increase economic inequality
Deregulation of different markets can lead to less accountability and government oversight which may increase in unethical behavior by different institutions
Can negatively impact the stability of developing nations as they now are competing with states with more advanced economics that are made up with more advanced, robust technology and infrastructure
Hurt workers in more economically advanced regions as they compete with workers in less economically advanced areas which often work at much cheaper rates
Economic Restructuring
A significant shift in production, employment, investment, trade patterns, or underlying economic systems and process
Often driven by technological change, globalization, consumer preferences, or government policies
Offshoring
The process of relocating a business process or service to a foreign country
Outsourcing
When a business contracts out a service or job to an external provider in order to reduce their costs and increase their efficiency
International Division of Labor
A concept that describes how countries utilize their comparative advantage to specialize in different economic activities, resources, and capabilities
Special Economic Zones (SEZs)
Regions within a country that provide different economic incentives with the objective of a attracting foreign investment and promoting economic growth
Goal is to attract foreign investment from multinational corporations and core countries to help promote economic development in the area
Companies that locate in special economic zones are given preferential treatment and do not have to follow the same laws and regulations as the rest of the country
Free-Trade Zones
A region within imported goods can be store and processes without being subject to tariffs or trade barriers
These zones are often centered around a port or infrastructure that allows for the movement of goods in and out of an area
Export Processing Zones
Regions within a country’s borders that offer special economic regulations and incentives to promote the production of goods and services for export
Goal of prioritizing the exportation of different Goods out of the area these have the primary focus on manufacturing goods in the area and then exporting those goods to a different country
Multiplier Effect
A phenomenon where an original investment by an individual, business, government, or organization leads to a chain reaction of spending and increased economic activity
Fordism
A system of production that emphasizes mass production of standard goods
Originated from Ford creating the assembly line where everyone had a specialized job
Decisions and production are centralized with a greater focus on standardization
Post-Fordism
A system of production that emphasizes more flexible production methods where workers are trained in multiple tasks and produce custom goods
Workers are trained in multiple tasks and roles to allow for adaptability and flexibility
Less focus on standard goods rather focus on custom goods that meet customer needs and wants
Uses local decisions with production often being decentralized
Production does not occur in one location, rather goods are produced in a variety of stages and locations
Most countries are using this method due to the changing market demands, technological advancements, and increased globalization
Done through Just-In-Time Delivery
Just-In-Time Delivery
A production and inventory control system where products and materials are delivered to the manufacturing plant precisely when they are needed in the production process
Reduces costs and waste by only receiving materials when they are needed and only sending the exact parts that are actually going to be used in production
Reduces the cost of carrying inventory and increases productivity
Delays and disruptions can delay the entire process
Requires high coordination between different suppliers and manufacturers
Miscommunication can stall productions and have a loss in revenue
Growth Poles
Specific regions, cities, or economic sectors that are considered centers of economic growth or development
Often created by targeted public or private investments
Targeted investments are done in a variety of ways such as creating specific infrastructure that fits the needs of the businesses in the area
Ecotourism
A form of tourism that focuses on responsible travel to natural areas that conserve the environment and improve the well-being of the local people