Unit 7 AP HUG Notes (copy)

7.1 The Industrial Revolution - ADD INFO FROM TEXTBOOK!

• Industrial Revolution 

  • Started in England between the mid 1700s to 1800s.

  • Cottage Industry (pre Industrial Rev.) - existed before the revolution. 

    • Small-scale businesses, typically operated out of a person's home (individuals typically use transition techniques and tools to produce custom goods by hand). 

    • Seen in multiple areas. 

    • Put out of business though the introduction of Industrialization. 

• Growing workforce, access to raw materials (coal, iron, etc.), access to new capital (money) and new inventions & technology. 

  • Steam engines 

    • Allowed factories to operate with assembly lines and machines instead of relying on workers. 

      • Changed how states and companies traded (fastest speeds).

    • Allowed trains to transport goods and people across larger areas of land. 

  • Spinning Jenning & Powerloom

    • Transformed the textile industry. 

    • Helped reduce the cost of producing the textile, and increase the output for companies. 

• Industrialization changed the social order of society (new social classes emerged based on wealth). 

  • Saw the rise of the middle classes. 

    • New jobs and opportunities created with the introduction of factories and large scale industries. 

• Benefits were not distributed equally among all citizens. 

  • Many workers experienced long hours, poor working conditions, and low pay. 

    • As conditions developed, a new working class emerged. 

      • Exploited by the factory owners. 

• Changed demographic trends. 

  • The Industrial revolution allowed states to enter stage two (DTM). 

    • Population growth, grows (less deaths). 

  • Allows the population to grow. 

    • Increases the number of consumers and workforce. 

  • Caused rural-to-urban migration (people sought new opportunities, and took advantage of the economic opportunities). 

• Impacted their food production. 

  • New developments in agricultural technology -> mechanization of farming. 

    • Decreased the reliance on human labor. 

    • Increased the output of each farm. 

  • Farmers were able to participate in international markets and trade due to the advances in transportation. 

• Led to the Enclosure Movement 

  • A movement in England which took agricultural land that was publicly owned by the community and privatized it. (Countered the tragedy of the commons and increased food production). 

    • Increased the amount of urbanization. 

      • Farmers migrated from rural areas to cities, seeking better agricultural and economic opportunities. 

• Contributed to the rise of colonialism and imperialism. 

  • Core countries labor and markets expanded, and sought more labor. 

    • Berlin Conference & Scramble for Africa (more for resources and profit). 

  • European countries use resources located inside the continents such as gold, iron, rubber, diamonds, oil, etc. 

• Increased the standard of living around the world. 

• Increased the amount of inequality between people and states (uneven economic development around the world). 

7.2 Economic Sectors and Patterns - ADD INFO FROM TEXTBOOK!

• Five sectors of economy: primary, secondary, tertiary, quaternary, and quinary.

  • Primary sector consists of the jobs centered around the extraction of raw materials or resources (fishermen, lumberjacks, etc.). 

  • Secondary sector consists of Jobs that take raw materials to produce or manufacture products of greater value.

    • Located near jobs in the primary sector. 

    • Located near major highways, ports, railways, etc.

    • Value-Added Products

      • Products that have been processed in a way that increases their overall value (Final product can be sold for a higher price than the original raw materials used to make it).  

  • Tertiary sector includes jobs and activities that provide services for other individuals (Lawyers, doctors, servers, etc.). 

    • Located near consumers. 

      • The Internet is helping this case. 

    • Majority of the U.S. is located in this sector. 

  • Quaternary sector includes jobs and activities that revolve around acquiring, processing, and sharing information (journalist, teachers, professors, etc.). 

  • Quinary sector includes jobs and activities that revolve around making decisions (CEOs, politicians, president, etc.). 

• Countries that have not industrialized yet, have more jobs located in the primary sector (agriculture-related). 

  • As economic development occurs, there are rises in jobs (in the secondary & tertiary sector). 

• Shift from an industrial society to a post-industrial society.

  • De-industrialization occurs, and the jobs in the secondary sector begin to dip, while the tertiary sector begins to rapidly expand. 

• Core countries have 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. 

  • Include U.S., Canada, Australia, Japan, etc. 

• Semi-periphery countries have emerging economies that are industrializing. 

  • Located between core countries and periphery countries in terms of development. 

  • Include China, Mexico, Brazil, and India. 

• Periphery countries 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. 

    • Include African countries, Asian countries, and European countries. 

• Many multinational corporations (a company that has business operations in at least one country other than its home country) locate their production facilities in periphery and semi-periphery countries. 

  • Allows them to take advantage of cheaper labor and reduce their costs (loose regulations). 

• Companies that produce their goods globally (and rely on complex supply chains) often use break of bulk points (places where goods are transferred from one mode of transportation to another) for their production & to transport finished products. 

  • Ports (cargo ships unload, and then place the goods into trucks or trains). 

  • Reduces the cost of production, lower prices for consumers, and more production. 

  • Led to unequal economic development around the world (less gains for semi-periphery and periphery). 

• Alred Weber’s Least Cost Theory

  • Looks how the location of an industry is influenced by three main factors: transportation costs, labor costs, and agglomeration. 

    • Transportation costs are connected to the moving of resources and materials for producing goods and shipping the final products. 

  • Labor costs

    • Costs that come from workers producing the product itself. 

  • Agglomeration

    • Clustering different economic activities and industries in a specific geographic area. 

      • Reduces their overall costs. 

        • Takes advantage of larger labor forces. 

        • Allowing businesses to use their different services and knowledge base in a specific area. 

  • States that the location of production should be located in an area where transportation costs and labor should be minimized, and the economic benefits of agglomeration are maximized. 

  • To determine the locations in the model, you have to identify whether the good is a bulk reducing good or a bulk gaining good. 

    • Bulk Reducing Goods are products that become lighter and easier to transport as they are produced.

      • Heavy and bulky raw resources are used in the production of the goods. 

      • Often located near the raw resources due to lower shipping costs (lower weight of the product). 

        • Facility would likely be located near the heavier and bulkier resource. 

    • Bulk Gaining Goods are products that become heavier and more difficult to transport as production occurs. 

      • Often made up of resources that are actually lighter and more maneuverable compared to the final product. 

      • Often located closer to the market since the shipping costs will not be as expensive. 

  • Has been criticized for:

    • Oversimplifying the factors that influence location of the production. 

    • Fails to consider other factors (government policies, cultural preferences, and environmental concerns). 

7.3 Measures of Development - ADD INFO FROM TEXTBOOK!

• Difference between the Formal and Informal Economies:

  • Formal Economy includes economic activities that are recognized by law and are overseen by the government. 

    • Doctors, servers, teachers, etc. 

  • Informal Economy includes economic activities and jobs that are not regulated or protected by the government. 

    • Street vendors, domestic work, or unregistered small businesses. 

    • Countries that are developing or have lower economies tend to have more jobs in the informal sector as they lack access to the formal economy jobs, or do not meet the requirements to do so. 

• GDP is the Gross Domestic Product.

  • Measures the total economic output of a country over a given period of time. 

  • Consumption + Investment + government spending + (exports - imports). 

    • Only factoring production inside the country. 

    • Increasing GDP shows the expansion of jobs in businesses and that the economy is increasing. 

      • Sees more consumption by the government and people. 

    • Declining GDP shows that the total value of goods and services inside the country;s boundaries are shrinking. 

      • Can be the result of a recession, an indication of struggling businesses, and consumers are spending less money. 

• GNP is the Gross National Product. 

  • The total economic output produced by a country’s residents and businesses, regardless of their location, during a specific period of time. 

    • Key difference between the GNP and the GDP is that the GDP is within the country’s borders, and the GMP factors in the domestic production and abroad production. 

    • If the GMP is larger than the GDP:

      • Significant number of citizens living abroad. 

      • More foreign investment and production inside the country. 

• GNI is the Gross National Income.

  • The total amount of income generated by a country’s residents and business, both domestically and abroad, in a given year, 

    • Focus is on income, not production. 

    • Difference between GNI and GNP is the GNI focuses on the income generated by a country’s citizens and income, and the GNP focuses on the production of the goods. 

• GNI per capita is a country’s GNI / total population. 

  • Indicates the standards of living. 

  • Includes all wages, profits, and investments. 

  • Gains us an estimate of an average income of each person in the country. 

  • Does not factor income inequality, quality of life, or other social factors. 

• GII is the Gender Inequality Index. 

  • A composite index that measures gender-based inequalities in health, education, and economic participation. 

  • Shows inequalities between men and women on three factors: reproductive health, empowerment, and labor markets. 

    • Reproductive health is measured by the maternal mortality ratio and the adolescent fertility rate. 

    • Empowerment is measured by the positions of power and level of education obtained by each gender. 

    • Labor market is measured by women’s participation in the workforce. 

  • Higher = more inequality.

  • Lower = less inequality. 

  • Countries with more economic development generally have a higher GII, and vice versa. 

• HDI is the 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 years of schooling, and GNI per capita. 

    • Ranges anywhere from 0-1. 

      • Higher = more development, vice versa. 

  • Helps identify areas in human development that could use more attention. 

7.4 Women and Economic Development - ADD INFO FROM TEXTBOOK! 

• Global Gender Gap Index uses four benchmarks to determine a country’s ranking: 

  • Economic Participation Opportunity

  • Educational Attainment

  • Health and Survival

  • Political Empowerment

• Regions that are more developed have more improvement towards balancing the pay gap between men and women, while developing regions (with less economic development) tend to have less opportunities for women and a wider gap between men and women. 

  • They also tend to take up more space in the informal economy. 

    • South Asia (non-agricultural jobs) ~ 80%

    • Sub-Saharan Africa ~ 74%

    • Latin America and the Caribbean ~ 54%

  • Consist of subsistence farmers, street vendors, domestic workers, and other jobs without legal protection. 

  • No guaranteed minimum wage. 

• Globally, women receive less social benefits and legal protections compared to men. 

• Many people, including women, in informal economies lack the ability to have a bank account. 

  • As account ownership continues to grow, women, poor adults, and less educated adults continue to make up the majority of people excluded from the formal financial sector.

    • Solutions can include the creation and utilization of micro-loans (small loans provided to individuals or small businesses who are typically excluded from traditional banking services) and micro-financing (a category of financial services that are for individuals and small businesses who lack access to traditional banking services, it also often includes access to a savings account, insurance, or money transfer services).   

      • Allows small businesses to be created (especially by women). 

        • Benefit them greatly. 

      • Reduced women’s reliance on debt. 

      • Provides more opportunities for women in developing countries.

7.5 Theories of Development - ADD INFO FROM TEXTBOOK! 

• Global economy has become a key driving force behind economic growth for countries globally. 

  • Disproportionately benefits some countries over others. 

• Rostow’s Stages of Economic Growth

  • Outlined five stages of economic development for countries:

    • Traditional society (1)

      • Subsistent lifestyle. 

        • Majority of the population are in jobs in the primary sector. 

      • Experience slow growth. 

      • Lack modern technology and specialization in certain fields. 

    • Pre-conditions for Takeoff (2)

      • Economy begins to grow due to more investment in infrastructure and education. 

      • Productivity increases (more jobs in the secondary sectors). 

        • More jobs begin to be centered around manufacturing and processing of raw resources. 

          • More foreign states become interested in their resources (political advantages). 

    • Takeoff Stage (3)

      • Rapid economic growth. 

      • Jobs transition to industrialized activities. 

      • Increased urbanization

        • New jobs and opportunities (secondary to tertiary). 

      • New technologies.

        • Increases overall production. 

      • Some countries get taken advantage of by more advanced countries, through their cheap labor (exploitation). 

    • Drive to Maturity (4)

      • States start to specialize more, and participate more in global trade.

        • Diversify the economy.

        • Creates new opportunities for jobs in the tertiary sector. 

      • Shift from heavy industrial industries to more consumer goods. 

      • Economy stabilizes. 

      • Becomes more independent, and relies less on exports.

    • High Mass Consumption (5)

      • Fully developed economy. 

      • Producing products for both needs and wants of the people. 

      • Majority of jobs are in the tertiary sector. 

      • Develop a consumer culture. 

        • Economy becomes centered around consumption rather than manufacturing. 

  • Gain insight into how a country's economy develops and changes overtime. 

  • Claims that all countries follow the same exact pattern of economic growth and development.

  • Criticized for:

    • Not accounting for outside political and social factors. 

      • Impact of colonialism that had states and developments. 

      • Limited resources & carrying capacity. 

• Dependency Theory

  • Suggests that developing countries are dependent on developed countries for their economic growth. 

    • Core countries use their power to exploit the semi-periphery and periphery countries for resources. 

      • Done by creating unequal trade relationships and investments. 

        • Less economically developed countries often rely on exporting raw materials and low-skilled labor to more economically developed countries.

          • Does not increase their own economic growth. 

          • Negatively impact the developing country.  

    • Balance in power of trade is uneven, and it is in favor of the core countries. 

• Wallerstein’s World System Theory

  • Breaks countries into three main categories: core (most developed) , periphery (least economic developed), and semi-periphery (emerging economies). 

  • Built on the belief that all countries are now interdependent on one another. 

    • Core countries purchase the most high profit consumption goods and services from the semi-periphery and periphery countries. 

      • Control the global economy. 

      • Most often exploit the resources of developing countries. 

    • Semi-periphery countries are more industrialized.

      • More jobs located in the secondary sector of the economy. 

      • Established infrastructure for the exportation of goods, cheaper labor and less regulations. 

    • Periphery countries see their economy become dependent on some core countries. 

      • Leads to the exploitation for the country’s cheap labor and raw resources. 

      • Difficult for these countries to advance economically due to the constant exploitation.  

        • Connects back to the dependency theory. 

  • Acknowledges the role of colonialism and imperialism in shaping the current global economy and system. 

  • Criticized for:

    • Fails to account for non-governmental organizations that offer micro financing and microloans to support those in periphery and semi-periphery countries, which allows them to be self-dependent and self-reliant. 

• Commodity Dependence

  • A country has more than 60% of its total exports made up of just commodities.  

    • Consists of raw material or agriculture. 

      • Vulnerable to the price changes. 

      • Less economic development in other industries. 

      • Many countries located in the semi-periphery or periphery become very vulnerable to any changes made in the commodity chain, which can interfere with their main source of income and profit; this causes it to be very unpredictable. 

7.6 Trade and the World Economy 

• Due to globalization, the world has become increasingly interconnected. 

  • Trading & interacting. 

• As a result, countries have opened up their markets to goods and services from across the world. 

  • Increases competition in the market. 

  • Increases the variety of choices for consumers. 

• Capital investments (the funds of resources that a company or individual put into an activity, project, or business with the expectation of generating future profits) are taking place as well. 

  • Allowing for more investment opportunities for individuals. 

  • New economic opportunities for different countries (periphery, semi-periphery, and core). 

• Globalization has allowed businesses to gain access to the global labor market. 

  • New opportunities for workers and new production. 

    • Contributed to the rise in income inequality. 

      • Economic benefits are not equally distributed across all states. 

• Countries that have more access to the labor market are often able to produce more goods. 

  • Improved efficiency and productivity to specialize more. 

  • Access new technologies and ideas. 

  • Strengthen political relationships. 

• Countries with a higher complementary 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) will be more likely to trade with another country. 

  • Measures the import and export patterns of two countries. 

  • Higher score = more favorable trade relationship, vice versa. 

    • 0-1 score. 

• 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) is also a measure for the basis of trade relationships. 

  • Lower opportunity cost than another country at producing a specific good or service. 

  • Impacted by scarcity. 

  • Countries with this advantage are better at producing a certain good or service than another country. 

  • Specialization = efficiency 

  • Allows the country to maximize efficiency and still get goods and services they desire. 

• When countries take advantage of their strengths, and trade with other countries to fill up their weaknesses, it helps them overall. 

• As for government policies, some states seek to reduce trade and promote domestic production (reducing reliance on other countries). 

  • Implementing tariffs (a tax or duty imposed by the government on goods and services that are imported into the country). 

    • Goal is to make goods produced outside of the country’s boundaries more expensive. 

      • Paid by the business. 

        • Businesses normally pass the expense to the consumer (making them pay them). 

    • Can implement them due to trade deficits (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). 

      • Prevent the market from efficiently using its resources.

• Promoting free trade is known as neoliberalism (an economic and political ideology that emphasizes individual freedom over government control, free markets, and free trade). 

  • Seek to reduce governmental intervention in the economy. 

  • The World Trade Organization promotes free trade and globalization all across the world. 

    • Contributing to economic growth and development. 

  • International Monetary Fund

    • Wants to further international monetary cooperation, encouraging the expansion of trade and economic growth, and discouraging policies that would harm prosperity. 

      • Sustainable economic growth through trade and commerce. 

        • Includes Mercosur, European Union, and OPEC. 

          • Merocsur consists of different countries in South America. 

          • The EU was created with the goal of peace, stability, and economic prosperity across the world. 

          • OPEC's objective is to coordinate and unify petroleum policies among Member Countries (supplying enough for a fair capital). 

            • Using its control over oil production. 

• Neoliberal policies have also led to the creation of NAFTA. 

  • Goal was to bring free trade between the US, Mexico, and Canada. 

• Criticisms of Neoliberal policies

  • Prioritize the needs of wealthier corporations and states over developing regions, which often increases economic inequality. 

  • Deregulation of different markets can lead to less accountability and government oversight, which may increase unethical behavior by different institutions. 

• Global Crises chains

  • A global crisis in one country (such as COVID 19), can have a ripple effect on multiple countries. 

7.7 Changes as a Result of the World Economy 

• Economic Restructuring (A significant shift in production, employment, investment, trade patterns or underlying economic systems and processes) a result of new businesses seeking to take advantage of new global markets. 

  • Core countries and businesses move production into semi-periphery countries. 

    • Also begin to move jobs out of the secondary and tertiary sectors, since they are seeking to utilize cheaper labor markets and geographic areas--also known as offshoring (the process of relocating a business process or service out to a foreign country. 

      • Advantages include lower labor costs, tax incentives, and favorable economic conditions. 

• Outsourcing (when a business contracts out a service or job to an external provider in order to reduce their costs and increase their efficiency) will increase with economic progress. 

• Companies will also adjust their economies of scale (as a company grows, they are able to reduce the average cost to produce its product).  

  • See a decrease in their cost per unit in their production (also have better machines, systems, and have more access to capital). 

• International Division of Labor is a concept that describes how countries utilize their comparative advantage to specialize in different economic activities, resources and capabilities. 

  • Results in a hierarchy of countries, with some countries becoming more dominant in the global market. 

  • Allows them to become more efficient in producing specific goods and trading with countries to obtain the goods and services they lack. 

• The deindustrialization of Detroit (due to global competition and increasingly competitive comparative advantages) led to urban blight (homes that hold close to no value due to being abandoned, vandalized, and/or stripped). 

• Core countries will continue to see their secondary sector located outside of the country, and increasing in the tertiary sectors. 

  • Periphery and semi-periphery countries will seek to gain more economic advantages by creating Special Economic Zones (regions within a country that provide different economic incentives with the objective of attracting foreign investment and promoting economic growth), Free-Trade Zones (a region within a country where imported goods can be stored and processed without being subject to tariffs or trade barriers), and 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). 

    • Maquiladoras are Mexican EPZs (made with the intention of attracting the U.S. to Mexico’s exports, and it increases the amount of exports from Mexico). 

• 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) creates a chain reaction of additional spending. 

  • Increasing economic activity in the area of original investment. 

• Switch from Fordist methods of production to post-Fordist methods. 

  • Fordism is a system of production that emphasizes mass production of standard goods.

    • Set a division of labor. 

  • Post-fordism emphasizes a system of production with more flexible production methods where workers are trained in multiple tasks and produce custom goods.

    • Allows for more adaptable workforce. 

    • Focus on custom goods. 

    • Use local decisions when it comes to production (less decentralized). 

      • Production no longer happens in one location, it is spread out. 

    • Utilizes 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). 

      • Reduce costs and waste. 

      • Helps reduce the cost of carrying inventory, and increases productivity. 

      • Requires a high-degree of communication. 

• Economic benefits of agglomeration (clustering of different economic activities and industries in a  specific geographic area).

  • Reduces the costs of their production. 

  • Occurs naturally. 

• Growth Poles are specific regions, cities, or economic sectors that are considered centers of economic growth and development. 

  • Created by targeted public or private investors. 

    • Can be done in a variety of ways. 

      • EX: Silicon Valley, California, has become a growth poll for technology and innovation. 

        • Led to more tech-focused companies in the area. 

      • EX: Dubai, which has experienced rapid growth and development due to investment from the government (now it has become an international hub for businesses). 

7.8 Sustainable Development - ADD INFO FROM TEXTBOOK! 

• Sustainability is the use of Earth’s resources in a way that ensures those resources will still be available in the future. 

  • Meet the needs of the present without compromising the needs of future generations. 

• Many concerns in the current rate at which our resources are being used and depleted. 

  • More countries continue to industrialize and modernize, new global challenges emerge. 

• As countries progress through the DTM, their growth rates start to shrink, reducing pressure on the local environment. 

  • As countries begin to develop, they become centered around the usage of fossil fuels, consumerism, have higher land and resource usages, and higher energy demands. 

    • Results in resource depletion. 

      • Refers to the depletion or exhaustion of natural resources as a result of unsustainable practice and excessive consumption. 

        • Land degradation also occurs due to soil erosion, desertification, soil salinization, and deforestation. 

• Environment and society begin to influence one another through interactions. 

  • More economic development = higher consumption rates in countries. 

  • Increases the air, water, and soil pollution in the environment.

    • Leads to larger landfills and more wasted resources. 

    • Increased greenhouse emissions. 

• Water shortages impacting the regions of the world, as a result of industrialization and changes in farming practices due to climate change. 

  • Impacts the country’s ability to produce their products. 

• Usage of recycled materials (old garments, plastic, etc.) in its production (reducing its carbon footprint). 

  • Removes greenhouse gas emissions. 

• Countries continue their efforts for sustainability through supporting sustainable energy sources, reducing urban sprawl, promoting carpooling, and making recycling programs more accessible.   

  • Promoting 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. 

      • Promoting an educational experience for the tourists.

      • Promoting activities for conservation. 

  • Following the SDGs by the UN. 

    • 17 different goals (each goal focuses on each aspect of society).  

    • Goals go hand-in-hand with each other, which makes the goals more reachable. 

      • See their standard of living increase and economic opportunities increase.