AP HUG Unit 6: Economic Development

• Human Development Index - indicator of the level of development for each country 

  • constructed by the United Nations, combining income, literacy, education, and life expectancy 

  • score between 0 and 1, lower the score the less developed

  • look after four indicators 

    • life expectancy at birth

    • mean years of schooling

    • expected years of schools 

    • gross national income per capita 

  • Low in LDSs: South Sudan → .39

  • High MDCs: Norway → .95

• Gross Domestic Product (GDP) - total value of officially recorded goods and services by citizens within a country

  • only take into account the formal account, things that are taxed

  • goods + services = GDP

• Gross National Product (GNP) - total value of goods and services by citizens and corporations of a country 

  • foreign investments 

  • domestic + international goods = GNP

• Gross National Income (GNI) - most accurate measure of wealth, it accounts for the impact of trade 

  • GDP + (exports - imports) = GNI

• Primary Economic Activities - jobs that include extraction of raw materials and natural resources from the Earth’s surface

  • mining, farming, fishing, foresty 

• Secondary Economic Activistes - jobs include processing and manufacturing raw materials into finished products 

  • factories & manufacturing

• Tertiary Economic Activities - jobs include service sector that focuses on moving, selling, and trading products in primary and secondary sectors

  • retail, marketing, design, restaurants, shipping, etc 

  • Quaternary Economic Activities - knowledge-based sector, focusing on research and information creation transfer

    • investment banking, real estate, college professor, etc 

  • Quinary Economic Activities - highest level of decision making, includes top officials in government and business

    • congress & CEO

• Gini Coefficient - measures the distribution of income within a population 

  • values between 0 and 1

    • the higher the number the higher the income inequality 

  • generally, MDCs have LOWER Ginis and LDCs have HIGHER Ginis 

• Total Fertility Rate (TFR) - average number of children per woman 

  • higher in LDCs: Niger → 7.39

  • lower in MDCs: Spain → 1.25

• Infant Mortality Rate (IMR) - the number of deaths of infants under one year old in a given year per 1,000 births 

  • higher in LDCs: Afghanistan → 111

  • lower in MDCs: Japan → 2

• Access to Healthcare: lower in LDCs, higher in MDCs

• Life Expectancy - average number of years a person is expected to live based on morality rates when they were born 

  • lower in LDCs: Central African Republic → 50.9 years 

  • higher in MDCs: Australia → 83.4 years 

• Literacy Rates: lower in LDCs: Niger → 19%

  • almost widespread in most other countries 

Industry

• Indstry- manufacturing of goods in a factory

  • much more clustered than agriculture

  • location highly dependent on where natural resources and markets exist

  • generally, the loss of manufacturing jobs is seen as a bad thing

    • outsourced, going to lower-developed countries 

• Cottage Industry- industry in which the production of goods and services is based in homes (not factories)

  • Specialty goods (assembled individually or in small quantities) are often produced in this manner

• Industry Distribution- 

  • hearth of industry → The Industrial Revolution: a series of improvements in industrial technologies that transformed the process of manufacturing goods 

  • originated in Europe, England to be specific 

    • credited with population growth, taking countries from Stage 1 to Stage 2

    • invention of the steam engine, the most important in fostering the revolution 

    • iron- steam engine able to ovens hot enough to mold iron

    • coal- operates steam engine

    • transportation- canals and railroads built

    • textiles- mills created (near water) to untangle cotton

    • chemicals- bleach and dye cloth obtained from burning coal

    • food processing- canning food in glass bottles

• Site Factor- a place’s physical features related to the costs of business production: land, labor, and capital 

  • Labor:  

    • the most important site factor

    • labor-intensive industries 

      • wages and compensation paid to employees constitute a higher percentage 

      • highest cost 

  • Land: 

    • rural sites

      • originally factories located in cities 

        • prox to market

        • shipping 

        • labor

        • source of capital 

        • cost of land went up→ buildings went tall instead of wide

      • contemporary factories operate more efficiently

        • one level

        • cheaper (rent)

        • easier to facilitate delivers  

  • Capital: 

    • companies settle where it is easier for them to get loans 

      • ex. car industry in Michigan, tech companies in Silicon Valley, CA

• Situation Factors- the features of a location's surrounding area, especially as related to the cost of transporting raw materials and finished goods 

  • Ideal Situation

    • proximity to inputs → want to locate as close as possible to buyers and sellers

      • usually forced to pick one 

  • Bulk-reducing Industries

    • input weighs more than final product needs

      • ex. steel, copper wire

    • need to be closer to the natural resources 

  • When sources of inputs change the optimal location for industry changes 

  • Bullk-gaining 

    • putting things together and making it heavier 

      • ex. cars, fabricated medals 

    • needs to be closer market 

  • Perishable → Just-In-Time-Deliver-Shipment of parts and other materials

  • Transportation:

    • truck = short-distance 

    • train = ship longer distances 

    • ship = slow, but very low cost 

    • air = most expensive, but very fast 

    • mixed = cost goes up every time goods must be transferred 

    • break-of-bulk-point- location where there is a transfer, one mode of transportation to another

• Self Sufficient Path- countries encourage domestic production of goods, discourage foreign ownership and businesses and resources

• International Trade Path- countries open themselves to foreign investments and international markets 

• Alfred Weber: Least Cost Theory 

  • Industrial equivalent to the Von Thunen Model Manufacturing will locate where coast are the least

    • transportation - best site is where the cost to transport materials & finished products lowest 

    • labor - high labor coast reduce profit-location, location near cheap labor can offset transportation costs

    • agglomeration - when a group of industries cluster for mutual benefit

Globalization

• Interdependence of the World Economy- international trade is increasing and there is a growing interdependence in the world economy 

  • Complementarity- the degree to which one place can supply something that another place demands 

  • Comparative Advantage- a situation in which a country, individual, company, or region can produce a good at a lower opportunity cost than a competitor 

  • EU: promote development within the member states through economic and political cooperation. 

    • eliminate tariffs amoung member nations and have fostered economic growth 

  • NAFTA: eliminated most barriers tio moving goods among Mexico, United States, and Canada 

• Impact of Geography

  • global financial crisis → unavoidable

  • the shift to manufacturing to newly industrilized countries → low cost labor, etc 

  • imbalances in consumption patterns → the makers and the takers 

  • the role of women in the workforce 

• Outsourcing

  • new International Divison of Labor- selective transfer of certain jobs th LDC’s bu transnational corporations

  • turn production over to independent suppliers

    • loss of jobs in manufacturing regions 

    • relocation of significant segment of the workforce to other areas 

      • Footloose Industry- an industry that can be located anywhere without effect from factors such as resources of transport, spatially fixed

      • Fm

• Special Ecnomic Zone (SEZ)- specific area within a country in which tax and investment incentives are implemented to attract foreign (and domestic) businesses and investments 

  • special parts of the country where the laws of the country do not apply to this area 

  • LDS mostly, wouldn’t be found in a core country 

  • Maquiladoras- plants in Mexico near the US border, things in the US can cross the border to have it assembled and shipped back to the States without a tariff (tax break = incentive)

• Free Trade Zone tax free area where goods can be landed and “value added” through handling and manufacturing and re-exported without intervention of costums 

  • usually focus on labor intensive manufacturing goods, such as textiles and electrical equipment

• Growth Pole- a concentrated area experiencing strong economic growth due to the development of key industries 

• Interregional shift within the U.S

  • shift from North East to South West

    • draw workers in with right-to-work laws → requires a factory to maintain an “open shop” and prohibits “closed shops”

• Fordist- a form of mass production in which each worker is assigned one specific tak to perform repeatedly

• Post-Fordist- a more flexible set of production practices in which the component of good are made in different places

Energy

• Low cost energy available 

• Animate Power → Biomass Fuel → Fossil Fuel

• Animate Power = animal power 

• Biomass Fuel = wood, plant material, animal waster - burned directly 

• Fossil Fuel = formed from the residue of plants andn animals buried millions of years 

  • coal, petroleum, natural gas

• Renewable- sources produced in nature more rapidly than they are consumed 

  • soil, wind, geothermal, hydropower, ocean, bioenergy

• Non-Renewable- sources of energy produced in nature more slowly than they are consumed 

  • oil, natural gas, coal, nuclear energy

• We deplete scarce resources, especially pertoleum, natural gas, & coal 

• We destroy resources through pollution of air, water, & soil

• Resources are not distributed or used evenly 

• “The higher the income the more energy you use”

• Nuclear Energy: 

  • advantages = large amount of energy released from a small amount of material 

  • disadvantages = waste is radioactive & lethal, running out of places to store waste, expensive 

• Biggest Enviromental Concerns: 

  • deforestation- cutting down of trees 

  • air pollution- concentration of trace substances at a greater level than occurs in average air (78% nitrogen, 21% oxygen)

    • most air pollution is generated by factores, power plants, and motor vehicles 

    • climate change- average temperature on Earth’s atmosphere is rising 

      • climate change is mainly caused by air pollution 

    • ozone- gas that absorbs ultraviolet radiation in the stratosphere, protects plants, animals, and humans from these dangerous rays

      • chlorofluocarbons destroy the ozone layer

    • as one’s income goes up one’s carbon foot print goes up

  • water pollution: 

    • demand for water- humans use about 950 billion gallons of water per year 

    • biochemical oxygen demand- measures water pollution, the amount of oxygen required by aquatic bacteria to decompose a given amount of organic waste 

    • sewage, runoff, waste 

    • oil in the water sits on top and blocks the sun from getting into the water and having that oxygen cycle go, harmful to the wildlife

• The Paris Agreement- commits nearly every country in the world to lowering greenhouse gas emissions in a effort to curb climate change 

  • 195 countries signed (2015), all voluntarily pledges 

  • U.S. currently no in the agreement anymore 

  • cannot prioritize industry and the environment, have to pick one or the other 

• Carbon taxes- attempt to minimize emissions by requiring the largest greenhouse gas producers 

Cap and Trade- governments allocate or sell a set of number of permits, each og which represents the right to emit a specific amount of greenhouse gases