The Entire Chapter of Unit 7 (copy)

The Industrial Revolution, which originated in Great Britain, refers to the rapid transformation of the economy through the introduction of machines, new power sources, and new chemical processes in Europe and the United States between 1760 and 1830. Until the Industrial Revolution, society and culture were overwhelmingly rural and agricultural. Cities certainly existed—as centers of political power, education, and innovation—but most people lived in the countryside, obtaining their food through agriculture. They fashioned tools, utensils, containers, and clothing by hand, laboriously and slowly. Origins and Preconditions In the early 1700s, conditions in Great Britain provided an ideal launching pad for the Industrial Revolution. Advances in agriculture had increased food production and reduced the demand for agricultural workers. The result was a steady movement of poor, unemployed people from the countryside into the cities. This geographically concentrated, idle, and expanding labor force was readily available to work in a large-scale, labor-intensive system of factory production. Additionally, Great Britain’s damp, cool climate was perfect for producing sheep’s wool. Indeed, the country had a long tradition of manufacturing textiles. A textile is a fabric or cloth woven from the fibers of wool, cotton, or flax. Historically, textiles were the products of a home-based industry composed of thousands of workshops in homes where spinners, weavers, and dyers worked independently. Finally, Great Britain was the world’s trade leader in the eighteenth century. As the dominant naval power, it monopolized trade with many parts of the globe, and vast wealth poured into the country. This new wealth provided the surplus of money needed to support innovations in industry, transportation, and energy (Figure 53.1). New machines and ideas attracted investment, allowing for further advances in technology and ongoing improvements in labor productivity. Figure 53.1 Wealth transfers to Europe, 1500–1840. According to this map, which city received the greatest portion of wealth transfer in the period shown? The map is titled Transfers of Wealth to Europe, 1500 - 1840 (in billions of 1990 U.S. dollars). Transfers are as follows. Profits from slave trade, British ships: 8.6 billion, from western Africa to London. Profits from slave trade, French ships: 5.8 billion, from Western Africa to Paris. Silver exports to Spain and Portugal: 14.1 billion, from Mexico and western South America to Madrid. Gold exports to Spain and Portugal: 12.3 billion, from Mexico, and eastern and western South America to Lisbon. Sugar profits from use of slave labor in North America and Caribbean (18th century): 28.5 billion, from the Caribbean islands and the southeastern United States to London. Profits from the Dutch spice trade (1650 - 1780): 6.8 billion, from Indonesia to Amsterdam. Profits from India-China opium trade (1800 - 1840): 4.6 billion, from China to London. Land rents and taxes from small farmers (1760 - 1810): 11.4 billion, from Bengal to London. Early Mechanization Industrialization originated in Britain’s textile manufacturing, centered at that time in the Lancashire district in northwestern England. At first, the changes were small. Craftsmen invented mechanical spinners and looms, and people channeled flowing water to power the new machines in textile mills (factories). These inventions—such as the spinning jenny, which allowed a single worker to operate multiple looms simultaneously—greatly increased labor productivity, the average amount of goods or services produced per worker per unit of time (Figure 53.2). Many such machines were placed under one roof in a factory and operated by workers hired by the factory owner. Figure 53.2 Spinning jenny. The spinning jenny was a major step toward the mass production of goods in factories. It allowed a single worker to operate multiple looms simultaneously, thereby dramatically increasing labor productivity. The Industrial Revolution also led to the development of new forms of transportation. The need to move raw materials and finished products from one place to another cheaply and quickly was the main cause of these transportation breakthroughs. Wooden sailing ships gave way to steel vessels driven by steam engines, and railroad systems were developed. Once in place, the railroads promoted additional diffusion of ideas and practices, including the diffusion of the Industrial Revolution itself. The Industrial Revolution, which originated in Great Britain, refers to the rapid transformation of the economy through the introduction of machines, new power sources, and new chemical processes in Europe and the United States between 1760 and 1830. Until the Industrial Revolution, society and culture were overwhelmingly rural and agricultural. Cities certainly existed—as centers of political power, education, and innovation—but most people lived in the countryside, obtaining their food through agriculture. They fashioned tools, utensils, containers, and clothing by hand, laboriously and slowly. Origins and Preconditions In the early 1700s, conditions in Great Britain provided an ideal launching pad for the Industrial Revolution. Advances in agriculture had increased food production and reduced the demand for agricultural workers. The result was a steady movement of poor, unemployed people from the countryside into the cities. This geographically concentrated, idle, and expanding labor force was readily available to work in a large-scale, labor-intensive system of factory production. Additionally, Great Britain’s damp, cool climate was perfect for producing sheep’s wool. Indeed, the country had a long tradition of manufacturing textiles. A textile is a fabric or cloth woven from the fibers of wool, cotton, or flax. Historically, textiles were the products of a home-based industry composed of thousands of workshops in homes where spinners, weavers, and dyers worked independently. Finally, Great Britain was the world’s trade leader in the eighteenth century. As the dominant naval power, it monopolized trade with many parts of the globe, and vast wealth poured into the country. This new wealth provided the surplus of money needed to support innovations in industry, transportation, and energy (Figure 53.1). New machines and ideas attracted investment, allowing for further advances in technology and ongoing improvements in labor productivity. Figure 53.1 Wealth transfers to Europe, 1500–1840. According to this map, which city received the greatest portion of wealth transfer in the period shown? The map is titled Transfers of Wealth to Europe, 1500 - 1840 (in billions of 1990 U.S. dollars). Transfers are as follows. Profits from slave trade, British ships: 8.6 billion, from western Africa to London. Profits from slave trade, French ships: 5.8 billion, from Western Africa to Paris. Silver exports to Spain and Portugal: 14.1 billion, from Mexico and western South America to Madrid. Gold exports to Spain and Portugal: 12.3 billion, from Mexico, and eastern and western South America to Lisbon. Sugar profits from use of slave labor in North America and Caribbean (18th century): 28.5 billion, from the Caribbean islands and the southeastern United States to London. Profits from the Dutch spice trade (1650 - 1780): 6.8 billion, from Indonesia to Amsterdam. Profits from India-China opium trade (1800 - 1840): 4.6 billion, from China to London. Land rents and taxes from small farmers (1760 - 1810): 11.4 billion, from Bengal to London. Early Mechanization Industrialization originated in Britain’s textile manufacturing, centered at that time in the Lancashire district in northwestern England. At first, the changes were small. Craftsmen invented mechanical spinners and looms, and people channeled flowing water to power the new machines in textile mills (factories). These inventions—such as the spinning jenny, which allowed a single worker to operate multiple looms simultaneously—greatly increased labor productivity, the average amount of goods or services produced per worker per unit of time (Figure 53.2). Many such machines were placed under one roof in a factory and operated by workers hired by the factory owner. Figure 53.2 Spinning jenny. The spinning jenny was a major step toward the mass production of goods in factories. It allowed a single worker to operate multiple looms simultaneously, thereby dramatically increasing labor productivity. The Industrial Revolution also led to the development of new forms of transportation. The need to move raw materials and finished products from one place to another cheaply and quickly was the main cause of these transportation breakthroughs. Wooden sailing ships gave way to steel vessels driven by steam engines, and railroad systems were developed. Once in place, the railroads promoted additional diffusion of ideas and practices, including the diffusion of the Industrial Revolution itself. Industrialization depends on a steady and reliable source of natural resources, which provide power sources and raw material inputs in manufacturing processes. In the earliest years of the Industrial Revolution, proximity to natural resources was essential. With innovations in transportation, the location of manufacturing became less constrained. Nevertheless, reliable flows of natural resources remain critical to industrialization. During the first stage of industrialization, manufacturing industries were still largely rural, dispersed, and tied to localized power sources. Water and wood were the key natural resources providing power. Sites near rushing streams, especially those with waterfalls and rapids, were ideal locations for the industrialized textile industry. Falling water was channeled to power the new spinning and weaving machinery. Similarly, proximity to forests was critical to early steelmaking. Charcoal, produced from wood harvested from the forests, was burned in the furnaces used in the smelting process. Further innovations in the mid-1700s, notably the improvement of the steam engine, shifted the main source of power to coal, which is a fossil fuel. Fossil fuels are natural fuels derived from the fossilized remains of living organisms. Coal, crude oil, and natural gas are all examples of fossil fuels. Coal contains much more energy to power machinery than wood. The coal-fueled steam engine allowed manufacturers to move away from older power sources and to relocate in cities that better suited their labor and transportation needs. Manufacturing enterprises generally began to cluster together in or near established cities. However, coal is heavy, bulky, and difficult to transport. As a result, manufacturing industries that relied heavily on coal, such as steelmaking, flocked to coalfields. Pittsburgh, Pennsylvania, provides a prime example. Located in the midst of several coalfields, it ultimately became the center of the world’s most productive steelmaking region (Figure 53.4). As industrialization progressed, improvements in transportation, such as canals and railroads, made coal readily available far from the mines. Nevertheless, steelmaking demanded such vast amounts of coal that it was often more economical to locate steel mills near coalfields. Figure 53.4 Coal and Pittsburgh steelmaking. What does this map tell us about the importance of the availability of power sources in decisions to locate manufacturing? The Ohio, Allegheny, and Monongahela Rivers run through the city of Pittsburgh and meet in the middle. Ohio is to the northwest, the Allegheny is to the northeast, and the Monongahela is to the southeast. Numerous steel mills are located along the Allegheny and Ohio Rivers near the center of the city. A few are located outside the city limits in the southeast along the Monongahela. Coalfields are located outside the city limits to the west, south, and southeast. Coal towns are labeled. Moon Run, Idlewood, and Fair Haven are on the west side, just within the city limits. Camp Hill and Fort Pitt are outside the city to the southwest. Further out to the southwest are National Hill and Essen. Castle-Shannon, Mollenauer, Coverdale, Horning, Curry, Bruceton, and Willock are to the south. Homestead and McKeesport are to the southeast. In the nineteenth century, industrial and chemical processes enabled the extraction and processing of another natural resource, crude oil. Crude oil is a yellowish-black liquid fossil fuel found in geologic deposits. It provided an even more efficient and transportable source of power for industrialization. Advances in the steam engine enabled the deep drilling of crude oil deposits. By the 1850s, innovations in chemical processing allowed crude oil to be refined into a variety of petroleum products, notably kerosene and gasoline. Fossil fuels became the most important natural resources and the main power source for industrialization. Natural resources also provide a source of raw materials for manufacturing processes. For example, iron ore provides iron, which is the basic metal in steel. The availability of reliable supplies of iron ore is essential for industrialized steelmaking. Let us return to the example of Pittsburgh. The nearby coalfields supplied coke, fuel derived from coal that served as both a fuel for furnaces and a reactant in the process of reducing iron from iron ore, and the city’s location at the intersection of three rivers made it ideally situated to receive barge loads of iron ore from the vast deposits in the northern Great Lakes region. Natural resource inputs were important in just about every aspect of industrialization. Water was necessary for the boilers of the steam engines and for cooling manufacturing equipment. The construction of factory buildings required lumber, stone, sand, brick clay, and limestone. The new machines for industrial manufacturing were made of steel and iron. New forms of industrial transportation, such as steamships and railroads, required a similar set of natural resource inputs. In sum, reliable access to natural resources is key to virtually every aspect of industrialization. Natural resources also provide a source of raw materials for manufacturing processes. For example, iron ore provides iron, which is the basic metal in steel. The availability of reliable supplies of iron ore is essential for industrialized steelmaking. Let us return to the example of Pittsburgh. The nearby coalfields supplied coke, fuel derived from coal that served as both a fuel for furnaces and a reactant in the process of reducing iron from iron ore, and the city’s location at the intersection of three rivers made it ideally situated to receive barge loads of iron ore from the vast deposits in the northern Great Lakes region. Natural resource inputs were important in just about every aspect of industrialization. Water was necessary for the boilers of the steam engines and for cooling manufacturing equipment. The construction of factory buildings required lumber, stone, sand, brick clay, and limestone. The new machines for industrial manufacturing were made of steel and iron. New forms of industrial transportation, such as steamships and railroads, required a similar set of natural resource inputs. In sum, reliable access to natural resources is key to virtually every aspect of industrialization. The increasing industrialization of agriculture pushed rural dwellers off their land. Farmland consolidation and increased productivity through mechanization meant fewer jobs and fewer places to live in rural areas. Rural residents had little choice but to leave. Industrial manufacturing, increasingly consolidated in and around cities, became the destination for uprooted rural dwellers, who could earn money by working in city factories. Urbanization accelerated dramatically. Urbanization, the process of concentrating greater proportions of a population into cities, was a major consequence of industrialization. Indeed, it is fair to say that industrialization is the main cause of modern urbanization. Prior to the Industrial Revolution, over 80 percent of the British population was rural. By 1850, the majority of people in Great Britain lived in cities. Similarly, in the United States, the majority of the population lived in cities by 1900. There were two aspects to urbanization in the Industrial Revolution. First was the rapid growth in the population of existing cities. London provides an excellent example. Its population grew from 2 million in 1840 to 5 million in 1880. The second aspect was the transformation of small towns into booming urban-industrial centers. Manchester, England, is a case in point (Figure 53.6). In the late 1700s, its population barely topped 20,000. However, with its cool climate and proximity to a seaport and coalfields, it was ideally situated to become the world capital of industrial textile manufacturing. Whereas London merely added industry to its existing functions in government, culture, and commerce, Manchester became the prototype for the industrial city. It was a city created by and for industrial manufacturing. By 1820, its population had increased nearly 1000 percent to 180,000. Figure 53.6 Early industrial city. Manchester, England, pictured here, grew rapidly as the city became a manufacturing center. Living conditions for the factory workers streaming in from the countryside were crowded and unsanitary, while coal burning made the air unhealthy. Although the new industrial cities became major sources of wealth, they had many drawbacks for factory workers. Urbanization was often so rapid that the construction of housing and infrastructure rarely kept pace. Industrial cities were typically overcrowded and dirty. In addition, worker housing was located near the factories. People, including children, were exposed daily to the noise and noxious fumes of early industrial processes. Unfiltered coal smoke darkened city skies and damaged residents’ lungs. It took many decades to improve the living conditions in industrial cities. The changes to society resulting from the Industrial Revolution were so extensive that we can touch only upon the most important. At the most general level, industrialization led to a new kind of economy with a new way of organizing society, industrial capitalism. A capitalist system implies a new set of social classes and a new set of relationships between them. Social Classes and Class Relations We can identify two changes that led to new social classes. First, the landowners who consolidated more and more landholdings and invested in mechanization became a new class of commercially oriented farmers. Commercial farmers raise crops and livestock to sell in the market at a profit, rather than raising them for their own consumption. The workers who were displaced by the processes of consolidation and mechanization had no way to feed themselves other than to sell their labor for wages. Wage labor, a distinctive characteristic of capitalism, is a socioeconomic relationship in which an employer pays a worker to complete a task, sometimes by the day or by the hour. The people who depended on wage labor to purchase the necessities of everyday life constituted a new social class, the working class (Figure 53.7). The employers, who owned the means of production and paid the wages, constituted a new capitalist class. In the later stages of the Industrial Revolution in the nineteenth century, another class category emerged. The middle class is composed of salaried professionals, such as lawyers, educators, and physicians, and office workers, such as bank tellers and store clerks. Figure 53.7 The working class. The Industrial Revolution produced a new socioeconomic class structure, with a working class composed of factory and mine workers. Workers coming together in factories from all over the countryside shared a common experience that helped create a working class identity. Class identity became a dominant marker of cultural difference. People tended to live in near members of their same class and shared similar daily experiences and concerns. Clothing, food preferences, beliefs, norms, and behaviors came to determine, and to be determined by, class position. The relationships among the new social classes were complex and often filled with tension. For example, commercial farmers and capitalists wanted to keep labor costs low in order to increase profit. Workers wanted a greater share of the capitalists’ profits and improvements in their working conditions. Workers therefore formed labor unions, associations of workers in particular industries created to collectively bargain with capitalists. Labor unions arose from and reinforced a sense of shared interests and common cause among workers. New Divisions of Labor All societies have some means of dividing up tasks among people. At the most basic level, tasks are divided among members based primarily on age and gender. Industrial capitalism introduced new divisions of labor, based on the needs of mass production in the assembly lines of the new factories. Mass production is the machine manufacture of large quantities of identical products. Mass production is accomplished on an assembly line, a system of manufacturing in which parts and procedures are added one step at a time through a series of workstations until a finished product is assembled (Figure 53.8). The labor is divided among the workers on the assembly line, with each worker assigned one task in a long series of tasks. Figure 53.8 Ford Model T assembly line. Henry Ford was well known for perfecting assembly line manufacturing to mass-produce automobiles. The line began with a bare auto chassis, which passed through station after station where parts were added until a fully assembled car rolled off at the end. To illustrate how an assembly line works, let’s imagine a shoe factory. Assembly might start with a worker cutting large pieces of tanned leather into uniform shapes and sizes. At the next workstation, another worker further cuts the leather into a section of the shoe, repeating that one task for the entire work day. At the next station, a worker repeatedly sews two leather sections together, and so on down the line until a pair of shoes is produced. A major social consequence of assembly line production was the deskilling of labor. One can work in a factory producing shoes but not possess the skills to actually make a pair of shoes, as professional cobblers did prior to industrialization. In sum, industrial manufacturing was built on a division of labor within factories, with each worker assigned only one small task in a long series of tasks. The division of labor in factories had implications for divisions of labor within families, as we will investigate next. Effects on the Family In preindustrial society, agricultural families tended to organize themselves as a single unit of production. Women, men, and children were all involved in producing for the household. Even the youngest children contributed by tending livestock or fetching water. Women were prominent in home-based crafts, and men might be involved in both farming tasks and crafts. Child rearing was spread among adult men and women and older siblings. Family, work, and workplace were closely integrated. With industrialization, a new household division of labor emerged. The workplace no longer consisted of the family’s fields and home. Now it was the factory or office building. Men went off to work in factories to earn wages. Young women worked in factories, too, especially in the textile industry. But after marrying and giving birth, women stayed home, where their unpaid labor was directed toward caring for their children and their home. Gender identities began to shift as males and females in the household took on distinct social roles that did not exist before industrialization. New Experiences of Space and Time With the new divisions of labor came the spatial separation of home and work. Due to the division of labor that emerged from industrialization, men became associated with public life and women with the domestic life. Women were therefore pushed out of political participation as they were pushed out of economic life. People’s sense of time shifted also, from the natural daily and seasonal rhythms of rural, agricultural life to the steady uniformity of the 24-hour clock of urban, industrial life. Finally, road improvements and the development of new transportation technologies enlarged people’s worlds. The invention of the steamship and the railroad connected distant places at speeds unimaginable a generation before. People had the sensation that the pace of life had sped up and that distances had collapsed. As industrialization diffused into mainland Europe, North America, and Japan, competition for reliable sources of raw materials increased. It also became clear that new markets were needed to absorb the vast quantities of mass-produced goods. Therefore, industrializing countries turned to colonialism and imperialism to find more natural resources and new markets. In the case of North America, the United States had access within the continent to vast supplies of natural resources, including lumber, timber, coal, and iron ore. The situation was different for the smaller countries of Europe and the island country of Japan, which had fewer resources and raw materials within their boundaries. Therefore, they had to look beyond their borders. Historically, it was common to seize needed resources through the conquest and control of other countries. Because many industrializing countries had similar raw material needs, they often competed with one another. Because Great Britain blazed the path of industrialization, let us begin with its experience. As we’ve seen, cotton and wool textile manufacturing was the first to undergo industrialization. Cotton has advantages that make it preferable to other sources of fiber for cloth. However, it is a subtropical crop and could not be grown in Great Britain. The country therefore had to look to other parts of the world for its cotton supply. Eighteenth-century India was the world’s largest producer of cotton textiles, putting it in direct competition with Great Britain for access to raw cotton supplies and markets for finished textiles (Figure 53.9). Figure 53.9 Cotton merchants, Bombay India, c. 1800. Prior to British imperialist control, India was an important exporter of manufactured textiles. Under imperialist rule, Indian manufacturers were forced out of business, and Indian labor was redirected to growing and exporting cotton for Britain’s textile industry. Great Britain eliminated both sources of competition through its imperial dominance of India. Under British rule, the importation of cotton textiles into Great Britain was outlawed. The British also established monopoly control over all cotton production in India. Thus, the British domination of India had the double advantage, from Britain’s viewpoint, of securing raw material supplies and opening a new market. Other industrializing European countries faced the same problem that Britain had: how and where to acquire the needed natural resource inputs. Imperialism was the answer. The Berlin Conference of 1884 illustrates how European governments systematically gained control of distant lands. The conference divided Africa into European national spheres of influence. Britain, for example, claimed Egypt and Sudan (good sources of cotton). The French claimed much of West Africa (cotton and vegetal oils for manufacturing). Belgium claimed equatorial Africa to secure supplies of raw rubber (Figure 53.10). Industrial capitalism requires a constantly expanding, reliable market in which to sell its manufactured goods. On its own, mass consumption, the purchase of large amounts of mass-produced goods by large numbers of people, is not enough. Let’s return to our shoe factory for a simple illustration. After a shoe factory has mass-produced enough shoes for everyone in its market, sales drop off because immediate mass-consumption needs have been satisfied. Assuming that people buy shoes only out of necessity, consumers will return to the market only when their shoes wear out. Therefore, unless markets can be enlarged, factory production will slow and profits will drop. And, because all the countries mass-producing shoes are in the same predicament, each country will seek to secure exclusive markets. With the inventions of steamships and railroads, it became economically feasible to ship large amounts of manufactured goods to other countries and continents. These transportation developments meant that imperialism might provide a solution to the problem of shrinking consumer markets. An important goal of nineteenth-century imperialism, then, was for European countries to secure exclusive foreign markets for their growing output of mass-produced goods. Imperialism led to the creation of an international division of labor. That is, the labor of different countries and world regions played complementary roles in an interdependent global economy. Industrialized countries supplied manufactured goods mass-produced in their factories. From their colonies, they imported only raw materials, including unprocessed agricultural products (for example, cotton) and natural resources. The labor of colonized people, therefore, was directed toward producing raw materials. Laborers used the money earned from the sale of raw materials to buy imported manufactured goods. Thus, the increased cultural interaction that occurred under European imperialism did not serve to diffuse industrialization. Rather, it served to block its diffusion. The Industrial Revolution might seem like ancient history, but industrialization continues to transform places around the world today and to shape nearly every aspect of our daily lives. In the next Module, we explore how the Industrial Revolution led to increasingly complex economies with distinct sectors. To understand spatial patterns of economic development, we must first analyze an economy’s different types of activities. Geographers divide types of economic activities into five broad categories called economic sectors. Economic sectors are groupings of industries based on what is produced and the activities of the workforce. Let’s take a closer look at each. Primary Sector The primary sector refers to industries that extract natural resources from the environment. For this reason, they are sometimes called extractive industries. Fishing, hunting, farming, logging, oil extraction, quarrying, and mining are examples of primary industries (Figure 54.1). The cultivation and harvesting of subsistence and commercial agricultural crops, such as cotton, are extractive activities. Natural resource extraction includes the extraction of renewable resources (such as timber) and nonrenewable resources (such as coal). Figure 54.1 Mining landscape. A conveyor is moving ore from an open pit mine to a processing plant. Such bleak landscapes are common in the primary sector. Secondary Sector Secondary sector industries process the raw materials extracted by primary industries, transforming them into finished, usable forms (Figure 54.2). For example, ore is converted into steel, logs are milled into lumber, and fish are processed and canned. Secondary industries are often lumped into the category of “manufacturing.” This sector can be further divided into “light” industry, such as furniture manufacturing, and “heavy” industry, such as automobile manufacturing. Figure 54.2 Smartphone manufacturing. Factory workers on an assembly line in Shenzen, China, make smartphones for a global market. Tertiary Sector The tertiary sector is dedicated to providing services to businesses and consumers, including the movement and delivery of goods and resources (Figure 54.3). This broad category includes jobs ranging from checkout clerks at the supermarket to lawyers and college professors. So wide is the range of services that some geographers find it useful to distinguish three subtypes: transportation/communication services, producer services, and consumer services. Figure 54.3 Amazon fulfillment center. Amazon has dozens of fulfillment centers, employing tens of thousands of people in the tertiary sector. These facilities are a key part of the process of moving finished goods from factories to consumers. Quaternary Sector As economies have grown more sophisticated, a fourth sector has developed. The quaternary sector includes intellectual and informational services. This is the sector of innovation and invention, and much of the work is scientific research and development that leads to the patenting of new procedures and goods (Figure 54.4). Computer software development and biomedical research are good examples of quaternary sector services. Figure 54.4 Genetic disease research. Medical research laboratories, such as the one in this photo, are developing new technologies to test for the presence of genetic diseases. Research labs are part of the quaternary sector. Quinary Sector The highest-level management decisions in the areas of business, government, education, and science are made in the quinary sector. Such decisions often have global-scale significance. For example, the chief executive officer (CEO) of a software firm oversees decisions on investment, research, patent applications, and product development by workers in the quaternary sector. The organization of economic sectors implies a hierarchy of economic development. For example, the primary sector has been basic to human survival since the dawn of time. Thus, an economy based mostly on the primary sector is considered the least developed (Figure 54.5). The secondary sector requires sophisticated mechanical and chemical engineering, modern transportation infrastructure, and so on. Therefore, an economy with a strong secondary sector is more developed than one based on the primary sector. The tertiary sector eventually emerged to service both manufacturers and consumers, indicating a growing economy. Relatively few national economies possess fully formed quaternary and quinary sectors, which are the defining markers of the most developed economies. Figure 54.5 Low-technology farming in Africa. Farmers in the Democratic Republic of the Congo cultivate their fields using simple hand tools. Such primary-sector activities take place at the lowest level of economic development. As the first industrialized economies grew more complex over time, each sector’s relative importance shifted. For example, increasingly greater portions of the workforce were involved in the tertiary sector and above. Some observers, therefore, rank national economies based on the proportion of the workforce in each sector. Thus, a national economy with a primary-secondary-tertiary workforce mix of 10-20-70 percent is considered more advanced than one with a 40-40-20 percent mix. The relative mix of economic sectors results in recognizable spatial patterns of development that are expressed at different scales. Let’s examine each scale—national and global—in turn. National Economic Core Areas Patterns of geographically uneven development arose within national economies as industrialization progressed. The steelmaking industry provides a good illustration. We can think of industrial regions as consisting of several zones, each dominated by a specific kind of labor and industry. The core area is the location of the manufacturing industry. The surrounding peripheral areas are the sources of natural resources. This pronounced spatial pattern occurs because different types of manufacturing activities find advantages in certain locations, such as nearby coalfields (peripheral area) in the case of steelmaking (core area). In our example, steelmaking is the base industry. A base industry is an industry of disproportionate economic importance and on whose existence other industries and employment sectors depend (Figure 54.6). Over time, the base steelmaking industry attracts new industries in the secondary and tertiary sectors to the core area. New enterprises arise to provide the steelmaking firms with supplies, specialized services, and facilities. Other new firms arise to make use of the conveniently accessible steel supply. Such firms include those that use steel to manufacture goods. Additionally, the movement of people into the core area to join the expanding workforce sparks further economic growth in housing, retail, infrastructure, schools, and so on. Figure 54.6 Hyundai auto factory. Automobile assembly plants, such as this Hyundai auto plant in Alabama, sometimes function as regional base industries. Base industries often serve as the economic engine for core areas. We can see from this simplified illustration how the mix of economic sectors reflects distinct regional development patterns. The workforce of an established core area is largely engaged in the secondary and tertiary sectors. The workforce of the peripheral area is disproportionately engaged in the primary sector. Global Economic Core States We can apply the core-periphery model at the global scale as well. Recall the case of the British textile industry from Module 53. The British government maintained strong control over the technologies central to industrial mass production. However, it could not produce the raw material input—cotton—within its national boundaries. For its cotton supply, it turned to subtropical countries like India and Egypt. The merchants and entrepreneurs of Great Britain became very wealthy from their domination of the textile industry. Meanwhile, the resources of India and Egypt were extracted, and the people were paid relatively little for their labor. In other words, Great Britain established itself as core state with an increasing proportion of its workforce engaged in the secondary and tertiary sectors. India and Egypt became peripheral states in an interdependent but unequal relationship with Britain, with most of their workforces engaged in the primary sector. Ultimately, these twin policies of (1) restricting the diffusion of industrial technology and (2) encouraging extractive enterprises consigned much of the world’s workforce to the primary sector, positioning many of the world’s nation-states as peripheral economies in relationship with Europe. A global pattern of uneven development emerged, with most countries’ national economies dominated by the primary sector (peripheral countries) and a few national economies with the majority of their workforces in the secondary and tertiary sectors (core countries). The late twentieth century saw changes to this global pattern of core and peripheral nation-states. A new, intermediary category of nation-states emerged, the semi-periphery. The semi-periphery is composed of countries or regions whose economies have elements of both the core and the periphery (Figure 54.7). Manufacturing’s relative importance to the core states’ economies decreased late in the century, and manufacturing was relocated to countries in the periphery, often European colonies or former colonies. Some of these countries, such as Mexico, Brazil, and India, moved out of the periphery to become the semi-periphery (see Modules 55 and 58). Meanwhile, core countries’ economies shifted even more toward the tertiary, quaternary, and quinary sectors. The uneven distribution of industrial manufacturing across the globe reflects the many factors that influence the location of manufacturing. Many different factors determine where a particular factory or business will be located. As a general rule, businesses weigh these factors against one another, with the goal of keeping production costs as low as possible. These factors include energy, materials, labor, markets, and transportation. Energy Every manufacturing process needs a reliable source of energy at the lowest possible cost. If electricity is the main source of power, then we might expect a factory to locate near hydroelectric sources. For example, early aluminum manufacturing plants, which use large amounts of electricity, were located near hydroelectric facilities at Niagara Falls. The relative costs of energy sources change as technologies change, sometimes leading to shifts in the location of manufacturing. Materials We learned in Module 53 that a ready supply of materials was important to the location of industry during the Industrial Revolution. In that discussion, we were talking mostly about natural resources—such as wood and iron ore—as raw materials. Today, most inputs have already been through some sort of manufacturing process. For example, automobile manufacturing requires massive amounts of steel ready to be stamped into a variety of shapes. The steel industry’s product output (for example, a particular size of steel sheet) is the auto industry’s materials input (for example, for forming car bodies). Therefore, the location of factories that manufacture inputs will influence the location of the factories that need them. Proximity to major seaports and airports is also a key consideration. These ports often serve as break-of-bulk points. A break-of-bulk point is a location where bulk cargo—large quantities of unpackaged goods, such as coal or grain—is transferred from one mode of transportation to another (Figure 54.8). Loading and unloading materials can be expensive. If manufacturing is located near a break-of-bulk point, transfer costs are lowered. Figure 54.8 Break-of-bulk point. Some commodities, such as coal, are transported in bulk and must be transferred from one mode of transportation another. Here, coal is unloaded from a barge to a hopper (the funnel-like container at left) at a coal port. Industries needing coal sometimes locate near such break-of-bulk points. Let’s take the case of iron ore mined in Minnesota. It is loaded onto ships in Lake Superior ports. When the ships come into port in Gary, Indiana, on the shore of Lake Michigan, the ore has to be unloaded and transferred to railroad cars. Therefore, locating manufacturing near the Gary port makes sense, because the Gary location saves additional transportation costs. The U.S. Steel Corporation built what was then the world’s largest steelmaking factory there in the early 1900s. Labor Labor costs are often a key component of overall production costs. Therefore, many companies seek to locate in areas with relatively low wages. Often, companies can pay low wages in a peripheral area with low education levels and high rates of unemployment. For example, the center of textile manufacturing in the United States moved in the early twentieth century from the high-wage manufacturing core in the northeastern states, such as Vermont and Massachusetts, to the low-wage states of the South, such as Georgia and South Carolina. In contrast, for manufacturing processes that require a specialized, skilled workforce, labor availability may be more important than wage rates. For example, high-tech companies, such as those in software development, require a pool of highly educated workers. Companies must bear the costs of higher wages in order to attract the skilled workers they need. Markets Delivery of goods to markets is technically a post production cost, but it still affects overall costs and business profits. As a general rule, manufacturing is located near its consumer base, whether those consumers are other firms or individual people. That choice of location minimizes the costs of transporting goods from the factory to consumers. However, lower transportation costs must be weighed against other costs, such as those for labor or energy sources. Transportation Last but not least, transportation costs and availability are important considerations. Transportation access, whether in the form of ports, waterways, or railroads, helped to determine the key locations of the Industrial Revolution. Since then, transportation innovations have allowed businesses to make manufacturing location decisions on a global scale. Let’s take a look at two of the most important transportation innovations. Beginning in the 1950s, jet planes were specially designed to carry large cargo. All passenger amenities were removed, fuselages were enlarged, and one or two large cargo doors were installed. For materials and goods with high value-to-weight ratios, the use of cargo jets can be cost effective (Figure 54.9). Today, over one-third of the value of all the world’s trade is shipped by air. Thus, manufacturing locations near international airports are desirable for some industries. Figure 54.9 Cargo jet loading. Cargo jets have given companies more options for locating manufacturing. Today, over one-third of the world’s trade is shipped by air. Shipping containers are another transportation innovation. Shipping containers are standardized, stackable, intermodal (that is, they can be used with different transport modes) metal boxes used to transport goods by ship, railroad, or truck. Prior to the international standardization of container dimensions, most goods were stored, loaded, shipped, and transferred as individual items—a slow, labor-intensive, and costly process. Today, truck beds, railroad cars, and ship cargo holds everywhere in the world are designed to haul identical containers. The world’s seaports are mechanized with giant cranes that lift containers off ships and directly onto truck beds and railroad cars to be moved to their next destinations (Figure 54.10). Today, 90 percent of the world’s non-bulk cargo is transported in containers. Figure 54.10 Transferring shipping containers. Containerization has greatly accelerated the delivery of goods worldwide by simplifying the transfer from one transportation mode to another. Here, a shipping container is loaded on to a trailer at a seaport. Containerization, the system of intermodal freight transport using shipping containers, is a simple technology that altered the logic of manufacturing location. It allowed firms to move manufacturing to peripheral economies, helping to give rise to the semi-periphery. Usually, two or more potential manufacturing locations will have different sets of advantages and disadvantages. Business managers must weigh these differences carefully in order to make the best decision. Least-Cost Theory One of the earliest and best-known theories of manufacturing location is Alfred Weber’s least-cost theory. Weber, a German economist, based his theory on his real-life observations of early industrialization in Europe. He set out to create a general theory to explain the spatial patterns he saw. Weber created an abstract model called the location triangle. The points of the triangle consisted of two locations for materials sources and one market location (Figure 54.11). He reasoned that manufacturing would be located at the spot offering the lowest costs of transportation. He began with two key variables, distance and weight. Specifically, he examined distances from the manufacturing location to the two materials sources and the market, and he considered the weight of material inputs relative to the weight of the manufactured goods. Transportation cost, he argued, was the key to the location chosen for manufacturing. The heavier the load and the greater the distance moved, the higher the costs. Figure 54.11 Weber’s location triangle. Economist Alfred Weber created this model to illustrate how firms make manufacturing location decisions. It represents a situation in which a factory needs access to two materials sources and one market. In this diagram, which costs more: transportation of raw materials to the factory or transportation of finished goods from the factory to the market? He next imagined two cases. In the first case, the weight of the final product is less than the weight of the raw material used in manufacturing the product. In the second case, the weight of the final product is greater than the weight of the raw material. In the first case, the heavier (costlier) load to be transported is the raw material. Weber theorized that firms would, in that case, choose locations closer to the material’s source. In the second case, the heavier load is the finished product. Weber reasoned that locations closer to the market would be chosen. The case of soft-drink bottling factories illustrates how well this model can work. Bottling plants will tend to be located nearer markets, because the main input, water, can be widely sourced, while the unit weight of the final product is quite high (Figure 54.12). Figure 54.12 Bottling plant locations in Georgia. Referencing least-cost theory, how do you explain the near-even spatial distribution of soft-drink bottling plant locations in Georgia? Cities and urban areas on the map are Dalton, along the northern border; Atlanta, in the northwest portion of the state; Athens, slightly east of Atlanta; Augusta, along the eastern border with South Carolina; Macon, south of Atlanta; LaGrange and Columbus, along the western border with Alabama; Savannah, Brunswick, and St. Marys, along the Atlantic coast, and Albany, Bainbridge, Thomasville, Americus, Tifton, Valdosta, and Waycross in the southern part of the state. Interstate highways 75, 85, and 20 run through Atlanta and radiate out through the rest of the state. Interstate 16 connects Macon to Savannah, and Interstate 95 runs along with the Atlantic coast from Savannah to St. Marys. Other divided highways crisscross the state. Thirty bottling or distribution facilities are marked. All are located next to an interstate or divided highway. While least-cost theory considers the importance of different production costs in choosing a manufacturing location, economic geographers have noted its limitations. First, the model is an abstraction that does not represent real-world conditions. Second, it assumes that decision makers have perfect knowledge of all possible factors, which, again, is not the case in the real world. Finally, transportation costs, while significant, are less important today than other production costs, such as labor, especially for high-skilled manufacturing and services. The mix of economic sectors in countries’ economies provides a window into geographically uneven development. Specifically, we can see how core-periphery relationships develop at multiple scales. We can also see how the location of manufacturing has shifted over time as national economies evolve. In the next Module, we’ll apply what we have learned here to the problem of measuring development among the world’s nation-states. The concept of economic development has a relatively short history. It emerged after World War II over concern about low living standards in many world regions. Subsequently, scholars established theories to explain why certain countries have or have not developed. Economist Walter W. Rostow formulated one of the earliest and most influential models of economic development. His suggested that all countries will inevitably progress in similar fashion through the same five development stages, all ending in wealthy, mass-consumption societies (Figure 55.1). Figure 55.1 Rostow’s stages of economic growth. Which countries today appear to be at stage 4 of the model? In the graph, the vertical axis represents development and the horizontal axis represents time. Neither contains any measurements. The graph begins with stage 1 at the beginning of time and near the beginning of development, and moves up and to the right at a 45-degree angle. Stage 1, traditional society, is characterized by subsistence, barter, and agriculture. Stage 2, transitional stage, is characterized by specialization, surpluses, and infrastructure. Stage 3, take off, is characterized by industrialization, investment, regional growth, and political change. Stage 4, drive to maturity, is characterized by diversification, innovation, and less reliance on imports. Stage 5, traditional society, is characterized by high mass consumption, consumer durable goods flourish, and the service sector becoming dominant. Rostow compared the development process to an airplane leaving the gate, taxiing the runway, taking off, and ultimately flying high. The first stage, which he labeled “traditional” economy, is based on agriculture and extraction. This stage is followed by four more stages characterized by increasing technological innovation and economic diversification. Rostow viewed the fifth and final stage, which he called the “age of high mass consumption,” as characteristic of economies in the United States and western Europe. In Rostow’s model, geographically uneven development exists because national economies are simply at different stages along the same flight path. Eventually, however, all countries will reach the cruising altitude of high levels of mass consumption. Rostow’s model has faced criticism because it suggests that countries and regions proceed along the development path in isolation from one another. But, as we’ve seen, different countries and their economies are not independent, but interlinked in complex ways. If one country’s economy is based on secondary and tertiary sector activities, for example, it needs other countries to supply its raw materials. The model also assumes that all economies will develop without obstacles from other countries, which is rarely true. Under imperialism, we noted, industrialized countries actively suppressed industrialization in other regions. An alternative to Rostow’s model is world systems theory, developed by the historical sociologist Immanuel Wallerstein. World systems theory regards world history as moving through a series of socioeconomic systems, culminating in the modern world system by about the year 1900. The modern world system is our current interdependent, capitalist world economy rooted in nation-state economies. World systems theory employs the core-periphery-semi-periphery model (see Module 54) on a world-historical scale. Core world regions are those that industrialized first, principally western Europe, North America, and Japan (Figure 55.2). They have the most advanced industrial technologies, the most complex manufacturing systems, and the highest levels of consumption. The periphery is composed of countries with economies focused mostly on agriculture and extraction and with low levels of consumption. In addition, Wallerstein recognized the existence of the semi-periphery, which plays a key role in mediating politically and economically between the core and periphery. Figure 55.2 The world systems model: core, periphery, semi-periphery. What geographic patterns can you identify in the locations of core, periphery, and semi-periphery countries in the world systems model? The map is titled World Economic Systems Theory. Countries identified as core are Canada, the United States, Australia, New Zealand, Japan, and most of Western Europe. Countries identified as semi-periphery are Mexico, Brazil, Argentina, Uruguay, Venezuela, Egypt, Nigeria, Senegal, South Africa, Saudi Arabia, Israel, Iceland, Portugal, Eastern Europe, India, China, and Russia. Countries identified as periphery are all of Central America, remaining countries of South America and Africa, most of western Asia and Southeast Asia, North Korea, and Indonesia. An arc-shaped arrow points from North America to Russia, at the top, and a second arc-shaped arrow points from Asia back to the Americas at the bottom. Unlike Rostow’s model, world systems theory suggests that countries do not inevitably march through a set of development stages. Rather, over time, regions have been incorporated into the world economy through imperialism and colonialism, creating interdependent but unequal relationships among them. The world system is constructed on an international division of labor in which the periphery’s labor force is found mostly in the primary sector. The core’s labor force is found in the tertiary and above sectors, and the semi-periphery’s labor force works in a mix of primary, secondary, and tertiary sectors. World systems theory is dynamic, recognizing that a country’s status can change over time in either direction. According to Wallerstein, the economies enjoying high levels of mass consumption historically exploited the cheap natural and human resources of less-developed regions to enrich themselves. In other words, core regions actively underdeveloped other regions and countries in the process of advancing and maintaining their superior economic positions. World systems theory has been criticized primarily due to its global scale of analysis. As a sweeping, centuries-spanning explanation of the world economy, it necessarily glosses over the complexities of development at regional and local scales. Thus, world systems theory is most useful at a global scale, and less useful at subregional and subnational scales. An alternative to Rostow’s model is world systems theory, developed by the historical sociologist Immanuel Wallerstein. World systems theory regards world history as moving through a series of socioeconomic systems, culminating in the modern world system by about the year 1900. The modern world system is our current interdependent, capitalist world economy rooted in nation-state economies. World systems theory employs the core-periphery-semi-periphery model (see Module 54) on a world-historical scale. Core world regions are those that industrialized first, principally western Europe, North America, and Japan (Figure 55.2). They have the most advanced industrial technologies, the most complex manufacturing systems, and the highest levels of consumption. The periphery is composed of countries with economies focused mostly on agriculture and extraction and with low levels of consumption. In addition, Wallerstein recognized the existence of the semi-periphery, which plays a key role in mediating politically and economically between the core and periphery. Figure 55.2 The world systems model: core, periphery, semi-periphery. What geographic patterns can you identify in the locations of core, periphery, and semi-periphery countries in the world systems model? The map is titled World Economic Systems Theory. Countries identified as core are Canada, the United States, Australia, New Zealand, Japan, and most of Western Europe. Countries identified as semi-periphery are Mexico, Brazil, Argentina, Uruguay, Venezuela, Egypt, Nigeria, Senegal, South Africa, Saudi Arabia, Israel, Iceland, Portugal, Eastern Europe, India, China, and Russia. Countries identified as periphery are all of Central America, remaining countries of South America and Africa, most of western Asia and Southeast Asia, North Korea, and Indonesia. An arc-shaped arrow points from North America to Russia, at the top, and a second arc-shaped arrow points from Asia back to the Americas at the bottom. Unlike Rostow’s model, world systems theory suggests that countries do not inevitably march through a set of development stages. Rather, over time, regions have been incorporated into the world economy through imperialism and colonialism, creating interdependent but unequal relationships among them. The world system is constructed on an international division of labor in which the periphery’s labor force is found mostly in the primary sector. The core’s labor force is found in the tertiary and above sectors, and the semi-periphery’s labor force works in a mix of primary, secondary, and tertiary sectors. World systems theory is dynamic, recognizing that a country’s status can change over time in either direction. According to Wallerstein, the economies enjoying high levels of mass consumption historically exploited the cheap natural and human resources of less-developed regions to enrich themselves. In other words, core regions actively underdeveloped other regions and countries in the process of advancing and maintaining their superior economic positions. World systems theory has been criticized primarily due to its global scale of analysis. As a sweeping, centuries-spanning explanation of the world economy, it necessarily glosses over the complexities of development at regional and local scales. Thus, world systems theory is most useful at a global scale, and less useful at subregional and subnational scales. Throughout this Unit, we’ve seen the importance of raw material inputs for industrialization. These raw materials are often called commodities. As we first learned in Module 38, a commodity is a primary agricultural product or raw material that is bought, sold, and traded. For example, oil, gold, cobalt, coffee, and cotton are commodities that are bought and sold in global commodities markets. Geographers have noted a relationship between economic development levels and an overreliance on commodity exports for revenue. As defined by the United Nations, commodity dependence occurs when commodities account for more than 60 percent of the value of a country’s total exports. The relationship between commodity dependence and economic development results from the observation of real-world data. The central observation is this: commodity dependence is linked to underdevelopment. Commodity dependence occurs in over half of the world’s economies, and almost exclusively in developing countries (Figure 55.3). Figure 55.3 Commodity dependence. How do the geographic patterns in this figure compare with those of Figure 55.2? In other words, can you find overlap between commodity dependence and a country’s position in the core-periphery-semi-periphery? The map is titled Commodity dependence: Commodity export value as a share of merchandise export value (percent). Countries with commodity dependence of 80 to 100 percent are Guyana, Venezuela, Colombia, Ecuador, Peru, Chile, Bolivia, and Paraguay in South America; nearly all of Africa and the Arabian Peninsula, Mongolia, Myanmar, and Papua New Guinea. Countries with commodity dependence of 60 to 79 percent are Guatemala, Brazil, Argentina, and Suriname in Central and South America; Niger, Senegal, Liberia, Togo, Namibia, Kenya, and Madagascar in Africa; and Syria, Iran, Afghanistan, and North Korea in Asia. Countries with 40 to 59 percent of commodity dependence are Cuba, Haiti, Dominican Republic, Honduras, Nicaragua, Egypt, South Africa, India, and Indonesia. Countries with 20 to 39 percent of commodity dependence are Morocco, Western Sahara, Turkey, Pakistan, Nepal, Myanmar, Vietnam, Thailand, and Malaysia. Countries with zero to 19 percent of commodity dependence are Mexico, China, and Cambodia. Other countries not mentioned are not included in the report. How do we explain the close association between underdevelopment and commodity dependence? First, commodity prices on the global market are not stable. Rather, they are subject to sudden and extreme fluctuation. Therefore, a commodity-dependent country’s export revenue stream is unpredictable. Second, in the long term, commodity prices tend to decrease. For these reasons, it is difficult to build a strong economy on the basis of commodity exports. Decades of evidence indicate that commodity dependence rarely leads to economic growth. To identify a country’s level of development, it is often helpful to measure the size of the country’s economy. Common measures include gross national product, gross domestic product, and gross national income. Gross National Product (GNP) Measures of the size of a country’s economy need to account for the fact that businesses’ and residents’ productive activities often occur in more than one country. Gross national product (GNP), measures the total value of all the goods and services made by a country’s residents and businesses in a specific time period regardless of the location in which they were made. For example, if you are a citizen of Canada who owns a business in France, the value of what you produce in France counts toward Canada’s GNP, not France’s. GNP does not count value produced within a country by foreign residents or businesses. Gross Domestic Product (GDP) GNP is not the best indicator of a country’s economic health. Rather, gross domestic product is the more appropriate measure. Gross domestic product (GDP) is the value of all goods and services produced in a country over a specific period, regardless of the producer’s national origin. In other words, while GNP extends beyond a country’s territorial boundaries to include overseas investments and activities, GDP is confined to the value produced only within a country’s boundaries (Figure 55.4). Figure 55.4 Gross domestic product. What regional patterns of economic output can you identify in this map? Regions with G D P above 2000 billion: United States, Brazil, United Kingdom, France, Germany, India, and China. Regions with G D P between 500 and 1999 billion: Canada, Mexico, Argentina, Spain, Italy, Switzerland, Poland, Sweden, Russia, Turkey, Saudi Arabia, South Korea, Sumatra, Java, Indonesia, Timor-Leste, and Australia. Regions with G D P between 200 and 499 billion: Chile, Peru, Colombia, South Africa, Nigeria, Egypt, Ireland, Portugal, Denmark, Norway, Finland, Luxembourg, Czech Republic, Austria, Greece, Romania, Iran, Afghanistan, Bangladesh, Thailand, Malaysia, Brunei, and Vietnam. Regions with G D P between 50 and 199 billion: El Salvador, Dominican Republic, Ecuador, Uruguay, Morocco, Algeria, Libya, Sudan, Ethiopia, Kenya, Tanzania, Angola, Bulgaria, Belarus, Ukraine, Croatia, Slovakia, Hungary, Iraq, Oman, Kazakhstan, Myanmar, and Sri Lanka. Regions with G D P between 10 and 49 billion: El Salvador, Nicaragua, Honduras, Bolivia, Paraguay, Senegal, Mali, Guinea, Guinea-Bissau, Burkina Faso, Cote d’Ivoire, Chad, Cameroon, Equatorial Guinea, the Democratic Republic of the Congo, Zambia, Namibia, Botswana, Zimbabwe, Mozambique, Madagascar, Slovenia, Croatia, Albania, Cyprus, Georgia, Azerbaijan, Armenia, Afghanistan, Turkmenistan, Uzbekistan, Laos, Mongolia, Nepal, and Papua New Guinea. Regions with G D P below 10 billion: Suriname, Guyana, The Gambia, Sierra Leone, Cote d’Ivoire, Mauritania, Togo, Benin, Ghana, Niger, Congo, Central African Republic, Somalia, Rwanda, Malawi, Swaziland, Lesotho, Serbia, Bosnia and Herzegovina, Moldova, Tajikistan, Kyrgyzstan, and Bhutan. Remaining regions: No data available. Gross National Income (GNI) Some international institutions use gross national income as the preferred measure of economic development. Gross national income (GNI) is the total income of a country’s residents and businesses, including investment income, regardless of where it was earned, as well as money received from abroad, such as direct foreign investment and development aid. In other words, it measures total income rather than the total value of goods and services produced. GNI is a more accurate measure of the economic health of countries that receive significant foreign direct investment or foreign aid—a group that includes many developing countries. It is more accurate because it counts actual available income within a national economy, which GDP misses. Refining Gross Economic Measures The map in Figure 55.4 shows the vast disparities in GDP from country to country. What do those differences really mean? In fact, not much can be inferred from GDP numbers except that some countries produce more total goods and services than other countries do. For instance, Brazil’s GDP is the ninth largest in the world, approximately 10 times larger than New Zealand’s. Is the average Brazilian 10 times richer or 10 times more productive than the average New Zealander? Not at all. New Zealand’s population is only about 2 percent of Brazil’s. So it is understandable that the far more populous Brazil can produce more total goods and services in a year than New Zealand can. To account for differences in population, it is common to divide GDP by the national population, which gives the GDP per capita. GDP per capita is a country’s GDP divided by its total population. GDP per capita provides one way of comparing how wealthy or poor the “average” Brazilian or New Zealander may be. In our example, New Zealand’s GDP per capita—which in 2018 was $41,966—was much larger than Brazil’s at $8920. Figure 55.5 shows GDP per capita figures globally. Figure 55.5 Gross domestic product per capita. What differences can you identify between this map and the map of GDP (Figure 55.4)? Above 40,000 U.S. dollars: United States, Canada, Greenland, Norway, Sweden, Finland, Denmark, Iceland, Ireland, Germany, Netherlands, Belgium, Luxembourg, Switzerland, Austria, Israel, U A E, Australia, and New Zealand. Between 20,000 and 39,999 U.S. dollars: South Korea, Japan, Saudi Arabia, United Kingdom, Portugal, Spain, France, Italy, Slovenia, and the Czech Republic. Between 10,000 and 19,999 U.S. dollars: Panama, Costa Rica, Argentina, Chile, Uruguay, Oman, Turkey, Greece, Slovakia, Hungary, Croatia, Estonia, Latvia, Lithuania, and Russia. Between 5,000 and 9,999 U.S. dollars: Mexico, Cuba, Dominican Republic, Venezuela, Colombia, Ecuador, Peru, Brazil, Suriname, South Africa, Namibia, Botswana, Gabon, Equatorial Guinea, Libya, Iraq, Iran, Bulgaria, Bosnia and Herzegovina, Serbia, Croatia, Macedonia, Belarus, Iraq, Iran, Turkmenistan, Kazakhstan, China, Thailand, Malaysia, and Brunei. Between 2,000 and 4,999 U.S. dollars: Bolivia, Paraguay, Guyana, Guatemala, El Salvador, Nicaragua, Honduras, Angola, Algeria, Morocco, Egypt, Sudan, Jordan, Azerbaijan, Armenia, Georgia, Moldova, Ukraine, Mongolia, Nepal, Vietnam, Laos, Sumatra, Java, Indonesia, Philippine, and Timor-Leste. Below 2000 U.S. dollars: Madagascar, Mozambique, Zimbabwe, Zambia, Congo, Tanzania, the Democratic Republic of the Congo, Uganda, Kenya, Somalia, Rwanda, Malawi, Central African Republic, South Sudan, Ethiopia, Eritrea, Yemen, Mali, Niger, Chad, Mauritania, Senegal, The Gambia, Guinea, Guinea-Bissau, Sierra Leone, Liberia, Cyprus, Cote d’Ivoire, Burkina Faso, Ghana, Togo, Benin, Nigeria, Cameroon, Syria, Uzbekistan, Kyrgyzstan, Tajikistan, Afghanistan, Pakistan, India, Nepal, Bangladesh, Myanmar, Cambodia, and North Korea. No data is available in the rest of the regions. Another problem with GDP and GNP is that they don’t account for differences in currency value from one country to the next. Economists developed the purchasing power parity theory to account for these differences. Purchasing power parity (PPP) measures how much a common “basket of goods” costs locally in the currency of each country being compared. PPP begins with a set of commonly purchased goods and services (the “basket of goods”) and then uses currency exchange rates to compare the price of that basket in different locations (Figure 55.6). Figure 55.6 Accounting for purchasing power. What are the advantages of using PPP instead of GDP per capita as a measure of development? The map shows purchasing power parity in U.S. dollars. More than 45,000: United States, Canada, Norway, Sweden, Finland, Denmark, Iceland, United Kingdom, France, Netherlands, Belgium, Germany, and Austria. 17,000 to 44,999: Mexico, Panama, Argentina, Chile, Uruguay, Libya, Gabon, Spain, Portugal, Italy, Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Romania, Bulgaria, Hungary, Slovenia, Greece, Turkey, Syria, Jordan, Israel, Iraq, Iran, Oman, Turkmenistan, Kazakhstan, Russia, Thailand, Malaysia, and New Zealand. 10,000 to 16,999: Costa Rica, Brazil, Peru, Ecuador, Colombia, Suriname, Egypt, Algeria, Namibia, South Africa, Zimbabwe, Botswana, Lesotho, China, Mongolia, and Indonesia. 6,000 to 9,999: Belize, Guatemala, Guyana, Bolivia, Paraguay, Morocco, Angola, Ukraine, Moldova, Uzbekistan, India, Bhutan, Laos, and Vietnam. 4000 to 5999: Honduras, Nicaragua, Cuba, Ghana, Nigeria, Sudan, Pakistan, Nepal, Bangladesh, Myanmar, and Papua New Guinea. 1000 to 3999: Mauritania, Mali, Senegal, Guinea Bissau, Guinea, Cote d’Ivoire, Burkina Faso, Togo, Benin, Cameroon, Chad, South Sudan, Ethiopia, Eritrea, Kenya, Tanzania, Malawi, Mozambique, Zambia, Madagascar, Yemen, Afghanistan, Tajikistan, Kyrgyzstan, and Cambodia. Less than 1000: Haiti, Niger, Liberia, Central African Republic, the Democratic Republic of the Congo, and Uganda. All other countries: no data reported. To identify a country’s level of development, it is often helpful to measure the size of the country’s economy. Common measures include gross national product, gross domestic product, and gross national income. Gross National Product (GNP) Measures of the size of a country’s economy need to account for the fact that businesses’ and residents’ productive activities often occur in more than one country. Gross national product (GNP), measures the total value of all the goods and services made by a country’s residents and businesses in a specific time period regardless of the location in which they were made. For example, if you are a citizen of Canada who owns a business in France, the value of what you produce in France counts toward Canada’s GNP, not France’s. GNP does not count value produced within a country by foreign residents or businesses. Gross Domestic Product (GDP) GNP is not the best indicator of a country’s economic health. Rather, gross domestic product is the more appropriate measure. Gross domestic product (GDP) is the value of all goods and services produced in a country over a specific period, regardless of the producer’s national origin. In other words, while GNP extends beyond a country’s territorial boundaries to include overseas investments and activities, GDP is confined to the value produced only within a country’s boundaries (Figure 55.4). Figure 55.4 Gross domestic product. What regional patterns of economic output can you identify in this map? Regions with G D P above 2000 billion: United States, Brazil, United Kingdom, France, Germany, India, and China. Regions with G D P between 500 and 1999 billion: Canada, Mexico, Argentina, Spain, Italy, Switzerland, Poland, Sweden, Russia, Turkey, Saudi Arabia, South Korea, Sumatra, Java, Indonesia, Timor-Leste, and Australia. Regions with G D P between 200 and 499 billion: Chile, Peru, Colombia, South Africa, Nigeria, Egypt, Ireland, Portugal, Denmark, Norway, Finland, Luxembourg, Czech Republic, Austria, Greece, Romania, Iran, Afghanistan, Bangladesh, Thailand, Malaysia, Brunei, and Vietnam. Regions with G D P between 50 and 199 billion: El Salvador, Dominican Republic, Ecuador, Uruguay, Morocco, Algeria, Libya, Sudan, Ethiopia, Kenya, Tanzania, Angola, Bulgaria, Belarus, Ukraine, Croatia, Slovakia, Hungary, Iraq, Oman, Kazakhstan, Myanmar, and Sri Lanka. Regions with G D P between 10 and 49 billion: El Salvador, Nicaragua, Honduras, Bolivia, Paraguay, Senegal, Mali, Guinea, Guinea-Bissau, Burkina Faso, Cote d’Ivoire, Chad, Cameroon, Equatorial Guinea, the Democratic Republic of the Congo, Zambia, Namibia, Botswana, Zimbabwe, Mozambique, Madagascar, Slovenia, Croatia, Albania, Cyprus, Georgia, Azerbaijan, Armenia, Afghanistan, Turkmenistan, Uzbekistan, Laos, Mongolia, Nepal, and Papua New Guinea. Regions with G D P below 10 billion: Suriname, Guyana, The Gambia, Sierra Leone, Cote d’Ivoire, Mauritania, Togo, Benin, Ghana, Niger, Congo, Central African Republic, Somalia, Rwanda, Malawi, Swaziland, Lesotho, Serbia, Bosnia and Herzegovina, Moldova, Tajikistan, Kyrgyzstan, and Bhutan. Remaining regions: No data available. Gross National Income (GNI) Some international institutions use gross national income as the preferred measure of economic development. Gross national income (GNI) is the total income of a country’s residents and businesses, including investment income, regardless of where it was earned, as well as money received from abroad, such as direct foreign investment and development aid. In other words, it measures total income rather than the total value of goods and services produced. GNI is a more accurate measure of the economic health of countries that receive significant foreign direct investment or foreign aid—a group that includes many developing countries. It is more accurate because it counts actual available income within a national economy, which GDP misses. Refining Gross Economic Measures The map in Figure 55.4 shows the vast disparities in GDP from country to country. What do those differences really mean? In fact, not much can be inferred from GDP numbers except that some countries produce more total goods and services than other countries do. For instance, Brazil’s GDP is the ninth largest in the world, approximately 10 times larger than New Zealand’s. Is the average Brazilian 10 times richer or 10 times more productive than the average New Zealander? Not at all. New Zealand’s population is only about 2 percent of Brazil’s. So it is understandable that the far more populous Brazil can produce more total goods and services in a year than New Zealand can. To account for differences in population, it is common to divide GDP by the national population, which gives the GDP per capita. GDP per capita is a country’s GDP divided by its total population. GDP per capita provides one way of comparing how wealthy or poor the “average” Brazilian or New Zealander may be. In our example, New Zealand’s GDP per capita—which in 2018 was $41,966—was much larger than Brazil’s at $8920. Figure 55.5 shows GDP per capita figures globally. Figure 55.5 Gross domestic product per capita. What differences can you identify between this map and the map of GDP (Figure 55.4)? Above 40,000 U.S. dollars: United States, Canada, Greenland, Norway, Sweden, Finland, Denmark, Iceland, Ireland, Germany, Netherlands, Belgium, Luxembourg, Switzerland, Austria, Israel, U A E, Australia, and New Zealand. Between 20,000 and 39,999 U.S. dollars: South Korea, Japan, Saudi Arabia, United Kingdom, Portugal, Spain, France, Italy, Slovenia, and the Czech Republic. Between 10,000 and 19,999 U.S. dollars: Panama, Costa Rica, Argentina, Chile, Uruguay, Oman, Turkey, Greece, Slovakia, Hungary, Croatia, Estonia, Latvia, Lithuania, and Russia. Between 5,000 and 9,999 U.S. dollars: Mexico, Cuba, Dominican Republic, Venezuela, Colombia, Ecuador, Peru, Brazil, Suriname, South Africa, Namibia, Botswana, Gabon, Equatorial Guinea, Libya, Iraq, Iran, Bulgaria, Bosnia and Herzegovina, Serbia, Croatia, Macedonia, Belarus, Iraq, Iran, Turkmenistan, Kazakhstan, China, Thailand, Malaysia, and Brunei. Between 2,000 and 4,999 U.S. dollars: Bolivia, Paraguay, Guyana, Guatemala, El Salvador, Nicaragua, Honduras, Angola, Algeria, Morocco, Egypt, Sudan, Jordan, Azerbaijan, Armenia, Georgia, Moldova, Ukraine, Mongolia, Nepal, Vietnam, Laos, Sumatra, Java, Indonesia, Philippine, and Timor-Leste. Below 2000 U.S. dollars: Madagascar, Mozambique, Zimbabwe, Zambia, Congo, Tanzania, the Democratic Republic of the Congo, Uganda, Kenya, Somalia, Rwanda, Malawi, Central African Republic, South Sudan, Ethiopia, Eritrea, Yemen, Mali, Niger, Chad, Mauritania, Senegal, The Gambia, Guinea, Guinea-Bissau, Sierra Leone, Liberia, Cyprus, Cote d’Ivoire, Burkina Faso, Ghana, Togo, Benin, Nigeria, Cameroon, Syria, Uzbekistan, Kyrgyzstan, Tajikistan, Afghanistan, Pakistan, India, Nepal, Bangladesh, Myanmar, Cambodia, and North Korea. No data is available in the rest of the regions. Another problem with GDP and GNP is that they don’t account for differences in currency value from one country to the next. Economists developed the purchasing power parity theory to account for these differences. Purchasing power parity (PPP) measures how much a common “basket of goods” costs locally in the currency of each country being compared. PPP begins with a set of commonly purchased goods and services (the “basket of goods”) and then uses currency exchange rates to compare the price of that basket in different locations (Figure 55.6). Figure 55.6 Accounting for purchasing power. What are the advantages of using PPP instead of GDP per capita as a measure of development? The map shows purchasing power parity in U.S. dollars. More than 45,000: United States, Canada, Norway, Sweden, Finland, Denmark, Iceland, United Kingdom, France, Netherlands, Belgium, Germany, and Austria. 17,000 to 44,999: Mexico, Panama, Argentina, Chile, Uruguay, Libya, Gabon, Spain, Portugal, Italy, Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Romania, Bulgaria, Hungary, Slovenia, Greece, Turkey, Syria, Jordan, Israel, Iraq, Iran, Oman, Turkmenistan, Kazakhstan, Russia, Thailand, Malaysia, and New Zealand. 10,000 to 16,999: Costa Rica, Brazil, Peru, Ecuador, Colombia, Suriname, Egypt, Algeria, Namibia, South Africa, Zimbabwe, Botswana, Lesotho, China, Mongolia, and Indonesia. 6,000 to 9,999: Belize, Guatemala, Guyana, Bolivia, Paraguay, Morocco, Angola, Ukraine, Moldova, Uzbekistan, India, Bhutan, Laos, and Vietnam. 4000 to 5999: Honduras, Nicaragua, Cuba, Ghana, Nigeria, Sudan, Pakistan, Nepal, Bangladesh, Myanmar, and Papua New Guinea. 1000 to 3999: Mauritania, Mali, Senegal, Guinea Bissau, Guinea, Cote d’Ivoire, Burkina Faso, Togo, Benin, Cameroon, Chad, South Sudan, Ethiopia, Eritrea, Kenya, Tanzania, Malawi, Mozambique, Zambia, Madagascar, Yemen, Afghanistan, Tajikistan, Kyrgyzstan, and Cambodia. Less than 1000: Haiti, Niger, Liberia, Central African Republic, the Democratic Republic of the Congo, and Uganda. All other countries: no data reported. To illustrate, let’s consider Switzerland and Australia. Switzerland has a higher GDP per capita than Australia, so we might say its citizens are wealthier. Let’s imagine, however, that the average price of a pair of women’s shoes is $60 in Switzerland and only $20 in Australia. Thus, for the same amount of money, Australians can buy three times as many shoes as the Swiss. Australians, then, have greater purchasing power because they get more for their money. PPP thus implies that Australia’s citizens are wealthier than Switzerland’s. Of course, this illustration greatly simplifies complex national economies. Without sufficient economic resources, societies are unable to provide for their citizens. But is money the only measure of development? Many experts think the main goal of development is to provide an environment that enables all people to enjoy long, healthy, and creative lives. Recognizing the need to consider quality-of-life issues, development specialists have devised various measures of social development. Gender Inequality Index (GII) A common measure of inequality is the United Nations’ Gender Inequality Index. The Gender Inequality Index (GII) is a statistical measure of gender inequality that combines data on reproductive health, empowerment, and labor-market participation (Figure 55.7). Reproductive health is measured by maternal mortality ratio and adolescent birth rates. Empowerment is measured by the proportion of parliamentary seats occupied by women and the proportion of adult females and males aged 25 years and older with at least some secondary education. Labor-market participation gauges the economic status of women and is measured as the labor-force participation rates of female and male populations aged 15 years and older. GII has proved important for revealing gender inequalities within national economies and sparking policy debates. It provides another way to analyze spatial variation in development levels (Figure 55.8). Figure 55.7 Measuring gender inequality. The United Nations created the Gender Inequality Index (GII) to assess how well the benefits of development are being distributed to women. This chart illustrates the data that go into measuring the Gender Inequality Index. Dimensions measured are health, empowerment, and labor market. Indicators for health are maternal mortality ratio and adolescent birth rate. These lead to a dimension index of the female reproductive health index. Indicators for empowerment are female and male population with secondary education and female and male shares of parliamentary seats. These lead to dimension indexes of female empowerment index and male empowerment index. Indicators for labor market are female and male labor forces participation rates. These lead to female labor market and male labor market indexes. The dimension indexes lead to a female gender index and a male gender index, which in turn yields a Gender inequality index (G I I). Figure 55.8 Gender Inequality Index (GII). What spatial patterns can you identify and explain in this map? Gender equality is rated from complete equality at zero to highest, inequality at 0.60 and above. Countries with a G I I of zero to 0.14 are Canada, Japan, South Korea, Australia, New Zealand, those in Western Europe, Poland, Estonia, Lithuania, Belarus, Czech Republic, Croatia, Albania, and Greece. Countries with a G I I of 0.15 to 0.29 are the United States, Uruguay, French Guiana, Libya, Saudi Arabia, Slovakia, Hungary, Slovenia, Bulgaria, Macedonia, Moldova, Serbia, Bosnia and Herzegovina, Montenegro, Kazakhstan, Armenia, Russia, China, Philippines, and Malaysia. Countries with a G I I of 0.30 to 0.39 are Mexico, Cuba, Haiti, Costa Rica, El Salvador, Brazil, Ecuador, Peru, Argentina, Chile, Tunisia, Turkey, Romania, Oman, Uzbekistan, Kyrgyzstan, Vietnam, and Thailand. Countries with a G I I of 0.40 to 0.49 are Dominican Republic, Belize, Guatemala, Honduras, Nicaragua, Panama, Colombia, Venezuela, Guyana, Suriname, Bolivia, Paraguay, Ukraine, Georgia, Azerbaijan, Iran, Jordan, Lebanon, Israel, Egypt, Algeria, Morocco, Western Sahara, Namibia, Zimbabwe, Lesotho, South Africa, Myanmar, Laos, Cambodia, and Indonesia. Countries with a G I I of 0.50 to 0.59 are Senegal, Ghana, Togo, Benin, Cameroon, Gabon, Congo, Angola, Zambia, Mozambique, Tanzania, Kenya, Rwanda, Burundi, Uganda, Ethiopia, Sudan, Syria, Iraq, Afghanistan, Pakistan, India, Bangladesh, and Myanmar. Countries with a G I I of 0.60 and above are Yemen, Mauritania, Mali, Niger, Cote d’Ivoire, Liberia, Chad, Central African Republic, the Democratic Republic of the Congo, Zimbabwe, and Malawi. No data is available for the remaining countries. Like all measures, GII has limitations. Specifically, it does not capture the breadth of gender inequality. For example, empowerment measures include only national parliamentary representation, neglecting local government levels and participation in nongovernmental public life. The labor-market measure does not consider the quality of jobs for women versus men. Nor does it count unpaid labor in caregiving and housekeeping, which fall primarily on women. Despite its drawbacks, GII marks a significant advancement in measuring the unequal distribution of development benefits. Human Development Index (HDI) The World Bank created the Human Development Index as a tool to measure the non-economic aspects of human life. The Human Development Index (HDI) is a statistical measure of human achievement that combines data on life expectancy at birth, education levels (to gauge literacy rates), and GNI per capita (PPP). HDI helps us evaluate how much of a country’s wealth is directed toward individual human achievement and well-being. Two countries with the same GNI per capita, for example, might have very different HDIs. HDI marked an important advancing in measuring development and spatial variation in development levels among nation-states (Figure 55.9). Nevertheless, it does not capture many quality-of-life factors such as individuals’ feelings of security or their sense of personal empowerment. It has little to say about persistent poverty, and it does not measure the existence of inequalities among genders, ethnicities, and the adherents to different religions. We have discussed the most common ways to measure economic and social development. However, national economies and societies are highly complex, and the meaning of development continues to evolve. In closing this Module, let’s look at other measures and considerations important to tracking uneven development. Formal and Informal Economic Sectors Off the books. Black market. Under the table. You may have heard these phrases. They all refer to what economists call the informal sector. The informal sector is the part of any economy that is not officially recorded, monitored, or taxed by the government (Figure 55.10). If you babysit or do yard work and are paid in cash that you don’t report to the government, then you work in the informal sector. Figure 55.10 The informal sector. This market scene from India illustrates the informal economy at work. Such markets are an important part of many developing countries’ economies. Often, market vendors are not registered with the government, and their cash transactions are not recorded. Babysitting and yard work barely cause a ripple in the ocean that is the U.S. economy. But many other countries have a huge informal sector that sometimes rivals the formal sector, which is the part of the economy that is officially recorded with the government. The informal sector draws its workforce from people with little education or formal training. For example, because gender discrimination can make it difficult for women to get an education and enter the formal work force, women often make up the largest portion of the informal-sector work force in developing countries. Entry into the informal sector requires little investment. For example, rather than building a factory with permanent employees, the garment industry in developing countries may pay people off the books to sew in their homes. The informal sector presents problems for measuring levels of development. Because those economic activities are not recorded, they are not included in GDP, GNP, or GNI numbers. Therefore, a country’s economic activity may be significantly underestimated. In addition, while the informal sector may be a big part of the economy, it is not taxed. Therefore, the government has less revenue to build schools, health clinics, and other social institutions that contribute to development goals. Income Distribution We noted previously that per capita measures of GDP allow for comparisons of national economies. However, per capita measures do not reveal income distribution. Income distribution refers to how a country’s total GDP is distributed among the individuals in its population. This is one way to assess economic inequality within countries. Access to Health Care Much harder to define and measure is how people feel about their lives and the opportunities available for self-fulfillment. These opportunities depend on culture and history, and they differ from person to person. One presumably universal measure is our own and our family’s physical and mental health. Access to adequate health care is a widely recognized as a general measure of well-being. But how do we measure the availability of access to health care? The United Nations measures many aspects of it, including reproductive, maternal, newborn, and child health, and the rate of infectious and noninfectious diseases. Reproductive health measures include fertility rates. Newborn health measures include infant mortality rates. Access to health care is measured as both availability (for example, doctors per capita) and affordability (for example, portion of income spent on health care). Fossil Fuel Use and Renewable Energy Another key consideration in measuring development is the link between economic growth and energy consumption. During the Industrial Revolution, fossil fuel consumption jumped as machines replaced human labor. The first industrialized economies had the advantage of supplies that were either domestic or obtained through imperialism. Fossil fuel consumption, then, spurred economic growth. Developing countries today face different situations. If there is no domestic source of fossil fuels, then countries must divert hard-earned revenue to buy them on the international market. Developing countries with a domestic source of fuel are in a better economic position, though they often have to pay foreign companies to extract and refine the oil. In both cases, there are negative environmental effects from fossil fuel use, including higher global levels of global greenhouse gases (see Module 59). There is evidence that the use of renewable energy sources, such as wind, water, and the sun, for industrialization can contribute to economic development. First, for countries without a domestic supply of fossil fuels, the use of renewable resources decreases the cost of importing fuels. Second, the establishment of a renewable energy industry can itself stimulate economic growth. In this Module, we explored different theories of development and the many different ways we measure it. We now have a better idea of how industrialization has facilitated higher standards of living for some, while also contributing to geographically uneven development. We have discussed the most common ways to measure economic and social development. However, national economies and societies are highly complex, and the meaning of development continues to evolve. In closing this Module, let’s look at other measures and considerations important to tracking uneven development. Formal and Informal Economic Sectors Off the books. Black market. Under the table. You may have heard these phrases. They all refer to what economists call the informal sector. The informal sector is the part of any economy that is not officially recorded, monitored, or taxed by the government (Figure 55.10). If you babysit or do yard work and are paid in cash that you don’t report to the government, then you work in the informal sector. Figure 55.10 The informal sector. This market scene from India illustrates the informal economy at work. Such markets are an important part of many developing countries’ economies. Often, market vendors are not registered with the government, and their cash transactions are not recorded. Babysitting and yard work barely cause a ripple in the ocean that is the U.S. economy. But many other countries have a huge informal sector that sometimes rivals the formal sector, which is the part of the economy that is officially recorded with the government. The informal sector draws its workforce from people with little education or formal training. For example, because gender discrimination can make it difficult for women to get an education and enter the formal work force, women often make up the largest portion of the informal-sector work force in developing countries. Entry into the informal sector requires little investment. For example, rather than building a factory with permanent employees, the garment industry in developing countries may pay people off the books to sew in their homes. The informal sector presents problems for measuring levels of development. Because those economic activities are not recorded, they are not included in GDP, GNP, or GNI numbers. Therefore, a country’s economic activity may be significantly underestimated. In addition, while the informal sector may be a big part of the economy, it is not taxed. Therefore, the government has less revenue to build schools, health clinics, and other social institutions that contribute to development goals. Income Distribution We noted previously that per capita measures of GDP allow for comparisons of national economies. However, per capita measures do not reveal income distribution. Income distribution refers to how a country’s total GDP is distributed among the individuals in its population. This is one way to assess economic inequality within countries. Access to Health Care Much harder to define and measure is how people feel about their lives and the opportunities available for self-fulfillment. These opportunities depend on culture and history, and they differ from person to person. One presumably universal measure is our own and our family’s physical and mental health. Access to adequate health care is a widely recognized as a general measure of well-being. But how do we measure the availability of access to health care? The United Nations measures many aspects of it, including reproductive, maternal, newborn, and child health, and the rate of infectious and noninfectious diseases. Reproductive health measures include fertility rates. Newborn health measures include infant mortality rates. Access to health care is measured as both availability (for example, doctors per capita) and affordability (for example, portion of income spent on health care). Fossil Fuel Use and Renewable Energy Another key consideration in measuring development is the link between economic growth and energy consumption. During the Industrial Revolution, fossil fuel consumption jumped as machines replaced human labor. The first industrialized economies had the advantage of supplies that were either domestic or obtained through imperialism. Fossil fuel consumption, then, spurred economic growth. Developing countries today face different situations. If there is no domestic source of fossil fuels, then countries must divert hard-earned revenue to buy them on the international market. Developing countries with a domestic source of fuel are in a better economic position, though they often have to pay foreign companies to extract and refine the oil. In both cases, there are negative environmental effects from fossil fuel use, including higher global levels of global greenhouse gases (see Module 59). There is evidence that the use of renewable energy sources, such as wind, water, and the sun, for industrialization can contribute to economic development. First, for countries without a domestic supply of fossil fuels, the use of renewable resources decreases the cost of importing fuels. Second, the establishment of a renewable energy industry can itself stimulate economic growth. In this Module, we explored different theories of development and the many different ways we measure it. We now have a better idea of how industrialization has facilitated higher standards of living for some, while also contributing to geographically uneven development. We can identify a consistent pattern of spatially assigned gender roles. Women are primarily assigned to private, domestic spaces (the household scale), while men are primarily assigned to public spaces (the local, regional, and global scales). As economic development progresses, these stark divisions begin to break down, and women’s roles in society increasingly expand to include participation in all aspects of public life and at multiple spatial scales (Figure 56.2). Figure 56.2 Women in public life. As education rates for girls and women rise with increasing economic growth, traditional gender roles shift. Women begin to participate more fully in public life on equal footing with men. Shown here, Catherine Samba-Panza was elected as Central African Republic’s interim president at the national assembly in Bangui. Geographic Mobility Geographic mobility, one’s relative ability to move through space, is a key measure of individual liberty and privilege. Like many liberties and privileges, women and men experience geographic mobility unevenly. Economic development significantly increases women’s freedom to move about as they become more active in school, employment, and the public sphere. Women’s increased education and participation in the formal workforce increase their geographic mobility. For example, as the U.S. economy grew in the mid-twentieth century, the expansion of the service sector provided new job opportunities for educated women, mostly in clerical and teaching jobs. More recently, in countries such as China and Mexico, the growth of the manufacturing sector provided jobs for young women in the consumer electronics industry, among others. In both cases, it became more socially acceptable for women to move independently between home and workplace. Other changes accompanying economic development have the effect of releasing women from domestic spaces. Historically, the introduction of appliances to the home freed women’s time for increased participation in the paid workforce. Similarly, the widespread availability of electricity in developing countries can reduce women’s domestic labor time, allowing them to work at paid jobs. Empowerment and Political Participation Higher education rates for women are associated with more participation in civic life, whether in community organizations or formal political institutions. Women’s greater presence in public spaces is related to women’s increasing ability to make choices and participate in societal decision making. A simple way to measure women’s participation in civic life is to calculate the proportion of women represented in national parliaments (Figure 56.3). However, the simplicity of this measure is also its main shortcoming: it does not account for many other forms of public and political engagement. Other measures, such as the United Nations’ Gender Empowerment Measure, try to create a broader description of empowerment. The Gender Empowerment Measure (GEM) is a measurement of gender equality that includes the proportion of seats held by women in national parliaments, the percentage of women in economic decision-making positions (for example, in administrative and professional careers), and women’s versus men’s share of earned income (Figure 56.4). Figure 56.3 Women in parliament. What factors account for the proportion of female participation in political life? In which world regions do women hold the highest proportion of seats in national parliaments? The map is titled Women in Parliament. Countries with 40 percent and more female participation are Mexico, Nicaragua, Costa Rica, Cuba, Ecuador, Bolivia, Argentina, French Guiana, Spain, Norway, Sweden, Finland, Denmark, Ethiopia, Senegal, Tanzania, Mozambique, Namibia, South Africa, Lesotho, and New Zealand. Countries with 30 to 39.9 percent female participation are Peru, Guyana, Greenland, Iceland, United Kingdom, France, Portugal, Belgium, Netherlands, Germany, Italy, Austria, Switzerland, Austria, Macedonia, Estonia, Latvia, Belarus, Tunisia, Cameroon, Uganda, Angola, Zimbabwe, Nepal, and Australia. Countries with 20 to 29.9 percent female participation are Canada, the United States, Dominican Republic, Honduras, Venezuela, Suriname, Chile, Uruguay, Ireland, Poland, Lithuania, Czech Republic, Slovakia, Romania, Moldova, Bulgaria, Serbia, Bosnia and Herzegovina, Albania, Croatia, Slovenia, Morocco, Algeria, Mauritania, Guinea, Sudan, South Sudan, Somalia, Kenya. Countries with 0.0 to 19.9 percent female participation are Israel, Iraq, United Arab Emirates, Kazakhstan, Turkey, Belize, Guatemala, Haiti, Panama, Colombia, Bolivia, Ukraine, Slovakia, Greece, Turkey, Lebanon, Syria, Jordan, Saudi Arabia, Kuwait, Yemen, Oman, Egypt, Libya, Chad, Niger, Nigeria, Mali, Liberia, Gambia, Guinea-Bissau, Sierra Leone, Cote d’Ivoire, Ghana, Togo, Benin, Burkina Faso, Central African Republic, Congo, Democratic Republic of the Congo, Gabon, Zambia, Zimbabwe, Botswana, Malawi, Madagascar, Iran, Georgia, Armenia, Azerbaijan, Russia, Uzbekistan, Kyrgyzstan, Tajikistan, Mongolia, India, Bhutan, Myanmar, Thailand, Malaysia, Indonesia, Papua New Guinea, Japan, North Korea, and South Korea. Figure 56.4 Gender Empowerment Measure (GEM). What differences in spatial patterns can you identify between this map and Figure 56.3? The map is titled Gender Empowerment Measure (G E M): Female participation in the power structure of a country. The G E M is above 0.75 in Canada, the United States, Iceland, the United Kingdom, Norway, Sweden, Finland, Denmark, Spain, France, Belgium, the Netherlands, Germany, Austria, Czech Republic, Australia, and New Zealand. The G E M is 0.50 to 0.74 in Cuba, the Dominican Republic, Mexico, Belize, Honduras, Costa Rica, Panama, Venezuela, Ecuador, Peru, Chile, Argentina, Uruguay, Portugal, Italy, Switzerland, Slovenia, Estonia, Latvia, Lithuania, Poland, Slovakia, Hungary, Croatia, Bosnia and Herzegovina, Bulgaria, Greece, Israel, United Arab Emirates Tanzania, Namibia, Botswana, China, South Korea, Japan, Vietnam, and the Philippines. The G E M is 0.25 to 0.49 in Colombia, Brazil, Bolivia, Paraguay, Ukraine, Moldova, Romania, Turkey, Morocco, Egypt, Ethiopia, Oman, Iran, Pakistan, Bangladesh, Nepal, Thailand, Cambodia, and Malaysia. The G E M is below 0.25 in Saudi Arabia and Yemen. No data is available for countries not listed. As Figure 56.3 suggests, the relationship between economic development and women’s political participation is not straightforward. In some developed economies, there are still cultural biases against women’s full participation in politics. For example, in the United States, women are underrepresented in elected offices at all levels of government. In contrast, some developing countries have laws that require more equitable representation of women in elected offices. It is safe to say that economic development, higher rates of education for girls, and delayed marriage are closely associated with and tend to open more opportunities for women’s political participation. Higher rates of women’s participation in political life give women a greater say in public policy matters such as health and education, which can translate into increased future opportunities for girls and women. While the rates of women’s participation in education and the formal workforce are increasing, gender inequalities persist. Many jobs and careers are arbitrarily defined as “men’s work” or “women’s work.” Jobs labeled as women’s work tend to pay less. In this section, we look more closely at the trends in gender parity associated with economic development. Gender parity is a way of documenting progress toward gender equality using measures such as relative access to education, average incomes for women versus men, and workforce participation. “Women’s work” often means unpaid labor at home. The idea that women are responsible for domestic spaces persists in nearly all countries. Globally, experts estimate that women spend more than twice as much time as men in unpaid family care and domestic work. Time spent in unpaid domestic work restricts women’s full participation in the formal workforce. Unpaid domestic work tends to push women toward employment in the informal sector. Informal-sector employment is generally more flexible in terms of both time and place, allowing women to more easily work around their domestic obligations. However, labor conditions are worse than they are in the formal sector, and wages are lower. In many developing economies, women are a large part of the agricultural workforce. As Figure 56.5 suggests, there is a strong relationship between GDP per capita and women’s employment in agriculture. Countries with the lowest GDP per capita tend to have high rates of women working in agriculture. But, as Figure 56.6 shows, countries with the highest and lowest GDPs per capita have the highest rates of women’s participation in the workforce. In the developing countries, women labor mostly in the low-paid or unpaid agricultural workforce. In wealthy countries, women work in higher-paid professional jobs. Countries in the middle range of GDP per capita have the lowest female participation rates. The meaning of men’s versus women’s work varies tremendously, both historically and geographically. In the United States, for example, in the 19th century, clerical work was considered “men’s work”, but now it is considered “women’s work”. In India, it was and still is considered “men’s work.” Such gender divisions are often legally enforced. A recent United Nations report noted that 104 out of 189 countries have laws that code jobs by gender. The manufacturing sector provides a good example of job division by gender. In the first waves of industrialization, manufacturing jobs were “men’s jobs.” Women were viewed as not physically suited for the work. The situation changed briefly in the United States during World War II, when women worked in factories to replace the men who left to fight in the war. Women did the same physically demanding work that men did, such as welding, riveting, and operating heavy equipment (Figure 56.7). After the war, men reclaimed their jobs and women returned (for a time) to the domestic sphere. Figure 56.7 Gendering industrial labor. In the United States, the heavy manual labor of factories was considered men’s work until World War II, when women became the main industrial workforce while the men were off fighting in the war. In contrast to the U.S. experience, new manufacturing sector jobs in developing countries may be considered women’s work—or, in other words, “coded female.” In garment, toy, and electronics assembly factories, women account for nearly three-quarters of the workers. In Mexico, China, Indonesia, and other developing countries, women are viewed as best suited to such manufacturing work. Such employment is a double-edged sword, however. On the one hand, it increases women’s opportunities to participate in the formal workforce and to achieve greater economic independence. On the other hand, these jobs tend to maintain existing gender disparities. Wages are low, working conditions are often repressive, and job security is minimal. There is also pronounced gender disparity at the highest levels of employment. Of the world’s 500 largest corporations, a mere 5 percent are headed by women. In general, in the quaternary and quinary sectors, women are significantly underrepresented. The gender coding of jobs has important consequences for women’s earnings. Jobs coded as men’s work command far higher wages. Even if women find employment in male-coded jobs, their wages are lower than men in the same job. In other words, women consistently earn less than men, regardless of the type of labor they do. The result is a persistent gender pay gap. Depending on the measure used, women earn between 20 and 32 percent less than men worldwide. The degree of gender parity is geographically uneven, with developed countries having smaller pay gaps than developing countries (Figure 56.8). Beyond this broad generalization, there are wide variations. For example, Pakistan’s pay gap is 34 percent, while Kenya’s is 68 percent. Regionally, western Europe is closest to gender parity and North Africa and the Middle East the farthest. In developing countries, most women have far less access to financial services than men do. They do not have savings or checking accounts in banks. They have lower rates of property ownership, which means they lack collateral for securing bank loans to build small businesses. Development economists introduced microcredit as a solution. Development experts have long identified women in developing countries as the “poorest of the poor” and have experimented with policies to help them break the bonds of their poverty. In the 1970s, economists introduced microcredit, a system of giving microloans to women. A microloan is a very small loan to people with little income or collateral intended to help them establish or expand a small business. Economist Muhammad Yunus achieved the most notable successes in Bangladesh; see Subject to Debate: Microloans and Development. For his work there, he received the Nobel Prize. Microcredit programs in Bangladesh and other developing countries provided microloans as small as $150 to help women purchase inventories for shops or supplies and tools for enterprises ranging from beauty salons to commercial flower cultivation (Figure 56.9). Hundreds of stories emerged of women who used their loans to establish profitable small businesses and greatly improve their standards of living. Figure 56.9 Microloans and women’s empowerment. Microloans have provided billions of dollars to millions of poor women in developing economies. Small amounts of credit can go a long way in helping women establish their own businesses and raise their incomes. The results of the initial microcredit programs were so promising that they became a standard component of economic development policy. In 2005, the United Nations declared the Year of Microcredit. By 2015, 125 million people, 80 percent of them women, were receiving billions of dollars in microloans. Despite the apparent success of microcredit, there were also stories of failures, of women struggling to repay microloans and sinking further into poverty. Economists designed several studies to determine the true success rate of microloans. The results were disappointing. None of the studies showed that the average microloan recipient was better off financially than those who did not receive a microloan. SUBJECT TO DEBATE Microloans and Development Preparing for the AP® Exam In the 1970s, an economics professor by the name of Mohammed Yunus was troubled. On the one hand, he was teaching textbook economic theory, while on the other hand, he was surrounded by the poverty and hunger of so many inhabitants of his native Bangladesh. One thing that stood out to Professor Yunus was the difficulty faced by poor people, particularly women, in securing credit. Banks didn’t want to lend to them because they had no assets or credit history. The loan sharks who did lend to women demanded exorbitant interest rates in return. In 1983 Yunus founded the Grameen (“Village”) Bank. The Grameen Bank lends only to those without assets or credit and requires loan recipients to educate their children and establish savings. Yunus himself initially loaned a mere $27, which was enough to erase the debts of 42 individuals. Most of the microloan recipients are women or groups of women, who—far from being credit risks—have very high loan repayment rates. The loans, which average $100, are used to establish small businesses and to lift families out of poverty. In 2006 Yunus was awarded the Nobel Peace Prize; at that time, over 7 million individuals had received loans through the Grameen Bank. Why do microloans efforts like the Grameen Bank focus on women? Research and experience have shown that poor women in developing countries by and large prioritize expenditures on family well-being, including health care, nutrition, and education. Poor men, on the other hand, often spend money on short-term pursuits that do not enhance family well-being, such as leisure activities and alcohol. In addition, women are far more likely than men to repay loans on time and in full and less likely to default. Microloans efforts throughout the developing world challenge the traditional focus of economic development, which emphasizes lending significant sums of money to organizations and governments to finance large-scale projects. Women are typically not well represented in the ranks of formal development organizations or national governments. In some ways, you might think of microloans as a postdevelopment undertaking. Continuing the Debate Consider the debates surrounding microloans, and ask yourself these questions: Do you believe that women are truly better credit risks than men? Why or why not? Microloans are for such small amounts of money—can they really make a difference? Would microloan initiatives work where you live? Thanks to bank loans, this Bangladeshi woman was able to start her own poultry farm. Microloans, however, remain popular and continue to benefit women in many ways. For example, microloans used to pay children’s school fees are a form of investment in the next generation. Microloans can also help women make immediate improvements in their daily lives. A microloan for a new roof, new solar lighting, or a new flock of laying hens might not launch a household out of poverty, but it provides a more comfortable life. Also, improved living conditions can help children increase their performance in school and ultimately land higher-paying jobs. In summary, microloans have improved some women’s lives, raised their standards of living, and even helped some to start successful businesses. They have not, however, proved to be the cure for widespread poverty among women in the developing world. We now better understand how economic development changes women’s roles in society. While higher education and workforce participation rates for women have risen, gender parity is still a distant goal. Microloans can help, but on their own, they are not sufficient. For half a millennium, geographers and economists have tried to answer the question “Why do countries trade with one another?” As the world has changed, so have the explanations for trade. In the sixteenth century, the prevailing theory of trade was mercantilism. According to the theory of mercantilism, each country strives to export more than it imports in order to accumulate wealth (Figure 57.1). Colonialism was central to the mercantilist system as European countries enforced a monopoly on trade with their colonies. Protectionism, trade rules that restrict imports in order to protect domestic industries, was also central to mercantilism. Figure 57.1 Mercantilist Venice. Venice, Italy, depicted here in 1697, was an early center of mercantilist trade. Mercantilism dominated European economic thought from 1500 to 1800. The economist Adam Smith argued in the late eighteenth century that the basis for trade is a country’s absolute advantage. Absolute advantage is a country’s ability to produce a good or service more efficiently than another country. Smith argued against protectionism and in favor of the free movement of traded goods. The market, he reasoned, would direct the flow of trade based on absolute advantage. Economic theorist David Ricardo later argued that one country can have absolute advantage in many goods and services, while other countries have no absolute advantage. In these circumstances, trade would be highly unequal, if it occurred at all. He therefore proposed that trade occurs because of comparative advantage. Comparative advantage is a country’s ability to produce one product much more efficiently than it can produce other products within its economy. According to Ricardo, countries will specialize in industries that have a comparative advantage, exporting their surplus production and importing the goods in which they do not have a comparative advantage. More recent explanations stress complementarity between trading partners. Complementarity is a measure of how well one country’s export profile matches another country’s import profile. A high degree of complementarity can provide the basis for successful trade. Finally, some scholars recognize the emergence of transnational corporations as dominant players in global trade. Economic geographer Peter Dicken defines a transnational corporation (TNC) as a firm with the power to coordinate and control operations in more than one country, even if it does not own those operations (Figure 57.2). Competitive advantage is a firm’s relative ability to outperform other TNCs in its industry. TNCs work to maintain competitive advantage through continuous innovation and upgrading. The importance of international trade to the world economy has increased rapidly under globalization. The world’s gross domestic product (GDP) growth closely matches the increase in world merchandise trade volume. For example, in the 2010s, world exports of goods expanded at an annual average rate of 2.3 percent, about the same as the world’s GDP. Historically, international trade meant trade between countries. Today, trade between countries has been eclipsed by trade between and within TNCs. In fact, TNCs account for roughly two-thirds of world exports. Moreover, most TNC trade occurs within TNCs rather than between different firms. For example, an estimated 50 percent of U.S. trade occurs between affiliates of the same TNC. Those affiliates may be located in different countries because TNCs have invested in production processes that stretch around the globe (see Module 58). Like many other aspects of the world economy, the growth in global trade is geographically uneven. Ten countries account for more than 50 percent of the total world trade in goods and services (Figure 57.3). China is the world’s leader in the trade of goods, while the United States is the leader in commercial services trade (Figure 57.4). Regionally, Asia had the world’s highest export growth over the past decade, while Africa’s exports have declined. Developing economies’ annual growth rates in trade lag behind those of developed countries. Historically, protectionism has reduced the flow of exports and imports. In response, countries came together to reduce the trade barriers that they had built. Neoliberalism displaced protectionism as an economic development strategy. Neoliberalism encompasses a range of pro-market and anti-government positions on the economy, such as reducing government ownership and regulation and promoting privatization and market-based solutions. In the realm of trade, it means promoting free trade by reducing government-erected barriers and deregulating global financial markets. New international trade organizations and new regional trade agreements have emerged alongside the shift to neoliberalism. The United Nations (UN) is the best known of these modern international institutions. In 1944, the UN organized the Monetary and Financial Conference in Bretton Woods, New Hampshire. Its key goal was to create an international regulatory system to promote free trade. The conference produced two new international organizations, the International Monetary Fund and the World Bank. The International Monetary Fund (IMF), now with 189 member countries, seeks to foster global monetary cooperation, achieve financial stability, facilitate international trade, and promote sustainable economic growth. One of its important functions is to provide loans to countries that are so deeply in debt that they cannot get loans from private banks. The World Bank is an international financial institution that provides funding and expertise to promote sustainable economic growth in developing countries (Figure 57.5). Figure 57.5 World Bank headquarters. The World Bank, headquartered in Washington, DC, is one the most important international organizations in the world economy. Among other activities, it directs development aid worldwide, mostly in the form of loans. In a further effort to reduce protectionism and promote free trade, the UN organized the General Agreement on Tariffs and Trade (GATT), a series of international meetings to bring down trade barriers. The final GATT meeting in 1994 established the World Trade Organization (WTO), which now regulates trade among 184 member states, providing a framework for negotiating agreements and resolving trade disputes. Collectively, the IMF, World Bank, and WTO work to stimulate global economic growth, stabilize the global financial system, and promote free trade. They have been central in the movement toward greater globalization. In addition to the global-scale efforts of the IMF, World Bank, and WTO, there have been numerous other initiatives at regional scales. These take various forms, such as free-trade agreements and customs unions. Free-Trade Agreements A free-trade agreement is a treaty between two or more countries that reduces tariffs and promotes foreign investment. Tariffs are taxes (sometimes called duties) on imported goods and services. The tariff is a percentage of the total cost of the product, including shipping, thus raising the price of the imported product. One of best-known free-trade agreements is the 2020 United States-Mexico-Canada Agreement (USMCA) between the United States, Canada, and Mexico, formerly known as the North American Free Trade Agreement (NAFTA). NAFTA eliminated some, but not all, tariffs and trade barriers among the three countries, and it increased international trade volume among all three countries, but unevenly (Figure 57.6). The European Union (EU) has a free-trade agreement at its core, with all tariffs and non-tariff trade barriers removed. Figure 57.6 NAFTA’s effect on trade. Which of these three countries has the highest value of exports? The map titled N A F T A trade flow shows Canada, the United States, and Mexico. Arrows show the following flow of trade in U.S. dollars. The United States to Canada: 363 billion. Canada to the United States: 354 billion. The United States to Mexico: 299 billion. Mexico to the United States: 371 billion. Canada to Mexico: 6 billion. Mexico to Canada: 27 billion. Customs Unions A customs union is another type of regional trade agreement. Customs unions are free-trade agreements among two or more member countries, combined with a single, common external trade policy for nonmembers. That is, a bloc of countries agrees to eliminate tariffs within the union, and it also establishes common tariff policies for countries that are not part of the bloc (Figure 57.7). The idea is to encourage free trade at a regional scale within the union, while adopting protectionist measures against competing imports from nonmembers. Figure 57.7 Customs unions. What world regions have few or no customs unions? Customs unions are shaded and labeled as follows. Caribbean Community (C A R I C O M): Belize, Haiti, Guyana, Suriname, and several small island nations in the Caribbean. Central American Common Market (C A C M): Guatemala, El Salvador Nicaragua, Honduras, Costa Rica, Panama, and the Dominican Republic. Andean Community (C A N): Colombia, Ecuador, Peru, and Paraguay. Southern Common Market (M E R C O S U R): Brazil, Bolivia, Uruguay, and Argentina. European Union Customs Union (E U C U): United Kingdom, Ireland, Sweden, Finland, Denmark, Belgium, the Netherlands, Germany, France, Spain, Portugal, Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary, Austria, Romania, Italy, Greece, Bulgaria, and Turkey. Switzerland-Liechtenstein (C H-F L): Switzerland and Liechtenstein. Eurasian Customs Union (E A C U): Russia, Kazakhstan, and Armenia. Gulf Cooperation Council (G C C): Saudi Arabia, United Arab Emirates, and Oman. Western African Economic and Monetary Union (W A E M U): Mali, Niger, Senegal, Burkina Faso, Cote d’Ivoire, Togo, and Benin. Economic and Monetary Community of Central Africa (C E M A C): Chad, Central African Republic, Cameroon, Equatorial Guinea, Gabon, and Republic of the Congo. East African Community (E A C): Kenya, Uganda, Tanzania, Rwanda, and Burundi. Southern African Customs Union (S A C U): Botswana, Namibia, South Africa, and Lesotho. One the best-known customs unions is the European Union Customs Union (EUCU). It is an important component of the EU, allowing it to function as a single trading bloc. It includes all EU member states, plus a few non-EU members, such as Monaco. The Southern Common Market is another customs union. Known by its Spanish acronym, Mercosur, it is a South American trade bloc that includes Argentina, Brazil, Paraguay, and Uruguay as its full members. Organization of the Petroleum Exporting Countries (OPEC) The Organization of the Petroleum Exporting Countries (OPEC) is an international trade agreement designed to regulate the output of oil. It was founded 1965 by the oil-producing countries of Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela to coordinate oil production and avoid trade competition among members. Today, OPEC has 13 member countries and controls about 44 percent of the world’s oil production. It strongly influences the global oil supply and oil prices. Free-trade agreements and customs unions create new spatial connections among countries by altering the flow of goods and services across international borders. Connections are enhanced among countries within trade bloc boundaries and reduced with countries that do not belong to the trade bloc. As we’ve seen, TNCs’ role in world trade has greatly expanded. However, nation-states remain central players, implementing laws and policies that affect trade and influence economic development at all geographic scales. Consider tariffs, which governments sometimes use as a tool to negotiate more favorable trade agreements. Tariffs are usually targeted at specific countries and their specific exports. Sometimes the targeted country retaliates with tariffs of its own, a situation called a tariff war. Trade is slowed, which may mean slower economic growth in both countries. Another government weapon in trade wars is the trade embargo. A trade embargo is an official ban on trade with a specific country or of a specific good. Embargos are usually imposed during periods of heightened political conflict. OPEC’s oil embargo of 1973 against the United States and some European countries is one well-known case. The embargo caused a spike in global oil prices that in turn affected economic development in countries worldwide. Governments at all scales also have the ability to promote international trade and stimulate economic growth. For example, most U.S. states have foreign trade delegations, often to encourage the export of a locally or regionally produced good. State and local governments invest in seaports and airports to encourage trade and boost regional economic growth. The world economy is now so interconnected that most consumer purchases are dependent on activities occurring in multiple countries. Let’s explore how this level of interdependence developed and what it means for economic development. The growth of financial services as a share of the total value of international trade is one of the most important recent developments in the world economy. Computers and new communications technologies allow for the near-instantaneous trade of financial products, such as corporate stocks. Thus, investors throughout the world can buy and sell stocks in rapid response to changing economic conditions. Computerized communication has sped up global trade, produced enormous amounts of wealth for some, and has helped to expand the world’s total GDP. The global trade in financial products is conducted through financial markets. A financial market is any marketplace where financial products are traded. Stock markets (Figure 57.8), bond markets, and foreign exchange (currency) markets are all financial markets. There are major financial markets in Asia, Europe, and North America, and global trade in financial products is conducted 24 hours a day. Investors in these markets come in many forms, from individuals to the largest TNCs. Figure 57.8 The New York Stock Exchange. Financial investment products are traded globally in financial markets, such as the New York Stock Exchange. The economies and people of the world have therefore become ever more closely interconnected and interdependent as the importance of global financial markets has grown. They also have become increasingly vulnerable to international financial crises. The world economy has experienced a series of financial crises that negatively affected virtually every country in the world. Each crisis demonstrated how financial markets have made the world increasingly interconnected and its countries interdependent. Let’s look at two specific examples. 1980s Latin American Debt Crisis OPEC’s 1973 oil embargo caused global oil prices to increase by 400 percent in a matter of months. As a result, OPEC countries began earning extraordinary profits from oil sales. They soon began looking for ways to invest their surplus cash, called “petrodollars.” They moved petrodollars into international banks, which in turn invested the money elsewhere in the global economy. The flood of petrodollars into international banks created a global surplus of money, which lowered the cost of international credit. Latin American governments took advantage of the cheap credit and borrowed freely to support their industrialization efforts. Consequently, the total debt for Latin American countries rose rapidly and far outpaced their GDP growth. The result was an international debt crisis. A debt crisis occurs when a government’s debts exceed its tax revenues to the point that it cannot meet its loan payments. Realizing that Latin American countries would not be able to repay their loans, banks cut off credit to the region. The threat of widespread government bankruptcies created panic in the global financial sector, and the IMF was forced to intervene and refinance Latin America’s loans to end the crisis. Global Financial Crisis of 2007–2008 The growing importance of financial markets has created incentives for bankers to develop new, often risky, financial products. If these financial products lose money, the effects on the world economy can be devastating, as in the global financial crisis of 2007–2008. It all started in the late 1990s, when banks began offering more mortgages (loans for home buying) to people with few financial resources. Many of these home loans were risky because they were not secured by borrowers’ incomes. The banks bundled all their home loans together, both sound loans and risky loans, and they sold the bundled debt as a product that would earn income for investors as the loans were repaid. Investment groups around the world bought these products hoping for high returns, unaware of the risk. The easy mortgage terms resulted in a flurry of buyers driving up home prices. Around 2006, it became clear that real estate worldwide was overvalued, and house prices plunged. Mortgage holders found that they owed more than their homes were now worth. People began to default on loans (that is, not make the required payments on their loans), causing the value of the bundled debt products to collapse. Major investment banks holding these now near-worthless financial products began to fail in 2008. A global financial crisis ensued as the world’s biggest banks and investment institutions teetered on bankruptcy. To stabilize the world economy, governments intervened with trillions of dollars to prop up the failing banks, illustrating the importance of government initiatives. The main consequence of the 2007–2008 financial crisis was the worst global economic downturn in 80 years. It caused massive unemployment and corporate and personal bankruptcies around the globe. Many individuals worldwide lost their jobs, their life savings, and their homes. The rising importance of financial markets in the world economy has reinforced patterns of geographically uneven development. A small number of cities, mostly in developed countries, now control most international financial transactions. These cities include New York, London, Chicago, Zurich, Tokyo, and San Francisco. However, Asia is emerging as an important player in the financial sector, and Shanghai, Hong Kong, and Singapore are among the top nine cities that together control about three-quarters of the world’s financial transactions. In addition, global financial crises affect developed and developing economies differently. For example, the Latin American debt crisis led to a change in the region’s development strategy. Prior to the debt crisis, Latin American countries had been pursuing a strategy of import substitution industrialization. Import substitution industrialization (ISI) is an economic development policy intended to replace imported goods with domestically produced goods as a way to spur industrialization and reduce dependence on other countries. Latin America’s borrowing in the 1970s and 1980s was part of governments’ efforts to maintain ISI policies. When the debt crisis struck, it forced Latin American governments to turn to the IMF because private banks had cut off credit. This allowed the IMF to dictate the terms of debt refinancing. In the case of Latin America’s debt crisis, the IMF demanded that countries abandon ISI as a development strategy. In place of ISI, the IMF imposed neoliberal development policies that encouraged free-market strategies. It forced Latin American governments to open up to foreign investment and reduce their expenditures on social and economic development programs. Industrialization projects were abandoned, and government funding for education, public health, and social services declined. Most developing economies have undergone similar neoliberal conversions under the IMF’s direction. We have learned how important international trade is to the world economy. Experts and governments continue to debate the best approach to trade, while new trade organizations and agreements emerge. Some agreements and trade policies reinforce patterns of geographically uneven development. In the years following World War II, the United States was by far the world’s manufacturing leader. Then, in the early 1970s, a significant restructuring of the world economy began, including deindustrialization in the United States and other core regions. The Decline of Manufacturing Sector Employment The post–World War II period of economic growth is often labeled as Fordism. Fordism refers to the economic and social arrangement based on the mass production of standardized goods, high labor union membership rates, stable and full-time manufacturing employment, and high factory wages that enable mass consumption. Fordism—named for Henry Ford, whose assembly lines allowed for the mass production of automobiles—brought higher standards of living for workers and greatly expanded the middle class (Figure 58.1). Figure 58.1 Fordism and American prosperity. This ad is typical of post–World War II automobile advertising. It suggests that the standardized mass production and mass consumption under Fordism lead to higher standards of living. In the 1970s, the conditions under which Fordism had flourished began to shift. Much of the industrial infrastructure had become outdated. In addition, the costs of doing business in the old manufacturing centers had greatly increased. In these aging centers, land values, workers’ wages, and taxes were high. The aging transportation infrastructure was prone to congestion that created costly delays. The result was a period of corporate disinvestment. Corporate disinvestment is a process in which companies stop investing in factory construction, equipment, and improvement and begin selling off assets, such as machinery, buildings, and land. As companies began disinvesting in the old manufacturing centers, they shifted their investments to emerging manufacturing centers in the periphery and semi-periphery. The relocation of manufacturing and support services from one country to another is known as offshoring. For manufacturing firms, offshoring reduces production costs because wages are much lower in the periphery than in the core. A related cost-saving practice is outsourcing. Outsourcing occurs when a firm transfers part of its internal operations to a third party. For example, a computer company might sell its touchscreen factory to another company and then buy the screens from that company. Or it might eliminate its accounting department and outsource those tasks. Corporate disinvestment, offshoring, and outsourcing combined in the late twentieth century to fuel deindustrialization and a movement away from Fordism. Deindustrialization is the decline, and sometimes complete disappearance, of employment in the manufacturing sector in the core’s manufacturing centers. For example, employment in the manufacturing sector accounted for 32 percent of all private-sector jobs in the United States in 1950. By 2020, it accounted for only 8.4 percent of total employment. Deindustrialization has devastated many communities in the manufacturing belts of the core regions, such as Ohio, Michigan, and Pennsylvania in the United States. As base industries such as auto and steel manufacturing closed their factories, all of the supporting businesses also closed for lack of customers. Manufacturing cities became “hollowed out,” meaning factories, offices, and houses were abandoned (Figure 58.2). We speak now of “Rust Belt” cities, a term that refers to rusting, abandoned industrial infrastructure. Figure 58.2 Hollowed-out Detroit. The U.S. automobile industry, which is concentrated in Detroit, Michigan, and its surrounding region, underwent a long period of disinvestment beginning in the 1970s. Abandoned factories, like this one, now dot the urban landscape. We should note that the term deindustrialization can be misleading. Employment in manufacturing has undeniably declined in the United States since its historical peak under Fordism. However, much of the decline in manufacturing employment was due to improvements in labor productivity rather than a decrease in manufacturing output. Indeed, manufacturing output in the United States has roughly doubled since the 1970s even as manufacturing jobs disappeared. The Rise of Service Sector Employment As manufacturing sector employment in developed economies declined, employment in the service sector, including the tertiary, quaternary, and quinary sectors, expanded greatly. By 2020, the service sector had grown to account for 71.2 percent of all private-sector employment in the United States (Figure 58.3). Figure 58.3 Fast-food workers in the service sector. In developed countries, service sector employment has grown as manufacturing employment declined. However, many new service jobs pay significantly less than manufacturing jobs. In addition to dominating employment, the service sector now accounts for the largest share of GDP for most economies in the core regions. In the United States, the service sector’s contribution to total GDP is nearly four times that of the industrial sector. Similarly, in the European Union, the service sector accounts for roughly three times as much of total GDP as does the industrial sector. In sum, the economic restructuring in the world economy has created a dramatic shift in the core’s employment patterns and GDP composition. The service sector as a share of both employment and GDP has expanded at the expense of manufacturing. The effects of restructuring on the periphery and semi-periphery are nearly mirror images of the effects in the core. The shift of manufacturing from the core to the periphery and semi-periphery has profoundly reshaped the geography of industrialization, creating a new international division of labor in the process. Special Economic Zones Since the 1970s, the governments of developing countries have attracted foreign investment and boosted industrialization by creating special economic zones. Special economic zones (SEZs) are specific areas within a country’s borders where business and trade laws are different from those in the rest of the country (Figure 58.4). For example, within an SEZ, governments might lower taxes and reduce customs duties (taxes) to entice transnational corporations (TNCs) to set up a factory there. Figure 58.4 Automobile factory in a Thailand SEZ. In its SEZs, Thailand offers incentives to foreign automotive corporations. These incentives include no corporate tax for eight years and tax exemptions on machinery and raw materials. Thailand now ranks among the world’s top 20 automobile exporting countries. The number of SEZs worldwide has skyrocketed in recent decades. In 1975, only 29 countries had them. By 2019 SEZs could be found in 147 countries, with most of them in developing economies. The most important types of SEZs are export processing zones and free-trade zones. Export processing zones (EPZs) are industrial zones with special incentives to attract foreign investment to places where imported materials undergo processing or assembly before being re-exported. Unlike typical exported goods, goods shipped from EPZs receive relief from tariffs and other taxes. TNCs invest in EPZs in developing countries because production costs in the periphery are significantly lower than in the core, and wages in developing countries are a small fraction of those in developed countries. Also, government oversight of EPZs in many developing countries is often minimal, which further reduces production costs. Labor unions are rare in EPZs, which keeps wages low. However, without the protection of labor unions, workers can be fired more easily, and companies can make employees work in unsafe or dangerous working conditions (Figure 58.5). Figure 58.5 The dark side of EPZs. Many EPZs pay very low wages and have hazardous working conditions. For example, the EPZs in Bangladesh have the world’s lowest wages and a poor safety record. A factory-producing garment exports in Dhaka, Bangladesh, collapsed in 2013, killing 1227 workers. Free-trade zones are a second type of SEZ. Free-trade zones (FTZs) are specially designated duty-free areas that provide warehousing, storage, and distribution facilities for goods intended for trade and re-export. They are typically located where international trade is focused, such as near seaports, international airports, or land border crossings. Global-Scale Production Systems The rapid increase in the number of SEZs, EPZs, and FTZs in recent decades is both a result and a cause of an increasingly interconnected and interdependent world economy. They are a result in that competition among firms and economies pushed governments to attract foreign investment, and corporations looked for new ways to maintain profitability. They are a cause in the sense that our interconnected, interdependent world economy would not be possible without them. To illustrate the latter point, let us look at the role of FTZs in the world economy. There are over 5000 FTZs in 147 countries, forming a network that allows goods to move across borders without customs procedures and duties. This network eases the free movement of component parts from zone to zone until a finished good is completed and finally released into a market for consumption. Customs duties are not paid until goods leave the network of FTZs, which keeps their price to consumers low. Similarly, EPZs have played a key role in restructuring the world economy. Employment in the core has shifted from the secondary sector to the tertiary, quaternary, and quinary sectors. This shift in the core is mirrored by shifts in the periphery and semi-periphery, where employment has shifted from the primary to secondary and, especially in the semi-periphery, tertiary sectors. China provides an excellent illustration of this global shift in manufacturing. In 1980, China established its first SEZs. Most of them were set up as EPZs in seaport cities (Figure 58.6). Due to the EPZs’ relatively low wages, a favorable regulatory environment, and proximity to the world’s largest consumer market, foreign investment flooded into China’s EPZs. They became the foundation of China’s transformation into a manufacturing economy and fueled three decades of massive economic growth. By 2020, China accounted for nearly two-thirds of the world’s total EPZ employment. Figure 58.6 China’s SEZs. What spatial patterns can you identify in the location and spread of SEZs in China? China’s special economic zones and the years they were established are as follows. 1980, four initial special economic zones: Xiamen, Shenzhen, Hong Kong, and Macau, all along the southeast coast. 1984, 14 coastal cities, all along the east coast. One is in Shanghai and one in Guangzhou. The others are not labeled. 1988, Province of Hainan, an island at the southernmost point in China. 1992, 6 ports of Yangtze: Nanjing, slightly west of Shanghai; Wuhan and three unlabeled cities, south and west of Nanjing; and Chongqing, further inland. 1992, 11 border cities: 4 along the northeast border with Russia; 1 along the border with Mongolia; 2 along the northwest border with Kazakhstan; 2 along the southern border with Vietnam, and 2 along the southern border with Myanmar. China’s shift to manufacturing, and similar shifts in other developing countries, reveal a new international division of labor. The new international division of labor refers to the spatial shift of manufacturing from developed countries to developing countries, including the global scaling of labor markets and industrial sites. That is, transnational corporations adopt a global-scale perspective in deciding where to locate their manufacturing operations. In general, low-wage developing economies are increasingly the sites for the labor-intensive manufacture of goods. Under the new international division of labor, China has eclipsed the United States as the world’s manufacturing leader. As developing economies shift from the primary sector toward the secondary and tertiary sectors, they account for a greater share of the world’s GDP. China is now the largest economy measured by GDP, ahead of the European Union and the United States. Economists forecast that in the coming decade, developing countries will account for most of world’s total GDP growth. While the new international division of labor undoubtedly marks a major restructuring of the world economy, the historical core regions retain important advantages. Developed economies continue to grow and evolve with the introduction of new production practices, technologies, and industries in the quaternary sector, which we examine in the next section. We have seen how new geographic designations, such as EPZs, offshoring, and GPNs, underlie spatial shifts in the world economy. These and other innovations in production together have led to a movement away from Fordism. Post-Fordism refers to the shifts from manufacturing centers to spatially dispersed production sites, from standardized mass production to specialized batch production, and from a permanent workforce to temporary employees and contract workers. Above all, post-Fordism is characterized by flexibility: flexibility in production sites, markets, workforce, and goods produced. Early flexible production innovations took the form of just-in-time-manufacturing. Just-in-time-manufacturing (JIT) is the production of small batches of goods as needed by customer demand. JIT manufacturing (also called JIT delivery) reduces warehousing costs while shortening delivery times between suppliers and manufactures. It also decreases a company’s dependence on a large, permanent factory workforce in favor of temporary employees and contract workers. That is, the company can flexibly expand the workforce during peak-demand periods, then reduce the workforce in low-demand periods. Under post-Fordism, the importance of economies of scale decreases. As we learned in Unit 4, economies of scale are achieved when the average per-unit cost decreases as output increases. Economies of scale are part of the cost-reducing logic of the Fordist model of standardized mass production. Under post-Fordism, cost reductions are achieved through demand-driven JIT production, which avoids the costs of maintaining large inventories of unsold finished goods. The rise of flexible production strategies coincided with the growing importance of microelectronics in manufacturing. Automation—the use of robotics for tasks once performed by assembly-line workers—and the use of computerized systems for efficient, small-batch production is essential to post-Fordism. In other words, high-technology industries have been central in reshaping the world economy. We turn now to examine high technology in detail. We hear much about “high tech” in the media and daily conversation. But what exactly is high tech, and what industries are part of it? A high-technology industry is one that develops and uses the most advanced technologies available and has the highest levels of research and development. The most widely accepted categories of the high-tech industries are aerospace, computers, communications and electronics, and pharmaceuticals. These four industries stand out in two ways: (1) the large amount of money invested in research and development of new technologies and (2) their use of high-tech goods and services in their production practices. In other words, they are all quaternary sector industries. They require a highly educated, highly skilled workforce, which commands the highest wages in the labor market. To get a sense of the importance of high tech’s contribution in restructuring the world economy, let’s look at how stock market investors’ valuation of the world’s top corporations has changed since 1980 (Table 58.1). Investors’ valuation of companies in dollar terms is called market capitalization. It is an indicator of where investors think future economic growth will be centered. Table 58.1 World’s Top 10 Largest Companies by Market Capitalization, 1980 and 2020 Rank (1980) Company (1980) Country (1980) Sector (1980) Market Capitalization in $ billions (1980) Rank (2020) Company (2020) Country (2020) Sector (2020) Market Capitalization in $ billions (2020) 1 IBM USA Tech 39.6 1 Microsoft USA Tech 1058 2 AT&T USA Telecom 35.6 2 Apple USA Tech 959 3 Exxon USA Oil & Gas 34.8 3 Amazon USA Consumer Services 959 4 Standard Oil of Indiana USA Oil & Gas 23.4 4 Alphabet (Google) USA Tech 839 5 Schlumberger USA Oil & Gas 22.3 5 Facebook USA Tech 550 6 Shell Oil Netherlands Oil & Gas 18 6 Berkshire Hathaway USA Financial 496 7 Mobil USA Oil & Gas 17.1 7 Tencent China Tech 436 8 Standard Oil of California USA Oil & Gas 17 8 Alibaba China Consumer Services 431 9 Atlantic Richfield USA Oil & Gas 15 9 Visa USA Financial 389 10 General Electric USA Multiple 13.8 10 JPMorgan Chase USA Financial 366 As Table 58.1 shows, the oil and gas industry dominated the top 10 most valued companies in 1980. By 2020, oil and gas companies disappeared from the top 10 and were replaced mostly by high-tech companies (Figure 58.7). Moreover, the table shows how much larger the world economy has grown under post-Fordism. The combined valuation of all top 10 companies in 1980 barely exceeds a quarter of the valuation of the top ranked company in 2020. Also, note the presence of Chinese companies in 2020, reflecting China’s rise in the world economy. Figure 58.7 Microsoft corporation’s new headquarters. Microsoft, the world’s largest corporation by market capitalization, built a new multibillion-dollar campus for its headquarters in Redmond, Washington. Like many high-technology corporations, its manufacturing operations remain mostly offshore. High-tech firms exemplify many features of post-Fordism, including the diminished importance of economies of scale and the increasing importance of agglomeration economies. Agglomeration economies occur where firms cluster spatially in order to take advantage of geographic concentrations of skilled labor and industry suppliers, specialized infrastructure, and ease of face-to-face contact with industry participants. They are most commonly found in or near large metropolitan areas. At first glance, agglomeration economies might seem to go against the grain of post-Fordism, with its emphasis on spatially dispersed production and labor force flexibility. For certain industries, however, it makes sense to cluster geographically. Clustering firms of the same industry can lower costs when close interaction with clients and suppliers and a deep pool of highly skill labor are critical. High tech is one such industry. California’s Silicon Valley, perhaps the world’s best known high-tech cluster, is a good example of an agglomeration economy. Silicon Valley is located in the San Francisco Bay Area’s metropolitan core, which includes world-class universities and three international airports. Apple, Google, and Facebook, three of the world’s five most highly capitalized firms, have their headquarters in Silicon Valley (Figure 58.8). However, almost no goods are manufactured in Silicon Valley. For example, Apple’s activities in Silicon Valley include mostly product design and software programming. Its consumer products are assembled mostly in Asian EPZs from components that are sourced from hundreds of suppliers around the world. Figure 58.8 The agglomeration economy of Silicon Valley. What high-tech agglomeration characteristics can you identify in these maps of the San Francisco Bay Area? The densely populated urban area includes San Francisco, Palo Alto, Sunnyvale, Santa Clara, San Jose, Fremont, Oakland, and Berkeley. Headquarters of the following corporations are marked. Facebook is in East Palo Alto; Alphabet (Google) is in Palo Alto; Apple is in Cupertino; Oracle is in Santa Clara, and Adobe and eBay are in San Jose. Universities marked are San Francisco State University, Stanford University, University of California Berkeley, California State University East Bay, and San Jose State University. International airports are located in San Francisco, Oakland, and San Jose. Agglomeration economies such as Silicon Valley often produce multiplier effects. Multiplier effects occur when investment in one industry indirectly creates new businesses and jobs in other industries. For example, some economists argue that one high-tech job has a multiplier effect of creating five follow-on jobs. One study of the San Francisco Bay Area estimated that for each job created in the high-tech sector, approximately 4.3 jobs are created in other fields, including lawyers, schoolteachers, restaurant cooks, and retail clerks. Multiplier effects thus create a cycle of regional economic growth and increasing job opportunities. Sustainable development is development that meets present consumption needs without compromising the ability of future generations to meet their consumption needs. It requires reducing industrialization’s worst environmental effects. Let’s begin by documenting those effects. As we’ve seen, industrialization consumes natural resources, which are subject to depletion. In addition, industrialization has contaminated Earth’s air and water. Resource Depletion Resource depletion refers to the consumption of natural resources faster than they can be replenished. Nonrenewable resources, such as fossil fuels, cannot be replenished, so we will run out of them eventually. We can exhaust even renewable resources if we do not manage them properly. Common forms of resource depletion include mining for fossil fuels and minerals, deforestation, soil erosion, aquifer depletion, and overfishing (Figure 59.1). Figure 59.1 Overfishing. The increased use of fleets of “factory ships,” such as this one in Argentina, has led to the depletion of ocean fisheries worldwide. Automated factory ships can harvest, process, freeze, and store tons of fish per day nonstop for weeks at time. Most industrial manufacturing relies on nonrenewable resources. For example, geologists project that the production of copper will begin to decline within the next 20 years. Iron ore, aluminum, and coal production are also likely to decline in this century. Without discoveries of new deposits or new extraction technologies, our current consumption of nonrenewable resources is unsustainable. Industrial agriculture is another source of resource depletion because it requires a great deal of water for irrigation. The success of many of our most productive agricultural areas is based on the depletion of aquifers. Water is being pumped to the surface for irrigation faster than it can be replaced. Agriculture expansion is also responsible for much of the world’s deforestation. The rapid depletion of natural resources raises important questions about our current mass-consumption habits. For example, in North America, average per capita car ownership has been climbing steadily since World War II. More recently, car ownership is skyrocketing in China and India. Will those countries, together accounting for over 2 billion people, be able to achieve the same levels of mass consumption as North America? Given the rate of resource depletion, it is doubtful that they can. Environmental Pollution Environmental pollution is the contamination of the physical (air, water, earth) and biological components of the environment to the point that normal functions are negatively affected. We can divide the sources of pollution into point sources and nonpoint sources. Point source pollution is any single identifiable source from which contaminants are discharged, such as a pipe or smokestack (Figure 59.2). Nonpoint source pollution is contamination originating from multiple, diffuse sources. Figure 59.2 Point source pollution. Contaminated water from a snack-producing factory is released directly into a river in Honduras. Factories are common producers of point source pollution. Oil refineries, paper mills, chemical plants, and automobile factories release a variety of chemicals into the atmosphere. At higher levels of concentration, many of these chemicals are poisonous to humans and other life-forms. Factories’ discharged wastewater also releases contaminants directly into rivers and lakes, destroying aquatic life. Most nonpoint source pollution is caused by rain or snowmelt moving over and through the ground. As the runoff moves, it picks up contaminants and transports them into natural water bodies. Common nonpoint sources include runoff from agriculture, mining, city streets, and parking lots. Climate Change Effects Climate change is a long-term shift in global or regional climate patterns. Since its formation billions of years ago, Earth’s climate has gone through many significant changes. With industrialization, however, climate change is increasingly influenced by human activities. The most significant of human-influenced change is the steady rise in average global temperature from the mid-twentieth century to the present. Let’s explore what’s behind this change. Carbon dioxide ( CO 2 ) is a naturally occurring gas in the atmosphere. It is one of the gases responsible for keeping Earth warm and suitable for all life. The CO 2 molecule traps heat in the atmosphere before it can escape into space. There is, therefore, a direct relationship between the amount of CO 2 in the atmosphere and average global temperature. There are many natural and human-generated sources of atmospheric CO 2 . Any form of combustion produces CO 2 . Since the Industrial Revolution, the combustion of fossil fuels has been the top human-created source of CO 2 in Earth’s atmosphere (Figure 59.3). In 1958, scientists placed instruments on top of the Mauna Loa volcano in Hawaii to precisely measure the atmosphere’s CO 2 . Scientists measure the amount of CO 2 in the atmosphere as parts per million (ppm), a way of describing very small concentrations of a substance. After more than 60 years of measurements, the data indicate that industrialization is raising CO 2 dramatically, thereby increasing the average global temperature (Figure 59.4). Figure 59.3 Carbon dioxide emissions by country. Which country has the highest annual CO 2 emissions? The map is titled Annual carbon-di-oxide emissions in metric tons per year. Countries with 7500 million and above: China. Countries with 2500 to 7499 million: The United States, Russia, India, and Japan. Countries with 500 to 2499 million: Canada, Germany, Italy, Saudi Arabia, Iran, Kazakhstan, and South Korea. Countries with 100 to 499 million: Mexico, Venezuela, Brazil, Argentina, Spain, France, United Kingdom, Poland, Czech Republic, Turkey, Iraq, Pakistan, Egypt, Nigeria, Algeria, South Africa, Vietnam, Thailand, Myanmar, Indonesia, and Australia. Countries with zero to 99 million: Cuba, Haiti, Dominican Republic, Belize, Guatemala, Nicaragua, Honduras, El Salvador. Costa Rica, Panama, Colombia, Ecuador, Peru, Chile, Bolivia, Paraguay, Uruguay, Guyana, Suriname, Iceland, Norway, Sweden, Finland, Denmark, Ireland, Portugal, Belgium, Netherlands, Switzerland, Austria, Estonia, Latvia, Lithuania, Belarus, Ukraine, Moldova, Romania, Bulgaria, Greece, Albania, Macedonia, Serbia, Croatia, Bosnia and Herzegovina, Slovakia, Hungary, Slovenia, Israel, Jordan, Lebanon, Syria, Georgia, Armenia, Azerbaijan, Uzbekistan, Turkmenistan, Kyrgyzstan, Tajikistan, Afghanistan, Mongolia, Nepal, Myanmar, Laos, Cambodia, Papua New Guinea, New Zealand, and all African countries not listed earlier. No data is available for Western Sahara or North Korea. Figure 59.4 Industrialization and climate change. How would you describe the relationship between ppm of CO 2 in the atmosphere and global average temperature? The graph is titled Global Temperature and Carbon Dioxide. The vertical axis on the left represents temperature in degree Celsius and ranges from negative 0.3 through positive 1.3 in increments of 0.2. On the right, the vertical axis represents C O subscript 2 in parts per million and ranges from 270 to 430 in increments of 20. The horizontal axis represents years and ranges from 1880 to 2020 in increments of 10. Atmospheric carbon dioxide is represented by a smooth curve that starts at 290 PPM in 1880 and ends at 410 in 2020. It rises slowly to 310 in the 1940s, and then rises more quickly, to 330 in 1970, 350 in the late 1980s, 370 in 2000, 390 in 2010, and 410 in the late 2010s. The line illustrating temperature is a jagged line that rises over time, but with frequent increases and decreases. The line starts at 0.1 in 1880. Its lowest point is -02 in the early 1900s. It varies from 0.1 to 0.3 in the 1950s and 1960s, between 0.5 and 0.7 in the 1980s, and reaches a high point at approximately 1.2 in 2010. For most of the graph, the two lines overlap; the exception is the late 1930s and early 1940s when the temperature line is higher. The burning of coal and oil to power industrialization has steadily increased the amount of carbon dioxide in the atmosphere. As a result, Earth’s atmosphere traps more heat, and average global temperatures rise nearly in lockstep with CO 2 concentrations. Climate change is producing several negative effects, such as rising sea levels, which lead to coastal flooding. In the coming decades, millions of people will need to relocate away from coastlines as a result. Our changed climate will also feature more extreme weather events. Hurricanes are becoming stronger and more frequent, and droughts and heat waves are becoming more prolonged and severe. Now that we understand some of the negative environmental effects of industrialization, let’s explore how sustainable development practices can eliminate or lessen the worst of them. Conserving Natural Resources One way to think about slowing natural resource depletion is to follow the 4 R’s: reduce, reuse, recycle, and rethink. This strategy applies to both industrial producers and everyday consumers. Reduce means consuming fewer resources by using more efficient methods. For example, industrial agriculture can use several techniques to decrease the amount of water used for irrigation, such as computers that monitor soil moisture and control watering (Figure 59.5). Consumers can reduce fossil fuel consumption by insulating their homes or driving fuel-efficient cars. Figure 59.5 High-tech water conservation. This Georgia peanut farmer is using a smartphone to check his crop’s water needs. Computerized monitors of soil moisture allow for more efficient irrigation, thereby reducing water usage. Factories and consumers can also reuse or recycle resources. For example, factories may establish cogeneration facilities. Cogeneration means producing two forms of energy from one fuel. When fuel is combusted, some of the energy is released into the environment as heat. Cogeneration facilities capture that heat and use it to warm buildings or to power machinery. The construction industry can reuse materials from demolished structures, and consumers can recycle everything from aluminum cans to computers. Finally, we must rethink how we will achieve environmentally sustainable and socially just economic development for all. Awareness of industrialization’s environmental effects is a first step to lessening them. We must think forward across spatial scales. How far will a contaminant spread? How long will it remain in the environment? How much will it cost to manage its effects? The saying “Think globally, act locally” applies here. Reducing Pollution In developed countries, the contamination of air and water from industrial production was far worse in the mid-twentieth century than it is today. Government regulation is the main reason for this dramatic reduction in pollution. In the United States, the most important regulations were the Clean Air Act of 1963 and the Clean Water Act of 1972. The Clean Air Act set standards for emissions from factory smokestacks and vehicle tailpipes. It identified common toxic contaminants that must be kept at low concentrations or eliminated completely. Industries met these requirements by using “scrubbing” technologies to extract contaminants before they leave the factory smokestack. Lead, a major contaminant, was removed from gasoline and paints entirely. Automobiles and jets were re-engineered to greatly reduce dangerous gas emissions. Similarly, the Clean Water Act set wastewater standards for industry, making it illegal for any person to release any point source contaminant into a water body. The act also funded the construction of sewage treatment plants for cities (Figure 59.6). These and other actions dramatically improved water quality. Figure 59.6 Nashville, Tennessee’s wastewater treatment plant. Since the passage of the 1972 Clean Water Act, U.S. cities are doing a much better job of reducing water pollution by cleaning up wastewater before it enters lakes and rivers. The success of these laws shows that industrialization does not necessarily lead to environmental harm. Unfortunately, however, some rapidly developing countries have not adopted and enforced the necessary regulations. In Asia, for example, pollution laws have not kept pace with the rise in automobile ownership that has accompanied economic growth. Consequently, the cities with the world’s worst air quality include Beijing, China; Jakarta, Indonesia; and New Delhi, India, all recently industrialized and undergoing rapid economic growth (Figure 59.7). Figure 59.7 China’s deteriorated air quality. This photo was taken at Beijing’s Tiananmen Square during the winter, when air contamination from burning coal is at its worst. Carbon-Neutral Industrialization Many individuals, corporations, and city, state, and national governments are committed to reducing the amount of CO 2 released into the atmosphere. The ultimate goal of these efforts is carbon neutrality. Carbon neutrality means achieving zero CO 2 releases through a combination of emissions reduction and carbon removal. Many developed countries, including France, New Zealand, and Norway, have passed laws to reach carbon neutrality no later than 2050 (Figure 59.8). Figure 59.8 Europe’s renewable energy island. Samsø, located off the coast of Denmark, is a model of renewable energy in Europe. Many European countries have committed to being carbon neutral by 2050. Renewable energy is a key component of carbon neutrality. Carbon removal is achieved mainly through carbon offsets. Carbon offsets are processes that remove or sequester (store) carbon from the atmosphere to make up for CO 2 emissions elsewhere. For example, forest conservation and reforestation projects are common offsets. Because plants take in CO 2 through their leaves, increasing forest cover through reforestation is a way to remove CO 2 from the atmosphere. Polluters, such as electrical generation plants using fossil fuels, can also pay to protect standing forests, which store CO 2 in living trees. Emissions reductions are achieved mainly by switching from fossil fuels to renewable sources of energy. Currently, hydroelectric, solar, and wind power are the main renewable sources positioned to replace fossil fuels. Denmark, the world’s leader in emissions reduction, will soon produce 70 percent of its energy from wind and solar. Ireland, Germany, and Spain already produce 20 percent of their energy from wind and solar. Globally, renewable resources now account for more than two-thirds of all new power sources. Many developing countries have natural landscapes that appeal to tourists. Tourism based on such natural attractions has been proposed as an economic development strategy. In the late twentieth century, a new type of tourism emerged as both a philosophy and a marketing strategy. Ecotourism is travel to natural areas of ecological value in support of conservation efforts and socially just economic development. Commonly, lodging and associated facilities are designed and managed for sustainability, using renewable energy sources, recycling waste, and conserving water. The economic logic behind ecotourism is simple. Natural landscapes, such as tropical forests and coastal marine ecosystems, can bring sustained economic growth if they are protected rather than exploited. A portion of the revenue from ecotourism goes directly to local conservation, ensuring that the natural landscape will be protected permanently. Ecotourism also has a social component, both for tourists and for host-country residents. Ideally, the ecotourism experience should have cultural and environmental education aspects. Tourists should come away enriched by a better understanding of the people, the place, and its environment. Likewise, with the new jobs that ecotourism creates, residents become empowered participants as guides and hosts. A significant share of the revenue from ecotourism should go to the local community and its members. Chumbe Island Coral Park in Tanzania (Figure 59.9) is one example of the many successful ecotourism destinations. The natural landscape attractions are a near-shore protected coral reef, an undisturbed stand of tropical forest, and a variety of rare wildlife. The lodging is made of sustainably harvested local materials and features composting toilets and solar-powered lighting. Supplies are purchased from local farmers and artisans so that more tourist dollars go directly to the community. The ecotourism company also provides environmental education and community outreach programs. While ecotourism has contributed to the preservation of natural landscapes, observers note that it is not a cure-all. Ecotourism has some of the same drawbacks for developing economies as the tourism industry in general. The large international corporations that run the airlines, hotels, and travel agencies that move tourists to their green destinations take the largest share of profits. Only a very small portion of the revenue contributes to the destination country’s GDP, and the majority of the jobs are low-skilled and low-waged, such as hotel maids and restaurant servers. Additionally, we must consider spatial scale when evaluating ecotourism’s contribution to environmental sustainability. Starting at the local scale, the preservation of wildlife, forests, and landscapes is a positive environmental effect. However, ecotourism lodging often has negative environmental impacts, such as pollution from sewage and fossil fuel consumption. At the regional scale, transportation infrastructure is required to move tourists into and out of the site (Figure 59.10). Such transportation can have the same negative environmental impacts as any transportation system based on fossil fuel consumption. Finally, at the global scale, most ecotourism relies on passenger jets to move tourists to their eco-friendly destinations. Jet travel is a major contributor to global warming. Since the 1970s, the United Nations has been at the forefront of devising and implementing sustainable development programs. Most recently, the United Nations established 17 sustainable development goals (SDGs) to be met by 2030. In 2000, the United Nations established eight Millennium Development Goals (MDGs), specifying targets for all countries to achieve by 2015 in areas such as environmental sustainability, gender equality, and poverty reduction. Some countries reached all eight goals, while others achieved none. In 2015, the United Nations organized the Sustainable Development Summit to renew international efforts toward achieving these goals. The 2015 Sustainable Development Summit resulted in the 2030 Agenda for Sustainable Development. The agenda is “a plan of action for people, planet, and prosperity,” captured in 17 sustainable development goals (SDGs). The SDGs are aimed at ending poverty, protecting the environment, and achieving prosperity for all countries by 2030 (Figure 59.11). Like the MDGs, the 17 SDGs are ambitious, and not all countries will be able to achieve them. Figure 59.11 United Nations sustainable development goals. These 17 goals are intended to further a sustainable development agenda that will, according the United Nations, “transform our world” by 2030. 1, No Poverty. 2, Zero Hunger. 3, Good Health and Well-being. 4, Quality Education. 5, Gender Equality. 6, Clean Water and Sanitation. 7, Affordable and Clean Energy. 8, Decent Work and Economic Growth. 9, Industry Innovation and Infrastructure. 10, Reduced Inequalities. 11, Sustainable cities and communities. 12, Responsible Consumption and Production. 13, Climate Action. 14, Life below Water. 15, Life on Land. 16, Peace, Justice, and Strong Institutions. 17, Partnerships for the Goals. The SDGs reflect a transition away from the purely economic understanding of development and toward a more holistic approach that considers human well-being and environmental sustainability. Goals range from “zero hunger” and “good health and well-being” to “climate action” and “reduced inequalities.” The ultimate objective is for all countries to achieve truly transformative development. The 17 SDGs are now the principal means used to evaluate and compare countries’ development status. The United Nations created the High-Level Political Forum on Sustainable Development (HLPF) to monitor each country’s progress. It is aided in this effort by the publication of the Sustainable Development Report, which is an annual review of all 193 United Nations member states’ performances on the SDGs. AP® Exam Tip The UN’s Sustainable Development Goals (SDGs) are mentioned as the last part of the course because for a true understanding of them, elements of all the previous Units are incredibly valuable. Do not rush through them. Learn the SDGs. Measuring countries’ performances on the SDGs is a complex and demanding task that heavily relies on the voluntary cooperation of member states. The Sustainable Development Report of 2019 collected data on 114 indicators. Table 59.1 provides examples of the indicators that go into assessing one of the SDGs and hints at the complexity of measurements involved. Specifically, the methods used to collect data for just the “sustainable cities and communities” SDG range from atmospheric gas sampling to a questionnaire on public transportation. Table 59.1 Indicators for SDG 11, “Sustainable Cities and Communities” Indicator Description Annual mean concentration of particulate matter of less than 2.5 microns of diameter (PM2.5) (μg/m3) Air pollution measured as the population-weighted mean annual concentration of PM2.5 for the urban population in a country. PM2.5 is suspended particles measuring less than 2.5 microns in aerodynamic diameter, which are capable of penetrating deep into the respiratory tract and can cause severe health damage. Improved water source, piped (% urban population with access) The percentage of the urban population with access to improved drinking water piped on premises. An improved drinking water source is one that, by the nature of its construction and when properly used, adequately protects the source from outside contamination, particularly fecal matter. Satisfaction with public transport (%) The percentage of the surveyed population that responded “Yes” to the question: In the city or area where you live, are you satisfied with the public transportation systems? Rent overburden rate (%) Percentage of the population living in households where total housing costs (“net” of housing allowances) represent more than 40 percent of disposable income (“net” of housing allowances). The Sustainable Development Report provides a comprehensive assessment of how close each member state is to meeting the 17 SDGs. The final result is a single score for each country ranging from 0 to 100. In the 2019 report, Denmark ranked at the top with a score of 85, followed closely by its Scandinavian neighbors, Sweden and Finland. The Central African Republic ranked last with a score of 39, just behind the nearby African countries of Chad and the Democratic Republic of Congo. These scores mean that Denmark is 85 percent and the Central African Republic is 39 percent of the way toward meeting the 2030 targets for all 17 SDGs. The 2019 report pointed to some disappointing signs in SDG trends. It noted that no country is likely to meet the 2030 targets and that improving income inequalities and health and education gaps remains a major challenge in all countries. Most discouraging in terms of environmental sustainability are the trends in climate change and biodiversity conservation. The report labels these trends “alarming” and “moving in the wrong direction.” The United Nations member states have embraced sustainable development as a goal for all to strive toward. It is an ambitious goal, and progress has been slow. However, there are encouraging signs that renewable resource power generation and ecotourism are taking hold and contributing to sustainable development. Monitoring and assessment at the global scale are important for keeping countries focused on sustainable development goals.