1. Industrialization & Economic Development (Unit 5) Review AP HUG REVIEW

2. QUICK OVERVIEW MAIN IDEAS – Classifying development – Economic activities – Economic development theories – Outsourcing ESSENTIAL QUESTIONS – Do the benefits outweigh the problems and injustices associated with sweatshops? – What role do women play in development? What role should they play? – What causes the economic and development differences between countries? Are these causes intentional?

3. CLASSIFYING DEVELOPMENT

4. What is Development? The act of improving/advancin g the quality of life (standard of living) of people.

5. What is sustainable development? Sustainable development –is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

6. “Rich Countries”“Poor Countries” Developed Undeveloped More DevelopedLess Developed DevelopedDeveloping First World (capitalist)Third World “The North” “The South” MEDC’s LEDC’s Time

7. LEDCs/LDCs  Less economically developed countries (LEDCs) or Less Developed Countries (LDCs) these are the poorest of the developing countries.  They have major economic, institutional and human resource problems.  In 2009, 49 countries were labeled as LEDCs/LDCs  many are in Sub-Saharan Africa

8. MEDCs/DCs More economically developed countries (MEDCs) or Developed Countries (DCs)- these are the richest of the developed countries.

9. The World of Haves and Have-Nots: UN Human Development Report The richest 20% of the world's people consumes 86% of all goods and services the poorest 20% consumes just 1.3%

10. The World of Haves and Have-Nots: UN Human Development Report the richest 20% consumes: – 45% of all meat and fish – 58% of all energy used and – 84% of all paper – has 74% of all telephone lines and – owns 87% of all vehicles

11. Have-nots Of 4.5 billion people in developing countries: – nearly 60% lack access to safe sewers – 1/3 have no access to clean water – 1/4 do not have adequate housing and – 20% have no access to modern health services of any kind

12. Measuring Economic Development All these are indicators of income Gross Domestic Product GDP – total value of goods and services produced in a country (US$) Gross National Product GNP – GDP that also Includes income from investments abroad (US$) GDP/GNP per capita Total value divided by the total population (per person)

13. National Income – Problems with using GDP/GNP Black market/informal economy Some economic activity not recorded – subsistence farming and barter activity, for example Some economic activity is carried out illegally – building work ‘cash in hand’, drug dealing, etc. Work of the non-paid may not be considered but may contribute to welfare – charity work, housework, etc. A small proportion of the population can own a large amount of the wealth in a country.

14. Development Diamonds Development Diamonds illustrate relationships for 4 socio-economic indicators relative to averages of the countries in the same income group

15. Strengths of using the Development Diamond as a method of showing level of development Development diamonds make it possible to assess a country’s achievements in both economic development and human development You can compare countries and their development using 4 indicators, not just 1

16. Weaknesses of using the Development Diamond as a method of showing level of development It only shows where a country stands in comparison to “low income” groups, not middle or high income It’s hard to determine development only with these 4 indicators It cannot be used to compare countries of different income groups

17. 1.4 billion people struggle to survive on less than $1.25 a day (World Bank 2005). How can they be helped?

18. The Goals were agreed to in 2001 The Goals were devised by the UN in 2000 and adopted by nations in 2001 The idea of course is to create a better world Many nations are already falling short But there are success stories Purpose

20. ECONOMIC ACTIVITIES

21. Primary Economic Activities Definition – Extraction of natural resources Examples: – Farming, mining, forestry

22. Secondary Economic Activities Definition – Processing of raw materials into finished goods by manufacturing Examples: – Steel manufacturing, furniture production, food processing

23. Tertiary Economic Activities Definition: – Provision of services Examples: – Retail, restaurants, tourism, police and fire provision, sanitation, advertising

24. Quaternary Economic Activities Definition: – Information and knowledge processing Examples: – Education, data processing, research and development, banking and finance, medical

25. Quinary Economic Activities Definition: – Highest level decision making Examples: – Top-level government officials, business executives, financial consultants

26. The Theories Used to Explain the Global Development Gap

28. Rostow - Stages of Growth 1.Traditional Society Characterised by – subsistence economy – output not traded or recorded – existence of barter – high levels of agriculture and labour intensive agriculture Village in Lesotho. 86% of the resident workforce in Lesotho is engaged in subsistence agriculture. Copyright: Tracy Wade, http://www.sxc.hu/

29. Rostow - Stages of Growth 2. Transitional Stage – Development of mining industries – Increase in capital use in agriculture – Necessity of external funding – Some growth in savings and investment The use of some capital equipment can help increase productivity and generate small surpluses which can be traded. Copyright: Tim & Annette, http://www.sxc.hu

30. Rostow - Stages of Growth 3. Take off: – Increasing industrialization – Further growth in savings and investment – Some regional growth – Number employed in agriculture declines At this stage, industrial growth may be linked to primary industries. The level of technology required will be low. Copyright: Ramon Venne, http://www.sxc.hu

31. Rostow - Stages of Growth 4. Drive to Maturity: – Growth becomes self- sustaining – wealth generation enables further investment in value adding industry and development – Industry more diversified – Increase in levels of technology utilised As the economy matures, technology plays an increasing role in developing high value added products. Copyright: Joao de Freitas, http://www.sxc.hu

32. Rostow - Stages of Growth 5. High mass consumption – High output levels – Mass consumption of consumer durables – High proportion of employment in service sector Service industry dominates the economy – banking, insurance, finance, marketing, entertainment, leisure and so on. Copyright: Elliott Tompkins, http://www.sxc.hu

33. Assumptions Made by Rostow’s Model all countries have similar development trajectories intrinsic factors like culture and natural resources don’t impact development countries that undergo development at different times in history will undergo the same processes all countries have the same access to development the goal and purpose of all economies is to increase productivity and material consumption.

34. Developmentalism The notion that every country and region will eventually make economic progress toward a high level of mass consumption if they only compete to the best of their ability within the world economy. Rostow’s Model keeps this myth alive.

35. Limitations of Rostow’s Model The weakness is that it’s not fair to compare today’s poorer countries to those that were the first to take off. Those that took off first didn’t have to compete in a global market. it is difficult to say whether all countries will eventually conform to Rostow’s Model. It is unlikely that Rostow’s model will be universally applicable.

36. Dependency Theory This theory blames the underdevelopment of the developing world on exploitation by the developed world (Andre Frank, Chicago, 1966) Frank argued that: – Poverty in the developing world arose through the spread of capitalism (countries were wealthy before Europeans colonized) – The development of the rich was achieved by exploitation of the raw materials in the developing world. – Developing countries became dependent on rich countries

37. Neocolonialism the geopolitical practice of using capitalism, business globalization, and cultural imperialism to influence a country, instead of direct military or political control.

38. World Systems (core/periphery) theory This theory is based on the history of the capitalist world economy. Countries fall into three economic levels, and can move from one level to another if their contribution to the world economy changes.

40. The CORE North America Western Europe East Asia Main trade flows are between these three areas. Countries in this core have diversified economies, with high output, high purchasing power and large domestic markets. These are the manufacturers.

41. SEMI PERIPHERY A wide range of countries. First waves of NICs – South Korea, Taiwan, Hong Kong, Singapore 2 nd Waves: Malaysia, Mexico, South Africa BRICs – Brazil, Russia, India, China.

42. THE PERIPHERY LEDCs. Mainly Africa. Small domestic markets, lack of infrastructure, population increase, low economic output, low levels of economic diversification, high agricultural population. Outside this core, the global periphery is a location of cheap raw materials or cheap manufacturing or a market for the core to “dump” their surplus products. Raw material Producers

44. Industrial Revolution Began in the late 1700s in England and led to the huge growth of the world population for the next two centuries as industrialization diffused outwards.

45. The Industrial Revolution B.Why did it begin in the Great Britain? – capitalist system people free to form businesses education patent system encouraged development – labor: Jethro Tull’s seed drill (1701) and other developments > improved productivity in farming > people can leave farms and work elsewhere

46. The Industrial Revolution (cont) B.Why did it begin in the Great Britain? 3.raw materials (iron ore, coal) 4.rivers, canals, harbors (ease in trade) 5.small, compact size (iron and coal near rivers and harbors) 6.existing banking system (borrow $ to buy machinery) 7.stable political system 8.colonies (guaranteed markets, additional raw materials)

47. The Industrial Revolution (cont) C.Key developments – James Watt patents the steam engine (1769) wood replaces running water as source of energy changes location of machinery – was located by running water (streams, rivers) – now can be located wherever wood exists (more flexibility)

48. The Industrial Revolution (cont) D.Effects – economic: more goods at lower prices – social: available labor leaves farms and clusters in cities – political: surplus labor > mistreated workers > liberalism and communism

49. The Industrial Revolution (cont) D.Effects 4.technological: > railroad, steamship 5.agricultural: > 2d Agricultural Revolution increased productivity use of machinery > larger farms > enclosures

50. OUTSOURCING

51. Globalization Globalization refers to how the world is increasingly inter-connected. It is most closely associated with the transnational activities of huge corporations, which operate sometimes in alliance with and sometimes against states.

52. Fordism The process of using assembly line techniques in manufacturing and is attributed to Henry Ford

53. Commodity Chain A chain of activities from the manufacturing to the distribution of a product. Example: The clothing Industry – Growing of cotton – Textile mills to create cloth – Garment factories where stiching occurs – Firms for design – Retailing and selling to the consumer

54. Transnational Corporations Companies that have facilities and processes spread among several countries. Found at the high- profit end of the commodity chain and specialize in brand names, high technology and design and marketing.

55. Theory of Comparative Advantage – countries should specialize in producing those goods of which they are relatively more efficient producers these countries should then trade with the rest of the world to obtain needed commodities – if countries do specialize this way, total world production will be greater

56. Outsourcing The practice of shifting production of a product to a third party either in the country in which you are based or in an other country. (part of comparative advantage) Taking advantage of less expensive labor

57. New International Division of Labor Transfer of some types of jobs, especially those requiring low-paid, less-skilled workers, from more developed to less developed countries.

58. Maquiladoras Foreign-owned assembly companies located in the United States/Mexico border region. These companies are able to take advantage of cheaper labor, tax breaks, lax environmental regulations while operating close the the markets for the products.

59. Consequences of Maquiladoras Economic Wages don’t match inflation Large dependence on companies from local communities Low wages perpetuate poverty Environmental Air pollution from factories Water contamination from raw sewage Social 60% of workers are women High risk of sexual harassment (pregnancy policy) Lack of money to send kids to school (low education rates)

60. Reasons why companies outsource business… Low wage structure Low tax structure, tax incentives Low land (site) costs or rent Low building costs/buildings available Large labor pool

61. Negative impacts of outsourcing on local communities Low wages  adds little to local economy through disposable income Short term/unstable employer  not a long term contributor to local economic development Amount of labor required is minimal  small addition of capital to local economy (highly automated) Skill level requirements are minimal  limited improvements on education system, limited employment benefits Global corporation  low investment requirements; longevity in place depends on corporate success; succession of owners

62. FRQ PRACTICE