Intro To Human Geography: People, Places, & Landscapes Chapter 10: Patterns of Development & Change Paul Sutton firstname.lastname@example.org Department of Geography University of Denver Outline • What is Economic Development? • How can one compare countries‟ Economies • Measures of Gross National Product (GNP) • Geography of Exchange Rates • GNP and the environment • GNP and the quality of Life • Theories of Economic Development • Global Patterns of Economic development • National Economic Development Policies • Transportation & Information Infrastructure and relationships to Economic development • Distribution of Wealth and Economic Development What is Economic Development? • Economic Development: Improving the economic productivity (as measured in money) of a nation. • Questions: (absolute or per capita?) (How is wealth distributed?) Sustainable Development “Development that meets the needs of the present generation without compromising the ability of the future generations to meet their own needs.” This simple definition /sentence has spawned research industries, international debates, and considerable attention. A formal, explicit, and practical definition of „sustainable‟ has yet to be identified. Nonetheless, Bruntland must be credited for causing a profound shift in the collective consciousness of the human race for coining such a phrase. Why do governments want economic development? • …‟to promote the general welfare, maintain domestic stability…….‟ • Raise standards of living to maintain power and authority • What effect is globalization having on economic development? • How do national policies vary with respect to promoting economic development? Analyzing and Comparing the Economies of different nations • Are national statistics „apples and oranges‟? • The word „statistic‟ is derived from the word „state‟. Benjamin Disraeli (past prime minister of Britain) knew that countries count things differently and might even lie in order to exaggerate their power or achievement or to conceal relative backwardness, thus many national statistics are unreliable. ….“Lies, Damn lies, and Statistics” • Can we think of examples where countries might lie about : Birth Rates? Poverty? Nuclear Capability? Example of Problems with „Statistics‟: Japan in 1989 • In 1989 the leading economic newspaper of Japan (Nihon Keizai Shumbun) reported the following: Japan is the world‟s richest country with total assests of land, stocks etc. of $43.7 trillion U.S. at that time only worth $36.2 trillion (according to the U.S. Fed Reserve Board) Japan‟s per capita wealth more than twice U.S. The city of Tokyo worth more than the whole U.S. - Does this make sense to you? - Strikes me that Economics is a funny discipline GNP and GDP definitions and problems • GDP (Gross Domestic Product): the total value of all goods and services produced within a country • GNP (Gross National Product): the total income of a country‟s residents regardless of where income comes from Example: I declare the state of „Suttonia‟: I make wind chimes and drums on my land and make $100,000 a year doing so. I also invest in a shoe factory in Indonesia making Nike shoes with slave labor. I receive $60,000 a year from this investment. Four people live in „Suttonia‟ and only I am working. The GDP of Suttonia is $100,000. The GNP of „Suttonia‟ is $160,000. The GDP/capita is $25,000 and the GNP/capita is $40,000 The GNP/GDP is 1.6 as is the GNP/Capita /GDP/capita ratio. The income of the other four residents of „Suttonia‟ is zero. What does that say about the distribution of wealth in „Suttonia‟? [See The GINI coefficient on the next slide] • What do GNP and GDP mean relative to one another? GDP measures economic productivity of a space GNP measures economic productivity of a people in a space If GNP greater than GDP the people of that space are deriving some of their wealth from people outside that space If GNP is less than GDP the people of that space are producing wealth for people outside that space The GINI coefficient: A measure of the distribution of wealth Distribution of Wealth in a The Kingdom of Suttonia perfectly socialist State: GINI = 0 %Age of Wealth %Age of Wealth h it h w it e ew e ne v lin curv ient e li l cur icien t the al f ic th en actua coeff een actu oef e e t w he etw the INI c a b d t GIN I a b nd e G are 1 an f the are a h e he e = 1 e of t T p T h ope = ue o slo valu sl val he he is t is t 0 25 50 75 100 0 25 50 75 100 %Age of Population %Age of Population GINI curve typical of GINI curve typical of India or Brazil: Large Value Sweden or Norway: Low Value %Age of Wealth %Age of Wealth h it h w it e ew e ne v lin cu rv ient th e li l c u r i c ie n t the al ffi c en actua coeff e en c t u tw the a NI co e we be bet the INI e a a nd h e G I rea 1 and the G ea r 1 t ea Th ope = ue of T h pe = u e o f s lo val sl v al he he is t is t 0 25 50 75 100 0 25 50 75 100 %Age of Population %Age of Population Explanation of GINI coefficient What countries have what kind of GNP to GDP ratios? • Kuwait (1990) GNP/GDP = 1.35 • United States (1990) GNP/GDP = 1.01 • Canada (1990) GNP/GDP = .95 • Ireland (1990) GNP/GDP = .87 • Brazil (1990) GNP/GDP = .86 • What number GNP or GDP is better for comparing people‟s standard of living between nations? (mention GINI here) • What number GNP or GDP is better for comparing nations internal economies? Some problems with GNP and GDP measures • Both GNP and GDP measure goods and services exchanged in markets. Many countries (particularly the LDCs have large „informal‟ economies in which goods and services are not traded in „markets‟) • How will the „informal economy‟ influence measures of wealth? • Does this exacerbate or mitigate differences between MDCs and LDCs? • Because these measures undercount rural subsistence farming etc. urban areas dominate measures of economic productivity: Sao Paulo, Brazil (10% of Population, 25% of economy) Abidjan, Ivory Coast (15% Population, 70% of economy) (Does Abidjan strike you as a likely Primate City?) Could you survive for a whole year in the U.S. on $250? How could the women of Kenya double Kenya’s GDP? The Geography of Exchange Rates and „Purchasing Power Parity‟ • GDP and GNP measures are often fail because there are „No Common Measures of Value‟ • The value of products and services are measured in local currencies that are changeable and can be manipulated • How much would you have to pay for a 5 lb bag of rice in: Denver? Beijing? Rural India? • Note: It would be a fair question on the final for you to put the above prices in at least ordinal order by using geographic reasoning and knowledge An interesting story about the U.S. Dollar between 1985 and 1990 • Between 1985 and 1990 the U.S. Government intentionally lowered the value of the dollar relative to the Yen and Western European currencies by 50%. • This had profound consequences: 1) American Goods cheaper to buy outside U.S. Thus… U.S. Exports up 80% 2) Foreigners invested Billions in the U.S. and millions more tourists to U.S. (note: the Japanese make Hondas in Tennessee now ) 3) In 1989 more tourism money to U.S. than out of U.S. (first time ever) 4) Summary results: Goods out (Exports up), Investment & Tourists in 5) Other results: Real kicker for globalization – Americans saw more foreigners on American soil, cultures exchanged yadda yadda yadda 6) American investment money stayed at home, Exports to the U.S. dropped, Many Foreign economies suffered What do you think happened to the price of a Lexus or a Volkswagen during that time? What is „Purchasing Power Parity‟? • PPP attempts to measure what goods or services a certain amount of money will buy at different places • Just because the GDP/capita in Japan is $30,000 does not mean that an average Japanese can buy the same amount of „stuff‟ that an American making $30,000 can. • Great Example: Some 40 million Indians live in households making incomes of over 900,000 rupees (This is equivalent to about $30,000 U.S. dollars) However, its purchasing power is about $600,000 Is it really appropriate to call India a poor country? Gross Domestic Product and the Environment • Some Economists and their stupid accounting tricks 1) Standard Business Practice Machines and Buildings etc. counted as assets As they deteriorate (are used up) they are depreciated and this depreciation is called a loss. 2) Standard National Accounting Practice Call sales of Oil, Timber, & Water: profits Ignore the loss of natural resources as losses Call housing starts economic growth Ignore loss of housing from flood, fire, earthquakes An Oil Spill in Mexico Good for the Economy? You betcha. Where best: U.S., Mexico, or Ecuador? A wildfire in Laguna Beach Do you think these people are hoping their homes will burn down To help boost the local economy? Gross Sustainable Product • If natural resources were treated as assets, then statistics might (would) demonstrate that protecting the environment is good economic policy • Many people are working on a new statistic: Gross Sustainable Product (GSP) • The GSP would subtract the value of natural resources destroyed or depleted from the GNP • A Costa Rica study showed that 25% of GDP dissappeared due natural resource losses • A U.S. Study showed natural resource losses balanced by new resources found Incorporating impacts to productivity of renewable resources like fisheries, forests, agriculture, and water supplies and incorporating costs of impacts of loss of ecosystem services will further erode measures of GSP Is GSP a useful measure? GNP and „Quality of Life‟ • How would you think that GDP/capita covaries with: Energy Consumption, Food Supply, Literacy Rates, and Access to safe drinking water? • The relationships are not always obvious. Is it possible for Mexico to have a lower Death rate than the U.S. and a lower life expectancy? • Variability of „Quality of Life‟ index can vary more within a nation than between nations. Do you think the GINI coefficient could predict within country variation? The United Nations: Human Development Index (HDI) • 1/3(Purchasing Power Parity) + (1/3) Life Expectancy + (1/3) Adult Literacy • A multi-variable Index • Uruguay 30, South Korea 33, Saudi Arabia 84 (lower score better) The HDI endices for these countries opposite the GNP/Capita ($2,620, $5,454, $7,070) • These kinds of indexes are problematic because of debate over the variables to choose and the weights to be assigned to them • Population Growth and Economic Development (next slide) The Relative Sizes of National Economies This map type is called a „Cartogram‟. What does that mean? Per Capita Gross National Product What could I reasonably expect you to remember from this map? Categories of Per Capita GNP Where are the People? Where is the money? Human Development Index (1994) Looks like a map of money to me……….. Pre-Industrial, Industrial, and Post-Industrial Economies: Characterizing the Nature rather than the Magnitude of an Economy • Recall the primary (mining, farming), secondary (manufacturing), and tertiary (service) sectors of an economy • Sectoral Evolution: Pre-Industrial, Industrial, and Post- Industrial economies have the largest proportion of their population in the primary, secondary, and tertiary sectors of their economies respectively • White man shows up in Africa and observes that to become „great like me‟ an economy „evolves‟ from primary to secondary to tertiary. (any comments?) Pre-Industrial Societies Many Societies today are still „Pre-Industrial‟. Despite the fact A large proportion of their population works in the Agricultural Sector many have difficulty feeding themselves. How many of you work in Agriculture? Do you know anyone that does? Industrial Societies • As countries industrialize people move from agricultural labor to manufacturing. The proportion of workers in the primary sector diminishes as the proportion in the secondary sector increases. At some undefined point the economy is considered „secondary‟ or Industrial. In the U.S., for example, this transition occurred during WWI. (manufacturing employment exceeded agricultural employment) By 1925 manufacturing emplyoment represented the largest single occupational group in the U.S. • Is this progress? • Upton Sinclair might Disagree? (do you know who Sinclair is?) • What do WTO protesters have to do with this? Post Industrial Societies • What happens after Industrialization? Some would argue „exploitation‟. The standard line is that the workers of an Industrial society increasingly become involved in „Service‟ industries. Once that happens the economy is considered „Post-Industrial‟. This happened in the U.S. sometime between 1929 and 1945. In 1990 the „service‟ sector of the economy represented over 75% of the U.S. labor force. „Where do you see yourself working in 5 years?‟ Ironically some poor nations have large proportions of their population in „tertiary‟ or „service‟ sectors or their economies. GUESS WHY? • Bob Dylan‟s Song: „Sundown on the Union‟ What does it say? (Who is Bob Dylan anyway?) • What does „Separation of Production & Consumption‟ mean to you? The „Post-Industrial‟ Economy • You Live in a „Post-Industiral‟ Economy. • What will you do for a living? • Is it sustainable? • To what extent are your needs met by the natural resources, labor, and capital in places outside the United States? • The U.S. GNP/GDP ratio is almost 1.0……Did the 1985-1990 devaluation of the Dollar relative to Yen and EU ameliorate this situation? • Ted Rall Cartoon: BONUS PRIZE …‟But Jean Paul Sarte said…” How do the sectors of the Economy contribute to Gross Product? • 1/3 Pop. primary, 1/3 Pop. secondary, 1/3 Pop. tertiary DOES NOT MEAN 1/3 GDP primary, 1/3 GDP secondary, 1/3 GDP Tertiary • Value Added/worker greatest in Secondary (Manufacturing) (for now anyway ) • Millers get richer than Farmers & Manufacturers get richer than Miners. Millers and Manufacturers typically get richer than their Sales Reps. • This is one reason why some places get richer than others. Should the United States be concerned? Rostow‟s „Stages of Growth‟ • The „natural‟ evolution of peoples are to „evolve‟ from „Hunter-Gatherer‟ to „Agriculture‟ to „Industrial‟ to whatever. • Is this Social Darwinism? • Is it reasonable? Why are some countries Rich and some countries Poor? • Natural Environmental Endowments of Raw Materials etc. DO NOT explain National Wealth • The Theory of Environmental Determinism has problems with this • „Adding Value‟ to raw material is key to Wealth • „Downstream Activities‟ are key to wealth creation because they are nearer the source of money. • Processing, Manufacturing, Transporting, Advertising, Insuring, Marketing, and Financing the flow of goods is more profitable than extracting the raw materials they are derived from. How did this happen? • Making things out of Copper Ore is more remunerative than the mining of the Ore itself • Grinding Wheat into flour is more remunerative than growing the Wheat in the first place • Raw Diamonds are valuable but the cutters, polishers, and sellers of Diamonds make more money than the Diamond miners. “Conceptual” Value Added The term „Value Added‟ has even been extended to conceptual value added, as in advertising. If a $10million advertising campaign convinces people to spend $100 million more for Brand X than for Brand Y, when those brands are, in fact, nearly identical, then $90 Million of value has been added to Brand X “conceptually”. (pay no attention to the man behind the curtain) That $90 million can provide a lot of jobs. The conceptual value added to products by the advertising industry in New York City today is far higher than the value added by manufacturing in many of the world‟s greatest manufacturing cities. The trademark of a good is often more valuable than the good itself. Selling brand name cookies can be more profitable than the total sum of revenue generated by growing the wheat, sugar, eggs, and production of the cookies themselves. (the Girl Scouts are making a killing ) The tertiary sector of the economy is chasing the secondary for „value added‟ domination. Note: If the world begins to „pay attention to the man behind the curtain‟ and realizes there is no reason to pay a difference when there is no difference, what will happen to the U.S. economy? Does anyone out there get the „man behind the curtain‟ reference? The United Fruit Company • Why is it that Oil producers can capture downstream activities but food producers cannot? • How many alternative sources of oil are there? How many alternative sources of food products? • The story of the United Fruit Company exemplifies the geography of „Value Added‟. In the 19 th century the company established banana plantations in Central America. Several countries came to depend economically on the export of bananas, and many aspects of their local cultures were consequently transformed. Their politics, for example, were manipulated internally by banana interests and externally by relations with the United States; their social structures reflected peoples‟ positions in the dominant export-oriented cash crop economy; the peoples‟ diet came to depend on imported staples. (ever bought clothes from „Banana Republic‟ ever wondered where the name came from or why?) The United Fruit Company owned the banana plantations and the ships that transported the bananas, and it marketed the bananas. Eventually many Central Americans began to resent the foreign control of the plantations, and they accused the company of “Yankee Imperialism”. The company responded by abruptly surrendering many of its plantations to local governments. This might sound like a financial sacrifice, but what really happened? The company was no longer tied to one supply (its own plantations), so it could bargain with several potential suppliers (and play one off the other). The producers increased production in order to raise their incomes, but they increased production faster than demand could be raised. This only lowered prices. Competition among the suppliers reduced the price of bananas still further. As a result, the new plantation owners got poorer. Transporting bananas and marketing them- „adding conceptual value through name brand advertising’- is considerably more profitable than growing them, and it supposedly causes far fewer headaches for the company‟s management. Eventually the company even changed its name to Chiquita Brands International, and it is now applying its valuable trademark to marketing other fruits from a great variety of sources worldwide. By focusing on downstream activities, the company transformed itself from a raw material supplier into a marketing company. Its profits fattened, while the countries that supplied the raw materiel got poorer. A similar tale could be told about almost any raw material or food supplier in the world today and its relationship with multinational corporations that control every aspect of handling and processing goods from the raw material to the final consumers. Compare the story of the United Fruit Company with the story of OPEC‟s petroleum marketing networks. In that case, the suppliers of raw materials are themselves seizing control of downstream activities. Output of Secondary Sector as Percentage of GDP What is this a map of? Is the a map of: A) % Pop Urban B) Rice Production/Capita C)% Pop with AIDS Note: Darker Red is Higher number What is this a Map of? A) # Automobiles/Capita B) HDI C) Total Fertility Rate What is this a Map of? A) GNP/Capita B) The Crude Death Rate C) Kangaroos/Capita What is this a Map of? A) Percent Urban B) Population Density C) Infant Mortality Government Involvement in the National Economy •Communism: Govt owns the natural resources and the productive Enterprises in the name of the workers. Known as „top down‟ or „command and control‟ economy Example countries include – Cuba, China •Laissez-faire Capitalism: Minimal government involvement in The business affairs of the country Example countries include– United States, Britain •Capitalism with State ownership of some industries. Many Latin American countries have nationally owned industries (e.g. Pemoco in Mexico). Many European nations have nationally Owned industries (25% GNP France, 11% in Germany) However, Privatization of these industries is running rampant particularly in Eastern Europe. •State Directed Capitalism: Many Asian countries do not own the private enterprises; however, their governments plan and regulate Their economies. This kind of situation is often referred to as an „Industrial Policy‟ Example story: South Korea is considered a capitalist, free-market economy, yet the government proposes national economic plans and subsidises some new industries. Industry is dominated by combinations of corporations that are affiliated by inter-locking dictatorships and ownership. Japan and Taiwan are similar. In the U.S. such situations/relationships would be broken up as illegal trusts. Fascistic top down ‘Industrial Policy’ while not ‘communism’ has its strengths and many people Feel that the U.S. should adopt some sort of ‘Industrial Policy’ to fight forces outside the U.S. Domestic Economic Geography • Countries try to organize their population, territory, and resources for economic production. • Education, Training, National Pride, and political stability are key to successful „nation building‟ • Internal Population Mobility: Workers are expected to move to jobs. Countries try to maintain „spatially homogenous‟ unemployment. Large spatial variability suggests inefficiency. • Why do people still live in Buffalo, NY? States with Frontiers • „Manifest Destiny‟ and other propaganda motivated much of the American population west. We occupied valuable territory and have benefited greatly from westward migration. • Brazil has similar concerns. They located their planned capital city „Brasilia‟ in their hinterlands. With economically and ecologically disatrous results. • The Island of Java is only 7% of Indonesia‟s territory yet it houses 60% of its population. The government has made efforts to „spread‟ its population with little success. • Russia has similar problems with Siberia • Canada and many African nations have similar spatial distribution of population problems. National Transportation Infrastructures • Transportation and Communication Infrastructures enable economic, population and information mobility. • Problems arise when transporation corridors are undeveloped (e.g. Columbian oil fields controlled by rebels and drug dealers.) • Economic growth in profoundly enabled by transportation. India is working on this. • Africa is characterized by „Tap Routes‟ which benefit foreign exploitation more than pan- African development National Communications Infrastructure • You have lived in the „buzz of the information economy‟. You can‟t eat information, you can‟t drive it, nor will it build your house; nonetheless, it is clearly a tertiary if not fourth economy. Only time will tell how valuable information is. • In any case, a wealth of diverse sources of information supports both economic efficiency and development, and political liberty. • How „Diverse‟ is the information you presently receive? Why? • The U.S. and Canada have 40% of the world‟s phones. Africa 1% This is changing rapidly (see next slide) • Information is a very unusual commodity. We could spend a whole quarter on this issue and only scratch the surface. • Any comments on your impressions of the Info Age you live in? New Paths for Economic Development • Wireless technology like Cell Phones are changing old ideas of economic development • Poor nations can develop sophisticated communications infrastructures without building expensive „Land-Line‟ com networks. • If China industrializes on the established patterns of Western Europe and the U.S. their CO2 emissions will dwarf historical emisssions. • Is there an „energy consumption‟ analog to the communications revolution/bypass. I hope so. National Spatial Data Infrastructure • Some people are arguing that Spatial Data that can be used in Geographic Information Systems also have institutional and public good value. • A good NSDI allows for more efficient use and allocation of resources, better urban and regional planning etc. • There is a huge digital divide in terms of hardware, software, data, and human capital National Trade Policy • Why do countries vary in the degree to which they participate in world trade and circulation? • To develop their own economy. • To ensure National Security. • To protect/maintain cultural identity. • Two Distinct approaches to addressing above concerns: Import-Substitution & Export-Led Import Substitution • Some countries subsidize „infant industries‟ in the hope that they will eventually achieve economies of scale and be able to compete in the global market place. (e.g. Brazil & computers, BTW it didn‟t work) • The philosophy of „Import Substitution‟ is one of self- sufficiency and potential independence • Countries that chose „Import Substitution‟ as national economic polices fell behind countries that chose „Export-Led‟ policies. However, the tides are turning and debate is growing as to what policy is best. • The U.S. protects its textile workers with subsidies to the tune of $145,000 per job saved per year in the U.S. • Cheap labor outside the U.S. raises difficult questions… Export Led • Export Led National economic policies have been the „darling‟ policy of economists in the recent past. • Nations that adopted „Export Led‟ Policies (the Asian Tigers) have enjoyed greater economic growth than nations adopting „Import Substitution‟ Policies. • Export Led policies rely on global capital markets to facilitate international investment and global marketing networks to distribute products. Import Substitution vs. Export Led National Economic Policies • In many respects the debate of Export-Led vs. Import Substitution led economic growth national policy is a debate about globalization vs. Local or Regional Diversity. • Export-Led economic policy essentially recognizes and accepts dominant patterns of power and will ultimately result in a world of powerful Chinese, Americans, Europeans, Japanese, and eventually every ethnicity/nationality; However, the differences will dissappear and the international distribution of wealth will be uniform across the globe. The internal distribution of wealth will NOT be uniform. • Import Substition economic policy is an attempt at fighting globalization, maintaining national identity, and establishing independence culturally, economically and ideologically. Some Comments on Globalization: What‟s Better, a homogenous globalized world; or, a world of differences economically, socially, and culturally? • Once we‟re homogenized we won‟t lynch people because they are black, hate them because they are Jewish, or blockade them because they live in Iraq. (Sounds good to me…………but) • Will „Mc-Gumbo‟ from McDonald‟s really taste as good as a down-home gumbo from New Orleans tastes today? • Will the allure of „Mulan‟ or „Dark Angel‟ really work once the differences she derives her identity from are gone? (The media (particularly Disney) play strange roles in the forces for globalization – Bigger Markets eh?) • Are we ready to celebrate diversity? Pay for it? What is this a map of? Everything and Nothing. In a globalized world.
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