Development and Trade The Geography of the Global Economy.
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Transcript of Development and Trade The Geography of the Global Economy.
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Development and TradeThe Geography of the Global
Economy
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Development
• What is development?– The process of improving the material condition of
people through the growth and diffusion of technology and knowledge
• We group countries into more or less “developed”
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Measures of Development
• Gross Domestic Product (GDP)– Size of the economy
• GDP per capita using Purchasing Power Parity (PPP)– What can people buy?– Standard of living
• UN Human Development Index
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GDP (2012)
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PPP (2012)
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GDP Density
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UN HDI (2014)
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Informal Sector
• In many developing countries, much economic activity is not counted– Barter– Black Markets– Illegal Activity
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Modernization Model
1) Traditional Society
Limited Technology; Static Society
2) Preconditions for Takeoff
Extractive Export Industries
3) Takeoff
Development of Manufacturing
4) Drive to Maturity
Wider industrial/commercial base
5) High Mass Consumption
Shift to service sector, domestic consumption
Rostow’s Model:
Stairway to Development
Critiques:
Does not account for “roadblocks” and colonial legacies
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Structuralism
• In contrast to classical views of development, some critics recognize structural impediments for poorer nations
• Dependency Theory (Wallerstein)– Nations locked in patterns set in colonial past– Core-periphery relationships hard to break
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Trade
• Trade is necessary for development– Exports bring wealth into country
• Comparative Advantage– Idea that countries will specialize in certain goods
for trade
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Globalization
• Economic globalization– The interconnectedness of the world economy
• Multinational Corporations– Main agents of globalization– Production spread across globe
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Foreign Direct Investment
• When foreign corporations open new factories or offices in a country
• Important for development
• But is all FDI the same?– Plantation– Research
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NICs
• New Industrialized Countries– States that are succeeding in moving forward in
industrial development
• Asian Tigers (1980s)– Taiwan, South Korea, Hong Kong, Singapore
• BRIC (2000s)– Brazil, Russia, India, China
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NAFTA
• North American Free Trade Agreement (1992)– Reduction of tariffs among US, Canada, Mexico– Enabled US corporations to take advantage of
cheap Mexican labor
• Maquiladoras– Export processing zones along Mexican border– Changed economic geography of Mexico
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Implications of Globalization
• New International Division of Labor– Economic production is spread across globes– Research/HQ in core– Production in periphery– Are states able to move up chain?
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Implications of Globalization
• Race to the bottom?– Are companies playing states off against each
other?
• Are we seeing a drive to:– Lower Wages– More Lax Environmental regulations– Tax Evasion