Economics

1. Economics Economic Development

2. Economic Development • How advanced is a country? • More Developed - MDC • Newly Industrialized – NIC • Less Developed – LDC • Human Development Index • Developed by UN 1990, ranks countries by looking at economic development & standards of living. • Indices & Data | Human Development Reports (HDR) | United Nations Development Programme (UNDP)

3. Demographic Indicators • Life Expectancy – average number of years a person is expected to live. • Birth & Death Rates – average number of children born and people who die in a year. • Death rate is called Mortality Rate. • Infant Mortality Rate – number of infants who die before 1st birthday in year.

4. Economic Indicators • Gross Domestic Product GDP – the total value of all goods & services produced within a nation in a year. • GDP per capita – per person in a country

5. Social & Political Indicators • Social • Literacy Rate – percentage of people who can read & write. • Number attending college, number of professionals, housing, water supply & sanitation • Political • Freedoms people enjoy, type of government, tolerance of other viewpoints.

6. MDC – higher life expectancy, lower birth rate & infant morality, higher literacy rates, more in college, more doctors, better water supply & sanitation • LDC - lower life expectancy, higher birth rate & infant morality, lower literacy rates, less in college, less doctors, poor water supply & sanitation

7. US – MDC #4 France – MDC #14 Zimbabwe – LDC #169 Bangladesh – LDC #129 Syria – NIC #111

8. Economic Activities – Primary • Primary – basic, food production & extraction of raw materials • Examples – farms, ranches, fishing, logging, mining. • LDC more people involved, MDC less people • US only 3% of labor force

9. Primary Economic Activities

10. Secondary Activities • Manufacturing & Production – taking raw materials & adding value. • Textiles, furniture making, processing food, making steel

11. A Sawmill Raw Material Semi Finished Product Finished Product

12. Processes – To change Raw Materials into semi-finished orfinished products we must process them.

13. Processes

14. Tertiary Activities • Deals with services – doctors, nurses, teachers, retailer (stores & restaurants) • In the US, 80% of labor force • MDC have a higher percentage of their labor force in Tertiary activities.

16. Quaternary Activities • Information processing & management • Examples: computer programmer, general manager, researchers, product development. • Jobs require special training & education. • Only in the MDC

19. US Economy • Leader in agriculture, manufactured goods & global trade. • 3 Factors = Economic success • Abundant available natural resources • Skilled labor force • Stable political system

20. US cont. • Ag – world leader – fertile soil, favorable climate and early mechanization of farms • Industry – advanced technology, petroleum, steel, chemicals, electronics & telecommunication, lumber & mining. • Postindustrial Economy – manufacturing no longer plays a dominant role; 80% of jobs are in the service industry

21. US cont. • Northeast – New England & Mid Atlantic • America’s Gateway • Fishing, farming, trade. • Coal, iron ore, oil, lumber, manufacturing, electronics, communication, chemical, medical research, finance, tourism. • Rust belt – decline in the regions manufacturing • States ME, NH, VT, MA, CT, RI, NY, NJ, PA

22. US Cont. • Midwest – America’s Breadbasket • Farming – Fertile soil, adequate rainfall, favorable climate. • Feed more people than any comparable area in the world. • Corn, wheat, soybeans, meat, dairy • Trade, transportation, distribution – Great Lakes & Mississippi & Ohio Rivers • Chicago transportation hub. • Auto making & steel industries • States: OH, MI, WI, MN, ND, SD, NE, KS, IA, MO, IL, IN

23. US Cont. • The South – Sun Belt • Farming: cotton, tobacco, fruits, peanuts, rice & livestock • Air conditioning has allow area to grow. Many companies leaving cold north for the south. • Tourism & retirees also drawn to warm South & West. • States: TX, LA, AR, TN, OK, KY, WV, VA, NC, SC, GA, FL, AL, MS

24. US Cont. • The West - • ½ land of US, varied landscape, some favorable landforms & climate, also deserts • Air conditioning & irrigation allowed growth • Farming, ranching, fishing, logging, mining, oil refining, tourism, film making, & computers • States: WA, OR, CA, NV, ID, MT, CO, WY, NM, AZ, HI, AK

25. Economic Alliances • NAFTA – North American Free Trade Agreement – began on January 1, 1994. This agreement removed most barriers to trade and investment among the United States, Canada, and Mexico with full implementation beginning January 1, 2008.

26. Economic Alliances • European Union • Economic and political union of 27 independent member states which are located primarily in Europe. • Purpose to create free trade zone • Austria, Belgium, Bulgaria, Cyprus, Czech Rep, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, & UK

27. EU Policies • The EU has developed a single market through a standardized system of laws which apply in all member states. • Passport controls have been abolished within the EU. • EU policies aim to ensure the free movement of people, goods, services, and capital. • Enact equal laws, maintain common policies

28. EU Policies • The EU has established a single market across the territory of all its members. • A monetary union, the eurozone, using a single currency – Euro. • In 2010 the EU generated an approx. 16.242 billion international dollars of global gross domestic product (GDP) = largest economy in the world. • Largest exporter and importer of goods and services. • Biggest trading partner to China, India, and the United States.

29. EU Problems • The Euro was to be a currency which would replace the U.S. dollar, but in 2009, a debt crisis arose. • In 2010 the debt crisis was mostly centered on events in Greece = cost of financing government debt. • On 2 May 2010, the eurozone countries and the IMF agreed to a loan for Greece, it failed. • It was followed by a €85 billion rescue package for Ireland in November. • That was followed by a €78 billion bail-out for Portugal in May 2011. • October 2011 – Greece bailout still a problem.

30. Global Implications of Crisis • EU losses could extend to American banks, which have large exposures to debt in France and Italy. • On top of this, American exports to the European Union could suffer if the crisis slows European growth and causes the euro to depreciate against the dollar. • The EU crisis also affects the cost of oil and the U.S. stock market.

31. Economic Alliances • ASEAN – Association of South East Asia Nations • Alliance that promotes economic growth, peace, & cooperation in SE Asia • Members – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, & Vietnam

32. OPEC • Organization of Petroleum Exporting Countries • Mission: is to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry. • Members: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, Venezuela

33. Outsourcing • the act of one company contracting with another to provide services that could be performed by in-house employees. These jobs are handled by separate companies that specialize in each service, and are often located overseas. • Advantages • Saves money, cheap labor • Allows companies to focus on product development • Outsource companies have specialized technology that the company can’t afford to buy.

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35. Outsourcing • Disadvantages: • eliminates direct communication between company and its clients. • prevent building solid relationships with customers • leads to dissatisfaction on one or both sides • not being able to control some aspects of the company • may lead to delayed communications & project implementation. • sensitive information is more vulnerable • dependent upon its outsource providers, if outsource provider backs out on their contract suddenly.

36. Infrastructure • The basic support systems needed to keep an economy going. • Includes: • Transportation – Most important • Communications – how linked to the world • Internet & Satellite communication • Power • Water & Sanitation • Education Systems

37. What is Development? DEVELOPMENT: Reaching an acceptable standard of living for all people by improving economic and social conditions. DEVELOPING COUNTRY: Low- and middle-income countries in which most people have a lower standard of living with access to fewer goods and services than do most people in high-income countries. There are currently about 125 developing countries with populations over 1 million; in 1997, their total population was more than 4.89 billion.

38. Levels Of Development Developed Newly Industrialized Developing Quaternary Stage 3/4 Populations Modern cities Poor rural area Secondary Economic Activities Tertiary Activities Stage 2 populations Agricultural/Primary Activities Poverty Stage 1 population characteristics

39. Less Developed Country • low national income, GDP • high rate of population growth • High unemployment, & dependence on commodity exports. • Majority of nations in Asia, Africa, and Latin America, • Low development of infrastructure

40. LDC • The Least Developed Countries represent the poorest and weakest segment of the international community. • More than 880 million people (about 12% of world population), but account for < 2% of world GDP & about 1 % of global trade in goods .

41. Newly Industrialized Country • A country whose level of economic development ranks it between the less developed and more developed classifications. • Have moved from an agriculture-based economy & to a more industrialized, urban economy, & developing infrastructure.

42. NIC • NICs usually share some common features, including: • Increased social freedoms and civil rights. • Strong political leaders. • A switch from agricultural to industrial economies, especially in the manufacturing sector. • An increasingly free enterprise economy, allowing free trade with other nations in the world. • Large national corporations operating in several continents. • Strong capital investment from foreign countries. • Political leadership in their area of influence. • Lowered poverty rates.

43. More Developed Country • A country with high levels of economic development & infrastructure. • Indicators of development: • low birth rate (< 10) & infant mortality rates (< 12 per thousand) • less than 10% of the workforce in agriculture • high levels of nutrition, secondary schooling, literacy, electricity consumption per person, and GDP per capita—generally above $US 20, 000 per capita.