Comparing economic structures by country and time

1. Comparing economic structures by country and time

2. Let’s see what you found from the homework • This has all the countries filled in – could you see a pattern between the LICs and the graph? The HICs and the graph?

3. Let’s see what you found from the homework Any patterns?

4. Lets look at these 3 • The primary sector: what kind of activities are in this group? What pattern do you notice? • The secondary sector: what kind of activities are in this group? What pattern do you notice? • The tertiary sector: what kind of activities are in this group? What pattern do you notice?

5. Lets look at these 3 • 1. The primary sector – farming, forestry, fishing and mining - decreases as a country gets a higher GDP • 2. The tertiary sector – shops, government sector, transport, entertainment – increases with the GDP • 3. Something a bit odd happens with secondary sector - - it starts off low and then increases but then starts to get smaller again in the HICs. • Our task in this section is to look at why this should happen.

6. Why are so many people employed in primary industries in LICs? • LICs have a low income per person. This is mainly to do with the things that they sell have low value. • These are mostly primary products – raw materials – which have not been processed. • The richer countries and the traders have always paid as little as they can for raw materials. • This means that these countries cannot afford the machines to do the work but depend on poorly paid labour to do most of it instead. • This also explains why such a large % of the population is involved in growing/collecting and harvesting these raw materials.

7. Why do MICs have fewer people working in primary industries? • However, once a country begins to develop, it will not sell raw materials for low values, but will begin to process them themselves and so become richer. • As they become more industrialised, they will have more money to invest in machinery, which means that few people are involved in the production of raw materials. • It becomes increasingly pressing that more people are released from primary production as more and more people are needed in the secondary manufacturing industries. • So as industrialisation increases, then the number of people employed in primary production decreases. This does not mean that the amount of primary production decreases, just the number people needed to carry it out.

8. Why does the number of people in tertiary industry increase with development? • As a country becomes richer, an educated work force becomes more important, so there is more invested in education (tertiary). • As fewer people are producing their own food, then services to provide food to the industrial workers also increases (secondary – food processing and tertiary – distribution network shops and transport). • Industries are most economical in urban areas so you need roads, water, police (all tertiary). So the general trend is that as a country becomes more industrialised, the greater the tertiary activity is. • When a country becomes richer still, then services likes banks, insurance, widespread healthcare and many others employ more and more people.

9. What about the odd pattern of secondary employment? • But what about that trough-peak- trough pattern of secondary economic activity? • As we saw there is little large-scale secondary activity in LICs because they do not have the money to invest nor the skilled worked force to operate and maintain the machinery. • But as they begin to develop, then more processing of primary products takes place there. • Once an industrial base exists, with lower costs that in HICs, the TransNational Corporations (TNCs) see this as a new market but also a good place to put new factories. • The governments of these countries are all in favour of bringing in more industry and so do their best to make the environment positive for any TNCs wishing to come. • So manufacturing employment decreases as a country more expensive than the growing MICs.

10. For example, Malaysia – take a look at their exports (case study 1) • Primary • 1970: 43 + 5+ 25 = 73+% (other will be some primary as well) • 2000: 7 + 3 =10% + other • Secondary • 1970: 15% + some • 2000: 61 + 4 + 3 = 68% + some What do you notice

11. Why did they make that change • Besides the usual ones of seeing it as the only way to develop, they had another reason. • There was one ethnic group, the native Malays, were very poor and this was causing civil unrest. • They could see that in order to make more money for everyone, industrialisation was the way forward.

12. What did they do? • In 1970 it introduced its New Economic Policy (NEP). They decided to: • provided financial incentives for foreign trans-national companies (TNCs) to invest in Malaysia. • train their workforce in the necessary skills. • use money from traditional exports to help fund this development. • They attracted inward investment with the inducement of low taxes and cheap land • They invested heavily in getting an educated workforce. • The government has also built an infrastructure of roads, railways, airports and ports, which benefit the population but also encourage the TNCs to invest • They kept the wages low • The strict labour laws minimised disruptions and union membership was not encouraged • The working day was long.

13. How did they get the population to accept these conditions? • The government achieved good social welfare results • The reductions in child and maternal mortality have been exceptional and rates are now similar to those of many developed countries. • These improvements are attributable to a well developed primary health care system, including substantial investments in the reproductive health service, and to access to quality water, sanitation and nutrition. • The Malaysian government subsidies for petrol, food and other essential goods allows the people to have sufficient, even if their income is low. • Over time, they built up their own design facility – Proton Cars and microelectronics component industries.

14. But what about the secondary employment blip? (HIC over time case-study) • Let’s look at the UK over time • What happened to the primary industry? The tertiary? • But now take a close look at the secondary industry – what do you notice?

15. But what about the secondary employment blip? (HIC over time case-study) • Let’s look at the UK over time another way • Line graphs are good if you want to look at change over time.

16. Let’s look at the patterns: in 1800 there was little in the way of service industries or manufacturing – back then most manufactured goods were made in small workshops by a few craftsmen. However, most primary production, farming in the main, was done by hand or simple technology. But as the industrial revolution took hold, more people were needed to work in factories and so fewer were employed in agriculture. This was facilitated by increased mechanisation – the steam engine being an important element But what about the secondary employment blip? (HIC over time case-study)

17. Even with mechanisation, factories employed a lot of people in the early days. However, even as more mass production, of items like cars and washing machines, meant more factories, the increase in labour began to tail off, as the automation took over from mechanisation. Another issue was raw materials – many of our early industries in the UK depended on locally available, bulk raw materials but as these began to run out, the advantage for the factory nearby was lost Add to this, as we have seen in Malaysia, as more countries becoming industrialised, then new factories tended to concentrate in those places where bigger profits could be made, due to lower wages and lower taxes. So as old factories became out dated in the HICs, new ones that replaced them were built in the developing countries, such as Malaysia. But what about the secondary employment blip? (HIC over time case-study)

18. So the number of people employed in secondary industry in HICs began to decline for both the above reasons. In the meanwhile, TNCs kept up their administrative and development arms in HICs, increasing the number of workers in tertiary and even quaternary occupations. In addition, finance and tourism and all the other service industries grew apace in HICs and their levels of healthcare, education and government services all grew too. But what about the secondary employment blip? (HIC over time case-study)

19. Ethiopia Brazil Japan UK Peru Change it a bit, take away the bottom scale and put in countries and …. • You can see that as countries develop they change their employment structure. • What do you notice about their primary industries, secondary industries and tertiary industries.

20. Comparison between the 2 case-studies Looking at them separately first

21. Comparison between the 2 case-studies • The number of people working in primary industry the UK, that is farming, fishing, mining and forestry, at 1.4% in 2006, is unlikely to go any lower. However, the number in Malaysia 13% and will probably continue to fall as agriculture/mining etc becomes even more mechanised. • The secondary industry peaked in the UK in 1900s before tailing off. This is due to increased mechanisation, raw materials such as coal and iron ore running out and competition for work, as the TNCs choose more profitable places to operate from, and in the meanwhile in Malaysia, those in secondary production is still increasing and already higher than that in the UK.

22. Comparison between the 2 case-studies • Both countries have increasing numbers involved in tertiary and quaternary production (although the figures for quaternary are not high enough to show up on the graphs just yet), as they are both concentrating on development and design rather than on straightforward production and the increasing standard of living of their respective populations can use more and more services

23. What is informal employment and why does it happen? • The official definition: The informal sector is largely made up of jobs over which there is little or no official control. It includes jobs such as child minding, domestic cleaning and bar tending. • In HICs, this is the main area for the informal economy. • Previously, in the UK for example, this also included something called the ‘Black economy’ or the ‘Lump’. • A lot of building workers were paid by the day in cash and did not pay tax nor did they show up as being employed – in fact many claimed unemployment pay and worked illegally. • Because of its illegal nature, pay rates were much lower than regular workers and so building contractors were only to happy to use them. • Another group were illegal immigrants who worked in sweat shops for long hours, poor and often unsafe conditions and very low pay.

24. What is informal employment and why does it happen? • But the minimum wage and the demand that building contractors withheld money, even from self employed people, to off-set tax has resolved many of these issues. • Officially, someone cleaning houses for a few hours a week or doing a bit of baby sitting should be registered as an employee but small infrequent jobs of work are largely disregarded by officialdom. However, they do form part of the informal economy. • In MICs and LICs the informal sector is far less controlled and involves a much greater variety of people and jobs.

25. What is informal employment and why does it happen? • In LICs/MICs most street workers do not appear on any statistics - these include street vendors, shoeshine boys, car washers, litter pickers, as well as employees of back street workshops who work long hours in dangerous conditions. • In some countries, children are sold by their parents to become ‘apprentices’ and so are virtual slaves until they reach adulthood and as it is for most part illegal to employ young children, they do not appear in any statistics either. Venezuela

26. What is informal employment? Why does it happen? • For example in India it has been estimated that the informal economy was responsible for 60% of net domestic product, 68% of income, 60 % of savings, 31% of agricultural exports and even 41% of manufactured exports! Some estimates say that as many as 80% of the population earn most of their money through informal means. In another example, Nigeria, it is thought that 40-45% of the GDP comes from the informal economy, even though Nigeria is a resource- rich country. India street market Guatemala