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Development Basics

Types of country:

G8 - Canada, France, United States, United Kingdom, italy, Japan, Germany. (WW2 nations)

G20 - Same, but with the top 20 countries, including Brazil, Austrailia, South Africa etc.

BRIC - Name given to four fastest growing economies, Brazil, Russia, Indonesia China.

Next Eleven - Emerging markets in the next centuary, Egypt, Mexico Nigeria  & Turkey etc.

Development Continuum:-

Idea of the 'North South divide'. Suggest different countries are at different levels of development and are passing through different stages of development. These stages are illustrated with:

Rostow's Model - Traditional society, preconditions for takeoff, takeoff, drive to maturity and then High-mass consumption. It's also noteworthy that this includes social and cultural changes.

Clarke's model - Shows changes in employment as society develops: Suggests economies of low levels of development have high proportion of population in agricultural jobs, as productivity increases, there is a shift in employment to manufacturing. Further shift towards employment of the service industry, with high employment in the service industry being indicitive of high levels of development. (Mirros past experience of major economies, and emerging  ones like India.

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Globalisation Charictaristics

Globalisation is :-

Increase in interaction, economic, social, political and cultural. (Even environmental, e.g Climate change.)

Increase in interdependency between countries. I.E actions of one country can directly affect others, be it trades, investment, carbon emissions etc.

Globalisation has developed due to:-

Technological developments in communication, telecommunications (especially internet) and undersea fibre optic cales permitting real time and more reliable communication

Technological developments in transportation - partciularly long range jet aircraft permitting faster and more reliable physical communications;

Lower cost of communications and transportation - development of cargo jets, large container ships permitting economies of scale etc.

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cont.

Increased ease of capital flows (profit and investment) around the world brought about by electronic transfer of funds.

Free flow of of goods and movement of people

Growth of large TNCs that can produce across national boundaries setting up international production lines on a worldwide scale.

Formation of regional trade and political group (Such as the EU, NAFTA)

Issues related to globalisation:

Can be seen as responsible for raising living standards of the billions of the world's population, however some argue it has imporverished large numbers too.

Opposition to globalisation from both left and right wing- left argue globalisation is exploiting low cost area, right see it as a loss of jobs from developed countries;

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cont.

Increased ease of capital flows (profit and investment) around the world brought about by electronic transfer of funds.

Free flow of of goods and movement of people

Growth of large TNCs that can produce across national boundaries setting up international production lines on a worldwide scale.

Formation of regional trade and political group (Such as the EU, NAFTA)

Issues related to globalisation:

Can be seen as responsible for raising living standards of the billions of the world's population, however some argue it has imporverished large numbers too.

Opposition to globalisation from both left and right wing- left argue globalisation is exploiting low cost area, right see it as a loss of jobs from developed countries;

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India

This activity however is more complicated that people percieve, it includes;

  • Cold calling
  • Customer helplines
  • Highly specialised customer support services (e.g Maintencne helplines.) 

This development has often been at the expense of existing centers in the west, and there has been a consequent transfer of employment and economic activities from places such as mid-scotland to India.

Causes

  • Speed, cheapness and reliability of communications technology have permitted 'footloose' location of communication based insutries - usually to the lowest cost location.(Lots of government investment)
  • Cost of indian workers is considerably lowers than that of western workers.
  • High motivation of Indian workers;
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Indian Higher educatio

Indian government into higher education, specifically ICT and linguistic skills. The linguistic skills further allows call centres to be used globally.

Deregulation of India's econmy also allows for further TNC  investment. 

Issues and Outcomes

Positive

Rapid development of the economy and higher skilled employment.

Development of young, professional middle class.

Skills acquired in whole range of call-call centers has led to development of other high-tech industries with both indiain companies and TNCs attracted to Indian cities.

Lower charges to western consumers based on lower operating costs.

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Negative

Negative issues:

Net loss if employement in western call centres:

Issues on working conditions at some call centres, including low pay, long hours, high stress.

Further issues linked to sustainability of economic development in India:

Focus on service industries has not led to the ssme environmental issues that development has raised in other countries - although certainly India has a very large industry section which is as polluting as any other country.

Adequate provision of electricity is still a major issue in India, both in terms of volume and reliability. India has a lot of investment into HEP, however reliabilty is the main issue.

Educated sector of India is very small, higher education has only benefitted a small minority, although it makes up a large number of individuals. (1.1billion population.)

Economic success has led to rapid urban ecpansion. 

Further growth is expected though, as India is now a major financial center.

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India conclusion

Other issues are the reaction against outsourcing by western consumers, illustrating concerns over globalisation. (Mainly transfer of employment.)

This has led to a further trend of insourcing, low skilled jobs being returned to high income countries.

Indian tertiary sector has grown by 50%, 

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Newly Industrialised countries

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Newly Industrialised countries

This refers to a group of countries that have rapid industrial expansion.

Characteristics:

Rapid economic growth

Growth based on export

Very stong government direction, many cases is an autocratic government.

Heavy TNC involvement

Significant inequality in living standards. (E.g Brazil.)

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The asian tigers

The Asian tigers

Comprised of Taiwan, South Korea, Malaysia, Singapore.

Reasons for rapid growth:

Labour force - small and densely settled, low cost and prepared to work very hard for a national goal. Educated and skills due to government investment in education as element of development.

Strong government involvement in development: Investment in infrastructure, education and control over workforce power (trade unions etc.). Futher incentives such as low taxation and development of trade free zones (E.G Hong Kong).

attraction of TNCs: Initially most Japanese taking advantage of low cost but still skilled workforce.

Willingness to use FDI: Local startups and development of major corporations often based on initial foreign investment.

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Case Study - South Korea

South korea has been one of the fastest growing Asian tigers, and is certainly now a high income country. Large investment following the Korean war was key.

government policy under General Parkfollowing the war included:

Development of Energy Industrial

Expanded agriculture 

Development of basic industries

attract exporting manufacturing industries (mostly through TNCs)

Promoting education in general and science and technology in particular.

Also maintaining a low cost workforce through control of trade unions.

Other factors:

Large and motivated working at lower cost:

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Case Study - South Korea cont

Higher education standards attracted more investment

Modern production plants enabled under cutting of western industries, especially ship building and steel production.

Investment by TNCs, often Japense, investment by US (geopolitical)

Technology from TNCs from which S.Korea gains skils, and established their own high tech industries.

Importance of large family run diversified companes called Chaebols, which developedi nto Korean TNCs, such as Hyundai.

Contemporary challenges

Limited development of creative and innovative industries, which are seen as necessary for next wve of development.

Extremely high level of personal debt, higher than any other country.

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Contemporary NICs, BRIC et al.

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Contemporary NICs, BRIC et al.

Following success of the Asian Tigers, a range of other countries can be considered to have become NICs. 

This second set of NICs tends to have a different set of characteristics than the original. E.G Brics

Large population and land area

Strong political control

large reasource, mineral or energy base:

Focus on some form of export

Size of country and growing econmy allows global role bigger than that accorded to smaller Asian Tigers. (All but Brazil have nuclear weapons.)

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BRIC issues

Russia

Rapidly declaring and aging population questions its capacity to continue as a major power, especially given relative ineffeciceny of its industry.

High level of corruption and political instability, despite apparent strong central government

Dependency of hydrocarbons means economy is volitile and relies heavily on oil prices - 22% of econmy is based off of it. E.G Recent slump in oil means econmy has fallen largely.

Brazil-

Concern over  development of Amazon could place limitations on Brazil's future development

Continued inequities within the country could prove an issue, e.g recent rioting over sporting investment instead of infrastructure and welfare.

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China Case Study - causes of growth

Causes of growth:

Liberalisation of Chinese economy in 1980s under leadership of Deng Xiaping. First move away from purely communist econmy to mixed economy with free market elements. Initially allowed China to sell food and other commodities for market, and allowed Western companies to entery china.

One child policy: Critical in controlling the rapidly growing population and reducing the dependency ration. This enabled increase in household savings and the start of spending on consumer items. This also reduced food demand, reducing risk of famine and need for food imports, freeing up labour for manufacturing. 

Characteristics of workforce: China has the world's largest workforce, which is also the cheapest. China price. China's workforce is educated, 99% of adult literacy, meaning the workforce is skilled. The workforce is also prepared to work long hours in poor conditions. Union power is kept weak by government, although strict employment laws exist, they're not rienforced ofte.

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China Case Study - causes of growth cont.

Strong government involvement in creating conditions for growth: Liberalisation of economic policy is one aspect of this. Government economic policy is framed within series of five year plans. In effect this results in investment in education, infrastruure (including communications) energy (nuclear and renweable) and high tech projects, space military development etc.

Creation of SEZs - free trade zones within china where foreign companies are encourgaed and permitted to invest, Shangai & Shenzhen. These are mostly coastal locations, and have been center of most intense and rapid development. 

Attraction of FDI - This has been crucial to Chinese development, as FDI provides the capital to develop with. Partly by attracting TNCs via SEZs:

Significant element of outsourcing - chinese owned companies doing work for western customers, such as Walmart.

TNCs entering China to take avantage of China price

Low value of currency: A common complaint against the Chinese government is the artificially low value on the Yuan. Concequence is that the price of Chinese exports are low and undercuts producers in other countries.

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Causes of growth Cont.

Balance of trade surplus: The volume of Chinese exports compared to the low level of imports means China has ammased a significant amount of foreign currency. This means: A large stock investment of capital, and China going on a spending spree buying western assets, which worries foreign governments.

Large domestic savings: Chinese do not spend much but save a lot, thise has increased sincce the reduction in family size and also since city workers started sending back part of their wages to rural areas. 

Espionage: China has accquired a lot of it's technology via corporate espionage, E.G MAGLEV train, Stealth fighter copied from Lockheed. Why develope own technology when you can steal someone else's for free.

Low cost of transportation: China benefits from the ability to move high value components and even higher value goods around the world by ship of airfrieght at remarkably low cost.

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Issues in China's development:

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Issues in China's development:

Loosing the China Price: Inevitably economic development will raise wages, which has happened in CHina, and so the ability to undercut the rest of the world is at risk.

Outsourcing: Chinese companies now maintain their edge by outsourcing their outsourcing:

Indonesia - seen as new china both in terms of large workforce, and lower cost production

Other more remote parts of China, meaning costs can still be very low. 

Progression to Higher Value Production: The Asian Tigers, when faced with same increase chose to increase value of what they produced - so china may move away from low cost assembly to higher value goods.

Low level of domestic spendng: As noted above, the chinese people do not yet buy much. This means economy is still export orientated with little domestic market. One way of maintaining growth would be to develop this market.

Reasources: The scale of Chinese reasources used poses a huge problem to the government.

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Issues in China's development:

This comes from:

Population size

Increasing demand per capita

Reduction in food production

Demand for reasources, especially fuel

These problems have largely found solutions:

Development of farming in other countries such as Ukraine

Developing alternate energy sources, e.g Three gorges dam

Controlling it's own supply of reasources, China has largest reserve of rare earth metals.

Developing friendly relations with reasource producing nations, especially investing in Africa

Developing strong regional military precense, which is safeguard for reasources.

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China Case Study - causes of growth cont.

Environmental issues: The social cost of economic development has large risk to public health though pollution, e.g urban smog, farm land contamination and now air pollution is reaching North America. (16.1% of China's soil showed contaminaton.)

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NIC closing notes

NICs are considered to be a major factor in globalisation and shifts in economic activity.

Transfer of employment from developed countries (soctland to india)

Generation of their own industries to compete with the west - development of car industries in Malaysia means imported car demand lessens.

FDI by NIC TNCs in other NICs meaning they can often avoid import charges.

Significantly affecred world balance trade - high income economies going into deficit as they import more, whilst their exports are dropping.

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TNCs

A transnation corporation is a company than operated in different countries. This can included offices, warehuses, service facilies and R&D facilities.

Usually are very large companies with the capital enabling it to seek out and exploit world-wide locations.

Often operate a 'spatial division of labour'. This involves different activities in different locations, e.g High skilled R&D being icated close to educational facilities in high income countries, and production being in NICs etc.

Locational decisions made in canterlaised head office. E.G problem with Phizer in Sandwich being a corporate strategy, rather than actual problems with Sandwich plant.

Although TNC activity is most highlighted in NIC and low income economies, most TNC FDI is in high income economies.

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TNCs cont

Mineral mining, petrochemical and agriculture: TNCs with least relative freedom of movement as need to operate where reasources are available. Often highlighted as having the highest environmental impact and also have a high prescence in low income countries.

Manufacturing constists of different groups of copanies:

Cost orientation: Locaition is based on finding lowest cost operating location, which often leads to location in a low wage economy.

Market orientated: Location of plant close to market access, or to circumvent customs charges. (E.G Toyota manufactured in Mexico, close to it's target market.) Even with this orientation, the actual location will still be influenced via cost considerations.

International production line: As noted above, many TNCs form part of an international production line. E.G Smartphones componants made in S.Korea will be assembled in China, and airfreighted to the west.

Services: This is also a very diverse group. These companys can exploit location and global operations, aswell as world events. (E.G Ryan air exploited financial crisis in 2008 to buy 200 new boeings.

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TNCs growth

Methods of growth:

FDI - simply be opening facilities in other countries.

Mergers and Acquisitions: Buying or merging pre existing companies. This can be cheaper to expand than FDI. Arcelormittal  is the largest steel producer but did not own a steelworks. 

Joint ventures: TNCs go into partnership with another TNC. 

Franchising: Similar to joint ventures. Mcdonald's is the best known example, as most of the mcdonalds restaurants around the world aren't owned by them. This is great for market awareness too.

Production under licence: Where a parent company sells the rights to production to another, usually overseas company. Very common with high tech products, e.g China buying rights to Siemens, a high speed train company.

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Reasons for TNC growth

Very much linked to globalisation:

Large reasources of large corporations have neabled them to exploit different locations for profit.

Restrictions on capital flows, both investments and profits have enabled the resources necessary for FDI.

Further to this global scale of TNCs have enabled them to evade tax.

Low cost of transportation has permitted the development of international production lines of components and finished products. (Economies of scale.)

Size of TNCs has enabled them to crowd out smaller competitors,  so giving them a monopoly.

Size of TNCs give them considerable political influence. E.G JP Morgan announcing they will cut some of its 26000 jobs in the UK if the UK leave the EU. (A case for stay campaign.)

Willingness by governments of NICs to attract TNC FDI. Weakness in lesser developed countries to resist TNCs (Sierra leon, $500,000 for largest diamond supply.)

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Reasons for TNC growth cont

Spatial organisation. Much of this has deakt with in discussion of international production lines, however a number of points can be made.

Head office: Usually in host country, E.G Toyota in Tokyo.

R&D Requires high skilled labour, so location in HICs with good education. (Toyota in Detroit).

Component/assemly: Tendency to be lowest cost suitible location:(Toyota in north mexico border)

Sales and services: located close to, or in the market. (Toyota depos around the US and Mexico.)

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TNC Case Study - Foxconn

Foxconn's head office is in Taiwan. It's main product is the production of products for other companies. Is assembles every brand of smart phone in the same factory in Shenzhen, China. It's location reflects both it's market, and the advantages taken of globalisation.

Foxconn's largest factory is in Lonhua, China in which hundreds of thousands of workers are employed. (230,000-450,000.) It covers around 3km swuared, includes 15 factories, dormitories, a swimming pool, it's own TV network. It's often referred to as Foxconn city, due to it's vast size. Many of these employees work 12 hour days 6 days a week. The plant is notorious for long hours, low wages, poor working conditions and worker suicides.

If contrasted with Foxconn's operations in Harrisburg, USA, the company has a high skilled, high wage workbase, albeit much smaller. This was build due to it's location, and its proximity to the Carnegie Mellon university in Pittsburgh. Low cost of land explains the specific location.

Contrast this again with Mexico, in which Foxconn has a facility in San Jeronemo, which assembles computers, and two facilities in Juarez which manufactures Mobiles. As Mexico is part of NAFTA, is allows products to be exported to it's northen markts without tariffs. (Juarez is on US border.)

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Positive impacts of TNCs:

Economic:

  • Creates jobs which generate local income,
  • Provides investment capital for FDI, and also bring it's own infrastructure developments.
  • Creates additional local tax base
  • Stimulates local multiplier effect which creates local supply lines.(Often creates local business)
  • Represents input of technology into an economy
  • Employees acquired skills for their own start ups.
  • Export of products improve balance of trade.
  • Social/Cultural
  • New jobs can modernise the workforce
  • Investment in local community facilities
  • Can improve services in local area, as wage will likely be higher than average in the area.
  • Can lead to provision of higher quality products (Leads to consumerism.)

Political & Environemental

  • Creates links and interdependency between nations, 'Countries that trade don't go to war'.
  • Has ability to develop reasources host country lacks, can operate in environemtally clean way.
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Negative impacts of TNCs

Economic:

  • Jobs created can be low skilled and low wages (although TNC wages are usually higher than other local jobs.)
  • Often jobs are lost from parent company
  • Can lead to loss of employment through crowding-out local companies. (property inflation, loss of workforce etc.)
  • Profits frequently exported to parent company with little local benefit or wider investment
  • TNCs often able to circumvent taxation.
  • Import of technology can often be very limited, especially true in low skilled manufacturing.
  • Low skilled employees are unlikely to be able to create start ups.
  • TNC plant often part of international supply and production line, to little interaction wiht locals.
  • Infrastructure developed can be focused on needs of TNC, which can have no benefit on locals.
  • Trade - Espeecially on primary reasources have been negotiated unfavourable to host country.
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Negative impacts of TNCs

Social/cultural

  • Low wages and poor working conditions can have harmful impacts.
  • Investment in communities can be limited, or only benefit the TNC itself.
  • TNC investment can lead to local inflation especially if leads to influx if a higher skilled cohort.
  • In some cases, direct harm to indigenous groups. (e.g amazonian tribes with oil production)
  • International marketing and branding reduces diversity.
  • Political 
  • TNCs can exert lconsiderable influence over host governments, often they represent the largest employer and single generator of income, giving them considerable power.
  • TNCs remove local decision making power - e.g Pfzier and Sandwich

Environmental

  • Development of primary reasource can be on unfavourable terms to host country (sierra leone)
  • Takes advantage of weak health and safety and protection laws, also has legal reasources to help circumvent such laws.
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TNC conclusion

TNCs are a direct concequence of globalisation, especially free movement of capital and goods, and the ease and cheapness of transport, freer trade.

They also have been a major driving force of globalisation:

Being a direct cause of ecnomic transfer, and especially jobs around the world.

Being a major component of the development of NICs

Changing the balance of trade surplus and deficits around the world

Influencing government policy in both host and parent countries.

It's unclear as to whether TNC involvement in a country is positive, however it is certainly postivie for the consumer, and results in lower prices, but perhaps at the expense of bad working conditions and pay of the workers in LEDCs

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Countries with low levels of development:

Reasons for low development: A wide range of problems can be attributted to why some countries, mostly in Africa, remain at very low levels of development:

  • Environmental: Lack of natural reasources, environmental damage (soil erosion), poor farm land.
  • Experience of natural disasters
  • An adverse climate.
  • Economic: Exploitation by TNCs, especially primary reasource producers
  • Unfavourable terms of trade, countries do not get a fair price for the reasources they produce.
  • Overwhelemed by debt repayment
  • Inability to accumulate investment capital 
  • Post-colonial past, usually stripped country of assets and with ineffective infrastructure,
  • Low income exploittion of works, e.g Factory collapse in Bangladesh with many dead in tiny building.
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Countries with low levels of development cont.

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Countries with low levels of development cont.

Social-

  • High fertility and rapid increase in population led to high dependency ration, which takes a high proportion of income, meaning low level of savings.
  • Poor social capital - low education levels and health care inhibits development (and adds to high fertility.)

Political

  • High levels of political unrest, civil and international violence. (most wars occur between countries with the lowest levels of development.)
  • High levels of curruption in governments. Catch 22, curruption is brought on by low levels of development, but in itself inhibits growth of development.
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Poverty Traps:

Population trap: Large and growing population creates high dependency ration stiffiling domestic markets and investment. Until population controlled, can be little economic growth.

Health Trap: Poverty causes disease which lowers workforce quality, and leads to high infant mortality. Economic growth requires a healthy workforce, but this can only come with a growth in the economy.

Political trap: As china and Asian tigers suggested, economic growth requires stable if not autocratic government. The poorest countries suffer from great deals of corruption.

Trade Trap: As also shown by China and the Tigers, countries need to trade to develop. However the poorest countries are exporting primary products (food, minerals, oil) and getting low prices. This means they get very low prices and limits the ability to invest. Until trade terms are improved, a country cannot develop fully.

Debt Trap: Countries that have borrowed heavily to fund development are unable to pay it back due to the lack of development. This huge burden with interest rates stop development.

Aid Trap: Countries which recieve large volumes of aid depend upon it (e.g food aid from EU undercuts local farmers, whom arenrn't profitable and cease food production.)

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Case Study - Sierra Leone

In reasource terms, one of the richest countries in the world by GDP, and HDI on of the poorest.

  • Mineral wealth, including titanium ore, aluminium ore are heavily mined by TNCs, which have had contracts with former government, but leaves Sierra leone with little income:
  • TNCS pay Sierra Leone a fixed income for ores rather than a % of income, and this is not negotiated if the value goes up. 
  • TNCs artificial undervalued the minerals mined by selling to another part of the TNC at a reduced rate. A practice known as transfer pricing, which involves selling mined ore to the refinary at low cost, where the refinary increases the cost disproportionatly. This reduces levels of income tax the mine has to pay, and thus means the government get less.
  • TNCs employed professionals from host country to manage mine which were paid very little income, and so paid very little income tax. (So little no one from west would work there.)

Concequences of this:

Farmland - Sierra Leone has very fertile farmland, however it's being destroyed by mining from TNCS, much of the metal ore coincides with the best farmland. > resulting in soil erosion.

Diamonds - Sierra Leone saw $500,000 per year from one of the largest reserves of diamonds. Overseas companies made huge profits off of this, whilst Sirra Leone made a fraction of a %.

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Sierra Leone

Fishing: Sierra Leone's waters have some of the richest fish stocks, but gov does not have reasources of will to enforce fishing laws, so fishing grounds are exploited without payment.

Poor Social infrastructure: With the country virtually bankrupt, there is no money to invest in health and education, so no investment other than minings is attracted.

Lack of intrastructure: No gov funds in infrastructure invested, only by TNCs for mines.

High fertility rate: High infant mortality rate means high fertility rate, health trap.

High debt repayment: Debt trap. Loans to world bank have imposed large spending cuts.

Corruption: Sierral Leone has had several unstable and corrupt governments.

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Ethiopia

Ethiopia remains one of the poorest countries in the world. In the 1980's, it's synonymous with famine, civil war and corruption. However Ethiopia gives an example of where a very low income has show signs of development:

According to the IMF, Ethiopia was one of the fastest growing economies in the world, with 10% growth in GDP from 04-09. 

The success has largely been due to a stable government with privatisation of many formaly state owned industries which attracted FDI. Ethiopia is dependent on Coffee exports, and has participated in Fair Trade agreements giving it larger profits.

A major development has been Ethiopian Airlines being amongst the largest airlines in africa.

  • Addis Ababa has become regional hub for passengers and cargo.
  • This has encouraged growth of both support services , and has seen a growth in financial and service companies in the city.
  • The airfreight potential has opened the possibility of Addis Ababa becoming an Aerotropolis, attracting industries which requires distribution services and cheap workforce. (e.g SEZ) If developed further, this could potentially challenege the China price.
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Ethiopia

How can the developed world assist the poorest countries. Considering the causes of the problems leading to low levels of development:

  • Renegotiation of terms of trade
  • Freer trade with poorest countries
  • debt reduction

Changing perspective on aid - aid channeled more appropriate ways, such as supporting farmers rather than undercutting them.

All of these issues derive from the fundamenta issue of lack of capital. If such capital were available, it could be used for economic and infrastructure developments which would also tackle aspects of the health, debt and population traps.

International assitance in tackling corruption:

  • Sanctions and embargoes on corrupt leaders
  • International legal proceedings against said leaders
  • Embargoes on illegal goods (e.g blood diamonds)
  • Direct military intervention 
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Aid and Trade

There are many different types of aid, including programme aid, development aid, food aid, military aid & budget support, amongst others.

There are wider reasons why aid is given, particularly dependent on who's giving it:

Bilateral aid: aid from developed nation can result in gains for said country with countracts etc.

Stregnthen political ties

aid to strengthen political stability of recipient (E.G US and Isreal)

Aid to meet emergency requirements (after disaster)

Aid given by governments is usually paid to other governments

NGO aid - tends to be targeted towards smaller scale projects. (charities)

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For & against aid:

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For & against aid:

For:

  • Emergency aid saves lives in time of Disaster
  • Aid helps rebuild livelihoods after disaster
  • Aid can support countries in developing their natural reasources and power suppleis.
  • Projects that develop clean water and sanitation lead to increase health and living stds.

Against

  • aid can increase the dependency of LEDCs on donor countries. Sometimes aid is not a gift, but a loan the poor countries struggle to repay.
  • Aid may not reach those who need it, e.g corruption.
  • Sometimes projects do not benefit smaller farmers, and are often large scale.
  • Some development projects may lead to food and water costing more
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Trade:

Trade is a fundamental aspect of globalisation, and is often seen as the most effective route to development. 

  • Tariffs: Where additional costs imposes on goods or services being imported  can result in protecting a home industry, or reduce mass consumption. Removing charges, such as in SEZs, EU single market of free trade zones are usually aimed at increasing economic activity. Reduction of tariffs has aided growth of TNCs & NICs alike.
  • Quotas: This is where a limit is imposes on the volume of a good that is permitted to be imported. This can also have the impact of raising cost due to lack of supply.
  • Trade Bans: This is where imports or exports are banned:  

- Protection of home industry, health concerns (e.g EU ban on indian mangos due to pests), protection of strategic technology by preventing sale to other countries, and as political sanctions against other countries. (E.G US trading ban on Cuba, Iran, restrictions with Russia over Ukraine).

  • Use of specification on goods - allowing import only goods which conform to specific standards, which are used to obstruct imports from low cost producers. (banning goods from china for H&S etc.)
  • Subsidies- where gov finances a home industry to reduce it's operating costs. EU CAP policy.
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Trade:

Trade is a fundamental aspect of globalisation, and is often seen as the most effective route to development. 

  • Tariffs: Where additional costs imposes on goods or services being imported  can result in protecting a home industry, or reduce mass consumption. Removing charges, such as in SEZs, EU single market of free trade zones are usually aimed at increasing economic activity. Reduction of tariffs has aided growth of TNCs & NICs alike.
  • Quotas: This is where a limit is imposes on the volume of a good that is permitted to be imported. This can also have the impact of raising cost due to lack of supply.
  • Trade Bans: This is where imports or exports are banned:  

- Protection of home industry, health concerns (e.g EU ban on indian mangos due to pests), protection of strategic technology by preventing sale to other countries, and as political sanctions against other countries. (E.G US trading ban on Cuba, Iran, restrictions with Russia over Ukraine).

  • Use of specification on goods - allowing import only goods which conform to specific standards, which are used to obstruct imports from low cost producers. (banning goods from china for H&S etc.)
  • Subsidies- where gov finances a home industry to reduce it's operating costs. EU CAP policy.
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Free trade vs Protectionism

It is argued that free trade is the best option for global economic development. The ability to export to HICs was key to NNIC development, and to the growth of TNCs.

However free trade can also imply the loss of employment in HICs, as lower cost producers undercut them. This brings call for protection against these imports, usng any of the methods listed.

  • > Reduction of trade reduces global economic activity. (argument in reccession against protectionism). Historical examples is the use of protection measures in 1930s which deepened depression.
  • >Measures taken by one country against another attracts retaliation, e.g China has serious investment into US economy, which if withdraw would have very serious impacts on US economy should proectionism be enforced there.
  • >trade restrictions Links to the problems of countries at the lowest levels of development: Denying a market, and denying investment capital.

Fair trade: Fair trade agreements seek to give better prices for supplying countries (LICs)

GATT - International org. which aims to negotiate reduction in trade restrictions and enhance free trade.

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Groupings of countries

Trade blocs: To reduce barriers to trade and increase volumes of said trade. (NAFTA)

International political organisations: United Nations

Regional political organisations: Organisation for African Unity helps relationship between nations.

Producers cartel: Exists to coordinate production and control price: OPEC

Regional political/economical blocs: EU- unique in economic and political organisation.

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The European Union

Origins: After WW2, the European Coal and Steel Community was created to assist in rebuilding after the war, and bring the warring countries together. (France, german, italy). By late 60s, had developed into the European Economic Community, fostering freer trade between member nations. UK joins in 73.

Single European Act passed in 87 led to the creation of the Single Market, which allows free movement of goods, services and people between member states.

Notes:

Original countries tended to be of generally equal levels of income and development. 

Development during 1980s brought in more peripheral countries, greece, spain etc. These had lower income and development.

During 1990s-2000s, additional members joined.

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EU pt2

Common Agricultural Poliy (CAP) : European policy for agriculture.

  • Subsidieses production of specific crops (oil seed)
  • Subsidises farming in remote areas where profit it threatened (hill farming in Britain)

Criticism of CAP:

  • Subsidies led to large scale over production. Much of this surplus is sold cheaply to low income countries, which undermines local produce.
  • Subsidisation of European Agriculture anti-free trade: protection of European farming by trade barriers being shut with LICs.
  • Hugly expensive and accusations of wastefulness.

European Regional Development Fund:-

Funds development infrastructure projects in deprived areas of EU. (e.g low income area of uk)

Affectively redistributes income from high income to low income areas.

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European Single Market

Impact of European Single market

  • ,Increase in trade: Largest volume of trade of most member countries is with other members of the EU
  • Attraction of non-eu TNCs to EU: In order to take advantage of free trade zone and to reduce costs. (Foxconns operation in Hungary to take advantage of low wages.)
  • Migration of workers within EU area: This includes movement of workers from peripheral countries, especially baltic countries. It's also involved the movement of skilled works between core countries, aswell as migration for retirement with older age groups from core countries. (e.g UK to spain.)
  • Migration for low skilled jobs have caused contraversy, migrants willing to work for less driving down wages, natives to host country suffer,)
  • Transfer of employment within EU to Peripheral Member states: Lots of large EU TNCs have transferred production from Parent country to peripheral member countries. Especially with car industry, movement of plant from France and Germany to Hungary and Poland.
  • Acquisition of cpmpanies within EU: Single market has permitted large corps. to expand by buying weaker companies, e.g Volkswagen buying Skoda.
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Economic Sustainability vs environmental Sustainab

Economic Sustainability vs environmental Sustainability

Economic issues:

  • Globalisation is credited with raising billions of the world's population out of poverty.
  • Has given rise to greater volume of economic activity and trade around the world.
  •   > Created new middle class, which has adversly raised property prices in both high and middle income cities often beyond the reach of those whom lived there prior. Given rise to squatter settlements for professionals (e.g traders in London.)
  • > New Urban Areas, and increasingly old ones in HIC experience greater inequality, aswell as a greater proportion of citizens living in them. (rise to arab springs,political instability etc.)
  • Rise of NICs has increasingly lead to a global shift of certain types of economic activity. Particularly with with low income jobs, the transfer of employment has transfered jobs from higher income countries without a guarentee of new jobs being created there.
  • At the same time, an influx of migrants into higher income economies filling in the gaps in the employment market that locals are either unable to fill. 
  • Population growth in India and China has increased the world's workforce by 1/3. This should have led to a fall in global wages, however wages in HIC continued to grow into 200s fuelled by credit, debt and cheap imports. This aided the crash in the late 00s.
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cont

In contrast, the volume of exports from NICs led to them accumulating large trade surpluses which were often spent on acquiring western assets. NICs now have influence over economies of much greater income.

Growth of TNCs has led to a global economy increasingly dominated by large corporations which are unaccountable to the governments of those which they operate in.

The greatest influence over these corporations is the demand for profitability by shareholders and this has tended to drive policies based on short term profit which have adverse effects on local areas. 

Rising incomes around the world also lead to a fall in fertility.

Continued growth will also lead to increased competition for increasingly scarce reasources, which will follow with either: 1) Rising prices which restrict development process, 2) Search for new or alternate sources, 3) increase conflict over said resources.

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Social and cultural issues

  • Cultural imperialism - World increasingly homogenised to western brands such as Coca-cola, mcdonalds apple etc.
  • Rise of groups opposed to globalisation and change, found in most world regions
  • Increasing levels of debt, especially in NICs.
  • Migration, cultural mixing which increase opposition to migration
  • Increasingly materialistic culture. Partially responsable for backlash of extreme politics.
  • Changing demographics of workforce, including taking women into formal employment, this has created a long term full in fertility, and is the underlying cause of extreme plitical backlash.

Low cost production brings in ethical issues:

  • Should western consumers pay more to increase wage of workers
  • Whether TNCs and retail chains would accept lower profits
  • Whether with despite the low wage, NICs enjoy a higher standard of pay and living than they otherwise would.
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Environmental- Climate change

Most environmental issues center around climate change. Rise in world affluence leads to higher carbon emissions, as more energy is used. (cars, tech etc.) This can be linked with long distance tourism, greater physical movement of goods which are byproducts of gaining wealth.

Whilst higher income economies have adressed carbon emissions, growth of middle class incomes have affeced this (see above.)

Similarly, energy efficiency is growing, meaning economic growth has increassed for NICs and China. (Which means more purchasing power, which means more energy etc.)

This is one of the keyt issues in attempt to form global agreements on Carbon Emissions:

  • NICs and poorer countries insist that limiting carbon emissions will restrict development, a tactic used by west to keep them poor
  • Many developed countries resist change for fear of drop in standard of living.
  • TNCs involved in hydrocarbon and coal production might obstruct restrictions
  • NICs such as Russia and Brazil would see primary export reasource threatened. 
  • Copenhagen agreement - carbon credits - inefffective.
  • Poorest countries are often the most at risk from climate change.
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Other environmental impacts

Other forms of pollution, toxic waste, soil contamination (china)

Impact of growing food consumption, and also change in what they eat. (More meat and Diary)

Increase in intensive farming increases pollution and carbon emissions.

Increase imports of food from LICs, source of economic development.

Increased demands on water sources, many of which are already stretched.

Geopolitical issues from countries protecting food imports, EU being used as political tool. (CPA)

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Flowers from Kenya

Most fresh flowers sold in the UK are produced in Kenya. 

Carbon emissions of growing in natural outdoors offsets carbon emissions of flight.

Rose grown under articifical conditions would produce more emissions.

Flower production is a major source of exports for Kenya, with high rural employment.

Wages are low, but higher than those not employed on rose farms.

Reduces land for local production, so food prices are pushed up. Lake Naivasha, local water supply has been pollutted by irigation runoff.

development of sustainbly artificial agricultural, e.g thanet earth, in HIC both reduces carbon emissions and meets growing demands for food sustainably, however would remove income for kenyan farmers.

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Copenhagen Accord

endorses the continuation of Kyoto Protocol.

Underlines that climate change is one of the greatest challenges in our time. 

Recognizes that deep cuts in global emissions are required, according to science.

Recognizes the crucial role of reducing emission from deforestation

Note, any questions on this require synopticity. Using more carbon friendly methods, such as thanet earth, is beneficial to the environment. Furthermore costs incurred to the consumer are minimal, however it would also affect Kenyan farmers, whom work in the rose farms.

The issue is is that many of the developing nations produce carbon, and limitations can inhibit growth. Already developed nations are curbing carbon emissions. But to grow, LEDCs and poor economies will produce carbon, which will ultimately contribute to climate change,which will affect themselves the most. It's a catch 22 with no clear way of dealing with it.

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Sustainable tourism.

Unsustainable aspects of tourism:

Usually related to mass tourism, large numbers of people going to one location:

Increase in tourism has impact on climate change through transport emissions

Impact on local environment include Loss of land, often farmland - Loss of coastal habitat (2004 tsunami would of absored by mangrov swamp in many places, in which was cut down) - Stress on water resources - contamination of water and sea via pollution and impacts on food production (loss of land, heavy imports for tourists).

Economic impacts are mixed:

Provied employment, but often low wage and low skilled.

Mass tourism increasingly dominated by TNCs which all the prior problems, including distribution of profits, crowding out local suppliers etc.

Increase in income from tourism can be offset by increase in imports to service tourists. In small countrys, shifts into the workforce can hinder the economy more than it benefits. (st lucia where bannan plantations loss of workers led to decline of the more profitable industry.)

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Sustainable tourism.

Social and cultural: 

Can have preservation effect on cultures and environments, but also undermine local ways of life.

In some areas, can have a harmfu effect on cultures of indigenous people.

Easter Island:

Easter Island faces many issues, including lack of a decent hospital, a steady accumulation in garbage, over fishing, the arrival of thousands of tourists each year and damage to the moais.

It raises the question, as with many similar sized islands such as the Galapagos, how do you develop a sustainable tourist industry when each year, more people want to visit: Do you limit tourist numbers, how do you ensure locals aren't crowded out? How do you provide basic services in such a remote outpost?

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Easter Island

it's difficult to grasp how remote the island is. It is the most isolated permanently inhabited place on earth. It's nearest neighbour Pitcairn is over 2000KM away, with the mainland being 3600km.

Easter island itself is tiny, only 25km from one end to the other. It's population is omnly 6,000, yet recieves 80,000 tourists per year, which brings in a lot of money, put puts a lot of strain on the islands services.

it also produces 20 tonnes of rubbish per day, which can't be burnt, and exporting it to the mainland is very expensive. The only resort has been to bury it in landfills, which are now full.

As the tourist industry has accelerated, Chileans have moved from the mainland to live there to open hotels, bars and restaurants. Sustainability concerns around water, fuel, wastemanagement and general space for buildings have arose. There's also evidence to suggest that if the amount of tourists rise to over 100,000 per year, there could be serious concequences.

Overfishing is also a problem, as the island's tuna and lobsters are highly prized. Foreign fishing fleets frequently pluder the waters.

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How can sustainability be achieved?

Sustainable tourism can reduce the impact of tourism in many ways:

Informing themselves of the culture, politics and economy of the communities visited

anticipating and respecting local cultures

supporting the intergrity of local bussinesses  which conserve cultural heritage and values

support local economies by purchasing local goods and participating in small, local bussinesses

Conserving resources by seeking out businesses that are environmentally concious.

It also requires great cooperation between governments, local people, non government organizations and tourists. It essentially requires a balance of environmental, economic and social issues which arise with tourism. If off balance, atleast one of the sectors will suffer.

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