7.9 Challenges for superpowers Flashcards
What are some of the main challenges superpowers will face in the future?
-economic restructuring
-structural unemployment
-ageing and social care costs
-increased debt levels
What is economic restructuring and why has it occurred in the UK?
The shift in employment from primary and secondary sectors to tertiary and quaternary. This has been seen in the UK as manufacturing moves to Asia as TNCs want to take advantage of cheaper labour
What long term challenges are caused by economic restructuring?
-Unemployment
-loss of social cohesion in the industrial regions
What is an example of unemployment in the UK caused by economic structuring? What other countries has this also been happening in?
In the UK’s traditional mining sector in the Midlands and North: In 1980, 240,000 people worked in the UK’s coalmines, but by the mid 1990s, this number had dropped to 13,000.
North East industrial regions in France were also affected along with the ‘rust belt’ in the USA, where manufacturing towns such as Allentown has lost 2,800 jobs and is in decline
What happened to the British Bank Northern Rock in 2007?
Northern Rock had greater debts than assets, meaning people feared their savings were at risk and withdrew their money immediately. The Bank of England rescued Northern Rock with £3 billion and then nationalised to stop the panic: the government feared if it collapsed that public panic would spread and other banks would follow. However, this soon occurred in lots of banks
What was the main cause of the 2007-8 financial crisis?
The main cause was sub-prime lending by US banks to low-income earners with insecure jobs, who would never normally be able to afford a mortgage. This made it questionable if mortgages would be repaid and so they were sold on to others. However, when the property bubble eventually burst, almost every global bank was affected
What were the consequences of the global financial crisis?
-The property market crashed and houses were now not worth the same
-The global stock market crashed
-Businesses closed
-A global recession was caused
-Mass unemployment was caused
What are examples of banks who were affected by the global financial crisis?
-some banks collapsed e.g. US investment bank Lehmann Brothers
-some were bailed out with government money e.g. Lloyds
-were nationalised e.g. the Royal Bank of Scotland
What were government debt levels like after the global financial crisis?
Debt levels were high due to increased bank bailouts, meaning they had to pay an increasing proportion of their GDP to service debts (pay interest on them)
How did the UK’s debt level change between 2007 and 2013?
The UK debt more than doubled
What was UK debt in March 2023 as a proportion of GDP? What are the interests rates on this? Why are these rates so high?
100.5%
Facing a 20-year high of 5.05% interest rates and these will stay higher for longer. In 2022, the government spent £111 billion on debt interest, which is more than what is spent on education.
Covid and the global financial crisis caused debt rates to soar
What were the three different routes taken by governments after the financial crisis?
The US government chose to respond by increasing national debt level to maintain consumer spending and an economic multiplier effect
However, centre right parties in the UK and Germany favoured policies of austerity to reduce government spending. This led to unemployment as government spending was cut
-Elsewhere, such as in Greece, countries had to aid their government as they nearly went under and hate crimes against immigrants soared.
What is structural unemployment?
Where certain demographic of people become unemployed because the demand for workers in sectors they are primarily in decreases. It’s mainly seen in male, low-skilled, middle aged workers, because they had jobs in manufacturing. There is very little enthusiasm to retrain
What is an example of structural unemployment?
Youth unemployment in the EU was 22% in 2015 and over 45% in Spain and Greece. Although by July 2023, this had reduced to 13.9%
Unemployment rates also vary between regions in the UK: In September 2023, NE England had 5.3% unemployment and SE England had 3.9%
Why is there issues in the UK with an ageing population and social care costs?
The baby boom of the 50s is reaching retirement age and with better health care, we have longer life expectancy.
Less people working means we have a higher dependency ratio with increased healthcare costs and higher state pensions
