Economic transition Flashcards
(35 cards)
What is GDP?
the total value of goods and services produced by a country in a year
What is GNI?
GDP together with a country’s income received from other countries - profit leakage form countries where TNCs operate
What is GNI per capita?
total GNI of a country divided by the total population
What is Purchasing Power Parity?
- the exchange rate needed to buy the same quantity of products in each country
- they measure the total amount of goods and services that a single unit of a country’s currency can buy in another
what are the top 3 countries by GNI per capita (US$) ?
- Bermuda - 116,540
- Lichtenstein - 116,440
- Switzerland - 90,360
Strengths and Weaknesses of economic indicators of development
Strengths:
- widely established
- US$ means easy comparison
- PPP -> weighting
- primary measure of development - HICs, MICs, LICs, etc.
Weaknesses:
- inequality not measured - differences in regions and distribution by highest to lowest earners not taken into account
- not a social or political development measure
- skewed by resources, tax havens, gambling revenue, etc.
What is HDI?
takes into account life expectancy at birth, expected years of schooling, mean years of schooling and GNI per capita PPP
Annual UN development report containing 191 countries
Groupings: very high/high/medium/low
Comparable between countries and over time
Top 5: Switzerland, Norway, Iceland, Hong Kong, Australia
Bottom 5: Burundi, Central African Republic, Niger, Chad, South Sudan
What is the Physical Quality of Life Index (PQLI)?
the measure of quality of life or wellbeing of a country
PQLI takes into account – basic literacy rate, infant mortality rate and life expectancy at age one
Top 5 countries: Netherlands, Denmark, Switzerland, Luxemburg and Finland
Bottom 5 countries: Iran, Sri Lanka, Venezuela, Bangladesh, Nigeria
What is the Happy Planet Index?
Happy planet index is a measure of sustainable wellbeing, ranking countries by how efficiently they deliver long, happy lives using our limited environmental resources
Gallup world poll is used to measure wellbeing/happiness using a sample of 1000 people however, the accuracy of this can be put into question
HPI takes into account – wellbeing, life expectancy, inequality of outcome and ecological footprint
Top 5 countries – Costa Rica, Vanuatu, Colombia, Switzerland and Ecuador
Bottom 5 Countries – Zimbabwe, Lesotho, Central African Republic, Mongolia and Qatar
What is the Gini Inequality index (Gini coefficient)
- the most commonly used measure of inequality expressed as a percentage
- a value of 0 corresponds to the absence of inequality, so that, having adjusted for household size and comparison, all individuals have the same household income
- a value of 100 corresponds to inequality in its most extreme form, with a single individual having all the income in the economy
- a Lorenz curve allows the index to be compared spatially and temporally
top and bottom 3 of Gini Inequality index
Top:
1. Ukraine
2. Slovenia
3. Iceland
Bottom:
1. South Africa
2. Namibia
3. Botswana
What is Globalisation?
The increasing interconnectedness and interdependence of the world economically, culturally, and politically
What is Global Shift?
the movement of economic activity, particularly in manufacturing, from HICs to NICs and LICs
What is New International Division of Labour (NIDL)?
a change in the geographical pattern of specialisation, with the fragmentation of many production processes across national boundaries – ‘outsourcing’ and ‘offshoring’ signify the importance of this process
What is Globally concentrated production
- all production at a single location
- products are exported to world markets
What is Host Market Production
- each production unit produces a range of products and serves the national market in which it is located
- no sales across national boundaries
- individual plant size limited by the size of the national market
What is Product specialisation for global/regional markets?
- each production nit produces only one product for sale throughout a regional market of several countries
- individual plant size is very large because of scale economies offered by the large regional market
What is Transnational vertical integration?
- either each production unit performs a separate part of a production sequence
- units are linked across national boundaries in a chain like sequence
- the output of one plant is the input of the next plant
- or, each unit performs a separate operation in a production process and ships its output to a final assembly plant in another country
what type of TNC production unit category does Coca-Cola fit into?
Host-market production
Revenue - Cost = __________
Profit
Why do companies want to become a TNC?
- Keeping costs lower through access to cheaper labour
- exploiting new resource locations which will increase the company’s resource availability
- avoiding trade barriers - e.g. Nissan factory in Sunderland
- tapping into more market potential in other world regions which increases revenue
- avoiding strict domestic environmental regulations
- maximising exchange-rate advantage
What are the 4 categories in the A.T. Kearney index of globalisation?
- political engagement
- personal contact
- technological connectivity
- economic integration
- top 3 countries are Singapore, Hong Kong and Netherlands
what are the social impacts of Apple?
Positive:
- In countries where Apple directly employs people, such as the US and the UK, workers are generally paid and treated well which enables them to enjoy a good standard of living
Negatives:
- 64.2% of the workers at Foxconn are from rural villages which creates greater levels of inequality due to the lack of investment in rural areas
- Accusations of poor working conditions, excessive working hours and forced overtime have been made at Foxconn
- In 2018, the guardian reported that many workers were working 70 hours overtime per month, in breach of Chinese law
- In 2010 and 2011 there were several suicides among Foxconn workers as a result of poor conditions
- 43.4% of workers said that they had experienced or seen an accident at the workplace
what are the economic impacts of Apple?
Positives:
- FDI in many different countries which also attracts FDI from other TNCs
- Wide range of jobs both directly and indirectly – 22,000 jobs in Europe – 170,000 through its suppliers in Europe – 350,000 at Foxconn – creates a positive multiplier effect
- Wages are above the minimum wage than other parts of China
Negatives:
- Economic leakages occur as profits from overseas operations are sent back to the USA
- Extremely low wages of £2.20 an hour compared to £27 an hour in the USA means that workers can only have a basic existence – survey in 2012 from Fair Labour Association found that 64.3% of the workers felt that their wages were insufficient to cover their basic needs
- People are concerned about job security as if sales fall or if assembly is sub-contracted to a different company or work becomes automated, thousands will be affected
- Many countries are unhappy with the amount of tax that is paid – accused of tax avoidance – in 2016 ordered to pay 13 billion euros back to Ireland – later rejected by an EU court in 2020 – also agreed to pay 10 years of back taxes to France
