geog 216 notes 1 Flashcards
(106 cards)
1
Q
what is economic internationalization
A
extent to which national economies interact with each other through exchange of goods & services
- can be measured (trade/GDP ratio)
- focus on extension of economic activities across ntl borders (arms length trade)
- quantitative approach (shallow) approach to global integration
2
Q
what is globalization
A
more than just increased intl trade
- set of processes through which economic activities are increasingly interconnected
–> functional integration of production activities (MNCs,
–> new actors (institutions & agreements)
- quantitative & qualitative
3
Q
what are hyperglobalizer
A
end of 20thC led to new world order with decreased role of nation-state
–> creates borderless economy
triumphalist: Fukuyama (free market capitalism triumph post berlin wall)
Friedman (no frictions of distance, geo is irrelevent)
4
Q
who are the skeptics
A
economic globalization = overblown myth mislabeling of internationalization
–> point to 19thC high trade/gdp ratio as proof that its nothing new
5
Q
transformationalist
A
recognize globalization as on-going transformative
–uneven patterns of devel (wealth)
–national economic space =/= national territorial borders
–emphasize local-global connections
6
Q
is the global economy new (give history + era 1)
A
since antiquity: roman empire, silk road
middle ages rise of trade
fall of empires (constantinople)
1500-1800: early commercial expansion (europe)
–> discovery & exploration
–> euro conception of the world shifts trade
–> trade in commerce & high value goods
- mercantilism & protectionism
7
Q
what happens post 1800
A
rise of colonial economy
- trade boom in bulk staples
drivers: free trade (lower protectionism), mass migration, innovation
–> 1% to 4% increase
euro takes off everyone else stays the same
8
Q
what are the new elements of our global economy
A
more of everything - gdp ratios dont change as much
- trade & capital flows still similar to 19thC
2 key differences:
1. type (composition) of trade flows
- trading services, rise of TNCs, direct foreign investment
2. market integration (breadth & depth)
- more exchanges & larger scope, price convergence, markets integrated & optimized
9
Q
what is contagion
A
smth happens in one area affects other areas
e.g. stock market goes down in shanghai goes down in US
10
Q
what are the key changes in the 20thC economy
A
- trade reliberalization: less trade/tariffs/policy barriers (free up capital
- intl governance: unilateral to multilateral world –> trade promotion seen as crucial for devel (GATT,WTO,IMF)
greater degree of connectedness (increased global conflicts)
11
Q
what is the global connectedness index
A
DHL index
01-07 = strong growth
08 recession
09-20 = uneven recovery, covid
slowbalization: reaching peak levels of globalization
12
Q
what are the consequences of globalization
A
- loss of domestic control over nations own economy (race to the bototm, TNCs & environmental regulations)
- increased intra-firm (activity within corporate conglomerates)
- job opportunities vs job losses (relocation of production activities for cheaper costs)
13
Q
what does economic globalization involve (3)
A
- set of ongoing processes
- spatial & temporal dimensions
- stretching (extension)
- intensification (growing magnitude)
- velocity (of transactions) - magnified local-global impacts
14
Q
what is an economy
A
system that allows us to meet our material needs
–> scale independent: laws that govern dont change based on size
15
Q
what is a core economic problem
A
finite resources/scarcity forces valuation/tradeoffs which require choices
16
Q
what is the production possibilities frontier
A
illustrates problem
trade off between goods: preferation, valuation, opportunity cost
amount of one good you can produce without sacrificing another good
–> can expand PPF
e.g. partying vs studying
17
Q
what are economic agents
A
any individual/group that act to make production/consumption decisions
18
Q
what are economic institutions
A
norms/rules that govern commerce, trade, production & consumption
–e.g. laws, corps, unions, invisible to us
19
Q
what are the factors of production + types of goods
A
LLK—> land labor and capital
–> output of LLK = goods & services
private goods: excludable & rivalrous
public goods: not
20
Q
what could scarcity either be
A
natural e.g. coal
socially constructed e.g. diamonds
21
Q
what are markets
A
institutions that facilitate the exchange of goods and services
productive & allocative
-goal: allocate scarce resources in a efficient way –>
adam smiths invisible hand of the market: whoever most efficiently uses oil will bid more, so allocation will not be equal but based on use
22
Q
what is the structure of the market economy and what does each actor do
A
households: buy from product market, sell labor to resource market
businesses: buy from resource market, sell to product market
government: regulates 2 markets, collects taxes, resources & goods/services, and gives expenditures to markets
23
Q
what are the types of economic systems
A
- traditional: exchanges are done face to face by bartering/gifting (no market, agrarian, governed by norms)
- market economy: exchanges mediated by supply & demand (govt limited role, impersonal, private ownership, consumer goods, wealth accumulation, capitalism)
- command/planned: little market, exchange regulated by govt according to public need (strong state, communism)
- mixed economy: combine market & command, market controls both but govt provides incentives (private & public property, govt provides infrastructure, Canada)
24
Q
what is the political economy
A
large spectrum: right = profit motive –> capitalism
left = not profit motivated –> socialism to communism
anarchism = no state, no private property
25
what is economic growth and what are the 2 drivers
growth: value of outputs
1. new resources: discovered, taken, traded
2. tech change: enables more efficient production
26
what is GDP and what does it measure
gross domestic product: market value of all goods and services produced within a countries borders in a given year
(does not consider intermediate goods, only finished)
- standard way of tracking globally, can look at specific sectors
--> use real gdp (adjusted for inflation) for relative income and GDP per capita for cross country comparisons
27
what are the problems with GDP
1. informal/underground economy excluded
2. ignores unpaid work
3. doesnt differentiate between welfare enhancing vs reducing activities
4. overlooks uneven wealth distribution
5. harder to compare developing countries with differing circumstances
28
what is GNP
gross national product: market value of all goods & services produced by nationals of a country in a given year
--> include overseas companies
where production occurs & where productions repatriated is important
GDP is better domestic reflection
29
what are the 2 adjustment & alternate income measures
purchasing power parity (PPP): adjust GDP as if countries outputs are sold in US (to match 1us$) --> account for exchange rates & purchasing power
gross national income (GNI): focus on incomes received rather than goods & services ---> bigger difference for devel countries between GDP & GNI
--> considers foreign aid & remittances
30
what is the difference between growth & development + what are the millenium devel goals
economic growth isnt only measure of welfare --> need economic growth, but it isnt enough for total development
e.g. GDP increase =/= same increase in education rates
millenium development goals (UN goals): poverty/hunger, education, women, child mortality, maternal health, disease, environment, global partnership (8)
31
what are the alternate development measures
human devel index (HDI): 3 dimensions - education, health, living standards (4 indicators- Ex yrs of school, Mean years, life expectancy, GNI)
gross national happiness index (GNHI): psychological wellbeing- govt, diversity, community, education
genuine progress index (GPI): used to track devel beyond economy with indicators of sustainability (econ, enviro, social --> diminish or add)
32
what are two ways to measure income inequality
* inequality greater between countries then within
income shares: within/across countries, look at what % of GDP top 10% capture
lorenz curve: allows us to see inequal distribution across all levels not just top 10% --> measures % of households against % of income
----> find Gini coefficient (G=A/A+B)
- 0 = perfect equality, 1 = perfect inequality e.g. canada is 0.3
33
what are the factors firms consider for industrial location (7)
1. access to inputs (raw materials, no absolute correlation)
2. availability of labor (skills)
3. processing costs (LLK, offshore)
4. "pull" of the market (depends on product or service)
5. transfer costs of alternative locations (weber, raw materials to market)
6. institutional/cultural factors (govt policy)
7. behavioral considerations (objectives/constraints of decision makers)
all factors change depending on activity
34
what is the industrial structure of economies (types of activities)
primary: concerned w natural resources
secondary: processing/transforming raw materials into manufactured goods
--> light manu (consumer oriented, finished) heavy manu (prod process)
tertiary: service activities sale & exchange
quarternary: handling/processing of knowledge/info
Transition: economic growth/devel pushes economies from primary to qaurternary
35
what are the industrial areas of the rust belt
1. Boston: textiles
2. New York: apparel, food, book (upstate = chem optical devices)
3. Pittsburgh: steel
4. Philly, Baltimore: steel, chemicals
5. New Jersey: pharma
6. Detroit: cars
7. Cleveland: tires
8: Ontario: cars
9. Montreal: bioeng, aerospace
36
what are the industrial regions of the sun belt
5 high tech pockets
1. SoCal: apparel, aircraft, biotech, electronics
2. SanFran: silicon valley, semiconductors, microchips, computers & software
3. Seattle Tacoma: aircraft & computers
4. Tech triangle: ranleigh-charlotte-durham --> software
5. Texas: dallas-fortworth-houstan --> computers electronics
37
what are the major industrial regions of europe
1. germany: ruhr rhine, saxony, stuttgart (industrial, reflect IR, secondary prod)
2. France: Ile de france (pharma, cars), lyon (textiles), nice (high tech)
3. italy: golden triangle (milan-turin-genoa industrial cluster), venice to florence (artisanal)
4. UK: manchester (IR), London (M4 high tech corridor)
5. spain: barcelona & bilbao
38
what are russia & ukraines districts
Russia: central industrial region, volga region, urals region (3 major industrial- cars & steel), shift to kuzbas, corridor, & far east (vladivlosik) regions
Ukraine: dunbas region (steel)
39
what are japans key industrial districts
1. Kanto plain: (tokyo, yokohama, kawasaki) primary industrial region
2. Kansai district: (kobe-kyoto-osaka) heavy industry
3. Kitakyushu district: (kyushu island) shipbuilding, steel
4. Toyama district (paper, textiles)
40
what are chinas districts
1. Northeast district (shengyang) steel, coal
2. Northern district (beijing) food, textiles
3. Change district (shanghai-wuhan) ports, shipping
4. Guangdong district: pearl river delta (hong kong, guangzhou) worlds workshop (things we buy, temu type stuff) 450 million population, 1/3 chinas exports
41
who are the 4 asian tigers and what do they do
1. south korea: heavy industry, high tech
2. taiwan: shift from labor intensive work to high tech
3. hong kong: financial industries & break of bulk point
4. singapore: transshipment (quarternary) info industries
42
what is the global triad
3 large producing & trading regions: North America, Europe, East/South Asia
--> 85% of worlds GDP & of worlds trade
US is largest economy 25 trill, followed by China 17 trill, Japan 4 trill high, Germany 4 trill low
--> asia is growing economy fastest, shifting to the east
43
what trends do we see in manufacturing activity world wide (and who are biggest manufacturers)
still see global triad
biggest: China, US, Germany, Japan (50% of global manufacturing)
brazil emerges as south american giant
subsaharan africa has little, (south africa has more)
canada slipping over time, barely top 20 at 1.4%
44
what structural changes can we see in world value added production
value added production = output $ - input $
europe had (1970) highest world manufacturing value added shares of 40% which asia has 15%
as of 2008: europe loses 5% and asia grows 15%
--> now asia is still growing in value added
45
what are the diverging trajectories in value added shares between US & China from 1970-2008
1970: chinas shares at 2% (agri based economy), US at over 25%
1978: chinas economic reforms driven by Deng Xiaping open up economy to foreign capital, and privatize state owned enterprices (MNCs begin to take advantage of cheap labor)
2008: china has risen to almost 20% and US has dropped to 20%
46
how has annual growth in manufacturing changed from 1980s -2003
North America: remains relatively flat, canada holds own, not much growth
europe: remains flat as well
eastern europe: huge influx of manufacturing due to fall of berlin wall
asia: sees lots of growth (japan being exception due to 1990s financial crisis and "lost decade" w aging pop)
47
what are the overall manufacturing pattern trends
for much of 20thC: US Germany Japan dominated
Now: shift to newly industrializing economies (NICs) like BRICs with China leading the way
--> primary resources still diversify like oil in gulf coast
48
what are trade balances and give an example of how they evolve
surplus = export $ > import $
deficit = export $ < import $
E.g. US historically was exporting at same rate as importing, but began relying on imports more
--> now US is in deficit, mirroring China's surplus
US needs to be borrowing to sustain high import activity, makes it susceptible to financial crisis
49
how are internal and external trade patterns reflected within regions
Europe: trades slightly more within region (because of EU)
Asia trades slightly more within region
N America trades more outside region
--> Asia & North America are increasingly reliant on each other
50
is trade or outputs growing faster, how has the growth changes, and who are the biggest traders now
growth of exports is growing faster than of outputs
--> trade/GDP ratio very high in UK, Germany, US 1870s (hence globalization skeptics)
--> all takes downturn
but china continues growing in trade/GDP ratio --> mega trader
NIEs experience highest trade growth
emerging economies is surpassing developed world in GDP, trade, population etc
51
what is the time-space compression
processes that revolutionize the qualities of space & time such that the ways we represent the world are altered (Harvey)
--> TSC = accelerated movements of goods, info, & financial resources
growing (more, volume), stretching (further), increasing (velocity, speed) of economic activities w globalization
52
what are some characteristics of the TSC
circulation technologies: overcome frictions of space & time e.g. broadband internet, cargo ships
--> TSC =/= tech determinism (tech not only factor to explain TSC & globalization)
- transport advanced before communication
TSC is uneven: investments in transport & communications infrastructures are largest in areas where demand & financial returns r greatest
e.g. plane ticket to paris v.s. st johns
53
what was Canadas economy like through and before the 19thC
pre 19thC: Canada = periphery, exports staples to Europe, St Lawrence is a channel for this
Mid 19thC: US manufacturing belt industrializes (exports flow south of the border)
1867: confederation led to nation building policies (transnational railway), tariff protection, industrial cores emerge (encourage east-west trade)
54
what happened to Canadas economy through the 20thC
ww1: pacific coast lumber industry develops
ww2: consolidation of parts of Ontario & Quebec as key manufacturing districts
1965: canada-us auto pact, managed trade (not free) eliminate tariffs on auto industry related goods, unique relationship w volume of bilateral trade & patterns of corporate ownership
1970s: devel of oil industry in Alberta
1988: Canada-US Free Trade agreement, greater regional economic integration
1994: mexico joins and it becomes NAFTA
55
what has canadas growth been like since 1963-2022
trade/GDP in 1961 = 19.1%
trade/GDP in 2022 = 63%
trade has grown a lot (especially merchandise trade - value of exports + imports) and canada relies heavily on imports & exports
56
how is canada and the US's relationship special
62% of our imports come from US
75% of our exports go to US
US sneezes, we catch a cold
57
what does the canadian economy revolve around
harrold innes (1930s) said canada economy revolves around staples
still a main exporter of staples, but now a service based economy
--> still lacking in services at global level, but surplus of research & engineering
overall in a surplus,
58
which way does canadas economic center of gravity shift (+ how much trade is provincial vs across the border)
westward shift to pacific rim: 204km west from 1926-2013
southward shift: NAFTA orients canadian economy around US
1988 inter provincial flow = 20x > cross border
1998 inter provincial flow = 12x > cross border
--> more trade across border than before
59
where does canada invest and where does foreign direct investment to canada come from
canada direct investment abroad: 69% north america (carribean islands - treasure islands)
--> 29% finance & insurance, 24% management
foreign direct investment in Canada: 48% north america,
--> 31% management 18% manufacturing
60
what is canadas relationship with china like
"feeding the dragon"
total chinese imports: minerals (19%), electronics (16%) machinery & equipment (10%)
imports from canada to china: agriculture (46%) minerals (30%), chemicals (8%)
shares increasing of imports from canada to china over time
61
what are differences in a countries factor endowments
1. natural resources (raw resources)
2. climate/terrain (wheat in alberta vs swiss alps)
3. labor forces (quantity, skills)
4. capital/technology (tech transfer)
62
what are basic reasons to trade
differences in factor endowments
- intra industry/firm trade (globally integrated prod activities)
63
what is the heckscher ohlin model
looks at the advantages and gains from trade
countries are advantaged (more efficient) in certain production and disadvantaged is other (less efficient) based on factor endowments
countries should specialize in what they are more advantaged and less disadvantaged in
gains from trade: when products are redistributed countries end up with combo of goods better suited to their preferences than before e.g. sandwich milk example
64
what is opportunity cost (+ arbitrage & autarky)
how much of one good you gain by forgoing another
--> relative ratio of productivity differentials
opportunity cost determines exchange rate through arbitrage process
autarky is when no trade relations occur so countries consume what they locally produce
64
what is absolute vs comparative advantage
absolute advantage: if a country can produce a good using less resources
comparative advantage: even if one country has absolute advantage in production of goods, it has comparative advantage in production of a good its least inefficient in producing compared to another country
64
what does the ricardian model suggest
regardless of absolute advantage countries can still benefit from trade if they specialize in good they are relatively more efficient in
65
what are the limitations of the ricardian trade model
ignores economies of scale & agglomeration
assumes perfect competition and no power imbalances
66
what is competitive advantage, who founded it, and what are the pillars
michael porter (1985-1990) focused on productivity growth, 4 pillars effected by local context
1. factor conditions (LLK, tech, infrastructure)
2. demand (market) conditions
3. supporting industries (banking etc)
4. firm strategy, structure, competition
67
what was trade like in the medieval world
roman empire --> extensive system of trade with high degree of integration including the silk road with north africa and europe integrated (until fall of constantinople)
--> roman empire fragments leading to depopulation, and weakening trade
68
what happened with trade in new empires
franc, byzantine, and islamic empire rise
islamic empire blocks mediterranean trade from north africa
trade now only flows on land
69
what changes happened in the high middle ages
high pop growth --> manorialism (rise of self sufficient manor estates)
crusades lead to increased use of roads which opens more commerce
transforms europe --> rise of towns (insteal of feudal islands) peasants move to frontier and become craftsmen
increased market exchange (cash + barter)
self propelling growth dynamic: increase trade --> increase demand --> increase production
70
who and why/what is the turn to the sea
portugal sorrounded by land enemies, constaninople falls (1453) cutting off mediterranean and east (countries afraid to sail off edge of world)
portugal explores first - cape Bojador (morrocco) and africa coast
71
how did spain join the sea exploration and what did this lead to
christopher colombus under spain found the americas (1492-termed west indies)
treaty of tordesillas: 1494, split world --> spain gets west portugal gets east
exploration golden era (1500-1550) treaty unlocked rules to exploration that gave everyone incentive to explore
--> globe circumnavigated in 50 years
--> england, france, dutch all jump in north & south
russians also engage
72
what happened to trade and commerce during this time
age of exploration led to explosion of intl trade & commerce driven by prospect of luxury goods
- extraction & trade: establish monopolies, partition the world
-conquistadors: take gold and silver from new world "god,glory,gold"
73
what are east india companies
first MNCs --> pull capital from investors to finance trade expeditions
--> create mechanism to mobilize capital furthering expedition & trade
- dutch east india company was largest for 200 years
74
what does merchant capital fuel
fueled trade expeditions, wealth fueled consumption, inflation, and industrial revolution
75
what are the innovations during this era of discovery and what do they enable
enable commerce & trade
1. finance & banking (stock, insurance etc)
2. ship building & navigation
3. naval ordinance: guns,cannons etc used to defend colonies
4. communication: more letters etc
76
what resources were important during the era of discovery
gold & silver = wealth & security
potosoi mines in bolivia = lots of silver to spain
used to buy goods from east, finance armies etc
--> when mines deplete colonists look to agriculture and create colombian exchange (potatoes, tomatoes new crops to new world) which effects biodiversity
77
when and why was there a shift from feudal to nation states
1800s --> emergence of nation state led to idea that wealth was in precious metals, need to aquire as much as possible in countries treasury and not let it leave
78
what are the 4 policies supporting mercantilism
merchant capitalism
1. gold & silver from conquest & trade
2. trade surplus needed - trade seen as 0 sum game
3. increase import tariffs & import substitution - manufacture inside country
4. strong navy & military - protectionist
79
what are the 3 intellectual challenges to mercantilism
john locke critiques:
1. wealth of nation is in human labor not precious metals
2. trade can be mutually benefitial (comparative advantage)
3. confounding wealth with money: spains excess in gold led to inflation (couldnt export overpriced products, lagged their industry investment)
80
what are the political challenges to mercantilism and what changes
liberal free markets --> adam smiths invisible hand
monarchy is replaced by parliament with a rise in democracy
groups become powerful outside of merchant class
rise of colonialism & colonial empire
81
what was trade like pre 19thC trade boom
world is interconnected but not fully integrated (trade seen as competitive)
--> 1% growth per year pre boom, to 4% post boom
--> huge divergence between western europe & the rest of the world
82
what are the drivers of the trade boom
1. free trade: england starts trend, unilaterally opens up trade, due to political challenge (navigation & food policy shift) impose free trade on colonies
2. industrial revolution
3. transport/communications innovation: non tradeable goods (e.g. coal) & telegraph
4. gold standard: peg every currency to the price of gold (1841)
5. mass intl migration: 50 million ppl moved
6. peace from 1850-ww1
83
what is the cycle of expansion of trade in the IR
---> innovation ---> trade ---> surplus ---> innovation
84
what were european trade changes like during the boom
europe exports manufactured goods, and imports raw materials
--> increase in trading of staples
expanding middle class had changing tastes for new crops & elements of culture
85
what is import substitution
during mercantile era domestic industry is protected
by the free trade era infant industries are mature enough to export goods & compete w overseas markets
e.g. cloth in india
86
what was the atlantic trade circuit
spanish & portuguese: decimate indigenous population + run out of gold & silver --> look to old world crops (sugar, cotton)
manufactured goods (western europe) --> enslaved people (africa) --> produce sugar, tobacco etc (carribeans) --> raw materials (canada) --> back to europe
87
what was the east indian tea circuit
england loves tea, sells opium to china in exchange for tea (previously metals but thats not good for mercantilism, so now manufactured goods)
1830s EIC sends spy to steal tea plants from china and replant them in India ending chinas monopoly
88
what is colonialism and how powerful was england
discovery --> conquest --> colonization
britain held 1/4 land surface at height
EIC owned india (even had own military) 1847 britain takes over in imperial rule
89
what were the 3 major waves of colonialism
1. 16th-19thC: new world - spain & portugal in Latin America/caribbeans, english & french in north america
2. 19th-20thC: competitive colonialism - create artificial boundaries (regardless of ethnicities) and map it to claim it, scramble for africa and south east asia
--> active colonialism ends in 1897
90
what are the economic roles of the colonies
1. new source of resources
2. new market for industrial goods
3. new investment opportunities (valve for surplus)
4. safety valve for excess population
91
what are the consequences of colonialism
1. population of indigenous ppl decimated - african enslavement
2. economic 'centering' on primary products for exports (core-periphery)
3. formation of dual society: colonial ties or disenfranchised
4. urbanization
5. transplantation of nation state: institutions brough are reflected tdy, e.g. french vs english africa
92
what were the outcomes of the trade boom
1. economic growth: GDP increasing
2. market integration: convergence towards one price
3. income divergence- between & within countries
--> before 1820 GDP driven by pop size
--> after 1820 GDP driven by productivity
4. increased inequality
93
what is development and how has the idea evolved
economic growth & structural change- endogenous & internal
mercantile: dont consider poverty
later: realize poverty is bad
Big change: post ww2 ppl start thinking about development
econ growth --> basic needs --> poverty reduction --> freedom & capabilities (self actualization)
94
what economic structural changes occur with development
1. exports & imports increase (trade opens with GDP)
2. accumulation of capital w rising GDP (rise in human capital, investments)
3. agriculture share falls & industry/services rise
--> 2 reasons: 1. increased productivity means less people farming, 2. engels law - as income rises % of income spent on food decreases
95
what are the other 2 changes with development
1. urbanization: because of economies of agglomeration & economies of scale
2. inequality: kuznets curve- inequality rises w GDP and then falls again (1950s) because of shift to importance of human capital (ppl more similar in terms of education & economic endowment)
--> some argue it goes back up in an S shaped way
96
what is rostows developmental theory
5 stages of development: key is savings & investment allowing promotion to industry --> industrialization leads to economic devel
savings gap = need funds in devel countries for industry, underpins need for foreign aid
1. traditional, 2. preconditions to takeoff, 3. takeoff 4. drive to maturity 5. age of mass consumption
97
what is the 2 sector development model
arthur lewis believes growth occurs through industrial devel where rural people come to urban cities to work more profitably
rural sector --> urban sector
e.g. China, people move to urban coast from rural farms
98
what is dependency theory
belief: dependency = 0 sum game, some develop others dont
core & periphery relationship (development of underdevelopment)
need to cut off core ties and consider history/causes
99
what is endogenous growth theory
growth is driven not only by LLK but by how the factors interact
--> consider relationship between labor & capital
e.g. precision agriculture productivity increases not just because of increased labor but also increased capital (higher tech)
100
what are the 3 paths to growth
1. primary product exports
2. inward-looking industrialization
3. export oriented industrialization
101
what is the primary product export path
export raw resources
--> comparative advantage: growth based on bring new resources into economy & improve existing resources
creates the linkage effect where increasing primary product industries creates new industries e.g. wheat creates mill and railways to ship wheat etc
problems: sluggish demand, volatile prices, slow growth, never step in same river twice
102
what is inward looking industrialization
focus on manufacturing, use import substitution industrialization to promote local production for domestic markets and rely less on imports
how?: large domestic market
-- acquire capital and tech from abroad (foreign investment in industries)
--provide protection for infant industries (tarriffs, overvalued exchange rate, etc govt)
problems: infant industries never grow up, exports are uncompetitive
used in mercantile era, 20thC latin america, and kenya
103
what is export oriented industrialization
promote manufacturing for export markets, govt protects & promotes export industries (force tech adoption)
how?: subsidies & preferential treatment if reach export targets (govt will invest in infrastruture, cut taxes, create export processing zones)
-- manage exchange rates (depreciation)
--factor market intervention (govt provides low interest loans and capital for industries)
problems: expensive & difficult, protectionism (let failing companies die), creates vulnerability (countries slap on tariffs)
104
