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To Do Today List Approaches to Characterising Economic Eras: Revolutions – Agriculture and Industry. Capital. Globalisation as an Economic Process: Pre-global processes. The post-war globalised world. On Becoming Urban: Urban growth versus urbanisation. Demographic transition, urbanisation economic change. Space, Geography, Territory: The Global Village. The Rise and Fall (and rise again) of Colonisation. Economic Base Theory (EBT): How places earn a living. ECONOMIC ERAS Economic transformations are meshed with social, demographic and urban change. Different ways to classify different eras, but going to look at two: Revolutions Approach Agricultural (3) and Industrial (6) Capital Approach Competitive, Organized, Disorganized ECONOMIC ERAS - INTRODUCTION Agricultural Revolutions Approach Neolithic: @10,000 years ago, domestication, tool use, end of wide spread hunter-gatherer and nomadic society and beginning of urban growth. British: 1600s-1800s, application of science, mechanisation, four field rotation, selective breeding, enclosure, drives industrial revolution with surplus food and workers. Green Revolution: 1940s-1970s, application of chemical and biological tools to create high yield crops, and creation of factory systems of agricultural production. In each case the result was greatly increased output. ECONOMIC ERAS - REVOLUTIONS APPROACH Industrial Revolutions Approach So far, six of them, starting around 1730 in Britain. All involve changes that increase the output of manufactured goods significantly. This results in knock-on effects for the socioeconomic and environmental systems in which they occur. Most significant changes involve the application of new technology to either or both of: • Production systems. • Consumer goods. ECONOMIC ERAS - REVOLUTIONS APPROACH The Six Industrial Revolutions – 1 & 2 (Dates based on U.K. experience) First Industrial Revolution (1730-1820s in UK) cottage to factory system, human to water then coal/steam power, innovations to inventions, manufacturing moves to urban areas, ‘invention’ of the factory worker. Second Industrial Revolution (1830s-1880s) steam technology applied to transportation, complex organisational structures, MN firms begin, ‘The American System of Manufacture’, labour saving devices, mass production. ECONOMIC ERAS - REVOLUTIONS APPROACH The Six Industrial Revolutions – 3 & 4 Third Industrial Revolution (1880s-1939) Science and technology linked, Systematic and organised R&D, Mass consumption culture begins, WW 1 stimulates R&D and changes labour patterns gender-wise, automation, electrification, the oil economy starts. Fourth Industrial Revolution (1945-1974): WW2 destruction, technical innovation, transformed labour patterns, Complex organisational structures (TNCs), servicemen provide well trained labour force, and huge economic demand. Consumer Society becomes engine of growth in the U.S. ECONOMIC ERAS - REVOLUTIONS APPROACH The Six Industrial Revolutions – 5 & 6 Fifth Industrial Revolution (1974-2000) ‘Oil crisis’ of 1974 threat to manufacturing, aging U.S. manufacturing infrastructure, foreign competition, international division of labour, offshore production, J-I-T manufacturing systems, automation and cheaper offshore production, decreased labour dependency in developed economies, manufacturing declines and growth in services, especially finance, begins. Sixth Industrial Revolution (2000 until ??) Decline of developed world’s manufacturing, globalization leads to increasingly ‘stateless’ TNCs in an increasingly territorial world, consumerism begins in the rest of the world, financial sector risk taking increasingly impacts economy, environmental impacts noticeably affect global systems. ECONOMIC ERAS - REVOLUTIONS APPROACH What is capital? One of the “factors of production” in the production cycle and refers to two things: First, the money used to fund all these things is called financial capital. Second, non-financial capital refers to the things (goods, capital assets such as infrastructure) produced by or used in the production process. Broader definitions can include land (or natural) capital, social capital, human capital, and examples would be: The machines that make goods; The machines that make machines that make goods; Trucks, ships, railways, etc; Roads, schools, hospitals, etc. ECONOMIC ERAS - THE CAPITAL LABOUR APPROACH Capital Approach Competitive Capital (1730-1880) 1st and 2nd industrial revolutions Organized Capital 1 & 2 (1880-1974) 1.Imperial capitalism (Colonialism – to 1945) 3rd industrial revolution 2. Advanced Capitalism (Decolonialism –1945 to 1974) 4th industrial revolution Disorganized Capital (1974-present) 5th and 6th industrial revolutions ECONOMIC ERAS - THE CAPITAL LABOUR APPROACH Competitive Capital (1730-1880) Birth of fundamental capitalism where supply and demand are allowed to reach equilibrium in the free market of consumers and producers – or so the theory goes. Also known as laissez-faire (Fr.: “let do”) or the economics of non-intervention and non-interference. Principal system governing political economies after end of feudalism and fueled by mercantile capital. Application of capital to the purchase and production of commodities – so called commodity capital. Operated in an almost resource unlimited world – i.e. raw materials and labour. Applied mechanisation and division of labour to extract ‘surplus value’. ECONOMIC ERAS - THE CAPITAL LABOUR APPROACH Organized Capital 1 (1880-1974) Imperial capitalism (Colonialism – to 1945): Organised production begins (Fordism) as demand for labour outstrips supply and technology offers a solution. Organised government and labour interventions begin as excesses of capitalism become obvious: Sherman Anti-Trust Act (1890), Clayton Act (1914), UK Trades Union Act (1871), U.S. Federation of Trades and Labour Unions (1881), U.S. National Labour Relations Act (1933). By the 1940s Keynes and fiscal policy theory becomes widespread operational model of economies work. Money capital dominates in the form of accumulated wealth used to generate more wealth, as in stocks for dividends. Growth of financial trading sector: money for money instead of money for commodities and goods. ECONOMIC ERAS - THE CAPITAL LABOUR APPROACH Organized Capital 2 (1880-1974) Advanced Capitalism (Decolonialism – after 1945): Rapid decolonialisation of imperial territorial holdings and ascendancy of the TNC as the new ‘colonial’ power. Development and application of the Bretton Woods Agreement’s instruments (World Bank, IMF, gold standard). Application of the Marshall Plan to rebuild Europe and Japan’s industrial sector. Development of the General Agreement on Tariffs and Trade to control trade. Continued use of Keynesian fiscal policy to control economies. Development of consumerism as an engine of growth. Rapid application of capital to production in response to the development of consumerism. ECONOMIC ERAS - THE CAPITAL LABOUR APPROACH Disorganized Capital (1974-present) Age of paradoxes as globalisation increases rapidly with… • • • • • • • Increasing territorialisation through decolonialisation; Increase in # of global & corporate cartels; Increase in competition from developing nations; Increase in calls for freer trade and/or trade controls; Increase in offshore production facilities; Maturation of the TNC. Increasing globalisation & complexity of finance & capital with few controls and high risk taking culture. Development of Global Village where investment, finance, communications, disease, terror, respect neither rules nor boundaries. ECONOMIC ERAS - THE CAPITAL LABOUR APPROACH In stores now! Mercantilism + Renaissance = Revolution Money + Freedom = A New World Order HISTORY - PRE GLOBALISATION Mercantilism + Renaissance = Revolution Refers to an era when trade became the principal means of wealth generation. Begins in 12th century with opening of trade routes by crusades. By 15th to 17th century Age of Exploration leads to expanded resource base and trade routes. By 18th century immense surplus of financial capital generated in Europe through trade, along with banks and fiat currency. → the creation of a wealthy merchant class that contrasts with the “landed gentry” of the Middle Ages. Fundamental shift in how money was earned and who owned it. HISTORY - PROCESS - PREGLOBAL Mercantilism + Renaissance = Revolution Transition from medieval to modern history starting in the early 14th century. Across 15th to 19th centuries the Ages of Reason and Enlightenment were in full bloom in Europe. Characterised by the emancipation of scientific thought and methods of inquiry, → discovery of the scientific principles necessary for the development/application of machinery. Freedom from religious interpretations of nature and social behaviour → critical reappraisal of the political economy and the development of democratic capitalism in most of Europe. FundamentalHISTORY shift- PROCESS in human world view. - PREGLOBAL Mercantilism + Renaissance = Revolution Transition from a chiefly agrarian society to an industrial society, early 18th century, U.K. Characterised by the application of scientific principles and inanimate power sources to the development and use of industrial machinery in producing goods. Creates a new division of labour: factory workers who produce and consume goods, → market that is consumption driven. Starts process of urbanisation, growth of personal & national wealth → the creation of public institutions. Result is a new type of political economy – capitalist democracy. HISTORY - PROCESS - PREGLOBAL A Short History of Globalisation For our purposes three periods to discuss: Pre- 1945 @1870-1914: growth, innovation, expansion 1918-1945: risk taking → crash → sobering reality 1945 to 1973 Global institutions → prosperity → naiveté 1973 to present mid 70s to mid 80s – shock and pessimism mid 80s to mid 90s – recovery and restructuring mid 90s to mid 2008 – growth and greed post 2008 – sobering reality - or not? HISTORY - PRE GLOBALISATION Pre 1945 1945-1973 1973-Now 1870 until 1914: Growth of capital, labour, and trade. Innovations in transportation & communications technology. 1918-1945 (complicated hiatus): WW I (1914-1918) caused cessation in growth & trade, then huge growth (roaring twenties) until ended by... ... the Great Depression (1929-1932) & after … ... protectionist policies stifled growth and international trade until after WW2. Was perhaps the first stage of globalisation though this would be disputed as merely a continuation of internationalization and economic liberalism. HISTORY - PROCESS - POSTWAR Pre 1945 1945-1973 1973-Now Period of unprecedented growth and prosperity in the west under the Keynesian model. Birth of many impoverished nations. Politically, world divides into 1st, 2nd, and 3rd worlds. Economically, each has very different characteristics. Socially, creation of the ‘global village’ of McLuhan. Three global economic structures: 1. Bretton Woods: World Bank, IMF, gold to currency. 2. Marshall Plan: $14b to rebuild Germany and Japan. 3. GATT: Free trade among signatories. Watershed: 1973 oil crisis Cessation of western growth and prosperity. Rebirth of free market thinking. GLOBALISATION - POST WAR HISTORY Bretton Woods (1944) The most significant political and economic event of the 20th century. Shaped (and continues to shape) the political economy of the 1st and 3rd worlds. Three important economic institutions: The International Monetary Fund (IMF). The International Bank for Reconstruction and Development (The World Bank). Establishment of fixed exchange rates using the U.S. dollar as a reserve currency, it in turn fixed to a $35 ounce gold standard. GLOBALISATION - POST WAR HISTORY The Marshall Plan (1948-1952): US$17 billion (US$223 billion 2014 dollars) injected into war torn economies in Europe and Asia. Money to West Germany and Japan in order to ‘win the peace’ and not repeat Versailles Treaty. Also, to build a ring of containment around the Soviet Union’s “Iron Curtain”. Rebuilt economies of the two principal axis powers (Germany and Japan) allowed them to dominate post war manufacturing. GLOBALISATION - POST WAR HISTORY The General Agreement on Tariffs and Trade (GATT, 1947): Designed to prevent similar protectionist policies that crippled the post depression global economy. Free flow of capital and goods essential for a healthy economy. Signatories got freer trade among themselves, and trade protections from competitors. Since 1995 superseded by the WTO (World Trade Organisation). GLOBALISATION - POST WAR HISTORY A Brief Summary of the Period Pre 1945 1945-1973 1973-Now Remarkable growth rates (8-10%) for developed western economies. Trade increased more rapidly than production. Offshore production starts. International division of labour starts. A few smaller newly industrializing economies began to prosper based on comparative advantage in labour costs. Many third world nations born but languish. GLOBALISATION - POST WAR HISTORY Post-war prosperity ends with the… …1973 oil crisis GLOBALISATION - POST WAR HISTORY Much more on oil in the resources lecture, but for now the impact of The Oil Crisis… … the first one. GLOBALISATION - POST WAR HISTORY 100.00 Hostage crisis ends, 2008 January 1981. financial Non-OPEC oil crisis. becomes economically feasible. OPEC 2003 - Iraq increases supply War and and price drops. Venezuelan general strike. Asian October 19th-20th 1973 financial Oil embargo begins. crisis. Iran takes US hostages. Saudi 80.00 Arabia raises market crude from $19 to $26 barrel. 60.00 40.00 20.00 0.00 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Price Per Barrel Constant (2012) Dollars The price of oil quadruples to nearly $12 per barrel ($58 today). US and 120.00 Netherlands embargoed for supporting in the 1973 Yom Kippur war. Oil Price Per Barrel, Constant Israel (2012) Dollars, 1965-2012 Pre 1945 1945-1973 1973-Now Post Oil Crisis – 1973 until now History has yet to “officially” characterize the past four decades but we can possibly see it as: A decade of shock and pessimism. A decade of recovery and restructuring. A decade of growth and greed. Perhaps now, a decade of sobering reality? (…or not.) GLOBALISATION - POST WAR HISTORY Mid 70s to mid 80s - Shock and Pessimism Optimism, growth and prosperity of post war years ends, Keynesian economic policy stumbles and eventually fails due to speed at which transactions takes place. Western nations find themselves vulnerable to debt and the development of newly emerging industrial nations. U.S. had changed from gold standard for its dollar to production as measure of wealth facing increased competition and obsolescence. Developing countries take on huge debt loads trying to address balance of power and balance of payments. Debt and political problems of the developing world begin to impact the financial institutions of the West. Western response was to address their vulnerabilities. GLOBALISATION - POST WAR HISTORY Mid 80s to early 90s - Restructuring and Recovery The corporate west diversifies, globalises, modernises. Corporations create international division of labour and come to control foreign companies. Foreign policy increasingly becomes economic policy driven by profit needs of TNCs. Financial sector becomes a risk laden driving force in wealth creation. Countries shift to the political, economic, social right, adopt free market, deregulatory, monetarist policies. Cracks in the planned economies of the world become too big to hide, repair: Soviet de-colonialisation follows. GLOBALISATION - POST WAR HISTORY Mid 90s to 2008 Crisis - Growth and Greed Development of transnationals, high growth in the financial sector, shift towards free market, deregulation and right wing politics creates a renewed global laissez faire economic system. End of 1990s, the laissez faire attitude of the global financial sector unravels in the Asian Meltdown that threatens the whole global economic system. Debt laden developing countries brought under control of global financial institutions whose loans are tied to adoption of free market, monetarist policies. 1999 WTO meeting in Seattle: opposition to globalisation begins in response to meltdown of the global economy. GLOBALISATION - POST WAR HISTORY Where We Are - or Where Are We? 2008 Crisis and after - A Decade of Sobering Reality? Still too close to this period to know for sure what has happened let alone where it is going. The west has suffered from an economic crisis of Depression proportions, and now faces an unprecedented sovereign debt crisis with no obvious solution, yet seems paralyzed to do anything to end it. Meanwhile west still focuses on oil and problems in the Middle East, and on terrorism in Afghanistan, as the real economic history is being made by China and India. And where economic history goes, political history follows. GLOBALISATION - POST WAR HISTORY Where We Are - or Are We Anywhere? Perhaps not… Current oil price plunge due to excess Middle East production and thus supply has devastating implications for shale oil, tar sands and African oil. In December big US banks successfully got parts of the Dodd-Frank law repealed, especially the Volkler Rule that stopped them from trading in the more speculative derivatives – such as CDOs. More on all this later. Suffice to say for now that self destructive human behavior appears so well entrenched that we just can’t learn – we still support the right wing school of self interest and easy answers. GLOBALISATION - POST WAR HISTORY URBANISATION On Becoming Urban… Urban areas are: Dense collections of people. The largest machines on earth. Nodes in the global network of interaction. Collections of production and consumption chains. Points of economic, demographic and cultural transformation. They are comprised of and driven by: Form & structure, and the processes that give rise to it. Change in response to economics, technology, demography, culture. We humans were not always an urban species – we became such in response to major transformations in the way we convert resources into lifestyles. URBANISATION World Urban Population REGION WORLD North America URBAN POP 1955 850 million (30%) 125 million (67%) URBAN POP 2015 3,819 million (52%) 301 million (83%) Latin America Europe Asia 87 million (45%) 307 million (53%) 280 million (18%) 510 million (80%) 532 million (73%) 1,970 million (45%) 41 million (16%) 477 million (42%) Africa Africa and Asia still not quite 50% “urban” but urban growth rates there have been by far the most rapid of any region since 1955. Asia also has 6 of the 12 largest cities and Africa has 2 of them. Urbanisation, Industrialisation, Demographic Transition Relationships between these 3 processes shape modern societies. Is a cause/effect cycle where all elements must stay synchronized for economic development to occur. For the developed world this has occurred over the past 100+ years. For developing nations, they have occurred over a 2030 year period - or are in the process of occurring. →developmental problems for virtually all newly industrializing nations. URBANISATION, DEMOGRAPHIC TRANSITION, ECONOMIC CHANGE MODEL Urban Growth versus Urbanisation Urban Growth Total Population Growth Rates/Share Rural Urban 10,000ya Time URBANISATION, DEMOGRAPHIC TRANSITION, ECONOMIC CHANGE MODEL 1700s Urban Growth versus Urbanisation Urbanisation Total Population Growth Rates/Share Rural 1700s Urban Time URBANISATION, DEMOGRAPHIC TRANSITION, ECONOMIC CHANGE MODEL Present Urbanisation Stages 100% 80% Urban Share of Population 20% 0% 10,000ya To 1700 Terminal Stage high levels, low rates Growth Stage increasing levels, high rates Initial Stage (low levels, low rates 1850-1950 (depends on Time URBANISATION, DEMOGRAPHIC country) TRANSITION, ECONOMIC CHANGE MODEL Present Natural Increase Demographic Transition Model postulates four stages of demographic change premised upon the interplay of birth and death rates and resulting population change. URBANISATION, DEMOGRAPHIC TRANSITION, ECONOMIC CHANGE MODEL Economic transition reflects the changing employment profile for sectors of the economy and how people earn a living. URBANISATION, DEMOGRAPHIC TRANSITION, ECONOMIC CHANGE MODEL Urbanization (urban transition) is the process wherein a predominantly rural population migrates to become predominantly urban one. URBANISATION, DEMOGRAPHIC TRANSITION, ECONOMIC CHANGE MODEL The stages of each transition must more or less synchronize for economic development to occur. URBANISATION, DEMOGRAPHIC TRANSITION, ECONOMIC CHANGE MODEL URBANISATION, DEMOGRAPHIC TRANSITION, ECONOMIC CHANGE MODEL 25 Demographic Transition 50 40 15 Death Rates 10 35 Rates per 1000 Rate Per 1,000 Population 45 20 Birth Rates 30 25 20 15 10 5 Demographic Transition 0 -5 5 0 Years Year Birth Rate Employment Change Percent Employment 8 7 6 5 North… 4 3 Stage 1 Stage 4 2 1 2000 1997 1994 1991 1988 1985 1982 1979 1976 1973 1970 1967 1964 0 1961 Natural Increase Percent Employment in Agriculture Percent Employment Percent Employment in Agriculture Death Rate 90 80 70 60 50 40 30 20 10 0 Sub Saharan… Year Year Urban Share of Total Population 90.0 60.0 Percent Urban 80.0 Urban Share of Total Population Urban Population Percent Urban Europe 70.0 60.0 50.0 E… 50.0 40.0 30.0 40.0 Sub Saharan Share 20.0 30.0 Stage 4 20.0 10.0 Stage 3 10.0 0.0 0.0 Year DEVELOPMENT - TRENDS Year Developing World Current point in time Stage 4 Stage 3 Europe Demographic Transition Space, Geography, Territory SPACE GEOGRAPHY TERRITORY Space, Geography, Territory Territorial Implications: More and more nations from 1945 as decolonialisation occurs – 56 in 1945 to 193 in 2013. Geographical Implications: More complex culture, language, social, religious, economic, legal, boundary landscapes to navigate. Spatial Implications: Development of Global Village has led to rapid movement of ideas, money, people, problems, conflicts, both because and in spite of more nations. SPACE GEOGRAPHY TERRITORY The Global Village Marshall McLuhan, technology and the global village (1962). Information, ideas, attitudes travel at the speed of light though mass media. ‘Reduces’ the size of the earth to that of the village. Everyone knows everyone else’s business. The demonstration effect and societal homogenization. Darker side of the global village: Darknet, terror, surveillance, sex tourism, human trafficking. SPACE GEOGRAPHY TERRITORY - THE GLOBAL VILLAGE The Global Village(s) Also means, for our purposes: more and smaller nations, and as a result… … more borders and boundaries… … more laws, more rules … … more corruption. … and thus more ways to circumvent them: Increase in number of sectoral and regional blocs. Sophistication of financial sector. Communications and technology innovations. Which in turn leads to: More channels for disease and contraband. More intra and inter regional conflict. More disenfranchised groups, leading to… … more terrorism. Recent Historical Reasons… Technology and transportation advances started during and after WW2: radar/radio technology, computing/ data capture, visualization technology, weather prediction, nav systems, sonar, etc. Transportation technology improved significantly. Large global movements of people (military, refugees, migration). Rapid resource extraction, production & consumption. Growing number of nations → new geopolitical interest and often aggressive foreign policy initiatives. Tourism and infrastructure also begins to expand rapidly SPACE GEOGRAPHY TERRITORY - THE GLOBAL VILLAGE Decolonialism and the Rise of Modern Nation States All but @30 of the @200 modern nation states of the world resulted from the past 70 years of decolonialisation. Three major areas and phases: The Americas, Australia and New Zealand from 1776 to 1900. Africa, South-East Asia, the Caribbean and Oceania from 1945 to 1980. The former Soviet Union from 1990. SPACE GEOGRAPHY TERRITORY COLONIALISATION