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Ch. 1 Introduction, continued
• Economic Geography of the World
Economy
• Globalization
• Globalization versus local diversity
• Problems of World Development
GDP Per Capita
GDP = Consumption + Investment + Government
Figure 1.7 The Global North and
the Global South
Variations in Economic Structure
Gross National Income
Low Income
Middle Income
High Income
World
Population
846
4813
1117
6775
% Growth per
capita income
GNI/Capita
2008-2009
$509
2.4%
$3,397
1.5%
$37,990
-3.9%
- 3.0%
$8,732
Source: World Bank (2012) World Development Indicators
GNI (Gross National Income) = GDP + foreign income receipts
(such as dividends and interest) – foreign income payments
GNI at
Purchasing
Power Parity
$1,220
$6,730
$36,213
$10,594
Income Inequality
Source: Wikipedia, but attributed to the World Bank
Calculating Gini Coefficient
The graph shows that
the Gini coefficient is equal to
the area marked A divided by
the sum of the areas marked
A and B. that is,
Gini = A / (A + B).
It is also equal to 2*A due
to the fact that A + B = 0.5
(since the axes scale from 0 to 1).
Global Shares of Population and
Gross National Income (2009)
16%
High Income
72%
71%
% of Population
Middle Income
% of GNI
28%
12%
Low Income
1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Structure of Production (% of GDP)
Low
Middle
High
World
Share of Global
GDP/GNI
Agriculture
1965
2008
1965
9%
3%
44%
12%
28%
19%
79%
69%
5%
$1,759 $60,587
10%
Growing
Inequality
Agriculture
2008
25%
10%
1%
3%
Industry
1965
28%
34%
43%
40%
Industry Services Services
2008
2003
2008
29%
28%
46%
37%
45%
53%
26%
54%
73%
28%
51%
69%
Hollowing of
Decrease in
Industry
Agriculture,
Services Growth
Share of Output
The Clark-Fisher Model of
Structural Change
Services
Agriculture
Time
Is This Model Inevitable?
Distribution of Gross Domestic Product (%)
GDP = Final Sales to Government, Consumers & Investment
Consumption
1965
Low
70%
Middle
67%
High
61%
Japan
59%
U.S.
63%
World
63%
Investment
2008
1965
75%
19%
56%
22%
62%
17%
57%
28%
70%
12%
61%
18%
Government
2008
1965
27%
11%
30%
11%
21%
22%
24%
12%
19%
25%
22%
19%
Why so high &
why the decline?
Note: 2008 Exports includes services
2008
9%
14%
18%
18%
16%
17%
Exports
1965
7%
17%
13%
11%
6%
12%
Global
Increase
in Trade
2008
29%
29%
26%
14%
11%
27%
Imports/Exports 2006 ($ billions)
Low
Middle
High
Japan
U.S.
World
Total
Exports
434
3771
10651
765
1436
14852
Merchandise
Imports Exports
512
323
3456
3312
10955
8451
714
650
2227
1038
14908
12085
The U.S. Share of
Services Trade is
very high
Imports
389
2958
8985
580
1919
12327
Services
Exports
111
459
2200
115
398
2767
Imports
123
498
1970
134
308
2581
High Income have
much stronger trade
in services than Low
and Middle Income
Structure of Merchandise Exports (%)
Fuels,
Other
Machinery Other Mfg. Textiles &
Minerals,
Primary
&
Clothing
Metals Commodities Transport
Equipment
1965 1992 1965 1992 1965 1992 1965 1992 1965 1992
16 21
60
17
1
9
23 53
12 26
Low
Income
Middle 27
Income
Oil
80
Exporte
rs
High
9
Income
U.S.
8
Japan
2
World
15
32
46
19
14
18
13
31
3
10
92
16
2
0
1
3
5
0.1
1
7
21
11
31
43
39
39
7
5
6
1
13
27
7
26
14
1
13
37
31
25
48
66
37
28
60
34
32
31
38
3
17
7
2
2
6
Structure of Merchandise Imports (%)
Food
Low
Income
Middle
Income
Oil
Exporters
High
Income
U.S.
Fuels Other
Machinery Other Mfg.
Primary
&
Commoditi Transport
es
Equipment
1965 1992 1965 1992 1965 1992 1965 1992 1965 1992
20
9
5
9
8
9 31 34 34 40
15
11
8
10
11
6
30
38
34
35
22
15
2
2
5
5
32
40
40
39
19
10
11
9
20
6
19
35
31
41
19
6
10
11
20
4
14
41
36
38
Origin and Destination of Merchandise Exports (%)
(From/To)
All Trade:
Developing
High Income Oil
Ex.
Industrial
Market
Manufactures
Developing
High Income Oil
Ex.
Industrial
Market
Industrial
Market
Economies
1965
1985
Nonreporting
Nonmember
High Income Oil
Export
Developing
Countries
1965
1985
1965
1985
1965
1985
67
70
63
59
8
(.)
7
(.)
1
3
2
1
25
27
30
40
70
71
2
2
1
3
27
24
47
30
56
47
19
0
8
0
2
21
4
16
32
49
32
36
66
70
2
2
1
3
31
25
Globalization
• “Essentially an expansion in the scope,
scale, and velocity of international
transacations” p. 12
• Culture and consumption
• Telecommunications
• Economic Dimensions – finance, TNC’s,
FDI, regional specialization in production,
tertiary sector, office activity, tourism
TNC Sales and Selected
Country GDP
FDI in the U.S. – similar diagram
could be drawn for any country
Another view of FDI
An Example of Global Trade –
United’s Business First Amenity Kit
China, USA, Thailand
Globalization vs. Local Diversity
• The desire to preserve local diversity
• But the inevitable outside pressures
• Producing “glocalization”
Problems In World Development
• Structural changes in low, medium & high
income countries
• Environmental Constraints
• Disparities in wealth and well-being
– Internal trends: growing income disparity in
many nations
– The cycle of poverty
– The Core-Periphery Model – developed in
chapter 14
The Cycle of Poverty in ThirdWorld Countries