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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