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GLOBAL ECONOMICS Economic Geography The branch of geography concerned with how people use Earth's resources, how they earn a living, and how products are distributed is called economic geography. People's economic activities can be divided into four categories-primary (first order), secondary (second order), tertiary (third order), and quaternary (fourth order) industries. industries involve manufacturing. For example, a dairy takes a raw material (raw milk) and processes it into products such as ice cream and butter. Often, a product will go through several stages before it becomes a finished good. Many factors determine the locations of manufacturing industries. Some industries, such as dairies and bakeries, are located near markets because their products may spoil if they must be transported too far. Modern refrigeration and improved roads, however, have made longer hauls possible. Other industries are located where special manufacturing needs can be met easily. These may be needs for cheap power sources, skilled workers, or specialized transportation facilities. Primary industries include agriculture, forestry, and mining. These activities directly use natural resources and raw materials and are found at or near sources of those materials. Agriculture and forestry are found in regions with suitable soils and climates. Mines are located where mineral deposits have been found. Secondary industries take goods from primary industries and change the goods into products that are useful to consumers. Secondary Tertiary industries are service industries. These industries provide services to primary and secondary industries, to communities, and to individual consumers. Service industries include stores, restaurants, banking, insurance, transportation, and government agencies. Services usually are located close to where people live. The use of computers and electronic communications is changing some service industries. Today, consumers can buy a wide variety of catalog items over the telephone. Computers allow some people to work at home, which gives them more flexibility in deciding where they want to live. A worker living in Jackson Hole, Wyoming, for example, may work for a firm in New York City. Some geographers include this movement and processing of information in a fourth category of economic activity. Quaternary industries, a subdivision of tertiary industries, are performed by professionals having specialized skills or knowledge. Information research, management, and administration are quaternary industries. Your school principal is an example of a worker involved in a quaternary industry. Economic Indicators As economic activities vary, so do economic conditions. Accurately measuring levels of economic development is difficult, but geographers can use several means to compare data and make generalizations. It is important to remember that a country's economic level says little about its cultural values and contributions. One measure of a country's economic development is gross national product or GNP. Gross national product is the total value of goods and services produced by a country in a year, both inside and outside the country. Some geographers use gross domestic product (GDP) instead of gross national product. Gross domestic product includes only those goods and services produced within a country and does not include income earned outside that country. This number becomes more useful when it is divided by the number of people in that country. This figure tells us the per capita GDP, which then can be used to compare the economic level among countries. Another way to describe levels of economic development is to identify the extent to which a country has industrialized. The world's poorest countries have little or no industrial activity. The next poorest countries are industrializing, which means they are in the process of developing manufacturing and industry. Some countries are beginning to move out of the industrial stage into a postindustrial stage. In a postindustrial country, more people are employed in tertiary and quaternary industries than in primary and secondary industries. This trend, however, has resulted in industrial decline in some regions, as experienced in the Northeastern and Midwestern United States. The full impact of this trend will not be known for some time. Other measures of economic development are literacy, infrastructure, and telecommunications. Literacy is the ability to read or write. In general, the higher a country's literacy rate, or the higher the number of people who can read or write, the more economically developed the country. Infrastructure includes roads, bridges, transportation facilities, power plants, water supply, sewage treatment facilities, and government buildings that are necessary to build industries and to move goods in and out of a country quickly and easily. Telecommunications is electronically transmitted communication. Today, a rapid, efficient telecommunications network is important for developing high-technology industries. DEVELOPED AND DEVELOPING COUNTRIES Categorizing the world's countries by economic level identifies the world's richest and poorest countries and those that lie in between. The world's wealthy countries are called developed countries. These include many of the countries in Europe, the United States, Canada, Japan, Australia, Singapore, and others. Developed countries share a number of common characteristics. Among these are a good educational system, widely available health care, and many manufacturing and service industries. Developed countries are industrialized and participate in international trade. People mostly live in cities. The few people who work as farmers use modern technology. In developed countries, most people have access to a telephone and are part of the global network formed by modern telecommunications . The wealthiest of the developed nations have per capita GDPs above $29,000. About three-quarters of the world's people live in the poorer countries, which often are called developing countries. Many of the people in developing countries live by subsistence farming (growing just enough to eat) in rural areas. These countries have few manufacturing and service industries to provide jobs. Though capital cities and other major cities may be large, poverty and unemployment are widespread. Many people migrate, or move, from rural areas to cities. Many city dwellers are underemployed, working only part time. In developing countries, health services are limited and schools often are crowded. The literacy rate is usually low. Modern telecommunications are not usually found outside of major cities. Exporting agricultural products and minerals to developed countries often is an important source of income for developing countries. Some of the world's poorest countries have per capita GDPs of less than $600. Several fall below $200. Between the world's richest and poorest countries are middle-income countries such as Argentina, Mexico, Venezuela, Brazil, and Malaysia. These countries combine characteristics of developed and developing countries. Some middle-income countries, such as South Korea and Taiwan, are newly industrialized. Their per capita incomes are growing rapidly and soon will be in the developed category. Other countries, such as Argentina, have remained in the middle category for decades. These are often called “emerging economies.” Choices in Economic Development How can a poor country improve its economy? If it has many natural resources such as oil fields, mineral deposits, or valuable crops, then development of these resources can lead to economic progress. Income from economic activity can be invested in education and infrastructure. For a developing country with few natural resources, the economic choices often are very limited. Sometimes the governments of developed countries help developing countries with loans and gifts of money. Some of this foreign aid goes to ease human suffering. Developed countries often debate how to help developing countries. Some wealthy countries provide little help. They argue that there are too few resources to share and that by helping others their own economic growth will suffer. Other developed countries give aid only to countries with rich natural resources or a low rate of population growth. Still other countries give aid only to those countries with which they are on close political terms. Multinational companies build factories in many poor countries around the world. These companies are businesses with activities in many countries. Multinational firms seek raw materials and labor at low cost. Multinational companies provide jobs and often transfer technology from the developed countries to developing countries. Multinational companies sometimes are criticized, however, for harming the natural environment or changing the cultures of developing countries and paying low wages to workers.. Politics and Economics Economic development is of concern to all governments. What kinds of economic and political ideas lead to economic progress? The world's economically developed countries share two important characteristics. The first is an economic system guided by free enterprise. Under free enterprise, prices are determined mostly through competition in which buyers and sellers are free to choose what and when to sell and buy. As a result, goods that people want are produced in large amounts and are sold at fair prices. Under free enterprise, people are free to move in search of higher wages and better working conditions. Free enterprise is the basis of capitalism, an economic system in which resources, industries, and businesses are owned by private individuals. Capitalism is also called a market economy. In a market economy, consumers determine what is to be bought or sold by buying or not buying certain goods and services. The term market refers to a system in which goods and services are exchanged freely. The second important characteristic of the developed countries is democracy. People must have personal freedom to make free enterprise work. During the past few years, all of the countries whose economies have improved also have expanded free enterprise and democratic ideas. In contrast to economies based on free enterprise are command economies. In a command economy, the government determines wages, the kinds and amounts of goods produced, and the prices of goods. Communist countries have command economies. Communism is an economic and political system in which the government owns or controls almost all of the means of production. Since the breakup 0of the Soviet Union, the once communist countries of Eastern Europe and the former Soviet Union have been reforming their economies on a capitalist model. The world’s developing countries are often a mix of command and free enterprise. India, for example, is a democracy, but much of its economy is controlled by the government. Though China has greatly expanded free enterprise, democracy in the country has been put down violently. Globalization. Today’s “buzz word” is globalization. This is the economic and political process that involves the entire world in its scope. People and businesses working in a world-wide economy that has proved beneficial to some yet harmful to others. The Economic Gap Unfortunately, there is still a wide divide between developed and developing countries. While developed countries make up around 25% of the world’s population, they consume nearly 75% of the resources. In most of today’s world, it is still true that the rich are getting richer, and the poor are getting poorer. poorer.