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GEOG 322W (3)

Geog 322-Oct 23 notes.docx

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Alex Clapp

Geog 322- Oct 23, 12 RESOURCE CURSE: Staples Trap – - countries rich in natural resources specialize in resources and get stuck. - Import knowledge of the staple is a large expense. - branch plants and external control - global, not local linkages - debt overhang, transfer pricing Why do they get trapped? - not making own decisions, some one else making decisions from great distance- Multi national corporations- MNC’s - money, power concentrated where “decisions” are made- location of decision maker- US city for a resource in pnom penh, Thailand. Toronto and Calgary are other decision making centers. Linkages: - capital equipment- made in country or imported? - ownership structure and which owners have control Transfer Pricing: - administrative pricing, where subsidiary company sells to bigger company- convenient non market transaction done by contract Enclave economies: - Enclaves set up to link outsides more than inside - corporations run major pieces of the country, by which can control country, such as by establishing Shah’s- who took commands eg. Banana Republic- Guatemala and Honduras Dutch disease- traps when resource price rises- eg . oil regional overdependence on a single industry. - high returns and high wages in one sector draw capital and labor from other sectors - other industries and exports atrophy - Niger delta- most polluted, hazardous environment due to oil industry - discovery of natural gas in Netherlands- resulted in fall off in agriculture – loss of labor -one sector booms, causing loss in other sectors. Distortion in exchange rates - exchange rates rise - raise of Canadian $ due to rise in oil? Did it destroy Ottawa auto industry? Results- yes- currency due to Dutch disease- expansion of oil- Increase in currency: due to petro currency-40%; other reasons- 60%, US $ drops. Can look at who is going shopping where (Canadians now heading to states) to see whose currency is stronger. - benefits transporters, retailers, real estate- cheap condos , roads, building- quick development=untrained workers, cheaply done Corruption lots of people=lots of need, country has to output money very quickly- Saudi, Qatar took time to process energy boom, thus economy doing well Mexico, Algeria- got increase in $ in oil, distributed by state- state took profits and distributed $ to petro class-upper middle class. This changed consumption, starting wars and revolutions- Iran- Shah’s were fundamentalists, wealthy show off’s- thrown out by people Global Oil
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