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Lecture 3

GGR221 Lecture 3.pdf

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University of Toronto St. George
Romila Verma

GGR221 Lecture 3 ▯ - Capitalism is a dynamic and unstable system, with periods of rapid growth followed by periods of decline - Kondratieff/Long Waves - named after the Russian economist N.D. Kondratieff who in the 1920s studied long term fluctuations in economic activity - each wave of economic development approximately 40-60 years - each wave is characterized by a period of growth or upswing (approximately 25 years), followed by a period of stagnation and decline or downswing (approximately 25 years) - fundamental qualitative transformations rather than mere quantitative fluctuations - shorter oscillations in the level of business activity superimposed on long waves ▯ According to Freeman and Perez each wave is associated with: - dominant industries- main carrier branches - new industries- sunrise industries - new technologies and techniques of production - key entrepreneurs - five long waves ▯ Mensch and Schumpeter: - each new wave created by a bunching or clustering of innovations Schumpeter: - bunching stimulated by leadership of pioneering entrepreneurs searching for ways of resuscitating rates of profit ▯ Aprocess of creative destruction: new technologies and products emerge, rendering existing industries obsolete - as markets become saturated, investment shifts to process technology - excess capacity and decreasing demand- crisis- “technological stalemate” - fall in profit stimulates search for new opportunities ▯ Freeman and Perez: different levels of technological change: - incremental innovations - radical innovations - new techno-economic paradigms: associated with Kondratieff cycles - Freeman and Perez, but also Gordon: stress social and institutional circumstances in which technologies emerge ▯ Technology a social process in which individuals and organizations deploy technologies for particular ends ▯ ▯ - Once established, centers of innovation offer advantages in terms of further industrial growth - law of cumulative causation (Myrdal) - reinforces certain industrial centers - uneven development: a systematic process of economic and social development that is uneven in time and space - waves associated with the rise and fall of nations and regions ▯ Spatial divisions of labour and waves of investment - each Kondratieff wave produces a new pattern of uneven development - new layer of investment: the successive cycles of economic development in particular places and regions (Massey, 1978) ▯ waves of disinvestment - where capital withdrawn from a particular part of the economy, often through rationalization- reduction
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