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GEOG 216
Geraldine Akman

Section 2: Emergence of the World Economy 12/5/12 1:03 AM Early Commercial Expansion 1500-1880 • Initially, commodity integration grew slowly (a little over 1% per annum) • 1720-80: international trade doubles in value • 1780-1840: international trade increases more than 3 fold (industrial revolution) • 1840-70: merchandise trade increases more than fourfold (internationalization) Transport and Communications (How and Why of Change) • Railways and steamships (fast and affordable) • Telegraph and telephone systems • Suez Canal (1869), cut down trip to Mumbai by half • Panama Canal Capital Flows (How and Why of Change) • Internal financial market growth and innovation • More sophisticated financial systems à more trade and integration in the world economy Population Flows • 1450-1800: migrations of coerced slave (Africa) and contracted indentured labour (Asia) • 1800s: European populations grew faster due to the diffusion of the industrial revolution o better living conditions o birth rate decline o growing more food and more nutritious food Demographic Transition Theory: relates births, deaths and economic growth • Phase 1: Birth and death rates are in a high equilibrium • Phase 2: more children survive, death rate slows, demographic gap • Phase 3: lower birth and death rate equilibrium Population lag effect represents continued growth after achievement of replacement level fertility is reached. à a relatively large generation of woman have fewer children. Population is an important factor in an industrial revolution. Population 1500-1800 • World population increases in absolute numbers • Percentage distribution changes relatively • Percentage relative increase in Europe and NA • Percentage relative decrease in Asia Population 1790-1850 • Early free migration (settlers) • Population increase in West Europe à shortages of land and economic opportunities à migration flows overseas Population 1850-1913 • Mass migrations from Europe • NA, LA and Oceania à increased international trade Mercantilism (16 -19 th century) • A country’s strength came from: o Acquiring and accumulating gold and silver o Restricting manufactured imports o Developing production for exports • A state use of Joint Stock companies (Hudson Bay) o Government backed companies o Members would pull their money to create a joint stock company • Use of overseas colonies as sources of raw materials and as markets for manufacturers from the mother country • Capital accumulation • Profits were invested primarily in Europe’s industrial revolutions • Transatlantic Trading System (1650-1850) th 18 Century world is dominated by slave trade. • Africa’s participation in the world economy grew to major proportions • Expansion of sugar, tobacco, and cotton cultivation on slave plantation in the Caribbean and Southern USA • 18 thcentury accounted for 2/3 of a total transfer of more than 10 million persons out of Africa during the entire history of the trade (15-19 c) Changes To the World Economy (1500 to late 1700) Atlantic Trading System Accumulation favours West Europe • Increase in finance capital • Industrial revolution Eurasian trading system: trade reorients from eastern focus to one centered on Western Europe India, China … had higher living standards than Europe Specialization of exports of raw materials from a ‘periphery’ initiated Industrialization takes more than just money. Transition to Western Domination of the World Economy • Productivity increased due to new methods and better organization • Capital and goods move relatively freely with improved transit • Change in the volume and composition of foreign trade • A rise in real incomes in Europe and NA à an increase demand for raw materials and foodstuffs The Effects on India • Trade relations that favoured India are skewed by foreign monopoly: the British East India Company • Textile artisans become ‘bond slaves’ of the BEIC • Indian merchants prohibited from buying directly from producers à get power militarily • Surplus wealth literally sucked out of the Indian subcontinent The Effects on China 200 BC-6 thC: Iron Works th th 8 -13 C: China’s innovations grow to 19 thcentury: China’s only interest is the sale of its own products • Britain had a trade deficit with China British conquest of India and the establishment of a triangular trade • England: cotton and manufactures • India: raw cotton and opium • China: tea and silk Devastating effects of opium imports to China à first opium war (1840-42) between China and BEIC China lost à had to open 5 ports to Britain, plus ports to France and US 1850’s: Second opium war, China forced into more concessions The Colonial World Economy • Early 1800s: Britain dominated world economy • Competition increases as industrial revolution spreads • Late 1800s: profits fall, results in a global recession • 1850-1920: New Era of Empire building • Accelerated colonialism in Asia, Pacific, and Africa • 1875-1915: ¼ of globes land surface carved up for colonies • Colonies role increased • Colonies became a vital part of the rapid expansion of world trade • 1913: Africa and Asia provided more exports to world economy than either USA/Canada/UK/Ireland Britain Battles with rivals in World Economy • Demand increased in industrial countries for o Cheaper raw materials and food o New opportunities for investment capital o Protected lines of commerce o Guaranteed markets The World Economy • Mechanisms of Integration o Competitive colonialism (investment in colonies) o Trade (regional specializations) o Transport and communication routes The Diffusion of the Industrial Revolution Where Did Capitalism Come From? th 1) Italian City States 11-16 century • trade and banking • rational accumulation 2) Cities in Medieval Northwest Europe • Europe shrunk into itself • Crusades à beginning of trade within Europe • Cities are rediscovered, city walls • Cities become a space outside of feudalism (overlapping control of territory, static system) • “city air makes you free” • Cities are places of innovation th th 3) England 16 -18 century • Agricultural concentration • Enclosure of the commons à “privatization” • More productive land use • Economies of scale • Crop rotation • Land becomes a source of wealth à productivity increases, pushes people off land and into cities • Manufacturing • Wool • Industrial Revolution: people had relatively high incomes, as productivity increased, prices decreased • Drive to innovate How did Europe come to dominate the World? • Knox: population, land, inheritance laws, innovations in navigation, finance • Diamond: guns, germs and steel • Harvey: over accumulation, spatial fix o Because Europe invented capitalism, they had technology and needed to expand and innovate o Had limits on how much Europe could absorb, needed new places to sell Systemic Cycles of Accumulation • “leadership cycles”, “imperial over reach” th th • Genoese: 15 - early 17 century: capital through trade • Dutch: late 16 th – 18th century th th • British: second half of 18 century to early 20 century • US: late 19 thcentury to ? • Shift to finance: instead of reinvesting, began loaning money out • GM and GMAC: general motors has their own finance sector • Relationships between merchants and the state • Merchant à finance, which usually finances other countries capitals Three Waves of Industrialization • 1790 -1850: Steam Engine, cotton textiles, Ironworks • 1850-70: Steel, machine, tools, railroads, steamships • 1870-1914: electricity, electoral engineering, telecommunications o the world became one place with the telegraph Capitalism in North America • Spread to US: natural resources, British capital o Internal combustion engine, oil, plastics, electrical engineering, radio, telecommunications • Canada: Britain to US dependence o 1900: 15% US capital o 1920: 50% US capital o tariff 1879: industrialization • After Britain, every county to industrialize has used tariffs at sometime (ISI) à need the state to play a big role • US capitalism became an outpost of British capitalism, Canada remained dependent on Britain (raw materials) Transport Revolutions • Canals: Erie, 1825 • River Steamboats: 1830-1850 • Railroad: 1825, Canada transcontinental 1885 • Fordism: internal combustion engine The Nature of Resources: 1 Environment: all external conditions, abiotic and biotic, that affect an organism or group of organisms Resources: naturally occurring substances that humans regard as useful or necessary • Obtained from the biological and physical environment • Are neither absolute or constant • Depend on human perception, attitudes and behaviours, new technologies and prices • Resources are not fixed Renewable resources: capable of self-replenishing or can be replenished by human action Non-Renewable resources: once used, are not replenished naturally or take millions of years to replenish Exhaustable: non-renewable, consumed by use (fossil fuels) Renewabity depends on use levels and human investment (plants, animals, minerals, air and water quality) Naturally renewable independent of use (solar, tidal, wind, water) Two Positions on Economic Growth 1) Not Sustainable • Assumes: o Near limits to non-renewable resources o Limited ability to make accurate, timely predictions of environmental impacts o No substitutes for critical capital (ozone layer) 2) Sustainable • Assumes: o A free market system with government intervention o A potential to restore many resources o A value change to less consumption and more recycling o A resolution to mineral exhaustion through price structure, product substitution, technology gains o A resolution of negative impacts by pollution controls and economic instruments (emission charges) o Fiscal incentives Global Food Supply • Generally sufficient global production but mal/undernourished populations exist • Distribution per/capita is not equal and is affected by: o General poverty o Trade practices (protectionism) o Debt loads (lack of foreign currency) o Wars and political factors o New technologies and practices The Green Revolution (Mid 1960s-70s) • Some success stories… but potential diffusion problems o Financing inputs such as new seed strains, chemical fertilizers, machinery and water supply o Capital/labour ratio increases, unemployment increases, o Price decreases due to supply increase o Research and development favours export, not subsistence crops o Environmental impacts (deforestation, wetland, draining, soil erosion, contaminating surface and ground water, water loss by irrigation) o Externalities Externalities (negative) • An activity by one agent causes a loss of well being to another agent • The loss of well being incurred by the sufferer remains uncompensated Biotechnology • The use of living organisms in agricultural, medical and other productive processes • Domestication of animals, cultivation of plants, artificial selection and hybridization as well as genetic engineering • Potential Benefits: increased yields, reduced vulnerability to drought, salt and viruses, increase quantities of food, reduce dependence on fertilizers, pesticides and other agrochemicals; production of substances in crops for other than food uses • Potential risks: destroy key components of cropping systems (natural pest control); negative affects on non- target organisms and ecological processes; loss of locally adapted varieties Trading Primary Commodities Agriculture: cultivating crops and rearing livestock to produce food and fiber for sustenance or economic gain Agribusiness: direct corporate involvement in agriculture including food production, processing and distribution Cash crops: crops grown for sale or trade compared to subsistence crops that are mainly consumed by the farm family Terms of trade: The ratio of a country's average export price to its average import price (commodity terms of trade) (exports/imports) Reasons for relatively low prices for traditional cash crops: increased supplies, new technologies, changes in consumer behaviour, limits to growth in world market shares Income elasticity of demand: the relative change in the amount of a commodity purchased divided by the relative change in money income Price elasticity of demand: the relative change in the quantity of a good demanded divided by the relative change in the relative price of the good Supply and demand for drug crops The Nature of Resources (2) Physical context for non-renewable resources Location of producers and consumers of non-renewable resources Proven/Known Reserve: a resource of potential use and/or profit that can be extracted under prevailing conditions, e.g., price, technologies, legal, environmental Conditional Reserve: discovered but sub/uneconomic due to current prices and technologies Mineral resources: trends Influences on supply, demand and price for mineral resources Minerals: social impacts Minerals: environmental impacts Oil and Regional Interdependence Oil The most important traded item internationally by volume and value. A great source of economic and political power. A major energy source for transport, heating, cooling and production processes. A raw material for manufacturers . Oil Effects • Infrastructural decisions à highways, railways, ports, • Industrial production decisions • Export revenues and import costs (balance of payments) • Levels of national income and spending • Country growth rates and debt levels • Worlds financial system • Environmental quality Oil Supply • OPEC is an international cartel of major oil producing countries o Saudi Arabia, Iran, Iraq, Kuwait, Venezuela, Nigeria • OPEC is the main regulator of world supply (members have state companies) • Private oil companies (about 4) are responsible for most exploration and production Oil Demand • State and Private oil companies o Have vertically integrated production processes of exploration, production, transport, refining, and distribution
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