Summary ch 1 sec 2, 3, 4, 7, 8
Section 2: Prosperity
There are two ways to measure the prosperity of a country.
- GNP/capita (total income of one year : number of inhabitants = GNP/capita)
Netherlands: approximately 25 000 euros
Ivory Coast: 1100 euros
The differences are smaller; there are two reasons for that:
- Not all people work in the formal sector (and therefore pay taxes) so there income is not declared
- Purchasing power (how much you can buy for one dollar) is lower in Ivory coast
- The distribution of labour force. The labour force consists of everybody who is paid to work and the unemployed.
There are three sectors: agriculture and fishing (primary sector), industry (secondary sector) and the service sector (tertiary sector). The higher the service sector, the richer the country is.
The world can be divided into three groups:
- Core countries: most developed. Tertiary sector is big, primary sector small. Play a major role in world trade
- Semi-periphery: fast-developing countries; they are growing. Tertiary sector is becoming increasingly more important, just as their role in world trade
- Periphery: (also: third world countries; developing countries) primary sector is big. Poorest countries in the world. Minor role in world trade.
Section 3: Quality of life
The Human Development Index (HDI) is used to measure the quality of life in a country. According to the UN this is increasing. These factors form the HDI:
- Life expectancy. Closely related to hygiene, healthcare and food situation
- Purchasing power
- Literacy rate
In many countries, prosperity is not equally divided. In developing countries there is often a small group of people that is very rich while the largest part of the population is very poor. Large differences in prosperity between different groups of people is called social inequality.
Large differences in prosperity between areas is called regional inequality.
Section 4: The world is becoming a village
You can classify goods into three types: raw materials, semi-finished products and final products.
Due to much improved transport and communication it is possible for more and more goods to be moved and traded around the world over large distances. Due to the Internet and satellite connections, information exchange has also increased a lot. As a result, areas on Earth are becoming more and more connected in various ways. This process is called globalisation.
There are three major developments responsible for the process of globalisation.
- Since 1975, more companies have been developing into multi-national corporations (MNCs). They are less and less concerned about the borders of their country. They see the whole world as their market and as a workshop to have things made. They often open factories in periphery or semi-periphery countries because the wages are lower.
- Trade barriers are disappearing. Since 1990, more countries have been opening their borders to the world market.
- The distance between areas is shrinking. This is possible due to new means of communication. But even more so because transport is much cheaper and faster now, than it was 25 years ago.
Due to these 3 developments, different areas on Earth are becoming more connected and this is having its effects.
Core countries control the world market. However, the production of goods is taking place outside rich countries more often. More and more developing countries are exporting industrial products such as clothing and electronics.
The world economy is growing by 3 to 5% per year; the BRIC countries (Brazil, Russia, India, China) easily achieve twice that. There is a large group of countries that hardly play any role in the world- trade game. These countries are mainly in the sub-Sahara. This is because these countries, or part of them:
- Have no major resources;
- Are not interesting for MNCs;
- Are not attractive to tourists;
- Are badly managed, lots of corruption, war.
Section 7: A small country which can be big
Economically, the Netherlands is big. We have one of the largest seaports in the world and export a lot of agricultural produce. Dutch companies are some of the largest investors in the US. The Netherlands is also the home base for large MNCs. Furthermore, we provide many services in the areas of transport and hydraulic engineering.
The trade balance gives an overview of the value of goods that you import and export. A country that exports for more money than it imports, has a positive trade balance. The balance of payments (BOP) provides an overview of all income and expenditure with other countries. A main port is a port or airport that plays a major role in international transport. The Netherlands has 2: Rotterdam Europoort and Schiphol Amsterdam.
Many labour-intensive companies have left for lower-wage countries. A labour-intensive company employs many people to create a product.
Section 8: The Netherlands, gateway to Europe
Dutch prosperity is mainly due to its favourable location. The Netherlands is on the edge of the European continent and at the mouths of several major rivers. To the west, the Netherlands borders the most sailed on sea of the world, the North Sea. Rotterdam is the only European seaport with direct access to the sea. Ships up to 25m deep can access the dock basin quickly.
The hinterland is the area that depends on transport to and from the area form one port.
The reasons a company has for establishing itself in a certain area are called site location factors.
Japanese and American companies often come to the Netherlands, because:
- The favourable location and good accessibility;
- The Netherlands’ focus abroad;
- The well-educated population who speak different languages;
- The low taxes for foreign companies in the Netherlands.
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