Marina Bay, Financial District of Singapore. Panoramic Image by “Ray in Manila.”
The world is filled with an infinite amount of desire. Everybody, no matter how wealthy or impoverished, wants more than they can have: more money, more toys, more and better friends, better health, higher status, . . . If we get all we thought we wanted of one thing we discover something else, even better it would be nice to have. Demand is infinite. It is the one thing we never run out of.
Supply, on the other hand, is finite. We have to make decisions about what we want, and what we are willing to give up to get what we want. The more we are willing to give up to get something, the more we value it. If we pay $20 for a pizza and $200 for a bicycle, we have made the decision that the bicycle is ten times more valuable to us than the pizza. If we buy the bicycle, we have given up the chance to buy ten pizzas. We make that decision because we believe that the bicycle will make us happier than ten pizzas.
There is some good news here—especially if you want both pizza and a bicycle. The supply of pizzas and bicycles in the world may be finite at any given point in time, but the supply is not unchanging. If you think that there are not enough pizzas in the world, or not enough bicycles, or not enough anything, you can invest your time and money to bake and sell more pizzas or to manufacture more bicycles. In doing this, you have increased the supply of good things in the world and, perhaps, have increased human happiness. When this process is expanded to include an entire community or region, it is called Economic Development. As you can see from the map above, economic development is spread unevenly around the globe. Countries colored in dark green (The USA, Canada,Western Europe, Japan, Australia and New Zealand) have the highest levels of economic development. Countries shown in lighter shades of green have somewhat lower levels of economic development. Countries shown in increasingly dark shades of red are, as you might suspect, increasingly lacking in economic development.
There are a number of ways to measure the level of economic development a country or region enjoys. The most commonly employed is the Gross Domestic Product or GDP. The GDP of a country is equal to the sum of all of the goods and services produced in a single year. GDP (or Y) is calculated by adding consumption (C), investment spending (I) government spending (G) and Net Exports (the value of all exports minus the value of all imports or X-M). Put into a simple equation, the formula for calculating GDP is: Y = C + I + G + (X − M).
International Monetary Fund, map of the world showing Nominal GDP by country in 2017. Darker colors indicate higher levels of GDP.
The map above compares Gross Domestic Product by country. Darker blue countries—the US, Canada, Brazil, India, China, Russia and Western Europe lead the world in GDP. But this is misleading. Australia may be in the same league as China and India in terms of GDP, but if the total amount of wealth the GDP represents were to be divided by population (giving us the per capita GDP) we would see a very different map.
Per Capita GDP
Here, Australia remains a healthy green while China, whose GDP is vastly higher than Australia’s, has a much lower per capita GDP and India has turned a distressing red. The difference, of course, is that India and China each have populations in excess of a billion people while Australia’s population is about 25.5 million. Almost as many people live in the Chinese city of Beijing as in all of Australia. Thus, while China has a huge GDP (13.6 trillion dollars in 2018), its per capita GDP is only $9,700. Australia’s GDP is a little under two trillion while its per capita GDP is $57,300.
Even within wealthy countries, the GDP is not evenly distributed. Not only are some individuals able to enjoy fabulous wealth while their neighbors struggle to buy groceries, we often find impoverished regions—often in the rural parts of a country—and wealthy (usually urban) regions. As the US map above shows, a few states enjoy per capita GDP of over $70,000 per person. At the other end of the spectrum, Mississippi’s per capita GDP is $31,881. And even there, some citizens are quite wealthy while many others struggle.
If GDP measures the value of all goods and services sold in a country, the Gross National Income (GNI) measures the total income of all citizens of that country, even if that income is earned abroad. In wealthy countries, this would include wealth earned from foreign investments, while in less developed countries, it quite often includes foreign aid contributions from wealthy countries and the remittences sent home by citizens who work abroad.
World Systems Theory
Why is it that some parts of the world seem to enjoy booming economies, high levels of personal wealth, good health care, good roads, good everything, while other parts of the world seem to be forever mired in poverty? Is this simply the way things must forever be, or is it possible to build a fairer, safer, more equitable world?
While there are no easy solutions to global poverty and inequality, any solutions are going to have to begin with understanding. This pursuit of understanding is at the root of what we know as World Systems Theory. Initially developed by Immanuel Wallerstein of Columbia University in the 1970s, World Systems Theory looks at the economy globally and regionally and seeks to understand the underlying forces that move wealth and opportunity from one part of the globe, and from one group of people, to another.
Today, we drive cars built in Japan or Korea. We wear clothes made from American cotton that was woven in Mexico and sewn together in Vietnam, and we talk on smart phones assembled in China that are made from rare earth metals mined in Africa. Meanwhile, American cotton, corn wheat, lumber, movies and manufactured goods find their ways to consumers all over the world.
In thinking about this global economy, Wallerstein divided the world into three regions, which he called the Core, the Periphery, and the Semiperiphery. Core regions (shown on this map in blue) have been able to benefit the most from global trade. They dominate global banking and usually have enough military power to protect their nations’ economic interests around the globe. Countries in the Periphery often lacked effective governments, had little or no industry, and very little access to the global economy. Some countries on the Periphery were able to sell raw materials to the Core, or to use their poorly paid labor force to make low-tech goods for exports. Even so, control of production—along with most of the profits—remained in the Core. For example, until 1987, almost all of the baseballs used in the United States were made in Haiti. After civil and political unrest in that impoverished Caribbean nation made business there less profitable, manufacturing of baseballs, was shifted to Costa Rica.
Between the Periphery and the Core lies the Semiperiphery. Countries in the Semiperiphery have begun to move out of the Periphery, perhaps by developing stronger, more representative governments, more stable economic systems, and by providing better educational opportunities for their children. Countries in the Semiperiphery are able to export manufactured goods as well as raw materials, and benefit more from their location in global trade networks, but still, most of the major decisions about production are made in the Core.
Core regions are able to maintain their status by military force if necessary. For example, when, Somali pirates started attacking cargo ships belonging to American, European, and other Core nations, beginning in the year 2000, they were initially able to do so with impunity. They had no fear of getting caught or punished because Somalia lacked any functioning government and the ship owners—most often businesses in the Core regions—found it cheaper to pay ransom for their ships, cargoes, and crews, rather than risk losing all three. As a result, piracy thrived for awhile until core governments like the United States and Britain, began using their naval forces to capture and kill pirates and to rescue their crews.
KEY CONCEPTS
Gross Domestic Product (GDP): A measure of the total wealth bought or sold in a region. GDP only measures the final expense of individual products so it does not measure the cost of raw materials that go into manufacturing a product that will be sold to a final user. Nor does it measure the value of goods and services that are not sold (such as unpaid labor, or the value of crops grown and consumed by a subsistence farmer). The formula to determine GDP Y = C + I + G + (X − M).
Global North: With some important exceptions, the wealthiest countries are found in the temperate zones of the Northern Hemisphere. Australia and New Zealand are important exceptions to this generalization.
Global South: Again with important exceptions, countries in the Periphery and Semiperiphery are most often found in the tropics and south of the equator.
More developed country (MDC): Countries that have developed higher levels of economic activity, education, and income. These might also be thought of as part of the Semiperiphery.
Demographic indicators of development: Generally speaking, people in more economically advanced countries will live longer, on average, than will people in Least Developed Countries. Reasons for this are not hard to discover. People who are born into highly developed countries are much more likely to have the advantages of advanced medical care, clean water, as well as healthy and abundant food. People living in LDC rarely enjoy any of these benefits of development. As a result, children born in the world’s most developed countries will, on average, live longer than children born into LDCs. Therefore, two important measures of economic development are life expectancy and infant mortality.
The infant mortality rate (!MR) measures the number of children who die before the age of one per one thousand children in the same age group. In 2015, the global infant mortality rate was 29 deaths per 1000 or 2.9 percent. In the United States, infant mortality was 5.8 per 1000 (or .5 percent) in 2017. In Afghanistan, the most dangerous place in the world to be a baby, the Infant Mortality Rate was 110.6 per 1000 or 11.6 percent. In Japan, by contrast, the IMR in 2017 was two per thousand or .2 percent. (Source: CIA World Factbook).
While infancy and early childhood are dangerous times to be alive in much of the world, it is also important to measure the years people of any age can expect, on average, to live. Except for estimates based on historical groups of people (like Vikings, or the residents of colonial Salem, Massachusetts, all of whom are long dead), measures of life expectancy are necessarily estimates and make certain assumptions that may not prove accurate. A life insurance company, for example, needs to know how long a customer can expect, on average, to live. If a customer is 20 years old, then the company can charge a much lower premium than if the customer is 80. It is possible, of course, that the 80 year old might outlive the 20 year old, but the company can be confident that far more 20 year olds will be alive in twenty years than 80 year olds.
And as with infant mortality, countries with more resources for healthcare, safer food and water, and better living conditions overall can expect to see more of their citizens living longer, healthier lives than in Least Developed Countries. For example, a child born today in Somalia has an average life expectancy of 54 years. A child born today in Japan would be expected to live to be 86.
Measuring Human and Economic Development
Social indicators of development -
U.N. Millennium Development Goals
U.N. Sustainable Development Goals
The Industrial Revolution: new technologies and natural resources
Industrialization created changes in food, population, jobs, urbanization and new class structures
Search for new sources of raw material and new markets for manufactured goods led to colonialism and imperialism
Economic Sectors: Primary, Secondary, Tertiary, Quaternary and Quinary.
Labor
Transportation
Shipping containers
Break-of-bulk point
least cost theory
Core, semiperiphery, periphery
Gross Domestic Product
Gross National Product
Gross National Income
Per Capita
Sectoral structure of an economy
formal and informal
income distribution
fertility rates
infant mortality rates
access to health care
fossil fuels and renewable energy
literacy rates
Gender Inequality Index (reproductive health, empowerment, labor market participation)
Rostow’s Stages of Economic Growth
Wallerstein’s World System Theory
Dependency theory
Commodity dependence
Complementarity and comparative advantage
Neoliberal policies
Free trade agreements
EU
WTO
Mercosur
OPEC
Government Intitiatives
Tariffs
Global Financial Crisis (debt crisis)
IMF
Microlending
interdependence
Oursourcing
Economic restructuring
Jobs and manufacturing moving from core to periphery
Manufacturing zones
Special Economic Zones
Free trade zones
Export-processing zones
International division of labor
Post-fordist methods of production
multiplier effects
economies of scale
agglomeration
just in time delivery
service sectors
high tech industries
growth poles
Sustainable development
Ecotourism
UN Sustainable Development Goals