Economic Sectors and Economic Indicators

• Economy includes all the activities a country does related to production, distribution, trading, and consumption of goods and services.
• GDP (Gross Domestic Product) measures a country's economy.
• Goods refer to materials that people use to satisfy their needs and are tangible.
• Services are intangible products like accounting or banking.
• GDP refers to the total value of services and goods a country produces, usually in a year.
• GDP per capita refers to the total value of all goods and services divided by the number of people living there.

Economic Sectors

• All economic activities are divided into three groups called sectors.
• The primary sector obtains resources directly from nature, such as agriculture or fishing.
• The secondary sector transforms materials into finished or semi-finished goods.
• The tertiary sector provides services for people or companies, such as tourism or health services.

Evolution of Economic Sectors in Spain

• Until 1850, most people worked in the primary sector, like agriculture and livestock farming (75%).
• During the 19th and 20th centuries, the distribution of economic sectors changed a lot because of the industrial revolution and industry modernization.
• Most people began working in the secondary sector (55%) because the primary sector needed fewer workers due to mechanization (20%).
• The tertiary sector was increasing, but not yet as important(25%).
• Many people moved from rural areas to cities (rural exodus).
• After the 1975 oil crisis the secondary sector went through a hard time and lost many workers, in part because of the crisis and the use of robots and mechanisation (27%).
• The tertiary sector became most important (70%) because of the improvement of living conditions allowed people to have more services.
• The primary sector needed even fewer workers due to machines (3%).

Economic Sectors and Economic Inequalities

• The distribution of a country's economic sectors depends on its economic situation.
• LEDCs (Less Economically Developed Countries) are also known as Underdeveloped Countries.
• NICs (Newly Industrialized Countries) are also known as Emerging Countries.
• MEDCs (More Economically Developed Countries) are also known as Developed Countries.
• Most people in LEDCs work in the primary sector, using traditional technology to produce crops for consumption.
• Secondary sector is not well-developed based on traditional technology and obsolete machinery making it uncompetitive.
• The tertiary sector is not specialized and doesn't require much training.
• NICs have fewer people in agriculture because they start working in industries and use machinery in agriculture.
• Multinationals set up industries in NICs to use cheap labor and emerging markets.
• The tertiary sector is becoming more important in NICs as living standards rise, and people demand specialized services like healthcare.
• A small number of people in MEDCs work in the primary sector due to machinery.
• MEDCs have very advanced technology and machinery with production aimed at internal and international markets.
• Although the secondary sector was very high(55%) some years ago is now has less importance due to the increase of the tertiary sector.
• The majority of the population in MEDCs work in tertiary activities, like hospitals, schools, and IT

Globalisation

• Globalisation describes the current economic situation where countries all over the world connected.
• Globalisation refers to the international integration of the economies and cultures.
• Goods, services, people, ideas, and cultures are rapidly exchanged across countries.

Factors that promote Globalisation

• Improved transportation helps with the movement of goods and people.
• Advances in communication make it easier for companies to communicate and transfer information, which is essential for outsourcing.
• Outsourcing describes when Transnational Corporations or Multinationals move some industries or services to less developed countries where labor is cheaper.
• The expansion of the capitalist system has increased the exchange of goods, services, capital, ideas, and cultures, because many countries have accepted the capitalist system.
• International organizations like the WTO, G-8, G-20, and EU promote free trade globally.
• Multinational corporations are interested in globalization because it increases benefits.

Consequences of Globalisation

• Consequences can be divided into two groups, positive and negative.
• The global market is much larger, including all transactions made worldwide (goods, capitals, services, etc).
• The exchange of goods and services is easier and more accessible.
• Production is organized worldwide with some countries specializing in certain goods or services, based on physical and human conditions.
• Economies of scale are more profitable by reducing the cost per unit.
• Multinationals increase their profits by accessing to cheap materials and labor in LEDCs.
• Negative consequences include the exploitation of poor countries, a loss of jobs in developed countries when multinationals move factories to countries with cheap labor and small companies struggle to compete with multinationals.
• Governments are influenced in their decisions by TNCs and lobbies.
• Wealth accumulates by a small group of people
• Poor countries become poorer the underdeveloped countries end up trapped in the vicious cycle of poverty.
• Environmental problems occur due to the exploitation of natural resources without consideration for the environment.
• Some countries become dumping sites, receiving a lot of waste from developed countries

Geo-economic regions

• The world can also be divided in geo-economic regions.
• The Triad contains the most developed areas: the USA, Canada, European Union, and Japan.
• Emerging countries used to be underdeveloped, but have improved their economic status through investment and growth.
• Regional Powers are developed countries with big influence in their region, typically an underdeveloped area with countries like Russia, South Africa and Australia.
• Underdeveloped countries are in Africa, Latin America, and Asia.

Economic Systems

• An economic system is how a nation manages its resources, goods, and services.

The communist system

• It started after the Russian Revolution of 1917, and it still exists in countries like North Korea, Vietnam, and Cuba.
• The State owns all factories, companies, and means of production, also called planned economy.
• The State decides production amounts, prices, and salaries to achieve social equality, provide basic products, and control the economy.

The capitalist system

• The economy is regulated only by the market by supply and demand.
• Private companies own the methods of production in this system often called market economy.
• Prices and wages are decided by the market law of supply and demand.
• The objective of of this system is to obtain the maximum profit.

Keynesian system

• The Keynesian system appeared as a solution for the deficiencies of the capitalist system( repeated economic crisis).
• The State interferes in legislation, creation of public companies and social planning with the objective to achieve social equality and to limit the policies of the capitalist system.
• Is a mixture between the capitalist system and the communist system, because of that it is also known as mixed system.

Neoliberal system

• The Neoliberal system is a renewed version of the capitalist system that defends the total liberation of the economy and the non-intervention of the state
• The objective is to obtain the maximum benefit for the companies

Active and Inactive population

• Active population refers has multiple meanings:
  • People that are working (occupied population)
  • People that are unemployed (unoccupied population).
• Inactive population refers to people that are not part of the working force of a country which includes, students, pensioners, and housewives.
• Activity rate describes the percentage of people that can offer labour in a country and gives information about these populations.
  • If the country is very old the active population is very low.
  • If the country is very young the active population is low, but it will increase in the future.
• Unemployment rate indicates the proportion of the active population who are unoccupied, calculated by dividing the unoccupied population by the active population.

Labour Market

• The labour market is based on supply and demand.
• Supply is offered by the companies, by the state (civil servants) and by self-employed
• The Demand composed by the people that want to work.
• The three main agents are the Government, the trade unions and the employer's associations.
  • The Government passes the laws that rule the labour market
  • Trade unions are organizations represent workers between workers and emplyers.
  • Employer´s associations are organizations defend interests of employers also negotiating with governments and workers.
• Key recurring problems are:
• Unemployment
• Child labour
• Worker exploitation
• Discrimination against women

Explore economic sectors (primary, secondary, tertiary) and concepts like GDP and GDP per capita. Learn about the impact of automation, technological innovation, and factors that influence the growth or decline of different sectors. Understand economic indicators and their implications.