Evolution of the World Economy

Evolution of the World Economy

• The stages in the evolution of the world economy include:
  • Mercantile Capitalism
  • Industrialization Revolution and Empire
  • Mid-20th century to present
• Models of economic development include:
  • Rostow's Model of Economic Development
  • Core-Periphery Model and Dependency
  • World Systems Theory

Capitalism

• Drives the world economic system
• Based on market competition and private ownership of production
• Emerged in Europe during the Renaissance, fueling industrialization and colonialism
• It grew from feudalism, where land was owned by nobility and worked by peasantry
• From the 14th-16th centuries, the merchant class rose across Europe, accumulating wealth through trade

Mercantile Capitalism (1450–1750s)

• The merchant class drove change with increasing overseas business interests during the Age of Discovery
• This was the early phase of colonialism, marked by the expansion of European empires like Spain, Portugal, England, France, and Netherlands
• Control of trade became important to increase profits
• Settlement and trade occurred between mother countries and their colonies in the Americas, Africa, and Asia
• Colonization of America starting in the 1500s (16th century) increased overseas trade volume
• This era included triangular trade

Industrial Revolution and Empire (1750s–1940s)

• Began in Europe, transitioning from agrarian capitalism
• Featured technological advancements in manufacturing, energy, transport, altering economic development patterns
• Reorganized global economic geography
• Expanded international trade
• Britain, France, Germany, and Holland were initial industrial powers

British trading empire in the late 19th century

• Maps were a crucial part of the trade during the industrial revolution

Age of Imperialism (1800-1914)

• Marked by a drive for political prestige and inter-European rivalry
• The treaty of Berlin in 1885 was used to carve up Africa into European colonies

Mid-20th Century to Present

• Industrialization began in developing countries
• By the 1950s, some Latin American countries became industrialized (e.g., Argentina)
• Newly Industrializing Countries (NICs) rose to prominence in the early 1970s:
  • Included the Asian Tigers (South Korea, Taiwan, Hong Kong, Singapore) during the 1960s/1970s
• In the early 20th century, world trade was dominated by Britain, Europe, the U.S.A., and Japan, increasing trade volume and value
• Late 20th century:
  • Hong Kong, Taiwan, and South Korea (NICs) entered export trade, followed by BRICS nations
• The advanced service sector and information technology increasingly shape the world economy
• The rise of financial services, especially in industrialized countries
• Many emerging economies exist, including Mexico, Indonesia, Turkey, Philippines, Thailand, and alliances like BRICS

Defining Economic Sectors and Systems

• There are four main economic sectors:
  • Primary sector: farming, rearing animals, extracting raw materials through mining, using forests for resources, fishing, and harvesting
  • Secondary sector: transforming natural resources through manufacturing, processing products, construction, and assembly
  • Tertiary sector: providing services like banking, retail, insurance, car maintenance, hairdressing, distribution, transport and tourism
  • Quaternary sector: specializing in knowledge and technical services such as information gathering, tech services, R&D; known as the "knowledge" sector

Primary Sector in the Caribbean

• Accounts for 7-17% of GDP in most Caribbean countries
• Employs a significant share of the population (10-25%, ~50% in Haiti)
• Agriculture remains key in Haiti, Dominica, Guyana, and Grenada
• The primary sector (agriculture) accounts for about 9% of Jamaica's GDP and is declining

Service Sector in the Caribbean

• The Caribbean region moved directly from agriculture to services
• Industrialization did not fully develop in most of the Caribbean, except for Puerto Rico and Trinidad & Tobago
• The region is highly reliant on travel and tourism globally
• Eight of the top 10 most tourism-dependent countries globally in 2019 were in the Caribbean

Examining Economic Systems

• An economic system is a system of production, resource allocation, and the distribution of goods and services within a society or specific geographic area
• It occurs within an economic system
• Systems can range in size:
  • Small-scale: Includes subsistence agriculture or manufacturing where places are virtually self-sufficient
  • Large-scale: Includes British and Roman Empires

Types of National Economic Systems

• Capitalist economies: Supply and demand determine prices and quantity. Market competition determines geographical production patterns
• Socialist planned economies: Government controls production, prices, and supply
• Mixed economies: Blend capitalism government intervention, including a private and public sector arrangement

Complexity of Modern Economic Systems

• Over time, economic systems became larger, more complex and international
• Globalization and technological change made economic systems connect countries, people, and businesses
• Spatial interactions include:
  • Financial transactions and international service provision
  • International labor market with supply/demand for cheap and skilled labor
  • International trade and supply chains
• This resulted in a global World Economy

Economic Systems and the Global Supply Chain

• A global supply chain is an interconnected system of companies and processes across multiple countries
• Raw materials, components, and finished products go through stages of production and distribution
• This includes sourcing, manufacturing, logistics, and delivery; optimizes costs
• Global supply chains are an example of spatial interaction in economic systems
• These are the connections between the sources of the parts to construct and assemble products, e.g., cell phones or cars

Lee Cooper Jeans (2004)

• A Lee Cooper jeans global supply chain in 2004 was used as example