Technological Change

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Technological Change The EmergenceOf a Global
Economy
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Long Term Trends

• From Subsistence to Exchange
• From Local to Regional to Global

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Subsistence Economies

• Making most of what you consume, consuming most
  of what you make
• Until very recently, most of the worlds people
• Includes
• Hunters gatherers
• Traditional fishing cultures
• Slash burn agriculturalists
• Rice cultures of East and South Asia
• Traditional farming of the mid latitudes

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Exchange Economies

• Sell what you produce, buy what you consume
• Major factors
• Land
• Labor
• Capital
• Key principles
• Significance of supply demand
• Comparative advantage
• Economies of scale
• Ease of exchange
• Ease of transport

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Changing Scales of Economic Organization

• For most of history, most exchange was local
• Food, building materials, clothes generally
  produced nearby
• Competition limited to nearby people
• More regional exchange after the Industrial
  Revolution
• Increase in value could overcome transport cost
• Competition increased to more distant places
• Clearly global exchange today
• Transport cost less significant as proportion of
  total cost
• Global or near-global competition

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Wallersteins World Systems Theory

• World economy is dominated by a core of countries
  able to get a jump on the others through
  combinations of military power and wealth
  creation through economic activities
• The semi-periphery benefits from exchange with
  the core
• The periphery is in a disadvantageous situation
  where it is dependent on products of the core,
  selling its raw materials to gain those products

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Diamonds Germs, Guns Steel

• Jarod Diamond asks, how did Europeans come to
  dominate the global economy?
• Location, as the ancient Greeks thought?
• Race, as many social Darwinists thought?
• Resources?
• Culture?
• The Enlightenment?

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Diamonds Answer

• A fortuitous conjunction of circumstances
  involving
• New and Old World domestication of biota
• Consequent greater resistance to disease
• The jump that The Enlightenment gave Europeans on
  others in technological advances
• Willingness of Europeans to use their advantages

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An Economy of Global Exchange with Many Powerful
Players

• Transnational corporations
• National states
• International institutions
• Emphasis on open trade
• Built-in advantages for those on top

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How Do You Grow an Economy?

• Myrdals model of circular and cumulative
  causation
• New economic activity within a region generates
  additional economic activity
• It does so with forward linkages
• It does so with backward linkages

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What is a good location for economic activity?

• Access to resources, especially if the resource
  is reduced in weight through processing
• Access to markets, especially if generally
  available materials are used
• Access to labor, whether because of lower cost or
  because of greater productivity
• An enabling environment, whether culturally,
  politically or economically

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Significance of Agglomeration

• Economic activities tend to concentrate
  (agglomerate) in particular locations
• Some agglomeration is simply expansion of
  economic activity already going on
• Some agglomeration is specialization of a region
  with new firms taking advantage of what makes an
  older firm successful
• Other agglomeration takes advantage of what makes
  the area successful in the first place with new
  kinds of activities starting