GEOG_3762_economy week 4 - 10/6/08
 GEOG
3762



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Unformatted text preview: 10/6/08
 GEOG
3762

 Geography
of
Europe
 Week
4
‐

 The
European
Economy
 Fall
2008

 Dr.
Olaf
Kuhlke

 Overview
 •  The
European
economy
at
a
glance
 •  The
primary
sector
 –  Origins
of
European
agriculture

 –  European
agricultural
tradiGons

 –  The
contemporary
agricultural
economy

 –  The
Common
Agricultural
Policy
and
its
aKermath
 Overview
 •  The
European
economy
at
a
glance
 •  The
secondary
sector
 –  Origins
of
European
Industry
 –  Industrial
resources
in
Europe


 –  The
EU
and
industrial
policies

 Overview
 •  The
European
economy
at
a
glance
 •  The
terGary
sector
 –  Origins
of
European
monetary
policy
 –  European
financial
integraGon

 •  The
common
market

 •  The
European
Central
Bank
 •  The
Euro

 •  Impact
of
the
introducGon
of
the
Euro
on
EU
naGonal
 economies
 1
 10/6/08
 The
European
Economy
at
a
glance
 How
big
is
the
EU
economy
and
what
does
it
look
like?
 •  Large
market
of
500+
million

people
 •  Larger
total
Gross
DomesGc
Product
than
USA
 •  Similar
average
purchasing
power
than
USA
 •  Most
EU
countries
have
lower
per
capita
GDP
than
USA
 •  Human
Development
Index:
15
of
top
20
countries
are
 European,
20
out
of
top
30
are
European

 •  US
ranks
12th
in
HDI
list
 •  For
the
last
30
years,
a
European
country
has
topped
 the
annual
HDI
list
for
15
years
 The
European
Economy
at
a
glance
 European
GDP
per
capita
in
2006

 The
European
Economy
at
a
glance
 The
European
Economy
at
a
glance
 European
GDP
(adjusted
for
purchasing
power)
per
capita
in
2006

 HDI
in
2006

 2
 10/6/08
 The
European
Economy
at
a
glance
 How
big
is
the
EU
economy
and
what
does
it
 look
like?
 •  Small,
highly
producGve,
and
highly
subsidized
 agricultural
sector
 •  Large,
highly
varied
industrial
sector
that
is
 also
subsidized
and
protected
by
tariff
barriers
 •  Large,
highly
compeGGve
terGary
sector
driven
 by
European
integraGon
 The
European
Economy
at
a
glance
 The
European
Economy
at
a
glance
 The
European
Economy
at
a
glance
 3
 10/6/08
 The
European
Economy
at
a
glance
 1

 2
 3
 4
 5
 6
 7
 8
 9
 10
 11
 12
 13
 14
 15
 16
 17
 18
 19
 20
 
Wal‐Mart
Stores

 
378,799

 
Exxon
Mobil
 
372,824
 
Royal
Dutch
Shell
 
355,782
 
BP
 
 
 
291,438
 
Toyota
Motor
 
230,201
 
Chevron
 
 
210,783
 
ING
Group
 
 
201,516
 
Total
 
 
 
187,280
 
General
Motors
 
182,347
 
ConocoPhillips
 
178,558
 
Daimler
 
 
177,167
 
General
Electric
 
176,656
 
Ford
Motor
 
 
172,468
 
ForGs
 
 
164,877
 
AXA
 
 
 
162,762
 
Sinopec
 
 
159,260
 
CiGgroup
 
 
159,229
 
Volkswagen
 
149,054
 
Dexia
Group
 
147,648
 
HSBC
Holdings
 
146,500
 
12,731
 
40,610
 
31,331
 
20,845
 
15,042
 
18,688
 
12,649
 
18,042
 
‐38,732
 
11,891
 
5,446
 
22,208
 
‐2,723
 
5,467
 
7,755
 
4,166
 
3,617
 
5,639
 
3,467
 
19,133
 The
European
Economy
at
a
glance
 The
twenty
largest
corporaGons
in
the
world
 European
Agriculture
 What
are
the
characterisGcs
of
European
 agriculture
 •  Medium
size
producGon
area
 •  Medium
size
market
 •  Highly
producGve
and
mechanized
work
force
 •  Highly
regulated
producGon
and
market
 •  Highly
trained
and
paid
workforce
 •  Highly
protecGve
and
subsidized
market
 4
 10/6/08
 5
 10/6/08
 European
Agricultural
TradiGons
 Transhumance
 •  TradiGonal
agricultural
 pracGce

 •  Highly
producGve
 •  Grazing
 •  Livestock
migraGon
 from
summer
to
winter
 pastures

 –  Sheep
and
Cows
 The
contemporary
agricultural
 economy
 •  Agricultural
StaGsGcs

 –  By
Country

 –  By
Product

 –  Discussion
of
StaGsGcs

 •  Discrepancies
in
holding
size

 •  Discrepancies
in
ag.
contribuGon
to
GDP
 –  “Old
15”
versus
“New
10”
 •  Discrepancies
in
import/export
pajerns
 6
 10/6/08
 The
CreaGon
of
European
Agricultural
 Policy
 Why
does
the
EU
need
a
common
agricultural
 policy?
 •  Post‐WW
II:
Fear
of
Shortages
 •  IntegraGon
of
naGonal
policies

 •  CreaGon
of
a
“fair,
transparent
and
 compeGGve
market”

 •  ProtecGon
of
European
agricultural
goods
 from
outside
compeGGon
 The
CreaGon
of
European
Agricultural
 Policy
 What
issues
does
this
policy
encompass?

 •  Economic
and
ecological
sustainability
 •  Food
quality
and
safety
 –  Animal
welfare
 –  Control
mechanisms
 7
 10/6/08
 The
CreaGon
of
European
Agricultural
 Policy
 Elements
of
CAP
 •  Economic
and
ecological
sustainability
 –  ProducGvism
 –  Price
support

 –  IntervenGon
buying
 –  Tariffs
on
imported
goods
 The
CreaGon
of
European
Agricultural
 Policy
 Elements
of
CAP
 •  Problems
 –  Price
guarantees
hike
up
market
prices
of
goods
 –  Guaranteed
prices
for
goods
encouraged
overproducGon

 –  OverproducGon
requires
storage
and
disposal
 –  Tax
money
is
used
to
support
the
sale
and
disposal
of
 goods!!

 –  Tax
money
is
used
to
arGficially
manipulate
world
markets
 and
to
establish
import
barriers
 The
CreaGon
of
European
Agricultural
 Policy
 New
Elements
of
CAP
(2003+
newer)


 –  Post‐producGvism
 •  Single
volume‐independent,
size‐dependent
farm
 subsidy

 •  Subsidies
are
Ged
to
environmental,
food,
and
safety
 standards
 •  Quotas
 •  Gradually
reduced
intervenGon
prices
 •  DiversificaGon
grants

 •  Land
diversion
 •  PluriacGvity
 •  Strong
support
of
new
member
states

 The
CreaGon
of
European
Agricultural
 Policy
 New
Elements
of
CAP
(2003+
newer)


 –  Problems
 •  Subsidies
are
not
cut,
but
just
shiKed
in
focus

 •  Non‐producGvity
is
rewarded

 •  Large
farms
will
receive
the
largest
benefits
for
not
 using
their
land
 •  Small
farmers
will
receive
less
for
products,
and
will
be
 moving
further
towards
poverty

 •  Countries
contribute
to
agricultural
subsidies
according
 to
their
overall
economic
status,
but
receive
according
 to
the
development
of
their
agricultural
sector.

 8
 10/6/08
 European
Industry
 Why
study
European
Industry?

 •  Regional
differences
in
industrializaGon

 •  Historical
conflict
over
key
industries

 •  Recent
market
integraGon
and
its
effects
on
 member
states

 •  Recent
transiGon
of
parts
of
the
EU
(and
 potenGal
future
members)
to
a
market
 economy

 Geography
of
European
Industry
 Geography
of
European
Industry
 9
 10/6/08
 European
Industrial

Policy
 What
does
the
EU
do
about
these
geographic
pajerns
 of
producGon?

 •  General
Policies

 •  General
measures
for
the
internal
market

 •  External
commercial
policy

 –  Bilateral
and
mulGlateral
trade
agreements
with
implicaGons
for
individual
 industrial
sectors
 •  Social
and
regional
policy

 •  CompeGGon
policy

 –  legal
instruments
for
intervenGon
in
market
mechanisms

 –  monitoring
state
aid
 •  Research
and
development
policy
 •  The
strengthening
of
cooperaGon
among
European
enterprises
 10
 10/6/08
 European
Industrial

Policy
 What
does
the
EU
do
about
these
geographic
pajerns
 of
producGon?

 •  Regional
policies
 •  Structural
and
Cohesion
Funds
 •  Cohesion
Funds

 European
IntegraGon
Policies
 •  Reality
Check:
European
IntegraGon
 •  European
goals
for
trade
(and)
integraGon

 •  European
tools
for
trade
(and)
integraGon
 –  Industry‐specific
tools
 •  CAP

 •  Industrial
policy
 •  EMU
and
EURO
 –  Regional
tools
 •  Structural
Funds

 •  Cohesion
Funds

 •  Project
examples
 Reality
Check
 Reality
of
IntegraGon
 •  OKen
dramaGc
differences
in
economic
indicators

 •  Significant
divide
in
economic
development
between
 and
within
EU
naGon
states

 •  ParGcularly
visible
differences
in
economic
 development
between
EU
15
and
new
Eastern
 European
member
states
 Reality
Check
 Reality
of
IntegraGon
 •  Prior
to
the
EU,
a
system
of
naGonal
markets,
 networks
and
supply
chains
existed
 •  The
EU
integrated
these
markets
significantly
 •  Core/Periphery
relaGons
sGll
exist
in
 European
markets

 11
 10/6/08
 Economic
Development
Stats
 Economic
Development
Stats
 Economic
Development
Stats
 Economic
Development
Stats
 12
 10/6/08
 Economic
Development
Stats
 Economic
Development
Stats
 Economic
Development
Stats
 Economic
Development
Stats
 13
 10/6/08
 Economic
Development
 Stats
 Regional
Tools
for
Trade
and
 IntegraGon

 Goals
 •  Reduce
the
differences
in
economic
development
 between
“poor”
and
“wealthy”
regions
and
 countries
 •  Provide
matching
funds
for
economic
development
 projects

 •  Key
tool
to
counteract
recession
and
to
sGmulate
 equality
across
a
geographically
diverse
area
 Regional
Tools
for
Trade
and
 IntegraGon

 Structural
Funds
 •  Four
different
types
of
funds
 –  –  –  –  ERDF
=
European
Regional
development
fund
 ESF
=
European
Social
Fund
 EAGGF
=
European
Agricultural
Guidance
and
Guarantee
Fund
 FIFG
=
Financial
Instrument
for
Fisheries
Guidance
 Regional
Tools
for
Trade
and
 IntegraGon

 Structural
Funds
 •  Four
different
types
of
funds
 –  ERDF
goals
 –  Improve economic prosperity and social inclusion •  High unemployment •  High ethnic diversity •  Three
different
types
of
objec7ves
and
area
classifica7ons

 –  ObjecGve
1
 –  ObjecGve
2
 –  ObjecGve
3
 –  Investing in projects to promote development •  Public and Private organizations –  Encourage the diversification of industry into other sectors •  Traditional rural regions •  Traditional industrial regions •  Development of service industry and high tech sector •  Regions
qualify
for
different
pots
of
money
 –  Areas lagging behind –  Available in Objective 1 and 2 areas 14
 10/6/08
 ERDF
Project
Example
 Regional
Tools
for
Trade
and
 IntegraGon

 Structural
Funds
 •  Four
different
types
of
funds
 –  ESF
goals
 –  Funds training, human resources and equal opportunities schemes •  Job-training of the unemployed •  Job-placement programs •  Programs to encourage women to enter the workforce •  Birmingham
Examples:
 –  –  –  –  Metro
System

 ConvenGon
Center
 Parks

 Business
Corridor
Infrastructure
 –  Employability of people in both Objective 1 and 3 areas •  Additional training an schooling –  Objective 2 areas: ESF may be used to complement the ERDF activities ESF
Project
Example
 Regional
Tools
for
Trade
and
 IntegraGon

 Structural
Funds
 •  Four
different
types
of
funds
 –  EAGGF
goals
 –  Encourage the restructuring and diversification of rural areas •  Funding supported by CAP goals –  Promote economic prosperity and social inclusion •  ESF
Projects
of
good
pracGce
 –  –  –  –  –  Unemployment
 Youth

 Social
Exclusion
 Equal
opportunity
 Industrial
change
 •  Reintegration of unemployed farmers •  Protection of rural migrant population –  Protecting and maintaining the environment and rural heritage •  Local heritage museums •  Local history projects •  Tourism –  Rural Objective 1 areas 15
 10/6/08
 EAGGF
Project
Examples
 Regional
Tools
for
Trade
and
 IntegraGon

 Structural
Funds
 •  Four
different
types
of
funds
 –  FIFG
goals
 –  Modernize the structure of the fisheries sector –  Encourage diversification of the workforce •  Tourism •  Security and rescue •  Trade and transport –  Ensure the future of the industry through achieving a balance between fisheries resources and their exploitation •  Research facilities •  Volunteer program grants FIFG
Project
example
 Regional
Tools
for
Trade
and
 IntegraGon

 Structural
Funds
 •  Three
different
objecGves
and
areas

 –  ObjecGve
1:
Areas
with
less than 75% of EU average GDP. Promotes the development and structural adjustment of the EU regions most lagging behind in development –  ObjecGve
2:
Supports the economic and social conversion of areas facing structural difficulties. Areas qualify under four strands - industrial, rural, urban and fisheries –  ObjecGve
3:
European Social Fund. Develops labor markets and human resources. Directed at long-term unemployed and those facing barriers to finding employment because of their disability, racial origin, or sex. •  Projects
 –  Scotland
 16
 10/6/08
 Regional
Tools
for
Trade
and
 IntegraGon

 Structural
Fund
Objec0ve
Areas
for
the
 UK
 RED
+
PINK
‐
Obj.
1
 BLUE
‐
Obj.
2
 Cohesion
Funds
 •  Why
was
it
set
up?

 •  Single
European
Act
1987
 •  Aimed
at
countries,
not
regions

 •  Convergence
criteria
 •  Aimed
at
improving
infrastructure

 •  Environment

 •  Transport

 •  Reformulated
policy
due
to
Enlargement
to
EU‐25
 Regional
Tools
for
Trade
and
 IntegraGon

 Cohesion
Funds
 •  Who
benefits?

 •  Spain

 •  Portugal

 •  Greece
 •  New
Member
states
 •  Seven
year
funding
periods
 •  Website

 •  •  •  •  •  •  •  Regional
Tools
for
Trade
and
 IntegraGon

 Cohesion
Funds
 •  What
is
it
exactly?
 Member States whose GNP is less than 90% of the Community average Economic convergence program Beneficiary State must limit their deficit (no more than 3% of its GDP) The maximum rate of aid granted is between 80% and 85% of expenditure Projects are selected and implemented by the country concerned, which is also responsible for management and financial monitoring. Projects are also regularly monitored by the Commission THE IRISH EXAMPLE 17
 10/6/08
 European
Finance

 Why
study
the
European
Monetary
Union?
 Legacies
of
InflaGon
 •  •  •  •  New
geographic
unit
of
currency
use

 New
global
financial
force

 Challenge
to
naGonal
fiscal
policies
 Benefits
and
drawbacks
of
new
system

 Legacies
of
InflaGon
 Legacies
of
InflaGon
 18
 10/6/08
 Legacies
of
InflaGon

 •  •  •  •  •  Legacies
of
InflaGon
 World
War
I
(1914‐18)
 German
Central
Bank
 Gold,
Currency
and
Taxes
 War
financing

 Loans

  Four‐fold
increase
of
currency
volume
  Price
Index
increase
 Legacies
of
InflaGon
 •  •  •  •  AKer
World
War
I
(1918‐21)
 ReparaGon
payments
 Currency
depreciaGon
 Social
democraGc
government
  Increased
wages
  Social
and
educaGonal
benefits
 Legacies
of
InflaGon
 •  AKer
World
War
I
(1922‐23)
 •  HyperinflaGon
 •  Ruhr
conflict
between
Germany
and
France
  Passive
resistance
  Wages
could
not
keep
up
with
inflaGon

  Hunger/malnutriGon
  Bartering
economy
 19
 10/6/08
 Legacies
of
InflaGon
 •  •  •  •  •  •  AKer
World
War
I
(1923‐24)
 Rentenmark
introducGon
 1
RM
=
1
trillion
Mark
 Confidence
in
currency

 Currency
backed
by
property

 New
Reichsmark
introducGon
1924

 •  •  •  •  •  •  •  •  •  Legacies
of
InflaGon
 Young
Plan
1928

 ReparaGon
payments
unGl
1988

 Rise
of
unemployment

 Rise
of
NaGonal
Socialist
Party


 1931
World
Economic
Crisis
 Debt
repayment
 1933
ElecGons:
Hitler
takes
over

 1938
Conference
in
Munich

 1939
World
War
II
begins

 The
Historical
Geography
of
the
 European
Monetary
Union

 The
Brejon
Woods
Agreement
 •  1944/46
 •  Post‐WWII
instrument
of
global
economy
stabilizaGon

 •  50
countries
Ged
their
currency
to
the
US
Dollar,
and
the
 Dollar
value
was
Ged
to
gold
prices
 •  “Fixed”
exchange
rates
 •  RegionalizaGon
of
money
 •  Transparent,
low
risk
markets
 •  Growth
of
industrial
economies



 The
Historical
Geography
of
the
 European
Monetary
Union

 AKer
the
Brejon
Woods
Agreement
 •  •  •  •  •  •  •  1971
 End
of
BWA
 ShiK
to
fluctuaGng
exchange
rates

 Era
of
global
finance

 Global
geography
of
money
 Currencies
were
traded
globally
 Control
issues
 20
 10/6/08
 The
Historical
Geography
of
the
 European
Monetary
Union

 AKer
the
Brejon
Woods
Agreement
 •  •  •  •  •  •  Risk

 Instability
of
financial
markets

 Growth
of
mulGnaGonal
banking

 Loans

 Debt
Crisis
of
early
1980s
 NaGonal
focus
on
currency
stability
 The
Historical
Geography
of
the
 European
Monetary
Union
 History
of
the
EURO
 •  Treaty
of
Rome
(1957)
 –  Common
Market

 Steps
of
IntroducGon
 •  Jan.
1999

 –  Fixing
of
Exchange
rates

 –  Common
Monetary
Policy

 •  Single
European
Act
(1986)
 •  Treaty
on
the
European
 Union

 –  Economic
and
Monetary
 Union
(EMU)
 •  Jan
2002
 –  IntroducGon
of
new
coins
and
 currency

 •  July
2002

 –  Complete
conversion
to
new
 currency
 History
of
European
Monetary
Union
Video

 Aspects
of
the
European
Monetary
 Union
 Benefits
of
the
EURO
 •  Stability

 –  Economic
and
cultural
bonds
 Drawbacks
of
the
EURO
 •  Austerity
measures
 –  Curbing
debt,
inflaGon
and
 interest
rates

 –  Curbing
subsidies


 •  Corporate
benefits

 –  TransacGon
costs
 –  Efficiency
of
resource
allocaGon

•  TransformaGon
costs

 –  Public

 •  Price
transparency
 –  Private
 –  CompeGGon
 •  Consumer
benefits

 –  Tourism

 •  Bureaucracy
 •  EU
aid
distribuGon
 –  Standardized,
transparent
 distribuGon
of
EU
resources

 –  AdministraGon
of
new
currency
 –  Short‐term
lack
of
transparency
 21
 ...
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