Urban Social Problems, Economic Systems, and Globalized Economy
Social Problems in Developed Urban Areas
Social problems in cities of developed countries include:
- Changes in Residential Areas: Speculation and deterioration of infrastructure lead to the marginalization of the poorest and excluded populations, such as the elderly and immigrants.
- New Social Movements: Ideological critique spreads throughout the system, exemplified by movements like squatting.
- The Fourth World: The poorest and most disadvantaged sectors of society living within developed nations.
- Racial and Cultural Diversity: Can create challenges in coexistence, sometimes motivating the formation of racist groups.
Profit, Cost of Living, and Investment
Profit: The difference between expenditure and revenue. Losses occur when expenses exceed revenue.
Value: Anything that satisfies a need and possesses worth.
Service: A benefit designed to meet a specific need.
Cost of Living: Minimum spending required for a certain standard of experience. The Consumer Price Index (CPI) measures rising commodity prices, indicating inflation.
Investment: An amount of money intended to maintain a business for profit. Speculation occurs when someone seeks quick profit from price changes.
Market: A collection of consumers requiring goods and services that producers offer.
Production: Goods and services generated by economic activity. High production with low resources indicates high productivity, while low production with many resources indicates low productivity.
Gross Domestic Product (GDP): The total value of goods and services produced within a territory in one year. Per capita GDP is calculated by dividing GDP by the number of inhabitants.
Stock Exchange: A financial institution for trading.
Turnover: The sum of the value of products sold by a company.
Subsidy: Public administration assistance for social or economic activities.
State Involvement in Economic Activity
The state is involved in economic activity by:
- Developing rules regulating private economic activity.
- Providing incentives through subsidies and grants.
- Creating businesses in strategic or struggling sectors.
- Providing public services.
- Generating employment.
- Collecting taxes.
Workers join unions to defend their interests with businesses and employers. Issues include permanent/temporary employment, unemployment, the informal economy, discrimination against women, and child exploitation.
Factors of Production
Physical Capital: Material elements.
Human Capital: Qualifications, retraining, and experience of workers.
Financial Capital: Money needed to maintain or fund a company.
Technology: Procedures used to produce goods and services.
- Manual Production: Human strength and management of tools.
- Mechanized Production: Machinery provides strength, and people handle the tools.
- Technified Production: Machinery provides strength, tools, controls, and monitoring by personnel.
Economic Systems
An economic system is how an economy is organized and distributes resources.
- Livelihood Systems: Families produce and sell only what they need to survive (underdeveloped economies).
- Communist: No private property; the state controls all aspects of the economy.
- Capitalist: Recognizes private property, pursues profit as the economic engine, operates by supply and demand, and promotes free competition. A monopoly occurs when one company controls production and sales. An oligopoly exists when a small group of companies does.
The Globalized Economy
Economic relations between different parts of the globe are increasingly interconnected, with companies acting on a global scale, leading to a globalized economy. This has four key features:
- Tremendous growth in internationalization.
- New organization of production divided among several countries.
- More intense international financial flows.
- Increasingly numerous interconnections between countries.
This is made possible by advancements in communications and the internet.
Economic Powers: United States, European Union, Japan, China, and India
- United States: Big business leaders, entrepreneurial spirit, investment in research, high productivity and competitiveness, qualified workforce, wealth of natural resources and energy, flexible economy, foreign investment, the dollar, high college education, high consumption, high per capita income.
- European Union: Economic power, the euro as the second major currency. Conditions vary among EU countries.
- Japan: Leading technology industry, but lacks natural resources and energy sources.
- China and India: Rapid industrialization, cheap labor, attraction of foreign investment, large growth, but internal imbalances and inequalities in the distribution of benefits.