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Geography, Economics
And

Economic Geography
Sher Singh Parmar

Gold Medallist, B.A. (Geography)


University of Pune

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1. Author : Sher Singh Parmar.


2. Copyright © : Author
3. First Edition / : 2002 A. D.
Impression
4. Publishers : ASD Publications,
Pune,India.
5. Price : India : Rs.200
Nepal / Pakistan / Sri Lanka:
Rs.250
Others: US $ 100

This edition is for sale only in India.

NOTE: THIS BOOK MATERIAL IS BEING RELEASED ON INTERNET, FREE OF


COST, TO THE PUBLIC FOR THE PURPOSE OF CREATING AMONGST THEM
AN INTEREST IN THE WONDERFUL SUBJECT OF ECONOMIC
GEOGRAPHY.NO ONE IS HEREBY PERMITTED TO EXPLOIT COMMERCIALLY
OR OTHERWISE THE GIVEN BOOK EXCEPT WITH THE EXPRESS WRITTEN
PERMISSION OF THE AUTHOR.

Acknowledgement

The author is greatly indebted to all those whose works have been relied
upon as reference material.

Dedicated to
My Spiritual Master,
beloved Parents
and Teachers.

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Geography, Economics And Economic Geography


1. Economic Geography

Introduction

Definitions

Nature

Scope
Approaches to the study of economic geography

Testing/Type Of Hypothesis
Introduction
Testing Of Hypothesis
Originators
Types Of Hypothesis
Elaboration / Procedure Of Testing A Hypothesis
2. Economic Landscape
Introduction
Historical Evolution
Types Of Economic Landscape

Types
The Idealised Perfectly Balanced Pentagonal Economic Landscape:
The Realistic Isostatically Balanced Amorphous Model/Type:

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Measurement Of Deviation From The Idealised Model

Example Of Co–Efficient Of Imbalance In A Hypothetical Economic Landscape “X”

Idealised Hypothetical Example Of A Quantitatively Perfectly Balanced Economic


Landscape
Isostatically Balanced Economic Landscape

The Model Of Economic Landscape Balance

Objections

Importance Of The Concept Of The Balance Of Economic Landscape

Homestead Economy
Introduction
Significance
Present Status

Tribal Economy
Introduction
Working Of The Tribal Economy
Factors Influencing Tribal Economy
Physical
Cultural
Historical
Examples Of World Tribes
Criticism Of Tribal Economy

village Economy
Introduction
Present Scenario

Modern Economic Landscape


Introduction
Working Of The Modern Economic Landscape

Factors Affecting Modern Economic Landscape


Human Attitude
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Political Factors
Economic Factors
Social
Cultural
Science And Technology

Criticism Of Modern Economic Landscape


3. World Economy
Introduction
Historical Evolution
Medieval Feudal Economies
The Rise Of Mercantilism
The Slave Trade
The Industrial Revolution

Colonialism
Economic Benefits
Harms

Multinational Corporations(MNCs)
Reasons/Factors For Multinationalisation
Impact Of Mncs
Positive Impact
Negative Impact
4. Location Of Economic Activity

Location Of Primary, Secondary ,Tertiary,Quaternary And Quinary Production


Flow Chart Showing Increasing Order Of Complexity And Specialised Nature Of
Economic Production Activity.
Graphical Hypothetical Simplified Representation Of The Complexity And Specialisation
Involved In Different Productions.
Location .

Von Thunen’s Model


Introduciton
Assumptions
Explanation
Application
Criticism
Negative
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Positive

Alfred Weber’s Model


Introduciton
Assumptions
Principles
Transport Costs
Labour Costs
Tendency To Agglomerate
Criticism
Positive
Negative
Conclusion
Some Additional Points

Walter Christaller’s Central Place Theory


. Introduction:
Assumptions
Explicit
Implicit
Important Concepts
Working Of Central Place Hierarchy
Examples Of Functions In Central Places Of Varying Sizes
Principle Of Christaller’s Theory
The Theoritical Basis Of Christaller’s Central. Place Network
Market Principle ( K = 3 ).
A Central Place Systems Organized According To Christaller’s Marketing Principle.
Traffic Principle (K = 4)
A Central Place System Organised According To Christaller’s Is Transport Principle
Administrative Principle ( K = 7 )
A Central Place System Organised According To Christaller’s Administrative Principle
Criticism
Negative
Positive
Conclusion
Central Place System In India
5. Resources
Introduction
1. Attributes :
i. Functionability
ii. Utility
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A Resource Can Be Viewed From Different Perspectives :


Changing Perspective
Normal Classification
A) Natural
B) Human
Comparison Between Wealth And Resources
Comparison Between Resources And Neutral Stuff
Important Definitions

Natural Resources
1.Characteristics Of Natural Resources:
Availability
Distribution
Occurrence
2.Types
Fund Resources
Flow Resources
Importance
Dynamism
Significance Of Natural And Human Resources In Economic Development
Introduction
Significance Of Natural And Human Resources In Economic Development
Significance Of Natural And Human Resources In Economic Development
Formula Of Sustainable Economic Development
An Introduction To The Interesting Elements Of In The Study Of “Resources Geography”
6. Factors Of Produciton
Introduction

Factors Of Production
Explanation
Land
Labour
Capital
Technical Knowledge
Entrepreneurship
Organisation
Time
Government Policy

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Power Resources
Historical Factors
Opportunity Cost
Oceans, Sky And Space
Demand For A Product
Time

Spatial Variation In The Factor Cost


Introduction
Explanation
Causes Of Variation
Significance Of Spatial Variation In The Factor Cost
7. Transportation

Introduction

Basic Elements Of Transportation

Different Mediums Of Transportation

Means Of Transportation

Models Of Transportation
Planner Models
Non – Planner Models
Simple Models
Complicated Models
Builder Friendly
User Friendly

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Shapes Of Transportation Models

Importance Of Models Of Transportation

Elementary Measures (Topological) Of Network Structures (Based On Gross


Characteristics

Objective Of The Study Of Transportation

Variation In Cost Of Transportation


Introduction
Variation
Classical Case Study
Types Of Costs

factors Of Variation In Transportation Costs


Geographical/Economic Distance
Terrain
Type Of Carrier
Commodity
Competition
Quantity And Frequency Of Commodity Movement
Concessions
Specialised Nature Of Services
Government Policies

Modes Of Transportation
Introduction
Explanation
Flow Chart Showing Modes Of Transportation
Characteristics Of Different Modes Of Transport
Introduction
Characteristics
Air
Positive/Advantageous

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Negative / Disadvantages
Roads
Positive /Advantages
Negative/Disadvantages
Water
Sea, Lakes, Rivers, Canals
Water Bodies
Positive/Advantages
Negative/Disadvantages
Rail
Positive/Advantages
Negative/Disadvantages
Space Shuttles/Space Crafts
Positive/Advantages
Negative/Disadvantages
Pipe Ways
Positive/Advantages
Negative/Disadvantages
Significance
8. Economies Of Scale

Economics And Scale


Introduction
Meaning
Constant Returns To Scale
Increasing Returns To Scale
Decreasing Returns To Scale

Economies
Introduction
Types
Internal Economies:
Economies Of Increased Dimension
Economies Of Linking Processes
Economies Of Superior Techniques

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Economies Of Specialisation And Division Of Labour


Managerial Economies
Marketing Economies
Financial Economies
Economies Of Risk Bearing
External Economies
Economies Of Concentration
Economies Of Information
Economies Of Disintegration

Diseconomies Of Large Scale Production


Spatial Variation In Demand
Introduction
Geographical Perspective
Example

Theory
Criticism
Positive
Negative

Other Important Theories


Transport Cost Theory Of Edgar M. Hoover
Behavionral Theory
Market Areas Theory
Integral Theory
9. Economic Development

Classification Of Countries
Classification By Hartshorne & Alexander
First World Countries
Second World Countries
Third World Countries
Classification By United Nations
“More Developed” Countries
“Less Developed” Countries

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Measures Of Economic Development


World Development Report 1997 (World Bank ,Washington 1997)

Geographical Account Of W.Rostow’s Non-Spatial Model


Introduction
Principle
Examples
Criticism
Positive
Negative

G.Myrdal’s Spatial Model Of Economic Development


Introduction
Principle :
Cumulative Causation
Spatial Interaction
Stages Of Regional Differentiation
Criticism
Positive
Negative
10.International Trade
Introduction

Meaning

Background

Certain Facts And Figures About International Trade/Global Economy

Advantages Of International Trade

Cause Of International Trade

Basic Concepts
Factors Influencing The International Trade
Flow Theory

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Gravity Model
Network Revolution
The Cargo Revolution
Wars And Economic Scenarios
Population Growth
Emergence Of Economic Blocks
Diversity In Natural Resources
Differences In Tastes
Economies Of Scale Or The Decreasing Costs

Foreign Exhange Regime

Structure Of International Trade


Volume Of Trade
Composition Of Commodity Flows

Trends/Direction

Problems Of International Trade

Problems Of International Trade Or the Factors Influencing International Trade


I) General, II) Special Or Immediate
Historical
Political
Economic
Geographical / Physical
Cultural
Technological
Natural Hazards
Special Or Immediate Factor

Prospects Of International Trade

David Ricard’s Classical Theory


Introduction

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Background
Explanations
Two Types Of Advantages

Economic Gains From Trade


Importance
Criticism
Positive
Negative

Conclusion
References

PREFACE TO THE FIRST EDITION

1. The present volume is written inter alia to meet the needs of the
student community as per the syllabus prescribed for “Economic
Geography” for MA by University of Pune as of 2002 – 2003.

2. It is hoped the present volume shall be helpful to the students


preparing for ‘Economic Geography” paper of various other
universities and competitive exams, too.

3. I lay no claim as to the originality of ideas/facts/figures presented in


the present volume except the chapter on “Economic Landscape”
which purely is my own contribution. My endeavour has been to
bring at one place the study material on Economic Geography
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scattered over a large number of sources like books, articles, etc. It is


hoped it shall save the student precious time wasted in looking for
study material. It is hoped it shall help those students who can’t
afford to purchase costly books prescribed in the course, too.

4. However, I do have a piece of advice to students. Although present


text is fully equipped to help a student sail through exams with flying
colours, yet an extensive and wide study covering reference and non –
reference study material has no perfect substitute. A serious and
scholarly student must try to read all the reference material, if time ,
money and energy allow so . A wide reading does certainly help
widen one’s intellectual horizons.Especially for the latest facts and
figures on international trade , the sincere student must make it a point
to religiously browse through the section on trade/finance in the daily
newspapers of established authentic standing.

5. I wish to place on record my deep gratitude to Mrs. Jayamala Dedee,


the Head Of the Department, Department of Geography ,University of
Pune,Pune ,Mr. Jayaprakash Jadhav, the Head Of the Department,
Department of Geography, and Vice – Principle of Padmashree Dr.
D.Y.Patil College of Arts, commerce and science, University Of Pune
, Mrs. Sharmila Chodhuri, , lecturer geography, Padmashree Dr. D.Y.
Patil college of Arts , commerce & science , Pune , & Mrs. S.R.
Kulkarni , lecturer geography, Modern College, Pune who provided
me a great deal of encouragement and moral support to go ahead with
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the present text.I feel equally indebted to all the lecturers and
professors of the Department of Geography ,University of Pune and
others who encouraged me to take up the present task. I would love to
put on record my heartfelt gratitude to my Ahmednagar college days’
lecturers and professors , viz. , late Professor Sangamkar ,Professor
Kulkarni and Professor Shaikh who had ignited in my mind a deep
passion for Geography. I am equally indebted to Subhash Rabra , my
Economics Teacher in school, who was instrumental in laying my
firm foundations in the subject of Economics besides chiselling the
creative skyline on my intellectual horizon. My youngest brother
Rajesh Parmar, a management student, deserves my appreciation, too,
since it was he who got the original manuscript typed electronically
and did the drawings.But for the intelligent hard and sincere work put
in by Rajesh , the present work would not have seen the light of the
day. Last but not least, my publisher deserves a word of appreciation,
too.

6. Constructive suggestions and comments to improve the present text


are most welcome. Presence of error of omission or commission, if
any in the given text, are solely mine.

SHER SINGH PARMAR

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Pune: /7/2002

1. ECONOMIC GEOGRAPHY

1.1 INTRODUCTION
The phrase “Economic Geography” consists of two words ‘Economic’ & ‘Geography’.
What do we mean by the term “economic” ? Hartshorne & Alexander say,
“The word economic pertains to all the activities in which people engage the world
over, in the production, exchange (or distribution), and consumption of goods and
services. Anything people buy, barter, or work to produce, consume, or exchange is
an economic activity.”
Next, what do we mean by the t erm “Geography”?
The word geography has Greek roots: “geo” means “earth” and “graphos” means
“description”. Thus, “geography” means “description of the earth”. Other sciences
like geology, pedology, botany, zoology, meteorology too describe the earth.
Surely, geography can’t be a sum total of all these earth sciences. Main feature of
geography is the way or how it studies and not what it studies. As says V. A. Janaki,
“Geography is a method of study rather than a subject… In geography, we approach the
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subject matter with a spatial perspective”. The subject of geography is primarily related
to variations from place to place rather than from time to time. Hartshorn & Alexander
say,
“Any phenomenon whose distribution diff ers from place to place is t ermed a
spatial variable and qualifies as an element of geography”.
Thus, geography is the study of spatial variation on the earth’s surface inclusive of
all spheres, i.e. Lithosphere, Atmosphere, Hydrosphere, and Biosphere.

1.2 DEFINITIONS :
In simpler terms, economic geography can be defined as the study of spatial variation
on earth’s surface of production, exchange & consumption of goods,
services/information. Although opinion differs on the exact definition of economic
geography, yet everyone agrees on one point that economic geography is the study of
the spatial distribution of human beings economic activities in relation to its
environment, be it physical or non-physical.

Let us review a few of famous definition on the subject :


A. Hartshorne & Alexander,
“Economic geography is the study of the spatial variation on the earth’s
surface of activities related to production, exchanging and consuming goods
and services… wherever possible, the goal is to develop generalizations and
theories to account for these spatial variations … Economic geography refers
to the field of study focussed on the location of economic activity at the local,
national and world scale.”
B. V.A. JANAKI,
“ It deals with the economic and commercial aspects of man on earth and the
influences on these of the environment in its broadest sense. The adjective
‘Economic’ confines the geographer to the economic problems and system of
man and as such he must know something of the principle of economics”.
C. DUDLEY STAMP :

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It “… involves consideration of the geographical and other factors which


influence man’s productivity, but only in limited depths in so far as they are
connected with production and trade”.
D. E.W. ZIMMERMANN:
“Economic geography deals with the economic life of man with relation to

E. R.S. THOMAN :
“Economic geography may be defined as an enquiry into the production,
exchange and consumption of goods by people in different areas of the
world. Particular emphasis is placed on the location of economic activity -
upon asking just why economic functions are situated where they are in this
world.”

F. J. MACFARLNE :
“It is (study of)… influence exerted on the economic activity of man by his
physical environment and more specifically by the form and structure of the
surface of the land, the climatic conditions which prevail upon it and the
spatial relations in which its different regions stand to one another.”
G. CHISHOLM :
It , “…Forms some reasonable estimate of the future course of commercial
development”, as det ermined by geographical factors.
H. SHER SINGH PARMAR :
“Economic geography is that branch of geography which deals with the
influence of so-called geographical and extra-terresterial factors on economic
activities of human beings on earth and in universe from a spatial perspective
in the short run in juxtaposition with primacy of the influence of non-
geographical and extra-terresterial factors on such spatially varied economic
activities in the long run.”
1.3 NATURE:

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Economic Geography personified has a nature too, just as any human being has a peculiar
nature or psychological tendency. It is a science, arts and philosophical by nature.
It is a science because it follows scientific methods of observation,collection of
data,hypothesis, theory and model building ever open to scientific scrutiny in terms of
relationship among variables under study and validity of such a relationship.
It is an arts, since it involves quite a subjective approach too in terms of skilful
organization of field studies, collection of data, map drawing and interpretation of results.
Its philosophical, too, in terms of ever trying to philosophise questions of human being
and environment relationship in economic terms. It tries to frame postulations as to what,
why, how, and where an economic activity takes place in a particular corner of the globe
or the universe?
Finally, it of course is interdisciplinary, flexible, dynamic, friendly and far-reaching ,
too.

1.4 A) SCOPE:
Scope or ambit or area of economic geography is vast both in terms of temporal and
spatial scope.
Although Hartshorne and Alexander opine that “the geographer is concerned
primarily with variations from place to place rather than from time to time ”, yet a
geographer can’t escape studying temporal aspects, too in terms of studying varied
geographical patterns of phenomena prevailing at any given point of time on earth.
(i) TEMPORAL SCOPE:
With emphasis on the current contemporary situation, it includes in its ambit the scope of
going back into times, since ills of many countries today have their roots in past
geographical economic spatial patterns like during the great age of discovery, 30 million
young people aged 15-35 years were removed from Africa during Slave Trade Era which
depleted human resources of that continent. It caused a lack of economic development in
Africa whereas slave trading nations like U.K., Spain, etc. flourished and built up
enormous monetary and capital assets which helped them later to kickstart and sustain
economic development in their own countries. This led to spatial variation in economic

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development in that bygone era. But, its repercussions are still felt in Africa, where
economic development has quite been low due to bequeathing of no economic
development by their preceding generations.
Thus, one may devide temporal aspect into following broad categories :
1. Ancient,
2. Medieval,
3. Great Age of discovery
4. 19th century,
5. 20th century,
6. Contemporary,
7. Recent,
8. Present.

(ii) SPATIAL ASPECT/SCOPE :


Economic geography has enormous spatial scope which includes the following
aspects/points:
1. VERTICAL:
Spatial locations right from ocean bed to the mountain top and related economic
phenomena.
2. HORIZONTAL:
(i). Continental Scope : It includes studies of all continents/islands in economic
terms and their interactions.
(ii) Hemispheric Scope : Economic geography may be studied in terms of eastern,
western, northern, southern hemispheres.
3. ECONOMIC ACTIVITIES SCOPE:
i. PRODUCTION :
It includes studies of all kinds of economic activities – primary, secondary,
tertiary, Quaternary, quinary.
ii. EXCHANGE :

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It includes value addition to each product, goods, services created by the


specialized services provided at each level of handling, including packaging,
promotion, financing, and merchandizing of the product.
iii. CONSUMPTION :
It includes both the pattern of consumption and the spatial aspects of consumer
behaviour.
4. DEVELOPMENTAL SCOPE :
It includes a study of spatial variation in terms of economic development, i.e.
different categories of countries like more developed and less developed
countries.
2 INTEGRATIVE SCOPE :
It includes a study of spatial variation in economic activities in terms of an
integrated approach to all spheres, i.e. Lithosphere, Atmosphere, Hydrosphere and
Biosphere. It includes studies of underground spatial aspects like aesthenosphere,
sial, sima, mantle, core so as to determine their influence on economic activities
of human beings.
3 EXTRA TERRESTERIAL SCOPE :
With the opening up of extra terrestrial scope, economic geography shall have to
take into consideration availability of economic activities/possibilities in outer
space like Moon, Mars, etc. Experiments carried out to produce special kinds of
minerals aboard spacecrafts fall within the spatial scope of economic geography.
4 GLOBAL SCOPE :
It has global scope, because of variations in the level and interdependencies that
exist in international economic development. The whole earth has become a
global system with shrinking economic distance. So much that even a person in
the most remote geographical/economic areas of the world now participate in an
economic system that is less local and regional and more national and
international in scope.
(iii) THEORETICAL SCOPE :

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It has enormous theoretical scope. Hartshorne & Alexander say ,” Locational


analysis in economic geography involves not only an explanation of activities
already present on the landscape but may also involve the selection of a
future location for an activity such as a restaurant or shopping mall.”
Theories are used in so far as possible to explain why activities are located as they
are ,i.e., Von Thunen’s Model (Agriculture), Weber’s Model (Manufacturing) and
Christaller’s Central Place theory (tertiary, quaternary, quinary activities
including retail location) are excellent examples.
It includes concepts in analytical work like distance, interaction and region.
(iv) INTERDISCIPLINARY SCOPE :
It studies other subjects like economics, political economy, etc. to gauge the
effects on spatial variation in economic activities of factors like political economy
of a nation, macro forces associated with the transition of the world economy
from a manufacturing to a post industrial base, the international monetary system,
and multinational corporations.

1.4(B) APPROACHES TO THE STUDY OF ECONOMIC


GEOGRAPHY:
Broadly speaking , following are the “12 Golden” or main
approaches to the study of “economic geography” or any other
sub discipline in the field of geography or any other subject:
1.Descriptive, Analytical , Prescriptive.
2.Subjective/Artistic , Objective/Scientific.
3.Holistic/Whole/Homogeneitic,Isolationist/Parts/Heterogeneitic/
Choreal , Particularitic.
4.Systems , Systematic.

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5.Political: Socialist ,Capitalist ,Communist , Democratic , Fascist,


Liberal.
6.Activity, Principle.
7.Quantitative/Mathmatical ,Qualitative/Behavioural/Humanistic.
8.Temporal , Spatial , Spatio-Temporal.
9.Philosophical,Theoretical,Practical/Applicationary,
Environmental/Consequential,Interdisciplinary.
10.Gender , Racial.
11.Civilian, Military.
12.Economics,Geographical , Economic-Geographical.

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1.5 TESTING/TYPE OF HYPOTHESIS

1.5a INTRODUCTION:
First of all, let us try to find out what we exactly mean by the concept of a
“hypothesis”. A “hypothesis” is a tentative logically drawn conclusion concerning
any parameter of the population based upon observation of the population. Here
“population” means a given set of certain variables. For example, a collection of
different crops in a village may be said to be a “population”. After having made
an observation of the yield or production of different crops in general, it may
seem that a particular crop gives better yield than others. So, one may form a
‘hypothesis’ that the particular crop (let us say rice) is most suitable for sowing in
the agricultural fields of that village. For this purpose, a sample (chosen
randomly) may be taken of the agricultural lands. Now, this involves an element
of risk, the risk of taking a wrong decision. Here, modern theory of probability
plays an important role in decision making by helping arrive at decisions in
certain situations having an element of uncertainty on the basis of a "Sample" or
"“representative small set of variables ” taken from the “Larger set of variables”
or the “Population” . In the above example, if the sample mean and population
mean have no significant differences, the hypothesis is accepted. Otherwise, it is
rejected, if significant differences exist.
1.5b TESTING OF HYPOTHESIS :
That statistical method which helps in arriving at the criterion for making
decisions in situations having an element of risk or uncertainty, the risk of taking
a wrong decision, where inductive influence is for deciding about the
characteristics of the population on the basis of sample study is called Testing of
Hypothesis. In other words, the testing of hypothesis is a process of testing of
significance regarding parameter of the population on the basis of sample. It
involves computation of a “statistic” from the sample drawn from a population on
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the basis of which it is decided whether the sample so drawn belongs to the
parent population with certain particular characteristics. It shows whether the
difference between the computed "“statistic” and the hypothetical parameter is
significant or otherwise. If the difference is small, it is accepted on the grounds
that it has cropped up due to sampling fluctuations. Accordingly, it is accepted. It
is rejected, if such difference is quite large in which case it is presumed that the
difference has arisen due to some other reasons and not due to sampling
fluctuations. “Testing of hypothesis” is also called the “test of significance”,
because it reveals the significance or otherwise of differences between the
computed “statistic” and the hypothetical parameter.
1.5c ORIGINATORS :
Neyman and E.S. Pearson initiated this theory.
1.5d TYPES OF HYPOTHESIS :
Hypothesis are of 2 types:
1. Null Hypothesis
2. Alternative hypothesis
i. NULL HYPOTHESIS :
It is a hypothesis which is stated for the purpose of possible acceptance. It
is denoted by the symbol Ho. To quote Professor R.A. Fisher, “Null
hypothesis is the hypothesis which is tested for possible rejection
under the assumption that it is true.”
ii. In the foregoing example, we may express the Null hypothesis as below : -
iii. Ho:µ.= Rice
Following two precautions are taken while setting up a Null Hypothesis :
1. A Null Hypothesis that “ the difference is not significant” is set up when
one has to test the significance of the difference between a “statistic” and
the “parameter” or between two sample “statistics”. In other words, the
difference if any is just due to fluctuations of sampling.

Ho : µ = X (X = Sample mean)

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2. A null hypothesis that “It is true” is set up when one has to test any
statement about the population, e.g., if one has to test whether population
mean has a specific value “(µo), this type of hypothesis is set up
Ho : µ = µ o
ii. ALTERNATIVE HYPOTHESIS :
It is a complementary hypothesis to the Null hypothesis. It is denoted by H1 For example,
if we want to test the null Hypothesis that the average yield is 100 kg per hectare in
agricultural fields, i.e. ,
Ho: µ=100 k.g.= µ o (say) µ
the alternative hypothesis could be:
i. H1: µ ≠µ 0 (i.e. , µ >µ 0 or µ <µ 0) [two tailed alternative]
ii H1: µ >µ 0 [right tailed test]
iii. H1: µ >µ 0 [left tailed test]
1.5e ELABORATION / PROCEDURE OF TESTING A HYPOTHESIS :
It involves following 7 steps :
i. Setting up a hypothesis
ii. Computation of a statistic
iii. α ) and Type II error (β
Finding out type I Error (α β)
iv. finding level of significance
v. Critical Region or Rejection Region.
vi. Two tailed Test and one-tailed Test.
vii. Taking a decision.
1. Setting up a hypothesis: A statistical hypothesis is logically drawn
concerning any parameter of the population. Either a Null Hypothesis or
an Alternative Hypothesis is set up as explained earlier.
2. Computation of a statistic : It is based upon an appropriate probability
distribution. It is used to find out acceptance or rejection of the Null
Hypothesis set-up. 2 distributions- Z and t distributions are used. Z
distribution under normal curve for large sample where the sample size is

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equal to or larger than 30 (n>30). t distribution for small sample where the
sample size is less than 30 (n<30).
3. α ) and Type II error(β
Type I error (α β ) : Acceptance or rejection of a
Null hypothesis on the basis of sample data always carries the risk of
errors of two types : 1.True hypothesis is rejected 2. False hypothesis is
accepted.
ACTUAL DECISION
Accept Ho Reject Ho
Ho is true Correct decision, no error Wrong decision, type I error
Probability=1-α Probability = α
Ho is false Wrong decision, type II error Correct decision, no error
Probability = β Probability=1- β

While accepting or rejecting a Null hypothesis chances of type I errors and type II
error have to be avoided as far as possible.
4. finding the level of significance : The level of significance denoted by α
is the maximum probability of making type I error. The level of
significance denoted by β Is the maximum probability of making type II
error. Derived level of significance always is fixed in advance. Generally,
these are 5% (0.05) and 1% (0.01). 5% level of significance means that
every 5 out of 100, there are chance of rejection of a correct Ho. This
means 95% confidence of the rejection of Ho being correct. This 95% of
confidence is also called the confidence coefficient.
The probability of error (β) is much higher in accepting a false hypothesis
than in rejecting a true hypothesis ( α type error).
5. Rejection region/critical region : The total area under a standard normal
curve is equal to 1 signifying probability distribution. The rejection region
or the critical region is the region of the standard normal curve
corresponding to a pre-determined level of significance fixed for knowing
the probability of making the type I error of rejecting the true hypothesis.
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The acceptance region is the region not covered by the rejection region.
If the “test statistic” computed to test the hypothesis falls in the acceptance
region, it is reasonable to accept it, because it is believed to be probably
true. If it falls in rejection region, it is rejected, as it is reasonable to reject
it because it is believed to be probably false. The acceptance region and
rejection region are separated by the "critical value” (which is the value of
the test statistic computed to test the hypothesis) .In case of large sample
size, the critical value of Z from the Z table is used and in case of small
sample size, the critical value of t from the t table is used.
6. 2 - tailed test and One-tailed test : The critical region under the normal
curve is presented in 2 ways :
i.)“One tail” or one side under the curve, either ‘the left’ or the ‘right tail’.
ii.)“Two tails” or two sides under the normal curve. These are a called one
tailed test and two-tailed test respectively,also.
Two tailed test is used when the sample mean is significantly different
from the population mean. In other words, it is used when the positive or
negative difference between the sample mean and the population mean
tends forwards rejection of the Null Hypothesis.
One tailed test is used (right tail) when the population mean is at least as
large as some specified value of the mean or (left tail) when the population
mean is at least as small as some specific value of the mean.
Rejection region
UCV (α/2)
(α/2) LCV
) Acceptance region (1-α )

-Z α Z=0 +Zα

UCV = Upper Critical Value, LCV = Lower Critical Value

α ’)
Two tailed Test ( Level of Significance ‘α

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Acceptance Rejection region


Region (α)
(1-α )

Z=0

α’ )

Rejection Region
(α )

Acceptance
Region
( 1-α )

-Zα Z=0

Left Tailed Test (Level of Significance ‘£


£’ )

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7.Taking a decision :

Finally, a decision on acceptance or rejection of a Null Hypothesis is taken. A


Null Hypothesis is accepted, if the computed value of the “test stastic” is less than
the critical value(and it falls in the acceptance region). It is rejected, if the
computed value of the ‘test stastic’ is more than the critical value (and falls in the
rejection region). Unless stated expressly otherwise, generally a 5% level of
significance (α = 0.05) is used in testing a hypothesis.

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2. ECONOMIC LANDSCAPE

2.1 INTRODUCTION:
What do we exactly mean by the term “Economic Landscape”? It means viewing
the geographical area around in terms of economic activities like production ,
distribution and consumption of goods, services and information.
The term landscape has been borrowed from geomorphology. In geomorphology,
the term “landscape” means the configuration of land. That is whether the given
piece of land is even or uneven; whether it is plain or rugged, whether it contains
features like hills, mo untains plateaus and so on. In short, it means the physical
features present on a given piece of land. When applied to economics, the term
landscape shall naturally mean the economic features present on a given piece of
economic land. “Economic Land” here means any given piece of land on which
economic activities take place. Instead of physical features like hills, plains, etc.,
here one has to visualize economic features like production , exchange and
consumption of goods, services, and information. Also, visualize one has to the
spatial location, processes and impact of economic activities in various forms like
primary, secondary, tertiary, quaternary, and quinary.
However, one has to keep in mind that the term “ Land “ as used in economic
geography has quite broad meaning. When we talk of an economic landscape, it
means not only the land aspects, but any physical features that may be present in a
given area, i.e., land, water bodies, etc. In other words, any economic activities
happening in a given area are covered under the term “ Economic Landscape.”
Thus, the term “Economic Land Scape” means the economic scenario existing
on any given point of time at any given place of the earth or anywhere in the
universe.
2.2 HISTORICAL EVOLUTION:
Economic scenario at any place constitutes economic activities taking place
there. Just as in geomorphology, we see the growth of any landscape over a large

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period of time, so do we see the economic activities grow at varying rates in


varying directions at varied places owing to various factors, too.
These economic activities may differ in time and space. Temporally speaking
, humanbeings have advanced from the primary economic stage of subsistence on
food gathering, hunting and fishing to the modern day economic activities based
on services and information technology. We see a giant leap forward from a
simple barter economy to the modern day complex economics greatly influenced
by Multinational companies (MNCs). Also, economic activities differ greatly
from one physical region to another depending on the effective use of existing
natural and human resource. For example, human beings living in an alluvially
rich plain primarily carry out agricultural activities, because physical factors
therein like rich soil and presence of water are conducive to growing of crops. On
the other hand, rugged mountainous areas are unfavorable to the growing of
crops. So, people in mountains regions carry out other kinds of economic
activities like horticulture, sheep rearing ,etc.
The evolution of economic landscape or growth of economic activities is not
the same for all regions and people on the earth. North West Europe and
North America represent the highest stage of contemporary economic
development. Whereas, people living in some other areas like pygmies of
equatorial rain forest have still not come out of their outdated economic mode of
subsisting on the free gifts of nature like fruits, roots, etc., with practically nothing
to spare for sell to others. It means no economic activities in the modern sense,
because any activity can be said to be an economic activity only when there is a
sale and purchase involved.
Historically speaking, some 5 lakh years ago, humanbeings were dependent on
subsistence kind of hunting, fishing and food gathering. Humanbeings led a
nomadic life in Palaeolithic era upto 8000 B.C. (Stage age) .In Neolithic er a(8000
B.C. - 4000 B.C.), Human beings learnt to domestic 1. Plant 2. Animals and
started living a settled social life, thereby involving some extra production of
plants and animal products which could be exchanged, though exchange was still

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of primitive type involving barter system. Areas in Asia/Europe especially those


in Iran / Arabian desert showed some economic progress .They started producing
cotton, wool clothes, milk ,meat ,sharp edge stone implements for agriculture
purposes. Discovery of fire, pottery, weaving, and wheel greatly aided the
economic progress. Later on, during copper & Bronze era ( 4000 B.C. – 2000 B.
C.), city life evolved. Great civilisations like Indus river valley, Sumerian
(Mesopotamian), Egyptian (Nile River Valley) and Chinese (Hwang – Ho River
Valley) emerged on the world stage. Emergence of city life necessitated division
of labour. Advances in science, technology and arts helped increase agricultural
production in terms of better improved implements like hoe, and highly improved
systems of irrigation like canals and dams. This made it possible to produce extra
surplus food grains. Therefore, the whole population was not required to engage
in agricultural activities. Consequently, some of them were freed from
agriculture. This freed population now could concentrate on activities other than
agriculture. This freed population engaged itself in trade and commerce which
helped the growth of big cities and hastened the urbanisation process. This freed
population was able to engage in producing highly useful agricultural inputs like
hoe, etc. ,which they could exchange for food products. Thus, it initiated a
process of rural - urban interlinked economy. This linkage was further reinforced
during coming Iron Age ( 1200 B. C. – 600 B.C.) wherein Iron implements led to
easiness in clearance of forests for agricultural purposes, besides helping increase
agricultural productivity. Iron caused the industrial development. Weaving
became easier. Bullock carts were developed. Fighting arms of iron were made.
Iron age was experienced differently by different regions, i.e., India first
experienced it around 1000 B.C. , whereas Africa around 1 B.C. All this
revolutionized the existing economic landscape. Now, the economic landscape
consisted of highly developed centres of trade and commerce.
Refining of economic activities continued at a slow pace till round 1750 when
industrial revolution in North –West Europe triggered rapid economic growth in
all sectors like agriculture and industrial. With further growth of transportation

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system around 1800, economic development picked up leading to the modern day
complicated interlinked and interdependent global economy.
Thus, as the above discussion clearly shows, the historical evolution of economic
landscape has not shown a consistent linear pattern. Rather, it displays different
rates and directions both temporally and spatially.
Following flow chart shows the idealized model of development of economic
landscape:

Homestead

Tribal

Village

Modern

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2.3 TYPES OF ECONOMIC LANDSCAPE


1. INTRODUCTION:
Economic landscape on any given point of time at any scale whether local, regional,
national or international may be viewed from numerous perspectives. One perspective is
to see whether it is a balanced or an imbalanced type of economic Landscape.
Accordingly, I propose to introduce through the present textbook two types of Economic
Landscape:-
1) The Idealised perfectly balanced pentagonal Model/type.
2) The realistic Isostatically balanced Amorphous Model/type.
2. TYPES
(i) The Idealised Perfectly Balanced Pentagonal Economic Landscape:
An economic landscape may be said to be perfectly balanced if the number of
people employed theorein are proportionally distributed over all the 5 kinds of
economic activities: Primary, Secondary, Tertiary, Quaternary and Quinary. In
other words, each type of activities must engage 1/5ths of the productive
population. It has to be proportional, because a balanced economic scenario
requires that all natural and human resources be fully utilized. The full
utilization of all resources in a given space is possible only if all the above
mentioned 5 types of economic activities are undertaken. For example,
mineral resources falling under primary activities may remain unutilized, if the
whole population of the given area engages only in tertiary activities (services)
like clerical works, secterial jobs, etc. This shall naturally lead to top sided
existence of the resultant economic landscape characterized by dependence on
outside areas for mineral based needs! In fact, the idealized perfectly balanced
economic landscape denotes a totally self – dependent economic landscape with little or
no dependence on outside areas. Such an idealized landscape is likely to lead to a growth
of favorable terms of trade to the people of the region contained in it.
A pentagon represents perfectly this idealized state of the balanced Economic
landscape.All triangles P, S, T, Qa, Qu have equal area and represent equal
number of productive population engaged in economic activities in the Pentagonal
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Economic Landscape represented by the area contained in the Pentagon abcde.

P = Primary Activities.
S = Secondary Activities.

b P S e T = Tertiary Activities.
Qa = Quaternary Activities.
. Qu = Quinary Activities.
Qu T abcde = The Pentagon
representing the given
Qa
economic Landscape.

c d

(ii). The Realistic Isostatically balanced Amorphous Model/Type:


However, real world is quite different from the idealized one, especially in social
sciences. Likewise, one does not find in existence in the real world the idealized perfectly
balanced pentagonal economic landscape. On the contrary, deviations from the idealized
model are noticed more as a rule rather than an exception.
Why are deviations noticed? Well, human beings on different parts of the earth’s surface
have different wants, desires, needs, choices and different abilities to realise the same.
Thus, the economic landscape of a typical village in India shows primacy of agricultural
activities, whereas a highly developed metropolitan region like that of Mumbai reflects
an economic landscape consisting primarily of tertiary, Quaternary, and Quinary
economic activities both representing economic landscapes in a rural and urban setting
respectively. Neither is self – sufficient. Rural economic landscape provides food grains,
vegetables to the urban one, while the typical urban landscape provides to the rural one
the quinary products like finances and health services.

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2. MEASUREMENT OF DEVIATION FROM THE IDEALISED MODEL:


An economic landscape in the real world exhibits amorphous tendencies with all the 5
activities forming differing proportions of the total economic landscape unit. However,
the economic landscape itself remains in an isostatically balanced state, i.e., increase of
workers in one sector leads to decrease in other sectors.
One may measure the deviation by applying the following method. First of all, divide
total productive population according to 5 activities. Add the grand total. Divide the
grand total by 5 (representing the total number of activities). This figure be taken as the
expected proportional population in any given economic activity. Then , find the
difference between this expected productive population with actually observed
productive population in a given activity. This gives the deviation against each category
of economic activity. Add all the deviations, if any, ignoring the minus (-) signs. Divide
the total of deviations by the grand total of productive population. The resultant final
deviation , co-efficient or the degree of imbalance shall range from 0 to 4 indicating
varying co-efficient of imbalance in the given economic landscape as per following table
of co-efficient of imbalance:
Co-efficient of KIND OF
IMBALANCE IMBALANCE
(20%) 1 and > 0 SLIGHT
(40%) 2 and > 1 HIGH
(60%) 3 AND >2 VERY HIGH
(80%) 4 and > 3 PERFECT

Note: The ideal to any country should be to keep the co – efficient 0 to 1 and see that
it does not increase beyond 1. The values are applicable universally at all levels, i.e.,
local, regional, national, international (global).

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EXAMPLE OF CO–EFFICIENT OF IMBALANCE IN A


HYPOTHETICAL ECONOMIC LANDSCAPE “X”

Sr. Economic Total Working EXPECTED Deviations


No Activity POPULATION Proportionate (D) =
(O) Population (E) (O – E)
1. Primary 500 720 -220 NOTE: ΣD is
2. Secondary 600 720 -120 calculated by
3. Tertiary 720 720 0 ignoring
4. Quaternary 780 720 +60 minus (-)
5. Quinary 1000 720 +280 sign
N ΣO = 3600 ΣD =680

E = ΣO = 3600 = 720
N 5
ΣD 680
Coefficient of IMBALANCE = ΣO = 3600
= 0.188 = 0.188 x 100 = 18.800 %

INTERPRETATION:
The given economic landscape shows only slight imbalance (18.8%) as per table of co-
efficient of imbalance. In other words, the given region is fairly economically self –
dependent.

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5 4
Qui
P A Qua
5 3
S T
1 2
4

1
B
X
0

IDEALISED HYPOTHETICAL EXAMPLE OF A QUANTITATIVELY


PERFECTLY BALANCED ECONOMIC LANDSCAPE :

1,2,3,4,5 (circular feature) = Economic Landscape


P = Primary activity
S = Secondary activity
T = Tertiary activity
Qua = Quanternary activity
Qui = Quinary activity
AB = Height of the economic landscape from base
A = Centre of the Economic Landscape Model (representing same height for all sectors
of economic activity)
(NOTE : In the above graphical figure, AB is equal to 5. In other words, all the economic
activities have 5 workers each. Thus, it is a perfectly balanced economic landscape).

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ISOSTATICALLY BALANCED ECONOMIC LANDSCAPE :

OX = Base level
AB = Original height = 5 workers
CB = New height = 6 workers
DB = New Height = 4 workers
Workers in secondary, quaternary and Quinary activities = 5 workers each.
Workers in Primary activity after isostatic adjustment = 6 Numbers.
Workers in tertiary activity after isostatic adjustment = 4 Numbers.
(NOTE : It is clear the total Number of workers in figure (i) is 25 which remains the
same in figure (ii). However, in figure (ii), One worker is reduced or the tertiary portion
has sunk beneath the base level OX to –1. This one worker lost to tertiary activity (T) has
flown into the Primary activity block which gets pushed up to level 6 from 5 on Y axis.
This means that Primary activity has now a larger number of workers. Although the
present resultant economic landscape is activitywise imbalanced, yet it is isostatistically
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balanced because the orignal total number of workers remain unchanged in the whole
landscape, i.e., 25).
THE MODEL OF ECONOMIC LANDSCAPE BALANCE :-
OBJECTIONS :-
The above model of the balance of Economic Landscape may be found highly
objectionable in view of its emphasis only on the quantitative aspects of different
activities, i.e., number of human population employed in each . It may be pointed out that
it ignores the qualitative aspects like scientific and technological advancements and their
impact on development of a particular economic activity .For example , it is generally
observed that a proportionaly large number of population engages in primary activity of
agriculture in developing and underdeveloped countries compared to other activities. Yet,
contribution in productivity per head in agriculture measured in terms of market value of
primary products is less compared to the productivity per head in secondary or tertiary
activities .On the other hand, a very small population takes to agriculture in developed
countries as compared to other activities. Still, this small population is able to give
substantial higher contribution per head in terms of agricultural productivity. This
difference can easily be explained in terms of various factors like advanced technology,
agricultural methods, etc. employed in developed countries. So, one may argue that the
model of the balance of economic landscape is invalid as it ignores qualitative aspects as
mentioned above.
However, a further look into the model reveals that it still is valid, if we consider
qualitative aspects associated with each economic activity in addition to the quantitative
aspects of human labour force. Therefore, we may further refine the above explained
model by stating that an economic landscape is perfectly balanced, if contribution by
each economic activity is perfectly balanced , if contribution by each economic activity is
proportional in terms of equal output by each worker irrespective of the type of activity
undertaken. For example , in a hypothetical case, 5 workers each may be employed in
secondary, quaternary ,quinery activities, 6 workers in primary and 4 in tertiary activities.
Now, if each worker contributes equally a product of the same worth/monetary value, the
resultant economic landscape may be said to be an ideally balanced one.

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IMPORTANCE OF THE CONCEPT OF THE BALANCE OF ECONOMIC


LANDSCAPE :
In an idealised situation of a perfectly balanced economic landscape, each
worker contributes products of equal value. Or alternatively put,
each one’s work is considered of equal importance in society. This
leads to the concept of the dignity of labour both in social and
economic terms.
Any economic landscape gets imbalanced because of either disproportionate
quantitative deployment of workforce in different economic activities or the
disproportionate cornering of economic benefits in terms of price of products by
workers in certain economic activities. For example, both a doctor and a mine
worker may be putting same hours of work daily. Still, a doctor earns more than a
mine worker. Why? Commonsense would like to explain it away in terms of the
varying degree of complexity involved in both the activities, besides the
operation of law of demand and supply in terms of excess supply of mine workers
and less supply of doctors which gives doctors a higher bargaining power for their
products in the market as compared to the so called unskilled mine worker.
However, a further analysis shall reveal that this difference is more than simply a
case of law of demand and supply dictated by market forces. Rather, it is the
“degree of dignity” attached to the jobs that causes this wide variation. One may
ask how could it be? Well, a doctor no doubt is required on the economic
landscape to take care of health problems of the human population. But, so is
required the services of other so called unskilled low paid workers like plumbers,
electricians, scavengers. All workers, irrespective of specialisation of their jobs
are a cog in the big machinery of interdependent society, whether big or small.
You take one part out however small it may be and the whole machinery shall
come to a grinding halt. For example, if scavengers or plumbers stop work when
required to do so in a doctor’s house, the doctor shall loose precious time in
trying to do the cleaning or plumbing work all by herself or himself! What does it
show? It shows that all types of economic activities are of equal importance on
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any given economic landscape. It further shows that the dignity of labour has to
be restored to encourage workers to participate fully in exploiting economic
potential in all economic activities of the economic landscape instead of the
present tendency of the people to rush to the economic activities which provide
better monetary and other benefits.
The present concept of the balance of Economic Landscape clearly shows
as outlined above that it’s the dignity of the labour which is more
important than the simple play of market forces of demand and
supply on any given economic landscape. Therefore, it follows as
a natural corollary that we don’t need any isms like socialism,
capitalism, etc. to usher in a balanced development of an economic
landscape. Rather, it’s the change in human attitude restoring the
dignity of labour which is the most important factor.
Many of contemporary and past world political problems have their
genesis in the imbalance of economic landscape on a global scale.
Several examples may be cited in support of this proposition.
Babur, the ruler of Kabul attacked the Gangetic plains of India during
medieval periods due to this factor only. Kabul was steeped in
poverty, whereas the economic landscape of the then gangetic
plains was highly developed. This difference stimulated the less
developed economic landscape of Kabul symbolised by Babur to
attack the highly developed economic landscape of gangetic plains
represented by Ibrahim Lodhi. Conversely, Highly developed
economic landscape of Europe prompted subjugation by
Europeans of the less developed economic landscape of Africa
which caused a drain of African resources during the evil slave era.
Likewise, the capitalist economic landscape represented by highly
developed U.S.A. pulled down the lesser developed economic
landscape of the erstwhile communist U.S.S.R. U.S.S.R. itself
disintegrated, because of the disenchantment with central

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command structure in Moscow of constituent states finding


themselves floating on an imbalanced Russian Economic
Landscape with certain areas highly developed as compared to
others! Even as recent as 11th September, 2001, this phenomenon
expressed itself ghastly , when two jet airliners hijacked by
international terrorists pulled down the “North and South Towers
of the “World Trade Centre” in New York, sending the world
economy into a slide. Highly developed economic landscape of the
U.S.A. is perceived by Islami jehadists as a threat to the culture
and economies of the lesser developed economic landscapes of
Muslim states of African Sahara and middle east. In all probability,
these attacks might not have taken place had both U.S.A. and
Islamic world economic landscapes been ones developed to the
same degree. In fact, world wars I and II were fought as a fall out
of this imbalance of economic landscapes.
As the above brief discussion shows clearly, even a slight imbalance in economic
landscapes at any level is sufficient enough to engineer political and other
problems.
World peace may be achieved, if the whole globe is developed into a
perfectly balanced economic landscape. Such an ideal landscape
shall discourage wars simply because of the equitable distribution
of fruits of human progress and consequent disincentive for wars,
besides the realisation by each part on the economic landscape of
other constituent parts being equally developed. The concept of the
dignity of labour may play a vital role in this direction. Therefore,
the integration of the world economy in a perfectly balanced state
shall cause development of the perfectly balanced economic
landscape. Thus, world peace and economic prosperity may
ideally speaking be accomplished!

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2.4 HOMESTEAD ECONOMY

1. INTRODUCTION :
Homestead economy existed prior to the emergence of tribal and village
economies on the economic land scape. First of all, lets know what we do meant
by the term “Homestead”. The word “Homestead” means “a building with
outhouses”. Therefore, the phrase “Homestead Economy” means the economy
related to a homestead characterised by primitive level of division of labour and
low specialisation. The head of the family generally controls the nature, type,
structure and direction of economic activities performed by members of the
family.
2. SIGNIFICANCE :
Homestead economy shows an advance over the palaeolithic economy in the
sense that now human beings tend to organise themselves in small socially
recognisable units capable of carrying out more refined activities as compared to
cave dwelling human beings.
3. PRESENT STATUS :
“Homestead economy” hardly exists on the earth’s surface as a major economic
force. In less developed countries, the transition from “homestead economy” to
modern economy is direct without experiencing the intermediate stages of tribal
and village economies. It is because of the direct impact of the benefits of
modern economy flowing from Developed countries to less developed economies.

2.5 TRIBAL ECONOMY


1. INTRODUCTION:
Tribal economy exists on this earth, since times immemorial. Despite evolution of
economic landscape from early homestead economy to the modern day
complicated global economic landscape, earth’s surface is still replete with
regions housing tribal groups with their tribal ways of carrying out economic
activities. However, contact with the more developed (scientifically/technically)

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outside world is slowly influencing their economies. Consequently, their


economic behaviors/activities is reflecting a perceptible change, albeit a slow one.
2. WORKING OF THE TRIBAL ECONOMY :
As a general rule, tribal people depend on physical surroundings for their basic
needs like food, clothing, shelter. Nothing belongs to any individual human being.
All natural resources are supposed to belong to the whole tribal community. No
two tribes are similar in their appearoach towards economic activities. Some
tribes depend purely on Mother Nature for survival. Whereas, some other tribes
take up activities like agriculture, fishing, and hunting. Some tribes are barely
able to eke out a living. While, a few other tribes are able to exchange their
products with outsiders or in the local market. Mode of tribal economy is quite
primitive lacking in modern methods of economy like sophisticated production
complexes or financial institutions. They are generally happy the way they are
and quite content with whatever bare minimum for survival is provided to them
by Mother Nature, though to an outsider brought up in the modern cultural
settings this may appear to be quite inadequate by modern standards of living. To
quote Balbir Singh Negi in “HUMAN GEOGRAPHY – An Ecological
APPROACH.” “Undoubtedly, they are nurtured by the hardy mother nature
making them strong and stout, but side by side they have to suffer a lot of
trouble and material loss.”
Although world has many tribes in all parts, yet a brief study of Indian tribes shall
suffice to indicate fully the scope of any tribal economy in general. Indian tribal
people are the earliest amongst the present inhabitants of India. They have
variously been called by various authors, i.e. “Aboriginal” by Risley, “ Primitive
Tribes” by Hutton, “Hill Tribes” by Sir Bains, “Aborigines” by Shoobert,
“Adivasis” by Balbir Singh Negi. They are still in primitive sage of
civilization/economy.
To quote Balbir Singh Negi , “ The Adivasis of India are the most backward,
even at present their existence depends to a large extent upon hunting of wild
beast, and the gathering of wild fruits and berries.”

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The following chart gives an example of tribal economy with reference to India:
ECONOMIC ACTIVITY TRIBES
Hunting, food gathering Raji (U.P.), Kharia, Birhor(Bihar),
Kuki(Bengal and Assam), Nagas
(Nagaland), Konyak; Hill Maria (M.P.),
Koya, Reddi, Yan Kadar, Hill Pantaram
(T.N. & Andhra Pradesh), Juang (Orissa).
Shifting Cultivation, Lumbering , Korwa, Saheria, Bhumji (U.P.), Korwa,
manufacturing Asur, Santhals (Bihar), Garo (Bengal),
Nagas (Nagaland), Khasis, Mezos, Garo;
Muria, Damdami, Gonds (M.P.), Rhonds,
Kurimba Gonds, Saora Mudavan (T.N. &
Andhra Pradesh), Saora (Orisa).
Settled Agriculture, Poultry, Tharv, Bokhasa, Kol, Khasis(U.P.),
Cattle, Weaving, Spinning, Munda, Ho, Oraon (Bihar), Polia Santhals
Knitting, Terrace farming (Bengal), Khasis, Manipuri, Parja, Bhutva
(M.P.) Badga, kota, Irula, Parja (TN &
Andhra Pradesh), Bhil, Gonds (Orissa).

3. FACTORS INFLUENCING TRIBAL ECONOMY :


1. PHYSICAL / NATURAL
2. CULTURAL
3. HISTORICAL
1. PHYSICAL –
Physical isolation, inaccessibility of the land inhabited by the tribals
owing to difficult rugged physical terrain, dense forests have all meant a
relative isolation of primitive tribes from modern highly developed
materialistic civilization. Consequently, they have generally remained
untouched by influences of the working of modern day economies. Thus,
they keep carrying subsistence level of primary economic activities like

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fishing, hunting and food gathering in sharp contrast to the commercial


level of these activities being practiced by highly civilized people with the
help of latest science and technological gadgets. This prevents them from
producing for higher level markets or to undertake production and
exchange of goods, services and information on a commercial level.
2. CULTURAL –
1. CONTENTMENT –
Tribals as a rule are generally happy with whatever bare minimum
necessary is provided to them by Mother Nature. Whereas, highly
civilized society undertakes highly sophisticated economic activities,
because, of a desire for various materialistic objects, services and
information. Fully satisfied with their material situation and with no or
little desire for material comforts of modern civilization ,tribal population
remains at primitive economic level.
2. POLITICAL –
Tribals had so far been kept out of ambiance of economic development in
the modern sense of the term by political rulers of the day. Consequently,
tribals generally remain economically backward.
3. SOCIAL –
With no or little social contact with the civilised world, some of these
tribes still retain Palaeolithic age streaks subsisting purely on food
gathering economy, and not knowing even how to make a fire.i.e ,the
Onge Tribe of the Little Andaman islands in the Bay of Bengal. These
people to not know agriculture. They live on hunting, fishing, wild fruits,
edible roots, honey, fish (Sardines), fat of turtle. They live in huts which
are shared communally by all members turn by turn.
3. HISTORICAL FACTOR:
Time itself has acted a great factor by reinforcing primitive mode of tribal
economies with hardly any perceptible changes.

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4. EXAMPLES OF WORLD TRIBES:


1. Eskimos (North American Coasts)
2. Khirghis (Steppe – Central Asian Russia)
3. Bushman (Kalahari Desert)
4. Pygmies (Central Africa – Cango basin)
5. Semang and Sakai (Malay Peninsula)
6. Melanesians and Papuans (Melanesia – New Guinea & adjacent
islands)
7. Bedouins (Arabian Peninsula)

5. CRITICISM OF TRIBAL ECONOMY:


Tribal economy carries both advantages and disadvantages in terms of
economic development.It has the advantages of optimum utilization of
natural resources, since tribals meet their economic needs in harmony with
their natural surroundings.This blissfully avoids overexploitation of
natural resources and consequently less chances of problems like
deforestation , and pollution, etc. unlike modern econmies.On the negative
side, the tribal economies being selfsufficient are unable to provide a
higher standard of living .

2.6 VILLAGE ECONOMY


INTRODUCTION:
Generally speaking, a village economy is a fully self dependent economy with hardly any
interaction with the outside world. It is based on specialised division of labour,
determined either by society-imposed social caste system or the capability of the
individual. Nearly all areas in the world had the predominance of this type of economy
till the great industrial revolution of 1750s in North West Europe (England), wherein
villages started loosing village labour to newly created factories in big cities in Europe. It
adversely affected the village economy in developed Countries. Similarly, it affected
badly the village economies in other parts of the less or underdeveloped regions of the
earth like Asia and Africa by forcibly supplying to these areas the cheaply produced stuff
of the industrialised colonial ruling countries. Simultaneously, it soaked natural or raw
materials of these villages at cheap rates. This ruined the village industries like weaving,

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tannery, etc. which could not compete with cheaply produced foreign goods and it
deprived them of invaluable local raw materials supply. Other factors came into
operation, too, like slave trade. Colonial powers / merchants of powerful European
nations stripped African villages of nearly 30 million productive population through
forcible enslaving during the slave era. Therefore, African village economies collapsed
beyond repair.
PRESENT SCENARIO:
However, in the present contemporary globally integrated economy, village economy is
moving away from subsistence type of economy to the one based on commercial type of
primary and related agro – based industries and activities. Various factors have speeded
up this process like explosion of information and technology, improvement in rural
education, availability of financial and technical support, better irrigation facilities,
improved means of transport and communication, improved medical facilities,
introduction of better crop production and soil conservation practices.Political factors like
ascendancy in regional politics of the rural politician too have helped this cause.For
example, the powerful politician Vikhe Patil using his clout in the sugar – belt of
Maharashtra was successful in bringing medical and technical educational institutes to
the rural settings of the Loni – Pravara villages. The presence of these institutes meant
presence of a large community of students and supporting staff which created demand for
food, clothing and shelter by these students and staff. Consequently, economic landscape
of Loni – Pravara changed drastically to cater to these newly created sustainable
demands.
General global phenomenon of “ Pull & Push Factors” has led to mass exodus of rural
labour to urban areas leading to impoverishment of village economic landscape.
However, in India, this phenomenon is absent as illustrated by various studies.
Presently, all governments the world over have initiated various remedial measures to
help sustain village economies, modernise them and thereby avoid problems of flow of
rural population to urban areas which generally end up as poorly paid factory workers
leading to problems like proliferation of slums. The primary effort is aimed at integrating
rural economies with local, regional, national and international economies in a holistic

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manner retaining their plus points and removing their disadvantages. This is done through
effective rural planning.
2.7 MODERN ECONOMIC LANDSCAPE

INTRODUCTION:
Modern economic landscape or the modern economic scenario is a highly complicated
one influenced by a complex set of factors both natural and human. No economic activity
takes place in isolation. Rather, it is interlinked in a highly complex and amazing maze of
economic relations. It is indicative of the high degree of economic sophistication of
contemprarory humanbeings. The concept of “Self dependency” has been replaced with
the dictum of “global integration”.

WORKING OF THE MODERN ECONOMIC LANDSCAPE:

This landscape can be viewed at various levels, i.e., local, regional, national and
international. No place, region or a nation state is fully self dependent due to non –
existence of all the resources required for economic development in that place, region or
the nation state. Therefore, interdependence is the key word. This interdependence causes
an exchange of goods, services and information. For example, U.S.A. can’t survive
without supply of crude oil (petroleum) especially from Saudi Arabia. Likewise, Saudi
Arabia can’t have the benefits of American Science and technology without supplying
crude oil to U.S.A., since Saudi Arabia does not have advanced science and technology
so vital to its rapid economic development. Coming to the national level, every region is
dependent on the other. For example, Punjab farming sector can’t survive without farm
labour migrating from Bihar, since Punjab lacks in cheap farm labour. Likewise, Bihar
and other states are dependant on Punjab for food grains like Wheat, etc., because these
states lack in these agricultural products. Still, further down the line, we may examine
this interdependence on a local level. Take the case of big cities like Pune, Mumbai,
Ahmednagar and Nasik with their rural hinterlands. These cities depend on their
hinterland for supply of basic necessities like fresh vegetables, fruits, food grains, simply
because these are not produced by these cities. Simultaneously, the adjoining hinterlands
depend on these cities, too, because these villages in the hinterland don’t produce
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industrial products like water pump sets, television sets, etc. which are produced in Urban
centers and their fringe areas like Kirloskar brothers in Pune manufacture water pump
sets. Also, these cities provide to rural areas many services like court, higher education,
modern medical facilities, etc.
Thus, as the above discussion clearly shows the Modern Economic Landscape is a
complicated landscape characterized by interdependence of different key economic
players.
1. FACTORS AFFECTING MODERN ECONOMIC LANDSCAPE:
Many factors influence the content, type and structure of modern economic Landscape.

These factors are primarily as stated below:


(i) HUMAN ATTITUDE:
A sweeping change in human attitudes has greatly changed the contemporary economic
landscape. Now, no longer people have this notion of self dependency. Having realized
the virtues of interdependency, they interact more vigorously in the economic sense. This
factor has led to other factors like Social, Cultural, Political, Science and technology.
(ii) POLITICAL FACTORS:
Political compulsions have forced many nation states to lower their tariffs, thereby
leading to greater flow of economic goods, services, and information. This has helped
growth of block like E.E.C., ASEAN, G-7, etc. The emergence of W.T.O. is a big signal
of the importance of this factor.
(iii) ECONOMIC FACTORS:
Economic factors influence an economic landscape, too. For example, emergence of a
single currency “Euro” in Europe has done away with the currencies of its members.
Consequently, the many exchanging Houses existing near borders earlier amongst its
members have vanished from the respective economic landscapes of its member
countries.
(iv) SOCIAL:

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With greater democratisation and freedom of social choice, people are free to undertake
any activity anywhere generally without any restrictions like caste system, etc. This
social aspect has influenced modern economic landscape.
(v) CULTURAL:
With cultural advancement, people are progressing more towards tertiary activities in
addition to quaternary and quinary areas. This is influencing the whole face of economic
landscape of a given place.
(vi) SCIENCE AND TECHNOLOGY:
Science and technology is a contributory factor, too. This has led to the emergence of big
economic landscapes dominated by big industrial complexes like Maharashtra Industrial
Development Corporation, to cite just one.

1. CRITICISM OF MODERN ECONOMIC LANDSCAPE:


A. Following are the plus points in favour of modern economic landscape:
(1) It shows greater refining of economic activities.
(2) It reflects material progress of human beings in positive and practical terms to be
quite high compared to earlier period of human civilisation.
(3) It leads to utilization of natural and human resources optimally and holistically in an
integrated manner.
(4) It has led to a general ushering in of economic prosperity.
B. Following are the negative points which show modern economic landscapes in
poor light:
(1) It has led to the complications of all economic relations with attendant negative
impact on relationship in other areas like political, etc.
(2) It has created problems of vast unmanageable economic relations.
(3) It has created problems of fast changing skylines of Urban Countries.
(4) It has created problems related to modern urban life like slums, traffic congestion,
pollution, socio-economic crimes, etc.

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(5) It has made life more stressful to an already stressed human beings to keep working
towards the continuity and maintenance of the existing economic landscape so as not
to lose material comforts flowing from it.
(6) These become easy targets by enemy, if these represent pillars of economic strength.
For example, Terrorists knocked Down “North and South Towers of World Trade
york, on 11th September 2000, killing nearly 4,000 people
inside. This centre represented the core of American Financial Might.

3. WORLD ECONOMY
3.1 INTRODUCTION :
A. World economy consists of an open economy system wherein each nation is
dependent on others directly or indirectly either through bilateral or multilateral
trade arrangements, since no single region or nation is endowed with all the
Natural and Human resources to develop, grow and sustain its particular
economy. Countries carry out activities involving production, exchange and
consumption of goods, services and information having transnational sources of
origin and destination. Thus, one has a peculiar perspective called world
economy or simply the “world system Perspective.”
To quote Hartshorn & Alexander, ”The world system perspective builds on the
network of linkages that tie together the various countries of the world”.
This broad network of linkages has evolved through time from its infancy into
contemporary mature form. Various factors are responsible for the evolution and
development of contemporary world space economy consisting of developed and
underdeveloped counties reflecting dependency of the later on the former.

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B. No space economy can be discussed in isolation. Immannuel Wallerstein and


Samir Amin argue that the spatial integration within the world system
innately generates a dependency relationship which leads to
underdevelopment. For example, they argue that the economic
underdevelopment of most of today’s third-world countries derives from
dependency relationships with developed countries, dating back to the pre
colonial mercantilist period, when a wide range of trade relations first started.
However, even developed countries depend on one another and compete with
each other. These countries depend on underdeveloped countries too as reflected
in their helplessness when Arab countries put an oil embargo in 1973.In a period
of 24 hours daily , 40% of global output of goods and services is traded and
nearly 1.5 trillion US$ is exchanged in the world’s currency markets!
C. In the broader frame work, world space economy consists of three types of
countries :

i. Centre countries
Ii Semi peripheral countries
ii. Peripheral countries.
1. Centre countries like U.S.A., Japan, European Nations, Australia have
strong economies and sturdy economic activities.
2. Semi-peripheral countries like Israel, Taiwan, South Africa. India show
intermediate characteristics between centre countries and peripheral
countries.
3. Peripheral countries like Pakistan, Thailand, Indonesia, Kenya, Nigeria,
Mexico, Chile and Jamaica have “weak” states, low wages, simple
technology economies.
D. A study of world space economy is helpful in understanding many
features like :
i. Process of development and sustaining of relationship between
developed and underdeveloped countries.

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ii. Causes for the failure of most underdeveloped countries to develop


their economies to overcome basic problems of economic poverty,
unemployment , underemployment, spatial social inequalities.
iii. Role of multinational Corporations.
iv. Suggestions of remedial measures to overcome problems faced by
the world economy in general and underdeveloped countries in
particular.
3.2 Historical Evolution :
Contemporary world economy has its genesis in the extensive trade relations that
developed first in the pre-colonial mercantilist period. Medieval feudal
economies were replaced by mercantilism due to the Age of Discovery and
Exploration in the middle of the 15th century in Europe with church loosing
control over the lives of people. In the 15th and 16th century, dominance of
European nations on the international trade and development of long distance
economic interactions for the first time integrated all major countries into one
world space economy. Slave trade was a prominent feature of this era. With
enormous profits from trade in slaves and other commodities, Europeans got
enough cash/capital to prepare ground work for industrial revolution in England
in late 18 th century which began with the mechanical harnessing of steam
power. Big factory systems emerged requiring sources of raw materials and
potential vast markets for finished products for profit maximisation which led to a
scramble for colonisation of known and unknown lands for raw materials and
finished goods markets. This created a dependency relationship between
temperate and tropical countries with the former supplying primary raw material
to the later and the later supplying finished goods to the former in which generally
the former always was a looser since terms of trade were dictated by developed or
temperate countries. This caused enormous miseries to underdeveloped people.
Of course, it also had positive aspects like modernisation of dependent areas into
modern nation-states with western education, science and technology. After
World War I & II, colonialism came to an end nearly with all former colonies

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getting freedom. However, the depending relationship stills continues in various


forms with newly freed colonies/countries being dependent on their former bosses
through various means/mechanism. To quote Hartshorne and Alexander,
“These include international trade, multinational corporations, international
labour migration, foreign aid (both economic and military) and technology
transfer.”
Uruguay Round (1993), Doha round (2000), etc., too are being perceived by some
scholars as a sophisticated way of continuing this colonial legacy of dependency.
3.3 MEDIEVAL FEUDAL ECONOMIES:
To quote Hartshorne & Alexander, “No international economy in the mo dern
sense existed in medieval times.”
Not many long distance spatial economic relationships and interaction existed
between and among the comity of nations. Regional relationships existed which
were limited in scope or extent. Feudal structure had created a centripetally
oriented economy. To quote Lekachman, “Change was slow in towns and
slower elsewhere partly because of the conception of life which emanated
from the period’s dominant social institution, the church.”
Like elsewhere in the contemporary medieval world, in Europe too nature
determined space economic relationship, because of the infancy of advancements
in science and technology. Therefore, economic activities were primarily
domestic and regional at most. Tribal feuds and territorial expansionary wars
only occasionally led to long distance interaction. Otherwise economic life
remained static/subsistence oriented, more so the supreme controller, the
CHURCH discouraged materialistic values, desires, objects and the development
of commercial and industrial activities.

3.4 THE RISE OF MERCANTILISM :

The great period of “Renaissance” or the age of Discovery and Exploration began
in Europe in the middle of the 15 th century. Old “geocentric” concept gave way

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to “Heliocentric” concept of the universe. People started questioning the moral


authority of the church in view of contemporary scientific discoveries, inventions,
and explorations. Church lost its hold. Europeans set out on voyages in search of
wealth, to gain personal glory and, to spread Christian gospel in the 16 th century.
Europe, especially London became the hub of commercial activities. Europeans
found new sea routes to Asia and China. They began dominating import export
trade in Africa, Asia and the new world of North and South America. This led to
mercantilism which encouraged long distance economic interactions spatially
amongst the countries. Earlier , Arab merchants had done international trade but
not on such a large scale and with such a sophistication as practiced by mercantile
European Traders who changed the whole complexion of International trade and
there by world economy. Western Europeans acting as merchants/brokers in this
trade expropriated to Europe the profit from trade which laid the foundation of
Industrial revolution.
Spain, Portugal, England, France, Netherlands dominated the trade. In the 17 th
century, European sold African Ivory to Indians, where, says Walter Rodney,
“they engaged in buying (Indian) cotton cloth to exchange for slaves in Africa
to mine gold in Central and South America. Part of the gold in the Americas
would then be used to purchase spices and silks from the far East.”
Europe benefitted enormously at the cost of less developed countries, especially
through slave trade, which helped it retain its dominance in the world Trade till
world War II, wherein U.S.A. had to step in to help rebuild it through “Marshall
Plan” aid. Famous Barclays Bank and Lloyd’s of London (one of the biggest
banking/insurance companies) was founded primarily on the basis of the profits
earned in slave trade! (As per Eric Williamsin in “Capital and Slavery
3.5 THE SLAVE TRADE :
Mercantilism was characterised by the Trans Atlantic African slave trade
especially between 1700 A.D. and early 1800 A.D.European traders enslaved able
Africans of 15 years to 35 years of age, sometimes below 15 years too, but rarely
older people to the New World to work in back breaking mines/fields. It

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continued for several decades despite its abolition in U.K. in early 1800 . Africa
lost 30 million productive people through slave trade. Depletion of young hands
created a shortage of labour for agriculture in Africa which caused decline in local
domestic production activities, whereas it helped Europeans exploit resources in
the New World. It created a systematic linkages between Africa and the
North/South America, West Indies.
To quote Walter Rodney :
“Europe itself had a very small population and could not afford to release the
labour required to tap the wealth of the Americas. Therefore, they turned to
the nearest continent, Africa, which incidentally had a population
accustomed to settled agriculture and disciplined labour in many spheres….
Those are the reasons why the capitalist class in Europe used their control of
International trade to ensure that Africa specialized in exporting captives.”

3.6 THE INDUSTRIAL REVOLUTION :

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Mercantilism was followed in the late 18TH century in U.K. by Industrial


revolution. Mercantilism had laid the foundation of Industrial revolution in terms
of providing financial support based on enormous profits expropriated from slave
Trade. Even James Watt expressed “eternal gratitude to the West Indian
Slave Owners who directly financial his famous steam engine.”!
It all began with the mechanical harnessing of steam power. Capital got central
role. New technological advances changed production processes, especially in
textile sector, the most important sector in U.K. Innovations in transportation
towards the closed of 18TH century, especially steamships and railroads reduced
economic distance, reduced transportation costs of goods and people. Easy
accessibility to sources of raw material encouraged and sustained factory
production in Europe with U.K. leading the field followed by other European
countries and the U.S.A.
Industrial Revolution created following problems for Britain :
1. Shortage of raw materials’ supply for expanded production capacity.
2. Question of expanding markets for expanded production capacity.
3. Declining margins of profit due to capital glut, wherein capital
(i.e. machine, tools, etc.) was created in larger quantity than that could be
utilized effectively domestically.
4 Excess capital created problem of sustained economic growth on the
domestic front.
5 Recently industrialised countries like Germany, France, U.S.A. created
stiff competition in the international market.
6 It created employment problem since machines meant less need for human
labour.
3.7 COLONIALISM:
With European & American countries in stiff competition with it, U.K. protected
its resource base and foreign markets by using its powerful naval forces and
colonising/annexing foreign territories. It helped her continue the sustained
economic development bequeathed by the earlier mercantilism. Also, it

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neutralised international competition. To quote Cecil Rhodes, “My cherished


idea is a solution for the social problem, i.e. in order to save the 40,000,000
inhabitants of the United Kingdom from a bloody civil war, we colonial
statesman must acquire how lands to settle the surplus population, to provide
new markets for goods produced in the factories and mines. The Empire is a
bread and butter question. If you want to avoid civil war, you must become
imperialist.”
However, tug-of-war originated due to a “scramble for foreign territories or
colonies”, especially in Africa, amongst Western European Powers. This led to
convening of Berlin Conference (November 1884) under the leadership of Otto
Von Bismarck, German, Chancellor, participated by 14 countries including
U.S.A., to discuss distribution/demarcation of colonies in Africa controlled by the
U.K. and France, among others.
Colonialism led to economic benefits for colonisers and losses to the colonised.

ECONOMIC BENEFITS :
1. Europeans and other colonisers got a guaranteed productive outlet for the use of
excess capital generated in industrial countries. To quote Lenin, “
In these backward countries (colonies) profits are usually high, for capital is
scarce, the price of land is relatively low, wages are low, raw materials are
cheap.”
2. According to John Stuart Mill, it had following advantages :
1. Use of Capital in the colonies helped increase Europe’s profits by maintaining
the productivity level of capital that remained back in Europe.
2. It guaranteed access to raw materials and assured markets for finished good of
European countries in view of scarcity of resources and a small domestic
consumer market respectively.
3. It allowed access to contemporary luxury items like silk & porcelain from
China, tea & spices form India, ivory, gold and diamond from Africa; Sugar
from the West Indies and Latin America.

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4. It acted as a safety valve by releasing an increasing number of domestic


unemployed and underemployed labour force to work in the colonies.
5. Clonisation provided cheap source of food products to the colonial powers
which helped feed industrial labour force, control inflation and keep wages
lower back at home. Food shortage in Europe was created due to shifting of
labour from Agriculture to industry.
HARMS :
Colonised countries / regions were harmed in the following main ways :
1. Destruction of local industry:
Small local industry was slowly and steadily finished as it could not
compete with cheap foreign products from colonisers.
2. Depletion of Primary Resources :
Primary resources were depleted owing to their use by colonisers.

3 Creation of dependency Psyche :


Colonisers did not in general train the local population in different
sciences, technologies and skills, thereby leading to lower self
esteem/poor managerial or technical skills amongst the locals. Thus, local
people became psychologically dependent on their foreign masters. They
could not develop their economies spatially on their own.
To quote Hartshorne & Alexander,“colonial government rarely
trained the indigenous population to handle managerial or highly
technical tasks, which served to psychologically dampen their
confidence and innovative abilities and to institutionalise the
dependency situation found in the modern world system.”
3.8 MULTINATIONAL CORPORATIONS(MNCs) :
Multinational corporations or MNCs are one of the several mechanisms through
which developed countries maintain and sustain dependency of the
underdeveloped countries despite colonial era having ended long back. These

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MNC’s or Transmultinational Corporations have a far reaching impact on the


developing/Underdeveloped countries/regions.MNCs contributed 1/3rds of the
total world trade in merchandise in 1998,i.e.,2 trillion US$! They are inter
related with international trade, foreign aid, and technology transfer in numerous
ways.
To quote Hartshorne & Alexander, “In a sense, MNC’s are a modern version
of mercantilist trade…..but the mode of operation is very different.”
MNCs are privately owned firms, companies, Corporations having legitimacy and
consent of host countries, establishing their branch operations in foreign
countries. Although they maintain a headquarter in their parent country, yet all
other operations like manufacturing, transportation, distribution, procurement etc.
are spread globally to take full advantage of and make efficient use of all the
factors of production. They are an excellent example of true internationalisation
of space economy. Their main goal is to minimise the cost and maximise
volumes of profits. They have a vast global operating network. They command
enormous Natural, human and other resources.
REASONS/FACTORS FOR MULTINATIONALISATION :
1. Raw Materials and Naturals resources : It helps cut down transportation
cost of bulky raw material and marketing of finished products.
2. CHEAP MANUAL LABOUR : Underdeveloped regions provide cheap
blue collar manual labour with no obligation to cover their health and
other benefit aspects. This saves money.
3. MARKETS : Sheer large number of population despite poor standard of
living provides a big market in host countries of Africa, Asia, Latin
America.
4. LABOUR UNION : Existence of minimum of labour unions and
consequent no problems in underdeveloped regions.
5. ENVIRONMENTAL LAWS : Hardly anyone cares about environmental
standards in underdeveloped regions.

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6. TAX BENEFITS : Host countries provide to MNCs tax benefits so as to


attract them to invest in their country so as to help develop economically
the region.
7. POLITICAL POWER STRUCTURE : Generally in a relatively stable
strong underdeveloped region, MNCs don’t face threats. A corrupt
political structure ensures symbiotic relationship with elite framing
policies favorable to MNCs in exchange for material/financial benefits.
8. BETTER PRACTICAL INDUSTRIAL LOCATION MODEL
ADVA NTAGE S.
IMPACT OF MNCs :
It can both be positive and negative both to host and parent country.
POSITIVE IMPACT :
1. MNCs bring badly needed foreign investment in money, material, and
technology to the host region.

2. They help develop the area ,i.e. , involvement in manufacturing activities has been
found beneficial. Hongkong’s initial industrialization was strongly related to the
development of textile and apparel industries whose success attracted more
foreign investment causing greater diversification.
3. They provide employment.
4. They help harness natural resources.
5. they help overcome business pressures through cross-border mergers and
acquisitions(M&AS),i.e.,the value of M&As in 1999 was nearly 720 billion
US$!
NEGATIVE IMPACT:
1. Generally, MNCs choose and concentrate on only on that activity in such a region
only which may help maximize its profits without caring for the priorities of the
host region.
2. They provide little local employment, because they are capital intensive.

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3. Relocation adversely affects workers, i.e., closing down of iron production by


General Electric Company in Ontario, California and relocating it to Singapore
made workers loose their jobs permanently.
4. Flooding of domestic and other markets with cheaply produced products
elsewhere discouraging domestic production, leading to closure of domestic
industries and consequent employment loss.
5. Sometimes, MNCs are involved in scandals such as was the case in Enron,
Dabhol. Also, in 2001, Mittal who does not hold British passport created uproar in
U.K. over his alleged payment of £1,25,000 to Tony Blair, U.K. P.M to secure a
crucial 70 million pound loan to buy the state-owned Romanian steel company
Sidex at a cost of millions to the British taxpayer. Mittal is an international tycoon
controlling steel plants globally. Similarly, IBM , one of the world’s largest
companies has been accused by Edwin Black , a jew author in his book “IBM
AND THE HOLOCAUST” to have had helped Hitler during Nazi era by its
proactive policy of providing solutions in advance before clients found problems
by way of collecting information on jews of Germany .It showed Hitler just how
he could get lists of jews in every city and profession, how census could be
conducted to provide details of purity and descent .This information helped Hitler
implement the Nuremburg Laws to systematically and easily locate and liquidate
German jews !
A) SHARE OF TERRITORY RULED BY EUROPEAN COLONISTS,
BY CONTINENTS, (%)
COLONIES IN 1876 1900 CHANGE
AFRICA 10.8 90.4 + 79.6
POLYNESIA 56.8 98.9 + 42.1
ASIA 51.5 56.6 + 5.1
AUSTRALIA 100.0 100.0 -
AMERICA 27.5 27.2 - 0.3

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B) COLONIAL POSSESSION OF FOREIGN TERRITORIES (AREA


IN MILLIONS OF SQUARE MILES- PEOPLE IN MILLIONS)

Year Great Britain France Germany


Area Population Area Population Area Population
1815-1830 - 126.4 0.02 0.5 - -
1860 2.5 145.1 0.2 3.4 - -
1880 7.7 267.9 0.7 7.5 - -
1899 9.3 309.0 3.7 56.4 1.0 14.7

Source: V.I. Lenin, “Imperialism, the highest stage of capitalism” (Peerking:


Foreign Language press, 1969) as given in “E
Hartshorn & Alexander.

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