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LESSON 2.

ECOLOGICAL PROBLEM (ENVIRONMENTAL


PROBLEM)
Evolution of some magnitudes. 1890-1990.
Growth factor
World population
X4
GDP
X14
Energy consumption
X16
Water consumption
X9
Air pollution
X5
Sea fishing
X35
Pig population
X9
Horse population
X1,1
Species of birds and mammals (1% X0,99
reduction)
Forest area (20% reduction)
X0,8
Humpback population (97% reduction)
X0,03
Collapse. How societies choose to fail or succeed, Jarred Diamond
(2005).
Chapter 16
The world as polder: what does it all mean to us today?
In this chapter Diamond explains the major sets of environmental
problems facing modern societies.
He considers as well the objections most often raised to dismiss the
significance of environmental problems today.
Finally he looks at differences between the ancient and the modern
worlds that affect what lesson we can draw from the past.
The twelve environmental problems
1. Destruction of natural habitats
The natural habitats whose loss is more worrying are:
o Forests
o Wetlands
o Coral reefs
o The ocean botton
More than half of the worlds original area of forest has already been
converted to other uses.
A present conversion rates one-quarter of the forests that remain will
become converted within the next half-century.
Forests provide us not only with timber and other raw materials but
also with some ecosystem services such as:
o Protecting our watersheds.
o Protecting soil against erosion
o Helps the water cycle (rainfall)
o Provides habitat for most terrestrial plants and animal species
And even larger fraction of the worlds original wetlands than of its
forests has already been destroyed, damaged or converted.

About one-third of the worlds coral reefs (the oceanic equivalent of


tropical rainforests) have already been severely damaged.
Finishing by trawling is destroying much or most of the shallow ocean
botton and the species depending on it.
2. Overexploitation of fishery resources
(We saw before that the fish catches multiply by 35 throughout the
XXth century).
Presently the great majority of valuable fisheries already either have
collapsed or are in steep decline.
And more than 2000 million people (most of them poor), one third of
mankind, depend on the oceans for protein.
3. Biodiversity loss
A significant fraction of wild species, populations, and genetic
diversity has already been lost and present rates a large fraction of
what remains will be lost within the next half-century.
We should remember that the entire natural world is made up of wild
species providing us for free with services that can be very expensive
and in may cases impossible for us to supply ourselves.
4. Soil erosion
Soil of farmlands used for growing crops are being carried away by
water and wind erosion at rates between 10 and 40 times the rates of
soil formation, and between 500 and 10000 times soil erosion rates
on forested land.
Therefore, this means a net loss of soil.
Other types of soil damage caused by human agricultural practises
include salinization, acidification and alkalinisation.
5. Fossil fuel energy
The worlds major energy sources, especially for industrial societies,
are fossil fuels: oil, natural gas, and coal (about 80% of the energy we
use).
It seems that oil and natural gas will last for a few more decades.
This doesnt mean that oil and natural gas will have been used up by
then. Instead further reserves will be deeper underground, dirtier,
increasingly expensive to extract or process, or will involve higher
environmental costs.
6. Freshwater depletion
Most of the world freshwater in rivers and lakes is already being
utilized for irrigation, domestic and industrial water.
Rivers and lakes that are not already utilized are mostly far from
major population places.
Throughout the world, freshwater underground aquifers are being
depleted at rates faster than they are being naturally replenished, so
that they will eventually dwindle.

It is possible to get freshwater by desalinization of sea water, but that


costs money and energy, as does pumping the resulting desalinized
water inland for use.
Hence desalination, while it is useful locally, is too expensive to solve
most of the worlds shortages.
7. Photosynthetic ceiling
According to Diamond, the supply of sunlight is not infinite.
...in 1986 humans already used (e.g., for corps, three plantations,
and golf courses) or diverted of wasted (e.g., lights falling on concrete
roads and buildings) about half of the Earths photosynthetic
capacity.
8. Release of toxic chemicals
Many industries manufacture of release into the air, soil, oceans, lakes
and rivers many toxic chemicals:
o Insecticides, pesticides and herbicides.
o Mercury and other metals
o Fire-retardant chemicals
o Fridge and freezers coolants
o Detergents
o Components of plastics
We swallow them in our food and water, breathe them in our air, and
absorb them through our skin.
Often in very low concentrations, they cause birth defects, mental
retardation, and temporary or permanent damage to our immune and
reproductive systems.
For instance, deaths in the U.S. form air pollution alone are estimated
at over 130000 per year.
In the case of Spain, air pollution alone causes more than 16000
deaths per year. This means more than ten times car accidents
deaths.
9. Transfer of alien species
The term alien species refers to species that we transfer, intentionally
or not, from a place where they are native to another place where
they are not native.
Some alien species are obviously valuable to us as crops (e.g. the
potato), domestic animals (e.g. the horse), and landscaping.
But others devastate populations of native species with which they
come in contact causing damages of billions of dollars.
Some well-known examples are:
o Australias rabbits and foxes.
o Pests and pathogens of trees, crops and livestock.
o The water hyacinth that chokes waterways.
o The zebra mussels that chokes power plants.
o The lampreys that devastated the former commercial fisheries
of the North American Great Lakes.
10.

Emission of harmful gases

Human activities produce gases that escape into the atmosphere,


where they either damage the protective ozone layer of else act as
greenhouse gases that absorb sunlight and thereby lead to global
warming.
The gases contributing to global warming include carbon dioxide and
methane.
o Deterioration of the ozone layer
Ozone is the earths primary filter for ultraviolet radiation.
Ozone absorbs 99% of that radiation. Before ozone appeared
life was only possible underwater. Ozone is, therefore, the
plants sunscreen, what protect us from that ultraviolet
radiation that may cause cancer and cataracts.
In 1974 professor Rowland and Molina discovered that
chlorofluorocarbons (CFC) contribute to ozone depletion by
activating themselves with sunlight so that chloro destroys the
ozone by chemically reacting with it to form chlorine monoxide.
CFCs were used from the thirties onwards in order to
refrigerate car engines. Later on CFCs were applied on freezers,
fridges, sprays, and so on. It was thought that CFCs were inert
but now we know that, as we already said, once at the
atmosphere they interact with ozone decomposing it.
Since the eighties holes both in the North and in the South
Poles can be observed. As the protection given by the
ozonosphere wakens, solar ultraviolet radiation grows.
By the way, the hole more than a hole is a depression.
In the Hague conference (1988) twenty five countries agreed a
deal to quickly remove CFCs.
It seems that this problem is in the process of being solved. In
any case, the ozone layer will not recover until the last decades
of this century.
o Acid rain
Acid rain is caused by emissions of sulphur dioxide and nitrogen
oxide (from combustions of human origin) which react with the
water molecules in the atmosphere to produce acids that
afterwards come back down to earth when it rains, poisoning
the soil and the waters.
Acid rain is mainly caused by fossil fuel power plants.
Unfortunately we have a very contaminant one very near. We
are referring to Endesa, in As Pontes. This company is the
biggest producer of carbon dioxide (CO2) emissions in Spain.
o Greenhouse effect and global warming
When burning wood, coal, gas or oil, the carbon, there retained
in released into the atmosphere in the shape of carbon (co2).
The accumulation of the co2 in the atmosphere sets up a layer
that works like the glass of a greenhouse, allowing the flow of
sunbeams but preventing its return. Thats why part of the suns
heat bounces in the atmosphere and comes back to earth.
That causes the climate change, in the sense of an increase in
the average temperature of the earth.

Nevertheless, there is a greenhouse effect which is natural and


positive. As positive that without it, life would be almost
impossible in our planet, since the average temperature would
be of -18 instead of the current 15.
But human activity, since the industrial revolution breaks the
balance, in two ways:
- Increasing the emissions of greenhouse gases (ghg)
- Reducing the carbon natural deposits (the forest) . Carbon
is no longer a prisoner in its natural places and therefore
combines itself with oxygen, forming CO2.
The four major ghg are:
- water vapour
- carbon dioxide (CO2)
- methane
- ozone
Nowadays, more than 30000 millions of tons of CO 2 are emitted
annually into the atmosphere as a result of burning fossil fuel (coal, oil
and gas), industrial activity, deforestation and so on.
Half of that amount of co2 is absorbed by nature but the other half
increases the greenhouse effect.
Before the industrial revolution (18th century) Co2 concentration in the
atmosphere was of 280 parts per million (ppm)
Around 1950 was of 315 ppm.
And just a few months ago (may 2013) this indicator has reached, for
the first time in three million years, the value of 400 ppm
(observatory of Mauna Loa, Hawai)
According to some scientist, by the end of this century this value (Co2
concentration) could be between 540 and 970 ppm.
Ghg

Average
life
atmosphere
Water vapor
1 week
Methane
10 years
Ozone
100 years
Carbon
dioxide 100 years
(CO2)

in

the

Methane is the main component of natural gas. About 60% of


methane emissions from diverse human activities (extraction, farming
...). The rest come from cattle digestion and rice cultivation.
The emission of one ton of methane has 23 times the impact of the
emission of one ton of co2 for the next hundred years. Therefore we
may say that methane has big effect for a short term (around 10
years) whilst co2 has a little effect for a prolonged period (about 100
years).
With regard to global warming is very important to bear in mind that a
few degrees up or down are crucial.

For instance, global average temperatures in the most intense period


of the last glaciations were only 5 degrees (Celsius) lower than usual.
Sea levels around the world are already rising due to:
o Thermal expansion: as ocean water warms, it expands
o The melting of ice (glaciers, ice caps).
Between 1870 and 2004, global average sea levels rose almost 20
cm.
The ocean level rise will endanger the lowlands of countries such as
Holland or Bangladesh, many Pacific islands and the deltas of the
Mekong and Nile rivers.
Many millions would have to leave these areas
11.

Growth of worlds human populations

12.
The impact of population on the environmental
What really counts is not the number of people alone but their impact
on the environment.
Population pose problems insofar as (we) consume resources and
generate wastes VIT
The per-capita impact (the resources consumed and the wastes put
out per person) varies greatly around the world.
On the average each citizen of the rich countries consumes 32 times
more resources and puts out 32 times more wastes than do
inhabitants of the third world
But low impact people are becoming high impact people for two
reasons:
o Rises in living standards in some third world countries.
o Immigration of third world inhabitants into the first world.
I have described these 12 sets of problems as separate from each
other. In fact, they are linked: one problem exacerbates another or
makes its solution more difficult (J. Diamond).
Our world society is presently on a non-sustainable course, and any
of our 12 problems of non-sustainability that we have just
summarized would suffice to limit our lifestyle within the next several
decades. They are like time bombs with fuses of less than 50 years
(J. Diamond).
As we are rapidly advancing along this non-sustainable course, the
worlds environmental problems will get resolved, in one way or
another, within the lifetimes of the children and young adults alive
today. The only question is whether they will become resolved in
pleasant ways of our own choice, or in unpleased ways not of our own
choice, such as warfare, genocide, starvation, disease, epidemics and
collapses of societies.

Ten objections to dismiss the importance of environmental


problems (pages 503-514):
1. The environment has to be balanced against the economy.
2. Technology will solve our problems.
3. If we exhaust one resource, we cam always switch to some
other resource meeting the same need.
4. There really isn`t a world food problem; there's already enough
food; we only need to solve the transportation problem of
distributing that food to places that need it. Or else: the
world's food problem is already being solves by the Green
Revolution, with its new high-yield varieties of rice and other
crops, or else it will be solved by genetically modified crops.
5. As measured by commonsense indicators such as human
lifespan, health, and wealth (in economist`s terms per-capita
gross national product or GNP), conditions have actually been
getting better for many decades. Or: Just look around you: the
grass is still green, there is plenty of food in the supermarkets,
clean water still flows from the taps, and there is absolutely no
sign of imminent collapse.
6. Look at how many times in the past the gloom-and-down (algo
muy
pesimista
)
predictions
of
fear
mongering
environmentalists have proved wrong. Why should we believe
them this time?.
7. The population crisis is already solving itself, because the rate
of increase of the world`s population is decreasing, such that
world population will level off at less than double its present
level.
8. The world can accommodate human population growth
indefinitely. The more people the better, because more people
mean more inventions and ultimately more wealth.
9. Environmental concerns are a luxury affordable just affluent
First World yuppies, who have no business telling desperate
Third World citizens that they should be doing.
10.
If those environmental problems become desperate, it
will be at some time far off in the future, after I die, and I can`t
take them seriously.
The Kyoto Protocol
The Kyoto Protocol to the UNFCCC (United Nations Framework
Conventon on Climate Change) is an international treaty that sets
binding obligations on industrialised countries to reduce emissions of
greenhouse gases (GHG).
The protocol was signed in1997 and entered into forced in 2005.
The KT recognises that developed countries are principally responsible
for the current high levels of GHG emissions in the atmosphere as a
result of almost two centuries of industrial activity.
Developing countries do not have binding targets under the KT, but
are still committed under the treaty to reduce their emissions.

The aim (in 1997) was to reduce GHG emissions below 1990 levels by
2012. The global reduction must be of a 5,2 % (100- 94,8= 5,2).
1990
100

2008-2012
94,8

Under the Protocol, each industrialized country set a binding GHG


emission target to reduce emissions below 1990 levels by 2012.
These targets were different for each country.
For instance the target for the USA was 7%, for Japan 6% and for the
EU, as a whole, 8%.
As soon as George Bush (puaj) became president (2001) the USA
backed out of the agreement.
This was a terrible blow to the Kyoto Protocol as USA emit more than
20% of world`s Green House Gases.
Presently, a similar percentage is emitted by the Peoples Republic of
China.
As we already saw, more than 30.000 millions of tons of CO 2 are
emitted annually into the atmosphere as a result of burning fossil fuel
(coal, oil and gas), industrial activity, deforestation and so on.
Now let`s see some CO2 emissions per capita, according to the World
Bank (2011).
CO2 emissions per capita and per years (metric tons)
USA
19,3
JAPAN
10,1
EURO AREA
8,4
HIGH INCOME COUNTRIES
12,7
LOW INCOME COUNTRIES
0,4
WORLD AVERAGE
4,4
The KP was a failure; only the EU complied with it, as a whole.
Spain was allowed to increase its emissions in 15% at the end of the
period (2012), but in 2007 the increase has reached 50%. From then
on (2007) due to the crisis, the emissions have diminished, being in
2012 about 20% above the base year.
This was the Spains commitment with the KP:
1990
100

2008-2012
115

and this is the reality:


1990
100

2007
150

2012
119

Now, how is it possible that each of us (europeans), on average, send


more than 8 tons of CO2 to the atmosphere?
In the case of spain, we have:

Production of electricity
Transport
Industry
Agriculture

24%
24%
20%
11%

The first commitment period applied to emissions between 2008 and


2012 and, as we said, was a complete failure.
The outcome of the Cancun summit (on climate change) in December
2010 was an agreement to implement a second commitment period
for the Kyoto Protocol.
This second commitment period applies to emissions between 2013
and 2020, but without clear targets.
Actually, apart from the USA, countries such Canada, Japan, New
Zealand and Russia are presently out of this second-round Kyoto
targets.
The Intergovernmental Panel on Climate Change (IPCC) is a scientific
intergovernmental body. It was first established in 1988 by the United
Nations.
Its mission is to provide comprehensive scientific assessments about
the risk of climate change caused by human activity.
The IPCC provides an internationally accepted authority on climate
change, producing reports which have agreement of leading climate
scientist and the consensus of participating governments.
The 2007 Nobel Peace Price was shared, in two equal parts, between
the IPCC and Al Gore.
The IPCC has published four comprehensive assessment reports
reviewing the latest climate science.
These reports were published in 1990, 1995, 2001 and 2007.
A fifth assessment reports is due to be issued in 2014.
Human development index (HDI)
The human development index (HDI) was devised by a group of
economist (among them Amartya Sen, Nobel Economy Price in 1998)
working for the United Nations Development Programme (UNDP).
The purpose was to shift the focus of development economics from
national income accounting to people-centred policies.
This indicator was presented in 1990. Ever since it is annually
published by the UNDP.
The human Development Index (HDI) is a composite measure of
health, education and income.
The HDI is an alternative to purely economic assessments of national
progress, such as GDP growth and, consequently, GDP per capita.
So HDI is a multivariable indicator.
HDI definition: we could say that HDI has three dimensions and four
indicators.
Three dimensions:
o Health

o Education
o living standards
Four
o
o
o
o

indicators:
Life expectancy at birth
Mean years of schooling
Expected years of schooling
GNP per capita (PPP US$)

So whilst GDP/per capita only measures the average income, HDI,


apart from that, measures two matters as important to everyone as:
o Health (life expectancy at birth.
o Education (Mean years of schooling and Expected years of
schooling)
In theory the value of HDI is between 0 and 1.
In real life it goes from, around, 0.3 to 0.9.
In this case (HDI), the higher, the better.
Human Development Index groups (2013)
HDI rank
N
HDI
countries
Very
high
human 47
>0,8000
development
High
human 47
0,712-0,799
development
Medium
human 46
0,536-0,711
development
Low
human 46
<0,536
development
The top 10 in 2012:
1. Norway
2. Australia
3. United States
4. Netherlands
5. Germany
6. New Zeeland
7. Ireland
8. Sweden
9. Switzerland
10.
Japan
12. Republic of Korea
23. Spain
35. Slovakia
39. Poland
50. Belarus
72. Georgia
87. Armenia

0,955
0,938
0,937
0,921
0,920
0,919
0,916
0,916
0,916
0,912
0,909
0,885
0,840
0,821
0,793
0,745
0,729

The top bottom in 2012


178. Burundi
0.355
178. Guinea
0.355
180 Central African Republic 0.352
181. Eritrea
0.351
182 Mali
0.344
183 Burkina Faso
0.343
184 Chad
0.340
185. Mozambique
0.327
186. R.Congo
0.304
186. Niger
0.304
Calculating the HDI
Since 2011 the UNDP Human Development Report uses a new method
1990-2010 old method
2011 onwards new method
A long and healthy life: Life expectancy at birth.
- Education: Mean years of schooling and Expected years of schooling
- A decent standard of living: GNP per capita (PPP US$)
Mean years of schooling (MYS) = years that a 25-years-old person or
older has spent in schools.
Expected years of schooling (EYS) = years that a 5-years-old child will
spend with his education in his whole life.
Calculating the HDI (2011) in dollars
Maximum value
LE index
83,2 (Japan)
MYS index
13,2 (USA)
EYS index
20,6 (Australia)
CE index
0,951 (New Zeeland)
Income index
(Zimbabwe)

Minimum value
20
0
0
0

108,211 (UAE) United Arabic Emirates

163

In order to calculate the HDI for a particular country, we contrast the


country values with the maximum and minimum values just
mentioned.
Index=

country valueminimumvalue
maximum valueminimum value

So, first of all we calculate the four indices (or indexes) and then the
HDI as the geometric mean of the previous four normalized indices.
Exercise 1: Mozambique
Life expectancy at birth

48,4 years

MYS
EYS
GNP per capita
index=

1,2 years
8,2 years
854 US$

48,420
=0,4493
83,220

1,20
=0,091
13,20
8,20
EYS=
=0,398
20,60
MYS=

Educationindex=
Income index=

MYSEYS
0,09090,398
=
=0,2
CE index( MaxMin)
0,9510

ln 854ln 163
=0,255
ln 108,211ln 163

HDI = 0,44930,20,255=0,284
Exercise 2: Norway
Life expectancy at birth
81,1 years
Mean years schooling 12,6
Expected years schooling
17,3
GNP p/c PPP
47.557 US $
index=
MYS=
EYS=

81,120
=0,967
83,220

12,60
=0,955
13,20

17,30
=0,8398
20,60

Educationindex=
Income index=

0,9950,8398
=0,937
0,9510

ln 47557ln 163
=1,0198
ln 108211ln 163

HDI =3 0,996780,920,8735=0,925
Ecological footprint
An ecological footprint (EF) is a measure of the amount of
bioproductive land and sea required to support a persons lifestyle.

It includes the land needed to get the resources and dispose of the
waste (including the carbon emissions).
The EF also counts the impacts of companies (business) and
governments.
EF measures how much land and water area a human population
requires to produce the resources it consumes and to absorb its
wastes under prevailing technology.
EF is expressed in hectares per capital.
EF measures the extent to which humanity is using nature's resources
faster than they can regenerate.
So EF is a measure of human demand on the Earths ecosystems. It is
a standardized measure of demand for natural capital that may be
contrasted with the planets ecological capacity to regenerate.
Therefore EF can help us plan for a world in which we all live well,
within the means of our one planet.
But today, humanitys Ecological Footprint is over 50% larger than
what the planet can regenerate.
It now takes more than one year and six months for the Earth to
regenerate what we use in a single year.
In other words, we are presently using one and half planets Earth.
At this pace in less than forty years we will need three planets.
o Ecological Overshoot
When humanitys ecological resource demands exceed what
nature can supply, we reach ecological overshoot.
The effects: collapsing fisheries, carbon-induced climate
change, species extinction, deforestation, the loss of
groundwater and so on.
The EF has more than tripled since 1960.
o Humanitys Footprint 1961-2003
How many Earths were needed to meet the resource
requirements of humanity for each year?
Ratio between resource demand & Biocapacity.
Demand = population times per capita consumption (population
* per capita consumption)
Biocapacity = 1 planet
Mexico
Mexico has moved from using only 1/3 of its domestic biocapacity in
1961 to nearly 1 times it own biocapacity in 2002.
Cuba
Cuba suffered from the disintegration of the USSR in 1989.
Cuba adapted to live more in lin e with its own natural capacity.
Shortcomings of the GDP indicator
Some of the most respected economists caution against using GDP as
a measure of social welfare.

Among them Kuznets, Galbraith, Samuelson, Mishan, Tobin, Hirsch,


Sen or Arrow.
They think that although GDP is still the best measure of market value
of goods and services, it is not necessarily a measure of welfare or
even a significant measure of standards of living.
They add that GDP ignores social and environmental costs and is thus
inadequate and misleading as a measure of true prosperity.
Some shortcomings of GDP/p.capita
1. GDP ignores distribution of income and consumption.
GDP per capita is an arithmetic mean. It divides de GDP by the
countrys population, providing a rough estimate of each
persons share of the market economy.
However, in actual fact, some peoples share of the economy is
much grater than others as the income distribution is very
unequal everywhere, especially in the Third World.
There is a partial solution to this shortcoming: the concentration
indexes, such as the Gini index (or Gini coefficient).
2. GDP excludes non-market activities.
The GDP is a measure of market activity; as such it excludes
anything that does not have a price attached, excludes
nonmonetary production.
For instance, unpaid housework, childcare, volunteer services,
barter, NGOs.
And we mustnt forget that an important portion of the economy
is submerged, escaping of the authorities control. We are
referring to the underground economy, also called:
- Black market
- Informal economy
- Shadow economy
In the case of Spain, for instance, underground economy
represents more than 20% of GDP.
This means more than 200.000 million euros.
3. Not all contributors to welfare are economic.
Because the GDP measures only those items that can be priced,
it automatically excludes thing that are not in the economic
sphere, such as:
- A low crime rate
- Family stability
- Clean air
- Green areas
At the same time, negative costs show up as an addition to
GDP even as they arguably contribute little, if anything, to
overall welfare. For example:
- Pollution control
- Spending on burglar alarms
- Daycare costs

4. Stocks versus flows


As the GDP measures only flows, not stocks, the consumption of
non-renewable natural resources such as oil counts as an
addition to GDP, while the remaining stock of oil reserves is not
valued as a stock.
Natural resources should properly be treated as stocks that are
run down when they are extracted and used.
This would result in a clearer picture: when resources are
discovered, they would be added to the wealth of the country,
and subtracted as they are run down.
5. Externalities
Externalities occur in economy when one persons actions affect
another persons well-being and the relevant costs or benefits
are not reflected in market price.
A positive externality happens when there's a benefit for
others.
A negative externality arises when one person's actions harm
another.
For instance, when polluting, factory owners may not consider
the costs that pollution imposes on others.
6. More income does not necessarily mean more welfare.
This can be true if people:
- work more hours per year
- work more years in their lifespan
- have less holidays
- have problems in housing or transport
The Gini index
The Gini index (GI) is also called the Gini coefficient.
The Gini index (GI) intends to represent the income distribution of a
nations residents. Namely, how equal or unequal is the income
distribution among the people or even the territory.
Actually we have four kinds of income distribution:
o Personal (or familiar) distribution.
o Spatial (or territorial) distribution.
o Functional (or factorial) distribution.
It refers to the distribution of the national income between the
two main protagonists of the production process:
- Entrepreneurs (or businessmen)
- Workers
GDP (at factor cost) = CE + GOS
o Sectorial distribution.

Consist in analysing the distribution of the national income


among the three great productive sectors: I, II and III. We mean:
- I = agriculture and fishing.
- II = industry.
- III = services.
The Gini index ranges between 0 and 1, with inequality increasing
with an increasing index. 0 < GI < 1
A Gini index of 0 expresses perfect equality, where all values are the
same (for example, if everyone had an exactly equal income).
A Gini index of 1 expresses maximal inequality among values (for
example if only one person had all the income).
Both situations are quite unreal. No country in the world has these
extreme values (0 or 1).
In real life, the Gini index ranges from around 0,2 to near 0,7. Lets
see some real values:
Norway
The Seychelles
European Union
The World

0,226
0,658
0,307
0,630

(2012)
(2007)
(2011)
(2011)

There are some issues in interpreting a Gini coefficient. The same


value may result from many different distribution curves. Thats why
the demographic structure should be taken into account.
We can use the GI for at least two questions:
1. One country, two moments in time.
e.g. evolution of income distribution in Galicia between 1980
and 2010.
2. Two countries, one moment in time.
e.g. compare the income distribution in Galicia and in Scotland
2010.

IG=

piqi
pi

being:
pi the accumulated percentages of population.
qi the accumulated percentages of income.
Exercise 1 of GI: Distribution of the familiar disposable income
1960
pi
30
55
69
78

qi
15
25
36
52

pi-qi
15
30
33
26

85
95
100
512

70
83
100

15
12
0
131

131
= 0,318
412
(We put 412 instead of 512 because we have not in account the last
number, thats 100).
GI1960 =

2000
pi
35
62
74
82
89
99
100
541

qi
20
44
59
68
79
96
100

GI1960 =

75
441

pi-qi
15
18
15
14
10
3
0
75
= 0,17

LORENZ CURVE
Vertical axis qi
Horizontal axis pi
La diagonal es una bisectriz 45
Exercise 2 of GI: Distribution of the familiar disposable income
1970
pi
qi
pi-qi
32
10
22
58
22
36
71
31
40
86
45
41
93
68
25
98
79
10
100
100
0
538
183
GI1960 =
2000
pi
34
54

183
438
qi
23
41

= 0,42

pi-qi
11
13

69
85
93
97
100
532

55
72
82
94
100

GI2000 =

65
432

14
13
11
3
0
65
= 0,15

Exercise
Cuintile
s
20
20
20
20
20

3: GI
Brazil (%)

Cuintile
s (pi)
20
40
60
80
100
300

Brazil (%)
(qi)
2
7
17
35
100

GIBrazil =
Cuintile
s (pi)
20
40
60
80
100
300

2
5
10
18
65

Singapore
(%)
7
13
16
22
42
Pi-qi
18
33
43
45
0
139

139
= 0,695
200
Singapore
(%)
(qi)
7
20
36
58
100

GISingapore =

79
200

Pi-qi
13
20
24
22
0
79

= 0,395

The European Union


An important explanation: until 1992 its name was "European
Economic Community (EEC)".
From 1993 onwards, upon the entry into force of the Maastricht
Treaty, the EEC was renamed the "European Union (EU)".

o EU: some basic data


EU population (more than 500 millions) makes it the third
demographic power in the world (after China and India) and the
first of the rich world, exceeding the sum of The United States
and Russia population.
European Union GDP is about 30% of global GDP.
Its share in world trade is even higher.
In 2005, UE accounted for roughly two-thirds of total global
investment flows into the U.S.A.
EU is the most advanced integration process in the world.
Besides, as we have already seen, it occupies a prominent place
in the global economy.
However has a major weakness: its political disunity:
- In many cases the UK is nearer to the USA than to the EU.
- The war in Yugoslavia, from 1990.
- The invasion of Iraq (2003).
- the case of Palestine.
- the (recent) USA espionage scandal.
o The way to the EEC
After the gigantic disaster of the World War II, its 60 million deaths
(more than 70% Europeans) a series of European politicians thought
that is was necessary to do all the possible to avoid such a horror in
future.
The founders of the united Europe: Konrad Adenauer, Winston
Churchill, Jean Monnet, Alicide de Gasperi, Robert Schuman.
1948 Creation of Benelux.
1951 Creation of ECSC
Benelux: Belgium, the Netherlands and Luxembourg.
ECSC: European Coal and Steel Community, formed by Germany,
France, Italy and the Benelux.
With the ECSC two historical enemies (France and Germany) turned
into partners only five years after the end of the World War II.
On the 25 of march 1957 these six countries signed the Treaty of
Rome which gave birth to the European Economic Community (EEC).
Actually , there were three communities:
- European Coal and Steel Community (ECSC).
- European Economic Community (EEC).
- European Atomic Energy Community (EURATOM).
The seven enlargements of the EU:
The EEC-EU has been enlarged, for the moment, in seven occasions.
Thus the EEC-6 has become the UE-28.(there are 28 countries in the
EU)
These enlargements were starred by the following countries (States,
in reality):
1. 1973 Ireland, Denmark, UK.
2. 1981 Greece.
3. 1986 Spain and Portugal.

4. 1995 Sweden, Austria, Finland.


5. 2004 The great enlargement ever: Estonia, Latvia, Lithuania,
Malta, Cyprus, Slovenia, Slovakia, Czech Republic, Poland,
Hungary. For the first time in the history 8/10 communist
countries enter in UE.
6. 2007 Bulgary and Romania.
7. 2013 Croatia.
Note: in 1973 Norway decided, by referendum, not entering the ECC.
In 1994 the referendum was repeated, with the same result: no to the
entrance in the EU.
Candidate countries
Iceland, Bosnia, Kosovo, Albania, Macedonia, Montenegro, Serbia,
Turkey.(Norway and Switzerland).
The EU institutions (those were born with the European
community).
The Council of the EU (council of ministers)
The Court of Justice of the EU.
The European Commission.
The European parliament.
This four institutions were created in 1957 with the Treaty Rome.
Afterwards, another three were founded:
The European Council (summit).
The European Court of Auditors (tribunal de cuentas).
The European Central Bank.
EU treaties
1952 The European Steel and coal community.
1958 The Treaties of Rome, the European Economic Community, the
European Atomic Energy Community.
2009 Treaty of Lisbon.
2003 Treaty of Nice.
1999 treaty of Amsterdam.
1993 Treaty of European union Maastricht.
1987 the European Single Act: the Single Market.
Eurozone
UE members states (they are 17) that have adopted the euro as their
common currency:
Germany,France, Luxembourg, Belgium, Italy, Netherlands, Ireland,
Greece, Spain, Portugal, Austria, Finland.
More recently join the eurozone:
Malta,Cyprus,Slovakia,Slovenia,Estonia.
vaticano andorra luxemburgo monaco.
SPAIN
A brief overview since 1939:

Hay

algunas

miniestados

1936-1939: Civil war.


1939-1975: Economy of dictatorship.
1975-2013: Econmy of democracy.
The epoca of Franco se divide en 3:
1939-1959: Autarky.
1959-1975: Beginning of economic liberalization. Desarrollismo.
1975-1986: Transition towards the EEC.
1986-2013: Integration in Europe (EEC-EU).
1939-1959: the autarky was very difficult for foreign goods
and services.
Out-and-out protectionism.
Out-and-out interventionism.
Widespread poverty and famine.
International blockade from 1945 until 1951.
In 1953 agreement with the USA to set up military bases on
Spanish soil.
By the end of the fifties Spanish economy was about to collapse.
In 1959, for instance, the standard of living lower than in 1936.
1959-1975: desarrollismo.
Desarrollismo: process of economic growth that ignores the
social, political and ecological.
In 1959, on the brink of bankruptcy, a combination of pressure
from the USA, the IMF and technocrats from Opus Dei managed to
convince the regime to adopt a free market economy.
The measures to reach a free market economy were presented in
the stabilization plan (1959).
The plans objective were two:
1. To take the necessary fiscal and monetary measures
required to restrict demand and to contain inflation.
2. And, at the same time, liberalize foreign trade and
encourage foreign investment.
The Stabilization Plan was a completed success from the
macroeconomic point of view, and economic growth picked up.
Economists even talked of the Spanish Miracle.
Actually and with a two centuries lag behind England, Spain
accomplished then its peculiar industrial revolution.
There are three main factors that explain this growth:
- The monetary remittances of two million Spanish workers
abroad (emigrants).
- The huge increase in tourism.
- The foreign investment.
On the other hand, as it happens today in China, for instance,
there were no liberties in Spain and therefore:
- Strikes were forbidden.
- The trade union were illegal.

Wages were low.


Direct taxes nearly non existent (according to our income).
Labour health or real state regulations were unheard off.
At the time of Francos death (1975), Spain still lagged
behind most of Western Europe, but the gap between its
GDP per capita and that of the major Western countries had
narrowed.

1976-1986: Transition towards the EEC.


(World) economic crisis that coincides with the political transition to
democracy and, besides with the economic transition to the EEC.
(Economic European Community).
The two oil price stocks (1974 and 1979) had a huge impact on the
Spanish economy, most dependent on foreign energy.
The worst problem was, indeed, the increase of unemployment, due
to:
- The explosive rise of oil prices.
- The fall of productivity
- The increase of interests rates
- The reversal of migrations trends
- The increase in wages
- a high rate of inflation (which reached 26% un 1977)
In order to deal with this problems the main political parties
reached some agreements known as Los pactos de la Moncloa (The
Moncloa pacts).
On the other hand at this third stage (1976-1986) the Spanish
authorities created:
- The State of autonomies
- The Welfare State
In October 1982 the PSOE led by Felipe Gonzalez won the elections by
an absolute majority.
With this majority, he was able to undertake unpopular austerity
measures (as the industrial reconversion program or more labour
market flexibility, for instance).
1986-2013: Integration into Europe
On the 1st of January 1986 Spain enters the EEC, with a delay of
nearly thirty years.
At that time both inflation and public deficit were brought down.
From then on, until 1993, the Spanish economy underwent an
important expansion.
Some factors fostered this strong economic growth:
1. The fall in oil prices
2. The increase of tourism
3. A massive surge of foreign investment
4. A rise in domestic demand
After entering Spain in the EEC, European Structural Funds and
Cohesion Funds were a major component in Spains economic
growth.

An important part of these funds were spent (and waste)


infrastructures: roads, motorways, ports, airports
1992-1995. Spain like most other countries was hit by the global
recession.
1997-2007. there was an economic boom
1997-1999. property values and employment increase in Spain.
After joining the Eurozone in 1999 interest rates dropped and the
property boom accelerated.
By 2006 property prices had doubled from a decade earlier.
During this time construction of apartments and houses increased at
a record rate.
In those years Spain constructed more buildings than France,
Germany, Italy and the UK combined.
It was the construction rush, based on political corruption.
Actually, the European Parlament condemned Spain for its wild
urbanism that destroyed most of the Spanish coast (27/03/2009).
Another most remarkable question in this period was the arrival or
around five million of foreign inmigrants. (mainly Romania, Morocco,
Ecuator).
So, for the fist time in its history, Spain received labour force instead
of expelling it.
1992-1994 (short) Economic crisis.
1995-2007 (long) Economic boom, (giant with feet of clay gigante
con los pies de barro).
1996-2004: Goverments of PP.
2004-2011: Governmets of PSOE.
PP, PSOE: two parties, one model.
Maybe the prime weaknesses of the Spanish economy is its
technological backwardness.
And this lead to a low productivity.
Theres a very simple indicator to measure this issue:
Expenditure on R&D (Research and Development) divided by GDP
Expenditure on R&D / GDP (2011)
Sweden
3,3
Japan
3,3
S. Korea
3,0
USA
2,7
EU
(15
first 2,0
Spain
1,3
countries)
So, in the Spanish economy are prominent sectors such as
construction and tourism which have a very low productivity.
2007. The real state bubble bursts.
2008-2013. Economic, financial and social crisis. Spain, again, First
world champion in unemployment.