Short Essay on the Economy of India

Although the rising oil prices crashed the U.S. economy during 2007, emerging markets India and China clocked some record growth.

China’s growth at 11.5% seems likely to be kept up in 2008, and India seems poised to maintain the high rate of GDP growth even if it slows down a bit from last years 9%.

The start of 2008 has seen the U.S. go into recession. Globalisation has meant that the affects of U.S. recession will most definitely be felt by other parts of the world as well.

The Indian stock market did a classic knee jerk reaction, with the SENSEX index recording a drop of2000 points in one day itself. Despite the reaction of the investors, the Indian prime minister reassured the people that India’s fortunes are not hitched to the US economy.

The rapid growth that industry has seen, the record profits booked by the corporate sector are reasons enough to believe that the Indian economy can now stand on its own. However, even as the GDP is a record 9% the escalating pressures of inflation loom high over the horizon and one is inclined to believe that the interest rates are going to rise. The escalating cost price of capital is already beginning to deplete retail and corporate borrowing appetites around the country.

The Indian economy will definitely feel the pressure of the U.S. slowdown. It could mean that the 9% growth rate might drop to maybe 7% this year. This could lead to the arrest of industrial growth. It’s happened before- a two percentage drop in growth rate. In the years following the 1994-1997, Asian financial crisis led to exports crashing, new plants set up in anticipation of exporting went bust, and the banks that had lent them the money went bust as well.

However, with lower borrowing costs and healthier debt-equity ratios the Indian companies seem much better equipped to handle a slump this time around.

Despite the rising costs of inflation there are several who continue to be “bullish on India.” India’s open door policy has meant that there is a large opportunity for foreign investors to invest in India. The Indian finance minister P. Chidambaram remains optimistic about India’s dream run. He has hinted at income tax cuts in the budget for the year 2008-2009 fuelled by the dramatic growth in direct tax collections in the year 2006. Tax collections jumped 40% in 2006 and are expected to be 42% higher in the year 2007 translating into a rise of Rs.90, 000 crores just in taxes.

To maintain the current 9% growth rate India needs an investment of close to 475 billion dollars in infrastructure in the next five years of which 120-130 billion dollars are expected to come from foreign investment. India has exceeded the goal of 10 billion dollars of foreign direct investment last year and seems poised to maintain the same growth rate.

However, there is much concern over the inflation driven by high oil, commodity and food prices which the government seems to be having tough time keeping a check on. Tlie world’s eyes are focused on India now. The role of the Indian economy in the year 2008 will be important in charting the further course of development of the world’s largest democracy.

a short essay on economic development

The first important task for a society is to maintain itself. There must be food, clothing and shelter for its members. Modem men spend most of their daytime making a living. It is not sufficient that there must be a system of production in society equally important in its distributive system. The more complex the society, the more its welfare rate on the distributive system. In a simple society, the problem of distribution is simple because the society is usually self-supporting. The family in the simple society satisfies its needs all most directly. But in a complex society goods pass through many hand until they reach the consumer.

In our country, one of the major causes of economic ills is mal-distribution of goods. Economic institutions arise out of the goods and need. They are basic ideas, norms and statuses, which govern our economic life.

In the primitive days, man satisfied hunger by searching for food and living upon whet he could raise. As an aid in this search for food primitive people invented weapons and tools. The procuring fruits, berries, greens and seed were supplemented by some hunting.

In places where animals were abundant, the technique of hunting people did not go separately but rather lived in small groups and moved in a group for hunt. Man moved forward again and he learned to domesticate animals, particularly the big animals such as cattle.

Most of the hunting people had already domesticated the dog, which aided in the hunt and also helped some what in transportation. The domestication of animal became a group responsibility. In order to secure pasture the people followed their animals in flocks and herds.

Group organization took a new aspect. Instead of human life being organized around the mother and children. The creator shifted to the flocks and herds. Women were subordinated and men came into a larger dominance.

The development of agriculture came next. When men turned to whole culture, he invented new tools, which supplement culture by crude field culture in a relatively large scale. With the rise of agriculture men passed from the flesh diet of nomadism to a large use of vegetable foods. The roaming life of the hunting and pastoral stage gave way to the more settled life of agriculture. With the stable life of agriculture there seem to have associated others inventions.

Pottery making, the weaver of hair or wool or cotton are more often founded among agricultural groups. With the cultivation of the soil populations multiplied. Agriculture led to the establishment of village communities. The making of money becomes an occupation, which besides adding to human welfare also created an unlimited amount of human ill will and misery.

Down to the middle of the eighteenth century, agriculture was the leading occupational activity of mankind. With the industrial revolution and with the manufacture of tool on a large scale, here developed a new type of agriculture. The division of land into farms under independent ownership became common. The increase in population inaugurated the era of scientific agriculture of the twentieth century. Labor system came into vogue.

The Industrial Revolution furthered specializations. With specialization, the volume of trade increased. The city arose as a centre of trade with these early cities, located places for trade. The goods were assembled at certain place on certain days and sold. The city developed into a from of an economic group besides being social and political group, the handicrafts-men of the city banded together for protection in guilds which may said to constitute the forerunners of trade unions of today. These guilds were however manufacturers, associations rather than workers associations.

The use of the factory system in the latter part of the eighteenth century and in the early nineteenth century gives birth to capitalism. The application of steam as a motive force in operating machinery revolutionized industry. Power driven machinery supplemented the hand driven tools. Due to the loss of personal contact between the employer and the labor on account of the large size of the factory labor capital disputes became intensified. Labor organized itself for its protection. Capital likewise began to organize for its advancement.

The twentieth century has brought about mass production rise of many near monopolies and a high degree of division of labor. New market situation has been profoundly altered. The consumer has become more and more dependent upon the institutions of the market place.

Advertising profoundly influences consumers wants and habits of buying. A product is associated with a popular film star. So that it may, appeal takes an increasing interest in consumer production. These laws providing for pure food and drugs per standard methods of packing and labeling and for licensed inspection. The prices are fixed by the government. The traditional theory of economic competition has now been replaced by government has control in the fields of production has now been replaced. Government has control in the fields of production, exchange and consumption. The age of Lassiez faire is gone.

(Reuters) news about India U.S nuclear deal. Republic day special

(Reuters) - India and the United States were trying to narrow differences on nuclear trade on Thursday ahead of President Barack Obama's visit, but New Delhi ruled out a change in its liability law that has choked off U.S. investment.

Nuclear commerce worth billions of dollars was meant to be the centrepiece of a new strategic relationship between the United States and India, allowing New Delhi access to nuclear technology and fuel without giving up its weapons programme.

But the 2010 Indian nuclear liability law that makes equipment suppliers ultimately responsible for an accident has held back firms including GE-Hitachi, Toshiba's Westinghouse Electric Company and France's Areva from proceeding with the construction of reactors.

On Thursday, negotiators from the two governments met for a second day in London to hammer out an accord that Obama and Indian Prime Minister Narendra Modi hope to announce during talks set for Sunday. It followed talks in Vienna and New Delhi.

"Even as we speak our negotiators are working together in a collaborative manner in London. It is the third time they are meeting in approximately 45 days, you can see the element of effort that is going into the nuclear issue," foreign ministry spokesman Syed Akbaruddin told reporters.

India has offered to set up an insurance pool to indemnify companies which have won the right to construct reactors in the country against liability in the case of a nuclear accident, as a way around the law.

It says the law can't be changed for lack of political support.

Under the plan readied by state-run reinsurer GIC Re, insurance would be bought by the companies contracted to build the nuclear reactors who would then recoup the cost by charging more for their services.

Alternatively, state-run operator Nuclear Power Corporation of India (NPCIL) would take out insurance on behalf of these companies.

"What is being discussed is how, within the four walls of our legal framework, our legislation, we can provide assurances to our partners in the U.S. of any concerns they may have through their vendors or their lawyers," Akbaruddin said.

India's law, written under the shadow of the Bhopal gas disaster, is a deviation from the global norm in which the nuclear operator bears responsibility for an accident, not the equipment providers.

Foreign nuclear firms are also worried about another part of Indian law which they say exposes them to tort claims.

One U.S. official said that contact group talks in London were continuing and that there were "some creative things in the mix" to address whether India needed to change the law to address industry concerns about nuclear liability issues.

"The best way would be to change the law," said the official, adding that negotiators were examining how to come up with "a reasonable package of assurances without changing the law."

Obama's visit had an important "forcing function" in the nuclear discussion, the official added, but even if there is no breakthrough at the summit, the nuclear talks will continue as part of the U.S. administration's broader effort to promote a clean energy partnership with India.

The Industrial revolution

The Industrial revolution

The Industrial revolution was a time of drastic change and transformation from hand tools, and hand made items to machine manufactured and mass produced goods. This change generally helped life, but also hindered it as well. Pollution, such as co2 levels in the atmosphere rose, working conditions declined, and the number of women and children working increased. The government, the arts, literature, music and architecture and man's way of looking at life all changed during the period. Two revolutions took place, both resulting in productive but also dire consequences.

Before the first industrial revolution, England's economy was based on its cottage industry.  Workers would buy raw materials from merchants, take it back to their cottages, hence the name, and produce the goods at their home. It was usually was owned and managed by one or more people, who were generally close to the workers. There was a good worker/boss relationship, which was demolished and destroyed by capitalism. This industry was efficient but the workers, productivity was low, making costs higher. The longer it took one person to manufacture a product, the higher the price. Subsequently, goods were high in price and exclusive only to the wealthy people.

The year was 1733, the demand for cotton cloth was high, but production was low. This crisis had to be solved or England's economy would be hindered. The answer came from a British weaver, John Kay, who invented and fashioned the flying shuttle, which cut weaving time in half. John Kay was a pioneer and his invention paved the way for numerous inventors. Although at first, many workers didn't accept machines, in fact, many inventions were destroyed, but what was inevitable, couldn't be stopped. The machines had made their way to England, and nothing could stop them.

By the 1750's, the industrial Revolution had begun. At first, inventions were strictly limited to cotton weaving. Inventions such as the spinning jenny and the water-powered frame, both of which provided spinning yarn faster, the spinning mule, the power loom and the cotton gin, all helped the manufacture of cotton goods by speeding up the process. Mass production had begun, along with capitalism. Capitalist, people who have their own materials, money and space, bought many machines and stored them in a factory, where hired people worked the whole day manufacturing goods. The factory system had replaced the cottage industry. Mass production made usually expensive items, such as shoes, less expensive and easily affordable by lower class and less wealthy people. The quality of life had improved. In the 1800's, inventions weren't just limited to the cotton industry. Steam engines were invented, providing a faster mode of transportation, instead of the use of horses and carriages. With steam engines, cities were able to move farther away from rivers and sources of water, to start cities.

The second Industrial revolution proved more drastic, not only in inventions, but in social and government policies and reforms. Art and culture flourished and was transformed into many different and unique styles. The first industrial revolution had forever changed England, and later the world. England was now ready for another change, as life with machinery had already been assimilated into society.

The second industrial revolution utilized the power of electricity to help them develop their technology and help social and home life. Michael Faraday, a British scientist, demonstrated how an electric current could be made. This concept and principle is still in use today. Electricity improved life by supplying people with light, and electricity to power machines. Communications improved as a result of electricity. The telephone and telegraph were the first communicational devices that were for public use. With the development of technology, radio waves were discovered. Now messages could be sent over long distances in virtually no time.

Advances in Science were also made. The discovery of radioactivity by Marie Curie helped discover radioactivity as power source, but also led to the discovery of the nuclear bomb. During the 1800's over 70,000 chemical compounds were broken down. Some of these were Portland cement, vulcanised rubber, synthetic dyes, and petroleum products. Petroleum begun to be widely used as an alternate energy source. Gasoline was also needed for transportation also changed from steam engines to the internal combustion engine. The internal combustion engine made transportation faster and less public. A person could own a car instead of using public transportation. During this time, a new technology was born in the field of transportation. Orville and Wilbur Wright successfully completed the first airplane flight at Kitty Hawk. The air plane industry was born.

Medicine before the 1750's and in the 1750's wasn't well developed. Once infection set in, nothing was possible to save the patient. Various diseases couldn't be stopped or controlled because of limited technology. In the 1850's however, vaccinations were discovered and administered. X rays were also discovered and provided doctors with a faster way of diagnosing medical problems. Louis Pasteur discovered and fabricated a way to eliminate all germs in milk. Called pasteurisation, this technique is now widely used on all milk. The technique involves heating the milk to slow the fermentation process.

Darwin was a naturalist who devised the theory of evolution. It stated that all animals and plants evolution from a lower species. He also developed the concept of Social Darwinism that the strongest survive. Many people contested his ideas and argued against them.

Life was drastically changed during the industrial revolution. People were living in germ infested, crowded and very unhealthy conditions, much like their place of work. Children and women laboured in harsh conditions, working long hours with little pay. The British Parliament stepped in and limited and controlled child labour. This sparked a rebellion. People, especially wealthy capitalists, wanted the government to stay out of its issues, called the laissez-faire system. Many people opposed the laissez-faire system, saying the capitalists would gain too much power and people would be mistreated. The laissez-faire system was disregarded after a few years.

Art changed with the different ideas of social Darwinism, the laissez-faire system and the industrial revolution. Romanticism painted emotions that they had no control over, such as love, religion, and beauty. It showed more of how people look at one moment in time. Realism tried to capture what was really happening, all the sadness and tried to make people work to change what was happening.

Socialists were reformers who wanted to construct a better life for all people. Among them, Robert Owen, an owner of a textile mill, whose reforms reshaped the working class. He raised pay, improved working conditions, and didn't allow children under 11 to work. Directly related to Owens reforms, crime and disease rates dropped and life improved. Marx, also a socialist, stated the class struggle, the conflict between the different classes of people, had an impact on the changes that occur in history.

The Industrial revolution brought on more technology, wealth and power, but at what consequence? The people were living in filth, working unthinkable hours and being paid very little. The revolution shaped modern society to what it is today. As Rousseau said, "Civilization spoils people," but did people spoil civilization by implementing machines to do our work?

1600's

By the 17th century the limitations of wind and waterpower caused by calm and dry weather spells were seriously affecting the development of mining for valuable metals and to some extent coal. Mines were becoming too deep for animal and human powered pumps to cope with subterranean water. When wind and water power failed, the mines flooded.

1606 Della Porta in 1606 showed that water could be forced up a pipe by steam pressure.

1611 Likewise, Salomon de Caus demonstrated in 1611 that steam pressure could forcibly eject water from a closed boiler.

1629 Giovanni Branca of Loretto proposed in 1629 to provide power by impinging steam issuing from a boiler on to vanes fitted to a horizontal wheel. It is doubtful if this machine existed otherwise than in the mind of the presenter.

1643 Galileo's pupil, Evangeliste Torriceli, proved in 1643 that the earth's atmosphere had weight and therefore exerted a pressure.

1672 Otto von Guericke in 1672 made a cylinder with a close fitting piston. This he strongly fixed in the vertical position. By a rope and pulley 20 men effortlessly raised the piston to the top of the cylinder. Von Guericke had earlier prepared a large hollow sphere from which he had removed the air using a vacuum pump of his invention. When the sphere was connected to the cylinder atmospheric pressure pushed the piston down in spite of the efforts of the 20 men to restrain it. This demonstrated that the atmosphere was a potential source of energy but a vacuum was also needed to make use of it. No easy means existed of creating a vacuum except by a mechanical pump.

1680 Huygens and his assistant Denys Papin tried gunpowder in 1680 to expel air from a cylinder and create a vacuum. This was not at all practical.

1690 Denys Papin went on to replace the gunpowder by a small quantity of water which he boiled off into steam. When the fire was put out, the steam condensed causing a vacuum and the piston was forced down by the pressure of the atmosphere, raising a weight by rope and pulleys. Papin, however, did not pursue this line of investigation.

1698 Thomas Savery, a Devon man, was the first to combine the force of steam and the pressure of the atmosphere. He was granted a patent in 1698 for "Raising water by the impellent force of fire". Savery's "engine" comprised a boiler and a receiver. Steam from the boiler filled the receiver. Cold water poured over the receiver condensed the steam causing a vacuum. Atmospheric pressure forced water up a suction pipe connected to the receiver, which became full of water. Steam from the boiler at pressure blew the water out of the receiver up a delivery pipe and also refilled the receiver with steam. The cycle was then repeated. Valves were fitted in pipes to control the steam and to prevent the water, which was being raised, from going the wrong way. In time the boiler became empty. To refill it with water meant drawing the fire and relieving the boiler of its pressure.

1700's

By the 1780s factory owners were demanding steam engines that could provide rotary motion. This need was answered, with engines running at constant speed without any attention from the driver, which also led to experiments with paddle steamers and miniature carriages. The 18th century saw the development of the first workable and commercially viable steam engines pumping out the mines and allowing them to go deeper.

1702 Savery overcame the problem of intermittent operation to some extent by providing a second boiler, which was used to refill the first boiler under pressure. Although the "Miner's Friend" was workable, boiler making technology of the time could not cope with the steam pressures involved. Effectively it became a suction machine only, capable of lifting water to 30 feet at the most. Savery abandoned his attempts to introduce the engine in 1705.

1712 About the time that Savery was developing his engine, Thomas Newcomen of Dartmouth assisted by John Calley, was experimenting with a cylinder and piston engine. Steam under the piston was condensed to form a vacuum, whereupon atmospheric pressure pushed the piston down. By means of chains and a rocking beam the piston could be connected to a pump in a mineshaft. A vital discovery was that direct injection of cold water in to the cylinder rapidly produced condensation so that the engine could operate at several strokes per minute. The height to which water could be lifted was limited only by the size of the piston, and the engine would work with the pressure of 1.5 pounds per square inch (0.1 bar). Here was an engine that could be built by the millwright and blacksmith. Success was assured. Because of Savery's patent, Newcomen had to go into partnership with him although Newcomen's engine had hardly anything in common with Savery's machine. The first Newcomen engine of which there is record was erected on a colliery near Dudley castle in 1712. It had a brass cylinder 21 inches bore (533mm) and 7ft 10 inches high (2.388metres). When the boiler was making plenty of steam and the engine made 12 pumping strokes a minute lifting 10 gallons per stroke (45 litres) from 50 yards (46 metres depth). At the time of it's construction it was the world's first self-acting machine apart from clocks. By 1800 some 1500 engines were at work in Britain, with others in Europe and one in the USA.

1760's

The Newcomen engine was extravagant in fuel and a newcomer, James Watt, perfected a less fuel hungry engine which he patented, with the financial backing of Matthew Boulton. But the next great hurdle was rotary motion for the factories.

1769 The Newcomen engine was extravagant in fuel due to the injection of cold water into the cylinder at each stroke. This was made evident to James Watt when he asked to try and make a model of Newcomen work. Although he had no previous experience of engines he began experiments which led to his "separate condenser" which eliminated the injection of water directly into the cylinder with a consequent great saving in fuel. He also used steam, still at very low pressure to push down on a piston instead of the atmosphere. A vacuum was still needed under the piston for the engine to do useful work. Watt's patent for the separate condenser was taken out in 1769.

1774 James Watt encountered great financial difficulties in perfecting his new engine and in 1774 entered into partnership with Matthew Boulton, a Birmingham industrialist who was able to provide financial backing and business acumen.

1775 An Act of Parliament in 1775, Watt was able to extend his patent to 1800.

1780 By 1779, factory owners desperately wanted engines that could provide rotary motion. This was considered a great difficulty. James Pickard and Matthew Wasborough fitted a crank, connecting rod, and flywheel to a Newcomen type engine to obtain rotary motion and patented the arrangement.

1780's and 1790's

After an abortive attempt at the introduction of the "compound" engine, the indefatigable Boulton and Watt developed the double acting rotative engine for the Albion flourmills in London.

1781 Jonathan Hornblower the younger obtained a patent for a "compound" engine in 1781. Steam was first admitted to a small cylinder, and after pushing the piston, was exhausted to a larger cylinder to do further work before exhausting to the condenser. Hornblower used Watt's separate condenser and was prosecuted. In any event the very low steam pressures of the time prevented success.

1783 Until 1783, steam engines had been "single acting". Steam had pushed one side of the piston only. Watt now introduced the "double acting" engine in which steam pushed each side of the piston alternately. A problem was the attachment of the piston rod to the beam as it is now pushed up as well as pulled down. The chains used up to now were no use. Double chain and rack-and-sector arrangements were not satisfactory either. In 1784, Watt perfected his "parallel motion" linkage which provided a positive connection to the beam and also guided the piston rod in a straight line. The double acting rotative engine was now a practical proposition. About this time, William Murdoch, a senior employee of Boulton and Watt devised an oscillating cylinder engine which drove directly on to the crankshaft without the interposition of a rocking beam.

1786 A double acting rotative engine was supplied by Boulton and Watt in 1786 to drive the new Albion flourmills in London. This was followed by a second engine in 1789. William Murdoch made a miniature steam carriage in 1786.

James Watt built an engine that needed no attention from the driver, an employee of Boulton and Watt's was prosecuted for patent infringement - though his engine was popular at collieries, and a clergyman loomed large.

1788 James Watt introduced his centrifugal pendulum in 1788. This regulated the steam supply to rotative engines. These could now run at a steady speed without any attention from the driver. Miller, Taylor and Symington built a small paddle steamboat and tested it with some success on Dalswinton Loch in Scotland, near to Miller's residence. William Symington, an engineer at Wanlockhead lead mines, made the engine.

1792 Edward Bull, one of Boulton and Watt's engine erectors, introduced a pumping engine with the cylinder inverted over the mineshaft. The piston was coupled directly. Bull used the separate condenser. After he had built several engines James Watt prosecuted him for infringement of patent. Later, this type of pumping engine became quite popular at collieries.

1797 Richard Trevithick, a Cornish engineer was experimenting with higher pressure steam than Boulton and Watt were using. With a higher pressure steam, he could manage without a condenser. He was also experimenting with miniature road carriages at this time.

1798 Edward Cartwright, a clergyman and inventor of the powered weaving loom, designed a vertical engine whose piston drove an overhead crankshaft directly, without using a beam.

1800's

The 19th Century was the true age of steam, fuelling the Industrial Revolution. Steam changed Britain, its people, and the landscape forever. Steam not only ran the factories and the mines, but now powered locomotives and steamships. This was also the century that saw great names such as Stephenson and Brunel build the first commercial railway systems, changing the way people and goods were moved around the country. Steam changed the focus of life from the countryside to the towns and cities, changing us and the world from the rural to the industrial.

1800 Phineas Crowther of Newcastle-upon-Tyne patented an improved type of vertical engine in 1800. It had no beam. Quite soon it became widely used as a colliery winding engine. James Watt's patent expired in 1800. About this time Richard Trevithick's father may have invented the egg-ended boiler. It was suitable for a steam pressure of around 30 pounds per square inch. (2 bar).

1802 At Coalbrookdale, Shropshire, a steam railway locomotive was built, possibly to Richard Trevithick's design. Also in 1802, William Symington built a stern wheel steam paddle tug, which underwent successful trials on the Forth and Clyde Canal. Named "Charlotte Dundas", it was afterwards laid aside. Its engine had a Horizontal cylinder.

1804 Richard Trevithick built a locomotive for the Pen-y-Daren tramway in South Wales during 1802. This also had a horizontal cylinder. Colonel Stevens, an American, built a small steamboat with a propeller or "screw" for propulsion instead of paddle wheels.

1807 Robert Fulton, an American, launched his paddle steamer "Clermont" in 1807, the world's first steam ship to provide a regular passenger service in America. Also in 1811, Richard Trevithick introduced his "Cornish" boiler. It was stronger and more efficient than any boiler in use up to that time, and could withstand steam pressures up to 60 pounds per square inch (4 bar). Arthur Woolf returned to his home county, Cornwall, with a patent for a "compound" engine very similar to the Hornblower engine of 1781. The pursuit of higher steam pressures had begun. The compound engine in time became very widely used.

Explaining the Demographic Transition Model

Here are the characteristics associated with each stage of the classic four-stage DTM. In parentheses, the approximate dates of the onset of each stage are shown as they occurred in Europe, but there was much variation even across that region, so these dates are approximate.

Stage 1: Both birth and death rates are high and population grows slowly, if at all (Europe between pre-history and about 1650).

Stage 2: Birthrates remain high, but death rates fall sharply as a result of improved nutrition, medicine, health care, and sanitation.  Population begins to grow rapidly (began in Europe slowly after 1650, then more rapidly after the Industrial Revolution spread in the early 19th century).

Stage 3: Birthrates begin to drop rapidly, death rates continue to drop, but more slowly.  Economic and social gains, combined with lower infant mortality, reduce the desire for large families (in Europe, birthrates in some nations began to fall in the 19th century and spread across the region by the early 20th century).

Stage 4: Both birth and death rates are in balance, but at a much lower rate; population growth is minimal if at all (Europe since the 1970s).

The theory of demographic transition assumes that a country will move from a pre-industrial (agricultural) economic base to an urban, industrial one, with a corresponding decrease in family size and population growth.  The slowing of population growth theoretically results from better standards of living, improvements in health care, education (especially for women), sanitation, and other public services. Although this four-stage pattern has been repeated in other places besides Europe, there are local variations, sometimes significant, as the trajectory of development is everywhere different and by no means inexorable. For example, many of today's least-developed countries still retain the high birth rates characteristic of Stage 2. Also, parts of Europe, Russia and Japan may be entering a new, fifth stage, where birth rates are below death rates, and the population ages and begins to decline.

Pause and Reflect 2:  Before continuing, think about the following questions and discuss them with your classmates: 1. The demographic transition theory assumes that birth and death rates begin to fall as nations develop their economies. Do you think economic development is enough to stabilize a country's population? Why or why not? 2. What has the demographic experience been in your country? Does it fit the demographic transition model? Why or why not?

The Causes of Famine?

The Ethiopian crisis stimulated interesting questions about the demographic causes and consequences of the famine and how best to address the tragedy through policy. The tragedy enables students of geography to apply population theories to a particular place and time and to better understand the real world implications of policy recommendations.

Would the task of sending Western aid in the form of money and food to Ethiopia sink the lifeboat portrayed in Hardin's metaphor?  Or, following Barry Commoner's view, might Ethiopian relief efforts be more accurately viewed as "the return of resources" to a formerly wealthy nation made poor through colonialism? (Ethiopia, at the height of the Kingdom of Axum, boasted a mix of urban architecture, extensive trade networks, and mineral extraction, while in 1984 its GDP per capita was $283).

With a total fertility rate of 6.7 in 1984, the Ehrlich camp might identify Ethiopia's large population as the major culprit behind the crisis (US Census Bureau, International Database).  Left uncontrolled, population pressure ultimately increased stress on the nation's environmental resources; exacerbated by drought, these factors caused a crisis of Malthusian proportions.  Viewed from Julian Simon's standpoint, however, the Ethiopian people were not the problem but the solution.  What sorts of technologies might Ethiopians employ to increase crop yields and prevent future famines?   

In sum, the theories of Malthus, Marx, Ehrlich, Simon, Hardin and Commoner enable us to apply general demographic principles to real world geographic problems such as the Ethiopian famine. Yet the African famine cannot be separated from the particular economic, social, cultural and environmental context of that region. Indeed, there are differences in the world that call for consideration.  Not every location on earth is the same.  Because of geographic differences – whether in economies, population growth, or natural resource availability - we can see different outcomes resulting from population changes and resulting interactions with natural resources.  Geography therefore provides us with a lens for understanding the complex spatial dimensions of population issues.  

Karl Marx's Theory of Population

Karl Marx (1818-1883) is regarded as the Father of Communism. He did not separately propose any theory of population, but his surplus population theory has been deduced from his theory of communism.  Marx opposed and criticized the Malthusian theory of population.

According to Marx, population increase must be interpreted in the context of the capitalistic economic system.  A capitalist gives to labor as wage a small share of labor's productivity, and the capitalist himself takes the lion's share.  The capitalist introduces more and more machinery and thus increases the surplus value of labor's productivity, which is pocketed by the capitalist.  The surplus is the difference between labor's productivity and the wage level.  A worker is paid less than the value of his productivity.  When machinery is introduced, unemployment increases and, consequently, a reserve army of labor is created.  Under these situations, the wage level goes down further, the poor parents cannot properly rear their children and a large part of the population becomes virtually surplus.  Poverty, hunger and other social ills are the result of socially unjust practices associated with capitalism.

Population growth, according to Marx, is therefore not related to the alleged ignorance or moral inferiority of the poor, but is a consequence of the capitalist economic system.  Marx points out that landlordism, unfavorable and high man-land ratio, uncertainty regarding land tenure system and the like are responsible for low food production in a country.  Only in places where the production of food is not adequate does population growth become a problem.

Malthusian Theory of Population

Thomas Robert Malthus was the first economist to propose a systematic theory of population.  He articulated his views regarding population in his famous book, Essay on the Principle of Population (1798), for which he collected empirical data to support his thesis. Malthus had the second edition of his book published in 1803, in which he modified some of his views from the first edition, but essentially his original thesis did not change.

In Essay on the Principle of Population,Malthus proposes the principle that human populations grow exponentially (i.e., doubling with each cycle) while food production grows at an arithmetic rate (i.e. by the repeated addition of a uniform increment in each uniform interval of time). Thus, while food output was likely to increase in a series of twenty-five year intervals in the arithmetic progression 1, 2, 3, 4, 5, 6, 7, 8, 9, and so on, population was capable of increasing in the geometric progression 1, 2, 4, 8, 16, 32, 64, 128, 256, and so forth.  This scenario of arithmetic food growth with simultaneous geometric human population growth predicted a future when humans would have no resources to survive on.  To avoid such a catastrophe, Malthus urged controls on population growth. 

On the basis of a hypothetical world population of one billion in the early nineteenth century and an adequate means of subsistence at that time, Malthus suggested that there was a potential for a population increase to 256 billion within 200 years but that the means of subsistence were only capable of being increased enough for nine billion to be fed at the level prevailing at the beginning of the period. He therefore considered that the population increase should be kept down to the level at which it could be supported by the operation of various checks on population growth, which he categorized as "preventive" and "positive" checks.

The chief preventive check envisaged by Malthus was that of "moral restraint", which was seen as a deliberate decision by men to refrain "from pursuing the dictate of nature in an early attachment to one woman", i.e. to marry later in life than had been usual and only at a stage when fully capable of supporting a family. This, it was anticipated, would give rise to smaller families and probably to fewer families, but Malthus was strongly opposed to birth control within marriage and did not suggest that parents should try to restrict the number of children born to them after their marriage. Malthus was clearly aware that problems might arise from the postponement of marriage to a later date, such as an increase in the number of illegitimate births, but considered that these problems were likely to be less serious than those caused by a continuation of rapid population increase.

He saw positive checks to population growth as being any causes that contributed to the shortening of human lifespans. He included in this category poor living and working conditions which might give rise to low resistance to disease, as well as more obvious factors such as disease itself, war, and famine. Some of the conclusions that can be drawn from Malthus's ideas thus have obvious political connotations and this partly accounts for the interest in his writings and possibly also the misrepresentation of some of his ideas by authors such as Cobbett, the famous early English radical.  Some later writers modified his ideas, suggesting, for example, strong government action to ensure later marriages. Others did not accept the view that birth control should be forbidden after marriage, and one group in particular, called the Malthusian League, strongly argued the case for birth control, though this was contrary to the principles of conduct which Malthus himself advocated.

Trading Blocs and Regional Trade Agreements (RTAs)

Trading Blocs and Regional Trade Agreements (RTAs)

Over the years average tariffs and other import controls have declined, with progress especially marked in developing Asia and in Eastern Europe after the break-up of the Soviet Union. But the breakdown of theDoha trade talks has dashed hopes of a globally based multi-lateral reduction in import tariffs and other forms of protectionism. In its place there has been a flurry of bi-lateral trade deals between countries and the emergence of regional trading blocs.

Some of these deals are free-trade agreements that involve a reduction in current tariff and non-tariff import controls to liberalise trade in goods and services between countries. The most sophisticated RTAs include rules on flows of investment, co-ordination of competition policies, agreements on environmental policies and the free movement of labour.

Examples of Regional Trade Agreements (RTAs):

• The number of RTAs has risen from around 70 in 1990 to over 300 today
• The European Union (EU) – a customs union, a single market and now with a single currency
• The European Free Trade Area (EFTA)
• The North American Free Trade Agreement (NAFTA) – created in 1994
• Mercosur - a customs union between Brazil, Argentina, Uruguay, Paraguay and Venezuela
• Association of Southeast Asian Nations (ASEAN) Free Trade Area (AFTA)
• Common Market of Eastern and Southern Africa (COMESA)
• South Asian Free Trade Area (SAFTA) created in January 2006 and containing countries such as Indiaand Pakistan

In 2012 there were numerous new bi-lateral trade agreements between countries – here is a selection:

• US – Colombia
• Panama – Peru
• China – Costa Rica
• New Zealand – Malaysia
• Australia - Malaysia
• South Korea – United States
• European Union – South Korea
• European Union – Latin America
• European Union - Singapore

Each of these is a reciprocal trade agreement between two or more partners that the countries hope will stimulate cross-border trade and investment. One of the dangers of this bi-lateral approach rather than progress in reaching multi-lateral trade agreements through the World Trade Organisation is that a patchwork quilt of trade deals is emerging, including over-lapping agreements between clusters of countries.

Far from promoting mutual gains, RTAs might cause numerous distortions of markets. Keep in mind also that trade agreements can be expensive to monitor – eating into some of the economic welfare benefits.

Stage of Economic Integration	No Internal Trade Barriers	Common External Tariff	Factor and Asset Mobility	Common Currency	Common Economic Policy
Free Trade Area	X
Customs Union	X	X
Single Market	X	X	X
Monetary Union	X	X	X	X
Economic Union	X	X	X	X	X

Customs Union

The European Union is a customs union. A customs union comprises countries which agree to:

Abolish tariffs and quotas between member nations to encourage free movement of goods and services. Goods and services that originate in the EU circulate between Member States duty-free. However these products might be subject to excise duty and VAT.

Adopt a common external tariff (CET) on imports from non-members countries. Thus, in the case of the EU, the tariff imposed on, say, imports of Japanese TV sets will be the same in the UK as in any other EU country.

Preferential tariff rates apply to preferential or free trade agreements that the EU has entered into with third countries or groupings of third countries.

A customs union shares the revenue from the CET in a pre-determined way – in this case the revenue goes into the EU budget fund. The EU receives its revenues from customs duties from the common tariff, agricultural levies and countries paying 1% of their VAT base. Payments are also made through contributions made by member states based on their national incomes. Thus relatively poorer countries pay less into the EU and tend to be net recipients of EU finances.

A single market represents a deeper form of integration than a customs union. It involves the free movement of goods and services, capital and labour and the concept are broadened to encompass economic policy harmonization for example in the areas of health and safety legislation and monopoly & competition policy. Deeper economic and business ties requires some degree of political integration, which also requires shared aims and values between nations

Trade Creation and Trade Diversion with Customs Unions and Regional Trade Agreements

Trade Creation

Trade creation arising from trade deals between countries involves a shift in domestic consumer spendingfrom a higher cost domestic source to a lower cost partner source for example - within the EU - as a result of the abolition tariffs on intra-union trade

So for example UK households may switch their spending on car and home insurance away from a higher-priced UK supplier towards a French insurance company operating in the UK market

Similarly, Western European car manufacturers may be able to find and then benefit from a cheaper source of glass or rubber for tyres from other countries within the customs union than if they were reliant on domestic supply sources with trade restrictions in place.

Trade creation should stimulate an increase in trade between countries that have signed trade agreements and should, in theory, lead to an improvement in the efficient allocation of scarce resources and gains in consumer and producer welfare.

Trade Diversion

• Trade diversion is best described as a shift in domestic consumer spending from a lower cost world source to a higher cost partner source (e.g. from another country within the EU) as a result of the elimination of tariffs on imports from the partner
• The common external tariff on many goods and services coming into the EU makes imports more expensive. This can lead to higher costs for producers and higher prices for consumers if previously they had access to a lower cost / lower price supply from a non-EU country
• The diagram next illustrates the potential welfare consequences of imposing an import tariff on goods and services coming into the European Union.
• In general, protectionism in the forms of an import tariff results in a deadweight social loss of welfare. Only short term protectionist measures, like those to protect infant industries, can be defended robustly in terms of efficiency. The common external tariff will have resulted in some deadweight social loss if it has in total raised tariffs between EU countries and those outside the EU.

The overall effect of a customs union on the economic welfare of citizens in a country depends on whether the customs union creates effects that are mainly trade creating or trade diverting.