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. 

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What is Equity Market

DEFINITION OF 'EQUITY MARKET'

The market in which shares are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.

INVESTOPEDIA EXPLAINS 'EQUITY MARKET'

This market can be split into two main sectors: the primary and secondary market. The primary market is where new issues are first offered. Any subsequent trading takes place in the secondary market.

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