4.3.Changing+economic+activities

(Comparative study between sectoral shifts within one HIC and one LIC)
Thinking back to the last section – these are some of the things I hoped you noticed: 1. The primary sector – farming, forestry, fishing and mining - decreases as a country gets a higher GDP 2. The tertiary sector – shops, government sector, transport, entertainment – increases with the GDP 3. Something a bit odd happens with secondary sector - - it starts off low and then increases but then starts to get smaller again in the HICs. Our task in this section is to look at why this should happen.

LICs have a low income per person. This is mainly to do with the things that they sell have low value. These are mostly primary products – **raw materials** – which have not been processed. The richer countries and the traders have always paid as little as they can for raw materials. This means that these countries cannot afford the machines to do the work but depend on poorly paid labour to do most of it instead. This is why so such a large % of the population is involved in growing/collecting and harvesting these raw materials

However, once a country begins to develop, it will not sell raw materials for low values, but will begin to process them themselves and so become richer. As they become more industrialised, they will have more to invest in machinery, which means that few people are involved in the production of raw materials. It becomes increasingly pressing that more people are released from primary production as more and more people are needed in the secondary manufacturing industries. So as industrialisation increases, then the number of people employed in primary production decreases. This does not mean that the amount of primary production decreases, just the number people needed to carry it out. Also as a country becomes richer, an educated work force becomes more important, so there is more invested in education (tertiary). As fewer people are producing their own food, then services to provide food to the industrial workers also increases (secondary – food processing and tertiary – distribution network shops and transport). Industries are most economical in urban areas so you need roads, water, police (all tertiary). So the general trend is that as a country becomes more industrialised, the greater the tertiary activity is. When a country becomes richer still, then services likes banks, insurance, widespread healthcare and many others employ more and more people.

But what about that trough-peak- trough pattern of secondary economic activity? As we saw there is little large-scale secondary activity in LICs because they do not have the money to invest nor the skilled worked force to operate and maintain the machinery. But as they begin to develop, then more processing of primary products takes place there. Once an industrial base exists, with lower costs that in HICs, the ** T **rans** N **ational ** C **orporations (** TNC **s) see this as a new market but also a good place to put new factories. The governments of these countries are all in favour of bringing in more industry and so do their best to make the environment positive for any TNCs wising to come.

For example, Malaysia – take a look at their exports (case study 1) These exports are an indication of the % of people working in each industry (it gives you the idea but is only about exports and gives you an idea of change not actual figures – see pie chart for 2005 below for actual figures) Primary 1970: 43 + 5+ 25 = 73+% (other will be some primary as well) 2000: 7 + 3 =10 + other Secondary 1970: 15% + some 2000: 61 + 4 + 3 = 68% + some **Why did they do it?** There was one ethnic group, the native Malays, were very poor and this was causing civil unrest and they could see that in order to make more money for everyone, industrialisation was the way forward. What did they do? In 1970 it introduced its New Economic Policy (NEP). They decided to: provided financial incentives for foreign transnational companies (TNCs) to invest in Malaysia.
 * train their workforce in the necessary skills.
 * used money from traditional exports to help fund this development.
 * They attracted inward investment with the inducement of low taxes and cheap land
 * They invested heavily in getting an educated workforce.
 * The government has also built an infrastructure of roads, railways, airports and ports, which benefit the population but also encourage the TNCs to invest
 * They kept the wages low
 * The strict labour laws minimised disruptions and union membership was not encouraged
 * The working day was long.

**How did they attract the population to accept these conditions?**

 * The government achieved good social welfare results
 * The reductions in child and maternal mortality have been exceptional and rates are now similar to those of many developed countries.
 * These improvements are attributable to a well developed primary health care system, including substantial investments in the reproductive health service, and to access to quality water, sanitation and nutrition.
 * The Malaysian government subsidies for petrol, food and other essential goods allows the people to have sufficient, even if their income is low.
 * Over time, they built up their own design facilities – Proton Cars and microelectronics component industries.

But what about the blip? Remember UK historically from B4.2 (HIC case study)
Lets look at the patterns: in 1800 there was little in the way of service industries or manufacturing – back then most manufactured goods were made in small workshops by a few craftsmen. However, most primary production, farming in the main, was done by hand or simple technology. But as the industrial revolution took hold, more people were needed to work in factories and so fewer were employed in agriculture. This was facilitated by increased mechanisation – the steam engine being an important element

Even with mechanisation, factories employed a lot of people in the early days. However, even as more mass production, of items like cars and washing machines, meant more factories, the increase in labour began to tail off, as the automation took over from mechanisation. Add to this, as we have seen in Malaysia, in more countries becoming industrialised, then new factories tended to concentrate in those places where bigger profits could be made, due to lower wages and lower taxes. So as old factories became out dated in the HICs, new ones that replaced them were built in the developing countries, such as Malaysia. So the number of people employed in secondary industry in HICs began to decline for both the above reasons. In the meanwhile, TNCs kept up their administrative and development arms in HICs, increasing the number of workers in tertiary and even quaternary occupations. In addition, finance and tourism and all the other service industries grew apace in HICs and their levels of healthcare, education and government services all grew too. So looking at the line graph of the UK economic development, you can see where various other countries have got along the path to development.

Comparison between Malaysia and the UK:
The number of people working in primary industry the UK, that is farming, fishing, mining and forestry, at 1.4% in 2006, is unlikely to go any lower however, the number in Malaysia 13% and will probably continue to fall. The secondary industry peaked in the UK in 1900s before tailing off and in the meanwhile in Malaysia, those in secondary production is still increasing and already higher than that in the UK. Both countries have increasing numbers involved in tertiary and quaternary production (although the figures for quaternary are not high enough to figure on the graphs just yet).