GEOG 3762 Geography of Europe

1. GEOG 3762 Geography of Europe Week 4 - The European Economy Fall 2008 Dr. Olaf Kuhlke

2. Overview • The European economy at a glance • The primary sector • Origins of European agriculture • European agricultural traditions • The contemporary agricultural economy • The Common Agricultural Policy and its aftermath

3. Overview • The European economy at a glance • The secondary sector • Origins of European Industry • Industrial resources in Europe • The EU and industrial policies

4. Overview • The European economy at a glance • The tertiary sector • Origins of European monetary policy • European financial integration • The common market • The European Central Bank • The Euro • Impact of the introduction of the Euro on EU national economies

5. The European Economy at a glance How big is the EU economy and what does it look like? • Large market of 500+ million people • Larger total Gross Domestic Product than USA • Similar average purchasing power than USA • Most EU countries have lower per capita GDP than USA • Human Development Index: 15 of top 20 countries are European, 20 out of top 30 are European • US ranks 12th in HDI list • For the last 30 years, a European country has topped the annual HDI list for 15 years

6. The European Economy at a glance European GDP per capita in 2006

7. The European Economy at a glance European GDP (adjusted for purchasing power) per capita in 2006

8. The European Economy at a glance HDI in 2006

9. The European Economy at a glance How big is the EU economy and what does it look like? • Small, highly productive, and highly subsidized agricultural sector • Large, highly varied industrial sector that is also subsidized and protected by tariff barriers • Large, highly competitive tertiary sector driven by European integration

10. The European Economy at a glance

11. The European Economy at a glance

12. The European Economy at a glance

13. The European Economy at a glance 1 Wal-Mart Stores 378,799 12,731 2 Exxon Mobil 372,824 40,610 3 Royal Dutch Shell 355,782 31,331 4 BP 291,438 20,845 5 Toyota Motor 230,201 15,042 6 Chevron 210,783 18,688 7 ING Group 201,516 12,649 8 Total 187,280 18,042 9 General Motors 182,347 -38,732 10 ConocoPhillips 178,558 11,891 11 Daimler 177,167 5,446 12 General Electric 176,656 22,208 13 Ford Motor 172,468 -2,723 14 Fortis 164,877 5,467 15 AXA 162,762 7,755 16 Sinopec 159,260 4,166 17 Citigroup 159,229 3,617 18 Volkswagen 149,054 5,639 19 Dexia Group 147,648 3,467 20 HSBC Holdings 146,500 19,133 The twenty largest corporations in the world

14. The European Economy at a glance

15. European Agriculture What are the characteristics of European agriculture • Medium size production area • Medium size market • Highly productive and mechanized work force • Highly regulated production and market • Highly trained and paid workforce • Highly protective and subsidized market

22. European Agricultural Traditions Transhumance • Traditional agricultural practice • Highly productive • Grazing • Livestock migration from summer to winter pastures • Sheep and Cows

23. The contemporary agricultural economy • Agricultural Statistics • By Country • By Product • Discussion of Statistics • Discrepancies in holding size • Discrepancies in ag. contribution to GDP • “Old 15” versus “New 10” • Discrepancies in import/export patterns

27. The Creation of European Agricultural Policy Why does the EU need a common agricultural policy? • Post-WW II: Fear of Shortages • Integration of national policies • Creation of a “fair, transparent and competitive market” • Protection of European agricultural goods from outside competition

28. The Creation of European Agricultural Policy What issues does this policy encompass? • Economic and ecological sustainability • Food quality and safety • Animal welfare • Control mechanisms

29. The Creation of European Agricultural Policy Elements of CAP • Economic and ecological sustainability • Productivism • Price support • Intervention buying • Tariffs on imported goods

30. The Creation of European Agricultural Policy Elements of CAP • Problems • Price guarantees hike up market prices of goods • Guaranteed prices for goods encouraged overproduction • Overproduction requires storage and disposal • Tax money is used to support the sale and disposal of goods!! • Tax money is used to artificially manipulate world markets and to establish import barriers

31. The Creation of European Agricultural Policy New Elements of CAP (2003+ newer) • Post-productivism • Single volume-independent, size-dependent farm subsidy • Subsidies are tied to environmental, food, and safety standards • Quotas • Gradually reduced intervention prices • Diversification grants • Land diversion • Pluriactivity • Strong support of new member states

32. The Creation of European Agricultural Policy New Elements of CAP (2003+ newer) • Problems • Subsidies are not cut, but just shifted in focus • Non-productivity is rewarded • Large farms will receive the largest benefits for not using their land • Small farmers will receive less for products, and will be moving further towards poverty • Countries contribute to agricultural subsidies according to their overall economic status, but receive according to the development of their agricultural sector.

33. European Industry Why study European Industry? • Regional differences in industrialization • Historical conflict over key industries • Recent market integration and its effects on member states • Recent transition of parts of the EU (and potential future members) to a market economy

34. Geography of European Industry How and where did European Industry begin? • Industrial revolution • 1750’s United Kingdom • 1769 steam engine • James Watt • Late 1800’s diffusion • Industrial restructuring

35. Geography of European Industry How is European Industry distributed today? • Regional patterns show • Clustering in “traditional” sites near resources • Weber’s model of industrial location • Clustering of resources • Strong inequities in resource and industry distribution • Newly emerging production sites in “non-traditional” sites • Flexible accumulation • Just-in-time production

40. European Industrial Policy What does the EU do about these geographic patterns of production? • General Policies • General measures for the internal market • External commercial policy • Bilateral and multilateral trade agreements with implications for individual industrial sectors • Social and regional policy • Competition policy • legal instruments for intervention in market mechanisms • monitoring state aid • Research and development policy • The strengthening of cooperation among European enterprises

41. European Industrial Policy What does the EU do about these geographic patterns of production? • Regional policies • Structural and Cohesion Funds • Cohesion Funds

42. European Integration Policies • Reality Check: European Integration • European goals for trade (and) integration • European tools for trade (and) integration • Industry-specific tools • CAP • Industrial policy • EMU and EURO • Regional tools • Structural Funds • Cohesion Funds • Project examples

43. Reality Check Reality of Integration • Often dramatic differences in economic indicators • Significant divide in economic development between and within EU nation states • Particularly visible differences in economic development between EU 15 and new Eastern European member states

44. Reality Check Reality of Integration • Prior to the EU, a system of national markets, networks and supply chains existed • The EU integrated these markets significantly • Core/Periphery relations still exist in European markets

45. Economic Development Stats

46. Economic Development Stats

47. Economic Development Stats

48. Economic Development Stats

49. Economic Development Stats

50. Economic Development Stats