Transcript Economic Systems

Economic Systems
Traditional, Market and
Command Economies
Mixed Economy
Pure market economy = no government
control
Pure command economy = total
government control
All Middle Eastern countries have MIXED
economies with different levels of
government control.
Israel
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Mixed economy - the government and private
companies own and control the economy.
Technologically more advanced than other
Middle Eastern countries.
Does not have many natural resources.
Imports - grain, oil, raw materials, and military
equipment.
Exports - cut diamonds, high-technology
equipment, and agricultural products (fruits and
vegetables)
Focuses on service industry activities –
insurance, banking, retail, tourism
Uses the Shekel as its currency
Relies heavily on US economic and military aid
Oil is not an important part of the economy.
Saudi Arabia
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Mixed economy with much government control.
Oil accounts for more than 90% of export
earnings.
Oil revenues pay for education, defense,
transportation, health and housing.
The government created the Saudi Basic
Industries Corporation to develop other
industries, including power generation,
telecommunications, natural gas exploration, and
petrochemicals, to reduce its dependence on oil
and increase employment opportunities.
Uses the Riyal as its currency
Turkey
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Mixed economy with much government
control
A large part of the economy is based on
farming (1/3 of the workforce is in
farming)
has a major textile/clothing industry –
(1/3 of the workforce is in textiles)
like Israel, focuses on service industry
activities
Private businesses are increasing and
there are many entrepreneurs in Turkey.
Turkey used the Lira as its currency.
Literacy Rates and the Standard of Living
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Higher literacy = higher standard of living
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Literate people are wealthier, have better jobs,
and are easier to train for new jobs.
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Countries with a higher literacy rate can
compete with other countries for international
business.
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Except for Israel, many nations have literacy
rates in the 70% range.
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Literacy rates are typically lower amongst
women as compared to men.
TRADE IN SW ASIA
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The Middle East’s main export is oil.
65% of the world’s oil supply comes
from the Middle East.
SW Asia imports much of its food
and other agricultural products.
Trade Barriers
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Definition: anything that makes trade
more difficult
Physical barriers that cause
transportation problems:
• Deserts
• Lack of Rivers
• Mountains
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Political barriers
• OPEC oil crisis 1973
• Foreign governments ban trade because of
human rights issues or terrorism.
OTHER TRADE BARRIERS
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Tariffs – tax on imports
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Quotas – limit on imports
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Embargos – limit on trade with
another country
Specialization
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Definition: production of a limited range of
goods; increases interdependence
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Natural resources are not evenly spread
throughout the world - some areas have
more than others.
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Much of the Middle East specializes in oil,
and this means it has to trade with other
countries to get the goods the people
need.
INTERDEPENDENCE
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Definition: relying on other countries to
provide some needs and services
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Example: The U.S. relies on the
Middle East for its oil.
Challenges to economic growth
include…
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War – especially in Iraq, Afghanistan
and Israel
Immigration
Limited natural resources
Ways that economic development
has been supported include…
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Government investments in building, etc.
– investment in capital
Increased levels of education – investment
in human capital
“Broadening” of economies (focusing on
more than just oil)
Private Investment / Entrepreneurs
Why does international trade
require a system for exchanging
currencies?
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Countries import and export goods.
Countries use different currencies.
To calculate how much imports cost
To calculate the profit on exports
Countries trade with other countries.
Exchange rates – how much one currency
is worth against another currency