ECONOMIC STRUCTURE

Economic Geography is the study of how people earn their living, how livelihood systems vary by area and
how economic activities are spatially interrelated and linked. Economic activity can be: primary, secondary,
tertiary, quaternary, and quinary. Each type of economic activity is determined by a number of factors:

(1) The Physical Environment: The physical environment supplies the local resources available for use. Many
production activities are rooted in the limits set by the physical environment. For example logging is only
possible in a forested region. The unequal distribution of minerals makes mining only possible in areas
where specific minerals occur.

(2) Cultural Considerations: Economic activity or production of specific goods is sometimes dictated by
cultural considerations. For example, culturally based food preferences, rather than environmental
limitations may dictate the choice of a crop or a livestock farm. Maize is a preferred grain in Africa, Rice in
Asia, and Wheat for North Americans. Pigs are not reared in Muslim countries.

(3) Technological Development/ Advancement: This has implications for the production process as well as the
level of efficiency of the industries in the country. The technological advancement of a group of people
affects their ability to recognize resources and exploit them. Highly advanced technologies make possible
farming in dry areas such as deserts.

(4) Political Decisions: Decisions made by a country's rulers, congressmen, and leaders may cause some
economic activities to be located in certain areas. The government can influence such locations through
subsidies, taxes and protective tariffs.

(5) Economic Factors: The demand for certain goods may attract capital and entrepreneurship and stimulate
production for the goods in specific regions.

Figure 1: Economic Sectors

CHARACTERISTICS OF PRIMARY ECONOMIC ACTIVITIES

The primary sector of the economy is the sector of an economy making direct use of natural resources. These
economic activities are directly tied to the extraction of resources from the earth. Such economic activities
occur at the beginning of the production cycle where people live in close contact with the resources of the land.
Such primary economic activities produce basic food stuff and raw materials for industry.

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Examples of primary economic activities include:
Agriculture
Commercial fishing
Farming - growing crops (arable farming) or animal husbandry (pastoral farming)
Quarrying - extracting sand or gravel
Mining of minerals, oil and gas extraction, and production
Harvesting materials that grow in the wild, such as peat moss
Forestry and logging
Irrigation
Fish farming or aquaculture

About 3% of the U.S. labor force is engaged in primary sector activity today, while more than two-thirds of the
labor force were primary sector workers in the mid-nineteenth century. Primary industry is a larger sector in
developing countries; for instance, animal husbandry is more common in Africa than in Japan. Canada is
unusual among developed countries in the importance of its primary sector, with the logging and petroleum
industries being two of Canada's most important. However, in recent years, Canadians have relied more on the
quaternary industry.

In general, the proportion of workers engaged in primary activities is declining in both developed and
developing countries. Heavy dependence on primary economic activities is equated with a poorly developed
economy, with limited linkages. The money earned from the production and export of primary products such as
bananas and bauxite in the Caribbean is less than what could be earned if these products were further processed.
In addition, jobs are created by the establishment of processing industries in the secondary sector. Primary
economic activities are dependent on the location of the resources to be exploited such as mineral ores for
mining, or fertile soils for agriculture.

CHARACTERISTICS OF SECONDARY ECONOMIC ACTIVITIES

The secondary sector of the economy manufactures finished goods. All of manufacturing, processing, and
construction lies within the secondary sector. These economic activities add value to the raw materials by
changing their form, or combining them into a useful and hence more valuable commodity. Activities associated
with the secondary sector include:
Milk production from pastoral farming
Steel making from a combination of minerals
Metal working and smelting
Automobile production
Textile production from cotton farming
Chemical and engineering industries
Aerospace manufacturing
Energy utilities
Engineering
Breweries and bottlers
Baking
Construction
Shipbuilding
Furniture production from logging
A great deal of energy is required for secondary economic activity to feed factories, mills and plants. This sector
consumes a lot of fuel resources and produces much waste. Consequently, secondary economic activity draws
considerable attention from environmental regulators who seek to govern and improve its practices.

Goods produced in this sector are important for the domestic economies of countries and also to generate
revenue through international commerce via export.

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 Primary Secondary Secondary
Economic Economic Activity Economic Activity 2
Activity 1:
Production of
Components

Rubber Production of rubber

Tapping tyres, bumpers

Mining of Ore Smelting and AUTOMOBILE

production of metal PRODUCTION

Creation of thread and

Growing of crop, for
fabric
example, cotton

Figure 2: Links between Primary and Secondary Economic Activity

CHARACTERISTICS OF TERTIARY ECONOMIC ACTIVITIES

The tertiary sector of the economy is the service industry. This sector provides services to the general
population and to businesses. They include professionals such as teachers and professors, lawyers, medical
officers, clerical and personnel services. Others include professions such as postal services and music. Activities
associated with this sector include:
Retail and wholesale sales
Transportation and distribution
Entertainment (movies, television, radio, music, theater, etc.)
Restaurants
Clerical services
Media
Tourism
Insurance
Banking
Healthcare
Law/ Legal services
Social services

In both developed and developing countries, this is one of the largest sectors. A growing number of workers are
employed in this sector. Because of its nature, this sector is heavily dependent on its proximity to a market, and
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is not restricted by a lack of physical resources. Many small Caribbean states offer a range of services in
tourism, and tertiary activities may be more economically important than primary activities.

CHARACTERISTICS OF QUATERNARY ECONOMIC ACTIVITIES

The quaternary sector of the economy consists of intellectual activities. These are economic activities composed
entirely of services rendered by white-collar professionals working on management and information processing
and disseminating. They are footloose industries (not limited by physical resources, and may be found
everywhere). The most important location factors are the availability of a good communications network and a
suitably skilled workforce. Firms engage in activities on a global scale because of advances in
telecommunications. The emergence of this sector reflects a highly specialized and developed economy.
Activities associated with this sector include:
Government agencies
Culture
Libraries
Scientific research
Education
Information technology

CHARACTERISTICS OF QUINARY ECONOMIC ACTIVITIES

Some consider there to be a branch of the quaternary sector called the quinary sector, which includes the highest
levels of decision making in a society or economy or high level scientific research. This sector would include
the top executives or officials in such fields as government, science, universities, non-profit organizations,
healthcare, culture, and the media. Quinary activities involve the creation, rearrangement, and interpretation of
new and old ideas and information, as well as innovation of methods in data interpretation.

Secondary Tertiary Quaternary Quinary

Economic Economic Economic Economic
Activity Activity Activity Activity

Concept Car Development

Car Sales Development of Alternative
AUTOMOBILE $$ Fuels
PRODUCTION New
Design Redesign of
Fuel transportation
efficiency networks and
upgrade systems
Mechanic

Figure 3: Higher Order Economic Activities

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CHANGING RELATIVE IMPORTANCE OF THE TYPES OF ECONOMIC ACTIVITIES

Table 1: Importance of Economic Sectors, by Employment %

Human Development Index Rank Employment Employment in Employment Employment
Totals Agriculture in Industry in Services
(thousands) (% of total (% of total (% of total
1996 2005 employment) employment) employment)
1996 2005 1996 - 2005 1996 2005
High Human Development
4 Canada 16 170 3 22 75

12 United States 141 730 2 21 78

16 United Kingdom 28 166 1 22 76

31 Barbados 132 3 17 70

49 Bahamas 161 4 18 78

51 Cuba 4 642 21 19 59

57 Antigua and Barbuda 28 4 19 74

59 Trinidad and Tobago 525 7 28 64

Human Development Index Rank Employment Employment in Employment Employment

Totals Agriculture in Industry in Services
(thousands) (% of total (% of total (% of total
1996 - 2005 employment) employment) employment)
1996 2005 1996 - 2005 1996 2005
Medium Human Development
71 Dominica 26 24 18 54

72 Saint Lucia 59 11 18 53

80 Belize 78 28 17 55

82 Grenada 35 14 24 59

93 Saint Vincent and the Grenadines 35 15 20 56

97 Guyana 240 28 23 48

101 Jamaica 1 063 18 18 64

146 Haiti .. 51 11 39

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 Figure 4: Economic Sector Comparison in Three Countries

Table 1 and Figure 4 above show that more developed countries have a much higher percentage of workers in
the services sector than in the primary sector. This contrasts with the LDCs which have a higher percentage of
the workforce still involved in the primary sector. The type of economic activity reflects the level of
development in the country.

REASONS FOR THE CHANGES AND THE RELATIONSHIP TO ECONOMIC DEVELOPMENT

Changes in Less Developed Countries (LDCs)
Historically, primary economic activities such as agriculture and mining have played a large role in the
economy of most Caribbean countries. This was especially so in the light of the colonial administration of these
countries, which focused on the production of crops for export.

Countries such as Barbados and St. Kitts had strong primary sectors, centered on the production of sugar cane.
Their small size and lack of other physical resources ensured that agriculture held a strong position in the
economy of these islands. In the more rugged Windward Islands, the growing of bananas was the primary
activity. Jamaica, although possessing a greater range of physical resources, still heavily emphasized primary
activities such as agriculture and bauxite mining. Similarly, in Trinidad and Tobago, oil mining was dominant.

During the post-colonial period, many Caribbean nations sought to diversify their economies and reduce their
reliance on primary economic activity. Secondary industries were encouraged and given protection, especially
manufacturing. However, the primary sector is still very significant in countries such as Haiti, Guyana, and
Belize, while in countries like Barbados, Antigua, and Trinidad, its relative importance has declined.
In Trinidad, the potential of the oil industry has been developed to the point where the secondary sector is very
strongly linked to a primary resource (petroleum). There is, for example, an iron and steel plant. Elsewhere,
minerals such as bauxite, remain as products of the primary sector.

High oil prices in the 1970s brought hardships to non-oil producing countries in the Caribbean such as Jamaica.
Jamaica sought help from the International Monetary Fund (IMF) and a Structural Adjustment Programme
emphasized the removal of protection from industries and the liberalising of the economy. Local manufacturers
were faced with competition from imported goods and there was a decline in manufacturing activity. The
service industry tourism was given encouragement because of its potential to earn foreign exchange and its
ability to absorb low skilled labour. Employment in the tourist industry explains the high levels of employment
in the service sectors in Barbados and the Bahamas.

Two reasons for the changes in the relative importance of types of economic activity:
(1) Changing emphasis of economic development in a country governments may change their policies with
respect to the direction of development and growth in a country. Depending on the development path a
country follows, governments may emphasize one sector over another in the belief that development will
occur more rapidly because those sectors may earn more money from tourism versus agriculture, for
instance.
(2) Reduced availability or depletion of resources may force countries to engage in alternative economic
activities. Poor farming practices may deplete soil resources and reduce yields, forcing countries to try to
develop other sectors of the economy such as service industries.

Changes in More Developed Countries (MDCs)

In the developed world, changes in technology have resulted in a change from primary economic activities.
Starting with the Industrial Revolution, new processes have made primary activities more efficient, for example,
the intensification of agricultural practices, reducing the number of persons employed in this sector. A decline in
the numbers involved in the primary sector also reflects the gradual exhaustion of primary resources such as
coal, and the necessity to import foreign products. With the increase in new technology and improved
processing techniques, employment in manufacturing has also been declining. New and improved methods of
production have reduced the need for a large workforce, consolidated production, and caused the relocation and
closure of industries.

Globalisation has resulted in a major shift in the location and importance of manufacturing in the developed
world. Countries such as South Korea and Taiwan have seen extremely rapid growth in their secondary sectors,
while some industries have declined in the United States and the United Kingdom (especially older, heavier
industries such as shipbuilding, textiles, and chemicals). Markets are increasingly dominated by large
transnational firms, which are geared towards global production. Jobs have moved overseas, resulting in the
growth of the secondary and tertiary sectors of newly industrialised countries (NICs) such as India, Taiwan, and
South Korea and decline in MDCs. The adverse environmental effects of heavy industry activity have also
affected the current scale and location of secondary economic activities.

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Increases in income, the demand for luxury items, the increase in leisure, travel, and the increasing importance
of financial institutions and transactions, have all been responsible for the dominance of the service sector
today. The changes in the developed world have been referred to as deindustrialization. It marks a shift from the
production of goods to the provision of services. Changes in the industrial structure can be measured by changes
in the employment structure.

The economic development of a country is linked closely with the level of industrial activity practised.

Primary and tertiary economic activities are dominant in LDCs. Typically more than 50 per cent of the
workforce in LDCs is employed in agriculture. The least developed countries, such as Mali, are still in the early
stages of economic development.

Secondary, tertiary, and higher level economic activities are dominant in MDCs.

CASE STUDY UK

The pre-industrial phase the primary sector leads the economy and may employ more than two-thirds of
the working population. Agriculture (primary sector) is the most important activity.

The industrial phase the secondary and tertiary sectors increase in importance. The primary sector
declines.

The post-industrial phase As the tertiary sector becomes the most important sector, the secondary sector
declines and the primary sector employs a small percentage of the active population.

Figure 5: The Clark-Fisher Model

Manufacturing now contributes only around 12% of total output and employs over 6 million fewer people than
in 1964. One of the most prominent of todays industries, North Sea oil and gas, did not even exist 35 years ago,
and service activities now dominate the economy in terms of both output and employment. There are even
suggestions that the UK is becoming a postindustrial economy, i.e. one in which information-handling
activities are predominant.

Reasons for the decline in numbers employed in the primary sector in the UK

1 Depletion of Resources
Decline of mining industry because many raw materials have been used up
Reflected in the decrease of the workforce:
o 1913: > 1 million people employed in coal mines.
o Now: only 5,500 people employed in coal mines.

2 Cheap Imports
Cheaper to import raw materials from abroad because the raw materials left in the UK are difficult to
mine.
o E.g. iron ore from Norway and coal from Russia which used to be mined in South Wales.

3 Mechanisation
The need for agricultural workers was reduced since machinery has replaced many jobs formerly carried
out by men.

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4 Social Change
Major change in peoples attitude towards primary sector jobs often seen to be dirty and physically
demanding.
Fewer career prospects.
Better paid and less physically demanding jobs in the tertiary sector (more regular hours/ located in
urban areas)
5 Government Attitudes to the Value of Primary Industry
Vary from place to place and over time.
LDCs: whole of the countrys economy based on primary industry = high value of primary industry.
As countries develop over time, the value of primary industry decreases as more secondary industries
spring up.
In oil-producing countries such as Saudi Arabia, still high value of primary industry.
In many MDCs, primary industries such as farming are of value to feed their population but the main
sector of industry is tertiary.

Reasons for the decline in the secondary sector in the UK

1 Cheaper Production in Lower Income Countries and Middle Income Countries

Relocation of many manufacturing industries to MICs and LICs because of lower production costs and
cheap labour
o E.g. China
Lack of rules and regulations in the productive process.
Government grants to help the establishment of industry.
o E.g. Brazil

2 Globalisation
Globalisation is the growing economic interdependency of countries worldwide which has been brought about
by technological advancements. The world is becoming increasingly interconnected as a result of massively
increased trade. The biggest companies are no longer national firms but multinational corporations with branch
plants in many countries.

Reasons for Globalisation

Firms can keep in contact with producers easily and quickly using the internet.
Developments in transport technology: goods can be moved around the world quickly and easily.
Development of aircraft and containers, efficient motorway networks which cross Europe.

Named example: Marks and Spencer

Many products are made in Portugal where land and labour costs are less and then transported to the UK
by lorry using the European Motorway system.
Other manufacturing plants in Sri Lanka, Morocco, the Far East and Middle East.

3 Mechanisation
Increased use of machinery and advances in technology (robots) = large decrease in the number of people
employed. E.g. Car industry.

4 Government Policies
Withdrawal of government help to industries.
o For instance, in 1967: Formation of the British Steel Corporation, a nationalised company,
owned and run by the government to protect the production of steel in the country and to keep
employment high in the declining industry. Since British Steel was a main employer in depressed
regions, it had to keep many mills and facilities operating at a loss. Therefore, the company was
sold back in 1988. Under private control the company has dramatically cut its work force.

5 Government Attitudes to the Value of Secondary Industry

Vary from place to place and over time.
HICs: As much of the manufacturing is done abroad in MICs, the government of some countries, for
example the UK, has tried to keep some manufacturing in the country by offering development grants to
foreign manufacturers. E.g. late 1980s, Toyota were offered incentive to set up their plant in the UK.
Change of attitude: the UK government now concentrates on the development of tertiary industry.
Over the last twenty years: China has put a high value on the growth of secondary industry to help the
country to develop.

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The growth of the secondary sector in China.

China: GNI per capita: $5,680 in 2012/ population: 1.351 billion (2012)
A Reasons for Growth:

1- Physical Factors
(a) Raw materials: Great wealth of natural resources: coal, oil and natural gas.

(b) Location: Geographical position beneficial for its development: markets in South Korea, Taiwan and
India/ on major trade routes.

2 Human Factors
(a) Workforce
Plentiful supply of workers
Rural-urban migration: people moving from rural areas to find a job due to the modernisation of
agriculture.
High unemployment of 25%, therefore lowest salaries in the world

(b) Changes in Government Policy

Laws which used to stop people investing in China have been abolished.
Many companies from foreign countries have factories in China.

(c) Education
Increase of literacy levels over the past 20 years: 90%.
China has both large numbers of unskilled workers and a growing numbers of highly skilled workers.
o E.g. China trains 600 000 new engineers every year.

(d) Private Enterprise: In the past manufacturing was state-owned. Nowadays, 20% of firms are privately
owned.

(e) Energy: Development of hydroelectric and nuclear power stations.

(f) Infrastructure Improvement: building of many new roads and new factories.

(g) Globalisation
Companies in HICs have goods produced in LICs at a fraction of the price of the manufacturing process
in the HICs.
China has a large workforce which can be employed cheaply.
Easy transport around the world.

B Impacts of Growth (positive and negative)

Economic (positive)
Unprecedented growth: With a population of 1.3 billion, China recently became the second largest
economy and is increasingly playing an important and influential role in the global economy.
GDP growth averaging about 10 percent a year has lifted more than 500 million people out of poverty.

Social
Very little spending on social structure. E.g. spending on health lower than in the 1980s.
However, positive input in education: decrease of illiteracy.
Few laws to protect the workers, particularly the migrant workers (200 million).
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Under the Chinese hukou (residence permit) system, most migrants still maintain rural resident status even
those who may never have lived in or even visited the rural villages to which their hukous are tied. This hinders
migrants access to critical social services and benefits (like health care, education, and credit) in their de facto
home cities.

Environmental
16 of the worlds 20 most polluted cities are in China. This is because 75 per cent of Chinas energy is
still produced from coal.
In the whole country there are 760,000 recorded deaths a year from air and water pollution.
80 per cent of rivers are below the standard for fishing and 90 per cent of underground water in urban
areas is polluted.

Reasons for the dramatic growth of the tertiary sectors

1 A rise in the demand for services is linked to an increase of disposable incomes

Disposable income is the amount of money which an individual has available to spend on non-essential items
after essential bills have been met. The average disposable income doubled between 1987 and 2006. There has
been a rise in luxury services such as beauticians and health clubs.

2 The development of new technologies and services

Computing and telecommunications sector
High demand for mobile phones
Development of the Internet and websites
Call centres which answer calls from numbers given on internet sites, or make unsolicited calls. There
are 5,675 call centres in the UK employing 1,125,000 people. That means 4 per cent of all workers are
now employed at call centres.

3 Decrease in employment in the primary and secondary sectors: More people employed in the tertiary.

4 Demographic changes
People in their late twenties: Late marriage and fewer children more disposable income and more free time
to spend on services such as entertainment, socialisation and beautification services.

Ageing population (more people living longer): Increasing number of wealthy retired people with money and
time to spend on leisure and tourism.

Deindustrialisation has been a mixed blessing. There have been costs and benefits.

Costs
1-Loss of jobs in rural areas.
2-Break-up of rural communities, as people move to towns and cities to find work.
3-Derelict industrial buildings and disused quarries scar the landscape.
4-Need to clean up old industrial sites-demolishing old buildings, filling in old pits and removing
toxic waste
Benefits
1-Less environmental pollution.
2-Old industrial buildings that can be made into tourist attractions.
3-The opportunity to remove ugly industrial buildings from the landscape.
4-The chance to return land to farming (reagriculturalisation) or forestry-or to create new wildlife
habitats.
5-The opportunity to use brownfield sites area which is no longer used for industry -for new
housing and services.

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.

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LICs have a low income per person. This is mainly because 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 such a large
percentage 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 like banks, insurance, widespread healthcare and many others
employ more and more people.

As we saw there is little large-scale secondary activity in LICs because they do not have the money to invest nor
the skilled work 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 TransNational Corporations (TNCs) 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 wishing to come.

For example, Malaysia take a look at their exports.

These exports are an indication of the percentage of people working in each industry.

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

In 1970 Malaysia introduced its New Economic Policy (NEP). The government decided to provide financial
incentives for foreign transnational companies (TNCs) to invest in Malaysia.

-They trained their workforce in the necessary skills.

-They 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.
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-The working day was long.

-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 allow 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.

The pie charts and graph above explain the history of economic activity in the UK. 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 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 below of the UK economic development, you can see where various other countries
have got along the path to development.

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Comparison between Malaysia and the UK
The number of people working in primary industry in 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 is 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,
secondary production is still increasing and already higher than that in the UK. Both countries have increasing
numbers involved in tertiary and quaternary production.

TYPES OF ECONOMIC SYSTEMS

An economic system refers to the means or structures in society within which decisions about what to produce,
how, and when to produce goods and services and allocate them are made and implemented. The four main
economic systems are:

(1) Traditional Systems

(2) Capitalist or Commercial Systems
(3) Socialist or Centrally Planned Systems
(4) Mixed Economic Systems

There are no pure economic systems in the world for none of the systems exist in isolation in an increasingly
interdependent world.

1) Traditional Economic Systems

An economic system under which people produce just enough to feed their households with very little goods or
services left for sale or exchange in the market. Production is geared towards subsistence and basic survival.
Market and money are of little importance for trade is mainly by a barter system (direct exchange of goods and
services. Several traditional systems are today replaced by market systems.

2) Capitalist or Market Systems

Under market capitalist systems, decisions about what to produce and how to allocate resources are influenced
by interactions of price, supply and demand for goods. Demand for a commodity tends to fall when the price
rises and rises when price drops. Conversely, supply for the commodity will increase when the price rises and
decrease when the price falls. The capitalist system encourages competition and allows for increased
production. There are therefore externalities or environmental side effects such as air and water pollution that
result from market operations.

3) Socialist or Centrally Planned Economic Systems

Under the centrally planned economies, decisions about what commodity to produce, how, and where to
produce and distribute the products are made by a central government rather than individuals in a market. Such
command systems exist in socialist countries such as the former Soviet Union, Cuba and China.

4) Mixed Economic Systems

Mixed economic systems combine elements of market and centrally planned economies. It is currently the most
common economic system for many countries. In the mixed systems, governments often intervene to modify
the market economy. For example, governments intervene to prevent monopolies and ensure free competition,
influence prices of agricultural products rather than leave them to be influenced by market forces. Government
may also offer incentives (tax relief, grants, exemptions or penalties) to encourage particular activities (e.g. tree
planting).

There are websites about Dominica that offer commentary on the banana dispute between the World Trade
Organization (WTO) and European Union (EU) from a Caribbean perspective.

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