Economic history its trends and future

1.Economic institution is also one of the
most basic institutions.
2.Even the primitive societies have them
but of very old and simple nature.
3.Technology and industry have a role in
developing
the economic system in modern societies

•Definitions:
•Definition Of Economy By
John J.Macionis:
•“Economy is the social
institution that organizes
a society’s production,
distribution, and
consumption of goods and
services”.

•“It is a social
institution that
accomplishes the goal
of producing and
distributing goods and
services with in society
called economic
institution.” (Calholm,
Light & Keller)

“Economic system is a complex of
inter-related institutions through which the
economic activity of man is expressed.
Economic activity is the production and
distribution of goods and services.”
(P. Gisbert)

•International Trade:
Economic Institutions
promote International
Trade and improve
relations between
countries.

•Promote Stability:
By promoting stability, we
can reduce vulnerability to
crisis, encourage sustained
growth, high living
standards, reducing
poverty, adverse healthcare,
lack of food,
unemployment, and
insecurity.

•Need Satisfaction
It is a major
function of
Economic Inst –
provides people
with basic needs,
food, healthcare,
livelihood,
transportation,
entertainment.

•Income Generation
& Employment:
By providing
employment, people
have a source of
income generation.
This promotes
stability and
consequently
progress in society.

•Division of Labor:
Labor is divided on
basis of skills and
abilities of people. This
allows them to become
expert in their field, and
increases efficiency.
This principle is now
being applied in Rural
areas as well.

•Encourage
Business:
By giving loans, and
creating business
laws, investors can be
attracted to set up
new businesses
around the world.

•Reduce Issues:
Economic Institutions
help plan for future
needs, and make
arrangements to reduce
poverty, illness, hunger,
and illiteracy.

•Promote Trade
Economic Inst.
Promote trade,
facilitate transactions
and permit economic
cooperation resulting
in the creation of new
jobs and overall
improvement in
economy &
infrastructure

•Promote Investment:
In a secure environment,
investors start new
projects.
•Innovation and
Invention:
Economic Inst. Promote
technological innovation,
research and
innovations.

•Social Stratification
Economic Inst.
Distribute the
resources which allows
society to be divided
into various classes,
such as higher class,
middle class and lower
class with clearly
established
boundaries between
them.

•Primitive Societies:
•- Earliest Record of Economic Systems
• Examples: Cro-Magnon people, Eskimo.
• Lived on hunting and gathering
• Concept of shared property
• Gathered and Stored food (Rich People)
•There is considerable difficulty of describing any
part of ancient activities as constituting an
“economy.” (Elizabeth Marshall)

•Agricultural Revolution:
•- About 5000 years ago, it began
• People settled in communities, began to grow food
and domesticate animals.
• Surplus of food meant people could find other
work.
-Agricultural revolution is known for:
• Agricultural technology (tools, etc.)
• Permanent Settlement
• Trade started between communities.

•Industrial Revolution:
• Mid 18th century, England and North America
• Major changes in agriculture, manufacturing,
mining, transportation
• Focus on Experimentation and Invention
• New sources of energy: Manual labor replaced
by Steam Engine
• Steam Engine Used in Factories

James Watt – 1765,
Steam Engine

1778 – Iron bridge (Abraham Darby)

•Mass production of goods (lot of raw material,
finished product from one factory)
•Division of labor and specialization of work
•Concept of laborers: less important than the
machines
•Child Labor
•Exploitation
•Polluted environment, safety hazard
•Women worked hard for low wages

Major Inventions
1760 – Spinning Jenny
(James Hargreaves)
1793 – Cotton Gin (Eli
Whitney)

Major Inventions
Robert Fulton, Steam Ship 1807
1879 – Light bulb (Thomas Edison)
1876 – Telephone (Alexander Bell)
1892 – Diesel Engine (Rudolf Diesel)
Source: Encyclopedia Britannica (Online)

•Post Industrial Societies
•- System introduced in 1950
• Focus on specific jobs, not labor, and high use of
technology
• Computer has resulted in ‘Information Age’
• Workforce has changed from laborers to
machine operators, technicians, clerks.
• Highly qualified people employed as managers
and supervisors
• Shift from mechanical skills to mental,
analytical and literary skills.

•Economic Systems can be divided into:
•Capitalism
•Socialism

•In capitalist economies, there is a high
ownership of wealth producing property, like
factories, land, etc.
•People can take any measures to extract
maximum profit, including price fixing, price
mafia, shortage, etc. Govt regulation of
business causes negative effects including
strange regulations, political pressure, etc.

•Pure Capitalism
proposes ‘free market’
system without any
government rules. Adam
Smith said: “A free
economy governs itself
by invisible hand, it is the
consumers who regulate
the economy and market
by defining their
demand.”

•Capitalism is defined as “A type of
economy based on private ownership of most
resources and goods and the freedom to use
them to get the most profit”.
•Features
•Private Ownership of goods, resources,
property, etc.
•Freedom to obtain maximum profit

•System of open markets (anyone can
enter)
•Competitive market system
•Govt established rules of business and
trade*
•Govt institutions include military, and
some education, and infrastructure
development facilities

•Is USA Capitalist?
•Yes:
•Private ownership of business
•Free and open market
•Freedom to obtain maximum profit

•No:
•Govt regulation of business
•Minimum Wage level
•Worker health insurance and
• safety
•Labour rights

•Socialism is defined as “An economy that is
based on government ownership, rather than
individual ownership, worker controlled
government and equal distribution of goods
and services”

•Features
•Public/Govt Ownership of
resources, property, etc.
•Govt controls all manufacturing
(mean of production)
•Markets have restricted access (
ban on imports )
• Govt controls all establishments,
include military, education,
healthcare, etc.

•Private ownership rights are limited, there is
collective ownership.
•People must pursue collective goals not
personal goals (E.g feed the country, not buy
mobile phone)
•Economy and trade are completely under the
government.
•Due to limited choice, there is little or no
advertising.

•Functions of Economy & Economic Systems
Karl Marx:
Conflict Perspective
1- Economic Inst. are the base of all other
institutions in society.
2- Serves interest of only to the owning class
3- Business Cycles: Caused by Capitalist greed.
4- At peak, the worker’s are faced with alienation,
exploitation.

6- Concept of Alienation
7- Purchase of cheap labor caused alienation
8- Society is governed by class struggle (rich /
poor)
9- Eventually the poor will bring about
revolution
10- Economic inst. Form the basis of society’s
super structure

Functionalist Perspective
1- Economic Inst. are an important component
of society.
2- Goods & Services for the survival of society.
3- Business Cycles: Part of economy
4- At peak, workers are hired, more expansion
happens. Social Mobility.

6- Individual actors, work for benefit of society.
7- Certain needs must be met for survival
8- Institutions fulfill these needs
9- A stable ordered system is created
10- Each structure has a function to contribute to
the stability of the whole

Symbolic Interactionism
1- Economic Inst. shape and affect our behavior.
(Belonging or Alienation)
2- Important to determine sense of
belonging.
3- Business cycles shapes our perception of
these inst.
4- Intrinsic and Extrinsic values must be seen to
determine effect on workers
Intrinsic: Nature of Work
Extrinsic: Salary, Vacation, etc.

6- We attach meanings to symbols.
7- These meanings define our understanding.
8- Effective communication
9- Chance of misunderstanding
10- Anything that conveys meaning is considered
a symbol

Conflict
Perspective
5- A recession
causes people to
lose jobs, create
unrest.
6- Main
features
including govt.
are determined
by it.
Functionalism
perspective
5- Recession must be
stopped by
government, it will
cause unrest.
6- It is inter-related
and inter-dependent
with other
institutions.
Symbolic
Interaction
5- Workers work
harder and more
in a recession to
save their
company.

Aims of a Good Economic
System:
Economic growth
Socio-economic development
Maximum Possible employment
Prices Stability

•Land / Natural Resources
•Labour / Workforce
•Capital: manufactured stock of tools, machines,
factories, offices, roads and other resources used in
the production of goods and services.
•Market: occurs whenever buyers and sellers are in
contact with each other

•Oligopoly: market
structure where there is a
small number of firms in
the industry and where
each firm is interdependent
with other firms.

Monopoly: market
structure where one firm
supplies all output in the
industry without facing
competition because of
high barriers to entry to
the industry.

Sectors of Economy
Primary sector
Secondary sector
Tertiary sector

•Primary Sector: “The primary sector of the
economy extracts or harvests products from the earth.”
The primary sector includes the production of raw
material and basic foods. Activities associated with the
primary sector include agriculture, mining, forestry,
farming, grazing, hunting and gathering, fishing, etc.
The packaging and processing of the raw material
associated with this sector is also considered to be part
of this sector.
In developing countries, economy depends more on
Primary Sector – In Western countries, economy is less
dependent on primary sector.
Source: Macionis, J.J. Sociology (2010)

•Secondary Sector: “The secondary sector of
the economy manufactures finished goods.”
All of manufacturing, processing, and
construction lies within the secondary sector.
Activities associated with the secondary
sector include metal working and engineering,
car manufacture, textiles, chemical and
technological industries, energy sector and
construction.
•Examples: Pakistan Steel Mills, Toyota Indus
Motors, Nishat Mills, etc.

•Tertiary Sector: “The tertiary sector of the
economy is the service industry. This sector
provides services to the general population
and to businesses.” 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, and law.
•Examples: PTV, Geo, Jang, MCB Bank, etc.

•GDP:
•The total market value of all goods and
services produced within the political
boundaries of an economy during a given
period of time, usually one year.
•GNP:
• The total market value of all goods and
services produced by the citizens of an
economy during a given period of time,
usually one year and includes income from
abroad.
Source: World Economic Glossary 2011

•Human Development Index (HDI):
• compares countries on the basis of real
GDP, life expectancy, education (literacy
and school enrolment)
•Human Suffering Index (HSI):
• takes into account factors such as access
to clean water, adequate food, and
education.

•Goods: “means physical, tangible products
used to satisfy people's wants and needs.”
•Short Run: period of time when at least one
factor input cannot be varied.
•Long Run: period of time when all factor
inputs can be varied.

•Nominal: values unadjusted for the effects of
inflation / values at current prices
•Black Market: “An illegal market in which
the price of the goods sold is above a legally
set maximum price. A black market
invariable”.
•Budget: A statement of the financial
position of a business, or government--based
on estimates of anticipated revenues and
expenditures.

•Balanced budget :is if the
revenues and expenditures are
equal.
•Budget Deficit: A budget deficit
arises if expenditures exceed
•Budget Surplus: revenues and a
budget surplus exists if revenues
are greater than expenditures.

•Demand: “The ability to buy goods at a
range of prices, during a given time period.”
Demand is one half of the market exchange
process; the other is supply.
Demand is created by the wants and needs of
people.
•Supply: “The ability to sell a range of
quantities of a good at a range of prices,
during a given time period.”
Ownership and control of resources is the
ultimate source of supply.

•What things are included in the
‘Economy’?
•An economy may include several sectors
(also called industries), that evolved in
successive phases. The ancient economy was
mainly based on farming and gathering
(barter system).

•The industrial revolution introduced
mining, construction and
manufacturing industries as part of
economy.
•In the age of technology, we have
today Information Technology,
Financial Services, Manufacturing
Companies, Social Organizations,
Farming, Public and Private Sector
Businesses.

•Technology companies: PTCL, Ufone, Warid,
Etc.
and many others………..
•All these elements:
- Create jobs/livelihood
- Provide Services
- Increase or Generate revenue
- Open doors for trade & business

U Unemployment
The USA department of
labour regularly reports
data on the
unemployment rate the
percentage of these not
working but officialy
defined as looking for
work, currently almost
8.8million people are
officially unemployed
Source: US department (2006)

UNDEREMPLOYMENT
Underemployment
refers to an
employment
situation that is
sufficient in some
important way for
the worker,relative to
a standard..

Conglomerates:
A conglomerates is a
combination of two or
more corporations
engaged in entirely
different bussiness
that feel under one
corporative system..

Multinationals:
Companies or
corporations
that manages
production
and deliver
services in
more than one
country..

 As of 2006
there were
63,000
multinationa
ls with over
700,000
branches
scattered
across the
globe

•Post Industrial Societies (Information Age)
•- Computer changed way of storing, receiving and analysing
information
• Use of computers and robots for manual work
• Networking has created a ‘global village’
•Shift from physical skills to computer skills
• Work from home concept
• Internet allows communication, banking, entertainment, etc.
• Shift to renewable sources of energy
• More access to information through social media

•“The international network of
individuals, businesses,
governments, and multilateral
organizations which collectively
make production and
consumption decisions”
•GDP tells us about our
country's economy by telling us
the total money value of all
final goods and services in our
country.

•Globalization:
“A global movement to
increase the flow of goods,
services, people, real capital,
and money across national
borders in order to create a
more integrated and
interdependent world
economy.”

2011 Economies
Ranking Country
Approximate GDP-
Purchasing Power Parity
1 United States of America $14,624,180,000,000
2 China $10,084,370,000,000
3 Japan $4,308,630,000,000
4 India $4,001,100,000,000
5 Germany $2,932,040,000,000
6 Russia $2,218,760,000,000
7 Brazil $2,181,680,000,000
8 United Kingdom $2,181,070,000,000
9 France $2,146,280,000,000
10 Italy $1,771,140,000,000
Source: CIA World Factbook

TRADE IN GOODS AND SERVICES, % OF GDP IN 2004

Source: Forbes Magazine Online Edition
Top 25 Business Companies 2010

Top 25 Emerging Business Companies 2007

 Planning Commission Pakistan – GDP comparisons


Source: World Development Index
Growth Rates of Regional Countries 1961-2009

•G20 countries:
Argentina, Australia,
Brazil, Canada, China,
France, Germany, India,
Indonesia, Italy, Japan,
Mexico, Russia, Saudi
Arabia, South Africa,
Korea, Turkey, the
United Kingdom, the
United States and the
European Union.

Mass Media and Economy
 Mass media refers
collectively to all
media technologies
that are intented to
reach a large
audience via mass
communication

Collapse of
global economy
in 2012

Economy As Social
Institution In
Pakistan

•The economy of Pakistan is 27th largest in
the world (in absolute dollar terms).
•Pakistan has a semi-industrialized
economy including textiles, chemicals, food
processing, agriculture and other industries.
•Growth poles of Pakistan's economy are
situated along the Indus River and Karachi
and Punjab's urban centers.

•GDP growth, spurred by gains in the industrial
and service sectors, remained in the 6-8% range
in 2004-06 due to economic reforms in the year
2000 by the Musharraf government.
•In 2005, the World Bank named Pakistan the
top reformer in its region and in the top 10
reformers globally.
•Foreign exchange reserves are bolstered by
steady worker remittances, but a growing current
account deficit - driven by a widening trade gap
as import growth outstrips export expansion -
could reduce growth.

•Indus Valley Civilisation from 2800 BC to
1800 BC carried trade through the Indus River,
and its inhabitants were some of the most
resourceful traders.
•Pakistan's average economic growth rate
since independence has been higher than the
average growth rate of the world economy
during the same period. Average annual real
GDP growth rateswere 6.8% in the 1960s, 4.8%
in the 1970s, and 6.5% in the 1980s. Average
annual growth fell to 4.6% in the 1990s with
significantly lower growth in the second half of
that decade

•During the 1960s, Pakistan was seen as a model
of economic development around the world, and
there was much praise for its economic
progression. The capital Karachi was seen as an
economic role model around the world, and there
was much praise for the way its economy was
progressing. Many countries tried to copy
Pakistan's economic planning strategy and one of
them, South Korea, copied the city in its capital
Seoul.
•Later, economic mismanagement in general,
and improper economic policies as well as two wars
with India and the separation of Bangladesh
negatively affected economic growth.

Source: Planning Commission of Pakistan, 2010

Health….
World Health Org defines health as “a state of
complete mental, physical and social well-
being and not merely the absence of disease or
infirmity” .
It increases the welfare of people in five ways:
 Helps avoid mental stress and a general
dissatisfaction of an individual from his life.
Second illness leads to social exclusion which
ultimately leads to a deteriorating quality of
life.

Third it increases the productivity of a person as
a healthy person can work more means more
productivity and more income both at individual
and national level.
Fourth it enables a person to realize his full
potential and utilize his maximum creative
ability for innovation.
Fifth helps people to come out of the vicious
circle of poverty as low income causes ill health
or malnutrition which lowers the worker
productivity and low productivity means low
income and so this vicious process continues.

TRENDS IN GROWTH OF PUBLIC HEALTH INFRA
STRUCTURE
0
250
500
750
1000
1250
1500
1750
2000
2250
2500
2750
3000
3250
3500
3750
4000
4250
4500
4750
5000
5250
5500
5750
1947
1951
1955
1959
1963
1967
1971
1975
1979
1983
1987
19911,995.1,999.2,003.
YEARS
HOSPITALS
DISPENSARIES
BHUs SUB HEALTH
CENTRES
MATERNITY CHILD AND
HEALTH CENTRES
RURAL HEALTH CENTRES
TB CENTRES

Poverty
Although Pakistan has maintained a much
higher growth rate compared to the region`s
average annual growth rate, it has been
unable to eliminate poverty.
The reasons include improper economic
policies as well as
Neglect of rural areas, as well as areas such as
Balochistan on political pretenses
Improper system of Zakat and Kherat in the
country,

Inability to reduce and eliminate begging.
Begging becomes an easy profession for
people.
The basic pre-requisite is to introduce
structural changes in the economy which
requires vision, sincere effort, political will,
and good governance; some key
characteristics unfortunately not present in
our ruling elite be it the political elite or civil-
military top brass. The poverty in Pakistan
during Bhutto` s regime decreased because of
doing land reforms to some extent

Poverty Trends in Pakistan
0
10
20
30
40
50
60
19
63-
64
19
66-
67
19
69-
70
1979 19
84-
85
19
87-
88
19
90-
91
19
92-
93
19
96-
97
19
98-
99
20
00-
01
Years
Percentage
Total
Rural
Urban
Source :( Zaidi, S. Akbar, Issues in Pakistan economy, chapter 19)

Pakistan is still a low income country and it would
require at least next 14 years of 7 percent average
annual GDP growth to double its per-capita
income to around $ 2000.
Mail to Jawaid Bokhari,
Karachi on 10-3-200Dawn 7
PAKISTAN’S ECONOMIC FUTURE

 It is easy to make this normative statement but
more difficult question is how can this growth rate
be achieved on a sustained basis? Pakistan was one
of the few countries that grew by 6 percent
annually between 1960 and 1990. Growth
momentum can also dissipate if other existing or
emerging structural constraints and bottlenecks
are not resolved on time.

 It is possible to reach this goal of doubling
the per-capita income by 2020
 Reducing the poverty by half by 2015. But for
this some preconditions has to be made…….!
 What are these preconditions?

(A) favorable global economic
condition
(B) successful integration of Pakistan into
the global economy .
(C) Pursuit of sound, credible and
consistent economic policies
(D) strong institutional delivery
and governance framework
(E) investment in physical infrastructure

Economic history its trends and future

Economic history its trends and future

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