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 Mixed economy - the government and private companies own and control the economy. Mixed economy - the government and private companies own and control the economy. Technologically more advanced than other Middle Eastern countries. Technologically more advanced than other Middle Eastern countries. Does not have many natural resources. Does not have many natural resources. Imports - grain, oil, raw materials, and military equipment. Imports - grain, oil, raw materials, and military equipment. Exports - cut diamonds, high-technology equipment, and agricultural products (fruits and vegetables) Exports - cut diamonds, high-technology equipment, and agricultural products (fruits and vegetables) Focuses on service industry activities – insurance, banking, retail, tourism Focuses on service industry activities – insurance, banking, retail, tourism Uses the Shekel as its currency Uses the Shekel as its currency Relies heavily on US economic and military aid Relies heavily on US economic and military aid Oil is not an important part of the economy. Oil is not an important part of the economy.

Saudi Arabia Mixed economy with much government control. Mixed economy with much government control. Oil accounts for more than 90% of export earnings. Oil accounts for more than 90% of export earnings. Oil revenues pay for education, defense, transportation, health and housing. 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. 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 Uses the Riyal as its currency

Turkey Mixed economy with much government control Mixed economy with much government control A large part of the economy is based on farming (1/3 of the workforce is in farming) 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) has a major textile/clothing industry – (1/3 of the workforce is in textiles) like Israel, focuses on service industry activities like Israel, focuses on service industry activities Private businesses are increasing and there are many entrepreneurs in Turkey. Private businesses are increasing and there are many entrepreneurs in Turkey. Turkey used the Lira as its currency. Turkey used the Lira as its currency.

Literacy Rates and the Standard of Living Higher literacy = higher standard of living Higher literacy = higher standard of living Literate people are wealthier, have better jobs, and are easier to train for new jobs. Literate people are wealthier, have better jobs, and are easier to train for new jobs. Countries with a higher literacy rate can compete with other countries for international business. Countries with a higher literacy rate can compete with other countries for international business. Except for Israel, many nations have literacy rates in the 70% range. Except for Israel, many nations have literacy rates in the 70% range. Literacy rates are typically lower amongst women as compared to men. Literacy rates are typically lower amongst women as compared to men.

TRADE IN SW ASIA The Middle East’s main export is oil. The Middle East’s main export is oil. 65% of the world’s oil supply comes from the Middle East. 65% of the world’s oil supply comes from the Middle East. SW Asia imports much of its food and other agricultural products. SW Asia imports much of its food and other agricultural products.

Trade Barriers Definition: anything that makes trade more difficult Definition: anything that makes trade more difficult Physical barriers that cause transportation problems: Physical barriers that cause transportation problems: DesertsDeserts Lack of RiversLack of Rivers MountainsMountains Political barriers Political barriers OPEC oil crisis 1973OPEC oil crisis 1973 Foreign governments ban trade because of human rights issues or terrorism.Foreign governments ban trade because of human rights issues or terrorism.

OTHER TRADE BARRIERS Tariffs – tax on imports Tariffs – tax on imports Quotas – limit on imports Quotas – limit on imports Embargos – limit on trade with another country Embargos – limit on trade with another country

Specialization Definition: production of a limited range of goods; increases interdependence Definition: production of a limited range of goods; increases interdependence Natural resources are not evenly spread throughout the world - some areas have more than others. Natural resources are not evenly spread throughout the world - some areas have more than others. 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. 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 Definition: relying on other countries to provide some needs and services Definition: relying on other countries to provide some needs and services Example: The U.S. relies on the Middle East for its oil. Example: The U.S. relies on the Middle East for its oil.

Challenges to economic growth include… War – especially in Iraq, Afghanistan and Israel War – especially in Iraq, Afghanistan and Israel Immigration Immigration Limited natural resources Limited natural resources

Ways that economic development has been supported include… Government investments in building, etc. – investment in capital Government investments in building, etc. – investment in capital Increased levels of education – investment in human capital Increased levels of education – investment in human capital “Broadening” of economies (focusing on more than just oil) “Broadening” of economies (focusing on more than just oil) Private Investment / Entrepreneurs Private Investment / Entrepreneurs

Why does international trade require a system for exchanging currencies? Countries import and export goods. Countries import and export goods. Countries use different currencies. Countries use different currencies. To calculate how much imports cost To calculate how much imports cost To calculate the profit on exports To calculate the profit on exports Countries trade with other countries. Countries trade with other countries. Exchange rates – how much one currency is worth against another currency Exchange rates – how much one currency is worth against another currency