4.3.4 Specialization and the Alberta Economy

What are the origins of contemporary economic globalization?


If specialization works for individuals and companies, can it work for Alberta? If the people of each country specialize in producing various products, is it possible that everyone could become richer?

division of labour
the fact of workers taking on various tasks and roles (specialization) to increase efficiency and output to reduce costs
Division of labour and
specialization
the assumption by workers or involved individuals of various tasks and roles to increase efficiency and output as well as to reduce costs
specialization were topics of the previous section. Through
comparative advantage
the ability to produce a particular product at lower cost than another business or country

Comparative advantage means that no matter how good (or bad) the individual is at producing goods, he or she is always better at something than someone else is. Because the person can produce this one thing by giving up less than others give up, he or she can sell it or trade it to others. The idea of comparative advantage is that people and nations can benefit from specialization and exchange.
comparative advantage, many nations can benefit. This comparative advantage works for Alberta because of the natural resources we have and the products we can produce.

Watch the video for a very simple explanation of how specialization works.



Countries are trading with one another as never before and, as Adam Smith would have predicted, the world is becoming increasingly wealthy. This is called
economic growth
an increase in a country's output of goods and services

Economic growth usually is  measured by changes in real GDP (Gross Domestic Product)
economic growth.

Each country and province has a different level of economic growth. Not all grow equally, and some economies even shrink depending on several factors. However, Alberta's economy is strong. Why?

Oil and gas prices have huge roles in Alberta's economy. Natural gas and oil are important sources of energy in the global economy. As more countries industrialize and more people use personal vehicles, the demand for oil and gas has increased. What happens when there is a high demand and little supply? Prices go up! Therefore, Alberta's economy is strong. It is strong partly because we
specialization or division of labour
the assumption by workers or involved individuals of various tasks and roles to increase efficiency and output as well as to reduce costs
specialize. We do not try to produce things that other countries can produce more cheaply. We focus on what we can do well.

Global trade makes Alberta rich. Albertans sells various raw materials to the United States and the remainder of the world. We sell oil and gas, lumber, paper and the pulp to make paper, coal, wheat, barley, and canola, among others. In return, we can buy cheap manufactured goods from other parts of the world. Canada is the second largest country in the world and is rich in natural resources. By specializing in the production and sale of raw materials, Alberta's economy is strong. With the proceeds of our raw materials, we can purchase manufactured goods from countries with fewer natural resources and more human resources that can be put to work manufacturing goods â countries such as China, Mexico, and India.

Reflect


In our globalizing world, if we all specialize in producing what we are good at making and trade it for the other goods and services, will the whole world be richer?

Some people think we should always shop Canadian. They think we should not export oil and gas or lumber just to have it processed in another country. They think each country should process its own raw materials at home so it is not dependent on anyone else.

What do you think?