Topic 1 * Overview of Economic Geography

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Transcript Topic 1 * Overview of Economic Geography

GEOG 135 – Economic Geography Professor: Dr. Jean-Paul Rodrigue

Topic 1 – Overview of Economic Geography

A – Approaching Economic Geography B – Theories in Economic Geography C – Globalization D – Economic Development

The world is not random… the spatial order of the economy

What is located where, why, how?

Hong Kong Skyline (China)

Container Yard, Veracruz (Mexico)

A - APPROACHING ECONOMIC GEOGRAPHY

Defining Economic Geography Themes for Approaching Economic Geography

Economic Geography

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Subdiscipline of geography concerned about:

• The spatial organization and distribution of economic • • activity: • Production (primary, secondary, tertiary) • Transportation • Communication • Consumption The use of the world’s resources.

The geographic origins, structure, and dynamics of the world economy.

Global Manufacturing, 2009

Global Container Port and Air Cargo Traffic, 2008

Global Submarine Cable Network

World’s Largest Cities and Human Development Index 2010

Economics and Economic Geography

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(1) Historical specificity of geography

• Difficult to separate spatial and temporal processes.

• The current situation the outcome of past decisions: • Firms • Individuals • Organizations • Governments. • Economic geography is spatially and temporarily constructed.

Spanish and Portuguese Empires (1581-1640)

Themes for Approaching Economic Geography

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(2) Interconnectedness of regions

• Places do not exist in isolation from one another.

• Networks of locations; implies links.

• Types of linkages: • Biophysical (e.g. winds, sea currents, pollution).

• People (e.g. migration, commuting).

• Capital (e.g. investments, remittances).

• Goods (e.g. trade, supply chains).

• Power relations (e.g. trade agreements).

Global Net Migration (2005-2010)

Themes for Approaching Economic Geography

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(3) Interpenetration of human and biophysical systems

• Natural resources impact economic opportunities: • Climate, topography, soils, vegetation, minerals, water resources.

• Agriculture, Mining, Logging.

• People and economic activities also impact biophysical • systems: • Irrigation.

• Deforestation.

• Desertification.

• Pollution.

• Climate change.

Long history of interdependencies since the agricultural revolution.

Most Suitable Cereal

Themes for Approaching Economic Geography

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(4) Importance of culture in the creation of social and spatial relations

• Influence of culture on economic behavior.

• Culture dictates what is desirable and acceptable; • consumption norms.

Political economy reflective of culture; distribution of • power and wealth.

Gender relations. © Dr. Jean-Paul Rodrigue

World’s Major Cultural Regions Western Latin American Slavic-Orthodox Islamic African Hindu Confucian Islamic Western

B – THEORIES IN ECONOMIC GEOGRAPHY

Location Theory Political Economy

1. Location Theory

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Concept of location

• Absolute location (coordinate system).

• Relative location (referring to other locations)

Definition

• Analyzing location decisions of firms and individuals.

• What locates where?

• Looking for a formulation / rules of behavior.

• Why?

Basic Location Factors Land, utilities, visibility, transportation (local access), amenities Location Site Micro (local) Labor, materials, energy, markets, suppliers / customers Accessibility Meso (regional) Capital, subsidies, regulations, taxation, technology Socioeconomic Environment Macro (national)

1. Location Theory

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Relevance of geography

• Location is a resource multiplier: • Using resources more effectively.

• A city is a more effective production and consumption structure.

• Some locations have higher sale potential; they differ mainly • because of their accessibility.

• Accessibility can be a proxy for the value of space.

A location can be a resource in itself: • Bottleneck rent effect on flows (canals, bridges, tunnels).

• Capturing rent for right of passage (plus construction and maintenance of infrastructure).

2. Political Economy

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Political economy

• Investigation of power structure and wealth distribution • • within a society.

“Who gets what, when, where and why”.

Institutions behind this structure and distribution.

Main systems

• Capitalist System: Power (suffrage), wealth (private).

• Command Economies: Power (bureaucracy), wealth • (state).

Traditional economies: Power (monarch), wealth (feudalism).

2. Political Economy

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The rise of capitalism

• The general demise of command and traditional • • economies in the face of globalization.

Economic geography as the study of capitalist landscapes: • Private property.

• The search for innovation and efficiency.

• Profit as a driver (capital accumulation).

• Competition through processes and locations.

Capitalism emerged in the 15 th century, diffused with colonialism and accelerated with globalization.

The Circular Flow in the Capitalist System

$ to pay for resources Goods & Services (sales)

Resource Market

(prices) Income from work Labor (consumption - resources)

Businesses & Government

(production) Savings & Investment:

Capital Markets

(production - labor)

Households

(consumption) Goods & Services $ from product market (sales)

Product Market

(prices) Goods & Services $ to pay for consumption

Public Goods: Taxation & Provision

World GPD, 2008

C – GLOBALIZATION

Economic Globalization Transnational Corporations

Major Forms of Globalization: A Multidimensional and Dynamic Concept Form Nature Cultural / Social

How globalization changed human behavior?

Outcomes Issues

Homogenization Hybridization Rejection Is a global culture emerging?

Political

What forms of regulation or control are linked with globalization?

Transnational agreements (global or regional)

Economic

How globalization influences wealth creation and distribution?

Trade, new markets, new products Are forms of global governance suitable?

Is globalization promoting inequalities?

Main Possible Causes of Globalization Cause Technology Cultural Economic Political Dimension

Scientific standardization (weights and measures, time zones). Communication technology (mass communication, internet, electronic translation).

Transport technology (air transport, containerization).

Spread of ideologies (religions, democracy).

Development of global events (Olympics, World Cup).

Consumerism (global brands).

Voyages of exploration (15th – 17th centuries).

Commercial policy (free trade).

Expansion of trade and markets (comparative advantages).

Multinational corporations (global production).

Supra-national regulations (institutions facilitating international exchanges).

Environmental consciousness (climate change, resource depletion).

The Drivers of Globalization Integration

Regulatory chains.

Harmonization of regulatory regimes.

Trade agreements.

Production

Supply chains.

Offshoring.

Global production networks.

Transportation

Transport chains.

Containerization.

Transborder transportation.

Transactions

Information chains (ICT).

Capital for investments.

Credit for transactions.

Economic Integration Levels, 2011

Globalization: Elements of the Debate

Main model Trade Growth Culture Relations Environment Welfare Politics

Pro-Globalization

Laissez-faire capitalism Free-trade Creates prosperity and opportunities Cultural fusion (promotion of positive cultural traits) Positive-sum Lead to an efficient allocation of resources Improvement in life expectancy and education Improve civil liberties and democracy

Anti-Globalization

Socialism Fair-trade Results in inequalities Erode traditional cultures and promotes homogenization Zero-sum Promotes unsustainability Erosion of the middle class and exploitation of labor Process subjugated by corporations © Dr. Jean-Paul Rodrigue

Examples of Globalization in the Service Sector Sector

Retail Tourism Telecommunication

Driver

Increase in disposable income Cultural homogenization Emergence of brand names Increase in disposable income Available leisure time Affordable air travel Technological innovations (WWW, mobile) Privatization (mostly)

Response

Chain stores Global products Mass tourism Chain hotels / resort areas Ubiquitous networks and access Global telecom carriers © Dr. Jean-Paul Rodrigue

“Arabica Universalis”

International Tourists Arrivals and Receipts, 1950-2010

500 400 300 200 100 0 1000 900 800 700 600 Arrivals (millions) Receipts (billions of $US) © Dr. Jean-Paul Rodrigue

Diffusion of Telecommunication Services, 1985-2011

3 000 2 000 1 000 0 7 000 6 000 5 000 4 000 Cellular Phone Subscribers Fixed Broadband Subscriptions © Dr. Jean-Paul Rodrigue

2. Transnational Corporations

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Multinational corporation

• A corporation that takes a global approach for: • Its inputs (raw materials, parts).

• Its outputs (customers).

• Different parts of the industrial system are located in places where they are the most productive.

Types of Multinational Corporations Raw Materials Seekers

Lower input costs Resource acquisition

Market Seekers

Economies of scale Expand market First MNCs to emerge Large investors

Minimal Cost Seekers

The World’s 20 Largest Corporations by Market Value, 2011 ($US millions)

AT&T Wal-Mart HSBC JP Morgan Chase China Mobile Gazprom IBM Nestle Berkshire Hathaway General Electric Microsoft Chevron Royal Dutch Shell China Construction Bank BHP Billiton Petrobas Industrial & Commerical Bank of China Apple PetroChina Exxon Mobil 0 50 000 100 000 150 000 200 000 250 000 300 000 350 000 400 000 450 000 © Dr. Jean-Paul Rodrigue

World's 250 Largest Corporations by Head Office City

D – ECONOMIC DEVELOPMENT

The Notion of Development Wealth Disparities

The Notion of Development

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What is development?

• Development is about people, not necessarily the • • economy.

Development is a process.

Improvement of the welfare of the population: • Create an enabling environment for people.

• Long term process.

Conditions

• Appropriate social conditions.

• Appropriate political and legal conditions.

• Appropriate economic conditions.

The Notion of Development Outcomes Human Capital Physical capital Development -Health -Education -Quality of life -Rights -Equity -Rule of law -Employment -Surplus Conditions

The Notion of Development

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Physical capital

• Infrastructures and resources that can be used in a • • • • productive manner.

Natural resources are not physical capital.

Include public utilities: • Energy, telecommunications, water supply and waste disposal.

Public works: • Roads, dams, irrigation canals.

Transport infrastructures: • Ports, airports, railways, public transit systems.

The Notion of Development

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Human capital

• The total population and its qualification level.

• Development of human capital: • Supported by education systems.

• Reproduce and improve the productivity of the labor force.

• Information economy: • Human capital a resource that differentiates nations.

• Not always because of wage differences, but because of differences in the qualification level.

Poverty and its Vicious Circle Poor Country Foreign Imports Low Productivity Foreign Loans Limited Investments Low Demand Low Purchasing Power Limited Savings

2. Wealth Disparities

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The expression of needs

• Wants versus needs.

• Goods and services that population groups need: • Food, shelter, clothing, health care and water.

• Expression of new needs: • Demographic growth.

• Each level of development linked to a level of need from the population.

• Consuming goods, energy, mobility and education • Demographic growth creates the most important needs. © Dr. Jean-Paul Rodrigue

Basic Needs Context Issues Food

Basic caloric and nutritional requirement. 2,500 calories per day is the minimal intake for a working adult.

Population growth and changes in diet Globalization Growing availability of food in quantity, quality and diversity.

Health

Consumption of health services.

Aging of the population Faster spread vectors.

Education

Provide a level of education to insure continuity.

Housing

Fundamental expression of comfort and status.

Advanced economies require a higher level of education.

Global information networks.

Necessitate raw materials and infrastructure.

2. Wealth Disparities

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Trends

• Economic development is linked with global inequalities: • Reinforces the differences between countries and even within countries themselves.

• The assets of the 200 richest people are more than the combined • income of 41% of the world’s population.

• Difference between those contributing to the generation of wealth and the excluded.

• Ethnic origin, language, skills, etc.

Inequalities not linked with a particular political system: • In the US, the income of the poorest 20% has declined since the 1970s.

• The income of the richest 20% has increased by 15%.

• The income of the richest 1% has increased by 100%.

Share of the World GDP, 2008 (Current USD) United States 20% Rest of the world 47% Other G8 15% Japan 7% China 6% Germany 5%

Percentage of the Population Living on Less than $2 per Day, 1981 2002

100 90 80 70 60 50 40 30 20 10 0 1980 East Asia South Asia Sub-Saharan Africa 1985 1990 1995 2000 2005 © Dr. Jean-Paul Rodrigue

Income of the 10% Richest and the 20% Poorest, c2005

Japan Denmark Sweden Germany Canada India United States Russian Federation China Mexico Brazil Bolivia Haiti 0 10 20 30 Highest 10% Lowest 20% 40 50 © Dr. Jean-Paul Rodrigue

Topic 1 * Overview of Economic Geography

Transcript Topic 1 * Overview of Economic Geography

Topic 1 – Overview of Economic Geography

A – Approaching Economic Geography B – Theories in Economic Geography C – Globalization D – Economic Development

What is located where, why, how?

A - APPROACHING ECONOMIC GEOGRAPHY

Subdiscipline of geography concerned about:

Similar problems; different approaches

(1) Historical specificity of geography

(2) Interconnectedness of regions

(3) Interpenetration of human and biophysical systems

(4) Importance of culture in the creation of social and spatial relations

B – THEORIES IN ECONOMIC GEOGRAPHY

Concept of location

Definition

Relevance of geography

Political economy

Main systems

The rise of capitalism

C – GLOBALIZATION

Multinational corporation

D – ECONOMIC DEVELOPMENT

What is development?

Conditions

Physical capital

Human capital

The expression of needs

Trends

Directory