Download 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
Hofstra
Department
of Global
Studies
& Geography
HofstraUniversity,
University,
Department
of Global
Studies
& Geography
The world is not random… the spatial order of the economy
What is located where, why, how?
© Dr. Jean-Paul Rodrigue
Hong Kong Skyline (China)
© Dr. Jean-Paul Rodrigue
Container Yard, Veracruz (Mexico)
© Dr. Jean-Paul Rodrigue
A - APPROACHING ECONOMIC GEOGRAPHY
1.
2.
Defining Economic Geography
Themes for Approaching Economic Geography
© Dr. Jean-Paul Rodrigue
Economic Geography
■ 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.
© Dr. Jean-Paul Rodrigue
Global Manufacturing, 2009
© Dr. Jean-Paul Rodrigue
Global Container Port and Air Cargo Traffic, 2008
© Dr. Jean-Paul Rodrigue
Global Submarine Cable Network
© Dr. Jean-Paul Rodrigue
World’s Largest Cities and Human Development Index 2010
© Dr. Jean-Paul Rodrigue
Economics and Economic Geography
■ Similar problems; different approaches
• Economic geography:
• Conceptualize economic issues in terms of space, place and scale.
• Tend to be empirically based.
• Economics:
• Tends to homogenize the economic world.
• The “market” is often considered as “aspatial”.
• Main areas of investigation:
•
•
•
•
•
•
•
Technological change
Geopolitics
Cultural homogenization/localization
Transport & communication cost reductions
Fall of centrally planned economies
Rise of global capital markets
Institutions and governance World Bank, IMF, WTO, OPEC,
OECD….
© Dr. Jean-Paul Rodrigue
Themes for Approaching Economic Geography
■ (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.
© Dr. Jean-Paul Rodrigue
Spanish and Portuguese Empires (1581-1640)
© Dr. Jean-Paul Rodrigue
Themes for Approaching Economic Geography
■ (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).
© Dr. Jean-Paul Rodrigue
Global Net Migration (2005-2010)
© Dr. Jean-Paul Rodrigue
Themes for Approaching Economic Geography
■ (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.
© Dr. Jean-Paul Rodrigue
Most Suitable Cereal
© Dr. Jean-Paul Rodrigue
Themes for Approaching Economic Geography
■ (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
Slavic-Orthodox
Western
Confucian
Islamic
Hindu
Latin American
African
Islamic
Western
© Dr. Jean-Paul Rodrigue
B – THEORIES IN ECONOMIC GEOGRAPHY
1.
2.
Location Theory
Political Economy
© Dr. Jean-Paul Rodrigue
1. Location Theory
■ 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?
© Dr. Jean-Paul Rodrigue
Basic Location Factors
Location
Land, utilities, visibility, transportation
(local access), amenities
Labor, materials, energy, markets,
suppliers / customers
Capital, subsidies, regulations,
taxation, technology
Site
Micro (local)
Accessibility
Socioeconomic Environment
Meso (regional)
Macro (national)
© Dr. Jean-Paul Rodrigue
1. Location Theory
■ 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).
© Dr. Jean-Paul Rodrigue
2. Political Economy
■ 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).
© Dr. Jean-Paul Rodrigue
2. Political Economy
■ 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 15th century, diffused with
colonialism and accelerated with globalization.
© Dr. Jean-Paul Rodrigue
The Circular Flow in the Capitalist System
$ to pay for resources
Goods
& Services
(consumption - resources)
Businesses & Government
(production)
Goods &
Services
$ from product market
(sales)
Resource
Market
(prices)
Income from work
Labor
(production - labor)
Households
(consumption)
Savings &
Investment:
Capital Markets
(sales)
Product
Market
(prices)
Goods &
Services
$ to pay for consumption
Public Goods: Taxation & Provision
© Dr. Jean-Paul Rodrigue
World GPD, 2008
© Dr. Jean-Paul Rodrigue
C – GLOBALIZATION
1.
2.
Economic Globalization
Transnational Corporations
© Dr. Jean-Paul Rodrigue
Major Forms of Globalization: A Multidimensional and Dynamic
Concept
Form
Cultural / Social
Political
Economic
Nature
How globalization
changed human
behavior?
What forms of regulation
or control are linked with
globalization?
How globalization
influences wealth
creation and
distribution?
Outcomes
Homogenization
Hybridization
Rejection
Transnational agreements
(global or regional)
Trade, new markets,
new products
Issues
Is a global culture
emerging?
Are forms of global
governance suitable?
Is globalization
promoting inequalities?
© Dr. Jean-Paul Rodrigue
Main Possible Causes of Globalization
Cause
Dimension
Technology
Scientific standardization (weights and measures, time zones).
Communication technology (mass communication, internet, electronic
translation).
Transport technology (air transport, containerization).
Cultural
Spread of ideologies (religions, democracy).
Development of global events (Olympics, World Cup).
Consumerism (global brands).
Economic
Voyages of exploration (15th – 17th centuries).
Commercial policy (free trade).
Expansion of trade and markets (comparative advantages).
Multinational corporations (global production).
Political
Supra-national regulations (institutions facilitating international
exchanges).
Environmental consciousness (climate change, resource depletion).
© Dr. Jean-Paul Rodrigue
The Drivers of Globalization
Integration
Production
Transportation
Transactions
Regulatory
chains.
Supply chains.
Transport chains.
Offshoring.
Containerization.
Information
chains (ICT).
Harmonization of
regulatory
regimes.
Global
production
networks.
Transborder
transportation.
Capital for
investments.
Trade
agreements.
Credit for
transactions.
© Dr. Jean-Paul Rodrigue
Economic Integration Levels, 2011
© Dr. Jean-Paul Rodrigue
Globalization: Elements of the Debate
Pro-Globalization
Anti-Globalization
Main model
Laissez-faire capitalism
Socialism
Trade
Free-trade
Fair-trade
Growth
Creates prosperity and
opportunities
Results in inequalities
Culture
Cultural fusion (promotion of
positive cultural traits)
Erode traditional cultures and
promotes homogenization
Relations
Positive-sum
Zero-sum
Environment
Lead to an efficient allocation of
resources
Promotes unsustainability
Welfare
Improvement in life expectancy
and education
Erosion of the middle class and
exploitation of labor
Politics
Improve civil liberties and
democracy
Process subjugated by corporations
© Dr. Jean-Paul Rodrigue
Examples of Globalization in the Service Sector
Sector
Driver
Response
Retail
Increase in disposable income
Cultural homogenization
Emergence of brand names
Chain stores
Global products
Tourism
Increase in disposable income
Available leisure time
Affordable air travel
Mass tourism
Chain hotels / resort areas
Telecommunication
Technological innovations
(WWW, mobile)
Privatization (mostly)
Ubiquitous networks and access
Global telecom carriers
© Dr. Jean-Paul Rodrigue
“Arabica Universalis”
© Dr. Jean-Paul Rodrigue
International Tourists Arrivals and Receipts, 1950-2010
1000
900
800
Arrivals (millions)
Receipts (billions of $US)
700
600
500
400
300
200
100
0
© Dr. Jean-Paul Rodrigue
Millions
Diffusion of Telecommunication Services, 1985-2011
7,000
6,000
Cellular Phone Subscribers
Fixed Broadband Subscriptions
5,000
4,000
3,000
2,000
1,000
0
© Dr. Jean-Paul Rodrigue
2. Transnational Corporations
■ Multinational corporation
• A corporation that takes a global approach for:
• Its inputs (raw materials, parts).
• Its outputs (customers).
• Different parts of the industrial system are located in
places where they are the most productive.
© Dr. Jean-Paul Rodrigue
Types of Multinational Corporations
Raw Materials Seekers
Market Seekers
Minimal Cost Seekers
Lower input costs
Economies of scale
Comparative advantages
Resource acquisition
Expand market
Lower production and
distribution costs
First MNCs to emerge
Large investors
Remain competitive
© Dr. Jean-Paul Rodrigue
The World’s 20 Largest Corporations by Market Value, 2011 ($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
© Dr. Jean-Paul Rodrigue
D – ECONOMIC DEVELOPMENT
1.
2.
The Notion of Development
Wealth Disparities
© Dr. Jean-Paul Rodrigue
The Notion of Development
■ 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.
© Dr. Jean-Paul Rodrigue
The Notion of Development
Outcomes
Human Capital
Physical capital
Development
-Health
-Education
-Quality of life
-Rights
-Equity
-Rule of law
-Employment
-Surplus
Conditions
© Dr. Jean-Paul Rodrigue
The Notion of Development
■ 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.
© Dr. Jean-Paul Rodrigue
The Notion of Development
■ 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.
© Dr. Jean-Paul Rodrigue
Poverty and its Vicious Circle
Poor Country
Foreign
Imports
Low Purchasing
Power
Low Productivity
Low Demand
Limited Savings
Foreign
Loans
Limited Investments
© Dr. Jean-Paul Rodrigue
2. Wealth Disparities
■ 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
Food
Health
Education
Context
Basic caloric and
nutritional
requirement. 2,500
calories per day is
the minimal intake
for a working adult.
Consumption of
health services.
Provide a level of Fundamental
education to
expression of
insure continuity. comfort and
status.
Issues
Population growth
and changes in diet
Aging of the
population
Advanced
economies
require a higher
level of
education.
Faster spread
vectors.
Global
information
networks.
Globalization Growing availability
of food in quantity,
quality and diversity.
Housing
Necessitate raw
materials and
infrastructure.
© Dr. Jean-Paul Rodrigue
2. Wealth Disparities
■ 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%.
© Dr. Jean-Paul Rodrigue
Share of the World GDP, 2008 (Current USD)
United States
20%
Rest of the world
47%
Japan
7%
China
6%
Germany
5%
Other G8
15%
© Dr. Jean-Paul Rodrigue
Percentage of the Population Living on Less than $2 per Day, 19812002
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
Highest 10%
Lowest 20%
Denmark
Sweden
Germany
Canada
India
United States
Russian Federation
China
Mexico
Brazil
Bolivia
Haiti
0
10
20
30
40
50
© Dr. Jean-Paul Rodrigue