Transcript GEOG 3404 Economic Geography

GEOG 3404
Economic Geography
LECTURE 1:
Globalisation and the Factors of
Production
Dr. Zachary Klaas
Department of Geography and Environmental Studies
Carleton University
Economic Geography: the
subject matter of the discipline
The words “economic” and “geography” have their roots in
the Greek language:
 “Economic” comes from the Greek word oikos, meaning
“home”.
 The implication here is that economic matters are matters of
tending to the requirements of one’s household – of taking care of
oneself and one’s family.
Note the implication here that one is concerned with something
local.
 “Geographic” comes from the Greek word geos meaning
“earth”.
 The implication here is that geographic matters deal with land
and terrestrial space.
 Note the implication here that one is concerned with something
of decidedly broader scope than the local – the regional, national
or global.
Theorising in Economic Geography: The
Factors of Production
 Economics concerns itself with production, which is the
provision of items for people either to consume
(consumption) or to keep as valuable property (wealth).
 There are three “factors” of production, which account for
all possible forms of productive economic activity:
 Land / Natural Resources – any commodity which is provided
by the earth (e.g., a forest/the wood found there)
 Labour – the work one does, taken as a commodity (e.g.,
lumberjacking)
 Capital – any commodity which may be in turn used in further
production (e.g., a paper factory)
 Economic geography is concerned with the tracking of
production in geographic space.
Economic Geography: How do
we come to understand it? What
are our models?
 The “normal science” modeling process:
Inductive models: Models based in our experience; models
describing what we see in practice.
Deductive models: Models based on mechanisms which are
rationally or inherently related; theoretical models.
 Ideas about scientific modeling from Thomas Kuhn’s
1962 philosophy of science text The Structure of Scientific
Revolutions:
Paradigms: Models with general applicability which attempt to
describe “reality” as science understands it.
Anomalies: Elements of reality unexplained by scientific models.
The Paradigm of a “Globalising”
World: Economic Geography in
the 1990s and 2000s.
 There is little doubt that the world of the decades of the
1990s and 2000s saw the assertive rise of “globalisation”
as a paradigm to explain great economic changes that
were taking place.
 The “death of distance”: many of the specific observed
changes dealt with dramatic improvements to
transportation and communication, which lowered the cost
of doing business across great distances.
 The internet and ETF (electronic transfer of funds) in
particular made it possible for business relationships to be
essentially unhindered by a distance factor. The rise of “Ecommerce” was thus a large component of a globalisation
paradigm.
Convergence: the “home” of
economics closes in on the
“earth” of geography
 The communications theorist Marshall McLuhan
famously referred to the earth as a “global village”. If the
claims of the globalisation theory are true, we are
witnessing a rapid convergence of our “local” lives with a
new “global” culture.
 Note that, as we initially observed, the very word
“economics” comes from a Greek root referencing the local
or that which pertains to “home”, while the word
“geography” comes from the Greek root referencing the
global or that which pertains to the “earth”.
 In that sense, “globalism” would be a very significant
development in the history of economic geography, in that it
implies a convergence of scales of analysis in economic
geography.
The Mobility of Capital:
Trans-National Corporations
(TNCs)
 This “death of distance” factor led, in turn, to capital
being more mobile – corporations with assets in one
country, in other words, would have the ability to liquidate
them quickly and transfer them to other countries.
 Trans-National Corporations (TNCs) could therefore
much more easily leave countries they deemed
unfavourable to their business needs and set up shop in
other countries.
 “The realities of globalisation” in this sense, is a sort of
shorthand reference for the need to ensure that TNCs will
find one’s own country sufficient to provide for their
business needs, as they can quite easily relocate
elsewhere. To “adapt to the realities of globalisation”, thus,
is taken to be shorthand for accepting the heightened
power of the TNCs in a globalised world.
Globalisation: A Key Model in
Economic Geography
 Is this model inductive? Does it accord with our
experience to say that we live in a world in which economic
activities are integrated across large distances? Or is this
sometimes not true?
 Is this model deductive? Are there identifiable
mechanisms by which this integration necessarily takes
place? Or are there countervailing mechanisms which tend
against integration rather than toward it?
 Is globalisation an exclusive paradigm? (TINA: “There
Is No Alternative.”) Are people who deny globalisation
denying reality, purely and simply?
 Or, are there anomalies? Are there things that
“shouldn’t be happening” if the globalisation model is
accurate?
Perspectives on the paradigm: is
“globalisation” real? Some views
discussed in Peter Dicken’s Global Shift.
 Perspective 1: Yes, and we ignore it at our peril –
because we will be left behind by the power of the TNCs if
we do, and we must adapt to the fact that they can relocate
and transfer their assets so easily. (Peter Dicken calls this
view hyperglobalism.)
 Perspective 2: Yes, and we ignore it at our peril –
because TNCs are being allowed unprecedented power
over the world’s peoples, which must be resisted actively.
(Peter Dicken refers to this as anti-globalism or
hyperglobalism of the left.)
 Perspective 3: Yes, but the economy has been
“globalised” to varying degrees for centuries now, and may
have even been more globalised before than it is now.
(Peter Dicken refers to this as sceptical internationalism.)
Perspectives on the paradigm: is
“globalisation” real? Some views
discussed in Peter Dicken’s Global Shift.
 Perspective 4: Not always, there are important nationallevel, regional-level and local-level forms of economic
integration which run contrary to the presumed trend to
more global forms of integration. (This is the view put
forward by Dicken himself. It implies that “globalisation” is
a useful generalisation or ideal type which may not prove
adequate as a description of things in all cases.)
This last view takes issue with the paradigm, as opposed to
the other three, which do not break from it. It posits that
“globalisation” is a rational explanation for observable
economic trends, but not necessarily the explanation. If it
were the only possible explanation, then there would be no
“anomalies” left unexplained by the theory.
The Mechanisms of the World Economy:
How can we measure economic
relationships across geographic space?
 As you can see, one question we will be very concerned
with in this course is to what extent we really do have a
world economy and to what extent economies are local,
regional or national in scope.
 In order to know this, we must be concerned with
measuring elements relevant to the functioning of a world
economy – the mechanisms of the world economy.
 The factors of production are the logical thing to measure
as the mechanisms of the world economy: it is land, labour
and capital, and movements in space related to these
mechanistic elements, that will help us evaluate theories
about the world economy – such as the globalisation
paradigm.
Relationships of the Factors of Production
to Geographic Space
 Land – Plots of land are generally fixed in space, but
ownership can be more distributed. Some nations forbid or
restrict foreign ownership of land, others permit foreign
ownership to a greater degree or completely.
 Natural Resources – These can generally be moved
and shipped through space. Often there is some savings
to processing natural resources near the source from which
they exist in nature, but it is also possible they may be
shipped to be processed into a product elsewhere. Some
nations “nationalise” their natural resources so that profits
from their sale benefit the state.
Relationships of the Factors of Production
to Geographic Space
 Labour – Immigration law generally forbids labour from
moving across national boundaries, but within nations and
in liberalised trade areas and regional blocs (e.g., the
European Union) labour can move great distances for work
opportunities.
 Capital – Physical capital can either be easily moved
(like office supplies) or moved with more difficulty (like
factories or heavy machinery), but the “liquid” form of
capital (money) is quite easily moved, especially with
advances in the electronic transfer of funds for international
transactions.
Is there a “death of distance”?
 One of the primary assumptions of the globalisation
paradigm is that geographic distance is diminished in our
modern world to the point of being a negligible influence on
the world economy. But is this true?
 The preceding discussion of the extent to which we
observe the factors of production as rooted in space or
freely moving through space does not establish that
distance has completely ceased to be a factor in our
modern world.
 Instances where distances continue to reflect real costs
are anomalous for the globalisation paradigm.