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
Hofstra
University,
Department
of Global
Studies & Geography
Hofstra University,
Department
of Global Studies
& Geography
The world is not random… the spatial order of the economy
What is located where, why, how?
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The Primary Sector (Paraguay)
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The Primary Sector (Utah)
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The Secondary Sector (Chicago)
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The Tertiary Sector: Hong Kong Skyline (China)
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The Tertiary Sector: Container Yard, Veracruz (Mexico)
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A - APPROACHING ECONOMIC GEOGRAPHY
1.
2.
3.
4.
Defining Economic Geography
Economics and Economic Geography
Space, Place and Scale
Themes for Approaching Economic Geography
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Defining Economic Geography
■ Subdiscipline of geography concerned about:
• The spatial organization and distribution of economic activities:
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Production (primary, secondary, tertiary).
Transportation.
Communication.
Consumption.
• The use of the world’s resources.
• The geographic origins, structure, and dynamics of the world
economy.
Explain what economic geography is and provide an example
of a spatial characteristic of economic activities.
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Global Manufacturing, 2009
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World’s Largest Cities, 2010
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World’s Major Container Ports, 2012
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Passenger Traffic at the World’s Largest Airports, 2010
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Global Submarine Cable Network
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Economics and Economic Geography
Discuss the main differences
between economics and
economic geography.
Economics
Economic Geography
• People are behaving in a
rationale manner (homo
economicus).
• People and firms are
competing on markets where
supply and demand reach an
equilibrium.
• A market economy operates
according to laws and
principles.
• Universalism: laws and
principles work everywhere.
• People are behaving
differently according to their
context (homo geographicus).
• Markets have locations and
geography is influencing
supply and demand.
• Laws and principles are
disrupted by geographical,
social and political factors.
• Geographical diversity
challenges universalism.
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Economics and Economic Geography
■ Similar problems; different approaches
• Economic geography:
• Conceptualize economic issues in terms of space, place and scale.
• ‘Economies must take place’.
• Tends to be empirically based.
• Economics:
• Tends to homogenize the economic world (universalism).
• The “market” is often considered as “aspatial”.
• Tends to be theoretically based.
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Space, Place and Scale
■ Space
• Includes physical distance and area.
• Where an activity is occurring.
• Involves territory, location, flows and unevenness.
■ Place
• Specificity or uniqueness of particular places.
• Involves an embeddedness of economic processes in
environmental, social, cultural, institutional and political contexts.
■ Scale
• Help understand the hierarchy of places.
• From local to global scale.
• Lived scale.
Explain the differences between space, place and scale in
economic geography.
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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:
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Firms.
Individuals.
Organizations.
Governments.
• Economic geography is spatially and temporarily constructed.
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Spanish and Portuguese Empires (1581-1640)
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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:
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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).
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Global Net Migration (2005-2010)
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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:
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Irrigation.
Deforestation.
Desertification.
Pollution.
Climate change.
• Long history of interdependencies since the agricultural
revolution.
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Most Suitable Cereal
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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 (workforce participation).
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World’s Major Cultural Regions
Slavic-Orthodox
Western
Confucian
Islamic
Hindu
Latin American
African
Islamic
Western
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Essay: The Themes of Economic Geography
Elaborate about the four main themes of economic
geography.
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B – THEORIES IN ECONOMIC GEOGRAPHY
1.
2.
Location Theory
Political Economy
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Main Theoretical Foundations in Economic Geography
Location theory
Explaining the distribution and patterns of economic activity across
space.
Quantitative perspective.
Behavioral economics
Range of factors influencing decision making.
Impacts of culture and psychology (irrational behavior).
Political economy
Importance of social and political relations (concentration and
distribution of wealth).
Marxist perspective (role of the state as an economic agent).
New economic geography
Look at economic globalization.
Location of production in space (relations).
Role of factors such gender, race, age, religion and culture.
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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?
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Basic Location Factors
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Micro (local)
Meso (regional)
Macro (national)
Land, utilities, visibility, transportation
(local access), amenities
Labor, materials, energy, markets,
suppliers / customers
Capital, subsidies, regulations,
taxation, technology
Location
Site
Accessibility
Socioeconomic Environment
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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).
What is location theory and what are the main location
factors?
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Political Economy
■ Political economy
• 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).
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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:
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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.
Explain the nature of capitalism and the circular flows
of capital.
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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
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C – NEW ECONOMIC GEOGRAPHY
(GLOBALIZATION)
1.
2.
Economic Globalization
Transnational Corporations
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Major Forms of Globalization
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
International agreements
(global or regional).
Multiple layers of
governance.
Trade, new markets, new
products
Issues
Is a global culture
emerging?
Are forms of global
governance suitable? Will
supranationalism prevail?
Is globalization promoting
inequalities?
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Economic Globalization
■ Growing interdependencies
• Individuals and corporations impacted by processes taking place
elsewhere.
■ Key trends impacting interdependencies
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International finance.
The role of transnational corporations.
Foreign direct investments.
Global value chains.
Outsourcing and offshoring in the service sector.
Global tourism.
What is economic globalization and what are its main
driving forces?
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The Drivers of Economic Globalization: Connecting Different
Chains
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.
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Economic Integration Levels, 2011
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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
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International Tourists Arrivals and Receipts, 1950-2014
1400
1200
Arrivals (millions)
Receipts (billions of
$US)
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1000
800
600
400
200
0
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Millions
Diffusion of Telecommunication Services, 1985-2015
8,000
Cellular Phone Subscribers
7,000
6,000
Fixed Broadband Subscriptions
Mobile Broadband Subscriptions
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Internet Users
5,000
4,000
3,000
2,000
1,000
0
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Corporations in the Global Economy
■ Multinational corporation (MNC)
• Provides goods and/or services.
• A corporation that takes a global approach for:
• Its inputs (raw materials, parts).
• Its outputs (customers).
• Different parts of the industrial system are located in places
where they are the most productive.
© Dr. Jean-Paul Rodrigue
What Multinational Corporations are Trying to Achieve to
Compete?
Lower production costs
• One of the main goals of a corporation. Exploitation of comparative
advantages.
Stability of prices and deliveries
• The rationale of low costs must also take account of price changes of raw
materials and parts. Risky to relocate (long-term investment) to take
advantage of conditions that can change on the short term.
Product quality
• Performance, service and maintenance. A quantitatively competitive product
has limited advantages if not qualitatively competitive.
Production and distribution flexibility
• Facing changes in the demand confers a notable advantage.
© Dr. Jean-Paul Rodrigue
Types of Multinational Corporations by Strategy
Raw Materials Seekers
• Lower input costs
• Resource acquisition
• First MNCs to emerge
Market Seekers
• Achieve economies of scale
• Expand market
• Large investors
Minimal Cost Seekers
• Look for comparative advantages
• Lower production and distribution costs
• Remain competitive
© Dr. Jean-Paul Rodrigue
The World’s 20 Largest Corporations by Market Value, 2015 ($US
millions)
Pfizer
Samsung
Procter & Gamble
JP Morgan Chase
Roche
Toyota
Nestle
General Electric
Wal-Mart
China Mobile
Novartis
Industrial & Commerical Bank of China
Johnson & Johnson
Wells Fargo
PetroChina
Microsoft
Google (Alphabet)
Berkshire Hathaway
Exxon Mobil
Apple
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Explain what are multinational
corporations, their role and
function.
0
100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000
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D – ECONOMIC DEVELOPMENT
1.
2.
The Notion of Development
Wealth Disparities
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The Notion of Development
■ What is development?
• Development is a process; a mean towards an end.
• Improvement of the welfare of the population:
• Development is about people, not necessarily the economy.
• Create an enabling environment for people; economic opportunities.
• Long term process; takes place over decades.
• Different societies can have different development goals:
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Promote private accumulation of wealth.
National and collective interests.
Reducing national inequalities.
“Hard” (e.g. infrastructure) versus “soft” (e.g. education) approaches.
© Dr. Jean-Paul Rodrigue
The Notion of Development
■ Development goals
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Adequate food and water supplies.
Healthcare system.
Sanitation and disease control.
Providing transport and communication infrastructure.
Employment opportunities.
Educational opportunities.
Rule of law and protection of rights and private property.
Access to housing.
Low environmental impact of society.
■ Conditions
• Appropriate social, political, legal and economic conditions.
© Dr. Jean-Paul Rodrigue
The Notion of Development
Physical Capital
• Infrastructures and resources that can be used in a productive manner.
• Public utilities:
• Energy, telecommunications, water supply and waste disposal.
• Public works:
• Roads, dams, irrigation canals.
• Transport infrastructures:
• Ports, airports, railways, public transit systems.
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
capabilities.
© Dr. Jean-Paul Rodrigue
The Notion of Development
Explain the main conditions and outcomes of
economic development
Conditions
Outcomes
Social
Political
-Health
-Education
-Quality of life
-Rights
-Equity
-Rule of law
Physical capital
Economic
Human Capital
-Employment
-Surplus
Development
© Dr. Jean-Paul Rodrigue
Global Gross Domestic Product and Human Development Index,
2010
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Waves of Development
Steam
Rail
Steel
Cotton
Electricity
Chemicals
Internal combustion engine
Petrochemicals
Electronics
Aerospace
Digital networks
Software
New Media
Biotechnology
Pace of innovation
Water power
Textiles
Iron
Mechanization
Commerce
1st Wave
1785
60 years
2nd Wave
1845
55 years
3rd Wave
1900
50 years
4th Wave
1950
40 years
5th Wave
1990
30 years (?)
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2. Wealth Disparities
■ Inequalities
• Large differences in wealth and quality of life around the world.
• Differences between nations (mostly between developed and
developing countries).
• Differences within societies.
• Inequalities not linked with a particular political system, but
capitalism appears to be reinforcing inequalities.
■ Trends
• Economic development is linked with global inequalities:
• Reinforces the differences between countries and even within countries
themselves.
• 1% of the global population accounts for about 44% of the world’s wealth.
• Difference between those contributing to the generation of wealth and the
excluded.
• Ethnic origin, language, skills, etc.
© Dr. Jean-Paul Rodrigue
Distribution of Global Wealth, 2014
© Dr. Jean-Paul Rodrigue
Share of the World GDP, 2014 (Current USD)
United States
23%
Rest of the world
37%
Japan
7%
China
13%
Other G8
15%
Germany
5%
© Dr. Jean-Paul Rodrigue
World Nominal GDP, 2007, 2014 (in billion USD)
Mexico
Spain
South Korea
Australia
Canada
Russia
India
Italy
Brazil
France
United Kingdom
Germany
Japan
China (PRC)
United States
0
4,000,000
8,000,000
2014
12,000,000
16,000,000
20,000,000
2007
© Dr. Jean-Paul Rodrigue
Countries with More than Half of Population in Extreme Poverty,
2011 (less than $1.25 per day)
Mali
Sierra Leone
Republic of Congo
Angola
Haiti
Nepal
Burkina Faso
Dem. Rep. of Congo
Mozambique
Chad
Central African Republic
Swaziland
Zambia
Nigeria
Madagascar
Tanzania
Malawi
Rwanda
Burundi
Liberia
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
© Dr. Jean-Paul Rodrigue
Essay: Inequalities
Economic inequalities are a controversial issue.
Provide some evidence about how inequalities are
taking place between and within societies.
© Dr. Jean-Paul Rodrigue