Topic 1 – Overview of Economic Geography

1. Topic 1 – Overview of Economic Geography A – Approaching Economic Geography B – Theories in Economic Geography C – Globalization D – Economic Development

2. The world is not random… the spatial order of the economy What is located where, why, how?

3. Hong Kong Skyline (China)

4. Container Yard, Veracruz (Mexico)

5. A - Approaching Economic Geography Defining Economic Geography Themes for Approaching Economic Geography

6. 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.

7. Global Manufacturing, 2009

8. Global Container Port and Air Cargo Traffic, 2008

9. Global Submarine Cable Network

10. World’s Largest Cities and Human Development Index 2010

11. 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….

12. 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.

13. Spanish and Portuguese Empires (1581-1640)

14. 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).

15. Global Net Migration (2005-2010)

16. 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.

17. Most Suitable Cereal

18. 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.

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

20. B – Theories in Economic Geography Location Theory Political Economy

21. 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?

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

23. 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).

24. 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).

25. 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.

26. The Circular Flow in the Capitalist System $ to pay for resources (sales) Resource Market (prices) Income from work Goods & Services Labor (consumption - resources) Businesses & Government (production) (production - labor) Households (consumption) Savings & Investment: Capital Markets Goods & Services Goods & Services (sales) Product Market (prices) $ from product market $ to pay for consumption Public Goods: Taxation & Provision

27. World GPD, 2008

28. C – Globalization Economic Globalization Transnational Corporations

29. Major Forms of Globalization: A Multidimensional and Dynamic Concept

30. Main Possible Causes of Globalization

31. The Drivers of Globalization

32. Economic Integration Levels, 2011

33. Globalization: Elements of the Debate

34. Examples of Globalization in the Service Sector

35. “Arabica Universalis” Tokyo Melbourne Berlin

36. International Tourists Arrivals and Receipts, 1950-2010

37. Diffusion of Telecommunication Services, 1985-2011

38. 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. MNC Inputs Outputs

39. Types of Multinational Corporations

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

41. World's 250 Largest Corporations by Head Office City

42. D – Economic Development The Notion of Development Wealth Disparities

43. 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.

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

45. 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.

46. 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.

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

48. 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.

49. Basic Needs

50. 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%.