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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). - PowerPoint PPT Presentation
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GEOG 135 – Economic GeographyProfessor: Dr. Jean-Paul Rodrigue
Hofstra University, Department of Global Studies & GeographyHofstra University, Department of Global Studies & GeographyHofstra University, Department of Global Studies & Geography
Topic 1 – Overview of Economic Geography
A – Approaching Economic GeographyB – Theories in Economic GeographyC – GlobalizationD – Economic Development
© Dr. Jean-Paul Rodrigue
The world is not random… the spatial order of the economy
What is located where, why, how?
© Dr. Jean-Paul Rodrigue
An Economic Hierarchy of Activities
Tran
spor
t and
telec
omm
unica
tion
Quaternary• Information and research• Management and decision making
Tertiary• Retail and wholesale• Personal services
Secondary• Manufacturing and processing• Power generation
Primary• Agriculture• Gathering and extractive industries
Adde
d Va
lue
© Dr. Jean-Paul Rodrigue
The Primary Sector (Agricultural Fields in Paraguay)
© Dr. Jean-Paul Rodrigue
The Primary Sector (Open Pit Coal Mine, Utah)
© Dr. Jean-Paul Rodrigue
The Secondary Sector (Chicago)
© Dr. Jean-Paul Rodrigue
Tertiary Sector (West Edmonton Mall)
© Dr. Jean-Paul Rodrigue
The Tertiary and Quaternary Sectors (Hong Kong Skyline)
© Dr. Jean-Paul Rodrigue
The Tertiary Sector: (Container Yard, Veracruz)
© Dr. Jean-Paul Rodrigue
A - APPROACHING ECONOMIC GEOGRAPHY1. Defining Economic Geography2. Economics and Economic Geography3. Space, Place and Scale4. Themes for Approaching Economic Geography
© Dr. Jean-Paul Rodrigue
Defining Economic Geography
■ Subdiscipline of geography concerned about:• The spatial organization and distribution of economic activities:
• Production (primary, secondary, tertiary).• Transportation.• Communication.• Consumption.
• The use of the world’s resources.• The geographic origins, structure, and dynamics of the world
economy.• Patterns: Where activities are and how are arranged.• Processes: Why and how activities have located.• Impacts: How activities have an impact on each-other and geography.
Explain what economic geography is and provide an example of a spatial characteristic of economic activities.
© Dr. Jean-Paul Rodrigue
Global Manufacturing, 2009
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© Dr. Jean-Paul Rodrigue
World’s Largest Cities, 2010
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© Dr. Jean-Paul Rodrigue
World’s Major Container Ports, 2012
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© Dr. Jean-Paul Rodrigue
Passenger Traffic at the World’s Largest Airports, 2010
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© Dr. Jean-Paul Rodrigue
Global Submarine Cable Network
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© Dr. Jean-Paul Rodrigue
Economics and Economic Geography
Economics
• 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.
Economic Geography
• 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.
Discuss the main differences between economics and economic geography.
© Dr. Jean-Paul Rodrigue
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.
© Dr. Jean-Paul Rodrigue
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.
© 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)
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© 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 (2010-2015)
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© 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 (workforce participation).
© Dr. Jean-Paul Rodrigue
World’s Major Cultural Regions
WesternSlavic-Orthodox
Latin American African
Islamic
Western
Hindu
Confucian
Islamic
© Dr. Jean-Paul Rodrigue
Essay: The Themes of Economic Geography
Elaborate about the four main themes of economic geography.
© Dr. Jean-Paul Rodrigue
B – THEORIES IN ECONOMIC GEOGRAPHY1. Location Theory2. Political Economy
© Dr. Jean-Paul Rodrigue
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.
© Dr. Jean-Paul Rodrigue
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
Location
Basic Location Factors
Site
Accessibility
Socioeconomic Environment
Land, utilities, visibility, transportation (local access), amenities
Labor, materials, energy, markets, suppliers / customers
Capital, subsidies, regulations, taxation, technology
Macro (national)
Micro (local)
Meso (regional)
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© Dr. Jean-Paul Rodrigue
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?
© Dr. Jean-Paul Rodrigue
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).
© Dr. Jean-Paul Rodrigue
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.
Explain the nature of capitalism and the circular flows of capital.
© Dr. Jean-Paul Rodrigue
The Circular Flow in the Capitalist System
(sales)ResourceMarket(prices)
(consumption - resources)Businesses & Government(production)
(sales)ProductMarket(prices)
(production - labor)Households(consumption)
Goods &Services
$ to pay for consumption$ from product market
Goods &Services
Goods& Services Labor
Income from work
Savings &Investment:Capital Markets
Public Goods: Taxation & Provision
$ to pay for resources
© Dr. Jean-Paul Rodrigue
C – NEW ECONOMIC GEOGRAPHY (GLOBALIZATION)1. Economic Globalization2. Transnational Corporations
© Dr. Jean-Paul Rodrigue
Major Forms of Globalization
Form Cultural / Social Political EconomicNature How globalization
changed human behavior?
What forms of regulation or control are linked with globalization?
How globalization influences wealth creation and distribution?
Outcomes HomogenizationHybridizationRejection
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?
© Dr. Jean-Paul Rodrigue
Economic Globalization
■ Growing interdependencies• Individuals and corporations impacted by processes taking place
elsewhere.■ Key trends impacting interdependencies• 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?
© Dr. Jean-Paul Rodrigue
The Drivers of Economic Globalization: Connecting Different Chains
IntegrationRegulatory
chains.Harmonization of
regulatory regimes.
Trade agreements.
ProductionSupply chains.
Offshoring.Global
production networks.
TransportationTransport chains.Containerization.
Transborder transportation.
TransactionsInformation chains (ICT).Capital for
investments.Credit for
transactions.
© Dr. Jean-Paul Rodrigue
Economic Integration Levels, 2011
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© Dr. Jean-Paul Rodrigue
Examples of Globalization in the Service Sector
Sector Driver ResponseRetail Increase in disposable income
Cultural homogenizationEmergence of brand names
Chain storesGlobal products
Tourism Increase in disposable incomeAvailable leisure timeAffordable air travel
Mass tourismChain hotels / resort areas
Telecommunication Technological innovations (WWW, mobile)Privatization (mostly)
Ubiquitous networks and accessGlobal telecom carriers
© Dr. Jean-Paul Rodrigue
International Tourists Arrivals and Receipts, 1950-2016
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
0
200
400
600
800
1000
1200
1400Arrivals (millions)
Receipts (billions of $US)
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© Dr. Jean-Paul Rodrigue
Diffusion of Telecommunication Services, 1985-2016
0
1,000,000,000
2,000,000,000
3,000,000,000
4,000,000,000
5,000,000,000
6,000,000,000
7,000,000,000
8,000,000,000Cellular Phone Subscribers
Fixed Broadband Subscriptions
Mobile Broadband Subscriptions
Internet Users
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© Dr. Jean-Paul Rodrigue
Corporations in the Global Economy
■ Multinational corporation (MNC)• Provides goods and/or services.• A corporation that takes a global approach for:
• Its inputs (raw materials, parts).• Its outputs (customers).
• Different parts of the industrial system are located in places where they are the most productive.
Inputs OutputsMNC
© Dr. Jean-Paul Rodrigue
What Multinational Corporations are Trying to Achieve to Compete?
Lower production costs• One of the main goals of a corporation. Exploitation of comparative
advantages.
Stability of prices and deliveries• The rationale of low costs must also take account of price changes of raw
materials and parts. Risky to relocate (long-term investment) to take advantage of conditions that can change on the short term.
Product quality• Performance, service and maintenance. A quantitatively competitive product
has limited advantages if not qualitatively competitive.
Production and distribution flexibility• Facing changes in the demand confers a notable advantage.
© Dr. Jean-Paul Rodrigue
Types of Multinational Corporations by Strategy
Raw Materials Seekers• Lower input costs• Resource acquisition• First MNCs to emerge
Market Seekers• Achieve economies of scale• Expand market• Large investors
Minimal Cost Seekers• Look for comparative advantages• Lower production and distribution costs• Remain competitive
© Dr. Jean-Paul Rodrigue
The World’s 20 Largest Corporations by Revenue, 2017 ($US millions)
Walmart
State Grid
Sinopec Group
China National Petroleum
Toyota Motor
Volkswagen
Royal Dutch Shell
Berkshire Hathaway
Apple
Exxon Mobil
McKesson
BP
UnitedHealth Group
CVS Health
Samsung Electronics
Glencore
Daimler
General Motors
AT&T
EXOR Group
0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000
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Explain what are multinational corporations, their role and function.
© Dr. Jean-Paul Rodrigue
D – ECONOMIC DEVELOPMENT
1. The Notion of Development2. Wealth Disparities
© Dr. Jean-Paul Rodrigue
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:• 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• 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
Conditions Outcomes
-Health-Education
-Quality of life
-Rights-Equity
-Rule of law
-Employment-Surplus
Human Capital
Physical capital
Development
Social Political
Economic
Explain the main conditions and outcomes of economic development
© Dr. Jean-Paul Rodrigue
Waves of Development
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1785 1845 1900 1950 1990
Water powerTextilesIronMechanizationCommerce
SteamRailSteelCotton
ElectricityChemicalsInternal combustion engine
PetrochemicalsElectronicsAerospace
Digital networksSoftwareNew MediaBiotechnology
60 years 55 years 50 years 40 years 30 years (?)
Pace
of i
nnov
atio
n
1st Wave 2nd Wave 3rd Wave 4th Wave 5th Wave
© Dr. Jean-Paul Rodrigue
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
Global Gross Domestic Product and Human Development Index, 2010
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© Dr. Jean-Paul Rodrigue
Share of the World GDP, 2016 (Current USD)
United States25%
European Union22%
China15%
Japan7%
Germany5%
United Kingdom3%
France3%
Rest of the world21%
© Dr. Jean-Paul Rodrigue
World Nominal GDP, 2007, 2016 (in billion USD)
United States
China (PRC)
Japan
Germany
United Kingdom
France
Brazil
Italy
India
Russia
Canada
Australia
South Korea
Spain
Mexico
0 4,000,000 8,000,000 12,000,000 16,000,000 20,000,000
2007 2016
© Dr. Jean-Paul Rodrigue
Countries with More than Half of Population in Extreme Poverty, 2011 (less than $1.25 per day)
LiberiaBurundiRwanda
MalawiTanzania
MadagascarNigeriaZambia
SwazilandCentral African Republic
ChadMozambique
Dem. Rep. of CongoBurkina Faso
NepalHaiti
AngolaRepublic of Congo
Sierra LeoneMali
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.