Review Images #6: Economic Geography

Commodity Chain (Supply Chain)

How Can We Measure The Value of Economic Production?

• Gross National Product (GNP): value of goods and services produced by a country in a year

• Gross Domestic Product (GDP): value of goods and services produced in a country in a year

• Gross National Income (GNI): value of goods and services produced in a country in a year plus net income from other sources

Additional Key Measure of Economic Development:

Labor Force Structure Percent Employed in Primary, Secondary, Tertiary Sectors

Quaternary: information generation & sharing

Quinary: high level decision making

Percent of Labor Force Engaged in Agriculture

Other Statistics We Can Use

and many more …

2016 U.N. HDI

Regional Trends? Outliers?

Single best statistic for measuring standard of living

Shortcomings of GNP, GDP and GNI?

• Only measure formal economy–Do not include subsistence, informal and

illegal (black market) activities• Do not measure true costs of

production (externalities)–Examples: environmental effects, health

effects, working conditions, etc.

Example: Illegal Activities That Are Not Calculated in GDP

Example: Externalities

Example: Externalities

As China develops economically, a wealthier population purchases more cigarettes, which helps the economy in the short run, but will result in increased health care costs in the

future.

Example: Externalities

2013 Garment Factory Collapse 1000+ Died

Why Does Hans Rosling Say “Stop Calling Them

Developing Countries”?

Developed and Developing

Regional Trends? Outliers? Outdated?

Core, Periphery and Semi-Periphery

Global North - Global South“The Brandt Line”

1st, 2nd and 3rd World Countries

Why Is Scale Important?

GDP per capita

Walt Rostow

Economist

U.S. National Security Advisor 1966-1969

Rostow’s Stages of Growth Modelalso called Modernization Model, Take Off Model &

Ladder of Development

– Stage 1: Traditional Society - Subsistence– Stage 2: Preconditions for Take-off - Leadership

embraces modernization– Stage 3: Take-off - Industrialization, urbanization,

technology adoption– Stage 4: Drive to Maturity - Industrial

specialization, technology diffusion, international trade, slowing population growth

– Stage 5: High Mass Consumption - High incomes, diverse production, emphasis on tertiary sector

Neocolonialism

• Political colonialism has ended, economic colonialism continues …–Structuralist theory: economic disparities

are built in to the global economy; can not easily be changed

–Dependency theory: former colonies are still dependent on their former colonial powers

Wallerstein’s World Systems Theory

1. The world economy has one market & a global division of labor.

2. Although the world has multiple states, almost everything takes place within the context of the (a single) world economy.

3. The world economy has a three-tier structure (core, periphery and semi-periphery)

Barriers to Development: Low Standard of Living

Inadequate nutrition, health care, sanitation, drinking water, and lack of access to education. High rates of disease.

Barriers to Development: Foreign Debt

• World Bank & International Monetary Fund (IMF) loan money to developing countries

• Developing countries spend huge amounts of money repaying loans with interest, leaving little money for other development efforts

• Austerity (cost-cutting) measures can create social problems and unrest

Costs of Development: Export Processing Zones or

Free Trade Zones

Millions of people work in EPZs in 100+ countries producing clothes, shoes, electronics & toys

China’s Special Economic Zones (SEZs)

Shenzhen, China

Maquiladoras in Mexico

“Costs” of Development

Environmental Degradation & Desertification

Negative Impacts of Tourism

Uneven Development Within the State

• Government policies may give some producers an advantage over others– Subsidies (payments to producers)

– Import quotas (limits on what can be imported from certain countries)

– Trade agreements (WTO, NAFTA, etc.)• Governments may make investments

that give certain locations an advantage over others– Islands of development

Islands of Development

MicrocreditThe supply of loans, savings and other

financial services to the poor

Non-governmental Organizations (NGOs) Play a Key Role in

Development Efforts• More than 40,000 internationally

– Some have budgets & staff larger than countries!

Industrial Revolution• 1700’s - 1800’s• Began in UK, diffused to Europe, later to U.S.

and rest of world• Manual (hand) labor replaced by machines

– New energy source: burn coal steam– New machines produced textiles (fabrics) & iron– Trade expanded - new canals, roads, railroads &

ships helped transport• Early industrial locations were based on:

access to capital ($), coal fields and ports

World Coal Deposits

Location Theory•Weber’s Least Cost Theory: industry locates

where costs are lowest• Transportation

–Bulk losing industry: if raw materials are bulkier than end product, locate close to raw materials

–Bulk gaining industry: if end product is bulkier than raw materials, locate close to market (consumers)

• Labor–Unskilled: found everywhere–Skilled: more difficult to find

• Agglomeration: cluster together with similar industries to lower common costs

Location Theory: Hotelling

Locational interdependence: Location of Industry A depends on location of Industry B. Goal is profit maximization.

Location Theory: LoschLosch’s Zone of Profitability: businesses will identify a zone where profits outweigh costs

Early Industrial Regions Pre-1950

Western and Central Europe

North America

Manufacturing Belt - now called “Rust Belt”

Russia

East Asia

Fordist vs. Post-Fordist Style Production

• Fordist: production of goods at a single location

• Post-Fordist: production dispersed around the globe

Time-Space CompressionTime and space are “shrunk” by

increasing connectivity (advances in communication &

transportation)

DeindustrializationIndustries move or close

Deindustrialized region must “reinvent itself” and work through a period of high unemployment

Ex.: Bethlehem, PA

Closed steel manufacturing

facility to become multi-million dollar

casino!

From the Rust Belt to the Sunbelt

Sunbelt Has Gained Jobs Due To Relatively Low Labor Costs and Taxes

Read about the Sunbelt:http://geography.about.com/od/specificplacesofinterest/a/sunbelt.htm

Why The Sunbelt?“Industries such as aerospace, defense and oil boomed in the Sun Belt as companies took advantage of the low involvement of labor unions in the south .. and enjoyed the proximity to many U.S. military installations … The oil industry helped propel many southern states such as Texas and Louisiana forward … tourism exploded in Florida and southern California … high tech and new economy industries have been major drivers of growth in California and Texas as well as many other parts of the Sun Belt … More than a third of all Fortune 500 companies today are based in the belt with Texas and California among the top 3 states in the nation.” (New York #2)

Outsourcing and Offshoring

• Outsourcing: moving individual steps of the production process to an outside supplier (subcontracting)

• Offshoring: moving individual steps in the production process out of the home country

Tholon’s Top Cities for Outsourcing

What regional trends and patterns do you see in this

data?

“The Race to the Bottom”

A phrase used to describe the idea that companies are always looking for the cheapest labor. The location of cheap labor can change over time.

China’s Locational Advantage: Manufacturing

Special Economic Zones (SEZs):Regions with special government policies promoting

manufacturing for export

India’s Locational Advantage: Services

Populous, motivated, educated, English-speaking, wired to the world …

Manufacturing Beyond China

“… growing labor supply, improved productivity, increasing affluence, more attention to education and training, increasingly integrated free trade area and economic community …

Newly Industrialized Countries (NICs)

Mexico, Brazil, Turkey, South Africa, India, China, Thailand, Malaysia, Indonesia, Philippines

The 4 Asian Tigers• Focus on exports &

industrialization led to rapid economic growth from 1960’s to 1990’s

• Today:• Hong Kong & Singapore =

financial centers• South Korea & Taiwan =

global manufacturing hubs• All have educated populations

& high savings rates

South Korea, Taiwan, Hong Kong, Singapore

BRICS: Brazil, Russia, India, China, South Africa

Large, fast-growing economies, significantInfluence on regional affairs

MINTs: Mexico, Indonesia, Nigeria, Turkey

Busiest Ports of Call for Container Ships

What regional trends and patterns do you see in this data?

What does this tell us about development?

High Tech Corridors and Technopoles:Centers of R & D, High Tech

Manufacturing

Example: Silicon Valley, California (San Jose) Many more here: http://en.wikipedia.org/wiki/List_of_technology_centers