ch08 economic dev pt ii

Economic Structure of Countries & Regions & Globalization

Ch. 8 – Geographies of Economic Development

Economic Activities• Primary activities – natural resource extraction &

production – agriculture, mining, fishing, & forestry• Secondary activities – process, transform, assemble raw

materials into food products & manufactured goods such as textiles, furniture, automobiles, garments, etc.

• Tertiary activities – sale & exchange of goods & services, warehousing, retail, personal services, accounting, advertising, entertainment, professional services, etc.

• Quaternary activities – processing of knowledge & information. Data processing, information storage & retrieval, education, research & development.

Geographical Divisions of Labor• National, regional, & locally based economic

specializations evolving out of world-system of trade & politics & with locational needs of successive technology systems.

• Economies with primary-sector activities – low per capita GDP, mineral extraction & agriculture, exception is Oil extraction

• Africa & Asia – 50-75% of labor force engaged in primary economic activities

International division of labor

Specialization by country / products for export: • Globally-large Secondary sector, higher GDP• Argentina, South Korea are nations with large

exports of products, agricultural & manufactured goods

• Specialized manufacturing industries in Core & semi-Peripheral countries

Newly industrializing countries (NIC’s)

• Former peripheral nations – acquired significant industrial sector via Foreign direct investment

• 7 NIC’s including China, South Korea, Mexico, Brazil, India, Indonesia & Thailand in order

• China – 2nd largest exporter of manufactured goods Brazil & India rank 9th & 10th in manufacturing output 2010 or MVA Africa 1%

• Asian NIC’s manufacturing growth is highest

Asian “Tigers”

Largest gains in manufacturing growth:• South Korea• Hong Kong – separate political entity from China• Taiwan• Singapore• Malaysia• Thailand• All have access to Ocean Port shipping for Export

Post Industrial Economies• Core nations – Tertiary & Quaternary sectors

dominate the workforce with smaller, highly productive secondary sectors. 2% primary, 22% secondary,

• United States - share of world manufacturing output was 40% in 1960’s, now 22%

• Japan - was 6% in 1960’s to 18% in 2010• Tertiary & Quaternary sectors only significant in U.S. –

50% Tertiary, 25% Quaternary – knowledge-based activities part of Globalization

Knowledge & Technology• Core dominance via tech & knowledge • Knowledge is more important than physical &

human resources – ½ U.S. GDP based on knowledge production

• Peripheral nations always at disadvantage, do not have same economic specialization, & educational institutions

© 2013 Pearson Education, Inc.

Stages of Economic Development

Figure 7.15 A model based on the idea of successive stages of economic development, nowregarded as overly simplistic.

International Trading blocs dominate economic trade

Global Trading Blocs:• Western Europe, former African, India,

Caribbean, & Austral nations• North America & Latin American nations• Former Soviet nations – border western Russia• Japan & East Asian states, Saudi Arabia & Bahrain• Blocs are Core & semi Periphery & Oil-producing

nations


Economic Structure, (cont’d)

• Trading blocs• Autarky• Neoliberal polices

Figure 7.8 Manufacturing in South Korea

Figure 7.9 World economic forum in Switzerland, 2011

Autarky & world trade trends• Countries that do not contribute significantly to world

flows of imports & exports• Smaller peripheral countries: Bolivia (S. America), Burkina

Faso, Ghana, Malawi, Tanzania (Africa), & Samoa (Micronesia)

• Trend toward intensification of trade within & between core regions at expense of peripheral countries except for Oil.

• Innovations – transport, communications, manufacturing diminish constraints of distance.

• Intervening opportunities are regionally significant but not as much globally

Global politics & trade

• Neoliberal policies – favor unregulated capitalism but human rights suffer & transnational corporations concentrate wealth & advantage

• Persistence of peripheral dependence on trade with core countries that are proximally closer in distance. No big surprise, advantage & wealth concentrates within Core while choking off any hope of development at the same scale in periphery.


Dependency

Figure 7.10 One reflection of dependency: the index of commodity concentration of exports, 2002

Economic dependency

• Forced Dependency created by Core’s dominance of periphery countries for natural resources without investing in the population. Morally lacking in regard for culture, environment & human rights.

• Dependency is an artificial situation caused by focus on market gain only.

• Results in a narrower economic base for peripheral countries. No manufacturing & export of a few resources – agriculture or minerals.

Figure 7.12 Cocoa production, GhanaCoffee bananas, & cocoa are grown in tropical soils, often at higher altitudes


The 2008 debt crisis

Figure 7.11 The 2008 debt crisis

International Debt

• Another outcome of Core dominance & lack of investment in Peripheral infrastructure

• Ridiculous amounts of debt service levels to keep Core markets profitable & periphery in debt.

• At root is structural inequality of world economy! • Terms of trade always benefit Core who sucks up

natural resources of Primary Producers/Exporters without benefit to periphery & forces issues of sustainability

• Ratio of prices at which exports & imports are exchanged on global markets.


Fair Trade

Figure 7.13 Fair trade coffee in Uganda Figure 7.14 A fair trade shop in Canterbury, England

Fair Trade – Mobilization against Globalization

• Movement result of increasing awareness within Core that small producers supply the global economy, but make the least profit.

• Now a global network of Producers of traders, marketers, advocates, & consumers building equitable trading relationships.

• 750 Fair Trade-certified retailers & “world shops” supporting periphery producers.

• Fair Trade Bananas = 20% of retail market• Fair Trade Coffee = U.S. $600 M in Sales – 2009• Ethical Trading Initiative (ETI) Multiagency groups of companies

& non-govt. orgs (NGO’s) – basic code of labor practices to protect Workers, conditions, living wage, 48 hr.

Regional Economic Development

• Geographical path dependence – relationship between present-day activities in a place & the past patterns & relationships – i.e. infrastructure, educational institutions, early manufacturing, history of economy

• Initial advantage – importance of early start in a new business that take advantage of:

• External economies – existing labor force, consumer markets, fixed social capital, etc. Educated financial workers take positions in newly formed investment firms targeted towards upper middle class technical labor force

Regional Economic Cores

• Agglomeration effects are associated with kinds of economic linkages & interdependencies

• Cost advantages that accrue to companies because of location among functionally-related activities

Regional Economic Cores cont.• Backward linkages – firms supply new industry with

components, supplies, specialized services, consulting, or facilities to support industry.

• Forward linkages – develop as firms integrate finished products into their own processing, assembly, finishing, packaging or distribution operations.

• Ancillary industries that support industry such as maintenance & repair, recycling, security & business services

• An established pool of specialized labor force with specific skills and expertise that are attractive to other firms. Engineers, accountants, marketing professionals can work with many business types.

Regional & Local economic growth

• Cumulative causation is spiraling accrual of advantages of geographic location as a result of external economies, agglomeration effects & localization. Specialized / trained work force in movie industry located in a region with accrual of proximity of forward, backward & ancillary industries. Actors, editors, technical professionals, support & construction professionals, service & transport professionals. Media & print industries.

• Infrastructure - roads, airports, residential & commercial areas, school districts, recreational activities, physical amenities from environment, etc.

• Backwash effects – out-migration of trained work force, investment capital outflow to other regions, states, etc., shrinking local tax bases

Modification of Regional Core-Periphery Patterns

• Spread effects positive impacts on a region from economic growth of another core economic region.– Creates demand for food, consumer products, other

manufacturing industries, construction, roads, public services, etc. to support a growing community.

• Import substitution – closely imitated product or service replaces more expensive or core related product or service. – Businesses copy an innovative idea or service and create

new forward and backward regional linkages resulting in more positive spread effects.


Regional Economic Development, (cont’d)

• Modification of regional core-periphery patterns

• Spread effects• Import substitution• Agglomeration

diseconomies• Deindustrialization• Creative destruction

Figure 7.18 An abandoned Packard automobile plant in Detroit, Michigan.

Deindustrialization & Creative Destruction

• Agglomeration diseconomies – negative economic effects of urbanization & concentration of industry in regions, air pollution, traffic, over-crowding, lack of housing, high housing costs, substandard housing, health impacts, crime, increased public service costs. California metropolitan areas.

• Deindustrialization – Regional disinvestment in formerly prosperous industrial core regions such as Detroit, MI by relocation to Asia & S. Asia

Government Intervention

• National governments may intervene to redirect regional economic growth to prevent disaster

• Regional planning – shapes residential & commercial, industrial landscapes via land planning – environment, natural resources, public health & welfare, green spaces for recreational & public use

• Growth poles – ‘propulsive industries’ generate most economic development; auto manufacturing, then aerospace & military industry, biotechnology & digital technologies

• Techno-poles- sites of high-tech industries emerge from regional specialization & direct foreign investment from core, Ex.: 4 Motors of Europe, Silicon Valley

Flexible Production Systems

• Neo-Fordism – mass production based on assembly-line techniques along with mass consumer consumption modified by more flexible production, distribution & marketing systems. Allows shifts to meet consumer demands

• Just-in-time production – vertical disintegration within large formerly functionally integrated firms, auto manufacturers, produce just enough for inventories to meet demands

• Between firms• Vertical disintegration evolution of large functionally integrated firms,

such as IBM, Kodak, into less management heavy organizations. Use more specialized subcontractors to provide components of production.

• Strategic alliances - agreement between transnational corporations to share technology, marketing networks, market research, product development to sell to consumers seamlessly, intensified globalization of standardized products. Sucks away labor rights, forces markets to accept products without reaction time. I’m not a fan of globalization!!!


Globalization and Economic Development

Figure 7.20 The impact of containerization on world trade

Figure 7.21 24-hour trading between major financial markets

“Offshore” Economic Theft by Corporations• Maquiladoras & Export-Processing Zones – direct result of lifting of trade barriers

courtesy of NAFTA, benefits manufacturing firms in cheaper labor costs, less environmental regulations in Mexico. Consumer pays less in short term, more profit, loss of jobs in the U.S.

• Export-Processing Zones – financial incentives to Core Export-Import business• Retailing Chains & Global Sourcing - nice way of saying goodbye to well paying

employment in the U.S. Advantages go to large corporations to keep profits high• New Geographies of Office Employment – another nice way of saying goodbye to

U.S. jobs although results in cross-cultural exchanges between 2 similar populations of India & U.S. & other nations.

• Clusters of Specialized Offices – Outsourcing or Temporary Employment, no long term advantage for Labor

• WAL-MART – Low prices at expense of Labor. Costs U.S. Taxpayers due to lack of health benefits. Monopolistic control of transport of goods transnationally. Worth Billions. Gives Nothing. : ) OCCUPY WAL-MART

• Offshore Financial Centers – Another way for Corporation to evade paying Taxes to support the country they operate from. Profits from overseas industry do not add to nations’ GDP.


Geographies of Office Employment• Decentralization

– Back-office functions means rote jobs with job security

• Outsourcing – Temporary workers with no rights

• Clusters of specialized offices

• Offshore financial centers Figure 7.30 Workers at a call center in India.


Economic Globalization• Just-in-time production• Vertical disintegration• Strategic alliances

• Export-processing zones• Homogenization of

consumption• Experience economy

Figure 7.27 Principal maquiladora centers on the United States–Mexico border

Tourism & Economic Development• Ecotourism - Tourists visiting Tropical countries, adds to

peripheral GDP. Hopefully maintains biodiversity.• Experience Economy & Place Marketing - Tourism is

the 4th in a sequence of phases of economic organization. 1. Shift form agrarian to 2. industrial economy to a 3. service economy & finally to an 4. experience economy by staging experiences. Deliberate manipulation of Culture to appeal to large segments of population: Museums, Staged-historical events, waterfronts & historic districts, sport arenas, concerts, professional conferences, marketing of “place”.


Future Geographies• Availability of resources• Expansion of world

economy• Globalization of

industry• Transportation

technologies– High-speed rail systems– Smart roads– Smart cars

Figure 7.34 Energy-consuming goods: in an Apple Store in Beijing, China