Chapter 1 Economic Geography:An Introduction

• Geographic Perspectives

• Economic Geography of the World Economy

• Globalization

• World Development Problems

• Four Major Questions of the World Economy

• Political Economies

• Geographical Information Systems

Geographic Perspectives

• Barney Warf’s Style: anything goes

• The geographic perspective

• Key Point: Why are activities located where they are? Space and time are interdependent

• Geographic Perspectives: Fig 1.1, Fig 1.2

Economic space is highly unequal

Economic Geography as a field

Figure 1.1 Cartogram of GNPAreas are NOT proportional to population Area looks

too large

Figure 1.2 GDP per capitaHighly variable among countries

Geographic Perspectives – Economic Geography

• Different paradigms abound in economic geography– Logical positivism, use of scientific method

(development of hypotheses, data collection, and development of predictive models

– Predominant approach to location theory and models of spatial interaction, representation of spatial structures, based on “homo economicus” –

– Other approaches: behavioral, humanist, structuralist, post-structuralist & the “cultural turn”

Economic Geography of the World Economy

• The global perspective – an interdependent network of people and industries linked in a dynamic system of resource distribution, wealth creation, and power structures

• Shifting technologies, geopolitical forces, transportation and IT, culture, environment

• Transport & communication cost reductions• Fall of centrally planned economies• Rise of global capital markets• Rise of institutions such as World Bank, IMF,

WTO, OPEC, OECD….

Figure 1.3 The Global North and the Global South

Crude Oil – OPEC & Recent TrendsPrice Spike

2008 2010 now

$140 Peak

$769/15/10

Recent Oil Prices from WTRG.com

The 2008 Price Spike In Crude Oil

Variations in Economic Structure Gross National Income

Source: World Bank (2010) World Development Indicators

Country GroupPopulation 2008

MillionsGNI/Capi

ta

GDI Growth

Rate per Capita

2007-2008

GNI/Capita at Purchasing

Power ParityLow Income 973 $564 4.1% $1,407Middle Income 4651 $3,260 5.0% $6,154High Income 1069 $39,345 zero $37,141World 6692 $8,613 0.8% $10,357

Global Shares of Population and Gross National Income (2008)

16%

70%

15%

73%

26%

1%

0% 10% 20% 30% 40% 50% 60% 70% 80%

High Income

Middle Income

Low Income

GNI

Population

Structure of Production (% of GDP)

Growing Inequality

Hollowing ofIndustry Decrease in

Agriculture, Services Growth

Share of Global GDP/GNI Agriculture Agriculture Industry Industry Services Services

1965 2008 1965 2008 1965 2008 2003 2008Low 9% 3% 44% 25% 28% 29% 28% 46%Middle 12% 28% 19% 10% 34% 37% 45% 53%High 79% 69% 5% 1% 43% 26% 54% 73%World $1,759 $60,587 10% 3% 40% 28% 51% 69%

The Clark-Fisher Model of Structural Change

Time

Share

of

Ou

tpu

t

Agriculture

Manufacturing

Services

Is This Model Inevitable?

Distribution of Gross Domestic Product (%)

Why so high &why the decline?

GDP = Final Sales to Government, Consumers & Investment

GlobalIncrease in Trade

Note: 2006 Exports includes services

Consumption Investment Government Exports1965 2008 1965 2008 1965 2008 1965 2008

Low 70% 75% 19% 27% 11% 9% 7% 29%Middle 67% 56% 22% 30% 11% 14% 17% 29%High 61% 62% 17% 21% 22% 18% 13% 26%Japan 59% 57% 28% 24% 12% 18% 11% 14%U.S. 63% 70% 12% 19% 25% 16% 6% 11%World 63% 61% 18% 22% 19% 17% 12% 27%

Imports/Exports 2006 ($ billions)

High Income havemuch stronger tradein services than Low and Middle Income

The U.S. Share ofServices Trade isvery high

Total Merchandise ServicesExports Imports Exports Imports Exports Imports

Low 434 512 323 389 111 123Middle 3771 3456 3312 2958 459 498High 10651 10955 8451 8985 2200 1970Japan 765 714 650 580 115 134U.S. 1436 2227 1038 1919 398 308World 14852 14908 12085 12327 2767 2581

Structure of Merchandise Exports (%)

Fuels,Minerals,Metals

OtherPrimary

Commodities

Machinery&

TransportEquipment

Other Mfg. Textiles &Clothing

1965 1992 1965 1992 1965 1992 1965 1992 1965 1992LowIncome

16 21 60 17 1 9 23 53 12 26

MiddleIncome

27 32 46 19 14 18 13 31 3 10

OilExporters

80 92 16 2 0 1 3 5 0.1 1

HighIncome

9 7 21 11 31 43 39 39 7 5

U.S. 8 6 27 14 37 48 28 32 3 2J apan 2 1 7 1 31 66 60 31 17 2World 15 13 26 13 25 37 34 38 7 6

Food FuelsOtherPrimaryCommodities

Machinery&TransportEquipment

Other Mfg.

1965 1992 1965 1992 1965 1992 1965 1992 1965 1992LowIncome

20 9 5 9 8 9 31 34 34 40

MiddleIncome

15 11 8 10 11 6 30 38 34 35

OilExporters

22 15 2 2 5 5 32 40 40 39

HighIncome

19 10 11 9 20 6 19 35 31 41

U.S. 19 6 10 11 20 4 14 41 36 38

Structure of Merchandise Imports (%)

IndustrialMarket

Economies

NonreportingNonmember

High Income OilExport

DevelopingCountries

(From/To) 1965 1985 1965 1985 1965 1985 1965 1985All Trade:Developing 67 63 8 7 1 2 25 30High Income OilEx.

70 59 (.) (.) 3 1 27 40

IndustrialMarket

70 71 2 2 1 3 27 24

ManufacturesDeveloping 47 56 19 8 2 4 32 32High Income OilEx.

30 47 0 0 21 16 49 36

IndustrialMarket

66 70 2 2 1 3 31 25

Origin and Destination of Merchandise Exports (%)

Globalization

• P.9 “processes that make the world, its economic system, and its society more uniform, more integrated, and more interdependent.” Some dispute uniform

• Elements: culture, consumption, telecommunications, economy, transnational corporations, investment, labor, services, tourism. Role of IT.

• Globalization & Local Diversity

Globalization and MNC’s

SampleU.S.

MNC’s Foreign Revenue

FDI in the U.S. – similar diagram could be drawn for any country

Another view of FDI

World Development Problems

• Environmental constraints

• The cycle of poverty (Fig 1.9)Low Real

IncomeUnemploymentUnderemployment

LowOutput /Productivity

RapidPopulationGrowth

Low LevelOf Saving

Low LevelOf Demand

Low levels ofInvestment inCapital deficiency

Four Major Questions of the World Economy

• What should be produced, at what scale of output, and with what mix of inputs?

• How should factors be combined? Labor, capital, resource factors, etc.

• Where should production occur?

• Who should get output? How should it be divided?

The Four Questions for the World Economy

Economics – Key Topics• Allocation of Scarce Resources• Markets for Production, Distribution, and

Consumption• The Division of Labor• Solving What, How, What Price, What

Quantity, and Where Production Takes Place

• Types of Economic Systems• Neoclassical versus Behavioral and

Structural Approaches

Political Economies

• Alternative Systems: capitalism, command, and traditional – with systems of power & class that shape output

• Capitalist System (Fig 1.11)• Command Economies• Traditional economies• The general demise of command and

traditional economies in the face of globalization

The Circular Flow in the Capitalist System (set in space and time)

(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

Geographical Information SystemsManifold applicationsdisplaying attributes-Examples in this figure-Many other layers possible-Display current patterns and changes-Integrated with data from remote sensed sources with human system data bases including geocoded economic information

Summary and Plan

• The chapter plan

• Learning objectives at beginning of each chapter

• Study questions at end of each chapter

• Key terms

• Suggested readings

• Web sites