What are we seeing here? 10% What countries are in red? 10% each What country is in teal? 20% What countries are in yellow and blue? 25% each

CHRIS FOWLER OCTOBER 1 ST 2010 Economic Geography Geog 207 Lecture 2: The World Economy

Chapter 1 World Economy: An Introduction Geographic Perspectives Economic Geography of the World Economy World Development Problems Four Major Questions of the World Economy Political Economies Geographical Information Systems

Geographic Perspectives Barney Warf’s Style:  anything goes  Use what is useful Key Points for this course: Why are activities located where they are? - Requires a knowledge of economics, business practices, human behavior with regard to economic choices - Interaction of space and time Why do these activities create such an uneven (unequal) global landscape?  Requires a knowledge of underlying inequalities and differential access to resources of all types

Do we need space to understand the global economy? WRONG!

Yes

How does space effect the economy at small scales? Many, many answers to this question. No two geographers likely to agree. This course takes much of economics as a starting point  Homo economicus  Supply and demand  Opportunity costs  Profit seeking But geographers are, in general, much more willing to accept that these “rules” are just poor approximations.  Behavioralism  Humanism  Just the tip of the iceberg….

How do we understand the economy at broader scales? Interdependence  What happens in one place or time will shape/influence outcomes elsewhere  Ex. U.S. housing crisis led to near collapse in several major economies Dynamism  Relationships among places are constantly changing, and it is this change that makes space interesting  Ex. Low cost transportation is creating port cities in places with no history of economic activity at all Structured  The relationships among places need to be understood in terms of historical processes like inequality, colonialism, racism, etc… because they will shape future relationships as well  Ex. Australia and Hong Kong have had very different economic trajectories despite their nominally similar colonial past.

Some specific areas of investigation Technological change Geopolitics Cultural homogenization/localization 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….

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?

Figure 1.1 Cartogram of GNP Areas are (supposedly) proportional to GNP

Figure 1.2 GDP per capita Highly variable among countries

Figure 1.3 The Global North and the Global South

Variations in Economic Structure Gross National Income Source: World Bank (2010) World Development Indicators

Accessed at access date October 1 st 2010http:// High income Per capita Income: $41,674

Middle income Per capita income Egypt: $5,049 Per capita income Poland: $13,573

Accessed at access date October 1 st 2010http:// Low income Per capita income: $1749

Global Shares of Population and Gross National Income (2008)

Structure of Production (% of GDP)

The Clark-Fisher Model of Structural Change Time Share of Output 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 Global Increase in Trade Note: 2008 Exports includes services

Imports/Exports 2006 ($ billions) High Income have much stronger trade in services than Low and Middle Income The U.S. Share of Services Trade is very high

Structure of Merchandise Exports (%)

Structure of Merchandise Imports (%)

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

Sample U.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 Income Unemployment Underemployment Low Output / Productivity Rapid Population Growth Low Level Of Saving Low Level Of Demand Low levels of Investment in Capital 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) Resource Market (prices) (consumption - resources) Businesses & Government (production) (sales) Product Market (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 Systems Manifold applications displaying 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