2/11/2019

Dr. Nguyen Thi Phuong Chau

Course email: weg_worldeconomicgeography@yahoo.com

The changing world economy

Aims:
1. Studying Economic Geography
2. Economic Organization and Spatial Change
- Evolution of Capitalism
- Technology and economic Development
3. Spatial Divisions of labor
- Globalization and changing spatial divisions of labor
- Outsourcing and global commodity chains

1
 2/11/2019

1. Studying Economic Geography

 Rapidly increasing interdependence of the world economy 
regions and cities everywhere depends increasingly on
complex interactions  economy of global scale 
‘globalization’.
 World’s 6.2 billion inhabitants now are integrated into global
markets for goods and finance.
 In late 1970s only a few less developed countries (LDCs) had
opened their borders to flows of trade and investment capital.
 Three giant population blocs – China, Russia, and India have
been drawn into the global market.
 Emerging of NICs, now is BRIC/BRICS, have already become
involved in deep linkages.

1. Studying Economic Geography

 Less developed countries (LDCs): Countries that are not fully
industrialized or do not have sophisticated financial or legal
systems. These countries, also called members of the Third
World, typically have low levels of per-capita income, high
inflation and debt, and large trade deficits.
 Newly industrializing countries (NICs): Developing country
whose economy is supported to a greater or lesser degree on
exports from internally generated industrial production, such as
Argentina, Brazil, South Korea, Mexico, and Taiwan, rather than
on agricultural products or commodities.
 BRICS: Brazil, Russia, India, China, and South Africa

2
 2/11/2019

1. Studying Economic Geography

We are living through a transformation that will rearrange the politics

and economics of the coming century. There will be no national
products or technologies, no national corporations, no national
industries. There will no longer be national economies, at least as we
have come to understand that concept … As almost every factor of
production – money, technology, factories, and equipment – moves
effortlessly across borders, the very idea of an American economy is
becoming meaningless, as are the notions of an American
corporation, American capital, American products, and American
technology.
Reich (1991:3,8)

• All sorts of people in different places are affected by globalization.

1. Studying Economic Geography

General economic
forces

Socioeconomic
Local variability
relationships

combination
General Unique
-spatial change-
Universally applicable Something distinctive

 The point emphasize at the moment is that all these direct, indirect and
interaction effects are important to an understanding of spatial change.
They are all implicated, in accounting for both the general and the unique.

3
 2/11/2019

1. Studying Economic Geography

Question
 Furthermore, how should we approach the local,
regional and national implications of less newsworthy
but equally profound changes in the world economy,
such as the remarkable developments that have taken
place in international finance and banking?

2. Economic organization and spatial change

 ‘Economic organization’ approximates to the concept of mode
of production: the way human organizes their productive
activities and reproduce their socioeconomic life.
 Five major modes of production (or forms of economic
organization):

Subsistence Slavery Feudalism Capitalism Socialism

The national Laborer is - Peasant/ - Laborer - Refers to the

economy bought and laborer owns owns no social relation
supplies for sold, along instruments of instruments - Production for
its own with other production, of production use is
demands instruments - Feudal lord - but is free coordinated
of production owns land & to sell his or through
products her labor conscious
- Peasant is tied power economic
to a specific tract planning
of land

4
 2/11/2019

2. Economic organization and spatial change

 The distinguish of modes of production: differences in the relations
between the factors of production (land and other natural resources,
labor, physical and human capital)
 Subsistence
 Slavery (laborer is bought and sold, along with other instruments of production)
 Feudalism (peasant laborer may own some instruments of production, but land
and a certain amount of product is the property of the feudal lord and the peasant
is legally tied to a specific tract of land)
 Capitalism (laborer owns no instruments of production but is free to sell his or
her labor power)
 Socialism

• Different modes of production are also characterized by different

forces of production (technology, machinery, means of
transportation) and by different social formations (specific
proportions of different social classes)

2. Economic organization and spatial change

 Evolution of capitalism:
 First phase: Competitive capitalism
 Second phase: Organized capitalism
 Third phase: Globalized capitalism

5
 2/11/2019

Evolution of capitalism

2. Economic organization and spatial change

 Business services
 Transnational corporations (TNCs)
 Flexible production systems
 Disorganized capitalism

6
 2/11/2019

2. Economic organization and spatial change

 The most important economic sectors in the informational

economy are:
- High-technology manufacturing
- Design-intensive consumer goods, ranging from high-
fashion footwear to entertainment products. Selling in
market niches around the world.
- Financial and business services.

2. Economic organization and spatial change

Technology and economic development:

 Geographical path independence
 Creative destruction
 Technology systems
 Initial advantages
 Competitive advantages
 Diminishing returns
 Increasing returns to scale

7
 2/11/2019

2. Economic organization and spatial change

 Once dominant technologies emerge in a region, they

become progressively more “locked in”. Small initial
advantages in the use the critical new technologies and
subsequent refinements in them bring much larger or
increasing returns to those firms (and places) that have
them.

3. Spatial divisions of labor

 In Fordist period, the basic division of labor was organized
within the national economy or within regional parts of the
national economy.
 International division of labor
 External economies of scale
 Agglomeration: is a major feature of economic organization
across a large number of manufacturing industries.

8
 2/11/2019

3. Spatial divisions of labor

 In addition to regional specialization and regional dispersal, four
other spatial divisions of labor can be identified:
 Functional separation with management/research activities in
major metropolitan regions: skilled labor in ‘old’ manufacturing
areas, and unskilled labor in regional peripheries.
 Functional separation with management/research activities in
major metropolitan regions: semi-skilled labor and unskilled
labor in regional peripheries.
 Functional separation with management/research: skilled labor
in more advanced industrial regions, and unskilled labor in the
global periphery.
 Division between areas with investment, technical change and
job expansion, and other areas with stagnant and progressively
less competitive production and job loss.

3. Spatial divisions of labor

 Components or specific services are ‘sources’ or obtained

from multiple suppliers in different countries
(Outsourcing) and assembled in several.
 Offshoring
 Neoclassical economics
 Captive outsourcing
 Offshore outsourcing
 Economic of scale
 Offshore financial centres
 See more at http://www.sourcingmag.com/content/what_is_outsourcing.asp

9
 2/11/2019

Interrelationships surrounding economic

organization and spatial change

By dictionary:
Study of both quantitative and qualitative aspects of human population. Quantitative aspects
include composition, density, distribution, growth, movement, size, and structure of the population.
Qualitative aspects are the sociological factors such as education quality, crime, development, diet
and nutrition, race, social, class, wealth, well being.
(http://www.businessdictionary.com/definition/demography.html)

10
 2/11/2019

1. Studying Economic Geography

- Discussion -
1. What factors push the changes of economic
organization?
2. How space in geography affects the changes of economic
organization?
3. How economic organization and spatial change affect the
changes of Demographic, Political, Cultural, Social, and
Technological?
4. What ‘Comparative Advantages’ can help the host
countries call for the foreign investment to develop the
economy?

1. Studying Economic Geography

- Discussion -
The factors of geographical space affect the changes of
economic organization:
 Tracing the location of natural resources
 Income inequality between DCs and LDCs
 Comparative advantages
 Natural resources
 Labor
 In-side market
 Good government
 Good institutions and policies

11