GEOG 3404Economic Geography

Dr. Zachary KlaasDepartment of Geography and Environmental Studies

Carleton University

LECTURE 1:

Globalisation and the Factors of Production

Economic Geography: the subject matter of the discipline

The words “economic” and “geography” have their roots in the Greek language:

“Economic” comes from the Greek word oikos, meaning “home”.

The implication here is that economic matters are matters of tending to the requirements of one’s household – of taking care of

oneself and one’s family.Note the implication here that one is concerned with something

local. “Geographic” comes from the Greek word geos meaning

“earth”. The implication here is that geographic matters deal with land

and terrestrial space. Note the implication here that one is concerned with something of decidedly broader scope than the local – the regional, national

or global.

Theorising in Economic Geography: The Factors of Production

Economics concerns itself with production, which is the provision of items for people either to consume

(consumption) or to keep as valuable property (wealth). There are three “factors” of production, which account for

all possible forms of productive economic activity: Land / Natural Resources – any commodity which is provided

by the earth (e.g., a forest/the wood found there) Labour – the work one does, taken as a commodity (e.g.,

lumberjacking) Capital – any commodity which may be in turn used in further

production (e.g., a paper factory) Economic geography is concerned with the tracking of

production in geographic space.

Economic Geography: How do we come to understand it? What

are our models? The “normal science” modeling process:

Inductive models: Models based in our experience; models describing what we see in practice.

Deductive models: Models based on mechanisms which are rationally or inherently related; theoretical models.

Ideas about scientific modeling from Thomas Kuhn’s 1962 philosophy of science text The Structure of Scientific

Revolutions:Paradigms: Models with general applicability which attempt to

describe “reality” as science understands it.Anomalies: Elements of reality unexplained by scientific models.

The Paradigm of a “Globalising” World: Economic Geography in

the 1990s and 2000s. There is little doubt that the world of the decades of the 1990s and 2000s saw the assertive rise of “globalisation”

as a paradigm to explain great economic changes that were taking place.

The “death of distance”: many of the specific observed changes dealt with dramatic improvements to

transportation and communication, which lowered the cost of doing business across great distances.

The internet and ETF (electronic transfer of funds) in particular made it possible for business relationships to be essentially unhindered by a distance factor. The rise of “E-commerce” was thus a large component of a globalisation

paradigm.

Convergence: the “home” of economics closes in on the

“earth” of geography The communications theorist Marshall McLuhan

famously referred to the earth as a “global village”. If the claims of the globalisation theory are true, we are

witnessing a rapid convergence of our “local” lives with a new “global” culture.

Note that, as we initially observed, the very word “economics” comes from a Greek root referencing the local

or that which pertains to “home”, while the word “geography” comes from the Greek root referencing the

global or that which pertains to the “earth”. In that sense, “globalism” would be a very significant

development in the history of economic geography, in that it implies a convergence of scales of analysis in economic

geography.

The Mobility of Capital:Trans-National Corporations

(TNCs) This “death of distance” factor led, in turn, to capital being more mobile – corporations with assets in one

country, in other words, would have the ability to liquidate them quickly and transfer them to other countries.

Trans-National Corporations (TNCs) could therefore much more easily leave countries they deemed

unfavourable to their business needs and set up shop in other countries.

“The realities of globalisation” in this sense, is a sort of shorthand reference for the need to ensure that TNCs will

find one’s own country sufficient to provide for their business needs, as they can quite easily relocate

elsewhere. To “adapt to the realities of globalisation”, thus, is taken to be shorthand for accepting the heightened

power of the TNCs in a globalised world.

Globalisation: A Key Model in Economic Geography

Is this model inductive? Does it accord with our experience to say that we live in a world in which economic activities are integrated across large distances? Or is this

sometimes not true? Is this model deductive? Are there identifiable

mechanisms by which this integration necessarily takes place? Or are there countervailing mechanisms which tend

against integration rather than toward it? Is globalisation an exclusive paradigm? (TINA: “There

Is No Alternative.”) Are people who deny globalisation denying reality, purely and simply?

Or, are there anomalies? Are there things that “shouldn’t be happening” if the globalisation model is

accurate?

Perspectives on the paradigm: is “globalisation” real? Some views

discussed in Peter Dicken’s Global Shift.

Perspective 1: Yes, and we ignore it at our peril – because we will be left behind by the power of the TNCs if we do, and we must adapt to the fact that they can relocate and transfer their assets so easily. (Peter Dicken calls this

view hyperglobalism.) Perspective 2: Yes, and we ignore it at our peril –

because TNCs are being allowed unprecedented power over the world’s peoples, which must be resisted actively.

(Peter Dicken refers to this as anti-globalism or hyperglobalism of the left.)

Perspective 3: Yes, but the economy has been “globalised” to varying degrees for centuries now, and may

have even been more globalised before than it is now. (Peter Dicken refers to this as sceptical internationalism.)

Perspectives on the paradigm: is “globalisation” real? Some views

discussed in Peter Dicken’s Global Shift.

Perspective 4: Not always, there are important national-level, regional-level and local-level forms of economic

integration which run contrary to the presumed trend to more global forms of integration. (This is the view put

forward by Dicken himself. It implies that “globalisation” is a useful generalisation or ideal type which may not prove

adequate as a description of things in all cases.)

This last view takes issue with the paradigm, as opposed to the other three, which do not break from it. It posits that

“globalisation” is a rational explanation for observable economic trends, but not necessarily the explanation. If it were the only possible explanation, then there would be no

“anomalies” left unexplained by the theory.

The Mechanisms of the World Economy: How can we measure economic

relationships across geographic space?

As you can see, one question we will be very concerned with in this course is to what extent we really do have a

world economy and to what extent economies are local, regional or national in scope.

In order to know this, we must be concerned with measuring elements relevant to the functioning of a world

economy – the mechanisms of the world economy. The factors of production are the logical thing to measure as the mechanisms of the world economy: it is land, labour

and capital, and movements in space related to these mechanistic elements, that will help us evaluate theories

about the world economy – such as the globalisation paradigm.

Relationships of the Factors of Production to Geographic Space

Land – Plots of land are generally fixed in space, but ownership can be more distributed. Some nations forbid or

restrict foreign ownership of land, others permit foreign ownership to a greater degree or completely.

Natural Resources – These can generally be moved and shipped through space. Often there is some savings to

processing natural resources near the source from which they exist in nature, but it is also possible they may be

shipped to be processed into a product elsewhere. Some nations “nationalise” their natural resources so that profits

from their sale benefit the state.

Relationships of the Factors of Production to Geographic Space

Labour – Immigration law generally forbids labour from moving across national boundaries, but within nations and

in liberalised trade areas and regional blocs (e.g., the European Union) labour can move great distances for work

opportunities. Capital – Physical capital can either be easily moved (like office supplies) or moved with more difficulty (like factories or heavy machinery), but the “liquid” form of capital (money) is quite easily moved, especially with

advances in the electronic transfer of funds for international transactions.

Is there a “death of distance”?

One of the primary assumptions of the globalisation paradigm is that geographic distance is diminished in our

modern world to the point of being a negligible influence on the world economy. But is this true?

The preceding discussion of the extent to which we observe the factors of production as rooted in space or

freely moving through space does not establish that distance has completely ceased to be a factor in our

modern world. Instances where distances continue to reflect real costs

are anomalous for the globalisation paradigm.