ECONOMIC GEOGRAPHY
Spring 2009
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ECONOMIC GEOGRAPHY
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Geog 5
People, place
& Environment
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The study of the location, distribution and spatial
organization of economic activities; how are
economic activities spatially interrelated and linked?
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Types of economies
Categories of economic activities
Agriculture & land use
Factory location theory
Agglomeration effects
Globalization
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Spring 2009
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THREE (BROAD) TYPES OF
ECONOMIES:
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Free market economy:
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Property rights are exchanged based on the law of supply
and demand
Planned economy:
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Geog 5
People, place
& Environment
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Central government manages economy, either through
central control or through a system of influence, subsidies,
grants, and taxes.
Subsistence:
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Spring 2009
Production in any given period is just enough to meet
survival needs; no accumulation of wealth or transfer of
productivity from one period to the next.
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CATEGORIES OF ECONOMIC
ACTIVITY
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Geog 5
People, place
& Environment
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Primary: material extraction, agriculture
Secondary: material transformation, processing,
manufacturing
Tertiary: merchants, professional services
Quaternary: information, research, government,
education, executive management
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ECONOMIC ACTIVITIES
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Geog 5
People, place
& Environment
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Primary activities: location limited
Secondary and beyond: more choice in location
• More removed from nature with each level
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PRIMARY ECONOMIC ACTIVITIES
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SUBSISTENCE AGRICULTURE
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Farm economies in which most crops are grown
nearly exclusively for local or family consumption
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Geog 5
People, place
& Environment
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By definition, subsistence agriculture does not foster the
accumulation of wealth and capital
Less resource intensive; however, environmental
degradation can occur, e.g. deforestation and erosion
Extensive & intensive subsistence agriculture
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EXTENSIVE SUBSISTENCE
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Geog 5
People, place
& Environment
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Large areas of land
Minimal inputs (labor, chemicals, $)
Low population density
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Geog 5
People, place
& Environment
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INTENSIVE SUBSISTENCE
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Geog 5
People, place
& Environment
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Smaller pieces of land
Intense labor, greater inputs ($ and resources)
Support larger populations
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GREEN REVOLUTION
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Management techniques to make agriculture more
intensive and more productive
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Geog 5
People, place
& Environment
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Fertilizers
Pesticides
Improved seed varieties (GMOs)
Mechanization, irrigation
Monocultures
Food security vs. environmental concerns (also
health concerns)
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COMMERCIAL AGRICULTURE
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Geog 5
People, place
& Environment
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Commercial extensive: large land areas, highly
mechanized, cost-effective
Commercial intensive: expensive to produce,
transport, and buy
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GLOBALIZATION OF AGRICULTURE
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Geog 5
People, place
& Environment
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What is globalization?
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Spring 2009
Actions or processes that result in making something
[local] worldwide in scope
Stretching and deepening of interactions across space
Integration of sociological, economic, technological and
political forces
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WHY THIS PATTERN?
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Geog 5
People, place
& Environment
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Transnational Corporations (Agribusiness)
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Integration of numerous activities*:
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Plant production/Inputs into plants
Plant processing/Packaging
Advertising
Consumption
*all occurring in different places across the globe
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BANANAS
65% of Global Banana Production owned by 3 U.S.
Corporations
25% of the Global Banana Market
15% of the Global Banana Market
25% of the Global Banana Market
Ecuador:
21% of exports for entire economy,
64.7% of agricultural exports
Nearly 100,000 Ecuadorian workers work on plantations owned by
American companies (pop. Between 15-65=800,000)
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VON THUNEN MODEL OF
AGRICULTURAL LAND USE
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Geog 5
People, place
& Environment
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Distribution of agricultural land use to achieve
greatest profit?
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ASSUMPTIONS
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Geog 5
People, place
& Environment
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Flat plain with uniform arability
One market (higher value land near market)
One mode of transportation (cost increases with
distance)
Farmers are economically rational
Land Rent = amount of profit per unit area
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Von Thunen Model of Agricultural Land Use
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SECONDARY ECONOMIC ACTIVITIES
(AND BEYOND)
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ECONOMIC GEOGRAPHY
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A geography of supply
A geography of demand
A geography of cost
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PRINCIPLES OF LOCATION: WHERE
TO PUT FACTORIES?
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Geog 5
People, place
& Environment
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Assume Profit maximization, then
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Spatially fixed costs
Spatially variable costs
• Least total cost location
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Transportation charges
• Locational determinants (orientation)
• Industrial Revolution = transportation revolution (successive
improvements in the movement of people and commodities)
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Importance of Interdependence and linkages
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SPATIAL IMPLICATIONS OF FIXED
AND VARIABLE COSTS
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Steel industry, early 20th
century (multiple raw
materials)
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BREAK OF BULK POINTS
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Geog 5
People, place
& Environment
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Points where it is necessary to transfer of goods and
services from one carrier to another (e.g. shipping to
rail)
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MATERIAL INDEX MODEL (WEBER)
Geog 5
People, place
& Environment
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Where should a factory be located?
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Least-cost theory
Manufacturing location determined by transport
costs, labor costs and agglomoration effects
Assumes:
– Isotropic plain
– Manufacturing of single product to be shipped to known location
– Raw materials from more than one location
– Infinite but immobile labor availability
– Transportation by shortest path
• MI (material index) = Weight of raw material/weight of finished
product
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AGGLOMERATION EFFECTS
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Geog 5
People, place
& Environment
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Cost advantages that occur when individual firms
locate together in space
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Spring 2009
e.g. shared transportation facilities, utilities, social services
specialized labor pool
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ANCILLARY ACTIVITIES
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Geog 5
People, place
& Environment
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Economic activities that surround and support largescale industries
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Spring 2009
Cumulative causation: need for ancillary activities
increases as population expands = larger local tax base
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LOCALIZATION ECONOMIES
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Geog 5
People, place
& Environment
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The economic benefits of locating one type industry
in the same area
e.g. Locating in an urban area
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infrastructure, ancillary activities, labor and markets
Entire regions of specialization can evolve
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FOOTLOOSE INDUSTRIES
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Geog 5
People, place
& Environment
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Defy all the need for location principles
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Spring 2009
e.g. portions of the computer industry
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BEYOND SECONDARY ECONOMIES
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LOCATIONAL CONSIDERATIONS
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Geog 5
People, place
& Environment
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Typically market-oriented (day to day services)
Information related services can be footloose
Service offshoring: replacement of technical,
professional, white-collar workers with foreign labor
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OTHER CONSIDERATIONS (IN
CURRENT ECONOMIC GEOGRAPHY)

Geog 5
People, place
& Environment
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Deindustrialization: a relative decline in industrial
employment in core regions
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Spring 2009
Where does it go?
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THE RUST BELT (1960/1970)
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COMPARATIVE ADVANTAGE
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Geog 5
People, place
& Environment
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Regions produce items that have greatest relative
advantage
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Spring 2009
Historically coal, grain, and other manufactured goods
Now labor, land, capital
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GLOBALIZATION
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Geog 5
People, place
& Environment
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Distance no longer as important due to:
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International division of labor (outsourcing)
Functionally integrated economic activities
Transportation and communications technologies
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GLOBALIZATION
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Transnational Corporations (TNCs)
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Private firms with branch operations outside of country of
headquarters
Transnational Conglomerates
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Geog 5
People, place
& Environment
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Made up of a number of different companies that operate
in diversified fields
Export Processing Zones
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Spring 2009
special areas of a country where some normal trade
barriers (e.g. tariffs, quotas) and other regulations (e.g.
labor and environmental laws) are lowered or eliminated
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TRANSNATIONAL CORPORATIONS
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Geog 5
People, place
& Environment
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$19 trillion in sales: 1/10th of global GDP
56 million employees directly, 150 million indirectly
In 2003, 29 of the worlds top economies were TNCs
[not countries]
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Nestlé
• Largest food and beverage corporation
• Headquartered in Switzerland
• 141 brands of food all over the world
– Nestle chocolate, Nescafe beverages, baby formula, Carnation,
Arrowhead water, Fancy Feast, Friskies, Juicy Juice, Lean Cuisine, etc.
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EXPORT PROCESSING ZONES
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Geog 5
People, place
& Environment
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Industrial zones in foreign countries
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Manufacturing
Incentives for foreign corporations
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Free trade
Relaxed environmental standards
Cheaper labor
Relaxed customs requirements
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MAQUILADORAS
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Geog 5
People, place
& Environment
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Began in 1960s
Duty-free assembly of products for re-export
20 km (12 mi.) from U.S. Mexican Border
3000 in 2003
Over 1 million Mexican workers
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