CHAPTER 5: ENVIRONMENT
Making the spatial economy: State, environment, labor, and finance
Anthropocene (Capitalocene): proposed epoch (geological time period) whereby humans have
become the main drivers of environmental change / destruction;
Economic geography and environment up to the 1990s: Nature = resources
 Nature is Passive
Economic geography and environment today:
 Environment impacts of economic activity, (consumption and production)
 environmental deregulation and governance
 energy transition from carbon to renewable
 Critiquing the Business As Usual (BAU) approach to a green economy
A natural resource is anything created through natural processes that people use and value,
distinguished from human creations (e.g., money, information, labor). BUT, there is a human
component to defining “natural” resources
Nonrenewable resources characteristics: Form slowly, can't be replaced
Renewable resources E.g. solar energy, wind, water, trees, grain, can be replaced in human life
span, Some renewables can be depleted (or no longer economically viable);
Resource in nature to valued natural resource
Cultural Values– Do social norms say it is desirable and acceptable to use?
Technology– Is technology advanced enough to use it?
Economic System– How is it priced? How accessible is it?
o Cultural Values Insects– Resource of nature to be largely ignored, exterminated, etc. or
valued natural resource to eat? Car– Typically idolized in the US, Social status, Symbol of
freedom
o Technology The utility of a natural substance depends on the technological ability of a
society to obtain it and to adapt it to that society’s purposes. Potential resource: things
that might become resources in the near future.
o Economics Natural resources acquire a monetary value through exchange in a
marketplace. Supply and Demand.
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In economics,
o More labor=more value
o Higher quantity=less value
o Strong desire=more value
o Low prices=more demand
Three dimensions of a society determine nature’s commodification: cultural, technological,
and economic.
Economic thinking is concerned with assigning a current monetary value to nature, allowing
natural “things” to be integrated into a common framework. And thus natural things AND
wastes can both be commodified.
If nature is to be sold in the form of resources, then a further requirement is that it has to
belong to someone who will do the selling. (ownership)
Four possible models through which ownership is established over a natural resource
commodity:
1. Communal access
2. State ownership and state exploitation
3. State ownership and private exploitation
4. Private ownership and private exploitation;
Neoliberalization of Nature
 New opportunities for profit (reinvention of capitalism)
 Biological resources (ex. GMOs, privatizing water)
 Commodification of pollution and degradation
Neoliberalization of Nature/Water
 Water is in many ways an “uncooperative” commodity when it comes to private
ownership. However, this has not deterred efforts to do just that.
 Over the last two decades, water has been privatized in many contexts around the
world.
Bolivia
 World Bank loans in the 1990s: “privatize the water systems”
 Left many without access to water
 Two revolts to return water to public hands;
Land Grab by David Harvey
• Neoliberal policies from the 1970s onward serve to concentrate wealth and power in the
hands of a few by dispossessing others of their wealth and/or land.
• Example: Foreign Direct Investment (farmers in Uganda selling land to tobacco companies)
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How does protecting the environment from pollution and degradation become commodified?
1. Being “sustainable” or “green” is used as a selling point for many products—i.e.,
environmental protection is being integrated as part of the value of a commodity.
2. The protection of natural environments from the waste, outputs, and effects of economic
production is becoming a commodity with a tradable value. (ex. Carbon trading)
Market as mechanism for environmental protections “Saving the world through consumption:
How enjoying a beer from Maine Beer Company can cleanup the coastline.” Issue:
?;
Carbon Trading
• Again, an economic solution to symptoms of the capitalist economy.
• This particular “solution” seeks to address the problem of climate change (greenhouse gases)
through credits or cap- and-trade.
• Outsourcing the responsibility?
 Difficult to monitor
 Allocation of permits when markets 1st created do not recognize past responsibility for
climate change
The “green economy” represents activities that are needed to ensure a low-carbon,
sustainable future:
 Activities: Renewable energy generation, energy- efficient products, reducing
greenhouse gases, recycling, and so on.
 The market is important here. However, relying solely on the market to address
environmental problems (that have resulted pursuing perpetual growth) has raised
many criticisms.
Summary
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In the last few decades economic geographers have examined a diversifying range of
topics concerning nature. Environmental impacts, the energy transition, and
commodifying nature are just a few examples.
A natural resource becomes a commodity once it is assigned value through the
marketplace and exchanged.
Business as usual approaches to the green economy raise several concerns about
addressing environmental problems within the frame of capitalism.
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CHAPTER 6: LABOR POWER
Labor acts as a significant agent of economic change.
Labor is an agent that shapes the economy.
Global labor-value chains:
o measurement of wages and productivity
o highest participation in China, India and Indonesia
o means wages very low; production very high
o higher profit margins
o additional value is created in countries where companies are headquartered, NOT in the
country of production
o Unequal exchange of value capital
Gibson‐Graham’s iceberg model of the economy.
o Labor extends well beyond performing wage labor for firms.
o Labor extends beyond labor on market
o TOP- capitalist markets and wage labor
Labor has important geographical dimensions. How?
o Uneven development plays a major role in creating differentiated landscapes of
employment and labor.
o Jobs vs. Careers
o Availability of online workers (concentrated in US, India, Middle East)
o Outsourcing is profoundly geographical
o Outsourcing manufacturing is labor control
Labor is and is not MOBILE
o Because labor is mobile, the World Bank: “Migration is, therefore, the most effective
way to reduce poverty and share prosperity...”
o Feminization of Labor- domestic worker demand filled by migrants (gender inequality)
Traditional economic analysis of labor: Labor as a commodity; as a key input to the production
process.
Labor: David Ricardo (1772‐1823)
o Concerned with how to conceptualize labor under capitalism.;
o David Ricardo's Labor Theory of Value– The value of a good is linked to the quantity of
the labor required to produce it.
o Snags: Prices of goods that didn’t really match the quantity of labor used to produce
them – e.g. wine.;
Karl Marx- Labor power under capitalism became commodified after the means of production
were taken away by capitalists during a process of PRIMITIVE ACCUMULATION
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o Labor under capitalism is exploited.
Labor markets
•Commodification of labor means it can be sold on the market.
•Employment and Local Scale (ex. local labor markets) show the importance of PLACE
•Social Institutions that shape/ regulate labor market
•Flexibility and Deregulation (ex. wages, working hours, training), signs of flexible labor market.
MONOPSONY- a market where there is only one buyer
o Map: relatively competitive labor markets at major urban areas, but monopsony is
rather pervasive elsewhere.
o Important because monopsony creates spatially uneven labor markets and creates
conditions where wage stagnancy can exist alongside corporate profit.
o highly concentrated in rural area, means less employers competing for your labor.
Globalization
o TNCs (transportation network companies) are a spatial fix
o New International Division of Labor (NIDL) = Spatial division of labor at a global scale
o The process by which TNCs based in western countries have shifted low- status
assembly and processing operations to developing countries where costs are much
lower.
o BRICS (an association of five major emerging national economies: Brazil, Russia, India,
China and South Africa)
Lean Production- an approach to management that focuses on cutting out waste, whilst
ensuring quality
o Functional Flexibility- increased job rotation, multi-skilling
o Numerical Flexibilty- contracting out/ part time labor
o Temporal Flexibility- new shift patterns (ex. 24 hr shifts, overtime)
Spatial Division of Labor by Doreen Massey (1944 – 2016)
• Massive industrial restructuring in England during the 1970s and 80s.
• Accumulation as distinctive rounds of investment unfolding over time.
• Each round of investment produces a distinct geography = spatial division of labor.
Global Economy: Work and Employment
• Deindustrialization in the Midwest brought new spatial configurations of labor,
unemployment, investment, devaluation, and more.
• 2007-8 economic crisis and recession had similar effects in California and Nevada.
• These spatial divisions of labor and conditions of work are dynamic.
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The labor market is influenced by a range of institutions:
– Governments (as employers and as creators of labor laws).
– Controlling access to trades and professions.
– Families are crucial as well.
– Market intermediaries (temporary staffing agencies)
Some models of labor market regulation minimize regulation while others prioritize
government involvement in labor market processes. (ex. US/Germany)
Local Labor Control Regimes (LLCR)
– Refers to the ways that labor is disciplined and controlled in distinctive ways in specific places.
– Results in the creation of local spaces where labor can be controlled and where the labor
force can be reproduced. (ex. Export processing zones)
Capital encounters a spatial limit as it peruses perpetual growth.
– “Labor problem”
– TNCs cannot continually drive down labor through spatial switching of production locations.
– Eventually it (a TNC) settles down to produce things and make profit.
What else factors into this labor market “solution”?
• Local labor control regimes
• These regimes seek to construct sustainable conditions for profit accumulation and typically
involve various local and national government actors.
Labor geography- a branch of economic geography that seeks to understand how workers exert
agency in the face of the economic structures around them.
WORKER AGENCY
–Trade unions, resistance, and international coalitions.
– Key concern: to counter dominate narratives of work and labor supplied by businesses and
states.
Labor Migration- While labor is relatively immobile, more people are moving than ever before
(ex.mobile elites, temporary migrant workers)
What might labor migration/ mobility mean for the power of labor?
– For the minority of migrants it represents empowerment.
– For the majority of migrants the experience is quite the opposite.
A majority of global migrants are engaged in temporary labor migration
– Less stability and security
– Protections
– Threat of deportation
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Labor markets in Dubai and Singapore- Temporary workers and government recruitment
One prominent way that neoliberalism shapes labor and labor markets is through the policy
imperative of flexibility.
Flexibility in the neoliberal state means efforts to reform labor markets through policies that:
o Place business needs at the forefront.
o Make it easier for companies to hire and fire employees.
Labor market flexibility in four key elements (employer perspective):
o Numerical – reduce the number of workers according to business needs.
o Wage – ability to change payment based on business needs.
o Functional – ability to reorganize labor between job tasks based on business needs.
o Time – ability to control the hours employees work based on business needs.
Businesses stand to benefit most from policies that aim to make labor markets more flexible.
o Consequences: less careers, more jobs.
o New global class: the precariat– Unstable, temporary, and precarious forms of work.
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MAKING THE SPATIAL ECONOMY: FINANCE
Shift from finance OF production to finance AS production
o Money, credit, debt
o Banking system
o Global finance and financial instruments
Finance AS production- its own industry; detached from “real economy”
Money: Conventional Economic Perspective
• The use of money developed to address the limitations of bartering.
• David Graeber (2011): The rise of money is about FINANCING WARS & IMPERIAL EXPEDITIONS
• Money as medium of exchange.
• Money has made the market economy and international trade (including financial markets)
possible
The culture of capitalism is one that must maintain perpetual growth (3%).
• $40,000 dollars in 2015= $44,800 in 2019
• This steady increase in money is only possible by making increases to money supply through
banks, lending and transformation through money as a commodity
Commodity money- value rooted to the commodity it is made of (coins, shells, gold, etc)
o Transformation to money as a commodity was change to paper money.
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Fractional Reserve Banking (1:10 ratio)
o Every dollar deposited = lend out ten dollars.
o Making more money (creation of money from nowhere)
o Separation of money from its traditional form
Some important years in the transformation of commodity money to debt money:
o 1931 – cannot convert paper money to gold
o 1971 – currency no longer backed by gold.
Virtualization of money- money exists as a form of debt
Debt Money- The promise by the borrower to repay the debt at some future date.
o Money is lent into existence, which means that for every dollar lent out some entity /
person incurs a dollar debt.
Debt-based economy
o 1960 – debt twice supply
o 2010 – debt four times the supply of money
Credit Card debt is result of Neoliberal state:
o Tells us to take on debt/ credit
• Consumer credit (personal credit cards)
• Consumerism and Interest = Growth
Money supply must grow for a healthy economy.
o Growth occurs when there is a steady increase in things to buy
Commodification- things of no monetary value are transformed into things that do.
o This imperative creates the conditions necessary for the rise of finance AS production.
How does the money supply increase?
o Transforming money into debt or account money.
o Fractional reserve banking (commercial banks)
o Credit and debt (lent into existence by banks)
Banking- Financing Production
o Savers (creditors) receive compensation in the form of interest on their deposit.
o Borrowers (debtors) pay a cost for using the funds pooled from many creditors
depositing with the same bank.
o Banks as intermediaries, as facilitating exchange.
 Pool together money/savings as capital and use that capital to finance productive
activity;
The bank, saver, and borrower all receive returns in relation to their inputs into overall financial
capitalist system.
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Banking: A Reorganization
• 1970s onward
• This context brought forth a reshaping of the existing geography of banking and finance,
namely the consolidation of banks
- Closing of bank branches
- Financial exclusion (uneven effect of excluding people from participating, for example in poor
or urban areas)
• Consequence: The emergence of a new role for banks (and the rise of financial capital).
Banks increasingly keep their financial resources.
o ‘Churning’ (finding creative ways to make money grow)
o Actively engaged in securitization by issuing securities with assets values over direct
lending to borrowers.
Since the 1980s, the proliferation of financial services and investment instruments has led to
the emergence of what we now know as GLOBAL FINANCE.
National banking systems in the 1960s
o Closely regulated
o Self-contained, regional
A limited form of internationalization of finance came about when national banks expanded
activities abroad in order to service transnational corporations from the 1960s onward.
Since the mid-1970s, competitive international deregulation became the dominant trend.
o State organization in the U.S. and the U.K. was experiencing an ideological change from
a welfare regime to a neoliberal market regime
Reaganomics–(new neoliberal market regime)
o Associated especially with the reduction of taxes and the promotion of unrestricted
free-market activity (Wikipedia)
o Led to privatization of public goods (transportation, communications, utilities)
o Bolstered securitization
Another prominent factor contributing to the globalization of the financial system concerns
the emergence of new financial products.
Financial instrument:
o Monetary contract between parties.
o This contract is tradeable in a market.
o E.g. Bonds;
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Financial Instruments: Bonds
1. You purchase a bond, which means you are lending out money to a borrower.
2. Borrower uses the money.
3. Borrower pays you a set amount of interest over an agreed amount of time.
4. At maturity the borrower pays the principal.
Financial Instruments: Derivatives
• Encompass a diverse range of instruments.
• A contract between two parties that establishes the value of underlying “things,” as well as
sets dates, obligations and more.
• Value is derived from the value of underlying ‘‘things’’ (commodities, assets, debt, etc.)
• Bought and sold through an exchange (e.g. Chicago Mercantile Exchange) or ‘over-thecounter.’
Financial Instruments: CDOs
• CDOs (Collateralized Debt Obligations) are a type of derivative.
• A bank makes a loan -> sells that loan to an investment bank -> the investment bank
repackages the loan into a financial product called a CDO.
• Investors can then buy and sell the CDOs (i.e. tradeable).
• “Underlying”: loans and the promise to repay them.
CDOs- Whitefish Bay, Wisconsin school pensions
o Deregulation
o High risk, potential high returns (by no means guaranteed)
o Crisis, defaults, crash (pensions were lost)
State bailout
o Using taxpayer money for bad business decisions/risks.
o Creates a culture where it is okay to take risks
o More risks = more crisis
o Socialism for banks, capitalism for the rest of us
The financialization of the economy: A concept that helps us understand growing influence of
the financial process and actors in the global economy.
Shift: ‘finance of production’ to ‘finance as production’ (i.e. circulating investments detached
from the real economy)
o Profits over people, the environment, etc.
Three key aspects of financialization:
1. Growth of financial activity in relation to the rest of the economy.
2. The dominance of financial capital over productive capital.
3. Financialization of everyday life.
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o Growth of Financial Capital
Financial activities have increased as a share of total economic activity in recent years.
– Geographically variable
– Global South mid-90s
o Dominance of Financial Capital
The emergence of ‘finance as production’ doesn’t mean productive activity vanishes.
- Non-financial activity being driven by financial imperatives.
- Maximizing shareholder value, new distribution of production process, downsize;
o Financialization of Everyday Life
- Financialization of personal debt
- Personal credit cards, retail banks
- Credit card companies selling debt
Does the highly mobile financial investments that shape our global economy signal the end
the of geography?
o Time-space compression
- Refers to the effects of information and communication technologies in reducing the
time and costs of transmitting information and money across space.
- We do not witness an even distribution of firms that provide financial services. In other
words, geography is crucial for our understanding of how finance works.
Summary
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Finance concerns making money with money.
Guided by new policies, deregulation, and geographical transformations, banks have
emerged as majors sites for investment services and financial profit.
Financial instruments facilitate the linking of distant geographical relationships and thus
are a major factor in the global expansion of the financial system.
Financialization concerns submitting more and more areas of economic, political, and
(everyday) cultural life to the logics, practices, and priorities of finance.
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CHAPTER 6: COMMODITY CHAINS
Global Commodity Chains- The term originates within world-system theory to help account for:
o How global trade is organized
o The spatial and historical transformations of trade over time.
o Uneven development.
One popular definition of global commodity chains views them as ‘networks of labour and
production processes whose end result is a finished commodity’ (Gereffi et al. 1994).
“Chain” is the linking of suppliers, producers, and consumers
Commodity Chains may feed into other chains, and these chains are one of the primary
organizational features of the world economy.
GCCs are constituted by four major characteristics:
1. Input-output structures
2. Geographical distribution
3. Governance structures
4. Institutional frameworks
1. GCC Input-output structures- The exchange relationships that link suppliers, producers,
and consumers.
raw materials-->processing-->logistics-->retail-->consume;
2. GCC Geographical distribution- Geographic complexity of global commodity chains is
increasing.
• Geographical distribution of value is unequal along the chain.
3. GCC Governance structures- The rules, regulations, and power relations that determine
how firms will interact in the GCC.
 E.g. fair trade, organic certification, etc.
 Producer-driven and Buyer-driven;
 Producer-driven chains- Large industrial transnational corporations play the central
role in controlling their global production.
 Buyer-driven chains- Large retailers and brand-name merchandisers play the central
role in controlling their global production system.
- Common in labor intensive consumer goods (clothing, footwear, toys, etc)
 Relational- in between producer and buyer-driven, based on close inter-firm
relationships
4. GCC Institutional frameworks- Institutional frameworks are similar to governance
structures in terms of influence but are distinctive to how they reference the wider
structural environment.
 E.g. Safety standards, intellectual property rights, environmental regulations, trade
policies, etc.
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Capturing Value- large disparity from farm to retailer
• example: $0.14(supplier)vs $26.40 (retailer) per kg of coffee.
• 60–80% of the value of coffee is captured by firms in developed countries.
Coffee
• Illuminates several aspects of a GCC.
• Extraction of wealth
• Strategies to increase value
for primary producers
• Trade trap: when a country is forced to trade in raw materials or agricultural produce through
the threat of heavy tariffs and related measures.
Black Gold- Wake Up and Smell the Coffee
o Extraction of wealth in Ethiopia
o Strategies to increase value for primary producers
o 2 billion cups are sold daily
o From 1990 to now, coffee has gone from a $30 billion to $80 billion industry
o 4 companies dominate coffee:
o Kraft
o Nestle
o Proctor & Gamble
o Sara Lee
o Price of coffee around world established at market in NY and London
Exchange value of a commodity is the price- reflects how it is created and the costs of labor,
skills required to make, and overhead in production.
 Profits are extracted at every point in the process.
Use value- usefulness of a particular product to the individual.
-serves as disconnect for consumers to not consider terms and conditions under which the
commodity is made.
-personalized value from ads that are attached to emotions (ex. gold/ diamonds = passion, love)
Commodity is a bundle of social relations- represents connections between people that have
enabled consumer to purchase
Commodity Chain- corporate activities or interfirm relationships linked together like a chain
with each stage adding value to process of production
Input-Output Structure- sequence and range of actors involved in a particular commodity
chain.
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3 Important dimensions to all commodity chains:
1. Geography
2. Governance
3. Institutional Frameworks
Geography of a Commodity Chain- can be concentrated in one place OR dispersed across range
of locations
Geographic Structure of GCCs
1. Geographic Complexity is increasing
2. Geographic configurations are more dynamic and liable to rapid change
3. GCCs reveal the dynamics of interplace competition (firms in different places vying for
market share at different points in the chain)
4. GCCs not just a feature of agriculture or manufacturing, but also many service sectors
(ex. Data processing, call centers)
5. Connect ideas of geographic extensiveness and complexity to geographical clustering of
economic activity
Regulating Commodity Chains
 UN Global Compact- strategic policy initiative for business in principles of human
rights, labor, environment, anti-corruption
o World’s largest voluntary corporate sustainability initiative
 Fair Trade movement- concerned with economic returns primary producers secure
for their commodities
 Ethical Trading Institute- code for labor conditions in supply chains
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