Geography of the World Economy Study Guide

Economic Crisis of Late 1960s / Early 1970s

  • Causes:
    • Oil shocks (1973 and 1979) drastically increased energy costs.
    • Declining productivity growth in advanced economies.
    • Structural changes in manufacturing (deindustrialization).
    • Rising competition from NICs.
    • Stagflation (inflation and unemployment rising).
  • Symptoms:
    • Slowed economic growth in developed countries.
    • Declining income growth for many workers.
    • Increasing income inequality.
  • Responses:
    • States increased intervention (monetary policies, subsidies).
    • Firms downsized, automated, or outsourced.
    • Shift from Fordist mass production to flexible production.

Firm Strategies: Dispersion vs. Flexibility

  • Dispersion: Offshoring to lower costs.
  • Flexibility: Flexible production models emphasizing variety and customization.

Production Systems and Spatial Implications

  • Fordist: Mass production, standardized products, rigid labor, centralized, spatially clustered.
  • Flexible: Smaller batch, skilled labor, customization, decentralized, dispersed or networked.

Product Life Cycle & Geography

  • Introduction/early growth: Production centralized near innovation centers.
  • Maturity: Production disperses to lower-cost locations.
  • Decline: Production shifts to developing countries or declines.

Industrialization Patterns

  • Diffuse: Independent firms developing full capabilities.
  • Branch Plant: Subsidiaries with limited tasks, controlled by headquarters elsewhere.
  • Inter- and Intra-Metropolitan Decentralization: Movement from central cities to suburbs due to land costs and infrastructure.
  • New Industrial Spaces:
    • Rustbelt: Declining regions adapting through diversification.
    • Sunbelt: Growing regions attracting new industries.
  • Japanese Automobile Production in the U.S.: Motivated by tariffs and market access.
  • Just-in-Time Production: Inventory minimized; requires close supplier relationships.
  • Just-in-Case Production: Larger inventories held as buffers against disruptions.

Innovation and Clustering

  • Forces of Attraction for High-Tech Clusters: Skilled labor, research institutions, venture capital.
  • Skills-Biased Technological Change: Technology favors skilled labor.
  • Creative Class & Knowledge Spillovers: Professionals driving innovation; knowledge shared informally.
  • Silicon Valley and Non-Competes: Employee mobility promotes idea sharing.
  • Marshallian Industrial Districts: Concentrations fostering spillovers and specialization.
  • The Great Divergence in the U.S.: Growing income gaps linked to globalization.
  • Colonial Legacy & Industrialization in Developing Countries: Colonial patterns affect postcolonial economies.

Agricultural Development Challenges

  • Limited access to technology, land tenure issues, market access.

Labor vs. Capital Intensive Industry

  • Labor-intensive: Relocates to low-wage countries.
  • Capital-intensive: Requires skilled labor, often remains in developed countries.
  • Low-Cost Production Switching: Firms shift production to minimize costs.
  • Export Processing Zones (EPZs): Zones with tax breaks to attract export-oriented manufacturing.
  • Industrialization Geography of China: Coastal regions prioritized for growth.

International and Supranational Integration

  • Types: Free trade areas, customs unions, common markets, economic unions, political unions.
  • Promotes trade, investment, and cooperation.

Trade Regulation

  • Pre-WWII: Tariffs and protectionism.
  • Post-WWII: GATT and WTO promote liberalized trade.
  • Trade Relationships: Intertwined via global supply chains; linked to migration.
  • NAFTA and Mexican Immigration: Mixed outcomes due to structural factors.

Key Definitions

  • Deskilling: Reduction of workers’ skills due to mechanization.
  • Horizontal Integration: Merging with firms at the same stage.
  • Vertical Integration: Controlling multiple stages of production.
  • Flexible Production Systems: Adaptable manufacturing with skilled labor.
  • Just-in-Time Production: Minimizing stock by synchronizing supply and demand.
  • Localization (Agglomeration) Economies: Benefits firms gain by locating near each other.
  • Time-Space Compression: Technology reduces spatial and temporal barriers.
  • Back-Office Functions: Administrative tasks outsourced to cheaper locations.
  • World City: Global economic hubs.
  • Comparative Advantage: Ability to produce at lower opportunity cost.
  • Creative Destruction: Innovation that destroys old industries.
  • Global Sourcing: Procuring materials globally to minimize costs.
  • Green Revolution: Agricultural innovations increasing productivity.
  • Supply-Side: Policies focused on increasing production capacity.
  • Export Processing Zone: Area promoting export manufacturing with incentives.
  • Disorganized Capitalism: Fragmented industrial organization.
  • Most Favored Nation Treatment: WTO principle ensuring equal trade advantages.
  • Customs Union: Free internal trade and common external tariffs.
  • Economic Union: Customs union with common policies and regulations.
  • Trade Preference Associations: Groups granting favorable trade terms.
  • Supranational Political Union: Political integration above nation-states.
  • Primate Cities: Disproportionately larger cities.
  • Latifundia: Large landed estates.
  • Maquiladoras: Mexican factories assembling goods for export.