7 Economy & Development

. A word that we hear and use all the time, but what exactly does it mean?

The etymology of the word reveals that its first meaning was “household management” but has since grown to signify the presence and use of “wealth and resources of a country.”  Colloquially, economy is often used to mean how a person or a country makes money and supports a livelihood.

The field of concerns itself with the often unevenly distributed spatial dimensions of economic structure and type, resources, and general activities of production and consumption. Economic geography is often oriented around issues and questions of , which refers to the processes of increasing the wealth and quality of life within a country.

But before we talk about development, let’s pause and learn some ways to describe economy and economic development.

Economic Type

One way to describe the economy of a place–a city, a country, or an entire world region–is by classifying its economy into types:

  1. Primary (aka. extractive) examples: agriculture, mining
  2. Secondary (aka. manufacturing) examples: automobile assembly, textile manufacturing
  3. Tertiary (aka. service) examples: tourism, banking
  4. Quaternary (aka. knowledge) examples: education, information-technology, research and development

In addition to these 4 types, there is also the , which refers to activities that happen outside of any formal regulations. For instance, shoe shining, street performances, and window washing at stop lights are examples of economic activities that tend to fall with in the informal economy–rarely do people who engage in these activities get protections employees do (in theory) in the formal economy, nor is their compensation for services subject to taxes. Other terms for the informal economic sector is under-the-table or the black market. Those of you reading this that have earned money babysitting or housesitting have likely participated in the informal economy.

Nearly all economies have elements of each of the types above, albeit in vastly different proportions. In fact, there is a geography to how economic type is distributed across the world, which we will talk about below.

Just as a financial planner would tell you that a diversified financial portfolio is a stronger than a undiversified one, so too is a diversified economy generally stronger than an undiversified one. This means that economies that are nearly all made up of one of the sectors or types above is more vulnerable to damage than one that has economic activity in multiple sectors. Why and how is this the case? Let’s look at an example.

The Arab states have a huge proportion of the world’s oil and gas reserves; as such, the primary economic sector of their economy has historically and still is in large part very robust in comparison to other sectors. As long as oil and gas are present, extractable, and in demand, this allows the region to easily amass wealth, BUT, what happens when the oil and gas reserves are depleted and/or demand for alternative forms of energy overtake demands for oil and gas? If the Arab states’ economy were overly reliant on the primary sector of the economy, they may face economic turmoil.

One way countries in the Middle East are working to diversify their economy and ramp up the tertiary and quaternary sectors is through developing various tourism industries (even building islands off the coast with extravagant hotel experiences) and educational facilities, such as attracting major universities to open branch campuses in places like Qatar and the United Arab Emirates (UAE). Building the infrastructure to support these expanding sectors takes a huge amount of labor.

Check out this time-lapse of infrastructural development in Dubai, UAE (speed it up to get an idea of how the landscape has changed).

To learn more about issues surrounding the labor conditions facing typically migrant workers from South Asia who come to Arab States for construction-related jobs, including those surrounding building stadiums for the 2022 Wold Cup in Qatar, see here.

Exercise: Tree Maps

Check out the Atlas of Economic Complexity hosted by Harvard to view various countries’ economic tree maps, representations of how the economies of a country break down. Type in or select the country you want to view by clicking the Country box in the right hand navigation panel. Hover over the boxes on the tree map to learn more.

  • View the export tree maps for Vietnam, Mauritania, and Poland
  • Compare and contrast the tree maps. Why are the economies different? What aspects–geographical, historical, cultural–can you think of that would explain the differences?
  • Practice classifying the economy by applying the correct economic type to various product sectors depicted in the tree maps

Development & Measuring Development

Development is a broad term referring to processes of increasing the wealth and quality of life within a country.

It is common practice to conceptually break the world into different categories based on each country’s or region’s level of development. The result is a geography of development that codes regions like North America and Europe as developed, and regions like South Asia and East Asia as developing. refers to more developed countries and refers to least developed country. Other terms used to describe these distinctions are core and periphery, or core, semi-periphery, and periphery, which were foregrounded as part of sociologist and historian Immanual Wallerstein’s .

Check out the video below to learn about other terms used to describe the developing-developed spectrum.

So, how do we assess and measure development?

Common metrics include the following:

  • HDI, Human Development Index
  • GII*, Gender Inequality Index
  • GDP, Gross Domestic Product
  • GNI per capita, Gross National Income per person
  • Gini coefficient, which measures income inequality
DEEPEN YOUR UNDERSTANDING: Learn what these terms mean and about more ways to describe the world in terms of development by clicking here and reading the following sections: A Mission to Help the World, Measuring Development, and The Geography of Development.

*View map below and click here for interactive map.

Source: https://ourworldindata.org/grapher/gender-inequality-index-from-the-human-development-report

 

Exercise: HDI

Examine this map of HDI using UN data from Our World in Data. Hover over and/or click on countries to learn more.

  • What patterns do you notice regarding the spatial distribution of HDI across the world?
  • On the top right of the map, click the drop down menu labeled “world” and click to view a particular world region that hast countries with varied HDIs. Select a country in that region to explore more.
  • Learn more about your selected country by viewing its country profile in the CIA World Factbook (select relevant country in drop down menu on top right). What information did you learn that helps contextualize why the HDI is relatively high or low in this country?

Paths to & Funding of Development

There are many different approaches a country may take towards developing. These may include or development, and may strive more towards self-sufficiency or international trade.

Top-down development may include projects initiated and funded at the federal level, whereas bottom-up development may include projects (infrastructural development, social aid programs, educational initiatives) that emerge from a group of people at the local level and are carried out from there.

Taking a self-sufficiency path towards development means that a country places primacy on limiting/eliminating foreign influence in the domestic economy. Two ways this is typically done is by limiting the ownership of business by foreign companies and increasing tariffs (taxes) on imported foreign goods and services. refers to when domestically produced items come to replace foreign imports.

Countries that take the international trade path towards development, in contrast, focus on amplifying their production of a few key resources, products, or services, and competing on the international market. Foreign business presence in the country is not limited and the goal is not to eliminate foreign imports.

DEEPEN YOUR UNDERSTANDING: Read more about the paths to development here. *NOTE: you ONLY need to read the section labeled Strategies for Development.

All paths and approaches to development require funding, which often comes through any combination of the following:

  • Foreign Direct Investment (FDI): when a foreign country or company provides funds for a domestic project
  • International Monetary Fund (IMF): provides loans to countries specifically to expand their presence within international trade
  • World Bank: provides loans to countries for development purposes
  • Microcredit/microfinancing: when banks provide tiny loans to individuals who would otherwise not qualify for traditional loans

Check out this video which has clips from the documentary Life & Debt, which documents the on-the-ground impacts on everyday life of the IMF and World Bank loans to and programs in Jamaica.

Globalization & Economic Geography

In the current iteration of , which can be understood as increasingly intensified interconnectedness among people and places across economic and socio-cultural dimensions, the way that national economies work has vastly changed.

One way to understand how is to borrow the term , foregrounded by geographer David Harvey. Space-time compression refers to the idea that the world is getting smaller due to the reduced time it takes to travel (in reality and virtually) through space.

As space-time compresses, what happens to the uniqueness of place? As the world gets ‘smaller’, is the world becoming a single place? To some degree, yes. There are places separated by vast distance that have similar looks and feels. If you are traveling the world, there is a decent chance you can still encounter Americanized fast food, with its familiar packaging. You likely might hear the same songs popular back home. But this is far from the full picture; in many ways, place differentiation is being heightened by globalization. Regional and ethnic differences can become more valuable as cultural diffusion eases. The further transnational corporations (see below) reach, the more they may respond to place-to-place differences.

Some factors that have led to the current landscape of globalization include Transnational Corporations (), which operate in multiple countries, and the associated of labor to areas where labor is less regulated and cheaper to obtain. Examples of this include how Apple outsources labor to China to produce the iPhone, as exemplified by the Foxconn factory in Zhengzhou, China and maquiladoras, or foreign-owned factories in Mexico that produce tax-free products for US export. For considerations about what it’s like to work in the maquiladora industry, which overwhelmingly employs women, read this synopsis for the movie Maquilapolis. Some see globalization as ; a process in which former colonies, now as new independent countries, are still controlled economically and politically by core countries. This is an informal rule, rather than the formal and direct rule of core countries over colonies. Informal rule is enforced via international financial regulations, commercial relations, and covert intelligence operations. At the same time, corporations in core countries grew larger and became transnational, themselves being able to exert financial pressure on peripheral countries.

In order to illustrate the truly global scope of international economic integration and contemporary globalization, it is common practice among economic geographers to chart , which show from where all the component parts of a fabricate product come. Products of everyday use may travel tens if not hundreds of thousands of miles to reach their final destination. This is made possible by the effects of . Wealthy people and regions can consume more, and corporations are able to reduce prices through outsourcing. Not only are products and components outsourced, but so too are labor and pollution. Look at cotton; the United States ranks first in cotton production around the world by far. However, most cotton-based apparel sold in the United States was imported from abroad. How does that make sense? While the US produces the raw product (with the help of government subsidies), but corporations that need the raw product to create finished clothes ship it overseas. The corporation saves on labor costs through international outsourcing, plus the United States saves locally on greenhouse gases and other pollution associated with the manufacture of clothing. The final product is then shipped and bought back to the US, in some cases at a low cost for end consumers.

Click here to view an interactive map charting the commodity chain of Nike shoes.

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Human Geography by Christine Rosenfeld & Nathan Burtch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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