4 Economic Geography –
Concepts and Terminology

“Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats.”

• Howard H. Aiken, American pioneer in computer science

Economic geography is the study of the spatial dynamics of the economy, and the role that economic forces play in shaping places. Some key economic themes in world regional geography include economic activity, economic development, economic power, globalization, and trade.

Economic Sectors

The world’s population is engaged in thousands of different kinds of businesses and occupations, but most economic activity can be placed in one of four sectors. The primary sector of the economy involves the extraction of raw materials, such as agriculture, mining, fishing, and the timber industry. The secondary sector of the economy is manufacturing, and includes the production of relatively simple products, such as cloth or copper wire, to far more complex goods, such as cars, electronics, or aircraft. The tertiary sector of the economy is the service sector, in which workers provide a service to consumers. Examples of the tertiary sector include transportation, retail, entertainment, and tourism. The quaternary sector is the information sector, and involves the generation, dissemination, management, and interpretation of information. Examples of the quaternary sector include finance, research, publishing, media, and education.

Development

Economic development refers to the material conditions of people in a particular place. There are some countries with generally high standards of living. These More Developed Countries (MDCs) feature low poverty rates, low rates of unemployment, high levels of education, high incomes, long life expectancies, and opportunity for upward mobility. The United States, Canada, most of Europe, Japan, South Korea, Taiwan, New Zealand, and Australia are examples of MDCs. Other countries have generally low standards of living. These Less Developed Countries (LDCs), tend to feature higher rates of poverty and unemployment, lower incomes and levels of education, shorter life expectancies, and fewer opportunities for upward mobility. Some regions that feature numerous LDCs include Sub-Saharan Africa, South Asia, and Southeast Asia.

It is important to think of MDCs and LDCs as ends of a spectrum of development, rather than as two distinctly separate categories. Some very wealthy countries, such as Norway, Canada, and Japan, are obviously located on the more-developed end of the spectrum. Some very poor countries, such as Niger, Yemen, and Cambodia, are obviously located on the less-developed end of the spectrum. Other countries, however, can be somewhat difficult to categorize. One example of an “in-between” country is Mexico. When compared to two of its neighbors, it could be labeled as either an MDC or LDC. Mexico has a relatively low standard of living when compared to the United States, but has a relatively high standard of living when compared to Haiti. Similarly, Turkey, which straddles the border between Europe and Southwest Asia, is relatively poor by European standards, but relatively rich when compared to its Asian neighbors. It also important to remember that significant developmental differences often exist within countries as well. Even the poorest countries on earth contain some very wealthy individuals, and even the world’s wealthiest countries often contain significant populations who are relatively poor.

Measuring Development

In the regional overviews, we will examine the development differences among countries and some of the causes of those differences. There are many different ways of measuring economic development. A common one is per capita GNI. Gross National Income (GNI) is the combined annual income of all citizens in a country. Per capita GNI is determined by dividing a country’s GNI by its population. (The term “per capita” means “per person,” or, literally, “per head.”) The resulting number reflects the number of dollars that each person in a country would receive annually if the country’s wealth was divided up evenly. Per capita GNI varies widely from country to country. The United States’ per capita GNI is over $60,000 dollars, while China’s is just over $18,000, which is close to the world average. Burundi has the dubious distinction of possessing the world’s lowest per capita GNI, at under $800.

Per capita GNI is a useful statistic because it is meaningful to most people. One can imagine what it would be like to survive on $60,000, or $18,000, or $800 per year. The problem with per capita GNI is that a country’s wealth is never divided evenly among the population. Significant income variations can exist among a country’s regions and social classes, and can also vary significantly by age, ethnicity, and gender. For example, while $60,000 per year may be close to the annual income for a good many Americans, a lot of people in the United States earn well more than $60,000 per year, and a larger number of people earn significantly less.  Here is a sampling of GNI per capita statistics.¹

Gross National Income (GNI) per Capita Statistics

There are other ways of measuring development. The infant mortality rate reflects the number of children per one thousand live births who die before their first birthday. In Japan, the infant mortality rate is 2/1000. In Afghanistan, it is 110/1000.  Here are several countries’ infant mortality rates for 2020.²

Infant Mortality Rate for Selected Countries 2020

Life expectancy reflects the average lifespan in a country.³ In Japan, the average person lives eighty-five years. In the Central African Republic, life expectancy is just over fifty-four years.  This table displays a selection of life expectancy rates for various countries.

Selected Life Expectancy Statistics

One of the most comprehensive measurements of standard of living is the human development index (HDI). Developed in the 1990s by the United Nations, HDI combines statistics reflecting income, education, and life expectancy into a single index.⁴ According to the HDI, Norway has the world’s highest standards of living, while Niger has the world’s lowest.  Here a some of the better HDI numbers.  For an excellent chart, go to https://ourworldindata.org/grapher/hdi-vs-gdp-per-capita.

Human Development Index (HDI) Statistics

Core and Periphery

Along with levels of economic development, geographers study the uneven distribution of economic power. The terms core and periphery describe this imbalance. Countries in the global economic core are those with tremendous economic power. Such countries are the drivers of the global economy, and set the terms of international investment and trade. Economic growth in a core country can stimulate economic growth throughout the world, and an economic downturn in a core country can, likewise, cause economic stagnation throughout the world. Countries in the global economic periphery have much less economic power, and have the terms of international investment and trade dictated to them. Economic growth and decline in these countries may have a ripple effect on other countries, particularly their regional neighbors, but these changes don’t typically have the same global ramifications that economic changes in core countries do.

The countries of the economic periphery are also LDCs, such as Yemen, Chad, Haiti, and Bolivia, and the countries of the economic core are usually MDCs, such as Australia, the United States, Canada, France, Germany, South Korea, and Japan. It is possible, however, for a country to be considered both a core country and an LDC. China, India, and Indonesia, for example, possess moderate to low levels of economic development, but are still at the core of the global economy because of the sheer size of their respective markets.

Globalization and Free Trade

One of the most significant trends in the global economy over the last eight decades has been globalization. Globalization refers to the unification of the world’s economy into a single economic system. One could certainly argue that globalization has been occurring for centuries. Two thousand years ago, the “silk road” trade routes across Central Asia were already connecting South and East Asia to the Mediterranean. Centuries later, global trade would accelerate rapidly during the European age of exploration. Still, the full integration of the global economy largely began in the 1940s, and accelerated dramatically in the 1990s. Globalization was enabled by the development of rapid transportation and communications technologies, and has led to the evolution of large transnational corporations. Accompanying economic globalization has been cultural globalization (the increased exchange of ideas across international boundaries), and a dramatic increase in international migration.

One cornerstone of globalization has been the emergence of free trade agreements. For years, many countries embraced anti-free trade measures known as protectionism. Protectionism is an attempt to block trade from foreign countries in order to protect domestic industry. There are a wide variety of protectionist measures, but the most common is a tariff. A tariff is a tax or similar fee placed on imports in order to make them artificially expensive and, therefore, less appealing. A country might, for example, place a tariff on foreign cars to encourage its citizens to purchase cars made in their own country, thus protecting domestic companies and their workers from foreign competition.

Free trade agreements seek to eliminate such protectionist measures. A free trade agreement can be bilateral, involving two countries, or multilateral, involving many countries. One of the world’s largest multilateral free trade agreements is shared by the members of the European Union (EU). Consumers and companies within the EU can trade across the international borders of the EU community with little or no restriction. In other words, it is as easy to trade between France and Germany as it is to trade between Illinois and Indiana.

Advocates of free trade cite multiple benefits. One argument is that free trade benefits consumers by giving them access to a wider variety of products, and that it allows companies to access a larger pool of potential customers. Free trade also, in theory, allows each country to specialize in what it can produce most efficiently, and to avoid those economic activities at which they are not particularly efficient. Such efficiency, it is argued, will lead to higher living standards. Put simply, as more countries embrace free trade, more countries will be able to specialize in what they do best, making for more efficient economic production, higher profits, greater reinvestment, more innovation, and higher overall standards of living. Furthermore, advocates of free trade argue that it prevents conflict, since countries that are economically connected to one another are less likely to go to war with one another.

Free trade is not without its critics. Environmental activists argue that free trade encourages the shipping of products over longer distances, which increases the consumption of energy. Also, free trade can be responsible for the shift of manufacturing and raw material extraction from wealthier countries with strict environmental laws to poorer countries with far more relaxed environmental standards. Similarly, labor activists argue that free trade encourages a “race to the bottom,” in which corporations shift jobs from countries with higher wages and stronger labor standards to countries with lower wages and poorer working conditions. Others are troubled that free trade encourages the concentration of wealth and power into the hands of the relatively few people who control major transnational corporations. Finally, it is argued that free trade can lead to artificial economic specialization, in which a poorer country’s economic “specialty” is having low wages, poor working conditions, and high rates of pollution.

In recent years, there has been significant pushback against globalization. Part of it is a reaction against the environmental, labor, and social issues created by free trade, but also against cultural globalization and international immigration. One example is the emerging trade war between China and the United States.

Cited and additional bibliography:

¹ “GNI per Capita, PPP (Current International $) | Data.” 2019. Data.Worldbank.Org. 2019. https://data.worldbank.org/indicator/NY.GNP.PCAP.PP.CD?most_recent_value_desc=truehttps://data.worldbank.org/indicator/NY.GNP.PCAP.PP.CD?most_recent_value_desc=true.

² “Infant Mortality Rate By Country 2020.” 2020. Worldpopulationreview.Com. 2020. https://worldpopulationreview.com/countries/infant-mortality-rate-by-country/.

³ “Life Expectancy by Country and in the World (2020) – Worldometer.” 2020. Worldometers.Info. 2020. https://www.worldometers.info/demographics/life-expectancy/.

⁴ “2019 Human Development Index Ranking | Human Development Reports.” 2019. Undp.Org. 2019. http://hdr.undp.org/en/content/2019-human-development-index-ranking.

“Historical Index of Human Development vs. GDP per Capita.” 2015. Our World in Data. 2015. https://ourworldindata.org/grapher/hdi-vs-gdp-per-capita.