General Information

⚫ The World Economy

⚫ Lecturers:

1. Dr. Do Thi Huong

2. MSc. Tran Hoang Ha
Textbook

Frederick P. Stutz, San

Diego State University,
Barney Warf. The World
Economy: Geography,
Business, Development.
Prentice Hall
Course Goals
After studying this course, students will be able to:
⚫ Understand the growth and structure of the world
economy;
⚫ Understand global population distribution and growth;
⚫ Understand global environmental pollution and
solutions for this issue;
⚫ Interpret flows of the world trade goods and services
and factors of production in practice;
⚫ Analyse roles and changes in agricultured,
manufacturing, and service industries in the world.
Course Requirement & Expectation

⚫ Grading:
• Attendance: 10%
• Midterm exam: 20%
• Group assignments & presentation: 20%
• Final exam: 50%
⚫ Bonus Points: May be given to students actively
participating in class times.
 Word Map
What do you know about the world economy?
 CONTENTS

⚫ Chapter 1: Introduction (Textbook, Chapter 1)

⚫ Chapter 2: Manufacturing (Textbook, Chapter 7)
⚫ Chapter 3: Resources and Environment (Textbook,
Chapters 3&4)
⚫ Chapter 4: Agriculture (Textbook, Chapter 6)
⚫ Chapter 5: Service in the World Economy (Textbook,
chapter 8)
⚫ Chapter 6: International Trade and Investment
(Textbook, Chapter 12&13)
Chapter 1

Introduction

© 2012 Pearson Education, Inc.

Objectives

⚫ To acquaint you with the discipline of geography and

the subfield of economic geography
⚫ To discuss five analytical themes useful in comprehending
social and spatial issues
⚫ To summarize the major paradigms for approaching
economic geography
⚫ To introduce capitalism as a system that forms the major
focus of the textbook
⚫ To note the various dimensions of globalization
⚫ To situate economic geography within the context of
world development problems
 Contents

1. Geographic Perspectives
2. Economic Geography
3. Capitalism
4. Economic Geography of the World Economy
5. Globalization
6. Problems in the World Development
1.1. Geographic Perspectives and Economic
Geography

a. Understandings of geography
⚫ Everything that happens on the Earth’s
surface
⚫ The study of Earth and the forces that shape
it, both physical and human
1.1. Geographic Perspectives

b. Types of geography
⚫ Physical geography describes the science
behind Earth's development and focuses on
natural events.

⚫ Human geography, also known as cultural

geography, relates to how humanity has
impacted the development of Earth over time by
considering many factors.
c. Economic Geography

What is Economic Geography?

⚫ (a)... “a subdiscipline concerned with the spatial
organization and distribution of economic
activity” (production, transportation,
communication, and consumption);

⚫ (b)…"the use of the world’s resources…”;

⚫ (c)…“the geographic origins, structure, and

dynamics of the world economy.”
 c. Economic Geography (continued)

Five main themes of geography

⚫ The study of space is inseparable from the study of time
Accumulation of decisions of actors in the past
⚫ Every place is part of a system of places
All regions are interconnected and never exist in isolation
from one another
⚫ Human action always occurs in a biophysical environment
Includes climate, topography, soils, vegetation, and
mineral and water resources
Five analytical themes (continued)

⚫ Culture - the shape of consciousness - is fundamental

to economic geography
Human beings are sentient beings - manifested in
perceptions, cognition, symbolic form, and language

⚫ Social relations are a necessary starting point

for understanding societies and geographies
Studied through the lens of political economy, focusing
on the role of power distribution in society
1.2. Capitalism

a. Understandings of capitalism
⚫ Capitalism is the economic, social, political, and
geographic system characterized by PRIVATE
OWNERSHIP of economic means of production
⚫ The fundamental institution of capitalism
involved in the organization of factors of
production in capitalist economies is the
MARKET
⚫ The guiding imperative in capitalist economies is
PROFIT
1.2. Capitalism (continued)

⚫ Capitalism features two major groups of decision-

makers:
– Private households (and individuals)
– Businesses or corporations
⚫ Capitalism dominates the world today
⚫ Capitalism arose in Western Europe in the late
and sixteenth centuries, and, in the form of
colonialism, ultimately came to be spread over
most of the contemporary world
1.2. Capitalism (continued)

⚫ Mechanisms operating in capitalism

– Resource market and product market (Figure 1.1)
– Resource markets organize capital, land, and
labor to produce goods and services (outputs)
– Product markets consist of buyers and sellers of
those outputs
– Markets are tied together through flows of capital
labor and wages, consumption of goods and
services (Figure 1.2), and sales revenues and
profits
 1.2. Capitalism (continued)

FIGURE 1.1 Circular flows in the capitalist economy. The circular flow in
the capitalist economy involves a resource market where households supply
resources to businesses and businesses provide income to households.
1.2. Capitalism (continued)

⚫ Types of capitalism
– Pure capitalism
– Mixed capitalist system

Today, most countries practice a mixed

capitalist system of business and ownership of
select industries
1.2. Capitalism (continued)

⚫ GDP (gross domestic product)

– United States: world’s largest economy ($20.89 trillion
in 2022)
– Japan: the third-largest economy in the world ($5.06
trillion in 2022)

⚫ GDP per capita is often used as a measurement

of the quality of life
GDP divided by population = GDP per capita
 1.2. Capitalism (continued)

FIGURE 1.3 Gross domestic product (GDP) per capita—is the most commonly used
measure of wealth and poverty in the world economy, and varies considerably around22
the world.
Stutz & Warf; The World Economy, 6th Edition © 2012 Pearson Education, Inc.
1.3. Economic Geography of the World Economy

a. Introduction to the world economy

✓ The World Economy: networks, processes, and
institutions that shape the planetary system of resource
distribution, create wealth and poverty in different parts
of the globe, and contribute to the rise and fall of
different national powers.

✓ The World Economy is constantly being transformed

by a combination of technological and geopolitical
forces, which in turn generate a globalization of culture,
the economy, and environmental issues.
 1.3. Economic Geography of the World Economy
(continued)

a. Introduction to the world economy

✓ Changes in the world economy are
simultaneous:
+ Culture
+ Technology
+ Politics
+ Environment
1.3. Economic Geography of the World Economy
(continued)

b. Concepts of the World Economy

⚫ refers to all of the economic activity within
each country and between countries around
the world.
⚫ refers to the interconnected worldwide
economic activities that take place between
multiple countries.
⚫ is an economy in which wealth and resources
move across national borders.
.
1.3. Economic Geography of the World Economy
(continued)

⚫ International economic system or world economy,

includes institutions and relations of global
capitalism such as global flows of capital, goods,
information, technology, and labor.

⚫ Capitalistworld economy is a multistate economic

system that began in Western Europe as it expanded,
it developed a core of dominant, developed countries
and a periphery of other countries.
1.3. Economic Geography of the World Economy
(continued)

⚫ First - Third Worlds-Cold War terms

– First World
– Second World
– Third World

Some observers even identify a Fourth World as a

subset of the Third World, the poorest countries on
earth (located mostly in sub-Saharan Africa)
1.3. Economic Geography of the World Economy
(continued)

⚫ Global North and Global South terms:

That is used to describe a grouping of
countries along the lines of socio-economic
and political characteristics:

Global South: Countries in regions of Latin

America, Africa, Asia, and Oceania.
• Low-income, dense population
• Poor infrastructure
• Often political or cultural marginalization
1.3. Economic Geography of the World Economy
(continued)

⚫ Global North and Global South terms:

Global North: Including the US, Canada, all

European countries, Russia, Israel, Japan, South
Korea, Australia, New Zealand, and a few others
depending on the context.
1.4. Globalization

Introduction:
▪ The world economy has become integrated with
increasing globalization.
▪ Mobility of goods, services, technology, information,
and capital has intensified recently.
▪ And globalization plays a vital role in driving economic
activities in a country.
▪ Some countries get to enjoy more mobile production
factors and goods.
What is globalization?
 1.4. Globalization (continued)

What is globalization?
⚫ Globalization refers to a complex set of Worldwide
processes that make the world economy and the
various societies that comprise it more integrated and
more interdependent
⚫ Globalization describes the growing interdependence of
the world’s economies, cultures, and populations,
brought about by cross-border trade in goods and
services, technology, and flows of investment, people,
and information.
 1.4. Globalization (continued)

a. Concepts of globalization
⚫ Globalization refers to a complex set of Worldwide
processes that make the world economy and the
various societies that comprise it more
integrated and more interdependent
⚫ Globalization describes the growing
interdependence of the world’s economies, cultures,
and populations, brought about by cross-border
trade in goods and services, technology, and flows
of investment, people, and information.
 1.4. Globalization (continued)

a. Concepts of globalization
⚫ Globalizationcan be defined as the gradual
disappearance of barriers from all perspectives
regarding social, human, industrial, sports
aspects, etc.
 1.4. Globalization (continued)

b. Types of Globalization
⚫ Globalization of culture and consumption
⚫ Globalization of economy
⚫ Globalization of telecommunications
⚫ Globalization and Transnational Corporations (TNCs)
⚫ Globalization of investment
⚫ Global specialization of work
⚫ Globalization of services…
1.4. Globalization (continued)

⚫ Globalization of culture and consumption

✓ Culture: the body of beliefs, customs,
traditions, social forms, and material traits
constituting a distinct social tradition of a group
of people
– Leading to increased cultural homogeneity
– Improved communications and transportation promote global
consumer culture
– All people do not have equal access to globalization
1.4. Globalization (continued)

b. Types of Globalization
⚫ Globalization of culture and consumption
– Distinctive local cultural traits threatened by global
diffusion of consumer culture (synonymous with
Americanization)
– International consumer products
Nike shoes and jeans, Coca-cola, Pepsi, Marlboro cigarettes,
Mcdonald’s, Lady Gaga
Global language

⚫ Whatis a global language ?

– There is no official definition of global
language; It refers to a language that is
learned and spoken internationally by native
and second-language speakers.
1.4. Globalization (continued)

b. Types of Globalization
⚫ Globalization of the economy
– International finance
– Foreign direct investment
– Global specialization in location of production
– Global supply chain
– Globalization of tertiary sector of the economy
– The globalization of office functions
– Global tourism
1.4. Globalization (continued)

⚫ Globalization of telecommunications
– Growth of global digital telecommunications
Television, cell phones, Internet
– Not ubiquitous
Gaps in access to technology

What are the world’s most wired countries?

(fixed broadband penetration, mobile broadband, and % of
households using the internet)
1.4. Globalization (continued)

⚫ Globalization of the economy

– International finance
– Transnational corporations
– Foreign direct investment from core regions
– Global specialization in location of production
– Tertiary sector
Services (retail, wholesale, teaching, government, medicine, law, recreation)

– Office functions
– Tourism
1.4. Globalization (continued)

⚫ Transnational Corporations (TNCs)

– Also known as multinational enterprises (MNEs)
+ Most have headquarters in one of the three regions of the core
North America, Western Europe, Japan
+ Today TNCs, not countries, are the primary agents of
international trade, largely between and within their
organizations
+ TNCs can compete on a world scale due to their
transnational communications ability which allows them to
share information with the subsidiaries and branches
– TNCs are formed and developed by Foreign Direct
Investment
 1.4. Globalization (continued)

⚫ Globalization of investment
– Three major command centers (world cities):
New York, London, Tokyo
– Manufacturing (jobs) located in low-wage,
low-cost, low-regulation countries
– Trends:
+ The proportion of FDI that core countries are sending to the
periphery is declining; core countries investing in other core
countries
+ FDI located in countries with export-led industrialization
(selectivity increasing)
+ Fastest growing economies have followed the export-led
model
1.4. Globalization (continued)

⚫ Global specialization of work

– “Every location in the global economy plays a
distinctive role based on its particular combinations
of assets and weaknesses”
– MNCs choose locations of
+ Raw material extraction (from among a limited pool)
+ Production (factories)
+ Storage
+ Office functions
+ Marketing
+ Management
+ Research and development
 1.4. Globalization (continued)

⚫ Globalization of Services
– Business services are essentials inputs for TNCs
+ Legal counsel, consulting, accounting, marketing, sales, and
computer services
+ Also includes tourism, foreign students, and entertainment
– Operates in a world of a declining role for the nation-
state, but continuing emphasis on cultural
differences
– American culture, the most powerful export
 1.4. Globalization (continued)

⚫ Globalization of Tourism
– One of the world’s fastest-growing industries
– Leading export for many countries, expected to grow
– Natural and cultural attractions, beaches, pleasant
climate
– Political stability is a must
 1.4. Globalization (continued)

⚫ Information Technology and Globalization

– Export and import of knowledge increases innovation
– Success is based upon access to information
– Knowledge workers mine databases and other
knowledge bases
– Real-time information systems and instantaneous
exchange of digital information facilitates international
transactions (ex: radiologists)
– Increased connectivity facilitates economic activity
Globalization versus Local Diversity

⚫ Many current political, social, and economic problems form

tension between those that promote the globalization of
culture and economy and those striving to preserve local
traditions and economic self-sufficiency.

⚫ Will coexist and shape each other (“globalization”)

⚫ In a globalized world more people become aware that their

well-being is dependent upon events and trends
elsewhere.
1.5. Problems in World Development

⚫ Differential development between places

(refer to Figure 1.10)
– Purpose of development is to improve quality of life
– Wealthy countries versus impoverished countries
– Problems of the poor
+ Access to food, health care, affordable transportation
+ Clean water and air, secure jobs, adequate housing, etc.

– Two critical issues

+ Environmental constraints of energy supplies, resources,
and pollution
+ Enormous and explosive disparities in the distribution of
wealth between rich and poor, rural and urban, dominant and
subordinate ethnic groups
World Development Problems (continued)

FIGURE 1.10 The cycle of poverty in Third World Countries. Most

Third World nations have low per capita income, which leads to a low
level of saving and a low level of demand for consumer goods.
1.5. World Development Problems (continued)

⚫ Environmental Constraints
– Environment being overstressed by:
⚫ Massive overconsumption
⚫ Wasteful consumer culture in developed world
– Environment being squeezed in developing countries by poor
destroying resource base to maintain life
– Three obstacles to economic growth
⚫ Diminishing energy supplies, resource limitations, and environmental
degradation
– Fragility of environment poses formidable obstacle to economic
growth
1.5. World Development Problems (continued)

⚫ Disparities in Wealth and Well-being

– The world economy generates tremendous variation in
well-being
Measured by GDP and paralleled by social and demographic measures

– Poverty both in developing and developed countries

– Who are the world’s poor?
Developing countries, most were former European colonies in Africa, Asia, and Latin
America

– The developing world is not homogenous

– Continued disparity exacerbated by international
development and
economic agencies, such as the IMF