Lecture 4 - New Economic Geography Flashcards
How has international division of labour came about
Through globalisation of capital/finance
ICT
In Britain where is the profit/growth from, economies of scale or scope?
Economies of scope
What are the UK competitive in?
High value knowledge, skills and sectors I.e f1 and super cars
What is the area, where f1 development thrives?
‘Motorsport valley’
What is an economy of scale? (List 4)
- Repetitive Tasks
- Specific items
- Fast time, high quantity
- Competitive through cost, low per unit
What is an economy of scope?
- Flexible
- Competitive through flexible application of skills
- E.g niche breads, olive or forccacia
- but diverse into new markets
- products with dough, pizza, doughnuts etc
- same skills, ingredients, machinery
Profit and growth in UK is found in? (List 4)
- New International Division of labour
- Ability to organise operations to make best use of locations, resources
- Natural resources
- Labour
List 3 areas UK are competitive in?
- Areas of high knowledge
1. Pharmaceuticals - UK high knowledge
2. Green economy - world leader in wind tech
3. Creative economy - e.g films
In 1 sentence explain Michael Porters New Trade Theory?
Competitor advantage of nations
Name two components of a successful economy?
- Identifying niche areas
2. Creating value chains
What is a value chain?
It’s a process view of organisations. With viewing manufacturing as system with subsystems. Subsystems include inputs transformation processes an outputs
What are inputs, transformation processes and outputs in value chains?
They involve the acquisition and consumption of resources, e.g money, labour, materials, equipments, buildings, land, administration and management
How value chains are carried out determine what?
Costs and affects profits
In short, what is a value chain?
A string if companies or players working together to satisfy market demands for a particular product
Name 3 components of niche competition?
- Creates unique activities an products that are non replicable of low cost countries
- Makes activities sticky - embedded activities
- Agglomeration economies - benefits of location
Name 5 things niche competition brings together ideas of?
- New international division of labour and spatial division of labour
- Agglomeration economies
- Relationships
- Value chains
- Competitiveness
Who is Paul Krugman?
Main theorist behind New economic Geography
Developed from the new trade theory
What are 2 quotes from Paul Krugman on Agglomeration?
Agglomeration ins ‘The outcome of the interaction of increasing returns, trade costs and factor price differences’
‘Economic regions with most production will be more profitable and therefore attract even more production’
Thinking of spatial division of labour, what are 3 components of economies of scope?
- Using capital in multiple ways to create flexibility and maximise advantages
- Change in factory focus
- Assembly lines more variation in product ranges and customers due to just in time systems and cad cam technology
What are just in time systems?
The right material at the right time, at the right place, at the right amount. Without the safety net of inventory
What is cad-cam technology?
Computer aided design to cut down on waste
What is spatial division of labour?
Spatial separation of low and high skilled parts of a company. Allows firms to use geography to work out how to increase profits from seeking the least cost location for each part of the production process
What is the neoclassical location theory?
The optimal location is the least cost location
What is the behavioural location theory? (Massey and Meegan 1982,1984)
Businesses make location choices based on other decision e.g the environment, schools etc.
What is the structural location theory?
Location is determined by structural dynamics of capitalism
There are two types of agglomeration economies what are they?
Urbanisation economies
Localisation economies
What is an urbanisation economy?
The benefits of using urban places such as infrastructure e.g big cities
What are localisation economies?
Benefits of location in certain places, from the proximity of certain companies (traded and ungraded interdependencies) e.g Silicon Valley
Localisation economies also spillover knowledge in two ways to other companies, how?
Informally - word of mouth, turnover of staff
Formally - through contracts etc.
Why do some localisation economies companies locate in expensive areas with high wage cost. Name 3 reasons.
- Switzerland - pharmaceuticals
- Silicon Valley - ICT
- UK - Digital arts/media
What is one of the most important features of world economy since 1989?
Financial globalisation
What 3 issues does financial globalisation raise about globalisation?
- Development
- Inequality
- Instability
Who does global finance affect?
EVERYONE BITCH
What happened in 1945-1973?
The Motherfucking ‘Bretton Woods’ system
Name 2 things the Bretton Woods system tried to accomplish?
- Promote stable growth
2. Maintain full employment
What 2 things did the Bretton Woods system manage?
It managed trade (GATT) by a gradual reduction in barriers
It managed exchange rates, exchanged rates which were pegged against the dollar which were pegged against gold
What other two things did the Bretton Woods system change?
Capital controls - restrictions in amount of currency which could be bought in/out country also restrictions on converting currency
WB and IMF aimed at growth and stabilisation meaning financialisation was limited
What was the Marshal Plan the USA instituted, and what year?
1948- plan to save capitalism in Western Europe
Why was the Cold War important, what 2 more things did USA do?
- Allocate economic, military and other general aid across the world
- USSR allocated funds to Warsaw Pact countries and other countries, Vietnam and Ethiopia
What happened on August 15 1971?
president Richard Nixon announced end of Bretton Wood system
What were the two major changes that began to break the Bretton Woods system?
Rise of financial speculation (short term flows)
Rise of international lending (long term flows)
Explain why rise of financial speculation began to break the Bretton woods system?
- International financial transaction began to grow
- fuelled by MNCs investing abroad
- expansion of offshore finance
- led to speculation on currencies
- most currencies began to float from early 70s
Explain why rise of international lending began to break Bretton woods system?
- WB and IMF lending to communist countries
- promising developing counties borrowed more
- medicos debt went up from 4bn in 73 to 43bn in 81
Countries who borrowed struggled to pay back debt this led to what?
1982 debt crisis
Stagflation in the West
Massive political realignment across West Europe and North Amerixa
Massive wave of freeing up global financial system
In 1980s what happened?
Financial linearisation
What happened in UK and USA from financial liberalisation?
New market players
Expansion of banks and pension funds
Expansion of speculation
In 1990s what happened?
Washington Consensus
The Washington consensus meant what?
New financial markets
End of split between retail and investment banking
Reduced tax burdens on financial institutions
New financial trading and new products
Expansion created problems name 5?
- Financial economy within nations and globally became detached from ‘real’ economy
- Global economy grew slower
- Speculation more important
- Crisis became frequent
- 1982 Latin American debt crisis to the 2000 dot com crisis
