CRE: Introduction, Concepts, Approaches, and Basic Facts

1. Comparative Regional Economy <Lecture Note 1> 13.09.05 CRE: Introduction, Concepts, Approaches, and Basic Facts * Some parts of this note are summary of the references for teaching purpose only. Semester: fall 2013 Time: Thursday 9:00-12:00 am Class Room: 114 Professor: Yoo Soo Hong Office Hour: By appointment Mobile: 010-4001-8060 E-mail: yshong123@gmail.com 1

2. Introduction • Purpose of the Study • Course definition: Study of world regional economies in comparative perspective • Multi-facet comparative study of regions in the world economy • Drive implications for strategies of competitiveness, development and geopolitics • Understand the relationship between regionalism and globalism • Approach to the Subject (Eclectic Method) • International political economy • New comparative economics • New economics of geography • Theories, empirical studies, case analysis, etc.

3. Geographic Levels of Earth • Global • The whole Earth • Major World regions • Whole or large parts of continents and the division used in this text for the regional chapters • Countries • The building blocks of major world regions • Local regions • Parts of countries and the places where many individuals voice their concerns

4. Geography • Geography is study of • Where and how human and natural feature and events (political, economic, cultural, and environmental) are distributed on Earth’s surface, the relationships among them, how their distributions change over time, and how those features and relationships affect human lives. • The tensions among globalization, localization, and the continuing significance of country governments provide a basis changes and move toward either greater interdependence or conflict. • Thus, geographers compare places and assess the interactions among them at different levels of geographic scale.

5. Regions and Globalization • Regions are defined by • A high degree of uniformity • Limited variability • More-or-less lasting boundaries • Regional boundaries may include physical features, political boundaries, or economic characteristics. • Regions are also dynamic geographic entities that have distinctive internal and external flow patterns of such phenomena as people, goods, and ideas. • Nodes are key features of regions, being specific places from which flows begin or through which of a set of nodes may define the boundary of a region.

6. Development of World Regions • Early history (about 5000 B.C) • Settle farming • City-state and empires (2500-1000 B.C.) • Trading empires and earlier civilizations (1000 B.C.- A.D.600) • Disruptions, migrations, and feudalism (A.D. 600 - 1450) • Modernization • Explorations and colonies ( around A.D. 1450) • Industrialization (1700s) • Imperialism and expansion (1450- early 1800s)

7. Concept: Realms and Regions  Realm - The largest geographic units into which the inhabited world can be divided • Based on both physical (natural) and human (cultural) characteristics • The smallest scale of commonality - The result of the interaction between human societies and natural environments: • A functional interaction - Represent the most comprehensive and encompassing definition of the great clusters of humankind - Geographic realms change over time: • Russia (disintegration of the former Soviet Union) • European integration

8. Realms of the World

9.  Regions • Areas of the earth’s surface marked by certain properties. • Based on an established criteria: • Human (cultural) properties • Historical identity • Physical (natural) / locational characteristics • All regions have: • Area • Boundaries • Location  Formal region • Marked by a certain degree of homogeneity in one or more phenomena • Also called a uniform region or homogeneous region

10.  Functional region • A region marked less by its sameness than its dynamic internal structure. • A spatial system focused on a central core • A region formed by a set of places and their functional integration • Also called a “nodal” region  Physical Geography • The study of physical processes and characteristics in space such as: • Continental drift • Pacific Ring of fire • Weathering: • Decay and breakup of rocks on the earth's surface by natural chemical and mechanical processes. • Erosion: • The wearing away of land or soil by the action of wind, water, or ice.

11. Structure and Drift of Earth Surface

12. World Seismic and Volcanic Activity

13. Cultures and Population  Culture • Shared patterns of learned behavior • Components: • Beliefs • Institutions • Technology  Cultural geography • Spatial aspects of human cultures • Major components focus on: • Cultural Landscapes • Culture Hearths (Centers) • Cultural Diffusion • Cultural Environments • Cultural Regions

14.  Cultural landscape • The composite of human imprints on the earth’s surface • Take many shapes: • Agricultural tenure • Organization of cities • Architecture  Cultural hearths • The source areas from which radiated ideas, innovations, and ideologies that changed the world beyond  Cultural diffusion • Process during which a culture / religion spread to new areas

15. Core Cultural Hearths of Humanity

16. Diffusion of Major Religions in Pacific Asia Hinduism (4,000 B.C.) Buddhism (563 B.C.) Shinto Traditional Chinese Islam (571 A.D.) Christianity (1510 A.D.) Christian presence

17.  Population distribution • Linked with agricultural potential • 4 major clusters: • East Asia • South Asia • Europe • Eastern North America

18. World Population

19. States  Political geography • The study of the interaction of geographical area and political processes • The spatial analysis of political phenomena (e.g. voting) and processes  State • A politically organized territory • Administered by a sovereign government • Recognized by the international community • A state must also contain: • A permanent resident population • An organized economy • A functioning internal circulation system

20.  Nation • All the citizens of a state (legal definition) • Group of people with a strong linguistic, ethnic, religious and cultural commonality.  Nation-state • A country whose population possesses a substantial degree of cultural homogeneity and unity

21. Development  Economic geography • The study of economic activities in space • Particularly concerned about production and consumption  Economic conditions • Significant variations in income • Developed and developing countries • From low to high-Income  Globalization • A complex and highly dynamic process • New industrial regions and global production • International trade and new markets • Three main poles of the global economy

22. Three Poles of the Global Economy Western Europe North America East Asia Economies Underdeveloped Developing Newly Industrializing Advanced Oil Export / Rent

23. Classifications of Regions: Conceptual Approach  Spatial tradition • The spatial tradition emphasizes the use of quantitative methods in geographic research. • Places are studied in terms of their spatial attributes, namely location, position and geometry.  Area studies tradition • Area studies tradition (also called as regional geography) divides the world into smaller units based on their dominant features or characteristics. • These units (i.e. region or area) are often subdivided into four static typologies, namely formal (also called as uniform), functional (also called as nodal), administrative and perceptual region.

24.  Man-land tradition • Man-land tradition entails a focus upon the relationship and interactions between societies and natural environments, i.e. how people activities are affected and controlled by the physical environment and vice versa. • Relevant concepts are those describing some specific land use pattern, i.e. a region, which is uniform from the perspective of some specific type of a land use.  Earth science tradition • The earth science tradition lays the focus fully on the physical environment, i.e. the waters of the earth, landforms, vegetation, soils, topography, etc. • These categories can be distinguished either under the concept of “natural feature”, “functional area” or “formal area”.

25. Classifications of World Regions: Geographic/ Economic Approach  Classification by location • Asia • East Asia • Northeast Asia • Southeast Asia • South Asia • Central Asia • Middle East

26. Europe • North Europe • South Europe • Central Europe • Eastern Europe • Africa • North Africa • Sub-Saharan Africa • America • North America • Latin America • Caribbean (Middle America) • South America • Oceania

27.  Classification by Income Level (World Bank) ① Low-income economies (<$975) ② Middle-income economies ($976-$3,855) ③ Lower and upper-middle-income economies (divided at $3,856) ④ High-income economies (>$11,906)

28. New Economics of Geography • Concept • New Economics of Geography is the study of location, distribution and spatial organization of economic activities across the earth. • New Economics of geography is usually regarded as a subfiled of the discipline of geography, although recently economists such as Paul Krugman and Jeffrey Sachs have pursued interests that can be considered part of economic geography • Krugman applied spatial thinking to international trade theory, which is called the new economic geography. The name geographical economics has been suggested as an alternative.

29. Focal Areas • Location of industries • Economies of agglomeration • Transportation • International trade and development • Ethnic economies • Core-periphery theory • The relationship between the environment and economy • Culture-environment interaction • Globalization

30. Political Economy • What Is Political Economy? • Political economy is the study of the interaction of the market and political process. • Nature of Political Economy • Markets are embedded in larger sociopolitical systems: The government, powerful domestic interests, and historical experiences determine the purpose of the economy and establish the parameters within which the market functions • Contrary to traditional economists’ assumption that economic activities are universal in character and the same everywhere, the specific goals of economic activities are in actuality socially determined and differ widely over the world.

31. Essential Feature • Political economy focuses on the understanding of how markets work and how market forces affect economic outcomes as well as an understanding of how powerful actors such as the nation-state attempt to manipulate market forces to advance their private interests. • The study of political economy and international political economy requires and analytical approach that takes into account economics, political science, and other social sciences. • It must incorporate the many economic, political, and technological factors that determine or influence the nature and dynamics of the international economy.

32. International Political Economy • What Is International Political Economy (IPE)? • International political economy is an analytical effort to break down the barriers that separate and isolate the disciplines of politics, economics, and sociology and their methods of analysis, seeking a comprehensive understanding of mainly international issues and events. • IPE employs elements of economics, politics, and sociology to describe and explain international and global problems and issues in a way that cannot adequately be addressed by each of those disciplines alone.

33. The Essence of IPE • - IPE is international in scope, meaning that it deals with issues that cross national borders and with relations between and among nation-states. Increasingly today, people talk about a global political economy because more and more problems and issues affect the whole world, not just a few nations, and require a universal perspective and understanding. • - IPE involves a political dimension in that it usually focuses on the use of state power to make decisions about who gets what, when, and how in a society. • Politics is a process of collective choice, drawing in competing and often conflicting interests and values of different actors, including individuals, nation-states on a bilateral and multilateral basis, conflicts between states and international organizations, regional alliances, nongovernmental organizations and transnational corporations.

34. - IPE is about the economy or economics, which means that it deals with how scarce resources are allocated for different uses and distributed among individuals, groups, and nation-states through the market process, which is sometimes decentralized and other times quite centralized or controlled by state officials. • Economic analysis focuses less on issues of state power and national interests and more on issues of income, wealth, and individual interests. • - IPE attempts to understand the complex interaction of real people in the real world, along with their attitudes, emotions, and beliefs. • The social forces associated with class, ethnic, religious, and other cultural groups, along with their different beliefs and values, must also be considered in the IPE analytical formula. Likewise, the state, economy, and society are also affected by the historical development of important events and issues.

35. Why Study International Political Economy? • (Important) IPE is crucial in today’s world, in which events and conditions in one part can strongly affect conditions in other parts, that we analyze these conditions so as to understand what caused them and how they might be managed. • (Useful) In a global political economy and society in which so many things influence and affect one another, employers and government officials seek out those who can understand the international and global context of human activity. • (Interesting) IPE is all about life and the many actions and interactions that connect human beings around the globe.

36. Analytical Building Blocks: States, Markets, and Societies • Much of the study of IPE focuses on the interaction of three highly important institutions - states, markets, and societies - and how their relationship to one another affects the behavior of a variety of different actors. • The State • The state is a legal entity, or a relatively coherent and autonomous system of institutions that governs for a specific geographic territory and population. • Since the mid-seventeenth century, the state has become the dominant actor in the international community, based on the principle that it has the authority to exercise sovereignty over its own affairs.

37. The Market • People associate the market with the institutions of modern capitalism, for selling and purchasing, manufacturing and service industries, firms, large banks and so on. • A market can represent a geographic location where goods and services are exchanged. However, what defines a market is not the Physical characteristic but its function as the institution for exchange of goods and services. • Under pure market conditions (the absence of state intervention or social influences), people are assumed to behave rationally. They will naturally seek to maximized their gains and limit losses by producing and exchanging things. This desire to exchange is a strong motive behind their behavior, along with pressure to generate wealth by competing with others for sales in local and international markets. • A value many people strongly hold that is reflected in market activity is economic efficiency, the ability to use and distribute resources effectively and with little waste.

38. Markets exist within some form of political arrangement or bargain whereby states or some other form of political unit helps maintain their existence and ultimately decides their primary function. • In “mixed economies”, then-such as the US and England, among others-market forces influence a great many resource allocation and distribution decisions, but not all of them. In many nations, people prefer more state control or regulation over market activity in an effort to guide outcomes in directions that favor certain people or groups. • In “command (planned) economies” such as the former Soviet Union before 1989, the state tried to make nearly all allocation and distribution choices based on the leadership’s notion of society’s and the national interest. Many critics of socialist societies point out that the state overregulated the economy, resulting in huge inefficiencies when it came to the production of goods and services and to the over-bureaucratization of the state.

39. Since the end of Cold War, a number of former Soviet-bloc countries in Eastern Europe and elsewhere have been undergoing a transformation whereby markets play a decidedly bigger role in deciding economic policies. • In many cases, such as with some of developing countries and also China, shifting to a market economy and to a democratic government that will supposedly limit the state’s role in the economy is not an easy process. •  Society • Society adds another element of tension to the state, market, and society mix, because different societal groups usually want to preserve and promote the history, culture, and values of their social system.

40. There are usually many different social groups within a state, such as tribes, clans, and ethnic or other types of communities whose borders often cut across national boundaries. • In an age of increasingly growing globalization, market systems link people and their different values and interests with one another when they make products better, cheaper, or more attractive to people in other nations. Relatively unregulated markets can perform a social “coordinating without a coordinator” function, whereas, in more authoritarian systems, markets serve as a “cruel and harsh coordinator.” • The standards used to judge the effectiveness or efficiency of markets and market systems always reflect the dominant ideas about society’s values and beliefs. Markets are a force but not one that is easily separated from social and political forces that give them purpose and provide them with different functions.

41. What should be the proper balance among the state, society, and the economy? There is no set formula for all nation-states nor for their societies. • What is interesting are the patterns of interaction between the state, society, and markets that change over time and that shape local, national, and international institutions as well as individual behavior patterns in dynamic ways. • At times, the market may dominate more than the state or society, resulting in a shifting configuration of group and actor interests and values. This seems to have been the pattern of the 1990s when globalization became so prevalent.

42.  Nature of Political Economy • - Because states, markets and society embrace different basic values and prefer to work in different ways to achieve different ends, sharp tensions and conflicts often result within and between different nation-states and their societies. • - Most people live simultaneously in a state that exhibits certain types of political institutions, national market arrangements and a distinct social system that differs from other nation-states that have their own political, market and social arrangements and institutions. • - How well the collective choices of the state reflect the general will and the public interest depends on a large number of factors, such as voting rights, rules about representation, and the nature of political institutions in a country.

43. Four Global Structures • (The Security Structure) When one person, state, or international organization contributes to or provides security for states and other organizations, a security network is created. The nature of this security structure depends on the kind of bargain that is struck among its participants. • (The Production and Trade Structure) Producing things is one element of generating value and wealth, and wealth is nearly always linked to power. The issue of who produces what for whom on what terms, therefore, lies at the heart of international political economy. Structural changes affect trade and the distribution of wealth and power in the world and the other IPE structures. • (The Finance and Monetary Structure) One way to describe the finance and monetary structure is to say that it is the pattern of money flows among nations. This structure is, then, really a description of how certain resources are allocated and distributed between and among nations. Financial bargains create obligations, which join the interests of different nations.

44. (The Knowledge and Technology Structure)Who has knowledge and how it is used is an important factor in IPE. Nations with poor access to knowledge in the form of industrial technology, scientific discoveries, medical procedures, or instant communications, for example, find themselves at a disadvantage relative to others. Increasingly, the bargains made in the security, production and trade, and finance and monetary structures depend on access to knowledge in its several forms. • These four IPE structures form the international system within the interdependent relations of individuals and states occur. The international systems composed of a set of interactions and relationships that condition how states and individuals behave and determine in multi-dimension.

45. Evolution of Global GDP and Per Capita GDP

46. Growth of the World Population and Some Major Events in the History of Technology-9,000 B.C. to Present

47. World Key Data Source: World Bank database

48. Regional Share of World Income, 2010 • Comparing incomes: The share of developing economies is higher when measured using purchasing • power parity Source: World Bank, World Development indicators database

49. Division The number of borders between nations tripled in the past 50 years Global GDP is concentrated in a few world regions, 2006 Source: World Development Report 2009 (World Bank 2007;Stinnett and others 2002).

50. World Economic Development Status • The Classification of Developing Countries • Classification of less developing countries by UN: ① Least developed, ② Non-oil-producing developing countries, ③ OPEC members • Classification of countries by WB (2008): ① Low-income economies (</=$975),② Lower middle-income countries ($976-$3,855), ③ Upper-middle-income countries (3,856-11,905), ④ High-income countries (>/=$11,906) • Present Status • 80 percent of the world population live in developing countries. • The rate of the population in the absolute poverty (e.g. <$1/1.25 per day) is highest in South Africa below the Sahara Desert and second highest in Latin America. • The number of the population in the absolute poverty is highest in South-West Asia.