1.5 Global Economics

Economic geographers explore the spatial distribution of economic activities. Why are certain states wealthier than others? Why are there regional differences related to economic development within a country? All countries have some sort of economic system but have different resources, styles of development, and government regulations.

When we start to explore the spatial distribution of economic development, we find that there are stark differences between and within world regions. Some countries have a very high standard of living and high average incomes, while others have few resources and high levels of poverty. Politically, some countries have stable, open governments, while others have long-standing authoritarian regimes. World regional geography is, in many ways, a study of global inequality. But the geographic study of inequality is more than just asking where inequalities are present, it is also digging deeper and asking why those inequalities exist.

Countries by percentage of population living in poverty
Countries by percentage of the world population living in poverty

Economic conditions are connected to how countries gain national income, opportunities, and advantages. One way of gaining wealth is simply by taking someone else’s wealth. This method has been common practice throughout human history: a group of armed individuals attacks another group and takes their possessions or resources. This is regularly practiced through warfare. Unfortunately, this pillage-and-plunder type of activity has been a standard way of gaining wealth throughout human history. The taking of resources by force or by war is frowned upon today by the global economic community, though it still occurs. The art of piracy, for example, is still practiced on the high seas in various places around the globe, particularly off the coast of Somalia.

PolyMatter: How Somalia’s Pirates Make Money – Note: This video is about 9 minutes long.

Natural resources, agriculture, and manufacturing have been traditionally targeted as the means to gain national income.

Countries with minerals, oil, or other natural resources can earn income from the extraction and sale of those items. Saudi Arabia and other countries with abundant petroleum reserves can gain wealth by selling that resource to other countries. Since these resources are not renewable, once the minerals or oil run out, the country must turn to other activities to gain national income.

Russia has the largest diamond production in the world and produced 40 million carats in 2016. The 2nd largest diamond producer in 2016 was Botswana.

Agriculture is the method of growing crops or trees or raising livestock that provides food and some raw materials. The excess is usually sold for profits. This is a renewable method of gaining wealth, as long as conditions are favorable. Profits for agricultural products might be low because of global competition.

Saffron is the most costly spice by weight in the world. It can cost over $4,000 US dollars per pound or more! Saffron is hand-harvested from the stigma of a type of purple crocus flower.
Kashmiri saffron – Saffron is a valuable agricultural product produced in Greece, Afghanistan, Morocco, India, and other countries.

Manufacturing has offered the industrialized world the opportunity for the greatest value-added profits. From the beginning of the Industrial Revolution, solid profits have been made by turning raw materials into useable products that can be mass-produced and sold in high quantities. The core areas of the world have all made enormous wealth from manufacturing profits. Today, information technology and high-tech manufactured products generate a lot of wealth. The geographic region of California south of San Francisco was labeled Silicon Valley after this type of information-generating activity.

Working at Google – Check out the FREE food! 😉

Places around the world have sometimes been named after the methods used to gain wealth. For example, the Gold Coast of western Africa received its label because of the abundance of gold in the region. The term breadbasket often refers to a region with abundant agricultural surpluses. Another example is the Champagne region of France, which has become synonymous with the beverage made from the grapes grown there. Banana republics earned their name because their large fruit plantations were the main income source for the large corporations that operated them. Places such as Copper Canyon and Silver City are examples of towns, cities, or regions named after the natural resources found there. The United States had its Manufacturing Belt, referring to the region from Boston to St. Louis, which was the core industrial region that generated wealth through heavy manufacturing for the greater part of the nineteenth and twentieth centuries.

Silver mining in Nevada, a state of the United States, began in 1858 with the discovery of the Comstock Lode, the first major silver-mining district in the United States. Nevada calls itself the “Silver State.” Nevada is the nation’s second-largest producer of silver, after Alaska.

Countries with few opportunities to gain wealth to support their governments often borrow money to provide services for their people. National debt is a major problem for national governments.

To pay for public services, the government might need to borrow money, which then increases that country’s national debt. The government could have a high national debt even when the country is home to a large number of wealthy citizens or a growing economy.

Taxes are a standard method for governments to collect revenue. If economic conditions decline, the amount of taxes collected can also decline, which could leave the government in a shortfall. Again, the government might borrow money to continue operating and to provide the same level of services. Political corruption and the mismanagement of funds can also cause a country’s government to lack revenues to pay for the services it needs to provide its citizens.

National debt, defined as the total amount of money a government owes, is a growing concern across the globe. Many governments have problems paying their national debt or even the interest on their national debt. Governments whose debt has surpassed their ability to pay have often inflated their currency to increase the amount of money in circulation, a practice that can lead to hyperinflation and eventually the collapse of the government’s currency, which could have serious negative effects on the country’s economy.

Click here to see the interactive world debt clock(s).

Rich countries are often attractive places for those seeking greater economic opportunities or advantages. Populations in these countries generally have fewer children, so the demand for entry-level workers is often higher. Immigrants with fewer skills take entry-level jobs to enter the economic workforce.

An established country with a long-standing history and culture does not always welcome an influx of new immigrants. The arrival of an immigrant labor pool often includes individuals who hold different cultural traditions or customs than those of the mainstream society.

Social tensions arise if different ethnic groups are vying for the same cultural spaces and opportunities. One example is the large number of people entering the United States across its southern border. Europe is experiencing a similar immigration issue, with immigrants from North Africa, the Middle East, and former colonies. Japan, on the other hand, has taken pride in holding on to its ubiquitous Japanese culture but is facing the same employment situation.

How does immigration impact the economy? | CNBC Explains
Note: This video is about LEGAL immigrants.

Key Takeaways:

✎ Economic conditions are connected to how countries gain national income, opportunities, and advantages.
✎ Natural resources, agriculture, and manufacturing are ways countries earn income.
✎ Some places around the world have been named after the methods used to gain wealth.
✎ National debt occurs when a government borrows money to pay for services.
✎ Rich countries attract immigrants. Those immigrants are not always welcome and can cause social tension.

Next: 1.6 Regions

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Image and additional information credits:

Countries by percentage of population living in poverty
CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=550807
Silver City sign
By Las Vegas in Pictures, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=77554291
Silver mining info:
By Renuabesinghe – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=79696005
Kashmiri Saffron
By Sohail akil – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=49403566
By Swamibu – https://www.flickr.com/photos/swamibu/1182138940/, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=5266232
Diamond production information

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