Ch. 19 The Challenges of Globalization Outline Notes 1.What factors influence where economic activities are located? 2.Why do nations carry on trade with each other? 3.How is globalization transforming the world?

What is Globalization? Globalization is the creation of a single global economy and community. According to Thomas Friedman (best selling author) there are several key forces behind globalization. – the end of the Cold War – the spread of democracy – the creation of the Internet – the new practices of outsourcing and offshoring

How Geography Influences the Location of Economic Activities The location of productive resources and consumers influences where economic activities are situated. Economic activities produce goods or provide services. Economists identify four types of productive resources that economic activities require:

Productive Resource Types Natural Resources The resources provided by nature that people use to create goods and services. They include air, water, plants, and minerals. – Lumber, cotton, iron ore, and fresh water are all natural resources. Human Resources This includes all the human labor that is required to produce something. They include all the planning, studying, and training, as well as the work that is actually required to produce a good or service.

Productive Resource Types Capital Resources Goods made, not to consume, but to make other goods and services. Machines and tools are capital goods. – For example, a hammer is a capital good used by a builder to make houses. Infrastructure (technology, transportation routes, communications, networks) is a capital resource. Entrepreneurship People who bring together and organize all the other productive resources are called entrepreneurs. Often they are business owners or managers.

Location of Productive Resources The location of an economic activity is based in part on where these resources can be found. Physical geography often determines where many of the productive resources that go into making a good or service are located.

Natural Resources The materials from nature that go into making a good. They also include the rivers, lakes and oceans that often make it possible to bring these materials together. Manufacturing is often located close to these natural resources. – For example, large amounts of coal are needed to make steel. In the United States, western Pennsylvania has valuable coal deposits. For this reason, Pittsburgh became the center of the U.S. steel industry.

Resource Management Because the availability of natural resources is essential to many economic activities, it is important for countries to manage key natural resources wisely. Often countries will require companies to obtain licenses or permits before they take and processes valuable resources, such as oil, gas, water, or minerals. Companies have to follow strict regulations to minimize pollution and to restore areas after mining activities. The requirements of natural resource management often affect where businesses are located and where money is invested.

Resource Management: Water The management of water resources poses special problems. Fresh water is needed as drinking water by ever growing populations. It is essential to farmers in order to irrigate their crops, especially in dry areas. Factories often use water in their manufacturing operations. Most countries require special permits or licenses to establish facilities that use large amounts of water. They often impose penalties on polluters. This allows regulators to balance competing uses and to control pollution.

CLIMATE Climate is another important factor affecting the location of economic activities. It greatly influences the types of crops that can be grown in a place and therefore is especially important in the location of agricultural activities. For example: – Many Caribbean islands experience warm temperatures with plentiful rainfall. – In the 1700s, these islands became centers for growing sugar cane. – In those days, most sugar cane was grown by slaves from Africa. – Because it was expensive to ship raw sugar cane, which is heavy and bulky, plantation owners built refineries on these islands to process the sugar cane and turn it into sugar.

Human Resources Natural resources are one ingredient in producing a good. Human resources and entrepreneurship are just as important. Where human resources are located also affects the location of economic activities. For example: – Japan lacks many natural resources, but its population is highly educated and provides a large supply of skilled labor. Because of its advanced technology and skilled workers, it has become a center of manufacturing. Electronics manufacturers, like Sony, and automobile manufacturers, like Toyota and Honda, are located in Japan.

Infrastructure Infrastructure is a type of capital resource. It is the investment that a society makes by: – building roads, – laying railroad tracks, – constructing electric power plants, – and setting up telephone and Internet lines. Infrastructure also includes the investment a society makes in providing a: – system of law-and-order, – money and banking system, – hospitals and healthcare, and other essential services. Infrastructure is simply the foundation upon which businesses operate and is essential ingredient for economic growth. The available infrastructure makes it possible for different productive resources to come together. – It also makes it possible for producers to bring their finished goods to consumers. – reduces a company's costs of production, and reduces workers' time spent on non-productive activities. The existence of infrastructure is a critical factor in the location of farms, manufacturing plants, offices, and other economic activities.

Access to Consumer The location of consumers influences the location of many economic activities. Some economic activities provide services to consumers. – Schools, – hospitals, – professional services, – and retail stores will usually be located directly where consumers are found. Even production facilities like factories need access to consumers. Physical barriers -- such as mountains, forests, deserts, and rivers – may make it difficult to reach consumers. Flatlands, valleys, and rivers are more likely to bring productive resources and consumers together. Changes in technology and the creation of infrastructure can sometimes overcome, geographic barriers. Many businesses have moved to areas where production costs are lower. They then ship their goods to global population centers.