Topic 7.7 Notes – Changes as a Result of the World Economy

What Changes in the World Economy Are

The biggest idea is global production networks. One country often does not make an entire product anymore. A phone might be designed in the United States, use parts from East Asia, be assembled in China or Vietnam, and sold worldwide.

That shift did not erase the old core-periphery pattern. It changed its form.

• Core regions still tend to control the highest-value work like design, finance, research, and branding.
• Semiperiphery and periphery often gain lower-wage manufacturing, assembly, or extraction jobs.
• This creates interdependence. A disruption in one place can affect jobs and production far away.

This world map is a useful quick visual of the core, semiperiphery, and periphery pattern.

Core, semiperiphery, and periphery world map

Why did this happen?

• Better transportation and communication made it easier to move parts, money, and information fast.
• Trade liberalization reduced tariffs and other barriers, so goods and capital could cross borders more easily.
• Transnational corporations coordinate production across countries and choose locations strategically.
• Firms look at wages, regulations, and market access when deciding where each stage should happen.

Vocabulary that gets mixed up

• Outsourcing means hiring another company to do work.
• Offshoring means moving work to another country.
• Economic restructuring means a major change in how and where an economy works.
• Deindustrialization means manufacturing jobs or activity decline, especially in older core regions.
• Interdependence means places depend more on economic decisions and events elsewhere.

New Patterns of Production and Labor

Once firms could split production across space, an international division of labor formed. Different countries specialize in different steps.

The new international division of labor means manufacturing is no longer concentrated mainly in the old core.

Newly industrialized countries

NICs industrialized quickly through manufacturing and exports. Standard examples are South Korea, Taiwan, Singapore, Hong Kong, and China. Some move up the value chain from simple assembly to advanced manufacturing and services.

Special manufacturing zones

Governments built special zones to attract investment.

• SEZ = special economic zone with different rules to attract business.
• FTZ = free-trade zone, often near ports, airports, or borders, where tariffs and customs rules are reduced.
• EPZ = export-processing zone focused on making goods for export.

Named examples

• Shenzhen became the classic SEZ. State support, foreign investment, and proximity to Hong Kong helped turn it into a huge manufacturing and tech city. The Pearl River Delta map below helps place Shenzhen in the larger manufacturing region linked to Hong Kong, Guangzhou, and other nearby cities.
• Maquiladoras in Mexico are border assembly plants tied closely to the U.S. market.
• Bangladesh’s garment industry shows export growth built on low wages. The Rana Plaza collapse in 2013 became a major symbol of labor risk in global supply chains.

Pearl River Delta manufacturing region

How Production Changed Inside Firms

These global shifts also changed how companies make things.

• Fordist production used assembly lines, standardized goods, large inventories, and vertical integration.
• Post-Fordist production uses flexibility, smaller runs, more variety, outsourcing, subcontracting, and dispersed networks.

Just-in-time delivery

1. Parts are ordered to arrive right before they are needed.
2. Firms store less inventory.
3. Costs and waste go down.
4. The system depends on reliable transportation, information, and suppliers.

Toyota is the classic example. The weakness is easy to test. If one port closes or one supplier fails, production elsewhere can stop.

Scale and clustering

• Economies of scale mean larger output lowers average cost, so production often concentrates in big firms or plants.
• Agglomeration means related firms cluster together to share workers, suppliers, infrastructure, ideas, and capital. Silicon Valley is the standard example.
• Agglomeration can build through cumulative causation, then run into high costs, congestion, and other diseconomies.

Geographic Consequences of These Changes

In older core regions, this often shows up as deindustrialization.

• Classic example is the U.S. Rust Belt, plus older industrial areas in the UK and western Europe.
• Causes include automation, foreign competition, relocation to cheaper regions, and aging infrastructure.
• Effects include structural unemployment, brownfields, out-migration, lower tax revenue, and greater inequality.

Receiving zones often gain:

• formal-sector jobs
• export earnings and FDI
• infrastructure
• urbanization
• more jobs for women

But they may also face low wages, unsafe conditions, pollution, dependence on TNCs, and profit repatriation.

A new factory can create a multiplier effect. It hires workers directly, then supports suppliers, stores, and services through more local spending. After a closure, the negative multiplier helps explain why one factory loss can damage a whole town. Leakages weaken the multiplier when profits or spending leave the area.

A growth pole is concentrated investment meant to spark wider regional development. Forward and backward linkages connect the leading industry to buyers and suppliers. Shenzhen and Silicon Valley both work as examples. The catch is that growth often stays concentrated and increases regional inequality.