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Economic Geography: Economic Opening and Industrial Agglomeration in China

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Within the period between the late 1800s until the 1930, commercial geography existed, and concerned commodities according to their places of origin and their paths of transportation (MacKinnon and Cumbers, 2007, pp23). Post World War 1, a decline in the colonial empires powers was seen (MacKinnon and Cumbers, 2007, pp24) and the realisation of the need for major growth in the economy was globally apparent.

The 1930s saw the rise of Fordism, a system of mass production and consumption, bringing high rates of productivity in the workplace and expanding wages (Mackinnon and Cumbers, 2007, pp31). This was possible through fixed expenses being shared over a larger number of outputs thereby reducing unit costs and the exploitation of the division of labour (Thompson, 2007). A period of sustained high economic growth and economic advancements was present throughout most major world economies due to Fordism (Thompson, 2007).

However, Keynes emphasised the importance of government control over the level of demand in the economy to reach full employment. States took on interventionist approaches Mackinnon and Cumbers, 2007, pp 31). The Keynesian economic theory, which consisted of raising government expenditure and lowering tax rates, aimed to stimulate demand and get economies out of a depression and was entrenched during the 1930s (Investopedia, n.d.).

Fordism experienced many problems leading up to the 1970s. A new form of ‘post-Fordism’ saw a larger emphasis on the role of small firms, ICT and individualised forms of consumption (Mackinnon and Cumbers, 2007, pp32).

Neoliberal approaches became more apparent in the 1970s as we shifted away from Keynesianism, towards the reduction of state intervention and the increase of free markets, which promoted competition (MacKinnon and Cumbers, 2007, pp32).

The development of the Marxist theory came about in the late 1960s (Mackinnon and Cumbers, 2007, pp30). In its early stages, focus was based on how capitalism can create certain geographical landscapes; there is both need for capital to be fixed in one place and for it to be able to move around (MacKinnon and Cumbers, 2007, pp31). Productive environments need to be built up over a period of time, which is done through keeping capital immobile however, if capital doesn’t eventually move, it will not be able to respond to the changing economic conditions and miss out on locations that are more profitable (MacKinnon and Cumbers, 2007, pp31). Spatial fix, which is “the establishment of relatively stable geographical arrangements that facilitate the expansion of the capitalist economy for a certain period of time” (MacKinnon and Cumbers, 2007, pp302), saws North America and Western Europe deindustrialize in the late 1970s and expansions in certain industries in newly industrializing countries. (MacKinnon and Cumbers, 2007, pp.31)

In the 1980s, Marxism became criticized for being too out of touch with modern times and thought (MacKinnon and Cumbers, 2007, pp32). Three important critiques included the view of human beings as their class instead of their individual person, too much stress on economic forces and relations and too much attention to class, with little to gender or race (MacKinnon and Cumbers, 2007, pp33).

The post war welfare state agreed with Keynesianism theories to accelerate economic growth. Keynes rejected the idea of a classical market economy and embraced state fiscal policy to offset business cycles and reach maximum employment (MacKinnon and Cumbers, 2007, pp93). Spatial Keynesianism was enforced to close the widening gap between richer and poorer regions. Factories and office spaces were positioned in depressed locations and development of financial core regions was halted to even out the development (MacKinnon and Cumbers, 2007, pp95). These policies were prominent until the stagflation crisis of the 1970s, when attention shifted towards neoliberalism (MacKinnon and Cumbers, 2007, pp96).

Neoliberalism is concerned with underlining free market competition and is non-interventionist (Smith, n.d.). It reinvented regulatory techniques since the early 1980s, introducing new experiments and reforms, based on private enterprise and individual liberty (MacKinnon and Cumbers, 2007, pp103). The three main policies of neoliberalism are privatisation, liberalisation and deregulation in order to open up new markets (MacKinnon and Cumbers, 2007, pp103). When Prime Minister Thatcher was elected in 1979 and President Reegan in 1981, the reduction of state intervention was put into practice, the International Monetary Fund also spread neoliberalism across the world through grants and loans and by the early 1990s neoliberalism was considered normal and the correct way to go about controlling the economy (MacKinnon and Cumbers, 2007, pp104).

During the mid 1990s, a new balance between state socialism and free market capitalism was sort due to the uneven implementation of neoliberal policies, as states had adopted some parts of policies whilst completely ignoring others (MacKinnon and Cumbers, 2007, pp104). Neoliberalism has created problems which ultimately resulted in the 2007 – 2008 financial crisis. Due to the implementation of neoliberalist policies such as deregulation and liberalisation 20 to 30 years prior, world trade dropped and developing countries whose economies were built on exporting raw materials saw a great downturn (MacKinnon and Cumbers, 2007, pp106 & 218). Countries that saw economic growth during the 2000s suffered dramatically, a real turn around for Ireland the ‘Celtic Tiger’, which suddenly became one of Europe’s weakest economies (MacKinnon and Cumbers, 2007, pp218). However, one country in particular did not see such problems, China, due to its vast amount of infrastructure spending, was still able to keep production and growth rates high during this period (MacKinnon and Cumbers, 2007, pp218).

The growth in Multinational Corporations (MNCs) was mainly to do with state policy changes brought about since Keynesianism was discarded (MacKinnon and Cumbers, 2007, pp106). The opening up of national economies led to governments turning their focus to low tax and inflation rates and more flexible labour (MacKinnon and cumbers, 2007, pp107). In order for developing countries to receive loans and grants from the IMF and World Bank, strict rules and conditions were imposed, including partaking in Structural Adjustment Programmes, which are designed to advance a countries foreign investment climate in three ways: ridding of trade and investment regulations, cutting government spending and promoting exports (Chebucto, n.d.).

China: Its Emergence as the “Workshop of the World”

Due to the opening up to foreign trade and investment in China in 1979, an unprecedented rate of growth was seen by the country [1980 to 2003: 9.5% growth/year, 2003 to 2008: 10% growth/year] (MacKinnon and Cumbers, 2007, pp105). This growth has decelerated slightly since the recession but is still a strong 6-7% ahead of the global average (Spark, 2013). At the time when many economies saw their growth decline, during 2007 and 2012, Chinas GDP grew by a notable 60% (Spark, 2013). During the mid-20th century China was categorised as one of the “poorest countries in the world” which was mainly at fault due to its very weak health and educational systems, in addition to this, wars completely destroyed parts of the country (Spark, 2007). The Maoist period of stagnation from 1949 to 1978 was crucial in providing China with a strong economic base as during this time GDP had already started to increase by ~5% per year alongside life expectancy (Spark, 2007).

In order for China to attract foreign investment, four Special Economic Zones (SEZs) were created in 1979 (MacKinnon and Cumbers, 2007, pp105) with the aim of attracting capitalists (Spark, 1013). Success of these SEZs was incredible, with two thirds of investment coming in through Hong Kong (MacKinnon and Cumbers, 2007, pp105) and the Chinese government decided to create “open coastal cities” in 1984 which meant that Western companies could now set up along the East coast of China, soon after this the Yangtze valley opened up for foreign investment (Spark, 2013).

A number of factors facilitated the growth of China into becoming a flourishing production economy. China has a large labour supply, meaning supply outstrips demand for work. The Chinese workforce will work for low wages as they are mainly lower middle or working class (Investopedia, n.d.). There are also no workers’ rights relating to child labour or low wages, meaning companies can get away with paying the lowest possible wage. Chinas evolution of supply chains has helped to support its growth as many areas now connect together to form a system of manufacturing through low cost labour, large workforces with great technical skills, component manufacturers, suppliers and customers (Investopedia, n.d.). For example, in the late 1980s China supported the fastest growing automobile industry, which was composed of six main clusters around China that all linked together (Mackinnon and Cumbers, 2007, pp233). By 2003 every single major player in this industry had invested in China, proving the singularity of Chinese bargaining power in gaining access to any world market (MacKinnon and Cumbers, 2007, pp234). 1985 saw the abolition of “double taxation” on exported goods from China, which increased its competition and lower tax rates and meant that production costs could be kept down (Investopedia, n.d.).

China’s dominance over other economies is not likely to remain forever. Already we are seeing newer emerging economies (such as India) with growth rates increasing rapidly and they may pass China in the near future. As China shifts to a more knowledge based economy, away from production, this will cause wage rates to rise meaning the one key advantage that China historically had, i.e. cheap labour, will no longer be maintained, reducing Chinas competitiveness (Investopedia, n.d.).

China’s growth has not all been positive. The country has suffered both socially and environmentally since the start of its growth period. The poorest nations in the world have a similar divide between the incomes of the rich and the poor to China and due to the mass rural to coastal migration, regional inequalities have severely worsened (MacKinnon and Cumbers, 2007, pp105). Environmental degradation and pollution is incomparable to any other country, seen as a major factor of Chinas growth is dependent on using up masses of raw materials and energy (MacKinnon and Cumbers, 2007, pp106).

Chongqing: An Emerging Megacity

Chongqing is a city in central China that has seen a rapid increase in growth since the early 2000s (Xinhua Finance, 2016). This has helped to push China’s development inland as well as along its coasts. Many have realized, that with China’s rapid development, costs along central hubs at the coast are slowly increasing, and it is cheaper to now set up factories in rural areas with costs of construction being half the price of coastal comparisons and house prices are way below the coastal average (Ijjasz-Vasquez, 2018)

Growth has increased by 14% annually since 2007, which is ~6% above Chinas average (Xinhua Finance, 2016). This has been assisted by the mass investment in transport and SEZs inland (Internships China, 2016). A direct train line was set up between Chongqing and Germany in 2010, opening up the area to car manufacturing (Ijjasz-Vasquez, 2018). Two thirds of laptops are now produced in Chongqing as many major foreign high-tech firms have moved to the area due to its economic attractiveness (Brown, 2009). It is producing high tech goods so as to try and jump the “developmental” stage that most megacities have to go through, gaining a high return on investment (Brown, 2009). Chongqing’s GDP is currently the same size as Thailand’s combined (Ijjasz-Vasquez, 2018).

Areas such as Chongqing are helping to eliminate some of the economic problems caused by the coastal concentration of development in China which diminished the differences between rural and urban inequalities and household incomes.

The Geography of Economic Power: Consequences to People and Places

Leeds

Leeds saw a dominant industry in wool during the time of the Industrial Revolution, along with high rates of production in other industries such as printing and iron (Burt and Grady, 1994). Leeds industrial strength saw a surge in factory construction, and much of Leeds development relied on an inflow of Jewish migrants (Leeds City Council, 2015). However, foreign competition was too strong by the 1970s and left many of Leeds industries, especially the manufacturing of clothing, in decline (Burt and Grady, 1994). The majority of factories and mills in Leeds central district were left abandoned and derelict (Leeds City Council, 2015).

The area had gone into depression, the landscape left scarred. Regeneration plans were vital to save Leeds from the crippling period of deindustrialisation. By feeding money into service industries and rebuilding the city into a more migrant worker and student friendly place, Leeds was able to develop its financial sector in the 1990s (BBC, 2006). Local affluence has picked up in recent years and this led to an expansion in Leeds retail sector (Anon, 2009). As a result, Leeds is now the “retail capital of the North” with its latest openings of The Trinity Centre and Victoria Gate shopping centres. At present, 86% of employment in Leeds is within the service sector (Leeds City Council, 2015).

An issue with many brownfield sites that are seen abandoned along the river Aire which runs through the centre of Leeds, is that of contamination from industrial waste. With the recent regeneration of Leeds, companies attracted to the sites are now able to work alongside the local government and together can invest in converting and cleaning up the old contaminated brownfield sites into offices and housing. The council has confirmed that “the accommodation of nearly 20,000 homes will be provided by 2018 due to brownfield site clearing” (Dewar, 2017).

London – Kings Cross

Since 1952 when the station opened, Kings Cross has always had great links with Northern industrial cities (Kings Cross, n.d.). In the mid 19th century a considerable amount of housing was removed in order to make room for the world’s first underground system which opened in the 1963 (Kings Cross, n.d.).

Post wartime, most industries prominent in Kings Cross declined including the use of transport by rail (Kings Cross, n.d.). The area quickly changed from a roaring central industrial area to a derelict, unused wasteland (Kings Cross, n.d.). Trade for businesses was non-existent, all employment opportunities were lost, youngsters turned to crime and the area was riddled with poverty into the 1980s (Kings Cross, n.d.). The removal of housing also caused major overcrowding in neighbouring boroughs (Campkin, 2013) and the London smog which occurred from 1952 to 1962 was likely due to the polluted, hot atmosphere brought by the railways, causing major respiratory problems and further migration out of the area (Campkin, 2013).

However, change came in the late 1990s, when it was decided that the Channel Tunnel Rail Link would be moved to Kings Cross and in 2006 planning permission to completely regenerate the area was passed (Kings Cross, n.d.). It has now been converted into an area of central business and leisure, with “50 new buildings, 10 new public spaces, 2000 homes and a University” (Kings Cross, n.d.). It has been the greatest city centre regeneration in Europe (ULI, 2014).

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Economic Geography: Economic Opening and Industrial agglomeration in China. (2018, November 19). GradesFixer. Retrieved October 23, 2020, from https://gradesfixer.com/free-essay-examples/economic-geography-economic-opening-and-industrial-agglomeration-in-china/
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Economic Geography: Economic Opening and Industrial agglomeration in China [Internet]. GradesFixer. 2018 Nov 19 [cited 2020 Oct 23]. Available from: https://gradesfixer.com/free-essay-examples/economic-geography-economic-opening-and-industrial-agglomeration-in-china/
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