AAG10B: Elements of Human Geography
Week 10 – Geographies of the economy
This essay reflects on three aspects studied in economic geography. They include the growth of Transnational Corporations (TNCs) that have made the world’s economy more interconnected, the enhancement of transportation technology that has facilitated global economic connectivity and lastly, the usefulness of Foreign Direct Investments (FDI) as a tool to study the globalisation of economies.
Firstly, the concept of economic interdependence as a common characteristic of globalisation is well illustrated by Transnational Corporations (TNCs). TNCs are becoming increasingly caught up in complex Global Production Networks (GPNs). The power of TNCs shapes economic actions taken across various parts of the world. For instance, when TNCs outsource or set up research or production facilities in various parts of world, they increase economic interdependence between the TNC and host countries because national economies across the world depend on TNCs to help boost their economies. This would mean that the economic activities of TNCs become globalised. TNCs generate significant flows of capital, knowledge, information, expertise, products, raw materials and components amongst their own establishments and between countries. For instance, an item or product can be produced through a series of stages that range from design, to the way the raw materials are acquired, to its mass production, supply, distribution and sale. A company may also outsource some of its production, paying another company to make part of a product. Therefore, TNCs benefit from economies of scale. Their cost to produce goods are lowered through specialisation. The large workforce can be divided to specialise and focus on producing only certain components. In some ways, I would regard this as opportunities exploited or taken advantage by TNCs in terms of differences between different countries, regions or cities around the globe in terms of land, labour and capital.
I also agree with the one of the fundamental nature that characterises TNCs, where they benefit from economies of scale. To illustrate these ideas, we can look at an example. ‘Boeing’ is a US-based TNC that designs, manufactures and sells airplanes, rotorcrafts, rockets and satellites worldwide (Boeing: 787 Dreamliner, 2017). When the Boeing 787 Dreamliner aircraft was made in 2013, as many as 45 large companies were involved in building the main components of the plane. The Dreamliner is assembled in the USA with about 70% of its parts supplied by US companies and 30% is outsourced to other companies abroad. This complex series of economic activities provides jobs for many people and generates diverse economic activity across the various stages of production. Hence, a TNC organises aspects of its operation across national borders at the global scale, rather than simply duplicating its activities in each national economy where it is present. The...