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), saw North America and Western Europe deindustrialise in the late 1970s and expansions in certain industries in newly industrialising countries (MacKinnon and Cumbers, 2007, pp.31).
In the 1980s, Marxism became criticised 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.).
Chinas 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.).
Chinas 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).