Is Geography Important to Understand the Economy and Why?

Is geography important to understand the economy and why? 62%

Geography is important to understand the economy as it helps one understand different components to it. The following will discuss how geography has impacted the economy through trade, globalization and interdependency. However, this essay will also discuss the implications inevitably attached to trade and globalization, which for instance, leads to corruption.

One reason why geography is important to understand the economy is because of the emergence of trade blocs. For example, the ‘European Union (EU) has created a common European market’ (McCann, n.d.). Trade blocs, such as the EU have enhanced the exchange of services and commodities, by removing trade barriers such as tariffs, therefore encouraging trade among EU members. The creation of free trade created ‘’perfect and ubiquitous information flows between regions’’ (Martin 1999), which therefore enhances the role of the economy, by making countries more globalized and reliant on one another. Consequently, the economy has shifted to become a complex entity, whereby political agreements have enhanced trade and created a globalized economy. Trade blocs therefore make geography important to understand the economy as it shows that the economy has political dimensions which have enabled the economy to grow.

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On the other hand, some have suggested that that this concept of a ‘global economy’ mentioned previously, can be used as an indicator of economic development, as oppose to aiding the general understanding that the globalization of international economies have enhanced trade. This is because some countries do not have the political, economic or technological advances to trade, and therefore become politically isolated, which leads to the exclusion of trade blocs and thus restricts economic development. Less developed countries tend to occur among countries where Leyshon and Thrift coined the term “financial exclusion” (Leyshon and Thrift, 1997; Barnes) to describe how ‘disadvantaged groups are denied access to mainstream retail financial services’ (Dymski and Veitch,1996; Barnes). This is emphasized by that fact that some people living in isolated countries cannot ‘afford a telephone’ (Graham and Marvin, 1996; Barnes), which further excludes people from the global economy. This implies that geography is important to understand the economy, as one can see how flows of trade can help develop a country and see whether a country is in the global market.

Moreover, geography can be seen as less important when it comes to understanding the economy as it could be argued that a globalized economy has aided corruption. This also links to McCan’s theory of a ‘common European market’, whereby goods and be traded to other countries. For example, the in 2005 the UN predicted that in 2003 global illegal drug trade was worth US$321.6billion (UN, 2005). However, this has been criticized as corruption is hard to quantify as it is part of the illegal sector of employment, meaning that figures lack in validity. This indicates that geography has complicated the understanding of the economy due to enhancing mechanisms to create illegal markets.

Furthermore, geography can be seen as important to understand the economy by recognizing the world’s interconnectedness. This links to trade blocs which have been previously mentioned, as they allow the free flow of goods and people, such as the EU.  This is because ‘workers from less developed countries come to industrialised nations in search of work opportunities & better living conditions’ (Leitner, n.d.). This is evidenced by Castels and Miller who coined the term ‘the age of migration’ to describe current patterns (Castels and Miller, 1993).  This suggests that countries have become reliant on the exchange of people to work for secondary sectors of employment which can impact the economy due to remittances. For instance, people from less developed countries may be attracted by ‘pull-factors’ such as employment opportunities in more developed countries, and will work their whilst sending money back to their home country. This suggests that geography can help to understand the economy by enabling people to see how the development of transportation alieved some out of poverty and improved their quality of life. Nevertheless, remittances do have a negative effect on domestic economies where the money is being generated. This is because money is no longer being re-invested into the developed countries. This indicates that geography is important to understand the economy, as it allows one to comprehend the interdependency of the global market. On the other hand, some view immigration as having a positive effect on the economy. This is because ‘studies grossly overstate the public cost of immigrants…immigrates generate significantly more in the taxes they pay than they cost in services received’ (Fix and Passel;1994). This suggests that immigration is important to understand the economy as the taxes that immigrants pay are beneficial for a host country’s economy. Nevertheless, immigration and the globalization of economies have benefitted the economy by then allowing more capital to be spend on development. This acts as a positive cycle, as more money can be invested into welfare, therefore increasing levels of education which enables citizens to work in a higher sector of employment such as tertiary or quaternary. Consequently, there will be a rise in middle-class citizens which increases the likelihood that people can have a disposable income to re-invest into the economy. This highlights how important and beneficial globalization has been and therefore implies that in order to understand the development of the global economy, one needs to understand through immigration how it has advanced.

Overall one can deduce from this essay that geography is important to understand the economy, as it allows one to be aware of the post-modern, global economy which has now evolved due to globalization. This is because of factors such as the interdependency of trade which has led to the economy shifting to become a global enterprise. Geography therefore allows people to understand the different political and social dimensions to economy.

Citations

• 1993, C. a. M., n.d. In: A Companion to Economic Geography. s.l.:s.n.
• McCann, D., n.d. The Political Economy of the European Union, An Institutionalist
• Barnes, E. S. a. T. J., n.d. A Companion to Economic Geography 2008. s.l.:s.n.
• Leitner, H. (. ‘. P. E. o. I. L., n.d. A Companion to Economic Geography. In: s.l.:s.n.
• 1999, M., n.d. A Companion to Economic Geography. s.l.:Leyshon 2008.
• Passel, F. a. & 1994, n.d. In: A Companion to Economic Geography. s.l.:s.n.
• UN, 2005. United Nations Office on Drugs and Crime. [Online]
  Available at: https://www.unodc.org/unodc/en/data-and-analysis/WDR-2005.html