Economic Geography, Giaccaria _ Appunti riordinati e integrati, Appunti di Geografia Economica

Scarica Economic Geography, Giaccaria _ Appunti riordinati e integrati e più Appunti in PDF di Geografia Economica solo su Docsity! ECONOMIC GEOGRAPHY Introduction Importance of Economic Geography Most of the things we've seen in the courses of Micro and Macro assume that the world is flat and that there®re rules that we can use to study all of the markets around the world. This approach doesn't consider all of the differences that exist between nations and even regions while considering them is one of the main ideas of Economic Geography. Indeed, principally because of Globalisation, many disciplines started considering the world as "flat space" and started using an A-spacial/A-geography approach, while analysing the differences between different areas is fundamental to better understand economic and cultural events. Therefore, today new theories are coming up, trying to reintroduce the idea of differentiation between places around the world. Moreover, the links between different and far away places are fundamental in today's economy, since we tend to be interconnected and our economies depend on each other, in terms of finding raw materials and selling finite products. EU and USA still spend most of their money on raw materials and agriculture while it's not the same for the UK. This is due to Tathcerianism and the spread of Neoliberals ideas in the UK. Indeed, she decided to invest in other sectors then in raw materials, and the UK would have imported them. So, as you can see, economics is not just linked to geographical concepts, but cultural and political, too. Definition of Economic Geography Geography is about the relationship between Human agencies and the terraqueous globe. The choice of the terms "Human" and "Terraqueous globe" is something central in this definition. Indeed, there're a lot of different definitions that decide to use the terms "Men" and "Earth", but: * The idea of a "Man" comes from the Humanistic Tradition, which refers to an abstract and archetypical definition of Humanity and Men. However, considering lots of historical events, like deportations and colonialism, we should admit that this archetypical definition was not right but historically used to ensure the domination of a specific category of subjects. Indeed, the term "Man" was usually intended to refer to a white, heterosexual and catholic individual. On the other hand, the choice of speaking about "Terraqueous globe" is better than speaking about "Earth" because of different reasons, like: 1. "Globe" refers to the geometrical property of the Earth being a globe, that, also in the past, was used as a symbol of perfection, since every point on the surface is at an equal distance from the centre. 2. Moreover, the term "Globe" is meaningful to use because it establishes a connection with the phenomenon of "Globalisation" that is the main sociological, cultural and economical fact nowadays. 3. Finally, the globe is a figure that can't be flatted, which is at least weird, since one of the main objectives of Geography is to represent the globe on maps, which means flattering it. Therefore, there can't be a "true" way of flattering them without leaving empty spaces, since we're always going to mystify reality. Peters and Marcatores used two different systems of projections. The choice between one system or the other is not random, scientific and objective, but responses to the questions of their times. In the case of Marcatore putting Europe in the centre was useful to justify European colonialism and colonisation project. Conversely, Peter's one was made after the student rebellion, during the age of decolonisation, therefore Europe is no longer in the centre, but the continents look elongated. So, it°s the cultural background that determined the change in the Eurocentric representation. 4. The world "Earth" in Italian is translated as "terra", which is not the same for English, where "Earth" is the word itself, while "land" means "terra". If we used the term "Earth" in Italian, it would be translated as "terra", creating ambiguity and risking forgetting the importance of seas and oceans. Indeed, water has a key role in our every day life and our imagination (earthquakes, increasing level of the seas, with cities that are expected to be underwater, projects of land reclamation, immigration and so on). Using the term "terraqueous" we avoid this ambiguity. The ambiguities of Geography Geography is ambiguous knowledge. Try comparing it with social sciences: the name itself underlines the difference from all of them. Indeed, Social Sciences' names are always composed of a prefix and a suffix. The prefix refers to the object of study and suffix refers to the methodology used to study the object of investigation. About the suffix, two names are used, which are "logos" e "nomos". "Logos" means "world" but also "logical thought", and it refers to a rational understanding of the object of investigation. "Nomia" means "law", referring to the fact we are explaining how things in this science work or how they should work. Conversely, the name "Geography" is made of "Geo", which means "Terra" and "graphia", which means "drawing" and "writing". Geography as "drawing" the Earth is specifically Cartography, one of the identities of geography. The big assumption of maps and Cartography is that they are true and objective. On the other hand, Geography is about writing, and therefore about a discursive representation of the World, that is not objective at all. Indeed, Geography as writing is metaphorical and not objective, but subjective. This is a big ambiguity regarding these two sides of the coin of Geography. Even in ancient Greek, there was this kind of tension. Strabo in the introduction of his book was ironic against Eratosthenes, who was a cartographer, saying that he used to tract the Earth as a geometrical object among other geometrical objects, while the real geographers were travellers and used to experience the words, describing it with a vivid imagination. Lecture 2 - Water Economic Geography is the study of the relationship between Human Economic Agencies and the Terraqueous Globe. Indeed, Geography has many sub-subjects (Cultural Geography, which deals with culture; Political Geography, which deals with politics, and so on) and Economic Geography is one of them. Geography as a social discipline uses several concepts and mediators that are used to study the relationship between different agencies and the terraqueous globe. At least we can individuate 4 mains concepts that geographers use to create geographical explanations of economics processes: * Space * Place * Network * Territory Think about the production of bottles of mineral water. Water is a contested commodity and yet the production of bottles of water experienced dramatic growth during the last years. This trend reflects a number of processes, like: * In the Global-South, the huge expansion of middle-class consumers with disposable income to spend, along with the failure of many governments in providing accessible and safe drinking to their populations. This has led to an increased dependence on bottled water. * On the other hand, in the Global-North, where the incomes were already relatively high, and safe water is available, the growth of bottled water can be explained with regard to a deepening focus on personal health and fitness. Indeed, water seems to be a healthy alternative to sugary soft drinks. So, today having bottles of water, depending on the part of the world in which you’re, can be a necessity or fashionable (water bar). The expansion of the industry has happened alongside the emergence of large bottle companies that have expertise and capital to invest in producing, distributing and marketing water bottled products. Indeed, the bottled water industry provides an example of a rapidly growing sector around a relatively simple product. But, at the same time, the growth in this industry has been controversial, in particular, because it generates environmental issues regarding: The expansion of the industry has happened alongside the emergence of large bottle companies that have expertise and capital to invest in producing, distributing and marketing water bottled products. Indeed, the bottled water industry provides an example of a rapidly growing sector around a relatively simple product. But, at the same time, the growth in this industry has been controversia, in particular, because it generates environmental issues regarding: Extraction: conflicts have been particularly acute where bottlers continue to draw water for profits even if the supplies are running low. Bottles production. Indeed, another concem is the plastic used in bottled water, since it generates three important concerns. First, the raw material for the bottles is essentially oil, so the manufacturing process involves all of the environmental impacts associated with processing and transporting it. It seems that in 2007 16 million gallons of oil were consumed to make bottles of water. Transport. A further area of environmental concems regards the transportation of bottles by road and rail and the resulting carbon emissions. This compares very unfavourably with the highly efficient system of pipes used to transport municipal water, at least in the North of the Globe. But, against this point, the industry argues that most of the bottles are consumed relatively locally and that long-distance shipments are the exception. Disposal. The disposal of plastic bottles after use contributes to a growing global problem with plastic accumulation. But, even if bottles are recyclable, rates vary greatly around the world. In this case, producers responded by increasing the recycled content in their plastic containers, supporting the recycling effort, and trying to use less plastic in their packagings. Moreover, there're also contestations about the economic faimess of producing all of these bottles of water: . Even the most expensive municipal water supply costs consumers a fraction of the price of bottled water. Some estimates suggest that bottles are sold for between 240 and 10.000 times the cost of tap water . Several brands of bottled water use tap water as their raw material. This is, for example, the case of the Coca- cola Dasani brand, which was forced to leave the UK when newspapers learned that Dasani was produced just treating municipal tap water. . Opponents of bottled water argue that whether the water is from a tap or the ground, such massive markups represent the extraction of private profit from what is essentially a public resource For all ofthese reasons there”s a strong activism spreading around the world about this themes. Location in Space Space is the main geographical concept, as it's the geometrical order of the world. Basically, it's our way of codifying our position on the terraqueous globe. Deciding to produce something you have to decide where to produce it. Indeed, ‘when we look at the locational decision making of an economic activity, we can analyse why it happens in some places and not others. Unpacking these kinds of locational decisions has been a fundamental part of Economic Geography for decades. that doesn't deal with continuity in space, but with connections. Therefore, today the Euclidean proximity is no more important since networks allow to bring geographically distant places closer together. In this sense, we can say that today Milan is nearer to London than Turin, and it is not about euclidean distance, but about the numbers of connections ‘and networks between the cities. Networks can be defined as groups or systems of interconnected people or things. They're made by points connected in various ways and are kind of a representation of the space, that is not even more geometrical space. Topology is a branch of mathematics that is primarily involved in the study of networks. One of the important measurable characteristics of networks is connectivity, which is calculated by di g the number of connections by the number of points in the network considered. So, as you can imagine, the connectivity's value does not depend on the euclidian distance between two places since it's something that does not matter. The idea of the connections through space can be analysed considering three-forms of connections, which are: * Linkages created by firms and production networks : Corporate systems generate and organise several networks in the global economy in various ways: - The way itself in which transnational corporations are structured generate important networks. Indeed, for example, one of the major players in the business of bottled economy, Nestle, is headquartered in Switzerland. 1/3 of its shareholders are Swiss and 1/3 are Americans. At the same time, sales of this company are largely based on the extraction of a local commodity. Since most of the profits generated with local row materials are transferred to a global headquarter and then divided as dividends mainly located in America and North Europe, the structure of this company has effects on the redistribution of global wealth and it's part ofthe processes that create uneven patterns of development around the world. This is true for Nestle, but also many other companies in the business of bottled water and other ones. The distribution of benefits from a transnational corporation is also determined by where they pay taxes. Companies with global operations will use intemal accounting mechanisms (called ‘transfer pricing’) to ensure that profits are declared in the lowest possible tax regime. Moreover, companies can also locate their business in tax havens to ensure that their tax bill is as low as legally possible (FIJI for example is owned by an entity registered in Luxembourg). - The bottled water business is, however, a system of relationships that goes far beyond the companies that create and market the product. Indeed, business involves a lot of other actors and institutions, creating a network that is even larger than the one of the producers themselves. The bottled water business, for example, involves a lot of producers in the petrochemical industry, to produce plastic bottles. Moreover, the industry has other suppliers of goods and services such as manufacturers of filtration, purification, and bottling equipment, bankers and so on. Governments at all levels (from local governments to international organisations like the European Union) play a key role in establishing and enforcing the rules of water extraction, product safety, recycling, and other issues. Labour unions in any of the sectors mentioned above may bargain to determine wages and working conditions. Activist groups seeking to protect their local environments can have a significant impact on the activities of water bottlers. Even schools, colleges, and universities that ban bottled ‘water on their campuses (or conduct research on the sector) are having an impact on the sales and reputations of bottled water producers. In the bottles of water, a large part of the products that's available today in our supermarkets is the result of a complex network of relationships that connect different economic activities ‘across space. . Waste disposal networks and environmental processes: not just manufactured products that are embedded in networks that connect global space but also the waste we produce as well. Once that the plastic bottle is discarded, indeed, it enters a whole other set of networks that connect places across space. In some cases, it might be quite local, while in other cases it might involve faraway places. The issue of plastic waste also reminds us of another form of connectivity that binds global space together: environmental processes. And another less direct form of connectivity is finally to be found in the process of global climate change. Indeed, places with higher pro capita levels of bottled water consumption are contributing disproportionately more to global climate change than others. Moreover, we often assume that the bottled water industry exacerbates water shortages through its water extraction practices and its contribution to global climate change. In fact, the total extraction of water is very small relative to other uses (such as agriculture). The larger concern is, however, the unnecessary energy used in the industry, which is tied to overall carbon emissions. Thus, it is through the global climate system that we can see the connections between bottled water consumption in one place and water shortages in another. . Wider linkages forged by a capitalist world system: There is a third way in which we can see bottled water as part of a larger space-connecting system, which is through the system of global capitalism. Indeed, all of the international companies today are creatures of this capitalisti system and the global space in which they operate is, in a sense, connected together as the common terrain of capitalism. There are theree characteristics of capitalism that are important to define (opinabile che sia una definizione non di parte): - This system, as for bottled water industry, is based on the ownership and use of private property to generate profits for the owners. - In its search for profit, capitalism is inherently innovative in terms of the commodities offered for sale and the processes through which they are made (we can see it in the creation of new water products with impressive claims about their mineral concentrations, vitamin content and so on). - Capitalism will always seek out new markets to sell commodities, new sources of raw materials, and less expensive or more efficient labour. Territory One final conception of space is territory. Indeed, one aspect of space which is not quite captured in these other formulations is the way in which it can be carved up and controlled. Indeed, a segment of space can be bounded and defined in some way, and then jurisdiction can be exercised. This combination of demarcation and power creates what we call territory. The concept of territory is very meaningful. Just think that, according to the definition of State of Weber, the State is a human community that successfully claims the monopoly of the legitimate use of physical force ‘within a given territory. Indeed, the primary form of territorial power is exercised by governments, who can exert power in a variety of ways within their jurisdictions. But govemnments are not the only organisations that have some degree of territorial power. A campus ban on bottled water is an example of territorial power exercised by a university administration. Moreover, there can be examples of illegal territorial power. In all of these cases, we use the word "territory" to indicate the exercise of power in defined spaces. If we think about Economic, the power to control economic flows into and out of a territory sits most clearly with national governments which can control what moves across those boundaries, including workers, products, and money. Territorial control over borders might also be imposed through duties or tariffs imposed on imported goods. Governments can also use their territorial power to sharp and regulate the economy. In the case of national states, this power is exercised in many ways. In the case of bottled ‘water, for example, governments can impose and enforce environmental and food safety standards. Most of the time they also "own" the natural resource that is been extracted, so they can set the prices. Governments are often major buyers of commodities produced within their jurisdictions, and they can also even own enterprises, for example, involved in the bottling water business. Finally, we should consider that local governments don't stand alone in sharping and regulating the economy or in managing flows and boundaries, but they are also influenced by international agreements and laws. Transnational corporations * Multinational companies: operate in more than one country and have a centralised management system. * Transnational companies: have many companies around the world but do not have a centralised management system A TNC is simply a business firm that controls and coordinates its own and/or other firms’ activity in more than one country. This control and coordination is possible because a TNC owns its subsidiaries abroad or because it is a large buyer of outputs from foreign firms that serve as its suppliers. Their transnational activities tend to be organised around production networks that span and connect different places and territories. Our focus on the TNC is deliberate because of its enormous corporate power, capacity for switching activity from one place to another, and extensive global reach. [Example of Fiat: at first itwas a Italian multinational company, but then it started having troubles because of its debts. Marchionne saved it finding an agreement with General Motors. Therefore Fiat became part of a transnational company]. TNCS are spread all over the world and have much power and capital, but they also mask the enormous complexity and potential risks inherent in the everyday management of these highly globalised operations. Just think about Volkswagen, ‘which, from its humble origins in making ‘people’s cars’,has grown into a multi-brand transnational corporation (TNC) that had become the world's largest automobile firm by revenue in 2016, overtaking Japan’s Toyota. Its range of 12 brands includes many famous automobile names, such as Audi, Bentley, Bugatti, Lamborghini, and Porsche. The corporation, indeed, in the same year in which became the largest automobile firm by revenues, had to face a big crisis, which is called “diesel dupe” scandal The crisis started when the EPA (Environmental Protection Agency) found software in the diesel engines of many Volkswagen cars that had operated as a ‘defeat device’ to pass the stricter and more rigorously enforced emissions laws in the United States. This scandal resulted in a recall of over 10 million of its diesel cars worldwide, including about half a million in the United States alone, and illustrates the enormous organisational complexity and operating risks confronting today”s transnational corporations (TNCS) when they expand and operate internationally. The lack of adequate management supervision and control systems over its diesel engine development and quality inspection executives in Germany was the most fundamental lapse in this entire crisis. This kind of transnational corporations, indeed, expanding rapidly, begin to lose sight of their internal operational processes, reporting and control systems, and testing practices too, as in the case of Volkswagen. It°s evident that global firm find it increasingly difficult to control and coordinate adequately its constituent elements (some not even directly owned) in different continents and regions, with potentially disastrous consequences. The myth of being everywhere without effort In 2011 Hong Kong and Shanghai Banking Corporation (HSBC) claimed categorically that it was ‘the world’s local bank” and this motto of a global bank having a local presence everywhere was central to a rebranding exercise that had started as early as in 2002 and remains today as one of the great success stories of modern marketing. Headquartered in London, HSBC was then one of the world's top five largest banking and financial services groups and the most globalised among them. Despite its origins as a British bank founded in Hong Kong and Shanghai in 1865 to finance the growing trade between China and Europe, HSBC had developed into a global corporation that seemingly operated in almost every comer of the global economy. This kind of motto is not only a matter of geographical locations, but more importantly it gives substance to the myth of the global corporation that operates the same way everywhere. In this myth, there is no compelling reason why a TNC should be different in its organisational makeup or corporate behaviour in different places and geographical contexts. This myth fuel the idea that TNCs can operate the same everywhere. The media often celebrates this idea as a natural phenomenon because “global competition drives global firms to become more and more alike in their global business practices and corporate organisation”. So, these kind of ideas circulated through the leading business schools at which managers are often trained, books and so on, and fuelled the general idea that or TNCs from different regions and countries, there is supposedly no holding back the tide of globalisation; any irregular or idiosyncratic business and organisational practices will be erased by market pressures. In short, only a standardised and efficient form of business organisation will survive global competition. Anywhere, we should understand that worldwide presence does not necessarily mean that organising on a global basis is easy or the same everywhere. On the contrary, as TNCs become more globalised, they face greater difficulties in holding everything together within a single corporate entity, as the Volkswagen case aptly shows. Indeed when TNCs enter a new market they need to configure carefully their functions and roles in order to adapt to different local economies and places, but they also necessitates the design, implementation, and ongoing management of different organisational forms and processes. Just think about that: to recover its major losses during the 2008/2009 global financial crisis, even HSBC was compelled to scale back its global operations by closing branches in several countries and withdrawing from some key emerging economies. In late 2011, it underwent another major rebranding exercise and phased out its iconic motto because it could no longer legitimately claim to be ‘the world’s local bank” with these closures and withdrawals. The changing fortunes of HSBC illustrate well the myth of the global corporation being everywhere effortlessly in a world economy characterised by immense uncertainty and volatility. To make sense of the diversity of TNCs and their operations and to avoid falling prey to the polemical ‘borderless world” discourse we should be able to answer these questions: + How do TNCS organise their diverse activities in different parts of the world? This helps us understand the spatial patterns and territorial dimensions of their activities and the role of these activities in connecting different places in the world economy. + How do TNCS engage and interact with other firms when they operate internationally? This informs us about the role of TNCs as network builders who connect diverse actors and economies. * How do TNCs keep everything together in the face of different risks and vulnerabilities? This brings us to the geographical concerns with place-specific disruptions and multi-scalar events that can impact severely on TNCS. Organisation of TNCs It can be useful to try understanding the emergence of TNCS over time. TNCs also existed before the first World War and even before, during the era of European empires like the British one. However, they started having a global significance when the process of "internationalisation" started in the 1960s. Therefore, most of today's TNCS started as domestic firms headquartered in specific places of origin and then became TNCS. Indeed, as their businesses grew they gained experience through exports to the intemational market and began to establish operations outside their home countries looking for new markets, lower production costs and so on. In particular, they engaged foreign firms to supply specific products and services. Therefore, in operating abroad these domestic firms became transnational corporations. In 1985 Williamson published the book “The Economic Institutions of Capitalism: Finrms, Markets, Relational Contracting” in which he described two different organisational practices: . Internalised transactions: These are value-added activities that occur within the legal and organisational boundaries of a particular TNC. We use the term ‘hierarchy” to describe these inra-TNC transactions as they are subject to the internal governance system ofthe TNC. These internalised transactions are not subject to the implications of open market mechanisms of price competition and are also more likely to be subject to decisions made by the corporate headquarters. . Externalised transactions: These are business relationships that exist between independent firms, (some of ‘which may be TNCs). We describe these inzter-firm relationships as ‘markets’ because they are subject to pressures of price competition and other factors beyond the control system of a particular firm. If you choose this kind of organisation you should accept that you do not have control of the entire process of production. At this point may be interesting trying to compare Apple and Samsung, since they have a completely different approach in organising the production of their products. Apple is a giant TNC specialised in R&D, marketing, retail elements and so on, but it leaves all the manufacturing activities to strategic partners and key suppliers (which often are TNCS themselves). The entire manufacturing process, therefore, can be described as taking place through inter-firm transactions. ON the other hand, Samsung has a completely different approach: it's heavily involved in the in-house R&D, marketing and retail, but even more in the manufacturing part of the production. In the case of personal computers production, Samsung's 50% of the elements of a computer is made inside the firm. Apple works different and they buy almost all ofthe components, also from the same competitors. Intra firms Now we're going to explore how TNCs organise their economic functions and labour's divisions internally. Indeed, the internal organisational structure of TNCs varies according to: * The different corporate strategies being pursued * The distinctive corporate cultures Unlike commercial subcontracting, industrial subcontracting takes place when the suppliers carry out only OEM production on behalf of its key customers — that is, manufacturing only. Industrial subcontractors do not engage in ODM and other value-added services (e.g. logistics and distribution) on behalf of their customers. In the footwear industry, such a mode of outsourcing activity by TNCS is very common. (Ex: Nike's industrial subcontracting practices provide a well-known example. Headquartered in Beaverton, Oregon, the company focuses on the design, R&D, marketing, and retailing of sports products. It is the world's largest and leading athletic brand, with revenue of $34.4 billion in 2016-2017. Apart from manufacturing its Air-Sole cushioning materials and components in two wholly- owned facilities in Beaverton, Oregon, and St. Charles, Missouri, Nike outsources all the production of its thousands of products to contract factories worldwide: as of August 2017, Nike had contracts with 565 factories in 42 countries that employed 1 million workers). We can state that there are many geographical implications due to these forms of international subcontracting. They're: + international subcontracting may lead to the development of highly localised manufacturing clusters in developed economies * it has led to the development of enclaves of export-oriented production in developing countries. This phenomenon is described as "new intemational divisions of labour". * Extensive macro-regional integration can take place if the production networks of TNCs span different countries within the same region and yet strong inter-firm relationships serve as the thread to stitch together different places within the region. This geographical process of macro-regional economic integration works in relation to the presence of TNC production networks in North America, the European Union, and Southeast Asia. + the dynamics of outsourcing in GPNs can change over time. Recent advancements have allowed for the possibility of what might be termed ‘reshoring’, which is the relocation of some manufacturing activities from foreign suppliers or subsidiaries back to home countries. * Strategic alliances and joint ventures: Subcontracting and Joint Ventures are different from mergers and acquisitions (M&As). Indeed, firms taking part in strategic alliances or Joint Ventures do not experience ownership change and remain independent. On the other hand, firms involved in M&As necessarily undergo ownership change. Regarding strategic alliances, only some business activities are involved in these alliances and no new equity capital is involved. They can be considered as a mix of cooperation and competition and they're being more and more used in sectors characterized by intense competition, high costs of R&D and new product development, and rapid rate of technological change. By contrast, when two firms decide to establish a separate corporate entity for a specific purpose, equity joint ventures are often used. In this case, partners have to invest in new equity capital, but sometimes they can decide to use other assets (like land or goodwill) to substitute for capital investments ( we speak about cooperative joint ventures). As joint ventures are formed for partners to share financial risks, to benefit from inter-firm synergy, and to develop new products or markets, they are a popular form of inter-firm relationship that can be found in most industries. Just like international subcontracting, the geographical implications of intemational strategic alliances and joint ventures are manifold. Indeed, these project teams tend to take place between cities and science hubs located in different countries, certain kinds of places become more strongly interconnected in the world economy to the exclusion of others. So, most of the activities in these alliances and ventures concern high-value-added projects, places hosting these activities become more prosperous and competitive. So, spatial uneven development is often exacerbated and certain kinds of places become more strongly interconnected in the world economy to the exclusion of others. * Franchising and Cooperative agreements: Franchising refers to an organisational form in which the TNC owmer of a registered trademark or intellectual property rights agrees to let a franchisee (often outside the home country) use that trademark or rights provided that the franchisee follows the guidelines and requirements laid down by the TNC. There is thus an inter-firm relationship established between the franchisor (a TNC) and the franchisee (a local firm or another TNC). Franchising is particularly common in service industries oriented towards final consumers, like Burger King and McDonald's. This form of inter- firm network is particularly popular in the consumer service sector for two key reasons: - most service TNCs may not have sufficient capital or may not want to incur the substantial costs of expanding into many markets at the same time. It's typical for fast-food industries. - some service TNCs may not want to be exposed to risks arising from unfamiliarity with local cultures, social relations, and the practices of local customers. Franchising provides a convenient and lower-cost alternative for service TNCS to have a local presence through their franchisees, who are likely to be local entrepreneurs familiar with host- country markets. On the other hand, cooperative agreements encompass a wide range of inter-firm relationships that range from licensing agreements to non-equity forms of cooperation (a form of agreement is for example the agreement between McDonald and the producers of Fassone). These agreements can be found in both manufacturing and service industries. In the manufacturing sector, a TNC may decide to license out its patented technology in retumn for royalty payments. By contrast, in service industries firms may come together to form a cooperative agreement for training activities, combining their training teams to offer human resource development programs to their combined employees. In this ‘way, each can reap the benefits ofthe combined human resource practices. Through both franchising and cooperative agreements, TNCs can rapidly internationalise their market presence and promote the consumption of their products and/or services in these host markets Risk Management Driven by the competitive dynamics of global capitalism, lead firms and their suppliers are confronted with a greater sense of uncertainty and unpredictability in a world economy characterised by rapid technological shifts, massive production fragmentation and international outsourcing, and the rise of new markets and competitors. Today it°s required a fuller understanding of changing risk circumstances associated with global interconnectedness and the worldwide presence of TNCs. Morfeover, you should remember that while clearly finns cannot know unknowable conditions in advance (uncertainty), some conditions have a certain chance of occurrence (risk) and firms can mitigate them by doing something about it. There are 5 main sources of risks that companies have to face if they want to operate transnational: Form Nature Effects on TNCs Recent examples Economic risk _ Systemic shifts in markets - new technologies and innovations, changing demand, financial disruptions, exchange rate fluctuations, and so on Loss of competitive position in cost and/or market leadership; reduction in financial returns and profitability; lower income and structural volatility to localities and regions Decline of Canada’ RIM (BlackBerry) and Finland's Nokia in smartphone devices, 2013 Product risk Quality, safety, branding, and efficiency considerations Regulatory Political, public-to-private risk governance, and changing standards and norms Labour risk | Struggles over working conditions and employment practices Environmental Natural hazards or human- risk made disasters Negative views of goods or services by consumers and customers; greater demand for corporate social responsibility Disruption or termination of global production, existing industrial practices, and organizational arrangements Resistance and industrial action by employees; disruptions to global production and employment prospects; and potentially greater reputational risk Accentuating the above four forms of risk and their causal effects The bankruptcy of Takata in June 2017 due to its faulty car airbag problem since 2008 EU” tough regulation of genetically modified organisms (GMO) since 2003 and impact on GM crop growers (e.g. Monsanto’ MON$10 maize) Strikes in Foxconn's plants in China, maker of Apple's iPhones, due to workers demanding for better terms and working conditions, 2012-2013 Hurricanes Harvey and Maria in August-September 2017 and their disruptive impact on American farmers and global supply chains in food products Finally, remember that in an interconnected world economy, risk is generally produced not by an individual actor (e.g. a firm) and is therefore a collective behaviour that affects a large number of actors, localities, and economies. A risky condition in one place can be transmitted through these networks and its effects can have a much broader geographical scope (more places affected) and longer temporal dimension (enduring effects). Example: BlackBarry —> they were sure about their position in the market so they didn't innovate. Another case was the one of Nokia in Finland. Finland was a world leader in producing personal phones. Nokia is considered to be quite often more secure than iPhone and the battery can last for 3/4 days, but they was top world leader and now they're almost disappeared. Their market decline has led to reduction of employment, shutting down of R&D facilities and factories, and loss of tax revenue in their home regions. These effects are also spread to their production net- works throughout the world. Labour Nowadays Dubai is an iconic image of wealth and rapid development. Oil and gas, which were the original foundations of the emirate’s health, today are only a little part of its economy. Indeed, the city today is famous and known worldwide because of its famous port and airport, financial and IT sector, and most of all, for high-end tums and retai, ‘which today are its economic foundations. [They invest a lot in high education and technological innovation. Sovereign funds are investment funds that are directly connected to a State Power. They're important in authoritarian countries ‘where the state top class control the found and make investments all over the world, probably persecuting their own interests.]So, the city today is known as a synonymous of wealth and luxury. It's got something like 3 millions inhabitants, but only a little part of them is actually composed by UAE (united Arab emirates) citizens. Indeed, less than 10% of Dubai’s people are UAE citizens. This means that the landscape of luxury for which Dubai is today known is been built, maintained and staffed by a huge migrant workforce. Most ofthese migrants come from India, but they may also come South Asia, Southeast Asia, Middle East or Africa. Dependence on migrant labour is part of a global pattern that is widespread. Indeed, migrant labour is becoming a normal part of the functioning of global economies. It happens in Dubai, but also in London, where this phenomenon can be perceived as unsurprising. Indeed, London has a long colonial history and therefore migrant labour has always been part of their like. However, more recently, the labour mobility within the EU added a new stream of migrants to the oldest ones. The result of both old and new streams of migrants is that today the 38% of London's workforce is born outside the UK. A similar story can be depicted for many other cities. Moreover, we should also consider that the huge presence of migrant labour is not only restricted to big cities; indeed, smaller cities in y countries experienced an increase of migrant workers arriving. Additionally, the presence of migrant workers can also be related to a specific work sector: agriculture, for example, is one ofthe sectors which mostly depends on this kind of workforce. The use of migrant labour, however, is not always popular, especially in places where the locals feel that their livelihood is threatened by newcomers. However, we should consider that rather than being the cause of negative changes in the world of work, the use of migrant labour is often a symptom of deteriorating conditions. Someone also says that migrant work represents a risk for loss of territorial control by the State. However, the State has huge power in controlling movements and rights of the different categories of migrants. Are migrants a problem? Nowadays public rhetorics that blame migrants are usually used and repeated in many places around the world. Main concems: The idea that free flows of migrants are causing governments to lose control of their borders. This was, indeed, one of the prominent lines of argument for proponents of Brexit, too. However, we should consider that border crossing by migrants is still very much controlled by the state, which establishes the circumstances under which migrants can move. The idea that they represent a drain on the economic resources of the host countries because of their claims on the social welfare system, unemployment benefits and healthcare services. This idea should be considered analysed under specific-place analysis depending on the regimes of social welfare that are used in a given location. In Sweden, for example, it is true that they draw significantly on the resources of the State. However, it's not the same for places like Singapore, where there's very little impact by migrants on state expenditures. In the USA, according to a study driven in 2017, federally an immigrant contributes positively to tax revenues, but it's not the same from the local point of view: indeed, in this second case, their impact is slightly negative, because young immigrant families tend to use locally funded public school systems and also tend to pay fewer taxes because they're earning less. The third argument against immigrants is that migrants will take jobs from those who are locals in a particular place. This kind of rhetoric, in particular, intensified after the economic crisis of 2007/08 and the programs of austerity driven by the various governments in the later years. However, it's hard to find out if these claims are true or not since it requires us to know whether those jobs would have existed migrants willing to take them and whether the locals would have been willing to take them in absence of migrants. In this contest too, it would be necessary to answer this question by analysing the local situation. In the USA, for example, according to the previous study, immigrants have very little impact on the employment of local populations since they're competing with very specific segments of the labour market. Finally, a common idea is that they undercut local wages and working conditions because of their willingness to work less. Even in this case, we should consider the thing from a geographical point of view. For example, in the USA it seems that the reduction in wages is something that only involves low skilled jobs located in the segments of the labour market in with migrants are competing. Moving up to the scale of the economy as a whole, however, despite all of these rhetorics, the impact of migrants is nearly always positive, because they're usually specifically selected to fill essential roles and create profitability for their employers. Moreover, other states paid the cost for their education and training. Finally, as outsiders, they tend to be less able to assert their rights or to push for better working conditions, resulting in being more manageable than their local counterparts. II. The third feature of migrant workers is that they can be controlled and disciplined easily because of their precarious status in the host economy. In the case of illegal migrants, for example, they're always vulnerable to deportation if they take any complaints to the local authorities. However, even in the case of temporary foreign programs, several aspects of migrant workers' lives make them very compliant and controllable. One example could be the Seasonal Agricultural Workers Program driven by Canada. It has been used especially in the southern agricultural belt of the province of Ontario and is administrated by the Canadian Federal government. Workers are recruited based on bilateral agreements with Mexico, Jamaica, and other Caribbeans countries. Workers arriving through this program have visas locked into a contract with a particular employer and for a specific type of work, meaning that it's difficult for them to seek a new employer if their conditions are not good. Moreover, they cannot create labour unions and while migrants may have certain rights according to the standard legislation it's very difficult in practical terms for them to assert their rights because of linguistic barriers, unfamiliarity with rules, institution procedures and so on. For all of these reasons, these workers have very little opportunity to interact and ask for better work conditions. This happens in Canada, but it can apply everywhere in the world, since migrant workers have very little opportunity to interact, organise or integrate into their host society. Consequences in places of origin Labour migration also has important impacts on the places where migrants came from. The most relevant economic dimension is undoubtedly represented by the money they sent back to their families, also called remittances. Countries receiving the highest levels of remittances are generally low and middle-income countries, like India, China and the Philippines, with Mexico at the top ofthe list. In the Philippines, for example, remittances represent 10% of the national GDP, but in smaller economies, the level of dependence is even higher: in Nepal, for example, remittances account for more than a quarter of the total GDP. There're widely different views on the benefits of remittance flows for the migrants' places of origin. The more optimistic view sees them as as valuable development potential and has been promoted by international organisations like the World Bank. According to this view, remittances have a variety of positive impacts: * they can fuel everyday consumption, finance new business or provide capital for the existing ones. * They support the value of a country's currency * they're immune to capture by comupt practices or political agendas since they're sent directly to migrants' families. Therefore, they go directly to the people who need them. * they provide some degree of immunity from unpredictable business cycles or economic crises * They provide direct improvements in quality of life for those who receive them * They can provide a safety net against sudden hardships created by natural disasters or epidemics (like what happened after the strong storm in the Philippines in 2013) According to this view, remittances have a positive impact on the places where migrants came from, and so they have to be encouraged, for example reducing the cost oftransactions so that migrants would be encouraged to send more. A more pessimistic view lays out the problems that arise from a remittance-based development strategy. These problems are: * there is debate over whether remittances generate productive activities that will sustain long-term livelihoods or just fund short-term consumption. Indeed, if this were the case, and money are spent for enabling consumption and not investments in productive activities, families may not experience long-term improvements in their economic circumstances loss of talent and young human capital Productive workers may also be lost if non-migrants who are receiving remittances from a family member decide that they no longer need to participate in the labour market since poorest segments of society do not have the resources to migrate the migration flows could generate an increase in income inequality among sending communities remittances can have inflationary impacts on the costs of land, housing, schooling, and other everyday expenses in sending areas. Prices start to reflect the buying power of migrants and their families, placing essential items out of reach for non-migrant families migrations produce a set of human costs that are difficult to include in any economic accounting of migration as a development strategy, due to the fact that families are separated, children grow up without their parents and so on Or ganising migrant labour Now we tum to consider the ways in which workers collectively organise themselves within, and sometimes resist, the economic system in which they work. The traditional face of labour organising has been the union. Since the nineteenth century, labour unions have sought to bind workers together within a workplace, a company, and even a whole economic sector to have a collective voice for negotiations with the managers and owners. The rate of union membership has declined in many countries in recent years. According to different studies, we know that: * the level of union membership is highly uneven across different countries, reflecting labour histories, government policies and economic structure * in the last 14/5 years union membership has dropped dramatically. Indeed, the trends in the labour market we mentioned above have all reduced the number of traditionally unionised jobs or made them harder to organise. Moreover, neoliberal policies that undermine the ability of unions to organise have also played a role. In this context, the rapidly increasing use of migrant labour presents a further set of challenges to the collective organising of workers. In many cases, it is simply illegal for temporary migrant workers to join a union or it may be difficult for them to organise themselves because of ethnic and linguistic differences and because of dispersed workplaces. Therefore, new strategies of labour organising have been developed as a response: * Community alliance-building __ This first strategy involves unions reaching out to other community groups in order to organise and bargain for workers. One of the best examples is the Justice for Janitors (bidello) campaign in the USA which reached out to many different workers in the building services sector who were used to working at night in isolation, they may have language barriers and therefore feel that they had little in common with each other. The JfJ was able to organise collaborations with creative media campaigns to raise awareness of the hard and essential work done by janitors and the poor pay and the hard working conditions they had to face and in the end the results were impressing, enabling the JfJ model to spread globally. Their example highlights two key geographical elements pf contemporary labour organising: - the need to move upwards from the workplaces to the larger scales at which employees are operating = place-based local alliances built by the union (often called community unionism) are critical so that the workers can understand that they're not alone Social movement unionism __ This strategy involves building campaigns for more generalised improvements in pay and working conditions that apply to all workers. In this way, migrants and other workers who are hard to reach or difficult to organise can benefit even if their own workplaces are not unionised. What is especially interesting here is that this struggle for better working conditions is not based on negotiations between a group of workers and a specific employer. Instead, it is part of a wider social movement to mobilise for all workers in a particular place. Workers' centres __ This model involves creating workers” centres that provide services for low-wage and precarious employees, especially where their status as temporary or undocumented migrants, or recent immigrants, makes them vulnerable. Such centres are often partly funded or supported by unions but do not operate in the traditional union model. Instead, they provide a wide range of advice, services, and advocacy that often goes well beyond workplace issues. One example is found in Chicago, where migrants without legal authorisation to work or live in the United States represent a particularly vulnerable group. The migration industry It is easy to assume that labour markets are simply the sum of the actions of individual buyers and sellers of labour power, but this is seldom the case. Instead, they are deeply underpinned by an array of actors and institutions that shape them and make them work. These institutions range from training and educational institutions, to staffing agencies, to the laws and regulations imposed by the state. These functions, indeed, inevitably involve the regulatory role of the state, but they also involve private entrepreneurs, personal social networks, and other actors. This web of institutions forms a ‘migration industry” or ‘migration infrastructure”. Of course, the State is closely involved in migration in a variety of ways since, as we've said before, the right to legally move, settle and work is controlled by the territorial state. Sometimes, however, the State goes further d seeks to facilitate or promote the export of human labour, as happens in the Philippines. Indeed, the Philippine government has one of the most highly developed infrastructures for labour export in the world, prepares migrants with pre-departure orientations (which may also serve to indoctrinate ‘good’ migrants, who will work hard and faithfully send money home) and regulates and permits an extensive private recruitment and training industry. However, the practical aspects of labour migration are mostly administered not by governments but by dense networks of private businesses that are involved in the training, transportation, processing, and placement of workers. While these service providers operate legally and in a regulated industry, in many other contexts labour brokers work informally and may facilitate illegal migrations or human smuggling. Furthermore, while these examples generally refer to low-paid workers, intermediaries will be no less important in the assembly of a migrant workforce within professional, technical, and managerial types of work. Headhunters, for example, play a key role in facilitating the global flow of migrant labour. Moreover, we should note that a local worker getting a local job may not need such an extensive chain of brokers, but intermediaries may be equally important. The case of temporary employment agencies provides a good example of how labour markets are institutionalised for migrants and non-migrants alike. Consumers Purchase decisions of consumers sometimes are based simply on impulse, but sometimes depend also upon flows of information, which can come from many different sources, such as the producers of goods and services, the media, family members and friends. In particular, advertising today is a huge global business, with the largest advertising group, WPP, generating annual revenue of 15 billions dollars and employing more than 200.000 people worldwide. Advertisers seek to influence the many decisions we make as consumers about what to buy. However, today profound ongoing transformations involve the world of social media, advertising and retailing. Increasingly, we're alerted to new goods and services, research and discuss about their quality and finally purchase them through digital platforms as part ofyour daily online activities. We should know that there®re several geographical dimensions to these seemingly ubiquitous developments: Even if the growing significance of globally networked companies is clear, sometimes what is not clear is that they're reworking patterns of consumption in uneven ways. For instance, while Amazon and Google are dominant in the United States and many other markets, in China for regulatory and consumer preference reasons, the clear market leaders are Alibaba, Tencent, and Baidu.These online worlds are not simply erasing what went before, but rather continue to sit alongside, and interact with, ‘old’ technologies like televisions and newspapers or magazines. Similarly, as we shall see in this chapter, store-based and online modes of retailing are co- evolving and will continue to do so. We should not assume that everyone in the world can easily tap into these various online forums. Indeed, uneven internet access remains notable in the contemporary world. Moreover, within these broad spatial patterns of uneven access, there are place-specific dynamics at work. Over 20 years ago advertisers and producers started targeting their goods and services at individual consumers with increasing sophistication and accuracy, especially through the use of their data. As a result, today the collection of consumers” data is one of the dominant form of advertising in a highly fragmented world of consumption. Importantly, this targeting is simultaneously social and spatial, as firms adjust their targeting to reflect the place-specific nature of consumption dynamics. Indeed, consumption is also given a local flavour since it’s not a strictly individual practice anymore, but is informed by social relationships and peer reviews and options since today, before buying something, we often do pre-purchase research using online forums, like Trip-advisor for hotels, or discuss them with family and friends. Who controls the consumption process? There ca be three different views: 1 Consumers-as-dupes view __ According to this view large corporations of different kinds, rather than consumers, are the dominant shapers of consumption within such networks. Indeed, this view emphasises the primacy of production within the economic system as a whole. From such a perspective, consumption is read as the outcome of changes in the nature of the production process and therefore driven by these capitalist firms. It is a pleasure- seeking but ultimately regressive activity in which passive consumers are enticed into parting with their money, thereby delivering profits for producers and refuelling the basic capitalist system. However, the rise of retail capital over the last few decades has complicated the picture and today the consumption process Id increasingly shaped by retai rather than manufacturing companies. Consumer sovereignty view __ this view foregrounds row free will of individual consumers. Deriving from neoclassical economics, consumption is seen here as an economic transaction dependent on individual preferences and price-based decisions. Rational consumers — the homo hoeconomicus - acting on full information about different products and prices and in accordance with their preferences, will make informed decisions about which products to buy. In tum, these actions will have an impact on the production process, as market information about which products are popular feeds back through retailers to manufacturers. In short, consumers can choose whether to buy the products on offer or not, and as such they have considerable sovereignty, or control, over the economic system as a whole. This approach is not entirely without merit: indeed, it’s true that capitalist firms closely monitor their customers and markets and respond rapidly to signals they receive about the popularity (or not) of the commodities they produce. However, it has also clear limitations, since it represents consumption decisions as being taken by autonomous consumers unaffected by wider society and its various norms and expectations. Sociocultural perspective __ emphasises the way in which consumers actively construct their own identity through their consumption practices. Such an approach draws attention to the other intersecting facets of identity — such as class, gender, ethnicity, age - and looks at how consumers knowingly purchase certain commodities and use them in specific ways as part of an active process of identity construction. These processes are not individualised as in the consumer sovereignty view, but are instead part of larger social forces and trends within society. So, rather than simply being rational economic actors (homo hoeconomicus), consumers also exercise aesthetic judgement (homo aestheticus) and are unavoidably social beings (homo socio-logicus). From such a perspective, the interactions between consumers and producers are viewed as complex and two-way. Consumption processes are clearly influenced by manufacturing and retail corporations and the commodities they offer, but consumers purchase such goods selectively and knowingly: firms, in tum, will respond to emerging consumption dynamics within society. This approach incorporates three important aspects of consumption: A. Conceives the consumption as a process involving sale, purchase and the subsequent use of commodities. Therefore, consumption is not only about the interaction between producers and consumers, but it also involves what people do after they bought commodities. So, consumption is no more simple an economic 3. Large retailers have started to reinvest in the inner city, prompted in part by the gentrification trends just mentioned. These processes have partly been driven by the competitive responses of retailers to planning restrictions on large format stores, a process also seen in emerging markets Online commerce Since the late 1990s various forms of business-to-consumer e-commerce have emerged, presenting challenges to traditional retailers. After many initial years of steady expansion, the last few years have seen explosive growth in such online retailing. While estimates of online retailing vary considerably, many observers agree that in 2017, online sales in China exceeded US$1 trillion for the first time (up from less than US$100 billion in 2010; and the expected grow for 2024 is for China to exceed 3 trillion), accounting for approximately 20 per cent of all retail sales in that country. Other leading markets in terms of the penetration of online retailing at that time were the United Kingdom (18 per cent of total sales), United States (15 per cent), Germany (15 per cent), South Korea (14 per cent), France (10 per cent), and Japan (9 per cent). For Italy the percentage in 2017 was lower than 10%. Geographic unevenness in uptake of online retailing has been accompanied by important sectoral differences. For certain segments, for example, online retailing has been transformative and it also has also proven highly effective for a range of niche and specialist goods (e.g. relating to hobbies) due to the Intemet’s ability to match buyers and sellers over long distances, thereby increasing the effective size of the market. In terms of services, the Intemet has proved to be a very efficient channel in several areas including travel and insurance. These variations in reveal important aspects of retailing: it has become clear that while online retailers can save money by avoiding the need for store premises, there are still considerable costs associated with selecting and delivering goods ordered over the Internet. In particular, the logistical challenges associated with high-frequency, low-value local deliveries are severe (+ algorithms and data analysis) there are elements of tactility and sociality inherent in many forms of shopping, meaning that ahead of purchase consumers like to see and ‘feel’ the goods, discuss them with family and friends, and benefit from the expert knowledge of retail staff. In this way, many consumers now move seamlessly between the online and physical spaces of retailing, sometimes even for the same product, for instance, combining in-store assessment of goods with the power of online price comparisons and peer review (One of the main problem is represented by people who go to physical stores in order to better understand the quality of products and then buy online if the price is lower) Growth in online retailing, therefore, has been driven not only by ‘online only” retailers but also by store-based retailers who have moved parts of their business online, remodelling themselves as multichannel ‘bricks-and-clicks” operators. Major store-based retailers have been proven to have considerable competitive advantages relating to their pre- existing warehouse and supply chain infrastructures, customer support centres, and product-retum networks. They have been able to leverage these resources and economies of scale — for example, in terms of sourcing — by grafting e-commerce operations onto their existing businesses. Therefore, many leading retailers started operating extensive store and online operations simultaneously. As a result, efficient logistics have become critical to these combined operations. For this reason, models of fulfilling online orders have been introduced over time, involving different geographical configurations of warehouses and different levels of involvement of independent logistics firms. Until this point, online retail spaces have thus by no means replaced physical spaces, but rather are overlain on, and interact with, the changing geographies of store-based retailing. Moving forward, however, there are signs that online- only retailing may be in the ascendancy, as the operations of the global leaders such as Amazon, Alibaba (Taobao and Tmall), and JD.com are reaching an unprecedented scale and driving more systemic change. For example, small stores are being put out of their business by the online competition, while on the other hand, small areas specialised in the production of certain commodities for the national markets are growing thanks to the development of e-commerce, reducing in significant terms the levels of poverty (like what is happening in the case of “Taboo villages”. The case of Amazon is interesting. The company was established in 1994 and did not retum any profit until 2001, but has undergone exponential growth since 2010. The company ’s competitive strength derives from its combined abilities in logistics and data management. While its data centres collect and manage a vast array of consumer data, Amazon’s fulfilment centres manage the efficient flow of goods to customers, in some cases using its data processing to predict consumer demand. Amazon’s operations are therefore underpinned by an extensive network of different kinds of centres. There are clear spatial patterns here: fulfilment centres are spread across locations near to large urban areas, customer, services centres are in more peripheral locations, and HQ/data centre operations are located in leading cities. Interestingly, to cope with the increasing demands of time-sensitive deliveries and also a growing interest in fresh food retailing, Amazon is currently adding a layer of smaller scale ‘sorting centres” in its leading markets to bridge between regional distribution centres and urban end markets. Informal retailing So far we've focused on formal retailers, since it’s probably the most prevalent and important consumption site in capitalist society. However, it°s important to recognise that beyond the formal spaces of retail lie a wide variety of informal trading and exchange practices. These are different to formal retailing in several ways: * while some are relatively permanent features of the built environment (e.g. charity shops), many are transient and temporary in nature (e.g. mobile street vendors and street markets) * while some will be entirely legal operations, others may operate at the very limits of the law, or even illegally * prices are often agreed through negotiation and bargaining, rather than being fixed. In this sense, there may be more consumer involvement than in the standard shopping experience structured by retailers * shopping in informal retail spaces can be a less predictable experience, as participants do not know what goods will be available. Instead, the shopping experience unfolds as an exciting and highly tactile (i.e. hands-on) search for bargains Informal retail activities are present in all countries but much more so in developing countries. Indeed, while informal retail spaces can thrive also in developed market contexts, they tend to operate around the margins of the mainstream, formal retail sector. Therefore, informal retail spaces take on far greater significance in the context of developing world cities, where such exchanges may be more important than formal sites of retailing. Examples are found on the streets of many Asian cities such as Bangkok. In such contexts, informal retailing is central to the livelihood strategies of many families and households. Estimates suggest that in the developing world, some 60 per cent of employment is provided by informal economic activity (ranging from 38 per cent in Latin America to 76 per cent in Africa) compared to 15 per cent across high-income countries. Summary about retail Retail geographies are restless and continually changing. These changes reflect both the growing size and power of retailers, and wider societal dynamics such as patterns of urban decay/ renewal and the movement of high-income segments of the population. Due to the acute sensitivity of retailing to planning and regulatory conditions, the timing, nature, and extent of change varies substantially between different territories, and from place to place. Moreover, the tangible geographies of stores, and the logistics and distribution systems upon which all forms of retailing depend, increasingly coexist and intersect with a range of online retail spaces. In tum, a variety of informal retail activities and places exist alongside these formal retail operations. The importance of such activities varies geographically: in some contexts they will be relatively insignificant, filling particular market niches in a largely formal retail sector, while in others they form the mainstay of the urban economy, representing the only way for millions of poor urban inhabitants to make a living. Uneven Geographies of consumption We?ve seen that consumers can be seen as active agents making informed decisions about which commodities to buy in order to construct their particular identities. This is true especially for certain kinds od highly symbolic goods, like clothing, jewellery and so on. Other consumption activities, including the choice of restaurants, bars, and holiday destinations may be part of the same process. Through all these goods, indeed, an individual is able to communicate key elements of his individual identity. It is important to appreciate that the ability of consumers to engage in symbolic forms of consumption varies hugely, both socially and spatially. Socially, it may only be certain groups within the population, and particularly middle- and upper- class consumers with the necessary disposable income, that choose to take part in symbolic consumption. Spatially, such consumption will be more widespread in wealthy countries than in poorer countries, where simply meeting basic needs requirements. However, Even within wealthier countries, poor urban or rural dwellers with low- income levels, limited local retail provision, and poor access to transportation may effectively be excluded from the consumption of symbolic goods. These factors intersect to create a segmented spatial pattern of consumer types. On the other hand, it°s true that today we can speak about the “spread of a global elite worldwide”, meaning that even if in low- income countries you can find a local elite that has the possibility to consume almost as the wealthier countries’ elites. At the risk of simplification, it is perhaps useful to think of three broad groups of consumers that are unevenly distributed across the global economy: We can profile a high-end, luxury segment involving an estimated 330 million consumers worldwide and worth US$1.1 trillion in 2014. The markets which most represent this segment of populations are the one offering luxury cars, branded personal goos like jewellery and clothing and so on. After the United States — by far the largest market for these goods — Asia is home to the most rapidly expanding national markets for these goods, namely China, Japan, ‘and South Korea. The emerging middle class.Towards the higher income end of the range, it clearly overlaps with the luxury consumption we have just described. The bulk, however, may exhibit different consumer preferences, with price being an overwhelming consideration, and product variation mattering less. Thus, while millions are reaching broad middle-class status, they do not yet have the same levels of income as their counterparts in more developed economies and price sensitivity remains of paramount importance. The potential of tapping the consumer power of the newly emerging consumer class has been popularised through the notion of the ‘fortune at the bottom of the pyramid”. * Low-income consumers whose consumption practices are dominated by meeting basic needs on a daily basis. While poverty levels have fallen significantly at the global scale over the past two decades, it is salutary to note that estimates suggest that some two/thirds of the world's population eam less than US$10 per day and are therefore deemed to be ‘low income”. In short, the majority of the world®s consumers are to a greater or lesser extent excluded from many consumption practices and yet they are not often the focus of investigation. Even within the same types of consumer identified above, there will be great place-to-place variation in their consumption practices. This variation will reflect the intersections of a consumer’s unique individuality, their membership of particular groups in society (e.g. youth or ethnic cultures), and their position within particular regional or national cultures. Turism: consuming places There is another angle we can take here, namely recognising that a significant proportion of consumption activity is actually concemed with the consumption of places themselves. Tourism is centrally about the generation of different kinds of pleasurable and/or memorable in-place experiences. Tourist experiences are often about the combination of tangible elements (e.g. hotel and flight) and intangible experiential elements (e.g. sunset and mood). Tourism is a huge industry — accounting for an estimated 7 per cent of world exports, 10 per cent of GDP, and 1 in 10 jobs — and is increasingly global in scope. International tourist arrivals have grown strongly in recent decades, rising from 435 million in 1990 to 675 million in 2000, 950 million in 2010 and 1,235 million in 2016 and 1,500 million in 2019. During the pandemic we had a decrease of 75% in the sector of international tourism with a loss of USD 1.3 trillion dollars. History: Large-scale tourism dates to the second half of the nineteenth century, when first the middle classes and then the working classes in countries such as the United Kingdom took advantage of social change and improvements in transports. Intemational tourism flourished from the 1950s onwards, driven by increased disposable incomes and leisure time in developed countries and the rise of airline travel. The 1960s and 1970s were the golden era of international mass tourism in Europe in particular, with large numbers of consumers purchasing standardised products. This period of strong growth was associated with the development of standardised tourist resorts. As anew trend, today we're interested in the experiences we might try during our travels, so a new kind of tourism of experiences is developing. As with consumption trends more generally (see Table 7.1), the tourist industry has changed significantly in recent decades, becoming more post-Fordist in nature. More individualised consumption patterns have become apparent in tourism as they have in many other consumer-oriented industries. Mostly, there has been something of a rejection of mass tourism from middle-class consumers who now seek a wider range of tourism experiences, driving growth in a number of areas, including: Urban and heritage tourism: urban tourism, often undertaken in short trips, has grown rapidly. As a result, tourism has become central to the economic development strategies of many towns and cities, in particular through what can be thought of as ‘culture-led’ development. * Mega-event tourism: these processes of urban regeneration can be given a boost by cities hosting large-scale one-off events that attract significant numbers of visitors. It°s for example the case of Olympics Game, Eurovision and the Expo Event. Theme park tourism: here visitors pay for admission to an entirely themed complex, placing particular emphasis on the architecture and its symbolism. At the heart of the theme park model is the consumption of multi-sensory experiences which may combine simulated environments; the humanising of those environments by live interpretations, performances, and commentaries; and themed exhibits and eating places. Ecotourism: this has been defined by the International Ecotourism Society as ‘responsible travel to natural areas that conserves the environment and improves the well-being of local people” Finance During the last decade we assisted to an extraordinary growth of student debt both in USA and UK. In the United Kingdom, a Guardian report on 15 June 2017 showed that at the end of March that year, cumulative tertiary student loan debt, covering 3.9 million borrower accounts, passed £100 billion for the first time in history. Some economists have even predicted that this debt level will double to £200 billion by 2023. In the United States, outstanding tertiary student debt was $1,340 billion by March 2017. In the midst of this extraordinary growth in student debt, the UK government began a sale of up to £12 billion worth of student loans — through its not-for-profit Student Loans Company (SLC) — as a class of financial ‘assets’ to investors in global financial markets. In the United States, a similar sale of loan portfolios comprising federally guaranteed student loans took place in the second quarter of 2017 when JPMorgan Chase. Indeed, you would probably know that student loan can actually be financed in different ways: you might have taken up a student loan with a government institution funded by taxpayers, or a govemment-guaranteed institution, or a loan with a commercial bank. But your debt will eventually get packaged into financial instruments or ‘assets’ that can be bought and sold among financial institutions in global markets. This process is called securitisation = A process through which debt and loans are packaged into, and sold via financial securities at prices determined by their under-lying risks and retumns. Therefore, together with many other types of corporate and consumer debt, these billions of dollars of In this view, global cities are not just the site of corporate headquarters but full-blown (= a tutto tondo) global service centres with a wide array of innovative support activities such as legal, banking, insurance, accountancy, management consultancy, advertising, public relations, and software firms. Three caveats about this approach should be noted. First, beyond this very top tier, the ranking can alter significantly, depending on what kind of measure is being used. Second, any ranking of cities must be seen in dynamic terms: the more recent rise of cities such as Beijing, Hong Kong, Shanghai, and Singapore, for example, has profoundly shaped existing pattemns. Third, an ongoing challenge for economic geographers is to reveal the nature of the connections between key cities, rather than their static attributes. It may well be that the notion of a hierarchy is outdated in today”s interconnected world economy Sovereign wealth funds In recent years, certain states have become major global investors through their own national funds or SWFs. A sovereign wealth fund is a state-owned investment fund composed of money generated by the government, often derived from a country's surplus reserves. One example of something like a sovereign find in Italy is represented by “Cassa depositi e prestiti”. In general, SWFs are developed through the accumulation of capital via the following means: * Huge resource endowments in home countries: Surplus national funds can be accumulated through the large-scale extraction and export of commodities derived from such endowments as oil fields and minerals * Significant trade imbalances through exports: Surplus foreign exchange reserves are tumed into national funds for global investment (e.g. China, Hong Kong, and Singapore). * Longstanding conservative fiscal management: Significant government budget surpluses over time are accumulated to form SWEFSs (e.g. Singapore). * Accumulated pension and social security funds: There are state-backed allocations and accumulations of retirement funds for citizens (e.g. China and New Zealand). “Cassa depositi e prestiti” is part of this group. A couple of things should be noted: Most of the leading SWFs are based in rapidly developing countries, where the pace (ritmo) of economic growth is allowing the accumulation of funds. On the other hand, some of the SWFs from developed countries are relatively smaller Many SWFs come from small economies, indicating their intention to seek greater retums to their national wealth for sustaining future generations. Some of the SWFs have a very long history of existence, but experts claim that only during the first decade of the new millenium governments around the world discovered that these investments vehicles were crucial to achieve their goals. While most SWFs are managed professionally by national agencies, their close connections to ruling monarchs or political regimes have raised significant concern among the broader international community. Critics argue that the investment objectives of SWFs are often intertwined with state objectives that go beyond pure financial considerations to include geopolitical concerns and economic diplomacy. In reality, however, SWFs vary greatly in the extent to which they are pursuing strategic as opposed to economic objectives, and also in the extent to which there is transparency about those objectives. This mixing of financial with political imperatives has the potential to be an increasingly destabilising and controversial aspect of state action within the global economy. The growing role of the state as a major institutional investor in the international financial system has gone hand-in- hand with the advancement of financialisation since the 1990s. With much greater national wealth accumulated through different state-controlled means, these SWFs are no longer constrained by the domestic orientation of their financial objectives and investment possibilities. Traditionally, SWFs have tended to be risk-averse and invest in ‘safer’ financial assets. Moreover, most of the SWFs around the world outsourced the management of their assets to the world's leading private asset management firms. Now, s financialization has opened up many new avenues for generating greater returns on their assets, some SWFs have become more aggressive in their choice of investment vehicles and risk appetites and their acquisition of new asset classes. Islamic finance Even if global finance has apparently penetrated almost Avery corner of the world economy, we should not forgive that the world is made up of many different societies and nation-states, some of which operate under cultures and religions quite distinct from the Anglo-American form of capitalism. Moreover, finance, just like any other form of economic life, is a social-institutional phenomenon that is deeply embedded in the norms and practices of these societies and states. Islamic finance is not a small and isolated phenomenon, but rather it represents a major form of economic practice distinct from Anglo-American finance. As a significant and yet burgeoning trend in global finance since the 19905, it has several core tenets that are consistent with Islamic beliefs of freedom from colonial rule, exploitation and oppression, the elimination of poverty, and the reduction of unequal distribution of wealth: * Money: Money cannot be used to generate further wealth outside of a productive process. Money has no intrinsic value in itself and is only meant to define the value of something (e.g. goods or services). This is a rather different belief from the ‘spirit of contemporary global finance in which profits can be ‘produced’ on the basis of retums to investment in all sorts of financial instruments, irrespective of their speculative, manipulative, or even fraudulent motives. * Interest (riba): The charging or paying of interest on a deposit or a loan is not allowed under Shari'a or Islamic law. Loans and mortgages are not part of the financial products offered by Shari'a-compliant banks. A Shari'a- compliant bank can only use its deposits and funds to acquire productive assets and share any profits made on those assets with its depositors. Shari’a-compliant bonds known as sukuks, for example, typically offer a fixed-rate profit to their holders. Investment: Shari’a permits investing money in manufacturing, services, or trade compliant with Islamic principles, but investment in undesirable activities, such as gambling, alcohol, and pork-related products, are disallowed. * Risk (gharar): Banks share the risk of investment with their depositors and all risks and related information must be known to them. This means that high- risk investments are not permitted. Shari'a-compliant investments must also be on the basis of ownership to avoid future unavailability of underlying productive assets. Derivatives and CDOs, popular investment vehicles in Anglo- American finance, are thus uncommon in Islamic finance. Taken together, this religious/cultural belief system, which requires investment behaviour that lies outside of the profit- maximising and risk-taking imperatives of most conventional banks and financial institutions in Anglo-American capitalism, has fostered the rapid development of an alternative banking and finance system emphasising equity and investment in the real economy. The practice of Islamic finance has led to the creation of an alternative circuit of significant financial centres with a different geographical structure than the existing network of global cities. Apart from London, it is clear that Islamic finance operates in networks and places outside the dominant form of Anglo-American finance capitalism. Indeed, the recent development in Islamic finance has further prompted regulatory shifts in the United States and the United Kingdom to accommodate non-interest-based financial practices among Muslims. Clusters An economic cluster is a dense network of companies and institutions in a certain geographic sphere. The cluster is composed of production companies, raw materials suppliers, services providers, companies in related fields, and public institutions. Since the early 1970s Sand Hill Road has been the centre ofthe global venture capital industry. Venture capital firms are private fund managers who invest in early-stage companies — usually in high technology sectors — acquiring equity shares through successive rounds of investment[ Let’s think about Satispay: developed by a start up born in Cuneo, then they moved to Turin in an incubator and now they’re moving to London for founds]. It's a high risk and high reward form of corporate financing that funds ideas usually not supported through traditional bank loans.The ones who finance a start-up are called venture capitalists. They usually invest in more than one start-up in order to have a portfolio that somehow compensate the risk. You have 2 ways to get a profit from a start-up: © wait until the technology start to produce revenues (you get your part) - exit strategies = the start-up, which goes well, is sold to a large company, where the inventor of the start-up can have a role In 2017, the United States accounted for 55 per cent of global venture capital investment. California, in tum, dominated the US industry with a 50 per cent share of total US venture capital investments, while the region around Menlo Park, ‘where Sand Hill Road is, constituted just over 80 per cent of the Californian total. Put another way, the cluster of firms centred on Sand Hill Road invested 22 per cent of the global venture capital in 2017. It helps us in understanding: in an era of advanced and instantaneous telecommunications, it illustrates the continued importance of ‘being there” in particular places, of having a physical presence among the networks of lawyers, investors, inventors, and entrepreneurs that constitute the social fabric of the area. Indeed, the close physical proximity of talent and capital in a specific area is central to its competitive success it demonstrates how over time, certain places become associated with certain forms of economic activity; they become known as the ‘place to be”. These reputational effects reinforce the strength of the cluster. Indeed, having the right address gives the firms located there a certain credibility that in tum enables them to raise the capital on which their business depends the attributes of venture capital as an economic activity are important to understand. Venture capital investments are based upon localised networks of ‘know-how? and ‘know-who” that allow the rapid and effective circulation of particular forms of knowledge. Selecting new industries for investment and finding promising firms requires detailed observation of market and technological trends over time; working with firms after the initial investment also necessitates frequent ongoing interactions based on trust and social relations. Indeed, in the risky and volatile world of venture capital and high technology industries, the place-specific relations between technologists and financiers are absolutely crucial. * Hill Road offers a window on to the way in which locally specific ‘ways of doing business’ may develop over time. Silicon Valley is in part unique because of the particular business practices or ‘cultures’ that have developed there over a matter of decades, distinguishing it from other high-tech clusters around the globe However, clustering is not specific to Silicon Valley or the venture capital industry; rather it is a generic characteristic of the capitalist economy and is seen in all sectors and places. Promoting he development of clusters is extremely popular with policymakers as they are often based on high value-added activities and are export oriented, thereby contributing strongly to economic growth. As will see later, however, there can be risks associated with clusters being overly specialised on a limited range of economic activities. Industrial Location Theory - Weber Weber, a German economist whose 1909 classic work The Theory of the Location of Industries was published in English in 1929, developed his theory in the context of strong industrial growth in the coalfield areas of the Ruhr region.His aim was to develop a general theory of location that could explain the spatial distribution of production activities, and the approach he developed was a /east cost model of industrial location. This seemed to be entirely appropriate in a period in which the dominant industries were locating close to energy and raw material sources, and transportation networks. His idea was that the individual firm locates in its optimal location, according to the minimax profit approach, which consists in maximising profits and minimising costs. Indeed, Weber started from the observation that manufacturing plants tended to locate where total transportation costs were minimised. He proposed that transportation costs were shaped by two factors — the weight and the distance. Therefore, he derived a basic unit of cost, the ton-mile. The locational decision then became a search for the point where the total ton-mileage of a given production and distribution process was at a minimum. His locational triangle model was a key representation of the industrial location problem: © srt it models a situation in which a single manufacturing plant needs to access two sources of dè raw material inputs and one market location. Weber then used both mechanical and mathematical models to calculate the least cost location within the triangle. This process highlighted the significance of whether the manufacturing process was weight-losing — in which case the optimum location was drawn towards the raw material sources — or weight-gaining — in which case it was drawn towards the market site. So, while metal Ran Raw smelting, for example, is likely to take place near to where the relevant ores are extracted, material è è materie the production of soft drinks or cars is likely to be located close to market. Optimal location Weber also introduced variable labour costs into his analysis. Through an index of labour cost, he measured the average cost of labour required to produce a given unit weight of a product; industries with a higher index were presumed to be more sensitive to spatial variations in labour costs. His model predicted that firms would move towards a source of cheap labour if the savings per unit of production were greater than the increase in transportation costs incurred by moving. This was calculated through using isodapanes, or lines of equal cost. The critical isodapane represented the places where the savings from a given location factor were just enough to outweigh the additional transport costs of being in that position. Webers approach to industrial location, and others like it, was particularly dominant in economic geography during the 1950s and the 1960s. Since the 1970s, however, they have been extensively critiqued by economic geographers as such abstract modelling techniques have slipped out of fashion. Critiques: * It assumes that industrial decision makers have access to perfect information and act in an entirely rational manner dictated by pure economic thinking. * It represents raw materials, markets, and cheap labour as being located at single points in space, which is clearly not the case. * It priorities transport costs that are now a far less significant component of a firms total costs, particularly in the service sectors that dominate the economic structure of many advanced economies. That being said, the basic insight that industrial location is shaped by the trade-off between different production costs still has tremendous contemporary resonance, particularly in the notion of the new international division of labour. [In his understanding of human behaviour, according to the neoclassical view, Weber assumed that people are agents who primarily care about minimising costs and maximising profits and then introduced some degrees of complexity considering that there’re some points in space where labour is cheaper. The big issue in neoclassical economic, however, is weather were able to reduce everything as a measurable element]. Importantly, however, Weber was also one of the first to consider the nature of the agglomeration economies. While industries do indeed agglomerate or cluster, to differing degrees, at the sources of raw materials, at transportation and transhipment terminals, and at cheap labour locations, clustering offers further economies for the firms that take part in it. In contrast to the inferna/ economies that can be accrued within a firm by producing at larger volumes (known as ‘economies of scale’), there are economies external to these firms that can be derived from connections to other firms and organisations. So, he introduced the idea that there’re not only internal economies of scale, but also external ones. However, the analysis of agglomeration was arguably one of the weaker elements of Webers analysis. His work reveals incentives within specific territories. Examples are to be found across the export processing zones (EPZs) of the developing world. * Business service clusters. Business service activities such as financial services, advertising, law, and accountancy are usually to be found in the central districts of leading or ‘global’ cities, and in some cases, their hinterland regions. Indeed, such activities are among the most spatially concentrated of all sectors. Business services enable control and coordination functions for global production networks and hence usually co- locate with TNC headquarters in leading cities to facilitate knowledge exchange. State-anchored clusters. A disparate category of clusters has developed due to the location decisions of government facilities, such as universities, defence industry research establishments, prisons, or government offices. Consumption clusters. There are also strong propensities to cluster — often in central urban areas — in a wide variety of consumer service activities including retailers, bars and restaurants, and cultural and leisure facilities. The theatre districts of the Londons West End and New Yorks Broadway offer specific examples, as do the many retail and entertainment districts of Tokyo (e.g. Shibuya) and Shanghai (e.g. Xin Tian Di). Las Vegas, in turn, provides a compelling example of a whole city economy based upon consumption activities. Tourist activities more generally also tend to congregate around different kinds of amenities. In reality, of course, applying any such typology is not an easy task. Some places are constituted by clusters that are hybrid forms merging the characteristics of two or more of these types. In addition, clusters are not necessarily shaped by local forces only. Limits of Clusters Although the idea of clusters has become extremely influential in both academic and policy circles, its ascendance has not been without critique. They're still very popular, but in the ‘90s they were more than popular and were the main framework to understand the relationship between space and human agents. Indeed, they were polarising the debate. In Italy, in particular, the enthusiasm about the theory of “districts of industries” was high because of the characteristic of the economic system, characterised by MPIs. In this context indeed, the structure of the economic Italian system seemed to be something positive, even if we had not large corporations. Taylor (2010) goes as far as to argue that the notion of clusters has become a ‘mesmerising mantra” that obscures meaningful understanding of the growth dynamics of local agglomerations. There are several elements to these critiques: * Slippery scales: the geographical scale at which clustering is seen to occur varies widely from small districts within cities through city-regions as a whole to small national economies. Precision is required as to the precise spatial scale at which clustering dynamics take place or the concept risks becoming meaningless. Over prioritising ‘the local’. there is a real danger that cluster accounts overemphasise the importance of local economic interconnections at the expense of connections over wider geographies, e.g. at the national or international scales. Often the significance of local connections is presumed rather than demonstrated empirically, while there is counter- evidence that forms of knowledge can be effectively transferred across clusters, e.g. within TNCs and their global production networks. We speak about “the local trap” (Purcell) , related to the idea of “national trap” (famous concept in economic geography, according to which we tend to think that most of the phenomenal can be understood in national terms). He studied in particular the idea positive prejudice according to which, especially for foods, local is always better. Cluster interactions: views also vary on the nature and importance of links between individual industry clusters within wider agglomerations. This may occur within the same industry — Beijing, for instance, has three complementary clusters in the biomedical sector — or in broadly similar industries. Capitalist imperatives: many clustering accounts focus on the positive aspects of community, collaboration, shared goals, and win-win interactions. The capitalist imperatives of competition, prices, profits, and unequal power relationships — equally if not more important to the success of a cluster — can seemingly be neglected. Nodes in Global Networks Clusters, then, are embedded within wider regional cultures that give them distinctive characteristics. But now we need to ‘open up’ clusters to understand why they continue to be so important in an era of globalisation and advanced information and communications technologies. In this way, we are also going to be able to respond to some of the limits quoted above. Clusters are re/ational places, exhibiting important connections across space, as well as localised networks of traded and untraded interdependencies. We thus need to understand how the concentration of certain economic activities in particular places is part of the very same processes that are seeing other kinds of activities dispersed across the world through the formation of global production networks. Within the production system for a particular product or service, there are some operations, such as corporate decision-making, which need to be located in agglomerations. Other corporate activities, such as production, sales and marketing, and customer support, can be more spatially disparate. Put another way, the spatial decentralisation of economic activity facilitated by space- shrinking technologies requires the very kinds of control and coordination that can only be achieved through locating certain important corporate functions in key global cities. Indeed, the dispersion creates different challenges of integration and coordination for global firms, since they have to: = Acquire information about what is going on across the production system as a whole - Allow to develop important interpersonal interactions such us trust through social interaction - Keep up with innovation Clusters offer a solution to these problems by acting as centres of tacit knowledge transfer and control within wider global networks, for example, through the interaction of corpo- rate headquarters, government departments, and industry-specific media. Indeed, they act as centres of sociability, places where interpersonal relationships are created and maintained. Moreover, they act to provide a critical mass to help generate innovations through the intense ongoing interaction of numerous users and suppliers of technologies. Clusters, then, should not be considered on their own, and purely in terms of the local relationships they contain, but as modes in global networks, where certain kinds of local relationships are used Aciore, firme to facilitate and support other kinds of non-local Region relationships. In reality, the ‘buzz’ of local clusters Shared values, atttudes igni Pell can rely to a significant extent upon face to face ® Local information flows. and everyday interactions, but can also be achieved *d * gossip, news, buzz through combinations of interpersonal and 9. +— Global pipelines electronic communications or travels. Therefore, the ‘buzz’ of local clusters is also combined with è , OUIZI a custe various ‘global pipelines” that connect and transfer 9 knowledge between clusters. In some cases, separate clusters may develop in a symbiotic manner through their interconnections. Figure 12.12 Local i global pipe [In the figure you have something with clear SO Lp Ba 204) i epruno of ape boundaries, a continuous space, that is the region. Publications. Then you have an atmosphere of shared value, skills and so on, that is not exactly inside the region. You also have relationships. The region is coincident with the cluster. The relationships are contained inside the region, but other are moving also outside. Then you have global distant relationships, called global pipelines] A dynamic approach to Clusters So far in this chapter we have looked at clusters in somewhat static terms. We have profiled various types of clusters and the different types of ‘glue’ — in the form of traded and untraded interdependencies — that bind firms together within those clusters. We have also highlighted the role of non-firm organisations, regional economic cultures, and global pipelines as important shapers of clusters. But that leaves some important questions unanswered, such as: how do clusters form in the first place? How do they develop over time? And why do some clusters disappear over the longer term while others go from strength to strength? Clusters pass through a life cycle consisting of four phases — emergence, growth, sustainment, and decline. As firms leam from one another, over time the benefits from being in the cluster will diminish, as their capabilities start to Emergence Growth Sustainment Decline converge due to ongoing processes of interaction and knowl- edge exchange. In essence, it becomes harder to stand out from the crowd, and over time the specialisation of the cluster in a particular area of economic activity changes from a strength to a weakness, as a process of lock-in occurs and established ways of doing things start to stagnate. If the issue is unaddressed, the cluster will then decline unless it can launch a process of renewal that sustains the cluster or, more radically, a transformation process that launches another life cycle entirely. s— Number of employees Size Maturity How does it happen that a cluster is created? Sometimes a cluster is created through accidental events, such as an unplanned innovation or an arbitrary location decision of a company or an entrepreneur that acts as a ‘trigger’ for growth. More often than not, however, a cluster emerges due to a mixture of pre- existing conditions and certain trigger events, which may be either local or non-local in origin. What about the decline? The life-cycle model suggests that, after a period, decline will set in and clusters will contract due to the limits to specialisation. Indeed, the economic landscape is littered with cases of former clusters that have gone into inexorable decline. A Scandinavian example will explain us this process. From the 1960s onwards, the Arendal area of southern Norway emerged as the country’s leading cluster for the production of glass fibre leisure boats, driven by its heritage of producing wooden boats in combination with some inward investments in glass fibre technologies. By 2000, the area accounted for 75 per cent of Norway”s production of such leisure boats, and the cluster encompassed 800 jobs across 30 boatyards and their supplier networks. Initial signs of decline were then exacerbated by the global financial crisis of 2007-2008, which saw demand fall significantly. In this new context, boatyards were unable to adapt their expensive craft assembly methods, and by 2018, there was only one significant firm left in the cluster, with the rest having either shut or moved their production to cheaper sites overseas. The case of Arendal's leisure boat industry thus nicely conforms to the cluster life-cycle model, while illustrating that decline is not only related to ‘local’ processes of lock-in but rather, as with cluster birth and emergence, is also shaped by external triggers, in this case a financial crisis. So how, then, can clusters avoid lock-in and decline through the processes of renewal and transformation? * Renewal_tends to be driven by sustained innovation within the same sector of the economy. It's something incremental and it’s about innovation and continuity in the same sector. It's about innovation and continuity: thanks to innovation you can continue being competitive in the original sector * Transformation processes_can take two forms: - First, if growth can be generated in a related activity to the core business of the cluster, this can be thought of as a branching process. German automotive firms in Munich or Stuttgart developing electric cars in addition to their traditional petrol variants would be an example of such branching. - Second, if growth can be generated in an entirely new area, this can be characterised as the process of path creation. The latter developments are far more challenging and less commonplace, and are most likely to occur in broad-based agglomerations, such as Silicon Valley or global cities. For instance, the rise of Tesla other green technology firms in Silicon Valley represents a new path from the traditional focus on IT. The notion of related variety has been developed by economic geographers to capture the potential benefits of loosely connected clusters in cognate industries driving wider growth. In other words, in contrast to specialisation, there may be benefits to diversification and heterogeneity. Related variety aims to capture the extent to which firms are related to another in terms of underlying technologies and/or markets. The argument is that, within an agglomeration, firms that are different but somewhat related may have the potential to combine knowledge through their interactions in ways that can be innovative and thereby drive economic growth. Unrelated variety, by contrast, describes a situation in which economic activities are too disparate for such knowledge interactions to be productive. As we saw in the Norway boat- building example, where places are small and dominated by a single cluster, there is limited potential for related variety to drive processes of branching or path creation. Most clusters, however, are embedded in wider agglomerations, and in those contexts the extent to which synergies between clusters in the same or related industries can sustain growth or generate new branches and paths becomes an important question. Temporary Clusters Even if Prato or others are clusters that have been existing since a lot of time, it's not usually like that. Moreover, do firms have to be permanently located in clusters in order to benefit from the associated agglomeration economies and knowledge spillovers? Recent research has suggested that there are forms of temporary cluster as well as the more permanent forms usually recognised in the literature. We can have: * project-based forms of economic organisation They are becoming increasingly prevalent across a range of industries, with specialised teams of workers being brought together, from both within and across different firms, to work on a particular task for a given time period. For example, we can have this kind of clusters near to universities or in very pleasant tourist localities, depending on the nature of the task being pursued by the cluster. In the case of more high tech intensive tasks it°s easier that you need also specific facilities, while if the task is more creative, the cluster can take place also in a very pleasant and appealing locality (for example, before Covid, the top creative people from Disney where together in Piozzo) On the other hand, it can be argued that professional gatherings, such as conferences, conventions, and trade fairs, can be viewed as temporary clusters in that they exhibit some of the knowledge transfer mechanisms found in clusters, but in a more short-lived and intensive form. For example, the week of fashion in Milan is a temporary cluster fundamental for the fashion industry. Yet, organising this kind of events can become a real industry and a way of increasing the business tourism. An area that has invested a lot in business tourism in Riviera Romagnola But how can such brief events replicate the benefits of permanent clusters? Importantly, trade fairs not only provide an opportunity for attendees to conduct business and make deals but also enable them to share product and market information through their interactions. In this way, knowledge can be exchanged both ‘vertically’ (i.e. between suppliers and customers) and ‘horizontally” (i.e. between competitors in the same line of business). The temporary proximity of the trade fair creates a forum for the exchange and circulation of both codified and tacit knowledge about new and existing products, production processes, and market dynamics. The outcomes of these interactions can encompass enhanced understanding of market trends, effective maintenance or establishment of customer relationships, awareness of new technological developments, and the sourcing of new partners in research, production, and marketing. Some of the interaction is pre-planned and strategic, but much will be accidental, with chance meetings occurring in the corridors, cafés, bars, and restaurants surrounding the formal meetings. In effect, trade fairs can create a form of ‘global - Deindustrialization of the developed world and a structural shift towards service-sector employment. With this change, the secure and well-paid industrial work of the Fordist era, which sup- ported male-breadwinner families and stay-at-home mothers, has largely disappeared. As levels of pay and job security have declined, dual-income families are increasingly the norm in developed countries. This produced greater participation in the public sphere and at the higher levels of education. Partly because of this and partly causing it too, there has been a trend towards later marriage and childbirth, and the greater social acceptability of doing neither. - At the same time, certain kinds of manufacturing jobs from the developed world have moved to Mexico, China, India, Bangladesh, and other developing countries. In these places, it has primarily been women who have been the rank and file of the industrial workforce. In many industrial estates around the world, where clothing, toys, electrical appliances, and computers are assembled, at least three-quarters of the workforce is female. According to managers it is due to their personality traits, which are particularly fitting for these jobs, including patience, tolerance for boring, precision and so on. However, there is a huge debate on whether employment in the labour-intensive factories of the developing world is actually liberating for young women, or if it just represents further capitalist exploitation and oppression. Indeed, they can be seen as easier to control and allow for low wages, since most ofthe times they're single and therefore without families to support. - A further point that should be made about the increasing participation of women in the workforce is that their household work is not usually taken up by men, but by other women. - Overall, we see a process of increasing women”s participation in the workforce worldwide, but often in subordinate roles. Access to employment opportunities As we've seen women are the main subjects involved in unpaid work, including house-work and childcare. The integration of paid and unpaid work into the everyday lives of women can have an effect on the type of employment available. Moreover, thank can be a number of processes as work, which fuel the unevenness access to the workforce between women and men. Several studies on specific cities in the USA have shown different ways in which woman and men enter the labour market and their consequences, too: - studies have shown that women tend to have shorter commuting times than men. This, of course, have an importance in determining the exclusion of a number of possibilities for women. The quality of public transportation can also be a factor. Indeed, low investment in public transport has left many women dependent on walking to get to work. For families that do own cars, they are far more likely to be used by men. This kind of ‘transport poverty” severely constrains access to employment among women. - In searching for jobs, there is some evidence that women tend to use personal networks, while men rely more on formal processes, such as advertisements or employment agencies. This means that they mainly ask to other women, most of the time neighbourhood based. This means that their job opportunities are often highly localised and limited, and that it will contribute to the unintended concentration of women in certain jobs. This is especially so when ‘women are also members of a racial or ethnolinguistic minority. - Employers may locate in particular neighbourhoods in order to access specific pools of labour, and may deliberately recruit through existing employees in order to ensure a locally resident workforce. These concentrations of female employment in the suburbs of large cities have been referred to as pink collar ghettoes. - Women may find their jobs after a household has decided where to live. This decision is often made on the basis of the husband®s employment. Thus, women tend to be looking for work locally without actually having selected their residential location with a view to the possibilities for employment. - Finally, it is important to emphasise that racial differences intersect with gender when it comes to linking home and work in urban space. In particular, the radicalised segregation of residential patterns, and uneven access to public transport in those neighbourhoods (a feature, especially, of American cities), can lead to very uneven access to employment opportunities. AIl of these factors demonstrate how the geographies of labour markets and home-work linkages can lead to uneven employment outcomes for men and women and for different radicalised groups. Identity and Workplace Workplaces can also become gendered and radicalised environments, resulting in the exclusion of groups who are not seen as fitting in. Indeed, workplaces can be discriminating through everyday practices, many of them quite minor ‘when viewed in isolation, that add up to an exclusionary environment. - Women in some kinds of industries are likely to be part-time employees because of pressure to combine work and family responsibilities. They are therefore less likely to socialise with colleagues during working hours as they focus on getting their work done. As a result, the social atmosphere of the firm becomes more male dominated. - Maleness of the social atmosphere further discourages women from attending social events. These might seem like a minor issue, but it has two major consequences: - female employees are participating less in the informal exchange of knowledge in the firm and so their ability to contribute is reduced. This may reduce the overall productivity of the firm by creating exclusionary spaces of knowledge exchange and innovation. - The second consequence is that women are participating less in the networking and knowledge gathering that are essential to career advancement both within their current firm and in the broader labour market. Moreover, we should also consider that jobs increasingly require the performance of certain kinds of femininity or masculinity. This is especially so in work that requires some form of social interaction with a customer or a client. The demeanour, including the gender and sexuality of the provider of a service, is thus crucially important, and indeed is a fundamental part of the ‘product’. For example, it is common for international airlines to emphasise the attentive and caring demeanour of its flight attendants. As a result, jobs are increasingly widespread in service-oriented economies and require not just technical skills but also an embodiment of certain characteristics. A separate, but related, aspect of identity in the workplace relates to queer gendering and non-normative sexuality. For example, being gay or lesbian may have a significant impact on the types of jobs that are available. Indeed, heteronormative or homophobic places of work may present significant barriers to professional advancement for young gay workers. Therefore, gay individuals or couples may deliberately seek work in cities known to have large gay communities where they will feel both safe and supported. They may also target sectors (such as government work) that are perceived to be more accepting. Ethnic entrepreneur ship In some cases, ethnic and racial minorities have responded to marginalisation in the labour market by establishing their own businesses and their own commercial neighbourhoods. This is an entrepreneurial process with a long history, but it is a phenomenon that has become even more prevalent with increasing flows of migration since the last quarter of the twentieth century. Where immigrant groups have been quickly assimilated into the waged labour force then levels of self-employment are generally low. But where the cultural barriers to employment are difficult to surmount, self- employment has been more common. This has been especially true where immigrant communities have also arrived with sufficient capital to start their own businesses. When it does not happen, it might be that co-ethnic networks may provide capital for the initial establishment of a business, and credit during its operation, but they may also offer important information on how to navigate the bureaucratic intricacies of establishing a new business, market intelligence. However, they can face a number of difficulties: * Regulatory barriers * The general economic climate A further feature of these businesses is their congregation in spatially defined clusters, forming identifiable commercial districts, such as a Chinatown or a Little India. It would seem that place therefore plays an important part in the emergence of an ethnic economy. There are several dimensions to the process: Ethnic business clusters are usually located in the heart of the residential neighbours associated with the specific ethnic group involved, It creates a number of advantages in terms of employment opportunities and concentration of potential consumers. There might be agglomeration economies that generate benefits for business locating close to they competitors. Ethnic business clusters enable enterprises to access the ethnic resources mentioned earlier. Networks that provide capital, know-how, and market information are often based on face-to-face interaction, which requires spatial proximity. A spacial enclave collectively forms a tangible basis for the Dimension Positive Negative nurturing and maintenance of Causes for * Market opportunities 1 Discrimination the ethnic identity. entreprencurship * Entrepreneurial initiative * Blocked mobility Networks and * Ethnic resources * Excessive internal . organizational — Organizing capacity of competition There has been much debate conceming structure ethnic groups * Dependence on networks the desirability of spatial clustering and . € * Cooperation in raising —» Commodification of enclave formation ‘among ethnic groups capital ethnicity in major immigrant-receiving cities. Networks and * Job opportunities for * Containment and On the positive side, the ethnic labour immigrante segregation of ethnic economy is seen as providing * Efficient labour groups opportunities for new immigrants, recruitment * Poor pay rates and access to particular market segments, * Advantages due to exploitative working and an array of mutual support low-cost labour conditions mechanisms. On the negative side, * Returns to human * Low returns to human however, ethnic economies are seen as capital capital marginalized, providing poor wages and —Networks and * Access to protected * Limitations of a closed working conditions, and holding limited markets markets ethnic market opportunities for expansion * Successful business transactions General outcomes * Internal support * Exploitative labour mechanisms and social relations and broader mobility structural marginalization Spousal exploitation Alternative economies Community currencies, like the Bangla-Pesa and the Brixton Pound, provide powerful examples of an alternative way of organising and running the economy. Indeed, even if today the mainstream view is the capitalocentric one, we should not fall in the trap of assuming that it is ubiquitous and all-powerful. AIl of these alternatives ways of understanding the economy have one characteristic in common, that is having different set of goals to that of maximizing private wealth and profit for business owners. In some cases, such as the desire to enhance local economic development through an alternative currency, the goal will be complementary to conventional capitalism. In others, however, the alternative practice may be explicitly designed to be separate from, and even undermine, the profit motives of capitalism. It is important to understand that altemative economic activities are not isolated, marginal cases, but are instead commonplace and take multiple forms in the contemporary economy. While a community currency seeks to provide an alternative means of economic exchange, we can also identify alternative forms of enterprise, work, and property ownership. Moreover, it should be noticed that there are underlying geographies under these alternative economies. Capitalocentric view The ‘capitalocentric’ discourse arguably dominates the entire economic landscape, and often comes with associated terminology including free markets, consumer choice, economic efficiency, and trickle- down effects. Capitalocentrism thus describes the way in which capitalism is placed centrally in economic debate, squeezing out or marginalizing alternative or noncapitalist modes of development, that are assigned a lesser value. Such noncapitalist activities are seen as barriers to economic development on account of being primitive, backward, stagnant, traditional, incapable of independent growth and development, and opposed to the modern, growth-oriented, and dynamic capitalist economy. Challenging capitalocentrism requires two interlinked strategies: * Understanding that the development of a different language or narrative of the economy that does not normalise the central elements of the formal economy * Revealing the everyday scale and significance of alternative economies to show that, instead of being dominant, capitalism is a partial and porous economic system Gibson-Graham and their colleagues provide the best guides to the terrain of understanding alternative economies: * First, in terms of counter-narratives of the economy, a new framework is required to recognise that economic activities can be underpinned by varied and overlapping motivations in addition to, and perhaps distinct from, the imperative of capitalist profitability. Gibson-Graham suggest that we try to ‘take back” the economy through the notion of the community economy, which poses a tentative answer to the deceptively simple question of ‘what is the economy for*? For them, a community economy concems: = surviving together well and equitably - distributing surplus to enrich social and environmental health - encountering others in ways that support their well-being as well as ours - consuming sustainably - caring for — maintaining, replenishing and growing, our natural and cultural commons - investing our wealth in future generations so that they can live well Here obviously we do not only take into consideration the idea of maximising private wealth as in the capitalistic view, but we do refer to a wide range of important human values. Gibson-Graham go even further in developing the language of the community economy, counterposed to that of the mainstream economy. The latter might be thought of as global, large scale, based on competition, export-oriented, focused on short-term returns, management led, and amoral. The community economy on the other hand emphasises place-attachment, small scales of production, cooperative relations, a local market orientation, long-term investments, and a community led and ethical approach In general terms, they underline that it is important to appreciate that capitalism has not been around for all of human history, but is instead a specific form of economic organisation that emerged in Western Europe (and its associated empires) in the sixteenth and seventeenth century and has subsequently expanded across the globe, leaving few countries untouched by time of the collapse of the communist Eastern Bloc. Moreover, capitalism itself is not a homogenous system but rather exists in distinct national varieties that reflect the institutional configuration of the different states and territories. Moreover, within predominantly capitalist economies there is a huge amount of economic activity that does not neatly conform to capitalist norms. Alternative economies While such alternative economies have always existed, many commentators suggest that in times of economic transition and crisis they become more prevalent and visible. The four columns of the table detail separate domains under which economic diversity can be assessed: * Different kinds of transactions, with associated ways of assessing worth in the process of exchange * Different forms of enterprise, with associated ways of producing and distributing surplus value * Different types of labour, with associated ways in which workers might be compensated * Different forms of property ownership, with associated implications for how community resources can be managed large markup on certain products. As such, rather than thinking in terms of alternative capitalist or non- capitalist activities, it might be more effective to think of more-than-capitalist practices that are always intertwined with capitalist dynamics but at the same time have the potential to reshape those dynamics within, and across, particular places. Platform capitalism In contrast to the rise of the sharing or gig economy, some commentators have charted a broader mode of growth called “platform capitalism’. The term is intended as an antidote to sharing economy discourses that celebrate the liberation of individual workers and users through the networking power of new technologies. Instead, platform capitalism denotes a new mode of capitalist growth that is increasingly focused on capturing and using data to generate profits. Platforms have emerged most decisively in the period since 2010, and are now apparent across a wide range of domains including social media, online marketplaces, crowdsourcing, and crowdfunding. But what are platforms? We can think about them as having four characteristics: * they are digital technologies that provide an intermediary function between different groups of users, such as advertisers, customers, producers, and suppliers; platforms generate and in tum rely upon ‘network effects’. This means that as more users join a platform, the more useful it becomes for everyone, as the quality of the data allows the service to be improved. Over time, these effects create monopoly tendencies as dominant platforms emerge in different market segments. platforms are often based upon cross-subsidization of different activities. (e.g. Google uses advertising to allow it to offer search and email services for free). platform owners set the rules of the game for interaction