VIETNAM NATIONAL UNIVERSITY- HCM

INTERNATIONAL UNIVERSITY
----O0O---REPORT
SUBJECT: WORLD ECONOMIC GEOGRAPHY

THE CHANGING WORLD ECONOMY

HCM, JULY 30TH, 2011

GROUP MEMBERS

1.
2.
3.
4.
5.

NGUYN VN TUN
MAI PHNG THY
MAI TH I TRANG
NGUYN TH MAI TRM
NGUYN TH HNG DIM

BAIU09448
BAIU09211
BAIU09431
BAIU09453
BAIU09470

CONTENTS
ABSTRACT
I.

ECONOMIC ORGANIZATION AND SPACIAL CHANGE

1. ECONOMIC ORGANIZTION
2. SPATIAL CHANGE

II.

DIVISION OF LABOUR AND OUTSOURCING

1. DIVISION OF LABOUR
2. OUTSOURCING

III.
IV.

CONCLUSION
REFERENCES

ABSTRACT
Sweeping changes are afoot in the global economy. The distribution of global growth
will become more differ use, with no single country dominating the global economic
scene. Over the past two decades, the world has witnessed emerging economies rise to
become a powerful force in international production, trade, and finance. Studying
economic geography is to make sense of the world the real world and the way in
which its economic landscapes are changing. The branch of economic geography
concerned with the study of the territorial distribution of the world economy as a whole
and of its sectors in terms of social and economic formations and in terms of individual
countries and large regions, as well as the study of the patterns determining the
tendencies of the geographical distribution of the world economy. The general tasks in
studying the geography of the world economy are to establish developmental tendencies
and to study the factors influencing the distribution of the world economyboth the
natural and the socioeconomic factors. Natural factors include natural conditions, natural
resources, and the existence of natural means of communication; among socioeconomic
factors are the mode of production of material wealth, the economic geographic situation,
labor resources, transport and other economic conditions, the level of technological
progress, the correlation between industrial and agricultural production, the correlation
among subdivisions of industrial production, the level of national income, and the
correlation between domestic consumption, exports, and imports. The paper therefore is
to investigate the interrelationship surrounding economic organization and spatial change
as well as the changing spatial division of labour.

I. ECONOMIC ORGANIZATION AND SPACIAL CHANGE

1. ECONOMIC ORGANIZATION

Fundamentally, the idea of economic organization approximates to the concept of

mode of production meaning the way of producing which, according to the writings of
Karl Marx and the Marxist theory of historical materialism, combine of:
+ Productive forces: these include human labour power and available knowledge
given the level of technology in the means of production (eg. tools, equipment,
buildings and technologies, materials, and improved land).
+ Social and technical relations of production: these include the property, power
and control relations governing society's productive assets, often codified in law,
cooperative work relations and forms of association, relations between people and the
objects of their work, and the relations between social classes.
There

are five major modes of production: Subsistence, slavery, feudalism,

capitalism, and socialism.

a. Subsistence:
A subsistence economy is an economy which refers simply to the gathering or
amassment of objects of value; the increase in wealth; or the creation of wealth.
Capital can be generally defined as assets invested with the expectation that their
value will increase, usually because there is the expectation of profit, rent, interest,
royalties, capital gain or some other kind of return. However, this type of economy
cannot usually become wealthy by virtue of the system, and instead requires further
investments to stimulate economic growth. In other words, a subsistence economy
only possesses enough goods to be used by a particular nation to maintain its
existence and provides little to no surplus for other investments. Therefore, this type
of economy aims to create economic stability so that capital can be accumulated and
the inevitable economic surplus can be invested in other potentially lucrative business
ventures.
Characteristics of Subsistence Economic Systems:
-

Production is geared towards subsistence (the family) and basic survival.

Trade is mainly by a barter system (direct exchange of goods and services).

Market and money are of little importance

Custom and traditions are major influences on what is produced and how products
are allocated.

b. Slavery:
Slavery is a system under which people are treated as property and are forced to
work. Slaves can be held against their will from the time of their capture, purchase or
birth, and deprived of the right to leave, to refuse to work, or to demand
compensation. Conditions that can be considered slavery include debt bondage,
indentured servitude, serfdom, domestic servants kept in captivity, adoption in which
children are effectively forced to work as slaves, child soldiers, and forced marriage.
And a slave who is forced to work -- through mental or physical threat; owned or
controlled by an 'employer', usually through mental or physical abuse or threatened
abuse; dehumanized, treated as a commodity or bought and sold as 'property';
physically constrained or has restrictions placed on his/her freedom of movement.
Characteristics of modern slavery:
Slavery is based on financial exploitation and social insignificance. In society, slaves
are the population group most susceptible to physical and emotional abuse and the
elimination of freedom. They are assigned a life of poverty and oppression. Slavery
has always existed, but it is different in every society and time period.
-

Financial characteristics: The commercialization of human beings as property and

owners can buy and sell human beings. This objectifies people, and makes them
walking tools.

Social characteristics: The relation between an owner and slave is based on

extreme dependence and inequality. The slaves are strangers, excluded from
society and are ethnically and linguistically different from it. They are uprooted
from their families and from any possible support network.

Political characteristics: Slavery occurs when a country delegates all its authority
to the citizens living there. It removes its responsibilities to the slaves, who are not
citizens, and abdicates them to private individuals. These individuals then become
actual owners, who benefit from the gap of power between themselves and the
people who are left to their mercy.

Types of slavery exist today:

-

Bonded labour affects at least 20 million people around the world. People become
bonded labourers by taking or being tricked into taking a loan for as little as the
cost of medicine for a sick child. To repay the debt, they are forced to work long
hours, seven days a week, 365 days a year. They receive basic food and shelter as
'payment' for their work, but may never pay off the loan, which can be passed
down through several generations.

Forced labour affects people who are illegally recruited by governments, political
parties or private individuals, and forced to work - usually under threat of violence
or other penalties.

Child labour refers to children who work in exploitative or dangerous conditions.

Tens of millions of children around the world work full-time, depriving them of
the education and recreation crucial to their personal and social development.

Commercial sexual exploitation of children. Children are exploited for their

commercial value through prostitution, trafficking and pornography. They are
often kidnapped, bought, or forced to enter the sex market.

Trafficking involves the transport and/or trade of humans, usually women or

children, for economic gain using force or deception. Often migrant women are
tricked and forced into domestic work or prostitution.

Early and forced marriage affects women and girls who are married without
choice and are forced into lives of servitude often accompanied by physical
violence.

Traditional or 'chattel' slavery involves the buying and selling of people. They are
often abducted from their homes, inherited or given as gifts.

c. Feudalism:
Feudalism was a set of legal and military customs in medieval Europe that flourished
between the ninth and fifteenth centuries, which, broadly defined, was a system for
ordering society around relationships derived from the holding of land in exchange for
service or labour. Although the definition of feudalism varies among historians, there
are certain characteristics that define feudalism as a whole. We can divide these ideas
into governmental and economic characteristics.
The basic structure of government in a feudal system involves the exchange of land
for military service. A hierarchical ranking system was developed with men ranked by
military power. At the center of this system was the king. The nobility was essentially
a military class. The king granted ownership of land to lords who in return provided
warriors. These knights or vassals swore allegiance to their lord who provided
protection and justice. Originally, the fief (in this case land), had to be renewed upon
the death of the lord or vassal. Gradually, renewal by heir became prominent and local
control became driven by personal and hereditary factors.
The economy of the feudal system was agricultural with little to no outside trade.
Religious beliefs discouraged trade for profit and accumulation of private wealth. For
this reason, the economy was based on self-contained estates which were dominated
by locally- powerful landowners who provided most of their own domestic
production. These estates often housed serfs who were peasants tied to the land and
lord. They offered their services or rent in order to work the land or receive some of
the benefits that the land produced. They were also provided protection by their lord.
There was very little social mobility in a feudal system with nobility eventually
entitled by birth.

In summary, feudalism was characterized by a system of loyalties and protection with

a ruling military class in Medieval Europe. It offered little to no movement for the
lower class and wealth was based on power.
d. Capitalism
Generally, it is the economic system that emphasizes the right to private property and
in which the means of production are privately owned and operated. In a Capitalist
system, the investment of capital and the production and distribution of various
commodities, goods and services are accomplished in an open and free market.
In other word, Capitalism is a type of economic organization which is defined by:
Private ownership and control of the economic means of production.
The gearing of economic activity towards making a profit.
A market framework which serves to regulate economic activity.
The appropriation of profit (surplus value) by the owners of the means of
production.
The provision of labor by workers.
Features of Capitalism
Main features of Capitalism are as follows:
+ Private Property: Under capitalism, people have full right to use their own or private
property in any manner they like and this right is protected by government. They can use
the means of production like machine, tools, lands etc. in any manner. In case of death of
owner of the property, his property passes to his successors.
+ Price Mechanism: Price mechanism is the guiding principle of capitalism. In
Capitalism, price is determined by the forces of demand and supply. Government does
not interfere in the fixation of price. Equilibrium between price and demand is brought
through the process of price mechanism.
+ Freedom of Enterprise: In capitalism, every enterprise is free to choose any kind of
business. He can take independent decisions with regard to what, where, how and when
to produce.

+ Competition: In capitalism, freedom of enterprises leads to more and more

competition, which ultimately results in efficiency of industrial units and production of
goods at low costs.
+ Profit Motive: The only aim to start the business is to earn and maximize the profit in
capitalism.
+ Sovereignty of the Consumer: Under this economic system, consumer is sovereign.
Consumer buys only those things which give maximum satisfaction to them.
+ Labor as a commodity: In capitalism, labor acts as a commodity and can be bought
and sold like any other commodity in the labor market. In some cases, exploitation of
labor also takes place.
Evolution of Capitalism
History offers various types of capitalism over time. In 17th century, capitalism refers to
the total freedom of enterprises or we can call it a Free Market Economy. Government
only focused on defense and law and order.
Capitalist, with a view to maximize their profits, exploited the laborers. This fact forced
the Government to interfere in the business and make labor protection laws and with the
growth of monopolies, further forced the government to widen its scope of its
interference in economic system of the country. To achieve the aim of social welfare,
government undertook the charge to produce strategic commodities. Government
controlled and directed the system of price mechanism. Thus, the todays capitalism is not
a pure type of capitalism or a free market economy. It is a controlled or regulated
capitalism.
Organized capitalism
In capitalism individuals are encouraged to follow their self-interest. In capitalist
economies, individuals are free to do whatever they want as long as it's legal. The market
is relied upon to see that what people want to get, and want to do, is consistent with what's
available. Price is the mechanism through which peoples desires are coordinated and

goods are rationed. If there is not enough of something to go around, its price goes up; if
more of something needs to get done, the price given to individuals willing to do it goes
up. If something isn't wanted or doesn't need to be done, its price goes down. Under
capitalism, fluctuations in prices play a central role in coordinating individuals want.
Capitalism is becoming the dominant economic system in the world, and historically, its
increasing dominance arose from industrialization. In common usage, as well as the means
of production being mostly privately owned, capitalism also refers to the fact that market
forces determine investments, production, distribution, prices and income. This is known
as a free market. Private ownership of the means of production is in contrast with
socialism and communism, where the means of production is owned and run by the state
or a collective. All of the economies in the western world are regarded as being capitalist
or as mixed economies based on capitalist principles. Some economists see the private
ownership of capital as the core of capitalism, whilst others view the free market as a
means for the movement and accumulation of capital.
The most famous critic of capitalism was Karl Marx who believed that private ownership
of production was beneficial and enriching for capitalists (the bourgeoisie) at the expense
and exploitation of the workers (the proletariat), thus a source of social problems.
Supporters of capitalism counter this argument by proposing that private ownership of the
means of production gives incentive to owners to increase productivity, thus enriching
workers as well. They also cite examples such as China and other parts of the developing
world as having halved the percentage of people living below $1 per day in the past
twenty years. Nevertheless, critics cite the growing power of transnational organizations
which they view as a worrying trend since heads of such corporations are not answerable
to individuals living within nation states in the same way as are the governments of these
states.
Often, TNCs possess more economic power than smaller nation states. In addition, critics
argue that the economic growth of the TNCs has often been achieved at the expense of the
environment. Many environmental activists question whether the world can sustain the

growth associated with the establishment of capitalism on a global scale. In addition,

workers within Third World countries are often exploited and forced to work in appalling
conditions.
Global Capitalism is also associated with:
A shift from Fordism (strict division of labor with workers performing low-skill
repetitive tasks to produce standardized goods for undifferentiated markets) to
Post-Fordism (the organization of production in a flexible manner in order that
production can adapt to changing consumer demands).
Ideologies of human rights and social justice.
The economic rights of individual citizens and protection from the arbitrary
powers of the state and also the state's obligation to protect property rights and
guarantee the enforcement of commercial contracts.
Rationality especially within the work of Max Weber who saw capitalism as
embodying efficiency.
The capitalistic economy of the present day is an immense cosmos into which the
individual is born, and which presents itself to him, at least as an individual, as an
unalterable order of things in which he must live. It forces the individual, in so far as
he is involved in the system of market relationships, to conform to capitalistic rules of
action. The manufacturer who, in the long run, acts counter to these norms, will just as
inevitably be eliminated from the economic scene as the worker who cannot or will
not adapt himself to them will be thrown into the streets without a job.
(Weber, Max, The Protestant Ethic and the Spirit of Capitalism, trans. T. Parsons,
London, Allen &Unwin, 1930:54-55)
Merits of Capitalism
+

Rich Variety of Goods and Services: In Capitalism, different demands of the

consumers are met through diversifying production. Different types of goods and services
are produced in order to meet the demands of the consumers.

+ Proper use of Resources: The only aim is to earn profit and it is achieved through the
optimum and proper use of resources.
+ Inducement to Work: Private ownership and law of succession induces the people to
work more, under the capitalism so as to earn more income.
+ Efficient Production: In Capitalism, every firm tries to compete with one another by
producing better quality products and lower prices. Modern and advanced techniques of
production are adopted to achieve this aim. It results in efficient production.
+ Increase in the Standard of Living: More and more quality goods are produced at
lower prices through different techniques of production. So this enables the poor people
to purchase them at lower prices and consequently they can improve their standard of
living.
+ Automatic: In capitalism, the balance between demand and supply is maintained
automatically. If in any case, demand increases the supply, the new producers will enter
the market and start producing that product and existing producers will increase its
production.
+ Growth of Entrepreneurship: Various features of capitalism economy like private
ownership, competition, profit motive induces the entrepreneurs to become more
efficient, competent, hard working and dynamic.
+ Economic Freedom: In capitalism, everyone enjoys complete economic freedom.
Everyone is free to use his property in any manner he likes and there is no restriction on
sale and purchase of goods and services.
Demerits of Capitalism
+ Unequal Distribution of Wealth: The greatest demerit of the system is unequal
distribution of wealth and income. This inequality is due to private property, less
government interference, freedom of enterprise etc. These features of capitalism render
rich more rich and poor more poor.

+ Class Struggle: On account of inequality of wealth and income, society under

capitalism is divided into two classes. One the one hand, the rich and capitalist class leads
a luxurious life and on the other hand, the labor class struggles hard to get even two
square meals.
+ Exploitation of Labor: Another bane of capitalism is the exploitation of labor. Under
capitalism laborers get wages which are less than their marginal productivity.
+ Wasteful Competition: Competition that is one of the distinctive features of capitalism
is in reality quite wasteful. A producer spends thousands of rupees on advertisement to
push the sale of his products.
+ Business Fluctuations and Unemployment: Automatic character of capitalistic
economy is responsible for causing business fluctuations in it. The economy is afflicted
with alternative cycles of boom and depression. In the boom phase there is considerable
fall in production, income, employment and prices.
+ Disregard of Public Welfare: National resources are used by the entrepreneurs for the
sake of personal profits. While fixing prices, private entrepreneurs ignore public welfare
and consider only their personal profit.
+ Lack of Coordination: Due to lack of central planning, there is very little coordination
in total production. Thus, some goods are produced in more than the required quantity
while other goods fall short of the total requirement.
e. Socialism
Socialism refers to various theories of economic organization advocating public or direct
worker ownership and administration of the means of production and allocation of
resources, and a society characterized by equal access to resources for all individuals with
a method of compensation based on the amount of labor expended.
A socialist economy is based upon the principle of welfare of the people. As opposed to
capitalism, a socialist economic system is based upon the principle that economic
activities should be undertaken so that people would be able to use goods produced there

of, instead of employing the production for profit. Many economic philosophers had
previously refused to believe in this system as a legitimate one, but countries with socialist
economic system, have proved the importance and success of the element of socialism in
the governance of any economy. This has eventually led to the evolution of mixed
economies. The masterpiece of such a collaboration of socialism and capitalism are the
progressive and fast growing economies of the third world nations, prominent ones among
them being the ones of India and Brazil
Ownership by Government: The principal characteristic of a socialist economy is the
governmental ownership and nationalization of key production sectors. Though in theory
almost all firms and companies should be nationalized, in practice, such a transfer from
private to public is almost impossible. Due to this governments are promoted to rely on
some private establishments that are largely regulated and managed by governmental laws
and officials. Organizations that are involved in production in many cases are co-operative
organizations, instead of firms and companies.
Progressive Taxation and Wealth Redistribution: Often considered to be a drawback of
the socialist economy, taxation system, progressively taxes higher income with higher tax
percentages. The collected mammoth tax is then redistributed with the help of several
public welfare schemes and policies.
Price Control: Another distinct feature of a socialist economy is the technique of price
control. Prices of commodities are not fixed by demand and supply analysis, but are fixed
by the government, with respect to the necessity and nature of the commodity.
Nationalization and Centralization: A socialist economic system is basically operated by
a central government. The nationalization and centralization of all avenues of production
are handled by one centrally based government that also frames the fiscal policies. The
success of a socialist economy is found in such a convention where fiscal policies so
implemented are executed by regional and grass root level administration, with an
absolute timing and discipline. The economy, as a whole, thus, becomes very, very
successful. The GDP shoots up almost instantaneously and poverty is abolished.

Karl Marx is known in history for being the biggest supporter or most known supporter of
socialism. He argued that societies and economies would ultimately fall under capitalism.
Marx believed that eventually too much freedom would be afforded to consumers and a
revolution of sorts would occur, in which the government would be overthrown. He also
believed that in a communistic society, the economy and government would fail, because
individuals would be too oppressed. His overall theory supported equality and balance
versus oppression and freedom. Hes known for his famous statement of from each
according to his ability, to each according to his contribution.
Main Features of Socialism
+

Common ownership: Socialism implies social ownership/state ownership of

means of production. Common ownership means that the entire structure of
production and all natural resources be held in common by all people. This means
that every person will stand in equal relationship with every other person with
respect to the means of producing the things we need to live, that is, mines,
industrial plants, manufacturing units, all land and farms, and all means of
transport and distribution. This also means the common ownership of all natural
resources.

+ It implies equality of incomes and equality: Under socialism, all industries

belongs to the States, therefore, there is little chance of accumulating wealth by
individuals. The basic objective of socialism is to provide equal opportunity to all.
To ensure equal opportunities for all, it is essential to provide free education and
health services.
+ Economic planning: an essential features of socialism. It ensures speedy economic
development. It is not only essential to accelerate economic development but also
to ensure a fair distribution of economic growth.

+ Social welfare and social security: In a Socialistic Economy the government

decides all

economic decisions and sets the goal of the economic welfare and

security of weaker sections of society and aged people.

+ Classless society: Class is a social relationship that invades and has a corrupting
influence on every part of our lives. In socialism, social relationships of common
ownership and equality will end class divisions.
Merits of Socialist Economy
+ Efficient use of resources: The resources are utilized efficiently to produce socially
useful goods without taking the profit margin into account. Production is increased by
avoiding wastes of competition.
+ Economic Stability: Economy is free from business fluctuations. Government plans
well and everything is well coordinated to avoid over-production or unemployment.
There is stability because the production and consumption of goods and services are well
regulated.
+ Maximization of Social Welfare: All citizens work for the welfare of the State.
Everybody receives his or her remuneration. The State concentrates on the production of
basic necessaries instead of luxury goods. The State provides free education, cheap and
congenial housing, public health amenities and social security for the people.
+ Absence of Monopoly: The elements of corporation and monopoly are eliminated
since there is absence of private ownership. The state is a monopoly but produces quality
goods at reasonable price.
+ Basic needs are met: In socialist economies, basic human needs like water, education,
health, social security, etc, are provided. Human development is more in socialist
countries.
+ No extreme inequality: As social welfare is the ultimate goal, there is no concentration
of wealth. Extreme inequality is prevented in socialist system.

Demerits of Socialism
+ Bureaucratic Expansion: A socialist economy is operated under a centralized
command and control system. People here work out of fear of higher authorities. It does
not give any initiative for the people to work hard.
+ No Freedom: There is no freedom of occupation. Allocation of factors of production is
not done rationally. Jobs are provided by the State. Place of work is also provided by the
State. The consumer's choice is very limited.
+ Absence of Technology: Work is monotonous and no freedom is given. Any change in
the production process will alter the entire plan. Hence any innovation cannot be easily
enforced. Everything is rigid and technological changes are limited.
+ Absence of competition makes the system inefficient.
2.

SPATIAL CHANGE:

There are some central interrelationships surrounding economic organization and spatial
change. In this interrelationship, demographic, political, cultural, social and technological
change serve as both cause and effect.
a.
Demographic change
Demographic change has important and growing influence on spatial development in
most of countries in the world. There have been fundamental changes in population
structures and migration patterns. The impact of demographic changes will differ from
city to city and from region to region. World population is uneven as some places are
considered rural and are sparsely populated, while others are more urban and are densely
populated. The demographic trends concentration of population around some
metropolitan centre and depopulation of some rural areas; declining headship rates
(household size); and increasing international in-migration. There are several factors
which affect population density - population distribution. Such factors can relate to the
physical environment like climate and topography or be related to the social, economic
and political environments of an area. Overall population growth and change because the
world's population has grown dramatically over the last two centuries. Demography is

inextricably linked with spatial development and planning through the demand for urban
development, the matching of economic activity, labour supply, services and
infrastructure; and the pattern of settlements.

The workforce in most of todays

organizations is becoming more and more diverse with respect to demographic variables
such as gender, age, race, ethnicity, nationality, as well as cultural and educational
background. Diversity is often viewed as an organizational asset, as it constitutes a
broadening of directly or indirectly task-relevant resources such as knowledge, skills,
abilities, experience, perspectives, and social network ties. The interaction between
economic development and demographic processes has been extensively documented in
populations that already are involved in the labor market and cash economy.
Considerably less is known about demographic changes when permanent settlement,
wage labor, vaccination programs, market foods, and modern technology are introduced
for the first time.

b.

Political change

Underpinning changing geography was the interaction of social and political structures,
including the interdependence of enterprises with a developing political economy. With

the slave mode of production, for example, the labourer is bought and sold, along with
other instruments of production, by the slave owners. Under feudalism, the peasant
labourer may have right to own some of the instruments of production, but the land and a
certain amount of the production is the property of the feudal lord and the peasant is
legally tied to a specific tract of land. Hence, it leads to the form of spatial organization
that feudalism brings a patchwork of self sufficient domains with little trade and,
therefore, few market centers. Under capitalism, the labourer do not have right to own
any instruments of production, but they are free to sell his or her own labour power. In
this form of economic organization, the spatial is also change. Merchant capitalism
requires a highly developed system of market towns and brings a built intendancy for
the colonization of new territories in order to furnish new resources and bigger markets.
Moreover, industrial capitalism requires spatial restructuring in order to exploit new
energy sources, new production techniques and new forms of corporate organization.
Under capitalism, business became more organized as companies set out to serve regional
or national consumer markets rather than local ones. Labour markets became more
organized as wage norms spread and governments began to be more organized as the
need for regulation in public affairs became increasingly apparent. The role of
government is to regulate the unwanted side effects of free enterprise capitalism and
partly to mediate the relationship between organized business and organized labour. The
role of government expanded dramatically to include responsibility for full employment,
the management of the national economy and the organization of various dimensions of
social well being. This type of economic policy, which looks to stimulate aggregate
demand in order to reduce unemployment. The transport cost parameter in a spatial
competition model has a natural interpretation as an index of infrastructure. Since
consumers have dierent locations they utilize infrastructure dierently. This in turn
gives rise to preferences for the level of infrastructure that vary with location which feed
into the political process. Recent political change has certainly been profound and
dramatic, but also paradoxical.

c.

Cultural change

The changing of culture also influence on the spatial change and vice versa. Cultural
geography is the study of the many cultural aspects found throughout the world and how
they relate to the spaces and places where they originate and then travel as people
continually move across various areas. Cultural landscapes are also important because
they link culture to the physical environments in which people live. This is vital because
it can either limit or nurture the development of various aspects of culture. For instance,
people living in a rural area are often more culturally tied to the natural environment
around them than those living in a large metropolitan area. Cultural components
consisting of norms, customs, mores, life-style, family and kinship structure form the
"Cultural Setting", components of "dimension", "location" and "form" the "Spatial
Setting". Migration from rural areas to towns and metropolises both means a change from
rural to urban life as well as a change from rural production to industrial production. The
characteristics of this transition period from tradition to the futuristic are reflected in the
physical environment. Such an urbanization starting with migration to towns from rural
agricultural-traditional areas and ending in an urban, industrial-modern society can be
analyzed for its values of culture-space interactions according to different scales.

If the cultural change affect to spatial about where they live, the cultural change will affect
to economic organization about how they do business. (To make understand easier, we call
culture change affect to economic organization being the change organization
culture). So the organization culture refers to system of shared meaning held by members
that distinguishes the organization from other organizations. This system of shared
meaning is, on closer examination, a set of key characteristics that the organization values.
Organizational culture is concerned with how employees perceive the characteristics of an
organizations culture, not with whether or not they like them. The role of culture in
influencing employee behavior appears to be increasingly important in todays workplace.
As organizations have widened spans of control, flattened structures, introduced teams,
reduced formalization, and empowered employees, the share meaning provided by a
strong culture ensures that everyone is pointed in the same direction.
Because an organizations culture is made up of relatively stable characteristics, its
difficult to change. An organizations culture develops over many years and is rooted in
deeply held values to which employees are strongly committed. In addition, a number of
forces continually operate to maintain a given culture. Although changing an

organizations culture id difficult, it is not impossible. For culture change to be effective, it

helps if certain conditions are prevalent. The evidence suggests culture change is most
likely to take when most or all of the following four conditions.
First is a dramatic crisis exists or is created. This is the shock that undermines the status
quo and calls into question the relevance of the current culture. Such crises might be a
surprising financial setback, the loss of a major customer, or a dramatic technological
breakthrough by a competitor. It is not unheard of for some executives to purposely create
a crisis to stimulate change.
Second is turnover in leadership. New top leaders, who can provide am alternative set of
key values, are usually needed to make cultural change work. They are more likely to be
perceived as capable of responding to the crisis. Bringing in a new CEO from outside the
organization is likely to increase the chances that new culture values will be introduced.
Third is young and small organization. Culture change is more likely to take if the
organization is both young and small. Cultures in younger organizations are less
entrenched. And its easier for management to communicate its new value when the
organization is small. This, incidentally, helps explain the difficulty that multibilliondollar corporations often experience when trying to change their cultures
Forth is weak culture. The more widely held a culture is and the higher the agreement
among members on its values, the more difficult it will be to change. Conversely, weak
cultures are more amenable to change than strong ones
Even when these conditions are favorable, cultural change is a lengthy process- and
should be measured in years rather than mouths.
The purpose of cultural change is to secure the future of the organization and this can only
be achieved by examining the economic impact it can deliver. The way culture change can
contribute to organizational success is by adding value to existing customers and winning
new ones for the business. Culture change is about developing a strong competitive edge,
developing core competencies and attracting and retaining the best people.

d.

Social change

Social change refers to an alteration in the social order of a society. It may refer to the
notion of social progress or socio-cultural evolution, the philosophical idea that society
moves forward by dialectical or evolutionary means. It may refer to a paradigmatic change
in the socio-economic structure, for instance a shift away from feudalism and towards
capitalism. Accordingly it may also refer to social revolution, such as the Socialist
revolution presented in Marxism, or to other social movements, such as Womens suffrage
or the Civil rights movement or more recently, The Venus Project. Social change may be
driven by cultural, religious, economic, scientific or technological forces.
The typical example is the social revolution. When the old institutions crumble, there is
no guarantee that more human-centered structures will replace them. In fact,
conservatives have their own ideas about how the new world should be organized, and it's
not pretty.
That is why we all must participate in the transformation of societyto ensure that
human values replace the values of the old elite. Because destruction is also creation, the
methods we use to pull down the ruins will determine what kind of world arises from the
rubble. Our struggle should not be completely political because political revolutions
simply deliver concentrated power into new hands, rather than dispersing it. Furthermore,
political thought is rarely innovative: political change usually originates from social
conditions, rather than the other way around.
Instead of political revolution, our goal should be social revolution. Social revolution is
nothing more than a change in the way we live our lives. It springs from changes in the
way we think.
In today's context, revolution occurs when people stop believing one thing, and start
believing something else; when people discard their old ways of living, and begin to live
in new ways. When enough people lose faith in an institution and begin to act as if it did
not exist, that institution disappears.

Values and institutions are social constructions. They were not handed down by God or
created by nature. We invented them. And if they don't serve our needs, we have the
power to eliminate them.
Everything we do can have revolutionary implications: how we make money, how we
spend our leisure time, how we relate to our family, friends, co-workers, strangers. Every
activity that asserts individuality and autonomy from corporate/government/religious
control is in itself a profoundly revolutionary act, regardless of content.
When we make our own music (garage bands, self-produced records), produce our own
food (home-brewed beer, collective gardens), or create our own forms of communication
(graffiti, zines), we strike at the heart of mega-corporation hegemony. When we engage in
"do-it-yourself" projects that express our unique personalities and deepest desires, we
participate in the transformation of the world.
e.

Technological change

Technological change (TC) is a term that is used to describe the overall process of
invention, innovation and diffusion of technology or processes. The term is redundant
with technological development, technological achievement, and technological progress.
In essence TC is the invention of a technology (or a process), the continuous process of
improving a technology (in which it often becomes cheaper) and its diffusion throughout
industry or society. In its earlier days, technological change was illustrated with the
'Linear Model of Innovation, which has now been largely discarded to be replaced with a
model of technological change that involves innovation at all stages of research,
development, diffusion and use.
The change of technology is seen the most important for economic and spatial is Internet.
Internet is a global system of interconnected computer networks that use the standard
Internet Protocol Suite (TCP/IP) to serve billions of users worldwide. It is a network of
networks that consists of millions of private, public, academic, business, and government
networks, of local to global scope, that are linked by a broad array of electronic, wireless

and optical networking technologies. The Internet can also be defined as a worldwide
interconnection of computers and computer networks that facilitate the sharing or
exchange of information among users. The Internet carries a vast range of information
resources and services, such as the inter-linked hypertext documents of the World Wide
Web (WWW) and the infrastructure to support electronic mail.
Nowadays the access to the Internet is the most important source of information.
Someone says that Internet provides people with a lot of valuable information. First of
all, the Internet is a big library, where you can find whatever information you like.
Secondly the Internet helps you to communicate, which means to trade with the newest
information with your friends and society. Thirdly the Internet gives you opportunity to
purchase whatever you want without even going to the shop.
Imagine you can find a book without even going out to the library. You dont have to
spend time and money to go outside and find a book you want. You just go to Internet
library and find any book you want in 2 minutes instead of spending 2 hours in search of
the book you want in the library. Also, internet helps you with your work on abstracts. In
days of my mothers youth she spent the whole day in the library to find the information
she needs for her abstract. But presently I spend maximum 2 hours to get the needed
information.
We all have distant relatives, whom we havent seen for a long time. Internet gives us a
chance to communicate with them by using newest technologies. You can use voice-talk
and live web-camera to hear them and to see them. I think this is very valuable advantage
of the Internet. If you cannot actually afford a ticket to visit your distant relatives every
week, you can see them and to share the information every single day by accessing the
Internet.
Nowadays, you dont have to go to the shop to buy stuff like cameras, mobile phones,
computers, refrigerators, etc. You can use the online shops to find the information about
the price and item you want to buy. Then you can use your own credit card to buy the

item you want. Then in a few days after the purchasing the item will be delivered to your
home. I know many people that purchase everything by using online shops.
Moreover, in the economic, Internet is special part in business. Dot-coms, so named after
the .com in many web addresses, are a group of companies that embrace the Internet as
their key component in their business. A typical dot-com firm is an internet pure play that
operates only from its online website. Its ability to reach customers in vast geographic
regions via the Internet, while not having to invest in building physical facilities, has been
among its most attractive features for investors and entrepreneurs because the lack of
brick-and-mortar investments reduce overhead costs creating a greater opportunity for
profit.
The growth of the Internet as a medium for connecting computers as communicating
devices has been revolutionary in our society. The Internet was originally created by the
U.S. military, but started to catch on commercially in 1995 with an estimated 18 million
internet users. These users were instantly viewed by companies as potential consumers.
Shortly after internet technology became commercially available in the mid-1990s, the
potential of electronic commerce was recognized leading to a huge wave of formation of
dot-coms to conduct business via the Internet. During a short period in the late 1990s,
about 7,000-10,000 new substantial dot-com companies were established, most with a
vision of generating huge market values after taking the firm public.
The boom fueled tremendous excitement throughout the business world. After climaxing
on March 21, 2001 the dot-com bubble finally burst wiping out $5 trillion in market value
and nearly 500,000 jobs in the technology industry by October 2002. Nearly 103 tech
firms sought bankruptcy protection by April 30, 2003. It has been recognized, belatedly,
that too many firms rushed into the dot-com market and that we were bound to
experience the inevitable shakeout that had to follow as the market corrected itself.
From opinions above, the Internet is a most valuable source of information. It has power
to change myth the world from the spatial to the economy.

II.
DIVISION OF LABOUR AND OUTSOURCING
1. SPATIAL DIVISION OF LABOUR
With the world economic changing rapidly as well as the evolution of capitalism, division
of labour plays an important role in the production of the economy. Division of labour is a
process whereby the production process is broken down into a sequence of stages and
workers are assigned to particular stages. It is based on the idea that workers can attain a
high degree of efficiency if they are restricted to one particular process. Spatial division of
labour are now structured in a variety of ways depending on the needs and characteristics
of particular industries including:
+ Regional specialization
+ Regional dispersal
+ Functional separation:

Management/research activities in major metropolitan regions, skilled labour used

in old manufacturing areas and unskilled labour used in region peripheries to take
advantage of lower wages and/or disorganized labor force

Management/research in major metropolitan regions, and semi- skilled and

unskilled labour used in region

Management/research and skilled labor in more advanced industrial regions an

unskilled labor in global peripheries.
+ Division between areas with investment, technical change and job expansion, and other
areas with stagnant and progressively less competitive production and job loss.
The changing spatial divisions of labor has give benefits in many industry for enjoying the
high productivity. In this rapid changes, comparative advantage and economic of scale are
two perspectives of influences.
According to Ricardian comparative advantage, two (or more) countries are better off
when each specializes in producing one product and trades the surplus for the other
product(s), than they would be in autarky, whenever their opportunity costs differ. Under

different opportunity costs, it doesnt matter if one trading party is better in producing all
commodities (i.e., has an absolute advantage in producing every commodity) than the
other, since both will always have, by definition, a comparative advantage in one
particular product. By specializing in the production of the goods in which they are
relatively better (or least disadvantaged), they can both benefit from transacting with each
other.
In this theory, the industry, in order to get highest benefit from free- trade, will special in
which production they are most advanced. Then, obviously, it results Regional
specialization.
In the case of an individual firm, economies of scale arise in a situation when the
increased size of a single operating unit producing or distributing a single product reduces
the unit cost of producing or distributing (Chandler 1990, 17). In a regional economy,
localized economies of scale arise when the addition of a new firm in a region reduces
unitary costs for all firms in the region. This cost reduction takes place indirectly via
reduced costs of skilled labor, intermediate inputs, transportation, financing, marketing,
infrastructure, etc., as a result of increasing demand for these products and services when
they are characterized by decreasing marginal costs. External economies of scale are of
two kinds. Firstly, technological economies exist when an industry benefits from the
shared experiences or facilities of its member firms. Secondly, financial advantages occur
when there are industry-wide savings in the expenditure needed to create demand, carry
out market research, or otherwise maintain profitability
In the trend of globalization, these new spatial division of labor become easier for each
corporation than ever before since the development of communication technologies and
modern transportation as well as the integration between the manufacturing firm with
logistic or transportation companies such as DHL, FedEx, or UPS. Moreover, under this
new international division of labor, the process of production is no longer confined to
national economies. This has led to a trend of transference, or what is also known as the
"global industrial shift", in which production processes are relocated from developed

countries (the USA, Europe and Japan) to developing countries in Asia (for example
China, Vietnam and India) and Latin America. This is because companies search for the
cheapest locations to manufacture and assemble components, so low-cost labor-intensive
parts of the manufacturing process are shifted to the developing world where costs are
substantially lower. From 1953 to the late 1990s, the industrialized economies' share of
world manufacturing output declined from 95% to 77%, and the developing economies
share more than quadrupled from 5% to 23%. This process of obtaining sources from
multiple supplier in different countries is also called outsourcing.

2. OUTSOURCING
Outsourcing is often viewed as involving the contracting out of a business function commonly one previously performed in-house - to an external provider.
Outsourcing becomes a hot topic of many economists and in many industry because when
a companies can exploit all potential value of outsourcing, they can take lot of benefits
including profit. Here are some advantages that outsourcing organization are seeking to
realize (from http://en.wikipedia.org/wiki/Outsourcing) :

Cost savings: The lowering of the overall cost of the service to the business. This

will involve reducing the scope, defining quality levels, re-pricing, re-negotiation,
and cost re-structuring. Access to lower cost economies through offshoring called
"labor arbitrage" generated by the wage gap between industrialized and developing
nations.

Focus on Core Business:

Resources (for example investment, people,

infrastructure) are focused on developing the core business. For example often
organizations outsource their IT support to specialized IT services companies.

Cost restructuring: Operating leverage is a measure that compares fixed costs to

variable costs. Outsourcing changes the balance of this ratio by offering a move from
fixed to variable cost and also by making variable costs more predictable.

Improve quality: Achieve a steep change in quality through contracting out the

service with a new service level agreement.

Knowledge: Access to intellectual property and wider experience and knowledge.

Contract: Services will be provided to a legally binding contract with financial

penalties and legal redress. This is not the case with internal services.

Operational expertise: Access to operational best practice that would be too

difficult or time consuming to develop in-house.

Access to talent: Access to a larger talent pool and a sustainable source of skills,

in particular in science and engineering.

Catalyst for change: An organization can use an outsourcing agreement as a

catalyst for major step change that cannot be achieved alone. The outsourcer
becomes a Change agent in the process.

Enhance capacity for innovation: Companies increasingly use external

knowledge service providers to supplement limited in-house capacity for product

innovation. Reduce time to market

Commodification: The trend of standardizing business processes, IT Services,

and application services which enable to buy at the right price, allows businesses
access to services which were only available to large corporations.

Risk management: An approach to risk management for some types of risks is to

partner with an outsourcer who is better able to provide the mitigation.

Venture Capital: Some countries match government funds venture capital with

private venture capital for start-ups that start businesses in their country.

Tax Benefit: Countries offer tax incentives to move manufacturing operations to

counter high corporate taxes within another country.

Scalability: The outsourced company will usually be prepared to manage a

temporary or permanent increase or decrease in production.

Creating leisure time: Individuals may wish to outsource their work in order to

optimize their work-leisure balance.

Liability: Organizations choose to transfer liabilities inherent to specific business

processes or services that are outside of their core competencies.

However, outsourcing has some disadvantages beside above benefits:
Loss Of Managerial Control: when company decide to outsource, they accepted
to share part of or turn Managerial Control to outsourcing company
Hidden Costs
company will sign a contract with the outsourcing company that will cover the

details of the service that they will be providing. Anything not covered in the contract
will be the basis for firm to pay additional charges. Additionally, another extra fee is
legal fees retaining a lawyer to review the contacts. Some other cost also arise in
negotiation stages
Threat to Security and Confidentiality
The life-blood of any business is the information that keeps it running. If company
has payroll, medical records or any other confidential information that will be
transmitted to the outsourcing company, there is a risk that the confidentiality may be
compromised.
Quality Problems
The outsourcing company will be motivated by profit. Since the contract will fix the
price, the only way for them to increase profit will be to decrease expenses. As long
as they meet the conditions of the contract, company will pay. In addition, firm will
lose the ability to rapidly respond to changes in the business environment.
Tied to the Financial Well-Being of Another Company
When company outsource, they will be turning over part of the operations of their
business to another company, and of course, they will now be tied to the financial
well-being of that company.
Bad Publicity and Ill-Will

The word "outsourcing" brings to mind different things to different people. If we

live in a community that has an outsourcing company and they employ our friends
and neighbors, outsourcing is good. If our friends and neighbors lost their jobs
because they were shipped across the state, across the country or across the world,
outsourcing will bring bad publicity.
Although company has to face with some disadvantages of outsourcing, benefits are
outweigh of these advantages. Therefore, outsourcing still remains its importance in the
global economy. It contributes a lots to the quality and price of products as well as the
succession of many company, especially TNCs, in the global scale and local scale as
well.
III.

CONCLUSION

Economy is changing day to day and it brings much of opportunities and threat to
investors. From the past until now, each of 6 modes of production that economic
organization go through has its own way of ownership, relationship and production
forces. The most recent mode of production is organized with high tech machine with
service orientation, but it still has much of challenge for many organizations in organizing
and competing as well. The process of changing the economy to become more advanced
as today are affected by many factors including demographic, political, cultural, social
and technological change. These factors are not only related with each others, but it
occurred surrounding the interrelationship between economic organization and the overall
picture of spatial change. In other words, they are factors that directly or indirectly affect
the economic organization. In these factors, political and technological changes are
dominated in both global and local or national scale. They are policies of organization
and nation which is, for example, the opened and closed economy. The modern and high
technology today contributes a lot to the wealth of developed countries. It changes the
economy landscapes which results in the changing spatial division of labor and
outsourcing among economic organizations. It rearranges the distribution of skilled and
unskilled worker between each economic sectors and between developed and developing

countries. Many TNCs also establish in order to deal with global market today. These
companies used outsourcing as its strength and advantages to compete with its
competitors. Nowadays, Globalization continued to spread out the range of influences.
Together with that, the economy also change so fast, so each organization has to change
many things consist of internal and external factors to fit with the situation and can stand
in the global competition.

IV. REFERENCES
1. http://en.wikipedia.org/wiki/Subsistence_economy
2. http://www.geography.ccsu.edu/kyem/GEOG473/3rdWeek/Economic_Systems3a.
3.
4.
5.
6.
7.

htm
http://en.wikipedia.org/wiki/Slavery
http://www.ynetnews.com/articles/1,7340,L-3394274,00.html
http://www.edenbridgetown.com/ethics/people/slavery.shtml
http://en.wikipedia.org/wiki/Feudalism
http://www.oppapers.com/essays/Describe-The-Political-And-Economic-

Characteristics/601773
8. The geography of the world economy, 5th, Paul Knox, John Agnew & Linda Mc
Carthy