Global shift mapping the contours of the world economy

7TH EDITION

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For Valerie, with love

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THE GUILFORD PRESS New York London

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Copyright © Peter Dicken 2015

Published in the United States of America by The Guilford Press A Division of Guilford Publications, Inc. 370 Seventh Avenue, Suite 1200, New York, NY 10001 www.guilford.com

All rights reserved

No part of this book may be reproduced, translated, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, microfilming, recording, or otherwise, without written permission from the publisher.

Printed and bound in Great Britain by Ashford Colour Press

This book is printed on acid-free paper

Last digit is print number: 9 8 7 6 5 4 3 2 1

Library of Congress Cataloging-in-Publication Data

Dicken, Peter. Global shift: mapping the changing contours of the world economy/Peter Dicken. — Seventh edition. pages cm Includes bibliographical references and index. ISBN 978-1-4625-1955-2 (pbk.) 1. Industries—History—20th century. 2. International economic relations. 3. International business enterprises. 4. Economic policy. 5. Globalization—Economic aspects. 6. Technological innovations—Economic aspects. I. Title. HD2321.D53 2015 338.09′051—dc23 2014029508

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Praise for Global Shift

SEVENTH EDITION

“Given the rapid changes in the configuration of the global economy, Global Shift, Seventh Edition, will be welcomed by academicians and assigned in graduate and undergraduate classes. While retaining the strengths that have made prior editions much adopted around the world, the seventh edition has been updated to weave in such important new topics as the impact of the recent global financial crisis, the global smartphone infrastructure, climate change, corporate social responsibility, and national and international inequality. Readable case studies and excellent fig- ures and graphs provide students with the empirical illustrations they need to understand the larger theoretical concepts. A remarkable update by the foremost economic geographer of globalization that should be on everyone’s reading list.”

—Martin Kenney, Department of Human Ecology, University of California, Davis; Senior Project Director,

Berkeley Roundtable on the International Economy

“Global Shift, Seventh Edition, continues to be a key resource for understanding the complexity of the global economy and the ongoing, often contentious negotia- tions among nations, corporations and locales. In addition to clearly outlining larger institutional and structural processes, Dicken provides a wealth of detailed new empirical material to explain how the outcomes of the global economy manifest in specific contexts. The book’s diverse concrete examples – such as the global production network of iPhones or corporate strategies to shield profits from taxation – are drawn directly from the headlines. An extremely valuable text for all courses on economic geography, globalization, international business and economics.”

—Matthew Zook, Department of Geography, University of Kentucky

“Given the dizzying pace of change in the global economy, it’s more important than ever to have a comprehensive point of reference to allow us to understand and map the transformations around us. Global Shift, Seventh Edition, is that book.

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vi PRAISE FOR GLOBAL SHIFT

While continuing to add new material on countries, sectors and the policies that shape global industries, Global Shift also provides a solid analytical framework that helps the reader navigate the new terrain. And its great graphs, diagrams and charts are a visual delight. If you had to use just one book to convey globalization’s promise and perils, this is the book I would recommend.”

—Gary Gereffi, Department of Sociology and Center on Globalization, Governance and Competitiveness, Duke University

“Not just an update, the seventh edition of Global Shift offers compelling theo- retical and empirical insights as it takes on the critical global political-economic processes and debates of our time. Dicken provides a welcome synthesis and inter- rogation of prevailing theories of the global economy and addresses such fraught issues as the 2008 financial crisis and the intensification of inequality. An amazing resource.”

—Erica Schoenberger, Department of Geography and Environmental Engineering, The Johns Hopkins University

“Global Shift defines the gold standard in the field of globalization studies, which it has had a large hand in defining. The revised seventh edition continues to accomplish what no other book in the field does – it presents a grounded but broad view of globalization, judiciously assesses the key debates and recognizes (but never drowns in) complexity. Global Shift combines an authoritative voice with meticulous documentation and outstanding illustrations; it’s the trusted source.”

—Jamie Peck, Canada Research Chair in Urban and Regional Political Economy, University of British Columbia

“I used this text in my undergraduate Global Apparel Industry Dynamics class. It is a valuable text that explains the critical components and dynamics of the global economy in a straightforward and engaging style that is accessible to undergradu- ates as well as graduates. Dicken provides important historical perspectives on the evolution of the global economy while keeping abreast of recent developments. Key industries are examined in a relevant manner, adding an extra dimension to the work. Global Shift will equip any young graduate/executive with important insights into the global characteristics of business environments.” —Peter Kilduff, Professor and Chair, Department of Apparel Merchandising and

Management, California State Polytechnic University, Pomona

“Global Shift has become the de facto textbook for middle- and upper-level courses in economic geography. Dicken synthesizes the economic, political and social complexi- ties of globalization in highly accessible prose. The case studies of various industries contribute to a better understanding of the processes of globalization.”

—Marc Vachon, Department of Geography, University of Winnipeg

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viiPRAISE FOR GLOBAL SHIFT

SIXTH EDITION

“A magnificent achievement. Since the publication of the first edition of Global Shift in 1986, Peter Dicken has constructed in successive editions a phenomenal record of the changing geography of capital accumulation on a world scale. This wholly new sixth edition of 2011 is an essential companion for anyone concerned to understand the rapid geographical shifts occurring in the world’s economic power relations in these stressful and troubled times.”

—David Harvey, Distinguished Professor, CUNY Graduate Center, New York

“A masterful new edition of a masterful text. Once again, Peter Dicken is at the cutting edge of the analysis of economic globalization and global trends. Global Shift is the authoritative text on these issues.”

—David Held, Co-Director, Centre for the Study of Global Governance, London School of Economics and Political Science

“Global Shift, Sixth Edition, continues to deconstruct globalization to show that distance (economic geography) still matters. Dicken uses insights from interna- tional business research to demonstrate that world business activity is more regional than global. Multinational enterprises are at the hub of global production networks and service delivery; they interact with governments and generally act as agents of economic development. In short, economic geography and interna- tional business are closely aligned in their approach to globalization.”

—Alan Rugman, Henley Business School, University of Reading, UK

FIFTH EDITION

“A comprehensive, balanced, thorough, interdisciplinary review of one of the critical issues of our time. A ‘must’ for anyone interested in globalization.”

—Stephen J. Kobrin, The Wharton School, University of Pennsylvania

“Impressive in the extent of empirical research, Global Shift successfully captures the historical continuities and basic changes marking the world economy. Peter Dicken’s new edition is a vividly written guide to globalizing processes.”

—James H. Mittelman, School of International Service, American University

“Global Shift, Fifth Edition, remains the benchmark for studies of the geography of glo- balization. In accessible prose, Dicken presents tightly argued propositions about the emerging economic landscape. The fields of international business, economic geography, international relations, and economic sociology can profitably use the book to commu- nicate the fundamentals of globalization. Clear, effective, and engaging case studies are

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viii PRAISE FOR GLOBAL SHIFT

ideal for classroom use. There is no other text with such a broad reach or appeal for anyone interested in understanding the contemporary international economy.”

—Amy K. Glasmeier, Department of Geography, The Pennsylvania State University

“Global Shift just keeps on getting better. There is no other source that gives you the full story on globalization in such a fluent and authoritative way. This book is not just recommended, but essential.”

—Nigel Thrift, Vice-Chancellor, University of Warwick, UK

“With this edition of Global Shift, Dicken confirms his mastery as one of the preeminent authorities in the study of globalization. This careful and penetrating analysis of the complexities of a unifying world should prove a seminal text for students, scholars, and policymakers. If you wish to explore beyond ‘flatland,’ I can’t recommend a better source.”

—William E. Halal, Department of Management Science, George Washington University

“The fifth edition of Global Shift remains at the top of the ever more crowded field of globalization texts. Peter Dicken is a master of weaving together new theoretical arguments, visually compelling charts and graphs, and insightful indus- try case studies. If you had to use just one book to convey globalization’s promise and perils, this is the book I would recommend.”

—Gary Gereffi, Department of Sociology and Center on Globalization, Governance and Competitiveness, Duke University

FOURTH EDITION

“Dicken identifies states and transnational corporations as the two key actors in the multiple processes of restructuring and institutionalization that we usually call the global economy. In so doing, he has written a political economy of globaliza- tion and produced a far more comprehensive account than is typically the case in books about the global economy, most of which tend to confine the analysis to firms and markets.” —Saskia Sassen, Ralph Lewis Professor of Sociology, The University of Chicago

“In these uncertain times, it is reassuring to have Peter Dicken as our guide to the world economy. No other commentator has his eye equally attuned to both the big picture of global corporations and capital flows, and the fascinating stories of local places, people, and industries. In this new edition of Global Shift, Dicken shows us once again why he has become one of the most respected social scientists studying the world of global business and economy.”

—Meric Gertler, Department of Geography, University of Toronto, Canada

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ixPRAISE FOR GLOBAL SHIFT

“The book presents not only a thorough and balanced description and analysis of globalization, but also a nuanced explanation of the globalization–antiglobalization debates and provocative examination of the distributional consequences of globaliza- tion. I will certainly continue to use Global Shift in my graduate seminar. In fact, I am contemplating using it in my introductory economic geography course as well.”

—Robin Leichenko in Economic Geography

“A solid 640-page text on the phenomena of globalization in the modern age … provides detailed case studies of crucial global industries, more than 200 updated figures and tables, and well serves to broaden and illustrate the critical points toward understanding the world’s economic future. This is an ideal text for classroom instruction and recommended to the attention of non-specialist general readers with an interest in understanding the complexities of global economics.”

—Library Bookwatch

“One of human geography’s minuscule number of ambassadorial texts. The social sciences, the humanities, and international business studies will be much poorer when Global Shift ceases emerging as regularly as a Tissot watch keeps time.”

— Kris Olds in Progress in Human Geography

THIRD EDITION

“Global Shift has become a landmark and a classic. It remains a popular text whose strength lies in its clear presentation and analysis of empirical data and in its focus on the production chain. This alone makes it a welcome corrective for the many speculative works on globalization based, as Dicken says, more ‘on rhetoric and hype than on reality’.”

—Paula Cerni in Review of Radical Political Economics

“By far the best and most readable account of the past three decades of economic globalization. Replete with maps, graphs, and tables, the book offers the clearest and most complete exposition of the scale and depth of the transformation currently affecting all societies.”

—John O’Loughlin in Lingua Franca

“A first-rate and eminently readable work, with a unique blend of empirical and conceptual material and an analytical depth rarely achieved in textbooks. The third edition of Global Shift continues to be one of the most useful, interesting, and readable texts in the field of economic geography. I thoroughly recommend it both to students of geography and to readers in other disciplines who are inter- ested in seeing what contemporary economic geography is really all about.”

—John Holmes, Department of Geography, Queen’s University, Kingston, Ontario, Canada

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Contents

List of Abbreviations xv Preface to the Seventh Edition xix About the Companion Website xxiv

1 What in the World Is Going On? 1 The end of the world as we knew it? 1 Conflicting perspectives on ‘globalization’ 4 Grounding ‘globalization’: geography really does matter 6

PART ONE THE CHANGING CONTOURS OF THE GLOBAL ECONOMY 11

2 The Centre of Gravity Shifts: Transforming the Geographies of the Global Economy 13 The importance of taking a long view: the imprint of

past geographies 14 Roller-coasters and interconnections 16 Global shifts: the changing contours of the global economic map 24 The centre of gravity has shifted 35

PART TWO PROCESSES OF GLOBAL SHIFT 47

3 Tangled Webs: Unravelling Complexity in the Global Economy 49 Connections, connections 50 Institutional macro-structures of the global economy 52 Global production networks 54 Even in a globalizing world, economic activities are

geographically localized 67 Networks of networks 71

4 Technological Change: ‘Gales of Creative Destruction’ 74 Technology and economic transformation 75 Processes of technological change: an evolutionary perspective 75

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xii CONTENTS

Time–space shrinking technologies 83 Technological innovations in products, production systems and

organizational forms 99 Geographies of innovation 106

5 Transnational Corporations: The Primary ‘Movers and Shapers’ of the Global Economy 114 The myth of the ‘global’ corporation 115 Why firms transnationalize 118 How firms transnationalize 123 TNCs as ‘networks within networks’ 130 Configuring the TNCs’ internal networks 136 TNCs within networks of externalized relationships 153 Perpetual change: reshaping TNCs’ internal and external networks 165

6 The State Really Does Matter 173 ‘The state is dead’ – oh no it isn’t! 174 States as containers 178 States as regulators 183 States as collaborators 207

PART THREE WINNING AND LOSING IN THE GLOBAL ECONOMY 227

7 The Uneasy Relationship Between Transnational Corporations and States: Dynamics of Conflict and Collaboration 229 The ties that bind 230 Bargaining processes between TNCs and states 233

8 ‘Capturing Value’ within Global Production Networks 251 Placing places in GPNs 251 Creating, enhancing and capturing value in GPNs 253 Upgrading (or downgrading) of local economies within GPNs 258

9 Destroying Value? Environmental Impacts of Global Production Networks 279 Production–distribution–consumption as a system of materials

flows and balances 280 Disturbing the delicate balance of life on earth:

damaging the earth’s atmosphere 282 Fouling the nest: creating, disposing and recycling waste 292

10 Winning and Losing: Where You Live Really Matters 304 Location matters 305 Incomes and poverty 308 Where will the jobs come from? 322 Populations on the move 340

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Transnational Corporations xiiiCONTENTS

11 Making the World a Better Place 354 ‘The best of all possible worlds’? 355 TNCs and corporate social responsibility 357 States and issues of global governance 363 A better world? 380

PART FOUR THE PICTURE IN DIFFERENT SECTORS 393

12 ‘Making Holes in the Ground’: The Extractive Industries 395 Beginning at the beginning 396 Production circuits in the extractive industries 397 Global shifts in the extractive industries 400 Volatile demand 402 Technologies of exploring, extracting, refining, distributing 404 The centrality of state involvement in the extractive industries 408 Corporate strategies in the extractive industries 413 Resources, reserves and futures 419

13 ‘We Are What We Eat’: The Agro-food Industries 423 Transformation of the food economy: the ‘local’ becomes ‘global’ 424 Agro-food production circuits 425 Global shifts in the high-value agro-food industries 427 Consumer choices – and consumer resistances 430 Transforming technologies in agro-food production 433 The role of the state 437 Corporate strategies in the agro-food industries 440

14 ‘Fabric-ating Fashion’: The Clothing Industries 451 A highly controversial industry 452 The clothing production circuit 452 Global shifts in the clothing industries 453 Changing patterns of consumption 454 Technology and production costs 456 The role of the state 460 Corporate strategies in the clothing industries 462 Regionalizing production networks in the clothing industries 469

15 ‘Wheels of Change’: The Automobile Industry 477 All change? 478 The automobile production circuit 478 Global shifts in automobile production and trade 480 Changing patterns of consumption 482 Technological change in the automobile industry 484 The role of the state 487 Corporate strategies in the automobile industry 489 Regionalizing production networks in the automobile industry 499

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xiv CONTENTS

16 ‘Making the World Go Round’: Advanced Business Services 510 The centrality of advanced business services 511 The structure of advanced business services 512 Dynamics of the markets for advanced business services 514 Technological innovation and advanced business services 516 The role of the state: regulation, deregulation, reregulation 519 Corporate strategies in advanced business services 521 Geographies of advanced business services 530

17 ‘Making the Connections, Moving the Goods’: Logistics and Distribution Services 539 Taking logistics and distribution for granted 540 The structure of logistics and distribution services 541 The dynamics of the market for logistics services 544 Technological innovation and logistics and distribution services 545 The role of the state: regulation and deregulation of logistics

and distribution services 550 Corporate strategies in logistics and distribution services 553 Logistics ‘places’: key geographical nodes on the global

logistics map 562

Bibliography 566 Index 597

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List of Abbreviations

ABS Advanced business services AFTA ASEAN Free Trade Agreement ANCOM Andean Common Market APEC Asia-Pacific Economic Cooperation forum ASEAN Association of South East Asian Nations B2B Business-to-business B2C Business-to-consumer BAIC Beijing Automotive Industrial Corporation BIS Bank for International Settlements BRIC Brazil, Russia, India, China BSE Bovine spongiform encephalopathy CA Controlled atmosphere CAFTA Central American Free Trade Agreement CAP Common Agricultural Policy (EU) CARICOM Caribbean Community CCC Clean Clothes Campaign CFC Chlorofluorocarbon CIS Commonwealth of Independent States CIVETS Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa CKD Completely Knocked Down CME Coordinated market economy CMEA Council for Mutual Economic Assistance CRA Contingency Reserve Arrangement (BRICs) CSO Civil society organization CSR Corporate social responsibility CUSFTA Canada–US Free Trade Agreement DC Distribution centre ECB European Central Bank ECE Eastern and Central Europe EDB Economic Development Board (Singapore) EDI Electronic Data Interchange EEC European Economic Community EFTA European Free Trade Association

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xvi LIST OF ABBREVIATIONS

EMU European Monetary Union EOI Export-oriented industrialization EPB Economic Planning Board (South Korea) EPC Electronic product code EPOS Electronic point of sale EPZ Export processing zone ETDZ Economic and Technological Development Zone (China) ETI Ethical Trading Initiative EU European Union FAW First Auto Works FCCC Framework Convention on Climate Change FDI Foreign direct investment FSB Financial Stability Board FTAA Free Trade Area of the Americas G7 Canada, France, Germany, Italy, Japan, UK, USA G8 G7 plus Russia G20 Argentina, Australia, Brazil, Canada, China, France, Germany,

India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, UK, USA, EU

GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade GCC Global commodity chain GCSO Global civil society organization GDP Gross domestic product GFA Global Framework Agreement GHG Greenhouse gas GII Global Innovation Index GM Genetic modification GNC Global network connectivity GNH Gross national happiness GNI Gross national income GNP Gross national product GPN Global production network GSM Global social movement GSP Generalized system of preferences GVC Global value chain HVF High-value food IATA International Air Transport Association IC Integrated circuit ICAO International Civil Aviation Organization ICFTU International Confederation of Free Trade Unions ICSR International corporate social responsibility ICT Information and communications technology

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Transnational Corporations xviiLIST OF ABBREVIATIONS

IFI International financial institutions ILO International Labour Organization IMF International Monetary Fund IMO International Maritime Organization IPCC Intergovernmental Panel on Climate Change ISI Import-substituting industrialization IT Information technology ITU International Telecommunication Union JIT Just-in-time JLR Jaguar Land Rover LAFTA Latin American Free Trade Area LAIA Latin American Integration Association LBL Labour Behind the Label LDC Less developed country LETS Local exchange trading system LME Liberal market economy LSP Logistics services provider MAI Multinational Agreement on Investment MBS Mortgage-based securities METI Ministry for Economy, Trade and Industry (Japan) MFA Multi-Fibre Arrangement MFN Most-favoured nation MINT Mexico, Indonesia, Nigeria, Turkey MIST Mexico, Indonesia, South Korea, Turkey MITI Ministry of International Trade and Industry (Japan) MNC Multinational corporation MPI Multidimensional Poverty Index MSW Municipal solid waste MVMA Motor Vehicle Manufacturers’ Association NAFTA North American Free Trade Agreement NDB New Development Bank (BRICs) NEM Non-equity modes of international production NGO Non-governmental organization NIE Newly Industrializing Economy NOC National Oil Company NTB Non-tariff barrier OECD Organization for Economic Cooperation and Development OFC Offshore financial centre OICA International Organization of Motor Vehicle Manufacturers OPEC Organization of the Petroleum Exporting Countries OPT Outward Processing Trade PGST Permanent global summertime PLC Product life cycle

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xviii LIST OF ABBREVIATIONS

ppm Parts per million PRC People’s Republic of China PTA Preferential trading arrangement QE Quantitative easing R&D Research and development RFID Radio frequency identification RIA Regional integration agreement RTA Regional trade agreement SAIC Shanghai Automotive Industrial Corporation SEZ Special Economic Zone (China) SME Small and medium-size enterprises SOE State-owned enterprise SPM Solid particulate matter SSA Sub-Saharan Africa SUV Sports utility vehicle SWF Sovereign wealth fund TCC Transnational capitalist class TCS Tata Consultancy Services TEU Treaty on European Union TNC Transnational corporation TNI Transnationality Index TPP Trans-Pacific Partnership TRIMS Trade-Related Investment Measures TRIPS Trade-Related Intellectual Property Rights TTIP Transatlantic Trade and Investment Partnership UNCTAD United Nations Conference on Trade and Development UNEP United Nations Environment Programme VOIP Voice Over Internet Protocol WCN World city network WHO World Health Organization WTO World Trade Organization WWW World Wide Web

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Preface to the Seventh Edition

What began, more than 30 years ago, as a one-off attempt to make sense of the changing geographies of the world economy has evolved, rather unexpectedly, into a longitudinal global project. Each successive edition, appearing at roughly four- or five-year intervals, has come to constitute a temporal and spatial ‘marker’ of the empirical changes in the configuration of the global economy and of changing interpretations of, and attitudes towards, ‘globalization’ and its effects on people and places.

Such a longitudinal perspective emphasizes the dangers of making hasty judge- ments about immediate events and extrapolating them into the future. What may seem to be dramatic changes at one moment in time can turn out to be ephem- eral perturbations when seen from a longer-term perspective. Indeed, underlying the turbulent surface of change there is a great deal of continuity: of slower mov- ing processes. Like the tectonic processes that reshape the earth’s physical crust, their build-up may take long periods of time before we become fully aware of the true magnitude of change. The plate tectonics of the global economic map, there- fore, are just as difficult to predict, but also as potentially catastrophic, as those of the earth’s physical map. It is this interplay between the short and the long term that makes a project like this so challenging.

The basic principles on which Global Shift is based derive from my deep belief that we need:

•• an approach to globalization that is firmly grounded in the real world but which is not merely empirically descriptive;

•• an approach that engages with the theoretical and ideological/political issues of globalization, drawing upon a wide range of literature and ideas;

•• an approach that allows us to adopt a more considered perspective on how the immediate ‘events of the moment’ fit into the longer-term underlying pro- cesses of global economic change so that we are not swept away by instant predictions about the future;

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xx PREFACE

•• an approach that recognizes that globalization is a profoundly complex set of interlocking economic, political and social processes that operate in highly uneven ways over space and time and in ways that are not easily predictable but which have immense effects (both positive and negative) on people’s lives.

With these principles in mind, the basic aim of this Seventh Edition, as of its six predecessors, is to provide a clear path through the dense thickets of what are large, often conflicting, often confusing, debates and arguments about globalization; to show how the global economy works and what its effects are. It tries to separate the reality from the hype; to provide a balanced, grounded – but emphatically not an uncritical – perspective on a topic often richer in rhetoric than reality.

What is new about the Seventh Edition? As in all the previous editions, I have set out to produce the most up-to-date and comprehensive account of economic– geographic globalization. Hence, all the empirical data have been fully updated using the latest available sources as of early 2014. (Of course, anybody who has worked on the global scale will appreciate that this inevitably means that the ‘latest’ data always lag behind what we would ideally like to have.) The illustrations, which form such an integral element of this book, are, for the first time, in full colour, which greatly enhances their effectiveness. Each is either completely new or has been redesigned. Every chapter has been completely revised and extensively rewritten not only to take into account new empirical developments, but also to incorporate new ideas on the shaping and reshaping of production, distribution and consumption in the global economy. There is specific discussion of some of the key issues that have come to the fore in recent years, including:

•• the continuing impact of the 2008 global financial crisis, an issue that perme- ates all of the chapters to a greater or lesser degree;

•• the growing controversy over the tax-avoiding strategies of transnational cor- porations and other aspects of corporate social responsibility within increas- ingly interconnected and shifting business networks;

•• the continuing debates over economic governance institutions and policies at the global, regional and national scales in the spheres of finance, trade and the environment;

•• the fundamental issues of employment, unemployment, inequality, poverty and development, both between and within developed and developing countries;

•• the real relevance of the so-called BRICs (and other over-simplifying categorizations);

•• the eurozone crisis and broader issues and conflicts within the EU.

One major structural change has been made for the Seventh Edition. The sectoral case studies that made up Part Three of previous editions have been moved to the end to become Part Four. The previous Part Four (‘Winning and Losing in the Global Economy’) becomes Part Three, to create a much more direct connection

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xxiPREFACE

between the discussion of the processes of global shift (Part Two) and the outcomes of these processes. This change, I think, improves the coherence and flow of the argument – at least I hope so.

Otherwise, Global Shift continues to be both a cross-disciplinary and a multilevel book. It deliberately spans, and draws from, a wide range of academic disciplines, including business and management, development studies, economics, economic geography, political science and sociology. At the same time, the book is designed for use at different levels. On the one hand, my aim is to make the book accessible to readers without any prior specialist knowledge by ensuring that all key terms are clearly defined, by avoiding excessive jargon and by making extensive use of graphics. On the other hand, for the specialist reader, each chapter contains end- of-chapter notes that connect to the extremely extensive and up-to-date research bibliography. Through such means, the book should be useful to undergraduate and graduate students and researchers, as well as to policy makers and to people in business. Certainly my experience of the reception of previous editions suggests that this is so.

***

With each successive edition, my debt to friends, colleagues and users of the book has widened and deepened. Indeed, without a rich network of friends and col- leagues from all round the world, a book like this simply could not exist. To all of them, I offer my sincere thanks and I hope they will forgive me for not mentioning them all by name. However, several people deserve special mention. First in line must be Nick Scarle, Senior Cartographer at the University of Manchester. Nick has been responsible for designing and producing all the illustrations for all seven edi- tions. Always superb, they have simply got better and better. Indeed, this book could not exist as it does without Nick’s creativity, commitment and enthusiasm. I am immensely grateful to him. Second, I continue to rely on – and to appreciate so very much – the stimulus and friendship of Neil Coe and Henry Yeung, forged through long collaboration on global production networks at the University of Manchester (though both are now at the National University of Singapore). They, together with Martin Hess, Roger Lee, Anders Malmberg, Liu Weidong, Jamie Peck, Adam Tickell, Kevin Ward and Ray Hudson, amongst many others, provide continuing support and friendship. I particularly want to thank the following colleagues for providing material and inputs for specific topics: Neil Coe (Chapters 3, 17), Martin Hess (Chapter 3), Mark Graham, Matt Zook and Martin Dodge (Chapter 4), Liu Weidong (Chapters 6, 10, 15), Gavin Bridge (Chapter 12), and James Faulconbridge (Chapter 16). Henry Yeung (NUS), David Inglis (Exeter University) and Richard Woodward (Hull University) have created invaluable guides to supplemental reading material for the website, while Fiona Moore (Royal Holloway University of London) has again done an excellent job in devising and producing the support materials for business and management users of the book. Of course, none of them bears responsibility for any errors or misinterpretations on my part.

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xxii PREFACE

I am, as ever, extremely grateful to the team at SAGE Publications in London. SAGE is a publisher for whom I am proud to write. In particular, my long-stand- ing editor, Robert Rojek, is the most caring, encouraging and stimulating pub- lisher and friend. Katherine Haw has, yet again, lavished enormous skill and care on creating a visually stimulating book. I would also like to thank Keri Dickens, Izzi Drury and Michael Ainsley for all their help and enthusiasm. Thanks, too, to Seymour Weingarten and the staff at The Guilford Press in New York, especially C. Deborah Laughton.

However, at the end of the day, as the saying goes, it all ultimately comes back to the people who matter to me most of all: my family. Michael, Sally, Jack and Harry in Switzerland, Christopher and Annika in Germany are all such great fun to be with. And then, above all, there is Valerie, who makes everything worthwhile and who (still) does so with so much love, humour and tolerance. This is for her.

Peter Dicken Manchester, 2014

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About the Companion Website

dicken_global_7e_PC4 PB AW.indd 7 06/11/2014 15:57

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Features of the Companion Website for Global Shift

On the companion website for Global Shift – www.guilford.com/dickenGS7 – you will find resources for each chapter:

•• Questions that test your understanding of the Applied Case Study and Further Reading for each chapter for Business, Management and Organization Studies

•• Suggested Further Reading for each chapter for Geography, Politics and Sociology; with an explanation of why each reading is important and relevant

•• A set of interactive flashcards, so you can always test your knowledge of key terms

In addition, there are Applied Case Studies for each chapter and video overviews by Peter Dicken of each section:

1 What in the World Is Going On? •• Video: Peter Dicken introduces the new, 7th edition of Global Shift: How do

we understand the complexity of globalization?: five approaches •• An Applied Case Study: How globalized was the world between 1880 and

1914? What are the differences between then and now?

PART ONE: THE CHANGING CONTOURS OF THE GLOBAL ECONOMY

2 The Centre of Gravity Shifts: Transforming the Geographies of the Global Economy •• Video: Peter Dicken introduces Part One of the new, 7th edition of Global

Shift: How the world is changing; patterns of trade, investment and production; the rise and fall of economies – all understood in the long-term context

•• An Applied Case Study: How important is the free circulation of labour to the formation of global networks? Hamada’s ‘Under the Silk Banner’

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xxv FEATURES OF THE COMPANION WEBSITE FOR GLOBAL SHIFT

PART TWO: PROCESSES OF GLOBAL SHIFT

3 Tangled Webs: Unravelling Complexity in the Global Economy •• Video: Peter Dicken introduces Part Two of the new, 7th edition of Global

Shift: How is change produced, what are the underlying processes, who are the key actors and institutions, who has the power, how do they all interact?

•• An Applied Case Study: How does a global civil society organization use global networks to promote and achieve its aims? Oxfam

4 Technological Change: ‘Gales of Creative Destruction’ •• An Applied Case Study: What can a transnational social democracy move-

ment show about the development of global networks and the unevenness of power relations? www.indymedia.org

5 Transnational Corporations: The Primary ‘Movers and Shapers’ of the Global Economy •• An Applied Case Study: How many ways can a transnational corporation be

transnational, how diverse can the strategies be to accomplish this end? ZwoBank and BMW

6 The State Really Does Matter •• An Applied Case Study: How does the state act globally outside of formal

policy making and economic activity? The Chinese diaspora

PART THREE: WINNING AND LOSING IN THE GLOBAL ECONOMY

7 The Uneasy Relationship Between Transnational Corporations and States: Dynamics of Conflict and Collaboration •• Video: Peter Dicken introduces Part Three of the new, 7th edition of Global

Shift: Winning and losing in the global economy, the complex relations between transnational corporations and states

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xxvi FEATURES OF THE COMPANION WEBSITE FOR GLOBAL SHIFT

•• An Applied Case Study: How does a company develop a ‘stateless’ image, and yet continue to have relationships with states, particularly with its home country? Deutsche Bank

8 ‘Capturing Value’ within Global Production Networks •• An Applied Case Study: How complex is the relationship for transnational

corporations between global and local within global production networks? McDonalds

9 Destroying Value? Environmental Impacts of Global Production Networks •• An Applied Case Study: How does social identity – factors like gender, class

and ethnic identity – relate to how individuals recycle? Waste

10 Winning and Losing: Where You Live Really Matters •• An Applied Case Study: Does the present period of globalization show the

emergence of a transnational elite, or ‘transnational capitalist class’? German business people and diplomats in London

11 Making the World a Better Place •• Video: Peter Dicken introduces Part Four of the new, 7th edition of Global

Shift: Variation across sectors – the processes of globalization involve the same actors but differ from case to case, sector to sector

•• An Applied Case Study: What are the ongoing arguments for and against micro-finance as a tool for alleviating global poverty? Micro-finance

PART FOUR: THE PICTURE IN DIFFERENT SECTORS

12 ‘Making Holes in the Ground’: The Extractive Industries •• An Applied Case Study: Is taking materials out of the ground a neutral

activity, or one which can be undertaken in more or less ethical ways? Shell

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13 ‘We Are What We Eat’: The Agro-food Industries •• An Applied Case Study: How are labels and narratives used by pro- and

anti-genetic-modification factions to influence consumer choice? GM foods

14 ‘Fabric-ating Fashion’: The Clothing Industries •• An Applied Case Study: How is an African exporter influenced, formally

and informally, by global and local debates about gender, labour and centre– periphery relations? Lesotho

15 ‘Wheels of Change’: The Automobile Industry •• An Applied Case Study: What advantages and disadvantages has the most

recent period of globalization – since the 2008 global recession – brought? General Motors

16 ‘Making the World Go Round’: Advanced Business Services •• An Applied Case Study: How do ‘global cities’ act as hubs of networks

developed by transnational businesses, migrants, activists and others in global production networks? London

17 ‘Making the Connections, Moving the Goods’: Logistics and Distribution Services •• An Applied Case Study: Is e-tailing a completely different and revolutionary

development from conventional forms of retailing? Amazon.com

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One WHAT IN THE WORLD

IS GOING ON?

CHAPTER OUTLINE The end of the world as we knew it? 1 Conflicting perspectives on ‘globalization’ 4 ‘Hyper-globalists’ to the right and to the left 4 ‘Sceptical internationalists’ 5 Grounding ‘globalization’: geography really does matter 6

THE END OF THE WORLD AS WE KNEW IT?

During the past 50 years the world economy has been punctuated by a series of crises. Many of these turned out to be quite limited and short-lived in their impact, despite fears expressed at the time. Some, however, notably the oil-related recessions of 1973–9 and the East Asian financial collapse of 1997–8, were very large indeed, although neither of them came close to matching the deep world depression of the 1930s. And recovery eventually occurred. Meanwhile, during the last three decades of the twentieth century the globalization of the world economy developed and intensified in ways that were qualitatively very different from those of earlier periods. In the process, many of the things we used in our daily lives became derived from an increasingly complex geography of production, distribu- tion and consumption, whose geographical scale became vastly more extensive and whose choreography became increasingly intricate. Most products, indeed, developed such a complex geography – with parts being made in different coun- tries and then assembled somewhere else – that labels of origin began to lose their meaning. Overall, such globalization increasingly came to be seen by many as the ‘natural order’: an inevitable and inexorable process of increasing geographical spread and increasing functional integration between economic activities (Figure 1.1).

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WHAT IN THE WORLD IS GOING ON?2

And then … On 15 September 2008, the fourth largest US investment bank, Lehman

Brothers, collapsed. It was an unprecedented event, heralding the biggest global economic crisis since the 1930s. And this crisis is still ongoing. The repercussions of the financial collapse that began with the disaster of the US ‘sub-prime’ mort- gage market continue to be felt throughout the world, although to widely differ- ent degrees, as we will see throughout this book. Since 2008, for example, economic growth rates (production, trade, investment) have plummeted in most of the developed world, notably in parts of Europe but also in North America. In all these cases, job losses have been huge, and the fall in incomes of the majority of the population has been so serious as to place many more people and house- holds on the margins of survival. At the same time, the incomes and wealth of the top 1 per cent have continued to increase even more astronomically, creating enormous social tensions and an upsurge of popular resistance in many countries. The most obvious recent example is the Occupy movement, which first emerged in late 2011 as ‘Occupy Wall Street’, using ‘We are the 99%’ as its rallying cry. In comparison, some developing countries – the so-called ‘emerging markets’ – have experienced relatively high growth rates, leading some observers to talk of the emergence of a ‘two-speed world economy’. But that broad-brush picture, though valid in some respects, masks continuing and deep-seated issues of poverty and deprivation throughout the world. The notion that developing countries can somehow ‘decouple’ from the effects of financial crisis in developed countries is demonstrably far from the truth.

To individual citizens, wherever they live, the most obvious foci of concern are those directly affecting their daily activities: making a living, acquiring the

Figure 1.1 Globalization as inevitable trajectory

Extent of geographical spread of economic activities

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WHAT IN THE WORLD IS GOING ON? 3

necessities of life, providing the means for their children to sustain their future. In the industrialized countries, there is fear – very much intensified by the current financial crisis – that the dual (and connected forces) of technological change and global shifts in the location of economic activities are adversely transforming employment prospects. The continuing waves of concern about the outsourcing and offshoring of jobs, for example in the IT service industries (notably, though not exclusively, to India), or the more general fear that manufacturing jobs are being sucked into a newly emergent China or into other emerging economies, suddenly growing at breakneck speed, are only the most obvious examples of such fears. Such fears are often exacerbated by concerns about immigration, especially among lower-skilled workers who perceive, correctly or incorrectly, a double squeeze of jobs moving abroad and those at home being taken by immigrants on low wages. But the problems of the industrialized countries pale into insignifi- cance when set against those of the very poorest countries. The development gap persists and, indeed, continues to widen alarmingly.

Hence, the world continues to struggle to cope with the economic, social and political fallout of the unravelling of the global financial system which occurred with such sudden, and largely unanticipated, force in 2007–8. The spectacular demise of Lehman was only one of many casualties. But its collapse was highly symbolic. Lehman was one of those institutions that epitomized the neo-liberal, free market ideology (sometimes known as the ‘Washington Consensus’) that had dominated the global economy for the previous half century. This was the ideology of so-called free and efficient markets: that the market knew best and that all hindrances to its efficient operation – especially by the state – were undesirable. But in 2008, all this was sud- denly thrown into question. As one financial institution after another foundered, as governments took on the role of fire-fighters, and as several banks became, in effect, nationalized, the entire market-driven capitalist system seemed to be falling apart.

Question: does the economic turmoil that broke out in 2008 herald ‘the end of the world as we knew it’, ‘the end of globalization’? Well, it all depends on what we mean by ‘globalization’: it is important to distinguish between two broad meanings of the term:1

•• One is empirical. It refers to the actual structural changes that are occurring in the way the global economy is organized and integrated.

•• The other is ideological. It refers to the neo-liberal, free market ideology of the ‘globalization project’.

These two meanings are often confused. Of course, they are not separate but it is important to be aware of which meaning is being discussed.