The relationships between the physical environment and economic activities are no longer important

‘Second life’ has its own settlements, inhabitants, firms, markets, geography and economies. In January 2007, it even had its own political riot. What is significant about this? Well, its economic activity bears absolutely no relation to the physical environment. It is an entirely virtual world and, admittedly, a computer game – but the point remains. Their currency, the transactions, the profits and the losses may occur in the game’s own currency but can be converted into real life US dollars.

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This is 21st century economic activity as the science fiction author’s imagined it, and fundamentally, is totally isolated from the physical environment. This could certainly be the shape of things to come, as indications of it can be seen translated onto the non-virtual world. The physical environment is consistently being conquered by human activity – there is little requirement for physically conducive circumstances for an area to be entered into the global capitalist economy. Anecdotally, there is a real snow slope in Dubai – economic activity based around winter sports is happening in the desert.

Arguably, humans still cannot conquer wilderness – settlement in Japan is restricted to the coast and the vast majority of mankind live close to coastal areas. Is this, however, more an issue of tradition than one of physical necessity? Certainly, conservative theory would suggest that people draw their identities from tradition, which can have important economic implications. Las Vegas typifies the ‘bright lights’ view of the USA – yet having outgrown its aquifer it surely shouldn’t exist. Where there are serious economic incentives, the physical environment pales into very little.

This has seriously implications in, for example, settlement patterns. Examination of a pre industrial city, such as Potosi, in Bolivia, demonstrates the importance of the relationship between the physical environment and economic activity. These cities were centres of power, bringing together the wealthy and politically powerful – both underpinnings of economic activity – with their servants and slaves in one large urban area, thus representing the beginnings of hierarchal economic systems that have been replicated around the world. This was the start of urbanisation, but what dictated the locations of these economic hubs?

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The physical environment, from which everything was derived and upon which everything relied. These new cities were focused on the exploitation of a raw material such as coal or iron ore; Catal Huyuk in Turkey developed around volcanic glass, becoming one of the first economic centres. As these activities grew the industrial city emerged, bringing people together in a work force and selling the products of their labour in a market system for the first time – it was the physical environment providing the impetus and the raw materials that enabled both extended settlement and trade to occur. The relationship could not have been more important.

However, what is the postindustrial city tied to? Very little – location of industry is no longer tied to traditional centres that formed due to the physical environment. ‘Footloose’ industries can be observed in the UK and other knowledge based economies. The sunrise strip around the M4 corridor and silicon fen have not developed where they are because of an exceptionally good crop of microchips. They are focused around centres of learning – science parks attached to the Universities of Oxford and Cambridge, or important communication routes that link them into the global economy – the M4, and important links to London.

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Similarly, it is human economics that has ‘saved’ those areas previously dependent on the physical environment. The decline of the mining industry in South Wales had a profound impact on the surrounding areas causing significant depression. This situation is being reversed with subsidies from the European Union; an economic body that rose from a belief in the law of comparative advantage as opposed to the physical environment. The relationship here between the physical environment and economic activity appears somewhat less significant than for pre industrial cities.

If post industrial cities no longer rely on the physical environment for their economic activity, but pre industrial and industrial cities derive their location, habitation and economic activity from the physical environment of their surroundings, it could be argued that those nation states who have no undergone industrialisation have a greater reliance on the physical environment. Rio de Janeiro owes much of its grandeur and wealth to the physical environment – many of the municipal buildings were built on the influx of wealth from the extraction of gold in the 18th and 19th centuries.

Today, the area is the biggest extractor of petroleum in Brazil from off shore fields; a position in continues to hold despite the opening of markets due to its resource endowment. Conversely, it can also be the physical environment that dictates a very different course of economic events; resource curse theory suggests that an endowment of a particular resource – such as diamonds in many African nations – can in fact lead to stinted economic activity as the economy develops in an unbalanced manner.

The poor economic situation in these states would certainly suggest an important relationship between economic activity and the physical environment that must be understood for a solution to be reached. In a similar vein, some cities have not been able to cope with the move away from a close relationship with the physical environment. ‘Old’ industrial cities, such as Sheffield in the UK and Lille in France are characterised by loss of employment in the primary sectors, as mining and other physical environment heavy industries decline.

There are often high levels of social deprivation and population loss from the inner city as out migration occurs. This illustrates that the relationship between the physical environment and economic activity is just as relevant today as it was with the initial city forming influences – in this case, the location of the cities, a physical factor, on the periphery of post industrial development has lead to economic depression and social deprivation. Furthermore, the observance of the growth of the postindustrial city from pre industrial times has been focused on the core regions of the UK, the USA and Japan.

This conservative view of development theory assumes that all development will undergo similar courses, thus implying that the relationship between the physical environment and economic activity in LEDCs is more important than that in MEDCs. Structuralists, however, will argue that this is not the case. The growth of these ‘core’ regions has huge implications for the entire global economy based around human derivatives as opposed to physical factors. The periphery is, in essence, not affected by the physical constraints that some argue are the cause of its poverty.

It is the economic actions of ‘core’ elements of society that result in the economic situations in LEDCs. Studies that led to this ‘dependency theory’ observed the actions of wealthy in Sao Paulo which had huge implications on the favela dwellers and the unskilled labourers of Brazil; this is translated on a global scale – the economic activity that keeps the poorest sections of global society in that position is arguably the result of the actions of the core nations which they have had most to do with in the past.

If this is the case, there is little relationship between the physical environment and economic activity. In spite of all this, however, there is an undeniable economic impact when disaster strikes. The dramatic impact of the Asian tsunami is a clear illustration. The movement of the tectonic plates that in turn triggered the tsunami could not have been predicated, although it has been argued that the quick pinpointing techniques could have provided greater notice of the wave. Even if this was the case, what of the impact to the settlements, the farmland and the tourist industry that it destroyed?

The economic implications of this were huge – raising the point that no matter how much humans attempt to harness the physical environment in pursuit of economic incentives, what initially allowed the development of the global economy can just as easily destroy it. The impact of natural disaster on economic activity is neither new nor restricted to LEDCs. Although the death count in LEDCS, such as the Kerala Earthquake, is usually higher than in MEDCs, the economic impact in MEDCs can be even more dramatic – the Kobe Earthquake, or the effects of Loma Preta ripping through San Francisco.

Here, flights were disrupted when a runway ruptured, and damage to free ways and bridges held up over one million commuters for over a month. The economy that these commuters were a part of may not have derived directly from the physical environment, but the disruption and thus cost caused by the physical environment was huge. Even those natural disasters we have warning of have significant impact. The Stern Report recently emphasised the huge economic cost of climate change to certain regions of the globe, which in an increasingly globalised economy would have resounding effects around the globe.

There is strong evidence to the effect that the current warming is human induced, and even speculation that it will be global warming that proves to be Malthus’ final resource limit. As global temperatures increase, the Greenland ice sheet will melt. This introduction of fresh water will reduce the salinity of the Gulf Stream as it goes northwards and sinks, powering the global conveyor. If this ocean current is unable to sink, the global conveyor will cease to moderate climatic extremes around the globe.

Whilst the UK may have handled this in the past during the Little Ice Age, in an economy dependent on roads, private cars and international travel, the economic disruption would be huge as the climate became colder. Limited snowfall has considerable economic impact today, making its potential impact huge. Economic activity itself, therefore, has reinforced the importance of the relationship between the physical environment and economic activity. Furthermore, given the attention paid to climate change by governments, the press, and NGOs alike, the carbon trading business is increasingly significant.

Carbon Exchange, a firm that manages both voluntary carbon trading schemes in the US and administers the compulsory cap and trade system in the EU, has seen its share prices rocket to nearly i??12 a share in recent months. Here, the impact of economic activity on the physical environment is giving rise to another ’round’ of economic activity. Carbon trading is big business and completely inseparable from the physical environment. Is this, rather than a ‘Second Life’ virtual existence of economic activity more the shape of things to come?

There are other such examples of considerable profits being derived from climate change concerns – effectively; we are reverting to a system whereby economic activity is the direct result of the physical environment. In conclusion, it would appear that the physical environment did much to shape the initial economic developments of core regions, such as the UK, the USA and Japan. It has imparted traditions that persist by way of settlement patterns and economic strengths. If this is the case, a simple division can be made – MEDCs do not rely on the physical environment for economic activity where LEDCs do.

However, this ‘model’ cannot be held paramount, as it appears not to be the case; structuralist views point out the presence of highly developed and desperate poverty even within the same city as a result of dependency, rather than economic development as a result of the physical environment. In spite of this, there exists an undeniable relationship between the physical environment and economic activity that applies to both LEDCs and MEDCs – the impact of natural disaster.

Furthermore, there is increasing economic emphasis surrounding climate change, particularly in MEDCs. Fundamentally, economic activity is an aspect of human activity. Humans are part of the biosphere, and in turn, part of the physical environment. Whilst we may not be as constrained by mountain ranges or climate extremes, as once was the case, it is doubtful there will ever be a situation where the relationship between the physical environment and economic activity is totally irrelevant.

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