twentieth century under the Gold Standard
regime. They also pointed to the concentra-
tion of trade, investment and capital flows
among Europe, Japan and North America.
Since then, China has emerged as a major site
of trade and investment flows, as well as the
single largest holder of US debt.
Burgeoning US debt underscores the struc-
tural asymmetries that have propelled the lib-
eralization of financial markets since the
1970s. A widely held view is that the collapse
of the Bretton Woods system of international
monetary and financial arrangements in 1971
represented a defeat for a weakened US capit-
alism, unleashing market forces that quickly
gained ascendance over nation-state power
(seemoney and finance). New information
technologies and a ‘space offlows’ also figure
prominently in this account of intensified eco-
nomic integration (e.g. Castells, 1996a).
In a revisionist analysis of the shift to
what he calls the Dollar–Wall Street regime,
Peter Gowan maintains that the liberation of
international financial markets was part of a
deliberate strategy by the Nixon administra-
tion, ‘based on the idea that doing so would
liberate the American state from succumbing to its
economic weaknesses and would strengthen the
power of the American state’ (Gowan, 1999,
p. 23; italics in original). Cutting the link
between the dollar and gold in 1971 meant
that the USA could force revaluation on other
states through its own policy for the dollar. In
a second key set of moves, closely linked to
the OPECoil-price rise, the USA insisted
that petrodollars be recycled through the pri-
vate banking system and devised a set of
incentives for commercial banks to lend to
governments in the South. These included
the abolition of capital controls, scrapping
the ceiling on bank loans to a single borrower
and repositioning the IMF to structure bail-
out arrangements that shifted the risk of
such loans to the populations of borrowing
countries. While ensuring the banks would
not lose, these arrangements have also meant
that financial crises in thesouthprovoked
capital flight of private wealth-holders that
ended up strengthening Wall Street (seeneo-
liberalism). While the banks and Wall Street
benefited in the period after 1973, the contin-
ual liberalization of the financial markets came
screeching to a halt in 2008 with the collapse
of over-extended US investment banks and
insurance houses, and the crippling of a global
financial system made excessively vulnerable
by a massive housing bubble driven by exces-
sively leveraged banks deploying risky financial
instruments (credit default swaps, for
example) in a fiscal environment characterized
by corruption, fraud and virtually non-existent
regulation and oversight.
Neo-liberal forms of economic integration
emerge from this analysisnotas a set of in-
exorable technological and market forces
increasingly divorced from state-political con-
trols, but as integrally linked with what Harvey
(2003b) calls ‘the new imperialism’. Such
understandings are crucial in a post-9/11 world
in which economic integration and military
force are becoming closely intertwined. ghaSuggested reading
Barnett (2004);RETORT(2005).economies of scale The cost advantages
gained by large-scale production, as the aver-
age cost of production falls with increasing
output. Total production costs usually
increase less than proportionately with output,
up to a point wherediseconomies of scale(cost
disadvantages) set in.
Economies of scale generally arise from con-
ditions internal to the operation of the plant in
question. Some important internal sources of
scale economies are: (a)indivisibilities, where
plant is built to a certain capacity below which
the average cost of production will be higher
than at full capacity, and the plant cannot be
divided up into smaller units working with the
same efficiency as the larger one; (b)special-
ization and division of labourassociated with
expansion of scale, which can increase effi-
ciency and hence lower costs; and (c)overhead
processes, such as the design of a product,
which must be undertaken and paid for irre-
spective of scale, so that the larger the output,
the lower is the overhead cost per unit. Certain
external economiesmay also be associated
with expansion of scale of output; for example,
if the growth of an entire industry reduces
costs in each individual firm.
The existence of economies of scale encour-
ages the expansion of productive capacity up to
the point at which diseconomies eventually pull
the cost of the additional (marginal) unit above
the price that it will fetch. In some modern
industry, it may be that this point is reached
only at a very high volume of output, so that
average cost continues to fall with rising output
well beyond the level at which diseconomies
might be expected to arise. However, in other
activities a trend towards more flexible and
differentiated production may lead to diseco-
nomies at relatively small scale of output. (See
alsoeconomies of scope.) dmsGregory / The Dictionary of Human Geography 9781405132879_4_E Final Proof page 183 1.4.2009 3:17pmECONOMIES OF SCALE