chapters 9 and 11 © robin foster. topic of great interest in economic geography economic...

Economic Development and

IndustryChapters 9 and 11

© Robin Foster

Topic of great interest in Economic Geography

Economic geography studies the impact of economic activities on the landscape and investigates the reasons behind the location of economic activity

Industrialization

Process by which economic activities evolved from primary goods to using factories.

Industrialization

Primary economic activity extracts products from the earth.

Secondary economic activities transform raw materials into usable products, giving them usefulness.

Industrialization

Began in England in the late 18th century. Secondary Economic activity was created

by the Industrial Revolution. Animal and human muscle was replaced by

machines. Transformed societies beyond economic

activities changing lifestyles, customs, beliefs and values.

Industrial Revolution

James Watt First reliable Steam Engine 1775 Eli Whitney Cotton Gin, Interchangeable parts for muskets 1793,

1798 Robert Fulton Regular Steamboat service on the Hudson River

1807 Samuel F. B. Morse Telegraph 1836 Elias Howe Sewing Machine 1844 Isaac Singer Improves and markets Howe's Sewing Machine 1851 Cyrus Field Transatlantic Cable 1866 Alexander Graham Bell Telephone 1876 Thomas Edison Phonograph, Incandescant Light Bulb 1877, 1879 Nikola Tesla Induction Electric Motor 1888 Rudolf Diesel Diesel Engine 1892 Orville and Wilbur Wright First Airplane 1903 Henry Ford Model T Ford, Assembly Line 1908, 1913

Industrial Revolution Inventors

MCD-LCD

Newly Emerging-light blue

Rapid political and economic change. Transforms country into a stable nation with

a growing economy.

Mexico is an example.◦ Beginning in the 1980’s based on its abundance

of oil.

Compressing modernity

1. Gross Domestic Product per Capita.Per capita GDP= GDP

population

$14,143.3 billion 307,448,945

The higher the per capita GDP, the more industrialized the country.

Economic Indicators of Development

Per Capita GDP in USD

3. Types of jobMDC’s-fewer workers in primary sectorLDC’s-more workers are farmers.

Economic Indicators of Development

4. Worker productivityMDC-more machinery, tools and equipment to perform work.LDC-more human and animal power. Productivity measured by the value added in manufacturing by each worker.

Product value=$ of raw materials-energy

Economic Indicators of Development

5. Access to raw materialsDevelopment requires access to raw materials-oil, coal, water, natural gas.England’s access to coal fueled the industrial revolutionEuropean empires came to control raw materials in other areas of the world.

Economic Indicators of Development

6. Availability of consumer goodsMDC’s money for essentials and non-essentials. Cars, telephones and televisions measures of consumption.LDC’s few people can buy non-essential goods.

Economic Indicators of Development

Less than 1% of the Earth’s land is devoted to industry.

Industrial production concentrated in 4 regions:◦ Northwestern Europe◦ Eastern Europe◦ Eastern North America◦ East Asia

Where is industry located?

Industrial Regions

What factors explain differences in levels of economic development?

Two conflicting theories have developed:Modernization Theory (Westernization Model)Dependency Theory

Theories of Economic Development

Economic prosperity is open to all nations.According to W.W. Rostow, modernization

occurs in four stages:1. Traditional stage2. Preconditions for takeoff3. Take off stage4. Drive to technological maturity5. High mass consumption

Modernization Theory

1. Traditional stage-society built lives around families, local communities and religious beliefs.

2. Precondtions for Takeoff-investment in infrastructure. More knowledge=more ability to have technology. Trade is promoted.

3. Take off stage-people produce goods for profit. Some form of industrial revolution takes place. Urbanization increases, technological breakthroughs occur. Desire for material goods take hold at the expense of family ties and traditional customs.

Modernization

4. Drive to technological maturity-economic growth accepted, people focus on higher living standards. Economy diversifies because people can afford luxuries. Poverty reduced, material goods are more common. Rate of population growth reduced, as children are more expensive to raise. International trade expands.

Modernization

5. High Mass Consumption- Economic development raises standards of living as pass production encourages mass consumption. Items which once were considered luxuries are now necessities. High incomes, with a majority of workers in the service sector of the economy.

Modernization

High income countries can help poorer countries with foreign aide, economic aide.

Criticized as exploiting capitalism. Fails to recognize rich nations, which benefit

from status quo. Blames poor countries for being poor. Poor countries develop from a position of

global weakess.

Modernization

Immanuel Wallerstein explained economic growth using a model of the capitalist world economy.

A global economic system that is based in high income nations that have a market economy.

Dependency (Core/Periphery)Theory

Wallerstein divided today’s countries into three types, according to how they fit in the global economy.

1. Core countries2. Countries of the periphery3. Countries of the semi-periphery

Dependency Theory

Core/periphery

Core countries-rich nations that fuel the world’s economy by taking raw materials from around the world and channeling wealth to North America, Europe, Australia and Japan through multinational corporations

Periphery-low income countries drawn into world economy by colonial exploitation

Semiperiphery-remaining countries of the world somewhere in between. Exert more power than periphery, but are dominated to some degree by core countries.

Dependency Theory

Primary economic activity develops around location of natural resources.

Secondary industry develops based on several factors as raw materials can be shipped:1. variable costs-energy, labor, and transportation.2. friction of distance-cost increases as distance to transport increases.3. distance decay-industries are more likely to serve markets nearby than far away.

Evolution of Economic cores and peripheries.

Dependency Theory

World economy benefits rich societies, harms others by making them dependent on core countries.

Sell inexpensive raw materials and buy expensive manufactured goods-high foreign debt.

Economies are crippled even further.Ignore cultural factors that in poor countries such as

family values and tradition rather than innovation.Corrupt leaders,, poor economic health, countries

wealth squandered by the elite.To Summarize-Rich nations keep poor nations poor

Dependency Theory

Core-primary and secondary economic activity.

Within cores-wealthy urban cores and depressed rural areas. People move to cities for jobs.

Core-periphery model

Foreign investment-money travels from core to periphery.

Theory of the Location of Industries, 1909.Compared to Von Thunen’s agricultural model

because they explain location of economic activity.

Weber’s Least Cost theory explained location of industry in terms of three factors:

1. Transportation2. Labor3. Agglomeration

Weber’s Model

1. Transportation-cost of moving raw materials to factory; then factory to market.

2. Labor-cheap labor allows for higher transportation costs. Example: an American Factory in Mexico. Factories in South rather than north because of unions vs. non-union labor.

3. Agglomeration-several industries cluster in one city, they can share talents, services and facilities. Ex. Restaurant supply stores

Weber’s Model

A result of excessive agglomeration can lead to:

Deglomeration-the exodus of a business from a crowded area.

Substitution principle-business owners can juggle expenses as long as labor, rent, transportation and other costs do not increase all at once.

Weber’s Model

The influence on a firm’s locational decisions by locations chosen by its competitors

Variable revenue analysis-a firm’s ability to capture a market that will earn it more customers and money than it’s competitors.

Locational Interdependence Theory

Water

Beach middle of beach

Fred’s snow cones Sam’s snow cones

area of profitability

Locational Interdependence

1. Situation factors-involve transporting materials to and from a factory. A firm seeks a location that minimizes the cost of transporting inputs to the factory and finished goods to the customers.

2. Site factors-result from the unique characteristics of a location. Land, labor an capital are the three traditional production factors that may vary among locations.

Why do industries have different distributions?

1. Proximity to inputs-1. Every industry uses inputs.2. Raw materials, parts of materials3. Locate near input to minimize transportation

costs.

Bulk reducing industry-final product weighs less than its inputs-copper

Situation Factors

Copper Foundries

2. Proximity to markets where product is sold. Transporting goods to consumers is critical location factor in three types of industries:

Bulk gaining-volume, weight added during production-soft drinks, fabricated machinery

Situation Factors

Steel Industry in the USA

Breweries

Car Assembly

Single market factories-manufacturers with only one or two customers

Situation Factors

Perishable products-produce, milk, bread, newspapers

Frozen, canned food can be farther from the market.

Situation Factors

Inputs are transported in one of four ways:shiprailtruckair

Firms seek the lowest cost. Long distance transportation is cheaper.

Inputs and shipping

A location where transfer among transportation modes is possible.

Important break-of-bulk points are airports and seaports.

A steel mill near Baltimore-iron ore by ship from South America, coal by train from Appalachia.

Port of New York, Port of Houston

Break-of-bulk points

Labor-your workerslabor intensive industries-wages and compensation are a large portion of costs-textile industry

Cottage industries-work done at home.High tech industries tied to skilled labor.

Site Factors

Labor intensive

Land-not every location has the same climate, topography, recreational opportunities, cultural facilities and cost of living.

Industries like low cost energy sources-Alcoa-hydroelectric power.

Site Factors

Capital-where is the money available?Industries typically borrow money for new

factories. Banks in MDC’s typically loan money to

businesses in LDC’s

Site Factors

Interregional shifts-USA to the South and West.Right to work laws

Southern and Eastern Europe Asia-China Latin America-Mexico and Brazil

Where are industries expanding?

Manufacturing zone created in the 1960’s in Northern Mexico just south of the border.

Goods are produced primarily for US consumers

This has been promoted by NAFTA-1995 treaty to promote free trade with the USA, Canada and Mexico.

Maquiladora

Cost of labor Outsourcing-”new international division of labor”

Why are location factors changing?

Just in time delivery-reduces money that is tied up in inventory.

Parts and materials arrive daily, if not hourly.

Producers have less cushion against disruptions in the arrival of needed parts.◦ Labor unrest◦ Weather related events, “acts of God”

Why are location factors changing?

Challenges for MDC’scompetition within countries in a trading bloc.

NAFTAEU-European UnionEast Asia-no formal organization

Transnational corporations-operate factories in countries other than headquarters country

conglomerate corporations exist-smaller firms that support the overall industry

Global Inequalities

Fewer jobs within industrial sector. Number of jobs in service or tertiary sector

has increased. A result of globalization? Labor intensive manufacturing in

developing world is displacing jobs of workers in advanced economies.

Deindustrializaiton

Distance from markets-invest scarce resources for airports, docks and ships.

Inadequate infrastructure-few schools to educate workers

Competition with existing manufacturers in other countries-transnational corporations in MDC’s use LDC’s for cheap labor. Competition among LDC’s for MDC’s factories.

Challenges for LDC’s

Fossil Fuel Reserves-how much coal, oil and natural gas remains in uncertain.MDC’s with ¼ of the population consume ¾ of the world’s fossil fuels

Industrial pollution global warming, greenhouse effect-increasing

earths temperatureacid rain-sulfur dioxide and nitrogen oxides released into atmosphere by burning fossil fuels.

Sustainable development-people living today should provide for future generations

Industrialization/Environment

1. Prevention2. Technological change3. Mitigation-undo or reduce damage once it

happens4. Compensation-persons who sue

companies.

Possible solutions

Human Development Index

Developed by the United Nations. Measures a countries level of development

according to three factors:◦ Economic◦ Social◦ demographic

Human Development Index

GDP per capita Types of jobs Productivity Raw materials Consumer goods

Economic Indicators

Types of jobs

Education and literacy

Health and welfare

Social Indicators

Economic indicators

Life expectancy Infant mortality rate Natural increase rate Crude birth rate

Demographic indicators

Demographic indicators

More/less developed

A numeric measurement The nearer to 1 the better. Anglo America-.94 Western Europe-.93 Eastern Europe-.8 Japan-.94 Latin America-.9 East Asia-.76 Southeast Asia-.58 Middle East-.68 South Asia-.58 Sub Saharan Africa-.51

HDI

Gender-related Development Index (GDI)◦ Average incomes of men/women◦ Education and literacy◦ Life expectancy

Gender Empowerment Measure (GEM)◦ Economic power-income and professional jobs◦ Political power-managerial and elected jobs

Measure of gender inequality

GDI

GEM

Products are made and traded according to standards that protect workers and small businesses in LDC’s.

Food or craft products can be fair trade.

Fair trade