Industrial Activity and Industrial Activity and Geographic LocationGeographic Location

Economic Unit Study Guide*Rostow’s modernization model (5 stages)

*Location Theory/Harold Hotelling*Wallenstein’s Theory

*Self sufficiency and the practices of international trade*Compare and contrast the differences that distinguish

the developing from the developed world*Why are there regional economic difference within a country?

*Causes of deindustrialization - tertiary and quatenary economic sectors*Positive and negative effects of industrialization

*Globalization and the effects.

• “Preindustrial World” – Industries did exist before the Ind. Rev. (e.g.

India – carpenters, textiles, silver,…) – Ind. Rev. began in Midlands of North-Central

England (Black Country – coal fields) & diffused eastward

– Affected production, transportation, and communication (steam-engine, locomotive, telegraph,…)

• The Location Decision – Primary industries – located near raw mat.s – Secondary industries – less dependent on

resource location

– Economic models assume: • 1) People will try to maximize their advantages over

competitors, • 2) They will want to make as much profit as

possible, • 3) They will take into account variable costs –

energy, transportation, labor,…

– Friction of distance – the increase in time and cost that usually comes w/ increasing distance

– Distance decay – the impact of a function or activity will decline as one moves away from its point of origin

• Key Concepts of Trans. & Comm.: • Require a specially designed and constructed

[cultural] landscape (roads, TV stations,…) • Cumulative causation – e.g. investment is

risky; usually occurs in developed states • Trans. & Comm. systems can be viewed as a

surface or a network:• 1) Surface: Pool table; move

freely (high potential for collisions); move at limited speeds

• 2) Network: faster movement, but restricted to certain paths (fewer collisions)

• We modify systems b/w both

• Ullman’s Conceptual Frame: • Forms a basis for understanding the volume

& timing of the flows of goods b/w locations; 3 main concepts:

• 1) Complementarily – refers to the needs of one region matching the products of another (copper from AK to manufacturing cities)

• 2) Intervening opportunity – reduces attractiveness of more distant locations

• 3) Transferability – refers to the ease w/ which products can be moved Kennicott Copper Mine

– • Harold Hotelling Model (Two dimensional) – Locational interdependence – the location

of industries can’t be understood w/o ref. to the location of other industries of like kind

– Two vendors located on pts. A & C, eventually gravitate toward pt. B (moving from this pt. will only hurt profitability)

– A third vendor complicates this (spatially)

– • Least Cost Theory (1909) – Alfred Weber’s model – owners of

manufacturing plants seek to minimize three costs: 1) Transportation, 2) labor, and 3) agglomeration (too much can lead to high rents & wages, circulation problems)

– Weight-losing case: final product weighs less than raw mat.s; location = source

– – Weight-gaining case: final product weighs more (or takes more space) than raw mat.s (e.g. addition of water); location = market

– Some argue Weber’s model doesn’t adequately account for variations in costs over time (e.g. taxation, consumer demand)

– Substitution principle – decreases in certain costs can offset increases in others

• Christaller’s Central Place Theory – Revisited

• Distance affects the marketing strategies of enterprises

• Businesses identify one location, possess a monopoly

• Hexagons display a nesting pattern; Christaller’s theory is not as accurate today (diminishing specialization)

– • August Lösch – Profit-maximization: firms will identify a

zone of profitability (not just a point) – Other businesses can come in and change

the configuration of that zone – Agglomeration can give the entire area a

competitive advantage

• Factors of Industrial Location:

• Raw Materials-e.g. Japan has few, but grew into an ind. giant b/c of skilled labor & low wages

• Labor-e.g. 1994 – wages in Shanghai’s Pudong dist. = 1/40 Japan, 1/30 Taiwan

• Infrastructure-banks, transportation, communication, social services,…Open-air laundry in

Mumbai, India

Resources and Regions:Resources and Regions:The Global DistributionThe Global Distribution

of Industryof Industry

• Four Primary Industrial Regions: – Eastern North America (largest) – Western & Central Europe – Russia & Ukraine – Eastern Asia (fastest growing)

• Industrialization Through WWI – Britain - enormous comparative advantage – Industrialization expanded along coal

deposits: N. France – Belgium – N-C Germany – NW Czechoslovakia – S. Poland

– Colonialism supplied Europe w/ raw mat.s – Ind. Rev. diffused (exp.) from core regions

– North America: only serious rival to Eur. – New York – great relative location, major

break-of-bulk (e.g. ship-to-rail) port – N. Am. benefited from nat. resources, trans.

networks, capital, and labor – Most of the rest of the world lagged far behind

(exceptions: Ukraine, Australia,…)

• Mid-Twentieth Century Industrialization – Oil & natural gas played a key role (U.S. is very

dependent on foreign sources today) – U.S. emerged as the world’s preeminent power

(escaped destruction of WWI) – American Manufacturing Belt - NE

• Late Twentieth Century and Beyond

– “Four Tigers”: South Korea (Seoul), Taiwan (Taipei), Hong Kong, Singapore (industrial powers)

– China – rapidly growing in influence

– Japan is losing its dominance

– Pusan, South Korea

- N. Hemisphere Ind. Zone: U.S. – Europe – Former USSR – E. Asia

- Secondary Regions – Mexico, Brazil, S. Africa, Egypt, India, Australia,…

Concepts of DevelopmentConcepts of Development

• Economic Activities (revisited) – Primary – ext.; Secondary – manufacturing – Tertiary – service (trans., sales, education,…) – Quaternary – exchange or application of info.,

knowledge, or capital (finance, insurance & real estate (FIRE activities), legal services,…)

– Quinary – higher order, specialized knowledge or skill (scientific research, high management)

– Relationship b/w industrialization and urban location changed over time • First industries were rural (e.g. water-powered)

• Mass production factories of early 1900s were urban based (e.g. cheap labor)

• Expansion of tertiary, quaternary, & quinary activities closely associated w/ growth of suburban areas (e.g. malls, edge cities,…)

• Agglomeration (revisited): – Occurs when certain conditions are met: – 1) When a cluster of activities create enough

demand for support services – 2) Activities needing access to information &

control tend to concentrate (e.g. face-to-face is better, no matter how rapid other forms of comm. are (e-mail, phone,…))

– 3) When cultural institutions (schools, hospitals,…) are attracted to the area

– Deglomeration = too many activities (of the wrong type); traffic, pollution, capital shortages, inc. land prices,…

• GNP (Gross National Product): – Total value of all goods and services produced

by a country in a single year (includes domestic & international)

– Does NOT: 1) include informal econ.; 2) reflect negative spinoffs (e.g. resource depletion, pollution, prisons,…), 3) illustrate distribution of wealth (UAE = >$15,000 p.c.)

– Alternative measures: 1) Occupational structure, 2) Productivity per worker, 3) Consumption of energy per person, 4) Trans. & comm. facilities per person, 5) Dependency (young & old) ratio, 6) social indicator rates (e.g. literacy, inf. mortality)

• Core-Periphery (revisited) – World System’s Theory

(Immanuel Wallerstein)

– Core-periphery link canexist at many scales: w/in a region (Los Angeles is a core of S. Cal.), w/in a country (Johannesburg is a core of S. Afr), global (Japan is a core of E. Asia)

– North-South Line (W. German Chancellor Brandt) – map of economic development in 1960s (“1st” world (US, Eur, Japan) market economies dominating the “3rd” world, w/ “2nd” world (USSR & China) traveling down a state-planned economic path)

Haiti - $410

Per Capita GNPs

Pakistan - $470

Japan - $32,350Egypt - $1,290

S. Afr. - $3,310

S. Korea - $8,600

U.S. - $29,240

• GDP/GNP vs. GNI PPP – GDP/GNP = Gross Domestic/Nat. Product

– GNI PPP = Gross National Income w/ purchasing power parity (allow cross-country comparisons of economic aggregates on the basis of physical levels of output, free of price and exchange rate distortions)

Country (2000) GDP ($ bn) GNI PPP ($ bn)

Nepal 5.5 31.6

India 457 2,375

China 1,080 4,951

Japan 4,842 3,436

U.S. 9,837 9,601

• Models of Development – Liberal: 1) Assume all countries are capable of

developing economically in the same way, and 2) disparities b/w countries & regions are the result of short-term inefficiencies in local or regional markets

– Structuralist: Economic disparities are the result of historically derived power relations w/in the global economic system; cannot be changed easily (misleading to assume all areas will go through the same process of development)

• Modernization Model (a “liberal” model) – Walt Rostow – 1960s; 5 stages: – 1) The Traditional Society: high % in agr.

(subsistence), high % of national wealth spent on “non-productive” areas (military, religion)

– 2) Preconditions for Take-Off: Educated elite influence pop. to invest in tech. & infrastructure; inc. in openness & production

– 3) Take-Off: “Industrial Rev”; urbanization, industrialization, but still some trad. areas

– 4) Drive to Maturity: Tech. diffuses, ind. specialization, modernization occurs in core

– 5) Age of Mass Consumption: high incomes, widespread prod., majority in service sector

Walt Rostow’s Modernization Model

Selected countries up to 1960

• Dependency Theory (“structuralist”) – Political & economic relationships b/w

countries & regions control & limit the developmental possibilities of less well-off areas (e.g. imperialism caused colonies to be dependent – this helps sustain the prosperity of dominant areas & poverty of other regions)

– Only at later stages of development does the core have a positive impact on the periphery (grants, loans, special economic zones,…)

• Conditions for Core Development: – Core – regions w/ concentrations of

employment, capital & economic control; develops w/ agglomeration

– Attract new investment through: • Backward linkages – supply firms w/ components &

services • Forward linkages – help firms find uses & markets

for their products • Ancillary industries – firms providing services for

other corporations • Investment into infrastructure & technology

Images

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• Conditions in the Periphery (revisited) – High rates of birth, death, infant mortality,

illiteracy, malnutrition, incidence of disease, rural populations, overcrowding in urban areas

– Women’s workloads are often heavier than men’s, landholdings are often fragmented (w/ poor harvesting tech.), soil erosion is commonplace, families often in debt,…

– A country’s core may illustrate “progress”, but often differs greatly w/ most areas

Images

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Nigeria

Deindustrialization and the Rise Deindustrialization and the Rise of the Service Sectorof the Service Sector

Deindustrialization and the Rise Deindustrialization and the Rise of the Service Sectorof the Service Sector

• New International Division of Labor – Periphery regions are dependent on core

for manufacturing jobs, likewise …

– Core TNCs are dependent on periphery for cheap labor, fewer environmental regulations, and expanding markets

• New International Division of Labor – Periphery regions are dependent on core

for manufacturing jobs, likewise …

– Core TNCs are dependent on periphery for cheap labor, fewer environmental regulations, and expanding markets

• Deindustrialization – Regions with high labor costs & old

technology may experience deind. (core countries, “Rustbelt”) as new tech. can be more cheaply appropriated elsewere

– US Sunbelt drew investment away from NE b/c of lower rates of unionization, higher amenity values (i.e. place), gov’t contracts, …

• Deindustrialization – Regions with high labor costs & old

technology may experience deind. (core countries, “Rustbelt”) as new tech. can be more cheaply appropriated elsewere

– US Sunbelt drew investment away from NE b/c of lower rates of unionization, higher amenity values (i.e. place), gov’t contracts, …

– Specialized Economic Zones: area w/in a country in which tax incentives & fewer enviro. regulations attract foreign business/investment

– Manufacturing export zone – periphery; favorable tax, regulatory & trade arrangements

– High technology corridors – core; network of research, development & tech. enterprises

A maquiladora in Mexico

A technopole – Silicon Valley

• OECD - Organisation for Economic Co-operation and Development

– Forum where gov’ts work together to address economic, social and environmental challenges

– Born after World War II to coordinate the Marshall Plan; today has 30 member countries (which produce > 2/3 world’s goods & services), w/ more than 70 developing and transition economies working w/ them

– Membership is limited only by a country's commitment to 1) a market economy, and 2) a pluralistic democracy

OECD Member Countries Countries/Economies Engaged in Working

Relationships with the OECD

– OECD: Sometimes accused of neo-neo-colonialism colonialism (entrenchment of the colonial order (trade & investment) under a new (non-pol.) guise); some countries’ have a high % of their GNP being allocated to payment of interest on accumulated foreign debts

– World Cities: John Friedmann (1980s) – Dominant in terms of their global-political economy; centers of control of the world economy, not the largest in terms of pop. or ind.

–Examples: N.Y.C., London, Tokyo, Sao Paolo,…

• Tourism: A Service Industry Giant – Some countries have made agriculture their

main priority, others – industry, and others,… – Tourism & travel = 11% of all global jobs, and

11% of global GNP (~$4 trillion/yr.) – Investment by “host” country is huge: i.e.

building hotels diverts money that could be used for housing, education, …

– Many hotels are owned by MNCs, NOT the “host” country, affects local economy little

– A fast-growing industry as people are traveling more, however congestion at tourist sites is a rising problem (i.e. usually need a reservation for a campsite in Yellowstone in the summer)

• Tourism: A Service Industry Giant – Some countries have made agriculture their

main priority, others – industry, and others,… – Tourism & travel = 11% of all global jobs, and

11% of global GNP (~$4 trillion/yr.) – Investment by “host” country is huge: i.e.

building hotels diverts money that could be used for housing, education, …

– Many hotels are owned by MNCs, NOT the “host” country, affects local economy little

– A fast-growing industry as people are traveling more, however congestion at tourist sites is a rising problem (i.e. usually need a reservation for a campsite in Yellowstone in the summer)

• Time-Space Compression: – Refers to the social and psychological effects

of living in a technologically advanced world – Time-space convergence – refers to the greatly

accelerated movement of goods, ideas, and information during the 20th c. made possible by tech. innovations in in transportation & communication

– Transition from Fordist ind. system to a faster, more flexible system that has opened new markets & brought places “closer together”

– World Wide Web - no accurate estimates of its economic impact, but it is growing