new industrial division of labor
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The NEW International
Division of Labor and
the new industry location in the U.S.How have things changed in the last 30 years
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Terms to know
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Just-in-Time Delivery• No overstock
•Use computers/technology/communication
•Produce just enough when needed
•Supply Chains
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Fordist vs Post-Fordist
Fordist
-Mass Production in one location-Assembly line
-Know one part of the process
Post-Fordist
Flexible production, adaptation, and innovation
-Post-Fordism uses workers in teams-all together working to solve
problems,
Post-Fordism outsources certain jobs
Production shifts worldwide
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Intermodal Connections•Break of Bulk locations
•Containerization is a system of intermodal freight transport using standard intermodal containers.
•These can be loaded and sealed intact onto container ships, railroad cars, cargo planes, and semi-trailer trucks.
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Outsourcing (Offshoring):
•moving part of your business operation overseas to take advantage of low costs (land, labor, taxes, etc)
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Transnational Corporation
•Nike
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Maquiladoras
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Technopoles•Silicon Valley
•Clusters of High-tech industries
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Technopoles
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Venture Capital•What Does Venture Capital Mean?
•Money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.
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THE MOST IMPORTANT FACTOR IN THE
CLUSTERING OF HIGH TECH INDUSTRIES IN SILICON
VALLEY WAS THE AVAILABILITY OF CAPITAL.
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Silicon Valley
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What is a footloose industry?
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a general term for an industry that can be placed and located at any location without effect from
factors such as resources or transport.
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Ex: internet companies...howev
er
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High-tech industries, needing a highly qualified workforce, may appear footloose, but
in practice they tend to locate close to universities, research establishments, and
motorways.
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Why the Change today?
LET’S LOOK AT U.S. REGION AND THEN WORLD CHANGES
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INTERREGIONAL CHANGE-the U.S.
•Cities to Suburbs
•Why?
•Northeast (Steel Belt) to Southwest/South
•Why?
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To Suburbs•Factories are better one story…need
cheaper land to build out; not up (land cheaper in burbs)
•Trucks and Interstate highways are the major modes of shipping goods today; not railroads
• Cluster near major highways in industrial parks
•Changing demands (more variety)-Cars!
• Regional plant produced cars for region (past)
• National plant produces 1 car for country
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Chevrolet Assembly Plants, 1955
In 1955, GM assembled identical Chevrolets at ten final assembly plants located near major
population centers. Why are cars located near market?
NEAR MARKET
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Chevrolet Assembly
Plants, 2007
In 2007, GM was producing a
wider variety of vehicles…where did factories
move and why?
Market is still key
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Chevrolet Assembly
Plants
In 2007, GM was producing a
wider variety of vehicles, and
production of various models
was spread through the interior
of the country.
Market is still key
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Site Selection for Saturn
GM considered a variety of economic and geographic factors when it
searched for a site for producing the new Saturn in 1985. The plant was
eventually located in Spring Hill, TN.
-land costs-labor costs
-transport cost-taxes
-infrastructure: energy, highways
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To South•Lower land costs, labor costs, taxes
• Right to Work States:
• hard to create unions, less pay for workers
• Saturn to the South
•Better infrastructure than past
• After Civil War, no railroads, no energy/electricity, poor roads
• Government provides: Tennessee Valley Authority, roads
• Air Conditioning
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BMW plant in South Carolina
•Near major highways; non-union workers!
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Sock & Hosiery Manufacturing
Men’s and women’s socks and hosiery manufacturers usually
locate near a low-cost labor force, such as found in the southeastern U.S.
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To Gulf Coast•Oil and Natural Gas over coal
• Natural Resources there
• Oil Refining, petrochemical manufacturing, food processing, NASA
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To S. California•Panama Canal opens
•Aircraft industry
• Light winds; no winters, clear skies
•Textile production (largest in U.S.); Furniture (2nd largest in U.S.)
• Immigrant labor (no unions)
•High-skill, college-educated workforce
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But…U.S. Production Workers1950 & 2005
States in the Northeast and Southern Great Lakes traditionally associated with manufacturing accounted for two-thirds of
manufacturing in 1950 but only two-fifths of manufacturing in 2005.
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New Industrial Division of Labor
MDCs to LDCs
The International Change
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Steel Production, 1980
The U.S., Soviet Union, and Japan were the largest steel producers in 1980.
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World Steel Production, 2005
By 2005, steel production had increased indeveloping countries but declined in the
more developed countries.
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Distribution of Steel Production
1980 & 2005Developed countries
accounted for 80% of world
production in 1980 but only 45% in 2005.
LDCs increased from 20%
to 55%. China is now the
world’s largest producer.
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Shanghai Steel Factory
The Baoshan Iron Steel Company in Shanghai,
China
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Why the changePartner up!
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Changing Location Factors•Economic
Interdependence/Globalization
• Transnational Corporations seeking high profits (Profit drive)
•Transportation/Communication changes
• Time-Space Compression
• Cheaper Transportation costs
• Internet superhighway
• (Don’t need to be near market as much anymore!)
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Changing Location Factors•Proximity to low-cost labor
(skilled/unskilled)
• Outsourcing by Transnational corps and other companies
•Other Advantages
• Lower Taxes *Lax environment laws
• Access to new markets
•Supernational Trade Agreements
• NAFTA: Move to Mexico and Maquiladoras
• European Union shift to cheaper labor
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Changing Location Factors•Special Economic Zones (SEZ)
• a geographical region that has economic laws that are more liberal than a country's typical economic laws. Usually the goal of a structure is to increase foreign direct investment by foreign investors, typically an international business or a multinational corporation (MNC).
• Includes Free Trade Zones (FTZ), Export Processing Zones (EPZ) – like Maquiladoras
• In China, Special Economic Zones -the early 1980s. The most successful, Shenzhen, has developed from a small village into a city with a population over 10 million within 20 years.
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What is the impact?
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Labor Cost per HourMDCs and LDCs
Fig. 11-22: Hourly wages can be under $1 in many LDCs compared to well over $10 in many MDCs.
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U.S. Clothing Production
1994 - 2005
Fig. 11-23: The percent of U.S. made clothing has declined sharply since the 1990s while imports have increased.
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New Industrial Regions
•China
• low cost labor; new market
• New laws allowing TNC in certain regions (Special Economic Zones)
• 3 areas: ¼ of pop; ½ of wealth; ¾ of foreign investment; 5/6 of foreign trade
• BACKWASH EFFECT: population leaving areas rushing to inudustrial areas
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New Industrial Regions
• 4 Asian Tigers
• South Korea
• Hong Kong
• Singapore
• Taiwan
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4 Asian Tigers• Rapid industrialization between the early 1960s -1990s
• Still industrial but move to tetriary
• Low cost labor + education = skilled labor force; export driven
• For example, Hong Kong and Singapore became world leading international financial centers, while South Korea and Taiwan became world leaders in information technology
• The Four Asian Tigers focused on improving the education system at all levels;
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Don’t forget IndiaComputer industries, accounting, call
centers, etc
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Latin America• Mexico
• NAFTA and Maquiladoras: 1980s HUGE growth in the north in MEXICO
• Cheaper labor than in US; Close to US
• Less environmental restrictions; child labor
• Interregional migration and development problems
• Some have closed due to cheaper labor in Asia (325 of 1122 textile maquiladoras closed and gone to Asia)
• EXPORT-PROCESSING ZONE
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Television factories
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New Industrial Regions
• EU has encouraged growth by giving capital to companies who locate in less developed areas
• Spain
• physically isolated and not developed into
• 2nd largest auto industry in EU
• Poland/Czech Republic
• Low cost labor and great situation (Central Europe)
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Overall impact on U.S.
• Unemployment (Flint, Gary, etc) due to outsourcing
• Deindustrialization (move from 2nd to 3rd service activities)
• Increase in Retail jobs (less $; less benefits)
• Internal Migration (Rust to Sun Belt)
• Decreased Union membership
• Lower-cost goods
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U.S. Imports From China
0
50
100
150
200
250
300
350
China Admitted to WTO
Source: U.S. Census Bureau
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