Industrial Activity and Geographic Location

1. Industrial Activity and Geographic Location

2. 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.

3. “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

4. 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

5. 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

6. 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

7. 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)

8. 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

9. 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

10. 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)

11. 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

12. 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

13. Resources and Regions:The Global Distributionof Industry

14. 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

16. 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

17. 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

18. N. Hemisphere Ind. Zone: U.S. – Europe – Former USSR – E. Asia • Secondary Regions – Mexico, Brazil, S. Africa, Egypt, India, Australia,…

19. Concepts of Development

20. 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,…)

21. 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,…

22. 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)

24. 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)

25. S. Afr. - $3,310 Haiti - $410 S. Korea - $8,600 Pakistan - $470 U.S. - $29,240 Egypt - $1,290 Japan - $32,350

26. 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)

27. 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)

28. 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

29. Walt Rostow’s Modernization Model • Selected countries up to 1960

30. 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,…)

31. 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

32. Images • of • New • York City

33. 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

34. Images • of • Lagos, • Nigeria

35. Deindustrialization and the Rise of the Service Sector

36. Deindustrialization and the Rise of the Service Sector

37. 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

38. 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

39. 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, …

40. 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, …

41. 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

42. A maquiladora in Mexico • A technopole – Silicon Valley

43. 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

44. OECD Member Countries Countries/Economies Engaged in Working Relationships with the OECD • OECD: Sometimes accused of neo-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

45. 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,…

46. 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)

47. 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)

48. 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