Industrialization and Economic Development Unit VI

Intro Economic geographers study the locations and reasons for economic patterns in the world’s human landscape Fast Fact Almost half of the people in the world live on the equivalent of less than $2 a day, and about 20% live on less than $1 a day People in the 20 richest countries on average earn 37 times more than people in the 20 poorest countries

Economic Classifications ECONOMY The system of production, consumption, and distribution PRIMARY SECTOR SECONDARY SECTOR TERTIARY SECTOR QUATERNARY SECTOR Assemble, assemble, and process information Ex. University research and investment analysis QUINARY SECTOR Highest levels of decision making Ex. Legislature or presidential cabinet

Industrialization The growth of manufacturing activity in the economy or a region Usually occurs alongside a decrease in the number of primary economic activities Fast fact The amount of world trade since 1950 has increased 20 fold, from $320 billion to $6.8 trillion This increase in the trade of manufactured goods is three time larger than the increase in the rate of the production of those goods

The Industrial Revolution Began in England in the 1760s Later diffuses to other parts of western Europe During this period… machines replaced human labor and new energy sources emerged (Coal) At beginning it was textile focused industry

Cont… England’s Industrial Revolution defined by the rise of assembly line manufacturing Industries powered by coal so they clustered around coal fields Led to development of a clear industrial landscape and working class housing area Along with industrial growth… transportation infrastructure grew to allow improved shipping supplies to urban factories

Cont… Farming also mechanized COMMODIFICATION Factory owners looking at their human labor as commodities (objects for trade) with price tags per hour As opposed to seeing them as people

In the beginning… Factory like labor first started in households Growth of factories initially by water sources which supplied the energy Then factories grew near coal and could move farther away from water Away from water, factories could build out rather than up By the 1960s, oil replaced coal US, Russia, Venezuela were big oil suppliers prior to the 60s Middle east emerged in the 60s

Diffusion of Industrialization By 1825 the technology had diffused to N. America and Western Europe Thrived in places with coal deposits Ex. Ohio and Pennsylvannia By the 1920s production breaks down into differentiated processes FORD PRODUCTION METHOD (FORDIST) Build out rather than up Only one floor so the product could by transported throughout the assembly line without problems

WEBER’S LEAST COST THEORY ALFRED WEBER Predicted where industries would locate based on the places that would be the lowest cost to them

Assumptions of Weber’s model Assumes the cost of transportation is determined by the weight of goods being shipped and the distance to the market The heavier the good and/or the longer the distance, the more expensive it is to ship Assumes industries try to minimize costs Assumes markets are in fixed locations Assumes labor is in fixed locations Like Von Thunen… assumed soil and political/cultural landscape is uniform

Four factors of model Industry location driven by Transportation Labor Agglomeration Deglomeration

Transportation and Distance Must consider weight and distance Not just distance to market… but from raw materials or energy sources to the industry During Industrial revolution, factories locate near coal (energy), after invention of electricity they were no longer tied down to the energy source Also had to locate near raw materials

Cont… SPATIALLY VARIABLE COSTS WEIGHT LOSING PROCESSES Costs that varied or changed based on location Ex. Using heavy raw materials you might build closer to the raw material WEIGHT LOSING PROCESSES Ex. Paper production MATERIAL ORIENTATION

Cont… WEIGHT GAINING PROCESSES Locates near market Ex. Soda Industry MARKET ORIENTATION

Cont… SPATIALLY FIXED COSTS Some industries maintain the same costs no matter where they are Usually light products with high value Ex. Computer chips May be called FOOTLOOSE INDUSTRIES

Labor Costs Not only human costs but machinery and money to purchase tools SUBSTITUTION PRINCIPLE When an industry substitutes labor costs for transportation costs Labor costs decrease… Transportation costs increase… in the long run they will save

Agglomeration Industries that clump together for mutual advantage Can share costs AGGLOMERATION ECONOMICS Saving money for both industries and consumers HIGH TECH CORRIDOR TECHNOPOLE BACKWASH EFFECT When other regions suffer a drain of resources and talent LOCATIONAL INTERDEPENDENCE Industries choose locations based on where the competitors are located Ex. Off highway exits… Gas stations AGGLOMERATE based on LOCATIONAL INTERDEPENDENCE Allows them to share the market

Deglomeration When an agglomeration becomes too clustered/too crowded in negatively affect the industry so they split up for more space “unclumping” of industry

Criticisms of Weber’s Model Does not identify the fact that markets and labor are often mobile Labor force varies by Skill Age Gender Language Etc… Some transportation costs are not necessarily proportional to distance

Contemporary Patterns and Impacts of Industrialization and Development

Development Process of improving the material condition of people through the growth and diffusion of technology and knowledge MDCs vs. LDCs On an economic spectrum… Not just wealth…may have additional social, economic, demographic factors involved

UN Human Development Index HDI Used to compare various development regions Three factors Life expectancy Average educational levels Standard of Living On a score from 0-1 Norway tops at .965 US around 8th place – 0.91 Democratic Republic of the Congo in last at .286

Economic component of HDI Gross Domestic Product (GDP) The value of total outputs of goods and services produced in a country usually over 1 year Per capita = per person In US… GDP per capita is around 35,000 or $10-15 an hour vs. $0.50 in LDCs

PPP Purchasing Power Parity Calculating the exchange rates required for each currency to buy an equal amount of goods BIG MAC INDEX “Apples to Apples”

In comparison IN US… rich about 15 times more wealthy IN Guatemala… rich about 75 times more wealthy that the poorest 10%

Informal Sector Data not reported They are “off the books” Not included in GDP May limit the usefulness of GDP

Development Gap The widening gap between MDCs and LDCs GDP tripled in MDCs within the last decade GDP only double in LDCs within the last decade Rate of Natural Increase (RNI) dropped 85% in MDCs in the last decade… only 5% in LDCs NORTH – SOUTH GAP Northern Hemisphere is more developed

Structuralist Reasons for the Development Gap Argue LDCs are locked into a vicious cycle of entrenched underdevelopment by the global economic system DEPENDENCY THEORY Says political and economic relations among countries limit the ability of LDCs to modernize and develop Countries are INTERDEPENDENT IMMANUEL WALLERSTEIN’S THEORY WORLD SYSTEMS ANALYSIS CORE, PERIPHERY, SEMIPERIPHERY Core depends on the Periphery If there is a core there is a periphery The core exploits the periphery Ex. Europe and Africa

Liberal theories of Development: ROSTOW’S MODERNIZATION MODEL Says all countries can develop MODERNIZATION MODEL “ladder of development”

Criticisms of Rostow’s Model Based on Anglo American and Western European Development Does not account for “roadblocks” to development like neocolonalism Considers each country independent rather than interdependent

Reducing the Development Gap: The self-sufficiency approach The ability to provide for its own people, independent from foreign economies Investments should be spread over the entire economy Ex. China, India, E. Europe, Africa all tried it… didn’t work Corruption and inefficiency limited gains India never improved products Governments paid failing businesses to stay open

Reducing the Development Gap: International Trade Pushes a country to identify its unique set of strengths in the world and to channel investment toward building on those strengths COMPARATIVE ADVANTAGE Japan and High tech products

Globalization The increasing sense of interconnectedness and spatial interaction among governments, cultures, and economies Originally just used to describe economics… now it is more broad Ex. Spread of MTV May lead to resentment Disneyification… McDonoadlization

Multinational Corporations MNCs Or Transnational Corps… TNCs Headquarters in one country and production facilities in others CONGLOMERATE One massive company that owns and operates smaller companies Ex. A soda company also owns the bottling company and food coloring company

Outsourcing Practice of an MNC to relocate a piece or all of its manufacturing in other countries

Newly Industrialized Countries NICs Asian Tigers Taiwan, S. Korea, Hong Kong, Singapore Make up the Pacific Rim economic region

Foreign Direct Investment Investment in LDCs SPECIAL ECONOMIC ZONES EXPORT PROCESSING ZONES FREE TRADE ZONES

Maquiladoras Special economic zones in Mexico along the US border Part of NAFTA Used to create jobs

New International Division of Labor Breaks up manufacturing process among many countries

Free trade vs. Fair Trade

Structural Adjustment and Privatization Stipulations that require the country receiving a loan to make economic changes in order to use the loan Privatization The selling of publicly operated industries to market driven corporations

Non governmental organizations To assist in boosting economic development and human rights throughout the world’s peripheral regions NGOs supply resources and money

Globalization and the Environment Resources are being depleted Travel has increased ECOTOURISM Costa Rica has turned a huge percentage of its land into protected areas that can be used for ecotourism “Jungle Swing” Only damage to environment is the guidewires

Cont… Sustainable development A rate of growth and resource-consumption that can be maintained from one generation to another UN called for conservation and careful use of resources Avoid overfishing Care for the soil Preserve forests Protect species from extinction Reduce air pollution Recycle Use alternative fuels

Greenhouse effect Caused by CFC, CO2, Methane Causes world temp to rise Kinda like what happens in a car on a hot day Related to OZONE LAYER DEPLETION Global Warming May cause sea levels to rise