Economic Geography Mr. Keller APHG– 2008.

Economic Geography Mr. Keller APHG– 2008

Types of Economic Activity
Primary = products of extraction or harvest Secondary = transformation of raw materials into a more usable form Fell from 31% of U.S. labor force in 1960 to 16% in 2000. Tertiary = provision of services to primary and secondary sectors and directly to customers Quaternary = information-based services Corporate headquarters Business services such as accounting, marketing, and HR Quinary = education, research, product or process development

Quaternary industry Includes those services mainly required by producers Trade, wholesaling, retailing, and advertising Banking, legal services, real estate transactions, and insurance Consulting and information generation Such activities represent one of the major growth sectors in postindustrial economies Manufacturing is increasingly shunted to the peripheries

Quaternary industry Corporate headquarters, markets, and producer-related service activities remain in the core Multiplier leakage — global corporations invest in secondary industry in the peripheries, but profits flow back to the core The industrialization of less developed countries actually increases the power of the world’s established industrial nations Today, we face a world in which the basic industrial power of the planet is more centralized than ever

Quaternary industry Global corporations are headquartered mainly in quaternary areas where the Industrial Revolution took root earliest Industrial development loans come from Europe, Japan, and the U.S., with the result that interest payments drain away from poor countries to rich countries Increasingly important is the collection, generation, storage, retrieval, and processing of computerized knowledge and information

Quaternary Industry: Hong Kong

Quaternary Industry: Hong Kong (Central)
Because of its natural harbor and accessibility, Hong Kong has functioned as an entrepot since 1841 and is also a major financial center. This is the view from Victoria Peak on Hong Kong Island across the harbor to the Kowloon peninsula.

The rose-colored buildings at top center house the stock exchange, offices and shops. The adjacent Jardine House, once the tallest building in Asia, is the center for travel and tourism. The Hongkong Bank is to the right of the green-roofed structure and I.M. Pei’s Bank of China skyscraper is further right.

Their dramatic architecture reflects the significance of banking in this post-industrial city. Luxury apartments dominate the foreground. Most manufacturing, mainly labor-intensive, is in the peripheral New Territories, and increasingly in China’s Guangdong Province.

Multiplier leakage occurs as many corporate headquarters and related activities remain in the Hong Kong. Hong Kong reverted from Britain to join China as an autonomous region in 1997.

Quaternary industry Postindustrial society is organized around knowledge and innovation used to acquire profits and exert social control Impact of computers is changing world dramatically, with implication for spatial organization of all human activities Many quaternary industries depend on a highly skilled, intelligent, creative, and imaginative labor force

Quaternary industry If seen on a local scale information-generating industries seem to coalesce around major universities and research centers Stanford and University of California at Berkeley helped make San Francisco Bay area a major center of such industry Similar foci developed near Harvard and M.I.T. in New England Triuniversity Raleigh-Durham-Chapel Hill “Research Triangle” of North Carolina

Quaternary industry If seen on a local scale information-generating industries seem to coalesce around major universities and research centers These high tech corridors, or “silicon landscapes,” are highly focused geographically, contributing to an uneven development spatially In Europe, emerging core is more confined geographically than earlier concentration of manufacturing

Quinary industry One of the most rapidly expanding activities is tourism By 1992 Generated $3 trillion in income Employed 1 in 14 workers worldwide Importance trend has continued in spite of tourist attacks Importance varies greatly from one region and country to another

Quinary industry Some countries, particularly those in tropical island locations, depend principally on tourism to support their national economies One advantage is that it is disproportionately focused in industrial peripheries rather than the core Disproportionately focused in industrial peripheries than the core Somewhat alleviates problem of uneven development Multiplier leakage typically drains most profits back to core

Quinary industry Tourism can be categorized into major types
One major flow is — from interior locations-to-seacoasts Second major movement is — from lowlands-to-highlands Third major flow — urban-to-rural People seek vacations away from crowded cities Acquisition of vacation homes in isolated places In rural Norway, about 40 percent of all farmers take in summer guest to supplement income

Quinary industry Tourism can be categorized into major types
Third major flow — urban-to-rural Ecotourism — visits to very remote areas, particularly wilderness regions Fourth flow is directed to places of cultural and historical importance Most modern tourism involves multiple destinations Europeans, in general, prefer a single destination for the summer Americans generally seek multiple destinations

Quinary Industry: Sex Tourism, Bangkok

Like Manila, Taipei, and (increasingly) Saigon, Bangkok is one of the “sex capitals” of the world. Desperate men and women enter into prostitution as a last resort to survive or to feed a drug habit. There is also an active slave trade from Mynmar (Burma).

Destitute families in urban squatter settlements and poor villages are enticed to sell their children (primarily girls) to middlemen who promise to find them employment with a rich family who will send them to school. These children are enslaved and forcibly turned into prostitutes by whatever means necessary including physical abuse and drug addiction.

This is Patpong Street, notorious for its sex shows, brothels, and related services. AIDS has reached critical proportions, but the industry continues to thrive on tourism. Planned sex tours are widely available from around the world and are especially popular with Japanese businessmen.

The Industrial Revolution
The Industrial Revolution began in the 18th century and continues today Involves a series of inventions leading to the use of machines and inanimate power in the manufacturing process Engages whole societies in seemingly limitless multiplication of goods and services Stimulates rapid bursts of human inventiveness Leads to population increase and redistribution Results in massive, often unsettling, remodeling of the environment

Regions of Primary and Secondary Activity

Secondary Activity Most of the world’s industrial activity has traditionally been located in MDCs of the mid-latitudes Parts of Anglo-America, Europe, Russia, and Japan In the U.S., industries originated in a region called the American Manufacturing Belt located in the Northeast

Manufacturing occupies the central core of Europe, surrounded by a less industrialized periphery

Japan’s industrial complex lies around the shore of the Inland Sea and in the southern part of the country

Industrial Regions of the U.S.
Why do high-tech industries have a distribution different from that of more traditional manufacturing?

Locational tendencies
Primary – oriented toward raw material source Services – market oriented Secondary – complicated spatial expression, depending upon a set of factors Raw material location Markets Agglomeration economies Labor costs

Industry creates a landscape, not for beauty, but for profit and utility
Renewable resource crises Deforestation Open-pit mines Strip-mining Overfishing Industrial landscapes Air and water pollution Acid rain Greenhouse effect and ozone depletion

Deforestation Most intensive clearing in East Indies and Brazil; commercial lumber interests largely responsible

Primary Industrial Landscapes
Open Pit Mine Slag Heap Evaporation Ponds

Coastal and Urban Pollution

Acid Rain Acid rain is capable of poisoning fish, damaging plants, and diminishing soil fertility By 1990 over half of all forests showed damage

Acid Rain Much of the pollution in Canada originates from American industries Deposition levels of 20 kg/hectare are generally considered dangerous for some ecosystems.

Greenhouse Effect Greenhouse Effect is produced by the burning of fossil fuels Carbon dioxide is just one absorbing gas involved in the greenhouse effect It contributes to a thermal imbalance and global heating

Ozone Depletion The upper atmosphere ozone layer shields humans and other forms of life from most harmful solar radiation. The ozone decrease in the Antarctic was first detected in the 1980s, and in the Arctic in the 1990s.

Radioactive Pollution
Invisible, but potentially the most serious form of pollution A large part of Europe received radioactive isotopes on April 26, 1986

The Future of Industrialization?
If we cannot be certain that global warming and ozone depletion are caused by industrial activity rather than being natural fluctuations or cycles, should we take action or simply wait and see what happens? Is it possible that our modern industrial way of life may prove a maladaptive strategy in terms of cultural ecology?

Industrial Location Source: tfors/industry.jpg

Manufacturing: Regional Patterns
Evenly spaced or random Clustered or linear How can we explain these patterns and their spatial arrangement?

Basic Assumptions in Location Decision-Making
People are economically rational Producers and sellers are intent on maximizing profit Best economic decisions result from market mechanisms: Price of land, labor, raw materials, energy, transportation Price is a function of supply and demand

Weber’s Theory of Location
Alfred Weber, German economist General theory (1909) is applicable to any economic, political or cultural system. Goal is minimum cost location Three categories of variable costs: Transportation Labor Agglomeration

Assumptions: Isotropic plain: uniform topography, climate, technology, and economic system. One finished product with one market Fixed location of raw materials and market site Labor is fixed, but available in unlimited quantities at production site Transport is uniform and costs are a function of weight and distance

Transport costs: Single market and single source: Ubiquitous material results in location at the market Pure material allows processing at market, source, or an intermediate location Weight-losing material will be processed at the source to avoid transporting waste material

Raw material location Weight-losing operations are drawn to the raw material source. Ex. copper smelter, iron and steel, fruit and vegetable packing, meat packing, orange juice, wine. A break-of-bulk point is where a good is moved from one mode of transportation to another – often an attractive location for production At Great Lakes ports of Chicago, Gary, Detroit, Cleveland, and Toledo coal was brought by rail from Appalachia and iron was shipped by boat from N. Mich. and Minn. For steel production.

Transport costs: One market and two sources: Equal distance and shipping costs dictates a market location Two weight-losing materials results in an intermediate location

Labor Costs: Location chosen always has least combined costs A location may have higher transport costs, but less expensive labor. China?

Agglomeration: Weber recognized that clustering will result in a per unit savings Shared benefits Facilities Labor force Infrastructure Services Raw materials

Limitations of the Theory: There are geographic variations in market demand There are terminal costs Transport costs are becoming less of a factor Labor is mobile and does not exist in unlimited quantities Plants often produce a variety of outputs for many markets

Additional Contemporary Considerations
Weber’s Theory of Location Additional Contemporary Considerations Access to capital Access to technology Friendly regulatory environment Political stability Land cost Inertia

Location Theory – Key Terms
Review Location Theory – Key Terms Material-oriented manufacturing Weight loss or perishability Market-oriented manufacturing Weight gain or perishability Footloose Industrial inertia

Review What is Weber’s theory of location?
What are the three factors of location? What are the assumptions of Weber’s theory? Explain how the three factors relate to the theory. Are there any drawbacks to the theory?

Economic Base The economy of every place is made up of two broad categories of activity Basic activities … Production of goods or services for “export” beyond the local place Creation of an inflow of money into the local economy “Engine” of economic growth in local economy Non-basic activities … Production of goods or services for consumption within the local economy Recycling of existing money within the local economy Sustains internal functioning of the local economy

Basic Sector The basic sector is made up of local businesses (firms) that are entirely dependent upon external factors Local resource-oriented firms (e.g., logging or mining) and manufacturing are usually considered basic sector firms because their economic success depend largely upon non-local factors and they export most of their goods. e.g., Agriculture, Mining, Tourism, Federal government, Manufacturing (partly)

Non-basic Sector The non-basic sector is composed of those firms that depend largely upon local business conditions e.g., a local grocery store sells its goods to local households, businesses, and individuals Almost all local services are identified as non-basic because they depend almost entirely on local factors e.g., Retail, Commercial banking, Local government, Local public schools.

Economic Base The total economic structure of a place is the sum of its basic and non-basic activities Most cities specialize in just one or a few basic activities Functional specialization allows classification of cities e.g., manufacturing, retail, wholesale, transportation, government, etc. Our mental images, i.e., our sense of place, of certain cities reflects their functional specialization Certain large central cities may perform many different basic activities, and thus have a “diversified economy”

Basic/Non-basic Ratio
Most economic activities cross over to some degree Assuming a clear separation in activities … Basic/non-basic ratio is roughly equivalent for cities of similar size As a city grows, non-basic activities increase faster than basic activities e.g., in a city of 1 million, there are about 2 non-basic jobs for every 1 basic job An increase of 10 basic jobs results in a total increase of 30 jobs (10 basic + 20 non-basic) The addition of non-basic workers in association with new basic jobs is called a multiplier effect

Urban Growth Growth of urban centers is, to some degree, self-generating because growth attracts service activity Basic activity attracts services New services attract additional services As an urban center becomes larger, an ever larger proportion of the workforce is employed in non-basic activities

Urban Decline If a basic activity declines or closes …
the demand for non-basic activities will also decline The decline of non-basic activities occurs with a lag time due to people’s reluctance to leave a place the has become “home” e.g., resistance of service activities to leave the NE Manufacturing Belt as basic activities either close or relocate

Basic and Non-basic Ratio
Calculating a ratio between basic and nonbasic activities … Provides insight into a city’s economic base Forms a basis for determining future employment trends (multiplier effect) Enables urban and regional planners to forecast future land use and population characteristics Facilitates examination of regional spatial connectivity in terms of basic employment and associated commodity flows Provides a conceptual view of the city

Markets Industrial districts develop through agglomeration
Creates a snowballing effect Difficult to control in free-enterprise systems Can produce serious overcrowding and an excessively clustered population Intense concentration of industries and population is characteristic of most industrialized nations

Industrialization and cultural change
Perhaps the principal cultural change and subsequent cornerstone of Western civilization was the concept of technology-based progress By-product of continual invention and change Many people discarded notions of heaven and afterlife to accept the belief in a better future on Earth Industrial society became more secularized Optimism bred of faith in progress allowed industrial cultures to discard, perhaps unwisely, “the ageless fear of the greater power and potency of nature”

On a more prosaic level, changes wrought by industrialization include: Increased interregional trade and intercultural contact Basic alterations in employment patterns A shift from rural to urban residence for vast numbers of people Release of women from the home Ultimate disappearance of child labor

On a more prosaic level, changes wrought by industrialization include: Initial increase in rate of population growth followed by a drop to unprecedented low birth rates Increased individual mobility and mass migrations of people Decline of the multigeneration family Greatly increased educational opportunities for the nonwealthy Increase of government influence and functions Most basic change is the way people make their living

Primary industries exert perhaps the most drastic impact on the land Open “forests” of oil derricks Geographer Richard Francaviglia calls these “hard places” He feels they accurately reflect much of what we in the Western world value-competition, risk taking, and dominion over nature

Other primary industries please the eye and complement nature Fishing villages of Portugal or Newfoundland even attract tourists In other cases, efforts are made to restore the landscape Establishment of grasslands in old strip-mine areas Recreational ponds in old borrow pits along interstates Artificial grasslands are inexpensive for mining companies to establish Poor and potentially toxic for cattle grazing Dominated by exotic Eurasian grasses Concentrated in areas that bore a forest cover before mining

The most obvious factory building landscapes are found in secondary industry or manufacturing Some are imaginatively designed and well landscaped Others are surrounded by gray seas of parking lots Range from the futuristic to stark “brick-pile factories to award-winning structure designed by famous architects

Industrial Landsape, Lanzhou, China

Industrial Landsape, Lanzhou,China
In 1949, as part of a decentralization effort, Lanzhou was designated for industrialization. A former Silk Road oasis, it functioned as a caravan stop and garrison. Now it is northwest China’s principal industrial base with refineries, coal and petrochemical complexes, metal processing and machine-making factories, and textile mills.

Industrial Landsape, Lanzhou, China
An important military base, it is also a key center for China’s atomic energy industry. Lanzhou’s population has swelled to more than 2 million. Air pollution is worse in most Western cities with sulfur-dioxide emissions from the combustion of low-quality coal in factories and household stoves a major contributor.

Service industries produce a landscape
Includes visual elements as diverse as high-rise bank buildings, hamburger stands, “silicon landscapes,” and concrete and steel webs of highways and railroads Some highway interchanges can be described as modern art forms Perhaps the high point of the tertiary landscape is found in bridges Many are often graceful and beautiful structures Few sights of the industrial age can match a well-designed rail or highway bridge

Age of the automobile Early in the twentieth century vehicles began to displace walking Los Angeles is the ultimate automobile city The freeway system allows motorists to observe their surroundings at nonstop speeds Allows drivers to look down on the world In some areas, streets actually have no sidewalks at all

Age of the automobile Los Angeles is the ultimate automobile city
In other areas, the layout of main avenues has been planned with the car in mind Pedestrians feel ill at ease amid the noise, traffic jams, drive-in banks, and parking lots Shopping streets are no longer scaled to pedestrians — Los Angeles’s Ventura Boulevard extends for 15 miles

Reading the Landscape: Vancouver, Canada

Vancouver is a major port on the west coast of North America. Canadian wheat is transported by rail to the Vancouver Wheat Pool’s storage elevators from where it is shipped around the Pacific Rim. The railway cars are designed to carry wheat. Note how rail lines, truck routes, warehouses and shipping facilities agglomerate here.

There are container ships, loading cranes and a variety of containers, some of which are refrigerated to carry products such as fish. Fishing boats and seafood packing plant are in the foreground. There is a sugar refinery in front of the grain elevators.

The large white ship reflects that Vancouver is a key stop on Alaska cruise routes. Which industrial sectors are represented in this picture? What kinds of spatial interaction between Vancouver and other parts of the world are evident here?

Port of Elizabeth, New Jersey

Secondary industry Pronounced regional specialization arose with the Industrial Revolution in the 1700s Core and periphery Evolving industrial core consisted of developed countries, with their collective manufacturing regions Periphery had nonindustrial and weakly industrialized lands, including many colonies Resources extracted from increasingly impoverished peripheries flowed to core

Secondary industry Core and periphery
Resultant geographical pattern is often referred to as uneven development, or regional disparity Uneven development has proven to be increasingly and unyieldingly present Manufacturing dominance of developed core countries persists A major global shift is currently under way in secondary industry

Secondary industry Core and periphery
In virtually every core country, much of secondary sector is in marked decline Especially steel making and other manufacturing requiring a minimally skilled, blue-collar work force Factories are closing Blue-collar unemployment rates at highest levels since the Great Depression of the 1930s In the U.S., a relative decline began about 1950 Nine out of every ten new jobs have been unskilled low-paying service positions

Secondary industry Manufacturing now booming in core countries mainly requires a highly skilled or artisanal work force “High-tech” firms produce quality consumer goods Blue-collar work force has proven largely unable to acquire needed new skills High-tech manufacturers employ far fewer workers than the former heavy industries New companies tend to be concentrated in relatively small districts sometimes called technopoles

Secondary industry Deindustrialization describes the decline and fall of once-prosperous factory and mining areas Brings demoralization and erosion of the spirit of place Western Germany’s reaction to deindustrialization Maintained a high proportion of its work force by reinvesting for high productivity Offered high wages Specialized in expensive export-oriented products

Secondary industry Western Germany’s reaction to deindustrialization Protected high level of labor skill through a well-developed apprenticeship system East German regions are now faced with same industries and mining that form core of deindustrialization and decline Manufacturing industries lost by core countries relocate in newly industrializing lands of the periphery South Korea, Taiwan, India, Singapore, Brazil, Mexico, Guangdong province in coastal South China, and India have a major expansion of manufacturing

Secondary industry Global corporations
Corporate giants based mainly in the U.S., Europe, and Japan have sweeping control over: International communications networks Latest advances in modern technology Large amounts of investment capital Corporate giants effectively control economic structure of many developing countries In Mexico, by 1970, foreign interest controlled 67 percent of metal- products, 84 percent of tobacco industry, and 100 percent of rubber, electrical machinery, and automobile industries In Argentina they controlled every “top 50” company by 1985

Tertiary industry Decline of primary and secondary industries has ushered in an era referred to as the postindustrial phase Part of the postindustrial phases includes: Transportation, communication, and utility services Highways, railroads, airlines, and pipelines Telephones, radios, television, and the Internet All facilitate the distribution of goods, services, and information Every industrial district is served by well-developed transport systems

The amount of cargo handled at the Shanghai ports has increased at a phenomenal rate.

As of Dec , Shanghai Port had handled 537 million tons of cargo in 2006, hanging on to its world number one spot, Shanghai Port handles 90 million tons more of cargo than Singapore port, which ranked second. According to the Shanghai Port Administration, the port's annual handling capacity topped 100 million tons in 1984 and the figure rose to 200 million tons in 2000 and 300 million tons in 2003. 2006’s figure was 21.2 percent more than that for last year and accounted for 12 percent of China's total for 2006. Shanghai Port handled million twenty-foot-equivalent unit (TEU) containers this year, up 20.1 percent from last year and accounted for 24 percent of the country's total for this year. A record 55,000 ships, including 23,000 container ships, berthed at the port this year. The port handles shipping routes reaching more than 300 ports worldwide.

Port of Shanghai

Shenzhen Twenty years after Shenzhen was designated China’s first Special Economic Zone (SEZ), the city has made unprecedented progress in several areas of economic development. Shenzhen has emerged from a small frontier town into a glamorous modern coastal city. Shenzhen continues to improve its status as a high-tech area, modern logistics hub, regional financial center, and beautiful seashore tourist destination.

The Shenzhen port ranks as the world’s fourth largest container port, having an annual throughput of 13.6 billion containers. The city’s subway system was put into operation in 2004 and a direct subway line to Hong Kong is under construction. Shenzhen is viewed by many as China’s gateway to Hong Kong and the global marketplace. In 2004, Shenzhen’s GDP reached USD 42 billion. Total import and export trade reached USD 147 billion, USD 78 billion exports, and USD 69 billion in imports. By the end of 2004, the accumulated value of foreign direct investment reached USD 28 billion.

Outsourcing to India & Beyond
A new way to leverage skills and markets Win-win situation: for DCs ?: productivity, competitiveness, higher employment, faster economic growth every dollar of outsourcing creates $ of value of which the US captures $ while India gets only 33 cents Outsourcing ‘industry’: to exceed $1 trillion by 2007 Total savings from global outsourcing: to grow from $6.7 bn (2003) to $20.9 bn (2008) Developing countries’ gains: $60 billion in ITES by 2008

Outsourcing: North-South issue?
More North-North trade-68% of trade North America, largest market: 60% of total Canada, largest exporter of private services to US Job displacement, unfounded? Net creation of 22 million new jobs in the US (from ); shortage of 10 million in 2010 Estimates for outsourcing: job creation: 317,000 net new jobs by 2008 in the US 2003: 98% of total contract value for outsourced business process service delivery in the US is done domestically (only 2% off-shored) India accounted for only 1% of total US imports of private services (of which, 2% - business services)

The Benefits Contributes to the Developing Countries:
gender empowerment, poverty reduction, access to technology Has positive spill-over effects: gains from additional consumption, skills and technology transfer, secondary employment Strengthens local capacity: through technological developments could assist Developing Cs in building their own industries Indian example: TCS, Infosys, Wipro Technologies

Gains for Outsourcing Companies
Strategic decision / competitive necessity Lower labor costs Economies of scale Round the clock operations / time zone Access to skills (including language skills) Legal and regulatory framework Quality Structure of existing corporate network Global R&D teams working in tandem

The Activities Lower end: customer contact centers, data entry operations, telemarketing, basic technical support Middle: processing of financial transactions (credit-card billing, insurance claims) Higher end: professional services such as research and development, accounting, engineering and architechtural design services, investment analysis, medical diagnostics

Developing Country Beneficiaries
India: a wide known success story 18 percent share of the global market Growth rate: 54% in Total export revenues to touch US$ 57 bn by 2008; US$ 148 bn by 2012 Employment to rise from 110,000 (2003) to 2.7 mn by 2012 Philippines, China, Malaysia, Vietnam, Bangladesh, S.Africa, Ghana, Senegal, Kenya, Jamaica, Mauritius, Nicaragua, Barbados, Mexico, Brazil. Others: Hungary, Czech Rep.

Programmers’ Wages YE2006 (Average Wage/year (US$000)
Source: United Nations conference on trade and development

Vietnam Experience Nortel, Cisco, IBM, Hewlett-Packard, British Petroleum, Sony, Fuji, TCS, now in Vietnam IT training specialists (NIIT, Aptech, Oracle) and Royal Melbourne Institute of Technology, providing training Attractions: cost advantage strong mathematical skills ( focus of educational system) knowledge of French and English Government: providing incentives to IT sector (tax holidays, infrastructure development, education) Vietnamese diaspora: key driver of IT industry

Ghana Experience Government: pro-active role: campaign, promotion for major US BPO players to set-up presence Attractions: stable political environment english-speaking workforce; high literacy Role of diaspora population: setting-up their own companies in Ghana; some in partnership with foreign investors knowledge of foreign culture and their networks

Success Stories: Summary
Competitive cost Language, education, skills also enables moving up the value chain Ability to develop global networks Adequate and reliable infrastructure Government role: infrastructure, education, various incentives, marketing, political stability, regulatory framework (e.g., security and protection of data) relates to long-term prospects of doing business Role of Diaspora population Cultural and relational proximity and trust

The Challenges to Overcome
Lack: infrastructure, trained HR, local market base Difficulty in gaining confidence of outsourcing companies: regulatory framework still under development political instability and governance issues Lack of coverage for liability and risk putting in place a strong risk-control framework Potential erosion of competitive advantage through new laws and regulations (e.g., restrictions on transfer of personal data) Growing protectionism in outsourcing countries

To Sum Up…. In my opinion, Outsourcing is an inevitable trend in the global economy… with potentially huge gains (for both developed and developing countries). Benefits are not automatic… but require targeted action… at national level (policies to support outsourcing, e.g. create infrastructure and educational base); at international level (targeted action for national policies and negotiating outcomes to curb protectionism).

Markets Attractive sites for weight-gaining operations
Ex. Soft drinks and beer Ubiquitous industries Newspapers, bakeries, dairies produce a perishable product for immediate consumption

Agglomeration Economies
Definition: cost savings from joint location Inter-industry linkages Backward – firm uses the output of another firm, ex. Automobile industry uses tires, paint, radios, seat covers, etc. Just-in-time delivery Forward – firm’s output is the input to another firm Steel is used in automobiles Boxes are used by food processing Chemicals Garment Urbanization economies – cost savings from an increase in total economic size Share labor, financial institutions, information – Ex. Semiconductor industry in Silicon Valley Share large market

Labor Important when labor is a high % of total costs, ex. Textiles, garments, furniture, shoes Maquiladoras – duty-free assembly of products in Mexico for re-export to the U.S. Takes advantage of cheap labor in Mexico for electronic products, textiles, furniture, leather goods, toys, automotive parts. Outsourcing – producing at foreign sites for domestic production 3,600 plants and 960,000 workers in Began at border, but more are now moving to Mexican heartland Growth limited by low-cost production in China

Though many corporations have abandoned Mexico for even cheaper labor in the Far East, the Maquiladora industries are currently experiencing a strong recovery as U.S. automakers and their suppliers shut down domestic production and transfer more work south of the border. Off-shoring to Mexico has received an additional boost from unstable energy prices that threaten Far East supply chains and render Mexico more attractive because of its proximity to U.S. and Canadian markets.

American Manufacturing Belt

Key Trends Globalization – In 1960, 20% of world production crossed national boundaries. Today, that is 50%.

Organization of production – vertical disintegration
Vertical integration vs. disintegration Integration = assembly line production, Fordism - Fordism refers to the system of mass production and consumption characteristic of highly developed economies during the 1940s-1960s. Under Fordism, mass consumption combined with mass production to produce sustained economic growth and widespread material advancement. During the 70’s, 80’s & 90’s, the system of organization of production and consumption has, perhaps, undergone a second transformation, which when mature promises a second burst of economic growth. This new system is often referred to as the "flexible system of production" (FSP) or the "Japanese management system." Disintegration = externalizing production, subcontracting, Post-Fordism

Why disintegration? Uncertain markets, can respond faster to changes in marketplace. Takes advantage of specialized labor. Weakens union by breaking up production – lowers wages.

Post-Fordism, on the other hand, involves the application of a variety of different production techniques to produce, in basic terms, the same sort of result (the most efficient method of producing a commodity such as a car or television). These techniques include things like co-operative working - Under this system, workers are organized into flexible teams, each with complimentary, related, skills. Each person within the team is capable of doing all other jobs within the team and each worker is not subject to the mind-bending monotony of the "single repeated task" Fordist production line.

The objective here, as far as the management of production goes, is to provide each worker with a sense of involvement (and hence ownership) of the tasks) they perform. By creating a sense of responsibility, the production process is improved by reducing the sense of alienation inherent in Fordist forms of production (the idea that the worker is separated from the things they produce and, thereby, has little sense of pride, achievement and responsibility for the things they produce). In addition, by giving individual workers some form of responsibility they are encouraged to think about - and possibly suggest improvements to - working practices… and Just-in-Time ("JiT") techniques - This technique involves the idea that a product is not built or assembled until an order for it is received - which means that large stocks of components do not have to be kept in warehouses. This saves a company money because capital is not tied-up in materials that may not be used for months, years or, indeed, ever...

In addition, once a commodity is assembled it doesn't have to be stored prior to it being bought (since it is already sold before its built). Thus, quite literally, the components used to build a commodity (such as a car, a television, a fridge and so forth) are delivered "just in time" to be assembled. This form of production is hugely efficient in economic terms, but it clearly requires a high degree of co-ordination if it is to work (since the whole production process depends on every component being available "as and when it's needed". If one vital component is not available the whole process judders to a halt...).

Examples Movie Industry has moved from the era of big studies to flexible production of movies Ladies dress industry - subcontract 48% of cutting; 89% of sewing. Highly agglomerated to take advantage of external economies

Economies of Scale: The savings that accrue from large-scale production whereby the unit cost of manufacturing decreases as the level of operation enlarges. Supermarkets operate on this principle and are able to charge lower prices than small grocery stores.

Economic Geography Mr. Keller APHG– 2008.

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Economic Geography Mr. Keller APHG– 2008.

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