Industrialization and Economic Development Unit VI Intro Economic

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, 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 1760 s • 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 1960 s, oil replaced coal – US, Russia, Venezuela were big oil suppliers prior to the 60 s – Middle east emerged in the 60 s

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 1920 s 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 – 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 8 th 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 = 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 • LIBERAL THEORIES – 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… Mc. Donoadlization

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 • Structural Adjustment – 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, CO 2, 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