Industrialization Economic Development Ethel Wood Economic Development O

Industrialization & Economic Development Ethel Wood

Economic Development O Primary sector (agriculture) O Secondary sector (industry) – economy focuses on factories and machinery O Tertiary sector (services) O Post-industrial societies – dominated by this sector but grow through industrialization O Quaternary sector – service jobs that deal with research and development, management and admin, processing and dissemination of info

Evolution of Economics O MDCs – those that have experiences industrialization O LDCs – those that have not experienced it O NICs – Latin American and Asian countries O South Korea O Compressed modernity – rapid economic growth

Economic Indicators O GDP per Capita O Exceeds $20, 000 in MDCs, $1, 000 in LDCs O Types of Jobs O Fewest workers in primary activity (MDC) O Large % in primary activity (LDC) O Worker Productivity O MDC – more productive worker O LDC – less productive – rely on human and animal O Value added is much lower than in LDCs O Access to raw materials O Coal needed to industrialize in Europe and motivated them to control raw materials elsewhere O Availability of consumer goods O Discretionary income vs no discretionary income

Modernization Model O Westernization Model – Britain was the first and was spurred by a combination of prosperity, trade connections, inventions, and natural resources (namely coal). O Greatest barrier to this theory – tradition – O Those countries or societies unwilling to change and adapt to more modern techniques will not increase their economic development (strong family systems, ties to the past)

Dependency Theory O Economic development for many countries is blocked by the industrialized nations that exploit them O Roots in colonialism O Outgrowth of Marxism O Nationalizing industries in LDCs so they can narrow the gap between rich and poor

Modernization Theory O Rostow’s Stages of development O Traditional Stage – traditional societies O Take-off stage – Trade starts to happen, goods produced for more than just themselves, urbanization increases O Drive to technological maturity – focus on attaining higher living standards, more urbanized, local community feeling takes a back seat to economic growth O High Mass Consumption – mass production, mass consumption

Critics of theory say… O Socialist countries criticize theory bc it “justifies capitalism” and encourages exploitation of non-capitalist countries O Modernization simply hasn’t occurred in many countries O Rich nation that benefit from the status quo often block paths to development. O Difference between 19 th century development and now.

Dependency Theory O Wallerstein’s World Systems Theory: 1974 O O (capitalist world economy explanation) Based his theory on high-income nations with market economies Traced to colonial era where advantage was taken of the wealth in periphery countries Core-Semi-periphery-Periphery Dependency comes from narrow exportoriented products like oil, coffee, fruit O Countries lack industrial capacity – sell inexpensive raw materials and buy manufactured goods

Critics of this theory say… O Dependency theory wrongly treats wealth as a bad thing that no one can get richer while all other get poorer O Too much blame on rich countries O Ignoring strong cultural factors in developing nations O Corrupt national leaders

Self-Sufficiency Model O Isolate business from trade and encourage internal growth O Countries may set limits on imported goods (high taxes or set quotas) O India used this model O No incentive to improve quality with no competition or improve production costs, reduce prices

In contrast to India O Asian Tigers (Hong Kong, Taiwan, South Korea, and Singapore) – export-oriented industrialization O Product life cycle – O Innovator country comes up with the something new and then move on to other things O Other countries think of ways to make the first item better and cheaper and import that item back to the innovator country. (i. e. automobiles & electronics)

Industrial Revolution O So Why Britain? O Series of invention O Stable government O Wealth from overseas ventures O Abundant supply of coal O All helped spread the new technologies to transportation (train) and communications O Comparative advantage O Skilled laborers, established trade routes, abundant raw materials

Why then the US? O Abundant resources O Land space available O Knowledge from the old country (Samuel O O Slater built first textile mill in Rhode Island in 1791) Embargos on European imports helped spur economic growth Before 1860 – food and lumber – afterwards steel and iron Despite lack of raw materials in NE U. S. – there was an abundance of consumption of goods which helped the region grow. New York – became break-of-bulk point

A shift happens… O Early IR – coal and steel O 20 th Century IR – oil and natural gas O Power plants, machinery, cars, airplanes, & ships O Heating homes, hot water and cooking stoves O Europe and Us start to turn to other countries for these resources (SA, Kuwait, Iran, Russia, China, Mexico, Venezuela and Nigeria) O Allowed for multinational corporations within their borders

Location Theory O Primary industry – location near raw materials O Secondary Industry – O Variable costs – less expensive in some areas than others O Friction of distance – cost goes up the farther the distance of transport from source to factory O Distance decay – further away it gets the less likely it is to do business (Wallerstein’s World Systems Theory in a nutshell) Happens at a global scale and regional scale (India, U. S. )

Weber’s Least Cost Theory 1909 O Often compared to Von Thunen’s agricultural Model O Transportation – cost of inputs to factory and outputs to market – look for the least distance O Truck is cheapest for short distances, RR for medium and ships for longest O Terminal costs – least expensive for trucks, most expensive for ships (passage through the Suez or Panama canals for ex. )

Least Cost Theory cont. ’d) O Labor – cheap labor can make up for transportation costs O Agglomeration – talents, workers and facilities. O Restaurants - furniture, and equipment companies that provide business for them O Workers – need clothes – clothing stores, etc. O Deglomeration – exodus from a crowded area

And of course the Critics chime in… O Too inflexible – no consideration of costs over time O Substitution principle – juggling expenses as long as they don’t all go up at the same time

Locational Interdependence Theory (yet another location theory) O Not concerned with variable costs like Weber O Concerned with variable revenue analysis – ability to capture a market that will earn it more customers and money than its competitors O Harold Hotelling – Ice cream vendor example

Contemporary Things to Consider… O Space-time compression – “every country’s industrial development is related to conditions in the global economy” O Situation and site factors are still important – globalization has altered the meaning O Infrastructure plays a key role in decisions as to where to locate industries.

Western & Central Europe O Ruhr River area of Germany post WWI O Greatest Industrial complex O Proximity to markets, accessible transportation and natural resources O WWII – much was destroyed but was built back with the aid of US post WWII

North America O US emerged after WWI & WWII as world’s strongest industrial power O Manufacturing belt that included Canada (Windsor, Toronto, Montreal) O 20 th century manufacturing regions

Russia & Former Soviet Republics O Ukraine - grew into one of the world’s largest manufacturing complexes by 1950 s O Moscow, Leningrad O Communism controlled the development but patterns still followed logical based on geography O Dams for hydro power O Canals linked Volga to Moscow O Trans-Siberian RR

Eastern Asia O Japan – Meiji Restoration (oligarchs), Kanto Plain O Four Asian Tigers – export-oriented industrialization O China – Northeast District

Secondary Industrial Regions O Southeast Asia – Thailand, Malaysia, Indonesia, Vietnam (sphere of influence from China) O Northern Africa – Cairo, Egypt O Southern Africa – Johannesburg O Western Hemisphere – Mexico (Mexico City to Guadalajara) and Brazil (Sao Paulo, Rio to Belo Horizonte)

Eastern Asia O Japan – O Out of the way from imperialist powers O Never colonized O Later half of the 19 C (Meiji Restoration) – govt. sponsored campaign for modernization and colonization (oligarchs) O Organized armed forces O Transformed education and transportation (to follow Western model) O Established colonies for raw materials O Kanto Plain – dominant industrial region O Chosen to be near the decision makers in Tokyo

Four “Tigers” O South Korea, Taiwan, Hong Kong – (transferred power from Britain to China in 1997) & Singapore O Export – oriented industrialization O Product Life Cycle – innovator countries

China O mid-20 th Century O Began under Soviet planners & under Communist Party esp. since 1979 O Northeast District – earliest heartland of industry (Manchuria) – coal and iron (Shenyang) O Now challenging Japan for E & P leadership in the region. O Special Economic Zones (SEZs)

Secondary Industrial Regions O Southeast Asia (China’s sphere) O Northern Africa (Cairo) O Johannesburg, South Africa O Mexico (Mexico City to Guadalajara)and Brazil (Sao Paulo, Rio and Belo Horizonte)

NAFTA O Signed in 1995 O maquiladora O New international division of labor O Criticisms – US companies accused of avoiding employment and environmental regulations by using maquiladoras (assembly intensive)

India’s prospects O Large labor force O Hydro power potential O Large coal and iron ore deposits O Geographical location midway between Europe and the Pacific Rim O Computer software development (Bangalore & Hyderabad) O Call centers – developed a strong tertiary sectory

Trading Blocs O NA – NAFTA O European Union O East Asia O Closer integration within blocs but increased barriers between blocs (quotas on imports, etc. ) O Transnational corporations – operate outside of where they are headquartered O Conglomerate corporations – made up of many small firms to support the overall industry O Disparities within trade blocs are problematic Greece

Deindustrialization O Industry decrease in jobs usually means an increase in tertiary sector jobs O Should it be a concern?

Environment O Fossil fuels O Proven reserves O Potential reserves O Global warming O Acid rain