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Industrial Activity and Geographic Location

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					Industrial Activity and
 Geographic Location
                       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.
•   “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
– 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
•   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
•   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
• –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)
• –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
– 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
•   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)
• –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
                      •   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,
Open-air laundry in       social services,…
  Mumbai, India
Resources and Regions:
The Global Distribution
      of Industry
•   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
    – 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
                     •   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       –
-   N. Hemisphere Ind. Zone: U.S. – Europe –
    Former USSR – E. Asia
-   Secondary Regions – Mexico, Brazil, S.
    Africa, Egypt, India, Australia,…
Concepts of Development
•   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
•   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,…
•   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)
•   Core-Periphery (revisited)
    – World System’s Theory
      (Immanuel Wallerstein)
    – Core-periphery link can
      exist 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)
Per Capita GNPs   S. Afr. - $3,310
Haiti - $410      S. Korea - $8,600
Pakistan - $470   U.S. - $29,240
Egypt - $1,290    Japan - $32,350
•   GDP/GNP vs. GNI PPP
    – GDP/GNP = Gross Domestic/Nat. Product
    – GNI PPP = Gross National Income w/
      purchasing power parity (allow cross-country
      comparisons of economic aggregates on the
      basis of physical levels of output, free of price
      and exchange rate distortions)
     Country (2000)    GDP ($ bn)      GNI PPP ($ bn)
         Nepal                   5.5            31.6
          India                 457            2,375
         China                1,080            4,951
         Japan                4,842            3,436
           U.S.               9,837            9,601
•   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)
•   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
  Walt Rostow’s
Modernization Model
 Selected countries
     up to 1960
•   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,…)
•   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
 Images
   of
  New
York City
•   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
Images
  of
Lagos,
Nigeria
Deindustrialization and the Rise
     of the Service Sector
Deindustrialization and the Rise
     of the Service Sector
•   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
•   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
•   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, …
•   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, …
– 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
  A maquiladora in Mexico




A technopole – Silicon Valley
•   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
                             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
– 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,…
•   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)
•   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)
•   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

				
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