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– 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• 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… 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
• 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, 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