Chapter 24 Deindustrialization and the Rise of the Service Sector

1. Chapter 24Deindustrialization and the Rise of the Service Sector

2. In the past three decades Deindustrialization Decrease in the cost of transportation Rise of public sector and Information and communication technologies Growth in Mechanization of production Growth of Service Sector

3. Categories of Service Industries • “Fordist” - Henry Ford’s idea of “assembly line” pioneered the production process. Was challenged in the early 1970s Postindustrial/post-Fordist economic order

4. Tertiary Industries - Service Sector Broad range - broken down into 3 categories Tertiary Quaternary Quinary Higher/more specialized knowledge skills- finance, admin, insurance, legal services, computer services Basic business-Personal services associated with retailing, restaurants/hotels,transportation, comm, utilities,etc High-level decision makers/advanced human capacities- CEO, CIO, CFO, top govt officials, research professors, Began expanding in WWII Growth up in early 20th century Last three decades

5. Service Industry Giant - Tourism • 11% of all the jobs around the world, employ 260 million (expected to reach 400 million next decade), 4 trillion economic value in 1997. Why? Increase Income No political barriers Better fringe benefit early retirement lengthier lives Growing infrastructure Better jet/airport/travel options Cruise

6. Finland is Home to World's Largest Cruise Ship Ever Builtin the world • From CNN - • Three-hundred-and- eleven meters long and nearly 50 meters wide on the deck level, the ship would be way too large to fit into the Panama Canal. Not even necessary, since the ship is tailor made for the Caribbean. . • Luxury doesn't come cheap. The ship has a price tag of 500 million U.S. dollars, and a typical one-week cruise will cost nearly $2000. In return, you get just about everything, a TV studio, an ice skating rink, a golf course, and a casino, pools, and a dozen fancy restaurants. The theater is named after the famous Las Cala (ph) in Milan, but is bigger than the original. Size does matter, says the cruise operator.

7. New International Division of Labor • Increase in Value of Manufacturing Exports to OECD (Organization of Economic and Development, 29 countries) Figure 24-1 • Behind this figure, there are 1) rise of service sector, 2) New locations (peripheral) for the labor-intensive manufactures 3) research/hi-tech still in core and 4) the core - high demand and major suppliers of manufactured goods and 5) exporters of manufactured goods- newly industrializing countries.5) trade between peripherals is low (they are rivals)

8. Where did the merchandise come from ? (link) 800 items surveyed of Cookeville Stores Country No. % China 277 28.88 US 198 24.75 Mexico 52 6.50 Taiwan 19 2.37 Bangladesh 18 2.25 Indonesia 16 2 Dominican Rep 16 2 Korea 16 2 India 15 1.87 Guatemala 13 1.62 Thailand 12 1.5 Malaysia 11 1.37 Philippines 11 1.37

9. The Pacific Rim “Four Dragons/Tigers” Automobile, grand piano, computer and calculators. 1997 economic crisis hit Korea Korea PC, telecommunications equipment precision electronic instruments, other hi-techs Taiwan Break-of-bulk point, started with textile and light industries, it becomes a world trade center due to its situational advantages Hong Kong Singapore Was “entrepot”(transshipment point), developed into a center for quaternary industries.

10. Just do it - Nike • Never has its plants built in Oregon • The headquarter employs financial administrators, marketing and sales specialists, information technological directors, computer technicians, lawyers and support personnel. • International exchange network influence each node it connects. • First shoe production in Japan then moved to Taiwan, S Korea, then Malaysia, Indonesia, China (due to labor cost)

11. Conglomerate Corporations - companies engaged in quite different activities • Philip Morris - Marlboro,Miller Lite,Kraft-cream cheese, Maxwell House Coffee, JELL-O Oscar Mayer-hot dogs, real estate, publishing... Transnational Corporations - beginning in the 70s, a sharp increase occurred in the growth of transnational conglomerates, by 1995, there are 35,000 such companies, and the top 300 control 1/4 of the world’s productive assets. Nation-States and transnational corporations compared

12. Joint Ventures - Auto Industry • Citroen (Peugeot, France) -made in Taiwan • Geo Prizm (Toyota Corolla) - made in CA, marketed by GM • Geo Metro(Suzuki and Isuzu)-market by GM • Fordist Jaguar • Mazda Navajo = Ford Explorer • DaimlerChrysler Offshore Financial Centers

13. Sources of US Clothing Retailers Bolivia Russia Peru Nicaragua Central America Caribbean Eastern Europe Indonesia Columbia Vietnam Burma Sri Lanka Malaysia Turkey Oman Taiwan Mauritius Mexico Italy France UK Japan Chile South China Madagascar Hong Kong South Korea El Salvador Zimbabwe India Pakistan United Arab Emirates N Korea Brazil Singapore Kenya Cambodia Thailand Egypt Macau Saipan Philippines Tunisia Lesotho Maldives Interior China Morocco Bangladesh Oatar Yap Bahrain Laos Fiji Cyprus source of data: Knox,Marston, 2000

14. Financial Relations Core countries - US, Japan, UK, Germany, Italy, France Foreign Direct Investment International banking mostly Go to other core and newly industrializing periphery Largest banks in the world Exceptions - Tatung, Hyundai, Samsung from Taiwan, Korea and Singapore

15. New Influences on Location • Service industries - no need for raw materials and energy Tertiary Transp and Comm Hotels/Rest/Retail Tied to pop patterns and locations of primary and secondary industries Consumer Market

16. Quaternary Service • Some are tied to the local activities • Retail Banking - interpersonal contact • National banking/credit services - find locations with better infrastructure, less expensive, favorable tax rates Quinary Sector • Centered around nodes of quinary activities - gov’t offices, universities, and corporate headquarters • university town, government seats in small towns.

17. World Cities - John Friedmann proposed • Where The world’s most important financial and corporate institutions are located and where decisions are made that drive the world economy • Most of them are located in the developed core. • Geographical affinity - quaternary and quinary sectors • Figure 24-3 Major World Cities

18. SEZs (Specialized Economic Zones) Manufacturing export zones in poorer countries H-tech corridors in weathier countries 60 countries established such zones Especially, China and Mexico UC Berkeley and Stanford Silicon Valley in CA a “technopole”, Similar technopole in Boston, Route 128 h-tech corridor Harvard and MIT

19. Hi-Tech Industries • Pollution-free • advantageous economic position • in coming years Drawbacks • Toxic chemicals • Negative environmental impact • Large amount of water required

20. Time-space compression-by David Harvey • “Time-Space convergence”, advance in transportation makes the distance factor less important, but this term too limited to describe the development in recent decades • Stock market’s chain-reaction, fruit and product shipped to another continents next day, Fedex, UPS and other cross-country services make the distance shrunk. WWW ….. • Technology and global economy development make “the end of geography”