ECONOMIC GEOGRAPHY • Industry – ch. 11 and Development Ch. 9
Econ Geog • Economic Geography: study of flow of goods and services across space • Look at ways in which people provide for themselves across the globe • Geographic patterns of inequality at different scales • Globalization: is a MAJOR thread throughout econ geog….free trade, intnl trade, international econ alliances, etc.
Industrial Revolution • Industry: manufacturing goods in a factory • Industrial Revolution: • GB – late 1700s – diffused to W. Eur and U.S. • Technology and mechanization led to unprecedented increase in production • Iron and textiles = 1st to industrialize
Industrial Revolution Innovations in Machinery and transportation….. RR, steam engines, cotton gin, Bessemer converter, spinning jenny etc. etc.
Where is Industry Distributed? • For 200 yrs industry was limited to • N. Europe – GB, France, Russia, Germany • E. Asia – Japan • N. America – U.S. • These countries dominated ind production/innovation until mid 20th C
Where is Industry Distributed • In recent yrs – shift in geography of industrialization • Major corporations have moved factories to LDCs (cheap labor) • Older industrial countries have shifted to service based economies – research and development, marketing, tourism, sales, telecommunications, etc. • Service jobs are safer, more pay, less pollution, and overall higher satisfaction
Where is Industry Distributed? • BUT service jobs require more education/training than factory work • i.e. difficult transition – factory lose jobs as factories outsource, must go back to school or switch careers in mid life • Mill towns/factory towns – ghost towns or reinvent themselves with new econ niche
Where is Industry Distributed? • Deindustrialization: when industrial factories leave an area and take that region’s econ base with them • Ex: Rust Belt: Great Lakes region was home to all auto manufacturing but GM and other companies have relocated – debilitating for the economy of the region and the workers there • Backwash Effect: when one region’s econ gain is another’s loss
Where are industries distributed and why there? • All industries seek to maximize profits by minimizing production costs • Critical question: Where is the most profitable place to locate a factory?? • Alfred Weber: Least Cost Theory: What factors do firms consider to decide where to locate?
Least Cost Theory You are in charge of locating a new firm….what factors do you consider?
Least Cost Theory • 1.) Transportation Costs: must move raw materials (inputs) to plant and finished product to market • Market Orientation Firms: if finished product weighs more or is perishable, then locate the plant closer to the market than the raw materials….4 types of market orientation:
Least Cost Theory – Market Oriented Firms • A.) Bulk Gaining Industry: product gains volume or weight during production (TV, refrigerator, soft drinks) • B.) Single Market Manufacturer: product sold mainly in one location • C. Perishibility: fresh fruits, milk, bread, newspaper – must be near market • D.Ubiquitious Industry: industry distr is in direct proportion to the distr of the population (i.e. near large metro areas with people = labor and market) i.e. hospitals, big business
Least Cost Theory – Material/Resource Orientation • Material/Resource Orientation: raw materials (inputs) weigh more (or are perishable) than the finished product so locate plant closer to raw materials than to market. These are called Bulk Reducing Industries: final product weighs less than the inputs (i.e. paper mills, steel, copper – most mining, tomato cannery, etc.)
Least Cost Theory – Other transportation variables • Footloose firms: industries w/ products that are lightweight and valuable and can locate anywhere (i.e. diamond of computer chips) • Spatially fixed cost: cost of product does not change no matter where factory is located • Spatially Variable cost: price of product varies depending on where factory is located and where product is produced
Least Cost Theory – Other transportation variables • Transportation – ship, rail, truck, or air?
Least Cost Theory - Transportation • Longer distance is cheaper per mile • Ships best for longest distances • Air – most expensive but fastest • Break of Bulk Points: cost of transport for some inputs is cheaper than another type of transport – so you use multiple methods of transport. BBP = transfer point (usually a seaport or airport)
Least Cost Theory - AGGLOMERATION • Agglomeration: when many companies of the same industry cluster together in a small area to draw from the same set of collective resources (i.e. computer companies in Silicon Valley, motion picture industry in LA, fashion in Paris)
Least Cost Theory - AGGLOMERATION • Multiplier Effect: as more firms from same industry locate in an area, more resources become available and cements that region’s specialty even more (ex: CA became known for high tech firms, it attracted more computer experts, which attracted more high tech firms, etc.)
Least Cost Theory - AGGLOMERATION • Ancillary Activities: agglomeration results in ancillary activities – i.e. the supporting cast. Economic activities that surround/support the primary industry of the region. These can include a range of activities – shipping, food services, etc.
Least Cost Theory - AGGLOMERATION • Agglomeration leads to regionalization: unique specialization from region to region • Deglomeration: opposite of agglomeration – when a firm leaves an agglomerated region to start up in a new place
Least Cost Theory – AgglomerationRegional Specialization – Silicon valley
Least Cost Theory –LABOR • Labor intensive industry = one where the cost of labor is a high percentage of production (ex: textiles) • Outsourcing: move production abroad for cheap labor. You’re willing to pay more for transportation b/c of cheap labor. Outsourcing usually goes to semi-periphery – cheap labor, decent infrastructure, no environmental regs
Least Cost Theory – LABOR • Textiles has followed cheap labor – originally in NE b/c of cheap immigrant labor, late 1800s/early 1900s moved to SE to avoid unions, post WW II moved overseas to LDCs in Asia (50s in Hong Kong and Japan, 70’s in China and Korea, today in Indonesia, Bangladesh
Least Cost Theory – Other things a firm may consider…… • Land: • Factories today usually rural or suburban • Need large tracts of land (1 story – more efficient) • Amenities – climate, cost of living, re opportunities (i.e. Sun Belt) • Communities engage in bidding wars – zoning, tax breaks, environmental conditions, etc. to offer most attractive package (i.e. Dell in NC)
Least Cost Theory – Other things a firm may consider…. • Capital • Money available to expand or open new factories • May go to area where banks are willing to make high risk loans (i.e. Silicon Valley)
Factory Work • Fordism: mass production and assembly lines (each worker assigned one specific task to perform repeatedly). Started by Ford in early 20th C
Factory Work Post-Fordism: more flexible – work in teams and often master a wide array of tasks
Weber’s factors to consider = site and situation factors • Site Factors: land, labor, capital • Situation Factors: transportation costs – i.e. relative location to inputs/raw materials and to market
Summary of Location Principles • Access to materials for production • Adequate supply of cheap labor • Proximity to shipping and market • Decrease production costs (cheap land, cheap labor, and favorable govn’t policies) • Natural factors, climate • Firm’s history and personal inclinations
Industrial Problems • Over production – global capacity to produce manufactured goods has increased more rapidly than demand • Consumption leveled off since 1970s b/c • No population increase • Wages have not risen as fast as prices • Market Saturation: everyone already has one (TV, cars, microwaves, etc.) • Higher quality goods last longer
Industrial Problems in MDCs • Must protect markets from new competitors • Trading Blocs: industrial competition in MDCs is betwn blocs, not countries • NAFTA, EU, ASEAN • Cooperation within bloc, competition betwn • Seek complementary trade within bloc
Industrial Problems in MDCs • Transnational Corporations – locate aspects of production in various countries. i.e. take advantage or regional diff in wages, tax laws, labor laws, natural resources, etc. • Ex: Nike – HQ in Oregon, but factories span the globe
Industrial Problems in MDCs • Most transnational corp are conglomerate corporations: firms that consist of many smaller firms that serve different functions (ex: GM – many smaller firms that operate all over the world, and produce a wide variety of goods and services
Industrial Problems in LDCs • Distance from markets – far from wealthy consumers in MDCs • Poor infrastructure (roads, technology, communication, etc.) • Cheap labor = best drawing card for industry. Intnl division of labor: low paid, low skilled work done in LDCs, high skilled work in MDCs
Industrial Problems in LDCs • Export Processing Zones: zones officially designated for manufacturing – have accessible facilities, lax environmental regs, and tax exemptions, cheap labor. Ex: Maquiladoras along US/MX border. Pros – jobs for MX, cheap labor for US. Cons – often plagues w/ high crime, govnt corruption, pollution
Industry today….. • Outsourcing • Export processing zones - maquiladoras • Tourism • All of these exploit LDCs/periphery. Neocolonialism: econ and political controls are exercised by developed states over the economies and societies of independent countries in the developing world
DEVELOPMENT • Development: process of improving material conditions of people w/ diffusion of knowledge and technology – continuous process of trying to improve health, living conditions, and prosperity • Wallerstein’s World Systems Model • N/S Divide (see handout)
Development Varies Across Space • Dev can be broken into econ, social, or demographic factors • Human Development Index (HDI): created by UN to look at all 3 • Life exp, educ (literacy rate and amnt of ed), income (GDP) • Highest possible – 1.0 (100%) • Norway – highest - .944 • U.S. never first, but always high • Lowest - sub Sahara Africa (Sierra Leone .275)
Economic Factors of Development • GNP and GDP (omits investments abroad) • Per capita (divide by population) • Annual per capita GDP more than $20,000 in MDCs and @ $1,000 in LDCs – this gap is widening
Economic Factors of Development • Types of jobs…. • Primary activities: w/ land – fishing, farming • Secondary: manufacturing, industry • Tertiary: service • Quaternary: research and development – generating/exchanging knowledge (teaching, banking, law, accounting, etc.) • Quinary: high tech scientific research
Bell Ringer: FRQ Practice • Turn in your Ch 9 HW (keep Rostow) • Compare and contrast Von Thunen’s Location Theory with Alfred Weber’s Least Cost Theory • Define the purpose and major components of each – USE GEO TERMS • Identify two similarities • Identify two differences
Economic Factors of Development • All countries have all types of econ activities. The higher up you go, the more educ required and the better pay. MDC’s mostly in tertiary or higher. LDC’s mostly in primary. Semi-periphery mostly in secondary. • Human Res and productivity increase in MDCs (workers produce more w/ less effort)….higher educ, skilled, machinery and technology