ECONOMIC GEOGRAPHY Industry – ch. 11 and Development Ch. 9 - PowerPoint Presentation

1. ECONOMIC GEOGRAPHYIndustry – ch. 11 and Development Ch. 9

2. Econ GeogEconomic Geography: study of flow of goods and services across spaceLook at ways in which people provide for themselves across the globeGeographic patterns of inequality at different scalesGlobalization: is a MAJOR thread throughout econ geog….free trade, intnl trade, international econ alliances, etc.

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4. Industrial RevolutionIndustry: manufacturing goods in a factoryIndustrial Revolution: GB – late 1700s – diffused to W. Eur and U.S.Technology and mechanization led to unprecedented increase in productionIron and textiles = 1st to industrialize

5. Industrial RevolutionInnovations in Machinery and transportation…..RR, steam engines, cotton gin, Bessemer converter,spinning jenny etc. etc.

6. Where is Industry Distributed?For 200 yrs industry was limited toN. Europe – GB, France, Russia, GermanyE. Asia – JapanN. America – U.S.These countries dominated ind production/innovation until mid 20th C

7. Where is Industry DistributedIn recent yrs – shift in geography of industrializationMajor 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

8. Where is Industry Distributed?BUT service jobs require more education/training than factory worki.e. difficult transition – factory lose jobs as factories outsource, must go back to school or switch careers in mid lifeMill towns/factory towns – ghost towns or reinvent themselves with new econ niche

9. Where is Industry Distributed?Deindustrialization: when industrial factories leave an area and take that region’s econ base with themEx: 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 thereBackwash Effect: when one region’s econ gain is another’s loss

10. The Rust Belt

11. Rust Belt Images

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13. Where are industries distributed and why there?All industries seek to maximize profits by minimizing production costsCritical 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?

14. Least Cost TheoryYou are in charge of locating a new firm….what factors do you consider?

15. Least Cost Theory1.) Transportation Costs: must move raw materials (inputs) to plant and finished product to marketMarket 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:

16. Least Cost Theory – Market Oriented FirmsA.) Bulk Gaining Industry: product gains volume or weight during production (TV, refrigerator, soft drinks)B.) Single Market Manufacturer: product sold mainly in one locationC. Perishibility: fresh fruits, milk, bread, newspaper – must be near marketD.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

17. Least Cost Theory – Material/Resource OrientationMaterial/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.)

18. Least Cost Theory – Other transportation variablesFootloose 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 locatedSpatially Variable cost: price of product varies depending on where factory is located and where product is produced

19. Least Cost Theory – Other transportation variablesTransportation – ship, rail, truck, or air?

20. Least Cost Theory - TransportationLonger distance is cheaper per mileShips best for longest distancesAir – most expensive but fastestBreak 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)

21. Least Cost Theory - AGGLOMERATIONAgglomeration: 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)

22. Least Cost Theory - AGGLOMERATIONMultiplier 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.)

23. Least Cost Theory - AGGLOMERATIONAncillary 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.

24. Least Cost Theory - AGGLOMERATIONAgglomeration leads to regionalization: unique specialization from region to regionDeglomeration: opposite of agglomeration – when a firm leaves an agglomerated region to start up in a new place

25. Least Cost Theory – AgglomerationRegional Specialization – Silicon valley

26. Least Cost Theory –LABORLabor 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

27. Least Cost Theory – LABORTextiles 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

28. Least Cost Theory – Other things a firm may consider……Land:Factories today usually rural or suburbanNeed 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)

29. Least Cost Theory – Other things a firm may consider….CapitalMoney available to expand or open new factoriesMay go to area where banks are willing to make high risk loans (i.e. Silicon Valley)

30. Factory WorkFordism: mass production and assembly lines (each worker assigned one specific task to perform repeatedly). Started by Ford in early 20th C

31. Factory WorkPost-Fordism: more flexible – work in teams and often master a wide array of tasks

32. Weber’s factors to consider = site and situation factorsSite Factors: land, labor, capitalSituation Factors: transportation costs – i.e. relative location to inputs/raw materials and to market

33. Summary of Location PrinciplesAccess to materials for productionAdequate supply of cheap laborProximity to shipping and marketDecrease production costs (cheap land, cheap labor, and favorable govn’t policies)Natural factors, climateFirm’s history and personal inclinations

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35. Industrial ProblemsOver production – global capacity to produce manufactured goods has increased more rapidly than demandConsumption leveled off since 1970s b/cNo population increaseWages have not risen as fast as pricesMarket Saturation: everyone already has one (TV, cars, microwaves, etc.)Higher quality goods last longer

36. Industrial Problems in MDCsMust protect markets from new competitorsTrading Blocs: industrial competition in MDCs is betwn blocs, not countriesNAFTA, EU, ASEANCooperation within bloc, competition betwnSeek complementary trade within bloc

37. Industrial Problems in MDCsTransnational 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

38. Industrial Problems in MDCsMost 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

39. Industrial Problems in LDCsDistance from markets – far from wealthy consumers in MDCsPoor 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

40. Industrial Problems in LDCsExport 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

41. Industry today…..OutsourcingExport processing zones - maquiladorasTourismAll 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

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43. DEVELOPMENTDevelopment: process of improving material conditions of people w/ diffusion of knowledge and technology – continuous process of trying to improve health, living conditions, and prosperityWallerstein’s World Systems ModelN/S Divide (see handout)

44. http://player.vimeo.com/video/61806527?autoplay=1

45. Development Varies Across SpaceDev can be broken into econ, social, or demographic factorsHuman Development Index (HDI): created by UN to look at all 3Life exp, educ (literacy rate and amnt of ed), income (GDP)Highest possible – 1.0 (100%)Norway – highest - .944U.S. never first, but always highLowest - sub Sahara Africa (Sierra Leone .275)

46. Economic Factors of DevelopmentGNP 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

47. Economic Factors of DevelopmentTypes of jobs….Primary activities: w/ land – fishing, farmingSecondary: manufacturing, industryTertiary: serviceQuaternary: research and development – generating/exchanging knowledge (teaching, banking, law, accounting, etc.)Quinary: high tech scientific research

48. Types of Jobs/Econ Activities

49. Bell Ringer: FRQ PracticeTurn in your Ch 9 HW (keep Rostow)Compare and contrast Von Thunen’s Location Theory with Alfred Weber’s Least Cost TheoryDefine the purpose and major components of each – USE GEO TERMSIdentify two similaritiesIdentify two differences

50. Economic Factors of DevelopmentAll 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

51. Economic Factors of DevelopmentEnergy Consumption per capita – correlates w/ technology and dev.MDCs =10X more per capita than LDCsMDCs consume sign more energy than they produceMDCs use coal, natural gas, hydropowerLDCs use firewood, dung, peat, and domestic fuels to cook and keep warmWood – 60% of fuel use in LDCs and 90% in poorest countries

52. Social Indicators of DevelopmentMDCs use money for schools, hospitals, that provide better educ and healthier longer lives – this is cyclical b/c better educated and healthier pop can be more productive and make more money

53. Social Indicators of DevelopmentEducation: MDC’s have greater quantity and quality of educStudent – teacher ratio (2X as many students to 1 teacher in LDC)Literacy Rate (over 95% in MDCs, less than 35% in LDCs)Avg student attends school 10 yrs in MDC and a few yrs in LDCs (varies)

54. Social Indicators of DevelopmentHealthMDCs – better ratio of people to hospitals, doctors, and nursesMDC consume greater calorie consumption. In LDCs many get less than daily recommended allowanceDifferent problems……MDCs – problems w/ obesity, elderly population, etc.

55. Demographic Indicators of DevelopmentLife Expectancy: avg # if yrs a newborn can expect to live (early 40s in LDCs, 70s in MDCs)Infant Mortality: die b/f 1st b-day (less than 1% in MDCs, 10% in LDCs)CBR – higher in LDCs but droppingMaternal Mortality Rate – sign higher in LDCs

56. Gender Issues in DevelopmentGender inequality exists in every countryTwo composite measures to look at……

57. GDI Gender Related Development IndexGDI: looks at same measure as HDI but to highlight disparity betwn men and womenComplete equality is 1.0Penalized for greater diff betwn men and womenHighest GDIs in Europe and N. America; lowest in Sub Sahara AfricaEven in MDCs women’s average income is less than men’s

58. GDIIn LDC’s women less likely to attend school and have lower literacy rates (99/100 women to men in MDC high school; 60/100 in LDC high schools) (remember this affect on pop growth)Globally women outlive men, but outlive men much longer in MDCs than in LDCs (mostly b/c of maternal mortality rate)

59. Gender Empowerment Measure (GEM)Measures econ and political power4 factors….IncomeProfessional jobsManagerial jobsElected positions (no country has a natnl Congress w/ majority women…highest in Eur w/ @ 30%....U.S. has @ 15%)

60. If a nation has a higher GDI and lower GEM, it means women possess a greater share of a nation’s resources than power over allocation of those resourcesEven in MDCs women’s average income is less than men’s…WHY?

61. FRQ PracticeMeasuring DevelopmentDefine the Human Development IndexIdentify and explain the indicators that make up the HDIIdentify two strengths of an index such as the HDIIdentify two weaknesses of an index such as the HDIIdentify and explain at least one alternative to the HDI

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63. LDCs Obstacles to DevelopmentWhile LDCs have improved, gap betwn MDC and LDC has increased. WHY? Circular/cumulative causation: process where tendency for econ growth are self-reinforcing….i.e. it takes money and development to foster money and developmentSolution? LDCs must dev at a faster rate, but how? Two prominent options….

64. Self Sufficiency/Balanced Growth Approach – China and IndiaCountry should invest = across all sectors of the economy and all regionsLimit imports (tariffs)Internal businesses encouraged to produce for own people; not export

65. Problems w/ Self-Sufficiency ModelProtects inefficient businesses in own country (protect from international competition, but has little incentive to improve quality or lower price)HUGE govnt bureaucracy to manage econ – leads to abuse and corruption – Govn’t red tape

66. Option Two – International Trade ModelDevelop through international trade (look outward). Identify a unique econ asset and export globally. Use funds and profit to finance other developmentDone in Arabian peninsula and E/SE Asia

67. W.W. Rostow – Dev ModelRostow advocated intnl trade approach with a 5 step model towards development. He created the model in the 1950s and based it on the pathway the U.S. and Eur followed:Stage 1: Traditional Society: country dominated by primary econ activities – low prod, low tech, low per capita income

68. Rostow – Intnl TradeStage 2: Preconditions to Takeoff: preconditions to econ dev are commercialization of AG and exploitation of raw materialsStage 3: Takeoff: foreign investment jump starts econ. Rapid growth in a limited number of sectors; other sectors still dominated by tradntl methods. Country uses profits to pour into infrastructure (roads, canals, etc.)

69. Rostow – Intnl TradeStage 4: Drive to Maturity: Dev and modern tech diffuse to wider variety of the econ. Workers become more skilled and specializedStage 5: high levels of mass consumption and per capita income. Shift from heavy industry to services and producing consumer goods.

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71. Criticisms of RostowNot all countries will pass through stages consecutivelyModel doesn’t account for….Global politicsColonialismPhysical geogWarCultureEthnic conflictAll of these may affect progression and cause different pathway

72. Example of INtnl Trade Model4 Asian Tigers/Dragons: S. Korea, Singapore, Taiwan, Hong Kongall poor in natural resourcesPromoted dev by focusing on a handful of econ goods (esp clothing and electronics). i.e. find comparative advantage – produce item for which you have the greatest advantages in comparison to other countriesLow labor allowed them to sell products cheaply in MDCs

73. Map – Asia - India – China – initially self/sufficiency and balanced growth model4 Asian Tigers – International Trade Model

74. 4 ASIAN TIGERSSouth KoreaTaiwanHong KongSingapore

75. Problems w/ Intnl Trade ModelMay hinder other LDC’s from following this path….1.) Uneven resource distr: many country's niche faced lower price on world market (ex: Zambia and copper – world prices for copper have been dropping)2.) Market stagnation: market for consumer goods slowing down in general

76. Problems w/ Intnl Trade Model3.) Increased dependence on MDCs: takeoff industries force LDCs to decrease production of food, clothing, or other necessities for own peopleConclusion….intntl trade model is widely accepted alternative to self-sufficiency model

77. Statistics……World Bank – since 1990 per capita GDP has increased more than 4% annually in countries w/ intnl trade model and less than 1% in countries w/ self-sufficiency model

78. Statistics…..1960-1990…..India’s GDP increased by 4%/year on self sufficiency modelThailand’s by 8%/year (intnl trade)Taiwan’s by 8%/year (intnl trade)S. Korea’s by 9% /year (intnl trade)Since 1990s India switched to intnl trade and GDP has increased by 6%/year

79. WTO – World Trade OrganizationEst in 1995 – promotes intnl trade model. Works to decrease barriers to intnl trade by….Eliminating restriction on trade (no tariffs, no quotas on imports, no subsidies on exports)Enforcing trade agreements (rules on arguments and accusations)

80. WTOLiberal critics – say WTO is anti-democratic and promotes interests of large, wealthy, transnational corpConservative critics – says WTO compromises gov of countries b/c it can order changes in subsidies, taxes, etc.ALWAYS protestors outside WTO mtgs

81. WTO

82. $$$$$ for Development??1.) Loans – usually from World Bank or International Monetary Fund (both controlled by MDCs)Together loan @ 50 billion/yearIdea – borrow $$ to improve infrastructure to attract businesses/investmentMany infrastructure projects fail – don’t work, don’t pay off, or businesses still do not come

83. $$$$ for Development?(Loans)Debt is greater than annual income in 30 countriesMany LDCs cannot even pay interest on loans, much less the principalResult….many MDC’s becoming more hesitant to grant loans

84. $$$$ for Development??2.) Foreign Direct Investment – Transnational Corporations: flow of money and investment from one country to another through private corporations (increasing trend in late 20th C)BUT only ¼ of foreign investment went from MDC to LDC (most goes from MDC to MDC)Of all money from MDC to LDC, ½ of that goes to Brazil, China, MX