INDUSTRY AND SERVICES

CHAPTER 12

Industrial and Economic Development

The use of terms to describe countries (first world, third world, developed, developing, underdeveloped, haves, have-nots, rich/poor) created some issues, and had some limitations.

Currently popular terms are “more developed countries” (MDC) and “less developed countries” (LDC).

Where Did the Industrial Revolution Begin, and How Did It Diffuse?Industrial Revolution: A series of inventions that brought new

uses to known energy sources, new machines to improve efficiencies and enable other new inventions

Industrial capacity existed in the form of cottage industries pre Indus. Rev. – india, China, Japan

James Watt: Steam engine improved

- Innovations in iron manufacturing enabled the production of the steam engine

- 1709 Durby discovered a way to smelt iron- Using coke (burning coal in a vacuum creates coke)

- Iron and coke in a blast furnace created cast iron (pour it into molds)

Beginning of Industrial Revolution

Began in Great Britain in the middle to late 1700s Why Great Britain?

Flow of capital (Gold, Silver, Raw Materials flowing in from colonial holdings – fueled the Industrial revolution

Second Agricultural Revolution Mercantilism and cottage industries Resources: Coal, iron ore, and water power

UK had a Great advantage – monopoly over products in demand and they had the skills necessary to make machines that manufactured products

Railroads first introduced in eng. In 1825, applied steam engine to shipping

Flow of Capital into Europe, 1775

Origins of the Industrial Revolution

Textiles: Liverpool, Manchester

Iron: Birmingham

Coal mining: Newcastle Midlands

Early manufacturing had to be located close to coal fields

Needed to be connected to ports where raw materials could arrive and finished products could depart

Early on, connected by canals or rivers

Diffusion of the Industrial Revolution

Mainland Europe Early 1800s Location criteria:

Proximity to coal fieldsConnection via water to a portFlow of capital

Later Late 1800s Some regions without coal Location criteria

Access to railroadFlow of capital

Diffusion of the Industrial Revolution

Major Industrial Regions and cities

How Do Location Theories Explain Industrial Location?Primary economic activities – draw form the land and are therefore

located where resources are found

Location theory: Predicting where business will or should be located, considering

Time Space compression – has led to a “smaller world”

- secondary are now less dependent on resource location

Variable costs – energy, transportation, labor Friction of distance – increase in time and costs associated with

distance Distance decay (chp 4) – assumes impact of a function or a

activity will decline as one moves away from a point of origin Suggests manufacturing will be more concerned w/ serving

markets that are close by rather than far away

Location Models

Weber’s Model

Manufacturing plants will locate where costs of transportation, labor, and agglomeration are the least

Theory: Least Cost Theory

Hotelling’s Model

Location of an industry cannot be understood without reference to other industries of the same kind

Theory: Locational Interdependence

Losch’s Model

Manufacturing plants choose locations where they can maximize profit

Theory: Zone of Profitability

LCT – location of manufacturing plant in terms of owners desire to minimize 3 categories of cost (transp., labor, agglom.) -deglomeration: excessive agglom. Leads to higher rents, wages and circulation problems-What examples of this can you think of?

Loc. Int. – competitors, trying to maximize sales, will seek to constrain each other’s territory as much as possible which will therefore lead them to locate adjacent to one another in the middle of their collective customer base-Cost to consumers will be greater (distance)-Cost to business: consumers may be unaware of them-What examples can you think of ?

- In his model he added the influ. of spatial location and its impact on consumer demand and production costs

- To the left and right of the zone, distance decay will make sales unprofitable

- When other businesses enter the zone and change its config. , can cause a locational change

Losch’s Model: Zone of Profitability

Major Industrial Regions of the World Before 1950 Main determinants

Near raw materials Transportation

Result – before 1950 there were only a small minority of industrial economies

But…additional needs Goods and capital Political circumstances Economic leadership Labor costs Levels of education and training

Four primary industrial regions W & Central Europe Eastern N America Russia and Ukraine Eastern Asia

Western and Central Europe

W Europe

Major Deposits of Fossil Fuels in North America

N. America

Major Manufacturing Regions of North America

N. America- Early industrialization begins in NY – today home to tens of thousands

of industrial establishments- Agglomeration- Large market, huge skilled and semiskilled labor force, intensive

transport network, a great natural port- Break-of-bulk point: cargo is transported from one mode to

another (ship to train or truck) - this activity generates employment, activity, and wealth (longshoremen, importers/exporters, merchants, trucking)

- Canada – Southern Ontario district extends from western L. Ontario to W end of L. Erie

- dfa

Major Manufacturing Regions of Russia

Former USSR- Focus on W part of Russia

- Moscow – offered an important local market, transport routes, large labor force, strong centrality

- Communist leaders add heavy industry- Nizhni Novgorod …. Soviet Detroit

- St Petersburg – one of Russia's oldest manufact centers- High quality machine building, optical products, medical equipment,

shipbuilding, textiles, food processing, chemical production

- The country was blessed with abundant raw materials- Urals : metallic ores – iron, copper, nickel, chromite, bauxite

- Eastern Region- Krasnoyarsk-Baykal Corridors region- Connected by Trans-Siberian RR

- The Volga : accessible raw materials and ease of transport

- WWII ; focus of industry moved east – distance protected them from conflict in West

Ukraine

- Began to industrialize after Russia annexed it following WWI

-Used the regions rich resources and industrial potential to become an industrial power

-Produced 90% of Soviet Unions coal reserves

Major Manufacturing Regions of East Asia

East Asia and Japan – both managed to avoid direct European colonization

large-scale industrialization took first place here 1st

Japan was one of the world's leading industrial countries less than a century after the beginning of the Industrial Revolution. It has limited natural resources.

They manufacture raw materials from all over the world.

built on capital from colonization and policies that set industrialization as a goal.

Meiji Restoration 1866-1869 reformers mechanized Japan's domestic industries, move the capital to the coast, organized its Armed Forces, obtained advice from the British on issues from education to transportation.

Japanese establish colonies-raw materials and capital began flowing to Japan. 1930s and 40s lead to triumph and disaster for Japan. 

After the war Japanese economy destroyed. The Japanese manufacturing belt-dominant region of industrialization:

Kanto plane. Tokyo-Yokohama-Kawasaki-cluster of cities and suburbs. Fine natural harbor in Yokohama. Country benefited from Tokyo's designation as capital. Industries and businesses chose Tokyo as their headquarters in order to be

close to government decision-makers. The second largest industrial complex is called the Kansai District:

Kobe-Kyoto-Osaka triangle. Steel mills, chemicals, automobile manufacturing, shipbuilding, textiles, other

types of production. Industries are sustained by highly skilled labor force. Products dominate

markets around the world. Japan's postwar success largely the result of the skills and low wages of

the labor force – allowed manufacturers to flood foreign markets with low-price goods.

Japanese factories are excelling high-quality products as well, has led to higher prices, wages, and more competition from countries with cheaper labor and goods.

How has industrial production changed?

Mass production assembly line pioneered by Henry Ford. Allowed for the inexpensive production of consumer goods.

Fordist production. Fordist systems include a set of political-economic structures and financial orders that supported mass production by corporations.

Corporations and countries supporting each other.

The world economy is now a post-Fordist system.

It's more flexible, components of goods are made in different places around the world and then brought together to meet market demand. Multinational companies play a major role in this system. post-Fordist

production brings places closer together in time and space.

Time space compression, some places in the world are more connected through communication and transportation technologies than ever before.

Modern capitalism has accelerated the pace of life and changed the relationship between places. 

Time-Space Compression Improvements in transportation and communications technologies

Many places in the world more connected than ever before

How has industrial production changed?

Time space compression has fundamentally altered the division of labor.

When the world was less interconnected, most goods were produced close to the point of consumption.

Just-in-time delivery allows corporations to draw from labor pools around the globe for different components of production, creating a global division of labor. Low transportation costs,

favorable governmental regulations,

spanning information technology to construct vast economic networks where different facets of production are carried on different places.

Publicly traded companies pressured by shareholders to grow their profits manually.

Leads to an attempt to cut costs and labor. Most multinationals have moved labor-intensive manufacturing to peripheral countries where labor is cheap, regulations are a few, taxes are low.

How has industrial production changed?

Manufacturing in the core remains highly mechanized. Remains located in the core because the expertise and infrastructure

are there.

Research and development activities also tend to be located in the core

high levels of education and access to technology are the norm.

With mechanized highly efficient agriculture and the move of manufacturing jobs for the semi-periphery and periphery, core countries now have large labor forces in the tertiary sector

trade flow among countries in the periphery are typically low b/c the dominant flow of goods is exported to the core.

How has industrial production changed?

Importance of transportation and industrial location.

Efficient transportation systems enable manufactures to obtain raw materials from abroad and sell finished products to a wide dispersion of consumers.

Intermodal connections: places were two more modes of transportation meet.

The container system-without it the volume of goods shifted around the globe daily would not be possible.

Refrigerated containers allow perishable goods to move around the globe.

Global shipping has allowed Rotterdam, Netherlands to become one of the busiest ports in the world. It's location on the Rhine in Western Europe has contributed to be becoming the warehouse of Europe.

Regional and global trade agreements: NAFTA, EDU, and influenced where imported goods are produced. 

How has industrial production changed?

The WTO negotiate rules of trade amongst member states. Promotes freer trade.

2001 Europe and United States agreed to allow China to become a member of the WTO also agreed to remove the quota system that restricts importation of Chinese goods.

There are over 300 regional trade organizations in existence.

These agreements encourage movement of production within the trade region and promote trade by diminishing quotas and tariffs among member countries.

Trade agreements directly affect the location of production and even what is produced in a place.

How has industrial production changed?

Importance of energy and industrial location dependent on external fuel supplies affects three of the four world

industrial regions.

United States has two neighbors with substantial fossil fuel reserves, Mexico ranks amongst the world's largest, but the US’s remain limited.

Japan is almost totally dependent on oil from distant sources.

US consumption of petroleum and natural gas is about 27% and 37% respectively of the annual world total.

US requires more than 20.6 million barrels of petroleum per day!

US production of oil averages about 10% of the world total.

The result of an increase of natural gas and pipelines transporting the gas around North America. (Keystone Pipeline from CAN)

Where Are the Major Industrial Belts in the World Today, and Why? Deindustrialization

A process by which companies move industrial jobs to other regions with cheaper labor

Period of high unemployment in deindustrialized region

Goal: Switch to a service economy

Newly industrialized regions Pro–free trade laws

Lax environmental regulations

Modern Production

Outsourcing

Moving individual steps in the production process (of a good or a service) to a supplier, who focuses their production and offers a cost savings

Offshore

Outsourced work that is located outside of the country

China: Newly Industrialized Country

Major industrial growth after 1950, in 1960s– State-planned– Focus on:

• Northeast district • Shanghai and Chang district

Today Companies that bring production (not the whole company) Advantages

Chinese labor Special economic zones (SEZs)

Geographical Dimensions of the Service Economy

Influences on location

Information technologies

Less tied to energy sources than manufacturing

Market accessibility more relevant for some and less relevant for others because of telecommunications

Presence of multinational corporations

Quaternary and quinary economic activities

High-Technology Corridors

Technology corridor: An area designated by local or state government to benefit from lower taxes and high-technology infrastructure with the goal of providing high-technology jobs to the local population

Technopole: An area planned for high technology with agglomeration built on a synergy among technological companies

Categories of Activity: 1• Primary Activities

Agriculture Gathering Industries Extractive Industries

2• Secondary Activities Manufacturing Processing Construction Power construction

3• Tertiary Activities Retail and Wholesale Trade Personal and Professional Services

Categories of Activity: 4• Quaternary Activities

Information

Research

Management

5• Quinary Activities Executive Decision Makers