Industrial activity and geographic location

Industrial Activity and
Geographic Location

01/25/13 01:04 AM by Dr.Rajesh Patel,Director, 1
nrvmba,email:1966patel@gmail.c

Economic Unit Study Guide
*Rostow’s modernization model (5 stages)
*Location Theory/Harold Hotelling
*Wallenstein’s Theory
*Self sufficiency and the practices of international trade
*Compare and contrast the differences that distinguish
the developing from the developed world
*Why are there regional economic difference within a country?
*Causes of deindustrialization - tertiary and quatenary economic sectors
*Positive and negative effects of industrialization
*Globalization and the effects.


• “Preindustrial World”
– Industries did exist before the Ind. Rev. (e.g.
India – carpenters, textiles, silver,…)
– Ind. Rev. began in Midlands of North-Central
England (Black Country – coal fields) &
diffused eastward
– Affected production, transportation, and
communication (steam-engine, locomotive,
telegraph,…)
• The Location Decision
– Primary industries – located near raw mat.s
– Secondary industries – less dependent on
resource location

– Economic models assume:
• 1) People will try to maximize their advantages over
competitors,
• 2) They will want to make as much profit as
possible,
• 3) They will take into account variable costs –
energy, transportation, labor,…
– Friction of distance – the increase in time and
cost that usually comes w/ increasing distance
– Distance decay – the impact of a function or
activity will decline as one moves away from
its point of origin


• Key Concepts of Trans. & Comm.:
• Require a specially designed and constructed
[cultural] landscape (roads, TV stations,…)
• Cumulative causation – e.g. investment is
risky; usually occurs in developed states
• Trans. & Comm. systems can be viewed as a
surface or a network:
• 1) Surface: Pool table; move
freely (high potential for
collisions); move at limited
speeds
• 2) Network: faster movement,
but restricted to certain paths
(fewer collisions)
• We modify systems b/w both

• Ullman’s Conceptual Frame:
• Forms a basis for understanding the volume
& timing of the flows of goods b/w locations;
3 main concepts:
• 1) Complementarily – refers to the needs of
one region matching the products of another
(copper from AK to manufacturing cities)
• 2) Intervening
opportunity – reduces
attractiveness of more
distant locations
• 3) Transferability –
refers to the ease w/
which products can
be moved
Kennicott Copper Mine

• –Harold Hotelling Model (Two dimensional)
– Locational interdependence – the location
of industries can’t be understood w/o ref. to
the location of other industries of like kind
– Two vendors located on pts. A & C,
eventually gravitate toward pt. B (moving
from this pt. will only hurt profitability)
– A third vendor complicates this (spatially)


• –Least Cost Theory (1909)
– Alfred Weber’s model – owners of
manufacturing plants seek to minimize
three costs: 1) Transportation, 2) labor, and
3) agglomeration (too much can lead to
high rents & wages, circulation problems)
– Weight-losing case: final product weighs
less than raw mat.s; location = source


– Weight-gaining case: final product weighs
more (or takes more space) than raw mat.s
(e.g. addition of water); location = market
– Some argue Weber’s model doesn’t
adequately account for variations in costs
over time (e.g. taxation, consumer demand)
– Substitution principle – decreases in
certain costs can offset increases in others


• Christaller’s Central Place
Theory – Revisited
• Distance affects the marketing
strategies of enterprises
• Businesses identify one location,
possess a monopoly
• Hexagons display
a nesting pattern;
Christaller’s theory
is not as accurate
today (diminishing
specialization)

• –August Lösch
– Profit-maximization: firms will identify a
zone of profitability (not just a point)
– Other businesses can come in and change
the configuration of that zone
– Agglomeration can give the entire area a
competitive advantage


• Factors of Industrial
Location:
• Raw Materials-e.g.
Japan has few, but
grew into an ind.
giant b/c of skilled
labor & low wages
• Labor-e.g. 1994 –
wages in Shanghai’s
Pudong dist. = 1/40
Japan, 1/30 Taiwan
• Infrastructure-banks,
transportation,
communication,
Open-air laundrybyin
01/25/13 01:04 AM social services,… 12
Dr.Rajesh Patel,Director,
Mumbai, India

Resources and Regions:
The Global Distribution
of Industry


• Four Primary Industrial Regions:
– Eastern North America (largest)
– Western & Central Europe
– Russia & Ukraine
– Eastern Asia (fastest growing)
• Industrialization Through WWI
– Britain - enormous comparative advantage
– Industrialization expanded along coal
deposits: N. France – Belgium – N-C Germany
– NW Czechoslovakia – S. Poland
– Colonialism supplied Europe w/ raw mat.s
– Ind. Rev. diffused (exp.) from core regions

– North America: only serious rival to Eur.
– New York – great relative location, major
break-of-bulk (e.g. ship-to-rail) port
– N. Am. benefited from nat. resources, trans.
networks, capital, and labor
– Most of the rest of the world lagged far behind
(exceptions: Ukraine, Australia,…)
• Mid-Twentieth Century Industrialization
– Oil & natural gas played a key role (U.S. is very
dependent on foreign sources today)
– U.S. emerged as the world’s preeminent power
(escaped destruction of WWI)
– American Manufacturing Belt - NE

• Late Twentieth
Century and Beyond
– “Four Tigers”:
South Korea
(Seoul), Taiwan
(Taipei), Hong
Kong, Singapore
(industrial powers)
– China – rapidly
growing in
influence
– Japan is losing its
dominance
Pusan, South Korea –

- N. Hemisphere Ind. Zone: U.S. – Europe –
Former USSR – E. Asia
- Secondary Regions – Mexico, Brazil, S.
Africa, Egypt, India, Australia,…

Concepts of Development


• Economic Activities (revisited)
– Primary – ext.; Secondary – manufacturing
– Tertiary – service (trans., sales, education,…)
– Quaternary – exchange or application of info.,
knowledge, or capital (finance, insurance &
real estate (FIRE activities), legal services,…)
– Quinary – higher order, specialized knowledge
or skill (scientific research, high management)
– Relationship b/w industrialization and urban
location changed over time
• First industries were rural (e.g. water-powered)
• Mass production factories of early 1900s were
urban based (e.g. cheap labor)
• Expansion of tertiary,Patel,Director,
01/25/13 01:04 AM by Dr.Rajesh quaternary, & quinary 20
activities closely associated w/ growth of suburban

• Agglomeration (revisited):
– Occurs when certain conditions are met:
– 1) When a cluster of activities create enough
demand for support services
– 2) Activities needing access to information &
control tend to concentrate (e.g. face-to-face is
better, no matter how rapid other forms of
comm. are (e-mail, phone,…))
– 3) When cultural institutions (schools,
hospitals,…) are attracted to the area
– Deglomeration = too many activities (of the
wrong type); traffic, pollution, capital
shortages, inc. land prices,…

• GNP (Gross National Product):
– Total value of all goods and services produced
by a country in a single year (includes
domestic & international)
– Does NOT: 1) include informal econ.; 2) reflect
negative spinoffs (e.g. resource depletion,
pollution, prisons,…), 3) illustrate distribution
of wealth (UAE = >$15,000 p.c.)
– Alternative measures: 1) Occupational
structure, 2) Productivity per worker, 3)
Consumption of energy per person, 4) Trans. &
comm. facilities per person, 5) Dependency
(young & old) ratio, 6) social indicator rates
(e.g. literacy, inf. mortality)

• Core-Periphery (revisited)
– World System’s Theory
(Immanuel Wallerstein)
– Core-periphery link can
exist at many scales: w/in a region (Los
Angeles is a core of S. Cal.), w/in a country
(Johannesburg is a core of S. Afr), global
(Japan is a core of E. Asia)
– North-South Line (W. German Chancellor
Brandt) – map of economic development in
1960s (“1st” world (US, Eur, Japan) market
economies dominating the “3rd” world, w/
“2nd”AM
01/25/13 01:04
world (USSR & China) traveling down
by Dr.Rajesh Patel,Director, 24
a state-planned economic path)

Per Capita GNPs S. Afr. - $3,310
Haiti - $410 S. Korea - $8,600
Pakistan - $470 U.S. - $29,240
Egypt - $1,290
nrvmba,email:1966patel@gmail.cJapan - $32,350

• GDP/GNP vs. GNI PPP
– GDP/GNP = Gross Domestic/Nat. Product
– GNI PPP = Gross National Income w/
purchasing power parity (allow cross-country
comparisons of economic aggregates on the
basis of physical levels of output, free of price
and exchange rate distortions)
Country (2000) GDP ($ bn) GNI PPP ($ bn)
Nepal 5.5 31.6
India 457 2,375
China 1,080 4,951
Japan 4,842 3,436
U.S.
01/25/13 01:04 AM 9,837
by Dr.Rajesh Patel,Director,
9,60126

• Models of Development
– Liberal: 1) Assume all countries are capable of
developing economically in the same way, and
2) disparities b/w countries & regions are the
result of short-term inefficiencies in local or
regional markets
– Structuralist: Economic disparities are the
result of historically derived power relations
w/in the global economic system; cannot be
changed easily (misleading to assume all
areas will go through the same process of
development)


• Modernization Model (a “liberal” model)
– Walt Rostow – 1960s; 5 stages:
– 1) The Traditional Society: high % in agr.
(subsistence), high % of national wealth spent
on “non-productive” areas (military, religion)
– 2) Preconditions for Take-Off: Educated elite
influence pop. to invest in tech. &
infrastructure; inc. in openness & production
– 3) Take-Off: “Industrial Rev”; urbanization,
industrialization, but still some trad. areas
– 4) Drive to Maturity: Tech. diffuses, ind.
specialization, modernization occurs in core
– 5) Age of Mass Consumption: high incomes,
widespread prod., majority in service sector
01/25/13 01:04 AM by Dr.Rajesh Patel,Director,
28

Walt Rostow’s
Modernization Model

Selected countries
up to 1960


• Dependency Theory (“structuralist”)
– Political & economic relationships b/w
countries & regions control & limit the
developmental possibilities of less well-off
areas (e.g. imperialism caused colonies to be
dependent – this helps sustain the prosperity
of dominant areas & poverty of other regions)
– Only at later stages of development does the
core have a positive impact on the periphery
(grants, loans, special economic zones,…)


• Conditions for Core Development:
– Core – regions w/ concentrations of
employment, capital & economic control;
develops w/ agglomeration
– Attract new investment through:
• Backward linkages – supply firms w/ components &
services
• Forward linkages – help firms find uses & markets
for their products
• Ancillary industries – firms providing services for
other corporations
• Investment into infrastructure & technology


Images
of
New
York City

• Conditions in the Periphery (revisited)
– High rates of birth, death, infant mortality,
illiteracy, malnutrition, incidence of disease,
rural populations, overcrowding in urban areas
– Women’s workloads are often heavier than
men’s, landholdings are often fragmented (w/
poor harvesting tech.), soil erosion is
commonplace, families often in debt,…
– A country’s core may illustrate “progress”, but
often differs greatly w/ most areas


Images
of
Lagos,
01/25/13 01:04 AM by Dr.Rajesh Patel,Director, Nigeria
34

Deindustrialization and the Rise
of the Service Sector


• New International Division of Labor
– Periphery regions are dependent on core
for manufacturing jobs, likewise …
– Core TNCs are dependent on periphery for
cheap labor, fewer environmental
regulations,nrvmba,email:1966patel@gmail.c markets
and expanding

• Deindustrialization
– Regions with high labor costs & old
technology may experience deind. (core
countries, “Rustbelt”) as new tech. can be
more cheaply appropriated elsewere
– US Sunbelt drew investment away from NE b/c
of lower rates of unionization, higher amenity
values (i.e. place), gov’t contracts, …


– Specialized Economic Zones: area w/in a
country in which tax incentives & fewer enviro.
regulations attract foreign business/investment
– Manufacturing export zone – periphery;
favorable tax, regulatory & trade arrangements
– High technology corridors – core; network of
research, development & tech. enterprises

A maquiladora in Mexico

A technopolePatel,Director,
01/25/13 01:04 AM by Dr.Rajesh
– Silicon Valley
42

• OECD - Organisation for Economic Co-
operation and Development
– Forum where gov’ts work together to address
economic, social and environmental
challenges
– Born after World War II to coordinate the
Marshall Plan; today has 30 member countries
(which produce > 2/3 world’s goods &
services), w/ more than 70 developing and
transition economies working w/ them
– Membership is limited only by a country's
commitment to 1) a market economy, and 2) a
pluralistic democracy

OECD Member Countries
Countries/Economies
Engaged in Working
Relationships with the OECD

– OECD: Sometimes accused of neo-
colonialism (entrenchment of the colonial
order (trade & investment) under a new (non-
pol.) guise); some countries’ have a high % of
their GNP being allocated to payment of
interest on accumulated foreign debts

– World Cities: John Friedmann (1980s)
– Dominant in terms of their global-political
economy; centers of control of the world
economy, not the largest in terms of pop. or ind.
–Examples: N.Y.C., London, Tokyo, Sao Paolo,…

• Time-Space Compression:
– Refers to the social and psychological effects
of living in a technologically advanced world
– Time-space convergence – refers to the greatly
accelerated movement of goods, ideas, and
information during the 20th c. made possible
by tech. innovations in in transportation &
communication
– Transition from Fordist ind. system to a faster,
more flexible system that has opened new
markets & brought places “closer together”
– World Wide Web - no accurate estimates of its
economic impact, but it is growing

• Tourism: A Service Industry Giant
– Some countries have made agriculture their
main priority, others – industry, and others,…
– Tourism & travel = 11% of all global jobs, and
11% of global GNP (~$4 trillion/yr.)
– Investment by “host” country is huge: i.e.
building hotels diverts money that could be
used for housing, education, …
– Many hotels are owned by MNCs, NOT the
“host” country, affects local economy little
– A fast-growing industry as people are traveling
more, however congestion at tourist sites is a
rising problem (i.e. usually need a reservation
for a campsitebyin Yellowstone in the summer)
01/25/13 01:04 AM Dr.Rajesh Patel,Director, 47

• Tourism: A Service Industry Giant
– Some countries have made agriculture their
main priority, others – industry, and others,…
– Tourism & travel = 11% of all global jobs, and
11% of global GNP (~$4 trillion/yr.)
– Investment by “host” country is huge: i.e.
building hotels diverts money that could be
used for housing, education, …
– Many hotels are owned by MNCs, NOT the
“host” country, affects local economy little
– A fast-growing industry as people are traveling
more, however congestion at tourist sites is a
rising problem (i.e. usually need a reservation
for a campsitebyin Yellowstone in the summer)
01/25/13 01:04 AM Dr.Rajesh Patel,Director, 48

Industrial activity and geographic location

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