Industry and Services

Where did the Industrial Revolution begin, and

How did it Diffuse?

Key Question:

Industrial Revolution:a series of inventions that brought new uses to known energy sources, new machines to improve efficiencies and enable other new inventions.

eg. steam engineiron smeltingwater pump

Beginning of Industrial Revolution

• When and where did the industrial revolution begin?– In Great Britain in the mid to late 1700s

• Why Great Britain?– Flow of capital– Second agricultural revolution– Mercantilism and cottage industries– Resources: coal, iron ore, and water power

The Industrial Revolution

• European domestic markets were growing, and a labor force was lacking in England

• The steam-driven engine made up for the lack of available labor

Flow of Capital into Europe, 1775Needed flow of capital in order to fuel the industrial revolution.

• Freed from charcoal use, iron smelters could be concentrated near British coal fields

• Transportation and communications were affected

The Industrial Revolution

Textiles Production:Liverpool and Manchester

Iron Production:Birmingham

Coal Mining:Newcastle

• The first steam-powered ocean-going vessel emerged

• England held a monopoly over products in world demand and the skills to make machines to manufacture them

The Industrial Revolution

Ironbridge, EnglandWorld’s first bridge made entirely of cast iron, constructed in late 1700s.

Iron Ore to Steel

Diffusion to Mainland EuropeIn early 1800s, innovations diffused into mainland Europe.

Location criteria: proximity to coal fieldsconnection via water to a portflow of capital

Later DiffusionIn late 1800s, innovations diffused to some regions without coal.

Location criteria: access to railroadflow of capital

Diffusion of Industrial Revolution

How do Location Theories explain Industrial

Location?

The Paris Basin is the Industrial base of France. Rouen (pictured here) is at the head of navigation point on the Seine River.

Location Theory

• Location Theory – predicting where business will or should be located.

Considers:- Variable costs- Profit maximization- Friction of distance- Transportation

Factors of Industrial Location

Raw Materials • Very few industries use raw materials • Most manufacturing is based on the

further processing and shaping of materials already treated in some fashion

• Transportation costs affect industry location

Power Supply (Energy)

• Power supplies that are immobile or of low transferability may attract activities dependent on them

• Current technology made less important

• Industries requiring large amounts of energy still situated near the power source

Labor

• Spatial variable affecting location decisions and industrial development

• 3 major traditional considerations – price, skill, and amount

• Labor Flexibility: highly educated workers able to apply themselves to a wide variety of tasks and functions

Market

• Goods are produced to supply a market demand

• Size, nature, and distribution or markets is important in industrial location decisions

• Ubiquitous industries

Transportation

• Unifying thread of all factors of industrial location • Modern industry is immediately

tied to transportation • Use many different form of

transportation media

Alfred Weber

• Created the classical model of industrial location theory in 1909

Least-Cost Theory• Explains the optimum location of a

manufacturing establishment in terms of minimizing three basic expenses – Transportation cost, labor,

agglomeration

Least Cost Theory

1)Transportation: the site chosen must entail the lowest possible cost of A) moving raw materials to the factoryB) finished products to the market. This, according to Weber, is the most important.

Least Cost Theory

2) Labor: higher labor costs reduce profits, so a factory might do better farther from raw materials and markets if cheap labor is available-ex: China – today

Least Cost Theory

3) Agglomeration: when a large number of enterprises cluster in the same area, they can provide assistance to each other through shared talents, services, and facilities -ex: manufacturing

plants need office furniture

1. Area is uniform physically, culturally, and technologically

2. Manufacturing involves a single product to be shipped to a single market whose location is known

3. Inputs involve raw materials from more than one known source location

5 Controlling Assumptions

4. Labor is infinitely available but immobile in location

5. Transportation routes connect origin and destination by the shortest path and directly reflect the weight of the items shipped and distance moved

5 Controlling Assumptions

Other Location ModelsHotelling’s ModelLocation of an industry cannot be understood without reference to other industries of the same kind.

Theory:

Locational interdependence:

indicates that locational decisions

are not made independently but

are influenced by the actions of others.

Other Location ModelsLosch’s Model

Manufacturing plants choose locations where they can maximize profit.

Theory:

Zone of Profitability

Major Industrial Regions of the World before 1950

Industrialization Through WWI

• The four primary industrial regions:1) Western & Central Europe2) Eastern North America 3) Russia & Ukraine4) Eastern Asia

Western and Central Europe

Late 18th Century:

Britain

France

Belgium

Netherlands

Germany: 3 districts?

Early 20th Century:

Italy: What area?

Spain: What area?

Sweden

Finland

Major Manufacturing Regions of North America

-Benefitted from overseas resources-Large coal and gas reserves to provide energy to manufacturing plants-US capitalized on industry after Western Europe destruction during WWI and WWII

Major Manufacturing Regions of Russia

-Many resources throughout the vast expanse of land

-Volga River provided an energy resource and transportation through canals

-

Major Manufacturin

g Regions of East Asia

-Japan imported raw materials from it’s colonial empire into Korea, Taiwan, and China

-3 major belts in Japan?

How has Industrial Production Changed?

Post-Fordist

Fordist – dominant mode of mass production during the twentieth century, production of consumer goods at a single site.

Post-Fordist – current mode of production with a more flexible set of production practices in which goods are not mass produced. Production is accelerated and dispersed around the globe by multinational companies that shift production, outsourcing it around the world.

Time-Space Compression

Through improvements in transportation and communications technologies, many places in the world are more connected than ever before.

Time-Space Compression• Just-in-time delivery

rather than keeping a large inventory of components or products, companies keep just what they need for short-term production and new parts are shipped quickly when needed.

• Global division of laborcorporations can draw from labor around the globe for different components of production.

New Influences on the Geography of Manufacturing

• Transportation on industrial location– Development of infrastructure: containers,

refrigeration– Intermodal connections

• Regional and global trade agreements– NAFTA, EU– WTO: ~150 countries, promotes free trade to

eliminate quotas• Proximity to Energy sources in industrial location

less important– Pipelines and tankers deliver fuel to far away

places– 2.5 million miles of pipelines in NA

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, leaving the newly deindustrialized region to switch to a service economy and work through a period of high unemployment.

Abandoned street in Liverpool, England, where the population has decreased by one-third since deindustrialization

The former Gautier rolling mills of Bethlehem Steel Corp. in Johnstown, PA

Newly Industrialized

• East Asia• South East Asia

Also known as the Pacific Rim.

Newly Industrialized

China – major industrial growth after 1950

1. Industrialization in the 1960s was state-planned:

-Northeast district -Shanghai and Chang district

2. Today, industrialization is spurred by companies that move production (not the whole company) to

-take advantage of Chinese labor-special economic zones (SEZs).

ex: Shenzhen

As China’s economy continues to grow, old neighborhoods (right) are destroyed to make room for new buildings (below).

Beijing, China

Newly Industrialized

East and Southeast Asia

1. Four TigersSouth KoreaHong KongTiawanSingapore

A map showing the Four Asian Tigers     Hong Kong     South Korea     Singapore     Taiwan

What is the Service Economy, and Where are Services Concentrated?

Service Economy

Service Industry – Tertiary1. Economic activity associated with the provision of services

– such as transportation, banking, retailing, education, and routine office-based jobs.

2. As services become more developed specific divisions are used:

ex: Quaternary – exchange of information…ex?

Quinary – complex decision making…ex?

Service Economy

Postindustrial: a society in which an economic transition has occurred from a manufacturing based economy to a service based economy

Examples:

United States, Canada, Japan, and Western Europe

Geographical Dimensions of the Service Economy

New Influences on Location:

- Information technologies - Less tied to energy sources- Market accessibility is more relevant for some

and less relevant for others because oftelecommunications

- Presence of Multinational Corporations

Geographical Dimensions of the Service Economy

Sunbelt: southern region of the US stretching from the southeast to the southwest- secondary industrial regions moving into Atlanta, Phoenix- high-tech industry

Wal-MartRequires producers of goods to locate offices in the Bentonville, Arkansas (Wal-Mart’s headquarters) area in order to negotiate deals with Wal-Mart.

Proctor & Gamble put their office in nearby Fayetteville, Arkansas.

How does the presence of these companies in the region change the region’s economy and its cultural landscape?

NikeHeadquartered in Beaverton, Oregon, Nike has never produced a shoe in Oregon. Beginning in the 1960s, Nike contracted with an Asian firm to produce its shoes.

Skopje, Macedonia

The swoosh is ubiquitous, but where is the shoe produced?

Nike has a global network of international manufacturing and sales.

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.

High-Technology Corridors

• 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.

eg. Silicon Valley, California

• Technopole – an area planned for high technology where agglomeration built on a synergy among technological companies occurs.eg. Route 128 corridor in Boston

Plano-Richardson, TexasTelecom Corridor is just north of Dallas

Development

How do you Define and Measure Development?

What does Development Mean?

• Development implies “progress”

– Progress in what?– Do all cultures view development the

same way?– Do all cultures “value” the same kinds of

development?

Measuring DevelopmentGross National Product (GNP)

Measure of the total value of the officially recorded goods and services produced by the citizens and corporations of a country in a given year. Includes things produced inside and outside a country’s territory.

Gross Domestic Product (GDP)

Measure of the total value of the officially recorded goods and services produced by the citizens and corporations of a country in a given year.

Gross National Income (GNI)

Measure of the monetary worth of what is produced within a country plus income received from investments outside the country.

** Most common measurement used today.

Issues with Measuring Economic Development

• All measurements count the:– Formal Economy – the legal economy

that governments tax and monitor.

• All measurements do not count the:– Informal Economy – the illegal or

uncounted economy that governments do not tax or keep track of.

Other Ways of Measuring Development

• Occupational Structure of the Labor Force• Productivity per Worker• Transportation and Communications

Facilities per Person• Dependency Ratio

Non-Economic Measures of Development

• Education: LDC’s 2/3 illiterate, DC 1%

• Public Services: access to safe drinking water (2000 2.48/40%)

• Health Services: ratio of people to doctors

DC 1:350, LDC 1:5,800, Sub Saharan 1:18,500

Differences in Communications Connectivity

Around the World

Dependency Ratio by Country, 2005A measure of the number of people under the age of 15 and over the age of 65 that depends on each working-age adult.

Development Models

Rostow Modernization ModelWalt Rostow’s model assumes all countries follow a

similar path to development or modernization, advancing through five stages of development, climbing a ladder of development.

- traditional- preconditions of takeoff- takeoff- drive to maturity- high mass consumption

Rostow Modernization Model

1. Traditional: dominant activity is subsistence farming

• Rigid social structure, resistance to change

2. Preconditions of Takeoff: progressive leadership moves the country toward openness and diversification

3. Takeoff: Industrial Revolution, Urbanization, Mass-Production

4. Drive to Maturity: Tech. Diffusion, industrial specialization, international trade, modernization of core,pop. Decline

Rostow Modernization Model

Rostow Modernization Model

5. High Mass Consumption: high income, widespread production of G&S, Service Sector

Many nations are past Stage 5. Create your own

column entitled High Technology, depicting the

modern world. Use the chart above as a source.

Rostow’s Ladder of Development

Rostow Modernization Model

1. What does Rostow not take into consideration with his model?

2. Criticisms?

Structuralist Theory

• Based on neo-colonialism• Economic disparities are built into

the system by people’s action, and it will not change easily

• Assumes all countries will not go through the same development process

Dependency Theory

The political and economic relationships between countries and regions of the world control and limit the economic development possibilities of poorer areas.-- Economic structures make poorer

countries dependent on wealthier countries.

-- Little hope for economic prosperity in poorer countries.

Dependency TheoryDollarization – Abandoning the local currency of a country and adopting the dollar as the local currency.

El Salvador went through dollarization in 2001

Wallerstein’s World-Systems Theory

• Explain the theory• Compare and contrast Rostow’s

ladder of development with Wallerstein’s three-tier structure of the world economy.

Development in Dubai

What are the Barriers to and the Costs of

Economic Development?

Barriers to Economic Development

• Low Levels of Social Welfare– High dependency ratio (many under 15)– Low number of Doctors per patient– Lack of access to education (girls not

attending as long as boys)• WHY??• What are peripheral countries doing about this?

– Trafficking: adults and children• How is this different from slavery?• Why does this happen?

Barriers to Economic Development

• Foreign Debt– After decolonization, peripheral countries need

funds for development– Structural adjustment loans

• Provided by IMF and World Bank• Loans with strings attached

– Privatization of industry

– Foreign trade, Reduced tariffs

– Foreign direct investment

– Free elections

– Stricter laws on corruption

• Debt becomes hard to pay off and invest in more development

– Argentina, 2001

Foreign Debt Obligations Total interest payments compared to the export of goods and services.

Foreign Debt and Economic Collapse in Buenos Aires, Argentina, 2001

Foreign Debt Obligations

Barriers to Economic Development

• Political Instability– Foreign influences

• Decolonization left gov’t unstable

– Groups competing for power• Military coups, dictators, and liberal democracies

– Disenfranchisement of the poor• Corruption of gov’t, cut off from foreign aid

– ex: Zimbabwe, 2002

Barriers to Economic Development

• Widespread Disease– Poor conditions in water, sewage, and

access to health care– Vectored Diseases spread by an

intermediate host (ex: mosquito)• Continue to plague the Tropics• Malaria (Silent Tsunami)

– 2-3million deaths per year– DDT spraying in Sri Lanka dropped death rate by ¾ from

1945– GMO mosquitos?

Widespread Disease

• Malaria kills 150,000 children in the global periphery each month.

Tamolo, India

This baby sleeps under a mosquito net distributed to villagers by UNICEF workers.

Global Distribution of Malaria Transmission Risk

Costs of Economic Development

• Industrialization– Export Processing Zones (EPZs)

• maquiladoras along USA/Mexico border• special economic zones (SEZs)

– Shenzhen in China, near Hong Kong

Export Processing Zones

Costs of Economic Development

• Agriculture– Small plots, outdated tools– Constant debt, no ability to by new

fertilizers, pesticides– Desertification

• Lack of education on soil concervation• Dry lands of Africa are growing

Areas Threatened by Desertification

Costs of Economic Development

• Tourism– Pros

• Provides income, wealth, and employment

– Cons• Large investments into industry, not into needed

areas• Local economies not benefited• Devastation of local culture• Multi-national corporations outbid local

entrepreneurs

Why do Countries experience Uneven

Development within the State?

How Government Policies Affect Development

• Governments – get involved in world markets– price commodities– affect whether core processes produce wealth– shape laws to affect production– enter international organizations that affect

trade– focus foreign investment in certain places– support large-scale projects

Governments and Corporations can create Islands of DevelopmentPlaces within a region or country where foreign investment, jobs, and infrastructure are concentrated.

Government-created Island of Development

Malaysian government built a new, ultramodern capital at Putrjaya to symbolize the country’s rapid economic growth.

Corporate-created Island of Development

The global oil industry has created the entire city of Port Gentile, Gabon to extract Gabon’s oil resources.

Nongovernmental Organizations (NGOs)entities that operate independent of state and local governments, typically, NGOs are non-profit organizations. Each NGO has its own focus/set of goals.

Microcredit program:

loans given to poor people, particularly women, to encourage development of small businesses.