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Unit 6 Notes: Industrialization and Development Industrial Terms & Concepts • • Economy - system of production, consumption, and distribution in a region Industrialization • Growth of manufacturing activity in an economy • Leads to decrease in subsistence farmers Economic Classifications • • • • • Primary Sector - activities revolve around raw materials • Farming, fishing, mining Secondary Sector - activities deal with processing raw materials • Factories Tertiary Sector - activities involve moving, selling, and trading products • Bank tellers, fast food workers Quaternary Sector - activities involve information creation & transfer • Investment analysts Quinary Sector - Sub-quaternary • High-level government research Diffusion of Industrialization • • • • • • • • • Industrial Revolution in 1760’s England Machine labor replaces human labor • Coal powered Assembly-line manufacturing Emergence of factories & factory cities Growth of transportation infrastructure Mechanized farming 1825 - technology spreads to N. America & W. Europe • Rich coal deposits 1920’s - Automobile factories Fordist Production Method: • Build out rather than up • Division of Labor Weber’s Least Cost Theory of Industrial Location • • • • Alfred Weber - German Economist Predict & Explain where factories choose to locate Similar to Von Thunen Consider 2 issues: • Distance of transportation • Weight of goods being transported Weber’s Model • • Based on Assumptions: • Transportation costs determined by weight of goods being shipped & distance • Industries are competitive • Markets are in fixed location • Labor is not mobile • Physical & political landscape is uniform Location based on 4 factors: • Transportation, Labor, Agglomeration, Deglomeration Weber’s criticisms • • Does not identify changes in labor forces (age, skills, gender, language) Transportation costs are not directly proportional to distance Concepts Related to Weber’s Model • • • • Weight-Gaining Processes - using raw materials to make a heavier product • Beverage Bottling • Locate near place where heavier product will be sold - Market Orientation Weight-Losing Processes - manufacturing raw materials to make a lighter product • Paper production • Locate near raw resource supply - Material Orientation Footloose Industries - Unrestricted in location • Spatially fixed costs - cost of transportation & production same regardless of location Substitution Principle - industry will move for lower labor costs • Industrial Capital - availability of machines, tools, workers Agglomeration • • • • Industries clump together in same geographic space Alfred Marshall - benefits of agglomeration in England Shared costs Agglomeration Economies: • Positive effects • Localization Economies - many firms in same industry benefit from clustering • Urbanization Economies - large populations in urban areas benefit from clustering High-tech Corridor • • Where technology & computer industries agglomerate • Silicon Valley • Technopole Shared resources: workforce, repair, electrical services Agglomeration Effects • • • Backwash Effects: • Negative Consequences of agglomeration • “brain-drain” Locational Interdependence: • Industries choose locations based on competition • Maximizing dominance in a market Deglomeration: • “unclumping” of factories • Too clustered, too crowed = strained resources MDC v. LDC • Development - improving material condition of people Differences MDCs LDCs Challenges Maintaining Economic Growth Improving Econonmic Growth GDP Greater than $20,000 Less than $1000 Development Rate Tripled over last decade Doubled over last decade Population Increase Rate Fell by 85% Fell by 5% Factors of Development • • • • GNP - all goods & services owned and produced by a country overseas • Poor measure of development Purchasing Power Parity (PPP) - calculating exchange rates • “apple-to-apple” Informal Sector - all business transactions not reported to government • Inexpensive • Illegal immigrants Human Development Index (HDI) - measure country’s development level & compare to other regions • Uses GDP, LE, Education, Literacy Rates Development Gap • • • Widening difference between development levels of MDCs & LDCs • MDCs > LDCs North-South Gap: • Pattern of locating MDCs & LDCs • Northern Hemisphere - MDCs • Southern Hemisphere - LDCs Dependency Theory: • LDCs locked in cycle of underdevelopment • Political & economic relations limits LDC • Colonization - reason for poor countries Core-Periphery Model • World’s countries are organized into 3 categories: 1. Core - Industrialized countries • Highest per-capital income 2. Semi-periphery - newly industrialized countries • Vast inequalities in standards of living 3. Periphery - LDCs with low industrialization • Low level of infrastructure, standard of living, per-capita income Wallerstein’s World System Analysis • • Immanuel Wallerstein - world is capitalist system of interlocking states connected through economic and political competition Unequal positions of countries - colonization & exploration • Lead to exploitation of semi-periphery & periphery • 3 divisions of nations b/c of competition Rostow Modernization Model • • • • • • • • 1950’s to predict economic development in countries 5 stages of economic development • MDCs = stages 4 & 5, LDCs = stages 1-3 Investing = development Stage 1 - Traditional Society (subsistence farming) Stage 2 - Preconditions for Takeoff (small group initiates innovative takeoff) Stage 3 - Takeoff (new industries begin rapid growth) Stage 4 - Drive to Maturity (advanced technology & development) Stage 5 - High Mass Consumption (service-oriented jobs dominate) Flaws to Rostow’s Model • Projections based on Western Europe • Does not consider structural issues that limit country’s development • Each country independent - No interlocking • Does high productive economy lead to high consumption? Improving Economic Development • • • 4 different approaches to improve development Self-Sufficiency: • reduce gap between rich & poor countries • under-developed countries provide for their own people • favors closed economic state Export-Oriented Approach: • International trade - under-developed nations identify what they offer • develop advantage over rest of the world • Comparative advantage - Let other countries develop Development Approaches • • Structural Adjustment Approach: • LDCs receive money/loans from supranational organizations • requirements attached to loan • increases privatization Non-Governmental Organizations Approach: • NGOs - charities & private organizations • Doctors w/o Borders • decrease government spending Globalization • • • • Increasing interconnectedness & spatial interaction among governments, cultures, economies • Originally economic, now cultural & political diffusion MNC/TNC: • primary agents of globalization • conglomerate corporations Outsourcing: • take advantage of low labor costs, low tax rates, low cost of land • Substitution Principle New Industrial Countries: • newly industrialized economy & global trade Asian Tigers • • • • South Korea, Taiwan, Hong Kong, Singapore Rapid economic growth in late 20th century Followed mold of Japan Pacific Rim economic region Special Economic Zones • • • • Foreign Direct Investment - MNC investing in foreign country’s economy SEZ - regions that offer incentives to attract foreign businesses & investment Export Processing Zone: • free-trade zone (no tariffs) • encourage MDCs to invest in LDCs Maquiladoras • SEZ on northern border of Mexico & US • MNC outsources labor to region for low labor costs • Mexican govt offers tax breaks to US MNCs • NAFTA phases out maquiladora program New International Division of Labor • • • • Breaks up manufacturing to different countries Fordist assembly-line production phased out with globalization More countries involved in production of single produce Free trade v. Fair Trade: • Free - MNCs outsource with no regulations • Fair - oversight of foreign direct investment Globalization & Environment • • • Sustainable Development: • rate of growth and resource consumption that can be maintained from one generation to another • Problem - increased production v. scarce resources • Solution - Conservation? Ecotourism: • tourist operations that do as little harm to environment as possible • Problem - areas being transformed to meet tourist desires v. destruction of local communities/environments • Solution - ecotourism = celebrate ecological diversity Global Warming