Industry and Economic Development

1. Industry and Economic Development AP Human Geography

2. Keys to Economic and Industrial Development • Some countries develop faster than other countries • Some urban areas develop faster than other urban areas • Why? Several reasons for economic success and failure of countries/urban areas • Industrialization is a major component • Economic Systems are another important factor

3. Economic Systems • Capitalism – the competitive market determines the price of goods. Winners and losers and those in poverty are ignored. Poverty is a huge debated issue in capitalist countries • Socialism – government control of basic items. Provides no incentive to work because gov’t provides social security for citizens • Communism – total government control of all prices in society. No incentives to succeed, gov’t dictates profession based on assessment of skills

4. Economic Success Factors • Environmentally Friendly Activities – can’t put factories in middle of city to pollute water and air – citizens will complain, fines, etc. • Political Support – local politicians are important to have on your side • Societal Acceptance – you must sell a product that citizens approve of • Economic Support Base – worker training and experience, also capital investment in buildings and large equipment/vehicles

5. Geographic Factors • Geographic Factors contribute to industrial development in some countries and keep others reliant on their agricultural sectors in other countries. • Site Factors – internal characteristics of a place based on physical features • Physical Characteristics • Situation Factors – relationship that a particular location has with the location around it • Pittsburgh – ideal for steel because iron ore and coal come from region • Detroit – ideal for cars, can export via Great Lakes and St. Lawrence River w/ access to Atlantic • Basic Industries – focal point of the economy for a city • Nonbasic Industries – secondary businesses that sprout up after the city has established its basic industry

6. Industrial Factors • Industrial Factors are probably most important in determining overall success of country’s economy • Industrial Costs • Variable costs – fluctuate based on volume of the order, businesses prefer this to encourage customers to buy more (usually the more you buy, the less the price) • Fixed costs – do not fluctuate based on the quantity ordered

7. Transportation Systems • Transportation Systems – need low cost forms to ensure product gets to market quickly • Time space compression – effort to increase the efficiency of time in the delivery process by diminishing distance obstacles • Five Primary Forms of Industrial Transportation: • Trucks – highly mobile, efficient but can have weather delays and use fossil fuels and have high maintenance costs • Trains – efficient, cost effective and can haul immense amounts long distances but have inflexible routes and have break of bulk points where cargo unloaded from one form of transportation to another • Airplanes – fastest way to transport, flexible routes but most expensive and low fuel efficiency and weather delays • Pipelines – efficient for moving gas/liquid, safe but limited products and expensive to build • Ships – most energy efficient, but slowest method, break of bulk points add costs and weather dependent

8. Location of Industry • Agglomeration – centralization of features of an industry for the mutual benefit of the industry as a whole (shopping malls) • Manufacturing/Warehouse Locations – industrial parks provide companies with tax breaks to locate their plants at particular locations for shared services • Cumulative Causation – continued growth due to positive aspects of the principle • Deglomeration – market has become saturated with a particular industry

9. Industrial Revolution • Industrial Revolution – mid 1600s, England, allowed for more mechanization, speeding up production process and allowing quantity and quality to improve, major invention steam engine

10. Weber’s Least Cost Theory • Alfred Weber – German economist, socialist in 20th century – described industrial location • Theory – company building an industrial plant needs to take into consideration the source of raw materials and the market for the product • Triangular – base consists of two raw materials necessary for the production of the product • Weight Gaining Industry – finished product weighs more than the raw materials – industrial production point needs to be located closer to market to minimize transportation costs associated w/ heavy product • Weight Reducing Industry – raw materials weigh more than the finished product – industrial production point will need to be located closer to raw materials (potato chips)

11. Foreign Production of Goods • Maquiladoras – industrial plants located in Mexico that produce good using relatively inexpensive labor and then sell the products in the US for more profit than if the products were made in the US • Outsourcing – jobs from the US to less developed countries where companies can pay employees pennies on the dollar • New International Divisions of Labor – global division of labor, 1960s, outsourcing jobs from more developed to less developed countries to take advantage of cheaper labor costs – loss of manufacturing jobs in developed countries and increase of employment opportunities in less developed countries • Footloose Industry – company with no allegiance or ties to a country or location, therefore can move its primary locations at will – done for tax purposes • Transnational Corporations – large companies that have offices or divisions around the world • Ubiquitous – product is available to consumers at any time and at any location around the world • International Division of Labor – individuals can specialize in their individual production – their speed, efficiency, and quality increase thereby reducing costs • Fordism – each person on the assembly line doing a specific task to speed up the overall process of production • Labor Intensive – agriculture, textiles • Sweatshops – poor working conditions • Manufacturing Exports – global economy of commerce, products being imported from Asia and less developed countries

12. Global Industrial Zones • NE US/SE Canada • Russia/Ukraine • Central/Western Europe • East Asia • Treaty Ports – international ports that must be kept open for international trade because of signing a treaty • Export processing zones – export goods made in China efficiently • Special Economic Zone – foreign companies locate their headquarters • Entrepots – areas where trade goods are brought to be reloaded onto other forms of transportation • Four Asia Tigers (Dragons) – Hong Kong, South Korea, Taiwan, and Singapore • Complementary – both sides benefit

13. Two Views of Economic Development • Optimistic Viewpoint – allowing capitalistic forces the ability to enter countries and get resources to the areas that need them, at the same time profiting from their investments • Pessimistic Viewpoint – inaccessibility of resources as a serious challenge and addresses three primary concerns • Distribution of resources doesn’t correspond to demand for them • Less developed countries may not be able to achieve critical mass to start a cycle of economic growth • Investment is not allocated equally around the globe but rather is concentrated in only a few locations • Foreign Direct Investment – a company located in one country enters the economy of another country

14. Ways to Describe Development • Development – continued progress of a society in all areas (demographics, economics, social, etc) • Human Development Index – Pakistani economist, MahbubulHaq – characteristics of development affect all members of the human race regardless of culture • Life Expectancy – how long you live, relatively high is 60-70, women live longer than men • Biologically stronger? Young men engage in high risk behaviors? Men have more stress? • Literacy – percentage of population that can fluently read and write, ability to use language to communicate • Developed 99%, many African countries less than 30% - huge stress on gov’t - low skilled labor inhibits economic growth • Education system is key • Education – workers are more productive, increases productivity of society as a whole • Brain drain – talented youth in less developed countries receive scholarships to schools outside the country and don’t come back to initiate development in the area • Standard of Living – measure of wealth or enjoyment that one experiences

15. Ways to Describe Development • Physical Quality of Life Index – David Morris developed instead of gross domestic product, puts factors of Human Development Index on a scale from 0-100 • Determine the literacy rate for country • Subtract infant mortality rate from 166 and multiply the result by 0.625. this is the indexed infant mortality rate • Subtract 42 from the life expectancy and multiply the result by 2.7. this is the indexed life expectancy rate • Add together the literacy rate, indexed infant mortality rate, and life expectancy rate and divide that sum by 3 • Economic Data Indicators

16. Ways to Describe Development • Economic Data Indicators – GNP and GDP • Gross Domestic Product – selling value, or market price, of all the goods and services produced within a particular country’s borders, typically in a given year • Gross National Product – value of the goods and services produced by that country’s companies, usually within a year • Gross Domestic Product Per Capita – total amount of goods and services produced in a country divided by the total population of that country – end result is the average person’s production in their country for a particular year

17. Ways to Describe Development • Economic Sectors – where the majority of people work in their economy • Primary Economic Sectors – basic activities – farming, industries extract resources from the earth (timber, fishing, minerals, soil, etc) • Secondary Economic Sectors – use materials from primary industries to manufacture a product for purchase • Tertiary Economic Sectors – sell the products from the secondary economic sectors and provide services

18. Ways to Describe Development • Expendable income – amount of money left over after all the bills have been paid • Technology gap – some people have more technology than others, some people know how to use it while others do not • Technology Transfer Process – amount of time that it takes a new technology to leave the laboratory and arrive on shelves for citizens to purchase • Raw materials – who owns the rights to and the profit from raw materials

19. Ways to Describe Development • Demographic Statistics – can determine whether a country is more developed or less developed • Gender Balance – equal opportunities for women and men to succeed • Birth Rate – less developed countries have a much higher birth rate that more developed countries

20. Additional Development Theories • World Systems Theory – Immanuel Wallerstein, coined phrases in analysis • Core Areas – more developed countries, which use the resources of the periphery to continue their success • Periphery Areas – less developed countries, lack of investment by the more developed countries continues to keep these countries in poverty • Semi-Periphery Areas – gaining in development and have some of the benchmarks of success but are still lacking the political importance associated with the core countries • World Cities – major urban centers serve the core area based upon their financial and cultural importance in their areas • Dependency Theory – some countries are allowing themselves to remain in poverty as a whole to obtain some other type of economic power, usually for an elite class – leadership hording economic resources for themselves while majority of the population is struggling

21. Additional Development Theories • Core Periphery Model – • Industrial core – where the majority of manufacturing or industrial activities of a nation or a city are located • Upward transition – gaining jobs and attracting industry, business incentives may include tax breaks and agglomeration • Downward transition – companies are leaving, unemployment rates are high • Resource frontier – provide the majority of resources for the industrial core

22. Growth Models of Development • Rostow’s Model of Development – Walt Whitman Rostow (Take Off Model) • Traditional society – majority of workforce is involved in primary sector of economy - farming • Preconditions for takeoff/transitional stage – material conditions improve (transportation, infrastructure, etc) • Takeoff – companies become involved in manufacturing sectors • Drive to maturity – technology now being diffused and integrated into all areas of manufacturing sector • Age of mass consumption – workers become highly skilled in their professions and are using their strengths for the overall benefit of the economy

23. Growth Models of Development • Richard Nolan’s Stages of Growth Model • Initiation – technology is used sparingly and primarily for data processing • Contagion – technology begins to spread • Control – management is more frustrated w/ use of technology because employees don’t necessarily have the training or hardware to maximize their productivity with new software • Integration – users have come to terms w/ technology and found practical uses for it • Data Administration – technology is used mostly in the collection and storage of data • Maturity – new uses for technology are being integrated into the workplace • Neocolonialism – less developed countries are still economically dependent upon the more developed countries