INDUSTRIALIZATION & ECONOMIC DEVELOPMENT

Unit 3

I. THE INDUSTRIAL REVOLUTION� �UNIT 3: INDUSTRIALIZATION & ECONOMIC DEVELOPMENT

A. IR Beginnings

1. The hearth of the IR was England in the 18^th c.
• The era prior to the IR is referred to as the Cottage Industry (home based manufacturing)
2. Wealth from colonization funded inventions like James Watt’s steam engine.
3. At first, manufacturing needed to be close to coal fields and ports
• in order to transport (situation cost) finished products
• this is the historical (classic) reason for the location of factories
• NOW LABOR (SITE COST) IS THE MOST IMPORTANT FACTOR IN WHERE A FACTORY IS BUILT
4. Later, the development of railroads, steamboats, and steam locomotives revolutionized the IR.

A. IR Beginnings

5. The IR was the principal cause of population growth in stage 2 of the Demographic Transition Model

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6. The results of the IR involved gradual diffusion of new ideas and techniques

• Beginning with England and diffusing to Western Europe, the U.S., Japan, etc.,

B. Diffusion to Mainland Europe

1. Manufacturing in continental Europe started near coal fields and ports.
2. The Rhine-Ruhr Valley was an important industrial area for three countries.
• France, Germany, & Italy
• Connects to the Rotterdam Port in the Netherlands (Europe’s largest port).

How would you explain the pattern of diffusion shown on this map?

C. Diffusion Beyond Europe

1. In the 19^th c., secondary hearths of industrialization were established in North America, western Russia and Ukraine, and East Asia.
2. Manufacturing in N. America first began in New England and later flourished along the Great Lakes (with the building of the Erie Canal).
3. In Russia and Ukraine, manufacturing is centered near St. Petersburg and Moscow and along the Volga and Oka Rivers.
4. Japan was the first to industrialize in East Asia, and China is a center of manufacturing today.
5. Today, industry in concentrated in 3 of the 9 world regions
• Europe (beginning w/ England in the 18^th century)
• North America (beginning w/ N.E. United States & S.E. Canada)
• East Asia (beginning w/ Japan, now China is the largest manufacturing country in the world)

* Reference maps on pg. 396 – 397 of old textbook.

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Current Leading Industrial Regions

• Industry is concentrated in Europe, N. America, and E. Asia (3/4 of industrial production)

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D. Industrialization, Colonialism, and Imperialism

1. Imperialism - A policy of extending a country’s power and influence over another territory or nation, often through colonization and/or military force.
2. Britain’s imperial dominance of India:
• Britain controlled India’s cotton production
• Exported cotton out of India, to the textile factories in Britain
• Textiles sold back in India (large market)
3. Led to a “scramble for Africa” – Berlin Conference
4. Imperialism led to the creation of an international division of labor – labor in different world regions play complementary roles in an interdependent global economy
• This international division of labor still exists, but has changed as more countries have began to industrialize (New International Division of Labor)

European Colonization of Africa after the Berlin Conference

II. VARIATIONS OF DEVELOPMENT��UNIT 3: INDUSTRIALIZATION & ECONOMIC DEVELOPMENT

A. Human Development Index (HDI)

1. The UN’s HDI bases the level of development on:

a. decent standard of living

b. long and healthy life

c. access to knowledge

2. Countries are grouped into 4 classes ranging from developed to developing.

• Very High (Developed): above 0.79
• High (Developing): 0.70-0.79
• Medium (Developing): 0.52-0.69
• Low (Developing): below 0.52

HDI

Identify a region that is very high, high, medium, and low.

HDI By Region

B. Economic Indicators

1. Economic indicators for determining development include:

• Gross National Income (GNI)
• the total income of a country’s residents and business, including investment income, regardless of where it was earned (includes money earned outside of the country)

b. Gross Domestic Product (GDP)

• the value of the output of goods and services produced in a year, NOT including money that leaves and enters the country

c. Purchasing Power Parity (PPP)

• Adjustment made to GNI to account for differences among countries in the cost of particular goods (a Big Mac for example)

d. Poverty Rates

• The percentage of people living below the poverty line

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Economic Indicators: GNI per Capita (PPP in US$)

Economic Indicators: GDP

GDP vs. GDP Per Capita

Compare the two maps… How does India (and China) demonstrate a potential flow in using GDP as a measure of development?

Economic Indicators: Poverty, Poverty Lines, and Poverty Rates

B. Economic Indicators

2. Economic Structure

• Formal Sector:

a. Primary Sector – directly extract materials from the earth (agriculture, fishing, forestry)

b. Secondary Sector – manufacturing (turning raw materials into consumer goods)

c. Tertiary Sector (Service Sector) – providing goods and services in exchange for payment (retail, banking, law, education, gov’t. etc)

• Quaternary Sector (part of the Service Sector)- technological advancement and data processing, scientific research, & development.
• Quinary Sector (part of the Service Sector)- highest level management decisions are made in the areas of business, government, education, & science.

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• Informal sector – part of an economy that is not officially recorded, monitored, or taxed by the government (babysitters, yard work, illegal activity)

C. Socioeconomic Indicators

1. Socioeconomic indicators include:

• Infant Mortality Rate
• Gap has narrowed since 1980
• IMR: 17 – 6 in developed countries
• IMR: 107 - 44 in developing countries
• Gap has gone from 90 to 38
• Access to skilled health personnel
• Leads to longer life expectancies
• Access to education
• Years of schooling, Pupil/Teacher ratio, Literacy rate

Socioeconomic Indicators:

Infant Mortality Rate

Socioeconomic Indicators:

Life Expectancy at Birth

Socioeconomic Indicators:

Mean (Average) Years of Schooling

Socioeconomic Indicators:

Literacy Rate

D. Gender Inequality Index

1. The UN created the Gender Inequality Index (GII) based on the following:

a. Empowerment

b. Labor Force

c. Reproductive Health

2. UN claims that gender inequality has declined in nearly every country since the 1990s.

*Also a gender empowerment index, so be careful what is being measured, inequality or equality.

Source: UN

Notes:

Canada: 0.069 (15)

United States: 0.179 (21)

China: 0.192 (79)

Mexico: 0.390 (86)

Gender Inequality Index

Gender Equality Index:

Female Labor Force Participation

Gender Equality Index:

Percent of Males/Females in Labor Force

Gender Equality Index:

Female Income as a Percentage of Male Income

Women in Parliament

Gender Equality Index:

Maternal Mortality Ratio

Gender Equality Index:

Adolescent (15-19) Fertility Rate

III. DEVELOPMENT AND INCOME INEQUALITY��UNIT 3: INDUSTRIALIZATION & ECONOMIC DEVELOPMENT

A. OECD Members

1. Thirty countries belong to the Organization for Economic Cooperation and Development (OCED)

2. The countries are mostly very wealthy and industrialized

OECD Members

The Gap Between the Rich and the Poor

B. Measuring and Mapping Income Inequality

1. Lorenz curves disclose income inequality within countries, showing the relationship between a country’s income and population.

2. The Gini coefficient shows income inequality. It is computed from the area between the line of equal income distribution and a country’s Lorenz curve.

Measuring and Mapping Income Inequality

Lorenz Curve

C. Income Distribution

1. Factors affecting income distribution

a. Individual

b. Social

c. Policy Related

d. Historical

2. Globalization and income distribution

a. Trickle-down theory

b. The theory of the widening gap between the rich and poor

IV. DEVELOPMENT THEORY� �UNIT 3: INDUSTRIALIZATION & ECONOMIC DEVELOPMENT

A. Self-Sufficiency Path

1. Self-Sufficiency Path Key Elements

a. Limit import of goods

b. Businesses don’t have to compete with international corporations

c. Investment spread equally

d. Minimized discrepancies in wages

2. Challenges to this Path

a. Protection of inefficient businesses

b. Need for large bureaucracy

Read Case Study: India’s Quest for Development on pg. 328-329 in old textbook.

B. Rostow’s Model of Development�(International Trade Approach/Neoliberal Model for Development)

B. Rostow’s Model of Development

This is the international trade approach to development, sometimes referred to the Neoliberal Model for Development

C. Wallerstein’s World-System Theory

1. Capitalism led to an international division of labor between core states, peripheral regions, semi-peripheral regions
• The core exploits the periphery and the semi-periphery
• The semi-periphery is exploited by the core, but exploits the periphery
• The periphery is exploited by both the core and the semi-periphery
2. This leads to the uneven development - the development of core regions at the expense of those on the periphery.

D. Dependency Theory

1. The theory that the periphery is poor because its economically dependent on the core in a disadvantageous relationship originally established under colonialism and imperialism
2. Dependency can develop through imperial dominance or financial-technological dominance
• Neo-Imperialism/colonialism – the use of economic, political, and/or social pressures to control former colonies (LDCs)
• Leads to Uneven Development

E. Poverty-Reduction Theory

1. Poverty-reduction theory has been the focal point of present development theory since 1999
2. It’s often advanced by the World Bank and IMF
3. Poverty-reduction strategies have been developed in concert with the UN’s Millennium Development Goals

1. Eradicate extreme poverty and hunger

2. Achieve universal primary education

3. Promote gender equality and empower women

4. Reduce child mortality

5. Improve maternal health

6. Combat HIV/AIDS, malaria, and other diseases

7. Ensure environmental sustainability

8. Create a global partnership for development

F. International Trade Approach

1. Most countries have embraced the international trade approach since the late 20th century
2. Neoliberal Model of Development Theory – capitalism can drive development as long as appropriate reforms are implemented (Fair Trade) that allow fair economic conditions between the core and the periphery (opposite of Wallersteins)
3. One example: Developing countries often contain an abundant supply of many raw materials sought after by manufacturers in developed countries (Think rare earth minerals in Mongolia, Oil in Papua New Guinea, etc.)

G. Closing the Gap

1. Progress in reducing the gap in the level of development varies based on the variable

a. Infant mortality gap has narrowed

b. Life expectancy gap hasn’t narrowed

c. Gap in wealth has widened

G. Closing the Gap: Infant Mortality Rate Change by HDI Level

G. Closing the Gap: Life Expectancy Change by HDI Level

G. Closing the Gap: GNI Per Capita Change by HDI Level

This is evidence of uneven development caused by neocolonialism.

H. Financing Development

1. Financing comes from direct investments by transnational corporations or loans from banks and international organizations
2. Foreign Direct Investments (FDI) is investment made by a foreign company in the economy of another country
3. The major lenders to developing countries are the World Bank and the International Monetary Fund (IMF)

I. Financing Challenges

1. Developing countries

a. The IMF, World Bank, and developed countries fear that granting, canceling, or refinancing debts create bad habits in developing countries

2. Developed countries

a. The heart of global economic crisis in developed countries was the poor condition of banks and other financial institutions

b. Bad loans were especially widespread in housing

V. DISTRIBUTION OF INDUSTRY� �UNIT 3: INDUSTRIALIZATION & ECONOMIC DEVELOPMENT

A. Industrial Regions

1. Industry is concentrated in Europe, N. America, and E. Asia (3/4 of industrial production)

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*Outside of these 3 regions the leading producers are Brazil & India (2 good examples of newly Industrialized Countries)

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B. Major Influences on the Contemporary Geography of Manufacturing

1. Intermodal connections, where two or more modes of transportation meet, have reduced transportation costs (Break of Bulk).
• Chicago is a great example of a break of bulk point in the US
2. Regional trade organizations like NAFTA (or USMCA) and the EU have influenced where imported goods are produced.
3. The role of energy supply has changed industrial location decisions.
4. Deindustrialization can also occur as companies move industrial jobs to other regions.
• The steel industry is a good example of deindustrialization in the US

There used to be a lot of steel mills in Pittsburg due to the close proximity to coal fields, but this deindustrialization has occurred and steel production is mostly outsourced to China.

The USMCA (formerly NAFTA) eliminated most tariffs and trade barriers among the three countries and it increased international trade

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The European Union is a free trade movement at its core, with all tariffs and non-tariff trade barriers removed.

C. New Centers of Industrial Activity

1. Four Tigers of East and Southeast Asia: South Korea, Taiwan, Hong Kong, and Singapore.

a. They were the first newly industrializing countries.

b. Manufacturing was their Rostow’s “take off” industry

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2. BRICS: Brazil, Russia, India, China, and South Africa.

a. Evidence of the shift in global economic power away from the traditional economic core.

b. Control ¼ of the world’s land area and 3 billion of the world’s inhabitants

c. BRICS countries are great examples of the semi-periphery of Wallerstein’s World Systems Theory

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3. These countries generally have abundant low cost labor (site factor) so labor intensive industries often outsource production to these countries.

• Cost of labor is the most important factor for labor intensive industries.

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VI. GEOGRAPHIC COSTS: SITE AND SITUATION��UNIT 3: INDUSTRIALIZATION & ECONOMIC DEVELOPMENT

A. Situation Factors

1. Proximity to Input – optimal plant location is near the input if raw material transportation costs > transportation costs of product to consumer
2. Proximity to Market – optimal plant location is near market if raw material transportation costs < transportation costs of product to consumer
3. Proximity to Market is critical for…
• bulk-gaining industries – beverages, automobiles, fabricated metals, etc.
• single-market manufacturers – only have 1 or 2 types of customers (companies that make car parts)
• perishable products – milk, eggs, newspapers, etc.
4. Situation Costs = Transportation Costs

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A. Situation Factors

5. The increasing importance of proximity to markets instead of proximity to inputs has changed the distribution of steel.

A. Situation Factors

6. Motor vehicles are built near their markets (excellent example of a bulk gaining industry).

The world’s 3 major industrial regions house 80% of the world’s final assembly production.

B. Transportation Costs (Situation Costs)

1. Firms seek the lowest-cost mode of transportation.
2. They usually have a break-of-bulk point, which is a location where transfer among transportation modes is possible.

C. Site Factors: Land, Labor, and Capital

1. Labor is the most important factor on a global scale. For instance, production of textiles requires less-skilled low-cost labor and mostly occurs in low-wage countries.

Firms will pay more in situation costs (transportation) if it means cheaper labor costs

a. Labor intensive industry – wages/compensation to employees constitute a high % of expenses

-More likely to be outsourced

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b. Capital intensive industry – much lower % of expenses are given to wages

C. Site Factors: Land, Labor, and Capital

2. Capital – manufacturers usually need to borrow funds to establish new factories or expand existing ones.
3. Land – lots must be large enough to accommodate efficient, contemporary one-story buildings.
• Factories need to be single story, so contemporary factories are located in the suburbs where land is cheaper than in central cities/downtown areas.

VII. CHANGES IN INDUSTRIAL PRODUCTION ��UNIT 3: INDUSTRIALIZATION & ECONOMIC DEVELOPMENT

A. Fordist Production

1. Fordist Production endured from 1945-1970. It was based on Henry Ford’s assembly line, which transformed mass production.
2. The Fordist period is marked by a surge in both mass production (because of the assembly line) and mass consumption (general increase in wealth).
3. Fordists also used vertical integration.
• Vertical integration – a company controls all phases of a highly complex production process (ie: Ford makes all parts, tires, windshields, etc. for their cars)
• Vertical integration is the OPPOSITE of outsourcing

B. Flexible Production and Product Life Cycle

1. Many enterprises today have moved toward a post-Fordist, flexible production model.
2. Flexible production allows firms to pick up and choose among a multitude of suppliers and production strategies all over the world and then quickly shift in response to changes in production costs or consumer demand.
• Just-in-time delivery – means parts are shipped to factory as needed, often on a day to day, or even hour to hour basis (Single Market Manufacturers)
• Cuts down on money needed to be spent housing idle inventory
3. Through the process of commodification, new goods are bought, sold, and traded on the market.
4. The product life cycle involves changes in the production of a good over time.
• (1)Introduction stage – (2)Growth Stage – (3)Maturity Stage – (4)Declining Stage

Fordism vs Post-Fordism

C. Weber’s Least Cost Theory Model

1. Alfred Weber’s least cost theory model explains where industries would cluster.
• His theory focuses on a factory owner’s desire to minimize three categories of cost:
• Transportation
• Labor
• Benefits of agglomeration
• Connects to bulk gaining vs bulk reducing industries

D. International Division of Labor

1. Labor is concentrated in the periphery and semi-periphery to take advantage of lower labor costs, whereas research and development is primarily located in the core.
2. High skill production usually occurs in developed countries, and low skill production usually occurs in developing countries.
3. The commodity chain shows the steps from development to consumption.
4. Outsourcing has had a major impact on the distribution of manufacturing.
• Each step in the production process is scrutinized to determine the best possible place for production to occur – has had a major impact on the distribution of industry
5. Skilled manufacturing work and bulk-gaining industries remain in MDCs

Global Supply Chain of a Computer

Manufacturing Value as Percentage of Gross National Income (GNI)

Clothing Made in the US

E. Shifts within the US/Europe

U.S.

1. Right-to-work laws have lured manufacturers away.
2. Industry has shifted from the Northeast to the South and West.

Europe:

1. European Union has created policies (subsidies) to explicitly encourage industrial relocation to regions experiencing economic hardships

F. Emerging Industrial Regions

1. The USMCA (NAFTA) eliminated most barriers to moving goods among Mexico, the US, and Canada since 1994.
2. Mexico attracts labor-intensive industries, resulting in plants in Mexico near the US border called maquiladoras.
• However, as Mexico has developed economically the cost of labor has increased, resulting in many maquiladora jobs being relocated to China or India where the labor is cheaper (site factor)
3. Export Processing Zones are free-trade zones. (Same as SEZs)

VIII. ENERGY AND DEVELOPMENT� �UNIT 3: INDUSTRIALIZATION & ECONOMIC DEVELOPMENT

A. Energy Supply and Demand

1. Development is based on availability of abundant low-cost energy.
2. 5/6 of the world’s energy needs are supplied by fossil fuels.
3. Developed countries consume 1/2 of the world’s energy
4. Earth’s energy resources are distributed unevenly

B. Energy Resources

1. Two types of energy reserves exist:

a. Proven Reserves

b. Potential Reserves

Natural Gas

Petroleum

C. Energy Sources

1. OPEC formed in 1960 to gain more control over their resource.
2. Prices are set by governments possessing oil reserves instead of petroleum companies.
3. In general, higher pries of petroleum caused consumption to decrease.

D. Alternative Energy Sources

1. Nuclear energy is considered is nonrenewable alternative energy source, supplying 14% of the world’s electricity.
2. Renewable energy sources include hydroelectric power, biomass energy, wind energy, and solar energy. The ultimate renewable resource is solar energy

IX. INDUSTRY AND POLLUTION� �UNIT 3: INDUSTRIALIZATION & ECONOMIC DEVELOPMENT

A. Pollution

1. Air Pollution: Burning fossil fuels causes air pollution. Air pollution can damage a region’s vegetation and water supply, lead to acid precipitation (acid rain), cause temperatures to rise, and deplete the ozone.
2. Solid Waste Pollution: About 4 pounds of solid waste is generated per person each day in the US.
3. Water Pollution: Point-source pollution enters a body of water at a specific location. Nonpoint-source pollution comes from a large, diffuse area.

Carbon Dioxide Emissions by Country