Sectors of the Economy Secondary Primary Tertiary Quaternary Figure 6.11 (p. 150) Figure 6.1 (p. 138) Secondary Primary DISCUSSION: * How do the photos in this slide represent the four sectors of the economy? * What are some other examples of these four economic sectors? Tertiary Quaternary

Agriculture & Rural Land Use – Key Topics Commercial Agriculture Subsistence Agriculture DISCUSSION: * How does commercial agriculture differ from subsistence production? * Is commercial agriculture equivalent to agribusiness? Primarily for purpose of selling products for money, often monocultures for economies of scale Primarily for direct consumption by a local population, usually small scale and low tech

Intensive Land Use Extensive Land Use Small-area farms or ranches High inputs of labor & high output per acre Cattle ranch, northeast Colorado DISCUSSION: * How does "intensive" agriculture differ from "labor-intensive" and "capital-intensive" agriculture? Rice paddies, southeast China Extensive Land Use Large-area farms or ranches Low inputs of labor & low output per acre

Large amount of human work is applied per unit of output Labor-Intensive Agriculture Large amount of human work is applied per unit of output Top picture – Labor-intensive corn raising in central Mexico. Bottom picture – Corn exported from capital-intensive U.S. farms to the Mexican market DISCUSSION: * In what other areas of the developed world is productivity increased by utilizing capital vs. labor intensive practices? Capital-Intensive Agriculture Large amount of capital (equipment and buildings used to produce other goods) is applied per unit of output

Subsistence – predominantly low-income regions Intensive subsistence – subtropical monsoon areas Shifting cultivation – tropical forests & savannas Nomadic herding – semiarid and arid lands Commercial – predominantly high-income regions Crop farming – more humid climates Livestock ranching - drylands

Probable culture-hearths of agriculture First Agricultural Revolution Invention of farming & domestication of livestock (8,000–14,000 years ago) + diffusion from several source regions = shift from hunter-gatherer to agricultural societies DISCUSSION: * What types of technical innovations made the First Agricultural Revolution possible? Probable culture-hearths of agriculture

Second Agricultural Revolution Technological changes (starting 1600s in Western Europe; spread by 1800s to North America) Began with new methods: crop rotation, better horse collars Later innovations: replace human labor with machines, supplement natural fertilizers & pesticides with chemical DISCUSSION: * How do machines like the one featured here boost agricultural production? * How does rotating crops assist in boosting agricultural production? Beginnings of commercialization of agriculture (production of surplus for trade); enabled widespread urbanization

Factors influencing location of agriculture • Climate and natural environment • Culture • Economic factors Urban market High transportation cost items (vegetables, eggs, dairy, flowers) Intensive land use – high land rent DISCUSSION: * Von Thünen developed his model in 1826. Is it still relevant today? * Are transportation costs still an important factor in where certain products are raised today? Medium transportation cost items (corn, soybeans, mixed farming) More extensive land use – medium rent Lowest transportation cost items (forestry, wheat, livestock ranching) Most extensive land use – lowest land rent Simplified von Thünen model of agricultural land use (1826)

Chile’s agricultural exports Vegetables and orchards near Santiago Regional produce warehouse in Chile Market in Slovakia

Third Agricultural Revolution Since 1960s - hybridized grains for better yields (“Green Revolution”) - greater reliance on synthetic fertilizers - genetically engineered crops - vertical integration of ownership (e.g., Cargill, ConAgra, ADM) - globalization of production A partial list of ConAgra’s brands Swiss Miss Hunt’s Van Camp’s Marie Callender’s Wesson Hebrew National Slim Jim Egg Beaters Rosarita Chef Boyardee ReddiWip Pam Peter Pan Orville Redenbacher’s Healthy Choice Banquet DISCUSSION: * How does this billboard reflect the Third Agricultural Revolution? * What is the difference between hybrid and genetically engineered plants?

“Green Revolution” – 1960s -1980s Rice - staple food for 2.5 billion Asians - provides 2/3 of calories for Asians with rice-based diets Green Rev – Raised yields * Improved rice strains * Greater use of fertilizer * Increase use of irrigation Asia’s rice production grew at annual rates of 3.0% until 1980s Yield growth rate exceeded high pop. growth rates of the time Rice plant Sources: FAO, IRRI (research organization devoted to rice) – part of global CGIAR effort at improving yields of staple crops worldwide

“Post-Green Revolution” (since 1980s) Green Revolution Plusses: Countries self-sufficient in rice or even exporters (Thai, Viet). Poor people benefited as yield increases caused real price of rice to drop. Problems Successes led to less concern about food security, and less investment in irrigation, agric research, and rural infrastructure. Growth rate in rice production declined during 1985-95 due to drop in growth rate of rice yields. In most places, despite increasing use of fertilizers, further increases in yields became harder to achieve and more costly. www.fao.org: Mobilising science for global food security

Globalization of the Cut-Flower Industry Kenya has become the European Union's biggest source of flower imports and overtaken Israel as market leader. It has a 25% market share, beating Colombia and Israel, which each have about 16%. Two thirds of these blooms go to the Netherlands, which dominates the trade in cut flowers worldwide through its auction halls where Dutch wholesalers buy flowers for re-export to markets as far away as the United States and Japan. Valentine's Day is a big date for Kenyan growers, thanks to the country's perfect match of high altitudes and equatorial sunshine. Roses make up 74% of Kenya's flower exports, followed by carnations which are the most popular flower in Britain at less romantic times because they last longest. Source – www.bbc.co.uk                    Flower industry workers in Kenya (left) and Colombia (right)

Third Agricultural Revolution Benefits Reduced uncertainties in agriculture Greater global exchange of ag products Increased yields Costs Increased dependence on fossil fuels Reliance on chemical inputs Less global diversity of food products Concentration of pollutants DISCUSSION: * How does this billboard reflect the Third Agricultural Revolution? * What is the difference between hybrid and genetically engineered plants?

Sectors of the Economy Secondary Primary Tertiary Quaternary Figure 6.11 (p. 150) Figure 6.1 (p. 138) Secondary Primary DISCUSSION: * How do the photos in this slide represent the four sectors of the economy? * What are some other examples of these four economic sectors? Tertiary Quaternary

Background on Economic Restructuring of the U.S. and Canadian Economies Job Competition Figure 6.8 (p. 147)

Structural change of the economy Figure 6.10 (p. 149)

Situation Analysis Situation: involves locating a factory because of its proximity to something else (raw materials, energy, customers) Very important historically – less important today except in a few industries where the transportation costs are so high (mining and very large items)

Site Analysis: Where to locate a factory or business Site: Availability of labor, land and capital at a particular spot or location Key Question: What is the cost of doing business in one location rather than another? (businesses want to keep costs at their lowest) Proximity (situation) still matters but is not the only factor to consider. In fact there are lots of other factors. In site analysis a factory can be located in the middle of nowhere as long as the total cost of doing business is cheaper than other locations. Task: Create a circle thinking map of all potential costs that a business must consider when locating a new business or factory.

Site Factors What factors does the list at the right not include? Do the factors change scale if outside the US? What does right to work mean?

Least-Cost Location Theory – Weber Cost minimization is half of profit maximization equation (along with maximizing revenues) Cost minimization theory: - labor-cost minimization - transportation cost minimization Cost minimization - an industrial location strategy that seeks to minimize what the firm pays to produce and distribute its products or services DISCUSSION: * Why is cost minimization so important to a business?

Sources: PBS & Ingolf Vogeler Minimizing Labor Cost Maquiladoras – foreign-owned assembly plants in Mexico (mostly textiles and consumer electronics) Over 11,500 maquiladoras along border with U.S.; employ 2 million+ Mexicans Revenues from maquiladoras, exceed make up 85% of trade between Mexico and U.S. Sources: PBS & Ingolf Vogeler Average work week is 60-70 hours; wages about $5.75 per day. Women are 70% of maquiladora workforce. Since 2000, some maquiladoras have closed as corporations move assembly-line jobs to even lower-wage countries, mainly China.

Fixed and Variable Costs Influence the Optimum Location for Economic Activity Classical economic geography models focus mainly on the variable cost of transportation

Determining the best location for a mfg Determining the best location for a mfg. plant with raw materials in Minnesota, Florida, and Texas & the market in New York (but with differing amounts of raw mat’s needed)

Weber Triangle Three factors: Transport costs: Transport costs Labor costs Agglomeration Transport costs: One market and two sources: Equal distance and shipping costs dictates a market location Two weight-losing materials results in an intermediate location

Weber’s Theory of Location Weber’s theory results in 3 generalizations: Using pure materials in the production process will always dictate a market location Weight-loss materials usage will pull the plant closer to the sources Intermediate location chosen most often No handling costs at terminal

Weber’s Theory of Location Labor Costs: Location chosen always has least combined costs A location my have higher transport costs, but more inexpensive labor Isotims: lines of equal transport cost Isodapane: line of total transport costs (sum of isotims)

Transportation Cost Minimization DISCUSSION: * What raw materials need to be processed close to where they are extracted due to high transportation costs? Raw Material Oriented Tendency for industry to locate near its source of raw materials in order to save on transport costs Usually occurs when raw materials lose weight in the production process (e.g., paper, steel)

Transportation Cost Minimization DISCUSSION: * What raw materials need to be processed close to markets due to high transportation costs? Market Oriented Tendency for industry to locate near population centers in order to save on transport costs Occurs when product is more costly to transport than raw materials (e.g., beverages, glass)

Break-of-Bulk Oriented Transportation Cost Minimization DISCUSSION: * What raw materials would be processed at a break-of-bulk point? Break-of-Bulk Oriented Location between sources of raw materials and markets – for products that must be divided and shipped from a central point of entry Intermodal transportation – e.g., moving from rails to trucks or ships to trucks, or ports to pipelines

Where is the best location for a steel manufacturing plant? Recipe for steel (traditional) Coal = 2 to 3 tons (+ energy*) Iron ore = 1½ to 2 tons Limestone = ¼ to ½ ton Mix all solid ingredients. Heat at about 600º F until thoroughly melted.* Pour molten blend into molds. Cool and serve. Makes one ton of finished steel.

The recipe for making steel has changed (new technology) How has this affected the location of modern steel-producing areas?

Shipbreaking industry, Bangladesh Shipbreaking yards in Bangladesh alone dismantle about 90 giant ships a year, mostly oil tankers, generating millions in revenue, employing tens of thousands, and providing a significant proportion of the iron and steel used by local industry. However, there is a dark side to the industry in which the workers must toil in extremely hazardous conditions that frequently lead to death or serious injury and which is tremendously harmful to the environment. ... A majority of ships are built in South Korea and China, filling orders placed by Japan, the UK, the US, Norway, Singapore and Denmark. Until the 1970s, shipbreaking was done in the countries of origin, using heavy machinery on salvage decks. But increasing environmental regulations and labour costs resulted in the transfer of this work -- first to Korea and Taiwan, and then to South Asia after the Asian Tigers upgraded away from this work. Source: www.sos-arsenic.net

Consider transport costs of a car’s components Consider transport costs of a car’s components. Where’s a good place to locate your assembly plant?

Over 50,000 U.S. auto-making jobs in these foreign-owned plants (New York Times data and map, 2005)

Proximity to highway transportation networks Is there a pattern or correlation shown on the map between factories and transportation? Source: www.fhwa.dot.gov

The cost of transporting data has declined to near zero Low transmission costs, plus ability to digitize data, revolutionized the location choices for high-tech industry What impact does this pattern have? Source: Probe Research, Inc., Telcordia (Bellcore); Progressive Policy Institute.

“Post-Fordist” Production – High Tech Industry Adapting the traditional models of economic geography Greater flexibility of production Less reliance on storage of inventory – seek prompt delivery of goods needed for production (“just-in-time”) Suppliers’ location Need to have access to fast delivery systems (= airports) Agglomeration of management Still occurs! High-tech innovators locate closer to airports; universities; amenities; venture capital (tends to be a “footloose” industry) Internationalized spatial division of labor Lower labor costs needed for production – industry locates manufacturing in lower wage areas (secondary) but tech and management stays in core area (quaternary)

Internationalized spatial division of labor Lower labor costs needed for production – industry locates manufacturing in lower wage areas (secondary) but tech and management stays in core area (quaternary) What is Outsourcing? Outsourcing is the act of one company contracting with another company to provide services that might otherwise be performed by in-house employees. Often the tasks that are outsourced could be performed by the company itself, but in many cases there are financial advantages that come from outsourcing. Many large companies now outsource jobs such as call center services, e-mail services, and payroll. These jobs are handled by separate companies that specialize in each service, and are often located overseas.

Economic Base Model Figure 6.7 (p. 146) DISCUSSION: * Where does the "regional multiplier" effect manifest itself in this model? Figure 6.7 (p. 146)

Multiplier Effect

Weber’s Theory of Location Agglomeration: Weber recognized that clustering will result in a per unit savings Example: