Industrial and Economic Development Unit 6

Economic Classification Production / Consumption / Distribution Sectors Primary Secondary Tertiary Quaternary

Economic Sectors Primary Raw Materials Secondary Processing

Economic Activities Tertiary Quaternary Moving / Selling / Trading Services Quaternary Information Quinary Decision Making

Industrialization Industrialization Decline in primary activities Manufacturing Machines Decline in primary activities

Industrial Revolution Machine Power Fueled by engines Steam Coal and water Textile Production

Industrial Revolution Factories Moving Water Coal allows movement Infrastructure Trains / Rails Transportation of goods

Assembly Line Production Henry Ford Assembly Line Production Interchangeable parts Mass Production Division of Labor

New Industrial Concepts International Division of Labor Just in Time Production

Weber’s Least Cost Theory Factory Location Least Cost to the Factory / Company Assumptions Cost of Transportation Weight Distance Maximize Profits Minimize Cost

Weber’s Least Cost Theory Assumptions Markets are fixed Labor is fixed Uniform Landscape 4 Main Drivers Transportation Labor Agglomeration Deglomeration

Weber’s Least Cost Theory Transportation and Distance Weight and Distance Types of Distance To raw materials Distance to energy Perishable

Weber’s Least Cost Theory Transportation and Distance Weight Losing vs Weight Gaining Heavier to lighter vs Lighter to Heavier Weight Losing Heavier to Lighter Raw Material Weight Gaining Lighter to Heavier Market

Weber’s Least Cost Theory Fixed Transportation Costs Light Weight / High Value Footloose Industries

Weber’s Least Cost Theory Labor Cost Wages and ……. Machines and Labor Labor vs Transportation Substitution Principle

Weber’s Least Cost Theory Agglomeration Several Industries come together Share Cost High Tech Corridor Silicon Valley Movement of Skilled Labor Backwash effect

Weber’s Least Cost Theory Locational Interdependence Location due to competitors Dominate markets Competitors close by

Weber’s Least Cost Theory Deglomeration Too crowded / congested Traffic / Pollution / Etc

Weber’s Least Cost Theory Criticisms Markets and Labor Mobile

Current Industrial Patterns Develop faster / Richer? Levels of Development Material condition of people Everywhere / some level of development

Current Industrial Patterns Classification MDC / LDC Social / Demographic / Economic

HDI Human Development Index Compare Development 4 Areas Life Expectancy (Demographic / Health) Avg Education (Social) Literacy Rates (Social) Standard of Living (Economic)

HDI Economic GDP More Developed Less Developed Gross Domestic Product

HDI PPP GDP Drawbacks Purchasing Power Parity Relative Wealth Not the whole picture Informal Sector

HDI Informal Sector Meets Demand Less Expensive

Other Data Raw Materials Consumer Goods TV’s and Radios Women’s Rights

Big Mac Index Big Macs Thailand / 1.78 -> 8,440 PPP Thailand / 1.78 -> 8,440 US / 3.22 -> 42,000

Development Gap MDC’s and LDC’s MDC’s Faster Gap Widens Examples:

Development Gap Regional Split Northern vs Southern Hemisphere North-South Gap

Development Gap Structuralists vs Liberals Structuralists Global Economic Structure Dependency Theory Dependent on MDC’s

Development Gap Dependency Theory Wallerstein’s World System Analysis Core Periphery and Semi Periphery Core and Periphery Colonization of Africa

Development Gap Rostow’s Model Similar Path of Development 5 Stages

Rostow’s Model Stage 1 Traditional Society Subsistence Consumed by Producer Gov’t Produced Resources

Rostow’s Model Stage 2 Before “Takeoff” Economic Activity Investments Technology / Infrastructure Surplus is traded Productivity

Rostow’s Model Stage 3 Takeoff Rapid Growth Industrialization Agriculture

Rostow’s Model Stage 4 Maturity Diffusion of Technology Industry Skilled Labor

Rostow’s Model Stage 5 Mass Consumption Services Oriented Higher Incomes Consume Products

Critics of Rowstow America / Western Experience Dependency Independent Agent Not a player in the larger scheme

Reduce Development Gap Self Sufficiency Provide for its own Evenly distribute investments Reduce Poverty

Reduce Development Gap Closed Economic State Limited imports High Tariff Used in China, India, Africa Corruption / Inefficiency

International Trade Trade with Foreign Nations / Companies Identify success Invest Compete Comparative Advantage Create comparable products / cheaper

Economic Globalization Global Interconnectedness of business Starbucks, McDonalds, MTV Multinational / Transnational Corporations HQ / Production Conglomerate Large company owns smaller Coke and bottling companies

Economic Globalization Outsourcing Production facilities Many reasons Taxes, wages, land, environment

New Industrial Countries Asian Tigers Tech boom Taiwan, Hong Kong, South Korea, Singapore Asian Tigers, Japan, China Pacific Rim Economic Region

Foreign Direct Investment LDC Investment from foreign company Special Economic Zones Taxes, Regulations Export Processing Zones Labor Restrictions, Taxes Free Trade Zones Duties / Tariffs

Maquiladoras Maquiladoras Zone Maquiladora Northern Boarder Free Export Created by Mexican Government Provide Jobs Problems

International Division of Labor Global Scale World Wide Production Assembled Elsewhere Automobiles Cheap Transportation

Free / Fair Trade Foreign Direct Investment Free Trade Invest by Foreign companies Good Bad Free Trade Outsourcing Work Regulations

Free / Fair Trade Fair Trade Outsource Work Some regulation

IMF / World Bank Improve Socioeconomic Statuses Loans at Low Rates Stipulations Economic Improvements Move toward Privatization Private instead of Public Greater efficiency

IMF / World Bank Pay for free services Privatization = improved services

Non Government Organizations NGO Non profit Help LDC’s Doctors w/out Boarders Save the Children Social / Human Rights Issues

Environment Earth’s sustainability Impact due to increased access / travel Eco Tourism Environmentally Friendly Travel / Vacations

Environment Sustainable Development Human Consumption / Earth’s resources UN Commission on Sustainable Development

Environment Global Warming / Climate Change Greenhouse Gases Trapped Heat = Warmer Temps