Industry

Origin of Industry The Industrial Revolution Industry = manufacturing of goods in a factory Shift from cottage industries to factories hand-made to machine-made dispersed (cottage industry) to clustered (factories) Impact greatest in certain industries iron, railroads, food processing/canning, chemicals textiles Led to increased productivity and over time an increase in the standard of living Origin “hearth” northern England/southern Scotland = Late 1700s

Diffusion of Industry The Industrial Revolution northern England/southern Scotland = Late 1700s Later → continental W. Europe/N. Amer (1800s) generally followed pattern of proximity to coal and iron Later with transportation improvements = RRs clusters in larger cities (London, Paris) Why? Large markets Labor force (displaced farmers, high NIR) Access to transportation (RR hubs) Access to capital (banks, loans, wealthy investors) other regions (East Europe, East Asia) in the 20th c.

Industrial Areas in Europe

Diffusion of Industry Diffused from a few MDCs to many LDCs What is the state of American manufacturing? 1/3 of manufacturing jobs lost over last decade “now in jeopardy”, “deindustrialization” similar situation in EU and Japan even Mexico is losing manufacturing jobs early 21st century Maquiladoras in decline???? Driven by globalization, mechanization and free trade

New International Division of Labor process by which companies move industrial jobs to other regions with cheap labor while retaining high-skilled tertiary jobs MDCs = highly skilled vs. LDCs = unskilled, labor-intensive Leads to high unemployment in deindustrialized region (i.e. Rust Belt) affects unskilled workers in MDCs negatively But skilled workers (quaternary, quinary) in MDCs benefit Leads to Interregional differences in LDCs areas connected to core developing more rapidly develop a growing middle-class (consumerism, pop culture, fast food) isolated, interior regions see little benefit/change Interior of China, Papua New Guinea, Sub-saharan Africa

Industrial Location Theory Location theory: Predicting where business will or should be located Assumes: Desire to maximize advantage over competitors Maximize profit Considers Variable costs Energy, transport expenses, labor costs, etc. Friction of distance Incr. in time and cost w/ distance

Location Models Compares the cost of transporting raw materials to factory vs. finished goods to market and considers the cost/benefits of Agglomeration: a process involving the clustering or concentrating of people or activities. Often refers to manufacturing plants and business that benefit from being in close proximity because they share skilled-labor pools and technology and financial services Weber’s Model Manufacturing plants will locate where costs of transportation, labor are the least and agglomeration is beneficial Theory: Least Cost Theory

How would Weber classify Beer Bottling and Breweries? Explain?

Weber’s Least Cost Theory Proximity to markets Bulk-gaining industries End product is heavy/larger/more fragile than inputs Examples: Fabricated metals (cars, appliances, etc.) Beverage production Other reasons to locate near markets (NOT WEBER”S LEAST COST THEORY) Single-market manufacturers Industry suppliers “Just-in-time” delivery Perishable products

Weber’s Least Cost Theory Proximity to inputs Examples: Copper, Steel Paper Bulk-reducing industries End product is lighter/less bulky and therefore easier and cheaper to transport than inputs. Locates closer to inputs

Weber’s Least Cost Theory

Modes of Transportation Ship, rail, truck, or air? Consider “line costs, terminal costs and route flexibility” Truck = most often for short-distance travel Train = used to ship longer distances (1 day +) Ship = slow, but very low costs per km/mile Air = most expensive, but very fast Locate at “break-of-bulk point” Place where transfer between modes takes place Minimize cost by locating processing nearby Oil refineries Less important now due to containerization

entrepôts A seaport where goods are exchanged/stored until they are shipped. The goods face no import/export duties upon shipment use of entrepôts dates back to long distance sea trade routes. The benefit was that it removed the need for ships to travel the whole distance of the shipping route. The ships would sell their goods to the entrepôt and the entrepôt would in turn sell them to another ship, removing the large risks associated with long distance travel. For example, if a ship was carrying spices from China is could sell the spices to an entrepôt in Singapore and the entrepôt could sell the spices to a ship heading to England. obsolete, but the term is still used to refer to duty-free ports with a high volume of re-export trade. Singapore and Hong Kong serve as modern day examples.

Site Factors Are Important Capital = loans for investment, machinery, inventory Labor (most important site factor) Labor-intensive industries vs. capital-intensive Examples: textiles vs. autos Which is more likely to relocate to an LDC? Labor-intensive because they will save more $ on wages since it is bigger part of their costs!

Site Factors Are Important Where are you going to find access to SITE factors like cheap labor and capital in the 1800s? Think…..displaced farmers, immigrants in the US banks, comp. headquarters, wealthy investors, etc. Where are you going to have SITUATIONAL access to modes of transportation and to markets (customers) in the 1800s? Think…….RRs CITIES!!!!

Site Factors Are Important Land also includes environmental factors = utilities bid-rent theory What is the basic assumption in bid-rent theory? Land is more expensive closer to the market/city center How does the architecture and location of early factories within cities reflect the site (bid-rent theory) and situation costs? situation located close to RRs for transporting goods RRs are located just outside the city center site city center (CBD/ the Loop) land is too expensive So they outbid other activities for areas just outside CBD West Loop, South Loop, River North multistory construction b/c land is still relatively costly there

Randolph and Clinton (West Loop) - 1957

How are site and situation factors affecting/changing the traditional distribution of industry?

Factors Changing Location (w/in USA) Changing industrial distribution within MDCs Intraregional shift (cities → suburban/rural) Development of road transport = trucking Interstate highway system (1950s) allows location away from central city railway hubs shifting situation costs Land is cheaper (shifting site costs) Rural electrification (shifting site costs) Tennessee Valley Authority (TVA) brings electricity to rural south

Why Are Site Factors Important?

Factors Changing Location (w/in USA) Changing industrial distribution within MDCs Intraregional shift (cities → suburban/rural) Interregional shift within the United States Northeast/Midwest (Rustbelt) → South/West (Sunbelt) Right-to-work laws/non-union = lower site costs see migration unit understand closed vs. open shop and “right to work” laws and their effect on wages. Climate = less utilities = lower site costs air conditioning makes South livable plus “city to rural” advantages from previous slides When factories moved form the urban north they relocated PRIMARILY to the RURAL SOUTH

Changing U.S. Manufacturing

Factors Changing Location Changing industrial distribution within MDCs Interregional shifts in European Union Directly encouraged by government policy Convergence shifts - jobs stirred toward poorer regions Competitive and employment regions “rich areas” that receives assistance to offset job losses What type of reaction might these policies produce? Anti-EU (supranationalism), anti-globalization Examples? Brexit Marine Le Pen (Populism, Economic nationalism) In the U.S. Blue collar votes for Trump in Rust Belt

Changing U.S. Manufacturing

EU Structural Funds

New International Division of Labor process by which companies move industrial jobs to other regions with cheap labor while retaining high-skilled tertiary jobs MDCs = highly skilled vs. LDCs = unskilled, labor-intensive Leads to high unemployment in deindustrialized region (i.e. Rust Belt) affects unskilled workers in MDCs negatively But skilled workers (quaternary, quinary) in MDCs benefit Jobs and investment income Leads to Interregional differences in LDCs areas connected to core developing more rapidly develop a growing middle-class (consumerism, pop culture, fast food) isolated, interior regions see little benefit/change Interior of China, Papua New Guinea, Sub-saharan Africa

International shifts in industry MDCs to LDCs (changing distributions) Attraction of new industrial regions East Asia, South Asia, Latin America Site factors: Cheap labor, lax environmental regulations Situation factors: free trade, easy transportation, telecommunications, etc. Outsourcing shift responsibility for production of components to independent suppliers

Global Production (Steel)

Effects of the New International Division of Labor on LDCs Added job opportunities Positive addition to personal and national income that raises societal status, family income, etc.

Effects of the New International Division of Labor on LDCs Gender opportunity Entry of women into work force means added inc. household support, which improves the standard of living and lowers population growth rate. Child labor abuse and exploitation use of child labor discourages further education which might hinder development in long-run.

Effects of the New International Division of Labor on LDCs Migration Migration to specialized manufacturing areas improves personal economic positions but weakens family and traditional culture

Effects of the New International Division of Labor on LDCs Environmental Relaxation/lax enforcement invites new health ailments/pollution problems.

Effects of the New International Division of Labor on LDCs Cultural change Westernization of production, management, etc., changes the social and cultural relationships (e.g., women in the workplace, language, cultural disruption)

Effects of the New International Division of Labor on LDCs Regional growth Location of new jobs fosters regional growth and concentration of wealth, pollution, etc. Uneven nature of growth creates a spatial gap between “have” and “have not” areas. “haves” = connected to int’l trade with the core “have-nots” = interior, subsistence farming, not connected to int’l trade with the core

China Wage Gap

Renewed attraction of traditional industrial regions Capital-intensive, bulk-gaining industries Proximity to market Availability of investment Proximity to skilled labor Technology corridor: area designated by local or state govt to benefit from lower taxes and high-tech infrastructure with goal of providing high-tech jobs to the local population Technopole: An area planned for high tech with agglomeration built on a synergy among tech companies

Footloose industries – industry not tied to other factors Cost of product does not change based on where it is produced. Both raw materials and end product are light and easy to transport. Use highly skilled labor but not labor-intensive Can use basic energy from the grid Diamonds and computer chips are often cited as examples

Electronic Computing Manufacturing