Regional Industrial Development Problems Smith’s 3 categories of problem regions: –Underdeveloped regions (lack industrialization or are backward - lack capital, low skills, lack transport networks, lack income for demand) –Depressed regions (Previously strong, plants closed and no replacement; high unemployment, negative multipliers, reduced demand) –Congested regions (overdevelopment leads to diseconomies, possible movement out of industry leading to depressed status

Remedies for Problem Regions National demand approach (free market adjustment) Planned adjustment –Government investment in infrastructure, labor force training, transfer payments, etc. –Agencies targeting development: EDA, state and local economic development organizations, EDD’s, regional councils, incentives for investment (free trade zones, enterprise zones), tax abatements, “smokestack chasing.” US vs. EU vs. other market economies use of national demand vs. planned adjustment strategies “Common markets” as solutions to national boundary constraints: EU, NAFTA, APEC

Regional Impact of Multiplant Corporations Oligopoly again Dicken’s quote on the contingent outcome for regions of the development of multiplant firms “Footloose” industry – cases where the Material Index equals 1, or where the costs of transportation are not a significant cost factor

U.S. Patterns of Manufacturing Figures 11.6 and 11.7: the dots are spread within the state boundaries, not where the activity is clustered within states Alternative perspective: cartograms of manufacturing for the BEA economic areas In these maps the area of the region is proportional to the level of employment

World Manufacturing Patterns “At the global level, manufacturing is the driving and dominant force behind both international production and trade.” p. 252 (But also trade in raw materials and services) Some diagrams from Dicken’s Global Shift make the point about the growth of manufacturing trade—in the context of a globally more interdependent economic system (These were in Ch 4_2.ppt)

Development of Manufacturing Output Source: P. Dicken, Global Shift

Merchandise Exports Source: P. Dicken, Global Shift

The Recent Scene: Post 1997/Dicken I’ll assert: an acceleration of offshore activity More dramatic rationalization of production in lines of manufacturing sensitive to labor costs (Mexico  China / Asia / India ) Caution within industrial economies about job expansion as outsourcing / offshoring opportunities have grown Do these trends recast the geographic level of viewing “problem regions”, and the free-market vs. planned adjustment approaches and institutions? Like WTO? Alternatives to WTO?

Globalization of Production: Key Attributes Transnational capital movements Proliferation of transnational businesses Global capitalist firms – vs. regional players “Flexible production systems” Greater FDI Lowered global trade barriers (WTO, NAFTA) Emergence of regional blocs / trading zones giving advantage to territorial groups The tension between the global and the local