1. Economic Development

2. 1. rational choice theory : decision-making  process that involves the most cost-effective choices  - profit maximization  - market mechanism (price) 2. Factors of Production: land, labor, capital, &  entrepreneurship I. Market Controls II. Raw Materials III. Power IV. Labor V. Transportation

3. Market equilibrium : price at which supply = demand

4. Manufacturing involves 4 distinct phases: 1. Selection (what product will be produced?) 2. Assembly (how will it be produced?) 3. Production (where will it be produced?) 4. Distribution (who will receive the product?)

5. II. RAW MATERIALS  form utility: transforming raw materials into usable products  Raw materials are classified into two categories:  ubiquitous materials: resources found anywhere  (production near market)  local materials: are found only at specific locations  (production near material site)  Paper made in Maine & Georgia? Why?  Ubiquitous or local?  Japan? Value added: Changing the form of a raw material increases its use i.e.: wheat to flour to bread

6. III.Power “Input” cost to manufacturing i.e.: Aluminum production needs huge electrical charges Early industries located near coal fields IV.Labor Labor “input” costs: skill, price & availability Nike shoes made in Thailand & Vietnam at 3 cents per shoe…Why? * Some industries require skilled labor: automotive, precision instruments, aerospace, computer programming V. Transportation water, rail, air, & road transport (water is the cheapest mode of transport) Role of Infrastructure: Production location is influenced by availability of transportation & communication

7. LOCATIONAL THEORIES OF INDUSTRY Beginning of the Industrial Revolution When & where?  Great Britain mid-1700s Why Great Britain?  Flow of capital  2 nd Agricultural Revolution  Resources: coal, iron, & water Types of Industrial Production Fordist Production: Fordist Production: assembly-line industrial production for mass consumption (post-WW I)  “Post-Fordist” Flexible Production:  “Post-Fordist” Flexible Production: “post-Fordist” multi-national producers can move production sites through outsourcing (post-WW II)  -role of technology?

10. Location Theories– predicting where business will or should be located 1. Weber’s Model 2. Hotelling’s Model Location Theories– predicting where business will or should be located 1. Weber’s Model 2. Hotelling’s Model 3. Losch’s Model Considerations: - variable costs - friction of distance 3. Losch’s Model

12. Weber’s Least-Cost Theory:  transport costs (“optimum point of production”)  labor costs  agglomeration costs Weaknesses of Weber’s theory?? -- “flexible” or “just-in-time” manufacturing -- “footloose” firms -- “offshoring” -- “new” international division of labor

13. “Just-in-time” delivery: rather than keeping a large inventory, companies engage in short-term production & ship quickly Offshoring: outsourced work or company headquarters that is located outside of the market country International division of labor: corporations draw from labor around the globe Time-Space Compression: improvements in transportation & communications technologies leading to more places being inter-connected

14. core-periphery model: a theory in which rich, industrialized countries (the “1st world”) dominate poorer, unindustrialized countries (the “3rd world”) *3 Major core regions of the world? *Internet Access: - a “digital divide”?

15. BULK-GAINING INDSUTRIES  Product gains volume or weight during production  i.e.: soft-drink bottling,  T.V.s, Automobiles BULK REDUCING  Product reduces weight during production  i.e. paper break-of-bulk point: location where transfer among different transportation types is possible i.e.: ship to truck

16.  Western & Central Europe  Anglo America  Russia & Ukraine  East Asia

17. Europe coincides with coal & iron fields of: Germany (Rhine-Ruhr Valley), IRON AND STEEL 1900: Europe controlled 90% of world’s manufacturing Deindustrialization: a process by which companies move industrial jobs to other regions with cheaper labor (switch from secondary manufacturing activities to a tertiary service economy)

18. Anglo America N.E. of U.S. & S.E. of Canada: manufacturing -“Megalopolis” (“Bowash” stretch of cities) -known today as “Rust Belt” *Today: U.S. manufacturing less than 15% of economy

19. E. Europe & Russia Manufacturing developed during WW II communist U.S.S.R. pushed for industrialization East Asia Japan: 2 nd most industrialized country after U.S.

20. Newly Industrialized countries: Brazil, Mexico, India & China China: major state-planned growth after 1950 focus on:N.E. district Northern district (Beijing) Chang district (Shanghai) Guangdong district Today: companies move production to take advantage of cheaper Chinese labor & special economic zones (SEZs), also known as export processing zones (EPZs) BRIC COUNTRIES!!!!! The Four “Asian Tigers” All industrialized economies: South Korea Taiwan Hong Kong Singapore

21.  High-tech jobs considered “white collar” jobs in the  quaternary/quinary:  communications, computers, software,  pharmaceuticals, biotechnology, aerospace, robotics  high-tech produces from the “core” to the “periphery”  part of the “knowledge economy”  U.S., E.U., Japan, China, South Korea  Regional concentrations agglomerated in: -- California (Silicon Valley, Pacific N.W. (aeronautical), New England (biomedical), Toronto  Why agglomerated??? 1. proximity to universities 2. avoid areas of strong unionization 3. local venture capital 4. “quality of life” 5. facilitation of communication & transportation links 6. “Special Economic Zones” (SEZ); Export- Processing Zones (EZP)

22.  tertiary: service sector jobs  restaurants, banking, education, offices, fast food, retail,  hotels, tourism  1. 1850: 60% of labor force in primary sector  2. In the post-industrial U.S. economy today (2000): 2% in  primary…80% in tertiary  Service Industry Giant: Tourism  11% of all the jobs around the world in tourism  High-Tech Corridors  An area designated by local or state governments w/lower taxes to provide high-tech jobs  i.e.: Silicon Valley, California Technopole: high tech agglomeration built on a between tech companies  i.e.: Route 128 in Boston

23. Black Market Economics: the “informal” economy 1. More than half the world works in the informal sector! 2. informal economy: best way to allocate scarce resources for the highest possible returns - D.M.V. or the Post Office 3.command economies (U.S.S.R./Cuba): tend to have large black markets 4.“Offshore Financial Centers” (mostly in Caribbean & S. Pacific)

24.  world is divided between relatively rich & poor countries Names for these countries  outdated names: 1st, 2nd, 3rd, or 4th World today: Developed---Developing---Underdeveloped or MDC---NIC---LDC  geographic description: “North/South line” Measuring Development “Economic indicators”: - GDP (gross domestic product): total value of all goods produced - per capita income - PPP (purchasing power parity):value of a dollar equalized across countries

25.  “Social indicators”:  - education, literacy, healthcare,  Happiness  “Demographic indicators”:  - life expectancy, infant mortality, birth  rate, % agricultural, HDI, PQLI  (Literacy Rate + INDEXED Infant Mortality Rate + INDEXED Life  Expectancy)  Characteristics of Developing Countries 1.lower levels of living & productivity 2. lower levels of living & productivity 3. Higher levels of inequality & absolute poverty 4. Higher population growth rates 5. Larger rural populations(more agricultural) and rural to urban migration 6. Less industrialization 7. Adverse geography 8. Lingering colonial impact: ethnic tension resource use

26. “Liberal” Models (Modernization Theory) Ex: Rostow’s Model 2. “Structuralist Models” (Dependency Theory) - Cores & peripheries 3. World-Systems Theory (Immanuel Wallerstein)

27. Dependency Theory: Sub-Saharan Africa Despite resources, sub-Saharan Africa severely lacks development legacy of the colonial era Mining companies Lack of Political institutions Ethnic problemS Biggest problem: imbalance between number of people & the food supply Modernization Theory: The Rostow Model Modernization Theory: The Rostow Model 5 stages of economic development American economist Developed model in 1950-60s (geopolitical context?) Studied 15 European countries Believed ALL countries have the ability to break the cycle of poverty Criticisms of Rostow Outdated and oversimplified (take your pill and blast Assumes all countries have same level of resources, population, climate Ignores “foreign aid” & “development loans” Underestimates effects of colonization & imperialism

30. Development Strategies Create economic “self-sufficiency” India government owned businesses, trade barriers & subsidies to promote domestic manufacturing Development through “international trade” Oil-rich regions (Persian Gulf, Russia, Mexico) E. & S.E. Asia? Ex: Rostow’s model Financing development Ex: FDI (foreign direct investment) Loans: World Bank & IMF microcredit and helping women

31. Global Partnerships Conservation Renewable resources Women Empowerment