1. Industry

2. 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

3. 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.

5. Industrial Areas in Europe

7. 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

9. 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

10. 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

11. 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

12. How would Weber classify Beer Bottling and Breweries? Explain?

13. 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

14. 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

15. Weber’s Least Cost Theory

16. 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

17. 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.

18. 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!

19. 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!!!!

23. 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

26. Randolph and Clinton (West Loop) - 1957

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

28. 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

29. Why Are Site Factors Important?

30. 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

31. Changing U.S. Manufacturing

33. 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

34. Changing U.S. Manufacturing

35. EU Structural Funds

36. 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

37. 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

39. Global Production (Steel)

40. 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.

41. 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.

42. 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

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

44. 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)

45. 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

46. China Wage Gap

50. 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

54. 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

55. Electronic Computing Manufacturing