1. Industrialization and Economic Development Lecture Notes Chapter 11

2. Industrialization Economy
The growth of manufacturing activity in an economy or a region
Usually accompanied by a decrease in the number of subsistence farmers in a country or region as they leave the agricultural sector in favor of manufacturing jobs
Economy
The system of production, consumption, and distribution in a region

3. Major Economic Classifications
Primary Sector- the part of the economy in which activities revolve around getting raw materials from the Earth
75% of LDC

4. Major Economic Classifications
Secondary Sector- deals with processing raw materials into finished products with greater value
Factories or Manufacturing

5. Major Economic Classifications
Tertiary Sector- services are those that move, sell and trade the products made in primary and secondary activities
Also involve professional services

6. Major Economic Classifications
Quaternary Sector- involves information creation and transfer
Assemble, distribute, process information
Manage businesses
University researchers/professors, Doctors, Scientists, Investment analysts.

7. Explaining and Predicting Industrial Locations
Alfred Weber’s Least Cost Theory of Industrial Location
Wanted to predict and explain where factories would choose to locate and grow
Called Least Cost Theory because it predicted where industries would locate based on the places that would be lowest cost to them
Industries used to criteria:
1. The distance of transportation to the market
2. The weight of the goods being transported

8. Material (per case)
Rail Transport Cost
Road Transport Cost
Hops & Grain
$.10/mile
$.11/mile
Spring Water
$.05/mile
$.03/mile
Bottled Beer
$.25/mile
$.27/mile

9. Assumptions in Weber’s Model
The heavier the good and/or the farther the distance, the more expensive it is to ship
Industries are competitive and aim to minimize their costs and maximize their profits
Markets are in fixed locations
Labor exists only in certain places
Assumes a uniform landscape with equal transportation paths and routs throughout the space (no mountains, lakes, rivers)

10. Critics of Weber’s Model
Weber’s theory does not identify the fact that markets and labor are often mobile and that the labor force varies in age, skill sets, gender, language and other traits
Some transportation costs, unlike in his model, are not directly proportional to distance

11. Concepts related to Least Cost Theory
Early factories also had to consider their proximity to raw materials
Spatial-variable costs- costs that change depending on the factories location
Example- Fish (perishable) packing factory would be built as close to the boats to eliminate the cost of transporting to the factory

12. Weight Gaining vs. Weight Losing Industries
Weight Gaining Processes take raw materials and create a heavier final product
Beverage bottling- take the liquid and fill into glass, aluminum, tin….
Factories are usually built near the marketplace because the product is heavy to transport in its final form
“Market Orientation”
Weight Losing Processes are those manufacturing processes that take raw materials and convert them into a product that is lighter than the original raw materials.
Paper production- paper mills are located near forests, trees convert to paper which is lighter and can be shipped long distances
“Material Orientation”

13. Footloose Industries
Industries which are not restricted in where they can locate because of transportation costs
Spatially Fixed Costs- industries which maintain the same cost of transportation regardless of location
Often produce lightweight products which have extreme value
Ex) computer chips

14. Agglomeration
Occurs when industries clump together in the same geographic space
Factories that are in the same area can share costs associated with resources, such as, electrical lines, roads, pollution controls
Agglomeration Economies occur when the positive effects of agglomeration result in the lower price for consumers
Example- High Tech Corridors such as Silicon Valley, California or Austin,Texas

15. Deglomeration
The “unclumping” of factories because of the negative effects and higher costs associated with industrial overcrowding
Occurs when agglomerations become too congested and cause extensive pollution, traffic congestion, strained resources, strained labor

16. Core-Periphery Model
States tat the world’s counties are divided into three groups
1. the Core consists of industrialized countries with the highest per capita incomes and standards of living
US, Canada, Australia, Japan, Western European countries
2. The Semi-periphery consists of countries that are newly industrialized and have not yet caught up to core countries in the level of development or standards of living
Brazil, India, China
3. The Periphery consists of LDCs with the low levels of industrialization, infrastructure, per capital income and standards of living
Most African countries (not South Africa), Parts of Asia, Parts of South America

18. Wallerstein’s World System Analysis
Looks at the world as a capitalistic system of interlocking states connected through economic and political competition
Linked to the core-periphery model because it assets that the unequal positions of countries grew out of early exploration and colonization
Argues that colonization led to economic and political interactions among different regions in the world and the inequalities that resulted from the domination and exploitation be core countries of the semi peripheral and peripheral countries
Theorized that the global core, semi periphery and periphery grew out of the competitive interactions among different countries

20. Rostow Modernization Model
Tried to explain and predict countries; patterns of economic development
Model consists of five stages
MDCs exists in stage 4 and 5
LDCs exists in stage 1, 2 and 3
Once a country starts building factories (investing in capital) it will begin to develop

22. Critics of Rostow’s Model
Based on projections on patterns of western European and Anglo-American countries
Does not consider structural issues that might limit a country’s ability to develop
Considers each country as independent rather than one piece of interlocking system of countries
Stage 5 assumes that higher economic productivity leads to high mass consumption of goods and services.

23. Approaches to improving Economic Development
Self Sufficiency Approach
Pushes LDCs to provide for their own people, independent of foreign aid
LDCs should spread investments and development equally across all sectors of its economy
LDCs should limit and heavily tax imports
Critics argue that the approach stifle competition, which decreases efficiency and innovation

24. International Trade (Export-Oriented) Approach
This approach pushes LDCs to identify what it can offer the world and then direct investments toward building that industry
A country has a “comparative advantage” when it is better at producing one product than other countries

25. Structural Approach
The movement to improve socioeconomic development in LDCs involves supranational organizations like the World Bank and the International Monetary Fund that regulate international trade and supply money to LDCs
Structural Adjustments are requirements attached to a loan from a lending agency that force the country receiving the loan to make economic changes in order to use the loan
Increase privatization, sell public industries, become more market oriented

26. Non Governmental Organizations
Charities and private organizations that provide money, supplies and resources to LDCs

27. Globalization
Term used to describe the increasing sense of interconnectedness and spatial interactions among governments, cultures, and economies

28. Multinational Corporation
Businesses with headquarters in one country and production facilities in one or more other countries
“Transnational Corporations”
Primary agents of globalization
Conglomerate Corporations- that one massive corporation owns and operates a collection of smaller companies that provide it with specific services
Coca-Cola might own the bottling company and the food coloring company

29. Outsourcing
Practice of a Multinational Corporation relocating a piece or all of its manufacturing operations to a facility in another country
Idea is to take advantage of low labor costs, low tax rates, cheaper land prices
Nike headquarters is in the USA but their shoes are made in factories through Asia
Even though transportation costs are higher they make more money with the savings of outsourcing

30. Asian Tigers Taiwan, Singapore, South Korea, and Hong Kong
Development of high tech products made in these countries led to rapid economic growth in late 20th century
The Pacific Rim Economic Region is Taiwan, Singapore, South Korea, Hong Kong, China and Japan
US Corporations

31. Special Economic Zones
Regions that offer special tax breaks, eased environmental restrictions, and other incentives to attract foreign business.

32. Export Processing Zones
Regions that offer tax breaks and loosened labor restrictions in LDCs to attract export driven production processes
Often referred to as Free Trade Zones

33. Maquiladoras Zones Economic zones on the Mexican-USA border
Multinational corporation outsource labor to these maquiladoras, taking advantage of low labor costs
Due to NAFTA, the goods are shipped to the US tariff free

34. Free Trade vs. Fair Trade
Free trade is the concept allowing Multinational corporations to outsource without any regulation except for the basic forces of market capitalism
Fair Trade involves oversight of foreign direct investment and outsourcing to ensure that workers throughout the world are guaranteed a living wage for their work
Critics argue that women are the most exploited for their work and pay

35. Globalization and the Environment
Sustainable Development- the rate of growth and resource consumption that can be maintained from one generation to another

36. Ecotourism
Tourist operations that aim to do as little harm to the environment as possible
Instead of tearing down a forest to build a theme park, they incorporate the forest into the park
Instead of tearing down the Sugarmill, they retool it into a shopping and movie area