Econ Geog

Economic Geography: study of flow
of goods and services across space
• Look at ways in which people provide
for themselves across the globe
• Geographic patterns of inequality at
different scales
• Globalization: is a MAJOR thread
throughout econ geog….free trade, intnl
trade, international econ alliances, etc.
Industrial Revolution


Industry: manufacturing goods in a
factory
Industrial Revolution:
• GB – late 1700s – diffused to W. Eur and U.S.
• Technology and mechanization led to
unprecedented increase in production
• Iron and textiles = 1st to industrialize
Where is Industry Distributed?

For 200 yrs industry was limited to
• N. Europe – GB, France, Russia,
Germany
• E. Asia – Japan
• N. America – U.S.
• These countries dominated ind
production/innovation until mid 20th C
Where is Industry Distributed

In recent yrs – shift in geography of
industrialization
• Major corporations have moved
factories to LDCs (cheap labor)
• Older industrial countries have shifted
to service based economies – research
and development, marketing, tourism,
sales, telecommunications, etc.)
• Service jobs are safer, more pay, less
pollution, and overall higher satisfaction
Where is Industry Distributed?
• BUT service jobs require more
education/training than factory work
• i.e. difficult transition – factory lose jobs
as factories outsource, must go back to
school or switch careers in mid life
• Mill towns/factory towns – ghost towns
or reinvent themselves with new econ
niche
Where is Industry Distributed?

Deindustrialization: when industrial
factories leave an area and take that
region’s econ base with them
• Ex: Rust Belt: Great Lakes region was
home to all auto manufacturing but GM
and other companies have relocated –
debilitating for the economy of the
region and the workers there
• Backwash Effect: when one region’s
econ gain is another’s loss
The Rust Belt
Where are industries distributed
and why there?



All industries seek to maximize
profits by minimizing production
costs
Critical question: Where is the most
profitable place to locate a factory??
Alfred Weber: Least Cost Theory:
firms look at the following to decide
where to locate……..
Least Cost Theory

1.) Transportation Costs: must
move raw materials (inputs) to plant
and finished product to market
• Market Orientation Firms: if finished
product weighs more or is perishable,
then locate the plant closer to the
market than the raw materials….4 types
of market orientation:
Least Cost Theory – Market
Oriented Firms
• A.) Bulk Gaining Industry: product gains
volume or weight during production (TV,
refrigerator, soft drinks)
• B.) Single Market Manufacturer: product sold
mainly in one location
• C. Perishibility: fresh fruits, milk, bread,
newspaper – must be near market
• D.Ubiquitious Industry: industry distr is in
direct proportion to the distr of the population
(i.e. near large metro areas with people =
labor and market) i.e. hospitals, big business
Least Cost Theory –
Material/Resource Orientation

Material/Resource Orientation: raw
materials (inputs) weigh more (or
are perishable) than the finished
product so locate plant closer to raw
materials than to market. These are
called Bulk Reducing Industries: final
product weighs less than the inputs
(i.e. paper mills, steel, copper –
most mining, tomato cannery, etc.)
Least Cost Theory – Other
transportation variables



Footloose firms: industries w/ products
that are lightweight and valuable and can
locate anywhere (i.e. diamond of
computer chips)
Spatially fixed cost: cost of product does
not change no matter where factory is
located
Spatially Variable cost: price of product
varies depending on where factory is
located and where product is produced
Least Cost Theory Transportation
• Longer distance is cheaper per mile
• Ships best for longest distances
• Air – most expensive but fastest
• Break of Bulk Points: cost of transport
for some inputs is cheaper than another
type of transport – so you use multiple
methods of transport. BBP = transfer
point (usually a seaport or airport)
Least Cost Theory AGGLOMERATION

Agglomeration: when many
companies of the same industry
cluster together in a small area to
draw from the same set of collective
resources (i.e. computer companies
in Silicon Valley, motion picture
industry in LA, fashion in Paris)
Least Cost Theory AGGLOMERATION

Multiplier Effect: as more firms from
same industry locate in an area,
more resources become available
and cements that region’s specialty
even more (ex: CA became known
for high tech firms, it attracted more
computer experts, which attracted
more high tech firms, etc.)
Least Cost Theory AGGLOMERATION

Ancillary Activities: agglomeration
results in ancillary activities – i.e. the
supporting cast. Economic activities
that surround/support the primary
industry of the region. These can
include a range of activities –
shipping, food services, etc.
Least Cost Theory AGGLOMERATION


Agglomeration leads to
regionalization: unique
specialization from region to region
Deglomeration: opposite of
agglomeration – when a firm leaves
an agglomerated region to start up in
a new place
Least Cost Theory – Agglomeration
Regional Specialization – Silicon valley
Least Cost Theory –
LABOR


Labor intensive industry = one where the
cost of labor is a high percentage of
production (ex: textiles)
Outsourcing: move production abroad for
cheap labor. You’re willing to pay more
for transportation b/c of cheap labor.
Outsourcing usually goes to semiperiphery – cheap labor, decent
infrastructure, no environmental regs
Least Cost Theory –
LABOR

Textiles has followed cheap labor –
originally in NE b/c of cheap
immigrant labor, late 1800s/early
1900s moved to SE to avoid unions,
post WW II moved overseas to LDCs
in Asia (50s in Hong Kong and Japan,
70’s in China and Korea, today in
Indonesia, Bangladesh
Least Cost Theory – Other things a
firm may consider……

Land:
• Factories today usually rural or suburban
• Need large tracts of land (1 story – more
efficient)
• Amenities – climate, cost of living, re
opportunities (i.e. Sun Belt)
• Communities engage in bidding wars – zoning,
tax breaks, environmental conditions, etc. to
offer most attractive package (i.e. Dell in NC)
Least Cost Theory – Other things
a firm may consider….

Capital
• Money available to expand or open new
factories
• May go to area where banks are willing
to make high risk loans (i.e. Silicon
Valley)
Factory Work

Fordism: mass production and
assembly lines (each worker
assigned one specific task to perform
repeatedly). Started by Ford in early
20th C
Factory Work

Post-Fordism: more flexible – work
in teams and often master a wide
array of tasks
Weber’s factors to consider =
site and situation factors


Site Factors: land, labor, capital
Situation Factors: transportation
costs – i.e. relative location to
inputs/raw materials and to market
Summary of Location Principles






Access to materials for production
Adequate supply of cheap labor
Proximity to shipping and market
Decrease production costs (cheap
land, cheap labor, and favorable
govn’t policies)
Natural factors, climate
Firm’s history and personal
inclinations
Industrial Problems

Over production – global capacity to
produce manufactured goods has
increased more rapidly than demand
• Consumption leveled off since 1970s b/c




No population increase
Wages have not risen as fast as prices
Market Saturation: everyone already has
one (TV, cars, microwaves, etc.)
Higher quality goods last longer
Industrial Problems in MDCs


Must protect markets from new
competitors
Trading Blocs: industrial competition
in MDCs is betwn blocs, not countries
• NAFTA, EU, ASEAN
• Cooperation within bloc, competition
betwn
• Seek complementary trade within bloc
Industrial Problems in MDCs

Transnational Corporations – locate
aspects of production in various
countries. i.e. take advantage or
regional diff in wages, tax laws, labor
laws, natural resources, etc.
• Ex: Nike – HQ in Oregon, but factories
span the globe
Industrial Problems in MDCs

Most transnational corp are
conglomerate corporations: firms
that consist of many smaller firms
that serve different functions (ex:
GM – many smaller firms that
operate all over the world, and
produce a wide variety of goods and
services
Industrial Problems in LDCs



Distance from markets – far from
wealthy consumers in MDCs
Poor infrastructure (roads,
technology, communication, etc.)
Cheap labor = best drawing card for
industry. Intnl division of labor: low
paid, low skilled work done in LDCs,
high skilled work in MDCs
Industrial Problems in LDCs

Export Processing Zones: zones
officially designated for
manufacturing – have accessible
facilities, lax environmental regs, and
tax exemptions, cheap labor. Ex:
Maquiladoras along US/MX border.
Pros – jobs for MX, cheap labor for
US. Cons – often plagues w/ high
crime, govnt corruption, pollution
Industry today…..




Outsourcing
Export processing zones maquiladoras
Tourism
All of these exploit LDCs/periphery.
Neocolonialism: econ and political
controls are exercised by developed
states over the economies and
societies of independent countries in
the developing world
DEVELOPMENT


Development: process of improving
material conditions of people w/
diffusion of knowledge and
technology – continuous process of
trying to improve health, living
conditions, and prosperity
Wallerstein’s World Systems Model
• N/S Divide (see handout)
Development Varies Across Space


Dev can be broken into econ, social, or
demographic factors
Human Development Index (HDI):
created by UN to look at all 3
• Life exp, educ (literacy rate and amnt of ed),
income (GDP)
• Highest possible – 1.0 (100%)
• Norway – highest - .944
• U.S. never first, but always high
• Lowest - sub Sahara Africa (Sierra Leone .275)
Economic Factors of Development



GNP and GDP (omits investments
abroad)
Per capita (divide by population)
Annual per capita GDP more than
$20,000 in MDCs and @ $1,000 in
LDCs – this gap is widening
Economic Factors of Development

Types of jobs….
• Primary activities: w/ land – fishing,
farming
• Secondary: manufacturing, industry
• Tertiary: service


Quaternary: research and development –
generating/exchanging knowledge
(teaching, banking, law, accounting, etc.)
Quinary: high tech scientific research
Types of Jobs/Econ Activities
Economic Factors of Development


All countries have all types of econ
activities. The higher up you go, the more
educ required and the better pay. MDC’s
mostly in tertiary or higher. LDC’s mostly
in primary. Semi-periphery mostly in
secondary.
Human Res and productivity increase in
MDCs (workers produce more w/ less
effort)….higher educ, skilled, machinery
and technology
Economic Factors of Development

Energy Consumption per capita –
correlates w/ technology and dev.
• MDCs =10X more per capita than LDCs
• MDCs consume sign more energy than
they produce
• MDCs use coal, natural gas, hydropower
• LDCs use firewood, dung, peat, and
domestic fuels to cook and keep warm
• Wood – 60% of fuel use in LDCs and
90% in poorest countries
Social Indicators of Development


MDCs use money for schools,
hospitals, that provide better educ
and healthier longer lives – this is
cyclical b/c better educated and
healthier pop can be more productive
and make more money
Social Indicators of Development

Education: MDC’s have greater
quantity and quality of educ
• Student – teacher ratio (2X as many
students to 1 teacher in LDC)
• Literacy Rate (over 95% in MDCs, less
than 35% in LDCs)
• Avg student attends school 10 yrs in
MDC and a few yrs in LDCs (varies)
Social Indicators of Development

Health
• MDCs – better ratio of people to
hospitals, doctors, and nurses
• MDC consume greater calorie
consumption. In LDCs many get less
than daily recommended allowance
• Different problems……MDCs – problems
w/ obesity, elderly population, etc.
Demographic Indicators of
Development




Life Expectancy: avg # if yrs a
newborn can expect to live (early
40s in LDCs, 70s in MDCs)
Infant Mortality: die b/f 1st b-day
(less than 1% in MDCs, 10% in
LDCs)
CBR – higher in LDCs but dropping
Maternal Mortality Rate – sign higher
in LDCs
Gender Issues in Development


Gender inequality exists in every
country
Two composite measures to look
at……
GDI Gender Related Development
Index

GDI: looks at same measure as HDI
but to highlight disparity betwn men
and women
• Complete equality is 1.0
• Penalized for greater diff betwn men
and women
• Highest GDIs in Europe and N. America;
lowest in Sub Sahara Africa
• Even in MDCs women’s average income
is less than men’s
GDI
• In LDC’s women less likely to attend
school and have lower literacy rates
(99/100 women to men in MDC high
school; 60/100 in LDC high schools)
(remember this affect on pop growth)
• Globally women outlive men, but outlive
men much longer in MDCs than in LDCs
(mostly b/c of maternal mortality rate)
Gender Empowerment Measure
(GEM)


Measures econ and political power
4 factors….
• Income
• Professional jobs
• Managerial jobs
• Elected positions (no country has a
natnl Congress w/ majority
women…highest in Eur w/ @
30%....U.S. has @ 15%)


Every nation has a higher GDI and
lower GEM i.e. means women
possess a greater share of a nation’s
resources than power over allocation
of those resources
Even in MDCs women’s average
income is less than men’s…WHY?
LDCs Obstacles to Development



While LDCs have improved, gap betwn
MDC and LDC has increased.
WHY? Circular/cumulative causation:
process where tendency for econ growth
are self-reinforcing….i.e. it takes money
and development to foster money and
development
Solution? LDCs must dev at a faster rate,
but how? Two prominent options….
Self Sufficiency/Balanced Growth
Approach – China and India



Country should invest = across all
sectors of the economy and all
regions
Limit imports (tariffs)
Internal businesses encouraged to
produce for own people; not export
Problems w/ Self-Sufficiency Model


Protects inefficient businesses in own
country (protect from international
competition, but has little incentive
to improve quality or lower price)
HUGE govnt bureaucracy to manage
econ – leads to abuse and corruption
– Govn’t red tape
Option Two – International Trade
Model


Develop through international trade
(look outward). Look outward.
Identify a unique econ asset and
export globally. Use funds and profit
to finance other development
Done in Arabian peninsula and E/SE
Asia
W.W. Rostow – Dev Model

Rostow advocated intnl trade
approach with a 5 step model
towards development. He created
the model in the 1950s and based it
on the pathway the U.S. and Eur
followed:
• Stage 1: Traditional Society: country
dominated by primary econ activities –
low prod, low tech, low per capita
income
Rostow – Intnl Trade


Stage 2: Preconditions to Takeoff:
preconditions to econ dev are
commercialization of AG and exploitation
of raw materials
Stage 3: Takeoff: foreign investment
jump starts econ. Rapid growth in a
limited number of sectors; other sectors
still dominated by tradntl methods.
Country uses profits to pour into
infrastructure (roads, canals, etc.)
Rostow – Intnl Trade


Stage 4: Drive to Maturity: Dev and
modern tech diffuse to wider variety
of the econ. Workers become more
skilled and specialized
Stage 5: high levels of mass
consumption and per capita income.
Shift from heavy industry to services
and producing consumer goods.
Criticisms of Rostow


Not all countries will pass through stages
consecutively
Model doesn’t account for….
•
•
•
•
•
•
•
Global politics
Colonialism
Physical geog
War
Culture
Ethnic conflict
All of these may affect progression and cause
different pathway
Example of INtnl Trade Model

4 Asian Tigers/Dragons: S. Korea,
Singapore, Taiwan, Hong Kong
• all poor in natural resources
• Promoted dev by focusing on a handful of econ
goods (esp clothing and electronics). i.e. find
comparative advantage – produce item for
which you have the greatest advantages in
comparison to other countries
• Low labor allowed them to sell products
cheaply in MDCs
Map – Asia 

India – China –
initially
self/sufficiency and
balanced growth
model
4 Asian Tigers –
International Trade
Model
4 ASIAN TIGERS

South Korea

Taiwan

Hong Kong

Singapore
Problems w/ Intnl Trade Model

May hinder other LDC’s from
following this path….
• 1.) Uneven resource distr: many
country's niche faced lower price on
world market (ex: Zambia and copper –
world prices for copper have been
dropping)
• 2.) Market stagnation: market for
consumer goods slowing down in
general
Problems w/ Intnl Trade Model


3.) Increased dependence on MDCs:
takeoff industries force LDCs to
decrease production of food,
clothing, or other necessities for own
people
Conclusion….intntl trade model is
widely accepted alternative to selfsufficiency model
Statistics……

World Bank – since 1990 per capita
GDP has increased more than 4%
annually in countries w/ intnl trade
model and less than 1% in countries
w/ self-sufficiency model
Statistics…..

1960-1990…..
• India’s GDP increased by 4%/year on
self sufficiency model
• Thailand’s by 8%/year (intnl trade)
• Taiwan’s by 8%/year (intnl trade)
• S. Korea’s by 9% /year (intnl trade)
• Since 1990s India switched to intnl
trade and GDP has increased by
6%/year
WTO – World Trade Organization

Est in 1995 – promotes intnl trade
model. Works to decrease barriers
to intnl trade by….
• Eliminating restriction on trade (no
tariffs, no quotas on imports, no
subsidies on exports)
• Enforcing trade agreements (rules on
arguments and accusations)
WTO



Liberal critics – say WTO is antidemocratic and promotes interests of
large, wealthy, transnational corp
Conservative critics – says WTO
compromises gov of countries b/c it
can order changes in subsidies,
taxes, etc.
ALWAYS protestors outside WTO
mtgs
WTO
$$$$$ for Development??

1.) Loans – usually from World Bank
or International Monetary Fund (both
controlled by MDCs)
• Together loan @ 50 billion/year
• Idea – borrow $$ to improve
infrastructure to attract
businesses/investment
• Many infrastructure projects fail – don’t
work, don’t pay off, or businesses still
do not come
$$$$ for Development?

(Loans)
• Debt is greater than annual income in
30 countries
• Many LDCs cannot even pay interest on
loans, much less the principal
• Result….many MDC’s becoming more
hesitant to grant loans
$$$$ for Development??

2.) Foreign Direct Investment –
Transnational Corporations: flow of money
and investment from one country to
another through private corporations
(increasing trend in late 20th C)
• BUT only ¼ of foreign investment went from
MDC to LDC (most goes from MDC to MDC)
• Of all money from MDC to LDC, ½ of that goes
to Brazil, China, MX