Economic Development and Industry

Chapters 9 and 11
© Robin Foster
Topic of great interest in Economic
Economic geography studies the impact of
economic activities on the landscape and
investigates the reasons behind the location
of economic activity
Process by which
economic activities
evolved from
primary goods to
using factories.
Primary economic activity extracts products
from the earth.
Secondary economic activities transform raw
materials into usable products, giving them
Began in England in the late 18th century.
Secondary Economic activity was created by
the Industrial Revolution.
Animal and human muscle was replaced by
Transformed societies beyond economic
activities changing lifestyles, customs, beliefs
and values.
James Watt First reliable Steam Engine 1775
Eli Whitney Cotton Gin, Interchangeable parts for muskets 1793, 1798
Robert Fulton Regular Steamboat service on the Hudson River 1807
Samuel F. B. Morse Telegraph 1836
Elias Howe Sewing Machine 1844
Isaac Singer Improves and markets Howe's Sewing Machine 1851
Cyrus Field Transatlantic Cable 1866
Alexander Graham Bell Telephone 1876
Thomas Edison Phonograph, Incandescant Light Bulb 1877, 1879
Nikola Tesla Induction Electric Motor 1888
Rudolf Diesel Diesel Engine 1892
Orville and Wilbur Wright First Airplane 1903
Henry Ford Model T Ford, Assembly Line 1908, 1913
Rapid political and economic change.
Transforms country into a stable nation with
a growing economy.
Mexico is an example.
◦ Beginning in the 1980’s based on its abundance of
Gross Domestic Product per Capita.
Per capita GDP= GDP
$14,143.3 billion
The higher the per capita GDP, the more
industrialized the country.
3. Types of job
MDC’s-fewer workers in primary sector
LDC’s-more workers are farmers.
4. Worker productivity
MDC-more machinery, tools and equipment
to perform work.
LDC-more human and animal power.
Productivity measured by the value added in
manufacturing by each worker.
Product value=$ of raw materials-energy
5. Access to raw materials
Development requires access to raw
materials-oil, coal, water, natural gas.
England’s access to coal fueled the industrial
European empires came to control raw
materials in other areas of the world.
6. Availability of consumer goods
MDC’s money for essentials and nonessentials.
Cars, telephones and televisions measures of
LDC’s few people can buy non-essential
Less than 1% of the Earth’s land is devoted to
Industrial production concentrated in 4
Northwestern Europe
Eastern Europe
Eastern North America
East Asia
What factors explain differences in levels of
economic development?
Two conflicting theories have developed:
Modernization Theory (Westernization Model)
Dependency Theory
Economic prosperity is open to all nations.
According to W.W. Rostow, modernization
occurs in four stages:
1. Traditional stage
2. Preconditions for takeoff
3. Take off stage
4. Drive to technological maturity
5. High mass consumption
Traditional stage-society built lives around
families, local communities and religious beliefs.
Precondtions for Takeoff-investment in
infrastructure. More knowledge=more ability to
have technology. Trade is promoted.
Take off stage-people produce goods for profit.
Some form of industrial revolution takes place.
Urbanization increases, technological
breakthroughs occur. Desire for material goods
take hold at the expense of family ties and
traditional customs.
4. Drive to technological maturity-economic
growth accepted, people focus on higher
living standards. Economy diversifies
because people can afford luxuries. Poverty
reduced, material goods are more common.
Rate of population growth reduced, as
children are more expensive to raise.
International trade expands.
5. High Mass Consumption- Economic
development raises standards of living as
pass production encourages mass
consumption. Items which once were
considered luxuries are now necessities.
High incomes, with a majority of workers in
the service sector of the economy.
High income countries can help poorer
countries with foreign aide, economic aide.
 Criticized as exploiting capitalism.
 Fails to recognize rich nations, which benefit
from status quo.
 Blames poor countries for being poor.
 Poor countries develop from a position of
global weakess.
Immanuel Wallerstein explained economic
growth using a model of the capitalist world
A global economic system that is based in high
income nations that have a market economy.
Wallerstein divided today’s countries into three
types, according to how they fit in the global
Core countries
Countries of the periphery
Countries of the semi-periphery
Core countries-rich nations that fuel the
world’s economy by taking raw materials
from around the world and channeling wealth
to North America, Europe, Australia and Japan
through multinational corporations
Periphery-low income countries drawn into
world economy by colonial exploitation
Semiperiphery-remaining countries of the
world somewhere in between. Exert more
power than periphery, but are dominated to
some degree by core countries.
Primary economic activity develops around
location of natural resources.
Secondary industry develops based on several
factors as raw materials can be shipped:
1. variable costs-energy, labor, and
2. friction of distance-cost increases as
distance to transport increases.
3. distance decay-industries are more likely
to serve markets nearby than far away.
World economy benefits rich societies, harms
others by making them dependent on core
Sell inexpensive raw materials and buy expensive
manufactured goods-high foreign debt.
Economies are crippled even further.
Ignore cultural factors that in poor countries such
as family values and tradition rather than
Corrupt leaders,, poor economic health, countries
wealth squandered by the elite.
To Summarize-Rich nations keep poor nations
Core-primary and secondary economic
Within cores-wealthy urban cores and
depressed rural areas. People move to cities
for jobs.
Theory of the Location of Industries, 1909.
Compared to Von Thunen’s agricultural model
because they explain location of economic
Weber’s Least Cost theory explained location of
industry in terms of three factors:
1. Transportation
2. Labor
3. Agglomeration
Transportation-cost of moving raw materials
to factory; then factory to market.
Labor-cheap labor allows for higher
transportation costs. Example: an American
Factory in Mexico. Factories in South rather
than north because of unions vs. non-union
Agglomeration-several industries cluster in
one city, they can share talents, services and
facilities. Ex. Restaurant supply stores
A result of excessive agglomeration can lead
Deglomeration-the exodus of a business from
a crowded area.
Substitution principle-business owners can
juggle expenses as long as labor, rent,
transportation and other costs do not
increase all at once.
The influence on a firm’s locational decisions
by locations chosen by its competitors
Variable revenue analysis-a firm’s ability to
capture a market that will earn it more
customers and money than it’s competitors.
middle of beach
Fred’s snow cones
area of profitability
Sam’s snow cones
1. Situation factors-
involve transporting
materials to and from a
factory. A firm seeks a
location that minimizes
the cost of
transporting inputs to
the factory and
finished goods to the
2. Site factors-result
from the unique
characteristics of a
location. Land, labor
an capital are the three
traditional production
factors that may vary
among locations.
Proximity to inputs1. Every industry uses inputs.
2. Raw materials, parts of materials
3. Locate near input to minimize transportation
Bulk reducing industry-final product weighs less than
its inputs-copper
Proximity to markets where product is sold.
Transporting goods to consumers is critical
location factor in three types of industries:
 Bulk gaining-volume, weight added during
production-soft drinks, fabricated machinery
 Single
factoriesmanufacturers with
only one or two
 Perishable
milk, bread,
 Frozen,
food can be farther
from the market.
Inputs are transported in one of four ways:
Firms seek the lowest cost. Long distance
transportation is cheaper.
A location where transfer among transportation
modes is possible.
Important break-of-bulk points are airports
and seaports.
A steel mill near Baltimore-iron ore by ship
from South America, coal by train from
Port of New York, Port of Houston
Labor-your workers
labor intensive industries-wages and
compensation are a large portion of coststextile industry
Cottage industries-work done at home.
High tech industries tied to skilled labor.
Land-not every location has the same climate,
topography, recreational opportunities,
cultural facilities and cost of living.
Industries like low cost energy sources-Alcoahydroelectric power.
Capital-where is the money available?
Industries typically borrow money for new
Banks in MDC’s typically loan money to
businesses in LDC’s
Interregional shifts-USA to the South and
Right to work laws
Southern and Eastern Europe
Latin America-Mexico and Brazil
Manufacturing zone created in the 1960’s in
Northern Mexico just south of the border.
Goods are produced primarily for US
This has been promoted by NAFTA-1995
treaty to promote free trade with the USA,
Canada and Mexico.
Cost of labor
 Outsourcing-”new
division of labor”
Just in time delivery-reduces money that is
tied up in inventory.
Parts and materials arrive daily, if not hourly.
Producers have less cushion against
disruptions in the arrival of needed parts.
◦ Labor unrest
◦ Weather related events, “acts of God”
Challenges for MDC’s
competition within countries in a trading
EU-European Union
East Asia-no formal organization
Transnational corporations-operate factories in
countries other than headquarters country
conglomerate corporations exist-smaller firms
that support the overall industry
Fewer jobs within industrial sector.
Number of jobs in service or tertiary sector
has increased.
A result of globalization?
Labor intensive manufacturing in developing
world is displacing jobs of workers in
advanced economies.
Distance from markets-invest scarce
resources for airports, docks and ships.
Inadequate infrastructure-few schools to
educate workers
Competition with existing manufacturers in
other countries-transnational corporations in
MDC’s use LDC’s for cheap labor.
Competition among LDC’s for MDC’s
 Fossil
Fuel Reserves-how much coal, oil and
natural gas remains in uncertain.
MDC’s with ¼ of the population consume ¾ of
the world’s fossil fuels
 Industrial pollution
global warming, greenhouse effect-increasing
earths temperature
acid rain-sulfur dioxide and nitrogen oxides
released into atmosphere by burning fossil fuels.
 Sustainable development-people living today
should provide for future generations
Technological change
Mitigation-undo or reduce damage once it
Compensation-persons who sue companies.
Developed by the United Nations.
Measures a countries level of development
according to three factors:
◦ Economic
◦ Social
◦ demographic
GDP per capita
Types of jobs
Raw materials
Consumer goods
Education and
Health and welfare
Life expectancy
Infant mortality rate
Natural increase rate
Crude birth rate
A numeric measurement
The nearer to 1 the better.
Anglo America-.94
Western Europe-.93
Eastern Europe-.8
Latin America-.9
East Asia-.76
Southeast Asia-.58
Middle East-.68
South Asia-.58
Sub Saharan Africa-.51
Gender-related Development Index (GDI)
◦ Average incomes of men/women
◦ Education and literacy
◦ Life expectancy
Gender Empowerment Measure (GEM)
◦ Economic power-income and professional jobs
◦ Political power-managerial and elected jobs
Products are made
and traded
according to
standards that
protect workers and
small businesses in
Food or craft
products can be fair