• A system of production, distribution and consumption in a region.

• PUT YOUR NAMES ON THEM!

Chapter 12: Industry

and Services

Unit 9:

Economic

Development

Ch. 12 and Ch.10

•Commodity = a good that is marketed and sold

•Commodity Chain – Explains the links between producers and consumers

Tea leaves grown

by thousands of

small farms

Trader sells tea to

various tea

companies

Tea companies

sell it to retailers

Consumers

purchases tea in

retail store

Most of the profit

happens at this

stage

Oversupply of

tea and poverty

at this stage

• https://www.youtube.com/watch?v=cbXqXMbCnrc

• Sectors = Economic categories• The economy can be broken down into different sectors

• The type of sectors depends on what is being categorized two ways:

Stage of

Production

Product or

Service Type

Primary

ActivitiesSecondary

Activities Tertiary

Activities

• Extracting natural resources from the earth

agriculturemining

energy

forestry

fishing

• Processing raw materials into goods for consumptions

manufacturing

• Transportation, wholesale, and retail of finished goods from the secondary sector

transportation

wholesale

retail

• Quaternary Activities – Information creation and transfer

• Quinary Activities – Highest level decision making

Marketing/

Finance

Government

Entertainment/

TourismHealth Care

Education

Scientific

Research

• All countries include these sectors• Depending on a country’s level of development, one

sector will be more prevalent

Primary Secondary

Tertiary

• Quaternary

• Quinary

Less developed Most developedMore

developed

• 10-15 minutes

• Read the Article

• May work with desk partner!

• Explain the “Stage of Production” Economic Sectors that go into the Smart Phone.

• Primary

• Secondary

• Tertiary

• Quaternary

• Quinary

• Identify where in the world these sectors are occurring based on the article.

• Sectors = Economic categories• The economy can be broken down into different sectors

• The type of sectors depends on what is being categorized two ways:

Stage of

Production

Product or

Service Type

1. Agriculture 2. Natural

Resources3. Manufacturing

4.Services

And many

more…

We must compare the

cash value of what is

produced in different

sectors.

•How it’s measured: the combined cash value of what is produced (not volume)•The least valuable of sectors

•Why do some crops become more or less expensive?

•Least-Developed Countries(LDC) farmers – if they grow cash crops, they search for local buyers and sell directly. •What is a potential danger for farmers?

A tea plantation in Sri Lanka

•Most Developed Countries(MDCs)– commercial farming: sold, and distributed globally

•Mining and Energy Extraction – fluctuates wildly with global prices

•Economies that rely heavily on energy prices (like oil)/one commodity can rise and crash quickly with global prices

Zambia relies heavily on its

copper mining industry. In

1990s, the U.S. Mint decided to

switch to zinc cores for its

pennies.

Identify 3 Countries that specialize in Agriculture and Fishing. Identify 3

Countries that specialize in Oil. Identify 3 Countries that specialize in

Metals/Minerals. Identify 3 regions specialize in a single commodity?

ONE COMMODITY COUNTRIES

Renewability•We can classify resources by their renewability

•Non-living sources= non-renewable

•Living sources = renewable

•Alternative energy sources = solar, wind, hydro, Geothermal

•Tend to be more expensive to harness

Fossil fuels Minerals

Fisheries Forestry

Sustainability

•Our ability to replace resources as fast as we harvest them. •Does not have to be replenished quickly, as long as it is consumed slowlyEx: Fish, Trees

•The cornerstone to economic development•Factory-made products far out-value agricultural and natural resource products•Why?

•The more complex and technology-driven the manufacturing, the higher the value of the end product

Value-added

processing

•Durable Goods = intended to be used for more than a year

•Non-durable Goods = intended to be used for less than a year

•Intangible products – you cannot “touch” them•Classified by

•Low-benefit services = labor force is low-skilled, low pay, 3 Examples?

•High-benefit services = labor force is highly-skilled, high pay

Tertiary Production

Most valuable areas of economic

production worldwide

• Re-Read the Article (If Needed)

• Explain what Product/Service Type Sectors go

into the Smart Phone.

• WHERE are these products/service sectors coming

from?

Question 1

Summarize the history and results of the Industrial Revolution in Europe. Describe its distribution throughout Europe and into other countries/regions.

Beginning of Industrial Revolution

In Great Britain in the mid to late 1700s

Why Great Britain?

1. Flow of capital (capital = wealth/money)

2. Second agricultural revolution

3. Mercantilism and cottage industries

4. Resources: coal, iron ore, and water power

Cottage Industries

A traditional type of manufacturing practiced on a small scale in individual households to produce handmade goods for local consumption.

Flow of Capital into Europe, 1775Needed flow of capital in order to fuel the industrial revolution.

What regions did capital come from? And Why so much to Europe?

What is the connection between iron ore/coalfield

locations and the placements of cities in Great

Britain?

Industrialization in the

1900’s

Fordist Production

1900’s : Dominant mode of mass production of consumer goods at a single site started w/ U.S automobile factories by Henry Ford.

Assembly Line model – different groups performing different small tasks to complete a final product.

• Before Fordism: Cars use to take 16 hours to produce. Then after Fordism: 5 minutes

Commodification of Labor

• Factory owners and corporations began looking at human labor as commodities (objects for trade) with price tags per hour.

• Not seen as people.

Charlie Chaplin - Factory Work

https://www.youtube.com/watch?v=DfGs2Y5WJ14

Neo/POST: Fordist

Current mode of production with a more flexible set of production practices in which goods are not mass produced.

Flexible Production System: Production is accelerated and dispersed around the globe by multinational companies that shift production, outsourcing it around the world.

Post-Fordist

Break of Bulk Point

• Location along a transportation route where goods must be broken down smaller then transferred from one mode or transportation (ship) to another (truck).

• EX: Port of Portland – Ships unload Toyota’s on to rail cars or semi-trucks.

Vertical Integration

When the same company owns and operates multiple sectors of the commodity chain.

BIG STEEL CORPORATION

Owns and Operates

Acme Mining Company

Pacific Railroad Joe’s Trucking

Location Theory

Theories predicting where business will or should be located.

Industrial Location Theory Con’t

Two Types of Industry:

Weight-losing (bulk-reducing)

Weight-gaining (bulk-gaining)

Weight Losing / Bulk Reducing

Final product weighs less than raw materials

Where would you locate your processing plant?

Weight Gaining / Bulk Gaining Final product weighs more than main raw material

Where would you locate your processing plant?

Question 2

Explain Weber’s least cost theory. What is agglomeration? List two examples of agglomeration.

• Describe, using Figure 12.8, where major fossil fuel deposits exist in the United States and what does that mean for industry/employment in those areas.

• Describe how site and situation factors influence the location of manufacturing and give examples.

Weber’s Least Cost Theory

Manufacturing plants will locate where costs are

the least (least cost theory)

Focus: minimize costs:

Location of raw materials

Location of the market

Transportation costs

Labor

Weber’s Least Cost Theory Cont’

Footloose Industries: Industries not restricted in where

they can locate because of transportation costs.

Ex: Industries that produce light weight products

extremely high value, like computer chips.

Agglomeration

Occurs when industries clump together in the same area. Can share costs such as electrical lines, roads, pollution control, etc.

TWO MAJOR KINDS:

• High Tech Corridor

• Technopoles

Deglomeration

Occurs when industries “declump” because of the negative effects of industrial overcrowding – pollution, traffic congestion, labor shortages, etc.

High-Technology Corridors

An area designated by local or state government to benefit from lower taxes and high-technology infrastructure.

• The goal of providing high-technology jobs to the local population.

Example - Silicon Valley, California

Technopole

An area planned for high technology where agglomeration built on a synergy among technological companies occurs.

Example - Route 128 corridor in Boston

Question 2

Explain Weber’s least cost theory. What is agglomeration? List two examples of agglomeration.

• Describe, using Figure 12.8, where major fossil fuel deposits exist in the United States and what does that mean for industry/employment in those areas.

• Describe how site and situation factors influence the location of manufacturing and give examples.

Question 3

What is deindustrialization? According to Figure 12.12, what countries/regions produce the most/least amount of oil? What does that mean for the economies of those countries?

• How have deindustrialization and the rise of service industries altered the economic geography of production?

• What are the vulnerabilities of a service economy?

Deindustrialization

• A process where companies move industrial jobs to other regions with cheaper labor.

• Leaving the newly deindustrialized region to switch to a service economy and work through a period of high unemployment.

EX: Rust Belt

Rust Belt

What states make up the Rust Belt?

Question 3

What is deindustrialization? According to Figure 12.12, what countries/regions produce the most/least amount of oil? What does that mean for the economies of those countries?

• How have deindustrialization and the rise of service industries altered the economic geography of production?

• What are the vulnerabilities of a service economy?

Service Economy

Economic activity associated with the provision of services – such as transportation, banking, retailing, education, and routine office-based jobs.

Weaknesses:

• Replaced by technology

• Outsourced to semi-periphery countries

• Tourism can be very weak

• Services can become less desired

Backwash Effect

The negative effects on one region (lost taxes for schools) that result from economic growth within another region.

EX: In the 1980’s, Flint, Michigan’s GM auto plant moved to Mexico. Thousands lost their jobs and moved to other areas of the country.

• Where is the American Rust Belt? Why is it called the

rust belt and what economic factors led to its current

economic conditions? Where and what is the Sun Belt?

•Services produce the majority of MDCs economic value

•Roughly 80% of economies in U.S. and Canada come from service sector•Manufacturing?•Agriculture? 17%

3%

•Investors are looking to maximize their return on investment

•Services provide the most value for investment dollars

Value of Raw

Materials

Value of

ManufacturingValue of Services

Sand, copper, aluminum

About $3

High-tech manufacturing

About $600Computer Programming

$1,000 to ???

Global Division of Labor

Corporations can draw from labor around the globe for different components of production.

Example: The low-paid labor in Guatemala does the labor intensive work of picking coffee beans. The beans are transported to United States where workers roast, package ,and market the product.

Chapter 10: Development

Development

• Process of improving the material condition of

people through growth and diffusion of technology

and knowledge.

Hans Rosling and the magic

washing machine

http://www.gapminder.org/videos/hans-rosling-and-the-magic-washing-machine/

What does owning a washing machine mean for

the development of a group of people? What is the

MAGIC of machines in the developing countries?

LDC vs. MDC

More Developed countries(MDC):

• Wealthy country with education and health developments.

• Try to maintain growth

Less Developed countries(LDC):

• Economically poor country with education and health improvements

needed.

• Trying to improve economic condition

(Newly Industrialized Country)

Countries in the transition stage between developing and developed countries.

NIC typically have rapidly growing economies.

EX: South Africa, Mexico, Brazil, China, India, Malaysia, the Philippines,

Thailand and Turkey.

How do we

measure a

countries

development?

• GDP = Gross Domestic Product

• Total value of goods and services produced in a country within its borders in a year.

• GDP per capita is GDP divided by country’s population

• MDCs: GDP per capita is greater than 20,000

• LDCs : GDP per capita is less than 1,000

• GDP per capita is gross domestic product divided by midyear

population

• GNP = Gross National Product

• The total value of goods and services, including income from overseas, produced by the residence of a country in a year.

Purchasing Power Parity = a conversion of the purchasing power of any foreign currency into common units.

EX: $750 in sub-Saharan Africa has a PPP for that income level shows a buying power of $4,000 in the U.S

• Basic Rule of Thumb…

MDC

$20,000 GNP per capita

LDC

• Explain the difference between GNP and GDP.

List two shortcomings for each economic measure.

Explain the difference between a formal and

informal economy.

• Measures inequality between men and women, the

higher the score the higher the inequality between the

genders.

• Highest Regions? Lowest Regions? Patterns?

The United Nations Human Development Index

(HDI)

• Measures country’s development level based on

factors such as life expectancy, education,

literacy, gross domestic product per capita.

* Need to know the TOP 10 countries!

Categorilla

Get out your Categorillas.

• Need to know the TOP HDI

countries and top GDP countries

• Core: MDCs, Industrialized(Tertiary/Quaternary/Quinary) w/ high

income and standard of living

• EX: Australia, Japan, Western Europe

• Semi-Periphery: Newly Industrialized Countries(Secondary

Activities), vast inequality in standards of living

• EX: Brazil, India, China, Indonesia

• Periphery: LDCs w/low industrialization( Primary Activities), with

low infrastructure, income, and standard of living.

• EX: Most of Africa (EXCEPT: South Africa, Northern Portions), Parts of Asia, Central America, and Parts of South America

Describe and explain each stage of Rostow’s

Modernization Model. For each stage, list a country

currently in that stage and explain why the country fits.

• 1950s: to explain and predict countries’ patterns of economic growth and modernization

• Assumption: Every country has some form of comparative advantage that can be used for economic growth

• Rostow’s 5 Stages:1. Traditional Society2. Preconditions for Takeoff3. Takeoff4. Drive to Maturity5. High Mass Consumption

• Economic activity is subsistence farming

• Very little investment in innovation

• EX: Nepal

• Country begins to invest in innovation/infrastructure –roads, ports, utilities, schools

• Infrastructure paves the way for natural resource extraction, manufacturing, and trade with other countries

• EX: The Philippines

• New industries start showing rapid growth

• Many people still in agriculture, but shifting to industrialization

• Increase in technical knowledge

• EX: Vietnam and Thailand

• Technology diffuses throughout country and urbanization grows

• Advances in industrial production are seen in most sectors

• Workers become more skilled and educated

• EX: China, Argentina, Chile

• Manufacturing jobs replaced by service-oriented jobs

• Technical knowledge, education = high

• Agriculture is mechanized (no longer traditional)

• EX: Australia and Western Europe

What other models have we studied remind you of Rostow’s Stages of Development?

• NIC/MDCs = Stages 4 and 5

• LDCs = Stages 1, 2, and 3

• His model is based on U.S. and western Europe, Problem?

• Too linear

• Structural issue might limit development

• ex: colonial dependency

• Assumed comparative advantage not equal

• Economies can go backwards

• What is Globalization?

• SIX facts/ details relating to globalization and industry

• https://www.youtube.com/watch?v=5SnR-e0S6Ic

Transnational/Multinational

Corporations

Businesses w/ headquarters in one country and production facilities in one or more countries.

• Geographical differences in wages, labor laws, environmental regulations, taxes, natural resources

EX: Nike’s headquarters are in Portland, but their factories are located in Indonesia because of low production costs.

https://www.youtube.com/watch?v=COPTIZ_Sg2E

Portland, Or Indonesia

The Real Cost of Fashion

(Article Questions)

1. Why do some retailers manufacture clothes on Bangladesh? Do Americans benefit from this? Why or why not? What happened in Bangladesh that made American’s rethink where they are getting their clothes manufactured?

2. Explain the connection between employee wages and where companies decide to locate manufacturing locations? How does this article connect with Weber’s Least Cost theory?

3. Explain the pros and cons from the article of United States companies producing clothes in other countries?

4. On the last page of the article there is a map of Asia, answer questions 1,2,3,6, and 9 in full sentences. These questions are located right below the Asia map.

Bangladesh Factories

http://www.cbsnews.com/news/cbs-news-goes-undercover-in-a-

bangladesh-clothing-factory/

Trends in Globalization

Outsourcing: Shifting production of a product to a

third party in another country.

Offshoring: Contracting with a third party service

provider in another country to take over part of the

business operations.

EX: An American company’s customer service

operator located in India

• Industrial economies of Asia that are rapidly growing

OLD ASIAN TIGERS NEW ASIAN TIGERS

Received foreign aid (U.S and Europe) from

international programs (not loans)Foreign direct investment (loans--looking for

profit)

Cause: Foreign democracies supported their growth

during Cold War to battle communismCause: Demand for low-cost consumer

products 1970’s-1990’s

Manufacturing developed in 1950s-70s to produce

inexpensive goods for world market

Irony: by 1970s these countries were competing with

U.S. and Britain

• Japan

• South Korea

• Taiwan

• Hong Kong

• Singapore

• India

• Indonesia

• Malaysia

• Thailand

• Vietnam

Question 7

Describe and explain dependency theory. Explain how dollarization fits into this theory.

• Most LDCs and all NICs are dependent on MDCs

• Why?

• LDCs and NICs require loans from MDCs for factories, etc.

• As LDCs and NICs industrialize and make money, the money pays back the loans and does not support the LDC growth

Export Processing Zones

(EPZ’s)

Regions that offer tax breaks and loosened labor

restrictions in LDCs and NICs to attract export-driven

factories for foreign market.

• Maquiladoras

• China’s special economic zones

Special Economic Zones

(SEZ’s)

China’s coastlines are made up of several SEZs

and benefited from this economic stimulus

https://www.youtube.com/watch?v=ND_Y4hfkesA

Explain export processing zones. Using Figure 10.12, what

countries have a high number of export processing zones, and

what does these high amounts EPZs mean for these countries

economically. Define and Describe maquiladoras, and describe

their place in the U.S economy.

• When a government or corporation concentrates economic

development in a city or small region in a country to reflect

development.

Islands of Development

Port Gentile in Gabon “Oil City”

The global oil industry has created the entire

city of Port Gentile, Gabon to extract Gabon’s

oil resources.

Malaysian government built a new,

ultramodern capital at Putrjaya to symbolize

the country’s rapid economic growth.

Barriers and

Costs to

Development

Barriers to Economic

Development

•Low Levels of Social Welfare (poverty, health care, etc)

•Child Trafficking (domestic servants)

•Foreign Debt

•Political Instability

•Widespread Disease

•Malaria (150,000 children die each month)

•http://www.voanews.com/content/gains-being-made-against-malaria/2732671.html

Nongovernmental

Organizations (NGOs)

• Non-profit organizations operate independent of country

governments to help rural residents.

• Each NGO has its own focus/set of goals.

• Improve human welfare.

EX:

Building schools

Providing malaria nets

Providing safe water

UN: Millennium

Development Goals

https://www.youtube.com/watch?v=A5giOGjj5X8

UN: Millennium

Development Goals

What impacts have we had on the EIGHT development

goals by 2015?

What are still some of the problems we are facing in

development today?

http://bcove.me/r3svz112

https://www.youtube.com/watch?v=A5giOGjj5X8

Fair Trade

• Emphasizes small businesses and worker owned run cooperatives.

• Employers to pay workers fair wages, permit union organizing, and comply with minimum environmental and safety hazards.

EX: Coffee Industry

Ecotourism

Tourism based on the enjoyment of scenic areas of natural wonders/culture (instead for hunting, fishing, and adventurers) in an environmentally sustainable way in rainforests, marine reef, and polar habitats.

Ex. Belize, Chile, Botswana