Chapter 11

Industrialization

Diffusion of the Industrial Revolution

Figure 11-2

Industrial Regions

Figure 11-3

Japan—autos, ships, electronics—low wages, sell cheap

China—textiles, steel, household products—in the 1990s, transnational corporations came in b/c China changed its economic policies

East Asia’s Industrial Areas

Industrial Regions of Europe#1-Rhine-Ruhr Valley—iron and steel manufacturing

because they are near the coal fields#2-Mid-Rhine—Steel (in Alsace and Loraine) at the

largest iron ore field—producing autos and chemicals—Germany is the center of Europe’s most important consumer market

UK used to have steel and textiles, but now it’s high tech industries—Japan has built factories here

Po Basin—textiles—2/3 of Italy’s manufacturing is 1/5 of the land area—hydroelectric power from the Alps

NE Spain—Textiles, autos—FASTEST GROWING AREA

Moscow (fabrics) St. Petersburg (shipbuilding)Volga (autos, oil, chemicals)—RUSSIA’S

LARGEST PETROLEUM AND NATURAL GAS FIELDS

Urals (iron, steel, chemicals, machinery)—CONTAINS MORE THAN 1,000 TYPES OF MINERALS

Silesia (Poland and N. Czech Republic)—steel—E. Europe’s leading industrial area outside of Russia

Areas in and around Russia

Industrial Areas in Europe

Figure 11-4

North American Industrial AreasNew England—cotton textilesMiddle Atlantic--#1 market—port for foreign

trade (NYC)Mohawk Valley—steel and food processing—

upper NYPittsburg-Lake Erie—steel (Pittsburg to

Cleveland)Western Great Lakes—steel, auto—centered

on ChicagoSouthern California—clothing and textile--#1

outside of the NESE Ontario—steel and car assembly

Industrial Areas in North America

Figure 11-5

Changing U.S. Manufacturing

Figure 11-21

What does America still make?Automobiles (Ford, Gm, Chrysler- Detroit), foreign

automakers assemble cars hereAirplanes (Boeing, McDonnell Douglas, Seattle)

Commercial and militaryPharmaceuticals (drugs)Entertainment (Music Movies- Hollywood)Computer software (Silicon Valley) TECHNIPOLESMilitary weapons

BRICSAssociation of the 5 major emerging national

economies due to rapid industrializationBrazilRussiaIndiaChinaSouth Africa

Newly Industrialized Countries (NICs)Socioeconomic classifications of countries not

yet considered developed countries, but making great strides in industry

Four Asian Dragons—Hong Kong, Singapore, South Korea, Taiwan

Other NICs—Turkey, Mexico, Argentina, Chile, Egypt

Canada, US, Mexico- NO TARIFFSMaquidoras : an area set up along Mexico / US border

where factories and industry are set up. It has the benefits of lower wages, lower transportation costs because of closeness to US, lower environmental restrictions, and due to NAFTA no tariffs on goods

NAFTA

Location Theory

• Location Theory – predicting where a business will or should be located.

• Location of an industry is dependent on economic, political, cultural features as well as whim.

• Location Theory Considers:– Variable costs-energy,

transportation costs & labor costs

– Friction of distance-increasing distance =increased time & cost

Weber’s Model-The Least Cost TheoryAlfred Weber, (1868-1958) a German economists, published Theory of

the Location of Industries in 1909. His theory was the industrial equivalent of the Von Thunen Model.

Manufacturing plants will locate where costs are the least.

Three Categories of Costs:

Transportation-the most important cost-usually the best site is where cost to transport raw material and finished product is the lowest

Labor-high labor costs reduce profit-location where there is a supply of cheap, non-union labor may offset transportation costs

Agglomeration- (clustering of an industry) when a group of industries cluster for mutual benefit-shared services, facilities, etc.-costs can be lower

Weber’s Theory simplified:If the raw material is bulkier, the factory will be closer to them, if the finished product is bulkier then the factory will be closer to the markets.Examples: Coke (Coca Cola) , cars, refrigerators

Why Are Situation Factors Important?

Proximity to inputsBulk-reducing

industries (inputs weigh more than the final product so factories will be located near the raw material)

Examples:CopperSteel

Figure 11-8

Proximity to marketsBulk-gaining

industries (industries that gain volume or weight during production)

Examples:Fabricated metals--carsBeverage production

Figure 11-10

Why Are Situation Factors Important?

Proximity to MarketsSingle-market manufacturers

manufacturers work near the customers for just-in-time deliveries (ex.-deliver car parts just in time for assembly to avoid storage of bulky items)

Usually have only 1-2 consumers for your factory’s production (ex.-TG parts go to Toyota in Georgetown)

Perishable productsEx.-daily newspapers, bread/milk products

Ship, rail, truck, or air?The farther something is transported, the

lower the cost per km/mileCost decreases at different rates for each of

the four modesTruck = most often for short-distance travelTrain = used to ship longer distances (1 day +)Ship = slow, but very low cost per km/mileAir = most expensive, but very fast

• Break of Bulk Point – location where transfer among transportation modes is possible• Seaports and Airports (Baltimore and

Louisville)• Companies that use multiple transport

modes locate at a break of bulk point (UPS)

Why Are Site Factors Important?3 production cost factors:Land

Factories like rural areas b/c they have lots of room for 1-story buildings

LaborThe most important site factorLabor-intensive industries (when employee

wages and benefit costs are high)Capital

In California’s Silicon Valley-there is a continuation of money being lent from banks for good software ideas

Why Are Location Factors Changing?Labor is the main site factor for why

locations factors are changingAttraction of new industrial regions

International shifts in industryEast AsiaSouth AsiaLatin America

Changing distributionsOutsourcing

Time-Space CompressionJust-in-time delivery

rather than keeping a large inventory of components or products, companies keep just what they need for short-term production and new parts are shipped quickly when needed.

Global division of labor

corporations can draw from labor around the globe for different parts of production. (Footloose industry—can be produced anywhere b/c it’s light and cheap to ship)

Deindustrialization in the Core

Relative decline in industrial employmentAutomation and “runaway shops” (an industrial

plant moved by its owners from one location to another to escape union labor regulations or state laws)

Reinvestment in higher profit areasSunbelt states (non-union)Semi-periphery and Periphery

In the last 60 years, U. S. manufacturing has shifted from the NE toward the S and W

In the S and W, right-to-work laws encouraged manufacturing by requiring factories to stop “closed-shop hiring” and unions so that factories could pay workers less and not have to deal with unions

U.S. Manufacturing Shifts

Collapse of Manufacturing =Rust Belt

Replaced in Boston, Pittsburgh by high-tech industries

International Industrial ShiftsIn Europe, manufacturing has shifted to the S and EInternationally, from N. America and Europe to E Asia,

S Asia, and Latin America (ex.-maquiladoras)2 major industries shifting from MDCs: steel and

clothingJobs staying in MDCs: jobs for highly skilled workersInternational Division of Labor-transfers of jobs, esp.

low paid, less skilled workers from MDCs to LDCsOutsourcing-turning over much of the responsibilities

for production to independent suppliers; in vertical integration, company controls all phases of production

• Creative destruction: the process of industrial transformation that accompanies radical innovation.• So what….– Deindustrialization in one location suggests that growth is occurring in a separate location• Capital is not destroyed, it is displaced.

Joseph Schumpeter – the Father of Creative Destruction

President Reagan – also liked the idea !

Movement of jobs and people to the Sunbelt