The NEW International

Division of Labor and

the new industry location in the U.S.How have things changed in the last 30 years

Terms to know

Just-in-Time Delivery• No overstock

•Use computers/technology/communication

•Produce just enough when needed

•Supply Chains

Fordist vs Post-Fordist

Fordist

-Mass Production in one location-Assembly line

-Know one part of the process

Post-Fordist

Flexible production, adaptation, and innovation

-Post-Fordism uses workers in teams-all together working to solve

problems,

Post-Fordism outsources certain jobs

Production shifts worldwide

Intermodal Connections•Break of Bulk locations

•Containerization is a system of intermodal freight transport using standard intermodal containers.

•These can be loaded and sealed intact onto container ships, railroad cars, cargo planes, and semi-trailer trucks.

Outsourcing (Offshoring):

•moving part of your business operation overseas to take advantage of low costs (land, labor, taxes, etc)

Transnational Corporation

•Nike

Maquiladoras

Technopoles•Silicon Valley

•Clusters of High-tech industries

Technopoles

Venture Capital•What Does Venture Capital Mean?

•Money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.

THE MOST IMPORTANT FACTOR IN THE

CLUSTERING OF HIGH TECH INDUSTRIES IN SILICON

VALLEY WAS THE AVAILABILITY OF CAPITAL.

Silicon Valley

What is a footloose industry?

a general term for an industry that can be placed and located at any location without effect from

factors such as resources or transport.

Ex: internet companies...howev

er

High-tech industries, needing a highly qualified workforce, may appear footloose, but

in practice they tend to locate close to universities, research establishments, and

motorways.

Why the Change today?

LET’S LOOK AT U.S. REGION AND THEN WORLD CHANGES

INTERREGIONAL CHANGE-the U.S.

•Cities to Suburbs

•Why?

•Northeast (Steel Belt) to Southwest/South

•Why?

To Suburbs•Factories are better one story…need

cheaper land to build out; not up (land cheaper in burbs)

•Trucks and Interstate highways are the major modes of shipping goods today; not railroads

• Cluster near major highways in industrial parks

•Changing demands (more variety)-Cars!

• Regional plant produced cars for region (past)

• National plant produces 1 car for country

Chevrolet Assembly Plants, 1955

In 1955, GM assembled identical Chevrolets at ten final assembly plants located near major

population centers. Why are cars located near market?

NEAR MARKET

Chevrolet Assembly

Plants, 2007

In 2007, GM was producing a

wider variety of vehicles…where did factories

move and why?

Market is still key

Chevrolet Assembly

Plants

In 2007, GM was producing a

wider variety of vehicles, and

production of various models

was spread through the interior

of the country.

Market is still key

Site Selection for Saturn

GM considered a variety of economic and geographic factors when it

searched for a site for producing the new Saturn in 1985. The plant was

eventually located in Spring Hill, TN.

-land costs-labor costs

-transport cost-taxes

-infrastructure: energy, highways

To South•Lower land costs, labor costs, taxes

• Right to Work States:

• hard to create unions, less pay for workers

• Saturn to the South

•Better infrastructure than past

• After Civil War, no railroads, no energy/electricity, poor roads

• Government provides: Tennessee Valley Authority, roads

• Air Conditioning

BMW plant in South Carolina

•Near major highways; non-union workers!

Sock & Hosiery Manufacturing

Men’s and women’s socks and hosiery manufacturers usually

locate near a low-cost labor force, such as found in the southeastern U.S.

To Gulf Coast•Oil and Natural Gas over coal

• Natural Resources there

• Oil Refining, petrochemical manufacturing, food processing, NASA

To S. California•Panama Canal opens

•Aircraft industry

• Light winds; no winters, clear skies

•Textile production (largest in U.S.); Furniture (2nd largest in U.S.)

• Immigrant labor (no unions)

•High-skill, college-educated workforce

But…U.S. Production Workers1950 & 2005

States in the Northeast and Southern Great Lakes traditionally associated with manufacturing accounted for two-thirds of

manufacturing in 1950 but only two-fifths of manufacturing in 2005.

New Industrial Division of Labor

MDCs to LDCs

The International Change

Steel Production, 1980

The U.S., Soviet Union, and Japan were the largest steel producers in 1980.

World Steel Production, 2005

By 2005, steel production had increased indeveloping countries but declined in the

more developed countries.

Distribution of Steel Production

1980 & 2005Developed countries

accounted for 80% of world

production in 1980 but only 45% in 2005.

LDCs increased from 20%

to 55%. China is now the

world’s largest producer.

Shanghai Steel Factory

The Baoshan Iron Steel Company in Shanghai,

China

Why the changePartner up!

Changing Location Factors•Economic

Interdependence/Globalization

• Transnational Corporations seeking high profits (Profit drive)

•Transportation/Communication changes

• Time-Space Compression

• Cheaper Transportation costs

• Internet superhighway

• (Don’t need to be near market as much anymore!)

Changing Location Factors•Proximity to low-cost labor

(skilled/unskilled)

• Outsourcing by Transnational corps and other companies

•Other Advantages

• Lower Taxes *Lax environment laws

• Access to new markets

•Supernational Trade Agreements

• NAFTA: Move to Mexico and Maquiladoras

• European Union shift to cheaper labor

Changing Location Factors•Special Economic Zones (SEZ)

• a geographical region that has economic laws that are more liberal than a country's typical economic laws. Usually the goal of a structure is to increase foreign direct investment by foreign investors, typically an international business or a multinational corporation (MNC).

• Includes Free Trade Zones (FTZ), Export Processing Zones (EPZ) – like Maquiladoras

• In China, Special Economic Zones -the early 1980s. The most successful, Shenzhen, has developed from a small village into a city with a population over 10 million within 20 years.

What is the impact?

Labor Cost per HourMDCs and LDCs

Fig. 11-22: Hourly wages can be under $1 in many LDCs compared to well over $10 in many MDCs.

U.S. Clothing Production

1994 - 2005

Fig. 11-23: The percent of U.S. made clothing has declined sharply since the 1990s while imports have increased.

New Industrial Regions

•China

• low cost labor; new market

• New laws allowing TNC in certain regions (Special Economic Zones)

• 3 areas: ¼ of pop; ½ of wealth; ¾ of foreign investment; 5/6 of foreign trade

• BACKWASH EFFECT: population leaving areas rushing to inudustrial areas

New Industrial Regions

• 4 Asian Tigers

• South Korea

• Hong Kong

• Singapore

• Taiwan

4 Asian Tigers• Rapid industrialization between the early 1960s -1990s

• Still industrial but move to tetriary

• Low cost labor + education = skilled labor force; export driven

• For example, Hong Kong and Singapore became world leading international financial centers, while South Korea and Taiwan became world leaders in information technology

• The Four Asian Tigers focused on improving the education system at all levels;

Don’t forget IndiaComputer industries, accounting, call

centers, etc

Latin America• Mexico

• NAFTA and Maquiladoras: 1980s HUGE growth in the north in MEXICO

• Cheaper labor than in US; Close to US

• Less environmental restrictions; child labor

• Interregional migration and development problems

• Some have closed due to cheaper labor in Asia (325 of 1122 textile maquiladoras closed and gone to Asia)

• EXPORT-PROCESSING ZONE

Television factories

New Industrial Regions

• EU has encouraged growth by giving capital to companies who locate in less developed areas

• Spain

• physically isolated and not developed into

• 2nd largest auto industry in EU

• Poland/Czech Republic

• Low cost labor and great situation (Central Europe)

Overall impact on U.S.

• Unemployment (Flint, Gary, etc) due to outsourcing

• Deindustrialization (move from 2nd to 3rd service activities)

• Increase in Retail jobs (less $; less benefits)

• Internal Migration (Rust to Sun Belt)

• Decreased Union membership

• Lower-cost goods

U.S. Imports From China

0

50

100

150

200

250

300

350

China Admitted to WTO

Source: U.S. Census Bureau

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US

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