Industrialization & Economic Development

1. Industrialization & Economic Development Ethel Wood

2. Economic Development • Primary sector (agriculture) • Secondary sector (industry) – economy focuses on factories and machinery • Tertiary sector (services) • Post-industrial societies – dominated by this sector but grow through industrialization • Quaternary sector – service jobs that deal with research and development, management and admin, processing and dissemination of info

3. Evolution of Economics • MDCs – those that have experiences industrialization • LDCs – those that have not experienced it • NICs – Latin American and Asian countries • South Korea • Compressed modernity – rapid economic growth

4. Economic Indicators • GDP per Capita • Exceeds $20,000 in MDCs, $1,000 in LDCs • Types of Jobs • Fewest workers in primary activity (MDC) • Large % in primary activity (LDC) • Worker Productivity • MDC – more productive worker • LDC – less productive – rely on human and animal • Value added is much lower than in LDCs • Access to raw materials • Coal needed to industrialize in Europe and motivated them to control raw materials elsewhere • Availability of consumer goods • Discretionary income vs no discretionary income

5. Modernization Model • Westernization Model – Britain was the first and was spurred by a combination of prosperity, trade connections, inventions, and natural resources (namely coal). • Greatest barrier to this theory – tradition – • Those countries or societies unwilling to change and adapt to more modern techniques will not increase their economic development (strong family systems, ties to the past)

6. Dependency Theory • Economic development for many countries is blocked by the industrialized nations that exploit them • Roots in colonialism • Outgrowth of Marxism • Nationalizing industries in LDCs so they can narrow the gap between rich and poor

7. Modernization Theory • Rostow’s Stages of development • Traditional Stage – traditional societies • Take-off stage – Trade starts to happen, goods produced for more than just themselves, urbanization increases • Drive to technological maturity – focus on attaining higher living standards, more urbanized, local community feeling takes a back seat to economic growth • High Mass Consumption – mass production, mass consumption

8. Critics of the theory say… • Socialist countries criticize the theory bc it “justifies capitalism” and encourages exploitation of non-capitalist countries • Modernization simply hasn’t occurred in many countries • Rich nation that benefit from the status quo often block paths to development. • Difference between 19th century development and now.

9. Dependency Theory • Wallerstein’s World Systems Theory: 1974 (capitalist world economy explanation) • Based his theory on high-income nations with market economies • Traced to colonial era where advantage was taken of the wealth in periphery countries • Core-Semi-periphery-Periphery • Dependency comes from narrow export-oriented products like oil, coffee, fruit • Countries lack industrial capacity – sell inexpensive raw materials and buy manufactured goods

10. Critics of this theory say… • Dependency theory wrongly treats wealth as a bad thing that no one can get richer while all other get poorer • Too much blame on rich countries • Ignoring strong cultural factors in developing nations • Corrupt national leaders

11. Self-Sufficiency Model • Isolate business from trade and encourage internal growth • Countries may set limits on imported goods (high taxes or set quotas) • India used this model • No incentive to improve quality with no competition or improve production costs, reduce prices

12. In contrast to India • Asian Tigers (Hong Kong, Taiwan, South Korea, and Singapore) – export-oriented industrialization • Product life cycle – • Innovator country comes up with the something newand then move on to other things • Other countries think of ways to make the first item better and cheaper and import that item back to the innovator country. (i.e. automobiles & electronics)

13. Industrial Revolution • So Why Britain? • Series of invention • Stable government • Wealth from overseas ventures • Abundant supply of coal • All helped spread the new technologies to transportation (train) and communications • Comparative advantage • Skilled laborers, established trade routes, abundant raw materials

14. Why then the US? • Abundant resources • Land space available • Knowledge from the old country (Samuel Slater built first textile mill in Rhode Island in 1791) • Embargos on European imports helped spur economic growth • Before 1860 – food and lumber – afterwards steel and iron • Despite lack of raw materials in NE U.S. – there was an abundance of consumption of goods which helped the region grow. • New York – became break-of-bulk point

15. A shift happens… • Early IR – coal and steel • 20th Century IR – oil and natural gas • Power plants, machinery, cars, airplanes, & ships • Heating homes, hot water and cooking stoves • Europe and Us start to turn to other countries for these resources (SA, Kuwait, Iran, Russia, China, Mexico, Venezuela and Nigeria) • Allowed for multinational corporations within their borders

16. Location Theory • Primary industry – location near raw materials • Secondary Industry – • Variable costs – less expensive in some areas than others • Friction of distance – cost goes up the farther the distance of transport from source to factory • Distance decay – further away it gets the less likely it is to do business (Wallerstein’s World Systems Theory in a nutshell) Happens at a global scale and regional scale (India, U.S.)

17. Weber’s Least Cost Theory1909 • Often compared to Von Thunen’s agricultural Model • Transportation – cost of inputs to factory and outputs to market – look for the least distance • Truck is cheapest for short distances, RR for medium and ships for longest • Terminal costs – least expensive for trucks, most expensive for ships (passage through the Suez or Panama canals for ex.)

18. Least Cost Theory cont.’d) • Labor – cheap labor can make up for transportation costs • Agglomeration – talents, workers and facilities. • Restaurants - furniture, and equipment companies that provide business for them • Workers – need clothes – clothing stores, etc., etc. • Deglomeration – exodus from a crowded area

19. And of course the Critics chime in… • Too inflexible – no consideration of costs over time • Substitution principle – juggling expenses as long as they don’t all go up at the same time

20. Locational Interdependence Theory (yet another location theory) • Not concerned with variable costs like Weber • Concerned with variable revenue analysis – ability to capture a market that will earn it more customers and money than its competitors • Harold Hotelling– Ice cream vendor example

21. Contemporary Things to Consider… • Space-time compression – “every country’s industrial development is related to conditions in the global economy” • Situation and site factors are still important – globalization has altered the meaning • Infrastructure plays a key role in decisions as to where to locate industries.

22. Western & Central Europe • Ruhr River area of Germany post WWI • Greatest Industrial complex • Proximity to markets, accessible transportation and natural resources • WWII – much was destroyed but was built back with the aid of US post WWII

23. North America • US emerged after WWI & WWII as world’s strongest industrial power • Manufacturing belt that included Canada (Windsor, Toronto, Montreal) • 20th century manufacturing regions

25. Russia & Former Soviet Republics • Ukraine - grew into one of the world’s largest manufacturing complexes by 1950s • Moscow, Leningrad • Communism controlled the development but patterns still followed logical based on geography • Dams for hydro power • Canals linked Volga to Moscow • Trans-Siberian RR

26. Eastern Asia • Japan – Meiji Restoration (oligarchs), Kanto Plain • Four Asian Tigers – export-oriented industrialization • China – Northeast District

27. Secondary Industrial Regions • Southeast Asia – Thailand, Malaysia, Indonesia, Vietnam (sphere of influence from China) • Northern Africa – Cairo, Egypt • Southern Africa – Johannesburg • Western Hemisphere – Mexico (Mexico City to Guadalajara) and Brazil (Sao Paulo, Rio to Belo Horizonte)

28. Eastern Asia • Japan – • Out of the way from imperialist powers • Never colonized • Later half of the 19C (Meiji Restoration) – govt. sponsored campaign for modernization and colonization (oligarchs) • Organized armed forces • Transformed education and transportation (to follow Western model) • Established colonies for raw materials • Kanto Plain – dominant industrial region • Chosen to be near the decision makers in Tokyo

29. Four “Tigers” • South Korea, Taiwan, Hong Kong –(transferred power from Britain to China in 1997) & Singapore • Export – oriented industrialization • Product Life Cycle – innovator countries

30. China • mid-20th Century • Began under Soviet planners & under Communist Party esp. since 1979 • Northeast District – earliest heartland of industry (Manchuria) – coal and iron (Shenyang) • Now challenging Japan for E & P leadership in the region. • Special Economic Zones (SEZs)

31. Secondary Industrial Regions • Southeast Asia (China’s sphere) • Northern Africa (Cairo) • Johannesburg, South Africa • Mexico (Mexico City to Guadalajara)and Brazil (Sao Paulo, Rio and Belo Horizonte)

32. NAFTA • Signed in 1995 • maquiladora • New international division of labor • Criticisms – US companies accused of avoiding employment and environmental regulations by using maquiladoras (assembly intensive)

33. India’s prospects • Large labor force • Hydro power potential • Large coal and iron ore deposits • Geographical location midway between Europe and the Pacific Rim • Computer software development (Bangalore & Hyderabad) • Call centers – developed a strong tertiary sectory

34. Trading Blocs • NA – NAFTA • European Union • East Asia • Closer integration within blocs but increased barriers between blocs (quotas on imports, etc.) • Transnational corporations – operate outside of where they are headquartered • Conglomerate corporations – made up of many small firms to support the overall industry • Disparities within trade blocs are problematic - Greece

35. Deindustrialization • Industry decrease in jobs usually means an increase in tertiary sector jobs • Should it be a concern?

36. Environment • Fossil fuels • Proven reserves • Potential reserves • Global warming • Acid rain