Local and Regional Development

1. Local and Regional Development By Rory O′Connor and Philipp Hollenstein Lecturer: Prof. Gunther Maier

2. Overview • Industrial Geography • Introduction to Industrial Geography • Theoretical Approaches 2. Historical Developments • Manufacturing Change in Historical Perspective • Smith vs. Marx • Industrialization as a Process of Creative Destruction

3. 1.1 Introduction to Industrial Geography • Industrial Geography/Manufacturing Geography • Explains changes in location of and growth/decline in industrial activity and the implications of such changes on local development • The watershed of the 1950s/1960s • Idiographic (Pre-) • Concerned with individual cases • Nomothetic (Post-) • Concerned with theory on widescale • Modern Theories • Neoclassical • Behavioral • Structuralist (Radical)

4. 1.2 Theoretical ApproachsConventional: Neoclassical and Behavorial • Neoclassical • Competition maximizes individual efficiency and social welfare in the longrun • Characteristics • Focuses soley on economic variables, disregarding factors such as social processes • Assumes universial economic laws • Challenged idiographic view of unique environments • Behavioral • Challenged neoclassical • Real world decisions do not follow set rules • Applied additional factors to decisions such as preference, rational, and abilility (i.e., small firm v. multinational fim)

5. 1.2 Theoretical ApproachsRadical and Structuralist • Influenced by institutional and marxian economics • Challenged the notion that capitalism provides the most ideal outcomes • Instead, unregulated capitalism generates instability • Emphasises political economy • Ability of corporations to manipulate their markets and locations • Structuralism • Strong marxian influence • Capitalism is crisis-ridden and exploits labor • Criticisms • Unclear, lack form of evolution • Overemphasis of macro-economic forces • Spread of Industrialization • Powerful tendencies help to standardize supply and demand • Geographically uneven, causing modification due to local circumstances

6. 2.1 Manufacturing Change in Historical Perspective • The Industrial Revolution of the late 18th century brought changes in the nature, scale and growth rates of manufacturing activities • Primitive accumulation • Handicraft industry, large workshops, factory system • Large workshop promotes division of labor by seperating workers from means of production • Industrialization follows through further labor exploitation and control • Proto-industrial • Handicraft industry, putting out system, factory system • Promotes large-scale industrialization through the capacity of rural areas to increase levels of production • In reality, path to industrialization is more complex

7. 2.1 Manufacturing Change...Evolution of Paper Making • Illustrates several aspects of the diffusion of traditional industry • Process was invented in China • Travel of merchants, explorers, artisans, etc. brought paper making to various regions worldwide • Through its evolution, experimentation with different processes and materials changed technology • By 1800, paper making was labor intensive and based in small workshops • Within 100 years, it became capital intensive and based in large factories • Expansion to areas of geographic significance (i.e., coniferous forests, rainforests, urban areas)

8. 2.1 Manufacturing Change...English Wool Industry • Different organization than that of paper making • Domestic system based in West Riding of Yorkshire • Putting out system based in West Country • Domestic system • Process was organized amongst small land owning families • Limited class differences between masters and workers • Putting out system • Organized by merchant manufactorers • Merchants owned material and equipment and paid workers to complete specialized processes • Workers based more heavily on agriculture, thus more susceptible to changes in harvest or wages • Workers borrowed more increasing merchant control of entire process • Encourgaged class alienation and conflict • Industrialization started through cooperative mills • Later developed into putting out system in which merchants owned factories and employed labor

9. 2.1 Manufacturing Change...The Factory System • Originally, factories and traditional industries existed side by side • Factories could higher quantities of goods at lower costs than traditional industries • Despite opposition, factory system grew in importance • Capitalists found motivation in profit, status, and control • Regulations were established to ensure the continued existence of a modern society • The industrial revolution helped develop capitalism‘s significant characteristic for self-generated change

10. 2.2 Smith vs. MarxThe truth is somewhere in between • Smith view: the markets work most efficiently when they are regulated by freely competitive processes • laissez-faire • no restriction of competition by the government • efficient allocation of resources • Marx view: industrialization is an exploitative processe at the expense of the labour force • capitalists are able to drive down wages to provide surplus value • Both sides where wrong • Perfect competition will not always serve the best results • Labour has developed abilities to cope with capitalism (labour unions)

11. 2.3 Industrialization as a process of creative destructionNew Innovations as response of a crisis • Kondratieff cycles • industrial revelution occured in terms of a series of long waves • each wave comprises periods of recovery, prosperity and recession and is terminated by severe depression • Development of the waves • each new wave is created by the clustering of basic innovations • This stimulate the opportunities for investment and employment in new branches of industrie • after some time markets for the new goods become saturated – the emphasis is now on improving precess technology (reducing labour) • This creates a crisis because of the excess capacity and decreasing demand • the way out is another cluster of innovations

12. 2.3 Industrialization as a process of creative destructionEach wave was started by an important innovation • 5 Kondratieff waves have been identified: • 1. Wave started in the 1770‘s evoked by clustering of innovations in the iron and textile industrie • 2. Wave started in the 1820‘s evoked by clustering of innovations in steam power and railways • 3. Wave started in the 1880‘s evoked by clustering of innovations in electric power and chemicals • 4. Wave started in the 1940‘s evoked by clustering of innovations in petrochemicals, electronics, autos and aerospace • 5. Wave started in the 1980‘s and is still in progress evoked by clustering of innovations in microelectronics

13. 2.3 Industrialization as a process of creative destructionThe new approach try to improve the old theory • Critique and improvements of the Kondratieff cycles theory • The emphasis is only on technological variables • But the reason way industrial development happens is more complicated and includes other variables • New approach – based on recognizing shifts in techno-economic paradigms • Long waves of economic activity are broadly based and embedded within a society

14. 2.3 Industrialization as a process of creative destructionRadical innov. have an greater impact than incr. innov. • Shifts in techno-economic paradigm 4 different types of innovations are distingushed • Incremental innovations • occur continuously • no single incremental innovation has a dramatic effect • but all all incremental innovations together have a great influence on the industrie • Radical innovations • occur unevenly over time, space and sectors • they have a dramatic impact • the basis of investment booms • the impact is may limited to the new products

15. 2.3 Industrialization as a process of creative destructionTechno-economic paradigm herald a new wave • New technology systems • combine radical and incremental technological innovations with organizationl and managerial innovations • broade impact on several branches of the economy • create new industries • Techno-economic paradigm • the new technology systems exercise pervasive effects throughout the entire economy • major industrial and infrastructural innovations • new principles of productivity • emergence of new forms of business organization • innovations in international and national systems of regulation • Broad shifts in industrial and technological leadership

16. 2.3 Industrialization as a process of creative destruction new paradigms are associated with a main industry • New techno-economic paradigms occure: • As a response of a downswing phase of the previous Kondratieff wave • Because it offers some decisive advantages over the previous one e.g. reducing the costs of production • Main industries and infrastructure • each paradigm is associated with specific mixes of dominant industies and expansions of particular forms of infrastructure • the new small industries of a paradigm which grow rapidly become the main carrier branches of the next paradigm • each wave adds layers of new activity and infrastructure while simultaneously forcing changes in existing structures • Interdependencies among industries is a very important feature for the industrializaton process

17. 2.3 Industrialization as a process of creative destruction new paradigms are supported by a key factor • Sources of producivity improvement: • economies of scale – fordism • highly spezialised labour can do the work faster and better • reduction in labour costs and improvement in quality • but there also diseconomies of scale e.g. rooted in the boring work or inflexibility • Key factor • each paradigm is associated with a key factor, e.g. oil or micro-electronics • they fulfill three conditions: • avarage cost (and price) of key factors falls rapidly • key factors are in almost unlimited supply for long periods • key factors have potential for incorporation in many products and processes

18. 2.3 Industrialization as a process of creative destructionA crisis pave the way for a new paradigm • Institutional innovations • each paradigm is implicated with new forms of international and national systems of regulation • In addition to that each paradigm is associated with institutional innovations affecting business organization (e.g. plc.), labour relations and systems of innovation (e.g. r&d laboratories, universities) • The crisis of structural adjustment • The shift from the old to the new techno-economic paradigm occurs mostly in time of recession – way? • Old paradigms are considerable resistance against changes because of the made investments, human attitudes (the sense of tradition) and because of the fear of new challenges • Thus, as the economic and social problems of the old paradigm become apparent, the people are willing to change their mind

19. Thank You For Your Attention