Unit 7: Industrial and Economic Development Patterns and Processes

Industrial Revolution

A series of improvements in industrial technology that transformed the process of manufacturing goods.

industrialization

The growth of manufacturing and development of industries on a wide scale

manufacturing

process of turning raw materials into a good

cottage industry

Manufacturing based in homes rather than in a factory, commonly found before the Industrial Revolution.

factory system

During Industrial Revolution, people worked in factories

Least Cost Theory

Model developed by Alfred Weber according to which the location of manufacturing is determined by the minimization of three factors: transportation, labor, and agglomeration.

weight-losing industry

If good weighs less than raw materials, factories will be closer to raw materials

weight-gaining industry

If good weighs more than the raw materials, the factories will be located close to market for the goods

break-of-bulk point

Location where one mode of transportation meets another
Ex: airports, ports, train stations

agglomeration

Grouping together of many firms from the same industry in a single area for collective or cooperative use of infrastructure and sharing of labor resources.

Gross Domestic Product (GDP)

measures all the goods and services produced in a country
- Equation: consumption + investment + government spending + (exports - imports)
- Can be expressed in either whole number or per capita

per capita

per person

Gross National Income (GNI)

Measures the amount of income (make) and wealth (have) of residents and businesses in a country

Gross National Product (GNP)

Measures the amount of income and wealth of residents and businesses in a country
* Two exceptions:
Excludes foreigners living in country
Includes all income earned abroad

purchasing power parity (PPP)

The amount of money needed in one country to purchase the same goods and services in another country

informal sector

part of economy not taxed nor monitored by government

Gini coefficient

measures the amount of income or wealth inequality in a country
- Gap between the richest and poorest residents in a country
- Expressed in a decimal from 0 to 1
Closer to 1 \= more unequal

Human Development Index (HDI)

Composite measure of 3 components:
Life Expectancy, Education, Mean years of schooling, Income (Uses GNI per capita)
- Expressed from 0 to 1
* Closer to 1 \= higher human development

Gender Inequality Index (GII)

- Measures gender disparity between men and women
- Composite measure of 3 components
1. Reproductive health
2. Empowerment
3. Labor Market Participation
Expressed from 0 to 1
Closer to 1 \= more unequal

microloans

very small loans that can be used to start own businesses

more developed countries (MDCs)/highly developed countries (HDCs)

Countries that score best on many measures of development

less developed countries (LDCs)

Countries that score worst on many measures of development

newly industrialized countries (NICs)

Countries that score in the middle on many measures of development

Rostow's Stages of Economic Growth

Theory that described how countries shift from traditional to modern economy
- Based on "modernization theory"

modernization theory

Idea that with right conditions, all countries can achieve economic growth and development

dependency theory

some people believe that countries in early stages of Rostow's model are dependent upon the countries in the late states of Rostow's Model
Result: get stuck at early stages

commodity dependence

Countries in early stages depend on exporting raw materials to earn money
However, both price of raw materials and demand for raw materials could drop
\> Country is unable to develop

World Systems Theory

Theory (Model) that places all countries into three categories
- core, semi-periphery, periphery
Wallerstein

comparative advantage

The ability for a country to produce a good or product more efficiently than another country

complementarity

The ability for countries who hold comparative advantages in certain areas to link together to satisfy each other's wants

neoliberalism

Economic ideology that promotes:
Power in the hands of private companies
Lower taxes
Less government spending
Free trade

free trade

Trade between countries that is not subject to tazes or limitations

trade barriers

taxation/limitation on trade imposed by governments
ex: tariff

tariff

tax on imports and exports

Organization of the Petroleum Exporting Countries (OPEC)

ensure oil prices in global markets

debt crises

Occurs when country loans money to another country, then that second country doesn't pay money back

International Monetary Fund (IMF)

Organization that allows countries experiencing financial problems to borrow money

new international division of labor (NIDL)

The shift in global employment patterns that has resulted from neoliberalism

foreign direct investment (FDI)

Control of a business in one country by an entity based in another country

multinational corporation (MNC)

A large business organization operating in a number of different national economies; the term implies a more extensive form of transnational corporation.

special economic zone (SEZ)

an area of a country where economic laws differ from the rest of the country
- Usually lower taxation & few regulation
- Can include free trade zones (FTZ)

free trade zone (FTZ)

a duty-free and tax-exempt industrial park created to attract foreign corporations and create industrial jobs

export processing zone (EPZ)

zones established by many countries in the periphery and semi-periphery where they offer favorable tax, regulatory, and trade arrangements to attract foreign trade and investment
(SEZ is specifically set up for manufacturing goods that will be exported)

maquiladora

Factories built by US companies in Mexico near the US border to take advantage of much lower labor costs in Mexico.

high technology corridor (technopole)

areas devoted to research, development, and sale of high technology products; (e.g., Silicon Valley, Boston).

corporate park

suburban agglomeration of office buildings

growth pole

the concentration of high value economic development that attracts even more economic development

deindustrialization

process of social and economic change caused by removal of manufacturing

"Rust Belt"

The manufacturing region in the United States that is currently debilitated because many manufacturing firms have relocated to countries offering cheaper labor and relaxed environmental regulations.

Fordist method of production

Manufacturing process broken down into differentiated components, with different groups of people performing different task to complete the product.

multiplier effect

Idea that increase in spending (for example, by starting a factory / investing in manufacturing) leads to an increase in consumption that is multiple times the original spending

post-Fordist method of production

several features: Flexible production, Just-in-time delivery, Outsourcing

flexible production

Different components of production of a good occur in different places simultaneously
- Some places might be more advantageous than others for certain parts of the good

just-in-time delivery

a system in which raw materials arrive at the factory very close to when they are needed

outsourcing

process of one company hiring another company to be responsible for a certain activity

offshoring

The practice of exporting U.S. jobs to lower paid employees in other nations.

ecological footprint

the impact of a person or community on the environment, expressed as the amount of land required to sustain their use of natural resources.

climate change

changing the global climate due to human activity

sustainable development

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

ecotourism

form of tourism tht attempts to protect local ecosystems

Sustainable Development Goals

Seventeen goals adopted by the U.N. in 2015 to reduce disparities between developed and developing countries by 2030.

Factors that led to the start of the Industrial Revolution

1. Availability of Natural Resources
- Especially coal & iron
2. New Technology
- Flying shuttle & spinning Jenny
- Steam Engine

Changes during Industrial Revolution

1) Working Location
- before people worked at home then shifted to factories
2) Increase in Food - Production
With stable food supply, death rate was lowered and populations increased
* Stage 2 of DTM
3) Urbanization
- shift to people from country to city
- new factory jobs in cities
4) Change in Class Structure
- new middle class
(rise of unions, demand for voting rights, colonialism)

Economic Sectors

Economic Activities (ie jobs) can be divided into five sectors

Weber's Locational Triangle

find the optimum location for the production of a good based on the fixed locations of the market and two raw material sources

other factors outside of Weber's model that might influence where factories are located

- Supply of power/energy
- Level of taxes
- Availability of skilled labor (not only cheapest labor)
- availability of land

Other Social Development Measures

A) Fertility Rates
B) Infant Mortality Rates
C) Access to healthcare
D) Use of fossil fuels VS renewable energy
E) Literacy Rates

Stage 1: Traditional Society

- Focus on primary sector
(Some countries in Stage 1 haven't even made it to organized agriculture, fishing, and mining yet)
- Limited technologies - not yet industrialized
- Local trading
- Countries today: probably none
(Maybe some societies in Sub-Saharan Africa)

Stage 2: Preconditions for Takeoff

- Still primarily focused on primary sectors with beginnings of secondary sector
- Investments in infrastructure made
- Technology begins to spread
- Countries today: Ethiopia, Democratic Republic of Congo, Niger

Stage 3: Takeoff

- Focus on developing secondary sector
- Widespread industrialization
- Beginnings of urbanization
- Countries today: Bangladesh; Egypt; Philippines; Vietnam
(Philippines is exception to Rostow - no manufacturing, but trying to skip Step 3)

Stage 4: Drive to Maturity

- Split between secondary and tertiary sectors
- Middle class forming
- Large improvements in energy transportation and communication
- Countries today: China, Mexico, Turkey, India

Stage 5: Age of Mass Consumption

- Emphasis on tertiary sector (or higher)
- Consumption of nonessential goods
- "Nicer" goods become common
- Countries today: United States, Japan, France, Germany

Criticism of Rostow's Stages of Economic Growth

1) Based (too much) on American and European culture
- Some countries may not desire all of these stages
- Non Western and non capitalist societies have different priorities
2) Assumes that all countries are able to progress through the stages
- Would be challenged by supporters of "dependency theory"

Core - World Systems

- Most industrialized and developed countries
- Focus on tertiary, quaternary, and quinary sectors
- Import manufactured goods from semi-periphery
Ex: United States, France, Germany, Australia

Semi-Periphery - World Systems

- Countries that are industrialized and developing
- Heavy focus on secondary sector and manufacturing
- Export finished goods to the core, and import raw materials from the periphery
- Ex: India, Brazil, Mexico

Periphery - World Systems

- Least industrialized and developed countries
- Heavily dependent on primary sector
- Export raw materials to semi-periphery (and core, to an extent)
- Ex: Democratic Republic of Congo, Tanzania, Bolivia

Criticisms of World Systems Theory

- downplays the role of culture
- somewhat outdated
- fails to recognize the role of nongovernmental organizations
- Lacks detail about change

Pros and cons of Trump's tariffs

Pros: Some workers in manufacturing that lost their jobs are getting them back
because cost of American metals is more competitive because foreign metals are more expensive

Cons:
1) American consumer has to pay more
because foreign goods are more expensive, domestic goods same price (were already expensive)
2) If other countries respond with tariffs, american companies will be forced to cut jobs

Global financial crises

A worldwide period of economic difficulty experienced by markets and consumers.

NIDL in LDCs

- Largest concentration on jobs in LDCs \= primary sector
- LDCs then focus on exporting raw materials to NICs (and to some degree MDCs)

NIDL in NIC

- Largest concentration of jobs in NICs \= secondary sector
- NICs focus on manufacturing finished goods for MDCs
- NICs want manufacturing companies to move parts of their business from HDCs to them (foreign direct investment)

NIDL in MDC

- Largest concentration of jobs in MDCs \= tertiary sector (or higher)
- One common development \= growth of high technology corridors (technologies)

How NICs attract business

- Lower pay standards for workers
- Lower environmental standards
- Tax breaks
- SEZs

Primary Sector

the part of the economy that draws raw materials from the natural environment \n - Fishers, Farmer, lumberjacks

Secondary Sector

Processing raw materials into finished goods (manufacturing , building) \n - Chef, Construction worker, car manufacture, steel workers

Tertiary Sector

the part of the economy that involves services rather than goods \n - Mcdo worker, Real estate agent, Telecommunication, Healthcare

Quarternary Sector

the knowledge-based sector including research and development, business consulting, financial services, education, public administration, and software development. \n - Doctor, Teacher, lawyer

Quinary Sector

Service sector industries that require a high level of specialized knowledge or technical skill. \n Decision makers in society \n - Politicians, Celebrities, CEOs, scientific research and high-level management.