Industrial and Economic Development - Unit 7 Notes

The Industrial Revolution (7.1)

  • Definition: A set of changes in technology and use of natural resources that dramatically increased manufacturing productivity.

  • Timeline: 1750-1850.

  • Industrialization: Increasing secondary (manufacturing) jobs and mechanization of materials, moving countries into stage 2 of the Demographic Transition Model (DTM).

Factors Leading to Industrialization

  • New technologies.

  • Availability of natural resources.

Shift from Cottage Industry to Factories

  • Cottage Industry: Business or manufacturing activity done at home.
    *People would weave cloth and make a finished product at home.

  • Factories: Large facilities housing machines for mass production of textiles.
    *Goal was to mass produce textiles with machines to lower the price of a good.
    *Machines were too big to have in a home so they were housed in larger facilities.
    *Less workers needed as automation increased.

  • Enabled mass production to lower prices.

  • Led to fewer workers needed due to automation.

Fordism (Assembly Line)

  • Creator: Henry Ford.

  • Process: Item moved from worker to worker, each performing the same task repeatedly.

  • Outcomes: Standardized products made quickly with less skilled workers.

  • Increased worker disposability.

Economies of Scale

  • Definition: Cost of production decreases as more of a product is mass-produced.

  • Factory efficiency allows affordable mass production.

  • Leads to a higher standard of living as consumers can afford previously unattainable products.

Diffusion of Industrialization

  • Mid-1700s: England.

  • 1850s: Western Europe and the USA.

  • 1900: Japan, Europe, parts of China, and South America.

  • 1960-70s: Rest of Asia.

  • Most of Africa has not industrialized.

Site and Situation Factors

  • Site Factors: Near sources of power for fuel.
    *Rivers for Hydropower.
    *Coal deposits.
    *Iron ore deposits (second wave).

  • Situation Factors: Near transportation for trading purposes.
    *Rivers or canals made easy transportation.
    *Later roads, rails and harbors.

Clay’s American System

  • Provided national funding for transportation infrastructure.

  • Contributed to the creation of roads, canals, and early railroads.

2nd Agricultural Revolution

  • Occurred simultaneously with the Industrial Revolution.

  • New technologies created new machinery and farming techniques.

  • Increased food supply and reduced the need for farmers.

  • Enclosure Movement: Created larger farms using machinery for commercial agriculture, feeding more people.

  • More food = larger/healthier population (CDR declines).

  • Larger workforce to work in factories = increased urbanization(moving to work in factories).

  • More food led to larger, healthier populations.

  • Generated a larger workforce for factories, increasing urbanization.

Urbanization: The Birth of Modern Cities

  • Opening of factories created an economic pull, leading to rural to urban migration.

  • Small towns grew into bustling cities.

  • Factories were strategically built to access natural resources and transportation.

Urbanization Statistics

  • 1900: 2 out of 10 people lived in an urban area.

  • 1990: 4 out of 10 people lived in an urban area.

  • 2010: 5 out of 10 people lived in an urban area.

  • 2030 (projected): 6 out of 10 people will live in an urban area.

  • 2050 (projected): 7 out of 10 people will live in an urban area.

Growth of Cities

  • Vertical Growth: New technologies allowed cities to take unique characteristics.
    *Affordable steel, stronger foundations and development of the elevators allowed cities to become vertical.

  • Horizontal Growth: Intra-Urban Transportation
    *Trains, cars and trucks allowed cities to grow further from downtown core.
    *Food could be easily transported from rural to urban population.

New Class Structure

  • Upper class: Very rich industrial/business owners.

  • Middle class: Business people, professionals, doctors, lawyers.

  • Lower class: Poorer factory workers, farmers.

Negative Effects of Industrial Revolution and Urbanization

  • Burning of fossil fuels in densely populated areas created harmful air pollution.

  • Crude Death Rate (CDR) increased.

Government Intervention

  • People supported stronger government actions to protect public health.

  • Building sewers.

  • Regulating cemeteries.

  • CDR decreased.

Colonialism and Imperialism

  • Industrialized countries needed cheap raw materials and new markets.

  • Imperialism: A policy of extending a country’s political and economic power.

  • Colonies provided:
    *Raw materials-- Sugar, cotton, lumber, minerals etc.
    *Labor to extract raw materials.
    *Markets to sell finished goods.
    *Ports where trading ships could stop and resupply.
    *Profits for investing in infrastructure--Factories, canals, railroads.

Colonialism vs. Imperialism

  • Colonialism: 1500-1800 (Americas and coastal areas of Africa/Asia).

  • Imperialism: 1850-1970s (Africa/Asia after Americas had independence movements).

Effects of Imperialism and Colonialism

  • Made western countries even wealthier and more powerful at the expense of the colonies.

  • Created a great divide between advanced industrialized countries and underdeveloped countries that can still be seen today.

Economic Sectors and Patterns (7.2)

Sectors of Industry

*There are hundreds of different jobs or occupations, they can all be classified into 4 categories:

  • Primary: Extraction of natural resources (e.g., farming, mining, forestry).

  • Secondary: Making things by manufacturing or construction (e.g., car manufacturing).

  • Tertiary: Providing services (e.g., commercial, professional, social, entertainment, personal services).

  • Quaternary: Linked to ICT and research development (e.g., genetics researcher).

The 3 Economic Sectors

  • Economists analyze a country’s workforce by dividing it into 3 sectors.

  • The composition or workers in a country’s economy changes over time.

  • Primary-- Extraction of natural resources--USA and other developed countries only have about 5% of their worker employed in the primary sector--In developing countries it jumps to 70%.

  • Secondary-- Taking raw materials and making them into finished products--Happens after industrialization.

  • Tertiary-- Providing services for people or business--Retail, plumbing, teaching, auto repair, restaurant industries--For developing countries where manufacturing is on the decline, the tertiary sector is expanding and dominating the labor force.

Refining Tertiary Sector

  • In recent decades, tertiary has gotten so large that economists began to divide it up into smaller groups

  • Quaternary Sector: Knowledge-based sector including research and development.

  • Business consulting, financial services, higher education, public administration, software development.
    *Quaternary--Knowledge based sector--ResearchDevelopment--Business consulting, Financial services--Usually considered a sector within tertiary.

  • Quinary Sector: Consists of the highest levels of decision-making.
    *Includes top officials in various levels of government/business.
    *Usually affects a larger amount of people
    *Quinary--Highest levels of decision making--Top officials in the government--Usually considered a sector within tertiary.

Economic Sector Examples by Country Type

  • Developing (Ethiopia, Angola): High percentage in agriculture, low in services.

  • Newly Industrialized (China): Significant industry, growing services.

  • Developed (USA): Low agriculture, high in services.

Factors Influencing Factory Location

  • Labor.

  • Transportation.

  • Break of bulk point.

  • Proximity to markets.

  • Resources.

Situation factor.

Least Cost Theory (Alfred Weber, 1909)

  • Explains key decisions companies use to locate factories.

  • 3 Factors
    *The first is the most important

  • Transportation Cost: Getting materials to the factory and getting products to the markets. The heavier the item, the larger the cost is in transportation.
    *Need to located near its source of inputs to minimize transportation costs.

  • Labor: Factories that are labor intensive try to locate where wages are cheaper to minimize costs.

  • Agglomeration: Spatial grouping of businesses in order to mutually share costs or benefit from each others business.

Weight and Manufacturing

  • Weight is a major factor in manufacturing products because transportation costs correlate to weight.

  • Industries try to reduce transportation costs by minimizing the distance where the product is heaviest.
    *Bulky items. Weight doesnt change but packaging becomes easier.

Bulk Reducing Industry (Source Oriented)

  • Industry in which the inputs (materials, etc.) weighs more than the final product.

  • Extra weight is reduced during the manufacturing process.

  • Needs to be located near its source of inputs to minimize transportation costs.

  • Examples: Paper, pulp, sawmills - Copper or iron ore - Steel - Meat Packing.

Bulk Gaining Industry (Market Oriented)

  • Industry that makes something that gains volume or weight during production.

  • Finished product weighs more than the raw materials Needs to be located near where the product is sold to minimize transportation costs

  • Examples: Soft Drinks - Fabricated Metals (requiring assembly) - Cars, TVs, Microwaves, Appliances etc. Factories are NEAR the market

Containerization

  • System of shipping containers that have a standardized dimension to make shipping of goods more efficient.
    *Container shipped on rail--->transferred to container ship--->unloaded unto receiving trucks.

Break of Bulk Point

  • Costs rise each time a shipping container is transferred.
    *To minimize this, locations are set up to break down shipments for different modes of transportation.
    *Seaports.
    *Airports.

Weber's Locational Triangle

  • Illustrates the best location for a factory with multiple raw material sources to minimize transportation costs.
    *Depending if it is bulk gaining/reducing, the plant will be placed wherever it minimizes cost of transportation when it is heaviest.

Labor

  • Factories that are labor intensive try to locate where wages are cheaper to minimize costs.
    *Traditionally U.S car manufacturers were located closer to markets in the midwest for east coast customers.--Newer factories are being built more south.

  • Many factories relocate to developing countries due employ lower pay workers.
    *Textiles-Electronic assembly.

Agglomeration (site factor)

  • Spatial grouping of businesses in order to mutually share costs or benefit from each others business.
    *Apple or Dell next to a university - Restaurants close to the university and to businesses.Car part manufacturer next to a car manufacturer - Furniture store next to apartment complexes.
    *Samsung, Texas Instruments and Apple next to each other - An idea from Dell can spread quickly to Apple. - A skilled car fabricator leaving Ford for General Motors.

The Multiplier Effect

  • The potential of an industry to produce additional jobs.
    *Businesses would open up to accommodate the Amazon employees and families.- New gas stations, clothing stores, theaters and restaurants would benefit.-Schools would need to be built to accommodate the families etc.
    *Amazon opens up a headquarters in a new city. 3,000 jobs are guaranteed but in the process other jobs are created due to the amazon headquarters opening up.

Footloose Industries

  • Some products have spatially fixed costs, which means that the costs of the products do not change despite where the product is assembled.
    *Therefore, the assembly plant location is is not important when factoring transportation costs--Diamonds- Computer chips.
    *Businesses or services that are free to set up regardless of site or situational factors.
    *They can pack up and leave for a new location quickly and easily.
    *Call centers--Offices can be located anywhere-- Language speakers for customers, computers, communications system (internet/phones)--Call centers opening up in rural parts of U.S., Canada, India, and Philippines. Take advantage of high unemployment, lower wages and speak english.

  • Businesses or services that are free to set up regardless of site or situational factors.
    *Call centers -Offices can be located anywhere- Language speakers for customers, computers, communications system (internet/phones) - Call centers opening up in rural parts of U.S., Canada, India, and Philippines. --Take advantage of high unemployment, lower wages and speak english.

Energy Dependent Industry

  • The type of power influences where factories are established.
    *Water- original factories-Coal--early Factoires-Electricity -Power became more mobile with the development of electricity. Location of energy sources becomes less important.

Measures of Development (7.3)

*Social and economic development include Gross National Income (GNI) per capita, sectoral structure of an economy, both formal and informal, income distribution, fertility rates, infant mortality rates, access to health care, use of fossil fuels and renewable energy, and literacy rates.

Development

  • Is a continuum, and for the most part it is linear. Most countries start at a similarly undeveloped point (low income, low life expectancy), and move along the ‘process’ toward higher development.
    North America, Europe, Japan, South Pacific = Developed Regions.

Measuring Development

  • Measured by a country’s monetary ($$$) income and output.

  • LDC (less developed country) MDC (more developed country).

  • GNI (Gross National Income) Per capita dollar value of a country’s final income in a year divided by its population. It reflects the average income of a country’s citizens. Includes all the income earned domestically and internationally

Formal vs. Informal Economy

  • Formal EconomyLegal economy that is taxed and monitored by a government and is included in a government's gross national product.

  • Informal (Shadow) Economy Economic activity that isn’t taxed or monitored by the governmentNot included in GDP/GNP . Garage sale Black market

Sectoral Structure

  • Lesser developed countries have more people engaged in primary sector.

  • Developed countries have a higher percentage of workers in tertiary sector.

Comparing Developments

  • Comparing average annual income or total accumulated wealth of a country between different countries helps us see differences in development.
    *Prices vary from country to country.

  • Purchasing Power Parity (PPP) Prices vary from country to country. Some countries have more purchasing power that allows them to stretch their dollar more.

Income Distribution

  • How countries distribute their wealth is another indicator of development.

  • GINI Coefficient Index (IHDI) Inequality Human Development Index Used to explain income inequality by using 0 to 1. The higher the number, the more income inequality. (gap between the rich and the poor). LDCs tend to have the highest income inequality. MDC’s tend to have lower income inequality.

Fertility Rates

  • LDC’s generally have higher TFR than MDC’s due to lower stages of the DTM.
    Infant Mortality Rates and lack of access to health care LDCs tend to have higher IMR’s due to less access to healthcare, medicine and proper nutrition. Life expectancies are shorter in LDCs vs MDCs due to poor healthcare and nutrition. Angola has LE of 56 and 1 in 10 babies die before age one.

Consumption Patterns

  • Developed As countries develop, citizens consume goods and services more rapidly. Usually increased development, means that citizens have moredisposable income and purchase more.

  • USA consumes ⅕ of all resources on Earth, but only 1/20th of the people. Baby born in U.S. will consume 200 times energy than a baby born in Bangladesh

  • DEVELOPING Not very high salaries so disposable income is sometimes non-existent and only purchase necessities . Environmental impact related to mining and manufacturing.

Human Development Index (HDI)

  • Developed in 1990 as an alternate measure development, one that considers more than just income.
    Standard of living--GNI Per Capita--2011, MDC GNI per capita was $34,000 while LDC GNI per capita was $7,000.Switzerland $80,560 -- USA $58,270-Afghanistan $570
    *Switzerland $80,560--Life expectancy World life expectancy is around 70, 80 in MDC’s and 68 in LDCs. Latin America-Average education level World Average is 7 years of schooling.11 years in MDC’s and 6 in LDCs
    Most of Africa = below 7.0 mean years of schooling

Human Development Index (HDI)

  • Patterns and exceptions There is somewhat of a correlation between income and HDI rankingWealthier countries tend to have higher HDI rankings
    *Countries that invest heavily in education and medical care rank higher in HDI than income -Ireland 6th in HDI but 22nd in income--Cuba ranks 67 in HDI but 114th in income Some countries that are rich in oil or other natural resources rank higher in income than an HDI. Qatar ranks first in world income but 32nd in HDI

Women and Economic Development (7.4)

Changing Role of Women

*Paleolithic role- women had hunts and gathered food worshiped for fertility Today woman = crucial role economically

  • The social role of women changes the as a country develops Paleolithic role Women helped with hunts and gathered food Some cultures even worshipped women due to their fertility abilities Neolithic role Women helped in agricultural duties and raised children Industrialization role--Women began to work in factories--TFR decreased. Today Women in developed countries play a crucial role economically. As conditions have improved for women, they are still not equal to men in many facets of society

Gender Gap

  • differences in the privileges afforded to males and females in a culture. Educational opportunities Employment -- Wages Voting rights Health care= Political empowerment Property rights== Ability to drive a vehicle Inheritance rightsRight to make contraception decisions.Size of gender gaps varies among countries based upon different aspects of society.

GII (Gender Inequality Index)

  • Composite numerical index that measures the gender gap or gender disparity .
    *Reproductive health Maternal mortality rates Adolescent fertility ratesShare of govt seats held by each sex-Proportion of adult females and males with a least some secondary education .Labor market participation of womenLabor participation rate of female to male populations 15 and olderCLOSER TO ZERO means less inequalityTrendsLDC’s tend to have the highest GII rating (less equality). Why? Reproductive right hinderedEmpowerment MDC’s (Specifically Europe) tend to have the lowest ratings (more equality)
    *(NGO’s) Non-Governmental Organizations Many NGOs help women find jobs outside the home .Improvement in Political empowerment and economic participation.

Improvements and Challenges

  • In the past decade, the gap in education and health care has been reduced BUT the gap in political empowerment and economic participation remains significant .

As more females gain employment outside thehome or agricultural sector, the economy of the country improvesWage gap still exists, in the USA there is a 17.5% differences between males and females for the same job-USA consistently ranks higher in HDI than in GII for two reasons -Less reproductive rights Less women in government positions.

Microloans/Microcredit/Microfinance

*Provide small loans to start or expand a business to entrepreneurs who would not normally qualify for credit from traditional sources Vast majority are women Repayment usually about 98%. Working women have more voice in their childbearing decisions and afford more contraceptivesWomen’s wealth also increases, children tend to be better nourished and this decreases child mortality

Theories of Development (7.5)

*Rostow's Stages of Economic Growth, Wallerstein’s World Systems Theory, dependency theory, and commodity dependence, help explain spatial variations of development
*Rostow's Stages of Economic Growth In 1960, Walt W. Rostow developed a modernizationmodel -Focuses on the shift from traditional to modernforms of society All countries modernize at different speeds butin a linear fashion =All countries modernize at different speeds but in a linear fashion = five stages: Traditional Society-Pre-condition for take-off=Take off=Drive to maturity=Age of mass consumption Criticisms-Based on western countries (American/European)Based on exploitation of LDC’s and can lead to dependence on MDC’s.= Not all countries have favorable climate, resources, political systems, population etc
Based on western countries-Based on exploitation of LDC’s -Not all countries have favorable climate, resources, political systems, population etc
Triggered by Infrastructure installed, and emergence of political/social elite -investment in manuf. is>10% of natl income; Traditional Society Limited tech; static society -Preconditionsfor Take-Off -Take-OffDevelopmentof a manufacturing sector Drive to Maturity developmentwide economic expansion. High Mass Consumption Rostow's Stages

Wallerstein's World Systems/Dependency model

  • Core Periphery=Division of high tech/capital tasks vs extraction of resources andlower skilled/labor intensive jobs
    *Core=High profit = ConsumptionSemi-Periphery=Periphery-Cheap labor and raw materials

  • In 1970’s, Immanuel Wallerstein proposed an alternative view to Rostow’s model=Both politically and economically=AKA Core-periphery model == 3 types of countries: Core =Semi Periphery ===Periphery

Core Dominance

  • Developed countries perform high skilled/capital intensive tasksDeveloping and Programming Due to high wages, labor intensive activities are outsourced to periphery countries
    *Are the least developed countries that provide low skilled labor, raw materialsand are exploited by core andsemi-periphery countries
    *Newly Industrialized Emerging Economies (NICMiddle income that provide manufacturing services for things corecountries use to provide for itself=Also exploit periphery countries

Dependency Theory

The notion that resources from the exploited poorer flow to enrich the wealthierCorecountries economically industrialized first whichled to political control through colonization.

Neo-Colonialism

Resources from the exploited poorer flow to enrich the wealthierCore countries economically industrialized first which led to political control through colonization. Even though semi-periphery/peripherycountries have since become independent economically, they are dependent on the core countries.
Commodity
A product that a country utilizes to engage in international trade and export =Fossil Fuels Sugar Corn Wheat Cotton

Commodity Dependence

When countries depend too much on a single orFew commodities due to lack of diversityVulnerable to international market pricesVaries depending on each nationoil countries during 2008 Saudia investing in non renewable energyCommodities in high demand helps the sourceCountry with income

Trade and the World Economy (7.6)

  • Trade occurs when one party desires a good or service that it does not have or cannot produce as efficiently as someone else can
    *Countries have become economically interdependent.
    Originally through a barter system with no money but today trades with the exchange of money
    *Climate and soil give comparative advantage to Florida for oranges BUT Idaho grows potatos and we trade.
    *Balance in trade When countries lack car manufacturing but produce steel that favors steel.
    *Trade usually occurs when each has a comparatively advantageComparative advantage =self sufficiency is not effective!
    Climate and soil gives a comparative advantage for growing oranges in florida rather than idaho potato.

Complementarity

*When both parties have goods or services that the other partyIdeally = Balance in trade Ex.Car steel benefit benefit from the steel -U.S. China Tension

  • Because governments want economic development, governments will offer incentives to encourage the expansion of existing economic activitiesor creation of new ones. Common incentives

. No or low tariffs (Free Trade Agreements)= Tax Breaks loans direct assistance =Changes in regulations =These economic tend to becontroversial.. Economic development that tariffs offer a lot of economic development.

Trade Efficiency due to technology

*Globalization has increased international trade to be more efficient andCheaper 9 TimeSpace Compression Containerization larger/faster shipsImprovements to new import facilities Economic policies have been created
*Free Trade Agreements between countries are created in order to eliminate import tariffs or quotas on products from one country to another.
Market-oriented reform policies reducing state influence in the economy -Neoliberal Policies including free trade agreements =greater globalization
Groups of countries that agree common trades and rules encourage and ease trade restrictions =Limiting tariffs on goodsNorth American Free Trade Agreement =movement of goods and service Economic between member states -Trading Blocs=Countries of trade partners. NAFTA AND Eu and more.
Current=USMCA
EU-Movement-people and capital

Trading Blacs

*Because of increasing importance of trade, countries have strengthened theirrelationships with trading partners .Trade has free barriers betweenMexico, Canada and USAMovement of goods and laborThe free movement of goods, people, and currency= Groups of countries that have agree a common set of rules =limiting tariff on Good North America =Trade NAFA
-Government organization=trade blocking agency trading business as wall EU trading organizations=trading and services more jobs, laws that wasnt only goods. WTO=economic organization economic
*Agencies that work together for-acommon goalTrading blocs offer to come become trade . That is concerned with the regulations ofInternatinal trade between Nations Opec
*Free trade agreements WTO regulation has the world largest 123-To Coordinate and unify the patrol of oil to a stable income but-stabilize-fair of and regular is a goal