Industrialization and Economic Development

Intervening Opportunities

A closer, alternative supply source between a demand point and the original supply source. Follows first law of geography: people, including businesses, are much more likely to interact with closer supply sources than farther ones; it is more convenient, and almost always cheaper.

Manufacturing Region

A region in which manufacturing activities have clustered together. Major US region has historically been the Great Lakes states, including IL, Indiana, Michigan, NY, OH, and PA. Also exist in southeastern Brazil, central England, around Tokyo, Japan, and elsewhere.

Four Tigers

Also called "The Four Asian Tigers," refers to the economies of Hong Kong, Singapore, South Korea, and Taiwan. All 4 economies pursued export-driven economic development in the 1960s, spurring tremendous economic growth that leveled off in the 1990s. Focus is now shifting to other Asian economies, most notably China and India, as both their rising exports and education levels are spurring rapid economic growth.

US Agglomerations

An agglomeration of the entertainment industry is found in the LA/Hollywood, CA, area, with its concentration of all industries related to entertainment (production, costume design, set design, etc.). NY is known for its concentration of finance activities. Hartford, CT has a strong concentration of insurance-related industries. An agglomeration of energy-related industries exists in Houston, Texas.

Offshore Financial Centers

Areas that have been specially designed to promote business transactions, making them centers for banking and finance. Provide a low-profile way for companies and individuals to conduct financial transactions and avoid high taxes. Many are offshore islands, including islands in the Caribbean and South Pacific, whereas many are located on-land, including banks in Kuwait, Luxembourg, and Switzerland. All provide conducive environments for conducting international business.

Export Processing Zones (EPZ)

Areas where governments create favorable investment and trading conditions to attract export-oriented industries. Maquiladoras are EPZ in Mexico, just outside the US/Mexican border. In this zone, which extends for 12 miles, factories cheaply assemble goods for export back into the US. While they do provide jobs for local populations, much of the income generated from the products returns to large TNCs rather than benefiting the local economy; additionally, regions tend to be plagued by high crime and high pollution levels.

Economic Sectors: Globally

As countries become more economically developed, they typically transition from being forced on primary and secondary economic activities to being concentrated in tertiary and quaternary activities. Highly developed regions generate much more revenue from service-based activities. Developing countries focus on secondary economic activities and increasingly in the service sector. Economics of the least developed countries, particularly sub-Saharan Africa, continue to center on primary economic activities, and predominantly agriculture.

Basic vs. Nonbasic Sector

Basic sector of a local economy includes any industry that brings in money from outside the area. For example, a large aerospace industry typically generates most of their revenue from buyers outside of the local area. Nonbasic sector includes all industry that supports and services the local community; money is not generated from the outside, but rather circulated among local community members. Includes industries like grocery stores, barbershops, and dog groomers.

Brick-and-Mortar Business vs. E-commerce

Brick and mortar refers to traditional businesses with actual stores in which trade or retail occurs. E-commerce refers to web-based economic activities. Brick and mortar must consider factory or retail location, whereas e-commerce is footloose. During the mid- to late-90s, thousands of dot-com companies began selling a variety of goods online (e-commerce): At the time many thought e-commerce would replace brick-and-mortar businesses. Many actual functions are more appropriate for actual stores (groceries), thus certain brick-and-mortar businesses will never be replaced by e-commerce.

Bulk-Gaining and Bulk-Reducing Industries

Bulk-gaining industries produce goods that weigh more after assembly than in their constituent parts. Bulk-gaining industries are located close to market to minimize transport costs. Bulk-reducing industries produce goods that weigh less than their constituent parts. Bulk-reducing industries are located close to natural resources to minimize transport costs.

Secondary Economic Activities

Concerned with the processing of raw materials; includes manufacturing, construction, and power generation. In primary economic activities, location of activity is limited to where resource exists; with secondary economic activities location of factories becomes more flexible. Many economic geographers focus on optimal factory location using a variety of principles or models.

Core, Periphery, and Semiperiphery

Core includes national or global regions where economic power in terms or wealth, innovation, and technology is concentrated. Periphery includes countries with low levels of economic productivity, low per capita incomes, and generally low standards of living; includes Africa (except for South Africa), parts of Asia, and parts of South America. Semiperiphery includes newly industrialized countries with median standards of living such as Brazil, Chile, China, India, and Indonesia.

Weber's Least-Cost Theory

Describes optimal location of a manufacturing establishment in relation to costs of transport, labor, and relative advantages of agglomeration. In terms of transportation, must take into account cost of transporting both raw materials and finished products, which is largely dependent on weight.

World Systems Theory

Developed by Immanuel Wallerstein. Describes the emergence of a core, periphery, and semiperiphery in terms of economic and political connections first established at the beginning of exploration in the late 15th century. Political and economic relations allowed certain regions to develop more rapidly as a result of exposure to technology and innovation. In the present, may of these relationships exist, with certain regions exhibiting greater economic access than others.

Formal vs. Informal Economic Activities

Economic activities that are a part of formal economy are legally registered and taxed; profit is included in a country's GDP (gross domestic product). Informal economic activities are not legally registered or taxed. They include most street vendors and the black market. Informal activities are a strong part of economies in developing regions even though income from them is not legally registered.

Ancillary Activities

Economic activities that surround and support large-scale industries. Include activities such as delivery, food services, and accounting services. Essentially synonymous with nonbasic industry. As the basic industry within a region expands, so does that region's need for ancillary services.

Fast World vs. Slow World

Fast world includes areas of the world, usually in economic core, that experiences greater levels of connection due to high-speed telecommunications and transportation technologies. Slow world includes developing world that does not experience the benefits of high-speed telecommunications and transportation technology.

Ecotourism

Form of tourism based on enjoyment of scenic areas or natural wonders. Aims to provide an experience of nature or culture in an environmentally sustainable way. Increasingly popular in developing regions as a way to develop in an economically and environmentally sustainable way.

Specialty Goods

Goods that are not mass-produced but rather assembled individually or in small quantities. Prior to the Industrial Revolution, the majority of goods were produced this way; in modern times, specialty goods are rare, especially in developed countries, and typically cost much more than items that are mass-produced.

GDP, GNP, PPP

Gross domestic product (GDP) is the total value of goods and services produced within the borders of a country during a specific time period, usually one year. Gross national product (GNP) is the total value of goods and services, including income received from abroad, produced by residents of a country within a specific time period, usually one year. Purchasing power parity (PPP) is a monetary measurement of development that takes into account what money buys in different countries.

Agglomeration

Grouping together of many firms, in a similar industry, in a single area for collective or cooperative use of infrastructure and sharing of labor resources. For example, Hollywood, which has many entertainment firms concentrated in one space for mutual benefit. Agglomeration leads to multiplier effect, or cumulative causation, meaning more firms locate to the same place providing jobs both within the firm and in ancillary activities, or services that support the firm. Can have positive effects on the local tax base.

Sustainable Development

Idea that people living today should be able to meet their needs without prohibiting ability of future generations to do the same. An attempt to address the issues of social welfare and environmental protection within the context of capitalism and economic growth. Looks to promote the use of renewable natural resources rather than nonrenewable sources and looks to limit harmful environmental effects of industrial and urban concentrations.

Transition of the Global Economic Core Over Time

In 1800, the core regions included western Europe and the eastern US. By 1900, the core regions of the world had extended to all of the US, more of western Europe, Australia, and Japan. By 2000, the core countries still consisted of the US, western Europe, Australia, and Japan, but greater portions of the earth's surface, such as northern and eastern Asia, South Africa, and large parts of South America, were considered semiperiphery instead of peripheral regions.

Geography of Tourism

In general, developing countries concentrate in primary and secondary economic activities, but an increasing amount of revenue is pouring into developing regions through tourism. One dramatic benefit of globalization for developing and least developed regions is greater access to previously inaccessible areas, which can stimulate local economies. Under the umbrella of sustainable development, ecotourism is becoming increasingly popular in developing regions, which involves both preserving and enjoying local natural environments.

Industrialized Countries

Include Britain, France, Germany, Japan, Russia, and the US, which were all at the forefront of industrial production and innovation through the middle of the 20th century. These countries still account for a large portion of the world's industrial output even though industry has been shifting to other countries to take advantages of cheaper labor and relaxed environmental standards.

Least-Developed Countries

Includes Africa, except for South Africa, and parts of Asia and South America. All have low levels of economic productivity, low per capita incomes, and generally low standards of living. Economy tends to focus on primary activities.

Call Centers

Industries that experiences a large volume of telephone-related interactions (customer service questions, debt collection, product support, etc.) increasingly set up operations in developing countries with highly educated populations but lower wage standards. India increasingly known for its concentration of call centers, where college-educated labor is much cheaper than in highly developed countries.

Cottage Industry

Industry in which production of goods and services is based in homes, as opposed to factories. The dominant industrial model before Industrial Revolution. Today, produces specialty goods, which are assembled individually or in small quantities.

Break of Bulk Point

Location where large shipments of goods are broken up into smaller containers, for example, ports. Often, manufacturing facilities concentrate at break of bulk points to minimize transportation costs of raw materials as each time a shift in transportation mode occurs (from barge to train). A company must pay laborers to transfer goods. Minimizing transfer of materials minimizes overall costs.

Deindustrialization

Loss of industrial activity in a region, typically because of relocation to developing countries with cheaper labor and relaxed environmental standards. For example, the Rust Belt, the US' main manufacturing region, is currently debilitated because of deindustrialization.

Footloose Industry

Manufacturing or other industry in which the cost of transporting both raw materials and finished product is not important for determining location of the firm. Common footloose industries include catalog companies, which can be located anywhere as shipping in the US depends on weight not distance, as well as expensive and light items such as diamonds or computer chips.

Net National Product (NNP)

Measure of all goods and services produced by a country in one year, including production from its investments abroad, minus loss or degradation of natural resource capital as a result of productivity. For example, if a timber company generates a $ 2 million profit from timber, the GNP would report that full value, while NNP would deduct the value of the services that timber provided. Problem with NNP is the difficulty of calculating monetary values for various ecosystem services.

Gender Equity

Measure of opportunities given to women compared to men within a given country. Not necessarily correlated with GNP; some places, such as Italy, Japan, and Kuwait, have high GNP, but low gender equity, usually because of cultural traditions that discourage women's achievement in education, government, and business. UN developed the GEM or "gender empowerment measure" that evaluates women's status in a country based on participation in national economic, political, and professional affairs. GEM criticized for being Western-centric and not considering standards and values accepted in other cultures.

Human Development Index (HDI)

Measure used by the UN that calculates development in terms of human welfare rather than money or productivity. Evaluates human welfare based on life expectancy, education, and income. On a global scale, the pattern of human development that closely matches the pattern of GNP, but with some discrepancies. For example, many countries in southern Europe (Greece, Portugal, and Spain) fare better on social welfare than GNP.

Problems with Rostow's Model

Model describes development process in America and Europe, but does not work for many other countries. Model assumes that economies will naturally pass through the five stages, which neglect factors such as global politics, colonialism, physical geography, war, culture, and ethnic conflict. Model automatically associates high levels of development and high mass consumption. Environmentalists argue that development does not equal consumption but can rather indicate increased social welfare or ecological sustainability. The model does not account for deindustrialization.

Rostow's Stages of Development

Model developed in 1960 that describes a country's development progression as occurring in 5 stages transforming it from a least-developed to most-developed country. In Stage 1, country is dominated by primary economic activities. In Stage 2, preconditions for take-off emerge, including commercialization of agriculture. In Stage 3, foreign investment pours in, jump-starting an economy prepped for growth. In Stage 4, a broad manufacturing and commercial base is developed. In Stage 5, a country is characterized by high mass consumption and high per capita incomes.

Downfalls of Sustainable Development Model

Model is anthropocentric, focusing only on humans, without consideration of other animals or ecosystems humans depend on. Many criticize it for being too vague and not attentive enough to the needs of local people. No guarantee that will actually result in conservation of natural resources and biological diversity.

Core-Periphery Model

Models the spatial structure of development in which underdeveloped countries are defined by their dependence on a developed core.

Factory Location Considerations

Must have easy access to materials necessary for production. Must have an adequate supply of labor. Must be proximal to shipping and markets. Site should minimize production costs (through cheap labor and land). For certain factories, physical geography limits location (agribusiness cannot exist everywhere). For certain factories, history and a leader's personal inclinations may influence factory locations.

Agglomeration Diseconomies

Negative economic and social effects stemming from concentration of industry in a particular area. These effects include high traffic, high pollution, high cost of living and land, and other negative effects associated with population and industrial concentration.

Backwash Effect

Negative effects on one region that result from economic growth within another region; regions experiencing the negative effect are called economic backwaters. With deindustrialization in the American Midwest, many moved from the Great Lakes region, which greatly debilitated the local economy. Migration resulting from backwash effects causes a loss of investment capital and shrinking of the local tax base.

Foreign Direct Investment

Overseas business investments made by private companies; typically involves purchase or construction of factories by transnational corporations in areas where labor is typically cheaper than on the homeland. A huge driving force behind globalization, although investment is currently somewhat concentrated on particular regions, such as south and Southeast Asia, including China. The amount of investments going toward least developed countries, particularly in Africa, is steadily increasing.

Service Offshoring

Practice of hiring foreign workers or contracting with an international 3rd-party service provider to run service-based functions of a particular industry. Types of jobs typically performed include call centers, accounting, billing, and similar "back office" service-related functions. Becoming increasingly prevalent as communications technologies become cheaper. Allows firms, typically in the developed world, to take advantage of a highly educated, but cheap, labor force in certain developing regions or countries, such as India.

Industrialization and Urbanization

Prior to industrialization, most work was either on family farms or in home-based cottage industry. Industrialization created concentrations of jobs outside of the home. Job availability in cities, along with the requirement of commuting to work from home, led to dramatic increases in urbanization immediately following the Industrial Revolution.

Economic Development

Process of economic growth, expansion, or realization of regional resource potential. Measured in variety of ways and described in a variety of models. Common measures include economic ones, such as gross national or domestic product and noneconomic ones, which generally measure social welfare and include things related to education levels, health care, public services, and technology.

Industrialization

Process of industrial development in which countries evolve economically from producing basic, primary goods to using modern factories for mass-producing goods. At highest levels of development, national economies geared mainly toward the delivery of services and exchange of information, and outsource much of their secondary labor.

Industrial Revolution

Profouund technological and economic changes that arose in England during the late 18th century and rapidly spread to other parts of Europe and North America. Modern factories, mass-produced goods, and modern forms of capital investment are all products of this time period. By the early 20th century, mass production and assembly lines had replaced many specialty goods, indicating a large-scale shift from dominance in primary sector of economy to dominance in secondary sector, particularly in NA and Western Europe.

Tertiary Economic Activities

Provide the market for exchange of goods by bringing together consumers and providers of services such as retail, transportation, government, and personal and professional services. Countries' economies in the highly developed world have shifted to dominance in the tertiary and quaternary sector of he economy.

Quaternary and Quinary Economic Activities

Quaternary economic activities are service-based activities concerned with research, information gathering, and administration. Quinary economic activities are the most advanced form of quaternary activities consisting of high-level decision making for large corporations or high-level scientific research.

Base Ratio

Ratio of basic to nonbasic employees in a local area, typically an urban area. Expands with increasing population, but almost always the number of new jobs in basic sector leads to higher number of new jobs in nonbasic sector. Motivates urban areas to attract basic economic activities to their cities because of multiplier effect: base ratio brings money in from outside and stimulates local economy through provision of nonbasic employment.

BRICS

Refers to Brazil, Russia, India, China, and South Africa which are all rapidly growing economies in the developing world. This acronym was coined because of the growing recognition of the significance of these five economies in global transactions and global rankings. BRICs account for 1/4 of the world's land and 2/5 of the world's population.

NAFTA/North American Free Trade Agreement

Refers to the International treaty made 20 years between Canada, the US, and Mexico that lessens trade restrictions between the 3 member countries to increase business in the global marketplace.

Neocolonialism

Refers to the economic, political, or military dependencies that exist between developed and developing countries even after most countries under colonial rule (and in the developing world) achieved independence.

Comparative Advantage and Regionalization

Regionlization describes the process by which specific regions develop economic activities that differentiate them from others within the same country. Principle of comparative advantage states that areas or regions should produce goods for which they have the greatest relative advantage over other areas. With secondary economic activities, comparative advantage dictates that certain industries locate near necessary raw materials. With tertiary activities, comparative advantage typically locating industry where labor is cheapest.

Outsourcing

Sending industrial processes out for external production, typically where labor is cheaper than internal labor. In terms of manufacturing, bulk-gaining industries are not typically outsourced because of high transportation costs. Originally most outsourcing occurred in secondary, manufacturing-related activities. Increasingly, firms are outsourcing service-based jobs.

Cumulative Causation

Similar to the multiplier effect, an economic term used to describe the positive effect of agglomeration. With increased concentration of industrial activity comes the increased need for ancillary services. This leads to population growth (to supply the labor force), leading to more money for the local tax base, which leads to better infrastructure and public services, encouraging more industrial concentration in that area, causing the cycle to continue.

Spatially Fixed vs. Spatially Variable Costs

Spatially fixed costs are input costs in manufacturing that remain constant wherever production is located (water). Spatially variable costs are input costs that change significantly from place to place in their total amount and relative share of total costs (cost of land).

Fordism

System of standardized mass production attributed to Henry Ford. By early 20th century, mass production and assembly lines had replaced many specialty goods.

Transnational Corporations (TNCs)

TNCs take advantage of geographic differences in wages, labor laws, environmental regulations, taxes, and distribution of natural resources by locating various aspects of production in different countries. Many TNCs are conglomerate corporations, meaning firms comprised of many smaller firms that serve several different functions.

Digital Divide

Term used to describe tremendous gap in access to communications technologies typically between the highly developed and least developed regions of the globe. Divides also exist at regional scales, with cities exhibiting high levels of connectivity and rural backwaters demonstrating little to no access to communications technologies. Essentially determines who does and does not benefit from the process of globalization.

Global Distribution of GNP

The areas with the highest GNP are found in the core regions of the world. Semiperipheral regions, such as large parts of South America, and parts of north and east Asia, have mid-level GNP values. The regions with the lowest GNP are found in sub-Saharan Africa and South Asia.

Transferabiliy

The cost of moving a commodity relative to that commodity's ability to bear the cost of moving. Items that are easily movable have high transferability; factory location is less influenced by transport costs. Items with low transferability are difficult to move, typically very heavy, very large, or very perishable items to fit in this category.

Deglomeration

The dispersal of an industry that formerly existed in an established agglomeration. For example, after the dot-com bust in the late 20th century, many high-tech industries that had been agglomerated in the San Francisco Bay (California) region relocated to places where the cost of living was cheaper.

Globalization

The idea that the world is becoming integrated on a global scale such that smaller scales of political and economic life are becoming obsolete. While the term is relatively recent, global interconnectivity has existed for many centuries. Global interconnectivity differs today from hundreds of years ago as communications and transportation technologies allow easier and quicker interaction over large spaces. Increasingly rapid flow of innovations, information, and capital may have profound implications for regulating economic flows across borders and across the world.

Infrastructure

The set of technological support and services that maintain and advance of a society. Include roads, water supply, sewage treatment, communications, waste collection and treatment, and power grids among other services. Typically the higher developed an area, the greater the extent of its available infrastructure. Industries often locate in urban areas where a strong and available infrastructure reduces or eliminates industrial costs for certain services.

Urbanization Economies

Type of agglomeration economy describing clustering of industrial activity, of any type, in urban areas. Benefits of locating within an urban area include a large labor pool, available infrastructure and other public services, and availability of ancillary services.

Localization Economies

Type of agglomeration economy in which similar industries concentrate together in one area or region. Benefits of this type of agglomeration include concentration of an appropriate labor pool, knowledge spillovers, and ability to share the costs of a specific infrastructure necessary for a particular industry. Examples include the entertainment industry in LA, the high-tech industry in the San Fran area (both in Cali), and the financial district in Manhattan, New York.

Brain Drain

When people of high education or with high-level professional positions pursue economic opportunities outside their home country, instead of encouraging development and economic growth locally.