APHG Unit 8.2

Economies of scale

The larger the scale of production the larger the cost advantage. The cost of production falls as output increases thus the larger the cost advantage. Some countries such as those in Europe looked to generate a greater profit by producing larger quantities of goods that were in high demand. They were looking to "capitalize on economies of scale" (p348)

Outsourcing and economic restructuring

The loss of manufacturing jobs due to outsourcing has caused economic restructuring in core countries. Economic restructuring refers to the license to of these jobs away from the core and the resulting changed in employment--> so more tertiary now

Spatial fix

The movement of production from one site to another based on the place based cost advantages of the new site. Today because of the new international divisions of labor (global division of labor) location is no longer the only consideration companies take into account when choosing a production site. Companies will not only look at location but they will look at cost of labor, transportation costs, government regulations, information technology, ect.

Foreign direct investment

The purchase or construction of factories and other fixed assets by transnational corporations.

Commodity chain

A commodity chain is a network of labor and production processes beginning with the extraction or production of raw materials and ending with the delivery of a finished commodity. The image shows the commodity chain for the lego. Your book gives the example of the commodity chain for the iPod Processor (see page 364 of your textbook).

Transnational corporations AKA Multinational corporations

A large business organization operating in at least two separate national economies. Transnational Corporations (TNC's) are becoming increasingly important in the globalizing world economy. "TNC's are private firms that have established branch operations in foreign countries. The total annual revenue of the world's largest TNCs rival the GDP of entire countries. For example Wal-Mart's $408 billion in revenues in 2010 would have placed it 24th in the World just behind Norway and ahead of Venezuela." (Bjelland, Gettis &Gettis) 91 of the top 100 TNC's in the world are headquartered in the EU, U.S., and Japan. TNCs will exploit the principle of comparative advantage by outsourcing and offshoring. They look to produce in the country/region where the costs are cheapest (materials, labor, production inputs). Their factories may produce for a global market rather than just a local/national market.

Role of mechanization in the service sector

A lot of things in the service sector are being mechanized. It will affect the economy because there will be less jobs and then what will happen. Will there be another structural change in our economy?

World cities

AKA: Global cities. These are the command and control points for the global economy. This is where the TNC headquarters and producer services offices are. These cities dominate commerce in their parts of the world. These cities are linked to other cities that serve as primary and secondary level world cities. The three largest world cities in 1959 were New York, London, and Tokyo. Although today not the most populated they still dominate as world cities. World cities are home to societies most elite and powerful members, centers of art, culture, and consumption of goods (Bjelland, Gettis, and Gettis). Some secondary world cities: Paris, Hong Kong, Singapore, Milan, Toronto, Chicago, Los Angeles.

Global division of labor

AKA: new international division of labor. Production of goods is done in the periphery to take advantage of cheap labor. Research and development is done in the core. Production can be moved to take advantage of infrastructure, skilled labor, and accessible markets. Skilled labor is in the core, unskilled labor in the periphery.

Hinterland

An area from which goods can be produced, delivered to a port, and then exported. Hinterland is defined in multiple ways in AP Human Geography so you must use context clues when taking the AP test. If the question concerns Urban Geography, hinterland is defined as the economic reach of an area. In the example above, the context is industry therefore the definition of hinterland is used differently.

Special economic zones

Areas of a country with different economic regulations designed to attract direct foreign investment. SEZs are oriented to other businesses in addition to manufacturing. Zones established by many countries in the periphery and semi-periphery where that offer favorable tax, regulatory, and trade arrangements to attract foreign trade/investments. The idea is that countries in the periphery and semi-periphery need the capital and business know-how that can be offered by core countries. Core countries, in return, get access to cheap labor. In many SEZs there are regulations stipulating that a certain percentage of employees must be from the host country. Additionally, foreign companies are often restricted as to how much ownership they have of the factory in the SEZ. Often the factories in SEZs produce products for foreign companies with help from foreign companies but the name of the factory is different.

Comparative advantage

Areas specialize in goods for which they are the most efficient producer. Areas and countries can best improve their economies and standards of living through specialization and trade. A country should focus on producing items in which they have more of an advantage then other countries/areas. A country would focus on producing a specific item and then trading with other countries. Because of this idea the idea of free trade between countries is justified. This idea may cause a country to outsource if it is more cost efficient for them because this would be more profitable and lead to increased prosperity. Example (As seen in the chart) because roadway only has to give up 1⁄2 boat to make a truck compared to 5 boats that Seaside would need Roadway has the comparative advantage for the production of truck. Because Seaside only has to give up 1/5th a truck to make a boat but Roadway has to give up 2 Seaside has the comparative advantage in the production of boats. In light of these facts it would be in their best interest for Seaside to produce boats and Roadway trucks.

Export processing zones

Areas usually in periphery countries designed to make products for export. Limited/no tariffs To be really specific, EPZs are designed solely to promote the export finished products. The jobs associated with EPZs are often low paying with long hours. The infrastructure associated with EPZs do little to help the country as a whole develop. The port area surrounding the EPZ has good physical and digital infrastructure put little extends to other areas of the country. While periphery countries receive economic benefits from EPZs, the overall effect on a country is minimal.

Rise of services and high technology

As countries develop there is a movement towards services and high technology. The concept of high technology refers to "the application of intensive scientific and engineering research and development to the creation and manufacturing of new, technologically advanced products"

Basic vs non-basic industries

Basic industries: businesses that sell to non-local customers(secondary) Non-basic industries: businesses that sell to local customers(tertiary) Basic industries are synonymous with mfg, mining and other secondary economic activities. Basic industries generate money by sales outside of the community. For example, a Ford automobile factory in Michigan makes money by selling cars through out the USA. Non-basic industries are associated with tertiary economic activities and support and service the local economy. Non-basic activities recycle money with in the community. For example, you eat at a restaurant and tip the server. The serve spends the money to get a hair cut. The stylist then spends the money at the car wash and so on down the line. It is said that one basic industry job will result in 2-3 non-basic indusry jobs.

Free trade advantages and disadvantages

Check activity on website

Node

Connection point in a network, where goods and ideas flow in, out, and through the network

Imbalances in consumption patterns

Core; highest consumers of resources/energy and highest producer of waste Periphery: lowest consumers of resources/energy and lowest producer of waste Semi periphery: moderate

Structural change (vs cyclical change)

Cyclical: this is the cycle that countries go through economically. They may have a cycle inflation, recession and then depression Structural change: this is the change in the structure of the economy. This may for example be a movement from secondary to tertiary or fordist to post fordist production

Deindustrializaion of the core

Deindustrialization is the movement of industrial jobs to other regions. Many of the core manufacturing regions have experienced deindustrialization and it has led to a rise in service industries in core regions.

Manufacturing in the NICs

Deindustrialization of the core has lead to the growth of manufacturing in the NICs

Secondary industrial regions

Develops in the mid late 20th century. Mainly semi periphery. South of Brandt line. Because industry starts moving to the south regions because of outsourcing and stuff

Service sector

Economic activities associated with the provision of services such as transportation, banking, retailing, education, and routine office based jobs.

Higher technology

Some high tech industries include: electronics and communication and computers and software and pharmaceuticals and biotechnology and aero space technology

Some international trade organizations

European union(EU) -most of Europe (not Iceland, Norway or Switzerland) North American free trade agreement(NAFTA) -Canada, Mexico, USA ASEAN -SE Asian countries MERCOSUR -South America Again, there are international trade organizations all over the world. Keep the basics in mind: make money; no/reduced tariffs; movement of manufacturing to lowest wages.

Primary industrial regions(worldwide)

First areas to develop industry. Location closely tied to location of raw materials. Remember to link early industrialization to raw materials (coal and iron), infrastructure linking factories to ports (water or rail), and heavy capital investment.

Maquiladoras

Foreign owned factories in Mexico. Originally along US/Mexico border but moving south

Secondary hearths

Industrialization secondary hearths: -eastern North America -western Russia -Ukraine -east asia(Japan and NE district of China) England and Western Europe were the first to undergo the Industrial Revolution. Britain would be considered the technical hearth of industrialization. The areas mentioned above are secondary hearths.

Circular and cumulative causation

Initial small advantages/disadvantages accumulate over time resulting in large advantages/disadvantages Circular and Cumulative Causation is one concept used to explain the division of the world in MDCs, NICs and LDCs. Advantages or disadvantages can result from physical factors, to relative location, to colonialization. Europe is a good example of an early advantage. Europe was the hearth of the industrial revolution. This set Europe on a path to economic development before other parts of the world this giving them an initial advantage. As industrialization helped Europe, it was one of a series of disadvantages for Africa. The Industrial Revolution placed Africa as a supplier of raw materials. Even today, Africa is still dominated by primary economic activities.

Free trade zones

International port areas where goods are handled without tariffs and minimal interference from custom authorities Free-trade zone, also called foreign-trade zone, formerly free port , an area within which goods may be landed, handled, manufactured or reconfigured, and reexported without the intervention of the customs authorities. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to the prevailing customs duties. Free-trade zones are organized around major seaports, international airports, and national frontiers—areas with many geographic advantages for trade. Examples include Hong Kong, Singapore, Colón (Panama), Copenhagen, Stockholm, Gdańsk (Poland), Los Angeles, and New York City. Alternative devices such as the bonded warehouse and associated systems are used in some large seaports (e.g., London and Amsterdam). The primary purpose of a free-trade zone is to remove from a seaport, airport, or border those hindrances to trade caused by high tariffs and complex customs regulations. Among the advantages of the system are the quicker turnaround of ships and planes through the reduction in formalities of customs examinations and also the ability to fabricate, refinish, and store goods freely.

International trade/trading blocs

International trade agreements have basic similarities -tariff free/reduced trade among members -movement of labor intensive/low wage mfg jobs Int'l trade agreements are all about the money. Foreign products that enter countries have taxes (tariffs) placed on them to protect local products. Int'l trade organizations remove or reduce the tariffs. The result is that foreign products are now often as cheap as locally made products. Production (manufacturing) will often move to countries w/in a trade union that has the cheapest labor. This comes at the expense of manufacturing jobs in more developed areas. However, the consumer gets a cheaper product. In the end, there are pros and cons of international free trade.

Fordist production

Large scale assembly line production that requires many repetitive, low skill tasks in order to produce large quantities of the exact same commodity. Fordism: Manufacturing economy and system derived from assembly-line mass production and mass consumption of standardized goods. (Fellman Getis &Getis).'

Government initiatives for economic development

Local- Aimed at improving a certain Regional- tax breaks National- protective tariffs or subsidies International- trade blocks and agreements

Decline in jobs in manufacturing regions

Manufacturing jobs in core countries have moved following cheap labkr

Examples of secondary industrial regions

Mexico, Brazil, South Africa, Egypt, India and australia

EU

Movement of manufacturing to eastern europe

NAFTA

Movement of manufacturing to mexico

Multiplier effect

One basic sector job created 2-3 non basic jobs. An increase in capital spending created an increase in income/consumption greater than the amount of capital spending. There are two ways you likely see the Multiplier Effect defined. A. An increase in capital spending produces an increase in income an consumption greater than the amount of capital spending B. An increase in basic sector jobs ledes to a greater increase in non-basic sector jobs by a factor of 2:1 or 3:1

Vertical integration

Ownership by the same firm of a number of companies that exist along a variety of points on the commodity chain. Your book gives the example of the Ford industrial Complex in Dearborn Michigan. The goal of this complex was to be self-sufficient and own, operate, and coordinate all the resources that were necessary for producing the automobiles. It had a power plant, boat dock, railroad, fire station, police department, and 100,000 employees.

Intermodal connections

Places where two or more modes of transportation meet in order to ease the flow of goods and reduce the cost of transportation. This includes air, road, rail, barge, and ship. Like a break of bulk point

Manufacturing jobs not equal to manufacturing output

Please keep in mind when we discuss the loss of manufacturing in core countries, we are talking about the number of manufacturing jobs. Core countries produce more volume of manufactured goods than ever before but core factories are more automated and extremely efficient than ever before as well. Thus there are fewer mfg jobs but more mfg volume. Manufacturing jobs that require non skilled labor have left core countries in droves.

Import substitution

Producing products locally that are usually imported. Do it because they don't have to rely on other countries to import products

Relocation of workforce to other areas

Push/pull factors associated with economic restructuring has redistributed the labor force(trade agreements, etc)

Sun belt

Rapidly expanding area of the south and west

Post fordist production

Replaced fordist manufacturing. Flexible manufacturing, smaller production runs, greater variety of goods aimed at smaller, niche markets

Post industrial

Service activities/industries are more dominant than secondary industries. Levels of living is now defined by quality of services and amenities rather than quantity of goods available.

Growth poles

Silicon Valley, research triangle, medical centers and universities. One area concentrated in an industry and the growth of that industry is going to spill over into the surrounding areas and make jobs and etc

Four tigers

South Korea, Taiwan, Hong Kong and Singapore Rapid industrialization in 60s and 70s -cheaper labor/light industry -government assistance---> commitment to education and training, protect local industry More recently -mfg of electronic/high tech goods As the cost of doing business in Japan became greater, mfg moved to other countries in the area, especially the Four Tigers

International division of labor

Technology, containerized shipping, and wages have resulted in a new international division of labor Core- R&D, high level mgt, specialized mfg Periphery- lower wage mfg Semi periphery-a little of both

Complementary and comparisons advantages as a basis for trade

The ability to produce a good or offer services at lower cost, relative to another country. Allows countries to "specialize" Globalization has put comparative advantage in a new light. With digital infrastructure and containerized shipping, there has been a major redistribution in intensive manufacturing. Countries around the world can "specialize" in certain products depending on access to raw materials, cheap labor, or even specialized labor.

First mover advantage

The advantage gained by being a hearth or first adopter. Industrialization first movers: -England -Western Europe This term relates to the previous explanation of Western Europe and the Industrial Revolution

Globalization

The expansion and intensification of linkages and flows of capital, people, goods, ideas and cultures afross national borders. Ex: globalization of the economy has led to (multinational) corporations. Because of globalization there is more interconnectedness across national boundaries

Global supply chain

The supply chain consists of the continuous buying and selling of goods and services. The supply chain covers all the steps it to get a good/service from the supplier to the consumer. For example how did a bag of potato chips or fruit snacks make it to your local grocery stores? Where did the idea come from? What about the raw materials needed to produce it? Where is the factory that packaged it? How did it get to the retailer and then eventually to you? All of this is part of the global supply chain as we get raw materials and cheaper labor from different parts of the world.

Disaggregation of labor

There has been spatial disaggregation of the production process which has lead to the global supply chain. Disaggregation of industry is the separation of production components. In the past all components of a product (for example a cellphone) were manufactured within the same plant/factory. Today each facet of production may be carried out in different places so that the computer company would benefit from the advantages of the specific location.

Spillover effect

This is the effect of one area that has developed industry into another area that is connected/linked to it. Your book uses the example of the Ruhr area of Germany. It is one of the largest industrial centers in continental Europe. It is connected to the port of Rotterdam in the Netherlands. Rotterdam benefited economically from this connection and expanded their port.

Time space convergence/time space compression

Time-space compression is the idea that with improvements in transportation and communication we have seen an increase in speed as to which things happen. This makes the distance between areas less important. The idea that our world is shrinking. In the past when we did not have these technologies most goods were produced close to where the product was consumed as well as the resource (think Weber). Today however because of new technologies things that happen in one place can quickly affect another Your book gives the example of the stock market. Fluctuations in the Tokyo stock market can affect New York mere hours later. Kiwis picked in New Zealand yesterday can be in lunchboxes in Canada tomorrow. (DeBlij/Murphy/Fouberg).

Diffusion of industry outside the core

Unskilled mfg jobs follow the cheapest labor. Core-->semi periphery----> periphery For example: USA to Mexico to Guatemala Industry follows cheap labor. As areas develop, labor prices rise causing mfg jobs to relocate. Mfg jobs first moved from core countries to the semi-periphery areas such as Mexico and China. As Mexico in China developed thanks to more secondary jobs, wages and other costs of doing business such as land rents. Eventually, it became more profitable for companies to relocate low skilled jobs to countries of the periphery. This explains the increase in mfg. jobs in countries like Guatemala and Vietnam. Should enough economic development occur in Guatemala and Vietnam, low skilled mfg jobs will once again relocate.

Rust belt

Used to be manufacturing and industry and now they all left and it is all deindustrialization. It's like north and Michigan and Ohio and stuff like that

Neocolonialism

Using economic power to influence other countries. Neocolonialsm is seen as a subversive version of colonialism. Core countries aren't actually using population or the military to control the periphery but they are so economically intertwined that, in reality, the periphery is "controlled."

Examples of primary industrial regions

West and Central Europe, eastern north america, Russia and Ukraine, east Asia Remember to link early industrialization to coal, infrastructure linking factories to ports(water or rail) and heavy capital investment

Global financial crises

With economic globalization, a major economic recession in a fire region will have a negative effect globally Ex: Great Depression in 1920s, etc

Gender issues in export processing zones

Women often exploited -women paid less than men -women less likely to complain -women less likely to form labor unions -higher manual dexterity Women hold many manufacturing jobs in EPZs/SEZs. Women have greater have smaller hands and are often better suited physically for tasks requiring high manual dexterity. In many countries of the periphery and semi-periphery, women can be paid lower wages than men for the same jobs. Women are also less likely to complain or form labor organizations (unions).