Industry Review

Types of Economic Activities

Primary Sector Activities

Secondary Sector Activities

Tertiary Sector Activities

AgricultureRaising

animalsFishingForestryMining

Refining petroleum

Turning metal into tools and automobiles

Manufacturing

TradeFinanceReal EstatePrivate

servicesGovernmentTransportation

“Industrialization and Economic Development” Ch. 11 Industry + Ch. 9

Development

Key Issue 1: Why does development vary among countries?

HDI – Human Development Index Economic - GDP Per capita Social – literacy rate and amount of education Demographic – life expectancy

Human Development Index

Where did industry originate?

What did Europe look like prior to the Industrial Revolution?

• Home based manufacturing (known as cottage industry)

• On a small scale

The Industrial RevolutionB. Why did it begin in Great

Britain? capitalist system

guilds had created a middle class of workmen

people free to form businesses

education patent system encouraged

development labor:

Jethro Tull’s seed drill (1701) and other developments > improved productivity in farming > people can leave farms and work elsewhere

B. Why did it begin in Great Britain? (CONT)3. raw materials (iron ore,

coal)

4. rivers, canals, harbors (ease in trade)

5. small, compact size (iron and coal near rivers and harbors)

6. existing banking system (borrow $ to buy machinery)

7. stable political system

8. colonies (guaranteed markets, additional raw materials)

Flow of Capital into Europe, 1775Needed flow of capital in order to fuel the industrial revolution.

Important Innovation 1 The Steam Engine

Patented by James Watt in 1769

Was the first (there had been steam engines in ancient times) to be able to make one efficient enough to power other things than itself

Important Innovation 2 Puddling and rolling of

iron By Henry Cort in 1783 Iron purification

process that increased the manufacture of iron

Puddling furnace

Important Innovation 3 Railways or “iron horse”

Two key inventions: A locomotive using Watt’s steam engine Iron track

The Rocket

Important Innovation 4 Chemicals

Sulfuric acid, chlorine gas and lime, vitriol

Today, the largest textile factories are owned by chemical companies

Important Innovation 5 Food preservation techniques

Canning by Nicholas Appert (done in glass jars) Peter Durand’s tin can

D. Effects– economic: more

goods at lower prices

– social: available labor leaves farms and clusters in cities • urban blight, pollution• canned food

(encourages new industry)

– political: surplus labor > mistreated workers > liberalism and communism

D. Effects4. technological: >

railroad, steamship 5. agricultural: > 2nd

Agricultural Revolution • increased

productivity• use of machinery >

larger farms > enclosures

6. demographic: caused move from Stage 1 to Stage 2 of DTM

Where is industry distributed? Key Issue #2

Diffusion of Industrial Revolution

Early diffusion eastward to Belgium, France, and Germany (early

1800s; delay due to Napoleonic Wars) further diffusion to Italy, Netherlands, Russia and

Sweden by late 1800s U.S. not affected by political instability in Europe:

diffusion by early 1800s 8,000 spindles of textiles in 1808 > 80,000 spindles by

1811 by Civil War, U.S. was world’s 2nd largest industrial

power

Why do industries have different distributions?

Weber’s Model for the Location of Industry

Transportation Labor Agglomeration

It is more expensive to move raw materials than it is to move final products.

Short distances = use a truckMedium distances = use a trainLong distances = use a ship

You can locate your business further from market if the labor costs make up for the cost of the added distance

If several industries cluster in one city, they can share talent, services and facilities.

Situation Factors

Bulk gaining

Bulk reducing

Single-market manufacturers

Site Factors

Costs of land, labor and capital

Labor intensive industries look for cheap labor

Footloose industries are so expensive to produce on their own that transportation to and from markets or factories is negligible

Situation factors

Inputs Factory Consumers

Each industry has to consider what costs more: to transport inputs or to transport the final product to consumers?

Factories are located to REDUCE cost

Other types of plants

Single-market manufacturers Make specialized parts to

go into larger products Located near the

consumer

Perishable Products Located near the

consumer Exs mostly include

fresh foods Newspapers (kinda)

How do inputs and products get from place to place?

• Short answer:– Trucks– Trains– Ships– Air

Important points Often times modes

get mixed (might use planes and trucks etc.)

Costs rise every time you switch from one mode to the next

Break of bulk point- places like seaports and airports where you can transfer from one mode to the next easily

Land factors Factories likely to be located in suburbs and rural areas

Energy sources play a key role (are you next to hydroelectric power? Are you near coal fields?)

Labor factors Is your industry labor

intensive? Do you pay a high percentage in wage? (note percentage does not equal high wages)

Capital Industry will

locate where it is able to get capital from banks

Industrial Regions of the World

Primary Industrial Regions

Western and Central Europe

Eastern North America

Russia and the Ukraine

Eastern Asia

Secondary Industrial Regions

Venezuela, Argentina, Brazil in South America

South Africa and Nigeria in Africa

Coastal areas and the Ganges River are of India, Malaysia, and southern Australia

Economic Organizations NAFTA- North American Free Trade Agreement- Mexico,

US and Canada (helps explain the new international division of labor where some components of products are made in one country and others in another)

The European Union- Most barriers to trade have been eliminated among them members of the EU. Countries that are not a part of the EU (Switzerland and Sweden) rely heavily on trade with the EU countries.

East Asia does not have its own formal organization but it is an important trading bloc.

ASEAN – Southeast Asian version of NAFTA.

What is deindustrialization and who is going through

it? More developed countries are decreasing

the total number of manufacturing jobs in favor of service industry jobs

The United States and Europe are experiencing this

Japan is joining in this along with the Four Tiger economies (Hong Kong, South Korea, Singapore and Taiwan)

Why are there disparities between countries? What challenges exist

for LDCs?

Distance from markets

Inadequate infrastructure

Competition with existing manufacturers in other countries

Demographic Transition Model

Theories of Economic Development- Rostow’s Modernization Theory

Theories of Economic Development- Wallerstein’s

Dependency Theory

Core

cou

ntr

ies • Rich

nations fuel the world’s economy and take raw materials from the rest of the world

Peri

ph

ery

cou

ntr

ies • Colonialis

m drew in low income countries that support the rich via cheap labor and a large market for industrial products

Cou

ntr

ies

of

Sem

iperi

ph

ery • These

countries are somewhere in between. They are still dominated by the core.