Industrialization and
Economic Development



Patterns of Industrialization and development

Economic Development


Industrialization is frequently considered as the replacement of farming and resource extraction by manufacturing and service activity. This transition takes different forms in different places at different times. Geographies of industrialization and economic development are important in understanding  future growth patterns.
The activities of a regional or national economy are commonly divided into five components. The primary sector includes activities directly involving the physical environment; occupations such as agriculture, fishing, forestry, hunting, and mining. The secondary sector involves the processing of raw materials and manufacturing. Most workers in North America are in the tertiary sector where they provide services. The service sector includes wholesale and retail sales, transportation, and finance, insurance, real estate (FIRE activities). Those whose work involves the exchange or application of information, knowledge, and/or capital are thought to be in the four or quaternary sector. Finally the expansion of the knowledge economy has necessitated the term quinary sector to refer to higher order, complex, and specialist tasks of control, production and management.
As a country goes through industrialization or economic development it is possible to see a marked shift in the percentage of the labor force involved in the each of the five sectors. Non industrial states have most of their workers involved in the primary sector. When industrialization begins there is great growth in the secondary sector and the percent of workers involved in primary production decreases. With continued growth in economic activity the labor force shifts toward the third, fourth, and fifth sectors.

Specialization of places
As economies develop places become specialized in certain forms of production whether it is in the primary, secondary, or other sectors of the economy. Underlying this specialization is the concept of comparative advantage. This is the competitive edge (in the form of lower production costs, cheaper raw materials, etc.) enjoyed by one location over another.  Assuming an established demand for a commodity like bananas, places with favorable growing conditions and inexpensive labor will become specialized in the production of the fruit. By the same logic Silicon Valley can specialize in technology innovation partly because its pool of highly skilled labor, creative entrepreneurs, and supply of investment capital give it a comparative advantage over a regions with similar human resources.  As a result of such comparative advantages some locations begin to specialize in one economic activity and exchange goods with other regions.

Transport and communications
However, without the ability to move goods between locations, specialization and economic growth cannot proceed. The Ullman conceptual frame forms a basis for understanding the volume and timing of such flows.  Complementarily refers to the needs of one region matching the products of another region (for example, oranges shipped from rural Florida to northern cities); intervening opportunity refers to the presence of a nearer opportunity which reduces the attractiveness of a more distant location; and transferability, which refers to ease with which products can be moved.

However, the nature of technological and management characteristics of transport and communications systems themselves have a great impact on economic development. Transportation and communication requires a specially designed and constructed landscape (roads, canals, railroad tracks, airports, TV stations, telephone lines and the like). Even the Internet requires a series of physical connections. Because these fixed investments are expensive and risky, they are often constructed first in places with existing locational resources. Contemporary investment in internet facilities illustrate the connected idea of cumulative causation, with most growth occurring in countries that have high levels of per capita income.

Once constructed transport and communications systems may constrain future economic growth. For example colonial lines of communication helped the flow of materials out of many colonies but do little to enable internal flows between remote parts of these now independent nations.

Transportation and communication systems can be viewed as being like a surface or a network. On a surface movement can occur in any direction like balls on a pool table. But because all the balls move with the same freedom of direction collisions can be frequent. In the real world movement on surface characterized by the freedom to move in any direction but at limited speeds. On the other had a network restricts movement to certain paths but because the likelihood of collisions is lowered the movement can occur at higher speeds. Because humans like both speed with out directional constraints we continually modify or systems to make the faster and to provide us more choices.

Models of industrial location
The analysis of circulation systems is focused on the ways technology enables people to reduce the effect of friction of distance.  Industrial location theory is the study of how the costs of overcoming distance (transportation costs) affect the location of economic activity. For example, Hotelling's seemingly trivial consideration of where two competing ice cream vendors should stand on a beach sets the stage for an appreciation of locational interdependence. He selected a beach because we can all understand that it as a very simple place, that is it is simplified version of the real world. He further assumed that people would be equally spaced on the beach. Therefore an ice cream vendor seeking to serve as many people as possible would set up an establishment in the middle of the beach. A second vendor would by the same logic locate right next to the first so they could divide the market in half. However the third vendor makes the geography significantly more complicated, and the vendors must move. Thus the location of one vendor is dependent on the location of the others.

Alfred Weber's industrial location theory also attempts to use transposition costs to determine where industrial activity is likely to occur. His model called for a featureless plain that contain a source of raw material and a market place for the products of the manufacturing process. His model accounts for the several different aspects of the change of raw material during the manufacturing process. If weight loss occurred the best place for the factory would be the site of raw materials, so that the costs of transporting the un-need portion of the raw material could be avoided.  Processes that increased the bulk of the product, or made it either more perishable or fragile would be better sited close to the market.  The work of other location theorists, notably Walter Christaller and August Loesch, illustrates how distance affects the marketing strategies of enterprises

Agglomeration, that is the concentration of enterprises in a locale, occurs when certain conditions are met.  First when a clusters of activities create enough demand for support services in a particular place (for example, temporary workers, restaurants, legal advisors, or specialist engineers).  Second, activities needing access to information and control tend to concentrate because the entrepreneurs believe that face to face communication is better than indirect ways no matter how rapid other forms of communication might be. Third when an infrastructure of cultural institutes such as school, hospitals, and services reach a certain level of new and divergent investment is attracted to the area.

By contrast, de-agglomeration (de-concentration due to technological change or increased costs of continued clustering) occurs when too many activities, perhaps of the wrong type, are too close together.  Traffic congestion, pollution, labor shortages, capital shortages, supply shortages caused by local demand, increased land prices, and a general decay of infrastructure because of the intense use of the infrastructure made by all the establishments can cause some enterprises to move out of the traditional centres.

By this point in the class, students can use factors of absolute location, relative location, distance, accessibility, linkages, and interdependencies to describe and predict the location of economic activity at the scale of individual companies or establishments.

The second section applies the generalizations and theories discussed in the first part to describe the development of industrial economies during the modern era. It also attempts to answer questions about the causes behind the uneven distribution of wealth and industrialization we see in today's world. It will also attempt to determine if the geographic factors are becoming less or more important in a shrinking world. Students should become aware of the interdependence between economic development and the matters raised in other sections of the course.

Changing Energy Sources and Technology
Energy sources and technology in combination greatly impact the timing and place of industrialization.  The growth of mechanized production, which is usually thought of the beginning of the industrial revolution, is strongly linked to the textile industry in Lancashire, in Northwest England. Mechanical looms could only be established in places with a sufficient energy supply that were close to sources of early venture capital.  Similarly, the industrial revolution in North America also first took place in rural areas with adequate energy supplies (waterfalls), technology, raw materials, capital, and access to domestic markets.

Technology and energy are essential to industrialization. Geography focuses on place or spatial context of this relationship. It is interesting to show students how the relationship between industrialization and urban location changes. The first industrial establishments were rural, the mass production factories of the early 1900s were urban based, and the expansion of tertiary and some quaternary activities is closely associated with the growth of suburban areas (e.g. shopping malls, edge cities).

Economic Cores and Peripheries
In geography the term core reefers to regions with concentrations of employment, capital, and economic control. Cores develop when industries take advantage of agglomeration economies to reduce costs. Industries attract new investment to the core through backward linkages (supplying firms with components and services), forward linkages (helping firms find uses and destinations for their products), and ancillary industries (firms providing services for other corporations are attracted to a core when a critical threshold of economic activity is reached). These attractions produce an upward spiral of economic growth, which is in part due to the impact of  in-migrants and, immigrants. These young, ambitious, and eager to work create new markets for consumer goods. Furthermore, profits were re-invested into infrastructure developments which further improved the competitive advantage of the core relative to other areas (e.g. improved accessibility would cut production costs).  Profits were also used to develop new forms of technology that could launch new waves of industrial expansion.

However, the growth of industrial cores can not be understood without examining the links between the core and peripheral places. In general a core will dominate a set of peripheral places because it receives more from the peripheral places than it returns. As a regional economic core develops, raw materials, skilled migrants, and savings would flow from the periphery to the core. Only at later stages of development, and perhaps with government intervention through grants, loans, road building, special enterprise zones and the like, does the core have a positive impact upon economic activities in the surrounding periphery.

Scholars called structuralists believe that the growth of the core is only possible through the systematic underdevelopment of the periphery. Wallerstein's world systems model is based on core-periphery relations at the global scale. A study of the emergence of specific industrial cores, for example the North American Manufacturing Belt (NAMB) will show students how the diffusion of ideas, innovations, and knowledge affects the course of industrialization. An analysis of the emergence of the Japanese industrial core in the 1920s-1950s could show how position in the emerging global economy affects the rise of new cores.

Models of Economic Development
It's useful to draw connections between the political geography section of the course and this material. Colonialism was instrumental in creating the international division of labor. Colonies with particular comparative advantages specialized in the production of raw materials and foods, provided they did not compete with the interests of the core nations.

Turn of the century imperialism on the part of Europe, the United States, and later Japan helped bind the global periphery into the emerging world system. Earlier economic specializations and terms of trade, new rounds of infrastructure investment, brain drain, and capital depletion increased the dependency of most of the world's population on a few core nations. With the USSR and China traveling down a Second World state-planned economic road following the Second World War, it was the North American economy, with Europe trailing and Japan catching up, which dominated economic growth in the expansionary 1960s.  This First World dominated an increasingly politically independent Third World.  West German Chancellor Brandt drew his famous North-South line on the map of economic development in the late 1960s.

The-classical economic model developed by Roster's Stages of Economic Development model argues that an isolated economy goes through a series of stages by economic processes, including income in elasticities of demand (the idea that the demand for, say, brussell sprouts does not increase as you get richer). Sociologist Immanuel Wallerstein's contributions to an understanding of the emergence of a World System, dominated by a core-semi periphery-periphery structure, is more obviously spatial in orientation, and includes a dynamic element that describes how economies may wax and wane with the passage of technology and political systems.

The term globalization is used to describe elements of the highly integrated global economy. This section focuses mostly on the transnational (spanning two or more nations), national, and regional variations in economic activity of the past thirty years or so.

The twin concepts of linkage and interdependence help bring globalization into focus. Technological innovation in space shrinking (jet engines) and time saving (email, fax, robotics) processes have enabled industrial organizations to stay efficiently co-ordinated while they grow in size and scope of operation. Transnational companies (TNCs or Multinational Companies, MNCs), like Ford and Exxon, now produce more than many countries do: for example, General Motors recently reported $130 billion in sales, almost double Pakistan's GNP! The ability of producers to move production sites around, and re-negotiate contracts with suppliers, wholesalers, retailers, labor, and even governments, is described under the umbrella heading of flexible accumulation, to distinguish it from the more rigid production relationships that previously characterized Fordism.

Linkages have also facilitated travel, tourism, and the diffusion of western, particularly American, consumer culture around the globe. Tourism has grown into a major global industry and helped fuel the demand for images and news of far flung places. Contemporary industrial processes in any economic sector exhibit an increase in interdependency. The so-called New International Division of Labor describes how periphery regions are now dependent upon the core for creating manufacturing jobs, while core TNCs are likewise dependent upon the periphery for the opportunity to obtain cheap wages, production regimes unfettered by complex costly environmental regulations, and access to expanding markets.

Maps which use nation-state lines miss what is distinctive about globalization (see, for example, Castell's 1996 for a depiction of network society. The global economy does have its core region (a tripolar core connecting the post-industrial economies of Japan and SE Asia, North America, and Europe) but it operates through networks of flows between particular control points (world cities, places with a disproportionate share of economic, political, and cultural influence).  Major industrial regions of the world are now woven into this web of control.

Students should thus be encouraged to glimpse the contours of these new industrial geographies and their impacts at multiple geographic scales and using multiple markers. Likewise, the specific geography of production and consumption can also be appreciated at multiple scales. Firm level analyses demonstrate interdependency: see, for example, diagrams of end products that show source regions for components. The Newly Industrializing Countries (NICs), part of the semi-periphery of World Systems theory, provide an excellent recent example of some winners. Of these, the four Asian Tigers, South Korea, Taiwan, Hong Kong, and Singapore are often cited as exemplars of modern economic development.  South Korea, Taiwan, and Singapore all appeared in the list of the US's top ten total trading partners in mid 1998 (see the US Census web site). These places successfully attracted the high labor intensive production activities (e.g. shoe production and textiles) away from locations in the United States and Europe where labor costs were much greater.

The topic of deindustrialization encourages students to apply their understanding of place to economic change.  For example, industrial activity is unevenly located through space because of the ways that innovation diffuses and the high fixed costs that stick or embed certain activities, technologies, and industries to place. Those regions with high labor costs and old technology experience deindustrialization as new technologies can be more cheaply appropriated elsewhere.  For example, the higher amenity values, lower rates of unionization, government contracts, and availability of greenfield sites all helped spark the economic development of the US Sunbelt around key technologies (aerospace, defense, refining etc.). This drew investment away from the locations with high fixed costs.

However, other parts of the old NAMB, for example Columbus OH, had a sufficiently diverse industrial heritage and escaped from having all their industrial eggs in one basket. They were able to attract investment based on traditional locational advantages (e.g. accessibility). Retailing and services grew strongly. Still other parts of the NAMB reindustrialized on the back of Japanese investment in new auto plants. Some of this growth can be linked to the forward-looking and aggressive government actions in promoting the region, and the remaining pools of skilled labor and knowledge.

Economic development initiatives: government policies
Examples of government or state actions designed to create a productive environment for economic accumulation, also called regulation, are common.  Internationally, the trade agreements negotiated by members of the General Agreement on Trade and Tariffs (GATT) help define global trade regulations.  Governments provide development assistance bilaterally or through international agencies like the International Monetary Fund (IMF) and the World Bank and regional agencies like the Asian Development Bank and the Inter American Development Bank.

Governments have devised export processing zones, maquiladoras, empowerment zones, and tax free zones to attract and retain economic investment.  Other strategies include the reduction of trade tariffs to promote the free movement of goods, capital, and in some cases labor across national borders (compare the EU and NAFTA), and the facilitation of access to national markets for firms who produce locally. Governments may also find it economically, politically, and morally undesirable to accept large regional disparities in economic growth. The creation of growth poles, regional development agencies, and even forward thrust capitals, together with the decentralization of public sector activities, have all been used to address these spatial inequalities in a domestic setting.  Governments can do a great deal to influence the direction of local economic development by building infrastructure or making grants.

Time-Space Compression

The term time-space compression  is applied to the new relationships among time, space, and the material world. It derives from geographers earlier observation that, as technology enables travel times to be speeded up, places appear to get closer together Is this the end or a new beginning for geography?  Now we see that characteristics of place no matter how subtle can be monitored and exploited. And because the of the time space convergence many more places with special features are available to us.

Social Stratification
Social impacts of industrialization can be illustrated by how the New International Division of Labor has tended to create particular clusters of jobs in particular places. For example, in world cities, a polarized (or dual) labor market structure seems to be emerging. Well-educated professionals take advantage of lucrative employment positions in FIRE, and have well paying career posts that include health insurance. Members of the secondary labor market over represent immigrants, minorities, and women, are employed on a fixed contract, part-time, or even under-the-table basis, lack representation and benefits, and are minimally remunerated.

Health and Quality of Life
Industrialization changes human health and thus affects the quality of life, morbidity, mortality, and broader population dynamics.  Many industrial processes have the effect of concentrating harmful materials near human settlements.

This narrative is based on an essay by Adrian Bailey of the University of Leeds, Leeds England. The complete article is published in the Journal of  Geography  Fall 2000.