key issue #3: where is industry expanding? since 1970: manufacturing declining in mdcs and rising in...

Key Issue #3: Where Is Industry Expanding?

• Since 1970: manufacturing declining in MDCs and rising in LDCs; also relocating within MDCs from traditional to nontraditional areas

• Changing Distribution within MDCs① Intraregional (from center city to suburbs/periphery)

• Historically located inside cities – close to market & transportation to national market (situation)– close to labor & capital (site)

• Increasingly difficult to find suitable land in city (space needed for large machinery, bulky inputs, storage) – once built multi-story

• Modern factories more likely suburban or rural– Large land tracts due to size, lower costs in periphery– Built single-story for efficiency– Transportation by truck rather than rail – locate near highway junctions (long E-W or N-

S routes or loops around cities)– Use of conveyors & forklifts to move materials on single story– Often cluster in industrial parks– Factories built larger today to take advantage of economies of scale – the more goods

produced, the lower the cost per good.


• Changing Distribution within MDCs② Interregional

• Moving from traditional clusters to regions not traditionally associated with manufacturing

• In U.S., from N & E to S & W• In Western Europe, encourage to move to economically depressed

periphery areas• Southern & Western U.S.

– NE lost 1 million manufacturing jobs in last 30 years (1/3 of total) – particularly in NY & PA (clothing, textile, steel, fabricated metals)

– South & West have grown by 1/6 – CA & TX have added 250,000 manufacturing jobs each

– South did not have industrial growth until 1930s – agricultural focus, depression following Civil War, lack of infrastructure (road, rail, electricity)

– TVA brought electricity & jobs to rural South; building of roads; air-conditioning important to make summers more tolerable for living/working

– Biggest draw for industries to the South: right-to-work laws


• Changing Distribution within MDCs② Interregional

• Southern & Western U.S.– Right to work laws

» Must maintain an open shop (union is optional for employment» Northern states often have closed shops (union membership required for

employment)» South made it difficult for unions to organize, collect dues, bargain with

employers (strikes, picketing, etc.)» Lower costs for industries if they can avoid potential work stoppages & union

compensation demands– South – industries include steel, textiles, tobacco, furniture

» Lower wages, less unionized» Access to oil & gas on Gulf Coast (refining, petrochemicals, food processing,

aerospace)– West Coast – clothing, textiles, furniture, food processing, aircraft

» Favorable climate (mild winters, clear skies, light wind) & large pool of low-wage immigrant labor (Mexico & Asia)

» Los Angeles harbor (1910) & Panama Canal (1914) – time & distance greatly reduced for shipping


• Changing Distribution within MDCs② Interregional • Western Europe (N & W to S & E)

– Government policies explicitly encourage relocation (incentives to lure to poor regions & discourage in wealthier; EU’s Structural Fund assists lagging regions/countries)

– Spain – largest growth in late 20th century» Joined EU in 1986» Had been physically (Iberian Peninsula & Pyrenees Mts.)

& politically (fascist, Franco) isolated» Now 2nd largest motor vehicle industry in Europe behind

Germany» Catalonia industrial area (NE Spain near Barcelona) –

textiles & autos


• Relationship to Core-Periphery Model– Core = more developed areas (MDCs, traditional

regions of economic activity, cities, etc.)– Periphery = less developed areas (LDCs, nontraditional

regions of economic activity, suburbs/rural areas, etc.)– The Core is the traditional center of power– The Core exploits the Periphery for its resources– Recently, the Periphery has gained power and

increased economic activity; however, it has benefited the Core on a global level (widening wealth gap, low wages in LDCs aid transnational corporations based in MDCs)


• New Industrial Regions– China leader among new industrial regions– Steel: 1980 – 80% in MDCs; 2005 – 45% MDCs

• Now, China 30% of world steel production• U.S./Canada dropped 20% to 10% 1980 to 2005• Japan constant at 10%• W. Europe 20% to 15%• E. Europe 30% to 10%

① Asia• China – world leader in textiles, apparel, steel, & many

household products– Most populous country – largest supply of low-cost labor & largest

consumer market– 1990s – policy changes opened up to transnational corporation– Foreign investment led to rapid economic growth


• New Industrial Regions① Asia

• China’s manufacturing regions on east coast (1/4 of pop., ½ of wealth, ¾ of FDI, 5/6 of foreign trade)– Guangdong & Hong Kong (Guangzhou, Shenzhen, Pearl/Xi River delta)– Yangtze/Chiang Jiang River Valley (Shanghai to Wuhan)– Gulf of Bo Hai – Tianjin to Beijing/Shenyang

• Clustering of investment has led to large wealth gaps in China• Thailand – reduced tariffs in 1990s (120% to 20%)• India – 1991 shift from self-sufficiency to international trade model

② Latin America• Mexico – northern Mexico & central (Mexico City)• Brazil – Sao Paulo• Protectionism in 1960s – required foreign companies who wished to

operate factories to use domestic raw materials; often inefficient factories & outdated products

• 1970s – oil shortages led to triple-digit hyper-inflation in 1980s in Latin America (unable to repay massive loans)


• New Industrial Regions① Latin America

• Protectionism ended in 1980s & 1990s– High tariffs ended– Foreign ownership restrictions ended– Privatized formerly gov’t-owned production

• 1980s in Mexico – industrial expansion near U.S. border with maquiladoras• NAFTA (North American Free Trade Agreement) in 1994

– Increased trade between member countries, reduced or eliminated tariffs (example of a trade bloc)

– Industrial jobs left U.S. for Mexico– Growth mainly in N. Mexico due to proximity to U.S. & Mexican policies– Led to trade deficit with Canada & Mexico for U.S.– May expand to other Latin American countries

• Proximity to U.S. is Mexico’s primary advantage– Just-in-Time not feasible because too far from most U.S. markets– Lower wages than U.S. but higher than many other LDCs– Maquiladoras have closed or relocated due to Asian competition (China, Thailand,

Vietnam); 325 of 1,122 textile maquiladoras closed 2001-2003


• New Industrial Regions③ Central Europe• Fall of communism in 1990s• Poland, Czech Rep., & Hungary• Site advantage (Labor)

– Less skilled but lower wages than Western Europe– More expensive & skilled than Asia/Latin America

• Situation advantage (Market proximity)– Closer to Western Europe market than Asia or Latin America

key issue #3: where is industry expanding? since 1970: manufacturing declining in mdcs and rising in...

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