Livelihood And Economy: From Blue Collar to Gold Collar

1
Chapter 9

• Livelihood And Economy From Blue Collar to Gold
  Collar
• Principles/considerations guide manufacturing
  locational decisions, how these considerations
  incorporated in theories
• Tansnational corporations affect classical
  locational control
• High-tech influences in older world patterns of
  manufacturing regions
• Characteristics of tertiary, quaternary, and
  quinary service

2
Components of the Space Economy
Primary industries tied to the natural resources

• The set of simplifying assumptions and controls
  explaining the structure of the space economy
  include economically rational agents heeding the
  guidance of the market mechanism in reaching
  correct economic decisions. Price, supply, and
  demand establish market equilibrium, an
  abstraction geographers refine by recognition of
  spatial variations in demand and in production
  costs. Behavioral traits may modify but do not
  erase economically rational decision making.
• Concepts and Controls - people of economically
  rational make decisions based on the
  cost-effectiveness. Maximizing profit is the
  driving force for human behavior about products,
  price and market location.
• Market Equilibrium (fig 9.2)

3
Concepts and Controls

• Distance decay - the intensity of spatial
  interaction decreases with increasing separation
  of places (3.4), Human being are economically
  rational - to make cost-effective decisions - is
  intent on maximizing profit.
• Market mechanism - measured by price, which is a
  function of supply and demand.
• the higher the price of a good, the more of it
  will be offered in the market (the supply curve
  in 9.2a)
• the lower the price of a good, the more
  attractive to customers (the demand curve in
  9.2b)
• Market equilibrium - where the supply and demand
  curves meet (decides the price of goods, the
  total demand, and the quantity bought and sold)

4
Secondary Activities - decisions in manufacturing

• Involve transforming raw materials into usable
  products, giving them form utility.
• On the demand side - distribution of pop, of
  purchasing power.
• On the supply side - costs of raw materials,
  distance from them and from markets, wages of
  labor, outlays for fuel, capital availability and
  rates.
• Secondary activities are the applications of
  power and specialized labor to the production of
  standardized commodities in factory settings.

5
Principles of Location - their relative weight
varies among industries and firms.

• 1) some of the input cost are spatially fixed,
  which have no implication for comparative
  locational advantage.
• 2) others are spatially variable costs (9.3)
• 3) the ultimate aim of the economic activity is
  profit maximization, when the plants are situated
  at the least total cost location. Considerations
  of sales and market may be more important than
  production coast in fixing best locations.
• 4) fixed cost is not as important as the variable
  cost, the minimization of variable costs is the
  major spatial decision factor
• 5) Transportation charges are highly variable
  costs,, may become the locational determinants
• 6) agglomeration process - linkages brought
  industries together for common resources

6
Raw Materials - the more advanced the industrial
economy of a nation, the smaller is the role
played by true raw materials in its economic
structure

• Material Orientation - copper smelting and iron
  ore beneficiation (scalping, sizing. logwashing,
  screening, cycloning and dewatering),pulp and
  paper, sawmills, fruit and vegetable in CA, meat
  packing in midwest.
• Multiple raw materials - decisions based on
  minimizing total cost (9.4) Gary and Cleveland

7
Labor

• Labor flexibility - more educated workers for a
  wide variety of tasks and functions. Some need
  cheap labor, other labor skills constitute the
  locational attraction and regional advantage.
  Hi-tech industries demand more skilled labor than
  unskilled, uneducated work force.
• Poorly distributed skill force in some area not
  ready for use in the development - Siberia, in
  central Asian Muslim countries, labor surplus
  seen due to resisted resettlement.
• Market
• Market Orientation - industrial location near to
  the consumer.
• location near the next stage of production -
  tires, windshields, Auto assembly plants
  scattered throughout the N Amer. - consideration
  of market orientation.
• ubiquitous industries - market and industrial
  location together, such as newspaper publishing,
  bakeries, and dairies

8
Wage Rates and the Cloth Trades

• Textile industry started from New England area,
  moved to Piedmont of the SE US (only area left in
  the US)
• Competition from NICs (newly industrializing
  countries), 1970s in Korea, Taiwan, and Hong
  Kong, moved to China, Bangladesh, Indonesia,
  Mexico and Thailand
• Apparel Industry - similar trend, see next slide

9
800 items surveyed of Cookeville
Stores Country No. China 277 28.88 US 198
24.75 Mexico 52 6.50 Taiwan 19 2.37 Bangladesh
18 2.25 Indonesia 16 2 Dominican
Rep 16 2 Korea 16 2 India 15 1.87 Guatemala 1
3 1.62 Thailand 12 1.5 Malaysia 11 1.37 Philippi
nes 11 1.37
10
Transportation

• Weight reduction - to minimize transportation
  cost
• When transportation cost is high, Market
  Orientation market would occur more often.
• Weight-gaining production - only ship
  concentrated syrup to reduce transportation cost,
  local bottlers to add water and distribute to
  local markets.
• Water transportation - cheapest means of long
  distance freight movement (9.5). Inland waterway
  improvement and canal construction marked the
  first phase of the Industrial Revolution in
  Europe and was the first stage of modern
  transport development in the U.S.
• Railroads - low labor and fuel, but inflexible in
  route, expensive to construct and maintain
  railroad. Traffic declines lead to the abandoned
  railroads (125,000 miles between 1930 and 2000)
• Truck - responsive to new traffic demands,
  intervening opportunities, but low efficiency in
  the long-distance and high volume commodities.
  (page 324 comparison table)

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Transportation and Location

• Fig. 9.7 - Spatial Orientation Tendencies -
  represents the application of differing freight
  rates - loading/transporting and unloading
  charges - different commodity has different
  freight rate.
• Fixed cost, Terminal cost and Line-haul (over the
  road cost), the curvelinear functions (9.8), two
  short hauls cost more than a single continuous
  haul over the same distance. (9.9)
• Break-of-bulk points - where goods have to be
  transferred or transhipped from one carrier to
  another. (NYC, SFO, Chicago.., Singapore, Hong
  Kong.)

Market Oriented
Weight gain
Baking
bottling
Auto, Furniture
Copper,Rice, sugar beets
Lumber Pulp Mills
Canning Freezing
Raw material oriented
Weight loss
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Industrial Locational Theory 1-Least-Cost Theory
- Weberian analysis

• Minimize three basic expenses - relative
  transport, labor, and agglomeration costs.
• Transport costs are the major consideration
  determining locations, but if the costs from
  other two factors are high then transport cost is
  not the determining factor.
• Five assumptions - 1) isotropic (uniform) plain
  2) single product shipped to single market 3)
  more than 1 raw materials sources 4) available
  labor in fixed location 5) shortest path between
  origin and destination (weigh and distance
  determine shipping cost)
• Locational triangle (9.10) determines the least
  transport location
• Plane table solution to a plant location (9.11)

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Theory 2 - Locational Interdependence Theory
(locational decision influenced by competitors)

• Concern is with variable revenue analysis
  (instead of variable cost)
• Fig 9.12 - Competitive location in a linear
  market
• Market become sensitive to price, sales
  (elasticity of demand) to more distant customers
  will be discouraged and producers seeking will
  again separate rather than aggregate
• Theory 3 - Profit-maximization approach
• substitution principles - reduced labor can be
  replaced by increased capital for automation.
• spatial margin of profitability (9.13) - points
  where costrevenue
• Satisficing locations - acceptable, but not
  optimal locations
• footloose firms - neither market or raw materials
  oriented, transportation cost can be neglected,
  spatial margin can be broad, such as computer
  industry where products are light and valuable
  and the locations are not important.

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Other considerations and controls

• Fordism - assembly line concepts
• Post-Fordist - flexible manufacturing - smaller,
  greater variety
• Info. tech. - cost-time rather than cost-distance
• Agglomeration - from sharing transport, social
  services, public utilities, comm. facilities.
• Multiplier effect - each firm added to the
  agglomeration will lead to the further
  development of infrastructure and linkages.
  (9.14)
• Deglomeration - suburbanization of industry or
  relocation to different locations - once the
  costs of aggregation exceed the benefits.
• JIT - Just-In-Time production., seeks to reduce
  inventories for the production process by
  purchasing inputs for arrival just in time to use
  and producing output just in time to sell.
• JIT - one expression of a transition from mass
  production Fordism to more flexible production
  systems. Such as reprogram to produce products,
  responding to current markets need.

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Comparative Advantage

• Based on the growing international importance in
  industrial location and specialization
  importance.
• Outsourcing - domestic products have parts or
  products produced abroad.
• Northern border of Mexico - American sister plant
  (maquiladoras) allowed in Mexico within 12 miles
  of the U.S. border for duty-free assembly of
  products, multiplier effect employed workers on
  either side of the border.
• US benefits from Japanese auto manufacturing
  plants outsourcing
• Tansnational Corporations (TNCs) - most of them
  are engaged in primary and secondary
  industries...(Fig 9.16)
• Conglomerate Corporations - companies engaged in
  quite different activities Philip Morris -
  Marlboro,Miller Lite,Kraft-cream cheese, Maxwell
  House Coffee, JELL-O Oscar Mayer-hot dogs, real
  estate, publishing...

16
World Manufacturing Patterns and Trends

• E Anglo America, W and Central Europe, E Europe,
  and E Asia - accounted for 3/5 of the worlds
  manufacturing output by volume and value. The
  first three are the beneficiaries of earlier
  Industrial Revolution development, are in
  postindustrial phase and the traditional
  manufacturing and processing is less important
  now. E Asia emerged in recent years.(Figure
  9.17)
• Anglo America - declining importance. Began in
  19th century from free Canada and US from total
  dependence on Europe. Megalopolis- market and
  labor base, from S Maine to Norfolk, Virginia

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Anglo America

• Anglo America -
• Southeast - textile/tobacco, food/wood/furniture,
  iron/steel in Birmingham
• Gulf Coast - Texas petroleum, sulfur and salt
• Denver/Salt Lake City - high-tech
• Asian-Pacific market more influence on Northwest
  region of the US - aircraft, software, Silicon
  Valley, Fruit/vegetable in LA to SD
• Fastest growing industrial region - la frontera
  border US and Mexico

18

• Western/Central Europe
• 1900, Europe accounted for 80 of the worlds
  industrial output, but it has since declined.
  Steam power provided the impetus for the
  industrialization in England
• Largest and most important single industrial area
  of Europe extends from the French-Belgian border
  to western Germany, cored in Germanys Ruhr.
  (9.20)
• Eastern Europe
• planned economy dominated the locations
  originally
• light industrial market-oriented production
  focused on Russias Central Industrial Region
  (9.21)
• Heavy industry in Ukrainian Donets Basin-Dnerpr
  River
• Eastern Asia - most productive region of the
  world (9.22)
• Japan - recovered from WWII, developed along
  coastal regions
• China - started activities in late 1970s.
• Four tigers - Taiwan (9.23), S Korea, Hong Kong
  and Singapore, may be joined by Malaysia,
  Thailand, Philippines, Indonesia, and Vietnam

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Japan

• Less than one century after the beginning of the
  Industrial Revolution, Japan became a leading
  Industrial force in the world.

Meiji Restoration

• 1867/68, Tokugawa era
• Moved capital from inland to coast area
• Adopted French/Germany compulsory education
• Sent scholars overseas to study sciences and
  languages
• Supported large family business/industries
  (zaibatsu)
• Sino-Japanese War (1894-95), Taiwan colonized
• Russo-Japanese War (1904-05), annexed Korea 1910.
• Established colonies which brought raw materials
  
• from Korea,China and Taiwan

20
Kanto Plan - 1/3 J pop, includes
Tokyo-Yokohama-Kawasaki metro area (27 mi)
Kansai District - from eastern end of the Seto
Inland Sea to the Nagoya area, including
Kobe-Kyoto-Osaka triangle. Major chemical,
automobile, shipbuilding and others. Tokaido
-urban agglomeration.
Kitakyushu District -heavy industries, good place
for doing business with China
Toyama District -cheap hydroelectricity, paper
manufacturing, chemical/textile industries
21
Northeast District - Industrial heartland with
coal and iron deposits, Chinese
Pittsburg-Shenyang Anshan - center for iron/steel
production Harbin - textiles, farm equip
Shanghai and the Chang (Yangzi) District -
diversified production and local specifications
Guangdon District - (Canton) 4th in the country
even with China rulers north preference
Special Economic Zones (SEZs) - open cities and
open coastal areas to encourage foreign
investors.
22
High-Tech Patterns (9.24)

• Classical location theories not applicable in
  explaining the location of high-tech industries.
• White collar worker - research scientists,
  engineers and skilled technicians
• Impact of high-tech industries -
• 1) become major factor in employment growth and
  output, 16 of non-farm workers of high-tech
  employees.
• 2) specialized agglomeration is created, such as
  Silicon Valley, Silicon Forest, Route 128,
  Software Valley in Utah, Silicon Swamp in D.C...
• 3) Five locational tendencies a) Proximity to
  major universities or research facilities b)
  avoidance of areas with strong labor unionization
  c) available venture capital d) location with
  quality of life reputation e) available
  first-quality comm. and transportation facilities

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High Tech States/Locations
Silicon Forest (Seattle)
Route 128/495 Boston
Software Valley (Utah)
Silicon Valley (Bay Area)
Silicon Swamp (DC)
Research Triangle Park (NC)
Irvine/Orange County (LA)
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Tertiary and Beyond

• Post-industrial - labor force in primary
  component fell from 66 in 1850 to 2 in 2000,
  service rose from 18 to 80 (9.25)
• Advanced and subsistence society difference
  (9.26). The greater the service share an
  economy, the greater is the integration and
  interdependence of that society. (Table 9.1)
• Tertiary - specifically to those lower-level
  services largely related to day-to-day needs of
  people and to the usual range of functions found
  in smaller towns and cities worldwide. - market
  oriented locational consideration based on pop
  pattern and spatial structure of production and
  consumption, - retailing sales..
• Outsourcing - contracting workers from
  professional cleaning companies...change status
  of worker from secondary to tertiary
• Tourism - largest industry in jobs, a tertiary
  industry

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Quaternary and Quinary (gold collar)

• Skill-based service.
• CEO, decision makers, research scientists found
  jobs in metropolitans, universities and research
  parks, government
• World fastest growing services in financial,
  brokerage and leasing activities.
• Cost of data transmission help to
  internationalize the service types. Developing
  countries benefited more from the export of
  service based on the new technologies, such as
  India become a major player in software industry,
  call centers in India, health insurance claim
  centers in Caribbean countries.
• Increased FDI (foreign Direct Investment) in
  international quaternary service benefit
  developing countries, but the major players are
  still developed countries (Table 9.2)
• International Financial Centers (9.29)