Economic Geography. Indicators of Development. Indicators of Development 1/9/2012. Economic Geography

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1 Economic Geography Economic Geography Chapter 10 The study of how people earn a living, how livelihood systems vary by area, and how economic activities are spatially interrelated and linked Livelihood patterns are influenced by Physical environment Cultural considerations Technological development Political decisions Economic factors Categories of Activity Primary Sector activities Harvest or extract something from the earth Hunting and gathering, grazing, agriculture, fishing, forestry, mining Secondary Sector activities Add value to materials by changing their form Manufacturing, processing, power generation, construction Categories of Activity Tertiary Sector activities Provide services to the primary and secondary sectors and goods and services to individuals Professional, clerical, and personal services, wholesale and retail trade Quaternary Sector activities Processing and dissemination of information and administration Education, government, management, information processing, research Quinary Sector activities High-level decision-making jobs - top executives or officials in such fields as government, science, universities, nonprofit, healthcare, culture, and the media. Economic indicators of development Gross domestic product per capita mean average Value of total output of goods and service produced United States $40 trillion / 300 million people = $40,000 per capita $27,000 MDC, $4,000 in LDC Progress has been made in LDC up from $800 in 1990 Average Hourly Wage: $15/hour in MDC $2/hour in LDC Percentage employment in the primary, secondary, and tertiary sectors of MDCs has changed dramatically, but change has been slower in LDCs. 1

2 Social indicators of development Education and literacy Quality of education measured by student/teacher ratio and literacy rate Literacy Rate percentage of a country s people who can read and write 98% in MDC vs. <60% in LDC Time in school MDC 10 years, LDC 2 years Social indicators of development Health and welfare MDC s Healthier have more hospitals, doctors, nurses per capita health care is a public service 70% or more subsidized by government 30% or less by private individuals Exception? LDC s Most people eat less than United Nations recommended daily allowance of calories and proteins MDC s MDC s also provide high levels of public assistance to the sick, elderly, poor, disabled, orphaned, veterans, unemployed or single parents Human Development Index, 2005 Demographic indicators of development Life expectancy given current social, economic and medical conditions Infant mortality rate infants under 1 year old for every 1000 live births in a society 94% Survive in LDC s 6% die 99.5% survive in MDC s Malnutrition, lack of medicine, dehydration, poor medical practices United Nations: life expectancy at birth, adjusted GDP per capita knowledge (schooling and literacy). Core and Periphery Model in World Economy Core: MDCs Japan, U.S., Canada, Western Europe north of 30 N latitude. More & Less Developed Regions More developed regions (HDI) Anglo-America (0.94), Western Europe (0.93), Eastern Europe (0.80), Japan (0.94) & South Pacific (0.87) Less developed regions (HDI) Latin America (0.80), East Asia (0.76), Southeast Asia (0.58), Middle East (0.68), South Asia (0.58, Sub-Saharan Africa (0.51) Periphery: The LDCs rely heavily on the core. 2

3 Agricultural Origins & Regions Agriculture deliberate modification of the surface of the earth through cultivation of plants and rearing of animals for sustenance Hunters and gatherers Hunt for animals, fishing, gathering berries, nuts, fruits Modern day hunters and gatherers 250,000 worldwide Isolation - Arctic, Australia, Africa, Asia Agricultural Origins & Regions Types of cultivation Vegetative planting duplications of plants by cloning existing plants - Cutting stems, dividing roots Originated in Southeast Asia West Africa, South America Agriculture originated with domestication of plants and animals Agricultural Origins & Regions Types of cultivation Seed agriculture reproduction of plants through annual planting of seeds Type of farming that most farmers today employ Subsistence Vs. Commercial Agriculture Subsistence agriculture production of food primarily for consumption by farmers family Found in LDC s Commercial agriculture production of food is primarily for sale off the farm. Found in MDC s Subsistence Agriculture Extensive subsistence Agriculture: requires large areas of land, low inputs of labor per acre / hectare. Two major forms: Nomadic herding & shifting cultivation Nomadic Herding involves large areas of land especially on fringes of deserts eg. Kalahari desert in Africa Herd animals like goats, horses, cattle, camels & sheep. Shifting Cultivation also known as nomadic farming / swidden or slash and burn. Involves the clearing of forests, burnt and prepared for crops like maize, millet, cassava, yams etc. As crop yield begin to decline, a new area is prepared for cultivation and the previous one is left fallow. Commercial Vs. Subsistence 1. Purpose 2. % Workforce 3. Machinery 4. Farm Size 5. Relationship to other business. 3

4 Combines on Wheat in Kansas Combines can reap, thresh, and clean crops like wheat in a single operation. Subsistence Vs. Commercial Agriculture 5. Relationship of Farming to Other Businesses Agribusiness farms are not isolated entities but are integrated into a large food-production industry Rely on mechanization and modern communication and information technology to keep track of prices, yields and expenditures 2% of labor force is farming 20% of labor force employed in production and industries related to agribusiness Food processing Packaging Storing Distributing Retailing commercial Commercial Agriculture Von Thünen s model of agricultural location Johann Heinrich Von Thunen ( ) a German economic geographer. attempted to explain the reasons for the distribution of farming systems. Discovered that crops change with distance from the town or city. Land uses are a function of differing rent values that reflect cost of overcoming distance to a market town Land close to markets is used intensively in small units Land far from markets is used extensively in larger units Von Thünen Model Assumptions The city centrally located within an "Isolated State" self sufficient no external influences. Isotropic plane surrounded by an unoccupied wilderness. The land of the state: is completely flat has no rivers or mountains. has soil quality and climate that are consistent. Farmers in the Isolated State transport their own goods to market via oxcart Therefore, there are no roads. Farmers act to maximize profits. Von Thünen Model 1. Vegetables, fruit, milk and other dairy Beyond products the spoil fourth easily ring and lies must the be unoccupied located close wilderness, to the city. which is too great a distance from the central city 2. for Timber any type and firewood of agricultural would be product. produced for fuel and building Despite it s age, the Von Thunen materials in the second zone. Heavy model to transport, is an excellent locate close illustration to the city. of 3. the Extensive balance fields between crops land grains cost for and transportation bread. Longer costs. shelf life As one gets closer to a city, the price of 4. Ranching land increases. is located furthest away require The farmers lots of of land the and Isolated are State selftransporting. balance the cost of transportation, land, and profit and produce the most costeffective product for market. Von Thünen Model Von Thünen s model shows how distance from a city or market affects the choice of agricultural activity in (a) a uniform landscape and (b) one with a river. 4

5 Secondary Activities: Manufacturing Industrial Location Factors Industrial location models Industrialists must evaluate variable costs To minimize total input costs to maximize revenue Least cost theory - Weber Minimize 3 basic expenses relative transport costs of raw materials Labor costs agglomeration costs the phenomenon of spatial clustering, or a concentration of firms in a relatively small area Weber concluded that transportation costs were the major consideration in location Optimal location would be where costs of transporting raw materials, and finished product to market was minimized. Industry seeks to maximize profits by minimizing production costs Geographers try to explain why one location is better suited over another Two factors to consider: site and situation Situation Location of something in relation to the physical and human characteristics of a larger region. transporting raw materials to manufacture and finished goods to market Proximity to inputs raw materials Proximity to markets where product will be sold Transport choices Site result from the unique characteristics of a location Labor Land Capital Situation Factors Manufacturers seek to minimize transportation costs (raw materials & finished goods) Further something is transported the higher the cost If cost to transport finished good is more than cost to transport raw materials, optimal plant location is close to the customer If cost to transport finished good is less than cost to transport raw materials, optimal plant location is closer to raw materials Situation Factors Bulk-reducing industry the final product weighs less than the inputs (raw materials) i.e. copper 0.7 of what is mined is copper, the rest is waste transports costs are kept low by locating close to copper mine. Situation Factors Steel bulk reducing industry Historically found around Pittsburg, Toledo, Cleveland, Detroit Chicago & Gary, IN later A shift towards source of iron ore LA, Baltimore Situation Factors Proximity to Markets Bulk-gaining industries an industry that makes something that gains volume or weight during production Ex. Soft-drink bottling Companies ship syrup and empty bottles to one of hundreds of bottling plants Instead they locate close to the consumers 5

6 Location of Beer Breweries Site Factors Beer brewing is a bulk-gaining industry that needs to be located near consumers. Breweries of the two largest brewers are located near major population centers. Three main site factors: labor, land, capital Globally labor is the most important site factor 150 million people worldwide are employed in manufacturing Labor intensive industry an industry where wages and other compensation paid to employees constitutes a high percentage of expenses 11% of total cost in U.S. a labor intensive industry would have a much higher percentage than that. Site Factors Textiles Labor-intensive industry vs. high wage Auto industry paid high wages, but not considered labor intensive Most of the cost of a car is the materials to make it, not the cost to assemble Textile industry labor accounts for a large percentage of the cost of producing a towel or shirt when compared with materials and machinery Textiles woven fabrics Labor intensive done primarily in low wage countries LDC s account for 75% of spinning production MDC s U.S. is only major cotton grower, also the only major cotton thread producer Woven Cotton Fabric Production Woven Cotton Fabric Production Labor constitutes a higher percentage of production costs for weaving Weaving is especially concentrated in LDC s 86% of all woven fabric is produced in LDC s China - >50%, India 25% Production of woven cotton fabric is labor intensive and is likely to be located in LDCs. China and India account for over 75% of world production. 6

7 Textile and Apparel Assembly Most of the 80 billion articles of clothing are produced in Asia 75% of shirts and other tops Asia <1/2 of suits and dresses Underwear, lingerie, nightwear Asia Europe/United States - woolens Site Factors - Land Land not a factor at a global scale land suitable for building a factory can be found in many locations It is critical if climate, topography, recreational opportunities and cost of living were important Site Factors - Capital Site Selection for Saturn Manufacturers typically borrow $ to build factories Banks not always willing to lend depending on the area and industry LDC s banks in LDC s don t have the money to spend. MDC s are weary of lending in states with unstable political system, high debt or bad economic policies Situation factors to reduce transport costs 500 kilometers of south central Ohio Site factors 1000 acre site Within 50 km of 250,000 city Near 2 interstates Gentle slope, good soil Low taxes, access to utilities 11 metropolitan areas met this criteria Spring Hill, TN New Industrial Regions New industrial regions Asia China 2 key factors: largest supply of cheap labor and world s largest market for consumer products Latin America Mexico City and Sao Paolo, Brazil the largest cities with closest proximity to largest market Maquiladoras (next slide) Central Europe Poland, Czech Republic, Hungary industrial development due to two important site and situation factors: cheap labor and market proximity. New Industrial Regions Maquiladoras: A manufacturing facility, located in Mexican border towns in close proximity to the United States Factory imports materials and equipment for assembly or manufacturing final products exported back to the U.S. 1 million Mexican workers are employed NAFTA trade block made this possible taxes and custom fees are almost nonexistent 7

8 Changing Location Factors Outsourcing turning over much of the responsibility for production to outside suppliers New International Division of Labor Shifting of jobs from MDC s to LDC s resulting in new development in LDC s High transportation cost balanced by low wages Impacts: Unemployment Deindustrialization regional unemployment (retraining for jobs in tertiary/quaternary) Internal immigration (rust belt to sun belt) Companies are profit driven Consumption availability of less expensive goods Labor Cost per Hour - MDCs and LDCs Hourly wages can be under $1 in many LDCs & well over $10 in many MDCs. U.S. Clothing Production The percent of U.S. made clothing has declined sharply since the 1990s while imports have increased. 8