9. Industrial and Economic Development Patterns and Processes
There are four parts to this chapter: Know the Concepts, Know the Math, Know the Theories and Know the Maps.
Sectors of the economy and country-scale levels of development are discussed in the section on concepts.
The development indicators used to measure economic volume and level of development are discussed in the math section.
Development theory and location theories are discussed in the theory section.
The locations and structures of some major industrial regions around the world will be shown in the maps section.
The economy can be divided into sectors.
Depending on what is being categorized, a sector of the economy can be different.
One way to group economic activity and employment is by the stage in the production process.
It is possible to group sectors by the types of products or services they create.
Agriculture, mining, energy, forestry, and fisheries are primary production.
The primary sector's raw materials are processed into secondary production.
Fabrication of components and assembly of finished goods are included in these activities and jobs.
All forms of manufacturing are reflected in secondary production.
Manufacturing is a type of industry, but not all industries are manufacturing.
Service industries can be included.
Transport, wholesaling, and retailing of finished goods to consumers are included in tertiary production.
Other types of services can be categorized as quaternary, such as finance or government.
The production includes wholesaling, finance, banking, insurance, real estate, advertising, and marketing.
These are called business services.
Quinary production includes retailing, tourism, entertainment, and communications, government, or semi-public services.
These are called consumer services.
The quaternary and quinary sectors are not part of tertiary production and are treated differently by the AP exam.
Each of these stages is included in the world's countries.
Depending on the country's level of development, one sector will be more prevalent than the others.
A large number of categories are created by dividing economic sectors by product or service type.
The cash value of what is produced in one sector is more important than the cash value of what is produced in other sectors.
This helps explain why certain products and services are emphasized in an economy.
Whether it's done by hand in the Third World or mechanized in the First World, it's still agriculture.
The combined cash value of what is produced is what is measured.
Despite the fact that most of the world's population still lives in rural areas, agriculture is the least valuable of the major product types.
People need food, but how they get it is different.
In less developed parts of the world, subsistence farming is very common, with agriculture supporting the farm family and local people.
Farmers in the Third World send crops around in search of buyers.
Farming is done on a commercial basis in the more developed countries.
The family farm is the most common type of agricultural unit here.
Commodity chain analysis shows the relationship between producers and consumers of a commodity.
Commodity chains include producers selling directly from the farm or through local farmers' markets, as well as supply networks selling to an international customer base.
Let's look at the chain of tea.
Tea production employs millions of people who live in poverty- stricken rural communities.
Many players are involved in the tea supply chain.
Tea leaves are either grown on large estates with their own processing factories or by thousands of small farmers who send their tea leaves to a local factory.
The tea goes to a broker who sells it to an international trader.
The consumer gets a box of tea bags after the international trader sells the tea to various tea companies.
Only a few multinational companies control the buying and retailing of tea in this long and detailed commodity chain.
International aid groups are concerned about the oversupply of tea and the fact that most of the profits are made at the retail end of tea's commodity chain.
Depending on the global commodity prices, mining and energy can be valuable.
In the summer of 2008, oil was traded for over $120 per barrel, only to fall below $50 per barrel by the end of the year.
With radical price changes, oil exporting economies like Saudi Arabia and Venezuela can rise and fall.
It's difficult for producers and consumers to deal with price fluctuations.
Now that metal prices are rising, copper-mining countries are doing well.
The US Mint's decision to switch to cheaper zinc cores caused a global crash in the price of copper.
Due to reduced supply, the price and value of timber have increased over the years.
In heavily regulated and protected natural resources, companies must use more technology and larger processing facilities to remain profitable and meet growing consumer demand, especially from large and growing newly industrialized markets like China and India.
Resources can be classified by their renewability.
Fossil fuel energy and minerals are notrenewable products.
The Earth cannot reproduce them once they are removed.
Some minerals can be recycled.
It's cheaper to recycle scrap metal for steel and aluminum than it is to mine new mineral ores.
It's possible to get a rebate if you turn in your soda cans and bottles.
If managed properly, energy sources that do not run on fossil fuels are generally renewable.
Alternative energy sources such as solar, wind, nuclear, tidal, and geothermal power are more expensive to harness than fossil fuels and are less common.
Despite this history, technological advances continue to bring down the cost of renewable energy to bring it closer to nonrenewable energy.
Alternative forms of energy can be used to shift energy usage away from fossil fuels.
Wind power, solar energy, and nuclear power are alternate energy sources that work with differing degrees of utility to power industries and generate electricity.
France and Spain rely on nuclear power and certain coastal regions of Spain have enough wind to power wind energy parks.
The Ivanpah Solar Electric Generating System is the largest solar power installation in the world.
Products from living resources are renewable.
Our ability to rely on a resource depends on sustainable use.
It's not possible to take fish from the sea at a higher rate than they can replace themselves, with or without the help of hatcheries.
Forest replanting is necessary for trees to be available.
The way trees are cut and the way fish are caught affect the survival of the environment.
The practice of using two-mile-long microfilament gill nets to catch fish is unsustainable.
The nets can easily tear and float free in the ocean, trapping and killing other sea life.
virgin forests are destroyed not only the trees, but also the delicate habitats of the many other species in the forest community.
A tree farm with one species of tree is not considered natural.
Most animals and plants found in natural forests are not seen on tree farms.
Factory-made products are far more valuable than those of agricultural and natural resource-based economies.
Farm products and natural resources have been processed into manufactured goods.
The higher the value applied to the finished product, the more complex the manufacturing is.
The utility of a product can affect its value.
There are different ways in which manufacturing can be divided.
The amount of time the product is going to be used determines the amount of production divided intodurable and non-durable goods.
Goods that are intended for use for more than a year are classified as durable goods.
Non-durables are those intended for less than a year.
A more lucrative form of production is durable goods.
A categorization can be made by product type.
The difference between services and manufactured goods is that services are intangible.
Services are the most valuable form of economic production.
Some services are more valuable than others.
One way to classify services is by their pay and benefits.
In low-benefit services, the labor force tends to be hourly employees who receive few if any additional benefits, like paid vacation or health insurance, not an issue in Canada or Europe where there is free public health care.
Hotel and food services, retail, customer services, contract agricultural labor, and construction are some of the low-benefit service jobs.
Health, dental, and vision insurance, vacation, sick days, and retirement reimbursements are some of the fringe benefits in high-benefit services.
The benefits are provided by other high-benefit service industries.
Business services, health care, government, and education are some of the high-benefit positions.
The most valuable areas of economic production worldwide are tertiary services.
When analyzing the overall economic productivity of First-World countries like the United States and Canada, it becomes clear that services are the majority of the countries' economic value and employment.
In recent history, the United States and Canada have deindustrialized, shifting away from manufacturing as the main source of economic production.
Roughly 80 percent of the economies' value is derived from services, 19 percent from manufacturing and resources, and 1 percent from agriculture.
The labor force percentages are similar, with 83 percent in services, 16 percent in manufacturing, and 1 percent in agriculture.
In the 1970s and 1980s when deindustrialization was widespread in Anglo-America and Western Europe, millions of factory workers lost their jobs and many old industrial cities suffered from the economic downturn.
The new service sector jobs paid less and had less benefits than factory jobs.
Manufacturing businesses had to focus on highly priced manufactured goods like vehicles, heavy equipment, and computing devices to keep profits and investment up and keep the remaining First-World manufacturing labor force paid and employed.
Chapter 8 discusses the effects of deindustrialization and the discussion on the Old Asian tigers begins.
There are cheaper off-shore locations to build factories.
The investment value of each sector is what determines deindustrialization.
Services are the most valuable investments out there, and investors in new businesses are looking to maximize their returns on investment.
The following thought experiment can be used to illustrate this.
If you could fill your classroom with corn, it would be worth a lot of money.
If you fill the room with coal, you could have thousands of dollars.
Imagine if there were three dump trucks filling the room instead of corn or coal.
The trucks would cost $270,000.
You can see that moving from natural resources to manufactured products adds a lot of value.
Imagine standing in the empty room with a folder in your hand.
There is a service product in this folder.
Inside that folder is a stock portfolio or a corporate insurance policy.
It could be a patent for a new drug therapy.
Imagine that it is worth $5 million.
Place the folders in the room.
The billions of dollars in this one room is why investors see services as the best investment in the United States and Canada, and it's why they are less interested in manufacturing and agriculture.
One way to better understand services is to think about how technology has affected economies in the past.
The development of the plow was the technical advancement that changed farming and increased the amount of land that could be cultivated.
Steel was the product that made all manufacturing possible.
Steel is too brittle and heavy to be used alone in locomotives, skyscrapers, and automobiles.
The computer makes all sectors of the service economy more efficient and capable of handling large numbers of consumers and data.
The impact of the microchip has made it possible for smaller handheld and wireless devices, as well as desktop computers.
Without computers and micro-devices, the services industries in the First World today would not exist, and the labor costs would make many of the services too expensive to afford.
In terms of economic development, we can categorize countries.
The following terms are used to acknowledge the different patterns of development in the world economy.
Some categories are better than others.
It's important to use terms that are appropriate.
Industrialized and service-based economies that have free markets, a high level of productivity value per person and a high quality of life are the First World.
In addition to the United States and Canada, there are many other countries, including the European Union countries, Norway, Switzerland, Israel, Australia, New Zealand, Japan, South Korea, Singapore, Taiwan, and Middle-Eastern oil states.
Some island nations like Trinidad and the Seychelles might be included in the first-world economies.
The productivity statistics are higher than the Third World, but not quite at First-World levels.
The term Second World has a different meaning than you might think.
Cuba and North Korea are the only two communist countries that are still in existence today.
These states have economies that are centrally planned.
The former communist states that are still restructuring their economy to free-market systems like the former Soviet Union and Eastern European states have joined the EU.
China and Vietnam are both newly industrialized countries that have adapted free-market reforms to their economies.
Third World countries with mainly agricultural and resource-based economies have low levels of per-person productivity and a low quality of life.
The underdeveloped states are found in Latin America, the Caribbean, Africa, and the Asian countries.
Some Third-World states have made an economic shift toward industrialization and urbanization, while others remain firmly in a rural, agricultural category.
The countries with the worst Third-World states are Haiti, and the countries with the best are the former USSR countries.
Some countries are more developed than others.
More developed countries and less developed countries are used to describe the economic differences between states.
First- and Second-World countries tend to fit in the LDC category, while Third, Fourth, and Fifth Worlds are not.
It is up to debate where the dividing line is between the two categories.
If you are asked to assign LDC status to a country based on gross national product per capita, use the following basic rule: $10,000 GNP per capita, above it are MDCs, below it.
The dollar value can be argued against on a number of technical points.
It is a simple dividing line that you can use to help you analyze the data that you are presented with on the exam.
Third-world states with economies that have made a distinct shift away from agriculture and toward manufacturing as the focus of economic development and production are called newly industrialized countries.
Industrialization can last decades in larger countries.
The construction and operation of factories can be done with the help of the infrastructure built by the NICs.
The two characteristics of NICs are related to your knowledge of population and migration.
NICs have rapid population growth and are usually on the border of stage two and stage three of the demographic transition model.
Brazil, Mexico, and India are some of the more advanced NICs.
China's One- Child Policy appears to be the most advanced in terms of demographic transition, but it should be economically categorized with the other NICs.
NICs experience rapid rural-to-urban migration as their economies industrialize and, as a result, urbanize.
These countries have started industrialization earlier than others.
Foreign aid, as well as foreign direct investment, can be used to develop infrastructure and factories.
New large-scale infrastructure projects can be funded with development loans.
Foreign development aid is not expected to be given back.
Foreign aid is rarely used to build private businesses.
Funding for schools, nutrition, health programs, and other government spending is provided by it.
Military aid is used to provide security for the state in order to assure foreign firms and investors doing business in the NIC.
Technology transfer is a less expensive source of foreign aid and can be used to increase business efficiency and capacity.
Foreign direct investment is money from international private investors or investment firms in other countries who are looking to make money.
The investors put money into a new business or a new factory.
When the business grows or the factory operates, investors are paid back plus a portion of the profits.
If the venture is unprofitable, investors may get less back, or in the case of business failure, they could not get anything at all.
When there is high demand for cheaply made products in the world, factory investment in NICs can have high returns on investment of 10 to 15 percent within a few years of factories opening.
International development loans from organizations like the World Bank can be used to help develop the necessary infrastructure to attract FDI.
Major infrastructure projects such as electric power systems, dams, water purification and waste treatment centers are often built with these loans.
The new services are expected to charge fees that will be used to repay the loans.
The inability of LDC economic systems to pay the full principal and interest on loans has led to many Third-World states default on loans.
Some development loans don't make a positive impact on the economy that was intended, or cause costly and significant environmental problems, but they still have to be paid back.
The 1990s saw a change in investment patterns that shifted the focus of Indian export development to manufacturing areas like cotton, textiles, and steel.
High-tech markets in software development and computing services began to open up in India due to its comparative advantages.
The English-language heritage of India's colonial past with Britain has two positive effects: access to the American technology markets via language and a large number of educated workers who speak the language.
It is common for highly educated workers in India to speak English.
The colonial legacy of British-style high schools and universities has led to many English speakers.
Several American tech firms have opened customer-service and technical-assistance phone centers in India.
Microsoft has partnerships with a number of Indian firms to write software for existing products that need upgrade.
The off-shoring of computing services from the United States to NICs has occurred in recent years.
The term comparative advantage means that a country has the ability or resources to produce a good or service at less cost and more efficiently than other states.
These goods and services are used for industrial production.
Industrial development in China and the newly earned wealth of the Chinese people have combined to create a large demand for energy in industry and transportation.
Coal is the main source of electrical production in the country.
Chinese citizens have more use for trucks and personal cars, which leads to high oil demand.
China invests a lot in oil exploration and production in Third World countries like Sudan, which is politically sensitive.
Pollution in the form of urban smog, acid rain, and an increasingly large portion of the world's greenhouse gas emissions are some of the problems facing the Chinese.
News commentators remarked that the skies over the city appeared clean during the 2008 Beijing Olympics.
Thousands of cars were restricted from use until after the games ended, and factories were closed for a week before that.
Levels of development that don't work well can be described with terms.
The North versus South analogy is used by some economists to describe the developed world and less developed countries.
It's problematic because of its location.
Australia and New Zealand are First-World countries that are located in the southern hemisphere.
Most of the world's less developed economies are located north of the equator.
It's a bad idea to refer to less developed economies or countries as "backward" or to their people in negative or racial terms.
This is a sign that you may not get additional points for discussion of examples if you score well on the test.
Don't insult or demean a population on the AP Human Geography Exam.
It's not a good idea.
The industrial economies of Asia have been aggressive in their economic growth rates and have the ability to compete for consumers.
Cold War realities in the region led to the building of a large manufacturing capacity.
The states were seen as free-market bastions against Communism.
The United States and Britain had no choice but to give foreign aid money to the region.
The funds were not paid back.
The rebuilding of war-torn Japan and South Korea depended on U.S. money.
Taiwan was desperate for American funding to aid in development after the Chinese Civil War.
Both the British and their colonial possessions suffered damage during World War II.
By the 1970s, the countries of the region were competing with the United States and the United Kingdom for global markets in manufactured goods.
In the American automobile and electronics markets, a focus on product quality in Japan and Korea created significant market share in the 1980s.
Firms in New York, London, and Tokyo, as well as companies in South Korea and Taiwan, funded manufacturing development in the New Asian tigers.
Foreign investors, as well as the newly industrialized countries, profited from these new locations.
The global demand for low-cost consumer products allowed for growth in these countries.
Cheap labor, low-cost land and resources, and few labor and environmental regulations were offered by the New Asian tigers.
These countries were the only profitable manufacturing locations for some low-end product lines.
China had the lowest costs and a large labor force.
The special economic zones helped fund China's free-market reform movement by attracting companies to open factories.
Growth in all of Asia stopped in 1997.
A credit crisis was caused by a banking crash in South Korea.
This is sometimes referred to as a "credit crunch" and results from banks and investors holding back on industrial loans and investments.
Money to develop new factories and infrastructure in the New Asian Tigers dried up.
The 2008 credit crisis in the United States slowed investment and development in the region.
The 1997 Asian economic crisis triggered deindustrialization in the Old Asian Tigers.
Many large firms, like Japan's Toyota and the KoreanHyundai conglomerate, had employed extra workers and their adult children under an old, traditional benefits system.
Corporations in Japan and South Korea propped up their partner companies with money.
The whole system had to change.
Hundreds of thousands of workers were laid off.
Several unprofitable companies shut down because they couldn't get loans from banks.
The Old Asian Tigers are similar to the Western First-World economies of the 1970s and 1980s in that they focus much of their new investment on service sectors and only in the most valuable and high-priced forms of manufacturing such as cars, electronics, and medical devices.
The Industrial Revolution has had the greatest impact on human development.
The Industrial Revolution was not a sudden change but a gradual advancement of technology that had been occurring for centuries.
The way that people lived was changed by industrialization.
Industrialization began in Great Britain in the second half of the 18th century.
There are a variety of factors that may have helped put Britain at the forefront of technological development, from its relative political and economic stability to the presence of existing manufacturing industries that would eventually become mechanized.
The shift in the size and distribution of the population was one of the factors that contributed to Britain's shift to an industrialized society.
Thanks to improved diet and living conditions, the population of Great Britain nearly doubled during the 18th century, creating an expanded pool of potential laborers as well as a fresh base of consumers.
Many small-scale farmers were being forced from the rural land they worked into urban areas, where they sought employment in factories.
British industry was able to quickly mechanize because of the availability of coal and iron Ore. Coal became a widely used source of power and was used to smelt iron, which was used to create larger, more productive machines.
The railroad is one of the most important inventions of the Industrial Revolution.
With the advent of the railroad, Britain had the means to efficiently move people and goods around the country, as well as a robust new employment sector centered around building the extensive rail infrastructure and providing transportation services.
The impacts of industrialization have been felt for a long time.
The Industrial Revolution spread from Britain to surrounding European nations and to the United States by the mid-19th century, causing major shifts in the size and distribution of their populations.
The Second Agricultural Revolution was spawned by the technological advancement in manufacturing.
The mechanization and scientific developments that occurred in agriculture boosted food production, which in turn allowed populations to grow and death rates to fall partly due to improved diet.
There was a push toward urbanization with industrialization.
The use of new mechanical devices in agriculture reduced the need for farm labor, just as the proliferation of factories in centralized areas called for a larger workforce in cities.
Urban populations in Britain and other industrializing nations outpaced rural areas for the first time.
In many cases, the rapid growth in these cities meant that they were overcrowded and unsanitary, and mortality rates for urban residents were higher than those in rural areas.
Living conditions would improve as infrastructure, services, and labor and environmental regulations caught up with the population boom.
Major shifts in family and class structures were caused by the Industrial Revolution.
Families in agricultural societies work together to manage farms and children are a critical source of labor.
Industrialization simply meant that children were sent to work in factories instead of on the family farm.
Women and children worked for lower pay and in worse environments than the men did.
After it was discovered that children were being beaten in the factories, the British government passed legislation limiting the number of hours that children were allowed to work.
As a result of the reduction in child labor, children contributed less to the family income and became an economic burden.
Birth rates in urban industrial areas declined without the need for families to have multiple children.
The working-class life in the Industrial Revolution was very bleak.
It was true for the urban working poor, who faced terrible living and working conditions and low wages, but also for those who had become economically displaced when their traditional professions were mechanized, such as weavers and farm laborers.
Workers began to organize into cooperative societies and trade unions, which provided benefits and services to their members, and began to advocate for higher wages and better working conditions.
For the first time, the time and money to enjoy entertainment such as dance halls and sports leagues was available for workers, as the standard of living for workers improved over time.
The middle class of professionals in the 19th century included merchants, engineers, factory owners, doctors, and lawyers.
The standard of living was more luxurious for these individuals who were wealthy.
Middle class families enjoy new innovations such as indoor plumbing and heat.
From the workplace, the home became a haven.
There was a marked shift in gender roles as a result of this economic shift.
Since middle-class families had the financial security to survive on a single income, women were discouraged from joining the workforce and instead were expected to focus on raising children and maintaining a comfortable home.
Women were largely excluded from higher education and professional opportunities because the middle class did not have enough money to send children to school.
Middle-class women were expected to know more about home economics and domesticity.
The countries that followed Great Britain's path toward industrialization had similar results: technological innovation, urbanization, and an improvement in the standard of living.
Mechanization helped turn these countries into economic powerhouses.
Not all parts of the world had the same benefits.
The Industrial Revolution was limited in its scope and there are countries such as Mexico and Malaysia that are only recently industrialized.
The living standards in these places are similar to those in Great Britain in the early 1800s.
The productivity boom in European countries left them hungry for both raw materials and new markets for their finished goods.
They want to go to Africa and Asia.
Although European nations had colonized other parts of the world for centuries, the speed and scope of this "new imperialism" was unprecedented.
The need for resources was the most important factor in Europe's desire for expansion.
Cotton imports from other parts of the world were required by the British textile industry to meet its production capabilities.
This was one of the main reasons for Britain's expansion into India and Egypt.
Precious metals, diamonds, and palm oil were found in Africa.
It was more difficult to get economic value from these areas than it was to get wealth from them.
Industrialization made it easier for European nations to conquer new parts of the world.
The development of weaponry that no unindustrialized country could compete with allowed Europeans greater mobility and faster communication.
Europeans were able to colonize and control vast areas of Africa and Asia thanks to innovations in medicine and vaccines.
The benefits of colonialism include improved infrastructure, educational opportunities, and standards of living.
The results of imperialism were less positive, as they were stripped of their natural resources and thrown into political turmoil.
Economic indicators can be used to help understand the variable levels of development.
There are gaps in development, technology, and poor standards of living that can be seen in the figures.
GDP is the dollar value of all goods and services produced in a year.
The total volume of a country's economy is measured.
GDP for the most recent three-month quarter of the year grew by 3.5 percent, which is sometimes compared to the same quarter in the previous.
Gross national income is the dollar value of all goods and services produced in a country, plus the dollar value of exports and imports in the same year.
Economic volume is also measured.
When imported goods are purchased from abroad, the national wealth is lost.
Many economists think that GNI is a better measure of economic volume than GDP.
In most countries, there is a foreign trade balance that is either positive or negative.
There is a trade surplus in countries where the export value is higher than the import value.
There is a trade deficit in countries where the import value is greater than the export value.
The United States had a large trade deficit in 2012 because of oil.
The value of American exports to other parts of the world is wiped out by the import of a large amount of oil that is needed to fuel the U.S. economy and car culture.
The per capita average is used to compare the level of development.
Latin says per capita means for every person.
GNI per capita is the estimated income of a person converted to U.S. dollars at currency exchange rates.
GDP per capita is a modified form.
For comparison purposes, this data is converted to U.S. dollars.
These numbers are not indicators of personal income or average salary for each worker.
They are a measure of the country's wealth.
A relative standard of living is measured by the services provided for the population.
Economists have refined these comparative indicators as indicators of income and purchasing power.
These indicators do not have simple definitions.
Gross national income purchasing power parity is an estimate that takes into account differences in prices between countries.
Gross national income per capita can make a First-World country appear more prosperous than other states and can make larger Third-World countries appear less prosperous, but it doesn't factor in the cost of living in each country.
A loaf of bread is the same price in all countries if the purchasing power parity correction is used.
This example shows the difference between the two indicators.
A loaf of bread in the United States costs less than a loaf in China.
The GNI per capita in China is $5,740, but this does not represent the true value of the money.
The same ratio as the bread example is used to calculate China's GNIPPP, which shows the estimated value of an individual's purchasing power.
The Human Development Index was designed by the United Nations to measure the level of development of states based on a number of social indicators.
The GDP per capita, adult literacy rate, average level of education, and total life expectancy are combined to calculate an index score.
The goal is to provide a more balanced measure of development and show some of the factors that show the negative impact of poverty on economic potential in Third-World countries.
There are different major indicators for nine countries.
Pick at least one of the following.
On a scale of 0 to 100, the Gini coefficient shows the level of income disparity between the country's richest and poorest population groups.
Higher numbers show a wide gap between the rich and poor and suggest major issues with poverty and the distribution of wealth in the country.
There is a large middle-class population where the nation's wealth is more distributed.
TheGDI takes the same indicators used to calculate HDI but replaces GDP per capita with income.
The data between men and women is compared using a formula.
Women's roles are higher in society if the score is close to 1.00.
The closer the score is to zero, the less rights women have in the country.
It's an effective indicator of social development to compare gender equality.
You can use the demographic transition model from Chapter 4 to help remember the path of development that countries generally follow.
The economy directly impacts the patterns of birth rates, death rates, and population, and each of the stages represents a type of economic context.
The model is the same as before.
Another approach to understanding the development process was developed in the 1950s by theorist Walt Rostow, who later became national security adviser to President Lyndon Johnson.
The five stages of growth were between agricultural and service-based economies.
Each country had at least some form of comparative advantage that could be utilized in international trade and thus fund the country's economic development over time, according to one of the assumptions made by Rostow.
The economy is focused on agriculture and fishing.
The country's limited wealth is spent on things that don't promote economic development.
Technical knowledge is low.
The country's leadership must invest the country's wealth in infrastructure such as roads, ports, and school systems that promote economic development and trade relations with other nations.
The economy is stimulated by more technical knowledge.
The economy starts to focus on a limited number of industrial exports.
Most of the country still participates in traditional agriculture, but the labor force begins to shift to factory work.
Business management and industrial production have technical experience.
Drive to maturity is a technical advancement that diffuses throughout the country.
Industrial production is growing rapidly in many sectors of the economy.
Fewer people are engaged in traditional activities like agriculture as workers become skilled and educated.
An industrial trade economy develops in which highly specialized production such as vehicles, energy, and consumer products dominate the economy.
There are high levels of technical knowledge.
A small labor force is employed in agriculture.
The historical development patterns of the United States and other industrialized countries are used in the model.
Although the model provides a framework for the economic development of nations, not all countries have the capacity to use potential comparative advantages for international trade.
Many of the valuable natural resources in the Third World were taken over by the colonial powers.
When these colonies gained independence, they had limited or zero access to the wealth that had been taken from their countries during the colonial era.
Many of the resources within their borders were technically owned by multinational corporations.
Government corruption and capital flight are not accounted for in the dependency theory.
He assumed that all countries could progress smoothly through the stages if they focused on trade and technology development.
The world economy tends to leave many countries far behind, as the large sums of international investment needed to develop an industrial economy tend to be focused only on the most capable and stable newly industrialized countries.
Dependency theory states that most LDCs are highly dependent on foreign-owned factories, foreign direct investment, and technology from MDCs to provide employment opportunities and infrastructure.
Third-World countries are stuck in a cycle of dependency on First-World loans to pay for economic development needs.
In 1950, these concerns were raised by an economist in Argentina.
The dependency of Third-World economies on First-World loans and investments to pay for the building of new industries and infrastructure was detailed in the Prebisch thesis.
Money made by LDCs from the sale of manufactured goods and natural resources is used to pay off loans and investments and to buy manufactured products from the First World.
LDCs are left with little money to show for their productivity, while the MDCs are richer.
Third-world countries don't have a lot of funds in their banking systems to invest in their own businesses.
Their only option is to seek First-World funding to keep people working and expand productivity.
There is a claim about the dominant role of First World-based corporations and investors in a postcolonial exploitation of the Third World in which LDCs have economically and politically subordinated populations.
Third-World economies are also subject to the level of demand for LDC-made products and the overall global economic climate.
If demand and investment decline, LDCs will suffer job layoffs and international loan payments will be unable to be made.
If an LDC's trade economy is solely based on the export of one or two agricultural or mineral resources, the risk is magnified.
Market stagnation in an LDC product can be catastrophic to its economy and harm the quality of life of its citizens.
Figuring out how to break the cycle of dependency has been suggested by theorists and politicians as dependency theory has been expanded.
Keeping the money made from industrial production in the country to be used later for local development projects was a focus of many of these efforts.
The Internalization of economic capital requires companies to deposit profits from factories in LDC banks.
Capital flight occurs when factory earnings are sent to banks in the First World where they can't be used for local development in the LDC.
Instead of buying simple First World-made consumer products like laundry soap, this approach calls for building laundry soap factories and producing it within the LDC.
The manufacturing profits can be reinvested in local banks.
Foreign corporate ownership of oil fields and mines robs the national government and local companies of potential earnings.
Money made from the production of publicly owned resources can be used for local economic development if these resources are nationalized.
Foreign companies are given permission to build new factories in China, Vietnam, and a few other countries under profit-sharing agreements.
The foreign companies agree to share a portion of the factory's profits with the government, which is used for further internal investment by government-owned companies.
Some countries use their limited public funds to invest in high-tech equipment and worker training for local manufacturers.
These companies can compete for contracts to produce goods for First-World corporations.
Locally owned companies get the profits from the factory.
The purpose of these programs is to accumulate a pool of national wealth that is recycled into the country's economy to help local businesses and improve the overall quality of life through funding for public services and utility infrastructure.
Doing this without financial help from the First World is a positive sign.
A number of factors can give a country an advantage in trade or development.
By attracting international tourists, countries can get large inputs of cash from foreign countries.
The countries must provide a large, low-benefit service workforce in order to be perceived as safe from crime, warfare, and terrorism.
To attract tourists, the country must have a certain degree of historical value, natural beauty, and sport recreation locations.
Beach resorts, golf, skiing, wine regions, historical districts, and cultural attractions can all draw tourists.
Ecotourism has become very popular over the past 30 years.
The rainforest, marine reef, and polar habitats have become destinations for tourists.
These were once the travel sites of hunters, fishermen, and explorers, but today there are well-established and accessible ecotourism resorts.
The countries that used to have little international tourist draw are now valuable ecotourism destinations.
A common way to improve international trade is through regional free-trade agreements.
The European Union and the North American Free Trade Agreement have made regional economies of multiple states stronger and have opened the doors of development for less-developed neighbors.
In the case of the EU, new member states that were once part of the Soviet Union or former communist states in Eastern Europe have been able to develop their free-market economies more quickly.
The United States and Canada have a free-trade relationship with Mexico.
The full removal of all tariffs between the three members of the North American Free Trade Agreement went into effect in 2001.
Mexico has become a low-cost manufacturing location for the US and Canada.
Several hundred firms were allowed to build facilities and contract with local firms in Mexico to produce goods after the signing of the North American Free Trade Agreement.
The United States-Mexico-Canada Agreement will replace the North American Free Trade Agreement in 2020.
The manufacturing of everything from boots to light pickup trucks was moved to northern Mexican border communities.
Foreign-run factories operating under favorable tariffs such as the North American Free Trade Agreement have become a major economic force in northern cities.
Population and manufacturing output have increased in these cities.
Better-paying jobs and increased services have improved the quality of life for many residents.
Many employed people don't have permanent housing or access to services such as clean water because of the rapid growth.
There are a number of health problems for the residents of these factory cities.
The Mexican government's push toward stricter environmental policies has helped improve conditions.
The old Soviet-style command economy in which all economic production was managed and planned by the central government was reformed in the 1980s by communist states like China and Vietnam.
Farmers can sell surplus agricultural goods in local and regional markets for profit.
The reforms allowed people to open privately owned businesses in cities.
The ability to purchase private real estate and the free movement of labor have been introduced.
Allowing foreign companies to open factories and retail services in these countries is the most significant reform.
Foreign firms were allowed to build facilities in coastal port cities when China established the first special economic zones in 1980.
A port location where foreign firms are given special tax privileges to incentivize trade is a type of export processing zone.
By the late 1990s, all of the coastal provinces in China and Vietnam had been opened to foreign manufacturing firms.
Low-cost labor, land, and utilities provided by provincial governments were in high demand by multinational corporations who wanted to maximize factory profits, which are shared with the Chinese and Vietnamese governments.
Since the introduction of the reforms, economic productivity has tripled in China and Vietnam.
Due to its large size, China has been able to integrate itself into the global economy through their state-owned corporations that have purchased Western brand-name product lines.
The United States sells many of its treasury bonds to China, and Chinese state-owned banking and finance firms play a significant role in trade integration with export markets.
The United States has become dependent on China for low-priced manufactured goods because of free-market reforms that have enabled China to become an important player in the global economy.
A world systems theory was developed in the 70s that sought to explain the development of the world.
The collapse of the feudal system was the cause of capitalism.
The modern nation-state was created in Europe as a way of protecting capitalist interests, which were based on the same highly unequal division of labor as feudalism.
Europeans were able to take control of the world economy and spread it around the world.
There is one world economy that has a distorted balance of power among its various markets.
In the world, core nations are the most influential.
Their populations are mostly bourgeois or working class, and they have strong, centralized governments.
Their economies are highly industrialized with emphasis on manufacturing.
The rest of the world is dominated by core nations.
They import goods from other countries, taking advantage of cheap labor and raw materials.
The least developed nations are periphery.
Weak governments and institutions are what they have.
Large numbers of poor and uneducated citizens make social inequality high.
Their economies are usually dependent on one or two forms of economic activity.
More often than not, that activity is related to agriculture or natural resources for export.
Core countries influence and exploit periphery nations.
In terms of influence and development, semi-periphery nations fall in between the core and the periphery.
They are not dominant in the world system because of their tendency to move toward industrialization.
It is possible that semi-periphery countries have strong protectionist policies as they try to keep themselves out of the core.
They import goods from the core and send them to the periphery.
The semi-periphery nations can play both peripheral and core roles because of their middle ground.
They're able to assert some dominance over the periphery, but they can also be influenced and exploited by the core.
dependency theory is heavily influenced by world systems theory, but the two differ on the point of the First World's exploitation of the Third World.
While recognizing the potential of core countries to exploit other nations, world systems theory focused more on a division of labor in the world economy.
According to Wallerstein, capitalism is capable of exploiting workers in all areas.
Economic and geographic studies have focused on the location of factories.
The selection of optimal factory locations has a lot to do with the minimization of land, labor, resource, and transportation costs.
By their nature, manufactured goods have a variable-cost framework that affects the location of factory sites.
Manufacturing involves a large amount of input that is reduced to a final product that weighs less or has less volume than the input.
The inputs that lose the most bulk in the manufacturing process are usually located near these factories.
bulk-gaining manufacturing involves a number of inputs that are combined to make a final product that gains bulk, volume, or weight in the production process.
The cost of transporting the finished product is more than the cost of transporting the inputs, which is why these factories are closer to consumers.
Weber's Theory is a popular topic for multiple-choice and free-response questions on the AP Human Geography Exam.
In weight-losing processing in which there is only one major input, such as seafood packaging, lumber mills, and metal Ore-processing or smelting, the industrial location is very close to the resource location.
When there are a number of major inputs to the production process, location must be balanced.
The inputs that lose the most bulk in the production process are more expensive to transport than the inputs that represent a more significant portion of the finished product.
The location of steel factories is dependent on four inputs.
Iron Ore has the lowest loss of finished product volume.
The steel is given comparative strength and lightness by using limestone.
Limestone makes up a small portion of the final product, and much of its bulk is lost in the manufacturing process.
Coal, refined into coke to burn hotter, is completely lost during production, as is water, which is required in large amounts to cool steel products so that they retain their form.
Condensers recycle steam into liquid.
Iron Ore is most distance elastic, meaning it can be transported over short or long distances to the steel plant, whereas coal, limestone, and water need to be in close proximity, as shown in the following table and example locations.
Steel production around Pittsburgh consolidated in the 1870s using small local sources of iron.
The iron fields near Lake Superior became the main supplier of iron Ore to large firms like United States Steel.
The steel industry expanded to port locations on the Great Lakes.
In the case of U.S. Steel's plant in Gary, just outside Chicago, they were able to cut transportation costs because they didn't have to transport Lake Erie to Pittsburgh by rail.
Andrew Carnegie named the new city after his company's vice president in 1906.
Today's new steel plants tend to be smaller operations that focus on specialized steel products.
Steel mini-mills run by companies such as ArcelorMittal have a number of building materials, vehicle parts, and high-tech steel.
Some of the mills are located in old steel-making cities, but others have been built in the South where land and labor are cheaper.
The assembly of several inputs into a finished product is what weight-gaining manufacturing involves.
The location of the factory should be close to consumers in order to minimize delivery costs.
bread is a basic example.
The flour from wheat grown in the Great Plains is combined with water, sugar, and yeast to make dough that rises from the yeast's CO 2 production.
The loaf of bread has gained more volume after baking is complete.
The limited shelf life of bread affects the industrial location.
Products like bread and milk are usually manufactured in plants that serve the local regions.
Fresh products are kept in stores longer by using a network approach.
bakeries are an example of ubiquitous industries as they are found in all cities.
When shelf life is not an issue for weight-gaining manufacturing, production tends to be centralized within larger consumer market areas.
In large centralized facilities, frozen foods are made and then shipped to stores and grocery warehouses across the country.
Jackson, Ohio, a small town in the eastern half of the United States, was chosen as the location of the first plant for Luigino's Inc.
Within 24 hours, 60 percent of Jackson's consumers could be reached in the United States and Canada.
Parts are assembled into components that are joined together to create larger finished products.
The assembly of a final product requires a large supply chain network.
The size of supply chain regions has increased as corporate profit requirements have increased.
In 1903, when Henry Ford opened his River Rouge plant in Detroit, every part of the car was made in one large factory complex, with the exception of tires, which were a highly specialized product made for Ford.
Fordism relied on a single company owning all aspects of production.
In the Post-Fordist era, car companies changed and became dependent on large networks of regional supply chains that stretch throughout the Midwestern United States, with some specialized electronic parts coming from overseas suppliers.
Car companies rely on several other companies to provide vehicle components such as brakes, electronics, glass, and specialized plastic.
The quality of supplier products is still monitored by car companies.
Car companies use just-in-time production methods, in which suppliers send parts to assembly plants on an as-needed basis, to minimize inventory costs and keep factories efficient.
These practices save space and money by not requiring warehouse and handling facilities for parts.
Sometimes even annually, car models change design more frequently.
If you get too many parts for a model that is out of style, they will go unused and be a wasted production cost.
Threshold and range are two factors that determine the market area of a city.
The minimum number of people required to support a business is described in the section on central place theory.
The maximum distance people are willing to travel to get access to a service is the range.
The precise location of retail services is dependent on the relationship between variable cost and revenue.
Business owners look for places where they can make more money.
The concept of the spatial margin of profitability is used to define areas of maximization.
Revenues would exceed costs in the diagram.
The optimal location for a theoretical retail location is the spot where revenues are furthest above costs.
Due to the availability of commercial real estate, not all businesses will be able to locate exactly on this point.
Business owners want to be as close to this point as possible to assure profitability.
Consumers' ability to access the optimal location have to be considered before a location choice can be made.
No one will be able to get to your bakery if it is down a dirt road that is prone to floods.
Since the 1990s, the location of businesses in the service economy has become a new area of research.
The recent work has focused on the location of high-benefit services.
The term footloose has been used to describe businesses that are not tied to resources, transportation, or consumer locations.
In high-benefit services, a number of different activities are technically footloose and can be found anywhere executives want.
There is no such thing as a completely footloose industry.
There are a number of factors to consider when choosing a location for a service-industry office.
Corporate executives are interested in a location for a number of different reasons.
There is a creative class of high-benefit service-industry firms and workers.
Creative firms and laborers have become the focus of local economic development programs.
The United States and Canada are competing to get these employers.
Ireland, Australia, and New Zealand are English-language states that they have to compete with.
Austin, Seattle, Portland, Toronto, Memphis, Atlanta, Boston, and San Francisco have all gained employment due to their local qualities.
Dublin, Glasgow, Auckland, Sydney, Melbourne, Brisbane, and Cape Town are some of the cities that are trying to attract top service firms and young, cool, well-educated workers.
The cities are in the "cool" category.
There are drawbacks to gentrification and rapid economic growth.
Firms with similar products locate together in clusters.
The firms enjoy the advantages of a shared skilled-labor pool, specialized suppliers, and service providers and can share technical knowledge on production or marketing.
When one firm finds a cost-minimizing advantage of a location, other firms will move to that location to achieve the same savings.
When a location is known for a particular product, related suppliers and competing firms will attempt to locate there as well.
A location has many firms and services.
Some firms may seek alternate locations to expand or move operations completely if local resources are fully utilized or over utilized.
In the early 1980s, Japanese firms looked to open factories in the United States to reduce transportation costs of moving new cars across the Pacific.
The labor force in Detroit was too expensive for Honda to land there.
Instead, they traveled south to rural Marysville, Ohio.
It is still close to many parts suppliers in Ohio and has proven to be an effective and inexpensive location.
As they moved south from Michigan and Ohio, Japanese firms found further reduced-cost advantages.
The northern unionized-labor states had higher payroll and benefit costs.
The south was a right-to-work state where regulation did not favor unions and did not affect pay benefit costs.
The Nissan Motor Company opened a plant in Tennessee in 1982.
The Toyota assembly facility in Georgetown, Kentucky was opened in 1986.
There are auto parts supply firms located in the surrounding region.
This expanded the American auto parts manufacturing region from Ontario to the Gulf Coast states of Mississippi and Alabama.
In the 1990s, European automakers looked for similar locations to build affordable luxury-brand cars.
In 1996, BMW opened its 3-series production plant in South Carolina.
In the late 1980s, tire supplier Michelin moved its headquarters to the area.
The Mercedes E-class cars began production in 1997.
Maps can be found in the free-response section of the exam.
When producers expand their operations, they incur lower per-unit costs in the process.
When a company increases output of a single product, it can save money by purchasing supplies in bulk, managing more workers with the same staff, financing larger sums of credit, and negotiating discounts for per-mile transportation costs.
Fixed service costs are not increased when more goods are sold.
Companies that achieve large size receive a return on their investment as they reap the benefits of expanded production.
Walmart has used economies of scale for decades to offer low prices and has become a retail outlet we know today.
In economies of scope, companies benefit from the increase in the number of different products under a larger brand name.
Several product lines can be marketed by a single sales staff and produced in the same factories.
When a product is replaced by a new model or alternative device, larger economies of scope are useful.
The economies of scope include Apple's products.
Women work more hours per day than men in every country except Australia and Anglo America.
In both developed and developing countries, the number of women in the paid workforce is growing.
Their role in society is changing because of opportunities for education, child care and maternity benefits.
Equity in pay and employment opportunities is still not achieved by women in many places.
Some programs are trying to close the gap.
Improved access to microcredit, such as the Grameen Bank microcredit loans in Bangladesh, give women the chance to start their own small businesses and provide for their families.
The Grameen Bank loans have spread throughout the world and are responsible for helping people out of poverty.
The Millennium Development Goals were created by the United Nations in 2000 to eradicate poverty by 2015.
The eight development goals seek to promote gender equality and empower women through provision of better women's health care, hunger eradication, basic universal education, and an end to poverty.
Neil M. Coe, Philip F. Kelly, and Henry W. C. Yeung wrote an introduction to economic geography.
Primary, secondary, manufacturing, tertiary, and quaternary are the five sectors of production in the world economy.
The United States and Canada are two First-World countries that have deindustrialized.
GDP is the value of all the goods and services a country produces in a year, plus the difference in the value of exports and imports.
The Stages of Growth tracks a country's development through five stages.
In the era of globalization, international free-trade agreements like the EU have become very important.
Weber's Theory of Industrial location states that weight-losing manufacturing should be located near its bulky inputs, while weight-gaining manufacturing should be located nearer to consumers.
There are answers and explanations at the end of this chapter.
Only quarternary production can focus on finance, banking, and other business services.
Primary production is concerned with industries like mining and energy, and secondary production is concerned with manufacturing.
quinary production is concerned with consumer services.
The most developed countries have political and economic power over other countries.
Primary economic activities in peripheral countries include agriculture and natural resource exploitation.
The reverse is true.
Eliminate as many incorrect choices as possible if you're not sure of the answer.
Japan, Taiwan, South Korea, and Singapore are some of the countries that received foreign aid during the 1950s-1970s.
(A), (B), (D), and (E) can be eliminated.
China is an example of a New Asian Tiger.
Everything that follows the production of goods is included in tertiary production.
The goods can be moved, sold to wholesalers, or sold directly to consumers.
Primary and secondary production are related.
A commodity chain is a process used by firms to gather resources, transform them into goods and then distribute them to consumers.
A commodity is then exchanged on the world market after a series of links connecting the many places of production and distribution.
The answer is correct.
All second-world countries are communist economies.
Cuba and North Korea are the only two left after the fall of the Soviet Union.
More developed countries and less developed countries are preferred by many economists.
The choice is correct.
His theory of how civilizations grow was only looked at first-world countries.
The theory has a huge blind spot regarding Third-World countries, including their colonial legacy, capital flight, and different histories.
Any business that can move quickly is considered a part of the footloose industry.
The executives can choose the location of their companies based on the best fit for their culture.
Many cities bend over backwards to get these corporations because of the money they bring to the local economy.
The answer is correct.
Any goods, whether durable or non-durable, are part of the manufacturing economy.
Choices A and B are both present in service economies.
A systems administrator for a major corporation provides a service for a salary and benefits while the drivers and graphic designers are paid hourly.
GDP per capita is the sum of goods and services divided by the population.
The sum of goods and services plus the difference between exports and imports is known as the gross national income.
Investing corporate money in technology and worker training is an acknowledgement of the importance of the local population that their business depends upon.
It is up to interpretation, but it should happen more.