Roger Hayter (1997). The Dynamics of Industrial Location

Chapter 3The Geography of Manufacturing

LocationPresentation to Class

“Local and Regional Development”

Katharina HandlerReinhard Haller

09/04/2008

(1) Introduction• Industrialization and its geographic component: dynamic

process, involving tensions and ‘creative destruction’– Example: term “new industrial places” (Scott, 1988) label for

newly emerged industrial regions, e.g. Silicon Valley, Emiglia-Romagna (Northern Italy)

– ‘Older’ industrial regions were “new industrial places” once, too

• Tensions:– “Law of circular and cumulative causation” (Myrdal, 1957)

industrial development is locked into existing industrial regions (pools of skilled labour, infrastructure etc.)

– New regions: easier to implement new technologies, forms of organisation

• Relative advantages of established vs. new places determine process of industrialization– Since beginning of Industrial Revolution, even stronger today

(mobility of capital, inputs, labour)

(2) Historical view 1750–today

• Prior to Industrial Revolution:– Manufacturing evenly spread around world (i.e. following population

distribution)– ¾ of production in „Third World“ countries

• Until 1950s:– Share of Third World decreases– Causes: differential growth, replacement of Third World production

through imports from industrialized countries (e.g. India/cotton)

• Since 1960s / 5th Kontradieff wave (ICT)– Rising share of Third World

• Individual countries dominated world industry production in different phases– UK: until end of 19th century– US: dominant power in first half of 20th century– After World War II: rise of followers Germany, Japan reduction of

hegemony

(2a) Manufacturing Production 1750–1990, developed countries and Third World

World

Volume Share (%) Volume Share (%) Volume Share (%) Volume Share (%) Volume

1750 34 27% 2% 0% 93 73% 127

1860 143 63% 20% 7% 83 37% 226

1928 1,258 93% 11% 31% 98 7% 1,356

1953 2,870 93% 8% 45% 200 7% 3,070

1973 8,432 90% – – 927 10% 9,359

1990 12,090 83% 4% 32% 2,480 17% 14,570

Column "Volume": Index UK 1900 = 100

"Third World"Developed countries

Year

UK United States

Source: Bairoch (1982, 1993), cited in Hayter (1997)

(3a) Contemporary global patternsin production (1/2)

• Industrial production is very unevenly distributed in the world– Established countries (US, Europe, Japan, rest of OECD) dominate

• Question of distribution is sensitive to measures used:– Value added OECD domination even stronger– Employment somewhat less concentrated pattern (

• Trends in manufacturing production– Rise of Japan to 2nd industrial power after World War II– Loss of US hegemony (in association with rise of Japan)– Industrial decline of UK (1963: rank 2 1990: rank 5)

• Trends in employment– Industrialized countries: peak in 1980s/1990s– Exception: Japan

• Increasing share of Third World countries• NIC (newly industrialized countries)

(3b) Contemporary global patternsin production (2/2)

• Trends in employment– Industrialized countries: peak in 1980s/1990s– Exception: Japan

• Third World countries– Share of manufacturing production rises since 1950s– Some countries have experienced particularly high growth rates

newly industrialized countries (NIC)

(4) Contemporary global patternsof trade

• Strong link between production and trade– Specialized industries depend on trade (exports)– Patterns of trade inform about competitiveness in production– OECD dominates trade, too

• Imports are „mirror image“ of exports• Global trade dominated by most industrialized countries

– Third World countries recently increase share– Third World exports mainly low-value/“low-tech” (e.g. clothing)

• Some observations on trade:– “Continental” dimension– Importance of trade links depends on country size– Strong sectoral differences

• Trade as source of tensions:– Imports as threat/substitute to domestic production– Counter-measure: protectionist policies (e.g. US auto market and

Japanese car imports)

(4a) Global imports and exports, year 1990

Exports Imports

Rank Country $ billion Share (%) Rank Country $ billion Share (%)

1 Germany 421 12% 1 United States 517 14%

2 United States 394 11% 2 Germany 359 10%

3 Japan 288 8% 3 Japan 235 6%

4 France 217 6% 4 France 234 6%

5 United Kingdom 185 5% 5 United Kingdom 223 6%

… ……………………. … … … ……………………. … …

10 CIS (former USSR) 104 3% 9 CIS (former USSR) 121 3%

… ……………………. … … … ……………………. … …

15 China 61 2% 18 China 52 1%

… ……………………. … … … ……………………. … …

20 Austria 41 1% 19 Austria 49 1%

… ……………………. … … … ……………………. … …

Top 25 2,933 84% Top 25 3,027 84%

World 3,475 100% World 3,616 100%

Source: GATT (1992), cited in Hayter (1997)

(5) Regional dimension of industrialization

• Beginning of Industrial Revolution:– Industrialization close to coal fields (energy)– Industrial regions in this phase: Axial belt (UK), Ruhrgebiet

(GER), Manufacturing Belt (US)• 2nd Kontradieff wave (railway):

– Reinforced position of established industrial regions– Specialisation within industrial regions (consumer goods,

machinery, lower-value goods)• Until 1950s/1960s:

– No fundamental shift in regional patterns– Development seemed to confirm law of circular and cumulative

causation• 1970s/1980s:

– extensive and unexpected de-industrialization– emergence of “new industrial places”– even before, industrial growth stronger in new than established

places

(5a) Distribution of Industry in Europe, 1875

Source: Pollard (1981), cited in Hayter (1997)

(6) Example: Manufacturing Geography in the US

• Intra-metropolitan shift– Core cities lose employment to suburban regions, especially in the 1970‘s, e.g.

New York, Miami

• Non-metropolitan shift– Higher growth rates of manucturing employment in all rural areas from the 1960s

until early 1980‘s– More varied employment trajectories over the past decade, e.g faster growth of

rural manufacturing in the South and West

• Non-predictability (several developments not anticipated by regional theories)– (1) Factors depend on time and spatial scale; (2) variations in local/global

factors; (3) different action of different actors (firms, …)

• Trends elsewhere– Shift of manufacturing to rural areas: global trend with regional variations (UK:

more pronounced; Japan: less, production mainly around Tokio and Osaka )

(6a) Sunbelt, intra-urban and non-metropolitan shift in figures

• Sunbelt • Changes in manufacturing employment in the US:

(7) The Manufacturing Sector in Economic Development

• Since the Industrial Revolution the most powerful and wealthy countries are the most industrialized(OECD)

As they developed economically their manufacturing output increased steadily

Since 1973 share of manufacturing employment in OECD countries has fallen

• Three-sector stage model (Fisher/Clark):each sector dominates the economy during different stages of economic development

1. Agriculture

2. Manufacturing

3. Services

(8a) Manufacturing employment as a percentage of total employment

(8) The Importance of Manufacturing in the Post-Industrial Society (1/2)

• Interdepency between sectors Manufacturing continues to stimulate economic development by generating

(new) demands in various sectors, e.g. construction, transportation or business services industries

• Manufacturing itself is driven by and drives knowledge accumulation, leading to the creation of high income, intellectually demanding jobs

• Significance of manufacturing should also be measued in terms of value added and income and not only in employment

(9) The Importance of Manufacturing in the Post-Industrial Society (2/2)

• Decline in industrial employment in OECD countries is (partially) offset by increases in Third World/NIC countries

• Manufacturing job losses due to greater technological efficiency; neglect of manufacturing still not a viable option

• Policy makers still concerned about manufacturing, both in developed and developing countries

(10) National policies towards industrialization

• 2 major approaches to industrialization– Anglo-Saxon model: based on economic liberalism (Smith)– „Economic nationalism“ model (List)

• Main differences:– degree of dependencies among firms, sectors, etc. varies– state influence in industry

– attitude towards foreign direct investment (FDI) (economic nationalism: no effective technology transfer but stronger R&D base, domestic control over economy)

• Example: Sweden (economic nationalism) vs. Canada (liberalism)

(11) NICs

• NICs confirm link between industrialization and economic

development (e.g. Singapore, Hong Kong, South Korea, Taiwan)

– Strongly activist roles of governments– Large NICs (Taiwan, S.Korea) are strong and still growing export centers– Particularly Singapore and Hong Kong are now high-wage economies

and suppliers of expertise and investment

• Can others imitate NIC development?– Optimistic vs. pessimitic views (emphasis on dynamics vs. ‚immobility‘)

• Established core-periphery distinction may be too crude instead „global mosaic of regions“