Deindustrialization in the U.S. and its Global Impact

Mr. KellerDanbury HS – Danbury, CTkellek@danbury.k12.ct.us

Primary activities

The extraction of natural resources:

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Secondary activities Processing and manufacturing of materials

U.S. Manufacturing Belt Impact of Globalization

Tertiary activities Sales, exchange, trading goods and services

U.S. stock exchange

Call Center in Indiahttp://www.telegraph.co.uk/telegraph/multimedia/archive/00627/news-graphics-2006-_627785a.jpg

Off-shore financial centers

Quaternary activities Processing knowledge and information

New York Public Library

Quinary activities

Economic activity involving the highest levels of decision making in a society or economy.

Silicon Valley Silicon Valley, California Bay AreaSilicon Valley, California

Place in Economic Geography

• Where firms come from is important.

• As firms expand …– they stitch together places – they create global interdependency

Principles of location

• Raw materials• Labor supply and cost• Processing costs• Markets• Transport costs• Government policies• Human behavior

Need to address with students:Weber’s Least Cost Locational Theory of Industrial Location

Geography of the Steel Industry

U.S.

U.K.

Industrialization in Europe

Resource dependency(“Banana Republic,” “Oil state,” etc.)

Global economic processes

• Spread and deepening of investment, trade and production flows

• Agglomeration of trade and production sites– (e.g., free trade zones, global cities)

Agglomeration (clustering of an industry)

• Availability of ancillary (service) industries

• Infrastructure (fixed social capital)

• “Forward linkages” to markets

Agglomeration diseconomies

• Traffic, pollution, full waste dumps

• High rent and taxes

• Labor shortages and turmoil

• The rise of the manufacturing belt:

• What was the region’s new label in the 1980s? Rust Belt!– Explaining the decline of industries…..

http://www.harpercollege.edu/mhealy/geogres/maps/nagif/namanuf.gif

In Crisis, Wheels Coming Off for Detroit AutomakersOct 9, 2008 Washington Post

The situation in Detroit looked bleak before the current economic crisis; now, it looks apocalyptic. GM’s stock fell 31% yesterday. Adjust for inflation, and the company is worth far less now than it was after the 1929 crash. “It’s devastating,” said Michigan Gov. Jennifer Granholm. “Companies that are already slammed by globalization are being slammed by the credit crunch.” Automakers are among the first hurt by any economic downturn, since people cut big purchases first. Ford and Chrysler have each seen sales drop more than 30% over the past year. That could mean even more pain for workers, and Michigan has already lost almost 400,000 manufacturing jobs since 2000. “We're in uncharted waters,” said one GM analyst. “Right now there's so much uncertainty, plans are being revised constantly.”

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“American” cars?

JapaneseNissan plantIn Tennessee

Jaguar made in UK by Ford

Geo Metro made in Japan, marketed by GM

U.S. and Japanese Owned Motor Vehicle Parts Plants*Think about how technology has changed the way we look at

this!

New International Division of Labor

• Specialization in particular kinds of economic activities …– of different people – of different regions

• Geographic division of labor– “Spatial justice”How fairly are the world’s resources distributed

geographically?APHG exam question - 2007

Deindustrialization

in the Core

• Relative decline in industrial employment– Automation and “runaway shops”

• Reinvestment in higher profit areas– Sunbelt states (non-union)– Semi-periphery and Periphery

Foreign Competition

While U.S. companiescontinued to make these through the 1970s…..

The Japanese wereSelling us these!

Economic StructureUS economy by industry (x1000)

1970 1980 1990 1998Total Employed 78678 99303 118793 131463

Agriculture 3463 4% 3364 3% 3223 3% 3378 3%Mining 516 1% 979 1% 724 1% 620 0%Construction 4818 6% 6215 6% 7764 7% 8518 6%Manufacturing 20746 26% 21942 22% 21346 18% 20733 16%

TCPU 5320 7% 6525 7% 8168 7% 9307 7%Wholesale 2672 3% 3920 4% 4669 4% 5090 4%Retail 12336 16% 16270 16% 19953 17% 22113 17%FIRE 3945 5% 5993 6% 8051 7% 8605 7%Services 20385 26% 28752 29% 39267 33% 47212 36%Public Administration 4476 6% 5342 5% 5627 5% 5887 4%Source: U.S. Bureau of Labor StatisticsFrom: U.S. Census Bureau, Statistical Abstract of the U.S., 1999 (Table 678)

View clips from Michael Moore’s Roger & Me – impact on Flint, MI

Major Manufacturing Region and its Sub-PartsCollapse of Manufacturing =Rust Belt

Replaced in Boston, Pittsburgh by high-tech industries

Deindustrialization: A Manifestation ofCreative Destruction(or “where do new industries come from?”)

• Creative destruction: the process of industrial transformation that accompanies radical innovation.• So what….– Deindustrialization in one location suggests that growth is occurring in a separate location• Capital is not destroyed, it is displaced.

Joseph Schumpeter – the Father of *Creative Destruction*see Knox text.

President Reagan – also liked the idea !

Bethlehem Steel

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Different types of industry have different site and situation needs

Movement of jobs and people to the Sunbelt