Why do Industries Face Problems?

11.4

Stagnant DemandDemand for many manufactured goods has slowed in MDCs during the past 3 decades

because…

•Domestic markets are shrinking

•New technologies have made older products

obsolete/less appealing.40 mpg.

•There is market saturation as a result of better quality, longer

lasting products.

Increased Capacity WorldwideHigher industrial capacity is a result of the global diffusion of the Industrial Revolution

into less developed regions…

…countries in LDCs like Brazil, China, and India have industrialized in an attempt to become more economically

self-sufficient.

European governments subsidize steel mills, helping to keep them open, which

results in oversupply & lower profits worldwide

Industrial Problems in

More Developed Countries

Cooperation within Trading Blocs

The establishment of trading blocs have increased cooperation & trade between countries

within the blocs.

the Western

Hemisphere

Western Europe

NAFTA The EU

East Asia

Competition between trading blocs have

forced MDCs to modernize their plants by buying

more efficient equipment…

Competition between Trading Blocs

…this has resulted in plant closings and job loses in MDCs.

Transnational Corporations

Many transnational corporations have

transferred much of their production/manufacturing

facilities to LDCs because of cheaper labor cost

Furniture factory in China

Maquiladora producing swimsuits for the U.S.

market

This movement of jobs from MDCs to LDCs is sometimes

referred to as the NEW INTERNATIONAL DIVISION of

LABOR

Why do corporations want to move their manufacturing faculties from

MDCs to LDCs?• To make money!

•Communication & transportation are cheaper and quicker.

• Operating costs are cheaper due to lower-priced labor, tax breaks, less environmental regulations…

(Comparative Advantage)

• The elimination/lowering of tariffs or other trade barriers

How has the movement of jobs from the MDCs to LDCs impacted the United States?

• Unemployment in the Midwest/Northeastern US

• Migration from the Rust Belt to the Sun Belt

• An increase in sales for retail businesses

• More jobs in the service sector

• A decrease in manufacturing/industry

How has the movement of manufacturing jobs from MDCs to LDCs impacted countries

like Mexico, China, and India ?

• Job Opportunities

• More women in the workforce/lower population rates

• Children working instead of in school

• Widening gap between the rich and poor

• Uneven regional growth

• rural out-migration/urban in-migration

• More pollution

Disparities within MDCs

One of the biggest problems in MDCs is the uneven distribution of industry

Northern Italy and western Germany are Europe’s most

important industrial

areas…other parts of Europe have relatively little industry.

Former Communists CountriesMany eastern European countries still lag behind

western Europe when it comes to providing consumer goods

Because the “planned”

economy of Eastern

Germany did not produce

many consumer goods, this part

of a united Germany still

has few industrial jobs

Outdated factory in the eastern part of

Germany

Problems for LDCsTwo major problems for LDCs include…

having inadequate infrastructure in place

being too far from markets (N. America/W. Europe)