31

M.A. GEOGRAPHY
SEMESTER I (CBCS)

GEOGRAPHY PAPER - 104

SPATIAL ORGANIZATION OF
ECONOMIC ACTIVITIES
 © UNIVERSITY OF MUMBAI
Prof. Suhas Pednekar
Vice-Chancellor,
University of Mumbai,

Prof. Ravindra D. Kulkarni Prof. Prakash Mahanwar

Pro Vice-Chancellor, Director,
University of Mumbai, IDOL, University of Mumbai,

Programme Co-ordinator : Mr.Anil Bankar

Associate Professor of History and
Head Faculty of Arts,
IDOL, University of Mumbai

Course Co-ordinator : Mr. Ajit Gopichand Patil

Assistant Professor,
IDOL, University of Mumbai, Mumbai

Course Writer : Dr. Sanjyot Deuskar

Assistant Professor, Dept. of Geography
Satish Pradhna's Dayansadhana College, Thane

: Ms. Rupanjali Dasgupta

Ph.D. Research Scholar on Fellowship
TISS, Mumbai

: Dr. Shweta Ranade

Asst. Professor,
P.D. Lions Dalmiya College, Malad

: Dr. Neetu Sharma

Asst. Professor
Guru Nanak College, Sion

September 2021, Print - 1

Published by : Director,
Institute of Distance and Open Learning ,
University of Mumbai,
Vidyanagari, Mumbai - 400 098.

DTP Composed & : Mumbai University Press,

Printed by Vidyanagari, Santacruz (E), Mumbai
 CONTENTS
Unit No. Title Page No.

1. Organisation of An Economy as a Dynamic Spatio-Social

System : Basic Concepts 01
2. Spatial Organization of World Economy 18
3. Organization of Production : Agriculture and Industry -
Global Patterns and Trends 35
4. Spatio - Social Organization of Production - Transport, Trade,
and Services : Global Patterns and Trends 97


 GEOGRAPHY
M.A. Part – I; Semester I
Paper 104: Spatial Organisation of Economic activities
Maximum No. of Credits: 4; Maximum no. of lectures including
continuous assessment: 60

1. Organisation of an economy as a dynamic spatio-social system: Basic

concepts (15 hours)
1.1 Economic organization and spatial change- Spatial division of labour
and Interdependence
1.2 Geographic fixity and mobility- typology of distance-Spatial
interaction and diffusion
1.3 Typology of Space - absolute and relative – Time and space
convergenceProduction of economic space

2. Spatial Organisation of World Economy (15 hours)

2.1 Economic organization of the pre-colonial world - Rise of the Core
Economies –industrial revolution in Europe
2.2 Colonialism and Geographies of inequities and uneven development –
neocolonialism and structuration of world economy as core, periphery
and semi-periphery
2.3 Flexibalisation of Production – Role of international Institutions like
World Bank, IMF, UNCTAD
2.4 Evolution and Growth of Multinational Companies - Patterns and
Processes of Globalisation

3. Organisation of Production: Agriculture and Industry - Global Patterns

and Trends (15 hours)
3.1 Agricultural Patterns-World Agricultural Regions – Theory of
Agricultural Landuse and Critique - Technology, modernization and
structuring of agrarian regions in colonial and post-colonial periods
3.2 Crisis of agriculture- Aspects of Food security and world patterns of
hunger
3.3 World Industrial Regions – Factors and processes affecting Location
of industries –critical assessment of theories of industrial location
3.4 Globalisation and shifting location of industries - New Industrial
Regions- EPZs and SEZs- South east and East Asian economies

4. Spatio-social organization of production –Transport, Trade and

Services: Global Patterns and trends (15 hours)
4.1 Organisation of transport - Bases of Spatial Interaction – Theoretical
Perspectives on Transport and inter-regional interactions - Role of
 transport cost- nodes-places, networks and flows- spatio-social
accessibility – Indian Examples
4.2 International trade theory- classical, neo-classical and Marxist
Perspectives -Critical review – Globalisation and changing structure
and composition of International trade – GATT & WTO
4.3 Logic of Regional Integrations- Types and levels - Significance of
regional integration as a strategy for the periphery - Case Studies - EU,
OPEC, ASEAN, SAARC, BRICS
4.4 New Economic Activities and Globalisation : Finance and Service
Industry- The Forth Industrial Revolution
References:
1. Knox Paul, Agnew John and McCarthy Linda, (2008): The Geography
of the World Economy, Hodder Education, UK.
2. Sheppard Eric and Barnes Trevor J., (eds.) (2000): A Companion to
Economic Geography, Blackwell, Massachusetts.
3. Wood Andrew and Roberts Susan, (2011): Economic Geography-
Places, network and flows, Routledge, London and New York.
4. Bryson John, Henry Nick, Keeble David and Martin Ron, (eds.)
(1999): The Economic Geography Reader- Producing and Consuming
Global Capitalism, John Wiley and Sons Ltd.,New York.
5. Hartshorn A. Truman and Alexander W. John, Third edition, (2010):
Economic Geography, PHI Learning Private Ltd., New Delhi
4. Liemt van Gijsbert, (eds.) (1992): Industry on the move- Causes and
consequences of International Relocation in the Manufacturing
Industry, International Labour Office, Geneva.
5. Harrington J.W. and Warf Barney, (1995): Industrial Location-
Principle, Practice and Policy, Routledge, London and New York.
6. Rodrigue Jean-Paul, Comtois Claude and Slack Brian, (2006): The
Geography of Transport System, Routledge, London and New York.
7. Harrington J.W. and Warf Barney, (1995): Industrial Location-
Principle, Practice and Policy, Routledge, London and New York.
8. Berry, B. J. L. et. Al. (1976): Geography of Economic Systems,
Prentice Hall, Englewood Cliff.
9. Boyce, R. D. (1974): Bases of Economic Geography, Holt, Rinehart
and Winston, New York
10. Conkling, E. C. & Yeates, M. (1976): Man’s Economic Environment,
McGraw Hill, London.
11. Hodder, B. W. and Lee, R. (1974): Economic Geography, Field of
Geography Series, Methuen & Co. Ltd, London.
12. Hussain Majid (ed.), (1993): Perspectives in Economic Geography,
Vols. 1-6,Anmol Publication, New Delhi.
13. Cole, J. P., (1983): Geography of World Affairs, Butterworths,
London.
14. Lloyd, P. E. and Dicken, P. (1972): Location in Space, Harper & Row,
San Fancisco.
15. Lowe Moryadas, (1975): The Geography of Movement, Haughton
Mifflin & Co.
16. Smith, D. M (1971): Industrial Geography: An Economic Geographic
Analysis, John Wiley & Sons.
17. Tarrant, J. R. (1974): Agricultural Geography, Problems in Modern
Geography Series, John Wiley & Sons.
18. Willbanks, Thomas J (1980): Location and Well- Being, An
Introduction to Economic Geography, Harper & Rowr San Fransisco.

Further Reading:
1. Lee Roger and Wills Jane, (eds.) (1997): Geographies of Economies,
Arnold, New York.
2. Scott J. Allen, (2006): Geography and Economy- The Clarendon
Lecture in Geography and Environmental Studies, Clarendon Press,
Oxford, New York.
3. Castree Noel, Coe M. Neil, Ward Kevin and Samers Michael, (2004):
Spaces of Work: Global Capitalism and the Geographies of Labour,
Sage, London.
4. Banerjee- Guha Swapna, (eds.) (2004): Space, Society and Geography,
Rawat Publication, Jaipur and New Delhi.
5. Brakman Steven, Garretsen Harry and Marrewijk van Charles, (2009):
The New Introduction to Geographical Economics, Cambridge
University Press, UK.
6. Desai Vandana and Potter B. Robert, (eds.) (2011): The Companion to
Development Studies, A Hodder – Viva Edition, London.

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 1
ORGANISATION OF AN ECONOMY AS A
DYNAMIC SPATIO-SOCIAL SYSTEM:
BASIC CONCEPTS
After going through this chapter, you will be able to understand the
following features:

Unit Structure :

1.1 Objectives
1.2 Introduction
1.3 Subject discussion
1.4 Definition of economic geography
1.5 Nature and scope of economic geography
1.6 Fundamentals of economic geography
1.7 Approaches to the study of economic geography
1.8 Organization of economic activities in global space- primary,
secondary, tertiary, quaternary, Quinary
1.9 Spatial distribution of labour- skilled and unskilled and their
interdependence
1.10 Geographic fixity and mobility- typology of distance-Spatial
interaction and diffusion
1.11 Time and space convergence- Production of economic space-
absolute and relative
1.12 Summary
1.13 Check your Progress/Exercise
1.14 Answers to the Self-learning Questions
1.15 Technical words and their meaning
1.16 Task
1.17 References for further study

1.1 OBJECTIVES
By the end of this unit, you will be able to -

 Identify the basic concepts of economic geography

 Know about organization of economic activities in global space
 Understand the implications of time and space convergence

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1.2 INTRODUCTION

Economic Geography deals with the organization of economic

activities in space and studies the role of space in economic interactions.
The major factor affecting the organization and the interaction is the local
geography of the place under consideration. Other factors affecting the
same include availability of appropriate labour, natural resources, capital,
and market. The present unit will help us understand the basics of the
subject and its status globally.

1.3 SUBJECT DISCUSSION

Economic geography is not a recent branch of geography. Initially,

it only dealt with the organization of economic activities across all the
sectors of the economy, but at present it also deals with the advanced
sectors and the interaction of all together. It also deals with the impacts of
the local activities and its further development.

1.4 DEFINITION OF ECONOMIC GEOGRAPHY

Economic Geography can be defined as, ‘a branch of geography

that deals with economic production and interaction along with the role of
physical conditions and mankind in the same’.

In the words of Hartshorn and Alexander: “Economic Geography

is the study of the spatial variation on the earth’s surface of activities
related to producing, exchanging and consuming goods and services.
Whenever possible the goal is to develop generalizations and theories to
account for these spatial variations.”

1.5 NATURE AND SCOPE OF ECONOMIC

GEOGRAPHY

Economic Geography studies the space, distribution of economic

output in that space and organization of economic activities over that
space. It is a branch of Geography since a long time hence it was studied
only by geographers in the past. However, many economists have also
studied the subject to understand spatial interaction in a better way.

2
 Fig. 1: Sub-disciplines of Economic Geography

Economic geography is also considered a branch of

anthropogeography because it studies development of human activities
region wise. For regions under study, the subject explains the patterns of
production, exchange, distribution, and consumption of outputs of
economic activities. Economic geographers can study the flow of raw
materials, finished goods, people, and information across spatio-temporal
base and suggest changes if necessary. Economic geography can be
divided into the following sub disciplines:

The scope of economic geography includes but is not limited to

localization of industries, economics of agglomeration, transportation,
economic development, urbanization, redevelopment, gentrification, core-
periphery development, environmental economics and alike.

In other words, it can be said that the scope of economic geography

includes the following questions/ research questions/ queries:

Fig. 2: Scope of Economic Geography

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 The answers to the above questions are sought through the study of
economic geography.

1.6 FUNDAMENTALS OF ECONOMIC GEOGRAPHY

Like every subject, economic geography too has certain basic

principles or fundamentals as follows:

1. Location: includes all aspects related to selection of a location. It

answers questions related to factors of localization of industries.
2. Spatial analysis: analyses available spaces to check suitability for the
economic activity under consideration.
3. Local vs. regional competitiveness: helps in the selection and decision
making between local resources and regional resources. It affects the
scope of the economic activity.
4. Regional planning and policy making: finally, a systematic plan to
develop the region under study is developed and policies can be
framed accordingly.

1.7 APPROACHES TO THE STUDY OF ECONOMIC

GEOGRAPHY

There are four approaches to the study of economic geography:

1.7.1 Regional approach

This is the most used and discussed about approach to economic
geography. This approach helpsin the study of various economic and non-
economic regions in the world. The term region implies to an area with
unifying characteristics. It must be noted that economic regions do not
necessarily coincide with administrative boundaries and therefore are
more interesting to study.

This approach becomes important as it helps in the understanding

of physical endowments and man-made potentials of a region due to
which a region has developed so far and can be developed further.

This approach helps to understand the pattern of spatial interaction

across the globe in a better way.

1.7.2 Systematic or commodity approach

The systematic or commodity approach gives a systematic
understanding of the distribution pattern of each resource or commodity or
an industry across the global space. It analyses the production, distribution
and development of each and every raw material, finished commodity or
service and industry appropriately so that further development of
associated activities can take place in a planned manner.

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 This approach is important as it helps to plan the supply of raw
materials from different parts of the world or the region and vice-versa. It
also helps to understand the distribution of labour in space.

1.7.3 Activity approach

The activity approach in economic geography studies the economic
activities of man by dividing them into different categories/ sectors viz.
primary, secondary, tertiary, quaternary and quinary.

The primary sector includes all the basic economic activities like
agriculture, forestry, fishing, hunting, collecting, and mining. In other
words, all human activities directly related to nature are included in this
sector.

Fig. 3: Sectors of the Economy

The activities in the secondary sector include all those processes

which convert the primary products into more usable ones. Therefore, all
those manufacturing activities which use naturally available raw materials
and convert them to finished products fall under this category.

The tertiary sector essentially belongs to the transport industry

which involves transportation of raw materials to the manufacturing units
and that of the finished goods to the markets. Trade is also included here.

The quaternary sector deals with the latest development in science

and technology viz. information technology. It is a major sector in the
developing and the developed urban areas. It deals with services as
products and has no restrictions over land and space as it can be carried
out from anywhere and everywhere.

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 The quinary sector is the one that includes managerial level
economic activities. It involves all those activities that require innovation,
idea generation, decision making, supervision, planning and ownership.
The people engaged at this post are responsible for bringing changes in the
society and economy. Therefore, top executives, government officials, and
officials in the fields of science, universities, non-profit organizations,
health care, culture, and mediaare a part of it. Recently domestic duties
like childcare and housekeeping by a family member is also included here
as the member provides these services for free which would be otherwise
paid services.

1.7.4 Principles approach

This approach focusses upon man-environment relationship with
the help of facts collected over time. It is this approach that has helped in
building a general understanding of spatial dispersion of man and his
economic activities. For example, ‘plains are highly populated’,
‘mountains are scarcely populated and occupied’ or ‘deserts are regions of
privacy’. It may not be true for all the regions of the world but it is true for
most of them. Hence, though the approach is challenged several times, it is
important as it helped to build basic knowledge about the globe. Further,
this approach explains the changing relationship of man and his
environment in both negative as well as positive ways.

1.8 ORGANIZATION OF ECONOMIC ACTIVITIES IN

GLOBAL SPACE- PRIMARY, SECONDARY,
TERTIARY, QUATERNARY, QUINARY

1.8.1 Primary
Primary activities are directly related to nature, and it includes
activities like hunting and gathering, pastoral activities, fishing, forestry,
agriculture, mining, and quarrying.

Hunting is the most primitive activity and involves hunting down

of wild animals for sustenance. It is practiced in high latitude zones which
include northern Canada, northern Eurasia and southern Chile and low
latitude zones such as the Amazon Basin, Tropical Africa, Northern fringe
of Australia and the interior parts of Southeast Asia.

6
 Fig. 4: World Distribution of Primary Activities

Co-operative farming is another primary activity which is practiced

by a group of farmers who form a co-operative society. It is practiced in
European countries like Denmark, the Netherlands, Belgium, Sweden,
Italy etc. In Denmark, the move-ment has been so successful that
practically every farmer is a member of a co-operative.

Agriculture involves growing of crops for personal, sustenance or

commercial purposes. It is practiced in various forms and combinations
based on methods of farming and crops raised. The area where each type
is practiced is different in some cases and overlapping in most of the
cases. Generally, all the third world countries are agrarian economies i.e.,
they are based on agriculture and allied activities on a major scale
followed by other sectors.

Fishing is mostly carried on for food supply and commercial

purposes either naturally or through fish farming or pisciculture. Since it’s
a water related activity, it is carried along the coasts and other freshwater
bodies all over the world.

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 Fig. 5: Major Agriculture Producing Countries of the World

Similarly, forestry is carried out in the major forests of the world.

It includes, Amazon Rainforest, South America; Congo Rainforest, Africa;
Valdivian Temperate Rainforest, South America; Tongass, North
America; Rainforest of Xishuangbanna; Sundarbans, India; Daintree
Forest, Australia and Kinabalu National Park, Malaysia.

Mining is the extraction of minerals for commercial uses. Hence, it

is practiced only where there are rich deposits of precious, semiprecious,
heavy, and light minerals across the globe. The following map shows the
global distribution of the most important minerals.

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1.8.2 Secondary
All secondary activities are dependant upon primary produce viz.
natural resources in their original form. It involves all the manufacturing
processes required to convert the natural resources from their original
form into usable products/ finished goods. Hence, manufacturing units are
spread across the space depending upon various factors of localization of
industries. The location with the least cost of raw materials, labour and
transportation is chosen for industrial location as it would incur least cost
on manufacturing and increase the profit margins. Hence, the location of
secondary activities in the world are found in the major industrial spaces
especially manufacturing units. The following map gives a broad idea.

Fig. 7: Factors Affecting Industrial Location

1.8.3 Tertiary
The tertiary activities include trade and commerce and transport. Trade is
a traditional activity and is mostly carried through waterways and airways.
Hence, the major ports and airways of the world serve as trading points.
However, it must be noted that these are not only trade points but have
served as starting points for the major urban areas that we see today.
Transportation on the other hand is practiced at a local level which is
found all over the global space.

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 Fig. 8: Major Industrial Regions of the World

1.8.4 Quaternary
Quaternary activities compose entirely of services rendered by
white-collar professionals working on management and information
processing and disseminating. The special quality of these services is that
they are foot-lose in nature. They can be located anywhere and can be
served everywhere. They are not bound by any factor of localization of
industries. Yet, there are major IT parks in the world which have the main
industries in the sector.

Fig. 9: Major Business and Technology Innovation Centres of the

World

1.8.5 Quinary
These activities are mostly practiced in offices which are either
administrative headquarters or head offices of businesses or at home.
Hence, their location is not bound by any factor but the need of the same.
Hence, all administrative units across the globe have at least one

10
administrative office with officials. The headquarters of MNCs and other
businesses fall under this category.

1.9 SPATIAL DISTRIBUTION OF LABOUR- SKILLED

AND UNSKILLED AND THEIR INTERDEPENDENCE

Division of labour implies to segregation of economic activities

and diffusion of labour according to the activities. This enables the
specialised (skilled) labour to approach the appropriate economic activity
and vice-versa. This helps the labour to earn appropriate wages and be
treated appropriately. There are certain activities that demand only skilled
and specialised labour without whom they cannot function. Therefore,
division of labour helps serve all types of economic activities and gives an
equal opportunity to all the labour to put in their best and earn maximum.

Historically, the culture of division of labour began with trade

activities and it was observed that specialised labour when employed to
trade resulted in an increase in the same. Hence, the concept was
recognised and came to be applied to all the economic sectors and
activities.

However, at present, spatial division of labour has resulted in

international migration of people to the areas where their skills are
demanded and in return they are paid appropriately. Hence, it is observed
that skilled workers from all parts of the world especially underdeveloped
or developing countries are migrating to developed countries with a view
to earning higher income and a better standard of living.

It must be noted that, no activity is complete with skilled labour

alone. It requires a mix of skilled and unskilled labour to accomplish any
activity. For example, a business may require top managerial
professionals, officers for ideation and decision making, clerks for
administrative tasks, peons for housekeeping and other miscellaneous
tasks. Therefore, there is need for both skilled and unskilled labour
everywhere. However, unskilled labour needs to be cheap and is therefore
available locally vis-à-vis the skilled personnel.

1.10 GEOGRAPHIC FIXITY AND MOBILITY-

TYPOLOGY OF DISTANCE-SPATIAL INTERACTION
AND DIFFUSION

1.10.1 Geographic fixity and mobility

Populations and goods have two tendencies- either they move from
one place to another viz. migration and trade respectively or they remain
fixed at one location. Several factors geographical and non-geographical
are responsible for the same. If the factors of localization of industries are
sufficient, then labour will be able to engage in economic activities and
will not move. Similarly, if activities dependant on local raw materials are

11
sufficiently developed, raw materials will also remain fixed. Hence, if a
region or an area is self-sufficient, then the area will have fixity or vice-
versa. Migration and international trade are representatives of mobility of
people and goods respectively. The fixity and mobility of people and
goods affect the fixity and mobility of capital as well.

1.10.2 Typology of distance

Distance is a major component of transportation and can be
represented in a variety of ways as follows:

Fig. 10: Diagrammatic Representation of Types of Distance

1.10.2.1 Euclidean distance

It is the most basic type of distance. it is represented as a straight
line between the point of supply and the point of demand. It does not take
into consideration the hindrances caused by geographical factors and is
expressed in geographical units such as kilometres. Since a straight
distance is not possible in reality, this type of distance can be rarely used
practically.

1.10.2.2 Transport distance

It is a complex type of distance which explains the existing
structure of transport network. It has two types viz. simple and complex.
In the simple type it considers only one mode of transport and uses only
the direct path between the points of supply and demand. In the complex
type, it considers several modes of transport along with the time required
for other processes acting in between the points of supply and demand.
Therefore, the distance is expressed in geographical units, cost, and time.

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1.10.2.3 Logistical distance
It is the most complex type of distance as it encompasses all the
tasks required for the movement of goods between the points of supply
and demand. Logistical distance also includes physical barriers and does
not consider geographical distance. It also considers the delays caused due
to managerial and packaging involved in the process of flow of goods.

1.10.3 Spatial interaction and diffusion

Spatial interaction takes place between two or more points for
various purposes. Trade or supply of goods is the most common purpose.
There are three types of spatial interactions as follows:

Fig. 11: Types/ Bases of Spatial Interaction

1.10.3.1 Complementarity
It is a simple supply and demand relationship between two
locations. However, it is more like barter system because if location A
supplies what location B demands, it is always in return of some other
commodity which location B would supply to location A. hence, both
locations complement each other as they fill in the deficit for each other.
In other words, it can be said that a situation of ‘reciprocity’ is created
which is a common feature in international trade.

1.10.3.2 Intervening Opportunity

It occurs when a third location rises or intervenes in between the
two locations complementing each other. If the location of the third point
is near to one of the locations and is able to supply the deficit commodity
sufficiently, the situation is called intervening opportunity. It helps the
demanding location purchase the commodity at cheaper price and faster
and the new location gets the advantage of selling its products. However,
it is not necessary that the third/ new location will get the full advantage, it
can also be partial in some cases.

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1.10.3.3 Transferability
In this type of interaction, the flow of goods is just one way. This
may be due to lack of capacity to produce goods for exchange or lack of
transport infrastructure or other unrest.

1.11 TIME AND SPACE CONVERGENCE-

PRODUCTION OF ECONOMIC SPACE- ABSOLUTE
AND RELATIVE

Time and space convergence or compression implies to the

decrease in the travel time required to reach a destination. Since the travel
time required to travel a distance has reduced, the space between the
places has also reduced apparently. One can now travel faster and reach a
destination earlier than before. This is an outcome of innovations in
transportation. Speed, therefore, is the main component in the concept of
time-space convergence. However, it is only a relative or comparative
concept. This is because, as transportation would advance, the time taken
to travel will reduce further. This is exactly what has happened when
compared from the past. Therefore, the degree of time-space convergence
can only be expressed on a comparative scale and can never be
superlative.

Due to advent of transportation, new places can be explored and

used as new economic spaces. Industrialization can be kick started in new
regions or areas and newer opportunities can be created for unemployed
people and unexploited resources. When new economic zones are created
which is accessible by maximum resources, it is called new economic
space.

1.12 SUMMARY

Economic geography is an application-based branch of geography

which encompasses pure geography, pure economics and knowledge of
both at the same time. It helps to analyse the locations and establish the
economic activity. Other factors like resource availability and labour and
capital also affect the distribution of economic activities over the global
landscape. Therefore, certain activities, people and goods are fixed at a
certain location while others move and are called mobile in nature. This
movement occurs in various ways and over different types of distances.
Not only do goods move, but labour also moves according to its demand
and is divided accordingly. The subject therefore holds a great importance.

1.13 CHECK YOUR PROGRESS/EXERCISE

1. True or False
a. Economic geography is not a recent branch of geography
b. Migration and international trade are representatives of mobility of
people and goods respectively
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c. Time and space convergence or compression implies to the increase in
the travel time required to reach a destination
d. The quinary sector is the one that includes managerial level economic
activities
e. Principles approach helps to understand the pattern of spatial
interaction across the globe in a better way.

2. Fill in the blanks

a. The _______ activities include trade and commerce and transport.
(primary, secondary, tertiary, quinary)
b. The major factor affecting the organization and the interaction is the
________of the place under consideration
(local economy, local politics, local geography, local social norms)
c. Economic geography is also considered a branch of __________
(economics, anthropogeography, politics, science)
a. _____ is a complex type of distance which explains the existing
structure of transport network
(Euclidean, Transport, Logistical, None of the above)
b. _______ is a simple supply and demand relationship between two
locations
(Complementarity, Intervening Opportunity, Transferability,
Euclidean distance)

3. Multiple Choice Questions

a. This approach becomes important as it helps in the understanding of
physical endowments
i. Regional
ii. Systematic
iii. Activity
iv. Principles

b. This approach in economic geography studies the economic activities

of man by dividing them into different categories
i. Regional
ii. Systematic
iii. Activity
iv. Principles

c. It occurs when a third location rises or intervenes in between the two

locations complementing each other.
i. Complementarity
ii. Intervening opportunity
iii. Transferability
iv. Trade

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d. These activities are mostly practiced in offices which are either
administrative headquarters or head offices of businesses or at home
i. Primary
ii. Secondary
iii. Tertiary
iv. Quinary

e. This is the extraction of minerals for commercial uses.

i. Fishing
ii. Digging
iii. Mining
iv. Forestry

1.14 ANSWERS TO THE SELF-LEARNING QUESTIONS

1.a True
1.b True
1.c False
1.d True
1.e False

2.a Tertiary
2.b Local geography
2.c Anthropogeography
2.d Transport
2.e Complementarity

3.a Regional
3.b Activity
3.c Intervening opportunity
3.dQuinary
3.e Mining

1.15 TECHNICAL WORDS AND THEIR MEANING

 Trade- movement of goods across international borders viz. import

and export
 Migration- temporary or permanent movement of people from one
place to another
 Economic sector- an area of the economy in which businesses share
the same or related business activity, product, or service.

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1.16 TASK

Make a list of economic activities in your local area and divide it

according to the various sectors of the economy.

1.17 REFERENCES FOR FURTHER STUDY

 Liang. 2008. Nine principles in economic geography. Geographical

research. Vol. 27, issue(1): 75-84. doi: 10.11821/yj2008010008
 Bengston. 1956. Fundamentals of economic geography. Prentice Hall.
University of California.
 Salil. Economic Geography: Definition, scope and
importance.https://www.yourarticlelibrary.com/
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 2
SPATIAL ORGANIZATION OF WORLD
ECONOMY
After going through this chapter you will be able to understand the
following features

Unit Structure :

2.1 Objectives
2.2 Introduction
2.3 Subject Discussion
2.4 Economic organization of the pre-colonial world
2.5 Rise of the Core Economies industrial revolution in Europe
2.6 Colonialism and Geographies of inequities and uneven
development
2.7 Neocolonialism and structuration of world economy as core,
periphery and semi-periphery
2.8 Flexibalisation of Production
2.9 Role of international Institutions like World Bank, IMF, UNCTAD
2.10 Evolution and Growth of Multinational Companies- Patterns and
Processes of Globalisation
2.11 Summary
2.12 Check your Progress/Exercise
2.13 Answers to the self-learning questions
2.14 Technical words and their meaning
2.15 Task
2.16 References for further study

2.1 OBJECTIVES

By the end of this unit you will be able to –

 Understand the concept of Spatial Organisation
 Know about Economic organization in the pre colonial world
 Understand Colonialism and Geographies of inequities and uneven
development
 Understand the role of international Institutions
 Understand Evolution and Growth of Multinational Companies

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2.2 INTRODUCTION

In this chapter we will study about significance of various spatial

Organisations and their significance in the world trade. We shall
understand the concepts like Colonialism, Neocolonialism. We will
understand the structure of world economy as core, periphery and semi-
periphery regions. We shall learn about role of international Institutions
like World Bank, IMF, UNCTAD and their significance in world
economy. We shall also learn about the growth of multination companies
and various patternsand processes of globalisation.

2.3SUBJECT DISCUSSION

As the world is always changing in economic, social and political

context, these spatial organisations define the patterns of globalisation. In
pre colonial era the world was not globalised thus the trading patterns
were limited. As the technology progress so does the economy and trade.
In the modern era the world became globalised and several multination
agencies were formed to benefit the trade and commerce. The globalised
world also resulted in social and economical unequal development of the
regions.

2.4 ECONOMIC ORGANIZATION OF THE PRE-

COLONIAL WORLD

The economic history of the world is very appealing. Answers are

hidden in the economic history of the world to the questions like why
economic growth was rapid in western nations, wherein eastern nations
like china and India have more potential in terms of resources are still
developing or why the economies of various nations are developed
differently?

For better understanding of economic history of the world the

economic eras of the world can to be divided into: Pre- modern era, Early
modern era or Mercantilist era and Colonial era, Neo-colonialism and The
twenty first century.

Pre – Modern Era

 Palaeolithic and Mesolithic era (about 500,000 to 10,000 BC) - The
Primary economic unit was small social groups and trading occur
between them for food, animal skins, tools etc. They also exchanged
ideas.
 Neolithic – As the name suggest the new era developed new set of
skills and tribal lifestyle. This led to creating specialized skills and
new crafts. This directed to the development of trade in between two
tribes for the specialized crafts. Crafts like jewellery, pots made by

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 localized clay and cattle were early commodities for trading. This
process developed pastoral society.
 Bronze and Iron age- This age was start of the formal money and
finance as markets were established on sites like Egypt.
 Classical era- The civilisations like Rome, China and India amounted
for the world Economy. This era also saw the introduction of Gold and
silver coins. Economic Scholars like Hesiod and Kautilya wrote books
on economics like ‘Works and Days’, and ‘Arthashastra’ respectively.
 Middle Ages – The economy slowly started expanding due to
development of silk route. In this period banking system was
developed in china and accounting system in Europe.

According to serval economic historians, Europe emerged as focal

point of world economy in around 1800. Other regions of the world, like
China and India, were the core economic regions before Europe entered in
early modern era. (Frank 1998).

 Early modern era-Mercantilism and international trade (16th to 18th

century)

Mercantilism is a policy related to economy intended for more

export and less imports of the country. It promoted imperialism. The
traded goods were subsidies to attain goal of economic growth. The policy
was designed for retain financial reserves by trading of finished goods. It
stimulated the colonial voyages. This period is also known as proto-
industrialisation.

Mercantilism became the prominent thought in European economy

throughout the early-modern period. Mercantilistic system emerged in
Venice, Pisa, Genoa and started functioning in the Mediterranean trade.
The Italian economist and mercantilist Antonio Serra wrote ‘A Short
Treatise on the Wealth and Poverty of Nations’ in 1613 on this subject.

Mercantilism was used in form of bullionism i.e. wealth by owing

precious metals. During Elizabethanera England and Spain promoted trade
and navigation with rivalry with each other. France and other European
nations also joined the Mercantilism system paved by queen Elizabeth.
Mercantilism was the warfare but with economic version. It was using
economics as a tool to expand rather than warfare. Mercantilism was
centred at France and England. The policies have included high tax on
manufactured goods, no trading by colonies with other nations, monopoly
in markets, no export of gold and silver, wage restrictions, exploit
domestic resources, restrict domestic consumption of goods etc.

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2.5 RISE OF THE CORE ECONOMICS INDUSTRIAL
REVOLUTION IN EUROPE

Ever since humans settled in life, instead of migrating in search of

food, there is a constant demand for the supplies of cloths, leather,
agricultural tools, boats, jewellery etc. These good were made by
craftsman. Craftsman were the chief manufactures of goods. As
population increased the demand for goods also increased, thus domestic
or cottage industries emerged. The emergence of cottage industry gave
rise to a system where merchant purchased the row material, distributed it
to craftsmen and collect the finished goods from them, sold these items in
the larger markets for profit. This system was flourished all over the world
for e.g. handloom industry of India.

The system of small workshops producing handmade goods and

selling it to local markets changed during late eighteen centuries with
Industrial revolution. Various scientific inventions like steam engine, steel
making and machines lead to factory system. The markets were widening
with the mass production method implemented by these factories. Steam
engine gave rise to improvement in transport system. Railways and huge
vessels made transportation cheap and easy. Although industrial
revolution began in Great Britain it soon spread to other European nations
as well as to North America, USSR, Japan, China. This period of
industrial revolution was marked by :

 Change in the methods of manufacturing – from handicraft to machine

 Change in the organization of manufacturing – central location of
industries in particular area.

Modern manufacturing was concentrated in total eight regions in the

world. –
i. East –Central North America
ii. West – Central Europe
iii. South Eastern Asia
iv. Western North America
v. Eastern South Australia
vi. Southern Africa
vii. South – Eastern Australia
viii. Middle Chile

Slowly these areas of manufacturing became the power belts.

These power belts consumed 90% of the world’s energy resources, thus
they started shifting to the places where energy resources like coal were
available. New clusters like soviet Union, China, Japan, Brazil, India
started emerging.

The Core Industrial power belts in Europe:

Europe had started early development of the industrial belt due to
scientific and economic advantage. Mercantilism and Colonialism helped
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 them to acquire ample amount of raw materials from the countries where
they had colonies. For e.g. The demand of cotton had increase in Britain
due to invention of spinning jenny and later power loom. This demand
was fulfilled by India. Gradually the core industrial power belt emerged in
Europe.

i. The axial belt of industry in Britain

ii. The Franco- Belgian coal field
iii. The Ruhr- Westphalian region
iv. The Saxony and Silesian coal field
v. The Plain of Lombardy
vi. The Moscow region
vii. The Donbas region of Ukrainian
viii. The Central lowlands of Sweden

2.6 COLONIALISM AND GEOGRAPHIES OF

INEQUITIES AND UNEVEN DEVELOPMENT

According to Angus Maddison, 150 years ago, the gap in mean per
capita share of gross domestic product between the richest and the poorest
global regions, namely Western Europe and Africa, was probably three to
one. Today the difference in income per head between the richest
industrial nation, say Switzerland, and the poorest non-industrial country,
Mozambique, is 400 to 11. Countries in Asia, Africa and South America
did not experience economic growth but were experience negative growth
in the almost all economic indices. This massive gap in economic
progression is a result of unequal development patterns, mostly the result
of Colonialism.

Colonialism can be defined as a political-economic phenomenon.

Various European nations explored, conquered, settled, and exploited
large areas of the world. The age of modern colonialism began around
1500, for e.g. on Africa’s southern coast (1488) and of America (1492).
The sea power of Portugal, Spain, the Dutch Republic, France, and
England increased during this time. To discover routes to various nation
voyages were commissioned by the head of state. By discovery, conquest,
and settlement, these nations expanded and colonized throughout the
world, spreading European institutions and culture. The transport-
technology barrier to the growth of trade between Asia and Europe was
narrowed down. During the period of 1500 European trade was based on
sea routes between Venice and the other nations. Ports of the Black Sea
was the main route to China and India. Portugal ruled the trade in the
second half of the fifteenth century with the fall Ottoman Empire which
opened the way to the Indian Ocean, Japan, China, Brazil and America.
During 1500-1820 African slaves were brought to America by the
Portuguese to work as plantation workers. Scenario of colonial powers
varied after the end of Napoleonic Wars as the Netherlands lost most of
the Asian territories, France lost Caribbean and Asia, Spain lost most part
of South America and Brazil became independent. Great Britain took
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colonies in Africa, South America and Asia; especially India. By 1860, all
tax restrictions were removed by Britain, opened free trade policy of
England. This provided free trade of their commodities and could import
raw materials for cheap price. By the beginning of the twentieth century
Britain became world’s most economically powerful nation. The colonial
factor becomes the foundation for the formation of international division
of labour, which means the consolidation by the most developed countries
of their monopolistic rights to produce major groups of manufactured
goods and the concentration of export-oriented goods in colonial
territories to meet the needs of their national economies in agriculture and
raw materials. (Khrystyna KYRYLYCH, p 349)

Table. 2.1 The level of GDP per capita of metropolises and former
colonial countries during 1500-1998

Source - Meddison, A. (2001) “The world economy: a millennium

perspective” Organisation for Economic Co-operation and Development
(OECD)

In the above table the clear division in economic development can

be observed in countries and their colonies pre and post-colonial era.
Countries like France, Great Britain and Netherlands and China, Brazil
and India can be seen at same stage of economic development in the year
1500, however the gap widens as more and more territory is captured and
turned as colonies in the year 1820. By the twentieth century the gap is
more than double between former colony and developed nations.

2.7 NEOCOLONIALISM AND STRUCTURATION OF

WORLD ECONOMY AS CORE, PERIPHERY AND
SEMI-PERIPHERY

Neo-colonialism can be defined as the control of less-developed

countries by developed countries through indirect means. The term came

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to use after the world war II, as it can be seen the dependence of former
colonies on other countries. The term neo-colonialism was originally
applied to various policies and schemes which was implemented by
European nations to retain their control their dependencies especially
African nations. In the year 1957in Paris European heads of government
meet where they agreed to open European Common Market to their
overseas territories. This step insured the involvement of these European
nations in the economic and trade affairs of former colonies. Neo-
colonialism can be described as an effort by developed nations to stop or
hold the economic growth of developing countries and use these
underdeveloped nations as a source of cheap raw materials and labour.
Neo-colonial powers operate through global corporations and international
financial institutes.

The world system term inquirers social, political, and economic

prospects of countries. This framework describes a situation where many
countries operate in the context of a single world economy (Taylor
1993).The spatial relation is a hierarchical, tripartite structure and reflects
the integration of a world economy with the world political system
(Wallerstein 1974). Immanuel Wallenstein developed the analysis of
world-systems. He explained how European nations used its advantage of
science and transportation to gained control over the world economy. This
resulted in growth of industrialization in developed nations subsequently
leading to unequal development.

The structuration of world economy is represented by three regions

core, semi periphery, and periphery. The determination of region is based
on commodity production, its processes and raw materials sources,
distribution of product and market.

Core economic regions-

These countries have higher wages, higher capital investments,
technological advancements, thus their finished goods or product is always
of a good quality. The overall living and working conditions are
respectable. The capital is flowing in these area thus trade of new and
improved goods are generated. This leads to more economic growth and
more generation of capital.

Characteristics of Core regions –

 Economically developed
 Powerful in militarily
 Strong central governing bodies
 Extensive bureaucracies
 Strong institutions that manage economic affairs internally and
externally with large tax base
 Produce manufactured goods
 Funding new technological advancements
 Dominant in productivity, trade and finance

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Peripheral economic regions-
Peripheral countries have low wages and low rates of investments.
They also have limited technology. Thus these countries export primary
goods and raw materials to core economic regions. Consequently, the
countries in the periphery possess only a marginal ability to concentrate
capital (Wallerstein 1974). Peripheral countries primarily produce raw
materials and are dependent on core countries for the import of goods and
services of higher value resulting in unequal exchange among the regions
(Krugman 1991).

Characteristics of Peripheral regions-

 Weak governing bodies
 Weak institutions to handle economy and smaller tax base
 Less infrastructural development
 Less economic diversity, limited economic activities
 Produce and export raw materials
 Often exploited for cheap labour raw materials
 Literacy rate is low
 Social inequalities and low standard of living

Initially, the core and periphery are proposed as opposite economic

states reflecting a duality in the division of labor in the world economy
(Chase-Dunn 1998). Core states generally exhibit strong political
structures and “state machinery’’ with a high level of integration reflected
in group representation (Wallerstein 1984). Peripheral states reflect
relatively weaker political and state bureaucratic structures with marginal
levels of population integration in the political process (Wallerstein1984).

Semi- Peripheral economic regions-

Semi-peripheral regions are developing regions but not as
dominant as core regions. They are the nations with industrialization and
more economic progress than peripheral regions. They import from core
regions wherein export to peripheral regions. Semi-peripheries areas are
the common thread between developed and underdeveloped regions. For
e.g Brazil, Russia, India, Israel, China, South Korea and South Africa.

2.8 FLEXIBALISATION OF PRODUCTION

Flexibilization refers to the changing work practices and

production process. It is also a practice of flexible employment relations.
Flexibilization allows changes in production methods as employment and
supply chain is flexible. It can be designed according to demand of the
product. This ensures the firms updates its process of production in
competitive product markets.

The method of flexibilization changes the ways of traditional

market and employment. The labours are not secure in the workspace as
the flexibility of workforce ensures alterations in it. This leads to labours
also have causal relationship with employer. For the production this
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process allows venders to be flexible and not committed for a long run. As
the global markets are becoming more competitive the flexibilization of
production allows core economics to get a better deal for the cheap
workforce or raw materials from peripheral economies.

2.9 ROLE OF INTERNATIONAL

INSTITUTIONS LIKE WORLD
BANK, IMF, UNCTAD

Multilateral economic agencies were created during the Great

Economic Depression of the 1930's. Three new organizations were
proposed to be created as multilateral economic agencies. For the
International Monetary Fund for monetary and financial cooperation,
the International Trade Organization for cooperation in the area of
market development and regulation (including the liberalization of
international trade), and the World Bank for post-war reconstruction and
the promotion of economic development in new States. The three
organizations were supposed to cooperate under the institutional umbrella
provided by the United Nations system.(Marc Auboin, WTO Secretariat,
2007) IMF and the World Bank are part of the United Nations as
specialized multilateral institutions. The Gold Exchange Standard system
was established to avoid sustained and disruptive balance-of-payments
crises and to maintain exchange rate stability around the world. Every IMF
member is responsible for keeping the fluctuation of its currency within
the limits against. (Marc Auboin, WTO Secretariat, 2007)

International Monetary Fund

The IMF was conceived in July 1944 at the United Nations Bretton
Woods Conference in New Hampshire, United States. The 44 countries in
attendance sought to build a framework for international economic
cooperation and avoid repeating the competitive currency devaluations
that contributed to the Great Depression of the 1930s. The IMF's primary
mission is to ensure the stability of the international monetary system, the
system of exchange rates and international payments that enables
countries and their citizens to transact with each other. In order to
maintain stability and prevent crises in the international monetary system,
the IMF monitors member country policies as well as national, regional,
and global economic and financial developments through a formal system
known as surveillance. (Source - imf.org)

Financial assistance:
IMF provide financial loans to member countries. These coundtries
needs to have actural or potential payment problem. In the crisis like 2009
Global economic crisis IMF created financial support mechanism to
strengthen the economic capacities.

Some facts about IMF:

 Membership: 190 countries
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 Headquarters: Washington, D.C.
 Executive Board: 24 Directors each representing a single country or
groups of countries
 Staff: Approximately 2,700 from 150 countries
 Total quotas: SDR 477 billion (US$687 billion)
 Borrowed resources envelope: SDR 492 billion (US$708 billion)
 Committed amounts under lending arrangements: SDR 200 billion
(US$288 billion), of which SDR 94 billion (US$136 billion) has not
been drawn.
 The largest borrowers: Argentina, Egypt, Ukraine, Pakistan
 The largest precautionary loans: Mexico, Chile, Colombia
 Capacity development spending: US$303 million in FY2020, nearly
a third of the IMF’s total budget
 Objectives of IMF
 To promote international monetary cooperation
 Enablegrowth of international trade
 Resource availability to the members experiencing payments
difficulties.
(Source imf.org)

World Bank
The World Bank was created in 1944 at the Bretton Woods
Conference, along with the International Monetary Fund (IMF). Various
countries were present at the Bretton Woods Conference. The conference
was dominated by United States and United Kingdom. The objective of
the World Bank was to provide financial loans to economically weak
countries. Goals

The bank has developed Millennium Development Goals targets.

i. stronger growth in unstable and African nations
ii. Promotion of health and education
iii. Co-operation between development and environment
iv. To provide better aid
v. Trade negotiations
vi. To provide support from multilateral institutions like the World
Bank.

To fulfil these goals following criteria are designed:

 Eradicate Poverty and Hunger
 Universal Primary Education
 Promote Gender Equality
 Reduce Child Mortality
 Improve Maternal Health
 Combat Diseases, Epidemics
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  Ensure Environmental Sustainability and Social Safeguards
United Nations Conference on Trade and Development (UNCTAD)
The United Nations Conference on Trade and
Development (UNCTAD) was established in 1964 as an organization to
promote the development of world trade. The intergovernmental
organization deals with trade and development issues. UNCTAD has 195
member nations. It has its headquarter in Geneva, Switzerland. It is a
member of the United Nations Development Group.

The UNCTAD work at the regional, national and global level

The key objectives of UNCTAD are-

 Comprehend options to address macro-level development challenges
 Achieve beneficial integration into the international trading system
 Diversify economies to make them less dependent on commodities
 Limit their exposure to financial volatility and debt
 Attract investment and make it more development friendly
 Increase access to digital technologies
 Promote entrepreneurship and innovation
 Help local firms move up value chains
 Speed up the flow of goods across borders
 Protect consumers from abuse
 Curb regulations that stifle competition
 Adapt to climate change and use natural resources more effectively
(Source- unctad.org)

UNCTAD fund implementation of Financial development align

with World Bank, IMF, WTO and the United Nations Development
Programme. UNCTAD primarily work with world governments for the
sustainability, development and social welfare.

The main goal of these Multilateral economic agencies is to

monitor, audit and track the economic activities for levelled development.
The another objective of these agencies is to bring out the underdeveloped
nations on the path of growth. They also deal with issues like inequality of
genders, poverty, child’s health and education, standard of living, better
trade and negotiations. They also try to maintain the international
relationship between nations in terms of trade and commerce.

2.10 EVOLUTION AND GROWTH OF

MULTINATIONAL COMPANIES- PATTERNS AND
PROCESSES OF GLOBALISATION

Before World War II, International trade and commerce was

restricted in the hands of colonial master nations and their colonies
suffered economic loss due to implementation of harsh regulation. After
the World War II new nations like USA, USSR, Canada, Australia
emerged as global economic leaders and the international business
developed. Technological advancement, improvement in transport
28
facilities, development of Management skills and societal development led
to more global interactions. This paved the path for globalization.
Analysed on the basis of the dynamic theory of social systems
globalization can be viewed as a phase embedded in the social and hence
economic evolution. (Luhmann 1984). Due to the development in
technology, the economic systems become independent. The advancement
led to dynamic change in process of trade and communication.

The time period of evolution of globalisation can be divided into:

 Multinational- 1920-1950- Due to high transport cost the multination
companies were having subsidiaries in other nations. These
subsidiaries were limited only for exchange activities and transfer of
profits.
 Global- 1950-1980- Global incorporation occur during this period. The
MNCs were looking at the subsidiaries as value for growth for
company rather than just transfer of profit. Cost of transport became
less and this lead to more liberal market.
 Transnational- From 1980 – Dualities of markets occur due to debates
like local vs global. The system demanded to be more environmental
conscious. The flexible market emerged resulting into global
competition.

A historical and evolutionary view leads to the observation that

globalization not only means a decreasing role of the rigidity of
boundaries, but as well an expansion and increasing density of global
competition. (Thomas Borghoff, Martin K. Welge)

The globalisation process can be divided into three stages:

 National – This stage involves starting of a national company and
expanding or diversifying the company at national level. For e.g. Tata
corporation started as steel company, now diversify the commodities
from car to salt.
 Internationalization – This stage involves building international
subsidies, expanding your product reach in the market of other
countries. It also includes establishing global relationship.
 Global Network – This stage is the about establishing global network
of the product and creating the company’s brand as global product.

At the beginning of the eighties, there was an emergence of a new

international division of labour, based on the globalisation of production,
which had been accomplished by the multinational companies, gradually
converted into central actors in the new world economy. (Fröbel,
Heinrichs and Kreye 1980) This new economic world featured:

 The economic overviewed by proper financial system

 Global investment
 Multiple location production process which is flexible in nature
 Less transportation costs
 Emergence of information technology
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 The emergence of the three major transnational economies- USA,
Japan and Europe

In terms of the new geography, compared to the 1950s, the 1980s

saw a narrowing of the geography of the global economy and a far
stronger East-West axis. This is evident in the sharp growth of investment
and trade within what is often referred to as the: the United States,
Western Europe, and Japan (Sassen, 1994). One of the most striking
transformations produced by neo-liberal economic globalisation lies in the
huge concentration of economic power in the hands of the multinational
companies: of the 100 largest world economies, 47 are multinational
companies; 70% of world trade is controlled by 500 multinational
companies and 1% of the multinational companies holds 50% of direct
foreign investment (Clarke, 1996).

This resulted in the increase in holding of multinational companies

in national financial system of a country. Although it gives boost
employment as local population is getting job , it also reflect on the local
business. The profit gained by these MNC’s are often contribute to core
economies and not the subsidies’ country. These inequalities in
development widen the gap between core and periphery regions. This is
the by-product of the model of globalisation. Multinational agencies such
as the World Bank and the International Monetary Fund also recognise
this problem. According to the Human Development Report the
difference in revenue between the five richest and the five poorest was, in
1960, 30 to 1, in 1990, 60 to 1 and, in 1997, 74 to 1.

This scenario is a criticism on the globalisation model. The model

makes sure the benefit of corporations and economically strong
economies, wherein weaker economies suffer from debts and
underdevelopment.

2.11 SUMMARY

From this chapter we understood the spatial organisation of world

economy. The time period of the world economy can be divided into pre
modern era and modern era. In the modern era colonialism dominated the
world economy. After colonialism, neo colonialism replaced the old
system with new norms. These new norms resulted in the structuration of
world economy into core, periphery and semi periphery areas. After the
world war II and introduction to new technology and transport system the
world economy changed as it became more global. Although the world
became more integrated and connected, one can observe the inequalities in
the development of the nation. The core, periphery and semi periphery
areas do exist in new world system as well. The multinational agencies
like IMF, World bank and UNCTAD were established for dealing with
this inequalities and other social issues like health, education and standard
of living in these under developed nations. However, the working of these

30
agencies are limited to providing loans and finical aid rather than help
them grow the nations economy.

2.12 CHECK YOUR PROGRESS/EXERCISE

1. Answer True or False

i. The term Neo colonialism came to use after the world war II.
ii. According to the report the difference in revenue between the five
richest and the five poorest was, in 1960, 30 to 1, in 1990, 60 to 1 and,
in 1997, 74 to 1.
iii. IMF have membership of 100 countries.
iv. The United Nations Conference on Trade and
Development (UNCTAD) was established in 1964.
v. The Ruhr- Westphalian region is the core economic region of Europe.

2. Fill in the blanks.

i. During 1500-1820 African slaves were brought to ______________by
the Portuguese to work as plantation workers.
ii. The demand of ____________had increase in Britain due to invention
of spinning jenny and later power loom.
iii. _____________wrote books on economics ‘Works and Days’.
iv. UNCTAD has its headquarter in __________________.
v. IMF has its headquarter in __________________.

3. Answer the following Questions (Multiple Choice_

i. Industrial revolution began in ____________.
a) Great Britain
b) Spain
c) France
d) USA

ii. Globalisation leads to the emergence of the three major transnational

economies USA, ____________and Europe.
a) China
b) Japan
c) India
d) Brazil

iii. ______________of world trade is controlled by 500 multinational

companies.
a) 55%
b) 14%
c) 70%
d) 9%

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iv. ________________ region have weak governing bodies.
a) Core
b) Peripheral
c) Semi- Peripheral
d) Nucleus

v. The ____________was established in July 1944.

a) UN
b) IMF
c) WTO
d) UNCTAD

4. Answer the following questions

i. Discuss the impact of colonialism.
ii. What is Neo-Colonialism? What was the impact of Neo-Colonialism?
iii. Write a note on IMF
iv. Explain industrial revolution and rise of core economies in Europe.
v. Explain the structuration of world economy.

2.13 ANSWERS TO THE SELF-LEARNING

QUESTIONS.

1.i True
1.ii True
1.iii False
1.iv True
1.v True
2.i America
2.ii cotton
2.iii Hesiod
2.iv Geneva
2.v Washington, D.C
3.i Great Britain
3.ii Japan
3.iii 70%
3.iv Peripheral
3.v IMF

2.14 TECHNICAL WORDS AND THEIR MEANING

 Palaeolithic- Old stone age

 Mesolithic- Middle stone age
 Neolithic- New stone age

32
 Mercantilistic - The economic theory that trade generates wealth and
is stimulated by the accumulation of profitable balances, which a
government should encourage by means of protectionism.
Mercantilism is an economic policy that is designed to maximize the
exports and minimize the imports for an economy.
 Bullionism- It is an economic theory that defines wealth by the
amount of precious metals owned.
 Pre-colonial world - Historical period before colonisation.
 Colonialism- The practice by which a powerful country controls
another country or countries, in order to become richer.
 Neo-colonialism - It is the practice of using economics, globalisation,
cultural imperialism and conditional aid to influence a country instead
of the previous colonial methods.
 Core regions - A central region in an economy, with good
communications and high population density and prosperity
 Periphery regions - The regions that are less developed. These
countries usually receive a disproportionately small share of global
wealth.
 Flexibalisation- The act or process of making something flexible.
 Globalisation- It is the word used to describe the growing
interdependence of the world's economies, cultures, and populations,
brought about by cross-border trade in goods and services, technology,
and flows of investment, people, and information

2.15 TASK

In a chart show the books and name of the authors of economic

history.

2.16 REFERENCES FOR FURTHER STUDY

 Berry, B. J. L. et. Al. (1976): Geography of Economic Systems,

Prentice Hall, Englewood Cliff.
 Boyce, R. D. (1974): Bases of Economic Geography, Holt, Rinehart
and Winston, New York
 Bryson John, Henry Nick, Keeble David and Martin Ron, (eds.)
(1999): The Economic
 Cole, J. P., (1983): Geography of World Affairs, Butter worths,
London.
 Conkling, E. C. & Yeates, M. (1976): Man’s Economic Environment,
McGraw Hill, London.

33
 Frenkel, Stephen. 1992. Geography, empire, environmental
determinism. Geographical Review 82 (2)
 Geography Reader- Producing and Consuming Global Capitalism,
John Wiley and SonsLtd., New York.
 Harrington J.W. and Warf Barney, (1995): Industrial Location-
Principle, Practice and Policy, Routledge, London and New York.
 Harrington J.W. and Warf Barney, (1995): Industrial Location-
Principle, Practice and Policy, Routledge, London and New York.
 Hartshorn A. Truman and Alexander W. John, Third edition, (2010):
EconomicGeography, PHI Learning Private Ltd., New Delhi
 Hodder, B. W. and Lee, R. (1974): Economic Geography, Field of
Geography Series, Methuen & Co. Ltd, London.
 Hussain Majid (ed.), (1993): Perspectives in Economic Geography,
Vols. 1- 6, Anmol Publication, New Delhi.
 Knox Paul, Agnew John and McCarthy Linda, (2008): The Geography
of the World. Economy, Hodder Education, UK.
 Liemt van Gijsbert, (eds.) (1992): Industry on the move- Causes and
consequences of International Relocation in the Manufacturing
Industry, International Labour office, Geneva.
 Lloyd, P. E. and Dicken, P. (1972): Location in Space, Harper & Row,
San Fancisco.
 Lowe Moryadas, (1975): The Geography of Movement, Haughton
Mifflin & Co.
 Rodrigue Jean-Paul, Comtois Claude and Slack Brian, (2006): The
Geography of Transport System, Routledge, London and New York.
 Sheppard Eric and Barnes Trevor J., (eds.) (2000): A Companion to
Economic Geography, Blackwell, Massachusetts.
 Smith, D. M (1971): Industrial Geography: An Economic Geographic
Analysis, John Wiley & Sons.
 Tarrant, J. R. (1974): Agricultural Geography, Problems in Modern
Geography Series, John Wiley & Sons.
 Will banks, Thomas J (1980): Location and Well- Being, An
Introduction to Economic Geography, Harper & Rowr San Fransisco.
 Wood Andrew and Roberts Susan, (2011): Economic Geography-
Places, network and flows, Routledge, London and New York.



34
 3
ORGANIZATION OF PRODUCTION:
AGRICULTURE AND INDUSTRY -
GLOBAL PATTERNS AND TRENDS
After going through this chapter you will be able to understand the
following features

Unit Structure :

3.1. Objectives
3.2. Introduction
3.3. Subject Discussion
3.4. Agricultural Patterns
3.5. World Agricultural Regions
3.7. Theory of Agricultural Land use and Critique
3.8. Technology, modernization, and structuring of agrarian regions in
colonial and post-colonial periods
3.9. World Pattern of Hunger
3.10. Aspects of Food security
3.11. World Industrial Regions
3.12. Factors and Processes affecting Location of Industries
3.13. Critical Assessment of Theories of Industrial Location
3.14. Globalization and shifting location of industries
3.15. New Industrial Regions – East Asian and South-East Asian
economies
3.16. Export Processing Zone (EPZ)
3.17. Special Economic Zone (SEZ)
3.18. Summary
3.19. Check your Progress/Exercise
3.20. Answers to Self-Learning Questions
3.21. Technical words and their meaning
3.22. Task
3.23. References for further study

3.1. OBJECTIVES

By the end of this unit, you will be able to -

 Know about the evolution of agriculture and identify the different
types of agricultural regions of the world
35
 Explain agricultural land use patterns in economic terms and how
modernization transformed agricultural output
 Understand the struggle against hunger across the globe and initiations
to end hunger through food security
 Spot the industrial regions of the world along with explaining where to
should firm locate their factories and why
 Perceive the role of globalization regarding the development of new
industrial regions and zones.

3.2. INTRODUCTION

The chapter will deal with how the cultivation of crops and
livestock rearing evolved. Besides, it will focus on the growth of
agricultural regions and patterns of agricultural land use. We shall also
learn the impact of technological advancement causing modernization in
agriculture. This chapter will provide an insight on the factors affecting
the location of industries, the theories determining their location, and the
growth of industrial regions across the world. Following this, we will
understand the world pattern of hunger, the concept of globalization, and
its impact on the development of new industrial regions and zones.

3.3. SUBJECT DISCUSSION

Agriculture together with livestock rearing replaced hunting and

gathering as the most significant primary activities throughout the world.
Agricultural regions with basic farming techniques different
specializations developed across latitudes. Slowly, this primary activity
witnessed the involvement of technologies for increasing agricultural
output to feed the growing population. The inception of the industrial
revolution changed the map of the world economy. Theories were
established to find a suitable location for industries for investors.
Globalization accelerated during the industrial revolution causing large
unrestricted flows of information, goods, ideas, cultural values, capital,
services from one region to another which in turn helped in building an
integrated economy. This also led to the development of new industrial
regions and economic zones. However, while these expansions were
occurring the world faced severe issues of hunger due to various reasons.
Researchers and policy makers are still trying to diminish food hunger
through initiatives like food security that ensures people’s physical, social,
and economic access to sufficient, safe, and nutritious food.

3.4 AGRICULTURAL PATTERNS

Agriculture is a way through which both cultivation of crops and

livestock rearing sustain the global human population by depending upon
each other. The word agriculture is derived from the Latin words – ager
(field) and colo (cultivate), combining as “agricultura” meaning field or
land tillage. The Oxford English Dictionary (1971) defines agriculture as
36
“The science and art of cultivating the soil, including the allied pursuits of
gathering in the crops and rearing livestock (sic); tillage, husbandry,
farming (in the widest sense).” According to United Nations (UN), more
than one-third of the world’s land area (excluding Greenland and
Antarctica) is in some form of agricultural use. Crop farming alone covers
about 12 percent of the Earth’s total land area. At least two-thirds of the
labor force is directly involved in farming and herding, in developing
countries. India is an agrarian country as 70 percent of its population
depends on agricultural activities.

Hunting, gathering, and fishing were the common means of

subsistence throughout the world, before the advent of agriculture. The
hunter-gatherers' invented tools, learned to control fires and adapted to the
environments based on their needs. The development of spears for hunting
was path-breaking. Hunters also invented tools to catch fish, like the
hooks, harpoons, and baskets to harvest trapped fish by cutting small
patches of standing water off from the open sea. These pre-agricultural
universal forms of primary production are now practiced by only a few
thousand people worldwide, in isolated and remote pockets of the low
latitudes and high latitudes. Few of the present hunting and gathering
practicing regions are - interiors of New Guinea, Southeast Asia,
diminishing segments of the Amazon rain forest, a few districts of tropical
Africa, northern Australia, and the Arctic region.

Agriculture replaced hunting and gathering as the most significant

primary activities and the entire event is termed as “The First Agriculture
Revolution”. It is spatially the most widespread and is found in every
region of the world where productive soils, adequate moisture, good
growing season length prevails. Agriculture was established in lands of
plenty according to geographer Carl Sauer, as only in such places people
can afford to experiment with raising plants or take time to domesticate
animals and breed them. Some scholars believe that the first domestication
of seed plants and cultivation of crops occurred in the Nile River Valley in
North Africa (fig. 1), however, most of the scholars believe that the crucial
development of cultivation took place in a region of Southwest Asia (also
called the Fertile Crescent) more than 14,000 years ago.

Scholars argue whether the process of animal domestication took

place before the advent of agriculture or later. Whatsoever, the integrated
use of plants and domesticated animals eased the work for early farmers.
Since then both the phenomenon became independent because animals
were used for ploughing fields, animal waste fertilized the crops and in
turn, the crops fed the animals. Also, animal domestication served as a
source of meat and a provider of milk. In Southwest Asia and parts of the
Mediterranean Basin, people domesticated goats, sheep, and camels.
Southeast Asians domesticated buffalo and chickens. In East India and
South Asia, people domesticated cattle, while in Central Asia, people
domesticated yak, horse, some species of sheep, and goats. In the Andean
Highlands, Americans majorly domesticated the llama and alpaca.

37
 There are two types of agricultural patterns – Subsistence
agriculture and Commercial agriculture.

Subsistence agriculture is a form of production that indicates total

self-sufficiency on the part of its members; where all crops or livestock are
raised to sustain the farm family, and surpluses produced are rarely sold
for cash. Subsistence farmers often hold land in common and surpluses are
shared by all the members of the community. In most regions of Africa,
South and East Asia, and much of Latin America, a large percentage of
people are dependent on subsistence farming. There are two types of
subsistence agriculture: extensive and intensive. Extensive subsistence
agriculture involves large areas of land, but low production per land unit,
minimal labor input per hectare, and practiced in areas where population
densities are low. Out of several types of extensive subsistence agriculture,
two are most common - nomadic herding and shifting cultivation or slash
and burn (discussed later in the chapter). Intensive subsistence
agriculture involves the cultivation of small landholdings, high yield per
unit area, expenditure of great amounts of labor per acre, and is practiced
in areas with high population densities. It is a popular densely populated
area of Asia. India, China, Pakistan, Bangladesh, and Indonesia, other
Asian, African, and Latin American countries are subsistence producers of
rice, wheat, corn, millet, or pulses. Vegetables and some livestock are part
of this agricultural system. Aquaculture is practiced in rice paddies and
ponds.
Commercial agriculture is a cropping method where crops are
cultivated and livestock are raised to sell the products on the market to
make a profit. In other terms, commercial agriculture is also known as
agribusiness. In commercial agriculture, large-scale crops are grown by
using modern technologies, machinery, irrigation methods, and chemical
fertilizers. Therefore it requires a huge capital investment. Cash crops and
cereals are mainly grown in this type of farming.

(Modern political boundaries are shown for reference)

Fig 1. The Fertile Crescent and Nile River Valley
38
3.5. WORLD AGRICULTURAL REGIONS

Whittlesey World Agricultural Systems/Region:

Derwent Whittlesey recognized that the regional pattern in an
agricultural classification is determined by the interaction between 2 sets
of variables – physical and non-physical.

1. The conditions of the natural environment set limit for crop production
and livestock raising as the most important elements are – terrain,
climate, water resources, and soil.
2. Influence of human interference on the natural environment.

In 1936, Whittlesey showed the relationship between climate and

agricultural regions in his paper “Major Agricultural Regions of the Earth”
published in the annals of the Association of American Geographers
(vol.26: 199-240). In his monumental paper, he delineated the agricultural
system of the earth based on the following five characteristics of
agriculture which appear to dominate every agricultural type -

(1) The crop-livestock association.

(2) The methods and techniques used to grow the crops and produce the
stock.
(3) The intensity of application to the land of labor, capital, and
organization, and the outturn of product which results.
(4) The disposal of the products for consumption (i.e. whether used for
subsistence on the farm or sold off for cash or other goods).
(5) The ensemble of structures is used to house and facilitate farming
operations.

Based on the above indicators, Whittlesey outlined the following

types of agricultural regions (fig. 2)-

1. Nomadic herding
2. Livestock Ranching
3. Shifting cultivation
4. Rudimentary Sedentary Tillage
5. Intensive Subsistence Tillage with Paddy Rice
6. Intensive Subsistence Tillage without Paddy Rice
7. Commercial Plantation Crop Tillage
8. Mediterranean Agriculture
9. Commercial Grain Farming
10. Commercial Livestock and Crop Farming
11. Subsistence Crop & Livestock Farming.
12. Commercial Dairy Farming
13. Specialized Horticulture

To broaden the agricultural regions –

1. Nomadic Herding – Nomadic herding is the wandering yet controlled
movement of livestock that is solely dependent on natural forage over
39
extensive land. Sheep, goats, and camels are most common, while
horses and yaks are locally important. Transhumance is a special form
of seasonal movement of livestock that involves either regular vertical
migration from mountain to valley pastures between summer and
winter months or horizontal movement between lowland grazing areas
to pastures that are temporarily lush from monsoonal (seasonal) rains.
Availability of drinking water and natural grasslands (forage) decide
the nomads’ length of stay in a particular place and their direction of
migration. Their temporary settlements is a tent which can be
transported easily or replaced and are widely scattered. Nomadic
herding evolved in the Eurasian-African landmass where domestic
animals were first put to man’s use. This aboriginal form of livestock
business is carried on by selling their animals or their products like
milk, meat, animal hair, skin, bone, etc. Due to socio-economic and
cultural change, nomadic herding is prominently scattered in semi-arid
regions of the world (fig. 3). In the tundra region, northern parts of
Norway, Sweden, Russia, and Finland constitute a significant part of
the herders’ population like the Eskimos, Nenets, Lapps, and Yakuts.
During the short summer season, nomadic herders live on the
mountains and during autumn they migrate to coniferous areas of the
south to protect themselves from the cold of the Tundra climate. The
North Africa and southwest Asia regions, the East African highlands
and semi-arid fringes of the Sahara desert; countries Iraq, Iran, Syria,
Jordan, Saudi Arabia, UAE, Turkey (Plateau of Anatolia), and Sudan.
These regions have scarce rainfall and due to the climatic conditions,
the major vegetation includes small grasses. During summers, herders
in the highlands of east-central Africa graze their sheep and goats in
the tall grasses of mountains and plateau; while during winters they
migrate to the short grass pastures of the savannas. Sheep, goats, and
camels are commonly reared here as scarcity of rainfall causes paucity
of pastures; and these animals can survive even in drought conditions.
Masai, Bedouin are some of the common tribes here. In the Central
Asia region, the traditional lands of nomads include Tibet, Mongolia,
Turkmenistan, Kazakhstan, and Uzbekistan. The Kazaks, Kirghiz, and
Mongols are among the principal pastoral nomads, who in search of
fodder and water migrate to the foothills, high valleys, mountains, and
plateau.

40
 Fig 2. The agricultural regions of the world, after D. Whittlesey.

2. Livestock Ranching – In the present century, a large change has

occurred in the lifestyle of nomadic herders. There is a reduction of
their grazing areas as livestock ranching has advanced into drier
regions, and many communities are pushed to adopt a sedentary way
of living. Livestock Ranching, a semi-sedentary system is a practice of
raising herds of animals in a large tract of land for breeding and
growing stock. Rearing of grazing animals like cattle and sheep is
common in temperate and dry regions of the world. Ranching includes
labor-extensive enterprises specializing in one or more livestock
species and producing largely animals not only for slaughter (for meat,
skins, etc) but also for wool and milk; by grazing within an allotted
boundary. Ranchers do not involve in migration; they have a fixed
residence and operate as individuals. Also, ranching is used for
commercial enterprises, with the generation of cash income as the
primary function of the livestock raised. Livestock ranching is
common in the Pampas region of South America (Brazil, Argentina,
Peru), the western United States, the Prairie Provinces of Canada, and
Australia, New Zealand, and the Republic of South Africa.

Fig 3. Nomadic Herding regions

41
3. Shifting Cultivation – It is found in warm, moist, and tropical areas of
the world (fig. 4). Farmers practicing this form of agriculture clear a
portion of forest land for farming. After several harvests, the soils get
depleted and the farmers shift to another land to repeat the process. In
other words, shifting cultivation is a mode of farming system in which
land under natural vegetation i.e. usually forest is cleared by the “slash
and burn” method. Cutting and burning of the native vegetation by the
farmers is followed by plantation of common arable crops in the
exposed. As the original organic matter reserve in the topsoil
decomposes and rainfall leaches out the nutrients from the root zone
for two or three seasons in succession, the farmers abandon the cleared
plot and move to an adjacent patch of forest to repeat the same. They
would allow each cultivated plot to recover its vegetation and fertility
(fallow period) for some fifteen or twenty years before returning to it.
The main function of the fallow period is to maintain and restore soil
fertility and reduce soil erosion. A variety of food grains like maize,
rice, millets are the principal crops; and cash crops like ginger,
turmeric, jute, soybeans are commonly grown. This extensive rotation
(forest-crop-forest) system has diverse forms and has acquired local
names across the regions of the world. For eg. Shifting cultivation is
known as Ladang in Indonesia, Ray in Vietnam, Chena in Sri Lanka,
Roca in Brazil, Milpa in Mexico and Central America, Jhum in north-
eastern India, Podu in Andhra Pradesh, etc. However, less than 3
percent of the world’s people are still predominantly engaged in
shifting cultivation on about 1/7th of the world’s land area. Previously,
the fallow land had enough time to restore soil fertility making it
sustainable for many generations. In recent times, progressive
population growth has disrupted the system and the farmers are forced
to return to the same plots earlier even before the complete
rejuvenation of the soil. This not only is deteriorating the soil fertility
but also there is a progressive erosion of soil. Shifting cultivation is
still common in the humid tropics of Sub-Saharan Africa (Zaire,
Rhodesia, Tanzania, Ghana, Madagascar), Southeast Asia (Java,
Indonesia, Vietnam, Sri Lanka, India, Myanmar, Philippines), and
South America (Mexico, Central America, Brazil, Venezuela).

4. Rudimentary Sedentary Tillage – This subsistence type of farming

activity is practiced on the same tract of land years after year. Unlike
shifting cultivation, rudimentary sedentary tillage includes majorly
crop rotation rather than field rotation. After continuous cultivation for
many years, the land is left fallow for some years to regain its soil
fertility. This farming is commonly practiced in tropical regions and
involves the growing of grain crops like maize, tree crops like rubber,
and others like potatoes, sweet potatoes, bananas, etc. Rudimentary
Sedentary Tillage is concentrated in the tropical lands of Central &
South America, Africa, South-East Asia.

42
 Fig 4. Regions practicing Shifting Cultivation

5. Intensive Subsistence Tillage with Paddy Rice Dominant –

Intensive subsistence tillage is a form of subsistence agriculture that is
characterized by high output per unit of land and relatively low output
per worker. As intensive farming is practiced in the densely populated
area every bit of tillable land from hill slopes to flatlands is utilized for
agriculture. Only the steepest hills and the most infertile areas remain
unutilized. Rice is the dominant crop here as it employs and feeds a
large number of people per unit area. Along with paddy, a double or
multi-cropping pattern is also practiced on the same land during a year.
The same paddy fields are used in the dry season to raise food or cash
crops like jute, cotton, groundnut, sugarcane, tobacco, or oilseeds.
Large farming lands are subdivided through many generations
resulting in small land holdings for many farmers. Traditionally,
farming was carried out through primitive tools and included more
hand labour for wet paddy cultivation. Animals like buffaloes were
used for ploughing the fields. With the advancement in farming
techniques, machinery has been developed for plowing the flooded
fields, planting and harvesting the paddy. For example - Japan is
highly mechanized in intensive farming. However, in many parts of
Monsoon Asia, machines are not yet widely accepted by farmers as
they are unaffordable. Despite constraints, Asian farmers are now
producing even greater yields of paddy per acre due to the use of
improved varieties of hybrid rice seeds. Increasing amounts of
artificial fertilizers to replenish vital plant nutrients in the soil are now
replacing manures in many countries. Often known as the ‘monsoon
type of agriculture’, this rice dominant intensive farming is common in
- Southeast China, Japan, East India, and much of Southeast Asia -
Bangladesh, Myanmar, Thailand, Srilanka, Malaysia, Philippines, etc.

6. Intensive Subsistence Tillage without Paddy Rice Dominant – Due

to variations in climate, terrain, soil, vegetation, etc., it is not possible
to grow paddy in many regions of the world. Therefore, this variant of
farming though similar to the aforementioned type of farming is
43
 designed for areas where precipitation is too low for wet paddy
cultivation. These dry climatic regions with a low amount of rainfall
grow grain crops like millets, maize, and wheat, other than rice. Oats,
corn, sorghum, pulses, barley, soybeans, and cash crops like cotton,
tobacco are grown under this type of farming. However, due to the
climatic conditions, farming in these regions suffers from frequent
famines and crop failures. This agricultural activity is practiced in less
wet areas of northeast China, Manchuria, North Korea, Myanmar,
Thailand, Middle-East, Central America, Southern and Northern
Africa, Southern Mexico, interiors of India (Punjab, Haryana, and
Western U.P.), throughout the year.

7. Commercial Plantation Crop Tillage – Whether practiced in large

tracts of land or smaller areas, this type of tropical agriculture adds
entirely or majorly a high commercial value. The commercial
plantation is highly capital-intensive farming and involves extensive
labours. This type of farming was developed in parts of Latin America,
Africa, and Asia to provide tropical crops to the European market
during the colonial period. Cultivation of tropical and sub-tropical
crops in plantations is still carried on to cater to the domestic and
international markets. These estate farming are found in less populated
areas and the farm size varies from few hectares to thousands of
hectares. Major plantation crops include tree crops like tea, rubber,
coffee, palm oil, spices, cocoa; fruits include coconut, grapes, apples,
oranges, avocado, and mangoes. The commercial plantation is
common in Southeast Asia - India, Indonesia, Malaysia, Philippines,
Sri Lanka, West Africa, South and Central USA, and Central America.
Asia is the leading producer of jute, tea, rubber, tobacco, and coconut
in the world.

8. Mediterranean Agriculture – This type of agriculture is found in

regions having the Mediterranean type of climate – hot and dry
summers, mild and wet winters; often surrounding the Mediterranean
Sea, and also regions with similar climates (fig.5). The evolution of
traditional Mediterranean agriculture depended on three environmental
characteristics –
a. Rainfall in these climatic regions is confined to winter resulting in
a long summer drought. Crops are sown in autumn and harvested
during summer.
b. The temperatures are such that a variety of temperate crops can be
grown in the rainy season, and sub-tropical crops during summers
with the help of irrigation. Crops such as rice, wheat, barley,
sugarcane, tobacco, potatoes, and fruits like citrus fruits, bananas,
and deciduous fruits are also grown.
c. Mediterranean agriculture has its typical terrain called locus on the
shores of the Mediterranean Sea, where coastal plains are backed
by low hills which share the summer drought, and mountains that
receive rainfall in both winter and summer seasons.

44
 This type of agriculture is unique as it is a mixture of diverse bio-
cultural activities - animal husbandry, crop farming, horticulture,
floriculture, citrus fruits, and vineyards. To specify, cereal crops like
wheat are most important in the Mediterranean lands. The Mediterranean
lands are also known as ‘orchard lands of the world’ as this region
supplies citrus fruits, olives, and figs almost to the world. Fruits are
commonly grown in California, Israel, and parts of France, Spain, and
Italy. Grapes of different flavours are raised in different parts of the
Mediterranean lands for wine-making - Southern Spain, Western Portugal,
France, Italy. Other than these, Mediterranean agriculture is common in
Central Chile, southwest of Cape Province in South Africa, and the
northern African coastal strip.

Fig. 5. Regions practicing Mediterranean Agriculture

9. Commercial Grain Farming – Commercial farming originated due

to the mechanization of farms in the continental lands of mid-latitudes.
It includes growing crops and rearing animals for food, raw material,
or export, particularly for profit maximization. Farmers cultivate
grains on large scale in the regions where population density is low,
there is high availability of land, low rainfall (between 305 and 660
mm), and a fraction of the population is economically dependent on
agriculture. Monoculture of wheat is mainly practiced as both spring
wheat and winter wheat are grown in regions of commercial grain
farming. Maize, barley, oats are other important crops grown. The
farm sizes are very large ranging from 240 to 16,000 hectares in mid-
latitudes and farming techniques, beginning from plowing to
harvesting are highly and entirely mechanized. Besides, a low density
of population facilitates higher per capita land availability. As the
name suggests, commercial grain farming is entirely dependent on
export; where the cultivators consume very little and products in bulk
are sent to the market for export. The market governs the magnitude of
production and also determines the nature of crop production. As
commercial farmlands are located at a distance, advanced transport
45
 systems (rail and road) are a prerequisite to carry out smooth export
business (farms to market). Commercial grain farming is adopted in
prairies of North America – USA and Canada; Eurasian steppes –
Russia, Ukraine, Germany, France, Netherlands, Austria, etc.; Pampas of
South America – Argentina; and southern Australia.

Fig.6. Regions practicing Commercial Grain Farming

10. Commercial Livestock and Crop Farming – Also known as mixed

farming, this type of farming involves both growing crops and rearing
livestock on the same farm. Crop production depends on the animal
manures used as fertilizers and supply of draught animals, which plays
a key role in land tillage. While livestock depends on crop residues
and grazing of the natural veld. The main advantage of mixed farming
is that being a closed system both the enterprises are integrated and
interwoven – waste products of crops are used as fodder for livestock
which subsequently returns its waste as manure to the crop field. Many
crops are grown in mixed farming. Cereals like wheat and maize are
common. Mixed farming is also labeled as the largest animal
production system in the world; as it produces 92% of the world's milk
supply, 70% of sheep and goat meat. About 40-80% of livestock is
associated with mixed farming systems.
Mixed farms are characterized by extensive use of fertilizers and
manures, high expenditure on machinery for efficient methods of
farming, and also skilled farmers who are expertise in farming and
aware of the market of their products. Proximity to urban markets and
connectivity from farm to markets are priorities, as mixed farming
generates fairly high agricultural returns. Due to its characteristics,
mixed farming has few advantages like firstly even during a crop
failure or fluctuation of prices, the farmer can depend on livestock for
income. Secondly, if crops are grown in rotation, a succession of
different crops are grown which reduces the risk of plant disease and
maintains the soil fertility. Third, farm-produced manure and fodder
save purchase costs from external suppliers for farmers. Commercial
livestock and Crop farming are common in the humid areas of the mid-

46
 latitudes, except Asia. It is found throughout Europe starting from
Ireland to Russia. It is also found in North America, in the ‘pampas’ of
Argentina, South Africa, South East Australia, and New Zealand.

11. Subsistence Crop & Livestock Farming – Another form of mixed

farming, but nearly all crops or livestock are raised for their
consumption (farm family) and rarely the surpluses are sold for cash or
are stored for later use. Subsistence Crop & Livestock Farming is a
traditional method of farming where primitive tools are used by
farmers for plowing and harvesting crops. Sheep and goats are mainly
reared while wheat, maize, barley are the main crops. It is found in
Northern Europe, the Middle East, Mountain regions of Mexico.

12. Commercial Dairy Farming - Dairying is capital-intensive farming

that involves the rearing of cattle for milk, butter, cheese, and other
dairy products. This type of farming evolved in Northern Europe in the
1800s and then spread to areas with cool and moist summers, and
where hay is available throughout the year as a satisfactory crop. Until
the 1850s dairying took place only on the farm and the fresh milk was
consumed by the farmer’s family members or at utmost transported to
nearby villages and towns. Butter and cheese were made by the family
members of the farmers. In the second half of the 19th century,
railways allowed the transportation of fresh milk from farms to distant
towns and cities. The invention of the cream separator and churner
transferred the making of butter, cheese, condensed milk, etc. to
factories for fulfilling the demand. The size of cattle and farms differs
country-wise. The modern dairy farm requires plenty of capital and
outlays as it requires - good breeds of milk cows, milking machinery,
special buildings for milking, and barns or silos for the storage of
winter fodder, field equipment for an arable dairy farm, and hay-
making machinery on grass farms. Milk production is an enterprise on
many different types of farm in Europe, Northern USA, Canada,
Russia, Australia and New Zealand and nearly 80% of the total milk
production and milk products comes from these regions. Sweden and
Denmark witnessed major development in the dairy sector. Belgium,
Netherlands, France, Finland, and Switzerland are also contributors to
milk and milk products.

13. Specialized Horticulture - This type of farming includes specialized

cultivation of fruits, vegetables, flowers. Also known as horticulture,
the items produced are majorly used for trade purposes. In horticulture,
the farms are small, lands are intensively cultivated and soil fertility is
maintained by using manures and fertilizers. The vegetable and fruit
gardens are scientifically managed to achieve optimum yields and
profitable returns. Generally, these farms are located close to the urban
centers and high densely populated areas. Specialized horticulture in
the U.S.A. is known as ‘truck farming’ because vegetables and fruits
are supplied to the urban and industrial markets through trucks from
distant farms. It is popular in the densely populated industrial districts

47
 of the U.S.A. – California, Texas, Florida; European countries – Great
Britain, Denmark, Germany (apple), Netherlands, France, Italy,
Switzerland; Argentina (grapes); Saudi Arabia – Iraq (popular for
dates); India and South-East Asia for spices, fruits like – orange,
mango, pineapple, banana, apple, berries, apricot, plum, grapes, guava,
etc.

3.7. THEORY OF AGRICULTURAL LANDUSE AND

CRITIQUE

Von Thunen Agricultural Location Model

One of the earliest attempts to explain agricultural land use
patterns in economic terms was done by Johann

Heinrich von Thünen (1783–1850) in the early 19th century. Von

Thunen published his major work of the Agricultural Location Theory in
his book “Der Isolierte Staat” (The Isolated State) in 1826. The theory is a
normative economic model based on the concept of Economic Rent that is
prevalent in farm market distance relationships. Von Thunen farmed in an
estate not far from the town of Rostock, in northeast Germany. While
studying the spatial patterns of land use around towns in Rostock, he noted
that when commercial agriculture geared to produce food for people living
in nearby towns or cities, a geographical pattern of land use based on the
“perishability” of products and cost of transportation emerged. He also
noted that as one moved away from the town, one commodity or crop gave
way to another without any visible change in climate, soil, or terrain.
When Von Thunen mapped this pattern, he found that particular activities
were concentrated in certain zones around the center. Each of these towns
or market centers was surrounded by a set of more-or-less concentric rings
within which particular commodities or crops dominated based on weight,
perishability, and transportation cost.

Von Thunen’s theory is based on certain assumptions prevalent

during his times–
1. There is an “Isolated State” consisting of 1 market city and its
agricultural hinterlands.
2. The “Isolated State” is self-sufficient and receives products only from
its hinterlands. It has no other external influences. The hinterland ships
its surpluses only to the city market.
3. This city is surrounded by a belt of forest.
4. The physical environment of the “Isolated State” is homogeneous –
flat terrain, soil quality, and climate.
5. Farmers inhabited the “Isolated State” and transport their goods to the
market through – the horse and the wagon (as in 1826)
6. Transport costs govern the use of land. Transportation costs are
directly proportional to the distance i.e. if the distance to market
increases, transport cost increases as it gets added to the production
cost of the commodity.

48
7. Farmers aim to maximize their profits and adjust automatically to the
market’s demands.

As per Von Thune, the location of crops is determined by – a.

market prices, b. transport cost, c. yield per hectare. The basic principle of
his analysis is the concept of Economic Rent which is also termed
locational rent by few geographers. Economic rent is defined as the
measure of the advantage of one piece of land over another.

It is assumed that the production cost of the products is the same

and all farmers receive the same price at the market. But it’s the location
of the land from the market that adds as an advantage i.e. if the land is
closer to the market its locational rent is higher and it reduces with the
distance from the market. The formula for calculating Economic Rent is –

LR= Y (m-c) – Ytd,

Where, ----- LR= locational rent per unit of land, Y= yield per unit
of land, m= market price per unit of land, c= production cost per unit of
product, t= transport rate per unit of distance, d= distance from the market.

The main aim of the Von Thunen Model of Agriculture is to

explain why and how agricultural land use pattern varies with the distance
from a market. He argued that different types of land use produce different
net returns per unit area, and the price a farmer obtains can be calculated
by deducting the price at the market from the cost of transporting it to the
market. Based on these, he postulated two basic models:

a. Intensity theory - The intensity of the production of a particular crop

declines with the distance from the market. The intensity of production
is a measure of the number of inputs per unit area of land. Due to
increased transportation costs, intensive cultivation is most suitable for
farms located near the city center.

49
b. Crop theory - The type of land use will vary with the distance from
the market. The market price of a particular crop, transportation cost,
production cost, and yield per unit of land are the factors responsible
for the variation in the land use pattern. Von Thunen explained this
theory through 2 cases –

Case- 1: When two crops P and Q have the same production cost and
yield but is having different transport costs and market prices. If P’s
transport cost is costlier and the market price is higher, then crop P
will be grown closer to the market than crop Q. Therefore, the location
rent of crop P decreases more rapidly due to the higher transportation
cost of crop P.

Case- 2: When two crops X and Y have the same production and
transportation cost (per ton/km) but different market price and yield per
unit of land. If crop X has a higher yield and lower market price than crop
Y, it should be grown closer to the market than Y.

50
 Von Thunen generated four concentric rings (zones) of agricultural
activity surrounding the city –

 Zone 1 – Market Gardening and Dairying – is dedicated to cash

cropping. Intensive farming and dairying occur in the ring closest to
the city. Milk, dairy products, vegetables, and fruits are produced
closed to the city as they are a highly perishable product that requires
to reach the market faster. Also, these products cannot be stored due to
deficiency of food preservation facilities and the mode of transport is
primitive.
 Zone 2 – Firewood - Timber and firewood production marked the
second zone. Before industrialization, wood was a major fuel for
cooking and heating. Due to bulkiness wood is difficult to transport, so
it is located close to the city. Wood was highly demanded in the
market as it also produced fuel and building materials.
 Zone 3 – Extensive Field Crops/Grain crops with no fallow – It
included the growing of extensive field crops like food grains. This
zone has the highest cropping intensity of the next 2 zones. Farms of
crops can be located farther from the city center because grains last
longer than dairy products, easy to transport as they are lighter than
fuel which reduces the transport cost, and also because agricultural
land are cheaper if located far from the market.
 Zone-4 - Grain crops with 14% of fallow land - This zone had 14%
of fallow land, having less crop intensity as compared to zone-3. Here
farmers usually practiced seven years of crop rotation, with one year
each rotation of rye, barley, and oats, three-year rotation of pastures,
and one year as fallow land.
 Zone-5 - Three-field system – Rye is an important cereal crop in this
three-field system. Farmers grow rye in 1/3rd of land, 1/3rd of the field
is for pastures and the rest is left for fallow land.
 Zone 6 – Ranching and Livestock – Livestock raising replaces field
crops in the outermost ring surrounding the city center. This zone
generates market products. Animals are raised far from the city as they
can walk to the city center (self-transporting) either for sale or for
butchering. Also, by-products of livestock such as cheese, butter, etc.
are sold in the market. Beyond the sixth zone lies unoccupied
wilderness.

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 Fig. 7. Von Thunen Model (Zones)

Modifications of the Classic model

Von Thunen himself considered the potentially improved
transportation routes - navigable waterways, roads, and railways. All these
were speedier and transportation costs reduced especially along the
waterway. He introduced a stream in his model as important cities have
access to a navigable waterway (fig.8.). This addition resulted in the
elongation of the production zones along the stream. Zone 1 was least
changed in shape while Zone 2 no longer remained an enclosed zone as it
extended in a narrow band both up and down the stream. Extension of
zone 2 made riverside location favorable for wood production. The figure
of modified model is–

Fig. 8. Modified Von Thunen Model (Zones)

The provision of only “one market” was also subsequently

removed by Von Thunen. Consequently, leading to consideration of more
than one market center or minor market centers, the possibility of several

52
small towns of equal importance and intermixing of production zones due
to numerous towns.

Critical Analysis of the Theory

Since Von Thunen presented “The theory of Agricultural
Location” in the early 19th century, numerous scholars of different fields
including geographers have pointed out certain aspects that are not
applicable as mentioned in the classic and modified model. His model is
considered anachronistic, outdated, and irrelevant to the contemporary
economic spatial scenario.

The main points raised by scholars are as follows:

 The concept of “Isolated State” hardly exists in any region of the
world. Von Thunen assumed the homogeneous physical environment.
However, in reality, internal variations in soil and climatic conditions
are prevalent.
 Not all types of farming systems exist in all the regions of the world,
as mentioned in the model.
 Due to complexity, it is difficult to test Thunen’s measure of economic
rent and its intensity. Cost of labor per hectare, number of working
days, or cost of per hectare total input cannot be measured uniformly
in intensive and extensive farming.
 The role of environmental factors in determining land-use patterns has
been undermined.
 The pattern of agricultural land use will change with the change in
location of the market center or transportation (accepted by Von
Thinen himself)

Fig.9. Location of the transport link and its direction changing with
the pattern of agricultural land use

 Similarly, if there exist two market centers, then the pattern of land use
will be –

53
 When there are several market centers in a region, then the situation
will be -

 Not every operator is a rational decision-maker regarding choices of

crops, livestock, etc. Neither everyone seeks profit maximization from
their lands.
 Over the two centuries, many aspects have changed due to agricultural
system development, up-gradation of the transportation system, and
advancement in technological developments. Other than these, certain
regional geo-economic factors direct and determines the pattern of
agricultural land use. To elaborate, the decision-making process in
farming does not depends entirely on rationality and economic
conditions but also political authority.
 The original model is also static and deterministic. In recent times, the
economic growth and changes in demand-supply will alter the spatial
patterns of agricultural systems and land use. In turn, it will influence
the rate of change.

54
 Despite various criticisms and modifications, Von Thunen's logical
framework of “The theory of Agricultural Location” has been important in
the evolution of thought of scholars. The model was one of the earliest
pioneering approaches, which attempted to explain agricultural land use
patterns in an economic sense. His contribution to modern thinking in the
social sciences stands unparalleled even after 200 years.

3.8. TECHNOLOGY, MODERNIZATION, AND

STRUCTURING OF AGRARIAN REGIONS IN
COLONIAL AND POST-COLONIAL PERIODS

Till the mid-19th century, an increased number of agricultural

productivity and livestock in the temperate countries accompanied the
rapid development of the industrial revolution. It was necessary to shift
agriculture beyond subsistence and generate surpluses, for feeding
thousands of people working in the factories. Therefore a Second
Agricultural Revolution had to take place before the beginning of the
Industrial Revolution where output and productivity increased due to
major changes in technology. Even though the degree of
commercialization varied the factors explaining its degree remained
uniform irrespective of region. The first is the size of the urban population
that determines the size of the market for farmers as no one in urban areas
grows their food. Secondly, the size of the farm holds importance. The
majority of Asian and African farms are only a few hectares in size, and
production is mainly for self-consumption. The third factor is the location
of farms from towns. If the farms are remotely located transportation cost
to market is high, and farmers will find it difficult to sell crops or livestock
regularly.

Often described as “modernization”, the Second Agricultural

Revolution related the progress of industrialization and the general process
of economic development. Inputs that were once produced on the farms
were now purchased from the industry. By the end of the 19th century, the
industry started producing new means of transportation like the railroads,
steamships, and new animal-drawn mechanical equipment like - metal
plows, sowing machines. The second agricultural revolution was depended
on the development of new means of agricultural production resulting
from the industrial revolution: motorization (electric motors and
increasingly powerful motorized tractors and engines); large
mechanization (increasingly complex and effective machines); and
chemicalization (purified and synthetic fertilizers). Out of many one of the
most notable innovations of the industrial revolution was the application
of steam-power to machines. The invention of electricity, internal
combustion engines, and petroleum replaced human labour and draught
animals. The second agricultural revolution spread to every developed
country and some limited sectors of the developing countries in only a few
decades after World War II. It encouraged the consolidation of fields into
large, single-owner holdings. Soil preparation, fertilization, crop care, and
harvesting methods improved. Farms began to specialize. New
55
technologies improved the production and the products were intended for
sale. This led to the formation of a vast multiregional agrarian system
which composed of complementary specialized regional subsystems -
large crop-growing regions, regions with stockbreeding for dairy or meat
products, grape-growing regions (wine), vegetable and fruit growing
regions.

Agricultural moto-mechanization initially began in Great Britain,

the Netherlands, Denmark, and other European neighboring countries with
large agricultural areas. It slowly spread to countries where European
settler colonies were established like the United States, Australia,
Argentina, and Canada. Grains and other major crops were the first to use
tractors and harvester-threshers; as they occupied a large part of the arable
lands. Subsequently, moto-mechanization was utilized for harvesting
fodder, providing fodder to livestock, removal of their manure, milking
dairy livestock, and growing vegetable and fruit crops. The new banking
and lending system made the new equipment affordable to farmers.

The second agricultural revolution also rested on the selection of

plant varieties and different domestic animal breeds that are capable of
making a profit. Advancement of transportation made the supply of
fertilizers to farms and agricultural regions easier from distant locations
along with shipping of their products to more distant markets. The railroad
helped move agriculture into new regions, such as the United States’ Great
Plains. The railroad companies in Europe attracted immigrants to the
Great Plains region, and the railroads took them to their new towns, where
they transformed lands from open prairie grass to agricultural fields.

Farmers started using fertilizers on crops and artificial feeds to

livestock by the 19th century. This led to the increased agricultural output
which made it possible to feed much larger urban populations, enabling
the growth of an industrial economy. In 1900 the 3 principal mineral
fertilizers - nitrogen (N), phosphoric acid (P2O5), and potassium (K2O)
and it's world consumption reached from 17 million tons to 130 million
tons by 1980. Fertilizers were only intensively used in northwestern
Europe until 1950, but since then their application has increased both in
northwestern Europe and in the rest of the world. Between 1960 and 2009,
world grain yields rose to nearly 140 percent. Global consumption of
fertilizers dramatically increased since the 1950s, along with inputs of
pesticides and herbicides. However, crop output, varied considerably
every year, adversely or favorably affected by weather, insect damage,
plant diseases, and other growing season conditions. The largest increases
in yields were in Asia, primarily India and China, and South America.

For increasing yields, the use of the excessive quantity of

fertilizers was not the only solution. It also required varieties of plants that
are capable of absorbing the increased quantities of minerals. Previously
farmers obtained the seed from the previous crop harvested. Over periods
many varieties of seeds evolved that adapted to local micro-conditions and

56
gave an adequate yield even under poor environmental conditions. This
process doubled the cereal yields in Great Britain and the USA during the
1930s to 1970s due to the adoption of new varieties, use of pesticides,
fertilizers, and other improved practices. By 1960, new high-yielding
varieties of wheat and rice were introduced into Asia; that gave much
higher yields, provided that fertilizers, pesticides, and irrigation were
properly used. Improved variety of maize was first developed in 1920 in
the USA and by 1980 substantial amount of maize started growing in the
developing world. The introduction of herbicides in the 1940s
revolutionized farming in the developed countries. Traditionally farmers
controlled weeds through frequent ploughing and hoeing. Herbicides
destroy weeds and in return reduces the labour input. Also, previously
farmers had little control over pests (insects, fungi, etc.). The use of
insecticides and pesticides since the 1940s has reduced these problems.
Therefore the use of fertilizers, pesticides, herbicides, and the selection of
plants led to an increase in the production of grains, as well as different
other plant products and by-products, which fed the domestic animals. The
plants served as raw material for a vast industry that manufactured
livestock. This consequently led to the breeding of livestock. It enabled
the farmers to develop new breeds that were either strong milk producers
or meat producers.

In the past agriculture largely depended on rainfall especially in

monsoon-fed regions of Asia. To increase productivity for supporting the
world’s growing population, irrigation was paramount. Irrigated land
increased from 8 million hectares in 1800 to 40 million by 1900. Another
80 million hectares were added between 1900 and 1950. Irrigated land
rose from 120 million to 228 million hectares between 1950 and 1988.
This expansion was due to the benefits that irrigation serves–

a. It allows the cultivation of land where rainfall is insufficient for any

crop growth. Example: Egypt
b. It is an important supplement in regions with variable rainfall growing
season
c. During the wet season, it allows storage of water which can be used
the dry season.
d. Controlled water supply allows much higher yields
e. Controlled water supply also ensures full utilization of fertilizers

The modernization of agriculture also witnessed an increasing

proportion of farm produce to be processed by food manufacturers. Also,
there was the introduction of methods of preserving perishable foods, such
as freezing and canning. Processing of products mainly milk products like
cheese and butter shifted from the farm to factories. Consequently, the
food processing and packaging industry advanced. Many of these
agricultural intensification practices are linked to the Green Revolution or
the Third Agricultural Revolution. The Third Agricultural Revolution is
associated with the use of biotechnology to expand agricultural production
through intensive agriculture and bring larger harvests from a given area

57
of farmland. According to agricultural scientist Donald Baker - the First
Agricultural Revolution depended on a change in human effort, the
Second Agricultural Revolution depended on increasing the amount of
seed cultivation through improvements in technology, and the Third
Agricultural Revolution is based on land use. Green Revolution enabled
farmers to produce crops intensively on the land and to bring more,
marginal land into production. It relied on the hybridization of seeds to
produce a more stable crop in a variety of circumstances -wind-resistant,
drought-resistant, intensified use of technology and irrigation, and
expanded use of land. The Third Agricultural Revolution dates back as far
as the 1930s when agricultural scientists in the American Midwest began
experimenting with technologically manipulated seed varieties to increase
crop yields. American researcher Norman Borlaug developed a dwarf,
high-yielding wheat variety at a Mexican research center in the 1940s and
by 1960 Mexico soon went from importing half its wheat to being a wheat
exporter. Similarly, the International Rice Institute in the Philippines
developed dwarf rice strains that yielded many more grains per plant
named IR8 that produced much better yields than earlier. These high-
yielding dwarf varieties responded dramatically to heavy applications of
fertilizer, resisted plant diseases, and tolerated shorter growing than their
natives. The Green Revolution also brought new high-yield varieties of
wheat and corn from the United States to other parts of the world,
particularly South and Southeast Asia. By the 1980s, India became self-
sufficient in grain production, and Asia as a whole saw a 2/3rd increase in
rice production between 1970 and 1995. These drastic increases in
production stemmed because of the use of new seed varieties, fertilizers,
pesticides, irrigation, and significant capital improvements.

Successes of the Green Revolution had caused social changes,

health risks, and environmental hazards. Green Revolution has worked
against the interest of many small-scale or poor farmers who lack the
resources to acquire genetically enhanced seeds and the necessary
chemical inputs to grow them. Poor farmers are unable to afford the
capital investment that the Green Revolution demands leading to
disruption in traditional rural society. Higher inputs of chemical fertilizers,
herbicides, and pesticides lead to the reduced organic matter in the soil
and groundwater pollution. Irrigation destroyed large tracts of land and
has led to serious groundwater depletion, creating conflict between
agricultural and growing urban and industrial water needs in developing
countries especially the ones with dry climates. It also caused
micronutrient deficiencies, soil contamination, reduced availability of
nutritious food crops for the local population, displacement of vast
numbers of small farmers from their land, rural impoverishment, and
increased tensions and conflicts.

In recent times, agricultural scientists are now altering the

chemical makeup of crops and modifying the genes of plants to create new
crops through biotechnology – through the use of genetically modified

58
(GM) crops. A few researchers are calling the use of biotechnology in
crop production a fourth revolution.

3.9. WORLD PATTERN OF HUNGER

The problem of hunger is complex. Hunger is usually understood

to refer to the distress associated with a lack of sufficient calories. The
Food and Agriculture Organization of the United Nations (FAO) defines
“food deprivation, or undernourishment, as the consumption of too few
calories to provide the minimum amount of dietary energy that each
individual requires to live a healthy and productive life, given that
person’s sex, age, stature, and physical activity level.” Widespread hunger
has stalked humankind for an infinite time. The challenge to feed and
sustain the human population has been a pre-eminent social, political, and
economic struggle across history, and remains a central issue today. In
Western Europe, there was ongoing hunger and malnourishment for the
working and agrarian classes throughout the onset of the industrial
revolution, causing food riots in late 1700. Over almost 10 years, 1845-52,
the collapse in potato production because of potato blight instigated
famine in Ireland. Much later the United Nations defines famine as
occurring when 3 conditions are met: (1) at least 20 percent of the
population has fewer than 2,100 calories of food a day; (2) the prevalence
of acute malnutrition exceeds 30 percent of children; and (3) the death rate
exceeds two deaths per 10,000 people, or four child deaths per 10,000
people per day. As European spread across the world, these challenges
traveled with them. The politics of hunger continued right up until the end
of the Second World War in Europe, as seasonal harvests faced
interruptions either by climate or due to war. Food insecurity remained a
threat in urban America through the 19th century, including New York’s
‘bread riots’ in 1837, and food riots in many cities during the Civil War
(1861–65). Frequent wars in Europe, in the 19th and 20th centuries were
often accompanied by food shortages and hunger. Famine in the western
Netherlands occurred in 1944–45 when Nazi rule caused disruptions to
food transports and an estimated 18,000 people died of hunger. The non-
Europeans are also bearers of hunger across human history. A series of
famines in India during the 19th century saw the deaths of an estimated
30–40 million people. The last major famine under British rule occurred in
Bengal, in 1942–43, when a combination of cyclonic devastation and war-
induced decisions to restrict the transportation of rice resulted in the
starvation deaths of more than 2 million persons. A similar story of hunger
and famine is found in the histories of China, other parts of Asia, and
Africa. For example, in Ethiopia, widespread crop failures and hunger
occurred with regularity once or twice a decade for many centuries ago
until 1984–85. The conditions of Ethiopia introduced a severe famine that
impelled global action. The recent episodes of famine are expected to be
confined to poverty-stricken and often war-torn pockets of the world. For
example, famine in Somalia (2011–12) and West Africa (2012) were due
to war and civil unrest.

59
 Even though famine cycles receded, chronic hunger still exists
across the world. Many countries are now troubled with a double burden
of malnutrition, dealing simultaneously with problems of hunger within
some segments of their population and overweight/obesity in others. The
food crisis of 2007–08, followed by the financial and economic crisis in
2009, continued till 2012, drew stark attention to the daily challenges
faced by millions of families around the world in their attempt to
overcome hunger and poverty and seek stable livelihoods. For the period
2011-2013, a total of 842 million people – or around one in eight people in
the world – were estimated to be suffering from chronic hunger. Global
hunger is dispersed across the world in a highly uneven way, with 40
percent of the world’s undernourished people living in China and India.
Bangladesh, Pakistan, the Democratic Republic of the Congo, and
Indonesia account for a further 26 percent (FAO 2010: 10). The FAO
estimates that in 2014 there were 791 million undernourished people on
the planet.

3.10. ASPECTS OF FOOD SECURITY

Food security exists when all people, at all times, have physical,
social, and economic access to sufficient, nutritious, and safe food that
meets their dietary needs and food preferences for active and healthy life
(World Food Summit (WFS) 1996). Food security is a difficult concept to
measure since it deals in very broad terms with the production,
distribution, and consumption of food. The issue of food security came
forward at the 1974 World Food Conference in Rome. In the 1970s the
whole problem of food security was seen as one of supply, originating
from a series of food crises and major outbreaks of famine. The main
focus was on guaranteeing the availability of food as well as attempting to
ensure price stability both nationally and internationally through increased
food production and the use of food surpluses. This approach led to the
1974 definition of food security:

“Availability at all times of adequate world food supplies of basic

foodstuffs to sustain a steady expansion of food consumption and to offset
fluctuations in production and prices” (United Nations. 1975. Report of
the World Food Conference, Rome 5-16 November 1974. New York).

The Green revolution of the 1980s increased levels of food

production; however, the problem of famine did not completely go away
and it was realized that the underlying cause was only food supply but also
purchasing power of specific social groups. The definition of food security
now took in the economic as well as the physical aspects of food
availability and attention was drawn to ways to alleviate poverty and
enhance the role of women in the development process. The widely
accepted definition of food security was given by FAO of the United
Nations -

60
 “A situation that exists when people lack secure access to sufficient
amounts of safe and nutritious food for normal growth and development
and active and healthy life. The ultimate objective of world food security
should be to ensure that all people at all times have both physical and
economic access to the basic food they need. Food security should have
three specific aims, namely ensuring the production of adequate food
supplies; maximizing stability in the flow of supplies; and securing access
to available supplies on the part of those who need them.”

The rapid changes in the incidence of global undernourishment in

recent years have triggered debate amongst researchers and policymakers
on the causes and manifestations of hunger. To reduce this and to
understand the food security’s relevance, WFS, developed a framework
for understanding the processes that created particular patterns of food
security or insecurity. This framework has three dimensions of the food
system:

 Food Availability: The supply-side factors (food production, or having

large stocks of food in reserve) that shape the availability of sufficient
quantities of food of appropriate quality. In other words, it refers to the
overall capacity of the planet to produce enough food to eliminate
hunger. The factors behind these production gains were: more land put
to agricultural use, improvements in water infrastructure and
technologies; developments in post-harvest technologies and storage
facilities; increased capitalization and economies of scale in farming
i.e. introducing machinery such as tractors and combine harvesters;
innovations in livestock breeding and husbandry; and intensive protein
production (fish, poultry and meat, in particular). The development of
the green revolution provided a boost to world food output precisely at
a time when the global population was increasing very rapidly.
 Food Access: The political, social, cultural, and economic processes
that connect supply-side processes to individuals. In a general sense,
people gain access to food in three ways - people can grow or procure
their food directly, through either by cultivating crops, tending
livestock or by hunting, fishing or foraging; people can buy food
through the use of money; people can gain access to food through food
banks, food aid and food voucher welfare programs operated by
governments, international organizations or NGOs. Households across
the world have diverse, multi-dimensional modes of food access. For
example, a household in an Indian coastal village the food security of
household might depend on fish being caught daily, fruits and
vegetables can be bought at a local market using the cash income
earned, and rice and cooking oil can be acquired at a public
distribution outlet operated as part of a government food program.
 Utilization: The elements of clean water, sanitation, and health care
that ensure that food is made available and is accessible for generating
nutritional well-being for consumers.

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 Food security is a human right, and recent approaches to this issue
have stressed peoples’ Right to Food. To raise awareness and understand
the struggle against hunger across the globe, it is important to compare
levels of hunger between countries and regions, and call attention to those
areas of the world where hunger levels are highest and where there is a
need for additional efforts to eliminate hunger is greatest. Therefore, the
Global Hunger Index (GHI) is a tool designed to comprehensively
measure and track hunger at global, regional, and national levels. GHI
scores are calculated each year to assess progress and setbacks in
combating hunger. It was first published in 2006 jointly by Concern
Worldwide and Welthungerhilfe. For each country, values are determined
for four indicators:

 Undernourishment: the share of the population that is

undernourished. Undernutrition is the result of inadequate intake of
food in terms of either quantity or quality, poor utilization of nutrients
due to infections or other illnesses, or a combination of these factors.
 Child Wasting: the share of children under the age of five who have
low weight for their height, reflecting acute undernutrition.
 Child Stunting: The share of children under the age of five who have
low height for their age, reflecting chronic undernutrition.
 Child Mortality: the mortality rate of children under the age of five.

Then, each of the four component indicators is given a

standardized score on a 100-point scale where 0 is the best possible score
(no hunger) and 100 is the worst. These standardized scores are
aggregated to calculate the GHI score for each country. India has been
ranked at 94 among 107 countries in the Global Hunger Index (GHI)
2020. With a score of 27.2, India has a “serious” level of hunger.

3.11. WORLD INDUSTRIAL REGIONS

Industrial regions are areas where the concentration of

manufacturing industries occurred due to favorable geo-political and
economic conditions. The spatial distribution of manufacturing industries
shows a distinct trend of localization towards a few selected areas referred
to as ‘industrial regions’. The industrial regions of the world are unevenly
distributed as the localization of industrial regions largely depends on the
availability of resources. Various other factors affect the concentration or
localization of industry as these regions have a variety of industries and
other infrastructures. These are – the type of market, large population
engaged in industrial pursuits (labour supply), cost of the land, availability
of raw materials, the network of communication lines, banking and credit
facilities on a large scale, terrain, access to water resources, and supply of
capital.

The manufacturing of goods began long before the Industrial

Revolution, through cottage industries, where communities worked
together and created finished goods. The transition from cottage industries
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to the Industrial Revolution happened in the context of changing
economies of scale for generating a greater profit by producing larger
quantities of the goods in high demand, which in turn decreased the
average cost of producing the goods. The first steps in industrialization
occurred in northern England, where cotton from America and India was
shipped to the port of Liverpool. In the 18th century, the hearth of the
Industrial Revolution was England. During the early part of the Industrial
Revolution, before the railroad connected nodes of industry and reduced
the transportation costs of coal, manufacturing was located close to the
coal fields; and plants were usually connected to ports by a broad canal or
river system. In Britain, densely populated and heavily urbanized
industrial regions developed near the coal fields. With the advent of the
railroad and steamship, Great Britain had greater advantages globally than
it did at the beginning of the Industrial Revolution. Industrialization began
to diffuse from Europe to America and Asia in the 19th century marking
the growth of “industrial regions”. The secondary hearths of
industrialization were established in Eastern North America, Western
Russia and Ukraine, and East Asia. Each of these industrial regions was
established in areas close to coal, which was the major energy source,
connected by water or railroad to ports, and heavily invested by wealthy
European merchants and local regions.

Fig. 10. World Industrial Regions

1. European Region
In the early 1800s, the innovations of Britain’s Industrial
Revolution diffused into mainland Europe (west to east) roughly along the
southern margins of the North European Lowland—across northern
France, southern Belgium, the Netherlands, the German Rühr, western
Bohemia in the Czech Republic, and Silesia in Poland. When the industry
develops in one area, economic growth had a spillover effect on the port
cities to which they were linked by river or canal. For example, one of the
largest industrial centers in continental Europe was the Rühr area of
present-day Germany which was connected to the port of Rotterdam, the
Netherlands by the Rhine River. Each port has a hinterland, or an area
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from which goods can be produced, delivered to the port, and then
exported. Once railroads were well established in Great Britain and
continental Europe, companies located their manufacturing plants away
from coal and iron ore and in major cities, like London and Paris. In the
19th century, Western Europe’s early industrialization gave industries a
huge economic head start, putting the region at the center of a quickly
growing world economy.

a. The United Kingdom was the first country in the world to become
highly industrialized and emerged as one of the most industrialized
countries in the world. Most of its industrial regions are closely
associated with the coalfields. The major manufacturing items in these
regions were chemical, textile, engineering, electric, leather, food,
beverages, and many more. The manufacturing of United Kingdom
may be subdivided into –
 The Midland - This is one of the oldest regions where one of the
two largest centers of industry of Great Britain developed due to
the concentration of coal fields that provided rapid growth of
industries. The nucleus of this industrial region is Birmingham,
while Nottingham and Leicester are other centers. The Midland
region of Britain manufactures almost all types of metal products.
 The Lower Scotland - After the discovery of coal and iron ore
within this region, diverse types of manufacturing activities like
textile centers evolved throughout the region. Iron-steel
engineering factories, shipbuilding, petrochemical, heavy chemical
industries also developed in the region. The major centers of
production are Edinburg, Glasgow, Clyde Valley, Aberdeen,
Dundee, and Perth.

Fig. 11. Industrial Regions of the United Kingdom

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 The North-East Coast - This industrial region also accords closely
with a coalfield, and the basic industries include coal mining, iron, and
steel production (heavy industrial output). Presently, steel processing
industries, chemical industries, shipbuilding, mechanical and
constructional engineering have thrived across this region.
Manufacturing Centres of the northeast coast are New Castle,
Stockton, Sunderland, Middles-borough, etc.
 The South Wales: South Wales region principally attracted iron and
steel industries due to its vast reserve of coal within. Non-ferrous
industries were also developed near coal mines along with the
production of petrochemical, electrical and other consumer goods. The
major industrial centers in South Wales are Cardiff, Newport,
Swansea, Cornwall, etc.
 The Lancashire: This region is dominated by the cotton industry and
is another largest center of industry in Great Britain. The major cotton
textile centers of this region are Manchester and Liverpool. Due to the
decline of textile plants in recent times, the area now produces high-
quality textile goods. Coal mining, iron, steel, shipbuilding, and
chemical industries are present in few parts of Lancashire.
 The London Basin: Amongst other industrial regions of Great Britain,
the London Basin houses the greatest variety of industries like
engineering, electronics, refining, chemical, metallurgical and

65
 electrical, cement and paper. The Greater London region and its
suburbs produce a vast amount of consumer goods, clothing, prepared
food, and furniture.

In recent times industry in the United Kingdom is declining due to

cheaper and more efficient production overseas, but still, the industrial
structure of the regions of the UK is considered important.
b. Germany - Even before unification, West Germany was considered
the greatest industrial power not only in Europe but also in the world.
Germany (East and West Germany united) thus stands as one of the
most dominant industrial regions of the world. The major
manufacturing regions in Germany are:
 Rhine - Ruhr Valley – This is Europe’s largest area located on the
banks of rivers Rhine and Ruhr. The Rhine industrial region is
popularly known as the ‘Ruhr - Westphalia industrial region’. The
large reserve of high-quality coal from Ruhr coalfields and the
transportation route through the Rhine were the major factors that
contributed to the massive growth of industries in this region. Iron ore
was also available in this region earlier, but after it got exhausted iron
ore was obtained from Siegerland. In response to the locational
advantages a wide range of industries developed across the valley.
They are heavy industries including iron and steel (at Duisburg, Essen,
Bochum, and Dortmund); heavy chemicals (around Dusseldorf and
Leverkusen); engineering (Gelsenkirchen, Oberhausen, Rheinhausen,
Essen and Dortmund) and several specialized industries such as
cutlery (at Solingen and Remscheid) and textiles (at Krefeld and
Wuppertal). The growth of industries created a vast industrial
conurbation with a population of around 10 million creating a huge
chunk of labour supply and also an extensive local market for smaller
manufactured goods, consumer goods, and service industries.
 The Saar and Middle Rhine Industrial Region– This region has a
widely spread industrial complex that includes urban centers of
Frankfurt, Mannheim, and Saar. The major industries in this region are
iron and steel, motor vehicles, petro- chemicals, textiles, paper,
machine tools, aircraft, and precision industries.
 The Hamburg Industrial Region – This is not a region as Hamburg is
a metropolitan city. Industries like engineering, ship-building, light
chemicals, non-ferrous industries, tobacco, petro-chemical, and
petroleum refining have developed here.
 The Berlin Industrial Region – West Berlin developed as a major
industrial center while it was part of West Germany. This region
contributed to the growth of non-conventional industrial products
including electronics, cosmetics, light chemicals, and precision
engineering.
 The Leipzig Industrial Region – This was the principal industrial
center and industrial town of erstwhile East Germany. This region is
famous for optical instruments, leather products, engineering goods,
and machine tools production.

66
c. France - France is one of the forerunners in the manufacturing world.
This is the third-largest industrial power in Europe, after UK and
Germany. The leading manufacturing regions of the country are:
 The Northern Industrial Region - This region is the largest and the
oldest industrial area of France. Coal deposits and availability of iron
ore promoted iron and steel, textile, and engineering industry.
 The Lorraine Industrial Region – This region has contributed to
France’s economy ever since First World War. Lorraine’s iron ore
deposits helped 2/3rd of the production of France’s total steel and more
than 3/4th of the country’s total pig iron. It also helped in the growth of
several metallurgical industries. This industrial region not only
produces steel but also a good amount of ceramics, chemical, textile,
glass, leather, and electrical products.
 The Paris Industrial Region – The capital of France produces a large
number of consumer goods, automobiles, locomotives, aircraft, and
chemical industries. It is also the chief manufacture of fashion items.

d. Italy – Industrial development in Italy began after the Second World

War. There are two distinct industrial regions of Italy –
 The Northern Regions – Around 4/5th of Italy’s industries are
concentrated in Northern Italy. The major industrial regions here are
Lombardy, Piedmont, etc. Venice, Milan, and few other urban centers
consist of the majority of the manufacturing units. The entire northern
region is highly developed with several types of industries like paper,
textiles, silk, iron and steel, paper pulp, agricultural machinery,
aircraft, machine tools, electrical and automobiles.
 The Southern Region - This region is far less developed in
manufacturing than the northern region. Naples is the only major
industrial center, with textiles, machinery, and iron & steel
manufacturing units.

e. Other European Industrial Regions: Most of the European countries

have important manufacturing activities such as Belgium has heavy
industries, including iron and steel making. Some of the major
industrial centers of Belgium are Brussels, Antwerp. Luxembourg City
has iron and steel as well as engineering industries. Nearly half of the
Netherlands population are engaged in the industrial sector. Sweden
has the richest iron ore resources in Europe and well-developed
hydroelectric power industry. Norway has leading industries of
marine engineering, shipbuilding, fish-canning, and the pulp and paper
industries. Denmark is famous for its dairying and agricultural
industries, chemicals, textiles, beer, machinery, etc. Switzerland is
famous for watch-making, chemicals, and textiles industries. Iron and
steel, chemicals, textiles, and zinc/lead refineries are important
industries in Poland.

2. North American Region

By the beginning of the 20th century, manufacturing in North
America began in New England, a territory settled predominantly by
67
Europeans and the capital flow from linkages in Britain fueled the
industrialization of the region. However, the northeastern states were not
rich in mineral resources and it benefitted from its companies’ ability to
acquire raw materials from overseas. The majority of the industrial output
in this region is contributed by the United States of America and Canada.

a. The United States – The United States coal reserves are among the
world’s largest and widely distributed, therefore making coal the chief
fuel for its industries. Therefore, manufacturing activities are available
almost in all states. Large industries developed along the Great Lakes
where canals, rivers, and lakes were connected with railroads for the
movement of goods and resources. The USA industrial region may
broadly be divided into the following units –
 New England Region - This vast industrial region comprises 6 states -
Connecticut, Massachusetts, Rhode Island, Vermont, New Hampshire,
and Maine. Boston Metropolitan Region is the nucleus of this region.
The major industries of this region are electrical, machinery, textiles,
leather, and other industries. This industrial region enjoys the
advantages of huge capital, cheap and skilled labour, good transport
network, export facilities, and vast market.
 New York and Mid-Atlantic Region – This industrial region
contributes to steel production and it extends from New York to
Baltimore with industrial centers scattered over New Jersey,
Pennsylvania, Maryland, Philadelphia, and Baltimore.
 Mid-Lake Region - This region has the greatest concentration of
ferrous industries, producing around 25 percent of the ferrous products
of the country. The Lake Superior iron ore and Appalachian coal
provide major raw materials and are responsible for its massive
development.
 North-Eastern Region - This covers the industrial regions of Ohio,
Michigan, etc. Overall combined manufacturing output is huge in this
region.
 Southern Industrial Region – It extends from North Carolina in the
east to Texas in the south-central and is a producer of agro-based items
like food and beverages, tobacco, and furniture.
 Western Region - This sparsely populated region is backward in
industrial activities in the country.
 Pacific Coastal Region - A narrow coastal strip running through
Washington, Oregon, and California is the great industrial
agglomeration of the Pacific coast. San Francisco and Los Angeles are
the major industrial nucleus of the area. This region houses the
production of a wide range of items like - automobiles, aircraft, metal
fabrication, petrochemical, and heavy chemicals, etc.

b. Canada - Manufacturing activities are highly developed in Canada as

it possesses an abundance of iron ore, petroleum, and forest resources
along with hydroelectric power. Canada is moderately developed in
aluminum, petrochemicals, paper, textiles, iron & steel, and industry.
The major industrial region of Canada are:
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  Ontario and St. Lawrence Valley - This is one of the most
important manufacturing regions of the country and mainly
produces paper, cheese, flour, agricultural machinery, copper and
nickel smelting, iron & steel industry, and chemical industry.
 Prairie Region – This region consists of agro-based industries, the
other noted industries like petroleum refinery and chemical
industry.
 Pacific Coast: The major industries of this region are paper and
pulp, furniture, agricultural machinery, and hydel-power stations.

3. Russia and Ukraine

World War II devastated Europe’s industrial might and USSR
emerged as one of the major industrialization centers with its major
regions around – Moscow (the capital), and Leningrad (in the west). In the
former USSR, there are 5 major industrial areas, of which 4 are now in
Russia, presently known as the Commonwealth of Independent States
(CIS). Industrial centers in Moscow and Ukraine were established in the
19th century. Iron ore of Tula and brown coal of Moscow created the
largest concentration of industries within the Moscow-Tula region of the
former USSR. Iron-steel, heavy chemical, metallurgy, refineries, textile,
electrical, automobile, oil, and gas, etc. are produced in this region.
Industries in Ukraine are centered on a coalfield and have access to iron
and steel, manganese, gas, and chemical industries. The other 3 regions
are located in southern Russia. The Volga industrial region area to the east
of Ukraine has local oil and gas sources and is home to major industries
like machinery, chemicals, and food processing. The Urals region in the
farther east is the source of many raw materials, especially minerals, and is
also a major producer of iron and steel, and chemicals. Farthest east is the
Kuznetsk area, which is endowed with minerals as well as a major
coalfield.

4. East Asia
The Industrial Revolution diffused in Japan in the mid-19th
century. During the 1950s and 1960s, Japan excelled in heavy industry,
particularly shipbuilding. By the late 1960s, the emphasis shifted to
automobiles and electronic products. Japan has been a world industrial
power despite being relatively small in size and having only a few
industrial raw materials of its own, therefore relying more on imports.
Further, it is also at a substantial distance from major world markets.
Despite these challenges, Japan has overcome the obstacles by making use
of its large population. Low labour costs, high levels of productivity,
emphasis on technical education, aid from the United States, and a
distinctive industrial structure are some of the factors responsible for its
industrial achievements. Since the late 1990s, Japan has shown signs of a
substantial economic downturn as it faces competition for production
manufacture from China and competition for high-technology production
from South Korea

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 Fig. 12. Industrial Regions of Russia and Ukraine

Fig. 13. Industrial Regions of East Asia

3.12. FACTORS AND PROCESSES AFFECTING

LOCATION OF INDUSTRIES

Economic activities that process, transform, fabricate, or assemble

raw materials derived from primary activities (farming, forestry, etc.) and
also activities that reassemble, refinish, or package manufactured goods
are known as secondary activities. Secondary activities, therefore, the
question as to where the processing should take place. The decision

70
regarding where to locate a manufacturing facility should be based on
costs and opportunities that vary from one place to another. In secondary
economic activity, there are many possible locations and therefore, the
locational decision is more complex.

 Location - Measures of distance are very important in the location of

the industry. There are two types of costs that influence locational
choices. Input costs of certain manufacturing items are relatively
unaffected no matter in whichever region the industry is located, it is
known as a spatially fixed cost. Other inputs of manufacturing show
significant differences across regions, it is known as a spatially
variable cost. Distance from sources of raw material is important as
raw materials are unevenly distributed and vary in aspects like quality,
quantity, cost of production, and perishability. The cost of bringing the
raw materials incurs high transportation charges that are highly
variable costs. During the 19th century distance from an energy supply
was essential to locate factories near a source of coal. However, due to
the emergence of new energy sources, this constraint is not important
as a location factor but is still relevant. Distance from the market is
also a factor as demand for a product decreases with increasing market
distance and the cost of transportation becomes high.

 Raw Material - In the manufacturing industry availability of raw

materials is fundamental. Due to its complex structure, the modern
industry requires a wide range of raw materials for its growth. Also,
the finished product of one industry may well be used as the raw
material of another industry. For example, pig iron production by the
smelting industry serves as the raw material for steel making industry.
Industries that use heavy and bulky raw materials in their primary
stage in large quantities are usually located near the supply of the raw
materials. For example, the iron and steel industry uses exceedingly
large quantities of coal, and iron ore are generally located near the
sources of coal and iron ore. Some industries, like electronics
industries, use light raw materials and therefore are often located with
no reference to raw materials. These industries are commonly known
as ‘footloose industries’ due to their wide range of locations.

 Power: Coal, mineral oil, and hydroelectricity are the three important
conventional sources of power, making the regular supply of power a
prerequisite for the industry location. Most industries tend to
concentrate on the source of power. During the early Industrial
Revolution, water power sites attracted textile mills and fuel (initially
charcoal, later coking coal) attracted the iron and steel industry. The
iron and steel industry which depends on large quantities of coal as a
source of power is frequently attached to the coalfields. Metallurgical
industries were concentrated in the coal-rich regions - Midlands of
England, the Ruhr district of Germany, etc. Chemical and
metallurgical industries are also found in the areas of hydropower
production as they use cheap hydroelectric power. Massive amounts of

71
 electricity (in this case hydroelectricity) are required to extract
aluminum from its processed raw material, alumina (aluminum oxide).
For example - the Kitimat plant on the northwest coast of Canada is
placed close to vast supplies of cheap power but far from sources of
raw material or market.

 Labour – Without labour, the manufacturing industry cannot function.

Availability of labour shows spatial variations in terms of quality,
quantity, and cost. Though theoretically mobile, labour is frequently
limited to specific locations due to social reasons or because of
restrictions on movement. Besides, labour costs are highly variable
across space, increasingly affecting decisions on the location and
development of industries. Traditionally, skill, price, and amount—of
labour were considered important. In the present manufacturing world,
labour flexibility, highly educated skilled labourers are prime features.

 Transport – It is an essential factor as the transportation system is

inseparably linked with the location of industry. The advent of the
Industrial Revolution involved a transportation revolution as
successive improvements in the technology of movement of peoples
(labours) and commodities. All the advanced economies of the world
are well served by diverse modes of transport. Land or water transport
is necessary for the assembly of raw materials and then for the
marketing of the finished products. Water transportation is the
cheapest means of long-distance goods movement. Construction of
canals and improvement of an inland waterway marked the first phase
of the Industrial Revolution in Europe. It also was the first stage of
modern transport development in the United States. Railroads
efficiently move large volumes of freight over very long distances at
low fuel and fewer labour costs. They are, however, expensive to
construct and maintain. Indian railways are among the largest rail
network in the world, and therefore, plays a huge role in freight
movements from one place to another. Roadways provide great
flexibility of service and are also quickly responsive. Simultaneously,
pipelines play a significant role in fast, efficient, and dependable
transportation for a variety of liquids and gases - oil refineries,
fertilizers, and petrochemical plants. Air transport is vital for the
movement of high-value, low-bulk commodities and skilled labourers.
Nonetheless, it is difficult to estimate how much a particular industry
owes to transport facilities.

 Market - Goods are manufactured to fulfill market demand. The size,

nature, and distribution of markets are therefore important. Location of
industries closer to the market is essential for quick disposal of
manufactured goods, as it helps in reducing the transport cost and
enables the consumer to purchase commodities at cheaper rates. Large
urban concentrations mostly represent markets, and major cities have
always attracted producers of goods consumed by their residents.

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 Water-Water is required for nearly every step of production across a
multitude of different industries. Manufacturing and other industries
use water during the production process either for creating, fabricating,
processing, washing, diluting their products or cooling equipment used
in creating their products. Hence, many industries are established near
rivers, canals and lakes. Even to produce 1 kilowatt-hour (kWh) of
electricity, 15 gallons (gal) of water necessary. Sources of water are
requisite for the disposal of industrial waste. Industrial water and
wastewater is a by-product of industrial or commercial activities.
Dairy industries, petroleum refineries, sugar mills and refineries,
chemical industry, textile manufacturing, oil and gas refineries, food
industry, pulp and paper mills, aircraft and automobile industry and
many others require a large amount of water.

 Capital – Capital investment is the basic requirement for the

establishment of any manufacturing unit. The amount of financial
investment decides the magnitude or scale of the manufacturing unit.
Modem industries are capital-intensive for modernization, and to keep
pace with the changing nature of the manufacturing process. In the
modern manufacturing world, marketing also needs tremendous capital
investment. Equipment purchase, advertisement of the product, land
and remuneration of workers, in all kinds of processes, require
sufficient capital.

 Demand - Demand of a particular commodity determines the

existence or survival of the industry and is the reflection of market
condition. At the macro level, the demand of a region or a country
attracts industries. The demand of a commodity determines its price
and high demand increases the price that in turn brings a higher rate of
profit. The expansion of industries is directly proportional to
increasing demand. That means as demand determines the magnitude
of production, if production increases, the industry automatically
expand.

 Government Policies - The government of the countries are

responsible for their country’s industrial growth and selection of
locations. Broadly, governments work to reduce regional inequalities.
In developing countries, the government plays a pivotal role in the
location of an industry. In-country like India, its five-year plan
examine relevance on industrial location in the country. For example,
the emergence of suitable industries in south India around new nuclei
of public sector plants has taken place due to Government policies.

 Subsidies and Taxes - Tax structure and its rate influence industrial
location. Subsidies and concessions in tax rates favour the location of
industries while a high rate of taxes discourages the location of
industries in some regions. Equal tax structures were introduced in
some states to bring homogeneity within the entire nation. This policy
is advantageous for some regions while it nullifies other regions.
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 Sometimes, the demand for industrialization, witness exemption of
taxes to attract industrialists for fresh investment. Also, a low tax rate
attracts new entrepreneurs in the area.

 Banking Facilities and Insurance – The establishment of industries

involves the exchange of a huge amount of money on daily basis.
Therefore, capital accumulation from financial institutions and state
governments is a constant practice. At the same time, there is a
constant worry of machine damage and injuries of workers. This
accounts for proper insurance coverage of any industry. As the role of
financial institutions like banks and insurance are increasing with
every passing day, the areas with better banking and insurance
facilities attract large industrial establishments of industries.

3.13. CRITICAL ASSESSMENT OF THEORIES OF

INDUSTRIAL LOCATION

Industrial location theory explains where firms locate their

factories and why. Locational are central issues for geography. Industries
strive to minimize costs and maximize profit including labour costs.
Different types of the economic organization play different roles in the
industrial process. Corporations also play a significant role in a country’s
economy. Some firms are individually owned while others are in
partnerships, co-operatives, or by corporations. Economists such as Adam
Smith and David Ricardo believed that industrial location was related to
the location of agricultural food surpluses that was needed to feed the
industrial workers. However, the doctrine of capitalism made Smith
realize that the central consideration in location decisions of industries was
purely financial and profit.

As discussed, the principal aim of an industrial location theory is to

find out the economically best location or optimal location which gives
maximum profits. The maximum profits can be obtained when the costs
are minimum and the revenues are maximum. Therefore, industrial
location theories can be classified into two groups-

 Least coast location theories

 Maximum profit location theories

Alfred Weber’s “Theory of Industrial Location”

Alfred Weber, a German economist was the first to propound the
theory of industrial location” in 1909. He gave a scientific exposition to
the theory of location and thus filled a theoretical gap created by classical
economists. Also known as the “Least Cost Location Theory”, this classic
work of Weber was entitled Uber den Standort der Industrien and was
translated from German to English as “Theory of Location of Industries”
in 1929. He was the first one to analyze the general regional factors of
transport and labour costs as primary factors, and the agglomeration costs

74
as secondary factors, influencing the optimal location of the
manufacturing industries.

According to Weber, factors affecting the location of industries

may be broadly classified into two categories:

1. Regional factors or Primary causes of regional distribution of

industry - After examining the cost structures of different industries,
Weber concluded that the cost of production varies from region to region.
Therefore, the industry, in general, is localized at a place or in a region
where the cost of production was minimum. Two general regional factors
affect ‘cost of production’:

(i) Transportation costs - It plays an important part in the location of an

industry. Transportation costs are influenced by the weight to be
transported and the distance to be covered. Generally, industries will tend
to localize at a place where material and fuel are not difficult to obtain.
Weber has further given that the basic factors for the location of an
industry are the nature or type of material used and the nature of their
transformation into products. Based on quality and purity, Weber divided
raw materials into 2 categories –

 Ubiquitous Raw Materials – found everywhere, for example – water,

air, sunlight, land, soil etc.
 Fixed Raw Materials – confined to particular places, for example –
iron, manganese, copper, ore etc.

These raw materials have been classified into –

 Pure raw material – Raw material whose weight remains the same
even after processing and manufacturing.
 Impure raw material – Raw material whose weight reduces after
manufacturing.

(ii) Labour costs – It also affect the location of industries. If transportation

costs are favourable but labour costs are un-favourable, the problem of
location becomes difficult. Industries may tend to get located at the place
where labour costs are low.

2. Agglomerative and de-agglomerative factors or Secondary causes

responsible for redistribution of the industry - Agglomerative factors
make industries centralize at a particulars place. Such factors may include
banking and insurance facilities. The tendency of centralization is
influenced by the manufacturing index which indicates the proportion of
manufacturing costs in the total of production. De-agglomerative factors
are those which decentralize the location of industries. Examples - local
taxes, cost of land, residence, labour costs and transportation costs.

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The main objectives of the theory of industrial location are to –
1. Ascertain the minimum cost location of an industry.
2. Establish that transport cost plays a vital role in the selection of the
location of industry.
3. Prove that irrespective of socio-economic and political conditions,
transportation cost is universal in the location of industries.

Like other deductive theories, Weber too had certain assumptions to

analyze different cost-minimizing factors and processes and their impact
on industrial location. They are as follows –
1. The area is typically uniform or isotropic surface in form of terrain or
relief, climate, soils, economic system, landform, technology, labour
and distribution of population.
2. The area/region under consideration has a self-supporting economy.
3. There is perfect market competition.
4. Labour is spatially fixed (static) and immobile by nature in general but
is abundantly available at a particular wage level (uniform) in the
region.
5. There is uniformity and stability in the socio-economic and political
environment in the region.
6. The industrialists and the labourers are rational and economic persons
who try to optimize their profits and wages respectively.
7. The cost of transportation increases uniformly and proportionately
according to weight in all directions.
8. Manufacturing involves a single product at a time and the product is
supplied to a single market.
9. There is uniform demand for a product at all places, resulting in a
uniform price, and therefore the factory is located at the point of least
cost would get the highest profits.
10. Raw materials are not evenly distributed in space
11. Markets are known and fixed at specific places.

According to Weber, there are 2 possible locations of Industries –

1. Linear Location – when the industry is located between the source of
one raw material and the market. In case of this, the following are the
possible locations: a. at the source of raw material, b. at the market, c.
at the intermediate location. The selection of the location of industry
here depends on the nature of raw material and the degree of weight
loss during manufacturing. The cotton textile and leather goods
industry has a linear location.

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 Linear Location

2. Non-Linear Location – when the industry is located between the

market and the source of more than one raw material. In the case of
non-linear location of industry, when 2 raw materials are used, ‘the
influence area’ for the location should be a triangle. The following
possible locations are a. at the market; b. at the source of raw material
(M1); c. at the source of raw material (M2); d. at any intermediate
point between the above three.

Non-Linear Location

Postulations – As per Weber, the optimum location of a firm is

determined by the:
I. Influence of transport cost (general factor)
II. Influence of labour cost (general factor)
III. Influence of industrial agglomeration (local or special factor)

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I. Role of Transportation Costs:
In this triangular area, the least cost location may emerge through
transport cost analysis. The location of an industry in a triangular area is
closely influenced by the nature of the raw material – whether pure or
impure. The material index of each raw material and the distance of the
market from the raw material source decides the least-cost location.

A. One market (M), one raw material (R1) condition gives rise to 3
situations-
(i) Raw Material Available Everywhere: Market is the best location
in this situation, as it will simply eliminate the transportation costs
for the manufacturing unit.
(ii) Raw Material Pure, And Fixed: In this case, the manufacturing
unit should be located either at the market or at the source.
(iii)Raw Material Fixed and Gross (i.e. It Loses Weight on
Processing): The best location will be at the source.

B. One Market, two Raw Materials (R1, R2) condition gives rise to 4
situations.
(i) Both R1 and R2 are found everywhere: Market is the best location
as lowest transportation costs would prevail.
(ii) R1 is fixed, R2 is found everywhere, and both are pure: Market is
the best location because then, transportation charges for R1 will
only be paid.
(iii) Both R1 and R2 are fixed and pure: Market is the best location
because the lowest aggregate transportation charges will prevail.
(iv) Both R1 and R2 are fixed and gross: this is a complex situation, for
which Weber introduced the “locational triangle”. Two raw
materials-R1 and R2-and market (M) form the three modes of this
triangle. The transportation charges are a product of the cargo
weight and the distance carried by transportation. Thus, a pull is
being exerted on the location by each of these three modes. It is
seen that the weight-losing manufacturing processes like iron
smelting tend to be located near the source of raw materials, while
the weight-gaining ones like baking tend to be located near the
market.

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 Fig. 14. Weber’s Locational Triangle
II. Role of Labour Costs:
Weber next examined the effects of labour cost on location as he
considered that industries would be located away from the point of least
transport costs to the point of least labour cost; to have greater savings in
labour cost than transportation cost. The influence of labour cost can be
explained using “isotimes”, that are the line joining the places of equal
transport cost of raw material to the cheap labour centres. All along the
isotimes (lines), the transportation cost remains the same per unit distance.
For example, if the least transportation cost is Rs. 300 at R2L and the total
labour cost per tonne of production is Rs. 500, then at R2L, the total cost
of production (labour charges + transportation charges; Rs. 300+ Rs. 700)
will be Rs. 1000.

Supposedly, the labour cost at “O” situated in the 12th line of the
isotime is Rs. 250 and the wages of the workers is also Rs. 250. In that
case, the total cost of production will be Rs. 400 + Rs. 250 + Rs. 120
(additional transport cost) = Rs. 770.

In case of cheap labour requirement, the factory will be located at

“O” as the cost of production per tonne will be cheaper i.e. only Rs. 770
against Rs. 1000.

Isotimes - the line joining the places of equal transport cost

According to Weber, labours are concentrated at some definite

places and the cost of labour varies as per place. To save the labour cost,
the industrial plant may be relocated away from the point of the least
transport cost. An industrialist considers the possible savings in labour
cost to be greater than any possible additional costs involved. Weber
resolved this matter by using isodapane method. An “isodapane” is
defined as a contour line joining the points of equal additional transport
costs of the two materials and delivering the product to the market. Here
the cost of production and supply of the finished product is the same in a
place.
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Isodapane

III. Role of Agglomeration:

After comparing labour and transport cost, Weber examined the
effect of industry’s tendency to agglomerate. Agglomeration of industries
offers cuts in production costs if two or more industries operate from the
same location. It occurs when several industrial enterprises with different
industrial plants mutually agree to locate and operate closely at a clustered
spatial point. Agglomeration will take place in the common areas of the
critical isodapanes. As more and more enterprises cluster, linkage
increases and there is an increased flow of goods between industrial
plants. Also, savings can be incurred on specialized labour, in bulk
purchase of materials and large-scale marketing of finished products.

Agglomeration of Industries

Criticism of Weber’s Industrial Location Theory:

Even though Weber's industrial location theory explains some

basic influences on the location of industries, it has been largely criticized
because of its assumptions and changed circumstances related to
technology, transport system etc. The criticisms are as follows:

1. Many critics believe that Weber’s assumptions are unrealistic as he

overemphasized the role of transport cost for the establishment of an
industry. There are other reasons like topography, quality of goods, the
character of region etc. that needed to be considered for setting up an
industry.
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2. Weber assumed that there are fixed labour centers with unlimited
supplies of labour. However, it is not possible to have fixed labour
centres, as each industry creates new labour centres. Similarly, there
can never be unlimited supplies of labour in any centre.
3. The cost of transportation of raw materials is comparatively cheaper
than that of finished products. Also, the rate of transportation is
generally cheaper at long distances.
4. There can be no fixed point of consumption, as consumers are
scattered all over the region.
5. In the role of agglomeration of industries, Weber ignored the problem
of space, high cost of land, high rent in the industrial areas.
6. Weber has not mentioned the non-economic factors of industrial
location like the historical and social factors, which play a huge role in
deciding the location of industries.
7. The assumption of perfect competition is only an ideal condition, as it
is very difficult to sustain perfect competition in the long run in the
real world.
8. Weber’s assumptions about cost, prices and the effect of
agglomeration are still questionable.

Despite criticisms and limitations, Weber’s theory of industrial

location is pioneering in nature.

August Losch Profit Maximization Theory

The theory of Profit Maximization was published by August
Losch, a German economist, in the year 1954. Losch discarded the least
cost location theory of Weber entirely. According to him, the industry will
not necessarily be located within the least cost (labour cost and transport
cost) location. Rather it would locate itself in areas where maximum profit
will occur. In other words, Losch suggested that the only objective of the
entrepreneurs (whether individual, co-operative, or state) should only be
profit maximization.

Losch expanded the theory on Christaller’s Central place theory in

his book The Spatial Organization of the Economy (1940). Christaller’s
central place system began with the highest order, while Lösch began with
a system of lowest-order (self-sufficient) farms, which were regularly
distributed in a triangular-hexagonal pattern. Losch derived several central
place systems mathematically including the 3 systems of Christaller from
this smallest scale of economic activity. At the same time, he illustrated
how some central places develop into richer areas than others. This theory
of profit maximization or “market area” focused primarily on spatial
variations in scales potential.

Weber postulated his least-cost location theory in an economic

state of perfect competition, while Losch, depicted the largest possible
market to be in a monopolized competition. Consequently, Losch attempts
to find the maximum profit location by comparing different locations on
the costs of production and the market area. Within this framework of the

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competitive situation, the location chosen will be based on the location of
maximum profit built on sales and revenues rather than only production
and distribution costs.

Emphasis on Demand and Consumption

The profit Maximization theory of August Losch considered
demand as the most important variable. Also, to incur maximum profit,
total consumption is important as the higher the consumption rate, the
greater will be the profit. Losch emphasized most on the price reduction of
the commodity because the price decrease would automatically stimulate
the volume of consumption. As illustrated in fig., it is evident that when
the price of the commodity drops from R to P, there is an increase in
consumption from M to N.

Assumptions

August Losch developed his model based on certain assumptions

as Christaller. The optimum conditions in which maximum profit location
may occur:

1. An isotropic surface (having uniform physical properties in all

directions) especially where raw materials are evenly distributed.
2. There is a constant supply of goods or services.
3. Transport cost is uniform and directly proportional in all directions.
4. The population is evenly distributed and the area has self-sufficiency
in agricultural production.
5. Buyers are evenly distributed and have identical demands, knowledge,
and technical skills over an area.
6. Economic discrimination doesn’t exist among people, as equal
opportunities are available for every individual.

For achieving homogeneity of the economy within a region, the

theory required some more conditions other than the previous ones -

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 Factories should equitably serve the entire area and no area should be
exempted from the supply.
 Conformity in the range and quantum of profit should be there. In case
of abnormal profit, new firms may try to enter and establish their plant.
 Consumers must have the provision the avail products from other
adjacent areas.
 Both producer and consumer must be satisfied with the location. The
optimum location must incur profit to the firm and satisfy the
consumer.
 The total number of consumers, producers and geographical areas
should be well defined and not extensive. Because a limited number of
producers within a small area will be able to overcome the
complexities and satisfy completely the handful of consumers.

For industries to expand, attaining equilibrium in the producing

area is compulsory. In case a single entrepreneur enters the vast area of the
production process, the cost of distribution will be automatically high.
However, when several small producers are engaged in the production
process in separate regions, the distribution cost lowers and due to
increasing competition, the efficiency of the product and the cost of the
production decreases. And consequently, there will be an increase in
profit. The area served by the individual manufacturing units will reduce
due to increasing competition. Several small producing areas will emerge
in the reduced area and no area, therefore, will remain unserved. This
entire scenario opined the hexagon as an ideal market shape and viewed
the trading area of the various products as the nets of such hexagons.
Hexagon deviates least from the circular form and in consequence,
minimizes transportation expenditure in supplying a given demand.
Therefore, to establish this theoretical model Losch proposed 3 distinct
phases of development -

1. If sufficient and symmetrical demand for a product prevails in the

market, the market conditions may be explained by a demand cone.
The fig. illustrates that the effective demand of the particular product
will be the same as the volume of the cone. In the diagram, P is a
producer, and the demand curve is lying on QF. P or price line is
controlled jointly by transport cost and distance. The price increased
from P to F. Along the line PQ (Y-axis), the demand of quantity is
measured between PF and QF.

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 When the measure of distance is PF and is rotated about P, the
circular market area is formed, bounded by the locus of points F, where
the price becomes too high. The volume of the cone produced by the
rotation of PQF gives the value of total sales. The demand cone
establishes that circular trade areas are formed in the first phase away from
the centre, where the demand of the quantity decreases with increasing
distance.

2. A vast rounded area with a concentration of several factories occurs in

the second phase. The extensive market area will automatically give
rise to a lucrative operational area and growing competition among the
firms will capture larger market areas and consumers. Despite these,
there should be a void in the boundary zone, like an intra- molecular
space, where a certain amount of region remains un-served or less
served. The circular pattern of industrial hinterland in this phase will
ultimately decide the future of the industry in that region. Fig. shows
that spaces situated outside the circular areas are vacant and naturally
other industries can capture these potential market areas. Thus, the
influx of new industries in that unserved region will result in shrinkage
of the market areas. This will further reduce when the intrusion of one
market area to other will distort the circular market areas.

3. The third phase witness the narrowing of the intermediate space

between two market areas and the vacant area becomes the target of
new enterprises. As new firms set up themselves within the vacuum,
the hinterlands of earlier industries reduce causing rapid disruption of
the previous circular pattern. Consequently, the market area of the
industries attains a hexagonal shape (fig. ). According to Losch,
whenever any area possesses several hexagons, lying upon each other
and surrounding a particular centre, a metropolitan city grows. In other
words, numerous hexagons (market areas) of different commodity
grows around the nucleus of a city. So, in this fashion, industries
would concentrate within a region, each having different products. The
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 hexagons will have products ranging from raw materials to finished
goods. This will, in turn, reduce the transport cost as raw materials will
be available at a nearer distance. Slowly ‘equilibrium conditions’ will
be attained.

In special conditions, there might be a deviation in the above

theory. Losch, himself hinted that when the price of the commodity of a
particular firm increases, the demand for the product decreases. Naturally,
due to higher prices, the company will lose some of its market areas and it
will automatically be encroached by the adjacent firms. This incident was
explained by the figure given in fig. as stated by Losch. Here, A and B are
two producing centres, with the total cost of production of P and Q. Their
respective market boundaries are CPD1 and EQD1. At the product cost of
M, their production touches the optimum level and hence, equilibrium is
attained. But when production cost at A increases from P1 to P2, the
equilibrium condition is disrupted. The product of A becomes less
attractive than before, so market boundaries also reduce from CP1D to
C1P2D2. Following the reduction of the market of A, automatically market
area of B advances in that vacant region. This leads to an increase in areas
- from EQD1 to EQD2, of D1D2, BD1 radius increases to BD2 and former
AC radius reduces to AC1.

Merits of the Profit Maximization Theory:

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1. Losch tried to restore order in the former chaotic classifications of
industrial location.
2. He was the first person to consider the influence of the magnitude of
demand on industrial location.
3. He emphasized the role of competition as an important determinant of
location analysis.
4. The calculations adopted by Losch were simple and easily applicable
at any place.
5. The equilibrium concept is perhaps the greatest contribution among
the location theories developed.

Demerits of the Profit Maximization Theory:

1. The theory is abstract as in reality, only on a rare occasion, these
events may occur.
2. It overstressed on demand.
3. Assumed conditions of the homogeneous region, equal distribution of
raw materials, cultural homogeneity, uniform transport rates and taste
of people never occur in reality.
4. Markets often overlap and do not occur in isolation. Therefore, as
pointed by Losch, location equilibrium rarely occurs between a
unit/entrepreneur and its market. As more firms appear, profits have
competed away.
5. Losch’s notion of the market demand was too simple. In reality, an
entrepreneur will have to deal with several issues before he estimates
demand as a basis for their locational decisions.
6. Losch ignored that political decisions play an important role in the
industrial location and also, the variation of technological development
of different regions. 6. The variation of the cost of raw materials and
labour wage rates were not given properly.
7. The empirical study might show no such pattern as that envisaged in
the theory

3.14. GLOBALIZATION AND SHIFTING LOCATION

OF INDUSTRIES

Globalization is a process mainly driven by rapid and largely

unrestricted flows of information, goods, ideas, cultural values, capital,
services, and people shift to the more than ever integrated world economy.
It is recognized as one of the most significant powers that affect the world
economy. The four dimensions of globalization are: economic
globalization, world opinion formation, democratization, and political
globalization; and changes in one of these dimensions will lead to changes
in the other. Global flows of information, goods, and people are
transforming patterns of economic development. Local self-sufficiency is
giving way to global interdependence as people and places are
increasingly becoming connected, sometimes across vast distances.
Economic globalization has many characteristics and effects on the
world’s business, marketing, and trade. Trade is the backbone of economic
globalization.
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 Globalization accelerated in the 19th century during the industrial
revolution. As the factories became established, more companies used
lands for their production and investment, replacing and selling goods
with each other. The processes of globalization play a significant role also
in contemporary industrial geography, affecting location, organization,
and activity. Industrial restructuring amounts to a global shift in industrial
investment and activity. The process was underway by the 1980s, along
with a decline in the friction of distance due to new communication
technologies. These two processes together produced a new and dynamic
industrial geography. Related to the two globalization processes is the
transition from Fordism to post-Fordism. The term Fordism refers to the
methods of mass production first introduced by Henry Ford in America in
the 1920s, using assembly line techniques that reduced labour time and
related costs. The Fordist period is marked by a surge in both mass
production and mass consumption. Ford imported raw materials, from coal
to rubber to steel, from around the world and set up large-scale
manufacturing complexes. Also, the Fordist system gave workers the
necessary income and leisure time to become consumers of the various
new mass-produced goods. Money flowed through the world economy as
consumers purchased large-scale manufactured goods.

As the global economy became more integrated and transportation

costs decreased, the advantages of concentrating production in large-scale
complexes declined; resulting in a shift toward a post-Fordist, flexible
production in the 20th century. The post-Fordist model refers to a set of
production processes in which the components of goods are made in
different places around the globe and then brought together as needed to
assemble the final product in response to customer demand. The term
flexible production is used to describe this state of affairs because firms
can pick and choose among a multitude of suppliers and production
strategies all the good, to compete. Flexible production regions emerged in
response to the new flexible production strategies and dependencies on
outside suppliers. Those regions also have a different set of labor-owner
relations. Post Fordism experienced technological advancements like
production technologies (automated tools), transaction technologies
(computer-based) and circulation technologies (satellites) due to
globalization made it easier for companies to take advantage of spatial
variations in land and labour costs and to serve larger markets.
Deindustrialization and reindustrialization occurred due to economic
restructuring. Deindustrialization is usually seen as a negative element as
it experiences loss of manufacturing activity and related employment in a
traditional manufacturing region in the more developed world. Whereas,
reindustrialization is the development of new industrial activity in a region
that has earlier experienced a substantial loss of traditional industrial
activity. This process may take various forms. First, there is an increasing
tendency for small and/or new firms to be more competitive outside the
traditional industrial areas; second, is the high-tech industrial activities
expand rapidly; third is the expanding service industry. It is generally

87
assumed that, as an economy progresses, it undergoes a transition from
primary (extractive) to secondary (manufacturing) to tertiary (service)
activities. The service industries, including transportation, utilities,
insurance, real estate, education, health, and government, are crucial
components of any economy. The service industry grew along with
manufacturing during the Industrial Revolution but achieved its rapid
expansion since World War II. This was followed by outsourcing where
an outside firm is paid to handle functions previously handled inside the
company (or government) with the intent to save money or improve
quality. Outsourcing is a term often used interchangeably with offshoring.
Offshoring is referred to as the transferring by a company of production or
service provider to another country. Business processing outsourcing
(BPO) is the outsourcing of back-office and front-office functions
typically performed by white-collar and clerical workers.

As firms became international, their foreign direct investment

(FDI) increases and their production focuses on their overseas customers.
For example for manufacturing a Barbie doll: raw materials are brought
from Taiwan and Japan; assembled in the Philippines, Indonesia, and
China; while the design and final coat of paint come from the United
States. However, outsourcing is just one small part of the growing
international structure of today’s manufacturing and service enterprises.
Transnational corporations (TNCs) became ever more important in the
globalizing world economy. TNCs (also known as multinational
companies) are private firms that established branch operations in foreign
nations. The direct impact of TNCs is limited to relatively few countries
and regions. FDI—the purchase or construction of factories and other
fixed assets by TNCs—has been a significant engine of globalization.
Although more than half of FDI goes from one developed country to
another developed country, a growing proportion is invested in less-
developed economies, potentially stimulating their economic growth. The
main sources for outward FDI are the countries that are home to the
largest TNCs are—the United States, Europe, Hong Kong, and Japan. The
leading destinations for inward FDI are Hong Kong, China, Singapore,
Mexico, Brazil, and India. Distance and proximity influence where FDI
flows go. For example, FDI from the United States is more likely to go to
Latin America, and Asian countries are more likely to invest in other
Asian countries.

3.15. NEW INDUSTRIAL REGIONS – EAST ASIAN AND

SOUTH-EAST ASIAN ECONOMIES

Due to advances in flexible production, many older manufacturing

regions experienced deindustrialization. Besides the places with lower
labor costs and the right mix of laws attracted to become the new
industrial regions. The new industrial regions emerged due to shifts in
politics, laws, capital flow, and labor availability. East Asia, particularly
became an important new region of industrialization. From South Korea to
Singapore, the islands, countries, provinces, and cities fronting the Pacific
88
Ocean have gotten caught up in a frenzy of industrialization that has made
the geographic term Pacific Rim synonymous with manufacturing.
Throughout the beginning of the 20th century, Japan was the only global
economic power in East Asia. Other nodes of manufacturing existed, but
these were no threat to the regional dominance of Japan’s industrial might.
The picture began to change with the rise of the so-called Four Tigers of
East and Southeast Asia, namely - South Korea, Taiwan, Hong Kong, and
Singapore in the 1960s and 1970s. The tigers emerged as newly
industrializing countries (NICs) because of the shift of labor-intensive
industries to areas with lower labor costs, government efforts to protect
developing industries, government investment in education and training.
All these NICs experienced a similar shift from agriculture to industry as
that of Europe experienced in the 19th century. South Korea developed
itself from a poor rice production country to an industrial giant focusing
on automobile and high-technology products. It developed significant
manufacturing districts exporting products ranging from automobiles and
grand pianos to calculators and computers. One of these districts is the
capital, Seoul (with a total population of 10.29 million and a density of
16,000 people per sq. km.). Taiwan’s economic planners promoted high-
technology industries, including personal computers, telecommunications
equipment, and other high-tech products. Recently, the South Koreans
have moved in a similar direction. The industrial growth of Singapore was
also influenced by its geographical setting and the changing global
economic division of labor. Strategically located at the tip of the Malay
Peninsula, Singapore is a small island inhabited by a little over 5 million
people. Half a century ago, Singapore was mainly an entrepôt
(transshipment point) for such products as rubber, timber, and oil; today,
the bulk of its foreign revenues come from exports of manufactured goods
and, increasingly, high technology products. Singapore is also a center for
quaternary industries, selling services and expertise to a global market.

The growth of China’s industrial hub describes the country as the

workshop of the world. Liberalization of China’s economy began in 1978
with the opening up of the country to international trade and foreign
investment. Hong Kong exploded onto the world economic scene during
the 1950s with textiles and light manufactures from a mere trading colony
seven decades ago. The success of these industries, based on plentiful,
cheap labor, was followed by the growing production of electrical
equipment, appliances, and other household products. Hong Kong’s
situational advantages contributed enormously to its economic fortunes.
The colony became mainland China’s gateway to the world, a bustling
port, financial center, and break-of-bulk point, where goods were
transferred from one mode of transport to another. The country is vast and
has a substantial resource base. China planned to speed up the
industrialization of the economy, and their decisions created several major
and lesser industrial districts. Under state planning rules, the Northeast
district became China’s industrial heartland, due to the growth of heavy
industries based on the region’s coal and iron deposits. The Shanghai and
the Chang Jiang district, the second-largest industrial region in China,

89
developed in and around the country’s biggest city, Shanghai. The Chang
Jiang district, containing both Shanghai and Wuhan, rose to prominence as
a major contributor to the national economy. Modern skyscrapers
presently dominate the skyline of the cities at the top of the Chinese
urban-economic and administrative hierarchy—including Beijing,
Shanghai. At the same time, the Northeast has become China’s “Rust
Belt” as many of its state-run factories have been sold or closed, or are
operating below capacity. The “Rust Belt” has high unemployment and
economic growth stalled. Eastern and southern provinces have grown into
major manufacturing belts and have changed the map of this part of the
Pacific Rim. China thus has become the world’s largest exporter, and its
energy and raw materials demands are now affecting the global supply of
key resources.

However, several of these NIC economies suffered during the

financial crisis of 1997–98, the global recession in 2008, and resulted in a
shrinking of the world economy in 2009. But several reforms that allowed
the region to overcome these economic troubles served to strengthen East
and Southeast Asia’s economies, and the Four Tigers continue to exert a
powerful regional—and international—economic role.

Other newly industrializing countries that have become

increasingly significant global nodes of production are - South Africa and
parts of Central and South America. Brazil, Russia, and India
demonstrated a shift in global economic power away from the traditional
economic core. India became the world’s sixth-largest economy. Although
industrial production in India is modest in the context of the country’s
huge size and enormous population, major industrial complexes developed
around Calcutta (the Eastern district, with engineering, chemical, cotton,
and jute industries, plus iron and steel based on the Chota Nagpur
reserves), Mumbai (the Western district, where cheap electricity helps the
cotton and chemical industries), and Chennai (the Southern district, with
an emphasis on light engineering and textiles). The main reasons for its
remarkable success are - its substantial market, availability of resources,
adequate labour, and relatively sound government planning. A well-known
feature of the Indian economy is the vibrant software and information
technology industry, especially in Bangalore. With a location midway
between Europe and the Pacific Rim, India’s economic influence is clearly
on the rise.

3.16. EXPORT PROCESSING ZONE (EPZ)

Export processing zones (EPZs) are geographically defined areas

within developing countries, intended to attract export-oriented foreign
direct investment (FDI) by offering barrier-free environments and special
incentives to firms that operate in them. In other words, EPZ is an area set
up to enhance commercial and industrial exports by encouraging
economic growth through investment from foreign entities. The main
goals and benefits of an EPZ are growth from foreign exchange earnings
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through nontraditional exports, creation of jobs to assist in income
generation and develop labor skillsets, the attraction of direct foreign
investment, and fostering of transfer of technology. These zones are
established in strengthening the exporting business of the country, as EPZ
offers export - oriented investors a host of advantages concerning the
domestic investment environment. Most EPZs offer a simplified
administrative environment, enhanced infrastructure, access to land and
factory shells, and reliable utility services. Till inception, EPZs have
grown dramatically in importance, with increases in overall business
volume, in the number of nations with zones within their territory, and the
number of firms operating in them.

EPZs first appeared in the 19th century in the form of free trade
zones at ports located in Singapore, Hong Kong, and Gibraltar. Formally
implemented in the 1930s, EPZs encourage foreign investment in a
country. By the 1970s, these zones gained popularity to the point where
many countries used the mechanism to boost their economy through
investment from advanced nations. In 2006, approximately 130 countries
founded over 3,500 EPZs. In India, the first EPZ was set up in Kandla as
early as 1965. The second EPZ, SEEPZ (Santa Cruz Electronics Export
Processing Zone) was set up in Maharashtra in 1974. Subsequently, the
government set up four more zones namely NEPZ (Noida Export
Processing Zone) in Uttar Pradesh, MEPZ (Madras Export Processing
Zone) in Tamil Nadu, CEPZ (Cochin Export Processing Zone) in Kerela,
and FEPZ (Falta Export Processing Zone) in West Bengal during the mid-
1980s; whereas the VEPZ (Vishakhapatnam Export Processing Zone) in
Andhra Pradesh was commissioned in 1994. Surat EPZ became
operational in 1998.

Objectives –
 Increase the exporting probability in the international market to
increase export and foreign exchange earnings.
 Generate employment and consequently increase the standard of
living.
 Economic diversification, and rapid industrialization in the country.
 Expanding the use of advanced technology through access to foreign
technology and management expertise.
 Broaden the scope of FDI
 Strengthen relationships with other countries

Merits
 Companies based in an EPZ tend to benefit from tax concessions that
are generally long-term in nature.
 Imports of materials and goods for export are duty-free.
 EPZs are fitted with advanced communication facilities and enhanced
infrastructure.
 They can accommodate both domestic and foreign firms.
 The zones are typically located in the vicinity of ports of air and sea,
therefore making the import and export process more convenient.
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 Labour laws are more flexible in EPZs.

Demerits
 In zones where labour is skewed mainly toward the female population,
unemployment of the male population remains unresolved there.
 In some situations, employees work excessive hours in unsafe
conditions such as in extreme heat
 Wages are typically low, often below that of the required country
minimum wage.

Countries such as China, Indonesia, and South Korea boasted great

benefits from the establishment of EPZ. However, countries like the
Philippines have faced poor performance from EPZs. One of the reasons
might be the cost of establishment of the facilities outweighed the gains in
profits.

3.17. SPECIAL ECONOMIC ZONE (SEZ)

Special economic zones (SEZs) are widely used in most

developing and many developed economies. In these geographically
delimited areas, governments facilitate industrial activity through fiscal
and regulatory incentives and infrastructure support. Thus SEZ is an area
in a country created to facilitate rapid economic growth and is subject to
different economic regulations than other regions within the same country.
The economic regulations of SEZs tend and attract FDI. They are typically
created to facilitate rapid economic growth by leveraging tax incentives to
attract foreign investment and spark technological advancement. By 2018,
there were some 5,400 zones across 147 economies. The SEZ boom is part
of a new wave of industrial policies and a response to increasing
competition for internationally mobile investment. While many countries
have set up special economic zones (SEZs), China has been the most
successful in using SEZs to attract foreign capital which in turn expanded
the country’s industrial activity. In 2000, the Export-Import (EXIM)
policy of India shifted towards this new scheme of SEZs. Under this
scheme, EPZs at Kandla, Santa Cruz, Cochin, and Surat were converted
into SEZs. In 2003, the other existing EPZs at Noida, Falta, Chennai, and
Vizag (also known as Vishakhapatnam) were also converted into SEZs.

There exist many types of SEZ –

a. Sector-specific SEZ - Manufactures one or more goods in a particular
sector like jewelry, electronic hardware, or software; and also
manufactures one or more services.
b. Multi-Product SEZ - Manufactures multiple goods or renders
multiple services in one sector or across multiple sectors.
c. SEZ in a port or airport or for free trade and warehousing - SEZ
in an existing port or airport for the manufacture of goods falling in
two or more sectors including trading and warehousing.
Objectives

92
 Enhance foreign investment and provide an internationally competitive
and hassle-free environment for exports.
 Development of infrastructure facilities.
 Generation of additional economic activity.
 Creation of employment opportunities.
 Promotion of exports of goods and services.

Merits
 Offer fiscal incentives
 Relief from customs duties and tariffs
 Business-friendly regulations concerning land access, permits and
licenses or employment rules
 Administrative streamlining and facilitation.
 Infrastructure support, especially in developing countries where basic
infrastructure for business outside these zones can be poor.

Demerits
 Loss of revenue to the government.
 Land acquisition on the pretext of development (mainly loss of
agricultural land).
 Regional disparity as the places near to SEZs is likely to be more
developed than other regions.
 As SEZ attracts industries due to certain benefits, it sometimes causes
deindustrialization in few regions.

3.18. SUMMARY

3.19. CHECK YOUR PROGRESS OR EXERCISE

3.20. ANSWERS TO THE SELF-LEARNING

QUESTIONS

93
3.21. Technical Words and their meaning

 Agriculture - The practice of farming, including the cultivation of the

soil and the rearing of livestock.
 Agricultural revolution - The slow transition, beginning about 12,000
years ago, from foraging to food production through plant and animal
domestication
 Agglomeration - A process involving the clustering or concentrating
of people or activities. The term often refers to manufacturing plants
and businesses that benefit from close proximity because they share
skilled-labor pools and technological and financial amenities.
 Aquaculture - Farming of cultivated fish and shellfish under
controlled conditions, in contrast to the harvesting of wild fish and
shellfish.
 Biotechnology- Technology designed to manipulate seed varieties to
increase crop yields.
 Capital - money put into circulation or invested with the intent of
generating more money.
 Commercial agriculture - Term used to describe large-scale farming
and ranching operations that employ vast land bases, large mechanized
equipment, factory-type labor forces, and the latest technology.
 Connectivity - Connectedness of a node in the world economy to
other nodes along networks.
 Deindustrialization - Process by which companies move industrial
jobs to other regions with cheaper labor, leaving the newly
deindustrialized region to switch to a service economy and to work
through a period of high unemployment.
 Export Processing Zones (EPZs) - Zones established by many
countries in the periphery and semi-periphery where they offer
favorable tax, regulatory, and trade arrangements to attract foreign
trade and investment.
 Fertile Crescent - Crescent-shaped zone of productive lands
extending from near the southeastern Mediterranean coast through
Lebanon and Syria to the alluvial lowlands of Mesopotamia (in Iraq).
Once more fertile than today, this is one of the world’s great source
areas of agricultural and other innovations.
 First Agricultural Revolution - Dating back 10,000 years, the First
Agricultural Revolution achieved plant domestication and animal
domestication.
 Flexible production system - a system of industrial production
characterized by a set of processes in which the components of goods

94
 are made in different places around the globe and then brought
together as needed to meet consumer demand.
 Fordist - A highly organized and specialized system for organizing
industrial production and labor. Named after automobile producer
Henry Ford, Fordist production features assembly-line production of
standardized components for mass consumption.
 Globalization - The expansion of economic, political, and cultural
processes to the point that they become global in scale and impact. The
processes of globalization transcend state boundaries and have
outcomes that vary across places and scales.
 Green Revolution - The recently successful development of higher-
yield, fast-growing varieties of rice and other cereals in certain
developing countries, which led to increased production per unit area
and a dramatic narrowing of the gap between population growth and
food needs.
 Gross Domestic Product (GDP) - The total value of all goods and
services produced within a country during a given year.
 Hearth - The area where an idea or cultural trait originates.
 Least Cost Theory - Model developed by Alfred Weber according to
which the location of manufacturing establishments is determined by
the minimization of three critical expenses: labor, transportation, and
agglomeration.
 Migration - A change in residence intended to be permanent.
 Newly industrializing countries - States that underwent
industrialization after World War II and whose economies have grown
at a rapid pace.
 Post-Fordist World - economic system characterized by a more
flexible set of production practices in which goods are not mass-
produced; instead, production has been accelerated and dispersed
around the globe by multinational companies that shift production,
outsourcing it around the world and bringing places closer together in
time and space than would have been imaginable at the beginning of
the twentieth century.
 Rust belt - a region in the northeastern United States that was once
characterized by industry. Now so-called because of the heavy
deindustrialization of the area.

3.22. TASK

95
3.23. REFERENCES FOR FURTHER STUDY

1. Bryson John, Henry Nick, Keeble David and Martin Ron, (eds.)
(1999): The Economic Geography Reader- Producing and Consuming
Global Capitalism, John Wiley and Sons Ltd., New York.
2. Cole, J. P., (1983): Geography of World Affairs, Butterworths,
London.
3. Fouberg, E. H., Murphy, A. B., & De Blij, H. J., (2015): Human
geography: people, place, and culture. 11th edition. Hoboken: Wiley,
USA.
4. Grigg David, (1995): An Introduction to Agricultural Geography,
Routledge, London.
5. Hartshorn A. Truman and Alexander W. John, Third edition, (2010):
Economic Geography, PHI Learning Private Ltd., New Delhi.
6. Harrington J.W. and Warf Barney, (1995): Industrial Location-
Principle, Practice and Policy, Routledge, London and New York.
7. Hussain Majid (ed.), (1993): Perspectives in Economic Geography,
Vols. 1-6,Anmol Publication, New Delhi.
8. Knox Paul, Agnew John and McCarthy Linda, (2008): The Geography
of the World Economy, Hodder Education, UK
9. Mazoyer, M., & Roudart, L., (2006): A history of world agriculture:
From the neolithic age to the current crisis, Monthly Review Press,
New York.
10. Sheppard Eric and Barnes Trevor J., (eds.) (2000): A Companion to
Economic Geography, Blackwell, Massachusetts.
11. Smith, D. M (1971): Industrial Geography: An Economic Geographic
Analysis, John Wiley & Sons.
12. Tarrant, J. R. (1974): Agricultural Geography, Problems in Modern
Geography Series, John Wiley & Sons.



96
 4
SPATIO-SOCIAL ORGANIZATION OF
PRODUCTION –TRANSPORT, TRADE,
AND SERVICES: GLOBAL PATTERNS
AND TRENDS
After going through this chapter you will be able to understand the
following features

Unit Structure :

4.1. Objectives
4.2. Introduction
4.3. Subject Discussion
4.4. Organisation of transport - Bases of Spatial Interaction
4.5. Theoretical Perspectives on Transport and inter-regional
interactions
4.6. Role of transport cost- nodes-places, networks and flows-Spatio-
social accessibility – Indian Examples
4.7. International trade theory- classical, neo-classical and Marxist
Perspectives - Critical review
4.8. Globalisation and changing structure and composition of
International trade – GATT & WTO
4.9. Logic of Regional Integrations- Types and levels
4.10. Significance of regional integration as a strategy for the periphery -
Case Studies - EU, OPEC, ASEAN, SAARC, BRICS
4.11. New Economic Activities and Globalization: Finance and Service
Industry
4.12. The Forth Industrial Revolution
4.13. Summary
4.14. Check your Progress/ Exercise
4.15. Answers to the Self-learning Questions
4.16. Technical words and their meaning
4.17. Task
4.18. Reference for further study

97
4.1. OBJECTIVES

By the end of this unit you will be able to:

 Learn the Organisation of transport and its theoretical perspective
 Understand bases of spatial interaction
 Learn the role of transport cost, nodes, places, networks, and flows,
and spatio-social accessibility through Indian Examples
 Discuss the international trade theory and i
 Understand globalization and changing composition of international
trade and the role of GATT & WTO in International trade
 Understand regional integration, types, and levels through case studies
of trading blocs
 Learning the new economic activities and understanding the fourth
industrial revolution

4.2. INTRODUCTION

In this unit topics on the organization of transport, theoretical

perspective, and transport cost, bases of spatial interaction shall be studies.
The international trade theory and its changing composition with reference
to GATT and WTO shall be learned. Regional integration through major
trading organizations and trading blocs such as EU, OPEC, ASEAN,
SAARC, and BRICS will be studied. The new economic activities in the
globalized world and the fourth industrial revolution shall also be studied.

4.3. SUBJECT DISCUSSION

Transport has been playing a significant for societies to develop

and create spatial interaction between them.

4.4 ORGANISATION OF TRANSPORT - BASES OF

SPATIAL INTERACTION

Movements of people, goods, and information have always been

fundamental components of human societies. Contemporary economic
processes have been accompanied by a significant increase in mobility and
higher levels of accessibility. Societies have been increasingly dependent
on transport systems to support a wide variety of activities ranging from
commuting, supplying, energy needs, to distributing parts between
manufacturing facilities and distribution centers. Developing a transport
system has been a continuous challenge to satisfy mobility needs, support
economic development, and participate in the global economy.

98
 The unique purpose of transportation is to overcome space, which
is shaped by a variety of human and physical constraints such as distance,
time, administrative divisions, and topography.

Transport represents one of the most important human activities

worldwide as it allows us to mitigate the constraint of geography. It is an
indispensable component of the economy and plays a major role in
supporting spatial relations between locations. Transport creates links
between regions and economic activities, between people and the rest of
the world, and as such, generates value. It is composed of core
components, which are the modes, infrastructures, networks, and flows.

Transportation modes are essential components of transport

systems since they are the means of supporting mobility. Modes can be
grouped into three broad categories based on the medium they exploit:
land, water, and air. Each mode has its requirements and features and is
adapted to serve the specific demands of freight and passenger traffic.

Bases of Spatial Interaction

Spatial Interactions consider the dynamics of flows of people,
freight service, energy, or information from one location to another. They
are demand-supply relationships expressed over a geographical area and
usually refer to a variety of movements such as tourism, commuting,
migration, international trade, and the transmission of information or
capital.

The theoretical origins of spatial interaction can be attributed to the

French Geographer Edward .L. Ullman. He proposed that there are three
conditions for spatial interaction to occur i.e. complementarity,
transferability, and intervening opportunity.

1. Complimentarity:
Complementarity refers to demand or deficit in a product at one
location and a supply or surplus of the same product at another location.
For example, a city has a demand for vegetables while the surrounding
rural areas may provide them. Spatial differentiation does not necessarily
correspond to complementarity as the former is only a necessary condition
not a sufficient condition for a spatial interaction to occur. For example,
Country X has a shortage of coal while Country Y has a surplus of coal.
The energy consumption in country A mainly depends on other sources,
namely oil, natural gas, and other alternative energy. So, coal trade
between both countries is limited. Therefore, the surplus-deficit
complementarity is commodity-specific and depends on the level of
economic development.

A supply and demand pair is necessary for spatial interaction to

take place, which implies that a location generating a supply provides
surplus products while a location generating a demand has a shortage of
them. The direction, distance, and route of interaction depend on the
99
respective locations of supply and demand. Due to complementarity
relationships, spatial interaction may occur over longer distances like the
flow of petroleum between the Middle East and the U.S.A. or over shorter
distances such as the flow of commuters from their places of work to their
places of residence. For example, location A has a surplus of minerals,
and location B has demand for it, then spatial interaction can take place
between the two locations.

Spatial Interaction
A B

Supply Demand

2. Transferability.
Transferability refers to the possibility of interactions occurring
between locations by overcoming distance, time, and cost. Even if a
complementarity supply-demand relationship exists between two
locations, no interaction will take place if the transfer cost is higher than
the benefits derived. The cost of overcoming distance is known as the
friction of distance, which is subject to factors such as existing
transportation, technology, and the cost of energy. The shorter the distance
between supply and demand, the higher is the spatial interaction. For
example, high-value low-weight goods such as high-tech are transferable
at a global scale while heavy, low-value goods such as construction
materials are usually consumed very close to where they are produced.

Transferability can be accomplished by different transport modes

depending on the weight and value of goods as well as the distance
involved. For example, steel factories and petroleum refineries are
location A and location B is the port area, thus location A is more inclined
to locate at the port area (Location B) where iron ore and petroleum are
usually imported. Transferable distance could be extended by improving
the capacity and efficiency of the transport system. are more inclined to
locate at port cities where iron ore and petroleum is usually imported.

Spatial Interaction
A B

3) Intervening Opportunity:
A supply and demand pair is necessary for a spatial interaction to
occur, which implies that a location generating a supply provides surplus
products while a location generating a demand has a shortage of them.

100
 Intervening Opportunity is the third basis of spatial interaction. It
explains the absence or insufficiency of intervening opportunity between
two complementary locations. Complementarity will only generate a flow
if there is no intervening or closer location. The flow that would otherwise
occur between two complementary locations maybe diverted to a third
location if it represents an intervening opportunity such as a closer
complementary alternative with a cheaper overall transport cost. For
instance, to have an interaction of a customer to a store, there must not be
a closer store that offers a similar array of goods. If location C offers the
same characteristics (namely complementarity) as location B and is also
closer to location A, an interaction between A and B will not occur and
will be replaced by an interaction between A and C.

Spatial Interaction
A C

4.5. THEORETICAL PERSPECTIVES ON TRANSPORT

AND INTER-REGIONAL INTERACTIONS

The growth and development of transportation provide a medium,

contributing to the progress of agriculture, industry, commerce,
administration, defence, education, health, or any other community
activity. This leads to inter-regional interactions.

The theoretical perspective of transport includes theories and

models to understand the inter-regional interactions. Edward Ullman
studied the inter-regional interactions with the help of Complementarity,
Transferability, and Intervening Opportunity. There were other theories
put forward by others like the theory of M.E. Hurst. M.E. Hurst in 1974,
introduced a non-economic dimension into location choice and presented
it graphically in the Hurst matrix.

White and Senior (1983), in their book entitled, Transport

Geography considered five basic factors, which influence the growth and
development of transport systems and how changes take place. The factors
are historical, technological, physical, economic, political & social.

Taaffe, Morrill, and Gould (TMG) Model (1963)

Taaffe, Morrill, and Gould, in 1963, undertook a comparative
analysis of the development of transport in developing countries. Their
spatial model of transport network development in developing countries
has proved to be a valuable help in the understanding of transport

101
development and has been widely applied. The model which Taaffe and
his colleagues devised was based upon Ghanaian and Nigerian experience,
but it applies to other developing lands, for example, in Latin America.

Gould’s Spatial Exploration Model (1966)

The behavioral model was proposed in 1966 as an alternative to
the Taaffe, Morrill, and Gould concepts of transport development. It
incorporates a random approach and is based upon a simulation of search
theory, with the development of a transport network within an area, which
contains resources and hazards, or constraints, indicated by isorithms of
environmental quality.

The Vance Model (1970)

Based on his work on the eastern seaboard of America, Vance
(1970) developed a five-stage ‘mercantile’ model to illustrate the
development of transport links and the growth of the urban hierarchy in
North America. Although primarily concerned with trade, his model is
important in that it stresses the impact of exogenous forces on the
evolution of transport networks and their associated spatial patterns.

The Rimmer Model (1977)

Using terminology derived from Brookfield (1972, 1975), Rimmer
identified four phases in the evolving interrelationships between
metropolitan and Third World countries in transport terms.

These models help to understand how transport provides

interactions between regions. These interactions play an important role at
local or regional levels but also the global level.

4.6. ROLE OF TRANSPORT COST- NODES-PLACES,

NETWORKS, AND FLOWS- SPATIO-SOCIAL
ACCESSIBILITY – INDIAN EXAMPLES

 Transport cost
Transport costs are the costs internally assumed by the providers of
transport services. They come as fixed and variable costs, depending on
various conditions related to geography, infrastructure, administrative
barriers, energy, and how passengers and freight are carried. The fixed
costs refer to the infrastructure cost while the variable cost refers to the
operating cost. Three major components, related to transactions,
shipments, and the friction of distance, impact the transport costs.

 Nodes
Transportation primarily links locations, often characterized as
nodes. They serve as access points to a distribution system or as
intermediary locations within a transport network. This function is mainly
serviced by transport terminals where flows originate, end or are being

102
transshipped from one mode to another. Eg: railway junction station, port,
airport terminal, etc.

 Places or Locations.
As all activities are located somewhere, each location has its
characteristics conferring to a potential supply and demand for resources,
products, services, and labour. A place will determine the nature, the
origin, the destination, the distance, and the possibility of a movement. For
eg., A city provides employment opportunities in various sectors.

 Networks.
A transport network, is a network or graph in geographic space,
describing an infrastructure that permits and constrains movement or flow.
It is composed of a set of linkages expressing the connectivity between
places and the capacity to handle passenger or cargo volumes. It considers
the spatial structure and organization of transport infrastructures and
terminals.

 Flows
It is the amount of traffic over a network, which is composed of
nodes and linkages. This is jointly a function of the demand and the
capacity of the linkages to support them. Eg. Interactions between
travelers and infrastructure.

 Spatio-Social Accessibility- Indian Examples

Accessibility is the measure of the capacity of a location to be
reached from, or to be reached by, different locations. Therefore, the
capacity and the arrangement of transport infrastructure are key elements
in the determination of accessibility.

Well-developed and efficient transportation systems offer high

accessibility levels, while less-developed ones have lower levels of
accessibility. Thus, accessibility is linked with an array of economic and
social opportunities. All locations are not equal because some are more
accessible than others, which implies inequalities. Thus, accessibility is a
proxy for spatio-social inequalities.

As accessibility determines human opportunities - for jobs, for

economic or social interaction, for access to goods, or for the use of social
or economic resources—the differentiation in the level of accessibility
creates variations in opportunities As accessibility determines human
opportunities—for jobs, for economic or social interaction, for access to
goods, or for the use of social or economic resources - the differentiation
in the level of accessibility creates variations in opportunities.

Accessibility determines human opportunities for jobs, economic,

or social interactions, access to goods, or the use of social or economic
resources. The differentiation in the level of accessibility creates variations
in opportunities. Inadequacies in transportation provision could
103
undoubtedly exclude several people from fully participating in daily
activities, for instance, obtaining access to education, employment, and
various social and leisure pursuits. One of the most powerful instruments
is the accessibility analysis in which the accessibility measures comprise
two main parts. The first is the cost of travel e.g., money or time and the
second is the availability of opportunities e.g., the distance to public
transportation services.

India's transport sector is large and diverse. Since the early 1990s,
India's growing economy has witnessed a rise in demand for transport
infrastructure and services. The significance of urban transport in India
stems from the role that it plays in the reduction of poverty, by improving
access to labour markets and thus increasing incomes in poorer
communities Services and manufacturing industries particularly
concentrate around major urban areas, and require efficient and reliable
urban transport systems to move workers and connect production facilities
to the logistics chain.

Mumbai is known to be the city where people from different parts

of India migrate. However, historically Mumbai was the center for trade
and this was due to this accessibility to water transport. Overseas trade
brought in a floating population of traders and seafarers from different
communities. Mumbai became a major trading hub during the time of
Britishers as transportation improved. Economic opportunities and access
to social services also improve due to transport.

Transport also creates opportunities for better education facilities.

Better education facilities are available in India in cities with good
accessibility like Bangalore, Pune, Ahmedabad, Delhi, Mumbai, etc. After
the planned development of Navi Mumbai city in Maharashtra, it is well
connected to other parts of the state and country. It has all forms of
transport well-developed and remarkable infrastructure it has now become
a home to various educational institutions offering courses in several
streams. Even a number a of Multi-national company branches and head
offices are located across the city. Also, Navi Mumbai provides several
recreational facilities for spatio-social interaction to take place.

Thus, it can be observed that accessibility plays a major role in

creating spatial interactions. It also determines the number of opportunities
for people. Areas less accessible shall have limited spatial interaction and
vice-versa.

4.7. INTERNATIONAL TRADE THEORY- CLASSICAL,

NEO-CLASSICAL AND MARXIST PERSPECTIVES-
CRITICAL REVIEW

International trade theories are simply different theories to explain

international trade. Trade is the concept of exchanging goods and services
104
between two people or entities. International trade is then the concept of
this exchange between people or entities in two different countries. People
or entities trade because they believe that they benefit from the exchange.
They may need or want the goods or services. While at the surface, this
may sound very simple, there is a great deal of theory, policy, and
business strategy that constitutes international trade.

It is important to understand how countries traded with one another

historically. Over time, economists have developed theories to explain the
mechanisms of global trade. The main historical theories are
called classical and are from the perspective of a country or country-
based. By the mid-twentieth century, the theories began to shift to explain
trade from a firm, rather than a country, perspective. These theories are
referred to as modern and are firm-based or company-based. Both of these
categories, classical and modern, consisting of several international
theories.

i) Classical and Neoclassical

Classical Political Economy, as well as Neoclassical theory,
embraces free trade. This is because of the theory of comparative
advantage first developed by David Ricardo. Ricardo’s theory postulates
that free trade is advantageous as it allows nations to specialize in
production that requires relatively fewer factor inputs. This reasoning is
based on the concept of opportunity cost and postulates that even nations
that are worse in producing any good stand to gain something from trade.
As a consequence of trade, nations would be able to reach consumption
(and thereby utility) that goes beyond the possibilities that could be
reached by producing all required goods in an autarch manner. The
neoclassical theory later refined Ricardo’s assumptions by introducing
increasing marginal costs when shifting production factors from one good
to another, thereby explaining why there is no complete specialization in
countries.

A theory that seeks to explain why different countries specialize in

different goods is the Heckscher-Ohlin theory. This theory says that
countries will tend to export goods that require more inputs from a
production factor (capital, land, labour) they have in abundance and vice
versa import goods that require more input from a production factor that is
scarce. Also, due to trade both the prices of goods as well as the returns to
production factors will reach an equilibrium or a world price.

The political implications of these insights are to repeal restrictions

on trade such as quotas, tariffs, or national subsidies wherever possible
since they reduce the overall welfare of the world and lead to inefficient
production. Historically, free trade proponents' first great victory was the
mobilization against the "Corn Laws" in 19th century Britain.
Contemporarily the different rounds of the GATT and the WTO are
promoting trade by reducing tariffs as well as non-tariff barriers (such as
regulations and bans on certain goods).
105
ii) Institutionalist
Institutionalists have a more ambiguous stance about free trade.
This is mostly because they embrace a more active role for state
management of economic development and fear that opening up national
economies to world trade (too soon) might interfere with those plans.
Also, most of the time a different normative metric for welfare or
goodness is applied. Friedrich List, in particular, eschewed the classicals'
preoccupation with the utility of individuals or the welfare of the world as
a whole. Instead, he emphasizes the nation as the locus of collective
identity. Consequently, national indicators like, for example, the balance
of payment, the share of the manufacturing (or any other nationally
relevant) industry, or the exchange rate of the nation's currency would
become more important issues than consumers' welfare gains. Another
prominent contribution of List is the "kicking away the ladder" metaphor.
He argued that the British economy had relied on protectionist tariffs and
interventionist policies before embracing free trade and that prescribing
other nations to go directly from underdevelopment to free trade would be
the equivalent of kicking away the ladder. Contemporary institutionalists
might not necessarily share List's strong attachment to economic
nationalism. Still, institutionalists are wary of the consequences for
political and cultural consequences that might arise due to free trade i.e.
when production patterns are shifted.

iii) Marxian and Developmentalist

Marx has a critical approach towards the other theories put
forward. Marx stressed the necessity of international trade for the sake of
capital accumulation in his analysis. Others working in the Marxian
tradition such as Karl Kautsky, Rosa Luxemburg, J.A. Hobson, and V.I.
Lenin subsequently developed theories of imperialism whereby the
conquest of new markets was a function of the capitalist mode of
production in the industrialized economies. Consequently, capital needed
to expand ruthlessly and violently to realize its surplus value and therefore
bring all parts of the world not yet subjected to capitalist production under
its aegis. It is noteworthy that free trade here is seen as a zero-sum game,
where value is transferred from the powerless to the powerful, often under
the use of (physical) force i.e. in the form of colonial armies, foreign-
backed dictators, or economic and financial pressure.

A variant of imperialist theorizing is World Systems Theory

developed by Immanuel Wallerstein, in which a "core" set of nations
exploits the "periphery." In this model, the core imports cheap raw
materials from the periphery and sells expensive manufactured goods back
to the periphery market. As a consequence of this structure, the core can
maintain its wealth by keeping the most profitable sectors of economic
production within its boundaries, while the periphery is unable to move
out of impoverishment (even though transitions towards a semi-periphery
are possible).

106
 Somewhat connected to this strand of thinking is
the developmental school. Developmentalists, however, instead of
embracing revolution against capitalism as a policy prescription are closer
to the early institutionalists in the sense that they advocate for national
strategies such as infant industry protection or the development of import
substitution industries that are seen to be able to increase their power in
the world trade system in the long term. The political implications from
this theory were, for example, the proposal of the New International
Economic Organization (NIEO) in the UN in the 1970s, which however
failed, and national economic strategies pursued by various states in Latin
America roughly from the 1930s until the 1970s.

4.8. GLOBALISATION AND CHANGING STRUCTURE

AND COMPOSITION OF INTERNATIONAL TRADE –
GATT & WTO

In a global economy, no nation is self-sufficient, which is

associated with specific flows of goods, people, and information. Each
nation is involved at different levels in trade to sell what it produces, to
acquire what it lacks, and to produce more efficiently in some economic
sectors than its trade partners. International trade, or long-distance trade
since there were no nations in the modern sense, has taken place for
centuries.

The nature of what can be considered international trade has

changed, particularly with the emergence of global value chains and the
trade of intermediary goods they involve. This trend reflects the strategies
of multinational corporations positioning their manufacturing assets to
lower costs and maximize new market opportunities. About 80% of the
global trade takes place within value chains managed by multinational
corporations. International trade has thus grown at a faster rate than global
merchandise production with the growing complexity of distribution
systems supported by supply chain management practices. The structure
of global trade flows has shifted, with many developing economies having
growing participation in international trade with an increasing share of
manufacturing.

Globalization has been accompanied by growing flows of

manufactured goods and their growing share of international trade. The
trend since the 1950s involved a relative decline in bulk liquids (such as
oil) and more dry bulk and general cargo being traded. Another emerging
trade flow concerns the increase in the imports of resources from
developing economies, namely energy, commodities, and agricultural
products, which is a divergence from their conventional role as exporters
of resources. This is indicative of economic diversification as well as
increasing standards of living. However, significant fluctuations in the
growth rates of international trade are linked with economic cycles of

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growth and recession, fluctuations in the price of raw materials, as well as
disruptive geopolitical and financial events.

At the beginning of the 21st century, the flows of globalization

have been shaped by four salient trends:

 The ongoing growth of international trade, both in absolute terms and

concerning global national income, is a growth that appears to be
leveling off. From 1980 to 2015 the value of exports has grown by a
factor of 9 times if measured in current dollars, while GDP increased 6
times and the population increased 1.6 times. Since the 2010s,
international trade appears to be leveling.
 A substantial level of containerization of commercial flows, with
container throughput growing in proportion with global trade.
Containerization tends to grow at a rate faster than that of trade and
GDP. This has been associated with the setting of intermodal transport
chains connecting exporters and importers.
 A higher relative growth of trade of emerging economies, particularly
in Pacific Asia that focuses on export-oriented development strategies
that have been associated with imbalances in commercial relations.
 The growing role of multinational corporations as vectors for
international trade, particularly in terms of the share of international
trade taking place within

GATT (General Agreement on Tariffs and Trade)

The General Agreement on Tariffs and Trade (GATT) is a legal
agreement between many countries, whose overall purpose was to
promote international trade by reducing or eliminating trade barriers such
as tariffs. According to its preamble, its purpose was the "substantial
reduction of tariffs and other trade barriers and the elimination of
preferences, on a reciprocal and mutually advantageous basis."

GATT is a multi-national trade treaty. The GATT was first

discussed during the United Nations Conference on Trade and
Employment and was the outcome of the failure of negotiating
governments to create the International Trade Organization (ITO).
Twenty-three countries signed the Final Act of the General Agreement on
Tariffs and Trade (GATT) on 30 October 1947 after a period of intensive
negotiations. It has been updated in a series of global trade negotiations
consisting of nine rounds between 1947 and 1995. Its role in international
trade was largely succeeded in 1995 by the World Trade Organization.
The GATT, and its successor the WTO, have succeeded in reducing
tariffs. The average tariff levels for the major GATT participants were
about 22% in 1947 but were 5% after the Uruguay Round in 1999. Experts
attribute part of these tariff changes to GATT and the WTO.

In addition to facilitating applied tariff reductions, the early

GATT's contribution to trade liberalization "includes binding the
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negotiated tariff reductions for an extended period, establishing the
generality of non-discrimination through most-favored-nation (MFN)
treatment and national treatment status, ensuring increased transparency of
trade policy measures, and providing a forum for future negotiations and
the peaceful resolution of bilateral disputes. All of these elements
contributed to the rationalization of trade policy and the reduction of trade
barriers and policy uncertainty.

GATT has provisions of Special and differential treatment (S&D)

which exempts developing countries from the same strict trade rules and
disciplines of more industrialized countries. In the Uruguay Round
Agreement on Agriculture, for example, developing countries are given
longer periods to phase in export subsidy and tariff reductions than the
more industrialized countries. The least developed countries are exempt
from any reduction commitments. Cultural exception is also introduced in
GATT. Its purpose is to consider cultural goods and services as exceptions
in international treaties and agreements, especially with WTO. Its goals
are to point out that States are sovereign as far as limitation of culture-free
trade is concerned to protect and promote their artists and other elements
of their culture.

WTO (World Trade Organisation)

The World Trade Organization (WTO) is the only global
international organization dealing with the rules of trade between nations.
The WTO has over 164 members representing 98 percent of world trade.
The WTO is headquartered in Geneva, Switzerland. The goal is to ensure
that trade flows as smoothly, predictably, and freely as possible. It is an
organization for trade opening. The WTO is run by its member
governments. All major decisions are made by the membership as a
whole, either by ministers (who usually meet at least once every two
years) or by their ambassadors or delegates (who meet regularly in
Geneva).

The WTO precursor General Agreement on Tariffs and

Trade (GATT), was established by a multilateral treaty of 23 countries in
1947 after World War II. The WTO’s creation on 1 January 1995 marked
the biggest reform of international trade since the end of the Second World
War. Whereas the GATT mainly dealt with trade in goods, the WTO and
its agreements also cover trade in services and intellectual property. The
birth of the WTO also created new procedures for the settlement of
disputes.

The WTO agreements cover goods, services, and intellectual

property. They spell out the principles of liberalization, and the permitted
exceptions. They include individual countries' commitments to lower
customs tariffs and other trade barriers and to open and keep open services
markets. They set procedures for settling disputes. These agreements are
not static; they are renegotiated from time to time and new agreements can
be added to the package.
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 WTO agreements require governments to make their trade policies
transparent by notifying the WTO about laws in force and measures
adopted. Various WTO councils and committees seek to ensure that these
requirements are being followed and that WTO agreements are being
properly implemented. The WTO's procedure for resolving trade quarrels
under the Dispute Settlement Understanding is vital for enforcing the rules
and therefore for ensuring that trade flows smoothly. Countries bring
disputes to the WTO if they think their rights under the agreements are
being infringed. Judgments by specially appointed independent experts are
based on interpretations of the agreements and individual countries'
commitments.

WTO agreements contain a special provision for developing

countries, including longer periods to implement agreements and
commitments, measures to increase their trading opportunities, and
support to help them build their trade capacity, handle disputes, and to
implement technical standards. The WTO organizes hundreds of technical
cooperation missions to developing countries annually.

Over the past 25 years, WTO members have agreed on major

updates to the WTO rulebook to improve the flow of global trade. In 2015,
the WTO reached a significant milestone with the receipt of its 500th trade
dispute for settlement. In 2020, the WTO marked its 25th anniversary.

4.9 LOGIC OF REGIONAL INTEGRATIONS-TYPES

AND LEVELS

Regional Integration is a process in which neighboring countries

enter into an agreement in order to upgrade cooperation through common
institutions and rules. The objectives of the agreement could range from
economic to political to environmental, although it has typically taken the
form of a political economy initiative where commercial interests are the
focus for achieving broader socio-political and security objectives, as
defined by national governments.

Regional integration simply is the process by which states within a

particular region increase their level of interaction with regard to
economic, security, political, or social and cultural issues. Regional
integration initiatives, according to Van Langenhove, should fulfill at least
eight important functions:

i) the strengthening of trade integration in the region

ii) the creation of an appropriate enabling environment for private
sector development
iii) the development of infrastructure programmes in support
of economic growth and regional integration
iv) the development of strong public sector institutions and good
governance;

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 v) the reduction of social exclusion and the development of an
inclusive civil society
vi) contribution to peace and security in the region
vii) the building of environment programmes at the regional level
viii) the strengthening of the region's interaction with other regions of
the world

Types and levels

Regional economic integration has enabled countries to focus on
issues that are relevant to their stage of development as well as encourage
trade between neighbors. Economic integration can be classified into five
additive levels, each present in the global landscape:

i) Free trade. Tariffs (a tax imposed on imported goods) between member

countries are significantly reduced, some abolished altogether. Each
member country keeps its tariffs regarding third countries. The general
goal of free trade agreements is to develop economies of scale and
comparative advantages, promoting economic efficiency.

ii) Custom union: It sets common external tariffs among member

countries, implying that the same tariffs are applied to third countries; a
common trade regime is achieved. Custom unions are particularly useful
to level the competitive playing field and address the problem of re-
exports (using preferential tariffs in one country to enter another country).

iii) Common market: Services and capital are free to move within
member countries, expanding scale economies and comparative
advantages. However, each national market has its regulations, such as
product standards.

iv) Economic union (single market): All tariffs are removed for trade
between member countries, creating a uniform (single) market. There are
also free movements of labor, enabling workers in a member country to
move and work in another member country. Monetary and fiscal policies
between member countries are harmonized, which implies a level of
political integration. A further step concerns a monetary union where a
common currency is used, for example, European Union (Euro).

v) Political union: It represents the potentially most advanced form of

integration with a common government and where the sovereignty of a
member country is significantly reduced. Only found within nation-states,
such as federations where there are a central government and regions
(provinces, states, etc.) having a level of autonomy.

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4.10. SIGNIFICANCE OF REGIONAL INTEGRATION
AS A STRATEGY FOR THE PERIPHERY-- CASE
STUDIES - EU, OPEC, ASEAN, SAARC, BRICS

In the past decade, there has been an increase in these trading blocs
with more than one hundred agreements in place and more in the
discussion. A trade bloc is a free-trade zone, or near-free-trade zone,
formed by one or more tax, tariff, and trade agreements between two or
more countries. Some trading blocs have resulted in agreements that have
been more substantive than others in creating economic cooperation.
Regional integration appears today as an alternative that will enable
countries in the region to overcome the global economic crisis by creating
dynamic economic relations and ties of solidarity among themselves.

These agreements create more opportunities for countries to trade

with one another by removing the barriers to trade and investment. Due to
a reduction or removal of tariffs, cooperation results in cheaper prices for
consumers in the bloc countries. The regional economic integration
significantly contributes to the relatively high growth rates in the less-
developed countries. By removing restrictions on labor movement,
economic integration can help expand job opportunities. Member nations
may find it easier to agree with smaller numbers of countries. Regional
understanding and similarities may also facilitate closer political
cooperation.

There are more than one hundred regional trade agreements in

place, a number that is continuously evolving as countries reconfigure
their economic and political interests and priorities. Additionally, the
expansion of the World Trade Organization (WTO) has caused smaller
regional agreements to become obsolete. Some of the regional blocs also
created side agreements with other regional groups leading to a web of
trade agreements and understandings.

Case Studies
EU (European Union)
The European Union (EU) is a political and economic union of 27
member states that are located primarily in Europe. EU policies aim to
ensure the free movement of people, goods and services, and capital
within the internal market, enact legislation injustices and home affairs
and maintain common policies on trade, agriculture, fisheries, and regional
development.

The predecessor of the EU was created in the aftermath of the

Second World War. The first steps were to foster economic cooperation:
the idea being that countries that trade with one another become
economically interdependent and so more likely to avoid conflict. The
result was the European Economic Community (EEC), created in 1958,
and initially increasing economic cooperation between six countries:
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Belgium, Germany, France, Italy, Luxembourg, and the Netherlands.
Since then, 22 other members joined and a huge single market (also
known as the 'internal' market) has been created and continues to develop
towards its full potential.

European Union is the largest trade block in the world. It is the

world's biggest exporter of manufactured goods and services, and the
biggest import market for over 100 countries. Free trade among its
members is one of the EU's founding principles. This is possible in a
single market. Beyond its borders, the EU is also committed to liberalizing
world trade. Internal trade between the member states is aided by the
removal of barriers to trade such as tariffs and border controls. In
the eurozone, trade is helped by not having any currency differences to
deal with amongst most members. The European Union represents all its
members at the World Trade Organization (WTO) and acts on behalf of
member states in any disputes. The European Union's services trade
surplus rose from $16 billion in 2000 to more than $250 billion in 2018.

OPEC (Organization of the Petroleum Exporting Countries)

The Organization of the Petroleum Exporting Countries (OPEC) is
a permanent, intergovernmental Organization, created at the Baghdad
Conference in 1960, by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela,
its first five member countries. The other member countries of OPEC are
Algeria, Angola, Congo, Equatorial Guinea, Gabon, Libya, Nigeria, and
UAE. Altogether, the organization has 13 member countries. As of
September 2018, the 13 member countries accounted for an estimated 44
percent of global oil production and 81.5 percent of the world's "proven"
oil reserves giving OPEC a major influence on global oil prices Its
headquarters is located in Vienna in Austria since 1965.

The mission of OPEC is to coordinate and unify the petroleum

policies of its Member Countries and ensure the stabilization of oil
markets to secure an efficient, economic, and regular supply of petroleum
to consumers, a steady income to producers, and a fair return on capital for
those investing in the petroleum industry. The organization is also a
significant provider of information about the international oil market.

The formation of OPEC marked a turning point toward national

sovereignty over natural resources, and OPEC decisions have come to
play a prominent role in the global oil market and international relations.
The effect can be particularly strong when wars or civil disorders lead to
extended interruptions in supply. In the 1970s, restrictions in oil
production led to a dramatic rise in oil prices and the revenue and wealth
of OPEC, with long-lasting and far-reaching consequences for the global
economy. In the 1980s, OPEC began setting production targets for its
member nations; generally, when the targets are reduced, oil prices
increase. This has occurred most recently from the organization's 2008 and
2016 decisions to trim oversupply.

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ASEAN (The Association of Southeast Asian Nations)
ASEAN is an economic union comprising 10 member states
in Southeast Asia, which promotes intergovernmental cooperation
between its members and other countries in Asia. ASEAN was established
on 8 August 1967 in Bangkok, Thailand, with the signing of the ASEAN
Declaration (Bangkok Declaration) by the Founding Fathers of ASEAN,
namely Indonesia, Malaysia, Philippines, Singapore, and Thailand. Later,
Brunei, Vietnam, Laos, Myanmar, and Cambodia joined, making it a ten-
member association.

ASEAN's primary objective was to accelerate economic growth

and through that social progress and cultural development. A secondary
objective was to promote regional peace and stability based on the rule of
law and the principle of the United Nations charter. With some of the
fastest-growing economies in the world, ASEAN has broadened its
objective beyond the economic and social spheres. In 2003, ASEAN
moved along the path of the European Union by agreeing to establish an
ASEAN community comprising three pillars: the ASEAN security
community, the ASEAN economic community, and the ASEAN socio-
cultural community.

ASEAN sought economic integration by creating the ASEAN

Economic Community (AEC) by the end of 2015 that established a single
market. The average economic growth of member states from 1989 to
2009 was between 3.8% and 7%. The ASEAN Free Trade Area (AFTA),
established on 28 January 1992, includes a Common Effective Preferential
Tariff (CEPT) to promote the free flow of goods between member states.
ASEAN countries have many economic zones (industrial parks, eco-
industrial parks, special economic zones, technology parks, and innovation
districts). In 2018, eight of the ASEAN members are among the world's
outperforming economies, with a positive long-term prospect for the
region.

SAARC (The South Asian Association for Regional Cooperation)

The South Asian Association for Regional Cooperation (SAARC)
is the regional intergovernmental organization and geopolitical union of
nations in South Asia. Its member states include Afghanistan, Bangladesh,
Bhutan, India, Nepal, Maldives, Pakistan, and Sri Lanka. SAARC
comprises 3% of the world's area, 21% of the world's population, and
4.21% (US$ 3.67 trillion) of the global economy, as of 2019.

SAARC was founded in Dhaka on 8th December 1985. Its

secretariat is based in Kathmandu, Nepal. The organization promotes the
development of economic and regional integration. It launched the South
Asian Free Trade Area in 2006. SAARC maintains permanent diplomatic
relations at the United Nations as an observer and has developed links
with multilateral entities, including the European Union.

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 The objectives of the Association as outlined in the SAARC
Charter are: to promote the welfare of the peoples of South Asia and to
improve their quality of life; to accelerate economic growth, social
progress, and cultural development in the region and to provide all
individuals the opportunity to live in dignity and to realize their full
potentials; to promote and strengthen collective self-reliance among the
countries of South Asia; to contribute to mutual trust, understanding and
appreciation of one another's problems; to promote active collaboration
and mutual assistance in the economic, social, cultural, technical and
scientific fields; to strengthen cooperation with other developing
countries; to strengthen cooperation among themselves in international
forums on matters of common interests, and to cooperate with
international and regional organizations with similar aims and purposes.
Decisions at all levels are to be taken based on unanimity, and bilateral
and contentious issues are excluded from the deliberations of the
Association.

The SAARC intra-regional trade stands about five percent on the

share of intra-regional trade in overall trade in South Asia.
Similarly, foreign direct investment is also dismal. The intra-regional FDI
flow stands at around four percent of the total foreign investment. Lasting
peace and prosperity in South Asia has been elusive because of the various
ongoing conflicts in the region. Political dialogue is often conducted on
the margins of SAARC meetings which have refrained from interfering in
the internal matters of its member states. During the 12th and 13th
SAARC summits, extreme emphasis was laid upon greater cooperation
between the SAARC members to fight terrorism.

BRICS
BRICS is the acronym for an association of five major emerging
national economies: Brazil, Russia, India, China, and South Africa. The
acronym BRIC was first used in 2001 by Goldman Sachs in their Global
Economics Paper, "The World Needs Better Economic BRICs" based on
econometric analyses projecting that the economies of Brazil, Russia,
India, and China would individually and collectively occupy far greater
economic space and would be amongst the world's largest economies in
the next 50 years or so.

As a formal grouping, BRIC started after the meeting of the

Leaders of Russia, India, and China in St. Petersburg on the margins of the
G8 Outreach Summit in 2006. The grouping was formalized during the 1st
meeting of BRIC Foreign Ministers. The 1st BRIC Summit was held in
Yekaterinburg, Russia, on 16 June 2009. It was agreed to expand BRIC
into BRICS with the inclusion of South Africa at the BRIC Foreign
Ministers' meeting in New York in September 2010.

The BRICS members are known for their significant influence on

regional affairs. It comprises 43% of the world population, having 30% of
the world GDP and 17% share in the world trade. The BRICS members
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are all leading developing or newly industrialized countries, but they are
distinguished by their large, sometimes fast-growing economies and
significant influence on regional affairs; all five are G20 members. Since
2009, the BRICS nations have met annually at formal summits.

Apart from economic issues of mutual interest, the agenda of

BRICS meetings has considerably widened over the years to encompass
topical global issues. BRICS cooperation has two pillars – consultation on
issues of mutual interest through meetings of Leaders as well as of
Ministers of Finance, Trade, Health, Education, Agriculture,
Communication, Labour, etc., and practical cooperation in several areas
through meetings of Working Groups/Senior Officials. Regular annual
Summits, as well as meetings of Leaders on the margins of G20 Summits,
are held.

Bilateral relations among BRICS states are conducted mainly

based on non-interference, equality, and mutual benefit. Currently, two
components make up the financial architecture of BRICS, namely, the
New Development Bank (NDB), or sometimes referred to as the BRICS
Development Bank, and the Contingent Reserve Arrangement (CRA).
Both of these components were signed into a treaty in 2014 and became
active in 2015. NDB is a multilateral development bank operated by the
five BRICS states. The bank's primary focus of lending will be
infrastructure projects with authorized lending of up to $34 billion
annually.

4.11. NEW ECONOMIC ACTIVITIES AND

GLOBALIZATION: FINANCE AND SERVICE
INDUSTRY

Globalization of economic activity describes the process of

merging between domestic economies, businesses, and societies. The
phrase relates to economic activity that indicates that globalization
involves the participation of companies and corporations actively
contributing to the integration of international businesses. The features
of the globalization of economic activity include an international
development of trade, production, investments, and flow of workforce.

International trade is an essential component of the globalization

of economic activity as business acts on an international level mainly to
ensure benefiting from participation in the global trade system. New
economic activities have emerged in today's globalized world. It is
popularly the finance and service industry that has emerged in recent
times.

Finance and Service Industry

Globalization has emerged in various sections of the finance
industry. Banking, foreign exchange, bonds, equities, and insurance
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services are now provided through an increasingly global marketplace. In
financial services, as in other activities, globalization can be seen as a
process opening up national economies and markets, widening the extent
and form of cross-border transactions, deepening the international
character of productive activity. As such, globalization is propelled by the
liberalization of trade and deregulation of capital markets, underpinned by
technological change which is lowering communication and transport
costs and enhancing the international trade of services. There is an
emergence of international commercial banking. The international banking
market consists of the foreign sector of domestic banking markets and the
unregulated offshore markets. It has undergone important structural
changes over the last decade. Like domestic banking, international
banking involves lending and deposit-taking. A considerable portion of
international banking activity occurs in unregulated offshore banking
centers

The international lending activities of most banks, aside from the

money centers, are concentrated heavily in the area of providing a variety
of credit facilities to banks in other countries. It is known as the interbank
market. Even Foreign exchange (forex) trading is another important
international banking activity. reign exchange trading at $400 billion.°
Like the loan markets, forex markets are primarily interbank markets.

Today, a very large part of financial globalization involves

financial intermediaries dealing with other, foreign, financial
intermediaries. Consequently, prices in one market are affected by
conditions in other markets. The financial services industry and financial
markets have become more globally integrated.

The service sector plays an increasingly important role in the global

economy and the growth and development of countries through the generation
of opportunities for greater income, productivity, employment, investment,
and trade. The service sector includes a wide and varied range of economic
activity including banking, telecommunications, education, entertainment,
transportation, health, and much more.

Services contribute to economic growth and development through

the creation of a competitive economy by providing jobs, enhancing
access to essential services, and stimulating trade. The service sector
provides the backbone of an integrated and effective economy, nationally,
regionally, and globally.

Globalization is inextricably linked with services. The key linkages

between countries occur via telecommunications and trade, both of which
are services. Changes in technology, competition policy, and trade policy
in these industries have helped to lubricate the channels of global
economic integration. Services are becoming increasingly open to
international trade. Most World trade is in goods, but global international
trade in services recently has been growing faster. More than half of the
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new direct foreign investments are in services. This creates new
opportunities for consumers and producers. Even the International trade
agreements are being extended to cover trade and investments in services.

India has become a hub of business process outsourcing for the

developed countries due to the availability of cost-effective and skilled
human resources. The service sector has also thrown up several
opportunities for the export of software products and services, technical
know-how, technology, transfer, and human capital.

4.12. THE FORTH INDUSTRIAL REVOLUTION

The First Industrial Revolution started in Britain around 1760. It

was powered by a major invention: the steam engine. The steam engine
enabled new manufacturing processes, leading to the creation of factories.
The Second Industrial Revolution came roughly one century later and was
characterized by mass production in new industries like steel, oil, and
electricity. The light bulb, the telephone, and the internal combustion
engine were some of the key inventions of this era. The inventions of the
semiconductor, the personal computer, and the internet marked the Third
Industrial Revolution starting in the 1960s. This is also referred to as the
"Digital Revolution." However, the Fourth Industrial Revolution is
different from the third for two reasons: the gap between the digital,
physical, and biological worlds is shrinking, and technology is changing
faster than ever

The phrase Fourth Industrial Revolution was first introduced by a

team of scientists developing a high-tech strategy for the German
government. Klaus Schwab, executive chairman of the World Economic
Forum (WEF), introduced the phrase to a wider audience in a 2015 article
published by Foreign Affairs.

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Four Industrial Revolutions, in progression from the 18th century to the
21st century © Vectimus/Shutterstock.com
Source:https://www.britannica.com/topic/The-Fourth-Industrial-
Revolution-2119734

The Fourth Industrial Revolution describes the exponential

changes to the way people live, work and relate to one another due to the
adoption of cyber-physical systems, the Internet of Things, and the
Internet of Systems. After the implementation of smart technologies in
factories and workplaces, connected machines will interact, visualize the
entire production chain and make decisions autonomously. While in some
ways it's an extension of the computerization of the 3rd Industrial
Revolution (Digital Revolution), due to the velocity, scope, and systems
impact of the changes of the fourth revolution, it is being considered a
distinct era.

The Fourth Industrial Revolution is a way of describing the

blurring of boundaries between the physical, digital, and biological
worlds. It’s a fusion of advances in artificial intelligence (AI), robotics, the
Internet of Things (IoT), 3D printing, genetic engineering, quantum
computing, and other technologies. It’s the collective force behind many
products and services that are fast becoming indispensable to modern life.
As a result of this perfect storm of technologies, the Fourth Industrial
Revolution is paving the way for transformative changes in the way we
live and radically disrupting almost every business sector. The Fourth
Industrial Revolution focuses on the technologies driving it. These include
the following:

Artificial intelligence (AI)

AI describes computers that can “think” like humans. They can
recognize complex patterns, process information, draw conclusions, and
make recommendations. AI is used in many ways, from spotting patterns
in huge piles of unstructured data to powering the autocorrect on your
phone.

Blockchain
Blockchain is a secure, decentralized, and transparent way of
recording and sharing data, with no need to rely on third-party
intermediaries. The digital currency Bitcoin is the best-known blockchain
application. However, the technology can be used in other ways, including
making supply chains traceable, securing sensitive medical data
anonymously, and combating voter fraud.

Faster computer processing

New computational technologies are making computers smarter.
They enable computers to process vast amounts of data faster than ever
before, while the advent of the cloud has allowed businesses to safely
store and access their information from anywhere with internet access.

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Quantum computing technologies now in development will eventually
make computers millions of times more powerful.

Virtual reality(VR) and Augmented reality (AR)

VR offers immersive digital experiences (using a VR headset) that
simulate the real world, while augmented reality (AR) merges the digital
and physical worlds. Examples include L’Oréal’s makeup app, which
allows users to digitally experiment with makeup products before buying
them, and the Google Translate phone app, which allows users to scan and
instantly translate street signs, menus, and other text.

Biotechnology
Biotechnology harnesses cellular and biomolecular processes to
develop new technologies and products for a range of uses, including
developing new pharmaceuticals and materials, more efficient industrial
manufacturing processes, and cleaner, more efficient energy
sources. Researchers in Stockholm, for example, is working on what is
being touted as the strongest biomaterial ever produced.

Robotics
Robotics refers to the design, manufacture, and use of robots for
personal and commercial use. While we’re yet to see robot assistants in
every home, technological advances have made robots increasingly
complex and sophisticated. They are used in fields as wide-ranging as
manufacturing, health and safety, and human assistance.

The Internet of Things (IoT)

The IoT describes everyday items — from medical wearables that
monitor users' physical condition to cars and tracking devices inserted into
parcels — connected to the internet and identifiable by other devices. A
big plus for businesses is that they can collect customer data from
constantly connected products, allowing them to better gauge how
customers use products and tailor marketing campaigns accordingly.
There are also many industrial applications, such as farmers putting IoT
sensors into fields to monitor soil attributes and inform decisions such as
when to fertilize.

3D printing
3D printing allows manufacturing businesses to print their parts,
with less tooling, at a lower cost, and faster than via traditional processes.
Plus, designs can be customized to ensure a perfect fit.

Apart from this, innovative materials, including plastics, metal

alloys, and biomaterials, promise to shake up sectors including
manufacturing, renewable energy, construction, and healthcare. Energy
capture, storage, and transmission represent a growing market sector,
spurred by the falling cost of renewable energy technologies and
improvements in battery storage capacity.

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4.13. SUMMARY

After going through this unit we have learned that transportation is

the means of conveyance or travel from one place. Human’s urge for
movement has paved the way for society's progress. Societies have been
increasingly reliant on transport to support a wide variety of activities.
Developing a transport system has been a continuous challenge to satisfy
mobility needs, support economic development, and participate in the
global economy. We have also learned about transport leads to spatial
interaction. The concept of spatial interaction was first used by French
geographer Edward Ullman. According to him, there are three bases for
spatial interaction i.e. Complementarity, Transferability, and Intervening
opportunity. The role of transport in spatio-social accessibility in been
understood.

International trade, the economic transactions that are made

between countries, has become very important to the economy of any
country in recent years. It has also given rise to several trade organizations
and trade blocs, which not only deal with the flow of goods and services
but also promote regional cooperation. Globalization has played a major
role in the flow of goods and services. It has lead to the emergence of new
economic activities like finance and service industry and the use of
technology at a faster pace. The fourth industrial revolution will change
the present organization production and could make it's faster and
efficient.

4.14. CHECK YOUR PROGRESS/ EXERCISE

1. True or False
a. Ullman proposed four conditions for spatial interaction to occur.
b. Tariffs between member countries are significantly reduced, some
abolished altogether in regional integration.
c. BRICS is the acronym for an association of six major emerging national
economies
d. Ricardo postulated the theory of comparative advantage.
e. The First Industrial Revolution started in Britain around 1760.

2. Fill in the blanks

a. The theoretical origins of spatial interaction can be attributed to the
French Geographer _______________
(Feidrich Ratzel, Immauel Kant, Karl Marx, Edward Ullman)

b. Transportation primarily links locations, often characterized as

___________
(costs, nodes, networks flows)

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c. _______________countries signed the Final Act of the General
Agreement on Tariffs and Trade (GATT) on 30 October 1947 after a
period of intensive negotiations.
(Twenty three, Thirty, Thirty-five, Fifty)

d. ______________ industry has emerged as new economic activity in

today’s globalized world.
(Agriculture, Manufacturing, Fishing, Service)

e. ______________is a secure, decentralized, and transparent way of

recording and sharing data, without relying on third-party intermediaries.
(Blockchain, 3D Printing, Biotechnology, Robotics)

3. Multiple Choice Questions

a. Which of the following refers to demand or deficit in a product at one
location and a supply or surplus of the same product at another location?
i) Tranferibility
ii) Complimentarity
iii) Intervening Opportunity
iv) Transport node

b. Who stressed the necessity of international trade for the sake of capital
accumulation in his analysis?
i) David Ricardo
ii) Heckscher-Ohlin
iii) Feidrich Ratzel
iv) Karl Marx

c. ASEAN was established in which year?

i)1945
iii) 1952
iii) 1967
iv)1976

d. The WTO has over 164 members representing ______ percent of world
trade
i) 50
ii) 85
iii) 90
iv) 98

e. Which of the following is associated with the fourth Industrial

Revolution?
i) Steam engine
ii) Electricity
iii) Mass Production
iv) Cyber-physical systems

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4. Answer the following
1. What is the basis of spatial interaction? Explain the three bases of
spatial interaction?
2. Give an overview of the theoretical perspective of Transport
organization
3. Explain in brief the perspectives of international trade theory.
4. Discuss the role of GATT and WTO in changing the composition of
international trade.
5. Explain the significance of regional integration as a strategy for the
periphery through a case study.
6. Write a note on the emergence of new economic activities in the
globalized world.

5. Write short notes on:

i) ASEAN
ii) SAARC
iii) EU
iv) OPEC
vi) Fourth Industrial Revolution

4.15. ANSWER TO THE SELF-LEARNING QUESTIONS

1. a. False
1. b. True
1. c. False
1. d. True
1. e. True
2. a. Edward Ullman
2. b. nodes
2. c. Twenty-three
2. d. Service
2. e. Blockchain
3. a. Complementarity
3. b. Karl Marx
3. c. 1967
3. d. 98
3. e. Cyber-physical systems

4.16. TECHNICAL WORDS AND THEIR MEANING

 Transferability: the quality of being transferable or exchangeable

 Trade: is the activity of buying and selling goods
 Globalization: movement of goods, services, capital, technologies,
and cultural practices all over the world.

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4.17. TASK

 On the map of India show the important transport routes

 State any two examples of the bases of spatial interaction of your
locality.
 State the details of important trading blocs in a tabular form

4.18. REFERENCE FOR FURTHER STUDY

 Space, Society, and Geography: Banerjee- Guha Swapna

 Geography and Economy: Scott J. Allen
 Commercial Geography: Nimbhalkar Chaudhari
 Oxford Dictionary
 Encyclopedia Britannica



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