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summary of NIDL topic under space and place / globalisation...

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Definition global spread of labour-use across international borders in the face of international globalisation and industrial competition (TNCs seek cheaper manufacturing) spatial division of labour which occurs when the process of production is no longer confined to national economies Characteristics 1) Driven primarily by TNCs since they have the required large capital outlay (refers to financial resources for large projects, for global investments) 2) leads to Hierarchical, Tripartite Relationship (eg. NIKE model) ● Core – HQs, Research & Development (DCs) ● Semi-periphery – Regional HQs (NIES) ● Periphery – Manufacturing plants (LDCs) 3) Leads to organic, dynamic relationship between ‘Producers’ and ‘actors’ (TNCs). TNCs are footloose (high spatial mobility) – can re-organise ‘actors’ with ease, pull out of industries for cheaper destinations (through outsourcing to contracts/factories) 4) Capital accumulation of profits is highest at the top of the hierarchy where R&D is concentrated.

Causes of NIDL - Pull Factors in Countries (attracting TNCs which are footloose) ♡ Search for cheap, efficient labour in labour intensive industries to ↓ production costs. (Electronics, textiles) LDCs with youthful population are good sources of labour TNCs tap on for greater efficiency and profit due to ① cheap abundant labour ② weaker labour unions ③ low land costs & taxes. ⇒ Singapore: Produces highly skilled labour force ⇒ India: High number of IT students/specialists ⇒ Toyota: has assembly plants in Thailand, Indonesia and the Philippines; youths are obedient and hardworking (Asian values) ♡ Search for large, new markets because DC markets have become over-saturated. NIEs and LDCs are increasingly attractive markets due to a rising middle class with higher disposable income ⇒ India: middle class salaries double every 3 years and household disposable income doubled since 1985 ♡ Improvements in transport and communications infrastructure → affordability and accessibility ● Driven by: advances in air transport (Changi Airport – check your Sec 4 Geog TB) ● Containerisation ● Mobile telecommunications, Internet ♡ Role of State and Supranational Bodies ① Through Special Economic Zones (SEZs) and tax incentives (tax holidays) ⇒ EU: manufacturing remained in mature economies such as Germany (instead of shifting) due to its open market allowing free flow of goods, capital and labour within its 27 members (* EU is large so it’s politically/economically strong enough to reduce negative impact of

deindustrialisation) ⇒ BMW keeps manufacturing in Germany because it employs cheap labour from Poland, Czech Republic, etc. ② Through bureaucratic red tape, so TNCs have to go through an oppressively long/complex procedure to gain bureaucratic approval to pull out of a country. ② Through bribery which attracts TNCs to stay to receive political/economic leverage ⇒ China: ‘guan-xi’ is important in doing business. Push Factors (repelling TNCs) ♡ High labour costs in DCs + Strong Labour Unions (USA labour unions account for over 25% higher labour costs for firms) ♡ Resistance to change from supranational bodies: Each EU member can veto a policy, impeding TNCs’ moves to do business in nations that veto them → TNCs relocate to more open markets in NIEs/LDCs ⇒ When there were slow economic reforms in WTO, China created its own supranational body, Asian Infrastructure Investment Bank (AIIB). “China’s frustration with the USdominated institutions is that China sees a need for more resources and is willing to contribute, whereas the different parts of the US government cannot agree to this expansion.” ♡ Saturated markets + Changes to Product Life Cycles (PLCs): new modern products are manufactured in DCs initially, then relocated to LDCs when the PLC is ending to save on transport and labour costs. ⇒ When LED TVs were introduced into markets, they were manufactured in DCs such as Japan/South Korea; as PLC matured, manufacturing was relocated to China due to lower production costs. (TNCs seek cheaper labour) + Weight-gaining Products: products that get bulkier moving down the production chain. (computers, cars) → costlier shipping. ⇒ Old Process: manufacturing semi-finished products in DCs/NIEs then shipping to LDCs for final assembly ⇒ New Process: specialise all production in one place with highest demand like DCs, to save transport costs. ♡ Competitive Advantage: Different nations have different fortes/advantages. When countries lack an advantage in an area, they overcome it through Trade (can worsen terms of trade) ♡ Inadequate Infrastructure Some LDCs lack sufficient/adequate infrastructure which impedes TNCs’ ability to do business. ⇒ India: In Chennai, power outages of 2 hours occur daily.

Impacts of NIDL on LDCs Positive ♡ Job Creation: production work in manufacturing industries is labour intensive. ⇒ China: Manufacturing & Construction make up 47% of Gross Domestic Product and contribute to 20% of world manufacturing output

♡ ↑ Standard of Living + Multiplier Effect: wages are invested to reap profits and then profits are reinvested ⇒ China: Coca-Cola directly invested 138,000 RMB which then reaped an indirect profit of multiplier 414,000 RMB through multiplier effect ♡ Transfer of Skills and Technology TNCs’ presence in formerly LDCs aided Hong Kong, Taiwan, Singapore and South Korea in moving to NIE status in < 20 years through technological + skill transfer Negative ♡ Largely limited to labour intensive manufacturing industries → uneven development across industries → overly reliant on developed industries which is dangerous due to footloose TNCs’ presence ⇒ Mexico: Maquiladora effect – TNCs relocate to USA-Mexico border, depriving other areas of investment. ♡ Limited Transfer of Skills and Technology Low value manufacturing has a repetitive nature → limits how much you can learn and causes labour immobility ♡ Profit repatriation to TNCs’ home economies → ↓ multiplier effect ⇒ China: TNCs can legally repatriate up to 90% of their annual profits, provided they fulfil certain norms by the Chinese Government, eg. They need to set up local offices in China. ♡ Economic Leakages Caused when raw materials are imported instead of being sourced locally eg. TNCs concerned with name use only branded goods in hotels to preserve status – enclave tourism (* Not negative impact per se, just a reduction in positive gains by LDCs) ♡ Spatial mobility of TNCs ↓job security due to TNCs’ impermanence and ease of pulling out ⇒ Singapore: 42,000 jobs lost in 1997 - 2002 when disk manufacturer TNCs – SeaGate, Maxtor - pulled out ♡ Neo-Colonialism Dependency in LDCs on stronger DCs (DCs have ↑political/economic power and ↑control over LDCs) (* Similar to colonial era when DCs demonstrated economic + political dominance over weaker nations)

Impacts of NIDL on DCs Positive ♡ Push towards tertiarisation and beyond to a post-industrial society for Value-Adding Benefits (move towards higher-value service-based economy requiring a skilled and educated work force) ⇒ Singapore: Higher-tech manufacturing industries such as chemical/pharmaceutical industries • Reskilling: Sending workers for retraining to re-equip them, so their skills are relevant again for changing economies (* Trains small skills as before but updates knowledge)

• Multi-skilling: Equipping workers with multiple skill sets to make them ↑flexible for deployment to ↑productivity ♡ ↑Competitive Product Pricing: NIDL forces firms to be ↑competitive by lowering prices. Consumer prices ↓ when low cost production moves to China → benefits DC consumers eventually ♡ ↑Profit for TNCs (* Assumes most TNCs are from DCs) Saving production costs will ↑ profit (* not necessarily higher savings for consumers) Negative ♡ Deskilling: Making workers’ skills irrelevant and non-transferable due to a changing economy (Caused by move towards lines of mass production using machinery, on global scale.) Loss of lower-level manufacturing jobs impacts blue-collar workers by deskilling them (* Deskilling occurs when people were skilled beforehand but no longer are) ⇒ Detroit, USA: Once had a vibrant economy with developed amenities and was the envy of USA cities. But by 1970s, TNCs relocated to 4 Asian Tigers → decline in industries + exodus, causing negative deindustrialisation which affected the poor. (urban decay, economic recession) ♡ Socio-Political Resentment towards LDCs Unhappiness of people in DCs caused by resentment to xenophobia to migrants, who blame migrants for their unemployment eg. EU prompted to introduce protectionist measures against migrant workers

Measures to combat negative impacts Developed Countries (DCs) ● Tertiarisation/Reindustrialisation DCs restructure their economies to move towards high-value industries, firms or service industries that require a skilled and educated work force. The restructuring is as follows: With a shift to high-end manufacturing, policies will focus on R&D and reskilling workers through re-training schemes for low skilled workers previously from manufacturing plants rise in service/high-tech industries. Service and High-Tech Firms will replace manufacturing industries that have relocated. * Skills learned at one point may become irrelevant after 5 years – causes rise of niche firms (SMEs) that need to specialise in R&D because reindustrialised areas will lose their

● Singapore In 1970s, employed export-oriented strategy to attract TNCs (Sanyo, Panasonic, Sony, etc.) In later years, wave after wave of deindustrialisation led to socio-economic decline. Jurong Island came about from a shift to high-tech manufacturing. Many TNCs from Europe and USA in petrochemical industries are found there – ExxonMobil, Shell, Chevron. Has Plug and Play infrastructure, with attractive modern amenities such as support & emergency services to improve protection of TNCs’ properties/industries. Jurong Rock Caverns were built in 2014 as the 1st underground oil storage facility in Southeast Asia to support TNCs’ activities. ● UK & Europe Toyota and Honda still manufacture cars in UK despite NIDL, due to the higher quality labour there

competitive advantage when their skills become outdated

and a stable government and geopolitical economy. Also due to influx of low-cost labour from nearby Eastern Europe, since citizens of EU nations don’t need work permits to work in UK. ● Hong Kong So many manufacturing industries shifted abroad in 2010 such that the services industry made up 92.4% of its GDP

● Continued Industrialisation Some TNCs (e.g. USA TNC MasterLock) relocate back to DCs due to rising labour costs in LDCs or unstable geopolitical climates (e.g. civil war), and concerns about Intellectual Property (IP) caused by reverse engineering

● China Little enforcement of Intellectual Property laws → local manufacturers used technology in Apple’s iPhones to create their own phone brand which they sold for lower prices

Pull Factors of Reindustrialisation ♡ Increased Productivity of workers in DCs ● Caused by reskilling of low-skilled workers in DCs ● Prioritising education through subsidies for higher education (USA) ● Equip students with necessary skills for manufacturing (USA’s Skills for America’s Future 2011) ⇒ Japan: Cell workers are 6 times more productive than typical Malaysian workers ♡ Stable Government – investments are safe in long-term ♡ Labour migration of poorer migrants seeking jobs into DCs → ↑ cheap source of labour in DCs ♡ Save transport costs and shipping time for weight-gaining products ♡ Tax incentives ⇒ USA: Obama’s Insourcing policies to encourage American TNCs to relocate home ♡ Patriotism: Sense of duty to help home country during tough economic downturns/recessions ⇒ USA: MasterLock relocated some manufacturing back to Wisconsin in 2010. It uses the slogans “Made in America with Pride” in its factories.”

Push Factors of Reindustrialisation ♡ ↑ Labour Unrest in LDCs Workers have rising expectations and demand ↑ pay. ♡ ↑ Labour Costs due to social expectations/unhappiness ⇒ USA & China: Tim Cook, CEO of Apple, agreed to raise pay + ↓work hours for 1.2 million workers in Foxconn ♡ Corruption and Red Tape Bureaucracy Hinders TNCs’ ease of doing business especially in unstable geopolitical climates.

♡ Weak enforcement of Intellectual Property (IP) Laws LDCs commit Intellectual Property theft and reverse engineering ♡ ↓Quality Control of manufactured products caused by low-skilled/poor-quality labour ♡ Poorly designed/Unconducive infrastructure in Sub-Saharan African LDCs deters TNCs Inadequate infrastructure causing power outages disrupts businesses....