Changing Regional Shares of Global Manufacturing

The general and most noticeable trend in the figure shows MEDCs global shares of manufacturing decreasing and in turn NICs, such as China’s, increasing. The main reason for this being TN

Cs relocation from the MEDCs to NICs. LIDCs shares remain minimal throughout the time period and do not grow, because they are yet to experience industrialisation.

There is roughly an 18% decline in the global shares for MEDCs between 1970 to 2005. In 1970, they dominated the shares owning around 88%, because they were to first countries to shift between an economy based on the primary sector (extraction of raw materials) to the secondary sector

(processing of raw materials). This will have been because of a combination of factors; including the availability of raw materials, free trade policies, good transport links and an intellectual climate in the countries to allow new innovations and technology to flourish and be put into practice.

People become more attracted to the secondary sector than the primary sector as they earn higher wages and employment is more reliable. However, by the 1970s deindustrialisation, the long term absolute decline in the manufacturing sector starts to occur in MEDCs. In the space of 5 years it drops by around 5%. Deindustrialisation happens because powerful TNCs established in MEDCs move their operations abroad to NICs, hence why East Asia and China’s shares have dramatically increased since 1970 to 2005 by 20%. The main benefit TNCs gain, which results in them shifting their manufacturing activities abroad, is an increase in profits. Unlike MEDCs, in NICs wages are much lower, trade unions and environmental legislation is weak and workers regulations are usually non-existent. For example, the weekly hours of labours in the UK would be about 36, whereas in India labours will work 40 hours or more a week. Therefore, foreign direct investment is a highly effective way to make more capital.

Additionally, there are many factors which provide TNCs with the means of doing this. Improvements in transport, specifically containerisation allows vast quantities of good to be moved around the world. Similarly, communication improvements enable globalised production systems to be set up and companies can keep in immediate touch with their overseas operations. As well as this the emergence of global capitalism, involving expansion of free trade between countries and fiscal policies, result in freer and easier importing and exporting of goods and makes it more economically viable to operate in several countries. Furthermore, there are reasons for manufacturing declining in MEDCs not relating directly to TNCs. Governments may stop investing in the manufacturing industry and instead invest into the tertiary sector, due to the increase in people’s disposable income which means they have more to spend of services. The rise of manufacturing in NICs means MEDCs manufacturers cannot compete with the new cheap prices and therefore have to close down. Lastly, MEDCs economies may fail to achieve a surplus of manufacturing exports compared to manufacturing imports. North and West Africa’s share has steadily increased from 1% in 1970 to 5% in 2005. They will be experiencing the very beginnings of industrialisation, as people and jobs have marginally started to shift from the primary to secondary sector. This is as a result of TNCs relocating from various NICs, because as their manufacturing sectors develop, it brings in more wealth to the country, so wages go up and therefore company’s profits will be reduced. LIDCs like North Africa will provide TNCs with an even cheaper workforce they can exploit. Latin America’s share has fluctuated throughout the time period. Between 1970 to 1980 it gained a small amount of the global share, but from then on experienced a steady decline of it. This may be because it is phasing out of its industrial phase. South Asia and Sub Saharan Africa have experienced very little change and have continued to own an extremely small portion of global manufacturing shares. Industrialisation has not yet reached these parts of the world, so they remain in the primary sector.

In conclusion, the most significant change has been in East Asia and China, closely followed by MEDCs. The increase and decrease between these regions is very closely linked and almost indirectly proportional.

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