Overview of Service Economy and Deindustrialization

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Questions and Answers

What major economic transition did Pittsburgh undergo after the decline of its steel industry?

Shift to manufacturing electronics

Increase in agricultural production

Expansion of the healthcare sector (correct)

Growth in technological innovation

How did the population of Detroit change from 1908 to 2010?

It fluctuated but had no significant change.

It grew initially, then significantly declined. (correct)

It increased steadily year after year.

It remained stable at around 1 million.

What characterizes the job market in service-dominated economies like Pittsburgh's?

Job security is mostly guaranteed across sectors.

Most employed individuals work in full-time positions.

A majority of jobs are unionized and highly stable.

Wages tend to be either very high or very low. (correct)

What was a key reason for the population decline in Pittsburgh from 1980 to 1990?

Rapid deindustrialization and job losses. Signup and view all the answers

In what way did global cities change their focus during the 1980s?

They prioritized connections with other global cities. Signup and view all the answers

What differentiates offshoring from outsourcing?

Outsourcing relies on independent suppliers, offshoring does not. Signup and view all the answers

What social impact accompanied the deindustrialization in Detroit?

Widespread poverty and inequality. Signup and view all the answers

What is a defining characteristic of services in the service economy?

Services are intangible. Signup and view all the answers

What percentage of employment did the service sector represent as of 1987?

50% Signup and view all the answers

What trend marked the transition from industrialization to a service economy?

A decline in the manufacturing sector. Signup and view all the answers

What economic factor has contributed most significantly to the rise of the service sector?

Technological advancements. Signup and view all the answers

Which of the following was a major outcome of the Industrial Revolution related to the service sector?

A rise in demand for services as urban populations grew. Signup and view all the answers

What is a primary reason that offshoring differs from Foreign Direct Investment (FDI)?

Goods from offshore facilities are part of a global production process. Signup and view all the answers

Which factor significantly contributed to the rise of offshoring after World War II?

Institutional support for trade and currency stability. Signup and view all the answers

What role did technology play in offshoring during the post-war period?

It facilitated better transportation and telecommunications. Signup and view all the answers

What was a significant trend observed in the offshoring of electronics production starting in the 1960s?

U.S. companies began offshoring to East Asia, especially Japan. Signup and view all the answers

What was one of the challenges companies faced with global production systems?

Fragility in operations due to interdependence. Signup and view all the answers

How did offshoring impact job availability in advanced economies?

Led to deindustrialization and more service sector jobs domestically. Signup and view all the answers

What is an advantage of the global production strategy?

It allows firms to maximize efficiency by utilizing optimal locations. Signup and view all the answers

What trend was evident in the semiconductor industry by the 1970s?

High-tech tasks increasingly shifted to developed countries. Signup and view all the answers

Why do many companies prefer to keep research and development within their home country?

To ensure proximity to their established customer base. Signup and view all the answers

What is a common reason companies choose to go abroad besides finding cheap labor?

To access specific skills or technology Signup and view all the answers

What is a negative consequence of offshoring mentioned in the content?

Increase in inequality Signup and view all the answers

How did De Beers utilize offshoring strategies in the early 20th century?

By consolidating mining operations in one location Signup and view all the answers

What percentage of global GDP is estimated to be held offshore?

About 8-10% Signup and view all the answers

What was a significant impact of the Panama Papers leak in 2016?

It sparked a global debate on financial transparency. Signup and view all the answers

What are the two distinct concepts of 'offshoring' and 'offshore financial center' primarily known for?

Offshoring concerns production; offshore finance relates to managing finances Signup and view all the answers

Which of the following is NOT one of the characteristics of the service sector?

Material production Signup and view all the answers

How does offshoring finance benefit companies, according to the content?

By minimizing or avoiding taxes Signup and view all the answers

What percentage of the global service sector output does the US account for?

30% Signup and view all the answers

Study Notes

Service Economy Overview

Service sector accounts for 50% of employment and 67% of global GDP.
Shift from agricultural to industrial to service-based economies over time.
Canada illustrates this shift, with agriculture declining from half the workforce in 1867 to only 4% in 1987 and manufacturing decreasing in similar proportion.
Productivity gains are easier in manufacturing than in services.
Services like education, healthcare, and finance are essential and are becoming more important for development.

Deindustrialization

Deindustrialization is the decline of manufacturing industries in a region or country, like factories producing cars or steel.
Technological advancements (mechanization, mass production) led to increased manufacturing productivity.
Detroit and Pittsburgh experienced significant deindustrialization due to competition, automation, and economic shifts, resulting in immense population decline and hardship.

Rise of the Service Sector

Service sectors grew rapidly after deindustrialization in the 1970s.
Healthcare emerged as a major employer, often hiring in areas like care work that were once primarily in manufacturing sectors.
The service sector return in economies is often U-shaped: either very high paid or very low paid work rather than bell curved (many more in the middle in industrial economies).
Global cities like New York, London, and Tokyo became hubs for advanced services (law, finance) due to easier communication and economic complexity.

Offshoring

Offshoring is the relocation of production facilities outside a firm's home market.
Outsourcing is contracting with foreign suppliers (often related to offshoring)
Offshoring driven by institutions (e.g., WTO), technology (transportation & communication), and the end of Bretton Woods.
Offshoring electronics production began in East Asia (e.g. Japan in the 1960s). This involved U.S. companies establishing manufacturing operations in low-wage countries.
Global production strategy emerged, spreading production across multiple countries for efficiency.

Offshore Finance

Offshore financial centers provide financial services to non-residents.
Offshore finance is often used for tax avoidance, minimizing costs and escaping regulation.
The Panama Papers leak highlighted the controversy and extent of offshore financial activity.

Service Sector Characteristics

Intangibility: Services cannot be stored or transferred.
Inseparability: Production and consumption occur simultaneously.
Inventory: Services cannot be stored.
Inconsistency: Services are unique.
Involvement: Both provider and consumer participate.

Service Sector Effects

Global service sector contributions are vast.
Service sector activities can have significant social and environmental consequences (pollution from tourism, transportation).
Quaternary sector: Knowledge based services (information technology, consulting, etc.) is one of the largest sectors in advanced economies.
Quinary sector: Top-level decision making (CEOs)

Supply Chain Disruptions

The pandemic highlighted vulnerabilities and inadequacies in supply chains.
Companies need systematic capabilities to anticipate, diagnose, detect, activate resources, protect against, and track disruptions (ADDAPT framework).

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Description

Explore the shift from industrial to service-based economies with a focus on Canada and significant deindustrialization examples like Detroit and Pittsburgh. Understand the impacts of productivity gains and the increasing importance of service sectors such as education and healthcare in global development.