Industrial inertia

Government influence

Since the 1920s the government has played a role in business location. Business activity is rarely geographically balanced. There have always been regions which suffer from a lack of business and employment. Also, regions that were once prosperous have suffered when the local industry declined. For example, the Far East region of Russia was hit as the shipbuilding industry declined. The South Siberian region declined when the coal industry collapsed. In the past these have been called “assisted areas”. The government has attempted to help with the use of regional policy. The government attempted to attract businesses to the areas and restrict development in the prosperous areas. A range of incentives was offered, particularly to the manufacturers. Investment grants, tax breaks, employment subsidies and rent-free factory space were some examples.

Another situation turned out in the European countries. For example, in the UK the government criticized many features of regional policy. They objected to the automatic use of investment grants and felt that the chosen “assisted areas” were too broad. They were also committed to lower levels of government spending. The government defined areas eligible for assistance as “development areas”. Development areas are regions which are most severe in terms of decline. Intermediate areas still qualify for assistance, but do not enjoy the same benefits as development areas.

When businesses in the same industry locate in an area with similar firms, this is called industrial inertia. Even when the original advantages cease to exist, new firms might be attracted to the area. The original attractions, coal and water, might be replaced by other power sources and the natural humidity of the area can be imitated by mechanical means. In addition, natural fibers might be replaced by synthetic materials. Firms continue to locate because of other advantages. These include a supply of skilled labor, specialist marketing and support services. Industrial inertial does have disadvantages. When a region relies heavily on one industry, it will suffer if that industry declines.

Дата добавления: 2014-11-29