Poor World and Rich World - Essay Example

Poor world and rich world Student’s Name University Affiliation Introduction Industrialization is often regarded as one of the principle indicators of economic development. Countless empirical investigations have revealed that industrialization is the underlying element in divergence of level of living standards between developed nations and developing nations. It can be noted that, years following the end of World War II, many leaders of less developed countries adopted industrialization strategies. The new economic structure was adopted because many developing countries hoped to expand their colonial economy and solve various societal problems. Immediately after the World War II, many governments of less developed countries adopted industrial policies geared towards spurring economic growth. The industrial policies adopted by those nations sought to modify production structure, enhance market outcome and improve the export vector. During that time, many developing nations successfully formulated and implemented industrial policies. Some of them include South American countries and East Asian Tigers, that is, Hong Kong, Singapore, Taiwan and South Korea (Cullen, 2006 p. 17). Reasons for industrialization option Numerous reasons could be attached to economic boom that was witnessed in many developing economies following the end of World War II. One of them was the understanding that economic development was the key to improving living standards. The concept of economic development was also intertwined with use of government intervention to create reasonable objectives for achieving issues of national interest. Thus, government intervention became a major driving force behind industrialization efforts of many developing nations during that time. Government intervention helped to give meaning to industrial efforts because it was perceived as a projection of national needs and aspiration (Alavi, 1996 p. 267). Through government intervention, industrial policies were able to induce structural change, improve firms’ performance and boost economic growth. Leaders of many less developed economies were motivated by the desire to move away from external control. During that time, many nations had been set free from their colonial masters. However, their freedom was not guaranteed because they had to depend on their former colonial masters for various industrial products. In addition, many agricultural products from those less developed economies fetched low prices in many world markets. The circumstance was perceived by less developed countries as a continued colonization in economic realms. Industrialization strategies were applied as a tool for proving to the whole world that less developed countries could achieve economic development without assistance from former colonial masters. Many developing economies had realized that venturing into the export market could play a key role in enhancing their economic growth (Zarnowitz, 1999 p. 168). Nonetheless, most of them could only offer agricultural products, which were known to fetch low prices in world markets. For that reason, industrial drive was initiated to implement various policy measures that could ensure that local products were internationally competitive in terms of quality, exchange rate policy, productivity measures and income policy. Industrialization drive in less developed countries was also ignited by availability of resources. During the 18th and 19th century, Western countries acquired colonies in Africa, Asia and Americas because those regions had vast natural resources. Following the culmination of World War II, leaders of less developed countries were convinced that there was no big difference between people from different racial background. Initially, natural resources were transported from developing economies into developed countries, processed into finished goods and then shipped back. Idyllically, folks in third world countries used to purchase expensive products that they could easily manufacture. After World War II, many less developed countries like Jamaica, India and Caribbean decided to make use of available human and natural resources. Use of available natural resources led to emergence of industrial specialization. Countries like Japan decided to specialize in automobile industry because technology, human resources and natural resources could be easily found. Because of vast natural resources, government policies majored on decision on the most appropriate resources to be exploited. Most industrial policies across developing countries adhered to four principle indices. Those indices included regional approach to industrial development, degree of economies of scale, resource and energy requirement and labor requirement (Garavini, 2012 p. 78). Use of available raw materials saw many countries reduce imports and increased exports in various industrial products. For instance, in Caribbean development of favorable industries saw a notable increase in production of various products, such as building materials, glass, textiles, footwear, garments, leather and hosiery. Other products that could be produced included food canning, paper products, electrical lamps, toys, electrical switches, rubber goods and plastics. Apart from considering availability of human resources from the cost perspective, governments in less developed countries also undertook industrialization as a tool for employment. Educational institutions had been established in many parts of the world leading to readily available human resource. The high rate of unemployment in many developing countries deeply affected standards of living. Thus, industrialization was seen as a way through which people could be access employment opportunities. Industrialization policies enacted after WWII championed for those industries that required fewer skills, but employed many people. Without employment opportunities, people could not embrace education. Since education had been noted as a fundamental element of modernization, governments had to strive to educate its citizens. Adoption of labor-intensive industries was seen as a vital element in encouraging development of various economic institutions. Economic institutions were required to form a framework through which economic activities could be handled effectively. Economic institutions like schools, government agencies and group of private entities could ensure that local products are marketed effectively. In addition, those institutions could assist in formulation of sound policies to make local products gain a huge share of international markets. In that respect, more people could be employed leading to increased standards of living. Another reason was that after the World War, population began to increase rapidly because of improved health care. Rising population meant that governments had to adopt new ways of increasing productivity. A multi-perspective policy framework was required to increase level of production in proportion to rising population (Francks, 2005 p. 467). Some of the most vital elements to be considered included capital allocation, incentives, health and nutritional facilities, education and training needs and political and social philosophy of people. It was deemed that by enhancing productivity, especially in agricultural sector citizens could increase their level of incomes leading to increased percentage of spending on manufactured goods. Thereby, industrialization was seen as a long-term solution towards catering for needs of a modern population. The needs of rising and highly demanding population could only be met by adopting a cost-reduction strategy. Importation of huge amounts of manufactured products was seen as a leading factor in draining personal and national financial resources. Adoption of a cost-reduction strategy saw encouragement of consumption for homemade products to breach trade surplus. The rapid rise in industrialization was supported by vast adoption of the Import Substitution Industrialization (ISI) economic policy. The economic policy became a movement that was rapidly taken by less developed countries to handle various challenges. Adoption of ISI encouraged countries to take up domestic production as a replacement to foreign imports. The ISI principle was based on the premise that every economy should strive to reduce foreign dependency via local production of industrial goods. Although the economic policy had been widely advocated during the 18th century, it finally found application in many less developed nations immediately after the Second World War. The import-substitution industrialization policy emerged as one of the greatest driving force towards industrialization after the WWII. The policy encouraged developing economies to shun foreign dependency and adopt self-sufficiency via production development and creation of internal markets (Caldentey, 2009 p. 38). Adoption of the ISI positioned the state to spearhead economic development through protectionist trade policies, increased taxation, subsidization of vital industries and nationalization. During the nineteenth century, the concept of division of labor emerged and created a huge influence in world economy. Colonies and developing countries were perceived as producers of raw materials and food substances for developed economies. On the contrary, developed economies were responsible for producing industrial products. After the Second World War, less developed economies adopted the strategy of Import Substitution Industrialization to break away from world division of labor. The world division of labor was seen as colonial and unfit for modern world because some countries benefitted while others continued to languish in poverty. The level of poverty in less developed economies was maintained by the fact that they imported expensive industrial products and exported cheap farm products leading to negative balance of payment. Import substitution strategy dictated that nations had to establish domestic production facilities and manufacture their own products instead of exporting food and raw materials and importing finished goods. The idea was widely taken by developing economies Technology was another driving force towards adoption of industrialization in less developed countries after WWII. By 1930s, technology had been used to enhance industrial production in developed countries. Technology resulted in replacement of coal with oil, creation of highway systems and automation technologies in factories. After the World War II, new global policies came into existence, paving the way for less developed economies to formulate their national policies and pursue their areas of interests. Cynical models of economy were replaced with growth models because of need to increase production, repair damages caused during the war and cater for needs of world population. Use of technology in industrial undertakings was also supported by other social-economic factors. Some of those factors include existence of administrative capacity, growing regional markets, infrastructure and labor force. Besides, less developed countries had established its entrepreneurial class that could support implementation of industrialization policies. References Alavi, R. (1996). Industrialization in Malaysia import substitution and infant industry performance. London: Routledge. Caldentey, E. (2009). Trade and economic growth: a Latin American perspective on rhetoric and reality. México, D.F.: Naciones Unidas, CEPAL. Cullen, J. (2006). Did big government's largesse help the locals? the implications of WWII spending for local economic activity, 1939-1958. Cambridge, Mass.: National Bureau of Economic Research. Francks, P. (2005). Rural Economic Development in Japan. Hoboken: Taylor & Francis Ltd.. Garavini, G. (2012). After Empires: European Integration, Decolonization, and the Challenge from the Global South 1957-1985.. Lanham, Md.: Routledge. Zarnowitz, V. (1999). Theory and history behind business cycles are the 1990s the onset of a golden age?. Cambridge, MA: National Bureau of Economic Research. Read More