Industrialization in Development - Essay Example

Industrialization in development Introduction: Industrialization marked the importance of industry to an economy. The process of industrialization describes the transition from an agricultural society to one based on industry. During the process of industrialization, per capita income (level of income per person) rises and productivity levels increase. The industrialisation took place almost in all the countries, but its effects varied from country to country. The industrialization determines the power of a nation in the modern world. Modern industrialization is often dated as having its origins in the Industrial Revolution, which began in Great Britain in the 18th century and spread to other parts of Europe and North America in the early 19th century {Stearns, Peter N., and John H. Hinshaw,1996). Industrialization had occurred by the end of the 19th century in some southern European countries and in Japan, and during the 20th century, particularly after World War II (1939-1945), in eastern Asia. In many developing nations, industrialization started even later during the 80’s and 90’s.Today, Japan, the United States, and the United Kingdom are among the worlds major industrialized countries. Of the late China, Singapore, and many other European nations have also joined this list. Along with these many prospective developing countries like India, Brazil and South Africa have also made great strides. The process of industrialization usually includes a movement from rural to urban living and a shift from home to factory production. Increased mechanization in agriculture generally leads to increased agricultural productivity and enough food for large urban populations. Agricultural productivity growth is necessary for modern industrial growth to become self-sustaining. Other conditions are also necessary for industrialization to occur, and the next section describes three differing theories on this process that were developed during the 20th century. Industrialization was not a process of smaller period, but it was slow phase change of the economy and the manufacturing methods. It led to the mechanization of the process. The production of goods was decentralized, giving small groups of workers a sense of active participation in and control over their work. Costs were high, however, and the volume of production was relatively low. Industrialization greatly heightened output and made key goods, sometimes called commodities, more accessible. Pros and Cons of industrialization in developing countries: Industrialization has a great impact on modern economy. It made rich more richer and poor still poorer, due to dominance of the contemporary capitalism. For developing countries, growth and development are much less about pushing the technology frontier and much more about changing the structure of production. While recent researches have enhanced our understanding of the interplay between inequality and growth, much remains to be done before we can confidently describe the policy mix that will give nations the best chance to grow and reduce poverty. To date, little effort has been made to carefully quantify the importance of the channels emphasized by the new theories on inequality. Satisfactory theories of the relationship between growth and inequality will have to account for these recent patterns. The industrialization has given insufficient attention to the human factor and to political development. The human values have been lost in the growing mechanized living. Even Japanese, who have a great tradition for over hundreds of years, have now blame the traditional festivals to be a waste of time. The industries have also decreased the leisure hours and there are a growing number of other commercial entertainments and shows. Industries often fail to use natural resources in a way that is best suited for society. For example, without catch limits, commercial fishing fleets may over harvest fish populations. Similarly, the companies dump a a lot of waste in the environment, polluting rivers, land, air, etc. If laws are not forced to clean up pollution, they might release more wastes than they would if required, by laws or contracts, to pay cleanup costs. Developing countries have a less established industrial base, less infrastructure, and less financial stability, and in some cases they suffer from political instability. As a result, they are often perceived as risky environments for starting businesses, and financial institutions may be less willing to lend money to these economies. Developing countries generally depend on foreign investors for the finance capital that they need. Multinational corporations carry out much of this foreign investment. However, in 2001, 68 percent of all foreign direct investment went to industrialized countries(Hubbard, G.E., and Janet Hunter, 2000). In the developing world, Latin America received 11.6 percent, Asia received 13.9 percent, and Africa received 2.3 percent. Many developing countries also borrow money on international financial markets (by selling bonds), but they usually must pay higher interest rates (the cost of borrowing money) than developed countries do. This type of foreign dependency will force the country to oblige the policies of the investor company’s country. Though the developing nation may not be interested in the deal, it would be threatened to follow the deal due to financial instability. Disparities in education lead to shortages of skilled workers and educated managers in developing countries. An unskilled workforce is less productive and receives lower wages. Lower wages, in turn, encourage highly educated workers in these countries to migrate to industrialized countries to earn higher salaries. This migration, known as the brain drain, increases the scarcity of educated and skilled workers in developing countries. Like finance capital and education, facilities and personnel for technological research are scarcer in developing than in industrialized economies. For example, in 2000 Japan had 5.0 and Sweden had 4.5 research scientists and technicians per 1,000 people in their populations. In contrast, during the same period Egypt had 0.5 scientists and technicians per 1,000 people, El Salvador had 0.02, and Pakistan had 0.08. During industrialization many developing countries have tried to stimulate economic growth by simply acquiring machinery from developed economies, assuming that the technological knowledge necessary to use the physical capital could be as easily transferred. However, many of the developing countries that tried this have not experienced similar economic growth after acquiring equipment and machinery from industrialized countries. But, on the contrary industrialization in the developing nation has emerged much more advantageous than its ill-effects. It has encouraged rapid development in the field of education and culture development in the countries which had ignorance about utilization of the available natural resources. The countries which initially employed children for labor has drastically reduced it due to the availability of advanced machineries, so children are engaged in education, thereby increasing their style of living. The development in industrialization has created a drastic appetite for the consumption of natural resources, which would naturally lead to the betterment of human lifestyle. It paved way to exploit the best possible ways to best available resources. The people who participated in the industrialization process were naturally benefited through higher wages, due to increased productivity and this lead to the development in the society (Gregory Clark,2007). The phase change during industrialization naturally led to the development of newer professions and newer opportunities which led to the development of quality entertainment shows, movies etc. This eventually led to the flow of money across various layers of the society. This accelerated the economic growth in an indirect way. Also, industrialization led to innovation in products due to tough competition in the global market scenario. It also helped industry to generate revenue gradually; there by self-independent state could be achieved. The modern industrialization led to advancement in agricultural sector. There were advanced equipments and machineries for agriculture to increase its production capabilities. It helped to develop newer scientific methods to be adopted in the development of newer crop varieties and advanced procedures for crop protection measures. industrialisation strategies in developing world: Industrialization is the driver of technical change, and overall productivity increases are mainly the result of the reallocation of labor from low- to high-productivity activities. Late industrialisation is often considered to involve a sequential shift in the engines of manufacturing growth from traditional to modern industries. The industrialisation experience of East Asia’s Newly Industrialised Countries (NICs), especially Korea and Taiwan, demonstrates this. Before their entry into technology- and scale-intensive industries during the mid-seventies, they had accumulated nearly a decade-long manufacturing experience in traditional and light industries. The East Asian industrialisation was assisted by a policy regime, which nurtured learning and innovation by adopting an export-oriented industrialisation strategy. Indonesia offers a slightly different example of late industrialisation on account of following a different sequence of industrialisation and of a fluctuating policy regime (Jojo Jacob, 2004). Compared to Korea and Taiwan, Indonesia’s industrialisation began much later, from the seventies, with a state-led heavy industrialisation-drive under an import-substituting, export-pessimistic industrialisation strategy. This gave way to an export-oriented industrialization strategy, based mainly on resource- and labor-intensive industries, from the mid-eighties. The nineties saw science based industries playing a leading role in manufacturing exports, thanks to acceleration in foreign investment, especially from the NICs and Japan. The increases in oil prices in 1973 and later in 1979 led to an expansion in state investment in industry and a return to the (pre-1971) restrictive trade and foreign investment policies. The oil revenues were recycled into large-scale investment in state-owned enterprises in sectors such as iron & steel, petroleum, aluminum and fertilizers. The inward-oriented industrialization programme generated sustained growth during the 1971- 1981 period. However, the fall in oil prices coupled with a slowing down of economic growth during the 1982-1986 period led to the liberalization and opening up of the economy. The deregulation measures involved reductions in tariff and non-tariff barriers, liberalization of foreign investment regulations, financial sector reforms and efforts to reduce monopoly power of the big businesses through state-induced divestiture. The manufacturing export boom began in the eighties, after facing a decline during the 1975-1980 periods. The early surge in manufacturing exports in the eighties stemmed mainly from the resource- and labor- intensive industries such as wood products and garments & leather, respectively, and, to a smaller extent, a scale-intensive industry like the textiles. One good example for the failure of the industrialization is china, which was predominantly ruled with communist principles, on contrary to the industrialization principle(World Economic And Social Survey,2006). The new party purge under the direction of An Tze-wen, who seemed to be a rising star in the Chinese Communist firmament, kept personnel of the CCP [Chinese communist party] in a high state of discipline. On September 17 there was a government shakeup involving the firing of Li Wei-han, Po I-po, and Wang Cheng, obviously in connection with the failure to maintain the initial goals of the industrialization program. The combined pressure of famine and totalitarian control brought an uneasy state of tension during 1953. Not only did it necessitate a temporary relaxation of the collectivization process and a concentration on labor discipline, but apparently it was strong enough to evoke a new drive from the regime—the Five-too-many drive. This drive was directed against too many meetings, tasks, organizations, concurrent posts, and official documents and forms. Mainland newspapers admitted the revolt of more than 30,000 peasants, mainly Moslems, in Kansu and also unrest in Yunnan. Several thousand fishermen fled from the South coast to the freer atmosphere of British-held Hong Kong. In July and August the Communists called up peasants to help stalk wild beasts who were destroying crops in several provinces, including Kweichow, Yunnan, Shensi, and Hupeh. It was apparent that the beasts were guerrillas. In a similar manner sabotage was reported in many factories. The Korean War was one of the key factors for the economic instability. Another big blow to the Chinese Communists in 1953 was the death of Stalin on March 5 and the resulting period of indecision in the Kremlin. Some foreigners looked for a Peking-Moscow rift as a result, but the Chinese Communists gave no indication of a change in policy. The successful implementation of industrialization in a developing nation is another South- East Asian nation, the republic of Singapore. Though, china, Singapore and Hong-Kong had similar cultural and traditional attributes. They differed in their political policies which led to a drastic variation in the economic growth. There are three main theories. The first theory holds that the cause was primarily strong, strategically astute governments that promoted particular kinds of industries, especially those with an export orientation. Singapore is often cited as a good illustration of this theory. The second theory suggests that deregulation of economies allowed open markets to flourish, releasing the productive resources within Southeast Asian countries. The best illustration of this is Hong Kong. The third theory argues that the key was so-called Asian values, such as the emphasis given to cooperative family-based work, high levels of family savings, and a readiness to invest in businesses. This argument is often directed at the economies of China, Taiwan, and Singapore. During the 1980s and for most of the 1990s, the growing Southeast Asian economies were remarkably consistent in their growth from year to year, even when global economic activity dipped. This reflected their focus on competitively priced manufacturing exports, especially for the United States and European markets, where demand remained consistent. During the Southeast Asian “economic miracle” of the late 1980s to mid-1990s, the primary beneficiaries were the indigenous entrepreneurs, who often became extremely wealthy, and the urban middle class, which expanded considerably in number and individual wealth. These classes desire, and can afford, imported products such as motor vehicles, televisions, cellular phones, and computers. They are also able to travel abroad more frequently than they did before the economic boom. Conclusion: Thus, the structure of investment is also important, not only because industrialization requires more investment in the manufacturing sector, but also owing to the fact that important investments in financial and business services are needed to support industrial development. Further, low growth is associated with greater investment volatility. External shocks and erratic domestic policies are conducive to greater economic uncertainty, which hampers the long-term investment required to realize dynamic structural change. The economic reforms played a facilitating role for structural change by altering the preferences of the final demand consumers. Thus the structural reforms need to be established which are fiscal reforms, privatization, market regulation, trade openness and international liberalization. And the non-dynamic productive base and insufficiently diversified industrial sector should be reformed to attain better macro stability. Industrialization has always landed up countries on to higher economic stability, in the case of china which lacked industrialization goal, reached it after suitable political reforms to sustain the global competition. The countries which were running on the agrarian economy also improved and shifted towards industrialized economy, as agrarian economy may not be suitable for long run in the globalization era. In order to interpret changes in the aggregates of output, employment and productivity, it is useful to decompose the changes into their structural components. For instance, overall job creating potential is determined by the sectoral breakdown of employment growth of an economy which interacts with changes in technology and aggregate demand. The inherited structure of the centrally planned economies, which were all “over-industrialized”, and the fact that the industrial structure was heavily concentrated in large State-owned firms, further compounded the problem. As production facilities were generally obsolete, active restructuring and new productive investment by firms was called for if they were to survive and grow under the new market environment. References Webster, Andrew.Introduction to the sociology of development.New York: Humanities Press, 1984. Clark, Gregory. Social Consequences of the Industrial Revolution. A Farewell to Alms. New Jesey:Princeton University Press,2007.Chapter 14. Hubbard, G.E., and Janet Hunter. Eastern Industrialization and its Effect on the West. Oxford:Routledge, 2000. Licht, Walter. Industrializing America: The Nineteenth Century. Maryland:Johns Hopkins University Press, 1995. Stearns, Peter N., and John H. Hinshaw, eds. The ABC-CLIO World History Companion to the Industrial Revolution. Oxford :ABC-CLIO, 1996. Development Policy and Analysis Division. Structural Change and Economic Growth.World economic and Social survey. United Nation: Development Policy and Analysis Division,2006.Chapter 2. Jacob, Jojo.Late Industrialisation and Structural Change:The Indonesian Experience. The Netherlands: Eindhoven Centre for Innovation Studies,2004. Erwan Quintin and Jason L. Saving. Inequality and Growth: Challenges to the Old Orthodoxy.Federal Reserve Bank of Dallas,2008. Pieper, Ute.Openness and structural dynamics of productivity and employment in developing countries:A case of de-industrialization ? New York: New School for Social Research. González ,Norberto.The motive ideas behind three industrialization processes.Cepal review,2001. Read More