Why industrialization?
Economic development involves structural change
that involves shifting labor from low productivity
activities to higher productivities.
• These shifts may be within the same sector but often
they are from non-industrial to industrial activities.
Drivers of industrialization
- ‘Catching Up’/ Initial Conditions
- Ideas
- State
What is the Role of Initial Conditions in Industrialization?
“catching up” - important part of political economy
- Late industrialisers - assumes that Britain is pioneer of industrialisation and the rest of the world is trying to catch up
What is Role of Ideas in Industrailization
Ideas - Nationalism closely linked to industrialization ‘ Right to industrialization’
What is Role of State in Industrialization
• The role of the state
• In many countries the state was the only
national institution or organized entity with an
industrial project
• “Market failures” prompted government
intervention
Who is interested in industrialization?
- the first wave of industrialization was externally driven, only internal interest was nationalist ideal
- That’s why it was so undisciplined, no solid national interest
- there were no interests beyond state bureaucracies and nationalist view (no capitalist class to force state to industrialize)
- protection of industry policies wasn’t from domestic capitalists, it was from foreign capital saying they won’t invest unless they get protection
- problem: if policies in Africa are driven not by strong domestically organized interests, but by external interests, they are easy to reverse politically
International context of industry
• Industrialisation in the developing countries complemented
reconstructions in Europe (by importing manufactured
products and exporting raw materials
- created developmental states in south (idea of embedded liberalism), north south divide
What was post-colonial industrialisation like?
- few countries managed to attract foreign investors in Africa
- no response to ‘invitation to industrialisaiton’
- in absence of foreign investment, ‘socialism by default’
- failure to attract FDI, made role of state increase
Strategy of development after failure to attract FDI?
• Strategy adopted was standard ISI
• Import substitution was the only game in town when
Africans became independent
- colonial model reinforced because Europe refused products that weren’t colonially made
• No major economy had ever industrialised without
protection of infant industries
Annual growth rate of industrial production
1965-1980, 1980-1990
SSA 7.2/2.0
EA 10.8/10.2
big gap in industry
What were the problems of the strategy of African industrialisation?
2 kinds of critique
- Structuralist
- Neoliberal Critiques
Structuralist critique against industrialization
- ISI had not been selective
- companies proposing, and no clear strategy over what is being domestically produced -difference between Import replacement and import substitution
- ISI was shallow, rarely went beyond the beverage and tobacco group, apparel, and leather
• ISI strategy was capital intensive and not labor intensive
what is difference between import replacement and substitution
replacement - domestically producing what used to be imported
substituted - adding value, changing structure, reengineering products to fit better
Neoliberal arguments against ISI?
- state interventions led to “market distortions”
• Lack of competition produced industries that could not compete globally
• Easy credit and protected markets led to excessive use of capital intensive technologies and overcapacity
• Highly subsided parastatals were a fiscal burden and contributed to
macroeconomic instability
• The import intensive industries did not contribute to forex earnings
What do neoliberals argue is the interests of African states to industrialize?
- rent seeking behind interventionist policy (critique of structuralism),
- shifted to neopatrimonialism, unlike Asia where state was strong and could pursue industrial policy well, Africans had captured state
What did SAPs have to say about industrial policy?
- Structural Adjustment was against industrial policy
- taboo in policy discourses to talk about ‘strategy’ of industrial policies
what is ‘enfant terribles ‘argument
- import substition will just lead to another capture
- Africa has tried and it was captured by elite, and unlike Asia which did learning by doing process, Africans were stuck in infant industry argument, produced terrible infants that never grew up ‘enfants terribles’
First phases of import substitution
- 30s during the depression, when the collapse of global trade meant that countries were forced to have ISI but only a few,
- most countries colonial government didn’t allow ISI
- after war, domestic industry seen as threat and stopped
Second phase isi
- ALso in 30s, end
- Africa not apart of this
- still under colonial rule
third phase of ISI
1950s, still colonial countries
-these weren;t old infants that never grew up, they were hindered
Asian Lesson of ISI
- Asian industries take around 20 years to mature, very few countries that could claim to be running an ISI for more than 10 years, so infants approach isn’t fair
- import substitution didn’t fail, it was never tried, it takes a longer time than given
What is de-industrialization
- WB argued that only policies that didn’t do SAPs deindustrialized
- second argument is that many industries were too big anyway because it got rid of inefficient industry
Is deindustrialization a problem?
- third argument - industry is no longer needed for development, you can develop through services as in India
- but services is someone selling chewing gum in streets, not grand scale, can be informal
- what’s growing isn’t industrializing services it is informal sector with low productivity
Has there been industrial recovery?
Yes, it is slow recovery
- as a country grows usually manufacturing sector gets building
- even as income goes up in recovery however, manufacturing goes down
– Population moving from low productivity
agriculture to low productivity services
