Tuesday, December 01, 2015

The de-industrializing pre-industrial world

The global economy still isn't "lifting the developing world out of poverty."
Economists’ worry is that the factory-led model of advancement—which, for more than a century, has offered the quickest route out of poverty—is simply no longer available to today’s poorest nations.

That poses a huge challenge for places like India that are still brimming with young people in need of good jobs. The South Asian giant, whose population today is around 1.3 billion, is expected to overtake China as the world’s most populous country by 2022 and have 1.7 billion people by 2050. Its working-age population is growing by a million people every month.

Having lots of young people working, earning and spending should yield a demographic boost that turbocharges growth for decades. But it can turn into a disaster if jobs don’t materialize.

Harvard economist Dani Rodrik, who began compiling data on manufacturing world-wide a few years ago, says he is seeing growing evidence of what he calls “premature deindustrialization”—the idling or shrinking of manufacturing sectors as a share of the economy in poor countries like India that never industrialized very much in the first place.
Automation allows factories to produce more and employ fewer. That's certainly part of the problem. But it's more than just that. Industry is spread further and across more borders than ever. Manufacturing processes are fragmented and dispersed. Capital is perfectly mobile.

Most importantly, all of these factors are arrayed strategically, in order to more efficiently capture and concentrate the wealth generated from production rather than distribute it justly. Notice, for example, how China's strategic advantage is identified here.
But his “Make in India” campaign may face limits that didn’t exist for other countries during their industrialization. When China’s factory sector took off, demand world-wide was buoyant and multinationals hadn’t yet moved as much of their production offshore. Also, China’s authoritarian political system means it had a far easier time building highways and clearing land for industry.
This isn't an article about the failure of global industrial development. It's about its success. 

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