Industrialisation

The meaning of industrialisation

As a part of the development process, the role of industrialisation is seen as central, particularly for modernisation theorists such as Walt Whitman Rostow (1960). Rostow saw it as key to the development path taken by the West and Europe in the early twentieth century.

Not only this, but classical Marxists/dependency theorists also see industrialisation as central to development, though for very different reasons. Let us consider a concise definition of what industrialisation actually is.

Fig. 1 - Industrialisation: a sign of development?

Below, we shall look at a variety of paths to industrialisation, the effects of industrialisation, and sociological debates around whether there are benefits of industrialisation in developing countries.

First, however, let's review when the industrialisation period was.

When was the industrialisation period?

Historically, the industrialisation period refers to the time when now developed countries - i.e. the 'West' - went through their process of industrialisation, in the late 18th to early 19th century.

However, in the context of global development, the industrialisation period is country-specific - it depends on (to revisit the definition again) when they engage in 'the process of social and economic change whereby a country's economy comes to be based primarily on the manufacturing of goods'. In many instances in the global south, the industrialisation period is occurring right now.

What are stages of industrialisation?

Stages or paths to industrialisation for a developing economy can be split into two broad areas: more ‘traditional’, i.e. through mechanisation, and those that follow ‘other opportunities’ to industrialise. ‘Traditional’ paths to industrialising an economy include:

1. Import substitution industrialisation (ISI)

2. Export-orientated industrialisation (EOI)

The aforementioned other opportunities for industrial development include agriculture and tourism. Below, we shall look at some of the positives and negatives of each path to industrialisation.

Traditional paths to industrialisation

We will start by looking at the traditional paths of industrialisation.

Import substitution industrialisation

Import substitution industrialisation (ISI) is the process of reducing the dependence on imported goods by increasing levels of domestic production.

ISI supports ‘infant industries’ within a developing country by providing subsidies for internal manufacturers and increasing tariffs on foreign goods.

Positives of import substitution industrialisation

• Developing countries have increased control over their economies and are less dependent on MEDCs.

• Increased profits allow more investment opportunities to improve the social aspects of development.

• Modernisation theory has a positive view of ISI as it reflects the development trajectory seen in the West that led to higher material wealth and standards of living.

• Dependency theorists, such as Fernando Henrique Cardoso (1977) and Andre Gunder Frank (1971), are also positive about ISI as it is crucial for ‘independent development’. In other words, it is essential to allow developing nations to be in control of their own process of industrialisation rather than being dictated to and exploited by the ‘West’.

Negatives of import substitution industrialisation

• The use of tariffs to protect infant industries leads to retaliation by other countries. Consequently, tariffs are then imposed on their goods, making them uncompetitive in the global market, reducing the chance to increase levels of profit to be reinvested in the economy.

• Neoliberals are critical of ISI as they say it distorts the ‘free market’ by keeping industries artificially buoyant. The use of subsidies is seen as wasteful and indicative of inefficient and uncompetitive businesses in the global world market.

Export-orientated industrialisation

Export-orientated industrialisation (EOI) is the process of industrialising the economy so that it becomes specialised in the manufacturing and exporting of specific goods for which they have a global comparative advantage.

Positives of export-orientated industrialisation

• This type of industrialisation has been successful for Japan and the ‘Asian Tigers’ of Singapore, Hong Kong and South Korea.

Negatives of export-orientated industrialisation

• This type of industrialisation makes developing countries heavily reliant on export markets remaining strong. The ‘Asian tigers’ have experienced rapid growth, but they are also highly susceptible to global market fluctuations, as seen with the 1997 Asian financial crash.

• EOI requires a degree of development within the country – high levels of capital investment and a skilled workforce. Often, LEDCs are forced to attract Transnational Corporations (TNCs), which take the lion's share of any profits.

• Large corporations destroy small producers as they can’t compete with the prices.

Other opportunities for industrialisation

We will be considering other opportunities for industrialisation, including agriculture and tourism.

Agriculture and industrialisation

Some countries such as Malawi, Kenya, and Ghana have focused on industrialising their agricultural markets rather than investing in mechanical industries. Here, these countries rely on exporting ‘cash crops’ that are in demand in Western countries.

Similar to EOI, agricultural industrialisation is heavily susceptible to global market prices. Not only this, but the use of GM crops, fertilisers and pesticides brings with it environmental and ecological problems.

Tourism and industrialisatoin

With globalisation increasing, tourism is now regarded as the third-largest industry globally (Cohen and Kennedy, 2013). It has provided a non-traditional way for many developing countries to industrialise.

However, relying on tourism as a core industry can bring its disadvantages:

• The seasonal nature of tourism leads to unemployment for parts of the year.

• ‘Tourist hotspots’ often see the major development benefits of tourism whilst other country areas remain underdeveloped. This leads to regional, economic, and social inequalities.

• Hotels, if owned by larger Western corporations, e.g. Hilton hotels, Marriott International, and Intercontinental Hotel Group, face the same criticisms as more traditionally industrial TNCs – it is they rather than the developing country that receives the larger share of profits from tourism.

• Alongside other forms of industrialisation, tourism also leads to negative environmental impacts.

Fig. 2 - The hidden costs of tourism - waste!

Benefits of industrialisation in developing countries

In theory, industrialisation should promote economic and social development in developing countries. It should do so in the following ways:

1. Industrialisation increases economic gains when engaging in international trade

Industrialisation means a nation can produce a variety of higher-value goods that can then be sold as exports or used within internal markets.

Industrialisation also means a reduced reliance on imports from abroad.

2. Industrialisation brings with it positive multiplier effects

This is because industrialisation:

• requires workers who will be paid wages. These wages can then be spent on other areas of the economy.

• requires a more educated workforce for management positions. In turn, this should encourage the government to invest in education.

• leads to urbanisation and the positive effects that may bring.

Evaluating the effects of industrialisation in developing countries

The following section carries out an evaluation of industrialisation in developing countries.

Eurocentrism as an effect of industrialisation

The idea of industrialisation being central to development is Eurocentric. Just because Europe developed through this process does not mean that it will necessarily work for the rest of the world. Issues with ISI, EOI and agricultural means of industrialisation highlight that it is increasingly difficult to do so.

Where there is industrialisation, the benefits are often negated by either external forces, i.e. levels of global demand that affect the price of exports, or by TNCs, which often take the lion's share of any profits gathered.

Environmental damage as an effect of industrialisation

The process of industrialisation often comes at the expense of environmental damage. Just how sustainable is development through industrialisation? With increasing pressures to reduce global carbon emissions and negate climate change, it would seem counter-intuitive to perhaps the most defining issue of this decade and hinder progress in terms of the targets set by the UN's sustainable development goals.

Fig. 3 - Successfully industrialising and mining coal or signs of environmental harm?

Social development as an effect of industrialisation

The economic benefits of industrialisation are often not matched by benefits to social development. Looking again at the role of TNCs in industrialisation, improvements to education, health, working conditions and human rights in developing countries are often hampered rather than improved.Further, the TNCs often receive the majority of economic benefits through industrialising. This is because developing countries depend on these corporations to establish the infrastructure necessary to export their commodities and goods.