On premature deindustrialization

Traditional economies grow and develop first by industrializing, and then by moving into services.  This has been the classic path to economic and political modernity.

A few non-Western countries have been able to replicate this path: Japan, Taiwan, and South Korea are examples that come immediately to mind.

I have been concerned for some time that for most latecomers this path has become increasingly difficult to traverse.  It is not that industrialization has gotten entirely out of reach. Most poor countries do experience some industrialization, and China has become the world's manufacturing factory. But the vast majority of developing countries are not attaining industrialization levels reached by early industrializers.

What's even more striking, the onset of deindustrialization is now taking place much sooner, at lower levels of industrialization and lower incomes.

This shown in the chart below, which depicts the peak level of industrialization (measured by manufacturing's share total employment) in a sample of early and late developers.  For each country, the income per capita at which deindustrialization began is also shown.  

The pattern is unmistakable. While early industrializers managed to place 30 percent or more of their workforce in manufacturing, latecomers have rarely managed that feat. Brazil's manufacturing employment peaked at 16 percent and Mexico's at 20 percent. In India, manufacturing employment began to lose ground (in relative terms) after it reached 13 percent.

This may come as a surprise, but even China employs few workers in manufacturing, relative to its huge labor force. Moreover, the manufacturing share of employment in China seems to be coming down (caveat: Chinese data on manufacturing employment are problematic).

As I explain in a new Project Syndicate column, the early onset of deindustrialization has a number of implications.  On the economic front, it slows down growth and delays  economic convergence. Politically, it forecloses the typical path to democracy -- through the development of a labor movement, disciplined political parties, and habits of compromise and moderation arising out of industrial struggles over pay and working conditions.   

Comments

[Ulysse Colonna]

Actually a lot of countries in the West never reached the 30% bar. Italy and Spain for instance seem to have skipped the industrialization phase altogether. France also only reached 30% with a very generous understanding of what fits as industrial jobs (many being rather artisanal) and even then only for a decade or two.
I suspect that including all Euro countries nowadays considered as developed and democratic and replace the point by a peak period of ten or twenty years would profoundly affect your results.

[Uwe Kerkow]

There is no German translation of this very interesting text so I gave a brief overview over the concept in my blog on development issues: http://epo-mediawatch.blogspot.com/2013/10/nachholende-entwicklung-ist-anders.html

[Tom Grey]

Funny that you focus on premature deindustrialization rather than premature gov't bureaucracy growth.

Harvard has probably been among the worst in the world because of promoting gov't, and thus force based development, rather than peaceful, voluntary exchanges and private investment.

Had the "aid" for most poor countries gone into either manufacturing investment OR micro-finance service development (hair stylist? furniture making? house building?), the reduced opportunities to use low cost flexible labor instead of expensive robots would be less problematic.

[Francesco Totino]

Close the "Tax Havens " :The domestic economic policy alone does not solve the problem of the growth of a country, we must act simultaneously at the international level.
http://economicsandpolicy.blogspot.it/2013/01/the-domestic-economic-policy-alone-does.html

[Seth Lavine]

One more thing, I am just on my lunch break at work and was wondering if the author had any suggestions as to any other industrialization parallels I could use in my work. Thanks.

[Lisa Sun]

the manufacturing share of employment in China seems to be coming down
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[JosephLarsen2]

I have misgivings as to whether the share of the working population employed in manufacturing is the best measure of "industrialization." In my view, combining that measurement with a measurement of output or productivity would tell us a lot more. For example, Chinese and Mexican manufacturing accounts for a much larger share of output than it did at "peak employment," so it makes little sense to say that these country's as "deindustrialized."

[JarredBottum]

This may come as a surprise, but even China employs few workers in manufacturing, relative to its huge labor force.

[JarredBottum]

few workers in manufacturing, relative to its huge labor force. Moreover, the manufacturing share of employment in China seems to be coming down pharmacy global rx net generic viagra point by a peak period of ten or twenty years

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