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The industrialization mirage: politicians’ and experts’ heads are stuck in the manufacturing sands

Por Jean Daudelin*

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Try to forget industrialization: it’s essentially over and it won’t happen again. The challenge is to grow rich and not too unequal with service economies.

From Nigeria, Brazil and India, to Canada, France and the United States, the discussion of the future of economic growth is obsessed with industrialization. Everybody wants a share of the shrinking pot of manufacturing jobs. In Brazil, the private sector and the opposition, in the now rare instances when they discuss policy, complain that the government hasn’t been able to stop the dis-industrialization that has plagued Brazil essentially since the election of Collor de Melo. Obviously, they are right—about this government, Lula’s and Cardoso’s too: the proportion of industrial value added in Brazil’s GDP, which had been increasing regularly since the 1940s, has declined precipitously and is now lower than in the 1960s. What to do about this?

There are two options: either you try to reverse it—though it is happening everywhere on the planet—or you try to think of ways in which economic development could take place, for the first time in history, without a large manufacturing sector. To me, the last option is the only realistic. Unfortunately, people seems to be obsessed with industrialization. And I am not just talking about politicians.

When you have time, check this podcast from Brookings, which features one of their fellows, John Page, a former Chief Economist for Africa at the World Bank. Its hook is that about 85 million of China’s “bottom-end” manufacturing jobs will have migrated away by 2030 and that Africa’s challenge is to capture as many of those jobs as possible. The point is to plug a book by Brookings, UNU-WIDER and the African Development Bank called “Learning to Compete in Industry.”

Now, in 2030, there will be 1.6 bn people in Africa, about half of whom will be older than 15 years old. Among the latter, assuming participation rates similar to todays (70-80%), the region’s labour force will be about 600 million strong. This means that while 85 million jobs look like a lot, if Africa were to capture ALL OF THOSE JOBS–an extremely unlikely outcome–that would still represent only 13% of the region’s labour force. Adding those jobs to the current paltry levels of industrial employment, in other words, would just not make African countries “successful industrializers.” Most likely, in fact, these economies will morph—some already have—from mining and agricultural primary goods producers to service economies, without the historically “standard” industrial episode in the middle.

This study, in other words, like much of current development scholarship, is stuck with the assumption that development and industrialization are synonymous and that the first simply will not happen without the second.

Obviously, that assumption may be right, but if it is, Africa is doomed.  because the very evidence mentioned by promoters of industrialization makes it clear that industrialization on any significant scale will not happen in the region. At the very least, however, we should check, which we are not doing, in spite of all our ritual evocations of “evidence-based” research.

What we may find once we start looking may not be that depressing, by the way. Indeed, there is no theoretical reason why service economies can’t become more productive. The most compelling explanation of growth today–endogenous growth–sees ideas as its core driver. Why should ideas only impact productivity in the manufacturing sector? Or, from a research perspective, why should we keep thinking of development as if it could only happen as it did in the past, both old, in the West and Japan, and recent, in China?

Oh, and by the way, the industrialization mirage is not just misleading for Africa, it is even more of an illusion for countries—hello Canada, and soon, hello Brazil—that have long ago become service economies.

To repeat, the challenge is not to find a time machine to reach back to the 1950s (and call it a “revolution”) when the path to industrialization crossed indeed manufacturing land, but to see how service economies can deliver reasonably equitable growth in developing countries.

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* Doutor em Ciência Politica (Université Laval). Desde 2002 é Professor Associado na Norman Paterson School of International Affairs, Carleton University. Tem experiência em Relações Internacionais das Américas, Política Externa Brasileira, Políticas de Drogas, Mercados Ilegais e Violência. É pesquisador do Núcleo de Estudos em Política Comparada e Relações Internacionais (NEPI/UFPE) e do Núcleo de Estudos e Pesquisas em Criminalidade, Violência e Políticas Públicas de Segurança.

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