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Industrialization in Less Developed Countries

INDUSTRIALIZATION IN LESS DEVELOPED COUNTRIES

In the two and a half centuries since the Industrial Revolution in England, the process of industrialization has perhaps had more impact on all the nations of the world than any other complex set of forces. This process has not been uniformly introduced in all countries, nor has it occurred at the same time or at the same rate. Despite the common features of industrialization, these differences in its introduction and adoption have produced inequities among nations and among people on a scale never before experienced.

In describing various countries and regions of the world, certain terms have been adopted, first by official agencies such as the United Nations and national governments, and then more generally by scholars, journalists, and those interested in making sense of international relations. According to a now commonly used United Nations classification, more developed countries (MDCs, or developed countries) comprise all of Europe, North America (excluding Mexico), Japan, Australia, and New Zealand. Other countries (e.g., Singapore, Taiwan, and Israel) constitute recent additions, while many of the former Soviet-bloc countries (including the Russian Federation) are now in a developing, or "transition," phase. Less developed countries (LDCs, or developing countries) make up the remainder. The distinction between MDCs and LDCs mirrors the famous "North–South divide," a phrase coined by former West German chancellor Willy Brandt (1980) in his Commission's report to the World Bank. LDCs have also been referred to as the Third World, a term devised in post–World War II Europe to distinguish the politically nonaligned, underdeveloped nations of the world from the industrialized capitalist nations (First World) and the industrialized communist countries (Second World) (Worsley 1984, pp. 306–315).

In some cases, the underlying variable upon which these distinctions are based is economic, in other cases it is political, and in still others it is unspecified. However, generally speaking, MDCs are "rich" and LDCs are "poor." In 1996, the per capita gross national product (GNP) among all MDCs was US$25,870, while in the LDCs it was only US$1,183 (World Bank 1998, p. 38). The major explanation for this vast discrepancy is that MDCs are fully industrialized whereas LDCs are not. In 1994, the industrial market economies produced 81.4 percent of total world manufactures (World Bank 1997, p. 152). Considering that LDCs comprise 84 percent of the world's population (World Bank 1997, p. 36), their industrial output and, consequently, their standard of living are dramatically lower than in MDCs.


INDUSTRIALIZATION DEFINED

Industrialization is a complex process comprised of a number of interrelated dimensions (Hedley 1992, pp. 128–132). Historically, it represents a transition from an economy based on agriculture to one in which manufacturing represents the principal means of subsistence. Consequently, two dimensions of industrialization are the work that people do for a living (economic activity) and the actual goods they produce (economic output). Other dimensions include the manner in which economic activity is organized (organization), the energy or power source used (mechanization), and the systematic methods and innovative practices employed to accomplish work (technology). Table 1 specifies these dimensions and also lists indicators commonly used to measure them.

According to these indicators, MDCs are fully industrialized. On average, close to one-third of the labor forces in these countries are employed in industry (three-fifths work in the service sector); manufacturing makes up approximately one-quarter of the gross domestic product; the overwhelming majority of workers are employees of organizations; commercial energy consumption is high (5,100 kilograms of oil equivalent per capita); and professional and technical workers comprise on average 15 percent of the work force. Furthermore, more than 95 percent of all receipts for royalty and license fees are collected in the MDCs (Hedley 1992, pp. 128–133; United Nations Development Programme [UNDP] 1998; World Bank 1997). Industrial activity and the services associated with it constitute the major driving force and source of income in these more developed economies.

In contrast, none of the LDCs is fully industrialized as measured by these five dimensions of industrialization. Although manufacturing accounts for a significant proportion of many of these countries' total output, most do not achieve industrial status on any of the other dimensions. Manufacture in these countries is accomplished largely by traditional methods that have varied little over successive generations. Consequently, although manufacturing (transforming raw materials into finished goods) is an essential component of industrialization, there is considerably more to the process. Because industrialization is multidimensional, it cannot be measured by only one indicator.

In general, LDCs may be classified into three major groups according to how industrialized they are. The first and smallest group, referred to as newly industrializing countries (NICs), contains the most industrialized countries in that they achieve industrial status on at least two dimensions listed in Table 1. Located mainly in East Asia (e.g., South Korea, Malaysia, Thailand, Indonesia) and Latin America (e.g., Mexico, Brazil, Argentina, Venezuela), these eight NICs accounted for more than 40 percent of all merchandise exports from developing countries in 1995 (World Bank 1997, pp. 158–160). Although China and, to a lesser degree, India (because of their huge population bases) contribute significantly to the merchandise exports of LDCs, they have not developed their industrial infrastructures to the same extent as these NICs and therefore do not belong in the most industrialized group of LDCs.

A subgroup of NICs are high-income, oilexporting nations (e.g., the United Arab Emirates, Qatar, Bahrain, Kuwait, and Saudi Arabia). Although they do not have large manufacturing bases, they do have significant proportions of their labor forces involved in industry (oil exploration and refining), a substantial component of professional and technical workers (many of them imported), and high per capita commercial energy consumption (World Bank 1998, pp. 34–35, 42–43). Although concentrated in just one industry, they are more industrialized than most other LDCs according to the criteria specified in Table 1. As a result of their petrodollars, they have acquired an industrial infrastructure that in other countries has taken many decades to establish.

The second, very large group of LDCs in terms of industrialization are those with a traditionally strong manufacturing base that also have a substantial agricultural component. Their economies straddle the agricultural and industrial modes of production. China and India are in this group, as are most of the non-European nations that form the Mediterranean basin. The goods that these LDCs predominantly manufacture (e.g., apparel, footwear, textiles, and consumer electronics) are essential to their own domestic markets and, because they are labor-intensive, also compete very well in the international market. In addition, they export natural resources and agricultural products. Other countries included in this semi-industrial group are most of the nations in Central and South America as well as many in South and East Asia.

Table 1
dimensions and measures of industrialization
1. economic activity
a. percentage of labor force in manufacturing
b. percentage of labor force in industry
2. economic output
a. manufacturing as a percentage of gross domestic product (gpd)
b. industry as a percentage of gross domestic product
c. gross output per employee in manufacturing
d. earnings per employee in manufacturing
3. organization
a. wage and salary earners as a percentage of the labor force
b. number of manufacturing establishments employing fifty or more workers per capita
4. mechanization
a. commercial energy consumption per capita
b. total cost of fuels and electrical energy per employee in manufacturing
5. technology
a. percentage of professional and technical workers in labor force
b. registered patents in force per capita
c. registered industrial designs in force per capita


The third and final group of LDCs are not industrialized on any of the five dimensions listed in Table 1. On average, less than 10 percent of their labor forces are employed in industry; most (76 percent) work in agriculture. Manufacturing contributes only 20 percent to their national economies; the bulk of income derives from natural resources and cash crops grown exclusively for export. Per capita gross national product is very low (US$215). Most of these nonindustrial LDCs are located in sub-Saharan Africa and Asia (UNDP 1998).

Of these groups of LDCs, the semi-industrial cluster of nations is by far the largest, constituting just over half the world's population. China and India alone make up two-thirds of this group. The second-largest group, comprising between 10 and 15 percent of the world population, is the nonindustrial countries; NICs (including high-income oil exporters) comprise less than 10 percent. Thus, approximately one-quarter of the world is fully industrialized, another 10 percent are industrializing, half are semi-industrial, and the remaining 15 percent are nonindustrial.


CORRELATES OF INDUSTRIALIZATION

Research has demonstrated that industrialization is directly related to national and individual income, urbanization, the development of an infrastructure (e.g., communication and transportation networks, education, and health and welfare programs), and the overall quality of life (Hedley 1992, pp. 133–146). These relationships occur because industrialization results in huge productivity gains, which in turn raise individual and national income. For example, when Britain was industrializing, total national income increased by more than 600 percent between 1801 and 1901 (Mitchell 1962, p. 366). In 1850, workers in industrial nations earned eleven times more than their counterparts in nonindustrial countries. Moreover, the advantages of industrialization have been cumulative: today per capita income is more than fifty-two times greater in developed than less developed countries (World Bank 1995, p. 53), thus magnifying what one author has termed a Global Rift (Stavrianos 1981). For a variety of reasons, the direct relationship between industrialization and income is continuing to increase.

In an annual survey of all countries in the world, the United Nations Development Programme (UNDP) measures "human development" based on the combination of three, admittedly crude, criteria: longevity, knowledge, and a decent standard of living. Table 2 provides a summary of its most recent results grouped by level of industrialization. Of the 174 countries examined, MDCs consistently scored at the top of all three dimensions that comprise human development, while LDCs, particularly the least developed (nonindustrial) countries, scored at the bottom of the scales. The composite Human Development Index ranged from a high of 0.960 for Canada to a low of 0.185 for Sierra Leone.

According to the UNDP (1998, p. 2):

Well over a billion people are deprived of basic consumption needs. Of the 4.4 billion people in developing countries, nearly three-fifths lack basic sanitation. Almost a third have no access to clean water. A quarter do not have adequate housing. A fifth of children do not attend school to grade 5. About a fifth do not have enough dietary energy and protein. Micronutrient deficiencies are even more widespread. Worldwide, 2 billion people are anaemic, including 55 million in industrial countries. In developing countries only a privileged minority has motorized transport, telecommunications and modern energy. Inequalities in consumption are stark. Globally, the 20% of the world's people in the highest-income countries account for 86% of total private consumption expenditures—the poorest 20% a minuscule 1.3%. More specifically, the richest fifth:

  • Consume 45% of all meat and fish, the poorest fifth 5%.
  • Consume 58% of total energy, the poorest fifth less than 4%.
  • Have 74% of all telephone lines, the poorest fifth 1.5%.
  • Consume 84% of all paper, the poorest fifth 1.1%.
  • Own 87% of the world's vehicle fleet, the poorest fifth less than 1%.

Although annual GNP growth rates were higher overall in LDCs (4.1 percent) than MDCs (2.2 percent) between 1980 and 1995 (UNDP 1998, p. 210), the least developed of these LDCs did not fare so well. Not only were their GNP growth rates (2.1 percent) lower than those of MDCs, they were also significantly below their 1970–1995 average annual population growth rate (2.6 percent) (UNDP 1998, p. 209), which means that these countries are actually falling behind in what little progress they have made (Estes 1988). For example, of the 50 countries that comprise sub-Saharan Africa (Cunningham 1998), two-thirds have been evaluated as "least developed," that is, targeted for priority international development assistance by the Nations Nations (UNDP 1998, p. 226). Consequently, some experts have openly questioned whether these countries will ever reach the level of industrialization and quality of life now enjoyed in the capitalist countries of the North (South Commission 1990, p. 19).

DEVELOPMENT GOALS: A VIEW FROM THE SOUTH

World War II marked the end of one era and the beginning of another. Among the more notable turning points following the war were the establishment of the United Nations (and its subsequent Universal Declaration of Human Rights), the onset of the Cold War between East and West, the emergence of many new independent states following the end of colonial rule, and the sudden realization that the income and development gaps between MDCs and LDCs were growing at a precipitous rate. In turn, these events sparked the generation of theories on international development (see, for example, Modernization Theory, Convergence Theories, Dependency Theory, Global Systems Analysis), the creation of organizations such as the International Monetary Fund (IMF) and the World Bank to design an open and stable global monetary system and to establish development and investment programs (IMF 1985), and the formation of various world commissions to address issues of global development (e.g., Brandt Report 1980; Pearson Report 1969; World Commission on Environment and Development 1987).

These activities were initiated largely in MDCs by Northern-based scholars and practitioners. Although there have been several prominent writers from the South who have viewed relations between MDCs and LDCs from a Southern perspective, (Cardoso and Faletto [1969] 1979; Said 1993; Sen 1990, 1992); it was not until 1990 that delegates from the South expressed their concerns in a representative and comprehensive manner. The South Commission (1990), initially formed in 1987, was comprised of twenty-eight members from twenty-six LDCs located on all continents of the South. Chaired by Julius K. Nyerere, former president of Tanzania, the South Commission "has its origins in a recognition within the South that developing

Table 2
Human Development Index (HDI) by Level of Industrialization (1995)
hdi measuresindustrial countries 1 (n= 50)developing countries(n= 124)least developed countries2 (n= 43)world (n= 174)
source: adapted from united nations development programme (1998): p. 130.
note: 1including the former soviet-bloc nations.
note: 2designated by the united nations as ldcs targeted for priority international development assistance.
life expectancy at birth (years)74.262.251.263.6
adult literacy rate (%)98.670.449.277.6
combined 1st; 2nd; and 3rd-level gross enrolment ratio (%)82.857.536.461.6
real gdp per capita (purchasing power parity us$)16,3373,0681,0085,990
human development index0.910.540.340.77



countries have many problems and much experience in common, but that no one in the South was responsible for looking at these things in a comprehensive manner, or at the lessons about appropriate development strategies which could be drawn from them" (Nyerere 1990, p. v). Consequently, The Challenge to the South (South Commission 1990) is an attempt to articulate from a Southern perspective what needs to be done "to help the peoples and governments of the South to be more effective in overcoming their numerous problems, in achieving their ambition of developing their countries in freedom, and in improving the lives and living conditions of their peoples" (Nyerere 1990, p. vi).

As part of its initial mandate, the South Commission (1990) first defined its development goals:

Development is a process of self-reliant growth, achieved through the participation of the people acting in their own interests as they see them, and under their own control. Its first objective must be to end poverty, provide productive employment, and satisfy the basic needs of all the people, any surplus being fairly shared. This implies that basic goods and services such as food and shelter, basic education and health facilities, and clean water must be available to all. In addition, development presupposes a democratic structure of government, together with its supporting individual freedoms of speech, organization, and publication, as well as a system of justice which protects all the people from actions inconsistent with just laws that are known and publicly accepted. (p. 13–14)

To achieve these development goals, the South Commission (1990) identified three interrelated task areas:

  1. National self-reliance. Individual countries of the South must realize their own unique potential through united and sustained efforts on the part of all people working toward clearly defined interim and long-term objectives. However, because there are external factors (e.g., the current structure of the global economy) that impede progress, solidarity among nations of the South is crucial.
  2. South–South cooperation. "By joint endeavours to use to the maximum their different resources of expertise, capital, or markets, all would be able to address their separate and differing needs more effectively, thereby widening their development options . . . By exploiting these openings for co-operation, the South as a group can also become stronger in its negotiations with the North" (p. 16).
  3. An organized South for meaningful North–South negotiations. In their relations with the North, the South must "establish common priorities in keeping with the development interests of all," "share technical and negotiating expertise," and "hold constructive South–South discussions in advance of negotiations" (p. 21). Also, the South should actively support the growing initiative to establish international regulatory frameworks for the enforcement of global economic relations (including finance and trade) that are in the best interests of all nations and all peoples.

From this brief review of the report of the South Commission, it is possible to identify several key features of sustained development, as perceived by those affected:

  • The South must play an active role in its own self-reliant development,
  • Democratic grassroots participation is essential,
  • Cooperation must occur at several levels (e.g., community, nation, and region),
  • International regulatory codes must be renegotiated between North and South.

Although it is too soon to assess what results the recommendations of the South Commission will achieve, there are indications that some progress is being made. For example, President James Wolfensohn of the World Bank proposed a Challenge of Inclusion (1997) during a recent annual meeting of the Bank. Wolfensohn's "challenge" is similar to the objectives of the South Commission: "Our goal must be to reduce . . . disparities across and within countries, to bring more and more people into the economic mainstream, to promote equitable access to the benefits of development regardless of nationality, race, or gender" (p. 6). Moreover, the key elements of his challenge also resemble those offered by the South Commission:

  • First and foremost, the governments and the people of developing countries must be in the driver's seat—exercising choice and setting their own objectives for themselves . . .
  • Second, our partnership must be inclusive—involving bilaterals and multilaterals, the United Nations, the European Union, regional organizations, the World Trade Organization, labor organizations, NGOs [nongovernmental organizations], foundations, and the private sector . . .
  • Third, we should offer our assistance to all countries in need. But we must be selective in how we use our resources. There is no escaping the hard fact: More people will be lifted out of poverty if we concentrate our assistance on countries with good policies than if we allocate it irrespective of the policies pursued . . .
  • Finally, all of us in the development community must look at our strategies anew (Wolfensohn 1997, pp. 9–11).

Whether The Challenge to the South and The Challenge of Inclusion represent realistic steps toward meaningful North–South dialogue, cooperation, and beneficial action remains to be seen. However, if we do not tear down the many institutionalized structures of exclusion that are currently in place, all of us may eventually lose.


A NEW TECHNOLOGICAL REVOLUTION

Another set of challenges confronting LDCs is the new information and communications technology (ICT) revolution. Beginning in the late 1960s with breakthroughs in microelectronics and fiber-optic transmission (Diebold 1990; Gilder 1989), the ICT revolution is still very much in its genesis and is limited primarily to the developed countries (Hedley 1998). In 1994, just five G-7 nations (the United States, Japan, Germany, France, and United Kingdom) accounted for 80 percent of the information technology market, and American and Japanese corporations dominate the industry (Organization for Economic Co-Operation and Development [OECD] 1996, pp. 7, 37). Table 3 presents the stark facts of information communication by both traditional and modern means. Particularly with regard to telephones and personal computers, essential ingredients for electronic communication, the less developed, low- and middle-income countries are barely represented. In sub-Saharan African countries, for example, 51 percent of all telephones are located in the largest cities (7 percent in MDCs), and the average waiting time for a telephone connection is 15.2 years (Aggor 1998, p. 9). Inadequate infrastructure, low purchasing power, lack

Table 3
Information Communication by National Level of Income
means of information communicationhigh-income countriesmiddle-income countrieslow=income countriesworld
source: world bank (1997): p. 286; world bank (1999): p. 227.
daily newspapers per 1,000 people (1994)303621298
television sets/1,000 (1996)61125247211
telephone main lines/1,000 (1996)5407811133
mobile telephones/1,000 (1996)1318028
fax machines/1,000 (1995)33.71.50.26.3
personal computers/1,000 (1996)2242..50
internet hosts/10,000 (july 1997)203.52.40.134.8



of technological skills, and poor competition and regulation mean that particularly in the least developed countries, it will take years to realize much benefit from the ICT revolution (World Bank 1999, pp. 62–64). By some measures, the knowledge and information gap between MDCs and LDCs is larger than the income gap.

Various development scenarios have been proposed in anticipation of the impact of a full-scale ICT revolution (Hedley 1999; Howkins and Valantin 1997). The basic question addressed is whether this revolution will "help level the international playing field in terms of opportunities for social and economic development" or whether it will "lead to increasing disparities in incomes and information access" (Baranshamaje et al. 1995). In order to address this question, a high-powered workshop comprised of twenty-seven experts in technology and development from five MDCs and eight LDCs was convened in 1996 (Howkins and Valantin 1997). Sponsored by the U.N. Commission on Science and Technology for Development and the Canadian-based International Development Research Centre, the delegates attempted to establish the parameters of worldwide ICT development. Four possibilities emerged, based on the inclusivity and openness of the global community and the proactive or reactive responses of individual countries (Howkins and Valentin):

  1. The march of follies. "The global community is exclusive and fragmented," and "most developing countries respond only partially and reactively to acquisition and use of ICTs." In this scenario, the global rift between MDCs and LDCs widens.
  2. Cargo cult. "The global community is inclusive and supportive," but "most developing countries respond only partially and reactively to the acquisition and use of ICTs." This scenario results in cultural imperialism in which a few transnational corporations dominate the ICT industry. Developing countries have little input.
  3. Netblocs. "The global system is exclusive and fragmented"; however "developing countries take an active approach to the acquisition and use of ICTs and develop a complete set of policies." This scenario produces regional groups or blocs based on shared cultures, religions, and languages. "At the end of the scenario period, the blocs have achieved much. They have created information societies and economies that reflect their own histories, traditions, cultures, and ways of doing business. But their insistence on their own regional laws, regulations, and trading principles creates centripetal forces that lead to a highly unstable situation."
  4. Networld. "The global community is inclusive and supportive," and "developing countries have a complete and proactive set of policies toward the acquisition and use of ICTs." This is a global village scenario in which corporations from developed countries operate out of "enlightened self-interest as they seek ways of working with companies and institutions in the developing world . . . Their awareness is matched by a realization in developing countries that they should work with global corporations to create their own national information society and economy."

The workshop delegates did not attempt to predict which of these four development scenarios was most probable. Rather, based on their two sets of parameters, they indicated the various possibilities, what would be required to reach each, and some of the development consequences that would likely flow from them. In other words, if the global community is not inclusive and supportive, and if developing countries do not develop a complete and proactive set of policies toward the acquisition and use of ICTs, then we may expect various consequences that are inimical to comprehensive and sustained development worldwide. As Herbert Simon (1987, p. 11) has observed:

Technological revolutions are not something that "happen" to us. We make them, and we make them for better or for worse. Our task is not to peer into the future to see what computers will bring us, but to shape the future we want to have—a future that will create new possibilities for human learning, including, perhaps most important of all, new possibilities for learning to understand ourselves.

Thus, if we wish to take up The Challenge of Inclusion, there are certain courses of action to follow. If we do not take up this challenge, then, according to the founding editor of Scientific American, the very survival of our species is at stake (Piel 1992).


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R. Alan Hedley

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