Question

Explain with an example of a case study how premature deindustrialization has eluded the development of third world countries.

Answer 1

Deindustrialisation has been long been a concern in rich nations, where it is associated with the loss of good jobs, rising inequality, and declining innovation capacity. For all these and many other reasons, it should be a much bigger problem for developing countries. Premature deindustrialisation has serious consequences, both economic and political.On the economic front, it reduces the economic growth potential and the possibilities for convergence with income levels of the advanced economies. Formal manufacturing tends to be technologically the most dynamic sector, exhibiting unconditional convergence . Deindustrialisation removes the main channel through which rapid growth has taken place in the past.The political consequences of premature deindustrialisation are more subtle, but could be even more significant. Mass political parties have traditionally been a by-product of industrialisation. Politics looks very different when urban production is organised largely around informality, a diffuse set of small enterprises and petty services. Common interests among the non-elite are harder to define, political organisation faces greater obstacles, and personalistic or ethnic identities dominate over class solidarity. Elites do not face political actors that can claim to represent the non-elites and make binding commitments on their behalf. Moreover, elites may prefer – and have the ability – to divide and rule, pursuing populism and patronage politics, and playing one set of non-elites against another. Without the discipline and coordination that an organised labour force provides, the bargains between the elite and non-elite needed for democratic transitions and consolidation are less likely to take place. So premature deindustrialisation may make democratisation less likely and more fragile.Latin America appears to be the worst hit region. But worryingly similar trends are very much in evidence in bub-Saharan Africa too, where few countries had much industrialisation to begin with. The only countries that seem to have escaped the curse of premature industrialisation are a relatively small group of Asian countries and manufactures exporters.