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Monday, 15 August 2011

The Manufacturing Imperative

Dani Rodrik on why manufacturing is critical for developing nations :
For developing countries, the manufacturing imperative is nothing less than vital. Typically, the productivity gap with the rest of the economy is much wider. When manufacturing takes off, it can generate millions of jobs for unskilled workers, often women, who previously were employed in traditional agriculture or petty services. Industrialization was the driving force of rapid growth in southern Europe during the 1950’s and 1960’s, and in East and Southeast Asia since the 1960’s.

India, which has recently experienced Chinese rates of growth, has bucked the trend by relying on software, call centers, and other business services. This has led some to think that India (and perhaps others) can take a different, service-led path to growth. But the weakness of manufacturing is a drag on India’s overall economic performance and threatens the sustainability of its growth. India’s high-productivity service industries employ workers who are at the very top end of the education distribution. Ultimately, the Indian economy will have to generate productive jobs for the low-skilled workers with which it is abundantly endowed. Much of that employment will need to come from manufacturing.

 For developing countries, expanding manufacturing industries enables not only improved resource allocation, but also dynamic gains over time. This is because most manufacturing industries are what might be called “escalator activities”: once an economy gets a toehold in an industry, productivity tends to rise rapidly towards that industry’s technology frontier.
Manufacturing of course is a vital part of the diversification, something that Zambia has lamentably failed to achieve thus far, largely due to the inability to find sufficient revenues to aid the transformation process.

4 comments:

  1. I.P.A. Manning (Chosanganga)16 August 2011 at 09:47

    You cannot have manufacturing and free trade. And for Africa there are other problems: see Clark, G. A. 2007. A Farewell to Alms, Princeton: Princeton University Press. Zambia must think again about sweatshops and joining a system now being severely questioned.

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  2. Manufacturing enables a country to fully develop its people's potential, and master the resources in their country to uplift the standard of life.

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  3. Manufacturing is indeed a solution to Zambia's and Africa's economic crisis.however just as NO.1 as said its trick to meet the objective of manufacturing with a free trade policy in place.therefore the Government need to bring in policies which will protect manufacturing industries.take for instance if the Government want to promote the manufactring of bycyles.( as we used to some time back)it would put high taxes on bycyles imported , just the way South Africa has done on the Automible industy.where no second hand imported cars can not be sold within SA.
    In short Government policy is key to the success of every manufacturing undertaking.

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  4. Any attempt to set up manufacturing in Zambia will be strangled by licences, red tape and taxes. It will then be killed by cheap imports.

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