23 Things they Don't Tell You About CapitalismBy: Chang Ha-Joon
Major Topic: Economics
Minor Topic: Politics
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Thing 9: We Do Not Live in a Post-industrial Age
We are told that in the new post-industrial age manufacturing is not as important as it was in the past. In fact we do not really need it any more because in the new world we live in a service based economy. Furthermore, developing countries do not need to develop dirty manufacturing industries because they can now jump straight to a service based economy.
The truth is that industry is not unimportant. Industry has appeared to become less important due to the relative increase in the service sector and the incredibly huge gains in productivity of the manufacturing sector.
Manufacturing is still the wealth creator for an economy. The greater the size and productivity of a country's manufacturing sector the greater the total wealth in the country. But how is it possible that rich countries stay rich with so much deindustrialization taking place?
The answer is that not much deindustrialization has taken place. It only appear that rich countries are deindustrialized because the size of their service sector has grown immensely and manufacturing has become so much more productive that far few people are needed to just maintain the level production.
The only sense in which we have become post-industrial is in the type of jobs we have. Most jobs are in services not in manufacturing. This has a social and psychological impact. Service people are 1) more in control of how they work and when they work, 2) less likely to cooperate with each other and so there are fewer unions in the service sector, 3) more likely to actually meet their customers.
Deindustrialization could be a good thing or a bad thing. It depends on whether the industry is still growing in productivity. If productivity is going up then a smaller share of the economy dedicated to manufacturing is not bad. If industry productivity is not going up, then deindustrialization is a very bad thing because the overall wealth of the country will be going down and the long term economic future of the country will not be good.
It is therefore a fantasy to say that developing countries can skip the industrialization phase of development and jump straight to a service stage.
Added on: 2012-10-05 12:16:03
Text Crawl by: James McLaren
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