Chapter 7: INDUSTRIALIZATION AND THE THIRD WORLD COUNTRY

 The remarkable progress in communication and transportation has exposed the high
standard of living of the industrial countries to the third countries.
 In less developed countries, there is a great obstacles along the long path of
industrialization, not only in massive capital, modern technology, competent
management, and skilled labor.
 Well-developed agriculture and commercial sectors are also needed.
 Most important for industrialization is the restructuring of values and institutions in
societies.

Starting the Process of Modern Growth

 Economic, social, and political institutions were structured to pave way towards
industrialization.
 There was a rapid technology improvement.
 Substantial in transportation, communication, and electrification were undertaken.
 Social facilities and services were increased.
 Agriculture and commercial became variable.

The English Experience

 England during the middle ages had a pastoral economy and agriculture was basically
primitive.
 Europe was mainly under feudal and manorial system. Feudal lords were more
interested in wars.
 The church despised materialism. The government was weak.
 Upon the expansion of trade and commerce in Europe, town \and cities grew.
 The new merchant class become wealthy and powerful.
 Mercantilism was emerged and it was a greatly interested in the accumulation of gold
and silver through foreign trade.
 The state-and not the church-became powerful, and actively participated in trade and
commerce.
 Attitudes and values of people changed due to the influence of the Renaissance and
Reformation.
 Become interested in intellectual endeavours
 Became analytical about conditions and knowledge in society
 Value of thrift and industries became dominant
 The First Industrial Society

 England was the first to industrialize its economy.

 England developed a larger and stronger middle class than other European countries.
 Mercantilism started in England, and developed Industrial Revolution in late 1770’s.
 Inventions and innovation gradually developed.
 Under laissez faire environment, capitalism expanded.
 Benefits of Industrial Revolution did not remain in England. Other countries in Europe
and U.S started to industrialize their economies.

Approaches to Industrialization

 Many less developed counties have good reasons in their crusade for industrialization.
Exporter of raw materials and agricultural products, for them there is no good future.
 Later on, less developed countries become aware of the benefits of industrialization,
and have envisioned to industrialize their economies.

Developing the Foundation of Industrialization

 Agriculture is the principal source of income of most people in less developed countries.
 With a favourable agricultural development, it would be much easier to promote
industrialization.
 It can serve as a strong foundation of industrialization.
 Agriculture provides raw materials, food, labor, and market to industries.
 Agricultural growth cannot go very far without the help of industrialization.

Reasons for Industrialization

1. To increase the national income of the country.

2. To improve the stability of export earnings and national income.
3. To provide more employment to the unemployed and underemployed.
4. To expand markets of local raw materials.

Big Mistakes in Industrialization

 Many of unsound projects were put up without proper evaluation.

 Benefits can only be acquired if it is economically sound, feasible and appropriate to local
conditions.
 Many pet government projects have been inspired by a political leader who has no training in
industrial economies.
 Some useless projects were organized for political expediency
 Industrialization is a gradual and systematic process. It includes a network of interwoven skills
and facilities.

Criteria for Sound Industrial Projects

1. Economically sound and feasible

2. Stresses labor-intensive industries
3. Its benefits seep down to the level of the masses
4. Easily makes profit for investors and national economy
5. There is a ready market
6. Fits to the total economic development program

Problems of Industrialization

 Countries which became industrialized after England were luckier. They used the technology and
machines developed by Industrial Revolution.
 Less developed countries need massive capital to push vigorously their bid for industrialization.
 Leaders of the Third World countries have complained that foreign loans are too small to be
able to fund their development programs and also criticized the high interest rate of
international financial institutions
 Another problem is the very keen competition in the world market for industrial products.

Encourage Foreign Investments

 It is most likely alternative for a less developed country.

 Foreign investment should be a stepping stone for industrial development. It should not be
substitute for local private initiative and entrepreneurship and not compete with local
investment.
 Both foreign and less developed country could gain mutual benefits.

South Asian Clamor for Industrialization

South Asia Countries
Afghanistan, India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan and Maldives

According to Professor Gunnar Myrdal stated that the clamor for an industrial economy among the
South Asian intellectual elite has been influenced by several factors such as:

 The industrial Revolution paved the way for the industrialization of Western Countries
 The rapid industrialization of the Soviet Union through central planning
 The decline in the demand for raw materials and other agricultural products in the world markets
 The fast population growth and an increasing rate of human unemployment
 The high standard of living being employed by citizens of the industrial countries

Barriers to Industrialization
 Unskilled labor force and a small inexperienced managerial force.
 Rapid Industrialization will not generate sufficient unemployment.
 Inadequate logistic support
 Existing social, economic, cultural, political Institutions are not favourable to development.
 Attitudes and Values are not suitable to Industrialization

Early Philippine Industrialization

Professor frank Golay of Cornell University stated that the Philippine industrialization policy included
(1961):

 Direct participation of the state in manufacturing industrial activities as an entrepreneur or

partner of private firms.
 Development of financial Institutions for allocating scarce credit and foreign exchange resources.
 Provision of government incentives to private entrepreneurs.
 Promotion of selected foreign investment in manufacturing.

Government Participation
 In the early 1950's, the government owned and managed railroads, hotels, electric power, gas
and water works.
 It directly produced coal, textile, cement, steel, pulp and paper.
 It also operated shipyard and engineering shops.
 Moreover, the government had substantial investments in firms manufacturing incandescent
bulbs, fluorescent tubes, domestic and foreign airlines, and owned three ocean vessels.

However, with the election of President Ramon Magsaysay in 1953, there was a radical change in
industrial policy the following year. The government initiated the policy of selling government
companies in which the private sector was interested and those companies which were inefficient.

Not a few government corporations had been inefficient and became bankrupt. Corruption,
nepotism, mismanagement were rampant. The heavy losses and waste of public money and property
in maintaining Government Corporation prompted President Magsaysay to get rid of such inefficient
firms.

Industrialization Evaluated

 Philippine industrialization rose rapidly since 1950 in terms of growth, number of firms, and
number of plants or extent of Filipino participation.
 In 1950, the value added in manufacturing was only 8.5 percent of the national income
compared with 42.3 percent in agriculture.
 Eight years later, the contribution of manufacturing to national income increased almost
three times.
 During this period many infant industries were heavily subsidized by the government.
 Likewise, inefficiency, favoritism, and corruption crept into the operations of infant
industries.
 Many of these industries remained in their infant age at the expense of the taxpayers and
consumers.
  The quality of their products did not improve.
 They just took advantage of the subsidies extended to them by the government.
 In the 1950’s, economic nationalism has become stronger. Through the leadership of the
then Senator Claro M. recto, foremost Filipino nationalist, several noted Filipino leaders
criticized the Philippine brand of industrialization. Recto pointed out:

The policy of industrializing the country should be pursued vigorously and sincerely. Many of the
industries to which our administration, past and present, point with pride as achievements of
their so-called industrialization programs are nothing more than assembling, bottling or
packaging plants or concerns which import an almost finished product and perform the last
stage of manufacturing before selling it on the selling counter. When we refer to these
enterprises as “industries” we are deceiving ourselves (Constantino 1965).

The Social Cost of Industrialization

 Industrialization spawns more investments, employment, production, and income.

 In the process, more buildings, factories, and machines are being created in response to
an increasing demand for goods and services.
 Likewise, industrialization serves as a magnet to people in the rural areas,
 They go to the cities to look for jobs or for business reasons.
 This increases faster the urban population.
 Hence, housing, health, education, transportation, communication, and other social
facilities and services have to be expanded to serve the growing human needs.
 Not a few Third World countries which have two or three industrial cities have been afflicted
with numerous social problems.
 The uncontrolled massive influx of rural people has caused various economic and social
dislocation in the cities.
 Evidently, the less developed countries cannot provide even the most basic social
services to the poor.
 The presence of absolute poverty in a rich industrial society breeds crimes and many
forms of immorality.

The poor are exploited

 The emergence of social problems in an industrializing society was also obvious during the
Industrial revolution in England.
 The introduction of machines ushered in the growth of the factory system and the eventual
collapse of the flannel weaving industry in the countryside.
 The jobless weavers went to the cities to work in factories.
 The captains of industry exploited them in their desire to acquire more profits.
 Since there was no government intervention in economic activities, the capitalists abused ever
more the poor factory workers.
 They worked like slaves, including women and children.
 England became industrialized at the expense of the workers.
 The economic growth of San Paolo in Brazil has not really touched the lives of the masses.
 Most of the big corporations and plantations are owned by foreigners like the capitalists of the
United States, Japan, and Western Europe.
 The great masses have remained very poor because of economic exploitations.
 As a result, their poverty has been the root cause of endless many civil wars in the region.

The Case of Affluent Societies

 The highly developed countries are the industrial societies.
 They are rich and their peoples enjoy a high standard of living.
 Families have cars, appliances, and comfortable houses.
 The government provides the essential social services such as housing, health, old-age benefits,
and unemployment insurance.
 Such income is already a fortune to many countries in the less developed countries.
 However, the real quality of life is not only measured in terms of money, cars or high-rise
buildings.
 Aside from air, water and noise pollution, there has been an erosion of human values and family
ties in many industrial societies.
 Almost everybody is busy earning money and other material pursuits.
 Thus, broken families, drug abuse, and sex perversion have become widespread.
 Citizens of the highly developed countries consider themselves the most civilized race in the
world.
 They frown upon the savage people of the less developed countries.
 Yet, they have the highest rate of crime – including suicides.
 Almost always, the emphasis has been on industrial progress – leaving behind social
development.
 Money, machines, and technology can easily transform a primitive place into a modern city.
 Modern buildings, cemented roads, and other urban infrastructures can be constructed in a few
years’ time.
 Changing attitudes and values is indeed a very slow process.
 And much slower if such most important aspect of development gets a very low priority in the
development programs.
 A society is only as good as its people.