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1-Discuss the emergence of Industrialization

As people’s incomes increase,

service industry. their
demand for food—the main
Everything that grows also product of
changes its agriculture—reaches its natural
structure. Just as a growing tree limit, and they begin to demand
constantly changes the shape, relatively more industrial goods.
size, and configuration of its At the same time,
branches, a growing because of new farm techniques
economy changes the and
proportions and machinery, labor productivity
interrelations among its basic increases
sectors— faster in agriculture than in
agriculture, industry, and industry, making
services and agricultural products relatively
between other sectors—rural less
and urban, expensive and further
public and private, domestic- diminishing their
and export-oriented. share in gross domestic
product (GDP).
Industrialization and
Post-industrialization The same trend in relative labor
productivity also diminishes the
One way to look at the structure need for agricultural workers,
of an while employment
economy is to compare the opportunities in industry grow.
shares of its As a result industrial output
three main sectors—agriculture, takes over a larger share of GDP
industry, and services—in the country’s than agriculture and
total output and employment. Initially, employment in industry
agriculture is a developing economy’s becomes predominant.
most important sector. But as income per
capita rises, agriculture loses its primacy, Post-industrialization
giving way first to a rise in the industrial As incomes continue to rise,
sector, then to a rise in the service sector. people’s
These two consecutive shifts are called needs become less “material”
industrialization and and they
postindustrialization (or begin to demand more services
“deindustrialization”). —in
health, education,
All growing economies are likely to entertainment, and
go through these stages, which
can be explained by structural many other areas. Meanwhile,
changes in labor productivity in services
consumer demand and in the does not grow as
relative fast as it does in agriculture and
labor productivity of the three industry
main because most service jobs
economic sectors. cannot be
filled by machines. This makes health, education—and some
services quite
more expensive relative to new—modern communications,
agricultural information, and business
and industrial goods, further services. Producing services
increasing tends to require relatively less
the share of services in GDP. natural capital and more
The lower human capital than producing
mechanization of services also agricultural or industrial goods.
explains As a result demand has grown
why employment in the service for more educated workers,
sector prompting countries to invest
continues to grow while more in education—an overall
employment in benefit to their people. Another
agriculture and industry declines benefit of the growing service
because sector is that by using fewer
of technological progress that natural resources than
increases agriculture or industry, it puts
labor productivity and less pressure on the local,
eliminates jobs. regional, and global
Eventually the service sector 53
replaces the industrial sector as Conserving natural capital and
the leading sector of the building
economy. Most high-income up human capital may help
countries today are global development become
postindustrializing—becoming more environmentally and
less reliant on industry—while socially sustainable. Growth of
most lowincome countries are the
industrializing— becoming more service sector will not, however,
reliant on industry . But even in be a miracle solution to the
countries that problem of sustainability,
are still industrializing, the because agricultural and
service sector industrial growth are also
is growing relative to the rest of necessary to meet the needs of
the the growing world population.
economy By the mid- 1990s
services accounted for almost Challenges for
two-thirds of world GDP, up from Transition
about half in the 1980s.
In formerly planned economies
Service Sector Growth the
and service sector was previously
Development underdeveloped because
Sustainability governments controlled supply
The service sector produces and failed to respond to growing
“intangible” demand for services. In addition,
goods, some well known— many modern services that play
government, an important role in market
economies—such as financial,
business, and real estate
services—were not needed
under socialism. During these
countries’ transition to market
economies, their service sectors
have grown rapidly to meet
previously unfulfilled demand
and the needs of the emerging
private sector.
Growth of services in transition
economies is particularly
important because it allows
these economies to employ a
share of the educated labor
force that might otherwise be
unemployed due to the
economic crisis. So, in addition
to continued public support for
health and education, growth of
services can help formerly
socialist countries preserve the
stock of human capital that will
be crucial to their post industrial