Tag Archives: industralization

Breaking News: The old rapid peripheral industrial growth

The spread of manufacturing to the periphery 1870-2007: eight stylized facts.

by Agustín Bénétrix (benetria@tcd.ie), Kevin O’Rourke (kevin.orourke@all-souls.ox.ac.uk) and Jeffrey Williamson (jwilliam@fas.harvard.edu)

URL: http://econpapers.repec.org/paper/oxfwpaper/617.htm

Abstract: This paper documents industrial output growth around the poor periphery (Latin America, the European periphery, the Middle East and North Africa, Asia, and sub-Saharan Africa] between 1870 and 2007. We provide answers to the following questions: When and where did rapid industrial growth begin in the periphery? When and where did peripheral growth rates exceed those in the industrial core? When was the high-point of peripheral industrial growth? When and where did it become widespread? When was the high-point of peripheral convergence on the core? How variable was the growth experience between countries? And how persistent was peripheral industrial growth?

Review by Sebastian Fleitas

This paper was distributed by NEP-HIS on 2012-07-29, and starts with a fabulous quote namely:

“To a large extent, world economic history since 1800 has been the history of how the international economic system adjusted to the dramatic asymmetric shock that was the Industrial Revolution”.

Besides catching the reader’s attention, this powerful statement points to the globalisation of manufacturing as one of the most important economic events of the 19th and 20th centuries.

Authors document industrial output growth between 1870 and 2007 for core (“developed”) countries and for the periphery (Latin America, the European Periphery, The Middle East and North Africa, Asia and the Sub-Saharan Africa). Different phases of trade policy are highlighted: the globalization of the late 19th Century, the interwar period; the period after WWII, and the 1980s onwards.

Men working their own coal mines. Early 1900s, USA. Taken of Wikipedia.

Stylised facts emerging from their results provide insights into the process of globalization of manufacturing (from the core to poor countries in the periphery), these include,

  • Rapid peripheral industrial growth began relatively early in all peripheral regions, and
  • Peripheral industrial growth rates were uniformly higher than those in the three original industrial leaders between 1920 and 1989.
  • Rapid industrial growth was not a consequence of a small number of countries in each region but a response to the spreading of this growth to more countries.
  • The less industrialized countries saw statistically higher industrial growth rates between 1920 and 1989, with this convergence being higher during the ISI period.
  • Although some countries show a very persistent industrial growth, rapid long run industrial growth was not particularly persistent in the 20th century.
  • They find that industrial growth rates were more volatile in the periphery than in the core for every year except for the interwar period. In both regions, core and periphery, the volatility of industrial growth has reduced over time.
  • This paper makes several contributions first and foremost is the database itself. The possibility to reconstruct industrial output series for 134 countries for the period 1990-2007 and 23 for the period 1870-1889 is a remarkable effort. As they went further back in time, the authors had to rely increasingly on individual country sources and they acknowledge “many generous colleagues” for sharing the data with them. In this sense, setting up this kind of databases is possible thanks to many colleagues that are working to reconstruct different databases all over the world. A second contribution is that this paper documents and clearly shows us that the rapid peripheral industrialization had different paces and starting points for regions and countries. Moreover, this allows us to see that this is not a phenomenon unique to the recent past. These conclusions are important to understand, for example, that the process of the BRIC´s countries (Brazil, Russia, India and China) is more a historical trend than a completely novelty. Finally, this paper contributes to show that the relationship between openness and industrialization is not straightforward. In this sense the authors state that it may be contingent on other factors, just as appears to be true of the relationship between openness and growth, more generally.

    BRIC countries: Brazil, Russia, India and China

    Besides these contributions, there are also some comments to make at this point that I think are good to better understand the scope of the statements in the paper. To begin with, the paper discusses the evolution of the industrial output but not the industrial output per capita. Although the paper makes a very good job describing the spread of the industrial production over the world, the implications that this spreading has on the development process remain unclear. The relationship between economic growth and industrialization is given by several channels like structural change (labor shares in production) and productivity in industry (output per capita), to mention two of the most important. In this paper, the authors do not discuss labor shares in industry and the output per capita. Moreover, the output per capita is only used as the variable of convergence: they show regressions of manufacturing output growth rates against initial levels of per capita output. Then, what the regressions show is that less industrialized countries saw statistically higher industrial growth rates. However, this fact does not imply, for example, that these countries have been closed the gap of industrial product per capita since, for example, the population has grown much more in the developing countries than in the developed ones. In this sense, it seems that more research is needed to understand what are the process and determinants underlying the convergence and divergence of industrial output per capita and how they influence the process of economic growth.

    A second comment is that the paper does not make a difference among different process of industrialization in terms of the goods they produce for domestic consumption and their patterns of international trade. On the one hand, the specialization in different sectors matters because it has been stated that different sectors have uneven capabilities to boost economic growth. On the other hand, the big changes in international trade policies make the research about the sectorial composition of the industrial output even more important. During this period, international trade has changed from being mostly inter-sectorial trade based on comparative advantage to intra-sectorial trade based on other kinds of dynamic technological advantages. In this sense, the processes that can boost industrialization during some context are not the same processes that generate it in other contexts. Moreover, the composition of the industrial output is very significant during the period of the ISI when some peripheral economies were almost closed to international commerce. There is a possibility that the rapid economic growth of the industry during this period in some peripheral countries took place in industries heavily protected and where (even after the learning period) international commerce would turn impossible. In that sense, it is not straightforward what this rapid industrial growth represents in terms of economic development and more research would determine if it was good news for those economies or merely inefficient replacement of trade.

    To sum up, the process of industrial development over the world in this almost 140 years has yielded very different results. For example, some Asian countries have achieved a remarkable industrialization while Latin American countries have been diverging in productivity terms against United States in the long run. The common characteristics and the differences between all these paths established a very good scenario to understand, for example, the determinants of structural change or the relationship between trade and industrialization. Among others, these questions contribute to understand the process of economic development in the long run. This paper is a contribution and an invitation to carry on this task.