Industrialization means the growing importance of the secondary-sector and the reduced importance of primary sector.
Business activity never follows a constant pattern as industries tend to grow and decline over a period of time. Sectoral changes in the economy refer to a shift in the relative share of national output and employment that is attributed to each business sector over time causing the importance of each sector in an economy to change over time.
Usually, countries develop by shifting the majority of national output being contributed by primary sector, to manufacturing, then to services in tertiary sector and then finally to quaternary sector.
The UK example of industrialization
In the UK, major changes have occurred in the structure of the economy during The Industrial Revolution. Before the Industrial Revolution, most of the UK’s resources were used for primary production mainly agriculture, mining, forestry and fishing. In the 19th century, secondary production expanded rapidly which resulted in more resources being employed in manufacturing which led to industrialization.
Industrialization describers the growing importance of the secondary-sector manufacturing industries in developing countries and the reduced importance of primary sector business activity. These days, emerging economies of China, India and Vietnam are good examples of industrializing countries. In many countries in Africa the relative importance of secondary-sector activity has started to increase.
Countries develop thanks to industrialization
Countries are often described as either less-developed, developing or developed by measuring the size of a country’s different sectors of business activity. The relative importance of each sector (size of each sector) is measured in terms of either employment levels (number of workers) or output levels (Gross Domestic Product (GDP)) as a proportion of the whole economy.
Less developed and developing countries often have very small industrial sector and lower standard of living compared to other countries. It is because primary sector production tends to yield low added value for primary sector business organizations. If a country wants to develop economically, there must be a shift in business activity from primary sector activity to the manufacturing (secondary sector) and service sectors (tertiary sector) because they have higher added value, therefore more opportunity to earn higher profits.
A developed country has high levels of industrialization and most of its citizens work in services which yield higher added value. People living in Singapore, Switzerland or Japan have higher average incomes per month and enjoy a higher standard of living compared to less developed countries in Africa or South-East Asia.
Evaluation of industrialization
Industrialization brings benefits as well as drawbacks.
Advantages of industrialization include:
1. Total national output of a country measured as Gross Domestic Product (GDP) increases and this raises the wealth of the country in general.
2. The average standard of living of all citizens is increasing as more and more people work in manufacturing which yields higher added value.
3. Increasing output of goods can result in lower imports and higher exports of such products, therefore causing domestic producers to produce more and sell more which results in business growth.
4. Expanding and profitable firms will pay more TAX to the government, therefore increasing fiscal revenue of the country. That money can be used for the development of the country’s infrastructure such as building new roads, public schools and hospitals.
5. Expanding manufacturing businesses will result in more jobs being created which will led to lower unemployment in the economy.
6. In manufacturing, value is added to the countries’ output of basic raw materials instead of just exporting them as unprocessed products and charging lower prices.
Disadvantages of industrialization include:
1. There will be huge movements of poor people from the countryside to the cities which will result in many social problems, for example housing problems, discrimination, family issues, etc.
2. Because raw materials and components are often needed in production, it may lead to heavy exploitation of natural resources from earth. Also, the requirements for country’s imports will increase causing price inflation of raw materials.
3. Air, water and land pollution will be caused by industrialization as processing raw materials requires heavy machinery using vast sources of energy from coal or oil.
4. As growth of manufacturing industry is due to the expansion of competitive multinational companies, there will be unfavorable consequences affecting local economies, such as bankruptcy of small businesses or transference of wealth out of the country.
Industrialization, and what’s next?
The development of automation and mechanization in modern societies have caused decline in the secondary (manufacturing) sector in terms of employment as more jobs are being replaced by robots. This is known as The Technological Revolution. The Technological Revolution resulted in more resources being employed in services rather than in secondary sector of the economy which led to de-industrialization.
