A process of moving from labor-intensive to capital-intensive production and a top social and economic objective of the most developing countries.
The recognition of the importance of industrialization dates back to the Industrial Revolution of the 1750s. Liberal capitalism was born in west European countries in the late eighteenth and early nineteenth centuries. The most important process of this period was the integration of the various regions of the world with the capitalist world economic system centralized in western Europe. That course of action started in the sixteenth century and continued to expand until it included peripheral countries. The participation of the other regions of the world in this system occurred only after the Industrial Revolution in the nineteenth century.
The meaning of integration, at a simple economic level, is to produce for the world market. This process has converted self-sufficient countries into societies whose future is vastly dependent on the world economy. Although there are various types of integration, diverse regions of the world accepted that process in different ways. From about the fifteenth century onward, the European communities gradually moved from feudalism, to mercantilism, then through the Industrial Revolution, and currently into classical liberalism.
The Industrial Revolution brought about a big change and transformation in daily life, and England emerged as the final victor of intra-European rivalry. It is associated with the transformation from hand tools and handmade items to manufactured and mass-produced goods. The government, the arts, literature, music, architecture, and humanity’s way of looking at life all changed during this period. Within a fairly short time, societies of peasants and craftsmen turned into societies of machine-tenders and bookkeepers.
These developments were the origins of the first Industrial Revolution. By the 1750s, the Industrial Revolution had begun. At first, inventions were strictly limited to cotton weaving (e.g., the power loom and the spinning jenny). These inventions helped the manufacture of cotton goods by speeding up the process. Mass-production had begun along with capitalism. Capitalists who had their own materials, money, and space, bought many machines and stored them in a factory where hired people worked the entire day manufacturing goods. The factory system had replaced the cottage industry, where workers would buy raw materials from a merchant, take it back to their cottages, and produce goods at their home. The factory system was usually owned and managed by one or more people who were relatively close to the workers. This cooperative worker-boss relationship was destroyed by capitalism.
Mass-production made expensive items, such as shoes, less expensive and easily affordable by lower-class and less-wealthy people. The quality of life improved. In the 1800s, inventions were not just limited to the cotton industry. Steam engines were invented, replacing the horse and carriage and providing a faster transportation system. With the steam engine, cities were able to exist farther away from rivers and sources of water. Other inventions like the telephone, the telegraph, and electric lighting followed.
During the period between the publication of Adam Smith’s pioneer work, Wealth of Nations, in 1776 and 1850, the origin of the second Industrial Revolution, several events of tremendous social, political, and economic significance, occurred. The American and French Revolutions were two important upheavals. The rise of industrialism and the factory system in England, continental Europe, and the United States followed these upheavals.
The factory system ushered in major transformations in the social and economic landscape. Many contemporary writers feel that the working class bore the chief cost of these changes in the form of economic dislocation and urban congestion. Critics of the period arose to question the benefits of industrialization and the validity of an analytical system that sought to explain the consequences and momentum of the new industrial society. Thus, the nineteenth century was an intellectual battleground of sorts for literary, methodological, and, to a lesser extent, analytical skirmishes in the social sciences.
The second Industrial Revolution involved not only inventions, but also social and government policies and reforms. Art and culture flourished. Electricity improved the quality of life by supplying people with light and power for machines. Communications also improved as a result of electricity. The telephone and telegraph became the first communication devices available for public use. With the development of technology, radio waves were discovered. Advances in science were also made. The discovery of radioactivity (by Marie Curie), the breakdown of chemical compounds (during the 1800s, over 70,000 chemical compounds were broken down), and the discovery of the nuclear bomb also occurred during this period. Petroleum began to be widely used as an alternate energy source. The internal combustion engine made transportation faster for the public. Orville and Wilbur Wright successfully completed the first airplane flight at Kitty Hawk, North Carolina, which led to the development of the aviation industry.
In seeking rapid economic development, most developing countries drew lessons from the experience of the advanced countries. The main conclusion was that industrialization was the key to economic success. Developing countries have traditionally been primary exporters. Industrialization allowed them to exploit their comparative advantage in labor-intensive goods. However, with a low world income elasticity of demand for primary products, with the development of synthetic substitutes, and with the protection of agriculture in developed countries, the demand for primary exports has grown slowly. At the same time, the demand for manufactured imports into developing countries has grown rapidly. Dissatisfaction with relying on primary exporting has led most countries to embark on a process of industrialization.
Economic development is usually viewed as the transformation of a low-income society using traditional technologies and producing mainly primary products into a high-income society using modern technologies to produce both primary products and a variety of industrial goods.
The desire to industrialize is common to the less-developed countries for various reasons. First, most of the current developed market economies themselves achieved this status through industrialization, so it may seem reasonable to assume that following this same route will lead to the same results. Second, because of the inelastic world demand for the primary products, they are considered as an unsatisfactory basis for development. Third, it is believed that economic diversification may lead to greater stability in national income and foreign currency earnings. Fourth, it is believed that industrialization may reduce the country’s dependence on the rest of the world. Finally, having an industrial sector is seen as a symbol of independence.
Two issues have dominated the general debate concerning industrialization strategies and experiences. The question of strategy has largely focused on the choice between the inward-looking strategy of import-substituting industrialization (ISI) and the outward-looking strategy of export-oriented industrialization (EOI). Some countries preferred ISI, which is a strategy of restricting imports of manufactured goods and using the foreign exchange saved to build up domestic substitute industries. It is considered the best way to become industrialized, especially for countries facing the shortage of foreign currency to finance their import spending. By contrast, some countries gave priority to EOI strategy, meaning to encourage not only free trade, but also the free movement of capital, workers, enterprises, the multinational enterprise. There is still ongoing debate between the trade optimists (free traders) and trade pessimists (protectionists), and between outward- and inward-looking strategies of development.
Although different countries applied different industrialization strategies, generally, all countries have viewed industrialization as the “engine of growth.”
Elfi Cepni
See also: Aviation; Communication; Industrial Revolution; Transportation and Trade.
Ekelund, Robert. B., and Robert B. Hebert. A History of Economic Theory and Method. New York: McGraw-Hill, 1990.
Sodernsten, Bo, and Reed Geoffrey. International Economics. New York: Macmillan, 1994.