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African Development > Industrialization > Flashcards

Industrialization Flashcards

1
Q

Why industrialization?

A

Economic development involves structural change
that involves shifting labor from low productivity
activities to higher productivities.
• These shifts may be within the same sector but often
they are from non-industrial to industrial activities.

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2
Q

Drivers of industrialization

A
  1. ‘Catching Up’/ Initial Conditions
  2. Ideas
  3. State
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3
Q

What is the Role of Initial Conditions in Industrialization?

A

“catching up” - important part of political economy
- Late industrialisers - assumes that Britain is pioneer of industrialisation and the rest of the world is trying to catch up

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4
Q

What is Role of Ideas in Industrailization

A

Ideas - Nationalism closely linked to industrialization ‘ Right to industrialization’

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5
Q

What is Role of State in Industrialization

A

• The role of the state
• In many countries the state was the only
national institution or organized entity with an
industrial project
• “Market failures” prompted government
intervention

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6
Q

Who is interested in industrialization?

A
  • the first wave of industrialization was externally driven, only internal interest was nationalist ideal
  • That’s why it was so undisciplined, no solid national interest
  • there were no interests beyond state bureaucracies and nationalist view (no capitalist class to force state to industrialize)
  • protection of industry policies wasn’t from domestic capitalists, it was from foreign capital saying they won’t invest unless they get protection
  • problem: if policies in Africa are driven not by strong domestically organized interests, but by external interests, they are easy to reverse politically
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7
Q

International context of industry

A

• Industrialisation in the developing countries complemented
reconstructions in Europe (by importing manufactured
products and exporting raw materials
- created developmental states in south (idea of embedded liberalism), north south divide

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8
Q

What was post-colonial industrialisation like?

A
  • few countries managed to attract foreign investors in Africa
  • no response to ‘invitation to industrialisaiton’
  • in absence of foreign investment, ‘socialism by default’
  • failure to attract FDI, made role of state increase
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9
Q

Strategy of development after failure to attract FDI?

A

• Strategy adopted was standard ISI
• Import substitution was the only game in town when
Africans became independent
- colonial model reinforced because Europe refused products that weren’t colonially made
• No major economy had ever industrialised without
protection of infant industries

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10
Q

Annual growth rate of industrial production

A

1965-1980, 1980-1990
SSA 7.2/2.0
EA 10.8/10.2

big gap in industry

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11
Q

What were the problems of the strategy of African industrialisation?

A

2 kinds of critique

  1. Structuralist
  2. Neoliberal Critiques
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12
Q

Structuralist critique against industrialization

A
  • ISI had not been selective
  • companies proposing, and no clear strategy over what is being domestically produced -difference between Import replacement and import substitution
  • ISI was shallow, rarely went beyond the beverage and tobacco group, apparel, and leather
    • ISI strategy was capital intensive and not labor intensive
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13
Q

what is difference between import replacement and substitution

A

replacement - domestically producing what used to be imported
substituted - adding value, changing structure, reengineering products to fit better

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14
Q

Neoliberal arguments against ISI?

A
  • state interventions led to “market distortions”
    • Lack of competition produced industries that could not compete globally
    • Easy credit and protected markets led to excessive use of capital intensive technologies and overcapacity

• Highly subsided parastatals were a fiscal burden and contributed to
macroeconomic instability
• The import intensive industries did not contribute to forex earnings

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15
Q

What do neoliberals argue is the interests of African states to industrialize?

A
  • rent seeking behind interventionist policy (critique of structuralism),
  • shifted to neopatrimonialism, unlike Asia where state was strong and could pursue industrial policy well, Africans had captured state
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16
Q

What did SAPs have to say about industrial policy?

A
  • Structural Adjustment was against industrial policy

- taboo in policy discourses to talk about ‘strategy’ of industrial policies

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17
Q

what is ‘enfant terribles ‘argument

A
  • import substition will just lead to another capture
  • Africa has tried and it was captured by elite, and unlike Asia which did learning by doing process, Africans were stuck in infant industry argument, produced terrible infants that never grew up ‘enfants terribles’
18
Q

First phases of import substitution

A
  1. 30s during the depression, when the collapse of global trade meant that countries were forced to have ISI but only a few,
    - most countries colonial government didn’t allow ISI
    - after war, domestic industry seen as threat and stopped
19
Q

Second phase isi

A
  • ALso in 30s, end
  • Africa not apart of this
  • still under colonial rule
20
Q

third phase of ISI

A

1950s, still colonial countries

-these weren;t old infants that never grew up, they were hindered

21
Q

Asian Lesson of ISI

A
  • Asian industries take around 20 years to mature, very few countries that could claim to be running an ISI for more than 10 years, so infants approach isn’t fair
  • import substitution didn’t fail, it was never tried, it takes a longer time than given
22
Q

What is de-industrialization

A
  • WB argued that only policies that didn’t do SAPs deindustrialized
  • second argument is that many industries were too big anyway because it got rid of inefficient industry
23
Q

Is deindustrialization a problem?

A
  • third argument - industry is no longer needed for development, you can develop through services as in India
  • but services is someone selling chewing gum in streets, not grand scale, can be informal
  • what’s growing isn’t industrializing services it is informal sector with low productivity
24
Q

Has there been industrial recovery?

A

Yes, it is slow recovery
- as a country grows usually manufacturing sector gets building
- even as income goes up in recovery however, manufacturing goes down
– Population moving from low productivity
agriculture to low productivity services

25
Q

Relationship between industrialization and mineral-led industrialization?

A
  • some argue minerals are a curse, but there are many countries scandinavian that industrialized with minerals
  • but not coherent story of how it can be done
26
Q

Regional integration and industrialization

A
  • for first time African development bank is investing in regional infrastructure, and connecting African countries
  • one good thing of IMF is they made barriers to trade less, so regional integration can be better facilitated
  • Strengthen bargaining positions of members states
  • if you are going global for exports, try african markets first to test waters
  • the fastest growing market for african countries is african market
  • the african market involves more sophisticated products than global market, trade among africans is usually processed stuff (canned food, textiles)
27
Q

urbanization and industrialization

A
  • debate about should you urbanize and get labour and then industrialize, or industrialize and then bring in labour?
28
Q

What does Altenburg Argue?

A

Can industrial Policy work under neopatrimonial rule?
Industrial policy is - Definition of industrial policy - any government measure, or set of measures, to shape structural change in ways that the government views as desirable
- Do the risks of misallocation outweigh the benefits and should these countries abstain from industrial policies?
- Tunisia and Ethiopia - neopatrimonial success stories

29
Q

How does Altenburg argue for industrial policies?

A
  • When export diversification started to boom in Asia in the 80s, no mainland African country provided a comparable investment climate
  • Now a number of African cities offer reasonable investment climates, but they cannot compete with Asian cities that have comparable investment climates since the Asian cities have established clusters of firms in the new export sectors
  • Latecomers thus face a number of competitive disadvantages which can hardly be overcome without pro-active government action
30
Q

What do govt. need to do to shape structural change?

A

ALtenburg

-

31
Q

What is neopatrimonialism?

A

Altenburg
elements:
1) Presidentialism with strong concentration of power - inner circles of power exercise power in a privatized and discretionary way
2) Political clientelism and patronage - clientelism is award of personal favours, such as public employment, personal promotion or preferential treatment in the bureaucracy, in exchange for votes or other forms of loyalty

32
Q

Relationship between neopatrimonialism and industry?

A

Altenburg
- Most countries with industrial plans:
○ Neopatrimonialism is indeed pervasive in industrial policy making
○ Checks and balances are weak
○ Have visions and plans for industrial development, but little success
○ Poor implementing capability
Question: Why did Tunisia and Ethiopia, despite weak governance and typical characteristics of neopatrimonialism- manage to foster productive transformation better than the other countries?

33
Q

Case of Ethiopia and Tunisia industry?

A

○ Ethiopia - policy is authoritarian, politically controlled, and state-led attempt to create a competitive economy

  • Largely agrarian, less developed country
  • 85% of workforce in rural economy
  • Government embarked in top-down transformation projects
  • Industrialized with focus on export-led growth
  • Big public investments were made in infrastructure and education, including the foundation of new universities and training institutions
  • Technological upgrading and skilled workforce
  • Encouraged private investment and kept control of economy and established clear limits to liberalization

○ Tunisia

  • Sustainable economic growth of 5% annually
  • Success was achieved on the basis of an authoritarian system
34
Q

What are three things that determines if neopat states can be industrial?

A
  1. The endowment with easily extractable natural resources seems to be one important determinant
  2. The ruler’s time horizon seems to be another differentiating factor
    □ Purely self-interested rulers have incentive to immediately extract as many rents as possible if they assume their tenure to be short
  3. Intrinsic development orientation of the national leadership
    - Individuals act out of very different motives. Political leaders are also guided by values and convictions that include elements of altruism, nationalist convictions and are influenced by the predominant development ideas of their times
35
Q

UNIDO 2011 Economic Development in Africa Report main findings

A
  • Very strong linkage and spill-over effects associated with manufacturing activites
  • Manufactoring = critical source of demand for other sectors (banking, transport, insurance, communication etc.)
    ○ Industrial clusters play an important role in African manufacturing
  • Industrial clusters have contributed to the boosting the competitiveness of small and medium-sized firms in Africa
  • They make market access easer, facilitate tech. spillover, and reduce geographical and information costs for firms
36
Q

Case of industrialization in Mozambique

A

Due to SAPs and liberalization
○ Mozambique has gradually disengaged from industrial development affairs and has renounced to articulate policy initiatives aimed at shaping patterns of economic and manufacturing development
○ This has led to the emergence of a policy and institutional framework for manufacturing development that cannot address the underlying structural problems afflicting the Mozambican manufacturing sector at lease since Mozambique gained independence from Portugal in 1975
- High interest rates, increased competition and the informalisation of the economy
- Laissez fair approach to private sector development has had little success

37
Q

How has liberal policy shift has undermined manufacturing development in Mozam?

A
  • states ability to articulate strategic intervention in policy areas neutralized
  • It has led to a weakening policy and institutional framework for industrial development, further undermining any meaningful attempt by the state to shape patterns of economic and manufacturing development and address the many constraints that the Mozambican manufacturing sector currently faces
38
Q

Why is manufacturing so linked to growth?

A

○ Creating technological barriers to entry
○ Productivity increases in sectors of commodity production
○ Spillover - opportunities for linkages between sectors
The whole point of industrial policy is about structural transformation

39
Q

How does industrialization contribute to structural transformaiton?

A
  • Structurally changing the economy
  • Higher productivity and shifting people from low productivity activities into higher productivity
  • Commonly associated with a shift from agriculture to manufacturing
  • Protecting yourself from swings in trade, entry barriers and external shocks
40
Q

What are different kinds of manufactured products in Africa?

A
  1. Resource based (resource curse, vulnerable to pressure, and shocks) (Low value added/productivity)
    - wood, tobacco
  2. Natural protection
    - canned goods, beverages
  3. Labour intensive
    - textiles, handicrafts
  4. High Skilled (entry barriers, linkages/spillover)
    - tech, chemicals

African Development (7 decks)

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