Chapter 15: Industrialization * Highly developed and rich countries - US, Japan, Great Britain, France, West Germany,

Canada * to industrialize a primitive agricultural economy, it requires: - huge funds - modern machines and technology - competent managers - skilled workers * Western Europe countries, US, Japan have undergone significant changes: - economic, social and political institutions were restructured - there's a rapid technological improvement - capital, labor, entrepreneurial scheme were mae to be more responsive to industrialization - improvement in transportation, communication and electrification - social facilities and services were increased - agricultural and commercial industries became viable The First Industrial Society * England - first to industrialize its economy among industrial countries - Medieval Period (Middle ages) - Feudal Economy (people were protected by lords and must serve in war) - Renaissance (rise of modern world, 17th centuries, revival of learning and culture) - Mercantilism and Industrial Revolution (commerce, transactions, sales, purchases, goods, services) (to increase nation's wealth) (these 2 vital economic institutions paved the way to the industrialization of England) * However, factory workers were exploited as well as inhabitants. Strengthening the Foundation of Industrialization * less developed countries - derived most of incomes from agriculture (highly dependent on export that's unstable and low) - can export raw materials (copra, sugar, bananas) - can't export due to tariffs and quotas (become poorer) * improving the social and economic conditions will create more jobs and more incomes. Agricultural Supports Industrial Development * Strong agricultura base leads to industrialization * WHY? - Agriculture supplies raw materials and labor to industries - agriculture buys the products of industries like fertilizers, chemicals, tools and machines

- if agriculture is prosperous, people can buy more goods and services produced by the industries * basic principle in production of economics is to use resources that are available Industrialization also helps Agriculture * Ideally, it is better to develop agriculure and industry at the same time. This balanced apprach produces more economic benefits * Effects of industrial growth: - increases demand for agricultural products - stimulates the production of cash crops (readily salable crops like vegetables, cotton, tobacco) - develops the processing of agricultural industries - integrates rural and urban economies - supplies a wide range of consumption goods to the agricultural workers - creates more efficient factor markets - provides more employment - leads to capital - intensive production in agriculture - reduces the price of agricultural lands - encourages the consolidation of small farm units in order to obtain economies of scale (like lowering unit cost of production and more efficient farm management) Reasons for Industrialization - to increase the national income of the country - to improve the stability of export earnings - to provide more employment (more factories = more employment) - to extend markets for local raw materials (manufacturing industries need raw materials) Big Mistakes in Industrialization * many unsound projects were put up without proper evaluation * big mistakes constituted a huge waste of scarce resources * rich countries - have industrial projects that are economicall sound, feasible and appropriate * poor countries - not advisable to adopt the Western industrial projects completely without taking into account their local needs and conditions * projects have been initiated by top politicians without training in industrial economics (like superhighways and buildings) * institutional lags - educational and political systems are not yet conducive to industrial development Criteria for Sound Industrial Projects * in less developed countries, the only cheap inputs are labor and raw materials (because funding an industrial project is more difficult for it's expensive) * criterias to meet to have a good industrial project: - economically sound, feasible ( not be waste of time, skill, scarce) - reduce widespread unemployment

- economic benefits seep down to the level of the masses - there's a ready market, either at home or abroad - it fits to the total economic development program of the country Industrialization is Difficult * The first industrial countries (European countries) had all the benefits in their favor because of English technology, machines and money that flowed into them. * Causes of progress in Europe: - attitudes - values - institutions - thrift - industry of the Protestants * Max Weber proved the direct relationship between the growth of capitalism and the Protestant religion. * Difficulties: - it is long and difficult process for less developed countries to industrialize their economies because it involves people development and institution-building. - nature of financial and technical assistance of the industrial countries of the less developed countries. - have a very slim chance to get a profitable slice in the international markets for their industrial products. (highly industrialized nations have good quality of products and have a vast network of marketing channels spread all over the world.) Great desire for Industrialization * they believe that it is the key to their economic growth and solution to the radication of poverty, hugner and diseases * Asian has been influenced by several factors: 1. Industrial Revolution paved the way for the industrialization of the Western countries 2. Rapid industrialization of the Soviet Union through central planning 3. decline in the demand for raw materials and agricultural products in the world markets 4. last population growth and increasing rate of unemployment have become serious problems 5. high standard of living being enjoyed by citizens of the countries with the industrial economies Obstacles to industrialization * barriers to industrialization: 1. corrupt 2. inefficient public administrations 3. negative attitudes towards manual labor 4. colonial economy 5. conservatism in business enterprises 6. unjust distribution of wealth and income 7. nepotism in both government and private sectors * on the contrary, there should be:

1. 2. 3. 4. 5. 6.

a new spirit of nationalism efficiency punctuality labor mobility discipline entrepreneurial propensity

Government Participation * before: there was little or no priority to manufacturing for export * 1935 - government established and operated various marketing and industrial enterprises. * 1950's - government owned and managed railroads, hotels, electric power, gas and water works. - where it directly produced coal, cement, steel, textiles, pulp and paper. - also, operated shipyard and engineering shops.