Industrialization in Emerging Economies

Introduction

One of the important factors that helps drive emerging economies is industrialization. The economic prosperity that comes from industry can make life better for people in developing countries. However, with the rapid pace of industrial expansion in regions such as China and other areas of Asia, and the emphasis on economic development rather than environmental protection, serious environmental degradation can accompany industrial growth in developing countries.

In countries such as China, pollution of water and air are major problems. As China is now the leading producer of greenhouse gases, the polluted air in Beijing became a concern for the performance and safety of athletes competing in the Summer Olympics in 2008.

The legacy of the Industrial Revolution in Europe (late eighteenth and early nineteenth centuries) is that rapid industrial growth in the absence of environmental regulations creates conditions that can threaten the health of many people. But, while the Industrial Revolution in Europe spanned almost 200 years, similar industrialization has been achieved in areas such as China, Indonesia, and Taiwan in only a few decades, creating the potential for heightened environmental and health problems.

Historical Background and Scientific Foundations

Industrialization is accompanied by conditions that are environmentally detrimental. For example, the air- and water-borne emissions from factories can contain toxic chemicals. Although air and water standards that are intended to minimize these emissions are part of the environmental legislation of developed countries such as the United States, Canada, Britain, and other members of the European Economic Union, as examples, similar legislation may not have been enacted in developing countries.

Part of the reason for the lax environmental regulation is the rapid pace of industrialization that has occurred in some emerging economies. For example, according to the World Resources Institute, while North America’s industrial output increased at less than 3% annually between 1990 and 1995, industrial growth during this period was over 18% a year in China and 15% in East Asia. This speed of expansion and resulting economic prosperity can lessen the pressure to impose environmental protection legislation.

This pace of industrialization has and continues to generate a great deal of toxic waste. Degradation or disposal of the waste is a problem. Another factor related to industrial growth in emerging economies is the rapid urban growth that occurs. Industrialization occurs mainly in or near cities, which have infrastructure such as air, rail, and water transportation, and a supply of labor. This growth in turn draws more people to cities in search of work. This rapid urban growth has created problems with air and water pollution.

For example, a 2005 study utilizing high resolution satellite imaging as part of the European Space Agency’s Dragon Programme documented the influence of industrial development on air quality over developing regions of India and the city of Beijing. Satellite monitoring of China has revealed that Beijing’s growth into an industrial mega-city of over 10 million people and millions of cars and other vehicles has produced the planet’s highest levels of nitrogen dioxide. The gas, which is a respiratory irritant, is the main reason why the Chinese government contemplated banning vehicle traffic in the city during the 2008 Olympics. The excessive level of nitrogen dioxide in the air contributes to over 400,000 premature deaths each year from lung- and heart-related diseases, and is a major source of this atmosphere-warming greenhouse gas. Airborne pollutants over Beijing increased by 50% from 1995 to 2005. In addition to Beijing, China houses 16 of the world’s 20 most air-polluted cities.

China produces approximately 70% of the world’s farmed fish. Typically, fish farms are concentrated together around large ponds. Analysis of the pond waters has revealed the presence of pesticides and other agricultural run-off, antibiotics, and carcinogenic compounds. In late 2007, the United States and China signed an agreement to permit more monitoring of the farms and the safety of the exported products.

Industrialization in emerging economies often involves “heavy industries”—industries that transform raw material into products such as steel, paper, and chemicals. Such industries produce an array of noxious air and water-brine compounds. In contrast, with time, developed countries such as the United States have shifted more of their economic base to service sector functions including education, entertainment, defense, finance, communications, and information technology, which are less polluting.

Impacts and Issues

In places such as China, India, Taiwan, and in East Asia, the rapid pace of industrialization is expected to continue. Without the implementation of stringent air and

WORDS TO KNOW

CARCINOGEN: A cancer-causing agent, such as a chemical or virus.

GLOBALIZATION: The integration of national and local systems into a global economy through increased trade, manufacturing, communications, and migration.

GREENHOUSE GAS: A gas whose accumulation in the atmosphere increases heat retention.

RUNOFF: Water that falls as precipitation and then runs over the surface of the land rather than sinking into the ground.

water legislation, the release of air- and water-borne pollutants will increase markedly.

One-third of Chinese people do not have access to clean drinking water, due in part to pollution of an estimated 70% of the nation’s water supplies. In addition, the construction of tens of thousands of dams to generate hydroelectric power has resulted in loss of agricultural land and produced construction-related environmental damage.

However, the rapid construction taking place in these emerging economies offers the potential to install

the technologies needed to curb the pollution such as air scrubbers on chimneys and wastewater treatment facilities. As of 2007, for example, new buildings built in China must meet energy efficiency standards, and the country’s environmental agency has power projects and expansion projects in four cities on hold until environmental standards can be met.

Although encouraging, globalization of industrialization is hindering the will to make such changes. Decisions made regarding the operation of companies in developing countries may be made outside of the country, and can be guided more by a profit-driven mindset than by environmental concerns. Relatedly, a government’s decision to enact environmental legislation can be influenced by the tremendous economic boost that such global industries bring to their country.

Part of the industrialization of emerging economies involves the global shifting of environmentally destructive industries from developed to developing countries. An example is asbestos production, which has shifted from countries including the United States to Brazil, India, Pakistan, Indonesia, and South Korea. Similarly, the export of hazardous waste to developing countries for processing and disposal is occurring more frequently.

Primary Source Connection

The following news article recognizes the difficult transition China is making from a manufacturing-based economy to an innovation economy. Obstacles such as lack of capital to back small technology-based businesses, absence of patent enforcement, and government interference in research have made this change challenging. Although Chinese culture and government often disagrees with the philosophies of international contemporary society and business, China is inevitably evolving in science-based business.

CHINA READY TO LEAP FROM INDUSTRIAL TO INFORMATION-AGE ECONOMY

After 30 years of securing China’s role as the cut-rate factory to the world, its central planners are pouring money and political will into becoming an innovation economy.

But like other Asian tigers before it, China is finding making the shift from textile mills to Silicon Valley isn’t easy. The biggest challenge is nurturing technological creativity in a society run from the top down, says a chorus of foreign and local experts.

“The stakes are extremely high,” says Lan Xue, head of the Institute of Science and Technology Policy at Beijing’s Tsinghua University. “The environmental costs make it impossible to go on growing like this; we have to transform growth so it is based on technology and innovation.”

China, however, “has a long way to go to build a modern, high-performance national innovation system,” according to a new report by the Organization for Economic Cooperation and Development (OECD), a Paris-based think tank. “China is just about to change from an investment and low-cost driven economy to one driven more by innovation,” says Zhang Gang, one of the authors of the report, released here last week. “The nature of this transition is a great challenge.” The government has poured large amounts of money into meeting this challenge, doubling its expenditure on research and development as a percentage of GDP from 1995 to 2005—when it reached $30 billion—to become the sixth-largest spender in the world. Since 2000, China has ranked behind only the United States in the number of scientific researchers, and in 2005 they published more scientific papers than their colleagues anywhere except in the US, Britain, Germany, and Japan.

Last year the government unveiled a plan to make China an “innovation-oriented” society by 2020, and premier Wen Jiabao has harped on this subject repeatedly in recent speeches.

“They missed the IT [Information Technology] revolution and they missed out on [micro] chips” says Fred Simon, a technology expert at the State University of New York in Albany. “If there is a biotech or nanotech revolution coming, they won’t want to be left behind. They have to figure out how to plug in very, very quickly.”

“China has excelled in mobilizing resources for science and technology on an unprecedented scale and with exceptional speed, and is now a major R&D player,” the OECD report finds. But this “has not yet translated into a proportionate increase in innovative performance.”

One key problem, says Dr. Zhang, is that “the government has so far followed planned economy, top-down thinking” to promote innovation. “This has its limits,” he adds.

While Chinese officials are seeking to make individual enterprises the main drivers of technological innovation, they are running into difficulties, the OECD report says, because “the vast majority of domestic firms have not put innovation at the core of their business strategy” and are unaccustomed to innovating.

A lack of capital is also a major hindrance to the creation of the sort of small hi-tech startups that have been the fount of so much innovation in the United States, experts say. Chen Kejian, a 20-something software developer who founded a company in Beijing with a group of friends three years ago, can testify to that.

“There is no chance a Chinese bank would invest in our company,” which rewrites Microsoft and RealPlayer code to run on handheld mobile devices, says Mr. Chen. “In China, banks come to you when you are successful. But when you really need the money, they never lend it.”

Chen is also a witness to another dissuasive factor behind the lack of innovation in China—the ease with which rivals can pirate new technology without being prosecuted. “We have not applied for any patents because they are useless here,” he says. “Even if I sued a company violating my intellectual property rights and won, I could not be sure the judgment would be enforced.”

Though Chinese R&D is rich in government funds and researchers, scientists “are not well connected with [business] enterprises,” says Professor Lan. “China’s national innovation system has not been very efficient: The different pieces are not well connected.”

The government is seeking to remedy this by creating “grand alliances” between government-funded labs and key industries, and the authorities have offered tax incentives and other funds to encourage firms to innovate.

Many analysts, though, say that what the government does not do is as important as what it does, and that officials should not interfere with research, allowing scientists more freedom.

“The system must have a certain flexibility and adaptability,” says Zhang. Chinese scientists who have moved abroad, he points out, have thrived “in an environment that allows them to be creative and free thinking.”

“Chinese are not inherently uncreative,” adds Dr. Simon, who is technology adviser to the coastal city of Dalian. “It’s the institutional milieu” in both state-owned and private Chinese firms, “that does not promote innovative behavior,” he argues. “The system does not reward you for taking the risk to go outside the lines.”

Scientists returning from abroad could be the key to changing Chinese corporate and government attitudes to scientific research. “They understand what kind of creative juices are stirred by a free and open environment,” says Simon. “If they can bring that culture in, they will become vanguards for change.”

The government itself seems to have adopted this thinking. Earlier this year a former engineer with Audi in Germany, Wan Gang, was appointed minister of science and technology, the first in that position who did not belong to the ruling Communist Party.

Mr. Wan has much to change, not least the fear of failure that is built into the education and research system and which inhibits scientists from going out on a limb. He has started by promoting a new law, currently before the National People’s Congress, China’s parliament, that promises “scientists and technicians who have initiated research with a high risk of failure will still have their expenses covered if they can provide evidence that they tried their best when they failed to achieve their goals.”

Cultural changes go deeper than legislation, Lan acknowledges, and “this kind of thing always takes time, but China is changing.” Simon agrees. “There is tremendous room for opening up parameters of individual thinking that is not being utilized,” he says. “Fundamental cultural changes take a long time, but China is constantly being bombarded by pressures that make this a necessity.”

Peter Ford

FORD, PETER. “CHINA READY TO LEAP FROM INDUSTRIAL TO INFORMATION-AGE ECONOMY.” CHRISTIAN SCIENCE MONITOR (SEPTEMBER 5, 2007).

See Also Human Impacts

BIBLIOGRAPHY

Books

Ho, Mun S., and Chris P. Nielsen. Clearing the Air: The Health and Economic Damages of Air Pollution in China. Boston: The MIT Press, 2007.

Luken, Ralph, Frank van Rompaey, and Kandeh Yumkella. Environment and Industry in Developing Countries. Northampton, MA: Edward Elgar, 2007.

McGranahan, Gordon, and Frank Murray. Air Pollution and Health in Rapidly Developing Countries. London: Earthscan Publications, 2003.

Web Sites

New York Times. “In China, Farming Fish in Toxic Waters.” December 15, 2007. www.nytimes.com/2007/12/15/world/asia/15fish.html (accessed March 5, 2008).

Brian D. Hoyle