Industrialization

I Economic AspectsJ. R. T. Hughes

BIBLIOGRAPHY

II. Social AspectsWilbert E. Moore

BIBLIOGRAPHY

I ECONOMIC ASPECTS

Industrialization is the system of production that has arisen from the steady development, study, and use of scientific knowledge. It is based on the division of labor and on specialization and uses mechanical, chemical, and power-driven, as well as organizational and intellectual, aids in production. The primary objective of this method of organizing economic life, which had its genesis in the mideighteenth century, has been to reduce the real cost, per unit, of producing goods and services. The resulting increases in output per manhour have been so large as to stagger the imagination. The average American worker today produces as much in half an hour as his British counterpart did in a whole working day a century ago, and that American worker has ten times as much industrial capital behind him as he would have had a century ago (Slichter 1961).

This revolutionary rise in available output and supply of economic resources has been associated primarily with the development of industrial economies in, for the most part, a limited number of countries (League of Nations …1945; Kuznets 1959; Maizels 1963). By far the larger part of the dramatic rise in man-hour productivity is fairly recent—most of it occuring since the turn of the twentieth century—and apparently is still continuing powerfully in those economically advanced countries where the application of modern science to output continues to develop. Even so, the origins of modern industrialism can be found in the distant past. Industrialization is the outcome of a long and complex historical development, and it obviously has not yet run its full course as a long-range historical phenomenon. Judging from the record of the past, modern industry may be only a crude beginning of what is to come. It is not just the volume of output that measures the general economic impact of industrial development. The phrase “industrial society” has come to encompass a whole way of economic organization in which the social structure, from industrial management to the fine arts, utilizes the economies of standardization and specialization in basic human activities to produce, paradoxically, an ever more varied set of final products. Change in the structure of final output is ceaseless.

The history of economic change in the two hundred-odd years since the classical industrial revolution in England is varied and would have been difficult to predict. The ever-changing tides of technology, and the society that produces technical change, are manifestations of continuing growth of complexity in human specialization in all matters relating to economic life. Hence, by the 1960s two-thirds of the labor force in the United States worked in areas not concerned directly with the production of food and manufactured goods, compared with only 16 per cent of the labor force thus employed in 1820. European and Japanese industrial growth shows the same result in the occupational distribution of the labor force over time. Occupational diversity in nonmanufacturing life seems to be a product of industrialization wherever human society is free to respond to its own potentials as efficiency in economic life permits labor to go beyond direct production. What begins as mastery of basic mechanical technique ends by creating both the demands and the resources for a revolution in mass education and in science—a change in the “quality” of the labor force. Historical support for these general observations may be seen in the development and general characteristics of industrial society.

History

The phrase “industrial revolution” has long been used to identify the period roughly from 1750 to 1825, during which the accelerated application of mechanical principles, including steam power, to manufacturing in Great Britain produced an identifiable change in economic structure and growth. Workers were grouped together in factories using concentrations of capital equipment greater in cost and more efficient in operation than the capital equipment known in Britain earlier. These factories utilized a few mechanical innovations, primarily in textiles and iron manufacturing, which, with the application of the steam engine, made factory-sized scale the most economic size for the production unit. The proximity of others engaged in such manufacturing activities became a further cost-reducing factor of great importance, resulting in “external economies” that encouraged the grouping together of manufacturing enterprises and, hence, the growth of new urban aggregations. [SeeExternal Economies and Diseconomies.] The result was that Britain rapidly became the first urbanized industrial state.

There is now little agreement among scholars about the origins of the industrial revolution in Britain. Recent work even questions the uniqueness of the classical period of the industrial revolution in the long-term evolution of the industrial structure of the British economy (Deane & Cole 1962). The older view that the agricultural improvements of the late seventeenth century and early eighteenth century, together with the rise of foreign trade, made a manufacturing sector with a rapidly increasing population possible in Britain has also been questioned. These ultimate problems of economic historiography concerning the industrial revolution in Britain cannot be resolved here.

The pattern of industrialization in other countries after 1800 has been broadly similar in many respects to that experienced by Britain, although, of course, the permutations were never the same in any two countries (Maizels 1963). “Textiles first” (along with food processing) has been almost the rule in industrialization, followed by transportation development, heavy industry, and more sophisticated enterprises, such as metalworking, chemicals, and electronics. In most cases, substantial advances in agricultural output, or increased foreign trade, or both, have been concomitants of industrial development. These have been essential since, as in eighteenth-century Britain, industrialization has been accompanied by two ubiquitous demographic phenomena: a rapid increase in the size of the total population and its aggregation in urban areas.

There has been some confusion concerning the lessons of this history. Since World War II, certain economists interested in promoting the development of industrially backward nations have urged the adoption of “balanced growth” planning. According to this proposal, the developing economy should supply its own market outlets and production inputs, with all sectors growing “simultaneously” (Lewis 1955, p. 283). The history of successful industrial growth shows no evidence of such growth in the past (Hughes 1958). Instead, industrialization has been the product of certain industries or groups of industries—"leading sectors” and “dominant industries” (Rostow 1952; Hoffmann 1931) —pushing ahead of others as technological breakthroughs occurred and new markets opened. Retardation in the rate of growth and even absolute decline of particular industries have also characterized industrial development, the lag in over-all growth being compensated for by new industrial ventures that come into existence and push toward their maximum growth rates, thus carrying the economy with them (Kuznets [1953] 1954, pp. 253-277; Burns 1934). No given set of industries making up a given industrial structure in any country has been responsible for industrial development, because change has been continuous.

Preconditions

Since industry cannot grow without markets and sources of capital, similarities in the economic “preconditions” for industrial development have been identified. These bases for the development of an industrial sector include an available labor force, markets for finished production, access to raw materials (whether at home or through foreign trade), a source of investment funds (whether from the wealth and savings of the private sector, from the accumulations of the public sector, or from abroad), and, finally, access to technology. The last has in every case necessitated the extensive development of mass education, because access to technology on a large scale means, ultimately, access to science. In the long run, successful industrialization has been achieved in those nations which not only realized the preconditions but also were able to adapt to changes in technology which required extensive organizational flexibility on all levels. Examples of such necessary flexibility are antitrust laws, internal population migrations, and changes in representational balance due to shifts in the franchise.

Although some countries, notably the United Kingdom and the United States, experienced their industrial development under conditions of political and economic freedom that were based upon rational and calculable law, the experiences of Germany, Russia, and Japan in the nineteenth and twentieth centuries indicate that the basic economic preconditions for industrialization are to some extent independent of political framework. The same can be said of commercial policy—successful industrial development has occurred under regimes ranging all the way from free trade to state barter. It is true that the industrial nations with highest income per capita are those which have Western-style political democracy and basically free markets for labor, food, and commodities. But it is also clear that rising per capita income, the sine qua non of economic development, comes primarily from industry, however organized. There are few “poor” nations with extensive industry. There are poor democracies as well as poor dictatorships of all varieties. The question of the political preconditions for industrialization has no clear answer except for the evidence of the past, and even this furnishes no clear “lesson of history,” since, in terms of rates of growth, the communist dictatorships have ranked near the top in recent times.

The spread

The time path of world industrial development is marked by the slow spread of the “industry state” from Britain to the United States, to northwest and central Europe, Russia, and Japan, and then to other parts of the world. There are now industrial complexes in nearly all parts of the world except the polar regions. Counting mining and oil production, industry has spread to deserts and jungle alike, yet until the 1950s there was no significant industrial power, except Japan, which was not a European country or an overseas offshoot of Europe.

In modern times the international permeation of technology stemming initially from the advances of the British industrialization has been a slow and stubborn process, with all countries being borrowers as well as originators of invention. The United States developed a large-scale industry and an extensive internal transportation sector before 1860. Then, in the period extending roughly from 1870 to 1910, the United States experienced an accelerated development of heavy industry and surpassed- all other nations to become, and remain, the leading industrial power. Conditions were favorable for industrialization in Belgium, parts of Germany, parts of France, and to some extent in Scandinavia and Russia by the end of the Napoleonic Wars. For several reasons (about which there has been abundant academic dispute), including lack of resources, an unnecessarily restrictive commercial policy, and inappropriate social organization, industrialization in France was constrained in the nineteenth century. But Frenchmen and French capital participated widely in the industrialization and economic development of other parts of the world (Cameron 1961; Landes 1958). Belgium had an iron industry early in the nineteenth century as a result of available raw materials and English émigrés (Henderson 1954). Although parts of Germany, including the Rhineland, Saxony, and Silesia, had long histories of industry, especially textiles, great industrial development came only after unification in 1871 (Sombart 1903).

Under the tsars, Russia was unable, despite abundant raw materials, to achieve the other preconditions for industrial development on a scale anywhere near its obvious potential, and by 1914 it trailed Britain, Germany, and France as an industrial power but was fourth in the world behind the United States, Britain, and Germany as a textile manufacturer. After the emancipation of the serfs in 1861, great efforts were made by the Russian government to achieve industrial growth, and after the 1880s considerable development occurred, especially in railroad construction. Under the Soviet government after 1917, and especially since the adoption of the first Five-Year Plan in 1928, the Soviet Union has become the leading European industrial power—although still a poor country on the basis of per capita income—and is second only to the United States in many areas of industrial development.

Japan is a remarkable phenomenon in the history of world industrialization. Through the great efforts of the government (Rosovsky 1961) and a cohesive ruling class, Japan went from being a backward, Oriental feudal state to becoming a substantial industrial power in the years between 1859 and 1910, overcoming a lack of raw materials and despite social customs which needed drastic adaptation to meet the needs of industrial growth. In spite of vastly wasteful military efforts in the twentieth century and a catastrophic military defeat, by the 1960s the Japanese had achieved a near-European level of output per head of population and a structure of industry developing along Western patterns, that is, textiles and other light manufacturers being displaced by the growth of engineering and chemical industries (Maizels 1963). Japan is the only non-European country, or country not of European origin, to achieve such a measure of economic growth based upon industrialization up to the midtwentieth century. Other Asian countries, especially India and China, have mounted major long-term industrialization campaigns.

The experience of substantial economicgrowth—rising output per capita—based upon industrial development is still not widespread even in the 1960s, in spite of great efforts to achieve industrial growth among the more economically backward countries. By the mid-twentieth century perhaps two-thirds of mankind had not achieved these fruits of industrialization (Maizels 1963). The industrial economies, on the other hand, being the chief places where productivity has risen, have become the nodal points of economic progress. The rest of mankind has participated in economic progress almost solely through contact with that portion of humanity which has developed industry.

Over the course of industrial development since the industrial revolution, the interaction between the industrially developing economies has been widespread and intense, including not only great advances in trade in commodities but in people and capital as well. Thus, the Atlantic migration of the nineteenth and early twentieth centuries was by far the largest human migration in history. It transferred needed labor power from the surplus area (Europe) to the deficit areas (the United States, Canada, Latin America) and, to a lesser extent, to other areas of overseas European settlement like Australia, New Zealand, and South Africa. Accompanying this migration were capital flows of great magnitude which financed industrial growth throughout the world in advance of the possibilities of local wealth and savings in the receiving countries. In the past, industrialization has in a very real sense been an “international” affair, and it still is. However, in recent years privately financed capital flows have been exceeded by government transfers from the United States, western Europe, the Soviet Union, and even Communist China.

Comparative development

As might be expected, the industrial nations are generally far richer in output per capita than the nonindustrial nations. In fact, at the extremities of the international scale of income distribution the differences are incredible. In 1961 the mean income per capita in the United States was $2,790. In India the figure was $70, less than 3 per cent of the American figure.

Cross-sectional

The extremes indicated for the year 1961 in the cases of the United States and India (China, with a quarter of the world’s population, is apparently slightly better off than India—the UN estimate for 1961 was $85 per capita) largely reflect the general results Kuznets (1959) found in his study of world income distribution for 1956. Scaling incomes of some 58 nations into seven classes by income relatives (Class vII = 100; vI = 200; v = 270; Iv = 400; in = 650; II = 1,000; I= 1,700), Kuznets showed that, with the exception of the richest nations and those in Class iv, the higher the per capita income, the higher the proportion of the total generated by manufacturing industry (and, with no exceptions, the higher the proportion derived from agriculture, the lower the income per capita). These results are shown graphically in Figure 1, to which further reference will be made. All exceptions to the above rule can be covered by rephrasing the statement: In neither of the two richest (aggregated) categories of countries is the proportion of income derived from manufacturing less than 34 per cent of the total, nor is the proportion from agriculture more than 24 per cent. In neither of the two poorest categories is the proportion derived from manufacturing as high as 18 per cent, nor is the proportion derived from agriculture less than 42 per cent. We leave aside for the moment the question of the quality of agriculture and manufacturing in the rich as opposed to the poor countries. In the cases of individual nations there are of course several exceptions, but these scarcely negate the importance of the general results. Yugoslavia, for example, with some 42 per cent of its income in 1961 derived from manufacturing and mining, against 27 per cent derived from agriculture, forestry, and fishing, is one of the poorest (per capita) nations in Europe—although by no means poor compared with most Asian nations or those of Latin America and Africa. Similarly, Japan, with 30 per cent of its income derived from manufacturing in 1960, compared with 15 per cent from agriculture, forestry, and fishing, has a lower income per capita than all but the poorest European nations yet is the richest nation, by this measure, in Asia. In the case of New Zealand, which had the sixth highest level of income per capita in the world in 1961, income derived from agriculture and industry was nearly balanced (it was 22 per cent each in 1954), but it was a scientific agriculture, and New Zealand, with its preferences for food imports from the United Kingdom, is a very special case indeed. In the United States, manufacturing, strictly defined, accounted for only 28 per cent of national income by

1961—some 65 per cent being attributable to commerce, services, and the professions.

Bearing such special cases in mind, the main conclusion holds despite the great differences internationally in agricultural and industrial technique: The proportion of national income derived from manufacturing is a rough indicator of the amount of income generated per head—greater utilization of industry exists in the richer than in the poorer nations. The rule is made more general if the proportion of income derived from industry is related to that proportion derived from agriculture. The anomaly of the richest countries and of those in Class iv disappears, and it is simply the case that the higher this ratio, the higher the income per capita. Thus, dividing the percentage of income derived from manufacturing by the percentage derived from agriculture yields the following: I = 2.89; II = 2.41; III=1.52; IV = 0.81; V = 0.69; vi = 0.42; vii= 0.25.

Historical

The general outcome shown in the cross section of the present-day world economy reflects the level of productive technique employed. Interestingly enough, the world cross section roughly approximates the history of industrialization in this regard. At first, as industrialization progressed, the proportional contribution of manufacturing increased rapidly while that of agriculture fell. But then the proportional contribution of manufacturing grew less rapidly, agriculture continued to decline, and the proportion arising from commerce, services, the professions, etc., rose. British income estimates (Deane & Cole 1962), for example, show that about 45 per cent of income was generated from agriculture in 1770, while 32 per cent was derived from agriculture, forestry, and fishing in 1801; the rate then fell to about 18 per cent by 1861, just over 6 per cent in 1901, and only about 4 per cent in 1961. At first the proportion of income derived from industrial pursuits (unhappily, mining and building are included with the estimate for manufacturing) rose strongly, from 23 per cent of the total in 1801 to 36 per cent fifty years later. In the next fifty years the proportion grew only slowly, from 40 per cent in 1901 to 45 per cent by 1961. The figures for the United States (U.S. Bureau of the Census 1960; Statistical Abstract) show the same pattern, with agriculture declining as a proportion of national income from about 20 per cent in the period 1869-1879 to just over 9 per cent in 1939-1948 and down to 4 per cent by 1961. Income generated in the manufacturing sector rose from about 14 per cent of the total in 1869-1879 to 27 per cent in 1939-1948 and was still about 28 per cent of the total in 1961. (The United States manufacturing sector figure for 1961 comparable with the British figure of 45 per cent, which includes mining and building, was 36 per cent.)

Relative maturity

It is virtually a truism in economic development that, where an agricultural society has previously existed, a massive transfer of labor to industry must be made possible if industry is to grow. In both Britain and the United States industrial development was accompanied by this transfer of labor until the industrial sector reached a certain degree of maturity (a marked slowing down in the rate of increase of industry’s proportion of GNP); then the transfer no longer appeared as a shift to industrial employment but, rather, to trade, services, professions, and the like. The last movement seems to be a characteristic of industrial maturity as we know it thus far in the development of industrial economies (Maizels 1963). It is a logical progression, since the more sophisticated uses of the human brain in science, scholarship, finance, etc., can be widely achieved only after basic needs in food and goods are achieved. In Britain in 1801, 35.9 per cent of the labor force was in agriculture and 29.7 per cent was in manufacturing and mining, leaving 34.4 per cent in all other occupations. The industrial sector had more or less stabilized at 46.3 per cent of the labor force as early as 1901, but with agriculture still declining proportionately and employing only 8.7 per cent of the labor force, some 45 per cent of the labor force was “released” from direct production of goods and food. In 1951, with industry employing 49.1 per cent of the labor force and agriculture a mere 5 per cent, 45.9 per cent of the labor force was thus released for services, professions, etc.

This particular structural transformation was much more pronounced in the history of industrialization in the United States. There, both agriculture and manufacturing experienced higher man-hour productivity than in Britain, and, with easier access to general education (elementary and secondary), a more pronounced movement away from the direct output of goods and food was experienced than in Britain. Also, the movement was more dramatic than in Britain because the industrial revolution found the United States more agricultural in terms of labor distribution than was Britain, where a considerable movement into skilled trades, hand manufacturing, and so forth had taken place before the inventions of the classical industrial revolution appeared. In 1820, when 71.8 per cent of American “gainful workers” were employed in agriculture and 12.2 per cent in “manufacturing and trades,” a mere 16 per cent did not produce either food or goods. Agriculture then declined in importance as an employer while the industrial sector expanded. By 1900, 36.8 per cent of gainful workers were in agriculture, 21.8 per cent were in industry, and 41.4 per cent had been freed from direct production for trades and services. By 1940, with 16.9 per cent in agriculture and 22.4 per cent in industry, 60.7 per cent of the gainfully employed did not directly produce goods and food. In 1963, with 5.8 per cent of the “civilian labor force” in agriculture and 28.4 per cent in manufacturing, 65.8 per cent of the labor force had been released for commerce, services, professions, etc.

Obviously, the productivity growth of agriculture and industry in the United States has been very great, and one cannot foresee the limits of the release of labor from direct production of food and goods. The process of developing “sophisticated,” or tertiary, uses of labor resources seems to be characteristic of industrial development. The classical Marxist industrial “proletariat” does not grow apace with industrial development but, rather, its growth in proportion to total employment slows down.

Two paradoxical results of the Kuznets data are illuminated by the foregoing history of structural change in income and labor distribution. As can be seen in Figure 1, those countries with highest income, Class i, derive a slightly smaller proportion of their income from manufacturing than do those in Class II, the next most productive class. This is apparently due to the rising importance of services and professions of all sorts as industrialization so raises productivity as to release men and resources from direct production of food and goods. “Services” in Class i countries occupy 45.3 per cent of the labor force, compared with 41.7 per cent in Class II. Services in Class i countries generate 48.7 per cent of income, compared with 41.2 per cent in Class II countries. The structural impact of industrial development sheds light on another paradox in the Kuz-nets findings depicted in Figure 1. Class i countries, the most productive per head of population and generally the most “advanced” countries industrially, derive a smaller proportion of their incomes from the sum of agriculture and manufacturing than do the poorest and generally least industrialized nations. The sums of percentages of income derived from agriculture and from manufacturing, in descending order of income per head, are as follows: I = 51.3; II = 58.7; III = 48.4; iv = 54.4; v = 59.7; vi = 60.3; vn = 68.3. In the poorest nations, Classes vi and vn, where agriculture forms the greatest part of income-producing activity, one finds the highest proportions of the populations directly engaged in producing goods and services. In the middle ranges, in and iv, there are no apparent uniformities in this regard. The extent of the “liberation” of labor from direct production of goods and services in the richest countries bears witness to the efficiency of their economic activities and underscores the point made by Jacob Viner that “the real problem in poor countries is not agriculture as such, but poverty and backwardness, poor agriculture and poor manufacturing” ([1952] 1953, p. 52).

Role of education. In the most productive nations the possibilities of continuously improving the “quality” of the labor force by education, and thus of creating ever more productive societies, are very great (Maizels 1963) and are apparently proceeding apace. Historical statistics on educational achievement in the United States (U.S. Bureau of the Census 1960) show a tremendous change in the attainment of formal education by the labor force in the twentieth century. As late as 1900 only 6.4 per cent of American youths aged 17 had graduated from high school. By 1956 this number had reached the extraordinary level of 62.3 per cent. In 1900 only 4 per cent of American youths between the ages of 18 and 21 were enrolled in institutions of higher learning; by 1956 the figure was 29.9 per cent, and by 1964 the figure was apparently in the neighborhood of 33 per cent. If American society is prototypical of the world industrial society of the future, one result of industrialization is a vast improvement in the quality of the labor force (so far as that can be effected by formal education) and, hence, of productive potential. [SeeCapital, Human.]

Other characteristics

Urbanization

Another economic consequence of industrial development is urbanization. Cities have existed since antiquity as trade, financial, and administrative centers. But until the industrial revolution urban size was characterized by substantial stability—enough, for example, to make the medieval city wall a practical undertaking. With the industrial revolution the relatively stable relationship between town and country vanished, and the industrial conurbation began to spread. Because of the internal economies of the division of work based upon the prime mover and managerial centralization, the system of factories developed rapidly after the introduction of steam engines as prime movers in the 1780s. Factories based upon water power had existed earlier; but they were necessarily placed near fast-moving water, as was the case with John Lombe’s spinning factory, which was operating as early as 1718. Factories brought people together, and the external economies of proximity brought factories together; it paid to be near a labor force, skilled mechanics, sources of parts for machinery, and so forth. Where transportation could bring raw materials together with markets for the eventual products, new cities and factory districts grew up, changing the demographic maps of each area to which industrial growth came.

In Britain new centers—the Midlands around Birmingham and Wolverhampton, the textile districts from York and Leeds southwestward to Liverpool on the Irish Sea, and Newcastle and Stockton in the northeast—displaced older centers of population like Oxford, Norwich, the old market towns of the south, and the home counties, except, of course, London itself. For this change in the distribution of English population to have occurred in so short a time was itself “revolutionary.” It created social problems and upheaval on a scale unknown in Britain since Tudor times and resulted in fundamental changes in the English constitution.

In American development, there was roughly the same experience. Cincinnati, Pittsburgh, Columbus, Indianapolis; such Great Lake ports as Chicago, Cleveland, and Toledo; and so forth were cities of the American industrial revolution, not products of the earlier trade and finance which underpinned the population centers on the East and the Gulf coasts.

From the north of France across the Rhine estuary, central Europe, Russia, then in Japan (and now China), industrial conurbations grew rapidly in the nineteenth and twentieth centuries as manufacturing techniques spread. In most respects, industrial society became urban society.

A few figures from American data underscore the point. In 1840 nonfarm population in the United States was 10.5 per cent of the total; in 1960 it was 92.6 per cent of the total, of which 69.4 per cent lived in urban areas. In the United States, population classed as “rural” has fallen some since the 1940s, while that classed as “farm” has fallen sharply, from 30.5 million in 1940 to 14.3 million by 1962. The number of farms has also declined sharply. In Britain, on the other hand, the agricultural population declined, but the decline represented more a reduction in the number of hired laborers than any reduction in the number of farmers. In both countries, though, a decline of farm population reflected the growth of cities as the population grew. The experience of other nations in industry has been similar—urban population Rowing while rural population shrinks; in recent times the Soviet Union has provided an additional dramatic example.

Population growth

Until recently it was generally accepted that the great expansion of total population which accompanied the growth of industry and urbanization was a product of industrialization. The effective agent was thought to have been reduction of the death rate, especially infant mortality. The advances in real income, including more varied diets, better sanitation, heating, and housing generally, had contributed to the elimination of plague, to the building of resistance to communicable diseases of all sorts, and, generally, to a more healthful population (a view condemned by those whose argument it is that, until 1848 at least, industrialization impoverished and debilitated the population in spite of the explosive increase in numbers). This plausible view seemed to account satisfactorily enough for the prodigious increases in total population that came to the British Isles in the early nineteenth century, spread across Europe eastward and southward with the proliferation of the techniques and income effects of industrial development, and supplied millions of immigrants to the New World and other areas of overseas European settlement by 1914 while, at the same time, raising European population from 192 million to more than 450 million.

However, this view of population growth, which emphasizes a causal link with industrialization, has recently been questioned to some extent by those scholars who, by studying British records, have discerned an increase in birth rates in the United Kingdom before the industrial revolution took hold (before, say, 1780). The revisionist view (Deane & Cole 1962) holds essentially that the process of industrialization, by contributing to a fall in death rates, helped to accelerate a population growth already in process as a result of rising birth rates. Even more recently the revisionist view itself has been questioned (Tucker 1963). It is noted that alternate estimates of population in the sixteenth century could eliminate much of the forcefulness of the evidence of a dramatic rise in population growth in Britain before the industrial revolution. At present these problems are not resolved. All parties agree, of course, that industrialization and urbanization were associated with a gigantic population increase. The line of causation is, however, not clear.

International trade

Probably no part of the history of industrialization has been subject to more controversy than that relating to international trade. Thanks to customs controls, a vast amount of national information exists, but because of problems of valuation the information has been, and still is, remarkably inconsistent. There is no doubt that industrialization has been a powerful stimulus to the growth of international trade. What has been a subject of considerable controversy is the extent to which the argument is reversible: To what extent has international trade been a stimulus to industrialization?

Since rising productivity creates markets, and rising productivity has been the hallmark of world industrialization, the connection between the great increase in world trade which followed the industrial revolution (and the Napoleonic Wars) and the rise of industry has never been doubted. The industrial nations not only became great importers of raw materials, thus drawing the nonindustrial nations into the vortex of the international economy, but they also became, by virtue of their high incomes, the primary importers of manufactured goods. In 1959 the industrial countries accounted for 55 per cent of world imports of manufactured goods, most of the world’s imports of primary commodities, and most of the growth of total world imports since World War II (Maizels 1963). In every industrial country, however, the pattern of exports and imports has changed considerably over time in continuous reaction to domestic technological change, thus creating difficulties for primary producers whose product flexibility is more narrowly limited.

Widening markets are a stimulus to industrial investment, but since exports of manufactures are usually less than domestic sales, it is not at all clear to what extent exports have been a necessary (although no doubt a helpful) ingredient of industrial growth. Those extractive industries in the primary producing countries which have no important domestic markets—for example, Saudi Arabian oil —are an exception. Indeed, it is believed by some economists that no important manufacturing specialty in international trade can be developed where a successful domestic market has not been achieved. (This is a matter of practical economics, not of theoretical necessity.) In this qualitative sense, trade in manufactured goods has been viewed as a product of industrial development, but the argument is not reversible.

In the cases where foreign investment has been complementary to exports, international trade has been viewed by some as partly inimical to domestic industrial growth. Great Britain at the beginning of the twentieth century is the major example; it is held by some that Britain’s backwardness in industrial technique by 1913 was due to the lure of foreign investment. In the previous half century foreign investment had grown more rapidly than domestic investment. Indeed, by 1913 British foreign investment apparently was half as large as domestic investment, and by far the greater part of new issues in the London capital market were for foreign accounts (Cairncross 1953). On the other hand, it has also been argued that foreign investment, by stimulating growth of export industries which led the way in domestic economic expansions, acted as a fillip to the growth of income generally at home and abroad (Thomas 1954). Both views have been extensively developed, at least since the work of John Hobson and Lenin, and the differences in conclusions cannot be reconciled here.

By 1914 a remarkable system of world trade and payments, centering on the industrial nations, provided for total currency convertibility—the gold standard. The system had developed apace with the spread of industrialization, and it was adopted by country after country as multilateralism in payments displaced various bilateral and triangular trading systems. By 1900, when the United States adopted the gold standard, that system reached its apex. The world’s payment system was still centered on London as late as the 1870s, but as international financial power spread with industrial growth and the convertibility of currencies, many centers of financial settlement appeared. By 1914 the now almost legendary gold standard was the accepted system of trade and payments among the commercial nations.

By 1914 a large part of multilateral trade was based, not upon this series of disconnected patterns mainly centered around Britain …but upon a complex network of activity embracing whole continents or subcontinents, derived from a new world-wide division of economic functions…. The rapidly industrializing countries of Europe and North America expanded their purchases of raw materials and foodstuffs from the primary producers, and all, with the significant exception of Britain, ran up heavy deficits in their balances with those countries. (Saul 1960, pp. 44-45)

The connection that developed between industrialization and trade was striking. By 1913 the United States produced 35.8 per cent of the world’s manufactured goods, and the United States, Germany (15.7 percent), the United Kingdom (14 percent), France (6.4 per cent), and Russia (5.5 per cent) between them produced 77.4 per cent of the world’s total manufactures and occupied the center of world trade. By 1936-1938 the same five nations still carried on 75.1 per cent of world manufacturing and, with Japan, Sweden, Belgium, and a handful of other nations, accounted for some 89 per cent of world imports and exports. Only 11 per cent of world trade originated between the two-thirds of mankind that was bereft of industry. By 1959 the underdeveloped nations of Latin America, Africa, and Asia produced only 10 per cent of world manufactures (excluding the Soviet bloc). By 1926-1929 two-thirds of the earth’s population had a supply of manufactured goods equal to $7 per head, a third of mankind averaged $104 per head, the United States averaged $254 per head, and the United Kingdom averaged $112 per head. Like the income statistics noted earlier for the 1960s, manufacturing supplies were most unevenly available to mankind by the time industrialization had reached fruition in the (primarily Western) countries of its origin. By 1959 the major industrial countries, containing 28 per cent of mankind, consumed 82 per cent of the world’s manufactures. [SeeInternational Trade, article onPatterns of Trade.]

World War II and its aftermath of course added further disruptions to world industrial development. The international flow of capital, so much a feature of the old gold standard and choked off by the 1929 financial debacle, has only begun to make a comeback since the mid-1950s. Currency convertibility was still incomplete by the early 1960s, after nearly two decades of international cooperation in that area, and the world’s trade was badly split by the cold war and by the inability of the underdeveloped nations to earn foreign exchange. In 1961, for example, three-fourths of the known supply of world monetary gold ($41,000 million) was held by the usual industrial nations: the United States, the members of the European Economic Community, the United Kingdom, and Switzerland (a country which attracts foreign exchange by unique inducements—security from taxes, wars, confiscations, etc.). The wide inequalities of income resulting from success and failure in industrial growth show no signs of being reduced. There are no logical reasons why these inequalities would be reduced by international trade alone. Indeed, some economists have argued that trade has a tendency to make matters worse in this regard-to result in the rich countries’ exploitation of the poor—a view which has not been accepted on the basis of its formal merits (United Nations …1950; Prebisch 1959; Flanders 1964).

International migration

In addition to present-day problems of trade and capital flows, which many believe to be barriers to a wider dissemination of industrial development, the flow of persons in international economic life has been constrained. In the theory of international trade, factor price equalization is held to be, under highly restrictive conditions, a consequence of trade in commodities alone. Equalization of incomes is not implied by that logic because of unequal “factor endowments” (a phrase which includes, of course, the quality of “human capital”). But the international flow of persons and capital before 1914 assuaged to some extent the impact of differing rates of productivity growth and of unequal natural endowments. The poor could at least migrate to higher-income countries. All of the industrial nations benefited from the migration of skilled persons, and the so-called countries of European overseas settlement received a massive direct input of labor in the great nineteenth-century migration. The United States alone received 35 million immigrants between 1820 and 1914. Such labor contributions were accompanied by large-scale capital transfers. At least for those who left low-income countries to go to high-income countries, migration brought some “equalization” of the growing income resulting from industrial development and foreign trade. The migrations themselves were subject to the rhythms of long-term economic growth. [SeeMigration, article onEconomic Aspects; see alsoThomas 1954.]

Because of the nationalistic restrictions placed on immigration in modern times, especially since the 1920s, and because of the cold war, migration of persons is not a possible solution to international income inequalities (apart from particular situations such as that existing between the United States and Canada or between members of the EEC); neither the permanent migration on a large scale of skilled persons nor the movement of mass labor to areas of highest marginal returns is feasible. Migration, in any case, does nothing for income per capita in the low-income countries unless the migrants are the unemployed and other nonproductive persons who are charges on national income. To solve these problems, foreign aid schemes and the temporary loan of thousands of technicians by the advanced and industrialized countries on both sides of the iron curtain have been tried. However, these measures have not been notably successful thus far in spreading industrial development. [SeeForeign aid, article onEconomic Aspects; Technical Assistance.]

Theoretical generalizations

Finally, we might ask: Are there any observable “laws” in the economics of industrial development? As national economies have changed in their internal structures and in their economic relations with each other under the impact of industrial change, some apparent uniformities in their histories have given rise to attempts to generalize the “process” of industrial development on the basis of observed facts. The intractability of the facts has hindered those interested in so-called theories of economic development, and those facing the known facts have found more success in classification than in explanation. The “stage” systems, in which industrialization is cut into chronological segments, are the results of inductive methods, and however weak they may be as examples of theoretical virtuosity, they are useful in viewing a world of factual information which has rarely yielded to rigorous testing of theories of economic growth.

The attempt to establish stages is a natural course of thought when economic logic is confronted with a mass of facts representing primarily economic change. The American data on income and employment structure presented earlier fall easily into three stages: the present is greatly changed from the earliest days, and somewhere in-between is demonstrably different from early times or the present. The characteristics of Stage i are most prominent in the data around I860, when a growing industrial sector was still overshadowed by agriculture and foreign trade was characterized by sale of raw materials and food to the world in return for manufactures. These characteristics faded into those of Stage n. In Stage n, with its high point somewhere between the two world wars, manufacturing industry dominated income and employment, agriculture was overshadowed, imports consisted mostly of food and raw materials (the apparent outcome of the whole history of American industrialization), and exports consisted mainly of manufactures. In Stage in, the period since 1945, the sum of income and labor in manufacturing is less than that in employment not directly concerned with the creation of food and goods, and imports of finished manufactures are rising as a proportion of the total (thus reversing the apparent outcome of American industrial development), representing more diversified consumer tastes and larger consumer incomes. The most rapidly growing sectors are not in industry but in finance, professions, commerce, services, and the like.

This simple stage-system corresponds roughly in time periods to a more formal one developed by Sumner Slichter on the basis of data relating to productivity (1961). In Slichter’s Stage i, from earliest times until 1880-1900, there was a rise in capital-output ratios, since capital grew faster than income as the nation built its basic industrial plant. In Stage n, from 1880-1900 to 1929, the “sensational” increase in the uses of energy in electrical and internal-combustion engines caused income to grow faster than the stock of capital. The basic industrial plant was being rationalized and refined through technological progress. Since 1929 or so, Stage in, the technological revolution in managerial practices and industrial research, has raised productivity more through brain power than through applications of more capital and more powerful physical energy units. Thus, productivity has risen while the capital-output ratio has fallen.

Obviously, any industrial system with a considerable history is subject to such analysis. The two stage-schemes outlined above are based upon changes in given statistical evidence over time for the United States only. Of particular interest are two stage-systems which purport to be of more general applicability, those of W. W. Rostow and Walther Hoffmann. Rostow’s system (1960) faintly resembles the so-called classical stage-system, wherein any economy develops from agriculture and mining through industrialization, with an increasing part of the labor force employed in secondary and tertiary activities. In Rostow’s five-part system, development begins in a traditional economy, which gradually finds resources for investment until a critical proportion is reached wherein growth of income per capita accelerates, providing for self-sustained growth. This is the “take-off.” After that, the society moves forward toward maturity and high mass consumption. A further stage is suggested in which the marginal utility of real income diminishes. The problem in such a stage would obviously be to make leisure creative in some nonmaterial sense. According to Rostow, most industrial nations are now in Stage v, high mass consumption, and the Soviet Union is rapidly approaching it. Other societies are trailing on this time map all the way back to primitive traditionalism.

An interesting system adapted from formal theorizing about economic development is that developed by Walther Hoffmann (1931). The relevant theory comes from the work of the Austrian economist Eugen von Bohm-Bawerk, who held that “capital” in an economy is the indirectness or “degree of round-aboutness” in production [seebohm-bawerk]. It follows that the more developed an economy is, the greater that part of its industrial production devoted to the creation of producers’, as opposed to consumers’, goods. Measuring the world’s industrial activity against Bohm-Bawerk’s propositions, Hoffmann developed a four-stage system into which the major industrial economies are fitted historically. At first the highest proportion of industrial output is in consumers’ goods. As a nation becomes more advanced, the ratios of output of goods and inputs of labor in consumers’ goods industries fall relative to producers’ goods industries. Hoffmann’s system is much more narrowly defined than Rostow’s, since it embraces only the manufacturing sector of the economy. Also, the logical extension of Bohm-Bawerk’s theory is that the degree of round-aboutness would find expression in “human capital” as science became more sophisticated. But since Hoffmann does not extend his analysis beyond the manufacturing data, he does not detect the phenomenon noted earlier, namely, that the more advanced an industrial country becomes, the greater the proportion of its labor force liberated from the production of goods and food—once a critical level of industrial development is reached.

Other stage systems might be mentioned, for example, Lewis Mumford’s gigantic system based upon technological development or Douglass North’s special system for the analysis of regional growth. All of these are methods for simplifying the massive and nearly chaotic evidence relating to industrial development. Their usefulness is to some extent mitigated by a millenarian tendency which characterizes too much thinking about the worldwide industrial development that followed the industrial revolution. A survey of the history and modern characteristics of industrialism and its economic effects ought to be sufficient to deter the wise from making predictions, except, perhaps, to note that economic change has come relentlessly on the heels of technological change.

J. R. T. Hughes

[See alsoEconomic Growth; Economy, Dual.]

BIBLIOGRAPHY

Ashton, Thomas S. (1948) 1964 The Industrial Revolution: 1760-1830. Rev. ed. Oxford Univ. Press.

Burns, Arthur F. 1934 Production Trends in the United States Since 1870. New York: National Bureau of Economic Research.

Cairncross, Alexander K. 1953 Home and Foreign Investment: 1870-1913. Cambridge Univ. Press.

Cameron, Rondo 1961 France and the Economic Development of Europe, 1800-1914: Conquests of Peace and Seeds of War. Princeton Univ. Press.

Deane, Phyllis; and Cole, W. A. 1962 British Economic Growth, 1688—1959: Trends and Structure. Cambridge Univ. Press.

Flanders, M. June 1964 Prebisch on Protectionism: An Evaluation. Economic Journal 74:305-326.

Habakkuk, H. J. 1953 English Population in the Eighteenth Century. Economic History Review Second Series 6:117-133.

Henderson, W. O. 1954 Britain and Industrial Europe, 1750—1870: Studies in British Influence on the Industrial Revolution in Western Europe. Liverpool Univ. Press.

Hoffmann, W alther G. (1931) 1958 The Growth of Industrial Economies. Rev. & enl. Manchester Univ. Press. → First published as Stadien und Typen der Industrialisierung.

Hughes, J. R. T. 1958 Foreign Trade and Balanced Growth: The Historical Framework. American Economic Review 49, no. 2:330-337.

Kindleberger, C. P. 1961 Foreign Trade and Economic Growth: Lessons From Britain and France, 1850 to 1913. Economic History Review Second Series 14:289-305.

Krause, J. T. 1958 Changes in English Fertility and Mortality: 1781-1850. Economic History Review Second Series 11:52-70.

Kuznets, Simon S. (1953) 1954 Economic Change: Selected Essays in Business Cycles, National Income, and Economic Growth. London: Heinemann.

Kuznets, Simon S. (1959) 1961 Six Lectures on Economic Growth. New York: Free Press.

Landes, David S. 1958 Bankers and Pashas: International Finance and Economic Imperialism in Egypt. Cambridge, Mass.: Harvard Univ. Press.

League of Nations, Secretariat, Financial Section AND Economic Intelligence Service 1942 The Network of World Trade. Geneva: The League.

League of Nations, Secretariat, Financial Section AND Economic Intelligence Service 1945 Industrialization and Foreign Trade. Geneva: The League.

Lewis, W. Arthur 1955 The Theory of Economic Growth. Homewood, III.: Irwin.

Maizels, Alfred 1963 Industrial Growth and World Trade: An Empirical Study of Trends. Cambridge Univ. Press.

Mantoux, Paul (1906) 1962 The Industrial Revolution in the Eighteenth Century. London: Cape. → First published in French. A paperback edition was published in 1965 by Harper.

Nurkse, Ragnar (1953) 1962 Problems of Capital Formation in Under-developed Countries. New York: Oxford Univ. Press.

Prebisch, RaÚl 1959 Commercial Policy in the Underdeveloped Countries. American Economic Review 49, no. 2:251-273.

Rosovsky, henry 1961 Capital Formation in Japan, 1868-1940. New York: Free Press.

Rostow, Walt W. (1952) 1960 The Process of Economic Growth. Rev. ed. New York: Norton.

Rostow, Walt W. (1960) 1963 The Stages of Economic Growth: A Non-Communist Manifesto. Cambridge Univ. Press.

Saul, S. B. 1960 Studies in British Overseas Trade, 1870-1914. Liverpool Univ. Press.

Slichter, Sumner H. 1961 Economic Growth in the United States: Its History, Problems and Prospects. Baton Rouge: Louisiana State Univ. Press.

Sombart, Werner (1903) 1927 Die deutsche Volks-wirtschaft im neunzehnten Jahrhundert und im An-fang des 20. Jahrhunderts: Eine Einfiihrung in die Nationalokonomie. 7th ed. Berlin: Bondi.

Thomas, Brinley 1954 Migration and Economic Growth: A Study of Great Britain and the Atlantic Economy. National Institute of Economic and Social Research, Economic and Social Studies, No. 12. Cambridge Univ. Press.

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United Nations, Economic Commission For Latin America 1950 The Economic Development of Latin America and Its Principal Problems. Lake Success, N.Y.: United Nations, Department of Economic Affairs.

U.S. Bureau of The census 1960 Historical Statistics of the United States; Colonial Times to 1957: A Statistical Abstract Supplement. Washington: Government Printing Office.

U.S. Bureau of The censusStatistical Abstract of the United States. → Published since 1878.

Vtner, Jacob (1921-1951) 1958 The Long View and the Short: Studies in Economic Theory and Policy. Glencoe, III.: Free Press. → See especially pages 277-305, “Power Versus Plenty as Objectives of Foreign Policy in the Seventeenth and Eighteenth Centuries.”

Viner, Jacob (1952) 1953 International Trade and Economic Development: Lectures at the National University of Brazil. Oxford: Clarendon.

II. SOCIAL ASPECTS

Industrialization, in the strict sense of the term, entails the extensive use of inanimate sources of power in the production of economic goods and services. Even so restrictive a definition does not limit the concept solely to manufacturing, as agriculture is also subject to mechanization (as well as other modes of technical rationalization), and so are services such as transportation and communication. It is true, of course, that manufacturing is an essential ingredient, as the machines and instruments used in the production of raw materials or services are likely to be factory-produced.

The use of an initially technological criterion of industrialization does not imply a kind of technological determinism. On the contrary, there are clearly institutional and organizational preconditions and counterparts of large-scale and efficient utilization of power. Extensive industrialization (in the strict sense) is quite unlikely in the absence of a highly specialized and coordinated labor force, monetary exchange and rationalized accounting systems, the technology of precise measurement and production control, and so on. Furthermore, technology itself is properly viewed not as a kind of inanimate force but rather as a body of practical knowledge and skills; it is a social product having social consequences.

The term “industrialization” is often used in a broader sense as equivalent to any form of economic modernization. There is some justification for this looser usage, since there is no example of sustained economic growth (measured, say, by real income per head) without the extensive practice of manufacturing or the use of its products. Making industrialization equivalent to economic development runs some risks, however, particularly for somewhat fine-grained analysis of the components of economic growth. The risk is comparable to that displayed in Marxist theory, which attaches structural and dynamic primacy to “the economic factor” but then includes “dependent” variables in the independent one, so that the determination is by definition, or, worse, includes several elements and components that are independently variable, so that these variations are suppressed or defined away. Even if the structural integration of economic systems were greater than can be empirically confirmed, the order and rate of change of one or another component in a wide range of “economic factors” would still have significant consequences. The risk is minimized by its recognition, however, and industrialization will be used here in its broader sense except where finer distinctions are necessary and appropriate.

Theoretical and methodological issues

The conceptual models of complex social systems, including societies, used by most social scientists involve assumptions about structural de-terminateness and congruity that need careful scrutiny. In extreme form, these models assume such a close interdependence of elements in social systems that a substantial autonomous (or, more likely, exogenous) change in one component would lead to definite and congruent changes in others. This would be particularly true of such a crucial aspect of social organization as the system of economic production. If this degree of integration could be used with predictive reliability, the “system requirements” of industrialism could be worked out theoretically and checked against a single established case for empirical confirmation. The actual situation is more complex, however, as the variety in extant industrial societies makes evident. A theoretical approach involving a “system” concept is empirically warranted, but must focus on the degree of determination of the structural correlates and the consequences of economic transformation and continuing change.

The appropriate cautions in interpretation may be made explicit. First, structural congruities may apply between classes and ranges of structural forms rather than between specific features. For example, a strictly hereditary mode of occupational placement is clearly inconsistent with the recruitment of an industrial labor force in the broad sense, if for no other reason than the changing proportions of occupational categories and the appearance and disappearance of occupations from the “market mix.” Second, incongruities are probable. Persistent ones—for example, as’ between labor mobility and employer identification—may be kept within tolerable limits by various tension-management devices, but perfect solutions are unlikely and may be impossible. The low probability of absolutely synchronic change implies incongruities arising from leads and lags. Third, even empirical uniformity is not conclusive proof of theoretical necessity; structural alternatives simply may not have been tried. For example, the bureaucratic form of authoritative coordination of specialized workers in large productive units seems almost, if not completely, universal as the standard form of industrial organization. However, from direct and indirect evidence at hand, it cannot be determined whether this is a structural necessity, and if so, within what limits of variation, and if not, what are equally or more viable alternatives. The replication of a standard form of organization may derive from mere imitation, abetted by an untested theory of functional necessity, rather than from successive independent developments based upon experimentation with alternatives. These cautions do not imply chaos or random variability of social and economic structures; however, they do bespeak a stance of skeptical inquiry with respect to the theory and the available evidence.

Correlational and sequential analysis

In addition to doubts about the determinateness of functional or structural necessities, an important problem of time presents itself. When are these structural changes associated with industrialization to appear—immediately or in the “long run"? Can anything be said about the order of their appearance? These are questions that the integration models of society are plainly unsuited to answer. It is distressing to note how often this kind of analysis fails to make explicit the “change model” on which it relies. But even when the model is made explicit, it is clearly unacceptable. Although it has been characterized as a three-stage model, only the middle, transitional stage of it has been seriously studied; its preindustrial and postindus-trial stages are usually assumed to be static and “integrated” (for these and other criticisms see Feldman & Moore 1962). Change in preindustrial societies may be relatively slow or infrequent, but this assumption of stasis runs counter to evidence that all societies are subject to change from intrinsic sources and to the clear historic fact that most of the “newly developing” areas have had political, economic, and often religious contact with the Western world for periods ranging from decades to centuries. The assumption of postindustrial stability could only be an implication of scholarly neglect, for it is absurd when made explicit.

The extensive, empirically based generalizations about the social aspects of industrialization are, paradoxically, mainly consistent with this contrary-to-fact change model and with an exaggerated equilibrium or integration model as applied to the stages not directly examined. The fact is that, within limits, common origins and common destinations can be assumed. However, the errors of the theoretical structure appear when more detail is sought concerning routes and trajectories of change and the varieties of (temporary) destinations, or when attention is turned to the continuing dynamics of industrial societies.

Before-and-after comparisons abound in the descriptive and analytical literature. They gain their validity from the reality of structural constraints on social organization imposed by any of the variant forms of an industrial economy. What is clearly missing in the current state of knowledge, however, is any precision in the sequence and timing of structural changes. Moreover, since these factors are no more likely to be invariant than the antecedent conditions or the character of industrial societies, a change-model typology is also missing. The notion that each case is unique, though obviously true in some details, would defeat both generalization and prediction, and it is a prematurely pessimistic position. Generalization is indeed possible, as will be indicated in this article, but the day of “easy” generalizations is past.

Of course, cross-sectional data are still needed for establishing the range of conditions and the correlates of various forms and degrees of industrialization. There is an even more critical need for repeated observations through time, including quantitative trends. As social statistics become more widely available, at least through decennial censuses, the recent course of change in newly developing areas may be compared with the older

historic record, which also awaits systematic quantitative analysis. It may be confidently expected that since trends in one or another measurable aspect of economic and social structure are not truly autonomous, somewhat complex “stochastic” models will be needed for analysis of temporal patterns.

Conditions for industrialization

A review of the circumstances under which industrialization and broader economic development can take place may appropriately start with those most clearly economic in character. It should be noted at once, however, that the distinction between the economic and noneconomic components of social systems is not as sharp as is often assumed for analytic convenience. Industrialization involves, for example, extensive remobilization of the “factors of production,” including new supplies of capital, new power sources, “embodied technology” in capital goods and equipment, and workers with skills that are different from those required in the preindustrial economy. But lying just behind these economic inputs (or comprising the same requirements in different semantic guise) are the organization of capital markets or the investment decisions of the state, a network of relationships between suppliers and manufacturers, an external or internal training system for workers, and so on.

Just how much formal education is a requisite “capital investment” for economic growth is a matter of some conjecture and scholarly dispute. Moreover, given limited investment resources and urgently competing demands on them, there is also uncertainty as between an “elitist” policy, which concentrates attention on training professional, technical, and managerial personnel, and a kind of “populist” policy, which emphasizes the economic as well as social values of widespread education as a mechanism of attitudinal development along with cognitive learning. The historic record of the industrialized countries is poorly known and barely analyzed, and in any event it might or might not yield precise and applicable answers for countries with largely illiterate populations and extremely short historical backgrounds in the cultivation of the professions and other intellectual occupations.

It is a truism that underdeveloped areas suffer from a shortage of capital and, generally, a surplus of labor. Domestic capital resources may exist to some degree, however, and the problem becomes one of tapping unproductive savings, providing means and motives for diversion of capital from traditional to novel investments, or perhaps establishing a system of “forced saving” through the taxation system and fiscal policies of the state. Labor supplies are likely to represent underemployment in agriculture, but the actual diversion of labor to industrial employment is likely to require a reorganization of agriculture. Improved efficiency of labor in agriculture and some actual increase in farm output are needed to supply the needs for food and fiber of those who will not be engaged in primary production. The supplies of workers for industry, although numerically ample, are quite unlikely to have the necessary skills—to say nothing of attitudes and habits—for industrial work (Moore 1951). Thus some investment in training will be a requisite for new productive systems.

The historic cases of successful industrialization have involved countries that were either rich in territory and resources or else engaged in extensive international trade in capital, raw materials, and products. In contrast, many of the new nations are both poor and small, and they are not likely to be economically viable without the formation of international trading organizations or actual economic unification across political boundaries.

Institutional structures

As to the requisite organizational and institutional structure, we may note some further normative conditions for industrialization. Property rights must be transferable if land, raw materials, and other material factors of production are to be converted to new uses and passed, say, from supplier to manufacturer to consumer. Nominal ownership by the state changes this condition only in detail, as transfers of power over and responsibility for the materials of production are still necessary. Labor, too, must be transferable; short of reliance on the police power of a totalitarian state, this normally means the establishment of a “labor market” and a system of financial and other rewards to induce workers to move from one economic sector to another, one employer to another, one skill level to another, and so on. At the very least, fixed hereditary assignment of economic roles must somehow be broken down. Eventually, a whole new structure of social placement and relative status must be established; however, this structure may be viewed as a consequence rather than a condition of economic modernization.

Even exchange relationships, though nominally contractual and perhaps predicated on individual self-interest, are necessarily based on norms of propriety and fair dealing, compliance with promises for future performance, and restraints on competitive strategies that would destroy the system. The classic formulation by Durkheim (1893) of the “non-contractual elements in contracts” is in point here. The actual organization of monetary exchange relationships must be established where it does not exist. Industry, in particular, commonly involves assembling the factors of production over considerable distances (often crossing political boundaries) and over considerable periods of time. Systems of credit, stabilization of currency and its rates of exchange, and state fiscal policies of some reliability are thus necessary.

Since rules are not always self-enforcing or organizational arrangements self-policing, a modicum of stable political power is essential. The noninterference of the state in the development of “laissez-faire capitalism” was systematically and hypocritically exaggerated by ideologists for private businesses that generally benefited from direct and indirect governmental assistance. In the contemporary world of the newly developing areas, the state is likely to play a prominent, overt, and often dominant part in developmental policies and their concrete implementation. This comes about in part because only the state can muster the necessary capital from domestic and foreign sources and make the other necessary changes in social organization and the legal embodiment of normative codes.

Motives and values

It is also true that industrialization and other measures of economic development have become instruments of national policy in virtually the entire world; this fact brings us to questions of motives and values. Classical economic analysis operated with a very simple set of motivational assumptions: that individuals would act rationally in ways designed to maximize their own material self-interests. Just what those interests were, beyond health, food, clothing, and shelter, was left vague, or the question was simply neglected. Yet, despite this neglect, these motivational assumptions appear sounder than the rather exaggerated “value relativism” advanced by anthropological and sociological critics of economic theory. Once some knowledge of the possibility of economic betterment became fairly widespread, discontent with poverty also became widespread. At this level, the motivational requisites appear to be satisfied. But as usual the problem is somewhat more complex. New employments and styles of life are not always better than old ones, and they are never unmixed blessings. A simple quest for improvement does not automatically yield the means for its achievement.

Economists have long identified the functions of “entrepreneurship” as requisites for the development of the capital investment and extensive organizational and technical innovations that are necessary for economic modernization. Their faith was often a little magical and somewhat restricted to a free-market economy. Hagen (1962) has restated and broadened the case for the importance of creative or innovative personality types. Yet, in any case, leadership is not independent of the motives of those who are led. To balance this exclusive emphasis on the innovators or managers, other scholars have argued for the importance of labor commitment—not only performance but also acceptance of the relevant norms—and for the importance of some participation in decisions and actions for the appearance of commitment (Moore & Feldman 1960).

The motives of the ordinary individual participant in economic activities are not necessarily the same as the values espoused by national planners and their spokesmen. Short of terroristic totalitarianism, the two presumably have some congruence, but it need not be perfect. Industrialization and other developmental measures are always instrumental goals—but for which more ultimate values are they instrumental? Mere widespread improvement of present economic conditions would presumably best satisfy the aspirations of most participants. But maximizing present returns is likely to be at the cost of sustained future growth, which requires substantial savings and capital accumulation. The long-term view is likely to have little appeal to those who are faring least well in their present situations. The older solution to this problem, in terms of profits available for reinvestment, rested on the institutionalization of a particular property system; and, as for all forms of socially legitimized power, the foundations of that power were values and thus nonrational. In societies now just beginning to foster rapid economic development, the proprietary solution has been generally mixed with or superseded by an appeal to national interest and power. Those values are also non-rational, but they provide an ideological rationale for present sacrifice or forbearance and an appeal to collective rather than purely selfish interests.

It is perhaps premature to list nationalism as a precondition for industrialization, but for the reasons just given it would have a high priority among the values preceding major economic change. Nationalism serves another, correlative function, in providing a sense of identity and meaning for populations that are physically and socially uprooted. For the economic rewards, even if paid, have social costs, and those too merit attention.

Concomitants and consequences

The array of necessary and probable effects of economic modernization is extensive. It seems appropriate to start with the structural features of society that are primarily economic in form or function, then to proceed to the demographic and ecological characteristics of populations rearranged by economic development, and finally to attend to certain outstanding features of social organization.

A monetary basis of exchange is essentially a prior condition for any substantial industrialization; even remote, small, and isolated manufacturing establishments must either pay wages to their workers or set up a commissary. The extension of “custodial” arrangements has early limits, including the problem of finding external sources of supply. As economic modernization continues, the “economic calculus” tends to grow in importance. The variety of producers’ and consumers’ goods makes money the necessary medium for their acquisition and transfer. Perhaps even more significant for the transformation of traditional social forms is the movement of both new and old services and reciprocities through the market. Mutual aid among family members and neighbors either gives way to more specialized, hired services or, if it persists, tends to be given a market evaluation. The ubiquity of financial transactions and market evaluation becomes almost total: it affects clubs, religious orders, families, and welfare associations, as well as governments, banks, and retail shops.

Change in occupational structures

One of the more ridiculous conventions of traditional economic analysis was to treat labor as an aggregate of interchangeable units, its availability being governed over the short run by a market price translated into a wage rate. Even in the earliest stages of industrialization, a quotient of more skilled manpower is necessary, and this demand for differentiated services increases with time. Several interrelated and continuing processes of change in occupational structures can be traced to industrialization.

The first is that of “sectoral relocation”: the transfer of producers out of agriculture and other preindustrial pursuits into industrial and commercial employments. In a limited sense this process is true by definition, but the process is a continuing and probably an accelerating one. It is in fact often a mixture of two analytically separable changes: first, the formation of a labor force in the technical sense, by setting monetary values on productive performance, and second, the relocation of constructive effort from less productive to more productive economic sectors.

Specialization is a second characteristic process of occupational change. A few traditional positions are successively subdivided as larger units provide the organizational mechanism for division of labor. At least equally important is the creation of demand for new skills associated with changes in the technology of products and processes and the steady expansion of services that are ancillary to the productive process or provide information and technique for the problems and aspirations of increasingly sophisticated consumers.

The subdivision of traditional craft skills and the partial substitution of mechanical for human effort in production have given rise to the criticism that industrialization is essentially degrading to the workmen. Ample evidence for this effect can be found historically, and there is little doubt that it will happen again and again. Yet, the initial effect of industrialization is to create demands for a new range of skills, and those new demands tend to require steadily higher levels of education and experience. On balance, and without denying the human costs and wastage involved, the long-term consequence of industrialization is an upgrading of occupational structures.

A final process of occupational change is that of bureaucratization: that is, the employment of specialized workers in large administrative organizations, which provide coordination by means of hierarchical authority rather than through the medium of contractual exchange in a market. Whether this rather authoritarian ordering of the work force is a necessary consequence of industrialization has not been fully examined, as noted above. It appears probable, for example, that the steady upgrading of the labor force reduces both the necessity and the efficacy of bureaucratic organization, which assumes the superior wisdom (and commitment) of the managers as compared with those managed. The loosening and decentralization of administrative controls may gradually supersede the rigidly hierarchical coordination of specialized producers.

Demographic and ecological effects

By very indirect and largely unintentional means, industrialization tends to create part of its own labor supply. This comes about by mortality reductions deriving from the whole range of public health, medical, and food-producing technologies. Birth rates, however, are not so immediately affected; they may in fact increase slightly, owing to better health and nutrition. The historic record indicates that after a variable period of rapid transitional growth, fertility also gradually comes under a measure of rational control. The interpretations of declining fertility vary and remain in dispute. That lower birth rates result from deliberate family limitation can scarcely be doubted, but the explanation of the attitudinal and behavioral change is by no means settled. In any event, the immediate effect of rapid population growth may be dampening to rates of economic growth, though not in any simple way, since rapid growth also produces an expanding labor force and, given other favorable conditions, expanded consumer demand. It seems highly probable that fertility declines will eventually happen in newly developing areas; and the combination of official concern and new contraceptive techniques may speed the process, as compared with past experience, just as death rates can now be reduced more rapidly than was historically true [seeFertility].

To population growth as a consequence of industrialization must be added a major spatial redistribution. The historic association between industrialization and urbanization was close but not perfect; large commercial and political centers antedated the industrial era, and, here and there, manufacturing establishments can be operated without large urban agglomerations. Even now, the rate of urbanization in newly developing areas commonly exceeds the rate of industrialization, as measured by employment in manufacturing. The urbanization rate displays attitudinal dissatisfaction with present conditions in conspicuous and troublesome ways; the “flight from the land” is an unmistakable “vote with the feet” for better opportunities. The cities of the world, even if not important manufacturing centers, are not “independent” of industrialization. The metropolitan complex vends the products of manufacturing and depends upon industrial products for communication, transportation, water, sewerage, public health measures, and public and private construction. The rate of urbanization is probably increasing everywhere, and it is likely to continue wherever there remain substantial residues of marginal agricultural producers [seePopulation, article onDistribution].

Social structural changes

The consequences of industrialization are also evident in the principal features of social structure. Most conspicuous and far-reaching, perhaps, is the impact of industry on kinship and the family, for in many nondustrial societies the constellation of kinsmen constitutes the major source of social position and personal identification. The required geographical and social mobility of an industrialized economy clearly weakens or breaks up the multigenerational and laterally extended “corporate” kin group. The destruction is unlikely to be total, however, which is contrary to certain interpretations that saw the functional utility of the “nuclear” family in an industrial society but did not comprehend the importance of the close bonds between generations and among siblings even in the small-family system. Intergenerational tensions are in fact likely to be sharpest in the very early stages of industrialization, as youths are the likeliest recruits to new occupations and styles of life. After a few generations, intergenerational disparities are less distinct, since they are within the “modernized” social system, rather than between radically different systems.

At the very time that traditional kinship ties are weakened or broken, the network of other essentially informal relationships is also likely to disappear for the urban industrial recruit. Village or tribal identities may be transferred to the cities temporarily, but they rarely survive in important measure among the first urban-born generation. For many of those displaced, there is little social framework between the immediate family and the (possibly remote) state. If either of these links to society fails, and especially if both do, apathy, alienation, and amoral or criminal conduct are likely to ensue. This is a persistent problem of industrial societies, despite the gradual growth or deliberate creation of new formal associations and forms of political participation.

The institutionalization of rationality—that is, an emphasis on problem-solving and impersonal relationships—often leads to a kind of “instrumental-ism” and lack of fundamental value orientations. The family retains its importance in these circumstances as an affectional and personal set of relationships, permitting legitimate individuality and emotionality. On the larger scale, nationalism and religion compete, uneasily, for nonrational adherence. Both are threatened by secularization; in response to skeptical questioning of received doctrine, each attempts to provide answers to the intrinsic doubts and uncertainties of human existence. Nationalism rarely offers a sufficiently personal meaning to death and misfortune to supersede entirely the richer theology of traditional religions.

For social differentiation and stratification, the consequences of industrialization are, to say the least, complex. The invariant and probably inevitable initial effect of industrialization is a polarization of social status within the modernized sector. The managers and the managed, the innovators and the reluctant followers, are likely to represent radical differences in education, income, and power. This polarization may lead to apathy and discontent on the part of the lower orders, but only rarely to revolutionary disturbances. By the time the modernized sector has incorporated a substantial portion of the population, its status system has become far more complex. Multiple status gradations, including a disproportionate expansion of “middle positions,” are further complicated by multiple criteria of differential valuation and relative position—a “lateral” extension of differentiation.

Marx correctly observed the polarities in early industrialization and almost correctly predicted (with some exaggeration) the disappearance of preindustrial strata. Although Marx was categorically wrong in his expectation of increasing polarization in Western societies, his theory does possess a certain validity in predicting the characteristics of early industrialization in the areas that are now beginning the process of economic modernization. The disparity between the great speed of “ideological” incorporation of impoverished populations into the common aspirations of the modern world and the slower pace of actual structural transformations may well increase the revolutionary potential in newly developing areas.

It is quite clear by now that rapid industrialization is consistent with a rather wide range of political regimes, although not all. Political centralization and substantial stability are clearly requisite for continuing growth, but democracy is not. In fact, in the contemporary world the state more nearly shapes the industrial structure than conversely; moreover, various alternative forms of the state, as well as various unprecedented combinations of technology and economic strategies, may be constructed eclectically from a world-wide pool of precedents. Any modern state is likely to hit upon forms of popular political participation as a mode of tension management under conditions of strain and rapid change. However, manipulative and essentially totalitarian management of such participation appears to be a viable alternative to genuine democracy. Though the ministries of political administration are likely to look pretty much alike in one capital or another, their ultimate accountabilities are likely to differ widely.

Continuities

The variability of political structures associated with industrialization highlights a weakness in the assumption that industrialization leads to a common social destination. The structural congruities are real enough, but they fall short of indicating structural determinism. Some persistent differences will be matters of detail and not very consequential at a generalized level of analysis. Others cannot be dismissed so lightly; they bear witness to a measure of systemic “openness.”

Industrial societies of course have no stable, final destination, and this is part of the problem in predicting the exact consequences of industrialization in areas now beginning the process. Some underlying processes, such as continuous specialization and functional differentiation, are likely to provide sounder bases of generalization than the finer features of social structure at any particular time. Similarly, the substitution of machines for men is likely to be ubiquitous and continuous, with correlative positive consequences for occupational upgrading, ambiguous implications for the use of leisure, and negative consequences for those displaced or for those unable to fit such standardized selective mechanisms as the school.

Predicting the future of industrial societies has excited remarkably little scholarly, as opposed to literary, attention. That enterprise cannot seriously engage us here, except for one additional point. Paradoxically, and despite political diversity and exceptionally dangerous international tensions, there is a lesson of theoretical importance in worldwide industrialization. The contemporary form of industrialization is not autonomous and “autarchic,” country by country, and indeed it never was. But now the new arrivals benefit from accumulated technological and organizational experience. The resulting “eclecticism” has at least two theoretical implications: novel combinations of structural elements may be expected, some of them viable; and, in many instances, the society (approximately equated with the national state) will no longer be the most useful comprehensive system for analytic purposes. In other words, in seeking to understand present and future large-scale, dynamic processes, we will have to view the world as a single system.

Wilbert E. Moore

[Directly related are the entriesEconomic growth; Economy and society; Modernization. Other relevant material may be found in Automation; Entrepreneurship; Labor force, article on definitions and measurement; Workers; and in the biographies of Marx and Weber, Max.]

BIBLIOGRAPHY

Braibanti, Ralph; and Spengler, Joseph j. (editors) 1961 Tradition, Values, and Socio-economic Development. Durham, N.C.: Duke Univ. Press.

Wilbert E. Moore

De vries, egbert; and medina echavarria, jose (editors) 1963 Social Aspects of Economic Development in Latin America. 2 vols. Paris: UNESCO.

Durkheim, Émile (1893) 1960 The Division of Labor in Society. Glencoe, III.: Free Press. → First published as De la division du travail social.

Economic Development and Cultural Change. → Published since 1952. Especially valuable for theoretical and empirical studies of industrialization.

Feldman, Arnold S.; and Moore, Wilbert E. 1962 Industrialization and Industrialism: Convergence and Differentiation. Volume 2, pages 151-169 in World Congress of Sociology, Fifth, Transactions. London: International Sociological Association.

Hagen, Everett E. 1962 On the Theory of Social Change. Homewood, III.: Dorsey.

International Social Science Council 1958 Social, Economic, and Technological Change: A Theoretical Approach. Paris: The Council.

International Social Science Council 1962- Social Implications of Technological Change. Paris: The Council.

Marx, Karl (1867-1879) 1925-1926 Capital: A Critique of Political Economy. 3 vols. Chicago: Kerr.

Moore, Wilbert E. 1951 Industrialization and Labor: Social Aspects of Economic Development. Ithaca, N.Y.: Cornell Univ. Press.

Moore, Wilbert E. 1963 Social Change. Englewood Cliffs, N.J.: Prentice-Hall. → See especially pages 89-112 on “Modernization.”

Moore, Wilbert E. 1965 The Impact of Industry. Englewood Cliffs, N.J.: Prentice-Hall.

Moore, Wilbert E.; and Feldman, Arnold S. (editors) 1960 Labor Commitment and Social Change in Developing Areas. New York: Social Science Research Council.

North American Conference on The Social Implications of Industrialization and Technological Change, Chicago,1960 1963 Industrialization and Society: Proceedings. Edited by Bert F. Hoselitz and Wilbert E. Moore. Paris: UNESCO.

Weber, Max (1904-1905) 1930 The Protestant Ethic and the Spirit of Capitalism. Translated by Talcott Parsons, with a foreword by R. H. Tawney. London: Allen & Unwin; New York: Scribner. → First published in German. The 1930 edition has been reprinted frequently.

Weber, Max (1922) 1957 The Theory of Social and Economic Organization. Edited by Talcott Parsons. Glencoe, III.: Free Press. → First published as Part 1 of Wirtscfiaft und Gesellschaft.

Industrialization

In the eighteenth and early nineteenth centuries, industrial activity in Ireland was substantial and geographically widespread. The 1821 census of Ireland indicates that more than 40 percent of men and women who stated their occupation were "chiefly employed in trades, manufactures, or handicraft." Of the provinces, Ulster, predictably, had the highest percentage (55%), followed by Connacht (43%), Leinster (33%), and Munster (24%). Six counties outside Ulster had a greater proportion of their population in trade, manufacture, or handicrafts than in agriculture. Within all the provinces there were further great disparities and in some east Ulster baronies the percentage of workers engaged mainly in trade, manufacture, or handicraft might exceed 70 percent, but even in the west of the province, some baronies had about a half of their populations so concentrated.

From the 1820s to the end of the nineteenth century, however, the process of industrialization in east Ulster accelerated, and this led by the 1850s to a much clearer industrial demarcation of this area from the rest of Ireland. Indeed, until the 1830s Dublin and Cork led Belfast in a range of industries, most notably in brewing, distilling, flour milling, and shipbuilding, but also in others such as engineering and foundries, tanning, woolen manufacture, glass-making, and paper-making.

Cork was and remained much more a commercial than an industrial city, as reflected in the significant presence of merchants on the city council. Nevertheless, the optimistic view expressed in the 1790s that the commercial significance of the city would soon rival that of Liverpool could not have been more ill founded. In fact, the nineteenth century was one of widespread stagnation, and the 1901 population figure of 76,000 was some 5 percent less than that of 1821. Even if nineteenth-century Cork lost its dynamism, it remains the case that at least 20 percent of its male and female population was engaged in manufacturing. Census data show that on the eve of the famine 8,000 men worked in manufacturing; this had fallen by a quarter in 1851, and the figure declined still further to 4,000 in 1901. The number of women in manufacturing remained much more stable in the long term: 3,500 in 1841 and around 3,000 in 1901. There was a sharp, if short-lived, increase (to over 5,000) recorded in the 1851 census, which reflected a postfamine revival movement in cottage-based manufacturing in, for example, lace-making, net-making, and knitting.

Before the development of large-scale brewing and distilling in the later eighteenth century, sugar refining was Dublin's most significant capital-intensive industry, in which the firms catered to a countrywide market. In general terms the industrial development of eighteenth-century Dublin evolved from commercial activity, where goods were manufactured for the home market from raw materials drawn either from within Ireland itself (e.g., woolens) or were imported (as with silk or iron). During the eighteenth century, Dublin was the predominant economic and social center for the whole of Ireland, and to a considerable extent this derived from the dependence of Ulster's rapidly growing linen industry on Dublin as a financial center, marketplace, and port. Toward the end of the eighteenth century, however, this dominance began to look less secure.

In Dublin, traditional industries like cabinetmaking and carriage manufacture declined, as did clothing, the last apparently a victim of a determination to retain outdated techniques. Few manufacturing industries developed to provide substantial employment to the "deposed capital" in the nineteenth century. There was some growth in engineering, especially relating to the railways, as well as in food and drink. A small number of large firms stand out. Among these are the Quaker biscuit manufacturer W. and R. Jacob, formerly of Waterford, which opened a factory in Dublin in 1851. The firm demonstrated an early commitment to mass-production methods and became a public company in 1883; by the beginning of the twentieth century it employed more than 2,000 workers. Dominating the manufacturing sector in Dublin was Guinness, established in 1759, but its output still lagged behind Beamish and Crawford of Cork in the early nineteenth century. The trend in Irish brewing was to install much larger units in a smaller number of urban centers. Guinness rose to prominence not only because of its distinctive product but also through its high-quality management, technical innovation, and successful marketing. The firm exploited the British market, and as the transport system improved the market within Ireland increased. In both markets consumers increasingly favored high-quality stout. Decades of expansion led to the conversion of Guinness into a public company in 1886. Between that date and 1914, dividends on ordinary shares rose from 15.4 to 35.7 percent. Some members of the Guinness family entered the peerage. Firms like Jacob and Guinness, however, were very much the exception to the rule; indeed, apart from food and drink, much of the south and west of Ireland had very little industry by the early twentieth century.

Linen in the Process of Industrialization

Leading the industrialization process in the north of Ireland was the linen industry. Within Ireland, linen production developed from a thoroughly rural and widespread activity into a much more localized but strikingly successful example of factory-based industry centered on the Belfast area. However, factory techniques did not become widespread in spinning until the 1830s and in weaving until the late 1850s and 1860s.

The influence of Huguenot immigrants who arrived in 1698 has been shown to have been exaggerated. In fact, the industry had been growing for several decades before that. In the 1640s and 1650s substantial surpluses of linen yarn were sent from Ulster to England to be woven. A combination of cheap land, the chance to take refuge from religious persecution, and the opportunity to take advantage of the evident yarn surpluses all combined to attract migrants from the north of England and Scotland in the later seventeenth century. The earliest known reference to a significant linen industry in Ulster comes from the 1680s; from this period through the eighteenth century access to the English market was the main stimulus to Irish linen industry, especially following the abolition in 1696 of duties on flax, yarn, and cloth imported into England from Ireland. Further encouragement for Irish linen came with the formation in 1711 of the Trustees of the Hempen and Flaxen Manufactures of Ireland known as the Linen Board. The main tasks of the board were to oversee and operate the regulations governing linen duties, to promote quality control in production, and to make determined efforts through financial incentives to spread the industry more widely outside Ulster. The board continued to function until 1828, but it lacked the expertise to ensure that its grants were used in the most cost-effective way. Even so, the most balanced assessments of the board's activities have judged it to be mildly positive, and linen dominated the manufacturing sector in both Ireland and Scotland by the later eighteenth century. During the course of that century a number of significant and related developments can be identified, each of which contributed to the subsequent transition to factory production. These included the following: (1) changes in bleaching and finishing technology and the emergence of the large-scale bleachers and drapers; (2) the move away from Dublin as the main entrepôt in the Anglo-Irish trade, and the associated switch to direct exports from Ulster; and (3) the impact of the short-lived factory-based cotton industry, whose appearance coincided with the final phase of domestic spinning in the linen industry.

Taken together, these developments were crucial in the acquisition of skill, the accumulation of capital, the refinement of credit and banking networks, and the introduction of factory techniques. Ultimately, they contributed enormously to the emergence of northeast Ulster as the premier linen-producing area in the world and also to the rise of Belfast as an example of spectacular urban growth and very much a symbol of successful industrialization. Most of the flax produced for the Irish linen industry before the 1860s was grown on farms in the north of Ireland. Having been prepared, the flax was spun and wound onto bobbins by women and children, then woven into cloth by the farmer-weavers and perhaps their older children, who would then take it to market. Although the farmer-weaver predominated, by the late eighteenth century the journeyman weaver working for a variety of middlemen was increasingly in evidence and was typically provided with board and lodging and paid a wage, or, if married, he was more likely to work in his own home. One important consequence of the growth of the linen industry, often under landlord patronage, was that it stimulated competition for land, drove up rent levels, encouraged subdivision of holdings, and increased population pressure. In 1841, for example, County Armagh was the most densely settled county in Ireland.

The techniques for flax spinning and weaving remained fundamentally unaltered before the 1820s, and the same is true for the marketing arrangements for selling the webs. The brown (unbleached) linen webs were sold through a large network of brown linen markets. At the markets, some held weekly, others monthly, jobbers could supply weavers with yarn, and drapers and bleachers purchased weavers' webs. If the drapers played a key role in organizing and marketing the cloth, the bleachers were responsible for initiating profound long-term changes in the industry. Sometime during the eighteenth century, mechanical power was applied to bleaching, thus making it the first process in the industry to experience mechanization. From the late 1780s, following Bertollet's discovery of the bleaching properties of chlorine gas, it became possible for bleaching to be carried on throughout the year. Bleachers and their agents made more frequent appearances at brown linen markets in order to buy webs for their bleach-greens (on which linen was laid on the grass to be bleached). At the same time it is clear that bleachers might supply yarn to weavers and also play an important role in the export of linen across the Irish Sea and beyond. These changes in the scale and function of bleachers had fundamental long-term significance because bleachers turned into drapers and linen merchants provided some of the earliest machine spinning and weaving.

The linen trade contributed much to the development of an embryonic credit structure based on bills of exchange. In the absence of formal banking facilities credit networks evolved directly between northern bleachers and Dublin, and between English merchants and bankers. As direct shipments from Ulster to Britain increased, the intermediate role of Dublin declined: in 1710, 88 percent of Irish linen exports to Britain had been shipped through Dublin, but by 1780 that proportion had fallen by half. A reflection of the growing importance of the industry and the reorientation of trading links was the construction in 1785 of the White Linen Hall in Belfast. This in turn led to a further decline in the proportion of linen sent to Dublin, even from such major markets as County Armagh, which traditionally had strong links with the capital. Research in the 1980s into the late eighteenth-century business community has shown that although the construction of the Linen Hall was originally advocated by drapers, other merchants quickly came forward and used the hall's management committee in order to organize shipping arrangements and the discounting of bills of exchange. This same group of merchants has also been identified as the driving force behind the formation of the Belfast Chamber of Commerce in 1783 and of the Belfast Harbour Board two years later. These developments contributed considerably to the emergence of Belfast as a leading commercial center.

Cotton and the Transition to Factory-Based Production

The role of Belfast as a center of textile production was transformed in the late eighteenth and early nineteenth centuries by the cotton industry, and its origins as a factory town may be said to date from this period. The need to import raw cotton, coal, and machinery meant that the Ulster cotton industry tended to be concentrated in coastal towns such as Belfast, Bangor, Larne, and Carrickfergus, although it also spread inland. In origin the region's cotton manufacturers were from a range of backgrounds, including haberdashery and, significantly, linen bleaching and drapery. The industry was stimulated by the wars with France and by the Linen Board, which provided, inter alia, some thirteen grants for cotton-spinning machinery in 1782. In 1797 the board was authorized to grant up to £350 to firms wishing to purchase steam engines. The principal type of cotton produced in Belfast was muslin, a finer and lighter product than calico, though the latter was also made. The area's experience with the manufacture of fine linens ensured a ready supply of skilled labor that could easily move into muslin production.

Another factor that contributed to the switch to manufacturing muslin rather than linen was the ease with which muslin could be bleached, making it an attractive business for the small enterprise. The rise of the large bleaching businesses forced many smaller concerns out of business, but some of them were able to turn to muslin bleaching. The Ulster cotton industry was heavily reliant on imported technology, which often proved extremely troublesome to install and maintain. Belfast did not really begin to acquire a textile machine–making industry until the 1830s and 1840s, and this was in response to the growth of flax spinning. Although the cotton industry failed to lead to the development of textile machine making, it certainly helped to stimulate credit networks and banking facilities.

Banks began to develop partly in response to demands of the cotton industry, but it was the linen industry that was of much greater significance for the region and its banks in the long run. The main reason for this lies in the contraction of the cotton industry in the late 1820s and 1830s and the introduction of factory-based wet spinning of flax at the same time. However, the ascendancy of Belfast within the Irish linen trade has been shown to predate the coming of joint-stock banking and the inauguration of regular steamship services (both in the mid-1820s). For the triennium of 1820 to 1822, six ports accounted for 98 percent of Irish linen exports, and the share of Belfast (43%) was double that of Dublin. Particularly striking were the links between Belfast and Liverpool: the latter had taken a mere 8 percent of Irish linen exports, but fifty years later the proportion was 61 percent.

The advent of the wet-spinning process provided cotton spinners with an attractive alternative in the years after 1825, when trade was depressed. Those with a great deal of fixed capital already committed in Ireland thus had an opportunity and a strong incentive to move into power spinning. For these reasons, then, it is no surprise that two of the first entrants into power flax spinning were a bleacher and a cotton manufacturer, and this in turn helps us to appreciate the technological and organizational developments in Ulster textile industries that had taken place since the late eighteenth century. Bleachers like the Murlands of Castlewellan in County Down integrated backwards into spinning, building their first mill in 1828 and their second in 1836. This set a pattern for several other bleachers such as the Richardsons at Bessbrook in County Armagh and the Adairs at Cookstown in County Tyrone. The Murlands' enterprise was an early example of factory flax spinning in the countryside using a mixture of water and steam power. The Mulhollands, by contrast, were the first to open an entirely steam-driven mill in Belfast, and their move was the first of several made by former cotton spinners who now converted to flax. By 1834 twelve mills had been built or converted and a further nine were in the process of construction. Such a rate of expansion had never been achieved by the Ulster cotton industry. Provincial production of linen was responsible for the growth of industrial villages in many parts of Ulster, especially in the period 1830 through 1870. Although most of these were in the east, some—like Sion Mills in County Tyrone, developed by the Herdman family from 1835—were in the west.

The major factor underpinning the expansion of factory spinning (and, later, factory weaving) was the growth of export markets, especially the United States. Over 40 percent of Ulster's linen exports went to the United States by the late 1850s. Textile machine making emerged soon after the advent of power spinning and by the mid-1830s was beginning to make a noticeable impact on the local economy, lessening dependence on imported technology. Mill construction continued apace, with only brief interruptions in commercial crises such as that of between 1847 and 1848, so that by 1850 there were sixty-nine spinning mills in Ireland, the vast majority of them in Ulster. One consequence was a massive increase, perhaps a doubling, in the demand for flax during the 1840s.

The advent of mill-spun yarn had an adverse effect on those households involved in hand spinning. Here both demand and wages declined drastically, and this had an adverse effect on the viability of households, especially in peripheral areas of northwest and southwest Ulster. Before the Great Famine the decline of the linen industry in these areas led to deindustrialization and emigration. To a limited extent the impact of decline was offset by the growth of embroidery and sewing trades, which, though present from the late eighteenth century, grew rapidly from about 1830 to the 1850s. Organized largely by Scottish firms, working through agents resident in Ulster, this work perhaps served as a brake on depopulation as well as a more genteel alternative to mill work for young girls of "decent" family.

Commentators on the eve of the Great Famine were well aware of the pace of growth of Belfast, and that such growth was unprecedented. Within the Chamber of Commerce by the 1820s, although textile interests (cotton, linen, and wool) were dominant, there were also representatives from shipbuilding and engineering, tanning, distilling, printing, and, among many from the service sector, members drawn from accountancy, banking, and insurance. No group lobbied more energetically on behalf of Ulster business from the later eighteenth century and the chamber continued to grow in membership, and in the range of businesses in which members were involved, during the nineteenth and early twentieth centuries. Acutely aware of the significance of Britain as a source of raw materials and intermediate goods, especially the coal and iron that under-pinned industrialization, and as a market for manufactured goods, the chamber lobbied hard for more regular and cheaper cross-channel transport and postal services and for lower port dues.

From the 1820s the chamber lent its support to the promotion of railways in Britain and Ireland as well as to improvements in mail services between Belfast and the west of Ireland. It attached great importance to free trade across the Irish Sea and declared in 1834 that "it is now generally admitted that had a free intercourse existed between this country and England since the Union such as now exists that our manufactures would be at present further advanced than they are." This comment points to an increasingly important characteristic of the industrialization process in Ulster: it was perceived to be underpinned by the Act of Union of 1800. Many businessmen, especially in the larger export-oriented firms, were Protestant and the view that industry and trade were dependent on the British connection resulted in a strong and militant unionism in the business community. Indeed, Ulster unionism could scarcely have become the force it did from the 1880s to partition without the financial support and leadership from industrialists and merchants. The chamber also intervened in many other areas of public policy. Thus in December 1846, in the face of the "great national calamity" of the famine, it called for the "suspension of the use of grain in Breweries and Distilleries whereby the food of more than five millions of people is daily consumed in the United Kingdom."

The mechanization of flax spinning was of fundamental importance in extending the industrialization process in northeast Ulster. The low wages of handloom weavers, together with the technical deficiencies in the power weaving of the fine linens in which Ulster specialized meant a considerable delay in the widespread adoption of power looms. However, the labor supply was dramatically curtailed through death and emigration in the late 1840s, and as a consequence wages rose by some 20 percent to 30 percent between 1848 and 1852. This particular problem was compounded as late as the early 1850s because weavers' were to some extent locked into seasonal agricultural work. Under these circumstances the pressure to refine power loom technology intensified during the 1850s, and necessary improvements were made just in time for Ulster to reap huge benefits from the unprecedented demand for linen occasioned by the "cotton famine" during the American Civil War of 1861 to 1865.

In many ways the American Civil War period was a crucial one for the Ulster linen industry, with much new investment. A number of spinning and bleaching firms integrated weaving into their operations, but there were now more opportunities for specialist, single-process, weaving enterprises to develop. In fact, the number of looms in both types of enterprise was almost exactly equal by 1875, though there was a marked tendency for the specialist firms to increase their share of weaving capacity during the late nineteenth and early twentieth centuries. At the same time a relatively small number of large, fully integrated firms developed and became the giants of the industry between the 1860s and 1914. This process was accelerated by the decision, first taken by the York Street Flax Spinning Company in 1864, and soon by many others, to adopt a joint-stock form with limited liability. It was also aided by an immense expansion of bank credit, by the availability of flax increasingly imported from Europe, and by the development of a textile-engineering sector, which by mid-century also competed successfully in American and European markets.

The transition to factory production in the linen industry was the most significant feature of industrialization in nineteenth-century Ireland and led to a much greater role for Belfast in both manufacturing and services. Linen was also an industry subject to economic fluctuations, with frequent downturns in business leading to short-time working and unemployment in, for example, 1879, 1886, 1893, 1904, 1908 through 1909, and 1912. The majority of workers in the linen industry as a whole were women, but the diversification of the economic base in Belfast meant that men increasingly found work, and relatively high wages, in engineering and shipbuilding. The two shipyards Harland and Wolff, established in the late 1850s, and Workman Clark, set up in 1879, though subject to considerable short-term fluctuations in output, grew over the long term. From the 1880s to the First World War they came to epitomize the success and self-confidence of industrial Belfast. Good business connections, bank assistance, design flair, highly skilled labor, and a massive expansion in world seaborne trade and travel, all combined to underwrite growth. On the eve of the First World War employment at Harland and Wolff had reached 14,000. Other industries such as rope making and various branches of engineering developed as spin-offs and helped to sustain expansion when the rate of expansion of the linen industry slowed. By 1911 these sectors, together with textiles, accounted for some 40 percent of total employment in the city. While three-quarters of the working population of Belfast was described as industrial, much of it in factory production and employed by medium-sized and large firms, the proportion in Dublin was just over half, and much of this was in craft industries or in unskilled occupations. For example, less than 20 percent of the work force of Guinness, Dublin's largest employer, was skilled. The population of Belfast grew from 19,000 in 1801 to 387,000 in 1911, and increasingly the city depended on a labor force born outside its boundaries: Less than 40 percent of the population had been born inside the city in 1901. Belfast was also exceptional in Ulster terms. Derry, the province's second city, had no comparably dynamic industrial base; rather, it developed a specialization in shirt making, collar making, and embroidery, mostly using female labor.

The industrialization process in Ireland conformed to a pattern of regional growth and decline often observed in Europe since the eighteenth century. Dependence on overseas trade led to an increasing concentration of industry in the northeast in general and Belfast in particular. The economic problems following the 1914 through 1918 war inflicted permanent damage on the staple industries and helped to ensure that Northern Ireland after 1920 would never have the economic self-confidence of pre-1914 Ulster and would, moreover, always have a substantial unemployment problem.

SEE ALSO Banking and Finance to 1921; Brewing and Distilling; Factory-Based Textile Manufacture; Industry since 1920; Rural Industry; Shipbuilding; Transport—Road, Canal, Rail; Women and Children in the Industrial Workforce

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Daly, Mary E. Dublin: The Deposed Capital: A Social and Economic History, 1860–1914. 1984.

Dickson, David. "The Place of Dublin in the Eighteenth Century Irish Economy." In Ireland and Scotland, 1600–1850, edited by Thomas M. Devine and David Dickson. 1983.

Geary, Frank. "Deindustrialization in Ireland to 1851: Some Evidence from the Census." Economic History Review 51 (August 1998): 512–541.

Hepburn, Anthony C. A Past Apart: Studies in the History of Catholic Belfast. 1996.

Macneice, Denis S. "Industrial Villages of Ulster, 1800-1900." In Plantation to Partition, edited by Peter Roebuck. 1981.

Murphy, Maura. "The Economic and Social Structure of Nineteenth-Century Cork." In The Town in Ireland, edited by David Harkness and Mary O'Dowd. 1981.

Ó Gráda, Cormac. Ireland: A New Economic History, 1780–1939. 1994.

Ollerenshaw, Philip. "Industry, 1820–1914." In An Economic History of Ulster: 1820–1939, edited by Liam Kennedy and Philip Ollerenshaw. 1985.

Ollerenshaw, Philip. "Businessmen and the Development of Ulster Unionism, 1886–1921." Journal of Imperial and Commonwealth History 28 (January 2000): 35–64.

Solar, Peter. "The Irish Linen Trade, 1820–52." Textile History 21 (spring 1990): 57–85.

Takei, Akiro. "The First Irish Linen Mills, 1800-1824." Irish Economic and Social History 21 (1994): 28–38.

Philip Ollerenshaw

Industrialization

EARLY THEORIES OF INDUSTRIALIZATION

DEPENDENCY THEORY

EXPORT INDUSTRIALIZATION AND OTHER APPROACHES

DEINDUSTRIALIZATION

BIBLIOGRAPHY

Industrialization refers to a broad process through which industry displaces agriculture and assumes a dominant role in a society’s economy. It involves the extension of commodity production on a large scale and the emergence of wage labor as the principle mechanism for the organization of work.

Historically, this shift has often come with a number of concomitant changes, including the formation of a united territory, where the state either created a legal system to protect property rights or directed the industrialization process itself; an increase in agricultural productivity, allowing a surplus population move into industry; the diffusion of scientific knowledge and technological know-how; the creation of a workforce socialized into an ethos of time discipline; and a willingness of investors or the state to commit large funds to industry rather than to speculation, plunder, or military expenditure.

EARLY THEORIES OF INDUSTRIALIZATION

Industrialization began in Britain at the end of the eighteenth century, and it soon spread throughout Europe, North America, and Japan. However the process was profoundly uneven, particularly as countries combined elements copied from the more advanced regions with their own traditional social practices. In his classic 1969 account of the French “paradox,” Tom Kemp argued that while the Revolution of 1789 created the most favorable legal conditions for capitalist development, it also, ironically, allowed the peasantry to stay more rooted to the land and gave small-scale preindustrial forms of capitalism new opportunities for commercializing agricultural products. On a more general level, Alexander Gerschenkhron claimed that backwardness (essentially defined as a divergence from the British model) led to a “tension” that was only resolved when larger institutions such as banks intervened to mobilize scarce capital for an industrialization project. In the case of Germany, for example, the banks helped create an “organized capitalism,” through which investment was concentrated in coal mining, iron and steel-making, electrical and general engineering, and chemical plants. Earlier industries that had played a key role in Britain’s development, such as textiles, were of fringe interest because the banks strategically concentrated on new lead industries.

The pressure to industrialize, when combined with a scarcity of capital and a lack of domestic markets, also led to the intervention of another key player: the state. For Adam Smith and the neoclassical school, the only role assigned to the state was that of the famous “night watchman,” who patrolled the perimeter of the economy guaranteeing property rights and security. Subsequently, many writers have questioned this minimalist role. For Ernest Gellner, writing in the 1980s, the very social and geographical mobility that industrialization required forced the state to take measures to standardize the cultural outlook of its population through the introduction of national curricula in schools. Gerschenkhron went further, arguing that a stronger state role might be needed to break the barriers of stagnation. Merely providing the promise of rewards for entrepreneurial efforts might not be enough. Writing in a decade when China was still an impoverished rural society, he noted that “capitalist industrialization under the auspices of socialist ideologies may be, after all, less surprising a phenomenon than would appear at first sight” (Gerschenkkhron 1952, p. 25).

In what the American economist Paul Krugman has called the period of “high development theory,” in the late 1940s and 1950s, there was a consensus that a “visible hand” was necessary to propel a country towards industrialization. The Polish economist Paul Rosenstein-Rodan noted in 1943 that balanced growth and a “big push” were also required. Balanced growth was needed so that a complementarity of demand would reduce risk in investment. When investment occurred on a wide front, new producers could become each other’s customers, thus reducing the risk of not finding a market. In addition, the state had a key role to play in developing infrastructure and training a workforce. While the concept of “balanced growth” was questioned by Albert Hirschman in 1958, the consensus was that industrialization would emerge from increased savings directed by the government to industry.

DEPENDENCY THEORY

Outside the field of conventional economics, a more radical critique of Smith’s neoclassical model also developed. Starting with Raul Prebisch, who led the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) from 1948 to 1963, this critique emphasized the wider structural relationships into which poorer countries were inserted. Prebisch and the other dependency theorists claimed that the nations on the periphery were often forced to supply primary produce to metropolitan countries in return for industrial and consumer goods. Far from gaining a comparative advantage by specializing in exporting products where they had natural advantages, however, they had to produce ever more primary goods to obtain the same quantity of manufactured goods. The solution, according to Prebisch, was import substitution, through which tariffs are imposed on goods from industrialized countries so that a space can be created for domestic manufacturers to produce simple consumer goods.

Dependency theory took on a more radical direction in the hands of Paul Baran and Andre Gunder Frank. For Baran, dependency was characterized by a dual economy comprised of a large agriculture sector with extremely low productivity and a small industrial enclave that could not find a domestic market for its goods. Shifting Marx’s paradigm, Baran argued that a surplus was extracted from the peasantry and appropriated by landowners, moneylenders, merchants, and a mainly foreign capitalist class. These groupings had little interest in development and often functioned as a “comprador class,” siphoning off the surplus to foreign capital and gaining privileges as a result. The only solution was extensive state intervention to promote national development.

Frank agreed that the cause of underdevelopment was the extraction of a surplus by metropolitan countries. This, however, occurred primarily through trade itself, rather than through a dualistic structure of the economy. The trading relationship with the metropolis affected all sectors of society and led to the draining away of resources. There was no original state of underdevelop-ment from which such countries had to incubate; they were underdeveloped through coming into contact with the metropolitan powers. The route to development lay, therefore, in delinking from the world economy.

Not everyone, however, shared this pessimism about the dual-sector model in underdeveloped countries. For W. Arthur Lewis, who won the Nobel Prize in Economics in 1979, the dual-sector economy meant that the modern capitalist sector could draw on a relatively unlimited supply of labor from the more traditional sectors without having to raise wages significantly. This meant that it could expand until the absorption of surplus labor was complete. Adopting a pragmatic approach to the use of public and private enterprise in the modern sector, he argued that it could give a positive feedback to the traditional sector by, for example, creating markets for its commodities.

EXPORT INDUSTRIALIZATION AND OTHER APPROACHES

The demise of dependency theory coincided with the emergence of a number of newly industrializing countries, particularly the “Asian Tigers” of South Korea, Singapore, Taiwan, and Hong Kong. By seeking a niche in the world economy and opening their economies to foreign investment, these nations appeared to overcome the obstacles to development through adopting an export industrialization program. As a result, contact with the global economy did not intensify underdevelopment, but instead allowed them to rapidly industrialize.

As the process of industrialization has spread, however, some older predictions are also being questioned. According to Simon Kuznets’s famous hypothesis, economic inequality should increase during the early stages of industrialization because an income gap will grow between those in rural and urban areas. Over time, however, this inequality should decrease as mass education opens the possibility of a more meritocratic society. Yet while this may appear to have been the case up to the 1970s, there has been a return to growing levels of inequality since then. As outlined by Robert Pollin in Contours of Descent (2003), evidence from the United States indicates that the share of wealth held by the top 10 percent of the population has grown, and that the difference between the pay of the average CEO and that of the average employee has multiplied considerably.

DEINDUSTRIALIZATION

Current debates also focus on deindustrialization. According to Robert Rowthorn and Ramana Ramaswarmy, the share of employment in industry in the twenty-three most advanced countries declined from 28 percent of the workforce in 1970 to 18 percent in 1994. The growth in services and the development of a “knowledge society” has led many to argue that the transition to a postindustrial society has already occurred. However, this ignores the fact that modern societies continue to rely heavily on mass-produced goods, and it fails to explain how most foreign direct investment (FDI) is still going to the advanced industrial economies, rather than to those with an abundance of cheap labor. The rise in employment in services may, in fact, be the result of the relatively slower growth of labor productivity in that sector when compared to manufacturing. The process of industrialization, therefore, appears to still have a long way to go.

SEE ALSO Dependency Theory; Developing Countries; Development Economics; Economic Growth; Frank, Andre Gunder; Industry; Knowledge Society; Lewis, W. Arthur; Modernization; Prebisch-Singer Hypothesis; Terms of Trade; Unequal Exchange

BIBLIOGRAPHY

Baran, Paul. 1957. The Political Economy of Growth. New York: Monthly Review Press.

Frank, Andre Gunder. 1967. Capitalism and Underdevelopment in Latin America. New York: Monthly Review Press.

Gellner, Ernest. 1983. Nations and Nationalism. Ithaca, NY: Cornell University Press.

Gerschenkron, Alexander. 1962. Economic Backwardness in Historical Perspective. Cambridge, MA: Belknap Press.

Hirschman, Albert O. 1958. The Strategy of Economic Development. New Haven, CT: Yale University Press.

Kemp, Tom. 1969. Industrialization in Nineteenth-Century Europe. London: Longmans.

Krugman, Paul. 1992. Toward a Counter-Counter-Revolution in Development Theory. In Proceedings of World Bank Annual Conference on Development Economics, 15–38. New York: Oxford University Press.

Kuznets, Simon Smith. 1965. Economic Growth and Structure. New York: Norton.

Lewis, W. Arthur. 1954. Economic Development with Unlimited Supplies of Labour. The Manchester School of Economic and Social Studies 22 (May): 139–191.

Lewis, W. Arthur. 1979. The Dual Economy Revisited. The Manchester School of Economic and Social Studies 47 (3): 211–229.

Pollin, Robert. 2003. Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity. London: Verso.

Rosenstein-Rodan, Paul. 1943. Problems of Industrialization of Eastern and Southern Europe. Economic Journal 53: 210–211.

Rowthorn, Robert, and Ramana Ramaswarmy. 1997. Deindustrialization: Causes and Implications. IMF Working Paper. Washington, DC: International Monetary Fund.

Roxborough, Ian. 1979. Theories of Underdevelopment. Atlantic Highlands, NJ: Humanities Press.

Kieran Allen

Industrialization

Industrialization, an increase in the proportion of total gross domestic product (GDP) resulting from the manufacture of goods in mechanized factories. This process began relatively late in Latin America and has, partly as a consequence, developed slowly and unevenly. Since the conquest and colonization of Latin America by European powers, the economies of the area have been oriented toward the production of agricultural commodities and mineral resources for export. While Latin America possesses the natural and mineral resources required for industrial growth, the international division of labor has not favored the creation of manufacturing enterprises. The export orientation of Latin America, fashioned during three hundred years of colonial rule, retarded the growth of a domestic market, limited the purchasing power of domestic consumers, and either obstructed or concentrated capital formation. Some development theorists explain the relative weakness of the industrial sector as a reflection of the natural comparative advantage enjoyed by Latin American countries in the production of tropical commodities such as coffee, sugarcane, and bananas. Others argue that agro-export specialization was forced on Latin America by imperial powers whose industrial growth required a steady supply of primary materials and captive markets for their manufactured products. Whatever the cause of industry's belated appearance, the fact remains that industrial production did not surpass agricultural output in any of the Latin American republics until the mid-twentieth century.

Industrialization resulted from deliberate government efforts to break out of an international division of labor in which Latin America specialized in agricultural exports. Government policies have been influenced by a bitter initial experience with free-trade policies in the early independence period. Spanish and Portuguese colonial policies permitted a degree of growth in small cottage industries. In colonial Mexico a primitive textile industry developed in the eighteenth century. While English textile plants mechanized the production process, the Mexican plants (obrajes) mass-produced cotton textiles by using cheap manual labor working inefficient looms, yet satisfied a substantial portion of Mexican demand for cotton textiles. As less expensive and higher-quality English textiles flooded the market after the lifting of trade restrictions in the early independence period, these native industries were wiped out by the competition. Subsequent efforts to revive the textile manufacturers failed, but the political leadership in Mexico and elsewhere learned that weak native industries could not modernize and grow stronger without substantial government protection.

With the spread of liberalism in the nineteenth century, governments adopted policies that encouraged the development of mechanized factories. The first stage of industrial development occurred between 1850 and 1914, when a dramatic increase in export production, combined with indirect government incentives for industry, established the foundations for the region's first manufacturing plants. Railroad construction, designed primarily to facilitate agricultural exports, also stimulated industrial growth by reducing transportation costs and uniting the domestic market. New banking laws and the confiscation of communal and church lands fostered capital accumulation, while educational reforms and immigration incentives helped to produce a skilled labor force. Capital surpluses generated in the industrializing countries also made some capital available for investment in Latin America.

Yet the major impetus for industrialization came from the dramatic expansion of agricultural exports. In São Paulo, Brazilian entrepreneurs diverted some of the proceeds from the coffee boom (roughly 1830–1910) to the establishment of factories producing the bags in which they exported a majority of the world's coffee. In and around Buenos Aires, a few meat-packing plants developed with the expansion of the cattle industry. While the early industries in Latin America were often tied to the export sector, the increase in agricultural productivity also expanded the domestic market for consumer goods. A few consumer-goods industries developed to supply domestic demand for processed foods, beer, cigarettes, shoes, and textiles.

Hence the first stage of industrialization is often referred to as an era of export-led industrial growth, characterized by the establishment of small, low-technology industries processing agricultural products or manufacturing light consumer goods for local consumers. The total contribution of industry to the GDP paled in comparison to the leading economic sector—exports of primary products—yet the foundations of Latin America's consumer-goods industry were laid in the late nineteenth century. The emergence of the manufacturing sector is reflected in the establishment of industrial organizations such as the Society of Manufacturing Development in Chile (1883), the Industrial Union of Argentina (1887), and the National Society of Industries of Peru (1897). Industry made its most significant advances in the largest countries, Argentina, Brazil, and Mexico, where natural and mineral resources, a relatively large domestic market, and a measure of capital accumulation favored the development of a manufacturing base. Mexico began producing steel in 1901, Argentina's industries employed 323,000 workers by 1915, and the Rio de Janeiro-São Paulo axis was a hub of industrial activity around the turn of the twentieth century. Even in the smaller countries of Central America a few consumer-goods industries had developed by 1900.

The onset of World War I disrupted international trading patterns and ushered in a second stage of industrial development, which lasted from 1914 to 1945. With war reducing demand for Latin American exports and cutting off imports, Latin Americans were faced with the choice of forgoing consumption of some manufactured goods or producing them in domestic plants. Governments chose to foster industrial development through import-substitution industrialization (ISI) strategies, a set of policies designed to promote the manufacture of products previously imported from foreign plants. While ISI is a development strategy associated with the post-World War II era, Latin American governments established the broad framework of ISI between 1914 and 1945. In their ad hoc responses to emergency situations, such as revenue shortages and scarcity, governments found that by increasing tariffs, a common practice for revenue-starved governments, and offering fiscal incentives, they could stimulate growth in the industrial sector. Protective tariffs and fiscal incentives made investment in industry more attractive to domestic entrepreneurs, who had always feared competition with British and American industries. Some foreign capitalists invested in South American industry, but the stimulus for industrial expansion was generated locally. Governments gave greater incentives to industry because the new factories provided employment for a growing urban population, reduced the total cost of the country's imports, and improved the national balance of payments.

From 1914 to 1945, through two world wars and one Great Depression, import-substitution policies accelerated the rate of Latin American industrialization. Between 1915 and 1947, the number of industrial plants increased from 40,200 to 83,900 in Argentina and from 13,000 to 78,400 in Brazil. During the same period, industrial employment increased from 45,000 to 176,000 in Chile and from 323,000 to 1,921,000 in Argentina. Most of the industrial expansion occurred in the primary or consumer-goods sector, but a few intermediate and heavy industries were established. Chilean factories manufactured paper, glass, and cement; Brazil produced iron and steel; and Argentina manufactured farm machinery. By 1950, the industrial output of Latin America exceeded agricultural production. Import-substitution industrialization policies, while they were not popularly labeled as such at the time, had transformed the economic structure of Latin America.

Industrialization also contributed to significant changes in politics and society. With the emergence of industries came an industrial bourgeoisie, a proletariat, and a larger middle class, most of them resident in increasingly more populous urban centers. Urbanization reflected the growth of industry and also promoted it, for with a larger domestic market came greater incentive to increase manufacturing capacity. Moreover, the industrial bourgeoisie and the proletariat, occasionally united in populist political parties by a charismatic leader, penetrated the political structure and pushed forward development programs that accelerated industrial development. This was especially true during the populist regimes of Getúlio Vargas in Brazil (1930–1945 and 1951–1954), Juan Domingo Perón in Argentina (1946–1955 and 1973–1974), and Lázaro Cárdenas in Mexico (1934–1940).

Populist politics of the post-1945 era ushered in the third stage of industrial development, an era one might label "dependent industrial growth" or "advanced import-substitution industrialization." Development issues took center stage in national politics, and reformists advocated more ambitious development projects to combat unemployment, raise the standard of living, and "catch up" with the more advanced industrial economies. Beginning in the late 1940s under the forceful leadership of Raú l Prebisch, an Argentine economist, the United Nations Economic Commission for Latin America (ECLA) urged the republics to promote industrialization in order to escape increasingly unfavorable world-market conditions for raw-material exporters. In the minds of policymakers in Latin America and the United States, industrialization became a panacea for a whole range of economic, social, and political problems that plagued the region. By the end of the 1950s, virtually every nation of Latin America was committed to rapid industrial growth.

Political factors at the national level coincided with and were perhaps strengthened by conditions that favored the growth of multinational industries. Industries based in Europe and North America, looking for new markets and new outlets for their capital, began to invest more heavily in Latin American industry. Prior to 1945, foreign investment was concentrated in agriculture, transportation, and mining. In the postwar period, foreign capital flowed in ever larger amounts to the manufacturing sector. In 1949, the German multinational company Volkswagen set up a plant in Brazil, and it was followed by Ford, General Motors, and Mercedes Benz in the 1950s. In the third stage of industrial development, governments attempted to harness and coordinate the domestic and foreign factors that propelled industrial growth to its highest levels in the 1970s.

While a manufacturing base existed in 1945, plants were generally small, inefficient, and incapable of competing directly with foreign enterprises. Moreover, with some exceptions in the larger countries, few plants existed in the intermediate and capital-goods sectors, the industries that generate self-sustaining growth by producing tools, machines, and equipment that are subsequently utilized in other productive enterprises. Consequently, ISI in the post-1945 period has involved a higher degree of state intervention to expand manufacturing into the so-called heavy industries. States erected tariff barriers, subsidized and occasionally nationalized industries, funded industrial development banks, constructed hydroelectric plants and other power facilities, and loosened restrictions on foreign investment.

Government policies stimulated even higher levels of foreign investment, as multinational corporations were eager to get behind tariff barriers and take advantage of government incentives. Although foreign capital contributed less than 10 percent of total investment per year, it helped establish key industries like steel, petrochemicals, pharmaceuticals, automobiles, and other capital-goods industries. While ECLa economists and some political leaders would have preferred to industrialize with only national capital, others argued that foreign capital was a necessary ingredient in the total development program. Without it, few countries could have developed intermediate and heavy industries.

International political factors also contributed to an increase in industrial productivity. In an effort to correct the conditions that bred revolutionary movements in Latin America, the United States committed itself to finance the Alliance for Progress in 1961. Over the next ten years, the U.S. government made available billions of dollars in low-interest, long-term loans to finance economic diversification, infrastructural development, and other projects that governments could not have financed otherwise on such flexible terms. A significant part of the development effort involved regional economic integration. Recognizing that the growth of industry required the expansion of markets, governments in Central and South America attempted to form common markets in which tariffs on manufactured goods would be gradually eliminated. While these integration measures failed to achieve all that had been intended, they helped to stimulate industrial exports and attract foreign investment.

A combination of domestic incentives, increased levels of foreign development assistance, direct foreign investment, and economic integration produced spectacular increases in industrial productivity. Between 1950 and 1978, Latin America's manufacturing sector grew at an average annual rate of 6.5 percent. The value of the industrial product increased more than five times, from $13 billion in 1950 to $77.2 billion in 1978. As shown in the accompanying table, the growth in industrial productivity was greatest in Brazil, which recorded a remarkable 12 percent annual growth rate between 1965 and 1973, during the so-called Brazilian miracle.

As a result of these high growth rates, the industrial sector replaced agriculture as the leading economic sector. In 1950 the agricultural sector accounted for 25 percent of the GDP, while industrial output represented 19.6 percent of the GDP. By 1978 industry was the leading economic sector in Latin America, accounting for 26 percent of the GDP. Brazil led all Latin American countries in the value added by the manufacturing sector, producing a record $97.7 billion in 1987. Mexico's industrial sector, however, contributed a greater percentage of the country's gross domestic product, as shown in the associated table.

High industrial growth rates were accompanied by significant changes within the manufacturing sector. The contribution of the consumer-goods sector to total GDP declined from almost 66 percent in 1950 to 40 percent in 1980. During the same period, the contribution of intermediate industries increased from 25 percent to 33 percent, and consumer durables increased from 11 percent to 25 percent. The development of heavy industries was most successful in Argentina, Brazil, and Mexico, which even began to export industrial products in significant quantities during the third stage of industrial development.

The world recession of 1979–1984 slowed the rate of industrial growth throughout the region, and Latin American industry has still not recovered the high growth rates of the previous decades. Burdened by foreign debt and shortages of foreign exchange, the most industrialized countries were still registering negative growth rates in the mid-1980s. The decline in industrial productivity forced policymakers to reconsider the strategies that had been so successful since World War II. In the 1980s and 1990s particularly, many countries embarked on neoliberal development strategies, eliminating tariff protection for industries, privatizing state corporations, and offering incentives to foreign manufacturers. International firms established export-manufacturing facilities throughout the region. Liberalization policies brought Latin American industries into global competition in more profound ways. In spite of macroeconomic instability, some industries survived and also succeeded. The manufacturing sector showed signs of recovery in the 1990s, but the adoption of neoliberal policies will not likely reduce industry's dependence on foreign capital and the state. Some of the most productive Brazilian industries (automobiles, tires, cement, and pharmaceuticals) are controlled by multinational firms. As these firms are free to repatriate profits, critics are openly questioning the contribution of foreign enterprises to Brazilian development. At the same time, business leaders have called for an industrial policy that will enhance national firms' competitiveness, encourage efficiency, and regulate unfair trading practices. Moreover, in the twenty-first century, several countries have derived sizable export revenues from traditional and new commodities. Thus, despite high growth rates in Brazil and elsewhere, industrialization has not been the panacea for the many social and economic problems faced by Latin America.

See alsoEconomic Development; Technology.

BIBLIOGRAPHY

Werner Baer, Industrialization and Economic Development in Brazil (1965).

Albert O. Hirschman, "The Political Economy of Import-Substituting Industrialization in Latin America," in Quarterly Journal of Economics 82, no. 1 (1968): 1-32.

Warren Dean, The Industrialization of São Paulo, 1880–1945 (1969).

Celso Furtado, Economic Development of Latin America, 2d ed. (1976).

Fernando Henrique Cardoso and Enzo Faletto, Dependency and Development in Latin America (1979).

Frederick Stirton Weaver, Class, State, and Industrial Structure: The Historical Process of South American Industrial Growth (1980).

Robert N. Gwynne, Industrialization and Urbanization in Latin America (1986).

Stephen H. Haber, Industry and Underdevelopment: The Industrialization of Mexico, 1890–1940 (1989).

Fernando Fajnzylber, Industrialization in Latin America: From the "Black Box" to the "Empty Box" (1990).

Additional Bibliography

Altenburg, Tilman, and Dirk Messner, eds. América Latina competitiva: Desafíos para la economía, la sociedad y el estado. Caracas: Nueva Sociedad: Instituto Alemán de Desarrollo (IAD); Deutsche Gesellschaft für Techni-sche Zusammenarbeit (GTZ), 2002.

Cárdenas, Enrique, José Antonio Ocampo, and Rosemary Thorp, eds. Industrialización y Estado en la América Latina: La leyenda negra de la posguerra. México, D.F.: Fondo de Cultura Económica, El Trimestre Económico, 2003.

Davis, Diane E. Discipline and Development: Middle Classes and Prosperity in East Asia and Latin America. Cambridge, U.K.: Cambridge University Press, 2004.

Dijkstra, A. Geske. Trade Liberalization and Industrial Development: Theory and Evidence from Latin America. The Hague: Institute of Social Studies, 1997.

Durand, Francisco, and Eduardo Silva, eds. Organized Business, Economic Change, and Democracy in Latin America. Coral Gables, FL: North-South Center Press, 1998.

Katz, Jorge M., and Ricardo Bielschowsky, eds. Estabilización macroeconómica, reforma estructural y comportamiento industrial: Estructura y funcionamiento del sector manufacturero latinoamericano en los años 90. Buenos Aires: Alianza Editorial, 1996.

Murga Frassinetti, Antonio. Industrialización y capital extranjero en Honduras. Tegucigalpa: Centro de Documentación de Honduras, 1999.

Olmedo Carranza, Bernardo. Apuntes sobre industrialización y sector externo en América Latina: El caso de México. México: Universidad Nacional Autónoma de México, Instituto de Investigaciones Económicas: Miguel Ángel Porrú a, 2006.

Schneider, Ben Ross. Business Politics and the State in Twentieth-Century Latin America. New York: Cambridge University Press, 2004.

Shadlen, Kenneth C. Small Industry in Postwar Latin America: Economic Internationalization and the Institutional Bases of Business Activism in Argentina, Brazil, and Mexico. Storrs: Center for Latin American & Caribbean Studies, University of Connecticut, 1999.

Ugarteche, Oscar. El falso dilema: América Latina en la economía global. Lima: Fundación Friedrich Ebert-FES (Perú); Caracas, Venezuela: Editorial Nueva Sociedad, 1997.

                                               Paul J. Dosal

INDUSTRIALIZATION

Manufacturing in the Middle East, with a legacy of state-led industrialization, remains underdeveloped and ill prepared for the challenges of globalization.

The countries of the Middle East and North Africa have failed to develop viable manufacturing sectors and industrialize in a way comparable to more dynamic countries in Southeast Asia and Latin America. After decades of state-led industrialization efforts, most economies of the region remain dependent on primary produce exports, labor remittances, and foreign aid, while few manufacture
goods that are competitive in international markets. Indeed, without tariff and quota protection and subsidies, most of the existing industries that have been established would fail to compete successfully in their own domestic markets. As a result, the economies of the region remain unprepared to meet the challenges posed by economic globalization and will be hard-pressed to provide sufficient employment and wealth generation for the growing populations of the region.

Overview

From the perspective of global economic history, the Middle East would appear to have the necessary prerequisites for successful industrialization given its manufacturing inheritance, artisan skills, and availability of finance. In the early postwar period, expectations for industrial modernization were high, yet half a century later the region's industrial sectors appear to be mismanaged and technologically deficient. Although conditioned by the experience of colonialism, this fate was not predetermined by geography, religion, or culture. For most economies of the region, it has rather been the result of authoritarian regimes failing to overcome the legacies of inward-oriented, state-led industrialization efforts through market reform and technological innovation. Meanwhile, economies across the region have been sustained by oil incomes, labor remittances, and strategic aid flows while suffering the strains of regional insecurity, leading to high spending on imported military equipment and diverting investment away from the region.

The Middle East has a strong preindustrial manufacturing tradition, for the ancient cities of the region served not only as centers of commerce but also as bases for handicraft manufacturing. The skills of Arab and Jewish craftsmen from Andalusia to Baghdad were renowned throughout the medieval world. Later in the sixteenth century, cities such as Isfahan in Iran had more skilled artisans than Paris, with more than half a million workers engaged in manufacturing.

In the eighteenth and nineteenth centuries, European capitalist penetration and various forms of direct and indirect colonialism led to the dislocation of indigenous economic patterns, while defensive modernization efforts, such as that of Muhammad Ali in Egypt, failed to sustain local industrialization. With the inability to protect local markets, European industrialization resulted in the relative deindustrialization of the Middle East. Small-scale artisan and domestic manufacturing for local consumption, however, continued and in some cases expanded in isolated markets. By the early twentieth century intense economic interaction with Europe did bring access to investment and technology, resulting in establishment of mechanized factories often owned by Europeans as well as ethnic and religious minorities.

These possible foundations for industrial development, however, were disrupted by the rise of nationalist movements that led to the evacuation and expropriation of the assets of much of the existing bourgeoisie. Postcolonial states led by a new class of reform-oriented elites took over the drive toward import substitution industrialization (ISI). With a heavy urban bias, these regimes viewed large-scale factory production as a marker of modernity and national independence. These projects, however, were often driven more by an interest in expanding state power and employment generation than long-range development goals. As a result, most industrial sectors remained dominated by state-owned enterprises and/or supported by tariff and quota protection and subsidies that have proved politically difficult to remove ever since.

Although state-led ISI efforts made impressive early gains, their inward-oriented development models soon faced crises. In the 1970s states such as Turkey, Egypt, and Tunisia adopted "open door" policies to attract investment, but only in the 1980s and 1990s did they implement substantial price liberalization and the privatization of state-owned assets. Economic liberalization spurred smaller scale, private sector investments in light manufacturing, textiles, and food processing.

Meanwhile, in the wake of the 1973 oil embargo the region witnessed a massive inflow of capital with the soaring price of oil. This income allowed the oil-rich states of the Persian Gulf to expand their modern infrastructure and oil-related sectors. Many would also later seek to diversify their economies.

Regional oil dependency, however, has resulted in "rentier" economies marked by excessive state expenditures, unproductive investments, and unsustainable import levels. At the same time, investment in turnkey projects rapidly increased industrial capacity but failed to sustain technological advancement or encourage local innovation. Moreover, oil incomes gave these states the ability to provide extensive educational and social welfare benefits for their populations while eliminating the need for taxation, reducing pressures for administrative accountability and political representation. The bulk of the excess capital generated by the oil boom was invested in the advanced industrial economies, and regional investment was mostly limited to tourism, real estate, and construction. The oil boom also produced rentier effects in the oil-poor states by generating flows of aid and private remittances.

Throughout the post-1945 era, some of the greatest negative factors inhibiting industrialization have been the successive wars, continuous political hostilities, and military authoritarian regimes in the region. In many states, more effort and finance has gone into building military might than into developing civilian industry. In fact, the Middle East devotes a greater share of income to arms purchases than any other region.

The wars and political tensions in the Middle East, caused by regional insecurity and external intervention, have also resulted in investors being put off by the risks and uncertainties. As investment flooded the "emerging markets" in the post–Cold War era, there has been little foreign direct investment in the Middle East, and major multinational companies are still reluctant to establish substantial production facilities in the region.

While economic fortunes vary considerably across the region, in general, Arab states have failed to encourage knowledge-intensive fields and make investments in research and development. And in the last two decades of the twentieth century, encompassing both the oil boom and the decline of oil prices in the late 1980s, per capita growth in the Arab states was on average 0.5 percent, which is well below the global average of 1.3 percent. As a result, most states remain ill prepared to face the challenges of economic globalization. In many states, large sections of the population view globalization as an externally driven threat to their well-being and way of life.

Country Experiences

Not surprisingly, Turkey has experienced the most success with industrialization in the region. The regional paradigm for state-led ISI was set by Turkey, which under Mustafa Kemal (Atatürk) established heavy industries in the 1920s and 1930s such as steelmaking and modern textile plants. These were planned on the Soviet model, primarily to serve a protected domestic market. These plants provided the inputs for more consumer-oriented industries such as clothing and household fabrics, and eventually consumer durable manufacturing was developed, including vehicle assembly using domestically produced sheet steel.

Despite the substantial size of the domestic market in Turkey, the import substitution process was running out of steam by the 1960s, and most of the state-owned industries were sustaining heavy losses. Change finally came in 1980, when economic liberalization measures were introduced, liberalizing prices, reducing subsidies, removing import restrictions, and, most importantly, letting the exchange rate find its own level in the market. An export boom resulted, encompassing a range of manufacturing sectors, and Turkey moved into balance of payments surplus as a result of flourishing trade with Europe and exports of manufactured goods to neighboring Middle Eastern countries.

Egypt's state-led industrialization drive under Gamal Abdel Nasser had also faltered by the 1970s, although it was the Arab–Israel War of 1967 that led to the end of development planning and economic policies based on Arab socialism. In the wake of the 1973 Arab–Israel War President Anwar al-Sadat initiated the infitah (open door policy) to attract foreign investment. Husni Mubarak followed up by introducing a partial liberalization of the economy, but it was much less sweeping than Turkey's changes. Egypt's subsidies have been reduced at the behest of the International Monetary Fund (IMF), some price controls removed, and the exchange rate floated.

There has been some privatization, but Egypt's industries are not yet internationally competitive, due as much to lack of quality control as to price. Although the large state-owned firms still provide substantial employment, the most dynamic firms are the privately owned export-oriented ones engaged in light manufacturing for international franchises. Much of Egypt's private capital, however, has been invested in real estate and service-sector businesses such as tourism.

Although oil was discovered in the Middle East before World War II, it was the development of the Organization of Petroleum Exporting Countries (OPEC) and the 1973 oil embargo that led to the rapid rise of oil prices, which in turn led to massive revenue increases in the oil-rich states such as Saudi Arabia, Kuwait, Iraq, and Iran.

In Saudi Arabia, the state-owned Saudi Basic Industries Corporation (SABIC) has become a major petrochemical producer working in collaboration with leading multinational oil and chemical companies. Jabal Ali has risen from the desert sands to become the leading industrial complex in the Persian Gulf and the largest in the Arab world. It produces not only a large variety of petroleum derivatives, but also fertilizers and steel. The petrochemicals are the feedstocks for plastics, and Saudi Arabia already has a range of downstream manufacturing, producing everything from transparent bags and other disposables to heavy durable plastic products.

Apart from Turkey, Saudi Arabia is the only Middle Eastern country to have experienced a considerable degree of industrial success. The Riyadh government took the lead because of the substantial scale of the financing involved, but Saudi Arabia, like Turkey, has a vigorous and growing private manufacturing sector. In Turkey, the comparative advantage lies in its modest labor costs and the adaptability and skills of its people. In Saudi Arabia, where much of the labor is foreign, the advantage is the abundance of energy and a tradition of trade and commerce.

With oil resources, abundant human capital, and an agricultural base, Iraq could have been expected to develop into a regional economic powerhouse. After an emphasis on agricultural development and decentralized food-processing factories in the early republican (post-1958) era, during the oil boom Iraq came to focus on its oil and gas sector. By the late 1970s Iraq had shifted toward heavy industry and armament manufacturing. In the wake of two wars and a decade of sanctions, however, its oil sector and industrial base became dilapidated, and it will be difficult to rebuild it in the wake of the U.S.-led toppling of the Baʿathist regime.

Iran saw its industrial output in steel and petro-chemical production decline throughout the 1980s following the disruption of the Islamic Revolution and the Iran–Iraq War. Many industrialists and managers left after the overthrow of the shah, and the war resulted in severe shortages that made it difficult for industries to obtain necessary raw materials and imported inputs. After the war the Tehran government engaged in a "construction jihad" to develop the country's infrastructure and educational system, but political isolation has continued to limit its industrial prospects.

Israel is the most industrialized country in the region and one of the few with a highly skilled work-force and a commitment to supporting research and development. Industrial development, however, has been hampered by isolation and continuing regional conflict. The Oslo peace process of the mid-1990s led to short period of exaggerated hopes in Israel and across the region for economic cooperation in inward investment, but these expectations fell with the decline of the peace process in the late 1990s. As a small state trying to diversify with a limited domestic market, Israel has suffered from its exclusion from regional markets, despite post-Oslo efforts towards regional normalization. Israel's trade with Egypt and Jordan has been minimal, though some low-skilled labor-intensive production has been outsourced to these states, which have peace treaties with Israel. Trade relations with the European Union have been difficult despite a cooperation agreement, and the United States is a somewhat distant market.

Cut diamonds remain a major industrial export for Israel, but earnings are static and the industry provides direct employment for only a few hundred skilled workers. Much of the country's industry is defense related and is dependent on the financial injections from the United States, which sustain the country's high level of military expenditure. Defense equipment, including aircraft, is exported to a number of countries.

In the 1990s Israel made considerable efforts to build up its civilian high technology industries, including electronics and software development. But Israel is a relatively high-cost producer and faces cutthroat international competition. Export growth in its high-technology sector came to a halt in 2000 with the high-tech bust in the United States and with the collapse of the peace process.

The peace treaty between Israel and Jordan failed to generate extensive economic cooperation, but Jordan has sought to diversify and liberalize its economy. With a small domestic market, Jordan had relied on mineral exports and trade with Iraq during its oil-boom phase, but since the mid-1990s has sought to promote tourism development, as well as export-oriented light manufacturing by granting incentives to firms located in qualified industrial zones (QIZ) and through its free trade agreement with the United States. Jordan has also developed a relatively successful pharmaceuticals sector, but its generic drug production might run into trouble with intellectual property rights.

In North Africa, Algeria's industrialization drive, supported by oil and gas revenues, was anchored by heavy-industry plans that failed to act as growth poles. Socialist planning has been disastrous, in particular, for truck and tractor assembly plants. Most consumer durables industries were established to serve the domestic market and have been protected from competition by tariffs and foreign exchange rationing. This also applies to Morocco, which never adopted socialist controls over its economy, as Algeria and Tunisia did. In fact, in Morocco, small-scale craft-based activities such as ceramics, woodcarving, metalworking, and clothing remain a source of strength, providing employment and output possibly equal to that of the country's industrial plants.

Tunisia and Morocco have pursued outward-oriented industrialization policies by promoting tourism development and building private-sector textile plants that carry out subcontracting work for European garment producers. These firms expanded during the 1980s and early 1990s, but have suffered from lower-cost Asian producers. Despite investment incentives and liberal laws on foreign capital, they have failed to attract considerable industrial investment from overseas. Both states have signed association agreements with the European Union that will gradually reduce tariff barriers on industrial products. In the meantime, Tunisia and Morocco have benefited from preferential access and have sought to promote an innovative industrial modernization program (mise à niveau ) for small- and medium-sized firms in order to meet the challenges of integration into European and global markets.

See also algeria: overview; economics; egypt; international monetary fund; iran; iraq; israel: overview; jordan; manufactures; morocco: overview; organization of petroleum exporting countries (opec); petroleum reserves and production; saudi arabia; tunisia: overview; turkey.

Bibliography

Henry, Clement M., and Springborg, Robert. Globalization and the Politics of Development in the Middle East. Cambridge, U.K.: Cambridge University Press, 2001.

Issawi, Charles. An Economic History of the Middle East and North Africa. New York: Columbia University Press, 1982.

Richards, Alan, and Waterbury, John. A Political Economy of the Middle East, 2d edition. Boulder, CO: Westview Press, 1998.

United Nations Development Programme. Arab Human Development Report 2003: Building a Knowledge Society. New York: UNDP, 2003.

rodney j. a. wilson
updated by waleed hazbun