Thirty years ago there was virtually no manufacturing in third world countries. Today manufacturing in the third world especially in The Far East and South America is quite substantial.
Many economists think that the industrialisation in LEDC is the fastest way to economic growth and social change; But is this entirely true? Industrialisation is the proportion of total GNP or GDP resulting in the manufacture of goods in factories.
Although industrialisation in S. America is considerable there are many problems. Firstly the infrastructure in South America is not sufficient; the roads, railways, electric power and other basic services are required if basic services in industry is to function efficiently. Most counties also have the shortages of appropriately skilled labour and capital and managerial expertise to get industries started. South America also has few advantages; useful raw materials and a relatively cheap labour force although not as cheap as Asian countries.
Industrialisation can be broken down into three stages. All south American countries have embarked on the first stage of industrialisation but very few have progressed to the next two levels.
The first stage of industrialisation is the processing of exports and the manufacture of basic consumer goods for local ,markets. In South America this stage is characterized by the establishment of low- technology industries. The pattem of production and the processing industries for export showed a high concentration of activity in and around port cities
The growth of cities, the additional incomes generated by export activities, and the spread of new technologies and consumer habits from the first world, all combined to create a larger market for consumer goods in most S. American countries. New factories were established in the towns and cities using simple technologies to produce basic consumer goods such as bottles. These new industries then replaced traditional production, much of which was located in rural areas. As a result there was not only a growth in manufacturing activity , but also a shift from domestic to factory production, and from rural to urban areas. '
Immigrants were important as entrepreneurs. They imported machinery, trained workers and established factories in many parts of S. America.
The second stage of industrialisation is import substitution. Import substitution involves the establishment of new factories to manufacture goods to meet local demands which were previously satisfied by imported goods .The new factories provide industrial jobs for local people. Import substitution also reduces the total cost of the country's imports by substituting home produced goods for imported goods which then improves the country's B of P .By the 1950s many south American countries were introducing incentives to promote import- substitution industrialisation.
The first industries to have been helped by import substitution were those requiring least capital to supply most of nat. and least high levels of technology such as textiles.
The establishment of the motor vehicle industry in Brazil is an example of relatively high technology form of import substitution.
Although import subt. Has quickened the pace of economic growth in S. America it is not without its disadvantages. The import substituting industry has generally been subsidised and protected by foreign competition by quotas or tariffs has meant that production has often been inefficient and the goods have been sold at high prices. This has increased the cost of living and reduced the quality of goods for local consumers. The new industries have become heavily reliant of govt. support to ensure their profitability, so the managers of these companies have often put more effort into influencing the govt. rather than improving industrial efficiency. '
The third stage of industrialisation is known as general industrialisation because it implies to the expansion of all types of industries. In particular it involves the establishment of industries to manufacture capital goods such as cranes and turbines. The intent of theses industries is not only to sell the goods to the domestic market but also to the foreign market. The Only s. American country to have fully entered this stage is Brazil. The Brazilian govt. had some policies to encourage general industrialisation like having heavy state investments in key industries.
Despite Brazil's heavy foreign debts, reliance on MNCs and . technological dependency is vital and many politicians feel that other countries should follow Brazil and start general industrialisation.
In the ~rst stage of industrialisation, the new industries were spread quite widely across S. America. Even in the first stage there were the beginning signs of industrial concentration but there were no major clusters of industry in specific cities. The industries established during the first stage were merely supporting activities for export orientated farming and mining.
In the second stage of industrialisation, major concentrations of industrial activity began to emerge in specific cities in S. America. It is also to be said that the regions that with the most secondary industrialisation i.e. South - East Brazil are the areas which have gone into the third stage of industrialisation. Also the industries established in the third stage have contributed to further concentration in the same regions which in turn has widened the incomes and wealth of the growing areas and the areas that are unable to flourish.
In general, the most profitable locations for the industries established in the second and third stages of industrialisation lie in the main cities and the most densely populated areas. These areas usually have relatively good infrastructure and labour supplies, as well as large concentrations of potential customers for the industrial products.
The concentration of new industries in and around the major cities is further encouraged because many industries operate more cheaply and easily if they are located close to other industries.
In most of the S. American counh-ies the concentration of manufacturing industry began to grow between 1930 - 1950. The cities which already had the most wealth were made even wealthier by this process of concentration.
Over the past few years govts. In S. America have become increasingly aware of growing problems between core and peripheral regions, and particularly between the major cities and the rural areas. Political pressures have tried to encourage the dispersal of industries throughout Brazil.
The govt. has tried to take upon to major policies. Firstly they have tried to offer financial incentives to try and establish industries into the peripheral areas. The second approach is to build other industries alongside the existing industries for example building a steel mill alongside an iron ore mine. There is however quite a substantial problem, with this. Multinational and domestic companies are mainly interested in maximising profits. They are unlikely to go to the poorer regions unless very large incentives are offered by the govt., or major natural resources are discovered near to the primary industry.
Industrial expansion has generated considerable economic growth in certain regions of Brazil such as Rio De Janeiro. Industrialisation in Brazil is not as clear cut as it is made out to be. Industrialisation can be considered undesirable because of its effects on health, agriculture and the environment. The large scale manufacture of cigarettes and alcohol has definitely generated some major health problems. The govts. Have been so enthusiastic to promote industrialisation they have far to often not paid enough attention to environmental controls, so that large scale pollution has often been a large side effect on industrialisation. Foreign companies often start high polluting industries in Brazil because anti - pollution measures demanded in First world countries are not required in Brazil. Industrialisation can contribute in quite a large way to the reduction of inequalities and the provision of basie needs in Brazil, if a careful balance is struck between concerns for economic growth, efficient production and social objectives. If industries have this in mind then they can be shown how to produce goods at low prices for a large percentage of the population. Industry could also be geared to generate income and employment for as many people as possible.
As like many other countries BraziI has the potential for its industries to yield tax revenues which can provide the govt. with the resources to improve the welfare of the population. There is however, a rather, large problem. Tax revenues are often quite small due to tax exemptions granted as incentives to persuade industrialists to establish plants, and because the industrialists then put pressure on the govt. to keep taxation low. The failure to yield large tax revenues is one of the many problems of Brazilian industrialisation. Industrialisation has also failed to reduce unemployment on a large scale, because population expansion has continued while industrial growth has involved new manufacturing plants which often employ very few people.
Another country which has developed due to industrialisation is Taiwan, however the results of this industrialisation are very different to Brazil.
Thiriy years ago Taiwan was just another very poor country with its G.D.P. per capita at around $ 120 per year. At the end of 1996 Taiwan's G.D.P. had risen to just below $ 14000, a rise in around $ 13500 in about 30 years. Taiwan over the last thirty years has had a remarkable turn around and much of this economic growth in Taiwan is due to the location of Trans National Companies developing into Taiwan.
Taiwan's industry today is mainly dominated by small to medium sized firms. The industry in Taiwan is extremely well diversi ied with the largest sectors being textiles, machinery and petro~ chemicals.
Japans rule over Taiwan endedjust after the second world war which modernised the countries infrastructure which in turn improved the road and rail networks.
Many TNCs decided to invest in Taiwan due to the fact that it has a few advantages over investing in the UK and the US. The main advantage of course being the cheap labour force. Today however cheap labour in Taiwan is virtually non- existent. Industries that rely on a cheap labour force a barely seen today in Taiwan. Firms that used to locate in Taiwan are now locating in countries such as Indonesia and China.
Nowadays the Taiwanese workforce is its biggest asset. It might not be the cheapest but it is one of the most educated anywhere in the world.
Today Taiwan is still growing from strength to strength. The Brazilian govt. can only hope that one day its industrialisation techniques will be as successful as Taiwan's.