capitalist system) but could not replace it with production based on need, and
much of the resulting output was unwanted junk. A central justification of
planning was that it could look ahead, focus on deliberate aims and achieve a
more co-ordinated pattern of industrial growth. The system did not manage to
abolish the boom and bust associated with capitalist market economies.
National income in China dropped by around 35 per cent in the early 1960s
(the Great Leap Forward) and by 13 per cent between 1966 and 1968 (The
Cultural Revolution) (Nolan, 1995). While socialist industrialization was
dramatic, in some cases socialist deindustrialization (see Box 8.2) was even
more so.
The role of services in structural change
A shift to services, once a feature of the highest-income countries, has now
become general in countries of all income levels.
If the highest elasticity of demand at high income levels is in service-sector
activities, such as retail, leisure,education, finance and media, the corollary is
that economies can expect to shift from industry to services at these income
levels. Not only is there evidence for this, but this shift seems even more gener-
alized,with a significant increase recorded in the service-sector share of GDP
after 1980 in all countries (Table 8.3). The world economy is now dominated
by services, in contrast to the old idea that developed countries exported manu-
factured goods and developing countries agricultural goods. In high-income
Economic Growth and Economic Structure since 1750 175Table 8.3 Services’ share of GDP in selected Asian, African and Latin
American countries, 1960, 1980, 2000 and 2010Country Services,value added as a % of GDP
1960 1980 2000 2010Argentina 52.4 67.4 59.1
Bolivia 48.6 55.2 49.9
Brazil 42.3 45.2 66.7 66.6
Burkina Faso 39.6 50.1 46.1 41.7
Côte d’Ivoire 39.0 54.4 50.9 50.0
Germany 56.5 68.2 71.2
India 38.2 39.9 50.8 54.4
Japan 57.9 67.4 71.5
Malawi 39.6 33.7 42.5 49.9
Morocco 50.5 56.0 55.0
Pakistan 38.2 45.6 50.7 53.4
Senegal 59.9 57.6 60.2
Uganda 35.0 23.5 47.7 50.3Source:Data compiled from World Development Indicators(2013).