about 7 million were lost because of developing-country competition and
about a million were created by additional exports to the south. This net loss of
6 million jobs was less than one-fifth of all the manufacturing jobs lost because
of deindustrialization since 1970.
The ‘naturalness’ of deindustrialization is supported by evidence that as
per capita incomes exceed a certain level the income elasticity of demand for
services exceeds that for manufacturers. So at very high income levels the
highest income elasticity for demand is found in service-sector activities, such
as retail, leisure, education, finance and media. Chang (2011) argues that we
are not living in a post-industrial age. The falling share of services in output
and employment is not due to slow output or demand growth but to the falling
relative prices of manufactured goods, due to increased productivity in manu-
facturing. Manufacturing, Chang states, is still more tradeable internationally
and still has greater scope for productivity gains, and so industrialization
continues to be crucial for any developing country seeking to raise living stan-
dards. This does not,however, mean that all governments should launch state-
led industrialization drives. Only a few developing countries have succeeded in
this; for every successful South Korea there is an unsuccessful Ghana.
Key points
- Two important ideas of long-term structural change are the Lewis model
and inequality. - Agriculture’s share of GDP or employment typically declines relative to
other sectors during growth and development. - Agriculture,long neglected as a declining sector, can have a positive impact
on long-term economic growth. - A shift from agriculture to industry has been a characteristic feature of
many contemporary and historical stories of growth and development. - Deindustrialization is now common among the most developed countries;
there are particular examples in Latin America in the 1980s and Russia in
the 1990s. - A shift to services, once a feature of the highest-income countries, has now
become general in countries of all income levels. - Contrary to earlier concerns, the rapid growth of the services sector can
have a positive impact on long-term economic growth in many contempo-
rary developed and developing countries. - Economists known as ‘structuralists’ argue that the structural features of an
economy do not merely passively change with economic growth but are
rather a key determinant of growth. In particular industry has advantages
over agriculture for promoting long-term economic growth. - Some have argued that the ‘China effect’ has changed the nature of the
global economy and there are now more permanent advantages to relying
on exports of raw materials.
Economic Growth and Economic Structure since 1750 181