The Economics Book

178

INDUSTRIALIZATION

CREATES SUSTAINED

GROWTH

THE EMERGENCE OF MODERN ECONOMIES

T

he Russian-born economist

Simon Kuznets described

the emergence of the

modern economy as a controlled

revolution—in which the factory

replaces the farm. The resulting

higher living standards require

economic and social changes that

run deeper than might at first be

suggested by a simple, numerical

rate of growth. Kuznets called this

IN CONTEXT

FOCUS

Growth and development

KEY THINKER

Simon Kuznets (1901–85)

BEFORE

1750s French economist

François Quesnay states that

wealth comes from agriculture,

not from industry.

1940 British-Australian

economist Colin Clark argues

that economic growth involves

a shift from agriculture to

manufacturing and to services.

AFTER

1967 US economist Edward

Denison highlights the

important contribution of

technological change and

productivity growth to

economic growth.

1975 US economists Hollis

Chenery and Moshe Syrquin

find evidence that as

agriculture declines,

economies grow, and then

industry and services increase.

With new technology

and the growth

of manufacturing...

Workers benefit from

learning and contribute

toward cultural change

and business growth.

Succeeding generations

continue to benefit from

these cultural and

industrial advances.

Industrialized work

requires more skill

and education than

agricultural work.

... people increasingly

move from rural areas

to the cities for work.

Industrialization

creates sustained

growth.

process “modern economic

growth,” and showed how success

in achieving this is what sets

rich countries apart from the rest.

The key characteristic of Kuznets’

growth theory is that income per

person grows rapidly, even in the

face of an expanding population:

there are more people and they are

richer. This expansion is driven by

the spread of factories and machines.