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Noah Smith

Countries Can Still Get Rich From Manufacturing

Keep an eye on Vietnam and Bangladesh.

Industrialization is still a road to development.

Industrialization is still a road to development.

Source: Bloomberg

Since the Industrial Revolution began, every country that hasn’t been lucky enough to have huge oil deposits has gotten rich the same way: by getting good at manufacturing. Countries like the U.K., Germany, the U.S, Japan, and South Korea all became world-class manufacturers long before their economies began to shift toward services. More recently, a new crop of almost-developed countries including Malaysia, Poland, Turkey, China, Romania, Thailand and Mexico have also strengthened their manufacturing capacity.

Economists like Ha-Joon Chang and Dani Rodrik and writers like Joe Studwell have argued that intentional promotion of manufacturing exports is crucial for this kind of development. In a 2008 paper, Rodrik summarized much of the empirical and theoretical case in favor of industrial policy. “Development,” he writes, “is fundamentally about structural change” toward producing high-value exportable products -- most of which tend to be manufactured goods. Competing in export markets also forces a country’s producers to increase productivity and enables them to adopt advanced foreign technologies.