Saturday, May 28, 2011

Development through Services

Traditionally many developing countries develop through manufacturing. Think about the US during the last 1800s and early 1900 and even China today. The path to economic growth is usually through the promote of manufacturing goods, developing countries have a comparative advantage in low skill manufacturing exports (think outsourcing). After a few decades incomes will start to rise allowing residents to invest in better education, technology, and health care. The process is slow, but with the right government it works, recent examples  include China, Singapore, Korea, Ireland, Taiwan, and Brazil (these are just a few). Of course with the wrong government the low-skilled work force will be exploited and the country will fail to growth.

Here is an article talking about the possibility of skipping manufacturing and go straight into services.

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