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What is Industry?

In its broadest sense, industry is any work that is undertaken for economic gain and that promotes employment. The word may be applied to a wide range of activities, from farming to manufacturing to tourism. It encompasses production at any scale, from the local—sometimes known as cottage industry—to the multinational or transnational.

In a more restricted sense, industry refers to the production of goods, especially when that production is accomplished with machines. It is this limited definition of industry that is embodied by the notion of industrialization: the transition to an economy based on the large-scale, machine-assisted production of goods by a concentrated, usually urban, population of workers. Manufacturing, which literally means "making by hand", has come to describe mechanical production in factories, mills, and other industrial plants.

The Continuing Industrial Revolution
The experience of some of the world's oldest and largest industrial economies demonstrates the stages of industrialization. In the pre-industrial economies of the United Kingdom and the countries of Northern Europe, most activity was directed towards commerce, concentrating on trading with countries in their empires. Some people still lived at a subsistence level, concentrating on the production of food. Technology was comparatively primitive, and any crafting of wood and metal goods was generally done to support farming, trade, or to provide hardware for everyday use. Long-distance transportation of goods was rare. Market towns acted as trading centres for the exchange of foodstuffs and other local products. Natural events, such as crop failures induced by weather or disease, could easily upset the pattern of economic activity. The opportunity to accumulate capital to fund economic growth and generate more wealth was limited.

By the middle of the 18th century, the Industrial Revolution was under way. This began in the United Kingdom, but followed soon after in other countries of northern Europe and, from the 1790s, in the United States. The process of industrialization gathered pace with every decade that passed. Although a significant amount of manufacturing took place in rural areas, many industries located in the emerging cities. People were attracted to these centres by the lure of work, and the processes of urbanization and industrialization became intimately linked. In 1800, only 25 per cent of Britain's population lived in cities or towns; by 1881 it was 80 per cent. The production of cotton goods destined for markets in India and South America led the way in the UK. This was followed on a larger scale by coal and iron and steel at the end of the century. One industry supported another. Coal was needed to make iron and steel to build ships and railways, which in turn required coal as fuel. As heavy industry thrived and manufacturing and transport technologies improved, industrial regions developed in the north of England; the Ruhr Valley in Germany, northeast France, and the Meuse Valley of Belgium.

Large-scale industrialization in the US was based largely on the European model. By the end of the 19th century, the United States had surpassed the UK in the production of iron and steel. The abundance of raw materials, a rapidly growing population, and the adoption of innovations such as the telegraph, the telephone, the electric light, and the refrigerator, along with petroleum products, provided the basis for a boom in manufacturing. Industry spread from its original centre in the northeast of the country towards the Great Lakes and the Ohio Valley creating a powerful and prosperous manufacturing belt stretching from the East Coast to the Midwest.

The main contribution to world manufacturing made by the US in the late 19th and early 20th centuries was the increase in the scale of production. Beginning in 1913, Henry Ford pioneered mass-production methods in his vehicle plants. The analysis of production into its component tasks, which were then performed in order on a production line, allowed higher wages to be paid while reducing operating costs. From this time until the 1960s, the US excelled in the techniques of mass production and led the world in productivity. In recent years, however, the "Fordist" approach has become discredited for its lack of flexibility and for diminishing the skills of the labour force. It has been replaced by more flexible and responsive systems of production, especially within Japanese companies.

Since the end of World War II, the relative significance of manufacturing in the economies of Europe and the US has declined, and its importance in the economies of East Asia has risen. Japanese manufacturing, in particular, had a worldwide impact in a very short time, and other Asian economies have followed Japan's lead. The renewal of its industrial plants after World War II gave Japan the advantage of modern production facilities. Since the mid-1950s, Japanese industrial output has grown at an annual rate of at least 6 per cent, and the country is now a world leader in shipbuilding as well as one of the principal producers of electronic components and appliances, scientific equipment, motor vehicles, steel, chemicals, and synthetic fibres.

Japan's manufactured goods are noted for their high quality, which is due to the use of advanced technology in the production process. Increasingly, Japanese-designed products are being made at different locations around the world. In the UK, the number of Japanese-owned factories rose from just one in 1972 to approximately 220 by 1991. Japanese car manufacturers have increased their production capacity in the UK and the US and have succeeded in their attempt to gain a greater market share while avoiding import limits and penalties. This strategy depends on building modern manufacturing plants and agreeing to use local raw materials and labour.

Although 75 per cent of world production is concentrated in the US, western Europe, and Japan, other countries are emerging as manufacturing centres. Some are newly industrialized countries (NICs) that emphasise exports because of small internal markets. Others are actively industrializing, developing industrial capacity in response to the needs of a large and growing internal market. The leaders of the NICs are Taiwan, South Korea, Hong Kong, and Singapore, which manufacture and export textiles, clothing, and electronic consumer products such as computers, microwave ovens, and televisions. Known collectively as the Four Tigers or Four Dragons, these countries have experienced overall economic growth at an average annual rate of 10 per cent over the last 25 years. Their output of manufactured products rose by 28 per cent in this same period. The high level of export has dramatically influenced world manufacturing and trade patterns. About three-quarters of these exports are now purchased in the US and western Europe, whose own industries have contracted as a result.

In the future, industrialization is likely to increase most in the countries that are regarded as economically less developed (ELDCs), such as Brazil, China, and India. These countries have large internal markets and a growing middle class, amongst which the demand for consumer goods is rising. At the same time, they are seeking to emulate the Tiger economies by exporting manufactured products to the developed countries of the world, where the importance of manufacturing is declining.

The Brazilian economy is now the eighth largest in the world, and much of its growth has been due to industrialization. In the mid-1960s, primary products accounted for 80 per cent of Brazil's exports, with coffee worth about half of the total value. By 1989, manufactured goods accounted for 72 per cent of exports, and coffee had dropped to only 4 per cent of the total. Several measures reflect the rapid change. Of the economically active population, 13 per cent worked in industry in 1960, 18 per cent in 1970, and 23 per cent by 1990. The percentage of gross domestic product (GDP) accounted for by industry rose from 25 to 34 per cent between 1960 and 1994. Brazil has traditionally sent its products to markets in the US and the countries of the European Union (EU), but in the last 20 years, it has aggressively sought to increase exports to Japan and the oil-rich countries of Middle East.

China is another emerging industrial power determined to strengthen its manufacturing base both by supplying its huge domestic market and by sending its products abroad. Industrial output increased by 12 per cent each year between 1980 and 1990. The production of consumer goods accounted for half of the total, largely to satisfy the internal demand for televisions, washing machines, and refrigerators. China's approach has been to set up Special Economic Zones (SEZs), especially along the coast, where cities such as Shanghai are encouraged to trade with the outside world. Economic growth has been unprecedented, although it remains concentrated in small pockets. Nevertheless, plans are afoot to establish SEZs across the country. Another indicator of China's explosive growth is the extent to which foreign firms are being invited to locate in the country. In regaining control over Hong Kong in 1997, China has acquired a ready-made Tiger economy.

Classifying Industry

An industry is usually classified as belonging to one of the following four groups: primarily, secondary, tertiary, and quaternary. Primary industries, which collect or extract raw materials, are located where the resources are found. Secondary industries are those that process or convert the raw materials into finished products. Some of these manufacturing industries must be situated close to the raw materials they use, others are tied to their largest markets, and still others—independent of both resources and markets—are often located wherever it is cheapest at the time.

Tertiary industries are the service industries. These include retailing, wholesaling, transport, public administration, and the professions, such as law. Finally, quaternary industries comprise activities that provide expertise and information. Consultancy services and research organizations belong to this category. These are generally market oriented, but since electronic communication permits swift contact and the easy transmission of data, they may be located almost anywhere.

Industrial Transition

Changes to the industrial structure of a country can be measured using either the value of manufactured output or alterations to the employment structure. For the established industrial nations, there has been a clear shift in the relative importance of different types of industry, and this has been accompanied by a change in employment. Since the mid-19th century, the proportion of the US workforce employed in primary industry has declined from about 70 per cent to its present level of just 3 per cent. Employment in secondary industry reached a peak of 30 per cent in the 1950s, after which it dropped back to 23 per cent. Tertiary and quaternary industries now employ 74 per cent of the workforce. The corresponding figures for the UK are nearly identical: primary industry has just 2 per cent, secondary 23 per cent, and tertiary and quaternary 75 per cent of the workforce. In Germany, the distribution is 3 per cent in primary industry, 37 per cent in secondary, and 60 per cent in tertiary and quaternary.

These figures stand in marked contrast to those of the ELDCs. In India, for example, 65 per cent of the workforce is engaged in primary industry, 19 per cent in secondary, and 11 per cent in tertiary. Not all ELDCs display similar figures, however-much depends on their history and their links with the rest of the world. In Nigeria and South Africa, for example, approximately 44 per cent and 50 per cent of the workforce respectively is engaged in tertiary activity.

Scale of production and Technology

The early years of industrialization witnessed the replacement of small-scale craft production with large-scale factories. However, industries that depended on variable product lines, such as fashionable clothes, continued to produce goods by hand. Even today, small firms are still a very important component of the economy.

The introduction of mass-production techniques and robotic assembly has resulted in the growth of component industries. These supply parts to other industries that are devoted to assembling the finished product. The motor-vehicle industry, which has been greatly refined by the Japanese, "just-in-time" production methods ensure that components arrive at car factories as they are needed, rather than accumulating in large, wasteful, and expensive stockpiles. This approach makes vehicle production more responsive to the market, and therefore more competitive.


De-industrialization describes the decline in the contribution made by manufacturing industry to a nation's overall economic prosperity. The process might better be termed re-industrialization, because the shift is not away from industry altogether, but from secondary to tertiary and quaternary industry. In other words, a de-industrializing economy moves away from the manufacture of goods and towards the provision of services.

Those countries to industrialize first—the UK, France, and the United States—are now undergoing de-industrialization. The ascendancy of the service economy in the context of the post-industrial society is characterized by a number of apparently negative features, such as a decline in manufacturing employment and a dependence on imports across a wide range of sectors. Although the loss of the manufacturing base is likely to create unemployment at first, it may not be an adverse development in the long term. Ironically, de-industrialization in the three countries mentioned above has been accompanied by a growth in the high-tech industries in areas such as the Côte d’ Azur in France; Silicon Valley in California; and along the M4 motorway, around Cambridge, and in central Scotland—the so-called Silicon Glen—in the UK. The long-term impact of de-industrialization has yet to be felt. It may be the speed of the process, rather than the process itself, that needs careful management.

Transnational Corporations

Probably the most significant industrial development since the 1960s has been the rise of the multinational or transnational company. Examples of these companies, which operate in many countries, are Ford, General Motors, IBM, Siemens, and Matsushita Electrical. United Nations (UN) estimates that investment by transnational companies has risen by 13 per cent per year over the last 20 years, largely because more and more governments are accepting these firms into their countries.

Nevertheless, the growth of multinational corporations has raised a number of concerns. An enormous amount of production power is concentrated in the hands of a few controllers, which means that the countries involved become directly susceptible to economic changes in other parts of the world. The transfer of assets from one country to another may be difficult for governments to manage or prevent, and there are likely to be disparities in the treatment of different countries.

Manufacturing countries experiencing the decline of home-based industry, such as the UK, have proved attractive targets for multinationals. So have countries in Asia and South America, where energy and labour are relatively inexpensive. By contrast, few African countries have benefited from investment by transnational corporations because of the general lack of skilled workforce and adequate infrastructure. Not all transnationals have their origins in the developed nations. The development of such companies is encouraged in the NICs as a means of securing expanding export markets.

Consequences of Industrialization

Most countries regard industrialization as a positive development capable of generating rapid wealth, revitalizing run-down areas, and conferring influence in world affairs. Most also now recognize the need for a diversified industrial base to safeguard their economies from fluctuations in the market price for their own specialized product.

Chile, one of the Pacific Rim countries, is a case in point. Its economy has grown by up to 10 per cent per year since 1990. Trade with Japan and South Korea doubled between 1987 and 1990, and new markets have opened up with Taiwan, China, Hong Kong, Singapore, and Malaysia. The key to this success has been diversification within Chile's traditional resource-based industries of mining, forestry, fishing, and agriculture, coupled with a strong drive to increase exports. Traditional dependence on copper has been reduced in favour of aluminium smelting, and forestry products have been expanded into salmon aquaculture, and agriculture into wine production as well as freezing and canning fruit and vegetables. Manufacturing has been less successful, but more overseas firms are now locating in Chile as it offers a secure platform from which to supply other markets in South America.

The negative consquences of industrialization are sometimes more apparent in developing countries than in countries with established industrial structures, where the social dislocation and environmental problems that often accompany development began long ago. Modern large-scale industrialization schemes commonly require a parallel development of energy sources. In the case of hydroelectric plants, substantial numbers of rural communities may be displaced, since large areas may be flooded to create the necessary water reserves behind the so-called super-dams.

In all countries, whatever their level of development, there are long-term problems associated with industry. Environmental safeguards may be overlooked, leading to serious problems of air, land, and water pollution. One of the worst incidents occurred in Minamata, Japan, where mercury residues from nearby chemical plants contaminated the water of Minamata Bay, were ingested by fish, and then entered the human food chain to cause death and illness for up to 30 years after the event. Another notorious example was Bhopal, India, where a leak of poisonous gas killed thousands of people and blinded or otherwise injured many others.

In Europe, the North Sea is suffering from the effects of industrial waste, thermal pollution from power stations, atmospheric fallout containing high levels of lead, oil spilled form ships, and radioactive materials from nuclear power stations. Increasing industrialization means that pressures to conserve resources are rising. The world faces a moral dilemma in encouraging ELDCs to restrict the exploitation of their raw materials at the expense of raising their standards of living towards those of more developed nations.

The Future of Industry

Several trends are likely in the global pattern of industrialization. First, only certain countries, and not the world as a whole, may experience a post-industrial future. A second trend will be the efficient and careful use of resources and the growth in recycling as the concept of sustainability becomes better established. Recycling industries are a growth area themselves, and established manufacturers are increasingly operating product-recycling schemes. A final trend will be the growing need for alternative technologies to reduce the consumption of resources for industrial production and to protect the natural environment. Worldwide cooperation will be necessary if all nations are to gain from the potential benefits of industry.