IDST 1000Y Lecture Notes - Lecture 11: Capital Accumulation, Workforce Productivity, Sub-Saharan Africa
IDST Lecture - Industrialization: is it a development imperative: 3rd December, 2014
• Developed countries have higher levels of material well-being than developing
countries
• Generate the resources needed to invest in social and human development
• Reflect differences in the patterns of economic activity
• Developing countries: people work in agriculture and extractive industries
• Developed countries: services and manufacturing
• There are 4 key differences between developing and developed countries:
patterns of employment (where people work), patterns of industrial output (what
industry produces – i.e. garments vs. technology), patterns of agricultural inputs
(how farming takes place – people’s ability to work vs. industrialized farming),
and the pattern of demand (foreign consumers vs. domestic consumers)
• Economic development is the process of structural transformation – change to a
rich economy
• Capital accumulation: increases in the stocks of assets (physical assets/capital.
financial assets/capital, human assets/capital (i.e. skills of workforce)) available
in the country - necessary but not sufficient for structural transformation
• Labour productivity: the more effective use of the capital/labour you have or how
it works with the machinery, etc. you have – about producing more with the
same or producing the same amount with less – not about working more but
about getting more out of the work that you do
• Increasing rates of capital accumulation of capital requires an increase in
productivity
• In order to produce more you must be able to manufacture things to sell
• The richest countries have the highest productivity
• Living standards can go up if workers are producing more – as there is more to
buy, and the price will go down
• Countries can choose to work less without reducing living standards
• The more productive countries use more capital/worker
• The most productive countries are the most highly industrialized
• Industry generates the fastest growth of labour productivity
• Industry even 30 years ago is unrecognizable from the industry of today
• Technological innovation is faster in manufacturing in services, which is faster
than technological innovations in agriculture
• Employment in manufacturing is going down while productivity goes up – less
people are needed
• Rural wages are going up as farming is becoming capital-intensive
• Farmers are going to cities to look for better jobs – cities want skilled workers
though, so jobs are not available
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