Industrial development and the growth process: a structural framework

Industrial development is a privileged route to sustained economic growth due to the relationship between manufacturing, division of labour, and increasing returns. This chapter calls attention to the systemic character of transformations that industrial development introduces in networks of interdependent production activities. This chapter explores how fundamental changes in manufacturing technology entail changes in interdependence between production activities. The discussion of contributions to manufacturing analysis in pre-classical and classical political economy (Serra, Smith, Babbage, and List) introduces the analysis of division of labour in alternative patterns of connectivity between production processes. Changes from one manufacturing regime to another (say, from Fordist manufacturing to a flexible manufacturing system) involve changes in production networks This involves switching to different trajectories of industrial development and patterns of increasing returns. The paper concludes by exploring ways in which changing modes of interdependence involve switching to different opportunities and constraints for industrial policy.