Breaking the “Bottleneck” to Global Economic Structural Transformation and Upgrading

As discussed in Sect. 2.3 of Chap. 2 , new structural economics holds that the essence of economic development lies in an ongoing process of economic structure transformation and upgrading, which involves industrial upgrading to enhance productivity levels and simultaneous improvements in corresponding infrastructure, both hard and soft, to reduce transaction costs at each developmental stage. For example, during the agrarian stage of development, much of the production is for the producer’s own consumption, with minimal reliance on external inputs and markets, and surpluses are typically exchanged in nearby local markets. Therefore, the demand for infrastructure services is limited. However, as countries progress and industrialize, production shifts to manufacturing, economies of scale expand, and producers increasingly produce for others. This transition necessitates a reliable supply of electricity, and purchasing machinery, equipment, fuel, and other inputs from other sources, including even foreign manufacturers. As the market range expands, robust infrastructure becomes crucial for securely and efficiently transporting products and services. Therefore, as the shifts occur from agrarian production to manufacturing and from simple to advanced manufacturing during the development process, the scale of production and the market scope for inputs and products grow substantially, leading to an increased demand for transportation and power.