Premature Deindustrialization: Issues and Implications

For over 150 years, it is industrialization that has been at the core of structural change that underpinned development. However, the narrative of economic growth as it has unfolded in the labour-abundant nations of the developing world over the preceding three decades makes it evident that much more than one engine of economic growth is required for sufficient employment provision. Fundamentally, the reason for this is premature deindustrialization, a phenomenon that has occurred across a number of developing nations. This chapter will discuss the reasons for the onset of this feature and the implications of this for dynamics of growth and industrialization. It will then proceed to demonstrate the relevance of Arthur Lewis’s theory of economic development with unlimited supplies of labour. In order to enable a better understanding of these insights, the modified Lewis framework will be used because its assumptions continue to apply to contemporary developing nations This will be followed by a discussion of the role that intersectoral linkages play in employment generation, and for a better illustration of this point, India’s economic experience will be cited.