1. 9. Late Industrialization, Factor Endowments and the World Market
COMMENTS
Gareth Austin 14/11/2012

2. ‘The Case for Industrialization’
Agree, but do not forget:
Services: though where/when can they be the lead sector, as in Singapore?
Countries that grew rich through agriculture (let alone oil) in the context of expanding industrial populations elsewhere
Denmark, Australia, New Zealand – and Argentina to 1920s)
Distinction between industrial & non-industrial now blurred in some sectors
‘industrial’ farming

3. ‘Why Late?’ Resources important too: Coal & iron ore combination
Sugihara’s distinction of East Asian ‘labour-intensive’ and Western ‘K-intensive’ paths of development:
you would expect industrial technologies to be invented in K-intensive economy not a labour-intensive one
Pomeranz’s comparison of Yangtse Delta & Britain in early modern period:
how the former ran out of land and energy for further expansion, the latter got access to American land tilled by African slaves

4. Industrializers of the Second Industrial Revolution
Did the State do much in US and German industrialization?
‘Absence or presence of [NEW] technology’
Advantage of little/no effective international property rights regime

5. South Korea & South Africa
Correction: SK population was bigger than SA’s!!
1950: SA just under 14 m, SK 20.8 m
1998: SA 42.8m, SK 46 m
Minerals apart, questionable whether SK had worse natural endowment
Long history of agricultural surpluses
SK not ‘one of the poorest countries in the world’ in 1950: on level of the richest African colonies, at least

6. Other key events in South African economic history
1910 Independence from Britain, albeit as a dominion: made ISI politically possible when adopted in 1924
1913 Natives Land Act: policy of driving Africans out of the produce market and into the labour market
1922 repression of Rand Revolt of white miners, 1924 they get revenge at the ballot box

7. African Real Wages on South African Gold Mines: selected years, (annual averages, 1970 Rand) (Lipton 1986)
1970 Rand
White: African wages (Af = 1)
1911
225
11.7
1921
---
15.0
1931
186
11.3
1941
191
12.1
1951
188
14.6
1961
16.9
1971
209
20.9
1972
227
19.2
1975
602
8.4

8. South African Economic Growth’s Record: WHEN did it begin to fail?
Think again about Moll’s claim that the apartheid economy was a failure even in the 1950s
What sort of ‘economic slump’ features 4% growth a year? !!!!(see his Moll’s series, reproduced by Leo on slide 31)
Slow down occurred only from later 1960s; stagnation from 1979

9. South Africa from growth to slump: a statistical summary
Average annual growth in real GDP per head, : selected periods % % %
Source: Feinstein 2005: 145

10. ‘Capitalism and Apartheid’ Debate (1)
Radical v Liberal views
Repression of black wages was essential to SA’s early C20th economic growth
Feinstein’s calculation on the contribution of labour repression (artificially low wages) to profitability of gold mining before 1933 shows

11. Capitalism & Apartheid Debate (2)
But when further growth required more human capital and newer technology, the apartheid education system + the colour bar made HK artificially expensive, while labour repression constrained growth of consumer demand
the gross incremental capital-output ratio more than triplied,
So I think radicals were right about earlier history of apartheid (and before that, segregation), up to mid- 1960s; the liberals are right after that

12. Fine-tuning on fall of apartheid
Sanctions mostly too little too late to be decisive; and tended to follow African protest
More important was run on the currency and flight of capital in response to the permanent township revolt
Political conflict of course aggravated the unemployment and growth problems

13. Factor Endowments & Late Industrialization
In both cases, government intervention ultimately – but to different degrees, and with different dynamics – shifted the a country’s comparative advantage up the value-added scale
Your SK steel example (POSCO) a very vivid case of success in this respect

14. Factor Endowments & Late Industrialization (2)
SA shared SSA’s general land abundance, labour scarcity as of 1652, 1900, even 1950 except that state intervention (land grab, ban on African tenancy) drastically reduced the cost of unskilled labour
Unlike the ‘peasant’ colonies of West Africa, where real wages were similar to or greater than East Asian wages (even Japanese) as late as 1940s
South Korea: ISI then XOI (1960+), but even latter involved major state intervention (‘gentting the prices wrong’)

15. Comparison of SK & SA
SK’s Japanese colonial past: what difference did that make??
South Korea the more densely populated, bigger mass consumer market by 1970s at latest
Cold War arguably a spur to industrialization in SK, in several ways: facilitated the survival of apartheid in SA
Land reform: yes in SK, no in SA
Contrasting investment in human capital (education): in SA, concentrated on whites

16. Comparison of SK & SA (2)
Both states intervened to alter prices, but SK did so more directly, SA through indirect labour coercion
Similarity: labour repression – Trapido’s thought-provoking article is relevant on both

17. CONCLUSON
Many thanks for a very interesting presentation & discussion!
I am going to Madrid for a conference tomorrow, but will be back by Tuesday