Economic Development and the History of Industrialization

Key Economic Concepts

Progress and Productivity

Progress is irreversible; it is a discovery over time that is always connected with improvement. Crises do not mean that capitalism no longer hopes for progress. The 1950s and 1960s were eras of consumerism, which is why the crisis of the 1970s occurred. Today, we are passing through a similar phase. The opposite of progress is reversion. In economic terms, these concepts are often refined through the lenses of development and progress.

Productivity is the process of producing goods and services. It is defined as the ratio between production and the factors used. It typically follows the law of diminishing or marginal returns.

Growth and Development

Growth is measured by GDP and gross income. While widely used, it often leaves aside intangible factors. The Quality of Life Index is a measure of growth in which life expectancy is added to GDP per capita and the level of education. True progress, however, cannot be fully measured.

Development involves a structural change (such as the shift from an agricultural to an industrial economy). It requires a balance of several factors. The causes include an industrial character, the availability of capital, a society that permits change, and favorable legislation. Countries are considered developed because they possess these advantages and favorable capital. This is why different development and growth programs must be applied in different countries.

Quality of Life vs. Living Standards

Quality of Life involves a series of mathematical operations that describe the material situation of a population; these variables can be measured. However, quality of life is also subjective; it is the ratio between what we expect to achieve and what we actually attain. It is possible to have low living standards but a high quality of life.

Historical Economic Eras

Pre-Industrial Economies

In pre-industrial economies, human capital was initially based on slavery. This was followed by feudalism and bondage (which included material means of production and certain rights granted by Christianity). Eventually, servitude declined, and man became a free settler. In this system, the worker paid an annual rent to the landowner. Where living conditions were worse, systems reverted to slavery and servitude. Over time, institutions improved, facilitating economic growth.

This era is divided into three stages:

• 1450–1580: Bondage receded as settlers gained ground. The Portuguese and Spanish conducted a process of spatial expansion that led to the achievement of the first World Wide Web of trade.
• 1580–1670: Globalization consolidated, but new competitors emerged, such as the English and the Dutch.
• 1679–1760: The English became the primary global power, cornering the Netherlands and Spain. As the British developed manufacturing, industrialization began before the sector reached full priority.

Industrial and Post-Industrial Economies

Industrial Economies:

• 1760–1870: The First Industrialization occurred, with Britain as the prime example, followed by Belgium (due to easy access to Great Britain), France, and the USA (in rivalry with Great Britain).
• 1870–1970: The Second Industrialization was driven by the chemical industry. The British no longer led; instead, the U.S. and Germany became the major powers. Industry contributed the largest share of GDP and exports, enriching internal markets that were previously very limited. The struggle for industrial control and power eventually led to the two World Wars.

Post-Industrial Economies: This era is defined by industrial decline and the consequent outsourcing of the economy toward the service sector.