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Outline the reasons why the process of industrialization in developing countries might require government intervention. How far do these reasons justify the different forms of intervention that have been used to promote and direct industrial development?

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Introduction

Outline the reasons why the process of industrialization in developing countries might require government intervention. How far do these reasons justify the different forms of intervention that have been used to promote and direct industrial development? Every Less Developed Country (LDC) seeks industrialization, or structural change as it is otherwise called, as this can lead to a higher GDP per capita, which can lead to a higher quality of life in the LDC's. In fact growth in GDP per capita (p.c) is seen as an indicator of industrialization. It can often be difficult for the population of a country to bring about industrialization in an efficient and well directed manner by themselves, it is here that the government can play a huge in role in managing the whole process of structural change, indeed industrialization may not occur at all if the government does not intervene or at the very least that it will progress very slowly. There are many situations which create necessity for intervention, the most cited reason is market failure, this can mean that the market is too small and therefore investment is needed, however it can be less clear cut, it can cause development to be unsustainable, for example if natural resources are depleted at faster rates than they are replenished development becomes unsustainable. ...read more.

Middle

third in both males and females in a period of 9 years, but also perhaps more importantly we see how low the level of youth illiteracy is compared to that of another African LDC, Ethiopia. The youth illiteracy rate in Botswana can be seen to drop dramatically during the 90's, dropping by five percentage points in both males and females. Compared to Ethiopia who have not used such an effective system of investment due to other recent problems such as drought and starvation. However these statistics alone do not show that the investment has reaped rewards in terms of economic growth. However the following table, again comparing Botswana and Ethiopia gives several indicators of development that show how Botswana has progressed compared to a fellow LDC that hasn't used a similar policy. Botswana Ethiopia GDP p.c 1998 (US $) 3,070 100 Average growth rate of GDP p.c 1965- 98 7.7 -0.5 % of labour force in agriculture 1990 46 86 % of population in urban areas 1970 8 9 % of population in urban areas 1998 49 17 Primary school enrolment rate (%) 1997 80 35 Secondary school enrolment rate (%) ...read more.

Conclusion

Therefore it has been shown that government intervention can indeed affect the pace and progress of industrialisation, we have seen that by both investing in infrastructure and encouraging FDI dramatic returns in Growth can be reaped. However it is important to note two things, first of all that these two forms of intervention will by no means create growth by themselves, Botswana complemented its investment strategies, with other mechanisms of growth encouragement, for example the use of prudent exchange rate policies. Many policies must be implemented to consolidate each other in order to create rapid, but more importantly sustainable development. The second item of note is that fairly obviously each country is individual, it has unique natural resources, unique human resources and unique geographical features that may promote one type of pro-industrialisation policy above another. Where infrastructure investment worked well in Botswana it can be said that FDI had a lesser impact, where as in Cote D'Ivoire FDI had a huge impact. Governments in LDC's must combine an efficient use of their resources (natural or otherwise) with smart and intelligent economic policy in order to promote and direct industrialisation. We have seen here that it can and does work. ...read more.

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