Agriculture and industry: economic and social relationships

Economics

Agriculture and Industry

This is a paper about switching technique from Agriculture to Industry. There is one reference used for this paper.

There are a number of changes occurring in agriculture and industry today. It is important to examine the switching technique utilized between these two entities, and what developing countries need to know to successfully become industrialized.

Industrialization

Industrialization is seen as a way to increase economic growth. It "requires the expanded use of new technological processes and ways of doing and thinking, a more skilled and productive labor force and entrepreneurial cadre, and the expansion of physical capital investment at the enterprise level and in the economy as a whole, including physical and social infrastructure formation (Cypher, 266)."

Industrialization has been met with resistance since it "disrupts patterns of life and ways of doing things, particularly in the countryside (Cypher, 266)." Influential organizations in underdeveloped countries may feel their position is threatened, and oppose industrialization. In other situations "opposition comes from religious or cultural institutions which see a way of spiritual life threatened by the material concerns of industrialization and the private acquisitiveness on which it thrives (Cypher, 266)."

Agricultural Sector

Studies have shown that the "size of the agricultural, or primary, sector tends to shrink with economic growth, as rural workers move into the industrial, or secondary, and service, or tertiary, sectors (Cypher, 268)." As workers become needed to run machines in industries, there is a labor migration from rural to urban areas.

During successful industrial transformations, agricultural production also becomes more efficient and intensive in its use of capital, both physical and human, and in the use of technology which increases worker productivity (Cypher, 268)."

This leads in an increase in the economy as workers migrate from industry to service jobs, increasing their earning potential.

There is an inverse relationship between the percentage of the workforce involved in the agricultural sector, the per capita income, and the development level. The "higher the level of development, the smaller the share of the labor force engaged in agriculture, while the smaller the share of the labor force in industry and services, the lower the level of income and development of the country or region; the higher that share, the higher the level of aggregate income and development (Cypher, 269)."

Development and Structural Transformation

There must be a "reorganization of the agrarian sector and an industrial revolution (Cypher, 270) for development to occur.

The initiating of structural transformation begins with "easy import substitution industrialization or ISI (Cypher, 276)." All nations which have been successful in industrializing have utilized this stage. ISI is needed because "in less-developed nations there are few or no local companies that are likely to exist that can effectively produce and compete with imported goods (Cypher, 276)."

During the easy ISI stage, the "labor force develops both specific and general human capital skills as a result of 'learning-by-doing' in working with modern machines and technology. Management and other essential entrepreneurial skills will be acquired and improved during this stage, capacities that are integral to successful and sustained industrialization over the long-term (Cypher, 288)."

After ISI, there are 2 pathways of industrialization a country can follow: "easy export substitution and 'hard' or secondary ISI (Cypher, 302)." As the exports of ISI firms "begin to replace and substitute for traditional primary imports, the peripheral economy's export structure will begin to become more like that of developed nations (Cypher, 303)." Export substitution is the "logical and recommended stage of evolution in development strategy as the gains from easy ISI begin to be exhausted (Cypher, 304)."

Shifting From Easy ISI

When a country decides to shift from easy ISI to secondary ISI, its rational is to "decrease imports to improve the trade balance (Cypher, 315)." If this shift is established too soon, the country runs the risk of "further reducing imports via a deepening of the import substitution process (Cypher, 319)."