Opinion / Commentaries
Wednesday, 15 Nov 2017 15:00 EATceo@kam.co.ke
South Korea, currently the 11th largest economy in the world, is often regarded as an economic miracle because of its rapid economic and social transformation, which continues to be a case study as to how global economies can achieve sustained and broad-based growth. In describing this transformation, author of Korea: The Impossible Country, Daniel Tudor, says that, “South Koreans have written the most unlikely and impressive story of nation-building of the last century.” Their historic feat is thanks, in no small part, to their shift from an agrarian society into an industrialized economy. At the end of World War Two, the country was devastated, mortality rates were high, agricultural productivity was limited, literacy levels were low and the entire economy was declining sharply. However, they turned this around and by the late 80’s, the Country had risen up the global economic ladder, stunning the entire world in its capability to successfully host the 1988 Olympic championship in its capital.
Why is this historical anecdote relevant to us? Because sadly, current development tropes seem to relegate manufacturing to a medium priority in favour of other sectors including services, as a prescriptive method to achieving economic growth, whilst it is clear that manufacturing should take centre stage in these conversations. Very few developed countries in the world can speak of their economic development and sustained growth without crediting it to the creation of a strong manufacturing base towards achieving the same.
Renowned economist Nicholas Kaldor, is famous for making a link between living standards and the share of national resources dedicated towards industrial activity. In this regard, he came up with three laws on the causes of economic growth summed as; one, growth of the GDP is linked to the growth of the manufacturing sector. Secondly, that the productivity of the sector is linked to the continuous growth of the sector and lastly, that the productivity of other sectors in the economy is positively linked to the growth of the manufacturing sector.
In view of our own development as a country, the above statements point to the fact that manufacturing should not be seen as one among many solutions towards building an inclusive economic order, but rather as the primary element from which all other development solutions coagulate and take shape. Manufacturing should be centralized in our national vision towards creating an inclusive political economy. It should dominate discussions on nation building, equal distribution of resources and poverty alleviation. In short, manufacturing should be everyone’s business.
There are many reasons why but I will focus on two. Primarily, the manufacturing sector is the guaranteed provider of productive, sustainable jobs. It has been said that there are ‘hundreds of miracles within a single machine’. The creation and growth of jobs is one of these miracles attributed to industrialization. Through forward and backward linkages, manufacturing has the ability to create new jobs as well as grow existing jobs to ‘feed’ other sectors of the economy.
There is a big difference between jobs and productive jobs. Productive jobs, as defined by the International Labour Organization, are those that ‘yield sufficient returns to labour to permit workers and their dependents a level of consumption above the poverty line.’ This includes guaranteed job security and advancement. The growth of productive jobs by manufacturing means that many people will be able to support their dependants, to live quality lives with access to basic amenities such as health care, education, clean water and food. The current increasing inequality points to many people lacking these amenities and hence becoming disenfranchised.
Secondly, a good manufacturing base means that other sectors flourish. A thriving and competitive local industry will create a demand for domestic products and this will positively impact for example, the retail sector. The more the demand for quality and variety of home-made goods, the more the retail sector will continue to grow as part of the value chain to supply to the population. And seeing as the sector will grow jobs hence increasing the number of consumers that can afford goods and increasing their spending power as well, the retail sector will subsequently keep growing in order to meet these needs. The agriculture sector as well, due to backward linkages, will grow if the manufacturing sector is fit enough to process huge quantities of raw material from the farm into finished goods for consumption.
The case to champion local industry’s competitiveness should not be viewed as an effort solely to increase the country’s GDP. It is a much bigger vision for social transformation through the creation of economically empowered individuals, the ability for self-sustenance as a country, with a favourable balance sheet and less borrowing, and the achievement of a sustainable future for generations to come.
The writer is the CEO of Kenya Association of Manufacturers and the UN Global Compact Network Representative for Kenya.