Monday , September 25 2017
Home / COLUMNISTS / Andrew Mwenda / THE LAST WORD: Manufacturing still matters

THE LAST WORD: Manufacturing still matters

Why very few poor countries will escape poverty by taking gigantic leaps into the service industry

 By Andrew M. Mwenda

Two weeks ago, I had a disagreement with the president of the World Bank, Jim Yong Kim, at a conference in Kigali, Rwanda. Kim had argued that increasing automation and use of robots is taking away jobs. He showed a slide of numbers of jobs at risk of being lost due to automation by country – China 77%, India 69%, Nigeria 65%, Ethiopia 85%, South Africa 67%, USA 47%, Argentina 65% and Thailand 72%.

The statistics may be compelling but the problem is with some of Kim’s conclusions. For example, he said that poor countries should think about the economy of the future – where most jobs are automated i.e. not done by human beings but machines and robots. This, he argued, will shift their focus away from manufacturing and into services as the source of future growth and jobs. The fear that automation takes away jobs is not new. It is as old as manufacturing.

Between 1811 and 1816, textile workers in Nottingham England began smashing new labour saving knitting machines claiming they were taking away their jobs. This was true since these workers lacked the skills to work with the new technology. They publicised their action in circulars marked “King Ludd,” a factor that led to them being called Luddites. The English government hanged 14 of them.

Their movement led to an idea called the Luddite Fallacy i.e. that an economy-wide technological breakthrough enabling the same amount of work to be done with fewer workers results in an economy with fewer workers. This argument is a fallacy because it ignores the reality that the factory could, in fact, keep the same number of workers and simply be able to produce more output. This is called “increased labour productivity”.

I suspect the basis of Kim’s argument in favour of services is the usual claim that Western nations have become post-industrial (shade off most of their manufacturing and grown into service economies). This is only partly correct. The reality is that manufacturing has declined less than presented. Rather, increasing productivity has meant that “current” prices of manufactured goods have fallen, but not as steeply as “relative” prices. Manufacturing has, therefore, declined as a share of GDP.

The richer people become, the higher they tend to spend on services – going for massage, eating in restaurants, playing golf, etc. But poor nations don’t have the incomes to raise the demand for services which would in turn employ more people and pay them better. Secondly, there are few services poor countries can export to earn higher foreign exchange. In any case, services are less tradable compared to manufactured products.

4 comments

  1. There are a number of manufacturing companies in Uganda e.g Beverage and Breweries industries like Coca cola,Pepsi ,Nile breweries,Uganda breweries, Mukwano industriesMovit etc some of these industries use local raw material from Ug has govt carried out an audit on whether Ugandans who supply raw materials to these companies have benefited?

    There is alot of concoction in the herbal industry which for some strange reason is dominated the Muslims.

    If i were Stella Nyanzi’s lawyer i would have advised her to apologize 1st of all she is a single mother the man who did her a favor and impregnated her has fled(she looks like Kazinda even their features are similar) She will definitely be declared mad by Doctors in Butabika there are some many things that suggest that she is indeed mad e.g how could she carry her belongings in a basin as if she could not afford a suitcase(do people still use basins for bathing?) what happened to showers?

    Women activists have lost the war on pads( even 5 year olds want pads now) they should 1st advise teenagers to open their legs sparingly for men; just go to villages you find a 16 yr old girl with HIV you wonder what she wants top do in the grave at an early age. I dont think pads have been an issue to Ug girls they just love sex they would rather balance men in bed than solve a maths equation like XY2+ ZYXX3 =——–besides that i dont get the corrolation between studies and pads after all most girls are ever pregraenag so when will thye use the pads?

    Mbu NTV’s reporter was kidnapped(Ugandans really love the the social media) i just laughed that was the work of one of her jilted lovers.

  2. One of the major strengths of manufacturing is the large multiplying factor. For every job in manufacturing there are almost three created in other sectors such as transportation, banking, raw material producers, etc.
    But still, the other end of the argument is not incorrect. Manufacturing automation has been eating jobs not necessarily that manufacturing output has been declining.

  3. James jones bantu

    Guys, first you need to understand what industrial automation is? And what it actually reffers to. Today in Europe or USA , most industries are either fully or semi-automated and yet they are by far the largest employers in euro and USA. So automation is does not take a way jobs as that un man allege. Automation create new jobs and skills and increases productivity, yes services can be an option but we need to remember that the best service providers such as bankers, airlines, insurance providers, will want to provide their services to an automated country .

  4. #BuyUgandaBuildUganda

Leave a Reply

Your email address will not be published. Required fields are marked *