PROBLEMS AND

DEVELOPMENT STRATEGIES
• Problems of the Third World Countries
• Agricultural Development
• Rural and Urban Development
• Industrialization and the Third World Countries

Economic Development
Instructor: Sherry Joyce V. Nuestro
After the completion of this chapters, the students
will be able to:

◦Discuss the different classical theories of economic and

growth development;

◦Breakdown the four approaches of classical theories

◦Describe the contemporary models of development

and underdevelopment
PROBLEMS OF THE
THIRD WORLD
COUNTRIES
 PROBLEMS OF THE THIRD WORLD
COUNTRIES
Third World countries refer to the less developed or
developing countries. These are the nations that emerged
from their colonial periods (at least politically). There are still
many Third World countries which are under the economic
control or influence of their former colonial administrators.
The poorest of these countries are located in Africa, Asia,
and Latin America.
On the other hand, the rich nations are very few. The gap
between the rich and the poor is very wide and is getting
wider.
 Characteristics of The Third World
Countries

Developing countries may differ in their religious, cultural,

social, or political institutions. For instance, countries in Africa
and Asia may vary in their religious beliefs or government
structures. However, such countries have common
characteristics. And this is the root causes of their poverty.
Unless and until their favorable attitudes, values and
institutions are eradicated, there would be no significant
success in any of their economic development programs.
Some of the principal characteristics of
the less developed countries are:
1. subsistence agricultural economy
2. low per capita income
3. high birth rate
4. high illiteracy
5. poor health
6. negative attitudes, values and institutions
7. inefficient public administration
8. high rate of unemployment
 The Problems of Less Developed
Countries
The aforementioned characteristics of the less developed
countries can spawn more economic and social problems.
And final result is widespread poverty of the people.
The basic problem of most societies is not only scarcity of
resources but also the proper allocation and utilization of
such resources.
The unjust distribution of wealth and income among the
less developed countries has been considered as the root
cause of poverty.
 The Barriers to Development

With the numerous almost insurmountable problems of the

Third World countries, the task of improving their conditions
involves great efforts, long time, and huge amount of
money. However, the more difficult obstacle to conquer is
the change of values of the people, and the institutions of
their society. One major cause of poverty is not really lack
of money but more on the underutilization of human
resources.
Here are some of the more fundamental problems which
hamper the process of “take off” among the less developed
countries:

1. Improving values and institutions

2. Redistributing wealth and income
3. Adopting western technology
4. Preparing for industrial development
5. Reducing birth rate
6. Eliminating economic exploitations
 The Big Push
The dismal conditions of the less developed countries seem to
be hopeless. In fact, many underdeveloped countries have
remained poor for centuries. Some of them are deteriorated in
their economic conditions.
In reality, however, it is not completely impossible to
breakthrough the vicious circle of poverty. Some former very poor
countries have succeeded in releasing themselves from the fetters
of extreme poverty and squalor. Of course, there were trade-offs
like proper utilization of scarce resources, temporary sacrifice of
consumption, individual discipline, among other things.
 To be able to free themselves from the clutches of poverty, the less
developed countries could adopt economic measures such as:
1. The few very rich individuals have to invest their money in productive
labor intensive industries.
2. Those who are not extremely poor have to save more.
3. Scarce resources have to be properly used and equitably allocated.
4. The nature of taxation should encourage employment and
production, and reward economic success of the members of
society.
5. Foreign investments should be stimulated on a selective basis so as
not to compete with domestic efforts.
6. Foreign loans and aids should be applied to productive social and
economic programs, preferably self-liquidating projects, meaning
those that can pay for themselves.
 Implementing the Big Push

The aforementioned economic measures are not that

easy to implement. Some development economists have
stressed the need for massive investment as a breakthrough
of the vicious circle of poverty. But where will they get the
huge capital? Many rich countries are even trying to reduce
their foreign loans to the poor countries. Nonetheless, poor
countries have still the chance to improve their
conditions-mostly through their own resources, efforts, and
creativity.
 For the successful implementation of said economic
measures, the following are required:
1. The government should vigorously initiate, encourage and
assist development.
2. Human resources development should be given the
highest priority.
3. Family planning programs should be improved.
4. The agricultural sector should be developed first.
5. Appropriate technology should be used to fit the local
conditions like labor, capital, culture, land, and other
geographical considerations.
AGRICULTURAL
DEVELOPMENT
 History of Agriculture
The early primitive people did not produce foods. They
just obtained these through hunting and fishing. There were
no permanent human settlements. People wandered from
place to place searching for foods. Economic life then was
similar to animal existence.
The word agriculture was derived from Latin word ager
cultura which means field cultivation. The discovery of
agriculture by man was one of the most crucial phenomena
towards human development. It ended their nomadic life.
People were no longer like wild animals roaming in the
wilderness looking for foods.
 The beginnings of agricultural practices were first
discovered in Southeast Asia, Middle East, and Central and
South America. Archaeological findings show that men in the
Middle East raised wheat and barley around 6000BC. This
region was greatly responsible in spreading the knowledge of
agriculture in Asia and Europe.
One of the first true agricultural villages was discovered in
the hills of Iraq. This village is now called Jarmo. It was a
permanent community with mudhouses built on stone
foundations. Excavations showed that people lived in the
village about 4750BC. Aside from wheat and barley, they
raised goats, pigs, sheep, and cattle. Also, a great variety of
tools, ornaments, and other regions which proved that the
people had contacts with the outside world.
 From Jarmo, the knowledge and practice of agriculture
spread out to many other parts of the Middle East, then to
Asia, Europe, and the rest of the world. The early
developments of agriculture did not only create stable
societies but also economic, social, political, cultural, and
religious institutions. Eventually, civilizations gradually
developed in the different parts of the world. However, not a
few agricultural villages have not graduated from their
primitive societies until now. In fact, most of them
deteriorated in their economic conditions because disease
and exploitations have been perpetuated by more powerful
and civilized races.
 Problems of Agriculture

◦Natural calamities can easily destroy agricultural

investments.

◦Financing, production, processing, and

marketing

◦The prices of farm products are not stable

 Agricultural Development in Poor
Countries
◦In the less developed countries, agricultural resources are
not only underutilized but also inefficiently developed due
to deficiency in capital, technology, and management.

◦Nations depend on raw materials and very few crops for

exports to the industrial countries.

◦There are many big plantations and these are owned

mostly by the local elite and multinational corporations.
 Agricultural Development in Rich
Countries
◦The highly developed countries are equipped with proper
institutions.

◦They are successful in their agricultural development

through high capital-labor ratios, optimum-sized individual
farm units, and high rate of savings.

◦The large-scale immigration was encourage to accelerate

the pace of agricultural development.
RURAL AND URBAN
DEVELOPMENT
 The Nature of Rural Problems
Many people in rural areas are poor because they have little
incomes. Other poor groups like to engage in small business
but they have no capital. It is not easy for them to borrow
money from credit institutions.
An ocular survey in most of the rural communities of the poor
countries show the conspicuous absence of economic and
social infrastructures. Many villages appear to be isolated from
civilization. People still use tools of production which were used
during ancient times.
Rural problems encompass various aspects like social,
economic, political, cultural, and educational activities.
 Rural Development
◦Rural development is a continuous process, it is
developmental and progressive.
◦It is primarily concerned with optimum utilization of
resources-human, economic, social, and physical.
◦Rural development is not only concerned with the
economic improvement of rural conditions but also
other aspects which contribute to the total
development of people and their quality of life.
◦Rural development should start with the economic
needs of the people.
 Rural areas- Roots of Poverty

The world’s poorest are found in the rural areas of the poor
countries. Economic opportunities are extremely rare and
hopes for a better future are dim for them. Their
dependence on primitive agriculture makes them poor, and
they are poorer if they do not own the land they are
cultivating. In addition, their rapid population growth even
more contributes to their miserable conditions.
 Rural poverty and hunger are not the real problems-the
unjust economic, social, and political structure. In the LDC’s,
the main economy is agriculture but most people are
tenants, sharecroppers and farm workers. Only the
hacienderos control the economic structure of the society
but also the social as well as political system.
 Small Farmers ⎯ The Rural Poor
•Tenants or sharecroppers are farmers without a land
of their own. They are very poor because their level
of income is very low.
•The institution of land reform by Third World
governments has significantly changed the
economic conditions of the rural poor.
•It is still the middlemen who get the profits.
 Helping the Rural Poor
The task of helping the rural poor, while difficult, is
achievable. By improving the structure of institutions,
fashioning appropriate development strategies,
better use of available resources were able to
transform the rural areas from poverty prosperity.
However, the primary responsibility rests on the
government.
 Development is people development. All
development programs should be focused on
people. Their development can only grow in an
atmosphere of freedom and opportunity. Without
these, poor people only exist as slaves of the
privileged few.
Rural Development in the Philippines
A more structured rural development program in
the Philippines started in the 1950’s. Most of the rural
projects were assisted by the United States in the
form of financial, technical and commodity aid.
Among the popular rural development institutions
were the PACD (Presidential Assistant on Community
Development), PRRM (Philippine Rural Reconstruction
Movement), PRUCIS (Philippine Rural Improvement
Services), and 4-H Clubs (Heart, Hands, Head and
Health).
 The Philippine rural development program is an
integrated approach in improving the social and
economic conditions of the rural poor. Among the
key programs of the government for rural
development are agrarian reform, cooperatives,
labor-intensive industries, manpower development
and the KKK. The strategy for rural development
takes into consideration the needs, problems, and
resources of every region in the country. The
application, therefore, of rural development varies
from region to region. The policy is to provide more
financial and technical assistance to depressed
regions in order to develop an equitable rural
development.
 However, the effectiveness of a rural development
program does not depend only on an excellent
blueprint or plan. There are other factors that can
ensure the success of any rural development
program. Another very important factor is the
availability of funds for the projects. Foreign loans
are not enough to finance the many rural
development projects of the government. Clearly,
such financial constraints hamper the
implementation of not only a few essential projects
for improving the quality of life of the rural poor.
 Filipino Farmers and Rural
Development
The Philippines is an agricultural economy. Most
Filipinos work in agriculture. These farmers are the
backbone of the national economy in the
Philippines.
To improve the social and economic conditions of
the farmers is to make them the owners of the lands
they have been cultivating for many years.
 Approaches to Economic
Development
Given the goals and policy of development, those
who lead in the development effort must adopt a
particular approach, which is the practical way to
get results. This involves translating the approved
policy and strategy of development to a line of
action around which programs and projects could
be established. Approaches should complement
each other in their application.
 Countryside Development
◦a popular approach to the problem of inadequate
employment and income for the rural population.
◦the process of transforming the rural areas into productive
centers by providing the essential support in agriculture,
trade and industry.
In line with this approach the following actions are taken:
◦Construction of farm-to-market roads;
◦Introduction of production technologies in small scale
industries and farming;
◦Liberalization of credit through the rural banks;
◦Linking the countryside to the power grid for electrification;
 ◦Opening of non-formal education for occupational skills;
◦Improvement of the peace and order situation;
◦Enhancement of the primary health care for the rural
population;
◦Formation of production and credit cooperatives;
◦Establishment of irrigation systems; and
◦Agrarian reform for wider distribution of land ownership.
This approach has the advantage of retaining the
population in the rural areas instead of flowing into the
already crowded urban centers where employment cannot
is readily available.
 Agrarian Reform
Agrarian reform can refer either, narrowly, to government-initiated
or government-backed redistribution of agricultural land, or
broadly, to an overall redirection of agrarian system of the country,
which often includes land reform measures, training, extension, land
consolidations, etc.
The World Bank evaluates agrarian reform using five dimensions:
1. Stocks and market liberalization
2. Land reform (including the development of land markets)
3. Agro-processing and input supply channels
4. Urban finance
5. Market institutions
 Giving farmers the chance to own the land they till has
been considered not enough to enable them to raise their
income, thus the provision of such support as farm credit,
access to the market for farm products, agricultural extension
services, distribution of certified seeds, subsidized prices of
cheap fertilizers, crop insurance, formation of farm
cooperatives, and construction of irrigation systems.
Land Reform which is the abolition of tenancy and the
conversion of sharecroppers to leaseholders and later on to
be owner-tillers is an approach to development that is more
strongly directed to equitable distribution of wealth than to
generating economic growth.
 Cottage Industries
◦It generate income and employment in the rural areas. It is
small enterprises based on indigenous raw materials,
recycled materials or their combination with some imported
product components. 
◦Cottage industries are handicraft, woodcraft, embroidery,
metal craft, leather craft, or food processing establishments
operated with little capital and a few workers. 
◦This is done to give people in the countryside the
opportunity to earn cash while waiting for the harvest and
planting seasons and to give them a subsidiary source of
income to augment the low income from agriculture.
 Import Substitution
◦The productive capacity of a country that has suffered
trade deficits is usually oriented to the development of a
capacity to duplicate imported goods. This is called import
substitution, which may be designed to conserve the
foreign exchange holdings of the economy. 
◦Import substitution is a hindrance to the free flow of goods
between countries and may lead to the existence of
industries that are comparatively inefficient.
◦The main advantage is being able to generate jobs for the
citizens who might be jobless if importation of many kinds of
goods continues.
 Cooperative Approach
◦The formation of member-managed groups called cooperatives
for production; marketing, credit, equipment ownership, and
supply of consumer goods can be used to pool resources and to
generate growth and development through the acceleration of
investment and economic activities. 
◦The increase of purchasing power of the members of a consumer
cooperative improves the economic status of the low-income
groups just as farmers marketing cooperative enhances the
income of the members through better prices received for their
products. 
◦The success of cooperatives depends upon a strong communal
bond that exists among the members who should be concerned
for group's welfare.
 Pump-priming Approach
◦The injection of massive government funds into the economy
purposely to spur economic activity, to increase employment and
income, to build infrastructure and to induce private sector
investment.
◦The use of pump priming as an approach should be premised on the
condition that there is idle liquidity in the hands of prospective
investors.
◦In other words, the action are to awaken resources that have
stagnated after over production had caused inventories it piles up.
◦When goods could no longer be absorbed by the domestic market
and there is no way to export the excess production, the
consequence is closure of business, unemployment, loss of income by
the poor and middle class and a standstill situation of the economy.
 Foreign Investment Attraction
◦The developing countries have given much attention to the
creation of a favorable climate for the entry of foreign
investments.  
◦It has been considered that foreign investors who would take
advantage of cheap labor, available raw materials, and lower tax
burden in the developing country could remedy the lack of
domestic capital. 
◦In the process, the foreign investors will provide the benefits of
development in terms of employment, income, and a better
quality of life for the people.  
◦The effort to attract foreign investments has caused some
countries to extend extra-ordinary concessions to foreign investors.
 Appropriate Technology Approach
◦Developing countries since 1975 have been introduced to the concept
of appropriate technology, which is the use of machines and equipment
of low capacity, low cost and suited to small-scale production. 
◦The Philippines is one of the countries that turned to appropriate
technology because of inadequate resource to acquire new machinery
technology and because the country has no machinery production
industry. Cars, trucks, and tractors in the Philippines are actually only
assembled in the country by the foreign companies that sell them.  
◦The use of small thresher’s aid water pumps and the construction of
biogas tanks for electricity and fuel are appropriate technology
applications that have improved the farm enterprise not only in output
and income but also in the formation of a machine culture in the farm
sector.
 Non-Formal Education
◦Non-formal education is a misnomer. It is really a type of
training provided on short-term basis to transfer productive
technology in the urban and rural areas to enable the
participants to engage in a trade. 

◦As an approach to economic development, the

non-formal education program induces people to use their
skill for self-employment. It has been the way to improve
income for many urban and rural poor and has therefore
done much to mitigate poverty.
 Non-Government Organizations
◦Non-government organizations have done much in job
creation, transfer of technology and utilization of idle land.
◦The non-government organizations have been a way for aid
to reach the urban and rural poor directly through
people-oriented livelihood projects.
◦They are expected to provide facilitative services such as
seed dispersal, operation of irrigation systems,
demonstration of technology, manpower training, and
promotion of backyard industries, utilization of idle land or
drug rehabilitation.
 Preferential Credit
◦A country that wants to support the growth of an industry may give
preferential status to certain projects that contribute to development.
If a felt need for instance exist in the large scale production of organic
fertilizer to replace chemical fertilizer, the government may grant lower
interest rates on such projects through the Land Bank of the Philippines
or the BSP.
◦Preferential credit for low cost housing is for social amelioration as it will
widen the opportunities for home ownership but its development
effect is less than in processing and manufacturing.  
◦The industry with preferential credit status must have high employment
effect, must utilize a large volume of domestic raw materials, must
develop an export potential, must assist in the upgrading of productive
technology, or must help safeguard the environment.
 Tax Relief Approach
◦Selective tax relief to some industries is an approach that may
enable government to influence the quantum of investment
towards the desirable area. 
◦That relief might be of different levels of exemption and duration
of enjoyment. This approach is really to let private business grow
at a faster rate than they would if taxes were to be paid in full.  
◦The response to tax relief however is mixed.  
◦Tax exempt status given to an investment area gives the
impression that this is for attracting investment due to its low
profitability.
◦Tax exemption is a real advantage that should be taken as an
opportunity.
◦To the government, tax relief is in anticipation of the collection of
more taxes from a fully-grown industry in the future.
 Vocational-Technical Education
◦This is considered as an approach to provide the worker
component of industry. The pursuit of economic
development requires adequate manpower to do the
technical work, which do not call for professional
qualifications. 
◦To meet these requirements, the expansion of enrolment in
schools should be in the vocational-technical areas rather
than in the degree oriented courses. 
◦There should be enough graduates who will do the work
instead of an excess of graduates to perform managerial
and professional work.
 Alternative Energy Sources
◦Energy is a basic requirement of growth and development.
Industrialization is stunted when the supply of energy is
inadequate and irregular. The traditional and most widely used
fuel for generating electric power has been coal and crude oil.  
◦Countries with limited coal and crude resources that are also low
in purchasing power have turned to alternative sources of
energy.  
◦Some of the common are: hydroelectric power, dendro-plant,
and geothermal power generation. 
◦Growth cannot take place when there are constant power
interruptions that upset production schedules, power generation
should be a primary concern for the developing country.
 Labor and Consumer Protection
◦One approach to development is to preserve and enhance
the gains and benefits of laborers and consumers. The
income of labor must be protected from failing below the
living wage level. 
◦A high wage rate causes the cost production to rise, this
induces an increase in the prices of goods and generates
inflation.
◦The reaction of labor to inflation is to demand higher wages
through collective bargaining or a higher minimum wage,
which will in turn worsen inflation.
 Deregulation
◦There is advocacy that developing countries that have
installed so many regulations on business and industry should
dismantle them to allow the market forces to operate freely. 
◦Some of the objects of clamor for deregulation is wages,
energy rates, airfares, shipping fares, fuel prices, rent and land
transport fares.  
◦Labor unions, consumer groups, and the public might oppose
deregulation but they will ultimately accept the larger
number of employed manpower, improved products, and
less government intervention in business as benefits from
deregulation.
 Fertility Curtailment Incentives

◦Rapid population growth is a deterrent to the

growth of a developing country because the
households are not able to save as the number of
dependent increase. 

◦Family size and dependency limitation to a

desirable level is attainable when the people
accept some fertility control measures.
INDUSTRIALIZATION
AND THE THIRD
WORLD COUNTRIES
 The remarkable progress in communication and
transportation has exposed the high standard of living of
the industrial countries to the Third World. In contrast, many
leaders of the Third World countries have realized the big
difference in their primitive products of development. Thus,
their impressions of an industrialized economy have further
improved.
Henceforth, there has been a strong clamor among many
of the Third world countries for industrialization. For years,
this has been their aspiration. Through industrialization, they
believe they can eliminate the problems of poverty,
insecurity, and overpopulation.
 However, industrializing a less developed country is
certainly not an easy task. There are obstacles along the
path of industrialization. It is not only massive capital, modern
technology, competent management, and skilled labor that
are required. Well-developed agricultural and commercial
sectors are also needed. And of course, the most important
requirement for industrialization is the restructuring of values
and institutions in society.
In spite of the formidable barriers to industrial
development, it is not completely impossible for a less
developed country to industrialized its economy.
 Starting the Process of Modern Growth
Industrialization among the developed countries did not
happen overnight. Prior to their industrialization, they
experienced changes such as:
Economic, social, and political institutions were restructured to
pave the way towards industrialization.
There was a rapid technological improvement
Factors of production like capital, labor, and entrepreneurial
scheme were made to be more responsive to industrialization
Substantial improvement in transportation, communication and
electrification were undertaken
Social facilities and services were increased
Agricultural and commercial industries became viable.
 Approaches to Industrialization
Many less developed countries have good reasons in their
crusade for industrialization. As exporters of raw materials and
one or two agricultural products, there is no good future for
them. There have always been problems in employment and
income. Poverty has never left their peoples since the time of
their ancestors up to the present time. Aware of the benefits
of industrialization, which the rich countries are now enjoying,
the less developed countries have envisioned to industrialize
their economies.
 However, not a few developing countries have made
mistakes in their strategies’ or approaches to
industrialization. For instance, it is not true that almost any
kind of industrialization will help them attain their objectives.
It is likewise wrong to assume that the benefits of
industrialization will automatically flow from investments to
industrial projects. Such countries even commit and error if
they give industrial development the top priority in their
development programs during the formative stages.
Developing the Foundation of Industrialization
Most peoples in the less developed countries live and work
in the rural areas where agriculture is the principal source of
income. Obviously, improving agriculture and its institutions is
also improving the welfare of the peoples. This means there
are more jobs and incomes in the agricultural sector. As a
result, consumption of goods and services increases and
further stimulates investments and production.
 With favorable agricultural development, it would be
much easier to promote industrialization. Agriculture can
serve as a strong foundation of industrialization. On the
other hand, a weak and inefficient agricultural base cannot
possibly maintain the viability of industrialization. Products of
industries have very limited markets, because most of the
people have little purchase power. There is therefore a
need to develop first the agricultural sector where most of
the people are benefited. In addition, agriculture provides
raw materials, food, labor and market to industries.
 Agricultural development and industrialization are
interdependent. Agricultural growth cannot go very far
without the help of industrialization. For instance,
agricultural improvements in production, processing and
marketing require modern machines, facilities, and other
industrial inputs. These are the problems of industries. As
agriculture becomes more modernized, the number of
farm workers decreases. These are being absorbed by the
various industries both located in the rural and urban
centers. Such symbiotic relationship between agriculture
and industry therefore needs a more balanced
development and growth.
 Industrial countries like the United States, Japan and
those in Europe started their economic development with a
strong agricultural base. Even up to the present, their
agricultural productivity is the highest in the world. In the
case of the United States, 70 percent of its population was
engaged in farming during its early stage of development.
At present, only four percent (4%) of the people work in
agriculture. And yet such small group in the whole economy
can support the needs of not only the United States but also
many other countries. In case of Japan, it was the farmers
who financed the initial industrialization of their country
through taxes and export of silk.
 Reason for Industrialization

◦To increase the national income of the country. Productivity

is higher in manufacturing industry. This means more income
for the factors of production such as land, labor, capital and
entrepreneur. Another, prices of industrial products are more
stable and higher both in the local and world markets. Such
earnings, together with the incomes of the factory owners,
increase national income.
◦To improve the stability of export earnings and national income.
Most agricultural countries export one or a few agricultural
products. These are sold in highly competitive international
markets. Their prices are determined by demand and supply. The
supply of agricultural products is not stable. Whenever a bad or
natural calamity strike the crops, supply decreases, and so with
export earnings. On the other hand, over supply likewise brings
down export earnings. Such shortcomings of agricultural products
have been further aggravated by the unfair trade practices of
the industrial countries towards the agricultural goods of the less
developed countries. As a result, such exploited countries suffer
from balance of payment problems. The price of their imports
exceeds that of their exports evidently, industrialization appears
to be the solution to such problems.
◦To provide more employment to the unemployed and
underemployed. Industrialization creates more jobs, and
therefore absorbs surplus rural labor. Industrialization means
more factories. This demands for more workers. Farmers
during their slack seasons can do some part-time jobs in
processing plants in their own communities.

◦To expand markets of local raw materials. Local

manufacturing industries need raw materials. Agricultural
products and byproducts will be fully used by factories. Such
products will be processed for both personal and industrial
consumption
 Big Mistakes in Industrialization
Many of the observations under this topic are based from
the book Industrial Development by Murray Bryce. The author
has assisted many developing countries who organized their
development plans.
Maximum benefits can only be acquired if the individual
industrial projects are economically sound, feasible, and
appropriate to local conditions. Not a few industrial projects
in most developing countries could not even pass the most
basic economic test. Many of these unsound projects were
put up without proper evaluation. Such mistake was a great
waste of scarce resources.
 Many pet government projects have been inspired by a
political leader who has no training industrial economics.
Although such economically unsound projects were made in
good faith, the error entails a high price for a poor country.
Some useless projects were organized for political
expediency. Others are misguided symbols of national
prided. For example, long and beautiful super high ways, and
imposing buildings whose cost is several items as much as the
expensive machines they housed.
 Industrialization is a gradual and systematic process. It
includes a network of interwoven skills and facilities, such
system can only perform effectively if there is a progression
from the small to the large, from the simple to the complex.
For a less developed country, it becomes impossible to do
too many large and difficult things in a very short time. For
instance, super highways provide insignificant economic
benefits if most of the farms have no feeder roads to the
markets. Only the very few elite can enjoy the pleasure of
travel while riding in their luxurious imported cars.
 There is a fundamental principle in community
development that applies to industrial projects. It states that in
putting up a community project, always begin with a simple
project which is a felt need of the community. The idea is to
minimize the possibility of failure and frustration. Clearly, the
probability of success in implementing a simple project is
greater than that of a big and complex project. Moreover,
the experience of being able to plan, implement, and
manage a successful project, becomes a very valuable
training process for those who have been involved. Thus, they
can continue to undertaker bigger feasible projects that are
also needed by the community.
 PROBLEMS OF
INDUSTRIALIZATION
 What is
INDUSTRIALIZATION?

• Industrialization is the process by which an

economy is transformed from primarily
agricultural to one based on the
manufacturing of goods. Individual manual
labor is often replaced by mechanized mass
production, and craftsmen are replaced by
assembly lines.

• Characteristics of industrialization include

economic growth, more efficient division of
labor, and the use of technological innovation
to solve problems as opposed to dependency
on conditions outside human control.
 IS INDUSTRIALIZATION

GOOD BAD

FOR THE SOCIETY?

PROBLEMS OF INDUSTRIALIZATION:
HARD LABOR AND BAD WORK CONDITIONS

OVER-POPULATION

LOSS OF CRAFTMANSHIP

POLLUTION
PROBLEMS OF INDUSTRIALIZATION:
LESS HEALTHIER LIFESTYLE

UNEMPLOYMENT

DISEASES

FINANCIAL DISAVANTAGES
 HARD LABOR AND BAD WORK CONDITIONS

Working in factories was

exhausting, where people
worked longer hours under
bad conditions, which led to
illnesses and even death.
 OVER-POPULATION

Industrialization attracts
immigrants, causing
overcrowding on the region.
 LOSS OF CRAFTMANSHIP

Before industrialization,
people where obliged to
make their own items, as
products are not mass
produced.
 POLLUTION

Factories and vehicles

produce an unthinkable
amount of air pollution for
modern cities worldwide.
Improper disposal of wastes
put the ecosystem at stake.
 LESS HEALTHIER LIFESTYLE

People in the past got up

early and worked physically,
thus promoting a healthier
lifestyle.
 UNEMPLOYMENT

More machines were used to

take the place of manual
labor, resulting in high
unemployment rate for
people who did not have the
right skills and competencies.
 DISEASES

With the new lifestyle trend

came new inventions and
products, among which
became the primary causes
of lifestyle diseases.
 FINANCIAL DISADVANTAGES

Industrialization results in a
wide gap between the rich
and poor due to a division of
labor and capital.
 Barriers to Industrialization
South Asian leaders have been aware of the economic
success of highly developed countries due to their
industrialized economies. Hence, the aspiration for
industrialization has not been forgotten.
However, to imitate Western technology as a
development strategy may not be correct. Conditions
during the take-off stage of the now developed countries
were different for the conditions which pervade the less
developed countries in the region. For instance, during the
industrialization process of the Western countries, there was
no population explosion, and competition in the world
market was not yet keen.
 It is noted that not a few conditions in many South Asian
countries have not been favorable to industrialization. For
instance, there has been inefficient public administration.
Colonial economy is widespread. Negative attitude towards
work persist. There is conservatism in business enterprises.
Wealth and income distribution is still unjust. Nepotism is very
strong in both government and private sectors. Instead there
should be a new spirit of nationalist, efficiency, punctuality
labor mobility, discipline, and entrepreneurial propensity.
In his ten-year survey of South Asian conditions, Myrdal gave
his observations on the region’s dream of industrialization;
◦There is an unskilled labor force and a small-inexperienced
managerial resource.
◦Rapid industrialization will not generate sufficient employment. It
may even be negative if modern industry will compete with
traditional labor- intensive manufacturing.
◦There is inadequate logistic support such as power, transport and
communication facilities. Also, not all raw materials for
industrialization are locally available.
◦Existing social economic, cultural, and political institutions are not
favorable to development.
◦Attitudes and values are likewise not suitable to industrialization.
 Nevertheless, Myrdal did not discourage South Asian
countries in their industrialization drive. He proposed that
such economic pursuit should be complemented with mass
education and public health programs. In addition, he
suggested that the bid to industrialization should be
supported by the development of other fields of the
economy. Myrdal stated that vigorous policy measures
should be aimed towards improving labor utilization and
productivity in other sectors, especially agriculture which is
the largest and most important sector in a less developed
economy.
Early Philippine Industrialization
 In 1830, it eventually developed gradually and quickly
reached every corner of the globe. Along with its
worldwide expansion, it underwent a huge regional
expansion. Every area in the world enhanced their
specialized fields in the industry. The global economic
power and technological superiority entailed by the
Industrial Revolution had eventually reached the
Philippines.

Located in the heart of the Orient, it took time for

technological innovations to enter the Philippines. 
 The goal of the early Philippine economy has to increase
the share of manufacturing in the GNP. Like other developing
countries, the Philippines has been aspiring for
industrialization. Since 1916, there were experimentation with
policies which were envisioned to promote manufacturing in
the Philippines, and the promotion of entrepreneurial
ventures among local businessmen.
Professor Frank Golay of Cornell University stated that
Philippine industrialization policy included (Golay, 1961):

◦Direct Participation of the State in manufacturing and

industrial activities as an entrepreneur or partner of private
firms.
◦Development of financial institutions for allocating scarce
credit and foreign exchange resources.
◦Provision of government incentives to private entrepreneurs.
◦Promotion of selected foreign investments in manufacturing.
 Government Participation
Philippine industrialization in its formative stage provide little or no
priority to manufacturing for export. It only sought to reserve the
domestic market for local manufacturers and to expand the range
of Philippine manufacturers. For 20 years since 1935, the government
established and operated various marketing and industrial
enterprises. In the early 1950’s the government owned and
managed railroads, hotels, electric power, gas, and water works. It
directly produced coal, cement, steel textiles, pulp and paper. It
also operated shipyard and engineering shops. Moreover, the
government had substantial investments in firms manufacturing
incandescent bulbs fluorescent tubes, domestic and foreign airlines,
and owned three ocean vessels. There were several other
manufacturing enterprises in which the government was an active
participant.
 However, with the election of President Ramon Magsaysay
in 1953, there was a radical change in industrial policy the
following year. The government initiated the policy of selling
government companies in which the private sector was
interested and those companies which were inefficient.
Not a few government corporations had been inefficient
and became bankrupt. Corruption, nepotism, and
mismanagement were rampant. The notorious “padrino
system” did not spare the government corporations. The
heavy losses and waste of public money and property in
maintaining Government Corporation prompted President
Magsaysay to get rid of such inefficient firms.
 Industrialization Evaluated
Philippine industrialization rose rapidly since 1950 in terms of
growth, number of firms, and number of plants or extent of
Filipino participation. In 1950, the value added in
manufacturing was only 8.5 percent of the national income
compared with 42.3 percent in agriculture. Eight years later,
the contribution of manufacturing to national income
increased almost three times. During this period many infant
industries were heavily subsidized by the government. They
were granted tax exemptions and foreign exchange
allocations. They were also protected from foreign
competition.
 Likewise, inefficiency, favoritism, and corruption crept into
the operations of infant industries. Many of these industries
remained in their infant stage at the expense of the
taxpayers and consumers. The quality of their products did
not improve. They just took advantage of the subsidies
extended to them by the government.
In the1950’s, economic nationalism has become stronger.
Through the leadership of the then Senator Claro M. Recto,
foremost Filipino nationalist, several noted Filipino leaders
criticized the Philippine brand of industrialization, Recto pointed
out:
The policy of industrializing the country should be pursued
vigorously and sincerely. Many of these industries to which our
administration, past and represent, point with pride as
achievements of their so-called industrialization programs are
nothing more than assembling, bottling or packaging plants or
concerns which import an almost finished product and perform
the last stage of manufacturing before selling it on the selling
counter . When we refer to these enterprises as “industries” we
are deceiving ourselves (Constatino, 1965)
You do not help people if you do
things for them which they
themselves can do
-Abraham Lincoln