NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, August 7, 2019

By Noah Smith

Backyard industrialization has been tried; it was a miserable failure. During the so-called Great Leap Forward in China under Mao Zedong, peasants were encouraged to erect steel furnaces in their back yards. Predictably, most people had no idea how to build a mini steel plant much less make steel, and there was no market for their wares. The result was economic disaster.

But you don’t have to invoke Mao to see that most production tends to be centralized. Manufacturing tends to cluster in factory towns, and these towns are connected by roads and rail. Infrastructure is essential to development — factories need to ship in raw materials and parts and ship out finished goods, and workers need to travel from home to work. Energy, sewage, broadband internet and infrastructure are also essential for offices and factories. Good transportation is important for more subtle reasons — salespeople and marketers can more easily get a feel for demand in nearby areas, and engineers and other knowledge workers can more easily intermingle and exchange ideas.

This is probably why the world’s rich countries tend to be those with effective centralized governments that are dedicated to building infrastructure networks.

Photo courtesy of Neil Palmer.