Industry and Enterprise: An International Survey of Modernization and Development

An ISR Economic growth & performance study

The latter part of the twentieth century was a period of radical global political-economic changes. Numerous non-Western countries industrialized and transitioned from statist-collectivism to modern market-capitalism and democracy. However, others stagnated or even regressed in economic developmental and other respects.

This book provides a concise, comprehensive account of industrial-economic modernization and development in a wide range of present-day countries in Africa, Asia, the Middle East, and Latin American and the Caribbean.

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1. Industrial Modernization and Development: General and Introductory

Introduction and overview* Theories and research* Evolutionary and comparative perspectives* Pre-modern organization: mercantilism, Oriental despotism, and primitive capitalism* Summary & conclusions* Bibliography*

2. Other-Societal Influences: Politics, Economics, andDiffusion

Introduction and overview* Political-economic models* Diffusionist models* The transition from political-economic organization to market capitalism* Bibliography*

3. The Geography of Industrial Modernization and Development: Physical Environmental Influences

Introduction and overview* Resources and growth* Modernization and environmental controls* Bibliography*

4. Cultural and Personality Influences

Introduction and overview* Political ideology* Psychological influences* Bibliography*

5. Historical Studies

Introduction and overview* The Industrial Revolution in Great Britain*The failure of the East to modernize*Bibliography*

6. The Economics of Modernization and Development

Introduction and overview* Current concerns* Economic traditionality* Modernization and development* National and area case studies* Bibliography*

7. Industry and Enterprise in East Asia

Introduction and overview* Hong Kong* Singapore* Korea* The Philippines* Malaysia* Indonesia* Bibliography*

8. Industry and Enterprise in China

Introduction and overview* Political-legal obstacles* Agriculture* Price controls* Manufacturing* Energy supply problems* Bibliography*

9. Industry and Enterprise in India

Introduction and overview* Liberalization*Bibliography*

10. Industry and Enterprise in the Middle East

Introduction and overview*Saudi Arabia* Egypt* Jordan*Bibliography*

11. Industry and Enterprise in Latin America and the Caribbean

Introduction and overview*Debt* Obstacles to industrial modernization and development* Barbados* Jamaica* Mexico*Bibliography*

12. Industry and Enterprise in Africa

Introduction and overview* Nigeria* Kenya* Tanzania* Zimbabwe*Bibliography*

13. Manufacturing Firms and Industries

Introduction and overview* Manufacturing in Korea* Trade unions, labour, and other resources* Manufacturing in Nigeria*Bibliography*

14. Agriculture

Introduction and overview* Agriculture in India* Agriculture in Nigeria* Agriculture in Kenya* Other cases* Bibliography*

15. Trade, Markets, and Development

Introduction and overview* Trade and markets in Hong Kong* Trade and markets in India* Bibliography*

16. Finance, Investment, and Development

Introduction and Overview* Finance and Investment in Barbados* Finance and Investment in Hong Kong* Finance and Investment in China*Bibliography*

17. Educational, Political, and Wider Socio-cultural Aspects

Introduction and overview* Education* Government* Wider social and cultural aspects* Culture and society: national and area cases* Bibliography*


Print book

Second revised edition 2003. New impression 2011

ISBN 9780906321270

128 two-column pages


Price £74.95 including free postal delivery


E-book price £15.39 (British pounds 15.39)

E-book ISBN 9780906321584

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Sample passages

The general upshot of these evolutionary changes is increased production volumes, enhanced scope and efficiency in distribution, and improvement of the functional capabilities/performance of economies overall.

Such things as the differentiation of production structures and functions and increased universalism in exchange remove various ceilings on output that non-economic institutions impose in traditional economies. Production and trade expand as protective tariffs and other official barriers disappear at the inter-community level. Meanwhile, the replacement of traditional status-based and officially controlled arrangements with wage contract employment has positive effects on plant-level efficiency. The appointment and compensation of personnel on ability rather than because of family or political connection, age, or gender etc. enhances role performance all around.

The case of the Industrial Revolution in Britain well illustrates the general process. In this country, the disappearance of a range of traditional negative social influences resulted in massive advances in industry and commerce from the 18th century onward… (page 22)

In the real world, industrial growth and enterprise performance is a function of a wide range of variables. Political obstacles are not the only important barriers to economic growth and efficiency in countries. However, there are invariably negative economic effects in countries from such things as:

· the compulsory state ownership, distribution, and direction or ascription of economic resources;

· state control of labour and employment;

· government restrictions on prices, enterprise competition, and consumer choice;

· foreign colonization and satellitization; and

· the pursuit of national economic autarky rather than free international division of labour, trade, and investment.

Historically and internationally, politically organized systems of production and distribution have declined and lost out in competition with their market capitalist counterparts. Essentially the term market capitalist economic system is just another name for a modern economy – i.e., one that is structurally differentiated, functionally specialized, and autonomous vis-à-vis the polity and other non-economic subsystems in the society… (page 29)

Modern industrial economies with open trading systems, advanced technologies, and efficient production organizations are far less subordinate to physical-organic environmental controls and limitations than pre-industrial economies are.

Over the years, developments in transport and communications have overcome many so-called insurmountable barriers of space and time.

Finally, with the expansion of the tertiary service sector of the economy, the concentration of firms in particular geographical localities has diminished – while the overall dependency of industries on natural physical resource has declined… (page 32)

Cultural influences shade off into personality factors – i.e., the attitudes, motives, and behaviour of particular individuals and groups.

There are a number of psychological theories of the origins of business-economic growth. Writers such as McClelland and Hagen have explored the nature and economic significance of achievement motivation and individual entrepreneurship. Certain sub-cultures consistently produce more entrepreneurs than others do. Within firms, personality is also often a significant influence on entrepreneurship and innovation.

However, economic and wider social factors also influence personal attitudes and behaviour. Such things as child rearing, the organizational structures and market economic situations of firms, and experiences of unemployment and status withdrawal can have significant effects on individual motivation, entrepreneurship, and innovation… (page 36)

In traditional Asia, monopoly state ownership and control of basic economic resources such as water, land, and labour was fundamentally incompatible with private industrial-commercial enterprise and democratic politics. The general situation in the West was very different. However, we still have to explain why industrial modernization and development took place much sooner in some Western countries than in others. Plainly, socio-cultural variables were crucially important in the process.

Britain had already made the transition to a predominantly market capitalist economy by the late 17th century. Religion had long been reformed. After the Glorious Revolution, the country also enjoyed stable parliamentary government, an independent judiciary, and the rule of law. The well-established, comparatively favourable general socio-cultural environment was clearly the main reason why the Industrial Revolution first occurred here rather than in Continental Europe… (page 43)

Old-fashioned technology, inbuilt structural organizational obstacles to production/distribution efficiency and lack of product innovation have often existed side by side in enterprises. In the countries surveyed, many enterprises have failed to realize adequate economies of scale – or had initial development and operating costs too high for price competitiveness. On top of this, many have failed to adopt modern professional management and accounting methods.

Poor plant maintenance has often existed alongside technical-engineering, labour, and management-organizational problems in introducing new technologies. Poor management has frequently resulted in over-manning or high labour costs and low productivity. However, the fault has not always been that of managers. In some cases, trade unions and governments have pressured for costly job creation or work sharing and employment security schemes. As well as the labour market and employment, there has also often been overall lack of flexibility or openness in property, financial, and other intermediate markets… (page 51)

Fiscal reform would have to accompany industrial policy reform. The government was too heavily dependent on profits from the sale of oil and other commodities. Privatization would not be possible until this ended and the government relied much more on regular taxation to finance its expenditures.

Moves towards free trade would require lower import duties and other trade taxes – and the reduction/elimination of official industrial subsidies. There was much scope for improving the tax collection system to both broaden the public revenue base and reduce official corruption and underground working.

Industry and enterprise would also much benefit from improvements in the quantity and quality of public infrastructural facilities – from more and better roads, railways, inter-island links, electricity supplies, telecommunications networks, and so on.

Finally, allowing foreign financial institutions into the country on an equal fiscal and legal-regulatory basis would greatly help in generating new investment. A more modern commercial banking and finance sector would put substantial oil revenues and other capital to better industrial-commercial use… (page 58)

Electric power shortages are still common in China – with generally negative effects on industry and commerce.

Over the years, power shortages have resulted from official underestimation of energy requirements, operator inefficiencies and poor management, and outdated technology and lack of investment funding.   Power station load factors in China are often double those in North America and Europe. Because reserve peaking capacity is so small, the plant and equipment in use tends to deteriorate more rapidly and maintenance costs are high. Meanwhile, efficiency in industrial energy consumption is comparatively low. Thus for example it can take 30-70% more coal to produce a unit of energy or steel in China than it does in Western Europe.

China has plenty of coal. However, deficiencies in the transportation system (especially the railways and ports) have caused problems in moving coal from the Northern mines to the South of the country and in selling to the large and lucrative Japanese market… (page 64)

Liberalizing reform in India in the late 20th and early 21st centuries had several major aspects to it.

The first was privatization. There was extensive reduction of direct state ownership and control of industry in the country. The separation of industry and commerce from government came much closer to contemporary Western standards.

Next, the government abandoned or modified many of its old isolationist policies on trade and investment. It steadily freed imports of capital goods, raw materials, and new technologies. As the use of modern foreign technology increased, the capacities of Indian manufacturers to export etc. grew.

External borrowing increased – not only from official institutions but also on the international financial market. Equity capital also became a major means of financing capital investment projects: new plant and buildings, purchases of ships and aircraft, imported high-tech plant and equipment, and so on.

Private companies could now invest in a much wider range of industries, produce substantially larger amounts, and acquire significantly bigger market shares before so-called anti-monopoly laws (actually designed to protect small enterprises and traditional industries from competition) blocked them.

In the energy field, an important reform allowed the private commercial generation and sale of electricity. Independent companies could now build and operate power stations and sell their outputs to the national grid. The government finally abandoned its policy of monopolizing electricity production and distribution: a policy that had blocked growth and hampered cost efficiency across Indian industry for decades. It also scrapped the old policy of national self-reliance in oil and natural gas production – inviting bids from foreign firms wanting to prospect-and-develop reserves in the country.

Finally, official price controls disappeared on many items. Both firms and consumers benefited from the removal of controls on the prices of basic household goods, steel, cement, and other products. Scrapping the controls curtailed black market activities, stimulated investment and new production, and ended persistent and widespread shortages of the items concerned… (pages 67-68)

Like Egypt, Jordan does not have substantial oil or other natural resources. The natural resources that do exist (for example phosphates) have limited economic value. Here as elsewhere in the region, the very hot climate and water shortages constrain industrial development.

However, the country’s geographical position is a commercial advantage. Jordan benefits from substantial transit trade between the port of Aqaba in the South, Iraqi and Syrian centres, and places further afield.   It also gains extensively from foreign tourism.

The government has friendly relations with other governments and the international business community. This helps the tourist trade. In the past, the government banned tourists from neighbouring Israel entering or exiting through Jordan. This meant that operators could not offer joint country tours and considerable business was lost as a result. The normalization of relations with Israel not only stimulated tourism but cross-border trade, industry, and investment in general.

Domestically, the well-educated work population enjoys comparatively high levels of employment and earnings. Substantial foreign wage earnings also boost household incomes.

Finally, the widespread use of English and modern Western management, financial accounting, and commercial legal practices have helped attract direct foreign investment into the country… (page 73)

Elsewhere in the Caribbean, the Jamaican government has sought to create a favourable political-legal environment for economic growth.

In the 1980s, the Seaga government specifically envisaged the Caribbean as a kind of future Southeast Asia. It privatized state enterprises and restored free markets by removing large blocks of items from price controls imposed by the previous neo-mercantilist Manley government. It also curbed inflation by stopping the printing of large amounts of un-backed money, reduced government expenditure, and improved the management of the tax system to increase revenues.

Following these reforms, North American and British firms increased direct investment in the country. Total export earnings rose and unemployment fell as business-economic growth accelerated… (page 80)

In Zimbabwe, business tax and regulatory burdens were onerous even by African standards.

There were high taxes on profits and dividends, limits on the remission of earnings abroad, and a host of other measures that stymied private industrial-commercial investment and growth.

A new minimum wage tariff barrier to labour market entry and employment increased production costs, unemployment, and poverty.

Import surcharges and higher petrol taxes further raised business and domestic household living costs. Meanwhile, protective tariffs and quotas, restrictive licensing schemes, and cuts in official foreign currency allocations for import purchases curbed international trade. The once flourishing farming industry and agricultural export trade suffered great damage.

The government imposed statutory limits on the diversification and expansion of private companies generally. It also stepped up its policy of nationalization or indigenization through purchasing equity stakes in companies. At first, the acquisitions were voluntary but eventually they became compulsory. The government expropriated the private owners in industries ranging from farming, through banking and financial services, to newspapers. There were brazen seizures of white-owned farms by members of the political regime for their own personal enrichment.

Finally, when the government ran out of real assets to appropriate, it began printing money. Eventually, it created hyperinflation on a scale not seen since Germany in the 1920s… (page 88)

Internationally, the Nigerian economy is a lot more open than many other African economies are. Nonetheless, protectionist policies can still damage manufacturing and investment.

The government has sometimes restricted imports of important spare parts and raw materials for use in manufacturing. Curbs on many ordinary consumer goods imports have raised retail prices to customers and reduced competitive market pressures for production cost efficiency and innovation.

Apart from hitting manufacturers and consumers, high trade taxes and other restrictions on imports have hit government tax revenues. The government has lost a great deal of revenue over the years because of extensive smuggling and black market trading.

Where direct inward investment is concerned, there have been some attempts to indigenize industrial-commercial ownership and management. The government has reserved businesses in such fields as baking, textiles and clothing production, dry-cleaning, travel agency, and general distribution and retailing exclusively for Nigerians. Even in the case of relatively open industries, the government has sometimes obliged foreign firms setting up in the country to take on Nigerian partners and prohibited them from bringing in foreign managers and technicians to run production plants… (pages 94-95)

Economic factors aside, various wider socio-cultural factors affect farming development and performance.

In many societies, there is significant disdain (especially on the part of young people) for living and working on the land. Population migration to the towns is substantial. Not only is urban-based industry comparatively attractive to workers. There is often bias on the part of banks and other investors in favour of funding manufacturing and service rather than farming enterprises.

Nowadays, large efficient farms using advanced technical-production methods are in operation in most countries. However, it is still common to find traditional agricultural sectors and inefficient smallholdings existing alongside advanced commercial farming.

In China under the Mao regime, the programme of forced state collectivization of agriculture was a disaster. Liberalization or commercialization has greatly boosted farming output and efficiency around the world. Nonetheless, agricultural productivity still varies considerably between countries. It is common to find farmers producing the same kind of things in similar physical environments – but with widely varying levels of success.

Differences in technology and other key inputs are one explanation. Ownership and organizational variables are also crucially important. Commercial or market capitalist modes of production and distribution are essential to maximize efficiency. Finally, it will not be possible to have buoyant, profitable agriculture in the absence of satisfactory demand and prices for the commodities being produced… (page 100)

Commercial freedom has been a major factor in the overall economic development of the territory.

Hong Kong is a major entry port for trading with China. Over the years, much of its income has come from this trade. The Korean War of the early 1950s resulted in the suspension of the China trade altogether. Hong Kong businesses turned instead to manufacturing and supplying other markets. Firstly, a textile and clothing industry developed from scratch. Then factories making plastic goods, electronic, and other, higher-grade export products were set up. Subsequently, Hong Kong became a major international banking, finance, and communications centre.

Hong Kong firms have benefited enormously from the opening up of the mainland Chinese market and from growing markets elsewhere in Asia. Among other things, the country has become a major re-export centre for other manufacturers in the region that lack foreign trading contacts and effective marketing and distribution capabilities. Many Chinese businesses use Hong Kong facilities in preference to poorer road, rail, sea, and air transportation facilities of the mainland.

In the late 20th century, Chinese ports had only limited container facilities and their average turnaround times for foreign vessels was long – typically a week compared with just one or two days in Hong Kong.

Hong Kong traders have also profited from a willingness and ability to handle various politically sensitive transactions that others do not want to touch. Among other things, they have supplied Chinese coal to South Korea and handled general business between mainland China and Taiwan, Indonesia, South Africa, and Israel… (page 106)

Though it has improved, the overall legal framework for doing business in China is still deficient and unsatisfactory in several respects. Traditionally, trading in China has depended significantly on personal contacts, inside knowledge, and direct local experience. Because of this, Hong Kong businesspersons often have an advantage. They often share the same language and have family and kinship connections with the mainland. They are also used to working via personal contacts, simple standard contracts, and ad hoc negotiations etc. Many Western corporate executives find it difficult to adapt to this comparatively informal, personalistic and non-legalistic business environment… (pages 113-114)

There are other significant cultural differences between the United States and Latin America – affecting not just the economy but also political institutions and societies at large.

In the United States, national independence occurred on an already well-established liberal political and economic base. Free market capitalism, democracy, and the rule of law have always been stronger in the United States than in Latin America.

In the latter, many governments still have large stakes in industry and commerce. Old World traditions of political autocracy have also persisted. Many countries have remained authoritarian, unstable, and poor – centuries after achieving national independence. The Spanish royal silver mines began a tradition of government economic ownership in the 16th century that has continued up to the present day – manifest in the numerous giant state monopolies, official holding companies, and other corporatist-type institutions still operating in economies…(pages 123-124)