The Effects of Industrialization on the Developing World

The Effects of Industrialization on the Developing World

The quality of life in the developing world can be improved by investing in the industrial tools people use to improve their productivity.

Investment in the industry of developing countries has a good impact on the quality of life of the people in the developing world. For example, every million US dollars invested in agriculture in Sri Lanka creates 2 057 jobs, not including jobs created through the spending of employees. This adds to the lifespan of the employees, as every doubling of income, on average is associated with a 4.2 year increase in lifespan. This means that if a job doubles someone's income from subsistence farming, it will increase their life expectancy by 4.2 years, so a million US dollar investment in Sri Lankan agriculture will add over 8 600 years of life to the employees’ lives, not including the employees’ families’ lives (4.2 years of life saved for each complete employee career-span, assuming a career-span investment legacy). Doubling a person's income is easy through investments in agriculture, because the income from subsistence agriculture is below 456.25 US dollars per year (the extreme poverty income), and the wages supported by a one million US dollar investment in agriculture in Sri Lanka pays up to 1 167 US dollars per worker.4,5,6,7,E1,E4,E7

Though Sri Lankan agriculture investments create more jobs than most investments in the developing world, the effects of other investments still create many jobs and save many years of life. Investing in Tunisian construction creates 613 jobs per million US dollars invested, saving 2 575 years of life. A million US dollar investment in agriculture in Ghana creates 1 398 jobs, saving 5 872 years of life. The average one million US dollar investment in Ghana creates 116 jobs, and the average one million US dollar investment in Tunisia creates 247 jobs, saving 487 and 1 037 years of life, respectively.4,6

The increase in income has other benefits as well. A 10% increase in GDP leads to a 5% to 7% reduction in infant mortality rate. A one percent increase in GDP leads to a reduction of 1.6% in poverty.2

Though it is not possible to invest just one dollar and have control over all of the profits gained from that investment, theoretically investing just one dollar in Sri Lankan agriculture, and reinvesting the profits would save forty years of life in ten years.E7

Industrial development can create environmental issues, so is industrialization worth it? Coal power plants and agricultural equipment use fossil fuels causing lower air quality and increased health costs, and fertilizers end up in waterways making waterways less useful as a source of drinking water and fish. Investing one million US dollars in Sri Lankan agriculture adds 5.8 million US dollars to the GDP despite the direct and immediate environmental consequences(fertilizer runoff, air pollution, etc.), which results in a 4.2 year increase in lifespan, despite direct and immediate environmental consequences. The increase in GDP from investment does not account for indirect and future consequences, such as consequences in other countries or resource depletion. However, these consequences are minimal in their negative consequences and even have some positive consequences. While WHO reported that climate change will cause about 250 000 additional deaths per year from 2030 to 2050, this only includes death from malnutrition, malaria, diarrhea, and heat stress, and does not include any diseases that will be reduced from climate change, such as cardiovascular disease. Another report says that climate change is expected to save over 849 000 lives in 2050, and included malaria, schistosomiasis, dengue, cardiovascular, respiratory, and diarrhea diseases. It is hard to say whether or not climate change will cause more deaths than the lives it will save, because there are many factors, but there is good reason to believe that climate change will save lives, because colder weather tends to cause more deaths than warmer weather, mainly because cold weather increases the risk of cardiovascular problems. A study in an area of Kenya shows that when the temperature averaged 21℃, the increase in years of life lost was 27.4 years per day compared to when the temperature was 26°C, and when the temperature averaged 30℃, there was an increase of 3.3 years of life lost each day compared to when the temperature was 26°C. But what about deaths caused by natural disasters?7,9,14

More industrialized countries lose less lives through natural disasters than less industrialized countries, as they have infrastructure that is stronger and more extensive to transport and take care of people. Natural disasters will only cost the US economy less than 2% of GDP by 2100 in the pessimistic estimates of negative economic effects. Of the deaths caused by natural disasters from 1994 to 2013, only 10% happened in high-middle or high income countries, even though only 34% percent of natural disasters occurred in the low-middle and low income countries. High income countries have 40% of the natural disasters, yet only have 4% of the deaths because of natural disasters. Low income countries have 12% of natural disasters, but 63% of deaths caused by natural disasters. Despite increases in carbon dioxide emissions, the US reduced the death rate from natural disasters 94.2 per million people per year to 4.9 per million people per year comparing the years 1900 to 1989 and the 1990 to 2006 through industrialization. Industrialization helps countries cope with natural disasters.10,12

The estimated costs of carbon dioxide emissions to the world economy accounting for the cost on the future economy have wide ranges from 27 US dollars to 220 US dollars per tonne, as models of the climate change vary significantly. Less than 25% of the world population emit more than 0.6 kilograms of per US dollar earned(GDP in PPP), and very little emit more than one kilogram per US dollar earned. At 27 US dollars per tonne of carbon dioxide, the amount earned by emitting one tonne of carbon dioxide would have to be just 27 US dollars to make the emissions not worth the cost, which is 1.6% of the 1 670 US dollars actually produced from 0.6 kilograms of carbon dioxide per US dollar earned. In the worst case scenario with 220 US dollars of cost to the environment per tonne of carbon dioxide and one kilogram of carbon dioxide emitted per US dollar earned, the emission still only uses up 22% of the value created.10,17

Resource depletion is an issue for industrialization, as fossil fuels are finite and industrialization needs energy. Coal is usually used because other similarly priced sources of electricity are not practical in the area, such as there being no suitable rivers for hydroelectric dams. Nuclear usually costs less than 10% more than coal, so even if coal runs out, electricity costs will not be a big issue. Oil and gas can be made from coal, and there is still a lot of coal left; in 2014, the world used 0.035% of the coal left in the ground, meaning that there is 2817 years of coal left. Other sources of electricity will take over after uranium is depleted such as nuclear fusion which could fuel a house for a year with a few milligrams of water and rocks, or solar which has a cost that has fallen by 99% since 1977. Other fossil fuels such as oil have replacements that are rapidly declining in cost, too, such as electric cars that are just a few thousand dollars more than regular cars. The depletion of resources has never caused problems in the past, and future technologies will make sure the depletion of resources never is a problem in the future, as there is a lot of time left before most resources would run out. To learn more about fossil fuels, see our infographic on fossil fuels coming soon.12,16

Investment in the developing world creates jobs for the people, but the wages are often quite small compared with the developed world. Investors make good returns in the the developing world, so should the profits be used to increase the wages? A million US dollar investment in Sri Lankan agriculture creates annual profits of 2.1 million dollars, and 2.4 million US dollars in wages. If the 2.1 million US dollars is put into wages, it could nearly double wages, creating a 4.2 year increase in lifespan per employee, which will save over 16 400 years of life. However, if it is reinvested, it will save over 310 000 years of life within five years of reinvestment, if it doubles their wages from subsistence farming. Reinvesting profits in Tunisia on average saves over 40 700 lives per one million US dollar investment within five years of reinvestment, compared to 4 520 if profits are put into wages. Reinvesting profits instead of increasing wages saves many more years of life than increasing wages over time.5,6,7,E3

Industrialization can be increased through reducing constraints on investment and improving market access. In Bangladesh, restrictions were taken off importing farm machinery, which increased agricultural productivity. Market access was improved in Indonesia, Vietnam, and Bangladesh through lowering transaction costs with improved roads and new marketplaces.2

Though many environmentalist and human rights organizations seem to portray industrialization in the developing world as an economic system where companies come into to poor countries harming their economy, damaging their environment, and paying less than they should, all for no benefits whatsoever except to increase the profits of billionaires, this idea has no bearing when one looks at the facts. Ignorance of the benefits of industrialization has caused a large portion of people in the developed world to think that the very thing that is the reason they are living on one hundred dollars instead of one dollar per day, is a cause of problems in the developing world. Industrialization is what will bring everyone out of extreme poverty by 2030 as the UN has as a goal.

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