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Published online by Cambridge University Press: 03 February 2011
I Was assigned for this occasion a rather substantial—one might almost say grandiose—subject. I would not deny responsibility, because I accepted it. But in view of its scope I should first explain how I have tried to render it manageable, with respect to both theoretical structure and mode of exposition.
I am greatly in the debt of colleagues who commented on an early draft of this paper, notably: Rolf Henriksson, Forest Hill, Albert Kervyn, C. P. Kindleberger, S. S. Kuznets, M. M. Postan, Austin Robinson, P. N. Rosenstein-Rodan, and P. A. Samuelson. I am also grateful to V. R. Fuchs and Daniel Creamer for clarifying conversations on their published work.
1 Svennilson, Ingvar, Growth and Stagnation in the European Economy (Geneva: United Nations Economic Commission for Europe, 1954).Google Scholar
2 Maddison, Angus, Economic Growth in the West (New York: Twentieth Century Fund, 1964).Google Scholar
3 Kuznets, Simon Smith, Modern Economic Growth (New Haven: Yale University Press, 1966).Google Scholar
4 Denison, Edward Fulton, Why Growth Rates Differ (Washington, D. C: Brookings Institution, 1967).Google Scholar
5 Kindleberger, Charles Poor, Europe's Postwar Growth (Cambridge: Harvard University Press, 1967).CrossRefGoogle Scholar
6 Postan, Michael M., An Economic History of Western Europe, 1945–1964 (London: Methuen, 1967).Google Scholar
7 The foundations for this kind of analysis of sectors, with their built-in capacity to lead and then decelerate the growth process as a whole, are to be found in: Kuznets, S. S., Secular Movements in Production and Prices (Boston and New York: Houghton Mifflin, 1930)Google Scholar; Burns, A. F., Production Trends in the United States Since 1870 (New York: National Bureau of Economic Research, 1934)Google Scholar; Hoffmann, W. G., The Growth of Industrial Economies (Manchester: Manchester University Press, 1958)Google Scholar, a translation of his 1931 Stadien und Typien der Industrialisierung; the author's Process of Economic Growth, Second Edition (Oxford: Clarendon Press, 1960)Google Scholar (especially Chapters 4 and 11); The Stages of Economic Growth (Cambridge: Cambridge University Press, 1960), especially pp. 12–16Google Scholar; and the more full elaboration “Leading Sectors and the Take-Off” in The Economics of Take-off into Sustained Growth, edited by the author (New York: St. Martin's Press, 1963)Google Scholar. The interested reader should also note the discussion of the problem of dating precisely when a rapidly growing sector becomes a “leading sector,” pp. xvi-xx.
8 The Stages of Economic Growth (Cambridge: Cambridge University Press, 1960), p. 15.Google Scholar
9 Economic Survey of Africa Since 1950, United Nations Department of Economic and Social Affairs (New York: United Nations Publication, 1959), p. 135Google Scholar.
10 Ibid., p. 187.
11 Economic Survey of Africa (Vol. 1. Western Sub-region, Republic of South Africa), United Nations Department of Economic and Social Affairs (New York: United Nations Publication, 1966), Part 1, Chapter IV, pp. 39 ff.Google Scholar
12 For a vivid analysis of this phase of growth in a major Latin American country see Furtado, Celso, The Economic Growth of Brazil (Berkeley and Los Angeles: University of California Press, 1963), especially pp. 217Google Scholar ff.
13 See, for example, Economic Survey of Latin America 1964 (New York: United Nations Publication, 1966), pp. 150–52Google Scholar; and Economic Survey of Latin America 1966 (New York: United Nations Publication, 1968), p. 251Google Scholar. Reliable and consistent time series for the industrial sub-sectors of Latin American countries are difficult to come by, although the general sequence of sectoral development is quite clear. In the case of Mexico, for example, some typical preconditions industries were established before the 1910 revolution, under Porfirio Diaz; for example, glass, papermaking, brewing, tobacco, as well as modest beginnings in textiles, iron, and steel. In the 1940's and 1950's, consumers goods import substitution rapidly increased, as described, for example, by Glade [Glade, W. P. Jr. and Anderson, Charles W., The Political Economy of Mexico (Madison: University of Wisconsin Press, 1963), p. 87Google Scholar]: “…A nucleus of enterprises in iron and steel, cement,, paper, and in textiles, shoes, beer, tobacco, soap, sugar refining, and flour milling had been substantially expanded from their Porfirian base, and new enterprises, both domestic and foreign in ownership (e.g., Ford, Simmons), had arisen to produce rubber items, household furnishings, metal goods, window glass, foodstuffs, and other products. An expanded resource base and higher income levels provided the elements for rising amounts of domestic capital formation, while a new pattern of investment opportunities was beginning to pull that capital into fields with a higher potential for long-run productivity increases and reinvestment.” As Vernon observes: “By the late 1950's …the easy opportunities for domestic investment in import-substituting manufactures seemed to be reaching an end. Consumer goods were no longer being imported into Mexico in very large amounts; less than one fifth of all Mexican imports fell in the consumer category. Substitution from this point forward would have to take place mostly in intermediate goods—in steel instead of bed springs, in aluminum instead of kitchen pans, in engine blocks instead of assembled cars, and so on. Such substitution usually involved larger investment, more difficult technology, and a more difficult market structure; from all points of view, therefore, it represented much more forbidding terrain.” [Raymond Vemon, The Dilemma of Mexico's Development (Cambridge: Harvard University Press, 1965), p. 117.]
Nevertheless, the transition to the post-take-off sectors was begun in directions summarized by Ernesto Fernández Hurtado: “Although figures are not available for the period from 1930 to 1950 that would show the increase in the output of consumer goods as compared to producer goods, there is a noticeable trend in the Mexican manufacturing industry to extend production beyond nondurable consumer goods to durable consumer goods and capital equipment.” (In Mexico's Recent Economic Growth: The Mexican View, Introduction by Tom E. Davis, Translated by Marjory Urquidi, Published for the Institute of Latin American Studies [Austin: University of Texas Press, 1967], p. 66.) The scale and timing of the shift is suggested by these index numbers for steel and chemical production: 
14 For Japan, see, especially, Ohkawa, K., The Growth Rate of the Japanese Economy Since 1878 (Tokyo: Kinokuniya Bookstore Co., Ltd., 1957)Google Scholar, Part II, Section II (“Secondary Industry”), and tables, pp. 83 and 88–89; and Rosovsky, H., Capital Formation in Japan, 1868–1940 (Glencoe: Free Press, 1961)Google Scholar, especially table XI-I, pp. 328–36. For the U.S.S.R., see, especially, Nutter, G. Warren, The Growth of Industrial Production in the Soviet Union (Princeton: Princeton University Press, 1962)Google Scholar, Table 37, p. 165, covering annual average rates of growth for 1928–1945. The high rate of growth in consumers durables is set aside by Nutter because of the extremely low level of the base figure for 1928. Note also Nutter's observations on the relation of economic developments in the 1930's to the state of war preparation, pp. 210–13. Also, see below, pp. 158–60.
15 Fabricant, S., The Output of Manufacturing Industries, 1899–1937 (New York: National Bureau of Economic Research, 1940), especially pp. 9–22, 102–3, and Chapter 21 (“Transportation Equipment”). In the following table Fabricant (p. 102) demonstrated the rise and fall of the automobile and carriage sectoral complexes, respectively.Google Scholar
In the present context the automobile complex is, of course, defined in wider terms than in Fabricant's table,' above:
16 For Western Europe, see, for example, M. M. Postan, op. cit., p. 190, Table 20; Economic Survey of Europe in 1962, United Nations (New York: United Nations Publication, 1963)Google Scholar, Chapter 11, p. 8; Economic Survey of Europe in 1966, United Nations (New York: United Nations Publication, 1967)Google Scholar, Chapter 1, pp. 29 and 39; Youngson, A. J., The British Economy (Cambridge: Harvard University Press, 1960), pp. 205–207.Google Scholar
17 See, for example, the rise in services from 34.3 percent to 37.1 percent of disposable personal income in the United States between the 1956–58 average and 1967 (estimated), in Economic Report of the President and Annual Report of the Council of Economic Advisers, Washington, D. C, February 1968, p. 49. Note also p. 48, the rise in state and local government expenditures from 7.5 percent of GNP in 1954 to 11.1 percent in the fourth quarter of 1967. For a general survey of shift to the service sector, see Fuchs, V. R., The Service Economy (New York: National Bureau of Economic Research, 1968Google Scholar; distributed by Columbia University Press);Kuznets, S.Modern Economic Growth (New Haven: Yale University Press, 1966), pp. 143–53Google Scholar. The implications of this movement are discussed further below, pp. 163–7.
18 S. Fabricant, op. cit, Part Two, “The Output of Individual Manufacturing Industries,” pp. 123 ff. The charts on pp. 136–7, 154, 162, 172–3, 192, 201, 208, 222–3, 244, 254, 263, 276, 292–3, 304–5, and 318, show well the heterogeneous fate of the sub-sectors which renders of doubtful meaning the averages for the sectors as a whole.
19 See, notably, for a kindred disaggregated view, Postan, M. M., An Economic History of Western Europe, 1945–1964 (London: Methuen, 1967), especially pp. 128–33Google Scholar, including note 1, p. 129, with observations on divergent movements within the U.K. textile index. See also Postan's observation on the ambiguity of “tertiary industry,” note 1, p. 191.
20 In services, a task of disaggregation not unlike Fabricant's in manufacturing has been performed for private consumption expenditures by Houthakker, H. S. and Taylor, L. D. in Consumer Demand in the United States, 1929–1970 (Cambridge: Harvard University Press, 1966). For further observations on services, see below, p. 164.Google Scholar
21 See, for example, Hawley, A. H., The Changing Shape of Metropolitan America (Glencoe: Free Press, 1956), Table 4 and Figure 4 (pp. 14–51) for striking shift to suburbia in the 1920's.Google Scholar
22 See, for example, Clark, Colin, The Conditions of Economic Progress, Second Edition (London: Macmillan, 1951), pp. 46–7 and 63 for comparison of U.S. and U.K.Google Scholar
23 For the U.K., see, for example, A. J. Youngson, op. cit., pp. 46–9. And for an earlier analysis, Sayers, R. S., “The Springs of Technical Progress in Britain, 1919–1939,” Economic Journal, LX (June 1950), 275–91.CrossRefGoogle Scholar
24 Op. cit., pp. 46–7.
25 I. Svennilson, op. cit, Table 40, p. 149.
26 K. Ohkawa, The Growth Rate of the Japanese Economy Since 1878, Tokyo, Japan, 1957, Table 3, p. 83.
27 Nutter, G. W., Growth of Industrial Production in the Soviet Union (Princeton: Princeton University Press, 1962), Table 37, p. 165. The high rate of growth of consumers durables in this period reflects the low initial figure for 1928 rather than a substantial role in Soviet growth before 1940.Google Scholar
28 For statistical data see Appendix A.
29 See, for example, the author's discussion in The United States in the World Arena (New York: Harper, 1960), pp. 444–8Google Scholar and quotation from S. H. Slichter's March 3, 1958, address to the Associated Industries, p. 466. Some data relevant to this judgment are presented in Appendix B.
30 See, especially, Soviet projected sectoral growth rates for 1957–72, Economic Survey for Europe in 1957 (Geneva: United Nations Economic Commission for Europe, 1968), Chapter 1, p. 31, and the author's observations in The Stages of Economic Growth, pp. 102–3. Also, G. Warren Nutter, op. cit., pp. 222–4, on “The Years Since 1955.”Google Scholar
31 For a typical assessment, see Economic Survey of Latin America, 1966, United Nations (New York: United Nations Publication, 1968), p. 251Google Scholar: “This gradual relative decline in the growth rate of manufacturing has been accompanied by a tapering off in efforts to modify its internal structure. Over the period 1955–60, annual rates of expansion had averaged 4.4 percent in the food, beverages and tobacco industries, 3.2 percent in the case of textiles, 10 percent in the chemical industry, and 15 percent in those manufacturing metal products, machinery and transport equipment. Thus, the dynamic industries considerably increased their share in total manufacturing activities during the second half of the fifties. In the five-year period 1960–65, annual growth rates fell to 4 percent in the food, beverages and tobacco industries and 2.8 percent in the textiles industry, while in the chemical, metallurgical and metal-transforming industries they decreased to 8.8 percent, 8.1 percent and 7.3 percent respectively. Thus, although the structure of the industrial sector continued to change, it changed much more slowly, and its slow pace persisted in 1966.
“Although similar changes took place in all the countries of the region, they were on a larger scale and assumed different forms in a few countries. For example, in Argentina, Brazil and Mexico the traditional industries contributed less to total manufacturing: their participation dwindled from 54–57 percent to 40–47 percent between 1955 and 1965. Food, beverages, tobacco and textiles were most affected. On the other hand, the dynamic industries increased their share from 43–46 percent to 53–60 percent of the total, with the largest increases in the chemical, petroleum refining and metallurgical industries, and in the manufacture of machinery and transport equipment.
“In a second group of countries—Chile, Colombia, Peru and Venezuela—similar but less radical changes occurred, with the traditional industries retaining a somewhat larger share in total manufacturing (between 50 and 60 percent in 1965). The changes were primarily in the metallurgical industries and the manufacture of machinery and transport equipment, and the chemical industry made only a slightly higher contribution to the total.”
32 For a brief discussion of these structural transitions, see “How Self-Sustained is Self-Sustained Growth,” in The Economics of Take-off into Sustained Growth, edited by the author (New York: St. Martin's Press, 1963), pp. 9–11.
33 Ibid., see especially Chapter 5.
34 Ibid., pp. 159–60.
35 Ibid., Table 5.5, p. 161.
36 Op. cit., Economic Report of the President, February 1968, Table 6, p. 67.
37 See, for example, Royal Commission on Canada's Economic Prospects, “The Service Industries” by the Bank of Montreal, March 1956; Gilbert, Milton, et al, “Comparative National Products and Price Levels” (Paris: O.E.E.C., 1958)Google Scholar. For more recent estimates, see Lengellé, Maurice, The Growing Importance of the Service Sector in Member Countries (Paris: O.E.C.D., 1966)Google Scholar; Houthakker and Taylor, op. cit., for a comparison of their findings with those of Sandee, J. (ed.), Europe's Future Consumption (Amsterdam: North-Holland Publishing Company, 1964)Google Scholar; and the discussion of comparative patterns of service outlays in V. R. Fuchs, op. cit., pp. 24–31.
38 Loc. cit., p. 151.
39 Op. cit., pp. 3–6.
40 For an excellent brief analysis, see C. P. Kindleberger, op. cit., pp. 36–41.
41 For further observations, see below, pp. 173–4.
42 Housing, of course, carries with it a high marginal capital-output ratio. One cannot, therefore, predict confidently the direction in which the Soviet capital-output ratio would shift if consumers' sovereignty were to reign as, for example, in Western Europe. Expanded housing outlays might raise the capital-output ratio. The turning of the heavy industry complex to automobiles and other fabricated products would lower the capital-output ratio. The most important potential factor in determining upshot for GNP, however, might be a rise in labor productivity with more powerful incentives available in the form of ample supplies of durable consumers goods and improved housing.
43 Soviet sectoral targets for 1970 are given in the following table from The European Economy in 1966 (Geneva: United Nations Economic Commission for Europe, 1967), ch. 2, p. 48.Google Scholar
44 For data on some heavy industry and fabricating sectors in key Latin American countries during the 1960's see United Nations Monthly Bulletin of Statistics (New York: United Nations Publication, December 1968), pp. 52–4Google Scholar (fibres), 56 (newsprint), 60–4 (chemicals), 68–71 (pig iron, ferro-alloys, and steel). Progress will be seen as generally irregular, excepting the-case of.Mexico.
45 It may be that Africans might do best by studying not the more obvious models from the advanced industrial world but that of Sweden which built its modern economy by the purposeful elaboration of its limited natural resources, applying modern technology to successive processing stages. Pan-Africanism Reconsidered, edited by the American Society of African Culture (Berkeley: University of California Press, 1962), p. 161.Google Scholar
46 As noted previously, the technological content of the rapidly growing service sub-sector is still to be determined; but the emerging phase of economic history could, run counter to past experience of new sectoral complexes, since it may not involve the introduction of new high productivity technologies.
47 S. Fabricant, op. cit., p. 120.
48 Princeton, 1960, p. 106.
49 K. S. Lomax, “Production and Productivity Movements in the United Kingdom Since 1900,” Journal of the Royal Statistical Society, Part 2, Vol. 122, p. 203.
50 Merton, R. K., “Fluctuations in the Rate of Industrial Invention,” Quarterly Journal of Economics (1934–1935), pp. 465–8Google Scholar; M. Postan, op. cit, especially, pp. 265–302. See also the author's Process of Economic Growth; Second Edition (Oxford: Clarendon Press, 1960), pp. 101–3Google Scholar, on the range of factors determining sectoral retardation.
51 See, for example, discussion of postwar European capital-output ratios in M. M. Postan, op. cit., pp. 115 ff; also Maddison, A., Economic Growth in the West (New York: Twentieth Century Fund, 1964)Google Scholar, especially Chapter III, “Investment and Growth.”
52 Governmental policies of relatively full employment may have had an important indirect as well as a direct effect on the outcome via the expectations of private investors. Growing confidence that governments would not pay the severe political penalties of severe unemployment and that they knew how to maintain the level of effective demand may have induced investment policies in the private sector geared to long run growth, with diminished sensitivity to short-run fluctuations in tie economy as a whole.
53 Op. cit., p. 128; see also, pp. 163–6.
54 Denison, E. F., Why Growth Rates Differ (Washington, D. C: Brookings Institution, 1967), pp. 236–7Google Scholar. See, also, pp. 252–5 on relative U.S. and European automobile ownership and economies of scale in distribution.
55 Op. cit., pp. 296 ff., especially pp. 337–42.
56 In general terms the proposition would be almost universally agreed. But Professor Rodan makes an important three-way distinction among: the actual introduction of new technologies; the transition from inefficient to efficient operation of known technologies; the diffusion of old and familiar technologies to economies which have not yet applied them. The second concept is of particular importance: the problem of interwar Europe and contemporary Latin America is not so much a lack of technological knowledge as the lack of a market environment which would permit industries, rooted in those/technologies, to expand rapidly. As noted above, pp. 174–6, the point is highly relevant to relative U.S.-European growth rates, in the.1950's and 1960's.
57 “Prices and Incomes Policy,” pp. 799–806.
58 Op. cit., pp. 119–28.
59 See, for example, Development Assistance, 1968 Review, Report by Martin, Edwin M. (Paris: O.E.C.D., December 1968), Table 1, p. 225.Google Scholar