DEVELOPING AN INDUSTRIAL BASE
Countries with a large base generally have higher per capita GDPs than those that do not. Some, such as the United States and japan developed an industrial base while largely restricting imports. Many developing countries try to emulate this strategy using trade protection to spur local industrialization. Specifically, they operate under set of assumptions:
1. Surplus workers can increase manufacturing output more easily than agricultural output.
2. Inflows of foreign investment in the industrial sector promote sustainable growth.
3. Prices and sales of agricultural products and raw materials fluctuate widely, which is detriment to economies that depend heavily on just one or a few commodities
4. Markets for industrial products grow faster than markets for commodities.
5. Industrial growth reduces imports and/or promotes exports
6. Industrial activity helps the nation-building process.
In the sections that follow, we review each of these assumptions in some detail.