Contents
Industrialization brings both positive and negative effects. During industrialization, the manufacturing sector enjoyed a rapid increase in output. It also creates more jobs and income in the economy as it increases the value-added of primary sector output. However, industrialization has also resulted in more population, urbanization, and pressure on social and environmental problems.
Let’s explore one by one the positive and negative effects of industrialization.
Positive effects of industrialization
Industrialization wasn’t all smokestacks and pollution. It ushered in a wave of economic and social progress, evident in the following:
Goods available in abundance and variety
The goods available are more abundant and more diverse. Industrialization allows us to have more things to buy at affordable prices. Manufacturing increased its production significantly. Machines help workers be more productive, producing more goods than ever before. Thus, prices can fall as output increases on a large scale.
On the other hand, we can also enjoy more diverse goods. Various manufacturing businesses developed during industrialization. Research and development give rise to new innovations, not only related to the production process but also to products.
Economic boom
Industrialization fueled a significant increase in the rate of output. Machines replaced manual labor, enabling factories to produce goods at an unprecedented scale. This production boom translated into a more prosperous economy.
With a larger Gross Domestic Product (GDP) and higher tax revenues, governments had more resources to invest in infrastructure and social programs. Technological advancements and the division of labor led to substantial efficiency gains.
Production processes became streamlined, allowing factories to produce more goods with fewer resources. This economic engine laid the foundation for further growth and development.
Urbanization
The promise of jobs in factories drew people from rural areas to cities. This rapid population shift, known as urbanization, led to the expansion of cities to accommodate the influx of workers.
Urbanization created a demand for new infrastructure, including housing, transportation networks, and sanitation systems. Governments had to invest heavily to meet these growing needs. While urbanization presented challenges, it also fostered a concentration of talent and resources that fueled innovation and economic activity.
More job opportunities
Industrialization spurred various businesses to develop. When the demand for manufacturing inputs increased significantly, various businesses in the primary sector sprang up. If previously relying on small-scale businesses, large companies have started working on the primary sector. An example is an agribusiness company, which has a supply chain from upstream to downstream.
In addition, the tertiary sector is also developing. For example, the manufacturing sector requires various services from businesses in this sector. For example, workers need training services to improve their skills. Other examples are transportation, logistics, warehousing, wholesale, and retail businesses, which play an important role in delivering the company’s output to consumers.
Higher labor productivity
Machines help workers produce more output and are faster than doing it manually. It is even more significant because, at the same time, production technology and techniques are developing more advanced.
Furthermore, specialization and division of labor allow workers to become more proficient in carrying out their daily tasks. This is because they focus on a specific task, making it easier for them to learn from experience how to get the job done faster.
Increased national income
Manufacturing businesses add value to primary sector outputs by processing them into semi-finished or finished goods. As a result, it makes their contribution to gross domestic product increase.
Manufacturing expansion also creates more jobs and recruits more workers. Demand also came from supporting businesses in the manufacturing sector, especially in the service sector. That ultimately brings more employment and income opportunities into the economy.
Rising standard of living
People have access to cheap and varied goods. As a result, they get the things they need to make their lives easier and more productive. In addition, urbanization also allows people to have better access to education or health services.
On the other hand, manufacturing expansion creates more income for households. They earn higher wages than those earned in the primary sector, which they can use to buy goods and invest in education and training.
Trade balance improvement
Primary products or commodities have low added value, so they are sold cheaply in foreign markets. In addition, they are also more volatile and vulnerable to price fluctuations in international markets.
On the other hand, manufactured products have higher added value. Thus, they can be sold at higher prices in international markets, leading to more export earnings for the economy.
An increase in manufacturing output is also beneficial for the exchange rate. Domestic production can better meet demand in the domestic market, reducing dependence on imports. More limited imports save foreign exchange, ultimately helping improve the trade balance.
More qualified workforce
Specialization encourages workers to become professionals, specialized workers, or experts in their functional areas. They achieve this, for example, by attending training or continuing their education to a higher level. It helps them improve their bargaining position when applying for new jobs, enabling them to earn higher salaries. However, this effect may vary between manufacturing industries and occupations.
Population boom
Industrialization often led to advancements in healthcare and sanitation, which declined mortality rates. Additionally, rising wages allowed families to improve their quality of life, potentially leading to higher birth rates, which contributed to population growth.
However, rapid population growth also put a strain on resources like housing, food, and water supplies. Governments needed to develop strategies to manage these demands effectively. This population boom presented both opportunities and challenges for policymakers and societies as a whole.
Innovation engine
“Necessity is the mother of invention” perfectly captures the spirit of industrialization. The need to increase production, improve efficiency, and develop new products spurred a wave of technological advancements, ranging from new machinery and power sources to improved materials and production techniques.
Companies and governments invested heavily in research and development (R&D) to stay ahead of the curve. This culture of innovation fostered a dynamic and competitive economic environment, propelling further industrial development.
Cultural transformation
The rise of factories and urban centers often led to a cultural shift. Traditional ways of life, centered around agriculture and rural communities, had to adapt to the new industrial landscape. This could involve changes in social structures, family dynamics, and work-life balance.
Industrialization also facilitated the spread of new ideas and values, such as individualism, efficiency, and materialism. This shift in cultural norms had a lasting impact on societies around the world.
Specialization for Efficiency
Industrialization promoted a more efficient division of labor within factories. Instead of one worker completing an entire product, tasks were broken down into smaller, specialized steps. This allowed workers to focus on specific tasks, leading to increased productivity and reduced production time.
Specialization created a demand for workers with specific skills. This fostered the development of training programs and vocational schools, leading to a more skilled and specialized workforce. The power of division of labor became a cornerstone of industrial production and continues to be relevant in today’s manufacturing landscape.
Negative effects of industrialization
Social problems in urban areas
The urban population is increasing along with urbanization. For example, in the early 18th century, urban dwellers in the British made up about 20% of the total population. Due to the Industrial Revolution, this percentage jumped to 50% in the mid-19th century.
Although people have better economic opportunities in cities, the denser the population also raises other problems such as access to housing and other social problems.
Some people come to the city without adequate skills. They are unemployed but need money to survive. It may lead to rising crime in urban areas.
Environmental pollution
Environmental problems such as garbage appear in urban areas. With a dense population, garbage accumulates every day, and without building an adequate waste treatment system, it raises various problems to the environment, such as water pollution.
In addition, the increase in greenhouse gas emissions—both from the manufacturing sector and households—also causes global warming and climate change. For example, global atmospheric carbon dioxide had already reached 315 ppm in 1858, increasing from 280 ppm before the first Industrial Revolution started in the mid-1700s.
Natural resource depletion
Industrialization leads to an increase in demand for natural resources as raw materials. The rapid growth of manufacturing leads to exploitative behavior, depleting natural resources, and destroying environmental sustainability.
It then gave rise to the green approach as a solution. It emphasizes efforts to conserve natural resources while sustainably improving the economy.
Wealth gap
Capital owners enjoy the benefits of increased manufacturing activity and other services. They use their money to set up a business or invest it in various corporate securities, such as manufacturer’s stock. Finally, their money makes more money.
Instead, workers think more about how to meet their daily needs for any income they receive. So, they are more difficult to allocate more money for investment as capital owners. Eventually, their money runs out for daily expenses without being able to make more money.
Rising structural unemployment
Urbanization has resulted in the depopulation of rural areas. This raises problems in the agricultural sector, as it is difficult to recruit enough workers.
Industrialization also brought mechanization to the agricultural sector, replacing farm laborers. As a result, some farm laborers are unemployed and find it difficult to upgrade their skills according to market demand, making them structurally unemployed.
Foreign dependence
Industrialization contributes to improving the trade balance if resources are abundantly available in the domestic economy. Otherwise, it increases the demand for imported raw materials and components.
Likewise, suppose industrialization is not directed at building an integrated supply chain in the economy. In that case, it will also lead to an increase in capital goods imports. Domestic industry is not enough to meet domestic demand. The reason may be that the transfer of technology from developed countries to developing countries is hampered.
Global Interdependence
Industrialization fostered a world of global interdependence, where nations rely on each other for trade and investment. This interconnectedness offers both opportunities and challenges.
On the positive side, international trade allows countries to specialize in what they do best, leading to a wider variety of goods at lower costs for consumers. Additionally, foreign direct investment (FDI) can bring much-needed capital, technology, and expertise to developing economies, creating jobs and fostering innovation.
However, this global interdependence also introduces vulnerabilities. A downturn in one nation’s economy can ripple through the interconnected system, impacting trade and investment worldwide.
Political instability in key trading partners can disrupt supply chains and trade agreements, further hindering economic activity. These external shocks highlight the importance of economic diversification and strong trade relationships to weather global storms.
Capital outflow
While foreign direct investment (FDI) can be a powerful tool for boosting industrial development, it’s crucial to consider potential drawbacks. Multinational companies may transfer a significant portion of their profits back to their home country, reducing the pool of capital available for reinvestment in the local economy. This can limit the host nation’s long-term growth potential.
Additionally, an influx of foreign companies can intensify competition in certain economic sectors, potentially harming smaller local businesses that may struggle to compete with the resources and economies of scale of multinational corporations.
Policymakers need to strike a balance, creating a framework that attracts foreign investment to promote sustainable industrial development while minimizing these risks. This might involve policies that encourage technology transfer, profit sharing, and support for local businesses to ensure a level playing field.
Worker exploitation
Miserable working conditions and the recruitment of underage workers were common practices during industrialization. The significant demand for labor left workers with no bargaining power. Moreover, the regulatory system and labor organization were often underdeveloped.
Indeed factories can produce more output and enjoy greater economies of scale. However, it requires workers to spend much of their time in jobs with deplorable and dangerous conditions. They have to perform the same routine and tasks repeatedly, much like a robot assigned to a job. Finally, it gives rise to stress between workers in the factory.
Less time for family
Expanding factories make most of the male workers move to the city. They bring their families to the city and hope for better economic opportunities, even though the reality may not live up to expectations. In addition, factory work makes them tired and stressed, making it difficult for them to enjoy leisure time and family life after returning from work.
