Industrialization’s Second Golden Age

Unless developed countries stop relying on financial deal-making and reinvest in the real sector, they will lose their current standard of living. To prevent this from happening, the global priority must shift from the eurozone and sovereign-debt crises to structural transformation in the developing world.

WASHINGTON, DC – “The golden age of finance,” the economist Barry Eichengreen has said, “has now ended.” If that is true – and let us hope that it is – what follows will most likely be a new golden age of industrialization.

Historically, except for a few oil-exporting economies, no country has ever become rich without industrializing. Thus, all eyes nowadays should be on our economies’ real sectors. Confronted by the global financial crisis that looms over Europe, political leaders around the world are waking up to a stark new reality: unless the developed countries stop relying excessively on financial deal-making and start to rebuild from the ground up, they will lose their current standard of living.

The global community must look beyond the eurozone and sovereign-debt crises and pay attention to the opportunity of structural transformation in the developing world’s real sectors. By structural transformation, I mean the process by which countries climb the industrial ladder – their workforces move into higher value-added manufacturing sectors as their sources of production advance.

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