Eli5 is a manufacturing economy or service economy better for national economic growth


Eli5 is a manufacturing economy or service economy better for national economic growth

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3 Answers

Anonymous 0 Comments

It is entirely dependent upon the circumstances and nearly all countries are a mixture of both.

Anonymous 0 Comments

That’s a complex question.

The thing with manufacturing is that you need raw material, which limit how much a manufacturing economy can growth. In service economy you just (mostly) need human labor, which just keep growing as your population growth (that said this is becoming an issue in some countries that don’t grow in population anymore). That’s one of the reason why most developed countries have between 50% and 80%+ of their economy being service industry.

At the same time, manufacturing jobs then to have better benefice and salary than non manufacturing jobs. But this advantage is getting smaller and smaller over time. The other big aspect of manufacturing is national safety. We saw the effects of this very well during the pandemic. The more your country is dependent on others for their manufacturing products, the worst position you are in when there is trouble. You are not at the top of the priority list if the product is manufactured in another country. We usually think of that especially for strategic resources like oil, steel, food, etc. But it’s also true of products that people use everyday.

So technically manufacturing is better, but it just can’t growth fast enough to keep your economy afloat, only services can grow fast enough since it’s by far less limited by natural ressources.

Anonymous 0 Comments

This depends on factors that any society and economy has and in what quantity.

The three main sectors commonly described are the primary sector (mining, farming, resource extraction/refining), the industrial sector (manufacturing of intermediate products or consumer products, and the service sector (banking, entertainment, etc)

If a country is like Saudi Arabia – one could argue that the primary sector has been “better” for their economy for many decades. If a country has a large low cost semi skilled labor pool with access to imported capital and knowhow, the industrial and manufacturing sector might be a “better” bet.

As far as modern economies go, most wealthy and developed economies tend to have a large portion of the workforce engaged in the service sector. Going through history of the last 250 years, one does see a trend of economies transitioning from primary to industrial and then a more dominant service sector.

Having said that, the service sector is rather non-specific. The wealthiest economies tend to be those that have a high concentration of finance oriented activities possibly followed by technology services. Examples like Sri Lanka gives evidence that tourism might not be the most robust service sector.