Countries like Bangladesh may lose competitive advantage in attaining economic growth to come out of poverty by creating mass urban employment in the garment industry, a Bloomberg article says.
It has pointed out that automation is making textile manufacturing less labour-intensive.
“This is a crucial question because as technology advances, there’s a concern that the traditional path out of poverty might be closing,” reads the article titled “Bangladesh Versus India in the Development Race”.
The author, Noah Smith, observed that technological advancement might cause the industry to migrate back to rich countries like the US, “where labour is expensive but capital is relatively cheap”.
“The developing world is at risk of premature deindustrialisation. If Bangladesh fails due to competition from rich-world robots, it will bode ill for countries such as Ethiopia that are looking to hop on the escalator to prosperity,” the article said.
“That would leave India’s service-centric development model as the only feasible path.”
It mentioned that Bangladesh is one of the biggest beneficiaries of the process of rising wages in developed countries and shifting of low-tech, labour-intensive manufacturing industries to counties with cheaper workers.
This economic development path, the article pointed out, “has no doubt come at a real human and social cost -- Bangladesh's workers suffer harsh working conditions and many industrial accidents, including a horrific factory collapse in 2013 that killed more than a thousand people.”
“But overall, the tried-and-true industrialization strategy seems to be working.”
Referring to some economists’ argument, the article said automation “hasn’t closed off the traditional path, and that there is still plenty of work for industrious people in poor countries.”
It raised a twin question: “Will Bangladesh, with its traditional approach to growth, catch up and overtake India? Or has India stumbled upon a new development model that cuts out the need for a country to do a stint as the workshop of the world?”
The article further observed that Bangladesh is scrambling to diversify into more valuable manufacturing industries such as autos and electronics.
Smith explained that although the leaders of Bangladesh and India have similar goals, the difference in the country’s development models is making for an interesting experiment.
“If Bangladesh grows faster, it will suggest that manufacturing, starting with textiles, is still the ticket to industrialisation; but if Bangladesh falters and India sustains its growth, it will imply that poor countries should look to services first,” the author concluded.