Decreasing poverty levels, increased purchasing power, low crime rates, and decreased mortality rates are some of the positive things said of the modern world. All these nice things enjoyed in the modern world are as a result of the Industrial Revolution witnessed in Europe in the 18th Century that saw the sudden surge in the global manufacturing sector.
Manufacturing is the process of converting raw materials into finished usable products. The manufacturing sector in a country dictates the prosperity of its economy. Here are some reasons why a thriving manufacturing sector is so important to a country’s economic well-being.
Favorable Balance of Payments
Manufacturing is among the major factors that influence the balance of trade of a nation, the balance of trade being the difference between the value of imports and exports of a country. Economies with a thriving manufacturing sector often have a favorable balance of trade since they are able to fill the domestic demands of manufactured products, instead of sourcing them from foreign markets. Favorable balance of payments is also important in strengthening the currency of a nation. The strength of a currency is often the most profound indication of the status of a country’s economy.
Reduced Unemployment Rates
Unemployment is one of the biggest headaches facing most governments around the world since it can trigger a wide array of societal ills. A financially empowered population and growing middle-class are both results of a growing manufacturing sector. While there are many reasons behind the rate of unemployment in a country, one common pointer is the level of manufacturing in a country.
There is an inverse relationship between the growth of manufacturing and the rate of unemployment in an economy. Employment in the manufacturing industry also triggers the decline in unemployment in other sectors in the economy. Some sources have it that a manufacturing job creates three other jobs.
The manufacturing industry also has what is known as “the multiplier effect”, a ripple effect where it touches many other aspects of the economy. An example can be seen in the spending of the people employed in manufacturing industries. Such employees would require accommodation and thereby spur the growth of real estate around the industries.
With their purchasing power, employees in manufacturing will attract investors offering to fill their numerous needs; basic or otherwise. The increased population will result in the government or civil society establishing social amenities such as schools and hospitals. Apart from labor, manufacturing also requires power for production and so areas around a manufacturing facility also benefit from electrical connections.
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The level of manufacturing in a country is a factor in its position and influence in international affairs. The common denominator under all the countries that are termed as being “global powers” is that they are all manufacturing powerhouses.
This is linked to the impact manufacturing has on the balance of payments in a country, as manufacturing boosts local production and hence makes a country less reliant on foreign markets. The most recent global power, China attributes its sudden prominence in international politics to its manufacturing sector that has grown exponentially over the last few decades.