Is Manufacturing Really the Only Path to Growth? Why Agriculture Holds the Key
- Adonias Tebebe
- 4 minutes ago
- 2 min read
On March 25, The Economist referenced a pivotal study that challenges the conventional wisdom of global economic development. Conducted by two highly respected economists -one a former Executive Director of the IMF and the other a professor at a prominent US university - this research sheds new light on the growth trajectories of five large emerging economies: China, India, Mexico, Indonesia, and South Africa.
The findings? Sensible investments in the rural economy generally provide a greater return in terms of improving local livelihoods than investments in industry.
Rethinking the "Industrialisation First" Model
For decades, the prevailing economic dogma has been that manufacturing is the singular key to economic growth and employment. Developing nations are often pushed to industrialize rapidly, sometimes at the expense of their agricultural sectors.
However, this recent research undermines that idea. It highlights that specific, targeted investments in rural infrastructure yield superior results for the people living there. These critical investments include:
Education
Rural roads and bridges
Local markets
Refrigeration and cold storage
Transport networks
The Critical Lesson for Africa
For poor countries across Africa, these conclusions are not just academic—they are urgent. The findings support the proposal of economists who argue that for rural populations, the future must be rooted in a robust agricultural sector.
Many poor nations currently find themselves stuck in a precarious position. They are effectively the last to arrive at the "table of industrialisation," making it nearly impossible to diversify into manufacturing in a competitive global market. Yet, they are simultaneously burdened by the need to repay enormous debts to the international financial community.
The Debt Trap: Health vs. Repayment
The structural inequality faced by these nations is stark. The debts owed to rich countries - via the IMF, the World Bank, and other International Financial Institutions—consume huge portions of national income.
In 20 countries across sub-Saharan Africa, debt repayments amount to more than the national budgets for health or education. In some heartbreaking cases, the repayment costs exceed the health and education budgets combined.
In other words, under current international rules, the education and health of a country's own citizens take a backseat to the money owed to the rich world.
A Deeper Dive
These absurd rules, which trap poor countries into cycles of ever-greater poverty, require a complete overhaul.
For a full analysis of this perverse economic landscape, I explore these themes in detail in my book:
It is time we look past the industrial fantasy and start investing in the reality of rural economies - before the debt trap closes completely.