Can a country develop only by providing services and exporting commodities? Considering all the hype associated with the so called "creative economy" based on innovation and entrepreneurship, is this model sustaintable?
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2Your question is a mess. Yes, a country can survive without strong industrial production. Yes, a country could be self sustaining and not import/export anything. Your title doesn't match your two questions though.– user1873Commented Mar 28, 2015 at 18:10
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I'm not talking about zero imports and zero exports. I'm talking about modern/dynamic economies. If a country don't have a strong industrial production it will be necessary to import. The balance of payments would be equilibrated by commodity exports and/or services. I Hope it's clearer now.– endrienCommented Mar 28, 2015 at 21:24
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2I believe you're describing the United States. Seems to be doing OK.– user1530Commented Mar 29, 2015 at 1:10
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1Care to define "prosper" and "develop"? How can a country export "commodities" which aren't "industrial"? What is a "commodity" to you? What is "industrial production"?– Samuel RussellCommented Mar 31, 2015 at 0:04
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2 Answers
There is no reason why a country shouldn't be able to do what you're describing. In order to get the goods and services a country's people desire a country has to engage in trade. If a country lacks a specific good its people will have to trade others for that. There are a vast multitude of things other than manufactured goods a country can trade. For example: entertainment, computer programs, raw materials, consulting services, security services, transportation services, tourism, seasonal workers, financial services, research and development, healthcare, ect.
In order for it to make sense for a country to specialize in producing these things, it's people would have to have comparative advantage. This isn't as simple as saying that Europeans are better at making steel than Americans, Europeans have to be better at making steel relative to making movies compared to to the Americans relative skill at making movies vs steel. If there's a difference, then one can specialize in steel production while the other specializes in movie production and then they trade steel for movies.
For a country to specialize away from industry it will need, peaceful neighbours with comparative advantage in industry and the ability to transport the services and raw materials the country has comparative advantage in producing. The country might also need intellectual property treaties if it will trade in intellectual property.
If such a system exists, it seems very possible that a country specializing almost exclusively in producing services and raw materials could be prosperous, since many of the services I listed have the potential for citizens to create enormous value. The United States, one of the world's most prosperous nations, has certainly moved away from an industrial economy while expanding its prosperity. That being said, the United States manufacturing sector is still as big in absolute terms as it has ever been before.
In theory this may be possible, but this is practically impossible. A creative or service economy requires a large amount of educated workers, and developing the infrastructure to do this takes a lot of time to build. Every developed nation today used an industrial production based economy to essentially subsidize the necessary education infrastructure. There is a general progression of labor that needs to happen from unskilled to semi-skilled to skilled, because unskilled positions really don't provide much value beyond subsistence so a country/family/person won't have much time/money left for education. Industrial production is simply the easiest way to provide those semi-skilled positions we have found, and by having native production of finished goods makes it easier to develop more advanced economies that rely on those goods.
