5.7 Impact of Industrialization and Economic Development

In the previous topic guide we talked about how the governments want to maintain stability by adapting their policies to social issues. In this topic guide we will analyze how the industrialization 🏭 and economic development 💰can also motivate the government to make some adaptations due to significant changes these processes cause on a country. 

For this topic, it is important that you keep in mind the importance and validity of different approaches. You should also be able to refute certain ideas and arguments with better ideas to solve these issues. This is what many social scientists do! They have to be able to analyze certain approaches and come up with more effective ones. 

Solutions to the impacts of Industrialization 🤔

As the world and the different economies are becoming more integrated, the demand for goods and services also increased significantly. This has caused the process of rapid industrialization in many nations, which has consequences for the environment and the wellbeing of citizens. For example, China 🇨🇳 became more industrialized very quickly over the past few decades, and practices such as the burning of fossil fuels have caused drastic changes to the environment and the health of its citizens, specially their respiratory health. 

Since governments want to maintain their legitimacy and guarantee a sense of stability to its citizens, they often take measures to remedy these issues. Here are some common solutions: 

• Changing Structures - Governments can physically move factories to other locations, they can incentivize green technology by prodiving government subsidies for industry compliance, increase infrastructure to allow for more government regulation.
• Policies - Governments can pass laws that engage citizens in more sustainable practices. For instance, by requiring a nationwide conversion from gas-fueled vehicles to electric ones. - The UK 🇬🇧 has implemented very effective laws to engage citizens in the use of EVs. One of its policies include the Plug-In Car Grant, in which the government provides subsidies to people that purchase a new electric vehicle, by covering 35% of the cost.
• Development - Governments can also strengthen their health system to deal with systemic air pollution. This is a way to remedy the situation and show the population that the government is concerned with their health/wellbeing.

How do governments deal with the impacts of Economic Liberalization? 

Economic liberalization has a huge impact in a state's economy, as it affects the growth of businesses, the amount of Foreign Direct Investment (FDI usually increases with economic liberalization), foreign exchange rates, population movement, and also the environment 🌲. 

💡Remember the role of Tariffs: ⬇️ lower tariffs decrease consumer prices but can affect domestic industry negatively, whereas ⬆️ higher tariffs will increase consumer prices but will benefit domestic industries over foreign goods. 

Another important mechanism adopted by governments to deal with fiscal deficits - when the expenditures exceed the revenues ina. government - is Austerity. 

** Austerity measures consist of cutting expenses of a government, usually destined to social and welfare programs, and increasing taxes. It aims to reduce budged deficits and increase the revenue of the government. **

Remember that the governments, due to the increased interconnectedness of their economies, may face complications due to world market changes. The policies mentioned above are usually adopted as a response to these changes, as an attempt to maintain equilibrium to their economic and political spheres.