Industrialization – the period of transformation from an agricultural economy to an urban, mass-producing economy – has accompanied every period of sustained per capita gross domestic product (GDP) growth in recorded history. Less than 20% of the world's population live in industrialized nations, yet they account for more than 70% of world output. The transition from agrarian to industrial society is not always smooth, but it is a necessary step to escape the abject poverty found in less-developed countries (LDCs).

Defining Industrialization

The first period of industrialization took place in Great Britain between 1760 and 1860. Historians disagree about the exact nature and causes of this first Industrial Revolution, but it marked the first period of compounding economic growth in world history. Industrialization reached the United States in the early 19th century and eventually spread to most western European nations before the end of the century.

There are two widely accepted dimensions of industrialization: a change in the types of predominant labor activity (farming to manufacturing) and the productive level of economic output. This process includes a general tendency for populations to urbanize and for new industries to develop.

Effects of Industrialization

Economic and historical research has overwhelmingly showed that industrialization is linked to rising educations, longer life spans, growing individual and national income, and improved overall quality of life.

For example, when Britain was industrializing, total national income increased by more than 600% from 1801 to 1901. By 1850, workers in the U.S. and Great Britain earned an average of 11 times than workers in non-industrialized nations.

These effects have proven to be permanent and cumulative. By 2000, per capita income in fully industrialized countries was 52 times greater than in non-industrial countries. Industrialization disrupts and displaces traditional labor, encouraging workers towards more valuable and productive activity that is accompanied by better capital goods.

Hong Kong's Industrialization

Perhaps no industrialization was as rapid, unexpected and transformational as that which occurred in Hong Kong between 1950 and 2000. In less than two generations, the small Asian territory grew into one of the wealthiest populations in the world.

Hong Kong is only 1,000 square kilometers in size. It lacks the land and natural resources of major industrial powers such as the U.S. and Germany. Its period of industrialization began with textile exports. Foreign businesses became increasingly attracted to operating in Hong Kong, where taxation was low, no minimum wage laws existed, and there were no tariffs or subsidies for international trade.

In 1961, the British governor of Hong Kong, Sir John James Cowperthwaite, instituted a policy of positive noninterventionism in the former colony. Between 1961 and 1990, the average GDP growth rate in Hong Kong was between 9 and 10%. The lowest five-year growth rate, from 1966 to 1971, was still 7.6% per year.

Industrialization in Hong Kong was accompanied by a huge number of small and medium-sized companies. Despite no pro-industrialization policies by the Hong Kong government, investment venture capital flooded into Hong Kong from the outside – though not from China, which placed an embargo on trade with its neighbor. As of 2015, Hong Kong's average income was $33,534.28. In 1960, prior to industrialization, it was barely over $3,000 in 2015 dollars.