Industrialization occupies a central place in th
e rich tapestry of development theory and
practice. Although that place has varied over time, many have agreed with Nicholas Kaldor
that the kind of economic growth that leads to high real income per capita can only occur
through industrialization. This paper argues that it is becoming increasingly difficult for
most developing countries to achieve rapid growth through industrialization, and especially through export oriented activities. But the key mechanisms seen as driving the industrial
take-off in much of the literature (internal increasing returns, transfer of labour into higher
value activities and pecuniary externalities) are alive and well, and are evident in services as
well as in industry. Furthermore, China is ac
tively trying to move from a strategy based on
industrialization to one based much more on agriculture and services, as the costs of the
current pattern of industrialization become prohibitive, and India has demonstrated that
rapid growth based primarily on the services sector is possible. Thus more attention needs
to be given to strategies based on the expansion of the agricultural and services sectors, and
to the ways in which better services in rural areas and higher rural output can combine to
achieve rapid growth and improved human welfare in poor countries.