THE LONG‐RUN EFFECTS UPON THE UNITED STATES OF THE INDUSTRIAL DEVELOPMENT OF THE FAR EAST*

Abstract

THE OBJECTIVE of this dissertation was to explore theoretically the economic effects of the industrialization of India and China upon the United States. This examination involved a combination of theoretical analysis, and the application of this theory to the statistical material available on India and China. The theoretical framework used was the theory of international trade. An attempt was made to determine those fields in which India and China might have a comparative advantage, which would enable them to compete effectively in the production of industrial goods. Then, assuming that the two countries did industrialize to a technical level approximately equivalent to that of Japan (possible new techniques were not considered), calculations were made of the output of various types of goods that the countries would produce, the percentage of workers in India and China that would be employed, and the raw material requirements for such a level of industrialization. Following this, the foreign trade and productive structure of the United States was examined to estimate the effect of this industrialization upon the comparative advantage of this country, under conditions of relatively free movement of goods in international trade. The population of 800,000,000 people in India and China is both a source of a major comparative advantage, as a supply of relatively inexpensive labor, and a major problem in the attempt to raise the living standards of the people. Industrialization is probably the one hope of the latter goal, but any industrial program would have to be very extensive if it wDre to employ a large proportion of the total population. It is doubtful if there is sufficient internal consumer's demand for industrial products, at present low per capita incomes, to support such a program, so that a large part of the output might have to be exported. This might so reduce the prices of manufac-