One more bit of quick evidence on manufacturing and its share of GDP - this time, international evidence. I found some data from the United Nations for the period 1970 to 2010 and calculated the manufacturing to GDP ratios for Canada, the other six G-7 countries as well as Brazil, China, India, Australia and also the Netherlands.
The results show that all of the G-7 countries have seen a decline in the share of GDP accounted for by manufacturing. It would be a stretch to argue that they are somehow all suffering from "Dutch Disease".
Japan and Germany have traditionally had the highest G-7 manufacturing to GDP shares but nevertheless declined from 35 and 31 percent respectively in 1970 to 20 and 19 percent by 2010. Over the same period, Italy went from 25 to 15 percent, the United States from 24 to 13 percent, Great Britain from 29 to 10 percent, France from 22 to 10 percent and Canada from 19 to 11 percent. In 1970, Canada already had the lowest manufactuirng to GDP ratio of the G-7 countries. Australia and the Netherlands have had performances comparable to the G-7 when it comes to the evolution of their manufacturing to GDP ratios.
As for the so-called BRIC countries - Brazil paralleled the performance of the G-7 going from a manufacturing to GDP ratio of 25 percent in 1970 to 13 percent by 2010. China and India, on the other hand, have largely maintained their manufacturing sectors relative to their GDP. However, India's manufacturing to GDP ratio was 13 percent in 1970 and is still at 13 percent in 2010. China is the exceptional performer with a manufacturing to GDP ratio of 37 percent in 1970 but with a small decline to 33 percent by 2010.
The decline of Canada's manufacturing sector has parallels with other countries. Our experience parallels Australia - which can be viewed as a resource staples or resource exporting country - but it also parallels France, Great Britain and Italy which are not viewed as natural resource driven economies. Generally speaking, all developed economies have seen declines in their manufacturing sector's share of GDP over time. A high manufacturing to GDP ratio is often more representative of an earlier stage of economic development - the early stages of transition from agricultural to industrial development. Canada certainly fits into that pattern prior to the Second World War. China certainly can be seen as an economy that over the last forty years has been transitioning from agriculture to industry but on the other hand it had a high manufacturing to GDP ratio even fifty years ago when relatively underdeveloped - no doubt the legacy of centrally planned industrial policy. India on the other hand has had quite a different performance from China in this regard. Certainly interesting stuff.