ABSTRACT
For a long time, Malaysia was heralded as a model of a rapidly industrializing country for
other countries to emulate (World Bank 1993). However, the lack of industrial deepening,
and the onset of negative deindustrialization since the late 1990s have cast a different
light on the Malaysian experience. The importance of manufacturing towards sustaining
economic growth and development is well established, but conditionally on continuous
productivity gains and in successful cases, on passage through positive deindustrializa-
tion. Heterodox economists identified manufacturing as the path to engender rapid growth
and structural change because of its increasing returns (Young 1928).1 Industrialization is
viewed to drive its own growth, as well as that of the other sectors, including stimulating
structural change from low value-added activities to high value-added activities and the
consequent differentiation and division of labour to provide the opportunities for generat-
ing more and better jobs. To this argument, we take a related argument that was taken up
by political economists concerned with the impact of differentiation and division of
labour on the quality of jobs created. Piore and Sabel (1984), Pyke and Sengenberger
(1992) and Zeitlin (1992) focused on the high road to industrialization. This article takes
a leaf out of this argument by examining the Malaysian experience to evaluate the propo-
sition that economies gripped by negative deindustrialization are incapable of supporting
significant improvements in wages.
