In the mid-1980s, Bangladesh seemed an unlikely candidate for industrial takeoff. It was desperately poor, had explosive population growth, and exported barely over $30 million in simple garments a year. But the global economy offered a ladder. Europe had already abolished tariffs on Bangladesh-made clothing, while U.S. quotas on other Asian exporters pushed retailers to seek new suppliers. Western brands hunting for cheap production showered Bangladesh with orders. Those orders, in turn, unlocked bank credit to build and expand. Entrepreneurs could rent a floor, install sewing machines, hire workers, and start exporting; South Korea’s Daewoo came in and trained Bangladesh’s first generation of garment industry managers. By 2022, garment exports had risen more than a thousandfold, surpassing $40 billion a year, and the industry employed roughly 4 million people. Since 1990, annual income of the average Bangladeshi has risen from under $300 to about $2,600.
One generation later, Ethiopia tried to climb the same ladder but found its rungs broken. The country borrowed $1 billion abroad, spending most of it to build six new industrial parks. By mid-2021, all of Ethiopia’s parks together employed only about 90,000 people in a country where 2 million new workers enter the labor force each year. Bangladesh, China, and Vietnam already dominated labor-intensive manufacturing, while India and the Philippines had captured much of the low-cost services trade. Automation, meanwhile, was reducing the value of cheap labor. Because the new factories imported most of their inputs from abroad, few local suppliers developed. All the while, the parks carried nearly $500 million in scheduled interest payments. The triple hit of the COVID-19 pandemic, civil war, and new U.S. tariffs drove out investors and shuttered businesses. Ethiopia defaulted on its debt. Income per person remains around $1,000 a year.
