What Is an Essential Industry?
An essential industry is any industry that is considered crucial to the stability of the economy within a nation. In order for an industry to be considered essential, it must produce goods and services that are important to keeping the economy somewhat stable, both during peacetime as well as when the nation involved is at war. Essential industries will vary somewhat from one scenario to the next, although there is a core group of industries that are likely to be considered key to economic stability at any time.
The broader approach to an essential industry not only calls for the inclusion of all companies that produce specific goods and services related to an industry identified as essential, but also all companies that supply raw materials to those producers. For example, if the textile industry is considered to be essential to the economy of a given nation, then businesses that manufacture textile machinery or provide support materials such as bobbins, cones, and raw fiber for the production process would also be included in the assessment. This approach allows for recognizing the importance of those supporting companies and industries and the role those entities play in keeping the economy stable.
Defining what does and does not constitute an essential industry can be somewhat difficult. The effort calls for identifying specific criteria to determine the impact of those industries on the overall economy. Typically, if the loss of that industry would seriously cripple the economy and open the door for some sort of severe economic downturn, such as the onset of a recession, there is a good chance that the industry is in fact essential. In addition, if the loss of the industry would constitute a significant decrease in the standard of living for citizens within that nation, that industry is most likely classed as essential.
Two of the essential industry types that are usually included in just about any identification of crucial industries are gas and steel. Shortages of either product could seriously damage an economy, creating a great deal of economic hardship for consumers as well as businesses. Electricity is also considered essential in many settings, owing to the dependency of most companies, as well as households, on this type of service.
Determining the status of what constitutes an essential industry and what does not may change somewhat, depending on how the economy of the nation is structured, as well as what type of political and other events are occurring. It is not unusual for some industries to be classed as essential during wartime, but lose that status during periods of peace. In addition, emerging technology may render a formerly essential industry as non-essential to the newer economic conditions. For this reason, economists and analysts can and do adjust listings of essential economies from time to time.
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