Carlota Perez Centennial Professor at the London School of Economics (LSE), UK Professor of Technology and Development, Tallinn University of Technology, Estonia JICA/IPD, Jordan, May 2014 THE NEW CONTEXT FOR DEVELOPMENT AROUND NATURAL RESOURCES: An opportunity for Latin America (and other resource rich countries)?
THE NEW CONTEXT FOR DEVELOPMENT AROUND NATURAL RESOURCES: An opportunity for Latin America (and other resource rich countries)?. Carlota Perez Centennial Professor at the London School of Economics (LSE), UK Professor of Technology and Development, Tallinn University of Technology, Estonia - PowerPoint PPT Presentation
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Carlota PerezCentennial Professor at the London School of Economics (LSE), UK Professor of Technology and Development, Tallinn University of Technology, Estonia
JICA/IPD, Jordan, May 2014
THE NEW CONTEXT FOR DEVELOPMENTAROUND NATURAL RESOURCES:An opportunity for Latin America(and other resource rich countries)?
Circumstances have significantly changedsince our ideas on development evolvedin the post-war period
In the character of energy, materials and food markets
In the potential for innovation in developing countries
In the interests and behavior of global corporations
In the influence of environmental factors asboth obstacle and challenge
BASIC ARGUMENT:
And in the level of awareness of the role of innovation in growth and development
What determines the synchronicity?Development opportunities are a moving targetdepending on the nature ofsuccessive technological revolutionsand on their stage of diffusion
It’s no use trying to imitate current successesthey were achieved with past opportunitiesTomorrow’s successes dependon anticipating the future todayBeware of developing policy theories using only data from past decades?
A historical observation: Fast growth and catching up processes tend to cluster in certain regions or countries that move in similar directions for a certain period
• The US and Germany caught up with Britainfrom the 1870s in the Age of steel and heavy engineering
• Australia, New Zealand, Argentina, etc. made a leapwith counter seasonal trade made possible by steamships and London funding
• Western Europe moved to mass consumptionwith the mass production revolution (following US)
• Latin America and Asia grew with protected ISIwhen mass production matured (Africa came late)
• Japan and the Four Tigers took the double technological opportunity of the paradigm shift to ICT
• China (the BRICs?) took the globalisation “train”
SOME OF THE OBSERVED OPPORTUNITIESof different magnitudes and outcomes;of single countries or groups of them
Could shifting opportunities explainOcampo’s “truncated convergence”?
And what different countries getfrom using a particular opportunity is not necessarily the same outcome
Both Latin America and the Asian Tigersused the ISI opportunity(when the industries in the Northwere maturing and facing saturated markets)
TAKING ADVANTAGE OF EACH OPPORTUNITY
DEPENDS ON PREVIOUS CAPABILITIES
(technological and social)
ON POLITICAL AND ENTREPRENEURIAL WILL
AND GOOD TIMING
METHOD Import parts instead of finished products. Set up tariff barriersAccept low productivity and high prices to increase employment
FOCUS Final stage of fabricating (assembly) industries for the domestic market (the mature products of ‘Fordism’). In practice little technological learning and rare innovationBut, together with multiplier effect (suppliers) created its own demand
LEARNING In the complementary activities and the processing industries:Construction, infrastructures; transport, commerce, distribution, banking, etcManagement of large and small firmsProcessing industries: food, beer, cement, paper, bottles, metallurgy, etc.And previous learning continued (in some cases intensified) in natural resources: mining, oil, agriculture, livestock, etc.
When world conditions changed and protection was lifted, the model collapsed
The ISI opportunity for jobs and growth in Latin America from late-50s to late 70s
SO ISI ACTED AS THE “STARTER ENGINE” OF ECONOMY WIDE (LIMITED) LEARNING
Mature industriesin the advanced world
looking for market growth
“Third World” governments looking for paths to development
WHILE IT WAS ADEQUATE FOR THE CONTEXT, IT ACHIEVED GROWTH
THE ASIAN LEAP TO DEVELOPMENT BEGAN WITH ISI, BUT SOON TOOK ADVANTAGEOF THE WINDOW OF OPPORTUNITY THAT OPENED FROM THE 1970s WITH ICT
They made alliancesto produceelectronics, electrical, electro-mechanical goods and textile-clothing
They took advantage of low-cost labourAND MADE HUGEEFFORTS IN TRAINING AND EDUCATION
When the ICT revolution came, they were ready to make the leap
NOW THEY ARE ABLE TO INNOVATE THEIR WAY UP
They specialised in mass fabrication (assembly) for export markets
A ROUTE FOR A SOUTH AMERICAN (double) LEAP TO DEVELOPMENT:TAKING ADVANTAGE OF THE WINDOW OF OPPORTUNITY OF THE 2010s?
To make alliances to produceenergy and materials (basic and special, natural and synthetic, macro and nano)and biological products (traditional and advanced, ecological and biotechnological)adding technology and innovating up and downstream
When the next revolution comes (possibly bio, nano, new and green materials, etc.) the economies can be ready to make the leap
WOULD THAT BE POSSIBLE?
To specialize in the PROCESSING industries around natural resources for export markets
The ideas about the role of natural resources in development
have changed over time
End 19th Century and early 20th = ADVANTAGE Major asset to favor and finance development (US, Canada, Australia, New Zealand, Argentina, Scandinavian countries)
Post WWII = DISADVANTAGE 1940s-50s: Increasing advantage goes to manufacturing industry. Price Scissors (Prebisch 1945, 1951; Singer 1949)1970’s: Dutch disease (The Economist 1977, Corden 1982)1980s and 1990s: “Resource curse” (Sachs and Wagner 1995, Auty 1995)
2000s = COULD THEY BE AN ADVANTAGE NOW?
Price level and trend? Probably higher (demand greater than supply)
Volatility? Continues
Corruption? Still a problem
Nature of markets? From mainly commodities to hyper-segmentation(while much of manufacturing and services has been commoditized). Long tail in products long tail in materials
Market growth? Strong in emerging countries (Engels law prolonged, if full globalization occurs). New billions to middle class need to be fed
Technological dynamism? Much greater, facilitated by ICT, spurred by differentiation in demand and increasinglyshaped by environmental and health concerns
Type of innovation? From mainly process innovation (to lower the cost of homogenous products and to overcome local limits) to special product innovation and customization with higher profit margins and possible barriers to entry
REVISITING THE NATURAL RESOURCES ISSUE. WHAT HAS CHANGED?
Behavior of MNCs? From enclave with affiliates to global networks with suppliers and partners (much greater interest in transfer of technology to ensure final quality)
From cartel-type behavior (or market control) to East West competition for access to resources, creating conditions for a stronger negotiating position
Access to information? Significantly enhanced
Access to markets? Much greater variety of distribution outlets and transport systems for different quantities and qualities, all enabled by ICT
Initiating local production? From domestic to global markets; protection difficult; possession of natural resources becomes important advantage; Asia has become the factory of the world (huge advantage in experience and labor costs)
Nature of markets? From homogeneous (three tier) to hyper-segmented diversity, adaptability, special products (long tail). Coexistence of multiple technologies. New price-scissors between standard and “long tail” products?From supply-defined industries to user-defined sectors
REVISITING THE POTENTIAL FOR TECHNOLOGICAL CATCHING-UP
Natural endowment? Abundance and variety of resources
Population density? Much lower than in Asia
Technological capabilities? Tradition and learning in NR activities and in the processing industries: strong in agro-industry but also chemistry and metallurgy
Infrastructures? Relatively well developed physical and business support infrastructure: ports, roads, electricity, water, telecom, banking, transport, construction industry, etc.
Social capabilities? Educated middle class with organizational and business experience (basis for improvement)
Main limitations? Unchanging traditional power structures; high levels of poverty, corruption, poor education, etc.
SPECIFICITY OF LATIN AMERICA (with significant differences between countries)
Can these countries use Asian markets to achievetechnologically dynamic and inclusive growth by innovating around NR?
The potential for technological dynamism for the innovation system would driven by the changes occurring
in the market context
NR-Production
Equipment Inputs
ServicesRD&E
Investment (incl. exploration)
Processing A1
Processing A2Processing B2
Packaging, branding, etc.
Transport, marketing, distribution
Processing B1
A successful strategy would need to encompassTHE WHOLE NATURAL-RESOURCE-BASED NETWORK
from capital goods and services to processing and delivery
THE NATURAL RESOURCE INDUSTRIES WITH THEIR INNOVATION NETWORKS
Success depends on continuous improvement of technologies, companies, products, human capital and networks
• Multiple engineering services Design, construction, adaptation and maintenance
• Software and systems services• Capital goods: Equipment and instruments