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Technology
The very high standard of living that the developed world
enjoys clearly owes a great deal to the technological
advances of the past two hundred years. Consider how
disabled we are during a power outage; our way of life is
dependent on electricity, a form of energy little used
before 1850. The ability to use energy to manufacture and
transport products and the ability to transmit information
more rapidly and in greater quantity have made our lives
radically different from lives 250 years
ago.1
It is not clear when people became aware that what is
usually called the Industrial Revolution, a transition
unlike any before, was happening. Joseph Schumpeter, who
stressed the importance of innovation and the role of the
entrepreneur in economic development, argued that Karl Marx
clearly understood the dynamic nature of capitalism,
something earlier economists had not fully recognized. An
integral part of that dynamism was an encouragement of
technological change. In contrast, previous political and
economic systems almost always discouraged change of any
kind. Both the feudal/manoral system and the guild system of
medieval Europe were designed to promote stability, not
change. Still, Europe in the Middle Ages was "one of the
most inventive societies history had known."2 However, resistence to change was so strong that in
the mercantilist system of 18th century France,
"Jean-Baptiste Colbert's technocrats executed 16,000 small
entrepreneurs whose only crime was manufacturing and
importing cotton cloth in violation of France's industrial
codes."3
Economic historians have long asked, "Why Europe?" China
and the Islamic countries had a huge lead over Europe before
1000 AD. Why did they fall behind? In the Islamic world the
conviction that all truth worth knowing had been revealed
seems to have been a major factor in resistance to change.
As for China:
"The ingenuity and inventiveness of the Chinese,
which have given so much to mankind--silk, tea,
porcelain, paper, printing, and more--would no doubt have
enriched China further and probably brought it to the
threshold of modern industry, had it not been for this
stifling state control. It is the State that kills
technological progress in China."4
The state not only nipped in the bud any change that
seemed to be against its interests, but also contributed to
a culture of routine, immobility, and traditionalism that
discouraged innovation. Economic development requires an
acceptance and maybe even the encouragement of change.
Technology is clearly the main reason that people in the
United States, Europe, and the rest of the developed world
enjoy a much higher standard of living than did their
ancestors of two centuries ago. However, technology does not
explain why some nations today are so much richer than
others. Technology is a form of knowledge, and knowledge is
usually a public
good, something freely available to everyone. Modern
technology, which is knowledge, is available to all nations.
The puzzle is why some countries have not been able to
effectively use this knowledge.
The public-good quality of technology has given rise to
the idea of convergence, the idea that it is possible
for poor nations, if they pursue the right policies, to grow
more rapidly than the rich nations and to attain equivalent
standards of living within a few generations. Per capita
growth in rich nations is limited by the development of new
technology because they are currently on the technology
frontier. They have to "buy" more technology to grow more.
In contrast, poor nations do not have to develop new
technology to grow. They can simply adopt the existing
technology. Furthermore, the poor nations can skip all the
layers of obsolete technology that the rich nations
developed in the past and go directly to the current
technology. There is no need for a developing nation to
adopt the technologies from the age of steam, or to
construct a telegraph network, or to ever watch
black-and-white television.
Technology to a large extent determines what is and what
is not a natural resource. Until the nineteenth century,
petroleum was a nuisance, not a resource. Petroleum seeps
reduced the value of land. In the Stone Age a deposit of
obsidian attracted people from a wide area; today it would
have little value. Virtually all ores that are mined would
not have value were it not for the technology that allows
them to be processed.
To some extent technological change is
unpredictable--there is a role for the random genius. But
much technological change is the result of planned research
and development efforts. A company can invest in research
and development in much the same way that it invests in more
equipment. The fact that technological change is not random
but can be accelerated or slowed in various ways means that
government policy can affect technological change.
Government can sponsor research directly or it can encourage
it indirectly through subsidies, tax incentive, and patent
laws.
1 For a fascinating look at the development of
energy utilization, see Smil, Vaclav. Energy
in World History.
Boulder, CO: Westview Press, 1994.
2David Landes, The
Wealth and Poverty of Nations,
(Norton, 1999), p 45.
3Etienne Balazs, La Bureaucratic
Celeste, quoted in David Landes, The
Wealth and Poverty of Nations,
p 57.
4 Hernando De Soto, The
Mystery of Capital: Why Capitalism Triumphs in the West and
Fails Everywhere Else.
Basic Books 2003. page 10.
Copyright
Robert Schenk
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