THE POWER
OF TECHNOLOGY Simon Schwartzman
Published in Latin American Research Review,
24, 1, 1988. This article was completed when the author was a fellow at
the Swedish Collegium for the Advanced Studies in the Social Sciences, Uppsala.
What can technology do for the development, modernization and well-being
of Latin America? How is technology acquired, generated and incorporated
to countries without a strong technological tradition? What are the roles
played by private firms, state enterprises, state bureaucracies and multinational
corporations in this process? How can the different social sciences contribute
to the understanding of these processes and to the shaping of suitable policies?
Forty or fifty years ago, it was generally assumed that the world was naturally
divided among industrialized and agricultural societies, and that this was
for the best interests of all. After the War, the expression "developing
countries" was coined, the new assumption being that all countries, although
born differently, were destined to become equally modern, industrialized
and rich. "Modernization" was the key concept, to be brought from central
to peripheral countries through technical assistance programs, education
of their elites in the values of Western civilization and the enlightened
presence of branches of multinational corporations in their territories.
Latin America, however, would not wait for modernization to fulfill its
promises. In the sixties and seventies, industrialization, first, and technological
self-reliance, later, came to be seen as the only ways to break the vicious
circle of poverty, backwardness and dependéncia, identified, since
the golden years of the United Nations' Economic Commission of Latin America,
with economies based on the export of primary goods. In some Latin American
countries, for a while, the strategy of government induced industrialization
and technological development seemed to be working; the crisis of the eighties,
however, brought again to the fore the old arguments based on the theories
of comparative advantages and modernization through the free market. According
to these theories, there is nothing, really, you can do to enter the club
of advanced countries. If you are endowed with comparative advantages, and
allow the market forces to follow their course, they will reveal your potentialities
and put them to good use. Too bad if you do not have them.
Now, in the eighties, it is fashionable to think again that modern technology
and modern industries may be after all inadequate for less developed, or
non-Western countries, as too dangerous, too expensive, too complex. They
offend the environment, concentrate income, lead to unrealistic competition
with the industrialized countries, and may place dangerous weapons in hands
of irresponsible people. The notion that countries that are born different
should also remain different is recovering ground on both sides of the Equator.
Shouldn't the North pay more respect for the cultural and historical idiosyncrasies
of South, and cease to try to feed them with Western values and culture?
Shouldn't the South stop trying to monkey the North, and look again for
its authentic origins and vocations?
Empirical research was always used to bolster or refute these changing and
sweeping generalizations. The books discussed in this review can all be
taken as directed towards confirmation or elaboration of thesis three, that
is, that technology and its corollary, advanced industrialization, can place
Latin America in the same footing with Europe and the United States. They
belong, in a way, to the transition between the seventies and the eighties,
and can help to undermine, or to strengthen, the current wave of pessimism.
Cortes and Bocock's book(1) is a direct attempt
to examine whether technology is actually transferred between North and
South through market mechanisms. "As the technological capacity of developing
countries has come to be seen as one key to their overall economic development,
economists and policy makers alike have begun to ask questions about the
technology transfer process and its consequences. In particular, interest
has focused on the extent to which transfer mechanisms affect the ability
of recipients to acquire indigenous technological capability and to operate
their plants independently of suppliers" (p. vii). In order to examine this
question, Cortes amassed, through the years, an impressive amount of data
on a specific field, namely the transfer of petrochemical technology to
a group of industrializing countries in Latin America; the materials obtained
were later organized in the present volume by Bocock. Most of the work was
carried on at the World Bank's Economic Development Department, and the
book itself is a World Bank publication.
The main result of their effort is to show that the realities of technology
transfer are much more complex than what one would generally think. "Technology
transfer" can mean very different things, from preinvestment, feasibility
and marketing studies to basic engineering, detailed engineering, procurement
and construction, training of personnel, start-up, troubleshooting and technical
assistance; and it can deal with basic, intermediate or final production
processes. Technology can be "packaged" in different degrees, which depends
on who are the suppliers, who are the receivers, and on what kind of technology
we are talking about. Suppliers can be either process owners or producers.
The first will usually transfer basic technology and processes, while the
later tend to deal with final products, and to participate in post-start-up
operations, that is, in the actual production and marketing of the final
products. Recipients vary by size, ownership and local technological capabilities.
There is no clear lesson to be taken from the exercise except a better knowledge
of the difficulties involved. For the authors, there are no "general policy
prescriptions" to be derived, nor stable economic processes to be understood,
since the standard theories of technology diffusion - the technology gap
and the product life-cycle theories - have only "limited application" to
the case at hand. "The world of technology transfer", they conclude, "is
not an economic determinist's morality play, in which all issues are clear-cut
and involve straightforward conflicts between the righteous and the self-serving"
(p. 133).
The other side of technology transfer would be that of technology generation,
and in that sense the volume edited by Katz(2)
could be seen as a complement to that of Cortes and Bocock. In fact, however,
the volume deals more with questions of technical change and technical progress
in general than with "technological innovation" as such. This book is a
late edition of a series of articles presented to a Seminar on Technology
and Economic Development held in Buenos Aires in 1978, based mostly on papers
produced by the largest research program on the subject ever to be assembled
in the region, with the support of the Interamerican Development Bank, the
Economic Commission for Latin America, the United Nations Development Program
and the International Development Research Corporation of Canada. Part I
in the volume includes a text on "domestic technology generation in LDCs",
by Jorge Katz, which summarizes the main conclusions of a series of case
studies, and theoretical articles on the economic theory of innovation by
Joseph Stiglitz, Richard Nelson and Simón Teitel. Part II is a series of
case studies on technological change in firms, industries and two macroeconomic
studies; part three includes two "preliminary theory-building efforts" by
Morris Teubal and Adolfo Canitrot.
It would take an economist, writing in a specialized journal, to evaluate
the theoretical and conceptual achievements of this book. Let us follow,
instead, what Katz conceives as the main findings of the first four years
of the project. The first findings relate to the "rate and nature of the
domestic technology-generating efforts carried out by different companies
and manufacturing sectors"; next, "the macro and micro-variables which affect
such knowledge generating efforts"; and finally, "the consequences - upon
such performance indicators as overall factor productivity growth, export
capacity, etc. - of the local technological efforts" (p. 14).
There are no straightforward answers to the questions posed. The basic conclusion
about the first item seems to be that technology generation by firms is
a gradual learning process, rather than the simple adoption of off-the-shelf
technological packages according to rational economic choices. Cost reduction
is only one of the objectives of technology generation, others being product
diversification, quality and better use of installed capacity. The intensity
and direction of this effort depends, among other things, on whether the
environment is competitive, the relative cost of capital equipment, the
expansion of demand, the rate of interest, tariffs, availability and cost
of skilled personnel, tax incentives, and so forth. They also depend, of
course, on which kind of technology and industry we are dealing with. The
final result, in terms of productivity growth, can be very significant,
but quite often as a consequence of "minor" technological changes and adaptations,
rather than of true innovation. Once a firm has engaged in the learning
process, and the external and institutional constraints are not too limitative,
they can approach the international levels of productivity of their sector.
"In our view it is exactly a situation of this sort on top of conventional
explanations such as relatively lower wage rates, that partially 'explains'
the growing international competitiveness of a large number of enterprises
from newly industrialized countries" (p.46). Whether a given firm, or a
given sector, will follow this path, is difficult to predict. At the end,
like in Cortes' study, it is impossible to generalize: "the answers firms
come up with are likely to be specific and idiosyncratic rather than general
and easily transferrable" (p. 44). The final conclusion is one of extremely
guarded optimism: "a few decades behind the Japanese or Italian 'catch-up',
on a more reduced scale, and within the context of much greater market imperfections
and structural weakness, specific industrial subsectors of the newly industrializing
countries of Latin America are showing increasing signs of economic and
technological maturity even within the midst of relatively backwards domestic
development situations".
In spite of the author's warnings, we can summarize their conclusions by
saying that technical change at individual firms and sectors, if taken as
a mix of "true" technological transfers and local innovations, can, in certain
cases, lead to significant results. "True" technological transfer and innovation
are not fully explained by external macro or micro economic variables; on
the macro level, they depend on governmental policies, availability of local
expertise and competence, market conditions and the nature of the technology
(its complexity, rate of expansion, and so forth). Whether firms, at the
micro level, will be able to grasp the opportunities, is less a matter of
choice than of their ability to engage in a slow and gradual learning process
of technological innovation, which depends, in turn, on the firms's size
and varies according to which segment of the productive cycle we dealing
with, from plant construction to production.
We can generalize further by saying that technological and industrial "catching
up" depends on the existence of clearly conceived governmental policies
which take into account the reality of the firms which will be the bearers
of new technologies, the overall constraints of the technologies involved,
and the operation of market mechanisms. The other two books, by Adler(3)
and Rushing and Brown(4), aim directly at
the policy level.
Emanuel Adler's book is a detailed comparison of two high technology policies,
nuclear and computers, in Argentina and Brazil. It is the work of a political
scientist, not of an economist, and his question is to explain how "technology
development has occurred in those cases where structural indicators would
have shown only a small potential for it" (p. 5). There are two "success
stories" to be explained, the nuclear program in Argentina and the computer
industry in Brazil; and two corresponding failures, the Brazilian nuclear
program and the Argentine computer industry. The explanation, for Adler,
can be summarized in the title of the book: the power (or weakness) of ideology.
What gave consistency and shape to the Argentine nuclear program, as well
as to the Brazilian "informatics" policy, he says, was that these policies
were put forward by well identified and well organized groups endowed with
a strong commitment with their nationalist ideals, an element which was
lacking in the other two cases. These "pragmatic antidependency guerrillas",
or "subversive elites" , as he calls them, were able to compensate, in the
case of Argentina, for the country's traditional "fracasomania", and, in
the case of Brazil, for the established policies of open doors to the multinational
corporations. Both Brazilian and Argentinean "guerrillas" were unholy alliances
of academic intellectuals and the military. In Argentina there was Jorge
Sábato's group and the Navy, in the Consejo Nacional de Energia Atómica;
and in Brazil the physicists trained at the Instituto Tecnológico da Aeronáutica
and the Universidade de Campinas and the military at the Navy, first, and
later at the intelligence establishment, the Serviço Nacional de Informações,
who joined hands in the creating the Secretaria Especial de Informática.
The intellectuals brought to the alliance technical competence and quality,
while the military contributed with institutional stability and access to
public funds. Both the Brazilian nuclear program and the Argentinean computer
industry lacked these components, and this is why, for Adler, they ultimately
failed.
The main question with Adler's book is whether his cases of success are
really successful. There is no question that Argentina preceded Brazil in
the production of nuclear energy and the mastering of the fuel cycle, while
the Brazilian nuclear program is a shambles of cost overruns and technological
failures (including the turn-key Westinghouse power plant in Angra dos Reis),
and Adler's explanation for the differences do make sense. What is less
clear, and not considered in Adler's book, is whether the Argentinean nuclear
program, based on the use of heavy water and natural uranium, is a good
basis for future developments, and an adequate answer to the country's projected
energy needs. It is also true that Brazil's achievements in the establishment
of a local industry of micro-computers are quite impressive, mostly so when
contrasted with Argentina's failure to do anything significant in this field.
What is less certain is the mid-range viability of the Brazilian "informatics"
policy, in comparison, for instance, with that of the Asian new industrializing
countries. Adler never discusses relative costs or alternative strategies.
In his belief in the power of ideology, he is steadfastly optimistic, and
in this sense his book is very much a product of the late sixties and seventies,
rather than of the eighties.
The volume by Francis Rushing and Carole Ganz, in comparison with the others,
is much more "modern" in terms of the skepticism with which it addresses
the efforts of several countries, Brazil included, to enter the world of
high technology. Like the Katz volume, this is also a collection of papers,
derived from a research project supported by the International Division
of the National Science Foundation and the American section of the Brazil
-- U.S. Business Council. It includes ten country studies of national policies
for high technology -- Brazil, France, India, Japan, Korea, Mexico, Taiwan
and the United States -- and an introductory, comparative article by Henry
Nau.
One important contribution of this book is that it helps to expose the myth,
so current in the eighties, that all efforts by governments and nationally
protected firms to incorporate modern technology, like in Latin America,
are doomed to failure, and only free enterprise and the presence of multinational
corporations, like in South Asia, can be successful. The question, says
Nau in his introductory chapter, is not whether governments play a crucial
role in the development of new technologies and modern industries, which
they do, but which kind of policies are successful, and which are not. There
seems to be two possible courses of action, one directed towards import
substitution, the other based on a "domestic/export market approach". Both
require the use a large array of economic policy instruments, like monetary
and regulatory policies, tax incentives, import controls, export incentives,
exchange rate policies, and so on. The main difference is that the first
tends to be voluntaristic, and do not to take economic realities into consideration,
while the second is based on much clearer assessments of the internal and
external market potentiality and comparative advantages of a given country.
The issue "is not government versus markets, as it is often posed, but governments,
as well as private groups, operating on market versus open ended or arbitrary
criteria for making technological and industrial decisions. Governments
can influence but not deny market forces. In some cases, regardless of the
effort they expend, they cannot convert any or every competitive (or absolute)
advantage into a comparative one" (p. 14). The secret for the recent success
of countries like South Korea and Taiwan have to do, among other things,
with a strategy of "forward integration", in which one starts with the large
scale production of some components (like computer monitors, or some circuits)
and gets the final product at the end, instead of the other way round; with
the adoption of high technology processes in manufacturing, management and
marketing activities for all kinds of products; and with the use of the
opportunities given by a highly competitive international market of high
technologies in their favor. They have also been helped by the quality of
their labor force, in sharp contrast with the low educational levels found
in countries like India and Brazil.
At bottom, for Nau, the Asian countries are successful because they have
been able to play the game of international trade and comparative advantages,
instead of looking for barriers and protection. His text is very illuminating
regarding the first point, but it is not very convincing about the second,
since protectionism has certainly played a much larger role in these countries
-- and, of course, in Japan -- that he is willing to admit. Nau is more
concerned, however, with the future realities of closed economies than with
the what protectionism was able to achieve so far. Protectionism may have
worked in the past, but will have more difficulties working in the future.
Newly industrialized countries, he says, "cannot make their case any longer,
as they did in the 1970s, by arguing for a combination of discriminatory
liberalization for their labor-intensive exports and broad-scale protectionism
for their high-technology imports (e.g., informatics sector in Brazil).
This kind of export skewed trade liberalization shrinks markets and hence
growth. Technological nationalism, while still a potent political potion,
is economic poison for the world economy" (pp. 27-28).
For Nau, then, the Brazilian informatics policy, Adler's success story,
is actually a big failure. In fact, it is as difficult to argue with Adler
about the early achievements of that policy as to argue with Nau and other
recent analysts about its current predicaments. The problem, however, does
not seem to be limited to the sins of protectionism. Adler's "subversive
guerrillas" were strong enough to create a legislation for the protection
of the Brazilian microcomputer industry, but never had the power to link
it with broader industrial and economic policies, nor with a long-range
program of scientific and technological research. They created a stalemate
which was intensified during the Sarney government, and transformed the
"informatics" policy, from an aggressive project of technological self-reliance,
into a purely defensive screen for a group of stagnant and largely ineffective
micro-computer assembly plants. It was probably this isolation, a reflection
of the segmentation of the state bureaucracy and the weakness of the federal
government, which precluded the Brazilian informatics policy to be more
tuned to internal and external economic realities, which are now making
themselves felt.
Not only was high technology sought outside the logic of economic forces,
it was usually carried on fairly independently from significant policies
for scientific research and higher education. Universities and technological
institutes are the only places where a country can develop its skilled manpower
in enough quality and quantity, and university-based, academic oriented
research is, and increasingly so, the main permanent source of competence
a country could have to support long-term policies of technological choice,
adaptation and, eventually, innovation. In countries like Brazil, however
(or India, or France), higher education institutions are in most part too
politicized and controlled by self-serving interest groups to be amenable
to change and modernization in a comprehensive scale. Meanwhile, the economists'
concern with "Science and Technology" in the last several years, and the
power of their ideologies, has led to the progressive neglect of academic
oriented research in favor of the supposedly more useful technological research,
to be carried on in the productive sector or, in any case, in research institutes
protected from the political and institutional hazards of higher education
institutions.
At the end, high technology industries remained, in those Latin American
countries which were able to establish them, as a series of more or less
isolated enclaves, protected both from the rigors of international competition
and from the vagaries of local political crisis, economic ups and downs
and distributive and clientelistic practices. This kind of "bureaucratic
insulation" was probably necessary for starting them up, and Adler's well
documented work shows how this can be done. The challenge of the 1980's
and 1990's will be to take them out of isolation, root them more deeply
in society, and make them economically meaningful. For this to be achieved,
modern technology will have to be treated and understood not just as an
ideology, or as an element of the production process, or a cultural and
sociological fact, but as all these things at the same time.
Katz', Cortes' and Ganz' books are good examples of the powers and limitations
of what economists can achieve within the bounds of their discipline. They
can brake the realities of "technology" into a myriad of components, and
see, better than anyone else, how they occur within and between firms, how
they can cross national boundaries, and be present or not in government
policies. A sign of the value of their work is how quickly they reach the
boundaries of their discipline, and talk about things like the institutional
learning processes involved in innovation, the political constraints to
the establishment of viable economic and technological policies or the broad
educational and cultural context on which technological competence can grow.
This is where, however, their analysis usually stop.
Traditionally, economists have talked about "science and technology" while
thinking only on the latter, and their inability to incorporate "science"
in their thinking has had important consequences in the science and technology
policies they helped to create. They can talk about "policy", and better
still, about economic policy; but they have difficulties in understanding
the political and institutional realities that condition the formulation
and permanence of policy decisions. They have talked about education and
the role of a skilled population in economic development and technological
modernization; this concern, however, has not led to adequate proposals
for educational reform and modernization.
One could take the above as a plea for interdisciplinarity, were it not
for the fact that the other social sciences have usually lagged so much
behind economics in their approach to these questions. There are few books
in political science which, like Adler's, try to move from the the level
of ideological and "dependency" imputations to the analysis of concrete
political processes; sociology of science and higher education is barely
starting in Latin America, while in Europe and the United States they tend
to remain in the micro or institutional level and not address the broad
questions like ones we are discussing here.
Notes
1. North-south technology transfer: a case study
of petrochemicals in Latin America. By Mariluz Cortes and Peter Bocock.
(Baltimore and London: The Johns Hopkins University Press, 1984. Pp. 176).
2. Technology Generation in Latin American Manufacturing
Industries. Edited by Jorge M. Katz (New York, St. Martin's Press,
1987. Pp. 549).
3. The power of ideology - the quest for technological
autonomy in Argentina and Brazil. By Emanuel Adler (Berkeley, California;
University of California Press, 1987. Pp. 398).
4. National policies for developing high technology
industries -international comparisons. Edited by Francis W. Rushing
and Carole Ganz Brown (Boulder and London: Westview Special Studies in Science,
Technology and Public Policy, 1986. Pp. 247).
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