Essays in Honor of Lance Taylor
Edited by Amitava Krishna Dutt
Chapter 13: Bringing the firm back in
13. Bringing the ﬁrm back in Helen Shapiro1 INTRODUCTION For ﬁve years at the Harvard Business School, I taught a required MBA course on international political economy. When discussing policy alternatives for less-developed countries, many students gave unqualiﬁed support to an approach in which market forces, rather than government intervention, determined the allocation of resources. They were typically critical of import substitution strategies and thought that a country’s productive structure should be determined by its comparative advantages, that is, low wages, natural resources, and so on. Even if they acknowledged that industrial policies may have had a positive role in the East Asian NICs, they were generally skeptical about the government’s capacity to intervene fairly and eﬃciently, and thought that state-owned enterprises should be privatized. In short, they were very much in sync with the neo-liberal approach or the so-called Washington consensus, assuming that once prices were correctly aligned and trade was liberalized, the private sector would invest enthusiastically and eﬃciently. I found this ironic, because at the same time that they were taking my class, they were also taking a course entitled ‘Competition and Strategy’ based on the work of Michael Porter.2 In that course, while wearing the hat of CEO rather than that of a public policymaker, they focused on how ﬁrms must create and exploit ‘competitive’ advantages. They emphasized how a ﬁrm’s strategy should be based not on ephemeral, ‘non-sustainable’ cost advantages such as low wages or depreciating exchange rates, but on non-price factors...
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