The Evolution of the World Economy

The Evolution of the World Economy

The ‘Flying-Geese’ Theory of Multinational Corporations and Structural Transformation

New Horizons in International Business series

Terutomo Ozawa

The world economy is near a critical crossroads, as a rising China, the greatest-ever beneficiary of US-led capitalism, ironically dreams big to replace America's supremacy as a new hegemonic power with a non-liberal world order. This third volume of the trilogy on ‘flying-geese’ theory reformulation explains how capitalism has changed industrial structures across the world. Using structural development economics and political economy analytics the unfolding changes in the global industrial landscape are examined in depth. Will the ‘flying-geese’ formation survive the formation that has produced the East Asian miracle and is hoped to spread to Africa?

Chapter 3: The ladder of economic development revisited – and elaborated

Terutomo Ozawa

Subjects: asian studies, asian business, asian economics, business and management, asia business, international business, economics and finance, asian economics, industrial economics, international economics


The nebulous notion of the ladder of economic development has been defined in terms of a stages-delineated framework á la Schumpeter, consisting of, so far, five stages or rungs (labor-driven, resources-processing, assembly-based, research and development-driven, and information and communication technology -enabled industries) plus an inchoate stage of green and health technology-based growth presently in the making. The first and second rungs (that is, labor-intensive manufacturing and heavy and chemical industries) were developed under Pax Britannica with its strategy of ethnocentric industrialization and ‘kicking away the ladder’ from emerging economies. In contrast, the higher (third through sixth) rungs have come into existence under Pax Americana that has been spreading mass consumerism and ‘providing the ladder’ to the emerging world, for business- and ideology-motivated reasons. In addition to the inter-industry ratcheting-up progression, an intra-industry side-ladder is conceptualized for each rung of inter-industry ladder. This is where cross-border supply chains are embedded to exploit both the ‘endowed’ and the ‘created’ advantages of constituent economies. In the Appendices to Chapter 3, the role of MNCs in industrial take-off and sustained growth is discussed by reproducing three short essays published in the Columbia FDI Perspectives series.

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