Institutions for Economic Development
Chapter 8: Conclusion: Putting it Together
Neoclassical economics emphasized the advantages of being late: backward countries could obtain existing technology from wealthier nations and catch up with them rapidly. In the real world, however, latecomers suffer from a number of disadvantages, many of them institutional. It is sometimes possible to licence, transfer, or imitate technologies, but it is not easy to imitate mores, organizations, best practices, and public policies. Besides, national specificities (natural resources, culture, geographical location, sector choice) mean that at best catching-up countries can take some inspiration from industrial nations, old or new. Yet national idiosyncrasies make imitation impossible. In the nineteenth and early twentieth centuries, each would-be catcher up developed its own institutions: Germany invented its multi-function banks, France and Italy their state enterprises, and Japan its conglomerate zaibatsu. In the late twentieth century, South Korea took the example of Japanese conglomerates to establish its national chaebols; Canada and Finland created their own mix of science, technology, and innovation (STI) policies and picked specific sectors to nurture their economic development. Singapore chose two industrial sectors (electronics and biopharmaceuticals) and developed specialized human capital through an aggressive policy of importing capital, corporations, and skilled labour. In contrast, the developing countries we saw in Chapter 6 did not choose industries, technologies, or sectors and made only timid movements to create their own STI institutions. They not only set up few institutions; they conceived them poorly, seldom evaluated them, and when they did assess them it was through local organizations – sometimes too close to bring the...
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