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Prof. Dr. Jeffrey D. Sachs
Director of the Center for International Development (CID), Director of the Harvard Institute for International Development (HIID), the Galen L. Stone Professor of International Trade at Harvard University. |
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Globalization and economic growth |
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Since Adam Smith first described the advantages of international trade in
the Wealth of Nations in 1776, economists have believed that an expanded world market
would contribute to faster overall economic growth.
For many major regions of the world, especially North America, Western Europe, much of
East Asia, and a few other parts of the world, both the logic of the analysis and the
economic outcomes have vindicated these expectations. Economic growth did accelerate in
most of the advanced countries (Japan being a notable exception), and it seems that much
of that acceleration resulted from a technological boom that has been spurred, if not
caused, by the globalization process. There can be little doubt that the revolution in
computing, communications, and other forms of information technology has been a major
stimulus to faster global growth, and that globalization itself has been a major stimulus
to information technology itself, by increasing the profitability of innovations in the
sector. What was less clear a decade ago, however, was how varied would be the capacity
and desire of different economies to share in this technological revolution. Both
technological innovation and technological diffusion are complex economic processes, and
both processes depend on a complex set of institutions.The United States, for example,
have developed a rich set of institutions in both the public and private sectors to
support a very high level of technological innovation, while other countries lack
institutions to give even rudimentary support to the innovation process. A closer look at
the US innovation process can give us insights as to what is missing in other economies.
Innovation depends on a complex interplay of basic science opening doors to new
technologies and commercialization of those technologies in new products and production
processes. Basic science is not exclusively a market-driven activity, because it is
difficult for markets alone to cope with the conflicting objectives of maximizing
incentives and maximizing dissemination. Markets often do not offer high rewards for
innovation because it is so easy for others to grab the invention. Intellectual property
protection and patents help, but these are imperfect and block wide dissemination of the
invention, which is also desirable. Thus, a range of market and non-market institutions
usually carries out basic science. Examples include government laboratories, academic
centers such as universities, and think tanks. Of course, some corporations sponsor basic
scientific research in their laboratories as well.
The innovation process depends on a strong foundation of basic science, which is then
carried forward to the commercialization of new products and processes.This step almost
inevitably takes place in market-based institutions: mainly business enterprises that can
capture the returns to commercialization of inventive activities through patent rights,
royalties, or simply first-mover advantages in the introduction of new products. An
effective commercialization process depends on several things. First, there must be a
close interface of basic scientists and applied scientists.This can be fostered, for
example, through a close cooperation between academic centers and business enterprises.
Second, there must be strong intellectual property rights to encourage enterprises to make
large outlays in research and development activities for many years before a product is
actually introduced to the market. And third, the economy must be flexible enough to
support the rapid adoption and diffusion of new technologies. For example, venture capital
funds should be available to the innovative firm to put a new technology into commercial
use. Also, no state monopoly (such as in the power sector or telecommunications) should
have the ability to block a new innovation through the use of monopoly power.
Conclusion
The evidence today still suggests that increased global integration of the 1990s will be
seen eventually as one of the brightest events for millions of the world's poor. New jobs
in international companies and export sectors have raised incomes of millions in the past
two decades, and most of these have been for people with below-average incomes –
certainly below average by global standards if not also by the standards within the
countries themselves. Furthermore, many of the countries that have achieved rapid growth
via global integration were relatively poorer countries in East Asia such as China,
Malaysia, Thailand, Indonesia, Korea, and Taiwan; or were relatively poorer countries in
Europe such as Ireland and Poland.
Globalization alone is unlikely to solve the problems of much of the world's poor, yet a
reaction against globalization is even less of an answer. Countries can counteract the
isolating effects of geography with infrastructure, break local telecommunications
monopolies that make access to the Internet prohibitively slow and expensive, ensure
proper incentives for innovation to overcome their own specific problems, and leave aside
false solutions based on a fear global integration. |
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