Technology and the World Economy: The Case of the American Hemisphere

ENRIQUE MARTÍN DEL CAMPO

WE LIVE IN A COMPLEX INTERNATIONAL setting in which technology has an ever-growing influence on the world economy. The diffusion of technologies is one factor in the globalization of the marketplace which influences the transculturation process, resulting in shifts in national preferences, values, and aspirations. The progressive pluralism in international trade contrasts sharply with the growing bipolarity in the strategic and military affairs of the two superpowers, the United States and the Soviet Union. From a strictly economic standpoint, the heightened struggle between the two superpowers diverts resources that both countries could more usefully apply to the problems of their relationships with other countries.

The development of the Latin American and Caribbean countries is affected by these continuously changing international influences. Many of the problems confronting our societies are linked to such international phenomena as the debt crisis, which affects both debtors and creditors. Despite these problems, Latin American and Caribbean countries are engaging in greater international activity, and their policies and proposals are receiving more attention in hemispheric and global affairs.

The region is heterogeneous and includes countries of varied complexity and history. Despite these differences, a basic solidarity is evident in their international actions, and the region is perceived by the rest of the world as

This paper was written on the basis of a draft by Zoltan Szabo. Also assisting with the intermediate documentation and the final version were Raul Allard, Arturo Garzón, Washington Monge, and Ruben Perina. The authors are staff members of the Organization of American States, and none of the views expressed in this study reflects explicitly the positions of the General Secretariat of the organization.



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Globalization of Technology: International Perspectives Technology and the World Economy: The Case of the American Hemisphere ENRIQUE MARTÍN DEL CAMPO WE LIVE IN A COMPLEX INTERNATIONAL setting in which technology has an ever-growing influence on the world economy. The diffusion of technologies is one factor in the globalization of the marketplace which influences the transculturation process, resulting in shifts in national preferences, values, and aspirations. The progressive pluralism in international trade contrasts sharply with the growing bipolarity in the strategic and military affairs of the two superpowers, the United States and the Soviet Union. From a strictly economic standpoint, the heightened struggle between the two superpowers diverts resources that both countries could more usefully apply to the problems of their relationships with other countries. The development of the Latin American and Caribbean countries is affected by these continuously changing international influences. Many of the problems confronting our societies are linked to such international phenomena as the debt crisis, which affects both debtors and creditors. Despite these problems, Latin American and Caribbean countries are engaging in greater international activity, and their policies and proposals are receiving more attention in hemispheric and global affairs. The region is heterogeneous and includes countries of varied complexity and history. Despite these differences, a basic solidarity is evident in their international actions, and the region is perceived by the rest of the world as This paper was written on the basis of a draft by Zoltan Szabo. Also assisting with the intermediate documentation and the final version were Raul Allard, Arturo Garzón, Washington Monge, and Ruben Perina. The authors are staff members of the Organization of American States, and none of the views expressed in this study reflects explicitly the positions of the General Secretariat of the organization.

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Globalization of Technology: International Perspectives a unified whole. This gives Latin America a particular capacity for action and negotiation that can be best used by setting joint and independent positions. LATIN AMERICA AND THE CARIBBEAN IN THE WORLD ECONOMY A notable feature in the development of the world economy is the persistent inequality of the Latin American and Caribbean countries’ economic weight. The gross domestic product of the United States, the Soviet Union, or Japan is 1,000 times larger than those of the small countries of the world, and up to 10,000 times larger than those of the smallest national economies. The countries of Latin America and the Caribbean, except for Brazil and Mexico, are in the group that is 100, 1,000, or up to 10,000 times smaller than the superpowers (Table 1). The economic weight of all developing countries, Latin American and Caribbean countries in particular, has hardly increased at all in the last quarter century. From 1960 to 1982 Latin America’s share of world production rose from 4.2 to 5.3 percent (Table 2). This increase was mainly due to Brazil and Mexico, whose share of world production rose from 1.1 to 1.8 percent and from 0.9 to 1.3 percent, respectively.1 Most of the other countries in the region experienced only slight increases or declines in their share of world production. The relative weights of the market economy in developed countries and in countries with centrally planned economies have remained virtually unchanged since 1960. However, changes within each group have significantly affected the international economic and political situation. At the same time that the U.S. share dropped between 1960 and 1982 from 36 to 26 percent, Japan’s share rose from 3 to 9 percent (Table 3). The change was even more dramatic in their relative power positions in the international economy. For 1985, Japan’s exports totaled $174 billion and U.S. exports totaled $217 billion. But Japan showed a net foreign investment of $125 billion, whereas the United States recorded a net foreign debt of $107 billion (Brown et al., 1986; World Bank, 1986). Consequently, Japan’s external economic position, measured only with these partial indicators, appears better than that of the United States. Japan’s economic power is supported by the combination of a high propensity to save and invest domestically, low military expenditures (1 percent or less of gross domestic product), and an orientation toward building a large 1   For further information see Yearbook of National Accounts Statistics for 1976, Volume II, International Tables, United Nations, New York, 1976; National Accounts Statistics: Analysis of Main Aggregate, 1982, United Nations, New York, 1985; Statistical Bulletin, January-December 1985, Organization of American States, Washington, D.C.; and Brown et al. (1986).

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Globalization of Technology: International Perspectives TABLE 1 Economic Magnitude of 120 Countries Measured by Gross National Product, 1982 (in U.S. dollars) More than $1,000 billion 1 . United States 2. Soviet Union 3. Japan $200 billion to $1,000 billion 4. Federal Republic of Germany 5. France 6. United Kingdom 7. People’s Republic of China 8. Italy 9. Canada 10. Brazil $100 billion to $200 billion 11. Spain 12. India 13. Australia 14. Mexico 15. Democratic Republic of Germany 16. The Netherlands 17. Saudi Arabia 18. Romania 19. Poland $50 billion to $100 billion 20. Sweden 21. Switzerland 22. Indonesia 23. Belgium 24. Yugoslavia 25. South Africa 26. Nigeria 27. Czechoslovakia 28. Republic of Korea 29. Austria 30. Denmark 31. Norway 32. Argentina 33. Turkey $10 billion to $50 billion 34. Finland 35. Bulgaria 36. Algeria 37. Venezuela 38. Philippines 39. Greece 40. Thailand 41. Hungary 42. Egypt 43. United Arab Emirates 44. Pakistan 45. Colombia 46. Hong Kong 47. Malaysia 48. Cuba 49. Israel 50. New Zealand 51. Peru 52. Kuwait 53. Chile 54. Syria 55. Republic of Ireland 56. Singapore 57. Morocco 58. Bangladesh 59. Ecuador $1 billion to $10 billion 60. Guatemala 61. Ghana 62. Tunisia 63. Qatar 64. Ivory Coast 65. Oman 66. Dominican Republic 67. Sudan 68. Zimbabwe 69. Uruguay 70. Kenya 71. Burma 72. Paraguay 73. Republic of Zaire 74. Tanzania 75. Sri Lanka 76. Ethiopia 77. Panama 78. Jordan 79. Brunei 80. Jamaica 81. Gabon 82. Costa Rica 83. Zambia 84. Trinidad and Tobago 85. Luxemburg 86. El Salvador 87. Bolivia 88. Madagascar

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Globalization of Technology: International Perspectives $1 billion to $10 billion 89. Honduras 90. Nicaragua 91. Iceland 92. Senegal 93. Papua New Guinea 94. Nepal 95. Cyprus 96. Reunion 97. Haiti 98. Bahamas 99. Rwanda 100. Malawi 101. Sierra Leone 102. Fiji 103. Malta 104. Burkina Faso 105. Mauritius 106. Burundi Less than $1 billion 107. New Caledonia 108. Liberia 109. Togo 110. Barbados 111. Swaziland 112. Guyana 113. Lesotho 114. Belize 115. Seychelles 116. Antigua and Barbuda 117. Grenada 118. St. Vincent and the Grenadines 119. Dominica 120. Tonga   SOURCES: Organization of American States and the World Bank. technological and industrial potential supported on a firm base of education, science, and technology. The dramatic expansion of Japan and the significant contraction of the U.S. share have been accompanied by an increase in the Soviet Union’s economic share in the countries with centrally planned economies. In this context, there is economic, technological, and ideological competition between the developed market economies and the centrally planned economies. At the same time, the first group experiences trade wars and struggles that create difficulties for the developing countries, particularly when these events lead to trade and technology protection measures that produce unfavorable shifts in international trade. TABLE 2 Breakdown of World Gross Domestic Product by Groups of Countries, 1960 and 1982   Percentage of World Gross Domestic Product in: Countries 1960 1982 Developed countries 65.8 64.8 Centrally planned economies 19.8 19.0 Developing countries 10.2 10.8 Latin America 4.2 5.3   SOURCES: Organization of American States and the World Bank.

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Globalization of Technology: International Perspectives TABLE 3 Contribution of the 10 Largest National Economies to the World Gross Domestic Product   Percent Country 1960 1982 United States 36.0 25.6 USSR 7.7 10.3 Japan 3.1 8.9 Federal Republic of Germany 5.1 5.5 France 4.3 4.5 United Kingdom 5.1 4.0 People’s Republic of China 6.8 3.2 Italy 2.5 2.9 Canada 2.8 2.5 Brazil 1.1 1.8 All other countries 25.6 30.8   SOURCES: Organization of American States and the World Bank. The present international situation, then, presages change for the future. Increasingly, the developing countries are demanding a fairer and more equitable share in the international economy. Given this trend, Latin American and Caribbean countries will need to learn how to benefit from emerging opportunities and overcome new problems. Also desirable is a dual strategy for outward growth, with optimum participation in the international economy and, within the region, through subregional and national markets. Both inward and outward growth will require improved technological capacity, entrepreneurial activity, and rational government participation. HIGHLIGHTS OF WORLD TECHNOLOGICAL DEVELOPMENT Research and Development Expenditures Closely connected with the changes in the world economic weight of the larger industrialized countries is a change in their technological and industrial weight. Japan and the Federal Republic of Germany now exceed the United States in their rates of research and development (R&D) expenditures devoted directly to technologies with industrial applications. They achieved this by shrinking expenditures on military R&D. As a result, both countries have substantially increased their technological and industrial potential and have become highly effective competitors of the United States (Table 4). The rate of expenditures on research and development in industrialized countries has an impact on developing nations as well. The higher rate of technological innovation in developed countries makes it possible for them to maintain a privileged position in international markets, particularly with respect to levels of demand and profitability.

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Globalization of Technology: International Perspectives TABLE 4 Percentage Share of Military Programs in the Government Research and Development Budget of Selected Countries Country 1961 1976 United States 71 50 United Kingdom 65 48 France 44 30 Federal Republic of Germany 22 11 Japan 4 2   SOURCE: Norman (1981). The United States accounts for approximately one-third of the world’s expenditures on R&D, or somewhat over $150 billion a year. Western Europe and Japan together account for another third, and the Soviet Union and the centrally planned market economy countries in Eastern Europe account for most of the rest. According to a recent estimate, the developing countries account for less than 3 percent of the total.2 By the start of the 1980s, research and development expenditures in Latin America and the Caribbean were estimated at about $1.5 billion, or 1 percent of the world’s total (Sagasti and Cook, 1985). Thus, the ratio of research and development expenditures to gross domestic product was only 0.24 percent in the region at the start of the 1980s, compared with 1.8 to 2.3 percent for most of the larger industrialized countries. The per capita cost of R&D in these countries was $200, whereas the average for Latin America was less than $5 (Norman, 1981). About 3 million scientists and engineers are employed in research and development worldwide. In 1980, Latin America had about 100,000 researchers, or 3.3 percent of the world total. Thus, the region had less than 350 researchers per million inhabitants, compared with a world average of 673. The Latin American average was less than one-third of the U.S. figure (Martín del Campo, 1983). Research and Development and Comparative Advantage in International Trade Accelerated worldwide technical change, based on intensive research and development in the industrialized countries, is modifying the conditions of comparative advantage in international trade. Two of these modifications are particularly important. First, comparative advantage is no longer defined 2   For further information see Martín del Campo (1983), Norman (1981), and Sagasti and Cook (1985).

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Globalization of Technology: International Perspectives only by the abundance and relative cost of the traditional factors of labor, capital, and certain natural resources; it is also defined by the technological capacity to produce and sell new or diversified products. Second, the development of science-based technologies is completely revolutionizing modes of production. Microelectronics and informatics, biotechnology, and the production of materials with special properties, among others, are changing the relative use of capital and labor in various productive sectors. Gonzalez (1986) has pointed out that Latin America’s comparative advantage in labor-intensive production and natural resources is being eroded by the introduction of new technologies in the developed countries. Hence, it is essential to understand such technological transformations and to define the actions needed to support appropriate domestic activities that respond to the new situation and develop a more diversified export structure. The region’s technology strategy cannot concentrate on a few advanced sectors and a few productive strata in the sectors since such concentration would be inconsistent with the objective of improving economic and social conditions of broad sectors of the population. It would be more beneficial to promote and develop technology in traditional small- and medium-size enterprises, both rural and urban, by adapting technologies that are purchased abroad and by adjusting to intermediate technologies. Such technologies include those that emphasize manpower rather than modern concepts, e.g., factory drill presses without numerical control. These more innovative strategies have three required elements. First, the development and commercial application of more advanced key technologies—which require a greater concentration of resources—must be accompanied by modest innovations with more immediate applications. Second, a high proportion of small and medium enterprises should be linked to large enterprises through subcontracting relationships. Third, technological development should not be concentrated in a few sectors since that dooms the other sectors to obsolescence in a free international market. In practice, it is appropriate for the region to choose a combination of various types of technologies. These would include certain state-of-the-art technologies (microelectronics, biotechnology, and new materials) and, at the other extreme, technologies to increase the use of labor and support marginal sectors. The mix of technologies would be determined by the relative development level of each country and its objectives. These issues will be explored in greater detail in a later section of this paper. PARTICIPATION OF THE REGION’S COUNTRIES IN THE WORLD ECONOMY The economies of the Latin American and Caribbean countries participate in the world economy mainly through foreign trade. Other economic growth

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Globalization of Technology: International Perspectives variables such as investment, domestic demand, production, and technology are determined by the extent of participation in foreign trade. Roots of Asymmetrical Interdependence After the postcolonial period, the countries of the region took part in the world economy according to an international division of labor based on their comparative advantage in producing and exporting agricultural and mineral raw materials and importing manufactured goods. When international prices were high for these raw materials, the resulting prosperity promoted the creation of the infrastructure needed to exploit, transport, and export the goods and produced development in many other sectors. However, the developed countries displayed a long-term trend toward consuming manufactured products, which accounted for most of the region’s imports, and slow growth in the demand for primary-sector products, which represented the overwhelming proportion of their exports. This resulted in firm prices for industrial products and a relative reduction in the prices of raw materials. Thus, the countries were faced with a chronic terms-of-trade problem. As the region lost the advantages of the existing international division of labor, trade became more asymmetrical and development more subject to changes in the markets of industrialized countries. While those countries took the lead and assumed a growing weight in the world economy, the countries of Latin America lagged behind. By 1940, the developed countries were establishing and maintaining decisive advantages and influences over Latin American and Caribbean countries in technology, education, culture, politics, and defense. Consequently, the asymmetry went beyond commerce to include all of the interactions between the region and the developed countries. It is important to keep in mind that this phenomenon is one of asymmetrical interdependence rather than direct dependence on the developed countries, for the pace of development in the “center” was determined largely by their economic ties with the peripheral countries. Now, increasing integration of the world economy, involving trade and financial and geopolitical relations, has given peripheral countries greater potential for maneuvering, negotiating, and making independent decisions in their relations with the developed countries. This particularly favors those countries that have already achieved high intermediate development, a category that includes most of the countries in the region. Development Patterns: 1940–1975 In the 1940s and 1950s, when the limitations of preferential production and export of a few raw materials became clear, the Latin American and

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Globalization of Technology: International Perspectives Caribbean countries adopted an industrialization policy based on import substitution and product diversification, a strategy of inward growth. Thus, manufacturing production increased in the region at an annual rate of slightly over 6 percent in the 1950s (Schwartz, 1983). This growth followed a development pattern that mimicked the consumer society models of the developed countries. There was a clear preference also for developing lines of products with markets in the wealthy sectors of the population and neglecting to meet the massive needs of the poorer sectors for products adequate in type, cost, standard, and quality. This growth pattern was partly shaped by certain regressive economic, political, and social structures and also by transnational corporate interests from the developed countries. Manufactures increased by 6.5 percent between 1960 and 1965. In the second half of the 1960s, industrialization in the region began to enter a more mature phase and started a new tentative phase of “growth outward.” Manufactures grew at a rate of 7.5 percent in that period. The region saw the beginning of a policy of developing nontraditional exports, particularly manufactured goods. From 1966 to the mid-1970s, the share of manufactured goods in total exports increased 10-fold, rising from 2 to 20 percent, excluding processed foods and metals, and generally production grew by about 8.5 percent. If these items are included (most should strictly be classified as semimanufactured goods), the share of industrially processed exports rises to nearly 55 percent. By 1975 manufacturing production in the region began to slow, and in the early 1980s there was a clear recession (Schwartz, 1983). In the outward growth phase, the asymmetry of the region’s trade in terms of global technological innovation underwent a transition. Latin America began to export products with a relatively low degree of technological sophistication, although they were not necessarily raw materials, whereas its imports from advanced countries had a larger content of new technology. Thus, the asymmetry of trade took a new form, still detrimental to the region. Reversing Asymmetry in Trade There are a number of significant factors which affect the competitiveness of the countries of the Latin American and Caribbean region in foreign markets. These include rate of innovation, the ability to apply advanced technology, degree of capital investment, use of natural resources, and the existence of technological support services. National producers must be able to penetrate foreign markets with new and diverse products, which must be produced and delivered at low cost, with satisfactory quality, and on time. To accomplish these things, companies require favorable conditions of national economic, industrial, and technological policy. They must also overcome their management problems. The

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Globalization of Technology: International Perspectives more industrially advanced countries of the region must also try to overcome, slowly at first, their current inability to originate innovative products that incorporate advanced technologies. These products are desirable because their export is not very vulnerable to the troughs of the economic cycle. To promote technological innovation to achieve these goals, creativity and innovative change must assume cultural value among scientists, businessmen, and technicians, as well as factory and farm workers. This is perhaps the most complex challenge, and it requires many changes in the education system at all levels, from primary school to higher education (Waissbluth, 1983). A second factor affecting the region’s competitiveness in world markets is its ability to apply advanced technologies. The region’s comparative advantage in labor-intensive production processes that use local natural resources is being eroded by state-of-the-art advanced technologies, which are widely used in developed countries. The impact of technologies such as microelectronics, informatics, robotics, biotechnology, and recently developed special materials is particularly important since these technologies can be used to improve production and design of a wide range of products. Some countries in the region have the technical and financial capacity to adapt these applications to the local environment or to develop new applications. They would benefit from participating with advanced countries in developing applications of state-of-the-art technologies. Moreover, these countries must develop a strong domestic scientific base in order to best utilize these advanced technologies. The boundaries between science and technology are disappearing as marketable technologies and scientific know-how take their place alongside industrial products as tradable commodities. Consequently, it is becoming essential that the workers who deal with these technologies in a production environment be trained in basic as well as applied science. The rate of capital investment in the region is a third factor affecting Latin American and Caribbean countries’ ability to use technology and develop productive export sectors. Most of the machinery and equipment used by companies in the region are worn out or outdated, and solving this problem would be costly. Between 1986 and 1995, the region would need about $600 billion for new machinery and equipment to modernize and expand its productive capacity and achieve an average annual growth of 4 to 5 percent in gross domestic product. Given this high cost, it is necessary to increase domestic design and production capacity for machinery in industries using the entire range of technologies: labor-intensive, intermediate, and advanced. At the same time, the countries must meet the terms for foreign purchase of capital goods, arrange for the transfer of technology connected with those goods, and implement mechanisms for intraregional cooperation and trade. Argentina, Brazil, and Mexico have already undertaken cooperative efforts in this field with LATINEQUIP, a technological, industrial, and financial

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Globalization of Technology: International Perspectives consortium. Argentina, Brazil, and Uruguay also have recently begun an ambitious economic integration experiment. A fourth factor giving impetus to exports and economic growth is that the Latin American and Caribbean countries have a wide range of raw materials, whose transformation into processed products using recent scientific advances could be a nucleus of new technological and industrial development. This is particularly important for the small countries, which need open economies and specialization even more so than do the larger and middle-size countries in the region. The specializations of small countries in the Caribbean and Central America, for example, could be based on export-oriented production complexes using sugar cane and other food-oriented agro-industries. Such complexes could achieve a high level of international competitiveness by comprehensive use of basic raw materials. Finally, technological support services are also necessary if a modern production system is to meet the requirements of foreign competitiveness in overseas and domestic markets. These include a technical information services infrastructure; research and development to replace products and processes, as well as develop new products; and preparation for—or at least the application of—basic engineering, quality control, product analysis, and standardization. Thus, to modernize and adapt to foreign competition, companies of all sizes need well-equipped laboratories and other national or local scientific and technological services to support them. DOMESTIC DEMAND, PRODUCTION, AND TECHNOLOGY Domestic demand in Latin America is limited by persistent internal economic and social problems such as obsolete land ownership systems, a markedly unequal income distribution, inequities of ethnic integration, segmentation of production and marketing systems, inequities for various socioeconomic groups in education and training, and restricted social mobility. Because these situations have been difficult to change, it has not been possible to filter the fruits of economic growth to all sectors of Latin American societies. In some cases, policy formulations have been designed to orient economic growth toward comprehensive social improvement, increased income for the poor, and the consequent expansion of domestic demand for a wide range of consumer products. However, these efforts have been hampered by social conditions and serious political obstacles and pressures. Economic and technological variables also influence development in the countries of the region. An interpretation of these variables by Raul Prebisch and collaborators has recently been summarized by Man (1986). In essence, technology can have both positive and negative effects. On the positive side, technical changes in production systems tend to increase productivity and extend the production processes, leading to end

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Globalization of Technology: International Perspectives products that are increasingly refined. The longer processes use increasing volumes of capital goods and materials, whose production involves increasingly complex and sophisticated technology. A direct effect of increases in productivity is the decline in human labor requirements. In the developed countries, labor displaced in producing final consumer goods is reabsorbed in producing the new advanced production equipment. However, this does not occur in Latin American and Caribbean countries, which produce few capital goods or critical basic intermediary goods. Since the countries of the region must import such means of production, the technical change produces unemployment that is not reabsorbed. The continued structural unemployment in the countries of the region perpetuates low wages and a small domestic market. In addition, if the demand for simple consumer goods is reduced because of low wages, the domestic market is biased toward consumption by the middle and upper classes. These are two aspects of unequal income distribution. This biased composition of domestic demand leads to excess production (and imports) of consumer durables and shifts the stimuli to sectors with more imported technology and profitability, such as the sectors that produce means of production. The bias also restricts the development of those industries that would more easily produce domestically the necessary intermediate goods, which are simpler to produce than sophisticated consumer goods. These industries, too, might be able to use locally generated technologies that make the best use of domestic natural resources and abundant labor. These elements produce a profile of an economic distribution and production structure different from those of the developed countries. One consequence of this is that countries in the region must behave differently to recover from recessions and other economic crises. At present, a key component of economic recovery in the developed countries is the replacement of marginal production equipment with more innovative equipment. Companies do this to stay competitive in markets; to open up new domestic and foreign markets; and to stimulate the consumer to buy through lower prices, higher quality, or modified goods. For the countries of the Latin American and Caribbean region, this solution and the resumption of economic growth are hampered by two main difficulties: Investment is curbed by an economically depressed environment with little or no expansion of foreign and domestic demand, uncertain economic and financial policies, and inflation. Some of these problems would tend to improve and others to worsen with the adjustment measures implemented or proposed for the debt crisis. These measures include the “Baker plan” and International Monetary Fund economic adjustment techniques suggested to debtor countries as conditions for backing new loans.

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Globalization of Technology: International Perspectives The tight domestic market removes stimuli from productive investment, and this is combined with weakness in the demand for traditional export products. Moreover, the limited domestic capacity for producing capital goods hampers solving these problems through massive and cheap production of products for the domestic market or the penetration of larger foreign market areas by new nontraditional exports such as semimanufactured products and electronic components. Thus, the measures that Latin American and Caribbean countries take to solve crises must consider both economic elements and their structural roots. Short-term measures must be compatible with the long-term strategy and must contain the following elements: policies aimed toward greater participation in the world economy as well as domestic development; transformation of the production sectors and their technical bases to enable them to generate self-sustained economic growth and support social development; investment and consumption to improve income distribution; and expansion of production and employment through technical change. LINES OF ACTION Given the technical requirements for achieving sustained economic growth, a better international trade position, and lower unemployment, there is a clear need to consider technology in any action plan. This raises a series of technology-related questions: How do we encourage the production sector to apply the output of research and development to innovations in production? What changes would be necessary to make a particular production sector compatible with the region’s characteristics? What technological changes would be needed to preserve the region’s current comparative advantages and to develop new ones in new product lines? To deal with these questions, any action plan should address the following areas: development of local technological capacity; internal and external transfer of technology; strategic projects that integrate science and technology; and government policies on science and technology. Development of Local Technological Capacity Internal technological capacity has been defined as the capacity of a country to select, acquire, generate, and apply technologies to attain its development objectives. Technological capacity is not an absolute concept, but refers to

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Globalization of Technology: International Perspectives specific national objectives. It is a means, not an end. Thus, the technological capacity needed to produce an abundance of food for the population while also promoting the highest possible level of employment in such production differs from what is needed to explore outer space. Technological capacity unmatched to economic and social objectives is of limited usefulness (Bhalla and Fleitman, 1986). Indicators that can be studied to evaluate and enhance the technological potential of a region or industry include: the professional qualifications of employees; the technical level of production; product quality; and the availability of trained workers and equipped laboratories. Any action plan should establish goals for local technological capacity as well as the integrated development of society as a whole. Another way to study the problem is to think of it as a tridimensional matrix. The first dimension would include the various components of technological capacity—the capacity to select technology, negotiate its transfer, and adapt and generate technology. The second dimension would include the factors that shape technology: human, financial, or information resources; plans and policies; institutions and infrastructure; and the natural, cultural, and social environments. The third dimension would cover objectives: enhanced competitiveness of national output, job creation, increased food security, import substitution for specific goods, and the like (Bhalla and Fleitman, 1986). This methodology will reveal the technological capacity available to achieve the country’s objectives and the weaknesses that need to be remedied. Several international organizations carry out activities to support the development of Latin America’s technological capacity. These include the Organization of American States (OAS), through its Regional Scientific and Technological Development Program and its multinational, national, and special projects; the Inter-American Development Bank (IDB), through various lines of credit; the United Nations Development Program (UNDP), through specific national projects; the Board of the Cartagena Agreement, through the Andean Technological Development Program; and the International Research for Development Center of Canada. The Regional Scientific and Technological Development Program of the OAS has oriented its projects toward increasing technological capacity. Despite limited resources, it has been active throughout the hemisphere, responding to the interests of smaller and relatively less developed countries, through science and technology projects linked to their specific degree and form of development—such as aquaculture and the use of land and biotic local resources with economic potential. In the future, any action by these organizations should be considered in view of the following issues:

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Globalization of Technology: International Perspectives Changes in technological development since the program’s inception may require that additional resources be allocated. A dual strategy is needed: To improve cooperative mechanisms to meet the new technological needs of the region while also maintaining efforts that have succeeded over the past 15 years. All of the actions proposed under the plan should prescribe that technological management be local. This requires a thorough inventory of the resources and needs of each business and organization. Internal and External Transfer of Technology Several countries in the region have already taken advantage of their capacity to produce new technology. They have succeeded more frequently when applying R&D results from institutes that specialize in the technological problems of particular sectors or serve large state enterprises, such as those for petroleum, electricity, and copper. Success was also achieved using R&D from parts of the scientific and technological infrastructure involved in carrying out large national programs. Conditions for the successful transfer of R&D to the production sector include better-trained factory workers, wide application of standards and quality control systems, and access to current technical information. Positive experiences should be disseminated and broadened within countries and the region. This is a task for cooperation among countries. Several constraints stand in the way of meeting these conditions: In the scientific infrastructure: Research areas that are not oriented toward solving the particular problems of a country, the unwillingness of scientists to address the urgent problems of the production sector, and the absence of institutional links between universities and the production sectors. In research and development institutes: Insufficient contact with the production sectors; flaws in the selection and management of projects; poor dissemination of research results; and in some cases, defective management. A priority in this field should be the training of administrative personnel in correct management techniques. In the sector of technological intermediaries: Shortages of companies and institutions to market and finance technology and insufficient development of national engineering and consulting firms, which are frequently biased toward the use of imported technology. In the production sectors: Lack of awareness of national technological capacity; strong aversion to risk, especially in technological innovation; and indifference to improving technical conditions of production. In the public sector: Economic policy measures that do not encourage the use of local technological capacity; flawed policy implementation

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Globalization of Technology: International Perspectives of scientific and technological development plans; insufficient coordination of research and development centers; and the need to improve resource allocation. The transfer of external technology, on the other hand, faces different problems. The limited and sometimes highly bureaucratic approach that prevailed in the 1950s and 1960s must be changed to match the new global context. Revision is needed for two reasons. The first is the accelerating pace of international technical change and its impact on trade, which is greater since the recent recession in the developed countries. The second factor is that fundamental progress in the new technologies requires resources beyond what is generally devoted to science and technology. Mechanisms to facilitate the transfer of external technology include: The establishment of channels and exchange markets to increase access to freely available technological knowledge, including that of developed countries. The promotion of regional consortia, with public and private participation that includes the scientific, technological, financial, and production communities; importers; and exporters. The consortia would encourage the manufacture of advanced technology products, drawing on the scientific and technological capacity and production of Latin America and the Caribbean. Modification of the most-favored-nation clause to include the particular characteristics of commercial exchanges of technology, and adapting norms of conduct agreed on internationally for foreign investment and the operation of multinational corporations to the conditions of the mixed consortia indicated above. In summary, the plan would ensure that the transfer of technology between countries does not undercut local efforts to develop a technology infrastructure. Transfers within the region will create opportunities to substitute imports, to pool resources, and to expand markets. Correct management of the transfer of technology from outside the region could aid technical change, as long as unjustified social and economic costs are avoided. Strategic Projects to Integrate Science and Technology Projects in this area must pursue two strategies. At the regional level and at the national level of some of the larger countries, work should begin on a few key advanced technologies, such as biotechnology, microelectronics, and new materials. In countries with limited markets and less advanced science and technology infrastructures, activities should focus on adapting and developing only applications of advanced technologies, not on basic investigations of the technologies themselves.

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Globalization of Technology: International Perspectives This dual strategy requires study to see whether the region can compete in science with the rest of the world and whether a critical mass of trained people is available to sustain the development of science-based technologies, as well as technologies to exploit, conserve, and manage local resources of raw materials and energy. The countries in the region have been hampered in developing this cadre by the lack of financial resources to retain a significant number of high-level scientists, insufficiently developed postgraduate programs, and limited supplies of up-to-date laboratory equipment. Nevertheless, in designing a program to develop a local capacity in basic and applied science, these factors should be taken into account: First, the region as a whole already has scientific capabilities that provide a basis for initiating the proposed projects. Second, pooling the scientific capabilities of several countries requires the cooperation of scientific centers with sufficient resources to ensure the international technical contacts of its personnel. Third, efforts should be made to carry out all aspects of technological development: research and development, experimenting in pilot plants, preparing for commercial application of technological innovation, negotiating of financial backing, and marketing the final process or product. Government Policy on Science and Technology In Latin America and the Caribbean, government is an important promoter of scientific and technological development. In particular, it plays an important role by setting in motion the mechanisms for financing scientific and technological development. The recent economic crisis and the need to advance technological change pose a challenge to the government’s function in this field. As a result, government action on science and technology should consider and address two key issues. First, governments must emphasize the importance of democratic discussion of strategic options in science and technology. An example of this process is the public discussion in the United States on international competitiveness and technological strategies. Second, it is necessary for the government to refine its coordination of technological development programs and to support the necessary scientific and information base. CONCLUSION For the past 30 years, the development of the Latin American and Caribbean region has been characterized by external dependence and vulnerability on the one hand, and defects in the socioeconomic systems on the other. In the postwar period, various models emphasizing economic variables were promoted. These models have proved to be of limited use in dealing with the changing situation in the Latin American and Caribbean countries, and

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Globalization of Technology: International Perspectives their use has not ended the region’s socioeconomic heterogeneity nor reduced the dependence of the region’s growth on the developed countries. Because sustained economic development in the region can occur only in association with positive social change, development policies must cover all of the main factors that make progress possible, including the effective use of technology. REFERENCES Bhalla, A.S., and A.G.Fleitman. 1986. Indicators and social and economic development. Science and Technology Series. Proceedings of the Panel of Specialists. Graz, Austria: Westview Press. Brown, L.R., et al. 1986. State of World, 1986: A Worldwatch Institute Report on Progress Toward a Sustainable Society. New York: Norton. González, N. 1986. Reactivatión y desarrollo: el gran compromiso de America Latina y el Caribe. Presentation by the Executive Secretariat to the Twenty-First Session of the Economic Commission of Latin America, Mexico, D.F., April 17–25, 1986. Marí, M. 1986. Technology Gap: Support for Marginal Sectors and National Technology Policy. Washington, D.C.: Department of Scientific and Technological Affairs, Organization of American States. Martín del Campo, E. 1983. Perspectivas y limites de la cooperación tecnica y cientifica internacional en la década de los 80 y el caso de Mexico. Washington, D.C.: Organization of American States. Mimeograph. Norman, C. 1981. The God That Limps. New York: World Watch Institute. Sagasti, F.R., and C.Cook. 1985. Tiempos diffciles: Ciencia y tecnologia en America Latina durante el decenio de 1980. Lima, Peru. Mimeograph. Schwartz, H.H. 1983. Bottlenecks to Latin American Industrial Development. Inter-American Development Bank study . Washington, D.C. Waissbluth, M. 1983. Sinópsis de los problemas de la innovación tecnologica en America Latina. Latin American Meeting on Technology Innovation Management. OAS, SUBIN, FINEP, PACTO, São Paulo, Brazil, September 26-October 7, 1983. World Bank. 1986. World Development Report, 1986. Washington, D.C.