Technology, globalization, and international competitiveness: Challenges for developing countries

This paper traces the role of technology in economic growth and competitiveness, summarizes the strategies of the fastest growing economies over the last 50 years from the perspective of their technology strategy, summarizes some of the key global trends which are making it more difficult for developing countries to replicate the fast growth experience of the countries mentioned, and traces the impact of the rise of China on developing countries. The main argument of this paper is that technology is an increasingly important element of globalisation and of competitiveness and that the acceleration in the rate of technological change and the pre-requisites necessary to participate effectively in globalisation are making it more difficult for many developing countries to compete. Section 2 gives a long-term perspective on technology and economic growth. Section 3 presents a global overview of changes in regional competitiveness as revealed by economic growth. Section 4 identifies some of the high performers in the last 50 years and reviews the strategies of the high performing East Asian economies comprising the well known “gang of four”, plus three South East Asian countries. Section 5 reviews the strategies of the BRICM countries, the largest developing country economies (Brazil, Russia, India, China and Mexico). It also argues that it is harder for developing countries to replicate the success of the high performing East Asian countries for two main reasons. One relates to new elements in the global competitive environment. These are summarized in section 6. The other is the rapid rise of China (and to a lesser extent India). This is covered in Section 7, which also includes a preliminary analysis of the effects of the rapid rise of China on the rest of the world. Finally, Section 8 draws some conclusions. Developing countries must develop more technological capability and greater flexibility to succeed in the more demanding and asymmetric global environment. It is likely that the pressures of globalisation and greater international competition generate strong protectionist retrenchment in both developed and developing countries. These should be resisted. The world as a whole will be better off if developed countries focus on increasing their flexibility to adjust to changing comparative advantage resulting from rapid technical change, and developing countries focus on increasing their education, infrastructure, and technological capability. There remain however large asymmetries in the global system and greater efforts need to be made to provide some global balancing and transfer mechanisms.