Competitiveness and Development: Myth and Realities (The Anthem Other Canon Series) - Hardcover

Shafaeddin, Mehdi

Hardcover

ISBN 10: 0857284606 ISBN 13: 9780857284600

Verlag: Anthem Press, 2012

Inhaltsangabe

‘Competitiveness and Development' provides an insightful analysis of the confusions surrounding the concept of competitiveness in the context of developing countries, and proposes how these countries can attain competitiveness at a high level of development.

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Über die Autorin bzw. den Autor

Mehdi Shafaeddin is a development economist with a DPhil degree from Oxford University and over 30 years of experience in teaching, research and policy advice at the national and international levels. He held the position of Head, Macroeconomic and Development Policies Branch, UNCTAD. He is currently an international consultant. Shafaeddin is the author of many articles on trade, industrialization and development policy issues in international academic journals. His latest books include ‘Trade Policy at the Crossroads: The Recent Experience of Developing Countries’ (Palgrave Macmillan, 2005).

Erik S. Reinert is Professor of Technology and Development Strategies at the Tallinn Technical University in Estonia, and is the President of the Other Canon Foundation.

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Competitiveness and Development

Myth and Realities

By Mehdi Shafaeddin

Wimbledon Publishing Company

Copyright © 2012 Mehdi Shafaeddin
All rights reserved.

ISBN: 978-0-85728-460-0

Contents

List of Tables, Figures and Boxes, xi, 
Foreword, xiii, 
Preface, xvii, 
Acknowledgements, xix, 
List of Abbreviations, xxi, 
1. Introduction: Framework of Analysis, 1, 
2. Context and Conditions of International Competition, 27, 
3. Alternative Theories of Competitiveness, 49, 
4. Firm Strategy and New Industrial Organization, 79, 
5. External Economies: Organization of Interfirm Relations, 107, 
6. Reputation and Trust: A Firm's Relations with Stakeholders and Others, 135, 
7. Innovation and Upgrading, 145, 
8. Government Policies, 175, 
9. The Experiences of China and Mexico, 207, 
10. Summary and Concluding Remarks, 259, 
Appendices, 275, 
Bibliography, 283, 
Index, 303, 

CHAPTER 1

INTRODUCTION: FRAMEWORK OF ANALYSIS

The problem that is usually being visualized is how capitalism administers existing structure, whereas the relevant problem is how it creates and destroys them. As long as this is not recognized, the investigator does a meaningless job. (Schumpeter 1934, 84)

The issue of competitiveness has attracted a lot of attention, both at the academic and practical levels, during the last quarter-century, i.e. since the emergence of the new economic philosophy in favour of market orientation and trade liberalization. Such development has, in turn, resulted in changes in the rules of the game in business and in international trade. Some have regarded competitiveness as an important element of success in economic performance (e.g. OECD 1992); others have considered it as a misplaced concept and an obsession (e.g. Krugman 1994). The problem is that when the concept of competitiveness is applied to developing countries, it is often delinked to economic development as though competitiveness is an end per se. If this were the case one could go to the extreme in arguing that one could sell everything at zero prices on the international market!

Some proponents of the neoclassical theory of international trade do refer to the prevalence of some market failure, particularly in the case of developing countries. Nevertheless, the orthodox theoretical background to competitiveness is the pure neoclassical theory of static comparative cost advantage (CA), which is the philosophical and ideological basis of the 'Washington Consensus', activities of international financial institutions and their recommendations for economic reform and universal, across-the-board trade liberalization in developing countries. It is also the philosophy behind the GATT/WTO as a multilateral trade organization which sets rules on international trade.

According to the neoclassical theory, inherited and evolved from Adam Smith's theory of international trade, comparative advantage is rooted in resource endowment: capital, including natural resources, and labour. Material capital is the main source of specialization, division of labour and growth. The doctrine of CA, as it is applied, however, is a static theory, based on a number of unrealistic assumptions, and does not contribute to long-term development. For example it is assumed inter alia that technological knowledge is freely available in the market, and that the firm, which is a nucleus of economic activities in modern world, is atomistic and passive. This theory disregards the fact that economic development requires the upgrading of the production structure, which is a policy-induced activity requiring government intervention for specialization based on dynamic comparative advantage.

While a number of alternative theories have been developed to explain competitiveness, there is no satisfactory theoretical framework relevant to the case of developing countries. We will develop a framework of analysis based on Reinert's view on competitiveness. To him competitiveness is an element of development; it refers to activities, which, while 'being competitive' in the micro sense, also contribute to development, raising income, and contribute to the improvement in the standard of living of the population of a nation (Reinert 1995, 26). To do so, we have benefited from the views and theories of a number of economists such as F. List (1856), Kalecki (1955), Schumpeter (1934), Penrose (1959), Hirschman (1958) and Lazonick (1991), proponents of the theory of capability building, and Shafaeddin (2005c).

According to List (1856) productive power is the main source of comparative advantage, and development and mental capital (knowledge), rather than material capital, is the main source of productive power. Division of labour and accumulation of capital are the results of development. Knowledge is not given; it is to be acquired through education, science, training, discoveries, inventions, experience and division of labour. Further, according to List, knowledge is determined by social order, i.e. sociopolitical and institutional factors (Shafaeddin 2005a). List's theory is a dynamic one and, though it is an important step forward, the role of the firm in his theory is not well developed.

Kalecki (1955), like List, gives importance to sociopolitical and institutional factors in economic development. According to him, the contribution of capital accumulation to capacity building and development is limited by sociopolitical, institutional, infrastructural and other structural factors. In particular he maintains that the interest of the government might not necessarily coincide with the interest of the public at large. In other words, the government 'indifference decision curves' may diverge from the community's indifference curves (Kalecki 1971). However, he ignores the important role of the firm in his theory of capacity building and development even though in his theory of capitalist economy, designed for the case of developed countries, firms play an important role.

Schumpeter (1934) pioneered in placing the role of the firm and entrepreneurship in the centre of his theory of competitiveness and development. In his theory, a firm is active, has a strategy, and may have the knowledge and capabilities to change technology. Further, it influences not only the market but also the performance of other firms through its 'creative destruction'.

The Schumpeterian concept of firm is the centrepiece in our analysis of firm activities. Nevertheless, using elements of, and developing on, the theories of dynamic comparative advantage, productive power of F. List, competitive advantage of M. Porter, business organization of Lazonick, and the theory of capability building, we will argue that the firm is not an abstract concept. It is the main coordinator of economic activities; it has links with other firms, market, government and consumers (Shafaeddin 2005c). Furthermore, entrepreneurs not only play the coordinating role, but also perform 'creative' and 'cooperative' functions as suggested by Hirschman (1958). Moreover, like Penrose (1959), we regard a firm as a collective learning unit. According to her, firms are 'living organs', with their own specific culture, collective capabilities and specific knowledge. Therefore, knowledge is firm specific.

Finally we regard competitiveness as a means to development, not an end per se. To increase income, and the rent accrued to a firm and a country, a firm can be operated in such a way as to make it difficult for others to compete with it – that is, by...

Details zur Ausgabe

• Verlag: Anthem Press
• Erscheinungsdatum: 2012
• Sprache: Englisch
• ISBN 10: 0857284606
• ISBN 13: 9780857284600
• Einband: Gebundene Ausgabe
• Anzahl der Seiten: 344
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: GPSR Kontakt; gpsr@libri.de; ; Europaallee 1; Bad Hersfeld; 36244; Deutschland