Will New Technologies Help or Harm Developing Countries?

Oct 8, 2018 Dani Rodrik

Trade and technology present an opportunity when they are able to leverage existing capabilities, and thereby provide a more direct and reliable path to development. When they demand complementary and costly investments, they are no longer a shortcut around traditional manufacturing-led development.

CAMBRIDGE – New technologies reduce the prices of goods and services to which they are applied. They also lead to the creation of new products. Consumers benefit from these improvements, regardless of whether they live in rich or poor countries.

Mobile phones are a clear example of the deep impact of some new technologies. In a clear case of technological leapfrogging, they have given poor people in developing countries access to long-distance communications without the need for costly investments in landlines and other infrastructure. Likewise, mobile banking provided through cell phones has enabled access to financial services in remote areas without bank branches.

These are instances of technology improving the lives of poor people. But for technology to make a real and sustained contribution to development, it must not only provide better and cheaper products; it must also lead to more higher-paying jobs. In other words, it must help poor people in their role as producers as well as consumers. A model of growth that the economist Tyler Cowen has called “cell phones instead of automobile factories” raises the obvious question: How do people in the developing world afford to purchase cell phones in the first place?

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0 Comments on this paragraph, 13 in all 13 Comments on this article

Thomas Timberg Oct 14, 2018

The late Prof Alexander Gerschenkron said ironically Industry is better than trade, heavy industry better than light, and finance better than any of them. His point is that any real value adding economic activity is equally valuable whatever sector it falls in. Even dynamically there is little reason to privilege one over the other. Countries should do what they can in whatever field it is. Even in terms of employment there is no reason to think that manufacturing is better, especially given the deficits in healthcare, education and security they face.
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Pedro Silva Oct 11, 2018

So, if skilling and education are not the answer, what is the best development strategy for developing countries? Continue to bet on manufacturing investments in the face of growing penetration of automation technologies? Rely on commodity exports, which enrich a few and employs less and less? I cannot see a way out other than massive investment in training and education, and innovation policies that would foster local R&D and the growth of high-tech industries. Developing countries should increasingly become developers and producers of technology, and not simply passive consumers.
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Soleiman Arnold Mamesah Oct 10, 2018

Great observation.
Post great recession global trade growth (CAGR) in the range of 2.1-2.4% while global growth is somewhere in the range of 3.5%.
Global Commodity index trend tend to decreasing that cause income not to increase in commodity exporting countries.
Cost of debt becoming increasing as USD keep getting stronger.
The new tech will cause mfc product becoming over supply then impact price to decrease.
If both commodity & mfc price decreasing then global growth under high pressure and the developing economies facing high uncertainty !
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Max Mikheev Oct 9, 2018

It is clear that uneducated and unskilled people have become superfluous and a burden to the economies. With world population projected to reach almost 10 billion by 2050 (the undeveloped counties being the biggest contributors) the most important measure to alleviate poverty and environmental deterioration is to adopt strict population control. Failing to do so would result in more suffering and degradation of living standards, no matter what else you do: any gains due to education and innovation would be immediately eroded by ever expanding population.
The greatest obstacle to such methods are progressivists, who automatically consider them racist and undemocratic (without offering any real alternative, which does not exist).
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Paul N Oct 8, 2018

The answer is...as high-globalist Thomas Friedman of the NYT recently told Americans....that everyone has to become....”above average”.
- Prashant Kotak Oct 9, 2018
  
  "...everyone has to become above average...”
  
  So Logic and Maths are not Thomas Friedman's strong suit I take it.
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nigel southway Oct 8, 2018

Sorry but the examples in this article that say recent technology has added wealth are thin what they have done is allowed system gaming and labor arbritage . The only way technology supports wealth is if it liberates labor so it can be more productive elsewhere but if it displaces or replaces labor it just transfers wealth and that coupled with globalization driven by liberalized trade is exactly what has mostly happened. I would say that almost all of the advances in the developing world has been at the expense of the mature world so it’s clear the point is valid
Yes it’s going to be harder for the next gen emerging markets as the days of vast labor arbritage opportunity is gone and why should the emergers get in 20 years what the west took 200 to achieve they should pay with loans for the benifit of our IP and knowledge and not get it for free via global corporate squander . Our wealth is not for the taking by the global beggers
- Paul Friesen Oct 10, 2018
  
  We in the "west" are not rich because we are smarter or harder working than anybody else. We are rich due to good luck. We happened to be born in places where industrial clusters got established early, and those clusters have grown, enriching us at the expense of everyone else. We get many things from the rest of the world for very little, because the surplus labour there keeps wages down.
  
  The good thing is that this is changing. Industrialization is spreading. But something else is happening at the same time. Automation is threatening the value of labour everywhere. But we need to solve our own problem with that, not try to prevent the spread of industrialization to people who have always had the short end of the stick.
  - nigel southway Oct 10, 2018
    
    No… your dead wrong…. I don’t wish the developing nations ill… but…We made our own wealth from initiative and hard work over many centuries.. and we should not let it be transferred out of our children’s hands in a few decades to mainly copy cats and migrating free riding opportunists who have been handed un earned wealth due to our stupidity and softness.
    I have explained how we let it happen… and the fix is necessary, as we are over populated as a planet, and its every nation for them- self’s. To define a self-sustainable plan. More free flow globalization will just aid the problem.
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Prashant Kotak Oct 8, 2018

I cannot understand how this article can completely ignore addressing the most obvious, lethal scenario, that the elites of the developing countries will cut out huge tranches of their own populations from employments that currently earn them a bare hand-to-mouth living, by bringing in automation/AI tech from the developed world.
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Jose Antonio Vanderhorst Silverio Oct 8, 2018

Next is my tweet reply to the tweet about this article which leads to a conversion in Medium of 8 consecutive tweets:

Might #GVCs benefits be only available as #GreatNews_GD #GlobalDebout distributed governance #NewPower @thisisnewpower and #Dweb insights in https://medium.com/@gmh_upsa/greatnews-gd-the-opposite-of-fakenews-synthesis-to-your-celebrities-14d93f395643 about the conversion to Medium of the narrative for your celebrities.
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Prashant Kotak Oct 8, 2018

At the very least, it exacerbates the schism between the educated and the uneducated. Exactly how would you use mobile apps when you can't read or write?
But eventually tech has the potential to do something much more lethal: Just what will those earning a bare subsistence do when fishing and agriculture are automated, even if they can read and write? That is a mere decade away, but millions and millions will still have several decades of life in front of them. So what will they all do? Become AI programmers? Exactly how will the tech in their mobile phones help them in that situation?
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Marc Laventurier Oct 8, 2018

So, with apologies to, and in contradiction of, William Ross Wallace, 'The Hand That Dons the Bunny Suit Is the Hand That Rules the World'.
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