Confronting the ‘Inconvenient Truths’ of Globalization

Beyond the ‘tiger’ model of economic management: new forms of social

partnerships and global networking

Michael BestProfessor Emeritus

University of Massachusettsand visitor, Center for Innovation and

Structural ChangeNational University of Ireland, Galway

New Growth Machine: Globalization and Technology-

based Industrial Strategies

• Establish an economic ‘mandarinate’ as an executive industrial growth agency

• Form partnerships with global business leaders to build, or leverage, an S&T infrastructure and guide policy

• Goal: grow via strategic sectoral transitions and introductions

• Invest heavily in skill formation

M.Best, NCA

PS 5Knowledge intensive(systems integration)

information, communication, instruments

PS 1Low technology, labour intensive

(interchangeability)apparel, toys, furniture

PS 3,4Complex-assembly intensive(flow)auto, consumer electronics

PS 2Material-intensive

(flow)steel, plastic

food processing

(Principle of production)

present

future

Evolution of Industrial Structure

Strategic Technology Upgrading Agencies

• Japan: EPA, MITI

• So. Korea: KIST

• Taiwan: ITRA

• Singapore: EDB

• Ireland: IDA

• Finland: TEKES

• Sweden: Vinnova

Irish Economic Mandarinate

Business Models for Technology Assimilation

• Japan: Indigenous WCM + tech licensing• So. Korea: Indigenous WCM + equipment

suppliers• Taiwan: Tech-based SMEs + Brain

circulation with SV• Singapore: FDI-affiliates + GPN-hubs +

skill formation • Ireland: High-tech FDI-affiliates + RTCs• Nordic: Tech-based + NPD+SF

1975NS&E

1975M&CS

1995NS&E

1995M&CS

Ireland 706 NA 5456 NA

Singapore 702 NA 2965 NA

S. Korea 10266 0 47277 12351

Taiwan 6700 1200 15170 2818

Growth in Engineering and Science Graduates 1975-1995:

creation of a global ICT labor market

Ireland’s Strategic Assessment: (what the IDA saw and acted on)

• The triumph of neo-liberalism and the opening of global markets (EU, Eastern Europe, ex-USSR, China, India, Brazil)

Inter-determinant with:

• Emergence of high-tech ‘industrial districts’ in US (3000 companies in MA, Silicon Valley, Austin) serially ‘spawning’ new sectors

MA: New Sector Creation

• Minicomputers

• Data Storage Systems (‘file cabinets of IT)

• Medical devices (US output grew 9 times in 25 years to 2004; regionally specialized)

• Network Switching Equipment

• Mutual fund industry (asset management)

• Biotech

• Business software tools

• Defense systems

MA comparative advantage

• Technological innovation: Leadership in emergence of new high-tech sectors via a population of 3000 high tech companies

• A S&T infrastructure anchored in research intensive universities

• Business development infrastructure: Grow companies from small to medium to and leaders to large size

• Legacy of technology capability and skills (optics, systems engineering)

Opportunity: Ride High-tech Waves

• High tech companies have 2 parts: platform development and production

• Production activities can be off-shored

• Ireland established a comparative advantage as a remote management site

• Ireland’s business/education partnership is attractive to US high-tech companies

The demise of ‘social partnership’ in the US

• Triumph of neo-liberalism, the collapse of the ‘New Deal” and attack on organized labor

• The attack on public sector including public education

• Decline of American manufacturing capabilities (e.g. Ford v. Toyota)

Partnership with High-tech Leaders

• Information-communication technology: 7 of worlds top 10 including IBM, Intel, HP, Dell, Oracle, Lotus, and Microsoft

• Medical technologies: 15 of world’s top 25• Pharmaceuticals: 13 of world’s top 15 and

6 of world’s top 10 drugs produced in ROI• Financial services: over half of world’s 50

largest banks and of world’s largest insurance companies

Foreign Direct Investment: Ireland's Growth Driver

1985 2000 FDI inflows $164 million $24 billion Exports to W. Europe $10 billion $76 billion Foreign affiliates share of Exports 90 percent Source: UNCTAD, WIR 2002

Elements of a new Irish, Niche Strategy

• Localization capabilities for EMEA (diverse languages, sensitivities to cultures…)

• Offer remote management to technology-driven companies concerned about IP Rapid location and scale-up for plants (skills and infrastructure) IDA

• International back-office and services hub

High Tech Remote Facilities for any ‘routine’ operations

Is Ireland a high-tech economy?

• Yes, affiliates of high tech companies• Yes, higher education skill formation • No, GER&D/GDP• No, activities of affiliates• No, new sector creation• No, technology platform development• No, establishment of distinctive regional

technological capabilities

Indicators of New Technology Development

R&D Intensity Patent intensity Ireland 1.2 2 Massachusetts 5.3 14 Finland 3.4 9 R&D intensity = R&D to GSP/GDP, 2003 Patent intensity = USPTO patents awarded GSP/GDP, average of 1999, 2001, 2003 Source: The John Adams Innovation Institute

‘inconvenient truths’

Arctic Melt Unnerves the Experts

Haiti

Food

Era of Cheap Resources

• Oil for $10 a barrel in 1999; last week $117

• Food prices soaring

• Basic metal prices soaring

Economic Damage Caused by Climate Change in Billion Euros

0100200300400500600

1950-59 1960-69 1970-79 1980-89 1990-99 1994-2004

Source: Munich Re (Topicsgeo Annual Review: Natural Catastrophies 2004)

Intractable sectors to economic mandarinates

• Energy

• Urban transportation

• Food

• Depletable resources

Facing the Inconvenient Truths: Towards a Sustainable Model of

Economic Governance

• Extend the social partnership to account for social infrastructures of consumption. Example: Nordic model of urban transportation

• Focus technology research, assimilation and development on clean technologies. Example: Texas and renewable energy

Urban Transportation

• Social infrastructure of consumption

• Democratic v. exclusive or oligarchic sectors

Dubliners visit Copenhagen

Cargo bike: SUV alternative

Bridge over harbour

I find out what the world needs, then I proceed to invent…

--Thomas A. Edison

in per cent

0

10

20

30

40

50

60

70

80

1860 1880 1900 1920 1940 1960 1980 2000 2020 2040 2060

coal

oil, gas

nuclear power

2080 2100

Year

Energy: democratic versus exclusive products

Renewable Energies

wind energy, hydropower, photovoltaics

, etc. traditional biomass

Texas: $10 billion clean energy project with huge employment

Clearwater, Nolan County, Texas: from oil to renewables with scale

• Today, Nolan County (pop: 18K) produces more wind power than UK, France and CA on 3 large wind farms. Wind West

• T Boone Pickens 4 year plan: 4000 MW, 2700 turbines across 200,000 acres—150 miles across Panhandle (1 million homes)

• Master scheme: Army of wind farms North to South Great Plains and West to CA solar energy corridor

Cuchulainn’s energy

Where is Cuchulainn? Dundalk’s alternative energy: no hulk

New Deal Strategy: investment priorities

• Focus on clean technology/renewable energy (from high-tech to clean tech)

• Research and source world for leading, fast growing companies (basic industries)

• Develop complementary capabilities to Basic Research: TR + DR + AR and match to Skill Formation (global partnerships)

• Transition to post-carbon products and processes sector by sector (toxic use reduction extension services; energy efficiency)

Transition sector strategies, including world-class technology-management based regulation, to

reduce inflationary pressures

• Energy

• Transportation

• Water

• Raw materials

Clean Tech: well-known technologies

• Solar power• Wind power• Green buildings• Personal transportation• The smart grid• Bio-based plastics• Advanced lithium-ion batteries• Water filtration

Clean Tech: Emerging Technologies

• Tidal power

• Silicon-based fuel cells

• Distributed hydrogen generation

• Plug-in hybrid vehicles

• Nano-technology-based materials

Clean technology are products and services that:

• Harness renewable materials and energy sources or reduce use of natural resources by increased productivity

• Cut or eliminate pollution and toxic waste• Deliver equal or superior performance• Provide investors, companies, and

customers with promise of increased returns, lower costs, and reduced prices

• Create quality jobs in management, production and deployment

From TQM to LCA, sector by sector

How? Benchmark economic governance models

• Nordic countries, US cities and states, European industrial districts

• Envision a post-carbon age economy• Leverage skills and capabilities developed in

high growth years• Extend mandate of the economic mandarinate to

the ‘intractable’ sectors• Address the social infrastructure of consumption

with democratic goods • Social partnerships for socially rational products

Sources and Acknowledgements

• Elephant in the Room, Guy Harrison, Google Images• G8 Renewable Energy Task Force• Google Images for fox, pollution, and clean technology

images • Waves of Innovation, The Natural Edge Project;

Hargroves, K. and Smith, M.H. (2005) The Natural Advantage of Nations: Business Opportunities, Innovation and Governance in the 21st Century, Earthscan, London, p 17.

• Ron Pernick and Clint Wilder, The Clean Tech Revolution, HarperCollins, 2007.

• http://www.copenhagenize.com/2007_10_01_archive.html