Technology and Development in the Third Industrial Revolution

Charles Cooper, Raphie Kaplinsky

• Publisher: Routledge
• Year: 2005
• Print ISBN: 9781138419155
• eBook ISBN: 9781135778415
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

First published in 1989, Technology and Development in the Third Industrial Revolution is a significant contribution to history.

‘Technological Revolution’ and the International Division of Labour in Manufacturing: A Place for the Third World?

Raphael Kaplinsky^*

I.
INTRODUCTION

There are three central issues in the discussion which follows. The first concerns the question of what constitutes a ‘technological revolution’ and relates to the role played by embodied technological change in the evolution between technological paradigms. In particular it concerns the relative importance given to the development of microelectronics technology at this historical juncture. The second relates to the interaction between technological change and the international division of labour. And finally I will attempt to anticipate the future role of the Third World in global manufacturing specialisation.

In covering this terrain much of the discussion will be informed by a detailed sectoral analysis recently undertaken of the global automobile sector [Hoffman and Kaplinsky, 1988]. This comprises an investigation into the emerging pattern of global production and sourcing of auto components, and involved detailed fieldwork in Japan, the US and Europe. It concludes by contrasting the anticipated New International Division of Labour (NIDL) in the era of ‘machinofacture’ (ably sketched out by Frobel et al. [1980]) with the new international division of labour emerging in the era of ‘systemofacture’. Whilst the auto industry is representative of merely one type of industrial sector (the mass production of discrete products), I believe that there are systematic ways in which its conclusions can be generalised across other sectors. This is important since there are reasons to believe that the spread of the new production paradigm is likely to be uneven, not just across sectors, but also across regions. This provides an important window of opportunity for developing country decision-makers. Many of the detailed points made in later discussion are drawn from this study of the auto sector as well as from Kaplinsky [1985] and [1989]; readers who want more justification of particularly contentious points are referred to these texts.

Three brief caveats are required before proceeding. First, unlike Dore (in this volume) and Rosenberg and Frischtak [1984], I am convinced that are indeed witnessing a major transition in industrial era. However, the detailed nature of this transition is debatable and my own frame of reference has a greater historical scale than the 50-year cycles identified by Kondratieff, Schumpeter, Freeman and others. It involves the transition between the three major industrial eras since the onset of the industrial revolution. The first, beginning in the sixteenth century, involved the transition between handicraft production and manufacture; the second (after the late eighteenth century) saw the transition between manufacture and machinofacture; and the most recent (beginning in the late 1970s) is seeing the growing dominance of a new paradigm which I refer to as systemofacture. (This scale of change and its periodicity is analagous to Piore and Sabel's transition between mass production and flexible specialisation [Piore and Sabel, 1984].) The second major caveat is to warn against the too-easy conflation of the terms ‘LDCs’ and Third World’. There is an enormous difference between the South-East Asian NICs and Sub-Saharan Africa, much greater in fact than that between the industrially advanced countries (IACs) and the NICs. Much of the discussion which follows applies more to the NICs— especially the so-called ‘second-tier NICs’—than to the industrially least developed countries, although it will of course be relevant to both groups. And, finally, it is important to note that most of the discussion applies to the industrial sector. There are important developments occurring in biotechnology which in my view are not only of great historical significance, but which relate most clearly to agriculture, especially to the industrialisation of agriculture.¹ It may be that some of my discussion is relevant to this but I make no pretence of having thought through these issues in a clear manner.

II.
‘TECHNOLOGICAL REVOLUTION’: THE TRANSITION TO SYSTEMOFACTURE

I begin with the recognition that the global economy is in crisis, defined in the proper sense of the word to represent a turning point. At this period of transition in industrial history, it is possible that the inherited pattern of global industrial specialisation will change, leading to an altered role for the Third World in this international division of labour. In order to understand this change of role it is necessary to treat the subjects of long waves and flexible specialisation before outlining the emerging era of systemofacture.

Technology and Long Waves

By the end of the 1970s, when it had become clear that demand-management alone was insufficient to rectify international imbalances and to bring supply into balance with demand, Freeman and his colleagues at the University of Sussex picked up the issue of long waves which was first raised by Kondratieff and subsequently elaborated by Schumpeter.² What Freeman and his colleagues offered was a path to understanding the achievements of Japan and the Republic of Korea, both of whom had achieved success by focusing on technology and the supply-side of production. In adopting this perspective these long-wave proponents were changing the framework of the policy debate, providing for example a theoretical point of entry to the reindustrialisation policies which became increasingly popular in the 1980s.

Another particularly valuable outcome of this set of theories was the identification of the major technological developments which Schumpeter first referred to as heartland technologies. Freeman extended the initial insight of Schumpeter and offered a threefold classification of technological change.³ The first of these are incremental changes, occurring continuously and representing minor changes in product and process. The second set are radical innovations which comprise a more significant set of technological breakthroughs, as in the case of nylon and polyethylene. The third and final set of technological changes are the revolutionary ones such as the steam engine, the railroads, the internal combustion engine and microelectronics.

Valuable as this particular perspective of technologically-based long waves is, it is not free from difficulties, of which three stand out in importance.⁴ The first arises out of the conception of technology which they use, particularly in their earlier formulations. Their preoccupation lay with machinery, as can be seen from the list of the heartland technologies which they identified. Steam engines, textile machinery, steel, railroads, the internal combustion engine, chemicals and microelectronics—all in the realm of embodied technology. There seemed to be little space in their schema for ‘soft’ or ‘disembodied’ technology. It is true that if pressed they could point to the social implications of the heartland technologies which they had identified. But this is a far cry from endogenising organisational technology into their model of expansion, recession and depression. This is true for organisational technologies both at the micro level— as on the shop-floor—and in the wider sphere of social interaction.

A second and related problem in these formulations of the long-wave is a pervasive technological determinism. Given that social relations are in some way affected by the events which they are recording, their relationship to embodied technological change is generally considered by the long-wave theorists to be unicausal. Changes in embodied technology are considered to induce changes in social relations. (In this perspective of technological determinism they were rather close to the earlier views of Marx: The handmill gives you society with the feudal lord; the steam-mill, the society with the individual capitalist’.⁵)

The third difficulty with these long-wave theorists concerns the origins of the new heartland technologies. There was of course a long debate about whether they were induced by the extreme competitive pressures of the downswing or the rich surpluses of the upswing. There was also an interesting recounting of the change in Schumpeter's own views in which he began with a view of technical change which was exogenous to the system of accumulation—that is the firm— but as he recognised the increasing complexity of modem technology, this function was endogenised in his analytical model. But despite these important observations they tend to have a slightly mystical, deus ex machina quality. Why do they last 50 years? Do the heartland technologies necessarily exhaust the possibilities for new products? Are ‘competitive pressures’ a sufficient explanation for their emergence?

In a recent refinement of this discussion of technology and long waves, Perez [1985] goes some way to meeting these problems in the initial formulations of her colleagues at Sussex. At the same time she builds a bridge towards the concept of flexible specialisation which I will consider below. The major complement which Perez offers is a recognition of the importance of social relations—which she terms the ‘socio-institutional context’—in the transition between the waves. For Perez, each of the waves represents a ‘techno-economic paradigm’, incorporating a form of institutional and infrastructural development which enables the dominant embodied technology to be utilised efficiently. Long-wave recessions for Perez arise when there is a mismatch between the socio-institutional and techno-economic spheres. The new heartland technologies do not always produce the appropriate socio-institutional framework and their diffusion may indeed be held back by the social structures of the past.

But this approach is still deficient in the specification of the ‘socio-institutional’ framework. Passing reference is made to ‘a new model for the management and organisation of the firm’⁶ and ‘the forms of organisation of workers and major interest groups, together with the legal framework within which they operate’,⁷ but this is not spelled out in detail. Moreover, whilst it is acknowledged that the forces of production do not necessarily cause changes in the relations of production, there is no hint that changes in the forces of production may themselves be induced by initial changes in the relations of production. It is for this reason that it is useful to focus on the emerging literature on flexible specialisation, since in contrast to the theorisation of technology and long waves, it takes the social organisation of production as its starting point.

From Mass Production to Flexible Specialisation

Once the concept of technology is opened out to include both social and physical technology, the possibility arises that the observed eras of historical progress may primarily be conditioned by the social equivalents of heartland technologies. In such a schema embodied technologies may be given a minor, subordinate role. This is the underlying theme of Piore and Sable's recent explanation offered for the global economic crisis, seen as reflecting the transition from an era of mass production to one of flexible specialisation.

Piore and Sabel focus in their analysis on the ‘limits of the model of industrial development that is founded on mass production: the use of special-purpose (product specific) machines and of semiskilled workers to produce standardized products’ [Piore and Sabel, 1984:4].

Although this schema takes some account of embodied technology—as does their specification of the potential for flexible specialisation represented by the new electronics-based automation technologies—their primary focus lies in the realm of social relations.

Their first concern is with what may be called the ideology of production. This sees best-practice as involving the mass production of standardised commodities and focuses the competitive edge on cost reduction rather than product competition. This view permeates manufacturing horizons. For example, despite the fact that it is well known that around two-thirds of production in the engineering and wood-based industries occurs in small-batches, the dominant perception of manufacturing is one of large-batch production. The consequence is that the ‘techno-logical trajectory’⁸ which has permeated modern manufacturing industry is one which incorporates an obsessive drive towards standardisation of product and scale-economies in production. Yet, argue Piore and Sabel, there is often no necessary reason why this should be the case. Indeed in the nineteenth century the leading edge of manufacturing stood at the divide between the system of mass production and an alternative of craft-production based upon ‘a combination of craft skill and flexible equipment’.⁹ The balance at that time fell in favour of mass production and this occurred because it was in the United States—an economy experiencing a shortage of skilled labour—that the new systems were being forged.

Now that the paradigm of mass production is running into difficulties—in relation to growth-rates, high levels of unemployment and trade imbalances— Piore and Sabel suggest a ‘Second Industrial Divide’ with the possibility of flexible specialisation being linked to the new breed of flexible electronics-based automation technologies. Here, as can readily be seen, the discussion starts with social factors, involving a struggle between the political power of the craft-based industries and those premised on mass production.

The second element of social relations considered by Piore and Sabel concerns a wider specification of what Perez loosely referred to as the socio-institutional structure. A distinction is drawn between the development of the corporation (with its attempts to stabilise the market and to organise labour relations) and the emerging functions of the state (with its attempts to develop an appropriate regulatory mechanism which would facilitate the continued expansion of the mass production system).¹⁰ The fundamental problem which both the state and the corporation have to contend with is that the growing scale-economies of the mass production paradigm require a stable environment to ensure the conditions under which heavy expenditures on inflexible capital equipment can be written off.

In this schema the mass production paradigm runs into crisis because the external world is just too uncertain to allow for these scale-economies to be realised. This situation arises for a combination of reasons which are both endogenous and exogenous to Piore and Sabel's model. The endogenous causes relate to the saturation of the available global markets for standardised products by the end of the 1960s; this was coincident with the rise of productive capacity in the NICs. There was also a growing strain on raw material supplies. Exogenously, there was a series of conjunctural factors which deepened the crisis—these included the growth of social unrest,¹¹ the uncertainties induced by flexible exchange rates, the two oil shocks of 1973 and 1979 and the growth of global debt exacerbated by high interest rates.

All these factors created an uncertain world. Yet the mass production paradigm required in the first instance a stable environment in which large-scale and inflexible investments could be written off. The result has been a post-1973 slowdown which appears to have largely been immune to the conventional Keynesian demand-management policies which had been tried and tested in previous recessions. Piore and Sabel argue that there are two contrasting paths in the transition to a new stable era of high incomes and full employment. The first is the adoption of a strategy of international Keynesianism. Through coordinated international demand management, this will ensure that large, stable markets will continue to exist for mass-produced homogeneous commodities, thereby allowing for the continued reaping of scale-economies. The alternative is that of flexible specialisation which ‘will be seen in retrospect as a turning-point in the history of mechanisation’.¹² It is argued that both in the first divide of the nineteenth century and in the second divide of the 1980s and 1990s, there are two possible paths of transition. Which of these triumphs is not a reflection of the inherent power of particular types of embodied technology to determine social relations, but will be resolved within the realm of social relations. The forces of production which are subsequently developed will thus reflect the balance of power of these different sets of social actors.

In comparing the long-wave theorists with the emergent views on flexible specialisation we can see that they have many similarities. In contrast to the dominant neo-classical and Keynesian paradi...

Table of contents

• Front Cover
• Half Title
• Title Page
• Copyright
• Contents
• Introduction
• Technological Revolution’ and the International Division of Labour in Manufacturing: A Place for the Third World?
• Strategies for Developing Information Industries
• Radical Technological Changes and the New ‘Order’ in the World Economy
• New Technology and Catching Up
• Latecomers’ Problems