View Full Version : Technology And Economic Development

6th May 2011, 09:48 PM
One of the daunting challenges in development economics is finding the right matrix of factors that determine economic development. Development economists have a very good sense of factors that affect country’s economic progress, but it’s very hard to isolate the most important ones.

Having said that, technological progress is universally recognized as the most indispensable cog that connects all the spokes of the wheel of economic development. In our everyday interactions, most of us think of technology as some sophisticated piece of gadget that is supposed to do extraordinary things. Surely, technology, in the narrowest sense, can be conceived of as a piece of gadget. But in a broader sense technology is more than that.

In economics, technology is often referred to as a set of blueprints, institutions and mechanisms- developed within a social framework dictating the spectrum of goods and services that can be produced as well the techniques available to produce them. To be more concrete, what I have just described refers to the term technological progress– improved ways of accomplishing societal tasks. To a large extent, the state of technological progress of a society can tell a great deal about how deep a country taps into its wellspring of creativity and ingenuity. After all the evolutionary process of technological progress is Schumpeterian in nature because it organically involves creative destruction, the idea that the development of new goods make old ones obsolete, and thus requires the introduction of new techniques of production. Creative destruction invariably leads to churning because new techniques of production require new skills, as old skills are rendered less useful.

Technological progress has many dimensions: it may mean having the ability to produce larger quantities of output for given quantities of inputs - for example supposed we find a new way of land management that allows a farmer to produce more crop per an acre of the same land than before; it may mean producing better products – for example, steady improvement in the quality of our cocoa beans over time because of accumulated inter-generational knowledge of the cocoa production processes; or it may mean the introduction of new products – well we may not have developed any discernible products on our own in a very long time, but the importation of, for example, FM Radio Stations and cell phones into our technological culture has really changed the social and political landscapes in Ghana.

It is important to stress the crucial role of political and social systems for sustaining technological systems. In other words, technological systems thrive in political and social systems because any new technical solution requires a new set of political and social capacity, capability and functionings to sustain it. One of the reasons why the social and political systems are crucial is that they provide the anchors for technology adoption which occurs through learning-by-doing - learning how to use technology. Thus the social and political systems determine the extent of spillovers a society can accrue from adopting a particular technology because spillovers depend on how much people interact with and talk to their neighbors.

The important question is: how does a country achieve and sustain improved technological progress? Technological progress comes from innovation and new ideas, which in turn depend on research and development (R&D). Therefore it is important for a society to establish an ecosystem for research and development by developing a culture for science, technology and creativity, and putting in place the complementary investments for developing a research infrastructure. This means that government investments in research and development could be very crucial to unlocking the keys to our technological progress. It must be noted that in most present-day economically advanced countries, governments play a leading role in investments in research and development.

Yet it is the private sector that must be encouraged to take the bull by the horn in this endeavor. Therefore it is important for a society to not put impediments in the way of private businesses and individuals – for example killer taxes and unnecessarily repressive regulatory regimes that stifle domestic innovations, suppress domestic business investments and discourage technology transfers from the Diaspora community. Rather we should give incentives to private businesses and individuals to invest in research and development because these investments involve a great deal of risk and no-one can be sure of the fertility of the research process (how spending translates into new ideas) and the appropriability of the research results (the extent to which firms benefit from their research results).

The good news is that for poor countries like Ghana they don’t have to start from scratch or reinvent the wheel. Since most technologies are developed in the advanced countries, we can acquire them thorough international technology transfer. International technological transfer can be acquired through firm linkages via foreign direct investment, joint ventures etc. Another way to acquire technology from abroad is through international trade with other countries. Yet one other way is the return of our skilled emigrants (Memo to our politicians: we must do our best through creative thinking and innovative, incentive-driven programs to tap into the talent pool of our emigrants).

In essence, technological progress can be more a process of imitation than a process of innovation. The most important thing is to have in place the appropriate political and social systems – infrastructure, institutions, the culture and the leadership for even this process of imitation to thrive in. Institutionally, the protection of property rights may well be the most important.

It’s an entrepreneurial fact that only few individuals (if ant at all) will even dream about starting companies, introducing new technologies, and investing in new endeavors if the expectation is that hard-earned profits would either be appropriated by the state, extracted in bribes by corrupt bureaucrats, or stolen by other people in the economy. Therefore a scrupulous judiciary system that indiscriminately upholds fidelity to the tenets of rule of law is a necessary ingredient for achieving improved technological progress.

Source: Maxwell Oteng