(Submitted by Mikky)
So delusions make you believe what you see, how about opening our eyes and rehash our economic sensibilities. The developing countries are on a road to development. True. For them to reach the point of economic transition seems a distant dream. Well my question is, how long is the road to development ? Foreign Direct Investment is the direct pouring of factors of production by a foreign country in the host country. Investments that come into the developing countries through these means are generally preferred more than FII’s (Foreign Institutional Investor) which are potentially unreliable forms of investment for economic development of a nation.
The developing countries possess the cheapest forms of labour which makes them so attractive to the globalized players as their services are offered dead cheap, yet skillful. The attractiveness is not my dealing, the question is why is the transferred technology so obsolete ? Schumpeter’s economics tells us that development is through innovation. When the FDI pours in along with newer technologies from the distant parts of the world, it helps the host ( developing country) to fill in it’s economic gap. FDI that fills in these gaps by providing them the work, seem to do the magic by showing them a statistical growth, growth in terms of numbers. This doesn’t necessarily mean that these countries are on a road to development because the withdrawal (which isn’t practical) of these assets mean that they fall back to their low rate of growth. The development in these economies isn’t internalized. They remain and remain dependent heavily on International Trade.
The technology transferred is usually obsolete, chiefly the low-end electronics and medium level of technologies like automobiles. While the patenting in the developing countries are also from the FDI based industries, it does look like the technology flow is one sided. The receiving end thus bound to the obsolete technology, apparently. If innovation is the way to wave the growth curve, the tech transfer which also pushes the curve upwards seems virtual, delusional and hollow. The manufacturing of low-end commodities only increases the “hollowness” of economic development.
Following this mode of development is a stop-gap initiative. Until the developing countries do not get the full scale of newer technologies the development that they currently see in statistics will not materialize and will not be helpful in turning them into a developed country. To be the leader, you cannot be a follower. Innovation must take place in developing countries, investment in research is imperative and the transfer of labor to higher and much higher forms of production is the pathway for glory which can be viable through domestic innovations or full technology transfers.
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©The Idea Bucket, 2013. Submitted by Mikky.