Tag Archives: modernization theory

A Socio-Economic Theory of Emerging Economies and Technology Development

By:  Michael Kaiser

Old Sailing Ship

Understanding the socio-economic forces that drive the economies of international customers will help your company’s growth overseas

The Historical Precedent
In a previous article (New Globalization Trends = New Startup Opportunities) I described
globalization and its continuous fine-tuning of technologies, business and society. But globalization is not a recent geo-political or geo-economic phenomenon. Rather, we can safely say that the concept of trade between nations as we know it started with the Phoenicians, who were among the greatest traders of their time and owed much of their prosperity to their talent for commerce. Centuries later, international trade continued with Marco Polo’s trips to Asia, especially China. They preceded the onset, and set the tone, for present day global business standards by centuries. These two historical examples serve as an advisory to emerging economies that global trade is serious business (pun fully intended).

Two socio-economic theories, and the winner is…?
The late Neil Postman, a professor and media critic at New York University, postulated that “technological change is not additive; it is ecological. A new technology does not merely add something; it changes everything”.

A respected humanist and media critic, one wonders if Postman reluctantly conceded that the old conflict between Dependency (Dependency Theory) and Modernization (Modernization Theory) ended in favor of the latter. Whereas Dependency can be described as a social model that condemned economic colonialism, Modernization is a closer model of evolving economies and technological development. Unlike Dependency, which reached its apogee in the 1960’s and 1970’s, Modernization remains a viable and applicable model to this day.

Basically, Modernization defines the positive impact of technology on societies where poverty is the standard rather than the exception. It is worth mentioning that Modernization preceded the advent of Dependency, but paradoxically, it was its failure of viable social and economic solutions that led to the rebirth of Modernization, with its eye to the future. Dependency had a legitimate socio-political argument, but one that attempted to find solutions to narrow the chasm between developed and under-developed or emerging economies at a time when PC’s, cell phones, internet, and the sundry information technologies assisting international communications in business and social affairs where not even available in developed countries. The first IBM PC was marketed in 1981, and by then Dependency had seen its better days. The next decades, to the present day, witnessed advances in technology and financial clusters that can be best described as moving from days and hours to mere nanoseconds.

The rebirth of Modernization is due to its emphasis on transplanting information and other technologies, higher education and communications to those countries approaching or designated as ‘emerging economies’. It can be argued that one unexpected contribution of Dependency lies in the very targets it was addressing, (the periphery or semi-periphery) because those countries  disavowed the theory itself and were forced by overwhelming new technologies and communication tools to modernize, instead of blaming the wealthy, developed countries for their perceived ‘westernized exploitation’ supremacy.

The example of two BRIC countries
Globalization has been the force that changed the policies of growing economies. Nowhere was the case for Modernization more evident than in two BRIC countries: India and Brazil. The most populated democracy in the world, with a population exceeding 1 billion, India is a country divided by politics, areas of abject poverty or great wealth, religion, social origin and language differences (although English remains the language of business and international relations). Starting in 1991 and continuing to the present day, the two major rival political parties of India committed to improve the economy and development of the country, and thus, India set an example for modernization success. The Indian Institutes of Technology, spread over several locations, not only compare with the most advanced ones in the Western economies, but earned a reputation for their rigorous R&D. The wave of information technology and life sciences specialists from India started in the early 1990’s and created a new wave of entrepreneurship and global companies, e.g., the TATA Group, InfoSys, Wipro, Cognizant, Mahindra Group, and international pharmaceutical companies like Ranbaky, Sun Pharma, Dr. Reddy, Lupin, Torrrent, etc. In addition, India hosts some of the largest American and European corporations.

Brazil is a different case, but equally interesting because it actually used to be at the center of Dependence theory led by local sociologists, as well as André Gunder Frank, Dependency’s most prominent academic author and analyst.

Their very different cultures not withstanding, India and Brazil made the decision to make radical changes to their economies in the early and middle 1990’s. By 1994, when Fernando Henrique Cardoso became the country’s President, the social theory that fought against the imposing strength of developed centers against the countries of the periphery and semi-periphery no longer played a role in the economic future of Brazil. In Henrique Cardoso’s two terms as President, the Brazilian economy took a significant leap forward and when Luiz Inácio Lula da Silva, a union leader and head of the opposition Worker’s Party became President, he kept his country on an evolving economy track. Like India, Brazil is also known for dramatic, visible differences between the poor, the middle class and the well-to-do, despite being ranked as the most important economy in Latin America and one of the largest one in the world (Economy of Brazil) as well as a top automotive and international aerospace manufacturer, Embraer.

The University of São Paulo and the Oswaldo Cruz Foundation are advanced academic institutions of research. The Butantan Institute is the largest producer in Latin America (and one of the largest in the world) of immunobiologicals and biopharmaceuticals. In 2001 it produced approximately 110 million doses of vaccines and 300 thousand vials of hyper immune sera. The institute produces 90% of the vaccines used in Brazil. The anti-hypertensive ACE inhibitor, lisinopril, is a synthetic structural analog of a peptide derived from the venom of the ‘jararaca’, a Brazilian pit viper (Bothrops jararaca). The Vale Corporation and Petrobras (Petroleo Brasileiro, S.A) are global giants, Vale in mining and Petrobras in oil and gas. This year a new wave of social discontent is emerging, one that could compromise Brazil’s hard-won economic growth. Time will tell.

Brazil’s close to 200 million inhabitants cannot compare with India’s 1.2 billion, but it has a significant advantage over its Asian partner: Brazil was and still is a country of immigrants. From the early Dutch and Portuguese, to Italians, French, German, Syrian, Lebanese and other nationalities, Brazil has benefited from that international influx, comparable to the U.S., Canada and Australia. India, on the other hand, stands out for its unique expertise in the field of information technology, pharmaceuticals and its thousands of entrepreneurs spread overseas.

Epilogue
Although the notion that America is the easiest country for technology startups and innovation financing is being challenged, it still deserves its place as the source of opportunities, innovation and entrepreneurial spirit, qualities that seem to hark back to the need for achievement, described by David McClelland in his 1961 magnum opus “The Achieving Society”.  Worth recalling Neil Postman’s observation that: “… A new technology does not merely add something; it changes everything”. Does that mean that we are experiencing Aldous Huxley’s somber, satirical “Brave New World” and “Brave New World Revisited”? Or will countries with different cultures decide to adopt policies of rapid development for the benefit of their people?

Globalization was the target, the objective of both Dependency and Modernization. The evolution of communications and travel facilitated the improvement in the health care of both poor and emerging societies; this in turn increased the number of able workers in countries that could not absorb all of them, forcing large emigrations to the developed countries. By contrast, the developed countries witnessed the meteoric demand of their citizens for more goods and higher living standards as the prerogatives of better education and high-technology. Based on the importance of comparative advantages and their connection with free trade agreements between countries, it is safe to predict that Modernization will continue to fall under the magnifying glass of social and economic analysis and evaluation.

Recommended topical sources

Modernization Theory

Dependency Theory

Globalization

Indian Institutes of Technology

Brazil

Picture credit: Wikimedia Commons, Nanban Carrack