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In this new age of globalization, if
policy makers and academics are to
understand and promote accelerated rates of
national development in less developed
countries (LDCs), a more precise
understanding of why some nations are
significantly more successful than others is
essential. By contrasting means and outcomes
in the development of South Korea and Mexico
since the 1960s when both nations were
impacted by similar conditions of
underdevelopment, this paper intends to
contribute some insight into this debate by
identifying a few lessons learned. These
"lessons" need be prefaced by the
recognition that all nations are different.
Therefore, the following observations are
only intended to inform interested parties
rather than suggest any certainty about how
development takes place.
In this age of globalization the greatest
deterrent to industrialization is neither
land, labor not capital, but rather it is
the absence of manufacturing knowledge and
the skilled labor force to put it to work.
Beginning in the 1960s, the agricultural
nation of South Korea began to aggressively
and persistently pursue all aspects of
manufacturing knowledge with the awareness
that such knowledge is the key to
socio-economic development. Mexico has yet
to make this discovery.
Knowledge acquisition from foreign sources
is crucial for accelerated development.
Unless developing countries improve their
productivity and shift into the production
of new goods -both of which involve
acquiring new knowledge - they will face
declining standards of living relative to
the rest of the world.
Outsourcing transfers knowledge along with
jobs.
While outsourcing from transnational
corporations (TNCs) tends to be routinely
excoriated as exploitive at home an abroad
(and justifiably so at times) it can provide
development opportunities through knowledge
transfer. South Korea used the foreign TNCs
to learn progressively complex and
innovative manufacturing processes as well
as the "business of business" By contrast,
Mexico has valued the foreign TNCs primarily
for the jobs they provide.
Knowledge acquisition must be tied to a
development strategy.
The tenacious pursuit of higher-tech
knowledge should be tied to long-term
development goals rather than the specific
policies of a particular leader or political
party. South Korea's industrialization
process retained continuity despite years of
raging political battles in the halls of
government and out on the streets. Mexico
never developed a policy directed at the
acquisition of higher-tech knowledge from
the TNCs located on its soil. What policies
did emerge in later years tended to focus on
extracting revenue rather than knowledge
from these firms.
Offshoring and outsourcing can be a
"win-win" rather than a "win-lose" outcome
for the industrialized and developing nation
if comparative rather than competitive
advantages are the objective.
Mexico and South Korea provided
manufacturing platforms and human resources
in production-sharing processes that enabled
both countries to engage in the early
industrialization stage of product assembly.
However, while South Korea set out to learn
all aspects of manufacturing business that
would carry it beyond product assembly,
Mexico did not.
Unless an LDC invests substantial funds in
R&D initiatives, that nation will not move
up the development curve.
Mexico invests very little of its own
resources on R&D activities in the false
belief that R&D expenditures by the TNCs
substitute for its own lack of funding.
South Korea, on the other hand, moved beyond
assembling the products of foreign nations
by investing heavily in the R&D necessary to
design and develop its own products.
Technology transfer and technology
relocation are not the same.
While South Korea was careful to establish
relationships with TNCs (joint ventures,
licensing, collaborative research, etc.) to
ensure it could acquire relevant
technologies for its own use, Mexico tended
to believe that when a higher-tech TNC
established a manufacturing plant inside its
borders, technology transfers had taken
place.
When TNCs establish the proper
organizational structures, LDC firms can be
trained to manage
and operate manufacturing plants effectively
and efficiently.
In Mexico, once the TNCs put into place the
organizational procedures and production
processes, the Mexican personnel, form
senior management to operatives on the
factory floor, were quite capable of running
the manufacturing plants effectively and
efficiently.
An important role of governments is to
support the emergence of start-up firms
based on newly acquired industrial
technologies and the experience of skilled
managers and workers.
The South Korea government promoted domestic
startups by facilitating the availability of
capital and finding markets for their
products. The Mexican government routinely
imposed financial and bureaucratic barriers
that deterred the efforts of new domestic
firms seeking to develop their own
manufacturing platforms.
Less developed countries need a type of
broker to arrange for collaborative
knowledge development and sharing activities
between universities and TNC personnel.
In Korea the government often arranged for
and provided incentives, such as funding or
advanced training to promote collaborative
R&D projects between foreign industries and
local universities. In Mexico long-standing
suspicions about the motives of foreign
companies on its soil have significantly
reduced the spirit of collaboration between
university personnel and foreign industry.
As an LDC adopts a new (and hopefully
realistic) plan for advancing
industrialization, a
corresponding plan in support of the reform
needs to be adopted by the educational
system.
In 2000, the South Korean government
announced its goal of turning the nation
into an "advanced knowledge-based economy".
Shortly thereafter the Ministry of Education
came forth with its supporting
"Comprehensive plan for the Information Age
in Education".
Education is not synonymous with schooling.
Unlike the conventional view that education
means schooling, South Korea equated
education with knowledge transfer form
higher-tech, foreign industrial sources in
conjunction with schooling. Consequently,
targeted, industrial knowledge transfer from
TNCs was integrated with target schooling
reforms as part of the nation's successful
development strategy.
Assigning a high priority to government
spending on schooling does not necessarily
advance the nation far up the development
curve.
Since the 1980s Mexico's public expenditures
on schooling as a percent of total public
expenditures has been higher that South
Korea's and almost the highest in the world.
However, when combining determination and
private spending by Korean families along
whit publics spending and
government-targeted schooling reforms, the
result has been the availability of resource
to produce one of the highest quality,
technology-oriented school systems in the
world.
Accelerated industrialization cannot take
place if only the wealthy participate.
In South Korea, almost all students (rich or
poor, rural or urban) complete secondary
school with an academic or
vocational/technical skill. In Mexico, less
than half of secondary school-age students
graduate with most of them wealthier
families and studying non-technical
subjects.
The educational budget must support real
growth in the current and capital
expenditures.
South Korea provides sufficient funding to
expand its instructional personnel and
innovative programs as well as construct new
facilities. In Mexico, given the rapid rate
of population growth and the low level of
tax collection the educational system can do
little more than pay its teachers.
Educational investments in support of
industrialization require thoughtful
balances in type and amounts of human and
material resources.
Unlike South Korea, Mexico has
systematically under funded elementary and
secondary schools in favor of tertiary
education. This funding pattern results in a
hidden subsidy for the wealthy classes as
well as produces far fewer technically
skilled workers than necessary to meet the
nation's industrialization needs.
Educational and vocational/ technical
training programs must be well located and
sufficiently flexible to meet the human
resource needs of TNCs.
When the tertiary educational systems in
Mexico were unwilling and/or unable to
respond to the technical skill-needs of TNCs,
an entirely new, two-year junior college
system was developed with campuses
strategically placed where they could do the
most good to support industrial needs. South
Korea did the same.
Academic program flexibility through
decentralization is more appropriate for the
educational needs of industrialization than
an educational institution directed by a
centralized command and control system.
Although South Korea and Mexico established
decentralization goals, neither were
successful in transferring significant
degrees of policy formation and
decision-making from national to sub
national levels of their educational
systems. People with power are reluctant to
give up.
Trained personnel must precede rather than
follow upgraded industrialization processes.
A critical mass of students in targeted
technical/vocational roles is necessary to
advance accelerated development that is
rooted in specific types of industries, such
as electronics or agribusiness. The Korean
government anticipated in advance the
workforce-needs (in number and content) of
the domestic industries it is targeting for
rapid development and made serious efforts
to make ready the necessary personnel.
In short, what Mexico has done quite well is
upgrade the content and quality of its
technical training programs, particularly
through its relatively new, two-year
technological university system. What it has
not done so well is pointed out by a Mexican
business publication. The Mexican programs
have not fostered or encouraged R&D
activities, technical "incubators"
"scientific and technological pioneering
centers", or the creation of venture capital
to facilitate the creation of technological
enterprises. In South Korea, however, the
decades-long aggressive pursuit of foreign
industrial knowledge has led to an abundance
of all those listed activities that were not
energetically pursued in Mexico.
Finally, an old story can be used to sum up
the author's conclusion about why these two
countries developed so differently. "Give
someone a fish, and he eats for a day. Teach
someone to fish and he eats for a lifetime."
Since the 1960s, if the foreign offshored
industries were the potential teachers,
South Korea took the lessons and Mexico took
the fish.
By Mark Hanson
Mark Hanson is a Fullbright Scholar and
Professor of Education and Management at the
University of California, Riverside. He is
the author of 'Economic Development,
Education and Transnational Corporations", a
book published by Rout/edge of New York, NY
as part of its series "Rout/edge Studies in
Deve/opment Economics". The above are
excerpts from Mark Hanson's book.
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