Chapter 7 Conclusion
"Why do some social groups, economic institutions, and nations advance and prosper? This subject has facilitated and consumed the attention of writers, companies, and governments for as long as there have been social, economic and political units. In fields as diverse as anthropology, history, sociology, economics, and political science, there have been persistent efforts to understand the forces that explain the questions presented by the progress of some entities and the decline of others." (Porter, 1990: xi)
The nation's advancement or prosperity is not transient. Even once developed, nothing promises the continuous development or remaining in DC. On the other hand, there is wide range of disparity among LDCs, therefore the division between DCs and LDCs is not realistic. 133 countries line up between the gap from the lowest GNP per person of Mozambique to the highest GNP per person of Switzerland. In fact, some South American countries can be said as DCs comparing with some African countries but at the same time they are LDCs comparing with Japan or U.S.A. Thus, practically, all of country has same logic to develop its industrial structure. The generalised standpoint of Porter can be justified in this respect.
We have started by noting the transition of the central question related to development. The chapter 2 confirmed that the main argument is changing from "government failure or market failure?" to "how to combine government and market?" Then, the chapter found that there arises coordination problem throughout the industrialisation process. It emphasised that the coordination problems need to be solved by either private or government coordination capability. Then, it followed that if the private sector does not have sufficient ability, the government is justified to complement the ability.
Chapter 3 has begun by the discussion of the essence of industrialisation. Then, it showed the argument of Schumpeter's "new combination" as the innovation that complicates and improves the industrial structure. Continuously, it explained the system throughout the innovation process. At first, market competition pressure generates innovation. The pressure is accelerated by "profit prospect". The mutual stimulation between market competition and enterprise's innovative activity is activated by enterprise side, because markets are inanimate objects. Therefore, incentive toward the competition activated by profit prospect is significant. The profit prospect can be divided into two groups: new technology and new market. The chapter concludes that the elimination of coordination problems related to both prospects is essential in order to achieve effective industrialisation.
Reflecting to the conclusion of chapter 3, chapter 4 argued that some concrete policies to reduce uncertainty come from native coordination problem. Four points were introduced as important strategies to activate incentive: ①To generate information,② to replete information network and accelerate the flow, ③ to establish industry standard, and ④ to administrate technology transference Especially, in some cases, free trade market may cause undesirable result according to the industrial characters
Based on the idea that new market/segment prospect promotes or activates inventive in order to realise the possibility, we discussed the other profit prospect. Especially attention was paid to the point that the new market does not need to be developing, appearing or foreign market. The meaning of "newness" does not necessarily mean absolute newness. The point is that an enterprise newly recognises any market as profitable. Therefore, to indicate the secured market for indigenous enterprises means that "there is new profit prospect". The reason why Japan has been developed by only ISI is found the large potential domestic market. In other words, large profit prospect has been secured for indigenous enterprises, to activate their innovative activities. In particular, large minimum running scale industries like automobile, heavy chemical or consumer durable could enjoy the policy effectively. Thus, the characters of industrial structure or industrial technologies influence the desirable contents. Ignoring those differences and generalising all of characters must lead a failing policy.
Thus, the dissertation has emphasised the role of active government policy, however, there is a strong objection against government intervention. Chapter 6 has tried to counter those arguments. Firstly, it differentiated a contingent rents that does not make inefficiency from policy induced rents that tend to lead rent seeking behaviour. The contingent rent implies a competition to the awards, therefore it can avoid rent seeking behaviour. On the other hand, it is true that imperfect information issue captures any government policy, but the necessary level of information depends on the coordination problem. Therefore, if the coordination problem shows clear structure, even low state capability can be active to the problem. Absolute state capability is not required but relatively high capability against the problem is enough. Furthermore, the significant point to be noted is that the contingent rents can create/activate the competition among the domestic competitors artificially. It means that government rents may upgrade domestic market keener than the world market.
This dissertation has treated a wide range of issues. However, it has an important assertion all the way through. That is, the kernel of industrialisation is to activate entrepreneurship, and the government can activate the entrepreneurship. More importantly, only the government can create/activate competition to success, while any policy without competition results in failure.
Still now, the World Bank or IMF influenced by neoclassical school tends to avert from government activism, but the most point to be noticed is not government activism but "non-competitive statement". Certainly the argument that the competition is significant is found at neoclassical school as well, but the mistake is caused from the idea that "native market competition is perfect", though native coordination problem is universal in fact. The question to be asked here is whether there is effective competition should be asked. If there is no competition, or undesirable competition, it needs to be coordinated. Thus, government intervention or artificial protection do not always "distort" the competition, but those may "create", "reform" or "reinforce" to desirable style, in some cases.
On the other hand, development state view has not succeeded in distinguishing "successful intervention" and "failing intervention" with rationalised background. It is true that the East Asian Miracle could not be achieved without government intervention, but we can not generalise the role of government, because there are many undesirable result of government intervention in South America and African countries with strong government activism. Development state view is required to answer the questions what is indispensable kernel within the successful intervention, and what is lacked within a failing policy.
Thus, this dissertation has reached to a new question: how to find the coordination problem? It is of less difficulty to find coordination problem after the fact than before the fact. However, if any study finds some rules, it will help industrialisation as well as any other effective economic activity. At the same time, it will give a useful suggestion to the policy makers of both DCs and LDCs.
