Table Of ContentThe Rise of “The Rest”:
Challenges to the West from
Late-Industrializing
Economies
ALICE H. AMSDEN
OXFORD UNIVERSITY PRESS
The Rise of ‘‘The Rest’’
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THE RISE OF ‘‘THE REST’’
Challenges to the West from
Late-Industrializing Economies
ALICE H. AMSDEN
1
3
Oxford NewYork
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Preface
Market behavior is premised on the idea of “scarcity”—it is the essence of
value. It is, therefore, curious that leadingtheoriesofeconomicdevelopment
treat knowledge as a free good. In the theory that underpinspolicyprescrip-
tions for free trade, knowledge falls like manna from heaven. In the “new”
growth theories of the 1980s, knowledge in a given country is the quintes-
sential “public” good whose use by one individual or firm does not diminish
its availabilityto others.
Yet knowledge is possibly the most precious of all assets. The knowledge
needed to compete in world markets, as distinct from factual information,
comprises unique skills, sui generis capabilities, novel product concepts and
idiosyncraticproductionsystems.Becauseknowledgeisproprietaryandfirm-
specific, it is anything but universally available and free. It is the key to
economic development, which involves a transformation from wealth-crea-
tioncenteredonprimaryproduct-basedassetstowealth-creationcenteredon
knowledge-basedassets.
This book examines how latecomers caught up in an environment in
which knowledge was difficult to access and constituted an entry barrier of
incumbent firms. It analyzes the general properties of “pure learning,” or
industrializing “late,” on the initial basis of technologies that were already
commercialized by firms from other countries. The market behaviorofecon-
omies that industrialized during the First and Second Industrial Revolutions
with the aid of radically new technologies,andthemarketbehaviorofecon-
omiesthatindustrializedintheabsenceofanyoriginalproductiontechniques
or products, turns out to be distinct, necessitating different policies, institu-
tions, and theories in order for economic developmentto succeed.
Many people helped with this study. I am grateful for suggestions, com-
mentsorotherformsofaidfromBjornBeckman,BrendaBlais,ConnieChang,
Wan-Wen Chu, Daniel Chudnovsky, Joel Clark, CarissaClimaco,JohnCoats-
worth,JoshCohen,DianeDavis,CarterEckert,ZdenekDrabek,Yoon-DaeEuh,
PeterEvans,GiovanniFederico,DuncanFoley,RobertoFrenkel,DavidFriend,
Pankaj Ghemawat, Stephen Haber, Maria Innes Barbero, Devesh Kapur,
Maryellen Kelley, Duncan Kincaid, Emine Kiray, Sanjaya Lall, ThomasTun-
ghaoLee,LizLeeds,ChoonHengLeong,YoungilLim,YeoLin,thelateQiwen
Lu,BrookeMalkin,DanielMalkin,SunilMani,StephenMarglin,SunshikMin,
Antonio Morales, Mauricio Mesquita Moreira, Juan Carlos Moreno, Mona
Mourshed, O Wonchol, PK O’Brien, Arturo O’Connell, Peter Perdue, Tom
Rawski, Jaime Ros, Bish Sanyal, John Schrag, Martin Schulz,HelenShapiro,
Ajit Singh, Andres Solimano, Edward Steinfeld, Frances Stewart, Akira Sue-
hira, Lance Taylor, Peter Temin, David Unger, Nick von Tunzelmann, and
Kathy Yuan.
Unpublished data were kindly provided to me by Nancy Birdsall, Jorge
MarioDeSotoRomero,R.Deininger,MasatakaFujita,AnwarulHoda,Angus
Maddison, and Wang Tzyy-po.
AgrantfromtheSocialScienceResearchCouncilmadeitpossibletowork
withJoanaAndradeandDulcieMonteiro-Filhaontheperformancestandards
set by BNDES, Brazil’s development bank, over a 25 year period. The first-
class research of these people is greatfully acknowledged. Information on
China’s automobile industry is based on a field trip to the First Auto Works,
BeijingJeepandfirsttierpartssuppliersinJune1997withDong-YiLiu,Tom
Rawski and Yu-Xin Zhang, sponsored by the Chinese AcademyofSocialSci-
ence. Yeong Bon Lee performed outstanding work in estimating the off-line
sources of finance for Japan’s and Korea’s bureaucracies reportedinChapter
6.WorkingwithHyun-DaeChoonapaperaboutKorea’stechnologypolicies
in the 1990s helpedme toformulatemyideasabouttechnologypolicymore
generally.
Jon Clark, my research assistant, deserves special thanks for being cool,
calm, clever and amusing.
For their stimulating ideas and extensive criticisms, I bow deeply to Dun-
can Kennedy, Lex Kelso, Michael Piore, Jose´ Anto´nio Ocampo, the late Ray-
mond Vernon, Alfred Chandler, Joel Mokyr, and Takashi Hikino.
Cambridge, Massachusetts A.H.A.
May 2000
vi Preface
Contents
1 IndustrializingLate 1
I. SINKING BEHIND, 1850–circa 1950
2 The Handloom Weavers’ Bones 31
3 Tribulationsof TechnologyTransfer 51
4 Three-ProngedInvestment 70
5 ManufacturingExperience Matters 99
II. SNEAKING AHEAD, circa 1950–
6 Speeding Up 125
7 Selective Seclusion 161
8 National Firm Leaders 190
III. SQUARING OFF, circa 1980–
9 From Mechanisms of Control to Mechanisms of
Resistance 251
10 “The Rest” Will Rise Again 284
Notes 295
References 335
Index 387
The Rise of ‘‘The Rest’’
1
Industrializing Late
A
fter World War II a handful of countries outside the North
Atlantic—‘‘the rest’’—rose to the ranks of world-class com-
petitors in a wide range of mid-technology industries. National incomes
soared at unprecedented rates and per capita incomes doubled within de-
cades. How industrialization among these prime latecomers succeeded, why
it followed a unique and novel path, and what some countries did to ad-
vance farther than others are the questions this book addresses. By the end
of the century, hubris from economic success had led ‘‘the rest’’ to over-
expand and fall into debt. But it gave every sign of continuing to nibble
away at the North Atlantic’s bread-and-butter manufacturing, just as the
North Atlantic’s multinational companies continued to jostle to enter its fi-
nancial markets, to sell to its consumers, and to buy the assets of its up-
and-coming firms. In 1965 ‘‘the rest’’ supplied less than one-twentieth
of world manufacturing output. By 1995 it supplied nearly one-fifth (see
table 1.1).
Amongbackwardcountriesagreatdividehadalreadyappearedbytheend
of World War II in the form of manufacturing experience. ‘‘The rest’’—com-
prisingChina,India,Indonesia,SouthKorea,Malaysia,Taiwan,andThailand
in Asia; Argentina, Brazil, Chile, and Mexico in Latin America; and Turkey
in the Middle East—had acquired enough manufacturing experience in the
production of silk, cotton textiles, foodstuffs, and light consumer goods to
moveintomid-technologyandlaterhigh-technologysectors.‘‘Theremainder,’’
which comprised countries that had been less exposed to modernfactorylife
in the prewar period, failed thereafter to achieve anywhere near‘‘therest’s’’
industrial diversification. The dividing line between the two sets of countries
wasnotabsolute,asnotedlater,butcountrieswithoutrobustmanufacturing
experience tended to fall further behind, and the developing world became
1
Description:The rise of ''the rest'' : challenges to the west from late-industrializing industrializing “late,” on the initial basis of technologies that were already.
