1. as one good example of such

1.    Introduction

 

International
Political Economy plays a major role in the building of a formidable
developmental state. The concepts and experiences of developed/industrialized
states is used as a learning experience in paving ways to a better economic
state. As one of an MBA program activity, we are time to time assigned to read
through, understand and analyze works of great minds who came before us and
contributed a lot to the world. As part of the fulfillment of a course on
International Political Economy, we were given an assignment to choose from
three very important works by Alexander Gerschenkron, Ronald Rogowski and
Chuadhry and write a response paper. I took a special interest on the work of
Alexander Gerschenkron. I have read the paper, tried to understand it to the
best of my knowledge and react in my own way. In the next few sections of this
response paper you will find summary of what Gerschenkron wrote and my response
to his industrialization models in economically backward nations.

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2.    Summary
of Gerschenkron’s Model

 

Gerschenkron’s
paper in a nutshell illustrates that relative economic backwardness in late
developing or undeveloped nations as of the major catalyst for rapid
industrialization and eventual economic development that could arise from it.
Gerschenkron pointed out in his paper that the intervention or involvement of
the state (in case of Russia) and institutions (banks in Germany and to some
extent France) mainly contributed to systematically provision capital and
technological tools that are essentially needed to industrialize and modernize these
backward nations at the time. In his own words he said, “Differences in the
speed and character of industrial development were to a considerable extent the
result of application of institutional instruments for which there was a little
or no counterpart in an established industrial country”.

 

Ideally
he mentioned that backward nations have the opportunity to leapfrog technologically
to the level where developed or industrialized nations have reached and
eventually innovate more and more to sometimes surpass them. He said
“industrialization always seemed the more promising the greater the backlog of
technological innovations which the backward nation could take over from the
more advanced nation”. Germany has been presented as one good example of such
case where it has made significant technological advances in the steel industry
(Blast Furnaces) over England.

 

Gerschenkron
studied and analyzed the industrialization of Germany, Russia, France, Italy and
Austro-Hungry. He gave more emphasis to the storyline of the industrialization
of Germany and Russia. To assert his argument, he went at length and illustrated
the involvement of banks and state in the industrialization of these two
nations respectively. He indicated that the lack of access to capital can be
overcome with the establishment of banks and involvement of states. These
interventions were sources of rapid growth for the relatively backward nations.

 

His
work has mainly focused on the late 19th and early 20th
century Europe. He formulated an economic model for developmental states (third
world or states in severe backwardness) from the experiences of
industrialization of European Industrialized states in this period.

 

In
conclusion of summary of his work, I have found the following points as the
central ideas of Gerschenkron’s paper,

 

·        
Point Number I: For
a state in a stifling economic backwardness, I have understood that a tension evolves
from the effort applied to bring about economic development and the forces that
work against to keep it in stagnation. These frictions eventually lead to a
promising political and institutional reforms that create the platform for
innovations that fill the gaps required for stimulating development. These
conditions never existed while the state was still in economic backwardness.

 

·        
Point Number II: I
have captured in the paper another very important point which describes that
states in severe backwardness require greater level of intervention by the
state and/or institutions to initiate economic development. Greater level of
intervention means introduction of more capital and skilled labor to the
economy. The state’s intervention was mainly in the reduction of domestic consumption
of industrial products and accumulation of national capital mainly through exports
and savings.

 

·        
Point Number III: The
third point I have captured from his paper is the use of capital based instead
of labor based production mainly dependent on the import of advanced technology
and machinery than the use of domestic technology and local expertise in the
production of exportable goods instead of consumer goods for domestic market.

 

·        
Point Number IV: The
last point that I have learned from his paper is that the severe the
backwardness of the nation state, it is highly unlikely that the
industrialization or development of this nation state could come about from
agricultural industry.

3.    Objective
of Gerschenkron’s Model

 

I do
believe that his main objective in the economic model is that he has illustrated
that the story of European Industrialization in the 19th century can
offer helpful insights to current or present day problems of backward nations
in this century.

 

He
emphasized that specific preindustrial conditions or situations in backward
countries means it will be easier for governments in these nations to rapidly
industrialize with the introduction of institutional reforms that appreciate
the use of advanced technology and capital imported from already industrialized
nations. He opted to also conclude that the backwardness of the 3rd
world nations is not exclusively their problem rather they are equally the
problems of already advanced nations. Another huge lesson that he underlined is
policies of advanced nations towards the backward countries are unlikely to be
successful if they do not take into account the uniqueness of economic
backwardness. He conveyed a very important message saying “advanced nations
cannot simply ignore economic backwardness”, stating the failure of
industrialization of a nation can cause the whole world to pay the price of the
failure.

 

4.    My
Responses to Gerschenkron’s Model

 

I
would find myself on the wrong side if I simply choose to disagree or agree
with the work of a great and insightful person who made this very great
contribution to the political economy of the world. I am particularly delighted
to have read his work and widen the horizon of the knowledge I have on the
international political Economy. I believe his work has touched and transformed
the lives of many scholars and nations. His insight with regard to the
backwardness and industrialization is unprecedented in my view.

 

In
recent times, at least with my little knowledge of political economy of the
world, part or whole of his theory looks to have played an important role in
the industrialization and development of Asian countries. Especially, if we
take the case of China and the massive involvement of Chinese government in the
industrialization and production of goods for export. We can also take the case
of Singapore and its financial sectors involvement in its development.

 

Though
I could simply agree that his theory can be applied and bring nations out of
backwardness, I can see that it is also very difficult for nations in Africa,
South America and Asia to simply dive into industrialization without other
complimentary policies that could reinforce his central idea of state and banks
intervention.

 

In
today’s world, it is all clear that, the circumstances, dynamics of domestic and
international political systems and intricacies of international trade are
diverse and complicated than those in the late 19th and early 20th
century Europe. One could argue that today this model may not work merely on
the basis of international relations that nations have with their partners and
counterparts. It is also evident states involved in the building of a nation
through rapid industrialization have to face an all too different challenge
than that of the European experience. The preconditions that backwardness
brought up may not work in a similar fashion as they worked in the 19th
century Europe.

 

I would like to consider the case of my country Ethiopia in
the mirror of Gerschenkron’s model. Being one of the sub-Saharan undeveloped 3rd
world country, Ethiopia is in a relatively severe backwardness compared to
advanced nations. As severely backward as Ethiopia is today, the Ethiopian
government considers itself as the prime mover of growth and transformation of
the nation through industrialization. It is evident for any observer that the Ethiopian
government lacks a sustainable policy for industrial growth, vital industrial
labor/skills, a breadth of institutional capacity, capital and leadership that
Gerschenkron stressed will be used to spark its industrialization. His model
cannot totally apply to the case of Ethiopia because he has not given attention
to agricultural industry where 80% of Ethiopian population makes a living from.

5.    Conclusion

 

In conclusion, I have been able to learn a lot from the
logical explanations and experiences he has illustrated about the
industrialization of 19th century Europe specifically the industrialization of
nations like Germany and Russia. I also saw that his economic model still has a
very important value in today’s world economy. I have through extra readings
and research learned that his students have reinforced and in some cases
enhanced his work to a more relevant model which can address issues of economic
backwardness in some cases. Eventually, I believe his work contributes greatly
but not wholly to the industrialization of a developmental nation striving to
come out of economic backwardness in today’s world.

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