Driving economic growth: Lessons from Japanese and Indian approaches

M. Rokonuzzaman | Published: July 19, 2019 21:05:53 | Updated: July 25, 2019 21:22:20

Often economic growth sounds like a very complex issue to comment on or ponder about. In the simplest form, as Nobel laureate Paul M. Roomer suggested, "Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe." By adding new ideas of mixing ingredients in an improved manner, we can succeed in producing better quality food, even at less cost. When it comes to an economy, application of new ideas often succeeds in creating additional wealth, consequentially driving economic growth.

The question at this point usually is: from where should we get those ideas? To answer this, often two high contrast examples are cited: India's commitment to closing itself off and striving for self-sufficiency as opposed to Japan's commitment to acquiring foreign ideas and participating fully in world markets. That basically raises another vital question: should developing countries keep importing ideas like Japan? Or, should they invest in generating all their ideas by themselves like India?

It's being argued that the knowledge needed to provide citizens of the poorest countries with a vastly improved standard of living already exists in the advanced countries. If poor nations keep giving incentives to acquire ideas from the rest of the world, it can rapidly take advantage of the publicly-available information from across the world. Unfortunately, until and unless, those ideas are integrated into processes and products to generate profitable revenue in this globally connected competitive market economy, acquisition of those ideas do not lead to improvement in standard of living.

It's often argued that Japan succeeded in developing its industrial economy by acquiring foreign ideas and participating fully in world markets. But, often Japan's success in building an industrial economy by acquiring ideas is misinterpreted. In many cases, Japan took initial ideas from the West, primarily from the USA. But those primary ideas often did not make money for Japanese companies.  For example, Sony took the idea of digital imaging from Bell Labs. But that 8x8 imaging sensor of Bell Labs did not allow Sony to roll out a profitable digital camera business in 1970. Sony had to conduct research over 15 years to produce a pile of intellectual assets and finally succeed by releasing the first video camera in 1985. Through the sale of the product, Sony had enjoyed high revenues for a long time.

Similarly, American company Raytheon's invention--the microwave oven-- could not generate money initially following its release in 1947. It was very primitive, compared to today's standard. It was a 5-and-a-half feet tall machine, weighing over 759 pounds and had a cost of $5000. Moreover, it needed plumbing installation to cool the magnetron. Yes, the Japanese took this idea from the American. But they raced at refining the product with an aim to make it better. To make the first patent commercially successful, hundreds of additional patents were filed around the refined product. The development of a new air-cooled magnetron that no longer required a plumber, not only produced more reliable and lightweight ovens, but was also less expensive. The eventual breakthrough came with the invention of an efficient electron tube, developed in 1964 by the Japanese, which replaced older, bulkier tubes called magnetrons. In 1967, the first compact microwave oven, called the Radarange was introduced, retailing for $495, and cooked hamburgers in 35 seconds.

There are countless other examples. Yes, the Japanese took ideas from the West. But they took them at a very early stage. Irrespective of the greatness of those ideas, the Japanese could not make money by selling products around those ideas to the rest of the world. The journey of producing a flow of ideas began upon acquiring great ideas. They laboured at refining the great ideas and products making them better and more successful.

In absence of the capability of generating those additional ideas, developing countries cannot succeed to benefit from importing ideas from advanced countries.  Often such a lesson from Japan's success in building an advanced industrial economy is overlooked, and developing countries are wrongly advised.

On the other hand, India's apparent failure of building the advanced industrial economy by pursuing the policy of building own innovation capability is incorrectly interpreted. There is no denying that India failed to produce expected industrial success during the era of 1950-1980. On one hand, Indian scientists and engineers were following the linear model of innovation with the strategy of making a scientific discovery, which will lead to technology invention, and commercial innovation. But invariably, all technology inventions emerging in primitive form offer very little commercial innovation opportunity. 

In the absence of having a stronghold on the global defence market, India could not succeed at generating revenue from primitive technology invention at an early stage, consequentially failing to support commercial success later. On the other hand, Indian producers were mostly busy with replicating industrial products so that they can make a profit in a protected market. As the protected market was giving guaranteed profit, there was no urgency for improving their products and processes to offer better quality at decreasing cost. Often India's failure of developing an advanced industrial economy is cited by many famous economists and policymakers to advice developing countries: do not attempt to develop technology, just keep importing from the West.

It appears that both Japan and India offer good lessons in retrospect. Yes, great and useful ideas should be acquired from wherever they are available. But, those ideas should be acquired at the early stage of the technology and innovation life cycle. They should be improved further to succeed in generating profitable revenue by trading in the global market.

But, protection without the fear of suffering from the loss of profit and jobs do not lead to the urgency of innovation. Moreover, pursuing the linear model of innovation starting from scientific discovery leading to technology invention and commercial innovation does not appear to be suitable for developing countries either.

Instead, the focus should be on developing the local market of ideas. In that market, ideas will be acquired, adapted, and developed further, improving the quality and reducing the cost of that which is being produced now. Upon having some success, the focus should be on acquiring as well as generating great ideas at a very early stage, and to keep improving them further in creating new market opportunities. Building the capability of the local market for idea acquisition, generation, and advancement appears to be a key competence for developing countries in the quest for having better recipes that drive economic growth.  

M Rokonuzzaman PhD is an academic and researcher on technology, innovation and policy.


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