Do the Latin countries need more R&D?

That is the recipe of Jeffrey Sachs:

Latin American countries have not yet tried to foster a technological revolution, certainly not with the focus, skill, commitment, and financing that Asian countries have shown. Such a push could play a major role in jump-starting economic growth.

Such a policy would entail committing to a major increase in spending on research and development, as Asian developing countries have done. Latin American countries should aim to increase spending to around 2% of GNP (from 0.5% currently), partly through public support for laboratories and universities and partly through incentives for private-sector R&D. They should roll out the red carpet for high-tech multinational firms, just as Asia has done.

They should also increase their focus on scientific and technological training and encourage a higher proportion of students to go on to university education. Government stipends for tuition and for new and enlarged universities can play a big role, as can investment in computers and information technology in schools and communities.

My take:

I worry that this is putting the cart before the horse. Many of the public sector universities in the Latin countries are disasters. They are good places for left-wing politics, bad places to drive economic growth. Tech prowess has tended to come from the private sector and then the tuition-driven private institutions, not the subsidy-driven state universities. And Asian higher education did not play a major role in the Pacific successes, unless of course you are referring to MIT and Stanford.

Should the Latin countries be “home-breeding” their R&D? In other contexts economists insist that R&D is a public good. Why not borrow R&D from Europe and the United States and look elsewhere for comparative advantage? Process innovations might suffice, yet they typically arise from practice rather than from science in the narrower sense. Mexico is succeeding with this tactic. Furthermore process innovations, by their nature, are best implemented in decentralized fashion.

Most of all, the Asian technological revolution worked because the success stories made themselves relatively free of corruption. Effective technology arises from incentives, rather than from the mere desire to be technological. The Latin economies will grow faster once they can offer greater legality and predictability. The path here is slow but not impossible. Strong penalties against corruption, and non-tolerance of the idea, combined with higher public sector salaries, are moves in the right direction. But penalties alone do not suffice. Most of all a country needs a culture of trust, including trust in government, and for this there are no rapid solutions.


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