The problem of technology transfer in the Third World and in socialist states
A comment on Robert Linhart’s political economy of technology transfer
My attention was recently drawn to the fascinating writings of French critical sociologist and political economist Robert Linhart, and especially an essay by him written in 1977 with the title “‘Technology transfer’ and its Contradictions: Some Aspects of Algerian Industrialization.” This essay in particular drew my attention because technology transfer is the process I studied in my book, Globalization Under and After Socialism. I was fascinated to see the problem discussed by Linhart in the context of Algerian industrialization.
Technology transfer became a catchphrase in the 1970s as developing countries moved towards policies of industrial upgrade. It involved policies of the wholesale import of Western technology by developing states, usually in the form of “turnkey” factories and new machinery that were intended to facilitate and speed up the process of industrialization. Linhart argues in this essay that in reality technology transfer led to an increase in the power of technical and managerial elites and the weakening of workers’ movements or of the spirit of social emancipation in Algeria. He argues that technology transfer exacerbated the “extroversion” of Algerian industry and increased dependence on Western transnational firms, as well as empowered technical and managerial elites who (as he observed in 1977) decry the “bureaucratization” of state economic management and demand greater liberalization especially in the area of foreign trade.
In my book, I studied technology transfer in the socialist states of Eastern Europe during the Cold War. I was struck by how similar the problems Linhart observed in Algeria in the 1970s were with those in the socialist countries, and how the process led to similar dynamics. In the socialist states, beginning in the 1970s economic policy shifted towards the importation of Western technology (typically in the wholesale form of “turnkey” plants or large technical assemblages) which, in the view of economic planners, would modernize and expand output. This increase in productivity would also (in the eyes of planners) make socialist states competitive in world markets. As I argue in the book, technology transfer was also facilitated by the expansion of access by socialist states to Western finance. Since imports of technology and other producer goods had to be paid for in hard currencies, reliance by socialist states on private borrowing grew exponentially through the 1970s. This contributed to the debt crisis many socialist states suffered in the 1980s.
Linhart’s essay and my book demonstrate how technology transfer, while bringing along with it great potential for economic development, can also be accompanied by corrosive effects on the social fabric of a country and on the independence of its workers and its institutions. It is an insight that is particularly relevant to the socialist states. All the issues that Linhart documents – the domestic preference for large facilities (esp. steelworks), difficulties in procuring raw materials from world markets, bottlenecks (partly infrastructural, but mostly related to reliance on Western suppliers and freight companies) in transporting goods, the mismatch between imported technology and the availability of local technical skill, are also found in the socialist economies.
My “discovery” of Linhart’s sharp analysis of the political economy of technology transfer is inspiring me to revisit an idea that I had outlined some time ago but did not pursue. In particular, my research brought attention to an important aspect of economic dynamics in the socialist countries, namely their insertion into the world market. And while much literature has focused on the internal inefficiencies of the socialist system (e.g., as described in the well known work of the late Janos Kornai), it seems that less attention has been focused on how internal sociopolitical tensions generated a push towards “extroversion” that exacerbated contradictions in the economic structure.
For example, I highlight an interesting data point in the book. During the 1980s, the period often described as a period of crisis for the socialist economies, was in fact a period of growing industrial output. Much contemporary discourse sees the demise of socialist economies to result from their internal inefficiencies. In my alternative reading, it is more likely that the economic crisis of the 1980s was not the consequence of accumulated domestic inefficiencies, but of rampant external pressures. This came in two forms – both the constraints of the capitalist world market, as well as the financial pressures of external debt which added pressures towards expanding exports in order to secure hard currency. In the states of Central and Eastern Europe, the squeeze also came from the Soviet Union, the traditional supplier of cheap commodities. Realizing that profits could be made by exporting commodities to world markets (and to service its own hard currency needs), the Soviet Union began imposing limits and raising export prices in ways that made the procurement of basic commodities more difficult for countries of the socialist bloc.
In conclusion, the insights furnished by Linhart’s essay complement the findings of my book by demonstrating how technology transfer was a double-edged sword for industrializing countries of the Third World and the socialist bloc. In some instances it led to increased economic productivity and modernization, but it also had corrosive effects, as it exacerbated external dependence. As seen in the socialist countries of Eastern Europe, it also led to unsustainable levels of external debt. Technology transfer may offer an important key to explaining the troubled fate of industrialization in the Third World, and in the case of the socialist economies may also explain how internationalization opened the way to the economic system’s demise.
