I get blank stares when I tell students that the situation in the US is not all it’s cracked up to be. Saying that our Gini index is 41 compared to Vietnam’s 35 (down from 39 a few years ago) doesn’t do the trick, nor does the fact that one in 100 people in the US are in prison, and that the police shot and killed over 700 people last year. Their police don’t have guns.

Here’s a different way to explain it.

This comes from a document put out in August 2015 by the UN Industrial Development Organization (UNIDO) Country Office in Vietnam: Economic Zones in the ASEAN: Industrial Parks, Special Economic Zones, Eco-Industrial Parks, Innovation Districts as Strategies for Industrial Development.

 

They present five different kinds of economic zones as strategies for development and argue that picking the right strategy depends on understanding the stage of development of the country or region. The category “technology park” is left out of the title. The following is paraphrased from the first chapter.

The Industrial Park is for the lowest-developed country or region. It’s simply a tract of land broken up into plots, probably with water and electricity or other services, for the use of industrialists.

Special Economic Zones are areas where there are special laws, tariffs, quotas or duties imposed on (permitted for) the industries that are situated there.

In an Eco-Industrial park, businesses cooperate together to do as little environmental harm as possible. This is a US EPA definition.

A Technology Park “manages flows of information among universities, R&D institutions, markets” and provides high-quality spaces as well as value added. Likely to be located near a university or in a city.

Innovation District – an urban Technology Park. 22@Barcelona is given as an example. The neighborhood around MIT in Cambridge MA would be an example.

Someone named M.E. Porter wrote an article in the Harvard Business Review [Porter, M. E. (1990). The Competitive Advantage of Nations. Harvard Business Review, 68(2), 73-93] that this report quotes repeatedly. I agree that his categories are worth thinking about, so I’ll summarize.

On page 14 they quote him saying that there are four stages of national   competitive development, and that choosing the correct strategy will depend on matching it with the right stage of development. The first three stages are steps in successive upgrading of a nation’s economy and will “normally be associated with progressively rising economic prosperity” (p. 14). The forth stage, they say, is one of decline. That’s us. The basis for each is:

Stage 1: factor-driven. Depends on what kinds of raw inputs there are available: resources, energy, minerals, agriculture, low-cost labor. What factors are there on the ground now? This would be a stage of development where you would expect to find an industrial park. The investors would build the plant, bring materials designed elsewhere (for assembly, for example) and train the workers. The big capital investment is going on elsewhere.

Stage 2: investment-driven. The government is able and willing to build infrastructure and create education systems to attract investment long-term. Moving to this stage depends on the creation of business-friendly practices, growing an educated workforce, protection of contracts, access to capital, banking systems. Vietnam is right now moving from stage 1 to stage 2.

A comment here:

“Porter (1990) has noted that the investment-driven model requires a national consensus that favors investment and long-term economic growth over the current consumption and income distribution. The competitive advantage of the nation comes from the efficient production of standard products and services” (1990, 14)

Can you move to stage 2 without taking care of income distribution? He’s writing in 1990, right after the fall of the Soviet Union and at the very beginning of market globalization. A lot has happened since then. The question for Vietnam is, does long-term economic growth have to take priority over current consumption and income distribution? Is it really “required”, as Porter said in 1990, that you let investment come in and immiserate the workforce? In China, the answer is clearly yes. But does it have to be that way? I don’t think so. Here’s what the debate in Vietnam over raising the minimum wage is about.

3rd Stage: Innovation Driven. We can look back at Japan in the 1960s’ and 1970’s and remember what it was like to watch another country go from making what we thought of as low-quality junk to just about wiping out our automobile industry. Same with Mexico, after NAFTA, when only Ross Perot and Harley Shaiken saw that Mexican factory workers could build cars just as fancy and hi-tech as Detroit, along with everything else. So at some point in its economic development, a country ceases to just produce things that are designed and invented elsewhere, and starts inventing them and manufacturing them itself.

4th State. This stage is wealth-driven. Now we are looking at the US. The country no longer innovates, they mainly seek to preserve the wealth that they have. How true is this of the US? Well, for most people, the standard of living has gone down and wages have gone down over the last 45 years, since about 1975. The big money comes from the stock market and is blowing in the winds of speculation. I think the US is a wealth-drive nation, and to that extent, is actually in decline. When you look at our infrastructure, the punishment our educational systems are taking, our battles over a $15 an hour minimum wage, you can see it.

This shapes the way I talk about the comparison between the US and Vietnam in my classes. I know I often sound like a sour pickle, talking about things that are not great in the US. The cost of tuition (unaffordable) and obesity, which comes up when we talk about Vietnamese food, are other examples. I’m surprised that none of our students have asked, “Then why are you here? Why aren’t you back there doing something about it?”

Just now I was collecting photos from my study of the not-to-be-named power plant, to tell the story of workers pushing to boost the budget for infrastructure repair. The photos show an old, old facility – built in 1949 and fueled by something that should be outlawed. But the struggle was still the right thing and it was successful.