Facing economic stagnation and limitations to sustain a continuous development process, with the increase in demand for food, energy, and materials, along with the requirements of the green transition, a major mission for the Latin American region is to steer the productive apparatus towards seizing new innovation opportunities, as stated by ECLAC.
ISSUE 127 | 2024
ENERGÍABolivia
Astrategy that views natural resources as a platform for the development of new technologies, innovation, and linkages must be a policy of innovation and productivity, understood in a broader sense, encompassing labor, capital, and energy and materials in terms of volume, as stated in the document Natural Resources and Sustainable Development by ECLAC, adding that traditional economic theory has justified investment and public promotion of innovation due to the existence of market failures, which imply that less than necessary is invested in science and innovation.
It argues that within this framework and in line with structuralism and neo-Schumpeterian literature, not all activities have the same potential to contribute to growth and development, asserting that economic activities based on new knowledge, which intensively use new technologies and are based on innovation, are more dynamic, generate higher incomes, externalities, and linkages.
THE STATE AND ITS NEW ROLE
“It is desirable, therefore, to incentivize a structural change towards these more dynamic activities. For example, it is not the same to specialize only in soy, soybean oil, and soybean meal as it is to develop and export seeds, specialized agricultural machinery, and software services,” it says while highlighting that with this objective, the State and policies must not only “assist” markets in increasing investments in new knowledge and innovations in general but must actively identify and support dynamic and strategic sectors and technologies for development and even invest in them.
It adds that the examples of leading countries like the United States, traditionally supporting their pharmaceutical, space, and military industries, and now the microelectronics and “green” industries; Europe also committed to strengthening environmental transition industries, and China financing the development of artificial intelligence and sustainable technologies, show the need for policies directed at specific sectors and areas.
The microelectronics and “green” industries, the one from Europe also committed to strengthening environmental transition industries, and the one from China financing the development of artificial intelligence and sustainable technologies, all demonstrate the need for policies aimed at specific sectors and areas.
Consider that this intelligent active intervention aimed at selected sectors must become the normal practice of the public sector and its relationship with the private sector as the information and knowledge society develops fully.
“With global challenges, the idea has also grown that from politics and the State, it is necessary to promote major systemic, technological, and social changes. The current economic system has led to the greatest market failure ever seen, the climate crisis; ‘the greatest market failure the world has ever seen’ (Stern, 2006). Radical transformations are needed, encompassing all dimensions involved in solving key problems (e.g., transportation, food provision, housing),” it emphasizes.
THE IDEA OF “MISSIONS”
It ensures that the idea of “missions” has helped move the policy discussion from ideas of market failures and the selection of specific sectors to the idea of problems requiring systemic changes, as well as coordination and integration among diverse actors and sectors, adding that within this perspective, the State must and can lead these systemic changes.
“The imperative is to build an institutional framework that promotes and facilitates joint work and coordination among diverse actors, even in the presence of strong tensions…”
“It must drive and direct the new, investing and taking risks alongside private entities, collaborating in creating new markets (…). At the same time, it is necessary to actively address, from policy, the resistance of those who oppose change,” it emphasizes.
It believes that in addressing these resistances, power and cultural issues are as important as market, technical, and cognitive ones. It points out that import substitution industrialization (ISI) was a great mission in Latin America, successfully mobilizing a set of policies aimed at addressing the problem of over-specialization in primary sectors, industrial backwardness, and poverty in the specific context of the time. “The effort included institutional changes, training by ILPES of thousands of public employees to manage various policies, and the decisive support of ECLAC, led by Raul Prebisch, the original promoter,” it says.
For this approach, the opportunity seized then was the maturity phase of Fordist revolution technologies, when the main producing companies faced productivity limits and market saturation.
STEERING THE PRODUCTION APPARATU
It underscores that in this new period, facing economic stagnation and limitations to sustain a continuous development process, with the increase in demand for food, energy, and materials, along with the requirements of the green transition, a major mission for the Latin American region is to steer the production apparatus towards seizing new innovation opportunities and transforming activities associated with natural resources towards sustainability. It notes that, however, the State, institutions, and policies that carry out this strategy cannot be the same as those developed and used during the ISI period or in the subsequent free market period.
For ECLAC, technological revolutions require institutional innovations to adapt to the new potential and be viable. The same goes for the specific direction selected to seize them.
EVERY REVOLUTION REQUIRES ADAPTATION
In this line, it ensures that each technological revolution has required adaptation in the socio-institutional framework to facilitate its optimal deployment and notes that this has occurred both nationally and globally. In fact, it says, it is these profound changes in policies and government structures that have led to successive “golden ages”: the Victorian boom, the Belle Époque, and the post-war boom in central countries.
“Likewise, the great advances of peripheral countries, such as South Korea, Taiwan, and Singapore, have been promoted and supported by institutional redesigns, and their success has depended largely on that framework, as well as on the specific opportunity they seize,” it argues and notes that to carry out the required redesign now, it is important to understand the nature and demands of the current opportunity.
Thus, it indicates that an important aspect of change that occurs with each revolution is the redefinition of territory by the type of transportation and communication infrastructure. It points out that the iron railways of the second revolution allowed the formation of national markets; the steel transcontinentals of the third, along with the transoceanic telegraph and steamers, led to the first globalization; the mass production of automobiles, of the fourth, by opening the use of the entire territory (in contrast to railway stations) allowed suburbanization and the return to the primacy of national economies managed with Keynesian approaches and international trade.
“The imperative is to build an institutional framework that promotes and facilitates joint work and coordination among diverse actors, even in the presence of strong tensions…”
It says that the transition from the mass production era to this fifth information era has involved the transition from internationalization to globalization, based on new infrastructures: the internet, containers, and renewable and varied electrical systems.
“But this, like in the first globalization, far from implying a reduction of the role of the national State, requires its strengthening to define and shape its participation in the global economy, as shown by all cases of development leaps since the eighties. Additionally, this new period of internet-based globalization also includes localization. The market homogenization imposed by mass production, including the repression of diverse identities within each nation, can be overcome with the flexibility of the digital era paradigm. The cases of Spain and the United Kingdom with the return of powers and the rescue of regional languages, as well as the empowerment of governments in major cities, are testimony to a new way of seeing territory and conceiving governance,” it emphasizes.
In this framework, it affirms that it is possible and necessary to find ways to efficiently manage a multilevel structure, where different strata, from supranational to the most local, have sufficient power and economic and human capital to reach agreements and act successfully with the participation of all involved.
“This is even more crucial in a development strategy that uses natural resources as its object, which necessarily requires recognition from the population occupying the territory in question,” it indicates.
COLLABORATIVE PROJECT
It points out that the mobilization towards cities was typical of industrialization concentrated in urban centers, stating that in the current period, however, it requires a different approach. It ensures that every agricultural or mining project must be turned into a collaborative local development project and that not only are there now better possibilities, but there is a need to do it that way, given the growing conflict.
For this approach, natural resources activities use common resources and generate multiple local challenges. It ensures that discontent and conflicts related to the environmental and social impacts of such activities have multiplied in recent years in Latin America (Bebbington and Bury, 2009; Jaskoski), citing disputes on issues such as land access, water use, pollution, waste, as well as environmental, health, and labor risks. It maintains that conflict limits the possibilities of implementing policies aimed at promoting investments and designing productive and technological policies. It also says it is increasingly affecting companies, adding that millions of investments are stalled by conflicts, specifying that tensions and disputes previously only local now globalize and affect both the reputation and global operations of large multinationals and access to financing.
Here it emphasizes that the so-called social license to operate has become one of the most important barriers to investment by companies.
“The transactional solutions applied in the past are not capturing the complexity of the new phenomena. The closed and hierarchical Fordist state and its centralized developmental institutions are seeing their actions and impact limited by the diffusion of the networked society and the competent and multilevel modern state (…). Local actors (suppliers and local communities) demand participation in processes, not only distributive but also decision-making regarding those common goods, and local governments need to have high competence to handle the new complexity,” it says.
CHANGES FOR RESOURCE GOVERNANCE
In this framework, it recognizes the urgency and opportunity for the design of new policy approaches that drive significant changes in governance practices and technologies, exploitation, and production of natural resources, which at the same time serve to address social and environmental challenges and steer sectors towards more sustainable trajectories. “It is necessary to rethink the institutions and policies necessary to seize the new technological opportunities associated with these resources and address the economic, social, and environmental challenges they generate,” it states.
It ensures that the new State must be more open, transparent, and with more decentralized and flexible institutions and that the old bureaucratic pyramids of large corporations have been turned into complex flexible networks. It adds that companies are recognizing the need to move from pragmatic and normative corporate responsibility models to so-called political models, where the key is to find new processes to involve citizenship.
Thus, it indicates that the State must move in the same direction, and governments will have to rethink their way of working, moving from top-down hierarchical models to models of deliberation, negotiation, and joint work at all levels and with all actors. In particular, it recommends rethinking the way of working with companies and civil society.
Likewise, it concludes by indicating that dynamic interdependencies must be generated between companies, regulators, and communities, recognizing the inherent tensions in the processes and working with them to drive changes rather than trying to deny or eliminate them. For this approach, the imperative is to build an institutional framework that promotes and facilitates joint work and coordination among diverse actors, even in the presence of strong tensions. It considers that this, instead of aiming to eliminate conflicts or “solve” them, should be able to use them to drive changes and provide guarantees of sustainability, not only environmental but also social.
…dynamic interdependencies must be generated among companies, regulators, and communities…”
