A Thought About Wealth and Technological Diversity

A number of economists have suggested that technological innovation is the route to wealth, or at least the route that has been taken by modern developed nations. My last posting suggested the converse -- that wealth might be a good surrogate indicator of technological innovativeness.

Subsistence economies are relatively simple. Subsistence farmers work long and hard to eke out a living from their land, and have little time to produce goods other than the bare necessities.

As economic productivity continues, the portion of income spent on necessities tends to decrease. There is only so much one can eat, so much clothing the average person cares to own. Even in an age of McMansions, there is only so much people are willing to allocate of their income and wealth to shelter.

Economic progress then means people will opt for leisure, or they will opt for new products. Thus the more an economy grows the more differentiated its portfolio of goods and services.

Economies have been getting bigger, but even in our age of globalization, I think most goods are produced and consumed within a limited geographic area. That area may now be North America rather than an individual state, or Europe rather than an individual European nation. But within the market area of a rich market, there is a huge and complex set of products produced and consumed.

Correspondingly, therefore, there is a huge and complex set of technologies involved in those products and their production. Moreover, as economists have pointed out, the continued economic growth of those regions depends on continued innovation in products and processes.

Economies rising from subsistence to greater affluence can be expected to follow to some degree the path previously taken by now affluent countries. They will seek a better, more varied diet for their people, education and health services to meet basic needs, etc. To some degree they are more likely to pick up product and production technologies that have already been used in richer countries.

They are more likely to focus inventive activities on adaptation of technologies to better meet their needs, and to deepening of technological capacities, as opposed to inventing totally new products and services -- although that too is possible.

In our globalizing world, developing nations may import technology with which to produce for export markets, taking advantage of their sources of cometitive advantage (raw materials, low cost labor, etc.).

They are unlikely to start from scratch to build a new and complex industry to satisfy a demand that has yet to be created.