THE DISAPPEARANCE OF CLASSICAL COMPARATIVE ADVANTAGE :CUBA OF THE FUTURE
By Manuel Cereijo
The classicaltheory of comparative advantage was developed to explain the geographic location of industry in the 19th and 20th century. In this theory, location of production depended upon two factors-natural resource endowments and factor proportions., that is, the relative abundance of capital and labor. Those with good soil, climate, and rainfall specialize in agricultural production; those with oil supply oil.
Countries that were capital-rich made capital-intensive products, while countries that were labor-rich made labor-intensive products.In the 19th century and for most of the 20th century, the theory of comparative advantage explained what needed to be explained.
Consider the list of the twelve largest companies in the United States on January 1, 1900. Only one of these companies exist today-General Electric. Capitalism is a process of creative destruction whereby dynamic new small companies are continually replacing old large ones that have not been able to adjust to new conditions.
Natural resource endowments have fallen out of the competitive equation. Modern products simply use fewer natural resources. Bridges and cars have fewer tons of steel embedded in them, and devices such as the computer use almost no natural resources . Modern transportation costs have created a world where resources can be cheaply moved to wherever they are needed.
Today knowledge and skills now stand alone as the only source of comparative advantage. They have become the key ingredient in the location of economic activity. Being the low-cost producer is partly a matter of wages, but to a much greater extent it is a matter of becoming the masters of process technologies, having the skills and knowing how to put new things together, and the ability to manage the production processes.
To be masters of process technologies a successful business must be managed so that there is a seamless web among invention, design, manufacturing, sales, logistics, and services that competitors cannot match. The industries of the future have to be invented. They just don't exist. In the era ahead, countries have to make the investments in knowledge and skills that wil create a set of man-made brainpower industries that will allow their citizens to have high-wages and a high standard of living.
In an era of man-made brainpower industries, the global economy is a dynamic one always in transition. If a firm or country wants to stay at the leading edge of technology it must be a participant in the evolutionary progress of man-made brainpower industries so that it is in the right position to take advantage of the technical and economic jumps that occasionally arise.
Today, the ascendant nations and corporations are masters not of land and material resources but of ideas and technologies. The global network of telecommunications carries more valuable goods than all the world's supertankers.
Today, wealth comes not to the rulers of slave labor but to the liberators of human creativity, not to the conquerors of land but to the emancipators of mind.
The technological and industrial development in the transitional and stable democratic Cuba will be based in four critical factors:
1. Talent (people)
We will need to create business incubators, as an innovative approach to economic development. It will link public sector initiaves and private sector investments to spur economic growth and technological diversification. The primary driver of technology-based new business venture in Cuba will be neither the availability of funds nor the rate of technological advance. It will be the Cuban entrepreneur. The incubator will be a significant link between the entrepreneur and the commercialization of his product or service.
Hand with hand with incubation centers and industrial development is the manufacturing park. To assist in the economic development and reconstruction of Cuba, we need to promote the creation of manufacturing technology parks.
These parks will be composed of clusters of small, medium, and large manufacturing companies, located through out the country, and built by the private sector. A typical manufacturing park should be of approximately 150 Hectares. Some of the components of the parks must be: manufacturing companies, a hotel, a conference center, and amenities, such as restaurants, lounges, meeting rooms, etc.
The ideal situation will be that the smaller companies located in the park will act as suppliers of the larger ones. This way, the large ones will operate under "zero inventory", reducing production costs and making their products more competitive in the global economy. Industrial parks and incubation centers will will constitute the core of "regional development" in Cuba
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