High speed rail and green technology as examples of the Gerschenkron thesis

My first upper level political science course in college was on "political development and dependence." One of the articles we had to read was "Economic Backwardness in Historical Perspective" by Alexander Gerschenkron. According to the blog entry about the book's first chapter:

Many of the characteristics of countries that move suffering from “economic backwardness” to development (should probably be “economic forwardness”) can be mapped following a similar path. However, while these developments are similar, they are not altogether the same. Thus, with the advent of new technologies and advancements in economic ideology, the developments of these less well-off countries can change.

Basically the point of the argument is simple. Developing countries have an advantage compared to developed companies as they can adopt the latest technologies, rather than worry about all the sunk cost and investment in plant and production for technology in use, technology that might otherwise be junked in favor of advances.

So an advantage that countries like Spain ("Spain's Bullet Train Changes Nation -- and Fast" from the Wall Street Journal) or China ("China Sees Growth Engine in a Web of Fast Trains" from the New York Times) have with regard to the development of transportation infrastructure have compared to the U.S. is that because they hadn't developed to the same level of automobile-centricity and airplane-centricity as has the U.S., instead they can focus on deploying the most efficient technologies, in this case, high speed rail.

It's the same for green technology. Newspaper columnists like Bob Herbert ("Watching China Run" from the New York Times) lament that the U.S. is being overtaken by China in terms of the development of green infrastructure and technology. From the article:

China also has become the world’s largest manufacturer of solar panels and is pushing hard on other clean energy advances. As Mr. Bradsher wrote: “These efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China.” ...

The conference that I attended in Palo Alto spotlighted the need to move to a low-carbon economy in the U.S. and exemplified some of the resources available to make it happen. It was sponsored by the Brookings Institution and Lazard, the investment banking advisory firm. The participants included the leaders of — and major investors in — companies that are making great strides in the alternative energy industry. But much of their business is done overseas because right now in America’s wacky, dysfunctional public sector there is no clear vision of a viable clean-energy economy, and, thus, no clue about how to get there.

The network of world-class universities and advanced research institutions in the U.S. is by far the most impressive in the world: think Harvard and Stanford and Berkeley and M.I.T. and on and on. If you add to that the venture capital community in the U.S. with its vast experience and the willingness of investors to take risks, and the sheer entrepreneurial talent of the American business community, you end up with an array of resources fully capable of moving the U.S. into a low-carbon, high-growth and extraordinarily productive economy that would be the envy of the world.

But for that to happen — as Bruce Katz, a Brookings executive who was one of the organizers of the conference, pointed out — America’s corporate, civic and political leaders will have to “articulate what’s really at stake here.”

And what’s at stake is the future of the American economy. The low-carbon era is coming. We can be dragged into that newer, greener world by leading countries like China; or we can take up the challenge and become the world’s leader ourselves.

It's another example of the Gerschenkron thesis. So much has been invested in current technologies that it is difficult to get the present players to change and deploy new and expensive technologies. And the barriers of entry into many of the industries (such as utility power generation, transmission and distribution) not to mention the high cost of developing new technologies means that initially the cost of a new production plant based on new technology can be significantly higher than a comparable plant using old technology (it has to do with "the learning curve" as a microeconomic concept) makes it more difficult to deploy advances in extant economies.