Energy and technology policy and Alexander Gerschenkron

 In college, the first upper level political science course I took was about "political development" of nations and one of the papers we read was by Alexander Gerschenkron.  

About "the economic advantages of backwardness" it made the point that new entrants to markets had an advantage in not being wedded to legacy technologies.  Instead, they could adopt the newest technology, which typically came with greater outputs and lower costs.  From "Project 2001: Significant Works in Economic History: Economic Backwardness in Historical Perspective": 

The central notion is the positive role of relative economic backwardness in inducing systematic substitution for supposed prerequisites for industrial growth. State intervention could, and did, compensate for the inadequate supplies of capital, skilled labor, entrepreneurship and technological capacity encountered in follower countries seeking to modernize. England, the locus of the Industrial Revolution, could advance with free market guidance along the lines of Adam Smith. France, beginning later, would need greater intervention to compensate for its limitations. In Germany, the key innovation would be the formation of large banks to provide access to needed capital for industrialization, even as greater Russian backwardness required a larger and more direct state compensatory role.

This is still relevant "today."  Think about electric versus gasoline fueled cars, or coal power versus natural gas, or the impact of electric vehicles on gasoline consumption, a 100 year old automaker not wanting to junk their investment in internal combustion engines, an "oil" company being reticent about investment in alternative fuels, etc.

While I think he screwed up the company in many ways, Jack Welch of GE said that he only wanted to be in sectors where GE was #1 or #2.  That's why they sold off so many businesses that had been signature to the company, like appliances or light bulbs.  Those businesses had become commoditized and GE didn't really provide any competitive advantage or unique selling proposition in those fields.

Perhaps a better example is Corning, the glass products company that became well known for making housewares.  

In 1998 they sold off that division ("Corning to Sell Housewares Unit To KKR's Borden for $583 Million," Wall Street Journal), and refocused their attention to complex glass products, such as large sheets of glass suitable for large screen televisions or smartphone screens ("Apple invests $250 million in Corning for future iPhone glass research," c/net).

... and glass vials for pharmaceutical uses.  The company is the primary producer of the glass vials needed for the mRNA based coronavirus vaccine ("Covid-19 Vaccines Could Depend on the Strength of This Vial," WSJ).

A focus on "competitive advantage" and "core competencies" is a way for firms to not be lulled by large and legacy investments in technology and manufacturing practices.  That's why Corning sold off their housewares division, or GE its light bulbs.

But it's difficult to make hard choices.  And people wedded to legacy, like Corningware, aren't usually well positioned to make such difficult decisions.

The same is true of nations.

I was reading something that said that US politics, in particular Republican politics, and how it is focusing on privileging existing investments in fossil fuels and related technologies ("Trump administration to auction oil drilling rights in all federal lands of ANWR coastal plain," KTOO-radio/NPR; "Ohio bill would ban new large solar and wind projects for up to three years," Energy News Network, "As coal taxes decline, Republicans eye renewables," Billings Gazette) hurts the long term economic competitiveness of the US vis a vis China and other countries, which are heavily investing in alternative fuels technologies.

Although there is no question that changes in technologies have massive impacts on communities reliant on particular industries for jobs and tax revenue. From the Billings Gazette article:

Citing a need to “level the playing field” on energy taxes, Montana’s majority Republican Legislature will consider raising taxes on wind and solar developments as the coal industry struggles.  

The tax increase on renewables isn’t likely to replace all of the revenue lost to coal’s decline, but it would help, said state Sen. Duane Ankney, a Republican from Colstrip, home to a large, but struggling, coal-fired power plant and coal mine. 

“I see it as a backfill for a lot of failed revenue,” Ankney said. “It’s no more than any other energy pays. It’s not a special high tax for renewables, it’s comparable to any other energy tax except for the severance tax.” 

The plan is to eliminate especially low property tax terms that were created to encourage renewable energy projects more than 15 years ago. Now two decades in, renewable energy developments aren’t new, Ankney said. There’s no need for added incentive to develop renewable energy projects in Montana. 

Tax increases on renewables were outlined in a list of Montana House Republican priorities published this fall. Included on the list was a $1 per megawatt hour tax on renewable energy, that observers say would likely make Montana renewable energy uncompetitive for sale out of state.

The advantage China has, not only in its much larger market than the United States, is that it is less wedded to older technologies, even if its political environment is still marked by a form of cronyism similar to that of "crony capitalism" in the US.