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2.2.5 The role of government

There has been a good deal of interest in the role of public policy in biotechnology. In some cases, such as the report by the U.S. Congress, Office of Technology Assessment (1984), this has resulted from a concern with issues of international competitiveness.

There are a number of good descriptive accounts of biotechnology policy in the United States, Japan, and Western Europe (for example, see U.S. Congress, Office of Technology Assessment, 1984; Sharp, 1985a,b, 1986; Davies, 1986; U.S. Department of Commerce 1985a,b; Lewis, 1984; Anderson, 1984; Tanaka, 1985; Fransman et al., forthcoming).

One of the most interesting points to emerge from this literature is the substantially different pattern of government intervention that exists in the biotechnology field in the different countries studied. For example, in the United States there is strong support for basic research and relatively little for applied generic research and applied research. [It has been noted that 'The United States, both in absolute dollar amounts and in relative terms, has the largest commitment to basic research in the biological sciences.... On the other hand, the U.S. Government's commitment to generic applied research (defined as research which bridges the gap between basic science done mostly in universities and applied, proprietary science done in industry) in biotechnology is relatively small' (U.S. Congress, Office of Technology Assessment, 1984). The report goes on to observe that in 'fiscal year 1983, the Federal Government spent $511 million on basic biotechnology research compared to $6.4 million on generic applied research in biotechnology'. On the other hand, 'The governments of Japan, the Federal Republic of Germany, and the United Kingdom fund a significant amount of generic applied science in biotechnology' (p.14)]. In the United States there is little attempt to direct government research funding into areas selected for their strategic and competitive value. Furthermore, little or no attempt is made by government to influence interfirm interactions in the area of biotechnology.

The pattern of government policy in biotechnology is fundamentally different in Japan, where the biotechnology system is characterized by a number of distinctive features, including (1) the relative absence of national new biotechnology firms; (2) the weakness of Japanese university research in frontier basic research in the life sciences relative to universities in other advanced Western countries; and (3) the evolution of government-initiated, innovative forms of organization for the acquisition, assimilation, generation, and diffusion of new generic biotechnologies. These organizational innovations include the biotechnology component of the Next Generation Basic Technologies Development Programme initiated by the Ministry of International Trade and Industry in 1981 and the Protein Engineering Research Institute (PERI) supported by the Japan Key Technologies Center, under the control of MITI and the Ministry of Post and Telecommunications (MPT). These features of the Japanese system are analysed in Fransman et al. (forthcoming).

The United Kingdom has displayed a pattern of government intervention somewhat intermediate between those of the United States and Japan. Although there is no 'grand strategy' for biotechnology in Britain, there are nonetheless some similarities with the Japanese case. In 1980, for example, a year before the MITI biotechnology programme was launched, the Spinks report (ACARD, 1980) proposed a strong government-led programme in biotechnology. Although the response was not as strong as might have been envisaged in the report, attempts were nonetheless made by various government agencies to encourage generic applied and applied research through interfirm collaboration and cooperation with universities. The Department of Trade and Industry, which set up a specialist biotechnology unit in the Department, has established a number of research 'clubs' which bring firms together for collaborative research. [In fact, it was after these clubs, first introduced into Britain at the end of the First World War, that MITI modelled its research associations-see Sigurdson (1986), p. 6]. Similarly, the Science and Engineering Research Council, which finances basic research, has identified a number of 'strategic' areas in which to concentrate research and has set up a number of collaborative research programmes involving firms and universities (Dunnill and Rudd, 1984). Like the United States, Great Britain has had an extremely strong base in basic research, at least until recently when the science budget has been adversely affected by reductions in government expenditures (see Sharp, 1985b).

It is one thing to describe different patterns of government intervention such as these, but guise another to explain them. All of the governments whose policies in biotechnology have been reviewed in the literature have confronted the same set of internationally evolving biotechnologies with different institutions, strengths, and weaknesses. Why have their policies and strategies in biotechnology differed to the extent that they have? Furthermore, how is the effectiveness of the different policies of different governments to be evaluated? Finally, how should governments go about the task of making policy in the biotechnology field? In posing fundamental questions like these, it becomes clear that existing studies of biotechnology policy have barely begun to scratch the surface.

Perhaps the major conclusion to emerge is that we do not yet adequately understand the determinants of the policies of different governments in the field of biotechnology. Accordingly, for example, we are not yet able to explain why the biotechnology policies of the United States, Japan, and the United Kingdom, discussed at the beginning of this section, differ in the ways that they do. In view of our current lack of understanding in this area it may be suggested that a priority for future research should be to examine why governments have intervened in the ways that they have in the biotechnology field. With an understanding of the political influences and constraints it will then be possible to ask how governments might attempt to construct better, more effective, biotechnology policies. Cross-country comparisons should be of great help in highlighting national differences and helping to identify determinants of policy.

2.3 Economic effects of biotechnology

2.3.1 Introduction
2.3.2 A survey of some literature
2.3.3 The need for a more general approach

2.3.1 Introduction

If, as is often done in the literature, a distinction is drawn between old and new biotechnology, the latter involving the application of genetic engineering techniques, then it is clear that the effects of new biotechnology to date are only just beginning to be realized. For example, many of the new biotechnology firms have not yet begun to make profits. If there is to be a biorevolution, then the equivalent of the storming of the Winter Palace remains some way off.

However, biotechnology has already begun to have some important effects. This is seen, for instance, in areas related to medical sciences. One example is diagnostic kits made with monoclonal antibodies, which are already being sold commercially. Bioscot is marketing a diagnostic kit that allows fish farmers to detect a dangerous fish virus that can rapidly kill the entire stock of fish, and is working on a similar kit, using the same technology, that will facilitate the identification of a potato virus. In the therapeutic area, where monoclonal antibodies can be used for tumour imaging and treatment, the potential has not yet begun to be realized.

Genetically engineered products are also beginning to have an impact in the area of animal and human vaccines. In July 1986, the U.S. Food and Drug Administration approved the first genetically engineered vaccine for human use: a hepatitis B vaccine. The conventionally produced vaccine for hepatitis B was introduced in 1982; it is made by harvesting the excess of a hepatitis B viral surface protein from the blood plasma of people infected by the virus. Although there is no evidence that the conventional vaccine may be contaminated by hepatitis itself or by AIDS, some are reluctant to use blood-derived products. This was one factor that motivated the pharmaceutical company Merck, Sharpe and Dohme (which also produces the conventional hepatitis B vaccine) to develop a genetically engineered version in search of an estimated market of $300 million. The genetically engineered vaccine is produced by inserting a gene from the hepatitis B virus into yeast cells, causing the latter to produce the viral surface protein, which triggers immunity to the virus when incorporated into a vaccine. This method avoids the use of human blood (New York Times, 24 July, 1986). Genetic engineering is also being used widely to produce certain proteins (for example, insulin, interferon, and some enzymes), with important industrial implications in some instances.

In the field of agriculture and food processing, where biotechnology will possibly have its greatest effects, the overall impact is still limited. For example, bovine growth hormones, to be examined in more detail below, have not yet been licensed for use in the United States, though approval is anticipated in the next two or three years. Moreover, they have been temporarily banned in Europe for environmental-health reasons. Porcine and chicken growth hormones are even further from commercial applications. The fruits of new biotechnology applied to plants remain distant, since plants are far more complex organisms than the bacteria, viruses, yeasts, and fungi on which most work to date in biotechnology has been done. For instance, nitrogen-fixation in nonleguminous crops, such as rice, wheat, and maize, remains a distant prospect, although genes from other plants and even from bacteria have been successfully introduced into various plants. Nevertheless, new biotechnology and related developments are already having a significant impact by improving efficiency and increasing the substitutability of various agricultural inputs. Examples include corn-based fructose sweeteners, which substitute for sugar cane and sugar beet (Ruivenkamp, 1986), and the cloning of palm plants in Malaysia to increase the efficiency of palm as a source of vegetable oil (Elkington, 1984; Bijman et al., 1986).

Old biotechnology is having an impact in minerals production. About 10% of the copper in the United States is being produced by bacterial mineral leaching; similar techniques are being used and developed further in the Andean Pact countries in Latin America. New biotechnology may be of use in improving the efficiency of the bacteria (Warhurst, 1985). Although bioprocessing is technically feasible as a substitute production method in the area of bulk chemicals and energy, it remains on the whole uneconomic under prevailing relative prices (particularly oil) and the existing state of bioprocess technology. Single-cell proteins are a further area where great potential was foreseen as a way of producing sustenance for both humans and animals, and where significant investment was undertaken by large corporations, such as ICI. But a combination of relative prices and technical factors has tended to rule out rapid expansion in this area as well in the near future. [For very useful surveys of recent developments in these and other areas see Sasson (1988) and Walgate (1990) ]

In terms of actual achievement, as these examples illustrate, it is fair to conclude that at the present time the picture remains mixed. Not only are new biotechnologies being introduced in limited areas, but their rate of diffusion, upon which economic impact ultimately depends, is still very low. While there certainly are rumblings of change, by and large the forces of production of the old regime remain relatively firmly intact. The revolution may come. But most producers who are still, by choice or circumstance, locked into old technologies, or who refuse to be shaken by rumours of coming winds of technical change, are not yet seriously threatened.

In assessing the likely future impact of biotechnology, it is worth bearing two factors in mind, each having somewhat contradictory implications. The first is that there are many powerful groups in our society with a vested interest in highlighting, if not exaggerating, the potential future impact of biotechnology. Since for the most part the technologies and their associated products and processes have not yet been tested in the market place, the context is conducive to exaggeration. These groups include new biotechnology firms who must satisfy shareholders on the basis of their future prospects rather than their current financial performance; old companies that have moved into the biological area under pressure of declining profits in existing markets and who must similarly satisfy financial backers; consultants who have moved into biotechnology and are selling their wares; and university scientists who either were in, or have moved into, this field and who seek at least an increase in their research grants, or perhaps a share in the financial rewards that are to be made in an area of rising demand. All have invested their capital, financial or human, in biotechnology. Together these groups are capable of producing the same kind of 'hi-tech hype' in the field of biotechnology that has been a feature of other areas. An example of the latter is factory automation, where the much-heralded paperless factory of the future still performs much better on paper than on the ground [see, for example, Voss (1984) on the substantial problems of implementation that have been encountered in factory automation].

This is not to say, however, that the big-optimists will be denied their revolution, but rather only to stress that they often have a vested interest in the predictions they make. This is where the second factor-uncertainty-enters. As with all nonincremental technical change, uncertainty is significant. In the face of such uncertainty, expectations will differ regarding what the future will bring, and therefore where investment chips should be placed. One way to assess future prospects of biotechnology is to attempt to measure these expectations, directly or indirectly. In doing this the firms, scientists, and consultants mentioned in the preceding paragraph may be viewed in a different light, as investors who could be placing their chips on alternative spots. Since they are placing their capital (financial or human) where their mouths are, it must be accepted that they are firm in their convictions that, like microelectronics and information technology, biotechnology will generate new products and processes, and with them opportunities for profit. For example, the expectations underlying Monsanto's investment of around $2.7 billion over the next ten years in research in the life sciences must be taken seriously. So must the decision of MITI in Japan to select biotechnology as one of the 'next generation basic technologies'.

Accordingly, it may be concluded that, while there are reasons to expect a degree of 'unwarranted hype', a number of important groups are strongly of the view that biotechnology-like microelectronics and information technology-will have a broad, nonincremental, impact. However, as with previous technological revolutions, it is also likely that the main effects will be some time in coming.

In view of the infancy of new biotechnologies it is hardly surprising that very few rigorous studies exist of the economic impact of biotechnology. When this survey was initially undertaken I was able to find only three that go beyond rather vague indications of the likely direction of economic effects, and attempt further quantification. These are considered, along with some critical comments, in the next section.

2.3.2 A survey of some literature Technology, Public Policy, and the Changing Structure of American Agriculture
(U.S. Congress, Office of Technology Assessment, 1986)

Aim This report examines the combined impact of biotechnology and information technology on U.S. agriculture.

Background This report was written within the context of a growing crisis in American agriculture. During the 1980s, the financial position of many U.S. farmers deteriorated seriously as a result of a long period of farm surpluses. According to the report, the 'decline in agricultural exports is largely responsible for this situation'. In turn the poor performance of U.S. agriculture is related causally to:

1. A weak world economy;
2. The strong value of the dollar (the report was published in March, 1986);
3. The enhanced competitiveness of other countries;
4. An increase in trade agreements; and
5. Price support levels that permit other countries to undersell U.S. agricultural products.

The 'lower costs of production in other countries' are seen by the report as 'the long-term primary factor in the decline of [U.S.] competitiveness'. In the case of wheat, maize, rice, soybeans, and cotton, at least one foreign country has been producing at or below the average U.S. cost since 1981. A major conclusion of the report is that 'Future exports will depend on the ability of American farmers to use new technology', hence the interest in the impact of biotechnology and information technology in U.S. agriculture.

A second background factor is the long-term structural change that has been taking place in U.S. agriculture, antedating biotechnology and information technology. For example, between 1969 and 1982 the number of small farms declined by 39% while the number of very large farms increased by 100%. The report expressed concern with the impact of new technologies on the concentration of land holdings.

Technologies examined The report examined the impact of both biotechnology and information technology. The following biotechnologies in the area of animal agriculture were analysed: production of protein (such as hormones, enzymes, activating factors, amino acids, and feed supplements); gene insertion (which allows genes for new traits to be inserted into the reproductive cells of animals); embryo transfer (which involves artificial insemination of super-ovulated donor animals, removing the resulting embryos nonsurgically, and implanting them nonsurgically in surrogate mothers). The technologies discussed in the field of plant agriculture include microbial inocula (used to increase the efficiency of, or introduce, a plant's ability to supply its own fertilizer, and to increase its resistance to pests), plant propagation (such as cell culture methods for asexual reproduction of plants from single cell or tissue explants), and genetic modification (which, though at present the least-developed area technically, makes it possible to move DNA from one plant, or even other species, into another plant).

Information technology will also impact both animal and plant agriculture. Uses of information technology in livestock include electronic animal identification (which assists in feed control, disease control, and genetic improvement), reproduction (for example estrus detection devices which enhance reproductive efficiency), and disease control and prevention. In plant agriculture, information technology is being used for pest management, and irrigation monitoring and control systems. In addition, radar, sensors, and computers are being used to ensure that the correct amount of fertilizer, pesticides, and plant growth regulators are applied by coordinating tractor slippage and chemical flow.

Research methods The research is based largely on the so-called Delphi method (see p. 75 of the report). This involves collection and coordination of expert opinion, and then feedback for reconsideration by the experts until a convergence is obtained. As the report notes, this makes the conclusions dependent on the experts chosen (and, it may be added, their interaction as a social group).

Conclusions The combined effect of biotechnology and information technology will reinforce the ongoing long-run tendencies in U.S. agriculture noted above. More specifically

1. These technologies will have a major effect in increasing productivity. The 'biotechnology and information technology area will bring technologies that can significantly increase agricultural yields. The immediate impact of these technologies will be felt first in animal production.... Impacts on plant production will take longer, almost the remainder of the century'.

2. These technologies will be adopted more rapidly by large farmers partly because of their better access to information and financial resources: '70 percent or more of the largest farms are expected to adopt some of the biotechnologies and information technologies. This contrasts with only 40% for moderate-size farms and about 10% for the small farms. The economic advantage from the technologies are expected to accrue to early adopters'.

3. Biotechnology will encourage greater vertical coordination and control in agriculture which may 'induce a shift in control over production from the farmer to the integrator'. It will 'reduce market access [defined as 'the ability of sellers ... to gain access to buyers'] slightly for livestock producers in the long run', although its impact on market access for crop production is expected to be neutral. Finally, 'No significant impact on barriers to entry is expected ... for either crop or livestock production'.

4. The combined effects of biotechnology and information technology, together with preexisting trends, will significantly reduce the number of farms and increase the proportional contribution of the largest farmers to total output. 'If present trends continue to the end of this century, the total number of farms will continue to decline from 2.2 million in 1982 to 1.2 million in 2000'. Approximately '50,000 of [the] largest farms will account for 75 % of the agricultural production by year 2000'. 'Biotechnology and the Dairy Industry: Production Costs, Commercial Potential, and the Economic Impact of Bovine Growth Hormone'
(Kalter et al., Department of Agricultural Economics, Cornell University, December 1985)

Aim The study examines the likely future impact of bovine growth hormones (bGH) on the U.S. dairy industry.

Technology examined Milk productivity (output of milk per cow) has been rising since the 1960s as a result of traditional techniques. These include improved management and feeding practices, together with conventional methods of improving the quality of herds such as selection. These techniques have resulted in 'an average annual compounded increase in milk production of more than one% per cow since the 1960s' (p. 71). Biotechnology, however, promises to substantially raise the rate of increase of productivity.

Daily injection of bGH beginning about the 90th day of lactation has been found to increase output by up to 40%. That level corresponds to a 25% increase over the entire lactation cycle.... While the capacity ... to stimulate milk production was recognized in the 1930s, it has been only since the advent of biotechnology that the compound could be produced at a level and cost making it economical for farm use.
(p. 71)

Research methods Using production and financial data the minimum cost of producing bGH was calculated. The minimum cost was $1.93 per gram of bGH at a plant capacity of 6.5 million cow doses per day (p. 29). This provided the basis to calculate the likely price of bGH to the farmer (which, accounting for distribution costs, producer and distributor profits, etc., would be above the minimum production cost). Allowance was also made for the fact that the cost to the farmer includes not only the cost of the hormone and its administration costs, but also the additional consumption of feed by cows receiving the hormone. On the other hand the benefit to the farmer was calculated by considering increases in productivity induced by bGH, together with assumptions about milk prices. Changes in the farmer's rate of return as a result of adopting the bGH were then computed. The resulting information was given to farmers in the form of a questionnaire survey to calculate diffusion rates.

Conclusions Results of the survey showed that

Farmers expressed an acute awareness of the potential of increased milk output to further depress milk prices. Some farmers ... questioned the desirability of bGH being made available given market conditions, one farmer writing, 'It should be outlawed'. Others noted that if other farmers used bGH they would, practically, have no option but to adopt as well.
(p. 81)

The report concluded:

1. That bGH will be widely adopted when introduced (with the diffusion path following the usual sigmoid pattern but with a high rate of early adoption);

2. That adoption will lead to a significant increase in milk output;

3. That in the absence of government price support, the price of milk will fall; and

4. That this will lead to a substantial reduction in both the number of dairy farms and dairy cattle (the precise numbers depending on the various assumptions made). 'The Impact of Biotechnology on Living and Working Conditions in Western Europe and the Third World'
(Bijman et al., 1986)

The study by Kalter et al. (1985) is based on a partial equilibrium model. The effects of one kind of biotechnology product, bovine growth hormones, are examined within the confines of a single industry, namely the dairy industry. As we will discuss in more detail below, a partial equilibrium framework may produce misleading results by ignoring the causes and effects of more general interactions. For example, if one is concerned with the general effects of biotechnology on the dairy industry (and not only bovine growth hormones), it will be necessary to take into account:

1. The effects on this industry of biotechnology-induced events occurring elsewhere in the economy; and

2. The effects on the dairy industry of its own effects on other aspects of the economy.

An example of the first event is provided by Bijman et al. when they consider the implications of increased substitutability of vegetable products for dairy products induced by biotechnology. Their study will now be discussed in more detail.

Aim The study examines the economic and political effects of biotechnology-induced increases in product substitutability (of both inputs and final products) in Western Europe and the Third World.

Technologies examined The technologies examined include both old and new biotechnologies (for example, the use of enzymes and the use of cloning techniques to improve the quality of oil palm trees).

Research methods The research involves collection of data, primarily from secondary sources, which are then used to calculate the effects of substitution, particularly on employment.

Conclusions Conclusions were divided into two areas:

1. Substitution of sugar by other sweeteners. Biotechnology-induced substitution is most highly advanced in the case of sugar. This process has been encouraged by the high sugar prices resulting from protected sugar markets in industrialized countries. Sugar may be substituted by high-fructose corn syrup, manufactured using immobilized enzymes, and by aspartame. A substantial increase in consumption of nonsugar sweeteners relative to sugar in the main industrialized countries has resulted in a major decrease in the world market price of sugar. Since 1982 this price has been below production cost. The decrease in the price of sugar has had a major negative impact in Third World sugar-exporting countries. For example, in the Philippines revenues from sugar exports decreased from $US 624 million in 1980 to $US 246 million in 1984, resulting in the relocation of some 500,000 field labourers. Furthermore, the potential for Third World countries to shift into alternative crops is also limited by new technology. In the Philippines, for instance, a substantial proportion of the sugar-producing land has been converted to rice. However, methods of improving rice yields have been introduced by institutions such as the International Rice Research Institute (ironically based in the Philippines) and this has resulted in productivity increases. Traditional rice importers such as Indonesia and India are becoming exporters with serious implications for the world market price of rice. Furthermore, as noted by the U.S. Congress, Office of Technology Assessment (1986), genetic engineering is likely to contribute further to increasing rice productivity in the future. [For a summary of the rice story see Yanchinsky (1986).]

2. Competing raw materials for oils and fats. The two most important sources of vegetable oils and fats are soya and oil palm. The productivity of the latter has been increased by 30% (oil yield per tree) by cloning oil palm plants. The greater profitability of oil palm production relative to rubber in Malaysia has meant that plantations previously producing rubber have switched to oil palm. Since rubber production is more labour-intensive, the jobs of Malaysian and migrant Indonesian workers on rubber plantations are threatened. Furthermore, future increases in the productivity of oil palm could lead to reduced world market prices of vegetable oils, which would reduce incomes of producers of other vegetable oils, such as coconut farmers, many of whom are small and lack the resources to switch to oil palm production. In addition, less efficient oil palm producers, such as a number of African countries, may see their share of world markets dwindle.

2.3.3 The need for a more general approach

Ideally we would like to be able to trace the effects of biotechnology (including individual technologies and 'packages' of technologies) on economic variables, such as total output, employment, income distribution, trade flows, and regional impacts. In practice, however, the task is formidable due to the complexity of the socioeconomic system within which changes in biotechnology are occurring. For example, it is clear from two of the three studies just examined that the system is global. The report by the U.S. Congress, Office of Technology Assessment implies that in examining the effects of biotechnology on U.S. agriculture it is necessary to consider the impact on U.S. international competitiveness (although this is not adequately followed through in the study itself). To the extent that adoption of biotechnologies by American farmers increases U.S. international competitiveness, there will, through the export multiplier effect, be further consequences for U.S. output, employment, and possibly income distribution. Similarly, Bijman et al. (1986) note that one factor affecting the income of coconut farmers is the planting of improved oil palm trees, which resulted from successful cloning in other countries.

In view of the complexity of the pattern of interdependencies in the global system it is hardly surprising that analytical methods have been found wanting. Nevertheless, economists have attempted to capture more of these interdependencies, going beyond attempts to 'add up' the effects of technical change (which, because they ignore interdependence, often lead to erroneous results). A survey of some of these attempts is to be found in Lipton and Longhurst (1986) in the context of an examination of the effects on the poor in Third World countries of introducing modern seed varieties.

Lipton and Longhurst argue that 'because a national or village society or economy (we would add global economy) is a complete and interacting set of parts, the adding-up approach implicit in almost all the analyses of how modern varieties affect the poor ... is at best seriously incomplete and at worst dangerously wrong' (p. 88). They go on to examine three more general approaches that may be referred to as the general equilibrium approach, the Keynesian approach, and the Leontief approach.

The general equilibrium approach, based on the work by Walras and on subsequent development of this work by contemporary general equilibrium theorists, considers the effects of technical change on demand and supply and therefore on relative prices. Changes in relative prices lead in turn to a new set of price incentives for producers and consumers and hence to a new general equilibrium. The main strength of the general equilibrium approach is that it considers the effect on prices, and therefore resource allocation, of the interaction between markets. Its main weakness lies in the limiting assumptions which are made. It is assumed in general equilibrium theory that land, labour, and capital are fully employed; that prices are competitively determined; and that labour and other nonland inputs are perfectly mobile. Furthermore, unrealistic assumptions are made about technological knowledge and the nature of the production process (see Fransman, 1986b, pp. 10-11).

The Keynesian approach, as discussed by Lipton and Longhurst, considers the multiplier effect of expenditures (on items relating to the modern varieties) on incomes as the money is spent through successive rounds. For example, as large farmers purchase biotechnology packages (e.g., herbicide plus herbicide-resistant seeds) they generate income for the owners and employees of the producers and distributors of the packages who do the same when they spend their income, etc. To the extent that this creates a demand for increased production and therefore employment, small farmers may benefit, not from adopting the new biotechnology package, but from an increase in their off-farm income which is often an important source of total income for small farmers. This kind of interdependence is neglected by attempts to 'add up' the effects of technical change on different categories of farm, looking only at production while ignoring expenditures. Conversely, however, a major weakness of the 'Keynesian approach' is that it neglects a rigorous discussion of production.

The Leontief approach, on the other hand, examines the effects of successive rounds of production on incomes [for example, 'incomes from making extra grain via modern varieties; from providing the extra irrigation water, fertilizer, pesticides, etc. to grow the extra modern variety grain; from providing the extra feedstock to make the fertilizer, etc.; and so on' (p. 95)]. The Leontief approach assumes that all inputs increase in the same proportion as output rises. The main strength of this approach lies in its capture of intersectoral interdependencies.

Despite their drawbacks, these three approaches share an attempt to move beyond the partial analysis of the 'add-up' approach to capture more general effects. However, their progress is only relative, for the general effects are very general indeed. For example, in all three approaches, technical change remains exogenously determined. While this may be realistic in a Third World economy where at least in the initial stages, the new technologies are exogenously introduced, it does not deal adequately with the rich countries where, as we saw in Section 2.2, technical change is endogenous. Furthermore, as Lipton and Longhurst conclude,

Even if we managed to combine neo-Walrasian, Keynesian and Leontief ... analyses of 'directional effects' of modern varieties on the poor, larger 'historical' interactions of modern varieties with the state, class structures, population change, and land distribution would be left out. And such interactions may be the main way that, in the long run, modern varieties affect the poor.
(p. 102)

Despite the difficulties, a search for a more satisfactory way to analyse general effects is necessary if the total impact of technical change in general, and biotechnology in particular, is to be understood. The aim of the present section has been to point briefly to some of the ways being explored to move forward.

2.4 Implications for the third world7

2.4.1 Introduction
2.4.2 A survey of some literature
2.4.3 Preconditions and constraints on third world entry and desirable patterns of specialization
2.4.4 An illustrative case study: cuba's entry into new biotechnology
2.4.5 Biotechnology and information/communication technology

2.4.1 Introduction

Three key questions need to be examined in discussing the implications of biotechnology for Third World countries:

1. What are the effects of the global development of biotechnology on Third World countries?
2. What are the preconditions and constraints on Third World entry into the biotechnology field?
3. How may Third World countries go about selecting areas for specialization?

In this section we shall first briefly survey the literature that examines the implications of biotechnology for Third World countries. We shall then examine these three questions in more detail. Finally, the Cuban experience with biotechnology will be surveyed to examine the case of a small and relatively low-income country.

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