Page 149 - Global Political Economy_Understanding The International Economic Order

CHA PTER S IX
increased importance of these nonmanufacturing activities means that
the importance of production costs in determining total costs has de-
creased; the result is that low-cost producers can lose some of their
prior competitive advantage. Inputs of new materials and resource-
saving processes also decrease the importance of traditional commod-
ities in international trade, reduce commodity prices, and thus harm
commodity producers around the world (including in the United
States).

Organization of Production and Technological Innovation
The world economy is experiencing another phase of the industrial
revolution that began in the latter part of the eighteenth century. The
first phase, based on iron and steam power, was characterized by the
rise of the factory system; these developments took place in Great
Britain and led to the industrial and international preeminence of that
nation. The second phase, beginning in the latter part of the nine-
teenth century and based on steel, petroleum, chemicals, electricity,
and the internal combustion engine, occurred in the United States
and, to a lesser extent, in Germany. This phase reached its highest
development with the advent of the assembly line and mass produc-
tion (labeled “Fordism” by many writers). Once again, the technolog-
ical leader or leaders became the most powerful nation(s) in the
world. And, as in the earlier phases of the industrial revolution, the
dominant industrial nation used its power to reshape world affairs in
its own economic and political interests. Furthermore, the economic
expansion of the technological leader through trade and foreign in-
vestment imposed on other economies the choice of either adopting
the new production methods or retreating behind protective barriers
and inevitably falling behind in global economic competition.
Beginning in the 1970s, Japanese firms captured international lead-
ershipin one industrial sector after another, due in large part to their
implementation of lean production techniques. 17 Various techniques
associated with lean production—introduction of quality circles, reli-
ance on just-in-time inventories (kanban) that save resources, and
computerized automation—became central to the production process
in Japan; these highly efficient techniques, pioneered at Toyota and
associated with the technological and organizational revolution, dif-
fused rapidly throughout Japanese industry. Later, these techniques

17
The story of lean production and its advantages is told in James P. Womack,
Daniel T. Jones, and Daniel Roos, The Machine that Changed the World (New York:
Rawson Associates, 1990).
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