Expanding Production Capacity, Promoting Economic Growth and Development

economic development in breadth, economic development in depth, scientific and technological revolution towards technological innovation.

6.1.2. The nature of technology

- Technology is a set of methods, processes, skills, know-how, tools and means to transform resources into products and services serving social life. Nowadays, technology is considered a combination of hardware and software.

- Hardware reflects the technicality of the production method:

+ Technology is all the material conditions such as machinery, equipment, factories... created by humans for use in the production process to transform material objects to suit human needs.

+ Technology is the material basis that determines increased labor productivity.

+ Technical developments lead to major changes in production techniques  called technical revolution.

- The software consists of 3 parts:

+ People: Shown in knowledge, skills, techniques, expertise, experience, and work habits.

+ Information: Includes know-how, processes, methods, data, designs.

+ Organization: Shown in arrangement, planning, coordination and management.

- Any production process requires interaction between hardware and software. That is the basic condition for high efficiency production.

+ Technical components are the core and foundation of the production process.

+ The human component is the key that operates according to the instructions of the information component.

+ Information is the basis for human decision making.

+ The organizational component has the task of linking the above components to increase production efficiency.

- Production practices in our country show that when modern equipment is imported, but because of not mastering technological know-how, workers are not qualified.

level leads to products not achieving the desired quality, equipment capacity used is less than 50%. Therefore, to have a good product must:

+ Modern equipment.

+ Workers have suitable skills and grasp technological know-how.

+ Dynamic management system, capable of grasping the market and organizing the production process.

6.1.3. The relationship between science and technology

- Science and technology are both processes based on the development of human intelligence, but science and technology have the following fundamental differences:

+ If science is the activity of searching and discovering the principles and laws of development, then technology is the activity of applying the results of those searches and discoveries based on production and life practices.

+ If scientific activities are evaluated according to the level of discovery or perception of natural, social and intellectual laws, technological activities are evaluated by measuring their contribution to solving socio-economic goals.

+ If scientific knowledge, especially basic science, is widely disseminated and becomes common property, then technology is a commodity with a specific owner and can be bought and sold. Technology is a special type of commodity: because normal goods and products are lost after use, but technology lasts forever until it becomes obsolete.

+ Scientific activities often require a long time, and technology can be replaced very quickly.

- However, science and technology are closely related and affect each other:

+ Science paves the way for technological development, creating theoretical and methodological foundations for applying and developing new technologies in production and life.

+ Basic science outlines the main contents of technology, while applied science has the role of concretizing the theory of basic science into technology development, increasing production efficiency.

+ Technology is the basis for generalizing into scientific principles. The closer science is to production activities and life, the more direct the application and deployment of technology will be.

- The relationship between science and technology is developed through stages:

+ Before the 19th century, science often came later, explaining the development of technology. It is represented as follows:

production  technology  science

+ From the end of the 19th century until now, scientific inventions have created conditions for the creation of new technologies, thereby directly affecting the entire production process. It is shown as follows:

science  technology  production

- Scientific and technological achievements become direct productive forces, widely applied in all areas of life.

6.2. The role of science and technology

6.2.1. Expanding production capacity, promoting economic growth and development

- Science and technology not only create new tools, but also new production methods  are factors that increase labor productivity.

- Under the impact of science and technology, production resources are expanded:

+ Expand the ability to discover and exploit natural resources

of course

+ Change the quality of labor resources; change the social labor structure

Society shifts from simple labor to mechanical, technical, and intellectual labor  increases labor productivity.

+ Expanding the ability to mobilize capital, allocate and use investment capital effectively: it is demonstrated through the ability to modernize financial intermediary organizations, communication systems, transportation, etc.

- Science and technology facilitate the shift from extensive economic development to intensive economic development.

+ Extensive economic development is economic growth thanks to the increase in production input factors such as capital, labor, resources  depleting resources and destroying the ecological environment. When new technology is born (using new materials, electronics, biology, information technology, telecommunications, etc.), the economy develops in depth, that is, economic growth is achieved based on improving the efficiency of using production factors.

+ Science and technology are the means to transform from an agricultural economy to an industrial economy and a knowledge-based economy, in which high-tech industries that employ a lot of intellectual labor are rapidly developed.

6.2.2. Promoting the process of economic formation and restructuring

The development of science and technology not only promotes the rapid development of industries but also promotes the division of labor, dividing industries into many small parts, creating many new industries and economic fields  thereby changing the economic structure in a positive direction, showing:

+ The GDP proportion of industry and services tends to increase, that of agriculture decreases.

+ The economic structure in each industry changes in the direction of expanding production scale in industries with high technical and technological content, knowledge workers account for an increasingly large proportion, and the level of urbanization increases rapidly.

6.2.3. Increase the competitiveness of goods, promote the development of market economy

- The goal of a business is to maximize profits  businesses must produce products with high demand, minimize input costs, improve product quality, and improve designs. These requirements can only be met when applying scientific and technological advances to production.

- The application of scientific and technological advances has had impacts.

after:

+ Production materials are increasingly modern.

+ Production scale is increasingly expanding, creating new types of businesses, many new products, and increasing production scale.

+ Increase the pace of production and business activities.

+ Develop domestic market to foreign market, increase competitiveness in international market.

6.3. Content of technological innovation with economic development

It includes two basic activities:

- Product innovation: consumers are more interested.

- Innovation in production processes: Enterprises and developing countries are more interested.

6.3.1. Product innovation

- Is to create completely new products or improve the company's traditional products.

- To create new products, there must be prerequisites:

+ Information about market requirements and competitors.

+ Large budget.

+ Team of technical staff and workers with good implementation capabilities.

- Product innovation activities include the following 4 stages:

+ Research to determine the ability to produce new products and establish economic arguments.

+ Design new products, determine technical specifications and technological processes.

+ Organize trial production and determine production costs.

+ Market research and mass production. Product innovation results are shown in the graph:

P 1

P 0

D 1

D 0

Y 0 Y 1

When producing new products, demand shifts to the right D 0  D 1 .

Output increases Y 0  Y 1 , with price increase P 0  P 1 . Firm revenue increases.

- For developing countries, due to limited prerequisite conditions, they often choose to improve products in the following direction:

+ Improved technical parameters.

+ Change design, color, materials.

Product innovation allows saving resources and increasing product appeal.

Example: Improving car engines  saving fuel.

Replace raw materials, make products lighter, save resources.

6.3.2. Innovation in production process

- Technological progress for developing countries focuses mainly on improving the efficiency of technological processes. Because it increases productivity  shifts the supply curve to the right.

The results of production process innovation show:

S 0

S 1

P 0

P 1

Y 0 Y 1

Improving production processes has the effect of increasing production capacity.

 shifts the supply curve to the right, production output increases Y 0 

Y 1  saves production costs, product price decreases from P 0  P 1 .

CHAPTER 7: FOREIGN TRADE AND ECONOMIC DEVELOPMENT

7.1. Advantages of foreign trade activities, impact of foreign trade on economic growth

7.1.1. Absolute advantage of foreign trade

- Absolute advantage of foreign trade is the advantage obtained in the condition of comparing costs to produce the same type of product, when a country produces a product with higher costs and imports that product from another country with lower production costs.

- This advantage is considered from 2 sides:

+ For countries that produce products at low cost, they will gain more profit when selling products on the international market.

+ For countries that produce products at high costs, they will get products that they cannot produce domestically or that cannot be produced profitably (called compensating for the weakness in domestic production capabilities).

- For developing countries, exploiting absolute advantage is important when they are not yet able to produce means of production at low cost.

- When capital goods are imported, domestic workers first learn how to use the equipment and then learn how to produce them. Thus, foreign trade has helped developing countries by compensating for their lack of ability to produce capital goods and their lack of technological knowledge.

7.1.2. Relative advantage (comparative advantage) of foreign trade

Ricardo studied this advantage from the perspective of comparative cost:

We consider the possibility of exchanging products between Vietnam and Russia for 2 products: steel and clothing:

Production cost

Product

Production cost (labor days)

Vietnam

Russia

Steel (1 unit)

Clothing (1 unit)

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