State Intervention and the Computer

There is a perennial debate about the history of the computer, and the extent to private enterprise or government intervention was the driving force behind its development. Of course, both were involved, but the influence of government was very important and most probably the major factor:

“Transistors were developed in a private laboratory, Bell Labs, but it was a monopoly. There was no market and there was no consumer choice. Since it was a government-supported monopoly, they could charge monopoly prices, which is in effect a tax. As long as they had the monopoly, Bell Labs was a very good lab. They did all sorts of things at public expense. As soon as it was deregulated, Bell Labs went down the tubes.

Quite apart from that, Bell Labs was using state-generated wartime technology. Furthermore, they had nobody to sell the transistors to. For about ten years, the only market for high-quality transistors was the government, just like computers. During that period they were able to develop the technology, the scale, the marketing skills so that finally they could break into the market system.” (Barsamian and Chomsky 2001: 18).

In addition, the development of modern computers also occurred in Japan, where this happened by direct Japanese government industrial policy through their Ministry of International Trade and Industry (MITI):

“The real success of Japanese producers, American industry sources conclude, came only after the mid-1970s. [The Ministry of International Trade and Industry] targeted the computer and telecommunications markets as central to Japan’s future. Establishing a national goal to lead in those industries, the government offered substantial incentives to encourage R&D and investment, besides restricting foreign access to Japanese markets.” (Okimoto et al. 1984: 17).

The Japanese industrial policy was so successful that America semiconductor manufacturers were under extreme pressure by Japanese competitors by the 1980s (Nester 1997: 115–116), especially by the dumping of dynamic random access memory chips (DRAMs) on world markets. The American response to that Japanese threat was protectionism in the form of the Semiconductor Trade Agreement (STA) in July 1986 and tariffs on Japanese electronics imports in April 1986, to give US manufacturers relief. This eventually allowed them time to innovate and develop new generations of microprocessors and regain market share.

BIBLIOGRAPHY

Barsamian, D. and Chomsky, N. 2001. Propaganda and the Public Mind: Conversations with Noam Chomsky, Pluto Press, London.

Nester, W. R. 1997. American Industrial Policy: Free or Managed Markets?, Macmillan, Basingstoke.

Okimoto, D. I. et al. (eds). 1984. Competitive Edge: The Semiconductor Industry in the U.S. and Japan, Stanford University Press, Stanford.