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2How MNEs Help Mobilize Rural Labor for Industrialization, Alleviating Poverty (as have done across East Asia):Is the “America First” Policy a Threat?Terutomo Ozawabe continuously dependent on foreign interests, even though host governments can gain a share of profits as the key source of revenues. These revenues can be reinvested in economic development. In most cases, furthermore, the public will also benefit from income transfers and government spending on education, health, infrastructure, and other public welfare programs. Yet, this modality to initiate an industrial takeoff risks the instability of government revenues, since primary exports are subject to boom-and-bust cycles. Besides, it usually boosts the size and power of state, often leading to red tape, corruption and inefficient uses of revenue. Above all, it gives well-paid jobs only to a small minority of well-educated, skilled local workers (e.g., engineers, machine operators and skilled miners) and does not provide employment opportunities to a mass of unskilled people who are unemployed or underemployed and stuck in dire poverty, especially in rural/agricultural areas. The upshot is an unbalanced social structure consisting of a very small minority of high-income earners and a large majority of jobless, or meagerly paid, poor people. In other words, such a resource-focused strategy is accompanied by all sorts of “resource curse” that foil sustainable catch-up growth.1 In contrast, labor-driven takeoff (i.e., making the best use of abundant labor to produce labor-intensive goods) can build a stronger, long-lasting foundation for industrialization. Low-end, basic manufacturing activities (like apparel and sundries making) for export to the advanced world’s big markets require large numbers of low-skilled or unskilled (but easily trainable) workers. In fact, any aspiring economy that adopts this takeoff strategy gives a chance for people to uplift themselves from poverty by their own efforts through employment. Consequently, poverty alleviation occurs most effectively in a market-driven way at the beginning of catch-up when an undeveloped economy exploits its comparative advantage in labor-intensive basic manufactures. Historically speaking, therefore, in their respective approaches to economic development. the “have-nots” (i.e., those countries that are indigent in resources but abundant in labor) are ironically blessed, whereas the “haves” are cursed. With regards to the role of comparative advantage in catch-up growth, conventional trade theory assumes that each economy’s comparative advantage is ready-made, and no additional input or institutional support is needed. In practice, however, it is seldom exploitable immediately. Emerging economies usually need additional inputs in such areas as finance, organization skills, export marketing, and trained factory labor, thereby necessitating state involvement and/or private business partners (i.e., comparative advantage supplementation). In the past, these necessary inputs were locally procured through aspiring countries’ own efforts under the “Alexander Hamilton/Friedrich List” style of infant-industry protection and promotion, but such a self-reliant, autonomous approach took time--and often failed--to accomplish a successful takeoff. 1 The resource curse is well known in economics. See, for example, Sachs and Warner (2001) for empirical analysis.