Globalization, Economic Development and Inequality: An Alternative Perspective (New Horizons in Institutional and Evolutionary Economics Series)

349 Pages·2007·1.1 MB·English

by  Erik S. Reinert (Editor)

Globalization, Economic Development and
Inequality
NEW HORIZONS IN INSTITUTIONAL AND EVOLUTIONARY
ECONOMICS
Series Editor:Geoffrey M.Hodgson
Research Professor,University of Hertfordshire Business School,UK
Economics today is at a crossroads.New ideas and approaches are challenging the
largely static and equilibrium-oriented models that used to dominate mainstream
economics. The study of economic institutions – long neglected in the economics
textbooks – has returned to the forefront of theoretical and empirical investigation.
This challenging and interdisciplinary series publishes leading works at the
forefront ofinstitutional and evolutionary theory and focuses on cutting-edge analy-
ses of modern socio-economic systems. The aim is to understand both the institu-
tional structures of modern economies and the processes of economic evolution and
development.Contributions will be from all forms of evolutionary and institutional
economics,as well as from Post-Keynesian,Austrian and other schools.The overrid-
ing aim is to understand the processes of institutional transformation and economic
change.
Titles in the series include:
The Evolutionary Analysis of Economic Policy
Edited by Pavel Pelikan and Gerhard Wegner
The Evolution of Scientific Knowledge
Edited by Hans Siggaard Jensen,Lykke Margot Richter and Morten Thanning Vendelø
Evolutionary Economic Thought
European Contributions and Concepts
Edited by Jürgen G.Backhaus
Economic Institutions and Complexity
Structures,Interactions and Emergent Properties
Karl-Ernst Schenk
The Economics of Knowledge Sharing
A New Institutional Approach
Edited by Ernst Helmstädter
The Economics of Energy and the Production Process
An Evolutionary Approach
Guido Buenstorf
Institutional Economics and the Formation of Preferences
The Advent of Pop Music
Wilfred Dolfsma
Globalization,Economic Development and Inequality
An Alternative Perspective
Edited by Erik S.Reinert
Globalization,
Economic
Development and
Inequality
An Alternative Perspective
Edited by
Erik S. Reinert
President,The Other Canon Foundation,formerly at SUM –
The Centre for Development and the Environment,University
of Oslo,Norway
NEW HORIZONS IN INSTITUTIONAL AND EVOLUTIONARY
ECONOMICS
Edward Elgar
Cheltenham,UK • Northampton,MA,USA
© Erik S.Reinert,2004
All rights reserved.No part of this publication may be reproduced,stored in
a retrieval system or transmitted in any form or by any means,electronic,
mechanical or photocopying,recording,or otherwise without the prior
permission of the publisher.
Published by
Edward Elgar Publishing Limited
Glensanda House
Montpellier Parade
Cheltenham
Glos GL50 1UA
UK
Edward Elgar Publishing,Inc.
136 West Street
Suite 202
Northampton
Massachusetts 01060
USA
A catalogue record for this book
is available from the British Library
Library ofCongress Cataloguing in Publication Data
Globalization,economic development,and inequality :an alternative perspective
/ edited by Erik S.Reinert.
p.cm.—(New horizons in institutional and evolutionary economics series)
Includes index.
1.International trade—Social aspects.2.Income distribution.3.Technological
innovations—Economic aspects.4.Technological innovations—Social aspects.
5.Globalization—Economic aspects.6.Globalization—Social aspects.7.
Economic development.8.Evolutionary economics.I.Reinert,Erik S.,1949– II.
New horizons in institutional and evolutionary economics.
HF1379.G593 2004
337—dc22
2004045463
ISBN1 85898 891 8
Printed and bound in Great Britain by MPGBooks Ltd,Bodmin,Cornwall
Contents
List of contributors vii
Introduction 1
Erik S.Reinert
PARTI FOUNDATIONS OF AN ALTERNATIVE
THEORETICALPERSPECTIVE
1 The Other Canon:the history of Renaissance economics 21
Erik S.Reinert and Arno M.Daastøl
2. Natural versus social sciences:on understanding in economics 71
Wolfgang Drechsler
PART II THE STRATEGY OF SUCCESS:NINETEENTH-
CENTURY UNITED STATES AND GERMANY
3. The views of the German historical school on the issue of
international income distribution 91
Jürgen G.Backhaus
4. Technical progress and obsolescence of capital and skills:
theoreticalfoundations of nineteenth-century US industrial
andtrade policy 100
Michael Hudson
PART III THE STRATEGY OF FAILURE:LATE TWENTIETH-
CENTURY DEINDUSTRIALIZATION AND THE
ECONOMICS OF RETROGRESSION
5. Natural resources,industrialization and fluctuating standards
of living in Peru,1950–97:a case study of activity-specific
economicgrowth 115
Santiago Roca and Luis Simabuko
v
vi Globalization,economic development and inequality
6. Globalization in the periphery as a Morgenthau Plan:the
underdevelopment of Mongolia in the 1990s 157
Erik S.Reinert
PART IV TECHNICAL CHANGE AND THE DYNAMICS OF
INCOME INEQUALITY
7. Technological revolutions,paradigm shifts and socio-
institutionalchange 217
Carlota Perez
8. Income inequality in changing techno-economic paradigms 243
Chris Freeman
9. Information technology in the learning economy:challenges
fordeveloping countries 258
Dieter Ernst and Bengt-Åke Lundvall
10. Diversity:implications for income distribution 288
David B.Audretsch
11. Convergence,divergence and the Kuznets curve 309
Ådne Cappelen
Index 327
Contributors
David B.Audretschholds the Ameritech Chair of Economic Development
and is Director of the Institute for Development Strategies at Indiana
University.He is also a Research Fellow of the Centre for Economic Policy
Research,London.
Jürgen G.Backhausholds the Krupp Foundation Chair in Public Finance
and Fiscal Sociology,Faculty of Economics,Law and the Social Sciences,
University of Erfurt,Germany.
Ådne Cappelenis Research Director of Statistics Norway,Oslo.
Arno M.Daastølis a PhD candidate at the University of Erfurt,Germany.
Wolfgang Drechsler holds the Chair of Public Administration and
Government,University of Tartu,Estonia.
Dieter Ernstis a Senior Fellow at the East–West Center,Honolulu,Hawaii,
USA.
Chris Freeman is Emeritus Professor and Former Director of SPRU,
Science and Technology Policy Research,University of Sussex.
Michael Hudsonheads the Institute for the Study of Long-Term Economic
Trends (ISLET) in New York. He is also a Research Fellow at the Levy
Economics Institute of Bard College,New York.
Bengt-Åke Lundvall is Professor of Economics at the University of
Aalborg,Denmark.
Carlota Perez is Honorary Research Fellow at SPRU, Science and
Technology Policy Research, University of Sussex; Adjunct Senior
Research Fellow, INTECH, Maastricht, The Netherlands; and Visiting
Scholar 2002 and 2004 at Cambridge University. She is also an inter-
national consultant and lecturer based in Caracas,Venezuela.
Erik S.Reinertwas formerly Senior Research Associate at SUM (Centre for
Development and the Environment) at the University of Oslo, Norway,
and Head of Research,Norsk Investorforum,Oslo.He is now President of
The Other Canon Foundation, Hvasser, Norway, and Professor of
Technology Governance at the Tallinn Technical University,Estonia.
vii
viii Globalization,economic development and inequality
Santiago Roca is Professor of Economics and Director of Research at
ESAN,Escuela Superior de Administración de Negocios,Lima,Peru.He
has also been Visiting Professor of Economics and Finance, College of
Business, Department of Economics, Arizona State University, Tempe,
AZ.
Luis Simabuko is Research Assistant at ESAN, Escuela Superior de
Administración de Negocios,Lima,Peru.
Introduction
Erik S. Reinert
It is generally not recognized that two Nobel laureates in economics have
provided two conflicting theories of what will happen to world income
under globalization:
1. Based on the standard assumptions of neo-classical economic theory,
US economist Paul Samuelson ‘proved’ mathematically that unhin-
dered international trade will produce ‘factor-price equalization’,that
is that the prices paid to the factors of production – capital and labour
– will tend to be the same all over the world.
2. Based in an alternative dynamic tradition – which we here label
The Other Canon – Swedish economist Gunnar Myrdal was of the
opinion that world trade would tend to increase already existing differ-
ences in incomes between rich and poor nations.
We would argue that the second approach easily incorporates the main ele-
ments of evolutionary or neo-Schumpeterian economics, but with a
broader theoretical and historical perspective and with a broader agenda.
The aim of this book is to explore the contributions of today’s evolution-
ary economics to the understanding of the increasing gap in global income
inequality,that is to broaden the normal perspective ofneo-Schumpeterian
economics consciously into the realm of development economics.
The experiences since the early 1990s – since the fall of the Berlin Wall –
have shown that in many cases globalization has followed the trend pre-
dicted by Myrdal.During the 1990s a large number of nations have expe-
rienced falling real wages and falling national income; in many cases real
wages have declined both rapidly and considerably.In some of the former
communist countries a humanitarian crisis of large proportions is evolv-
ing.In most Latin American countries real wages peaked sometime in the
late 1970s or early 1980s, and have fallen since then. In several African
countries it is no longer possible to talk about a ‘state’as such; and this
problem of ‘failed states’ is growing. Many institutions that used to be
handled by the nation-state,like the educational systems,have broken down
in these nations,and different areas of what used to be a nation are ruled
1