Evolutionary Economics, Classical Development Economics, and the History of Economic Policy: A Plea for Theorizing by Inclusion

The author argues that in order to create a qualitative understanding of the factors polarizing the world in growing wealth and growing poverty there is a need to create economics by inclusion, a system where all relevant factors, some of which have been part of the economic discourse for centuries, but also elements (like the different effects of process and product innovations) that are part of evolutionary economics itself, are considered simultaneously. According to the author, this historical/institutional approach to economics would benefit especially the Third World. Moreover, the economics by inclusion should also open the way for policies of inclusion, a system that will put the accent on the wellbeing of the majority and not on the growth of the export sector.

Financial Crises, Persistent Poverty, and the Terrible Simplifiers in Economics: A Turning Point Towards a New '1848 Moment'

A key common element in persistent world poverty and in the financial and (real) economic crisis is the .terrible simplificationÿ . a theoretical overshooting into irrelevant abstractions . that has taken place in economic theory after World War II. As unlikely as it may initially sound, I shall endeavour to explain in this paper how . in spite of its apparent sophistication . equilibrium economics became .mathematized demagogueryÿ based on an extremely simplistic worldview. One element explaining the financial crisis is what Hyman Minsky called .destabilizing stabilityÿ: long periods of stability lead to increasing vulnerability. This paper argues that similar mechanisms are at work inside economics: long periods of economic progress in the core countries lead to increasingly abstract and irrelevant economic theories (.terrible simplificationsÿ). This leads to turning points towards more relevant economic theories, referred to as .1848 momentsÿ. The paper further outlines the key variables that need to be reintroduced into economic theory in order to furnish poor countries with the type of productive structures that makes it possible to eliminate poverty.

Institutionalism Ancient, Old and New: A Historical Perspective on Institutions and Uneven Development

institutions, structural change, uneven development, ancient institutional school

Capitalist Dynamics: A Technical Note

Carl Menger, the founder of the Austrian School of Economics, had the ambition that economics should be a .map of the forces at workÿ. Standard textbook economics (.neo-classical economicsÿ) takes as its starting point a metaphor of .equilibriumÿ based on the state of the physics profession in the 1880s. This force towards equilibrium is, however, only one of many forces at work. The most fundamental feature of capitalism is change, and this change is only poorly reflected in standard economics. Financial crises are just one of the many things that happen in real life, but cannot happen in standard textbook economics. From the standpoint of Joseph Alois Schumpeter (1883-1950), Austrian economist and Harvard economics professor who spent much time at Harvard Business School, .equilibriumÿ is the opposite of economic development. Equilibrium theory therefore fails to reflect many of the mechanisms of industrial and economic dynamics that create economic welfare. This note attempts to outline some of these forces.

Development and Social Goals: Balancing Aid and Development to Prevent ‘Welfare Colonialism’

In the paper the author tries to explain why the Millennium Goals, with which the world community is approaching the social problems in the poor countries, cannot be considered as good social policy in the long run. The key insight of the author is that having an inefficient manufacturing sector produces a higher standard of living than having no manufacturing sector at all.

Development and Social Goals: Balancing Aid and Development to Prevent ‘Welfare Colonialism’

The current development policy focus on poverty reduction is erroneous. Historically, successful development policy—from the late fifteenth century until the beginning of the twenty-first—has achieved structural change away from dependence on raw materials and agriculture, adding specialized manufacturing and services subject to increasing returns with a complex division of labour. In contrast, the Millennium Development Goals are heavily biased in favour of palliative economics: alleviating the symptoms of poverty, rather than attacking its real causes. This creates a system of ‘welfare colonialism’ increasing the dependence of poor countries, thereby hindering, rather than promoting, long-term structural change.Millennium Development Goals, economic development, palliative economics, welfare colonialism

Zeitgeist in Transition: An Update to How rich countries got rich and why poor countries stay poor

This article is a forward to French translation of How rich countries got rich and why poor countries stay poor.

European Eastern Enlargement as Europe's Attempted Economic Suicide?

We argue that the process of European economic integration has made a qualitative shift: from a Listian symmetrical economic integration to an integrative and asymmetrical integration. This shift started in the early 1990s with the integration of the former Soviet economies into the economies of Europe and the world as a whole, reached its climax with the Eastern enlargement of the Union in 2004, and now forms the foundation of the renewed Lisbon Strategy. This change is measurably threatening European welfare: the economic periphery in the first instance, and potentially the core countries as well. Two parallel processes aggravate this development: the timing of the enlargement at this particular phase of the evolving techno-economic paradigm; and the creation of the European Monetary Union along the so-called Maastricht route towards convergence and fiscal stability.

Modernizing Russia: Round III. Russia and the other BRIC countries: forging ahead, catching up or falling behind?

The term 'BRIC countries' - Brazil, Russia, India, and China - traces its roots to investment banking, Goldman Sachs coined the term in 2001. The idea of large emerging economies catching up with, and challenging, the West has captured social scientists and policy-makers alike. However, the sheer size and different historical legacies dictate that there are enormous differences between the BRIC economies. Russiaÿs situation is in three ways unique among the BRIC countries. First, Russia was an industrialized nation long before the others, secondly, it experienced unprecedented economic decline in the 1990s and by 2008 Russia barely reached the GDP level of 1989; thirdly, unlike Brazil, China, India and in fact most of the developing world, Russia is not a member of the World Trade Organization (WTO). These unique features beg the following questions that this document seeks to (at least tentatively) answer: first, what is the structural legacy of the decline in the 1990s in terms of technological and industrial capabilities in Russia; and second, what can and should Russia learn from the WTO experience of the rest of the BRIC economies until today. We argue, in brief, that while the decline of the 1990s is relatively well-known and documented on the macro-level (GDP) and more controversially in some of its micro-level and sociological impacts, there seems to be little awareness of the magnitude of devastation that took place during this period within Russiaÿs industry. Along with a massive increase in income from natural resources, a partial disintegration of the R&D system, and a greatly diminished policy capacity, the structural changes of the 1990s continue to pose grave challenges to Russiaÿs economic policy making. In fact, in many areas Russiaÿs technological and industrial capabilities have simply been lost.