Chapter 5: Innovation, demand and employment
Mario Pianta* 1. INTRODUCTION In the 1990s there was a fundamental change in the growth mechanisms of advanced countries; economic growth no longer led to an expansion of employment with rising real wages. The problem assumed different forms in different areas, with persistently high unemployment (but stable income levels) in Europe and a serious polarization of incomes (but high job creation) in the United States. These developments highlight the novelty of the challenges for economic policies and the variety of outcomes which may emerge in different countries. At the root of this is the breakdown of the postwar model of ‘Fordist’ growth, which combined a technological paradigm based on mechanical and chemical innovations with the organization of mass production and the expansion of mass consumption that was made possible by a signiﬁcant redistribution of productivity gains to wage earners. These developments required a complex regulation system which included a speciﬁc set of institutions, active public policies on both the demand and the supply side, and major social arrangements leading to the emergence of welfare states. What is most visible in the current ‘post-Fordist’ transition is the breakdown of the dynamics between technology, production, demand and employment, which ensured a ‘virtuous circle’ of growth with (almost) full employment in postwar decades, and the lack of new social and institutional arrangements. This combined breakdown is the result of three main economic ‘mismatches’ which have progressively emerged, related to the nature of technology, the structure of the economy and the importance...
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