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National Competitiveness and Economic Growth

The Changing Determinants of Economic Performance in the World Economy

Timo J. Hämäläinen

The current paradigm shift in the world economy is challenging the traditional competitiveness and growth theories with their few explanatory variables. This book offers a more holistic framework to synthesise the key findings of the various branches of competitiveness and growth research. The author illustrates this framework with a new long wave theory of socio-economic development. This theory emphasises the competitiveness and growth benefits of rapid structural adjustment in the rapidly changing techno-economic environment. Based on thorough analysis the author argues that both markets and governments have become less efficient due to the current transformation of the world economy. His empirical data from 22 OECD countries in the 1980s and 1990s illustrates that efficiency and growth-oriented governments have significantly contributed to their countries’ economic success.
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Chapter 6: Third industrial revolution

Timo J. Hämäläinen


In the current technoeconomic paradigm shift, the competitiveness and growth strategies of nations should be based on an objective assessment of their socio-economic situation (starting point) and the ‘state-of-the-art’ in socio-economic development. Since the adoption of the new best practice paradigm involves massive increasing returns, no nation can ignore it without major economic and social costs (Lipsey 1997). The socio-economic collapse of the former communist countries provides a case in point.1 The first section of this chapter examines the accumulation of problems within the old mass production paradigm in the 1970s and 1980s. The crisis of the old paradigm led to the emergence of a new technoeconomic paradigm in the early 1980s which was based on the new information and communication technologies. The second section introduces the core elements of the new paradigm. The final section of the chapter argues that a major global depression is quite possible in the next few years despite the strong performance of the world economy in the 1990s. 1 CRISIS OF THE TWENTIETH-CENTURY PARADIGM The mature twentieth-century socio-economic paradigm began to accumulate increasing problems in the late 1960s. These problems were related to fundamental changes in the technoeconomic core of the established paradigm: external business activities, productive resources, technologies, organizational arrangements and product market structures. The industrialized countries could not adjust to these structural problems without a fundamental paradigm shift in their economic systems. Globalization of business During the past few decades the continuous growth and geographical integration of markets has led to an...

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