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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 19: New macro-organizational role of government

Timo J. Hämäläinen


All industrialized countries are currently trying to redefine the role of government for the new technoeconomic paradigm of the twenty-first century (World Bank 1997; OECD 1997a). Once the new ‘best practice’ paradigm of government has been developed in some country, it is likely to diffuse among the industrialized countries who will adapt it to their own national circumstances (Hämäläinen 1997). This diffusion process is likely to resemble that of the welfare state in the twentieth century but it will, in all likelihood, be much more rapid. This last chapter of Part 4 elaborates the macro-organizational role of government that would better match the changed technoeconomic environment of the next century. In previous chapters we argued that governments need to reassess their role in economic organization due to the recent changes in the world economy. In particular these changes require a shift in the relative weight given to the two principal goals of government: economic efficiency (competitiveness) and social equity. When these two goals are contradictory, and this is not always the case, governments should put more emphasis on the efficiency and competitiveness goal. This is for the simple reason that, in a world of increasing global competition and mobility of productive resources, countries whose ‘framework conditions’ for industry do not match the international standards for efficiency and competitiveness will not be able to compete for new industrial investments and their economic performance is likely to suffer relative to the more efficient and competitive locations.1 The poor economic...

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