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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 23: Conclusions: the challenge of the new paradigm

Timo J. Hämäläinen


In this study we have argued that the world economy is currently undergoing a historical paradigm shift which will fundamentally transform the structure of our economies and societies as well as our mental models and value systems. The paradigm shift requires rapid and balanced technoeconomic and socioinstitutional adjustments from industrialized nations. Without such adjustments they will miss the massive increasing returns associated with the new paradigm. The laggards are also likely to fall behind the leading economies and stay behind them for a considerable period of time (up to several decades) as the ‘window of opportunity’ closes. Structural adjustments are not easy, however, because they have to overcome significant mental inertia and rigidities. The structural adjustment challenge is, above all, a mental renewal problem. The shared mental frames, beliefs, attitudes, values and behavioral norms will have to change before economic and social structures can be altered. In a democratic system a few visionaries cannot change the established structures if the majority of people are stuck with old mental paradigms that correspond to the old socio-economic realities. This is a great challenge not only to the visionary policy makers but also to all social scientists, journalists and teachers who shape the shared mental paradigm of the society. The paradigm shift also challenges the old social theories which were developed to explain social processes within the old technoeconomic and socio-institutional structures. Borrowing from Thomas Kuhn, both economics and sociology are currently in a ‘paradigm crisis’. We have argued in this study that...

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