Globalization, Economic Development and Inequality
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Globalization, Economic Development and Inequality

An Alternative Perspective

  • New Horizons in Institutional and Evolutionary Economics series

Edited by Erik S. Reinert

The expert contributors gathered here approach underdevelopment and inequality from different evolutionary perspectives. It is argued that the Schumpeterian processes of ‘creative destruction’ may take the form of wealth creation in one part of the globe and wealth destruction in another. Case studies explore and analyse the successful 19th century policies that allowed Germany and the United States to catch up with the UK and these are contrasted with two other case studies exploring the deindustrialization and falling real wages in Peru and Mongolia during the 1990s. The case studies and thematic papers together explore, identify and explain the mechanisms which cause economic inequality. Some papers point to why the present form of globalization increases poverty in many Third World nations.
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Chapter 3: The Views of the German Historical School on the Issue of International Income Distribution

Jürgen G. Backhaus

Extract

3. The views of the German historical school on the issue of international income distribution Jürgen G. Backhaus The title of this chapter needs a few words of explanation. First, the views discussed here are theory-based and tested against specific policies within welldefined institutions. Second, the reference to the German Historical School is purely a convenience; these views are likewise held in different language areas, such as the French, the Dutch and the Italian traditions, but when the institutions through which economic policies are to be carried out differ, then specific policies informed by the same basic outlook will differ as well. Third, the term ‘Historical School’ refers to a body of literature before the advent of econometrics, which used historical evidence systematically in order to test theories against empirical evidence. Historical economics also tended to be defined more broadly than economics is today; institutions, legal issues, rules of law and customs as well as issues of geography and technology tended to be part of the explanatory apparatus. We can refer to Friedrich List (1789–1846), Wilhelm Roscher (1817–1894), Gustav von Schmoller (1838–1917) and Werner Sombart (1863–1941), in chronological order.1 The list could easily be augmented with authors from other language areas. In a nutshell, the views of the Historical School on the international distribution of income resulting from international trade were inspired neither by nationalism (the issue of state building) nor by anti-market sentiment (the choice of state...

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