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

An Alternative Perspective

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 4: Technical Progress and Obsolescence of Capital and Skills: Theoretical Foundations of Nineteenth-Century US Industrial and Trade Policy

Michael Hudson


Michael Hudson This chapter reviews some early technological theories of competitiveness and (what often is left out of account) economic obsolescence. The implications of technological change and industrial head starts for the problem of economic backwardness in societies where progress was not occurring were analysed by mid-nineteenth-century American economists who are largely forgotten today: Calvin Colton, Henry Carey and E. Peshine Smith. These American School writers were associated with Whig (and after 1853, Republican) politicians in shaping the industrial policies that transformed the United States from a raw-materials-producing (‘Southern’) economy into the world’s major industrial power (a ‘Northern’ economy). Members of the American School, if they are discussed at all, typically are dismissed as protectionists. A more accurate name for them would be technology theorists, futurists or prototypical systems analysts. Their theory of productive powers focused on industrial and agricultural technology, especially the substitution of capital for labour and land. A quarter century ago (Hudson 1972a and 1975) I collected examples of their theorizing. More recently (Hudson 1992, especially Chapters 7 to 9) I placed them in the context of the evolution of international trade theory. But inasmuch as mainstream theory continues to ignore their remarkable contributions, it is not out of place to present a summary of their work. This chapter therefore contrasts their technological assumptions with the narrower assumptions adopted by subsequent laissez-faire orthodoxy. I conclude by suggesting some features needed to formulate a modern theory of the financial and social preconditions for international competitiveness versus backwardness. Twentieth-century...

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