An Alternative Perspective
- New Horizons in Institutional and Evolutionary Economics series
Edited by Erik S. Reinert
Chapter 4: Technical Progress and Obsolescence of Capital and Skills: Theoretical Foundations of Nineteenth-Century US Industrial and Trade Policy
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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