Concluding Remarks - Economic Growth and Structural Change: A Possible Explanation of the Long

To conclude t h i s working p a p e r , I use t h i s final section n o t just

to

r e p e a t t h e main line of t h e argument, b u t a l s o

to

p r e s e n t some thoughts o n a d e s i r e d economic development.

In my opinion, industrialized c o u n t r i e s show

a

long wave p a t t e r n with a dura- tion between 40 and 6 0 y e a r s . The main r e a s o n behind t h i s p a t t e r n i s t h e a l t e r n a - tion of p e r i o d s with s t r o n g and f a s t changes in t h e

structure

of production

-

^{h e r e}

used in t h e widest sense, comprising t h e whole of economic, technological, organi- zational, and institutional r e l a t i o n s as perceived in a country

-

and p e r i o d s with n o o r slow changes only. Developments in t h e field of technological p r o g r e s s , and later on in t h e s t r u c t u r e of consumption, and especially in t h e s t r u c t u r e s of pro- duction of o t h e r countries, r e q u i r e , however, a continuous p r o c e s s of adjustment in t h e s t r u c t u r e of production. That t h i s d o e s not happen i s b e c a u s e of t h e impos- sibility t o keep t h e motivation of a l l t h e economic actors o p e r a t i n g at s u c h a level

as i s necessary f o r t h e p r o c e s s of adjustment. In c e r t a i n periods, t h i s motivation i s c l e a r l y p r e s e n t , but as soon as vested i n t e r e s t s become important and/or

as

soon as t h e s e i n t e r e s t s

are

t h r e a t e n e d because of continuing changes elsewhere, t h e positive motivation

to

change a l t e r s t o a more defensive one, which t r i e s

to

re- t a i n t h e s t a t u s quo as long as possible. The s t r o n g e r t h e optimistic with r e s p e c t

to

t h e defensive mood, t h e longer t h e duration of t h e upward with r e s p e c t to t h e downward phase.

That t h e long wave i s a n international phenomenon, with a remarkable correspondence, c a n b e explained by t h e f a c t t h a t , o n t h e one hand, sometimes ma- j o r events influence a l a r g e number of c o u n t r i e s

at

t h e same time, and, on t h e oth- e r hand, t h a t t h e d i f f e r e n c e s in growth and change between c o u n t r i e s i s f e l t by all t h o s e participating in t h e world economy. An example of t h e f i r s t explanation i s World War 11, which shook s o c i e t i e s t o t h e i r c o r e , t h u s c r e a t i n g a v e r y s t r o n g demand -and making possible major changes in t h e social and institutional fmme- works. An example of t h e second explanation i s Japan a n d ,

to a

lesser e x t e n t , t h e NICs.

A long wave starts i t s upward phase when a majority of t h e countries, with r e s p e c t t o t h e i r economic importance, have r e a c h e d a kind of equilibrium between t h e i r production and consumption s t r u c t u r e s , with a r e a s o n a b l e balance of pay- ments. In t h e upward p h a s e t h e s t r u c t u r e of production c h a n g e s f a s t , while t h e s t r u c t u r e of consumption starts

to

change only a f t e r a delay. Because of growing v e s t e d i n t e r e s t s , t h e changes in t h e s t r u c t u r e of production slow down, just when c h a n g e s in o t h e r c o u n t r i e s , especially, demand a f a s t e r p r o c e s s of change occurs.

The increasing mismatch between t h e a c t u a l and t h e r e q u i r e d s t r u c t u r e of produc- tion causes rigidity on many d i f f e r e n t levels and markets. This rigidity c h a r a c t e r - izes t h e recession p h a s e , while t h e depression p h a s e shows t h e painful, slow pro- cess of adjustment of t h e s t r u c t u r e of production t o t h e new circumstances.

In considering again t h e questions posed in t h e Introduction as to t h e strong- n e s s and durability of economic r e c o v e r y , I am inclined

to

say t h a t t h e industrial- ized world h a s not y e t r e a c h e d t h e lower turning point of t h e long wave. In my opinion, t h e n e c e s s a r y adjustments of t h e production s t r u c t u r e are not y e t all exe- c u t e d totally; while t h e rigidity o n t h e various levels

-

in t h e form of protection- ism, r e s i s t a n c e t o change, gloomy f o r e c a s t s

-

still exists. Of c o u r s e , t h e f i r s t s t e p s have been t a k e n , b u t end i s not y e t r e a c h e d .

This sounds negative, and i t is in a c e r t a i n way. I t means t h a t more painful o p e r a t i o n s have

to

b e done. However, i t gives us also t h e possibility

to

think a b i t more about t h e d e s i r e d economic development. Do w e want a situation of economic growth comparable with t h e p o s t World War I1 e x p e r i e n c e , or i s t h e r e a p r e f e r e n c e f o r slower growth?

What t h e advantages are of a r e c o v e r y with a s t r o n g economic growth d o not need explanation. Most people/countries have a s t r o n g p r e f e r e n c e f o r

a

higher income,

to

b e a b l e t o fulfill more consumer wants. (Whether t h i s makes people more happy is a n o t h e r question!). This p r e f e r e n c e for growth h a s been a common c h a r a c t e r i s t i c of t h e economic behavior of t h e industrialized countries.

The disadvantages of s u c h a growth option are a l s o clear. On t h e whole t h e consequences f o r t h e environment, f o r t h e quality of l a b o r , f o r t h e r e a s o n a b l e use of raw materials supplies, and f o r t h e Third World Countries h a v e t o b e considered as being much less positive. More and more people have become convinced of t h e s e negative consequences. Also, t h e p r o c e s s of adjustment t h a t must o c c u r gives a negative impact o n t h e pro-growth option.

But is it then possible

to

change t o

a

low growth option? At f i r s t s i g h t , t h i s looks a r a t h e r promising option, especially f o r t h e environment, l a b o r quality, and t h e use of r a w materials supplies. For t h e Third World Countries t h e answer i s al- r e a d y ambivalent. But t h e main question remains: Is this option a r e a s o n a b l e one f o r industrialized countries?

Two answers are possible. The answer is no if t h e choice a l s o implies t h e ab- s e n c e of f u r t h e r s t r u c t u r a l changes. If t h a t occurs, t h e situation will d e t e r i o r a t e r a t h e r fast, assuming t h a t not a l l t h e c o u n t r i e s will choose for this option and t h a t consumers r e t a i n , in t h e f i r s t instance, t h e freedom t o choose. Of c o u r s e , r e s t r i c - tions in t h i s area are possible, but t h e y a r e not seen as a viable solution.

The answer i s maybe yes if a continuation of s t r u c t u r a l change i s accepted. In t h i s c a s e , such adjustments could b e made t h a t make a low-growth solution possible without r e s t r i c t i n g t o o much t h e freedom of consumption and t h a t of international t r a d e . I have written "maybe" because I d o not have c l e a r ideas as t o what kind of adjustments are needed or as

to

t h e economic viability of this option. The doubt i s a l s o suggested because of a social r e a s o n , namely whether a n industrialized, developed country, in which growth h a s been t h e major social value f o r c e n t u r i e s , c a n s t r i v e f o r a low-growth option without creating s e v e r e social tensions. This i s maybe t h e most important argument t h a t could prevent such a n option. The possible social consequences of t h e downward phase of a long wave, mentioned

at

t h e end of t h e l a s t section, make my expectations not really optimistic.

To find suitable solutions t o t h e problems sketched and t h e questions posed, taking into account t h e multidisciplinary and international c h a r a c t e r of t h e long wave phenomenon, more r e s e a r c h i s needed. Institutions like IIASA could play a c e n t r a l r o l e in this. Will t h i s challenge b e accepted?

NOTES

1. A s a n aside, sometimes t h e striking negative c o r r e l a t i o n between t h e long-wave development of t h e economy and t h e number of publications on t h i s topic i s noted. If t h i s c o r r e l a t i o n is significant, t h a n t h e economy h a s not r e a c h e d i t s downturn y e t , according

to

t h e still growing number of publications.

2. S e e Van Paridon (1979 a , b , 1982, and 1984).

3. S e e Freeman (1982), Freeman et at. (1982), van Duijn (1983), and Del- b e k e (1981, 1984).

4. Delbeke made t h i s s u r v e y on t h e basis of t h e proceedings of t h e Siena/Florence meeting on long waves, held in October 1983. Most of t h e e x p e r t s on long waves p a r t i c i p a t e d in this conference. The material w a s published in Bianchi (1983 and 1985). Delbeke's p a p e r w a s included in t h e proceedings (see Bianchi a.o., 1985). but w a s a l s o published indepen- dently (Delbeke, 1984).

5. This opinion i s based on o u r own r e s e a r c h (Van Paridon, 1979 a , b ) , but especially on Bieshaar and Kleinknecht (1984), Van Duijn (1983). and Metz (1984).

6. The following description of t h e s e v e r a l t h e o r e t i c a l a p p r o a c h e s on t h e explanation of t h e long wave i s strongly dependent on Delbeke (1981, 1984).

7. F o r a c l o s e r description of t h e s e v e r a l t h e o r i e s , s e e Delbeke (1981). To give a n indication, a u t h o r s are h e r e mentioned according t o t h e main determinant in t h e i r a p p r o a c h :

Capital: F o r r e s t e r (SDNM), Mandel, Van Dui jn

Labor: Freeman (SPRU)

Raw materials: Rostow

Entrepreneurship/innovation: Mensch, Van Duijn

8. S e e Delbeke (1984). Exceptions a r e Senge (SDNM) and Delbeke and S c h o k k a e r t .

9. S e e Delbeke (1984), with Perez-Perez, Gordon, Edwards and Reich, and Glissmann and Wolter, as t h e main r e p r e s e n t a t i v e s .

10. Delbeke, (1984). p. 6.

11. S e e Freeman (1982).

12. S e e t h e a r t i c l e of Mensch in Bianchi et al. (1983).

13. S e e t h e a r t i c l e by F o r r e s t e r et al. in Bianchi e t a l . (1983), and Sterman (1984).

1 4 . Whether a c o u n t r y c a n always r e a p t h e s e f r u i t s i s a n o t h e r question, as i s whether d i r e c t investment by t h e s e companies c a n b e judged as a profit- a b l e development f o r a country.

REFERENCES

Bianchi, G., G . Bruckmann and T. Vasko (Eds). (1983). Background m a t e r i a l f i r a Meeting o n Long Waves, Depression a n d I n n o v a t i o n , Siena/Florence, Oc- t o b e r 26-29, 1983. IIASA, Laxenburg, CP-83-44.

Bianchi, G.. G. Bruckmann, J . Delbeke and T. Vasko (Eds). 1985. Long Waves, Depression and Innovation: Implications f o r National and Regional Economic Policy. P r o c e e d i n g s of t h e S i e n a n l o r e n c e Meeting (26-30 October 1983).

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Freeman C. (ed) (1982). Long Waves i n the World Economy. Guildford, Butter- worth.

Freeman, C.. J. Clark a n d L. S o e t e (1982). Unemployment a n d Technical Innova- t i o n . London, F r a n c e s P i n t e r .

Metz, R. (1984). Zur empirischen Evidenz "Langer Wellen". Kyklos, V o l . 37, p.

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OECD (1984), Economic Outlook, No. 35, P a r i s

Rosenberg , N. and C.R. F r i s c h t a k . (1984). Technological innovation and long waves. Cambridge J o u r n a l of Economics, Vol. 8 , p. 7-24.

Sterman, J.D. (1984). An Integrated !theory of the Economic Long Wave. WP- 1563-84, Massachusetts Institute of Technology, Cambridge.

Van Duijn, J.J. (1983). The Long Wave in Economic LiJe. London, George Allen and Unwin.

Van P a r i d o n , C.W.A.M. (1979a). Lange goLuen i n het economisch Leuen (Long Waves i n Economic L u e ) . Unpublished Master's t h e s i s .

Van P a r i d o n , C.W .A.M. (1979b). Onderzoek n a a r d e l a n g e golven In Het economlsch leven (Study o n t h e long waves in economic life), M a a n d s c h m Economie, V o l . 43, p. 227-238 a n d p . 280-298.

Van P a r i d o n , C.W.A.M. (1982). De HandeLsreLatie van N e d e r l a n d met d e B o n d s RepubLiek L h i t s L a n d . BeLangrijk, m a a r n i e t u i t z o n d e r l i j k . @he t r a d e r e - Lations b e t w e e n t h e N e t h e r l a n d s a n d t h e Federal RepubLtc of G e r m a n y : Im- p o r t a n t b u t n o t E z c e p t i o n a l ) . Published by t h e S c i e n t i f i c Council f o r Governmental P o l i c y , S t a a t s u i t g e v e r i f , Den Haag.

Van P a r i d o n , C.W.A.M. (1984). T h e o r i e o v e r d e l a n g e golf. (A t h e o r y o n t h e long wave), in C. W. S c h o u t e n (ed), Lk Lange Golf @he Long Wave) SMGInJbrmatief 1984-1 Den Haag, pp. 32-36.

Im Dokument Economic Growth and Structural Change: A Possible Explanation of the Long Wave (Seite 21-25)