Showing papers by "Erik S. Reinert published in 2012"

Innovation systems and policy: not only for the rich?

Abstract: This article argues that the conditions for innovation by and for the poor have changed considerably in the last four decades in ways that can be related to the paradigm shift in technology and to the resulting changes in behaviour of the major corporations. It suggests that innovation studies and evolutionary economics should consciously and constantly pursue an understanding of such changes by fully incorporating history in the interdisciplinary mix. In essence it holds that evolutionary thinking needs to strike an appropriate balance between universal and changing truths, especially when studying innovation with a view to making policy recommendations.

Neo-classical economics: A trail of economic destruction since the 1970s

Abstract: This paper argues that the international financial crisis is just the last in a series of economic calamities produced by a type of theory that converted the economics profession from a study of real world phenomena into what in the end became mathematized ideology. While the crises themselves started by halving real wages in many countries in the economic periphery, in Latin America in the late 1970s, their origins are found in economic theory in the 1950s when empirical reality became academically unfashionable. About half way in the destructive path of this theoretical tsunami – from its origins in the world periphery in the 1970s until today’s financial meltdowns – we find the destruction of the productive capacity of the Second World, the former Soviet Union. Now the chickens are coming home to roost: wealth and welfare destruction is increasingly hitting the First World itself: Europe and the United States. This paper argues that it is necessary to see these developments as one continuous process over more than three decades of applying neoclassical economics and neo-liberal economic policies that destroyed, rather than created, real wages and wealth. A reconstruction of widespread welfare will need to be based on the understanding that what unleashed the juggernaut of welfare destruction was not ‘market failure’; it was ‘theory failure’. Being a resume of a larger research project, the paper includes references to more detailed studies of these processes of ‘destructive destruction’.

Mechanisms of financial crises in growth and collapse;Hammurabi,Schumpeter,Perez, and Minsky

Abstract: This article provides a historical and theoretical overview of the mechanism leading up to financial crises and financial bubbles. It suggests that the potentially explosive growth of the financial sector at the expense of the real economy fed by compound interest has-since before ancient mesopotamia under the rule of Hammurabi-represented a real threat for such crises. A more modern and additional factor that builds up crises is Joseph Schumpeters observation of the clustering of innovations.Carlota Perez has more recently developed Schumpeters vision into a theory of techno-economic paradigms which - about midway in their trajectory-produce a build-up to financial crises. The theories of Schumpeterian economist Hyman Minsky, which describe the mechanisms leading to the collapse of financial bubbles, complete the overview. The article ends with recommendations to bring the West out of the present crisis by - once again -putting the real economy, rather than the financial economy, in the drivers seat of capitalism.

Economics and the Public Sphere

Abstract: This paper identifies four different periods (1848, 1890s - partly also 1930s - and neoliberalism today) where the same tendencies recur: a Rise of Academic Monoculture (of esoteric knowledge), Refeudalization (tendencies towards a plutocracy), Crisis and Renewal. These sequences and their recurrence define the changing relationship between economics and the public sphere, and it is only through activities in the public sphere that any renewal will take place.