Counterfactuals that stick

–In a recent article titled, “Growth Regimes,” the economist, Peter A. Hall, posits three successive growth regimes in post-WWII capitalism (without the embedded footnotes):

The growth regime of the era of modernization promoted rapid economic growth, but it also ensured that more than 60 percent of national income in the developed political economies went to labor and reduced income inequality to the lowest levels it was to see in a century. Employment became increasingly secure and prosperity spread geographically, as industries moved to smaller towns and cities. The expansion of white-collar employment shifted the occupational structure in ways that increased social mobility. This was not a perfect society. Pockets of poverty remained, and opportunities were more limited for women than for men, but an expanding social safety net supported people without employment and the fruits of economic prosperity were widely shared.

By contrast, the growth regime of the era of liberalization shrank the labor share and increased levels of income inequality, especially at the top of the income distribution in Anglo-American economies, as managerial salaries increased more rapidly than those of production workers and rising returns to financial assets privileged people with access to them. Employment security declined for large swaths of the population, and outsourcing trapped many people in low-wage secondary labor markets. In some countries, the prospects for social mobility declined with each successive cohort entering the labor force after 1980. . .

The era of knowledge-based growth has brought further dislocation, as technological revolutions do. The rapid offshoring of manufacturing jobs has polarized the occupational structure, eliminating many middle- skill jobs that were once stepping-stones to social mobility. Forty percent of workers in Europe are now employed in nonstandard work. The movement of skilled jobs in high technology to urban clusters has exacerbated regional disparities in income and employment. The turn toward social investment has improved the lives of working women and expanded educational opportunities for some young people, but it has done so on a far from equal basis and at the cost of tying social benefits for many to work in low-wage labor markets. . .

I want to pick up that thread of thought, “This was not a perfect society,” in the first paragraph and ask: What was lost in modernization’s imperfect but evolving society when superseded by the later growth regimes? What failed to be realized that could/would have been better or worse than the developments later on?

The questions are important because answers are easy to overlook, namely: Modernization, liberalization and ever more knowledge-based growth occurred and still occur in different ways over different times and different locations. We have cases where modernization was not and is not superseded as rapidly as in other cases. The impacts of liberalization and knowledge-based growth remain highly differentiated and attenuated, in far many areas worldwide, to be ignored.

–So what?

Many now see the need to reconsider the notion that integration of China and Russia into the liberal economic order would moderate their behavior. Wouldn’t it have been better all along to say that the two nation states have modernized in very different ways in response to liberalization and the ICT revolution? Can we really demonstrate that their respective elites benefited in similar ways and to similar ends? I don’t think so.

Principal source

Hall, Peter A. (2022). Growth regimes. Business History Review doi:10.1017/S0007680522000034