The Professional Historian in the Era of Globalization

Who is Lying on the Procrustean Bed?: Current Historians of the World, Denationalize Ourselves!

By: Naoki Odanaka (Tohoku University)

Abstract: This paper aims to analyze and evaluate the arguments presented in the Writing the Nation series (hereinafter WtN), targeting particularly its Vol. 2 entitled Setting the Standard (hereinafter StS). In a globalized world, do we historians still need to talk about national history, that is, the practice of writing the history of nations or should we not instead seek to produce historical works suitable for the globalized world, including global histories?

URL: https://econpapers.repec.org/paper/tohdssraa/53.htm

Distributed by NEP-HIS on 2017-04-09

Review by: Stefano Tijerina (University of Maine)

Naoki Odanaka argues that the present era of globalization demands that the historian abandons its state-centered focus and instead begins to construct history from a global perspective in order to use history as an instrument to understand how we reached the current political, economic, political, and cultural dynamics. His argument departs from the conclusions of the Writing the Nation series, and more particular volume 2 of that series, where a consensus among almost 100 historians was reached that a refocus of the study of history was necessary in order to adapt to current realities.[1] Odanaka asks whether the current focus on “national history” is relevant or if historians should instead “produce historical works suitable for the globalized world;” in other words, should they instead engage in the production of global histories? [2] Odanaka does not discard the relevance of national history but instead suggests we move toward a global analytical approach that connects and provides a more holistic understanding of developments such as free trade, multilateralism, the emergence of trading blocks, geopolitical transformations, movements of people and commodities, and technology.

National histories, suggests Odanaka, continue to serve their purpose of nation building.[3] They are important tools for the construction of national identity; they “legitimize the existence” of the nation-state.[4] From his perspective, there is no denial that the nation-state continues to be relevant, and in some regions the concept “has grown stronger,” but globalization has inevitably impacted the political, economic, social, cultural, and environmental development of each nation.[5] The dynamics of globalization have “destabilized” the lives of private, public and social actors, forcing them to “cling” to their national identities as they become challenged by the flow of goods, ideas and people, and it has been the role of the traditional historian to keep the construct of the nation-state alive in spite of the changing dynamics.[6] Odanaka highlights the flow of immigrants from the Middle East to Europe and the impact that this has had on the nation-state narrative, forcing the co-existence between the global and the national interpretations of history.[7]

The author’s Euro-centric focus impedes him from moving beyond the North-South dynamics of globalization. A more holistic analysis of South-South and North-North dynamics would have strengthened his argument, since the legitimization of the nation-state is challenged by transformative historical realities within the global North and the global South as in the case of Venezuelan-Colombian relations or British and European Union relations that may only be explained through transnational global history.

Naoki Odanaka does agree that current realities may not be explained through the cohesively confined borders of the nation-state, because doing so leads to “methodological nationalism.”[8] There is no exclusivity anymore; borders have become very porous and in some instance they have completely disappeared as in the case of commercial trade under the North American Free Trade Agreement (NAFTA) or as in the case of global human and narcotics trafficking.

Therefore, says Odanaka, historians need to center their research strategy on “other frameworks of historical research.”[9] He suggests new approaches such as non-spatial focuses or “non-national spatial identities.”[10] His critical views of the nation-state approach impede him however from considering other spatial dimensions of historical analysis that, although relying on the nation-state, only incorporate the nation-state as one of many transnational actors within the more holistic analysis. For example the labor history of oil that forces the historian to see not only labor as a transnational issue, but corporations, management culture, institutional frameworks, technology, commercialization, transportation, marketing, and consumption as well.

Noaki Odanaka concludes by saying that the professionalization of the historian depends on the traditional notion of the nation-state as the central focus of historical narrative. There is a notion that there cannot be a historian without the nation-state, thus the state-centered focus of the local and international institutions that promote and justify the profession and science of history. From the beginning, the methodology became state-centered, thus his argument about the prevalence of “methodological nationalism” and the need to change this culture from within the profession.[11] Odanaka therefore suggests that a shift away from nation-state dependency demands institutional changes as well as a revision of the science’s methodology.

History may no longer be used as an instrument for the justification and preservation of the nation-state. Odanaka would agree that global and transnational approaches to the study of history may serve as an instrument to help societies look at themselves in the mirror, leading them to question traditional views by breaking the barriers of imaginary borderlands that currently impede the public from seeing the historical interconnectivity that has always existed between humans, commodities, ideas, cultures, and physical environments. History may serve as an instrument to break down the status quo, debunking the sovereignty of the nation-state, a reality that is already visible under the new dynamics of globalization. This might mean that historians may cease to exist as agents of the nation-state and instead serve as agents of humanity.[12]

Odanaka recommends that professional historians self-reflect on their responsibility to humanity.[13] This is challenging, particularly for historians in the Global North who are writing and researching from a position of privilege as well as for those historians in the Global South clinging to fragile institutional and nation-state structures that are quickly being dismantled by the market forces of globalization. Odanaka reminds historians to reflect on the current political, economic, social, cultural, technological, and environmental realities in which they are living.[14] He reminds historians that their job is to connect the past with the present in order to decipher and explain contemporary realities, constantly aware of identity and spatial constructs that limit our scope as researchers.[15]

[1] For more information see volume 2 Setting the Standard; Ilaria Porciani and Jo Tollebeek, eds., “Setting the Standard,” in Writing the Nation series, ed. Stefan Berger, Christoph Conrad, and Guy Marchal (Basingstoke: Pelgrave Macmillan, 2012)

[2] Naoki Odanaka, “Who is Lying on the Procrustean Bed?: Current Historians of the World, Denationalize Ourselves!” (paper, review forum for the Writing the Nation Series, Sogan University, Seoul, Korea, April 22, 2016), 1.

[3] Ibid., 1.

[4] Ibid.

[5] Ibid., 2.

[6] Ibid.

[7] Ibid.

[8] Ibid.

[9] Ibid.

[10] Ibid.

[11] Ibid., 5.

[12] Odanaka points out the case of local historians in France and Germany as well as Japanese historians that went against the status quo in order to illustrate alternatives to traditional nationalist approaches to history. Ibid., 5-6.

[13] Ibid., 8.

[14] Ibid.

[15] Ibid., 9.

Is the Glass Half Full?: Positivist Views on American Consumption

Fifty Years of Growth in American Consumption, Income, and Wages

By Bruce Sacerdote (Darmouth)

Abstract: Despite the large increase in U.S. income inequality, consumption for families at the 25th and 50th percentiles of income has grown steadily over the time period 1960-2015. The number of cars per household with below median income has doubled since 1980 and the number of bedrooms per household has grown 10 percent despite decreases in household size. The finding of zero growth in American real wages since the 1970s is driven in part by the choice of the CPI-U as the price deflator; small biases in any price deflator compound over long periods of time. Using a different deflator such as the Personal Consumption Expenditures index (PCE) yields modest growth in real wages and in median household incomes throughout the time period. Accounting for the Hamilton (1998) and Costa (2001) estimates of CPI bias yields estimated wage growth of 1 percent per year during 1975-2015. Meaningful growth in consumption for below median income families has occurred even in a prolonged period of increasing income inequality, increasing consumption inequality and a decreasing share of national income accruing to labor.

URL: http://EconPapers.repec.org/RePEc:nbr:nberwo:23292
(Click here for a free download version)

Distributed by NEP-HIS on:2017-04-23

Revised by: Stefano Tijerina (Maine)

Contrary to the popular outcry that the gap between rich and poor in the United States has steadily increased since the 1960s and that the quality of life has steadily deteriorated, Bruce Sacerdote argues that the picture is not as grim and that the steady rise of household consumption for households “with below median income” is evidence that the national economy has continued to thrive for all U.S. citizens and not just those on the top.[1] In “Fifty Years of Growth in American Consumption, Income, and Wages” Sacerdote reveals that the focus on wage growth favored by economists and policy makers impedes us from focusing on other aspects of growth, such as consumption and the quality of consumed goods.[2] From his perspective focusing on real wage growth and the inflated rates of the Consumer Price Index (CPI) only tells half of the story and that it is therefore necessary to center on consumption data in order to construct a more holistic picture of the economic realities of the below median income household.[3] From his perspective, “low income families have seen important gains in at least some areas of consumption” thanks in part to a steady growth in consumption of 1.7 percent per year since 1960.[4]

Bruce Sacerdote adjusted the CPI to the bias corrections developed by Dora Costa and Bruce Hamilton who previously worked on similar questions, looking at “the true costs of living” and new ways of estimating “real incomes” in the United States.[5] His findings for the period between 1960 to 2015 concluded that there was an increase of 164 percent in consumption for those below the median household income.[6] A previous consumption measure for the same period of time, excluding the bias measures from Costa and Hamilton, showed a 62 percent increase in consumption.[7] A third measurement that calculated real wages using the Federal Reserve’s Personal Consumption Expenditures (PCE) for the same period of time reversed the claims of wage stagnation furthered by some economists, policy makers, citizens, and labor union advocacy groups. This last measurement showed that when using the PCE to deflate nominal wages, the growth of real wages was 0.54 percent per year.[8] This contradicts the arguments of data sets such as the “2016 Distressed Community Index” that focus specifically on the increasing gap between rich and poor in the United States.[9]

Beside the bias corrections and other measurements, Sacerdote argues that the quality, technology, and durability of current consumption goods is superior to that of previous decades, therefore expanding the relative capacity of consumption of those below the median income. For example he claims that “the number of cars per household has risen from 1 to 1.6 during 1970-2015,” while the median home square footage for this income segment has risen about 8 percent during this same period of time.[10]

His objective of focusing “on growth rates in consumption instead of changes in poverty rates” is achieved by using data and methodologies for analyzing data that shows that “the glass half full” but as it is evident from the working paper, quantitative data can be tailored to fit the researcher’s agenda. Numerous questions surface regarding consumption trends in the United States that lead to further conclusions that indicate that the 164 percent increase of the past fifty-plus years is the result of greater household debt and cheaper consumer goods prices that are tied to the impacts of globalization. Consumer households that fall below the median income continue to steadily consume more, there is not doubt about that, but their wages continue to depreciate while their debt continues to rise. Moreover, globalization has allowed companies to transfer their production overseas, leading to a loss of jobs in the manufacturing sector that potentially offered higher than minimum wage salaries to those households that ranked below the median income. The transfer of production has at the same time guaranteed cheaper products to these consumers that then are able to consume more with their lower wages and their greater access to loans that artificially maintain their consumption capacity while increasing their debt to income ratio.

According to the U.S. Census Bureau, the median household income for the year 2014 was $53,719.[11] This means that half of Americans earned less than that amount. This population, that represents the central focus of Sacerdote’s research, currently has an average household debt of $130,000 (assuming that those earning below the median income are forced to go into debt to maintain their standard of living).[12] The breakdown of this debt shows that mortgages, credit cards, auto loans, and student loans make up most of the American debt.[13] This could indicate that the steady consumption increase demonstrated by Sacerdote could actually be artificially maintained by the financial system that keeps the American consumer afloat.

Sacerdote’s work could also benefit from qualitative research that would provide more in-depth analysis and at the same time counter-balance his claims on consumer choice and the reliability of products being consumed. Qualitative research could provide a different explanation as to why low-income consumers have opted to hold on to their vehicles for longer periods of time, how they are able to purchase expensive technology such as cell phones and access services such as internet and cable television, if indoor plumbing is a sign of a higher quality of life or simply a response to policy and the standardization of construction norms, and if the increase in housing square footage per household really represents a higher quality of life.  

Selectivity of data and research approach in this case clearly benefits the researcher’s argument but this could quickly be turned around with other sets of data and a different research approach. A focus on credit rates and debt rates over the same period of time shifts the argument around and leads to completely different conclusions, and so would a qualitative analysis of the quality of life of Americans. Although controversial, Sacerdote’s work forces the reader to think more critically about the changes that have taken place in American society in the past fifty-plus years and brings up the question of whether or not this consumption approach is more reflective of the nation’s economic dependence on consumer consumption as a percentage of the GDP.

References

[1] See for example Thomas Piketty’s argument on the increasing gap between rich and poor and the possible threat to capitalism and democratic stability in “Capital in the 21^st Century.” Cambridge: Harvard University (2014).

[2] Bruce Sacerdote. “Fifty Years of Growth in American Consumption, Income, and Wages.” National Bureau of Economic Research, working paper series, working paper 23292, March 2017. Accessed April 25, 2017. http://nber.org/papers/w23292, 2.

[3] Ibid.

[4] Ibid., 1-7.

[5] See Dora L. Costa. “Estimating Real Income in the United States from 1888 to 1994: Correcting CPI Bias Using Engel Curves.” Journal of Political Economy 109, no. 6 (2001): 1288-1310, and Bruce W. Hamilton. “The True Cost of Living: 1974-1991.” Working paper in Economics, The John Hopkins University Department of Economics, January 1998.

[6] Sacerdote. “Fifty Years of Growth in American Consumption, Income, and Wages,” 2.

[7] Ibid., 1.

[8] Ibid., 3.

[9] “2016 Distressed Community Index: A Analysis of Community Well-Being Across the United State.” Accessed April 25, 2017. http://eig.org/dci/report. See also for example Gillian B. White. “Inequality Between America’s Rich and Poor is at a 30-Year High.” Washington Post, December 18, 2014. Accessed May 1, 2017. https://www.theatlantic.com/business/archive/2014/12/inequality-between-americas-rich-and-americas-poor-at-30-year-high/383866/.

[10] Sacerdote. “Fifty Years of Growth in American Consumption, Income, and Wages,” 2.

[11] Matthew Frankel. “Here’s the Average American Household Income: How do you Compare?” USA Today November 24, 2016. Accessed May 2, 2017. https://www.usatoday.com/story/money/personalfinance/2016/11/24/average-american-household-income/93002252/

[12] Matthew Frankel. “The Average American Household Owes 90,336 – How do you Compare?” The Motley Fool May 8, 2016. Accessed May 10, 2017. https://www.fool.com/retirement/general/2016/05/08/the-average-american-household-owes-90336-how-do-y.aspx

[13] Ibid.

A Gift From Europe to the World: Globalization, Capitalist Expansionism and Professional Bicycle Road Racing

The History of Professional Road Cycling

by Jean-François Mignot

Abstract:

Why did cycling become professional as early as the late nineteenth century, while other sports (such as rugby) and other sport events (such as the Olympic Games) remained amateur until the 1980s? Why are the organizers of the most important bicycle races private companies, while in other sports such as soccer the main event organizer is a nonprofit organization? To what extent have bicycle races changed since the late nineteenth century? And how does cycling reflect long-term economic changes? The history of professional road cycling helps answer these questions and understand many related phenomena. This chapter provides a long-term, historical perspective on (1) professional road cycling’s economic agents, i.e., the public, race organizers, team sponsors and riders, and the relationships amongst them; (2) cycling’s governing body, the International Cycling Union; and (3) professional cycling’s final product, i.e., the show of bicycle races. More precisely, the chapter mostly focuses on the history of male professional road cycling in Western Europe since the late nineteenth century. It is founded on both an analysis of quantitative time series on the Grand Tours (and, to some extent, the classics) and a review of the existing literature on the history of professional cycling, whether economic history, institutional history, cultural history, or sport history.

URL: http://EconPapers.repec.org/RePEc:hal:journl:halshs-01326719

Distributed by NEP-HIS on 2016-10-02

Revised by: Stefano Tijerina, Ph.D.

The professionalization and commercialization of sports illustrates the forces of capitalism in action, as its culture and institutional structures transition from the local to the global in response to the demands of the market and the increasing interdependence among multiple private and public stakeholders. In his brief history of professional road cycling Jean-François Mignot demonstrates how the sport is transformed throughout the twentieth century as it transitioned from amateur to professional. Mignot argues that the professionalization of this sport anticipated many other international sports because the forces of capitalism pressured the athletes to abandon their amateur status early on in order to secure an income.[1] His research reveals the early infiltration of the private sector within the culture of cycling in Europe, the institutional transformation of the sport, the market’s impact on the institutional structure of bicycle racing, and its integration into the global system. Ultimately, his historic analysis allows the possibility of drawing parallels with the processes of transformation experienced by other goods, commodities, and services that adapted to the inevitable pressures of the expansion of capitalism.

Jean-François Mignot’s research shows that the idea of organizing road race competitions around the commonly used bicycle emerged from the desire of newspapers across Europe to sell more newspapers through this new and creative marketing scheme. Newspapers in France, Belgium, Spain, and Italy began organizing races on public roads in the late 1800s to show the public that human and bicycles could cover vast distances across flat and mountainous terrain. As indicated by Mignot, early races of 25 to 70 hours in duration covering 250 to 400 kilometers became epic sporting events of duration and perseverance among extraordinary European athletes.[2] The media’s construct of these epic figures created the thirst for road cycling, but it was the fact that the spectator standing on the side of the road was only able to watch the spectacle for a few seconds and depended on the print media to recreate the rest of the race, that pushed newspapers into the sponsorship business. It was this interdependent relation between spectator, athlete, and newspapers that inspired the print media industry to organize these road races, hoping that races would become magnets for advertisement sales. As indicated by Mignot, “cycling fans demanded more information” and “pictures of the race,” and the race organizing newspapers were interested in supplying the demand by covering the races in detailed form as they watched circulations increase.[3]

The one-day races or “Classics” and the three-week “Grand Tours” became the backbone of professional road racing in Europe. By the 1930s newspapers had monopolized the sponsorship of the events, while fans filled the roadways accompanied by publicity caravans “that distributed product samples to spectators.”[4] Meanwhile bicycle and tire companies became the sponsors of teams, as individual riders were replaced by teams that worked on behalf of the stars that made up the top cycling teams in Europe.[5]

In the early stages of professionalization, cycling stars did not receive any wages and were therefore forced to secure their income through race earnings. The increase in the popularity of the sport was followed by the increase in riders’ income.[6] The interdependent relations necessary for the expansion of capitalism slowly developed; increasing sales motivated the newspapers to improve the quality of the spectacle by increase the race winnings, forcing the sponsors to offer better wages in order to recruit and maintain the loyalty of the top cyclists, ultimately attracting more fan-base that in turn attracted other secondary sponsors that turned the caravans into marketing spectacles as well. This became even more lucrative as other means of communication joined in, particularly radio and later on television.

Jean-François Mignot points out at the first three decades of the Cold War was a period of crisis for the sport in Europe, emphasizing that urbanization and the increasing sales of motorcycles forced bicycle manufacturers to decrease their team sponsorship funding and ultimately sending the salaries of professional riders in a downward spiral.[7] This, argued Mignot, forced the professional rider to seek sponsorships outside of the bicycle world.[8] The stars and their teams began to tap the “extra-sportif” market for sponsorship and this market segment was quick to capitalize on the opportunity.[9]

Jean-François Mignot points out that sponsoring newspapers and bicycle companies interested in protecting their own profit margins opposed the penetration of “extra-sportif” sponsors by trying to control the rules of the sport in order to impede their participation, but at the end the market forces prevailed.[10] This European crisis that unfolded between the 1950s and 1980s was in fact the initial era of global commercialization of the sport. Mignot’s Euro centrism impedes him from moving beyond the region’s Grand Tours and Classics, not recognizing that the “extra-sportif” sponsorships that challenged the status quo took professional cycling outside of Europe and introduced it to the rest of the world. For example, by the 1950s radio transmissions of the European races were common in distant places like Colombia where their own private sectors had replicated the European business model and established lucrative professional road races to supply the local demand for professional bicycle road racing. The first edition of the Colombian Grand Tour, La Vuelta a Colombia, was organized in 1951, and by then several local Classics like the Tunja-Bucaramanga and the Medellín-Sansón were already engrained in the Colombian cycling culture. As in the case of Europe, local newspapers like El Tiempo became interested in sponsoring the local Grand Classic as a means to increase sales and circulation, but contrary to the European distrust of “extra-sportif” sponsors, the Colombian organizers welcomed other private local sponsors including the national airline Avianca, the Bavaria brewery, Avisos Zeón and the Flota Mercante Grancolombiana.[11]

The crisis of professional bicycle road racing in Europe described by Mignot was certainly caused by a decreasing popularity of the sport and the internal struggles over the monopoly of the sponsorship and management of the sport, but it was also the market’s response to the emergence of other professional sports in Europe as well as the professional cyclist’s ability to capitalize on the globalization of the sport. It was an illustration of how, in a capitalist system, the internal saturation of a market led to the natural expansion into other global markets, as in the case of Colombia in the 1940s and 1950s.[12]

Such was the case of French Born, José Beyaerst, the 1948 Olympic road race champion who moved to Colombia after the Second World War, winning the second edition of the Vuelta a Colombia in 1952 and later on establishing a career as the coach for the Colombian national cycling team.[13] Beyaerst would make Colombia his home, developing the professionalization of the sport and becoming a key player in what would later become one of the cycling powers of the world. The expansionism of the sport would reach all corners of the world between the 1950s and the 1980s, it was a period of crisis for Europe as Mignot points out but it was a glorious time for global professional bicycle road racing.

Television was the game-changer, spearheading the resurgence of professional cycling in Europe in the 1980s. Taking advantage of the integration of Europe, race organizers capitalized on the magic of television to attract new European audiences, redesigning the stage circuits of the Grand Tours (Giro d’Italia, Vuelta a España, and the Tour de France) with the intention of tapping new urban centers that were outside of Spain, France, and Italy.[14] Television also globalized the European Grand Tours, introducing the cycling stars to the world, providing an opportunity for sponsors to reach a global audience, selling commercial air space, and as a result increasing revenues, salaries and profits for the whole sport.

Jean-François Mignot points out that the globalization of the sport also impacted the nature of cycling teams. By the 1980s the teams competing in the Grand Tours were no longer made up of Spanish, Italian, and French riders; their nationalities diversified and so did their sponsors.[15] Although Mignot highlights the fact that by 1986 the American Greg LeMond had won the Tour de France, Colombia’s Lucho Herrera had conquered the Vuelta a España (1987), the Russian Evgueni Berzin the Giro d’Italia (1994), and the Australian Cadel Evans the Tour de France (2011), he does not point out that these foreign cyclists also brought with them new local sponsors that then began to compete with European sponsors.[16] Mignot avoids talking about the American Lance Armstrong, leaving a large gap in the history of the globalization of the sport, considering that the American rider won seven consecutive Tour de France championships (1999-2005) before the US Anti-Doping Agency and the Union Cycliste Internationale stripped him from his titles after a doping scandal. Although LeMond popularized cycling racing in the United States it was Armstrong that converted it into a multi-billion dollar industry bringing in American brands such as RadioShack and Motorola into the world of cycling.

Jean-François Mignot’s research illustrates how the sport expanded globally as the Western World exported the idea of the professionalization and commercialization of cycling, taking advantage of the expansion of Western culture across the world, the increasing leisure time and incomes of the global population, and the increasing communications technology that allowed viewers from across the world to connect with the live stage by stage action of the Grand Tours and the Classics. Nevertheless, his Euro centric approach impedes him from explaining how the professionalization of the sport evolved outside of Europe. Although Mignot clarified early on that his analysis centered on Europe, this approach weakened his argument regarding the globalization of the sport and its repercussion on the European construct, as foreigners began to conquer and dominate the sport as in the case of Americans Greg LeMond and Lance Armstrong, or the current stars South African born Christopher Froome and the Colombian climber Nairo Quintana. The incorporation of a broader global perspective would have allowed Mignot to test whether or not the professionalization of the sport in other markets was also spearheaded by other local newspapers or if on the contrary other media and non-media-based sponsors jumped on this business opportunity. It would have also been important to identify when professionalization took place in other markets to compare whether or not the influence of the European sport transcended the borders in a timely manner or even identifying political, economic, social, and cultural factors that delayed its expansion into other global markets. Moreover, it would have been important for Mignot to link the policies of the Union Cycliste Internationale to the globalization of the sport, as well as the escalation of global competition among bicycle manufacturers, and the global competition between scientists, technological designers, and pharmaceutical industries that centered on the legal and illegal preparation of the current athlete.

[1] Jean-François Mignot. “The History of Professional Road Cycling.” HAL archives-ouvertes.fr, https://halshs.archives-ouvertes.fr/halshs-01326719/document, June 5, 2016, p. 4.

[2] Ibid., 2.

[3] Ibid.

[4] Ibid., 3.

[5] Ibid.

[6] Ibid., 4.

[7] Ibid., 5.

[8] Ibid.

[9] Ibid.

[10] Ibid.

[11] “Vuelta a Colombia Historia.” Ciclismo colombiano – La Vuelta a Colombia. April 25, 2007. Accessed November 21, 2016. http://ciclismo.al-dia.info/index.php?option=com_content&task=view&id=13.

[12] Ibid.

[13] Kidnapping of Lucho Herrera (and José Beyaert’s Narrow Escape”. Alps&Andes, March 2000. Accessed November 21, 2016. http://www.alpsandes.com/posts/clinginquisition.com/2013/04/the-kidnapping-of-lucho-herrera-and.html

 

[14] Mignot, “The History of Professional Road Cycling,” 5.

[15] Ibid.

[16] Ibid., 6.

Neo-Schumpeterian views of Economic Development Today

The Theory of Economic Development of J.A. Schumpeter: Key Features

By Iurii Bazhal (Economics Department, National University of Kyiv-Mohyla Academy)

Abstract: This paper comprises translation into English of the preface of Iurii Bazhal to the first Ukrainian edition of Joseph Schumpeter’s famous fundamental book “The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle” that was translated in Ukrainian and published in 2011 in commemoration of its 100^th anniversary. The paper reveals the contemporary significance of this classical book as the challenger on replacing the neoclassical approaches in capacity to become the mainstream of modern economic theory. It is shown that Schumpeter’s approach gives a new vision of driving forces for economic development where a crucial conceptual place belongs to the category of innovation. Second part of the paper reviews modern Neo-Schumpeterian approaches which have substantiated the importance of the structural innovation technological change of national economy for economic development. The government must permanently analyze a compliance of the actual production structure in the country with the current and future technological paradigms.

URL: http://EconPapers.repec.org/RePEc:pra:mprapa:69883

Distributed by NEP-HIS on: 2016-03-29

Reviewed by Stefano Tijerina (University of Maine)

In an effort to recommend economic policy solutions to the “young market economy” of Ukraine, Iurii Bazhal breaks down Joseph Schumpeter’s principles of national economic development, arguing that current global implementations of economic development policies dominated by the neoclassical economic model are not generating and have never generated “evolutionary innovative ‘jumps.’”(p. 12). Emerging economies and stagnant advanced economies would benefit immensely from the revision of the neoclassical approach, centering instead on the Neo-Schumpeterian approach that recognizes economic structures of technological systems as the base of long-term economic growth (idem). From Bazhal’s perspective, business-government partnerships should focus on national economic development strategies that center on the creation and advancement of innovative technological systems that generate revolutionary global social, cultural, economic, and political change.

These historical transformations that have changed humanity and its relation to resources and the natural world have catapulted some nations into positions of power that have translated into national economic prosperity. Bazhal identified five “paradigms” that altered the economic development of the modern world, including the substitution of machinery for handwork in weaving (1790-1850), coal mining and the steam engine (1851-1895), iron industry (1896-1946), oil based energy and organic chemistry products (1947-1989), and microelectronics (1990-2040). Schumpeter identified these periods as “dynamic” periods of economic development (pp. 4 & 13).

Contrary to “static” development where reproduction of traditional production structures were replicated nation after nation across the world, “dynamic” economic development based on technological innovation was and continues to be the only solution for capitalist nations interested in substantially increasing their national wealth and social welfare (p. 4). Nations spearheading the different periods of global innovation promoted and justified the implementation of the revised status quo in order to legitimize its global systemic outreach, restraining other nation’s ability to create and produce new dynamic value added solutions to their own development strategy (idem). This, said Bazhal, explained the “trap” that has impeded the present economic development of nations such as Ukraine (idem).

In order to achieve “dynamic” economic development like the one that catapulted Britain and the United States into positions of global power, it was necessary to move beyond the “model of circular flow of income and expenditure between firms and households” promoted by the neoclassical macroeconomic model (p. 6). This Schumpeterian view that “new combinations” of economic development strategies and technologies is what takes nation states into new realms of economic development patterns is what Bazhal is arguing for Ukraine. Combinations, I would argue, that are exemplified in Brazil’s reinvention into an ethanol-based economy that moved the nation away from oil dependency and thus breaking the restrains imposed by the oil based development model advanced by the United States throughout the Twentieth Century. Brazil’s case represented a “disruption of equilibrium by new combinations,” as Schumpeter would put it (p. 7). A new equilibrium based on an increase in the size of resources, the size of capital, the size of the labor force and the size of the national domestic product represent at that point Schumpeterian dynamics of economic development. Impactful and effective economic development therefore lies in business-government relations where the innovative entrepreneur has the flexibility and authority to influence the direction of policy; norms, regulations, and institutional designs that allow the entrepreneurial forces to implement and carry forward new “combinations or innovations”(idem).

A more deregulated system, argues Bazhal, would allow Ukraine’s entrepreneurial forces to move forward with the model recommended by Schumpeter. Yet the neoclassical restrains promoted by the European Union, the United States and the multilateral agents impede the clicking of new combinations (p.8). Ukraine’s economic development salvation lies in the invention or creation of a “new technological paradigm” that will catapult the nation into a more advanced economic development stage within the global economic market system (p. 11). This evolutionary dynamic, argues Bazhal, must be accompanied by “structural technological changes” that will guarantee stable economic development conditions at the design and implementation stages of the policy.

Schumpeter’s theory indicates that for this to take place, the nation’s business and political actors must also be willing and prepared to execute the “creative destruction” of the traditional systems and philosophical ideas of production. This aspect of the evolutionary process, from my perspective, is what is impeding Brazil from capitalizing fully from its transformation into an ethanol-based economy. Although not highlighted by Bazhal, the economic, political, social, cultural, domestic and international struggle against the forces of status quo are factors that require a more thorough analysis. In the case of Ukraine it is these same forces that block the nation’s self-determined transition into an evolutionary technological economic development dynamic.

The implementation of a Neo-Schumpeterian economic development model in Ukraine or in any other nation across the world would look similar, in relative terms, to what happened in the United States during the oil or the microelectronics era. The new technological wave became the core driver of the nation’s economy, impacting at first the internal dynamics and systems of production and then replicating the same outcome nation after nation in incremental patterns. Not all nations converted to fossil fuels at once but eventually all did, accompanied by the construction of roads for the transit of vehicles together with the adoption of multiple other technologies and innovations that justified the conversion into a fossil fuels-based world. The same pattern has been developing on front of our eyes as the world adjusts to the microelectronics era.

As in the case of Brazil, a new technological innovation emanating from Ukraine would result in new structures of enterprise, new dynamics and interrelations between multiple economic indicators and sectors, new secondary and service productions sectors, in addition to value added systems, new forms and sectors for investment, new capital flows, new consumption patterns, and new domestic and international patters of trade flows.

Theoretically Bazhal’s advancement of the New-Schumpeterian model as the adequate paradigm shift for the Ukrainian economy is convincing and proven to be effective, as I pointed out in the case of Brazil, but the challenge remains in the implementation stage. Although Bazhal is aware that the technological revolution results in drastic changes on the state’s economic system and that it threatens the interests of those currently benefitting from the production status quo, he never provides his or Schumpeter’s solutions to these challenges. The success stories of Britain and the United States in altering the technological status quo indicate that domestically engineered social and political control systems must become an integral part of the sophisticated nation building process of post-modern nation states in order to secure flexibility for Schumpeter’s entrepreneur and the effective and efficient maneuverability of the government-business partnerships that advance the Neo-Schumpeterian model domestically and internationally.

Neoliberalism: A Cultural Social Construction

Crisis Without End: Neoliberalism in a Globalized Environment

by Richard N. Rambarran (University of Hyderabad)

Abstract: Since the 1970’s, both politically and theoretically, neoliberalism as an ideology has been on a persistent rise to the point where, in the twenty first century, it has garnered hegemonic dominance. Despite several recurring crises in countries since the ascendance of neoliberalism, we yet remain reluctant to point out the political economy philosophy as a root cause of the crises. Instead, many of the academics within Economics prefer to offer bouts of highly technical reasons for the downturn – this is especially true and almost solely applicable to those who practice within the ‘neoclassical’ conjecture of Economics. In a typical Marxian sense, one would have to look no further than the economic system to determine both economic and social outcomes of a country. What dictates that economic system however is the political philosophy of the leaders who guide the economic system – the policy makers. This paper attempts to show the neoliberal political philosophy, as the common thread for major crises within the last two decades. It also proposes a societal trinity for which change is driven through complex interactions among the political, economic and social spheres.

URL: http://EconPapers.repec.org/RePEc:pra:mprapa:67410

Circulated by nep-his on: 2015-10-25

Revised by: Stefano Tijerina

Richard Rambarran joins an emerging group of scholars that are spearheading an aggressive global criticism of modern capitalism, and particularly the impact that neoliberalism has had on its most recent methods of implementation within the international system. Thomas Picketty’s Capitalism in the Twenty-First Century has lead the way in recent times. Nevertheless Rambarran’s contribution to the discussion is welcomed because it points out that the economic political philosophy behind the social construction of neoliberal ideals is the determinant factor in preserving <status quo, even after numerous economic crises.

From Rambarran’s point of view, the neoliberal principles have become an “ingrained” ideology fomented by economists, local politicians and bureaucrats, domestic and multilateral institutions, academic institutions, mass media, corporations, and the consumer.[1] He further argues that today’s mainstream professional economist has perpetuated this social construction using its mathematical and econometric technical rhetoric to distance itself not only from the public sphere but also from the critical role once played by the “Classical economists.”[2] The complacency in the professional sphere has permeated the public sphere, where the collective political and social conscience is more concerned in pursuing the possibility of “wealth and great opulence,” occasionally reacting to economic crises like the one in 2008 only to quickly return to the initial passive approach once individual financial issues are partially resolved.[3]

Rambarran centers on the 1997 East Asian crisis and the 2008 Global Financial Meltdown in order to illustrate how the economic political philosophy has come to dictate “the very mechanics of our lives” through its systemic and institutional framework. He argues that contrary to the views of many scholars that the rise of neoliberalism came with the emergence of political leaders Ronald Reagan and Margret Thatcher, the foundations of the political philosophy and its social construction emerged in the post Great Depression era.[4] The solutions to the 1997 and 2008 crises therefore represent a series of theoretical models constructed since the first modern global financial crisis in order to scientifically justify the perpetuation of neoliberalism.

‘Well what a coincidence! I’m a financial regulator too!’

The ingrained idea that “human well-being and social welfare” are best advanced by the deregulation of the institutions, programs, and norms that once regulated the capitalist machine, seems to be an unquestionable thought. [5] To get to this social reality, argues Rambarran, classic liberal ideas of John Locke, Adam Smith, David Ricardo and the like had to be dismantled in order to neoliberalism to surge. According to Rambarran, neoliberalism is “not simply a minutely revised version of classic liberalism,” it is a new version of capitalism that reduces the role of the state to its minimal.[6] The business-government alliance that pushed neoliberalism forward after the 1930s slowly twisted the idea that “liberating individual and entrepreneurial freedoms and skills” through institutions, programs, and a normative systems “characterized by strong private property rights, free markets, and free trade” were actually responsible for the debacle of the market system in 1997 and 2008, and that greater privatization of services and deregulation for the business sector was the only solution moving forward.[7] These are the principles of nation state building under globalization, the basic political economic structures of nations that welcome open market and free trade, the minimal parameters for participating in the global market system; ideas that, as indicted by Rambarran, are part of the subconscious decision making dynamic between politicians, the private sector, and consumers.[8]

The current realities of this “macroscopic trinity” indicate that the business class, defined by Rambarran as the “intellectual class,” heavily influences political, economic, and social perceptions of nation building under a globalized system.[9] An intellectual class responsible for the cultural social construction of neoliberal principles that originated in the industrial world during the first half of the twentieth century and that began to spread across the developing world after the Second World War.

Neoliberal economists obsessed with breaking the chains of state regulatory systems and interested in returning to the deregulated conditions of the pre Great Depression era used theoretical models to debunk Keynesian economics.[10] During the 1970s and 1980s neoliberal principles became the formula for stagflation in the highly developed countries, and the remedy for the increasing external debt crisis across the developing world. The effective release of the forces of the market justified the dismantling of the social welfare state and the institutional and programmatic bodies that awarded citizens levels of accountability within the triangular dynamic of government-business-constituent relationships across the world. Nationalist development models based on Import Substitution Industrialization were dismantled and replaced by the principles of deregulation, privatization, and the strengthening of private property rights.

According to Rambarran, the implementation of the neoliberal experiment across the world produced mixed results, but the ability of the intellectual class to market success stories through its propaganda machine in order to justify the long-term preservation and expansion of neoliberal principles across the world gave birth to the Asian miracle.[11] Foreign direct investment and the “inflow of speculative money” would be the driving force behind the miracle, as capitalists in the industrial world shifted their production and manufacturing operations to newly unregulated regions of the world while at the same time taking advantage of the liberalization of capital accounts, escaping the already fragile regulatory systems in their own nation states, and setting the tone for the initial stages of accelerated “neoliberal globalization.”[12] Once the “speculative bubble…popped” foreign investors quickly pulled their money from the region, decreasing confidence in the East Asian region.[13] The neoliberal experiment had revealed the need for regulatory systems in order to impede the emergence of new unregulated speculative markets across the world under a more interdependent global market system, but the reshuffling of capital back into the industrial economies allowed the neoliberal propaganda system to quickly market the success of Free Trade zones.

 Rambarran misses the opportunity to explain the historical developments that took place between the Asian crisis of 1997 and the 2008 Global Financial Crisis that pushed neoliberalism further into the collective subconscious. Discussions about the emergence of the Canada-United States Free Trade Agreement, the North American Free Trade Agreement, and the consolidation of the European Union would have allowed the author an opportunity to illustrate how neoliberal intellectuals engineered and marketed to their constituents the illusion of a globalized economy for the sake of the consumer and the domestic worker.

The author’s lack of historical evidence makes his argument less convincing. The 1997 and 2008 crises help illustrate how neoliberal forces are able to perpetuate their principles even after severe global economic, political, and social damage, but he is not able to explain how the intellectual forces within his “macroscopic trinity” were able to create the social cultural construction that turned neoliberalism into an unquestionable economic political philosophy.

For example how neoliberal economists such as Milton Friedman and Lauchlin Currie together with multilateral organizations engineered the expansion of neoliberalism to markets across the world. How marketing and public relations intellectuals such as Philip Kotler and Daniel Edelman perfected the use of mass media in order translate the principles of neoliberalism to consumers, distancing them from their role as constituents and shifting their agency toward the world of consumption. How the roles of politicians and bureaucrats was redefined by Thatcher and Reagan in order to reinvent the democratic relationship between representative and constituent, and how the educational system at all levels was reengineered in order to replicate and export neoliberal ideals across the world.

A more detailed explanation of the concepts behind his “social trinity” would have clarified the dynamics between the intellectual class, and political, economic, and social actors. Why is there a one-way communication dynamic between economic actors and society? Why is the communication between political and economic actors a one-way dynamic? And why is the intellectual class not present within the political, economic, and social realms but separate from them? I would argue that the success of the expansion of neoliberal thought is that they now represent government, economic policy, and the collective social conscience. It is why it is more prevalent then ever before to see private sector representatives running for office, managing government institutions, and redefining the nature of once sacred social institutions such as universities. It is not a phenomenon of the industrial world but a common trend across the global system.

References

Duménil, G. & Levy, D. “Neoliberal (Counter) Revolution.” In D. Johnston & A. Saad-Filho, Neoliberalism: A Critical Reader. London: Pluto Press, 2004, pp. 9-19.

Harvey, D. A Brief History of Neoliberalism. London, United Kingdom: Oxford University Press, 2007.

Rambarran,R. “Crisis without End: Neoliberalism in a Globalized Environment Modeling the Historic Rise of Neoliberalism and its Systematic Role in Recent Economic Downturns,” Munich Personal RePEc Archive, October 22, 2015.

Palley, T. I. “From Keynesianism to Neoliberalism: Shifting Paradigms in Economics.” In D. Johnston & A. Saad-Filho, Neoliberalism: A Critical Reader. London: Pluto Press, 2004, pp. 20-29.

Picketty, T. Capitalism in the Twenty-First Century. Cambridge MA: Harvard University Press, 2014.

[1] Rambarran, “Crisis without End”, p. 1.

[2] Ibid.

[3] Ibid.

[4] For more information see Harvey 2007, Palley 2004 and Dumeril & Levy 2004.

[5] Rambarran, 2.

[6] Ibid.

[7] Ibid., 3.

[8] Ibid.

[9] Ibid.

[10] Ibid., 4.

[11] Ibid., 10.

[12] Ibid., 11.

[13] Ibid., 13.