The Changing Face of Advanced Industrial Economies

• Author: Burkhard Strumpel
• DOI: 10.1177/001041407701000302
• Published date: 01 October 1977
• Date: 01 October 1977
• Subject Matter: Articles

THE

CHANGING FACE

OF

ADVANCED

INDUSTRIAL ECONOMIES

A Post-Keynesian View

BURKHARD

STRUMPEL

Free University

of

Berlin

o

state that the advanced

economies

of

the West

are in trouble

T

is to belabor the obvious. Even in the relatively well-off countries

like the United States and West Germany, unemployment and inflation

are at historically very high levels. Both are remarkably immune to the

cures that one decade ago were praised as a “new economic policy”

capable of keeping the economy straight on the course

of

full employ-

ment and growth.

A

mere slowdown in the increase of production and

mass incomes has generated widespread disenchantment with the

economy, fear of crisis, distrust in the government’s economic

policies-in short, a malaise that reinforces the actual difficulties.

In spite of continuously high levels of production, the economy fails

to live up to many people’s expectations and, in particular, to satisfy

their needs for continuity, equity, and self-actualization through

meaningful work. The economies are highly productive and yet fail

according to many

or

most of the criteria that are used to judge their

performance. Conventional economics has not been helpful to the

public and decision makers in understanding and mastering the

unfolding turbulence. There has been much more than the usual

disagreement between practitioners of the art, leading to confusing

analysis and conflicting advice.

The failings of the Western economies in the

1970s

must be seen

in contrast with their success during the first two decades following

World War 11. There was rapid economic growth, unprecedented in

economic history; expanding production and consumption of material

goods conformed to the most urgent priorities and aspirations of the

populace; and appropriate images and concepts, notably the Keynesian

paradigm, provided adequate guidance for an understanding of the

economy and for effective policies. This constellation has all but solved

COMPARATIVE

POLITICAL

STUDIES,

Vol.

10

No.

3,

October

1977

@

1977

Sage

Publications.

Inc.

[300]

COMPARATIVE POLITICAL STUDIES

/

OCTOBER

1977

one of the great, seemingly intractable problems of our century: the

transition from a largely capitalistic economy to a mixed economy

containing heavy elements of the welfare state.

While there is a considerable amount of statistical and survey data,

and the number of economists has multiplied, there is great helplessness

of the public and decision makers in understanding and mastering

the difficulties of the

1970s.

What is lacking are frames of reference

that would permit us to place changingevents and trends into

a

familiar

context. There was another period in recent economic history full

of

confusing analysis and conflicting advice: the Great Depression of the

1930s.

The crisis then was accompanied by overoptimistic predictions,

unrealistic goals, and ineffective prescriptions that subverted con-

fidence in the competence of the experts and the politicians who heeded

their advice. Keynes’ effective explanatory paradigm came too late

to prevent the crisis

or

to speed up the recovery.

This, then, is a time for taking stock and rethinking. The miserable

performance of our economy under conditions of fairly high levels

of output suggests that it may have become less the quantity of the

product and more its composition

or

distribution that determines

whether the economy fulfills its objectives. Robinson

(1972:

6),

in

a

paper entitled “The Second Crisis of Economic Theory,” says:

The first crisis arose from the breakdown of a theory which could

not account for the level of employment. The second crisis arises

from a theory that cannot account for the content of employment.

. . .

Now that we all agree that government expenditure can

maintain employment we should agree about what the expendi-

ture should be for.

Robinson calls for nothing less than an alternative vision of the

contemporary economy, a vision that can guide our understanding of

employment policies quite like the Keynesian system had provided

guidance in the past. While a similarly comprehensive, systematic,

and persuasive paradigm for our time is not now in sight, it is worth-

while to examine the highly resilient remnants of the old beliefs in the

light of new realities and to draw some lessons for present-day full-

employment policies.

In the face of the limited success of conventional fiscal and monetary

policies, there is a good deal of agreement that we must employ our

resources differently in order to restore full employment and growth.

In the past, growth had relied mainly on perfecting the mastery of

man over nature. The utilization of natural resources was the frontier

during the period of industrialization. Human ingenuity, extensively