1 - Economic development and economic performance

Summary

Introduction

Looking back over the twentieth century at what are now the advanced capitalist economies, one of the more outstanding characteristics of macroeconomic development has been the radical transformation of their economic structures, i.e. the tastes, technologies and institutions that shape economic activity. The fourfold increase in real per capita income since the early years of the twentieth century is not the result of balanced growth, with output expanding at the same rate in every sector. Instead, growth has been accompanied by large shifts in the composition of output and in the sectoral distribution of capital and labour, transformations that have led economic historians and economists to distinguish among epochs of capitalism, such as the ‘industrial’ and ‘post-industrial’ phases. But this observation barely scratches the surface. These transformations are themselves made possible by technological change, as within each sector industries grow and decay, product and process innovation are commonplace and resources continuously reallocated. And with technological change there have been changes in the lifestyle of individuals that go far beyond those implied by mere increases in income, however large, and, beyond even this, changes in society itself. A well-known example is the advent of the ‘age of steam’, which introduced the factory system and urbanization. In the case of such sweeping change to the type of work and its organization, and to how and where people lived, it is relatively easy to recognize that new rules and norms would become established to govern behaviour under these new conditions.