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“Destructive Creation”? Some long-term Schumpeterian reflections on the Lisbon process

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  • Arno Tausch

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Abstract

Starting from Professor Kornai’s assertion about the necessity to focus on the long-term perspectives of the transformation process, we analyze in this paper the Lisbon performance of the countries of the European Union from such a long-term, structural perspective. First, we present the 14 Eurostat “structural indicators” and their measurement deficits as well as a debate about the performance of the countries of the EU in geographical terms. We then analyze this Lisbon indicator performance by factor analytical means. Traditional methods of simply adding together the ranks of the different countries along the 14 structural indicators are insufficient, whereas modern multivariate methods like factor analysis are much more appropriate to arrive at conclusions about “combined” performances. We eliminate one of the 14 Lisbon structural indicators – regional dispersion of unemployment rates – from the further debate, because that indicator does not produce ANY data throughout the entire observation period for nine of the 27 EU member countries. We then observe the contradictions between some of the remaining 13 indicators, chosen by the member governments and the European Commission, to measure the Lisbon progress. We conclude that only a Schumpeterian vision of capitalism as a process of “creative destruction” – or rather – “destructive creation” can explain these contradictions, which we empirically reveal in this analysis, and which beset the “Lisbon process” from the very beginning. European decision makers often seem to be unaware about these underlying contradictions, and our paper hopes to clarify the processes involved.For Schumpeter and his elitist-conservative visions of society, the decay of values in capitalist society was an all-important element in his pessimistic theory, developed in “Capitalism, Socialism, and Democracy.” For Schumpeter, the disappearance of the enterprising, male-dominated capitalist family was an all-important element in his theory. We of course strongly reject Schumpeter on this point, but his analysis about the importance of family and household structures as such for capitalist development enters, so to speak, the empirical analysis of European Union socio-political realities via the “back door.” It is not the disappearance of the enterprising capitalist family, which threatens the future of capitalism in Europe, but the often still existing incompatibility of work and family life, which explains more than 60% of Lisbon process failure. We then proceeded to analyze with multiple regression techniques the recent European Commission data on regional growth in Europe. Patterns of discrimination against the young and the elderly on the labor market are incompatible with long-run economic growth.Schumpeter’s observations about the destructive creation inherent in the process of capitalist development, his observations about the sociological limits, which the formation and continuity of capitalist elites encounter in the long-run development of the “market economies” as well as his strong belief in the cyclical nature of capitalist development, are all relevant for the interpretation of our other empirical results. To this end, we analyzed economic growth and development patterns in the world system with UNDP data, using SPSS XIV advanced multiple regression techniques. For one, economic growth in the long run is today strongly determined by the long-run positive effects of foreign direct investments per GDP of the host countries. At the same time – and contrary to the traditional expectations of neo-classical economics – the more short-term effects of heavy foreign direct investment inflows on the host countries of FDI are – ceteris paribus –negative. Transnational corporations do not like an environment of instability, and rather prefer the high-wage, high quality, and high-price economies of the typical West European countries, where their penetration rates of the host countries are highest. The critique in the spirit of Stanford economist Pan Yotopoulos and other social scientists of the drive to lower the comparative international price level, which we discuss at length in this study, is strongly vindicated by our empirical results. Low comparative international price levels, ARE ceteris paribus one of the most important impediments against long-run economic growth. At the same time, it is clear that state sector influence on the economy finds its limits in the post 1989 political economy of the world. However, it is not tax revenue and it is not public health expenditures per GDP, and it is not the priority of human development as a social policy goal over economic growth, but public expenditures in education, which yield the most robust negative (!) effect on the economic growth rate. Also, it can be shown, that public education expenditures are significantly related to high income inequality (differences in the incomes between the richest 20% and the poorest 20%, measured by the so-called quintile ratio). In the post-1989 world, we have privatized airlines and railways, shipyards and steel works, we privatized government services, but we did not privatize – or privatize to a very significant degree – education, especially higher education, which is one of the Achilles heels of the Lisbon realities. We show the relevance of such a reading of events also for the determination of gender empowerment, the UNDP Human development index, and life expectancy. Public education expenditures are also, ceteris paribus, significantly and negatively connected to low life expectancies.

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Bibliographic Info

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This book is provided by Argentine Center of International Studies in its series E-books in International Relations with number 024 and published in 2007.

Volume: 1
Edition: 1
Handle: RePEc:cis:ebook0:024

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Keywords: Schumpeterian;

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