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Ricardo was right: unless one can enforce 'productive' behaviour from rentiers, sustainable Growth is not an option -while emerging Asia succeeded, the West and Latin America failed, caught in their 'neo-liberal trap'. A tribute to Geoff Harcourt

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  • Palma, J. G

Abstract

The 1980s neo-liberal reforms led the West - both developed and Latin America - to capitulate to rentiers at the worst possible time, given the challenges of rapid technological change and evolving world order. Instead of productive flexibilities (Ã la emerging Asia), they delivered a 'neo-liberal trap' with its Ricardian growth-retarding rentier trilogy: a 'market inequality-augmenting, investment-weakening, and productivity growth-retarding' scenario. What these reforms actually did was to turn loose the 'uncreative-destructiveness' of a rentier-based accumulation by indiscriminately strengthening rentiers' property-rights, which allowed them to build an economy and a political settlement - even an ideology - in their own image. In such distorted markets, technological change and international trade could create market opportunities, but not the necessary 'compulsions' to be taken up. Following Geoff Harcourt's lead, I analyse this returning to 'classical economics'; in my case, to a broad Ricardian perspective on rents and rentiers. Emerging Asia, meanwhile, was able to take these opportunities by redirecting rentiers' income towards socially desirable investment strategies - aimed at 'demand adapt' and 'supply upgrade' their productive strategies. Bretton Woods was a guide. But in the West, as rentiers gained the upper hand, the resulting process of 'rentierisation' - of which financialisation is just one, although leading, aspect - is now proving as toxic for inequality, investment and productivity-growth as it is for our democracy.

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  • Palma, J. G, 2025. "Ricardo was right: unless one can enforce 'productive' behaviour from rentiers, sustainable Growth is not an option -while emerging Asia succeeded, the West and Latin America failed, caught in their '," Cambridge Working Papers in Economics 2553, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2553
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    References listed on IDEAS

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    1. Dani Rodrik, 2016. "Premature deindustrialization," Journal of Economic Growth, Springer, vol. 21(1), pages 1-33, March.
    2. A. P. Thirlwall, 2015. "Essays on Keynesian and Kaldorian Economics," Palgrave Studies in the History of Economic Thought, Palgrave Macmillan, number 978-1-137-40948-5, June.
    3. Richard Lipsey, 2007. "Reflections on the general theory of second best at its golden jubilee," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(4), pages 349-364, August.
    4. G. C. Harcourt, 2001. "Selected Essays on Economic Policy," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-51056-2, November.
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    JEL classification:

    • B00 - Schools of Economic Thought and Methodology - - General - - - History of Economic Thought, Methodology, and Heterodox Approaches
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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