The Gerschenkron Inversion: Industrial Policy in Deindustrialised and Financialised Economies

The Gerschenkron Inversion denotes a structural reversal at the core of mature capitalism. Where late industrialisers faced scarce capital and surplus labour, deindustrialised and financialised economies exhibit abundant capital detached from domestic production together with degraded institutions for the reproduction of skilled industrial labour. A simple model shows that skilled labour scarcity, external fragility, and suppressed private investment form a self-reinforcing circuit that defeats partial industrial policies. Taking Britain as the limiting case, the article shows how the destruction of industrial capacity, financialisation, and the defeat of organised labour produced this configuration. Breaking the Inversion requires simultaneous movement on several fronts, including rebuilding labour reproduction, a large investment wave, a public investment bank, public ownership at key junctures, trade regulation, and capital controls. The obstacle is ultimately social, rooted in the class structures of financialised accumulation.