The Economic Rise and Fall of the Great Powers: Technological and Industrial Leadership since the Industrial Revolution

Abstract

The article looks at Schumpeterian growth. What makes nations rise is their ability to use technological progress to create growth industries. But industrial leadership does not automatically translate into future industrial leadership, as technological progress means that the key industries never remain the same. I compare Britain, France, Germany, the U.S. and Japan during five periods of industrial leadership, from the Industrial Revolution until today, to analyze why certain nations have been better able to rise to industrial leadership, and stay there, than others. The theoretical framework blends Joseph Schumpeter and Mancur Olson’s work to yield three theoretical propositions which receive broad empirical support. First, human capital is crucial. Second, the state must prevent vested interests from blocking structural economic change. Third, the states that have managed to do so have been characterized by political consensus and social cohesion. This is because consensus and cohesion provides the state with more autonomy for independent policy-making.