Book contents
- Frontmatter
- Contents
- Illustrations
- Abbreviations
- Foreword
- Preface and Acknowledgments
- Executive Summary
- Chapter 1 What Is Inclusive Growth?
- Chapter 2 What Is the Main Constraint that Developing Countries Face?
- Chapter 3 Why Full Employment and Who Should Be Responsible for Trying to Achieve It?
- Chapter 4 Why Is Growth Unstable?
- Chapter 5 What Is the Role of Agriculture in the Process of Structural Change and in Delivering Full Employment? Full Employment I
- Chapter 6 What Is the Role of Investment in Delivering Full Employment? Full Employment II
- Chapter 7 Why Is “Planning Development” Necessary?
- Chapter 8 What Is Industrial Policy? Full Employment III
- Chapter 9 Structural Transformation, Industrialization, and Technological Change in Developing Asia: What Does the Empirical Evidence Show?
- Chapter 10 Why Do Export Diversification and Sophistication Matter?
- Chapter 11 Unemployment Versus Inflation: Which One Should Be the Public Enemy Number One?
- Chapter 12 What Should Be the Role of Fiscal and Monetary Policies for Development? Full Employment IV
- Chapter 13 Is It Possible to Achieve Full Employment in the Presence of Structural Transformation?
- Chapter 14 Should the Government (Public Sector) Intervene Directly and Become the Employer of Last Resort? Full Employment V
- Chapter 15 Can Competitiveness and Globalization Deliver Inclusiveness and Full Employment?
- Chapter 16 Export-Led Growth or Domestic Demand–Led Growth?
- Chapter 17 Is Education a Key Ingredient of Inclusive Growth?
- Chapter 18 Conclusions: How Can Developing Countries Implement an Inclusive-Growth and Full-Employment Strategy?
- References
- Author Index
- Subject Index
Chapter 4 - Why Is Growth Unstable?
- Frontmatter
- Contents
- Illustrations
- Abbreviations
- Foreword
- Preface and Acknowledgments
- Executive Summary
- Chapter 1 What Is Inclusive Growth?
- Chapter 2 What Is the Main Constraint that Developing Countries Face?
- Chapter 3 Why Full Employment and Who Should Be Responsible for Trying to Achieve It?
- Chapter 4 Why Is Growth Unstable?
- Chapter 5 What Is the Role of Agriculture in the Process of Structural Change and in Delivering Full Employment? Full Employment I
- Chapter 6 What Is the Role of Investment in Delivering Full Employment? Full Employment II
- Chapter 7 Why Is “Planning Development” Necessary?
- Chapter 8 What Is Industrial Policy? Full Employment III
- Chapter 9 Structural Transformation, Industrialization, and Technological Change in Developing Asia: What Does the Empirical Evidence Show?
- Chapter 10 Why Do Export Diversification and Sophistication Matter?
- Chapter 11 Unemployment Versus Inflation: Which One Should Be the Public Enemy Number One?
- Chapter 12 What Should Be the Role of Fiscal and Monetary Policies for Development? Full Employment IV
- Chapter 13 Is It Possible to Achieve Full Employment in the Presence of Structural Transformation?
- Chapter 14 Should the Government (Public Sector) Intervene Directly and Become the Employer of Last Resort? Full Employment V
- Chapter 15 Can Competitiveness and Globalization Deliver Inclusiveness and Full Employment?
- Chapter 16 Export-Led Growth or Domestic Demand–Led Growth?
- Chapter 17 Is Education a Key Ingredient of Inclusive Growth?
- Chapter 18 Conclusions: How Can Developing Countries Implement an Inclusive-Growth and Full-Employment Strategy?
- References
- Author Index
- Subject Index
Summary
One of the oldest unresolved dilemmas in economics is whether market economies are naturally stable, or whether they need to be stabilized by policy. Classical and neoclassical models argue that a market economy can look after itself and that, in the absence of egregious government interference, it would gravitate naturally to full employment, greater innovation, and higher growth rates. However, Keynes emphasized the flimsiness of the expectations on which economic activity in decentralized markets is based. While the dominant intellectual paradigm since the 1970s has adhered to the idea that a market economy gravitates toward full employment, the historical record shows that the regime of the 1950s and 1960s was more successful than what followed afterwards. Indeed, other than the exceptions of the People's Republic of China (PRC), and perhaps a few more developing countries recently (e.g., India, Viet Nam), economic growth was faster and much more stable in the Keynesian golden period; its fruits were more equitably distributed and social cohesion and moral habits better maintained.
Modern analysis of economic growth started with the so-called Harrod -Domar model (Harrod 1939, Domar 1946). This model has Keynesian and classical (mostly Ricardian) features. It is important to understand this model because subsequent modern growth models provide different solutions to the so-called Harrod- Domar knife-edge problem (discussed below).
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- Information
- Inclusive Growth, Full Employment, and Structural ChangeImplications and Policies for Developing Asia, pp. 29 - 34Publisher: Anthem PressPrint publication year: 2010