Article,

Mancur Olson and Structural Economic Change: Vested Interests and the Industrial Rise and Fall of the Great Powers

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Review of International Political Economy, 16 (2): 202--230 (May 2009)

Abstract

The article examines Mancur Olson's claim that the rise and decline of nations is intrinsically intertwined with the build-up of vested interests in the economy. I contend that Olson must be supplemented with Joseph Schumpeter for a theoretical framework that enables us to examine processes of long-term structural economic change. The specific focus is on technological progress and industrial growth, with a view to analyzing why certain nations have been better able to rise to industrial leadership, and staying there, than others. The framework yields one theoretical proposition, which receives broad empirical support: In order to rise to industrial leadership, states must prevent vested interests from blocking structural change. States that are unable to do this will get locked into yesterday's technologies and industries, and will effectively have consigned themselves to long-term stagnation and decline. The empirical support is derived from the second part of the article, where paired comparisons between Britain, France, Germany, the US and Japan for five core industries during five periods of industrial leadership, from the Industrial Revolution until today, provide a qualitative test of the theory.

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