1. RETURN TO DEVELOPMENT AND THE PROSPECTS OF
PROSPERITY1
H. Topalides, Ph.D∗
In the midst of global crisis the return to development arises as the new great
narrative of our times that may inspire a collective vision to severely
suffering from deep economic recession societies, most notably in Eurozone
South, that leads to a promising future. Its penetrating force especially to
middle class audiences is associated with the specific semiology embodied
in notion of development, in respect to formation of future expectations. Its
attractiveness is embedded on implied guess that economic recovery
achieved with undergoing structural adjustments, will also lead back to
prosperity, as the one previously enjoyed. Are these expectations reasonable
in a long-term perspective, or they are relying on hypotheses for productivity
growth that are irrelevant with recent technological changes?
Paul Krugman, the Noble awarded economist, answers that development as
a process synonymous to prosperity, is over (The NY Times, 27.12.12). This
inconvenient finding rests on a recent study for U.S. economy published by
R. Gordon (NBER, Working Paper No 18315). Demonstrating that
economic growth is going to substantially slow down over next decades, he
argues that the age of growth, starting on 18th
century, approaches now to an
end. His prediction that standards of living of 2007 will rather not get
doubled before year 2100, sets aside its observed over last decades trend to
grow exponentially in an accelerated pace. The downturn of expectations is
attributed to the emergence of intense pressures retarding growth, as
environmental (i.e. rise of gas emissions and energy cost) and social ones
(i.e. soaring of income inequalities). Technological progress will rather not
suffice for their address, since the pay offs to new (third) revolution in
information and communication technologies (ICT) are recorded, so far, as
far smaller than those to the second (industrial) one. Therefore expectations
regarding technology capabilities to accelerate growth and improve
standards of living have to be self-restraint.
Krugman considers Gordon’s thesis as “a useful counterweight to all the
gee-whiz glorification of the latest tech” but he is more optimistic about
expected pay offs of new technology to productivity growth: they have not
yield yet their fruits. However, the way that Gordon is probably wrong
∗
Author of the book “The global crisis of Prosperity. Sustainable Development in the transition from
industrial to global knowledge economy”, Aristotle University of Thessaloniki Press, 2012
1

2. according to Krugman has equally destructive implications to conventional
wisdom for the impact of technology and growth on standards of living: the
pay-offs from progress in artificial intelligence and adoption of smart
machines will lead indeed to rapid productivity growth and high overall
economic growth; however, who is going to benefit from this growth that
will end up devaluing the contribution of work, even the most highly skilled,
in production process? Thus, he concludes, the conventional wisdom
embodied in long run state budget projections – and we will add, in
structural adjustment programs of International Organizations as IMF- that
growth will generate prosperity, is all wrong.
Krugman’s position with which we shall agree, that generalized introduction
of new technology will lead to even more intense social pressures, implies a
structural change in development pattern followed by industrial economies.
Which are its new parameters?
The emergence of two global oil crisis and stagflation in early 1970s
demonstrated the appearance of intense environmental and social pressures
to growth signaling the crisis of industrial development model. Ordering
environmental ones as the most threatening, policy response focused in
accelerating technological progress and in extending economies of scale to a
global dimension.
New industrial revolution allows indeed their address, with the launching of
a new technology that improves efficiency of non-renewable natural
resources, increases labor productivity and facilitates financial globalization.
Its introduction in production processes upgrading (technological)
knowledge as the major production input alters (industrial) growth pattern
and leads to a global knowledge economy. Transition from productive
(industrial) to knowledge economy is, thus, raising radically productivity
growth, since it allows relief of environmental carrying capacity from excess
burden, as it saves natural resources and restricts emissions, and even more
extensive substitution of labor. Why is then social pressure increased?
Growth is now critically depended on an accelerated increase of capital
inflow and a dwindling labor’s contribution in production processes: new
technology has to progress faster than environmental burden and its
financing is far more expensive than industrial one, since it is more capital
intensive and it has be launched in a global scale. This goal is better served
with financial globalization and self-regulation of growth. Growth
regulation, dominant in post-war era, is now unfeasible, since it contradicts
to growth sustainability. Its abolishment though as a policy option, causes
further polarization between capital-labor and technology-natural resources,
but also in global division of labor: developed economies (abundance of
2

3. capital) are driven to technological specialization whereas developing
(abundance of cheap labor and resources) to inferior productive (industrial).
Brazilinization, the so-called trend of GDP control (70-80%) by a small
portion of population (10-20%), as seen flourishing in Eurozone South,
arises as the most acute new threat to prosperity. What are the implications
for an alternative vision of policy?
Distributing more evenly the pay-offs to productivity growth, the corner-
stone of growth regulation political agenda during industrialization, looks
today, unfortunately, outdated. While it presupposes growth, it fails to
address its consequences in social pressures increase since its
implementation, as seen in North’s dominant growth policies and South’s
structural adjustment programs, undermines growth. In distinction to
conventional wisdom, long-term sustainability of prosperity seems to lie in a
departure from the imperative of exponential growth, foremost for industrial
Northern economies, with a controlled de-escalation of productivity growth.
Then, environmental pressures may be addressed with labor (i.e. increase of
free from work time) rather than, solely, capital intensive policies (i.e.
technological acceleration). A desirable future commands now a regulation
of new development model towards a more austere and equitable prosperity
paradigm. Enforcing violently and unfairly its adoption exclusively to
weaker Southern economies, even of Eurozone, is a rather ineffective policy
option for its avoidance in the North and will raise new social pressures that
will threaten further global prosperity. As Krugman states it, the
conventional wisdom that future (of development) will resemble the past is
very likely to be wrong.
3

4. 1
Published in Greek Sunday newspaper “Kyriakatiki Eleftherotypia”, 3.3.2013