Page 160 - Global Political Economy_Understanding The International Economic Order

SIG NIFIC ANCE O F NEW T HEORI ES
ernment support for basic scientific and technological R & D can
produce large economic payoffs. In addition, the crucial role of skilled
labor in economic development and international competition makes
it imperative that governments actively promote education and
worker training. As they respond to the process of uneven growth,
governments do have choices.
Although the strategy of economic adjustment is certainly the pref-
erable response to convergence and to relative economic decline, it is
frequently the most difficult to carry out. As Mancur Olson argued
in The Rise and Decline of Nations (1982), the balance of power
within an economy tends to favor those groups whose interests lie
with the status quo and therefore do not want to pay the costs of
32
adjustment. Because they know precisely what they may lose, threat-
ened and entrenched economic sectors frequently put pressure on
their governments for protection against the “unfair” trading and
economic practices of rising competitors. In the contemporary world,
a frequent response to convergence and other shifts in the global dis-
tribution of highly valued economic activities is to undertake or ex-
pand regional economic and political arrangements, such as the Euro-
pean Union and the North American Free Trade Agreement
(NAFTA).

Conclusion

The new economic theories and their implications for the world econ-
omy lead me to conclude that governments and their policies are and
will remain of crucial importance for the functioning of the interna-
tional economy. Despite the increasing significance of the market and
economic globalization, economic outcomes are determined not only
by economic forces but also by governments and their policies. Yet,
national societies differ fundamentally in the degree to which their
governments play a meaningful role in the economy and in the ways
in which they attempt to manage their economies.

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Olson, The Rise and Decline of Nations.
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