Development and Underdevelopment in the History of Economic Thought

Divergence, convergence, and technological revolutions

Knell Mark, NIFU Nordic Institute for Studies in Innovation, Research and Education

Schumpeter (1939) believed that major or disruptive innovations and the diffusion of these breakthroughs initiate a fundamental change in the way things are produced, the types of products being produced, how a firm is organized, and the way people transport things and communicate. These innovations appear discontinuously in groups or swarms, causing a cyclical pattern of development. Each cycle or long wave transforms the technological paradigm, but also the entire economy and society. This paper studies convergence (catching up) and divergence (falling behind) over the course of five technological revolutions. It does this by weaving together ideas from the history of economic thought and economic history perspectives. Inspired by Schumpeter, Freeman and Perez (1988) named five successive techno-economic paradigms from the time Arkwright’s first cotton mill and to current digital revolution. Currently we are in the second half of the digital revolution. We contend that knowledge creation and novelty tend to produce divergence, while the international technology transfer and diffusion generates convergence. From the historical perspective, falling behind (divergence) is much more frequent than catching up. Changes in techno-economic paradigm suggest countries must build the capabilities and competences to be competitive. The most prominent examples of catching up include the United States in late 18th and 19th centuries, western and central Europe in the 19th century, Nordic countries in the late 19th and early 20th centuries, and East Asia in the late 20th century and early 21st century. These countries achieved rapid rates of productivity growth by learning to use and improve existing technologies and to integrate them into their productive activities. There is a general-purpose technology underlying the convergence and divergence dynamic of every techno-economic paradigm. These are all good examples of a great convergence or great divergence.

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Keywords: technology revolutions, great convergence, great divergence, catching-up