5
tures and therefore cannot consist of a set of unchanging recipes.’
4
Schumpeter is otherwise not
very positive to the use of stage theories, perhaps because for a long time the very idea of stages
and ‘modes of production’ was associated exclusively with Marxist economics.
Today the world economy is in a transition from a society based on Fordist mass production
to a society where information technology sets the standard on which a new organisational
common sense is being created. With their concept of techno-economic paradigms Carlota Perez
and Christopher Freeman offer us an analysis within what List and Ely would call the manufac-
turing stage. Alternatively, it may be argued that the incipient information society with its dema-
terialisation of consumption represents a brand new fifth stage in the history of mankind. Karl
Bücher treated the geographical dimension of this transition – globalisation – in his 1893 book
Die Entstehung der Volkswirtschaft.
2. Stages, Postmodernity, and Harmony in Economic Theory
Profound changes in the structure of society seem, then, to create a demand for broader perspec-
tives, for a qualitative and dynamic understanding of ‘the bigger issues’. In the history profes-
sion, the present paradigm shift has again recently awoken interest in ‘global history’. Although
the idea of global history is easy to dismiss from
[183] the depths of archival studies, long term
history has a professional tradition in history dating back to the Renaissance and is still seen as
compatible with the tools that historians use. During the 19
th
Century process of industrialisation,
also in the economics profession theories of economic stages
(Wirtschaftsstufen) were seen as
‘an indispensable part of the tool box of economics’.
5
From the standpoint of today’s standard theory, however, stage theories bring together three
key aspects which were the most important casualties of the neo-classical process of formalising
economic theory, i.e. the three conspicuously absent factors: time, space (geography) and human
knowledge. In today’s economics there is no longer such a compatibility with stage theories as
can be found in the history profession. Standard economic theory is fundamentally quantitative,
static and unhistorical, and the historical school of economics – which had produced the 19
th
Century stage theories – virtually died out with the 1950’s. In the first section of this paper we
have already pointed to a most important watershed in economic theory: how and when the Eng-
lish classical school – by no longer defining stages according to production – separates itself
from previous economic tradition and from 19
th
Century US and German economic theory and
policy. We would claim that this schism is of great importance in order to understand the eco-
nomics of ‘leader’ and ‘laggard’ nations to this very day.
Stage theories are typically not products of Anglo-Saxon economics. They are all children of
a dynamic and holistic, all-inclusive view of economics as involving all social sciences. Stage
theories are dynamic and modernist in the sense that the Renaissance philosophers, like Francis
Bacon in England and Leibniz in Germany, were modernists. A stage theory in the neo-classical
tradition of Paul Samuelson and Milton Friedman would be a contradiction in terms,
[184] be-
cause theirs is a theory void not only of time (and consequently of any historical sequence), but
4
Schumpeter, Joseph Alois, History of Economic Analyisis, New York, Oxford University Press, 1954, p. 442.
5
‘Die Aufstellung soldier „Wirtschaftsstufen“ gehört zu den unentbehr-lichen methodischen Hilfsmitteln’, Karl
Bücher, Die Entstehung der Volkswirtschaft, 11
th
edition, Tübingen, Laupp, 1919, p 87.
6
also of empirical facts.
6
As opposed to modernist dynamism and its resulting ‘stages’ -cumulative, progressive, retro-
gressive or cyclical – neo-classical economics, containing no learning and no novelty, has clear
postmodernist qualities
7
. Neo-classical economics with its innumerous equilibrium points takes
on a quality of indeterminacy, of ‘undicidability’ which is seen as typical also of postmodernist
poetry; of Gertrude Stein and Ezra Pound.
8
Like postmodernist poetry, the neo-classical world
view seems to describe a world where ‘innovation no longer seems possible, or even desirable.
9
When their extreme static generalisations and determinacy – like factor-price equalisation – are
queried, today’s standard economists tend to retreat to the opposite standpoint, to the extreme
unpredictability of theories of complexity and chaos theory. From the safe haven of a theory
predicting and proving automatic universal harmony in the equalisation of factor prices – a
‘Harmonielehre’ as Lionel Robbins so fittingly calls it
10
– standard economic theory retreats to
the opposite extreme, to a model with a complete lack of predictability. In other words, modern
economics tends to treat all economic activities as either being qualitatively all alike or all dif-
ferent. The intermediate levels of abstraction – where ‘some economic activities are more equal
than others’
11
– offer clues to understanding world income distribution, is conspicuously absent.
[185]
Today’s equivalent of the ‘invisible hand’ is that ‘the economy is like the weather’, or like
hurricanes and earthquakes.
12
These two types of metaphors are in a sense opposites – the auto-
matic harmony and predictability created by the ‘invisible hand’ on the one hand and the chaotic
complex diversity created by the weather on the other. What is interesting from the point of
view of economic policy is that these counterpart metaphors lead to the same policy conclu-
sions: in both cases Man is at the mercy of some uncontrollable force. Both in the case of the
invisible hand and of hurricanes and earthquakes, human will, skills, knowledge, intuition and
leadership can do preciously little to change the course of history. Adam Smith’s invisible hand
and Paul Krugman’s metaphor about the economy being like the weather at their very core share
the role of man as a passive being in the hands of ‘Providence’, as is discussed in Jacob Viner’s
interesting book on this subject.
13
In contrast to this strategy, where a passive Man is at the mercy of external forces – be they
invisible hands or the forces of the weather – stand the stage theories, where history is ‘the result
of human action, but not the execution of any human design.’
14
The contrast with Krugman,
when he describes the great depression, is clear: ‘...most booms and slumps have had no obvious
external cause. Most notably, the mother of all economic slumps, the contraction from 1929 to
6
It could be argued that diminishing returns is the only piece of historical evidence in neo-classical theory.
7
I am indebted to Wolfgang Drechsler for the idea of connecting neoclassical economic theory with postmodernism.
8
For a discussion of postmodernism and indeterminacy, see Hoover, Paul (Editor), Postmodern American Poetry,
New York, Norton,1994, p. xxxix.
9
Art critic Suzi Gablik, quoted in Hoover, op. cit., p. xxxix.
10
Robbins, Lionel, The Theory of Economic Policy in English Classical Economics, London, Macmillan, 1952, pp.
22-29.
11
With apologies to George Orwell.
12
Krugman, Paul, The Self-Organizing Economy, Cambridge, Mass, Blackwell, 1996.
13
For a discussion of this intellectual tradition, see Viner, Jacob, The Role of Providence in the Social Order, Phila-
delphia, American Philosophical Society, 1972.
14
Adam Fergusson (1793), quoted in Meek, op. cit. This is close to the idea of history previously expressed by Nea-
politan philosopher Giambattista Vico (1668-1744).