Beyond the Business Cycle: The Need for a Technology-Based Growth Strategy

This paper assesses the limitations of monetary and fiscal policies for establishing long-term growth trajectories and instead proposes a technology-based economic strategy targeted at long-term growth in productivity. The model expands the original Schumpeterian concept of technology as the long-term driver of economic growth where technology is characterized as a homogeneous entity developed and commercialized solely by industry. Instead, the new model defines technology as a multi-element asset that evolves over several phases of the R&D cycle, is developed by a public–private investment strategy, and is commercialized by a complex industry structure of both large and small firms. Eventually, the policy choice is between traditional macrostabilization policies that increase aggregate demand but do not significantly increase the real incomes of workers, resulting ultimately in inflation; or a technology-driven investment strategy that increases the productivity of the economy, thereby increasing the capacity of an economy to grow without inflation.