> It is true that, in the U.S. and Western Europe, this was the
> typical way sectoral imbalances were corrected until the Great
> Depression or second world war. 19th-century capitalism is full
> of cases that illustrate this mechanism.
>
> But this is different from the fact that, within the capitalist
> framework, accumulated sectoral imbalances in the reproduction
> of social capital must be corrected at some point, and that the
> corrections can be more or less disruptive. The key difference
> here is that these corrections as disruptive as they may be don't
> need to lead to generalized crises.
>
> How is this possible? Well, capitalists -- just like any other
> groups of people -- may learn from their collective experience.
With an eye toward institutions, Simon Kuznets referred to the "controlled revolution" of economic growth, managed with varying degrees of success:
The second intriguing aspect of structural change is that it represents shifts in the relative shares in the economy of the specific population groups attached to particular production sectors. Since economic engagement represents a dominant influence in the life of people, the shift in the share of a specific sector, with its distinctive characteristics and even mode of life, affects the population group engaged in it. Economic growth perforce brings about a decline in the relative position of one group after another - of farmers, of small scale producers, of landowners - a change not easily accepted, and, in fact, as history teaches us, often resisted. The continuous disturbance of pre-existing relative position of the several economic groups is pregnant with conflict - despite the rises in absolute income or product common to all groups. In some cases, these conflicts did break out into overt civil war, the Civil War in the United States being a
conspicuous example. Other examples, in the early periods of industrialization among the currently developed countries, or, for that matter, more recently within some less developed countries, are not lacking.
Only if such conflicts are resolved without excessive costs, and certainly without a long-term weakening of the political fabric of the society, is modern economic growth possible. The sovereign state, with authority based on loyalty and on a community of feeling - in short, the modern national state - plays a crucial role in peacefully resolving such growth-induced conflicts. But this and other services of the national state may be costly in various ways, of which intensified nationalism is one and other effects are too familiar to mention. The records of many developed countries reveal examples of resolutions of growth conflicts, of payments for overcoming resistance and obstacles to growth, that left burdensome heritages for the following generations (notably in Germany and Japan). Of course, this is not the only economic function of the state: it can also stimulate growth and structural change. And, to mention a closely related service, it can
refer, select, or discard, legal and institutional innovations that are proposed in the attempt to organize and channel effectively the new production potentialities. This, too, is a matter that may generate conflicts, since different legal and institutional arrangements may have different effects on the several economic groups in society.
In that modern economic growth has to contend with the resolution of incipient conflicts continuously generated by rapid changes in economic and social structure, it may be described as a process of controlled revolution. The succession of technological innovations characteristic of modern economic growth and the social innovations that provide the needed adjustments are major factors affecting economic and social structure. But these innovations have other effects that deserve explicit mention; and while these are discussed below in terms of effects of technological innovations, the conclusions apply pari passu to innovations in legal forms, in institutional structure, and even in ideology.
<http://nobelprize.org/nobel_prizes/economics/laureates/1971/kuznets-lecture.html>
Shane