Positive and Defensive Strategies in Sectoral Adjustment

Abstract

Changes in the structure of production and employment are nothing but a normal feature of any economic development. Indeed, the process of economic growth is little more than a sequence of structural changes. The famous Schumpeterian notion on the ‘process of creative destruction’ in capitalist development may somewhat overstate the point, but it is certainly correct in focusing attention on the relevant issues. During periods of economic prosperity, and this is the case by definition, structural change is not accompanied by major frictions in the adjustment process. Expanding firms and industries rapidly absorb available resources. The withdrawal of resources from stagnating or declining firms and industries takes place more or less smoothly and is encouraged by the existence of ample employment opportunities in other economic activities. Up to the first oil crisis of 1973–4, this happy conjuncture seems to have prevailed in the Western industrial countries. Since then, however, structural adjustment in almost all countries has been accompanied by extensive friction and by waste of resources through unemployment. Low investment activity and slow economic growth performance (measured in relation to earlier standards) have characterised the recent period of economic malaise.