Geoffrey M. Hodgson Drivers of strongCapitaliststrong Change.pdfVIP

Jei JOURNAL OF ECONOMIC ISSUES Vol. XXXVII No. 2 June 2003 Capitalism, Complexity, and Inequality Geoffrey M. Hodgson Under capitalism there is a potential for increasing socioeconomic complexity and greater specialization of skills.1 One implication is that there is a potential for increasing inequalities of wealth, income, and power on both a national and international scale. What follows is an updated, broad-brush account of possible future developments in a knowledge-intensive capitalist economy. They can themselves be manifest in different ways, in a number of quite different institutional frameworks (Hodgson 2001). Drivers of Capitalist Change Capitalism is a social formation in which markets and commodity production are pervasive, including capital markets and labor markets. Capitalism is the most dynamic economic system in human history. Its driving logic involves the expansion and diversi- fication of multiple markets. As it expands, corporations seek ever-new opportunities for trade and gain. As competition intensifies within particular markets, profit-seeking corporations innovate and diversify their products in unceasing creation of new market niches (Chamberlin 1933; Rueschemeyer 1986). The competitive pursuit of profit pres- sures firms to invest in new technology or new skills. In this quest for innovation, the frontiers of science and technology are advanced, leading to new fields of knowledge and enquiry. Services are generally more diverse than manufactured goods; hence, diversity also increases with the increasing relative size of the service sector. New and var- ied organizational forms are devised to increase productivity and to manage an exponentially expanding number of products and processes. Accordingly, there is a l