A Short-Run Model of a Semi-Industrialised Economy

Abstract

With the advent of the oil crisis, triggered by the 1973 oil embargo, most developed economies have faced a new era of economic problems. Prolonged periods of combined rampant unemployment and population rates against which, at least in the short run, market forces seemed inhibited, and action of the conventional mix of policy instruments inoperative, have challenged traditional economic thought. This new experience of the industrial world bears close similarities with the history of the process of modernisation of developing economies in the last three decades (see Furtado, 1964, and Hirschman, 1958). The unbalanced economic growth that followed the option to industrialise at a fast pace by primary-exporting economies generated an unbalanced productive structure. The coexistence of a traditional sluggish primary sector and a rapidly evolving modern industrial sector has been claimed responsible for the introduction of productive and external bottlenecks that need be dealt with accordingly.¹