The Innovation Pause Hypothesis and the Strategy of Modernization

Abstract

The Innovation Pause Hypothesis is developed in the article. According to this hypothesis, the current crisis can be explained by the exhaustion of possibilities of existing general purpose technologies and by the delay of new ones in combination with overoptimistic expectations due to a long period of rapid economic expansion. If this hypothesis is correct, then it is quite plausible that a significant period of time will be required before fast growth is restored in Western economies. Russia gets an additional chance to decrease the gap between Russian and Western economic productivity provided that an efficient mechanism of technology borrowing is created. An appropriate strategy must include a set of measures aimed at: increasing the countrys adaptive capacity; designing an interactive planning system in order to develop large-scale modernization projects; increasing the capital accumulation rate by stimulating savings and improving the credit system.