Fostering green and inclusive productivity growth

This chapter explains the main ideas underpinning the Schumpeterian growth paradigm and how it provides a new lens to look at the determinants and effects of the growth process. Schumpeter was pessimistic about the future of capitalism. Indeed, his belief was that capitalism was doomed because in his view it was impossible to prevent incumbent firms from barring new innovations, either directly or by exploiting political connections with government authorities. The chapter uses the lenses of the Schumpeterian paradigm to revisit growth policy debates and also to rethink capitalism and its ability to reconcile the promise of sustained prosperity with the quest for greener and more inclusive growth. We argue that the proper functioning of an economy of innovation and creative destruction rests on the triangle between firms that innovate, the state, which is meant to regulate and invest, and civil society, which serves as a watchdog to induce firms and the state to do the right things.