The Innovation Pause Hypothesis and Modernization Strategy

The article develops the innovation pause hypothesis. 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, combined 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 rapid growth is restored in Western economies. Russia has a greater chance to decrease the gap between Russian and Western economic productivity provided it creates an efficient mechanism of technology. An appropriate strategy must include a set of measures aimed at increasing the country's adaptive capacity; designing an interactive planning system to develop large-scale modernization projects; and increasing the capital accumulation rate by stimulating savings and improving the credit system.