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Pioneers in development

In the post-war period, orthodox economics still had no interest in the problems of growth and in what occurred in the long term, so that W.A. Lewis could write in 1955 that "the last great book covering this wide range was John Stuart Mill's Principles of Political Economy, published in 1848," adding, "after this economists grew wiser; they were too sensible to try to cover such an enormous field in a single volume, and they even abandoned parts of the subject altogether, as being beyond their competence" [40].

There has been a tendency to think of economics as a discipline founded by the classical school, and rounded out and perfected by the neoclassical school. The contribution of other economists to the shaping of the discipline tends to be presented as marginal, secondary, if not actually insignificant. Nevertheless, the success of Keynesian analysis meant that orthodox economics was forced to acknowledge the existence of Keynes's followers and the "new economics" they proposed. "Mainstream" economics thus split into two: orthodoxy and its concomitant heresy, with everything supposedly belonging to either the neoclassical or the Keynesian school.

As in any polarized situation, the two protagonists had a common interest in defending the validity of this dichotomy and denying that other views had any great significance or even existed. However, matters are not so clear-cut in practice, and if ever there was a branch of economics that managed to develop quite independently of the two main schools, it is development economics. Indeed, the problems of development must be analysed over the long run, i.e. in the time span where, as Alfred Marshall said, "real life begins" - or in which we shall all be dead, to quote Keynes's famous remark.

It is true that "development economics took advantage of the unprecedented discredit orthodox economics had fallen into as a result of the depression of the 1930s" and the victory of the Keynesian revolution [27, p. 375]. Nevertheless, development economics did not grow out of "new economics." The problems of development relate to the problems of change, i.e. they arise only in the long term and moreover require an interdisciplinary approach - but neither the neoclassical nor the Keynesian school provided appropriate conceptual tools for this purpose, as is clear from the writings of the "pioneers" [47]. Some of the early development economists were familiar with Keynes's ideas and those of his circle, but they did not consider themselves Keynesians. Several writers tried to adopt a Keynesian approach to the problems of development, one of the first and most famous being Kurt Mandelbaum [44]. But the relevance of Keynesian concepts for underdeveloped economies was already being questioned in the years immediately after the Second World War [53].

Among the "non-Keynesians," W.W. Rostow explained that a study of economic history made him aware of the narrowness of the neoclassical approach and led him to develop a "Marshallian long period," taking account of the contribution of social, political, and technological factors in real life [47]. Paul Rosenstein-Rodan, having parted company with the marginalist analysis, was forced to abandon the Marshallian theory of static equilibrium and to acknowledge the virtues of interventionism in order to devise a strategy for tackling poverty in the less advanced countries of southern and south-eastern Europe. He himself described the starting-point of his thinking about development in terms of a motto: in economics, "Nature does make a jump," which is the opposite of Marshall's belief that "Nature does not make a jump" (Natura non facit saltum). This led to the formulation of the well-known theory of the "big push," whereby "backward" economies needed a development strategy based on a kick-start to set in motion the "disequilibrium growth process."

The insignificance of the contribution of the neoclassical school to the emergence of development economics has been acknowledged by one of its most prominent representatives, Gottfried Haberler. He explained this in terms of "the decline of liberalism": "a sharp decline. . . started with the onset of the Great Depression of the 1930s (or possibly earlier- the precise date does not matter)" and reached its low point after the Second World War, when `'faith in liberalism, in free markets and in free enterprise was probably at its lowest point since the early 19th century." He therefore argued that it was because economic liberalism had become discredited that the neoclassical school failed to make any real contribution to the creation of development economics (in Meier [46]).

In order to identify the sources of development economics, we must therefore look instead to economists who worked outside mainstream economics. The problems of development have been a central concern for several branches of the subject. W.A. Lewis notes that "the theory of economic development established itself in Britain in the century and a half running from about 1650 to Adam Smith's The Wealth of Nations (1776)." Lewis defines development theory as "those parts of economics that play crucial roles when one tries to analyze the growth of the economy as a whole," and he demonstrates

how much of modern development theory was already available in the year 1776.... This was quite a good beginning, that gave us the constraints imposed on growth by the agricultural surplus, or foreign exchange, or saving. Also we had Say's Law, the "Quantity Theory of Money", inflation, continual unemployment, entrepreneurship as a separate factor of production, the theory of bank credit, human capital and the incidence of taxes. Just ahead of us, in the first half of the 19th century, would come the law of diminishing returns, the law of comparative cost, the theories of population and of land tenure. After that, interest in development theory would almost die out until the theoretical explosion of the 1950s and after. (in Chenery and Srinivasan [12])

Amartya Sen also stresses the importance of development problems to seventeenth- and eighteenth-century writers:

Indeed, in the early contributions to economics, development economics can hardly be separated from the rest of economics, since so much of economics was, in fact, concerned with problems of economic development. This applies not only to Petty's writings, but also to those of the other pioneers of modern economics, including Gregory King, François Quesnay, Antoine Lavoisier, Joseph Louis Lagrange and even Adam Smith. An Inquiry into the Nature and Causes of the Wealth of Nations was, in fact, also an inquiry into the basic issues of development economics. (in Chenery and Srinivasan [12])

The quality and importance of the contributions of pre-classical economists to the problems of development should not, however, make us neglect those of the German school or of Marx. The study of actual economic change in order to identify the mechanisms and the types, "stages," "periods," and "phases" was one of the main preoccupations of the German historical school, which consequently introduced into its analysis a notion of relativity in the "laws" of evolution. and adopted a multidisciplinary approach [28].

As for Marx's contribution, Schumpeter maintains that "development" is "the central theme" in the general schema of Marx's thinking [62]. Indeed, one of the first instances of the term "development" occurs in Marx, in a passage in the preface to the first German edition of Das Kapital, dated 25 July 1867, that suggests a special view of historical evolution: in order to forestall the criticisms of German readers who might question why he used England "as the chief illustration in the development of [his] theoretical ideas," Marx stressed that "it is not a question. . . of the higher or lower degree of development of the social antagonisms that result from the natural laws of capitalist production. It is a question of these laws themselves, of these tendencies working with iron necessity towards inevitable results. The country that is more developed industrially only shows, to the less developed, the image of its own future" [45, p. 1718]. As regards his methods of investigation, in his afterword to the second German edition of Das Kapital (1873), Marx referred approvingly to one of his critics, who had described the way he applied these methods:

The one thing that is of moment to Marx, is to find the law of the phenomena with whose investigation he is concerned; and not only is that law of moment to him, which governs these phenomena, in so far as they have a definite form and mutual connexion within a given historical period. Of still greater moment to him is the law of their variation, of their development, i.e. of their transition from one form into another, from one series of connexions into a different one. This law once discovered, he investigates in detail the effects in which it manifests itself in social life. [45]

Among the first to be concerned with the problems of development were colonial authorities and those living under colonial rule. The former were mainly interested in "colonial development." It is not just coincidence that the first occurrence of the expression "economic development" is found in an essay written in Australia in 1861 on "the manufactures most immediately required for the economic development of the resources of the colony" [5] Henceforth, investigation of the development/colonization/exploitation of colonial regions became the principal task of a new discipline, colonial economics, concerned above all with maintaining the status quo in "an essentially static world" [47], as well as with problems of foreign trade and overseas markets. The spirit and the concerns of colonial economics are well illustrated by British legislation, such as the Colonial Development Act (1928) and the Colonial Development and Welfare Act (1938).

Colonial economics could not avoid examining the reasons for the differences observed between the situation of the colonies and that of the mother countries, or saying something about the timeliness and the chances of success of measures (already taken or required) aimed at solving the problems of the "backward" countries. As a consequence, the unity of economics was challenged, and doubts were raised about the universal validity of the concepts and the analytical tools provided by "Western" economics. From early in this century, there are instances here and there of people stressing the insurmountable differences between two types of social and economic organization, and the uneasy coexistence of two distinct social and economic systems, one imported and imposed by the colonial power, the other belonging to the "native" population. A dualist theory was first formulated before the First World War, while starting in the 1930s there were references to differences in socio-economic "structures" as the main reason for the polarization of colonial societies and economies [9, 10]

The colonial approach was based on an ethnocentric viewpoint and a belief in Western supremacy, which in itself showed the "backward" countries the direction they should be going in order to achieve Salvation: they must take the West as their model. At the same time, it was understood the West should take responsibility for and even actively implement this global scheme of social, economic, and cultural emulation. There thus arose a "development strategy" based on Westernization as a first version of what was to be thought of later as "modernization." l he civilizing role of the developed world was even stressed in official documents: the League of Nations Pact of 28 June 1919 used the term "development" five times in its article 22 in talking about "peoples who are not yet able to run their own affairs themselves in the particularly difficult conditions of the modern world." "The welfare and the development of these peoples are a sacred mission of civilization." "The developed nations are entrusted with the supervision of these peoples." The conditions and the precise manner in which this supervision would operate depended on the degree of development of the people and the communities concerned [15]. It justified putting "under international mandate" countries that in fact were under the rule of a single nation.

It should be remembered that, already in the nineteenth century, there was persistent questioning in the "communities concerned" as to the reasons political, economic, cultural, etc. - for the "lag" behind the "advanced" countries, and a variety of answers were given to explain their state of political and economic subjugation, as well as to suggest swift, efficient, and lasting solutions that would get them out of poverty and decline [8]. "How to achieve economic development?" and "What should be done in order to catch up?" were the main preoccupations of the colonial world. The responses were diverse, but all of them made industrialization the key element in any development strategy, since that had been the critical factor in revolutionizing the West and generating its economic growth. For proof, one has only to read the passionate debates stimulated by plans to set up a bank, build a railway, to exploit mineral resources in countries such as Iran, Egypt, or in the Ottoman Empire. It was no coincidence that Sun Yat-sen published a book in 1922 on the international development of China, in which he set out an impressive programme for the country's economic development [5]. It would be easy to find other examples in other parts of the colonial world, indicating the same concerns with combating poverty and promoting progress.

By the interwar period, everyone believed that industry was more important than agriculture: you had to have begun to industrialize in order to have an industrial revolution. This craze for industrialization, explained by some observers as ultimately derived from the theories of Saint-Simon, was apparent in the discussions at conferences, from Baku in 1920 to Bandung in 1956, gathering together representatives of countries rebelling against the colonial status quo. One example must suffice here. Among the resolutions following the Asian Relations Conference in New Delhi (23 March-2 April 1947) attended by the representatives of about 30 countries, points 4 and 5 dealt with the transition from a colonial to a national economy, the problems arising from "the development of a national economy" and "agricultural reform and industrial development." Point 5 included the statement that "the real criterion for Asian independence will . . . depend on the capacity of Asia to achieve a substantial level of industrialization" (in Queuilles [55]).

The new discipline of development economics was thus created where several points of view came together, all of which had some impact upon it: those wishing to identify the laws of economic evolution, others seeking to build a new and better world, others trying to maintain colonial regimes, and yet others trying to throw off colonial rule. Although development economics was not entirely a product of the post-war period, it was none the less strongly influenced by the atmosphere of the Cold War [22] and decolonization, Western ethnocentrism and the emergence of new sovereign states in the third world seeking "good advice."

The discipline develops

Since the years following the Second World War, development economics has continued to evolve in a climate of optimism and confidence, sometimes arrogantly and aggressively, and often with doubt and depression. We therefore find today a range of different and frequently contradictory arguments based on the shared concerns of a particular school of thinking or a particular body of problems. To gain an insight into the distance that has been covered since the war, it is interesting to observe the changing contents of successive editions of handbooks on development, such as Meier [46], or even better to compare a "textbook" written in the early 1950s with a more recent one. Alternatively, one might look at the accounts by development economists of their experiences in recent decades, such as the two volumes produced at the instigation of the World Bank on "the pioneers on development" [47, 46]. Fifteen such "pioneers" were asked to make a critical examination of their own working hypotheses, concepts, analytical tools, advice, and policy recommendations. Contributions came from P.T. Bauer, C. Clark, C. Furtado, G. Haberler, A.C. Harberger, A.O. Hirschman, W.A. Lewis, H. Myint, G. Myrdal, R. Prebisch, P.N. Rosenstein-Rodan , W. W. Rostow, T.W. Schultz, H.W. Singer, and J. Tinbergen. Each essay is followed by comments from one or more younger economists, so that in all, 23 currently active economists offer their critical assessment of the work of the "pioneers." It was hoped that these studies would provide an exceptional opportunity for a review of what had happened to development economics since its early days.

This type of study invites the usual remarks about the selection and the representativeness of the sample and the reasons for notable absences. For example, one may reasonably wonder why no French speaking economists were included (such as C. Bettelheim, R. Dumont, F. Perroux, or A. Sauvy), nor any of the many African and Asian specialists in the field, such as those who took part in the planning efforts in India after Independence. The result is a somewhat incomplete picture of the pioneer age, with very few "local" representatives. Were they not concerned about their own development, or is this another example of (Anglo-Saxon) ethnocentricity? Or are those third world economists right who consider studying development within the social sciences as yet another "product of the West," "an outsider's view of our development, in particular from the countries that once ruled us" (Goonatilake quoted in [8])?

The literature on development economics has been so rich and various that numerous attempts have naturally been made to classify it (e.g. Hirschman [27], Dockès and Rosier [19]) or to present it in historical and analytical terms (Roxborough [58], Kitching [36], Harris [25], Stern [72], Oman and Wignaraja [49]), but these still leave the reader pondering on the absences and oversights, or the reasons why a given author has been classed under one heading rather than another. This situation is partly a product of the way that development economics has evolved.

The subject has grown up in different continents simultaneously, across many cultures and at different levels related to the problems encountered, the differing schools of economic thought, and the models of society created by or for the developing countries. These levels were clearly not independent of one another; on the contrary, the many links that were forged among them helped strengthen the multifaceted character of development economics. As regards the problems encountered, in both development theories and discussions about policy choices, there was a gradual shift away from a purely economic approach in favour of a more interdisciplinary one.

The first formulations of the "problématique" of development focused on capital formation, seeing that as the engine of economic growth. Lack of capital was the distinctive feature of low-income economies that relied heavily on low-productivity agriculture. How could they be transformed into industrialized economies with high incomes? The answer was simple and categoric: investment. But how and where was the capital to come from? According to W.A. Lewis,

the central problem in the theory of economic development is to understand the process by which a community which was previously saving and investing 4 or 5 per cent of its national income or less, converts itself into an economy where voluntary saving is running at about 12 to 15 per cent of national income or more. This is the central problem because the central fact of economic development is rapid capital accumulation (including knowledge and skills with capital). We cannot explain any "industrial" revolution (as the historians pretend to do) until we can explain why saving increased relatively to national income. [40]

The necessary capital would be found either through the free operation of the foreign exchange market, which would attract foreign capital, especially public or private aid, to the underdeveloped countries; and/or through the interventionist policies of the state in planning the national economy and mobilizing "hidden" resources in order to achieve an increase in national income.

The first argument was proposed by the neoclassicists, but in the post-war years it was the second argument that tended to influence the design of development policies. Industrialization offered the key to growth and was presented as the main hope of most poor countries hoping to raise their incomes. This policy of industrialization whether aimed at achieving "balanced'? [48] or "unbalanced" [26] growth, whether conducted via a "big push" [57] or via "growth poles" [52] or via the choice of "industrializing industries" [18] - concerned above all the domestic market, where it was expected to satisfy existing demand for "modern" products, previously met by imported goods manufactured abroad. Import substitute industrialization was thus meant to bring about growth in developing countries by creating a modern industrial sector that would replace imports with locally made goods. It was argued that the benefits would "trickle down" to reach all parts of society, and in consequence the implementation of such development policies did not require any political or social transformations to the status quo. As regards strands of economic thinking, these first attempts at formulating the problématique of development economics were supported by the structuralists, the institutionalists, and the proponents of the dualist approach in short, groups outside the orthodox camp.

The neoclassicists - the orthodox camp - argued that market forces unfailingly provided the engine of economic growth: the interplay of supply and demand in both domestic and international markets would ensure economic success. The market was seen as a tool of social and economic management, and as such was thought to be the most efficient way of making decisions about the optimal allocation of available resources. The free marketeers, who were extremely critical of the interventionist and protectionist positions of the structuralists and institutionalists, thought that opening up to world markets could only bring benefits to third world countries, as suggested by Ricardo's theory of comparative advantage or the improved versions of it proposed by Heckscher and Ohlin. Theories like that of Jacob Viner [78] argued that, through trade, the growth occurring in the advanced countries would be transmitted to the developing ones. Full integration into world markets therefore became the key aim of every development strategy, and nothing would be spared to achieve it.

This choice had enormous consequences: economic development would be promoted by free enterprise and not the state; laissez-faire would replace all attempts at planning, and the main policy emphasis, instead of import substitution, would be on encouraging exports. Third world countries therefore ought to stick to exporting raw materials and should do everything to expand production of these commodities, while waiting patiently for growth to be transmitted to them from outside.

This idyllic vision of the world economy was vigorously challenged by all those who argued that international economic relations were shaped by mechanisms of domination, submission, and dependency. As early as 1948 François Perroux offered an analysis in terms of domination of the world economy, which he argued was divided into dominant (firms, countries, or regions) and dominated elements, with the former having an extremely uneven impact on the latter [52]. The notion of general and mutual interdependence offered by the neoclassical theory of general equilibrium was therefore replaced by a notion of "the dynamics of inequality" arising from and maintained by the dominant forces.

The centre and the periphery

At the same time, quite independently of one another, Raul Prebisch [54] and Hans Singer [70] highlighted the issue of worsening terms of trade for the developing countries. They argued that international trade worked against third world countries that relied on exporting primary products and importing manufactured goods. It was not a matter of mutual benefit, as the neoclassical theory maintained, but of an unfair transfer of economic gains. For Prebisch and his colleagues at the United Nations Economic Commission for Latin America (ECLA), the world economy was made up of two different and separate entities - the centre and the periphery - and the nature of their relations tended constantly to reproduce the conditions of underdevelopment and to widen the gap between developed and underdeveloped countries.

This was the first formulation, inspired by the structuralists, of a new paradigm of development: dependency. The underdeveloped countries were part of a network of international economic relations in which the industrialized countries, favoured by their position at the centre and by their early technical progress, organized the system as a whole to serve their own interests. The producers and exporters of raw materials were thus linked with the centre as a function of their natural resources, thereby forming a vast and heterogeneous periphery incorporated in the system in different ways and to different extents, depending largely on their resources and their economic and political capacity for mobilizing them. According to Prebisch,

this fact was of the greatest importance, since it conditioned the economic structure and dynamism of each country - that is the rate at which technical progress could penetrate and the economic activities such progress would engender. Similarly this system. . . exaggerated the degree to which income in the periphery was siphoned off by the centers. Moreover, the penetration and propagation of technical progress in the countries of the periphery was too slow to absorb the entire labor force in a productive manner. Thus the concentration of technical progress and its fruits in economic activities oriented towards exports became characteristic of a heterogeneous social structure in which a large part of the population remained on the sidelines of development. (in Meier and Seers [47])

Dependency theory marked a radical departure in development thinking: henceforth, underdevelopment was thought to be an inescapable consequence of the world economic system, and to analyse it required that all the links of dependency between the periphery and the centre be taken into account. Any development strategy that hoped to be efficient should therefore make the restructuring of the world economic order its principal goal.

More radical versions of dependency theory were proposed by Marxist economists and sociologists. In his analysis of the political economy of development, Paul Baran [6] uses the concept of economic surplus, defined as the difference between production and consumption. In every society, two main types of economic surplus are found: actual, which is the difference between current production and consumption; and potential, which is the difference between the potential production of a given economy and what is considered its "basic consumption." According to Baran, much of the potential surplus remains unexploited in the capitalist developing countries, while much of the actual surplus is transferred to the industrialized countries. The capitalist world is made up of two organically interlinked parts, the development of the one being the reason for the underdevelopment of the other. The relations between the developed and underdeveloped parts (i.e. Prebisch's centre and periphery) prevent any chance of normal capitalist development in the underdeveloped countries.

In its radical versions, dependency theory is an extension of Marx, taking further the Marxist analysis of imperialism, of the dynamics of advanced capitalism or the characteristics of different types of development in social structures that have a "backward" sector. Underdevelopment is thus taken to be an inescapable concomitant of the laws of unequal development inherent in the capitalist system, and it arises from the way the capitalist mode of production in the dominant countries interacts with pre-capitalist or semicapitalist modes in the dominated economies. The links between the centre and the periphery create and maintain underdevelopment and at the same time constantly exacerbate the disparities between the two parts of the system - which in turn fosters underdevelopment. Arghiri Emmanuel [20] argues that the economic relations between the centre and the periphery are based on principles of unequal exchange, and this thereby both overturns the theory of comparative advantage and provides decisive arguments in favour of dependency theory. Samir Amin [2] argues that, mainly because of the transfer of the surplus from the periphery to the centre, capital accumulation now occurs at the world and not the national level.

According to the radical exponents of dependency theory, the solutions to underdevelopment lie not in partial efforts to reform the system but in severing the bonds of dependency, then embarking upon various types of self-reliant development. A clean break with the capitalist world system is thus the main prerequisite in the struggle against underdevelopment, and countries must choose a completely different approach in order to put such problems behind them forever [3].

The virulence of the criticisms, the messianic tone, and the simplicity of the message expounded by the dependency school made their ideas very popular with some peripheral countries and were seen by the countries of the centre as an essential part of the prevailing third world ideology. In social science, there was also interest in other forms of dependency: e.g. political dependency [21] and dependent societies [74]. All in all, dependency theory generated considerable debate [64, 11, 8].

Another version of the strategy involving a clean break with capitalism must be mentioned so as to put all the schools of this period in a fair historical perspective: that produced by Soviet writers as part of the theory of non-capitalist development. This started life at the conference of 81 communist parties meeting in Moscow in November 1960 and became the main argument of the Soviet position on development in the 1970s [4]. The non-capitalist approach meant rejecting capitalism as a system and making a commitment to creating the material basis for a socialist society. This meant taking decisive steps against imperialism, capitalism, and feudalism, with an "attack" on major representatives of domestic and foreign capital, nationalization of the main means of production, the creation of a state sector, and the implementation of "radical" land reform. In fact, in order ultimately to achieve its economic goals, the strategy should start with certain political measures: the removal of "pro-imperialist forces" and the establishment of a policy of cooperation with the socialist bloc countries [71]. In the final analysis, implementation of this policy of cooperation constitutes the only valid indicator of success in carrying out such a strategy of non-capitalist development! After the implosion of the communist world, nobody knows what aftermath, if any, these notions of development may turn out to have.

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