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Questioning and crises

It seemed a propitious moment, nearly 20 years after the first development programmes and plans were launched, to take preliminary stock of the results achieved thanks to the studies and advice provided by development economists. Three conclusions were drawn.

First, development did not always occur, and instead there were often disappointments and surprises. In the search for the miracle solution to the problems of underdevelopment, policies were changed too frequently (see, as a by no means exceptional example, the description of the successive development policies applied in Pakistan in an effort to keep up with the latest fashion: Haq [24]). The first disillusionments did not manage to dispel entirely the belief that miracle solutions existed, and the hunt for the developmental philosopher's stone was doggedly pursued. Nevertheless, every change of fashion drew attention to a new aspect of the complexity of the problems of underdevelopment.

Second, there is no miracle solution for generating development, which in any case cannot be achieved through the automatic workings of a set of economic variables and indices. Reality is not in the least like that, as is proved by the way that, where incomes did rise, the benefits did not spread evenly - instead, the rich became richer and the poor became poorer. The vaunted "trickle-down effect," so eagerly awaited, did not in fact occur.

Third, development is not accurately reflected in statistics in national accounts (e.g. gross national product or per capita national income), and it is not possible to monitor progress by such means. Other indicators besides growth in per capita income must be selected and examined.

This stocktaking led to a gradual broadening of the field studied by development economics, illustrated by a whole series of efforts to look critically at what was known and to extend it, as well as to take into account less purely economic aims in development strategies. This shift can be seen clearly in the various proposals made by international organizations and certain non-governmental organizations as they tried to define the goals of development policies. In 1969, the International Labour Office (ILO) launched its World Employment Programme, which gave priority to efforts to combat unemployment in all development strategies in the third world. In the early 1970s the World Bank announced its preference for "redistribution with growth" [13] as the only way to achieve equitable development. The second United Nations Development Decade, the 1970s, stressed "employment-oriented" development strategies that, with help from the prevailing populist tendencies, provided a good moment to revive the concept of "hidden unemployment," now renamed "the informal sector" and deemed likely to act as the engine of new types of development [69, 36, 51, 16]. The fight against poverty, which had been the prime mission of all development planners in countries like India in the early 1960s, also became a major concern of international organizations like the World Bank [80, 24]; the ILO, at its world conference on employment in 1976, adopted the strategy of "satisfying basic needs" [31]. According to the ILO's director-general, basic needs include not just material items like shelter, food, clothing and essential community services like supplies of drinking water, public health measures, public transport and education, but also non-material needs such as human rights, a job, and a share in decision-making.

Such attempts continue unabated, with each one highlighting new aspects of development problems that require attention: an alternative development strategy should be "need-oriented, endogenous, self-reliant, ecologically sound and based on the transformation of social structures" [17]. Unesco encouraged "endogenous development" that respected the cultural identity and lifestyles of each society [1]. Another, supported by the United Nations Conference on Trade and Development, sought to establish a "new world economic order," less hostile to the interacts of developing countries and more in line with their development requirements. As we shall see in Ignacy Sachs's chapter in this volume, the theme of "sustainable development" was put forward in the Brundtland Report of the World Commission on Environment and Development [79]. The Commission defined sustainable development as being development that meets present needs without compromising the capacity of future generations to satisfy their own needs. The final declaration of the Earth Summit in Rio in June 1992, in affirming that human beings are central to the concerns of sustainable development and that they therefore are entitled to a healthy and productive life in harmony with Nature (Principle 1), was yet another instance of this new approach to development, looking to the future and being highly aware of the ecological and demographic problems of the Earth. This broadening of the field covered by development economics is also revealed in the "human development" reports of the United Nations Development Programme (UNDP), published every year from 1990 onwards.

These examples give some indication of the efforts to come to grips with a complex and multifaceted problem. Some features are unchanging (such as the deteriorating terms of trade for raw materials, poverty, or external domination, to mention only the economic ones), but there are also surprises, like the recent unexpected slowing of population growth in some countries in Asia, Latin America, North Africa, and the Middle East, the success of industrialization in the Far East with the emergence of the "little dragons," or the continually worsening position of the "least developed countries."

As the situation changes, things alter and disappear. Does "third world," associated as it is with the Cold War and the division of the world into two opposing blocs, have any meaning now? Some writers emphasize its diversity [82], or recognize its variety but are interested by what unites it [37], while others declare that it no longer exists [25]. The international organizations are now producing classifications based on new criteria and with more refined subgroups in an attempt to give a more accurate picture of the changed situation (see, for example, the World Bank's annual reports on world development from 1979 onwards, the UNCTAD reports on trade and development from 1981, or the ICSPS report published by Unesco in 1992).

The uneven pace of change, the resistance mechanisms, and the appalling problems of the developing world continue to stimulate and challenge development thinking. Each set-back is another clear refutation of the notion of miracle cures for underdevelopment, and each crisis offers a new occasion for finding and expressing serious doubts and reservations about elaborate claims for development. These criticisms, arising from disappointed hopes, poorly shouldered responsibilities, or disgust at instances of domination and repression, occur and recur according to a cyclical pattern. The amount of debate and its virulence are indeed one of the remarkable features of development economics. Each round of criticisms leads to new questioning, the formulation of new demands, and suggestions of new priorities.

During the 1980s major debates raged in many countries on the subject of development economics. In France, for example, criticism of "la vision tiers-mondiste" was accompanied by a declaration that development was finished [50]. Latouche wondered whether it would not be better simply to throw out development, on the grounds that it is the product of a technocratic attitude that considers only the economic aspects of the problem, whereas in fact underdevelopment results from the destruction of the cultural coherence of developing countries by the expansionist and imperialist forces of capitalism [38, 39]. In rejecting development that depends only on the solutions of economists and technocrats, that is based on copying other cultures and leads to the Westernization and acculturation of third world societies, Latouche is defending a historical and cultural approach that sees the solution to these countries' problems in a revival of their own cultural identity. Once their native cultural creativity is reestablished, they will be able to have an independent vision of their situation, identify their own problems, and find appropriate solutions for them (for a critical discussion of Latouche's views, see Kabou[34])

At the end of his preface to the volume on the "pioneers in development" published by the World Bank, G.M. Meier acknowledges that readers of these accounts might well wonder whether the efforts of the pioneers in fact led to the creation of a new branch of economics, and if so, what proportion of their contribution is still valid and insightful, which questions have remained unanswered, and lastly where development economics is heading now. Many development economists try hard to provide answers to such questions.

Hirschman on the discipline in decline

Albert Hirschman, both an observer and a long-time participant, has examined the causes of the rise and decline of development economics [27]. In a text that Amartya Sen has called "an obituary of development economics" [67], Hirschman suggests a typology of development theories based on two criteria: the monoeconomics claim (the belief that there is one form of economics that is valid everywhere for all time), and the mutual-benefit claim (the belief that reciprocal advantages are to be found in any bilateral relationship).

Using these two criteria, Hirschman distinguishes four types of development theory:

For Hirschman,

it is easy to see that the conjunction of the two propositions - (a) certain special features of the economic structure of the underdeveloped countries make an important portion of orthodox analysis inapplicable and misleading, and (b) there is a possibility for relations between the developed and underdeveloped countries to be mutually beneficial and for the former to contribute to the development of the latter- was essential for our subdiscipline to arise when and where it did: namely, in the advanced industrial countries of the West . . . at the end of the Second World War. [27, p. 3 7 5]

According to Hirschman, the first proposition was the prerequisite for creating a separate theoretical structure, and the second was needed "if Western economists were to take a strong interest in the matter."

Today, however, this "fledgling and far-from-unified subdiscipline" is in a state of crisis thanks to the impact of two factors: on the one hand, a double attack from both the Right and the Left; on the other, the succession of development disasters that have occurred in several third world countries. The right-wing attack, from the neoclassicists, criticized development policies for denying the "universal validity of economic laws" and consequently alleged they were the main reason for the misallocation of resources in underdeveloped countries. The left-wing attack (from neo-Marxists and dependency theorists) argued, among other things, that these "so-called development policies only created new forms of exploitation and 'dependency."' As for the disasters, these were "clearly somehow connected with the stresses and strains accompanying development and 'modernization,'" and they include everything "from civil war to the establishment of murderous authoritarian regimes."

In the climate created by these criticisms and political disasters, development economics switched from optimism to deep pessimism. There then followed "a Freudian act of displacement" in which, so as to make up for their anguish at the political situation, some specialists in development theory and practice attacked the weak points in the economic results. Both the political and economic balance sheets were disappointingly bad, so that Hirschman could write:

development economics started out as the spearhead of an effort that was to bring all-round emancipation from backwardness. If that effort is to fulfill its promise, the challenge posed by dismal politics must be met rather than avoided or evaded. By now it has become quite clear that this cannot be done by economics alone. It is for this reason that the decline of development economics cannot be fully reversed: our subdiscipline had achieved its considerable luster and excitement through the implicit idea that it could slay the dragon of backwardness virtually by itself or at least, that its contribution to this task was central. We now know that this is not so. [27, p. 387]

Seers on the death of the discipline

In his article on "the birth, life and death of development economics" [63], Dudley Seers goes even further. He too considers that development economics started in the 1950s, and traces its ancestry in part to colonial economics. The other part, according to Seers, was political opportunism with regard to the development of "backward" countries, on the part of both their own governments and the major capitalist countries, who saw in development an efficient means of fighting the communist threat.

Based on simplistic arguments, development "became increasingly identified with economic growth, as measured by the national income (defined according to Keynesian conventions)." The "developed" countries, seen as the social and political models, had high per capita incomes, so that high per capita income became both a necessary and sufficient condition for creating a welfare state with low unemployment. In order to raise incomes, what was needed was capital. There was general agreement, shared even by the Marxists, that the goal was higher incomes and that capital investment was the means of achieving it. This vision of development was strengthened by a range of innovations in economics and statistics (national accounts, growth models, development plans, etc.), and their elaboration and use became a prerequisite for success in implementing development strategies.

The force of circumstances and the complexity of the situation in practice soon led to disillusionment. Already in 1964, at a conference at Manchester University on "the teaching of development economics: its position in the present state of knowledge," serious doubts were expressed not only about the efficacity of approaches to development based on concepts such as economic growth, but also about the usefulness and appropriateness of neoclassical economics when applied to underdeveloped economies. Seers reminds us how these doubts, expressed more and more clearly, developed and ended up by discrediting the discipline as a whole: "development economics in the conventional sense has therefore proved much less useful than was expected in the vigorous optimism of its youth. In some circumstances, it may well have aggravated social problems if only by diverting attention from their real causes" [63, p. 712].

Seers's low opinion of what development economics had achieved is matched by unambiguous scepticism as to the discipline's chances of survival, which he considers slim for two reasons. For one thing, it has become clear that the economic aspects of development cannot be studied in isolation from the social, political, and cultural factors. A macroeconomic analysis of changes in consumption patterns cannot pretend to be exhaustive unless it is accompanied by a study of foreign cultural influences or the way they are transmitted. Secondly, contrary to the understanding of the term development economics in the 1950s and 1960s, the problems of development are no longer confined to the developing countries. According to Seers, recent changes in the "developed" world, especially since the oil shock of the early 1970s, show that there is no longer a distinct frontier between North and South. Consequently, development economics should be disposed of, and greater emphasis should be placed on the similarities rather than the differences between countries.

Thus development economics died young, after much suffering. "The history of economic thought shows that, in the end, irrelevant theoretical frameworks are discarded." Henceforth, "the logical future . . . is the study and teaching of development in a social and political as well as economic sense, with a wider geographical coverage and special emphasis on European development needs" [63, p.717].

Streeten: The dichotomies overcome

The reactions to these arguments were many and various. Paul Streeten believes that development theories suffer from not just one but several dichotomies, and if these are taken into account, it is possible to make other classifications that are closer to reality. In an article on "development dichotomies," reprinted as the conclusion of the Meier and Seers volume on the pioneers of development [47], Streeten discusses the typology proposed by Hirschman and argues that the theories of development, which at the outset were devised on the basis of broad generalizations and abstractions, as they are based increasingly on concrete examples, is becoming more precise and realistic. It is true that there is a wide range of development theories, but with time this diversity appears both relative and highly complex as it is realized that many of the South's problems are shared by the North, and that few problems are common to all the countries of the South. This diversity is not always an expression of a split in the discipline, dividing it into opposing camps, but may be rather the result of the fact that there are many possible solutions to every social problem. Seen from this angle, the dichotomies are not, as Hirschman believed, the reason for the inevitable decline of development economics, but are on the contrary a sign of its great richness and intellectual vitality.

It should also be stressed that these different theories of development are not always separated from one another by insurmountable barriers and that in many cases the diversity of theories hides the beginnings of convergence, in so far as the tools created by development economists prove useful and efficient in analysing developed economies, as has been the case, for example, with the application of structuralist theories to the study of inflation in the industrialized countries. According to Streeten, therefore, we are not witnessing the death of development economics but its transition "from the 'economics of a special case', viz. Third World economies, to a new global economics of shared problems, but with greater differentiation of approaches and analyses" [73, p. 886].

Thanks to these analytical methods, development economists should concentrate on building up three hitherto neglected aspects of their research:

Based on these areas of research and with attitudes favouring synthesis, development economics could yet usefully provide "imaginative but carefully worked out visions of alternative social possibilities" [73, p. 875].

Sen and the economics of "entitlement"

In a speech to the Development Studies Association in Dublin on 23 September 1982, Amartya Sen, too, discussed the questions raised by Hirschman and offered an assessment of development economics. In his view, the evaluation is far from negative: traditional development economics "has not been particularly unsuccessful in identifying the factors that lead to economic growth in developing countries" [67]. To achieve this growth, development economists prescribed a policy based on several major strategic themes: industrialization, rapid capital accumulation, mobilization of underemployed manpower, planning, and an economically active state.

A swift examination of the results of efforts at economic development in underdeveloped countries between 1960 and 1980 leads Sen to conclude that there is "still much relevance in the broad policy themes which traditional development economics has emphasized. The strategies have to be adapted to the particular conditions and to national and international circumstances," but these themes are not "rejectable" and "the time to bury traditional development economics has not yet arrived" [67, p. 753].

This position does not prevent Sen from recognizing the "real limitations" of this new discipline: in fact, "it has been less successful in characterising economic development." Here, the limits of development economics appear much more clearly; they arise "not from choice of means to the end of economic growth, but in the insufficient recognition that economic growth was no more than a means to some other objectives." In order to fill these gaps, Sen proposes a new definition of economic development:

Perhaps the most important thematic deficiency of traditional development economics is its concentration on national product, aggregate income and total supply of particular goods rather than on "entitlements" of people and the "capabilities" these entitlements generate. Ultimately, the process of economic development has to be concerned with what people can and cannot do, e.g. whether they can live long, escape avoidable morbidity, be well nourished, be able to read and write and communicate, take part in literary and cultural pursuits, and so forth. It has to do, in Marx's word, with 'replacing the domination of circumstances and chance over individuals by the domination of individuals over chance and circumstances." [67, p. 754]

For Sen, "entitlement" refers to "the set of commodity bundles that a person can command in a society using the totality of rights and opportunities that he or she faces" [67], which allow that person to acquire some capabilities and not others. The process of development can be seen as a process of expanding people's capabilities and entitlements. This study of entitlements should not cover just purely economic factors but should take into account the political arrangements "that affect people's actual abilities to command commodities, including food" [67]. Thus, here again, an examination of development economics reveals the need for a new definition, stressing the non-economic and above all the political aspects of development phenomena.

Lewis: A discipline in good health

Defining the aim and the contents of development economics was also the main concern of W.A. Lewis in his speech to the ninety-third congress of the American Economic Association in San Francisco on 29 October 1983 [41]. Examining the "state of development theory," he proposes a new definition of development economics as that branch of economics dealing with "the structure and behavior of economies where output per head is less than 1980 US$2000" [41]. The justification for making this a separate discipline lies in the need for analytical concepts and tools appropriate to the special problems of these economies.

These problems fall into two main categories: problems of resource allocation in the short term and of growth in the long term. With regard to the first category, the difference between the developed and underdeveloped economies is one of degree and not kind, since the same phenomena are found everywhere that the market, influenced by a variety of factors, no longer brings about the famous state of equilibrium. In these circumstances, prices no longer reflect accurately the trends in supply and demand, thus preventing a sound allocation of economic resources. Among the examples of market failure are where prices no longer reflect real social cost, where "the unregulated market constrains productive capacity," or where low elasticities of supply and demand coupled with low levels of stocks mean that the economy moves too slowly towards equilibrium. In addition to these cases where the price mechanism cannot function properly, there are others where, for "noneconomic considerations," production and trade are not governed by the desire to maximize profits. To analyse these problems, recourse must be had to economic anthropology, the only discipline to have studied them.

Lastly, another non-economic factor must be taken into account in allocating resources in developing countries: the role played by the government. In poor countries, the government is far more active in the modern sector of the economy. Moreover, where there is market failure, it is up to the government to correct the errors and omissions of the price mechanism. Furthermore, it should not be forgotten that in these countries, it cannot always be assumed that the government represents the people, and that there are many models of government: "military (with generals), military (with sergeants), technocratic, aristocratic, popular front, peasant, kleptocratic - which react differently to similar stimuli" [41, p. 4]. Here, recourse must be had to the expertise of sociologists and political scientists.

Analysis of long-term growth involves quite distinctive problems peculiar to developing countries: the search for the motor driving development and the models of development. "The economist's dream would be to have a single theory of growth that took an economy from the lowest level of, say, $100 per capita. . . up to the level of Western Europe and beyond" [41, p. 4]. The problem is that such a theory does not exist. We have plenty of models for the final state of economic maturity and for those at the bottom of the ladder. As to the countries halfway up, our knowledge is too fragmentary and inadequate for us to answer a crucial question: "how output would be affected by policies that gave, say, an extra five percentage points of the national income to the bottom 80 percent of the population, assuming a peaceful transfer over, say, ten years. Would output per head rise faster, more slowly, or at the same rate? One must also ask whether it matters, or should the change be made in any case" [41, p. 6].

The pattern and size of these changes are poorly understood, and there is minimal knowledge about the "engine" of economic growth. What is it? Investment (whether in plant or in people) is not the only factor in growth, yet there is a strong correlation between the two, which allows us to consider it "as a proxy for the forces propelling the economy." How therefore does investment occur and what are the driving forces behind it? They may be economic (credit institutions, the tax system, etc.) or, more likely, non-economic, and the relationship between them and social institutions has always been one of the concerns of development economics. "Given the importance of incentives and institutions, are there particular circumstances that favor growth?" Each school of economists has chosen its own engine of growth: agriculture for the physiocrats, foreign trade surplus for the mercantilists, the free market for the classical school, capital for the Marxists, entrepreneurship for the neoclassical school, and so on.

According to Lewis, there is no single engine. "Growth occurs wherever there is a gap between capability and opportunity. Capability covers skills (domestic and foreign), government, savings and technology. Opportunity can be of any kind, including markets, rainfall, access to licenses, infrastructure. The engine may be at home or abroad, an innovation, a good site for a transportation center, or much else" [41]. Hence the problem of growth is extremely complex, demanding a whole package of complementary theories rather than a single, universally applicable one. However, there is no general agreement about the theories to be included in the package.

For Lewis, the central one must be the theory of distribution, because this will provide incentives and savings. Among the others are the theories of government, of training, and the class struggle, of the firm and entrepreneurship. "Thus, a theory of the growth of the economy as a whole brings together what we know of its parts." But it is not enough merely to explain growth, or to have a model that produces growth. Countries may grow strongly for a short while, then growth slackens or decline may even occur, so that "one must also be able to explain why some countries fall out of the line while others keep up the pace" [41].

Attention must also be paid to the problems arising from "self-sustaining" growth, which should be analysed with regard to both resources and leadership (public and private). As regards the first, a country can be said to enjoy self-sustaining growth when it is "more or less self-sufficient in savings, in its managerial cadre, in skilled workers, and in other infrastructure. The physical part we can quantify, even if rather arbitrarily" [41]. As regards the second, there is no way of predicting or prescribing the qualifications required for leadership; all that can be done is to observe that for the moment the developing countries lack leaders of sufficient quality to deal with the tasks of a self-sustaining economy.

After this survey, Lewis maintains that his subject is still just as much alive as any other branch of economics. "If conflict and dispute are indices of intellectual activity, our subject seems adequately contentious. Development economics is not at its most spectacular, but it is alive and well" [41].


What conclusions can be drawn from this long debate? Let us first acknowledge with W.A. Lewis that the life of the discipline is not in danger. Nobody can deny that there have been set-backs in some of the efforts to promote development, causing bitterness among the various partners involved. But the existence and survival of an academic discipline do not depend entirely on the success of policies recommended or inspired by its specialists, let alone their unfailing success in dealing with problems. In social sciences, failure may be a source of vitality, since it shows that the problem still has to be solved and therefore the business of analysis and research must be pursued further.

Development remains one of the crucial topics in economics: the functioning of any economy means that it generates and experiences change. The main aim of development economics is to identify the laws, causes, forms, and manner of these changes. Another aim is to study the direction and nature of these changes: are we witnessing "the natural movement towards opulence and improvement" (Adam Smith), a decrease in poverty (W.A. Lewis), or a growth of entitlements (Sen)? What should be done to trigger, speed up, or control this trend?

All economic systems have to cope with these problems, but development economics is concerned above all with studying them in the context of the former third world. Now, however, there is greater awareness of the diversity within different regions and countries, each with its own culture and its own experience of change generated by development in particular conditions and at varying speeds. The recognition of this variety has disturbed some development economists, as it means that universal remedies are misleading and useless. The critical analysis of these set-backs should be conducted with perseverance and clear-sightedness, and should make us less ambitious: let there be no more talk of "miracles," since they threaten to turn quickly into "mirages" [42]. Development is a long and slow process of change. The various stages cannot be rushed without suffering the consequences of trusting in the logic of formal models. And in fact, do these "stages" really exist? We must therefore start work all over again, taking account of the diversity of circumstances and the many dimensions of change, which can be economic, but also cultural, social, and political. Hence the need for constant recourse to multidisciplinary methods of analysis.

We should also not forget the prime importance of global, multinational, not to say imperial, economies in the process of development. This aspect has been highlighted above all by the work of the dependency school, and to neglect it would be to leave gaps in the analysis and in our understanding of the phenomena being studied.

Lastly, we must also stress the importance of the political dimension. In practice, any experience of development is simply the illustration of a development strategy, drawn up and carried out by a political authority. It cannot therefore be assessed without reference to the political context of its conception and implementation. Those development economists who like to think of themselves as development strategists and thus become "the Prince's advisers" should not be surprised to find their names on the list of those responsible for any given development catastrophe, figuring among those with "dirty hands," suspected of having helped the creation and growth of bloody regimes.

How can one be political without working for the "unenlightened despots" of the developing world? Development economists find themselves faced with Max Weber's dilemma of the scientist and the politician. In order not to collapse under the weight of "disillusionment" after rude awakenings, which also recall the well-known "white man's burden" caustically described by those with now-fashionable anti-third world views, development economists must ensure that their analysis is always a critical one. If they do, development economics will not become, as some fear, a branch of knowledge dedicated to the maintenance of the status quo, but rather one that helps "individuals to dominate chance and circumstances" [33]. The story of development thinking is no longer circumscribed by the intellectual weight of the most industrialized countries. No longer is it captured by economic references alone. It will continue as long as disparities between nations delineate an unbearable frontier of poverty and injustice. And thus, it will continue as long as it is a matter of both scientific research and political struggle that transcends the understanding of economics per se, as well as the heritage of the "Northern/Western" paradigm.

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