Abstract
It is expedient to spend a little time, if only to remove conceptual difficulties, in dwelling on the optimum rate of investment, since the optimum rate of foreign investment must depend partly on that. I take the main factor governing the optimum rate of investment to be the growth potential of the economy. This depends on the rate of increase of the working population and on the greatest feasible increase in output per head. In mature countries the latter is largely dependent on the occurrence of new ideas, including, but not consisting only of, the latest findings of technology. But in developing countries the latter depends mainly on the rate at which cadres of entrepreneurs, production engineers, managers, foremen, designers, draughtsmen, accountants et hoc genus omne can be made to grow. The maximum rates of increase of these impose, in my judgement, a far more important limitation on the growth of developing countries than the lack of availability of capital disposal, although that also has its place.
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© 1963 International Economic Association
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Harrod, R.F. (1963). Desirable International Movements of Capital in Relation to Growth of Borrowers and Lenders and Growth Of Markets. In: Harrod, R., Hague, D. (eds) International Trade Theory in a Developing World. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-08458-6_5
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DOI: https://doi.org/10.1007/978-1-349-08458-6_5
Publisher Name: Palgrave Macmillan, London
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