Abstract
This chapter presents insights of the first generation of development economists. The best-known works of Paul Rosenstein-Rodan, William Arthur Lewis, Ragnar Nurkse, Walter Whitman Rostow, Simon Kuznets, and Hollis Chenery are summarised. After these summaries, a critical analysis of the first generation’s thinking is presented, and conclusions are drawn. At the end of this chapter, neo-Marxist development theories are touched upon, including some observations.
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Notes
- 1.
For example, the World Bank’s World Development Report 2009 uses terms like balanced growth, unbalanced growth, and cumulative causation, introduced by Ragnar Nurkse, Albert Hirschman, and Gunnar Myrdal respectively.
- 2.
Not everyone agreed. Take Griffin and Enos. They argue: ‘To the extent that foreign assistance is biased in favor of capital-intensive technology, it has a tendency to increase the receiving country’s subsequent need for capital, prejudice exports, raise the capital-output ratio, and reduce the rate of growth.’ Griffin, K. and Enos, J. (1970) Foreign Assistance: Objectives and Consequences. In Economic Development and Cultural Change, Vol. 18, No.3, April, 323.
- 3.
UNIDO (2012) Climbing the Stairways of Development: Structural Change as the Driver of Economic Growth. Policy Brief, May.
- 4.
Adelman , I. (1984) Beyond Export-led Growth. In World Development, 12(9): 937–949. Adelman compared the relative merits of two alternative open development strategies: (a) export-led industrialisation; and (b) agricultural-demand-led industrialisation (ADLI) by means of several simulation experiments. The results supported the ADLI approach on all counts.
- 5.
Deepak Lal observes: ‘Keynesian models of thought were seen as relevant to the problems of development. Both the central theoretical concern of Keynesian economics –namely the determinants of the level of economic activity rather than the relative prices of commodities and factors of production- and its distinctive method—namely national income-expenditure analysis—were enthusiastically adopted by development economists.’ Source: Lal, D. (2000) The Poverty of ‘Development Economics’. Cambridge: The MIT Press, 8.
- 6.
Meier , G. (2001) The Old Generation of Development Economists and the New. In Frontiers of Development Economics. Ed: Meier, G., Stiglitz, J. New York: Oxford University Press, 15.
- 7.
Little , I. (1982) Economic Development; Theory, Policy, and International Relations. New York: Basic Books, 30.
- 8.
Ibid., 127.
- 9.
Suppose the target growth rate is 4% and the required capital-output rate is 3, then the required savings rate should be 12%. If the actual savings rate was lower than that, there obviously was a gap to fill. This could be done by borrowing money or by donor contributions.
- 10.
Economic Development, 41.
- 11.
The Old Generation of Development Economists and the New, 16.
- 12.
Tinbergen, J. (1967) Development Planning. London: Weidenfeld and Nicholson. Tinbergen consistently referred to foreign trade in relevant sections of Development Planning.
- 13.
Harberger, A. (1983) The Cost-Benefit Approach to Development Economics. In World Development, Vol. 11, No. 10, 866.
- 14.
Hirschman, A. (1958) The Strategy of Economic Development. New Haven: Yale University Press.
- 15.
De Haan, P. (2016) From Keynes to Piketty; The Century that Shook Up Economics. London: Palgrave Macmillan, 233.
- 16.
Lal, D., Myint, H. (1996) The Political Economy of Poverty, Equity, and Growth. Oxford: Oxford University Press, 307.
- 17.
Thirlwall, A., Pacheco-López, P (2017) Economics of Development. Tenth Edition. London: Palgrave Macmillan, 104.
- 18.
Ibid., 106–107.
- 19.
This is what William Easterly had to say about Domar’s model: ‘To sum up, Domar’s model was not intended as a growth model, made no sense as a growth model, and was repudiated as a growth model over forty years ago by its creator. So it was ironic that Domar’s growth model became, and continues to be today, the most widely applied growth model in economic history.’ Easterly adds on the same page: ‘Although Domar assumed that production capacity was proportional to the stock of machinery, he admitted the assumption was unrealistic and eleven years later, in 1957, he disavowed the theory.’ Source: Easterly W. (2002) The Elusive Quest for Growth; Economists’ Adventures and Misadventures in the Tropics. Cambridge: The MIT Press, 28.
Gardner Ackley had a comparable opinion. In his Macroeconomic Theory he wrote: ‘…Domar did not pretend to provide a theory of growth, but only to indicate one significant aspect of the problem of growth, and to compute, on simplified assumptions, what the necessary rate of growth would have to be in order to avoid the accumulation of excess capacity which would inhibit growth.’ Ackley, G. (1961) Macroeconomic Theory. New York: The Macmillan Company, 517.
- 20.
Rosenstein-Rodan, P. (1943) Problems of Industrialisation of Eastern and South-Eastern Europe. In The Economic Journal, Vol. 53, No.210/211 (Jun.- Sep.) 202–211.
- 21.
Ibid., 208–209.
- 22.
Nurkse, R. (1953) Problems of Capital Formation in Underdeveloped Countries. Oxford: Basil Blackwell.
- 23.
Ibid., 11.
- 24.
In a footnote on page 17, Nurkse quotes Joseph Spengler who made relevant observations about the conditions for industrial progress: ‘Industrial progress is markedly dependent upon (a) the relative number of imaginative and energetic innovators and entrepreneurs present in the population, (b) the extent to which these qualified persons are empowered to make and execute relevant decisions, and (c) the degree to which these individuals are free of hampering legal and institutional arrangements. In the past this distribution has been most favourable in countries possessing a comparatively strong ‘middle class’ that enjoyed sufficient support at the hands of the state; while countries lacking a sufficiently strong middle class have had to depend upon the state to provide entrepreneurial leadership in so far as possible.’
- 25.
This is what Myint argued: ‘How far is the Southeast Asian experience applicable to other underdeveloped countries outside the region? I think that it may be of some relevance to the other smaller and less densely populated export economies, notably in West Africa. There, also, expansion in the exports of primary products still offers the most promising engine of economic development both as a source of foreign exchange earnings to finance the new import-substituting industries and, even more important, as the method of drawing the under-utilized natural resources of the subsistence sector into the money economy.’ Source Myint. H. Economic Theory and Development Policy. In: Economica, Vol. 34, No. 134 (May 1967), 123.
- 26.
Lewis , A. (1954) Economic Development with Unlimited Supplies of Labour. In The Manchester School of Economics and Social Studies, 22 (May).
- 27.
Ibid., 173.
- 28.
Ibid.,179.
- 29.
Kuznets, S. (1955) Economic Growth and Income Inequality. In The American Economic Review, Vol. XLV, nr. 1, March.
- 30.
Ibid., 25.
- 31.
Ibid., 27.
- 32.
Kuznets, S. Quantitative Aspects of Economic Growth of Nations: VIII: Distribution of Income by Size. In Economic Development and Cultural Change, Volume XI, Number 2, Part II. January 1963.
- 33.
Ibid., 9–10.
- 34.
Ibid., 49.
- 35.
Ibid., 69.
- 36.
Rostow, W. (1971) The Stages of Economic Growth; a Non-Communist Manifesto. Cambridge: Cambridge University Press, 2nd Edition.
- 37.
Although Alexander Gerschenkron did not agree with Rostow’s stages of economic growth, he shared Rostow’s anti-Soviet sentiment. Gerschenkron observed that ‘There are no four lane highways through the parks of industrial progress. The road may lead from backwardness to dictatorship and from dictatorship to war. In conditions of a ‘bipolar world’ this sinister sequence is modified and aggrandized by deliberate imitation of Soviet policies by other backward countries and by their voluntary incorporation in the Soviet orbit.’ Source: Gerschenkron, A. (1962) Economic Backwardness in Historical Perspective; a Book of Essays. Cambridge: The Belknap Press, 29.
- 38.
Wickstead, M. (2015) Aid and Development; a Brief Introduction. Oxford: Oxford University Press, 18.
- 39.
The Stages of Economic Growth, 127.
- 40.
Rostow jokingly remarked that without appropriate disaggregation, the study of growth is Hamlet without the Prince, or playing piano while wearing mittens.
- 41.
Rostow was not the first economist who proposed various stages of economic growth. For example, well before Rostow, the French economist Anne-Robert Jacques Turgot (1727–1781) identified four stages of growth. Source: Hoyng, A. (2011). Turgot & Smith; Een Paar Apart, 14. And Colin Clark distinguished between primary, secondary, and tertiary production in The Conditions of Economic Progress. London: Macmillan (1940).
- 42.
Gerschenkron, A. (1952) Economic Backwardness in Historical Perspective. In The Progress of Underdeveloped Areas, Ed. B. Hoselitz. Chicago: University of Chicago Press.
- 43.
Fishlow , A. (2001) Review of Economic Backwardness in Historical Perspective: A book of Essays.
- 44.
The Stages of Economic Growth, 6.
- 45.
The beginning of take-off can be traced to a particular sharp stimulus, such as Germany in 1848, Japan’s 1868 Meji Restoration, and India’s independence in 1947. It may also come about by technological innovation, or the opening up of markets.
- 46.
Ibid., 137.
- 47.
Ibid., 164.
- 48.
Chenery, H., Strout A. Foreign Assistance and Economic Development. In The American Economic Review, Vol. LVI, No. 4, September 1966, 679–733.
- 49.
In section B of their article the authors apply their model to the transition in Pakistan.
- 50.
Bauer, P. (1971) Dissent on Development. Cambridge: Harvard University Press.
- 51.
Bauer’s favourite toast among friends was: ‘Death to our enemies’, to which he added: ‘which would make the bubonic plague look like a minor media event.’
- 52.
Bauer, P. (1948) The Rubber Industry. London: Longmans, Green &co; Bauer, P. (1954) West African Trade. Cambridge: Cambridge University Press.
- 53.
He did not foresee that more and more people, who become more prosperous, negatively affect the earth’s regeneration capacity.
- 54.
Sen, A. How Does Development Happen?. In Peter Bauer and the Economics of Prosperity (2009). New Delhi: Academic Foundation, 52.
- 55.
Myint, H. Economic Theory and Development Policy. In Economica, New Series, Vol.34, No. 134 (May 1967), 120.
- 56.
The Old Generation of Development Economists and the New, 15–16. Krugman, however, changed his views on the first generation, as described in Chap. 5.
- 57.
The Elusive Quest for Growth, xii.
- 58.
Ibid., 288.
- 59.
The Poverty of ‘Development Economics’, 5.
- 60.
Ibid., 5.
- 61.
Ibid., 103.
- 62.
Krugman, P. (1992) Toward a Counter-Counterrevolution in Development Theory. In Proceedings of the World Bank Annual Conference on Development Economics. Washington: World Bank, 28.
- 63.
Lin , J. (2012) Demystifying the Chinese Economy. Cambridge: Cambridge University Press, 75–76.
- 64.
Ibid., 135.
- 65.
The Elusive Quest for Growth, 39.
- 66.
White, H. The Macroeconomic Impact of Development Aid: A Critical Survey. In The Journal of Development Studies, Vol. 28, No.2, Jan. 1992, 175.
- 67.
Griffin, K, Enos, J. (1970) Foreign Assistance: Objectives and Consequences. In Economic Development and Cultural Change, Vol. 18, No.3, April, 320. It should be noted that White argued on page 184 of The Macroeconomic Impact of Development Aid that in Griffin and Enos’s analysis no allowance is made for the possible effect that aid will have on savings by increasing income through a multiplier effect or its impact on other economic variables.
- 68.
Meier quotes a bon mot of Peter Timmer who said that getting the prices right would not guarantee economic development, but getting the prices wrong frequently is the end of development. Source: The Old Generation and the New, 17.
- 69.
Baran, P. (1957) The Political Economy of Growth. New York: Monthly Review Press; Rodney, W. (1972) How Europe Underdeveloped Africa. London: Bogle-L’Ouverture Publications; Frank, A. (1967) Capitalism and Underdevelopment in Latin America. New York: Monthly Review Press; Mandel, E. (1963) Marxist Economic Theory. Brussels: New Left Press.
- 70.
Economics of Development, 300.
- 71.
Wallerstein, I. (1974) The Modern World-System, Vol. I: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century. New York/London: Academic Press.
- 72.
Dos Santos, T. (1970) The Structure of Dependence. In American Economic Review, Papers and Proceedings, 60(2): 234–236.
- 73.
Dos Santos, T. (1973) The Crisis of Development Theory and the Problem of Dependence in Latin America. In Bernstein, H. (ed.) Underdevelopment and Development. Harmondsworth: Penguin.
- 74.
McCloskey, D. (2010) Bourgeois Dignity; Why Economics Can’t Explain the Modern World. Chicago: Chicago University Press, 231–237.
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de Haan, P. (2020). The First Generation of Development Economists. In: Whatever Happened to the Third World?. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-39613-8_4
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