Keynes, Economic Development and the Developing Countries

Abstract

By almost any measure one cares to take, there are deep economic and social schisms in the world economy. Moreover, there are powerful ‘natural’ and institutional mechanisms perpetuating and even widening these divisions. The largest rift is undoubtedly between average living standards in the industrialised countries of the northern hemisphere and those prevailing the majority of countries in the southern hemisphere in Asia, Africa and Latin America — aptly called the North-South divide. According to the latest statistics from the World Bank (World Development Report, 1985), the average level of per capita income in the developed industrialised countries is over US$11,000 per annum compared to $260 in 35 very low income countries and $1,300 in 59 middle income countries. There are poor people in the developed countries, but there need not be; this is largely the result of social and political choices. There are rich people in the poor countries, but relatively few, and a radical redistribution of income by itself would make very little direct difference to the economic destiny of the average citizen. There are nearly three billion people in the world today living in primary poverty, and one billion of them suffer various states of malnourishment. As far as one can tell, the situation is deteriorating rather than improving. It is true that in most countries average living standards are rising slowly, but because of population growth the absolute numbers in primary poverty are increasing, and the world distribution of income shows no sign of equalising.

First published in Keynes and Economic Development edited by A. P. Thirlwall (London: Macmillan, 1987)