Two views on the obstacles to development

Social Research, Summer, 2004 by Jan Kregel

I COUNT MYSELF AMONG THE MULTITUDE GIVEN AN INTRODUCTION TO the history of economic thought through Bob Heilbroner's The Worldly Philosophers. When I first read the book I was not sufficiently knowledgeable of foreign languages to recognize the distinguishing characteristic for those included in the book was having a unique Weltanschauung. These were not worldly philosophers in the sense of having experience of the world, but rather in the sense of having an individual worldview of economic development.

My recollection is that I had the book assigned as a basic text in the autumn of 1964. Most students of economics were then unaware of the implications of the UN Trusteeship Council's rapid creation of new independent states from former colonies and the problems of economic development that they would face. But, the June 1963 preface to the revised edition of The Worldly Philosophers (despite several transoceanic moves I still have my original copy) already notes that this shift reflected the change in economics toward "more concern over the trend of economic development" (1964: ii).

Most of the specific discussion of development issues is found in the concluding chapter, "Beyond the Economic Revolution," which laments that economists are not "in general today keenly aware of the historic responsibilities and implications" of making policy recommendations on appropriate priorities and strategies for developing countries:

   The trend in economic thought in our time is not towards
   the "grand dynamics" of the future, but turns aside from
   such speculative social forecasting to consideration of more
   "scientific" matters. Many economists build "models" ... of an
   economy in growth, or concern themselves with complex
   quasi-engineering problems of labor inputs and commodity
   outputs.... But if the temper of most contemporary
   economists tends to be unadventuresome and academic
   there is no lack of prophecy and persuasion to which we
   can turn. Only they are not new voices. They go back--all
   of them--to the arguments and architecture of the great
   economists themselves" (290).

Heilbroner's position reflects Adolph Lowe's (1976) that "the standard works of the classical economists--Smith, Ricardo, Marx--not only contain but essentially are theories of economic growth" (Lowe, 1976: 5; emphasis in original). Returning to the book some 40 years later provides a range of alternative approaches, in contrast to the modern convergence of opinion on development issues and the basis for some reflection on the "trend of economic development" policy.

Today it is widely believed that economists know the right policies required for successful economic development; it is just a question of sufficient political will for governments to implement them. These basic policies largely reflect the principles put forward in the "Washington Consensus" policies applied in Latin America over the last two decades and the market "shock" approach to Eastern European transition. They do not, however, reflect the experience of the Asian economies. This alone should be cause for concern--since the 1960s Asia has far outstripped the performance of both Latin America and Eastern Europe.

This modern approach accepts what has been considered a given of development economics since the adaptation of the Harrod-Domar growth models of the 1940s and 1950s: the need to augment the resources available to support growth since developing countries lack the will or the ability to increase domestic savings or to attract foreign capital. Successful economies that have experienced growth have overcome this obstacle so that the sole aim of development policy can be reduced to the introduction and implementation of appropriate policies to improve the domestic mobilization of resources and to provide a hospitable domestic environment to attract the resources of foreign investors. The emphasis is on the implementation of domestic policies that will provide a sufficient flow of resources domestically or from abroad to be invested and produce higher growth. These policies are usually mirror images of the policies that are currently employed in successful developed countries.

However, if we use the worldly philosophers to investigate the earlier approach to economic development that Heilbroner and Lowe suggest contain the key to understanding the social and moral dimensions of development, this modern concentration on the lack of resources as the main obstacle to development is difficult to find. Adam Smith's Wealth of Nations, probably the first comprehensive "how to" manual in the economic development literature, as Heilbroner points out, refers to the period before the Industrial Revolution. Yet the Industrial Revolution is used by many authors--Rostow (1960) being the most visible--as the reference point for insight into the development process. The modern emphasis on the lack of resources for investment comes from the belief that the Industrial Revolution was the result of a rapid increase in the rate of fixed capital accumulation.