Perspectives of Economic Development

253 Pages·1973·24.877 MB·English

by  Amlan Datta (auth.)

PERSPECTIVES
OF
ECONOMIC DEVELOPMENT
Perspectives
of
Economic Development
AMLAN DATTA
Palgrave Macmillan
THE MACMILLAN PRESS L'"ID
London and Basingstoke
Associated companies in New York Dublin
Melbourne Johannesburg and Madras
Copyright© by Amlan Datta, 1973
Softcover reprint of the hardcover 1st edition 1973
SBN 333 15007 4
ISBN 978-1-349-01958-8 ISBN 978-1-349-01956-4 (eBook)
DOI 10.1007/978-1-349-01956-4
TO
GUNNAR MYRDAL
Preface
The writer of a book on economic development is faced with a
choice, or rather a number of interrelated choices. He has to
decide whom he would address and how wide would be his universe
of discourse. In this book I have tried to write in a language which
should be, on the whole, intelligible to the layman. At the same
time, the perspective in which principles of economic development
have been discussed here is wider than what is common in textbooks
for beginners. This seems to me to be necessary for making possible
a broad and intelligent understanding of the subject.
This book has been written from a particular point of view. It
is difficult for an author to make a concise statement of his own view.
Fortunately, Professor Simon Kuznets, who was kind enough to
take time off his heavy schedule of work and glance over the book
in manuscript, did this for me very satisfactorily. 'This view,' he
wrote, ' is critical of rigid schemes and ideologies, conscious of
elements of change and contingency in historical experience, and
allows for a wide variety of institutional and other adjustments
to problems and tasks of growth.' An attempt has been made
here to separate what is essential for economic growth from what
is inessential, and it has been stressed that different sets of institu
tions are, under different circumstances, compatible with the re
quirements of growth. The essentials of economic development
in our time include a combination of pursuit of science with search
for profit or cqst reduction; a readiness to invest in skill formation
as a necessary complement of capital formation; planning to ensure
certain balances and proportions along with an adequate rate of
investment; and vigilance against those disparities which grow out
of the process of development itself and threaten to disrupt that
process unless they are carefully held in check. More particularly,
attention has been paid to the problem of regional disparities,
which has so often been neglected in the past by growth econo
mists in their preoccupation with the overall rate of growth of
national income.
An attempt has also been made in the following pages to evaluate
Vll
viii Preface
earlier thought, particularly classical and Marxist, from the stand
point adopted in the present work. The literature on economic
development has proliferated and grown extraordinarily fast in
recent years. This book does not pretend to compress or pass in
review the whole of this literature. All that I have tried to do is
to present a central argument, or a stream of ideas, fairly broadly
conceived, and relate it to the past as well as the present, in the hope
that it will arouse the interest of the reader in the subject, while the
specialist will, I guess, find it provocative at several points.
Among economists in India I must particularly thank Professor
A. K. Das Gupta, who read in sick-bed a major part of the manu
script and made valuable comments. It is hardly necessary to add
that neither Dr Das Gupta nor Dr Kuznets is even remotely res
ponsible for the many shortcomings of this work.
The writing of this volume was made possible by a Fellowship
offered by the Indian Council of Social Science Research. I am
indebted to the Council and particularly to Mr J. P. Naik, its
Member-Secretary, for assistance received.
My wife came to my aid in so many ways while the book was in
preparation that I cannot begin to count them here, nor presume
to lighten my debt by a. public expression of gratitude.
AMLAN DATTA
Calcutta University
1972
Contents
PREFACE vii
I. THE Low-LEVEL EQUILIBRIUM
Appendix: A Short Digression on Methodology 10
II. THE BREAKTHROUGH 15
Ill. ' PRIMITIVE ' CAPITAL AccuMULATION 26
IV. THE CIRCULATION OF WEALTH 37
V. GROWTH OF PoPULATION 49
VI. THE STAGEs OF EcoNOMIC, GROWTH 59
Appendix A: Credit Institutions and Economic
Development 74
Appendix B: A Short Note on the Measurement
ofGrowth 77
VII. ' CoNTRADICTIONS ' IN DEVELOPING EcoNOMIES 82
VIII. STRATEGIES FOR EcoNoMic DEVELOPMENT: I
' BALANCED ' GROWTH AND MEASURES FOR AGRI
CULTURAL DEVELOPMENT 97
IX. STRATEGms FOR EcoNOMIC DEVELOPMENT: II
CAPITAL FoRMATION AND INDUSTRIAL LocATION 119
X. SCIENCE, EDUCATION AND DEVELOPMENT 142
XI. INFLATION, TAXATION AND EcoNoMic GROWTH 157
XII. INTERNATIONAL TRADE, Am AND DEVELOPMENT 170
XIII. RoLE OF THE GovERNMENT IN EcoNOMIC DEVELOP-
MENT 209
XIV. ON EcoNOMIC SYSTEMS 219
XV. CoNCLUDING OBsERVATIONS 233
INDEX 239
ix
Chapter I
The Low-level Equilibrium
IN THE long sweep of history, the advancement of technology or
the increasing control by man over external nature provides a
comparatively clear indicator of the 'progress ' of mankind. In
other respects, a positive assessment of evolution is more difficult.
It is not easy to establish beyond doubt that the quality of twentieth
century human civilisation surpasses that of ancient Greece, or
India in the days of the imperial Guptas, or China under the T'ang
dynasty. But there can be no question about the technical superio
rity of our century over all preceding ones. This superiority has
steadily grown, particularly since the eighteenth century, although
one must hasten to add that modern technology has not penetrated
all parts of the world equally. It is possible to look back over the
past and mark out broad phases of social development in terms of
the progress of technics. Lewis Mumford tried to do precisely this
in his book Technics and Civilisation. He distinguished between ' three
successive but overlapping and interpenetrating phases', which he
called eo technic, paleo technic and neotechnic. In terms of its base
in a natural source of power and characteristic supporting material,
the first of these technological phases of evolution has been des
cribed as a water-and-wood complex; the second is sustained by
coal and iron; and the third depends on electricity and alloys. Since
Mumford wrote this, the emergence of atomic energy has opened
up yet another phase of development of modem technology.
This is the evolutionary background in which a definition of
economic development must fit if it is to be historically meaningful.
In a sense, every society functions simultaneously at several levels.
This is particularly true of growing economics. Even in an indus
trially developed country, the incidence of growth and 'moderni
sation' is unequal in different parts. But some countries have
advanced more towards modem technology than others. A defini
tion of economic development has to be based on these differences
in the scale and sweep of industrial revolution in different countries.
An economically developed country is one in which modern science
and technology have become operative over a comparatively wide
2 Perspectives of Economic Development
area of its productive activities. In a backward economy, the con
verse is true. The wealth or poverty of nations is largely a conse
quence, while science and technology are more fundamental.
Since per capita income depends also on a number of other things,
such as natural resources relative to size of population, it is not very
satisfactory to make it the sole indicator of economic development.
It does not appear very meaningful to say that Australia is econo
mically more developed than, say, Denmark or Germany. Diffe
rences in per capita income among these countries do not exactly
reflect corresponding differences in the extent of acceptance of
science and technology. But it is certainly meaningful to say that
all these countries are economically more developed than Spain,
Greece or India, where the progress of modern technology has been
decidedly more limited.
It is one thing to stress that technological progress is essential to
growth and quite another to argue that developing countries
should always plump for the most advanced techniques. Econo
mic develpment is part of a larger process of social development.
Grave errors of policy are apt to arise when this simple fact is
ignored. An exclusive preoccupation with the rate of growth may
prove self-defeating from the point of view of growth· itself. All
these will be more fully discussed later.
Beyond a certain point, controversy on the definition of economic
development is unrewarding. It is more useful to try and under
stand the nature and causes of the poverty of nations, the forces
that support economic stagnation, and how these forces have been
overcome in some parts of the world and can be overcome in others.
The extent of disparity among different countries in the world to
day in respect of their per capita incomes is very great. While
sdence and technology point towards One World, these disparities
make for a world divided against itself. It is wrong to pretend to
make an exact comparison of national .incomes, but the following
figures will give some idea. In Atlas of Economic Development, 1 Norton
1Atlas of EcQnomic Development, University of Chicago Press, 1961. A distinction
is sometimes made between economic' growth', 'development' and' progress'.
Growth stresses quantitative increases; progress has a qualitative aspect; deve
lopment takes into account changes in attitudes, techniques and economic struc
tures. But we shall ignore these distinctions and use these words synonymously.