Why Developing Countries Fail to Develop: International Economic Framework and Economic Subordination PDF
Preview Why Developing Countries Fail to Develop: International Economic Framework and Economic Subordination
WHY DEVELOPING COUNTRIES FAIL TO DEVELOP International Economic Framework and Economic Subordination Why Developing Countries Fail to Develop International Economic Framework and Economic Subordination Purushottam Narayan Mathur Emeritus Professor University College of Wales, Aberystwyth Preface by Wassily Leontief New York University Foreword by Y oshimasa Kurabayashi Hitotsubashi University Palgrave Macmillan ISBN 978-1-349-21345-0 ISBN 978-1-349-21343-6 (eBook) DOI 10.1007/978-1-349-21343-6 © Purushottam Narayan Mathur, 1991 Preface© Wassily Leontief, 1991 Foreword © Yoshimasa Kurabavashi. 1991 Softcover reprint of the hardcover 1st edition 1991 978-0-333-47634-5 All rights reserved. For information, write: Scholarly and Reference Division, St. Martin's Press, Inc., 175 Fifth Avenue, New York, N.Y. 10010 First published in the United States of America in 1991 ISBN 978-0-312-05329-1 Library of Congress Cataloging-in-Publication Data Mathur, P. N. (Purushottam Narayan), 1925- Why developing countries fail to develop/Purushottam Narayan Mathur. p. em. Includes index. ISBN 978-0-312-05329-1 1. Developing countries-Dependency on foreign countries. 2. Developing countries-Economic policy. 3. Developing countries -Economic conditions. 4. International economic relations. I. Title. HC59.7.M348 1991 338.9'009172' 4--dc20 90-44836 CIP To my grandfather B. Brij Behari Mathur who stopped the cultivation of the cash crop (Indigo), realising it as one of the causes of famine of 1890s and started informal rationing as well as mango tree plantation work in the village And To my dear wife Mrs Sushila Rani Mathur who not only made this book possible with constant help and encour agement, but also freed the author from the other chores of daily living Contents List of Figures xiv List of Tables xv Acknowledgements xvi Preface by Wa ssily Leontief xvii Foreword by Yoshimasa Kurabayashi xviii Introduction 1 Non-applicability of received economic doctrines 1 Towards a new perspective 2 The international framework and the problem of price relatives 3 Failure of development 4 Structure of the book 4 PART I THE CENTRAL ARGUMENT 1 The Development Dilemma 9 Collapse of development in the 1980s: an unexplained phenomenon 9 Different paradigms in economic analysis 10 The patterns of development 12 Wage levels for developing countries and loan repayment 12 Price structure in low-wage countries 13 Two groups of developing countries 15 Macroeconomics of developing countries 17 Nominal wage rates in developing countries 26 The international economic order as an impediment to development 29 VII viii Contents PART II DEVELOPMENT THEORY AND EXPERIENCE 2 Metaeconomics 33 Economic environment and factors of production 33 Formalisation of the production process 35 Micro management and microeconomic problems 38 The macroeconomic problem 41 International constraints or worldwide macro limitations 43 Recapitulation 44 3 A Synoptic View of Economic Historic States in Theoretical Perspective: Before the Industrial Revolution 46 An idealised history of economic progress 46 Tribal self-sufficient economy: no surplus 47 Labour as the scarce factor: slave economy 47 Land as the scarce factor: feudal economy 49 International trade as a factor: mercantilism 49 Colonial economy 51 Subject economy and economic drain 53 Imperialism and structural change 55 Social theories of economic growth 58 Innovation and the process of growth 59 4 A Synoptic View of the Industrial Revolution in Theoretical Perspective 62 The basic character of the industrial revolution 62 Availability of risk capital 63 Cheap raw materials 66 The size of the market 68 The 'backwash' mechanism in developing countries 70 Institutions for industrialisation 71 5 Types of Developing Countries 77 Introduction 77 Classification of developing countries 79 Concluding remarks 86 Contents ix PART ill AN INTERNATIONAL FRAMEWORK FOR NATIONAL ECONOMIES 6 Determination of International Commodity Prices 89 Introduction 89 Commodity price determination in international markets 91 Short-term price determination 92 Duties on commodity imports and exports 93 Long-term supply curve 94 Secular decline of long-term supply price 96 An illustration of the short-term supply curve 98 Idealised story of commodity supply curves after 1945 100 Recapitulation 102 7 Commodity Price Shocks and World Economies 104 Introduction 104 Commodity prices and industrial production 105 Commodity prices and inflation 106 Strategy of monetary expansion 112 Transition to low commodity prices 113 Commodity prices and developing countries 114 Determination of exchange rates in developing countries 115 Changing wage levels in developing countries with changing commodity prices 117 Price structure with differing import requirements 120 Poverty as a necessary condition of export promotion? 121 8 Changing Export Income and the Developing Countries' Economy: A Diagrammatic Representation 123 Introduction 123 Labour-constrained economies with traditional techniques for producing wage goods 123 A diagrammatic representation of macro relations 125 Effects of export commodity price increases 125 Effects of decreases in commodity prices 127 Land-constrained developing countries with traditional techniques of foodgrain production 128 Developing countries with modem technology 130 X Contents The development dilemma 132 The 'fallacy of composition' and the barrier to the increase of real wage rates in the long run 133 PART IV MACROECONOMICS OF DEVELOPING COUNTRIES 9 The Macroeconomics of Economic Subordination and Drain 139 Economic subordination and drain 139 The macroeconomics of a traditional land-scarce economy 140 The macroeconomics of a subject or indebted economy 141 The macroeconomics of land-scarce developing countries with a traditional pattern of trade 142 The macroeconomics of labour-constrained under-developed countries 144 Imperialism in new countries 147 The demographic myth 148 10 The Wage Goods Constraint for Employment and Development 151 Prices and availability of basic consumption goods 151 UN study of purchasing power parity 152 Semi-feasibility of importing wage goods in a developing country 153 Wage goods constraints for employment and development 154 Autonomous expenditure in a wage goods-constrained economy 157 Moving unemployment due to an unsustainable development effort 158 Effect on marketed surplus in a semi-monetised economy 159 Recapitulation 161
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