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Approaches to the Problem of Economic Development
Published online by Cambridge University Press: 18 July 2011
Extract
These two books provide an opportunity to compare the approach of the economist and of other social scientists to the problem of economic development, although neither volume can be taken as a fair measure of the contributions the various disciplines can make to understanding the growth process in particular societies.
The United Nations Report, which is the work of a group of economists appointed by the Secretary General of the organization, aims at policy more than analysis. It is also quite general in character, and a discussion that embraces the tremendous diversity of so-called underdeveloped countries must perforce maintain a distressing level of abstraction. Despite this structure, the Report remains eminently readable.
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- Copyright © Trustees of Princeton University 1953
References
1 The Progress of Underdeveloped Countries is fortunately freer than most such volumes from this defect. I cannot, however, refrain from quoting the following sentences, which occur on p. 116: “Cognitively speaking, a relationship will be classified as rational or nonrational. The relationship as a whole will be considered more or less nearly rational or nonrational to the extent rationality is or is not institutionally expected of the action in terms of the relationship.” For all I know, this may not be a simple tautology.
2 Herbert Frankéel, an economist himself, bitterly reproaches the UN Report with using aggregate or average income as a measure of true progress without taking into account the losses that may be incurred in the process of moving from a rural to an urban setting. (See his “United Nations Primer for Development,” Quarterly Journal of Economics, LXVI [August 1952], pp. 301ff.)
3 Lest this criticism appear unfair, may I quote from a sociologist: “The great concern of functional sociologists and anthropologists with problems of social order and with the maintenance of social systems, has generally focused their scientific attention on the study of processes whereby a social system is preserved largely intact’ (Robert Merton, K., Social Theory and Social Structure, Glencoe, 111, 1949).Google Scholar This statement may be more true of the anthropologists than it is of the sociologists-but it is mostly the anthropologists we are dealing with in connection with underdeveloped countries.
4 Net United States long-term private capital exports to areas other than Europe and Canada were 0.6 billion dollars in 1949, 0.3 in 1950, and 0.3 in 1951. (These figures are very close to those for direct investment in these areas; for exact figures, see Balance of Payments of the U.S., 1949–1951, Department of Commerce, 1952.) Private capital exports from Europe (mostly the United Kingdom and France to their respective monetary areas) were 04 in 1949, 0.2 in 1950, and 0.6 in 1951. Over the three-year period, the average is $0.8 billion, half of which came from Europe. (International Monetary Fund, Balance of Payments Yearbook, 1950–51)
5 Stern, Ernest H., “Capital Requirements in Progressive Economies,” Economica, XII (August 1945), pp. 163ff.CrossRefGoogle Scholar
6 Fellner, William, “The Capital-Output Ratio in Dynamic Economics,” in Money, Trade and Economic Growth; Essays in Honor of John Williams, New York, 1951, pp. 126ff.Google Scholar
7 Clark, Colin, The Conditions of Economic Progress, London, 1951, p. 503.Google Scholar
8 Leontief, Vassili, et al., Studies in the Structure of the American Economy, New York, 1953, ch. 6.Google Scholar
9 The First Five-Year Plan, Government of India, January 1953, Part I.
10 Dr. Hans Singer has recently presented a numerical model for economic development in an interesting article, “The Mechanics of Economic Development,” Indian Economic Review, Delhi (September 1952). Dr. Singer is a member of the United Nations staff and presumably assisted the five experts in the preparation of their report. His model is, in fact, very similar to the one used in the Report, and although his capital coefficients appear to be on the high side (4 for agriculture, 6 and 4 for industry), he has avoided the methodological pitfalls into which the Report has fallen.
11 Applying a single capital coefficient without distinction between agriculture and industry is of course a very crude method, but the margin of error in the income and savings data is such as to make a more refined treatment hardly worth the while. The calculation would be as follows: total income (excluding China, etc.)would be $90 billions. Three per cent growth would imply an annual increase of $2.7 billions. With a capital coefficient of 3.5, the investment required would be $9.5 billions, of which domestic savings can supply $4.5 billions, leaving a deficit of $5 billions. With a capital coefficient of 3, the required investment would be $8.1 and the deficit $3.6 billions. Three per cent annual growth is the assumption of the Report.