A focussed revival

Print edition : August 18, 2001

Of the decline, rise and insecurities of development economics.

ECONOMICS as a discipline has always been concerned with development. The Classical economists were essentially concerned with understanding the processes of economic growth and structural change: how and why they occurred, what forms they took, what prevented or constrained them, and to what extent they actually led to greater material prosperity and more general human progress. It is true that the marginalist revolution of the late 19th century led economists away from these larger evolutionary questions towards particularist investigations into the current, sans history. Nevertheless, it might be fair to say that trying to understand the processes of growth and development have remained the basic motivating forces for the study of economics.

But what is now generally thought of as development economics has a much more recent lineage, and is typically traced to the second half of the 20th century, indeed, to the immediate post-War period of the 1950s and 1960s, when there was a flowering of economic literature relating to both development and underdevelopment. Much of this was very much within the mainstream of the discipline, and retained the fundamentals of the mainstream approach even while altering some of the assumptions. Thus, the economic dualism depicted by Arthur Lewis, the coordination failures inherent in less developed economies described by Rosenstein-Rodan, the efficacy of unbalanced "big push" strategies for industrialisation advocated by Albert Hirschman - all dealt with development policy as a response to the market failures that were specific to latecomers.

HOWEVER, all this discussion somehow receded into the background, especially during the 1980s. Development economics, even of the mainstream variety, on the whole suffered a fate similar to Keynesian economics in developed countries - of being first reviled, then ignored, and finally forgotten. It really seemed as if that particular subject was dead, at least in the metropolitan centres of economics.

But it now turns out that rumours of the death of development economics were greatly exaggerated, and what was thought to be its demise was really no more than its mid-life crisis. There is a revival in analyses which openly claim to be part of development economics, as a spate of new textbooks and the recent proliferation of such articles in the standard professional journals will indicate. This newer version of development economics is one which contains a much sharper focus on the micro; on the miniature as a representation of the larger reality.

Of course, the current "development" literature remains firmly entrenched in the methodological individualism which characterises all the mainstream economics of today. The models now being developed all tend to be based on the notion that prices and quantities are simultaneously determined through the market mechanism, with relative prices being the crucial factors determining resource allocation as well as the level and composition of output. This holds whether the focus of attention is the pattern of sharecropping tenancy or semi-formal rural credit markets or a developing economy engaging in international trade.

THIS literature also posits a basic symmetry not only between supply and demand, but also between factors of production. Thus, the returns on factors such as land, labour and capital are seen as determined along the same lines as the prices of commodities, through simple interaction of demand and supply. Where institutional determinants are recognised, they are seen as unwelcome messing about with market functioning, and "government failures" tend to be given wide publicity. An implicit underlying assumption in much of the literature remains that of full employment or at the very most underemployment rather than open unemployment.

While externalities are recognised, they are sought to be incorporated into more tractable models, thereby reducing the complexity of their effects. Similarly, while market failures are recognised, the policy interventions proposed or discussed are typically partial equilibrium attempts to insert incentives and disincentives into the market mechanism, with the objective of promoting "efficiency". And even the basic fact of uneven development tends to be translated into models of "dualism", which in turn also implies less attention to the differentiation internal to sectors and the patterns of interaction of different groups or classes within and across sectors.

FINALLY, there is a growing acceptance that "history matters". But once again, this is typically reduced to certain simple and modelable statements. Thus, a standard way in the literature of dealing with the effects of history is in the form of complementarities that cause the perpetuation of particular technologies, along the lines made famous by the example of the QWERTY typing keyboard. Other common ways of incorporating history are through inserting "social norms" as a variable, or analysing the effects of the "status quo" in creating inertia with respect to policy changes.

In some ways, the new development economics is an attempt to examine what are seen as "exotica" in terms of prevalent economic institutions in developing countries, and explain them in terms of the methodological individualism which is perceived as the correct way of analysing developed market economies. It could even be described as a sort of "National Geographic" view of development, whereby snapshots of particular institutions or economic activities are taken, the difference from the "norm" of developed capitalism is highlighted, and then these are sought to be explained using the same basic analytical tools developed for the "norm". The means whereby these economies or institutions can then become less different, or more like the developed market ideal, then becomes the focus of the policy proposals emanating from such analyses.

CLEARLY, there is still something missing, or just plain wrong, in this overall approach. And so it could be argued that even this new, apparently improved version of mainstream development economics, is not really worth saving any more than the current mainstream analysis devoted to developed economies. A better way of expending intellectual energy might instead be to try to develop alternative ways of addressing the still fascinating and relevant issues of growth, development, structural change and inequality in all economies, especially those not characterised as "developed". Such alternatives would give much greater precedence to the role of history, to the interplay of political and social forces with economic institutions and processes, and to the class interests and distributional conflicts which reflect and determine economic patterns.

But the new development economics also gives rise to certain interesting social phenomena. The recent literature is very much a product of the intellectual ethos prevailing in the academic centres of the North. Almost all of the practitioners, whatever be their country of origin, actually work in these places. To some extent this also explains the analytical approach described above: it is not only a reflection of a deep internalisation of the basic axioms of mainstream North Atlantic economic thinking, but also a niche market to which those of developing country origin tend to be relegated in the Northern academe, whatever their own intellectual skills and predilections.

But just as other people need to be loved, economists need to feel relevant, regardless of how relevant their work actually is. Thus it is that the brightest of emigre minds still concern themselves with the economic problems of their countries of origin, and rarely if ever presume to comment on economic policy debates in their countries of residence.

THIS explains the otherwise puzzling recent intervention of nine eminent Bengali emigre economists, who have been publishing articles and pamphlets during and after the recent elections in West Bengal, setting out what they call an economic agenda for the State. What is interesting in this is not the proposals themselves. Some of these, such as increasing investment in physical infrastructure and providing more and better quality health and education, are so obvious that most ordinary people would be afraid of repeating them for fear of sounding cliched. Some others put faith in already passing trends, such as relying on electronic data input services to increase urban employment. But these could be explained as the lack of immediate experience of those who reside far away and have to base their assessments on the annual family vacation.

What has been interesting about this intervention is that it shows that Non-Resident Indian development economists ultimately remain confined to policy proposals and debates in their places of origin rather than in the country in which they have chosen to live and work. It is possible to sympathise with this existential problem, which reflects the peculiar and arcane caste hierarchies of North Atlantic academe. But at the same time, this sociological tendency does end up in such economists serving as another force working for the introduction of marketist economic policy proposals in developing countries.

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