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Government, Entrepreneurship, and Economic Growth in Poor Lands
Published online by Cambridge University Press: 18 July 2011
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Self-sustaining economic growth remains a tantalizing and remote goal for the world's poor nations, whose populations comprise some seventy percent of all the world's people. Now halfway through its “Development Decade,” the UN has observed that a continuation of past development trends is not something that can be looked upon with favor. There has in fact been a large expansion in industrial production and in overhead capital facilities in these poor lands over the past decade or two.
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- Copyright © Trustees of Princeton University 1966
References
1 Many references can be given here. Specific mention needs to be made of P. N. Rosenstein-Rodan's “Problems of Industrialization of Eastern and South-Eastern Europe,” Economic Journal, Liii (June 1943), 202-11Google Scholar; and Nelson's, R. R.“A Theory of the Low-Level Equilibrium Trap,” American Economic Review, XLVI (December 1956), 894–908Google Scholar. Lewis, W. Arthur, The Theory of Economic Growth (London 1955)Google Scholar, gives a comprehensive discussion of balanced growth as well as an important analysis of rural-urban interdependence.
2 The true role of such conditions in the development program is not easy to categorize and is frequently exaggerated. Perhaps it is best to note here that in many respects the various theories of growth can be considered a continuum: one type merges with the next. Even where categories blur on the margins, categorization is helpful.
3 Most familiar to economists are Rostow, W. W., The Stages of Economic Growth (Cambridge 1960)Google Scholar; and McClelland, D. C., The Achieving Society (Princeton 1961)CrossRefGoogle Scholar. See also Annals of the American Academy of Political and Social Science, Vol. 358 (March 1965), New Nations: The Problems of Political Development, ed. Karl von Vorys.
4 A recent report on the progress in rural education and literacy in parts of India provides an interesting illustration of the importance of preconditions themselves in coping with preconditions: “. . . The creation of educational opportunities has not been followed up by their effective utilization. . . . There is now a growing realization among planners in India that the creation of opportunities is not by itself a sufficient condition for development” (P. C. Joshi and M. R. Rao, “Changes in Literacy and Education: Study of Villages in U.P. and Punjab,” Economic Weekly [July 3, 1965], 1061).
6 The International Development Bank's Annual Report of the Social Progress Trust Fund for 1964 (March 1965) states that the majority of the countries had initiated “important legal and institutional improvements,” but that the limited results “represent only the first stage of the great task that must be carried out . . .” (p. 91).
6 In much of the literature on what we here term interrelation models, the interdependence of input-output tables is presented as a classic illustration of sequences of actions and reactions. Unfortunately, the matrices for poor countries provide poor guides. The economies are in a state of disequilibrium, so that the coefficients do not measure functional relations. This is true in some degree within the modern industry sector; it is particularly true for the modern-traditional interdependence. The best single reference here is, of course, Hirschman's, A. O.The Strategy of Economic Development (New Haven 1958)Google Scholar. Basic as this outstanding study is to the idea of interrelations within an economy, it does not emphasize the chasm between modern and traditional parts of a poor nation.
7 J. A. Schumpeter's Theorie der Wirtschaftlichen Entwicklung was published in 1911. In his preface to the first English edition (The Theory of Economic Development [Cambridge, Mass., 1934]Google Scholar, trans. Redvers Opie), Schumpeter states that “some of the ideas . . . go back as far as 1907; all of them had been worked out by 1909.” In The Schumpeterian System (Cambridge, Mass., 1950)Google Scholar, Richard V. Clemence and Francis S. Doody observe, “His youthful vision, first reduced to a comprehensive model in 1911, has since been elaborated and refined, but it has been altered in no essential respect” through his lifetime.
8 Nonetheless, he does refer to the case “seen to-day [circa 1910] in the economic life of those nations . . . whom the development of the last century has not yet completely drawn into its stream, for example, in the economy of the Central European peasant. This peasant ‘calculates’; there is no deficiency of the ‘economic way of thinking’ in him. Yet he cannot take a step out of the beaten path; his economy has not changed at all for centuries. . . . Why? Because the choice of new methods is not simply an element in the concept of rational economic action, nor a matter of course, but a distinct process which stands in need of special explanation” {Theory of Economic Development, 80, footnote).
9 Rimmer, Douglas, in “Schumpeter and the Underdeveloped Countries,” Quarterly Journal of Economics, LXXV (August 1961), 422-50CrossRefGoogle Scholar, is concerned with precisely this problem. He argues the appropriateness of Schumpeter's analysis to the modern problem.
10 Theory of Economic Development, chap. 2, passim.
11 Capitalism, Socialism and Democracy, 43.
12 For an elaboration of these two approaches in one country, see my “The Role of Government in India's Third Five-Year Plan,” Economic Development and Cultural Change, viii (April 1960), 225-36Google Scholar.
13 See, for example, Watson, Andrew M. and Dirlam, Joel B., “The Impact of Un-derdevelopment on Economic Planning,” Quarterly Journal of Economics, LXXIX (May 1965), 183-94Google Scholar.