Post Second World War, certainly in the 1950s, and 1960s, Development Economics as a topic was prominent in economics. There was much interest in trying to understand why some countries had done better than others, as newly independent countries across the world tried to ‘catch up’.
A few influential works stand out: for instance, Walt Rostow’s The Stages of Economic Growth (1960). Ironically, written as a a Non- Communist Manifesto, it did not prepare economists analytically for the rise of countries like China and Vietnam. Hollis Chenery’s work on patterns of development defined economic development as a set of interrelated changes in transforming an agricultural economy into an industrial economy. Yet, in analyzing time series data of country performance (1975), it became clear that changes in growth could not be sufficiently explained by the two essential factors of production: capital and labor.
Albert Hirschman important work on Strategy of Economic Development (1958) in turn was full of ideas and insights. Yet, Krugman (1994) saw the book as a a rejection of the drive towards rigour ( by economists rooted in mathematics and modeling) by adopting ‘a sort of muscular pragmatism in grappling with the problems of development’. Gunnar Myrdal and Arthur Lewis were the other giants contributing to ideas about development.
Amartya Sen’s work on Human Capabilities and on Development as Freedom ( 1990) and Mahbub ul Haq’s introduction of the global Human Development Reports (1990 onwards) has set the stage for a deeper reflection on why some countries do better than others.
At their core, these tracts were about the nature of interactions between individuals, particularly producers and the size of market, and the notion of dualism, where ‘traditional, low productivity sectors’ with large reserves of ‘excess labour’ are gradually supplanted by higher productivity ‘modern’ sectors. The scale of production, and the size of the market become critical in achieving ‘take off’ and self sustaining growth.
The paradox: standard economic thinking and policy prescriptions derived from them are at odds with country level experience. Independent thinkers like Rodrik and Stiglitz no longer buy the argument that the key to rapid development is their willingness to liberalize trade. Nor boosting aid levels is likely to make much difference. Or, relying exclusively on market signals to drive progress. Few countries, if any, have achieved ‘ development’ in the past 50 years as a result of traditional policies promoted by western institutions. Policies appear to have ‘worked’ when they are tailored to local, domestic needs. And, there is little evidence that trade barriers were an impediment to growth for those charting their own development paths. Yet, standard economic thinking on these matters remains dominant. Examples of developmental progress now abound: from South Korea, to China, to Bangladesh. Yet, conceptual thinking about development lags.
