Killick - Trends in development economics

06 August 2006
10:06

1950's consensus on poverty trap requiring 'big push' to kickstart development - esp income increase.
[Sounds a lot like sachs. ]
Noone believes this by 1980. - industrialisation failed - income-raising eg aid failed - Importance of infrastructure downgraded Plus whole idea of single aproach to LDCs abandoned - now we have NICs, middle-income etc.

Until about 1970? Assumption is that growth = development
Only Marxist writers noted inequality
Then in 1970's becomes orthodoxy
Torado definition of development:
        ? Increase availability of life-sustaining goods to all
        ? Raise level of wellbeing, not just income but education, culture
        ? Reduce dependence and maximise choice through independence and education.
Arguably this represents move from 'economics' in strict positivist sense to a broader, more normative 'development

Dependency theory - really theories but have these shared characteristics:
1. Heavy investment in resource purchase and eurodollar flow. Highly profitable to investors, money flowing out.
2. Unbalanced reliance on a few primary or light-manufactured goods
3. Unbalanced trade
        a. Marxist: labour sold for less than what it's worth
        b. Others: unequal bargaining strength in exports etc
4. Technology imported from MDCs inappropriate to employment needs of LDCs (eg agribusiness?)
5. Elites identify with foreigners not countrymen, so consumption echoes foreign priorities
6. Means large inequalities in income distribution
7. Economic influence of foreign governments translates into cultural, education dominance.

There's disagreement on how severe the effects of these things are - is development possible at all in this state?
Most dependency theorists call for revolution to socialism, but some believe reform possible

Key achievement of 70's theory - greater awareness of connections between growth and employment etc. recognition that "grow now, redistribute later" won't work.

So, redistribution through growth:

· Sectoral priorities- focus on small agriculture, as this where poor live
· Improve rural infra and services alongside raising productivity
· Focus on labour-intensive not cheap efficient industrialisation
· Therefore more appropriate (small-scale, labour-intensive) technology
· Population restraint
· Identify subgroups of "the poor" for particular focus
· Focus on access of poor to public goods and services

No one of these new but bringing them together into coherent approach is.

BUT: Talk of neoclassical renaissance. Starts with arguing all policies need to be measured for social return.
· Is suspicious of education spending's utility.
· Also - makes economic-maximising case for rural-urban migration; if you want to reduce it you have to improve rural incomes, not other way round.
· Generally brought market back in
· Far more awareness of importance of agri prices and need for active exchange-rate policy.

Application of theories

Income inequality - NOTE THIS IN 1980
· Africa not actually as bad as some (eg East Asia?)
· Evidence that inequality increases during development then shrinks again once a certain stage met

Weaknesses of redistribution through growth:
· Sets up economists as moralisers; elites may pay lip service to principles but actually ignore them
· Have we moved too far from growth?
· There are tradeoffs between redistribution and growth, esp as regards investment
· Too dependent on technology to help countries with minimal R&D budgets
· Do governments have skill and authority to enforce (no)

Weaknesses of dependency theory:
· Developed for Latin America
· Points out real problems, like MDC control through investment;
· BUT doesn't really construct a proper theory and
· Many don't accept interests of LDCs and MDCs opposed.

LDC GDP grows faster than MDC GDP in 60s & 70s
BUT "dependency worriers" make useful reform suggestions. It's the detailed theory that's OTT

Neoclassical useful:
· Shows high taxes on exports will slow production
· Shows high min wages will raise unemployment etc
· BUT markets heavily imperfect, prices range town to town etc
· Go too far is suggesting market alone can deal with problems

Conclusions
Need for typologies of LDCs based on these criteria
· Stage of development - income, sectoral balance, education etc
· Natural resource availability - inc access to sea etc
· Size and openness of economy