3.1 A birds-eye view of economic development theory
3.1.2 Structuralist theories of economic development
By contrast to the neoclassical models, structuralist theories of development consist of those that regard development as a process of structural socioeconomic change whereby underdeveloped economies overcome specific structural barriers, after which they are finally able to pursue a path of self-sustained growth. Development is thus understood as the qualitative growth-enabling process of overcoming those barriers, although some of these theories postulate that underdeveloped economies are constrained by broader structures operating at the level of the world economy from changing their own internal structures in such a growth-inducing way. In the meantime, the reader may notice that if we define structuralist theories of economic development in this way, the historical materialist theory of development, too, must be regarded as belonging to this group. That is largely true, for Marxist theory indeed has a structural character (in a broad sense), insofar as it stresses the constraining role of qualitative structures upon quantitative growth as well as the dialectical relationship between the former and the latter. Thus, the theories of economic development usually referred to as structuralist consist in fact of the group of non-Marxist structuralist theories, and that standard practice is followed thoughout this chapter.
The first and perhaps best-known of these theories, which indeed was explicitly put forward as a “non-Communist Manifesto”, was Walt Rostow’s (1960) stages-of-growth theory (also known as the “take-off model”). It postulates that societies go through five stages as they modernise: traditional society; preconditions for take-off; take-off; drive to maturity; and high mass consumption – and that each society proceeds linearly through all of them once a number of conditions are met that enable the progression from stage to stage. In this theoretical framework, underdeveloped economies are peculiar in that they find themselves at the earlier stages, but all economies are alike in that they progress
57 mechanically through the various stages. The progression from stage to stage is not constrained by the fact that modernisation takes place belatedly; instead, development is postulated to be eventually attained by all and to be a consequence of structural changes that, crucially, depend on human will and voluntary actions (investment in capital, education, establishment of a robust financial sector, promotion of entrepreneurship, etc.) (cf. Menzel 2006).
Another important early proponent of a non-Marxist ‘stages’ approach to economic development was Alexander Gerschenkron (1962), who emphasised “economic backwardness” as being characterised by low productivity, low capital intensity, less advanced technologies, low literacy and other constraining features. In this theory, development consists of the move from economic backwardness to economic development, in spurts, through the diversion of resources to capital goods, growth in firm and plant scale, and the move away from agriculture, all of which can and should be actively supported by the government. Contrary to Rostow’s linear theory, an ‘agricultural revolution’ is not deemed a necessary pre-requisite and “latecomer” economies are regarded as able to skip stages by adopting the technologies and forms of social organisation of more advanced economies, spurred on by example and relative deprivation – hence his theory is most distinctive in its postulation of the possibility, indeed likelihood, of catching-up and convergence (Gerschenkron 1962; cf. Gwynne 2006).
Three other ‘pioneers’ of development economics as a distinct field were Paul Rosenstein-Rodan (1943), Kurt Mandelbaum (1945) and Ragnar Nurkse (1953), whose work followed close and parallel lines. The shared key features of the work of these authors, albeit expressed in different ways, were that backward economies are trapped in a “low- level equilibrium trap” (Rosenstein-Rodan) or “vicious circle of poverty” (Nurkse), which causes those economies to be structurally unable to develop unless a simultaneous “big push” takes place across different sectors, necessarily assisted by the government so that the problem of coordinating different agents and sectors is overcome. When we take a closer look at the specific mechanisms behind low-level stagnation in these authors’ work, we find many of the same key issues addressed in neoclassical theory: namely, the need to mobilise savings for investment and the need to foster the network externalities across industries that obtain from capital accumulation. However, the crucial differences vis-à-vis neoclassical theories lay in the fact that these authors regard these problems as a specific feature of underdeveloped economies, and that no automatic way out of them is made
58 allowance for in the absence of government intervention, which needs to take the form of the aforementioned “big push”.
Yet another seminal contribution in the context of the emergence of development economics, which we have already alluded to in the context of our overview of migration theory (Chapter 2, above), was the work of Arthur Lewis (1954, 1955). As we have seen, Lewis was most influential through his dual-sector model of developing economies, which postulated the co-existence of a traditional agrarian sector where the productivity of labour is nil or negligible, and a modern sector which exhibits the ‘normal’ features that neoclassical economics focuses on. The redundant labour from the traditional sector provides “unlimited supplies of labour” to the modern sector, accounting for the specific patterns assumed by wages, profits and prices in these economies (Lewis 1954). In this model, development is constrained not by insufficient labour supplies, but by the “inability of the agrarian sector (…) to trade with the industrial sector, so that industrialisation would need either a rapid increase in agricultural productivity or export markets” (Szeftel 2006:146). The policy implications resonate those of the advocates of the ’big push’
addressed above, since simultaneous rapid industrialisation and rapid increase in agrarian productivity are presented as necessary in order to improve the terms of trade and decrease rural poverty, thereby permitting growth.
While the structuralist writers mentioned so far generally regarded participation in international trade as an invariably positive ingredient in any development strategy, the version of structuralism developed by the UN’s Economic Commission on Latin America in the 1960s and 1960s under the auspices of Raul Prebisch (1950) did not. The key building block of Prebisch’s theoretical views and policy prescriptions (which drew on earlier work by Hans Singer, hence came to be known as the “Prebisch-Singer hypothesis”) consisted of the fact that the terms of trade between developed and developing countries tend to deteriorate over time to the detriment of the latter. There is thus a distinct differentiation within the world system between a developed and industrialised “core” and an underdeveloped and agrarian “periphery”, with trade between the two involving structural and increasing disadvantage to the latter (attributed to the lesser bargaining power of labour in the periphery). It is therefore clear that there were close similarities between the views of Prebisch and the ECLA structuralists, and those of later dependency theorists writing from a neo-Marxist perspective (see below, this Chapter), who were indeed significantly influenced by the former. However, while dependentistas conceptualised the mechanism of unequal exchange in terms of a systematic extraction of surplus-value in the
59 sphere of circulation, Prebisch did not frame it in similarly Marxist terms; and while some of the former called for de-linkage from international trade as a response, the latter instead advocated de-emphasising the export of primary commodities, fostering industrialisation and developing the domestic market (Kay 2006). This would provide the theoretical foundations for import-substitution industrialisation, which became a popular, if ultimately rather unsuccessful, policy strategy in the 1960s and 1970s, particularly in Latin America.
All in all, it is undeniable that structuralist development theories have made major theoretical and empirical contributions to the study of economic development, in addition to buttressing the legitimacy of, and interest in, this field of study in its own right. However, my view is that, by typically focusing on features that are but partial or epiphenomenal components of the broader process of economic development, these authors have largely missed the forest for the trees – and consequently misidentified some of the crucial determinants of the very features and processes that, in each case, they have purported to address.