Economic development: principles, problems, and policies. [1 ed.]

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Economic Development PRINCIPLES, PROBLEMS, AN D POLICIES /. ^ «•

Benjamin Higgins, M .Sc., Ph.D. P ro fesso r o f Econom ics, U n iv ersity o f Texas. V isiting P rofessor o f E conom ics and D ire c to r of th e Indonesia P ro je c t, M assachusetts Institute o f T e ch n o lo g y .

W

W

N O R T O N & COM PANY

326

IN C

N ev) Y ork

HP

C O P Y R IG H T ©

1959

BY \V . VV. N O R TO N & C O M P A N Y , IN C .

L ib ra ry o f C ongress C atalog C ard N o . 59-6085

PRINTED IN THE UNITED STATES OF AMERICA FOR THE PUBLISHERS BY TH E VAIL-BALLOU PRESS 23456789

TO THOSE WHO TAUGHT M E MOST

A lv in H ansen H e r b e r t H e a to n A r th u r M a rg e t

L ionel R o b b in s Paul R o sen stein -R o d an

Contents

Preface

xiii

.______________________________

PART 1

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Introduction: The Problem of Economic Development 1. The G eneral N ature o f the D evelopm ent Problem T he Meaning of “Underdeveloped” Other Char­ acteristics of Underdeveloped Countries The Con­ cept of Economic Development Policy 2. Some Case Studies Libya India Indonesia The Philippines Italy Summary and Conclusions

3.

25

Mexico

PART 2

Principles: General Theories of Development 3.

The Classical T h eo ry of CapitalistDevelopment: G r o w t h a n d S ta g n a tio n

T he Classical Model

85

The Malthus Version

4.

The M arxist Model: G ro w th and Collapse Propositions Summary The System in Operation T h e Theory of Economic Fluctuations Conclusions: A n Appraisal

107

5.

Unstable G row th: Schum peter Propositions Scope of the System Operation of the System Schumpeter's Theory of Trend

122

via

Vlil

CONTENTS

6.

Cumulative M ovement aw ay from Equilibrium : H arro d 144 Outline of the Model Application to Underdeveloped Areas

7.

Requirements for Steady G ro w th : H ansen The Essence of the Theory Aggravating Factors: Capital-saving Innovations The “Great N ew Indus­ tries” Argument Aggravating Factors: The Loss of the uFrontier Spirit” A Rising Propensity to Save? Logical Validity of the Hansen Thesis The Autono­ mous Investment Function Resource Discovery and the Frontier Application to Underdeveloped Areas

8.

Summary and Synthesis of General T heories of De­ velopm ent 199 Similarities and Differences Application to Underde­ veloped Areas Population Growth Synthesis of General Theories

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PART 3

167

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Principles: Lessons of History 9.

Historical Theories of the Rise of Capitalism The uRise of Capitalism” Commercial Capitalism Financial Capitalism Industrial Capitalism and Urban­ ism Entrepreneurship Capitalistic Agriculture Rostov) and the Take-off into Sustained Growth

10. Economic Development: Past and Present Economic Factors Political Factors Sociological Factors Technological Factors A n Impossible Task? _________________________________

PART 4

217

239

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Principles: Theories of Underdevelopment 1 1 . G eneral Theories: G eographic Determinism Human Behavior m the Tropics Reason for Low Pro­ ductivity in Tropical Agriculture Conclusion

265

12. General Theories: Sociological Dualism The Theory Policy Implications Appraisal of the Theory The Facts Is MDualism” an Eastern Phe­ nomenon? Is Western Social Theory Applicable to Underdeveloped Areas?

274