These endeavors to discredit implicitly or explicitly the drive for rapid development of underdeveloped countries, to present it as the manifestation of a deplorable impatience and irrationality of unenlightened mobs devilishly manipulated by sinister, power-greedy politicians—these are assisted by the neo-Malthusians who explain the backwardness of the backward countries as the inevitable result of their “excessive” population growth, and who therefore denounce all attempts at economic development in these areas as utopian so long as the population increase has not been brought to a halt. However, since a reduction of the population growth—assuming for the sake of argument that such a reduction is necessary—can only be achieved as a result of an all-round development of the backward societies, the neo-Malthusian position renders economic development a hopeless task, made insolvable by the very nature of the human animal.
A similar impact on opinion is exercised by most anthropological and quasi-philosophical writing related to the problem of economic development of underdeveloped countries. Here it has become fashionable to question the “absolute desirability” of economic development, to deride as unscientific its identification with progress, to accuse its protagonists in the West of “ethnocentrism,” of hypostatization of their own culture, and of insufficient respect for the mores and values of more primitive peoples. In keeping with the general relativism and agnosticism of contemporary bourgeois thought, this strand of social science denies the possibility of a rational judgment on the usefulness, let alone urgency, of economic and social change in colonial and dependent areas, and counsels utmost caution in disturbing the continuity of the backward societies. While not explicitly endorsing the “white man’s burden” concept of imperialist domination, this approach comes very close to it by pointing to the “cultural heterogeneity” of backward nations, by stressing the incomparability of value systems, and by suggesting that colonial and dependent peoples may actually “prefer” their present state to economic development and to national and social liberation. Small wonder that such a doctrine provides a poor background for the comprehension of the unprecedented popular movements that are at the present time revolutionizing and rejuvenating the greater part of the human race; small wonder that it supplies aid and comfort not to the peoples in the colonial and dependent countries struggling for freedom but to their masters seeking to preserve the status quo.
This political and ideological setting of the current discussion of economic development explains the highly unsatisfactory nature of what has been accomplished thus far. Robert Lynd’s challenging question, “Knowledge for What?” bears not only on the fruitfulness of an intellectual effort in terms of the ends that it is designed to serve; it also necessarily relates to the conduct and the contents of the effort itself. Thus, motivated by the overriding preoccupation with the requirements of the counter-revolutionary crusade, muzzled by the fear of antagonizing the dominant interests determined to obstruct at all cost economic and social progress in the colonial and dependent countries, research and writing on economic development eschew as much as possible reference to what is in the very center of the problem. They make no reference to the irrationalities of monopoly capitalism and imperialism that block economic development in advanced capitalist countries, and they give no attention to the system of internal and foreign domination that prevents or distorts economic growth in the underdeveloped world. Correspondingly little emphasis is placed on the study of the unique experience in rapid development gathered in the USSR and in other countries of the socialist sector of the world—as if that experience was of interest only to Military Intelligence. And yet there can be no doubt that efforts at economic development could all derive immeasurable profit from fully comprehending the process of economic growth that has taken place in the Soviet Union and in other socialist countries.
IV
In speaking thus far about economic development, I have confined myself to rather broad allusions to this complex term. It is time to buckle down to a somewhat more detailed examination of this process, and it may be convenient to begin by deciding on a definition of economic growth. Not that it is my objective to present here a formula that would exclude any other, nor do I wish to suggest that other definitions might not be superior for other purposes. All I propose to do is to organize my categories in such a way as to be able to approach the subject matter by what appears to me to be a simple and useful method—a method which I plan to explore further in the course of subsequent chapters.
Let economic growth (or development) be defined as increase over time in per capita output of material goods.6 It may be permissible in the present context to neglect the difficulty of comparing outputs over time, a difficulty arising whenever the outputs to be compared consist of more than one product, whenever, therefore, changes in output may affect its components unequally, and whenever certain products appear in the output of one period without appearing in the output of the other. This familiar index number problem, disturbing as it is even with regard to slow, gradual growth, becomes particularly vexing when what is considered is more or less rapid economic growth, the outstanding characteristic of which is profound change not only in the magnitude but also in the composition of output. Indeed, intertemporal comparisons threaten to be outright misleading when the periods to be compared are separated by changes in economic and social organization, by big spurts in urbanization, by decreases or increases of the “marketed share” of output, and so forth. Especially troublesome is the services sector, the expansion of which would cause an increase in Gross National Product (as conventionally defined) suggesting thus “economic growth”—although in most countries it would be considered to be a retrograde step rather than one in the direction of economic progress.7 Pigou’s famous gentleman marrying his cook and thus reducing national income comes readily to mind. Equally easily can one imagine a tremendous expansion of national income caused by the introduction of compulsory payments to wives for services rendered.
But we shall assume that increases of aggregate output over time can somehow be measured, and shall ask ourselves how such increases come about. They can be the result of one of the following developments (or of a combination of them) : (1) The aggregate resource utilization may expand without changes in organization and/or technology, i.e. previously unutilized resources (manpower, land) may be brought into the productive process. (2) The productivity per unit of resources at work may rise as a result of organizational measures, i.e. by a transfer of workers from less productive or unproductive occupations to more productive pursuits, by a lengthening of the working day, by an improvement in nutrition and strengthening of incentives available to workers, by rationalization of methods of production and more economic utilization of fuel, raw materials, and so forth. (3) Society’s “technical arm” may become stronger, i.e. (a) worn-out or obsolete plant and equipment may be replaced by more efficient facilities, and/or (b) new (technologically improved or unchanged) productive facilities may be added to the previously existing stock.
The first three routes to expansion of output—(1), (2) and (3) (a)—are typically not associated with net investment. Although it is probably impossible to impute to each of these four processes a proper share of the increase of output that has actually taken place, there can be little doubt that the economic application of increasing technical knowledge and net investment in additional productive facilities have been the most important sources of economic growth.
To be sure, in actual fact some net investment may be needed for all of them: previously unused resources may be unusable without some outlays on equipment, soil improvements, and the like; organizational changes may be predicated upon the installation of conveyor belts or similar devices; technological progress yielding improved machinery to be added to or substituted for worn-out equipment may be forthcoming only under conditions of large net investment. “If … technique largely depends on the state of science, science depends far more still on the state and the requirements of technique. If society has a technical need, that helps science forward more than ten universities. The whole of hydrostatics (Torricelli, etc.) was called forth by the necessity for regulating the mountain streams of Italy in the sixteenth and seventeenth centuries. We have only known anything reasonable about electricity since its technical applicability was discovered.”8
On the other hand, plowing back amortization allowances—without