Political Econ of Growth. Paul A. Baran

with some degree of accuracy the magnitude of the economic surplus appropriated by landowners, usurers, and commercial intermediaries of all kinds, but it would be wholly impossible to channel that segment of the surplus into productive investment even after these parasitic strata had been swept aside by a social revolution. This view is based on two sets of considerations. First, it is argued, a revolutionary government which would carry out the necessary expropriation measures could not possibly substitute itself for the blood-sucking rent collectors, money lenders, and greedy traders who were eliminated by the very revolution that put it into power. With such a switch in the destination of the surplus thus politically precluded, the nationalization and confiscation measures would not lead to an accumulation of an investible surplus in the hands of the revolutionary government but to its lapsing into the peasants’ desperately skimpy consumption basket. The second point is that in an underdeveloped country in which the economic surplus accrues to a numerically insignificant group of exploiters (as was and is the case in countries with a “classic” feudal system and/or those dominated by a handful of domestic and foreign monopolists) the situation is quite different from that prevailing in a society in which a multi-million-strong stratum of kulaks, village bosses lending money on the side, small traders, dealers, and brokers, appropriate altogether an amount of economic surplus constituting a large slice of total national income but providing only low per capita incomes to its recipients. In the former case the expropriators can be relatively easily expropriated, and their fate after the expropriation does not present a major social problem; their number being small, they either find alternative employment, emigrate, or retire to live on some remnants of their fortunes. In the latter case, however, the surplus recipients, being many, constitute an important social and political force; and, once deprived of their revenues, present a serious problem in social welfare. In fact, supporting them on even a minimum level by means of relief or artificially created jobs could annul much of the advantage derived from the expropriation itself.

      These are serious problems, and although I was by no means oblivious of their existence when writing this book,²⁵ they may not have received sufficient attention and emphasis. I do not believe, however, that recognizing their importance vitiates the basic approach to the issues confronting the underdeveloped countries which is outlined here, it undoubtedly implies that in some countries the breakthrough to the open road of economic and social growth is more difficult than in others, and that the obstacles that need to be overcome are in some places more formidable than elsewhere. It may well be, indeed, that in countries which are particularly plagued by the structural malaise just described, the strategy of development may have to be different from the one suitable to societies more favorably structured. Lenin’s famous law of uneven development suggests obviously not only that the historical process is different in different societies, but also that the stage reached at any given time differs from country to country. There is thus no general formula applicable to all situations regardless of time and place, and nothing was ever further from my mind than an intention to assert the existence of such a magic wand.

      Consider for instance a country in which there exists a certain nucleus of an industrial economy and where the peasantry, whether exploited by kulaks, or held in servitude by feudal landlords, is intensely land-hungry, and longs for nothing but individually owned plots of land. In such a country it may be possible to generate a sizable amount of economic surplus via the economy’s industrial sector. If, in addition, the country is relatively small so that whatever aid it may receive from abroad can materially influence the volume of its capital accumulation, it may well be able to afford to allow its peasants to “sit it out” for a while, and to learn by observation and experience the advantages of a rational and modern organization of agricultural production. Such has apparently been the broad perspective of some socialist countries in Eastern and Southeastern Europe.

      Take, on the other hand, a large country with a small industrial oasis in a vast sea of subsistence farming. Here the industrially generated surplus is of necessity small, and the practically accessible foreign assistance can constitute at best only a drop in the bucket of development requirements. If in such a country, the peasants’ craving for individually owned plots is for any number of economic or cultural reasons not urgent or even absent, its agricultural economy can be shifted onto new tracks based on cooperative farming or even on a system of state-operated, large-scale, and increasingly productive “factories in the field.” The gentry, rich peasants, village storekeepers, and moneylenders displaced in the process may either be integrated into the new agricultural economy or find employment in the expanding industrial and distributive sectors. And the surplus which they used to appropriate may become available for purposes of economic development. This would seem to be—in a nutshell—the model of the Chinese strategy of economic development.

      And visualize finally a banana or sugar republic—if that flattering designation is considered applicable to the semi-colonial dictatorships involved—where the bulk of agricultural output is produced in plantations, and where the. agricultural population consists predominantly or in large part not of peasants but of agricultural workers. In such countries the expropriation of the peasant was so thoroughly completed by the domestic and foreign plantation owners that even the image of individual land holdings has all but evaporated from the mentality of the rural proletariat. There mass parcelling of land is not on the agenda at all, and the nationalization of the plantations places immediately at the disposal of society as a whole the surplus that was previously appropriated by foreign and domestic corporations. This is not to say that all of the surplus so released can be turned to investment; much of it may have to be used to raise immediately the wretched living conditions of the working population. Also complications and frictions in the process of the reorganization of the economy, difficulties in securing new sources of essential supplies, as well as in finding new markets for customary exports—all largely due to the sabotage and obstruction on the part of the former ruling class at home and its allies and protectors abroad—may temporarily reduce aggregate output and accordingly also the volume of available surplus. In such a situation the possibility of overcoming all these hurdles is to such an extent dependent on various economic and political factors at home and abroad that there can hardly be a generalization that would fit the individual case. The obvious example of what I mean is the dramatic experience of Cuba since its great Revolution.²⁶

      Thus each and every one of the underdeveloped countries presents a wide spectrum of economic, social, cultural, and political configurations; and nothing could be more futile than to seek to force them into a rigid mold of a “universal prescription.” But as the intellectual gratification derived from the discovery of a broad generalization should not be permitted to deflect attention from the specificity of concrete reality, so fixation on detail must not be allowed to bar the insights which can only be gained through generalizing—i.e. theoretical—thought. And this brings me to what I referred to earlier as a reaffirmation of my views on the basic problem confronting the underdeveloped countries. The principal insights which must not be obscured by matters of secondary or tertiary importance, are two.

      The first is that, if what is sought is rapid economic development, comprehensive economic planning is indispensable. Small and gradual changes taking place, as it were, on the margin may well be expected to come about by a spontaneous process of trial and error. A few percent increase of output of any product already being produced can usually be obtained without any major planning effort, by raising somewhat its price and by letting the necessary adjustments “work themselves out.” However, if the increase in a country’s aggregate output is to attain the magnitude of, say, 8 to 10 percent per annum; if in order to achieve it, the mode of utilization of a nation’s human and material resources is to be radically changed, with certain less productive lines of economic activity abandoned and other more rewarding ones taken up; then only a deliberate, long-range planning effort can assure the attainment of the goal. On this there is actually hardly any disagreement among serious students of the subject.²⁷ What is perhaps even more important, on this there is no ambiguity in the historical record. While the most conservatively estimated per capita rates of economic growth in the socialist countries have been in the order of 10 percent per annum, in capitalist countries—advanced and underdeveloped alike—they rarely exceed 3 percent, except for extraordinary circumstances of war booms and postwar reconstruction.

      The second