Development Economics: from the Poverty to the Wealth of Nations

Citation

Ghush, D. (2000), "Development Economics: from the Poverty to the Wealth of Nations", Journal of Economic Studies, Vol. 27 No. 3, pp. 222-229. https://doi.org/10.1108/jes.2000.27.3.222.3

According to the author, this book is intended to be a comprehensive, cohesive treatise on development economics. The major approach used in this volume is comparative institutional analysis, defined as comparing the patterns of institutional evolution in response to changes in resource endowments and technology under different social and cultural traditions across space and time. The basis for these comparisons is the author’s knowledge and experience of economic development in East Asia, especially Japan. The author’s intention is to ultimately “prepare a block for building a new Wealth of Nations from the East Asian perspective”. This declared aim makes the task of a reviewer somewhat difficult, if not totally forbidding.

The author defines “economic development” as a process involving “economic growth” (expansion of GNP) and changes in such “non‐quantitative factors” as institutions, organizations and culture under which an economy operates. This book is primarily focused on the role of borrowed technology as a major source of economic growth for the low‐income economies. A critical condition for the transfer of foreign technology is development of appropriate institutions. To function effectively, these new institutions must be consistent with people’s value system in these economies. For this reason, the author has placed strong focus upon the choice of the appropriate economic system, defined as a combination of market, state and community. The author aims to examine how to combine market, state and community under the unique cultural and institutional set up of each individual developing economy.

Judging by the author’s aims, as summarised above, the organisation of the book is perhaps a little confusing. The discussion and analyses of the state and community in the volume is postponed until Chapters 8 and 9 – the two penultimate chapters. It is only in Chapter 9 that the author discusses rural organisations in developing economies. He observes, in the preface, how he found that small farmers in the Philippines are “rational and capable of maximizing incomes within their limited means by optimally utilizing the modern technology made available to them”. The author would have done justice to himself and his readers had he chosen to examine the issues dealt with in the earlier chapters from the above perspective. For example, when he discusses the population issues in Chapter 3, he uses Leibenstein’s approach of maximization of parental utility function in determining the family size. Perhaps to someone new to the area it would have been really useful to know that these parental preference functions are predominantly determined by the social and sociological conditions.

The main reason of dissatisfaction with this book, from this reviewer’s point of view, is its approach towards economic development. The author seems to have accepted the trickle down philosophy of poverty alleviation. The content and the logic of its various chapters may perhaps be looked at in the following way. Accumulation of capital and technological progress explain growth of income which, presumably, is the necessary and sufficient condition for poverty alleviation. We must point out that the author has indeed discussed issues surrounding inequalities in income distribution and its implication on the environment (Chapter 7). However, the entire literature that followed the so‐called First Development Decade seems to have passed him by. Absence of any reference to Dudley Seers, Mahbub ul Haq and Dharam Ghai (and the Basic Needs approach to development) to name but a few, may deprive the book’s readers of what is by now a vital and valuable part of the evolution of the practice of economic development. The absence of any reference whatsoever to the concepts of entitlement, capabilities and standard of living, perhaps the most rewarding way of analysing poverty and underdevelopment, makes this volume look dated. It would have been interesting to know the reason behind the author’s use of the intellectual inputs from the IMF and the World Bank but not the UNDP. Since the author has devoted so much time and intellectual energy to the role of the community, why did he not address the gender issue, understanding of which is so vital for policy formulation in fertility reduction, nutritional development, and so on?

In Chapter 9, we find the most important contribution of this monograph. The author has rightly emphasised the role of the community in economic modernization. However, perhaps he should have extended the analysis to incorporate his discussion of the global co‐ordination issue that one comes across in Chapter 7. Treatment of development economics with reference to global interdependence has undergone a few changes since its early days. The Pearson Commission in the late 1960s looked at the North‐South relationship in terms of charities and handouts. The Brandt Commission’s report in March 1980 looked at the relationship in terms of the economic interest of the North. Finally, the Brandtland Commission in 1987 delivered the message that the North‐South relationship should be looked at from the point of view of the survival of the North. The author’s application of prisoner’s dilemma, egoism and altruism, community failure of Chapter 9 could readily be extended to a treatment of North‐South relationship in the context of globalization. This would have placed his discussion of income distribution and environmental context, in Chapter 7, more robustly.