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A patina of buzzwords
Kashf Al-Aqni'ah 'An Nadhariyat Al-Tanmiah (Unmasking Economic Development Theories), Galal Amin, Cairo: Dar Al-Hilal, 2002. pp271
In this book, Egyptian economist Galal Amin does more than turn his critical eye to economic development theory as this has prevailed over the past half century since the end of World War II. Unmasking Economic Development Theories is a relatively small volume, but it is expansive in outlook, taking readers back to the fundamental attitudes and interests that have lain at the heart of these theories as they have evolved since Adam Smith's Wealth of Nations appeared in 1776 at the height of the Industrial Revolution in Great Britain, and then deftly exposing the degree to which they have gulled the political and economic elites that have governed the newly independent nations of the Third World. In the manner of many precepts and theories that emanated from the positivist scientific tradition, economic development theories have become accepted as axiomatic, incontrovertible truths.
From 1500 to 1750, notions of economic growth were governed by the mercantile perspective, which measured growth in terms of the State's stores of gold and silver and not in terms of levels of production of goods and services. Increasing the State's bounty was directly contingent upon expanding trade, both at home and abroad. A major departure from this thinking occurred in mid-18th century France, where a new school of economists posited a concept of wealth founded upon the availability of cultivable land and agricultural produce as the basis for production and trade. However, the inability of policies based on these theories to open new markets for French produce resulted in the early demise of the theory in practice. The French government reinstituted stiff customs measures to protect domestic markets from the flood of British goods, and Turgot, the then minister of finance, discredited for the failure of his liberal trade policy, was dismissed.
It was thus through another route that modern economic theory emerged, one paved by the Industrial Revolution that began in Britain in the mid-18th century and acquired tremendous momentum over the course of the next. Nor is it surprising that this era, with its complex weave of interests and class structures, was ideologically launched by Adam Smith's treatise, which propounded free trade, specialisation in production and the accumulation of capital as the prime engine for growth, investment and development.
Naturally, Smith's outlook was closely bound to the level of industrial progress Great Britain had attained, enabling it to dominate European and non-European markets. In this context, Galal Amin turns to the German economist Frederick List, whose National System of Political Economy, published in 1941, posited theoretical foundations emanating from a desire to protect German industry. In Amin's opinion, however, List's approach was not the most appropriate for developing nations keen on protecting their nascent industries from the ideas of Adam Smith, which began to take universal hold in tandem with the spreading grip of the British Empire, the dissemination of British culture and value systems, and the inculcation of the new intellectual elites of the 1930s and 1940s. Consequently, Amin discards List as the father of economic development theory.
At the same time, Amin observes that in the period stretching from 1870 to the end of World War II development theorising was all but ignored by European economists, most of whom branched off into various schools of micro- economic theory. He is not surprised that this trend should have coincided with the tidal wave of European colonial expansionism into Asia, Africa and Latin America, and that tangential issues of cost and benefit should have overshadowed macro-political economic issues of development.
However, the end of World War II brought a resurgence of interest in issues of economic development, a phenomenon that Amin ascribes to the interplay between three factors: the realities surrounding the Cold War, the expansion in the mass production of machines and appliances, the disposal of which required vaster markets and, hence, a certain level of prosperity conducive to developing new consumer tastes, and, thirdly, the independence of the former colonial nations, many of which began to adopt the Soviet model for economic and social development.
From the standpoint of Western and UN economic experts, Third World countries had certain characteristics in common, above all "a low national and per capita income." The universally accepted formula for addressing their plight therefore became: "increase the average national income, and let the rest take care of itself through the trickle-down effect." This outlook both precipitated and encapsulated a gamut of development theories that emerged in the 1950s and 1960s, such as WW Rostow's "Stages of Economic Growth", Rothstein's "Big Push", Liebenstein's "Minimal Critical Efforts" and Tirksa's "Balanced Growth". To these theorists and others, development was essentially a question of time, not structure or infrastructure.
An aerial view of the skyscrapers of New York City
Flagrantly absent in their theories, however, was any consideration of the role colonialism had played in undermining and distorting the social and economic structure of developing nations, and, consequently, the virtual impossibility of repeating the growth and development experiences of industrialised nations. Rostow, in particular, ignored questions concerning the nature of government, existing social institutions, modes of behaviour and the prevalent culture. Another common theme of 1950s and 1960s development theory was the belief that the "accumulation of capital" formed the primary impetus for growth and development and, conversely, that the lack of capital was development's most formidable obstacle.
Following this period, development theory doubled back on itself. Suddenly, it became anathema to posit a role for the State in economic activity, and the State was held retroactively at fault for all failures in development. Amin suggests that this predominant characteristic of the writings of the 1970s had its origin in Western donor institutions, but was quickly echoed by the mouthpieces of vested interests in the developing world. This is not to say alternative voices were not heard in the Third World during this period, notably from Marxist economic schools, and particularly from the Dependency Theory school that gave prominence to such names as André Gundar Frank and Samir Amin.
Nevertheless, while the attacks of these schools against the precepts propounded by the World Bank and the IMF combined with the paltry success of these institutions' prescriptions for development gave rise to some alternative thinking, this tended to take the form of catchwords and slogans that would flutter briefly like the latest fashion. Meanwhile, the general acceptance of the donor agencies' underlying formula for development -- "increase the rate of economic growth and per capita income" -- persisted, with the assistance of the powerful propaganda capacities of Western capitalist institutions and research centres.
However, although the essential formula remained the same, subtle changes took place on the surface. Certainly, it is not difficult to perceive Western interests at work in the 1980s trend to link per capita income growth with the influx of private foreign investment, rather than foreign aid. Simultaneously, notions of central economic planning, balanced growth, import substitution and economic integration remained unmentionables, while classical economic theory was repackaged in a patina of buzzwords: "economic stabilisation", "structural adjustment", "laissez-faire", "laissez passer" and "sustainable development". Amin suggests that transnationals were heavily instrumental in the promotion of distorted concepts and theories of development, pouring enormous funds into research projects that would produce the theory to support notions of free-market mechanisms and economic deregulation.
In spite of the fact that World Bank and IMF publications have been regurgitating the same ideas and formulas for the past 50 years, Amin believes they are not without some worth. This value, however, does not reside in their analytical frameworks; rather, it lies in the hordes of statistics they have compiled and ordered, enabling solid comparative studies of the economic development experiences of the countries of the world to be undertaken. It is interesting to note that the World Bank's Development Report for 2000/2001 was given the snappy, yet thought- provoking title of "Attacking Poverty". Suddenly, it seems, this powerful financial institution has discovered that for decades 2.8 million of the world's six million people have been living on less than two dollars a day.
The standard for gauging per capita income was originally based on per capita income in the US at the end of World War II. Nations with per capita incomes of less than a tenth of that of the US were considered impoverished. Eventually, it was determined that this standard was not scientific, and in the 1960s the World Bank posited a fixed figure -- $500 -- as the demarcation line between rich and poor countries. In Amin's opinion, diagnosing poverty in this manner generated what he terms three major follies. Firstly, the focus on per capita income drew attention away from those groups that actually suffered most from the plight of destitution. Secondly, the heavy emphasis on statistics in general failed to take into account equally important factors that could not so easily be quantified. Thirdly, it generated a race to close the income gap regardless of the means used to achieve that end.
In spite of the contributions of some economic experts from the Third World, such as Mahbub Al-Haqq, the dominant development indicator in Western development literature has remained per capita income. In the early 1990s, Al-Haqq proposed to UNDP a "human development index" as a means to gauge the economic performance of a given nation. This indicator was based on three factors: average life expectancy at birth, adult literacy rates and per capita share of GDP. Nevertheless, in spite of the greater comprehensiveness of this human development index for measuring economic development, Amin remains uneasy. He believes it simply adds to the showcase of World Bank slogans without producing serious and viable strategies for development. Indeed, he suggests that "economic reform", "deregulation", "security networks" and the like are fundamentally deceptive, couching in ostensibly objective terminology perceptions that are far from impartial and disinterested.
Summarising a half century of development in economic development thought, Amin observes that "without a doubt, scientific theories change with changing circumstances, interests and fashions".
Reviewed by Abdel-Khaleq Farouk
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