Academic journal article Harvard International Review

Growing Pains: The Outlook on Development Revisited

Academic journal article Harvard International Review

Growing Pains: The Outlook on Development Revisited

Article excerpt

"Only time will tell whether the developing countries will regain the
economic momentum of the 1960s and the 1970s. But 1983 may well prove to
be the worst year for them since the Second World War. There are four
principal dangers.
    First, that the world depression will continue ...
    Second, that protectionist actions by the major industrialized
countries, especially the United States and the European Community, will
restrict the imports of manufactured goods from developing countries ...
    Third, that either or both of the first two dangers could
precipitate major defaults on outstanding loans. Not only would banks
lose money under these circumstances, but the strong linkages among
banks could lead in the absence of skillful management by the leading
central banks of the world to a general seizing up of the international
financial system, as happened in the early 1930's.
    Fourth, that a prolongation of the present period of low or negative
growth, against the expectations established in the pervious quarter
century for visible progress in improved living standards, will lead to
violent political change in developing countries ..."
"The Outlook on Development"
Fall 1984

Statements about the future almost always involve extensions of the past. They may be complicated extrapolations, incorporating rates of change and even identifying turning points, but they are extensions of the past nonetheless. Few individuals genuinely identify true discontinuities, and they are usually dismissed as crackpots or are admired as intellectual entertainers rather than as serious futurologists. Some extensions of the past rely implicitly on a model of the social system under consideration, with its own dynamics and constraints. Others rely on analogies across apparently different social systems at different stages of their evolution.


However, they too implicitly (or occasionally explicitly) assume a common model for different systems, such that the observed characteristics and dynamics of one system can be informatively applied to other systems. For instance, the rise of Germany from 1870 to 1914 and its challenge to the leading power of the day, Great Britain, is said to suggest an informative warning about the current rise of China and its potential challenge to the leading power of the day, the United States.

Analogies, of course, are tricky, and it is crucial to get the matching points right. People usually neglect, in the above analogy, that the more significant rising power with respect to Britain was not Germany, but the United States, and the United States did not challenge Britain to combat, as Germany did. Analogies are colorful, and often pedagogically useful for driving a point home. But they too often substitute for serious analysis, permitting the user to avoid specifying exactly what are the key elements of similarity between the two systems or events being compared, and the dynamics that drive them--that is, without specifying explicitly the underlying model that supposedly covers both cases, even though they may be separated by a century or more in time.

With respect to developing countries in the mid-1980s, I had in mind the existence of a reasonably well-functioning (but not trouble-free) world economy with the key economic determinants being the level of economic activity in its largest national economies (the G-7 for short: United States, Japan, Germany, Britain, France, Italy, and Canada, in order of size of gross domestic product) and their policies toward imports from the rest of the world--all set within a cooperative institutional framework that was basically established after the Second World War, involving the rules, procedural frameworks, and attitudes of the International Monetary Fund (IMF) and the General Agreement on Tariffs and Trade (GATT, now transformed into the World Trade Organization).

If the G-7 economies were growing well and maintaining open markets, the world economy presented a permissive environment for growing economic prosperity in other countries. …

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