Academic journal article ASBM Journal of Management

Changing Perspectives about Development Economics: Indications from Literature on the History of Economic Thought

Academic journal article ASBM Journal of Management

Changing Perspectives about Development Economics: Indications from Literature on the History of Economic Thought

Article excerpt

(ProQuest: ... denotes formula omitted.)

Introduction

People in underdeveloped countries are hauntingly reminded of conditions in less developed lands, while people in the less developed countries are continually exposed to the relatively affluent style of living in the developed nations (Salvatore and Dowling, 1977).

This precipitates studies in economic development, which has been variously defined at various points of time. But, essentially, economic development is a complex historical process, in which economic and noneconomic factors are closely interwoven. It can be best defined as the exploitation of all productive resources by a country in order to expand real income (Alpert, 1964). Economic growth is generally thought of as one-dimensional and is measured by increase in income. Economic development involves structural and functional changes as well. In the absence of effective measures of the latter however, states of development are estimated by the growth of income. Ordinarily, levels of income and rates of increase are given on a per capita basis, to approximate measures of efficiency and welfare (Kindelberger, 1965).

There are broadly three periods in the early history of economic thought. The first is the period of early industrialisation in Europe, the second is the period of industrial revolution in England, i.e. the period from about 1775 to 1832, and the third period falls in the third quarter of the nineteenth century when other countries like Germany and the United States began to catch up with Britain and finally overtook it as the leading industrial power of the world (Hoselitz, 1960). But economic development as a discipline comprising systematic and scientific study may be said to have developed over the last few decades (Todaro, 1997).

Pre-classical notions of economic development

During the mercantilist era it was believed that material resources of the society were, in general, to be used to promote the enrichment and well being of the nation-state (Ekelund and Hebert, 1975). As Hoselitz (1960) notes that according to the mercantilists, GNP was a function of the size of the labour force, the quantity of capital and the quantity of money (or its substitute).

To the physiocrats, economic development was synonymous with capital formation. They argued that it was not men (i.e. population) that were needed in the countryside, but capital and in this sense, the physiocrats discarded the mercantilist notion of labour and the "utility of poverty" (Ekelund and Hebert, 1975). In contrast to the mercantilists, the physiocrats promoted the theories and policies of laissez faire or non-interference by the government in economic activities wherein economic development was sought to be achieved by seeking to free agriculture, manufactures and commerce from feudal controls (Whittaker, 1960). Adam Smith carried this idea forward in England through his theory of the "invisible hands" (Smith, 1950).

However, these early schools of economic thought, namely those belonging to the medieval times and the mercantilists did not have a strictly objective approach towards analyzing the factors responsible for economic development and were influenced by considerations of Christian ethics and political nationalism (Whittaker, 1960).

The Classical School

The last quarter of the eighteenth century heralded a new era in the European continent. It saw the emergence of the industrial revolution and radical economic and political thoughts. If Boulton and Watt represented the communion of industry and science, Adam Smith and his treatise, Wealth of Nations marked the beginning of the classical school of modern economic thought.

Roll (1973) has pointed out that during this period the conditions in England and other countries were very favorable to the reception and survival of classical ideas and their influence on policy matters.

Economic development was sought to be explained by Adam Smith through the applications of the rules of natural order and opposition to state interference in business and commerce (Abbot, 1973). …

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