The "Orderliness" of Economic Development (Presidential Address)

Syed Nawab Haider Naqvi


The process of economic development-in the sense of a
sustained increase in per capita income-is typically associated with
dramatic changes in some key economic variables relating to the sectoral
composition of production, trade, and factor-use. And this seems to
suggest that it is essentially a "disorderly" affair. Some of these
changes have been observed regularly enough to qualify as the stylised
facts, or the "regularities", of economic development. These general
observations about the real world seem to support a spate of
"disorderly" hypotheses about the nature of economic development. The
critical minimum-effort hypothesis, the poles-of-development conjecture,
the unbalanced-growth strategy of development, the propositions
advocating a big-push, the great spurt, or the process of cumulative
causation, all suggest that the development process may have been
disequilibrating in the "structural sense" . Yet another dimension of
such "disorderly" hypotheses is the pioneer's vision of the effects of
growth on income distribution. Thus Lewis's "capital fundamentalism"
envisages a particularly "bloody" scenario: capital accumulation
proceeds relentlessly in his dual-economy model, where profits rise
while real wages remain constant because the supply of labour-the
Marxian "reserve army"-is (definitionally) elastic. In Lewis's model, if
not in the real world, the story of (capitalist) growth comes to an end
once the real wage starts to rise; this must happen because, again by
definition, the wage-earners consume all that they earl}. Kuznet's and
also Myrdal's inverted U-shaped pattern of inequality-partially
confirmed by cross-country investigations of the size distribution of
income-postulates a worsening of income distribution, at least in the
initial stages of economic development.

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