Krishna Bharadwaj - Accumulation- exchange and development _ essays on the Indian economy-Sage Publications (1994)-71-90 (1)

Alternative Analytical Paradigms in Theories of Development

I. Introduction

• Overview of industrialization issues in developing economies.

• Discussion of dominant paradigm in development theory and suggestion of an alternative derived from classical and Marxian political economy.

• Development theory gained prominence post-independence of former colonies in the second half of the century.

II. Role of the State in Development

• The state's direct intervention in developing economies significantly influences their developmental experiences.

• Analytical perceptions shape state policies based on theoretical paradigms which address:

  • Forces of economic change.

  • Constraints limiting growth.

  • Strategies for development.

  • Policy instruments for intervention.

• Initial focus on managing resources for accelerated income growth.

III. Demand-and-Supply-Based Equilibrium Theory

• Early development theory characterizes underdevelopment through the lens of scarce-resource allocation equilibrium (misunderstood as neoclassical theory).

• Key features of demand-and-supply equilibrium theory:

  1. Endowment of primary resources (land, labor, capital).

  2. Technological possibilities for resource conversion into commodities.

  3. Consumer preferences influencing demand and supply.

• Theory emphasizes:

  • Profit maximization by producers and satisfaction for consumers.

  • Prices and quantities being interlinked and variably sensitive to changes.

IV. Limitations of Demand-and-Supply Theory

• The simplification leads to misinterpretation of development needs which are more about resource creation and economic restructuring.

• Emphasis on 'three givens' (factor endowments, technology, preferences) leads to strategic interpretations of development challenges.

• Common issues identified: inadequate resource supply, poor factor mobility, structural disequilibrium.

V. Critique of Initial Development Policies

• Policies based on modifying market structures to boost efficiency were inefficient in addressing underlying development challenges.

• Recognition of needs for broader analysis beyond initial conditions, leading to structural changes in policies and interventions.

VI. Transition in Development Theories

• Theories like 'balanced growth' recognized development as the creation of resources and restructuring production.

• Emphasis on the dynamics of output and balances in production structure.

• Shift from merely focusing on static allocation efficiency to addressing the active creation of economic growth drivers.

VII. Agricultural Sector and Industrialisation

• Arthur Lewis's dual economy model highlights agriculture's role in industrial growth but overlooks internal agricultural dynamics.

• Agricultural growth does not automatically translate to industrialization success, due to issues of internal organization and market inefficiencies.

VIII. Surplus-Based Approach

• Classical political economy presents an alternative framework focused on surplus generation and social reproduction.

• Surplus= Gross output - Productive consumption.

• This approach highlights:

  • Class relations and their influence on economic structure and development dynamics.

  • Importance of institutional factors and historical contexts in production and distribution.

• Classical theory accounts for variety in historical contexts unlike neoclassical approaches.

IX. Macro and Micro Perspectives in Development

• Need to interconnect agrarian and industrial economies for comprehensive development understanding.

• Individual contract analyses must consider systemic influences and the dynamics of production relations.

X. Conclusion

• Development theories have transitioned to accommodate resource creation and socioeconomic dynamics.

• There is a tension between macroeconomic intervention and market-based approaches, highlighting inconsistencies in economic policy applications.

• Recommend employing classical and Marxian frameworks to better understand development transformations within institutional contexts.