The Lost Massey Lectures (7 page)

I come in the next lecture to the question of policy—to what is called for by way of action, given the various obstacles to advance. But already it will be evident, I think, how dangerous it is to treat the poor countries as a class. The poverty that produces so many common tendencies in behavior—and which also gives such stark uniformity to the village hut or urban slum—proceeds from very different causes. For purposes of prescribing economic policy, it is at least as unwise to associate a country with a narrow cultural base such
as the Congo, Niger, Ethiopia, Nyasaland, Somalia, Afghanistan or Saudi Arabia with a culturally advanced country such as India as to prescribe a common policy for India and the United States. There is at least equal error in associating for purposes of policy countries with a regressive social structure such as Ecuador, Iran or Peru with the African countries where social structure is not a primary obstacle to advance.

In recent years, economists have prided themselves on the progress that they have made in refining the concept of economic growth and in developing the theory that explains it and the policies that promote it. We are inclined to believe that we are becoming much more scientific about the whole business although, in an established tradition of the discipline, there is some tendency to identify scientific precision with mechanical elegance rather than reality. But the claim to progress in these matters must also be viewed with some doubt so long as underdeveloped countries are treated as a class and one theory is assumed to cover all. The subject of economic development cannot be considered scientific so long as it involves highly unscientific generalization.

In the last two lectures I suggested a classification of the poor countries of the world in accordance with the barriers that are principally operative in preventing their advance. In the Model I countries, which I identified broadly, but not exclusively, with sub-Sahara Africa, it is the narrowness of the cultural base—the shortage of trained and educated people and the absence of facilities for providing more. In the Model II countries, which I identified with much of Latin America, the principal barrier is a regressive social structure. This means that most people labor without much hope for increased reward from increased effort or superior intelligence. In the Model III countries, which I identified principally with India, Pakistan and Egypt, we have the classically impoverishing phenomenon of too many people struggling to make a living with insufficient land and capital. It is evident that if the
obstacles to advance are different, the measures designed to remove those obstacles will be different. Any appropriate line of action for one Model will be quite inappropriate for another. It is time now to consider the policy appropriate to each of the three Models.

In the Model I countries, if the barrier to progress is the shortage of trained and educated people, the obvious first step is to widen the cultural base. Internal effort and external assistance must center on the provision of the trained and educated people without whom advance is impossible. It seems likely that this core must be substantial—large enough to dominate an adverse environment. Presumably, also, it must be pyramidal in shape—a small number with the highest administrative and technical skills, a larger number with the equivalent of secondary education, a yet larger number with basic literacy and companion preparation.

Here is the problem of the Model I countries. It requires a government of minimal competence, together with a nucleus of teachers to organize an educational system. In the more fortunate former colonial countries, this organization was provided by the colonial authority or the nucleus of teachers was provided by missionaries out of the sensible conviction that heaven has at least a marginal preference for the literate. In the less fortunate countries, comparable help from outside is still required.

This leads to the conclusion that, for Model I countries, organizations such as the American Peace Corps are a strategic form of aid. And, though originally regarded as an outlet for youthful idealism, the Peace Corps is coming to play this role. It is having its greatest success in Africa where it is primarily a teaching organization. In 1964, approximately one-third of the 9,000 Peace
Corps Volunteers were serving in sub-Sahara Africa; of these over 80 per cent were teaching in formal educational programs.
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External training of teachers, administrators and specialists on a generous scale is also important for the Model I countries. So is the need to supply administrators, teachers and specialists at a more advanced level than those supplied by the Peace Corps. In all instances, it should be noted, emphasis must be on active or primary participants as distinct from advice. Advisers are of little value when there are no effective institutions to advise, and real resources are more important than money. Pecuniary assistance, where provided, should carry with it the organization—provision of engineering, administration and training of local people—that insures its effective use.

Along with the requirements of the Model I countries, it is equally important to see what they do not need. Capital, by itself, is not of great value. It must be supplied in conjunction with the companion institutions that allow of its effective use. Otherwise it will be wasted and, additionally, it can have a corrupting influence on the society.
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3

Public ownership is obviously to be discouraged in the Model I countries; if administrative resources are not sufficient for the basic tasks of government, they obviously should not be taxed with these further and more demanding responsibilities.
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Elaborate planning of capital use is unnecessary and a drain on scarce talent. Social reform is not central to the problem of development in this Model.

All discussion of Model I countries must reckon with the possibility, and indeed the likelihood, that in some instances development will be impossible. Predatory and anarchic influence will overwhelm and submerge the small cultural legacy of the colonial period. Thereafter there will be disintegration without foreseeable end. The Republic of Haiti, where social fabric, political structure
and living standards have deteriorated with slight interruption in the century and a half since the French were expelled, is a case in point. Instead of the efficient slavery of the plantations, there is the incompetency and arbitrary despotism of Dr. Duvalier. This is defended in the name of national sovereignty. One wonders if some form of international administration, designed to develop the requisites of self-sustaining political development, should not be available for countries caught by such self-perpetuating misfortune. Whatever the virtues of national sovereignty, they are not so absolute as to justify the degradation of a whole people for an indefinite period.

I venture to think that in most of the Model I countries, given ample assistance in widening the cultural base, the prospect is much better. But it is important that we take an ample and generous view of such aid. Because aid does not go into dams, airports, steel mills and other physical monuments, it should not, for that reason, be less in amount.

Coming to the Model II countries—the Latin-American case—we may again begin by discarding, or assigning a low priority to, what is least important.

These countries already have an educated elite; administrators, teachers, engineers, entrepreneurs and like talent are comparatively plentiful. However desirable it might be to have more, this is not the decisive obstacle. And if public administrators are given to larceny or idleness, it is not because their training and education are deficient, but because there is the tradition of using the government not as an instrument of service but as a source of unearned income. If it seems hard to argue against primary education as a first priority, it remains true that the poor state of such
education is a reflection of the politically powerless position of those whom it would benefit. If the distribution of political power were different, the rural masses would have schools.

Nor is capital as such the decisive requirement for change. Many of the countries of this Model have considerable earnings from oil or—less frequently—other natural resources. These resources are now misused because the power structure channels them into non-functional employments. There is danger that this will happen to pecuniary aid; it will further enrich the functionless rich and further strengthen, or at least rigidify, the power structure which is the obstacle of progress.
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In recent years, it has unquestionably occurred to both Latin American and North American conservatives (abetted as always by the politically innocent) that economic aid can be a highly welcome support to the
status quo
.

There are other temptations to the pursuit of the forms rather than the substance of development in this Model of which the most prominent, in the past, has been the preoccupation with inflation.

Inflation is not the operative barrier to economic advance. As noted, it is the product of much more deeply-seated social and political factors—in particular, the political power of the nonfunctional groups, the low productivity which characterizes society which returns income to political power rather than economic performance, and the bidding between groups for the product that is available. But inflation has high visibility. And regularly in Latin America, it has been regarded not as the consequence of these deeper disorders, but as the disorder itself. As a result, men of self-described soundness of view, on coming into touch with Latin
American problems, have regularly prescribed not for the disorder but for the symptom.

To a certain extent, countries have been urged to treat whatever symptom they were displaying at the moment. Thus, if prices are rising rapidly, policy is directed toward arresting the inflation. This will include budget curtailment, restraint on wage and salary increases, efforts to reduce government employment and restriction on government and perhaps private investment. The nonfunctional income, as in the particularly clear case of the army, has political power. Thus, it can protect itself from any curtailment. Or, as in the case of landed income, by nature it is beyond the reach of any effective restriction. The burden of stabilization is thus borne by the urban proletariat, white collar workers or other vulnerable groups. It does not greatly affect
comprador
or trading enterprises or old and static industries which have no need for funds for expansion. It does force curtailment of developing industries which do need funds. So, as a broad rule, functional incomes and outlays are vulnerable to an anti-inflation policy; non-functional income is protected.

In consequence of this disparate effect, a stabilization policy is borne by the weakest groups and strikes at the expanding sectors of the economy. It becomes a source of social tension, possibly even social disorder, and a cause of economic stagnation. Those who arrive to advise the country at this stage are certain to urge relaxation. And, in the more common case, it is forced by political necessity—to continue the stabilization would be to jeopardize the position of those in power and also give further ammunition to the Communists and fidelistos. The result of the relaxation is a greater rate of inflation. This policy rhythm has now continued for many years in Brazil, Chile and Argentina.
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It is obvious that both the stabilization and inflation phase are variants on a far more fundamental theme.

There can be no effective design for economic development in the Model II countries which does not disestablish the nonfunctional groups—which does not separate them from political power and,
pari passu
, reduce or eliminate their claim on income. This solution applies equally whether power derives from land, other hierarchical wealth, the army, the non-functional bureaucracy or some coalition of these. (The problem presented by the trader or
comprador
group is less clear, for it performs, however expensively, an economic function. Elimination of privileged or monopoly position is more important here.) There can be no
a priori
judgment that a particular non-functional group, for example landlords or the army, is more regressive than another. Any non-functional group which governs in its own interest will govern at the expense of economic incentives.

The problem is that the disestablishment of non-functional groups is a task not of reform but of revolution. A country does not redistribute land or eliminate an army by passing a law. Certainly it will not do so if landowners or the military are in control of the government. Nor is compensation an answer; men will sell property but they will not sell power. Such change in recent times has usually involved some violence except where it has been under the
force majeure
of military occupation. General Douglas MacArthur's land reforms in Japan and Korea—one of the more remarkable achievements of an occupying army and one that would have provoked fascinating comment in conservative circles in the United States had anyone but MacArthur been responsible—were peaceful because any protest was futile. The disestablishment of the princes and other feudatories in India was peaceful (except for the police action in Hyderabad) only because those affected recognized that vast shifts in the power structure
had made opposition futile. Bolivia and Cuba, the other two recent examples of land reform, did not escape violence.

Yet there must be change in the social structure if there is to be economic advance. And the pressures for advance, in a world where the demonstration effect of economic development is persuasive, are unlikely to abate. The choice may well be between earlier and later revolutionary change, a choice which may well coincide with that between liberal revolutionary change—which establishes conventional economic incentives—and Communism.
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