Book Reviews - Trócaire · Book Reviews The Other Path: Hernando de Solo, New York, Harper and Row, 1989, Hardback, ISBN 0 06 016020 9, pp. 271, $22.95 TWO VIEWS I. This book has

Book Reviews

The Other Path:Hernando de Solo, New York,Harper and Row, 1989, Hardback,ISBN 0 06 016020 9, pp. 271,$22.95

TWO VIEWS

I.This book has been a best seller inLatin America under the title El OrroSendero - an obvious allusion to thealternative model for developmentbeing pursued by the SenderoLuminoso (Shining Path) movementwho, today, control almost a third ofthe territory of Peru. The author ispresident of the Peruvian InstitutoLibertad y Democracia and a memberof the United Nations Committee forDevelopment Planning. He was aformer managing director of theCentral Bank of Peru and he completed his undergraduate studies inGeneva before being employed as aneconomist with GATT. The forewordis by the famous writer, Vargas Llosa,now turned politician whosemovement, Libertad, has rece~tly

united the right in Peru. He isexpected to succeed Alan Garcia aspresident. Vargas Llosa, too, hasstudied and lived abroad. The book isproduced with the cooperation andsupport of the International Centrefor Economic Growth (ICEG) a nonprofit public policy organisation basedin the US. ICEG was founded in1985 "to sponsor and promote research on sound economic policies".

De Soto advocates a laissez-faire

Tr6caire Development Review 1989

economy and the removal of controlsby the "mercantilist" state. His heroesare the vast numbers of Peruvianswho are involved in the blackeconomy forced on them by stateregulation. The informal economyshould be seen as a solution to theproblems of the Third World ratherthan as a problem which governmentshave to "solve". Vargas Llosahighlights the political implications ofsuch an economy of slum dwellers:"we hear nothing about what somany Third World revolutionaries areadvocating in their name - violentrevolution and state control of theeconomy. All we hear is a desire forgenuine democracy and authenticliberty. "

The problem, according to deSoto, is the state itself. Bureaucratisedand law-ridden, it hinders theproduction of wealth by its continuedattempts to satisfy the needs ofcompeting commercial interests for itsown political purposes. This processhe calls "redistribution" and hetherefore describes the state as"mercantilist". In pursuing its ownpolitical aims in a traditional mannerthe state has totally failed to adjust tothe rapidly changing situation of thepast forty years during which thepop'ulation trebled and the urbansector increased from one-third totwo-thirds of the population as aresult of heavy migration from theAndes. The financial crises of recentyears - an inflation rate of forty fiveper cent per month and the rapidlyfalling value of the currency since1985, from less than 20 per US dollar

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to 3,000 per dollar - has completedthe chaos.

For almost two decades noweconomists of de Sora's persuasionhave been content to repeat theslogan - "get the government off thebacks of business and allow it toproduce the wealth" . In all this time,as the state has been withdrawingfrom economic domains, none ofthese ideologists has attempted toback up such assertions byresearch-to estimate, fur example, byhow many percentage points the statewould have to withdraw in order toget one percent increase from theprivate sector. The merit of de Soto'swork is that, while he does not gothat far, he has, with the assistance ofhis Institute colleagues, provided awealth of information about the blackmarket. Housing, distribution andtransport are explored in detail. Theextent of the market, its organisationand processes, the pattern of itsevolution and its advantages andlimits are revealed in depth for thefirst time. Half of all housing, morethan four-fifths of distribution andninety five percent of transport are inthe informal sector. It is primitive,violent and even savage but no onewho has visited Peru can fail to bequickly impressed and fascinated bythe resourcefulness, vitality andingenuity of this ubiquitous sector.

By far the most importantcontribution of this book is thechapter on the role of the legal systemin hindering economic development.Only one percent of laws pertainingto business are debated in parliament.The rest are the result of ministerialorders made at the instigation ofin terest groups who support theregime in power. For those not in theinner circle the sheer cost in time and

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money of trying to find a waythrough the labyrinth is a majorhandicap. De Soto's researchers hadto spend 289 days to get the elevenpermits they needed to set up agarment factory. The cost in time andmoney amounted to thirty-two timesthe normal working wage. Bribeswere solicited ten times in return fOr aspeecling up of the process but werepaid only twice as a last resort.Likewise, the cost of access tohousing (seven years delay and severalthousand dollars), state ownedwasteland and the setting up of amarket were shown to greatly hinderdevelopment.

De Soto amply demonstrates theprice of staying within the law, but heshows, too, that the informaleconomy is also hanclicapped by costsarising from such sources as theinsecurity of property rights, theinability to enforce contracts legally,the lack of limited liability, properinsurance and succession rights. Theultimate effect of the legal system isto reduce investment, depressproductivity and greatly increase theburden of taxes on those who staywithin the system. The outcome ofthis chapter is that henceforth a studyof the role of the legal system will bea necessary part of the study ofdevelopment in any society.

De Soto concludes with. a plea for anon-violent solution to the problemof an archaic, inefficient, andineffective legal system of themercantilist type. The spread of theinformal economy he sees as a nonviolent revolution which contrastsstarkly with the violence of thefollowers of the Sendero Luminoso.Both left and right, he argues, viewthe informal economy as the problem.Both support the archaic mercantilist


system. The Other Path suggests thatthe problem itself offers a solution,Le. to use the energy inherent in thephenomenon to create wealth of adifferent order.

The popularity of this bookundoubtedly arises from the empiricalsupport it appears to offer to thepopular ideas of the past twenty yearswhich define the state bureaucraciesas the problem and the industrioussmall businessman as the solution. Asecond avid readership will be foundamong those interested in thesolution of the terrible problems ofurbanisation without industrialisationfound in Third World cities swollenby migration. Although The OtherPath has much to offer by way ofstim ulating and provocativehypotheses, simple extrapolation toThird World or Irish situations wouldbe very misguided. The political,cultural and administrative hegemonyof Lima over Peru has seldom beenmatched elsewhere. The message isrelevant only in situations wherebureaucratic structures hampereconomic initiative inordinately. Inthe Irish case, emigration has reducedthe pressures in urban areas and thebureaucracies themselves haveengaged in development .to aconsiderable extent. We have plentyof entrepreneurs but too few largerfirms capable of competing abroad.De Soto does not deal with thisaspect of development. The relevanceof de Soto for us is an empiricalquestion deserving much morecareful thought than that which wentinto the advocacy of Denmark as amodel for Irish economicdevelopment.

Finally, readers interested indevelopment in the Third World willfind it remarkable that a book by a


member of the U.N. Committee onDevelopment makes so little referenceto the problem of foreign borrowings, which has depressed the level ofliving by approximately ten per centin Third World countries. Thereduction of the level of living inPeru, today, to thar of twenty yearsago is not due solely to theweaknesses of the national economy.

Paddy O'CarrolJ

IIVast shantytowns dwarf thedowntown core of every city in LatinAmerica. They have sprung up sincethe I940s to house the massivemigrations from the countryside; theirpopulations live a marginalisedexistence ou tside the "formal"economy, many peddling food, knickknacks and services on the street.Growing out of this humble form offree enterprise, however, there hasdeveloped a tremendously dynamicand important sector, the informal or"black" economy; according to theresearches of Hernando de Soto,Peruvian economist and businessman,it now accounts for almost 40% of hiscountry's national income, 95% of theurban transport fleet, 40% of Lima'shousing stock, and the predominantportion of the retail distribution ofconsumer goods in the capital.

De Soto documents his research inThe Other Path, a book which toppedthe bestseller lists in Latin America;an English translation has just beenpublished to wide acclaim. The booknot only represents the most seriousresearch into the operation andimportance of the informal economyin a Third World country; it is also acarefully argued and stimulatingpolitical manifesto detailing how the

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Latin American system must bechanged in order for this economicdynamism to be harnessed so that theregion can catch up with thedeveloped industrial economies.

Drawing an analogy with theeconomic system which prevailed inEurope between the 15th century andthe onset of the IndustrialRevolution, de Soto convincinglyportrays Peruvian, and by extensionLatin American, economies as"mercantilist" rather than as "freemarket" capitalist systems. While bothsystems are based on private property,the state under mercantilism regulatesall aspects of economic activity,controlling by various procedures thenumber of producers it allows operatein any sector of the economy. Becausecompetition is restricted in this waythese legal or "formal" firms possess adegree of monopoly power, whichenables them to reap extra profits.Potential producers vie with eachother to win the favour of thebureaucrats and politiciansresponsible for granting thesemonopoly rights, and so time, energy,and labour are diverted away fromproduction to become tied up inlobbying, in bribery, in red tape, andin developing political connections.Under free-market capitalism, on theother hand, state intervention ineconomic procedures is confinedlargely to specifying standards thatproducts must meet; any firms willingto meet these standards are then freeto produce. This latter systemfacilitat'es competition, keeps pricesand profit margins down, andstimulates economic efficiency and itsultimate measure, income per capita.

All of this ground has in fact beenthe subject of much research in recentyears; Douglas North (Structure and

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Change in Economic History, 1975 ),Mancur Olson (The Rise and Declineof Nations, 1982), and Anne Krueger("The Political Economy of the RentSeeking Society", American EconomicReview, 1974) studied how interestgroups reduce economic growth intheir struggle to have the state grantthem monopoly powers. What deSoto's work adds to these analyses is astudy of the pressures that build upwhen floods of migrants driven ordrawn from the land find themselvesexcluded by the monopolised formaleconomy, which is designed explicitlyto keep at bay the competitive threatthey represent to those controllingthe established housing, transport andretail trade industries.

Migration to the cities in LatinAmerica has been so vast that it hasnot proved possible to keep theinformals at bay. They haveconstructed their own economy,invading private and state lands,building their own housing estates,developing their own public transportsystems to serve these areas, andultimately taking over from a formalsector whose flexibility is hindered bythe massive red tape that binds legaleconomic transactions. (Anyone whohas changed money speedily andefficiently on the Latin Americanblack market, and sluggishly andfrustratingly through the legalchannels will take the pointimmediately! )

Even though the informals havemanaged to enter the economicsystem through the back door, theentire institutional structure isinefficient, de Soto argues, bothbecause of the resource-diversiondiscussed above, and because theinformals have little access to thecredit and legal systems; investment is


low and production occurs on aninefficiently small scale because of fearofdetection and expropriation.

Even labouring under theseconstrain ts, however, the informalsector has shown itself capable oftremendous entrepreneurial dynamism and wealth-creation. The wayforward, de Soto argues, and the onlyway to release the pressures towardsviolent revolution that build up whena large and growing proportion of thepopulation finds itself excluded fromthe potential for upward-mobility, isto change the legal and institutionalstructure from a mercantilistmonopolistic system to one whichwould enable the development of acompetitive free market.

All of this is insightful, I feel. Whilewe might agree that potentialeconomic growth, and the well-beingof the poor, would expand under afree-market system, however, de Sotofails to convince when he attempts todevelop from this a theory ofunderdevelopment: "All the evidencesuggests that the legal system may bethe main explanation for thedifference in development that existsbetween the industrialized countriesand those, like our own, which arenot industrialized". Mercantilism,however, has continued topredominate in Latin America notbecause no-one until now has realisedits inefficiency, but because it hasoperated, and continues to operate, tothe benefit of powerful groups whoaccordingly have a vested interest inits maintenance. How such groupshave been able to maintain:otheirdominance and keep in place thesystem that favours them is thepolitical question that must be faced ifde Soto's line of reasoning is to betaken to its conclusion.


De Soto ignores the fact that landholdings are concentrated in a smallnumber of hands; this is one of thecrucial factors behind the massivemigration to the cities. Theconcentration of industtial ownershipin a relatively small number of handsis the major factor explaining thetenacity with which the formal sectorhas been able to maintain themercantilist system. So a narrow

.rlisttibution ofwealth and power goesa long way towards explaining LatinAmerica's problems; the debilitatingmercantilist institutional and legalsystem is primarily a tool formaintaining this status quo.

It is of course the extremedifficulty in changing the vastlyunequal distribution of wealth thatexplains the extent and intensity ofpolitical violence in the region. For deSoto's proposals to be put intopractice, given that they will entailsome redisttibution away from thosewho currently hold wealth and power,some major actor in the political andeconomic process must be found toforce them through.

That actor, incredibly, is notmentioned once throughour thebook. It is, of course, the UnitedStates. De Soto's proposals will havetheir best chance of being adopted ifUS pressure is brought to bear onLatin American governments toreorganise their economies in thisway. Presumably this has not occurredin the past because multinationalcompanies, particularly in theagribusiness and mining sectors, haveas part of the formal sector reapedsome of the rewards generated for theelite by the existing system.

The time may now be ripe for deSoto's ideas to win favour, however,since the huge Latin American foreign

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debt means that it is now in USinterests to push to have all theproductive capabilities of the regionharnessed. This kind of institutionalchange, were it to come about, couldbe the silver lining to the dark cloudof the debt.

Whether such institutional changeswould be sufficient to wipe out thethreat of the Sendero Luminoso,without direct redistribution of landat least, is, however, questionable.

In taking the analogy with earlyEuropean mercantilism to imply thata Peruvian or other LDC free-marketeconomy could industrialise in theway that the European countries did,de Soto again seems to place toomuch faith in the curative propertiesof an unaided market. Sidney Pollard,a leading economic historian of theindustrialisation process has pointedout the extra difficulties meed by lateindustrialisers: "Not only is it truethat the later they are, the wider thegap in technology and the greater thedifferences in social structure thathave to be bridged; but also the largerthe pack of competitors baying attheir heels, and the narrower thebackward world still open to them."Industrial policy involving a highdegree of state intervention in theeconomy, rather than reliance on theunaided free market, seems to havebeen the route followed by Japan andother successful Asian lateindustrialisers.

To summarise my judgement onthe book,then: as a study of theinformal sector, of the proximatecauses for its being forced to remaininformal, and of the resulting costs tosociety in terms of productiveefficiency, The Other Path is excellent.As a set of proposals representing afirst step towards improving the lot of

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the dispossessed in these societies, it ispractical and timely. As a theory ofLatin American underdevelopment,however, and hence as an estimate ofthe ultimate benefits to be derivedfrom the proposed programme, it is, Ifeel, deficient.

Frank Earry

Modernising Hunger - Famine, foodsurplus and farm policy in the EECand Africa, Philip Raikes,CUR, James Curry, Heinemann, 1988,ISBN 085255 112 6, pp 280,£9.95."Cap Briefing", Numbers 1-19,Catholic Institute for InternationalRelations, October 1987 - February1989, London.European Parliament Report ofCommittee on Development andCo-operation on the CommonAgricultural Policy and thedeveloping countries,Doc A 2-359/88, January 1989.

The coincidence of the famine inEthiopia in the mid 1980s with recordfood stocks in the EEC and US anddepressed world prices created alegitimate sense of outrage amongmany people. The outrage led tovaried reactions. At one level therewas the demand to "move themountain" of food to the starvingpeople. At another level, the deadlyparadox of food surpluses andstarvation focused attention on thepoli<;Les in developed and developingcomitries which led to the situation.The book by Philip Raikes and thereports by the CUR and theEuropean Parliament which are underreview form a useful addition to the


growing body of literature on tbesepolicy issues.

Philip Raikes' book is divided intotwo parts. Part one deals witb Africa;its food gap; an outline of the"Mrican crisis", (including its debtand economic crisis); and foodshortages and famine. Part twoexamines tbe international dimensionsof tbe food and economic crisis facingAfrica. It looks at trends in worldfood production and trade; at theEEC and its policies which impact onMrica, including food and project aidand tbe Common Agricultural Policy(CAP). A final chapter entitled"Perspectives on the African FoodCrisis" attempts to pull the strands offact and argument togetber, to permitsome general conclusions.

There are a number of positivethings about this book. One is theauthor's well developed sense ofscepticism. This is applied to a verycatholic range of targets, from FAOfood production statistics to theusefulness of econometric models inprojecting tbe outcome ofagriculturaltrade liberalisation to monopoly statemarketing arrangements in Mrica. Healso displays a healthy disdain forblueprints to achieve development.There is much evidence throughoutthe book that his extended contactwith the rich complexity of Mricanlife has tempered any temptation toadvocate rigid models fordevelopment.

A central part of &likes' thesis istbat tbe model of western agriculturaldevelopment witb its intensive use ofcapital and chemical inputs and itspush towards higher productivity isnot appropriate to solving the foodand hunger problem in Africa. Hefears tbat Africa cannot afford such amodel, in terms of its import capacity)


environment and its difficulty increating non-agricultural employment.

While accepting the validity of acentral part of his thesis about theinapplicability to Africa of a certaintype of western agricultural"progress' J one would have wished tosee expressed more clearly anacceptance that tbe development anddiffusion of productivity enhancingtechnology must lie at the base ofAfrican agricultural and economicdevelopment. Such technology has tobe firmly grounded in existingfarming systems and in soundenvironmental practices. Thedevelopment and putting intopractice of such technology is a majortask for research institutes, extensionagencies and aid programmes. Itobviously has to be implemented intandem with a growth in income andemployment opportunities in thenon-farm economy.

In his discussion on the impact onAfrican food security of existinginternational agricultural tradepractices (including those related tothe CAP), Raikes essentially playsdown tbe importance of tbe issue. Hepoints out that the current crisis inAfrica is a highly complex affairconcerning not only food imports andhunger, but large and growingexternal debts, severe shortages offoreign exchange, major deficits onstate budgets and tbe virtual collapseof a number of economic factors,notably transport, industry andadministration. Faced with thisagenda of problems, the impact onMrica of CAP and agricultural tradereform, while not unimportant, needsto be kept in perspective.

Apart from tbe development of tbecentral elements of his thesis, there

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are a number of chapters (e.g. on theworld food economy, food aid etc)where a lot of facts are assembled in avery workmanlike way. In hisconcluding chapter, there is a sense ofpessimism about the future. Part ofthis may be his tendency towardsbeing the "two-handed" economistand seeing the two sides to everyproblem - and indeed to any possiblesolution. While he says that thepurpose of the book is not to drawgeneral conclusions but to stimulatethought and discussion, and it is clearthat he is not a believer in the "grandstrategy" of development) thisreviewer felt that it would have beenuseful at least to set down theprinciples for practical action, withinthe limits of the political realitieswhich exist in the African situation.

The CUR papers entitled CAPBriefings consist of a series of ninepapers, containing in all nineteenarticles, and produced over the periodfrom October 1987 to February1989. The articles are written byspecialist writers in their fields and thestandard is uniformly high. The highstandard and the fairly specific natureof some of the topics covered havenot presented a barrier to readability.

A major issue covered in the seriesis the international agricultural tradeproblems which result from thepolicies of the major world producersand consumerS. The impact of thesepolicies and trade practices ondeveloping countries, and on Mrica inparticular) is examined. A number ofthese issues arc of particular relevancein the context of the present GATTnegotiations, which have as a centralaim the liberalisation of agriculturaltrade and the reduction in the levelsof agricultural protection which havehitherto existed. One of the major

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conclusions to be derived from thisdiscussion is the very sharp divergenceof interest which exists betweendeveloping countries in regard tocertain of the ideas being discussed inthe GATT negotiations (e.g. a changein the Be import arrangements foroilseeds).

Another major focus in the CURpapers is the process of CAP reform,particularly in relation to changeswhich may be brought about forenvironmental reasons. The growingawareness of "green" issues meansthat many of these changes are nowmoving into the realm of practicalpolitics. CUR papers num ber 10-12list 15 principles for "greenagricultural policy". It will beinteresting to monitor the progress ofthese principles.

Finally, the report drawn up onbehalf of the Committee ofDevelopment and Co-operation ofthe European Parliament on theCommon Agricultural Policy and thedeveloping countries is a well writtenand clear summary of many of theissues covered by Raikes and the CURpapers. In conclusion) it advocates arelatively cautious approach to changein international agricultural tradingrelationships. This is probably in linewith the practical politics of thesimation.

However) it is encouraging that theEuropean Parliament is committed tomaintaining a keen interest in thechanges in trading arrangements andin other key issues (debt relief, aid)which will affect the relationshipbetween developing and developedcountries. In the context of thecurrent GATT negotiations, whichare now moving into their substantivephase, formal recognition has beengiven to the concerns of the


developing countries. There is acommitment to take account of thepossible negative effects of the reformprocess on net food·importingdeveloping countries and on the needfor special and differentiatedtreatment in trading relations fordeveloping countries. These are issueswhich the European Parliament mightusefully monitor, to ensure thatactions match up with rhetoric.

Tom Arnold

Uprooting Poverty: The SouthAfrican Challenge,Francis Wilson and MamphelaRamphele,W. W. Norton & Co., New York &London, 380 pp $27.50,ISBN 0 393 02610 8

Racism, the superiority of One raceover another, becomes a self·fulfillingcreed when, over a period, the law isused to depress the condition of apeople to such an extent that thepoints of contact or referencebetween the haves and have·nots areso far apart as to make referencealmost irrelevant.

There is not anything very unusualin colonists using or shaping the lawto such ends. In our own history weare aware of the Penal Laws which,while they may have beenindifferently applied, were aimed atreducing the native Irish to the levelof survival. More recently we haveseen the outline plans which the Nazishad for eastern Europe, as well as the"solution" they evolved for the Jewishpeople. All expansionists and colonistsevolve systems and ideologies tojustifY their actions and to safeguardwhat they have unjustly acquired. Law


gives legitimacy to such plunder, atleast in the eyes of the law·makers andthe plunderers. The plundered,however, never accept these kinds oflaws, this created legitimacy.

This excellent book dissects thepoverty and deptivation which themajority of the people of South Africaendure today and outlines variousstrategies which may be employed toredress the situation. It is a depressingbook in that the scale of the povertydiscussed is great, the gulf betweenthe status of the races so wide as tomake the possibility of Fabian reformalmost frivolous. It is a system which,because of its untenable base, cannotbe reformed. It requires boldtransformation on a massive - anddangerous - scale.

This Report of the SecondCarnegie Inquiry into Poverty andDevelopment in Southern Africa isthe successor - after an interval offifty years - of the first CarnegieInquiry into Poverty among WhiteSouth Mricans. The Second CarnegieInquiry began in I980 and this bookis no more than an overview of thehundreds of research papers written aspart of its work. It documents in PartI the many faces of poverty, includingunemployment, hunger and sickness,housing and environment, literacyand powerlessness. It then analysesthe many causes of poverty beforeturning in Part III "towardstransformation" .

South Mrica has the highest levelof inequality among the fifty·sevennations for which statistics areavailable. In I980, 50% of thepopulation lived below the povertyline. On the reserves or homelands,81 % of the people lived in direpoverty. In I970 the richest 20% ofthe population owned 75% of the

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wealth compared with 39% of wealthin the United States ofAmerica.

As might be expected, thisinequality is fully reflected in wagesand therefore in disposable income.In 1983 annual disposable income percapita was estimated as follows:

Whites R 6,242Asian 2,289Coloured 1,630African (Metro. areas) 1,366African (Reserves) 388

In 1980, 11 million Africans livedin the reserves which, in effect,constitute an administrative devicewhereby the poor are furthermarginaJised. However, in incometerms the reserves are not the lowest.It is the Africans living in thecommercial and white-ownedfarmlands who fare worsr. In 1980,20% of Mricans lived in the smallervillages of the platteland and earned amean annual income of R 670, whilein the reserves the mean was R 925.

The reserves, nevertheless, containthe greatest poverty for two reasons.First, the total area is small and thepopulation density is very high. Forinstance, the area of the Ciskeihomeland is 5,300 sq. km. whichmeans that it could support 47,700people living permanently on theland. In 1980 this land carried apopulation of 435,000, nine timesgreater than the land could carry.South African government policy aimsat increasing the numbers living inthese reserves. Between 1970 and1982 the population of Ciskeidoubled, partly natural increase,partly redrawing boundaries, partlyforced removal of Africans to the"homeland".

This population pressure isreflected in landholding statistics from

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one district in Ciskei where in onegeneration (1946-82) the average sizeofland-holding fell by 75% from 1.72ha to 0.43 ha. Landlessness increasedfrom 10% to 43% of all families.Throughout Ciskei as a whole,landlessness falls within the range of20-30%.

To all these indicators of povertymust be added the migrant laboursystem which draws off the ablebodied to the mines and often leavesbehind a labour shortage for theheavier work of cultivarion in thehomelands. In one survey of a districtin Kwazulu it was shown that of thoseat home between the ages of 20 and50,81% were women. The basic fact,however, is that the people do nothave the land on which to make aliving. The result is malnutrition on amassive scale.

Unpalatable and accusing statistics,however, need not be compiled. Since1968, kwashiorkor, the disease ofstarvation, has not been a notifiabledisease in Sou th Africa, though inthat year, 11 ,000 cases were reported.Nevertheless, a conservative estimatein 1975 was that between 15,000 and27,000 children under 5 died frommalnutrition. By the beginning of the1980s it was estimated that 136,000children under 15 were less than 65%of expected weight for age. When it istaken into account that more thanhalf of the Mrican children lived inthe reserves, it has to be concludedthat several hundred thousandchildren are at risk. Infant and childmortality rates reflect these findings.

It goes on: ruberculosis, dysentery,gastro-enteritis, illiteracy, foul water,all the familiar catalogue of poverty.Add to it all the calculated diminutionof human dignity which underlies allthis deprivation and we are meed with


a problem ofvast dimensions.Change in South Africa requires a

redistribution of land, massivespending on health and education, allof which while reducing inequalitywill cost the white population quite alot. Among this population there aremany who genuinely identifythemselves as African and who couldnot see themselves living elsewhere.For all the injustice, all the calculatedinjuries inf1icted, the region needs itswhite population for the skills andexpertise contained in it, so vital fordevelopment. The African leadershiprecognises this and proposes a multiracial South Africa wherein theinequality so prevalent today may beended and the races live in harmony.

There is change in South Mrica,small, perhaps, but growing. In theface of evidence such as that given inthis Second Carnegie Report onPoverty in South Africa even the mostultra-montaine Afrikaaner mustwonder how long more the situationcan continue as it is.

Tony Meade

Industry and EconomicDevelopment, The Challenge for theLatecomer,Eoin O'Malley, Gill and Macmillan,Dublin 1989, 306pp, £25.00,Hardback, ISBN 0 7171 1682 4.

The purpose of this book is toillustrate the problem ofindustrialisation for late developedcountries compared with the earlydeveloped countries. Ireland is usedas an example ofa latecomer.

The book is divided into tenchapters. The first chapter is anintroduction and the last a summaryand conclusions. Chapter 2 is the

Trocaire Development Review 1989

theoretical part of the book. Itoutlines different developmentstrategies available for developingcountries. I t is very critical of themarket-strategy Of, as it is called, theoutward-looking strategy. Barrierspreventing latecomers from enteringthe world market are also outlined.These barriers include shortage ofcapital, inadequate education andsome political and sociological hctors.One crucial factor is that manycountries have to import most of thecapital goods used in production. Inmany areas there are at the same timeeconomies of scale, which make itvery difficult for latecomers to getinto the market. Brand identificationand customer loyalties can also be aproblem for a developing country.

O'Malley concludes that theindustry of less developed countrieswill be concentrated in areas with lowentry barriers resulting in lowerincome.

It is argued that LDCs and NICscannot rely on export-orientedforeign investment because this willbe too small to make a major impacton their industrial development.Thisargument howeverJ is not convincing.Multinational companies willcontinue to diversify their investmentsand will invest where they can havethe biggest return. This does nothowever, necessarily mean, that therewill be great advantage for the localcountry. This is in fact what O'Malleydescribes in Chapter 8 for Singaporeand Hong Kong.

The problem is that foreigninvestment can create a highdependency and only a smallimprovement in the balance ofpayments. The reason for this is thatprofit will be repatriated. At the sarn~

time, it may only improve the

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employment a litde due to the capitalintensive nature of its production.The National Economic and SocialCouncil's latest report about theSingle Market (Table 4.3) shows ahigh productivity increase in Irelandsince 1979 yet a fall in the totalemployment (-6.4%) and in industry(-17.3%) in the period 1980-1986.

Chapters 3-7 describe the Irish caseboth historically as well as today. Theyare very well written chapters, givinga fine insight into the situation ofindigenous Irish industry and thereasons for this. They also show whyan outward-looking strategy can be aproblem.

This problem is also considered inChapter 8, which describes theexperience of other latecomers Japan, South Korea, Taiwan,Singapore and Hong Kong.

Japan is mentioned as an exampleof a country with a protective andselective strategy - "picking winners".South Korea and Taiwan are alsodescribed as countries with protectiveand selective interventionist strategies.All three countries had very highfinancial support from the US afterthe Second World War due toAmerican foreign policy - and thiscannot be expected for many otherdeveloping countries. For these threecountries O'Malley argues that theyhave overcome the problems oflatecomers without using an outwardlooking strategy.

The same is not the situation inSingapore and Hong Kong. Insteadtheir growth has been due to thehuge amount of foreign investment.They have not overcome theproblems of latecomers and will facevery big problems in the years tocome.

The book concludes that it is not

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advisable for LDCs to rely on aconventional market-based industrialisation strategy. I agree that anoutward-looking strategy based onmarket solutions is not effectivewithout active and selectiveintervention in the economy. Thelatter is necessary not only forindustrialisation but also to achievedistributional, allocative and macroeconomic stabilisation goals. However, I do not find the suggestions inthe rest of the book on how toovercome the problem for latecomerswholly convincing.

For example, it is argued that aprotectionist and selective strategyshould be implemented. A "niche"strategy with a significant stateinitiative is also suggested as a way tosolve the problem for the latecomers.There are many arguments for this,but two main problems arise: First,how to choose the industries? andsecondly, how to avoid inefficienciesdue to protection?

I would suggest that latecomersand LDCs should start to analysewhich are their strong and which aretheir weak positions. Danishindustrialisation and laterdevelopment can be seen in this light.The strong position now of Danishindustry has developed from previousareas of strength, i.e. processing offood, beverages and tobacco,shipbuilding, construction, manufacrure ofdrugs and medicines.

A strategy following the strongposition and with some diversification- to avoid dependence on oneproduct - will be a way of using acomparative advantage. Perhaps thiswill not in the beginning make acountry highly technologicallydeveloped, but it will give someopportunities. It is possible that the


industry in the early years will needsome protection, but in the long runthis is not a solution.

One problem of course, as arguedin the book, is that high incomes arisein the newer industries where highbarriers to entry exist. But it isdifficult to start with highlydeveloped technology particularly indeveloping countries with highunemployment and low educationalstandards. In addition there is the riskthat this strategy will not improveemployment or the balance ofpayments.

I can recommend the book as aconsistent analysis of theindustrialisation problem forlatecomers. It has a very goodtheoretical analysis and a fineempirical description of Ireland'sindigenous industry. The suggestionsdeserve further examination as a wayfor Ireland and other latecomers toovercome the barriers of entry.

Bent Greve

The Developing World - anIntroduction to Development Studiesthrough Selected Readings, AnnaFarmar with Mary McEvoy (eds),DESC Development EducationSupport Centre and DevelopmentStudies Centre, Kimmage Manor,Dublin, 1988,291 pp, £7.95, ISBN 095139230

The Development Education SupportCentre (DESC) was established in1986 by the Department of ForeignAffairs as part ofIreland's programmeof development co-operation. It ischarged with promoting awarenessand understanding among Irishpeople of development issues in Third

rr6caire Development Review 1989

World countries and Ireland's role ininternational development efforts.

The Developing World is the coretext for DESC's Open LearningCourse in Development Studies. It iscomplemented by a "Study Guide"prepared by DESC and seven halfhour radio programmes broadcast byRTE and available on cassette fromDESC.

The volume focuses on thecontinuing crisis of hunger, famineand debt, particularly in Mrica, andincludes discussions of the meaning ofdevelopment, theories of development and underdevelopment,concepts of poverty, the subordination of women, the idea of "theThird World" and the shiftingpatterns of international trade andworld market production.

The 22 readings are divided into 3sections: "Thinking AboutDevelopment"; "Food) Famine andPopulation"; and "The ChangingWorld Economy". Each sectionbegins with an Introduction by theeditors, and the entire volume isprefaced by an Introduction from Fr.Richard Quinn, Director of theDevelopment Studies Centre inKimmage Manor where the twoeditors were involved in preparingand teaching courses on development.

The volume includes a number ofclassic pieces such as Michael Lipton's"Why Poor People Stay Poor" firstpublished in 1977 and extracts fromAmartya Sen's Poverty and Famines:An Essay on Entitlement andDeprivation published in 1981. Thereare 4 readings on women anddevelopment; 2 on the role ofmultinationals in developmentincluding the only Irish authoredpiece by Eoin 0'Malley on "TheProblem of Late Industrialisation and

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the Experience of the Republic ofIreland", and two pieces on the DebtCrisis.

The topics covered in the core textare selected and the text does notclaim to be comprehensive. The radioprogrammes cover more or less thesame topics but there is no attempt tolink the book and the programmesdirectly. This is unfortunate. Theresources would form a morecoherent whole if the programmeshad been used to assist students moredirectly by exploring alternativeexplanations or interpretations tothose contained in the readings, or toelucidate key concepts and apply themin real world situations.

The Study Guide accompanyingthe book makes clear that "the coursecontent is of third level standard anddemands for maximum benefit awillingness on the part of students todo some background workthemselves, to be prepared to look upreference books and to devote someconcentrated time to study eachweek". It suggests three ways ofpursuing the study course, i.e. as anindividual, by forming a self-helpstudy group or by joining a tutorgroup where such has been.established by the local AdultEducation Organiser. To date anumber of such groups have beenestablished. The course has beenoffered in a small number of third

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level institutes and is underconsideration by others. The core texthas been incorporated into readinglists in a number of instances.

For the individual student or studygroup without the benefit ofinstitutional support, completing thecourse of readings would require avery high level of motivation. It is notdesigned for the adult with a generalinterest in development. It wouldform a useful preparation for themature student thinking of embarkingon a third level development studiescourse, or as a substitute for suchcourses for those living far from thecentres where they are offered. It istailored to the needs of this smallaudience rather than to those of thegeneralist who wants to learn moreabout the Third World. The radioprogrammes on their own, on theother hand would be accessible to awider audience.

The Study Guide is still in a pilotphase. The feed-back from individualsand study groups following the coursewill be the acid test of how well thecourse is meeting their needs.

Details of where courses areunderway or in prospect are availablefrom DESC, St. Patrick's College,Drumcondra, Dublin 9. Tel: (01)371525/371597.

Mary Sutton


Documents

Book Reviews - Trócaire · Book Reviews The Other Path: Hernando de Solo, New York, Harper and Row, 1989, Hardback, ISBN 0 06 016020 9, pp. 271, $22.95 TWO VIEWS I. This book has