Progress, Poverty, and Inter-Regional Disequilibrium

Progress, Poverty, and Inter-Regional DisequilibriumAuthor(s): V. C. FowkeSource: The Canadian Journal of Economics and Political Science / Revue canadienned'Economique et de Science politique, Vol. 17, No. 4 (Nov., 1951), pp. 501-514Published by: Wiley on behalf of Canadian Economics AssociationStable URL: http://www.jstor.org/stable/137905 .

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PROGRESS, POVERTY, AND INTER-REGIONAL DISEQUILIBRIUM *

V. C. FOWKE University of Saskatchewan

THE PHRASE "Progress and Poverty" in this title is borrowed from Henry George, but in this paper it is applied to a geographic paradox much broader than the one the famous single-taxer had in mind. For Henry George the principles implicit in the expression were universal; but the paradox of the inevitable survival of poverty in spite of economic progress existed within the limits of each nation or even of its smallest community. Progress and poverty as Henry George saw them were ubiquitous and inseparable companions. The progress and poverty referred to in the present paper are, it is true, inseparable companions in history; but the contrast is not between classes within one country or region, but, more generally, between different countries, between different regions of the world.

As for the disequilibrium mentioned in this title, it is broader than that about which so much has been written recently and which is sometimes referred to as "the Dollar Problem." The condition referred to here is not merely a condition of the present day; it is very old. It embraces the dollar problem and many others. It is not exclusively economic but has implications of equal importance for political and social life. It is the disequilibrium which arises from the persistent disparity in rates of technological progress between different areas or regions of the world.

In contrast to the disequilibrium represented by the dollar problem, where the nations chiefly concerned face each other across the Atlantic, the most striking technological inequalities in the world are those between the North Atlantic economy as a unit and other regions. Few things are more prominent in today's discussions of world affairs than the shocking contrast between the material circumstances of the peoples of the Western world and those of the peoples in the economically backward or undeveloped countries; and, while a few of the backward countries are in the North Atlantic area, Central America, and the West Indies, the great centres of under-development and economic retardation are in the Middle and the Far East, particularly the latter.

The inequality in material conditions and in technological advancement between the different areas of the world has been brought into sharp focus within the past two years by the publication of various specific proposals designed to make at least a beginning in modifying the inequalitv. In his inaugural address in 1949 President Truman proposed a programme of technical assistance to backward countries. This was immediately dubbed the Point Four Programme because of its location in the President's address.

*This paper was presented at the annual meeting of the Canadian Political Science Association in Montreal, June, 7, 1951.

501

Vol. XVII, no. 4, Nov., 1951



502 The Canadian Journal of Economics an-d Political Science

In January, 1950, the first steps were taken in Ceylon to formulate another plan which was made public in London in October and is ordinarily known as the Colombo Plan.' In March, 1950, President Truman appointed Mr. Gordon Gray as his Special Assistant for foreign economic policy, to advise concerning "the broad lines of policy which must be laid before the public and the Congress . . . to reinforce [American] economic strength and that of the other free nations."2 The Gray Report was made public in November last, carrying a score of specific policy recommendations of which a number related to the economic development of backward countries.

Neither the Point Four Programme nor the Gray Report, of course, has a particular sum of dollars attached, and the extent of their implementation will depend largely on the generosity of Congress. Congressional treatment of Point Four has not, it must be admitted, indicated tremendous enthusiasm. The Colombo Plan is more specific. It contemplates the expenditure in the Commonwealth countries of South-East Asia of some $5.2 billion over a six-year period from July, 1951, to June, 1957, practically all on projects which can properly be described as providing basic economic development.3 Of this sum, however, it is proposed that something over one-half is to be provided by the countries in which the developmental expeniditures are to be made.4

It is not intended here to outline these plans in detail, but rather to raise for discussion some aspects of the common claim that they constitute an entirely new approach to world economic realities. President Truman described Point Four as a "bold new programme for making the benefits of

'At a meeting of Commonwealth foreign ministers in Colombo, Ceylon, in January, 1950, the "Spender Resolution," introduced by Mr. P. C. Spender, Australian Minister of External Affairs, recommended a project of economic co-ordination for assistance to the countries of South-East Asia and proposed the establishment of a Commonwealth Consultative Committee to formulate a specific plan. The Consultative Committee met first in Sydney, Australia, in May, and again in London in September. At the latter meeting the six-year plan was embodied in the report made public under the title, The Colombo Plan for Co-operative Economic Development in South and South-East Asia, Cmd. 8080 (London, 1950).

2Cf. Report to the President on Foreign Economic Policies (Washington, Nov. 10, 1950), iii; hereafter referred to as the Gray Report.

3The proposed distribution of the total expenditure is as follows: Transportation and communications 34% Agricultural and river development 32% Health, housing, and education 18% Industry and mining (excluding coal) 10% Fuel and power projects 6%

Total 100% 4The proposed national allocation of funds is as follows:

? million India 1,379 Pakistan 280 Ceylon 102 Malay and Borneo 107

Total 1,868 Of this sum it is proposed that ?785,000,000 should be raised internally, ?246,000,000 would derive from sterling balances, and the remainder would require external financing.



Progress, Poverty, and Inter-Regional Disequilibrium 503

our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas." The introductory paragraphs of the Colombo Plan speak of the "new approach" to the problems of poverty in South-East Asia. Newspaper accounts are even less guarded. Local Canadian papers have described Point Four as "a global effort to help underdeveloped countries work out their economic, industrial and social salvation." After the publication of the Gray Report last November, the London Observer said, in an editorial headed, "New Deal for Free World," "It is hardly possible to exaggerate the importance of this Report. It represents a landmark in twentieth-century history. . . . It deserves to be set beside the Declaration of Independence and the Monroe Doctrine as one of those fundamental political statements by which America has consciously given shape to the history of the world for the century in which they were proclaimed."5

It cannot be entirely unnatural to react to claims of this sort with some degree of scepticism. There must surely be some way of evaluating present conditions and present proposals without recourse to such verbal extrava- gance. If present conditions are entirely new, what were the old? Once we raise this question we are into history whether we are historians or not; and for persons whose primary interest is in economic and social history the temptation to look for historical parallels and contrasts is irresistible. Just how new is this new approach to the paradox of progress and poverty? The Western planners say in effect that this is a new era in economic and political relations between the have and the have-not countries. The Com- munists, on the other hand, are saying that it is just the old imperialism thinly disguised. It should be possible to consider present-day affairs without following either of the party lines, and to examine critically the proposals put forward without being accused of subversion.

II

Before attempting to assess the degree of novelty in current proposals for attacking regional poverty we may look briefly at the circumstance which has prompted them. There is no suggestion in current discussions that regional disparities in technology are a new phenomenon. Long-standing disparities have been tremendously widened by developments which have taken place over recent generations, but that is the most we can say. One of the most fundamental features of modem history, and one which has received quite inadequate treatment from our historians, is the persistent and shifting inequality in regional skills applicable to the mastery of geographic environment. Further study of this phenomenon might well provide a key to the better understanding of the disequilibria in historical processes which have expressed themselves in mass migration, invasion, and the conquest and subjection of backward peoples.

The point need not be laboured. In the history of the modem world it is a familiar fact that the technical development of the western European area is far in advance of that of any other regions of the world. Among the

5The Observer (London), Nov. 19, 1950, 4.



504 The Canadian Journal of Economics and Political Science

significant factors which gave Western countries world leadership were improvements, first in the technology of navigation, such as cartography, improved ship design, and the application of the compass and the sextant; and, second, in the technology of business organization, advances such as double-entry bookkeeping, the bill of exchange, and deposit banking. One of the most important advances was the development of the chartered company and eventually the joint-stock type of organization for the financing and control of venture capital.

It is important for the present analysis to note that the newer skills in navigation and in business enterprise were essentially the skills whereby, to their own advantage, the Western powers were able to manipulate the backward peoples of the world. Beginning in the sixteenth century the chartered company was the chief instrument of economic contact betweeln the western European nations and the underdeveloped countries in other areas. Here in the context of modern times we can see the establishment and evolution of metropolitan powers, and the development of contacts between these powers and their economic and political hinterlands. The chief metropolitan powers were England and Holland, and the chartered company served for the exploitation of such economically underdeveloped areas as Russia, the Levant, West Africa, the West Indies, North America, and the Far East.

It is not too much to say that the disequilibrium associated with inequalities in the state of the arts from region to region has, since the time of the dis- coveries, provided the chief dynamic and driving force in the Western wav of life. Economically underdeveloped areas made possible the exchange of manufactured goods for raw materials, foodstuffs, slaves, and objects of conspicuous consumption. These areas, and the business of trading with them, provided an unlimited frontier of investment opportunities for all the factors of production which were comparatively abundant in the metropolitan areas and comparatively scarce in the underdeveloped regions. This meant, in effect, that new opportunities were offered for the profitable employment of capital, skilled labour, and entrepreneurship. Indirectly, and among the metropolitan powers as a whole, the marginal productivities of these factors could thus be raised or at least maintained.

There were also important social and political features in the contacts of the modern metropolitan powers with the underdeveloped areas and with each other. The extension of advanced technologies to backward areas produced effects in those areas which at their best were revolutionary and at their worst completely destructive. This was of little concern to the business men or the public of the metropolitan powers. As for the political side of the matter, its chief element was the rivalry and conflict among the metropolitan powers for the control and exploitation of backward peoples.

All the important economic and political features of disequilibrium attributable to differences in rates of economic development in different regions were brought into sharp focus in the half-century before 1914. During this period the relationships between the metropolitan powers and the hinterland or undeveloped areas of the world came to be characterized by the name "imperialism," and the essential feature throughout was the



Pr-ogress, Poverty, and Inter-Regional Disequilibrium 505

intelnse rivalry among the metropolitan countries for conquest and control. Spain and Holland, among the old metropolitan powers, were not prominent in the new imperialism; Britain, France, and Portugal were. Other European countries such as Germany, Belgium, and Italy successfully established themselves as metropolitan powers for the first time. Two metropolitan areas, one very old and one very new, expanded throughout great continental land masses. Russia, the old, expanded eastward; the United States, the new, occupied as much as possible of North America and expanded beyond the continental limits by the annexation of Hawaii and the absorption of some remnants of the Spanish empire in the Philippines.

The old elements of the metropolitan area-hinterland relationship were all clearly present in the new imperialism. There was the investment of labour, capital, and entrepreneurship, the spread of new techniques to the outlying areas, and the revolutionary impact of these techniques upon the backward peoples. The accompanying friction between the metropolitan powers was present in aggravated form, leading eventually to the First World War. One student of this period, Jeudwine, speaks of the "reckless gamble for African and Asian soil in which the western Powers of Europe have indulged since about 1884 . . . [and in which] Britain obtained about four million square miles of land."6 Hobson points out that the underdeveloped regions into which the metropolitan powers expanded their conquests after 1870 were all tropical or near-tropical areas where white men could not live and breed and where self-government was not even con- templated.7

III

Since the height of the nineteenth-century wave of imperialism we have witnessed two wars, both of world-wide magnitude. There have been great shifts in the relative strength of the various metropolitan powers. It may be sheer coincidence, but the two powers that in the nineteenth century had tremendous contiguous land masses in which to expand are the ones that survive today as great metropolitan powers. These are, of course, Russia and the United States. Germany, France, and even Britain, have all declined, relatively speaking, to the status of second-rate powers.

Regardless of these changes, however, in the middle of the twentieth century the outstanding economic fact in the international scene is still the vast disparity in the level of the economic arts and in the standard of living of the different countries and areas of the world. There are still metropolitan powers, advanced materially, powerful economically, politically, and mili- tarily, wealthy in the aggregate and per capita. There are, on the other hand, backward countries carrying on their economic pursuits by means of primitive methods and skills, devoting a high proportion of their efforts to agriculture and food production,8 and relying heavily on animate rather than

6J. W. Jeudwine, Studies in Empire and Trade (London, 1923), 50. -J. A. Hobson, Imperialism: A Study (rev. ed., London, 1905), 21. 8In most of the countries of Asia and the Far East agriculture provides from 50 to 75

per cent or more of the national income and employs from 60 to 75 per cent of the gainfully employed population. Cf. Economic Survey of Asia and the Far East 1949, issued by United Nations, Department of Economic Affairs (Lake Suiccess, N.Y., 1950), 300.




inanimate sources of power. They are weak and disorganized economically and politically; their military potential is regarded as low; and they are lacking both in aggregate and per capita wealth. Ihese regional disparities contribute to fundamental disequilibrium today as always. This is clearly shown by the constant thrusting of two factors into the range of public consciousness. The first of these factors is the relationship of the metropolitan powers to the backward areas, and the second is the relationship of the leading powers to each other.

With such fundamental similarities between the inter-regional scene of today and that of the past, the question arises: to what extent may we expect that the actions of the metropolitan powers will substantiate their sweeping proclamations of a new era of collaboration and mutual benefit in their dealings with the peoples of the geographic hinterland? The imperialism of fifty years ago is, after all, not very distant in historical time; and many will say that spots cannot be so quickly changed. President Truman voiced the new doctrine of the Western powers when he said regarding Point Four: "The old imperialism-exploitation for foreign profits-has no place in our plans." That statement, however, was for public consumption-it was meant to be read by the American taxpayer and to be translated into scores of languages and dialects throughout the world. We must go rather deeper than that to test for genuine conversion.

While it is too soon to assess fully the extent to which a genuine change of heart has occurred, one or two points may tentatively be made. The most striking evidence arises from the drastic change in the formal expressions of the political purposes of the western metropolitan powers in relation to many of the economically backward countries. We have already referred to Hobson who said at the turn of the century that European economic and political expansion after 1870 did not even contemplate the extension of self-government. "Of thirty-nine separate areas annexed by Great Britain since 1870 as colonies or protectorates," he said, "not a single one was granted responsible government and only a single one (the Transvaal) was accorded representative government."9 The remainiing thirty-eight were held as crown colonies.

The political climate has changed very considerably since that time. It is true that self-government is still lacking in great parts of the areas in Africa of which Hobson spoke. The proposals for economic development which the Western powers have put before the world within the past two or three years are more particularly concerned with areas in South and South- East Asia where imperial relationships are of much longer standing. In these areas, political associations between the metropolitan countries and their respective colonial territories have been altered in a most pronounced fashion within the past five years. No previous period in history has witnessed a revolution, whether peaceful or otherwise, in political dependency to equal that which has occurred within the past few years in South and South-East Asia.

Political independence has been extended to the Philippines by the 9Hobson, Imperiali*n, 21.




United States, and by Britain to the Indian sub-continent, to Ceylon, and to Burma. Indoinesia eventually secured independence from the Netherlands. Certain modifications are being made in Indo-China and Malaya. More than one-quarter of the world's population lives in the areas that have received great extensions of self-government since the war. The counterpart of the new independence is nationalism, and the recognition of this force will be of increasing importance in interpreting not only the political but also the economic relationships between the eastem areas and the metropolitan powers of the North Atlantic.

IV

The proposals considered in this paper envisage economic assistance and economic development. There may be some merit in an examination of the underlying motives of these proposals, in so far as they can be determined at this early date, to learn how far and in what ways the economic interests of the metropolitan powers in the backward areas today differ from those of the imperialistic powers of fifty years ago. It can be accepted without question that in the period of open and unashamed imperialism of the nineteenth century the search for private profit was the basic economic purpose which impelled the Western powers to an interest in the underdeveloped countries.'0 Certain small groups with little influence urged that efforts be made to improve the lot of the natives, but improvement was a marginal interest which was not allowed to interfere seriously with the profits to be derived from inter-regional trade and commerce.

To determine the important motives for the developmental plans of today, however, is a difficult matter. There are many declarations of motives; but they are for publication, and they vary with the prospective audience and with the purposes of the speaker. Motives, being intangible, cannot be measured; hence there can be no attempt to list them in order of importance with any degree of accuracy. We can, however, state the general purposes of the current interest in backward areas as far as these purposes are publicly known.

The first motive to be recognized is the genuine desire of Western peoples to improve the lot of their much less fortunate fellow men. There is a goodly streak of generosity in the average person, and citizens of the more advanced countries are sincerely distressed by widely publicized descriptions of the deplorable conditions in which the peoples of the underdeveloped countries exist. The adage, that one-half of the world does not know how the other half lives, has been strictly true in the past, and remains so to a great extent today; but a great deal of new information conceming living conditions in other areas has recently been forthcoming. Colin Clark observed a decade

l0Hobson said, "Imperialism implies the use of the machinery of government by private interests, mainly capitalists, to secure for themselves economic gains outside 'the country." Ibid., 83. Jeudwine said, ". . . the word [empire] suggests that the stronger race, being firmly persuaded of its moral superiority, when it comes into conflict with and absorbs a politically weaker people, will, so far as may be humanly possible, shape their social and political institutions in accordance with its own interests." Studies in Empire ,nd Trade, xxix.




ago that the world as a whole was a "wretchedly poor place," but the contrasts which he recorded within the general picture of wretchedness had a very considerable measure of shock value for the Western mind. He pictured four-fifths of the world's population with a standard of living supported by less than $10 (U.S. 1925-34) per week per breadwinner. In 1947 the Statistical Office of the United Nations estimated the average annual income at $1,400 per head in the United States while, at the same time, the average income for over half the world's population was less than $100 per year.

While we are on the question of generosity we must keep in mind the fact that current proposals do not call for an unlimited sharing of the good things of life. The proposals carry no implication of international communism in wealth or the world's goods. The suggestions are to make advances, some as grants and some as loans, to help the backward peoples to help themselves. The sums presumably involved are colossal in the aggregate but they are spread over several countries and over several years. Uncle Sam is, of course, the ultimate Santa Claus; we would not venture to accuse him of stinginess in this, or, indeed, in any other present-day situation. But notice his comments. In introducing the Point Four proposals President Truman said: "The natural resources which we can afford to use for the assistance of other people are limited. But our imponderable resources in technical knowledge are constantly growing and are inexhaustible. . . . I believe that we should make available to peace-loving peoples the benefits of our store of technical knowledge in order to help them to realize the aspirations for a better life. And, in co-operation with other nations, we should foster capital investment in areas needing development."

Surelv it is not unfair to describe that as a reasonably cautious statement. Of course, Point Four is essentially a technical-assistance programme and is not intended to provide an under-writing of foreign investment; but it is clear from this and other statements on the matter that, while we mav be committing ourselves to the issue of a blank cheque on our brains, we are by no means doing the same with our bank accounts. It may well be that the average citizen feels that there are much worse uses for our scientists and technicians than putting them to work in the backward countries of the world.

A second important element in the matter of motivation is the strong initiative that comes currently from the underdeveloped countries themselves. None of the proposals for economic improvement in these countries assumes that the full burden will be borne by outside funds or energies. Although there are wide differences of opinion on a proper sharing of the burden, foreign investment is uniformly regarded as only part of the requirements. The Colombo Plan emphasizes local initiative, which is evident in South- East Asia. "During the past five years," it states, "independent governments have come into being [in this area], supported by democratic institutions and imbued with enthusiasm for the welfare of their countries." Practically all the countries in Asia and the Far East have newly established planning agencies, which have prepared plans for local development covering from two to fifteen years, though most cover a five-year interval." The self-help

"United Nations, Economic Survey of Asia andl the Far East 1949, 382.




plans put forward by the Far Eastem governments in the pride of their new national existence, even though not yet fully seasoned and matured, are well designed to appeal to Western people by their confident expression of self- reliance.

The appeal to generosity and the challenge of self-reliance are, however, by no means the only forces responsible for the widespread current interest in the development of backward countries. It would be quite useless to attempt the substantial measures of foreign assistance envisaged in these proposals without a convincing argument or two for the hard-headed businessman, the self-made realist, who is not in the habit of expecting nothing for something. "Mere interest in human welfare," says one writer, "would have been power- less to produce remedial action on a major scale unless reinforced by some more compelling drive. This was provided, initially, by the growing realization in the developed countries that their national interests, viewed broadly, coincided with the desire of their poorer neighbours for economic advancement."'2

There are two basic reasons for the presumption that the national interests of the developed countries, the Westem metropolitan powers, coincide with the economic aspirations of the retarded areas. These reasons, in turn, constitute two additional motives for the advanced countries to aid in the economic development of backward countries. One of these motives is political, the belief that economic development may serve as an adequate counter-attraction to the powerful lure of communism;'3 the other is economic, the belief in the need for investment opportunities to assist in preventing both cyclical depression and secular stagnation.

There need be no criticism of Western plans simply on the score that they are designed to serve the purposes of the West as well as of the backward countries. The communists interpret the situation as a proof that we still harbour imperialistic designs on hinterland countries. We in turn interpret communistic activities as essentially imperialistic. Allegations do not, of course, prove the existence of imperialistic designs; and, as far as formal political relationships are concerned, we have already indicated the extent to which Western contacts with underdeveloped areas differ today from those of half a century ago. Particularly in our dealings with the Far Eastern countries, we must either be possessed of bona fide virtue or we must make a virtue of necessity; for the oriental nationalism of today will no longer tolerate external exploitation.

12p. T. Ellsworth, The International Ecornomy (New York, 1950), 792. '13President Truman described Point Four as "a world-wide effort for the achievement

of peace, plenty and freedom." Referring to economic development the Colombo Plan says: "It is of the greatest importance that the countries of South and South-East Asia should succeed in this undertaking. The political stability of the area, and indeed of the world, depends upon it, and nothing could do more to strengthen the cause of freedom." The Observer (London), featured Nora Beloff's comments from Washington on the publication of the Gray Report. She said, "American policy makers are hoping to induce Congress to accept a programme big enough to obtain an immediate psycho- logical impact, notably in the Middle East and Asia, as well as to secure long-term benefits. They hope that such a programme would provide an instrument through which they could wrest the championship of reform and social progress from Russia." Barbara Ward writes at considerable length in her Policy for the West about developmental plans as a means toward the "containment of Communism."




Briefly, our political hope is that the backward peoples of the world xvill be grateful to us and will like us a good deal better for our assistance; we hope, indeed, that they will like us well enough to adopt our version of the free enterprise system of economic organization, or, at the very least, that they will like us well enough not to adopt communism. It is much too sooni to judge the prospects of these hopes. The outcome can by no means be taken for granted. American experience with China is a part of the picture, and provides little encouragement. That episode may, of course, be put out of mind as an example of "too little and too late"; it is more apt to stimulate than to retard American generosity elsewhere. But the question remains. What will happen if Western plans for economic development in backward countries do not, as they mature, coincide with domestic aims in these countries, whose local nationalism has recently acquired such tremendous vigour? Nehru stated the issue quite bluntly at the Lucknow Conference last October and summed up his views with an illustration. "When Indonesia was struggling for its freedom it was a monstrous thing to us that any country should support Imperialism there. We just could not understand it, Com- munism or no Communism. Fortunately in the end the right counsel prevailed; Indonesian nationalism was supported and it won. No argument in any country of Asia is going to have weight, if it goes coutnter to the national spirit of that country-Communism or no Communism. "14

That statement summarizes the political reality without equivocation. The argument in the Western world is that economic assistance is to be extended without strings on political life; that it constitutes no threat to the freedom of the recipient countries. We must accept the fact that freedom is meaningless unless it is freedom to adopt communism or free enterprise or any other type of economic and political organization at will. Peoples in the underdeveloped countries who now are riding the crest of the wave of nationalistic fervour are not likely to tolerate the puppet governments of any of the metropolitan powers, whether of the right or of the left.

The final motive behind the current interest in the economic development of retarded areas may be called the full employment motive.1" The most pointed statement of the belief that these are related matters is found in the report on full employment measures prepared by a group of experts for the United Nations.'6 "We are of the view," they said, "that the problem of full employment cannot be solved except in the context of an expanding world economy of which the economic development of underdeveloped countries would form the most important single element."

There are two aspects of the full employment argument in present conditions. Investment opportunities in underdeveloped countries may be regarded either as a preventive of the business cycle or, more fundamentally,

41nternational Journal, VI, no. 1, Winter, 1950-1, 11. 15The goal of full employment was specifically recognized in the Articles of Agreement

of the International Monetary Fund, in the Havana Charter of tlhe International Trade Organization, and in the Charter of the United Nations, Article 55.

l6National and International Measures for Full Employment, Report by a group of experts appointed by the Secretary-General, United Nations, Department of Economic Affairs (Lake Success, N.Y., 1949), 12.



Progress, Poverty, and Inter-Regional Disequilibriunm 511

as an offset to a persistent tendency for savings to outrun investment in mature economies. Proposals for economic assistance may be regarded as worthy of support, therefore, because of either their counter-cyclical, or their counter-stagnation, possibilities. Undoubtedly there are those who consider such proposals a much too cumbersome instrument to remedy the business cycle but who, nevertheless, support them in order to increase the long-run employment of redundant capital resources.

The long-run aspect of investment opportunities is familiar to the historian, for it has provided the basic element in the rationale of imperialism for many generations. Hobson, at the turn of the century, related imperialism to the search for investment outlets for the savings of the rich, necessary because income distribution was so unequal and investment fields were so restricted by trusts and monopoly controls. He quoted Ricardo who wrote to Malthus, "If with every accumulation of capital we could take a piece of fresh fertile land to our island, profits would never fail."'17 John Stuart Mill, speaking negatively, said, "The expansion of capital would soon reach its ultimate boundary if the boundary did not continually open and leave more space."18 These opinions deal with profits as an end in themselves while in current analysis the prospects for profits arising out of foreign investments are considered as a means toward full employment.

Foreign investment contributes to employment in the investing country in the production of export goods; but it contributes more directly to the solution of unemployment in that narrow but very influential stratum of the total population comprising the citizens who possess any of the many types of technical training required to implement foreign investment. The term "capital" may be an abstraction, but capital is not. Nor can capital exports be exclusively embodied in machines or printed formulae. Skilled personnel from the lending countries have normally accompanied capital abroad; and that movement is, if anything, to be intensified by present-day plans for foreign economic assistance. Point Four, indeed, is essentially a scheme for the exportation of trained personnel to backward areas. Page after page in the Colombo Plan enumerates the types and numbers of trained people required under the plan. As you may imagine, engineers are the chosen people, but small numbers of each of many other types of trained persons are also regarded as essential.

This thought leads us to doubt whether we should expect impartial criticism of the international uplift schemes of today from groups with any type of technical training whatsoever. And this, of course, because none of them can be regarded as disinterested or impartial. University professors, as such, will find no great demand for their services in these new international ventures unless they can also qualify as some type of expert, as repositories of some small portion of the economically potent erudition of the advanced countries. It would, of course, be beneath the dignity of a university professor to sponsor any scheme which might raise his salary, but there would be nothing demeaning in his support of great international enterprises which might enhance his marginal vendibility. University professors, accordingly,

7'Quoted in Hobson, Imperialism, 79 n. l8Ibid.




should be classed with engineers, biochemists, pathologists, veterinary sur- geons, civil servants, and newspapermen as persons rendered incompetent by professional bias to pass impartially upon the merits of the economic development schemes of today. James Mill described the British colonies as a "vast system of outdoor relief for the upper classes."'19 Would it be grossly unfair to suggest that current plans for international development provide, among other things, a vast system of outdoor relief for our technical personnel?

v

This analysis cannot end without a brief reference to some of the special problems confronting plans for the economic development of retarded areas. In so far as our interest in these areas is prompted by the need for investment opportunities to offset savings, we need not concern ourselves with the results of our assistance in the advancement of the recipient countries; as an American professor said in the nineteen-thirties, the construction of post offices or of pyramids is equally effective in providing employment. But the avowed purpose of the various projects now afoot is to raise the standard of living of the people in the backward areas. That can be effected only by a vast increase in aggregate productivity in these areas in order that per capita income may be raised.

Considerable time could be spent in surmise as to the possibilities of achieving this increase in the standard of living, but only a very few points can be brought forward here. The desperate shortage of capital in the backward areas is so commonly emphasized that it need only be mentioned. Available evidence suggests, in fact, that sufficient capital can be assembled locally in combination with the developmental projects of the Western powers to make at least some impact on the worst of the existing inadequacies.

Other points, which ordinarily receive too little attention, must be mentioned even if space is lacking to deal with them adequately. The first of these is emphasized by the research officers of the International Bank: capital development is a process that cannot be unduly hastened. These officials say, in effect, that the immediate barrier to development in backward countries is not so much the lack of capital resources but rather of soundly conceived and thoroughly matured plans for integrated development. One statement of this point follows:

. . economic development is necessarily a long, hard process measured in decades, not years. There are many limiting factors, of which the inadequate availability of

191bid., 46. Hobson's further comments on colonial expansion. might be paraphrased with reference to current plans for economic development in underdeveloped areas. He said in part: "In all the professions, military and civil, the army, diplomacy, the church, the bar, teaching and engineering, Greater Britain serves for an overflow, relieving the congestion of the home market and offering chances to more reckless or adventurous members, while it furnishes a convenient limbo for damaged characters and careers. The actual amount of profitable employment thus furnished by our recent acquisitions is in- considerable, but it arouses that disproportionate interest which always attaches to the margin of employment. To extend this margin is a powerful motive in Imperialism. These influences, primarily economic, though not unmixed with other sentimental motives, are particularly operative in military, clerical, academic, and Civil Service circles, and furnish an interesting bias towards Imperialism throughout educated classes." Ibid.




finance is only one and generally not the major one. External financing is useful for development only when it is productively employed. . . . The most striking lesson of the Bank's experience to date is the dearth of soundly conceived development projects ready for financing... The very fact of under-development connotes an insufficiency of the talents necessary to translate development concepts into practical propositions ready for execution. . . ,20

A second point, and one which merits more attention than can be given to it here, relates to the proportioning of the factors of production. It is an economic truism that relatively scarce factors of production are valuable while abundance and cheapness go hand in hand. These principles are of vital importance to the problem of raising the standard of living of peoples in backward areas and they indicate a sharp contrast between the problem today and in former generations and centuries. The backward areas of past centuries were the empty spaces of North America, Australia, New Zealand, and Eurasia. They were empty, that is, of skilled and unskilled labour, entrepreneurship, and capital; the one abundant factor of production was land or natural resources. Under such circumstances land resources were cheap and their ownership, as such, yielded little wealth. But persons able to offer the services of labour, entrepreneurship, or capital were well rewarded, and a high aggregate productivity resulted in a high and widely diffused average productivity and a high standard of living.

In sharp contrast, the backward areas of the world today are "full" rather than empty spaces. The one super-abundant and consequently pitifully cheap factor of production is unskilled human labour. Natural resources, capital, entrepreneurship, and skilled labour are scarce. Despite low aggregate productivity and endemic poverty, therefore, landlords, money-lenders, and entrepreneurs are able to dispose of their services at exorbitant prices and to maintain standards of living grotesquely disproportionate to the misery of the masses. The problem of raising the general standard of living under such circumstances is one of appalling difficulty because it involves, essentially, the multiplication of capital and natural resources to the point where labour, now redundant, comes to be the relatively scarce factor of production. That would be an immense task even if population did not increase. In fact, however, population is increasing rapidly in many of the backward areas.

It would appear, indeed, that population increase is the most serious of the handicaps in raising the standard of living in backward countries. The lack of vital statistics for these countries makes it difficult to measure existing trends. Crude birth rates in Asia and the Far East range from thirty-five to forty-five while in the Middle East they run commonly above fifty. Death rates are high and variable, but generally speaking there has been a high rate of natural increase in underdeveloped countries during recent decades. It has been estimated that the population of India increased by fifty million people in the decade 1931 to 1940. Existing rates of increase, if maintained, would double the populations of Ceylon and Puerto Rico in twenty-five years, those of Japan and the Philippines in approximately thirty-five years, and those of Egypt and Latin America in forty years. The Colombo Plan states

20United Nations, Department of Economic Affairs, Methods of Financing Economic Development in Under-Developed Countries (Lake Success, N.Y., 1949), 91.




that if existing rates in South-East Asia were maintained, the present population of 570 millions in the Commonwealth countries of that area would increase by 150 millions in twenty years, an increase equal to the total population of the United States.

To cite current rates of increase is not to argue, of course, that these rates must continue. The rates do, however, point up some of the most serious of the questions facing present designs for economic inmprovement. if current rates of population growth were maintained it would take a tremendous increase in aggregate productivity in the backward areas simply to maintain the standard of living. The per capita productivity in Asia is, in fact, lower today than it was before the war. Despite a great deal of current publicity concerning our millennial technology there are very few careful thinkers who would consider it possible for productivity in backward countries to move ahead of, or even to keep abreast of, populations which increased for any considerable length of time at the rates prevalent in backward countries today.

What, then, are the possibilities that these rates may decline? In answer to this question there can be little but surmise. We have a considerable collection of historical and analytical information on population, but we are very far from understanding the laws of population growth. We have for reference the experience in the Atlantic region where industrialization was followed by a marked reduction in the rate of population increase. But does this indicate a law of population growth? Did the reduction in the Atlantic rates of increase spring from industrialization, or was it more closely associated with the discovery of processes for the vulcanization of rubber and with the spread of literacy? The tacit assumption too often is that industrialization will solve the population dilemma along with most of the other dilemmas of poverty. After all, has it not done all this in the Western world? But to argue that industrialization will contribute all these things to backward countries is to argue, as one writer puts it, that "since most wealthy men smoke cigars one has only to smoke cigars to become wealthy. "21

The advocates of economic aid to development in the world's hinterlands do not overlook the population problem; but they do not deal adequately with it. The Colombo Plan, for example, holds forth the following tentative prospect. "In the longer run," it states,22 "experience suggests that a general improvement in standards of living eventually exercises a steadying influence on the growth of population. In some countries in the area this influence is already apparent from the declining rate of the middle classes. In East Bengal, for instance, it has been found that the average size of families tends to be smaller on holdings of ten acres than on those of five." If this were expressed with more vigour it might pass as a statement of faith; as it stands it appears, rather, to be a mild expression of wishful thinking.

21Frederic Benham, "Full Employment and International Trade," Econoinica, New Series, XIII, Aug., 1946, 167.

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Progress, Poverty, and Inter-Regional Disequilibrium