"

THE STATE OF ECONOMIC DEVELOPMENT THEORY

IN THE SOUTH PACIFIC

H.M. Gunasekera and Ganeshwar Chand

This paper is an attempt to review the literature on economic devel­opment in the South Pacific written during the past decade and a half. The paper is based on an examination of over one hundred and fifty pieces which include theses, books, chapters in books, articles, development plans and reports. The list perused is by no means exhaustive, the authors I input in this regard being constrained by their imperfect knowledge of and accessibility to existing works and by the limited time available. Naturally, we have not been able to make individual mention of all the works examined. In this task we have been compelled to be selective, not only by the limitation of space but also by the fact that our main concern has been to classify these writings in terms of a certain set of theories of development. Hence, those writings which we considered as forming only detailed aspects of these theories have been mentioned only in passing.

. (:hoosing the right labels for our classification of development theo­ries was a difficult task. In the general literature, development theories have been classified as neo-classical, structuralist and radical and Marxist theories, (Kindleberger and Herrick 1977) or as "linear stages" model, neo-colonial dependence model, and the "falSi! paradigm" model (Todaro 1977). We did not choose to use the first classification because there are few or no writings belonging to the pure neo-classical variety. Of course, one might argue that all non-radical and non-Marxist theories ~ neo-classi­cal theories. In a sense this may be so. But writings fitting the descrip­tion of

• price-oriented, susp~c~ous of most interf~rences with competition (whether from government administrators or from private monopolists) and confident of the beneficial automatic adjustments -that an unencumbered market system will confer on the society and as exemplified by the works of P. T. Bauer and T.W. Schultz (Kindleberger and Herrick 1977).

do not seem to feature much in the South Pacific.

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On the other hand, most non-Marxist writings seem to fit the label of 'structuralist' theories. The disadvantage of this term, however, is that the term as used by Kindleberger and Herrick, does not make a distinc­tion between structuralist theories which are Marxist and those which are non-Marxist. After much consideration we decided to classify writings on development in the South Pacific as (a) linear stages and false paradigm theories and (b) radical and Marxist theories.

Although some writings have dealt with the question as to whether a separate development theory is applicable to small, island countries such as those in the South Pacific, we have not considered such writings as representing a separate development theory as such. These writings are considered in a later section in the paper.

'LINEAR STAGES' AND 'FALSE PARADIGM' THEORIES

Linear stages theories of economic development are those that seem to follow from the stages of economic growth theory of W.W. Rostow (Rostow 1960). Rostow's theory, which he called a "non-cormunist manifesto", divides the process of historical evolution of the Western developed economies into five main stages: primitive society, pre-conditions to the take-off, the take-off, drive to maturity, and the age of high mass consl.Jl1pton. While this theory seems to assume that there is a unilinear path to development as demonstrated by the Western developed economies and which could be followed in the same way by the Third World economies, the main message that it seems to put across as the secret of development is the need to accelerate the rate of capital accl.Jl1Ulation.

According to this theory, the criterion which shows whether a country has reached the stage of take-off into self-sustained growth is whether it has been able to achieve a savings rate of 15-20 per cent. This is clearly demonstrated in the often quoted dictum of Sir Arthur Lewis:

The central problem in the theory of economic growth is to under­stand the process by which a cOfTlTlunity is converted from being a 5 per cent to a 12 per cent saver -- with the changes in attitudes, in institutions, and in techniques which accompany this conversion (Lewis 1955).

Hence, a crucial role was assigned to capital accumulation in this theory. There could hardly be any disagreement with this position as a technical

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necessity for growth in any economy. One has only to look at the experience in the socialist economies in their early planning stages to see the importance attached to the role of capital accumulation. It is on other grounds that this linear stages growth approach has been questioned. Some of these criticisms will be dealt with under the radical and Marxist theories.

To come back to the main discussion, the important role attached to capital accumulation under the linear stages type theories can be seen in terms of the Harrod-Damar growth model. This model in its closed economy version and in its open-economy version (as used by the two-gap theorists) has served as the basis of economic development planning in many Third World economies during their immediate post-independence years. This has also been used by South Pacific island nations in their planning in recent years.

The fundamental growth equation used in this model is as follows:

s g

k

where g growth rate of the economy

s the national saving ratio

k incremental capital output ratio

Under this equation the growth rate of the economy becomes basically a function of the rate of saving. Since total national saving must equal total national investment, an economy I s rate of investment is dete-rmined by its rate of saving. Investment in turn determines the rate of growth, given the incremental capital output ratio.

One could therefore easily appreciate the important role attached to the savings rate as illustrated by the famous statement of Lewis. What is also important is that when the savings forthcoming from the domestic economy are insufficient to achieve the desired or planned growth rate, fo~

resources - - i.e., loans, investment aid -- can serve as a perfect substitute for domestic saving. As is noted below, many writings and much economic advice on the economic development of nations in the South Pacific spring from these basic premises.

Using the above equation to guide us through the development literature on the South Pacific, let us now deal with those writings which concentrate

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on the term's'. Let us leave 'k' for the time being.

One of the most important contributions in the tradition of the linear stages model which dwells on the question of investible real resources domestically available for the development of South Pacific island nations comes from Fisk and Shand (1970). In their paper, in which the authors sLmllarise their joint research on Papua New Guinea, they argue that there is a surplus of labour and land available in the South Pacific which is of "special importance to develo~ent planning particularly in the early stages. For, this surplus is virtually the only substantial resource avail­able for investment from within the sUbsistence economy itself" (1970: 259). This surplus is considered as a crucial element determining the rate of development in these economies "where the advanced sector is small and external resources limited" (1970: 259).

Fisk and Shand argue that this surplus can be tapped without reducing the existing level of production and consl.JTlPtion and without involving any serious hardship or sacrifice of leisure provided that effective and strong incentives are provided. The main mechanism through which this surplus is to be used in the development process is by the 'modernisation' of the traditional sector through the spread of the market mechanism. The latter is to be achieved by providing the necessary economic and institutional infrastructure services such as roads and marketing facilities.

Initially, roads, communication, and marketing institutions are to be developed using surplus rural labour. Next, subsistence agriculture is to be transformed into commercial agriculture. /lgricuUural production is to be increased by raising labour productivity in contexts marked by an absence of popUlation pressure and by increasing land productivity in contexts marked by the presence of popUlation pressure. The final stage in this development process is the stage of specialisation and trade by application of modern technology. The driving force behind this whole process consists of two sets of factors: incentive factors (comprising non-market influences such as law and order, taxation, extension services, demonstration effect, and education.

Recommendations along these lines were made for Fiji by Fisk in his book The Political Economy of Fiji (1970), published on the eve of Fiji's independence in 1970. The acceptance of these recommendations can be seen in Fiji's Sixth Development Plan (1971-1975) (FCPD 1970). In fact, the development of the rural sector, through monetisation and expansion of the market system, is one of the major development strategies in the development

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on the term's'. Let us leave 'k' for the time being.

One of the most important contributions in the tradition of the linear stages model which dwells on the question of investible real resources domestically available for the development of South Pacific island nations comes from Fisk and Shand (1970). In their paper, in which the authors st.mnarise their joint research on Papua New Guinea, they argue that there is a surplus of labour and land available in the South Pacific which is of "special importance to development planning particularly in the early gtages. For, this surplus is virtually the only substantial resource avail­able for investment from within the subsistence economy itself" (1970: 259). This surplus is considered as a crucial element determining the rate of development in these economies "where the advanced sector is small and external resources limited" (1970: 259).

Fisk and Shand argue that this surplus can be tapped without reducing the existing level of production and consunption and without involving any serious hardship or sacrifice of leisure provided that effective and strong incentives are provided. The main mechanism through which this surplus is to be used in the development process is by the 'modernisation' of the traditional sector through the spread of the market mechanism. The latter is to be achieved by providing the necessary economic and institutional infrastructure services such as roads and marketing facilities.

Initially, roads, communication, and marketing institutions are to be developed using surplus rural labour. Next, subsistence agriculture is to be transformed into commercial agriculture. /lgricultural production is to be increased by raising labour productivity in contexts marked by an absence of population pressure and by increasing land productivity in contexts marked by the presence of population pressure. The final stage in this development process is the stage of specialisation and trade by application of modern technology. The driving force behind this whole process consists of two sets of factors: incentive factors (comprising non-market influences such as law and order, taxation, extension services, demonstration effect, and education.

RecOll1Tlendations along these lines were made for Fiji by Fisk in his book The Political Economy of Fiji (1970), pUblished on the eve of Fiji's independence in 1970. The acceptance of these recommendations can be seen in Fiji's Sixth Development Plan (1971-1975) (FCPO 1970). In fact, the development of the rural sector, through monetisation and expansion of the market system, is one of the major development strategies in the development

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plans of the South Pacific island nations.

The necessity of modernising the traditional sector through the use of surplus land and surplus labour and with minimal capital contribution from the advanced sector (i.e., clearing land and planting it with new cash crops such as rubber and cocoa) was reiterated by Fisk some twenty years after his original paper (Fisk 1982).

While Fisk focus.d attention on the development of potentially avail­able investible 'surplus', others concentrated their attention on how domestic saving could be supplemented by foreign resources. One such writer was l'Iichael Ward, who wrote an exhaustive study on the economy of Fiji entitled The Role of Investment in the Economic Development of Fiji (1971). He identified Fiji's economy as a labour surplus economy. Although ITlJch of the country's land is still unused, this was considered as a scarce factor due to the traditional conmunal land tenure system. Further, the country is small and its development is constrained by Bruno-Chenery-Strout type resource bottlenecks: foreign exchange gap, saving gap, and skills gap. " The speci fic problem of development • • ." according to Ward (1971) "is that dealing with the internal and external financial resources for develop­ment." The solution he suggested was "attracting outside capital" and "reforming the present institutional framework for mobilising financial resources" (1971: 200).

In recommending the use of foreign private investment, Ward was extend­ing the application of Bruno-Chenery-Strout type of two-gap models to the South Pacific context. These two-gap models, which were a variation of the Harrod-Domar type growth models to suit the highly open nature of developing countries, stated the importance of capital accumulation for development in dichotomous terms of foreign exchange and domestic saving. To increase the growth rate of an economy it was not sufficient to increase the domestic savings rate. It was also necessary to have greater access to fore1gn exchange so as to import foreign inputs which are a complementary element in the aggregate production function. Developing countries are usually faced by a scarcity of both these forms of investment funds which means that they face both a savings gap and a foreign exchange gap. Foreign resources could be used to close both these gaps and thereby help to increase the growth rates in these economies (Chenery and Strout 1966).

Ward, however, went further and specifically reconmended the use of foreign private investment for reasons which will be discussed shortly.

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The relevance of the dual-gap model to Fiji and to the South Pacific context in general was pointed out by other writers as well. Ashok Desai, at one time a Professor of Economics at the University of the South Pacific, identified Fiji as a labour surplus and capital and foreign exchange short economy and advocated the continuation of foreign private investment, although under greater scrutiny of a government whose development policy must be guided by nationalistic considerations (Desai 1976). As a part of this nationalistic approach, he recommended the encouragement of domestic entrepreneurship through the development of a local share market. Schiavo­Campo, who succeeded Desai as Professor of Economics at the University of the South Pacific, was more cautious in making any specific policy recommend­ations (Schiavo-Campo 1978). Although he emphasised the need to find urgent solutions to pressing economic problems arising out of fast population growth rates and rising unemployment, he limited himself to saying that a middle of the ground strategy should be followed on the basis of goals decided by politicians: economics could only offer a tool box of theory. From these tools he recommended the two-gap analysis in addition to the idea of opportunity cost and the theory of comparative advantage.

While most writings of the traditional type seem to admit the importance of the role of foreign resources in the economic development of the South Pacific, some writers specifically have expressed a preference for foreign private investment. Ward, for example, favoured this type of investment rather than foreign aid, because of its expected higher social marginal productivity and its potential for granting access to the markets of the developed capitalist countries. He argued that because of the smallness of Fiji I S market, the potential for its development lay in the expansion of cheap exports of agricultural and manufactured goods. This could be done, however, only by gaining access to the markets of the capitalist countries and one sure way in which such access could be guaranteed was by bringing in investors from these same countries.

Al though he agreed that there were certain drawbacks to such invest­ments, such as their mmopolistic power, the tendency to dictate to domestic governments, and the tendency to replace domestic entrepreneurship, he argued that

• • • many of former colonial features of foreign investment have now been removed • • • capital is wanted now • • • the developing countries distrust of foreign firms is often misplaced and frequently unjustified. Nowadays most major international firms with overseas investment interest have management which possesses genuinely sympathetic understanding and concern for the social problems of developing countries (Ward 1971: 315).

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He felt that the case for foreign private investment rested on the argument that the developing countries have to pay some price for this scarce and vital resource. One may agree that this is how the real world works. Nevertheless, one finds difficulty in reconciling this idea, with the previous assertion about the TNC' s 'sYl1llathetic' outlook towards South Pacific island nations. The continuation of foreign investment also was reconmended strongly by Fisk. He wrote, with regard to Fiji, that its strong and healthy economy was due to a "strong inflow of private capital" and admonished that Fiji had to "learn to live with the monopolistic and oligopolistic practices of large scale operations" (Fisk 1970).

Recoomendations for foreign private investment in the South Pacific are also seen in the writings of Edward Doomen (see, for example, Dorrmen 1980) • He recoomended, as part of development strategies in the South Pacific, the setting up of export processing zones, financial centres, tax havens, and more emphasis on tourism. He pointed out that although these activities are unfashionable and unpopular in most South Pacific island nations they are sources of dynamism to these countries and the. closing of these lower development options should be prevented by good public relations and a steady-nerved goverrvnent. The limitation of this type of investment as a development strategy, of course, have been pointed out by many writers (see, for example, Howard 1983).

There is no doubt that in favouring foreign private investments these writers have been influenced by the physical constraints of the South Pacific countries. While many writers have formulated their theories in terms of the smallness, isolation, and resource scarcity of the South Pacific countries, it was perhaps Brookfleld who has brought out most clearly and bluntly the stark reality of this situation. What is most striking is the way in which he presents the case for foreign investment in the South Pacific. He starts off with a long historical analysis of the l'Ielanesian economies, and the analysis appears on the surface to be very radical. For example.. he states that independence is a "drive to retain or take local control of the management of society and economy and hence reverse the trend towards dependent condition inherent in colonialism" (Brookfield 1972). He 8I1llhasises the urgent need for changing the colonial economic structures of these countries so that true independence can be attained. But what was really happening, he observed, is that even after independence this colonial economic structure is strengthened under the continued dominant role played by foreign capital. By way of illustration he quotes a statement from the Prime l'Iinister of Fiji, Ratu Sir Kamisese Mara, to the effect that if Fiji's capital and industrial centre, Suva,

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Were burned to the ground the fYlelanesian Fijians would lose nothing but the records of their debts (Brookfield 1972: 141).

But at the end of it all he argues that the only alternative to the dominance of foreign capital in the South Pacific is to settle for a lower standard of living.

There is no alternative to dependence but stagnation and retrogression • • • with economies as small and weak as those of Melanesia it is hardly possible to eliminate the condition of dependency and even massive action to increase flows within the international and regional economies demanding decisive intervention to plan the allocation of resources and create new linkages, can scarcely have more than a palliative effect in the foreseeable future. But action to create something more like a mixed economy • • • is possible and it seems certain that the failure to proceed in this will lead to persistence and further deepening of the present satellite conditions (Brookfield 1971: 144).

The condition of dependency has been the subject of several writings by Brookfield and others. One aspect is the relative lack of power of the South Pacific island nations in relation to the superpowers operating in the Pacific. Brookfield points out that these nations, constrained by their insignificant economic and political muscle, lack the power to pursue successfully any independent policies in these spheres. This power­lessness has been highlighted by Tony Hughes in a recent paper entitled "Independence for Sale" (19B3), in which he tries to project the altern­ative available to the South Pacific island nations in the next decade when there is likely to be a scramble for seabed resources in the Pacific Ocean not only by the developed capitalist countries and the socialist bloc but also by countries in South East Asia and Australasia.

Other writings on the question of dependency are discussed under radical and Marxist writings.

Another subject that seems to have received considerable attention is the role of foreign aid in the development of the South Pacific. Although the role of foreign resources in general in the development of the South Pacific countries was justified by several writers referred to earlier in terms of the two-gap model, most of these writers showed a specific preference for private foreign investment as the form in which

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foreign resources should enter these economies. Among those who discussed the pros and cons of foreign aid as a resource is Te'o Fairbairn, the well known economist from Western Samoa who has served as an economist of the South Pacific Corrrnission for many years and who has considerable experience in the region as a planner and economic adviser. ~hile

sympathetic to foreign aid in the South Pacific, he complains that such aid comes in on an ad hoc basis and that it is "unpredictable, fragmentary and awarded wi thout-a ~al sense of corrmi tment or purpose" (F airbairn 1973). He argues for a more systematic and planned approach on the part of aid donors in granting such assistance based on the needs and priorities of development in the South Pacific.

L.V. Castle, writing in the South Pacific Agricultural Survey of the Asian Development Bank, notes that

• • • the acceptance of no growth state of affairs may be the only realistic option for the small countries unless they are prepared to accept a permanent dependence on foreign aid -assuming that such aid is permanentl y forthcoming (ADB 1979: 127) •

A very strong case for the continuation of aid to the South Pacific was put forward recently at a conference at the Australian National University (Shand 19BO). It was pointed out that these countries could be disqualified from receiving aid because of their subsistence affluence. It was argued, however, that these countries had a strong case for receiving such aid because of four special disadvantages confronting them: (.1) demo­graphic explosion, (2) rising expectations, (3) limited development poten­tial in agriculture, and (4) transport problems.

There is no doubt that foreign aid is playing a crucial role in the development of the South Pacific and in maintaining current living stand­ards. Per capita receipts or aid in many of the South Pacific countries are very high by world standards. In a few of these countries foreign aid finances the entire goverrvnent capital budget. In some cases the per capita aid received is higher than the per capita GOP (Gunasekera 19B4: 22) • What seems to be lacking in the existing literature, however, is an objective analysis of the contribution of aid to the economic development of the South Pacific. For example, one goal conmon to all development plans in the South Pacific is the desire to become self-reliant; meaning often to become less dependent on aid, through the development of the economy. No attelTllt, however, is seen in the literature to try and assess

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whether these countries suffer from a growing and self-propelled depend­ence on aid. Another gap in the literature seems to be an analysis of the case for foreign aid for some countries such as Tuvalu and Kiribati in terms of the category of least developed countries.

The writings so far discussed have concentrated on the question of how the growth rate of the South Pacific could be accelerated via an increase in the rate of investment either by using domestically available surplus resources or by augmenting such resources through an inflow of foreign resources in the form of foreign private capital and foreign aid. The mechanism assumed is that of a private enterprise system with an important role assigned to the public sector as a catalyst of development.

Now we turn to the other term on the Harrod-Domar equation giVEn above, namely the incremental capital output ration, 'k'. Since this relates to the marginal productivity of capital, according to the equation, it follows that any factors that affect the marginal productivity of capital also affect the growth rate. Any factors that contribute to a reduction in this productivity would lead to an increase in the size of 'k' and there­by lead to a fall in the growth rate. Several writers have dealt with institutional factors that are regarded as hindrances to growth (effectively arguing that these factors lead to a higher 'k').

These writings pinpoint the low elasticity of supply of land, skills, and entrepreneurship as a reason for the slow growth in South Pacific countries. The constraining role of the traditional land tenure systems of the South Pacific has received a great deal of attention in most of the literature reviewed, including development plans. For countries such as Fiji, Western Samoa, Solomon Islands, and Vanuatu, which are more generously endowed with land resources than their other counterparts in the South Pacific, this seems to be a great barrier to development. Over 80 per cent of their land is under traditional cOO1l1Unal holdings and is slow in becoming available for expansion of agricultural production. In some countries the problem is further complicated by the fact that nearly half the population does not have traditional land rights. The question of land has therefore been the subject of sfi!veral research projects and writings (see Crocombe 1977, Heath 1979). What should be noted therefore is that, while Fisk may be right in arguing that there is surplus land in the South Pacific island nations, the fundamental question of how this land successfully can be developed still remains to be solved.

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In the same vein, writers have also pointed out the constraints on development imposed by the lack of 'acquisitive instinct' and individual­istic behaviour in tradition-oriented South Pacific communities and by the high economic cost of traditional obligations and customs. It can be argued, however, _ that there is a conflict between the mode of behaviour required for development of an advanced capitalist society, which is the underlying goal of the development strategies, and that required by the so-called traditional and communal society. Among the writers who have highlighted these factors are Ward, Walters, Desai, Fisk, and also Lockwood. Lockwood, who studied the economy of Western Samoa, wrote that natural resources in Western Samoa were more than enough to maintain a socially acceptable level of living and that there existed only a few pressures to raise this level substantially. He pointed to their high rate of time preference: "Samoans feel little need to curtail present conslJlTlltion and above all leisure to ensure some higher goal in the future" (Lockwood 1970). He warned, however, that with rapid popUlation growth the existing living standard could be maintained only with hard work. A recent agricultural survey of Western Samoa has highlighted the conflict between the traditional economic behaviour and the behaviour required under the capitalist mode of production brought from outside:

In several DMC (Developing Member Countries) colonial government introduced legislation to protect indigenous societies. One unforeseen effect has been to fossilize social forms while their economic or ecological bases have been eroded. As a result more and more people find it difficult to achieve new goals within the older social systems •••

The essential dilemma is that changes in social structure has not kept pace with the increasingly rapid influx of conceptual and material innovations, which the islanders have experienced over the last century. As people move towards agricultural production systems which carry prerequisites of organization and scale determined from outside the producers locality or control, the discordance becomes more marked (ADS 1979: 46).

Here the report is putting its finger on a crucial problem which would be a real challenge under· any economic system bent on modernising its traditional sector and increasing productivity.

Most of the theories following the linear stages model seem to be so enthusiastic about accelerating the growth rate of the economy that

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the important question oJ how the gains from this growth are distributed within the society is ignored. It seems as though they assume that the benefits will eventually trickle down to the low income groups, or that growth should be achieved first so that distribution can be taken care of later. Even in the case of Fisk's model, the assumption appears to be that the distribution aspect will be taken care of automatically.

There are, however, writers who have brought this aspect of develop­ment more explicitly out into the open. For example, the views of those who are classified by Todaro as 'false paradigm' theorists seem to be directly related to the question of distribution of benefits of development to the less privileged classes in the society. In the case of the South Pacific, it is difficult to identify any specific theories or names of writers with the label given by Todaro. Nevertheless, one can observe shades of opinions which are similar to those of the 'false paradigm' type among the writers who blame the faulty and inappropriate advice from inter­national agencies and the inappropriate role played by the Western educated elite for the underdevelopment of countries in the region.

Thus, Fisk has highlighted the cultural alienation of the elites of Melanesia (Fisk 1972). He asserts that this leads to a bias in the decision making process in the private sector as well as in government. The bias is twofold: a bias in favour of the urban industrial and the international component of national development and against the interest of the rural majority; and a bias in the minds of the decision makers which causes them to "imperfectly comprehend where their (Le •• the rural people) well being is to be found and how to get them there" (Fisk 1972). He refers (1972: 2) to the "tragic alienation of much of the educated elites from the village • • • which leads many to scorn and reject their culture and their associations."

So it seems the South Pacific has had its own Liptons before Lipton himself wrote his well known book on urban bias and the rural poor (Lipton 1977). The fears of Fisk were echoed in the ADB agriculture survey of 1979:

Politicians are by no means the only interest group who influence • the directions of planning or agricultural development. Through-

out the South Pacific the urban bias in decision making which Lipton (1976) has analysed on a wider canvas, is very strong (ADB 1979: 134).

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The report advanced several reasons for this bias. These were the poli tical powerlessness of the rural producers, the unusually high propor­tion of link service in the labour force, rural-urban migration which causes government to succumb to pressure to invest in urban areas, and the histor­ically determined colonial legacy of high wage rates and consumption patterns in urban areas.

Ron Crocombe (1978), writing on the failure of past rural development policies in the South Pacific, referred to the existence of an "urban conspiracy if not a plot," which resulted in the near "exploitation of the rural poor." He pointed out (1978) that all powerful pressure groups (e.g., key politicians, elite civil servants, trade unionists, business owners and managers, foreign investors, expert advisers, diplomats and international agents) were urban centred. He argued that rural people were unorganised and helpless, but that contrary to those who came from developed countries and exaggerate the virtues of peaceful life in the Pacific, the villagers do want to work in factories in the developed countries.

Some of the growth strategies following from the linear stages model have also questioned the relevance of the present type of . develoj:XTlent planning in the South Pacific. Some have considered such planning in the interest of the elite. Others have highlighted the need to change the ethics of planning so that planners would understand the problems of the people and carry out strategies to serve their needs and wants better and to ensure freedom, human dignity, and fair distribution of the benefits of development (see Ratuvili 1974).

The Ao8 report quoted earlier asserts in general that the development plans of the Developing Member Countries of the Asian Development 8ank reflect the basic, though usually unspoken, assumption that the economic systems inherited from the colonial powers will not be changed. That the acceptance of this assumption implies continuation of a process of quite massive social change is usually overlooked. As noted by the ADS report:

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Most of the plans echo the Western Samoan statement that the 'growth objective must not be realized ats the expense of basic changes in Samoa's social institutions' (Western Samoa Department of Economic Development 1975: 2). Yet the role of existing social institutions in development is rarely considered and the possibility that they may be undergoing basic changes already as a result of individual decisions with the community and regard-

less of government rhetoric, is rarely acknowledged. Only in Fiji has a thorough examination been made under government auspices, of the social changes taking place in association with economic development. The Spate Report clearly sets out the nature of social changes then taking place in the late 1950' s the extent to which the social system was a constraint or advantage for development, the likely course of future changes and possible strategies to control or exploit these changes, as appropriate (Spate 1959). It is now clear that the changes Spate identified and which government implicitly accepted, have been crucial to the relative success of much of Fiji's develop­ment and are a key to Fiji's chances of adopting more productive agricultural systems. Similar studies could well clarify basic development issues in several other countries, and so provide a basis for realistic assessments of the trade-offs which must be made between conflicting political goals, such as revenue growth and rural welfare (AD8 1979: 133).

Among other fundamental issues, which these plans have not investigated, the report points out are "the relationship between the maintenance of sUbsistence production • • • and the growth of cash crop production, the costs in terms of reduced growth and benefits in terms of political and social equality, of policies of regional distribution, or the favouring of smallholders as against large" (AD8 1979: 133).

During a symposium on Fiji's Seventh Development Plan (1976-80), the trade unionists James Raman and Ian Howie (1974) attacked the plan as a piece of patchwork which tried to modify a basically inequitable system, in which the government championed the cause of uncontrolled big business from overseas while neglecting the domestic worker and the peasant.

Te'o Fairbairn (1972), reviewing planning in Tonga, pointed out the need for fundamental changes with respect to an unequal and wasteful traditional system of land holding, a system of traditional cultural atti..., tudes and values which often imposed a ceiling on the work effort, and in the power structure in both the government and private sectors. John Overton (1980), in a comparison of planning in Tonga and Fiji, highlighted the urban bias of the development strategies envisaged in these plans. Steven Halapua (1982) , who studied the problems of small scale fishermen in Tonga, has brought out the incongruity of the assumptions on which Tongan fisheries development plan was based and the way in which the country's traditional rural fishing is organised.

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The wisdom of current development strategies (based on the assumptions of the linear stages model) has been questioned at least implicitly in many writings relating to rural-urban migration in the South Pacific. The criticisms generally assert that the present strategies create insufficient economic opportunities in the rural and urban areas. Studies made on the food distribution systems in the South Pacific express alarm at the growing dependence of these countries on food imports (see Baxter 1980, fYk:Gee et. al. 1980, Hau'ofa 1980).

It must be noted, however, that these countries have been searching for alternative development strategies. These searches have focused on two major areas: regional or local-level planning (see Gunasekera 1982) and decentralisation (see Premdas and Steeves 1984). In recent years most countries in the South Pacific have been concerned about the concentration of lucrative economic activities in and around major urban centres and have expressed a desire in their development plans for a development strategy that is capable of bringing about a more even spatial distribution of these activities. Fiji seems to have made the greatest amount of progress in this respect, at least in theoretical terms. The second volume of its Eighth Development Plan (1980-84) is devoted entirely to regional develop­ment.

Writing on the interest shown in the South Pacific in regional develop­ment; Benjamin Higgins has cautioned them to look carefully at what type of regional development is most suitable in their specific context:

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The SPINs (South Pacific Island Nations) share the new enthusiasm for decentralization, with its related effort to disperse economic and political activity more evenly throughout the nation to hold the people in the countryside and to check the growth of the capital city and the maj or urban centres. Yet to a casual observer it might seem that activities of these very small nations are already excessively dispersed and that future dispersion might lead to activities on too small a scale for efficiency to be achieved anywhere. Surely decentralization must mean something different in an economic system where the metropolis has less than 200,000 people and other cities are much smaller from what it means where the metropolis has 10, 7 or 5 million inhabitants and other cities of more than one million population exist in the same hierarchy (Higgins 1982: 2).

This warning is quite sobering to those who might think decentralisation and regional development are a panacea to the real problems of the develop­ing count ries. Appropriate development strategies have to be designed and implemented after a proper di agnosis of the problems and to suit the context.

Decentralisation, in terms of devolution of political power from the central government to regional levels, seems to have proceeded at a rapid pace in Papua New Guinea, the Solomon Islands, and Vanuatu. A considerable volume of literature on decentralisation in these countries has come into existence in relation to these changes. Over seventy papers were presented on this theme at the Waiqani Seminar in 1978 (Premdas and Pokawin 1978). Most of these papers show that in practice there has not been a successful devolution of powers to the lower levels of government. This raises the question of the need to analyse in depth what decentral­isation should really mean when conceived of as a vehicle of economic development, and to consider what prerequisites are needed for such a programme to work successfully.

Several writings that are pertinent and which deal with various aspects of the development process of the South Pacific have not been discussed. These include writings on the impact of the inroads of the cash economy on the rural sector and the role of co-operative societies (see Knapman 1975, 1978, Knapman and Walter 1980), those that deal with the question of instability of export earnings of the South Pacific island nations (see Altman 1978, Knapman and Schiavo-Campo 1983), the role of monetary policy in small developing countries (see Schiavo-Campo 1978), as well as the proceedings of seminars on various themes such as the role of investment (e.g., P. Howard 1979), operation of central monetary authorities, studies on regional inequalities (UNESCO/UNFPA 1977, Treadgold 1979), and studies on more effective techniques for foreign aid allocation (Karunaratne and Steve~son 1 980) • Perhaps it might be ~uff icient to state that these paper~ deal with detailed treatment of specific aspects of the main diagnosis of the development problems in the South Pacific that have been outlined by the studies reviewed earlier.

The question as to whether the development problems of island states are unique has attracted much attention from academics, policy makers, and politicians. This is shown by the number of conferences and volumes on small economies in recent years (8enedict 1967, Selwyn 1975, Shand 1980, Dommen 1980, Jalan 1982). In the case of the South Pacific,

233

This warning is quite sobering to those who might think decentralisation and regional development are a panacea to the real problems of the develop­ing countries. Appropriate development strategies have to be designed and implemented after a proper diagnosis of the problems and to suit the context.

Decentralisation, in terms of devolution of political power from the central government to regional levels, seems to have proceeded at a rapid pace in Papua New Guinea, the Solomon Islands, and Vanuatu. A considerable volume of literature on decentralisation in these countries has come into existence in relation to these changes. Over seventy papers were presented on this theme at the Waiqani Seminar in 1978 (Premdas and Pokawin 1978). Most of these papers show that in practice there has not been a successful devolution of powers to the lower levels of government. This raises the question of the need to analyse in depth what decentral­isation should really mean when conceived of as a vehicle of economic development, and to consider what prerequisites are needed for such a programme to work successfully.

Several writings that are pertinent and which deal with various aspects of the development process of the South Pacific have not been discussed. These include writings on the impact of the inroads of the cash economy on the rural sector and the role of co-operative societies (see Knapman 1975, 1 978, Knapman and Walter 1980), those tha t deal with the question of instability of export earnings of the South Pacific island nations (see Altman 1978, Knapman and Schiavo-Campo 1983), the role of monetary policy in small developing countries (see Schiavo-Campo 1978), as well as the proceedings of seminars on various themes such as the role of investment (e.g., P. Howard 1979), operation of central monetary authorities, studies on regional inequalities (UNESCO/UNFPA 1977, Treadgold 1979), and studies on more effective techniques for foreign aid allocation (Karunaratne and Steve~son 1980). Perhaps it might be ~ufficient to state that these paper!? deal with detailed treatment of specific aspects of the main diagnosis of the development problems in the South Pacific that have been outlined by the studies reviewed earlier.

The question as to whether the development problems of island states are unique has attracted much attention from academics, policy makers, and politicians. This is shown by the number of conferences and volumes on small economies in recent years (8enedict 1967, Selwyn 1975, Shand 1980, Dommen 1980, Jalan 1982). In the case of the South Pacific,

233

there has been a tendency to think that these small economies are indeed unique to the extent that there has been some kind of a search for a 'Pacif ic Way' of development which is described by Shaw (1982: 95) as a "unique frarnE!ldOrk of action and thought which will guide the people of the South Pacific towards a life based on the' best of traditional values." However, there has not been any clear statement of any development theory or strategy that might be regarded as a unique 'Pacific Way'. 8arry Shaw (1982) grants the "existence and importance of behavioural and social norms which unify the South Pacific in a strong feeling of brother/sister­hood which operates at family, clan, village, national and regional levels." Nevertheless, he concludes that "there are many inviolate universalities: there is no 'Pacific Way' to fly an aeroplane, or to make a profit when expenditure exceeds receipts, or to increase government expenditure through money creation without inflationary pressure" (Shaw 1982:96). Shaw therefore argues that rather than focus on concepts such as "South Pacific Small Island States", there should be an attempt to develop an analytical framework from existing theory. As a starting point he presents an analytical framework in terms of "(1) level of income/deve­lopment, (2) size/smallness (3) internal fragmentation/dispersion (6) length of experience as an independent country and (7) level of resources per capita (a) human resources and (b) physical resources." The conclusion that Shaw arrives at is that smallness and spatial relationships are far more useful concepts than the concept of "islandness" in analysing the problems of these countries.

A team of researchers led by Brookfield has studied the population resources and development of the eastern islands of Fiji with a view to recommending a regionally balanced development strategy (UNESCO/UNFPA 1977). They have concluded that by the standards of other Third World countries, Fiji "is potentially a country with a well-balanced and relatively wealthy economy." They argue that while the "colonial era has done much for Fiji in the provision of a sound civil service, a basic­ally sufficient infrastructure and good educational and medical services," it has "been unkind in many ways. Not only has it created a plural society, severe inequalities in land holding and a chronic condition of dependency: it has also distorted the potentially varied use of Fiji's natural resources by imposition of sugar and coconut 'overlays' from under which greater variety is only now emerging." The team has argued that in order to correct this new imbalance a whole new approach to development is needed and that basic to this new approach is a new education system. They point to Beckford's statement (1972) that the worst aspect of colonialism is

234

the "colonized state of the minds of the people" as being equally applicable to Fiji and as being what is meant by dependency. The only way in which dependency can be eliminated they assert is by eliminating dependency in the mind (1977:354).

Roger Keesing (1973), writing on the options of development strategies available to the Solomon Islands, has gone much further and suggested what he conceives of as a revolutionary alternative development strategy suitable for this country to enable Solomon Islanders to overcome their colonial mentality and dependency. He argues that whatever path is choosen to achieve development after independence that they cannot hope to get rich in the sense of Western capitalist societies. Hence, they will have to find richness in a way of life that is by Western standards 'poor'. He recommends a development model ' buil t around the traditional village. Keesing starts off his diagnosis of the Solomon Islands case by pointing out the adverse effects of colonialism, including among other things the emergence of an "economy of exploitation" and the "underdevelopment characteristic of the tropical Third World, albeit an a small scale." He then implies that it is hopeless to expect any real kind of development from the hands of the local elites who take aver power because of the alienation of their values. He then advises the Solomon Islanders that "the alternative is not necessarily development by European or Japanese corporations vs no development at all," but that "it is possible for formerly colonised Third World peoples to free [themselves] from international capitalism and neo-colonialism and explore forms of internal socialism without committing themselves to [an] other 'ism ••• A revolution in Solomons society must begin with a model built not around cities and factories, not around plastic and television sets but rather around human beings living in small rural communities."

Keesing cites several examples from Africa for the benefit of the Solomon Islands. He fails, however, to discuss the shortcomings of African socialist experiments such as that of Tanzania or to go into an analysis of the prerequisites for the success of a Pacific brand of social­ism in terms of attitudes, commitments, institutions, aspirations, and so on.

To summarise this section on writings fashioned after the linear stages model of economic growth and the 'false paragigm' model, we have shown that the basic framework adopted by these writings is one of a private enterprise economy in which an important role is played by the

235

government as a catalyst of development. The main thrust of these writings has been on the question of how the rate of growth of the economy can be accelerated through an acceleration of the rate of investment. In so doing, the role and potential contribution of foreign resources has been extensively discussed. A large majority of these writings recommend the active encouragement of foreign private investment. This is not only to augment the scarce supply of domestic savings but also, in terms of the dual-gap model, to supplement scarce foreign exchange resources of the South Pacific. The use of such investment is also justified in terms of the smallness of the domestic markets of the South Pacific countries and hence in terms of the need for an export-oriented growth strategy. The success of such an approach, however, depends crucially on the access­ibiE t y to developed capi taEst market economies, which in recent years have been characterised by an accelerated movement towards an increasing degree of protection. The involvement of foreign private investment was expected to open up these markets for the South Pacific island nations. The other advantages claimed for such an approach to development is the contribution towards improving level of skills and technological gaps which are common in the South Pacific. While most writers have adopted this approach of growth through the engine of more trade, there are others who place more emphasis on the crucial role played by aid in the develop­ment of the South Pacific.

In terms of the Harrod-Domar equation, it was shown that these writings consider the average saving rate, 's', as the major constraining factor in South Pacific economic development. Hence their recommendations as to how this constraint could be overcome. The recommendations were, however, not limited to the potential role of foreign resources. At least two well known authorities on the development problems of this region have recommended ways and means by which the 'surplus' resources in the traditional sector (surplus land and labour) could be utilised to initiate a process of development.

Again, thinking in terms of the Harrod-Domar equation, a large nunber of contributions were revi£!llJed which concentrate on the term 'k' in the equation. These are the writings that consider institutional factors as the constraints which tend to keep the productivity of capital 10lIl so that the growth rate is adversly affected by a high incremental capital output ratio.

236

While the above type of writings seem to concentrate on the subject of growth, apparently assuming distribution will take care of itself, there has been no lack of writings which question this growth-first approach and raise questions about the benefits of development. Many of these writers couch their arguments in terms of a rural-urban dichotomy and a "conspiracy" on the part of the urban elite against the rural major­ity. Several writers question the relevance of the planning strategies as reflected in recent development plans. Pointing out the unfairness and danger involved in urban-based development under the present economic structure and dynamics, several contributors point out the need for a regional and decentralised approach to development planning.

A very striking feature about most of these writings by economists, as might be expected from the nature of the subject, is their narrow focus concerning economic choices available to the South Pacific. In discussing questions of what could be done given the available resources and what should be done in terms of resource use in order to meet the needs of a population which is expanding and whose expectations are rising, socio­political considerations have been kept to a bear minimum. The adoption of a broader framework of analysis has been left to writers who have followed a radical and a Marxist approach in their diagnosis of the deve­lopment problems of the South Pacific. It is to these writings that we now turn.

RADICAL AND MARXIST THEORIES

Among the writers who have searched for a more radical alternative theory of development for the South Pacific are Jayanth Prakash, John Samy, Wadan Narsey, William Sutherland, and Michael Howard.

Jayanth Prakash, in his search for an alternative to the theory of development that follows from the neo-classical theory, chose to do his post-graduate stUdies in Tanzania in preference to any developed capitalist country. He has pointed out that

in the writings of Fiji and the South Pacific generally there has not yet emerged the concept of underdevelopment in terms of an analysis of the articulation of the Pacific economies into world capitalism... Development is seen as a good thing which could be achieved through hard work,

237

more rational planning, commitment of people,less corruption of politicians etc. The appeal to moral-ethical commitment was very much part of the colonial system maintenance. While no one would deny the need for the above mentioned ingredients •.• there is a lack of concrete historical analysis of the socio-economic formation to see who creates wealth and who appropriates and the international context and links within which the Pacific economies function (Prakash 1982).

Prakash regards the existing theory on the development of the South Pacific as something akin to the modernisation theory but with a certain amount of regionalistic and racialistic flavour. While attack­ing Fisk (1970) for his communal approach to the development problems of Fiji, Prakash (1982) argues that "by actually emphasising rather than playing down racial self awareness the elite has sought to circumvent at a popular level the entire question of class and thus to remove the major perceived threat to the stability of Fiji's embryonic capitalism."

After tracing the historical evolution of the colonial capitalist economy in Fiji, Prakash examines the development strategy of the post­independence era. His finding is that the

post colonial state in Fiji is not much different and the industrialisation policy being pursued will lead to further underdevelopment. • • • Political independence did not lead to economic independence. Foreign capital has become more entrenched with all the conditions inherent in capitalist penetration into a peripheral economy (Prakash 1982).

In a paper contributed to a volume (Mamak and McCall 1978) which Michael Bellam (1980) has hailed as a "turning point in Pacific studies", John Samy (1978) has questioned the relevance of the traditional approach to the Pacific situation. He has argued that the traditional approach was based on the belief of the existence of a unilinear path of develop­ment from primitive to modern which was based on wants rather than on needs. He called for a new approach to development theory based on a broader historical and dynamic perspective. Like Prakash, he challenges the usefulness of theories based on racial analysis and those that advocate dependence on foreign capital.

238

more rational planning, commitment of people, less corruption of politicians etc. The appeal to moral-ethical commitment was very much part of the colonial system maintenance. While no one would deny the need for the above mentioned ingredients ••• there is a lack of concrete historical analysis of the socio-economic formation to see who creates wealth and who appropriates and the international context and links within which the Pacific economies function (Prakash 1982).

Prakash regards the existing theory on the development of the South Pacific as something akin to the modernisation theory but with a certain amount of regionalistic and racialistic flavour. While attack­ing Fisk (1970) for his communal approach to the development problems of Fiji, Prakash (1982) argues that "by actually emphasising rather than playing down racial self awareness the elite has sought to circumvent at a popular level the entire question of class and thus to remove the major perceived threat to the stability of Fiji's embryonic capitalism."

After tracing the historical evolution of the colonial capitalist economy in Fiji, independence era.

Prakash examines the development strategy of the post­His finding is that the

post colonial state in Fiji is not much different and the industrialisation policy being pursued will lead to further underdevelopment. • • • Poli tical independence did not lead to economic independence. Foreign capital has become more entrenched with all the conditions inherent in capitalist penetration into a peripheral economy (Prakash 1982).

In a paper contributed to a volume (Mamak and McCall 1978) which Michael 8ellam (1980) has hailed as a "turning point in Pacific studies", John Samy (1978) has questioned the relevance of the traditional approach to the Pacific situation. He has argued that the traditional approach was based on the belief of the existence of a unilinear path of develop­ment from primitive to modern which was based on wants rather than on needs. He called for a new approach to development theory based on a broader historical and dynamic perspective. Like Prakash, he challenges the usefulness of theories based on racial analysis and those that advocate dependence on foreign capital.

238

William Suther land's writings have concentrated on the role of the state. He has pointed out that

in its attempts to establish a material base upon which to build a strategy to overcome underdevelopment in Fiji, the neo-colonial state is seeking increasingly to engage directly in the productive process. What is problematic however, is the danger inherent in this tendency for the state to acquire the characteristics of and effectively function as a collective capitalist (Sutherland 1981).

Sutherland refers here to a problem which has received increasing attention by political economists and which seems to have driven several Third World countries into a trap from which they have been unable to find an escape.

A case study of the operations of a foreign company in the develop­ment of export agriculture has been done by Wadan Narsey (1979). His study is on the Colonial Sugar Refining Company in Fiji from the late 19th century to 1973. He attributes Fiji's underdevelopment to the policies of this company and shows how the indentured workers were exploited under its monopolistic control.

Another writer, geographer Stephen Britton (1981), has extended the Marxian analysis to study the colonial spatial economy in Fiji. To understand the regional imbalances of an economy, he has argued, the social forces which determine the spatial pattern of development should be studied. In the case of Fiji, the present regional imbalances are due to the past operation of the capitalist mode of production. His conclusion is illustrated through an analysis of the sandalwood and bech­de-mer trades, and the growth of the sugar, gold, and tourist industries.

A brief historical analysis, based on Marxian dependency theory, applicable to the whole of the South Pacific, has recently been put for­ward by Michael C. Howard and others (Howard, et. a1. 1983). This work, The Political Economy of the South Paci fic: An Introduction, is an attempt to analyse the problems of economic development of the South Pacific in terms of a Marxian framework. After tracing the spread of the capitalist mode of production in the Pacific economies, the book highlights four main problems that these countries are likely to face in the future if they were to continue their present dependence on the world capitalist system.

239

First of all the book points out that current development strate­gies inevitably lead to an increase in the degree of dependency of these economies. This is because their economic structures are export-oriented, having been so shaped in the colonial era and further developed in the same direction by the post-colonial period through the promotion of tourism, export processing zones, and other means. This increasing dependency is because the capitalist countries, which are supposed to provide the markets, are themselves in crisis while domestically the subsistence sector, which has served as a buffer against the failure of the export sector, is breaking down. Secondly, the monopolistic control over the economy by transnational corporations is increasing at the expense of local initiatives. Thirdly, as a result of the second, the unemployment rate in these economies is increasing. Finally, govern­ments are unable to find a solution to these problems because of their own financial crisis and increasing foreign debt. Domestic conflicts ar:e likely to become increasingly severe in the light of these develop­ments and greater worker militancy may be expected. Internationally, the region is likely to become increasingly unstable due to strategic and economic factors, including prospects of seabed mining in the region and the potential scramble among great powers for these resources.

The volume concludes that "it is possible that, as the current crisis worsens and as less and less of the wealth 'trickles down', ••• an opposition espousing a class perspective and an alternative development path will emerge" (1983:277).

Continuing on the same theme, political scientist Ralph Premdas (1983) has argued for the need to decolonise the minds of Pacific island­ers (as had previously been called for by 8rookfield 1977). He demon­strates that there is abundant evidence that Pacific islanders live in increasingly frustrating circumstances, and that the search for alterna­tives is increasing. He says that "free enterprise is alive and vigorous but does not hold the monopoly. There are silent whispers although Western monopoly control of the Pacific Island ideological map is still powerfull."

CONCLUSION

This review has examined over one hundred and fifty different pieces of work relating to various aspects of economic development

240

problems in the South Pacific written during the past fifteen years. These were considered under two main categories: (a) those that seem to come under the theoretical frameworks of what Todaro calls the 'linear stages' model and the 'false paradigm' model, and (b) r~dical and Marxist writings. The former type of writings have diagnosed the development problems in the South Pacific in terms of a private enterprise economic structure in which the government plays an important role in encouraging development through the private enterprise system. These writings recognise the need to absorb the traditional sector into the monetised urban sector and the pursuit of an open economy type of development model in which foreign investment is to play a crucial role. Some of these studies, however, bring out the needs of the rural majority. By and large, these writings are limited to a 'technical' type of analysis in terms of maximising the growth rate of the economy subject to the avail­able resource constraints.

Radical and Marxist types of writings are much smaller in number and have appeared only in the last few years. These adopt a wider frame­work of analysis -- taking the socio-political factors more into consider­ation in addition to economic factors. These have drawn particular attention to the dangers of present strategies of development in the South Pac if ic. In particular, they point to the increasing dependence of these economies on the world capitalist system and the economic dilemmas associated with this dependence. Some of these dilemmas are growing economic inequalities, poverty, increasing unemployment, increas­ing balance of payment deficits, and a range of financial difficulties for the governments.

In conclusion, it appears that there is a great deal to be learnt from both of these approaches to the diagnosis of the development problems in the South Pacific. The more traditional economist's approach shows the need to take heed of the resource constraints in these resource poor economies. But it is inadequate in not paying sufficient attention to the question of the distribution of benefits to the lower-income groups of these nations. There seems to be too great a faith that the wealth created will 'trickle down'. The question of heavy dependence on foreign resources, and the instabilities and inequalities associated with it, are inadequately taken into account. The radical and Marxist approach seems to fill this gap. These wr itings, however, are as yet weak in prescribing an alternaative strategy of development which might be practical and viable at present in the South Pacific.

241

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