a two circuit approach to economic development

A Two-Circuit Approach to Economic Development

Michael ShuteMemorial University

Expanding the Economic Development Policy DiscussionExpanding the Economic Development Policy Discussion

“All the good intentions in the world are compatible with all the blunders conceivable.”

“Any short range reform will merely produce a small variant in a mess that has become worse for two centuries”

Being Intelligent about economic development requires a collaboration that deals with the full complexity of development

Locating Economic Values in a Scale of Values

Ultimate Values (what sustains our commitments)

Personal Values (our actual commitments)

Cultural Values (Arts, Media, Education etc. regional, national, and global

Social Values (Legal, Political, Economic, Technological)

Vital Values (Health, Environment, Survival)

How do we create and sustain healthy, vibrant communities? (End)

How do we measure economic development? (Means)

A Personal Statement About Economic Development

We are experiencing the results of over 200 years of the implementation of radically incomplete theories in economics that have

created a culture of profit maximization and so-called ‘enlightened self-interest’ in business that is I believe wrong-headed idea

about what economy is for and how it actually works.

Pure profit is not the goal of economy, it is an outcome of a particular phase of an economic cycle. To misunderstand the function

of this pure profit or pure surplus income is in the long term to wreck serious havoc on the environment, the economy, cultures

and lives.

Concerns such as community well-being and personal liberty and responsibility should direct how we approach economic

decisions. But with our good intentions need to respect the realities of the structure of economic process. Otherwise, we will likely

do more harm than good.

Standard First Year Economics Model

Gross domestic product (GDP) is the market value of all officially recognized

final goods and services produced within a country in a given period of time.

GDP per capita is often considered an indicator of a country's standard of living.

Two-Circuit Diagram

Pure Cycle of Economic Development

Stationary Phase Surplus Expansion Basic Expansion NewStationary Phase

Surplus Expansion

Surplus Circuit Accelerates Massively; Pure Profits Increases; Basic Circuit should

remain steady

Thrift and Enterprise

Basic Expansion

Acceleration in the Surplus Circuit slows down in increments to 0;

profits drop off and then disappear; Basic Circuit accelerates, basic

income (wages) increase leading to overall improvement of the

standard of living

Enterprise and Benevolence

Stationary Economy

Business is a going concern, wages are steady; there are no profits

A Steady Hand at the Tiller

Be Open and Creative, Respect Reality

Plan for Roadblocks and Resistance to Change

Be Compassionate and Patient

Michael ShuteMemorial University

mshute@mun.ca