Approaches to Economic Development by Norman S. Buchanan; Howard S. EllisReview by: B. S. KeirsteadThe Canadian Journal of Economics and Political Science / Revue canadienne d'Economique etde Science politique, Vol. 22, No. 3 (Aug., 1956), pp. 402-403Published by: Wiley on behalf of Canadian Economics AssociationStable URL: http://www.jstor.org/stable/138455 .

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The Canadian Journal of Economics and Political Science

Approaches to Economic Development. By NORMAN S. BUCHANAN and HowARD S. ELLIS. New York: The Twentieth Century Fund. 1955. Pp. xiv, 494. $5.00.

To study the ways by means of which economic development might be

promoted in the so-called "underdeveloped" countries has become rather the fashion in the United States where the newly acquired responsibilities of a

metropolitan power rest uneasily on the shoulders of a colonial and anti-

imperial tradition. The intent back of this fashion is morally admirable, but much of the work the fashion has produced has been scientifically deplorable. Realizing that the application of Western economic principles to communities of different tradition, religion, and culture was dangerous, and seeking to evade the heavy labour of making themselves individually master of all relevant material, many authors, encouraged by Institutes with more money and enthusiasm than good sense, found their solution in "inter-disciplinary" studies which have had a brief topical success but have made no serious impact on the established sciences. Other authors, though aware of the importance of the problems involved, but austere in their unwillingness to become involved in a kind of study which was rapidly acquiring a notoriety as the domain of hollow fashion, have shunned the challenge of the economic problems implicit in the planned development of the economically backward countries. Pro- fessors Buchanan and Ellis have courageously ventured to assess the usefulness of the economic techniques of which they are masters in the analysis of the

problems of economic development. They do not pretend to contribute to the advance of economic science or to develop a new theory of progress. They are content to ask if "received" theory can appropriately or usefully be applied- and if so in what manner-to the problems of the backward economies. In this

unpretentious task they achieve a great success. The book begins by an evaluation of the problem, including a most useful

chapter on definitions, continues with an historical survey of economic de-

velopment in selected and significant instances, including the most important one of Japan, and concludes with a discussion of how economic development

may be promoted in the contemporary world. The outlines of a general theory

emerge in this last part. The authors accept the view which was explicitly stated

by Professor John Dales (American Economic Review, Supplement, May, 1953) that a surplus of food production is a necessary condition of economic develop- ment. The production of this surplus necessitates improved productivity in

agriculture (in some cases in fisheries) and usually means, too, that surplus labour, which had existed in the form of hidden unemployment, must be

squeezed out of the food-producing industries. They assess the ability of the so-called "underdeveloped" countries to find from their own savings the capital necessary to put this new labour supply economically to work. Here they come close to Dr. Hans Singer's "transformation." The danger of private foreign capital-and some imported capital is almost invariably necessary-is that it seeks profits from the exploitation of some superior natural resource. What Max

Weber called the agglomerative factor, or, as we might say, economies external to industries, for example the provision of public utilities and community

402

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services which would make private investment in secondary industries possible and even attractive, is probably beyond the capacity of most of the govern- ments involved. Herein lies the opportunity for non-profit-seeking capital from abroad. A final chapter on the "Interests and Responsibilities of the United States" drives this point home with political and moral as well as economic

arguments. B. S. KEIBRSTEAD

University of Toronto

The Problem of the National Debt. By EDWARD NEVIN. Cardiff: University of Wales Press. 1954. Pp. 115. 6s.

IN the United States and Canada, the post-war rediscovery of monetary con- trols has stimulated a substantial body of discussion relating both to broad

monetary policy and to considerations of debt management. In Britain, serious attention to these matters has been conspicuously absent, and it is with the

hope of breaking the "long silence" that this relatively brief and simplified discussion of the role of the national debt in Britian's economy has been

developed. In almost all countries, the most striking feature of the national debt since

1914 has been its tremendous increase, whether measured absolutely, or relative to national income. (To support the subsequent discussion, the author

provides a very useful statistical summary of the growth of debt in some

eighteen countries, during specified intervals, within the 1914-50 period.) This enormous increase is attributed primarily to the cost of two world wars and a world-wide depression, and government securities have now become a very important component of the asset structure of many countries. It has become

quite common to find at least one-quarter of these securities held by the debtor itself (government agencies and the central bank), while some 30 to 40 per cent are owned by the commercial banking system, thus having been

monetized, that is, providing the asset basis for a substantial part of the

country's money supply. It is clear that the welfare of any community varies with both the amount

and the manner of distribution of its wealth, and that the servicing of the national debt results in a net redistribution of income. While "it is not possible to say a priori that this redistribution will be good or bad," it is most unlikely that optimum results will be achieved, and it is in the consequences of such redistribution that the "burden" of the debt is to be found. Its importance, however, must be discussed in somewhat broader terms.

While the dominant position which government securities have assumed in the total stock of liquid assets in many countries has provided central banks with an important medium for the technical implementation of monetary policy, considerations of debt management have nevertheless reduced general monetary flexibility. It is correctly observed that the existence of a large public debt may, for example, inhibit a restrictive credit policy in a time of inflation "... either because of fears as to the effects of falling government securities

prices upon public confidence," or because of a desire to minimize the cost

services which would make private investment in secondary industries possible and even attractive, is probably beyond the capacity of most of the govern- ments involved. Herein lies the opportunity for non-profit-seeking capital from abroad. A final chapter on the "Interests and Responsibilities of the United States" drives this point home with political and moral as well as economic

arguments. B. S. KEIBRSTEAD

University of Toronto

The Problem of the National Debt. By EDWARD NEVIN. Cardiff: University of Wales Press. 1954. Pp. 115. 6s.

IN the United States and Canada, the post-war rediscovery of monetary con- trols has stimulated a substantial body of discussion relating both to broad

monetary policy and to considerations of debt management. In Britain, serious attention to these matters has been conspicuously absent, and it is with the

hope of breaking the "long silence" that this relatively brief and simplified discussion of the role of the national debt in Britian's economy has been

developed. In almost all countries, the most striking feature of the national debt since

1914 has been its tremendous increase, whether measured absolutely, or relative to national income. (To support the subsequent discussion, the author

provides a very useful statistical summary of the growth of debt in some

eighteen countries, during specified intervals, within the 1914-50 period.) This enormous increase is attributed primarily to the cost of two world wars and a world-wide depression, and government securities have now become a very important component of the asset structure of many countries. It has become

quite common to find at least one-quarter of these securities held by the debtor itself (government agencies and the central bank), while some 30 to 40 per cent are owned by the commercial banking system, thus having been

monetized, that is, providing the asset basis for a substantial part of the

country's money supply. It is clear that the welfare of any community varies with both the amount

and the manner of distribution of its wealth, and that the servicing of the national debt results in a net redistribution of income. While "it is not possible to say a priori that this redistribution will be good or bad," it is most unlikely that optimum results will be achieved, and it is in the consequences of such redistribution that the "burden" of the debt is to be found. Its importance, however, must be discussed in somewhat broader terms.

While the dominant position which government securities have assumed in the total stock of liquid assets in many countries has provided central banks with an important medium for the technical implementation of monetary policy, considerations of debt management have nevertheless reduced general monetary flexibility. It is correctly observed that the existence of a large public debt may, for example, inhibit a restrictive credit policy in a time of inflation "... either because of fears as to the effects of falling government securities

prices upon public confidence," or because of a desire to minimize the cost

Reviews of Books Reviews of Books 403 403

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