Deepak Lal

India and China: Contrasts in economic liberalization?

Abstract It is argued that in both India and China despite some important differences: 1. (a) similar cultural and political imperatives led to similar systems of dirigisme and economic outcomes — with the Chinese growth higher than the Indian because of higher investment; 2. (b) crises engendered by their dirigiste regimes impelled reform; 3. (c) their attempts to replace the plan by the market have striking similarities but 4. (d) ultimately because of continuing atavistic attitudes to toward trade and commerce the reforms remain insecure.

Distribution and development: A review article

From the recent proliferation of books and articles on the subject, it appears that there is a great surge of interest in problems of income distribution in both developed and developing countries. (See Chenery et al. [ 71, Adelman and Morris [ 11, IL0 [ 141, Atkinson [ 21, Blinder [S], Meade [26], Tinbergen [35], Wiles [ 371 and Cline [9] .) The three books specifically concerned with development and distribution, and reviewed in this article, are the Chenery et al volume, Redistribution With Growth (RWG), the Adelman-Morris book, Economic Growth and Social Equity in Developing Countries (AM), and the ILO’s report to the recent tripartite World Employment Conference entitled Employment, Growth and Basic Needs (ILO). All three books make grandoise claims to have discovered new insights into the development process and to propose new strategies for development. Thus Chenery, in the introduction to RWG, claims that the book ‘leads to several conclusions which . , . differ markedly from traditional approaches to development policy’ ([ 71, p. xiii). In assessing these claims, particularly those made by RWG and AM, it will be useful to consider the reasons for this resurgence of interest in distributional problems, for this will enable us to judge to what extent traditional approaches to development were blinkered about income distribution. This is our purpose in Section I. Section II deals more specifically with RWG and AM’s analysis of the relationship between growth and income distribution. It also contrasts their explanation of the determinants of income in developing countries with those presented in the other recent books on distributional problems, but which are chiefly concerned with developed countries [2, 5, 26, 35, 371. From describing the effects on distribution of growth, it is a small step to making prescriptions for equitable growth. RWG, AM and IL0 are much concerned with prescribing a ‘new’ development strategy. Any such prescriptions must, however, grapple with the problems of ‘distributive justice’ and the related themes of the rights of individuals versus the State. These have been the traditional concerns of political philosophy, which too has seen a recent revival. The two great philosophical works by Rawls [33] and Nozick [29] take one back to the 18th and 19th centuries in their scope, depth and (often) modes of argument about the basic principles on which the ‘Good Society’ should be based. As there is an underlying moral fervour in the prescriptions of RWG, AM and ILO, it will be useful to see to what extent the ethical preconceptions of these volumes are soundly based. Nozick’s [29] discussion of the principles of distributive justice provides an interesting counterpoise to these preconceptions, and is also of relevance in assessing the ethical validity of the system of distributional weighting recommended in RWG for intercountry comparisons of economic performance. This is the subject matter of Section III. Section IV discusses the specific policy prescriptions of the three books RWG, AM and IL0 whilst the final section briefly summarizes our conclusions.

Social Standards and Social Dumping

I have a tremendous sense of deja vu about the current debate on the introduction of labor and environmental codes in the World Trade Organization (WTO). While the demand for linking trade policy to environmental standards is new, the similar demand concerning labor standards is a repetition of the events surrounding the Tokyo round of multilateral trade negotiations (1973–1979). In the Trade Act of 1974, the U.S. Congress—under pressure from labor unions—had included a provision requiring the president to raise the subject of “fair labor standards” in the GATT framework. This President Jimmy Carter duly did in October 1979 just before the end of the Tokyo Round negotiations. About the same time the European Commission suggested that “minimum labor standards” be included in the Lome convention, which provided for tariff preferences and technical and financial aid to a group of African, Caribbean, and Pacific countries. In 1980, as the multifiber agreement (MFA) regulating trade in textiles and clothing came up for renewal, organizations representing business and labor in textiles and clothing industries in America and Western Europe advanced proposals for a “social clause” to be inserted in the MFA.

Why Growth Rates Differ: The Political Economy of Social Capability in 21 Developing Countries

Social capability as a determinant of the differing growth performance of development countries over the last three decades is meant to cover all those causes of growth which go beyond the proximate ones — the level of investment and its efficiency — in explaining differences in growth rates. These include: entrepreneurship, learning by doing, organizational and institutional aspects related to transactions and information costs, as well as the general economic and political framework which determine the relative costs of doing business in different countries, as well as their efficiency of investment, and levels of thrift.

Institutional Development And Economic Growth

This paper surveys the role of institutions in promoting economic growth in cross-cultural and historical perspective. It examines inter alia, whether institutional development can be incorporated in formal growth theory, the influence of politics on economic growth and the relationship of institutional development and income distribution.

A simple framework for analysing various real aspects of stabilisation and structural adjustment policies

This article shows how a simple geometric framework containing a real model based on the standard two‐good three‐factor trade theoretic model and a monetary model of the domestic banking system can be used to analyse the changes in the real and nominal values of various economic variables of concern resulting from stabilisation and structural adjustment policies

The fable of the three envelopes: The analytics and political economy of the reform of Chinese state owned enterprises

Abstract This paper applies the standard theory of trade and welfare to the question of reforming Chinese state-owned industrial enterprises. It shows how a continuation of the unique Chinese system of labour market control by party cadres, accompanied by a liberalisation of commodity and capital markets could reconcile the conflict between political control and economic efficiency which has bedevilled other attempted reforms of Communist economies. Finally, it delineates the ideal sequencing of price reform, removal of industrial planning, foreign trade liberalisation and the reform of the capital market.

Supply price and surplus labour: Some Indian evidence

A vast literature has developed on the theory and measurement of surplus labour in overpopulated developing countries, of which India is often taken to be the paradigm. (See Kao et al., 1964 and Sen, 1966 for reviews.) The subject continues to be one of practical importance, particularly for the estimation of shadow wage rates for project analysis. (See Lal, 1973, 1974, for a review of this literature.) It was in the context of estimating shadow wage rates for industrial public sector projects in India that the research reported in this paper was undertaken. For this purpose the important question is: what wilI be the effects on agricultural output when an agricultural worker is withdrawn either directly or indirectly through the process of rural-urban migration induced by increased industrial employment? (See Harberger, 197 1; Harris and Todaro, 1970, for models of the rural-urban migration process.) In the early literature on surplus labour it was commonly assumed that, in overpopulated developing countries, labour in agriculture was in surplus in the sense that its marginal product was zero, so that agricultural output would not fall if some agricultural labour were withdrawn. Tests for the existence of surplus labour were based in part on estimates of the marginal product of agricultural labour and partly on measurements of the surplus labour time available in agriculture. The latter measures also yielded estimates of the extent of surplus labour and disguised unemployment, as follows. First, the total requirements of labour in agriculture (in a given region) with given technology were estimated. Next, the total availability of labour was estimated by multiplying the number of workers available by some postulated number of ‘normal’ working hours in a day (or by some estimated ‘normal work-load). The number of labour days required were then subtracted from those available to provide an estimate of the number of surplus labour days (and hence labourers) available in the area. Mehra (1966) provides the most notable attempt to measure surplus labour in India on these lines. These ‘tests’ and estimates of surplus labour are implicitly based on a ‘stock’ definition of the surplus of labour time per worker which is available. They fail, however, to take account of the economic notion of a supply price of labour which is given by the possibilities of substitution of income and leisure (open to any utilitymaximizing labourer), at levels of labour input per worker below that postulated in the ‘norm’ of the full ‘work-load’ per worker. That is, these estimates implicitly assume that the disutility of work does not alter until the normal number of working hours postulated in making estimates of the full work-load have been worked.’ For, as the recent theoretical literature on surplus labour has shown (Sen, 1966; Berry and Soligo, 1968; Stiglitz, 1969; Zarembaka, 1972), the necessary and sufficient conditions for surplus labour are given by a constant disutility of effort, which implies a constant marginal rate of substitution between income and leisure, over the relevant range of hours worked per man in the traditional sector. ’ Hence zero marginal productivity (tests for which were one route toward testing the hypothesis of surplus labour) is neither a necessary nor a sufficient condition for the existence of surplus labour. Nor is the evidence

The Japanese slump

This paper examines the Japanese slump through the respecive macroeconomic spectacles of Hayek and Keynes, and shows that the decade old slump is Hayekian in nature, and its cure is hampered both by the high yen policy misguidedly thrust on Japan by the US as well the peculiarities of Japanese political economy.

The New Cultural Imperialism: The Greens and Economic Development

This paper argues that environmentalism has become a new secular Western religion, which threatens world disorder as well as the prospects of alleviating poverty in the Third World. It critically examines the Green agenda in terms of a number of prospective international environmental treaties: the Kyoto protocol, the Basle convention, the POPs treaty, and the Biodiversity convention, and shows how these pose serious threats to the prospects of alleviating poverty in India.