H. W. Arndt

Market failure and underdevelopment

Abstract The concept of “market failure” has played a key role in a large part of the literature on economic development. Some have gone so far as to suggest that a greater degree of market failure is the distinguishing characteristic of underdevelopment. This article seeks to clarify the meaning of “market failure” in less developed countries (LDCs). Drawing on Kaldors distinction between the “allocative” and “creative” functions of markets, it points to the paradox that structuralists have tended to downgrade the significance of allocative efficiency for economic development but have focused almost entirely on allocative efficiency in their discussions of market failure. It is suggested that the anatomy of market failure, in terms of signaling, response and mobility components, can be applied to the creative as well as the allocative functions of markets. But none of these distinctions is entirely clear-cut, and there is a residual problem, recently highlighted by Hla Myints thesis about “organizational dualism” — the case of non-existent or highly segmented markets.

The origins of structuralism

Abstract Starting out from I. M. D. Littles recent categorization of development economics as ‘neo-classical versus structuralist’, this article makes three points. First, it traces the origins of structuralism in this broad sense in the emergence of the doctrine of market failure in England during the 1930s and 1940s. Secondly, it indicates the links between this line of thought and the Latin American structuralist theory of inflation. Finally, it takes up W. A. Lewiss suggestion that the severity of the inflation problem in Chile was due not so much to structural factors which it had in common with much less inflation-prone LDCs but rather to the strength of organized interest groups making competing income claims.

Development and equality: The Indonesian case

Abstract In the current debate about development and equality Indonesia has, at least in its part of the world, become the ‘showcase state’. Paucity of hard facts about the distribution of income and wealth has lent a free rein to strong opinions. The first part of this paper is an attempt to assemble the fragmentary evidence about trends since the fall of President Sukarno in 1965. The author suggests that, while the rich have undoubtedly become richer, it is by no means certain: nd in some senses almost certainly untrue—that the poor have become poorer in this period of unusually rapid economic recovery and growth. The second part, after a reminder about the constraints that have limited the economic policy options in Indonesia, assesses the policies that were pursued and concludes with some short remarks about the present outlook.

Colin Clark as a development economist

Abstract Colin Clark did not think of himself as a development economist. Facts about less developed countries were to him among the facts he collected and interpreted all his life. But in doing so he made fundamental contributions not only to economic statistics, but also to applied economics, including development economics. He discovered the “gap” between rich and poor countries, he drew attention to the importance of structural change for growth, he mounted a formidable case against neo-Malthusianism, and much more. So original and pathbreaking were his many contributions that one must regret he was never awarded the Nobel prize in economics.

The Role of Political Leadership in Economic Development

ABSTRACT It is often said that strong political leadership is necessary for economic development. One look at the Third World suggests that strong political leadership may be good or bad for economic development. Almost everything depends on what sort of political leadership and what sort of economic development. This article seeks to clarify the issues by looking more closely at these two concepts. It distinguishes three functions of leadership—authority, inspiration and management. It then examines the relevance of political leadership in these three roles to the ends (objectives) and means (strategies) of economic development. It concludes that much depends on the circumstances of different countries, and that this applies not only to the desirability but also to the limitations of strong political leadership. In particular, except in the early years of mass mobilisation and fervour following a revolution, leadership which takes the form of central planning and detailed bureaucratic regulation of the e...