- Email: [email protected]
The Politics of Growth: An Essay in Transaction Theory*
Economic Analysis and Policy
1
Vol. 01 No. 02, September 1970
THE POLITICS OF GROWTH: AN ESSAY IN TRANSACTION THEORY·
Truth rather than profundity is served by the observation that the problems of economic and social growth are related to all ellormous
complex of social, institutional and economic considerations. Some of
these considerations when viewed as forces or factors are fairly general in developing societies, but some are unique to given societies or La given aspects of particular societies. The uniqueness of the Congo's resources and their ownership and distribution, plus the history of Belgian administration and indigenous
social organization, make that country's process and problems of change different from all olhers. Similarly, or perhaps one should say dissimilarly,
there are unique considerations in Vietnam, and in all other lands. Yet uniqueness and national cultural dissimilarities, as important and interesting as they are, do not supersede 11le concern with generalization, even limited generalization. Analysis and synthesis simply beg for generalization even if beforehand the results are known to be incomplete. Growth, i1lter alia, depends upon the amount and nature of the resources available to the developing society. In other words, growth is related to the natural and artificial capital a society can somehow command~ and to its labor force, with its particular skills, qualities and size. In their turn, physical resources and labor become effective to the extent of their potential response to the administrative and allocative mechanism. Generally speaking, the more efficient and directed the administrative and allocalive machinery, the more likely are labor with its peculiar skills and quirks and the reSOUl'ces with their peculiar structure 10 be effectively used. To be sure, this comment implies that, as economists are wont to say, "other things are equal". Pecular social cllstoms, political upheaval, natural disaster may frustrate the allocative process, just as an all-pervasive anti-economic ideology may be frustrating. But, abstracting from the non-economic forces and pressures of the real world, economic success is in great part related to the solution of the problem of allocating scarce resources. This is one of the great traditional problems of economics. Politics and political action have given these poor but emerging societies independence if not freedom. Personal freedom, implying free choice, almost inevitably requires some sort of market choice - market freedom. The free market as an ideal, which was probably of great importance in the development of the democratic ideals and democratic revolutions of 18th and 19th Century Western Europe, has been supplanted in •
The aUlhor thanks Ihelnstitutional Building Project of Michigan Stale. PitisburF,h, Indiana and Syracusc Universities (ford Foundation) for providing the wherewithal 10 study the process of institution building.
2
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
the world by the primacy of the ideal of political revolution as a mcans of securing "freedom" however defined. Thai political independence, among other ideals, wi1l secure economic bencfits via planning or socialism Or Some other catchword is a major idea and ideal in emcrging states. Where in Western Europe, in the early days of development, the motive forces for political change had an economic base, in the underdeveloped world the goal of economic change is the political base. Marx is stood on his head. The economic system no longer is viewed as determining the political system, rather the reverse is the view. This direction of change from politics to economics is the Soviet expericnce, and probably carries a great wcight because of its closencss in time to the present. The history of Ihe Western European system is dead history, nol living experience. The poor countries have, to a degree, acted in the style of the Western 20th Century, or more accurately of the post-World War 20th Century, and have accepted economic planning as a necessary technique in allocating resources. Planning is part of the governmcntal ideal and of massive government intervention which has become so general in the past 30 or 40 years, almost regardless of the degree of development of a nation. It is probably the prevaili.ng common view of the emerging nations. I Yet planning is a capricious mistress. It is comparable to the wayan old song characterizes women: "You can't get along when you're with 'em or without 'em". The importance of the public sector and the intense desire to husband resources, even private resources, for political, social and economic ends requires planning. Yet it is in the nature of things that planning never (rarely) works out exactly. If the plan does work out one may be justified in assuming that it was self-serving, i.e., the goals were set so low that exact accomplishment was foreordained. In reality a tight plan, that is one which tries to utilize the resources to their fuUest, is most likely to be frustrated by the changing natures of supply, demand and autonomous investment, e.g., technical and economic assistance over which the planners have no control, and whose advent often is unplanned, insofar as the planners arc concerned? The direct participation of the government in enterprises producing goods (e.g., coal and steel in Great Britain, power in the U.S., petroleum in France) for sale, or the direct control over enterprise through 1. Cf. the "National Planning Serics" editcd by Bertram Gross, Syracuse University
Press, 1965-66. Studies of countries both developed and developing provide intercsting documentation regarding the widespread nature of government conlrol or attempts at control of economic life. The word "planning" no longer refers to a plan, but rather lo a system of regulatory conlrols to secure certain ends. 2. See John P. White, The Admillistfatioll of Technical Assistallce, Syracllse University, 1967. This pamphlct analyzes the relation bctween the administration of planning, in a general sense, and the specifics of technical assistance, showing thai the latter arc not well integrated into the processes of the former.
3
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
regulations affecting costs, prices, quality and outputs, is the modern style. Government owncrship of firms or industries is only one aspect of public intervention to transpose the private sector to a public onc. Mixed firms, i.e., partly owned by Government agencies and partly by private investors, planning of various degrees, subsidies and tax policies (as in post-war Germany) and other devices are available and are used to wither, control or direct so-called market forces in a fashion desired by the governmental administration. Wh.ile such policies may have a similarity to Merc:'lI1tilism, in truth they are modern inventions with modern goals of full employmcnt, rising income, particular kinds of income distribution, etc. These policics arc 20th century conceptions, not 17th or 18th ccntury ideals. 3 Indirect intervention through fiscal or moncta!·y policy and through the usc of public works as a stimulant to busincss and employment, which also is a type of planning, is probably the most effcctive and generalized public policy in the West, and is a part of the administrative mechanism of the emerging nations. Our point is that sometimc in the Great Depression, and surely after World War II, planning as a govern· ment function for developed and underdeveloped countries as in the Soviet sphere, became so widespread as to becomc an integral part of the economic scene. The resultant (relative) decline of the pricing and allocative mechanism of the free market is almost universal in thc old strongholds of Wcstern Capitalism. The political and social forms and ideology of intervention and planning have permeated the developing world. II
This modern style of governmental activity as a regulator was qUickly taken up by thc underdeveloped countries and has developed according to the national resources, ideologies and institutional forms of each. As one would expect, there is a great weight on the side of government investment, in social overhead or infrastructure, and on the side of activities producing goods and services directly for sale to consumers. The number and intcnsity of indirect actions by government to influence markets are perforce limited in emerging societies because of the smallness and lack of complexity of their market systems. In economic life, even accepting the imperfection of compet~ ition of the "real" world, the ultimate determinant of availability of a product or service is still the consumers' willingness to buy. Thus in the imperfect capital market, which is so marked in the United States and elsewhere in the Western World by self-investment of large firms and by the difficulty or even impossibility for small investors to borrow long-term capital, thc success of a business venture ultimately depends on the con3. Sec Andrew Shonricld, Modem Capitalism, Oxford University !'ress, New York and London, 1965, especially ParI 1, "Approaches to Planning", 71-238. Shonrield's book is of inestimable value in treating developed economies as ongoing processes.
4
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
sumcrs' renction nud purchnses. The markets of the West are so large and so v:.Hied that buyers' dollars can be spcnt for autos, stocks or vacations for hair dryers or bcauty shops, for canncd or frozen food, for sendin~ childrell to school or building a game room, and so 011. Similarly, producers havc a wide variety of alternative choices. Consumer sovereignty can operatc in a world of imperfect competition because of the depth and breadth of the consumers' market. This deep and broad Ill:lrket affects, of course, the process of the aHocation of resources. No investor, whether he is investing llis own money, borrowing funds, or using the undistributed profits of a corporation, is unlllindful of actual or anticipated consumer reaction. The very size and complexity of the consumers' market determine the allocation of scarce resources. While these resources are still relatively scarce, they are absolutely more abundant than they ever have beell. Technology, education, domestic and international trade, bUSiness aCumen all have free play because of the size and complexity of the total enterprise of the Western economies. Such consumer and (private) investor markets may be untidy, but in point of fact they do work quite well even though competitive economic theory is not always satisfied. Indeed, speaking for the United States, a major aspect of public economic policy is directed toward the continued expansion of markets. The controversy over bank versus fiscal policy is a controversy over memts, rather than ends. Stabilization versus growth is a most important aspect, but growth is never a variable which can be set at zero. The acceptable rate of growth is the issue, not_growth itself. To some extent there is a public interest in the nature and quality of goods produced, but it is limited. Indeed, Galbraith's Affl1unt Society which concerns itself in part with quality is considered "interesting" because it elaborates this (obvious) point. Incidently, in a responsive government, that is onc which has a democratic orien tation as the United States, even public works, to achjeve approval, must enjoy some kind of consumer or popular approval. Fewer monuments are being built but more Lincoln Centcrs, hospitals and schools, fewer ornate State Capitol buildings are erected but more roads and public amenities. Even the greatest monumcnt of them all, space flights, is justified by some set of values which are operational; i.e. military or interplanetary purposes of great, perhaps vital (imputed) import are being served. The social organization of the underdeveloped countries often stresses regional, tribal, caste, religious or ideological structures as contmsted to consumer sovereignty. For example, the States of India, in the great Famine Year of 1966-67, controlled the movement of food acroSS Slate lines, rather than such control being vested in the Central Governmcnt. In addition to the control exercised by the States, the poor transport system and inefficient distributive mechanism create sheltered markets with marked per capita inequalities and available food for the various p;:trts of India. The tribes of the African states, too, are significant interest
5
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
groups in dctcrmining lhe appointment of cabinel ministers and the nature of public expcnditures. The religious conflicts of igeria, Vietnam, and the Indian sub·continent are well-known as forces affecting public political and economic policy. The racial antagonisms and connicts of Rhodesia and Malaysia arc often, if to a lesser degree, to be sure, found elsewhere in lhe underdeveloped world. The process of economic development requires, if it is to be tolerable, the crea tiOIl of or markcd add it ions to "socia I overhead" (nccessary public works), while maintaining a reasonable standard of living. The criteria for judging how and to what end resources should be a Itocated are different in planncd economies from those which rely on market structures. In the practice of planning, a basic cconomic criterion for allocating resources might be to allocate them in such a way that, at the margins of investment, thc yield would produce equal returns which, if relative prices are stable, a dollar of investment would yield a dollar of return; or at least, marginal yields would be proportional to marginal investments. Such a planning system would, in effect, simulate the results of a hypothetical perfectly competitive market. Presumably such planning would be undertaken because the flee market was overburdened with obstacles to free competition, free entry and all the other [eslraints on trade. More realistically, however, the ph.lnning practice is concerned with the future as well as the prescnt. Thc plan, in effect, attempts to satisfy certain needs by a system of investment priorities. The prioriTies need not be economic, Le., need not stress market concern of allocation and returns, but might consider political and social desiderata. A main goal, however, is to balance the income of the future economy with present pressures. In economic terminology ,the ideal is to build a structure which will not necessarily maximize income in the present, but which will optimize income in accordance with some criteria in the future, whilst providing political and social stability in the present. This is why there is a tendency to use five, six, or seven year plans, the plan being continuous in a sense that during each year the plan is extended by a year. Where, for one reason or another, thjs is a very great concern with the present, lhe public budget becomes an important veh.icle for allocating resources. In any case the public budget lends to be the mechanism to carry out the objectives of the extended plan.
III Priorities are not set solely on economic considerations and purpose. In p,Jrt, the ideal goal is to change the very structure of the society, including the economic structure, through the vehicle of investments and resource allocation. The principle of marginality then loses its singular importance. At any rate, where the criteri
6
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
the net yields from marginal expcnditur~s. In (his ,..'ir~UlllS(:llh:\.\ lh\.' Yaltk' of resources, investment goods and labor. do not n~~essarily 1'\.'11\.'\.'1 Ilk' t'CQ1Iomic vnluc of the final product or servil:~. Thus. th~ prilh..'ipk· llr derived demand as a determinant of the demand for fal:turs or prudll~t iOll loses its significance, a significance which oblains in the Western su~i(,I\'. by and large, even though in such societies competition of a pure. perfect or even very substantial sort does not exist in pari icular corners of a market. The equilibrium of the economic market for the reSOurces of labor and capital, in an underdeveloped country often tends to be an equilibrium of political and other pressure groups,4 'The contending political and social groups achieve a stability or a tmde off, one to the other, in their efforts to get more for themselves. Destroying this tradc off equilibrium can occur by the loss of position of onc or more groups due to autonomous events or through the destruction of some groups by other groups. Th.is Illay be the road to revolution. But revolution is not an ordinary solution. Political trading is more the usual one. Such pressure allocative mechanism Virtually reverses the process which is found in the economic systems of the West. The demand or anticipated demand for consumer's goods in the West ultimately determines the structure of investment and production even where the con· sumption and production markets are monoploid or otherwise restrained. In the under·developed societies the structure of consumption is, possibly in greater part, determined by the allocation of investment - goods and labor - but as we have argued the allocative process is not determined by economic considerations alone but by a complex of economic, political and social considerations which together transcend the usual definition of the capital and labOl' market. This is not to assert that the allocation of resources in underdeveloped areas is less rational than in the developed market. It is to assert that rationality if it exists, is not merely subject solely to the calculus of economics - meaning traditional economics. Yct, too wide a departure from principles of costs and returns would be costly, indeed, to an underdeveloped economy and might spell the frustration of the planning practice. Too much concern with consumpt· ion, even though the pressures are profound might restrict or negate growth. Feeding today's population tolerably well might speed starvation for tomorrow's, yet loday's population must be fed. If one might grow reOective, il is the richer countries with great potential resources which can afford the luxury of concern with noneconomic considerations in allocating scarce resources. On the other hand, the very life of underdeveloped countries requires politiC<11 and social adventures without which governments would fall, and political and social chaos or at least confusion result. This is a paradoxic
7
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
which haunts all the underdeveloped countries. It also provides the substance of criticism for conservatives who would stress investment (capilal formation) as the road which the poor nations are not following with surficient dedication. On the other hand, the plight of the poor leads to a humanitarian concern. Do something now for the poor! Autonomously supplied consumer and producer goods then become the responsibility of the richer lands! Consumer requirements can be translated into investment needs. Income priorities are represented as quantities of goods or services which it is hoped will be realized in the rirst,secolld or subsequent years of the plan. In truth, the cost of any item of priority is the alternative uses of the limited resources. This is an economic concept which is useful, even if not entirely operational from the viewpoinl of money costs and money returns, or even real costs and real returns. Needless 10 say, what is gained and what is given up arc not merely economic quantities but such intangibles as goodwill support for the regime, social change and even ideological alignment. Therefore we would adel to the concept of priorities the less administratively rigid notion of the use of economic resources to gain politically and socially necessary ends. This is 110t a novel idea. The end of economic activity is always some satisfaction which is essentially psychic in its composition - the economist typically uses the word "utility".
IV In the political, economic world of developing countries, particular interest groups, sllch as trade unions, or other associations of producers and consumers which may have a religious caste or political orientation, may and do require special treatment which is unrelated to their net contribution to the economy, because their role in the political economy or body politic are considered significant beyond their mere productive role. Such groups may be viewed, from the affirmative standpoint, that they help to hold the society together, or they lllay be viewed, from the negative viewpoint, as a potcntial for mischievous action, unless they are satisfied. Collective bargaining in the American or the Wcstern European sense is an institution which cannot fit into the social organization of many of the developing cOlllltries because of the enormous role of government in economic life. Furthermore, where the free market is extant, the industries which hire labor may have their own peculiar ethnic, religious or compositional characteristics. If, in East Africa, economically weak Africans bargain for wages with relatively strong Indians, the wage structure might be politically unacceptable to the Government. The foreign concessionaire operating lin oil well or refining enterprise canllot be allowed to be in a position, because of his economic strength, to pay eilher less or more than is politically acceptable because the wage bill and its composition might embarrass the Government and others less well economically sit uated. There is a Iso the quest iOIl of deferred bencfits, such
8
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
as insurance systems, social security, vacations, medical care, etc. which have a political significance even more pronounced than in well-developed count ries. Therefore, insofar a~ w~~es and profits play a ~ole in allocating labor, and surely wages arc a slgl11flcant factor, the admmistrative machinery of wage and benefit determination cannot be based on a market concept of wages being related to marginal value product of labor in the market. On the contrary, there may be a tendency for wages to be rather arbitrarily fixed. Insofar as the wage fixing mechanism fallows rational criteria the relUrns to labor are both cost determining and price determined, if the notion of price determined includes anticipated prices. The neatness of this two-way relationship is made less tidy by the notion of the product produced is not only the physical product, but SOme polit. ical and social product which the political and economic administrators consider vital. Sumner Stichter once pointed out that factories turn out
people as well as goods. To develop the contacts betwecn the political and economic administration so that the adjustments may be attained, many different forms are used. Wage boards consisting of representativcs of managcmcnt, labor and public administration occur in some places, arbitration mcchanisms, or merely governmentally appointed arbitrators occur, various mediation procedures have been developed, minimum wage legislation and other labor legislation has been passed to bc administered by public administrators, sometimes chosen from members of special interest groups. Social benefits too, are significant as charges on the public budget. The techniques are limited only by the ingenuity of the human mind, and the human mind under pressure at that. In a rich society the significance of some kinds of intervention may be and probably is grcat. But the great size of the economy can stand the risks since only a small fraction of the economy at a time is involved. Furthermore, price level adjustments as well as relative changes in prices, may easily offset any cost burdens, while shifts in employment and investment due to consumer or cost reactions also operate to reduce the ravages of risk. Such changes cannot easily occur in underdevelopcd countries becausc of the thinness of the consumer market and of the governmental nature of the planned investment market. Oncc an investmcnt program is under way, it cannot easily be changed especially if it is taking up great fractions of the investment funds of the society. Changes in relative prices are likely to have a more serious effect when there are few relative prices to be changed than when there are many, as in the case of a well-developed society. Thus it may be seen that the sclf·correcting mechanisms of a thin, narrow market are likely to be less self·corrective than similar ones in a large, complex, deep m.lfket. Also the distortions arising from the lack of self-correcting mechanisms arc likely to be greater in a small market.
9
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
The mcchanism of wage regulation in Ihe underdeveloped countries seems 10 be copied from the developed states in some modified form to fit the circumstances of a particular country in question. Thus, it is not surprising thai the social and economic mechanisms and processes of the prcvious imperium or IIIelropole are copied or have been imposed 011 the former colony or sphere of innuence. For example, the labor social mechanisms of French Africa are more like those of France than of Great Britain. On the other hand, in L'Itin America where the political connections with European Powers have been loose for many years, United States, Western European as well as indigenous institutional forms have been experimented with.
v By social change we shall mean (i) the acceptance of new or different goals by people acting in some ordered way, that is to say, in an institutional process, or (ii) the ways of behaving becoming different, although the goals do not change; or (iii) both means and cnds undergoing change. We realize the unwisdom and incorrectness of making persistent distinctions between means and ends. We use these words merely because of their semantic utility as they do imply a stable system of behavior. Without debate we accept the idea that ends are in themselves instrumental and therefore may, for certain purposes, be viewed as means. But we are using thc words "mcans" and "ends" matter of factly to indicate steps in an on-going but unchanging process. Any change in the social process is social change by our definition. The instruments of group behavior, be they physical or immaterial, may undergo change, and the objectives which arc being sought, be they physical or immaterial, may also undergo change. In either case,or in their combination, the value conceptions of the actorS are different in the "before" change and "after" situation. Change is successful if it is persistent, and such persistance usually implies (one is inclined 10 say always) legitimation to the actors by some historical or moral criteria. 5 In recent years the question of developmcnt of underdevcloped countries has c1aimcd the interest of politicians, scholars, administrators, i'ller alia, as to ways and means of inducing and assisting underdeveloped countrics to change particular modes of behavior or goals and more general value systems. As is to be expected, economists specialize in problems of an economic nature, political scientists in problems and questions of political organization and change, and so on. The administrators, for their 5. If the changes are minor, say the substitution of informal, "lounge suits" for evening dress or dinner jackets for formal dinners or parties the effects may seem trivial. nut such trivial changes may be indices of more significant social changes in class values :lIld status. To be sure, most social changes arc trivi
10
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
part, have to combine political and social considerations in their con. ceptions of change. What is fairly common in analysis is to view change as originating outside the system to be changed. Social change which OCCurs as part of the evolution or internal reaction to the ongoing process is not the kind of change most people concerned with development consider. Really the system is to be changed rather than changed by its own internal forces. Change to many observers and practitioners is usually the effect of an exogenous variable which somehow is inserted into the ongoing system, with the result of changing the nature or behavior of the system. Ultimately, this comes down, of course, to changing the nature or at least the behavior of individuals in the system. Economic and technical assistance, political advice, education reform have frequently been introduced to emerging nations' systems often in situations which are neither organized nor oriented to accept «imposed" changes. The results, on the whole, have been happy for neither donor nor host. Congressional doubts, and the spotty record of improvement in the underdeveloped world illustrate this unhappy conclusion. Foreign technical advisers, at all levels, often insist or strongly support reforms or behavioral changes which scarcely appeal to the host administrators. Examples in taxation, education, and investment policies are frequent. In a more recent period, perhaps dating from the shift in aid programs from emphasizing economic to stressing teclmical help, interest in change has been directed also to endogenous changes - to those which originate within the system, even though they may have been originally triggered by external forces. An example might clarify tlus point. The gift of grain from the United States to an underdeveloped country requires, if it is to be effective, a particular type of distribution mechanism within the underdeveloped country _Such a distributive mechanism may not and frequently has not existed within the country, SO that novel methods of distributing grain, independent of the traditional market system have to be devised. This is done by creating new patterns of behavior by the government as the distributing agency, as well as on the part of the recipients of the grain. Communal claims or money as a means of payment arc partially replaced by some other attribute, e.g.) need, political status, location, or what not. The distribution mechanism created by the government does not operate for profit, but for salaries, graft or again what not. 6 The new distribution system properly speaking is an institution in our case a novel institution, which In turn has its repercussions on other institutions, for example the market mechanism, social mobility, the land tenure or the family system of the country in question. It is possible, even likely, that the long run effect of the distribution of free U.S. grain 6. See S.C. Sufrin, ''Craft-Oil for the Wheels and Oil for the Palm", Challenge. Vol. XIII. (October, 1964). pp. 30-33, and S.c. Sufrin, "The Two Markets. or 'II Takes a Worried Man to Sing a Worried Song"', Ethics. Vol. LXIV, No.4, July, 1964, pp. 292 ff.
11
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
has been a burden to agricultural development ill some countries.? Similarly the great international concern with population control has resulted in some societies in a transvaluation of values regarding marriage, the home, family organizations, industrialization and a host of other considerations. [t is not unlikely that the changing U.S. legislature and judicial attitudes toward similar control values are, in part, the effect of the "exploding population" originally applied to developing societies as India or Africa. The change in the value structure has led to changes in goals (population in this case) all over the world. The goal changes are in their turn related to novelties in modes of group behavior (again all over the world). Similarly new institutions or clusters of institutions dealing with bank control, education, urb,:mization, etc. have arisen within diverse social systems. Thus, olltside pressures or exogenous forces may be internationalized, and in the act of internationalization, changes in the social process of a country originating the change take place.
VI Internal pressures themselves may cause changes in the value and behavior structure within a society. It is to t he latter that we will direct our attention - the endogenous changes or adjustments largely triggered from changes within the society. The catch phrase which has been used to classify such endogenous changes is "institution building", As in the case of means and ends, the distinction between exogenous and endogenous is blurry, and useful semantically, rather than being a firm operational differ· ence. In an ultimate sense all the world is a unity. Even in the limited purposes of social analysis it is quite incorrect to assume that undeveloped nations are insulated from the effects of behavior in the outside world. The concept of an isolated, sacred society is not a very useful one in the analysis of development. Yet it is useful to distinguish between a change introduced directly by a non-national or foreign agency sllch as a U.S. Mission, and a change arising from the accommodation of existing local institutions. To be sure a foreign force may generate local change, involving local groups, e.g., the training of a police force under foreign officers, but such secondary changes tend not to be considered "imposed" to the extent as t!lose engineered directly by "outside" agencies. 7. In private conversation, Professor Milton Friedman, a political conscrvative as well as famous economisl made this observation, but Dr. M, Ezckiel, whose political persuasion is unknown to mc, but who has been for years a most distinguished n
12
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
In a penetrating and most suggestive articie K originally published in 1890 and more recently reprinted in Science. the late Professor Chamberlin, a geologist by profession, argued that a single explanatory conception of a complex phenomenon is not likely (0 be SO effective in providing explanation as a ramily or hypotheses, (or a multiplicity or hypothetical processes). While Professor Chamberlin was mainly concerned with the earth sciences, his comments are distinctly applicable in a social analysis. One is inclined to believe that the value of a multiple hypothesis approach is even more valuable in the social than in the natural sciences. The subject matter or thc social sciences is immcnsely COIllplex, the inventory of relevant, potential variables taxing the imagination. The number or ways or looking at the phenomena arc exceedingly large, and the possible universes or discourses - (models) - with which the social scientists are concerned may easily be multiplied by including or excluding relatively minor aspects of behavior. For example, the family can be viewed narrowly or broadly. It may include or exclude diverse notions of saving, training or health without necessarily destroying the usefulness of the resulting models for certajn analytic purposes. If a model is defined as a mechanical (logical) image of social behavior, it is reasonable to argue that if one mechanical image can be devised to explain the social process in question, more than one can be devised, with the validity of usefulness of each being determined by its operational success. A low correlation between two variables or among more than two variables with a high level of probability may be a very useful analytic guide, for to account for some covariation with great certainty is better than to explain no variations, or even a great variation with a low certainty. In the social world,lllultiple causation is more likely to be the rule than single causation, and furthcrmore, the relative significance of causative factors are likely to vary in differing circulllslances. 9 We all know that there arc more ways to roast a pig than burning down the house. But this is not to deny, as Elia tells us, that once the legitimate way to roast a pig in old China was to burn down houses.
VII The ensuing discussion is limited to one of many possible hypotheses regarding institution building. No claim is made ror its universality or even for its great frequency in all times and all places. However, 8. Thomas C. Chamberlin, "Method of Multiple Working Hypothesis", Science, Vol.l48 No. 3671, May 7, 1965, pp. 754 fr. 9. The idea of "an economic" or "a technological" or "a anything" interpretation of history is. I feel, repugnant. Notions of social change, development or progress arc aspects of what uscd to be called the Philosophy of History. Recent fashion has dencgratcd that useful notion and substituted ideas of change. The objection to philosophies of history, in my opinion,is that they generally foiled to recognize Ihe multiple nature of causc, the role of choice, and the inconstancy of the forces which beilr on society, inducing change.
13
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
the hypothesis offered below docs seem to be one whieh explains lllany situations in which institutions are created in underdeveloped coulltries. The dominant institution which persistently continues to expand its scope and authority in developing societies is government. We use government here to include the legislative, administrative, and judicial functions of a society. The administrative aspect, however, probably is the most significant one in societies often not quite oriented to the traditional Western restraints on and of the courts or the compromises of the legislature. Amtlogy between governments of the Western World and of the developing world are dangerolls because of the much slower (and different) development of government, via nationalism, in Western Europe and North America as compared to the under-developed world of today. Clearly the Illodern structuring of the governmental conceptions in the West, let us roughly and arbitrarily say, between the middle of the fifteenth century and through the sixteenth and early seventeenth century occmed against the backdrop of a relatively undeveloped but nevertheless developing technology, a powerful international church organization, a declining feudal system being replaced, and on the whole, inefficient agricultural and urban systems. An indigcnous scicnce, novel concepts in philosophy and ethics inc.\uding public morality, a new technology, the era of discoveries and more complex trading arrangements, were however, on the side of fairly rapid growth as measured against the history of the past. It is from such factors thai the stimuli for change and development arose. The State-Government concept as an agency of control slowly developed feeling its way, creating its own justification and legitimation while adapting itself to new institutional forms and class structures. The various rorms of business enterprise, trade unions, capital markels, pressures for social legislation arc the lypes of activilies which impinged on governmenl, aided by the extension of political power to more and more people as voters. But the road was hard and long, and the results often less than satisfactory, in the history of the Western World. The underdeveloped world of today, however borrows or has forced upon it many of the aspects and attributes of Western history, among them nationalism. The multiplicity of national states which have, in some instances, quite arbitrarily asserted themselves since World War II, is a signal of the success of an earlier ideology of Europe which there, however, is slowly being replaced by some notion of inter-nationalism or even supranationalism. 10 The underdeveloped countries, upon achieving freedom from the metropoles, already had built into their value and behavior structures many aspects which the West had laboriously developed over many years. 10.
11 is interesting how the emergence of the new nations, surely a major phenomenon of the twentieth century, uses the nationalism of socialism of the nineteenth as ideological and tltopean justification. The up-to-date ideals of African and Asian intellectuals arc roughly those of Western nation
14
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
Surely among the more important, probably the Illost important, western conception was that of "big government" to use Dean Paul Appleby's phrase. But, in virtually all of the developing states, unlike the typical western example, the governmental apparatus rests on a one party system and is dedicated to some often vague ideal of socialism cum nationalisl11. The class structure of the emerging societies is typically dissimilar from the class structures which support the western governmental structures. For example, the middle class is largely absent, while the laboring classes have neither the occupational skills nor the size associated with urban socialism in Europe, or what we may, without any honorific intent, call welfarislll in the United States. This does not mcan that the social groups of a developing society are ideologically homogenous within each state, or that conflict is absent. On the contrary, ideological differences, religious and economic concerns, and other connicts and competitions make these societies heterogeneous from the behavioral viewpoint. Differences occur both without and within each governmental structure for each society. In spite of the usually weak economic and industrial base in developing societies, the institution of the labor (trade) union is widespread. The very fact of organization with its ideologic implications has given the union movement a power far beyond the economic importance that number might imply.1I In developing societies governmcnt is the major political and economic institutioll. It is economic in the sense that it tends to control the allocation of resources and the structure of the market. Jt is political since it is the agency which is the seat of ultimate power, and the one, therefore, with which other institutions must treal if they are to achieve any success. If the ideal or goal of a 11011-govcfllment institution is revolution, we have onc set of conditions in which there is a contest of power and the possibility of one institution overpowering another. However, this is an outSide, limiting casco By and large some form of institutional adaptalion is sought by non-goverllmelltal institutions pressuring government, even when revolutioll:Hy slogans are lIsed. For example, the desire for wagc increases by a lIllion docs not imply that failure 10 secure the incrcases will lead to a revolutioll. It might, but this is an outside casco Typically, the deSire for wage increases, assuming the government can exercise control over prices and income distribution, is the subject of negotiations and discussions among union leaders, governmcnt officials and politicians. Similar discllssions may be held on other issues such as social security, prices, availability of conSUJ1lcr goods, training, education, or any other matter in which some organized group has an interest and desires to act II.
See s.c. Sufrin, UII'-OIlS ill Emerging Societies: fh,slrolion ill Politics, Syracuse Univcrsity Press, 1964. Especially Chaptcr 2: Unions in Undcrdevelopcd Countries; see also tl.l·1. Millen, The Politic(l! Role of Lobor i" Del'eloped COllI/fries, Brookings [nslilulioll, Washington, D.C. 1963: cspcchilly Chap Icr~ 6, Dynarn ics and TeChniques :'Illd 7, Frcedom <'Ind Indcpcndencc.
15
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
through governmcntal channels. Or, the governmcnt may act unilaterally, although in the first instance the maller was thc subject of contention bctween non-governmcntal institutions, e.g., management and labor. So long as thc contending parties do 110t destroy each other, or onc of them, but continue to :Jpply mutual prcssurcs, the reaction is to be acc011llllodaled to the Illutual powcr and viewpoints. There is in effect a transfer, first of information and attitudes, and finally of understanding program. Thus, a trOllsaetioll relates the contending institutions, the government being one of the contending institutions. At the program and policy levels, which is to say, at the ideological and behavioral levels, adjustments, revisions and changes of values and behavior occur during the transactiQn process. The contentions may embrace more than two parties, and the ultimate issues are not so simply defined as in a win-all or losc-all game. There tends to be a multiplicity of parties and a multiplicity of possiblc solutions or adaptations, some of which are bctter than others, and some more likely to be persistent. This dialectic or better polylectic, thcn frcqucntly givcs rise 10 a new struclure, a new institutional mcans to carry out the program lind to implcmcnt the policy. For example, wage discussiolls givc rise to wage boards which becomc thc agencies to administer wage systems. The wage administration thcn becomes an institution with its own legitimation, interests and purposes. Price controversies give risc to price boards with similar effects from the structural point of view. The same phenomenon also occurs in the neld of education: "Educational activities and organizations become more widespread and a continuous differentiation between the different levels of the educational syslem - between primary, secondary, vocational, adult, higher education, takes place. Each of these systems - and cven Illany sub-systems - gradually becomes more autonomous, specialized and organized in its own framework."12 The complexity of what to teach, especially in respect to a language to be taught, is illustrated ill the "Role of Education in the Polit· ical and Economic Development of Southeast Asia" by T.H. Silcock.'3 Silcock examines the pressures and counter-pressures which the British authorities of Southeast Asia experienced in the post World War II period in an attempt to find somc balancc between the requirements of the 12.
Virtually all cmcrging countrics havc some sort of wagc or labor l,oards with power:; u:;ually inherent in lauor-management bargaining institutions in the U.S. and Western Europe. A similar situation of special qllflsi-govcrnl11clll:tl bodies with respect to export prices, domestic prices, necessities, etc. depcnding on the particular problem also exists ill lll11ny underdeveloped nations. S.N. Eisenstadt, "Education and Political Development". Post Primary J::duco/ioll 011 Poli/icol o"d Economic Delle/o/mli'llf, N.C. Piper and Taylor ('ole. cds. COlllll1unwealth Studies Ccnter. Uukc Univcr~ily Prc.~s. 1964. p. 35.
13.
T.H. Silcock. "Education in the Political & Economic Develolllllcnl of South· cast Asia", Post Primary l:.auCQtiOIl. OIJ. cif. pp. 200.IT.
16
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
govern_ various ethnic and econo mic groups . The responsiveness of the undoubt_ ments of South east Asia was admir able, althou gh the costs were s as system edly very high in Ihe development of such diverse cduca tional both the finally dcveloped under government conlro l. Contro l extcnd ed to under_ the of public school system s and the private schools. In several ries of developed countr ies formal attem pts have been made by the minist es to agenci ve istrati educa tion throug h commissions and other quasi admin . This direct educa tion in accord ance with the needs of organized groups L10S, pines, Philip Israel, also appea rs the case in such diverse countr ies as India, Peru, Burma , while it appear s to apply less to countr ies such as Iran, Vietna m. 14 To be sure, a responsive and responsible Western governmcnt effect. tends to get a public reactio n to its ideas before puttin g them into ve recepti also is nment This is an aspect of responsive govern ment. Gover the in role to the ideas of organized pressure group s recognizing their other scheme of things. In such transa ctions admin istrati ve bodies and s policie late organi zation al structu res arc often developed either to formu develand progra ms or to admin ister them. This is not peculiar to underU.S., the as such oped countr ies. Howcver, in well-developed societ ies, or permGreat Britain, or any of the other wester n countr ies such ad hoc tive legisla the h throug nt restrai anent institu tions are always subjec t to es societi ping machi nery, the courts or throug h the free electio ns. In develo a ritual where there are one party govern ments , electio ns are often more Illay be boards price , boards than a test. Agencies as comm ission s, wage al retution surrog ates for the free electio ns, and legislat ive and consti gical slraint s of the West. Such bodies may very well reflect the ideolo . groups res pressu values or value changes of govern ment and the social the doing The new institu tions also provide quasi public mechanisms for assumed lly genera so nts restrai of public business withou t the institu tional rstructu in a well developed societ y. Western societies use the institu tional with, a ing of pressure and interest group s in additi on to, or concu rrent es and attitud and n serious reliance on electio ns, the courts , public opinio interpretthe restrai nts impos ed bv the inner discipl.ine born of an ethica l are not ation of history . The processes of these general restrai nts however. to rely alway s, nor even usually, available to emerging states. They seem observer, on rather direct action , on social processes, with (to the Western nal" titutio at least) frustra ting and morall y irrating neglect of "cons es in restraint and moral conce rn. It is not unlikely that the planning agenci tional institu ate legitim to the new societies will become impor tant agencies additi ons to the social process.
VIII The 31'2'Ul1lenl is that econo mic and social forces tend to 14.
be found in Inform ation on the formal organization of educati on is to Department Millistries of !J'(/lu:alioll. Their FUllcliollS alld Organizatioll, U.S. D.C. 1962. gton, of Ilealth. Educat ion and Welfare. Office of Educat ion, WaShin
17
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
compel governmcnt and non-governmental agencies to act ill some concert without the elaborate ami sensitive social control mechanism of the West. Action is initially transactional in a sense lhat lwo or marc institutional parties become conccrned over a problem and the discussion or mutual pressures result in some values, altitudes and points of vicw belllg transferred from one to the otller, so that the contending institutions undergo SOllle form of accommodation or compromise. In the language of economics, the utility curve of each party in the transaction is changed. If the transacti011 is beneficial, the utility pOSition of each of the parties is improved. If the situation has deteriorated, the utility position of both diminishes. The third alternative, that either one may have improved or diminished with respect to the other. To this extent, the interactions or actions of the contending institutions upon each other are not entirely unlike the bargaining process of the economic market place. In addition to the transactions reaction, if the mutual adjustments give rise to persistent new forms of behavior, new values and new attitudes, there is a strong probability that new institutions or organizcd effort arises. Thus, the transaction is polylectic, more than two parties may transact, need more than two goals and may figure in the adjustment process. It is not as if position A and position 13 of contending parties is uniquely resolved to position C as in a parallelogram of forces. Rather there arc a bundle of possible positions on the side of A and a bundle 011 the side of 13 and so the determination of C is not unique. Nor do the contending parties necessarily contend for ultimate supremacy. Every petition to the government is not a real or implied attempt to destroy the government;but rather a move to change it, to adjust its behavior with the implication that the pressll1"ing forces are willing to adjust their behavior to the point of agreeing to a llew institutional form to carry out an activity indep~ endently of the pressuring force. It is interesting to note that lIOt only does government in underdeveloped countries frequently officially recognize pressure groups, a technique we suggest designed to compensate for the lack of meaningful democratic and intra-administrative procedures, but governments also often recognize as pressure groups agencies oulside their own government. Agencies of U.N., of foreign governments, e.g., technical assistance programs of the U.S. and other countries have official recognition which makes them in an operational sense part of the administrative machinery of the host government. The so-ca lied "Servicios" of L1t in America and elsewhere, agencies which are concerned with agriculture developmcnt as well ns education und health, and are in, but not exactly pnrt of, thcgoverllment, and in them the role of the U.S. foreign aid officials is very great indeed. They are an example of the transaction polylcctic in action to the point of institution creation. IS They have enjoyed success as well as suffered failure. 15.
Cf. Robert J. Shaefer, Sefl1icio t,'.xperiel/ce - Pos/ (lIId Prospect of Jnilll Opera/iolls ill Tee/micn! Assistance. Syracuse University Press. 1965.
18
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
The p
suggested above is a pmgmatic, operational solution of emerging cOulltries to the problem of creating a responsiveness, e.g., an aware citizenry, a sensitive bureaucracy, electoral pl'Occdurcs, but the rule of law and many of the other attributes which the Western World considers as lhe sine qlla /lOll of government arc absent. The concept of majority determination of general policy via elections is at best a primitive one in determining government policy. Minority rights, representative government, administrative responsibility, restraints all private bel~avior and ad hoc solutions to short range problems need to be built into any governmental system. Lacking the ideological base of the West and other social, political and economic development of the West, the underdeveloped countries may very well develop their own indigenous type of dcmocracy through thc creation of institutions devised to further ,md protect interests of special groups and classes through the empirical but nevertheless political method we have termed . . 16 t I1C transaction po I y Iectlc.
University of Michigan Syracuse University
16.
Sidney C. Sufrin
Cf. Kenneth E. Boulding, Conflict filld Defense - A (lenemf 'f1leoIY. Harper Torchoooks, J962, for an extended theoretical discussion of the complcxity but order in adjustment to contcntion.
1
Vol. 01 No. 02, September 1970
THE POLITICS OF GROWTH: AN ESSAY IN TRANSACTION THEORY·
Truth rather than profundity is served by the observation that the problems of economic and social growth are related to all ellormous
complex of social, institutional and economic considerations. Some of
these considerations when viewed as forces or factors are fairly general in developing societies, but some are unique to given societies or La given aspects of particular societies. The uniqueness of the Congo's resources and their ownership and distribution, plus the history of Belgian administration and indigenous
social organization, make that country's process and problems of change different from all olhers. Similarly, or perhaps one should say dissimilarly,
there are unique considerations in Vietnam, and in all other lands. Yet uniqueness and national cultural dissimilarities, as important and interesting as they are, do not supersede 11le concern with generalization, even limited generalization. Analysis and synthesis simply beg for generalization even if beforehand the results are known to be incomplete. Growth, i1lter alia, depends upon the amount and nature of the resources available to the developing society. In other words, growth is related to the natural and artificial capital a society can somehow command~ and to its labor force, with its particular skills, qualities and size. In their turn, physical resources and labor become effective to the extent of their potential response to the administrative and allocative mechanism. Generally speaking, the more efficient and directed the administrative and allocalive machinery, the more likely are labor with its peculiar skills and quirks and the reSOUl'ces with their peculiar structure 10 be effectively used. To be sure, this comment implies that, as economists are wont to say, "other things are equal". Pecular social cllstoms, political upheaval, natural disaster may frustrate the allocative process, just as an all-pervasive anti-economic ideology may be frustrating. But, abstracting from the non-economic forces and pressures of the real world, economic success is in great part related to the solution of the problem of allocating scarce resources. This is one of the great traditional problems of economics. Politics and political action have given these poor but emerging societies independence if not freedom. Personal freedom, implying free choice, almost inevitably requires some sort of market choice - market freedom. The free market as an ideal, which was probably of great importance in the development of the democratic ideals and democratic revolutions of 18th and 19th Century Western Europe, has been supplanted in •
The aUlhor thanks Ihelnstitutional Building Project of Michigan Stale. PitisburF,h, Indiana and Syracusc Universities (ford Foundation) for providing the wherewithal 10 study the process of institution building.
2
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
the world by the primacy of the ideal of political revolution as a mcans of securing "freedom" however defined. Thai political independence, among other ideals, wi1l secure economic bencfits via planning or socialism Or Some other catchword is a major idea and ideal in emcrging states. Where in Western Europe, in the early days of development, the motive forces for political change had an economic base, in the underdeveloped world the goal of economic change is the political base. Marx is stood on his head. The economic system no longer is viewed as determining the political system, rather the reverse is the view. This direction of change from politics to economics is the Soviet expericnce, and probably carries a great wcight because of its closencss in time to the present. The history of Ihe Western European system is dead history, nol living experience. The poor countries have, to a degree, acted in the style of the Western 20th Century, or more accurately of the post-World War 20th Century, and have accepted economic planning as a necessary technique in allocating resources. Planning is part of the governmcntal ideal and of massive government intervention which has become so general in the past 30 or 40 years, almost regardless of the degree of development of a nation. It is probably the prevaili.ng common view of the emerging nations. I Yet planning is a capricious mistress. It is comparable to the wayan old song characterizes women: "You can't get along when you're with 'em or without 'em". The importance of the public sector and the intense desire to husband resources, even private resources, for political, social and economic ends requires planning. Yet it is in the nature of things that planning never (rarely) works out exactly. If the plan does work out one may be justified in assuming that it was self-serving, i.e., the goals were set so low that exact accomplishment was foreordained. In reality a tight plan, that is one which tries to utilize the resources to their fuUest, is most likely to be frustrated by the changing natures of supply, demand and autonomous investment, e.g., technical and economic assistance over which the planners have no control, and whose advent often is unplanned, insofar as the planners arc concerned? The direct participation of the government in enterprises producing goods (e.g., coal and steel in Great Britain, power in the U.S., petroleum in France) for sale, or the direct control over enterprise through 1. Cf. the "National Planning Serics" editcd by Bertram Gross, Syracuse University
Press, 1965-66. Studies of countries both developed and developing provide intercsting documentation regarding the widespread nature of government conlrol or attempts at control of economic life. The word "planning" no longer refers to a plan, but rather lo a system of regulatory conlrols to secure certain ends. 2. See John P. White, The Admillistfatioll of Technical Assistallce, Syracllse University, 1967. This pamphlct analyzes the relation bctween the administration of planning, in a general sense, and the specifics of technical assistance, showing thai the latter arc not well integrated into the processes of the former.
3
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
regulations affecting costs, prices, quality and outputs, is the modern style. Government owncrship of firms or industries is only one aspect of public intervention to transpose the private sector to a public onc. Mixed firms, i.e., partly owned by Government agencies and partly by private investors, planning of various degrees, subsidies and tax policies (as in post-war Germany) and other devices are available and are used to wither, control or direct so-called market forces in a fashion desired by the governmental administration. Wh.ile such policies may have a similarity to Merc:'lI1tilism, in truth they are modern inventions with modern goals of full employmcnt, rising income, particular kinds of income distribution, etc. These policics arc 20th century conceptions, not 17th or 18th ccntury ideals. 3 Indirect intervention through fiscal or moncta!·y policy and through the usc of public works as a stimulant to busincss and employment, which also is a type of planning, is probably the most effcctive and generalized public policy in the West, and is a part of the administrative mechanism of the emerging nations. Our point is that sometimc in the Great Depression, and surely after World War II, planning as a govern· ment function for developed and underdeveloped countries as in the Soviet sphere, became so widespread as to becomc an integral part of the economic scene. The resultant (relative) decline of the pricing and allocative mechanism of the free market is almost universal in thc old strongholds of Wcstern Capitalism. The political and social forms and ideology of intervention and planning have permeated the developing world. II
This modern style of governmental activity as a regulator was qUickly taken up by thc underdeveloped countries and has developed according to the national resources, ideologies and institutional forms of each. As one would expect, there is a great weight on the side of government investment, in social overhead or infrastructure, and on the side of activities producing goods and services directly for sale to consumers. The number and intcnsity of indirect actions by government to influence markets are perforce limited in emerging societies because of the smallness and lack of complexity of their market systems. In economic life, even accepting the imperfection of compet~ ition of the "real" world, the ultimate determinant of availability of a product or service is still the consumers' willingness to buy. Thus in the imperfect capital market, which is so marked in the United States and elsewhere in the Western World by self-investment of large firms and by the difficulty or even impossibility for small investors to borrow long-term capital, thc success of a business venture ultimately depends on the con3. Sec Andrew Shonricld, Modem Capitalism, Oxford University !'ress, New York and London, 1965, especially ParI 1, "Approaches to Planning", 71-238. Shonrield's book is of inestimable value in treating developed economies as ongoing processes.
4
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
sumcrs' renction nud purchnses. The markets of the West are so large and so v:.Hied that buyers' dollars can be spcnt for autos, stocks or vacations for hair dryers or bcauty shops, for canncd or frozen food, for sendin~ childrell to school or building a game room, and so 011. Similarly, producers havc a wide variety of alternative choices. Consumer sovereignty can operatc in a world of imperfect competition because of the depth and breadth of the consumers' market. This deep and broad Ill:lrket affects, of course, the process of the aHocation of resources. No investor, whether he is investing llis own money, borrowing funds, or using the undistributed profits of a corporation, is unlllindful of actual or anticipated consumer reaction. The very size and complexity of the consumers' market determine the allocation of scarce resources. While these resources are still relatively scarce, they are absolutely more abundant than they ever have beell. Technology, education, domestic and international trade, bUSiness aCumen all have free play because of the size and complexity of the total enterprise of the Western economies. Such consumer and (private) investor markets may be untidy, but in point of fact they do work quite well even though competitive economic theory is not always satisfied. Indeed, speaking for the United States, a major aspect of public economic policy is directed toward the continued expansion of markets. The controversy over bank versus fiscal policy is a controversy over memts, rather than ends. Stabilization versus growth is a most important aspect, but growth is never a variable which can be set at zero. The acceptable rate of growth is the issue, not_growth itself. To some extent there is a public interest in the nature and quality of goods produced, but it is limited. Indeed, Galbraith's Affl1unt Society which concerns itself in part with quality is considered "interesting" because it elaborates this (obvious) point. Incidently, in a responsive government, that is onc which has a democratic orien tation as the United States, even public works, to achjeve approval, must enjoy some kind of consumer or popular approval. Fewer monuments are being built but more Lincoln Centcrs, hospitals and schools, fewer ornate State Capitol buildings are erected but more roads and public amenities. Even the greatest monumcnt of them all, space flights, is justified by some set of values which are operational; i.e. military or interplanetary purposes of great, perhaps vital (imputed) import are being served. The social organization of the underdeveloped countries often stresses regional, tribal, caste, religious or ideological structures as contmsted to consumer sovereignty. For example, the States of India, in the great Famine Year of 1966-67, controlled the movement of food acroSS Slate lines, rather than such control being vested in the Central Governmcnt. In addition to the control exercised by the States, the poor transport system and inefficient distributive mechanism create sheltered markets with marked per capita inequalities and available food for the various p;:trts of India. The tribes of the African states, too, are significant interest
5
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
groups in dctcrmining lhe appointment of cabinel ministers and the nature of public expcnditures. The religious conflicts of igeria, Vietnam, and the Indian sub·continent are well-known as forces affecting public political and economic policy. The racial antagonisms and connicts of Rhodesia and Malaysia arc often, if to a lesser degree, to be sure, found elsewhere in lhe underdeveloped world. The process of economic development requires, if it is to be tolerable, the crea tiOIl of or markcd add it ions to "socia I overhead" (nccessary public works), while maintaining a reasonable standard of living. The criteria for judging how and to what end resources should be a Itocated are different in planncd economies from those which rely on market structures. In the practice of planning, a basic cconomic criterion for allocating resources might be to allocate them in such a way that, at the margins of investment, thc yield would produce equal returns which, if relative prices are stable, a dollar of investment would yield a dollar of return; or at least, marginal yields would be proportional to marginal investments. Such a planning system would, in effect, simulate the results of a hypothetical perfectly competitive market. Presumably such planning would be undertaken because the flee market was overburdened with obstacles to free competition, free entry and all the other [eslraints on trade. More realistically, however, the ph.lnning practice is concerned with the future as well as the prescnt. Thc plan, in effect, attempts to satisfy certain needs by a system of investment priorities. The prioriTies need not be economic, Le., need not stress market concern of allocation and returns, but might consider political and social desiderata. A main goal, however, is to balance the income of the future economy with present pressures. In economic terminology ,the ideal is to build a structure which will not necessarily maximize income in the present, but which will optimize income in accordance with some criteria in the future, whilst providing political and social stability in the present. This is why there is a tendency to use five, six, or seven year plans, the plan being continuous in a sense that during each year the plan is extended by a year. Where, for one reason or another, thjs is a very great concern with the present, lhe public budget becomes an important veh.icle for allocating resources. In any case the public budget lends to be the mechanism to carry out the objectives of the extended plan.
III Priorities are not set solely on economic considerations and purpose. In p,Jrt, the ideal goal is to change the very structure of the society, including the economic structure, through the vehicle of investments and resource allocation. The principle of marginality then loses its singular importance. At any rate, where the criteri
6
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
the net yields from marginal expcnditur~s. In (his ,..'ir~UlllS(:llh:\.\ lh\.' Yaltk' of resources, investment goods and labor. do not n~~essarily 1'\.'11\.'\.'1 Ilk' t'CQ1Iomic vnluc of the final product or servil:~. Thus. th~ prilh..'ipk· llr derived demand as a determinant of the demand for fal:turs or prudll~t iOll loses its significance, a significance which oblains in the Western su~i(,I\'. by and large, even though in such societies competition of a pure. perfect or even very substantial sort does not exist in pari icular corners of a market. The equilibrium of the economic market for the reSOurces of labor and capital, in an underdeveloped country often tends to be an equilibrium of political and other pressure groups,4 'The contending political and social groups achieve a stability or a tmde off, one to the other, in their efforts to get more for themselves. Destroying this tradc off equilibrium can occur by the loss of position of onc or more groups due to autonomous events or through the destruction of some groups by other groups. Th.is Illay be the road to revolution. But revolution is not an ordinary solution. Political trading is more the usual one. Such pressure allocative mechanism Virtually reverses the process which is found in the economic systems of the West. The demand or anticipated demand for consumer's goods in the West ultimately determines the structure of investment and production even where the con· sumption and production markets are monoploid or otherwise restrained. In the under·developed societies the structure of consumption is, possibly in greater part, determined by the allocation of investment - goods and labor - but as we have argued the allocative process is not determined by economic considerations alone but by a complex of economic, political and social considerations which together transcend the usual definition of the capital and labOl' market. This is not to assert that the allocation of resources in underdeveloped areas is less rational than in the developed market. It is to assert that rationality if it exists, is not merely subject solely to the calculus of economics - meaning traditional economics. Yct, too wide a departure from principles of costs and returns would be costly, indeed, to an underdeveloped economy and might spell the frustration of the planning practice. Too much concern with consumpt· ion, even though the pressures are profound might restrict or negate growth. Feeding today's population tolerably well might speed starvation for tomorrow's, yet loday's population must be fed. If one might grow reOective, il is the richer countries with great potential resources which can afford the luxury of concern with noneconomic considerations in allocating scarce resources. On the other hand, the very life of underdeveloped countries requires politiC<11 and social adventures without which governments would fall, and political and social chaos or at least confusion result. This is a paradoxic
7
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
which haunts all the underdeveloped countries. It also provides the substance of criticism for conservatives who would stress investment (capilal formation) as the road which the poor nations are not following with surficient dedication. On the other hand, the plight of the poor leads to a humanitarian concern. Do something now for the poor! Autonomously supplied consumer and producer goods then become the responsibility of the richer lands! Consumer requirements can be translated into investment needs. Income priorities are represented as quantities of goods or services which it is hoped will be realized in the rirst,secolld or subsequent years of the plan. In truth, the cost of any item of priority is the alternative uses of the limited resources. This is an economic concept which is useful, even if not entirely operational from the viewpoinl of money costs and money returns, or even real costs and real returns. Needless 10 say, what is gained and what is given up arc not merely economic quantities but such intangibles as goodwill support for the regime, social change and even ideological alignment. Therefore we would adel to the concept of priorities the less administratively rigid notion of the use of economic resources to gain politically and socially necessary ends. This is 110t a novel idea. The end of economic activity is always some satisfaction which is essentially psychic in its composition - the economist typically uses the word "utility".
IV In the political, economic world of developing countries, particular interest groups, sllch as trade unions, or other associations of producers and consumers which may have a religious caste or political orientation, may and do require special treatment which is unrelated to their net contribution to the economy, because their role in the political economy or body politic are considered significant beyond their mere productive role. Such groups may be viewed, from the affirmative standpoint, that they help to hold the society together, or they lllay be viewed, from the negative viewpoint, as a potcntial for mischievous action, unless they are satisfied. Collective bargaining in the American or the Wcstern European sense is an institution which cannot fit into the social organization of many of the developing cOlllltries because of the enormous role of government in economic life. Furthermore, where the free market is extant, the industries which hire labor may have their own peculiar ethnic, religious or compositional characteristics. If, in East Africa, economically weak Africans bargain for wages with relatively strong Indians, the wage structure might be politically unacceptable to the Government. The foreign concessionaire operating lin oil well or refining enterprise canllot be allowed to be in a position, because of his economic strength, to pay eilher less or more than is politically acceptable because the wage bill and its composition might embarrass the Government and others less well economically sit uated. There is a Iso the quest iOIl of deferred bencfits, such
8
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
as insurance systems, social security, vacations, medical care, etc. which have a political significance even more pronounced than in well-developed count ries. Therefore, insofar a~ w~~es and profits play a ~ole in allocating labor, and surely wages arc a slgl11flcant factor, the admmistrative machinery of wage and benefit determination cannot be based on a market concept of wages being related to marginal value product of labor in the market. On the contrary, there may be a tendency for wages to be rather arbitrarily fixed. Insofar as the wage fixing mechanism fallows rational criteria the relUrns to labor are both cost determining and price determined, if the notion of price determined includes anticipated prices. The neatness of this two-way relationship is made less tidy by the notion of the product produced is not only the physical product, but SOme polit. ical and social product which the political and economic administrators consider vital. Sumner Stichter once pointed out that factories turn out
people as well as goods. To develop the contacts betwecn the political and economic administration so that the adjustments may be attained, many different forms are used. Wage boards consisting of representativcs of managcmcnt, labor and public administration occur in some places, arbitration mcchanisms, or merely governmentally appointed arbitrators occur, various mediation procedures have been developed, minimum wage legislation and other labor legislation has been passed to bc administered by public administrators, sometimes chosen from members of special interest groups. Social benefits too, are significant as charges on the public budget. The techniques are limited only by the ingenuity of the human mind, and the human mind under pressure at that. In a rich society the significance of some kinds of intervention may be and probably is grcat. But the great size of the economy can stand the risks since only a small fraction of the economy at a time is involved. Furthermore, price level adjustments as well as relative changes in prices, may easily offset any cost burdens, while shifts in employment and investment due to consumer or cost reactions also operate to reduce the ravages of risk. Such changes cannot easily occur in underdevelopcd countries becausc of the thinness of the consumer market and of the governmental nature of the planned investment market. Oncc an investmcnt program is under way, it cannot easily be changed especially if it is taking up great fractions of the investment funds of the society. Changes in relative prices are likely to have a more serious effect when there are few relative prices to be changed than when there are many, as in the case of a well-developed society. Thus it may be seen that the sclf·correcting mechanisms of a thin, narrow market are likely to be less self·corrective than similar ones in a large, complex, deep m.lfket. Also the distortions arising from the lack of self-correcting mechanisms arc likely to be greater in a small market.
9
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
The mcchanism of wage regulation in Ihe underdeveloped countries seems 10 be copied from the developed states in some modified form to fit the circumstances of a particular country in question. Thus, it is not surprising thai the social and economic mechanisms and processes of the prcvious imperium or IIIelropole are copied or have been imposed 011 the former colony or sphere of innuence. For example, the labor social mechanisms of French Africa are more like those of France than of Great Britain. On the other hand, in L'Itin America where the political connections with European Powers have been loose for many years, United States, Western European as well as indigenous institutional forms have been experimented with.
v By social change we shall mean (i) the acceptance of new or different goals by people acting in some ordered way, that is to say, in an institutional process, or (ii) the ways of behaving becoming different, although the goals do not change; or (iii) both means and cnds undergoing change. We realize the unwisdom and incorrectness of making persistent distinctions between means and ends. We use these words merely because of their semantic utility as they do imply a stable system of behavior. Without debate we accept the idea that ends are in themselves instrumental and therefore may, for certain purposes, be viewed as means. But we are using thc words "mcans" and "ends" matter of factly to indicate steps in an on-going but unchanging process. Any change in the social process is social change by our definition. The instruments of group behavior, be they physical or immaterial, may undergo change, and the objectives which arc being sought, be they physical or immaterial, may also undergo change. In either case,or in their combination, the value conceptions of the actorS are different in the "before" change and "after" situation. Change is successful if it is persistent, and such persistance usually implies (one is inclined 10 say always) legitimation to the actors by some historical or moral criteria. 5 In recent years the question of developmcnt of underdevcloped countries has c1aimcd the interest of politicians, scholars, administrators, i'ller alia, as to ways and means of inducing and assisting underdeveloped countrics to change particular modes of behavior or goals and more general value systems. As is to be expected, economists specialize in problems of an economic nature, political scientists in problems and questions of political organization and change, and so on. The administrators, for their 5. If the changes are minor, say the substitution of informal, "lounge suits" for evening dress or dinner jackets for formal dinners or parties the effects may seem trivial. nut such trivial changes may be indices of more significant social changes in class values :lIld status. To be sure, most social changes arc trivi
10
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
part, have to combine political and social considerations in their con. ceptions of change. What is fairly common in analysis is to view change as originating outside the system to be changed. Social change which OCCurs as part of the evolution or internal reaction to the ongoing process is not the kind of change most people concerned with development consider. Really the system is to be changed rather than changed by its own internal forces. Change to many observers and practitioners is usually the effect of an exogenous variable which somehow is inserted into the ongoing system, with the result of changing the nature or behavior of the system. Ultimately, this comes down, of course, to changing the nature or at least the behavior of individuals in the system. Economic and technical assistance, political advice, education reform have frequently been introduced to emerging nations' systems often in situations which are neither organized nor oriented to accept «imposed" changes. The results, on the whole, have been happy for neither donor nor host. Congressional doubts, and the spotty record of improvement in the underdeveloped world illustrate this unhappy conclusion. Foreign technical advisers, at all levels, often insist or strongly support reforms or behavioral changes which scarcely appeal to the host administrators. Examples in taxation, education, and investment policies are frequent. In a more recent period, perhaps dating from the shift in aid programs from emphasizing economic to stressing teclmical help, interest in change has been directed also to endogenous changes - to those which originate within the system, even though they may have been originally triggered by external forces. An example might clarify tlus point. The gift of grain from the United States to an underdeveloped country requires, if it is to be effective, a particular type of distribution mechanism within the underdeveloped country _Such a distributive mechanism may not and frequently has not existed within the country, SO that novel methods of distributing grain, independent of the traditional market system have to be devised. This is done by creating new patterns of behavior by the government as the distributing agency, as well as on the part of the recipients of the grain. Communal claims or money as a means of payment arc partially replaced by some other attribute, e.g.) need, political status, location, or what not. The distribution mechanism created by the government does not operate for profit, but for salaries, graft or again what not. 6 The new distribution system properly speaking is an institution in our case a novel institution, which In turn has its repercussions on other institutions, for example the market mechanism, social mobility, the land tenure or the family system of the country in question. It is possible, even likely, that the long run effect of the distribution of free U.S. grain 6. See S.C. Sufrin, ''Craft-Oil for the Wheels and Oil for the Palm", Challenge. Vol. XIII. (October, 1964). pp. 30-33, and S.c. Sufrin, "The Two Markets. or 'II Takes a Worried Man to Sing a Worried Song"', Ethics. Vol. LXIV, No.4, July, 1964, pp. 292 ff.
11
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
has been a burden to agricultural development ill some countries.? Similarly the great international concern with population control has resulted in some societies in a transvaluation of values regarding marriage, the home, family organizations, industrialization and a host of other considerations. [t is not unlikely that the changing U.S. legislature and judicial attitudes toward similar control values are, in part, the effect of the "exploding population" originally applied to developing societies as India or Africa. The change in the value structure has led to changes in goals (population in this case) all over the world. The goal changes are in their turn related to novelties in modes of group behavior (again all over the world). Similarly new institutions or clusters of institutions dealing with bank control, education, urb,:mization, etc. have arisen within diverse social systems. Thus, olltside pressures or exogenous forces may be internationalized, and in the act of internationalization, changes in the social process of a country originating the change take place.
VI Internal pressures themselves may cause changes in the value and behavior structure within a society. It is to t he latter that we will direct our attention - the endogenous changes or adjustments largely triggered from changes within the society. The catch phrase which has been used to classify such endogenous changes is "institution building", As in the case of means and ends, the distinction between exogenous and endogenous is blurry, and useful semantically, rather than being a firm operational differ· ence. In an ultimate sense all the world is a unity. Even in the limited purposes of social analysis it is quite incorrect to assume that undeveloped nations are insulated from the effects of behavior in the outside world. The concept of an isolated, sacred society is not a very useful one in the analysis of development. Yet it is useful to distinguish between a change introduced directly by a non-national or foreign agency sllch as a U.S. Mission, and a change arising from the accommodation of existing local institutions. To be sure a foreign force may generate local change, involving local groups, e.g., the training of a police force under foreign officers, but such secondary changes tend not to be considered "imposed" to the extent as t!lose engineered directly by "outside" agencies. 7. In private conversation, Professor Milton Friedman, a political conscrvative as well as famous economisl made this observation, but Dr. M, Ezckiel, whose political persuasion is unknown to mc, but who has been for years a most distinguished n
12
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
In a penetrating and most suggestive articie K originally published in 1890 and more recently reprinted in Science. the late Professor Chamberlin, a geologist by profession, argued that a single explanatory conception of a complex phenomenon is not likely (0 be SO effective in providing explanation as a ramily or hypotheses, (or a multiplicity or hypothetical processes). While Professor Chamberlin was mainly concerned with the earth sciences, his comments are distinctly applicable in a social analysis. One is inclined to believe that the value of a multiple hypothesis approach is even more valuable in the social than in the natural sciences. The subject matter or thc social sciences is immcnsely COIllplex, the inventory of relevant, potential variables taxing the imagination. The number or ways or looking at the phenomena arc exceedingly large, and the possible universes or discourses - (models) - with which the social scientists are concerned may easily be multiplied by including or excluding relatively minor aspects of behavior. For example, the family can be viewed narrowly or broadly. It may include or exclude diverse notions of saving, training or health without necessarily destroying the usefulness of the resulting models for certajn analytic purposes. If a model is defined as a mechanical (logical) image of social behavior, it is reasonable to argue that if one mechanical image can be devised to explain the social process in question, more than one can be devised, with the validity of usefulness of each being determined by its operational success. A low correlation between two variables or among more than two variables with a high level of probability may be a very useful analytic guide, for to account for some covariation with great certainty is better than to explain no variations, or even a great variation with a low certainty. In the social world,lllultiple causation is more likely to be the rule than single causation, and furthcrmore, the relative significance of causative factors are likely to vary in differing circulllslances. 9 We all know that there arc more ways to roast a pig than burning down the house. But this is not to deny, as Elia tells us, that once the legitimate way to roast a pig in old China was to burn down houses.
VII The ensuing discussion is limited to one of many possible hypotheses regarding institution building. No claim is made ror its universality or even for its great frequency in all times and all places. However, 8. Thomas C. Chamberlin, "Method of Multiple Working Hypothesis", Science, Vol.l48 No. 3671, May 7, 1965, pp. 754 fr. 9. The idea of "an economic" or "a technological" or "a anything" interpretation of history is. I feel, repugnant. Notions of social change, development or progress arc aspects of what uscd to be called the Philosophy of History. Recent fashion has dencgratcd that useful notion and substituted ideas of change. The objection to philosophies of history, in my opinion,is that they generally foiled to recognize Ihe multiple nature of causc, the role of choice, and the inconstancy of the forces which beilr on society, inducing change.
13
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
the hypothesis offered below docs seem to be one whieh explains lllany situations in which institutions are created in underdeveloped coulltries. The dominant institution which persistently continues to expand its scope and authority in developing societies is government. We use government here to include the legislative, administrative, and judicial functions of a society. The administrative aspect, however, probably is the most significant one in societies often not quite oriented to the traditional Western restraints on and of the courts or the compromises of the legislature. Amtlogy between governments of the Western World and of the developing world are dangerolls because of the much slower (and different) development of government, via nationalism, in Western Europe and North America as compared to the under-developed world of today. Clearly the Illodern structuring of the governmental conceptions in the West, let us roughly and arbitrarily say, between the middle of the fifteenth century and through the sixteenth and early seventeenth century occmed against the backdrop of a relatively undeveloped but nevertheless developing technology, a powerful international church organization, a declining feudal system being replaced, and on the whole, inefficient agricultural and urban systems. An indigcnous scicnce, novel concepts in philosophy and ethics inc.\uding public morality, a new technology, the era of discoveries and more complex trading arrangements, were however, on the side of fairly rapid growth as measured against the history of the past. It is from such factors thai the stimuli for change and development arose. The State-Government concept as an agency of control slowly developed feeling its way, creating its own justification and legitimation while adapting itself to new institutional forms and class structures. The various rorms of business enterprise, trade unions, capital markels, pressures for social legislation arc the lypes of activilies which impinged on governmenl, aided by the extension of political power to more and more people as voters. But the road was hard and long, and the results often less than satisfactory, in the history of the Western World. The underdeveloped world of today, however borrows or has forced upon it many of the aspects and attributes of Western history, among them nationalism. The multiplicity of national states which have, in some instances, quite arbitrarily asserted themselves since World War II, is a signal of the success of an earlier ideology of Europe which there, however, is slowly being replaced by some notion of inter-nationalism or even supranationalism. 10 The underdeveloped countries, upon achieving freedom from the metropoles, already had built into their value and behavior structures many aspects which the West had laboriously developed over many years. 10.
11 is interesting how the emergence of the new nations, surely a major phenomenon of the twentieth century, uses the nationalism of socialism of the nineteenth as ideological and tltopean justification. The up-to-date ideals of African and Asian intellectuals arc roughly those of Western nation
14
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
Surely among the more important, probably the Illost important, western conception was that of "big government" to use Dean Paul Appleby's phrase. But, in virtually all of the developing states, unlike the typical western example, the governmental apparatus rests on a one party system and is dedicated to some often vague ideal of socialism cum nationalisl11. The class structure of the emerging societies is typically dissimilar from the class structures which support the western governmental structures. For example, the middle class is largely absent, while the laboring classes have neither the occupational skills nor the size associated with urban socialism in Europe, or what we may, without any honorific intent, call welfarislll in the United States. This does not mcan that the social groups of a developing society are ideologically homogenous within each state, or that conflict is absent. On the contrary, ideological differences, religious and economic concerns, and other connicts and competitions make these societies heterogeneous from the behavioral viewpoint. Differences occur both without and within each governmental structure for each society. In spite of the usually weak economic and industrial base in developing societies, the institution of the labor (trade) union is widespread. The very fact of organization with its ideologic implications has given the union movement a power far beyond the economic importance that number might imply.1I In developing societies governmcnt is the major political and economic institutioll. It is economic in the sense that it tends to control the allocation of resources and the structure of the market. Jt is political since it is the agency which is the seat of ultimate power, and the one, therefore, with which other institutions must treal if they are to achieve any success. If the ideal or goal of a 11011-govcfllment institution is revolution, we have onc set of conditions in which there is a contest of power and the possibility of one institution overpowering another. However, this is an outSide, limiting casco By and large some form of institutional adaptalion is sought by non-goverllmelltal institutions pressuring government, even when revolutioll:Hy slogans are lIsed. For example, the desire for wagc increases by a lIllion docs not imply that failure 10 secure the incrcases will lead to a revolutioll. It might, but this is an outside casco Typically, the deSire for wage increases, assuming the government can exercise control over prices and income distribution, is the subject of negotiations and discussions among union leaders, governmcnt officials and politicians. Similar discllssions may be held on other issues such as social security, prices, availability of conSUJ1lcr goods, training, education, or any other matter in which some organized group has an interest and desires to act II.
See s.c. Sufrin, UII'-OIlS ill Emerging Societies: fh,slrolion ill Politics, Syracuse Univcrsity Press, 1964. Especially Chaptcr 2: Unions in Undcrdevelopcd Countries; see also tl.l·1. Millen, The Politic(l! Role of Lobor i" Del'eloped COllI/fries, Brookings [nslilulioll, Washington, D.C. 1963: cspcchilly Chap Icr~ 6, Dynarn ics and TeChniques :'Illd 7, Frcedom <'Ind Indcpcndencc.
15
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
through governmcntal channels. Or, the governmcnt may act unilaterally, although in the first instance the maller was thc subject of contention bctween non-governmcntal institutions, e.g., management and labor. So long as thc contending parties do 110t destroy each other, or onc of them, but continue to :Jpply mutual prcssurcs, the reaction is to be acc011llllodaled to the Illutual powcr and viewpoints. There is in effect a transfer, first of information and attitudes, and finally of understanding program. Thus, a trOllsaetioll relates the contending institutions, the government being one of the contending institutions. At the program and policy levels, which is to say, at the ideological and behavioral levels, adjustments, revisions and changes of values and behavior occur during the transactiQn process. The contentions may embrace more than two parties, and the ultimate issues are not so simply defined as in a win-all or losc-all game. There tends to be a multiplicity of parties and a multiplicity of possiblc solutions or adaptations, some of which are bctter than others, and some more likely to be persistent. This dialectic or better polylectic, thcn frcqucntly givcs rise 10 a new struclure, a new institutional mcans to carry out the program lind to implcmcnt the policy. For example, wage discussiolls givc rise to wage boards which becomc thc agencies to administer wage systems. The wage administration thcn becomes an institution with its own legitimation, interests and purposes. Price controversies give risc to price boards with similar effects from the structural point of view. The same phenomenon also occurs in the neld of education: "Educational activities and organizations become more widespread and a continuous differentiation between the different levels of the educational syslem - between primary, secondary, vocational, adult, higher education, takes place. Each of these systems - and cven Illany sub-systems - gradually becomes more autonomous, specialized and organized in its own framework."12 The complexity of what to teach, especially in respect to a language to be taught, is illustrated ill the "Role of Education in the Polit· ical and Economic Development of Southeast Asia" by T.H. Silcock.'3 Silcock examines the pressures and counter-pressures which the British authorities of Southeast Asia experienced in the post World War II period in an attempt to find somc balancc between the requirements of the 12.
Virtually all cmcrging countrics havc some sort of wagc or labor l,oards with power:; u:;ually inherent in lauor-management bargaining institutions in the U.S. and Western Europe. A similar situation of special qllflsi-govcrnl11clll:tl bodies with respect to export prices, domestic prices, necessities, etc. depcnding on the particular problem also exists ill lll11ny underdeveloped nations. S.N. Eisenstadt, "Education and Political Development". Post Primary J::duco/ioll 011 Poli/icol o"d Economic Delle/o/mli'llf, N.C. Piper and Taylor ('ole. cds. COlllll1unwealth Studies Ccnter. Uukc Univcr~ily Prc.~s. 1964. p. 35.
13.
T.H. Silcock. "Education in the Political & Economic Develolllllcnl of South· cast Asia", Post Primary l:.auCQtiOIl. OIJ. cif. pp. 200.IT.
16
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
govern_ various ethnic and econo mic groups . The responsiveness of the undoubt_ ments of South east Asia was admir able, althou gh the costs were s as system edly very high in Ihe development of such diverse cduca tional both the finally dcveloped under government conlro l. Contro l extcnd ed to under_ the of public school system s and the private schools. In several ries of developed countr ies formal attem pts have been made by the minist es to agenci ve istrati educa tion throug h commissions and other quasi admin . This direct educa tion in accord ance with the needs of organized groups L10S, pines, Philip Israel, also appea rs the case in such diverse countr ies as India, Peru, Burma , while it appear s to apply less to countr ies such as Iran, Vietna m. 14 To be sure, a responsive and responsible Western governmcnt effect. tends to get a public reactio n to its ideas before puttin g them into ve recepti also is nment This is an aspect of responsive govern ment. Gover the in role to the ideas of organized pressure group s recognizing their other scheme of things. In such transa ctions admin istrati ve bodies and s policie late organi zation al structu res arc often developed either to formu develand progra ms or to admin ister them. This is not peculiar to underU.S., the as such oped countr ies. Howcver, in well-developed societ ies, or permGreat Britain, or any of the other wester n countr ies such ad hoc tive legisla the h throug nt restrai anent institu tions are always subjec t to es societi ping machi nery, the courts or throug h the free electio ns. In develo a ritual where there are one party govern ments , electio ns are often more Illay be boards price , boards than a test. Agencies as comm ission s, wage al retution surrog ates for the free electio ns, and legislat ive and consti gical slraint s of the West. Such bodies may very well reflect the ideolo . groups res pressu values or value changes of govern ment and the social the doing The new institu tions also provide quasi public mechanisms for assumed lly genera so nts restrai of public business withou t the institu tional rstructu in a well developed societ y. Western societies use the institu tional with, a ing of pressure and interest group s in additi on to, or concu rrent es and attitud and n serious reliance on electio ns, the courts , public opinio interpretthe restrai nts impos ed bv the inner discipl.ine born of an ethica l are not ation of history . The processes of these general restrai nts however. to rely alway s, nor even usually, available to emerging states. They seem observer, on rather direct action , on social processes, with (to the Western nal" titutio at least) frustra ting and morall y irrating neglect of "cons es in restraint and moral conce rn. It is not unlikely that the planning agenci tional institu ate legitim to the new societies will become impor tant agencies additi ons to the social process.
VIII The 31'2'Ul1lenl is that econo mic and social forces tend to 14.
be found in Inform ation on the formal organization of educati on is to Department Millistries of !J'(/lu:alioll. Their FUllcliollS alld Organizatioll, U.S. D.C. 1962. gton, of Ilealth. Educat ion and Welfare. Office of Educat ion, WaShin
17
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
compel governmcnt and non-governmental agencies to act ill some concert without the elaborate ami sensitive social control mechanism of the West. Action is initially transactional in a sense lhat lwo or marc institutional parties become conccrned over a problem and the discussion or mutual pressures result in some values, altitudes and points of vicw belllg transferred from one to the otller, so that the contending institutions undergo SOllle form of accommodation or compromise. In the language of economics, the utility curve of each party in the transaction is changed. If the transacti011 is beneficial, the utility pOSition of each of the parties is improved. If the situation has deteriorated, the utility position of both diminishes. The third alternative, that either one may have improved or diminished with respect to the other. To this extent, the interactions or actions of the contending institutions upon each other are not entirely unlike the bargaining process of the economic market place. In addition to the transactions reaction, if the mutual adjustments give rise to persistent new forms of behavior, new values and new attitudes, there is a strong probability that new institutions or organizcd effort arises. Thus, the transaction is polylectic, more than two parties may transact, need more than two goals and may figure in the adjustment process. It is not as if position A and position 13 of contending parties is uniquely resolved to position C as in a parallelogram of forces. Rather there arc a bundle of possible positions on the side of A and a bundle 011 the side of 13 and so the determination of C is not unique. Nor do the contending parties necessarily contend for ultimate supremacy. Every petition to the government is not a real or implied attempt to destroy the government;but rather a move to change it, to adjust its behavior with the implication that the pressll1"ing forces are willing to adjust their behavior to the point of agreeing to a llew institutional form to carry out an activity indep~ endently of the pressuring force. It is interesting to note that lIOt only does government in underdeveloped countries frequently officially recognize pressure groups, a technique we suggest designed to compensate for the lack of meaningful democratic and intra-administrative procedures, but governments also often recognize as pressure groups agencies oulside their own government. Agencies of U.N., of foreign governments, e.g., technical assistance programs of the U.S. and other countries have official recognition which makes them in an operational sense part of the administrative machinery of the host government. The so-ca lied "Servicios" of L1t in America and elsewhere, agencies which are concerned with agriculture developmcnt as well ns education und health, and are in, but not exactly pnrt of, thcgoverllment, and in them the role of the U.S. foreign aid officials is very great indeed. They are an example of the transaction polylcctic in action to the point of institution creation. IS They have enjoyed success as well as suffered failure. 15.
Cf. Robert J. Shaefer, Sefl1icio t,'.xperiel/ce - Pos/ (lIId Prospect of Jnilll Opera/iolls ill Tee/micn! Assistance. Syracuse University Press. 1965.
18
Economic Analysis and Policy
Vol. 01 No. 02, September 1970
The p
suggested above is a pmgmatic, operational solution of emerging cOulltries to the problem of creating a responsiveness, e.g., an aware citizenry, a sensitive bureaucracy, electoral pl'Occdurcs, but the rule of law and many of the other attributes which the Western World considers as lhe sine qlla /lOll of government arc absent. The concept of majority determination of general policy via elections is at best a primitive one in determining government policy. Minority rights, representative government, administrative responsibility, restraints all private bel~avior and ad hoc solutions to short range problems need to be built into any governmental system. Lacking the ideological base of the West and other social, political and economic development of the West, the underdeveloped countries may very well develop their own indigenous type of dcmocracy through thc creation of institutions devised to further ,md protect interests of special groups and classes through the empirical but nevertheless political method we have termed . . 16 t I1C transaction po I y Iectlc.
University of Michigan Syracuse University
16.
Sidney C. Sufrin
Cf. Kenneth E. Boulding, Conflict filld Defense - A (lenemf 'f1leoIY. Harper Torchoooks, J962, for an extended theoretical discussion of the complcxity but order in adjustment to contcntion.