W. Arthur Lewis (1915-1990) " Development Economics"

Arthur Lewis Biography, Theory and Model

After the successful industrialization experience of the Soviet economy, it became the task of orthodox economics to come up with an industrialization formula that third world countries could embrace without undermining the advances and establishment of the capitalist cause (i.e. an anti-communism cause). This included preservation of the necessary legal, economic, and government institutions that were conducive to the spread of capitalism and it incessant quest for capital accumulation and more profit.

W. Arthur Lewis provided the necessary theoretical framework for this task by publishing several articles and books including "Economic Development with Unlimited Supplies of Labor" in 1954, and Theory of Economic Growth in 1955. Lewis started his theoretical framework with the presupposition that industrialization required a restructuring of the productive sphere so that surplus produce shifted from focus on the consumer goods area to the producer goods realm. This essentially necessitated that the basic consumption goods required for one's sustenance would have to be cut back to fewer provisions.

Prior to this time, England had industrialized (in the 19th century) at the expense or expropriation of the entire working class. The Soviet Union, in comparison, also underwent this industrialization shift successfully, but differently as needed economic surplus was attained through their "collectivization" policy which virtually stripped enormous assets and incomes from the capitalist and wealthy land-owning agricultural classes.

The problem with less developed countries during Lewis's era was that these countries were poor because they were already being stripped of any economic surplus by foreign capitalist and indigenous elites who did not show any interest to use their profits to help industrialization of other local economic sectors. However, Lewis, upon fully accepting the neoclassical ideological tenet of the marginal productivity theory of distribution, argued that these less developed countries were not developed to the point where wages equaled the marginal product of labor. In fact, Lewis held that workers in less-developed countries, who predominantly were employed in agriculture or what was labeled the "traditional sector," were being paid based on the average product of the farmer rather than the marginal product, leaving the marginal product of labor essentially zero or even negative. In other words, Lewis discovered that there was an excess of workers that could be taken out of the agricultural sector and placed or employed in the industrial (or "modern") sector where their marginal productivity would be much higher. This, of course, would.result in increased economic output.

The whole key to Lewis's development economics for economic growth was founded upon what Marx called 'primitive accumulation', that is, to expand capitalism by reducing and gradually destroying traditional economies. According to Lewis, primitive accumulation was justified because poor countries needed more capital and an increasing amount of national income to invest and enable their economy to grow. In order to get capital, less-developed countries needed to save more. In order to get more savings, capitalists needed to get more profits. In order to get more profits, capitalists needed to expand the capitalist sector. The best way to expand the capitalist sector was through primitive accumulation. For Lewis, the most effective method to advance capitalism in these less-developed countries, then, was to pull the so-called 'unproductive' labor out of the traditional sector and to strategically reposition them into the industrial sector.