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Each of the above-mentioned theories came to influence subsequent theory formation and the international debates on development problems, but not to the same extent, or with the same intensity, as two additional contributions from the early period: those of W. Arthur Lewis, born in the British West Indies, and the American, W.W. Rostow.

These two economists, in their more elaborate and detailed analyses with respect to conceptual framework and method and also reached different conclusions. Yet they had so much in common that they cane to function as mutually supplementary theoretical frames of reference, particularly in the Western world’s development debate from the 1960s onwards. Even in the 1990s, they continue to influence some of the basic notions of economic development.

Lewis and Rostow both focused on rising per capita income as the central measure of growth; they conceived of economic development as a modernization process; they used as their starting point a model of developing countries with an abundant supply of labour in the traditional sector; they regarded the savings rate as the central determinant for the investigation rate and further for the overall growth rate; and finally they viewed the capitalist or entrepreneurial class as an important driving force behind economic growth, essential, in particular , for initiating the process (Hunt, 1989: pp. 62).

More specifically, Lewis took as his starting point a two-sector model of a closed backward economy with an unlimited supply of labour at a subsistence wage; one sector was the capitalist, the other he characterised as the subsequent sector. The capitalist sector employed wage earners, used reproducible capital and paid capitalists for the use of capital. The subsistence sector was characterised by being based primarily on family labour, by not using reproducible capital and by low labour productivity.

It was in the subsistence sector that the abundant labour reserves were found not necessarily in the shape of many unemployed, but rather in the shape of many underemployed. These underemployed workers could be transferred to the capitalist sector without bringing about a decline in the subsistence sector’s total production, and a wage which was determined by the average in the subsistence sector — not by their productivity in the capitalist sector.

Lewis’s argument in the extension of this was that the most important barrier to economic growth was the lack of accumulation of productive capital, caused, in turn, by the low rate of savings. The central problem in the theory of economic development was, therefore, to investigate under what circumstances it would be possible to increase the rate of savings and investments in a backward and stagnant economy, where these rates would typically be as low as four to five per cent of national income, up to a level of between 12 and 15 per cent or higher.

Lewis’s answer t this central problem was that the poor in the subsistence sector and the workers in the capitalist sector could not produce such increased savings, because they were simply too poor to save a significant proportion of their income. The rich in the subsistence sector could not either, because they were mostly landowners, who used their rents and other income unproductively to buy existing assets rather than to create new ones.

Therefore, the capitalists, the other component of the rich in the basic model, had to produce the necessary increase in the savings rate. According to Lewis, they were capable of doing so. On this point, he followed the classical political economics’ assumption that the capitalists’ profits would be both saved and invested.

Consequently, the central problem was transformed into a question about how the profits could be increased as a proportion of national income. This could be achieved by the capitalist sector’s inherent dynamics. Lewis asserted that as soon as a core capitalist sector was established under conditions of an unlimited supply of cheap labour, the capitalists would reinvest at least a part of their profits and in this way increase the total amount of capital available.

This would attract more workers from the subsistence sector into the capitalist sector, where their productivity would be higher than reflected in their low wages (determined primarily by the subsistence sector). As a result, a relative increase of the profits in relation to total national income would occur and thus bring about an increase in the areas of saving and investment. The final outcome would be sustained economic growth, driven forward by the capitalists. Lewis emphasized that the capitalists did not necessarily have to be private capital owners; the state could play this role too.

In the presentation of the argument so far as we have assumed a dosed economy without trade or other transactions with other economies. However, Lewis further extended his model to cove an open economy. This part of his model will not be presented in detail but it should be noted that one of Lewis’s main conclusions was that trade between developing countries and industrialised countries did not promote growth and economic progress in the former.

This was explained chiefly with reference to the fact that wages in the poor countries, according to the model, were determined by the supply (subsistence) price of labour, as described above. The increased productivity of labour as a result of transferring to the capitalist sector would therefore be passed on to consumers in the industrialised countries in the shape of lower product prices. Lewis, with this reasoning, anticipated central elements in Arghiri Emmanuel’s theory of unequal exchange.

Summing up, one can say that Lewis’s model gave reasons for optimism regarding the possibilities for sustained growth in the capitalist sector. Lewis regarded this as identical with economic development, but he stressed, at the same time, that the working population in the developing countries, the vast majority, could not count on improvements in their standard of living in the short or medium-term if the capitalist growth rate was to be maximized.

Lewis’s economic model and his associated theories have been subjected to wide-ranging criticism. However, this should not obscure the fact that his original contribution to economic development theory was both interesting and innovative. Some of the basic elements have since been taken over and amended by some of the most structuralist-oriented development economists which will be presented below. Moreover, Lewis’s model formed one of the important starting points for Rostov’s theory of stages of economic growth and modernization.

W.W. Rostow formed his basic theory during the 1950s and presented it in its totality in 1960 in the book, The Stages of Economic Growth (Rostow, 1960). Variations and extensions have since been published (Rostow, 1978, 1980). Rostow, like Lewis, distinguished between the traditional sector and the modern capitalist sector.

Further, he agreed with Lewis that a crucial precondition for lifting an economy out of low-income stagnation and into sustained growth was a significant increase in the share of savings and investment in national income. But Rostow was more interested in describing the whole process through which a society develops in different stages.

The aim was to identify strategic or critical variables that may be presumed to constitute the necessary and sufficient conditions for change and transition to a qualitatively new stage. Rostow’s stage theory was essentially unilinear and universal, and assumed irreversibility.

Rostov divided the development process into the following give stages:

• The traditional society
• The establishment of the preconditions for take off
• The take off stage
• The drive to maturity
• The époque of high mass consumption.

Each of the stages was thoroughly described in his 1960 book and illustrated with examples from the historical development of selected countries.

One of Rostow’s central points was that ail societies, sooner or later, will pass through the same sequence of five economic stages. Whether this will happen sooner or later is determined primarily by natural and economic circumstances, but Rostow’s also assigned some importance to political and cultural conditions.

The conceptualization of the five stages is not characterised by the same precision in its formulation, or the same internal consistency of reasoning as found in Lewis’s theoretical model. Rather, what we find in Rostow are somewhat loosely substantiated generalisations based mainly on experience from a few industrialised countries. This, however, did not prevent Rostow’s theory from becoming one of the most popular among decision makers, consultants, and government officials involved in economic planning in the Third World. This applies, in particular, to this propositions concerning take off into self-sustained growth.

It should be added that Rostow himself, unlike many economic planners and consultants, was quite careful about specifying a long list of preconditions for the takeoff. In fact, it is in the discussion of the preconditions for take-off that Rostov has probably delivered his most crucial contribution and on this point even influenced theorists who have not accepted his notion that all economies will pass through an identical series of stages. Therefore, a little more should be said about these preconditions.

Rostow imagined, as noted that the developing countries would follow the same development pattern as the industrialised countries, despite their being surrounded by a quite different international economic system than were the advanced countries at the time when they took the big leap forward. In this sense, Rostow adhered to a mono-economic approach and thus placed himself, in this respect, outside the mainstream of development economics. However, in other respects he set the course for this mainstream, not so much in the sense that others adopted his theories, only a few did that, but more by inspiring critical revisions and amendments to the theory’s central assumptions and hypotheses.

One of these hypotheses claimed that a markedly increased savings rate would lead to a corresponding increased investment rate, which further would cause significant industrial growth. A second, related thesis asserted that capital accumulation was the central source of growth in developing countries.

Both these claims were rejected or heavily modified in later theory formation as we shall see in the next section. But prior to that, it may be of interest to compare Rostow’s basic development thinking the concept of modernization through an irreversible process divided into stages with corresponding conceptions in more mechanistic Marxism including, especially some of the Soviet theories,

Rostow launched his theory in 1960 as ‘An anti-communist manifesto’ (the book’s subtitle) as an alternative to Karl Marx’s theory of modern history, and that is what it was in many respects. Among other things, Rostow refuted the Marxist theories of exploitation and suppression of the backward and underdeveloped areas.

He proposed a number of other interpretations and underdeveloped areas. He proposed a number of other interpretations and explanations in opposition to Marxist assertions and warned against forcing development or turning it in another direction with assistance from the communist countries. That, Rostow declared, could only lead to worse results.

At the same time, however, it is interesting to note that Rostow and many development theorists with a mechanistic interpretation of Marxism have in common the idea that all societies, with almost compelling necessity, must pass sequentially through an identical series of stages or modes of production. The Marxist stage theories emphasise other characteristics and are often more comprehensive and complex than Rostov’s theory.

Yet one cannot avoid noticing the striking similarities, especially with regard to the early, more dogmatic Soviet Marxist stage theories (Solodovnikov and Bogoslovsky, 1975). They suggested in opposition to Rostow — that the underdevelopment countries could escape or completely avoid the capitalist stage by following a special non-capitalist road to development.

However, in principle, they simply swapped Rostow’s model of a capitalist industrial country with the Soviet version of a ‘socialist’ industrial country. Thus the Soviet Marxist theory became a special form of modernisation theory.

This applied alsointhe sense that they proposed a positive evaluation of imperialism, only here it was of Soviet imperialism and not the Western industrial countries’ imperialism. One of the points to note in this context is that the non-capitalist road to development was only possible with support from the USSR and Eastern Europe.

It has to be added that these remarks on Soviet Marxist theory apply only to the earlier prevailing conceptions. The theoretical debate on the Soviet Union was already, long before the dismantling of the Eastern Bloc, much richer and more nuanced. Many researchers even raised questions about the relevance to Third World countries of the Soviet and East European development model. Furthermore, there was an emerging consensus that the backward countries were too different to follow an identical path of change.

The idea that the growth process could be initiated with balanced capital investments in several sectors at the same time was strongly criticized by, among others, Alert Hirschman (Hirschman 1958). He claimed that, on the contrary, there was a need to maintain and accentuate imbalances and disequilibria is backward economies, because there were other barriers to growth than the limited market and the lack of capital investments.

Hirschman emphasized, with inspiration from Schumpeter, that the developing countries greatest problem was rather the lack of entrepreneurship and management capacity. Hirschman stressed his point by saying that if a country were ready to apply the doctrine of unbalanced growth, then it would not be underdeveloped in the first place’.

Rather than strive for a balanced approach where the resources would be thinly spread over several sectors and managed badly, the developing countries should according to Hirschman, aim at selected key sectors which had many links backwards and forwards in the economy, and therefore could pull other parts of the economy along with it.

The debate between the followers of the two above-mentioned models of growth continued up through the 1950sand1960s. Today, however, the focus of attention has shifted from the original dichotomy to considerations concerning the circumstances in which one or the other approach appears to be the more appropriate.

Evaluated retrospectively, it is interesting to note that both models of growth operated with imbalances with regard to income distribution. It was well known as early as the 1950s that the income distribution in developing countries was generally extremely unequal, but this was not a subject that preoccupied this period’s growth theorists.

Nurkse was worried that the rich would use their savings mainly on imported luxury goods, but it did not lead him to recommend, as in the case of Myrdall, redistribution in favour of the poor, because Nurkse did not believe that the poor had the necessary ability or opportunity to save. in this regard he was in line with the predominant conception of this early period that increased savings had to come from the rich in the backward countries.

In terms of strategy, therefore, it was deemed legitimate to concentrate on income growth for the rich, who would then increase their savings and thereby create continued growth. After a while this growth, it was implicitly claimed, would trickle down to the poor in such a way that in the end everybody would be better off.

Simon Kuznets was one of the few who stated in more explicit terms his opinion on this subject . He claimed that economic growth under average circumstances would lead to increased inequality in the beginning, but that this tendency would flatten out and to some extent turn to steadily increasing equality in income distribution. More specifically, Kuznets came to the conclusion that the incomes of the poorest 40 percent of the population would normally grow more slowly than the average until income per person reached a range of US$700 to US$900. Beyond this range, the incomes of poorer groups would tend to grow faster than the average.

Several development researchers have tried, since Kuznets stated his provocative hypotheses, either to substantiate it with further data or to reject it. The Indian economists V.M. Dandekar and N. Rath have undertaken particular thoroubh studies of the problem (Dandaker and RAth, 1971). They concluded, based on evidence from India, that a higher rate of growth was better than a lower rate of growth for all social groups, rich as well as poor — with the exception of the poorest ten per cent, who did not get any benefit at all from the economic growth in the various states of India.

They added to this observation that, seen from the point of view of the poor, a fair distribution of the growth results was of great importance than a generally higher growth rate, because the poor got considerably less out of a general increase.

Dandekar and Rath, therefore, deemed it justifiable to ask how rich the rich should become before the needs of the poor were taken into consideration through political intervention and special initiatives. This question provided one of starting points for the argument that latter led to the elaboration of the basic needs strategy.

In the previous articles we have discussed development researchers whose prime aim has been to adjust, elaborate or supplement the classical dependency theories. Other researchers within the Neo-Marxist tradition, however, have rejected the whole body of dependency theories and attempted to replace them with totally different approaches. This applies to, among others, the American social scientistBillWarren, who elaborated on the Elimination of Dependency.

In his Elimination of Dependency suggested process, Warren’s main point was; certainly imperialism has led to the creation of a system characterised by inequality and exploitation, but at the same time this imperialism has created the conditions for the spreading of capitalism to the Third World. And not only that. Warren went further by claiming that he was able to prove that capitalism, since the Second World War, had actually developed both in depth and width in the Third World.

Process of Elimination of Dependency

Although the capitalist mode of production was originally grafted on to the peripheral economies from outside, by the industrialised countries, Warren argued that in the long run it would lead to elimination of dependency or to a development out of dependency. Imperialism has, in other words, laid the foundations of its own dissolution.

Warren saw the situation in the 1960s and 1970s as especially conducive to national capitalist development in the Third World. He referred in this connection to the conflict between East and West, which he believed the dependent countries in general could derive considerable benefits from. He also pointed to the competition between the different industrialised countries, and between the many transnational corporations, and argued that these forms of competition could also be exploited with a view to promoting more independent national development.

The difficulties were chiefly the internal conditions in these countries, including a very widespread tendency to pursue totally misconceived agricultural policies, which neither brought about the necessary land reforms nor linked the rural economies to the dynamic capitalist urban economies.

Warren’s theory is essentially the classical dependency theory turned on its head. To him imperialism and the world market were in no way obstacles to economic growth and progress, understood as capitalist development. On the contrary, it was from these global systems that the whole process of development would be set in motion. The fact that progress reserved for the few meant less to Warren; in contrast to Soviet Marxism, he regarded the development of capitalism, for good or evil, as an unavoidable necessity, as a stage all underdeveloped countries had to go through to reach socialism.

Warren must be credited for drawing attention, at an early stage, to the actual growth of industry and other capitalist sector sin the Third World within the framework of Marxist theory. But he did it with the eagerness and intensity that has his theory became one sided and biased, and therefore make itself most useful as a closing marginal note to the main body of Marxist theory regarding underdevelopment and dependency. On the other hand, there is, within this tradition, a pressing need for a better theory which can explain both underdevelopment and development.

Before we come to dependency theories that during the 1970s and after came to dominate large parts of the development debate, it is deemed relevant to look a little close at the role Paul Baran played in establishing the theoretical linkages backwards to classical Marxism.

Baran who emigrated to the USA from the USSR before the Second World War, wrote his most influential work in 1957. It included both an historical account of the origins of underdevelopment and an analysis on the ‘morphology’ ofcontemporaryunderdevelopment. Baran conceptualized the causes of underdevelopment in much the same way as his contemporary non-Marxist economists.

He emphasized that the backward countries were characterized bydual economies: on the one hand they comprised large agricultural sectors, where productivity was extremely low and the marginal productivity of labour close to zero; on the other hand, they had small industrial sectors with high level of productivity.

Baran further stressed that the growth and’ employment potential lay in the industrial sector, but that its expansion was constrained by the small size of the domestic markets as well as by competition from the highly industrialised countries. All these were generally accepted views in the 1950s. The important new feature in Baran’s approach and analysis was his attempt to explain this state of affairs, and, in particular, why the backward societies remained underdeveloped. In pursuit of this explanation, Baran introduced a special version of Karl Marx’s economic theories with emphasis on class relations and their impact upon the utilization of the economic surplus.

Where Marx, in his analyses of conventional capitalism, had underlined how the capital owners could expropriate an economic surplus from the working class in the form of surplus value produced by the workers (who were not paid the full value of their labour), Baran, emphasized the extraction of economic surplus in all its forms. In the backward economies, the surplus potentially available for capital formation did not only take the form of surplus value produced by wage labour, but also included the appropriation of surplus from peasants and other direct producers in the form of land rent, interest on credit, and profits from trade. Four main classes each appropriate surplus in one of these forms.

Land rent was extracted by the feudal aristocracy or other big landowners. Interest on credit accrued to the moneylenders, who were sometimes the same people as the landowners. The profit from trade was appropriate by merchants who made a living from buying cheaply and selling dearly. Finally, the surplus value from capitalist production was appropriate by the largely foreign capitalists, but also to a certain extent by the emerging groups of national industrialists.

Baran’s crucial point was that none of these four propertied and economically dominant classes had any vital interest in promoting industrialization and the accompanying transformation of the peripheral economies. The feudal landowners, moneylenders and traders, in fact, opposed this because it would threaten their access to the traditional sources of economic surplus.

The foreign and national capital owners were also against it, because a more comprehensive industrialization process would undermine their monopoly position and force them into competition with new entrepreneurs a which in turn, could threaten their extraordinarily high profits. In such circumstances capitalism was devitalized and deprived of its growth and development dynamism, the dynamism that, under other circumstances, had created impressive economic progress in the centre formations during an earlier period.

Baran, contrary to the classical structuralists and many later dependency theorists, focused mainly on the internal conditions in the backward societies. It was in these internal conditions, and more specifically in the distribution of power among the classes and control over the economic surplus, that Baran found the primary barriers which had prevented the poor countries from copying the industrialised countries and reaching a similar stage of development.

However, Baran also emphasized the international circumstances by underlining that economic development in the backward societies was profoundly inimical to the dominant interests in the advanced capitalist countries. As these countries governed the international economic system, the underdeveloped countries remained trapped in poverty (cf. Palma, 1989).

The only way Baran could see out of the misery was through extensive state interventions to promote nationally controlled industrialization. The recommended strategy markedly distinguished itself from those of the structuralists by emphasizing the establishment of state-owned heavy industries as a precondition for evolution on the other industrial sectors.

The strategy proposed by Baran, directly or indirectly, achieved some influence on economic planning in countries such as India and China, but did not otherwise play any central role in the theory formation within the Neo-Marxiit school of thought. On the other hand, Baran’s analyses of the causes of underdevelopment became an important source of inspiration for scholars like the American economist, Andre Gunder Frank, the following section will briefly review the contributions to theory formation from the Egyptian economist, Samir Amin, and the Graeco-French economist, Ashiri Emmanuel.

Frank based his original dependency theory mainly on evidence from Latin America, while Amin drew his conclusions chiefly from empirical analysis of West Africa. Emmanuel drew more widely on the developing countries, trade with the industrialised countries. In terms of analytical perspective he worked only with a few rather limited subject areas, as opposed to Frank and Amin.

After a brief examination of the earlier works on dependency, from the 1960.. and the beginning of the 1970s, we shall try to trace the main lines of thought in the debate among the Neo-Marxists during the subsequent decades. This will include, on the one hand, a discussion of what can be conceived of as attempts to further elaborate and refine the original propositions, and, on the other hand, a summary of opposing positions in the debate.

In the next article, we shall follow yet another school of thought with roots going back to Mar and Baran, i.e., theories on modes of production and social classes which focus primarily on the internal conditions in peripheral societies.

Deprivation in developing countries is not simply a matter of low levels ofper capita income. There are many other dimensions to the development gap between rich and poor countries. Developing countries generally experience much higher levels of unemployment, open and disguised than do developed countries.

The levels of education, health and nutrition are often abysmally low, and income distribution tends to be much more in egalitarian. Policy in developing countries is increasingly concerned with these other features of the development gap. The basic reeds approach to development, pioneered by the World Bank, is a reflection of this switch of emphasis from exclusive concern with per capita income to these wider development issues.

Unemployment

The developing countries contain a huge reservoir of surplus labour. For a long time, poor countries, particular since the population explosion, have been characterized by underdevelopment of disguised unemployment in rural areas. What has happened in recent years is that disguised rural unemployment has transferred itself into disguised and open unemployment in the towns.

Unemployment in the urban areas of developing counties ins another dimension of the development problem and an increasingly serious one. The rationale for rural-urban migration will be considered later, but first let us outline some of the facts on employment and unemployment. According to the International Labour Organisation (ILO) in Geneva, 1 billion people in developing countries are either jobless or underemployed, which amounts to one-third of the total working age population.

This represents a colossal challenge, particularly as the workforce is expected to grow on another 1.5 billion by the year 2025. The ILO argues for a renewed commitment by developing countries to the goal of employment creation, and not to treat current employment levels as natural and the inevitable outcome of market forces, as if nothing can be done.

The ILO estimates that at least one billion new jobs need to be created in the next ten years if the proportion of people living in poverty is to be halved by 2015. The World Bank devotes its 1995 World Development Report to the conditions of employment in developing countries, and it painted a sombre picture.

To stop unemployment rising there has to be employment growth of at least 2 per cent per annum, which requires output of at least 4 per cent per annum. Not many countries are able to grow this rapidly. The statistical evidence across countries tends to suggest that rapid employment growth is associate with the implementation of market based policies and openness to trade. In particular employment growth is strongly related to manufacturing export growth, which in turn is closely linked to the skill to land ratio of countries.

All this is very aggregative analysis. The issue still to be addressed is the emergence of increasing urban unemployment. The problem is not so much one of a deficiency of demand for labour in an aggregate demand sense. The causal factors relate to the incentives for labour to migrate from rural to urban areas, and the incapacity of the urban areas to provide employment owing to a lack other necessary factors of production to work with labour particularly capital. As far as migration is concerned, there are both push and pull factors at work.

The push factors have to do with the limited job opportunities in rural areas and a greater willingness and desire to move, fostered by education and improved communities. The pull factors relate to the development of urban industrial activities that offer jobs at a higher real wage than can be earned in rural areas, so that even if a migrant is unemployed for part of the year, he or she may still be better off migrating to the town than working in the rural sector.

If there is no work at all in the rural sector, the migrant loses nothing, except perhaps the security of the extended family system. The rate of growth of job opportunities in the rural sector depends on the rate of growth of demand for the output of the rural sector and the rate at which jobs are being ‘destroyed’ by productivity growth.

As we saw in our previous example if the demand for agricultural output is growing at 1.5 per cent and productivity is growing at 1 per cent, then the growth of labour demand will be 0.5 per cent. But it the labour force is growing at 2 per cent there will be a 1.5 per cent gap between the supply and demand for labour.

If the level of disguised unemployment in the rural sector does not increase, this figure constitutes the potential volume of migrants. If the urban labour force is one quarter of the size of the rural labour force, a 1.5 per cent migration of rural labour would represent a 6 per cent increase in the urban labour force owing to migration.

On average, this is about the extent of the influx from the rural sector into the urban areas of developing countries. On top of this there is the natural increase in the workforce in the urban areas to consider; this is of the order of 2-3 per cent. If job opportunities in the urban areas are increasing at only 5 percent, then 4 per cent of the urban labour force will become unemployed each year, thus raising the amount of urban unemployment year by year, forcing labour into the informal service sector. In that case, unemployment shows up on poverty.

Historically, the process of development has always been associated with, and characterized by, an exodus from the land, continuing over centuries. The uniqueness of the present situations is not the migration itself but its magnitude and speed. And the problem is that the urban sector cannot absorb the numbers involved. For any given technology, the rate of which the urban (industrial) sector can absorb migrants largely depends on the rate of capital formation.

If labour and capital must be combined in fixed proportions, and the rate of capital accumulation is only 5 per cent, then the rate of increase is job opportunities can be only 5 per cent also. Unfortunately, however, the problem is necessarily solved by a faster rate of capital accumulation in the urban sector, because migration is not simply a function of the actual difference in real remuneration between the two sectors, but also of the level of job opportunities in the urban sector. If the rate of job creation increases, this may merely increase the flow of migrants with no reduction in unemployment.

The solution would seem to be to create more job opportunities in the rural sector. This will require, however, not only the redirection of investment but also the extension of education and transport facilities, which in the past few years have themselves become powerful push factors in the migration process.

Whereas formerly redundant labour might have remained underemployed on the family farm, nowadays education and easy transportation provide the incentive and the means to seek alternative employment opportunities. While education and improved communications are desirable in them, and facilitate development, their provision has augmented the flow of migrants from rural to urban areas.

The pull factors behind migration are not hard to identify. The opportunities for work and leisure provided by the industrial, urban environment contrast sharply with the conservatism and stultifying atmosphere of rural village life and naturally act as a magnet for those on low incomes or without work, especially the young.

Given the much higher wages in the urban sector, even the prospect of long spells of unemployment in the towns does not detract from the incentive to migrate. Moreover, the choice is not necessarily between remaining in the rural sector and migrating to the urban sector with the prospect of long periods of employment. The unemployed in the urban sector can often find work, or create work for themselves, on the fringes of the industrial sector — in particular in the formal services sector of the urban economy.

The wages may be low, but some income is better than no income. In other words, unemployment in urban areas may take the form of underemployment, or become disguised, just as in the case of the rural sector, its manifestation being low income. This has led to the notion of an income measure of unemployment, which needs to be added to register unemployment to obtain a true measure of unemployment and the availability of labour supply.

One way of measuring the extent of unemployment disguised in the form of low-productivity/low-income jobs is to take the difference between the actual labour employment at the sub-standard income and the labour that would be required to produce a given level of output of service at an acceptable level of income per head.

Before measurement can take place, of course, the acceptable (standard) level of income has to be defined. It could be that level set as the ‘poverty line,’ below which health and welfare become seriously impaired. The income measure of unemployment would thus be that is, one-half of the existing labour force is disguisedly unemployed in the sense that the level of output is not sufficient for those who currently work to maintain an adequate standard of living.

The above analysis of employment and unemployment trends in developing countries points to a number of policy implications that were also highlighted by the ILO in 1969 when it first sponsored missions to several countries to undertake a detailed diagnosis of the employment problem. Certainly an adequate rate of output growth is required to employ workers entering the labour market for the first time and to absorb the effects of productivity growth, but much more is required.

There is a case for the use of much more labour-intensive techniques of production, and the issue of rural-urban migration needs to be tackled by promoting more employment opportunities outside the urban centres, particularly for young people. Without such measures, unemployment will continue to grow, especially in urban areas.

Education

Another dimension of the development gap is the difference in educational opportunities between rich and poor countries, which manifest itself in much lower primary, secondary and tertiary enrolment rates in developing countries; much higher levels of illiteracy; and lower levels of human capital formation in general. This has a number of adverse consequences for the growth and development process.

Low levels of education and skills make it more difficult to countries to develop new industries and to absorb new technology; it makes people less adaptable and amenable to change; and it impairs the ability to manage and administer enterprises and organizations at all levels.

As the famous American economist John Kenneth Galbraith once said: ‘Literate people will see the need for getting machines. It is not so clear that machines will see the need for literate people. So under some circumstances, at least, popular education will have a priority over farms, factories and other furniture of capital development’ (Galbraith, 1962).

Available literature and statistics show the relative under provision of education facilities and opportunities in many poor countries, and the low rate of literacy in the poorest countries. In the primary and secondary sectors, the percentage sometimes exceeds 100 per cent because the gross enrolment ratio is the ratio of total enrolment, regardless of age, to the population of the age group that official corresponds to that level of education. While primary education is universal in high income countries, one quarter of children in poor countries still receive no primary education.

This amount to 125 million children, a third of whom live in Africa. In 1990, the world’s governments pledged to provide primary education for all by the year 2000, but clearly the commitment has not been met. In 2000, the pledge was renewed (by the so- called ‘Dakar Framework’) to provide universal primary education in poor countries by the year 2015 (the same date as the poverty reduction target): indeed, this is one of the `Millenium Goals.’

The estimates cost is $10 billion a year. This will required a reorientation of priorities in poor countries (e.g. less expenditure on arms and wasteful subsidies), more aid from donor countries, and more help from the World Bank. The World Bank readily admits that, until the recent past, it has neglected educational (and other social) expenditure in its lending policies.

There Is also a huge discrepancy in the provision of secondary education, with only one half of the age group in low-income countries receiving and education beyond the manifests itself in high level of adult illiteracy. A huge gender gap is also evident. in low-income countries, 30 percent of males are illiterate, and almost 50 per cent of females. Among the poor countries, China performs well, but in many of the poorest countries in Africa female illiteracy is way over 50 per cent. The gender gap narrows at higher income levels, but is still evident.

Developing countries neglect educational provision at their peril. Research also shows a strong correlation across countries between levels of human capital formation and growth performance.

In the following unit we present an analysis of the theories of underdevelopment and dependency for the simple reason of wanting to assess how relevant these theories are in explaining the status quo of many developing countries, especially as it relates to the characteristics outlined above. Furthermore, it would be interesting, for the purpose of this course to apply these theories to the apparent lack of human development in the Third World.