THE ANATOMY OF UNDERDEVELOPMENT

Poverty is the central economic fact of the underdeveloped areas. But there are many differences among them. Some are primitive; others, like India and China, boast civilizations which are far older than those of the West. Some have generous natural resources; others are bitterly poor in the endowments of nature. Some have a high ratio of population to land; others have vast open spaces. The poverty of a beggar in the streets of Calcutta is different from that of the Bushman of South Africa or the desert nomad of the Middle East. But in spite of these differences, there are some strong resemblances. And our theory from Chapter 15 can provide a useful framework for examining the problems of the underdeveloped nations.

Patterns of Economic Activity

First, a brief look at the economies of the underdeveloped nations as a backdrop for analysis of why they are noor, and of what can be done to raise their production.

Poverty and the Dominance of Low-Productivity Agriculture. In the underdeveloped countries, food is the main item of production and consumption. It has to be, for starvation hovers uncomfortably near. For the entire group of underdeveloped countries, about 70 per cent of all production is food. In the United States, the comparable figure is about 20 per cent. Although diets in most nations are adequate to preserve life, they are often inadequate to fend off disease or, even allowing for the small bodily stature of many peoples, to provide enough energy for continued hard work.

A mud or a thatched hut and a little simple clothing make up most of the rest of the consumption pattern in many underdeveloped countries. Remember that only around $50 per year per capita is left to cover everything except food. Formal education, medical care, plumbing, highways, and other such services that we take for granted have little place in such standards of living. The masses in these nations save little or nothing at all. In Calcutta, a teeming city, between a quarter-and a half-million people have no home or job whatsoever and simply wander the streets. Their food often comes from garbage in the gutter. In Pakistan, child labor is paid 10 cents per day.

Outside a few modern industries in the cities, production is at the handicraft stage. Since human labor is very cheap and capital scarce, the most laborious details are often done by hand. Tractors and other mechanized farming equipment are little known, and would generally be unusuable even if available, because of lack of fuel, maintenance facilities, and sufficient education to use them. Figure 18-1 shows vividly the great reliance on human and animal power in the poor nations, compared to the vast use of nonhuman energy (electrical, water, and mineral) in the developed nations. (In this and the following figures, income per capita, from Table 18-1, is always shown on the vertical axis. Here both income and energy use are plotted on ratio (logarithmic) scales to make relative comparisons easy.) The nonagricultural population is crowded into a few large cities, where small-scale industry, services for the wealthy, and government employment provide most of the jobs available. Simple textiles, sometimes not much beyond the handicraft stage, are important in many underdeveloped economies; the cloth is used for clothing and home furnishings. In the more developed countries, modern large-scale industry (steel, chemicals, fertilizers, and the like) has begun to appear in the major cities. In a few cases, one basic industry dominates the economy—oil in the Middle East, rubber in Malaysia, copper in Chile.

FIG. 18-1 Energy consumption per capita is closely corre’ated with the degree of economk devekpment. (Source: United Nations. Data are for 1964.)

Dual Economies: Limited Development of Markets. Thus, many nations are in essence “dual economies.” One part is a money, marketoriented economy centered in a few large cities, with modern industry mixed with crowded slums. The other part is a subsistence-level, rural, bartertype economy of hand labor and primitive superstitions, comprising 75 per cent or so of the population, substantially isolated from the markets and industry of the cities. To go from one to the other is to go from one world to another, from the dark ages to the present.

Transportation is crude. The highways of the cities rapidly dwindle to dirt roads and to mere paths a hundred miles away. Religious and cultural barriers fragment the nation. One can scarcely call them “economies”—for economic life as we know it exists only around the cities and towns. Without roads and communication, there is little chance for a market economy to develop.

In some nations, one-product export economies have developed—coffee in Brazil, rubber in Indonesia, oil in Saudi Arabia. Much of the investment to develop these export enclaves is foreign, and resentment against foreign ownership and operation is common. Often it leads to nationalization, whether or not there is a native competence to operate the industry.

Unequal Distribution of Income. In most underdeveloped countries, income is very unequally distributed. There are often a few rich landholders, sometimes a few industrialists. The masses are dismally poor, mainly living just above subsistence level on farms or in villages. Strikingly, there is often no “middle class” of shopkeepers, professional men, and skilled workers, such as makes up a major portion of Western populations.

Weak Governments and Limited Government Services. A few underdeveloped nations have well-established democratic institutions, but they are the exception. Governments are typically unstable, revolutions are commonplace. There can be little long-range planning of basic government services such as schools, highways, and the like. Often governments are dominated by the entrenched “haves,” who block social and political change which might endanger them. Tribal chieftains, religious leaders, and other guardians of the traditional culture are likely to occupy positions of great influence. Governments, which must provide leadership for many changes in development, are usually weakly staffed, reflecting the newness of the nations and the lack of education and traditions of honest civil service. Government jobs are often political perquisites, which mainly provide an accepted position for enforcing bribes and graft. All too often, confusion, red tape, and bungling characterize government “programs.” There is little chance for such governments to establish and administer effective tax systems to collect the funds needed to provide schools, highways, and sanitation.

So much for a general, if discouraging, overview. Now let us look more analytically at the problem, using our theory from Chapter 15. If the theory is right, low per capita output in the underdeveloped nations should reflect a high ratio of population to natural resources and to capital; a slow rate of capital accumulation and technical advance; an uneducated, low-productivity labor force; and an economic, political, and social environment unconducive to initiative, enterprise and organized economic activity. And in fact, this is a reasonable description of most of the underdeveloped nations. Let us look now at these factors one at a time.

Natural Resources

Lack of natural resources does not explain the plight of the underdeveloped nations. Switzerland has one of the world’s highest per capita incomes on virtually no natural resources; China has one of the lowest on vast natural resources. Africa is rich in natural resources. The Malthusian hypothesis suggests that per capita incomes will be lowest where the ratio of population to natural resources is highest—where people outrun the ability of the land to feed them. But this, too, is clearly too simple an explanation. The ratios of population to arable land for Switzerland, Belgium, and the Netherlands are about the same as those for Bolivia, Peru, and Egypt.

Plentiful natural resources can certainly help. The United States, Canada, and Australia all have rich resources and low ratios of population to land. Surely the vast western frontier helped to speed our early growth. Moreover, even the poor nations would be much worse off without generous resources—the copper and nitrates of Chile,. the oil of the Middle East, the rubber of Sumatra. Perhaps climate, rather than natural resources in the usual sense, is critical. Most of the world’s well-to-do nations lie in the temperate zone; none of them in the tropics. But within the temperate zone there are wide variations in economic development, as there are among tropical nations. Nor does primary reliance on agriculture, for whatever reason, necessarily characterize the poor nations. Denmark and New Zealand demonstrate that agricultural countries need not be poor. The poor nations are poor not merely because they are agricultural, but because productivity in their agriculture is so low.