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Review Article:
Economic
Strategies
or Growth with
Equity*
Graham
Pyatt
WorldBank
Redistribution
with
Growth
has to be
an
important
book
by
several
standards. As
indicated
by
its
authorship,
the volume is the
product
of
various minds and
is
essentially
the result of
a
joint
effort
by
individuals
from the World
Bank
(Ahluwalia,
Chenery,
and
Duloy)
and
from
the
Institute of
Development
Studies
(IDS)
in
Sussex,
England
(Bell
and
Jolly).
In
fact,
many
others
have
been
involved,
and
in
their
preface
the
authors
indicate
that the
original
idea
for some
such
effort
came from
Dudley Seers, but illness prevented him from participating in it to fru-
ition.
However,
Seers did
manage
to
play
a
limited
role as one of
the
seven others to whom
particular
contributions
are
attributed.
The
outcome
is
something
between
a
book
and
a collection
of
es-
says,'
built
initially
on the
complementary
experiences
of the
World
Bank-deriving
both
from
its role as a multilateral
development
agency
and
its
expertise
in
quantitative
economic
modeling-and
of the
IDS,
Sussex,
which
has
played
such
a
significant
role
in the International
Labour Office World
Employment
Programme
and is
deservedly
recog-
nized for its insistence that development should not be perceived simply
in narrow economic terms.
The
result,
then,
is
some variations
on common
themes
by
five
principal
authors
with
seven
supporting
parts
as
the
ulti-
mate
product
of a
workshop
of
19 in
Bellagio;
discussion
of
a draft
at
a
conference of 49 in
Sussex
(including
myself,
incidentally);
and,
no
doubt,
a
great
deal
more
by
way
of
thought,
comment,
and
hard
work.
The
book
is
in
three
parts:
part
I,
Reorientation
of
Policy
(chaps.
1-8);
part
II,
Quantification
and
Modeling (chaps.
9-13);
and
part
*
Hollis Chenery, Montek S. A. Ahluwalia, C. L. G. Bell, John H. Duloy,
and Richard
Jolly.
Redistribution
with
Growth. London: Oxford
University
Press,
1974.
Pp. xx+304.
1
The authors'
preface
(p.
v)
states:
Although
we
agree
on the
major
themes
advanced,
we have
not
tried
to
produce
a 'committee
report'
that
would reconcile
all our differences.
Such
an
attempt
seems
inappropriate
n a document
that
tries
to
bring
together
the
perceptions
of
policymakers
as
to
the
nature
of economic
and
political problems
and the
suggestions
of
researchers as to how
to solve
them.
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Economic
Development
and
Cultural
Change
III,
Annex
and
Bibliography,
in
which
the
former sets
out
specific
ex-
perience
in
six
countries with an
overview
by Jolly.
A
technical
point
is
that the absence of an index frustrates attempts at cross-referencing be-
tween
individual
authors
(whose
contributions
are
occasionally
repeti-
tious)
and
discourages
search
into what has
actually
said
in
toto on
particular
points.
In
his
introductory
chapter,
Chenery points
out
that
the
conception
of
growth
as
separate
from
distribution is
entirely
inadequate,
at
least
in
relation to
developing
countries,
and
that
while
the
overall
experience
has been
that
growth
performance
in
the
past
15
years
has
left
substan-
tial fractions in
poverty,
this
general
statement is
by
no means
without
its exceptions. Accordingly, the book is to be seen as a progress report
on
work on
[the
issues
this
raises]
in
the
World Bank
and the
Institute
of
Development
Studies over
the
past
two
or
three
years
(p.
xiv).
But in
fact the
book does
not
always
read
that
way.
This
may
be because It
grows
out of
dissatisfaction with
the
inadequate
responses
of
policymak-
ers
to
the
growing
problems
of
relative
poverty
and
underemployment,
and
a
desire to
provide
them with
analytic
tools
that
are
relevant to these
problems.
While
a
comprehensive
and
adequately
tested
formulation
of
the
ideas
advanced
here
is
probably
several
years
in
the
future,
we
do not
feel that it is
necessary
to wait for the results of further research to
begin
the
reorientation
of
policy
that
is
so
badly
needed
(p.
xiv).
This, then,
is
a
study
in
political
economy.
It
follows that
reactions
to
it
will
depend
on
political
and
social
attitudes
which,
it
will
be
assumed,
can be
influ-
enced
by
analysis
and
research
results.
In
chapter
1
Montek
Ahluwalia
sets
out an
impressive array
of facts
on
inequality
in
most
developing
countries.
Without
getting
tied down
by
the
philosophical
difficulties
of
defining
poverty,
he
is
able to show
that over half the
poorest people
in
the world
are in
India,
and
that,
in
terms of
proportions,
poverty
is
pervasive
in African and Asian countries
especially.
Inequality,
as
distinct from absolute
poverty,
is
more a Latin
American
problem.
The
distinction
between
absolute
poverty
and
in-
equality
is not
made a
great
deal of here or
elsewhere in the
volume and
calls
for
further
consideration.
In
the
context
of
Redistribution
with
Growth this
does
not
matter
so much
since
the
emphasis
is
largely
on
policies
to
adopt
within countries.
But
in
terms of
international trade
and aid
it
is
clearly
relevant,
and
the
question
of what
support
should
be
given
to
relatively
better-off
countries
which
have
the
internal
capacity
to alleviate the
poverty
within their boundaries remains to be addressed.
Chapter
2 is
titled
The
Economic
Framework and
begins
with
a
discussion
of how
growth
should be measured
as a
welfare
performance
index.
The
basic idea is
to form
a
weighted average
of
growth
in
incomes
for different
socioeconomic
groups.
It
is
pointed
out that GNP
growth
maximization
corresponds
to
weights proportional
to
incomes;
that
is,
the
rich are
given
the
greatest weight.
A
reorientation is
proposed using
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equal
weights
or
poverty
weights:
to count a 1
percent
increase as
con-
tributing
more
to the
growth
of welfare if
it
is
experienced
by
a
poorer
person. There is a surprising absence of references to the economic the-
ory
literature in this
discussion,
which
is a
pity
given
the
important
con-
tributions
which
have been
made in
recent
years.
The
chapter
moves from the
question
of welfare
measures
to a
brief
discussion toward a
theory
of
distribution and
growth,
followed
by
alternative
strategies.
In
the former the
major
(and
clearly
valid)
con-
tention
is
that an
explicit
treatment of
asset
ownership
is
essential to
un-
derstanding
inequality,
and
that
policy
to
help target groups
must
focus
on
the
factors
of
production
they
own
rather than
simply
on the
markets
in which they sell their services. This leads to the identification of four
basic
strategies: maximizing
GNP
growth, redistributing
investment,
re-
distributing consumption,
and the
transfer
of
existing
assets.
It
is then
argued
that
maximizing
GNP
growth
is slow to benefit the
poor,
given
an
initial
position
of
underemployment.
In
contrast,
poverty
alleviation
through
current
transfers
will
obviously
result
in
short-term
gains
but
may
be at
the
expense
of
longer-term
growth.
Large-scale
asset transfers
going beyond
land
reform,
for
example,
are not
likely
to be
politically
acceptable,
while
reductions
in
population
growth
rates can make the
position easier from a number of points of view. In arguing that the re-
distribution-with-growth
strategy
of
directing
increments of
investment
(especially public)
toward
target
groups
is
the main
thrust to
be fol-
lowed,
the
analogy
is
drawn with an
international
aid
strategy
of
assisting
investment
and hence the
capacity
to
be more
self-sustaining
in the future.
This
chapter
is
crucial to
the whole
volume. The
arguments
about
alternative economic
strategies
make reference
to a simulation
model
which
is
set
out
in
chapter
11
and
which,
when we come to
it,
is
simply
not
good
enough.
In
particular,
the transfer
of
existing
assets,
even
re-
stricted to land
reform,
is no
longer encompassed.
Meanwhile,
the struc-
ture
within the
chapter
of social
preference
functions on the one
hand,
and
a model of technical
and
behavioral characteristics on the
other,
is
familiar
enough
in
economics.
However,
there are
aspects
of its
use in
the
present
context which could
benefit
from
being
much
more
explicit.
Specifically,
the
set
of alternatives
between
growth
and
inequality
is not
defined
by
technology
alone
but
depends crucially
on the
range
of
policy
options
which are
entertained.
If the
latter
is
limited,
then the
resulting
redistribution
will
be limited also even
though,
in terms
of
the
objective
function,
the
weight given
to
poverty
alleviation
is
very
substantial. Much
more
might
be achieved
by
a less radical statement of
objectives
associ-
ated
with
a
more
far-ranging
exploration
of
potential
policies.
Chapter
3
focuses on the
political
framework within which redis-
tribution
with
growth
is
conceived. In it Bell
provides
an excellent sketch
of the coalition of
interest
groups
and the
processes
of accommodation
which
often characterize
pursuit
of
governments'
main
objective-to stay
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Economic
Development
and Cultural
Change
in
power.
He is
therefore not
optimistic
about
the chances for a
com-
prehensive
redistributive
policy
involving
land
reform,
nationalization,
education, consumption transfers, and public goods. In each area there
are reasons
why
the
full
potential
benefits
may
not
be realized
by
virtue
of
what
is
politically possible.
Accordingly,
the
policy
set
is
limited
and
the
scope
for
pursuit
of
such
policies
by planners
and
commentators is
constrained
by
the
prior
concerns of
the
political
leadership.
In
chapter
4
Ahluwalia
goes deeper
into
the economic
aspects
of
pol-
icy
intervention,
taking
the
political
scope
as
given.
This is
a useful
piece
which
pulls together
the
contemporary
wisdom on
a
number
of
issues,
such as
the bias in
market
prices
of
factors,
the
effects of
redistributing
final demand on employment, etc. But the spirit is somewhat depressed:
The
chapter
ends
with,
In
advocating
an
eclectic
approach,
we
recog-
nize
that the
conservative liberal solutions
may
not be sufficient
The ultimate
justification
for eclecticism
is
not that
it
is
always
right
but
that
it
is most
likely
to
be
politically
feasible
(p.
90).
Chapers
5, 6,
and 7
discuss the
formulation
of
a
strategy by
first
defining
four
target groups:
(1)
small
farmers,
(2)
landless laborers and
submarginal
farmers,
(3)
the urban
underemployed,
and
(4)
the
urban
(un)employed;
second,
it
discusses a
typology
of
countries based
on
degree of urbanization, land availability, and the concentration of land
ownership.
This,
then,
complements
Ahluwalia's
early
chapter
on
where
poverty
resides and
its
relationship
with
inequality by
showing, through
various
simulations,
what
is
in
fact
fairly
obvious,
namely,
that the
scope
for
poverty
alleviation
depends
on how much there is to redistribute
(and
hence on
growth)
and
on
the
degree
of
inequality
which
is the
starting
point.
The
argument
then
proceeds
in
chapters
6
and
7 to
focus on
rural
and
urban
target groups, respectively,
the
latter
chapter being
contrib-
uted
by
D.
C. Rao. There
is
a
great
deal
in
both
these
chapters
which is
of interest. Land reform is
prominent
in the rural
strategy, especially
in
the
Latin American and South
Asian
archetypes.
The
extensive
mar-
gin
of land also
provides
a
degree
of freedom
in
the
former
case
and
can
be
the
main concern in
Africa,
where
less
rigidity
in tenure
also
facilitates
new forms of
cooperative/collective
institutions.
Beyond
this,
the need for
support
in terms of
credit,
extension
services,
and infra-
structure
to focus on
the
rural
poverty
groups
is
clearly
spelled
out.
The
urban
poverty
groups
are
more
difficult
to
analyze,
if
not
to
help,
by
virtue of their origin, in good measure, in urban/rural differences. The
rural
strategy
is
therefore an
important part
of
the
urban
strategy,
both
in
relation
to
migration
and
in terms
of food
supply
and
the market
for
urban manufactured
goods.
While
Rao
urges
more
equitable
distribution
in
health and education facilities and accommodation for both
squatters
and informal
production
activities,
the main thrust
in
the urban context
must be
through
his
concern for
employment generation,
not least
by
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Graham
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correcting
actor
price
distortions.But
yet again
we come
up
against
he
political
realities
of both
capital
and labor
markets.
PartI of the bookis completedby a chapteron international imen-
sions
by Jolly.
He
puts
his
finger irmly
on whatworriesme
through
much
of
the earlier
chapters-that
the
extent
of
world
inequality
and
poverty
is too serious
and
persistent
a
problem
or
adequate
emedies
o be
found
only
within
the
range
of
currently
realistic debate
(p.
159).
He
then
proceeds
o discussthe
scale and natureof international
ransfers
which
would be
substantiveand even
appearpossible
in
comparison
with
the
magnitudes
nvolved
in
the
change
in oil
prices,
which
was
only
recent
at
the
time of
writing.
While
recognizing
hat such
developments
may
appear isionaryandunrealistic p. 167),Jollyis notnecessarilyndulg-
ing
idle
speculation
when
he
says,
In the
longer
run,
the world
as
a
whole,
rich
countriesand
poor,
could
tire of
the
instability
stimulated
by
[developments
n the
bargaining
power
of
primary
producers]
and
support
moves
towards
a
more
rationalworld
system,
involving
orderly
financial
ransfers
within,
for
example,
some form
of world
income
tax
(p.
167).
In
defaultof such
major
changes,
there remainsa
great
deal
which
could be done at the international evel to
support
the internal
policies
of countries,or even simplyto give them a chance.Jolly goes through
the list of
trade,
technology,
private
nvestment,
monetary
arrangements,
military
activities,
and
aid to
make the
point.
He
suggests
hat in
the first
two
areas,
at
least,
there are
options
from
which all
countries
might gain
in
terms
of
a
more
rationalstructure
of
world
production
and
by
a re-
allocationof scientificresearch
and
development
ffort toward he
prob-
lems
underlying
maldistribution.
he international
mobility
of
labor,
as
opposed
to that
of
capital
and
goods,
does not
feature much in this
discussion.
PartII of the book is disappointing. Available
Planning
Models
(chap.
9)
discusses
extensions
of
input-output
o
cope
with
distribution
and
employment
ssues-a theme taken
up
in
chapter
13 on Research
Directions.
Only
sketchesof the extensionsare
offered,
and
hence
the
case for
more
research
n this
area
s
presented.
Chapter
10
on
Sectoral,
Regional
and
Project
Analysis
s
similarly
concernedwith
pointing
up
the relevance
f
previous
researchand the
extensions
which
are desirable
for the
future.2
Both
chapters
ontainthreads
which,
t
is
suggested,
need
to
be
drawn
ogether
with those in
chapter
11,
A Model of
Redistribu-
tion
with
Growth,
n
order
to
arrive
at an
appropriate
ramework
or
evaluating
policy options.
But even
discounting
he
obvious internalde-
2
The
material
in
chapters9 and
10 is
drawn
largely from
two
recent
volumes:
Charles R.
Blitzer,
P.
Clark,
and
L.
Taylor,
eds.,
Economy-wide
Models
and
De-
partmentPlanning
(London:
Oxford
University
Press, 1975);
and Louis
M. Goreux
and
Alan S.
Manne,
eds.,
Multi-Level
Planning:
Case Studies
in Mexico
(Amster-
dam:
North-Holland
Publishing
Co.,
1973).
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Economic
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Cultural
Change
ficiencies
of
the
model
(the
specification
assumes
a
single-good economy
with no
external
relations),
it remains
lacking
in
what must be
crucial
elements. Thus there is no consideration of asset transfers, such as land
reform,
in
the
model,
notwithstanding
the
key
role
this
plays
in
diagnosis
for
Latin
America
especially;
and the treatment of
capital
at the mar-
gin,
that
is,
savings
and
investment,
is
innocent
of
any
notion
of
returns
or
a
capital
market.
Clearly,
then,
the
mapping
from
socioeconomic
classes on the one
hand
and their role
in
relation
to
capital
on
the
other
is
denied
the
emphasis
which earlier
arguments
establish
as
justified.
Part
II
concludes
with
chapters
on
Statistical Priorities
and
Re-
search Priorities.
Accepting
the
positive
point
that
more
and
better
data
would be helpful (as always), the chapter takes a negative attitude to
the UN
Standardized
National Accounts
(1968)
(incidentally,
mis-
printed
as
1958)
and
argues
against
complete
information
systems
in
favor of
concentration on the
poverty groups.
To
the extent that
this
should
be
read as a
plea
for
focusing
on
people
as the
important
unit,
rather than
money
magnitudes,
the
arguments
are well taken.
But it
is
not clear
to
what extent
the
authors of this
particular
chapter
(Bell
and
Duloy)
would
want to
go
further. But be this as it
may,
their
general
concern for
a
more
flexible and detailed
approach
to classifications
of
production, income and outlay accounts, etc. in order that duality and
poverty
groups
might
be
distinguished
in the total
framework
is
to
be
supported.
Their
plea
for data on
assets
is
unfortunately
not
likely
to
get
far in
political
circles.
Nor,
as
chapter
13
says,
does
reorientation
of
research alone
.
.
.
go
much of the
distance
towards
alleviating
poverty.
A
sustained
political
commitment
is the
primary
condition.
However,
by
evaluating
the
dimensions
of
the
problem
and
by
demonstrating
the effec-
tiveness of
different
strategies
and
policies,
research can contribute to
a
climate of
opinion
strongly
favorable
to
that commitment
(p.
249).
Here
then,
in the final sentence of the
book,
is the
challenge
for the
future
which
might
with
advantage
have come
much
earlier
in
the
text.
As it
is,
for
the future
the
perceived
research
priority
is
to
recast devel-
opment
analysis
into
a
framework
which
recognizes
different
socioeco-
nomic
groups;
how
they
behave
in terms of
consumption,
savings,
and
production;
how
they
relate to each other
and
the
linkages
or
leakages
which
determine
their
accessibility
with
respect
to
policy
influences;
and
how
they
relate to
both
public
and
private
assets and
services.
The
trans-
lation
of
this into
specific
research
activities
will be
interesting.
At
one
level it could
simply
be
disaggregation
of the household sector on lines
familiar
from
production
studies.
At
another
we could be concerned
with
capital
theory
as a
theory
of social
relationships.
There
is
plenty
of
mid-
dle
ground
between
these
two.
Part
III
( Annex
and
Bibliography )
is a useful contribution. The
six
country
studies
in
the annex-India
(Pranab
Bardhan),
Cuba
(Dud-
ley
Seers),
Tanzania
(Reginald
Green),
Sri
Lanka
(Lal
Jayawardena),
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7/7
Graham
Pyatt
Korea
(Irma
Adelman),
and Taiwan
(Gus
Ranis)-could
all
with ad-
vantage
have
been
permited
more
space.
Equally,
the
sample
could
well
havebeenextended o countrieswhichhad less concernwithdistribution,
and
others with
concern
but less success.
However,
these brief
reviews
of
experience
remain
very
worthwhile
and
bring
out
a numberof issues
which
the
main
text
skips
over. Not least nationalizationand trades
unions
loom much
larger
here
than
earlier,
as does the vexed
question
of
the role
to
be
played
by
the
private
sector.One would
like
to
see
these
issues
of
appropriate
orms
of
organization
ddedto the
research
agenda.
To
sum
up
Redistribution
with Growth
is
not
easy.
In the
first
instance t is a statement
f what
we need to
know more about
if
poverty
anddistribution re to be better understood.More ambitiously,t is an
attempt
o
specify appropriate olicies
given
that
enough
s known
to
be
sure
that the
problems
will
not
go away
and
might
well be
getting
worse.
However,
he
policies
are
conceived
n a
restricting olitical
framework.
This
may
in fact be
the
appropriate
way
to
set about
influencing
vents.
It
might,
on the other
hand,
have been
more effective
to
challenge
the
political
constraints
o
yield
to
what
might
otherwise
prove
to be inevi-
table economic
forces. Politicians
must
give
way
in
thinking
that
they
can
constrain
hese forces
if
they
will
not concede
that
they
ought
to
fromsome equitypoint of view. But this, then,has to referto the poli-
ticians and
people
of
the
developed
world at least
as much as
those
in
the
countries
where
poverty
resides. Redistribution
with Growth
is an
important
tatementof the
authors'
perceptions
of
development.
As
such
it will
raise
questions
n
dormant
minds.To
the extent
that
it is
not
strong
analytically
we
must wait for
subsequent
eports
on
research n
Sussex,
Washington,
and
elsewhere for some
of
the answers.
Meanwhile,
Re-
distribution
with
Growth adds
greatly
to
evolving perceptions
of
what
the
issues
are. Its
challenge
ies
at
the authors'own
feet,
alongside
all
otherdevelopment conomists,as well as with theirpoliticalmasters.
587