Professional Documents
Culture Documents
DEVELOPMENT PLANNING
ECONOMICS
Routledge Library Editions—Economics
DEVELOPMENT ECONOMICS
In 7 Volumes
W ARTHUR LEWIS
Development Planning
ISBN 0-415-31299-X (Print Edition)
Development Planning
London
GEORGE ALLEN & UNWIN
Boston Sydney
First published in 1966
Second impression 1967
Third impression 1968
Fourth impression 1970
Fifth impression 1972
Sixth impression 1976
Seventh impression 1979
PREFACE vii
I. PATTERNS OF PLANNING 1
II. PLAN STRATEGY 13
1. Interdependence 14
2. Foreign Trade 27
3. Capital Intensity 44
4. Regional Balance 58
5. Unemployment 65
6. The Distribution of Income 77
7. Public Expenditure 87
8. Taxes and Savings 106
9. Inflation 121
10. Foreign Aid 129
III. THE ARITHMETIC OF PLANNING 139
1. The Plan Period 140
2. The Rate of Growth 142
3. Projecting Financial Resources 157
4. Overall Commodity Balance 168
5. Industrial Balances 175
6. Linear Programming 188
7. The Capital Budget 204
x
INDEX 271
TABLES
Economic Survey
The Plan normally begins by reviewing progress in recent years,
especially since the last Plan was issued. Changes are noted in
population, national output, investment, saving, consumption,
Government expenditure, taxation, the balance of payments, and
the performance of each of the major industries. Giving this
information is not one of the purposes of the Plan; many
governments produce some kind of Annual Economic Survey
with this material, and many also produce Plan Evaluations from
time to time, which examine the progress of the economy in
various spheres, in the light of proposals in the Plan. In the
Development Plan document such information is merely a
curtain raiser, suggesting the problems which must be selected
for further attention.
2 DEVELOPMENT PLANNING
Government Expenditure
When the first Development Plans were issued at the end of the
war, the emphasis was on determining priorities in the public
sector. A review of public expenditure is still an essential part of
any Plan. The first move in preparing a Plan is normally to ask
each Government department or agency to submit its proposals
for expenditure over the period of the Plan. Most of the routine
work on the Plan consists of costing each proposal as carefully as
possible, and estimating potential benefits, financial and
otherwise. The total of the sums requested always greatly
exceeds the money the Government is likely to have; hence the
prime object of this part of the Plan is to assign priorities,
deciding what is to be included, and what shall be postponed or
rejected.
Hardly anybody doubts the value of this kind of periodic
reassessment of what Government departments are planning to
do, even though it is realized that modifications have to be made
in between Plans. It is very easy for Government agencies, like
any other institutions, to drift from day to day. The periodic call
to look ahead, and to make and defend proposals before the
planning authorities, in competition with the proposals of other
agencies, helps departments to keep their sense of direction.
Macroeconomic Planning
The principal danger of a macroeconomic exercise lies in its
propensity to dazzle. The more figures there are in a Plan,
produced by an army of professionals who have laboured
mightily to make them consistent, the more persuasive the Plan
becomes. Attention shifts from policy to arithmetic. Consistency
can be mistaken for truth. Revision is resisted. Yet the Plan is not
necessarily right merely because its figures are mutually
consistent. However, this is a psychological rather than an
intellectual danger. Once the point is grasped that mathematical
exercises do not of themselves produce truth, a Plan with figures
is no more dangerous than a Plan without figures.
The question remains: what useful purpose is served by
producing doubtful target figures for the private sector? The
answer turns on a number of factors, especially on the degree of
interrelationship between private and public sectors, on the
amount of control exercised over the private sector, on the
persuasiveness of the planning process, and on the availability of
reliable statistics.
That the public and private sectors are interrelated cannot be
doubted, but it does not follow that one must make a
mathematical model of the whole economy. Each public agency
must take account of private plans when making its own. The
Electricity Department must consult all potential major uses of
power, in order to forecast demand. The Water Department must
try to find out where new industries are to be located. Transport
and other communications must also be integrated with the
private sector, and so on, all along the line. This calls for much
consultation with the private sector, but to include the results of
this consultation in the plans of the public sector is relatively
simple. Large-scale investors in the private sector have to meet
the same problem every day; they have to know, or guess, how
others will behave, in both the private and the public sectors. In
small countries where all the chief decision makers know each
other, and consultation is easily arranged, co-ordination can be
achieved without elaborate models. In larger countries, like
6 DEVELOPMENT PLANNING
Policy
In the private sector statistics may help, but what really counts is
policy. The Government is seeking to induce people to do what
they would otherwise not do—invest more in physical resources
or in their own skills; change their jobs; switch from one crop to
another; adopt new technologies; and so on. The set of policies
which it will adopt to bring about these results is the core of
private sector planning.
Can a Government really contribute to raising the rate of
growth in the private sector of the economy? The first task of a
Development Plan is to bring order, priority and foresight into
Government expenditure; any Plan which achieves this is already
making a substantial contribution. Can a Government usefully do
more? The answer is in the affirmative. The main elements of
development policy may be listed as follows:
Summary
1. A Development Plan may contain any or all of the following
features: (i) a survey of the current economic situation; (ii)
proposals for improving the institutional framework of economic
activity; (iii) a list of proposed Government expenditures; (iv) a
review of major industries; (v) a set of targets for the private
sector; (vi) a macroeconomic projection for the whole economy.
12 DEVELOPMENT PLANNING