17

DUALISTIC THEORIES
Dualism arises from a clash between the social systems of East
West. East is East and West is West and never the twin shall meet."
Rudyard Kipling. -Quoted by J. H. Boeke

Introduction - Meaning

The underdeveloped countries of today are generally characte

rised by a dualistic economic structure- a modern economy exi_ting
side by side with a traditional or backward economy. As a matter of
fact, almost all underdeveloped countries have a dualistic economy.
Thus, dualistic economy is a co-existence of two opposite economies,
L.E., modern economy and the.backward economy. The modern
economy enjoys all facilities and amenities of the modern life whereas
the traditional economy remains devoid of all such things. The
existence of these two different economies creates a problem known as
the problem of dualism'. It. is a concept broadly discussed in the
developed economies. This concept of dualism has been examined and
cdiscussed at considerable length including questions relating to nature,
teatures and implication of dualism at different platgforms.
In this chapter, we propose to discuss the thrée main theories of
dualism i.e. (1) The Theory of Social Dualism as propounded by Dr.
J. H. Boeke, II) The Theory of Technological Dualism, as propounded
by Benjamin Higgins, and (1II) The Theory of Financial Dualism as
propound by Prof. H. Myint.
Elements or Characteristics of Dualism
According to Prof. H. W Singe; there are four main elements or
Characteristics of dualism. They are as follows:
1. It possesses different set of conditions, out of which some are
Superior and others are inferior. There is co-existence of modern and
raditional methods of production, the co-existence of wealthy,
cducated people with illiterate, poor people, the co-existence of
Wealthy industrialised nations with poor agricultural nations.
2The co-existence is chronic. Any discrepancy between superior
and inferior will not eliminate itself over time. The co-existence of
nternational wealth and poverty is not a temporary phenomenon which
WOuld be removed with the
passage of time. Jt is deep-rooted.
 238 Economics of Development and Planning8
3. Dualistic Theories I 239
The degree of difference between superiority and inferiority
fails to show any mark of diminishing, rather it has an (6) The Theory of Internationa! Dualism.
tendency to increase. For
inherent
instance, the difference of production Myrdal propound the theory of international Prof. H. Myint and G.
dualism. Prof. M. R
technigues between the workers of Todaro has further expanded this theory.
countries seems to be broadened over de"elopcd International dualism hass
and less
developed. been explained as pockets of wealth within broad areas of
time. has also been described as the poverty. It
4. The interrelations between superior and inferior elements are between rich and poor nations persistence of increasing divergence
of the world. International
such that superior element does little or nothing to improve or pull up responsible for international dualism. trade is
inferior eiement. But the universal truth is that superior element always In this
tries to push down the inferior element. chapter we shall confine our study to three types of
dualism, i.e.,
(1) Social Dualism, (I) Technological Dualism, and
Types of Dualism Financial Dualisn. (III)
(1) The Theory. of Social Dualism. Dr. J. H. Boeke, a Dutch? (I) THE THEORY OF SOCLAL DUALISM
economist, propound the theory of soçial dualism. This theory of social Introduction. Dr J. H. Boeke,' a
dualism is a general theory of economic and social development of the theory of social dualism. Dutch is
This theory economist, propounded
underdeveloped economies based primarily on his studies of the applicable only to
underdeveloped countries. It is based on the social
IndonesSian economy. Tn 1953, he showed the difference between development of
superior and inferiorelements of social and cultural conditionS. He underdeveloped economies on his
the underdeveloped countries are study
of Indonesian
economy. Today,
thimks that dualism creeps up due to the differences between the characterised by dualistic economic
structure.
pre-capitalist traditional society and capitalist modern.society. Meaning. According to Dr J. H. Boeke, there are three
(2) The Theory of Technological Dualism. Prof. Benjamin Higgins characteristics of a society in the economic sense.
propounded the theory of technological dualism. It implies the use of They are (1) social
spirit, (i) organisation forms, and (111) the technique
different productión functions in the advancedsector and_the
traditional sector. Dualism 1s a situation in which productive employ
Their interdependence and interreiation
are
dominatingit.
called the social system or
SOcial style. It is not necessary that a
society be
ment opportunities are limited, not because of lack of effective demand
by one social system. If atleast exclusively dominated
but because of resources and technological restraints in the two one social system prevails, the
sectors.
may be called homogenous. But when two or society
prevail simultaneously, the society may be called amore social systems
dual society. Boeke
3) The Theory of Ecological Dualism. In 1963, Greetz had made qualifies the term dual society to societies
of two synchronic and full grown social "showing
a distinct
different expianations for dualism. He was of the view that different cleavage
ecological systems influence dualism. Climatic conditions and natural historical styles
evolution of homogenous societies are
which in the nomal
resources endowments of different regions create elements of other by transitional
forms as for separated from each
superiority and inferiority. capitalism by earBy capitalism, and, instance, precapitalism and high
which there do not
(4) The Theory of Enclave Dualism. Prof. H. W Singer, Frutado contemporary dominating features. Without these qualifications,
"* coincide as
and H. Myint have explained enclave dualism. They argue that Would be impossible to distinguish between it
technological dualism proposes to describe a ituation that arises when SoCiety. If on the other hand, one social homogenous
system is
and dualistic
a capitalist wedge is introduced into the traditional economic structure abroad and this
system fails to oust or assimilate the imported soCial from
This wedge is in the form of productivity. The extractive industry like System, a dual society obviously exists. On account prevailing of this
mines, oil wells and plantations etc. are capital intensive and so moderna Boeke defines a dual reason,
society as a
social systems as a matter society
where "One of
the tWo
imparted technology is being used. In fact, this sector becomes an prevatling
Wll have been of fact always the most advanced,
enclave for export. This sector coexists with low productivity and imported from abroad and have
new environment without being able to oust or togained
labour-intensive technology. its existence in the
assimilate the divergent
(5) The Theory of Financial Dualism. Prof. H. Myint has SoCial system that has grown up there, with the result that neither oj them
propounded the theory of financial dualism. Financial dualism refersto CCOmesS general and characternstic for that society as a whole." The
the coexistence of different interest rates between the organised a n requent form of the socia! system imported from abroadmost
unorganised money markets in the underdeveloped countries. The rat underdeveloped countries is western capitalism which has penetrated in
EO the
of interest in the unorganised market in the traditional sector is mu precapitalistic agrarian community of these countries. The
higher than the rate of interest in the organised money market in u
modern sector.
2 Dr. J. H. Boeke : Economics and Economic Policy of Dual Socie:ies,
1953.
240 | Economis of Development and Planning Dualistic TheoriesI 241
imported social system is under western influence and supcrvision and not till six; when rubber prices
fall, the owner of a grove may decide to lip
more intensively whercas
uses advanced techniques and where the average standard of living is high prices may mean that he leaves a lurger or
high. On the contrary, the native or prevailing social system is Smaller portion of his tappable trees untapped". This
the necds of the eastern
clearly explains that
traditional with low level of techniques along with low standard of society are very limited. Such needs are
living of the average person. Bocke calls. it a social dualism. influenced more by social rather than economic considerations.
According to Boeke "Social dualism is the clashing of an imported (2) Overriding Importance of Social Needs.
characteristic of dualistic economies as pointed out byAnother mainis
Dr. Boeke
social ystem with an indigenous social system of an other style. Most
requenthy the imported social system is high capitalism. But it may be that they give greater importance to social needs as tocompared
western economies. According to Dr Boeke, "Possessions in ihe shape
socialism or
communism just as well, a blending of them. He believes
or
that dualism arises from a clash between the social systems of cast and of cattle, land, clothes and hou_es, the fulfilment of social duties in all
west. To substantiate his view-point Boeke quotes Rudyard Kipling's circumstances of lifë, must be regarded as largely the satisfaction of social
needs. It is not their economic usefulness nor the individual services
famousphrase, "East is East and West is West, and never the twain shall render their possessor which determine the value
they
of the goods. It is a
meet." This phrase makes the point amply clear that the social system
matter of secondary importance whether the land produces reasonable
system of West. It is due to
of East is radically different from the socialthat profit in proportion to the money paid for it or not; whether the cattle can
the clash between these two social systems social dualism arises in
the less developed countries, with the result that less developed
be made reasonabBy useful to their owner and owm his business o r
not;
whether the clothing cover protects, wams the weare or
economies are often called 'dualistic "economies" or "eastern ajfects
him
pleasantly any way. For it is not the use of these objects to the subject
economies". Such economies
of South and East Asia.
are
generally witnessedin the countries
himself that gives them their worth in his eyes; it is what the community
thinks of them that sets the standard."
Characteristics of a Dualistic Economy The social character of needs is due to the
of the eastern indigenous character
The study of the characteristics of a dualistic economy will enable society. In fact, "the lower the development of the
a reader to differentiate between the social system of the West indi.dual, the greuter is his dependence on social traditions, and the
and that fewer his economic needs the more place is
of the East. The word 'eastern' has been used as synonym for dualistic given to the social needs."
economy. The main characteristics of dualistic economy are as follows: (3) Unorganised Labour. Another important
(1) Limited Needs. The foremost characteristic of eastern or the dualistic economy is that labour is characteristic
of
unorganised, pass1ve, Silent and
pre-capitalist indigenous sector of the dualistic economy is the limited casual. Labour is unskilled and immobile too. People hesitate to leave
needs of the society in sharp contrast with the western society where neir huts and homes, as they are very much attached to these things.
the wants are unlimited. The reason for limited needs of the dualistic Because of the immobility, the labour remnains
unorganised and as
economy is simple habits and simple way of living of the people.
his
bargaining power is weak. People are orthodox in their outlocksuchand
According to Dr Boeke, "This is connected with the limited passive in action. They do not take initiative for
any adventure. In
development of exchange, with' the fact that most people provide for Contrast, the people in western economy are progressive, dynamic, and
themselves, that families have to be content (satisfied) with what they LOrward looking. They display their interest in every type ot adrenture.
are able to produce themselves so that needs have to remain modest in (4) Accent on Self-Sufficiency. Another important
quantity and quality." or
dualistic economy is that the eastern society considerscharacteristic
tamily as an
Unit and the individual
The people of the eastern society (backward society) do not self-sufficiency is the dominant idea. People are
aspire for more and more, rather they feel satisfied when their Ot easily induced to organise production or to collect
investment.
ACcording to Dr Boeke, "Not only they feel strangers to basic torms of
immediate needs are duly met. In simple words, the people remain exchange like business and profession but insofar as these are vusiness
contented with their present lot. Because of limited human needs, hese are always one-man aftairs that can har dly compete wth western
economic motivation to produce eitherleads
doestonot exist in the eastern
low level of cconomie
Capitalism and are not lasting." Thus, the main object of production is
is
society or weak.
very This,
in turn, not profit making but satisfying personal needs.
activity.
To quote Boeke, "when the price of coconut is high, the chances are )Absence of Enterprising Spirit.
ualistic economy is that people
Another characteristic of the
not adventurous and
are
that less of the commodities will be offered for sale; when wages are thus lack thc
raised the manager of the estate risks that less work wil be done; If three Cquisite enterprising spirit. In contrast,
the people of the western
acres are enough to supply the needs of the household, a cultivator will uclety are more adventurous, enterprising, forward looking and risk
242 | Economics of Development and Planning
Dualistic Theories I 243
taking There is complete absence of profit-secking activities in the.
eastern society. People indulge in speculative activities and pay little feeling of gloom, sorrow and defeatism. Prof. Benjamin Higgins severely
attention to the profit-giving activities. They do not believe in capital criticised Bocke 's theory of social dualism on the following grounds:
investments atended by risks. They lack initiative. (1) Wants limited-not true. Higgins contends that Boekes
assertions that peaple in underdeveloped countries have limited wants
5 People of dualistic economy
the modern technology.
are fatalists and hesitate to use
or backward sloping curve of effort and risk taking are not true.
(7) People lack in organisational skill and ability. 2 Bleak Possibility of Technological Progress. Boeke's
(8) There is absence of professional trading. pessimism in regard to bleak possibility of technological progress in
underdeveloped countries cannot be shown on the basis of experience
(9) Lack of elasticity of supply.
because in underdeveloped societies a large number of industries
(10) Export is the main objective of foreign trade in eastern organised on western lines are functioning well.
society as distinct from a western society where it is only the means
which makes imports possible. (3) Trade Unions not Visualised. Boeke's dualistic theory ignores
the role of union
(11) People are immobile and thus are relectant to leave the trade because according
to Prof. Boeke the workers
village community.
are
unorganised, passive, silent and casual in underdeveloped
countries. In fact, trade union activities are becoming more and more
(12) Migration takes place within the country and immigration streamlined all over the world. Even casual labourers are organisedin
takes place through state intervention.
tea, coffee and rubber plantation industries where there are strong
(13) Urban development takes place at the cost of ual life. trade unions.
(14) Goods are evaluated according to their prestige value rather (4) Not Peculiar to Underdeveloped Economies. Prof. Boeke
than vaue in use. takes one-eyed view by saying that phenomenon of dualism is only
(15) The idea of income does not fit in the eastern society. In the confined to eastern economies and he also admits that social dualism
eastern society, the result of cultivating food crops grown for the exists in underdeveloped economies of Africa and Latin America. To
maintenance of the household cannot be termed income' in the striçct some degree, it exists in almost every economy. According to Prof.
sense because there is absolutely no price basis, nor any basis for Higgins, even in most advanced countries such as Italy, Canada and
determining costs of production. United States, there are areas in which
techniques lag behind those of
ddvanced sectors and in which standards of economic and social
Inapplicability of Western Economic Theory
These contrasting characteristics of a dual society make »t welfare are correspondingly low." It means, dualism to some extent is
also found in developed countries.
unsuitable for the application of western economic theory. Eastern and
Western economies are basically different, the former is pre-capitali_t (5) Casual Labour not Organised-
not true. Boeke's
and the latter is capitalist. Therefore, Boeke advises that, "we shall de characteerisation of eastern casual labour as unorganised, passive, silent
well not to try to transplant the tender delicate, hot houseplants of westeri is not true. The fact is that trade
union activities are becominy more
theory to tropical soil, where an early death avaits them." Boeke does not and more organised and active even in underdeveloped countries like
spell out any scheme for economic development in such societies. He India, Indonesia and elsewhere. However, casual labour may not be
only says, industrialisation or agricultural development mnust be a slow ully organised in agriculture but in tea, coffee and rubber plantations
process, small-scale and suitable for dualistic framework along with the trade union movement is the
democratic ways. He suggests that the required leadership must come
strongest one.
from the people themselves, who should work with faith, charity and (6) Applicable to Westi r n Societies. Boeke is of the opinion that
the western economic
patience for economic prosper+ty of the country. theG. is not applicable to the problems of
eastern economies. However, this viewpoint has been criticised by
A Critical Appraisal Higgins. He holds the view that tools of western economic theory
is evident that Boeke's pertaining to fiscal and monetary policies can be applied with minor
From the above study, it theory of social
modifications for the solution of the crucial problems like balance of
dualism presents a gloonmy picture for underdeveloped countries. This
is due to peculiar circumstances in which it was formulated. In fact payments, disequiibrium and unemployment etc. of eastern economies.
under the name of Ethical Policy' in Indonesia a genuine effort was Further, whenever chronic inflation exists or threatens western
made to raise the standard of living of the people of Indonesia during economies, people prefer speculative profit long-term
to
1900 to 1930. However, this policy was a great flop which gave the Western economists, according to Higgins, "have recently investments.
developed a
whole field of analysis relating to
liquidity preference' and 'safety
244 1 Econonics of Development and Planning
Dualistic Theories 245
preference', to take account of the reluctance of investors the world
over to accept risk or iliquidityand their strong prefeYence for keeping (IT) THE THEORY OF TECHNOLOGICAL DUALISM
their capital safe and in liquid form."
Introduction. Prof. Benjamin Higgins'
(7) Social Dualism is not a Theory. Social dualism has been technological propounded the theory of
dualism. It is an alternative to
criticised on the ground that it is not a theory,but a mere description dualism which failed to solve the Boeke theory of social
of the nature of underdeveloped economies. There is a weight in this the basic problem of unemployment which is
problem of underdeveloped countries like India.
criticism because Boeke's dualistic theory only explains the various
traits of the eastern economies, but fails to furnish the social and Meaning. Technological dualism implies the use of different
countries. A theory of production functions in the advanced sector and the traditional sector
economic theory of underdeveloped of .an
underdevelopment is one which èxplains the various aspects of the underdeveloped economy. According to G. M. Meie,
problem, but dualistic theory fails on this account too. "Technological dualism is associated with the structural unemployment
(8) Eastern Labour not Immobile. It is not possible to accept the
or
technological unemploym ent-a situation in which productive
employment opportunities are limited, not because of the lack of
Bueke's argument that people in eastern economies are reluctant to effective demand, but because of resource and technological restraints
leave village community. Rapid urbanisation in eastern economies is a in two sectors."* As such the theory of technological dualism relates to
specific proof of the migration of the village people to cities. In fact, the factor-proportion
problem. This problem has been discussed by Dr
the attraction of the urban life, such as cinemas, shops, cafes, sports R. S. Eckaus in his
leading article entitled "The Factor- Proportions
events and employment opportunities have always led to migration problem in underdeveloped areas." He is of the view that
frora villages to cities. Prof. Higgins argues that "I see no evidence that difficulties of underdeveloped areas are not unemployment
effective demand but due to the marketbasically
due to lack of
oriental labour is intrinsically more immobile than western labour." inperfections, limited
Boeke in his opportunities for technical substitution of
factors aad
According to C. P Kindlebeger, theinappropriate
(9 Problem of Unemployment is not Insoluble. factor endowments.
dualistic theory has explained five catagories of unemployment, the
unemployment in underdeveloped areas arises due to problem
of
solution of which is beyond the reach of the government because of structural
huge financial investment. As the underdeveloped countries are
disequilibrium at the factor level and this factor f structural
make huge disequilibrium has been explained by him in the following words
proverbially capital deficient, so their capacity to But "Disequilibrium at the factor level may arise either because
investment for creating employment opportunities is very liz:ited.
receives diferent returns in different uses or becausesingle factor
a
Boeke has not furnished any statistical data in support of his argument. the price
at reducing relationships among factors are not in line with factor availabilities.
Moreover, the underdeveloped countries always aim Disequilibrium in factor proportions, which is the cause of unemployment
the device of deveiopment
unemployment and poverty through formulated or under-employment in the underdeveloped areas,
The employment policies are by the governments jactors () imperfect functioning can arise diue to two
plarning.
to reduce the magnitude of unemployment and poverty. As such, it 1s of price system; i) limitations in the
is beyond the reach.
existing technologY or the structure of demand."" Higgins' theory of
not convincing that the solution of unemployment technological dualism actually reiates to these
of the governments of the underdeveloped countries. underdeveloped countries with special reference to the phenomena
unemployment
of

Conclusion. Dr. Boeke fails to provide a distinctive economic and problem.

for underdeveloped economies. The dualistic theory . Characteristics of Traditional
sOcial theory fails to Rural Sector. The main
undoubtedly explains the various traits of eastern economies but characteristics of traditional rural ector
furnish an integral approach to the social and economic theory of such are as follows:
) Production techniques are relatively
countries. On this ground, dualistic theory failed bitterly. Similarly 1labour intensive.
Boeke's use of the tender, delicate, hot plants of western theory seems 1) It is engaged in peasant agriculture and handicrafts
1s Small industries. or very
to have in mind only neo-classical theory. But this economic theory
it can
e v e n to the western world. In this way,
inapplicable in many ways to problems o.
be concluded that this theory does not provide answer 1Prof. Benjamin Higgins : Economic Development, Principles,
economic theories Practice and
underdevelopment. In the end, there a r e n o special Policies.
or methods of analysis fashioned uniquely: for ihe study or 2
G. M. Meier : Leading Issues in Economic
are of wide. Developnent. (Delhi, Oxford
underdeveloped world. But wbile the tools of analysis the situations to
University Press, 1989)
of underdeveloped countries, C . P.
relevance in a study
which they must be applied very greatly.
Kindleberger and
Inte rnational Payments.
E. Despress, The Mechanism for Adjustmen! in