Decolonialisation of the developing world, Microeconomics

Decolonialisation of the Developing World

Advanced countries of the Western World, especially the European countries, have become prosperous and wealthy through a process of evolution spread over nearly three centuries. The developing countries began their march towards economic growth and prosperity by the middle of the 20th  Century when they became decolonialised and independent. All these countries, referred to as ‘late comers’ in development literature emulated the advanced countries, the ‘pioneers’ in their plans for economic growth. Continuous supply of high level skills, persons with technical/vocational/management/professional education was one of the essential ingredients envisaged in this model of growth. (Lewis, W.A., 1954 and Hirschman, A .O. 1958). It became clear from the beginning of the growth process of developing countries that they could not perform to expected levels without overcoming the paucity/shortage of skills. Along with capital and technology, adequate supply of skilled labour was necessary for ‘balanced growth’.

The process of decolonialisation of the developing world began after the second world war. The new and independent nations got both an opportunity and challenge to decide on their destiny. They needed to plan for their own growth and development. Planning is an exercise which implies the balancing of given resources with the needs of the people towards pre-set goals of individual and national life. The developing countries, including India, had witnessed enormous depletion of their resources during the colonial regimes. They had limited resources with people having unlimited needs and wants. They had to satisfy the continually rising hopes and aspirations of the people. Justice for all, equality and freedom from basic needs and wants of life, were the goals of national life as delineated by the Indian Constitution. Ensuring food security for masses of Indian population, provision of employment, alleviation of poverty and suffering among the people and redressal of regional disparities were some of the specific and concrete goals. Prevention of dreadful epidemic diseases like small pox and malaria, health care for the citizens, removal of illiteracy and spread of schooling facilities, were also some of the national needs. The Indian State, just as other developing countries, faced a dilemma that was stated as follows: Should we fritter away our limited resources on literacy promotion, schooling, health care facilities and similar avenues which are a sort of ‘consumption’, and are not directly contributing to economic growth, food production, industrial development, trade, business and commerce  or should we be prudent (wise) enough in spending on roads, communications, production and supply of fertilizers, setting up of industries that satisfy the demand for steel, cement, machinery and equipments, as well as harness the water resources of our nation for agriculture through irrigation projects, produce energy and power that is of value for industries. In sum, should we not spend our limited resources on directly productive and ‘growth’ oriented strategies. In all the debates, discussions and deliberations surrounding this dilemma, expenditures on health and education got classified as ‘consumption’ while that on infrastructure development works like roads, electricity, communications, irrigation etc. got classified as ‘investment’. Education, thus, got marginalized in investment planning as it was treated as a form of consumption.


This was, in general, the thinking/logic, of establishment/government economists. The proposition that national expenditures on health and education is a form of consumption was challenged by a group of economists, many of whom were on the faculty of the Chicago University. Theodore Schultz was prominent among these economists, the others being Gary S. Becker, Edward F. Denison and Dale Jorgensen. They were joined by other economists such as Mary Jean Bowman, Charles Anderson, Harbison, Myers and David McClelland. These economists propounded the contra-view which held that expenditure on education and health is a form of investment. It is to be noted that the dividing line between consumption and investment rests upon the time gap between expenditure and the utility arising out of it. That expenditure whose utility is immediate and terminal such as the one on food is called consumption. That expenditure which creates wealth and a greater capacity for expenditures and which is not intended for realisation of immediate satisfactions such as that on fertilisers is called as investment. Applying this definition of investment for expenditures on education and health, the Chicago economists argued that expenditures on education enhance the capabilities of individuals and develop their skills which serve as inputs for increasing economic productivity in agriculture or industry or the services. In essence, they are also a form of capital, a major factor of production, which was called as Human Capital. Education and health are no longer drains on the public purse but are avenues of investment. Hence they should be given adequate weightage in public expenditures.

Posted Date: 12/17/2012 2:52:35 AM | Location : United States







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