Breaking the Poverty Circle
BELL, PHILIP W.
Breaking the Poverty Circle Problems of Capital Formation in Underdeveloped Countries. By Ragnar Nurkse. Oxford. 157 pp. $3.00. Reviewed by Philip W. Bell Assistant Professor of Economics,...
...Resources for such an effort are easier to find in the overpoputated areas of Egypt and Southeast Asia than in the underpopulated areas of Africa and Latin America, for...
...The problem in such regions (of which Egypt has the greatest proportion of surplus labor, according to Nurkse) is to hold the consumption of those workers who remain on the land in check so that there will be sufficient food for those being shifted...
...Nurkse won many tributes for his League of Nations study on international currency problems in the inter-war period...
...In any such book of essays, too, a few sweeping generalizations always slip in...
...Nurkse provides a sound treatment of basic economic problems...
...Fortunately, there are some economists, among them Ragnar Nurkse of Columbia University, who are concerning themselves with the question and who can write in lucid yet thoroughly competent fashion for the interested and informed layman...
...A vitally important measure is the proper use of public finance, with the necessary growth in saving effected by increased taxation??especially on land, which provided the base for Japanese expansion??and, less desirably, by forced loans or forced saving through inflation...
...In underpopulated regions, increasing productivity in food is an essential prerequisite to industrial expansion, unless consumption standards are to be deliberately reduced, even below subsistence, as has been the case in the Soviet Union...
...Nurkse has serious reservations about the means most often recommended and/ or practiced today: foreign investment, favorable shifts in the terms of trade, and import restrictions...
...In the case of import restrictions on luxuries, for example, the author points out that the effect in Latin America, where such controls have been widespread, has been to channel new investment into middle-and upper-class residential construction and the domestic production of substitute luxuries??hardly a sound base for balanced industrial growth...
...To break out of the circle, "balanced growth" is necessary, with considerable investment all at once, each industry creating the demand necessary for new investment in another...
...But he purposely limits his scope rather severely, with the result that there is not a single direct reference to natural resources and only oblique mention of sociological questions, both of which may severely limit the type of growth he postulates...
...The British industrial revolution, for example, was made possible by the "agricultural revolution," which Nurkse attributes to the "lowly turnip...
...No other economist has been able to demonstrate this, and many have tried...
...in the former, surplus labor (presumably having zero productivity) may be removed from the land with no loss in the output of food...
...All require holding consumption spending in check and may be difficult to apply...
...If Nurkse can show that protection of infant industries is "the only [my italics??P.W.B.] argument for import restrictions that can be held even from a cosmopolitan point of view, on the grounds of world benefit," let him step forward with the proof...
...In this book, a revised version of six lectures given in Brazil in the summer of 1951, he tackles the heart of the economic problem in underdeveloped countries, viz., the accumulation of sufficient capital goods to break out of the "poverty circle" of low incomes due to low productivity due to insufficient capital due to low incomes...
...What policies must be followed to facilitate industrial growth...
...Reviewed by Philip W. Bell Assistant Professor of Economics, Haverford College Washington's sidetracking of the problem of foreign economic development to await successful negotiations on disarmament suggests that it will soon be forgotten by all but the academicians...
...The latter "made possible a change in crop rotation which did not require much capital, but which brought about a tremendous rise in agricultural productivity...
...The importance of increased agricultural output for industrial growth underlines the role of technical assistance at a time when Harold Stassen is under fire for "losing" the program in the morass of military aid...
Vol. 37 • January 1954 • No. 2
