The Concept of Economic Development

The Concept of Economic Development

The concept of economic development and a related notion, that of economic growth, have both assumed pivotal roles in any meaningful discussion of the state of the economy and its attendant social effects. Both have become indispensable tools of today’s economic analysis.  One needs only to witness the great energy and excitement spurred by Thomas Piketty’s recent magnum opus, Capital in the 21st Century, to have become convinced of the fact.

Piketty’s underlying thesis, whereby the relationship r>g [where “r,” the rate of return on capital, exceeds “g,” the rate of (economic) growth], signifies economic conditions conducive to generating greater and greater income inequality is a case in point. In no small measure because of the recent Occupy Wall Street movement, the thesis has become the starting point of any poignant critique of capitalist society, for allowing the growing disparities in income and wealth to become permanent features of everyday life ­– so much so, in fact, that almost overnight Piketty had become the darling of the liberal economists the world over, his thesis lauded as the greatest invention since sliced bread.

Needless to say, the concern is well placed even though the bulk of the proposed solutions, which range from progressive taxation on income to lowering the limit on tax-exempt inherited wealth, aim at ameliorating the symptoms rather than eradicating the cause.

What do we mean, however, when we speak of economic development or, by extension, of economic growth? Do we have a clear idea of the underlying concepts, or are they just buzzwords we tend to parrot now and then since they’ve become a part of everyday economic jargon?

On one level of discourse, the concepts are fairly straightforward, especially if we take them to be more or less synonymous.  Growth, for instance, measures an increase in size, in body weight, IQ, GNP, GDP, etc. It’s a relative measure, besides, relative, that is, to some prior value. Ever since the advent of statistics and scrupulous record-keeping, economics has become a science, not exactly hard science but a science nonetheless – just like (the history of) baseball can be said to have been put on a quasi-scientific basis by virtue of records scrupulously kept. Consequently, the economy’s growth and/or decline are calculable in terms of prior values, registering as an up- or a downtick.  That’s the business of econometrics. And yet…

The purely quantitative approach to concepts such as economic development or growth, unless we know exactly what it is that we’re measuring, can be grossly misleading. It doesn’t answer the fundamental question about the underlying conceptual content – the meaning of the terms so readily employed, which is by far the most interesting question of all! What exactly does economic development or economic growth come to? What’s their overall significance? What exactly is it that we are measuring? The scalar concept clearly obscures the metaphysical content of what it is that is being measured. Yet, it is commonly assumed that we all know what it is. But do we, really?

Offhand, I can think of at least two problems which arise from such a simplistic employment of what are purported to be key economic terms.

The first concerns the very notions of growth and/or development: they’re hopelessly ill-defined. If we are to take the physical model or analogy of growth seriously, as in body weight, for instance – and I don’t see why we shouldn’t! – then we clearly run into all kinds of difficulties, for surely, not all kinds of growth are identical: while some may be beneficial to your health, others may be detrimental.

An obese man, for one, obviously shouldn’t carry his great bulk as a badge of honor; he’d do much better to shed a pound or two if his health is a matter of concern. A cancerous growth, though an extreme example, is in the same category: harmful to body and soul, there being no benefit to it.

Likewise with the concept of development, for development can be normal as well as abnormal. It would thus seem that these economic concepts make little or no provision for these anomalies, which shows that their respective definitions leave a great deal to be desired.

The second problem is considerably more nuanced though no less perturbing. To wit, it had become a longstanding mantra among the critics of the capitalist system – an unexamined assumption, as it were – that capitalism is more prone to generating excessive or wrong kinds of growth than any other economic system. Charles Taylor, for one, makes a strong case to that effect (see, for instance, his “Growth, Legitimacy and The Modern Identity” in Praxis International, 1:2 July 1981, or the expanded version of the Praxis article, “Legitimation Crisis?” in Philosophy and The Human Sciences: Philosophical Papers 2), although the bulk of his argument in either version centers on moral repercussions likely to follow from what he dubs in so many words as “excessive growth.”

While certain aspects of Taylor’s analysis may be to the point, and while we may further agree that his singling out the capitalist system, of all economic systems, as being the most conducive to generating “excessive growth” is not exactly counterintuitive, it remains to show what it is exactly about capitalism proper that would make it so.

In particular, what is it about capitalism that makes it generate a kind of “excessive growth” that would be detrimental to our moral fiber, whereas any other kind of growth, simply because it would issue from some other economic system (say, one based on slavery or feudal relationships), would be likely to get a free pass? Why is “excessive growth” which is due to capitalism alone so cancerous insofar as our moral well-being is concerned, whereas any other kind of “excessive growth” doesn’t carry such a connotation?

If that were the sole basis of Taylor’s critique, I’d be inclined to dismiss it. But perhaps there’s another idea lurking in the background as well, namely, that perhaps certain kinds of “excessive growth” are proprietary, which is to say, characteristic of the capitalist system alone, proprietary to it and no other. But if that is the case, it remains to be shown.

In any event, in future installments, we shall re-examine this and similar assumptions in light of Jane Jacobs’s seminal work, The Nature of Economies. Ms. Jacobs’ central thesis is that any kind of development, including economic development, is but a species of natural development. According to Jacobs, growth, and development, whether economic or any other kind, is the way of nature.

If “excessive growth” is the main culprit insofar as its effects on our moral fiber are concerned, then why should it matter which particular economic system is responsible for generating it? In particular, why should capitalism be “punished” more severely than any other economic system for doing precisely the very same thing the others do? Simply because it does it better, in that it generates a greater abundance of goods and services than any of its predecessors?

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