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By A. P. Thirlwall

This concise booklet by way of one of many prime students in improvement economics is built from a chain of lectures given to masters scholars and may function an exceptional advent to the foundations of development and improvement conception. the writer offers traditional knowledge with a serious eye and charts improvement economics because it has developed from Adam Smith to ‘new’ or endogenous development idea. Thirlwall is important of the latter, and its predecessor neo-classical development concept, and attempts to place again call for as a driver in progress conception. He argues that during an open constructing economic system one of many significant constraints is the supply of foreign currency to pay for imports, in order that export development which relaxes a stability of funds constraint on call for turns into a vital determinant of total progress functionality. call for developing its personal provide in a progress context, instead of the pre-Keynesian view of provide developing its personal call for, offers another framework to the neo-classical one for knowing the differential development functionality of countries. This hugely unique ebook may be crucial studying for all scholars and students of improvement and progress economics.

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Since differences in growth rates are largely accounted for by differences in labour productivity growth (rather than the growth of the labour force), there must be some relationship between the growth of the manufacturing sector and productivity growth in the economy as a whole. This is to be expected for two main reasons. The first is that, wherever industrial production and employment expand, labour resources are drawn from sectors which have open or disguised unemployment (that is, where there is no relation Thirlwall 01 chaps 18/12/01 1:53 pm Page 45 Manufacturing industry as the engine of growth 45 between employment and output), so that labour transference to manufacturing will not cause a diminution in the output of these sectors, and productivity growth increases outside manufacturing (the third law – see below).

Kaldor’s two-sector model of agriculture and industry (Kaldor, 1996; Thirlwall, 1986) shows the importance of establishing an equilibrium terms of trade between the two sectors if the growth of the economy is to be maximized, so that industrial growth is neither supply-constrained because agricultural prices are too high relative to industrial prices, or demand constrained because they are too Thirlwall 01 chaps 18/12/01 1:53 pm Page 51 Manufacturing industry as the engine of growth 51 low. Through time, however, the importance of agriculture as an autonomous market for industrial goods will diminish and exports will take over, and a fast growth of exports and industrial output will tend to set up a virtuous circle of growth working through Verdoorn’s Law and other feedback, reinforcing mechanisms.

The World Bank (1991) did a study of 68 countries showing capital accumulation to be of prime importance, with technical progress minimal. This seems to be the central conclusion for developing countries in contrast to developed countries. Secondly, there is the controversial study by Alwyn Young (1995) of the four East Asian ‘dragons’ of Hong Kong, Singapore, South Korea and Taiwan which also shows that most of the growth in these countries can be explained by the growth of factor inputs and not technical progress, so that, according to Young, there has been no growth miracle in these countries – contrary to the conventional wisdom.

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