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Growth in the Macro-Economic Perspective
The necessary condition for development in underdeveloped economies is a rate of growth of capital higher than the rate of growth of population.
There is always some possibility, in these economies, of raising the rate of growth of capital in the non-disguised unemployment sector. There may be some possibility too of raising the rate of saving in the disguised unemployment sector. But if the increase is not sufficient for the rate of growth of capital to exceed the rate of growth of population, the factors strategic for development then become the rate of inflow; of capital, population planning and socialism.
The policy implications of this analysis are discussed here.
The author is indebted to the A N Sinha Institute of Social Studies, Patna, for the oppor-tunity for this study. He acknowledges his special debt to A K Das Gupta for his valuable criticism and comment. He also thanks R N Maharaj for helpful discussions.
[All figures and formulae can be accessed in the PDF version of the article]
It appears that one of the distinctive features of an under-developed economy is the paradoxical co-existence, in some sectors of the economy, of a low wage rate (i e, wage per labourer) with a low rate of profit. These sectors have been generally described, as under-developed or 'disguised-unemployment' sectors. The income (Y) or earning (i e, output of the composite commodity after allowing for depreciation of capital and raw materials used in its production) is a function of capital (K), employment of labour (N), and the efficiency of the labourer (work units per labourer).
Efficiency of the labourer is a function of the wage rate (wage per labourer is measured in composite commodity units), there being a minimum wage rate. OA in figure I, which gives positive 'work unit' from the labourer.2 This leads to a wage rate, OW, which gives miniOW mum cost per 'work' unit'2 ( — ) .
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