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The political economy of development
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A study prepared for the Fabian Society
W. Arthur Lewis
The principles of economic planning
New Edition with a new Introduction
First published in Great Britain in 1949 by Dennis Dobson Ltd, and George Allen and Unwin Ltd.
Second Impression 1950
Second Edition, Third Impression 1952
Fourth Impression 1954
Cover, Contents and Preface to the Third Impression

THIS book was originally published without a Preface. The reason for this is that it was never meant to be a book. The Fabian Society asked for a pamphlet on the economic perplexities of the moment, and this >\as what 1 set out to write. Ur fortunately the perplexities were so numerous that the pamphlet turned up at 120 pages, instead of their usual thirty, So it was put between hard covers.
I set out these facts not merely to explain the absence of a Preface, but also to account for* some of the book's more curious features. It is not, as its title might suggest, ati academic study of theoretical principles, but is rather a political statement. Neither does it cover the whole field of planning, but concentrates rather on some topics which happened to be of special interest in Great Britain in the summer of 1948, vvhen it was written. Perhaps it was wrongly named. It should have been called a *Brief Statement on some Current Topics in Planning*; but it is too late now to change its name.

I Why Plan?

THE dispute between planning and laisser-faire is not a dispute between order and anarchy in economic life. All serious political thinkers, and not least the laisser-faire philosophers, start with the proposition that production and distribution must be controlled to the service of social ends. The point at issue is simply how much of this control may be invisible, and how much must be visible. The invisible control, extolled by the laisser-faire protagonists, is that which the market exercises; the "visible control"  favoured by the planners, is that which is organised by the state.

II Fair Shares for All

THE first aim of socialists, prized above all others, is equality of income. Equality is desired for its own sake, in terms of moral justice, and it is desired also because the surplus of production should be used not to provide luxuries for a few but to abolish poverty, with its evil consequences of ill health, squalor, ignorance, ugliness and the waste of hundreds of millions of human lives. Fortunately, men have ceased, at least in this country, to dispute that it is the duty of the state to even up the distribution of income; the questions left are only how much and how.
Here there are two quite separate issues, relating to income derived from personal effort, and income derived from property.

III Money

THE circulation of money determines the level of prices and of employment in a country, and fluctuations in the level of monetary circulation determine whether that country shall suffer inflation or deflation. These issues are too important to be left to the control of private enterprise; that has long been agreed, and in every modern country the government itself controls the supply of money and seeks to influence the demand. Modern progress in monetary control involves not new objectives, but simply new techniques.

IV Investment

THE principal urge towards planning in modern states is the desire to achieve a much higher level of investment than is likely in an unplanned society. This is often confused with planning for stability but has nothing to do with it. In early formulations of the Keynesian doctrines it was thought to be necessary to plan investment not to keep it high, but to keep it steady, because it was believed that income and employment are a direct function of investment. This is true, or true for all practical purposes, if investment is defined to include everything except consumption, as Keynesians do define it, but not if investment is meant in the narrower and everyday sense. Income and employment can be kept steady through stimulating or restricting consumption by means of budgetary deficits and surpluses, and the maintenance of full employment does not itself demand any control over investment. The reason governments plan investment, in Russia or Eastern Europe, or in the U.K., is to get a higher level of investment than would occur if investment depended solely on the voluntary savings of the public.

V Foreign Trade

IN the laisser-faire philosophy at its most extreme there is no place for a special chapter on foreign trade. No significant difference between domestic and foreign trade is recognised. Trade between London and Paris or New York does not differ from trade between Cardiff and Glasgow, and needs no special treatment. Foreign trade is self-regulating, and raises no problems that domestic trade does not raise. There may be people who still believe all this, but they are now very rare.

VI Mobility
VII The Social Control of Business

Efficiency depends in the first place upon research, and upon its application. Competition stimulates research, but since only the largest firms can afford fundamental research, the result, in some industries, is to increase the advantages of large firms and to diminish the prospects of competition; and in other industries predominantly small scale, the result is that little research occurs. One remedy for both of these is cooperative research, which has been officially sponsored and assisted in this country for the past thirty years. Everyone agrees that cooperative research should be on a larger scale, and many think that every firm should be made to contribute, since all may benefit, and that as much emphasis as possible should be placed on cooperative at the expense of private research, so that new knowledge may be made available to all.

VIII Nationalisation

THE nationalisation of industry is not essential to planning; a government can do nearly anything it wants to do by way of controlling industry without resorting to nationalisation, as in Nazi Germany. Nationalisation is merely one of the ways of achieving ends; better for some ends, and not so good for others. We may begin by classifying the reasons for which nationalisation has been advocated...

IX How to Plan

... so far we have confined ourselves to governmental planning of that part of the economic system which is traditionally the sphere of private enterprise. Beyond this there is, of course, the traditional sphere of public enterprise, which even in the most laisser-faire country now usually absorbs about 20 per cent of the national income. We shall not discuss this sphere of planning because the need for such planning and its broad nature are beyond controversy. Everyone agrees that each government department has to decide what it is trying to do, and how and when it intends to do it, and this is all that planning involves - for education, defence, conservation of natural resources, town and country planning, the network of communications- for everything for which the government is responsible it must have a plan of its objectives.

Appendix 1: On Economic Union

ECONOMIC union between adjacent countries is widely canvassed today for two reasons. The first is to facilitate discrimination against the United States of America and its deflationary export surplus. Such discrimination, as we have seen, is very desirable, but economic union is rather a big project to use in order to achieve it. The simplest way to bring about this discrimination is for nations to make a joint demand on the United States to appreciate the dollar; or alternatively to effect a joint depreciation of non-dollar currencies. Or discrimination can be effected simply by agreeing to cut dollar imports as much as possible, while relaxing controls on imports from nondollar sources.

Appendix 2: On Planning in Backward Countries

PLANNING is at the same time much more necessary and much more difficult to execute in backward than in advanced countries.
In the first place, planning requires a strong, competent and incorrupt administration. It must be strong enough to be able to enforce its measures, such as to collect taxes from the peasantry, or to enforce a rationing system without black markets, measures which even so ancient a government as that of France has not found itself fully able to enforce. It must have a competent administrative service, with trained personnel, able to understand the large issues that are at stake, and to act reasonably and rapidly. And it must be free of all charge of corruption, since, whereas men will bear many restrictions from a government which they believe to be acting fairly and solely in the public interest (however mistakenly) without respect of persons, they will sooner or later resist violently measures which are corruptly administered, however acceptable the measures themselves may be.

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