Political Econ of Growth. Paul A. Baran
may per se support a significant expansion of output. Therefore where the capital intensity of the productive process is already large—in other words, where depreciation allowance constitutes an important part of the cost of the product—there is continuously available a source of capital for financing technological improvements without any need for net investment. While this aggravates the instability of the advanced capitalist economies by increasing the amount of currently generated surplus that has to be disposed of by investment, it also gives the advanced countries a major advantage over the underdeveloped countries where the annual amortization allowances necessarily amount to little.9
Net investment in any case can take place only if society’s total output exceeds what is used for its current consumption and for making good the wear and tear on its productive facilities employed during the period in question. The volume and the nature of net investment taking place in a society at any given time depends, therefore, on the size and the mode of utilization of the currently generated economic surplus.
Both, as we shall see later, are essentially determined by the degree to which society’s productive resources have been developed, and by the social structure within which the productive process unfolds. The understanding of the factors responsible for the size and the mode of utilization of the economic surplus is one of the foremost tasks of a theory of economic development. It is not even approached in the realm of “pure” economics. We have to look for it in the political economy of growth.
1 Lionel Robbins, The Theory of Economic Policy in English Classical Political Economy (London, 1952), p. 19. It is strange, therefore, to read on the next page of Professor Robbins’ book: “… I find it hard to understand how anyone who has given serious attention to the actual works of these men … can question their integrity and their transparent devotion to the general good.… It has become fashionable to dismiss them and their ideas not on grounds of logic and assumptions, but on the grounds of alleged class interest. On this view the classical economists are the spokesmen of business, and consciously or unconsciously the apologists of the dominant class.” (Italics added.) Yet “consciously or unconsciously” is precisely the issue. No serious writer to my knowledge has asserted that the classical economists-at least the great and important ones-were consciously servile scribes of a dominant or rising bourgeoisclass. In that case they would have hardly been worth the paper they were printed on, let alone the paper they are being constantly reprinted on. The crux of the matter is that they were—probably most unconsciously—the spokesmen of a rising bourgeoisie whose interests they objectively served. Professor Robbins himself has clearly seen the distinction between subjective awareness of interests and their objective contents in his The Economic Basis of Class Conflict (London, 1939) (p. 4). In general it may well be said that for the appraisal of a group’s or an individual’s role in the historical process, subjective motivations (conscious or unconscious) are much less important than objective performances. In case of doubt, it is always useful to ask in all such matters: cui bono? The answer may not always be conclusive—it is never irrelevant.
2 Thus it is by no means fortuitous that the marginal utility theory, the static character of which is one of its outstanding features, has become the heart of neoclassical economics.
3 Marx, The Poverty of Philosophy (Stuttgart-Berlin, 1921), p. 86.
4 “The record of the main European wars … is shown by the following index series (combining size of the fighting force, number of casualties, number of countries involved, and proportion of combatants to total population) : Century: 12th 13th 14th 15th 16th 17th 18th 19th 20th Index : 18 24 60 100 180 500 370 120 3080 For details see Pitirim Sorokin, Social and Cultural Dynamics, Vol. 3, 1937, and Quincy Wright, A Study of War, Vol. 1, Chap. 9 and Appendixes, 1942”; cited in Harold D. Lasswell, World Politics Faces Economics (New York and London, 1945), p. 7.
5 H. G. Johnson, Economic Journal (June 1955), p. 303.
6 Colin Clark suggests a different definition: “Economic progress can be defined simply as an improvement in economic welfare. Economic welfare, following Pigou, can be defined in the first instance as an abundance of all those goods and services which are customarily exchanged for money. Leisure is an element in economic welfare, and more precisely we can define economic progress as the attaining of an increasing output of those goods and services for a minimum expenditure of effort, and of other scarce resources, both natural and artificial.” The Conditions of Economic Progress (London, 1940), p. 1. This definition appears to me unsatisfactory for a number of reasons: (1) the identification of economic growth with increase in welfare leaves out of account a considerable share of total output that bears no relation to welfare, however the latter may be conceived: currently produced investment goods, armaments, net exports, and the like belong in this group. (2) Regarding an increase of output of “all these goods and services which are customarily exchanged for money” as identical with “improvement in economic welfare” is untenable. Economic welfare may be greatly improved by an increased supply of goods and services that are customarily not exchanged for money (schools, hospitals, roads, or bridges) while on the other hand a great number of goods and services that are customarily exchanged for money make no contribution whatever to human welfare (patent medicines and beauty parlors, narcotics, and items of conspicuous display, etc.) (3) Economic welfare can be improved without any increase of output—by a change in its structure and distribution. (4) While it is obviously desirable to secure any given output with a minimum of input, even an inefficiently secured increase in output might still constitute economic growth. It would seem to be preferable, therefore, to consider economic growth as an increase in output of goods regardless of whether they make a contribution to welfare, to the available stock of producers’ goods, or to armaments—leaving to a related but nevertheless separate examination the factors determining the composition of this output and the purposes to which it is put.
7 This was noted in the United Nations’ Economic Survey of Europe Since the War (1953): “In the eastern European countries services not directly connected with the production and transport of goods are not regarded as productive and their value is thus excluded from national income. For a poor country which is trying to develop its industry and to reduce the underemployment common in service trades, the Marxist definition of national income has some obvious advantages over the more inclusive concept suited to wealthy industrialized economies and now commonly adopted in under-developed countries.” (p. 25.)
8 F. Engels, Letter to H. Starkenburg, in Marx and Engels, Selected Works (Moscow, 1949–1950), Vol. II, p. 457. On the interesting relation between economic development on one hand and the progress of science and technology on the other, cf. B. Hessen, The Social and Economic Roots of Newton’s Principia (Sydney, 1946), as well as J. D. Bernal, Science in History (London, 1954).
9 Cf. Marx, Theories of Surplus Value (London, 1951), pp. 354 ff., where this point is stressed.
TWO
The Concept of the Economic Surplus
THE concept of economic surplus is undoubtedly somewhat tricky, and in clarifying and employing it for the understanding of the process of economic development neither simple definitions nor refined measurements can be substituted for analytical effort and rational judgment. Yet it would certainly seem desirable to break with the time-honored tradition of academic economics of sacrificing the relevance of subject matter to the elegance of analytical method; it is better to deal imperfectly with what is important than to attain virtuoso skill in the treatment of what does not matter.
In order to facilitate the discussion as much as possible, I shall be speaking now in terms of “comparative statics”: that is, I shall ignore the paths of transition from one economic situation to another, and shall consider these situations, as it were, ex post. Proceeding in this way, we can distinguish three variants of the concept of economic surplus.
Actual economic surplus, i.e. the difference between society’s actual current output and