Volume 43, Number 168,
January-March 2012
Back to Development
Jaime Ornelas
ANTECEDENTS ( ...continuation )

Persistence in a stable, balanced market became one of the fundamental premises of the neoclassical doctrine for sustaining growth in the free market, whose self-regulating functioning was considered the highest expression of economic rationality. From then on, the neoclassical idea of the general equilibrium theory dominated economic thinking and "subsequent development took the form of improvement or criticism of the equilibrium theory," but never further (Napoleoni, 1982: 11).

The disruption that alters equilibrium in the market, it was said, always came from external, variable circumstantials, but when these disturbances happen, "the system puts mechanisms into play that spontaneously bring it back to equilibrium, or rather it is in the presence of a homeostatic mechanism" (Valenzuela, 2009: 5). However when the State persists in its interventionist policy, it obstructs the free operation of supply and demand.

To function freely and regulate itself, the market demands that three factors, along with the non-intervention of the State, are met sine qua non (i) that no buyer or vendor influence price (ii) that the merchandise produced and sold is homogenous, hence the knowledge of the market presents no difficulty; and (iii) that access to and exit from the market is free of restrictions, i.e. that production factors are perfectly mobile (Ferguson, 1967: 485).

Methodologically speaking, the idea of stable equilibrium is incorrect because it is not based on real economic facts. The theory is incapable of offering a scientific explanation for social process production, circulation, distribution and exchange because it is not built on an abstract-concrete method.

DEVELOPMENT: INITIAL IDEAS

The first economist to mention development was the economist Joseph A. Schumpeter, a supporter of liberal democracy and a notable neoclassical economist. In 1912 he published his book Theory of Economic Development in which he considered development to be true "progressive economics" and the entrepreneur as the advocate of this process. It is the entrepreneur who brings innovation to the economic system (Ekelund and Hérbert, 1992: 603).

For Schumpeter, as for the neoclassicist economists, development is a strictly economic, not social issue, both of which can be considered alien to each other: "Social facts are, at least immediately, results of human conduct, economic facts result of economic conduct. And the latter may be defined as conduct directed towards the acquisition of goods through exchange or production" (Schumpeter, [1934] 2004: 3). Development is removed from the social sphere because it is an economic issue.

According to Schumpeter, the similarity between economic growth and development or "economic progress," was not even worth discussion and in his article "Theoretical Problems of Economic Growth," published in 1947, he advises: "I speak of economic growth during any stated period if the trend values of an index of per capita total output of goods and services have increased during that period" (Schumpeter, [1951] 2009: 233).

While offering a view of economic development with this definition, Schumpeter resolves the problem derived without doubt from the neoclassical insistence on measuring everything. In this case, Schumpeter finds tracking gdp performance during a given period to be the solution and only when this performance is positive do we speak of development.

Shortly after the Second World War, the metropolitan theorists began proposing to nations of the capitalist periphery that they leave underdevelopment behind and press ahead with the modernization of their economies in the "style of the West." In this climate, in 1955, the neoclassical economist Arthur Lewis published his book The Theory of Economic Growth, in which he expresses from the outset his idea of development as a concept that only emphasizes the problems of growth, while recognizing the importance of distribution. Lewis says:

The subject matter of this book is the growth of output per head of the population. What follows does not depend upon precise definitions of these terms; nevertheless some comment of their meaning may be helpful. First it should be noted that our subject matter is growth, and not distribution. It is possible that output may be growing, and yet that the mass of the people may be becoming poorer. We shall have to consider the relationship between the growth and the distribution of output, but our primary interest is in analyzing not distribution but growth (Lewis, [1955] 1963: 9).

In this way, by making growth central to the issue of development, the metropolitan economists focused their analysis on removing internal obstacles in underdeveloped countries to boost their growth development, in so doing strengthening the identity between development and the rise in production.

With this same focus, Gunnar Myrdal suggested periphery nations overcome the idea of being "economically backward," a "completely static" concept, and replace it with development which Myrdal sought to understand "as a dynamic theory to drive and sustain economic progress and make good the ideas of social democracy (Myrdal, [1957] 1979: 136-137).

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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