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Classical Economists View of Development and Their Critics

The most essential principle of Classical Economic Thought is the independence of market mechanism in bringing development. Capital occupies a prominent place in their approach to development. They consider the cause of underdevelopment or backwardness as the inadequate generation and availability of capital. Consequently the way to achievement of development is possible through the more adequate and more rational use of capital.

Adam Smith, who is regarded as the first representative of liberalism in economic sphere, emphasised on the freedom of market forces in directing individual economic affairs. The role of the state is restricted to general administration of protecting the laws envisaged by the constitution. This idea came from Smith’s faith on free market forces, as they (market forces) should play the role of ‘invisible hand’ in social progress. But it could be possible only through following Laissez-fare policy, on which he believed for the free moving of market forces. Paul Baran, in his outstanding work ‘The Political Economy of Growth’ expressed his views on Classical Economic Thought. According to him, “economic growth was the central theme of classical economics. This much is indicated by the title and contents of Adam Smith’s path-breaking work ‘An Inquiry into the Nature and Causes of Wealth of Nations’ and many a generation of economic thinkers were concerned with analysing the forces that made of economic progress”.

The emphasis on the supply of material goods is another important feature of Classical Economic Thought. J.B.Say, a French economist, came with a formula that ‘supply creates its own demand’, which has been strictly followed by then U.S.A. and Western countries. This emphasis on the mass production of goods without concern for consumption capacity of the people resulted in the low living conditions of the people. This finally caused the Great Economic Depression in 1930s in Europe and USA. This type of conditions in the West led to the growing consolidation of working classes against the miserable living conditions provided by the economic growth model of development. “The causes for the growing production and declining life conditions of working classes in the West can be claimed to the free-market mechanism and limited role of the state in individual affairs followed under the Laissez-fare policy”.

Commenting on the Great Economic Depression of 1930s in the Western countries and USA, Paul Baran opined that “the Great Depression with its manifold and protracted repercussions rendered the continuation of the conspiracy of optimism about economic growth and social progress under capitalism increasingly difficult to maintain”. In this context, the observations made by C.T.Kurien would give an over view of the Classical Economic Growth Model of development. He argued that “the marginalisation or exclusion of some people is accompanied by the enrichment of some others is the inner contradiction of the economic growth model of development”. As noted earlier, under the conditions of capital occupying a prominent role in the notion of development of classical growth model, consequently “those who have command over capital and thereby accumulated labour power have a natural advantage over those who only have current labour power. Since classical economists have faith in free market transactions, the terms of exchange must be determined by the person who owns resource power and capital”.

By adopting the above analysis, Kurien came to the conclusion that people verses capital is an in built feature of the economic growth model of development. Further, growth, which can be a means to human development as opined by classical economists, infact departs from this role and becomes the source of human misery and frustration. Social exclusion or marginalisation, thus understood by Kurien, is a fairly universal phenomenon seen at the global, national and regional levels.

The changes in the world brought up by the Socialist revolutions in Eastern Europe raised optimism about the alternative ways of development under the state ownership of the means of production. But, this was shortly refuted by the emphasis on large-scale industrialisation in Soviet Union during the period of Stalin. As observed by Paul Baran, the time-honored ‘scientific’ and ‘objective’ finding of economics that socialism was dramatically refuted by the success of industrialisation effort in the USSR.

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