Poor man's hero, politicians' bane

W. Arthur Lewis and the Birth of Development Economics
July 28, 2006

Academic economists who wish to change the world, beware. William Arthur Lewis was one of the foremost development economists of his time and yet, as is clearly shown by Robert Tignor's new book, he met with frustration and disappointment whenever he tried to effect change directly.

Despite this, many of the ideas he popularised have proved hugely influential in setting and guiding the development agenda in 2006.

W. Arthur Lewis was a pioneer. He was born in St Lucia in the Caribbean in 1915 and died in Barbados in 1991. Along the way, he was the first person of African descent to teach at the London School of Economics, to hold a named professorship at a British university, to be a professor at Princeton University, and to win a Nobel Prize for Economics. He was also the first vice-chancellor of the University of the West Indies. Perhaps most enduringly, and well explained by Tignor, Lewis was one of the founders of the field of economics that asks why some countries reduce poverty faster than others, in other words development economics. He may also have been one of the first development economists to try to get his conclusions put into practice on a national stage.

Tignor shows how Lewis's upbringing in St Lucia had a profound impact on his later life. His mother and father, devout Anglicans and believers in the higher values of Western culture, encouraged him to value intellect over emotion and gave him an unshakeable sense of self-worth and a respect for all human beings. These traits were to prove incompatible with Lewis's later attempts to bridge economic analysis and political realities. The poverty and powerlessness of the Caribbean combined with racial discrimination that friends and family faced at home and abroad made Lewis passionate about poverty and social justice and gave him the heart of an activist.

Lewis received a scholarship to study in the UK. Shortly after a BA in commerce from the LSE, he began working as a consultant for the Colonial Office (the precursor of today's Department for International Development).

As the Second World War drew to a close, the Colonial Office did not anticipate the rapid pace of decolonisation that would occur as a result of nationalist movements. Lewis, as an innovator in and teacher of "colonial economics" at the LSE, and being from "the colonies", was inevitably pulled into the thick of things.

But instead of detracting from his academic work, his stint with the Colonial Office allowed him access to internal audiences in which to try out his ideas and internal documents and data with which to formulate and validate those ideas. In one of his two most famous works, his article on "Unlimited supplies of labour", he proposed an economic model that was different from the prevailing orthodoxy. Lewis said that the models of the time, which assumed fixed quantities of labour, were not as relevant to poor countries with large pools of underemployed labour. Lewis developed a two-sector model, with a traditional sector characterised by low labour productivity and a modern forward-looking sector. By offering modestly higher wages, labour would leave the low productivity sector for the modern wage sector, which, if it could grow, would exhaust the pools of labour in the traditional sector and the dual nature of the economy would disappear.

By insisting that economic tools of the time needed to be modified for poorer countries, Lewis gave a strong impetus to development economics. A firestorm erupted over Lewis's use of the term "unlimited supply of labour" in the traditional sector. This was interpreted by some (but not Lewis) as an endorsement of the myth of the lazy farmer: that someone working in the traditional sector was adding nothing to the economic sum of all activity.

Lewis ruefully acknowledged that this strong interpretation (which was not necessary for his argument to hold - all that was needed was for the average product of labour in the traditional sector to be less than the marginal labour in the modern sector) dogged him for the rest of his life.

Lewis's bigger-picture work also focused on growth - why some countries experienced it and others did not. Unlike many contemporaries, Lewis emphasised the need to marry the economic and the non-economic aspects of growth: the need to take into account historical legacies, ethnic tensions, institutional weaknesses and geography. Only recently has this view become orthodoxy. His classic 1955 book on the theory of economic growth served to establish the field of development economics further.

Lewis was called upon by Kwame Nkrumah, the Ghanaian Prime Minister, to be his chief economic adviser in 1957. He lasted only 14 months in the post before resigning. His naive belief that people in power would listen to his economic rationalism and resist rather more immediate political pressures made him disillusioned with policy-making. Much the same resulted from his time as vice-chancellor of the University of the West Indies. Here he grew tired of the demands of fundraising and negotiating university politics. He was, in essence, a man of ideas.

How should his influence on the profession and on development be assessed? First, it is important to note that Lewis was one of the first "policy researchers" in development: those who aim to use research to influence as well as to inform. There are thousands of us today - my institute at Sussex contains 80 or so - but back then the desire and ability to straddle the worlds of policy and the academy were much more rare. Lewis's work at the Colonial Office had given him a taste for this. He established the first think-tank within the Colonial Office, and despite (or perhaps because of) fights with the people there, he was able to use that work to develop theory, then use the theory to make further recommendations. He was a great storyteller and synthesiser; he could write clearly and forcefully; and he grounded himself in number-crunching and fact-checking - all important traits of today's policy-relevant researcher.

Despite these attributes, Lewis failed to effect direct policy change. He did not appreciate how inextricably linked politics and economics are in real life. In Ghana, he failed to anticipate the political unrest that would be generated by taxing the country's most productive sector - cocoa farmers - and he took Nkrumah at his word that those funds would be used to develop other productive activities and not for symbolic gestures such as the Volta River project.

Second, it is striking how many of the core issues that worried Lewis remain central to contemporary development debates. If his direct attempts to change the world for the better were unsuccessful, then his indirect attempts - to change thinking about development - were much more effective. The central issue of how to raise agricultural productivity in Africa as a kickstart to overall economic growth, a feature of his writing that is often overlooked, has been a key question addressed by the UK's Commission for Africa and Jeffrey Sachs's United Nations Millennium Report . Whether to stimulate growth by focusing first on "hard" productive sectors such as market infrastructure or on "soft" assets such as health and education are issues that rage on.

Lewis also highlighted the way in which poor governance decisions that serve the interests of rich countries can undermine governance in the poorer countries. For example, the UK Government's need for an aluminium smelting plant in Africa led to its supporting the economically irrational Volta River project. Lewis even uses the term "fragile polities", very similar to today's development-speak of fragile states: those countries that lack the means or will to meet the development needs of their people.

If only more of today's state builders and governance experts in the Middle East and Africa had internalised Lewis's observation that the constitutions drawn up by the colonial powers for the new African states were more suited to the class-based polities of Europe than the ethnic, religious and geographically based divisions of Africa. He predicted the many zero-sum games played out since, in which ethnic group has fought ethnic group for a share of the cake, while no one had much incentive to bake a bigger cake for the whole of society to share. This prescience on so many topics surely says much about Lewis's wonderful ability to identify the core issues that must be resolved if growth and development are to occur.

Tignor's book is one for enthusiasts of development, of social science research and of African history. It is long, closely written, tightly researched and scrupulously comprehensive. Despite all this, we get a rather impersonal view of Lewis, perhaps in part because the book focuses not only on Lewis but also on African history, and also because, as the author acknowledges, Lewis did not reveal too much of his personal life. In spite of the author's friendship with his subject, he does not give us sufficient access to off-the-cuff first-hand quotes from Lewis (such as his reference to the budgetary "toys" wanted by the Ghanaian Ministers, which reveals much about his later disdain for their political calculations). It may be because of this friendship that the author refrains from judging Lewis; there are few direct criticisms of his opinions and decisions.

Nevertheless, I enjoyed the book. It reminds the reader that even though the context has changed, the current issues are familiar - and difficult.

The book inspires development researchers to be hard-headed and passionate in pursuing our beliefs, and wildly ambitious in our aspirations, but also somewhat modest in our expectations.

Lawrence Haddad is director, Institute of Development Studies, Sussex University.

W. Arthur Lewis and the Birth of Development Economics

Author - Robert L. Tignor
Publisher - Princeton University Press
Pages - 315
Price - £22.95
ISBN - 0 691 12141 9

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