W. Arthur Lewis: Pioneer of Development Economics

W. Arthur Lewis' best-known contribution to development economics was his path-breaking work on the transfer of labour from a traditional to a modern capitalist sector in conditions of unlimited supplies of labour. His article, "Development with Unlimited Supplies of Labour" (1954), contributed to the establishment of development economics as a specialized field of study. It addressed the mechanisms of transferring surplus labour from traditional activity to a modern capitalist sector under conditions of unlimited supply of labour.

In this model, wages in the modern capitalist sector are not determined by the productivity of labour, but by its opportunity cost. A "traditional" non-capitalist working environment -- variously comprised of peasants, artisanal producers and domestic servants -- augmented by population pressures and the entry of women into the labour force, provides the capitalist sector with "unlimited supplies" of labour, at a wage somewhat above the subsistence level. As the sector expands, employment and output increase and the share of profits (savings) in national income rises. Eventually, as surplus labour is exhausted, the wage rate rises. At this point, the economy crosses the boundary, from a dual to a single integrated labour market, and real wages rise with increasing productivity, in accordance with conventional growth models.

Lewis' model showed that low wages and poverty in a labour surplus economy will persist so long as the opportunity cost of labour to the capitalist sector remains low. It also served as an argument for government-led industrialization programmes in the 1950s and 1960s, something Lewis argued throughout his association with the United Nations. Lewis advanced the case for industrialization by demonstrating the comparative advantage of labour-surplus countries in manufacturing activity. Presented in The Industrial Development of the Caribbean (1951), his argument was based on the success of "Operation Bootstrap" in Puerto Rico, where he had advocated the production of manufactured goods for domestic, regional and metropolitan markets. It was a radical position at a time when the agrarian economies of the West Indies had been historically structured to provide agricultural and other primary commodities to the colonial powers.

The impact of the Great Depression on the West Indies was a formative influence on Arthur Lewis. He was born in 1913 in St. Lucia, a small island in the Caribbean archipelago that also produced poet and painter Derek Walcott, a Nobel Laureate like Lewis himself. The child of a schoolteacher and a customs official in a British colony dominated by the sugar industry, Lewis completed his secondary education at the age of 14. He was too young, however, to take up the Island scholarship that had been awarded him to proceed to a British university of his choice. He spent the intervening four years as a junior clerk in the public service.

Lewis did not want to be a doctor or a lawyer -- the two conventional routes to upward social mobility. He noted that he wanted to be an engineer, "but neither the colonial government nor the sugar plantations would hire a black engineer" (Lewis 1984:1). At age 18, he enrolled at the London School of Economics (LSE) to obtain a Bachelor of Commerce degree. There, he encountered economics, a subject he noted, neither he nor anyone in St. Lucia had ever heard of before; it seemed, however, to be a preparation for employment in business or public administration.

London of the 1930s and 1940s was the intellectual centre of anti-colonial struggles and the meeting ground of personalities, many of whom later would become future leaders of the newly independent nations of Africa and Asia. "In London, meeting fellow anti-imperialists from all over the world, I launched upon a systematic study of the British colonial empire and its practices -- colour bars, prohibiting Africans from growing coffee in Kenya so that they were forced into the labour market to work for cash to pay their taxes, and all the rest" (Lewis 1984:13). Lewis addressed the problems of the West Indies in a number of papers and pamphlets, including a submission to the Moyne Commission, set up following the labour unrest throughout the West Indies in the late 1930s; he also developed an economic plan for Jamaica, advocating radical land reform.

An outstanding scholar, Lewis was appointed assistant lecturer during his tenure at LSE, the first black appointment made by the prestigious institution. He lectured the first year course on Economic Analysis. He was appointed full professor at Manchester University in 1948, at the age of 35. It was at that time that he returned to a question he had pondered since the early days of his growing up in St. Lucia: why do workers in the sugar industry work so hard for so little pay, while workers in industrial countries enjoy better working conditions and receive far higher pay? His interest in economic development was "an off-shoot of my anti-imperialism" (Lewis 1984:12), and lead him to publish with the Fabian Society, an intellectual arm of the British Labour Party, associated with figures such as Sidney and Beatrice Webb and George Bernard Shaw. His writings included "Principles of Economic Planning", an essay on the management of a mixed economy. With early nineteenth century England in mind, Lewis theorized that economic growth required a capitalist sector able to internalize capital accumulation by ploughing back profits to expand employment.

With reference to "comparative advantage", Lewis argued that a small densely populated country like Jamaica should specialize in manufacturing and import food from countries that have a comparative advantage in agriculture, such as the United States or Canada. Foreign investors should be encouraged to introduce modern technology ("tricks of the trade") and access to external markets. At a time when colonial authorities were hostile to any form of industrialization, such a proposal was considered quite radical.

Practically speaking, industrialization had to start by addressing the domestic market, whether in Jamaica or in Africa, where Lewis, as the first economic advisor to the newly established State of Ghana, recommended import substitution combined with agricultural development. Lewis also insisted on the need to increase productivity in the domestic food-producing sector as a precondition for successful economic development. As a member of an expert group called upon by the United Nations that included another later Nobel Laureate, Chicago's Theodore W. Schultz, Lewis formulated a path to development that included rapid industrialization and social reforms. His work at the United Nations, in combination and collaboration with Raúl Prebisch, Simon Kuznets, Jan Tinbergen and others, proved highly influential throughout the "development decade" and in efforts to achieve balanced growth through a "big push" (United Nations 1951, 1955).

The search for solutions to the development problems of "tropical" countries was a constant preoccupation for Lewis. It led him to research the historical evolution of the international economy from the Economic Survey (Lewis 1949) to his major research on primary commodity producers, published as Growth and Fluctuations, 1870-1913 (Lewis 1978a). In his Schumpeter lectures, published as The Evolution of the International Economic Order in 1978, Lewis maintains that "the absence of industrialization in tropical countries in 1870-1914, was not due to any failure of trade to expand, but rather to their terms of trade". Solutions are not to be found in reform of trade relations, but in transformations of domestic structures, particularly in the increase in productivity of the domestic food sector.

Today, developing countries are forced to compete ever more fiercely with each other; their economies restructured to become ever more export dependent. At the same time, the increasing volume of cheap labour exports is driving down prices and depressing the real wages and purchasing power of the working classes in industrial and developing countries alike. The relationship between trade and development, so central to the writings of Lewis, remains a major unresolved problem of the contemporary world, and his insights into the mechanisms of "tropical primary exporting economies" -- forcefully argued in the Nobel Lecture (Lewis 1980) -- have lost none of their relevance. Although the Caribbean experiences inspired much of his work, the explanatory power of his insights embraces much of contemporary North-South relations. References * Jolly, Richard, Emmerij, Louis, Ghai, Dharam and Lapeyre, F UN Contributions to Development Thinking and Practice. Indiana University Press, Indianapolis, 2004.
* Lewis, W. A. Memorandum of Evidence to the West Indian Royal Commission. CO Public Records Office, London, undated.
* Lewis, W. A. Labour in the West Indies. Fabian Society, London, 1939.
* Lewis, W. A. "An Economic Plan for Jamaica". Agenda, 3 (4): 154-163, 1944.
* Lewis, W. A. The Principles of Economic Planning. Allen & Unwin, London, 1949.
* Lewis, W. A. The Industrial Development of the Caribbean. Kent House, Port of Spain, 1951.
* Lewis, W. A. Economic development with unlimited supplies of labour. Manchester School, 22, May: 139-191, 1954.
* Lewis, W. A. The Theory of Economic Growth. Irwin, Homewood, IL, 1955.
* Lewis, W. A. The Evolution of the International Economic Order. Princeton University Press, Princeton, 1977.
* Lewis, W. A. Growth and Fluctuations, 1870-1913. Allen & Unwin, London, 1978.
* Lewis, W. A. The Slowing Down of the Engine of Growth. American Economic Review, September: 555-564, 1980.
* Lewis, W. A. "Autobiographical note". In William Breit and Roger W. Spencer [eds]. Lives of the Laureates: Thirteen Nobel Economists. Third Edition. MIT Press, Cambridge, MA, 1984.
* United Nations. Measures for the Economic Development of Underdeveloped Countries: Report by a Group of Experts Appointed by the Secretary-General of the United Nations. United Nations, New York, 1951.
* United Nations. Processes and Problems of Industrialization in Underdeveloped Countries. United Nations, New York, 1955.