Journal Issue

Book Notices

International Monetary Fund. External Relations Dept.
Published Date:
June 1966
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Currie, Lauchlin, Accelerating Development: The Necessity and the Means, McGraw-Hill Series in International Development, New York, New York, U.S.A., McGraw-Hill Book Company, 1966, xiv + 255 pp., $7.50.

IN THIS BOOK, Lauchlin Currie offers refreshing views on what he regards as the basic obstacles to development and how they may best be tackled. His analysis stems from long and intimate experience with Colombia. This is not the first time that this country has inspired a new look at the general problem of development.

The main merit of the book is the forceful way in which it directs attention to some of the crucial links in the development process: the increase in agricultural productivity, the flow of labor into the towns and into industry, and the productive utilization of these new arrivals in the urban economy. Currie calls for a thorough reorientation of development expenditure and policies, stressing in particular the mobility of labor, housing and urban services, and the utilization of existing industrial capacity. A clear statement of development orientation is welcome—too many “plans” are merely macro-economic projections or an assembly of isolated projects, in neither case adding up to a development policy. Currie’s emphasis on expenditure on the towns fits neatly into a plan for absorbing rural workers, and one can hardly argue that this expenditure will not gain in importance in the wake of the heavy infrastructure spending of the past decade. But the book lacks a serious attempt to estimate the cost—in real and financial terms—of the recommended social-urban investment program. Without such estimates we cannot translate Currie’s reorientation into a workable plan or even begin to tackle the basic issue of the priority of these expenditures relative to investment in manufacturing industry, power, and transportation.

The book is in step with the emerging emphasis on a concerted approach to development planning and finance—both nationally and internationally (although, like others in Latin America, Currie overdraws the parallel with the Marshall Plan). It is new in its basic approach of analyzing the causes of low productivity and exploring ways in which these causes may be attacked directly. In his search, the author feels the need to evolve concepts and methods of analysis and measurement tailored to the problem of growth in developing countries rather than to the problem of employment and production in industrial economies. As he puts it: “What started out in the hands of Keynes as a useful set of definitions and concepts to explain inflation, or the persistence of unemployment, or the emergence of a brake on a recovery movement, is in danger of becoming a mental straitjacket on our thinking about development problems.”

I heartily commend this book. The reader will find it hard to put it down once he has started it.

Barend A. de Vries

Hawkins, Robert G. (editor), Compendium of Plans for International Monetary Reform, New York, New York, U.S.A., 1965, 131 pp., $2.00; Hawkins, Robert G., and Rolfe, Sidney E., A Critical Survey of Plans for International Monetary Reform, New York, New York, U.S.A., 1965, 80 pp., $1.00. Both published by C. J. Devine Institute of Finance, New York University.

THERE IS WIDESPREAD, though not universal, agreement that the international monetary system is passing through a period of difficulty and that the time has come for the introduction of basic reforms. There is little agreement, however, about either the nature of the problems which the system is facing or the solutions that must be found for them. Various plans for international monetary reform have been advanced from time to time. Some of them differ from one another in their technical details while the differences among others present fundamental differences in views about the basic nature of the problems which need to be solved. It is useful, therefore, to have some guide through the plans. Since the various plans are not equally accessible, it is useful also to have a single publication in which the major plans have been brought together.

Hawkins has arranged in three groups the various plans included in his Compendium. The original Keynes Plan, the Triffin Plan, the Angell Plan, and the Stamp Plan are presented in Part I. The proposals put forward by Lutz for a multiple reserve currency system, the Bernstein C.R.U. proposal, and the Roosa Plan are presented in Part II. The views on the subject of international monetary reform expressed by the International Monetary Fund in its 1965 Annual Report, and those of the Joint Economic Committee of the U.S. Congress given in Guidelines for Improving the International Monetary System, are presented in Part III.

The Critical Survey goes much further than the Compendium because it not merely examines the plans included in the Compendium but also discusses other proposals: those involving a return to the gold standard, those calling for some kind of break with gold, and those suggesting the introduction of flexible exchange rates. In each case, the merits and demerits of the proposal are outlined. The authors take particular care to show the nature of the problem that each solution reflects. They have also been able to compare the various proposals briefly with one another. The two volumes must, therefore, be considered extremely useful. As new variants of these schemes are still being introduced, and it could hardly be expected that all the plans could be thoroughly examined within the brief compass of 80 pages, the volumes under review should be considered introductory in nature.

Hannan Ezekiel

Andrus, J. Russell, and Mohammed, Azizali F., Trade, Finance, and Development in Pakistan, Stanford, California, U.S.A., Stanford University Press, 1966, xii + 289 pp., $8.75.

This volume presents an up-to-date account of Pakistan’s trade and payments, banking and public finance, and plans for economic growth. One author, Mr. Mohammed, is a member of the Fund staff; the other, Mr. Andrus, is a member of the U.S. Agency for International Development.

Farer, Tom J. (editor), Financing African Development, Cambridge, Massachusetts, U.S.A., Massachusetts Institute of Technology Press, 1965, viii + 245 pp., $6.00; Oxford Regional Economic Atlas of Africa, London, England, Oxford University Press, 1965, 164 pp., $15.00.

Cerych, Ladislav, Problems of Aid to Education in Developing Countries, Praeger Special Studies in International Economics and Development, New York, New York, U.S.A., Frederick A. Praeger for the Atlantic Institute, 1965, xiii + 213 pp., $7.50.

DURING THE PAST DECADE, the role of education in national development has commanded increasing attention from three principal sources. Economists have begun to study such neglected subjects as the economic return of education, residual factors in economic growth, manpower and human resources, and, more recently, the financial implications of educational expansion. Agencies financing development have realized that investment in physical development may be disappointing, owing to lack of essential human skills and attitudes. Finally, political leaders in the developing countries have had to respond to the surging demand of their people for education at all levels.

New strategies of educational development—more closely related to economic needs and possibilities and at the same time taking account of political realities—are now being worked out. Cerych’s brief but well informed and thoughtful study, aimed principally at the problems of aid-giving agencies, is a valuable contribution to these efforts, useful to specialists and nonspecialists alike.

Over the past five to ten years, Cerych points out, school enrollments and educational expenditures in the developing world have increased by approximately 10 per cent per annum, while the rate of growth of gross national product (GNP) has been about 4 per cent. Most developing countries are probably spending 4 per cent of GNP and allocating over 20 per cent of public expenditure for education—figures approaching those of the developed countries while still falling far short of what is needed for educational services. The “squeeze” produced by these disparate rates of growth calls for careful planning and no waste, the more so since capital expenditure in education involves a high rate of commitment to recurrent expenditure. A bad choice now not only wastes resources; it seriously restricts the range of choice in the future.

The book offers a number of useful guidelines on how external aid for education might be applied most fruitfully. Generally, Cerych holds, the higher the level of education the greater the scope and justification for external assistance and the greater the multiplier effect.

He also offers some sound warnings against oversimplified formulae relating to the form and content of education for economic growth, and emphasizes the importance of the distinction between trained people and those capable of being trained. Where possible, training should be done on the job or in close relation to the employer. The major task of the educational system is to supply the economy with people who are trainable. Therefore, he asserts, “The crux of the matter is not so much to create more technical schools but to increase science and technical teaching in the general schools.”

Cerych covers perceptively a wide range of other topics, including the sources of aid, the forms of aid (grants versus loans), and the problems of coordination among aid agencies. In referring to the entry of the World Bank Group into this field, for example, he recognizes that it is not simply the adding of another source of funds but a significant innovation in method: “The fact that this institution, which normally applies methods based on the concepts of classical banking economics, allotted over 18 months a total of $22.6 million of loans … for education, seems to be one of the major innovations, indeed almost a revolution, in the policy of international economic relations over the last fifteen years.”

Duncan S. Ballantine

TWELVE ESSAYS on five mid-African countries—Ghana, Kenya, Nigeria, Tanganyika, and Uganda—are collected in Financing African Development. The authors, all recent graduates from Harvard University or the Massachusetts Institute of Technology (M.I.T.), had, as M.I.T. Fellows in Africa, worked for two years as civil servants in African government agencies.

Four of the essays are concerned with the financial planning of economic development, seven with private investment, and one with foreign aid. The second group of essays should be of particular interest to African planners concerned with devising policies and institutions to generate external funds and local savings to satisfy the capital needs of new and expanding private firms. In “Promoting Private Investment in Less Developed Countries,” Scott Spangler describes the main features of Ghana’s legislation for this purpose and indicates what he considers to be its shortcomings. He points out that the mere existence of tax concession laws is no guarantee that the necessary directives have been issued to carry them out; for such laws to be effective, a permanent executive agency with a capable staff is required. He further suggests, citing experience in Puerto Rico, that in order to attract private foreign finance the rate of return may have to be in the range of 20-30 per cent, rather than the 8-9 per cent usually considered adequate by most tax concession legislation. In “Legal Safeguards for Foreign Investment,” Jonathan Mallamud pursues this theme further and argues that a public policy which is consistently well disposed toward private foreign investment makes many tax concession laws superfluous. Both Mallamud and Spangler are aware that determined governments can usually find the means, with or without tax holiday laws, to offer significant financial benefits to desired investments.

Curiously, as the literature on tax concessions for foreign investors continues to expand, relatively little attention has been given to the developing countries’ efforts to generate internal savings and to channel these funds through private capital markets to local productive investments. Douglas Gustafson’s “The Development of Nigeria’s Stock Exchange” is an effort to redress the balance. After a concise history of four successful private capital issues in Nigeria, Gustafson discusses the need for an exchange mechanism and relates the steps taken to organize a private stock exchange in Lagos for trading government stock and private securities. He considers that the early operations of the Lagos Stock Exchange were encouraging and that the yields on a number of private issues were attracting the interest of both institutional and individual investors. He deals briefly with the problems of operating an exchange in a relatively thin market and discusses what might be done to assist a small stock exchange in its formative years. This is an interesting and important pioneer study.

Another recent book, the Oxford Regional Economic Atlas of Africa, will be indispensable to African regional planners. Subject maps (60 pages) of the African continent dealing with such topics as soils, temperature, rainfall, natural resources, transportation, commodities, and population distribution follow 43 pages of detailed topographical maps. The value of the excellent cartography and index is but slightly diminished by the fact that the statistics used throughout 52 pages of economic comment are outdated.

August T. Schumacher


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