Ragnar Nurkse: Anthem Studies in Development and Globalization: 1 - Brossura

Brossura

ISBN 10: 0857283979 ISBN 13: 9780857283979

Casa editrice: Anthem Pr, 2011

Riassunto

‘Ragnar Nurkse, Trade and Development’ is a timely reprint of Nurkse’s most important works, given the renewed interest in his writings amongst development economists, who are turning to this pioneering thinker in search for new inspiration. This volume aims to make his rarely published works available for an audience of economists, policy makers, researchers and students.

Su questo libro

Informazioni sull?autore

Rainer Kattel is Professor of Innovation Policy and Technology Governance, Tallinn University of Technology, Estonia.

Jan A. Kregel is Senior Scholar at The Levy Economics Institute of Bard College; the Center for Full Employment and Price Stability at the University of Missouri, Kansas City; and the Tallinn University of Technology.

Erik S. Reinert is Chairman of The Other Canon Foundation, Norway, and Professor at Tallinn University of Technology.

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Ragnar Nurkse: Trade and Development

By Rainer Kattel, Jan A. Kregel, Erik S. Reinert

Wimbledon Publishing Company

Copyright © 2011 Rainer Kattel, Jan A. Kregel and Erik S. Reinert
All rights reserved.

ISBN: 978-0-85728-397-9

Contents

Preface by the Editors, vii, 
Introduction by the Editors, ix, 
1. Causes and Effects of Capital Movements (1934), 1, 
2. The Schematic Representation of the Structure of Production (1935), 15, 
3. Conditions of International Monetary Equilibrium (1945), 27, 
4. Domestic and International Equilibrium (1947), 51, 
5. International Monetary Policy and the Search for Economic Stability (1947), 73, 
6. Growth in Underdeveloped Countries (1952), 85, 
7. Problems of Capital Formation in Underdeveloped Countries (1953), 99, 
8. Period Analysis and Inventory Cycles (1954), 213, 
9. A New Look at the Dollar Problem and the United States Balance of Payments (1954), 237, 
10. International Investment To-day in the Light of Nineteenth-Century Experience (1954), 249, 
11. The Relation between Home Investment and External Balance in the Light of British Experience, 1945–1955 (1956), 261, 
12. Reflections on India's Development Plan (1957), 315, 
13. Balanced and Unbalanced Growth (1957), 329, 
14. International Trade Theory and Development Policy (1957), 359, 
15. Trade Fluctuations and Buffer Policies of Low-income Countries (1958), 385, 
16. Patterns of Trade and Development (1959), 397, 
Notes, 435, 
Bibliography of Ragnar Nurkse, 475, 

CHAPTER 1

CAUSES AND EFFECTS OF CAPITAL MOVEMENTS (1934)

The theory of capital movements has not been treated systematically, so far, in the literature of economics. The reason for this neglect may well be found largely in the fact that the classical doctrine of international trade, the theory of comparative costs, rests on the fundamental assumption that while the factors of production, labor and capital, are freely mobile inside a given country, they are lacking external freedom of mobility. This basic premise of the international immobility of capital seems to have prevented the possibility of a theoretical approach to capital movements, at least from the standpoint of international trade theory. It is significant that whenever the so-called problem of transfers comes up in the orthodox theory of international trade, the discussion is always concerned with indemnity payments between governments and matters of this kind, never with spontaneous, economic money transfers, i.e., with capital movements in the strict sense.

Secondly, the theory of capital movements undoubtedly suffers from the fact that the transfer problem, which arises in capital movements as well as in indemnity payments, has taken up far too much room at the center of the stage. No attempt has been made to look beyond it, either at the causes of capital movements or at their effects. The discussion has been limited to the immediate process of international transfers, in the belief that practical and theoretical problems could be seen here which actually have turned out to be largely spurious. After the war, the mechanism of transfer naturally attracted more attention than ever on account of the question of reparations. It was generally held that everything there was to observe on the subject of transfer of reparations must also apply automatically to the case of capital movements. This assumption was, to say the least, somewhat premature. Since the causes and effects of capital movements are utterly different from those of reparations and indemnity payments, differences are bound to arise as well with regard to the mechanism of transfers; only a few of these can be mentioned here later. (The general theory of transfers can be assumed to be understood and will not be discussed in this paper.) What it is that divides the causes of capital movements from those of indemnity payments and similar unilateral money transfers is obvious, and needs no explanation. The main difference lies in the fact that the latter are not economically oriented. They move in an opposite direction from that indicated by profit expectation; otherwise the transfer would have taken place earlier, of its own accord. There will be no further reference to reparations and indemnity payments in this paper. We are exclusively concerned with the study of spontaneous, economic and productive capital movements.

II

The immediate cause of profit-oriented capital movements is an interest-rate differential. The main point is to find out how this interest-rate differential can come about. A useful though somewhat superficial view consists in assuming the interest rate to be the outcome of capital supply and demand. Consequently, a change in the interest rate can be induced either from the supply or from the demand side.

An interest-rate differential, hence a capital movement from A to B, can thus come into being in the following way: country A, for one reason or another, saves more than country B; in other words, the supply of capital rises. Or both interest-rate differential and capital movement in the same direction are caused by a fall in the savings rate in country B, which means a decline in the supply of capital. (The possibility of creating an interest-rate differential by increasing the capital supply in country A artificially through credit creation may be mentioned briefly as a factor on the supply side.) These variations in the savings rate have no problems to offer. Of greater interest are the variations that occur in the demand for capital and produce both interest-rate differentials and capital movements.

To begin with, suppose that a technical discovery or an improvement in methods of production takes place in country B, that B's products become cheaper: on this account and that physical output expands. But the value of output will obviously rise only if the elasticity of demand in the relevant sector of the demand curve is greater than one. Industrial profits go up in B, the entrepreneurs strive to increase production, this in turn drives up the cost of the factors of production — including the interest rate — and the result is a capital movement towards B. The more labor-saving the discovery in B and the greater the elasticity of demand for B's product, the more extensive the ensuing capital influx. An opposite effect is conceivable: the improvement in technical methods of production may release capital in B and lead to an export of capital from B. But this is not very likely to happen. It can occur only if (a) the invention is a capital-saving one, and (b) the elasticity of demand is lower than one. That the first requirement alone is not enough is shown by the fact that even if the discovery is only relatively capital-saving, a high elasticity of demand can lead to such substantial extensions in production that surplus capital will be necessary.

In the case we have just considered capital movements were brought about, in the last analysis, by a change in the technical requirements of production. In the case we shall take up next, the cause of capital movements is a shift in demand for various end-products as the result of a change in consumers' tastes.

For the sake of simplifying the demonstration, a gold standard will be assumed. Further, labor as a factor of production is assumed to have no external mobility. Lastly, we will suppose that the world consists of different "countries" in the following sense: each country manufactures several kinds of consumer goods, and the higher stages in production required for the manufacture of each of these consumer goods are to be found in the same country as the end-product. For the purpose of this example, international trade is assumed to consist of consumer goods alone, and no exchange of intermediate products or capital goods takes place among different countries.

A transformation in consumption habits, a widespread change in consumer preferences will be followed by a decline in demand for the products of country A, for instance, and a rise in demand for those of country B. In the former country export prices fall, in the latter they go up. Production in A becomes less profitable and is therefore reduced. Capital will be released, or at any rate no new savings capital will be available for investment. The reverse is the case in B: the producers of the consumer goods that the shift in demand has favored make more profits, and develop a wider demand for capital in order to extend production. The interest rate goes up. The outcome is a capital movement towards B. A higher proportion of the flow of new savings finds its way into the country whose products are more intensely desired and have consequently risen in price.

It might seem that the rise in demand for B's export goods will not necessarily provoke a rise in their prices. If the industry favored by the shift in demand is subject to the law of increasing returns, that is, if it operates with diminishing costs, prices to all appearances can fall instead of rising. A case of falling costs of this kind becomes a little more involved under our present assumptions. Let us imagine that country B specializes, among other consumer goods, in the manufacture and export of pencils. Now let us have an increase all over the world in the demand for pencils. Country B shows an export surplus for the time, and gold flows into B. The influx of gold shifts the consumers' monetary-demand curve in B to the right. In the same way, a rise in the monetary cost and supply curves might be expected. The pencil industry's supply curve can display a negative slope: because of the gold influx (because of the greater quantity of money in B), the curve presently shifts upward all along the line so that the rise in demand makes the price of pencils go up instead of down. But this would not be a defensible argument. If an upward shift occurs in the pencil manufacturers' individual monetary-cost curves (on account of the gold influx and of their increased demand for means of production), a falling or negative supply curve cannot be valid for the pencil industry as a whole. In these circumstances it will have to have a positive slope, and there is little cause for surprise if the price of pencils goes up. Nevertheless we reach the same result — rise in price as the result of a general rise in demand — even if the pencil industry shows a falling supply curve in a sense presently to be explained. Supposing that we let the rise in demand for pencils take place in country B alone, it may proceed at the expense of some other product also manufactured in B for which demand will decline. Means of production in the latter industry will be released for expansion of the pencil industry. Because the means of production required for its expansion are placed at the disposal of the pencil industry while costs remain constant, external savings can be achieved that will not be overcompensated by a rise in the cost of the means of production and that produce a negative slope in the corresponding sector of the collective supply curve. Should the rise in demand for B's pencils occur outside country B and happen at the expense of a product not manufactured by B, but rather by country A, the international immobility of labor presumably prevents an adjustment of the real wage rate, which goes up in B. This counteracts the tendency towards external savings and falling costs in the pencil industry, and may convert the pencil industry's supply curve from a falling curve to a rising one. This seems to be a reason for assuming in the theory of foreign trade, at least in the case of international shifts in demand, that supply curves have in general a positive slope.

The price increase of export goods in country B which induces a capital flow towards B will mean an improvement in net terms of trade for this country. It is well know that discussions of the transfer problem have been mainly concerned with the question of whether capital movements in themselves create a change for the better or for the worse in the net terms of trade. The "orthodox" viewpoint has it that capital transfers bring about deterioration in the net terms of trade for the paying country and an improvement for the receiving country. We have just seen that the causal connection between capital movements and the net terms of trade can take the opposite direction: an improvement in the terms of trade is the cause of capital imports. Because of this fact, certain difficulties appear in verifying these mutually conflicting transfer theories — a subject to which we will briefly return below.

The immediate effect of the rise in demand for B's product is to create an export surplus in that country, followed by an influx of gold with the function of closing the gap between exports and imports, and of providing the inhabitants of country B with a greater share in the "world product." The gold influx is succeeded by certain price movements that remove the discrepancy between exports and imports after a while. At the same time, the increase in demand for B's product calls for a capital movement towards B, and this provokes a second gold influx, with the function and effect of inducing a discrepancy between exports and imports in the other direction, of bringing about an import surplus. Capital flows into B in the shape of goods. It is evident both that the first kind of gold import will not be enough for this purpose, and that the two kinds are only to be distinguished one from the other by analysis; they are separable neither practically nor temporally.

Let us consider briefly what effects the increase in demand for its product and the subsequently induced capital imports will have on the general structure of production in the pencil-producing country. Since the land and labor supply remains unchanged in B and only the capital stock is enlarged, it means a transition to more roundabout methods of production in B, to a more capital-intensive structure, while in A, the country whose products have suffered a decline in demand, there follows likewise a shortening of the methods of production. If we observe the pencil industry in particular, we find that it is led by wage increases to replace labor with capital. More capital is used in relation to the other factors of production, the "average period of production" becomes longer, the "coefficients of production" have altered in favor of capital — whichever way one wants to put it. It will not be the same, of course, if the shift in demand takes place among consumers in a single country or if, regardless of whether it happens all over the world, the industries affected by the shift in demand, whether favorably or unfavorably, are be found in the same country. If within each "country" full freedom of mobility is assumed for the factor of production labor, the industry favored by the shift in demand develops "horizontally," with no change in the existing coefficients of production. Conversely, the industry that has been prejudiced will shrink "horizontally" and there is no incentive for a change in its "average periods of production." In the latter case, the increase in consumer demand for pencils is met by an extension of production as a whole through intensified application of all the factors of production in approximately the same ratio, with no essential change in methods of production. In the former case, on the other hand, consumer wants are satisfied, thanks mainly to the increase in output afforded by more roundabout methods of production.

III

We have considered capital movements as being due to shifts in demand and fluctuations in the price of end-products. Let us now give up the assumption that international trade consists of consumer goods alone. From a mainly "horizontal" analysis, we move on to a "vertical" one.

In fact, the world's international trade is made up not only of finished goods ready for consumption but also, and to a far greater extent, of capital goods, "intermediate products," and "goods of higher order." Even if a country specializes in a certain consumer commodity, the principle of comparative costs determines that the goods of higher order required in the capital-intensive production of this commodity are not all manufactured in the same general neighborhood as the end-product. Needless to say, the principle of comparative costs applies to capital goods as well as consumer goods. From the standpoint of average length of the capital-intensive process of production, the geographical distribution of the various districts where each separate stage in production takes place is accidental and unimportant.

Capital movements that originate in a shift in demand for goods of higher order will now be discussed. With this in mind, let us imagine a closed economy — the world, for instance — divided into three geographical sections of equal size. The first region, which we will call A, specializes in the highest stages of production, i.e., farthest from the consumer (primary production, mining, etc.). In the second region, B, we have a concentration of industries devoted to the "middle" stages of production, nearer consumption (machinery, semi-manufactured products), while the third region, C, is connected with the final stages of production, those nearest to consumption. All consumer goods (the "real income" of our closed economy, A, B, C) are therefore exclusively produced in C. Out of this flow of consumer goods C retains one third, shall we say, to pay for its own initial means of production. Two thirds are handed over to region B, where C's intermediate products come from. B in turn keeps half the consumer goods it receives from C for itself, and exchanges the other half for the intermediate products farthest removed from consumption produced by A, which leaves A provided with one third of the total real income.

(Continues...)

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Dettagli dell'edizione

• Editore: Anthem Pr
• Data di pubblicazione: 2011
• Lingua: Inglese
• ISBN 10: 0857283979
• ISBN 13: 9780857283979
• Rilegatura: Copertina flessibile
• Numero di pagine: 504
• Redattore: Kattel Rainer, Kregel Jan, Reinert Erik S.
• Contatto del produttore: non disponibile
• Persona responsabile: gpsr@libri.de; gpsr@libri.de; ; Friedensallee 273; Hamburg; 22763; Germania