Rethinking Trade and Commercial Policy Theories

Rethinking Trade and Commercial Policy Theories

Development Perspectives

P. Sai-wing Ho

This controversial book offers a unique approach to rethinking the trade and development literature and will therefore strongly appeal to researchers, academics, and students of trade and development as well as those involved in the history of economic thought.

Chapter 11: Mrydal: Harnessing Spread, While Curtailing Backwash, Effects with a Multitude of Policy Actions

P. Sai-wing Ho

Subjects: development studies, development economics, economics and finance, development economics, international economics

Extract

11. Myrdal: Harnessing Spread, while Curtailing Backwash, Effects with a Multitude of Policy Actions 11.1 INTRODUCTION l Unlike Hamilton and List who reacted against largely the works of one economist, namely Smith, by the time Myrdal cultivated a serious interest in development studies he had to do battle with economic ideas that had been refined and polished by an economics profession for more than a century since the classical period. He attacked the 'equilibrium' analyses adopted by the mainstream of that profession, claiming that their limitations were amply exposed in accounting for the sustained and, in some respects, growing international inequalities between the underdeveloped and developed countries? He grouped various forces that bear upon these inequalities into 'backwash' and 'spread' effects on the underdeveloped regions as the developed regions grew and expanded. The forces materialise and interact in ways that are characterised by the principle of circular and cumulative causation, with growing inequalities the result when backwash effects dominate over spread effects. Mrydal's criticism, especially the aspect directed against 'conventional' trade models, understandably caused ire among mainstream economists. Haberler ([1959] 1988, p. 27) classifies him as one of the 'protectionist writers', adding that his theory 'bears a most striking similarity' to that of List even though the latter's policy recommendations are 'more moderate' than his (ibid., p. 25, n. 10).3 His concept of the 'backwash effects' is denigrated as one that 'flies in the face of classical trade theory' and '[i]t is very difficult to come to...

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