Sir Arthur Lewis Background information –born in 1915 in the West Indies –received bachelor of Commerce –earned Ph.D in Industrial Economics –served as intern for U.N. Economic Advisor to the Prime Minister –President of Caribbean Development Bank –Earned Nobel Memorial Prize in Economic Science

Basic Goals and Questions Lewis wants to find What is the appropriate size of the industrial sector and how is modernization to be financed? 3 strategies supporting industrialization –export more agriculture commodities –develop a self-sufficient economy emphasizing the home markets –export manufactores

Agriculture Exports Fits nations such as Burma, Thailand, Gold Coast, and Uganda 2 arguments against this theory –terms of trade argument –dependency argument

Terms of Trade Argument This argument was also categorized in two sub parts –historical part (not discussed today) –theoretical part

Theoretical Part If primary producers develop their exports faster than the industrial countries demand, then the terms of trade must move against them Found that 85% (plus or minus) of growth of production must exist to developed countries

Dependency Argument Country begins to export agricultural commodities and becomes paralyzed in it’s industrial takeoff These profits are transferred overseas instead of the country’s economy

Best jobs are reserved for foreigners, and local people are at loss Workers become upset and move or just lower their standards Basically, import products are pushed into the market while local producers suffer massively This movement makes it harder to find good jobs

This is typically occurring in tropical countries This study is consistent with the second half of the 19th century but not the 20th century

Import Substitution Wages in one industry which is good pay will bring wages up in other industries beyond what they can afford (Dutch Disease) This analysis shows prices and benefits - cost analysis Causes a push or migration of people into urban areas where work can be found

Self - sufficiency –import substitution strategy that relates to food production for domestic market –we do not know how much exactly to spend on food production so we choose program reasonably effective for our money –there is a huge gap in country’s production of food; tropic countries can produce up to 4% and dry countries can barely make 2% –gap will widen if something is not done

Export Manufactures This strategy basically was formulated for overpopulated countries But problem is unpredictability factor Growth could be up to 10% a year but behavior of developed countries is unpredictable It all depends on if they return to a fast growth of their GDP