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Arthur W. Lewis
: Challenge, Nov/Dec92, Vol. 35 Issue 6, p60, 2p
Houseman, Gerald L.& Maung, Ardeth
The world is undergoing rapid and fundamental economic change; this is undeniable regardless of United States election results or of any economic policy initiatives this nation may take. The departure of Communism from most of the world secene, the great challenges raised by Japan, other Asian nations, and now some Latin American economics, and the welding 'together of the European Community all promise to inaugurate growth, opportunities, and wealth, as well as some painful economic dislocations. Just as great a challenge, perhaps, is making sense of these changes so that we understand what we ar doing and, most importantly, what we should be doing.
Fortunately, we have some good resources with which to carry out this task. One of the most overlooked of these is the legacy of the late W. Arthur Lewis, who left us with a rich reservoir of theoretical and practical work which seems to grow more pertinent as the years go by.
Lewis as predictor
Lewis, who began life as a citizen of the Third World, was a prescient observer whose work possessed a clearly predictive capacity. We can see how Lewis's contributions helped explain the rise of Japan and the "four little tigers" of Asia-Hong Kong, Singapore, South Korea, and Taiwan--as well as the new and looming importance of countries like Brazil, Indonesia, Malaysia, Mexico, and Thailand. Most significantly, Lewis has provided us with a framework for analyzing not only what has happened in these countries, but what has happened to the United States as well.
In a landmark article published in 1950, "Economic Development with Unlimited Supplies of Labour," Lewis showed us how labor and investment patterns work internationally. He set out two requirements for a nation to become the desired recipient of capital investment, whether that investment happened to be domestically or internationally based. The first of these is wage levels, which reflect that a surplus pool of labor exists which can be profitably exploited. The second requirement relates to living standards and, most especially, to nutrition levels. The work force must be sufficiently skilled and must have enough physical energy to put in a day's work in a factory, shop, or other workplace. Until a national achieves these characteristics, the investment community will largely shun it. The "four little tigers" of Asia, for example, achieve these basic requirements and conditions at least a decade (or longer) ago, and in fact are now too expensive for low-tech investments such as shoe or umbrella factories. Japan, of course, moved past such points at an even earlier date. But Brazil, Indonesia, and Thailand; to cite three good examples, have moved into the Lewis theory's orbit only recently and should probably be considered optimal investment locales. Many other Third World nations--Bangladesh, for example, or Haiti, or many of the African nations--are still far behind the curve simply because they are too poor for achievement of adequate nutrition levels. Their day for development is awaited.
Lewis's theory is, of course, not entirely remarkable. Most casual observers of international economic affairs are aware of these trends. It is assuredly true that much of the developed community of nations--the United States, Britain, Canada and Sweden are notable examples-is presently grappling with an out-migration of jobs in conformity with the characteristics of Lewis's paradigm. A major concern, for which there is no obvious solution, is how to get around this problem which, incidentally, was predicted by Lewis's work. Only unique skills, products, cuffing-edge technology serve as hopes for the future in dealing with this crisis.
Usefulness of his work
What makes the work of Lewis most useful today, however, is that it enables us to take a better and more precise bearings on the status of any given country. With Lewis's observations in mind, it is possible for us to develop a classification scheme which incorporates virtually every nation into a position somewhere along the spectrum of developed, developing, and potentially developing countries. We have a better compass with which to find our way through the 'thickets of trade, production: employment, and sales figures.
Admittedly there are problems with Lewis's theory. It does not seem to take political stability and change sufficiently.into account; it ignores several well-known factors that are important to development; and, above all, it seems to make no allowances R)r the nuances of political culture. Recognizing these drawbacks does not make this model deficient, however; it tells us that we can attempt to solve such problems in various ways (and, frankly, with some other paradigms we have in mind) while utilizing Lewis's very worthwhile road map of world economic development.

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