All the Difference: A Development Economist's Quest 9780773563360

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All the Difference

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All the Difference A Development Economist's Quest BENJAMIN HIGGINS

McGill-Queen's University Press Montreal & Kingston • London • Buffalo

Benjamin Higgins 1992 ISBN 0-7735-0904-6 Legal deposit fourth quarter 1992 Bibliotheque nationale du Quebec

Printed in the United States of America on acid-free paper An earlier version of this book was published in 1989 by The Australian National University under the title The Road Less Travelled: A Development Economist's Quest.

Canadian Cataloguing in Publication Data Higgins, Benjamin, 1912— All the difference: a development economist's quest Includes bibliographical references and index. Originally publ.: Canberra, A.C.T.: Australian National University, 1989 under title: The road less travelled. ISBN 0-7735-0904-6 i. Higgins, Benjamin, 1912-. 2. Economic assistance. 3. Developing countries - Economic conditions. 4. Developing countries - Economic policy. 5. Economic development. 6. Economists — Developing countries Biography. 7. Economists — Canada — Biography. I. Title. II. Title: The road less travelled. HB121.H44A3 1992 338.91'0092

092-090383-5

This book was typeset by Typo Litho composition inc. in 10/12 Baskerville.

Contents

Preface vii Acronyms xi 1 How I Became a Development Economist 3 2 Initiation Rites: Libya, 1951—52

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3 The Ideological Factor: Indonesia, 1952-53 48 4 The Power Factor: Indonesia and the Philippines, 1954-59 73 5 The Regional Factor and Misdevelopment: Latin America, 1959-67 96 6 The Human Resource and Distribution Factors: The 1960s 119 7 The New Approaches of the 1970s 141 8 Africa and Foreign Aid, 1967—78 169 9 Planning Regional Development in Canada 201 10 The 1980s: Synthesis into a "New" New Approach 218 11 The Continuing Quest 249 Select Bibliography

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Index of Names 277 Index of Institutions 281

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Preface

I suppose anyone who has had a rich and varied career, and a rich and varied life to go with it, thinks occasionally of writing an autobiography. Yet few people actually do it, especially when they are still trying to write a dozen other things. In the case of "firstgeneration-development-economists" the lack of autobiographies is a genuine loss, because the story of the first decades of the international development effort and of the ideas that emerged as a consequence of that effort, lives mainly in the memories of the people involved in it. Thus one of the many reasons for which I am grateful to Helen Hughes and the National Centre for Development Studies is that they urged me to write this book. By the same token I am grateful to them for urging Heinz Arndt to write the first volume in the History of Development Studies series, and for the pressure they will no doubt put on other economists who entered the field of development early in the game, to keep the series going. In discussing the countries in which I have worked as a development economist, their economic, social and political problems and how they were tackled, I have mingled professional analysis with personal anecdotes. The reason for the latter is that I want to give readers, particularly those who are not (or not yet) development economists, some sense of the atmosphere in which the international development program was carried out, and a glimpse of the glamour and excitement that accompanied it. After the explosion of interest in the field in the 19505 and 19605, enthusiasm has waned considerably. Few of the brightest graduate students in economics today,

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at least outside the developing countries, choose economic development as their special field. That situation is unfortunate, because the international development effort will continue for some decades yet, and well-trained development economists will be needed. In terms both of intellectual excitement and patterns of daily life the field of development offers much that cannot be found in other branches of the profession. Moreover, as I declaim towards the end of the book, I am sure that much of the genuine progress in economic thought as a whole will come from those who have specialized in the field of development. When I speak of the "international development effort" I do not think primarily of official foreign aid programs. These have had much less to do with what actually happens in terms of development than people and events within the developing countries themselves. I am thinking more of the international effort to understand the development problems, to discover effective policies to promote development, to persuade the general publics of various countries to support them and their politicians to adopt them. I am thinking not only of the United Nations, its Specialized Agencies, Regional Commissions and affiliated institutions, plus the various bilateral aid programs, but also of the OECD, the SID, and the host of departments of planning, finance, agriculture, industry, transport, education, health and so on in developing countries. I think of the efforts to promote regional development in industrialized countries. Perhaps even more, I think of the countless specialized research institutes, in developing and industrializing countries alike, and the numberless universities providing training and doing research in the development field. And I think of the swarm of specialized journals that has sprung up, and the tons of books on the subject bending the shelves of libraries throughout the world. Thought of in this broad sense, the "international development effort" during the last thirtyfive years has been a truly remarkable phenomenon, and one unprecedented in the history of mankind. The book is organized as a fugue with four themes. The dominant theme is the story of the vast international campaign to conquer poverty and insecurity the world over. In that sense the book is more biography than autobiography. However, this story is told in terms of my personal involvement in it. It is my hope that by telling the tale in this fashion I can not only give readers a picture of how the international development effort works, but also a sense of the drama and satisfaction associated with it. The second theme is the story of the gradual evolution of thought about economic development, as a consequence of the experience with the series of fads, fashions,

ix Preface

fancies, nostrums, panaceas and experiments that mark the history of thought in this field, together with the growing volume of solid, serious, scientific research. The third theme is the evolution of my own ideas about economic development, policy and planning, and the organization of society. The connecting theme linking the other three is the story of my career, especially after I became a development economist at the age of thirty-nine. My story up to that point is told in the first chapter, to show what unlikely creatures became first-generation-development-economists, how irrelevant to the field most of their training and experience was, and the fortuitous circumstances that led them into this strange new world. I should perhaps explain that the order of presentation is not strictly chronological. The reason for that is that I want to tell the story of the evolution of thought and practice in the field of economic development, as well as the story of my involvement in both. Consequently I have been obliged to devote two chapters (5 and 6) to the igGos. The first of these deals with my immersion in Latin American development. The second deals with the concern shown during the 19605 for improved distribution of national income as well as its growth, for development administration, and for human resource development. If my story has an unusual facet justifying my use of Robert Frost's phrase as a title, it is my continuous involvement in both thought and action concerning development, in several dozen countries at various stages of development, and a series of universities, over a period of thirty-seven years. My ideas and my field experience have interacted, in both directions, as a feedback mechanism. The result, as indicated in the final chapter, is that I am more conservative with regard to social and political philosophy at the end of the road than when I took my first step; but I am a great deal more radical so far as scope and method of economics and other social sciences are concerned.

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Acronyms

ASEAN Association of Southeast Asian Nations ANU Australian National University BAPPENAS Badan Perencanaan Pembangunan Nasional, National Development Planning Board CASD Centre for Applied Studies in Development (University of the South Pacific) CEDES Conferencia sobre Educacion y Desorollo Economico Social (Chile) CEMLA Center for Monetary Studies of Latin America CENIS Center for International Studies (Massachusetts Institute of Technology) CEPAL see ECLA CFTC Commonwealth Fund for Technical Cooperation CHOGM Commonwealth Heads of Government Meeting CHOGRM Commonwealth Heads of Government Regional Meeting (Asia and South Pacific) CIDA Canadian International Development Agency CRDE Centre for Research in Economic Development (University of Montreal) DARA Lembaga Kemajuan Pahang Tenggara (Pahang Tenggara Development Authority) DPA Development Planning Associates of Ottawa DREE Department of Regional Economic Expansion DRIPP Developpement Regional Integre Petit Goave-Petit Trou de Nippes (Haiti)

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EC LA EPEA EPU ESCAP FAO FHA FWA IADB IGOR iDP IESR ILO IMF LDC LFC LPDSA LSE MAL MIER MIT NBER NEC NEP NESDB NGO NIRC OAPEC OECD PKI PNI PSI PWC PWR SID SIDA SUDENE

Acronyms

Economic Commission for Latin America (United Nations) Escritorio de Pesquisas Economicas Applicadas (Bureau of Applied Economic Research, Brazil) Economic Planning Unit (Malaysia) United Nations Economic and Social Commission for Asia and the Pacific Food and Agricultural Organisation (United Nations) Federal Housing Agency (United States) Federal Works Agency (United States) Inter-American Development Bank incremental capital: output ratio International Development Program (Massachusetts Institute of Technology) Indonesian Institute for Economic and Social Research International Labour Office (United Nations) International Monetary Fund Less developed countries Libyan Finance Corporation Libyan Public Development and Stabilization Agency London School of Economics Military administration lira Malaysian Institute for Economic Research Massachusetts Institute of Technology National Bureau of Economic Research (Columbia University) National Economic Council (Philippines) New Economic Policy (Malaysia) National Economic and Social Development Board Non-governmental organizations National Industrial Research Council (Philippines) Organisation of African Petroleum Exporting Countries Organisation for Economic Co-operation and Development Indonesian Communist Party Indonesian Nationalist Party Indonesian Socialist Party Public Works Canada Public Work Reserve (United States) Society for International Development Swedish International Development Agency Superentendencia para Desinvolvimento do Nordeste (Brazil) Northeast Development Authority

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TAA TDRI UNCRD UNCTAD UNRAD UNESCO UNRISD USAID USHA USP WEP WHO WPB

Acronyms

Technical Assistance Administration (United Nations) Thailand Development Research Institute United Nations Centre for Regional Development United Nations Conference on Trade and Development United Nations Centre for Regional Development United Nations Educational, Scientific and Cultural Organisation United Nations Research Institute for Social Development United States Agency for International Development United States Housing Administration University of the South Pacific World Employment Program (United Nations) World Health Organisation (United Nations) War Production Board (United States)

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All the Difference

Two roads diverged in a wood, and I I took the one less travelled by, And that has made all the difference. Robert Frost, "The Road Not Taken"

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i How I Became a Development Economist

My father was a gentleman. I still remember my astonishment when I first discovered this curious fact. As a boy I thought of my father as simply unemployed. He was trained as an engineer at McGill University, but had not held a job since my older sister was born. Then came the day when a census taker called. I happened to be alone in the house in which my father, as well as my two sisters, my brother and myself had been born, and which he had inherited from his father. The census taker had a large form which he filled in as I replied to his questions. When he asked what was my father's occupation I replied, rather shamefacedly, that he had none. The census taker glanced around him, and wrote in the "Occupation" box of his form, "gentleman". My mother was a writer — not a very good writer, but a writer nonetheless. She eventually reached a level of modest fame where she could sell to a respectable magazine every short story she wrote. She was a beautiful and charming woman, and a favourite with members of the Canadian Authors' Association. Our home in London, Ontario, became a salon, and I met in our drawing room some of Canada's best known authors. Naturally I wanted to become a writer. I could hardly have aspired to my father's profession, even had I possessed the requisite temperament. My father's parents believed in primogeniture, and as the only male child my father inherited their entire estate. My American mother, who had met my father at McGill, was something of an early Women's Libber. She made it clear to us that my parents' estate would

4 All the Difference

be divided equally amongst all four children. She was also incapable of concealing from us her faint disdain for mere gentlemen, much as she loved my father. The model she held constantly before us was her father, Professor E.W.D. Holway, who was brilliantly successful in three careers in one lifetime, first as a banker in Iowa, and then, simultaneously, as a botanist at the University of Minnesota and as a mountaineer in the Canadian Selkirks, where he made ten first ascents, including Mt Edith Cavell and the peak bearing his name. So the life of a gentleman was not for me, and I determined to be a rich and famous writer. One of my parents' friends suggested that a good way of keeping body and soul together while writing the Great Canadian Novel would be to work for a newspaper. There was no school of journalism in any Canadian university at the time. Another of my parents' friends pointed out that news was mainly economics and politics, and urged me to study economics and political science, while picking up as much English literature and composition along the way. So in the fall of 1929 I entered the University of Western Ontario and enrolled in economics and political science. The department of economics at Western then was a far cry from the prestigious body that it is today. It was small and rather undistinguished. But, looking back, I think I was really rather lucky in my experience at Western. The requirements for the economics and political science degree were not very onerous, and I was able to take courses, not only in English, but in such fields as psychology, zoology, history, mathematics, French and Latin. The economics department itself, small as it was, was quite diversified. Harold Logan was a solid Wisconsin Institutionalise and I wrote my first essay on Thorstein Veblen for him. Harold Logan was a disciple of John Commons, specializing in industrial relations and labor economics. He gave a course in socialist economic thought, much to the annoyance of the London business and financial community. Whether because of his influence, or through a bad conscience because the depression made my family better rather than worse off (rents fell less than cost of living), I became a member of the University Socialist Club - although the strongest action I took to defend my faith was to quarrel occasionally with my "absentee landlord" father. Another professor, Mark Inman, was a good Harvard theorist, and he and Logan wrote a successful principles text together. But the man who influenced me most was Professor Ed ("Colonel") Reilly. He was lazy and unproductive as a scholar, but he was a man of great charm, and had a keen appreciation of the sheer beauty of the neoclassical system. In my final year, in a course on theory of taxation, he succeeded in conveying some of that beauty to me,

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How I Became a Development Economist

and for the first time I became interested in economics for its own sake. I graduated in 1933, in the depths of the great depression. I still wanted to be a writer. London, Ontario, had at the time two excellent daily newspapers. Both the editors-in-chief were friends of my parents. I went to see them. Both seemed to me worn out and defeated. I felt I did not want to be like that at the age of sixty. Both offered me a job: I could hunt for news anywhere I liked, and they would pay me one cent a word for anything they published. I began to think of doing graduate work in economics. I had already arranged to work my passage to England on a cattleboat, and planned to spend the summer hitchhiking around Europe. My father agreed to finance two years' study at the London School of Economics if I could get in. I applied to LSE for admission. The chairman of the economics department, Lionel Robbins (later Lord Robbins), wrote a noncommittal reply, saying that my transcript showed little training in what passed for economics at LSE, but suggesting that if I were going to be in Europe anyhow, I should come to see him in September. Robbins was examining in South Kensington on the day I went to see him. The porter ushered me into a large and sombrely panelled room with a huge oval table, and sat me at one end. Robbins entered a few minutes later and sat down at the other end, about 9 metres away from me. Robbins was still in his early thirties, very tall, slender, elegant and god-like. I was tongue-tied. At one point he asked, a bit plaintively: "But, Higgins, what have you read? Have you read Frank Knight, Jacob Viner, J.M. Clark, Irving Fisher, Wesley Mitchell, Frank Taussig, Alvin Hansen?" Mystified, I replied, "Well no. You see, in Canada we read mainly American books." After a short stunned silence, Robbins said rather wearily, "I know, Higgins. That's why I named only American economists." How I got from that nadir to being admitted to LSE I have never quite understood. Perhaps it was because, when Robbins asked what I would do if refused admission, I said I would try to get into Chicago. Robbins threw up his hands in horror at that idea. At any rate, he not only admitted me but undertook to be my supervisor. And so, by accident, I became an economist. LONDON SCHOOL OF ECONOMICS

The London School of Economics in those years was at the height of its glory, arguably the leading centre for economics in the world. Long-established members of the department included R.H. Tawney and the husband-and-wife team Power and Postan in Economic History; Hugh Dalton and Frederic Benham in Public Finance; T.E.

6 All the Difference

Gregory in Money and Banking; Bowley in Statistics. Younger members, apart from Robbins, were R.G.D. Allen and J.R. Hicks, then involved in their "reconstruction of the theory of value"; Nicholas Kaldor, who was refining production theory; Abba Lerner, already interested in savings, investment, interest and the business cycle; and E.F.M. Durbin. Friedrich von Hayek was the focal point of interest among the graduate students at the time. He was then elaborating his Prices and Production, and his lectures were crowded, although most of us understood about two words in ten. Paul RosensteinRodan came over from University College for the weekly Robbins seminar, which was the core of the intellectual life of the economics department, and to which nearly all the staff, as well as all of the graduate students, came. (The other centre of activity in the School was Harold Laski's seminar, which frequently met in Laski's home, and to which the political science students flocked. I went once or twice, mainly because the girls were attractive, but found Laski fuzzy and pompous compared with the economists. The ideological rift between the economics and the political science branches of the School was very wide and there was little contact between them.) I also followed "Rosie's" lectures on history of economic thought at University College (he seldom got beyond Ricardo) and attended a rather distinguished seminar which he organized for me and two other students: Hugh Gaitskell, who became Chancellor of the Exchequer and Leader of the Labour Party; and Harold Barger, who became Professor of Money and Banking at Colombia University, and for whom a Barger Memorial Fellowship was set up when he died. I recall the seminar as being devoted mainly to the frightening prospect that there could be bumps on indifference curves, leading to multiple equilibria and indeterminacy. I elected to write my thesis on the relationship between psychology and economics, which took me deep into methodology, history of thought, and theory of value — which is not a bad way for a budding economist to begin. Robbins was extraordinarily generous with his time, and listened as well as talked. We spent long hours arguing over fine points of methodology. The graduate students spent even longer hours arguing among themselves. The School's reputation was such that it drew students from all over the world, and among them were many who were to become famous later on. We would take the afternoon's seminar debate with us to one inexpensive Soho restaurant or another, and continue it to the small hours of the morning. I learned very fast, and with all the riches of London at the time, I learned a good deal more than economics.

7 How I Became a Development Economist

Robbins was a master at getting the most out of a seminar, and surrounded by stars as he was, his "most" was a source of continual excitement. He had a remarkable talent for synthesis. He would listen to the discussion raging around him, slumping deeper and deeper into his chair, his long legs stretched out further and further in front of him, his long hair falling further and further over his face. Then suddenly he would sit up straight, toss his mane back from his face, and in a few trenchant sentences summarize the essence of the discussion and state his views on the truths to be derived from it. Robbins suffered from occasional migraine headaches, and found that badminton, which he played very well, was a good cure for them. The School had a badminton court in the basement, and when Robbins felt a migraine coming on he would come and dig me out of my cubicle, and down we would go to play fast and furious badminton for an hour or so. Lord Beveridge, the Director of the School, who was then in his early fifties, also played excellent badminton, but when he did Lucy Mair, his secretary and later his wife, would come down to the court with him and caution after each prolonged exchange, "Now William, remember your heart!" He never did. Robbins and Beveridge never played together; there was no love lost between them, as Robbin's autobiography makes very clear. So high were the standards at LSE at the time that each lecture course was a book or series of articles in the making. The prevailing idea was that unless one had some new and important things to say one should not be lecturing at all. One story illustrates this attitude. One year John R. Hicks told Robbins he had some ideas about the theory of foreign exchanges and asked if he might give a course on the subject. Hicks was very popular with the graduate students, and the first lecture in the new series was crowded. His introduction was brilliant, and the second lecture was more crowded still. Hicks came in, wearing his academic gown as usual, and carrying a pile of books and manuscripts. He started immediately writing equations on the board. Suddenly he stepped back, looked at the equations, clapped his hand to his forehead, then gathered up his books and papers, and fled from the room, his gown flying out behind him. He had discovered a mistake in his equations, which meant that he had no new theory after all. Such being the case there was no excuse for continuing. The course was over after one introductory lecture. One of the incidental effects of my LSE training, and of what seemed to me the contrast between the rigorous science of the rightwing economists and the sentimental but fuzzy approach of the leftwing political scientists, was to wean me away from my own vague

8 All the Difference

and wishy-washy socialism and to make me, for a time, an ardent marketeer. I got my M.Sc.(Econ) is the spring of 1935. My examiners for the final oral were Robbins and Rosenstein-Rodan. During the exam they got into a long debate with each other on utility theory. They enjoyed their debate and consequently congratulated me on a "splendid exam". During 1935 I also published my first two articles in professional journals, the first before I even had my master's degree. One was a summary of my thesis, on the relationship of psychology to economics. The other was a centenary estimate of W.S. Jevons's contribution to the theory of value. That I started publishing so early in my career was not a mark of any particular brilliance of my own, but rather a sign of the yeasty state of economics at the time, which afforded opportunities even for beginners to have their say in the learned journals. During my first year at London I shared a house, in the then essentially working-class district of Pimlico, near Victoria station, with two other Western graduates and a fourth Canadian. The owner, a motherly soul, kept the house clean and cooked for us. We went to the theatre, concerts, the opera, art galleries, and generally enjoyed London. During the first few months I met several girls I liked, but did not settle on any one of them. Then, towards the end of my first year, I met two people who were to play a significant role in my life. One was Elizabeth Peel, of the famous Sir Robert Peel family, who had been to Rodean (of course) and was studying political science at LSE, and who had become suitably left wing. The other was Heinrich Heuser (who had become Henry and whom we all called Heini), who had gone to Ridley (of course), then done a BA and MA at McGill and was doing a Ph.D. at LSE. I liked Heini and loved Elizabeth. Heini and I went home to Canada for the long vacation, on the same small freighter. We decided to come back to England together on a Cunard liner, and to share a small flat in Bloomsbury for our second year at LSE. Heini met and fell in love with Elizabeth's younger sister Joan. In the spring vacation of our second year Liz and I went to Spain. Joan and Heini went to Germany, but the story to the Honorable Mrs. Home Peel was that we were all going to Spain, so the two girls could chaperone each other. Upon our return to London their mother (their father had died years ago) invited us to dinner. We were very nervous, and Liz and I briefed Joan and Heini about Spain. But Mrs Peel was a superb diplomat. When we were seated at table, she said, "Now, tell me all about Spain. It must

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How I Became a Development Economist

have been marvellous. By the way, did you hear the Vienna Philharmonic last night? Didn't you find the brass a bit rough?" That was the end of talk about Spain. After I graduated from LSE I tried to persuade Liz to come back to Canada with me, but she had other plans and ideas. SASKATCHEWAN

Despite having my degree and publishing two articles, I spent the summer of 1935 at home wrapped in gloom. I missed Elizabeth, and I could not get a job. I felt my six years of studying economics had been a waste of time. And then out of the blue and just before the academic year began, I was offered an instructorship at the University of Saskatchewan, and Elizabeth agreed to come over for a visit. Saskatoon in the fall of 1935 was hardly London, the University was hardly the London School of Economics. The great depression was still much in evidence on the prairies, and the dust bowl was at its worst. If the wind came from the south the dust would blot out the midday sun. But just because of the magnitude of the problems Saskatoon had a certain wartime gaiety. As with the Viennese during the Nazi occupation, the attitude was, "things are desperate but not serious". So I had a good time; while the environment was a strange one for Elizabeth, she enjoyed it too, and made good use of the University library. And while the department of economics did not have the galaxy of stars to be found at LSE, it had, in addition to a good solid Marshallian as chairman, three very bright economists: George Britnell, who wrote a classic work on The Wheat Economy; Claude Isbister, who went on the fame at Statistics Canada at Ottawa and had much to do with the design of Canada's national accounts; and, best of all, Mabel Timlin — "Timmie's as she was known to her host of friends - who hid a razor-sharp mind behind a rather matronly appearance and manner, and who wrote one of the very first and one of the very best books explaining and criticizing Keynes's General Theory. I can claim some modest credit for that. Bob Bryce, who later became Deputy Minister of Finance and was certainly one of Canada's most influential economists, was studying at Cambridge while I was in London. There was at that time a joint LondonCambridge seminar, which I occasionally attended. Keynes frequently turned up, but as a loyal disciple of Hayek I considered the emerging general theory as misguided at best and potentially dangerous. Bob Bryce had more sense, and took copious notes on

10 All the Difference

Keynes's lectures, which he had mimeographed. He gave me a copy, which I lent to Timmie, so when the General Theory appeared she was already acquainted with its main ideas. MINNESOTA

At this point came another of the accidents which have shaped my career. Elizabeth and I planned to spend Christmas of 1935 in London, Ontario, going by rail through Minneapolis and Chicago. I had been in correspondence with Arthur Marget, concerning some fine points in his series of articles in the Journal of Political Economy on "the velocity of circulation of goods". I wrote saying that I would be coming through Minneapolis, and Marget invited me to call on him at the University. To my delighted surprise Marget not only spent a good deal of time with me, but took me around from office to office introducing me to other members of the department. At the end of the afternoon we visited the Dean of the School of Business, in which the economics department was. The Dean told me that Herbert Tout, an English economist known for articles written jointly with Alvin Hansen criticizing some points in Keynes's Treatise on Money, had been on leave in London and had decided to stay there, instead of coming back to Minnesota for the second semester as expected. The Dean then asked me if I could get away from Saskatchewan and take Tout's place; what I had thought were just pleasant conversations had been interviews, followed by clandestine comparison of notes among members of the department. I wired Saskatchewan and they gracefully released me. Elizabeth and I went to London, she drove with my parents to California for the winter (their normal practice) and I went to Minneapolis. The attraction of Minnesota was that it had then, as it has now, one of the best departments of economics in North America, and would therefore be a stimulating place to go on the Ph.D. Alvin Hansen already had a world-wide reputation for his work in business cycles. Marget's publications on monetary theory were well received, and the first volume of his two-volurne work (Theory of Prices and Theory of Output) was in press. Marget was still under forty, had studied classics at Harvard before going into economics, and combined brilliance with an elegant literary style. Frederic Carver was an outstanding theorist, with one of the sharpest analytical minds I ever encountered, but unfortunately published little. He was best known for the Principles text which he wrote jointly with Hansen, and which was the "Samuelson" (or the Marshall) of that era. His seminar was one of the most lively in all my experience, and I at-

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How I Became a Development Economist

tended it during each of the three years that I was at Minnesota. Eugen Altschul, a German refugee, brought us German business cycle theory and, from time to time, other German business cycle theorists who had also come to the United States, such as the distinguished Emil Lederer. A big bonus was ex-Australian and exCanadian Herbert Heaton, one of the best economic historians of his time. It was largely because of his presence that I decided to make economic history my minor field. Minnesota had a good international reputation (as I learned from Lionel Robbins when I wrote to him asking if he thought I was right in doing a Ph.D. there) and attracted people from all over North America and Europe. We had for periods of varying length during my sojourn there Oskar Morgenstern, Gerhard Tintner, George Stigler, and Tord Palander of location theory fame. There was also a large group of first-class graduate students. Altogether I learned a good deal at Minnesota. The department had no official chairman, but the unofficial chairman was indisputably Garver. His idea of enhancing the prestige of the Minnesota Ph.D. was to make it the most difficult to get in the country. He prescribed a graduate credit requirement of 135 hours (comparend to 48 at Harvard), roughly equivalent to four years of full-time graduate work, apart from the dissertation. There were a good many compulsory courses as well. Having two solid years of graduate work behind me, I was able to meet the credit requirements in an additional two and one-half years while carrying a part-time teaching load, but it was very hard work. I soon realized that my LSE training, high quality though it was, had been rather narrow in scope. I had listened to some lectures on economic history at LSE, but had taken no examination in the field. At Minnesota I not only had to read a great deal of history but to spend many hours among dusty documents deep in the bowels of Minnesota's excellent library, and wrote a series of papers, many of which I subsequently published. I had taken courses on taxation theory with Dalton and Benham, but knew nothing of the legal, administrative and historical aspects of the field. I nearly failed my exam in statistics, but did at least get a glimmering of what quantitative method meant. I learned that there were other business cycle theories than Hayek's. I chose to write my dissertation on "Taxation Aspects of Fiscal Policy", making a sharp shift in focus from the subjects I worked on at LSE, and one that changed the whole course of my career. Arthur Marget was my supervisor, and left me very much on my own, except for his efforts to improve my literary style. Marget went into the Office of Strategic Services during the war, and changed from a very

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All the Difference

pure theorist to a man fascinated by policy. After the war he became Director of International Research in the Board of Governors of the Federal Reserve System in Washington. He published little economics after that, but he was an excellent musicologist, and built up an international reputation through his publications on Wagner and Liszt. I think I learned more about opera than about economics from Arthur Marget. The man who really fascinated me was Hansen, and I did as much work with him as possible. Hansen paid me the enormous compliment of discussing theory with me, as his graceful footnote reference to me in his JPE review of Keynes's General Theory shows. My relationship with Hansen combined with another accident that was to change the course of my career again. In the fall of 1937 Hansen was appointed the first Littauer Professor of Political Economy at Harvard. A year later he brought me to Harvard as a Littauer Fellow and as his research assistant, and installed me in the office next to his in the newly built Littauer Center. For the next three years I saw him almost daily, and no one has influenced my thinking as much as he. When I set off for Harvard, I did not go alone. In the spring of 1936 Elizabeth decided to return to England via China, rather than joining me in Minneapolis. While I was sulking about that, I met a vivacious Minnesota-Norwegian girl, Agnes Quamme. After a whirlwind six weeks' courtship we were married, and our daughter Holly (Holway) was born the following year. HARVARD

Harvard during those three years - 1938 to 1941 - is almost indescribable. To begin with there were the cultural riches of Boston, almost comparable with London itself. Then there were the breathtakingly exciting activities of the "Cambridge Community", and especially of Harvard. I will mention only two examples, but they are typical enough. Stravinsky was Musician in Residence in one of those years, and conducted a series of concerts on campus including some of his most erudite works (Concerto for Two Pianos and Thirteen Percussion Instruments, for example). I attended them all: Stravinsky's conducting style really wrote out the music for me, and I became a Stravinsky addict for the first time. In another year the philosophy department invited Bertrand Russell, Tarski and Carnap, all at once, so that they could talk to each other, and to some seminars, about linguistics. As a tutor in economics at Winthrop House I shared a suite of rooms with a member of the philosophy department. One day he came to me and said that the three famous men wanted a

13 How I Became a Development Economist

quiet place where they could talk to each other without a larger audience. Would I mind if they used our suite? If I agreed, I could attend the sessions. What an incredible privilege for an unknown young economist! Of course much of the discussion was stratospherically above my head, but I basked in the light of sheer genius, and learned a bit more about methodology and philosophy of science. The department of economics itself was at that time arguably the best in the world, as LSE had been a few years before. Of course Cambridge, and especially King's College, was the fountainhead of the Keynesian Revolution; but the Harvard group were quick to take the new system and translate it into New Deal policies. Harvard also had greater breadth and depth than "the other Cambridge" in the field of economics as a whole. As for London, it seemed a bit passe, fighting a rearguard action against Keynes, whose policy conclusions were so diametrically opposed to those of Hayek and Robbins. Looking back at the Harvard scene forty-five years later, it seems clear to me that the greatest figure in the economics department was Joseph Schumpeter, and I have little doubt that historians of economic thought in another forty-five years will confirm this view. Of course Schumpeter was completely antipathetic to Keynes and the New Deal, regarding them as the death knell of capitalism as we had known it and which he so greatly admired. His reasons for this view were totally different from those of Hayek and Robbins; they did not relate to a supposed need to "shorten the period of investment" by liquidating excessively capital-intensive modes of production before a healthy recovery could begin. Schumpeter stressed instead the abrupt changing of the rules of the private enterprise game, and the creation of a climate inimical to entrepreneurship and innovation. However, the centre of excitement among graduate students and young faculty members, and even amongst most of the older ones, was the New Economics. So while Schumpeter was much liked and admired, and while nearly all graduate students attended his seminar, he attracted few graduate students to do their Ph.D. with him. I rather think that he would have liked me to work with him, and I sometimes wish that I had, but I was committed to Hansen. Some years later, at breakfast in the Hotel Windsor in Montreal (where Schumpeter had come to address the Association des Patrons, the Quebec employers' association, on how to stem the tide of socialism), he roundly scolded me for my conversion to the "nonsensical Hansen stagnation thesis", and predicted, almost sadly, that I would not be punished for it as I should have been. None of the other Harvard economists could match Schumpeter's performance in the classroom, the seminar room, on the public platform, or at the cocktail party; none had his combination of vir-

14 All the Difference

tuosity, unpredictability, wit, charm, "je m'en fouisme", and sheer brilliance. Gottfried von Haberler was also liked and admired and had his own dry, subtle wit; but to those who did not know him well he seemed very much the Austrian baron, a bit stiff and mannered. His lectures and policy recommendations were somewhat Austrian School, conservative, a little boring. Edward Chamberlin had played a major role in the history of thought with his Theory of Monopolistic Competition, but had not followed it with other works of equal importance. In any case the interest then was in macro-economics, not micro-theory. Chamberlin's dinner parties provided possibly the best cuisine and wines in Cambridge, and these were attributed to his French wife. Seymour Harris was respected and well liked, and he was quickly converted to the New Economics and applied it to United States policy; but he was not considered to be in the vanguard of the revolution in economic thought that was taking place. He embraced the Keynesian Revolution sooner than most but was regarded as a follower rather than a leader. John H. Williams was revered as a man of wisdom and as a person who played a major role in the formulation of monetary policy, through his position with the Federal Reserve Bank of New York and the Federal Reserve Board. Albert Payson Usher in history and Leonard Crum in statistics were recognized as leaders in their fields, and considered competent but a bit dull. Harold Hitchings Burbank, chairman of the department and professor of public finance, was perhaps the only member of the department who was positively disliked by the majority of graduate students. So far as we could see he had not written a line since completing his Ph.D. dissertation. He was ultra-conservative, antisemitic, pompous, and a New England snob. We were mystified as to how he became and remained chairman, a position from which he wielded considerable power. I should mention also the stars among the younger members of the department: John Kenneth Galbraith, and Alan and Paul Sweezy. In view of their later somewhat unorthodox development, it is worth mentioning that all of them were solid theorists in the neoclassical tradition, and made significant contributions both to the debate on theory of monopolistic and imperfect competition and to the debate on the New Economics. Arthur Smithies, a Hansen protege, was sporadically brilliant and gave good parties, but never quite fulfilled his early promise. We also had as visitors during my sojourn at Harvard, Fritz Machlup and Abba Lerner. The centre of intellectual excitement, however, was Alvin Hansen and the Hansen-Williams seminar on fiscal policy, to which everyone but Schumpeter flocked, year after year, out of sheer interest in the

15 How I Became a Development Economist

subject. Neither Hansen nor Williams talked a great deal in that seminar. Discussions were opened by graduate students, younger faculty members, and visitors from Washington and other universities in the United States or Europe (Gunnar Myrdal, for example). But Hansen provided the stimulus and the guidelines and brought together the threads of discussion, as Robbins had done at LSE; and Williams, with his calm, judicial, pipe-smoking manner and his practical experience, kept the discussion on the rails amidst the frequent outbursts of hysteria and the crossfire back and forth across the big seminar room table. Hansen stood a bit apart from the other Harvard economists. He had come to Minnesota as a Wisconsin Institutionalist, a student of John R. Commons, and his theory was largely self-taught. He retained throughout his career the virtues of Institutionalism: insistence on "the opaque fact" and a willingness to stray into disciplines other than pure economics. He disliked working at a level of abstraction so far from the real world that one could not move to workable policy recommendations in a few easy steps. He was a midwestern American, not a Viennese aristocrat. His relative simplicity and straightforwardness of manner, his essential decency and liberalism, his concern for the underdog, and above all, perhaps, his willingness to share the limelight with bright graduate students, all led to his being much revered and loved. I do not want to suggest that Hansen was a country bumpkin - far from it. He was a man of broad and deep culture, had a fine appreciation of music, and his house in Belmont (largely because of the good taste shown by his wife Mabel) was one of the most attractive in the whole Cambridge Community. After coming to Harvard he took up painting, and produced landscapes, particularly while in India, of extraordinary delicacy and sensitivity. But he remained a midwesterner, and basically an Institutionalist, throughout his long career. Schumpeter was, I think, a bit jealous of Hansen, as well as thinking that Hansen's original addition ot the Keynesian theory - the stagnation thesis - was misguided and dangerous. At one point he considered leaving Harvard for Yale, where at that time he would have been a very big frog in a (then) not very big pond. When the graduate students got wind of this appalling idea, we drafted a letter to "Joe", with about one hundred signatures, begging him not to leave us. He stayed at Harvard. With all the star talent on the faculty, what really made the atmosphere in Harvard at the time so exciting were the graduate students. Think of any leading American economist of the 19605 and he was probably at Harvard at that time: Samuelson, Solow,

16 All the Difference

Musgrave, Domar, Duesenberry, Tobin, Fellner, Reynolds, Metzler, Dunlop, Baran, Eckaus - the list is endless. There were also some who were to become famous elsewhere, like J.G. Crawford. Many of them were already publishing in the leading journals. My own publications at that time were a far cry from economic development (see bibliography). During the summer of 1940 I got my first taste of working at a policy-making level. John H. Williams invited Dick Musgrave and me to come to New York and work with him at the Reserve Bank. Dick and I shared a large and sumptuously furnished office next to that of Professor Williams. His office, as Vice-President, was about the same size as Adolf Hitler's, and had the same intimidating effect, as one walked the vast expanse separating the door from John H., seated at his desk and smoking his pipe at the other end. Our task was "the gold problem". (The United States had too much of it. Dick and I were privileged to go down to the bank's vaults and look at it under the floodlights: very pretty.) One of the things that came out of that summer was an article in the American Economic Review on 100 per cent money. I had another stroke of luck. My wife, daughter and I were then living in a lovely early eighteenth-century "saltbox" house in Topsfield, a rather feudal village with its surrounding countryside inhabited mainly by multimillionaires such as Leverett Saltonstall, the governor of Massachusetts, and the president of the United Fruit Company who had a polo field where the Prince of Wales played. One of our neighbours was Chief Geologist of Standard Oil of New Jersey and Professor of Geology at Harvard, Winthrop Haynes. He was spending most of that summer at his country home and offered me his penthouse in Manhattan. It covered the two top floors of a tall apartment house in the east seventies, and the top floor had terraces on all four sides, from which the views were magnificent. Henry Villard had been a fellow graduate student and instructor at Minnesota, and was then teaching at City College of New York. I remember walking a few blocks to see him at the still more palatial penthouse of his father, Oswald Garrison Villard, publisher of The Nation. TEACHING AT HARVARD

After my year as Littauer Fellow I was appointed instructor in economics, and assigned to Williams and Harris as "section man" in money and banking. I attended their lectures in both the undergraduate and the postgraduate courses, and became increasingly

17 How I Became a Development Economist

puzzled: there seemed to be little difference. I asked to see Williams and Harris together, and posed my problem. They smiled tolerantly, and Williams said, "You are right, Higgins. The two courses are essentially the same - except, of course, that the standards are considerably higher in the undergraduate course". Harvard had at the time about 4000 students in the undergraduate college and some 13,000 professional and graduate students. The undergraduate students were very carefully selected; many of them came from the country's top private schools. At the postgraduate level Harvard felt obliged to take students from universities all over the country, and reconciled itself to devoting the first year of graduate study to filling the gaps in their undergraduate training. The economics department was no exception. Among my undergraduate students were John and Robert Kennedy. They played good football, joined the best clubs, were popular and highly visible, and got "gentlemen's grades". Among my graduate students was David Kung, son of H.H. Kung, the Chinese Finance Minister in the Chiang Kai-shek regime, and himself director of an export-import bank. He came to see me occasionally in my Winthrop House suite to discuss the course. One day he brought a beautiful lacquered box filled with exquisite Chinese tea. Another time he brought a Chinese silk table cover and invited me to lunch, when we talked about China's financial problems. A couple of weeks later he brought me a beautiful silk hanging, which I still have, and invited me to dinner at a Chinese restaurant, where he ordered a magnificent meal. Then he explained the reason for all these attentions. The Chinese government, he said, felt the need for a top-level financial adviser, and he had come to Harvard to find one. He had decided that Joseph Schumpeter was the man they wanted. They could not approach him directly, because if he refused the Chinese government would lose face. Would I sound him out without telling him exactly what it was all about? If Schumpeter accepted, they would like me to come as his assistant. This was an enormously exciting prospect for a budding economist just twenty-eight years of age. I called Schumpeter and asked for an appointment, and he invited me to lunch at his large, gracious Cambridge house. With my subtle oriental diplomacy, when cocktails were finished and soup served, I asked, "Professor Schumpeter, would you like to go to China as financial adviser to the government?" Schumpeter did not turn a hair - he did not have many to turn. He said that the idea was intriguing, that he had enjoyed his period in Japan and would like to visit the East again, and that his wife, Elizabeth Boody, an economic historian who wrote about East Asia,

i8 All the Difference

would no doubt be much attracted by the idea. "But", he said, "you must explain to your friend Kung that such advisers are very expensive." I conveyed this reaction to Kung. He quoted an astronomical salary payable in gold, living and entertainment expenses, a large house with servants, and a car with chauffeur. I reported this news to Schumpeter, and the stage was thus set for him and Kung to meet face to face. It was arranged that Schumpeter and I would go to China some time in 1941. Schumpeter, however, became increasingly concerned about the spread of the war and delayed our departure. Then on 7 December 1941 came Pearl Harbor. By sheer accident I was at Harvard for a seminar next day and standing with Schumpeter in the entrance hall of the Littauer Center when someone - I rather think John Dunlop - came with the news of the us declaration of war on Japan. Schumpeter's reaction was characteristic. He threw up his hands in a despairing gesture and exclaimed, "Oh! What now will become of that beautiful, fragile, civilization?" With the United States entering the war and the war moving to the Pacific, our joint venture in China was definitely off. WASHINGTON

In the fall of 1940 my thesis was finally finished and I had to decide whether to present it to Harvard or Minnesota. I chose Minnesota for two main reasons: the Minnesota degree was much harder to get; and, somewhat to my surprise, I found as I began my first round of interviews for post-Ph.D. employment that the Minnesota degree carried greater bargaining power. Harvard Ph.Ds. were not exactly a dime a dozen, but there were an awful lot of them, especially in the eastern part of the country. I would have a Harvard degree anyway. It was the practice to confer on any Littauer Fellow who successfully completed four graduate courses a Master of Public Administration (which most of them certainly were not, including myself). All four of my courses were in economics. With Canada at war and the United States likely to be so, with my Ph.D. in my pocket and our China project uncertain, I wanted a job somehow related to the war effort. I had received a number of offers from government agencies in Washington. However, I felt that I would rather serve in my own country if I could obtain there a job as useful and as interesting as those available in Washington. I wrote to a few friends in Ottawa, and received an invitation from the recently established Bank of Canada to come for interviews. These kept me in Ottawa for the better part of a week, talking to everyone

ig

How I Became a Development Economist

from Governor Graham Towers down. I remember in particular Alex Skelton, a colourful and astute economist who achieved prominence as the brains behind the famous Report of the Rowell-Sirois Commission on federal-provincial financial relations. Late on Friday afternoon, J.R. ("Bob") Beattie, already a leading economist in the bank and my guide and mentor during my visit, told me that the bank would like me to join its staff, and asked if I had ideas as to salary. I told him of my Washington offers and said that the equivalent in Canadian dollars would be quite satisfactory. His eyes widened in consternation and he hurriedly left the room. He came back a few minutes later and said that the Governor would like to see me. Towers looked very sombre when I entered his vast office. He assured me that if I joined the bank I would find it interesting and rewarding, both for the duration and afterwards; but added that the post carried a maximum salary, which turned out to be below what I had received as an instructor at Harvard and about half of my Washington offers. Apart from the difficulty of supporting wife and child on so meagre a salary in a capital city in wartime, I felt (good neoclassical economist that I was) that the discrepancy was a measure of the difference in usefulness and importance of the work that I would do, and with considerable uncertainty and disappointment, declined the Bank of Canada offer and decided to go to Washington. I chose the United States Housing Administration: I have never been quite sure why, but it was an important turning point in my career, and while I did not know it at the time, one that led me towards development economics, since it got me into planning. The USHA was a New Deal agency, more open and flexible, and more in line with Keynesian thinking, than such old line agencies as the Treasury, the Bureau of the Budget, Commerce, or the Board of Governors of the Federal Reserve System. The post that was offered me - Special Assistant to the Administrator — appealed because it placed me much closer to the decision-making process than I could hope to be in such vast, sprawling old line agencies. I liked the Administrator, Nathan Straus, of the R.H. Macy Strauses, who had built a low-rental housing project on his own in lower Manhattan, had made a large contribution to Roosevelt's campaign fund, and whose sons I had met as students at Harvard. I liked the Deputy Administrator, Leon Keyserling, who was to become the first Chairman of the Council of Economic Advisors. I liked the Chief Economist, Warren Vinton, an agile operator in the bill and bond markets on behalf of USHA. And I enjoyed working with such distinguished "housers" and architects as Catherine Bauer and Langdon Post.

20 All the Difference

My job was mainly postwar planning, working with Leon Keyserling, who became a close friend. (We played tennis together, and while Leon was a few years older than I, he nearly always beat me.) Postwar planning in 1941 meant preparing for the gigantic postwar depression that everyone confidently expected. It was a job that brought me into touch with physical planning and planners for the first time, as well as economic forecasting. I began to realize how big were the gaps in my training for such a job, and to read about housing, urban and regional planning, economic forecasting models, and the like. The job also brought me into contact with government decision making, not only at the federal level but at state and local levels as well. I had been at USHA only a few months when the Federal Works Agency, through Jacob Baker, who had played a major role in New Deal public works programs, invited me to join FWA as Principal Economist and Economic Consultant to the Public Work Reserve. The PWR was accumulating a "shelf of public works projects at federal, state and local levels to throw into the breach and prevent mass unemployment when the war was over. The federal government was offering assistance, both for the planning and preparation of projects and for their postwar execution, to state and local governments which agreed to postpone projects for the duration and put them into the reserve. The FWA job was very enticing for me. Not only did it involve promotion to a higher civil service grade, but it meant that I would be engaged in public works planning on a national scale, instead of being confined to housing. Nathan Straus was very reluctant to let me go, and under wartime regulations I could not simply quit. Eventually Leon Keyserling persuaded Straus to release me. One of the most interesting aspects of my new job was visiting the state and the larger municipal governments to persuade them to participate in the reserve. Meetings were held in each state capital to muster public support for the program. Despite my youth and inexperience, and somewhat to my own surprise, as well as to that of the case-hardened engineers and architects who were my colleagues and superiors, I proved to be an effective speaker to large mixed audiences. At any rate, the FWA/PWR experience provided an excellent training in public works planning, and in intergovernmental relations within a federation. I wrote up the experience in an article in the International Labour Review and in a chapter of Seymour Harris's symposium, The New Economics. Then one day early in 1942 Congress killed the Work Progress Administration, the Public Works Administration, and PWR at one sitting, as a wartime economy measure and as a response to a wave

21 How I Became a Development Economist

of anti-New Deal sentiment. I could have stayed on in FWA, but with no real job to do. Instead I moved over to the War Production Board as Chief of the Housing unit in the Division of Civilian Supply. My immediate superior was Ascher Achinstein, of Columbia University, a Mitchell-style Institutionalist who later wrote an excellent textbook on business cycles. One of my most stimulating and colourful colleagues was A.R. Burns, also from Colombia. We called him Arthur "Decline of Competition" Burns to distinguish him from Arthur "WPA" Burns and Arthur "National Bureau" Burns. Down the hall in the same vast building was John Kenneth Galbraith as head of the Office of Price Administration. We had many joint meetings with him. (I recall one meeting where the problem was how to fix prices for new products, for which there was no prewar price base to start from. One of our bright engineers had the obvious solution: forbid all new products for the duration. It remained for the economists present to show why that might not be such a good idea.) My job in WPB was still planning, but planning for very different objectives and with very different tools from planning in FWA or USHA. Planning was done in terms of strategic materials, with a view to maximizing the war effort. Relatively new techniques such as operations research and systems analysis made rapid strides during the war. My task was essentially to make sure that not a single house was built that was not needed for the war effort, and that not one pound of strategic materials was used unnecessarily. The system was that each claimant agency — Army, Navy, Air Force and Civilian Supply — made its claims on strategic materials for the next quarter before the War Production Board (of which Bill Batt, a tough and successful industrialist, was chairman) and tried to justify them. In retrospect I think the WPB did a good job. Given the objective, I have no doubt that it improved resource allocation. At the time, most of us frequently wondered if we were doing the right thing. Few of us had training or experience that was directly relevant. But the aggregation of professional skills in WPB worked well, partly, of course, because we were all agreed on a clearly defined major objective which had the support of the general public. I fully expected to stay with the WPB for the duration of the war. But then came another of those totally unforeseen events that have shaped my career. In the early summer of 1942 I received a letter from Cyril James, Vice-Chancellor of McGill University, saying that I was on the short list for the newly created Bronfman Professorship of Economics, and inviting me to Montreal for interviews. I had visited McGill with the University of Western Ontario football team, and, as my parents had met at McGill, the University was certainly not unknown to me. I liked what I saw at McGill and in Montreal,

22 All the Difference and told James that if I were elected to the chair he need send only a one-word telegram, "Yes". The "yes" telegram came a few days later. And so, having not yet turned thirty, I was appointed to an endowed professorship at what was then considered Canada's best university. MCGILL

It was of course a great honour for me to be appointed to the Bronfman Chair, even if I recognized full well that McGill's choosing me was in large measure a reflection of the wartime scarcity of economists. It also meant that I was set for life; the post was one which I could quite reasonably hold with pride at the end of my career. Yet my feelings were not entirely unmixed. There are disadvantages in climbing to the top of the ladder at so tender an age. What does one do for encores? Also, of course, I asked myself many times if I were justified in leaving WPB while the war was still on, even for a job carrying such prestige. However, the Canadian government of William Lyon Mackenzie King had the prescience to attach high priority to continuation of university training and research during the war, and I felt sure that from a McGill base I would find other ways to serve the government as well. In fact, soon after my arrival in Montreal in September 1942, because of my Washington experience, I was appointed to the Subcommittee on Housing and Community Planning of the federal government's Committee on Postwar Reconstruction. I was called in for consultation by other Ottawa agencies as well. In addition, Cyril James arranged for me to join the Financial Research Program of Columbia University's National Bureau of Economic Research. The Program was directed by Ralph Young, a very able Wesley-Mitchell-style Institutionalist economist, who later became director of the domestic research section of the Board of Governors of the Federal Reserve System, and had a major influence on policy of "the Fed". I learned a good deal about how to do solid empirical work from Ralph and his NBER colleagues. The Program was then housed in a large mansion overlooking the Hudson River at Riverdale, with immaculate lawns sloping down to the river and an excellent tennis court. I stayed in the house when I went down to New York for consultations, and very elegant it was, with first class cuisine and a well stocked bar. I wrote two small books for NBER, Canada's Financial System in War, and Lombard Street in War and Reconstruction. An unexpected bonus at McGill was that the International Labour

23 How I Became a Development Economist

Office, fearing a German invasion of Geneva, had moved to Montreal for the duration, and had been given office space in a number of old houses and an adjacent college on the McGill campus. Most members of the ILO staff joined the McGill Faculty Club, and the ILO added a great deal both to the intellectual life and to the social life of Montreal. Towards the end of the war I joined their staff, working one year half time at ILO and full time at McGill, and another year full time at ILO and half time at McGill. I shared an office with Michael Kalecki, a great economist of small physical stature and an enormous voice. Our office had been the downstairs bathroom of the mansion we occupied, and all the walls and the floor were of tile. Kalecki used to expound his ideas while pacing the floor, and his voice would become louder and louder, until the decibels bouncing off the walls made it seem that I was inside a boiler while it was being riveted. I developed a capacity for withdrawing into myself and simply shutting out the hideous din. Kalecki discovered my trick, and would suddenly stop before my desk and drop his voice to a whisper: "Listen, Higgins". That brought me back to the world, and the crescendo would begin again. But Kalecki listened as well as shouting. He never seemed to listen during our arguments, but often he would come into the office in the morning and say, "Higgins, I've been thinking of what you said yesterday, and I have decided that you are right". Whether or not McGill was still Canada's best university during those war years, the faculty and students certainly conducted themselves as though it were. There was the same quiet air of assured excellence that I had found at LSE and Harvard, and found later at MIT and Berkeley. My department was still jointly economics and political science, and it was a very competent and productive one. The other two Bronfman chairs, in political economy and political science, were held by Burton Keirstead and Fred Watkins. Both were a bit older than I was, but still very young for the posts they held. Keirstead later abandoned McGill for Toronto, where his combination of Alfred Marshall and Frank Knight theory made him a misfit. (Only Innis-Easterbrook economic history and Chicago-style mathematical economics were respected.) Burton retired early and died relatively young. Watkins went to Yale, became chairman of the department of political science, and also died young. Other stars in the department were Donald Marsh, author of a widely used textbook on international trade, who later became a vice-president of the Royal Bank of Canada, and Eugene Forsey, who became a leading figure in industrial relations and a Senator. The centre of intellectual and social life of the University was the

24 All the Difference Faculty Club, located in a rather grand old mansion just across McTavish Street from the Redpath Library. I had lunch there several times a week. There was a special circle of armchairs in front of the enormous fireplace in the main drawing room, and a self-selected group of people who occupied them, rather like a German stammtisch. In addition to the more sparkling members of my own department, the group included Frank Scott, Max Cohen and John Humphrey in law; Donald Clark in music; Duthy in English; David Thompson in biology. These were among the most distinguished people in their fields in Canada; but what really distinguished them was their ability to conduct conversation in an Oxford Debating Society manner, making telling points on serious subjects in an engaging, witty and amusing manner, so that discussion was interspersed with bursts of laughter. I have never had better conversations anywhere than at the McGill Faculty Club. A frequent visitor to our circle was Pierre Trudeau, later a colleague of mine at the University of Montreal and later still Minister of Justice and Prime Minister. Pierre was fond of the McGill Faculty Club, and still is; and he had the Oxford Debating Society manner to perfection, with some Gallic grace notes added. My association with the ILO was to prove more fateful than I realized at the time. The major product of my work for the Office was my book on Public Investment and Full Employment. This book was very Keynesian in tone, but involved an elaboration and refinement of technical aspects of public works planning that I had worked on in Washington. Together with the work I did with John Firestone in Ottawa shortly after the war, in the Department of Reconstruction and in the Central Mortgage and Housing Corporation, the ILO book drew me deeper into planning theory and practice. But it did something more subtle as well. It was published when the explosion of interest in and concern for the less developed countries was just starting. I felt obliged to include in the book a chapter on what I then called "capital-scarcity countries", in contradistinction to the "over savings countries". Much of my theoretical work at the time was devoted to elaboration and refinement of Hansen's stagnation thesis. In putting together the chapter on capital-scarcity countries, I became increasingly plagued by an irritating puzzle: how can excess-savings countries and capital-scarcity countries both be stagnant? I began to feel that I would have to pay more attention to underdeveloped countries to find an answer. Serious work on this puzzle, however, was delayed by another accident. At the ILO was a brilliant Australian economist, Richard Downing, on leave from Melbourne University. As he was about to

25 How I Became a Development Economist return to Australia early in 1948, he urged me to apply for the recently vacated Ritchie Chair of Economic Research. Fond as I was of McGill, I was at that time in a mood to get away from Montreal for a while. To my considerable surprise I was appointed to the Ritchie Chair, perhaps Australia's most distinguished chair in economics at the time. McGill generously granted me two years' leave to find out whether or not I wanted to stay in Australia. Australian economics in the late 19405 are well covered by Heinz Arndt in A Course Through Life, and I shall not repeat his story here. Suffice it to say that many of the great figures were still around Colin Clark, Sir Douglas Copland, Sir Leslie Melville, "Nugget" Coombs, Sir John Crawford, L.F. Giblin - and there was at Melbourne a group of brilliant students who later became famous: Peter Karmel, Murray Kemp, Helen Hughes, Donald Cochrane. I enjoyed my association with all of them. A number of important things happened to me during my twoyear tenure of the Ritchie Chair. First, it was a very productive period for me. Alan Ritchie, son of the Ritchie who endowed the Chair, and who became a close friend, proposed that I devote my inaugural lecture to the question, "What do economists know?" I decided to tack on to my inaugural five more lectures to make a series of six. These became my book, What do Economists Know? It took me back to my first loves, scope and method and history of thought, and I learned some more about history and philosophy of science in writing it. I also wrote a review article on Harrod's book on the trade cycle, which Harrod liked, and when I sent him my article on "The theory of increasing unemployment" he accepted it for The Economic Journal. (The article was yet another elaboration of the stagnation thesis.) I visited Canberra, was horrified by its vast empty spaces, commensurately long commuting times, and lack of human qualities, and wrote an article on "Canberra: a garden without a city" which was published in a Canadian planning journal and reprinted in an American planning journal. I wrote an article pompously entitled "Towards a science of community planning" which was published in that holy-of-holies, the Journal of the American Institute of Planners. I went back again to scope and method in an article written for the Australian Journal of Philosophy on "Economics and Ethics". One fascinating experience was to appear before the Commonwealth Arbitration Court in the basic wage case of 1949, on behalf of the Australian Council of Trade Unions. In Australia nearly all wages and salaries consits of a basic wage determined by the Commonwealth Arbitration Court (now Commonwealth Arbitration

26 All the Difference Commission) and margins for skill for particular occupations determined by State Arbitration commissions. Basic wage decisions thus affect the entire Australian wage and salary structure. The case was a peculiar one in that, in contrast to the 1931 and 1937 basic wage cases, the government presented no expert witnesses and the court called none. I received a visit in my office from the head of the ACTU. After chatting with me for a while to determine my views, he asked me to write a brief and appear for the unions. I went to see Sir John Medley, the Vice-Chancellor, to ascertain how the University would feel about a professor appearing on one side of a basic wage case. Sir John said it would be most improper. "Of course," he added, "if you were subpoenaed, you would have no choice but to appear." I got the message, and that is how it was arranged. I was quite unprepared for the court atmosphere, with the judges and the battery of lawyers for the employers all in wigs and gowns. I had expected something like a seminar; instead I was on trial. I was on the stand for three days, I had a sore throat, and as a witness I stood continuously, while the employers' lawyers took turns crossexamining me and sitting down. I must say that the Bench, recognizing my naivete, took pity on me and treated me kindly. My essential argument was that, given the Australian and world economic situation, a ten shilling increase in the basic weekly wage would not cause unemployment or inflation. The court finally awarded a one pound increase, which I would then have opposed as inflationary if asked. This experience led to my article "Wage fixing by compulsory arbitration" in Social Research. But it had a greater impact than that. Like many before me, I came to Australia expecting to find the Workers' Paradise; an advanced, social democratic, welfare state, a model for other societies wishing to avoid the defects of both socialism and capitalism. But the Australia I found in those early postwar years was far from affluent (few faculty members could afford a car, for example); it was stagnant, technologically retarded, and it lacked entrepreneurship. The kind of management that Australia's managed economy was getting, wage determination included, dit not seem to be the answer to any of these problems. I found myself wishing that I had paid more attention to Schumpeter while I had the chance. Capitalism in a strait jacket just did not seem to work. Another interesting experience was, together with Dick Downing, assisting the Liberal Party in the preparation of an economic platform for the 1949 elections. We worked with Sir Richard (later Lord) Casey, whom I had met through Alan Ritchie, whose close friend he was. Sir John Medley was abroad, and had lent his country house

27

How I Became a Development Economist

in Berwick to Dick Downing. The Casey country residence was nearby; sometimes Casey came to us, sometimes we went to him. Both Sir Richard and his wife Mae were people of enormous charm, and it was a delight to be with them. His friend Alan Ritchie had studied economics at King's College, Cambridge, and had one of the sharpest minds I ever encountered (and kept abreast of economic thought with one of the best private libraries in economics I have ever seen, in his country house at Blackwood. He contributed a good deal to our discussions). Dick Downing's idea, and mine, was that the Labor Party under Chifley was bogged down, too much concerned with dividing the pie and too little with making it grow. In any case, Casey and his colleagues in the Liberal Party applied their economics well enough to stay in power for over two decades. It was my first experience of trying to design an entire economic program for a political party, and a very sobering experience it was. I would have been happy to remain in Australia, but it was impossible. Professorial salaries at the time were not high, and the Australian government taxed me as a single man, because my wife and three children were not resident in Australia. I could not support a family in Canada, and myself in Australia, while paying half my income in taxes. So at the end of 1949, with much reluctance, I returned to McGill. Once back in Canada I found myself once again bothered by the problem of stagnation in "capital-scarcity countries", and decided that I should spend some time in underdeveloped countries. The Director of the United Nations Technical Assistance Administration (TAA, as it was then called) was Hugh Keenleyside, a distinguished Canadian economic historian. I wrote to him indicating my availability for an overseas mission. Frank Scott had been appointed Resident Representative to Burma, and it was decided that I should join him at the end of the 1950/51 academic year as his economic adviser. But Frank contracted amoebic dysentery soon after his arrival in Burma, and had to come home. The UN felt that his successor should choose his own economic adviser. Meanwhile the Chief Economist of the UN Commission in Libya had suddenly resigned. There was I with my bags practically packed. It was decided to send me to Libya instead of Burma. And so, by a series of accidents, I became a development economist, just as I became an economist by accident in the first place. I had evolved from a micro-theorist with an interest in methodology, history of thought and theory of value, into a macro-theorist interested in monetary and fiscal policy, without completely dropping my earlier interests; and then, at the age of thirty-nine, I decided to

28 All the Difference

study the problems of underdeveloped countries, less because of any concern for them than because I felt that learning about them might help me to understand the problem of "economic maturity", or stagnation in advanced countries, as the other side of the coin. In broad outline my story is fairly typical of the first generation of "development economists". None of us was trained to be a "development economist", and few of us had any experience with developing countries when we first started thinking and writing about economic development, or even when we first gave advice on policy and planning for such countries. The status, or even the expression "development economist", did not exist until after World War II. I never took a course in economic development in my life. There were no such courses to take until the 19508. Schumpeter of course was concerned with economic development, but he called his course and his seminar "business cycles"; for him the two were the same. Hansen's stagnation thesis was a kind of theory of development, but applied to industrialized economies. There were scarcely any books on the subject. As late as 1953, the only book in the McGill library written by a professional economist who had some experience in developing countries was Jan Boeke's Economics and Economic Policy of Dual Societies. When I set out for Libya I had not even read that. So when I arrived in Libya as Chief Economist of the United Nations Commission, I was very wet behind the ears so far as development was concerned. In addition to shared ignorance, was there a shared ideology, a common conception of development, a special motivation that characterized the economists from Europe, North America, and Australasia who became "development planners" in the early 19508 and set them apart from their colleagues? Apart perhaps from a common curiosity and a vaguely defined wish to be helpful to less fortunate human beings, I think the answer is "not". "Development planners", as a group, had much the same range of views on centralized planning versus the market, occupied much the same positions in the right-wing neoclassical to left-wing neo-Marxist spectrum, as would have been found in any large and respected department of economics in the universities of those same countries at the time. We did share a basic premise that for countries to be so poor and so stagnant somebody must be doing something wrong, but we were as prepared to find that the somebody was government authorities and politicians, and the something government failure, as to find that the somebody was wicked monopolists and exploitative landlords, and the something market failure. Over-regulation, mismanagement, and exploitation by colonial, neocolonial, or elite-dominated regimes

29 How I Became a Development Economist

were suspected culprits as well as lack of entrepreneurship and competition in the private sector. By and large, we had few preconceptions and little idea of what awaited us when we embarked on our first missions to developing countries.

2 Initiation Rites: Libya, !95!-52

Libya in 1951 was near the bottom of the UN list in terms of per capita income, a true "least developed country", as we would say today. It was a big country, with an area equal to that of the United States east of the Mississippi, but most of that area was sand. The narrow coastal strip where citrus fruits, olives, tobacco and vegetables could be grown, together with the high plain suitable for wheat and nomadic livestock cultivation, and the oases further south in the Sahara, supported a population of less than one and a half million people, most of them barely above, and in drought years substantially below, subsistence level. There were no known mineral deposits of any importance, the forests had long since been cut down, and the chief export was esparto grass, which was grown on the high plain and sent to England to make bank notes. But its 2400 kilometres of coastline confronting "the soft underbelly of Europe" (as Winston Churchill put it), its harbours, and the American airforce base at Wheelus Field near Tripoli, gave Libya strategic importance. Italy was concerned about the fate of the 50,000 colonists it had settled in the coastal strip after driving the Arabs out of it. Next-door neighbour Egypt and Moslem power Pakistan were interested in Libya too; so when the Allied Nations found themselves at war's end with the British Army occupying Tripolitania and Cyrenaica and the French Colonial Army occupying the Fezzan, they faced a difficult question: what shall we do with Libya? They arrived at a daring proposal: make it an independent parliamentary democracy under King Idris, leader of the Senussi Moslem sect, in 1952; and, mean-

31

Initiation Rites

while, mount a United Nations Commission to write a constitution and prepare a development plan. The UN Commission was a large one, about 150 people altogether, and on the whole a very competent one. The Commissioner was a distinguished Dutch international civil servant, Adrien Pelt. The First Secretary was an American, Tom Power, who later became Libya's first UN Resident Representative, and went on to a brilliant career with the United Nations. The chief constitutional lawyer was Loutfi Bey, who was Egypt's Permanent Delegate to the United Nations at the time of the Suez crisis in 1957. To supervise the work of the Commission, the United Nations established a Council for Libya, with representatives of the United States, the United Kingdom, France, Italy, Egypt and Pakistan. The FAO, the ILO, UNESCO, and WHO all had large missions in Libya, which included some extremely able people. The IMF had a small contingent, and there were a few other TAA "experts" besides myself. My role as Chief Economist was an anomalous one, somewhat like that of a UN Resident Representative. That is, my terms of reference required me to integrate the work of all these missions into a six-year development plan, but I had absolutely no line authority outside TAA. The ILO and UNESCO made my task easier by making me their Chiefs of Mission. WHO posed no problems, because it was headed by an extraordinary man, Dr Lindsay, who had studied economics before turning to medicine, and was very helpful. The problem lay with FAO, which was headed by an American with a degree in agricultural science, and who had, as Adrien Pelt put it, "the suspicious nature typical of the peasant". It was clear from the beginning that the plan would have to deal primarily with the agricultural sector, where 80 per cent of the population was, but months went by and I still got nothing out of FAO. Then one night, without advising anyone of his intentions, the FAO chief gathered up all his documents, papers, statistics, and project proposals and flew to Rome; he wanted to deliver nothing to me before delivering them to his superiors. I had no choice but to chase him. Once arrived at FAO headquarters I found the mission chiefs superiors completely cooperative, and from them I got the materials I needed to complete the plan. That story, however, while providing some sense of the atmosphere in which I worked, jumps forward a bit in time. Here was I, with little knowledge of development theory of any kind, and no experience in any country even remotely resembling Libya, required to integrate the work of a many-disciplined "team" of over fifty "experts" into a six-year development plan in about six months.

h

There were few usable statistics. There was no real government. There were just six Libyans in the whole country who had ever been to university, and they were all in the provisional "cabinet". Many of the sheiks who exercised power at the local level, and virtually all of the population, were illiterate. The state of public health was appalling, with a death rate of about 4.3 per cent. There seemed to be nothing to work with by way of either natural or human resources. Except for a few sharp Libyan traders and a few of the Italian farmers and merchants, there seemed to be nothing remotely resembling an entrepreneur. There was no monetary system except for the paper notes distributed by the British Army (the "MAL" - military administration lira) and no fiscal system. And I had no analytical framework for tackling this mess. What I had, of course, was a knowledge of monetary and fiscal policy, some experience in the planning of housing and public works, plus some experience with planned allocation of strategic resources, which it never occurred to me to apply in peacetime. I began by putting the things I had to work. I had as a colleague a very able London-Pole, Stanislas Kirkor. Together, and with the aid of the experienced financial adviser to the British military occupation forces, we designed a rather sophisticated monetary, financial, public works, and stabilization system. Libya was a country of violent fluctuations in income and employment, associated with the rainfall cycle. In drought years there was literally nothing for 80 per cent of the population to do, and no source of income. They would consequently converge on the cities in search of food and water. Libya was also a country which had suffered a great deal of war damage. Such infrastructure as existed - roads, harbours, power plants, housing, public buildings and which had escaped war damage was badly delapidated. The country was expected to remain poor for a very long time, and to be totally incapable of financing its own development. The British were prepared to meet the budget deficits of the central government and of the provinces of Tripolitania and Cyrenaica, and to make a substantial contribution to the proposed Libyan Public Development and Stabilization Agency (LPDSA). The French would meet the deficit of the Fezzan, and would also contribute to the development fund. Voting in the LPDSA was to be proportional to contributions to the fund. The United States, rather nobly, gave its development grants directly to the Libyan government so that they would have some voting power in their own development agency. Other contributors to the fund were Italy and France. The British were much concerned with monetary stability, and insisted

33 Initiation Rites

on i oo per cent reserves in foreign exchange behind the new Libyan currency. The United Nations team did not protest against this demand, because it was clear that independent Libya would have plenty of foreign exchange; the inflow of foreign exchange in budgetary support and development funds would be about half the national income. Putting all these things together, we devised a monetary system with 100 per cent reserves in foreign exchange behind the currency. There would be two financial institutions. The LPDSA would receive grants from foreign governments (and conceivably from multilateral agencies like the World Bank) and make grants for public development projects. The Libyan Finance Corporation (LFC) would receive subscriptions from foreign governments and make intermediate and long-term loans for profitable development projects, mainly in the private sector. In good rainfall years the LPDSA would purchase and stockpile barley, the staple food, and accumulate foreign exchange. In drought years the development program would be accelerated, thus releasing foreign exchange to the monetary system and providing income and employment. It would also sell barley from stocks, thus providing food and reducing the amount of currency in circulation, and releasing foreign exchange for further development spending. Altogether, the system would provide food, jobs, and income when needed, while at the same time accelerating development and maintaining stability. Meanwhile the British would subsidize (in foreign exchange) the Libyan, Tripolitanian and Cyrenaican budgets, and France would subsidize the deficit of the Fezzan. By the time Libya became independent, it was no longer really a "capital-scarcity" country; the real problem was one of absorptive capacity. PLANNING

While the economists of the team felt more at home with stabilization than with development, a plan had to be prepared nonetheless. When I arrived on the scene, the planning process had already been through two stages. The first phase lasted only a few weeks, when a small survey team assessed the required size and composition of the resource survey team. The resource survey had taken six months, and covered national income, finances and balance of payments as well as agricultural, mineral, water and human resources. The planning team that I was to lead was drawn up on the basis of this survey, and in effect included experts in each of the sectors thought to have some potential.

h We were starting from a very low base. Libya was not merely a poor country, it was one that had deteriorated. In Roman times Libya had been more fertile, more heavily forested, more populated than it was in 1951. The Sahara is largely man-made. The classical literature referred to Libya as "the grainbowl of Europe" and "the land of the fleeces". The Delphic oracle spoke of "Libya's pleasant acres". As every development theory from Adam Smith's to Alvin Hansen's indicates, it is harder to reverse a tendency towards decline than to launch development where it has not yet taken place. The economy was in deficit in every respect, as it had been under the Ottoman Empire, as well as under Italian rule and under British and French occupation. There were deficits in the balance of trade, all the budgets, the operation of the Tripoli power plant, the wheatgrowing experiment at Barce, the Italian tobacco-growing scheme, the railways, the harbours, the Tripoli gasworks. The entire economy consumed more than it produced, although most of the population continued to live at or below the subsistence level. Given this unpromising starting point the plan might have seemed a bit unimaginative and unambitious. It involved little by way of industrialization, no entirely new types of industry or transport, no new public utilities, and no large-scale investment project of any kind. The emphasis was on raising productivity in agriculture, and on education and training in general, rather than on structural change. The keynote was expressed in the plan document itself as follows: Libya has only one major untapped resource: the latent skills of its people. Raising the productivity of the Libyan economy must consist largely of improving the production methods used by the people in their present occupations. The emphasis in the plan is accordingly on teaching the Libyans to do better what they are already doing. Such industrialization as there was in the plan consisted mainly of carrying further the processing of domestic products - pressing olives and refining olive oil, freezing fish, canning fruits and vegetables, weaving, a dairy, etc. The Tripoli steam turbine power plant was taken over by the government, the original Italian company retaining a 30 per cent interest, and modernized with American aid. The entire plan was on this modest scale. The strong point of the plan was that it was project oriented, much more micro than macro. We were not much concerned with target rates of growth, incremental capital output ratios (ICORS), or the savings and foreign exchange gaps. Capital and foreign exchange

35 Initiation Rites

would be provided through the LPDSA and the LFC anyhow. Indeed the plan consisted essentially of budgets for these two agencies, translated into specific and highly detailed projects (square feet of classroom space in each school, for example). Projects were ranked "A", "B" and "C". The "A" projects were to be launched in the first year of the plan; the "B" projects were scheduled for the next five years, but might be brought forward in the event of a drought; the "C" projects were a reserve for later on, but some of the more flexible of them might be updated if drought and unemployment were particularly severe. The report also included a kind of long-range perspective plan divided into three phases. Phase i was the Six Year Plan, with emphasis on education and training, agricultural research, experiment and demonstration, and improved techniques. Phase 2 incorporated the second and third Six Year Plans, with a net shift from public development projects to the private sector, mechanization of handicrafts, further processing of domestic products, and reduction of deficits in the balance of trade, budgets, and of reliance on foreign grants. In Phase 3, comprising the fourth and subsequent Six Year Plans, independence from foreign grants and technical assistance was to be achieved, trade and budgets were to be balanced, and further industrialization and mechanization would take place. Libya was an excellent theatre for my initiation into economic development. In the first place, with so little in the way of human and known natural resources, the range of possibilities was narrow. Development was a matter of doing the best one could with what was there, and the analysis needed to discover what was that "best" was not very complicated, especially on the economic side. Second, it was apparent that (pre-oil) Libya was not a country that could be confidently left to develop on its own, on the basis of its own entrepreneurship, initiative, management, skills, professional expertise and resources. It had virtually none of these things. There were opportunities for raising productivity, output and incomes, but taking advantage of these required a variety of technical skills which Libyans did not yet have. Thus planning could not be merely a matter of setting growth targets, calculating incremental capital: output ratios (ICORS), measuring the foreign exchange and savings gaps, and similar macroeconomic exercises then dear to the hearts of economists like myself. Through the LPDSA and the promised foreign aid, the macroeconomic problems would be solved anyhow. The real problems were at the micro level, and solving them would require a massive technical assistance effort and a big push in education and training.

36 All the Difference

Because of the limited statistics, in order to decide what micro-projects to put into the plan, even the economists had to go and look at what was going on in the olive groves, the citrus orchards, the nomadic grazing areas, the experiments in wheat and tobacco, the high plains with their esparto grass, the oases with their French experiments with artesian wells in the Fezzan. In so doing I learned a great deal, not only about the Libyan economy, but about Libyan society - or societies — as well. In Libyan villages I saw with my own eyes what underdevelopment meant, and was glad that I had eyes to see, as I looked at the children who crowded around me, nearly all with at least one eye glazed with trachoma. Compared to other development planning exercises of the early 19508 the Libyan planning effort was unique in several respects: (i) The bold experiment of converting what would now be called a "least developed country" into an independent nation, covering a territory that had never constituted an independent nation before, under United Nations auspices, meant that more concern, time and effort were lavished on it by the UN and its specialized agencies than would normally be the case in a country with so small a population, and so little by way of known natural resources. (ii) The size and general competence of the development planning team were consequently at an unusually high level. (iii) There was also a significant input from the Council for Libya and from experts attached to the Council's member governments, who regarded Libya as a pilot project that must succeed. (iv) Because of this attitude of committed donors, it was clear that lack of human resources (and as it was then thought, natural resources) rather than scarcity of capital would be the major obstacle to development. (v) There was no Libyan government in power at the time that the plan was constructed, and while Libyan Working Groups were formed and consulted as well as the King and the provisional Cabinet, these had no real power to modify the plan as prepared by the experts on the team. In effect, there were no indigenous "Libyan politics" to worry about. Despite these special characteristics, the actual process of plan preparation was fairly typical of the period. Most of the time and energy of the team was devoted to trying to assemble information concerning the known natural and human resources of the new nation; since there were scarcely any of either, this task was easier

37 Initiation Rites

than it is in most countries. The emphasis of the economists was laid strongly on capital accumulation and consequent increases in output and income. Beyond that we conducted rather simple cost: benefit analyses of particular projects and strove for some kind of sectoral balance. We had few ideas for promoting development beyond repairing war damage and otherwise improving infrastructure, and education. The strategy for development was essentially "to teach the Libyans to do better what they are already doing". We saw little prospect for structural change. To the degree that the Six Year Plan as written can be regarded as a good one, it is because of the contributions of the technicians provided by FAO, ILO, UNESCO, WHO, TAA, etc. These did not stop at making recommendations for raising output and income, but set about implementing them. Our Scottish leather products expert found that the Libyans were damaging valuable hides by flaying incorrectly, and set about teaching them to do it right. Our wool expert soon learned why Libyan wool fetched the lowest price in the Rome market. Libya still raised some very fine wool, but the graziers were accustomed to shearing black, brown, white, high grade and low grade wool all together, straight on to the ground, and shipping it all bundled together with the sand and the burrs. By teaching them to sort, grade, scour and package properly we greatly increased the average price of Libyan wool. It was thought that Libyan waters were poor in fish. Our Greek fisheries expert found that only a few kilometres further out than Libyans liked to fish (they preferred to stay within sight of shore) there was a wealth of fish life normally found only at the mouths of great rivers. The explanation of this richness lay in the Ghibli, the desert wind which picked up mineralrich sand from the Sahara and dropped it in the Mediterranean, giving rise to a rich plankton life, and thus the whole cycle of small, middle sized and big fish. There are many such stories. If oil had not been discovered, Libya today might be regarded as an early and successful case of a ruralled, "Basic Needs Approach", development. The discovery of oil hid from view most of that sort of development, although it still took place. The rural development was still important, because the oil provided income but few jobs. The provision of rural employment with higher output and income was still a basic aspect of Libyan development. The Libyan Six Year Plan that we produced is probably best known for one paragraph, in which it was stated in bold black and white that there was no chance of discovering petroleum in Libya. Obviously, if we had foreseen the discovery of vast reserves of oil, which

38 All the Difference

came only a few years after the plan was prepared, the whole plan would have been different. One may wonder how such a drastic error in foresight could have been possible. The answer is, it was easy. I had on my team a famous Belgian mineralogist, Dr Andre Brichant, who was something of a hero in North Africa for his discovery of the Algerian coal seams. But Brichant had no equipment beyond a small hammer and chisel for gathering rock samples; no seismograph, no magnetometers, none of the sophisticated equipment of today's aerial surveys. He had to rely on surface observation and prevailing geological theory, and these were dead against the possibility of oil being found. The Libyans, incidentally, never believed us. They were sure there was oil under the desert. They were also sure that there was water under the Sahara. We kept hearing tales of fish being caught through fissures in the surface, of a kind known only in the Nile; there was a branch of the Nile, the Libyans said, flowing under the Sahara. We dismissed these tales as folklore. Of course the Libyans were right about that too. The multinationals, in their exploration for oil, found vast reserves of water as well. THREE TALES

Of the many anecdotes that might be told about the United Nations mission in Libya, I would like to tell three. The first is a good example of the unforeseeable hazards that arise in the course of advisory missions to developing countries. The other two combined tell a good deal about the nature of French colonialism. Obviously a newly independent nation would require a currency of its own. In any case no new MAL had been issued for a long time, and the notes in circulation were in tatters. It also seemed obvious that the new currency should bear the portrait of King Idris, and a picture of an olive tree, for centuries the symbol of fertility in Libya. We arranged for several photographs to be taken of Idris, from which he chose one to go on the notes. The notes were designed, engraved and printed by the makers of the Bank of England notes in London. The entire national currency arrived in a single shipment, a few days before independence day. A sample was sent to Idris for approval, in his modest home near Benghazi. (Idris disliked Tripoli, the capital, and seldom went there.) Then came catastrophe: a message arrived saying that Idris refused to allow the currency to be circulated. He disliked the design. Apart from the cost of replacing a whole national currency in one fell swoop, there was obviously no time to design, engrave, print and ship another currency before independence day. So Adrien Pelt the

39

Initiation Rites

Commissioner, Tom Power the Principal Secretary, and I got into the little UN plane (a rather battered 003), flew to Benghazi and drove to Idris's little "palace". He seated us with Pelt on his left, then Power, then me. He explained his objections to the notes. First, the portrait was not the one he had chosen, and was most unflattering. Second, we stupid Westerners had forgotten that Arabs read from right to left; we had put the olive tree on the right, and Idris on the left, which made it seem that the olive tree was more important than the King. Pelt explained the impossibility of replacing the currency before independence day. Idris was adamant. After two hours we were still deadlocked. Then I had an idea. I leaned across Power and whispered in Pelt's ear (since he alone could address the King directly): "Tell the King that if we don't circulate the new currency his people will starve because they will have no money. The MAL is worn out." This statement was of course preposterous, and would have merited an "F" for any undergraduate who wrote it on an exam paper. But it worked; Idris was a deeply religious man, and his vanity did not run so deep that he would see his people starve rather than have the wrong portrait in the wrong place on the nation's currency. But he elicited a promise from us that next time the mistakes would be rectified. The second tale relates to a visit to Sehba, the "capital" of the province of the Fezzan. The province was administered by the French Colonial Army, which had its Libyan headquarters in Sehba. The "capital" consisted of a bedraggled village and a fortress built on top of a high crag, with a commanding view over hundreds of kilometres of desert. We flew to Sehba in the mission's 00-3. The idea was to show me the country, and to make sure that I saw it our American air force pilot flew so low that he had virtually to pull back on the stick to get over the humps of the camels, as well as the sand dunes. He took me on hair-raising side trips down winding gorges, once riverbeds, so narrow that he had to bank first one way then the other, wingtips almost scraping the sides of the canyon. There I saw the remains of ancient villages and waterworks, even some centuriesold olive trees still struggling for survival. The fortress at Sehba was pure Hollywood. The men had prepared a landing strip on the desert at the foot of the crag for the occasion. Then we made the long climb to the top, where the portcullis in the otherwise solid rock walls was raised for us to enter. We were greeted by the Commandant and the other officers at the portcullis, the men being lined up at attention in the square beyond. All this formality was not for me, but for my colleague Monsieur Lebel, a genuine Colonial Army general who had joined the United Nations team as

40 All the Difference

an expert on Sahara agriculture. At sundown the officers lined up at the portcullis again, in their swanky foreign legion uniforms, with black, red-silk-lined capes to their ankles, and saluted the camel corps as they rode in from the desert. I looked around for Gary Cooper and Marlene Dietrich but did not find them - although I seemed to hear more German than French when I went for a swim with the men in the fort's pool. This ceremony was repeated at sunrise when the camel corps rode out of the fort into the desert. That evening the Commandant gave a dinner for the general and me, and the officers of the fort. I was rather dreading it; how does one talk to foreign legion officers? I expected the conversation to be about huntin' and shootin' — huntin' Arab girls and shootin' Arab men. The dining table was laid out under the stars and a brilliant moon, with immaculate linen, gleaming silver and twinkling stemware. The cuisine would have graced a first class restaurant in Paris, the wines were superb, and the conversation was as cultivated and Parisian as the dinner itself— the latest plays, the latest books, music, painting, politics, international affairs. Next day General Lebel and I set off with an officer and a few men in two desert vehicles - two for safety — to visit some desert villages where the French had dug artesian wells. The vehicles were a cross between a jeep and a tank. Even so there were several occasions when one of them got stuck in the sand and had to be pulled out by the other. What we saw in the villages was remarkable. I expected that the wells would lead to irrigation systems, introduction of new crops, and the like. What I did not expect, but should have - the French being French - was that the abundance of water would form the basis for some simple town planning, with small lakes surrounded by trees and gardens in the centre of the village, even with swans swimming in the lakes! Compared with the squalor of the typical Libyan village, these were pleasant, gracious and inviting. Even more remarkable to me was the obvious enthusiasm, even affection, with which the French were greeted by the villagers. There was no way in which they could have been forewarned of our visit; the reaction was obviously spontaneous. Equally obvious was the commitment and the devotion of the French to raising the standard of living and the quality of life of the desert people. By the time I had left Sehba to return to Tripoli, my concept of the French administration of the Fezzan by the Colonial Army was completely changed. Now for the third tale. After the independence day "celebrations, Adrien Pelt, Tom Power and I flew in our battered 003 to Geneva, for the wind-up session of the Council for Libya. For reasons of weather, we went via Tunis and Nice. God only knows how the

41

Initiation Rites

people of Tunis found out that we were making a stop at their airport, but when we landed a vast crowd swarmed on to the tarmac to greet Adrien Pelt as he stepped out of the plane. Their message was simple: if those miserable Libyans can be made independent through United Nations offices, why can't we? The whole tragedy of French colonialism is encapsulated in these two tales. The French tried sincerely and on the whole competently to raise the level of civilization of the colonial peoples - as they saw "civilization" - to a level where they could become citizens of metropolitan France, with the same rights and privileges as any other citizen. But of course this was not what the colonial peoples wanted at all. They wanted independence, and freedom to develop in accordance with their own concepts of "civilization". LIBYA REVISITED

In 1966 I was a Senior Fellow at the East-West Center at the University of Hawai. While there I received an invitation from the United Nations to join a Special Evaluation Mission to Libya. The Director of the Center at the time was Howard Jones, who had been first the Director of USAID and then American Ambassador in Indonesia, and whom I knew well. He readily granted me leave of absence, saying, "Libya is terribly important on the world scene". He did not elaborate, but I presumed he was thinking of naval and air force bases, and now oil. When I reached Tripoli I learned the true story of the mission: Libya, after fifteen years of it, was tired of "United Nations imperialism". Libya had been born a United Nations baby, and the UN had acted as nurse-maid ever since. In her infancy, no doubt, Libya had needed some spoon feeding. Meanwhile there had been a major effort on the educational front, and Libya now had a sizeable cadre of extremely able and well trained people of her own. An example was Dr Attiga, who was then Minister of Planning and became Director-General of the Organisation of African Petroleum Exporting Countries (OAPEC). Attiga had been batman to an English officer during the war and spoke excellent English. He fooled the authorities into thinking he had a university degree, although he had barely finished high school, and they sent him to the University of Wisconsin to do a Ph.D. in economics. The gaps in his training were of course discovered, but he went from freshman to Ph.D. in record time, and did one of the most brilliant theses ever submitted to the Wisconsin department. With the oil revenues Libya could accelerate her overseas training program and hire consulting firms that would be directly under the control of the Libyan government. There was no

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All the Difference

longer a need for the hordes of UN experts who swarmed about the country, and who behaved as though they were not merely advisers but the real top-level government administration. Representatives of contract-seeking consulting firms lined the corridors of cabinet ministers. Dr Attiga said to me, as we waded through the floods of hopeful consultants in the anteroom to his office after lunching together, "I need a consultant on consultants. But where will I find an honest man?" The Special Evaluation Mission was set up as a face-saving device for scaling down the UN role in the country. The idea was to evaluate Libya's progress thus far and the UN role in it, and to assess the need for technical assistance in future, both in quantity and in quality. I had mixed feelings about the new Libya. Obviously the country was much more prosperous than before. With the opportunities that were opened up by the discovery of petroleum, entrepreneurs were popping up under every date palm. The man who had been my driver during the UN mission had become a millionaire by providing specialized desert equipment. So much for the lack of entrepreneurship stressed in our plan. There were many new houses, hotels and office buildings, including the hideous new capital at Beda designed by Doxiades. The harbours had been cleared of wreckage, the roads and bridges had been repaired and improved, the power plants were actually working full time. Most impressive to me was the magnificent job the FAO had done in recapturing land from the desert. In 1952 the desert had come into the southern suburbs of Tripoli. Now the whole area from sea to Gebel (escarpment), a distance of 75 to 125 kilometres, was one big garden, with olive groves, citrus orchards and tobacco plantations. But Tripoli was a boom town, full of carpetbaggers of various kinds, and of "con" men and people on the make. There was a much sharper rift between Libyans and Westerners than before. The women had withdrawn, or been pushed, deeper into purdah than ever. They always wore veils in public, never appeared on the beaches, and wives never accompanied their husbands to receptions or dinner parties. This behaviour was not always the result of deepeened religious conviction; the new austerity was maintained even by Libyans I had seen ardently enjoying a Western lifestyle in New York. Night clubs were forbidden to Libyans, and so also was alcohol - officially. The result was that an atmosphere of enormous artificiality pervaded life in the cities. With the increased stress on traditional Islamic laws no one seemed to be having simple fun, and relations between Libyans and foreigners, even with the best of intentions of both sides, were inevitably strained.

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Initiation Rites

One of the saddest features was the degeneration of the Italian colonization scheme. The agricultural development had been organized by the Italians on the basis of individual farms, each with its own house. Villages were located every 50 kilometres or so along the highway as "central places", with a market, shops, a church, and some government offices, a pharmacy or clinic. With the departure of the Italians, Idris decided that social progress could be made by converting nomadic Bedouin graziers into stable farmers, so Bedouins were offered subsidies to settle in the former Italian scheme. But the Bedouins knew nothing of farming. Whereas the Italians had scooters to go to the village, the Bedouins had not even bicycles. They quite clearly thought that their job was simply to live in the house, and that they were being paid for that alone. Consequently they abandoned the farms, except for a vegetable garden and a few chickens for their own consumption. Nomadic grazing was an efficient way of deriving an output and income from semiarid grasslands. The new settled farmers were simply a drain on the oil revenue. What had once been a fiercely proud people with its own culture was in danger of becoming a demoralized group dependent on Libya's new welfare state. In 1966 the Special Evaluation Mission found virtually every facet of the Libyan economy still in deficit except the petroleum sector budgets, foreign trade, balance of payments, public enterprises, total consumption less gross domestic product. A kind of negative import replacement was taking place; the flood of imports was displacing domestic enterprise. Yet under the Libyan monetary system, which meant that exporting oil was virtually the same thing as printing money, the flood of imports was needed to prevent galloping inflation. The Mission made projections for the Libyan economy under a variety of reasonable assumptions, and found that without an amount of subsidized consumption of imports that would turn Libya into a nation of "welfare bums" it was virtually impossible for Libya to spend the whole of its income on consumption plus investment: accumulation of large amounts of foreign assets seemed inevitable, and the question of what kind of portfolio to hold would become one of paramount importance. (One reasonable assumption we did not make was that Ghadafi would come to power and spend vast sums on armaments, which helped to solve that problem.) LESSONS FROM LIBYA

The most obvious lesson to have been learned from the Libyan experience, which emerges from the whole story of the international

44 All the Difference

development effort but appears more vividly in a case like Libya's, is that even very rapid growth of national income - even as much as 25 per cent per year - does not guarantee "development" in the sense of wide and deep improvements in productivity, output and welfare. "Sowing the petroleum" (as the Venezuelans put it) or the copper, guano, phosphate or whatever, is no easy task, especially in countries with virtually only one natural resource and a small population. Merely giving away the new-found wealth to the citizens to lavish on imported luxuries can destroy incentives, undermine budding indigenous enterprises and demoralize the population. (The classic example, of course, is the tiny nation of Nauru, which I visited some fifteen years later.) Rich natural resources can be a mixed blessing, especially when concentrated both by sector and in space. A second lesson is that social scientists and development planners should be very cautious about attributing "lack of entrepreneurship" to poor and stagnant societies. Arguments like those of Max Weber and Everett Hagen to the effect that a long, slow and painful process of cultural change is necessary before entrepreneurship can appear in traditional societies can prove sadly wrong when the economic situation in such a society is suddenly changed, as with the discovery of vast reserves of petroleum in Libya. The appearance of vigorous entrepreneurship in any society requires three things: (i) The presence of people with enough technical knowledge, organizational skills, ability to see opportunities, and willingness to take risks, to be able to undertake innovations and to organize a productive concern to exploit them. (ii) The presence of opportunities to exercise these skills. (iii) A social-cultural framework that is not inimical to the exercise of entrepreneurial skills. What was missing in Libya in 1952 and present in 1966 was (ii). The oil boom suddenly created many kinds of opportunities to introduce new products, techniques and organizations - opportunities for "doing things differently", in Schumpeter's words. These opportunities were quickly seized. The first and third prerequisites did not spring into being with the discovery of oil; they were there already, but hidden from the view of foreigners because of the lack of opportunity for doing anything new and different. No doubt the Italian occupation, the war, the British and French occupation, and the massive United Nations effort had some impact upon the culture and upon individual personality traits. But it was the sudden opening

45 Initiation Rites

up of opportunities to make money through a different kind of economic activity that triggered the explosion of indigenous entrepreneurial effort. A society, no matter how traditional it appears on the surface, need not wait three generations to launch a process of rapid growth. Of course Libya's leap into a phase of rapid growth was not the result of a sudden surge of indigenous entrepreneurship. The fuse was lit by enterprise imported from abroad. Some of the enterprise came from the Italian colonists, some from United Nations experts, and then the massive injection by multinational oil companies. But the indigenous "cluster of followers" was there to take advantage of opportunities created by the exogenous enterprise. It did not take three generations and massive cultural change for them to appear. "Cultural change" is of course an extremely complex concept, and it is a foolish economist who rushes in where more angelic anthropologists fear to tread. Superficially, at any rate, the Libyan culture was more traditionally Islamic in 1966 than it had been in 1951. Certainly there was no apparent evidence of long, slow, but fundamental cultural change before the appearance of indigenous entrepreneurship. A similar example is the Canadian province of Quebec, where the relative poverty of the predominantly French population has long been explained by "lack of French-Canadian entrepreneurship". But in the last decade there has been an explosion of entrepreneurial activity among French-Canadians, generated by the opportunities created by migration of anglophone firms and individuals to other parts of Canada (mainly Ontario) following the election of Rene Levesque's separatist Parti Quebecois in 1976. Experiences such as these support the attitude of Thorstein Veblen and Clarence Ayres to entrepreneurship - that there are always plenty of people around ready "to make a quick buck", and that the real source of progress is the scientists, engineers and technicians - rather than Schumpeter's view that there are always plenty of inventors, but that the capacity to organize productive enterprises which can successfully exploit inventions is a rare and delicate trait that must be nurtured. It might be convenient to make a distinction between "entrepreneurship" and "enterprise" - the former consisting of the latent capacity and talents for innovation and organizations, the latter of the exercise of these capacities and talents. The planning team was quite accurate in noting a lack of "enterprise", thus defined, in the Libya of 1951. The latent "entrepreneurship" was there, but it took a series of exogenous shocks to bring into action, and convert it to "enterprise". Whether Libya would have made the "great leap for-

46 All the Difference

ward" into rapid growth without the external shocks is of course impossible to say with any certainty. My guess is that it would not, or at least not until much later than it did. A third lesson is that no matter how hopeless the economic and social situation of a particular country may appear, with the application of the appropriate expertise ways can always be found to raise per capita output and income. The highly significant results of projects in the agricultural sector were easily overlooked because of the glitter of the oil boom and related activities, but they were there; and, as said above, if no oil had been discovered Libya might have been regarded as a case of outstanding success of a rural-led, basic needs, development strategy. Another lesson from Libya is that, once a five or six year plan has been committed to paper, given the stamp of approval by the government and foreign aid donors concerned, and published, it is hard to get away from. In the absence of such sudden and dramatic changes in the Libyan situation as the discovery of oil, the plan would have been sensible enough. It was based on the assurance that there would be substantial amounts of technical and capital assistance from foreign aid donors in both the public and private sectors. These resources had to be efficiently distributed, and at the time there was no "market" in place that could do the job. On the other hand, the "plan" involved virtually no substitution of centralized planning for market choices in the private sector; intervention in the price system, redirection of resources, and changes in the product-mix played almost no role. Instead, the emphasis in the plan was on greater efficiency, improved organization, and higher productivity, in enterprises and processes already in existence through education and training plus application of top-level expertise. The discovery of vast reserves of petroleum, however, necessitated massive reallocation of resources in both the private and the public sectors. The plan should have had more built-in flexibility to assist a totally inexperienced government and a largely inexperienced private sector to make that shift. To me, at least, a further lesson is that revisits are as important and useful for economists as for anthropologists, and too seldom undertaken. Returning to Libya after fifteen years, when the country had been exposed to so many strong shocks meanwhile, provided a profound experience in economic development and cultural change. Indeed one could hardly have had a better, laboratory, and a good many preconceptions were swept away as a result. I returned to McGill for the second semester of the 1951/52 academic year, having seen the infant nation safely through its in-

47 Initiation Rites

dependence day celebrations. I had not been in Montreal long when I received from the United Nations an intriguing proposal: that I should go to Indonesia for two years, as Monetary and Fiscal Advisor to the government, and as the first of what would eventually be a team of twelve, to set up a National Planning Bureau and prepare Indonesia's first development plan. I had turned down an invitation to become Libya's first United Nations Resident Representative, which seemed to me a deviation from my main interests, but I certainly had not solved the problem of stagnation in "capital-scarcity" countries, and two years in Indonesia would give me the opportunity to learn a great deal more about such countries. This time McGill refused to give me further leave. The authorities saw no value to the University in my going to Indonesia, and on purely personal grounds felt they had been generous enough to me already, as according to the criteria of that era they certainly had. There was nothing for it but to take the risk and resign, which I did with some misgivings, but with great excitement at the prospect of my Indonesia mission.

3 The Ideological Factor Indonesia, 1952—53

I arrived in Jakarta in July of 1952, two and one-half years after Indonesia's achievement of independence. I was settled in a room with a verandah overlooking the courtyard of the gracious old colonial hotel, the Hotel des Indes. It was still very Dutch in style and atmosphere, serving cold meat, cheese and nodules of chocolate for breakfast, which I intensely disliked, and rijstafel for lunch, which I greatly enjoyed. I was given an office next to the Finance Minister, Sumitro Djodjohadikusumo. Each day began with a policy conference in Sumitro's office. Sometimes in attendance were Kheow Bien Tie, a very able Chinese-Indonesian economist, Dr Aa and Dr van Andel, among the few former Netherlands East Indies civil servants who stayed on and faithfully served the new independent regime. (There were some 6000 former NEI civil servants in the Indonesian administration in Jakarta, but about 5900 of them used their power to aid Dutch enterprise, or even to sabotage the new regime.) Once a week I went to the old town to meet the Governor and Board of Directors of the central bank, the Bank Indonesia. The Governor was Sjafruddin Prawiranegara. I also had an office at the budding Biro Perantjana Negara (National Planning Bureau) on Medan Merdeka (Independence Square), across from the President's palace and a few doors from Vice-President Hatta's house. As I studied the available books and documents, talked to Indonesians and foreigners, and travelled about the country, I began to realize just how lucky I had been to have drawn Libya for my first

49 The Ideological Factor

advisory mission. Instead of Libya's one and one-quarter million relatively homogeneous population, Indonesia already had over 80 million, with hundreds of different languages and cultures. The land areas of the two countries were much the same, but Indonesia's was strung out over more than 3000 islands in such a way that, when superimposed on a map of the United States, Indonesia would extend from the Canadian border to Texas and several hundred kilometres into the oceans on either side. These diverse areas and cultures had never been united under a single administration; the Dutch had barely consolidated their hold on Java, Bali, Sumatra, Sulawesi and part of Kalimantan when the Japanese drove them out. Moreover, two-thirds of this population was concentrated on the small island of Java, nearly 1000 kilometres long and a mere 200 kilometres wide at its widest point. But what I found most be wildering, in contrast to Libya's virtual total lack of known natural resources, was Indonesia's vast array of resources: the volcanically renewed soil and ample rainfall that permitted Java to support a population density equal to that of a prosperous Australian suburb; the huge plantations of Sumatra, and the smallholders of Sulawesi; tin, bauxite, oil, gold, silver and forests. My bewilderment took two forms. First, with such a rich resource endowment, and 350 years of extremely competent Dutch colonial administration and private enterprise, bringing a manifold expansion of exports, plus some shrewd Chinese entrepreneurship as well, why was Indonesia at the bottom of the United Nations list in terms of per capita income? It was clear that turning Indonesia into a prosperous nation would require some change of development strategy — but to what? Second, with such a bewildering array of options, how could the new National Planning Bureau decide what projects and programs to recommend to the government, in both the private and the public sectors, for inclusion in the first five-year plan? As I saw more of the plantations, mines, industries, cities, and villages I became increasingly convinced that Indonesia could not possibly be as poor as the United Nations figures suggested. It seemed to me that Indonesia looked more like Tunisia than like Libya, which would mean a per capita income of around $100, not $25 as the UN would have it. I therefore persuaded the Indonesian government and UN headquarters to add a national accounts expert to the National Planning Bureau team. We were fortunate in being able to recruit Daniel Neumark of Stanford. He came out to Indonesia in 1953 and spent about a year, working with a small team, travelling widely throughout the country, studying Indonesian eco-

50 All the Difference

nomic activity on the spot. The figure for per capita GDP which emerged from this survey was $98. Still, the question of why Indonesia had made so little progress in 350 years of vigorous Dutch enterprise remained. In searching for an answer to this question, I began by rejecting out of hand Boeke's theory of sociological dualism - the idea that Indonesian culture and economic behaviour differed from those of the West in ways that made modernization and industrialization impossible. I wrote a critical article attacking that theory, which has been reprinted several times. Years later, when I realized that the Actors important for development are not the same for every society, and that even when they are they may behave differently, I regretted my harshness, and wrote another article revising my views. In searching for my own answer, I found myself driven further and further back in Indonesian history, until I came to the arrival of the Portuguese in the early sixteenth century, when a lively Indonesian entrepreneurship existed. Out of this study eventually came my theory of technological dualism, or bi-modal production, as I now wish I had called it from the beginning. I found the explanation of continuing Indonesian poverty in the population explosion that followed Dutch settlement wherever it took place, combined with the Dutch policy of hiring no Indonesian above the level of mandur (foreman) in their modern sector. The result was that at the time of the transfer of sovereignty only 7 per cent of the Indonesian labour force had been drawn into the modern sector, and the huge population increase had to be absorbed in the traditional peasant agriculture sector, leading to ever increased population pressure on the land and "shared poverty", as Clifford Geertz described it. Independence seemed to have brought little improvement. What to do? We had little at that time by way of received doctrine, let alone manuals on development planning, to guide us. Most of us identified development with growth. We had little idea how to promote growth except to encourage savings and investment. The Keynes-Hansen theory of stagnation arising from an excess of savings over fullemployment investment hardly seemed to fit countries like Indonesia. Colin Clark had shown that growth is associated with structural change, the share of output and employment in the primary sector falling and the share in industry and services rising, but we were not quite sure whether this change was a cause or an effect of development. We were convinced of the importance of entrepreneurship for innovation and technological progress, but lack of entrepreneurship hardly seemed to be the problem in Indonesia.

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The Ideological Factor

ENTREPRENEURSHIP

Indeed, compared with other countries at comparable levels of development, Indonesia seemed to be blessed with a large and varied cadre of entrepreneurs. In the first place, the modern sector constituted nearly one-quarter of the economy in terms of gross domestic product, and almost three-quarters of that were still in the hands of major Dutch corporations. Another 14 per cent was in the hands of giant British multinationals like Dunlop, Harrison and Crosfields, Lever Brothers and the British American Tobacco Co. The United States holdings were about half the size of the British, but were similarly concentrated in the hands of multinational giants: Standard Vacuum (a subsidiary of Standard Oil of New Jersey), Caltex Pacific, United States Rubber. Both the British and the Americans saw the transfer of sovereignty as an opportunity to take over markets from the Dutch; established enterprises were expanding and new ones were coming in, such as Hawaiian Plantations and Intercontinental Rubber. There were about two million Chinese in Indonesia, and these were providing entrepreneurship for anything from vast, multinational, multiproduct enterprises based on their extended family system, with branches of the family in Singapore, Hong Kong, London, and New York, to small shopkeeping. At the village level the Chinese were moneylenders, providers of seed, tools, fertilizer, and the marketing channel for rice, rubber, kapok, and other products of peasant and smallholder agriculture. They owned fisheries, sawmills, and a fast growing movie industry producing films for export. Three and a half centuries of Dutch domination of the economy had destroyed much of the vigorous Indonesian enterprise that existed before 1600, especially in the Outer Islands. Clifford Geertz has described the entrepreneurial endeavours of puritanical reform Moslems in Java, and of younger sultans and princes in Bali, in his excellent book, Peddlers and Princes. These enterprises included some industry as well as commerce, but were mostly rather small in scale. More impressive were the enterprises of the Bataks in North Sumatra, the Minangekebau of South Sumatra, the Menadonese of Sulawesi, and the Dayaks of Kalimantan, all areas where the Dutch economic penetration came later and was shallower. These included establishments in Java as well as in their home regions. The MIT Indonesia Project, for example, found 100 Batak firms in the Jakarta Chamber of Commerce alone. The important point is that all of the major societies in Indonesia, despite the vast differences in their cultures, proved capable of gen-

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All the Difference

crating enterprise in the years immediately following independence. By 1953 there was an explosion of enterprises created and managed by Indonesians of several ethnic groups, some of them quite large scale. Yet nothing seemed to be happening to improve the level of welfare of the mass of Indonesians. So far as I could see, Indonesia had all the ingredients for sustained economic growth. The agricultural base was capable of providing self-sufficiency of foodstuffs, raw materials for domestic enterprise, and major export products. There were other strong exports such as petroleum, tin and bauxite. With the removal of the restrictions imposed by Dutch colonial policy there was potential for further processing of raw materials, such as smelting tin and manufacturing aluminium. There were opportunities for import replacement, including the major import, textiles. There was vast, unexploited hydro-electric capacity. Despite the centuries of neglect of education by the Dutch, as Indonesianization of higher ranks of the labour force was imposed, Indonesian workers proved to be flexible, adaptable, easily trained, ambitious and hard working. An astute blend of Dutch, other foreign, Chinese and Indonesian enterprise should be able to generate an impressive rate of growth. It required only a government committed to appropriate policies, and that was precisely what was missing. It was not so much that Indonesian governments - particularly the Wilopo government which I served, and which I regard as the best that Indonesia has ever had - adopted the wrong policies. It was rather that they could not make up their minds on any policy at all. THE IDEOLOGICAL CONFLICT

I was not accustomed to analysing economic problems in terms of the ideological and cultural factors governing the approaches of various leaders and groups to policy questions. It took me some time to realize that the Indonesian development problem lay in the deepseated ideological conflict that pervaded the country at that time. People then spoke of the dwitunggal, or diumvirate, of President Sukarno and Vice-President Hatta, with the Cabinet and the Parliament as the third force. Power was considered to be divided between Sukarno and Hatta. This view did not reflect the constitutional powers accorded to the President and Vice-President, which were in fact severely limited. It reflected rather the situation existing in the legislature, where the formal constitutional power lay. With dozens of major parties and literally hundreds of smaller ones, no single party was able to form a government, and the coalitions which were es-

53 The Ideological Factor

tablished were torn apart by disagreement and so proved to be shortlived. Consequently the President and Vice-President became the symbols of continuity in government, and were able to exercise influence far beyond their constitutional authority. The President was Head of State, but his constitutional function was to appoint one or more "formateurs" and then to assemble a Cabinet, in accordance with the recommendations of the formateurs, to appoint the Prime Minister; and together with the Prime Minister, to appoint the other members of the Cabinet. All legislation was the function of the Parliament. From the very beginning Sukarno utilized his hold on the general public to assume for himself powers far beyond those accorded to him in the 1950 Constitution. A running battle for power between the President and the Cabinet soon appeared. The main role attributed to Hatta was to serve as bridge-and-buffer between the Cabinet and the President. While there were dozens of parties and hundreds of groups that listed candidates for the one really free election which has ever taken place in Indonesia (in 1955), five parties predominated. These were the Masjumi (Muslim) Party, which was generally believed to have the biggest membership during the early years of independence; the Nationalists (PNI) Party; the Communist (PKI) Party; the Nadahtul Ulama, or Muslim Scholars Party; and the Socialist Party (PSI). These labels could be misleading. In the 19508 the American ambassador, Merle Cochrane, was strongly opposed to the PSI. In fact, the PSI could have been the Americans' strongest ally in Indonesia. The thinking of Sukarno, Hatta and the leaders of these five major parties encompassed a wide spectrum of opinion concerning foreign investment, indigenous private enterprise and cooperatives; but there was a good deal of common ground. None of the political leaders was in favour of either the label or the ideology of capitalism, free private enterprise or liberalism. These were universally related to Dutch colonialism and economic imperialism; to this degree, all Indonesian leaders were "Marxists". On the other hand, putting freedom of religion at the head of the list of the five principles of the Pantja Sila showed that few of Indonesians were prepared to follow the Communist line in all its details. Even the PKI managed to suggest that freedom of religion was consistent with Indonesian Communism. The leadership in the early days was essentially middle-class but non-capitalist. Indonesia began her independence with no entrenched landed aristocracy. The few large land-owning sultans who had supported the Dutch during the revolution had been imprisoned

54 All the Difference

or killed. The smaller landowners had little or no political power. Also, Dutch policy had been such that no significant group of "native capitalists" had appeared before independence. The leaders came mostly from a rather narrow sector of society made up of middle and lower civil servants, a group of professionals and aristocrats, such as Sultan Hamengku Buwono IX, who had supported the revolution. In fact, the common denominator of this somewhat disparate group was that they had all been leaders of the revolution. Two basic conflicts, which would hinder the emergence of an economic system acceptable to all, were obvious from the outset. The numerically small business group, which looked upon independence as an opportunity for expansion of their activities, had to operate, if at all, through political parties whose main objectives and ideology were something different, if not directly opposed to providing a free hand to "native capitalism". Moreover, Indonesian politicians were first of all nationalists, and secondly socialists, yet the task which the government faced in 1950 was to stabilize and expand an economy that was foreign dominated and privately owned. On the other hand, the majority of Indonesians were nonCommunist if not actually anti-Communist. Their religious principles, if nothing else, inclined them against embracing the Communist system in total. Moreover, the image of the United States as the land of crass materialism, devil-take-the-hindmost cut-throat competition, and individualism so rugged as to ignore the sufferings of the underdog, was counter-balanced by another image, the image of the United States as the country that began the long struggle against colonialism. In opening the Asia-Africa Conference in Bandung in 1955, President Sukarno reminded his audience that the date was a particularly auspicious one for such an occasion, since it was the anniversary of Paul Revere's ride. The ideological debate is best summarized in terms of the attitudes of Sukarno, Hatta, and the leaders of the five major parties. SUKARNO

I cannot say that I knew Sukarno well, but I encountered him on the cocktail circuit and I was a frequent visitor to the palace. As well as formal receptions, he arranged dance performances, which Sukarno liked as occasions for bringing pretty young girls into the palace. He once arranged to have the Ketjak, or monkey dance, normally performed by the men of the village, performed by 300 carefully selected girls from the University of Indonesia; the result was ludicrous. There were also occasions when movies were shown

55 The Ideological Factor

at the palace for Sukarno and a few guests. Bill Palmer, head of the American Motion Picture Association, was a mutual friend of Sukarno and myself. Sukarno loved movies, and Bill arranged about once a week to screen a program of two full-length features at the palace. Sukarno's charm, style, wit and charisma are legendary — so are his linguistic capacities: he liked to use six or seven languages in his major speeches, always quoting other people in their original language. His brilliance as an orator is also well known. Sukarno enjoyed his own speeches, and they grew longer and longer - two hours, three, four. His advisers told him he must cut down. When he gave his Hari Merdeka (Independence Day) speech in 1953, I happened to be seated just behind him on the grandstand provided for the diplomatic corps and other dignitaries. His speech was written out in a large book which he had on a stand in front of him. He would glance at it occasionally and turn the pages as he went along. Then his advisers began signalling him that he was taking too long. Without turning a hair (like Schumpeter, he had few to turn), without any interruption in his flow of dramatic phrases, and without missing a beat in his ample gestures, Sukarno began making cuts, turning over several pages of manuscript at a time, like an experienced conductor turning pages of a well-known score without even glancing at them. Sukarno was above all a nationalist. He distrusted foreign investment and native private enterprise, setting great store by the "familylike society". He had a deep faith in the cultural and economic strength of the villages, regarding them as the backbone of the nation. As an engineer, he understood individual developmental projects, but derided worry about such economic problems as inflation, unemployment and trade deficits as "textbook thinking". His general distaste for economics and economists (of which Hatta was one) was accentuated as time went by. Professional economists were in the vanguard in criticizing Sukarno, his role in Indonesian political life, and his ideas, especially his "concept" of guided democracy. Later some of them became leaders in the civil war against Sukarno. These events solidified Sukarno's dislike of "textbook thinking"; but as early as 1950 Sukarno's attitude towards economics and economists had already been formed. At one level, Sukarno's views on economic policy might be explained by his engineering training. Like too many engineers, Sukarno tended to identify "development" with engineering activity; so long as dirt was flying, bricks being piled on bricks, concrete being poured, and riveting machines shattering the air, Sukarno felt that "development" was taking place. He had no patience with aggregate

56 All the Difference

statistics, and developed a capacity for ignoring deterioration and decay in some sectors and regions of the economy, so long as some progress was taking place in others. More important was his identification of "economic progress" with "continuing revolution". He claimed to be eclectic, quoting Engels, Jaures, Fourier, Gandhi and Thomas Jefferson; but it was the MarxLenin line which influenced him most. Revolution, however, for Sukarno as for the Mexicans, was not a single cataclysmic event, but a continuous process. The Indonesian revolution included the national revolution, the political revolution, the social revolution, the cultural revolution and "the revolution of man". What did Sukarno's views mean with respect to specific economic policies? Not much. Sukarno took from his reading one idea which is common to Marxism and nineteenth-century liberalism; so long as the right socio-economic system is established, economic problems will take care of themselves. Fundamentally, Sukarno felt that if Indonesians were not as prosperous as their natural wealth ought to make them, it was because some colonialist, imperialist, or neocolonialist and neo-imperialist group was preventing them from attaining their birthright. As inflation reached the rate of 1000 per cent per year, Sukarno said in a speech that he was going to find the people responsible and shoot them. With these general attitudes, it is not surprising that Sukarno was opposed both to foreign enterprise and to native capitalism. His rejection of foreign investment, and later of foreign aid as well, was to become more pronounced as the years went by. He also warned his people of the dangers implicit in native capitalism, exhorting them not to become "embryo capitalists" with no regard for the common weal. "Europe is the past", he quoted with approval, "United States is the present, and the Soviet Union is the future". HATTA

I knew Mohammed Hatta rather better than Sukarno. As an economist, Hatta was genuinely interested in what the National Planning Bureau was doing, which Sukarno certainly was not. (Hatta was almost always called "Doctor Hatta" in Indonesia, but actually his highest degree was "Doctorandus", which means that he had completed all the requirements for the Ph.D. except submission of a thesis.) He was also very approachable, which Sukarno was not. Since Hatta lived so close to the offices of the National Planning Bureau, I used to drop in on him occasionally after work. Hatta lacked the sparkle and presence of Sukarno, but he also lacked Sukarno's oc-

57 The Ideological Factor

casional deviousness. He was, in fact, a man of complete integrity, and thoroughly committed to the welfare of his country. Indonesian political parties have often been divided into three categories: Muslim, Nationalist and Marxist. One reason for Hatta's success as a middle-of-the-way moderator was that he combined all three strains of Indonesian political thought in his own ideology. He was a devout Muslim. He was one of the early leaders of the Indonesian nationalist movement which culminated in the revolution in 1945. He also shared with most of the educated Indonesian leaders a Marxist bent, acquiring his Marxist views as a university student in Holland. Hatta's education was European, and particularly Dutch; during the formative years between the ages of nineteen and thirty, he was in Dutch high schools and universities. Consequently, he approached questions of economic and social policy with a European as well as an Asian point of view. Throughout his writings and speeches Hatta treated cooperatives as the antithesis of capitalism. Yet the cooperatives included in their membership only 6 per cent of the labour force and grew slowly. Clearly, the cooperative movement could not be expected to make a fundamental contribution to Indonesian economic development in the short run. Hatta did not suggest that it could. Here Hatta failed: he provided no systematic program for the short run. SJAFRUDDIN AND THE MASJUMI

Sjafruddin once described the Masjumi Party as "an elephant with beri beri", underlining the fact that the Masjumi Party was massive but clumsy in its articulation and movements. Masjumi was stronger in the Outer Islands than in Java. Until the elections of 1955, the Masjumi Party was generally regarded as having much the largest popular following of all Indonesian political parties. Sjafruddin, who served as Governor of the Central Bank from 1952 to 1958, was the major intellectual leader of Masjumi so far as economic policy is concerned. He rejected Marxist socialism, with its concept of "inhumane" class warfare, as being contrary to Section One of Article 29, in which it was stated that the Indonesian State is based on faith in the Almighty God. A devout Muslim and a socialist, Sjafruddin yet took a pragmatic and constructive view of the role of foreign investment and private enterprise. He even argued that foreigners who had fallen in love with Indonesia were often more social-minded than the new breed of Indonesian national capitalists. I visited Sjafruddin, in his large and gracious house on Jalan

58 All the Difference

Diponegoro, early in 1957. He talked then of taking leave from the Bank of Indonesia to go to some Institute of Islamic Studies, such as the one at Harvard or McGill, and write a book on Reform Islam and economic development; would that he had. Instead he went to Sumatra as leader of the civil war against Sukarno. As a consequence he was lost to Indonesia as an intellectual leader and policy maker, although he has continued to write articles about Islam and development. I last saw him in 1979, when I was in Jakarta on a mission for the United Nations Centre for Regional Development. He was living in a modest bungalow — oddly enough, directly across the street from Sumitro's mansion - and going to the mosque four times a day. He seemed comfortable and cheerful enough, but it is a tragedy that Indonesia has lost so committed and competent a leader. Even today, she has few of those of spare. NAHDATUL ULAMA

I knew the leaders of Nahdatul Ulama (NU) less well than those of other parties, partly because the NU intellectuals were centred mainly in Jogjakarta rather than Jakarta. I will therefore say little about them. The name of the party means "Muslim Scholars", and its leaders had rather little to say about economic policy. While pressing for an Islamic state, they were rather more favourable to native capitalism than other parties, and attacked the government for excessive intervention in the economy. The NU split off from Masjumi only in July 1952, yet it emerged from the 1955 election as the third biggest party, probably because it represented the centuries-old fusion of Javanese Islam and Javanese Hindu culture and tradition. WILOPO AND THE PNI

The Indonesian Nationalist Party, while represented in the early Indonesian cabinets, was under-represented in terms of the strength which it revealed in the 1955 elections. The PNI then emerged as the party with the largest popular support. If the Masjumi Party was sprawling, the PNI was split. A "pragmatic" right wing, belonging to the group of "pragmatic conservatives", could be distinguished from a left-wing radical nationalist group. The former faction, which dominated the Wilopo government which I served, took a position with regard to economic policy not very different from that of the Masjumi and the PSI. The left nationalists, on the other hand, frequently found themselves closer to the Communist Party than to the Muslim or Socialist parties.

59 The Ideological Factor

Perhaps because of this basic split within the party itself, the PNI never established any very clear program with regard to economic development. The Wilopo Cabinet was the first and last to make any serious effort to apply economic analysis to the solution of Indonesian economic problems, until the Suharto takeover of 1966. The Cabinet was essentially a PNi-Masjumi coalition. However, Sumitro of PSI was Minister of Finance. The Justice portfolio was also held by PSI. Sultan Hamengku Buwono IX, as Minister for Defence, while officially non-party, was generally believed to be sympathetic to the PSI. Wilopo himself was highly pragmatic in his approach to policy questions, and selected his ministers for professional competence and ability to work as a team rather than for political position. PSI

The Indonesian Socialist Party (PSI) had a degree of intellectual influence out of all proportion to its popular support. The Finance Minister, Sumitro Djojohadikusumo, with whom I worked, was the leading figure in PSI economic policy. He was and is a man of great charm, keen intellect, and prodigious energy. He has been extraordinarily prolific in his writing. He was much the most pragmatic of Indonesian leaders where economic policy was concerned. He talked less about long run social goals than about concrete measures for achieving immediate objectives. In the early years of independence Sumitro talked of such down-to-earth measures as the creation of small Indonesian industries, their protection during their infancy, the establishment of larger-scale enterprises in vital and strategic industries through public investment, and the building up of social overhead capital power, transport and communications. He favoured the use of accumulated foreign exchange reserves to finance the import of capital goods and to back credit extension to new domestic industrial enterprises. Sumitro was less committed than other leaders to a Marxist view of capitalism and of foreign enterprise. The PSI was, in fact, on the right of the Indonesian political spectrum. Not that he had any enthusiasm for capitalism as a system nor was he blind to the exploitation of his own people during the colonial regime. However, Sumitro, perhaps more clearly than anyone else, saw the need to encourage foreign investment during the first phase of Indonesian development, not only for the capital it would provide, but still more for the managerial, entrepreneurial, scientific and technical expertise that would come with it.

6o All the Difference An important aspect of Sumitro's career is that he never lost interest in his students at the University of Indonesia. Lecturing to them was part of our duties at the National Planning Bureau. It was at this time too that we founded the journal Ekonomi dan Keuangan Indonesia [Economics and Finance of Indonesia] which was an instant success and is still going. AIDIT AND THE PKI

Aidit was perhaps the most effective of the political leaders in Indonesia in the 19505 and 19605. He did not have the professional status of Sumitro, Sjafruddin or Hatta, and was less dashing than Sukarno. But as a party organizer and administrator he showed a capacity that was unmatched in Indonesia at the time. The PKI was certainly the most disciplined and best organized of Indonesian political parties, with "cells" in virtually every village. Aidit was quick wilted in conversation or debate, without being doctrinaire. The PKI was not represented in any Indonesian cabinet until 1959, when Aidit and Lukman were awarded minor posts in an elephantine cabinet established at that time. During the first years of independence, the PKI was in outright opposition, attacking the governments as reactionary tools of the imperialists and fascists. Gradually, however, it became more nationalist and less Marxist in its public statements, and the beginnings of the entente cordiale between Sukarno and the PKI began to appear. This shift also opened the door to cooperation between the PKI and the left wing of the PNI, a factor which was to be of great importance in Indonesian economic history. In a book published in 1962, Aidit gave a mature interpretation of Indonesian socialism. Indonesian socialism can reach the stage of scientific socialism, Aidit writes, only when "exploitation of man by man" has been completely eliminated. Since in Indonesia remnants of imperialism and feudalism remain, Indonesian socialism has not yet been achieved. He also argued that Indonesia was not yet ready for true socialism, and a premature attempt to introduce it would result in "imperialist socialism" or false socialism. STALEMATE

The combination of this ideological conflict and the effort to run a series of coalition governments as if they were village councils conforming to the principles of musjarawah desa and mufakat desa (mutual discussion leading to unanimity) was disastrous. Nothing got done, no decisions were made. The principle in Cabinet meetings, as in village councils, was that if there were strong opposition from any

61 The Ideological Factor

quarter to any proposition the subject was simply dropped. I remember all too well my own naivete on the first few occasions when I was invited to meet the Cabinet to explain some policy proposal. Treating the Cabinet meeting like a seminar, if one Minister made a mild but seemingly irrelevant objection to my proposal, I would say, "Your excellency, perhaps I haven't explained my idea very clearly. Let me try again. You see ...". Finally Sumitro, who felt that he knew me well enough by then, drew me aside one day and said, "Ben, in your country the minister would have said, "Professor Higgins, if you knew anything about the society and the politics of this country you wouldn't be making such an absurd proposal". But since he didn't want you to lose face, he merely sent you a signal, so that you could shut up, learn more about the situation and not embarrass yourself and the Cabinet." There was never any real effort to resolve differences of viewpoint and arrive at a majority decision. A good example was the BPM (Royal Dutch Shell) properties in North Sumatra, which were very efficiently destroyed by the Indonesians in the face of a Dutch advance during the revolution. Indonesia did not have the capital and technology to put them back into production, yet many Indonesians were reluctant to return them to BPM. A parliamentary committee was set up under Mr Hassan to study the matter and report back to Parliament in three months. Four years later, when the committee still had not reported, an MP dared to ask the Minister of Mines about the situation. The Minister replied, "The situation is perfectly clear. We have not nationalized the properties, and we have not returned them to Royal Dutch Shell." One could almost say that during the 19505 Indonesia really had no "government". It had a series of administrations, with the major parties represented in different combinations in the Cabinet, with the same names turning up again and again in different positions, and the same fundamental debates going on — and on. In this atmosphere the Planning bureau got little guidance as to broad strategy of development. The leaders never had a close enough approach to unanimity to decide what kind of society and what kind of economy they wanted, so that major decisions were postponed again and again. Had it not been for the bond among political leaders of having been brothers in arms during the revolution, it is doubtful that the nation would have survived at all. THE 17 OCTOBER AFFAIR

I was eye witness to one of the crises which was to have profound implications for the course of Indonesian politics. About 9 a.m. on

62 All the Difference

17 October 1952 I became aware of a commotion on the streets outside the National Planning Bureau offices. I went out and saw that a large crowd was marching, carrying banners saving "Leave us our Cabinet, send Parliament home instead", "Purge the corrupters", and "Elections immediately". The crowd swarmed into Parliament, broke a few chairs, pulled down some Dutch flags, presented a petition to Vice-President Hatta, and moved on to the fence surrounding the President's palace. About an hour later, with a speed and efficiency not previously demonstrated, the army moved in with tanks, armoured cars, cannons and machine guns, and trained their weapons on the palace rather than the crowds. Sukarno came out, addressed the crowd in the face of the guns, promised early elections, declined to become a dictator by dismissing Parliament, and asked the crowd to disperse. They did so, a curfew was declared, and the armed forces patrolled the streets. In the next few days similar uprisings occurred in other major cities, and in three of the seven military districts the commanding officer was overthrown by junior officers. Both Parliament and the Wilopo Cabinet survived that particular crisis, but Wilopo succumbed to another a year later, arising out of efforts to remove Indonesian squatters from plantation lands and resettle them elsewhere. People are still trying to unravel the 17 October affair to determine exactly what lay behind it. In any case it started a train of events that led to the Sukarno dismissal of Parliament and the Constituent Assembly in 1959 and the introduction of his "guided democracy". The armed forces stood on the sidelines until the abortive coup of 1965 and the subsequent unrest, which led to the Suharto takeover in 1967. GETTING T H I N G S DONE

Meanwhile, despite government indecisiveness, at my three places of work - the Finance Ministry, the National Planning Bureau and the Bank of Indonesia — we did get some things done. This success was largely due to the competence and pragmatism of Sumitro and Sjadruddin. Although these two men were leaders in two opposing political parties, both put the formulation and implementation of effective policies before all other considerations. Sumitro is several years younger than I, has a Ph.D. in economics from the University of Rotterdam, and is one of the most brilliant men I have ever met. Sjafruddin, who was the one other Indonesian at the time to have a Ph.D. in economics, also from Rotterdam, is one of the wisest men I ever met. As graduate students Sumitro had become an ardent Keynesian, while Sjafruddin remained a solid neoclassical economist.

63 The Ideological Factor

They carried their Rotterdam seminar debates to the top level of Indonesian monetary and fiscal policy. Sumitro believed in an expansionist fiscal policy to promote growth and rural credit to promote agriculture. Sjafruddin believed in a conservative monetary policy to avoid inflation. When I arrived in Jakarta the two were not on speaking terms. Their quarrel was not about major issues of policy, but about one paragraph in the proposed statutes of the new Bank of Indonesia, then still De Javasche Bank. The paragraph related to credit policy. The Bank at that time was still a trading (commercial) bank as well as a reserve bank. Sjafruddin interpreted "credit policy" to mean the appraisal of clients for loans, deciding the appropriate terms, duration and interest rates for each loans to each borrower, determining what types of security were acceptable, and other aspects of normal, day-to-day business of any commercial bank. Accordingly he insisted that "credit policy" should be the responsibility of the Bank alone. Sumitro identified "credit policy" with monetary policy in general, the rate of expansion of the money supply, and insisted that ultimate responsibility for such policy lay with the government, and particularly with the Minister of Finance. Obviously a reconciliation between these two men was of fundamental importance. Frustrated by so many quarrels I was powerless to resolve, I had the great satisfaction of helping to end this one. As well as attending the weekly meetings of the Governor and Board of Directors of the Bank (the directors were still almost entirely Dutch) I tried to see Sjafruddin alone at least once a week as well. On every possible occasion I would say to him, "You know, Dr Sjafruddin, the Minister for Finance is in total agreement with you on that score." And when possible I would say to Sumitro, "It may surprise you, Mr Minister, but Dr Sjafruddin shares your views on that issue." Meanwhile with the help of Dr Aa and the Ministry's legal adviser I drafted a new paragraph which made a sharp distinction between "credit policy" in the sense of dealing with commercial borrowers and "monetary policy" in the sense of determining the desired rate of expansion of the money supply, assigning the first to the Bank and the second to the Ministry. On this basis agreement was reached, and Sumitro and Sjafruddin became fast allies. They constituted a strong team. THE PLANNING BUREAU

While things went well at the Finance Ministry and the Bank, at the Planning bureau progress was slow. There we faced complex questions: how to design an overall strategy for the development of

64 All the Difference

Indonesia, expressing that strategy in a program distributed through time and among sectors and regions, and finally establishing priorities for individual projects in each sector and region. The recognition that Indonesia was not a closely integrated national economy, but a collection of regional economies very loosely tied together, was a great leap forward in terms of understanding; but since I was unaccustomed to thinking in regional terms and had never been trained to do so, it only made the construction of an effective development plan more difficult. In the Outer Islands, with their rubber, oil palm, tobacco, sisal, tea, petroleum, bauxite, tin, gold, hydro-electric capacity, and relatively low population density, the problem seemed to be mainly one of distribution; growth should not be difficult. But what must be done with Java, where two-thirds of the population lived? Concentration of the development effort in the modern sector, located mainly in the Outer Islands, while Java had only a few modern sector services and the peasants were left largely to their own devices, had resulted in technological and regional dualism, and left the bulk of the population poor. What reason was there to think that the same strategy continued into the future would not have the same result? I was by no means alone in my confusion. The other United Nations posts in the National Planning Bureau were gradually filled, and moreover by extremely able and experienced people. An example was Nathan Keyfitz, who became distinguished professor of demography at Harvard, and who was our population expert. We had also recruited some very bright young Indonesians, including Mohammed Sadli and Widjojo Nitisastro who later went on the Cabinet, and some able volunteers, including James Mackie from Australia (now at ANU) and Anne Willner from the United States. We set up Working Groups, comprising leaders in various fields of economic activity. Top management of Dutch and other foreign enterprises, as well as Chinese and Indonesian entrepreneurs, were readily available to us. Cabinet ministers, senior bureaucrats and foreign advisers were eager to talk to us. Many of these had ideas about specific programs or projects, but we lacked the analytical framework which would enable us to assemble a sensible overall plan. This lack of clarity as to how to go about the task of development was no reflection upon the competence of the individuals concerned. It reflected instead the sad state of knowledge in the whole field of development, after seventy-five years of neglect of the field by economists, and by most other social scientists as well. It is difficult now, more than thirty years afterwards, to recall the extent of our ignorance of the development process at that time. The neoclassical theory on which most of us had been brought up

65 The Ideological Factor

included no theory of economic development. It had only a theory of capital accumulation, with technological progress taken for granted. Schumpeter had taught us the importance of entrepreneurship, but had not told us how to create entrepreneurs where they did not exist, beyond stressing the need for the right "climate" for entrepreneurial endeavour, without concrete instructions for creating that either. Few of us had yet learned how to apply Marxist analysis of power structure to improve our understanding of the functioning of particular societies, and deriving policy conclusions for a non-socialist system. The economic historians had always been concerned with economic development, even if they did not always use that term; but their conclusions were too general to be operational, such as "challenge and response" and the relationship of religion and "sub-dominant elites" to the generation of entrepreneurship. There were growth models and the related "two-gaps" (investment minus savings and imports minus exports) analysis, which were useful as far as they went, but were highly aggregative, and provided no clues as to what a particular country should actually do to promote growth, beyond encouraging international trade. In Libya it had been easier: our tools were adequate for the job. The efforts of my fellow economists and myself had been directed mainly towards designing a monetary, fiscal and foreign exchange system, which was something we more or less understood; and the specialists on the team were able to discover and install means of raising productivity in their own particular fields. The result was a quite respectable plan for the Libya of that time. But in Indonesia such a "basic needs" approach would not be enough. The modern export sector was already very efficient, innovations based on sophisticated research flowed in a constant stream, and exports were burgeoning. The traditional sector too was efficient in its way, producing adequate family incomes most of the time in most parts of the country on postage-stamp size holdings. Somethings might be done through improved seed, fertilizer and pesticides, but yields were already quite good and such innovations would not make the peasants prosperous so long as the peasant population continued to grow. In Indonesia, industrialization and structural change were essential for any real development to take place. But what industries, what change? STABILIZATION POLICY

I was saved from revealing my ignorance of the development problem and how to deal with it by the collapse of the Korean War boom.

66 All the Difference

Indonesia had been lucky in the timing of its independence. The Korean War which began a few months later brought a boom in some of Indonesia's major exports. Foreign exchange flowed in faster than Indonesians were able to spend it, and Indonesia quickly accumulated huge reserves. Since the revenue system was closely tied to trade, and the infant country's capacity for altering the pace and pattern of its spending was limited, large budget surpluses accumulated as well. The "two gaps" were automatically filled. The development problem was not one of finding enough domestic and foreign finance, but of deciding what to do to make effective use of available financial resources. As already stated, the National Planning Bureau at the time was not very expert at doing that. All that changed suddenly in the middle of 1952 when the Korean War ended. Prices of Indonesian exports dropped drastically, and both the balance of trade and the budget moved into deficit. The government suddenly found itself in a critical condition, and was compelled to turn from development to stabilization as its top priority economic objective. The compulsion was especially strong, of course, in the Department of Finance and the Bank of Indonesia. I found myself moving with them to a concentration on the current crisis. Once again I was on familiar ground, dealing with monetary, fiscal and foreign exchange policy. The story of stabilization policy during those years is told in my book on Indonesia's Stabilization and Development, and it would be inappropriate to repeat it in any detail here. I do wish, however, to dwell briefly on one aspect of it that might be considered controversial: the introduction of a system of multiple exchange rates. Multiple exchange rates are often attacked as one of the very worst kinds of intervention in the operation of a free market, and Latin American experience, where multiple exchange rates favoured imports of capital goods and delayed development of domestic capital goods industries, is frequently cited in support of this attack. To me this argument is like saying that one should never enter an automobile because many cars are driven badly and accidents occur; or that one should never go to bed because many people die there. The fact that some kinds of policy have unfortunate effects when they are badly designed and badly administered does not mean that those kinds of policy should never be introduced under any circumstances. On the contrary, there are circumstances when a uniform exchange rate cannot lead to "equilibrium", or stability, in the economy as a whole. The case for a single, uniform exchange rate rests on the assumption that the national economy is a single, tightly integrated

67 The Ideological Factor

whole, with a high degree of mobility of all resources among sectors and regions, rapid diffusion of information among sectors and regions, and quick responses of all prices and incomes to changes in any part of the system. The Indonesian economy in the early 19505 bore no resemblance to such a system. It was instead a highly fragmented economy, composed of distinct and essentially unrelated units, which might be defined in terms of either sectors or of regions. As already stated, there was a marked overlap among the sectors and the corresponding region; the technological dualism corresponded to the regional dualism. The modern export sector was almost entirely in the Outer Islands, the traditional peasant agriculture sector was almost entirely in Java, and this sector was also the major importer. Java had a crushing import surplus, the Outer Islands a handsome export surplus. There were virtually no flows between the two; the Outer Islands did not import Javanese rice or handicrafts to any significant extent, and Java was not a major market for rubber, palm oil, tin, bauxite and petroleum from the Outer Islands. Moreover the foreign markets to which the Outer Islands exported were not the foreign markets from which Java imported. There were fewer and weaker linkage effects among Indonesian regions than there were among European or North American countries. Under such circumstances there was no reason to expect that the same foreign exchange rate would equilibrate all of the distinct Indonesian economies at once. A price of foreign exchange high enough to achieve balance in the international accounts, keeping Javanese imports more or less in line with Outer Island exports, would put unwarranted amounts of rupiahs in the hands of exporters, make them unjustified gifts of windfall profits, and create inflationary pressure. Moreover, the gifts would not increase exports in the short run; supplies of export products were inelastic in the extreme. It takes years to expand the output of rubber, palm oil or petroleum in response to increased profits. Restoring balance in both the budget and the international accounts was virtually impossible with a single exchange rate, for the whole bundle of regional economies of which Indonesia consisted. Of course the same result could have been achieved - on paper - by a system of taxes and subsidies; but Indonesia at the time was quite incapable of administering such a system, whereas it could manage an exchange control system efficiently and without corruption through the central bank and the banking system. (Applications were made through the trader's bank, and were reviewed by several people, each concerned with one criterion for approval, who saw only a number and had no idea whose

68 All the Difference application he was handling. There was no way for the applicant to discover and bribe all the officials who might review his application.) In any case the system worked. Exports were sustained, imports cut, the budget deficit reduced according to target, and the rupiah was stable on the "free" market. The shift of interest from development to stabilization was particularly evident in what had become known as Sumitro's "kitchen cabinet": the Minister, myself, and the Treasurer General (Sutikno Slamat); the able Dutch lawyer referred to above, Dr Aa, who was sympathetic to the revolution and to the regime, and a friend of Sumitro's, who proved very valuable in the drafting of economic legislation and in foreseeing difficulties of implementation; a Dutch economist from the Ministry of Economic Affairs, Dr van Andel, also a friend of Sumitro's and a supporter of the revolution; an Indonesian economist from the Ministry of Economic Affairs, Dr Sunarjo, another friend of Sumitro's; and a young student of Sumitro's, Mohammed Sadli, who was a member of the staff of the National Planning Bureau, later to become Professor of Economics in the University and later still a Cabinet Minister; Dr Kheow Bien Tie, later to become director of the Amsterdam branch of the Bank of Indonesia; and Dr Ondt, who also moved to the Amsterdam branch of the Bank. This group met early each Monday morning in the office of the Minister. On the wall were charts, kept up to date within a week, indicating the actual level of foreign exchange reserves compared to the target set for the year, and indicating the aggregate cumulative cash budget deficit compared with the target established. Discussion centred around these two indicators of the economic situation. The actual stabilization measures introduced have been discussed elsewhere, and can be dismissed briefly here. One device was the multiple exchange rate already discussed, with the prices of foreign exchange varying in accordance with the importance attached to the imports. A second was a system of advance payments in rupiahs for foreign exchange allocations, a measure which brought immediate reductions in the monetary circulation. A third was the reduction of taxes on exports in an effort to encourage expansion of exports. Efforts were also made to bring direct increases in output through use of fertilizer, seed selection, expansion of acreage, and repair and improvement of irrigation systems and transport facilities. This constellation of measures was successful in checking the inflation for the time being, and also in bringing about an improvement in the value of the rupiah in world markets for foreign exchange. Astounding as it may seem in retrospect, at the time when Finance Minister Sumitro decided that some effort must be made to reduce

6g The Ideological Factor and regulate government expenditures, there were no budgetary limitations on expenditures of individual ministers. Indeed, the Finance Ministry had only the vaguest of ideas as to how much each of them was spending. No system of budgetary control had yet been enforced. Each minister operated more or less as an independent business, making commitments and drawing on the government account with the central bank according to his own views of his needs. So long as revenues were accruing faster than the ministries were administratively able to spend them, this system, while inefficient, was not disastrous. As the deficit grew and inflationary forces gathered it was obviously necessary to introduce some control. Up to this time, also, no budget had ever been presented to Parliament before the period covered by it was already over. In November of 1952, the 1953 and 1952 budgets were presented together to the Parliament. A "freeze" was imposed on the spending of various ministries, and the outlays above a stated minimum would henceforth require the approval of the budgetary control section of the Ministry of Finance. The fiscal year was then the calendar year. The 1953 budget aimed at a maximum deficit of Rps 1.8 billion, which was expected to be non-inflationary. THE PLAN

Meanwhile, the Planning Bureau took three years to assemble Indonesia's first Five Year Plan framework for 1956—60, the GarisGaris-Besar Rentjana Pembengunan Lima Tahun ig^6—6o. There were many reasons for this slow performance. It was not only caused by the lack of understanding of and commitment to development on the part of the leaders. Many members of the team were specialists in rather narrow fields, rather than specialists in development as such. In fact, most of us "experts" knew little about development, and still less of Indonesia, which, as we have seen, is a very complex country. There were delays in recruiting the planning team - it was not completed until June 1953. There were also administrative problems. It also did not help that, midway through the period, the Korean War's end throttled our budget. In retrospect, the Indonesian plan for 1956-60 was probably no worse and no better than most plans of the period. It was not really a development plan at all. At best it was a development budget: there was no strategy, virtually no structural change, certainly no "big push". It went through the usual macro-economic exercises of the time, but on a very modest scale. Net capital formation had been running at 5 to 6 per cent; it was hoped it could rise to 8 per cent by 1960. The incremental capital: output ratio was calculated at

70 All the Difference

below 2:1, and the average increase in national income over the plan period was estimated at 3 per cent. With population growth at 1.7 per cent that gave an increase in per capita income of 1.3 per cent per year. Monetary, fiscal, and other economic policies were to be directed towards recapturing 40 per cent of this increase for further capital formation, leaving 60 per cent, or 0.78 per cent of national income annually, for improvements in living standards. With the national accounts in the state they were, we could not possibly have told whether we were on target or not, and it would not have mattered much in any case. A 0.78 per cent improvement on a per capita income of $98 was hardly calculated to bring joy to the people's hearts. The development budget was divided by sectors in a manner calculated to increase the role of the modern industrial sector in terms of value of output, but the scale of the effort was so small that it would have little impact on the structure of the economy in terms of employment. It was, in fact, very much a continuation of the kind of development policy that had been pursued by the Dutch colonial administration. The individual projects in the plan were sensible enough, but they represented mainly extension or modest expansion of what the various ministries were already doing, plus some encouragement to private enterprise, especially in the modern export sector. Altogether it was a rather disheartening effort; but it reflected our most optimistic estimates of dometic and foreign resources that seemed likely to be available. We simply were not thinking of any drastic transformation of the economy that might yield significant acceleration of the rate of growth. LESSONS FROM INDONESIA

The most important thing I take from my Indonesian experience is this: for a country to develop, it must have a widely accepted ideology, whether or not in the form of a religion, which will do two things at once: unify the people behind their governments, and provide a framework within which decisions, both private and public, can be made, which are conducive to development. The combination of Christianity, liberalism, and parliamentary democracy provided such an ideology to the countries of Western Europe, North America and Australasia in the eighteenth and nineteenth centuries. Marxism and centralized planning worked reasonably well, so far as development is concerned, as an ideology for the socialist countries for a few decades in the twentieth century, but now seems to be breaking down. Some Islamic state may some day provide a different example;

71 The Ideological Factor

China's effort at market socialism may succeed. But such an ideology is what Indonesia has never had, and is still groping for. The pragmatism of the Suharto regime is not enough. Nor is the combination of Islamic religion and Hindu-Buddhist culture. At the same time, I rejected Boeke's concept of sociological dualism as the major explanation of underdevelopment. Is there an inconsistency here? Surely ideology, culture and religion are inseparably intertwined? But Boeke seemed to be speaking of individual values, aims and personality traits which resulted in individual behaviour inimical to development. His conclusion was that societies composed of such individuals could never develop as the now industrialized countries have done. It was this contention that I denied, and still deny. There is potential for development in any culture. The recent experience of the newly industrializing countries bears me out. This view does not mean that cultural factors are unimportant. On the contrary, as will become evident below, it has become my firm conviction that one must know just how a particular society functions in order to formulate effective policy or make effective plans for its development. Nor am I denying that behaviour of individuals and social groups can be barriers to development. But this behaviour is often much less deeply imbedded in the "traditional culture" of a particular society than appears at first sight. It can change radically and rapidly, in not more than a decade or so — again, as in the case of Quebec and Libya, when external conditions change. What is labelled "culture" often turns out to be the society's physical environment, and when this environment is changed abruptly, "cultural barriers to development" can melt away with breathtaking speed. Certainly the Actors making most of the decisions important for development in Indonesia at the time were Indonesians, and certainly the Indonesians were highly diversified both culturally and politically. The economic performance of the new nation's early years was prevented from being worse then it was by two factors: the appearance in virtually all sectors and regions of some kind of entrepreneurship; and the unifying bond among members of the "Leaders of Revolution Old Boys' Club". BACK TO C A M B R I D G E

Meanwhile, on the other side of the world in Cambridge Massachusetts, New York and Washington, a series of events had been launched which were to change the course of my career again. The Massachusetts Institute of Technology (MIT) was negotiating with the Ford Foundation, and mustering support from the State De-

72

All the Difference

partment and other Washington agencies, to finance a Center for International Studies, focused on American relationships with developing countries. A major part of the ambitious scenario presented by the Institute was the International Development Program. It came to be known as "the three-I program", covering development of Italy, India and Indonesia. Paul Rosenstein-Rodan, my mentor on history of thought and bumps on indifference curves in London, had been persuaded to leave his influential post as Director of Research in the World Bank and come to MIT as Director of the Italy Project. Wilfred Malenbaum was appointed Director of the India Project. Max Millikan, Director of the Center, came to Indonesia with his wife Tina to discuss the Indonesia Project with the Planning Bureau, other government departments, universities and research institutes. I played host to them, showed them around and drove them about the country. Tina was so terrified by my driving through the complex traffic of Javanese roads, with its motor cycles, bicycles, ox carts, and masses of people, as well as cars, lorries, military vehicles and buses, that she spent most of the time curled up in the foetal position on the floor of the back seat, and needed stiff drinks both at the beginning and the end of each journey. The conversations with the government went well, and before leaving the country Max invited me to come to MIT and direct the Indonesia Project.

4 The Power Factor: Indonesia and the Philippines, ig54~59

My luck was holding. I had been at London, Minnesota, Harvard and McGill during periods of unusual excitement, creativity and leadership in each case. When I arrived at MIT in 1954 it was widely considered to have one of the best, if not the best, department of economics in the world, with such stars as Paul Samuelson, Bob Solow, Evsey Domar, Everett Hagen, Charlie Kindleberger, Bob Bishop, Carey Brown, Max Millikan, Rupert Maclaurin, Richard Eckaus, Walt Rostow, Elspeth Rostow; and in the School of Industrial Management, Eli Shapiro, Robert Meadows, and others. In the new Center for International Studies, apart from the economists already mentioned, there were brilliant scholars from other fields: Ithiel de Sola Poole and Lucien Pye in political science; Dan Lerner in sociology; Harold Isaacs in communications. Harvard was still there, although at that time those of us who were at MIT thought of Harvard economics as a bit old hat, particularly in the development field. Boston University, Brandeis and Tufts were becoming increasingly lively and productive centres. There were of course the almost limitless resources of MIT in the natural sciences and engineering, and, beyond that, the splendours of the "Cambridge Community" and of Boston as a whole. I was glad to be back. I had enjoyed Indonesia, and indeed I had fallen in love with it, but, after two years, it was good to be immersed in my own culture again. Anyway, as Director of the Indonesia Project, I expected to spend a good deal of time in Southeast Asia over the next five years or so. The Indonesia Project already had some excellent staff members when I arrived: Bill Hollinger and Doug Paauw in economics; Jean

74 All the Difference

Mintz, Guy Pauker and Ruth McVey in politics; John Rodriguez in sociology. And then there was the Indonesia Field Team in anthropology, which was just getting under way: Clifford Geertz, John Fagg, Robert Jay, Hillie Geertz, Edward Ryan, Alice Dewey. At the time it worried me that we seemed to be spending more time and money on anthropology than on economics. Now I think that recruiting those bright young anthropologists and turning them loose in Indonesia was the best single thing the entire Indonesia Project did. Indeed, the interdisciplinary approach that the anthropological team signified was just part of the ferment of ideas at the Center for International Studies at the time. Paul Rosenstein-Rodan of the Italy Project was elaborating on his theory of the "Big Push"; Everett Hagen was expounding his ideas concerning environmental and cultural determinism; Eckaus and I were exploring the significance of technological and regional dualism; Walter Rostow was perfecting his theory of stages of growth. At the same time we were considering new theories coming in from elsewhere: Gunnar Myrdal's backwash theory, Francois Perroux's growth poles. Nurkse's balanced growth theory, Hirschman's unbalanced growth theory. Altogether there was a sense of exploration and intellectual excitement — in retrospect, perhaps more excitement than the theories themselves warranted. The Center for International Studies (CENIS) was then coming to the end of an initial two-year grant from the Ford Foundation, and would need more money to carry on with the program. The first thing that occupied the senior staff of CENIS just after my arrival, therefore, was the preparation of a new submission outlining the program for the next few years. With such an extraordinary team involved, the debates that took place in the course of preparing that document were extremely stimulating. We ended up with a booklength proposal, which I sometimes think is the best piece of work CENIS ever produced, not an unusual story for research programs of that kind. It got us our money from the Ford Foundation, although less than we asked for and spread over five years instead of three, so that our annual budget was quite a bit less than we had counted on. The response was speedy and simple: we had planned to tap the top level natural science and engineering talent of the Institute, especially for such topics as choice of technology. When our annual budgets were reduced, we dumped the scientists and engineers, a solution that I regret to this day. I spent the balance of 1954 in Cambridge, doing some writing based on my previous experience in Indonesia and Libya, and working out details of the project for the five years of the program.

75 The Power Factor

Discussion within the Center was almost continuous, and I learned a good deal from my colleagues. I returned to Indonesia in 1955 with other members of the team. We had no need to be continuously in Jakarta, so we rented a hotel room and a small apartment for our use there, and took two houses in Tugu, one of the loveliest spots in the Puntjak, a mountain resort some one and a half hour's drive from the capital. Our landlord was Takdir Alishabana, one of Indonesia's leading philosophers and poets, a man with an international reputation. His mansion was just across the road from our houses, with a large swimming pool that we were allowed to use. The weather at that elevation (about 1400 metres) was about as close to perfect as one could imagine, and we did our reading and writing, and much of our interviewing, there. An added bonus was that Bill Palmer's beautiful house was just a short walk away through the tea gardens. Bill was a friend not only of Sukarno but of all the top people in the government and in the private sector. On weekends there were always several of them there, and we made a practice of going to Bill's for a swim and a meal at least once on Saturdays and Sundays. On Saturday nights Bill showed movies for his guests and for the villagers, who squatted on the lawn while the guests sat in armchairs in the pendopo (open drawing room) with the screen set up on the lawn outside. At that time the Darul Islam, a terrorist group that wanted a Koranic State in Indonesia, were still very strong. On movie nights they would come down from the high mountains and, at Bill's insistence, stack their guns against the fence at the gate. Because of Bill we never had trouble with the Dural Islam, although they did visit us occasionally to exact contributions for their "schools" or their "hospitals". They were very polite and scrupulous about it, writing down the date and the amount in a ruled paper book; and if we felt that their demands were becoming too frequent, we had only to turn back a few pages and show that we had made a generous contribution quite recently. They never protested. (There was a story of a Dutchman who drove the back road to Bandung against all advice, since it was known to be held by the terrorists. He was stopped by a terrorist road block. His papers were examined and he was allowed to proceed. He then inquired whether it would be safe for him to do so. The leader replied, "You will be safe for the next fifteen miles, because for the next fifteen miles we hold the road. After that you will run into the regular Indonesian Army, and we can't be responsible for anything that may happen to you then.") My role upon my return to Indonesia was not very different from what it had been before. Sumitro was again Minister of Finance,

76 All the Difference

Sjafruddin was still Governor of the Bank, and Djuanda, who had been Director of the Planning Bureau, became Minister of Planning and later Prime Minister. Bill Hollinger and Doug Paauw quickly established excellent relations with the government, and since we were doing research on Indonesian development, we were treated in effect as additions to the advisory team provided under various technical assistance programs. I was as much an adviser to the Indonesian government as ever, and dealing with substantially the same set of problems as before - except, perhaps, to the extent that the simultaneous presence in Indonesia of the anthropological field team lured me across interdisciplinary boundaries. THE ASIAN AFRICAN CONFERENCE

It was an opportune time to return to Indonesia, since 1955 was the year of the Asian African Conference at Bandung. The Bandung Conference was the first major meeting of leaders of the newly independent countries of the world, and it made history. Because of our special relationship with the Indonesian government, the team was invited to attend the conference, and afterwards Guy Pauker and I wrote a joint article about its achievements. A major feature of the conference was the participation of Chou En Lai from China, which was uncertain until the last moment. Nehru obviously regarded the conference as his, and expected to dominate it. He counted without Chou En Lai, who, with centuries of landed aristocracy behind him and enormous finesse and charm, quickly and smoothly became the undoubted star of the meeting. Nehru was so upset by this course of events that he lost his temper and made extravagant and foolish statements, such as "We in India don't care for either of your blocs [capitalist and communist]! If need be we can take on both blocs at once and emerge victorious!" But in the end the conference gave the newly independent nations a stronger sense of identity, and a recognition that, acting together, they could be a powerful force in the world. The Bandung Conference was particularly important for Indonesia as host. It was a huge success, and gave Indonesians a new sense of confidence in their ability to operate efficiently on the modern world scene. For 350 years the Dutch had been telling them that they were incapable of doing anything on their own in the modern world, and many Indonesians had come to believe it. After the conference my Indonesian friends said, "This is the first time we have ever organized anything large-scale on our own, without the Dutch. Maybe we can run our own affairs and cope with the modern world

77 The Power Factor

after all." Not only did the delegates congratulate the Indonesians on the smoothness of the organization, and the competence with which they dealt with the fearsome problems of security entailed in having so many heads of state in one place, but they had a good time in Bandung, and said so. Especially appreciated were the discretion and tact with which the hosts arranged for their guests to enjoy the beauty and charm of Indonesian girls of various ethnic groups, in complete privacy and security. The conference attracted worldwide attention, and the press coverage was phenomenal. Tugu is on the main road from Jakarta to Bandung, and the team had opportunities to entertain distinguished participants on their way to and from the conference. Even more distinguished guests stayed with Bill Palmer and Takdir. Bill had the novelist James Michener; the famous syndicated columnist and friend of Jack Kennedy, Joe Alsop; and the Asian correspondent for the London Observer. One evening Joe Alsop, who was then also a Visitor at Harvard, drank a little more than usual and began berating our MIT project: "I can find out more about what's going on in Indonesia in two weeks than your team can in two years, because I am not only a journalist but a student of history, and what's happening in Indonesia today is exactly what happened in Yellow River Valley in China in the year ..." (I forget the year, I think it was 1200 B.C.). I was understandably irritated, and I became even more irritated as time passed, Indonesian democracy was eroded, the economy deteriorated, and I realized that he was right. Nonetheless he called on me in Jakarta to tap what special knowledge I had of Indonesian affairs. Takdir was an unusual landlord, to say the least. He liked to drop in on us, at one or the other of our two houses, to discuss philosophy, literature, politics and economics. He was always stimulating. But behind his scholarly facade was a shrewd entrepreneurial mind as well. The house in which I, Guy Pauker and our two secretaries lived had a terrace with no roof. Since the weather varied from rain to blazing sunshine during the day, the terrace was of little use to us. We decided to build a roof over it at our own expense. We hired some local labour, who collected local materials and built the roof very quickly. The next time Takdir came to visit us we sat out on the verandah with our drinks. After the usual round of scholarly talk, Takdir glanced up at the new roof that we had paid for, and remarked. "The roof is really very nice. Of course you realize that it raises the value of the house, and that I shall have to raise your rent accordingly." We did not argue. Housing was too scarce and our house too attractive to do anything but accept Takdir's logic.

78 All the Difference

Our two secretaries were both imports, one from England and one from Australia, who accepted our rather meagre salaries because they were eager to visit Indonesia. (Complete fluency in English, to the point of being able to transcribe and type dictation accurately in that language, was essential for us, and almost impossible to find among Indonesians at that time - especially Indonesians willing to live in Tugu, which had no society suitable for educated people.) Shortly after her arrival the young Australian girl was alone in the house one night, when for some unknown reason some Darul Islam soldiers approached the house and began shooting out the outside lights, one by one — perhaps just for target practice; they bore us no ill-will. Terrified, she threw open the front door and spoke two of the ten words she then knew of Indonesian: "Tabe, kopi" (Greetings, coffee). The men stacked their rifles on the verandah, admired the new roof, and went into the drawing room for coffee and a chat. After that our relations with the DI were better than ever. Meanwhile my bewilderment concerning Indonesian development was diminishing. I had begun to see that my principal error had been in seeking some sweeping solution to the problem of poverty in Indonesia at the macro level. Once I recognized the need to approach Indonesian development region by region, sector by sector, industry by industry, the picture became less of a blur and some sharp images appeared. There were policies to be pursued, measures to be taken in each of these subdivisions of the national economy, and a national plan could be constructed by aggregating and coordinating these policies and measures. However, before any democratic government could reach a degree of consensus to permit a development plan to be drawn up and implemented, Sukarno implemented his konsepsi in 1959, declaring the new constitution invalid and replacing it with the original 1945 constitution, in which the President was the centre of power. He dismissed the Constituent Assembly, which had been arguing endlessly over constitutional reform, and turned the Parliament into a cross between a rubberstamping agency and a debating society, with little real power. Hatta resigned in protest and Sukarno was left in virtual control of the country, with only the more right-wing army officers, especially Colonel Nasution, to provide any effective opposition or balance. From 1959 until the Suharto takeover in 1966, Sukarno's special genius managed to generate a declining per capita income in that country, so rich in human and natural resources. It was not until Suharto seized power and turned over economic policy to a group of brilliant young foreign-trained economists that anything like a respectable development plan was prepared.

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The Power Factor

THE INDONESIAN

PETROLEUM INDUSTRY

One of the most fascinating jobs that Sumitro gave me while I was financial adviser to the government was to negotiate a new agreement with the foreign oil companies - Standard Oil (the Standard-Vacuum Co.), Royal Dutch Shell (BPM) and Caltex. The problem was that the Indonesian government's take was too high, about 70 per cent, when the standard formula was the Venezuelan one of 50-50. Sumitro was convinced that if the oil companies were to be encouraged to invest heavily in Indonesia we would have to conform more or less to this formula. It might seem that this task would be simple, but it turned out to be enormously complex. The Indonesian take was an intricate maze of income taxes, sales taxes, export duties, royalties and fees that had accumulated over decades. Merely reducing corporate income taxes would be of no use, since the companies could deduct income taxes paid abroad from their income taxes in their home countries. We finally worked out a much simplified system that left the companies a little less than 50 per cent of their operating profits, and they invested so much in exploration that enormous reserves were discovered. Indonesia became a major oil exporter and oil became the major Indonesian export. One story may be worth relating for the light it throws on the effectiveness of American and other anti-trust legislation. At one point I became so desperate that I said to the top officers of each of the three companies, "The Minister and I are both so busy, it would help us enormously if the three of you would get together and make us a single proposal that would be satisfactory to all three companies." You would have thought I was proposing matricide, so deep was the shock and horror that greeted this proposal. They replied that they could not possibly consider such an idea, lest it be regarded as collusion and lead to anti-trust suits. It was dangerous enough for them to sit simultaneously in the same room for joint meetings with the Minister and myself, they protested, and they would agree to the proposal only if they had strong letters signed by the Minister ordering them to do so. No doubt it was partly my experience with the Indonesian oil industry that led the National Planning Association in Washington, which was undertaking a series of studies of American enterprise abroad, to come to the MIT Indonesia Project for their proposed study of Stanvac in Indonesia. I had some misgivings about this proposal because the first report in the series was on the United Fruit Company in Guatemala, and there were intimations that the United States Marines had gone into Guatemala largely to save the

8o All the Difference

United Fruit Company. However a later study covered Sears Roebuck in Mexico, which had done a good job in fostering Mexican enterprises as suppliers, and both Max Millikan's highly placed friends in Washington and the American Ambassador in Indonesia urged us to take it on. I knew the top people in Stanvac in Indonesia, and of the other oil companies as well, and I liked them. They were all extremely able and civilized, and it seemed to me that they acted in a very responsible manner both towards their Indonesian employees and towards the Indonesian people as a whole. A study of Stanvac Indonesia would require neither hiding facts nor whitewashing. Finally - and the big attraction - the project was very well financed, would increase our total budget by about 60 per cent, and would enable me to send the whole team to Indonesia for a few extra months. The project was of course highly sensitive politically, both in Indonesia and in the United States, and is a good example of the perils that await any academic research team that becomes involved in policy and planning in developing countries. The project was not without its bad moments (one member of the team irritated the Indonesians so much that he nearly got all of us thrown out of the country), but it came out well in the end, and added considerably to the total store of knowledge of the team about Indonesian development. During the writing of the Stanvac study I came to know Stanvac's top public relations officer very well. He wrote very well himself and gave me some useful lessons in style. One day when I was in his office, he had a call from someone in Socony-Vacuum, another subsidiary of Standard Oil of New Jersey, which had offices in the same Wall Street skyscraper. I said jokingly, "I suppose you have a secret passage from here to Socony." He looked startled out of his skull; he did not think it was a joke at all. The anti-trust nightmare again. THE PHILIPPINES

Early in 1956 I was approached by the United Nations to see whether I would be interested in going to the Philippines as economic adviser to the National Economic Council (NEC), the development planning agency of the country, then engaged in the preparation of their 1957-61 Plan. This was in intriguing idea, and I discussed it with Max Millikan. He agreed with me that some comparisons with the Philippines could only strengthen the Indonesia studies, and that going to the Philippines at UN expense would make it possible for me to go to Indonesia one more time. So I accepted the United Nations offer. My first wife, Agnes, and I had been divorced shortly

8i The Power Factor after my return to Canada from Australia, and a few years after that I married Dick Downing's cousin Jean. In June 1956 Jean and I set off together for the Philippines. When I arrived in Manila, the UN representative, an Australian economic historian named Eric Ward, explained to me a bit more of what was involved. The request of the Philippines government to the UN for a high level economic adviser, he said, was the beginning of a movement to break the monopoly of American advisers in the fields of economic policy and development planning. The United States was not pleased with this trend, and had tried to persuade the government of President Magsaysay to withdraw the request; but Magsaysay stood his ground. I had therefore to be very cautious and diplomatic in my approach to the United States Embassy and their aid mission. I would certainly need their help, since they had more studies and documents on the Philippines economy than anyone else. So it was with some trepidation that I first approached the USAID mission in Manila. It was a big affair. Together with the embassy they occupied a large office building, several storeys high, on what was then still called Dewey Boulevard, right in the centre of the curve of Manila Bay. Across the road the embassy had another building, and next to that was the Army and Navy Club, and exclusively American institution. Marine guards and limousines with American flags flying were much in evidence. It was all a bit awesome, but as it turned out the Americans were very friendly and helpful. They gave me access to such (unclassified) documents as they had, and Walter Krause, then head of the USAID mission and now with the Brookings Institution, told me much that was not in the documents, always adding "If you attribute this statement to me I shall deny it." I was even granted a temporary membership of the Army and Navy Club, which was a godsend, since it had an Olympic-size swimming pool right on the bay and very good food. Jean and I lunched there nearly every day. At that time Filipinos were not allowed to join, but could be invited as guests if sufficient notice was given to the house committee, and most of them liked to come; it was an excellent means of setting up quiet, informal meetings. I had heard something of Manila's lively night life, and Jean and I were eager to sample it, and to learn the cha-cha-cha, which was then the rage there. I went to Eric Ward's pretty young Filipina secretary for advice, feeling that she ought to be an expert, as she turned out to be. When I asked about nightclubs, she paused a moment and then explained, "Well, in Manila there are four classes of nightclubs: first class nightclubs where you take your wife; second

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class nightclubs where there are beautiful hostesses; third class nightclubs where there are hostesses; and then there are dives." The description was accurate, although sometimes it was not easy to distinguish the second from the first class, since the music was just as good and the decor just as elegant in one as the other. We once wandered into what looked to be a very smart club with a young Filipina journalist in tow. She immediately became nervous and said, "I can't stay here; all my father's friends are here with their mistresses." This successful young professional woman lived with her brother; her father lived with his mistress elsewhere in Manila, while her mother managed the family plantation in Mindanao, a common enough pattern in the Philippines of that day. She once arrived late at our flat for dinner, and explained that she had been compelled to wait until her brother left the house before she could sneak out. Otherwise her brother would have forbidden her to leave. We found the Manila of 1956 a somewhat sad place, as transitional societies often are. The young people especially seemed confused. They wanted to become as free as young people in America, but Spanish tradition and a puritanical Roman Catholic Church prevented them from doing so. (Shortly after our arrival the Church issued a statement that no girl enrolled in a ballet school would be allowed in a Catholic school, because the tutu was considered immoral.) The constant vacillation between traditional Spanish and contemporary American culture was not the only thing I found unsettling. I soon learned that "anomalies", as the Filipinos politely label corruption, were a way of life in the Philippines. The "anomaly" in the headlines when we arrived concerned the cabinet minister who was responsible for distribution of American food aid (Public Law 480), Concita G., who made sure that her photograph was on every sack of rice distributed so that the peasants would appreciate the true source of the compassion which led to these gifts from heaven. The "anomaly" was that several million dollars of food aid rice had disappeared, and Concita was suspected of selling it privately. Her counterattack was to say haughtily, to the press, "My father is a multimillionaire, and multi-millionaires don't steal." Unfortunately that statement was not altogether true even in 1956, and it became less true as time went by, culminating in the Marcos regime. No "anomalies" were associated with President Magsaysay that I can recall, and he tried hard to keep corruption out of his regime. He was not entirely successful, and after his untimely death in an aeroplane crash in 1957 things went from bad to worse in the Philippines.

83 The Power Factor MAGSAYSAY AND ECONOMIC DEVELOPMENT

The manner of Magsaysay's death reflects his personal style of living and governing. He liked to be directly in touch with his people, and to be as accessible to them as possible. One way of doing that was to spend much of his time flying about the country in a small plane laying a brick here, shovelling a few spades of earth there, and so participating directly in "development". He was returning from the launching of some development project or other when his plane crashed. I met Magsaysay only once, and the story of my interview with him tells much about his personal style of government. After I had been in the Philippines for a few weeks and had some ideas about development policy for the country, Eric Ward suggested that I should telephone the President and ask to see him to explain my ideas and enlist his support. My reaction was to demur; surely the President was too busy to see a mere UN expert. Eric said no, the President knew about my mission, was interested in it, and would surely see me. So I called the President's secretary, and the conversation went something like this: "Hello, this is Benjamin Higgins, a UN expert with the National Economic Council. The Resident Representative has suggested that I ask the President to be so kind as to give me a few minutes to discuss my work with him." "Certainly, Dr Higgins; when would you like to come?" "Well, when might the President be free?" "Oh, you name the day, Professor. I'm sure the President can arrange his schedule to your convenience." There was a pause while I gulped and tried to adjust to this extraordinary statement, and summoned my courage to name a day. "Would next Tuesday be all right?" "Next Tuesday will be fine, Dr Higgins." Another gulp. "Well, what time on Tuesday would be best for the President?" "Oh, you name the hour, Dr Higgins, I'm sure the President will fit in." By this time I felt the whole bizarre conversation must be a dream or a game, so I asked boldly without hesitation, "Eleven o'clock?" "Fine, eleven o'clock on Tuesday. We look forward to seeing you, Professor." I arrived at Malacanang about 10.30 next Tuesday morning, ex-

84 All the Difference

peeling to have to pass innumerable security guards and to be kept waiting in a series of anterooms. Instead I was ushered immediately into the President's secretary's office, with huge double doors leading directly into Magsaysay's private office. I arrived there about twenty minutes to eleven, apologized to the secretary for being so early and asked if I might sit down and wait. "Oh, no need to do that, Professor. Just go straight on in," and she waved me towards the double doors. By now I felt I was with Alice, in Wonderland, so I did as I was told. I pushed open the heavy doors and found myself in a vast room with about forty people standing in little groups, while Magsaysay went from one group to another, pausing for two or three minutes to speak to each of them, and then passing on to the next group, like a polite cocktail party. He came over to me and I explained who I was. "Oh yes, Dr Higgins, you're here to help us with our development plan. Splendid, splendid. So glad you are here." He glanced at the watch on his wrist. "I'm so sorry, I have an appointment in another part of town. I'm delighted to have met you." As the weeks went by, I found that with this style having been set by the President, other members of the Cabinet, and even top level bureaucrats, followed his example. It was impossible to see anyone with any decision-making power alone in his office, or to have a serious discussion there. There was some solid debate about development projects, plans and policies in the National Economic Council, and, as I got to know individual members of the Council better, such as Senator Gil Puyat and Salvador Araneta, I was able to see them over drinks or lunch outside of their offices. But as it turned out the NEC was not the real seat of power even with respect to development policy. In a way, the situation was even more frustrating than the one that confronted me in Indonesia. At least there I had operated at Cabinet level, and there was serious discussion which led to positive decisions on the rare occasions when there was consensus. In the Philippines the real decision-making process seemed to be one in which I was not involved at all, or at least only peripherally. I began to understand that real power lay with the industrial and financial establishment (then still sometimes called the "sugar bloc"), but exactly who decided what and how I did now know. THE PRIORITY FORMULA

It was Magsaysay himself, however, who insisted on having a uniform formula for evaluating development projects in both the public and the private sector, and especially for new industrial projects. The

85 The Power Factor

situation was that proposed investment projects were reviewed by the NEC for consistency with the plan, by the Central Bank for allocations of foreign exchange, and by the National Industrial Research Council (NIRC) for allocation of credits at concessional interest rates and technical assistance in setting up new plants. Each had its own criteria and it often happened that an investment project would be approved by the NEC and by the NIRC, say, and then be refused foreign exchange for the import of capital equipment or raw materials by the Bank. Magsaysay became impatient with this situation and ordered the NEC, in collaboration with the other two agencies, to turn out a single priority formula to be used as the basis for approval or disapproval by the entire government. Constructing the priority formula became a major task of the NEC, and I became deeply engaged in it. Fortunately the United Nations sent Hans Singer to join me, and I benefited greatly from his wisdom, experience and analytical acuity. We had good statistics, and were able to do dry runs on some 100 industries to see how they would fare with various versions of our formula. We would then show the results to the Council. The reactions were predictable. "Where's my new steel plant?", from the steel magnate on the Council. "Well sir, with the formula and the weights we are using, steel turns out to have low priority because it provides little employment and earns little foreign exchange." "Then change the formula!" So we would change the formula, keeping it and the weights within the bounds of reason, do another dry run and present the results to the Council once again. "Where's my cigarette factory?" from the tobacco industry magnate. "Well sir, with the changes suggested by Mr ... cigarettes don't come off so well, because we have reduced the weight for employment creation." "Well, change the formula again!" In this manner we finally produced a formula that was acceptable to the NEC, as well as to the Bank and the NIRC, while sticking to our professional principles and giving high weight to reduction of unemployment among unskilled and semi-skilled workers, and to alleviation of the pressure on the then very shaky peso. In a democracy, which the Philippines then was, despite the very unequal distribution of wealth and power among various social groups, I do not think it was an altogether bad way to set priorities for new industrial projects. That is not a task for a parliament, nor even a

86 All the Difference

cabinet, yet it is not something to be done by "experts", planners or bureaucrats on their own either. The Council was comprised of representatives of organized labour, agriculture, finance and industry, as well as congressmen and senators (a bit like a Board of Governors of the Federal Reserve System) and to that extent reflected a broad spectrum of public opinion. They could express that opinion more concretely in terms of individual projects than in terms of abstract principles. The principles were embodied in the formula by the experts, planners and bureaucrats. Anyone who has seen the British television series "Yes, Minister' knows how the system works. We cannot expect better from a democracy. To quote E.M. Forster, "Two cheers for democracy". LEPERS AND IGOROTS

At one of the American parties we met an American pastor and his wife, and they invited us to their church the following Sunday when they were having some special music. That chance encounter led to some of the most fascinating experiences we had in the Philippines, especially for Jean. Having time on her hands, she joined a women's group that was doing various things to help the poor of the parish. When the group discovered that Jean was a writer and film editor, they persuaded her that she must write an article about the country's leprosy victims. The church, together with the medical profession and others of like mind, were conducting a campaign to have those who were in remission accepted back into society and to be given jobs. They also sought acceptance of the children of the leprosy colonies. They were not having much success. Dr Rodriguez, the medical doctor most involved with the leprosy colonies, said bitterly: "It's the Bible" — a reference to all its horror tales of people touching lepers and immediately shrivelling up. In fact it takes prolonged skin-to-skin contact to contract leprosy, and once a person is in remission he or she is of no danger whatsoever to society, even if the ravages of the disease are apparent. That was the message they wanted Jean to get across in a newspaper article. Jean started to do research and to write; and then one day Mrs Hessel, the pastor's wife, called Jean in great excitement. Culion, the principal leprosy sanitorium, was celebrating its one hundredth birthday with a massive carnival, with sports competitions, a beauty contest, and a ball. The Navy had lent the organizers an old LST boat (large slow target, in World War II parlance), to go around to the various islands with leper colonies, pick up the athletic teams and the beauty queen contestants, and take them to Culion. And —

87 The Power Factor

oh joy! - it had been agreed that Jean and Mrs Hessel could travel with them! Jean was a little shocked to realize that she was terrified, and said she would have to discuss it with me. I was not totally unaffected by the Bible either; but I told Jean that if she believed what she was writing she had no choice but to go. I went down to the boat to see her off. She stood a long time at the rail looking down at me and trying to carry on a conversation. Suddenly, as the boat began to move, there was a blast from the whistle, and up from the bowels of the ship swarmed a small army of young people, each in the uniform of his or her colony, showing all the exuberance and excitement of children and adolescents anywhere setting off on a great adventure. Jean's work with the church also led to an invitation to visit Bontok, a village deep in the mountains which was the centre of the Igorot country. The Igorots are a virtually stone-age people, most of them illiterate, and ethnically and culturally distinct from other Filipinos. It was arranged that Jean should go to Bontok, stay with the Episcopalian minister and his family, and write a film script about the work of the church among the Igorots. I went up to join her for a long weekend. To reach Bontok one had first to fly to Baguio, a mountain resort famous for its agricultural college and its research on the International Rice Research Institute high-yield rice. From there it was a trip of several hours on a clanking, lurching bus along narrow, winding dirt roads through precipitous mountains. It was one of the most beautiful trips I have ever taken in my life. The countryside in those mountains is very thinly settled, with only occasional villages of lovely golden nipa (straw) huts with spikey roofs, and alternations of jungle with breathtakingly beautiful terraced rice fields. The rice terraces in Java and Bali are beautiful enough, but here all the walls of the terraces were built of stone rather than earth, giving the fields a look of ancient architecture combined with the natural beauty. Bontok had a wide dirt street through its centre. On one side were the traditional huts and longhouses of the villagers, cascading down the mountainside. On the other side were the substantial houses of the missionaries, their churches, schools and clinics, and a few shops. I have often said that the street was the widest in the world, because it traversed thousands of years. Once a village child crossed that street - and by no means all of them did - he or she was in a totally different world, and if he or she stayed very long in that world it was almost impossible for that child to go back across the street again. The custom in the villages was that, when children reached adolescence, the girls went into a dormitory to be trained by the Old

88 All the Difference

Women, and the boys into another dormitory to be trained by the Old Men of the village. Every night the boys went to the girls' dormitory to visit. When a girl became pregnant, the village elders met and decided which of the boys was the father. The chosen boy was obliged to marry the girl and live a strictly monogamous life thereafter. The missionaries told me that this system was breaking down. The boys entered happily into the traditional system until it was decided that they were fathers, but then ran off to Manila to look for a job. Another problem of a transitional society. There was considerable excitement in Bontok on the weekend of my visit because an American Episcopalian bishop had come from Manila to conduct confirmations and to open and bless a little schoolhouse high in the mountains. He had spent days clambering along mountain trails to visit villages not accessible by any means of transport. As he put it, when the church made him a bishop they "consecrated his legs". He was young, over six feet tall, well built and handsome. We attended the school opening. The pupils waited inside the school with the door closed. The bishop then arrived, a commanding figure in his purple robes and mitre, which extended his total height close to seven feet. He strode up to the door, pounded upon it with his crozier and shouted in stentorian tones, "Open in the name of the Lord!" The children obeyed him trembling with excitement as though the Lord himself were on the other side of the door — and the school was officially opened. The bishop's visit called for a party for all the Episcopalian missionaries of the region. Our host's large and elegant house was a good place for it. Also staying in the house was a genuine Church of England missionary from Hong Kong, whom everyone called "C of E". To prepare for the party C of E and I spent the afternoon concocting and testing a powerful punch, which has since become famous in five continents as "Higgins Killer Punch". THE BATTLE OF THE IGOR

When I first arrived in Manila I found the NEC planners working with an incremental capital:output ratio (ICOR) of 0.5; that is, they estimated that an investment of fifty cents would raise national income by one dollar. I knew that this figure was impossibly low, in terms of experience in other countries. I remarked to my colleagues in the NEC that, if this figure were correct, they certainly did not need me or anyone else to assist them with their development planning, but rather should set up a fellowship program to bring planners from other developing countries to see how the Philippines managed

8g The Power Factor

it. The question was a delicate one, because the NEC was then involved in a knock-down-drag-out fight with the Central Bank regarding foreign exchange policy, and the NEC position was defended by projections based upon their estimated ICOR. The NEC considered the peso to be overvalued. They expected such a flood of export products over the next few years that they thought devaluation of the peso would be necessary to sell them, while a higher price of foreign exchange was needed to keep out imports, and protect the Philippines market for the expected increased output of domestic products. The Bank scoffed at this argument and accused the NEC of not knowing the difference between capital:output ratios and output: capital ratios. Such debates were never polite in the Philippines, and they took place on the front pages of the newspapers. Tempers ran correspondingly high. The estimate for the ICOR was based upon the figures for investment and gross domestic product for recent years. I suggested that the NEC, together with the research department of the Bank (which was directed by a charming and very competent Yale Ph.D. in economics, Fanny Garcia), review the national accounts. It did not take long to find the sources of the trouble. First of all, the Philippines, like Libya, had suffered a great deal of war damage. There were accordingly opportunities in the postwar years for once-over investments that would bring large increases in output for very little expenditure: bringing large sections of the railway system and road system into use by repairing a few bridges, for example. Such highyield investments could not be repeated and so should not be included when calculating an ICOR for the future. Then there were large investments in the agricultural sector, restoring and replanting plantations, which simply had not been counted at all. Finally there were some straightforward errors. By the time we were through the ICOR had climbed from 0.5 to 1.7, which meant that investment requirements to achieve a given target increase in national income were over three times the original estimates. The Bank had not been so far off the mark when it talked of capital:output versus output: capital ratios. I argued that the 1.7 figure was still too low to be applied to the development budget that was emerging, because the plan involved a sharp shift towards more capital-intensive projects. But my colleagues at the NEC were horrified enough at the implications of this drastic change in estimated investment requirements, and refused to raise their estimate further. When the Five Year Plan had been completed the ex post ICOR was calculated at 2.2. I have told this tale, not only because it is a good illustration of the sort of problem with which a development planner can suddenly

go AH the Difference be confronted without warning, problems which are never purely economic but always have a large political component, but also because it provides a picture of the kind of planning that was undertaken by economists in the 19508. The planning was highly aggregative; macro-economics held the fort. Basically we felt that if the required Big Push could be mounted, in terms of investment, and if the savings gap and the foreign exchange gap could be filled with domestic plus foreign resources, growth (= development) would take place. We did worry about sectoral balance, and sometimes inputroutput analysis was applied if the figures were available, although usually the matrices were too small to be of great value. Sometimes too some species of costrbenefit analysis was applied to individual projects. But basically the analytical frameworks that informed our planning were neoclassical and neo-Keynesian; if the rate of capital accumulation were high enough, permitting some technological progress to take place, and if a monetary and fiscal balance could be achieved so as to assure full employment without inflation — and if happily there was some entrepreneurship in the country - then development would follow automatically. THE WORKING GROUP

The NEC Secretariat had a large and competent staff, directed by an able engineer, Conrado Ramirez, who later went on to a successful career in the private sector. It had, however, very few economists, and Hans Singer and I felt that we would like to tap the expertise of young Filipino economists who were not on the NEC staff. We therefore set up a Working Group which proved to be enormously helpful, and also, as the years went by, to have been extraordinarily well chosen. It included Armando Fabella, who became Professor of Economics at the University of the Philippines and then head of the Secretariat of ASEAN; Sixto Roxas, who became the country's top planner, then resigned with a loo-page letter of resignation which is one of the best analyses of the Philippines economy and economic policy ever written; and Allan Maglaque, who went on to a distinguished career with the United Nations in Bangkok and Geneva. By 1956 I had learned something I did not fully appreciate when I went to Libya in 1951; the technical assistance programs mounted by the various foreign aid agencies were not providing a kind or a quality of expertise that did not exist within the host countries (with very rare exceptions); they were merely increasing the number of trained people available to do various jobs in countries that were still shorthanded in certain areas of skilled labour. Effective cooperation with the host country's own experts was of fundamental importance.

gi

The Power Factor

THE PLAN

The plan which we ultimately produced for 1957-61 was fairly typical of the plans produced for that period. The macro-economics underlying it were quite solid by the time it was completed, and such detailed projects as it contained were quite reasonable. It did not much matter; the government changed and the plan was not implemented in any detail anyhow. It would not have made much difference if it had been; it did not entail fundamental changes in Philippines economy, society, or - above all - polity. The things that were fundamentally wrong with the Philippines and preventing its rapid and healthy development were still there, and would have been still there even if the plan that we put together and into print had been implemented in every detail. One can only hope that the accession to power - formal power, at least — of Corazon Aquino in this hauntingly beautiful country with its charming and vigorous people will at last lead the way to rapid and healthy development. Although the Philippines was baffling enough, I did not feel the bewilderment that beset me when I first went to Indonesia. Through my colleagues at MIT and my mounting field experience, I was beginning to learn. Most important, by the time I went to the Philippines I had learned that the first thing to do when arriving in a new country is to "case the joint", rather than trying to apply some preconceived model of development. INDONESIA REVISITED

From the Philippines I went on to Indonesia again. My sojourns in Indonesia during the life of the MIT Indonesia Project were not, however, "revisits" in the anthropological sense of my revisit to Libya. The visits came too close together, and I was impressed by continuity rather than change. What took place in Indonesia during the 19505 was slow and seemingly irreversible deterioration, but without crisis. Reading the American press day by day I often had the impression that Indonesia was about to explode at last; but when I went to the country again I found conditions better than they were painted abroad and was once again impressed by the extraordinary resilience of the Indonesian people - that is, until 1966. To go to Libya from Hawaii that year I bought a round-the-world ticket, and stopped off in Indonesia on the way. For the first time I found conditions in the country worse than the impression I had of them when looking at them from afar. There was visible starvation, something that had never been there before. In Jakarta people were sleeping in the open, on the streets or in the parks, and picking

92 All the Difference

through garbage hoping to find something edible. It looked to me more like Calcutta than Jakarta. I stayed, faut de mieux, at the glossy new Hotel Indonesia, which I greatly dislike, where the Indonesian rich arrived in their Mercedes Benzes with their chauffeurs and their elegantly gowned and dazzlingly bejewelled ladies. When Indonesian friends visited me in my room they would turn over cushions and look under sofas for bugs, and then whisper: "Let's drive around in my car, then we can talk." There was an odour of expectancy combined with terror in the air. A few months earlier, of course, the abortive coup had taken place, when left-wing armed forces officers tried to remove right-wing opposition by murdering them; Nasution had been saved by his aide-de-camp, who had faced the guns in Nasution's uniform while Nasution himself escaped over the back wall of his garden, although his daughter was killed by a stray bullet. These events led to a wave of revulsion throughout Indonesia, and this revulsion led to mass slaughter. I was told in 1966 that in the weeks following the coup the rivers in Java literally ran red. Sukarno was still clinging to power, but it was clear that change was in the air. When students organized protest marches in Jakarta, the armed forces fired on them, and some students were killed. Again there was a wave of revulsion, there was danger of more violence, and Suharto had the excuse he needed to take over. I visited Indonesia again in 1971, 1972 and 1979. All things considered, there has been great improvement in Indonesia since 1966. The rate of growth is impressive, and there has been some structural change at last. Petroleum has of course helped. Relatively stable government has increased both foreign investment and foreign aid. The surge of Indonesian entrepreneurship has continued. Tourism has burgeoned, and, in my opinion, has preserved Balinese culture, despite the ugliness associated with it; the sultans could not have gone on supporting Balinese dance, music, painting and sculpture all alone. So far as I can see, while the worst products of the arts are certainly worse than before, the best are even better. The economy is better managed, policies and plans have improved. However, I do not believe that Indonesia has yet reached a steady state. Economically and socially it still has a long way to go before satisfactory conditions are established. Politically it has improved to the degree that it has enjoyed greater stability over the past twenty years, but that stability has been bought at a high price. Fundamentally, the ideological conflict outlined in Chapter 3 has not been resolved, and until it is Indonesia will not develop evenly on the economic, social and political fronts.

93 The Power Factor CONCLUSIONS

My continuing immersion in Indonesia in the 19505, my mission to the Philippines, my shorter but fairly frequent visits to Thailand and Burma during the same period, combined to impress upon me the importance for development of the interaction among the distribution of real power in a society and the policies and plans adopted and implemented. My experience made me a good deal more willing to listen to, and profit by, my colleagues in politics, anthropology and sociology, and led me to do much more reading in these fields than I had done before. The discovery of the importance of power, other than monopoly power, and of the manner in which its distribution among individuals and social groups affects the economic process, also made me less hostile to the dependency theorists and other neo-Marxists. I continued to think them wrong in fundamental respects, but I could read their works with a more open mind, and derive from them lessons which I could apply in my own way, without necessarily accepting their specific policy conclusions. Even after my initial UN mission to Indonesia I retained something of my "seminar" approach to development policy and planning: if one could find the right solutions to problems and persuade "the government" of their validity, they would be implemented and all would be well. In my peculiar situation in Indonesia in 1952—53, and with regard to the monetary, fiscal, foreign trade, foreign exchange, and foreign investment policy with which I was mainly concerned, that attitude had been largely justified by events. Most of my policy recommendations were accepted and applied sooner or later, as they had been in Libya. In Libya there had been no real government at all; decisions were made by the UN Commission itself. In Indonesia, during its year and one-quarter life (the longest of any government up to that time), the Wilopo government was able to implement its decisions, and the people with whom I worked most closely - Sumitro, Sjafruddin, Djuanda and Wilopo himself- were among the most powerful decision makers. Only after the Wilopo government fell did the rot set in that led ultimately to hyperinflation, increasingly widespread corruption, the Sukarno takeover of 1959, and the Suharto takeover of 1966. In the Philippines the distribution of real power bore little relationship to the allocation of official responsibility in the organization charts. Persuading the Minister of Finance to follow a certain tax policy, or the Governor of the Central Bank to introduce a certain monetary policy, or the NEC to put a certain project into the plan and exclude another, meant little or nothing with respect to what would actually be done. And

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unfortunately, even in the 19505 some of the Actors with power to influence the course of development in the Philippines were Bad Actors, starting the country on the path that led ultimately to the grand-scale abuses of the Marcos regime. I agree with those who argue that the economist's job is to recommend the policies he thinks best, and not those that he thinks likely to be accepted. But I also agree with the Marxists that without studying the power structure of a society one cannot know how an economic system really functions (while insisting that the actual power structure if often very different from the one assumed in the standard Marxist model). It is not a matter of pandering to the political power elite, recommending second best policies because the best will never be implemented or even accepted. It is rather that policies based on models assuming equality of individual influences - every dollar and every vote has equal weight — and which seem to be "best" on the basis of such models, may turn out be second or third best, in terms of results, in the situation actually prevailing in a certain society. The experiences described in this chapter were disturbing to me, not just as an economic adviser, but as an economic theorist as well. They completed the process by which my faith in mainstream economics as a basis for policy and planning was undermined, and launched me on my search for a better methodology for economic science. FROM MIT TO TEXAS

Meanwhile, towards the middle of 1958 it had become clear that the interest of the Ford Foundation was shifting away from development of less developed countries and towards economic and social problems within the United States itself: the cities, crime, unrest, racial conflict. What that meant for the MIT Center was that financing for its International Development Program would not be renewed when the five-year grant was exhausted. Even if I stayed on, life at MIT would be less fun than it had been during the five years of the Indonesia Project. In any case, I was tired of Indonesia and Southeast Asia. Nothing ever seemed to go right there. I used to say then that Indonesia was a maddening mistress, irresistibly beautiful and seductive, but wayward, faithless and unpredictable. I wanted to become involved in some other region. -I knew nothing of Latin America, and was eager to fill this gap. Thus when the Chairman of the Department of Economics of the University of Texas came to see me, and informed me that the department wanted an outside chairman to replace him upon his

95 The Power Factor retirement, and had decided on me, I was all ears. Texas had the biggest and probably the best Institute of Latin American Studies in the country, and I felt that Texas would be an ideal base for sorties into Latin America. Perhaps the fact that the Chairman (Everett Hale) mentioned a salary 50 per cent higher than the one I was receiving at MIT had some influence too. Still, Texas was terra incognita to me, and it seemed a somewhat peculiar place for me to be. No one leaves "the Cambridge Community" without second thoughts, even the second time. I arranged with Max Millikan that I could take the fall semester of 1958-59 off and go to Texas to see how we liked it, and in September we set off for Austin in our new "solid gold convertible" feeling uncertain but light-hearted. We liked everything we saw in Texas, and decided to stay. We went back to MIT for the spring semester. We were allowed at MIT to sell one-quarter of our time to outside employers; I asked Max Millikan if I could sell it to myself. He said yes; and before returning to Texas in the autumn of 1959, I finished the first edition of my book on Economic Development.

5 The Regional Factor and Misdevelopment: Latin America, 1959-67

As we crossed the Texas border on our way to Austin for our trial semester, I remarked to Jean, "You know, the thing I dread is all the boring parties we'll be forced to attend. They want me to stay, so obviously we are going to be lionized." We rented a rather nasty little house in the northeast of Austin, settled into the routine of teaching and research, and explored the pleasant town and the beautiful surrounding countryside. After about a month I suddenly realized we were not being lionized, and I pointed this out to Jean: "We haven't been invited to anyone's house at all. It can't be that people dislike us that much, because they don't know us that well." Both Jean and I had been brought up in societies where new arrivals waited to be invited by those who were longer established. Some of my colleagues had "called", leaving two visiting cards in the entry hall, but to call uninvited in return was not within our range of experience. By that time there was one person in the University whom we knew well enough to consult, Easton Nelson, an economist who was at the time Director of the Institute for Latin American Studies. He explained that in Austin no one would invite us before we had invited them, in case we wanted to be left alone or did not like them. So we began having dinner parties, were promptly invited back, and found to our delight that, far from being bored, we were surrounded by bright, cultivated, well-informed, witty and charming people. In a university as big, as wealthy, and as good as Texas the faculty is international, and one can soon build up a circle of friends of the

97 The Regional Factor and Misdevelopment

same sort as one might have at Harvard, MIT or London. But the Texans themselves were the pleasant surprise. There are three zones in Texas, with Austin at the meeting point of the three. The northern part of the state is really an extension of the midwest, with essentially the same appearance and ambience. To the west is the beautiful hill country, which melds into mesas and the colourful, arid landscape of the American southwest. This area is still frontier, and society on the surface is a bit rough and ready, even when composed of oil multi-millionaires, as at Midlands. But the longer and more densely settled southeast is Old South, with all the gentility, culture, charm and aristocratic manners that the term implies. And it is this tradition that rules the Texan society of Austin, making New England seem a bit crass by comparison. Of course the vestiges of the frontier society are there too. One of the symptoms of its survival is the prevalence of firearms. A normal Texan sleeps with a revolver under his pillow and drives with a revolver under the driver's seat. Easton Nelson still had a Kennedy sticker on his windscreen after the 1960 election. One day when he was driving along the highway a car approached from the other direction with a driver who held different political views; the driver reached under his seat for his gun and shot at the sticker. Being a Texan he was a good shot and he hit the sticker, not Easton. However, not long afterwards Easton shot a graduate student through the throat after a long night of beer and economics. Fortunately the student survived and could swear to the Grand Jury that it had been an accident. The student was a male, but the press tried to make out it was a lovers' quarrel — Easton, who had had five wives, one a fiery Guatemalan, and the last one some thirty-five years his junior. Later we had a house with a steel roof that suddenly began to leak in several places at once. We called a repairman who inspected the roof and said, "No problem. Just bullet holes." Apart from the Kennedy assassination, which seemed more likely to occur in Dallas than anywhere else, the worst incident during our eight years at Texas concerned a member of the Minutemen (a semi-fascist organization) who somehow managed to lug a whole arsenal to the top of the University library tower, from which vantage point he gunned down students in the normally peaceful plaza in front of the library. The guns are there, like the rattlesnakes, but they are not part of daily life. You just have to remember thay they do exist and watch your step. In any case, we liked Texas and its university, and began looking for a house to buy. When we found a lovely hacienda built of fieldstone in the western hills, with a superb view down the valley to Bull

98 All the Difference

Creek and the river, two acres of lawn and garden and eight of virgin forest, our minds were made up. In the fall of 1959 I came back to Texas as chairman of the department and we settled in our house. THE INSTITUTE STUDIES

OF LATIN AMERICAN

Upon my return I was made a member of the Executive Committee of the Institute of Latin American Studies, of which Easton Nelson, as Director, was chairman. I well remember my first meeting. The top administration of the University had asked the Committee to find some topic for research that could unite the various disciplines represented in the Institute. The geologist wanted to study the evolution of volcanoes in the Rio Grande valley. The historian was interested in the non-military elite in Mexico between 1810 and 1830. The anthropologist suggested measuring the physical growth of members of Mexican Indian groups over the next twenty-five years. But the political scientist had just been to a conference in Chicago and was all fired up about interdisciplinary research, and made an impassioned speech: "No, gentlemen, we must be more ambitious. We must cast a wider net, venture on something truly interdisciplinary. Now I propose that we all unite in a study of local government, starting at the Mexican border and gradually working our way south." I began to think I should have stayed at MIT. Ther seemed little prospect of mounting at Texas the kind of interdisciplinary research on development that I had been engaged in there. Nevertheless my being at Texas did lead to involvement in Latin America. During 1959-60, I made several trips to Mexico, including one for a UNESCO seminar in Mexico City, on social aspects of Latin American development, which led to a book on that subject, published by UNESCO, written by myself and Jose Medina Echavarria of the UN Economic Commission for Latin America (ECLA). Another was to lecture in the Center for Monetary Studies of Latin America (CEMLA) there. But my first deep immersion in Latin American development came with an invitation from the United States Agency for International Development (USAID) to undertake a mission to Brazil, in 1961-62. During the 19605, in addition to my experience in the mainstream of development economics in Latin America, I made expeditions along two other avenues of exploration that were opening up: the intensified quest for better human resource development, of which the UNESCO seminar was a forerunner; and the related search for

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ways of assuring a better distribution of incomes, so as to quickly and significantly improve living standards in the developing world. These explorations were a response to the general disillusionment with the results of aggregative approaches to development and a consequent upsurge of interest in various kinds of disaggregation. In the mainstream of development economics there was also a move to disaggregate in space, as my Brazilian experience shows. In this chapter, I describe what I experienced in the mainstream in Latin America; Chapter 6 will cover the other two quests. BRAZIL

Relations between the United States and the newly elected Brazilian government of Janos Quadros were a bit strained at the time, partly because the United States, along with the International Monetary Fund and the World Bank, wanted the government to pursue a more cautious monetary and fiscal policy, while Quadros wanted to accelerate growth, reduce unemployment, and complete the construction of Brasilia, the new capital city in the centre of the country. Consequently Brazil was not asking the United States for high level advisers on policy and planning. The United States was nonetheless eager to have an impact on policy and planning, and was already keenly interested in regional development, especially the Northeast and Amazonia. So while my official terms of reference were limited to appraising American assistance in the training of Brazilian economists, my briefings made it clear that the American government was interested in having me survey the whole of Brazilian development policy and planning, especially in its regional development aspects. The United States program for training economists was based on the Fundacoa Getulio Vargas, and consisted in apperfectionimiento filling in gaps in undergraduate training in economics, mathematics and English, and then sending the Fellows off to the better American departments of economics for postgraduate training. The idea was not only to improve the supply of trained economists for government and private enterprise, but over the longer term to build up the departments of economics in Brazilian universities, so that adequate postgraduate training could be provided within the country. God knows the economics departments needed building up. The more I travelled around the country visiting various universities the more shocked I became. Apart from the National University of Rio, with such distinguished economists as Roberto Campos, Octavio Bulhoes, Maria Jose Paiva (who had been a graduate student of mine

ioo All the Difference

at McGill) and Eugenic Gudin, and the University of Sao Paulo with Delfin Netto (later Minister of Finance and Minister of Planning) and Roberto Simonsen, there was scarcely a department of economics in the country that merited the name. For the most part, if there were a professional economist in a department, he did not have a Ph.D.; and if there were a Ph.D. in a department, he or she had gained it in some field other than economics. The libraries were pitiful. I remember that the University of Pernambuco in Recife boasted 3000 volumes, which was about the size of a reasonable private collection for a professor of economics; but when I visited the collection, I found sets of Shakespeare and ancient encyclopaedias that had been given to the library by people eager to clean out their basements. How much the USAID program contributed to the obvious improvement since then in the status of Brazilian professional economics I would hesitate to say, but certainly some of its products, such as Joao Paulo Velloso who became Minister of Planning, played a major role in Brazilian economic policy and planning. Meanwhile it was obvious that Brazil was heading for trouble on the economic front. Inflation was mounting without curing the unemployment problem; the cruziero was under constant pressure; and the efforts of SUDENE (the agency for development of the Northeast) and SPVEA (the agency for Amazonia), despite the impressive scale of their staffs and their expenditure, had done little to reduce regional disparities. Disappointment in and dissatisfaction with Quadros's performance on the economic front mounted, in the parliament, in the press, and among the general public. Finally Quadros resigned and went off in a huff to Europe, expecting a popular outcry demanding his return. Quadros was unable to attend a major demonstration in his favour because his enemies arranged to have his plane refused the right to land. Under the Brazilian constitution, the president and Vice-President are elected separately, and can even represent different parties. Yet if the President dies in office or resigns, the Vice-President automatically becomes President. The Vice-President was Joao Goulart, an avowed Communist. Many millions of Brazilians, including most of the devout Roman Catholic women and a large contingent of the armed forces, were disturbed by the prospect of a Communist President. When Quadros resigned Goulart was travelling in China, and a movement developed to prevent him from reentering Brazil and assuming the presidency. Goulart's estates, his political support and his backing among the armed forces were all in the south, so Goulart first returned from China to Montevideo in neighbouring Uruguay, from which vantage point he could plot his return to Rio de Janeiro. When it became known that Goulart was attempting to fly to Rio,

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The Regional Factor and Misdevelopment

thousands of fervent Catholic women went to the airport and lay down on the tarmac so that he could not land, and had to return to his starting point. Eventually, of course, he did reach Rio and assumed the powers that were his under the constitution. Writing nearly three decades after that first mission to Brazil, I have some difficulty in recalling the exact details of its professional content, especially since I have no copy of my final report. As a Canadian on a USAID mission (the American government had to go through the formal pretence that no qualified American was available, in order to employ me), the highest security clearing rating I could have was "official use only". When the AID director or the embassy wanted me to know the content of some document with a higher security rating than that, someone had to sit behind his desk while I sat in front of it, and read it to me, pretending that we were just having a conversation. When I left Brazil the edited version of my final report (my only copy) was being typed. I begged the Director not to classify it; there was nothing in it that the whole world could not see. Instead they classified it top secret, which meant that I was not eligible to see a copy of my own report. One element of that mission I do recall with complete clarity. Arrangements were made for me to make a tour of the Northeast and north of Brazil (Amazonia), using the embassy plane. About that time word was received that Ted Kennedy, whose only official status then was as the us President's kid brother, wanted to visit Brazil. That status was quite enough for him to receive red carpet treatment, and since he too wanted to see Amazonia and the Northeast, obviously he was invited to come on the plane. Equally obviously, once that happened, the plane, the trip and the mission became his. Ted Kennedy already had the style of a successful politician. At each airport where we landed the news of Kennedy's arrival had somehow preceded us, and thousands of people were on hand to greet us. Kennedy always emerged from the aircraft first, flashing his magnificent grin and with his right arm stretched high in a victory salute, while the crowd shouted and clapped. At any rate he was a friendly, stimulating and interested travelling companion. After he became Senator I encountered him once on the New YorkWashington shuttle, and we sat together in the back and talked about Brazil, in which he had retained a sharp interest. BRAZIL II

In the spring of 1964 the new Director of the Institute of Latin American Studies, who had replaced Easton Nelson when the latter resigned from the University, rang me to say he had some money

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for research in Brazil, and that I had better go down and set up some kind of project to spend it on before he had to give it back. I was scheduled to go to Greece that summer on a mission for OECD, but I decided to go through Brazil on the way. Meanwhile Goulart had managed in his two years in office to turn the Brazilian economy into a shambles. Inflation had reached an annual rate of 140 per cent and was accelerating, but unemployment remained high. There was a severe balance of payments crisis and the cruzeiro was depreciating. Grain prices were kept low to avoid trouble with the workers in the cities, with the result that farmers had no incentive to grow grain. About two-thirds of Brazil's requirements were met by American PL 480 food aid. The political situation was much like that in Indonesia a year or so later. Goulart, like Sukarno, was not really much of a Cummunist, but his political support, like Sukarno's, had dwindled so much that the Communists seemed to be the only people he could count upon. As in Indonesia regarding Sukarno, people feared that Goulart might take Brazil down the Communist path rather than lose power. There was rioting in the streets, giving the army the excuse to take over, again as in Indonesia. Also as in Indonesia, the armed forces themselves were split. In the south some supported Goulart. In Rio itself there was a problem. The commanding officer of the fortress at Castelhino in Ipanema had not yet joined the forces supporting Branco. The commanding officer at Praie do Fogo brooded on the situation, and finally could stand it no longer. He got into his official limousine and told his chauffeur to drive him to Castelhino. He was confronted at the entrance by a soldier with a tommy gun. "Sir, you can't come in here!" said the soldier, pointing his gun at the officer's belly, "Nonsense!" said the officer. He slapped the soldier on each cheek with his gloves, and strode into the fortress, where he persuaded the commanding officer there to join his colleagues behind Branco. According to all accounts that was the most violent action in the whole revolution. As every one who has read them knows, the pages of Spanish American history drip blood. On the pages of Portuguese American history there is virtually none - the above incident is not unique. There is a story of a civil war in which the opposing armies marched up and down Brazil, carefully avoiding each other for two years. On one occasion, confrontation seemed inevitable: the armies were encamped on each side of a river. In the night one of the armies blew up the connecting bridge so that the river could not be crossed, thus once again avoiding bloodshed. Jean once asked a Brazilian lady why

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Brazilians behaved this way. The lady widened her eyes in astonishment and replied, "Why? Because we Brazilians don't like to be shot!" It may also have something to do with the values that lead to padding the horses in Portuguese bull fights and not actually killing the bulls. In the spring of 1964 Goulart was displaced, and Castello Branco became president. The first thing he did on attaining office was to declare his assets: a modest house, a battered old car, and a few thousand dollars in the bank; and to admonish the Brazilian people to make sure that he had no more than that when he left the presidency. After decades of corruption in high places in Brazilian politics this gesture was refreshing. The next thing he did was to appoint the best qualified civilians available to the technical and developmentrelated ministries in his Cabinet. These included leading economists Roberto Campos and Octavio Bulhoes as Minister of Planning and Minister of Finance respectively. As can be imagined, the United States government under Lyndon Johnson had not been too enthusiastic about the Goulart regime and did little to assist it. They welcomed the new government and indicated willingness to provide substantial development assistance, provided the new government made a strong effort on the stabilization front. Lincoln Gordon, Professor of Economics at the Harvard Business School, whom I had met often while I was at MIT, was then in Brazil as us ambassador; and Jack Kubisch, who had been head of the USAID mission in Sri Lanka, was then chief of the mission in Brazil. The result of all there interlinked events was that, when I landed at Rio airport on my innocent research venture for the Institute of Latin American Studies, I was met at the airport by Lincoln Gordon, Jack Kubisch, Roberto Campos and Octavio Bulhoes. They whisked me off to lunch at an elegant restaurant, and each in his way argued eloquently that I was duty-bound to come to Brazil and help reconstruct, stabilize and develop the economy. They were very convincing. I liked and respected each of these four men. I had met Campos first in Geneva at the ILO Expert Group on Employment Objectives in Development, of which he was chairman. By the time the meeting was over we had become good friends. After that I saw him occasionally in Washington, where he was Ambassador to the United States, and of course I had seen him during my earlier mission to Brazil. Bulhoes was attached to the Fundacao Getulio Vargas and had lectured in our training course for the Fellows destined for graduate study in the United States, so I had seen a good deal of him then. Kubisch and I had played a lot of tennis, and done a good deal of dining and drinking together during my Sri Lanka mission

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(of which more later). Besides the attractions of working closely with these four friends, there was of course the obvious fact that Brazil is an enormously important country, and the opportunity to work on its economic policy and planning at so high a level was both a privilege and a challenge. I explained that I was committed to going to Greece for OECD, but promised to come back in August, and asked Line Gordon to have Washington request leave of absence from the University of Texas. This particular assignment was obviously close to the University's interests, and since I was no longer Chairman of the Department of Economics, I anticipated no difficulty there.

EPEA (BUREAU OF APPLIED ECONOMIC RESEARCH) By the time I got back to Rio some three months later a good deal of progress had been made on the economic policy and planning front. In the first place Campos and Bulhoes, who were good friends, had agreed on a close working relationship for the Ministries of Planning and Finance in which the Planning Ministry was paramount. They saw each other almost daily to be sure that plans and budgets were synchronized. Campos had a considerable impact on monetary and fiscal policy, and on foreign trade policy, as well as on planning. He was clearly the dominant figure so far as the whole range of economic policy was concerned. Such a relationship is rare. More frequently the Ministry of Planning is virtually ignored and the Finance Minister goes his own way. Yet conceptually Planning is broader in scope than Finance, and the arrangement between Bulhoes and Campos was logical. In any case it worked very well so long as both of them were there. The government had also gone a long way towards making peace with the International Monetary Fund, the World Bank, and the us Department of State. Roberto Campos's stint as ambassador to the United States and his friendship with Line Gordon were a help there. At first the IMF, the Bank, and the State Department insisted that the only way to stop inflation was overnight. Roberto convinced them that such a policy was impossible in Brazil and persuaded them to accept a program of bringing the inflation rate down from 138 per cent to zero over a three-year period. On that basis Brazil was assured of large-scale assistance from the USA, and Roberto and Octavio had set about assembling a $1 billion aid package. They had also established EPEA, the Escritorio de Pesquisas Economicas Applicadas, or Bureau of Applied Economic Research, to

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assist them with their work. They had already assembled an able staff, including Roberto Simonsen (part-time) and Joao Paulo Velloso, fresh from the Yale Economic Growth Center. I was to be attached formally to EPEA, which had offices overlooking the harbour and not far from the financial district. I was assigned an old but elegant Cadillac, which had been used by President Kubischek, with chauffeur, to transport me between EPEA and our flat near the beach at Copacabana. I also had meetings with Campos and Bulhoes and others in their offices in the Ministry, or in the Ministry dining room at lunch time. EPEA was to play a major role in policy formulation over the next few years. THE TEAM

Another step that had been taken was that Roberto and Octavio, together with Line Gordon and Jack Kubisch, had decided that I should be suported by a team, financed by USAID, and working within EPEA. It was this kind of willingness to rely on American assistance, and his open friendship with leading Americans, that led to Roberto being called by his critics in Brazil "Bob Fields", a literal English translation of his name. For the same reasons he was labelled an enteregisto, someone who was willing to sell his country down the river. But Roberto was convinced that, given its geographic location and its economic situation, Brazil could develop rapidly and effectively only if it had close ties with the United States. The USAID personnel officer and I thus set about recruiting a team. I wrote to a number of possible candidates, and received a very good response; it was an attractive assignment. But I had approached top people in their fields, and top people are busy people. In their replies they would state the period for which they could be available. In my letter I also asked them to indicate the sort of salary they would sacrifice by being away from their regular job, but the personnel officer was accustomed to the world of business and bargaining, and always offered less than asked. If someone said he could come for six months for $20,000, he would offer a contract for one year and $30,000. I tried desperately to convince him that this kind of bargaining was a counterproductive affront to these people, but he would reply. "Let's not spin our wheels. If they want the job they'll come for what I offer." The result was that almost no one came. The first to arrive, being free at the time, was Easton Nelson. With his fluent Spanish he soon picked up Portuguese, and his vast knowledge of the Latin American economy as well as the American one made him an enormously

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valuable ally. Equally valuable was Douglass North, well-known economic historian from the University of Washington, who had worked on the interaction of regional and national development, a subject of fundamental importance in the Brazilian case. Then there was Al Fishlow from California at Berkeley, who has become a leading expert on the Brazilian economy. Finally there was a transport economist from the University of Texas School of Business, who had little or no experience in developing countries, and complained about the apartment the government found for him in an elegant neighbourhood near the centre of town, the shops and the traffic jams. Fortunately his assignment was a short one. The other members of the team came for only short periods, too, and with insufficient overlapping to allow an integrated program of research. PLANNING AND POLICY

Brazil is a vast country, and a federation with twenty-two states. In 1964 transport and communications outside the east central region, containing Rio de Janeiro and Sao Paulo, were still poor. The gap in per capita income between richest and poorest regions was of the order of 500 per cent, the gap between richest and poorest state perhaps twice that amount. The result of this situation was that development planning was highly decentralized. Every state had its department of planning, although these varied a good deal in size and quality, the best and biggest being in the richest, the state of Sao Paulo. In addition states were grouped into regions with a regional development authority, such as SUDENE for the Northeast, the poorest region, and SUDAM for the north, or Amazonia. SUDENE was the biggest authority, with some 3000 employees plus about 150 United States experts and 120 United Nations experts, an indication of the scale of operation. Planning by the states and regional authorities was project oriented, and they were engaged in implementation as well as planning. The result was that the central government did little detailed development planning. It set broad strategy, providing finance, indicated its priorities, and endeavoured to integrate all the work of its own departments and of all the state and regional authorities. Even Roberto Campos as Minister of Planning was more concerned with strategy and policy than with development planning as such. He visited the state and regional authorities when he could, and a part of my own task was to keep in touch with what they were doing. As a consequence, I visited every state in the union in the course of my assignment.

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The chief concern of EPEA and of both the Ministry of Finance and the Ministry of Planning, however, was stabilization and rationalization of the economy. To fight inflation Bulhoes and Campos relied mainly on monetary policy. The control of the fiscal authorities did not really extend to all sectors and regions of the national economy. The policy was successful in bringing down the rate of inflation, but of course tended to slow the growth of the economy. On the other hand, the business community, both at home and abroad, had faith in the new regime; and the government encouraged it by a broad policy of deregulation and privatization. Many of the excesses in government spending were eliminated, and damaging price controls were removed, especially in agriculture, with good results. The overall result was that the economy remained quite buoyant despite the restrictive monetary policy. Capital started flowing in from abroad again, especially for resource development and manufacturing. Not all Brazilians liked this strategy, but on the whole it worked. A highly pragmatic regime like that of Castello Branco and his colleagues had difficulty in arousing enthusiastic support, among politicians and the general public, for the draconian measures that were necessary to bring order into the economy. Nowhere was this lack of enthusiasm more apparent than in the program to curb inflation. Brazil was no stranger to inflation. It had been endemic ever since the "price revolution" of the sixteenth century, when world inflation was generated by discoveries of gold and silver in the New World, a significant portion of them in Brazil. Over the years Brazilians had learned to live with inflation, and institutional arrangements were such that no major social group suffered by it, except perhaps those farmers who did not share in it. Wages were adjusted regularly, taking into account not only the actual increase in cost of living over the past six months, but also the estimated increase over the next six months. Widows and orphans, and others living on past savings, could invest in treasury bills yielding 5.5 per cent per month. Rents were either quoted in dollars or adjusted monthly to the cost of living. Incomes were, in fact, almost completely indexed. The result was that no group with significant political clout gave strong support to our efforts to check inflation. But the government was convinced that it must be checked before it broke through into uncontrollable hyperinflation. One personal story reflects the atmosphere of the time. Our apartment in Copacabana was only partly furnished, and we were obliged to buy some furniture to make it liveable. Since I was paid in dollars

io8 All the Difference

and the cruzeiro had been floated, I decided that the only sensible thing for me to do was to borrow cruzeiros and pay back the loan after a few months when the cruzeiro had depreciated. I had no idea how to go about borrowing money in Brazil, but on the next Sunday both Campos and Bulhoes were with me on the yacht Roberto used, so I asked them. There was an awkward silence, and finally the Minister of Finance said, "Well really, Ben, I couldn't tell you how to borrow money here. But I see Mr Klabin's yacht approaching, he is going to join us for lunch, he owns some banks and you can ask him." Klabin was a wealthy but quite young businessman and financier, a friend of the Kennedys. When his yacht pulled up alongside I crossed over and explained my problem to him. He looked a bit worried but asked me to visit him in one of his offices, on the top floot of a skyscraper in the financial district, next day. When I entered his office and sat down, Klabin opened a discussion of the Brazilian economy and the government's policies regarding it. Finally he said, "The bank is on the ground floor. Let's go down and I'll introduce you to the manager." So at last I found myself seated before a real live banker. I filled out and signed a series of documents, and was eventually handed a bank book with a credit in it. Suddenly it struck me that none of the documents had mentioned an interest rate. I ventured to ask the manager what it would be. Again there was an embarrassed silence. Then the manager said, "To tell you the truth, we don't know. That will have to be decided by our head office in Sao Paulo. We'll inform you when we find out." I was stunned. I had signed an open ended agreement to pay back a loan with interest, and I had no idea what the rate would be. I was confronted with financial ruin. Weeks went by with no word from the bank. I was wrapped in gloom. Then I received a note from the bank saying that my interest rate would be 12 per cent, the fictitious legal maximum which in fact nobody actually paid, and which was padded by all manner of ingenious devices of dubious legality. Suddenly I understood the embarrassment that had surrounded the whole transaction. The inflation rate was still above 40 per cent, and to lend me money at 12 per cent was simply to make me a gift. Yet because of my position no one wanted to go through the usual devices to make the real rate about 12 per cent. The loan was for six months. After six months our anti-inflation policy had been so successful that the cruzeiro had actually hardened against the dollar. It was going to cost me more dollars to repay the loan than I borrowed. Yet I knew that we could not hold the line indefinitely; the cruzeiro was bound to fall in the next few months. Should I renew the loan? That would be asking for another present.

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I compromised; I repaid half the loan and extended the other half, and in the end came out about even. THE YACHT

The abovementioned yacht played a large role in our life in Rio. Roberto had a German friend who was president of Mercedes Benz do Brazil. He lived in Sao Paulo, and kept a large boat at the yacht club in Rio. It was on permanent loan to Roberto, complete with fuel and crew, for use on weekends. Once or twice in a weekend we went with Roberto for a trip across the bay to a beach on the other side, where we would swim, sunbathe, and have lunch, returning to Rio in late afternoon. Much of the diplomatic relations of the Ministries of Planning and Finance were conducted on that yacht. If there were an IMF, World Bank, State Department, or similar mission in town, they would be invited to join us on the yacht, for pleasure and for informal discussions. I remember that Paul and Margaret Rosenstein-Rodan were with us one weekend; Paul was on a mission for the World Bank, having left MIT and gone to Texas, as I had done earlier. I remember more vividly one Sunday when the American film star Madeleine Carroll and her daughter were with us, hunting for a house to buy in the bay area. Madeleine was still very beautiful, and gracious and charming; but the daughter in bikini was spectacular. One weekend there was on board a tall, quiet man whom nobody seemed to know, and nobody seemed to talk to, so Jean made a point of engaging him in conversation, and got along with him very well. He turned out to be the owner of the yacht. He remarked to Jean that Roberto used the boat only on weekends; so why did we not use it during the week? We needed no urging, and from that time on did much of our entertaining on the yacht. THE BRANCO REGIME

Castello Branco is of course gone, and with him many of those with whom I was most closely associated in Brazil. Roberto Campos was an honest Cabinet Minister, with the result that by 1968 the interest on his personal debts equalled his modest ministerial salary. He resigned, became an investment banker for a while to recoup his fortunes, then returned to the foreign service as Ambassador to the Court of St James. I saw him a few times in London, once at a gigantic reception at the residence to celebrate the delivery of two nuclear powered submarines to the Brazilian government by Vickers and

no

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the United Kingdom government. I never saw so much gold braid in my life; the top brass of both navies was there. Our irrepressible son Ean was then studying at Sussex, and accompanied us to Roberto's mansion. His journalistic instincts were already highly developed. He went around asking everyone if the submarines were nuclear armed as well as nuclear powered. No one undertook to say they were not. While Branco is gone the regime as such is not, and some of the same names are still much in evidence. Roberto is now Senator for Matto Grosso, his home state. Delfin Netto has recently been Minister of Planning, and so has Joao Paulo Velloso. At long last there has been a substantial period of stability in Brazilian government, and of continuity in development policy and planning. Some would argue that a whole generation of continuity of a military regime is far too much. I have a good deal of sympathy for this point of view. Yet a regime is not necessarily bad just because it is the armed forces that provide the framework within which the competent technocrats and professionals — such as Roberto Campos, Octavio Bulhoes, Delfin Netto, and the rest - can do their jobs. I met Castello Branco a few times during my period in Brazil. He struck me as a simple, decent man, of keen intelligence and total integrity, who had the interests of his country at heart. In my experience, high ranking officers of the armed forces in any country are often like that. With respect to the relationship between the military and the professional economists in the Cabinet, there are obvious similarities between the Suharto regime in Indonesia and the Branco regime in Brazil. In those two countries there is another similarity: the officers' corps itself includes some of the most competent, technically trained people in the country. In 1964 the War Academy was probably the best university in Brazil. The Branco regime was more technocratic than militaristic. If it did not generate wild enthusiasm, in the light of the recent record of Brazilian governments, the efficient technocracy of the Branco regime nonetheless had its appeal. There had been a dearth of strong leadership with a clearcut sense of direction, an articulated development policy and social philosophy. Goulart, for example, while a self-appointed "Communist", began his presidency as the country's third biggest landowner, and allegedly ended as the country's biggest. Indeed, where Indonesia suffered from ideological conflict, Brazil suffered from ideological confusion. The values of feudalism, Roman Catholicism, liberalism, rough-shod capitalism, Fabian socialism and Marxism were present in all manner of unlikely mixtures.

111 The Regional Factor and Misdevelopment

This coniusion resulted not only in lack of clearcut directions in policy and planning, but also in downright inefficiency. The country had been burdened by a series of erratic, unsystematic, often confused and misguided attempts to "repeal the law of supply and demand". Over the decades Brazil had accumulated a morass of economic and social regulations, with more and more agencies and more and more bureaucrats to run them, and more and more contradictions among them. Eugenic Gudin was frequently quoted as stating that the trouble with Brazil was not underdevelopment but misdevelopment; and a favourite quip in Rio was "Brazil grows at night while the government sleeps". A World Bank mission that visited Brazil in 1964 found that the government-owned railways had four times, and the government-owned shipping lines five times, as many employees as they needed for efficient operation. I myself came across one case where a shipment of coffee from a plantation in the state of Sao Paulo took two years to reach the port of Santos by rail. Against such a background the pragmatic efficiency of the Branco regime was welcomed by many. I am aware of the abuses under the Branco and subsequent regimes. They were widely reported, and protested against, in Brazil's very free press. Political prisoners were taken and some were maltreated. But Brazil is a big country, bigger than Australia and almost as big as the United States. In 1964 communications were not very good. The commanding officers of each military district had a good deal of autonomy. The command at the centre did not always know what the commanding officers in the outlying districts were doing; and it is there that most of the abuses of power took place. Certainly none of the people I worked with were connected with any such abuses. I am sure of one thing. The policies and plans that were set in motion in the mid-19608 in Brazil set the stage for the rapid growth that has taken place since. Brazil has been converted from a rather stagnant country with a per capita income of about $300 per year into a highly dynamic society with a per capita income of over $2000, exporting automobiles, aircraft, electrical and electronic equipment all over the world (wherever protectionist measures do not keep them out). From now on "the Colossus of the South" will be a power to be reckoned with. CHILE

During my eight years at the University of Texas I was fairly often in Chile, since CEPAL is in Santiago and consequently a good many

H2 All the Difference United Nations conferences regarding Latin American development are organized there. CEPAL maintains an extremely high level of technical competence, and from a professional point of view I always enjoyed my visits to Santiago. The University of Chicago had an AID contract to provide visiting professors of economics to the National University of Chile, so I encountered Arnold Harberger there from time to time, and also John Chipman, who had been a student of mine at McGill, and Albert Hart, who tried to sell the Chilean government the self-enforcing tax system I had designed for the Lebanese government, with about the same degree of success as I had in selling it to the Lebanese (see Chapter 6). Rosenstein-Rodan was a frequent visitor. He liked Chile, and got along well with a series of presidents, especially Gilberto Frey to whom he was quite close. He spoke fluent Spanish as well as practically everything else. So it was always interesting to be in Santiago. Yet I never warmed to Chile as a country. One reason I suppose is that Santiago is very often cold. Chile never seemed "Latin" to me. It reminded me rather of northern Europe, say Glasgow in the 19308. Santiago had a depressed air about it; the people on the streets were stolid middle or working class, shapeless and badly dressed. I went to listen to the symphony orchestra and found it bad. The soldiers goose-stepping through the streets in their German-style uniforms did nothing to improve my impression. Chile had started off so well as an independent country, rich in resources and with a solid democratic tradition. Something seemed to have gone wrong. Rosenstein-Rodan used to say that the Chilean women were the most beautiful in the world — and he was a connoisseur. I know what he meant; but his statement applies only to the top o.oi per cent of society. This top layer are cultivated, travelled, charming, gracious and very good-looking. They give excellent parties where the dancing starts at about midnight. These were the circles in which "Rosie" moved in Chile. Certainly I enjoyed such contact with them as I had. I enjoyed lunching at the Clube Union, where a Chilean friend told me one day that the men in the dining room at that moment owned half of Chile. He also told me that the rooms on the top floor of the club had Valparaiso telephone numbers, so that the members could tell their wives, "Darling, I have to go to Valparaiso on business, but you can always reach me there at this number", and then spend the weekend in Santiago with their mistresses. I enjoyed, too, visiting the first class nightclubs and learning the cuenca, a dance involving much waving of scarves or handkerchiefs. All this, however, has little to do with the lives of the vast majority of Chileans, lives which are not poverty stricken, but drab. I have never advised the Chilean government directly, and I do not think

ii3 The Regional Factor and Misdevelopment

I would enjoy doing so. Chile's economic problems are seated too deeply in their culture. I am happy to leave the Chicago School to its monopoly in Chile. ARGENTINA

On one of my trips to Chile the Argentina government asked me to stop for a few weeks in Buenos Aires and take a look at their development planning, particularly in its regional aspects, and give a lecture or two at the de Telia Institute. I had known Guido de Telia as a graduate student at MIT, where he did brilliantly, and I wa glad to see him again. I was also fortunate to find in Buenos Aires, on an advisory mission, Carter Goodrich, famed economic historian of Columbia University, who had been Chairman of the Board of Governors of the ILO when I joined its staff. I do not know how much I helped the Argentina government in so short a period - it was rather hard to help, given the continued influence of the Peronistas and the general sense of drift in economic policy - but they certainly helped me to clarify my ideas about Latin American development. Carter Goodrich took me into the countryside to see a pato game. Pato is like basketball played on horseback, and so called because originally a trussed-up duck was used for a ball. Now they use a basketball with handles, so that it can be swept up from the ground and passed while galloping at full speed. I do not know quite how the popularity of the game correlates with the pattern of development, but the horses were beautiful and the horsemanship magnificent. Buenos Aires is an elegant, beautiful city, with its broad tree-lined boulevards and plazas, smart shops, and excellent restaurants with the best beef int he world. I went to the Colon theatre, with the bust of Toscanini on the plaza before it (he began his career as a conductor there) and after a first-rate opera performance stood on the steps and watched the crowd, jewel-bedecked ladies in long evening dresses and men in white tie and tails, as the uniformed porters whistled for their Kaiser-Frazer limousines one by one (the Kaiser is still being manufactured in Argentina). The whole atmosphere was one of a sophisticated European capital city. Workers and farmers are obviously not so well off, but the poverty is that of an American of European country, not the pervasive and profound poverty of an underdeveloped country. Argentina is the most American (read: Transplanted European) of the Latin American countries that I have visited. In Brazil, Mexico and Peru, and in island nations like Haiti and Jamaica, the size of

ii4

A

H the Difference

black and indigenous Indian populations is so substantial, and the contrasts between living standards of rich and poor so stark, that one is continuously aware of being in a less developed country; there is some sense of continuity with countries in Asia and Africa, of being somewhere in the same spectrum. But in Argentina the realization struck me forcibly, "This isn't an underdeveloped country at all. It's another New World, industrialized country, European in origin, like Australia or Canada or the United States. But it has bogged down, through mistaken economic policies and strategies and failure to resolve its political conflicts." Having got that far, I thought, "If one industrialized country can bog down, others can too. Uruguay, Chile and Venezuela are obviously in the same boat. New Zealand, Ireland, Greece, Spain and Portugal all have similar stories at one or another period in their histories. It is a matter of going through the structural change from agriculture to industry and services, with too few of the industries being efficient and too few of the services being sophisticated, and too much protection of inefficient enterprises." Could Australia go the same route? Even the United States? I began to think the concept of three worlds (or four, with the "Least Developed" countries separated out from the Third World) was fuzzy, misleading, an analytical nuisance. Perhaps we needed a more elaborate taxonomy with a good many more categories, and perhaps one of these categories should be "failed industrialized countries". Latin America's ideological confusion makes the task of stabilization, reconstruction and development difficult. There is in Latin America, of course, a common bond of Roman Catholicism; but both for purposes of personal comportment and for translation into social and economic policy, its principles and values are variously interpreted. At the bottom of the social spectrum, workers and peasants, it could mean voodoo, macumba, or condomble: Catholic masses combined with animal sacrifice, drugs and drums, hypnosis, trances, and erotic dances. Among the landed aristocracy and upper-crust members of the business community it could be translated into support for a semi-feudal system: sets of loyalties on the part of the underdogs and responsibilities on the part of the privileged; a strong influence of the church in matters of economic and social policy; rerum novarum and quadrigessimo anno; the "divine right of property"; adding up to something approaching the corporate state. But even among these same people, and among intellectuals as well, there is also a strong faith in seventeenth and eighteenth century liberalism, with its emphasis on individual freedom, rule by law, representative

115 The Regional Factor and Misdevelopment

democracy, and curbs on the power of the monarch or the state. So far as I can tell, they see no real conflict between the two ideologies. Among the intellectuals, trade unions and politicians, there is also an old-fashioned Marxism, although not necessarily anti-church; and some members of the church hierarchy are not anti-Marxist. Finally, among the younger intellectuals, professionals ("yuppies"), and bureaucrats, there is a swelling crowd of "Cepalistas", disciples of Raul Prebisch and CEPAL (the Economic Commission for Latin America, or Commission Economica para America Latina). The Cepalistas are for the most part not dogmatic Marxists, but nevertheless believe in planning (mainly perspective planning) and in intervention to correct the structural defects in Latin American economies. The Cepalistas, following Prebisch, tend to blame Latin American underdevelopment on exploitation of "dependent" countries on the "periphery" by the "dominant" capitalist countries at the "centre". It was this group that gave rise to the Latin American "dependency school", represented at its best by such economists as Celso Furtado, who was Director of SUDENE and later Minister of Planning in Brazil, and Osvaldo Sunkel, of Sussex and CEPAL. The confusion is compounded by the fact that Latin American societies are in the midst of a transition, and one that does not clearly represent progress. When the landed aristocracy were the ruling elite Latin American society had a certain cohesion, which is now disappearing as the new industrial and financial class assume power, aided and abetted by top bureaucrats and politicians. In a paper presented to the UNESCO seminar in Mexico City, my friend Cosio Villegas, President of the Collegio di Mexico and one of Latin America's leading intellectuals, described the transition as follows: The old landowning oligarchy was itself the ruling class throughout the whole of the nineteenth and well into the twentieth century, in almost all Latin American countries. In these circumstances, they openly seized political power and certainly availed themselves of it to promote their own interests; but at the same time they did assume the attendant responsibilities. The new industrial and banking oligarchy wishes to influence governmental decisions, and actually does so, but without shouldering the responsibilities which such decisions necessarily involve. The social difference is no less important. In the course of time, the old landowning oligarchy reformed itself from within; its members acquired culture and good taste, learned to understand general problems which had nothing to do with the farming of their land, and were therefore able to indulge in the luxury of becoming patrons of arts and letters. The new oligarchy is still unduly crude and

116 All the Difference coarse, smacks unmistakably of money because it thinks of nothing else, and does not seem to understand anything that has no direct bearing on its business affairs.

The mixture of these ingredients in the Latin American cocktail, in Brazil and in other countries, varies with events and with swings of the public opinion pendulum. The result is a damaging lack of continuity in policy regarding all aspects of development. IMPRESSIONS FROM LATIN AMERICA

My work in Latin America left me with two major impressions. One of these, which has continued to grow in strength ever since, is that national economies, as well as being aggregations of enterprises, industries and communities, are collections of regions, integrated or disintegrated in varying degrees. All Latin American countries of which I have direct knowledge are highly regionalized, and regional policy and planning is a major aspect, if not the major aspect, of national development policy and planning. The second impression, which struck me with considerable force, was that Latin American countries are American. It may seem incredible that I could have been so naive as to think anything else; but the truth is that, like many other development economists, I was so mesmerized by the concept of "less developed countries" and "the Third World" that, when from the standpoint of my Asian experience I thought of Latin America, I thought of another group of underdeveloped countries, for the most part more advanced along the development path than those of Asia. After I had spent some time in Latin America I realized that most Latin American countries have far more similarity to the countries of North America than they do to any countries in Asia or Africa. Both Americas have transplanted European cultures with minorities of black and indigenous Indian populations. They are former European colonies that became independent between the late eighteenth and early nineteenth centuries. Most of them are, constitutionally, parliamentary democracies. Some of the South American countries are already "industrialized", in the sense that the bulk of their labour force is already in industry and services, and only a small fraction of the population is still engaged in agriculture. They are New World countries of recent settlement, where conquering new frontiers has been an important part of development and where frontiers still exist. Their similarity to North America is apparent. Why then are they as poor as they are? Could it be that we were confronted with more

117 The Regional Factor and Misdevelopment

than one kind of development problem, requiring different kinds of policy and planning, and perhaps even different kinds of analytical framework, for their solution? TWO INTERLUDES

During my years at Texas I had two long leaves of absence unconnected with advisory missions. In 1963 I was invited to the University of California at Berkeley as Visiting Professor for the spring semester. The department of economics at Berkeley was regarded as being one of the best in the country, and I thought that being at Berkeley for a while would provide me with a chance to recharge my intellectual batteries, escape sitting on committees and supervising Ph.D. theses, and get some writing done. How wrong I was. I found a dozen Ph.D. candidates waiting to pounce upon me on arrival, thinking, quite rightly, that I would not yet be acquainted with the Berkeley tradition of ignoring students at all levels. I sat in Ph.D. exams where no member of the committee had seen the candidate for two years, and no one was sure exactly which one was the supervisor, so that the Chairman (R.A. Gordon) had to call in his secretary to find out. I set up a special seminar for my Ph.D. students in our house high in the mountain above the campus, with a splendid view of the fog over San Francisco Bay. As for recharging my batteries, it was much more stimulating at Texas. The economists were never around, and did not talk to each other. The attitude was, "I know much more about my book than you do, and I have no interest in your book. So let's both go home and write our books." I understood very well the student revolts at Berkeley in that era. My teaching load at Berkeley was not heavy: an undergraduate course with eighty students and a postgraduate "seminar" of the same size. At the close of the final session of each the students gave me a standing ovation. That gesture had nothing to do with the quality of my classroom performance; it was simply an expression of gratitude for my willingness to give them some time outside the classroom. With 160 students "some" time added up to quite a lot. I did not get much writing done at Berkeley and was glad to get back to Texas. In any case our memories of Berkeley would always be shadowed by the fact that while there we learned that our blithe younger son, Alain, had leukemia. He lived but a few short months after we returned to Texas. When I arrived I was informed that I had been appointed to the out-of-salary-scale Ashbel Smith Professorship in Economics. Undoubtedly Berkeley's expression of interest

n8 All the Difference in me had something to do with that; and for that I am grateful to Berkeley. Two years later I was invited to the East-West Center at the University of Hawaii as a Senior Fellow. I was not disappointed in that experience, because all I expected was that it would provide me with a pleasant environment to do some writing, which it certainly did. We found a charming "executive hideaway" on Laie Point, about as far from Honolulu as one can get and still be on the island of Oahu, with one curving palm-fringed beach in front that was good for snorkelling and another curving palm-fringed beach behind that was good for surfing. Harry Johnston and his family visited us there on the way from the Conference on Pacific Trade and Development in Japan. My two older sons, Ben Jr and Tory, came for the long vacation, and surrounded us with young, beautiful, psychedelic people. Ben Jr was studying sociology and Tory psychology, but both were interested in development, so we had many stimulating discussions. However, most of the time I sat on one or the other beach or at my typewriter and wrote the second edition of my book on Economic Development, and some other things as well. While I was in Hawaii the various major shipping companies got together and created a fancy endowed chair in economics. It was offered to me. It was certainly a seductive offer, but as I began to look into the situation at the University of Hawaii at that time, and discovered the jealousies, the in-fighting and intrigue, in which even the wives joined, my misgivings grew. The deciding factor was the friction between the President of the University and the Director of the East-West Center; I would not have wanted to be in the University without being associated with the Center. I said to Jean, "It's bad enough being in a second rate university trying to become a first rate university, but a third rate university trying to become a second rate university is intolerable." So for once we rejected the road less travelled and went back to Texas. Incidentally, both Texas and Hawaii have achieved their objectives of twenty years ago. Neither of these interludes had much effect on my thinking about development. It is for that reason that I have treated them so briefly.

6 The Human Resource and Distribution Factors: The igGos

The other two roads I followed during the sixties were both relatively new, not only to me but to the economics profession as a whole. The first of these led to growing insistence on more equitable distribution of the pie, as well as making the pie grow, to assure reasonably quick and significant improvements in living standards of the majority of the populations of developing countries. The second led to growing emphasis on human resource development, as distinct from investment in plant and equipment and associated technical progress. By the end of the 19505 almost everyone engaged in the international development effort was already disillusioned with the widely applied strategy of a Big Push to capital accumulation in the modern sector, accelerated growth of national income, and trickle down, as the salvation of poor people in poor countries. It just did not seem to be working. It was not quite true that the rich were getting richer and the poor poorer, but inequalities were becoming more glaring, and any improvement in the welfare of the masses of peasants and workers was painfully slow. Therefore during the "Decade of Development" of the 19605 these two new areas of thought and action came to the fore. For economists like myself, entering the development field after being trained in the neoclassical tradition, both of these innovations were a bit discomfiting. Income distribution is a subject that has always been embarrassing for neoclassical economists, since it cannot be handled without some kind of value judgment, necessitating a departure from the ideal of Wertfreinheit;that is, freedom from value

'20 All the Difference

judgments in scientific analysis. Rather than tackling the awkward question of how to achieve greater equality where social justice clearly demands it, we preferred to believe that growth would benefit everyone in the long run, and not to brood on Keynes's reminder, "In the long run we are all dead". Prevailing attitudes of development economists on the eve of the Development Decade were well illustrated by the First ECAFE Expert Group on Development Programming Techniques, which I attended, in Bangkok, in 1959. This meeting was distinguished by two features. One was the quality of its membership. Jan Tinbergen was the chairman. Other members were Gamani Corea, then head of the Sri Lanka Planning Secretariat and later Secretary-General of United Nations Conference on Trade and Development (UNCTAD); Josef Pajetska, of the Polish Planning Commission and later its head; A.J. Ghosh of the Indian Planning Commission; Shinichi Ichimura of Japan. The second feature was that the group met for five weeks on end, and wrote its final report on the spot. Looking back, it seems incredible that such people could have been held together for five weeks. It was a more leisurely world then. Considering the status of the participants and the amount of time spent, the Expert Group's report could not be regarded as highly innovative. It was still bound to growth models, cost:benefit analysis, and input-output matrices, the development planner's stock-in-trade of the 19508. The aim was to promote savings, investment and exports; achieve an efficient resource allocation; evaluate projects in the public sector, and maintain balance among sectors and industries. It is interesting to note that shortly after this meeting Tinbergen became a leader in the effort to construct useful econometric models for educational planning. It is interesting also that despite the wide range of political systems represented by the membership of the Expert Group, no ideological differences emerged in their discussions. No one argued that the whole development planning effort be abandoned in favour of a totally free market, and no one urged that the market be totally abandoned in favour of centralized planning. Instead there was a common effort to identify weaknesses in both market operations and planning techniques that might be retarding development, and to find ways of eliminating them. In the early 19605 there were efforts to improve income distribution and further human resource development. There were moves to reform tax systems so as to yield greater equity. The UN Specialized Agencies took steps to reduce unemployment and to improve the level of education, health, nutrition, housing, social security and family planning. I was drawn into these efforts, first to reform a tax system, and then to promote human resource development.

121 The Human Resource and Distribution Factors

DISTRIBUTION: TAX POLICY IN THE LEBANON In the summer of 1960 I was invited by USAID to undertake an advisory mission on tax policy to the Lebanon, where my nose was pushed firmly into the mire engulfing issues of development and distribution. Someone - perhaps the perspicacious and able American ambassador, McClintock, maybe the USAID Director, possibly the Minister of Finance or the Prime Minister - was worried about the increasing inequalities of wealth and income as development took place. Especially worrisome was the concentration of wealth in the hands of the Christian minority, and of relative poverty among the Moslem majority. This all-too-evident situation threatened the precarious balance of political power, in a country where the constitution divided parliamentary seats among various Moslem sects and Christians. The idea was that perhaps something could be done to relieve the situation through reform of tax-and-spending policy. Jean was nearing the end of her second pregnancy, so I set off for the Lebanon alone, with the idea that she would join me as soon as possible. It happened that Jean's sister Vivian was working in Beirut at the time, so I had someone I already knew well to greet me and guide me about the city. On the way into Beirut from the airport I heard for the first time the story of Hjalmar Schact's financial mission to the Lebanon some years earlier, related with relish by the government official who was sent to meet me. According to the tale, Schact wrote a two-line report at the end of his mission: "I don't understand your economy, but it seems to work very well. I suggest you leave it alone." During the week that followed I heard this story two or three times a day from the businessmen, bankers, government officials and politicians whom I met to talk about taxation. It was clear that all of them were hoping I would write the same kind of report, and advising me to do so. I began to wonder who really wanted tax reform in the Lebanon. Perhaps my mission was mounted because the United States had made it a condition for their capital assistance. The Lebanon certainly had a very peculiar economy, and it did seem somehow to work well. It was a period when Christians and the various Moslem sects were getting along reasonably harmoniously. The economy was growing and exuded an air of affluence, ranging from modest to magnificent. It was a country of small farmers rather than peasants, and the people in the villages seemed quite prosperous. Even workers in the cities did not seem to live in the grinding poverty one associates with underdevelopment. And as for the rich, with their town houses and mountain houses and seaside

122 All the Difference

houses and fleets of cars and hordes of servants, they lived with a munificence that seemed pure Arabian Nights. Yet there were worrisome features — economic, political, and social. Exports were only 10 per cent of imports, and the economy was sustained mainly by imports of capital from, and sales of services to, the oil-rich Arab nations. As one Beirut banker said to me, "We Lebanese can finance trade between London and New York, between Paris and Sao Paulo, between Tokyo and Cairo." That seemed to be true, but could they count on it forever? There was only one industry of any importance in the country, the textile mills owned by the Arida family, who became my best friends in the Lebanon. The Aridas were wealthy enough to buy Hjalmar Schact's yacht after the war; but in Lebanese society it was not enough to be a successful industrialist, and the Aridas reminded me that they were merchants and bankers too. The Aridas were among the Christians who saw the need to alleviate the economic inequalities in the country. A few years later, Jacqueline Arida and her husband Gabriel Saab saw the writing on the wall and moved to Montreal. "Bob", as everyone called Gabriel, had a successful career as an agricultural economist. Because of his work for FAO, he was later appointed Director of FAO'S Liaison Office with the United Nations in New York. In that remote summer of 1960 economic and political troubles seemed far away. Beirut was a beautiful, elegant and charming city, with excellent restaurants and an active and sophisticated night life. Jean arrived with Ean and our infant son Alain, we moved into a penthouse apartment in a fashionable part of town, the Aridas introduced us into upper-crust society, and we had a good time in the Lebanon. My mission, however, flourished less spectacularly than our private life. I estimated tax evasion in the country as a whole at threequarters of tax liability. People were quite unblushing about tax evasion. They would say, "Let me tell you how the system works. Suppose I owe £100,000 in income tax. I will pay £10,000, and if a tax inspector comes around I will give him £15,000, and that will be the end of it." The system was tailor-made for tax evasion in any case. The Lebanon had the Swiss system of "secret bancaire" (secret numbered accounts), without the Swiss surmise income tax for citizens, under which the tax authorities can assess the income of a citizen by his style of living, the citizen being responsible for proving the estimate too high. In the Lebanon a taxpayer (or better, a nontaxpayer) had only to make a transfer from one of his secret accounts to another, and claim it as a cost of operations. If a tax inspector questioned the item and asked what the payment was for and to

123 The Human Resource and Distribution Factors

whom, the taxpayer would sanctimoniously refuse to answer on the grounds that such revelations were a breach of bank secrecy. It was obviously no use trying to bring about reforms within the existing income tax system. Accordingly I gave the Lebanese government two new tax systems. One was a self-enforcing income tax system, designed so that it always paid at least one party to a transaction to report it, and so that an effort to evade one tax would result in being caught by a worse tax. The system is described in a chapter of my book on Economic Development. It was the last thing the Lebanese wanted. Carl Shoup of Colombia University had my report reproduced and used it for teaching purposes in his graduate course in public finance. Albert Hart of Colombia tried to sell the system to the Government of Chile, but they did not want a selfenforcing tax system either. My other system was based on customs duties. All luxuries in the Lebanon were imported, and I found the Customs Department both competent and honest. It was easy to design a system of tariffs that would have much the same impact as an effective progressive income tax. What became of that system I am not sure. The government changed not long after my mission was completed, and the Lebanon has never since had the degree of economic, social and political stability it had then. The Lebanon story is a true Greek tragedy, destruction springing from seeds planted in the people themselves. I feel a sense of personal loss in the Lebanon story. In a short period I came to love the Lebanon, and it was a country I would greatly have enjoyed revisiting from time to time, had it evolved as I hoped it would. I have been in the Beirut airport a few times since 1960, on my way somewhere else, but I have never disembarked. The Lebanon is the only country in which I have performed an advisory mission and have subsequently never revisited. The Lebanese case, like the Philippines case, illustrates the difficulty of achieving "growth with distribution" in countries which have an official format of parliamentary democracy, but where economic power, wealth, and ultimately the real political power are all concentrated in the same few hands. It is a common enough picture in the developing world. E M P L O Y M E N T AND THE ILO

Where redistribution of income through the fiscal system is not possible, a simple way to alleviate poverty without "soaking the rich" seemed to be to reduce unemployment and underemployment - or so the ILO thought. On our way back to Texas from the Lebanon

124 All the Difference

we stopped in Geneva to attend the ILO Expert Group on Employment Objectives in Development. Upon my arrival John Riches, an able New Zealand economist who was the ILO'S Economic Adviser and later its Treasurer, told me that the ILO wanted Roberto Campos as chairman of the Group, and asked me to nominate him. At that time I had not been to Brazil and had never met Roberto, but was quite prepared to follow John's advice. By the end of the week Roberto and I were already good friends. The discussion in the Group was lively, and foreshadowed what was to come as a result of ILO'S efforts in the field of employment: in developing countries the scope for employment creation by Keynesian policies is limited. It is not so much a matter of promoting development by creating employment, but of creating employment by promoting development. The 1960 ILO meeting on employment was followed by others, which gradually nudged thinking and action about development into new channels. In 1969 the World Employment Program (WEP) was established, under the stimulating directorship of Louis Emmerij. The WEP engaged some of the world's best-known development economists and had a major intellectual impact. It made its way step by step from a direct concern with unemployment (the Colombia Report) through an emphasis on education, training and manpower planning (the Sri Lanka Report) to a recognition that the real problem is low productivity and rural poverty, or "the working poor" (the Kenya Report). I was invited to join the Kenya team, but to my great regret the timing made this impossible. The Kenya Report led to the conclusion that there is no single solution to underdevelopment; it requires human resources development over a broad front, not merely as a matter of social justice, but because there are all manner of feedback relationships among one element of such development and other aspects of it. A better trained, better educated, better nourished and healthier population is a prerequisite for further development. This set of ideas culminated at the World Employment Conference of 1976 in the "Basic Needs Approach" to development, of which more below. Other UN Specialized Agencies were also trying to push governments into directing more funds to one or another aspect of human resource development. They were assisted in their endeavours by the fact that, for some reason or other, it seems to be easier politically to improve welfare by programs for health, nutrition, education, housing and social security than to redistribute income directly through taxation and an income policy. Perhaps the rich do not trust

125 The Human Resource and Distribution Factors

the poor to spend increased income wisely, and prefer to provide increased welfare in forms of their own choosing. Naturally enough, each Specialized Agency directed its strongest efforts to selling its own wares. In these efforts, in the early ig6os, UNESCO was particularly successful. UNESCO AND PLANNING EDUCATION

In the early igGos there was an explosion of interest in the economics of education, and in planning education in relation to development. When the "residual factor" burst on the scene - the discovery that in several countries the accumulation of capital and growth of the labour force explained only a small fraction of the growth of national income over long periods, the bulk of it being due to some residual factor — UNESCO was quick to say, "the residual factor, of course, is education". ILO was equally quick to add, "true, but a major component of education for development is manpower training". FAO stressed the importance of training farmers. WHO was a bit slow in pointing out that the "residual factor" might include improvements in nutrition and health as well. In any case the economics of education became the vogue. OECD set up a special program to train people to plan education for development, and UNESCO set up an Institute for Planning Education in Paris, under the direction of the American economist, Phil Coombes. A good many academic economists climbed on this shiny new bandwagon. I had been interested in the interaction of education and overall development from the beginning of my work in the field of development. It will be recalled that UNESCO made me their Chief of Mission in Libya; UNESCO published a report on education andLibyan development under my name. In each developing country where I had worked since then, the education sector had been one of my major concerns. My travels took me to Paris quite frequently, and I always called in on UNESCO. The Director-General of UNESCO at the time was an extraordinarily able Frenchman, Rene Maheu, aided by an equally able deputy, an Indian economist called Malcolm Adishesiah. The Head of the Analysis Division of the Social Sciences Department was an Oxford-trained economist, H.M. Phillips. (Everyone called him Phil; I never did find out what "H.M." stood for.) The Head of the Social Sciences Department was Swedish sociologist and Nobel Laureate, Alva Myrdal. I came to know Phil Phillips and Alva Myrdal quite well (and through Phil came to know Paris quite well). So when UNESCO asked me to serve as Chief

126 All the Difference

Scientific Adviser for a series of conferences, workshops and seminars being organized jointly by UNESCO and the UN Regional Commission, I leapt at the opportunity. The first important conference for which I served in this capacity was the famous CEDES in Santiago de Chile (Conferencia sobre Educacion y Desarollo Economico y Social) in 1962. Before the conference I went to Paris for a few weeks to help with the preparation of the background documentation and the design of the UNESCO strategy. The UNESCO aim was simplicity itself: to increase the size of the education budgets in Latin American countries. The conference would be attended by, in addition to members of the UNESCO and CEPAL staffs, the Ministers of Finance and Planning, as well as Education, of the twenty-one countries that were members of CEPAL (the Economic Commission for Latin America). The Ministers would come empowered to commit their governments, so it was a meeting of supreme importance for UNESCO. I was not altogether happy with what I found in Paris. The principal background document, prepared in Phil Phillips' division by a team of bright young economists and econometricians, was an unblushing application of the residual factor concept. In effect it argued that, since the residual factor (= education) was responsible for the overwhelmingly most important part of economic development, returns on investment in education were far higher than those on investment in any other field; and provided educational standards were maintained, it would be physically impossible for any developing country to expand its educational system fast enough to bring returns on such investment below those on investment in some other sector. It was simply impossible for any nation to spend too much money on education, and education budgets should be increased as much and as quickly as was humanly possible. I felt that this line of reasoning went too far. There were many things besides formal education that might be included in the residual factor — economies of scale, resource discoveries, technological progress not directly related to education, improvements in health and nutrition, on-the-job training, improvements in organization, structural change. And, like many other economists, I thought that the particular production function used to measure the contribution to increased output of more capital and "more labour, and thus to measure the residual (Cobb Douglas), was much too simple and could lead to substantial errors. But these arguments made no impression in Paris and we set off for Santiago with the document substantially unchanged.

127

Tne

Human Resource and Distribution Factors

When Raul Prebisch saw the UNESCO document he liked it a good deal less than I did. In fact he threatened to withdraw the CEPAL delegation and boycott the conference if it were distributed. He felt that CEPAL had put a lot of time and effort into selling a certain kind of approach to development to the member governments, based on perspective planning, establishment of growth targets, calculation of investment requirements in the public and private sectors, and evaluation of individual projects. In his view, Latin America still needed a great deal of physical capital accumulation before it could start thinking seriously about major expansion or improvement of educational systems, and he did not want to have resources dissipated by large-scale investment in human capital. Maheu did not argue. He proved to be an even more skilled diplomat than Prebisch. Before the opening plenary session, he went quietly to the heads of the Argentinian, Brazilian, Chilean, Mexican and Cuban delegations and arranged for each of them to make a speech in the opening session complaining that it was a shame that UNESCO had not provided a general, analytical document as a basis for the conference's deliberations; could not the UNESCO delegation, on the basis of UNESCO'S expertise and long experience in the field, provide such a paper by tomorrow morning? Maheu, with a perfectly straight face, replied that the request imposed a heavy burden on the UNESCO team, but that they would meet the request, even if they had to work all night. The following morning, of course, UNESCO distributed the paper that had been brought from Paris in the first place. With Maheu having the open support of CEPAL'S most powerful delegations, Prebisch could not possibly boycott the conference. The result was that CEDES adopted a final resolution based on the UNESCO document. The resolution set up a number of ambitious targets for the member governments: universal primary school education, for both girls and boys, within ten years; every country to be spending at least 5 per cent of Gross National Product on education within ten years; and in any case to spend an additional i per cent of GNP on education in the next five years, and a second increase of i per cent in the following five years. UNESCO had triumphed. This conference was followed by similar ones in Africa and Asia, with similar results, although the African countries felt obliged to adopt less ambitious targets. Various Expert Groups were also mounted by UNESCO to assess progress, discuss planning techniques, and examine particular problems in the field of education. I participated in these, with growing misgivings. I also participated in a

128 All the Difference series of seminars organized by OECD to train planners of education for the European countries that were still ranked as "less developed": Greece, Yugoslavia, Portugal, Spain, Turkey. Meanwhile UNESCO'S residual factor approach was under fire. Apart from the personal misgivings indicated above, which were expressed in more quantified and scientific form by other economists (notably E.F. Dennison), it was asserted that the UNESCO argument about higher returns to investment in education than in anything else were much too sweeping and too crude, and that a more refined technique for measuring costs and benefits in education projects, and comparing them with projects in other sectors, was needed. It was also pointed out that returns to expanding the educational system alone could not possibly be as high as when growth of the educational system was accompanied by capital accumulation, growth of the labour force, and resource discovery. Then in 1966 came an Expert Group meeting in Santiago to assess progress to date, consisting of high-level planners of education, either in ministries of education or in ministries of planning. I arrived a day late, having stopped in Rio to consult with Roberto Campos, Octavio Bulhoes, Delfin Netto and others. When I entered the seminar room I found myself in a group of Angry Young Men. In effect, they had come to the conclusion that Prebisch had been right all along. Most Latin American countries were well on their way to the achievement of the CEDES targets; but these young planners were convinced that merely spending more money on education, if that meant only expansion of existing elitist educational systems, might contribute very little to development. They felt that, UNESCO to the contrary, some of the money spent on education could have been spent more effectively in other fields. Based as they were on European models, the education systems in Latin American countries, as in other developing countries, bore little relationship to rural needs, or even to the patterns of industrialization in process in these countries. They were designed mainly to preserve the privileges of the already privileged. Meanwhile the literature on economics of education was producing more and more sour notes. Those of us who had been raised in the industrialized countries were accustomed to thinking of education as an avenue to better jobs, and as a social "leveller". Careful empirical studies showed that in many developing countries unemployment was positively correlated with education: the more education one had, the more likely one was to be unemployed. In many countries, too, expansion of the education system had been accompanied by widening income gaps. Dissatisfaction with the "residual

129 The Human Resource and Distribution Factors

factor" as a basis for education planning had led to the trial of other approaches: the social demand approach, the manpower planning approach, the income approach. All of these were found wanting. The social demand approach was really a "copout"; essentially, it said that a democratic government must yield to the electorate's demands for more public education if it wants to stay in power. The manpower approach, translating targets for growth of national income into manpower requirements and thus into education requirements, projects into the future all the mistakes in design of education and training systems in the past, fails to allow for substitution of more labour or more capital for more education, and does not measure benefits of individual education projects. The income approach assumes that the social benefits of different amounts and kinds of education can be measured by differences in individual lifetime earnings associated with them. This approach assumes a perfectly functioning market, no assertion of monopoly power by members of particular professions, such as medical doctors or lawyers (or economists), so that the amount paid for any service measures precisely its value to society. It also ignores complementarities and externalities. Then Amartya Sen showed that the implicit assumption behind the residual factor approach is that the elasticity of substitution among factors of production (including education) is unity; that behind the manpower approach is the assumption that the elasticity is zero; and that behind the income approach is the assumption that the elasticity is infinite. Nothing can be simultaneously unity, zero and infinity. Yet, as Sen pointed out, not only were all three of these approaches used simultaneously in evaluating education projects and programs, but sometimes all three were used by the same person making the evaluation. By and large the "economics of education" was a failure, despite the calibre of the people who worked on it (Marc Blaug, Jean Bowman and Ted Schultz among others) and the ingenuity with which they tackled their difficult task. We learned a great deal about interactions between education and development but we never really did find a watertight method of measuring returns to education accurately enough to permit direct comparison and ranking with respect to a power plant, an irrigation system, a clinic, a family planning program, a feeder road, a textile mill. Towards the end of the Decade of Development of the 19605 UNESCO organized a final UN Expert Group Meeting in Bangkok to review the whole experience with integration of education planning and development planning. It was a high level meeting; I remember Marc Blaug as one

130 All the Difference of the stars of the show. Our report stated bluntly that a country certainly could spend too much money on education if the education system was not properly designed in the first place. We also suggested that it would be well to abandon the attempt to reduce returns to all development projects to single numbers, and concentrate rather on methods for ranking projects in terms of their contributions to the whole set of national development objectives. In terms of UNESCO Gospel these were heretical views, and UNESCO sat on the report for two years before publishing it. Recently Marc Blaug has presented convincingly the increasingly widespread view that some countries can and do spend too much on education even when their education systems are reasonably good. (See his chapter in Brecher and Savoie, editors, Equity and Efficiency in Economic Development: Essays in Honor of Benjamin Higgins.) But winds of change were blowing. In UNESCO there were changes of personnel, and both UNESCO and OECD fell back on the sensible and pragmatic approach of sending competent interdisciplinary teams to work at the community level in developing countries, designing education plans and programs as part of the overall development program. This approach is not very satisfying intellectually, especially to rigorous quantitative economists, but it works. In any country it is possible for such a team to establish sensible norms for education, and to design the education program so as to close over time the gaps between the actual state of affairs and these norms. UNESCO had moved a long way from the idea that any increase in spending for education is a good thing. In fact some educators were insisting that making investment in education more productive was a matter of educational reform, especially innovation in teaching methods and curricula, rather than continued expansion of the traditional elitist education system. Latin American educators, for example, declared that "through intelligent use of technological innovations and the elimination of irrelevant subject matter and outdated teaching routine, the basic task of the schools could be accomplished in less time and expense per pupil ..." UNESCO was turning to systems analysis as a tool. Unlike the usual econometric approach the systems approach does not base projections on past experience, but designs programs according to future needs. The "scenario" method envisages the "final scene" and then elaborates a plot for getting there. Moreover the systems analysis approach examines how education is related to other development. The concept of interactions and feedback was turning up again, as it had in the ILO studies of employment and development: the concept of economy as an organism rather than a machine.

131 The Human Resource and Distribution Factors HEALTH AND NUTRITION My involvement in health planning and health economics was less intensive than in education. I learned a good deal about the importance of nutrition for overall health and for both the mental and physical development of individual persons from my famous first wife, Agnes C. Higgins, Director of the Montreal Diet Dispensary. The knowledge I gleaned from Aggie stood me in good stead when planning the health sectors in Mauritania, the Pahang Tenggara region of Malaysia, the DRIPP region of Haiti (see pp. 121-2), and the Lower Uva region of Sri Lanka. When I say "planning" in this context I mean serving as a bridge between the WHO missions and departments of public health, and our own overall development planning teams, which had no specialist in public health, and integrating the health sector into the overall plan. It also fell to my lot to deal with the public health sector for the UN Research Institute for Social Development (UNRISD) team for the "Unified Approach", in 1971—73, of which more below. WHO'S big leap forward took place in the 19705. Late into the 19608 I can remember WHO representatives at conferences of Asian (or African or Latin American) planners saying in effect, "Well, all this planning business may be all right for other people, but it has nothing to do with us. How can you value the life of a child?" True to their oath of Hippocrates, they thought that the aim of any health program should be to cure the sick and keep the well in good health. But of course the health programs were not actually doing that in any developing country in the world. Incomes and health budgets were limited, physical resources and human resources for health were limited too. Choices had to be made, and were being made, as to how to distribute those resources among various health projects and programs. Moreover, in many LDCS mistakes were being made in resource allocation within the health sector. Too much was spent on curative medicine in large hospitals in large cities and not enough on preventative medicine in the villages. I have never been sure what brought on the revolution in WHO at the beginning of the 19705, but it was - to an outsider at least amazingly sudden, rapid and thorough. From being the member of the UN family least concerned with professional planning, operations research, systems analysis and the like, suddenly they were well ahead of UNESCO in this respect. Instead of medicine, like education, being "a basic human right, and that's that", WHO quickly developed a very sophisticated and very detailed method of measuring costs of and benefits from various health projects, including impact on mortality

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and morbidity rates, but also including such things as effect on mandays lost from work, productivity and the like. They were therefore able to rank health projects with considerable precision. Moreover, they were fully appreciative that health depends on things other than the size of the public health budget (something that took UNESCO longer to learn with respect to education). One story illustrates this point. In 1971-72, when I was working on the Pahang Tenggara project, Dr Mahler came to Malaysia as head of a WHO mission. Tong Yaw Hong and other top people at the Economic Planning Unit (EPU) in the Prime Minister's Office told him that any public health program that he recommended would have to meet the criteria applied to projects in other sectors, in terms of a whole range of national objectives. Six weeks later Mahler came back and told the EPU: "I'm sorry to say, gentlemen, that I have to recommend closing down the Ministry of Public Health. I cannot justify their program in terms of your criteria." The EPU representatives were appropriately horrified; the Minister of Health was a powerful politician. Mahler was asked to go back to his drawing board. In another six weeks he came back to EPU with an elaborate public health plan. This time he said: "Here, gentlemen, is a health program that is guaranteed to obtain a good budget for the Ministry of Health, and to attract a large amount of WHO assistance and other foreign aid. There is one thing it will not do: it will not raise significantly the level of health of the Malaysian people." Again the EPU personnel were horrified. How could that possibly be? "Because," Mahler went on, "the solution to Malaysia's health problems lies outside the Ministry of Health. You need housing and recreation facilities that will attract and hold nurses and doctors in villages and small towns. You need improved transport facilities that will enable people to get to clinics and hospitals, or medical personnel to people. You need improved communications so that problems in outlying areas can be reported. You need tariff reform to make Pharmaceuticals cheaper, or an industrial policy to increase domestic supplies of medical materials and equipment." In fact WHO became an early and enthusiastic supporter of the Unified Approach, discussed in the next chapter. HOUSING

Because of my early experience with the United States Housing Administration and the Central Mortgage and Housing Agency in Canada, it has sometimes been my fate to be assigned responsibility for the housing sector in planning teams that had no professional

133 The Human Resource and Distribution Factors "houser". Perhaps because of this early experience, I have never felt altogether comfortable in these assignments. When I was with USHA it was under constant attack from the rival Federal Housing Agency (FHA), which provided low-interest, 25-year mortgages through the private sector. USHA borrowed (then) at half of one per cent on treasury bills and lent to local public housing authorities at 3 per cent for sixty years. To FHA this operation was financially unsound and socialistic. "Everyone knew" that the normal life of a house is twenty-five to thirty years. FHA also argued that, since we were providing subsidized housing to the lower third of the income scale, many of whom were unemployed, we were encouraging idleness, sloth and low productivity. Nathan Straus asked me to counter these arguments. I first made a statistical study of the age-distribution of houses demolished in various American cities. Sure enough the mode was twenty-five to thirty years. But then I studied the age distribution of houses left standing in the same cities, and found it to be identical with that of houses demolished. Whether houses were demolished or not had nothing to do with age, but on whether the area of the city where they stood was undergoing a change in function or not. The public housing authorities could assure by effective town planning that the functions of the areas where their housing stood did not change. Then I made another study, which showed that, when slumdwellers moved into our nice new public housing projects, their earnings rose and their unemployment rates fell. Far from encouraging sloth and low productivity, we were encouraging increasing productivity and the work ethic. The study was a bit dishonest. It covered the period of the late 19308 and in this period unemployment was falling and incomes were rising throughout the entire population, whether they had moved from slums to public housing projects or not. I have never been entirely convinced that improved housing, as such, apart from related matters such as sanitation which influence health, has a significant effect on productivity. In calculating benefits from it, emphasis should be on improved quality of life, rather than any presumed impact on productivity in other sectors. SOCIAL SECURITY

I have had relatively little to do with planning social security in relation to development, although I did write about the question as part of my work for the UNRISD Unified Approach team, and published an article or two about it. There have been attempts to measure

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benefits from social security programs, but they are not very conclusive. One thing that seems to be clearly established is that effective social security programs reduce fertility rates and thus rates of population growth. Publicly provided security replaces the private security implicit in having large numbers of surviving children, especially in peasant societies. For that reason alone they are worth having. DEVELOPMENT ADMINISTRATION: SRI LANKA, 1963

With the growing understanding of the multi-faceted feedbacks among the various elements of the development process, and the increasing awareness of the need to take all these relationships into account in formulating policies and preparing plans for development, the emerging picture of the development process became at once more intricate and more blurred. Ideas about the way in which policies should be determined and plans assembled accordingly became more complex. In the early fifties we thought of development policy and plans as being the concern chiefly of ministries of planning and finance, and perhaps of the Central Bank and the Department of Trade and Commerce. The role of departments like agriculture, industry, transport, education and health was merely to provide technical information. Now it was beginning to appear that there was scarcely any discipline that could be safely left out in constructing a theory, .and scarcely any department of government that could be safely left out of planning and policy making. Consequently those of us engaged in tilling the development soil became uncomfortably aware that we were confronted with baffling problems of organization and administration of development efforts, both in the planning and policy-making phase and in the implementation phase. These were problems, moreover, to which we had hitherto paid little attention. During the ig6os the specialists in public administration stepped into this breach. Some of them were so bold as to maintain that the disappointing results of the development effort thus far were due to neglect of sound principles of organization and administration. A torrent of literature on the subject sprang into being, and numerous training programs were set up, in developing countries and industrialized countries alike, to teach administrators of development programs how to do their jobs properly. In 1963 I was asked by USAID to undertake an advisory mission in Sri Lanka, working with the Planning Secretariat of the Prime

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Minister's Office. This mission was to provide me with a stern and badly needed lesson in development administration. My first impression was that the political situation and the organization for development were ideal for getting things done. Madame Bandarenaike was again Prime Minister, and her nephew Felix was Minister of Finance and Deputy Prime Minister; the wellstaffed Planning Secretariat in the Prime Minister's Office was under him. The Permanent Secretary of Finance was Shirley Amerasinghe, who later died in harness at a Law of the Sea meeting at the United Nations. Gamani Corea was back at the Central Bank as Director of Research (and later Deputy Governor) which usually happened when the Bandarenaikes were in power. The head of the USAID was Jack Kubisch, with whom I worked later in Brazil. Both Jack and Shirley were good tennis players, and we combined tennis with discussions of Sri Lanka's development problems. Another major figure in economic policy was Roger Coomaraswami, former head of the Colombo Plan Secretariat, who later became "Raja" (the name sounds the same in Oxbridge) and served as economic adviser to President Jayawardene. I did not know when I arrived that my mission would be mainly concerned with the organizational framework for planning and implementation of development, but that is what it turned out to be. The main task of the Planning Secretariat at the time was to translate Gamani Corea's excellent ten-year perspective plan into an operational three-year plan. Felix was determined that the three-year plan should be integrated with the budget, and that no project would get support from the budget that had not been through the Planning Secretariat for approval. In early September 1962 he sent letters to all members of Cabinet requesting three things: that all projects for inclusion in next year's budget be sent to the Planning Secretariat by 31 December; that each department set up its own internal planning committee to work with the Planning Secretariat; and that each department appoint a liaison officer who would be more or less continuously available to the Planning Secretariat. Given the paper organization, with the overlap of the Ministry of Finance and the Planning Secretariat, plus the competence of the Secretariat's staff, one would have thought that the situation was ideal for the achievement of the Finance Minister's aims. Yet when I arrived in late January 1963, a month after the deadline, the Planning Secretariat had yet to receive a single project from any ministry. The "planning committees" were simply the Permanent Secretary and other top officials who went their ways as usual. The Liaison Officer was either the Permanent Secretary who had no time

136 All the Difference for the Planning Secretariat, or a junior officer who had time but could not speak for his department. Felix decided to act. He asked the Prime Minister to call a Cabinet meeting at which he laid down the law: if his requests were not met, there would be no budget allocations. I was privileged to attend that meetings, and was appalled. A typical response to Felix's "big stick" came from the Minister of Education: "Well, all this planning business may have some meaning for other departments, but not for mine. The children are there, they have to be educated." No department took the Planning Secretariat really seriously, and none wanted to give up the control of its own budget. Felix persevered, and the result was that a few weeks later he was forced to resign. That government, like most Sri Lankan governments, was a coalition of several political parties. Each Minister had his own political support, the Prime Minister needed that support, and faced with strong opposition within her own Cabinet had to give in. No paper organization can assure integration of the work of the Planning Secretariat or Ministry and that of the other departments of government unless the government itself is integrated and united.

C O N C L U S I O N : THE 19608 AS THE DECADE OF TRANSITION In the last pages of my book with Jose Medina Echavarria on Social Aspects of Development of Latin America, published in 1963, I reported that one of my graduate students, baffled by the complexity of the development problem and yearning for a simple theory that would explain all, had asked plaintively in his Ph.D. dissertation, "Where is our Newton?". He was thinking of the hope expressed by Keynes that his general theory would do for economics what the Newtonian system had done for physics. Dudley Seers voiced a similar sentiment some years later, asking explicitly, "Where is our Keynes?" In the 1963 book I went on to answer these questions: It is my own view that no Newton will appear, no breakthrough will occur. If we consider the three great breakthroughs in economics during the last century - the "marginal revolution" of the iSyos; the theories of monopolistic and imperfect competition of the early 19305; and the Keynesian revolution of the late 19305 — certain common characteristics appear. First, all these breakthroughs were essentially a rearrangement of variables already within the analytical system, with sharp shifts in emphasis on some strategic variables, in such a way as to bring out fundamentally new conclusions ...

137 The Human Resource and Distribution Factors When it comes to the underdeveloped countries, however, the problem is a good deal more complicated. Analysis of the process of launching or accelerating economic growth requires introduction of a whole new array of variables — political, sociological, psychological, and technical. In this situation gradual accretion of knowledge, rather than a breakthrough in the form of revealing rearrangement of old variables, is the more likely route to scientific progress. Indeed the last years of the 19605 saw the excitement and enthusiasm of the 19505 gradually ground into dust by the millstones of disappointing experience and revelation of flaws in every new theory offered - balanced growth, unbalanced growth, stages of growth, growth poles, backwash and spread effects, environmental determinism, cultural determinism, technological and regional dualism. It was not so much that these theories were wrong as that they were so obviously incomplete. Also by the end of the decade, most of us realized with regard to the arguments for concentration on education, or health, or better nutrition, or family planning, or transport, or better administration, or industrialization, or agricultural improvement, that they were all right, and that they were all wrong. They were right in stressing the need to recognize the importance of a particular sector, and wrong in presenting it as a "leading sector" whose expansion would pull all the others along with it. On the eve of the 19705 many of us had abondoned hope of any blinding flash of inspiration, any all-illuminating new theory. Instead, at least in my own case, there was a glimmer of another quite startling idea: We did not need a new general theory. We could deal with the problems of each society in an ad hoc, pragmatic way, provided that we took the trouble to study each society separately, in all its aspects. Perhaps what looked like dust emerging from the millstones was really rich flour, needing only the right leaven and skillful baking to become nutritious bread. Thus the conclusion reached from the experiments with human resource development during the 19608 was that it is essential to incorporate every aspect of it in development policy and planning, but neither as afterthought (as it was in the 19505) nor as a panacea (as it was presented in the 19605). Rather, each aspect should be seen as an integral part of the overall development process, with ramifications in other sectors that must be studied and taken into account. All are part of the vast and complex feedback mechanism of which the development process consists. With the recognition of this principle, the stage was set for the new approaches of the 19705.

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BACK TO M O N T R E A L :

1967

As I came to the end of my first assignment with the Brazilian government, Roberto Campos and Jack Kubisch decided that since the effort to form a team by recruiting through the USAID office in Rio had failed, USAID should let a contract to an appropriate university and leave the recruiting to them. Texas was their first choice. I was returning to the University for the second semester, and I went to Austin in some excitement, expecting the University, as an institution specializing in Latin American studies, to seize with alacrity the plum I was bringing them. Instead, I ran into a solid wall of opposition from the very scholars I expected to be most enthusiastic about working in Brazil. Their argument was that it is impossible to be involved in policy without being immersed in politics, and politics are the arch-enemy of sound scientific scholarship. Not only would they not go to Brazil themselves, but they were resolutely opposed to the University's accepting the contract, even if the team were recruited from outside the University of Texas. Under the circumstances the University administration had little choice but to refuse the contract. Since I had always found working directly for government the most effective way of doing research on any economy - everything is open to you then - I was bitterly disappointed in my colleagues. When Andre Raynauld wrote inviting me to spend the summer of 1965 at the University of Montreal, working with the Economic Research Division of the newly formed Royal Commission on Bilingualism and Bi-culturalism (the "by and by Commission" to many French Canadians) I decided to accept, rather than return to Brazil as planned. It was not an easy decision. Roberto and my other Brazilian friends felt that I had let them down, as indeed I had. But it was a crucial decision for me. Working that summer in Quebec, on regional development policy as an instrument for reducing disparities between anglophones and francophones within Canada, I began to see the potential for having an impact on Canadian policy, and perhaps even to contribute in a modest way to holding the federation together, by being an anglophone based on Canada's leading francophone university. Also, being in Montreal would enable me to maintain more continuous contact with my first family. Andre had long hoped to attract me to Montreal, and when two years later, as Chairman of the Department of Economics, he was able to offer me a professorship at a salary not too far from the one I had at Texas, I decided to accept that invitation too. Texas had certainly done everything within their power to hold me. They ap-

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pointed me Ashbel Smith Professor of Economics at an out-of-scale salary. They set up a Center for Economic Development and made me the Director, which provided me with research assistance, a fulltime secretary, and a light teaching load. They granted me frequent research leave. But, as a Canadian, there seemed to be restraints on my involvement in policy making in the United States even though it was the country in which I lived. I did not then want to become an American, although there was pressure on me from Washington to do so. By contrast, the potential for advisory services to government in Canada seemed virtually unlimited. Early in June 1967 we went to Quebec city, where I spent the summer working with the Quebec government, in the Bureau des Etudes en Amenagement Regional, precursor of the Office de Planification du Quebec. The Director was Francois Poulin, who had done his Ph.D. with me in Texas. The Co-Directeur was Guy Coulombe, now President of the vast Quebec government corporation, HydroQuebec. The Bureau was staffed with young, bright, well-trained Quebecois, thoroughly committed to improving the lot of Quebec and the French Canadians, especially those living in retarded regions of the province. The approach was not very different from the one I was used to in developing countries. On the whole, I found the average level of competence, and certainly the average degree of dedication, higher among Quebec civil servants in Quebec City than among Federal civil servants in Ottawa. It was an exciting place to work, and Quebec in a charming and vibrant city. To cap it off, by a fluke, we were able to rent a lovely eighteenthcentury French colonial house, situated at the Seigneurie de Lotbiniere, on the south bank of the Saint Lawrence, looking across the broad expanse of the river to the mountains beyond. The "fluke" was that the man who rented us the house, M. Mercier, did not own it and had no right to rent it to anyone; it belonged to the Grand Seigneur himself, Edouard Joly de Lotbiniere. As M. Joly explained in a letter on Seigneurie letterhead, M. Mercier was merely allowed to live in the house for his lifetime, as a reward for having saved the Seigneur "from the angry waters of the St Lawrence" when, as a boy, he overturned his canoe. But the Seigneur, conscious of "noblesse oblige", said he did not want to spoil our summer and allowed us to stay in the house. He was aide-de-camp to the Queen and spent most of his time in London. I do not think M. Mercier expected him to turn up that summer. M. Joly allowed us to use not only his house but his beach below the manoir. There was a constant stream of ships passing by, including President de Gaulle's battleship on its way to Expo' 67 in Montreal. Altogether that summer was one of the most

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pleasant and professionally satisfying of my whole career. It also gave me the opportunity to work all day and every day in French, so that when I arrived at the University of Montreal at the end of September I felt confident enough to start lecturing in French at once, although it was the University's custom to allow the few anglophones on the staff one year to break into lecturing in French. Shortly after I started at the University of Montreal Niles Hansen invited me to Austin for an international seminar on growth poles, which led to a well-known book on the subject. Niles had taken over from me as Director of the Center for Economic Development at Texas, occupying my former office and being looked after by my former secretary. When I went to visit my ex-secretary I found that she had accumulated a large stack of third class mail which had arrived since I left Texas in June. I was throwing envelopes unopened into the waste basket, one by one, when I came upon one from the United States Treasury. I was about to throw it into the waste basket too - it looked like a circular - but something made me open it. It was a letter, dated the previous May, inviting me to join the us Treasury Advisory Board. Had I received it before leaving for Quebec I may well have stayed at the University of Texas. The invitation provided what had been missing there: a chance to participate in American policy formulation. But as American poet Robert Frost has stated so eloquently, it is pointless to speculate on "the road not taken". Had I not gone to the University of Montreal I would have missed some of the most rewarding episodes in my career.

7 The New Approaches of the 1970s

In September 1969 I was invited to Stockholm to participate in the United Nations Expert Group on Social Policy and Planning for Development. The chairman was to have been Gunnar Myrdal, but he was involved in other matters and could not attend all the meetings. Consequently Gunnar and I were appointed co-chairmen. This Expert Group turned out to be a landmark in the history of the United Nations" involvement in development. It succeeded in pulling together the various ideas that had emerged during the 19605 into the concept of the Unified Approach to Development Policy and Planning. The formation of the Group was the outcome of two factors. The first was the continuing frustration with the international development effort during the Decade of Development of the 19605. True, the ambitious growth targets laid down by the United Nations had been exceeded by the developing countries taken as a group. Indeed, they had recorded rates of growth of national income unprecedented in history. Yet the expected "trickle down" effect had still not appeared. Poverty, ill-health, malnutrition, illiteracy, unemployment and underemployment, inequality and repression, had increased, in terms of total numbers, rather than diminished. A new approach seemed to be needed, one giving more emphasis to the human resource development and improved income distribution stressed during the decade. The second factor came from within the United Nations family itself. Despite the growing recognition by economists of the impor-

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tance of socio-cultural factors in development, the Social Development Divisions at UN headquarters and in the Regional Commissions, together with their equivalents in the World Bank and the Specialized Agencies, had long been irked by what seemed to them unwarranted domination of the development field by economics and economists. They capitalized on the general malaise in international development circles to push the case for greater emphasis on the socio-cultural and human resource aspects of development. The Stockholm meeting was one result. It was a distinguished but disparate group. It included, among the economists, Hans Singer, then still Economic Adviser to the UN Special Fund and later Professorial Fellow at the University of Sussex Economic Development Institute; Gamani Corea, then head of the Planning Secretariat in Sri Lanka, later Director-General of UNCTAD; Josef Pajetska, Governor of the Polish Planning Commission, now Professor of Economics in the University of Warsaw. It also included a Filipino Congressman and an assortment of sociologists and political scientists, one of whom was Marshall Wolfe, an American sociologist with a Filipina wife, who was head of the Social Development Division in CEPAL. Marshall combines a capacity for brilliant and penetrating analysis with a talent for expressing Marxist views in a language so elegant and delicate that not even the United Nations can object to it. For most of the week the discussion seemed a hopeless tangle; we were getting nowhere. But suddenly at the end of the week everything jelled, and the team wrote a stimulating and solid report. THE UNIFIED APPROACH

The recommendation for a Unified Approach to develop policy and planning was greeted with enthusiasm. First the UN Economic and Social Council adopted a resolution urging all member governments to apply the Unified Approach (1494 XLVIII, 26 May 1970) and then the General Assembly ratified it (2681 xxv, 11 December 1970). These resolutions were followed by others repeating the insistence of the General Assembly that the Unified Approach be adopted. The UN Research Institute for Social Development was charged with undertaking the basic research required to put more detailed and concrete content into the original concept. In the years that followed the "Unified Approach" came to mean many things to many people. However, the fundamental idea included the following facets:

143 The New Approaches of the igyos

1. Dropping the distinction between economic and social development. 2. The blurring of jealously-guarded lines of jurisdiction among the UN Specialized Agencies. For example, UNESCO was responsible for education, FAO for nutrition, and WHO for health. According to the Unified Approach the three are inextricably intertwined. 3. Forging links among departments of government in LDCS so as to achieve better integrated development policies and plans agriculture, industry, health, education, etc. 4. An interdisciplinary approach to formulation of policy and preparation of plans. 5. Planning for all the objectives of development directly and simultaneously, rather than for growth and "trickle down". 6. Assuring that the fruits of development reach all social groups, and particularly the lower income groups, whose basic needs must be met; and assuring the participation of the target population in both the planning and the implementation of development projects and programs. 7. Treating development as a total societal process, with concern for "style" of development and quality of life as well as rising incomes. This list obviously constituted a tall order. UNRISD mounted an able team to carry it out, with Marshall Wolfe as team leader. I was invited to join the team, with the consequence that over the next four years I spent many stimulating and agreeable months in Geneva. Jean and Ean came along for my longer visits. We bought a little Opel and kept it in Geneva. We saw most of Switzerland and made enjoyable sorties into France and Italy. During our longest stay we rented a large and beautiful Swiss chalet high in the Juras, at the little skiresort village of St Cergue. Ean went to a French-from-France school, staffed entirely by young French ski-bums. He improved his French and his soccer, which the staff played when there was no snow, even if he did not learn much academically. Many friends and relatives came that summer to share the delights of our chalet, including the superb view across Lac Leman to the Alps beyond — when the clouds lifted. The UNRISD team spent many hours in exciting discussion and turned out hundreds of pages of stimulating manuscript. They did not, however, succeed in providing a manual, or even guidelines, for applying the Unified Approach to the actual process of policy formulation and planning. The official Final Report of the team was

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a slim volume of thirty-eight pages. One reason why the work of the team never really jelled was that neither Marshall Wolfe nor Donald McGranahan, Director-General of UNRISD, a brilliant Canadian social psychologist, was really interested in techniques of planning and policy formulation. Marshall was convinced that it is the political process that determines the pace, pattern and style of development; improving the daily operations of advisers, "experts", and planners has little impact. I was never entirely clear as to what Don was after, but it seemed to be a new, non-economic theory of development, from which the guidelines might then emerge. Another reason why the team failed to produce a definitive set of guidelines, of course, was the sheer enormity of the task. In the autumn of 1973 another UN Expert Group meeting was held in Stockholm, to review the progress with the United Approach to date. Many of the participants were the same as in the original Expert Group, but this time Ilga Thorssen was in the chair and Gunnar Myrdal simply a participant. I was nominated rapporteur, a much more difficult and thankless task than being chairman. The meeting was a rather bad-tempered one. No one was satisfied with the progress of the previous three years, and virtually no two people agreed as to what should be done next. My efforts to draft a report that could be accepted by the Group failed, and I was obliged to go to Geneva with McGranahan and Wolfe, to try to write something so innocuous and so full of "motherhood" statements that it would get by. It was an inglorious end to a noble experiment. Nonetheless the Unified Approach had an impact. Simple-minded planning for growth of national income alone was gone forever. The actual process of policy making and planning in developing countries moved a considerable distance in the direction of the seven principles listed above. The best statement of the Unified Approach, and the true "final report" of the UNRISD team, is Marshall Wolfe's book, Elusive Development, published by UNRISD after Marshall had retired from CEPAL. During the 1973 meeting I was given a stiff lesson in Swedish manners. On the first evening the Group was entertained by the Swedish government at one of Stockholm's most elegant restaurants. Early in the meal one of the Swedish officials rose to his feet, made a short speech, and proposed a toast to the members of the Group. Dead silence followed. I felt that someone must respond, so I did. It was an enormous faux pas. Later it was explained to me that at formal Swedish dinners toasts are always proposed just after the soup, and the response is made with the coffee. Someone had been briefed to make the response, and I had stolen his act. On the last evening of

145 The New Approaches of the 19705 the meeting Alva Myrdal, who was then Minister for Disarmament, entertained us at dinner in the handsome Ministry of Foreign Affairs. I was guest of honour, and seated accordingly on Alva's left. She explained to me that she would propose a toast after the soup, and that I would kindly shut up until the coffee was served, and then make my response. I also learned that at Swedish dinners no one touches their wine until someone raises their glass to him or her and says "skol"; the ceremony must begin with the host or hostess. Despite the trappings of social democracy, Swedish society is one of the most formal, rigid and class conscious that I have ever encountered. On the way back to Geneva from Stockholm I spent a few days in Warsaw, at the invitation of Josef Pajetska, where I presented a series of lectures and seminars to the Planning Commission, the Institute for Economic Development, and Institute for Economics and Statistics. I found Warsaw considerably less grim than I had found Moscow some years earlier. Not even a socialist regime can repress for long the wit, joie de vivre, and sense of fun of the Poles. I was taken to the top of the Tower of Youth and Culture, a hideous, socialist realism skyscraper presented by the Russians after the war. As we stood looking out over the city, my Polish companion said, "This is the best view in Warsaw, because it is the only place where you don't see the Tower of Youth and Culture". I found the discussions at my seminars little different from what they would have been in Cambridge, Mass., or London, England. The library at the Institute of Economics and Statistics may be the best library in economics in the world. All the Western publications are there, and all the Eastern ones as well. The collection of professional journals is magnificent. I was shown around the library by the Director of the Institute. Even quite obscure Western journals were there, but I missed the American Economic Review, the Journal of Political Economy, and the Quarterly Journal of Economics. When I remarked on their absence to my host, he nodded and said "Follow me". He led me to the distribution desk, and there they all were, on reserve. "You see," said the Director, "these are the journals most frequently assigned to the students, so we have to keep them on reserve." APPLICATION OF THE UNIFIED PAHANG TENGGARA

APPROACH:

In 1971 I was approached by Sandy van Ginkel, President of the consulting firm van Ginkel Associates, to join the team being assem-

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bled to carry out a vast regional planning project in Malaysia, financed by the Canadian International Development Agency (CIDA). I had met Sandy a couple of years earlier when I was Chairman of the Special Task Force set up to recommend a site for the new Montreal International Airport, in the light of its impact on the pattern of urban growth and regional development. Sandy's firm had been involved in the earlier technical studies of possible sites. He had also been for a while Chief Planner for Montreal's Expo '67. I had found him an imaginative and stimulating, if somewhat temperamental man, and the idea of working with him was attractive to me, as was the idea of returning to Southeast Asia. The Pahang Tenggara study, for which I served as Senior Economist, started early in 1972. Pahang is a large state on the east coast of Malaysia, midway between the southern tip of the country and the northern border. Pahang itself is not a poor region; it is about in the middle of the income scale among Malaysian states. It is a thinly settled frontier region. The really poor states are those to the north, Trengganu and Kelantan, which are also the most predominantly Malay states. "Tenggara" means simply southeast. Thus we were not planning for an entire state, and redistribution of income from richer states to Pahang was not a prime objective. Pahang Tenggara itself was essentially empty. It contained only some 50,000 people, mainly engaged in stealing tropical hardwoods from the jungle. It was, however, a region of vast potential, and the federal government planned to lure anything up to one million people into it. The settlers would come mainly from Trengganu and Kelantan, and would move from small-scale, subsistence agriculture into modern sector, export, plantation agriculture and modern sector forestry complexes. They would thus raise their household incomes severalfold. It was also expected that the development of Pahang Tenggara would strengthen the state capital, the coastal city of Kuantan, as a development pole for the whole east coast region, and especially for the lagging northeast of the country. Since I was concurrently a member of the Unified Approach team, I was naturally eager to see this approach applied in Pahang Tenggara. In this aim I was warmly supported by Sandy van Ginkel, who, as an innovative and even slightly visionary architect-planner, needed little persuasion to depart from a purely economic approach. In fact he played a major role in designing the objective function that we ultimately used to evaluate projects. The idea also captured the imagination of Kingsley Haynes, an economic geographer on the team, later Director of the Regional Development Program at the University of Indiana and now at Boston University. Most of the technicians on the team - the soil analysts, the agronomists, the

147 The New Approaches of the 19705

hydrologists, the forest inventory people - were little concerned with the overall approach. But the other social scientists and planners gradually fell in line, and so eventually did our Steering Committee and others in the Malaysian Government. The result was a selection of weighting of objectives somewhat unique in the history of regional planning. The overriding aim was a purely political objective announced in the Malaysian New Economic Policy (NEP) and in the Second Malaysia Plan: to reduce the economic and social (especially occupational) disparities between the Malay majority and the Chinese and Indian minorities. In general, the Malays were on the land and poor (except for the sultans) and the Chinese and Indians were in the cities and rich. Creating employment and raising incomes were among the objectives, but in the end more weight was given to protecting and improving the physical environment, and still more to assuring a satisfactory socio-cultural environment and quality of life for the immigrants to the region, most of whom would be Malays. Because of this emphasis the pattern of settlement was much more urbanized than is usual in such resettlement schemes. In order to provide satisfactory levels of education, health, recreation and other facilities, and more important, to give Malays opportunities to move into urban occupations, the plan provided that even plantation workers should live in cities of no fewer than 5000 people, and preferably in cities of 10,000 to 20,000 people, with two regional centres of 50,000 and 150,000 by 1990. Finally, to make sure that the settlers would be prosperous farmers rather than poor peasants, holdings per household were doubled in comparison to former Malaysian resettlement schemes. The Pahang Tenggara project has attracted a good deal of interest, and there is now a substantial literature on it, including three papers of my own. The features of the project which have aroused this interest are primarily these: (i) Pahang Tenggara is much the biggest regional development project yet attempted by the Malaysian government. The region has over one million hectares, and 550,000 people were to be settled in it. The plan cost us$4 million at 1972/73 prices, and will require investment of us$i billion, public and private, to implement. It calls for the creation of thirty-six new towns. The regional development authority established to administer it (DARA) is the biggest yet to be created. (ii) In line with the Unified Approach, socio-cultural factors were accorded high priority. Since the future settlers were not in the region, a sociological survey was carried out in the regions from

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which they were expected to come, to determine their values, attitudes and aspirations. (iii) Given the goals of the NEP, the plan was designed to assur household incomes approximating the national average and rising as fast as the national average. Nearly all the investment required in the plan was in the modern sector, and most of it in the modern export sector. (iv) The special characteristics of the settler population (mostly young, childless couples) required tailor-made health and education systems. THE GROWTH POLE STRATEGY

Besides the Unified Approach there was in the air at the time application (or rather, misapplication) of the concept of "growth poles", introduced into the economics literature by Francois Perroux nearly two decades earlier. Much of the interest in the Pahang Tenggara project was stimulated by its conscious application of growth pole strategy. Within a general strategy of using the development of Pahang Tenggara to strengthen a growth pole capable of generating spread effects to the retarded northeast, it seemed that the only candidate for growth pole was the east coast city of Kuantan. It had only 75,000 people but was growing rapidly, and industrializing in a dynamic way. It was linked to Kuala Lumpur by road and air. It also happened that both the Prime Minister and the Director of the Economic Planning Unit (EPU) came from there and had a keen interest in seeing the city grow and modernize. Kuantan lacked a good harbour. The Pahang River there was shallow and silted up every year. Ships of any size had to moor offshore and unload by lighter. However, as part of their program of foreign aid, the Netherlands was building a deepwater port just north of the city, with a special technique for constructing moles right in the sea. Our idea, therefore, was that Pahang Tenggara should be used to strengthen Kuantan as a growth pole. Development would begin in the northern part of the region, along an axis from the proposed new regional capital of Muadzam Shah and Kuantan. Building the new city and the road connecting it to Kuantan would be given top priority, and as production of export products got under way they would flow along the new road to the new port. As the obverse of this policy, the road from Muadzam Shah to the south and the one to the west towards Kelantan would be delayed. We wanted to avoid linking Pahang Tenggara development to the west coast axis and the ports of Klang and Johore Bahru.

149 The New Approaches of the 19705

When I visited the region six years after the beginning of implementation of the program, exactly the opposite had taken place. Muadzam Shah, which was supposed to become the major urban centre of the region, had only 2000 people, while Tun Abdul Razak, which was supposed to be a secondary centre, already had 10,000. The roads to the south and to the west were further advanced than the one to the north. As the new port was being completed the mole tilted and cracked, dumping the buildings on top of it into the sea. Such production as there was by that time was flowing out through Port Klang and Johore Bahru, exactly what we hoped to avoid. A number of factors had conspired to bring about this change in strategy. First of all, the markets for rubber and palm oil had changed drastically, and oil palm had become a more attractive investment than rubber. Oil palm was most suited for the south of the region, rubber for the north. Consequently the south was developing more rapidly. The southern forestry complexes were also developing more rapidly than those in the north. The roads were constructed as joint ventures between the Department of Public Works and various private contractors; it so happened that the contractors working in the southern part of the region were more efficient than those working in the north. It also happened that the Federal Land Development Authority (FELDA) had already cleared a good deal of land in the south when the project began, especially in the "nucleus estates". Despite all these imperfectly foreseen or unforeseen events, had the Malaysian government been adamant in the pursuit of our growth pole policy it could have stuck to the plan. But the economic situation in general had changed in ways that made the growth pole strategy less attractive. When the master plan was put together employment creation was accorded top priority, according to the government's stated policies. In its early years, however, the major problem faced by Lembaga Kemajuan Pahang Tengara-Pahang Tengarra Development Authority (DARA) was labour shortage. The outburst of industrialization had accelerated rural-urban migration, and made rural-rural migration appear less attractive. Oil palm is less labour intensive in the early years than rubber, making oil palm still more attractive as compared to rubber, and shifting activity towards the south. Kuantan had become a boom town and had nearly doubled in population, but the boom had little to do with the opening of Pahang Tenggarra and was largely sui generis. Moreover, whereas the planning team had expected expansion of Kuantan to generate spread effects to the north, to the lagging states of Trengganu and Kelantan, it was becoming clear that such spread effects were not

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going to appear; except for attracting migrants to take jobs in the city, Kuantan's new prosperity had little impact on the states to the north. Solving their problems would require direct action within those states themselves. In sum, we had been a bit naive in our application of growth pole strategy. I was perhaps more to blame for that than any other member of the team, but no one made a serious effort to argue me out of the idea. Certainly we were not alone: similarly over-confidence in simplistic growth pole theories was being demonstrated all over the world at that junction of history. It should be added that the defects in the growth pole strategy had little effect on the projects, public and private, that constituted the core of the plan. The team had over fifty top-level experts from a wide range of professions and disciplines, who were in constant touch not only with the Steering Committee but with the top management, engineers and scientists of interested private enterprises. Most of them spent two years in the field. Every inch of the region was analysed in minute detail. When all the studies were completed and all the data were in, the optimal pattern of land use was virtually dictated, and was no different from what would have been chosen by an equally well informed multinational private enterprise, had such existed. And with land allocated, labour and capital were allocated too. It is this accumulation of knowledge and the infusion of the necessary entrepreneurship that is the essence of "development planning", and not any replacement of private enterprise by government bureaucrats in the decision-making process. REGIONAL POLICY AND THE THIRD MALAYSIA PLAN

In assembling the Third Malaysia Plan the EPU wanted to experiment with the idea of aggregating the various regional plans into the national plan. By that time both the Johore Tenggara and the Pahang Tenggara schemes had been launched. I was brought back to Malaysia to work directly within EPU on regional aspects of the Third Plan. Ove Simonsen, another member of the Pahang Tenggara team, transferred to EPU as World Bank/UN DP Adviser on Regional Planning. Dan Usher of Queens University was brought in to work on industrial incentives in regional policy, and other foreign experts were added to the regional planning unit within EPU. There was a recognition that it is not enough to select certain urban centres as growth poles, and then build some social infrastructure and try to lure some private enterprises to those centres:

151 The New Approaches of the 19705

it is necessary to plan the transmission lines and the receptors at the other end, as well as the generators. Accordingly the EPU launched a massive study of Malaysia's urban structure, and of all kinds of flows among cities. The analysis of various cities, and their impacts on regional and national economies, was farmed out to Malaysian universities. From these studies emerged a strategy. Policy would be directed towards slowing down the growth on the Kuala LumpurPort Klang area to a pace some 30 per cent lower than that which was expected in the absence of such policies. That would still be a high rate of growth. Penang would be left to its own dynamic devices; its growth would be neither encouraged nor discouraged. An effort would be made to resuscitate the economy of Malacca. Johore Bahru would be stimulated to grow faster through investment in infrastructure and incentives to private enterprise. The "Big Push" however, would be in the east coast cities, and especially in Kuantan. In addition, small and medium sized towns in the poorer regions of the west, north and south, which were smaller and weaker than they would be in a "normal" (rank-size rule) hierarchy, would be stimulated to more rapid development. Thus all regions were to be encouraged to grow, but some would receive more encouragement than others. Even in Malaysia, often presented as a "miracle" of development and a model of successful application of neoclassical economic principles, 'the best laid plans of mice and men gang aft agley', and things did not work out in quite the way that the regional planners would have liked. The experiment was new. There was little in the experience of Malaysia, or indeed of other countries, to guide us. We soon found out that in order to integrate regional plans into a national plan it is better to have that idea before the regional planning itself starts. As it was, the various regional plans were prepared by different consulting firms, from different countries, under different foreign aid programs, at different times, with different scopes and methodologies, even with somewhat different objectives in mind. It was almost impossible to add them up. The regional planning unit in EPU was too small, even with all the foreign assistance, to handle the mass of data coming in from the field, and to assure some modicum of uniformity in the regional planning process. What was in some ways worse, our theory was not very rigorous or refined, let alone tested. It was not the rigorous and refined theory of Francois Perroux that was being applied. That theory runs in terms of the tendency of development through market forces to lead to polarization, concentration of dynamic, innovative enterprises in certain spaces, generating spread effects to a global "economic

152 All the Difference space", spaces defined as "fields of force". We were trying to formulate regional policies to alter the spatial distribution of economic activity in accordance with stated goals of national policy. In other words, we were not content to leave the location of spread effects to the market, and let them fall where they may, even outside the country. We wanted spread effects to end up in certain spaces, to benefit particular societies. We did not really know how to do that, and there was no very convincing and generally accepted literature, no received doctrine, to guide us. In this situation the macroeconomic division of EPU, secure in their Keynesian armour, and not too happy with this new-fangled idea of using regional plans as building blocks for national plans, were able to go their customary well-trodden way, and have more impact on the actual plan document than was intended in the new strategy. Our path was relatively new and untrodden, and full of pitfalls. One of these pitfalls was that the urban studies proved to be much more complex than anticipated, and took much more time to complete than expected. Some of them reached the EPU too late to be of much use in preparing the Third Plan. No one can say what would have happened in Malaysia had there been no regional policy, or with a "socialist" regional policy. Yet I am convinced that the regional policies that were in fact carried out were in large measure responsible for the success of the NEP and the series of national development plans implemented since 1970. First of all, there are the well established interactions between the seriousness of regional disparities and performance of the national economy: (i) Countries with large and growing regional gaps tend to have a low level and slow rate of development; those with small and diminishing gaps tend to have a high level and rapid rate of development. (ii) Countries with large regional gaps have unfavourable trade-off curves between unemployment and inflation; those with smaller regional gaps have trade-off curves closer to the origin. (iii) Countries with large regional gaps tend to have economic fluctuations of greater amplitude, and a higher ratio of depression years to prosperous years, than those with small regional gaps. The essential point is that large regional disparities are a symptom of deep-seated disorders and structural defects in the national economy; and there is no case on record of such problems being remedied by measures to accelerate growth, taken at the national level alone.

153 The New Approaches of the 19705

All cases of wide regional disparity giving way to dramatic regional convergence - including that of the United States - are examples of regional policies designed to attack such problems in the place where they exist. Thus there is every reason to conclude that Malaysia's well designed efforts to reduce regional disparities contributed significantly to the accelerated growth and generally good performance of the national economy. Indeed, one may well ask whether Malaysia could have survived as a nation without the sort of regional policy that was pursued during the period 1970-86, given the overlapping polarizations among societies, sectors, structures and spaces outlined above. No Malaysian government can survive which fails to heed actual and potential race conflicts. Since these are defined to a large extent in regional terms, no government can survive that fails to heed the need for astute and effective regional policy. The essential point is that large regional disparities are a symptom of deep-seated disorders and structural defects in the national economy; and there is no case on record of such problems being remedied by measures to accelerate growth, taken at the national level alone. All cases of wide regional disparity giving way to dramatic regional convergence — including that of the United States — are examples of regional policies designed to attack such problems in the place where they exist. Thus there is every reason to conclude that Malaysia's well designed efforts to reduce regional disparities contributed significantly to the accelerated growth and generally good performance of the national economy. Indeed, one may well ask whether Malaysia could have survived as a nation without the sort of regional policy that was pursued during the period 1970-86, given the overlapping polarizations among societies, sectors, structures and spaces outlined above. No Malaysian government can survive which fails to heed actual and potential race conflicts. Since these are defined to a large extent in regional terms, no government can survive that fails to heed the need for astuce and effective regional policy. THE BASIC NEEDS APPROACH

While I never worked directly for the WEP and had no hand in the preparation of the documentation for the World Employment Conference, I was in contact with the WEP from the beginning. I was in touch with Louis Emmerij in Geneva, and with Dudley Seers, Richard Jolly and Hans Singer in both Geneva and Sussex, and was well

154 All the Difference acquainted with the evolution of their thinking. Other members of the UNRISD Unified Approach team were in touch with the WEP as well. In any case, the concept of a "basic needs approach" to development was in the air. Therefore when the World Employment Conference of 1976 made the Basic Needs Approach (BNA) its major Resolution, it is not surprising that the idea had been foreshadowed in the final report of the Unified Approach team. The 1976 Resolution led to a mountain of literature on the subject of basic needs, and as I tunnelled my way through it I became increasingly irritated by the fuzziness of this concept as well. In 1980 I wrote a long article critical of the basic needs approach for the UNCRD'S Regional Development Dialogue. This paper was mainly a review of the literature, to see whether or not it contained any ideas that were at once new and different, and suggestive of new ways of planning development that could be made operational. Finding no such ideas in the thousands of pages covered in the survey, I invented one of my own: essentially, that individual projects should be evaluated in terms of their contribution to achievement of basic needs, with the analysis conducted at the community level, and with the target population participating in the evaluation and ranking of projects. My feeling is that the BNA has become a nuisance and should be scrapped. That does not mean that achievement of basic needs should be dropped as an objective. But achievement of basic needs was the major objective from the beginning of the international development effort; one does not make this approach "new" by pinning a label on it. If anything was new it was the discovery that a Big Push in the modern sector may do little to meet basic needs, or may satisfy them only very slowly. But the fathers of the baby christened Basic Needs Approach do not seem to want to abandon the fruits of expansion of the modern sector, if comparative advantage clearly lies there. Certainly they do not want to drop the objective of accelerated growth. So it would appear that every nation must decide upon its own schedule for meeting basic needs, and upon its own strategy with regard to meeting them directly or indirectly. The BNA is not a technique for development planning. However, there is a continuing attraction in the idea of evaluating projects in terms of contribution to satisfaction of basic needs, even if we stop talking about a BNA as such. There is a good deal of overlapping between the Unified and Basic Needs approaches, but they are not the same. The attack on poverty and unemployment, the insistence that all social groups share the fruit of progress, concern for "style" of development, and for par-

155 The New Approaches of the 19705

ticipation of the target population, are the same. But the emphasis in the Unified Approach on integration of economic and social development planning, and of national, regional and local planning, the interdisciplinary analytical framework, the treatment of development as a feedback process in which distinctions between ends and means, causes and effects become blurred, all these are as relevant to industrialized societies as to developing ones. Rigorously defined, the SNA becomes less important as higher levels of social welfare are reached. The UA does not. \PPLICATION OF THE BASIC NEEDS APPROACH: DRIPP IN HAITI Between 1974 and early 1979 I was intermittently engaged in a largescale regional development program in Haiti, "Developpement Regional Integre Petit Goave-Petit Trou de Nippes", or "le DRIPP", as it came to be known. The DRIPP region was a least developed region in a least developed country, a far cry from Pahang Tenggara. It required a totally different approach. In Pahang Tenggara we had tried to apply a unified approach, but we gave little heed to direct satisfaction of basic needs; we concentrated on the modern sector. The approach in DRIPP was still unified, but the major emphasis was on direct satisfaction of basic needs, although the ILO'S "enthronement of basic needs", to quote Richard Jolly, had not yet taken place when the project began. Perhaps no CIDA project, and certainly no Canadian regional development project in a developing country, has received such wide publicity in Canada, not to say notoriety, as the DRIPP project in Haiti. During the seven-year life of the project it was constantly in the Canadian press, and when finally CIDA withdrew from the project, and from the Haitian foreign aid program altogether (the only case on record), the North-South Institute published a book about it, written by Ted English Jr. One reason for the wide publicity was that Haiti is about the closest developing country to Canada that one can find, less than four hours flight from Montreal, and the Caribbean is a pleasant place to visit, especially during the Canadian winter. Journalists and politicians were happy to find excuses for going to Haiti. A second reason was that the Duvalier regime was notorious. Many people had read Graham Greene's The Comedians or magazine stories about it, and most people simply assumed that the regime under "Baby Doc" was the same as under "Papa Doc", which it was not - not quite. So they asked, "Why are we [Canada]

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helping such a rotten regime?" A third reason, no doubt, was that the project lasted an unusually long time, for a foreign aid project, and encountered extraordinary difficulties. Some well informed critics also asked, "Why did CIDA give the contract for this project, concerned with the development of a desperately poor rural region whose largest town has 10,000 people, to M. La Haye, an "urbaniste" (architect-planner) who is famous for designing and building huge skyscraper complexes in Montreal?" It was a legitimate question. But M. La Haye is a very intelligent man and knew his own limitations for such a project. He appointed as Project Director Professor Pavel Turcan, who had been Czechoslovakia's leading regional planner until 1968, when the failure of the attempt to liberalize the regime there decided him to leave Czechoslovakia and come to the University of Montreal. We gave a joint seminar on urban and regional economics for seven years. We liked and respected each other, and in 1974 he invited me to join the team he was organizing to go to Haiti. For the next four years Jean and I spent every long vacation (which at the University of Montreal can be stretched to five months) and every Christmas vacation (a month to six weeks) in Haiti. Haiti is one of the countries that opted for regionalization of its national development planning in the early 19705. The regime under Baby Doc had been liberalized enough, in comparison to his father's harsh rule, for the various donors to decide that Haiti, which was the one "least developed country" in the western hemisphere, needed and deserved help. There were in fact over 300 donor agencies operating in the country, most of them Non-Governmental Organizations (NCOS), including church organizations. The country was carved up into regions, which were offered to donors as a sort of menu, so the first phase of our project, which was carried out mainly by Pavel, was to go to Haiti and look more closely at the menu, in order to select a region from it. The region chosen extended from Petit Goave to Petit Trou de Nippes, on the north coast of the southwestern prong of the Haitian "boomerang", and about twothirds of the way through the mountains towards the south coast, making a region much the same size as Pahang Tenggara. There were three main reasons for choosing this region: nobody else wanted it; it was a least developed region in a least developed country, and so offered a real challenge; and the Inter-American Development Bank was financing the construction of a highway, being built by a Canadian engineering firm, from Port au Prince to Les Cayes. Most of its length was in the selected region, and its construction seemed to offer possibilities of doing something new there.

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The team made its first foray into Haiti during the summer vacation of 1974. The project rented several houses in a new development owned and operated by M. Siclay, one of Haiti's most powerful multi-millionaires. The houses served as office space as well as accommodation. In the largest of them lived Pavel and his wife; his son Jano, who was our anthropologist, and his fiancee; Jean and I, and Ean; and the administrative officer. Siclay owned a fleet of construction vehicles bigger than that of the city of Port au Prince, but he could provide us with no more than a trickle of water every day. The houses were located only a couple of hundred metres above sea level, and at that time of year were blisteringly hot; yet we could allow ourselves only one very brief shower per day each. Meanwhile the large and handsome swimming pool in the garden stood empty. Finally Pavel could stand it no longer, and ordered enough tanker truck loads of water to fill the pool, after which life was much improved. After that summer, having learned our lesson, we all lived up in the fashionable suburb of Petionville with the diplomatic corps and the successful merchants and financiers, or in Petit Goave. By our next visit, at Christmas time, the government had provided us with an office, a large house about half way up the mountainside from the city centre to Petionville; and we also established an office in Petit Goave. The government donated to the project an attractive, wooded piece of land on the seashore just outside Petit Goave, and eventually a handsome complex of buildings was constructed there. Petit Goave had once been the coffee capital of Haiti, and contained some beautiful old houses, badly run down, and a splendid lycee with a campus that would grace most universities, but virtually no trained teachers. The municipal water supply had long since broken down, the electric power plant operated only about two hours a day, and - most troublesome in terms of operating the project - there were no telephone or telegraph connections with Port au Prince. It was less than 100 kolometres by road from Port au Prince to Petit Goave, but when the project began the state of the road was such that one was lucky to make the trip in five hours. This lack of communications was one of the major difficulties that confronted the project. We had to be in touch with the government in Port au Prince, and particularly with the Ministry of Agriculture to whom we were attached, and we had to be in our region. The project was set up with two parallel teams, one Canadian and one Haitian. There was an Haitian Director-General and a Deputy Director-General to match the Canadians with the same titles, and so on down the line. The Haitians were high ranking civil servants seconded to the project, and CIDA supplemented their salaries so as

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to diminish the income gap between the Canadians and the Haitians on the team. This form of organization, which looked sensible enough on paper, was to be the major source of trouble in the project. At the outset the region was divided in two, Sub-region A from Petit Goave to Miragoane, site of the Reynolds Mining Company's offices, about halfway along the coast to Petit Trou de Nippes; and Sub-region B from Miragoane to Petit Trou de Nippes. There was no road at all between Miragoane and Petit Trou de Nippes, only a trail said to be faisable by jeep, which sometimes disappeared altogether in the long grass and involved much climbing up and down rocky crags. One hoped to average 10 kilometres an hour. Finally the project bought a battered open finishing boat in order to be able to get to Sub-region B, leading one journalist to write that "the team spends its time cruising about in a luxurious yacht". Pavel found all these logistical problems a bit daunting, and decided that in the first couple of years we would concentrate on Sub-region A, postponing any effort to do serious planning for "B". I rather regretted this decision. In Haiti isolation can be an advantage, because it prevents the central government officials from coming down and dictating what is to be done by way of development, often determined by what is in it for them. I was impressed by what I saw at Petit Trou de Nippes. Left to their own devices, the local Conseil d'Action Communautaire had done marvels: schools, clinics, reforestation projects (rare in Haiti), irrigation projects, a deepened harbour, streets and roads. I felt that it would be stimulating to work with those people. However, it was decided to leave Sub-region B until later. There were difficulties enough in Sub-region A. There were virtually no statistics, and we soon began to suspect those that did exist. For example, there seemed to be many more people around than was stated in the Census. The Census was based on a sample of a sample; only certain areas of each region were covered, and only a sample of households in each area. We made friends with the Army Commandant in Petit Goave, and he organized his men to make a house-to-house count in Sub-region A. There turned out to be just twice as many people in the region as the Census estimated. When it came to such things as production, yields, livestock numbers and the like, we simply had no idea. Covering that mountainous terrain on foot in order to make our own counts was an arduous, timeconsuming task. It took us far too long to discover the marvels of aerial photography, partly because our first request to the government for overflights of the region led to our being taken in an army helicopter along the beach from Port au Prince to Miragoane and back again. We did finally get aerial photos of the entire region, from which the experts were able to give us detailed maps of land

159 The New Approaches of the igyos

use, livestock numbers, number of houses per village, and the like. The lack of data led us to cut down again on the areas selected for detailed study. We chose some areas in Sub-region A as "Zones d'lntervention Concentree", of zics. To study the zics we reverted to an essentially anthropological method. We had on our team a number of graduates of the MA course in "animation sociale" at Laval University in Quebec City, to my knowledge the only university outside France to give such a course. This group of young men and women trained a still larger group of young Haitian men and women. Then mixed teams of Haitians and Canadians would go out to the villages in the zics and stay there for three to six months, observing the people, their way of life and manner of earning a living, and gathering data. This way of acquiring information has many advantages; but it is, of course, slow. Meanwhile, back in Ottawa, CIDA (which as stated above always had trouble in spending its budget) was getting impatient. They wanted to spend money in Haiti, and to spend money they had to have projects. They thus ordered us to find some good projects and submit them to the Haitian government and themselves even "though our studies were not nearly finished". Also, they said, it would be our responsibility to see that the projects were implemented. We should find Canadian or Haitian entities capable of execution, and then monitor them. We were scared out of our skulls. How could we select projects on the basis of such imperfect knowledge? And we were not used to remaining in a country while the plans we had formulated were being implemented, let alone being responsible for implementation. But we had no choice. We instituted a system of "minimization of risk" - that is, of minimizing the risk of making serious mistakes in our selection of projects and making fools of ourselves. Every quarter we submitted a list of recommended projects to CIDA and the Haitian government, while continuing to make studies of other projects and other areas. We picked projects where we felt confident that nothing we might learn later could prove them to be a mistake. As time went by and projects began to be implemented, our knowledge was greatly improved by the experience with implementation. I now think that this manner of running a development program — research, analysis, planning and implementation all proceeding concurrently, with feedback relationships amongst them all — is the most efficient that can be designed. It is, after all, the manner in which any efficient, large-scale private enterprise operates. Early in the project we began to worry about our relationship with the Haitian team. In a country like Haiti the word "corruption" has almost no meaning. Civil servants and others on salaries scarcely

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above the poverty line look for any opportunity of improving their financial condition. We soon learned, for example, that construction equipment provided to the project was being used to build roads into the beach estates of the multi-millionaires. The Deputy Director was collecting kickbacks from the younger Haitians on the staff; if they wanted the higher paid jobs that the project offered, they had to pay. He then tried to do the same with the younger Canadians, saying that he could have them kicked off the team if they refused. The state of the project accounting was deplorable. No one really knew where all the money was going. When we reported our fears to the Haiti desk officer in Ottawa she said, "We must do what the Haitians want to do." We replied, "Which Haitians? The President For Life? His mother, his sister? The Cabinet? The Parliament? The millionaires? The People? They all want different things, and we are trying to serve the people." Eventually, however, even CIDA could not ignore the "anomalies" and the misallocation of resources, and closed the project down. The DRIPP project accomplished a good deal. In retrospect, I consider its innovations in the planning-implementation process to be of major importance. The on-the-spot approach to project analysis resulted in many good projects that might otherwise have been ignored. For example, we were taken one day by Haitian colleagues down "highway no. 2" marked on the map with a thick red line. It turned out to be a stream bed, with water up to the hubcaps, but even so the stony bottom was rather smoother than Highway no. i. We turned a corner and found ourselves confronted with 200 hectares of irrigated fields. The irrigation system was not working, because the iron sluice gate that diverted water from the stream to the irrigation channels had rusted solid in the "up" position, and the little barrage had been washed out. The NGO that provided the gate had not provided oil to lubricate it, and the peasants could not affort it. An outlay of about $3000 by CIDA created 200 hectares of irrigated land, providing a living for 200 households. There are many such examples in the DRIPP story. There were many successful projects. The Petit Goave water supply was restored, the power plant put into condition to run twentyfour hours a day. The market was rebuilt and enlarged. The port was improved. Hundreds of demonstration plots were developed, and the successful technologies and product-mixes from the DRIPP experimental farms applied to them. Roads, irrigation systems, hospitals, clinics, schools were built. Anti-erosion projects were instituted. Net yields were doubled by getting rid of the rats. Simple storage devices were installed to protect crops from other maraud-

161 The New Approaches of the igyos

ers. The pharmacy of the Petit Goave hospital was rebuilt after a fire - a hospital with two doctors and six nurses to serve a region with 600,000 people. All these projects were based on exhaustive studies of the socio-cultural and economic framework, marketing and transport problems, soil analysis, hydrology, topography, and the like. As in Pahang Tenggara, the team was large, competent, covered a wide range of disciplines, and spent a long period in the field. Our animation sociale team learned a good deal about the aspirations of the peasants, our scientists and technicians even more about the potential for raising productivity in various fields and in various ways. The two sets of information together enabled us to conduct sophisticated cost:benefit analyses, and the constraints imposed by both the human and the physical environment narrowed the range of choice to a degree that was close to being cruel. It was not so hard after all to come up with virtually risk-free projects. Yet there were failures too. Pavel Turcan, in his excellent article on DRIPP in the Special Issue on Small Island Nations of Regional Development Dialogue (Fall 1982) shows that projects were more likely to succeed the more capital-intensive they were, the more they depended on the foreign experts, the more isolated they were in space and time, and the less they depended on direct participation of the target population and interaction with other projects. For example, the demonstration projects worked well so long as they were managed directly by the foreign technicians; but as they were turned over to peasant associations they bogged down. The project spent many millions of dollars, but could not launch a simple system of agricultural credit. The "bicephalic" administration made the direction of the program formalistic and bureaucratic. Turcan does not believe that regional development programs in countries like Haiti can be truly "integrated". It is impossible to do everything at once. It is better to design an optimal sequence in time and in space, sector by sector and region by region, with full cognizance of the feedback relationships amongst sectors and regions, and of spread effects to other sectors and regions. Regions can still be the building blocks of national development schemes, but only limited areas should be planned at any one time. I am inclined to agree with Turcan, but I have one reservation. In order to decide which areas to plan in detail in any one period, one must have a fair amount of knowledge of the regions whose planning one decides to postpone. Perhaps DRIPP would have been more successful if we had started with Sub-region B? Whatever the answers to the puzzles raised by the DRIPP project, it furthered my own thinking on development a good deal, and the

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three of us enjoyed Haiti immensely. In Haiti one cannot even be too sad about the grinding poverty, because most of the time the people themselves are not sad. How can one be sad listening to Haiti's unique dance music, merengue, all day? The climate is superb and the landscape breathtakingly beautiful. FEEDER ROADS

In 1978 it became clear, partly through the work of the DRIPP team, that the Port au Prince-Les Cayes highway, financed by the InterAmerican Development Bank (IADB) and built by a Canadian firm, was having little impact on the development of the region through which it passed. Such agricultural surpluses as there were had been getting to the local markets anyway, on the backs of donkeys or, more frequently, on the heads of the peasant women. From there they went to the cities by bus or truck on the old road, mostly in the company of the "Madame Sarahs" (intermediaries between local and urban markets) on the bus. The trip from village to city was slow, uncomfortable and dangerous; but the produce got through. With the new highway the Madame Sarahs had rides that were quicker, more comfortable and safer, but most of them were well designed to sustain the roughness of the old road and they had time to burn anyway. The owners of the buses and trucks spent less on repairs and made more profits. Fewer people were killed by overcrowded buses overturning in metre-deep potholes, but more were killed by speeding weekenders from Port au Prince showing off their sports cars. Experts attached to DRIPP could commute between Port au Prince and Petite Goave more rapidly, more pleasantly, and more often; but whether efficiency was enhanced thereby was doubtful. Madame "X" attracted more clients to her resort hotel at Taino and doubled its capacity, but by and large the expected spread effects on output, income and employment had not taken place, and the impact on Haiti's rate of growth was minor. Therefore IADB and the Haitian government decided that, to make the new road effective, it should be connected with small towns and villages by feeder roads. The question was where these roads should be built. IADB agreed to finance a study to answer this question. They favoured labour-intensive techniques, using the target population of the region, for construction of the roads (except for blasting and compacting). It was more for this reason, rather than the fact that the highway had been built by a Canadian firm, that IADB turned to a large Canadian engineering firm, with experience in planning and building such roads in Africa, to make the study.

163 The New Approaches of the 19705

They appointed me as Senior Economist on the team, mainly, I suppose, because of my experience with DRIPP. The study was in many ways an expansion of DRIPP, although it covered a bigger region, extending all the way from Port au Prince to the western tip of the island. Since the scope of the project was relatively narrow, and since many of the needed preliminary studies had already been made by the DRIPP team, the feeder road team was smaller than many of those which I have worked. It was, however, very competent. All of its members were well trained, and some of them were quite exceptional, notably the President of the company, Ed Bennett, an engineer who served as team leader. Our first step was to assemble an agenda, or "menu", of possible feeder roads linking various towns and villages with the highway. We ended up with some three dozen of these. We then proceeded to a cost:benefit analysis of each of them, to measure their social rate of return, exclude the roads on which the rate of return was too low, and rank the others in order of priority. We soon ran into serious obstacles. The same problem arose with the feeder roads as had arisen with the highway itself. Except for the coffee-growing areas in the mountains west of Les Cayes, where improved transport would permit more specialization and an expansion of the area under coffee, there was no assurance that the feeder roads would increase agricultural production. Every square metre of arable land was already under cultivation. Indeed a good deal of land was being cultivated that should have been left under forest or lying fallow. Deforestation and erosion were major problems in the region. The technology in use, though primitive, was suitable to the factor endowment, the scale of operation, the pattern of land holding and the product-mix. Changing these would involve social upheaval, and the roads by themselves would not bring major social change in that highly traditional society. The returns to the roads in terms of increased output would depend a good deal on the success of the DRIPP in bringing about consolidation of land holdings, adaptation of the product mix to the physical conditions, and a higher degree of specialization. Of course the roads could permit trucks to come to the farmgate, releasing women from the need to go to the market; but they had no other employment opportunities, and missing the market would spoil their fun for the week. It was clear that the people in the villages wanted the feeder roads, mainly to get to the clinics or hospitals in the case of injury or illness, and for children to attend school more easily. For the girls, an im-

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portant consideration was easier access to water. It was their responsibility to fetch the household water supply each day, and many of them spent so much time clambering up and down mountain trails that they were unable to attend school. If the trace of a feeder road went by the streams and springs, much less time could be spent in gathering water and more time in school, a good illustration of the Unified Approach. All these benefits were real enough, but hard to quantify, especially in money terms. On the cost side we were on firmer ground. Our capable engineers could choose the best trace, in consultation with the villagers to determine their interests in access to things other than the highway, and estimate the cost of any necessary blasting, and of mechanized compaction. The labour would be provided by the target population of each road, in periods when they would otherwise be idle (outide planting and harvesting seasons) and so labour costs would be essentially zero, except for any additional food requirements. The company had found, however, that it did not pay to remove large boulders or cut through mountain walls, nor to do the compacting, by labour-intensive methods. Being in a position to measure costs with a high degree of precision, but benefits only approximately, we turned the usual procedure on its head. Instead of trying to measure cost:benefit ratios and ranking projects accordingly, we asked, "With the discount rate of 10 per cent favoured by the IADB, what must the returns be to each road, given its cost, to justify its construction?" With costs as low as they were, the result of this exercise was that all of the roads were justified. However, we did rank roads in order of priority, in case there was not sufficient finance for all of them. The IADB, however, was happy with our methodology, and with our results. They were quite willing, if not indeed eager, to finance all the roads. The technicians in the department of public works were less happy. From the beginning they had insisted that the only proper approach was to estimate the potential traffic flow between each two points, regardless of its purpose, then draw a straight line between each two points with a thickness indicating the traffic flow, and then build roads along the thickest lines. In time, however, the government came around to the IADB view, and the project proceeded on that basis. This story illustrates once again the importance of conducting development planning at the regional and community level, on the spot, and in touch with the target population. Only in this way could we have arrived at reasonably accurate estimates of benefits. It also illustrates once again the usefulness of the Unified Approach, with

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a multidisciplinary team considering all the objectives to be served by the project in question, and all the feedback relations among them. Finally, it underlines the need for inventiveness and flexibility in field operations, the importance of not being slaves to the methods and techniques taught in the "manuals". This need is much less apparent if one is never "in the field". Not that we spent all our time in the field. In fact the team was established in traditional-style houses attached to the Hotel Picardie, high in the hills of Petionville, with a magnificent view of the city, the harbour, the sea and the mountains, and a superb cuisine. The hotel was owned by a wealthy German-Argentinian family that had moved to Haiti. In the family was a number of first-class musicians, and once or twice a week we were treated to a concert, followed by dancing. The young project manager, an engineer, who had a fiancee in Canada, fell in love with the daughter of the house, married her, and lived happily ever after in Haiti. THE A N O T H E R D E V E L O P M E N T / S ELF RELIANCE

APPROACH

The Another Development and the Self Reliance Approach were born in Uppsala, at the Dag Hammarskjold Foundation, at about the same time that the Unified Approach was born in Stockholm. I have had little to do with it, except to wade through hundreds of pages of its mostly rather boring descriptions of projects illustrating "Another Development", in the Foundation's journal Development Dialogue, and the book entitled Another Development edited by Marc Nerfin. The Another Development/Self Reliance Approach was, perhaps, never intended to be operational. To the degree that it has a distinct operational content of its own, it lies in the field of public relations, winning friends and influencing people, animation sociale, techniques of organizing the villagers and mobilizing their energies, first for narrowly conceived individual development projects, and ultimately for broader social and political objectives. Worthy as it all is, an ineffable odour of the Religious Revival Meeting or the Boy Scouts Camp emanates from the whole affair. It is not concerned with planning techniques but with social organization. Its principles are hard to define in general terms (if any reader doubts this statement, let him or her try it). It would be extremely difficult to teach, although graduate programs in animation sociale exist in France and in the francophone Canadian Province of Quebec. At best, however animation sociale and "Another Development" constitute an aspect of

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the development planning process; it is not a development theory or a complete planning system in itself. The concept of Self Reliance shades into the Dependency Theory. The latter is somewhat more "scientific" in its approach and the literature under its title is more voluminous than that of Self Reliance strictusensu. But the dependency theory leads either to the conclusion that revolution must precede development, or that LOGS should be more self-reliant, at least in being more independent of advanced capitalist countries. Presumably if the whole world were socialist, international flows of goods and services, capital and people would be acceptable and even desirable for the dependentistas, although this question is not one that they often address. But once again, the dependency theory provides little guidance to the workaday planner. Of course, independence from outside help or domination, and reliance on human and physical resources available within the society itself, are major objectives of any development program. There can be no quarrel with them as objectives. But do they constitute a strategy for development as well as an objective? And if it is a strategy, how is it to be organized and how is its success to be assured? Independence and self reliance — Another Development, if you like were among the objectives of the DRIPP project in Haiti, even if we did not use those labels. As we have seen above, the efforts of the DRIPP team to achieve these objectives were a failure, despite the presence on the team of professionally trained "social animators", both Canadian and Haitian. Yet almost next door to the DRIPP region was a very successful cooperative, producing coffee and honey, which was established with only a minimum of guidance from some French Canadian monks of the Oblat order, and quickly became independent and self-reliant. Was the DRIPP approach too high powered from the beginning? What was the Oblats' secret? In the case of the coffee cooperative I visited in Haiti, the people had seen coffee cooperatives operating in neighbouring regions and decided to start their own. A series of meetings over many months took place at which the farmers studied the statutes of other cooperatives to guide them in organizing theirs. "We had many discussions over a period of three years," said the Oblat missionary, Father Halle. "We did not want to start the cooperative until everyone understood and chose for himself — or helself." The backbone of the operation was the coffee cooperative. About the same time, a store was operated by the same organization to generate income, stocking mainly hardware and soft goods. It also had a fleet of reconstructed sewing machines, which the village women could rent to make clothes for themselves or for sale. The money from the store paid for health, fire and life insurance.

167 The New Approaches of the 19705

This success story provides more support for the AD/SR approach than for the cooperative movement as such. There are enough studies of exploitation or failure by cooperative organizations to warrant caution in expecting the establishment of cooperatives in and by itself to solve the problem of underdevelopment. Much depends on how and by whom the cooperatives are set up. Father Halle did not impose a cooperative structure on the Haitians from above. Instead he spent three years encouraging them to build on traditional village cooperative structures that were already in place, and to generate their own leadership. Current problems were discussed in evening meetings. Help was sought both from government departments in Port au Prince and from foreign aid agencies, such as the treepruning expert provided by FAO. When last met the members, of their own volition, were talking of combining with four neighbouring cooperatives to prepare a development plan for the whole of the region covered by the five. While there are many such success stories, neither the AD/SR nor any of the other New Approaches has provided a "How-to" manual that gives a set of clear-cut, operational principles and criteria to guide national, regional and local development planners in their daily tasks. From the late 19505 to the mid-19708, when there was still confidence in macro-economic growth models buttressed at the micro-economic level by cost:benefit analysis and input-output analysis, there was a spate of such manuals, from the ECAFE/ESCAP series on Development Programming Techniques to the UNI DO Guidelines. However, the failure to produce a late 19805 equivalent to these manuals does not mean that no progress has been made. The experiments in the 19605 with disaggregation by sectors and by regions, and all of the New Approaches of the 19705, have made their contribution to the advancement of knowledge of the development process and of how to encourage it. In particular, they have highlighted the complexity of the development process and its management. We have no simple "How-to" textbook because we have no simple general theory of development, and we are unlikely to get one. But recognition and acceptance of these facts is progress in itself. If we accept the need to proceed on a case by case method, with careful diagnosis, prognosis and prescription for each case, there is no reason why we should not ultimately be as successful in promoting development as the medical profession is in promoting health, the legal profession in promoting justice, and the architectural profession in promoting pleasing three-dimensional structures. A great virtue of the Unified Approach is that its proponents basically understood these facts. They accepted the development process for the vast feed-back mechanism that it is, and sought to

i68 All the Difference

deal with and manage all of its strategic components. The Pahang Tenggara project provides a good example. With the recognition of the organic nature of economic development, management science, operations research, systems analysis, conflict resolution and decision theory were added to the economist's toolkit. The Basic Needs Approach was the ultimate rejection of the idea that rapid growth of national income would in itself solve the problems of very poor people in very poor countries. It recognized that specific problems like malnutrition, ill-health, bad housing, unemployment and illiteracy must be tackled by specific and appropriate measures, and that all of them are interconnected. It seems incredible today that such simple truths as the fact that malnourished, sick, illiterate and illhoused people are not likely to be very productive or raise their productivity very rapidly could ever have been overlooked in the formulation of development plans and policies, but they were. A major contribution of the new approaches is that they pushed development planners and policy makers out of their chairs and out of their offices into the field. Much of the new knowledge of development springs from that single, simple fact. The concept of target populations, particular social groups in particular places, which are disadvantaged and underprivileged, compels the planner and policy maker to go to those places and have a look at those people in their own environment — and having had a look, they are likely to stay around for a while. By staying around, they are likely to learn not only something about needs and aspirations of the target population, but also about unsuspected opportunities for raising productivity and welfare of that population, so as to bring quick and inexpensive reductions in gaps between welfare norms and the current status of the population concerned. A larger proportion of the planning exercise takes place today in the field, in contact with the target population, than it did ten years ago. This shift in emphasis has implications not only for the manner in which policies are formulated and plans constructed, but also for scope and method of the social sciences, and particularly of economics.

8 Africa and Foreign Aid, 1967-78

Until my return to Canada in 1967, Africa, except for Libya and Egypt, was still "the dark continent" to me. Nor had I been engaged in helping to administer a foreign aid agency. In the late ig6os and 19708, I became deeply involved in both. During his official visit to Expo' 67, Charles de Gaulle made his famous speech from the balcony of Montreal's Hotel de Ville, ending with "vive le Quebec — vive le Quebec libre". Ottawa promptly informed him that he was not welcome in Ottawa, and his state visit was cancelled. In reply, de Gaulle brought pressure on the government of Gabon, an ex-french colony, to invite Quebec but not Canada to an international conference on education and development, whereupon Ottawa severed diplomatic relations with Gabon. Pierre Trudeau, when he became Prime Minister in 1968, decided to go further and, in effect, steal France's ex-colonies from her in revenge for de Gaulle trying to steal Quebec from Canada. The way this plot was officially expressed was that henceforth Canada would offer to the peoples of francophone Africa an alternative to France, for foreign aid, trade and cultural exchange. I had been appointed a member of Canada's Foreign Aid Policy Review Committee soon after arriving at the University of Montreal. The Committee was small and met frequently. Consequently I became well acquainted with Maurice Strong, Canadian boy wonder, who never attended university, but rose quickly from United Nations security guard to multi-millionaire president of the Power Corporation, a major investment company. In 1967 he became president

i yo All the Difference of CIDA, and went on from there to serve as Chairman of the Stockholm Conference on the Environment and later as Director of the United Nations Environment Program. We got along well together, and early in 1968 he invited me to serve as his Special Adviser on Francophone Africa. I spent the summer of 1968 at CIDA headquarters in Ottawa, helping to formulate the new top priority program of aid to francophone Africa. I worked mainly with Maurice Strong and the VicePresident of CIDA, Denis Hudon. They made a good team. Maurice was dynamic, ebullient, accustomed to making quick decisions and following them through. He tried to run CIDA with the same dash and flair that had proved so successful in the Power Corporation. Denis Hudon was keenly aware of the complexities of a foreign aid program, and accordingly took a cautious, slow-down make-sure, attitude to his job. The result was a nice balance in the administration of CIDA; it emerged as innovative and energetic, but at the same time thorough in the assessments that preceded decision making. When the decision was made to mount a Big Push in assistance to francophone countries, the government dispatched a distinguished French Canadian diplomat, Lionel Chevrier, to Africa for a first round of talks with the governments of French-speaking countries. He found that persuading these governments to take Canadian money was not easy. With liberal French aid and good export markets they had foreign exchange running out of their ears. The association with France gave them access to the European Common Market, which was enormously valuable to them. We had to modify the regulations for granting Canadian aid, such as requirements regarding matching funds and local content, before our assistance could be accepted. Nevertheless, by the summer of 1968 a flow of project proposals was reaching Ottawa from the various Canadian embassies responsible for francophone Africa, and I spent much of my time that summer and in the months that followed evaluating such projects for CIDA. By the long vacation of 1969 Strong and Hudon felt that they had kept me under wraps - and under observation - for long enough to risk sending me on a field assignment. Meanwhile a major policy decision had been reached. Instead of providing all types of aid to each country, according to the requests from the recipient government, Canada would henceforth concentrate in each country on one or two sectors or one or two regions, in a manner which would reflect Canada's comparative advantage in aid giving. Since regional development was such a high priority endeavour within Canada itself, we felt that this was a field which certainly reflected our comparative

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advantage; but we also felt that there were sectors or industries, such as forestry, fishing and mining, where Canadian experience would be useful to developing countries. It was therefore decided to send me to North Africa to discuss with the governments there the application of this new policy in the countries of that region. A young CIDA officer, Claude Francoeur, came along to assist me. I began with Tunisia, where we already had a sizeable program, and where there was a CIDA officer for North Africa, Claude Demers. I began with meetings with high government officials, starting with the President and the Cabinet and proceeding to top bureaucrats. It soon became apparent that the Planning Secretariat, although it had some bright and competent Paris-trained Tunisians and some able foreign experts, was a rubber-stamping agency for such established departments as agriculture and industry. The Secretariat had a fourteen-equation model of the Tunisian economy, an inputoutput matrix, and a cost:benefit system with some shadow prices; but the real planning and project selection was done elsewhere. The Minister for Agriculture, for example, with a Paris Ph.D. in agricultural science, established his own priorities. But it soon became apparent that the man who really counted, where development policy was concerned, was Ben Salah, who was Minister of Practically Everything. (He was later convicted of treason and imprisoned, allegedly for falsifying statistics of agricultural production in order to disguise from the President the failure of his cooperative agricultural schemes. He was "rescued" from prison by supporters from abroad, went to Paris, and contributed to the Dag Hammarskjold Foundation volume edited by Marc Nerfin, Another Development.) Tunisia was fascinating and beautiful, but I made little progress with my mission. A typical conversation would go something like this. After I had explained the new policy of concentrating on sectors or regions, the "Excellency" to whom I was speaking would reply: "What a splendid idea! I do wish the other donors would adopt the same policy. It would make our development planning so much simpler. Now, let met see - Canada. Hmmm. Well, considering your special capabilities, I think you should concentrate your aid in industry, agriculture, forestry, education, health, environmental protection, transport, housing ..." I was in despair. Then, a few days before I was to leave, I got a call from Ben Salah. He told me that the Tunisian government had decided that they would like the Canadian government to concentrate its aid on development of the region of Kairouan, and asked me to come to see him. Naturally I was overjoyed. In our conversation in his office the Minister told me that he had already arranged for me to visit Kairouan, meet the

172 All the Difference

Governor and his staff, and launch discussions of a joint CanadianTunisian program for the development of the region. The Canadian ambassador was out of the country at the time, and the embassy was in the hands of a young charge d'affaires, who was in any case more directly involved in the aid program. He and I and Claude set off for Kairouan in the ambassador's limousine. My wife Jean was allowed to come too, provided she kept strictly in the background. When we arrived at the small but pleasant hotel where we were to stay, we noticed elaborate preparations being made around the swimming pool for some kind of banquet, and wondered what was the occasion. Somehow the Governor's office had anticipated Jean's arrival, and arranged for some of the local ladies to show her the town while we men went to the Governor's palace for a first round of discussions. The Governor proved to be very intelligent and alert, Paris educated, charming, cultivated and well informed. He had clear and sound ideas for the development of his region and for Canada's participation in it, as did members of his staff. I felt more and more optimistic regarding the outcome of my mission. After a long and fruitful discussion in the Governor's office we set off to examine the sites of possible projects. It turned out that most of the top officials in the provincial government were to accompany us, and a lengthy cavalcade of long black Citroens was drawn up before the palace when we emerged. Since these were all flying flags, our chauffeur unfurled the Canadian flag on our Citroen. As we drove through the town, the streets were lined with school children, who had been given an organized holiday for the occasion, each waving a small Canadian flag and shouting "Vive le Canada! Vive le Canada!" It was the first time I had been cast in the role of Mr Moneybags, and I was not sure that I liked it. The charge, however, obviously loved it. Where the Governor found all those Canadian flags I have no idea, but my admiration for his organizing talents took a great leap forward. When we arrived back at the hotel we found, of course, that the preparations were for us. The Governor had invited us to dinner. A stage had been set up on one side of the pool, its walls draped with lush oriental rugs. On the other side was a long line of tables, with chairs on one side, facing the pool and the stage. We were seated with Jean on the left of the Governor and me on his right. During the long and splendid dinner we were treated to an excellent performance of traditional Tunisian songs and dances. The Governor talked mainly to Jean, who found him as charming and cultivated as I had done. We could not, of course, determine the final details of our aid to Kairouan on the spot, but by the time we left for Tunis the broad

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outlines were clear. Canadian technical and capital assistance would be a major and integral part of the Kairouan development program, and in return Canada could program its aid to the region over a long period. It was in effect a partnership in regional development. In Tunis I had a final round of talks with the government there, especially Ben Salah and the Minister for Agriculture, who were happy with the arrangements made in Kairouan as far as they went. I left Tunisia well pleased with the results of my mission. Part of my pleasure, I confess, came from the large and handsome Kairouan rug which the Governor had given us. The charge, who was given a much smaller one, expressed some misgivings about accepting gifts from potential aid recipients. But I do not think he returned his, and when he came to the airport to see us off, used the full dignity of his office to squash a customs official who questioned our right to export such a "national treasure". ALGERIA

My next port of call was to be Algeria, which of course is next door to Tunisia. But such is the logic of the Canadian foreign service that our Canadian ambassador to Algeria was stationed in Berne, where he was ambassador to Switzerland as well, so we had to go to Algeria via Berne and Paris. That was no hardship. Berne is a charming town, the ambassador and his family equally charming, and the official residence a large and handsome house with a fine view over the city. The ambassador was really much more interested in Algeria than in Switzerland, but our penny-pinching government allowed him only a few weeks a year and very little money to go to Algiers. I made a fuss about that when I arrived back in Ottawa, and perhaps contributed a little to External Affairs' decision to set up a full mission in Algiers. On arriving in Algiers we received the red carpet treatment literally. We were met by Ministry of Foreign Affairs officials, whisked through customs and immigration, and led down a red carpet to a waiting Citroen limousine with chauffeur, which, we were told, were to be at our disposal during our visit to Algiers. We were taken to the Saint-Georges Hotel, the "Raffles" of Algiers, a gracious old colonial structure with a broad verandah overlooking the Mediterranean and a lovely garden. Algiers was a sharp contrast to Tunis. Where Tunis was rather sleepy and provincial and very Arab, Algiers was bustling and cosmopolitan and very French. Substantial reserves of oil and other minerals had been discovered, industrialization was proceeding apace, and Algiers had something of the boom-town atmosphere of

174 All the Difference

Tripoli three years earlier. The city was also ablaze with excitement over the coming Pan African Cultural Festival, and the main boulevards were decorated with lanterns bearing replicas of the ancient cave paintings in the Algerian south. The avowedly socialist government contrived to make things attractive for private enterprise, both dometic and foreign. Even American corporations were there, although the United States had severed diplomatic relations with Algeria, and handled its Algerian affairs through a sizeable contingent of "observers" holed up in the Swiss embassy. I found my dealings with the Algerian government different, too. Cabinet ministers and top bureaucrats were both busy and business like, hard working, pressed for time, and efficient. The position of the Planning Secretariat in the government hierarchy was not much more powerful than in Tunisia, but the commitment to planning was much stronger. It did not take me long to discover that the real source of power was the Ministry of Industry. Foreign experts — and very competent ones — swarmed the corridors, but the biggest and best team was in the Department of Industry. Because of the nominal commitment to Soviet-style planning there were a good many experts from East European countries, including the famous Polish planner, Baransky. I found this mixture of East and West fascinating, and the fact that they worked harmoniously together heartening. Ideology played little part in the daily work of the government, and problems of policy and planning were tackled in a pragmatic fashion. On balance Paris, especially Malinvaud and his mathematical approach, had more influence on the planning techniques actually applied than Moscow. One thing was the same as in Tunisia. The government officials to whom I explained my mission had the same tendency to reel off a long list of sectors for Canadian aid. But with the Tunisian experience fresh in my mind, I bided my time and did not give up hope. I was right in that. We had been watching the Saint-Georges fill up with delegates to the festival, ladies and gentlemen of all hues from pale cafe-au-lait to blue-black, in all manner of colourful native costume. Then, with dramatic suddenness, my Foreign Affairs liaison officer told us that we had to get out, not only of the SaintGeorges, but of Algiers altogether. With the festival beginning there was no room in the city, and no one would have time for us anyway. We were to go to Annaba, capital of a region in the east of the country, which might be a good candidate for our Canadian aid program. Moreover, the Citroen-with-chauffeur was also commandeered, and I was to arrange my own transport to Annaba. We hired

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a little Renault-4 station wagon, and with some misgivings set off across the desert. It turned out to be one of the most beautiful drives we had taken, stretches of desert alternating with vineyards, olive groves, fruit orchards, mountains and sea. Annaba proved to be a delightful provincial town, with tree-lined boulevards and pleasant, shady squares, again very French. We stayed in a small attractive hotel on one of the squares in the centre of town. Once we had arrived there, the red-carpet treatment began again, complete with Citroen and chauffeur, by courtesy of the provincial government. The next few days were devoted to examining potential projects, which seemed to allow time for some superb snorkelling and beach picnics. As always, the most pleasurable projects to examine were those for prospective tourism, including some hot springs set in the midst of incredibly colourful rock formations. One of the projects I was supposed to see, but never did, was a new steel mill which had been built with foreign aid. We drove past it a few times, but it was locked up tight and looked deserted. I do not think that my hosts' reluctance to show it to me had anything to do with security. I think it was just not working, and my hosts did not wish to be exposed to embarrassing questions. The government in Algiers then sent word that they had found us a room in a beach hotel near the city, the main festival being over. We drove back along the corniche, through a region called Cote d'Or, with the Mediterranean on our right and steep mountains on our left, surely one of the most beautiful drives in the world. Soon after our arrival in Algiers we were joined by my second son, Tory, and his French Canadian girl friend. They stayed with us for the rest of our African tour. When we reached our hotel we found that we had had a stroke of incredible luck: a large chunk of the festival had moved out to our hotel, and there were to be performances of music, dance and theatre from a number of countries for several nights in a row. It was a revealing experience. The quality of all the performances was extremely high, but their nature and content varied greatly, from the sophisticated and refined dance of French West Africa through the world-famous jazz of the Brazzaville ensemble, to the lighthearted, rather risque, sometimes slapstick humour of the Nigerians. Most impressive was the obvious excitement among the performers themselves. They stayed glued to their seats in the audience until the last possible moment before their own performances, and rushed back to their seats when their performances were over. They did not want to miss a moment of watching the others, highly critically but appreciatively, and with enormous curiosity. As one performer

176 All the Difference

explained to us, "You see, we Africans do not know each other. Under colonial rule there were no opportunities to get to know each other. The American landing on the moon came in the midst of the festival. The Africans were convinced that the expedition was deliberately timed so as to distract world attention from their cultural festival. We suggested to Africans around our hotel that it was more likely that the position of the moon and weather conditions were the primary considerations, but I doubt if we convinced anyone. The festival made me understand that, despite rivalries and quarrels between individual nations, henceforth African Unity would be a force to be reckoned with. The festival was used by the political leaders of various nations to discuss a whole range of issues, and the keen rivalry between Algeria and Nigeria as potential leaders of some sort of African union was already visible. But that there is a common bond among African peoples, or at least their elites, and an urge to get together somehow and present a united front to the rest of the world, there could be little doubt. After a final round of talks with members of the Algerian government I was satisfied with the results of my Algerian mission too, and pleased that we had selected a region, and such an attractive one, for our aid effort. MOROCCO

Morocco was the next, and the last, country on my list for that summer's mission. However, we could not simply proceed along the Mediterranean coast from Algiers to Rabat; the Canadian ambassador to Morocco was stationed in Madrid. So off to Madrid we went - not altogether a hardship either, although Madrid at that time of year was overrun by tourists. The embassy had a first secretary who concentrated on foreign aid and was very knowledgeable about Morocco, so I arrived in Rabat already knowing something about what was involved in this last stage of my mission. Better still, Morocco was one of the few countries where CIDA had a full-time representative, Tony Price of the Quebec Price Waterhouse Prices, or "Monsieur Preeece" as he was known in Morocco. Tony was an enormous help. I needed help. It is very hard to find out, let alone to understand, what is going on in Morocco. Clifford Geertz, the famous anthropologist who had worked with me in Indonesia, made Morocco the second in what was to have been a series of studies of Islam and

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development. Cliff wrote four well-known books on Indonesia. He wrote only essays on Morocco. When asked why, he replied that Morocco is too complex. Certainly I found it so. Intensely Islamic, intensely Arab, intensely traditional, yet with overlays of dynamic modernism, Morocco is a country which combines the use of centuries-old technology with the export of television sets. Above all, I never really understood the power structure, except that a great deal of power still belonged to the King. Consequently I never knew whether any conversation I had, even with Cabinet ministers, really meant anything or not. I never fathomed the exact relationship between the government and the private sector. It was obvious that the businessmen, bankers and industrialists in Casabianca could compete with anybody in the world, but whether they or the government ran the economy I was not sure. In that semi-feudal society I was not even sure if one could make a valid distinction between government and private sector. ADMINISTERING FOREIGN AID

After visiting the Canadian embassy in Madrid once more for a debriefing on the Morocco mission, Jean and I proceeded to Stockholm for the meeting of the United Nations Expert Group on Social Policy and Planning. Maurice Strong asked me to take advantage of being in Stockholm to learn more about SIDA, the Swedish International Development Agency, and to make some comparisons with CIDA. It was a natural comparison to make, since both countries are relatively small, are seldom accused of "imperialism", and the scale and objectives of the two foreign aid programs are similar. Indeed, I had already made the comparison several time in the field, where I found SIDA clearly more competent than CIDA. SIDA is a much more sophisticated operation than CIDA. A much higher proportion of the administrative work is carried out in the field, where the aided projects are. In the course of my conversations in Stockholm, SIDA officials said that they had learned that in any country where they had an aid program of any importance, they needed six to twelve administrative officers, quite apart from "experts" and advisers. In most of the countries with CIDA programs there was not a single CIDA officer. In some cases several neighbouring countries were served by a single CIDA official. In others the Canadian aid program was administered in the field by a member of the embassy staff, usually on a part-time basis. Bureaucrats sitting in the donor contry's capital city, and perhaps making an occasional

178 All the Difference quick trip into the field, cannot really evaluate accurately proposals for particular aid projects. Each project must be appraised within the context of the country's entire development problem and program, in addition to looking at the technical, economic and financial aspects of individual projects. Perhaps even more important, bureaucrats in Ottawa are not in a position to generate new projects, and to become involved in their identification and elaboration. The only way that they can exert power it to say "no", refusing or revising a suggested project. Perhaps we have here an explanation of the fact that CIDA often has difficulty in spending its budget. Aid agency officials stationed in the LDCS are always on the lookout for good projects, and become involved in their elaboration, in consultation with the host government. They can assert themselves by urging headquarters to say "yes" to good projects. WORLD BANK CONSULTATIVE GROUPS

My North African mission for CIDA brought an unexpected bonus. After my return to Montreal and Ottawa and submission of my report, Maurice Strong and Denis Hudon decided that I should serve as a member of the World Bank Consultative Groups for the countries I had visited. This decision led to two trips to Paris for that purpose. The meetings provided an opportunity to renew my acquaintance with members of the governments concerned, United Nations Resident Representatives, chiefs of UN missions, and to meet officials of the Bank and the various bilateral donors. What impressed me most was the evidence provided by these meetings of the extraordinary rapidity with which the whole international development process had matured. The sessions went like clockwork. The donor agencies had copies of the development plan, including the budget and the foreign aid proposals, in their hands before the meeting began. The meetings began with a brief presentation by a senior spokesman for the recipient government, outlining the main features of the plan, explaining its strategy and justifying the major projects. Then he or the finance minister would justify the budget and foreign aid requests. This presentation would be followed by questions and comments from the representatives of the donors, to which the appropriate minister of the recipient country would reply. In the meetings I attended there were no strong criticisms of the plans nor acerbic debates. The atmosphere was one of genial collaboration. The plans were well prepared, often with consultation with prospective donors, and the discussion involved only elaboration and clarification.

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In the next phase of the meeting, the donors, one by one, would "bid" for the projects and programs that interested them most, explain their interest and justify it in terms of their comparative advantage in aid giving. They would then state how much they were willing to provide in aid for these projects and programs, usually approximately the amount requested. After a couple of rounds of such "bidding" — sometimes with some competition among donors for particular projects which interested several of them — the total aid offered and its allocation more or less matched the initial request and the meeting was over. Of course there had been some negotiations between the recipient government and individual donors before the meeting, and among various donors as well. Nonetheless I found it surprising and gratifying that agreement was reached so quickly and easily. ADVISORY MISSIONS AND RESEARCH

Early in 1971 Maurice Strong resigned from CIDA in order to devote his full time to the UN Conference on the Environment. Gerin-Lajoie, who had been Deputy Minister of Education in the Quebec government at the time of the Gabon affair, was appointed his successor as president. Trudeau wanted to carry on his fight with de Gaulle, and he wanted to involve Quebec more deeply in Canada's foreign aid program. The appointment of Gerin-Lajoie as President of CIDA seemed like a step in the direction of both of these objectives. At the time I had a welter of foreign assignments coming up, including two for CIDA. Gerin-Lajoie suggested that I was going to be away too much to be of use to him, and my appointment as Special Adviser to the President was not renewed. This was probably not the real reason. Gerin-Lajoie had his own ideas about running CIDA and probably wanted no senior advisers held over from the Strong regime. In any case that was the end of my activities as a member of the CIDA staff. My work for the administration of CIDA stands a bit apart from my other experience in international development. I learned less about the economies and societies of the countries I visited as a representative of a foreign aid agency than I did as an adviser to the governments of developing countries. Indeed I have found no way of doing research on a country's development problems as effective as serving as adviser to its government on development policy and planning. When working from inside the government everything is open to you - statistics, information, documents, people. If the mission is long enough to do properly the job assigned to you, the

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end result is total immersion in the country's economy, society and political system. The same is not true when one is conducting purely academic research of advising a foreign aid agency. MOROCCO REVISITED

In the summer of 1977 I was invited to lecture at the United Nations Statistical Institute in Rabat. At the University of Montreal I had a Moroccan graduate student who did an MA with me, and who came to Ottawa when I moved there in order to continue working with me. When he learned that I was going to be in his country that summer he flew home in order to be able to greet me upon my arrival. He borrowed a car from one of his brothers in order to be better able to show me his country. I met his prosperous brothers, sisters and cousins in Casablanca - lawyers, merchants, bankers, all, apparently, very Westernized. He took me to remote villages in the Atlas Mountains, to Tangiers, to Marrakesh, and, best of all, to Fez, which I had somehow missed on my earlier visit. His parents had an old mansion in the very heart of the ancient walled city, with its maze of winding streets, too narrow for vehicular traffic. The house was surrounded by its own walls and was entered by a gate directly on the street. I remember it as four storeys high, built around an open courtyard with a fountain, every room with its verandah or balcony giving on to the courtyard. His parents served a splendid Moroccan lunch. After about the sixth course I prayed that each course would be the last. The family took turns handing me special pieces of each course, and there was no choice but to eat them. By the time I was through I felt like one of those French geese that have food stuffed down their throats to make their livers swell, and gratefully accepted the offer of a couch for a siesta. I was also taken to a huge dinner party at the ranch of one of my student's relatives. Dinner was served to at least sixty people in a vast tent, with chairs on one side of tables arranged in a square, facing the open space where the dancing girls performed to traditional Moroccan music, interspersed with their bloodcurdling, shrill, warbling shrieks. In this devout Muslim household, there was a full bottle of Johnny Walker Black Label every metre or so around the tables, and flagons of excellent wine as well. Long before my bottle or flagon was empty it was replaced by a full one. In sharp contrast to my Libyan revisit, I found little change in Morocco after eight years. Modernization and preservation of traditional culture still went on side by side. Through my student I got more intimate glimpses of Moroccan life, but these left me more

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bewildered than ever. The countryside, the architecture and the people are all hauntingly beautiful, but for me Morocco remains much more "the mysterious East" than any country in South or Southeast Asia. POSTLUDE

I recently had occasion to visit CIDA headquarters in Ottawa and to find out what had happened to the three regional development projects that were proposed during my mission in 1969. Claude Francoeur is still there in the francophone Africa division, and of course knew the stories. The Kairouan project in Tunisia was converted from an integrated regional development project into a capital assistance project for the construction of a major dam and related infrastructure. As such it was quite successful, but of course very different in form from what was originally conceived. No doubt the arrest and imprisonment of Ben Salah had something to do with the transformation of the concept. The Annaba scheme in Algeria never got off the ground at all. It was a victim of more general disagreement between CIDA and the Algerian government as to the approach to aid and development. Curiously enough, the most successful of the three is in Morocco, where one might have expected the greatest difficulties. The project for development of the Rif region is still going, although it is less comprehensive in scope than originally envisaged. It has been said that getting relative prices right is not the end of development, but getting them wrong frequently is. It might also be said that good planning does not assure successful development although bad planning can prevent it. Integrated regional planning is a very complex affair. Foreign aid is another. The two together present one of the most difficult administrative problems imaginable. I shall have more to say on this subject below.

TRAINING AFRICAN DEVELOPMENT PLANNERS Shortly after World War II, Averill Harriman donated to Columbia University his magnificent estate at Bear Mountain Lake, about an hour's drive from New York City. Arden House, as it was called, has about eighty rooms overlooking the lake, the Hudson River, and heavily wooded mountains. Dwight Eisenhower, then President of Columbia, conceived the bright idea of using Arden House for longweekend conferences. This idea finally crystallized as the American

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Assembly, whereby sixty leaders from industry and finance, the trade unions, the farm bloc, the Congress, the media, the professions, the armed forces, and the academic community, would foregather at Arden House to discuss major policy issues. The general idea was that if sixty such leaders could reach agreement on some contentious issue, and if the results were well publicized, then the whole country should be able to reach agreement. These Thursday-lunch-toSunday-lunch assemblies were certainly enjoyable; the company was stimulating, the cuisine and cellar splendid, the scenery superb, the house elegant and comfortable. Harriman himself liked to come when he could, occupying the "gatehouse" of the estate, which he retained for himself - a little cottage of only twenty or so rooms. One of the American Assemblies that I attended was on foreign aid policy. Among the participants were two famed economists: Barbara Ward (Lady Jackson), then a professor at Columbia; and David Bell, then Executive Vice-President of the Ford Foundation and later with the Harvard International Development Institute. During one luncheon break the three of us went for a stroll in the woods above the lake. I had recently arrived at the University of Montreal, and during our walk I remarked that the University of Montreal was unique, in that it offered North American style training in economics, including economic development, but in the French language. David Bell stopped dead in his tracks, snapped his fingers, and exclaimed "That's it!" He then explained that the Foundation had wanted to mount a program of graduate training in economics for relatively young francophone government officials, with emphasis on economic development, development policy and planning. The problem was that the French universities were not strong in these fields, and the various French institutes, though some of them were excellent, were not degree-granting institutions. The African officials needed degrees for promotion and salary increases, so the Foundation had found itself confronted with a dilemma. Dave suddenly realized that the University of Montreal offered a solution; France and Quebec had a reciprocal agreement to recognize each other's university degrees, and any degree recognized by France would be recognized in the former French colonies. The upshot was that Andre Raynauld and I were invited to New York to discuss the idea in some detail, and then were sent to Africa by the Foundation to organize the program in collaboration with the governments concerned, and to find candidates for the first round of fellowships. Since the Ford Foundation's regional office was in Lagos, we began there, and were provided with accommodation in the Foundation's hostel in that city. The regional director had a handsome house built right out over the sea, on a point where several

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members of the diplomatic corps had their residences. Nigeria had already become a major oil exporter, and Lagos was a huge, sprawling, bustling, chaotic city. The traffic jams rivalled those of any city in the world, and in Lagos any time of day was rush hour. The night life was rich and varied and went on from dusk to dawn. We saw quite a lot of Lagos, because our visits to other countries were arranged so that we went from Lagos to the capitals of each of them, and then returned to Lagos to digest our experience before setting off for the next country on our list. In this manner we visited Senegal, Mali, Niger, the Cameroons, the Ivory Coast, Gabon and Zaire. In each country we talked to Ministers and First Secretaries of Planning, Finance, Trade, etc. and to Presidents of Development Banks, about their training needs; and we interviewed candidates proposed for fellowships. Nigeria was a semi-military state and the armed forces were much in evidence. As one left the airport terminal after going through customs and immigration, one passed through an army check point, where the examination of documents and luggage was even more thorough. There was also an examination when leaving the country. Anything of value, such as cameras and tape recorders, which I intended to bring back into the country, had to be declared and entered on a form when leaving. On about my fourth sortie and return, when showing exactly the same equipment to exactly the same customs officer who had seen it three times before, he took me aback by asking, "Would you like to pay a little duty on these things this time?" I hesitated, knowing the risks involved, but in the end declined his invitation, and he took my refusal with good grace. This Ford Foundation mission was my introduction to Black Africa. I found the people enormously appealing, with their inherent joie de vivre even when confronted with the harshest of living conditions. I found their elite, with their French degrees and manners, extremely capable and well-informed, and for the most part hard working and dedicated to raising the level of welfare of the people. I also began to appreciate more fully the value of Trudeau's policy of offering the ex-French colonies an alternative to France for aid, trade and cultural exchange. France obviously still had a firm hold on the governments of her former colonies. Before I could see any high-ranking official, I had to fight my way past the French cooperant at the door to his office. My impression of French control was heightened when I attended the Conference of African Planners in Addis Ababa about a year later. Before and after each session the French African planners assembled at the feet of the French delegation, while the latter instructed them about the positions to be taken at the next session.

184 All the Difference

This mission was also my introduction to the African Sahel, the arid zone stretching across the continent between the Sahara to the north and the grasslands and jungle to the south. The contrast between lush countries like the Ivory coast, the Cameroons and Zaire on the one hand and arid ones like Senegal, Mali and Niger on the other was so striking that I realized the foolishness of lumping them together for analysis, policy formulation and planning into any such category as "francophone Africa". Also, for the first time, I began to allow myself to speculate on whether there may not be some countries which simply cannot be developed, just as there are some diseases that are incurable in the present state of human knowledge. Even to admit this possibility involves a sharp shift in the mentality with which one approaches the development problem. By and large, both the neoclassical and the Marxist frameworks assume implicitly that any society can achieve affluence provided only that it has the right economic system. Once one admits that there are economic and social maladies that no system will cure, and that we must look for specific remedies for these particular maladies, one is led to a more biological and less mechanical approach to analysis (diagnosis and prognosis) and to a more case-by-case and less holistic approach to policy and planning (prescription). My African experience had a profound effect on my thoughts about development. On the whole the University of Montreal program to train francophone African (and Vietnamese) economists and planners went well, and it still goes on today. If it had a flaw, it was that the University standards for higher degrees in economics were too onerous and too inflexible to be suitable for all the candidates who came our way, and some of them spent too many years in Montreal. Certainly standards for particular degrees should not be lowered for candidates from developing countries. But to be useful in a development bank or a ministry of planning or finance not every employee needs the amount of mathematical economics and quantitative eco nomics required today for a Ph.D. from a good North American department of economics. There is need for more MA programs of the sort offered by the Australian National University's National Centre for Development Studies, tailored more closely to the needs of students who are destined to enter or return to the civil services of their own developing country. THE CENTRE DE R E C H E R C H E EN DEVELOPPEMENT ECONOMIQUE

The establishment of our graduate program for training development economists and planners encouraged Andre Raynauld and

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myself to press on with another project that we had been discussing for some time: the creation of a Centre for Research in Economic Development within the economics department at the University of Montreal. Our hope was to obtain enough support from the University to allow some relief from teaching for persons engaged in research projects or advisory missions, and then to obtain contracts for projects both within Canada and within developing countries. The University proved to be very supportive, and contracts soon began to flow in. This program enabled some members of the department to obtain field experience who might not otherwise have done so, and offered the more experienced members occasions to broaden and deepen their experience. The teaching program was greatly strengthened as a result, especially, perhaps, in such fields as economic development, urban and regional economics, and planning; but also, in somewhat less direct fashion, in public finance, international trade, public policy and, more generally, welfare economics. Specialists in any branch of economics can benefit from immersion in real world problems. The CRDE is still going and still playing a significant role in both domestic policy and in foreign aid and foreign trade policy, although the emphasis has perhaps shifted slightly towards domestic issues. MAURITANIA

One of the earliest, and one of the biggest, longest, and most important projects of the CRDE, was a mission of assistance to the Ministry of Planning in Mauritania. This project began in 1971 and still continues, in modified form, today. It was initially funded by the United Nations, who came to us with a proposal for general support to the Ministry of Planning. The team obviously had to be francophone, but the Mauritanians did not want a team mounted by an institution in a former imperial power such as France or Belgium. Thus the University of Montreal and CRDE were selected through a simple process of elimination. When we first arrived in Nouakchott, Mauritania's capital city, we quickly discovered why the government had asked the United Nations for help. The Ministry of Planning had three divisions: Planning, Foreign Aid and Information. The Planning Division was relatively well off. Both the Minister himself and the Deputy Minister had done postgraduate work in economics in Paris. There was also a Chief of Division with French university training. Apart from that there was a secretary and no one else; and the Deputy Minister was also Deputy Minister of Fisheries, and had to spend some time in Nouadibou where the fish processing plant was. The Foreign Aid

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Division consisted of the Chief, a secretary, and no one else. The Chief had studied in Moscow under the Russian technical assistance program, and returned to Mauritania with a deep hatred for the Soviet socialist system but with a good background in administration and foreign aid. The Information Division had a Chief and a secretary, but the Chief had never gone beyond high school and came to the Ministry from the protocol section of the Ministry of Foreign Affairs. The Canadian team substantially outnumbered the total personnel of the Ministry, and the entire staff of the two together could meet in a good sized seminar room. Nouakchott is an artificially created capital city, like Brasilia or Canberra, located for some mysterious reason about 16 kilometres inland from a magnificent coastline, invisible from the city beyond the dunes. It sat on the margin of the Sahara to the north and the Sahel to the south. It was at the time a town of about 70,000 people. Its uncertain water supply came from a pipeline to an oasis in the interior, provided by the Chinese, and a desalination plant on the coast, provided by the French. It had no port and no railway, only a long wharf out into the sea where shallow-draft ships could pull up and unload. It had one night club, two or three bearable restaurants, the same number of shops with European-style wares. It had some schools and a French lycee. There was no university in the country. The streets were unpaved and could become impassable after a sandstorm. Still, it had a large diplomatic corps, with some forty embassies, many with swimming pools which we were invited to use, and an active social life, a Cercle Franchise which showed movies and even live theatre, and some pleasant villas, with the obligatory cook, houseboy and housemaid, so we were not uncomfortable and certainly not bored. It did not take long to realize that Mauritania's main development problem was that it really had no national economy or national society. Mauritania as then defined had never before existed as a unified nation-state. Its economy consisted of a handful of distinct sectors, overlapping with as many distinct regions, with very little interaction among them. Nouakchott was a sector and region unto itself. Apart from government, the modern sector consisted of the copper mine at Akjoust, some 60 kilometres to the north, the iron mine at Zouerate in the northeast corner, the fish processing plant at Nouadibou on the north coast, and the abattoir at Kaedi on the Senegal River. Except for the government, the modern sector was tied almost entirely to the outside world. It bought little from and sold less to Mauritanians, and employed virtually no Mauritanian people. The essentially self-sufficient camel economy, "les grands

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nomads", wandered from oasis to oasis in a crescent-shaped region in the northwest. The raisers of livestock (mostly cattle and goats) followed a regular migratory route in search of water and pasture, in the southern part of the country, ending up in the markets of Senegal. Settled agriculture was limited to a rather narrow band just north of the Senegal River, in the Sahel, always threatened with drought and starvation. The settled farmers were blacks, the rest of the population Moors, "les hommes bleus" after their flowing sky blue robes. The task was to find a way to tie together these disparate sectors, societies and regions into a more integrated economy and society. There was little hope in the existing modern economy. The British mining company at Akjoust was exporting high-grade ores while using the small Mauritanian mine to experiment with their patent process for utilizing low-grade ores, for application to their much more important holdings in Zambia and Zaire, charging the costs for tax purposes against their profits from the high-grade ore. (The ore was shipped in plastic bags. I asked the manager if it would not be a good idea to set up a Mauritanian enterprise to manufacture them. He said he "had no objections", if the price and quality of the bags were the same as for the imported ones. The idea that the company had some responsibility to assist in setting up such an enterprise had never occurred to him.) It was clear that the mine would not remain long in operation anyhow. The iron mine was also approaching the exhaustion of its high-grade ores. If it closed down, the fate of the one railway line in the country, linking the mine with the port at Nouadibou, was uncertain at best, as was the future of the country's lone international airport, also at Nouadibou. The fishing in Mauritania's fabulously rich waters was done by Norwegians, Japanese and Greeks with modern trawlers. They took most of their catch home with them, bringing into the plant at Nouadibou only the amount required by their contracts with the Mauritanian government. One possibility occurred to us. Mauritanian cattle, by the time they reached the end of the migratory route and arrived in a market in Senegal, were skin and bones, and fetched a very poor price. If installation of irrigation channels using the water of the Senegal system could produce grain surpluses, these could be used to fatten cattle in the feedlots near Kaedi. Then they could be slaughtered and processed at the abattoir, and flown to European markets where meat would bring high prices. The abattoir would need to be enlarged and the runway at Kaedi's airport lengthened; but no doubt foreign aid would take care of that. At any rate, this was the kind

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of project that Mauritania needed, linking together the livestock sector, the stable agriculture sector, and the abattoir and transport in the modern sector. If enough such linkages could be created we would have the beginnings of a national economy. How much could be achieved through irrigation? A Chinese technical assistance team was experimenting with the growing of rice in the Senegal River valley. They had brought from China not only experts but also workers, equipment, seed — and cooks. The rice fields were beautiful; but all we knew in the Ministry of Planning was that Chinese farmers directed by Chinese experts using Chinese seed and Chinese tools and equipment - and eating Chinese food prepared by Chinese cooks - could produce rice in Mauritania and get apparently high yields. We knew nothing about costs, and even if the Chinese were prepared to release their figures to us - which they were not —it would be hard to translate them into Mauritanian terms. Still more uncertain was whether or not Mauritanian farmers left to their own devices could get comparable yields. There is a branch of the Senegal — the Gogol - that flows through Mauritania. An FAO team was experimenting with various crops on irrigated experimental plots. The results looked promising. When the Yugoslav director of the FAO team handed us a draft of his report, it was enthusiastic. Accordingly, we planned to include the Gogol project in the Second Plan. But then we got the revised report from FAO headquarters. The top level experts in Rome warned us that we should on no account proceed with the project; it was bound to be a failure. The Yugoslav director was furious, and offered to resign from FAO and direct the implementation of the project himself if we put it in the Plan. What to do? In Saint Louis, at the mouth of the Senegal, was the headquarters of the Organisation des Pays Riverains du Senegal (OPRS), which should have more expert knowledge regarding potential for irrigation in the Senegal River system that any other body in the world. Together with a couple of my colleagues I set off in one of the team's Peugeots for Saint Louis. The French had used Saint Louis as their base for administering both Senegal and what became Mauritania. It is a very charming town indeed, retaining much of its French aura. I went to the headquarters of the OPRS and talked with the Secretary-General, explaining our dilemma. He shrugged his shoulders and said that OPRS had 10,000 reports on irrigation in the Senegal system, some enthusiastic about the possibilities and others warning of silting and salination and other environmental horrors. He said that a team was arriving shortly to go through the 10,000 volumes and arrive at some sort of conclusions. We ate an excellent dinner in a French restaurant

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overlooking the sea, and then went to a very pleasant and friendly mixed-race nightclub. I tell this tale, not for its own sake, but to illustrate the kind of uncertainties and limitations of knowledge with which any development planning team must contend. There is no way of avoiding such problems. The decisions must be made, and the decisions are not marginal. They involve large-scale, long-term commitments. Either the commitment is made or it is not. The fact that the commitment is often governmental is of no importance. A large multinational considering the same project would have to go through the same analytical process and face the same uncertainties and incomplete information, except that there are externalities on both the cost and the benefit side which a conscientious government must consider but which a multinational might ignore. Mega-projects of extraordinary scale and with time horizons longer than the life expectancy of the decision makers are certain to play an increasingly large role in future, in both the public and the private sector. We do not really know much about how to make decisions of this kind. The picture of the entrepreneur making investment decisions in terms of maximizing his profits is a gross oversimplification of the process involved; and the kind of cost benefit analysis usually undertaken by planners is not adequate to the task either. President Ould Da Da of Mauritania at the time had a still more ambitious scheme for developing his country: make it "the Switzerland of Africa". He was obviously not thinking of ski resorts and tourism. He meant that, since Mauritania had few natural resources and these were running out, the country could achieve a modicum of prosperity only by human resource development. To propose such a strategy in a country which was about 90 per cent illiterate and which had few adequate schools of any kind, let alone a respectable university, may have seemed simply mad. However, I sat down and drew up several alternative models, assuming that the bulk of the development budget would be devoted to education, including sending Mauritanians abroad for training, and alternative assumptions regarding the proportion of the output of the educational system that would be ploughed back into the educational system and the proportion that would be released to the labour force. The results were astonishing. Given an educational effort as strong as Libya's, say, a nation of illiterate people can be turned into a nation of professionals, scientists and technicians in less than a generation. Another puzzle concerned millet flour. Millet was the staple food of the Sahel. It grew virtually wild, and was gathered rather than

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cultivated. The women derived much ot their status in Sahel societies from the fact that it was they who gathered the millet, ground it into flour with a mortar and pestle, and cooked it into gruel. The flour was highly unstable, and had to be cooked soon after grinding. Then a scientist attached to the FAO mission in Niger discovered a method of stabilizing millet flour, so that it could be stored, and made into bread, biscuits and pasta. These activities would provide a basis for commercialization of millet cultivation, opening the door to highyield varieties of millet, irrigation, fertilizer, pesticides, and all the elements of a Green Revolution for millet of the sort that had already taken place for maize, rice and wheat in other countries. Our anthropologist warned that such a revolution would change the whole fabric of Sahel society, particularly the status of women, and God alone knew what the result would be. In any case, a meeting with the scientist concerned, and other meetings with the FAO and the Niger government, disclosed total confusion regarding the legal status of the invention. The scientist maintained that the patent was his. The FAO argued that since he was an FAO employee the patent belonged to the FAO. The Niger government insisted that, since the process emerged from a government project merely assisted by FAO, the patent was theirs. What eventually became of this venture I do not know; nothing was done with it in Mauritania so long as I was associated with its government. But the millet flour story provides another example of the roadblocks that bestrew the path of development, and of the wide range of inter-related knowledge, constituting a complex feedback system, that is necessary for effective decision making; "The road to development is paved with vicious circles". The Mauritanian Third Plan did not devote the entire development budget to education, or even half of it. Nonetheless it did stress human resource development, as any development plan must where natural resources are severely limited. Nutrition and health as well as education were accorded high priority. Before the plan was finished the 1972-73 drought and famine had struck the Sahel; we have recently seen a recurrence of such famine. Starvation is always around the corner in these countries, and nutrition can never be far from a planner's mind. In the Senegal River valley, where hope for increased output of foodstuffs through stable, irrigated agriculture is highest, about half the people suffer from malaria, about the same proportion suffer from bilharzia (river blindness) and intestinal parasites. Hence many people are debilitated by all three at once. No one does much work who has all three of these maladies together, especially when undernourished as well. Yet a successful Green Rev-

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olution in Mauritania, associated with the extension of irrigation, not only requires that the work connected with planting, irrigation, week control, fertilizer and pesticides be done, but that all of it be done at the right time. The farmer cannot wait until tomorrow or next week when he may be feeling better. Moreover, all three of these maladies are water-related. Enlarging the irrigated area without a frontal attack on the related health problems could reduce productivity, not raise it. We wanted a plan for education that would fit the kind of agricultural and industrial activities presaged in the Third Plan. UNESCO sent a team to help us. We saw in Chapter 6 that up to about 1970 UNESCO had stuck to its line that it is impossible for any country to spend too much on education, and that returns to investment in education are higher than in any other kind of development project. By the end of the First Development Decade, however, it had become clear that if spending more meant merely adding teachers and classrooms to existing educational systems, a nation certainly could spend too much on education, and returns in terms of improved welfare of the poor could be zero or even negative (more of this below). UNESCO made a sharp change of direction and greatly increased the sophistication of its planning techniques. In Mauritania the UNESCO team recommended closing down the internals, the boarding schools associated with the Lycee in Nouakchott, because they were expensive and benefited only the children of the elite. Instead the team recommended reaching children of the nomads, through radio and itinerant schools. Full employment was also assigned high priority in the Third Plan, not just to raise national income but also to improve its distribution; the unemployed were among the poorest of the poor. LESSONS FROM AFRICA

If Latin America gave me a jolt, and made me start thinking of "failed industrialized countries" as a separate category for analysis, policy formulation and planning, my immersion in Africa, especially black Africa, gave me a shock. Are countries like those of the African Sahel simply nohopers? Certainly there was no basis for considering them simply as countries at an earlier stage of development than the industrialized ones, ready to follow the same path if only proper policies were adopted. Putting Mauritania or Niger and Argentina or Chile into the same category, labelled less developed or developing or Third World, seemed little short of absurd. Both the causes and the cures of their respective maladies was totally different. There

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are regions, like the worst parts of Gaspesie in Quebec and of the Brazilian Northeast, where the only solution to continued grinding poverty seems to be to move the people somewhere else. Are there whole countries like that? Human resource development and specialization in a narrow range of hi-tech industry and sophisticated services seem to offer a solution on paper, but how does one get started on that path when the country is so desperately poor to begin with, and there are so many other pressing needs besides education? PITFALLS OF AID-PROJECT ADMINISTRATION

Two stories from our Mauritania project illustrate how treacherous the pitfalls can be on the foreign aid road. The Director of the University of Montreal's Centre de Recherche en Developpement Economique at the time was Pierre Paul Proulx. Pierre had a good deal of experience in administering projects finance by CIDA, the International Development Research Centre, and the Department of Regional Economic Expansion, but was not well acquainted with the United Nations. The three Canadian agencies provided somewhat elastic budgets, in effect recompensing contractors for the cost of approved activities. When the French and African franc was appreciated against the Canadian dollar, thus increasing the cost of living in Mauritania in terms of Canadian dollars, Pierre felt obliged to maintain the living allowances of the CRDE team in real terms, and accordingly increased the allowances in dollars. This action meant that CRDE needed more money for the Mauritania project. Pierre, Andre Raynauld and I went to New York to explain our problem to the people concerned at UN headquarters. To the amazement of Pierre and Andre, but not of me, the UN was absolutely adamant. Not only would there be no more money, but CRDE owed the UN a substantial number of manhours, which must be provided or the UN would sue. Pierre said that the picture of the UN suing the University of Montreal would not be a pretty one, and that there was no way we could continue without more money. On that sour note the meeting ended. We went straight from the UN Secretariat Building to the Canadian delegation to the UN, which at the time included one of Canada's leading statesmen, George Ignatieff. We explained our predicament, followed our New York conversations with visits to Ottawa, and in the end it was arranged more or less amicably that CIDA would take over the project from the UN. Pierre and the CRDE were then on more familiar ground, and there were sighs of relief on all sides. Fluctuating foreign ex-

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change rates and the rigidity of some of the bureaucracies involved are among the pitfalls confronting foreign aid programs. A pitfall of a quite different sort arose in connection with training "counterparts", or "homologues" as they are called in French. A firmly entrenched United Nations doctrine of the day was that every "expert" should have one or more "homologues", or counterparts, from the recipient country, and train them so that they could take over the expert's job when he or she left. My "homologues" in Mauritania were a husband-and-wife team: a young, handsome, fiercelooking Moorish man and a beautiful, blonde, blue-eyed Polish girl. Both had higher degrees in econometrics from the University of Leningrad. Both were confessed Marxists, but the faith was stronger with the girl, who was also the more accomplished econometrician and a harder worker. They had married as students in Russia, and had a baby girl. The wife was considerably shocked, upon arrival in Mauritania, to learn that her husband owned slaves, and that his father owned many. She was even more shocked when her husband, aroused by the throb of drums, the songs, and the shrill shrieks of the dancing girls from tent villages on the edge of Nouakchott, would abandon her and spend the night "sous les tentes". She reached the point where she could stand it no longer and decided to take her child back to Europe, something she could not possibly do under Mauritanian law without the formal consent of her husband, which of course she would never get. She took me with two other friends into her confidence, and together we plotted the "escape from the seraglio". This plan involved leaving the house when the husband was "sous les tentes", going secretly by car to a remote village on the Senegal River, and crossing into Senegal in the dead of night in a dugout canoe. This sort of planning is, to be sure, not the kind that a "planning expert" normally teaches his homologue to do. In any case, the girl and the child eventually made it safely to Europe, where no doubt she is putting her econometrics to good use. DAKAR

A pleasant aspect of the Mauritanian mission was that it afforded occasions for frequent visits to Dakar, a beautiful and charming city. One of the excuses for going there was the presence of IDEP, 1'Institut de Developpement et Planification, the training centre of the UN Economic Commission for Africa. David Carney, the Director, and later his successor Samir Amin, a prolific Egyptian neo-Marxist economist, invited me there to give lectures and seminars. Among Dakar's

iQ4 All the Difference

many charms is the relaxed, friendly relationship between blacks and whites in that city, for which the French deserve much credit. One story illustrates this point. On one of my visits I encountered, quite by accident, my friend Dr Henry Heuser, with whom I had shared "digs" when we were both students at LSE. He was at the time chief of a USAID mission in the Ivory Coast, and was in Dakar to visit the USAID mission chief there. I had heard of a particular nightclub on the edge of the city that was supposed to be especially attractive. The taxi seemed to take a very long time to reach the club, and the last few minutes of the trip were spent traversing a dusty and deserted dirt road. When finally we pulled up before the club, Henry, who had spent much of his career in Washington B.C., said "The only way you would come out of a place like that in Washington is feet first." So it was agreed that I would go in alone and "case the joint", and if it seemed amusing I would come out and fetch "Heini", as all Henry's close friends called him. I went in and was surprised to see no white people there. I sat down at a small round table and was immediately joined by a black man and a black girl. We chatted, drank some excellent Senegalese beer, and listened to the very good band. I danced once with the girl, and felt that I had enough evidence to lure Heini in. I went back out to the dirt street, and was astonished to find no sign of the taxi or of Heini. Some people on the street told me he had left shortly after I went into the club. (Next day he explained that, when I left, some blacks had crowded around the cab; he panicked and ordered the driver to take him back to the hotel.) I went back inside, rejoined my companions, another girl joined us, I ordered more beer and danced alternately with the two girls. About 2.00 a.m. the man told me that this particular club, despite the fact that I was the only white there that evening, was not really an African club, but one that catered to whites who wanted a taste of African night life. Now, he had a brother who owned a real African club and we should go there. So we piled into a taxi and drove to the centre of town - which turned out to be very close by the direct route. We drank and talked and danced (it did not seem very different from the club we had just left, except that the drinks were a bit cheaper) and then he suggested we go to another club owned by his cousin. He seemed to have endless relatives in the nightclub business. At about the fourth club he suddeenly asked me why my friend had not come into the first club. I explained that he lived in Washington, where relations between blacks and whites were not very good, and there was occasional violence: my friend was scared. Whereupon my

195 Africa and Foreign Aid

host flashed a splendid smile, spread his arms, and said: "As if there is anything that could be less important than the colour of a man's skin!" As dawn broke a whole crowd of blacks escorted me to my hotel, the men shook my hand and the girls kissed me goodbye, with fervent expressions of hope that we would meet again that night. THE MOVE TO OTTAWA

During 1972 and 1973, in addition to Malaysia and Mauritania, we spent several months in Australia. I divided my sojourn between Monash University and Heinz Arndt's department at the Australian National University, and we put Ean into Haileybury College. After my return to Canada in the spring of 1973, I was invited by the University of Ottawa to become the Vice-Dean for Research in their Faculty of Social Sciences. The University of Ottawa is an interesting institution. It is one of the oldest of Canada's universities, originally French and Catholic, now a provincially financed bi-lingual university, the only one of the kind. Going there would mean that I could continue lecturing in French; I would not at that point have gone to a purely English-language Canadian university. In contrats to the move from Texas to Montreal, which brought an initial sacrifice in income, to move to Ottawa would bring a handsome increase in salary. There were advantages too in working in the capital city while being able to live across the river in Quebec, as we had done during the summer of 1968. But the main attraction was the opportunity to direct an interdisciplinary research program of a large faculty, with five departments concentrating on economic and social development. My friends, family and colleagues in Montreal of course thought me mad even to consider such a move. No one leaves Montreal if they can possibly avoid it, any more than one leaves the Cambridge Community. Montrealers referred to the National Capital Territory, with Ottawa on the Ontario side and Hull on the Quebec side, as "the twin cities of Hull and Dull". We decided to go nonetheless. Once again we were fortunate in finding a lovely house, with three acres of lawn, garden and mature trees, in the Quebec village of Lucerne, fifteen minutes from Parliament Hill. We put Ean into Ashbury College, a fact which played a large role in his being able to go direct from secondary school to a first class English university, a rare event for Canadians. Going to Ottawa from Montreal was once again "the road less travelled", but it proved to be an interesting, pleasant and profitable way indeed.

196 All the Difference THE COMMONWEALTH SECRETARIAT: AN UNCOMMON COMMON MARKET

When working in Malaysia between 1971 and 1974 my most continuous contact within the Economic Planning Unit was Selvanathan, an Indian-Malaysian agricultural economist and lawyer. We became good friends. Later he became head of the technical cooperation division of the Commonwealth Fund for Technical Cooperation (CFTC), in the Commonwealth Secretariat in London. Early in 1978, out of a clear blue sky, I received a telephone call from Selva (as all his friends call him) in London. He explained that the Mano River Union, a small "common market" organization consisting of Sierre Leone and Liberia (the Mano River is the border between them) wanted an evaluation of past performance and a program for the future. The Union had been formed under United Nations auspices, and especially International Trade Corporation initiative, and a great deal of motherly attention from the UN and ITC had been lavished upon the organization since. Like Libya a decade earlier, the two governments were weary of "United Nations imperialism", and had deliberately bypassed the UN, and turned instead to the CFTC to organize and finance this project. Sierra Leone, a country established by emancipated British slaves, was a member of the Commonwealth. Liberia, a country established by emancipated American slaves, was not; but both countries wanted the Commonwealth Secretariat to take the project on. Would I undertake the assignment for the Secretariat? Taking a deep breath, I replied, "Yes, if I can have two University of Ottawa colleagues to work with me, Ozay Mehmet and Andy Axline". Selva said, "Oh, I know Ozay. I met him when he was working in Malaysia. He's a human dynamo. Hasn't he worked in Liberia too? I've never met Axline, but I know his work on economic integration in the Caribbean. Isn't he a Visiting Fellow at the Sussex Institute for Development Studies this year? I think it's a great idea to add them to the team." And so it was settled. Of all the foreign aid agencies I have worked for, I have enjoyed most working for the Commonwealth Secretariat. The open mindedness, the flexibility, the absence of bureaucratic red tape, the willingness to let their "experts" do their jobs without interference while at the same time providing able and knowledgeable backstopping and logistic support - and, yes, the sheer gentlemanliness with which their affairs are conducted - makes a mission undertaken for CFTC sheer pleasure. Perhaps having head offices in Marlborough House sets the tone for the whole operation. The

ig7 Africa and Foreign Aid

United Nations, for example, if adding two persons to a team, would have been obliged to go through their files, and submit names of persons from three or four different countries for the recipient countries to choose from. The idea of having a team of three, not only all from the same country but all from the same university without even having a formal university contract - would be anathema to the UN. Ozay Mehmet is an economist and management scientist in the University of Ottawa's School of Administration. Originally a Cypriot Turk, he has written a good book on economic development based on his Malaysian and Liberian experience and another on the Malaysian NEP. Andy Axline is a political scientist at the University of Ottawa who has written articles and books about economic integration in the Caribbean and in the South Pacific. Each filled gaps in my own knowledge and experience, and having them along made me less nervous about this — for me — somewhat curious mission. Ozay and I went to Brighton to meet Andy before going back to London to be briefed by CFTC. For me an added reward from this arrangement was that our son Ean was then studying at Sussex, and was sharing a house on the beach at next door Rottingdean with some other "lads" where he was able to put me up. In London the Secretariat put us up at the elegant Hotel Bristol, a short walk from Marlborough House. Our briefings were friendly, well informed, and to the point, and I liked all the people I met on the Secretariat staff. Ten years earlier, upon the retirement of Arnold Smith as General Manager of the CFTC, I had been invited to take his place. I had just arrived at the University of Montreal, and was getting started in francophone Africa. It seemed a drastically sharp change of direction. But I also made the great mistake of thinking the Commonwealth Secretariat anachronistic, if not moribund. If I had known the Secretariat as I do now, and predicted that in 1992 it would be stronger than ever, my decision might have been different. Moreover, the idea of living in central London and having an office in Marlborough House had great appeal, and the job would certainly have been interesting. On the other hand I would have missed the excitement of being in Canada and on various missions abroad between 1968 and 1978. Once again, there is no point in brooding on "the road not taken". Part of the agreement setting up the Mano River Union was that the head office should be in Freetown, with a branch office in Monrovia, and that the Director-General should always be a Liberian, with a Deputy from Sierra Leone, so it was to Freetown that we went

198 All the Difference

first. We stayed in a comfortable hotel, a few blocks up the hill from the Secretariat office building, a substantial structure several storeys high. Freetown is a pleasant town, with friendly, relaxed people, and a very active night life in which all classes share in one fashion or another. I used to walk between hotel and office, much to the astonishment of the local population. White men are supposed to go by car, even if the journey is only a few blocks long. I encountered the same people en route every day, and they always greeted me in the same manner: "How's the body?" Health standards are none too high in Sierra Leone; life expectancy then was about thirty-five years. It was a sensible question. The Mano River Union had a large Secretariat, as the size of their office building indicated. It was also, on the whole, a very competent staff. The Director, the Deputy Director, and most of the division chiefs all had American, Canadian or British Ph.Ds. It was a well paid staff. The Director and his Deputy had salaries equivalent to a Canadian Deputy Minister of Finance, plus a house with servants, car with chauffeur, and a handsome entertainment allowance. The rest of the staff were on the same scale, according to rank. In addition, senior staff were paid an extra $75.00 per day when sitting in meetings, and they were always sitting in meetings of one committee or another. When travelling abroad the Director and his Deputy received an extra $100.00 a day; and the Director was allowed 150 days a year abroad, the Deputy somewhat less. One would have thought that was enough; but several times during my stay, both the Director and the Deputy Director drew me aside to complain about the corruption of the other. Our mission was well timed, in the sense that it straddled the period of the annual meeting of the Union, which was a Cabinet level affair and lasted a whole week. After initial misgivings within the Union, it was decided that the three of us could attend the meetings, normally completely closed. Having gone that far, the Secretariat decided that we might as well have the background documentation of the meeting, including the auditor's report. That report was highly interesting and revealing. Whether or not the mutual complaints of the Director and the Deputy were well founded, it was clear that there were many "anomalies" (to use the Philippines expression) with regard to. expense accounts and other aspects of the Union's operation. The Union's meeting that year was in Monrovia, so the three of us flew to Liberia in a small plane. The atmosphere of Monrovia is quite different from that of Freetown. It is more sophisticated, with a quicker pace and more tension, American pizzaz, and still greater

igg Africa and Foreign Aid

contrasts between rich and poor. Neither Sierra Leone nor Liberia has a particularly admirable history or society; both groups of emancipated slaves pushed the indigenous people out of the rich coastal area and exploited the natural resources for themselves. But the Liberian elite seemed to me much more arrogant, and indulged in more flagrant conspicuous consumption, than the more easy-going elite of Sierra Leone. It came as no surprise to me when some years later I heard the news of the assassination of Liberia's President Tubman and his associates. Sitting in the meeting and listening to the speeches and discussion from top political leaders of the two countries was the best possible way of learning what the Union was about. It was clear that the participants enjoyed it, and that by and large they liked each other. There was a kind of class-reunion or party atmosphere over the whole thing, and indeed there was an elegant party with much drink, delicious African food, and lively dancing every night of the week during the meeting. Friendly relations between the governments of two neighbouring countries are obviously valuable in themselves, and as the meeting progressed we began to take a more kindly view of the Union than we had on the basis of reading the documents and having conversations with government officials and representatives of the private sector before the meeting. It was clear that the Union was a very expensive operation, and that the upper income groups were not paying for it. In short, it was one more burden on the poor peoples of the two countries. It was also clear that the various measures taken by the Union to liberalize trade between the two countries, establish common tariff levels against third countries, standardize sales taxes, definitions and language of customs laws, and so on were contributing little to the development of the two countries. Trade between them was simply not very important; their resource endowment was too similar. In addition, there was the question that arises with all "common market" arrangements, as to whether the liberalization of trade among the partners improves resource allocation more than common restrictions on trade with third countries distorts it. Despite these misgivings, we recommended in our final report that the organization should continue, and that it continue to receive support from the United Nations and other foreign aid donors. It seemed to us that it would be a shame to disrupt this avenue for friendly negotiation between the two countries. Also we were impressed by the potential of the Mano River itself. The most useful thing that the Union had done so far was to build a bridge across it and a road connecting the two capitals (which we took, at the invi-

2oo All the Difference

tation of a very bright and charming young central bank official, on our return trip to Freetown). But the river offered excellent opportunities for hydroelectric power, irrigation, transport and industries connected with these, that could be undertaken jointly by the two governments. The Mano River could become a miniMekong. There was also potential in joint shipping and airline ventures. The Union has in fact continued, and has been joined by another neighbouring country, Guinea. I hope that the organization has shifted its major emphasis from trade to development in accordance with our recommendations; the latest annual report that I have seen suggests that it has.

9 Planning Regional Development in Canada

I mentioned earlier that my experience of working with the Royal Commission on Bilingualism and Biculturalism in the summer of 1965 instilled in me an urge to return to Canada and find some way of participating in policy-making in my own country. I was especially eager to tackle problems of regional disparities, which I felt must be solved if Canada were to survive as a nation. An invitation from the University of Montreal to join its Department of Economics in the fall of 1967 seemed to provide the ideal vehicle for achieving this objective. Then in 1968 another event openned opportunities for me to become more deeply involved in Canadian regional development than anything I had imagined: Pierre Trudeau became Prime Minister. His top-priority national objective was to hold the Canadian confederation together in the face of separatist sentiment in Quebec and divisive elements in the Atlantic provinces and Alberta. To that end he was determined to reduce regional disparities within the country. Early in 1969 he created the Department of Regional Economic Expansion (DREE), pulling together the scattered agencies with responsibility for one or another aspect of regional development and giving the new agency sweeping powers to reduce regional gaps by encouraging development in retarded areas. The creation of DREE was to have considerable impact on my professional life, and even on my personal life. MIRABEL Well before the creation of DREE, the Canadian Department of

202

All the Difference

Transport had decided that Canada needed a new international airport at Montreal. The existing airport at Dorval was becoming overcrowded, and, with the increasing use of jumbos and supersonic jets, was expected to become totally inadequate. Since Dorval was located in a high-income residential district towards the western tip of the island of Montreal, enlarging it would be very expensive and would encounter strong and probably effective opposition from the residents of that neighbourhood. Residents had already been influential enough to obtain the imposition of a highly inconvenient curfew on take-offs and landings at Dorval between midnight and 7.00 a.m.; the newer, larger, and faster jets would require more flexibility in schedules. The Department of Transport established a consortium of major consulting firms to recommend a site for the new airport, chosen mainly on the basis of technical considerations such as physical nature of the terrain, air currents, fog, access to the city, and the like. The team started with over one hundred possible sites, reduced these to about thirty, and ended up with four: Vaudreuil to the west, St. Jean to the south, St. Hyacinthe/Drummondville to the east and St. Scholastique to the north. The team favoured the Vaudreuil site, mainly because it was relatively close to Dorval and to the major Montreal-Toronto and Montreal-Ottawa highways. The Department of Transport had stated firmly that the new Montreal airport was to be the only point of entry for trans-Atlantic flights. Passengers destined for Toronto, Ottawa, Quebec or elsewhere would have to land in Montreal and proceed by domestic flights or surface transport. Enter the Department of Regional Economic Expansion. The site for a project as large and important as this one could not be chosen without considering its impact on the pattern of urban and regional development and thus on regional disparities. It was estimated that the new airport would generate (directly and indirectly) 75,000 jobs, a community of 200,000 people, and nearly $1 billion in income. DREE insisted on a new study of the airport's impact on regional development before a site was chosen. Accordingly - over the protests of the Department of Transport which said the delay would cost the public millions of dollars - the governments of Canada, Quebec and Montreal set up a Special Task Force to undertake such a study. I was appointed Chairman of that Special Task Force. I suppose the reasons were that I was a professor in Canada's largest and most distinguished francophone university, I had worked on regional development for the Quebec government, I had worked on regional

203 Planning Regional Development in Canada

development as an instrument for improving the lot of francophones for the B-B Commission and I had some experience with physical planning and could communicate with physical planners. On my team were a young economist held over from the earlier team, my University of Montreal colleague Fernand Martin, and representatives of DREE, the Department of Transport, the Office of Development Planning of Quebec and the Department of Planning of the city of Montreal. Because of the Department of Transport's screams over the delay, we were given just six weeks to perform our task. It was apparent that we would have to work closely, night and day, seven days a week. I decided to set up our headquarters in my house on Jeanne Mance in central Montreal. We converted two room on the ground floor and two on the floor above into offices, moved in typewriters, a desk-top computer, and office supplies. We worked about fourteen hours a day, weekends included. We had most of our meals together in our dining room. (We stopped just short of sleeping together.) We were all very excited about the job, each member of the team was competent in his or her special field, and - fortunately - we liked and respected each other. As a result, we managed to get an incredible amount of work done in the much-too-short period of time allowed us. We eliminated the Vaudreuil site rather quickly. Traffic to Dorval was already congested, and putting a second airport a bit further west on essentially the same route would make it even more congested. Vaudreuil was a high-income and essentially anglophone community. Acquiring the vast amount of land needed for a major airport would be very expensive. The major consideration, however - given our terms of reference - was that the industrial expansion that the airport was expected to bring would inevitably take place to the west of Vaudreuil and would probably spill over the nearby border into Ontario, which was the last thing any of the three governments concerned wanted. Expansion to the east was blocked by the city of Montreal itself, to the south by the Saint Lawrence, and to the north by the Ottawa River. Moreover, the income effects near the airport would benefit mainly a prosperous anglophone community where unemployment was relatively low. Next came St. Jean. It was fairly close to the city, comparatively poor and had a good deal of unemployment. However, it was on the south shore. The extra lanes of highway, bridge or tunnel that the airport would require would have to deal with the St. Lawrence where it was wide and deep. They would have to deal somehow with the St. Lawrence Seaway as well. Costs of access could be exorbitant.

204 All the Difference

Moreover, St. Jean as a town was not particularly suitable for the high-tech industry, sophisticated services, hotels, and conference and convention centres we hoped the airport would attract. We hesitated a long time over Ste. Hyacinthe/Drummondville. It was on the south shore and much further from the city than any of the other sites. Costs of access would be extremely high. However, it was relatively poor francophone industrial community and the Union Nationale government then in power in Quebec was insistent that the airport be put there, mainly because it was the site closest to Quebec City. They even erected a large billboard near the proposed site saying (in French) "future site of the Montreal international airport". We were told that the Union Nationale were so confident of getting the site they wanted that they invested a large amount of party funds in land around it. What finally led the team to exclude this site was our knowledge of the economics and history of large airports. The enterprises that choose to locate near airports (as much for solid flat land and good communications as for use of the airport for travel and freight) tend to locate on the access roads between the airport and the city. So does the housing of the people that take up airport-related jobs. Putting the airport at St. Hyacinthe/ Drummondville could pull people from the declining old industrial towns of the Eastern Townships, where unemployment was high, in search of airport-related jobs. If they found them, they would live between the airport and the city. Putting the airport further east would thus pull the center of population to the west, just the opposite of what was intended. And so the Task Force recommended the site at St. Scholastique to the north. It had several advantages. It was close to Dorval — as the crow flies - and the Department of Transport promised a new divided highway directly linking the two airports, putting them within minutes of each other. It was also quite close to the centre of Montreal, and again the Department of Transport promised direct road links. It was already linked to the centre of Montreal by rail, and the DOT talked of a high-speed train. They even spoke grandly of having the check-in counters on the train, so that passengers would arrive at the terminal already checked in, take their hand luggage and their boarding passes and walk a few steps directly from the train to their planes. Costs of access would be much lower than for the other sites: the St. Lawrence to the north is narrow and shallow, and a direct road from the city to St. Scholastique would pass mainly through open country, not built-up urban areas. An airport at St. Scholastique, with its noise zone up against the Laurentian autoroute, would serve as a wall against development to the west and push it towards the

205 Planning Regional Development in Canada

east instead. Finally, as I wrote in my book The Rise - and Fall"? - of Montreal: "It was felt that the possibility afforded by the St. Scholastique site for people working at or near the airport (especially top managers, engineers, and scientists to live in the Laurentians and still be within a few minutes of their offices and half an hour from Montreal made it virtually unique among major airports in North America. The same considerations applied to hotels and convention centres" (p. 223). The report of the Task Force was quickly accepted by the federal government, and soon after by the City of Montreal. The Union Nationale government fought bitterly against it, and the issue was debated heatedly in the press and on the radio and TV. Emotions ran high - but not, as is usual with major airports, because no one wanted the airport near them for environmental reasons, but because everyone wanted it for the increased income, employment and improved real estate prices that it would bring. I received threatening letters and telephone calls, appeared on TV, and responded to attacks in the press. Then the Union nationale was defeated at the polls. The Liberals came to power in Quebec as well as in Ottawa and quickly accepted our report. The airport was constructed at St. Scholastique and named Mirabel. Nothing that has happened since has proved the analysis of the Task Force wrong. Yet Mirabel is probably the most underutilized major airport of all time. Passengers visiting it for the first time are astonished by the miles of fields and forest surrounding it, the city blocks of empty corridors inside it, the deathly hush of the empty lounges, the dozens of unused gates. It handles about the same number of passengers per year as Halifax, a city less than one-tenth the size of Montreal. What went wrong? Essentially two things. One is that Toronto has replaced Montreal as the financial, commercial and industrial centre of Canada; the hi-tech industries and sophisticated services have abandoned Montreal for Toronto. The second element in Mirabel's failure is related to the first. By the time construction of Mirabel started it was already apparent that the great majority of European passengers were heading for Toronto and greatly resented being obliged to change planes in Montreal. The national airlines of Europe brought pressure on their governments, who brought pressure on Ottawa, who gave in and allowed transAtlantic flights to land in Toronto because the Canadian government did not want Canadian airlines to lose their right to land in European airports. When it became clear that Mirabel was not being used at anything like capacity, the vast expenditures needed to build direct road routes to Dorval and central Montreal, to say nothing of the high-speed

206 All the Difference train, were not undertaken. Mirabel, instead of being one of the most convenient, became one of the most inconvenient airports in the world, and no one uses it as a "turntable" to get from one airport to a third airport if they can avoid it. If Mirabel handled all the international flights now going to and from Toronto it would be a busy airport indeed, and it would pay to make it a convenient one. But, obviously, the Canadian government cannot now close Toronto to international traffic. Could the task force have done anything to avoid the Mirabel Mess? I rather doubt it. We were not asked to undertake a cost/ benefit analysis to decide whether or not Montreal should have a new airport, only to recommend a site, given the objectives of regional policy, for an airport which the government had firmly decided to build. I have sometimes wondered whether, had Fernand Martin and I known at the time all that we knew when the HigginsMartin-Raynauld (HMR) report was completed, we could have gone to Ottawa - perhaps directly to Pierre Trudeau - and persuaded the government that the second airport should not be built in the light of Montreal's replacement by Toronto as Canada's major metropolis. Probably not; the Department of Transport had its heels dug in and was determined to build the Mirabel Monster. THE HMR REPORT

Since both DREE and the Quebec government at the time liked the report of the special task force, soon after its completion they asked my University of Montreal colleagues Fernand Martin and Andre Raynauld, and myself, to prepare a sort of grand design ("orientations") for the regional development of Quebec. The report was published by DREE in 1970, with the somewhat pompous title Les orientations de developpement economique regional dans la Province de Quebec. It generated a storm of controversy, and became know as "le rapport HMR". My good friend and distinguished French regional economist, the late Jacques Boudeville, referred to it that way in his attack on it. The main argument of the report was that a regional policy of encouraging the growth of smaller "growth poles" east of Montreal, such as Sept Isles, Quebec City and Trois Rivieres, and discouraging the growth of Montreal would be to kill the only goose that was laying any golden eggs at all in Quebec. Boudeville's view, associating Montreal with the Paris with which he was so familiar, was that Montreal's expansion was stifling growth in parts of Quebec farther east, where incomes were relatively low and unemployment relatively high. His view was held by a good many people in Quebec,

207 Planning Regional Development in Canada including economists and politicians as well as farmers and businessmen in the eastern parts of the province. We found, to the contrary, that Montreal was still too small to be safe, not too big, and that it was rapidly losing out to Toronto in finance, industry, commerce and population. It was also losing out to American centres in the northeast quadrant of the United States. Montreal was, in fact, in a precarious position, and the decline of Montreal could only damage the Quebec economy as a whole. In any case, both DREE and the Quebec government accepted our arguments, and as a result the Montreal economic region (not the City of Montreal proper) was added to the list of regions designated for DREE assistance. Not all Quebec economists were happy with this decision, but I still think it was the right one. Quebec is stronger within the Canadian national economy, and francophones are much stronger within their own province, than they were before 1970. How much the improvement is due to regional policy is difficult to pin down. A more extensive treatment of the controversies surrounding the HMR Report can be found in my The Rise — and Fall1? — of Montreal. THE GREATER MONCTON REGIONAL PLAN

The decade following the establishment of DREE was one in which the growth pole approach to regional development was at its height. DREE was certainly not immune to the intellectual fashion - if not faddism — of the period. On the contrary, its basic approach to regional development was to select cities within retarded regions to serve as growth poles and then use its powers, under agreements with the provinces, to improve social infrastructure, establish industrial parks, and lure private enterprises to the city. One of the cities so selected was Moncton, New Brunswick, and early in 1970 DREE let a contract to the private consulting firm Sunderland, Preston and Simard to prepare a plan for the greater Moncton region. The firm was heavily weighted towards physical planning and engaged me as an economic consultant. I had known Jacques Simard for some time. Although in the same age-group as myself, Jacques had been a graduate student in the McGill School of Architecture's program in urban and regional planning in which I participated, when I was Bronfman Professor of Economics. When I returned to Montreal in 1967 Jacques was, among other things, Mayor of Preville, a charming village on the south shore of the St. Lawrence, across from Montreal, where he had a magnificent colonial chateau right on the banks of the river. Jacques was a cultivated and charming

208 All the Difference man, and Jean and I spent several delightful musical evenings at his chateau. For eight years now I have spent every Canadian summer in Moncton, and I have become fond of it. It is hard to recapture now my first reactions to it. Let me therefore quote from Regional Development Planning, written in 1981: Moncton was at the time (1970) a moribund, ugly, rather poor railwayjunction town of about 70,000 people, about as far from the Perroux or Boudeville concept of a "pole de croissance" as one could imagine. The team argued that since New Brunswick was at a disadvantage in agriculture and mining in comparison to the more prosperous provinces, if the gap in per capita output and income between it and those provinces was to be closed, New Brunswick would need to be more industrialized than they, not less, as it then was. It also argued that Moncton could not be made into a growth pole on its own. It could become a dynamic city only as part of a dynamic Atlantic Provinces urban hierarchy, with Halifax/Dartmouth in Nova Scotia at its top, and with St. John, new Brunswick, between Halifax and Moncton. (P- 25)

We estimated that each of the three cities would need to more or less double in size in the next fifteen years to achieve this objective of a "dynamic urban hierarchy". But how was this sleepy railway junction, with its biggest employer the CNR repair shops, to double in size in fifteen years? The team preparing the plan was Montreal-based; we all were fond of Montreal and of French-Canadian culture. We were struck by the facts that about half of Moncton's population was French speaking; that 1'Universite de Moncton, a direct descendent of the century-old College de St. Joseph, was the only important francophone Canadian university outside of Quebec and was currently growing and improving rapidly; that there was also a French teachers training institute French theatre and other French cultural activities. Why not, then, make Moncton grow by converting it into the cultural capital of 1'Acadie, the francophone community of Atlantic Canada, and help it to become the financial and commercial capital as well? At that time the English-speaking Premier of the province and the English-speaking Mayor of the city were both worried about the increasing French influence in the city and in the province and were hence desperately opposed to the kind of strategy we were proposing. We were told that the Mayor even ordered his municipal workmen to go around the city and paint out the French on signs such as "Department of Public Works - Departement des Travaux Pu-

2og Planning Regional Development in Canada

bliques". We were required, for purely political reasons, to play down our "Capitale de 1'Acadie" strategy for Moncton. The interesting thing, however, is that the strategy has been carried out anyway. Moncton has about doubled in population. It has become a dynamic city in a dynamic hierarchy, although St. John has not. Moncton seems destined to become New Brunswick's biggest city. The CNR shops have recently been closed, but the Moncton regional economy has absorbed that shock with scarcely a quiver, and the university has become the region's biggest employer. The industrial parks are filled with scientifically oriented, hi-tech enterprises. The French culture is more visible, more audible and more vigorous than ever. The city is filled with good resturants and attractive nightclubs, the formerly empty centre of the town is filled with street life night and day. Its excellent shopping centres attract people from as far away as Prince Edward Island. In the same 1981 publication I wrote, "DREE and the Federal government generally have spent a fair amount of money in Moncton, but they have not yet succeeded in changing its character. Moncton remains an example of rather naive and simplistic application of development pole theory." How "naive and simplistic" - not to say blind - can one be? The character of Moncton has certainly been transformed, and the transformation cannot all have taken place in the ten years since my report. It has become a commercial and financial as well as a cultural centre, and it has become a pleasant city in which to live. How much of this transformation is due to policy, how much to purely private enterprise, how much to the grace of God? The question is a very good one and a research team at the Canadian Institute for Research on Regional Development is currently trying to answer it. The federal government has given Moncton, particularly the centre of the city, a facelift, which has made it physically much more attractive, and has induced private investment in hotels, cinemas, restaurants, and the like. A whole division of the Department of Transport has been moved to Moncton, providing the city with a large contingent of highly trained and well-paid people. The Institute for Research on Regional Development was established at Moncton, as was, later, the Atlantic Provinces Opportunity Agency, with over three hundred high-level professional people. The closing of the repair shops by CNR will no doubt turn out to be a blessing in the long run; a city whose biggest employer is an university has a different image from one where the biggest employer is a railroad repair shop. A major telecommunications centre and the headquarters of Blue Cross have been located there. Yet much of transfigu-

?io All the Difference

ration and development of Moncton is certainly due to purely private enterprise, and particularly to francophone enterprise of much the same sort that is transforming Quebec; often, it is true, with some governmental assistance. M A N I T O B A , W I N N I P E G , AND THE "STAY OPTION"

In 1972 I was asked by the Manitoba Department of Industry to come to Winnipeg and give them some advice on the provincial development plan, which was then in the course of preparation. Their problem, according to the Manitoba government, was rather different from that of other provinces. During the era when "the wheat economy" was at its height, Manitoba was prosperous enough and Winnipeg grew up as its governmental, financial, commercial and cultural capital. It was the seat of the grain exchange, had an excellent university, a respected symphony orchestra, and a worldrenowned ballet company. But the wheat economy alone was no longer sufficient to assure the continued growth and prosperity of the provincial economy, and Manitoba had not benefited from recent mineral discoveries to the same degree as the other two Prairie provinces. There was nothing to hold a growing population in the countryside and small towns of the province, and consequently it tended to drift into Winnipeg, where there was a problem of finding jobs, housing, schools and the like. The government wanted to stop this trend by providing a "Stay Option"; that is, they wanted to create employment and incomes for people where they already were. Winnipeg was already a "Primate City" within the province; it had a population of about 750,000 whereas the second biggest city had only 50,000 inhabitants. We were able to come up with some ideas for inducing people to "stay", but, with the HMR Report fresh in my mind, I cautioned the Manitoba government not to create incomes and employment elsewhere in the province at the expense of Winnipeg. The city was the only centre Manitoba had which even vaguely resembled a "growth pole" and which might attract hi-tech industry and sophisticated services. It was certainly not "too big", and might well be too small to compete successfully with Minneapolis/St. Paul, Chicago, and Canadian cities further east: ENCOUNTER ON THE ENVIRONMENT

Early in 1970 there were in the Nova Scotia Cabinet Offices two brilliant and energetic regional planners, both exiles from DREE:

211 Planning Regional Development in Canada

Leonard Poetske and Tod Duncan. There was also in Halifax a remarkable organization of private enterprise executives called Voluntary Economic Planning, which was endeavouring in an extremely enlightened way to improve economic policy and stimulate investment so as to accelerate development in Halifax and Nova Scotia and ultimately in Atlantic Canada as a whole. Together the Voluntary Planning Board and the Cabinet Offices organized the Encounter on Urban Environment, which was to have a major impact on the development of the city and the province. The essence of Encounter was to bring together twelve people who were (in one fashion or another) experts on urban and regional development but not experts on Halifax and Nova Scotia, and expose them to a week-long "shock treatment" through "encounters" with various groups in the Halifax/Dartmouth community. The team which immediately became "the twelve disciples" in the media - was composed of the Chief of the New York State Urban Development Corporation; a professor of Sociology at Northwestern University; the Director of the Center for Urban Economic Development at Wayne State University; a Vice President of Canadian Industries Limited; the Canadian Regional Director of United Auto Workers; an associate professor of Economics at York University (a specialist in transport economics); a professor of Tourism-Recreation at Texas A & M; the Director of the Center for Environmental Studies in London, England; the Director of the Urban Observatory at Georgia State University; the Director of the School of Journalism at Carleton University; the Executive Director of the Interreligious Foundation for Community Organization in New York (a black civil rights leader and minister of religion); and myself. Among the groups "encountered", usually for one to two hours each, were federal government planners, provincial government planners, municipal and county managers, the Mayor and Aldermen of Halifax and Dartmouth, executives of Volvo Canada Ltd., bankers, industrial and commercial managers, trade union leaders, representatives of culture and the arts, religious leaders, leaders of minority groups (especially blacks), the media, representatives of health, education, welfare, and transportation, lawyers and judges, and physical planners. Within the week, we had "covered the waterfront". The daily pattern was as follows: 6:30 a.m. wake-up call; 7:00 a.m. breakfast meeting of team and organizers; 8:00 a.m. first "encounter", followed by two more encounters; working lunch; three more encounters in the afternoon; 6:00 p.m. cocktail discussion for team, organizers and selected guests; 7 :oo p.m. dinner meeting to organize

212 All the Difference

the televised evening open meeting; 8:00 p.m. "On the Town", a TV show which attracted live audiences of up to 3,000 and a TV audience of hundreds of thousands with top ratings of all the TV programs broadcast from Halifax; 11:00 p.m. nightcap meeting of team to analyse the day's events; i :oo a.m. - or 2:00, or 3:00 — retire. After the first couple of days we were running on nerve, excitement and alcohol, and didn't want to go to bed. On two nights when the discussion was especially lively and ran particularly late I decided not to bother going to bed at all, but went instead to one of Halifax/ Dartmouth's excellent black-and-tan nightclubs where the dancing starts at midnight. When it was all over the organizers confessed that the break-neck pace of the whole affair was designed deliberately to wear us out and make us irritable, uninhibited and outspoken, which we certainly were. The whole event was ingeniously designed to assure maximum impact. In accepting my invitation I asked for some literature on economic development of Halifax and Nova Scotia. They sent me a ten-year-old report by the A.D. Little consulting firm in Cambridge, Massachusetts. I thought they were crazy. In fact they were crazy like a fox. They told me at the end that my request had caused some consternation, and that they had deliberately chosen to send me a document that would teach me nothing. They wanted emotional responses to direct confrontations, not intellectual, professional analysis based on literature and statistics. They certainly got them. Quite apart from the intensive and extensive media coverage, Encounter had visible effects while it was still going on. For example, as a reaction to the team's criticism of the Nova Scotia Industrial Council in an "On the Town" session, the Chairman resigned. When in another session the team attacked Volvo for not hiring blacks, the Vice-President International came over from Sweden and promised that henceforth the number of blacks employed in their Halifax plant would be at least proportional to their share of the city's population; the budgets of the city planning departments of Halifax and Dartmouth were increased, instead of being cut as previously stated; more funds were promised for Dalhousie University and other eductional institutions; reforms were promised in the social welfare program; significant reorganization took place in the personnel of newspapers and ratio-TV stations that had been accused of bias and misrepresentation by the team. All in all, the Halifax community was thoroughly shaken up by the week of Encounter. How much Encounter had to do with the marked improvement in the economic and social environment of Halifax and Nova Scotia is more difficult to estimate, but it certainly had some effect. Vol-

213 Planning Regional Development in Canada

untary Economic Planning is more influential than ever and recently celebrated its twenty-fifth birthday with a history of its accomplishments, including Encounter. It was a factor in the decision of Public Works Canada to use its property on the Halifax waterfront as a lever for organizing a total transformation of the Halifax harbour, converting it from a dirty and ugly dockside into one of the city's major attractions, for tourists and residents alike. Voluntary Economic Planning published a six-volume report which has been widely read, and the National Film Board produced a three-hour documentary which has been widely viewed. Both have had considerable influence. More important, however, Encounter stirred the Halifax community from its lethargy, held a mirror before its eyes and gave it a rude shock, and changed the pattern of decision making in both the public and the private sector. PUBLIC WORKS CANADA

Soon after I moved to Ottawa, the Corporate Affairs and Planning division of Public Works Canada (PWC) invited me to join them as a consultant. I worked with them on and off for the next six years, and found it one of the most stimulating things I had ever done. The Director of the division, and later the Assistant Deputy Director, was a brilliant and dynamic man, Douglas Hartt, who knew how to use his towering 6'7" presence to advantage. He was brought up in Minto, New Brunswick, and studied history at the College de St. Joseph, pregenitor of the Universite de Moncton. With such a background, he had a keen interest in regional development. He had surrounded himself with a remarkable group of bright and highly trained young people, including Gaston Haddad Luthi, a LebaneseEgyptian economist who also pursued a Ph.D. with me at the University of Ottawa; David Hamilton, a Harvard MBA who was also President of a small consulting firm; Hugh Coulthart, who was completing a Ph.D. in philosophy at the University of London; George Zaggety, an economist and statistician; and Sandra Kybartis, an architect-planner and designer. It was one of the most creative thinktanks in Ottawa. The situation in PWC at the time was unusual in another respect: the Deputy Minister was John A. Macdonald, also 6'7", who had done his Ph.D. with me at McGill, was a good Keynesian economist and firmly believed that a Department of Public Works had responsibilities for economic stabilisation as well as for getting things built; accordingly, he gave Doug Hartt's division its head. The result was a rare phenomenon: a division of PWC devoted to policy for stabilisation and development of the Canadian economy.

214 All the Difference Nothing like it has existed before or since. The Trudeau government had issued a Cabinet document requiring all ministries owning properties to use them to "contribute to the broader economic, social, and environmental objectives of the Government". PWC, which owned more than $40 billion worth of property, was obviously the department most affected by this directive. One of my first assignments was to translate this exceedingly general directive into specific actions and projects that PWC might undertake. Part of this task was determining just what the "economic, social, and environmental objectives of the Government" were, which involved studying all the other Cabinet documents, none of them very specific. However, it seemed clear enough that the government was interested in reducing regional disparities, combatting both inflation and unemployment, decentralising government activities, and encouraging privatisation and "appropriate" (labour-intensive) technology. PWC activities, properties and projects could certainly be used to promote all of these objectives. The next part of the task was finding out what PWC owned and where. No inventory existed. This research involved not only documents and photographs but also going to look at PWC properties to determine just what they were like, what sort of neighbourhood they were in, what condition neighbouring buildings were in and who owned them. As this study went on it became clear that there were many exciting possibilities, such as the Halifax waterfront, for using PWC properties and budgets to attract provincial and municipal governments and private enterprise into major joint projects. In this manner cities (such as Moncton) could be given a face-lift, urban renewal could be achieved, congestion and pollution attacked and incomes and employment generated. Another major study covered patterns of public works spending at the national, regional and provincial level. We found that at all these levels PWC, far from contributing to stabilization of the economy, was aggravating the fluctuations generated in the private sector. We then turned to a study of trade-off curves (combinations of unemployment and inflation) - their position, slopes, configuration and shifts — at the national, regional and provincial levels. We found such striking differences among regions and provinces in this respect that it was clear that a policy of placing as well as timing public works expenditures in accordance with the economic situation in each region could tackle the problems of unemployment, inflation, regional disparities and various social and environmental problems all at once. We estimated that half the existing unemployment in Canada could be eliminated in this way, with no increase in either budgets or budget deficits.

215 Planning Regional Development in Canada

PWC published a report incorporating these findings. The Standing Committee on National Finance of the Canadian Senate was holding hearings in the time. They caught wind of the report and invited me to appear before them on 7 December 1978. I presented a summary of the report and a long discussion followed. My testimony caused a flurry of excitement and was covered extensively in the press and on radio and TV. Prime Minister Trudeau demanded a copy of the report. But, as could have been anticipated, the Ministry of Finance, the Treasury Board, the Privy Council and the Bank of Canada were incensed. What was the Department of Public Works doing making proposals for fiscal policy? In any case, Professor Higgins' proposals were "merely academic". Shortly afterwards the Trudeau government fell, there was a new Minister of Public Works, John MacDonald was transferred to another position, Doug Hartt's situation became difficult (he retired early with a "golden handshake") and I left for Australia. The whole matter was quietly dropped. However, over ten years later, we are now reviving this analysis at the Canadian Institute for Research on Regional Development in Moncton, and intend to have another try. THE N O V A SCOTIA D E V E L O P M E N T B O A R D

At about this same time David Hamilton & Associates received a contract from the Nova Scotia Development Board to assist them with industrial development planning, and David invited me to join the team. The Board wanted a computerized system that would tell them what industries should be encouraged in Nova Scotia, where they should market their products, and what firms - throughout the world — were best qualified for each industrial development project. It was a tall order, but we came close to fulfilling it. We discovered incredibly rich, detailed and complete data banks on computer disks in Ottawa, Washington, Tokyo and Brussels. So the information was there, but it would take a great deal of diplomatic skill and money to gain access to it. And once the information was acquired, it would be just as valuable, if not more so, to larger provinces, to DREE, or to the governments of the United States, Japan and Europe as to Nova Scotia. We did not think that Nova Scotia should take on the whole job alone, and advised them accordingly. EASTERN ONTARIO

In 1976 my cousin John White was Minister of Treasury, Economics and Intergovernmental Affairs in the Ontario government. In the course of a conversation he told me that the government wanted a

216 All the Difference

study of the development potential of Eastern Ontario, thought that the University of Ottawa would be a good institution to carry it out, and suggested that I assemble a team and make a proposal. Not much money would be available and the project would require a good deal of travel within the region, so I put together a team consisting mainly of myself and my graduate students and was awarded a contract. Eastern Ontario was not a retarded area like Gaspesie or northeast New Brunswick. Rather it was a Rip Van Winkle area and had been asleep for a century after having been the leading industrial area in Ontario. Unemployment was above the national average in some of its cities, there were quite a few abandoned farms and some of the farms still in operation were marginal. But the University of Ottawa team saw the region more as an opportunity than as a problem: Viewed from this angle, the century-long doze of eastern Ontario may be regarded as a blessing in disguise. The region is a valuable reservoir of attractive residential space. Population densities remain very low; except for Ottawa no city reaches even 100,000 population. Most of the area is pleasant, rolling, wooded countryside, dotted with lakes and rivers that led to the early nineteenth century development of the region. For those whose tastes do not require constant immersion in the hustle and bustle of great cities, it is a very agreeable place to live — if you have an interesting and pleasant way or earning a living. We presented a plan for attracting one million people to the region over twenty years without harming the attractive environment. We argued that such a strategy would not only permit effective utilisation of the resources of the region, but would strengthen the Montreal economy and relieve congestion in the area of Toronto and the southwestern ("golden") triangle of Ontario. How does regional development planning in Canada compare to that in the Third World? Which did I find more interesting, more advanced professionally, which taught me most, which was more rewarding? Such questions are hard to answer because regional development is a highly complex affair and regional planning is a markedly variable process within as well as among countries. For example, the province of Quebec and Pahang Tenggara were more similar to each other in terms of regional development planning than either was to planning in Manitoba, Moncton or Eastern Ontario. In both Quebec and Pahang Tenggara the major objective was to improve the lot of a particular ethnic and linguistic group that was a majority of the population but economically dominated by minority groups. This consideration played no role in Manitoba or

217 Planning Regional Development in Canada

Eastern Ontario, and only a sub rosa role in Moncton. Of course there are some techniques, tools and principles which are general enough in their application to be useful anywhere, but one cannot decide what should be done in a particular region on the basis on these alone. Each region must be studied on its own and on the spot. At the same time, there was little that I learned in Canada that was not applicable at all in the developing countries, and vice versa. On the whole, I learned more in the LDCS and found my work there more interesting and rewarding, less because the LDCS were exotic and "different" than because regional policy and planning are more thorough and conducted at a higher level of competence than in Canada. The Canadian Institute for Research on Regional Development has devoted a whole book to the subject: Canadians and Regional Development at Home and in the Third World. (Higgins and Savoie Moncton, N.B.: Canadian Institute for Research on Regional Development, 1988). The authors find that regional development in Canada is dominated by federal-provincial relations and most planning and policy formulation is done by provincial government bureaucrats in a rather unsystematic and disintegrated fashion. By contrast, in LDCS planning is done in terms of clear national development objectives by carefully selected teams of top-level professionals from each of the relevant disciplines. The essence of "regional development" in Canada is the reduction of regional disparities by transfer of funds from richer to poorer provinces. In the LDCS the essence is the acceleration of national economic development through the integration of regional development plans, so debates about "equity versus efficiency" do not arise. In the LDCS the private sector is brought directly into the planning process as well as its implementation. In Canada the private sector is held at arm's length. In conclusion, the editors state that: "Regional planning plays a more vital role in developing countries that in Canada. Regional planning has come to be regarded as a key element, if not the key element, in the international development effort, by the United Nations and its specialized agencies, and indeed by the entire international community ... Within this context... regional development and national development tend to merge, in the literature, in politics, in policymaking and planning, in implementation" (p. 324). This analysis leads the editors to call for "an internal CIDA", or "a kind of "foreign aid program" for specific regions with particular problems or potential" (p. 326). The planning and implementation would be carried out by special agencies within the regions, and the functions of the small Department of Regional Development in Ottawa would be limited to reviewing regional development plans and financing them if approved, something like a development bank.

10 The igSos: Synthesis into a "New" New Approach

Towards the end of the 19708 there occurred a conjuncture of events that confronted me once again with divergent ways and set me on less travelled roads — "way leads on to way", as Robert Frost wrote. At the end of 1978 I retired from the University of Ottawa. A submission by the University to the Canada Council seeking finance for a vast five-year program of research on economic development under my direction had been turned down after protracted negotiation. There was nothing specific to hold me in Canada. Jean had lived for thirty years in countries of my choosing, and wanted to spend some time in Australia. That was fine with me; I like Australia. Ean had no plans beyond his graduation from Sussex in June 1979, except, like his father forty-five years earlier, to become a rich and famous journalist on his way to becoming a rich and famous writer. He had enjoyed going to Haileybury College while I was at Monash University and ANU in 1972, and was quite happy to see some more of his mother's country and perhaps do a higher degree there. I wrote to a few friends in Australia. Alex Kerr, who was then Dean of the School of Social Inquiry at Murdoch University, invited me there as Visiting Professor for a semester. This sharp shift in the direction of my path was to lead to long sojourns in Japan and Sri Lanka, to two and one-half years in the South Pacific, and finally back to ANU and our grazing property in the nearby Monaro district. These geographical deviations led me to less travelled roads in the scientific sense as well, and finally to a synthesis with revolutionary implications.

219 The igSos

We went once more to Haiti to finish the feeder road project, and in February 1979 went as directly as possible from Port au Prince to Perth. There we found a delightful house on the beach at Mosman Park, next door to the yacht club, and enjoyed watching the races from our terrace. I liked the atmosphere at Murdoch with its abundance of "mature scholars" and its flexible programs; we found life in Perth and its surroundings rich and varied, and considered settling in Perth. One does not feel isolated in Perth when one is there. After all, it is close to Singapore. I had agreed to take part in a CIDAfinanced regional development project in Sri Lanka, but we could return to Perth when that was over. But then my road diverged again. For several years I had been attending conferences and seminars at the United Nations Centre for Regional Development (UNCRD) in Nagoya, and in 1978 I became Chairman of its Advisory Committee. Just as my Murdoch appointment was drawing to a close, I received an invitation from Nagoya: would I join a travelling seminar concerned with training regional planners, that would meet in Manila, Bangkok, Penang and Jakarta, and then come to Nagoya for a few months as consultant to UNCRD? I said I certainly would, but was committed to going to Sri Lanka once the agreement between the government and CIDA regarding the Lower Uva project was worked out. We agreed that Ean would join us in Perth, then we would tour the northwest and centre of Australia by car; after that I would start on my travelling seminar, meet Jean and Ean in Malaysia, and we would all go together to Nagoya. When we reached Nagoya we learned that there was a vacancy in the editorial and publications division of UNCRD, which Ean applied for and won. The Lower Uva project was postponed several times, and in the end the three of us spent seven months together in Japan. UNCRD

Masahiko Honjo was Director of UNCRD from its inception. An architect-planner, he played a major role in town planning and housing during Japan's postwar reconstruction period. At UNCRD, however, he broadened his range of knowledge and his perception a great deal, and under his leadership the social scientists played the major role in the Centre's program. Gradually, also, through the network of associations that the Centre built up, and the reappearance of the same people in the conferences, seminars and workshops of the Centre year after year, the Centre's vision of its role changed from that of dealing with a rather specialized branch of the field of

220 All the Difference economic and social development to that of being at the very core of that field. This metamorphosis is apparent in UNCRD'S publications during the years. The new Deputy Director of the Centre at the time of our arrival in October 1979 was Dr R.P. Misra, a well-known Indian economic geographer of vast culture and charm. He lived with his wife, two beautiful daughters and young son on the second floor of an apartment building in the "geijin ghetto" (geijin is foreigner) inhabited by McDonnell-Douglas personnel and the like. It was some Japanese builder's idea of what Americans want, with hideous, ornate, overstuffed furniture and an astronomical rent. The Centre had arranged for us to have the third floor apartment in the same building. Every evening when Ean and I climbed the stairs after coming home from the office we encountered mouth-watering odours of the most delicious curries as we passed the second floor. Fortunately we were invited occasionally to share them, and the two families became fast friends. "R.P." and I — and Ean - became good working partners too. On most days the three of us travelled together to and from the office, by bus, by subway, and after we bought a car, sometimes in it, but the Nagoya traffic was so daunting and the ease of getting lost so frustrating that we usually left the car at home. On these trips we talked shop. R.P. was ambitious for the Centre. It had done a good job of training regional planners and had built up excellent relations with the people in government and the universities concerned with regional development throughout Asia. However, it had not had a major intellectual impact, and in Africa and Latin America it had not had much impact of any kind. The original idea had been to set up ten UN centres for regional development in various parts of the world; but in the event the money for the other nine was not forthcoming, so the Nagoya centre, financed almost entirely by the Japanese government, was the UN Centre for Regional Development. That being so, R.P. and I felt that, without abandoning its major concentration on Asia, the Centre should play a role in the other UN regions as well. We were also determined that the Centre should become a major contributor to the literature and discussion in the field of regional development. In these ambitions we had the full support of the Director, and, in time, of the other senior staff at the Centre as well. The Centre had once had a little journal, but it had somehow lapsed. We decided to launch a new one, bigger and better than the old one. We called it Regional Development Dialogue, and gave it a

221 The igSos

distinct format. Each issue would have a theme, and well-known people would be asked to contribute papers on particular aspects of that theme. In addition, two or three others would be asked to discuss each paper. It is a format that requires a good deal of advance planning, but it paid off. We succeeded in getting contributions from people with solid international reputations, such as Jose Corragio, John Friedmann, Bodan Guchman, Jorge Hardoy, T.R. Lakshmanan, Koichi Mera, Moonis Raza, Harry Richardson, Hans Singer and Paul Streeten. The Centre's tenth anniversary was coming up, in September 1981. We decided to celebrate it by the simultaneous publication of ten volumes on different aspects of regional development, each chapter written by a leading figure in the field. This project was also an ambitious one, but we received warm cooperation the world over, and the ten volumes were launched at an international conference to mark the Centre's tenth birthday. Participants came from all the UN regions, and the conference was like a big family party. In 1984 Masa Honjo retired from the Centre, and went on to direct an International Development Centre in Tokyo. He was replaced by Hidehiko Sazanami, who in turn replaced about two-thirds of the staff, mostly with other Japanese. He also persuaded the UN to replace the Advisory Committee. I have had little to do with UNCRD since. What of Japan itself? I think Japan is the most difficult country to write about of all those in which I have spent relatively long periods. Just when I have thought that I was beginning to know Japan — as in the case of individual Japanese — a whole new layer is suddenly revealed, making reappraisal necessary. Some features of the country are remarked upon by all visitors: the delicate beauty of the landscape; the appreciation of beauty in all forms by the people; the ability to create beauty in all manner of forms while using little or virtually no space - a single tree, aflowerarrangement, a display of fruit and vegetables in a supermarket, a garden consisting of rocks and pebbles; the ability of the Japanese people to adopt elements of foreign cultures while preserving their own traditional culture intact; their sense of loyalty to their employers and their country, and willingness to work hard and well for both. What surprised us a bit, with awareness of World War II still strong, was to find the Japanese people the most friendly, kind and helpful we had ever known - and not just friends, but even total strangers. We were frequently lost on our various trips by car around the country; it is easy to get lost when one cannot read the road and street signs.

222

All the Difference

In that situation the Japanese always solved our problem for us, drawing careful maps, and often getting in their own cars and leading us to a point where we could find our way. One act of kindness made all the difference to our stay in Japan. After a few months in our dreary "geijin ghetto" apartment, I told Jean that I could stand it no longer, and asked her to find a house on the seashore within commuting distance. Jean went to Masa Honjo's wife Masumi and explained our problem. Masumi apparently had close connections with the important Meitetsu family, and waved her magic wand. We were taken on a Meitetsu train to Utsumi, shopped in a Meitetsu supermarket in a Meitetsu station en route, and were met by Meitetsu real estate agents who took us in a Meitetsu taxi to see some Meitetsu houses and apartments. In July and August Utsumi is a popular seaside resort, crowded with people from the big cities, whole families sleeping in one room. The rest of the year it is a sleepy, deserted, picturesque fishing village, with traditional houses and lovely temples, fishing boats and nets for gathering seaweed, which the Japanese love to eat. We settled on a small traditional house, with tatami mats and shoji screens, and a minuscule but lovely garden in front, which gave on to the beach and sea. We furnished it in the traditional Japanese manner, cushions and mats on the floor and no piece of furniture more than a foot high. Our view of mountains and sea was magnificent, and a constant stream of shipping passing by. We shopped on bicycles, finding all home-produced food very cheap - oysters for $2.00 a kilo, for example. And for all this we paid a rent one-quarter of that we had paid in the geijin ghetto. In Nagoya, Kyoto and Tokyo we met many Westerners who had come to Japan for a visit, and been so charmed that they stayed on. We understand that reaction very well. During those seven months in Japan I was more completely absorbed in the literature, the philosophy, the theory, and the science of regional development and planning than ever before in my career. When one is engaged in an actual regional development project, as in Pahang Tenggara or DRIPP, or in my work on regional plans for various provinces in my own country, one has little time to think about the broader aspects of regional analysis as a discipline. But in Nagoya I met repeatedly people who were not merely experts in regional analysis but who were also deeply involved in policy and planning for national economic development in their own countries, such as Kamal Salih of Malaysia, Phisit Paakasem of Thailand, Dilawar Ali Khan of Pakistan, Moonis Raza of India, Song of South Korea; famous Europeans like Jos Hilhorst, Bodan Guchman and Antoni Kuklinski; and famous Americans like John Friedmann,

223 The igSos

Harry Richardson and Lloyd Rodwin. What impressed me about these people was that they did not separate regional development from national development, but regarded regional planning as a more effective way of doing national development planning and policy making. The "trade-off between regional development and efficiency of the national economy, so much debated in Canada and some other Western countries, was not an issue at UNCRD. Regional development was regarded as the most effective device for improving the efficiency of the national economy. LOWER UVA (SRI LANKA) In May 1980 negotiations among CIDA, the Government of Sri Lanka, and Development Planning Associates (DPA), the Ottawabased consulting firm that had been awarded the contract to prepare the development plan for the Lower Uva region, were finally completed. Jean and I left Nagoya for Colombo, while Ean remained at UNCRD. "Lower Uva" as defined by the government for development purposes was not a political entity, nor a clearly defined region with a long history and a distinct culture of its own. It comprised the whole of the District of Moneragala, the northern part of the District of Badulla, and about one-third of the District of Amparai, all situated in the southeast corner of the country. It had a certain degree of homogeneity in terms of resources and climate; it was in the "dry zone" (less than 1900 millimetres of rainfall per year); it had nothing very exciting in terms of resources; there was virtually no industry. Its largest urban centre, the city of Moneragala, seat of the District Government of Moneragala, had a population of only 7000 people. In Sri Lankan terms it was quite a large region, about 14 per cent of the total area of the country. It had only 3 per cent of the population, leading the government to think of it as a kind of reserve or "land bank" which could relieve population pressure in the densely populated western districts of the country. Immigration into the region had in fact been heavy in recent decades. Lower Uva was not, however, a resource frontier region like Pahang Tenggara. It had been settled for at least twenty-five centuries; once, apparently, a good deal more densely than in 1980. Up to the thirteenth century it had been home to an advanced civilization based on "tanks" (large reservoirs) and irrigated agriculture. Then a series of disasters befell it. The mountains were denuded of forest, and erosion, drought and floods set in. In 1980 the region had 440,000 people living in it, although its area (875,000 hectares) was substantially less than

224 All the Difference

that of Pahang Tenggara. After centuries of chena (slash-and-burn, shifting cultivation) its environment was seriously threatened. It did not take the team long to come to the conclusion that Lower Uva was no "land bank". I shall never forget our first low altitude flight over the region in a small plane. As far as the eye could see were fires, lit mostly illegally by squatters, to get rid of recently felled trees so as to use the ash for fertilizer. The whole region, even the State Forest, was covered in a haze of smoke. Later when we drove through the northern part of the region we realized that it was on the verge of becoming desert. The Lower Uva team was not quite so large as the one for Pahang Tenngara, mainly because there was more information about the region to begin with; nevertheless it contained forty professionals, including fifteen Sri Lankans. The range of disciplines represented was wide: economists, sociologists, irrigation engineers, hydrologists, agronomists, soil analysts, foresters, livestock experts, biomass experts, systems analysts. The president of DPA is a bright young Australian economist, trained at Sydney University, named Richard Higgins. The whole staff of DPA is comprised of relatively young workaholics and "whizz-kids". I never worked so hard in my life as I did for DPA. I averaged about 100 hours a week, but I was a loafer compared to the members of the firm, including my namesake. But they were playaholics too; when they played, they played just as hard as they worked. The operation was highly computerized. In Pahang Tenggara I had learned the value of maps and map overlays as a planning tool. Now I learned the value of computerized maps and computer map overlays. In a few seconds we could have (once the data were collected and the programs written) a map - based on composites of soils, slopes, rainfall, topography, hydrology, transport facilities, etc. - showing us, for example, what areas of the region were suitable for rubber. One of the first decisions that must be made in any regional planning project is, "Where should the team headquarters be? In the capital city or in the region?" There are obvious advantages in having a regional planning team live and work in its region, in touch with the target population and with the regional governments, as we did in Pahang Tenggara. In the case of Lower Uva, however, the decision was finally made to establish headquarters in Colombo. Moneragala had a severe housing shortage. To house the entire team there including the Sri Lankans who already had homes in Colombo would have been to impose a burden on that small community. For team members who were staying in Sri Lanka for the full two years of the planning period and had brought their families with them,

225 The igSos

schools and health facilities, as well as housing, were essential. The central government, particularly the members of our steering committee, wanted to have us readily available. The capital city also afforded easy access to leaders in the private enterprise sector, the Canadian High Commission and the local CIDA office, the offices of the United Nations and its specialized agencies, the World Bank and the IMF. But the computer was a major consideration too. Our project was attached to the Department of Lands and Land Development, and the Survey Department of that ministry had a computer of the same general type as the one that DPA regularly used. Therefore when the Survey Department offered the team a whole wing in its building, it was hard to resist. As it turned out, the Department's computer was not all that similar to DPA'S computer after all, and the DPA software did not work in it. The top DPA computer expert — a Ph.D. in mathematical physics - was the hardest working member of that very hard-working team, and nearly had a nervous breakdown before he straightened things out. When he did, there was another problem. There was a shortage of water, and therefore a shortage of electricity. Power was rationed, and available only from 7.00 p.m. to 7.00 a.m., when people wanted it most, for lighting and air conditioning. The DPA computer team was quite willing to work at night, but the Department would not allow anyone but its own staff in the actual computer room, and its own staff would not work after 5.00 p.m. or before 8.00 a.m. Eventually this problem was solved too, but there was a mad scramble to prepare our first progress reports for the steering committee without the computer, on which the team so much depended. Such are the pitfalls that await those who undertake advisory missions in developing countries. With the decision made to establish our headquarters in Colombo, we needed a team house for those members of the team who did not need or want houses of their own, and Jean was commissioned to find it. She found a large mansion with a spacious, well-tended garden, in a quiet street of an elegant neighbourhood not far from our office. The next problem was to staff it. We found that we had to hire teams. To recruit a good chef, we had to engage as well his number two cook and his assistant; to hire a good gardener we had to employ his number two gardener and his assistant; the same with house boys. We ended up with a staff of twelve. That done, however, we were able to entertain elegantly, a great advantage in terms of public relations. The rooms of the mansion were large, the dining room had a table that would seat fourteen with ease, and we conducted much of our diplomacy over excellent lunches and dinners. While we were well set up with office and housing in Colombo,

226 All the Difference

we still had to spend a good deal of time in our region. The District Government provided us with a small office and a house on the edge of Moneragala, at the foot of a mountain, and Jean furnished it simply but comfortably as the team rest house. Moneragala is a charming little town, and the surrounding countryside with its mountains and plantations is lovely. We always enjoyed being there and spent as much time there as possible. We also enjoyed staying at a nearby beach, where we found an establishment with palm leaf huts right on the sand, a dining room open to the view and the breeze on three sides, and a kitchen where the staff cooked food which we purchased - including seafood bought right on the beach - to our order. It was very cheap and totally delightful, and the only place I ever saw where the surf ran vertical to the beach, which made for exceptionally long runs. NATIONAL AND REGIONAL PLANNING

Sri Lanka is one of the many countries that decided in the 19708 to assemble national plans by aggregating a series of regional plans. As in Malaysia, the country had been carved up into regions for which various foreign donors could accept responsibility, both for planning and for implementation. It is one of the relatively few countries that have accompanied this strategy with a serious effort to decentralize development planning and implementation. The District ministers, chosen by the President from among the members of parliament from each District, are members of the Cabinet. Each District government is accorded a small development budget which it can allocate to small projects of interest to it. The Districts are also consulted in the course of planning and executing projects within their territory included in the national five year plan. A District Council advises the Minister. The secretariats of the District governments are members of the central government civil service who are seconded to the Districts. Many officials find working for the Districts more rewarding and interesting than working in Colombo; in the Districts they are in closer touch with the people and with the actual process of development. Competition for these posts is keen, and my own observation would suggest that the average level of competence and commitment is higher in the District offices than in Colombo. In any case I always found it a pleasure working with the Ministers and staffs of the District governments. It was an interesting time to be working on Sri Lankan development. Since 1950 Sri Lanka had been a much planned but comparatively stagnant country. Under the series of Bandaranaike governments, nominally socialist, relatively high levels of nutrition,

227 The ig8os

health and education were maintained for a "least developed country" with a per capita income (then) under $200 per year. Many items in the budgets of peasant and worker households were subsidized, such as rice, milk, flour, sugar, kerosene, fertilizer and public transport. One development plan stated that development projects would be financed from profits of public enterprises - and then the government proceeded to run all its enterprises at a loss. Sri Lanka is a predominantly agricultural country; 90 per cent of the population is rural, two-thirds are in agriculture. Yet it is heavily dependent on imports for foodstuffs; for 100 per cent of its wheat, for example, and 75 per cent of its refined sugar. On the export side the country was still overwhelmingly dependent on primary products. Over three-quarters of the value of exports was accounted for by just three products: tea, rubber and coconuts. Sri Lanka in 1980 presented a curious combination of notable achievement on the social welfare front and stagnation in the economy as a whole. There had been a genuine land reform, and the income distribution was among the least unequal in the world. In the World Bank list only Japan provided as large a share of national income to the bottom 20 per cent of income earners, and only China, Yugoslavia and Spain so low a share to the top 10 per cent. This relative equality was reflected in the high levels of nutrition, health and education, and these in turn were reflected in low birth rates and fertility rates, as is so often the case. In fact Sri Lanka had the lowest birth rates among low-income countries. All these indices of welfare were threatened, however, by the lack of growth and structural change in the economy, and indeed some of them were already falling. Sri Lanka was till a very poor country, eighteenth from the bottom on the World Bank list, even below Haiti. Between 1960 and 1980 only 36 of the 125 World Bank countries had as low a rate of growth as Sri Lanka, and the rate was falling. In the 19705 per capita income was virtually stagnant. The share of GDP produced in agriculture had actually increased slightly between 1960 and 1978, and employment in agriculture fell only from 56 per cent to 54 per cent of the total. Yet Sri Lanka was a very small country in area, and with 14.3 million people had one of the highest population densities in the world. The good, high rainfall land had long since given out. Industrial employment rose only from 14 to 15 per cent of the total over the same period. Employment in services rose only from 30 to 31 per cent, but the share of GDP produced in this sector declined; the quality of services was falling. In sharp contrast to other Asian countries, little urbanization was taking place. Colombo had scarcely grown at all, and its share of the total urban population had actually fallen. One reason for that was

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that the subsidized railway fares were so low that people lived in their villages and commuted to jobs in Colombo. Also, the rates of both unemployment and inflation were high, the balance of payments was in crisis and the rupee under pressure. All in all, Sri Lanka provided an example of a Basic Needs Approach to development. It was not a vigorous socialist country, it was a lethargic social welfare state. Private enterprise was stifled, but no dynamic public enterprises were created. The point had been reached where healthy growth was needed to protect basic needs themselves. Into this situation stepped J.R. Jayawardene, elected President in July 1977. He realized that Sri Lanka was at the point where it had to choose: either establish a full-fledged socialist system and make it work; or opt for a private enterprise system, recognizing that such a system can work well only if private enterprise is encouraged. Jayawardene's clearcut choice was for the latter. From what I know of Sri Lanka I am convinced that he made the right choice. I do not think many Sri Lankans would like full-fledged socialism; and even if they liked it, they do not have the discipline and the commitment to nation and state to make it work. The main features of Jayawardene's new development strategy were as follows: (i) To decontrol the private sector from top to bottom (in practice this part of the strategy seems not to have been fully implemented but the intent seems clear); (ii) to strengthen incentives for private investments so as to raise both the ratio of investment to national income and the ratio of investment to consumption; (iii) to increase public investment in infrastructure and in government enterprises; (iv) to absorb most of the increase in the labour force in the rural sector, mainly by opening up new land for cultivation; (v) in relation to this tactic, to make heavy investments in water resource development; (vi) at the same time, to conduct a species of "holding operations" with respect to traditional exports like tea, rubber, coconuts, etc.; (vii) similarly, to maintain and if possible improve standards of nutrition, health, education and housing. The strategy was not very systematic. It was born of weariness with "welfare statism", perennial crisis (balance of payments, inflation, unemployment) and stagnation. It was a reaction to frustration

22g The igSos

with planning which did not lead to implementation more than it was a positive long-term design for development. To implement this strategy, the new government introduced a system of "rolling plans", with a five-year investment plan revised each year. When the Lower Uva project started, there had been two of these: 1979-83 and 1980-84. The program was dominated by three "lead projects": the Mahaveli project, a vast power and irrigation scheme that would have taxed the capacities of much larger and richer countries, and to which 23 per cent of the total public investment budget was allocated; the urban renewal and housing program, concentrated in Colombo, including the new parliamentary and administrative capital in the suburb of Kotte; and the industrial development program, including the free trade zone and industrial park in Colombo. The early response to the new strategy had been favourable. The investment ratio jumped from its 1970— 77 average of 16 per cent to 26 per cent, and growth of GDP rose to 8.2 per cent in 1978 and 6.2 per cent in 1979. This, then, was the background against which plans for Lower Uva had to be prepared. As noted in Volume 2 of the final Lower Uva Regional Development Plan (pp. 94-5), in Sri Lanka's national development planning and policy, "regional development" had a somewhat different meaning, and somewhat different objectives, from those found in other developing countries. It was not primarily a matter of reducing regional disparities. It was not a matter of responding to social and political pressures from "regions" which were political entities in their own rights. It was not a matter of planning a national urban hierarchy, with a view to decentralizing urbanization and industrialization by creating new "growth poles". On the contrary, the government was trying to attract new industry and population to the capital city. It was also not a matter of genuine "resource frontier development" of the sort typified by Pahang Tenggara. In Sri Lanka there were no real frontiers left. In short, Sri Lanka's planning regions were spatial subdivisions of the national economy and society, based on Districts, but modified so as to define "regions" more convenient for planning and implementation. The question, then, was "How best can development of Lower Uva contribute to the goals of national development?" When the question was put in that way the restraints on development of Lower Uva were immediately apparent. It was not just that the "lead" projects were absorbing the bulk of available financial resources, foreign and domestic; of entrepreneurship, managerial and administrative skills; and of professional, scientific and technical skills. Most of Lower Uva's eleven river basins, for example, drained into the Mahaveli system to the north. There was no question (as

230 All the Difference the three District Ministers and some others hoped) of developing major power and irrigation systems within Lower Uva at the expense of Mahaveli. Nor was there any case to be made for pushing or pulling industries away from other regions to establish themselves in Lower Uva. The same applied to infrastructure and services. Anything recommended for Lower Uva had to belong there, in the sense that it had a comparative advantage there, or in the sense that it was essential to the basic needs of the population. As a consequence of this approach very few really large-scale projects were recommended. Exceptions were the identification for the private sector of opportunities to invest in modern sugar refineries, and a biomass refining industry, based on 20,000 hectares of permanent yield forest and waste from the sugar refineries, capable of replacing 25 per cent of Sri Lanka's fuel imports, thus relieving one of the severest strains on the country's balance of payments. These projects, and smaller ones for the private sector such as forest products, an abattoir, fruit processing, jams and jellies, improved jaggery mills, dairy foods, and tobacco, are good examples of the major entrepreneurial function that a competent planning team, working at the regional and local level, can play. But the major emphasis was on replacing chena with stable agriculture, saving the remaining forests and planting new ones, protecting wild life and halting the whole process of deforestation, exhaustion of the soils, erosion, and environmental degradation in general. Human resource development, especially housing, was also emphasized. PROJECT E V A L U A T I O N AND THE OBJECTIVE FUNCTION

The Lower Uva project gave me an occasion to carry further, with the help of my colleagues, an experiment I had begun with the Pahang Tenggara project: evaluating individual projects in terms of their contribution to a clearly defined and quantified objective function expressing goals of development. It had long bothered me that, very frequently in the development planning process, a set of national targets and goals would be established by one procedure and by one group - usually macro-planners and politicians — and then projects would be evaluated and ranked by an entirely different method by another group, usually micro-planners. Targets would be set in terms of growth of per capita income, reduction of unemployment, reduced inequalities of income distribution, improved levels of nutrition, health, and education, transport and power facilities, and the like; and then the micro-planners would come along and apply a cost:benefit analysis to each individual project, some-

231 The igSos times with shadow prices, sometimes without. One can justify such a procedure if the market is working well, and if growth of national income in itself guarantees the achievement of all other goals by some sort of "filter-down" process. But in many cases the operations of the micro-planners did not reflect any profound analysis of the way the market was functioning. They were just applying standard procedures. In a particular country in a particular period, the relationship of cost:benefit ratios for individual projects to the rate of growth of national income, and the interactions of growth of national income and improvements in nutrition, health, education, employment and unemployment, and the like, are enormously complex. I felt that it was more logical, and on the whole simpler, to rank projects in terms of contribution to the established objectives of development. I persuaded my colleagues on the Lower Uva project that such was the case, and we set about trying to put my ideas into effect. The first step was to establish an objective function. Here we had some guidance from the current five-year plans, and we received more guidance from the members of our steering committee and other government officials; but, after all, we were assembling a regional plan, not a national plan. It was a matter of fitting our regional plan into the framework of the national plan, not one of simply replicating the national plan at the regional level. We therefore consulted the District government as well, and, through our sociological survey, working groups and other encounters, the target population itself. On the basis of this research we formulated an objective function in the following form: SH = W j (N t — S^ +w 2 (N 2 — S2) + ... + w « (Nn -Sn); D = ASH; where the Ns are norms to be achieved, the Ss are the current status of the region with regard to each norm, the ws are the weights attached to each norm, SH is the "social health" of the region, and D is development. Thus "development" was defined as the curing or alleviation of social "maladies" of the region, defined as and measured by departures of the current status of the "patient" from the norm. Projects were to be evaluated and ranked in terms of their contribution to development thus defined. The norms selected for the objective function were as follows: value of agricultural output per hectare; growth of output per hectare; per capita income; growth of per capita income; nutrition; health; education; housing; employment and unemployment; participation and self-reliance. Each of these norms had first to be quantified and then weighted. I have described our methods of accomplishing these tasks elsewhere, and it would take too much space to repeat the description

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here in any detail (see bibliography - UNCRD publication for 1981). A few examples must suffice. For the most part, measures and weights were proposed by the team and then discussed with the steering committee, the District minister and council, and, as far as possible, with the target population as well. Modifications were made until there was general agreement on weights and measures. For per capita incomes of the region, for example, the norm was that no one should be below the absolute poverty line, that income distribution in the region should be no more unequal than at the national level, that the average income for the region should equal the national average and grow at the rate established in the national five year plan. For nutrition the norm was the WHO standard of 2200 calories per day for all. For health we felt that the existing situation at the national level was not quite good enough; we established a norm for life expectancy of 70 as compared to the national average of 64, an infant mortality rate of 60 per thousand and a child death rate of 2 per thousand. For education, too, we established norms above the existing national average: adult literacy of 80 per cent, primary school attendance of 80 per cent of the age group, secondary school attendance of 60 per cent, appropriate proportions of vocational, technical, agricultural and tertiary education to be determined after further study. We found the determination of costs and benefits in terms such as these no more difficult than the usual cost:benefit analysis, except for one thing. The feedback relationships are complex and hard to quantify. It is easy enough to quantify the contribution of a nutrition project to nutrition, of a health project to health, of an education project to education. But how does one estimate the contribution of a nutrition project to health and education, of a health project to nutrition and education, of an education project to nutrition and health? One knows the feedback relationships are there, and allowance must be made for them somehow. I would not say that we perfected a technique for estimating all benefits in these terms, but we were convinced that the approach to project evaluation developed for Lower Uva was an improvement over standard costrbenefit analysis, or even cost:effectiveness analysis with some shadow pricing. However, evaluating individual projects is not enough. We had also to consider the impact of the aggregate of projects on the economy, and on the society, as a whole. To conduct this analysis we asked, "What should Lower Uva look like in 1996? To achieve that picture, how must it look in 1991, in 1985, in 1982?" We called this our "Then to Now Analysis". Next we reversed the process and undertook a "Now to Then Analysis". To assure that Lower Uva

233 The igSos

would "look like" the projected picture at each phase, what policies, programs and projects must be undertaken in each year from 1981 to 1985, from 1986 to 1991, 1991 to 1996? The detailed description of the projects included in the plan filled two thick volumes. However, it was summarized as nine major projects: 1. Replace chena with settled agriculture, with small tanks to irrigate two-fifths of the farms, the rest being rainfed. 2. Construct five new reservoirs for existing agriculture. 3. Raise ouput on existing paddy lands. 4. Reforestation. 5. Develop wild life and tourism. One of the most interesting aspects of this project was a system of elephant walks to link existing national parks and forest reserves, so that the elephants could follow their normal migratory routes without damaging peasant crops — and without farmers damaging the elephants. 6. Fruit production. 7. Human resource development. This project involved housing, water supplies and town planning to make it possible to attract teachers, medical personnel and family planners into the region — the "Unified Approach". 8. Research and training in agriculture. 9. A detailed organization for plan management, to assure efficient implementation. Thus the plan involved a combination of Basic Needs projects and programs, middle-scale ventures in industry and agriculture, and modern sector projects. I am not sure of the status of implementation of the plan. Apart from the restraints imposed by the demands of the "lead projects", implementation of the Lower Uva program, like everything else in Sri Lanka, has been impeded by the outbreak of violence between Tamils and Sinhalese. We could not have foreseen this outbreak from what we saw in 1980 and 1981. At that time the two groups seemed to have reached a workable compromise, like Malays and Chinese in Malaysia. Whatever the impact of the Lower Uva Regional Development Plan on the people of Sri Lanka, it had a profound effect on me. The project was in a way the most instructive of my career as a development planner, which is why I have treated it at such length. My later mission in the South Pacific did not involve development planning in quite the same way; I was not working directly with government in the preparation of development plans. My more recent work with the Canadian Institute for Research on Regional

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Development has included advising on regional policy in my own country, but has not involved preparation of development plans for specific regions. In Lower Uva I worked more closely and more continuously with government at the central and regional level than in any other mission, and was involved more directly with the target population than in any other project except DRIPP in Haiti. The Lower Uva experience helped to complete the long, slow process by which my ideas on scope and method of economics were transformed. This process had two facets: growing dissatisfaction with the two major paradigms of contemporary economics (neoclassical and neo-Marxist) as a basis for designing strategies, programs and policies that would solve the economic and social problems (cure the maladies) of industrialized and developing countries alike; and a growing conviction that the method of accumulating knowledge which characterizes regional development planning, through on-thespot observation of the people concerned, their environment, and the interactions between the two, is not merely the best way to assemble national development plans, but is the best way to build an applicable economic science. A blend of this semi-anthropological approach with rigorous analysis and equally rigorous moral philosophy is after all the methodology pursued by the Classical School. We would do well to get back to it, without throwing out the additional knowledge we have gleaned from the work of neoclassicists and neo-Marxists, but freeing ourselves from the increasingly exhibitionist and sterile mental gymnastics of the former and the increasingly bad-tempered diatribes of the latter.

SUBNATIONAL REGIONS IN SUBREGIONAL N A T I O N S : THE SOUTH PACIFIC Many people dream of retiring to the South Pacific. As the reader must know by now (if he or she did not know it before), I am not exactly a retiring type. But for a post-initial-retirement job, my position as Director of the Centre for Applied Studies in Development (CASD) at the University of the South Pacific was about as close to ideal as one could imagine. Once again the instrument of my transport to Paradise was Selvanathan and the Commonwealth Secretariat. On a visit to Australia Selva found me in the (then) Development Studies Centre at ANU. He immediately began to talk about the post in CASD, which CFTC had decided to finance, to enable the University of the South Pacific to recruit someone with an international reputation. The former

235 The 19805

director, a Fijian aeronautical engineer who had worked on the Concorde in England, had recently resigned and taken over the management of the airport at Nadi. Selva, with his usual decisiveness, was determined that I was the man to replace him. He was wise enough not to talk about the beauty of the islands, the pleasantness of the climate, the friendliness and good looks of the natives, and similar elements of tourism propaganda. He talked instead about the strategic importance of the eleven small island nations that supported the University, their economic and political instability, the challenge and responsibility of being able, through CASD, to advise the eleven governments on development policy and planning, the extreme sensitivity of the mission, and the like. I was not eager to leave Australia for a long period, and I was committed to going back to UNCRD for a couple of months. But Selva was very eloquent, and the job was a challenge. I knew virtually nothing of the special development problems of small island nations, other than Haiti. The idea of being back in harness in a full-time job was attractive, and, as we had just bought our sheep property, "Kallarroo" (our ranch, in North American terms) the extra money would be useful. So I accepted, and in July 1981 Jean and I set off for Suva, Fiji. When the University of the South Pacific (USP) was founded shortly after World War II it took over a former New Zealand Air Force base. Many handsome buildings have since been added by various foreign aid donors, including both Australia and Canada. However, CASD had its offices in one of the old Air Force buildings, a one storey wooden structure with a pleasant view over the sea, which I found very attractive. My own office was on a corner, with windows on two sides, spacious and cool. Suva is an extraordinary city. Even including the entire commuting area, its population is less than 150,000; yet it has an urbanity exceeding that of many cities three times its size. It has good restaurants, elegant nightclubs, including the twin nightclubs Lucky Eddie's and Rockefellers, on opposite sides of the same stairway, which may be the most sophisticated in the world. Suva is not only the capital of Fiji but the regional capital of the whole South Pacific, with a very large diplomatic corps. It is also the regional centre for the United Nations and its Specialized Agencies. The internal UN telephone directory is as thick as the white pages of the Fiji directory, which covers the whole island. Then there are the foreign business, financial and professional communities; and finally, the Fijians themselves, the majority of Fijian ethnic origin and the minority of Indian origin, each with its own culture and contribution to the sparkle of life in Suva. There were also the cruise ships arriving every week,

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and flooding the streets, the shops, the restaurants and nightclubs with tourists. I was never quite sure whether that was an advantage or disadvantage on balance. In any case we never had any sense of isolation in Suva and life was never dull. My initial appointment was for two years, later extended for another six months. Thus Fiji was our base for a longer period than I had spent in any other developing country except Indonesia. Considering that fact, it must be confessed that I learned less per month than I did on most of my other missions. I think the main reason for that was that it was not really an advisory mission. I was attached to a university, not to governments. The presumed advisory role of CASD never really materialized. The reason was simple. The CASD budget was not big enough for us to mount teams to meet the needs of the eleven governments without someone paying for them. The South Pacific countries were at the time darlings of the donors, especially for technical assistance. If they wanted a study done relating to their development problems, they had only to turn to the UN or Australia or the UK or the u s o r E S C A P o r some other donor agency. The governments felt that they were giving enough money to USP already (in fact they were not giving nearly enough) and they were damned if they were going to give more money to a USP research group. We were able to take on some modest projects with our own budget; but our major undertakings during my tenure of the directorship were financed by international organizations, not the member governments of the USP. One of the biggest jobs that CASD took on was to prepare the documentation on trade policy for the meeting of the Commonwealth Heads of Government Regional Meeting that was to take place in Suva in October 1982. All the Commonwealth Heads of Government meet every other year (CHOGM), and the Heads of Government of the Asia and South Pacific region meet on the off years (CHOGRM), some twenty-two of them — so it was a big affair. The Grand Pacific Hotel was spruced up for the occasion and the meeting took over the entire hotel. The security problems were awesome, and Fiji was unused to dealing with security problems; there were almost no guns in the country, except in the hands of the armed forces and police. I once rode on an ordinary commercial flight from Nadi to Suva with the Prime Minister. He was met on the tarmac in Suva by two of his Cabinet Ministers, without a policeman, soldier or security guard in sight, and drove off with them, unescorted, in a private car belonging to one of the Ministers. Nonetheless the security was smoothly and quietly organized, I believe with the help of the Australian and New Zealand secret services. (As I complete this book, I

237 The 19805

have learned to my sorrow that guns in the hands of the army can cause civil disorder enough.) Selvanathan and CFTC provided an ample budget for the study of trade policy in the region, and I was able to put together a sizeable and competent team. We simply divided up the member governments among members of the team, each taking two or three countries. I took Australia and New Zealand for myself. The general idea was that CHOGRM should take major steps towards liberalized trade among countries of the region; this action would induce CHOGM to do the same; and a Commonwealth united on a policy of moving towards freer trade, and especially towards removal of restrictions imposed by industrialized countries on imports from developing countries, could have a major impact on UNCTAD and GATT to make moves in the same direction. As the two industrialized countries in the organization, it was clear that Australia and New Zealand were the key to the whole program. It was for that reason that I decided to tackle them myself. I had visited New Zealand before, but only for very short periods and not officially. Going to New Zealand as representative of the Commonwealth Secretariat and official guest of the Department of Trade and Industry was a very different affair, and in one week I learned a great deal about the New Zealand economy - and society. If I had not been in Australia in 1948 and 1949 I would have been totally unprepared for what I found in New Zealand in 1982. As I talked to people in government departments, the National Planning Association, the universities and the private sector, I put together a picture of a grossly overmanaged and mismanaged economy. In 1860 New Zealand had been one of the richest countries in the world, but when the rich pasture land was entirely occupied and the population continued to grow, New Zealand, like Australia but more so, turned to industrialization behind an extremely high wall of protection of all kinds. As time went by regulation was added to regulation, subsidy to subsidy, restriction to restriction, until private enterprise was almost completely manacled by, and yet dependent on, government intervention in the economy. Almost nothing could be done without the prior consent of several departments. Moreover, the criteria applied by different departments in evaluating a proposal from the private sector were not uniform. Invariably, the people I talked to in various departments and organizations were highly trained, very bright, and well-informed; but they were not in touch with each other. During my visit to Wellington I had my headquarters in the skyscraper office building of the Department of Trade and Industry. Directly opposite on the other side of the broad bou-

238 All the Difference

levard was another skyscraper office building occupied by the Reserve Bank. After several days of talking to my hosts in Trade and Industry I remarked to them that, after all, monetary and foreign exchange policy also has considerable impact on the volume and patterns of trade, and I would like to talk to some people in the Reserve Bank. Who would be the best persons to see? My hosts could not offer a single name. It had never occurred to them to make the acquaintance of their colleagues across the street. One day I crossed the wide street (until I asked my hosts for names of Reserve Bank staff I had not realized just how wide it was) to make the acquaintance of Reserve Bank staff on my own. I was very glad I did. I was received in very friendly fashion, given some extremely valuable information, and had some penetrating discussion. I liked all the economists on the Reserve Bank staff, but particularly enjoyed meeting Rod Deane, the Deputy Governor, who was very helpful to me, and later was equally helpful to our son Ean, when The Financial Review sent him to New Zealand as their correspondent after the election of the Lange government. The report produced by CASD on regional trade policy was presented to the CHOGRM meeting in Suva, but serious discussion of it did not come until next May, when the Consultative Group on Trade met in Apia, Western Samoa. On the whole the report was well received, but one of our bolder recommendations, to liberalize trade by instituting open bidding for import licences, was opposed by the New Zealand delegation without much explanation. They had obviously come briefed by their government. We'll have no liberalization here! The Lange government has changed the New Zealand stance on such issues, but there is a long way to go. One of the most curious assignments accepted by CASD was a study of housing in Papua New Guinea for the Institute of National Affairs in Port Moresby. The task was shared between the Fijian engineermanagement scientist, Vinod Kumar, and myself. During the years of the Australian administration the government had built excellent housing for its Australian bureaucrats and Australian private enterprises had built excellent houses for their managers, but the PNG workers in either sector were not encouraged to bring their families to the cities, or even to stay in cities when their temporary jobs were finished. They were accordingly housed in dormitories. After independence PNG employees in both sectors naturally wanted to live in the city where their jobs were, in houses with their families. There was therefore a severe housing crisis. I do not think Vinod and I resolved the crisis, but at least our report aroused a good deal of keenly interested, and even heated, discussion.

239 The 19805

After the Commonwealth Secretariat extended my appointment for six months at the end of June 1983 it became clear that the University of the South Pacific, and CASD with it, were in for a difficult time. The various foreign aid donors who had helped USP were fed up, and felt that it was high time the eleven governments footed their own bills. The USP Council, on the other hand, nearly all of whom were Ministry of Education officials and former school teachers, regarded USP merely as a slightly higher high school, whose main function was to train teachers, and also as the place where their daughters lost their virginity and the boys learned subversive ideas. (In one Council meeting the Vice-Chancellor, James Maraj, stoutly maintained that the girls were pregnant when they arrived on campus.) In short, the governments were not going to increase their contributions to the University budget, and Samoa was threatening to pull out of USP, set up its own university, and expropriate USP'S agricultural college in Apia for a campus. CASD had been living mainly on a Rockefeller grant. When my predecessor as director visited New York to negotiate the grant he assured the Foundation that CASD would never have more than one-fifth of its staff financed by the Foundation, and that it would have a presence in all eleven countries. CASD was visited by a Rockefeller representative a year or so later and he found that four-fifths of the staff were paid out of Rockefeller funds and that they were heavily concentrated in Suva. So the Foundation, quite justly, declined to renew the grant in 1983. At about this time James Maraj, whom I liked and admired, resigned as Vice-Chancellor after seven years in the post. James and I saw eye to eye on most things. Not everyone at USP, or outside it, liked and admired him; his is a strong personality. He ran the university as a People's Democracy. Discussion, debate and participation were warmly encouraged. There were innumerable committees, subcommittees, councils, senates, advisory groups. The faculty spent much of its time in meetings, discussing university policy. Then the top administration went ahead and did what they had planned to do anyhow. With all the factions, frictions, in-fighting (even to the point of physical blows in the case of one Professor of Economics and one Director of an Institute, which increased my teaching load that semester because the Professor had a nervous breakdown) and plotting that went on in that institution, I do not see how it could have been governed in any other way. A personal experience will give some idea of the atmosphere. The student newspaper attacked me as "that CIA-American, Benjamin Higgins, the worst disaster yet to befall the University of the South Pacific". I knew that this view was shared by some members of the

240 All the Difference

faculty, particularly in the departments of sociology and political science. Some of my colleagues, especially in the top administration, urged me to respond. But I had heard that my friend Andre Gunder Frank had been invited to USP as external assessor of the sociology department. He was the department's own choice; they thought that with such an extremely left-wing assessor, the fact that they were left-wing too would be enough to assure glowing praise for the department. I first met Andre at MIT. He came to spend a weekend with us talking about economic development, and stayed two or three weeks. Later he came to visit us in Texas for a long weekend and stayed several weeks. We have remained good friends through the years despite violent disagreement as to the conclusions to be reached from our rather similar analyses of the impact of colonialism and neo-colonialism on developing countries. On occasions when we debate in public he likes to tell this story. When I visited Ben in Texas I had a beautiful Mercedes Benz sports car. I let Ben drive it one day from the University to his house at Bull Creek Ranch. He drove with great speed, flair, and skill. Then when he drove the car into his garage he left the brake off and the door open, so that the car rolled back and took off the door on the entrance to the garage. Ben does economic analysis the same way he drives a car. It is brilliant up to the very end, but the end is a disaster.

Time wi'l tell which of us is right. While I was at Texas I encountered Andre in Mexico City, where he was living with his Chilean wife and their children, working as one of the miserably paid local staff of the branch office of CEPAL. I went back to Texas and persuaded my colleagues to offer him an Associate Professorship. I then helped the University persuade the immigration authorities to let him back into the country, which was more difficult. Not only was he regarded as a Communist, but he had declined the government's invitation to fight in Vietnam, on the grounds that he was still a German citizen. Andre wrote back and said he would come only as a full professor and would teach only Marxist economics. Andre has high standards and abides by them. When he was offered a professorship at the University of Havana, Cuba, I thought he had found his spiritual home. It turned out that the University wanted him to lecture (critically) on bourgeois economics. He refused. He took his family back to Chile, and was there when Allende was killed and Pinochet took over. His life was in danger, and some friends hid him in their home until they could

241 The 19805

find some embassy to give him asylum and get him out of the country. That proved to be a bit difficult because there were only two or three embassies in Santiago that conformed to Andre's rigorous rules of eligibility to handle his case. Later he became Professor at East Anglia University and is now Director of an Institute for Economic Development in Holland. When Andre arrived in Suva I explained the situation to him. I attended all his lectures and seminars during his visit, most of which, naturally, were staged by the sociology department. On each occasion he went out of his way to express his friendship for me and his admiration for my work. The sociologists were stunned. How can a disastrous CIA-American be liked and admired by Andre Gunder Frank? It was for more effective than anything I could have done on my own. Andre's evaluation of the department was quite harsh, and he went out of his way to insist that a university could not have a strong sociology department unless it had a strong economics department as well. WHO KILLED CASD?

My final report to the Council as Director of CASD contains a long section under the heading, "Who killed CASD?" An earlier outside review of USP'S institutes and centres maintained that there were too many of them; obvious candidates for fusion were CASD and the Centre for Rural Development on the University's Tonga (Nuku'alofa) campus. When the money gave out for CASD, it was decided to go ahead with this "amalgamation", and move CASD to the Centre for Rural Development in Tonga, for which a handsome complex of buildings had just been built with foreign aid. That is not really what happened. CASD was simply killed, and the Centre for Rural Development staff reduced to two, a veterinary scientist and a chemical engineer, to do all the research which both institutions had done before. It was an inglorious demise for CASD. In my "obituary" (final report) I stated what I thought the real problem was: the eleven governments did not place a high enough value on such a centre to be willing to pay for it; and potential foreign donors did not appreciate to the full the contribution that such a centre could make to accelerating development, while maintaining economic, social and political stability, in the South Pacific. None of those countries has reached a steady state, and if their economies falter almost anything can happen to the social and political scene. One would think that the memory of World War II in the Pacific would be enough to persuade potential donors of the importance of having

242

All the Difference

in the South Pacific a thriving university, with competence at least to give solid master's degree training in fields related to development. I have said that I learned at a slower rate in the South Pacific than I did on some of my other missions. That does not mean that I did not learn at all. On the contrary, I learned a good deal. The fact that I was less involved in policy making and planning for the countries I was serving, and the imperfections and gaps in the statistics and documentation concerning them, were offset by the other fact that these countries are so small that one can see them steadily and see them whole. One does not need statistics and documents; one can observe what is going on. Analysing the diverse economies and societies of the South Pacific by observing them had a profound effect on my own thinking, and brought into crystal clear focus an idea that had been hovering about subliminally, on the borders of consciousness, for some time: this semi-anthropological method of learning how an economy functions by observing it is a superior way of analysing an economy than the traditional method of assuming universal laws of individual behaviour (or in the case of the Marxists, of class behaviour), deducing from those principles about the functioning of economies as a whole, and testing these principles against "facts" in the form of statistics. By observing a society at both private and government levels one can determine which are the Actors who play major roles in the economy, how they behave, what their objectives are, and how the interplay of their actions determines what happens to the economy as a whole. Of course, use of this approach does not exclude more traditional methods; we need both. Another advantage of being Director of CASD was that I could invite former colleagues and other distinguished social scientists to come to USP as Visiting Fellows. Among these were Dudley Luckett of Iowa State University who turned out an excellent book on the Fijian monetary system; George Abonyi of the University of Ottawa's School of Administration; and Pavel Turcan of the University of Montreal and DRIPP. The latter two, especially, were on much the same deviant line as I was; and intensive discussion with them helped enormously to clarify, refine and expand my own ideas. Out of it all has come the manuscript of my book An Author in Search of Six Characters: a Semi-anthropological Approach to Development Economics. It is not possible to summarize it in a few paragraphs. But since it is the end result of all that is recounted here, I must try to give an idea of its content. The main point is that, instead of building micro-models on the basis of assumptions about universal human behaviour (maximizing utility), it constructs micro-models based upon observation of be-

243 The igSos

haviour in particular societies, observation that is semi-anthropological in approach. It discerns who are the real Actors whose decisions and activities determine the course of development, and what their behaviour patterns really are. It then analyses the behaviour of individuals, households, enterprises, industries and collectivities in terms of those Actors and activities. Only when that task is finished can the various components of a society and economy be aggregated into a system for analysis at the macro-level. For the economic behaviour of a risk-minimizing peasant in Haiti or the African Sahel (risk measured in terms of nutrition), the subsistenceaffluent villager of the South Pacific, the village capitalist in Java, the Industrial or financial entrepreneur in newly industrializing countries, is not identical. Certainly none of these Actors is adequately described by either the neoclassical or the neo-Marxist model. Moreover, the real life Actors in the industrialized countries do not conform to those of the neoclassical or neo-Marxist paradigms either. The Australian trade union leader arguing a basic wage case before the Arbitration Commission, or the American trade union leader entering the Oval Office to discuss a wage-price freeze with the President, bear little resemblance to the neoclassical Actor called Worker or to the neo-Marxist one called Working Class. Needless to say, these two sets of Actors also do not resemble each other, and they cannot both reflect reality. In the neoclassical drama we have a hero called Entrepreneur, who is ultimately responsible for all economic and much social progress. In the Marxist drama there is a character called Capitalist Class, wearing much the same costume and performing much the same actions as Entrepreneur, but now he is the villain, purveyor of exploitation, poverty, inequality, and "development of underdevelopment". Naturally such differences in diagnosis and prognosis lead to difference in prescription.

FULL CIRCLE: BACK TO CANADA AND "SECULAR STAGNATION" By the time I left CASD and the South Pacific at the end of 1983, as a consequence of data released by the United Nations and by the World Bank, together with my own observation, I had reached a conclusion that would have been astounding to me ten years earlier: the real economic problems were not in the less developed countries as a group, but in the more "mature" industrialized countries, socialist and capitalist alike, and especially in such one-time leaders in economic and social progress as the United Kingdom, the United States, Australia, New Zealand, Argentina, Uruguay, and, to a lesser degree,

244 All the Difference Canada (which has never done either quite so well or quite so badly as the others). True, there are LOGS where the continuing poverty and stagnation are appalling and the development problem seems almost intractable, such as Bangladesh, Haiti, and the countries of the African Sahel. But the developing countries as a group, and particularly the upper-income countries among them, have performed better than the industrialized countries in the last three decades on almost any criterion one might apply: rates of growth, ratios of savings and investment to national income, rates of return to investment in terms of consequent increases in gross national product (ICORS), balance of trade, terms of trade, shares of world trade (and particularly trade in manufactured goods), or shares of world capital formation. And they are not clearly worse - as a group - in terms of inflation or unemployment, although the worst performers on these criteria are among the LDCS. Why? My own view is that the developing countries as a group are simply better managed than the industrialized countries; but defending this position requires a book of its own. As this section of the present book is being written, evidence of mismanagement of the industrialized socialist countries pours through the media in flood proportion, but the threat to the world economy is probably greater still from the industrialized capitalist countries. Particularly interesting - and worrisome — is the poor performance of the United States economy, that former model of powerful economic progress, and now the greatest menace of all to the world economy. The biggest debt, the biggest trade deficits, the biggest budget deficit, the worst deterioration of terms of trade - one could almost argue the highest degree of "dependency," are in the United States. The ratio of savings and investment to GDP is among the lowest in the world. Even the least developed countries have as high a ratio of investment to GDP as the United States. Policy in the Reagan-Bush years has been directed mainly at containing inflation, in which it has been relatively successful. But the high interest rates applied by the American monetary authorities to arrest monetary expansion and attract capital to offset the trade deficits has not only slowed growth in the American economy, it has slowed growth the world over. With problems of economic maturity and secular stagnation beginning to appear once again in the industrialized capitalist countries, it was natural that my own interests should start to shift towards them and away from the LDCS. I was therefore delighted when L'lnstitut Canadien pour la recherche sur le developpement regional invited me to come to their headquarters at 1'Universite de Moncton as their first Fellow in Residence during the (Canadian) summer of

245 The igSos

1984. The Canadian government, which finances the Institute, chose the Universite de Moncton as its site for good reason. It is the only important francophone university in Canada outside of Quebec and, with Quebec prospering as it has in the past two decades, the main regional development problem has shifted from Quebec to Atlantic Canada, particularly to the francophone communities of that region. While the Institute does not ignore development problems in other industrialized countries and in the LDCS, it naturally focuses primarily on Canada and above all on the Atlantic Provinces. The Institute played a major role in the establishment by the federal government of the Atlantic Canada Opportunities Agency (ACOA), also in Moncton, with a large professional staff and a very large budget for the development of the region. The Institute's brilliant Director, Donald Savoie, an "Acadien" with an Oxford Ph.D. in political science, was particularly influential in organizing ACOA, and indeed in Canadian regional policy in general. My visit to the Institute was highly successful, and I have spent every Canadian summer since working there. My work with the Institute involves a good deal of travel within Atlantic Canada, frequent visits to Ottawa and Montreal, and occasional visits to London Ontario, Cambridge Mass., and Washington D.C. Thus at the end of my career I find myself having travelled full circle, not only geographically but conceptually, back in my own country and dealing with its problem and those of other industrialized capitalist countries, including unemployment, inflation, and trade, as well as regional development. I do not find these problems less intractable than those of the LDCS in which I have worked. Indeed in some ways I find them more difficult to handle because of the greater popular and political reluctance to tackle them head on, and the more profound and wide-spread faith in simplistic monetary policy as a panacea for all economic and social problems. In fact the problems of such retarded regions as the Northeast and Northwest of New Brunswick and of Cape Breton Island (where the Institute is deeply involved) cannot be solved by macro-economic policies formulated in Ottawa. No less than in Pahang Tenggarra, Lower Uva, or DRIPP, such regions need tailor-made policies, projects, and programs based on thorough study of their societies in relation to the physical environment that surrounds them. My work for the Institute has brought many pleasant side-effects, such as immersion in a charming francophone (Acadian) society, living by the seashore, and working again with my former Public Works Canada colleagues Douglas Hartt and Gaston Haddad Luthi. It has also contributed to the process of rejection of the concept of a world divided in three: industrialized capitalist, industrialized so-

246 All the Difference

cialist, and less developed. From the economic and social point of view the world is a continuum. The differences and similarities among the societies composing it can be ascertained, defined, and categorized only by studying each one separately. Regions within one country may vary enormously (witness the ao-fold gap in per capita income between the richest and poorest regions in Indonesia), whereas groups of countries may exhibit striking similarities. It may make more sense to have a uniform economic and social policy for all of Europe, for Canada and the United States, for New Zealand and Australia, than for Northern Ontario, Northeast New Brunswick, and Cape Breton Island. Recognition of this basic fact strikes at the very roots - the fundamentals of scope and method — of economic analysis. IMPORTANCE OF REGIONAL ANALYSIS

If I have given what may seem to some readers undue space to my various immersions in regional planning projects, it is because it is these experiences that have had the most profound impact on my ideas about scope and method, analysis, policy formulation and planning. The daily contact with target populations and on-the-spot observation of feedback relations between them and their environments which regional planning entails, in societies ranging from top to bottom of the income scale, has completed the long process by which I have become disenchanted with the two dominant paradigms in the development literature, neoclassical and neo-Marxist. I am convinced that the effort of economists to construct analytical models from universal laws of individual or class behaviour, and to derive policy conclusions from such models, has been misguided. I have moved a long way towards the Institutionalist School, which I treated in my Ritchie Professor Inaugural Lecture of 1948 virtually as a lunatic fringe. In their insistence on an approach that is at once empirical and interdisciplinary, evolutionary and biological, rather than emulating physics and above all mechanics, they were surely right. But Institutionalism never quite jelled, and the neo-Institutionalists are in danger of repeating the errors of their predecessors, gathering masses of statistics, case studies and descriptive material without synthesizing all these materials into tight analytical models. Economics needs a drastic overhaul before it can effectively tackle the problems which beset developing countries and industrialized ones alike in today's world. This overhaul involves at least four different aspects:

247 The 19805

(i) A semi-anthropological or biological method of micro-analysis. (ii) When that is done the micro-models can be assembled into macro-models for given countries, in the form of feedback systems. These macro-models must be based on the behaviour of Actors in the micro-models, not simply on functional relationships among macro-variables (savings, investment, income etc.) based on results of that behaviour. (iii) Countries or societies can be grouped together into categories of a taxonomy on the basis of similarity in the type of Actors present and in their behaviour, and consequent similarity of functioning of the entire system at the macro-level. They should not be grouped merely in accordance with some measure of results of this functioning, such as level of per capita income. (iv) The approach to policy formulation should be clinical. We have no general theory of development, and we need none. Once this proposition is accepted we can get on with our job of curing or at least alleviating maladies. This job involves the same three steps as in the practice of medicine: diagnosis, prognosis, prescription. Diagnosis. This stage involves activities very similar to those involved in regional planning. The society must be examined, and maladies (departures from normal on various tests) determined, as well as their causes. For the examination to take place the patient must be seen; it cannot be done at a distance by applying some general theory. The diagnosis phase involves an enormous amount of fact gathering relevant to each society and its environment, including statistics of the usual sort and on-the-spot fact gathering. It concludes with a statement of the maladies from which the society is suffering. Prognosis. As in the case of medical practice, the second stage is prognosis. The analyst must ask, "What will happen if there is no treatment (no change in policy) of these maladies?" and then, "What will be the response to treatments (changes in policies) a, b, c, ... n?" This stage is not very different from the usual kind of policy analysis, except that it is based on analytical models with Actors and behaviour specific to each society, instead of models based on assumed universal behaviour of individuals or classes. Prescription. From the analysis in phase two, policies most likely to cure maladies can be selected and recommended. Usually these prescriptions will apply to individual cases - poverty in the DRIPP region, environmental damage in Lower Uva, unemployment in

248 All the Difference

Northeast New Brunswick — but sometimes they may apply to "epidemics" on a national or even global scale, such as recession, inflation, and balance of payments difficulties. Even in epidemics, however, individual cases must be examined, to decide whether treatment should be individual or worldwide, such as reform of the international monetary system, universal trade liberalization, global freedom of immigration, etc. The idea that there may be a whole range of explanations as to why particular nations are rich, poor, or in between, and an equally wide range of prescriptions for the diverse maladies that beset nations, rather than all societies being in different stages of the same evolutionary process, was for me a disturbing yet exciting revelation, which may never had occurred to me had I worked in only one of the major underdeveloped regions. Perhaps we had been wrong in searching for a general theory of development that could be applied always and everywhere; perhaps the remedy lay rather in careful diagnosis of individual cases, with prognosis and prescription based on those individual diagnoses. This concept implied a revolution in the whole scope and method of economics, and indeed of other social sciences as well, and I kept it at arm's length for nearly two decades after it first occurred to me, until I was so convinced of its importance and validity that I felt compelled to write a book elaborating it. Does the synthesis outlined in this chapter mean the end to my quest as a development economist? Hardly. Certainly, much progress has been made since 1950 in the accumulation of knowledge regarding the development process and in finding better ways of applying that knowledge. We have learned enough to be able to cure many, perhaps even most, of the maladies that beset the economies of developing and industrialized societies alike. But a good deal of ignorance remains. Just as, with the current state of knowledge, the medical profession is unable to cure some diseases, no doubt some economic and social problems will remain unsolvable; and, as in the medical profession, no doubt as some problems are solved, new ones will crop up. The quest must go on.

11 The Continuing Quest

I have tried in this book to take the reader by the hand and lead him or her along a twisted, ever-diverging and sometimes bumpy road. We have followed some fifty-five years of a career directed mainly towards solving economic and social problems in several dozen countries, at vastly differing stages of development, and in all major regions of the world. There have been trials and tribulations along the way, but a great deal of stimulation and satisfaction as well. At least I have never found the journey boring. I hope the reader can say the same. In this final chapter I should like to confront some of the broader issues relating to the life of a development economist. How are we development economists doing? Is the whole international development effort working or not? How much progress has been made in the past half century with regard to economic and social development, and to human welfare more generally? To the extent that efforts to improve human welfare have failed, is the explanation the continuing ignorance of economists and other social scientists of the requirements for development, or the perversity of politicians who do not listen to the experts but pursue erroneous policies instead, or the fact that power lies in the hands of people who don't care about human welfare and promote only their own selfish interests? Before trying to answer these questions, I must lead the reader on one more journey, a journey of vital importance in explaining the conclusions I have reached. After I left CASD at the end of 1983, I had little direct contact with developing countries for seven years.

250 All the Difference

I spent one semester at the University of Papua New Guinea in 1984 and attended the UNCRD conference on the role of small cities in regional development in New Delhi in 1985, and that was all. As for Southeast Asia, the region that played so vital a role in my career, until I returned in November 1990 I had not been there for more than ten years. The impact of my return profoundly affected my evaluation of the international development effort as a whole, and I would like to tell the story of that mission. SOUTHEAST ASIA REVISITED

While I was working with the Enterprise Cape Breton Corporation in Sydney, Nova Scotia, I received a telephone call from the Canadian International Development Corporation (CIDA) asking whether I would like to do a mission for them in Malaysia. CIDA had been providing modest financial assistance to the Malaysian Institute for Economic Research (MIER), under the direction of my old friend and colleague Kamal Salih. The Malaysian government was now asking that this assistance be extended for another five years and greatly enlarged. Before saying "yes", CIDA felt that they should have some knowledgeable person evaluate MIER'S work to date and suggest a program for the next five years. Would I undertake such a mission? I said that I found the idea irresistible, but that I was committed to the Canadian Institute for Research on Regional Development for the next two or three months. CIDA said that the necessary paperwork would probably take that long anyway. They suggested that I come to Ottawa for a briefing and then visit the Department of Economics at Queen's University, since it had been nominated to collaborate with MIER in the CIDA project. Jean and I already had our return tickets to Australia, so it was agreed that we could go to Australia for a few days to take care of accumulated matters there, and CIDA would pick up my travel from there on. We went to Ottawa early in October 1990. In the course of our discussions there, the CIDA officers responsible for the MIER project pointed out that CIDA was also giving financial support to the Thailand Development Research Institute (TDRI). Since Bangkok was so close to Kuala Lumpur, while in the neighbourhood I might as well go up to Bangkok, take a look at TDRI, and make some comparisons. And having gone that far, why not go on to Jakarta and visit the Indonesian Institute for Economic and Social Research (IESR)? CIDA was not financing IESR but they were interested in it, and there might be occasions for "networking" among IESR, TDRI and MIER. That was fine with me, and I readily agreed; it had been much too long since I last visited those three countries.

251 The Continuing Quest We went by train to Kingston. We enjoyed being in that charming city and on Queen's University's beautiful campus again, but not much was accomplished with respect to my specific mission for CIDA. It turned out that the director of the project at the Queen's end was in Malaysia and there was no one else at Queen's who was really deeply engaged in it. When we returned to Australia we found a mass of problems, both at the University and at Kallarroo, that needed attention, so it was the beginning of November when we finally set off for Malaysia. We arrived at the Kuala Lumpur airport about 9.00 p.m. local time. It was a bit more than ten years since I had last been in that city. The next few days were to remind me of first visits to European, North African and Asian capital cities many years ago, in the sense that I was buffeted by a tidal wave of impressions. Of course there was one big difference: in London, Paris, Rome, Athens, Cairo, Kyoto or Bangkok it was the glories of the past, the sense of being in contact with a rich centuries-old civilisation, that overwhelmed me. In Kuala Lumpur in 1990 it was the sudden immersion in a vibrant, throbbing, dynamic present and the vision of a still brighter, just-around-the-corner future that was so exhilarating. My first jolting impression, which struck me during the drive from the airport to our hotel, was one of beauty, combined with order, harmony and serenity, generously spiced with innovation and excitement. Within a week I was convinced that Kuala Lumpur had become the most beautiful modern city in the world. It is a city of skyscrapers; not the steel-and-concrete canyons of New York or Chicago, but individual, many-stories-high sculptures, with trees, lawns, gardens, parks, even virgin jungle, between them. The boulevards are wide, the town planning prescient, the traffic moves rapidly and in uncluttered fashion — at least in most of the city most of the time. Great care has been devoted to the design of the individual buildings and imagination and artistry have been used to find ways of drawing on both Islamic and Hindu-Bhuddist culture in designing a skyscraper. (If you don't believe this is possible - go and have a look!) - I was told that most of the architects have been Malaysians. On our initial drive into town we noted as well that generous use is made of street lighting in a manner that is cheerful without being garish. As I visited the offices of leading financiers, industrialists, government officials, research directors and academics in the course of my evaluation of MIER, my second impression, equally jolting, was one of prosperity. Not even in New York have I seen offices more luxurious and yet tasteful than those I visited in Kuala Lumpur. In the parking areas of the office buildings were softly glowing Rolls

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All the Difference

Royces, Mercedes-Benzes and Volvos, sparkling Jaguars, BMWS and Aston-Martins. I learned in time that this new conspicuous wealth is part of the recent spread of Malaysia's traditional feudalism to the new world of Malaysian industry, commerce and finance. The new prosperity is far from being evenly spread, but I saw no abject poverty, nor do the statistics show it. My third impression, perhaps the most staggering and welcome of all, is that this new prosperity is genuinely Malaysian, and even, to a considerable and increasing extent, Malay. The men and women I saw sitting behind the desks of Chief Executive Officers, Presidents, Vice-Presidents and Treasurers were not foreigners, nor were most of them Chinese Malaysians. The share of Malays in ownership of the big corporations is still disproportionately low, although it is increasing rapidly. Malays are, however, taking over the management of the large enterprises, including multinational corporations. On the whole, the impression I got of Malaysian top management, whether in the private or public sector and including science, technology and research, was one of competence, confidence and dynamism. THE MALAYSIAN ECONOMY

A part of my task in evaluating MIER and recommending a program for its next five years was to study the Malaysian economy, isolate its major problems, and ascertain which of these problems were being adequately studied by other organizations and which could and should be tackled by MIER. My study of the Malaysian economy confirmed the impressions producted by personal observations. The performance of the Malaysian economy over the past two decades has been remarkable. There has been very rapid growth, combined with a high degree of stability and some success in improving income distribution among ethnic and occupational group and among regions. There has been structural change of the right sort, with rapid industrialization, much of which is based on a high-tech industries. Export-promotion has been stressed more than import-replacement, protection has been limited, and the government has shown a laudable willingness to expose Malaysian enterprises to international competition. Both unemployment and inflation have been maintained at low levels: the Malaysian "trade-off curve" is one of the lowest in the world. At present the Malaysian economy is one of the best behaved in the world. Recent figures suggest that Malaysia may currently be the fastest growing country in the world, with gross national product increasing at an annual rate approaching 10 per cent. The World

253 The Continuing Quest Bank has recently estimated Malaysian unemployment at a mere 3.5 per cent and the inflation rate for 1990 was below 4 per cent, a remarkable achievement. Moreover Malaysia, not having built up inefficient "smoke-stack" industries through a century or more of protection, does not have the horrendous problems of "adjustment" faced by Argentina, Australia, New Zealand, Uruguay and even, to some extent, Canada and the United States. Behind Malaysia's success is certainly a little bit of luck - discoveries of oil and the rise in oil prices, for example — but more important, has been a great deal of good management. Thus Malaysia is far from having an economy in trouble that needs rescuing through superior wisdom. Still less is it a question of Canadians providing technical assistance to help Malaysians run their economy better. The Canadian economy is performing so much worse than the Malaysian that it would make more sense to mount a program of "reverse technical assistance" and bring Malaysians to Canada to apply their expertise to improve the Canadian economy. Nevertheless, Malaysia does face some severe economic and social problems. 1. Malaysia is an exceptionally open economy, in terms of flows of goods and services, flows of capital and flows of people. It is therefore extremely vulnerable, and exposed to various kinds of shocks from outside. Thus far the Malaysian authorities have shown themselves to be highly skilful at managing such shocks, but the future of the global economy is shrouded in uncertainty and the shocks to come in the next five years are likely to rate higher on the Richter scale and to be less predictable than those during the last decade. Shock management will have to be more skilful than ever. 2. The balance of payments situation is worrisome. There is a chronic and substantial deficit in the services account and some danger of a small deficit in the commodity account as well. Stability of the foreign exchange value of the Ringgit (Malaysian currency) is bolstered by capital inflows. Of the $21.3 billion in private investments approved by the Malaysian Industrial Development Authority in the first nine months of 1990, $13.3 billion came from foreign investors. The biggest share of this inflow came from Taiwan, followed by Japan and Singapore. Such investment is highly volatile and can change direction almost literally overnight. Malaysia is no longer a truly low-wage country and such investors are starting to look at countries like Vietnam, Burma and Bangladesh.

254 All the Difference

3. The Malaysian Trade-Off Curve (TOG) shows signs of shifting outwards, as it has in other countries. That is, either unemployment or inflation or both might get worse. There is mounting inflationary pressure and monetary expansion is considered excessive by some experts. 4. The labour shortages are beginning to be reflected in wage increases, adding to inflationary pressure and aggravating the danger of capital outflow. The policy question, however, is not merely one of finding means to avoid excessive and dangerous wage increases. Malaysia is moving into a whole new phase of industrial relations, with a different sort of labour market. It is none too clear what this new labour market will be. 5. With the emergence of a more complex and more sophisticated labour market, together with the appearance of educated but unemployed people, it is becoming necessary to take a fresh and hard look at the educational system in relation to manpower planning. 6. There remains the major problem, at once economic, social and political, of the redefinition and revamping of the New Economic Policy (NEP). The task is an onerous one. In his speech to the Harvard Club of Malaysia on "Post 1990 - Economic Policy of Malaysia", on 22 August 1990, Prime Minister Mahathir expressed very clearly his dissatisfaction with the deficiencies and abuses of the NEP, but did not provide a clear picture of what he felt the "New New Economic Policy" should be. 7. Malaysia, like many other countries today, is embarked on a program of privatisation and deregulation, and is shifting from a managed to a free market economy. As attempts are made to bring about this shift, not only in the socialist countries but in such countries as New Zealand, Argentina, Australia, Uruguay even to some extent Canada and the United States - we are learning that the shift itself is something that has to be astutely managed if it is not to bring accelerated inflation, increased unemployment and balance of payments difficulties. Privatisation without pain, freeing markets without fear, is no simple task. DARA

To my knowledge, the Pahang Tenggara project is still the biggest regional development scheme ever undertaken by CIDA, and therefore its success of failure is important to the agency. Also, MIER was anxious to do a study of DARA'S experience. (DARA is the regional development authority established to implement and administer the

255 The Continuing Quest

Plan for Pahang Tenggara.) And, of course, having been Senior Economist for the project during its planning phase, and not having visited the region for ten years, I was very eager to see what it looked like now. It happened that on the Sunday of my second weekend in Malaysia I had an appointment with the Director of the State of Johor Economic Planning Unit, in the state capital, Johor Bahru. (Malaysia is a Muslim country and government offices are open on Sundays.) I had no appointments for Friday and Saturday, so I decided to go to Kuantan and visit the DARA offices over the weekend. Neither airline nor bus schedules were convenient, so we rented a car and drove to Kuantan late Thursday afternoon, staying overnight at the Coral Beach Hotel, an old haunt. The MIER office had made an appointment for me at DARA headquarters for 10.00 a.m. on Friday. I had assumed that the meetings would take place in the DARA office building in Kuantan, but when I checked the address on Friday morning to give directions to a taxi driver, I discovered to my dismay that DARA had moved lock, stock and barrel to Muazdam Shah, two hours drive from Kuantan. So I telephoned to Muazdam Shah, hired another car, checked out, and drove to Muazdam Shah. The drive was very satisfying. Ten years earlier there was only a narrow and dusty road through the jungle. Little land had been cleared and less planted. This time we drove on a splendid surfaced highway, through lush, immaculately tended rubber, oil palm and tea plantations, past cattle ranches and picturesque villages. It was very impressive and, of course, a particular pleasure for me. I arrived two hours late for my appointment, but the DARA staff were extremely courteous. They met me in their handsome new office building and took us to their attractive and comfortable resthouse, where we had lunch with three of the officers. After lunch we met with all the senior officers in their elegant "operations room" and were given a thorough and well-organized briefing. One thing that impressed me immediately was the obvious sense of consecration, even excitement, of the DARA staff. Some of them had been with DARA from the beginning — seventeen years - but the excitement with their jobs still hadn't worn off. We spent two days and two nights in and around Muazdam Shah, visiting various projects, and my favourable first impressions were strengthened as a result. In reading DARA'S 1989 report I had been puzzled by an apparent paradox: land development is on schedule with the plan, but instead of the 500,000 settlers foreseen by the plan for that year, there were only 200,000. How was that possible? On this visit I learned a large part of the answer. The pace of Malaysian industrialisation has been

256 All the Difference so rapid that the country now faces labour shortages in construction, and in industries and services requiring special skills and on plantations. DARA, too, faced labour shortages. It has been necessary to bring in workers from abroad: of the 200,000 settlers, 50,000 are Indonesian immigrants who came in as single men, leaving any families they might have behind. In forecasting the population of the region, we had estimated that by 1990 the average family size of the settlers would be five. Multiply 50,000 by five and the total population of the region would not be far below the figure we estimated. Another part of the explanation of the apparent paradox was that the average size of holding per household had been increased somewhat beyond the recommendation in the plan. A review of the plan in 1976 had reduced the number of urban centres from 50 to 30. Obviously, with a population so much smaller than planned, the degree of urbanization is much less than anticipated. Also, the plan had envisaged all plantation workers living in urban centres and commuting to work by motorized transport. A good many of the Indonesians are in the country illegally and do not have work permits. They dare not live in the towns and live instead on the private plantations, in somewhat poor conditions. The plan envisaged Muazdam Shah as the principal centre, and it was expected to have about 150,000 people by 1990. In fact, it has about 11,000. Obviously, the town plans and housing schemes designed for 150,000 people are useless for 11,000. Bandar Tun Razak, which was supposed to be the region's second town in 1990 with around 50,000 people, has about 20,000. It looks a bit more urbane that Muazdam Shah, but not much. One of the main objectives of the original plan, in accordance with the NEP, was to provide urban jobs for second-generation Malays in the region. It doesn't look as though that objective is going to be attained on any scale, at least for the present second-generation. On the other hand, there are signs of entrepreneurial endeavour in the two towns, some of it successful. Some settlers have managed to set up business enterprises while operating their farms, perhaps turning over the management of the farm to the wife and are making money selling used cars, operating a brick kiln, building houses, and various commercial activities. Some of the houses built privately are both large and handsome, almost mansions. DARA itself has built houses, schools, clinics and shopping centres. The transport system is adequate for the time being. The venture into cattle has been successful and is being privatized. The road through Muazdam Shah is the main artery between Kuantan and Johor Bahru, and there are also surfaced roads to the coast at Rom-

257 The Continuing Quest

pin and eastwards to Kula Lumpur and Port Klang. DARA has entered into several joint ventures, but the number of such companies has been reduced from 18 to 10. Some 5,000 hectares have been held as a nature reserve with elephants and tigers and tourist resort at Tjini Lake. On the whole, DARA gives the impression of an ambitious, wellmanaged and dynamic scheme. There are, however, some disappointments. I wonder whether and to what degree they are the result of shortcomings in the original plan. The extent of industrialization and urbanization is much less than we envisaged. The prefabricated housing enterprise on the coast, which looked promising ten years ago, has gone bankrupt. The two forest product factories, based on permanent-yield forestry, were supposed to be using high technology and producing sophisticated products such as plywood, laminated wood and veneers. They have reverted to traditional techniques even in their forestry operations and are producing only sawn lumber. These are, of course, private (and foreign) enterprises and are guided by market and profits considerations. It may be that the failure to achieve population and urbanization targets made the original plans unattractive. It may also be that the general shortage of skilled labour made it unprofitable to conduct sophisticated operations in such a remote region, They may have preferred to conduct such operations in the Klang valley, Penang or Johor Bahru. In any case, it is clear now that our rosy visions of urbanized patterns of settlement and secondary industry and tertiary services in the region were sadly misplaced. A second disappointment, clearly the result of inadequacies in the original plan, is that our idea of resettling the riverpeople in the plantation towns didn't work and had to be abandoned in 1984. If we had studied the river villages and their people more thoroughly, we might have been able to predict that the idea of resettlement wouldn't work and proposed instead a pattern of village development that would raise the standards of living of the riverpeople where they are, as DARA is now doing. A third disappointment is that the problem of the Orang Asli has not been satisfactorily solved. This is another problem that we didn't study thoroughly enough - we didn't go much further than setting aside some jungle as a reserve where the Orang Asli could pursue their traditional way of life. But, of course, they could not be expected to be forever satisfied with this life, side by side with a highly visible process of modernization. DARA has resettled them in nine regions, where they can become modernized small farmers. Their material standard of living will certainly be raised, but we found the

258 All the Difference

one Orang Asli settlement that we visited a bit depressing, with small houses crowded close together (instead of widely spaced as in their traditional settlements) and untended orchards. Of course the problem of the "Orang Asli" (original people) remains unsolved in many countries - witness the Indians in both North and South America, the aborigines in Australia, and the Maoris in New Zealand. Finding ways of permitting such peoples to preserve their traditional culture and at the same time enjoy the standard of living of a modern industrialized society is no simple task. Still, I wish we had done a better job of it in Pahang Tenggara. In various publications on the Pahang Tenggara project I have stressed three major shortcomings of the plan prepared by the Canadian team: our naivete in thinking that development of the region could make Kuantan a growth pole that would generate "spread effects" to the impoverished northeast, our failure to take enough account of the effect of other regional development projects on the availability of resources to DARA, and our failure to anticipate the industrialization and urbanization that made resettlement schemes less attractive. But if these failings had been all, the development of Pahang Tenggara could still have proceeded on something like the pattern envisaged in the plan. What has transformed the picture completely is the emergence of a labour shortage in Malaysia, something we never dreamed of. The labour shortage and the resort to immigrant labour in the DARA region means that the highly urbanized settlement patterns we envisaged, with the related creation of manufacturing and services jobs within the region, cannot happen at all in this generation. The inevitable consequence is that a good many of the second generation will leave the region, especially if they are provided with the kind and level of education to which they are entitled. And of course, the population of the region will then continue to grow more slowly than originally intended, making it all the more difficult to create within the region the high-level jobs that might hold educated young people. BANGKOK

After two weeks in Malaysia, Jean and I flew to Bangkok on a Saturday morning. We were met at the airpo'rt by George Abonyi and his wife Thora Broughton. George, it might be recalled, had been a colleague at the University of Ottawa and both of them had visited us when I was Director of CASD in Fiji. George was on a CIDA mission as advisor to the National Economic and Social Development Board and Thora was also working for CIDA on industrial development

259 The Continuing Quest through the private sector. They drove us to their sumptuous and spacious apartment, where we stayed during our visit to Bangkok. George had been in Thailand long enough to know everybody who was anybody in the development field, and was enormously helopful in organizing my brief mission. In Bangkok, that is no simple task. Like Malaysia, Thailand is going through a period of extremely rapid industrial development, based largely on foreign investment, and the boom is even more concentrated on Bangkok than the Malaysian one is on Kuala Lumpur. But whereas Kuala Lumpur has managed its growth very efficiently, Bangkok is choking to death. It is impossible to predict how long it will take to get from one appointment to another, even if it is a journey of only a few blocks, as one can sit completely motionless for hours in a traffic jam. The rule is not to attempt more than two appointments during working hours in one day, one in the morning and one in the afternoon. George was well acquainted with this situation and knew the city extremely well, and managed to get me from appointment to appointment with a minimum loss of time. On Sunday we took a day off and toured the klongs (canals) by boat with George and Thora. Despite my dozens of visits to Bangkok, that day I saw fascinating and beautiful corners of the city that I had never seen before. On Sunday evening we were invited to dinner by Edward van Roy and his Thai wife. Ed wrote his Ph.D. dissertation, a comparison of development in two Thai villages, under my direction at the University of Texas. While doing his research he met and married a Thai princess and has lived in Thailand almost ever since. He is now head of the Social Development Division of ESCAP. The dinner was one of those Chinese banquets where no rice at all is served until the very end. Then a huge bowl of rice is brought in, but you insult your host if you take so much as a teaspoon of it. I began my official mission next morning, calling on the CIDA officer at the Canadian embassy, Rosalind Coleman. We talked mainly about TDRI, of which she was "very proud". Through Rosalind and George, I was lucky enough to get an appointment early that afternoon with the new President of TDRI, Dr Ammar Siamwalla. I was even lucky enough to arrive on time. Ammar has degrees from London and Harvard and has held high level appointments at Yale University and the Stanford Research Institute. He is a highly qualified and experienced economist, a first rate scientist and could have had a brilliant career in the United States had he so chosen. We talked mainly of the work that TDRI was doing in connection with the government's Seventh Plan, which would absorb a good deal of their time and energy.

260 All the Difference

Next morning I had an appointment with Dr Phisit Paakasem, Secretary General of the National Economic and Social Development Board. Phisit and I are old friends, having seen a good deal of each other in Nagoya, at the UNCRD. I thought it would be well for George Abonyi to join us in this meeting, since he is working for NESDB. It was well that he did; Phisit chided George for not coming to see him more often, labelled him "007" because of his secretiveness and urged him to keep in touch. Our conservation was wide ranging, covering economic conditions in Thailand, Malaysia and other ASEAN countries. We visited George's office, where I met some of his colleagues, and then went again to TDRI where I had a meeting with Dr Norongchai Akrasanee, the Executive Vice-President. Like Ammar, Norongchai has staggeringly impressive qualifications. He had worked at the National Bureau of Economic Research in New York, and at UN headquarters. I had met him on several previous occasions. Once again we discussed TDRI and the Seventh Plan. I was profoundly impressed by TDRI. All the senior staff have qualifications that could enable them to obtain top level positions anywhere in the world. Altogether there are about fifty staff members with Ph.D.'s from top North American or European Universities. TDRI occupies three floors of a large modern office building in central Bangkok. Their budget is also impressive. It must be one of the most competent economic research institutes in the world. It made me think of the Brookings Institution in Washington, DC, with which it is frequently compared. With such an institution to buttress the already highly competent government bureaucracy, one wonders why Thailand needs foreign advisors at all. I was equally impressed by Thailand itself. There is the same sense of dynamism in Bangkok that I found in Kuala Lumpur. Thailand is clearly on the road to becoming a prosperous industrialized country. While the inconvenience of transport and communications in Bangkok is beginning to deter some foreign investors, and others are motivated by increasing labour shortages and rising wages to consider alternative countries where wages are still low, such negative factors may slow down Thailand's economic growth but won't stop it. J A K A R T A AND THE INSTITUTE FOR ECONOMIC AND SOCIAL RESEARCH

We flew to Jakarta on Wednesday, 21 November. We reached the Hotel Indonesia about 5.00 p.m.. There were no messages, so we

261 The Continuing Quest went for a swim and then had dinner. The following day began like a confirmation of "Murphy's Law" that anything that can go wrong will. Kamal's secretary had given me the name of Dr Iwan Jaya Aziz as the Director of the IESR. Accordingly, the Fax sent from Kuala Lumpur to the embassy in Jakarta asked for an appointment with him. When I called the embassy that morning, I was told that a call had been made to Iwan, but that he had not called back. I tried to reach him by telephone, failed, and decided to go to the university and try to track him down. I found the office of the Institute, encountered a young man, told him my name and inquired after Dr Iwan. He said that he was well acquainted with my publications. However, when it came to Dr Iwan Jaya Aziz, I was told first, that Dr Iwan was ill and his doctor had ordered him to bed for two weeks and, second, that Dr Iwan was not the Director of the Institute but Director of the Interuniversity Centre, an organization financed by the World Bank to send Indonesian students abroad. Perhaps because he was ill, Iwan had not returned the embassy's call, and had not told anyone else that I was coming to Jakarta, I expressed my consternation, and the young man went off to see Dr Darmin Nasution, the actual Director of Research of the Institute. Darmin was busy but would organize a meeting for 10.00 a.m. the next day. After lunch I went to the embassy to see Alex Volkoff. She knew about TDRI and MIER, and about the CIDA involvement in both. She also knew about IESR, was interested in it, but had had no direct contact with it. We agreed to meet again next day after my discussion with the Institute. Next morning I met with Darmin, who has his Ph.D. from the Sorbonne and speaks beautiful French; Dr. Dorodjatun KuntjoroJakti, Associate Dean for Academic Affairs of the Faculty of Economics (part of the famed "Berkeley maffia" - MA and Ph.D, from the University of California at Berkeley); and a younger man whom I already knew, a former Director of the Institute, now Professor of Economics and also Ph.D. Berkeley, Dr Mohamed Arief Djanin. They were a bright lot, and for two and a half hours we talked about the state of the Indonesian economy, economic policy in Indonesia, Thailand and Malaysia, and economic research in the three countries. The Institute is the same Lembaga Penyelidikan Ekonomi dan Masyarakat which I helped Dr Sumitro Djojohadikusumo (then Minister of Finance and Dean of the Faculty of Economics) to organize in 1952-53. Moreover, the Institute is still publishing Economics and Finance in Indonesia, of which I was one of the original editors. This journal has been a great success. It has been going for nearly 40 years now, is highly regarded by people working in the development

262 All the Difference field (especially, of course, those concerned with Southeast Asia) and has published some seminal articles as well as discussions of policy issues in Asia. Being attached to a university, with training or "internship" functions as well as research responsibilities, IESR differs somewhat from the other two institutes, but in its own way is at least equally impressive. It has a total staff of 123 persons. Of these, 50 are actively engaged in research. There are 11 with Ph.Ds from good American or European universities, 25 MAS and 14 "sarjana" (graduate students, teaching assistants). There are 18 staff members studying abroad, with assistance from the Interuniversity Centre or the British Council. In terms of academic qualifications, the IESR staff is not as strong as TDRI but stronger than MIER. As a university institution, it is appropriate for it to employ a significant number of graduate students. The list of former Directors reads like a Who's Who of Indonesian economists, many of them present or former cabinet Ministers: Sumitro, Widjojo, Sadli, Ismael, Ali Wardhana, Budhi hardjo, Rustam. In addition to the pure research staff, there is the staff of Economics and Finance in Indonesia, a sizeable Information Centre and Library staff, and an Advisory Board. The Institute is engaged mainly in doing sectoral studies for the government and is strongly oriented towards policy (Arief Djanin thinks too much so). Altogether between 1953 and 1988 the Institute produced 319 reports, an average of roughly 10 per year. The reports cover such fields as regional development (a strong interest of the Institute), transport, housing, tourism, transmigration, international economic relations, finance, population and labour, and rural development. The Institute also trains about 40 young government officials per year in special fields like regional development. Many of these trainees come from BAPPENAS (the Planning Board). They said that their ties with BAPPENAS are very close, and that if the Institute had more human resources, BAPPENAS would use them even more. The Institute is financed mainly by contracts, most from government but some from the private sector. Interestingly, most of the graduates of the Faculty of Economics go into the private sector. Indonesia, of course, started its development as an independent nation at a much lower level of per capita income than Malaysia, made little progress under the succession of governments from 1950 to 1959 and retrogressed during the Sukarno regime from 1959 to 1966. Despite the rapid growth since that time under the Suharto regime, the impression I got in late 1990 was certainly not one of widespread prosperity. The affluent elite with their luxury cars were

263 The Continuing Quest certainly there, but the poor were just as surely there too. Yet I found Jakarta greatly improved in the ten years since I last saw it. Despite the enormous increase in the population, there was less congestion, the traffic moved more freely and smoothly and the city looked less bleak. There had been some skilful and effective city planning, and there were open spaces and trees amongst the glass and concrete. The newer skyscrapers, while perhaps less imaginative than those in Kuala Lumpur, had a certain elegance and were pleasing to look at. In fact, to my considerable surprise, this time I actually enjoyed being in Jakarta. But the main thing, of course, is that while Indonesia is still on the United Nations' list of "low income countries", the level of welfare of the Indonesian people has improved markedly in the last two decades and Indonesia is clearly on its way to becoming a technologically advanced, industrialized country. On the whole, Indonesia's economy has been well managed by Suharto and his "Berkeley maffia". OVERALL IMPRESSIONS

FROM

THE

MISSION

On the way from Indonesia to Australia I stopped again in Kuala Lumpur to tie up some loose ends. As we took off on the long flight through Singapore to Melbourne and Sydney I found myself thinking, "I'm glad, not only to have visited Southeast Asia again but to have done so after working in other places for ten years. The tenyear interval was long enough for some highly visible improvement to take place. Hence my visit has had a far more profound impact on my appraisal of the international development effort than merely studying the statistices could have, or even than a series of annual visits". By the time we landed in Australia, I had argued myself into a state of elation. "Ben, it's working! It's really workingl" So after forty years of involvement in the international development effort, I conclude that, on the whole, it has been a success. True, it is in the Asian NICS and the ASEAN countries that one is most keenly aware of the "positive dominoes effect" that is now taking place amongst developing countries. First there was the "Japanese miracle" in the years immediately after World War II. Then the miracle spilled over into Taiwan, South Korea, Hong Kong and Singapore. Now there is the Malaysian miracle, with strong evidence of similar "miracles" to come in Thailand, Indonesia and perhaps even the Philippines. Prosperity is spreading in all these countries. One byproduct of this increasing prosperity is rising wages, so that

264 All the Difference

investors are starting to look at countries where wages are still low, such as Bangladesh, Burma and Vietnam, as possible locations for the establishment of new enterprises. As, and if, investment and industrialisation spreads to these countries, they will become more prosperous too. Of course there remain countries that are still poverty stricken and stagnant as well, such as Haiti and the countries of the African Sahel. These are much more recalcitrant than the countries of Southeast Asia, and designing strategies that will transform them into prosperous countries is a much more difficult task. One can only hope that as the dominoes effect spreads, it will create opportunities for the design of strategies which, with a great deal of wisdom and a little bit of luck, will bring acceptable standards of living even to countries such as these. EVALUATING THE FOREIGN AID EFFORT

The wild goose chases, frustrations, failures, successes and illuminations recorded in this book provide some basis for appraising the international development effort as a whole. However, my own conclusions on foreign aid, naturally enough, are based on my entire experience with the international development effort, and not just on the events reported here. In my forty years as a development economist I have been on the receiving end of the expenditures by three bilateral aid agencies and by four major foundations interested in development. There are few members of "the United Nations family" that have never paid me anything for work on development. I have been involved in the development efforts of OECD. In the field I have collaborated with other bilateral donors, such as si DA and ADAB (now AIDAB), and with dozens of NCOS. I have sat in innumerable international conferences, seminars, workshops and expert groups designed to improve the quality of the foreign aid program. I have written a book about the international development efforts of the United Nations and the United States. For a few years I was a cog in the vast machine which grinds out the flow of official international development assistance. I feel that I am well acquainted with the international development effort. How then do I appraise it? First of all, few people, even among those interested in the development field, appreciate fully how new, how complex, and how vast the international development effort is. The development program that has been mounted since World War II is a phenomenon unique in the history of mankind. To be sure, there had been con-

265 The Continuing Quest tributions from people in rich countries to help people in poor ones in times of disasters such as floods and famine, through the International Red Cross and religious bodies. There were also the efforts of the colonial powers to develop their colonies. But the deliberate collaboration of all nations of the world in a vast effort to improve conditions of poor people in poor countries, involving a huge collective effort to find a solution to the complex problem of continuing underdevelopment, is new, vast and complex. Today all members of the United Nations are involved in some fashion or another in the international development effort. The number of UN agencies concerned with one or another aspect of development has grown consistently since the war. Every economically advanced nation provides some assistance to the developing countries and has a special organization to deal with this assistance. Not only is the foreign aid program still continuing after more than three decades but it is still growing. At the other end of the line, every developing country has a Ministry of Planning, or Development, or some similar body to deal with overall development. These are not as a rule small offices lost in some dark corner of a government office building. The Indian Planning Commission has 3000 professional employees, and so does the Agency for Development of the Northeast in Brazil. Altogether, hundreds of thousands of professionally trained people throughout the world earn their living by contributing to the international development effort. The United Nations Development Program became too big for the UN Secretariat Building and built a skyscraper across Third Avenue in New York to house it. Yet there are more UN officials concerned with development in Geneva than in New York. The Economic and Social Commission for Asia and the Pacific occupies its own skyscraper in Bangkok. The Latin American Commission has another one in Santiago, the African Commission a palatial building in Addis Ababa, UNIDO a vast complex in Vienna, FAO one in Rome, and UNESCO another in Paris - the list is endless. The purely intellectual effort involved in unravelling the mysteries of development and underdevelopment has been on a similar scale. There has been an explosion of research and publication on development, and today books and documents on development fill large sections of the leading libraries of the world. There are dozens of specialized professional journals devoted to the subject. There are hundreds of centres and institutes specializing in development scattered throughout the world, in advanced and developing countries alike. No one could read the literature produced daily on the subject, let alone attend all the international conferences, seminars, and working groups meeting daily to discuss one or another aspect of

266 All the Difference

the development problem. Over 6000 international meetings a year, all concerned with one or another aspect of development, take place under United Nations auspices in Geneva and New York alone. Others take place in Paris, Brussels, Rome, Vienna, Montreal, Bangkok, Santiago, Addis Ababa, Lima and elsewhere. In an operation as big and as complicated as this one, there is bound to be malfeasance and failure somewhere along the line. I am well aware of the shortcomings and pitfalls of the foreign aid program. I know that many of the people who swell the excessively large bureaucracies of some of the development assistance agencies are there only because they failed to get the jobs they really wanted in other organizations. I am aware that many of them lack the training and experience, and even the interest and commitment, that would qualify them for the work they are doing. I have seen funds appropriated for development purposes diverted to political, diplomatic, or purely personal ends. I admit that aid administration is often cumbersome and inefficient. Aid programs offer opportunities for corruption and these are sometimes seized. The official development assistance program has been going on now for nearly four decades, and aid-weariness has set in among donors and recipients alike. Apart from the above problems, nothing is so difficult to administer as a foreign aid program. Within the donor countries, aid agencies have to deal with the Cabinet, the legislature, a host of governmental committees, NCOS, employers, organized labour and other pressure groups, the media, and the general public. They must negotiate with the governments of other donor countries. On top of all that, they must deal with dozens of government departments and hundreds of private organizations in scores of developing countries. The amount of knowledge, technical expertise, managerial and diplomatic skills required to do all that well is awesome. It would be a miracle if occasional mistakes were not made. Yet for all its flaws, I have no doubt that, overall, the international development effort has been enormously worthwhile. To my mind, it is not the financing of individual development projects, or the provision of particular advisory services and technical skills, that has played the major role, although there are many success stories, some spectacular and some less visible and less audible. Most important is the continuing international cooperation for development in itself. This cooperation has resulted in five major achievements: i. It has maintained a constant dialogue between industrialized and developing countries, and contacts among people, which no other

267 The Continuing Quest

vehicle could have accomplished. The dialogue has sometimes turned into debate, sometimes acerbic; but mutual understanding and respect have gradually increased, and this has been a major force for world peace as well as for increasing prosperity, especially in LDCS. 2. It has established a genuine "international civil service", of which the top members are of very high quality and thoroughly committed, who know and respect each other, and who have achieved a certain unity of ideas. Just as any democratic government tries to avoid open confrontation with a strong and united bureaucracy, so today governments the world over are reluctant to be in open opposition to the policies and proclamations of the international community. As a consequence the international civil services has a good deal of influence on the domestic policies of governments that are members of the United Nations, OECD, OAS, the Commonwealth, and similar international organizations. 3. It has done much to transform the colonial relationships of prewar days. The relationship between representatives of industrialized countries and those of LDCS is no longer one of teacher and pupil, let alone master and servant, but rather one of equal partnership, with representatives of LDCS perhaps "a little more equal" than the others. Most of the people engaged in the international development effort, at all levels, come from the ex-colonies. Moreover, people from the developing countries are acknowledged leaders in the field. 4. It has provided both the laboratory and the financing for research on all aspects of development on an unprecedented scale. The result has been an accumulation of knowledge about the economics, the sociology, the politics, the science, engineering and technology of the development process at a rate not even dreamed of before World War II. There is no other way such a vast store of knowledge could have been accumulated without the foreign aid programs. 5. The knowledge thus gained of the various economies and societies of the world constitutes a resounding challenge to all of the social sciences. It casts strong doubts about their traditional scope and methods, undermines many a cherished shibboleth, and exposes many a doctrine and dogma as the built-in prejudices that they are. More fresh air has been pumped into the social sciences through the international development effort than through any other source. Working on development problems in the field with real deadlines for the discovery of solutions has imposed a genuine need for new approaches, and necessity is the mother of

268 All the Difference

invention. It is not just the field of development as usually defined that is affected by these innovations, but the whole scope of the social sciences. It is these aspects of the foreign aid effort, rather than the dams, roads and irrigation systems that have been built, the schools and hospitals established, the high-yield varieties of seed discovered, the new industries launched, that I find impressive, important as these more concrete results are. The international development assistance effort has contributed a good deal to improved management of the whole global economy and global society, and a great deal to knowledge. And for that it must be assigned a grade of at least B +, and encouraged to continue. The spread of prosperity through the dominoes effect will not take place through unbridled market forces alone. The countries that have enjoyed rapid development in the last two decades have all been countries that have encouraged private enterprise and left the market free enough to do its job properly; but they are also countries whose economies have been well managed and where the requisite expertise has been injected into the decision-making process through a carefully designed planning mechanism. All have adopted a highly pragmatic approach to development policy, avoiding ideological extremes of either left or right and, while favouring private enterprise, have not hesitated to resort to public enterprise where it seemed more effective for the achievement of certain objectives. MANAGING DEVELOPMENT

It is difficult to explain to people who have never been involved in it just what "development planning", or management of development, entails. The stereotype of "centrally planned versus market economies" is so deeply implanted that many people — even some economists - tend to think that any kind of planning or management of an economy must be opposed to efficient operation of the economy. The collapse of centrally planned socialist regimes in Russia and central Europe no doubt strengthens this view. But the view is wrong. None of the planning or management projects described in this book involved displacement of private enterprise decision making by centralized government decision making. The Pahang Tenggara project, for example, "allocated" land only in the sense of determining its best use. In that same sense, by implication, it allocated labour and capital as well. The private sector was involved from start to

269 The Continuing Quest

finish. The team drew heavily on the expertise and planning skills of the private plantation companies, forest product companies, mining companies, construction companies, and so on. It consulted peasants and small farmers. The private companies were only too happy to have us make the technical and marketing studies, the hydrological and topological surveys, the forest inventories, the soil analyses, and to undertake the design of the urban and transport systems. Their own decision making was much more solidly based as a result. The peasants and small farmers who constituted the bulk of the private sector in the DRIPP and Lower Uva regions were similarly happy to have the increased knowledge and information which our studies provided; and very happy to have the improved infrastructure which implementation of the program put in place. Such projects are designed to assist private enterprise, not displace it. There is no more conflict between good management of an economy and effective functioning of the market than there is between good planning and management of a multinational corporation and effective response to market signals. The two are complementary, not conflicting. Indeed in developing countries one of the major problem is the meagre response to market signals, because of lack of information and knowledge, risk aversion, and inadequate incentive for change. A major responsibility of a management team is to improve the efficiency of the private sector by overcoming these and other obstacles to it. The major tasks of such teams are these: 1. To amass all the knowledge and information that can be found regarding the natural and human resources of the economy in question. 2. Analyse these data in terms of development projects, programs and policies, including analysis of the appropriateness and efficiency of economic activities presently pursued as well as of new ones that might be introduced. 3. Exercise an entrepreneurial function by discovering new opportunities for profitable private investment, and, where necessary, taking steps to bring together the management, capital and labour needed to launch new enterprises. 4. Explain alternative possibilities to the target population to help them to make truly rational choices. My views are influenced by my broader social philosophy and my taste in "style" of development. I do not believe that an ideology that preaches the virtues of cut-throat competition, rugged individualism,

270 All the Difference

devil take the hindmost, let the chips fall where they may, can be the foundation of an admirable and enduring civilization. There is more to be said for a system which unites the people in common loyalties and a common moral philosophy that commands rich and poor alike to "do unto others as you would be done by"; where members of each social group feel a sense of duty to protect the welfare of other social groups; where there is, in effect, a functioning social contract. Perhaps I am nostalgic for societies like the one I grew up in, or the Australia I first knew. In any case I realize — with a start - that I end up in a position not very different from my father's.

Select Bibliography (Major works and publications by Benjamin Higgins cited in text)

BOOKS

1944 1946 1946 1952 1957 1959 1962 1963 1963 1965 1967 1968

Canada's Financial System in War. New York: National Bureau of Economic Research. Lombard Street in War and Reconstruction. New York: National Bureau of Economic Research. Public Investment and Full Employment. Montreal: International Labour Office. What do Economists Know: Six Lectures on Economics in the Crisis of Democracy. Melbourne: Melbourne University Press. Indonesia's Economic Stabilization and Development. New York: Institute of Pacific Relations. Economic Development: Problems, Principles and Policies. New York: W.W. Norton. United Nations and U.S. Foreign Economic Policy. Homewood, Illinois: Richard D. Irwan. Social Aspects of Economic Development of Latin America (with Jose Medina Echavarria). Paris: UNESCO. Indonesia: the Crisis of the Millstones (with Jean Downing Higgins). Princeton N.J.: D. Van Nostrand. Technical Assistance and the Economic Development of Greece (with Angus Maddison). Paris: OECD. (editor) Investment in Education. Bangkok: UNESCO. Japan and Southeast Asia (with Jean Downing Higgins). New York: Harcourt Brace.

272 1969

1969 1970 1970 1976 1978 1979 1981 1982

1986

Select Bibliography

The Economic Impact of Alternative Sites for the Proposed Montreal International Airport. Ottawa: Department of Regional Economic Expansion. Les Disparites Regionales au Canada et au Quebec. Quebec: Office de Planification de Quebec. What do Economists Know Now? (Shann Memorial Lecture). Perth: University of Western Australia Press. Les Orientations du developpement economique regional dans la province du Quebec. Ottawa: Department of Regional Economic Expansion. The Process of Economic Development. Ottawa: Economic Council of Canada, Study Paper No. 64. Towards Growth and Stability in Construction. Ottawa: Public Works Canada. Economic Development of a Small Planet (with Jean Downing Higgins). New York: W.W. Norton. Regional Development Planning: The State of the Art in North America. Nagoya: UNCRD. The Postwar Trade Cycle as Shifting Trade-Off Curves: the Case of Australia, Canberra, Centre for Research on Federal Financial Relations, Australian National University. The Rise — and Fall? — of Montreal, Moncton N.B., Canadian Institute for Research on Regional Development. ARTICLES AND CHAPTERS

1935 1

935 1939 1940 1941

1941 1941 1942 1943

"The relationship between psychology and economics", The Manchester School, Spring. "W.S. Jevons: a centennary estimate", The Manchester School, Fall. "Elements of indeterminacy in the theory of non-perfect competition", American Economic Review, September. "The economic war since 1918" in Willard Waller (ed.), War in the Twentieth Century, New York, Dryden. "Deficit finance: the case examined" (with R.A. Musgrave) in C. Friedrich and E. Mason (eds), Public Policy II, Cambridge, Mass., Harvard University Press. "Comment on one hundred percent money", American Economic Review, March. "A diagrammatic analysis of the supply of loan funds", Econometrica, October. "Bargaining power and market structures" (with John T. Dunlop), Journal of Political Economy, February. "Problems of planning public work" in S.E. Harris (ed.), Postwar Economic Problems, New York, McGraw Hill.

273 Select Bibliography 1944

"Public work in the postwar economy" in NYU Institute of Postwar Reconstruction, Postwar Goals and Economic Reconstruction, New York, NYU

1947 1947 1949

1949 1949 1949 1950 1951 1951 1951 1951 1953 1954 1955

*955

*955 *957 1958 *959 *959

"Keynesian economics and public investment policy" in S.E. Harris (ed.), The New Economics, New York, Alfred A. Knopf. "The economic man and economic science", Canadian Journal of Economics and Political Science, November. "The modern theory of economic fluctuations" in Glenn Hoover (ed.), Twentieth Century Economic Thought, New York, Philosophical Library. "The optimum wage rate", Review of Economics and Statistics, May. "Towards a science of community planning", Journal of the American Institute of Planners, Fall. "Canberra: a garden without a city", Community Planning Review, August. "Savings and welfare in the world economy", Economia Internationale, November. "Wage-fixing by compulsory arbitration", Social Research, September. "L'economia del programma di difensa del Canada", Economia Internationale, May. "Interactions of cycles and trends", The Economic Journal, September. "Economic aspects of the Asian-African conference and its aftermath' (with Guy Pauker), Economics and Finance in Indonesia, May-June. "The rationale of import surcharges", Economics and Finance in Indonesia, May. "Central bank reserve systems and Indonesia's foreign exchange problem", Economics and Finance in Indonesia, November. "Economic development of underdeveloped areas: past and present", Economics and Finance in Indonesia, January; reprinted in Land Economics, August. "The dualistic theory of underdeveloped areas", Economics and Finance in Indonesia, February; reprinted in Economic Development and Cultural Change, January 1956, and in Gerald Meier, Economic Development, various editions. "The theory of increasing underemployment", The Economic Journal, June. "Prospects for an internationale economy", World Politics, April. "Hatta and co-operatives: the middle way for Indonesia?", The Annals of the American Academy of Political Science, July. "Politicas de establisacion en los paises subdesarrolados", Trimestro Economico (Mexico), February-March. "Fiscal control of monopoly" in American Economics Association, Readings in the Economics of Taxation (Musgrave and Shoup, editors).

274 Select Bibliography 1960 1961 1963 1964 1965 1965

1969

1971 1971 1972

1972 1

973

1974

1976

1976 1977

"Assistance etrangere et capacite d'absorption", Developpement et Civilisations, No. 4, October-December. "Conditiones necesarias para un rapido desarollo economico en America Latina", Economica (Chile), vol. xix, no. 2. "Latin American economic development", Economic Development and Cultural Change, July. "Southeast Asian society: dual or multiple?", The Journal of Asian Studies. "Financing accelerated growth" in OEC D, Government Finance and Economic Development. "Einige Bermerkungen zur regional plannung", and "Sektorale und regional aspekte des Entwicklungs Plannung" in Kruse-Rodenacker (ed.), Grundfragen des Entwicklungsplanung, Berlin. "Foreign economic policy and economic development" in Richard Butwell (ed.), Foreign Policy and the Developing Nation, Lexington, University of Kentucky. "Planning allocations for social development", International Social Development Review, November. "Poles de croissance et poles de developpement comme concepts operationnels", Revue Europeenne des Sciences Sociales, No. 24. "Regional interactions, the frontier, and economic growth" in A. Kuklinski (ed.), Growth Poles and Growth Centres in Regional Planning, The Hague (Mouton) and in OJ. Firestone (ed.), Economic Growth Reassessed, Ottawa, University of Ottawa Press. "The employment problem in development" in Eliezer Ayal (ed.), Micro-Aspects of Development, New York. "Trade-off curves and regional gaps" in R. Eckaus and J. Bagwadi (eds), Economic Development and Planning: Essays in Honour of Paul Rosenstein-Rodan, London, Allen and Unwin. "The unified approach to development planning at the regional level: the case of Pahang Tenggara" in A. Kuklinski (ed.), Regional Development and Planning: International Perspectives, The Hague, Mouton. "Welfare economics and the unified approach to development planning" in A. Kuklinski (ed.), Regional, Urban, and Environmental Policies in Comparative Perspective, The Hague, Mouton. "Development poles: do they exist?" in A. Kuklinski (ed.), Polarized Development in Regional Policy and Planning, The Hague, Mouton. "Social aspects of regional planning" in A. Kuklinski (ed.), Sociallssues in Regional Policy and Regional Planning, The Hague, Mouton. (Note: The series on regional development edited by A. Kuklinski and published by Mouton was the product of the Regional Development Project of the United Nations Research Institute for Social Development in Geneva.)

275 Select Bibliography 1978 1977

1978

1980 1981

1981

1981

1981

1982 1982

1982 1982 1984

1988

1988

"Is "development" a dirty word?" in Antonio Milani (ed.), Studi in Honore di G. Demaria.Padova. "Economic development and cultural change: seamless web or patchwork quilt?" in Manning Nash (ed.), Essays on Economic Development and Cultural Change in Honor of Bert Hoselitz. Chicago: University of Chicago Press. "Economics and ethics in the new approach to development" in Stuart Armour (ed.), Philosophy in Context vol. 7. Cleveland: University of Cleveland Press. "The disenthronement of basic needs twenty question." Regional Development Dialogue i, no. i, Spring. "The reluctant planner: an overview" (with Jean Downing Higgins) in W.D. Cook and T.E. Kuhn (eds), Planning and Development Processes in the Third World. Amsterdam: North Holland (TIMS). "Dualism, dependency, and continuing underdevelopment" (with N. Dung) in R.P. Misra and M. Honjo (eds), Changing Perceptions of Development Problems. Nagoya: UNCRD. "Development poles: do they exist?" in A. Kuklinski (ed.), Polarized Development and Regional Policies: Tribute to Jacques Boudeville. The Hague: Mouton (originally published in Economie Appliquee 2, 1977)"Economic development and regional disparities: a comparative study of four federations" in Russel Mathews (ed.), Regional Development and Economic Development. Canberra: Australian National University, Centre for Research in Federal Financial Relations. "Appropriate technology: does it exist?" Regional Development Dialogue 3, no. i, Spring. "Subnational regions in subregional nations" in Benjamin Higgins (ed.), Regional Development in Small Island Nations. Regional Development Dialogue Special Issue, Fall. "Development planning" in E.K. Fisk and H. Osman-Rani (eds), The Political Economy of Malaysia. Kuala Lumpur and New York: Oxford. "From growth poles to systems of interactions in space". Growth and Change, October. "Jan Boeke and the doctrine of 'The Little Push'", Bulletin of Indonesian Economic Studies, Special Issue in Honour of Heinz Arndt, December. "Australian regional development in international perspective", and "Summary and policy conclusions" in B. Higgins and K. Zagorsky (eds), Australian Regional Development. Canberra: Australian Government Publishing Service. Chapter i, "Introduction: the economics and politics of regional development"; Chapter 2, "Francois Perroux"; Chapter 9, "Regional and national economic development: trade-off or complementarity"; Chapter 16, "Conclusions" in B. Higgins and D. Savoie (eds), Regional

276 Select Bibliography Development: Essays in Honour of Francois Perroux. London and Boston: Unwin-Hyman. 1989 The Road Less Travelled: A Development Economist's Quest. Canberra: Australian National University. 1990 Regional Policy in a Changing World (with N. Hansen and D.J. Savoie). New York: Plenum. 1991 Anthropology: Social Science, Regional Science, or Literature"? Moncton: Canadian Institute for Research on Regional Development, Research Report No. 8. 1991 The Frontier as an Element in National and Regional Development. Moncton: Canadian Institute for Research on Regional Development, Research Report No. 10. 1991 "Subsidies, regional development, and the Canada-u.s. Trade Agreement," Canadian Journal of Regional Science, Special Issue.

Index of names

Aa, Dr., 48, 63, 68 Abonyi, George, 242, 258, 260 Achinstein, Ascher, 21 Adisheshiah, Malcolm, !25

Aidit, 60 Akrasanee, Norongchi Dr., 260 Allen, R.G.D., 6 Altschul, Eugen, 11 Amerasinghe, Shirley, !35 Andel, Dr. van, 48, 68 Aquino, Corazon, 91 Araneta, Salvador, 84 Arida, family, 122 Arief Djanin, Mohammed Dr., 261 Arndt, H.W., vii, 25 Attiga, Dr., 41, 42 Axline, Andrew, 196, 197 Ayres, Clarence, 45 Aziz, Iwan Jaya Dr., 261 Baker, Jacob, 20 Bandarenaike, Felix, 135 Bandarenaike, Madame, 135 Baran, Paul, 16 Barger, Harold, 6

Batt, William, 21 Bauer, Chatherine, 19 Beattie, J.R., 19 Bell, David, 182 Benham, Frederic, 5, 11 Bennett, Edward, 163 Beveridge, William, 7 Bishop, Robert, 73 Blaug, Marc, 129, 130 Boeke, Jan, 71 Boody, Elizabeth, 17 Boudeville, Jacques, 206, 208 Bowman, Jean, 129 Branco, Castello, 102, 103, 107, 108, 110, 111 Brichant, Andre, 38 Britnell, George, 9 Broughton, Thora, 258, 259 Brown, Carey, 73 Bryce, Robert, 9 Bulhoes, Octavio, 99, 103, 104, 105, 107, 108, 110, 128 Burbank, Harold Hitchings, 14 Burns, Arthur, 21 Buwono, Sultan Hamengku, 54, 59

Campos, Roberto, 99, 103, 104, 105, 106, 107, 108, 110, 124, 128, 138 Carnap, Rudolph, 12 Casey, Sir Richard, 26, 27 Chamberlin, Edward, 14 Chevrier, Lionel, 170 Chipman, John, 112 Chou En Lai, 76 Clark, Colin, 25 Clark, Donald, 17 Clark, J.M., 5 Cochrane, Donald, 25 Cochrane, Merle, 53 Cohen, Maxwell, 24 Coleman, Rosalind, 259 Commons, John R., 4 Coomaraswami, Roger, 135 Coombes, Philip, 125 Coombs, H.C. (Nugget), 25 Copland, Douglas, 25 Corea, Gamani, 120, 135, 142 Corragio, Jose, 221 Coulombe, Guy, 139 Crawford, Sir John, 16, 25 Crum, Leonard, 14

278 Index of names Dalton, Hugh, 5,11 Deane, Rod, 238 Demers, Claude, 171 Dennison, E.F., 128 de Telia, Guido, 113 Dewey, Alice, 74, 81 Dilawar Ali Khan, 222 Djuanda, Dr., 76, 93 Domar, Evsey, 16, 73 Downing, Richard I., 24, 26, 27 Dunlop, John, 16, 18 Durbin, E.F.M., 6 Duthy, Walter, 24 Easterbrook, Thomas, 23 Echavarria, Jose Medina, 98, 136 Eckaus, Richard, 16, 73, 74 Emmerij, Louis, 124, 153 Fabella, Armando, 98 Fa gg. J ohn » 74 Fellner, William, 16 Firestone, John, 24 Fisher, Irving, 5 Fishlow, Allan, 106 Foresey, Eugene, 23 Francoeur, Claude, 171, 181 Frank, Andre Gunder, 240, 241 Frey, Gilberto, 112 Friedmann, John, 221, 222 Furtado, Celso, 115 Gaitskell, Hugh, 6 Galbraith, J.K., 14, 21 Garcia, Fanny, 89 Carver, Frederick, 10,11 Geertz, Clifford, 50, 51, 74- 176 Geertz, Hilary, 74 Gerin-Lajoie, Paul, 179 Ghosh, A.K., 120 Giblin, L.F., 25 Goodrich, Carter, 113 Gordon, Lincoln, 103, 104, 105

Gordon, R.A., 117 Goulart, Joao, 100, 102, 103, 110 Gregory, T.E., 6 Guchman, Bodan, 221, 222 Gudin, Eugenio, 100, 111 Haberler, Gottfried, 14 Haddad Luthi, Gaston, 213. 245 Hagen, Everett, 44, 73, 74 Hale, Everett, 95 Hamilton, David, 213, 215 Hansen, Alvin, 5, 10, 12, 13, 14, 15, 50 Hansen, Mabel, 15 Hansen, Niles, 140 Harberger, Arnold, 112 Hardoy, Jorge, 221 Harris, Seymour, 14, 16, W

Harrod, Roy, 25 Hart, Albert, 112, 123 Hartt, Douglas, 213, 215, 245 Hassan, 61 Hatta, Mohammed, 52, 53. 54. 55. 56. 57.6°. 62, 78 Hayek, Fredrich von, 6, 9 Haynes, Kingsley, 146 Haynes, Winthrop, 16 Heaton, Herbert, 11 Heuser, Henry, 8, 194 Hicks, J.R., 6, 7 Higgins, Agnes C. Quamme, 131 Higgins, Alain Sinclair, 117, 122 Higgins, Benjamin Howard Jr, 118 Higgins, Ean Sanderson, no, 122, 143, 157, 195. !97. 218, 219, 220, 223, 238 Higgins, Edward Thor (Tory), 118, 175 Higgins, Holway, 12

Higgins, Jean Downing, 81, 86, 87, 96, 102, 108, 1 2 1 , 1 2 2 , 143, 156, 157, 1 7 2 , 177, 2O8, 2 l 8 , 219, 2 2 2 , 223, 225, 226, 235, 250, 258

Higgins, Richard, 224 Hilhorst, Jos, 222 Hirschman, Albert, 74 Hollinger, William, 73, 76 Holway, E.W.D., 4 Honjo, Masahiko, 219 Hudon, Denis, 170, 178 Hughes, Helen, vii, 25 Humphrey, John, 24 Ichimura, Shinichi, 120 Idris, King, 30, 38, 39, 43 Inman, Mark, 4 Isaacs, Harold, 73 Isbister, Claude, 9 James, Cyril, 21, 22 Jay, Robert, 74 Jayawardene, President, 135, 228 Jolly, Richard, 153 Jones, Howard, 40 Kaldor, Nicholas, 6 Kalecki, Michael, 23 Karmel, Peter, 25 Keenleyside, Hugh, 27 Keirstead, Burton, 23 Kemp, Murray, 25 Kennedy, Edward, 101 Kennedy, John, 17, 77 Kennedy, Robert, 17 Keyfitz, Nathan, 64 Keynes, John Maynard, 9, 13, 50, 136 Keyserling, Leon, 19, 20 Kheow Bien Tie, 48, 68 Kindleberger, Charles, 73 Kirkor, Stanislas, 32 Knight, Frank, 23 Krause, Walter, 81 Kubisch, John, 103, 105, 135. i38 Kuklinski, Antoni, 222

279 Index of names Rung, David, 17, 18 Rung, H.H., 17 Kuntjoro-Jakti, Dorodjatun Dr., 261 Kybartis, Sandra, 213

Morgenstern, Oskar, 11 Musgrave, Richard, 16 Myrdal, Alva, 125, 145 Myrdal, Gunnar, 15, 141, 144

Lakshmanan, T.R., 221 Laski, Harold, 6 Lebel, General, 39, 40 Lederer, Emil, 11 Lerner, Abba, 6, 14 Lerner, Daniel, 73 Logan, Harold, 4 Loutfi Bey, 31 Luckett, Dudley, 242

Nasution, Colonel, 78, 92 Nasution, Dr. Darmin, 261 Nehru, Jahawalal, 76 Nelson, Easton, 96, 97, 98, 101, 105 Netto, Delfin, 100, no, 128 Neumark, Daniel, 49 North, Douglass, 106 Nurkse, Ragnar, 74

Macdonald, John A., 213, 215 McGranahan, Donald, 144 Machlup, Fritz, 14 Mackie, James, 64 Maclaurin, Rupert, 73 McVey, Ruth, 74 Maglaque, Allan, 90 Magsaysay, President Ramon, 81, 82, 83, 84, 85 Maheu, Rene, 125, 127 Mahler, Dr., 132 Mair, Lucy, 7 Malenbaum, Wilfred, 72 Maraj, James, 239 Marcos, Ferdinand, 82, 94 Marget, Arthur, 10, 11, 12 Marsh, Donald, 23 Marshall, Alfred, 10, 23 Martin, Fernand, 203, 206 Meadows, Robert, 73 Medley, Sir John, 26 Mehmet, Ozay, 196, 197 Melville, Sir Leslie, 25 Mera, Koichi, 221 Millikan, Maxwell, 72, 73, 80, 95 Millikan, Tina, 72 Mintz, Jean, 74 Misra, R.P., 220 Mitchell, Wesley, 5, 21, 22

Ondt, Dr., 68 Paakasem, Phisit, 222, 260 Paauw, Douglas, 73, 76 Paiva, Maria Jose, 99 Pajetska, Josef, 120, 142, 145 Palander, Tord, 11 Palmer, William, 55, 77 Pauker, Guy, 74, 76, 77 Pelt, Adrien, 31, 38, 39, 40,41 Perroux, Frangois, 148, 151, 208 Phillips, H.M., 125 Poetske, Leonard, 211 Poole, Ithiel, 73 Post, Langdon, 19 Postan, Michael, 5 Poulin, Frangois, 139 Power, Eileen, 5 Power, Thomas, 31, 39, 40 Prebisch, Raul, 115, 127, 128 Price, Anthony, 176 Proulx, Pierre-Paul, 192 Puyat, Senator Gil, 84 Pye, Lucien, 73 Quadros, Janos, 99, 100

Ramirez, Conrado, 90 Raynauld, Andre, 138, 182, 184, 192, 206 Raza, Moonis, 221, 222 Reilly, Edward, 4 Reynolds, Lloyd, 16 Richardson, Harry, 221, 223 Riches, John, 124 Ritchie, Alan, 25, 26, 27 Robbins, Lionel, 5, 6, 7, 8, n, 13, 15 Rodriguez, John, 74 Rodwin, Loyd, 223 Rosenstein-Rodan, Paul, 6, 8, 72, 74, 108, 112 Rostow, Elspeth, 73 Rostow, Walt, 73, 74 Roxas, Sixto, 90 Russell, Bertrand, 12 Ryan Edward, 74 Saab, Gabriel, 122 Sadli, Mohammed, 64, 68, 262 Salah, Ben, 171, 173 Salih, Kamal, 222, 250 Samuelson, Paul, 15, 73 Savoie, Donald J., 130, 2i7> 245 Sazanami, Hidehiko, 221 Schact, Hjalmar, 121 Schultz, Theodore, 129 Schumpeter, Joseph, 13, 14, 15, 17, 18, 26, 27, 55'65 Scott, Frank, 24, 27 Seers, Dudley, 136, 153 Selvanathan, 196, 234, 237

Sen, Amartya, 129 Siamwalla, Ammar Dr., 259, 260 Siclay, Pierre, 157 Simard, Jacques, 207 Simonsen, Ove, 150 Simonsen, Roberto, 100, 105 Singer, Hans, 85, 90, 142, !53. 221 Sjafruddin, Prawirane-

280 Index of names gara, 48, 57, 60, 62, 63, ?6, 93 Skelton, Alex, 19 Smithies, Arthur, 14 Solow, Robert, 15, 73 Stigler, George, 11 Straus, Nathan, 19, 20, !33 Stravinsky, Igor, 12 Streeten, Paul, 221 Strong, Maurice, 169, 170, 177, 178, 179 Suharto, General, 59, 62, 71, 78, 92, 93, no, 262, 263 Sukarno, President, 52, 53' 54. 55. 56, 58. 6°. 62, 75, 78, 92, 93, 102, 262 Sumitro Djodjohadikusumo, 48, 59, 60, 61, 62, 63, 68, 75, 79, 93, 261, 262 Sunarjo, Dr., 68 Sunkel, Osvaldo, 115 Sweezy, Alan, 14

Sweezy, Paul, 14 Takdir Alishabana, 75, 77 Tarski, Alfred, 12 Taussig, Frank, 5 Tawney, R.H., 5 Thompson, David, 24 Thorssen, Ilga, 144 Timlin, Mabel, 9 Tinbergen, Jan, 120 Tintner, Gerhard, 11 Tobin, James, 16 Tong Yaw Hong, 132 Tout, Herbert, 10 Towers, Graham, 19 Trudeau, Pierre, 24, 169, 179, 201, 206, 214, 215 Turcan, Paval, 156, 161, 242 Usher, Albert Payson, 14 Usher, Daniel, 150 van Ginkel, Sandy, 145, 146 van Roy, Edward, 259

Veblen, Thorstein, 45 Velloso, Joao Paulo, 100, 105, 110 Villard, Henry, 16 Villard, Oswald Garrison, 16 Villegas, Cosio, 115 Viner, Jacob, 5 Vinton, Warren, 19 Volkoff, Alex, 261 Ward, Barbara, 182 Ward, Eric, 81, 83 Watkins, Frederic, 23 Widjojo Nitisastro, 64, 262 Williams, John H., 14, 15, 16, 17 Willner, Anne, 64 Wilopo, 52, 58, 59, 62, 93 Wolfe, Marshall, 142, 143. M4 Zaggety, George, 213

Index of Institutions

Association of Southeast Asian Nations (ASEAN), 90, 260, 263 Australian National University (ANU), 64, 218, 234 Badan Perencanaan Pembangunan Nasional, National Development Planning Board (BAPPENAS), 262 Canadian Institute for Research on Regional Development, 209, 215, 217, 232, 245- 250 Canadian International Development Agency (CIDA), 146-60, 170-92, 219-23, 250-64 Center for International Studies (Massachusetts Institute of Technology) (CENIS), 74 Center for Monetary Studies of Latin America (CEMLA), 98 Centre for Applied Studies in Development (University of the South Pacific) (CASD), 234-43, 249, 258 Centre for Research in Economic Development (University of Montreal) (CRDE), 185-92 Commonwealth Fund for Technical Cooperation (CFTC), 196, 197, 234—7 Commonwealth Heads of Government Meeting (CHOGM), 236 Commonwealth Heads of Government Regional Meeting (Asia and South Pacific) (CHOGRM), 236 Conferencia sobre Educacion y Desorollo Economico Social (Chile) (CEDES) 126—8 Department of Regional Economic Expansion (DREE), 201—10 Development Planning Associates of Ottawa (DPA), 223—5 Developpement Regional Integre Petit Goave-Petit Trou de Nippes (Haiti) (DRIPP), 131, 155—66, 222, 234, 242, 269 Economic Commission for Latin America (United Nations) (ECLA) (CEPAL), 98, 111-15, 126-7, 142-4 Economic Planning Unit (Malaysia) (EPU), 132, 148-52 Escritorio de Pesquisas Economicas Applicadas (Bureau of Applied Economic Research, Brazil) (EPEA), 104-7 Federal Housing Agency (United States) (FHA), 133

282

Index of Institutions

Federal Works Agency (United States) (FWA), 20-1 Food and Agricultural Organisation (United Nations) (FAO), 31-42, 122-5, 143> 188—90, 265 General Agreement on Trade and Tariffs (GATT), 237 Harvard University, 11-19, 2 3> 58, 64, 73, 77, 97, 103, 182, 259 Indonesian Communist Party (PKI), 53, 60 Indonesian Institute for Economic and Social Research (IESR), 250-62 Indonesian Nationalist Party (PNI), 53, 58—60 Indonesian Socialist Party (PSI), 53, 58-9 Inter-American Development Bank (IADB), 162-4 International Labour Office (United Nations) (ILO), 23—4, 31, 37, 103—13, 123—30, !55 International Monetary Fund (IMF), 31, 104—8, 225 Lembaga Kemajuan Pahang Tenggara (Pahang Tenggara Development Authority) (DARA), 147-9, 254-8 Less developed countries (LDC), 131, 143, 166, 178, 217, 244—5, 2^7 Libyan Finance Corporation (LFC), 33, 35 Libyan Public Development and Stabilization Agency (LPDSA), 32, 35 London School of Economics (LSE), 5—23, 194 McGill University, 3, 8, 21, 23-5, 27, 46, 47, 58, 73, 100, 112, 213 Malaysian Institute for Economic Research (MIER), 250-62 Massachusetts Institute of Technology (MIT), 23, 51, 71-9, 91-113, 240 Murdoch University, 218, 219 National Bureau of Economic Research (Columbia University) (NBER), 22 National Economic and Social Development Board (NESDB), 260 National Economic Council (Philippines) (NEC), 80—93 National Industrial Research Council (Philippines) (NIRC), 85 Organisation for Economic Co-operation and Development (OECD), 102—4, 125~ 30, 264 Organisation of African Petroleum Exporting Countries (OAPEC), 40 Public Work Reserve (United States) (PWR), 20 Public Works Canada (PWC), 213-15 Superentendencia para Desinvolvimento do Nordeste (Brazil) Northeast Development Authority (SUDENE), 100—06, 115 Swedish International Development Agency (siDA), 177 Technical Assistance Administration (United Nations) (TAA), 31, 37 Thailand Development Research Institute (TDRI), 250, 259-62 United Nations Centre for Regional Development (UNCRD), 154, 219-35 United Nations Conference on Trade and Development (UNCTAD), 120, 142, 237 United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), 167, 236, 259 United Nations Educational, Scientific and Cultural Organisation (UNESCO), 31, 37, 98-115, 125-32, 143, 191, 265 United Nations Research Institute for Social Development (UNRISD), 131-3, 14354 United States Agency for International Development (USAID), 81, 98-105, 121-38, 194 United States Housing Administration (USHA), 19-21, 133 University of California at Berkeley, 23, 106, 117, 118, 263 University of Hawaii East-West Centre, 40, 118 University of Indiana, 146

283 Index of Institutions University of Melbourne, 24, 25, 263 University of Minnesota, 4, 10, 11, 15—18 University of Moncton, 208, 209, 245 University of Montreal, 138, 140, 156, 169, 180, 182, 184, 185, 192, 195, 197, 203, 206, 242 University of Ottawa, 195—7, 216, 218 University of Papua New Guinea, 250 University of Saskatchewan, 9, 10 University of Texas, 94, 96-8, 104, 106, 111, 117, 118, 140, 195, 240, 259 University of the South Pacific (USP), 235-42 University of Warsaw, 142, 145 University of Western Ontario, 4, 21 War Production Board (United States) (WPB), 21—2 World Employment Program (United Nations) (WEP), 124, 153, 154 World Health Organisation (United Nations) (WHO), 31, 37, 125-32, 143, 232 Yale University, 15, 23, 89, 105, 259