Abstract
This chapter presents basic ideas of Elsenhans’ theory of development. Following him, underdeveloped economies can be defined as economies structured by marginality of large masses of the population. Essential mechanisms of capitalist economies as described in mainstream economics do not work in these economies: At low levels of development, a substantial part of the available labor force adds less to production than necessary for physical survival. Additionally, while average income is higher, marginal income is lower due to decreasing returns in agriculture. Not all types of technical progress contribute to removing rent and marginality, such as a general increase in productivity or an intensification of competition. The chapter shows that marketization does not necessarily overcome marginality and therefore the opening toward the world market comes with enormous challenges for development. The chapter models the possibility of mobilizing labor surpluses for “capitalist” investment. Historically, this possibility did not materialize because real wages, and hence internal demand, did not substantially increase, owing to these economies’ high degrees of marginality. These contradictions explain the tendency toward increased state interventionism as a plausible result.
Originally published as Elsenhans, Hartmut. 1995. Überwindung von Marginalität als Gegenstand der Armutsbekämpfung. In Bevölkerungsdynamik und Grundbedürfnisse in Entwicklungsländern. Schriften des Vereins für Socialpolitik 246, ed. Hans Bernd Schäfer, 193–221. Berlin: Duncker und Humblot.
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Notes
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\(f_{1} = 10\surd x, \, f_{2} = 10\surd x - 12,5 \, f_{3} = 10\surd x - 18,75\).
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This assumption is justified because labor cannot survive without at least a subsistence wage. In the real cases of transition to capitalism, especially in Latin America, there are however arrangements under which entrepreneurs pay less than subsistence wages for that part of production which they commercialize themselves—in exchange for rights in using land, the production of which is less certain, cf. Knight (1986: 49–51), Lynch (1992: 71–75).
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Similar model with differing conclusions regarding opportunities for technical development, using the example of China: Chao (1986: 8–12).
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Even a highly intensive analysis of the problem of the poor avoids, such as does Geremek (1980), quantitative evaluations of the phenomenon of marginality.
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Mingay (1963: 92), Grabowski (1991: 11–14), and Minami (1986: 388). In such a scenario the terms-of-trade between agriculture and industry may deteriorate. This is compatible with constant real incomes and increasing purchasing power for industrial products. I showed elsewhere the link between economic growth and increasing mass incomes as a condition for capitalist growth (and not as a result of it). This link may appear in the form of improving terms-of-trade between hours worked in agriculture and industrial products together with stagnating nominal but also under certain conditions stagnating real incomes. In the transition to demographic growth and the implied transformation of agriculture which faces increasing demand, there is the possibility of increasing costs of agricultural production. In such a case, real incomes in relation to products may not have increased, but stagnating incomes reflect increases in relation to a deteriorating average productivity, Elsenhans (1976, 1983, 1983). Position confirmed by Broadberry and Gupta (2006: 3–7). When different spending components are distinguished, real wages increased slowly in comparison with increases in average productivity, because productivity in agriculture initially decreased: Less productive agricultural land had to be put into cultivation. In the same time purchasing power for industrial consumption goods increased.
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The text was written in 1994. So, it could not consider Piketty (2014). To the difference to Piketty, I do not consider these different growth rates as a condition of capitalism but as a deviation of capitalism to a rent-based structure. Therefore, I write about the rent-oriented decline of capitalism (Elsenhans 2015). I consider that for getting majorities in the West one does not have to show, as Piketty does, that this difference in growth rates is unjust, but that it destroys capitalism. This is because very few people want to abandon capitalist regulation for state regulation if it is not inescapable.
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This is not identical with the Marxist tendency of the profit rate to fall. In case of appropriately rising real wages, which diminish the speed of accumulation to the level of the possibilities of technical progress, this tendency of the profit rate to fall would not occur. Such a configuration would correspond to capital accumulation parallel to the rate of technical progress and could be called capital accumulation in line with the exogenously (outside capital accumulation) generated technical progress. This was interpreted here as being time-dependent, provided that factors like competition facilitate this time depending discovery process. Cf. also Nadiri and Schankerman (1981: 318).
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The literature on the subject is relatively old and, the counterargument is dismissed by the mainstream as having been definitively rejected: Raveau and Vossenaar (1972: IV), Cline (1975: 395), Tokman (1975: 58). The opposing argument about a positive link between redistribution and growth has been reformulated, but it is not discussed by the mainstream following Murphy et al. (1989: 534). Cf. also Dutt (1991).
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Consequently, the share of this additional income in total income of our farmer is lower than the share of this additional labor time in the total time he is working.
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This applies also to the more recent contributions of US-American theory of rent seeking as in the edited book of Rowley et al. (1991).
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von Nardroff (1962: 137–140), Turner (1966: 28), and Shannon (1966: 41). This discussion is characterized by the lack of integrating the problem of marginality. In its center it deals with the absolute volume of the unemployed who migrated out of the cities. The fact that any additional farmer family created jobs by its demand for nonagricultural products in the cities and that the more that its productivity allowed higher consumption of industrial products is rarely investigated. After this theoretically cut short discussion, the American debate concentrated on property concentration. Cf. as examples Pessen (1971, 1982). Inequality is however secondary when the growth of mass consumption was assured by rising real wages. The struggle of American labor for free access to land credits it with more insight into the real interdependencies than on the part of academic social sciences, Commons (1918: 5).
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Yagr = net production of agriculture, Wagr = labor costs in agriculture, wage multiplied by volume of employment, \(w_{unit}\) = wage per unit.
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Elsenhans, H. (2021). Overcoming Marginality as an Objective of the Struggle Against Poverty. In: Warnecke-Berger, H. (eds) Development, Capitalism, and Rent. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-62605-1_5
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