Transcript Slide 1

INDEX
INTRODUCTION
STRATEGY
DUALISTIC
THEORY
APPROACH
CONCLUSION
 SOCIAL DUALISM
 TECHNOLOGICAL DUALISM
 FINANCIAL DUALISM
INTRODUCTION
 Dualism means the condition of being double called
duality.
 Dualistic - Relating to the philosophical doctrine of
dualism; "a conflict between good and evil"
 Dualism theories assume the economic and social
structures of different sectors they differ in organization,
level of development, and goal structures. Usually, the
concept of economic dualism differentiates between two
sectors of economy.
 The two sectors have inter relation and interdependence
according to its own pattern. The modern sector can be
considered an economic enclave of industrial countries,
and have little effect on the internal market.
 Economic, technological, and regional dualism are
often the consequence of a social dualism, the
absence of relationships between people of different
race, religion, and language, which, in many cases, is a
legacy of colonialism.
According to Dr J .H. Boeke there are three types of
dualism:
 1) Social dualism 2) Technological dualism
3) Financial dualism
SOCIAL DUALISM
 Dr J.H.Boeke is a Dutch economist propounded the
theory of social dualism. This theory is applicable only on
under development countries based on social
development of Indonesian economy. Today the under
developed countries are characterised by dualistic
economic structure.
 Interdependence and interrelation are called the social
system or social style. It is not necessary that a society be
exclusively dominated by one social system. If at least
one social system prevails the society may be called
homogeneous. But when two or more social systems
prevail simultaneously the society may be called a dual
society. Boeke qualifies the term dual society or societies.
It would be impossible to distinguish between
homogenous and dualistic society.
 Boeke defines a dual society is a society where one
of the two prevailing social system . The most
frequent form of social system imported from
abroad in under developed countries.
 Imported social system is under influence and
supervision and uses of advanced techniques and
where the average standard of living is high.
 On the contrary, the native or prevailing social
system is traditional with low level of techniques
along with low standard of living of the average
person Boeke called it’s a social dualism.
STRATEGY
 LIMITED NEEDS
In dualistic economy there are limited needs in the
society .In western society wants are unlimited. The
reason for limited needs in dualistic economy has simple
habits and simple way of living . According to
Dr J. H. Boeke, most people provide for themselves and
satisfied with what they are able to produce for
themselves so that needs have to remain modest in
quantity and quality.
The people of eastern society (backward society) do
not aspire for more and more, rather they feel satisfied
when their immediate needs are duly met.
In simple words, the people remain contented with their
present. Limited human needs motivate to produce
which does not exist in the eastern society and leads to an
economic activity.
 UNORGANISED LABOUR
In Dualistic economy labour is unorganized, passive,
silent and casual. Labour is unskilled and immobile.
People hesitate to leave their huts and homes as they are
very much attached to these things .The labour remains
unorganized and bargaining power is weak. They do not
take initiative for any adventure. In contrast the people
in western economy are progressive, dynamic, and
forward looking. They display their interest in every type
of adventure.
 ACCENT ON SELF SUFFICIENCY
Eastern society considers family as a unit and the
individual self sufficiency is the dominant idea. They
organize production and collect investment.
According to Dr Boeke “Not only they feel strangers to
basic forms of exchange like business and profession
but so far business always one man affairs that can
hardly compete with western capitalism. Thus the
main object of production is not profit making but
satisfying personal needs.
 People of dualistic economy hesitate to use the
modern technology.
 People lack in organizational skill and ability.
 There is absence of professional trading.
 Lack of elasticity of supply.
 Export is the main objective of foreign trade, western
society as distinct from eastern society and makes
imports possible.
 People are immobile and thus leave the village
community.
APPROACH
Boeke’s theory of social dualism on the following
grounds
 WANTS LIMITED
People in underdeveloped countries have limited
wants.
 POSSIBILITY OF TECHNOLOGICAL PROCESS
Possibility
of
technological
progress
in
underdeveloped countries shown on the basis of
experience because in under developed societies a large
number of industries are organized.
 TRADE UNIONS NOT VISUALISED
According to Prof Boeke the workers are
unorganized,
passive,
silent
and
casual.
In
underdeveloped countries. trade union activities are
becoming more and more streamlined all over the world.
Casual labourer are organized in tea, coffee and rubber
plantation industries.
 CASUAL LABOUR NOT ORGANISED-NOT TRUE
Labour is unorganized, passive, silent trade union
activities are becoming more and more organized and
active even in underdeveloped countries like India,
Indonesia. Casual labour may not be fully organised in
agriculture but in tea, coffee and rubber plantations the
trade union movement are strongest.
 PROBLEM OF UNEMPLOYMENT IS NOT INSOLUBLE
Employment in underdeveloped countries have
capacity to make huge investment creating employment
opportunities is very limited. The developed countries
always aim in reducing unemployment and poverty
through development planning. The unemployment
policies are formulated by the government.
The solution of unemployment is beyond the reach of
the governments of the under developed countries.
 SOCIAL DUALISM IS NOT A THEORY
Social dualism has been criticized that it is not a
theory but a mere description of under developed
economies. Boekes dualistic theory explains that
eastern economies fails to furnish the social and
economic theory of under developed countries . A
theory of underdevelopment explains the problem in
dualistic theory.
 EASTERN LABOUR NOT IMMOBILE
It is not possible to accept that people in eastern
economies leave village community. In Eastern
economies migration of the village people to cities
attraction to the urban life such as cinemas, shops,
cafes, sports events and employment opportunities
have always led to migration from villages to cities no
evidence that oriental labour is more immobile than
western labour.
CONCLUSION
 Boeke’s theory of social dualism presents a gloomy
picture for under developed countries. Effort was
made to raise the standard of living of the people of
Indonesia during 1900 to 1930 this policy was great
flop which gave the feeling of gloom, sorrow, and
defeatism.
 This theory does not provide answer to problems of
underdevelopment. In the end there are no special
economic theories or methods for underdeveloped
world.
TECHNOLOGICAL DUALISM
 Prof Benjamin Higgins propounded the theory of
technological dualism. Boeke of social dualism failed
to solve the problem of unemployment which is the
basic problem of under developed countries like
India.
 Technological dualism implies the use of different
production functions in the advanced sector and the
traditional sector of an under developed economy.
Technological dualism associates
the structural
unemployment or technological unemployment.
 According to Dr R.S.Eckaus leading the problem of
underdeveloped
areas.
Unemployment
of
underdeveloped areas is not basically due to lack of
effective demand in market. Limited opportunities
for technical factors create the problem of
unemployment in underdeveloped areas. Due to
disequilibrium factor level may rise and receives
different returns from price relationship which is the
cause of unemployment or under-employment in the
under developed areas..Technological dualism
actually relates to phenomena of under developed
countries with special reference of unemployment
problem.
STRATEGY
 Production techniques are relatively labour intensive.
 It is engaged in peasant agriculture and handicrafts or
very small industries.
 Production function in industrial sector or modern
sector.
 To illustrate technical dualism professor B Higgins
assumes to factors of production (labour, capital)
modern sector and industrial sector is composed of
heavy industries, plantation, mines and oil fields etc.
 Prof Higgins argues that during the last two centuries
there has been little or no technical progress in
agriculture or handicrafts, while in the industrial
sector (i.e. plantation, mining and petroleum etc)
rapid technological progress took place. Problem of
unemployment in the rural sector is high wage rates
by the government policy. Industrial wage rates are
high relative to the productivity of the workers in the
industrial sector are left with no option but to
introduce the labour saving devices. Industrial sector
provide employment and absorb growing population.
 Technological dualism discusses the problem of
unemployment in underdeveloped countries. Fixed
factor proportions in the industrial sector and
growing population in the rural sector.
APPROACH
The Higgins theory of technological dualism is an
improvement over Boeke’s theory of social dualism.
Unemployment gradually arises in the rural sector of
the dualistic societies.
 Unemployment gradually arises in the rural
sector of the dualistic societies. Prof G.M Meier
has expressed doubts:
 Has production in the advanced sector actually been
carried on with fixed coefficients?
 Even if an advanced capital intensive process was
initially imported, was there subsequently no
adoption to the abundant labour supply?
 Was technical progress actually labour saving in the
advanced sector?
These are questions according to which Prof. G.
M. MEIER call for studies.
 COEFFICIENTS NOT FIXED IN INDUSTRIAL
SECTOR
In this theory of production in the industrial
sector is carried fixed proportions between labour
and capital. It is not supported by empirical data.
Change is the rule of life and hence every thing is
likely to undergo change in the dynamic world,
nothing remains fixed or constants.
 FACTOR PRICES DO NOT DEPEND UPON FACTOR
ENDOWMENTS
In this theory indicates endowments and different
production function price unemployment in the rural
sector.
 NEGLECTS INSTITUTIONAL FACTORS
There are many institutional and psychological
factors, influence factor proportions which have been
neglected by the Higgins.
 USE
OF LABOUR ABSORBING TECHNIQUES
IGNORED
This theory indicates highly capital intensive
techniques used in industrial sector. Such techniques are
labour absorbing which are totally ignored.
For example the Japanese agricultural development
cannot be attributed to the use of capital intensive
techniques. Application of better seeds, increasing
use of fertilizers improved methods of cultivation.
 UNEMPLOYMENT IS AMBIGUOUS
Higgins theory of technological dualism does
clarify the nature of unemployment in the rural
sector. He fails to asses’ labour supply in industrial
sector.
CONCLUSION
With the above criticism Higgins theory of
technological dualism is superior as compared to
Boeke’s theory of social dualism it appears to be more
convincing in saying that technological dualism is the
real cause of structural and technological
unemployment in the dualistic economics.
FINANCIAL DUALISM
 The theory of financial dualism was developed by
Prof. H.M.MYINT different interest rates between the
organized and unorganized money markets in
underdeveloped countries. The rate of interest in the
unorganized money market in traditional sector is
much higher as compared to the organized money
market in modern sector.
 According to Prof. Myint, the unorganized money
market consist of the non institutional lenders like
village money lenders, shopkeepers ,traders and
landlords etc. They charge very high rate of interest on
account of several factors.
STRATEGY
 Acute shortage of money due to small savings.
 Substantial amounts of money in gold, silver and
land.
 The risks in cost of landing money are quite high due
to large number of small borrowers.
 The village shopkeepers, traders, landlords and
money lenders occupy position in the village economy
and have powers over the peasants.
The high rate of interest which the peasants have
to pay not only formal interest charges but also
charges obtained through manipulating the prices the
commodities which the peasants buy or sell.
The organized money market on the under developed
countries, the rates of interest are low and the credit
facilities are available. The organized money market
consists of commercial banks
 The present under developed countries are faced with
inflation and balance of payments problems
consequently small business units like peasants, small
traders, handicraft producers etc in the traditional sector
were required to face not only the problem of high
interest rates but also of foreign exchange. Under the
colonial system the organized money market of the
under developed countries consisted of the branches of
the western commercial banks linked with international
financial market.
 The modern sector consisting of mines, plantation
and foreign trading enterprises was in position to
borrow money at low rate of interest both from
commercial banks and from the international capital
market. The organized money market of the under
developed countries has been separated from the
world capital market.
APPROACH
According to Prof Myint this had led to the
abbreviation of the economic dualism between
traditional sector and modern sector . The cheap
money policy by maintaining low rates of interest
made credit available to large industrial terms. The
low rates of interest have discouraged the flow of
capital funds from abroad . It has resulted in heavy
demand of loans the bulk of domestic savings at low
rates of interest .Modern industrial sector supply the
capital to the traditional agricultural sector and small
industries .Foreign exchange import correct the
balance of payments benefited the modern industrial
sector. Manufacturing industries encouraged to adopt
the highly capital intensive methods of production.
Capital goods are obtained cheaply at over valued
exchange rates. On the contrary, the agricultural
traditional and small sectors suffer for the problem of
foreign exchange such as
 They get imported consumer at relatively high prices.
 They fail to obtain the foreign exchange and import
permits easily.
 They also suffer because the government expenditure
or public services favour the urban areas as against the
rural areas.
 Public utility services like transport, communications
and electric power are easily available at favourable
terms to modern industrial sector than to the
traditional sector
 They are easily victimized by the corruption prevailing
in the society
CONCLUSION
 Govt controls over the supply of capital growth of financial
intermediaries in the under developed countries. They
controls large manufacturing units and commercial banks.
On the contrary they discriminated against the small
borrowers and the small money lenders and provide credit
to the small borrowers.
 The critics and suggestion to improve the financial
dualism.
 High overhead costs and salaries of commercial banks and
cooperative credit societies in the rural areas.
 Lack of necessary coordination between head office and its
branches.
 Non-availability of sufficient capital funds.
 Such countries should raise the official interest rates
in their organized markets.
 Capital funds should be provided both to the modern
and traditional sectors.
 Interest rates in the traditional sector should reduced
by providing unlimited credit funds both cooperatives
and moneylenders.
PRESENTED BY
KIRTI REDDY