Review Article:

EconomicStrategiesfor Growthwith Equity*

Graham Pyatt
World Bank
Redistribution with Growth has to be an important book by several
standards. As indicated by its authorship, the volume is the product of
various minds and is essentially the result of a joint effort by individuals
from the World Bank (Ahluwalia, Chenery, and Duloy) and from the
Institute of Development Studies (IDS) in Sussex, England (Bell and
Jolly). In fact, many others have been involved, and in their preface the
authors indicate that the original idea for some such effort came from
Dudley Seers, but illness prevented him from participating in it to fruition. However, Seers did manage to play a limited role as one of the
seven others to whom particular contributions are attributed.
The outcome is something between a book and a collection of essays,' built initially on the complementary experiences of the World
Bank-deriving both from its role as a multilateral development agency
and its expertise in quantitative economic modeling-and of the IDS,
Sussex, which has played such a significant role in the International
Labour Office World Employment Programme and is deservedly recognized for its insistence that development should not be perceived simply
in narrow economic terms. The result, then, is some variations on common
themes by five principal authors with seven supporting parts as the ultimate product of a workshop of 19 in Bellagio; discussion of a draft at a
conference of 49 in Sussex (including myself, incidentally); and, no
doubt, a great deal more by way of thought, comment, and hard work.
The book is in three parts: part I, "Reorientation of Policy" (chaps.
1-8); part II, "Quantification and Modeling" (chaps. 9-13); and part
* Hollis Chenery, Montek S. A. Ahluwalia, C. L. G. Bell, John H. Duloy,
and Richard Jolly. Redistributionwith Growth. London: Oxford University Press,
1974. Pp. xx+304.
1 The authors'preface (p. v) states: "Although we agree on the major themes
advanced, we have not tried to produce a 'committee report' that would reconcile
all our differences.Such an attempt seems inappropriatein a document that tries to
bring together the perceptions of policymakers as to the nature of economic and
political problems and the suggestions of researchers as to how to solve them."

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III, "Annex and Bibliography," in which the former sets out specific experience in six countries with an overview by Jolly. A technical point is
that the absence of an index frustrates attempts at cross-referencing between individual authors (whose contributions are occasionally repetitious) and discourages search into what has actually said in toto on
particular points.
In his introductory chapter, Chenery points out that the conception
of growth as separate from distribution is entirely inadequate, at least
in relation to developing countries, and that while the overall experience
has been that growth performance in the past 15 years has left substantial fractions in poverty, this general statement is by no means without
its exceptions. Accordingly, the book is to be seen "as a progress report
on work on [the issues this raises] in the World Bank and the Institute of
Development Studies over the past two or three years" (p. xiv). But in
fact the book does not always read that way. This may be because "It
grows out of dissatisfaction with the inadequate responses of policymakers to the growing problems of relative poverty and underemployment,
and a desire to provide them with analytic tools that are relevant to these
problems. While a comprehensive and adequately tested formulation of
the ideas advanced here is probably several years in the future, we do not
feel that it is necessary to wait for the results of further research to begin
the reorientation of policy that is so badly needed" (p. xiv). This, then,
is a study in political economy. It follows that reactions to it will depend
on political and social attitudes which, it will be assumed, can be influenced by analysis and research results.
In chapter 1 Montek Ahluwalia sets out an impressive array of facts
on inequality in most developing countries. Without getting tied down
by the philosophical difficulties of defining poverty, he is able to show
that over half the poorest people in the world are in India, and that, in
terms of proportions, poverty is pervasive in African and Asian countries
especially. Inequality, as distinct from absolute poverty, is more a Latin
American problem. The distinction between absolute poverty and inequality is not made a great deal of here or elsewhere in the volume and
calls for further consideration. In the context of Redistribution with
Growth this does not matter so much since the emphasis is largely on
policies to adopt within countries. But in terms of international trade
and aid it is clearly relevant, and the question of what support should
be given to relatively better-off countries which have the internal capacity
to alleviate the poverty within their boundaries remains to be addressed.
Chapter 2 is titled "The Economic Framework" and begins with a
discussion of how growth should be measured as a welfare performance
index. The basic idea is to form a weighted average of growth in incomes
for different socioeconomic groups. It is pointed out that GNP growth
maximization corresponds to weights proportional to incomes; that is,
the rich are given the greatest weight. A reorientation is proposed using
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equal weights or poverty weights: to count a 1 percent increase as contributing more to the growth of welfare if it is experienced by a poorer
person. There is a surprising absence of references to the economic theory literature in this discussion, which is a pity given the important contributions which have been made in recent years.
The chapter moves from the question of welfare measures to a brief
discussion "toward a theory of distribution and growth," followed by
"alternative strategies." In the former the major (and clearly valid) contention is that an explicit treatment of asset ownership is essential to understanding inequality, and that policy to help target groups must focus
on the factors of production they own rather than simply on the markets
in which they sell their services. This leads to the identification of four
basic strategies: maximizing GNP growth, redistributing investment, redistributing consumption, and the transfer of existing assets. It is then
argued that maximizing GNP growth is slow to benefit the poor, given an
initial position of underemployment. In contrast, poverty alleviation
through current transfers will obviously result in short-term gains but
may be at the expense of longer-term growth. Large-scale asset transfers
going beyond land reform, for example, are not likely to be politically
acceptable, while reductions in population growth rates can make the
position easier from a number of points of view. In arguing that the redistribution-with-growth strategy of directing increments of investment
(especially public) toward target groups is the main thrust to be followed, the analogy is drawn with an international aid strategy of assisting
investment and hence the capacity to be more self-sustaining in the future.
This chapter is crucial to the whole volume. The arguments about
alternative economic strategies make reference to a simulation model
which is set out in chapter 11 and which, when we come to it, is simply
not good enough. In particular, the transfer of existing assets, even restricted to land reform, is no longer encompassed. Meanwhile, the structure within the chapter of social preference functions on the one hand,
and a model of technical and behavioral characteristics on the other, is
familiar enough in economics. However, there are aspects of its use in
the present context which could benefit from being much more explicit.
Specifically, the set of alternatives between growth and inequality is not
defined by technology alone but depends crucially on the range of policy
options which are entertained. If the latter is limited, then the resulting
redistribution will be limited also even though, in terms of the objective
function, the weight given to poverty alleviation is very substantial. Much
more might be achieved by a less radical statement of objectives associated with a more far-ranging exploration of potential policies.
Chapter 3 focuses on the political framework within which redistribution with growth is conceived. In it Bell provides an excellent sketch
of the coalition of interest groups and the processes of accommodation
which often characterize pursuit of governments' main objective-to stay
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in power. He is therefore not optimistic about the chances for a comprehensive redistributive policy involving land reform, nationalization,
education, consumption transfers, and public goods. In each area there
are reasons why the full potential benefits may not be realized by virtue
of what is politically possible. Accordingly, the policy set is limited and
the scope for pursuit of such policies by planners and commentators is
constrained by the prior concerns of the political leadership.
In chapter 4 Ahluwalia goes deeper into the economic aspects of policy intervention, taking the political scope as given. This is a useful piece
which pulls together the contemporary wisdom on a number of issues,
such as the bias in market prices of factors, the effects of redistributing
final demand on employment, etc. But the spirit is somewhat depressed:
The chapter ends with, "In advocating an eclectic approach, we recognize that the conservative liberal solutions may not be sufficient.
The ultimate justification for eclecticism is not that it is always right but
that it is most likely to be politically feasible" (p. 90).
Chapers 5, 6, and 7 discuss the formulation of a strategy by first
defining four target groups: (1) small farmers, (2) landless laborers and
submarginal farmers, (3) the urban underemployed, and (4) the urban
(un)employed; second, it discusses a typology of countries based on
degree of urbanization, land availability, and the concentration of land
ownership. This, then, complements Ahluwalia's early chapter on where
poverty resides and its relationship with inequality by showing, through
various simulations, what is in fact fairly obvious, namely, that the scope
for poverty alleviation depends on how much there is to redistribute (and
hence on growth) and on the degree of inequality which is the starting
point. The argument then proceeds in chapters 6 and 7 to focus on rural
and urban target groups, respectively, the latter chapter being contributed by D. C. Rao. There is a great deal in both these chapters which is
of interest. Land reform is prominent in the rural strategy, especially in
the "Latin American" and "South Asian" archetypes. The extensive margin of land also provides a degree of freedom in the former case and
can be the main concern in "Africa," where less rigidity in tenure also
facilitates new forms of cooperative/collective institutions. Beyond this,
the need for support in terms of credit, extension services, and infrastructure to focus on the rural poverty groups is clearly spelled out. The
urban poverty groups are more difficult to analyze, if not to help, by
virtue of their origin, in good measure, in urban/rural differences. The
rural strategy is therefore an important part of the urban strategy, both
in relation to migration and in terms of food supply and the market for
urban manufactured goods. While Rao urges more equitable distribution
in health and education facilities and accommodation for both squatters
and informal production activities, the main thrust in the urban context
must be through his concern for employment generation, not least by
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correctingfactorprice distortions.But yet againwe come up againstthe
politicalrealitiesof both capitaland labor markets.
PartI of the book is completedby a chapteron internationaldimensions by Jolly.He putshis fingerfirmlyon whatworriesme throughmuch
of the earlierchapters-that "the extent of worldinequalityand poverty
is too seriousandpersistenta problemfor adequateremediesto be found
only within the range of currentlyrealistic debate" (p. 159). He then
proceedsto discussthe scale and natureof internationaltransferswhich
would be substantiveand even appearpossible in comparisonwith the
magnitudesinvolvedin the change in oil prices, which was only recent
at the time of writing.While recognizingthat such developmentsmay
"appearvisionaryandunrealistic"(p. 167), Jollyis not necessarilyindulging idle speculationwhen he says, "In the longer run, the world as a
whole, rich countriesand poor, could tire of the instabilitystimulated
by [developmentsin the bargainingpower of primaryproducers]and
supportmoves towardsa more rationalworld system, involvingorderly
financialtransferswithin,for example,some form of world income tax"
(p. 167).
In defaultof such majorchanges,there remainsa great deal which
could be done at the internationallevel to supportthe internalpolicies
of countries,or even simply to give them a chance. Jolly goes through
the list of trade,technology,privateinvestment,monetaryarrangements,
militaryactivities,and aid to make the point. He suggeststhat in the first
two areas,at least, thereare optionsfrom which all countriesmightgain
in terms of a more rationalstructureof world productionand by a reallocationof scientificresearchand developmentefforttowardthe problems underlyingmaldistribution.The internationalmobilityof labor, as
opposed to that of capital and goods, does not feature much in this
discussion.
Part II of the book is disappointing."AvailablePlanningModels"
(chap. 9) discussesextensionsof input-outputto cope with distribution
and employmentissues-a theme taken up in chapter 13 on "Research
Directions."Only sketchesof the extensionsare offered,and hence the
case for moreresearchin this areais presented.Chapter10 on "Sectoral,
Regional and ProjectAnalysis"is similarlyconcernedwith pointingup
the relevanceof previousresearchand the extensionswhich are desirable
for the future.2Both chapterscontainthreadswhich,it is suggested,need
to be drawntogetherwith those in chapter11, "A Model of Redistribution with Growth,"in order to arriveat an appropriateframeworkfor
evaluatingpolicy options. But even discountingthe obviousinternalde2 The material in chapters9 and 10 is drawn largely from two recent volumes:
Charles R. Blitzer, P. Clark, and L. Taylor, eds., Economy-wide Models and DepartmentPlanning (London: Oxford University Press, 1975); and Louis M. Goreux
and Alan S. Manne, eds., Multi-Level Planning: Case Studies in Mexico (Amster-

dam: North-Holland Publishing Co., 1973).

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ficiencies of the model (the specification assumes a single-good economy
with no external relations), it remains lacking in what must be crucial
elements. Thus there is no consideration of asset transfers, such as land
reform, in the model, notwithstanding the key role this plays in diagnosis
for "Latin America" especially; and the treatment of capital at the margin, that is, savings and investment, is innocent of any notion of returns
or a capital market. Clearly, then, the mapping from socioeconomic
classes on the one hand and their role in relation to capital on the other
is denied the emphasis which earlier arguments establish as justified.
Part II concludes with chapters on "Statistical Priorities" and "Research Priorities." Accepting the positive point that more and better data
would be helpful (as always), the chapter takes a negative attitude to
the UN Standardized National Accounts (1968) (incidentally, misprinted as 1958) and argues against complete information systems in
favor of concentration on the poverty groups. To the extent that this
should be read as a plea for focusing on people as the important unit,
rather than money magnitudes, the arguments are well taken. But it is
not clear to what extent the authors of this particular chapter (Bell and
Duloy) would want to go further. But be this as it may, their general
concern for a more flexible and detailed approach to classifications of
production, income and outlay accounts, etc. in order that duality and
poverty groups might be distinguished in the total framework is to be
supported. Their plea for data on assets is unfortunately not likely to get
far in political circles. Nor, as chapter 13 says, does "reorientation of
research alone . . . go much of the distance towards alleviating poverty.
A sustained political commitment is the primary condition. However, by
evaluating the dimensions of the problem and by demonstrating the effectiveness of different strategies and policies, research can contribute to a
climate of opinion strongly favorable to that commitment" (p. 249).
Here then, in the final sentence of the book, is the challenge for the
future which might with advantage have come much earlier in the text.
As it is, for the future the perceived research priority is to recast development analysis into a framework which recognizes different socioeconomic groups; how they behave in terms of consumption, savings, and
production; how they relate to each other and the linkages or leakages
which determine their accessibility with respect to policy influences; and
how they relate to both public and private assets and services. The translation of this into specific research activities will be interesting. At one
level it could simply be disaggregation of the household sector on lines
familiar from production studies. At another we could be concerned with
capital theory as a theory of social relationships. There is plenty of middle ground between these two.
Part III ("Annex and Bibliography") is a useful contribution. The
six country studies in the annex-India (Pranab Bardhan), Cuba (Dudley Seers), Tanzania (Reginald Green), Sri Lanka (Lal Jayawardena),
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Korea (Irma Adelman), and Taiwan (Gus Ranis)-could all with advantagehave been permitedmore space. Equally,the samplecould well
havebeen extendedto countrieswhichhad less concernwith distribution,
and others with concernbut less success. However, these brief reviews
of experienceremainvery worthwhileand bring out a numberof issues
which the main text skips over. Not least nationalizationand trades
unions loom much largerhere than earlier, as does the vexed question
of the role to be playedby the privatesector.One would like to see these
issuesof appropriateformsof organizationaddedto the researchagenda.
To sum up Redistribution with Growth is not easy. In the first

instanceit is a statementof what we need to know more about if poverty

and distributionare to be better understood.More ambitiously,it is an
attemptto specify appropriatepolicies given that enoughis known to be
surethat the problemswill not go away and mightwell be gettingworse.
However,the policies are conceivedin a restrictingpoliticalframework.
This may in fact be the appropriateway to set about influencingevents.
It might, on the other hand, have been more effectiveto challengethe
politicalconstraintsto yield to what might otherwiseprove to be inevitable economic forces. Politiciansmust give way in thinkingthat they
can constrainthese forces if they will not concede that they ought to
from some equitypoint of view. But this, then, has to refer to the politicians and people of the developedworld at least as much as those in
the countrieswhere poverty resides. Redistributionwith Growth is an
importantstatementof the authors'perceptionsof development.As such
it will raisequestionsin dormantminds.To the extentthat it is not strong
analyticallywe must wait for subsequentreportson researchin Sussex,
Washington,and elsewherefor some of the answers. Meanwhile,Redistributionwith Growth adds greatly to evolving perceptionsof what
the issues are. Its challengelies at the authors'own feet, alongsideall
other developmenteconomists,as well as with their political masters.

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