INDEX DUALISTIC THEORY

INTRODUCTION

STRATEGY

APPROACH

CONCLUSION

DUALISTIC THEORIES

SOCIAL DUALISM

TECHNOLOGICAL DUALISM

FINANCIAL DUALISM

INTRODUCTIONDualism 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 DUALISMDr 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.

STRATEGYLIMITED 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 LABOURIn 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 groundsWANTS 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 VISUALISEDAccording 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 IMMOBILEIt 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.

APPROACHThe 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 FACTORSThere are many institutional and psychological

factors, influence factor proportions which have been neglected by the Higgins.

USE OF LABOUR ABSORBING TECHNIQUES IGNOREDThis 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 AMBIGUOUSHiggins theory of technological

dualism does clarify the nature of unemployment in the rural sector. He fails to asses’ labour supply in industrial sector.

CONCLUSIONWith 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 DUALISMThe 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.

STRATEGYAcute 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.

APPROACHAccording 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

CONCLUSIONGovt 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 BYKIRTI REDDY