ABSTRACT
In the first phase, lasting from 1940 to 1979, government was assigned a primary, entrepreneurial role. The intellectual roots of this view can be found in the writings of the pre-Marshallian classical economists and in their immediate post-WWII followers, Sir Arthur Lewis, Paul N.Rosenstein-Rodan, Ragnar Nurkse, Hans W.Singer, Raúl Prebisch, Albert O. Hirschman and Harvey Leibenstein. They viewed economic development as a growth process that requires the systematic reallocation of factors of production from a low-productivity, traditional technology, decreasing returns, mostly primary sector to a high-productivity, modern, increasing returns, mostly industrial sector. But, unlike the later neoclassical development economists who assume that there are few technological and institutional impediments to the requisite resource-reallocation, classical development economists assume that the resource reallocation process is hampered by rigidities, which are both technological and institutional in nature. Investment lumpiness, inadequate infrastructure, imperfect foresight, and missing markets impede smooth resource transfers between sectors in response to individual profit maximisation and provide the bases for classical, structuralist approaches to economic development. Technological external economies in infrastructural and ‘basic’ industrial projects would lead to co-ordination failures that would cause private agents to underinvest in them.
