by Mahtab Uddin, PhD candidate, GDI, University of Manchester

In 1954, Arthur Lewis published a paper that set out his famous Dualistic Development Model, arguing that developing economies could foster capitalist growth by employing surplus labour from the subsistence sector. This intervention arrived at a critical juncture in human history. The world was recovering from the Second World War, many countries were emerging out of colonial regimes, achieving their first independence in centuries, and geopolitical dynamics were shaped by the tussles between capitalism vs. communism.

Since the article’s publication, the world has changed phenomenally, in some ways proving stranger than science fiction. Today, you can wake up in Japan but start working for Jamaica or replace Claudia, a tech worker, for Claude, the AI. The dynamics of the global political economy have also changed with the world shifting from a bipolar Cold War-era system dominated by the United States and the Soviet Union to a multipolar landscape, where emerging economies like China, India, and Brazil increasingly shape global trade, finance, and development policies. Furthermore, the integration of global markets through digital technology, the rise of multinational corporations, and the dominance of global value chains have redefined the movement of goods, services, and labour across borders.

Does Lewis’s model hold up in this changing world? Academics at the Global Development Institute (GDI) organised a two-day conference to debate this question on 5-6 December 2024, celebrating the 70th anniversary of Lewis’s paper.

 

Andrew Fischer (ISS) pitched in with a paper titled “The Radical Intent of Arthur Lewis’ Theory and its Relevance Today,” providing an overview of Lewis’s key contribution to economics literature and how his theories shaped subsequent ideas in development economics. Fischer also highlighted how many development economists misinterpreted Lewis’s model, often reducing it to a simplistic labour transfer framework while overlooking its emphasis on structural transformation and the distribution of the gains from growth. This misinterpretation downplayed the critical role of institutional and policy interventions in ensuring that capitalist growth would lead to equitable development, a cornerstone of Lewis’s original intent. This misinterpretation led to an overemphasis on labour migration and a neglect of the need to foster a dynamic capitalist sector.

 

Christopher Cramer and John Sender, both from SOAS, bring a different point of view. They explore “What development economists miss in the Lewis Model and what the Lewis Model misses”. Cramer starts by quoting British statistician George Box, “All models are wrong, but some are useful”. He argues that adding extra-economic compulsion (like Marx suggested) would make the model “more useful” and “less wrong” as coercion, coercive relations, trickery, delusion, abuse, and crisis often propel the transfer of labour in contrast to Lewis’s original assumptions. Indeed, history supports this argument. For example, transatlantic slavery or colonial exploitations fuelled capitalism in Europe and America, as noted by many, including Eric Walliams in his classic “Capitalism and Slavery”. In fact, it still holds true in many African nations, particularly those heavily driven by mineral extractions.

 

Fernando Rugitsky (UWE) brings up another limitation to the model with a paper titled “Truly Unlimited Supplies of Labour: The Lewis Model and Some of its Radical Critics,” arguing that Lewis’s argument of unlimited labour supply is wrong. He gives the example of Brazil, which suffered from labour shortages during its economic expansions. He argues that the transformation of Brazil’s manufacturing and agricultural sector resulted from the mass migration of Europeans to Brazil in the late 19th century until the mid-20th century. Rugitsky argues that the Lewis Model might not apply to many developed countries because of the assumption of this unlimited labour supply. For example, labour productivity has increased severalfold in the USA over the last few decades, but wages have remained stagnant.

Nevertheless, Rugitsky misses a few things in his paper, as I see it. First, in the current global nature of labour supply, someone can remotely work for any service sector firm (such as telecom customer service or many financial service providers), and thereby, the supply of labour for many industries could be more elastic than it was before. Moreover, with the current surge of AI, capitalists have an unlimited supply of “artificial labourers”.

 

The last presenter of the session, Dianna da Silva Glasgow from the University of Guyana, argues that the Lewis Model is still relevant. In her article “Continued Relevance of Arthur Lewis’ Strategy for Industrial Development in the Caribbean: A Case Study of Guyana”, she shows evidence that the Lewis Model’s predictions align with the existing surplus labour in Guyana, the current unemployment rate and limited industrialisation.

 

 

 

The first day of the conference ended with keynote speeches from three prominent economists: Kunal Sen (UNU-WIDER), Lindsay Whitfield (Copenhagen Business School) and Andy Sumner (KCL). In his keynote speech, Sen nicely summarised Lewis’s key arguments and supported them with an empirical investigation based on the Groningen Growth and Development Centre (GGDC) 10-sector database for 30 countries from 1970 to 2010. In so doing, he demonstrated that the Lewis Model correctly explains the development patterns of many developing countries.

Whitfield then provided a summarised journey through the key excerpts from Lewis’s 1955 book, The Theory of Economic Growth. She showed how many of Lewis’s ideas have shaped later research and are often being rediscovered in the 21st century. Following her, Andy Sumner provided further arguments and justifications on how the model is still relevant to developing countries.

The conference brought together debates on Lewis’s development model – both the critics and the supporters. Despite remarkable changes in economic systems, political and economic structures, and structural shifts, the debates on Lewis’s development model continue. This proves how pivotal Lewis’s model was in conceptualising development economics. No wonder Sir Williams Arthur Lewis is credited as the father and founder of Development Economics.

Mahtab Uddin is a final-year PhD candidate at the GDI. He is also an Assistant Professor of Economics at the University of Dhaka, Bangladesh and a Research Director (Honorary) at the South Asian Network on Economic Modeling (SANEM). He can be reached at mahtab.uddin@manchester.ac.uk

Note:  This article gives the views of the author/academic featured and does not represent the views of the Global Development Institute as a whole.

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