Evolution of Economic Thought

Economic Growth and Development

Introduction

In this chapter, we shall study in outline the evolution of economic thought, the nature and meaning of the concepts of economic growth and development, the basic characteristics of underdeveloped countries (UDCs), the role of government in economic development and Rostow's stages of economic growth.

Evolution of Economic Thought

The history of economic thought deals with the origin and development of economic ideas and their interrelations. We find economic ideas in the writings of ancient Hebrews, Indians, Greeks, Romans and the scholars of middle ages. In the words of Prof. Bell, 'economic thought is a study of heritage left by writers on economic subjects over a period of about 2500 years ; and it freely draws upon all phases of human knowledge'. If we study ancient economic thought, we can have a proper understanding of the growth of economic theories and institutions.

The Hebrew Economic Thought

The Hebrews had one of the ancient civilizations of the world. The period dates back to 2500 B.C. The Hebrews never studied economic problems separately. In their writings, they gave top priority for religion and ethics. And they gave importance to agriculture. However, the Hebrews had definite ideas on subjects such as usury (interest), just price, property rights and monopoly.

The Hebrew thought was against lending of money on interest to fellow Hebrews. But they could lend money to strangers and get interest.

In those days, as money was borrowed by the poor for consumption purposes, they thought that it was unethical to charge high rates of interest. We may note that the Hebrew thought on interest is similar to the ancient Indian thought an interest. The Hebrews had many laws against false weights and adulteration. They wanted businessmen to charge a just price and they imposed ceiling on the profit margin. The Hebrews realized the dignity of labour. The Hebrew civilization was a rural and agrarian civilization. One of their proverbs is : 'He that tilleth the soil shall have plenty of bread'. The Hebrews did not cultivate the land every seventh year. They left it fallow. The object was to conserve the fertility of the soil. Another interesting feature of the Hebrew thought was the 'Jubilee year'. The jubilee year was the 50th year. According to Jubilee year, the land sold to someone was to revert to its owner in the 50th year. Money was used during the Hebrew Period. There are references to different kinds of money in the Old Testament.

The Sabbath : The Sabbath was the weekly day of rest, relaxation and good living. In the words of Spiegel, ' the institution of the weekend was a social invention that has no parallel in the civilizations of Greece, Rome or other ancient cultures'. In short, we find that religion, ethics, law, economics and philosophy were all bound together. Though the economic ideas of ancient Hebrews appear primitive to a modern economist, we should remember that they had a profound influence on men's minds.

Greek thought, Roman law and Christian religion form the basis of European culture.

Economic Thought in Ancient India

Life, work and thought in ancient India was not based on a negation of life. It was not based on otherworldliness. As Pandit Jawaharlal Nehru put it, 'There is no idolatry in them, no temples for the gods. The vitality and affirmation of life pervading them are extraordinary'.

The caste system was an important institution in ancient India. But we have to keep in mind that in the beginning, the basis of caste was profession and not birth. It was only during the latter period that the caste system became rigid and led to many abuses. The joint family was another important institution in ancient India. Agriculture was an important occupation in ancient India and it was held in high esteem and monarchy was the most popular form of Government. There was a certain amount of decentralization. For example, village assemblies enjoyed a measurement of autonomy; interest rates were regulated and regulations were there against false weights and measures. Kautilya's Arthasastra gives details of the political, social, economic and military organizations of the past. Thiruvalluvar's Thirukkural is a book of ethics and it deals with Dharma or Aram (ethics), Artha or Porul (Polity) and Kama or Inbam (Love). Valluvar's economic ideas are found mostly in the second part of the Thirukkural, the Porutpal or the part dealing with wealth. By Porutpal, Valluvar meant all that kautilya meant by Arthasastra.

Valluvar considered freedom from hunger a fundamental freedom. He was against begging. He considered industry as real wealth and labour as the greatest resource. According to Thiruvalluvar, agriculture is the most fundamental activity. He tells that the ploughmen alone live as the freemen of the soil, the rest are mere slaves that follow on their toil. (Kural 1032). For Valluvar, good ethics is good economics.

Medieval Economic Thought : The period from 476 A.D, which marked the fall of the Roman empire to 1453 A.D., the year in which the Turks captured Constantinople is generally regarded as the Middle Ages. The society of the Middle Ages was a feudal society. People in middle ages lived in a natural economy. Men lived largely in small and self-sufficient units. The Church, the Bible and Aristotle exercised a great influence on the life and thought of Middle Ages.