Apr 282008

It is simplistic to assert that population shifts are the same as structural transformation. Structural transformation in the Lewis theory of development begins with a shift of surplus rural labour to urban areas. That is, productive labour is fully employed gainfully in the rural agricultural sector and the ones with zero marginal product migrate until all surplus rural labour is absorbed in the formal urban sector.

The model assumes full employment and employment generation capability of the urban sector through full re-investment of the profits. After the absorption of surplus labour, the productive workers begin to get attracted to the urban sector as the wage rates go up also to induce productive workers to leave the traditional sector for the modern sector. As labour migrates in larger numbers, traditional sector has to then rely on capital- and technology-intense methods to enhance agricultural production and productivity. The process of development is reinforced through rural-urban migration that ends up in both industrial and agricultural development with benefits shared equitably by all.

While the model is based on assumptions not all of which may bear out in real life for example full re-investment of profits, full employment in the urban sector, and constant initial wage rates; it does illuminate the conceptual underpinnings of structural transformation.

The Lewis two-sector model became the basis of development process in many labour abundant underdeveloped countries during their initial period of development towards the middle of the 20th century and thereafter. However, several misconceptions came up due to the model’s simplistic interpretation by many policy makers and analysts alike. One of the misconceived notions is that all people movement from rural to urban areas is viewed as structural transformation and thereby development. This is not true. For, whether people stay in the countryside or move out to urban areas, indicators of development remain the same that is, levels of poverty, income inequality, education, health, gender disparity, economic, social, and political opportunities, and provision of basic utilities, sanitation, and water. That is, the issue of development continues to revolve around the rights to eat, drink, work, choose, and express.

If population shifts are coupled with remedial action on the above fronts, then we are on the road to development. Otherwise not! Ours is not a case of population movement that is even remotely linked positively with favourable movement on the above scores of development. For, this population shift from rural to urban areas is not structural transformation in the strictest sense. It is a mere concentration of the under-employed and the under-utilised people in urban nodes.

All naked eyes can observe clearly that increase in population in urban nodes is not really urbanization but is actually ruralization of urban areas in Pakistan. They get absorbed in not the formal but the informal sectors as there are no jobs in the formal sector. Their living conditions are pathetic and they throw up slums as the city governments are too stretched to serve this influx which is forced and not organic.

The populations that migrate from rural areas escape not just economic deprivation but also oppression in the countryside where the poor are exploited by the rich powerful farm lords. Many choose to remain trapped in patron-client mai-baap relationships. Survival of the client is dependent upon the small mercies that the patron may bestow on the client. When caught in this web of relationships, the labour is certainly not free as he is assumed to be in the capitalist mode of production. While agricultural mode of production may not be feudal literally, its above manifestation certainly is.

As for the share-cropping arrangements, they are highly unequal as the peasant is driven by a landlord who is his virtual lord since he is both a supplier of various inputs as well as a buyer. This situation cannot be described as mere ‘authoritarian’ due to the scale of dependency heavily tilted in favour of the lord and against the peasant who does not have many avenues for escape and is, therefore, a virtual captive that is another manifestation of the old feudal order. The extra-economic coercion exercised in extracting surplus is yet another manifestation of feudalism still rampant. The final demise of feudalism is, therefore, awaited as it is found re-incarnated in the current modes and processes in many sectors.

If development is about basic rights, the rural sector cannot move towards development until the farmers begin to till their own land that is found to be more efficient than share-cropping. Currently, that is not the case due to the feudal lord’s iron grip over the society, the economy, and the polity of not just the countryside but of the entire country.

For those who are enthused about rural-urban migration and view it as structural transformation may also take a leaf out of the Chenery’s model of development. According to Chenery’s findings, as share of production changes from agriculture to industry; savings, investment, and government revenues all as shares of GDP rise and so does school enrollments. While a lot is being read into the decline of agricultural output as a share of GDP in Pakistan even though there is less than commensurate rise in industry’s share; there is concomitant breast beating going on about savings, investments, government taxes, and school enrollments whose rise is much longed for. That is, even ala Chenery, the structure of the economy is not transformed yet.

Instead, the economy is in the simple reproduction mode with the surplus largely consumed by the exploiting classes. The rise in the production of durable goods and their consumption was also fuelled, interalia, by availability of cheap credit. Increase in mobile phones cannot be an indicator of success or the rise of middle class when the low income groups are also buying mobiles in large numbers. Many of the low-income individuals need cell phones for work like they also wear watches, listen to transistors, and ride bikes while remaining deprived in many other ways. Also, they are more gregarious and have a strong need for connectivity. Increase in cell phone connections has been coupled with increasing difficulty in procuring the desired amounts of sugar, wheat flour, cooking oil, milk, and petroleum products due to rapidly rising prices. Water and electricity became scarce as cell phone connections increased. Cell phones are, therefore, no indicator of success in isolation of the bigger socio-economic picture.

An even more naïve reading is about the large number of female university students when actually beyond the university they have little control over the direction of their lives. All our female prime minister, NA speaker, parliamentarians, fighter jet pilots, traffic wardens driving 250 cc bikes, engineers, journalists, professors, businesswomen, surgeons put together are not a representative sample of the pathetic plight of women in the country. Pakistan scores amongst the lowest on the gender gap index, to say the least on this. Women’s huge issues need not be swept under the rug by a perfunctory treatment based only on female enrollments in universities.

There is a need to see the reality as it is for the benefit of the underprivileged. This reality needs no microscopic lens for research but a discerning eye first and foremost!

Source: Daily Dawn, 28/4/2008

 Posted by at 4:57 pm

  2 Responses to “Structural transformation: myth and reality – By Dr Mahnaz Fatima”

  1. Such level of thinking is badly needed at the government level policy making. Instead of selfish and corrupt politicians, who know nothing about the real problems of the people of Pakistan, people like Dr. Fatima should be taken as economic advisors.

  2. Ditto above.

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