Consequences for Development Policy

In broad terms, we have a good understanding of the principal aspects of economic growth and development, and have had such understanding for a long time, at least since Adam Smith’s writings. As Harcourt (2006) mentions, Smithies (1962) already points out that in the first book of the Wealth of Nations Smith identifies the division of labor as the driving force of economic growth, and in the second book capital accumulation as a necessary condition for continuing the process. A division of labor leading to specialization includes an understanding of enhanced skills and knowledge, as we have seen, as the foundation for a further upgrading of skills and an extension of (technological) knowledge, so it can be used as a proxy for the broadening and deepening of the skill level in an economy during the process of economic development. The broad categories in which the driving forces of development processes manifest are, then, the same ones as in the definition of technology we have formulated here. And, in fact, Smith’s perception of a political economy let him view actors as embedded in what we now call the institutional framework. This last aspect has been driven to the sidelines of economics over time, though. As a result, policy proposals have often been formulated based on a theoretical foundation abstracting from some of the constituent characteristics of processes of change and development. Proposals for how to foster development have consequently differed in the emphasis and the kind of policies identified as promising for achieving a certain set of objectives.