The bias of Dual Economy school against the primary sector

Dual economy school of thought originates with the Lewis model of economic development, which was later modified by Rannis and Fei. It argues that there is an unlimited supply of labour in developing countries due to zero marginal productivity in the subsistence sector (agriculture sector). It was termed as an unlimited supply of labour. The argument put forward for growth tells that the labour can be transferred from a subsistence economy to a capitalist economy by providing slightly higher wages than what subsistence sector pays them. This would lure them to come to the capitalist sector.

The dual economy here fails to recognize any potential in the agriculture sector itself. Its argument is based on the imagined notion of no scope of development in the subsistence sector. However, this notion plummeted quickly as agriculture saw investment in modern technologies for its growth. The green revolution is a suitable example of showcasing the huge potential of the agriculture sector in contributing to the growth.

A great deal of literature on dual economics stressed the need for urbanisation, industrial growth but failed to understand that these couldn’t be carried out in isolation. Strong linkages of supply and demand, forward and backward, and production and consumption need to be established for mutual growth of both sectors. It was recognised that the supply couldn’t create its own demands as was thought of in the dual economy school. This led to re-thinking of the development strategies and it was felt that until and unless the rural population is not included in the growth, the demands will always fall short. This will also put a limitation on the growth of the capitalist sector.

The categorical ignorance or bias of the dual economy school towards the primary sector can be understood from the very fact that they think the wages should be kept low to let the capitalist sector grow more. The argument put forth by them, states that this will generate capital which when further invested will absorb more labour from the primary sector. To maintain this, they argue that the wage goods need to be kept at low prices. This exposes the pitfall where even by migrating to the secondary sector, labours wouldn’t be benefitted. It seems that the dual economy model wanted to promote capitalist mode. It also ignored the probability of capitalists investing the surplus generated through migrated labourers in labour-saving technologies which can not only block the further absorption of labours but would make those already migrated unemployed.

All this gave rise to the school of Rural Development. The bias is reflected in Hirseman’s writing as well which says that agriculture doesn’t act as a direct stimulus. The argument couldn’t stand much longer and with the green revolution, the rise in national income was seen clearly. The technological inputs for agriculture created the much necessary linkage through which other sectors could also flourish. The increase in income in the rural areas increased the demand for the consumer as well as capital goods.

The best example to follow this argument would be Punjab where many farmers bought modern technologies for agriculture and cars of brands like Mercedes, BMW etc. for personal use. Farmers of other states, who were left out of the green revolution’s impact, don’t even dream of these capitalist goods.

To conclude, neither the increase in food grain production itself will result in sustained growth nor it will happen through the isolated growth of the capitalist sector. Both need to work through linkages for mutual growth. Increments in the income and employment in food grain production will generate more jobs in other sectors. Hence, it is needed that the emergence of the capitalist sector happens within the purview of the agriculture sector.