2004 Proutist Universal 1

Proutist Economic Development

Balanced Economy

Dr. Michael Towsey

Dr. Michael Towsey Proutist Universal 2

The structure of an economy

• An economy can be divided into three sectors ...

• Agriculture, industry and service.

• The structure of an economy is determined by the relative importance of these three sectors.

Dr. Michael Towsey Proutist Universal 3

Structure of USA economy

Dr. Michael Towsey Proutist Universal 4

Economic structure% share of GDPsource – CIA World Factbook

USA Australia Brazil Venezuela (2001)

Agriculture 2 3 26 5

Industry 18 26 23 50

(oil 33%)

Services 80 71 13+36 45

Dr. Michael Towsey Proutist Universal 5

Venezuela & Dutch disease

• Much wealth generated in one sector

• Encourages demand for local services (because difficult to import)

• Discourages demand for local commodities (because cheaper to import)

• Solution: decentralised trickle up development

Venezuela (2001)

Agriculture 5

Industry 50

(oil 33%)

Services 45

Dr. Michael Towsey Proutist Universal 6

Structural problems in the Venezuelan economy

• Agricultural sector too small for self-sufficieny in important commodities.

• Excessive reliance on oil in industrial sector – how long will Venezuelan reserves last at present rate of extraction?

• Service sector too large – indicates excessive rent taking.

Dr. Michael Towsey Proutist Universal 7

What kind of development?

Prout rejects GDP growth and service sector growth as measures of economic development.

Calvert-Henderson measures of economic development.

Sarkar - concept of balanced economy.

Dr. Michael Towsey Proutist Universal 8

New Indicators of Development (Beyond Money-Denominated, Per Capita Averaged Growth of GNP)

• A reformulated GNP to correct errors and provide more information

• Purchasing power parity: corrects for currency fluctuation

• Income distribution: is the poverty gap widening or narrowing?

• Community-based accounting: to complement current enterprise-based accounting

• Informal and household sector production: measures productive hours worked (paid and unpaid)

• Deduction of social and environmental costs

• Account for depletion of non-renewable resources

• Energy input/GDP ratio: measure of energy efficiency and recycling

• Military/civilian budget ratio

• Capital asset accounts: for built infrastructure and public resources

Dr. Michael Towsey Proutist Universal 9

Calvert-Henderson Indicators Complementary indicators of progress toward societal

goals

1. Education: literacy levels, school dropout and repetition rates

2. Health: infant mortality, low birth weight, weight/height/age ratio

3. Nutrition

4. Basic services: water, sanitation, telephones, electrification, etc

5. Shelter

6. Child development

7. Political participation and democratic process

8. Status of minority and ethnic populations and women

9. Air and water quality and environmental pollution levels

10.Environmental resource depletion: hectares of land, forests lost annually

11.Bio-diversity and species loss

12.Cultural and recreational resources

Dr. Michael Towsey Proutist Universal 10

A balanced economyEmployment share in major sectors

0

5

10

15

20

25

Economic Sector

Agriculture

Agrico-industry

Agro-industry

Non-ag industry

Commercial

White-collar

Dr. Michael Towsey Proutist Universal 11

Under & over development

Agricultural Sector

(% employment in sector)

• <10% - dangerous, loss of tradition & technology

• <20% - unhealthy

• 20-40% - balanced economy

• >40% - underdeveloped, rural poverty, land degradation

Non-ag Industrial Sector

(% employment in sector)

• <20% - underdeveloped

• 20%-30% - balanced economy

• >30% - over industrialised

Dr. Michael Towsey Proutist Universal 12

A balanced economy?

0

5

10

15

20

25

30

35

40

45

Prout (employmentshare)

Venezuela (GDPshare)

Agriculture

Agri-industry

Non-ag industry

Service

Specialized economies are more vulnerable to changes in the global economic environment than diversified economies. – Prof. Ravi Batra

Dr. Michael Towsey Proutist Universal 13

Proper adjustment

• You know, in a balanced economy there should be proper adjustment among agriculture, industry and commerce. For example, a fixed percentage of people should be engaged in agriculture, another fixed percentage in industry and some percentage in commerce. Otherwise there will be no equipoise or equilibrium in the socio-economic sphere of life. Unfortunately no such adjustment exists in any country of the world today.

- P R Sarkar