a two circuit approach to economic development
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Keynote Dr. Shute gave this lecture at the 2013 NBSPRN Policy ForumTRANSCRIPT
A Two-Circuit Approach to Economic Development
Michael ShuteMemorial University
Expanding the Economic Development Policy DiscussionExpanding the Economic Development Policy Discussion
“All the good intentions in the world are compatible with all the blunders conceivable.”
“Any short range reform will merely produce a small variant in a mess that has become worse for two centuries”
Being Intelligent about economic development requires a collaboration that deals with the full complexity of development
Locating Economic Values in a Scale of Values
Ultimate Values (what sustains our commitments)
Personal Values (our actual commitments)
Cultural Values (Arts, Media, Education etc. regional, national, and global
Social Values (Legal, Political, Economic, Technological)
Vital Values (Health, Environment, Survival)
How do we create and sustain healthy, vibrant communities? (End)
How do we measure economic development? (Means)
A Personal Statement About Economic Development
We are experiencing the results of over 200 years of the implementation of radically incomplete theories in economics that have
created a culture of profit maximization and so-called ‘enlightened self-interest’ in business that is I believe wrong-headed idea
about what economy is for and how it actually works.
Pure profit is not the goal of economy, it is an outcome of a particular phase of an economic cycle. To misunderstand the function
of this pure profit or pure surplus income is in the long term to wreck serious havoc on the environment, the economy, cultures
and lives.
Concerns such as community well-being and personal liberty and responsibility should direct how we approach economic
decisions. But with our good intentions need to respect the realities of the structure of economic process. Otherwise, we will likely
do more harm than good.
Standard First Year Economics Model
Gross domestic product (GDP) is the market value of all officially recognized
final goods and services produced within a country in a given period of time.
GDP per capita is often considered an indicator of a country's standard of living.
Two-Circuit Diagram
Pure Cycle of Economic Development
Stationary Phase Surplus Expansion Basic Expansion NewStationary Phase
Surplus Expansion
Surplus Circuit Accelerates Massively; Pure Profits Increases; Basic Circuit should
remain steady
Thrift and Enterprise
Basic Expansion
Acceleration in the Surplus Circuit slows down in increments to 0;
profits drop off and then disappear; Basic Circuit accelerates, basic
income (wages) increase leading to overall improvement of the
standard of living
Enterprise and Benevolence
Stationary Economy
Business is a going concern, wages are steady; there are no profits
A Steady Hand at the Tiller
Be Open and Creative, Respect Reality
Plan for Roadblocks and Resistance to Change
Be Compassionate and Patient
