Article Reviewed: The Lewis Model after fifty years

Citation: Kirkpatrick, Colin, and Armando Barrientos. "The

Lewis model after 50 years." The Manchester School 72, no. 6
(2004): 679-690.
Year: 2022-23

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 CONTENT
S. No. Page No.

1. Abstract 3

2. Introduction 3

3. Motivation of the author 3

4. Focus & Analysis 3

5. Conclusion 5

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Abstract
The article under review is an attempt by the Economists Colin Kirkpatrick and Armando
Barrientos to re-evaluate Sir Arthur Lewis’s article titled "Economic Development with
unlimited supplies of Labour" published in the year 1954. The authors of the article tried to
throw light on the fact that due to Sir Lewis's key insight into the role of structural dualism in
the process of economic transformation, it was possible to chalk out a full-fledged and new
field of development economics as a discipline as a whole. This article attempted to highlight
that the model helps in real-world problem-solving and continues to yield valuable lessons
for development economists, policymakers, and other significant stakeholders.

Introduction
Arthur Lewis's article published in The Manchester School in 1954 is considered to be the
single most influential article in the field of development economics. It is in fact from this
article that the entire discipline and All of the literature stems out of. Subsequent attempts to
understand the article's key meaning have been made, each yielding a different perspective
and tool for comprehending the model better. The article makes an effort to provide a range
of perspectives on the assessment of the Lewis model after 50 years, attempts to understand
its Manchester background, and reception, followed discussions and finally concludes with
an insight into its legacy.

Motivation of the author

Arthur Lewis was born on the island of Saint Lucia in the West Indies in the year 1915 and
died in the year 1991. In his lifetime of 76 years, he had a genuinely distinguished academic
career at the London School of Economics, Manchester, and Princeton. Lewis made several
contributions to economics and economic history and in the process mapped out the
foundations for the field of development Economics. It was mainly during his time at
Manchester University that he worked on his article titled “Economic Development with
unlimited supplies of Labour”. He also won a Noble Prize for his work.
Authors Colin Kirkpatrick and Armando Barrientos were students of the University of
Manchester themselves. Hence their interest and intrigue to revisit and reassess the article
written by their super senior in an attempt to understand, analyze and shed light on its
importance to this day.

Focus & Analysis

The main focus of Lewis’s research during his time at Manchester was ‘in the fundamental
forces determining the rate of economic growth’. He was curious to understand the
phenomenon by which poor countries grew economically and would save voluntarily at a rate
much more than before. So in his article, he attempted to explain this by drawing ideas from
the experience of the Western industrialized nations and on the idea of classical economists to
build a dualistic model of the development process. Then came what we now know as the

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Lewis model. This model was majorly based on the assumption that labor supply was
unlimited that is it was infinitely elastic.

Lewis' model seeks to attempt a structure for understanding how relatively poor countries can
develop economically. He began by assuming that one of the characteristics shared by poor
countries is that their economies tend to consist largely of "subsistence sectors" in which the
supply of labor is unlimited and the amount of capital invested per worker is very low.
Eventually, he believes a ‘capitalist’ sector develops by using labor from a non-capitalist
‘subsistence’ sector. This way supply of labor remains constant in the capitalist sector and is
more than the demand for labor. So a surplus output is produced by the capitalist sector at a
low wage rate. This results in profits in the economy and the national income rises. The
constant supply of unlimited labor uses up the capital in the capitalist sector over time and
leads toward economic transformation. So surplus of labor from the subsistence sector gets
exhausted and wages begin to rise in the capitalist sector and reduces profits for the
capitalists. This slows down the capital accumulation process. At some point in this process,
the transfer of labor from the subsistence to the capitalist sector comes to reflect sectoral
differences in the marginal productivity of labor, eventually leading to an integrated labor
market and economy. At the end of this process of structural economic transformation, both
wages and profits are determined by marginal productivity.

Assessing the reception of the article, it faced a lot of discussion, debates, and criticism.
A lot was questioned time and again, like any other theory in Economics.
Some advocated that the model only supported the idea of industrialization and hence
neglected rural or agricultural development. Others were of the view that conventional wage
in the subsistence sector was ruling the economy. Few others argued that with the ongoing
urban unemployment, the process of labor migration from subsistence to a capitalist economy
was not justified. Owing to all this, Lewis made sure to make his point every time. He made
stronger comeback answers justifying his theory and finally in 1979 in a similar attempt, he
ended up renaming the sectors themselves and gave forth 3 key characteristics, properly
deciphering and deconstructing the model.
1. He clarified that there were just 2 sectors, hence the name "structural dualism" in the
theory. And named the sectors as modern and traditional such that the modern sector
grows and contributes to the nation's development by using up labor from the
traditional sector.
2. Unskilled labor is paid more in the modern sector for the same amount of work
3. Unskilled labor is initially excess in supply as the modern sector would wish to hire
only limited labor at the initial stage of development.

His theory borrowed the conventional wage idea from classical economists and hence ended
up receiving criticism too but it played a central role in his model.The explanation and
description of the conventional wage, he argued and as agreed by the authors of the article
under review, distinguished his approach from those of other development economists.

‘Lewis does not defend the dual economy model as a predictive model but instead shows how
it can be used as an analytical framework to describe and interpret what has happened.
On this basis, he concludes that ‘dualism will continue to be an appropriate mode of analysis
until the cessation of population growth and immigration create a single labor market’.

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Analyzing the criticisms and Sir Lewis' response to them, the authors of the article tried to
conclude by shedding light on how the model still holds profound importance in today's
economy and the significance of facing criticism for Sir Lewis for it helped to further develop
his idea that led to the evolution of a whole new field of academics from just one of his
meticulously studied and comprehended piece of work.

Conclusion

Even after fifty years of its publication in the Manchester School, the Lewis model is
considered the most important contribution to the discipline of development economics. The
discipline was just emerging when the article was published, it is only after the publication
that led to its further evolution. Arthur Lewis’s contributions can be considered to be of
twofold importance.
One, he termed and defined his idea of economic underdevelopment as a policy science that
dealt with issues of economic starvation and low standards of living of the population of the
world. In his own words, he said ‘Our purpose is rather to bring their framework up to date,
in the light of modern knowledge, and to see how far it then helps us to understand the
contemporary problems of large areas of the earth’ (Lewis 1954). Economists since Lewis
have been following his footsteps and are therefore more concerned with problem-solving
using public policy as their tool. It sheds light on the significance of the state’s interference in
promoting sustainable ways of development.
Two, Through his life experience and profound understanding of economic history he brought
forth the idea of development as a multidimensional process and vehicle of economic,
political, social, and institutional change. He comprehended the dynamic relation between
these dimensions and development.
The continuing importance of Sir Arthur’s ‘Economic Development with Unlimited Supplies
of Labour’ is a lasting affidavit to the author’s extraordinary ability to combine theory and
history into a framework that can aid our understanding of the issues of development.