Boeke’s Theory of Social Dualism | Economic Development | Economics

A common feature of the poor developing economies is their dualistic character. While certain parts of these economies have to some extent been exposed to the influence of modernization, their dominant segment belongs to the backward indigenous economy. The coexistence of such contrasting economic and social organisations—a relatively modern money economy and the traditional indigenous economy is a fundamental aspect of the growth process of the developing countries.

Any growth strategy for these countries must take cognisance of their dualistic character. For that, it is necessary to analyse the basic features, causes and consequences of dualism. It is only then possible to determine the possible effects of the dualistic character of these economies on their development.

Introduction to Boeke’s Theory of Social Dualism:

One of the earliest attempts to diagnose the causes underlying the dualistic character of underdeveloped countries and its implications for their developmental process was made by J.H. Boeke, a Dutch economist. He developed his theory called ‘social dualism’ on the basis of his studies of Indonesian development experience. His theory is a distinctive theory in the sense that it is applicable only to the underdeveloped countries—for it emphasises the contrasting social organisations and cultural patterns embedded in the overall framework of their underdevelopment.

According to Boeke, any society can be described in the economic sense by following three characteristics:

(i) The social spirit.

(ii) The organisational forms.

(iii) The techniques dominating it.

The type or form of a given social system is determined by the form, extent and interrelationship between the above basic characteristics of the society. When a single uniform social system pervades the entire society, it is homogeneous in Boeke’s sense. However, a society may be marked by the simultaneous coexistence of two or more social systems. As such, there could be a dual or plural society. Each one of these concurrently prevailing systems is markedly differentiated from the other in good many respects. And each of these comes to dominate a segment of the society.

Prof. Boeke concentrates his attention on dualism and expresses the view that it is a “form of disintegration, (which) came into existence with the appearance of capitalism in pre-capitalistic countries.” Reserving the term ‘dualism’ to such a phenomenon he offers its formal definition. “Social dualism”, he holds, “is the clashing of an imported social system with an indigenous social system of another style. Most frequently the imported social system is high capitalism. But it may be socialism or communism just as well or a blending of them. ”

Thus, one of the two social systems in a dualistic economy will necessarily have been imported from abroad. It is this imported western system that is an advanced one, while the other—the one indigenous to the country—is generally the pre-capitalist agricultural system.

The western capitalistic system gains ground in the overall matrix of the traditional pre-capitalistic agrarian community. Boeke calls the indigenous social system as the ‘eastern ‘or the ‘pre-capitalistic’ sector. On the other hand, he christens the imported system as the ‘western’ or the ‘capitalistic’ sector of the dualistic economies. The basic contention of Boeke is that dualism is the product of the clash between the East and West. He in this regard quotes the famous phrase of Rudyard Kipling- “East is East and West is West and the twain shall never meet.”

Characteristic Features of Social Dualism:

Boeke argues that the coexistence of two markedly different social systems gives rise to certain distinct economic features which are peculiar to all dualistic economies.

They are:

(1) The ‘eastern’ or the ‘pre-capitalist’ indigenous sector of the dualistic economies is marked by ‘ limited needs.’ In this sector, the fulfillment of the basic needs makes people feel fully contented.

In contrast, the ‘western’ or the ‘capitalist’ sector of these economies is the one where people have ‘unlimited needs’. The realisation of basic needs does not end their wants. Their wants are ever increasing and being continually stimulated by the ‘demonstration effect.’

(2) As a consequence of their limited needs, the ‘eastern sector’ is characterised by the backward sloping supply curves of effort and risk-taking. People do not wish to make additional effort beyond what is utmost necessary for the realisation of their basic needs. Once they are able to earn an amount that is adequate enough to provide them with their basic requirements, they have no inherent desire to work any further. Thus, “when wages are raised the manager of the estate risks that less work will be done; if three acres of land are enough to supply the needs of the household, a cultivator will not till six.”

One the other hand, the ‘western sector’ is characterised by a normal upward sloping supply curve of effort. This is because people here have constant desire to move up from one standard of living to the higher one. Therefore, they are always on the lookout for additional income. And they won’t mind putting in extra effort to eke out larger earnings. But the extent to which extra effort is put would vary according to the quantum and intensity of the desire to realise the new wants.

(3) Further, the commodities in the ‘eastern sector’ are not evaluated on the basis of ‘value-in- use’ but on the ‘prestige value’. This economic aberration stems from the fact that people here are influenced largely by the social rather than economic needs. “If the Madurese values his bull ten times as much as his cow,” remarks Boeke, “this is not because the former is ten times as useful to him in his business as the latter, but because the bull increases his prestige at the bull races.”

(4) There is almost the total absence of ‘profit motive’ in the ‘eastern sector’. The profits from speculative activities, however, hold attraction for them. But, ‘these profits lack every element of that regularity and continuity which characterizes the idea of income.’

(5) ‘Professional trading’ is conspicuous by its absence in the ‘eastern sector’. There may be an exchange of goods at personal levels. But by and large trading as a profession is almost unknown for people are ignorant of the market.

(6) Also the industry in the ‘eastern sector’ is not investment-minded. There is so to say an “aversion to capital” owing to some sort of “conscious dislike of investing capital and the risks attending this.” Besides, the industry in the ‘eastern sector’ lacks initiative, drive, discipline and organisational capabilities. In contrast, the industry of the ‘western sector’ possesses these business qualities.

(7) The labour too, in the ‘eastern sector’, is unorganised and unskilled. They happen to be quite “passive, silent and casual”. Another dominant characteristic of the labour of the ‘eastern sector’ it that it lacks mobility. People have strong affinity to remain in the village community. As such, autonomous intra, and inter-country migrations are not at all possible. These may perhaps occur through government intervention. As a consequence of the immobility of labour, the wage structure in the ‘eastern sector’ is marked by sharp differentials. This is particularly so as between the ‘eastern’ and the ‘western’ sectors.

(8) Technological progress along the western lines has yet to see the light of the day in the ‘eastern sector’ of the dualistic economies. In fact, Boeke argues that – “There is no question of the eastern producer adapting himself to the western example technologically, economically or socially.”

(9) Another outstanding feature of distinction Boeke contends is that while “export is the great objective” of foreign trade in the ‘eastern sector,’ it is “only the means which makes import possible” in the ‘western sector’.

(10) Boeke also holds that in a dual economy, urban development flourishes at the expense of the rural life. What he actually means by this is that in the wake of urbanization, there occurs a progressive fall in the rural population and income. Boeke also holds that in the absence of free competition for land, the rents in the ‘eastern sector’ depend on the “landowners’ need for money.”

(11) Above all, the ‘eastern society’ is guided by “fatalism and resignation” as opposed to ‘western industry’ which is moulded by common-sense and reason.

In the backdrop of the above markedly distinct features of the dual societies, the western economic theory becomes completely otiose for these economies. Boeke argues that the western economic theory is based on “unlimited wants, a money economy, and many-sided corporative organisations.” And none of these features is exhibited by the eastern societies. Thus, while western theory was developed basically to explain the capitalistic society, but the typical eastern village is pre- capitalistic.

In particular, Boeke is highly skeptical of any effort to explain the distribution of income or the allocation of resources on the basis of the marginal productivity theory. For such a theory to be applicable, the basic prerequisite is the free mobility of resources in the economy. And it is precisely the immobility of resources which distinguishes an ‘eastern society’ from its western counterpart. Boeke sounds the note of warning by saying that, “we shall do well not to try to transplant the tender, delicate, hot house plants of western theory to tropical soil, where an early death awaits them.”

Policy Implications of the Theory of Social Dualism:

The dismal socio-economic panorama revealed by the dualistic economies led Boeke to hold very pessimistic views on policy. He saw no hope of bringing about rapid development of these economies on the western pattern. In fact, he maintained that “any effort to develop them along Western lines can only hasten their retrogression and decay.”

The fact of dualism led Boeke to draw two policy conclusions- “first, that as a rule one policy for whole country is not possible and, second, that what is beneficial for one section of society may be harmful for the other.” Any effort to effect improvements in the pre-capitalistic agriculture of dualistic economies, on the western pattern, will not only fizzle out but also cause retrogression.

Unless the mental attitudes of the farmers undergo a basic change, the attempts to westernize the eastern agriculture will be frustrated. There is, in fact, the dilemma – If the modernisation of agricultural techniques succeeds in improving productivity, the increased wealth would bring in its wake further growth of population. On the other hand, if the modern techniques fail, the consequences would be tremendous indebtedness.

In this respect, therefore, Boeke is of the view that the existing agricultural system should not be disturbed. He is of the firm view that the existing system of agricultural production is “perfectly adapted to the environment,” so that the agricultural methods “could hardly be improved upon.” Almost totally identical views are held by Boeke in regard to the industrial production. The eastern production in the industrial field as compared with their western counterparts is conducted on entirely different lines. There is no scope of the western technology being filtered down into the eastern modes of industrial production.

Actually, Boeke maintains that the imitation of western technology by the eastern producers would tend to destroy their competitive qualities. Boeke seeks to corroborate his views on the basis of the Indonesian experience. The attempts at using the western technology dealt a death blow to small industry in Indonesia. The goal of self-sufficiency had thus been made all the more difficult and farther than it otherwise would have been.

In line with his pessimistic approach, Boeke held similar views with regard to the problem of unemployment. He recognises five types of unemployment in the underdeveloped countries – “seasonal, casual, unemployment of regular labourers, unemployment of the urban white collar workers and unemployment among the Eurasians”. Boeke maintains that there is not much that the government can do to eliminate any of these types of unemployment. This is because, he believes, to deal with them “would entail a financial burden far beyond the governments’ means.”

Above all, Prof. Boeke holds that limited wants stand in the way of economic development of any kind. Whether it is the increased production of foodstuffs or the industrial goods, the result would be the same, i.e., supply overshooting the demand. Consequently, there would occur a glut of commodities in the market leading to a fall in prices and ultimately to depression.

The foregoing discussion shows that no positive policy formulation is given by Boeke. However, one can discern from his views that he favoured a small scale and slow process of industrialization “adapted to a dualistic” framework. The agricultural development should also be a gradual process based on the dualistic fabric of these societies. Further, the native people have to undertake the responsibility of the entire developmental process. New leaders must strive for the goal of economic progress with “faith, charity, and patience, angelic patience.” But the sphere of action must be a small and the time slow.

Appraisal of Boeke’s Theory:

Boeke’s theory of ‘social dualism’ provides basic insight into the structure of the underdeveloped economies. Practically all these countries are segregated into two sharply differentiated sectors. The coexistence of a backward indigenous sector with an advanced exchange sector is the main consideration upon which any realistic theory of development of the underdeveloped countries should be based.

In fact, the major parts of economic development policy have to be directed against the prevalence of such a dualism. To the extent Boeke spotlighted on this crucial aspect of the development of underdeveloped regions, he deserves all praise. However, Boeke focused his analysis on dualism through the wrong mirror. Though dualism is an undeniable fact in the underdeveloped countries, yet the explanation given by Boeke that it primarily stems from the nature of society is not a very convincing one. Rather than to be a purely sociological phenomenon, it also has its roots in the economic and technological matrices. In this light, Benjamin Higgins makes a scathing attack on Boeke’s theory of ‘social dualism’.

The chief grounds of attack are – First, it is erroneous to think that people in underdeveloped countries have fixed or static wants. The case of Indonesia, on the basis of which Boeke held his views, is itself an example to the contrary. In less developed counties as Benjamin Higgins points out, the marginal propensities to consume and import are high. The fact is that the people, be they urbanites or ruralites, have multiple and varied wants. Thus, “any ‘windfall’, occurring initially through increased exports, is quickly spent on imported semi-luxuries unless vigorous import and exchange controls are applied to prevent it.” This phenomenon is not peculiar to Indonesia alone. Virtually all the underdeveloped countries have clamped stringent import and exchange controls.

Besides, it is a matter of common observation that when farmers’ pockets bulge—following a bumper harvest—there follows a swelling stream of orders for semi-luxuries, viz., transistors, radios, watches, scooters and bicycles, etc. The ‘Green Revolution’ in India brought with it a large demand for transistors and things like that. Thus, Boeke’s contention that the wants of people in the underdeveloped countries are limited is not borne out by the actual facts.

Secondly, having shown that the wants of people in underdeveloped countries are not really limited, the basic justification for the backward-sloping supply curve of efforts and risk also does not hold. However, the basic tragedy is the absence of a mechanism to realise these wants. “To turn these wants,” remarks Higgins, “into a wellspring of economic growth, the people must be shown the connection between satisfaction of their wants and their willingness to work, save, and take risks—a difficult but not impossible task.” Besides, the backward-falling supply curve of effort is not peculiarly an eastern phenomenon.

The recent economic history of developed countries provides several examples to the contrary. For instance, a backward-sloping supply curve of effort was all too evident in Australia and USA in the immediate post-War period. Benjamin Higgins, therefore, opines that the “backward-sloping supply curve is not exclusively a feature of eastern societies, but appears in any society which stagnates (or slows down) long enough to weaken the ‘demonstration effect’ provided by people moving from one standard of living to another, as a result of their own extra effort, directed specifically towards earning additional income.

Thirdly, Boeke’s contention that technological progress along the western lines in eastern production is not possible is not borne out by facts. “Considering the growing number of enterprises,” remarks Higgins, “efficiently organised and operated by Orientals, along western lines, it is difficult to share Boeke’s pessimism regarding possibilities of technological progress in eastern industry.” Assimilation of the already developed technology of advanced countries by the developing countries is now an established fact of the growth process of these countries.

Fourthly, Boeke’s view that the eastern labour is characteristically “unorganised, passive, silent and casual” is unacceptable. The contemporary experience in this regard points to the contrary. The emergence of strong trade unionism, not only in the field of large-scale primary production, viz., plantations in rubber, tea and coffee, but also large-scale modern industries in the developing countries is too hard a fact to be denied.

Fifthly, it is difficult to accept Boeke’s contention that the eastern people are inherently immobile. In fact, the mushroom growth of the urban centres with their attendant malaise of congestion, insufficient basic amenities and increasing unemployment are the consequences of large-scale migration from the villages to the towns. The attractions of the urban life such as cinemas, cafes, shops, libraries have always held attraction for the rural people. Thus, it is quite inadmissible to hold that the labour in the underdeveloped countries is inherently less mobile than that of the western countries.

Sixthly, Boeke’s view regarding complete absence of profit seeking is not sustainable. There is lot of evidence showing that the people of underdeveloped countries are not that oblivious to the ‘opportunities for making profit and the willingness to seize them’. “There is available a great volume of evidence “claims Prof. Bauer, “(which) illustrates prompt and sensitive response to small differences in prices.” The entrepreneurial acumen and other business qualities are very much there in the underdeveloped countries. Thus, remarks Prof. Bauer in this regard, “the Indian is perhaps all else an entrepreneur, a businessman always looking for new means of turning a penny.”

Seventhly, Boeke takes the one-eyed view by holding that the phenomenon of dualism is confined only to the eastern economies. Indeed, at one point, Boeke himself suggested that dualism existed in underdeveloped countries of Latin America. Besides, dualism is not a special feature of the underdeveloped economies alone. To some degree, it exists in almost every economy in the sense that any economy can be divided on the basis of the differences in the technological advance experienced by different regions. In this sense even the most advanced economies such as that of U.S.A., and Canada could be categorised as dual.

Eighthly, Boeke’s view that the characteristics of “preference for speculative profits over long-term investment in productive enterprises” is typical of eastern societies alone, smacks of lopsidedness. Such attitudes are not peculiar to the people of underdeveloped countries alone. These are to be found in the Western economies as well. The fact is that whenever the inflationary pressures persist for a long time, people in the western economies start preferring investments in quick profit-yielding speculative activities rather than in long-term projects. Thus, remarks Prof. Higgins that the “conscious dislike of investing capital in long-term projects and of risk attending this” prevails everywhere.

Further, Boeke’s view that people value goods in terms of the prestige associated with them rather than according to their use-value, is also not exclusively an eastern phenomenon. It is very much there in the western economies too. Had it not been the case, there was no necessity for Veblen to coin the term ‘conspicuous consumption’ to refer to such behaviour of the American society.

Ninthly, Boeke ignores one of the most conspicuous and stark realities of the underdeveloped countries, viz. the prevalence on a vast scale of disguised unemployment. Any theory meant to be applicable specially to the underdeveloped economies must take account of this phenomenon. Besides, his contention that the five types of unemployment, which he recognised, are “beyond the reach of government help” is quite implausible in the present-day conditions. It has been realised that the world over the government can play a significant and effective role in mitigating the unemployment problem in both the developed and developing countries.

Finally, Boeke’s contention that the western economic theory is completely irrelevant to the ‘eastern societies’ is also not wholly valid. While counselling against the use of “the tender, delicate, hot house plants of western theory” for underdeveloped countries, it seems, Boeke had in his mind the neoclassical theory. But this economic theory is applicable in many ways to even the western world.

However, the fact remains that some branches of the contemporary western economic theory, especially the theory underlying monetary and fiscal policy as also policies directed towards the elimination of disequilibrium in the balance of payment, is equally useful to the underdeveloped countries. Of course, it is necessary to choose the right institutional assumptions. “Thus although it is necessary to take account of differences in institutional framework and of cultural pattern”, says Benjamin Higgins, “economic behaviour is much the same in underdeveloped as in advanced countries.”

In conclusion, we might say that although “there can be no question about the phenomenon of dualism,” as a distinguishing feature of underdeveloped countries, yet Boeke looked in the wrong place for his explanation of backwardness of less developed countries. The proper explanation of dualism rather than to be a sociological one is to be found in economic and technological terms. This theory of technological dualism has been put forward by Benjamin Higgins.