Pioneer of development economics.

• Author: Levitt, Kari
• Position: William Arthur Lewis

W. Arthur Lewis' best-known contribution to development economics was his path-breaking work on the transfer of labour from a traditional to a modern capitalist sector in conditions of unlimited supplies of labour. His article, "Development with Unlimited Supplies of Labour" (1954), contributed to the establishment of development economics as a specialized field of study. It addressed the mechanisms of transferring surplus labour from traditional activity to a modern capitalist sector under conditions of unlimited supply of labour.

In this model, wages in the modern capitalist sector are not determined by the productivity of labour, but by its opportunity cost. A "traditional" non-capitalist working environment--variously comprised of peasants, artisanal producers and domestic servants--augmented by population pressures and the entry of women into the labour force, provides the capitalist sector with "unlimited supplies" of labour, at a wage somewhat above the subsistence level. As the sector expands, employment and output increase and the share of profits (savings) in national income rises. Eventually, as surplus labour is exhausted, the wage rate rises. At this point, the economy crosses the boundary, from a dual to a single integrated labour market, and real wages rise with increasing productivity, in accordance with conventional growth models.

Lewis' model showed that low wages and poverty in a labour surplus economy will persist so long as the opportunity cost of labour to the capitalist sector remains low. It also served as an argument for government-led industrialization programmes in the 1950s and 1960s, something Lewis argued throughout his association with the United Nations. Lewis advanced the case for industrialization by demonstrating the comparative advantage of labour-surplus countries in manufacturing activity. Presented in The Industrial Development of the Caribbean (1951), his argument was based on the success of "Operation Bootstrap" in Puerto Rico, where he had advocated the production of manufactured goods for domestic, regional and metropolitan markets. It was a radical position at a time when the agrarian economies of the West Indies had been historically structured to provide agricultural and other primary commodities to the colonical powers.

The impact of the Great Depression on the West Indies was a formative influence on Arthur Lewis. He was born in 1913 in St. Lucia, a small island in the Caribbean archipelago...