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dual economy

  An economic geography which appears to consist of two separate parts, each having a distinctive history and dynamic.

J.H. Boeke (see Furnivall, 1939; Boeke, 1953) argued that Indonesian society was divided into two separate cultures — a western and an eastern. These cultures were considered to be structurally and behaviourally so different that western principles of social analysis were quite inappropriate for an understanding of eastern culture or, indeed, for an understanding of the dual whole. Insofar as western culture is highly organized along lines which facilitate the fulfilment of material objectives by rational means of production (production for gain) and eastern culture is loosely organized, fatalistic, passive and concerned with production for use, the central problem of development in dual economies (the context in which they have, in the main, been analysed) is the relationship between the two cultures and, especially, the transformation of the latter by the former. In short, dualistic thinking implies a view of development as modernization — a view, rejected by, for example, Frank (1989).

Such an emphasis upon development generates an economistic and universal view of the world and so legitimates dualist thinking by imposing a particular and singular developmental western view of the world on all \'others\' (see ethnocentrism). It thereby encourages the simplistic division of the world in dualist terms (see Said (1985) for a critique of such a manoeuvre: cf. Orientalism). This fails to recognize either the dualities of social interactions or the heterogeneous nature of societies and the multiple circuits of social reproduction which sustain them. There may be two or more driven by very different logics; sensitive social dissection would reveal the variety of social discontinuities and interactions. Even generalizing at the global level, two particularly influential accounts of the world economy (Wallerstein, 1979; Braudel, 1985; see world-systems analysis) identify three, rather different, underlying structures. But to look for two is to find two — to generalize in such a way that the classification which results is binary in form. In developed industrial economies, for example, distinctions are sometimes drawn between the small number of very large firms which dominate economies and the large number of small firms whose conditions of existence are set by the former group.

Nevertheless Harold Brookfield (1975) asserts that \'it is a matter of simple observation that the economies of a great many developing countries are organized in two parts … the point must be emphasized that a phenomenon called “dualism” exists … \'. The question is whether \'simple observation\' is an adequate basis for such an assertion. On the basis of evidence on the complexity, recency and incompleteness of class structures in the underdeveloped world (Roxborough, 1979, chs 6 and 7) the answer must be that it is not.

An alternative but associated conception of dualism — elucidated most explicitly in the writings of Milton Santos (1979; see Chatterjee, 1989 for a critical evaluation) — is that of the emergence of two circuits of production and exchange. Santos (p. 18) refers to these circuits as the \'upper circuit\' and the \'lower circuit\' (see figure):

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dual economy (after Santos, 1979)

In simple terms, the upper circuit consists of banking, export trade and industry, modern urban industry, trade and services, and wholesaling and trucking. The lower circuit is essentially made up of non-capitalist-intensive forms of manufacturing, non-modern services generally provided at the \'retail\' level and non-modern and small-scale trade.The circuits correspond to what Geertz (1963, p. 34) speaks of as the \'firm-centred economy\' and the \'bazaar economy\' and the distinction between them is based primarily upon the non-modern/modern cleavage. Thus, whereas the upper circuit is characterized by modern capital-intensive industry, extensive trade and complex commercial flows, the lower circuit involves labour-intensive manufacturing, local services and limited trade. Access by the individual to the products of the upper circuit is restricted by income — the distribution of which is increasingly polarized as the landless and jobless live alongside those productively involved in, and highly remunerated for, their participation in the upper circuit. And yet the poor and dispossessed must somehow create the conditions of their own existence; they do so through their participation in a lower circuit (see informal sector).

Simple and reciprocal forms of complementarity (inputs and outputs) form the material relationships between the circuits but, insofar as the upper circuit is based upon capitalist production and exchange, the two circuits may be constantly intertwined through the activities of merchants and moneylenders facilitating a flow of capital in both directions. However, in terms of material linkages, the relationship between the circuits is asymmetric: the lower circuit serves as a market for the upper but the former finds its markets amongst households and producers elsewhere in the informal sector (Lubell, 1991).

A view of the circuits based upon the informal sector and the differentiation both of capital as self-expanding value, and of its sources of expansion, begins to undermine a simple dualism embodied in the dual circuit. This dualism is based on the notion that the hegemony of the upper circuit is reproduced by an inherent process of quantitative expansion (see capitalism) and provides not only the context to which the lower circuit must constantly adapt but the very reason for its existence.

The notion of dualism serves a significant ideological purpose (see ideology). On the one hand, and stemming from the work of Ragnar Nurske (1953) and W.A. Lewis (1954), economists have tried to build a theory of development based upon the assumed existence of dualism. Such theories, operating under various assumptions such as the abundance of unemployed labour power in the traditional sector, try to uncover the implications of economic growth and structural change for both parts of the economy, for their interrelationship and for economy-wide change. As a result the dominant sector may be imposed upon the subdominant and the latter may well disintegrate and be transformed into the image of its dominant partner (see dependence).

Leaving aside the question of whether or not dualism is an adequate description of the economy in question, problems arise over the nature of the two parts. The solution is to set up ideal types which correspond more or less to observed characteristics. But such problems are intensified when such more or less unreal ideal types are brought into interrelationship with each other. Without a detailed social specification of the two parts — which would, in any case, serve to break down a simplistic dualism — it is difficult to build an operational model.

On the other hand, the sustenance of the ideology of dualism may serve the interests of those who promote modernization on the grounds that everything associated with change is identified with progress and everything associated with the status quo is identified with stagnation. Furthermore, dualism implies that underdevelopment is the consequence of resistance to change. It suggests that underdevelopment is caused by development-restrictive conditions within the underdeveloped society (such as may be manifest in a backward-sloping supply curve of labour) rather than through its relationships with the world outside. For Santos (1979) the objective of development is to open up the upper circuit to participation by those in the lower in order to increase their skills and productivity. This is classical dualist thinking and, despite assertions to the contrary, implies a \'dichotomized or fragmented urban economy\'.

Dualism is a powerful idea. It has given rise to a substantial body of development theory and practice and insofar as it emphasizes the uneven nature of development and the barriers to its progress, it is useful. The major problem is that it imposes a simplistic, misleading and teleological predefinition of the world (see teleology) into two parts (development-facilitative and development-restrictive) rather than emphasizing either the causal links between them or offering a critique of the universalism and implicit assumptions of modernization embodied within the idea. The dualism is defined by external criteria derived from the processes of development under advocacy and are seen as exogenous to the historical geography of those processes. In this way dualism acts as a kind of intellectual as well as practical imperialism defining one entity in terms of another and so simultaneously asserting the superiority of the \'self\' and denying both the integrity of the \'other\' and any responsibility for its underdevelopment. (RL)

References Boeke, J.H. 1953: Economics and economic policy of dual societies, as exemplified by Indonesia. Haarlem: H.D. Tjeenk Willink and Zoon; New York: Institute of Pacific Relations (reprinted 1976, New York: AMS Press). Braudel, F. 1985: Civilization and capitalism 15th-18th Century, vol. I: The perspective of the world. London: Fontana Press. Brookfield, H. 1975: Interdependent development. London: Methuen; Pittsburgh, PA: University of Pittsburgh Press, ch. 3. Chatterjee, L. 1989: Third world cities. In R. Peet and N. Thrift, eds, New models in geography, vol. II. London and Winchester MA: Unwin Hyman, ch. 6, 127-46. Frank, A.G. 1989 The development of underdevelopment. Monthly Review 41 July: 37-51. Furnivall, J.S. 1939: Netherlands India: a study of plural economy. Cambridge: Cambridge University Press (1944 edition reprinted 1977, New York: AMS Press). Geertz, C. 1963: Peddlers and princes. Chicago: Chicago University Press. Lewis, W.A. 1954: Economic development with unlimited supplies of labour. Manchester School of Economics and Social Studies 22: 139-91. Lubell, H. 1991: The informal sector in the 1980s and 1990s. OECD Development Centre. Paris: OECD. Nurske, R. 1953: Problems of capital formation in underdeveloped countries. New York: Oxford University Press. Roxborough, I. 1979: Theories of underdevelopment. London: Macmillan; Atlantic Highlands, NJ: Humanities Press. Said, E.W. 1985 [orig. 1978]: Orientalism. London and New York: Penguin Books; Santos, M. 1979: The shared space. London and New York: Methuen. Wallerstein, I. 1979: The capitalist world economy. Cambridge: Cambridge University Press and Editions de la Maison des Sciences de l\'Homme.

Suggested Reading Brookfield (1975); Frank (1989); Santos (1979).



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