Contradictions of “Doing Development”

We construct an economy composed of modern/formal sector and the government and situate it within an exogenously given traditional economy consisting of farm and non-farm activities. The particularities of interactions between formal sector, government and agriculture on one hand and between farm and non-farm sectors on the other are discussed and the departures from the literature are identified. Next, we propose, for accumulation and growth in formal sector a large part of agriculture is modernized and thus there is drain of resources from the traditional economy. This expropriates a sizeable section of non-farm population from the means of consumption and reproduction. Consequently, a vast “surplus population” is created endogenously, which remains outside the domain of capital. This phenomenon points at a fundamental conflict between the modern/formal sector and the traditional nonfarm activities in presence of agricultural-supply-constraint, which was missed out in the orthodox “dual economy” literature proposing only a frictionless transition. Next, following the dictum of “development management” we assume that this “surplus population” is rehabilitated in the newly “discovered” and valorized informal sector. But, contrary to the mainstream position which asserts a symbiotic relation between this informal sector and other sectors of a less-developed-economy we propose that, this promotion of informal activities either generates formal – informal contradiction or engenders a conflict within the non-modern economy in the form of contradiction between the valorized informal sector and the residual petty non-farm activities. Hence, the projection of informal sector as a cushion mitigating unemployment is nothing but a myth.