Economic Growth in a Free Society

Summary

W. W. Rostow’s address, reprinted from The Hindu of 2–4 September 1963 and circulated by the Forum of Free Enterprise in November 1963, argues that economic development is the central problem of the modern world: the gap between nations with roughly $3,000 per head of gross national product and those with as little as $50 per head. Rostow insists that the operational criterion is regular, equitable growth substantially exceeding population increase, and that no nation has been spared the common sequence of problems — only the resources, technology, and political and social arrangements available to solve them differ.

The pamphlet’s argumentative centre is a defence of private enterprise as the engine of growth inside a framework that only government can supply. Foreign aid, Rostow says, is helpful only as a margin to self-mobilised national effort; he cites Adam Smith’s prescription for eighteenth-century underdeveloped Britain to underline that national programming and government provision of social overhead capital — schools, irrigation, highways, land tenure reform — are preconditions for a vital private sector. He warns against the false antithesis between national planning and private enterprise, drawing on Japanese and American precedents where the state launched first-generation industry before private business took over.

Rostow then attacks the doctrine that totalitarian regimes outpace free societies in growth. Citing 1962 GNP growth figures — 3.6 per cent for Communist nations, 4.8 per cent for NATO, 5.4 per cent for the United States — he holds that the economic gap between the Free World and the Communist bloc is widening, and that the Indian sub-continent’s progress, achieved “under God and law,” vindicates the principle of consent over police-state methods. He closes with an Alliance for Progress-style call to demonstrate the compatibility of human freedom and economic development, urging confidence in the “great humanistic tradition.”

Key points

• Frames the rich-poor divide as the defining problem of the modern world — a gap stretching from $50 to almost $3,000 per head measured in gross national product.

• Defines the operational criterion of development as regular, equitable growth at a rate substantially higher than population increase; stagnation, not absolute poverty, is the diagnostic.

• Aid from outside a country only helps to the extent that the recipient government and people organise their own resources; aid is a margin, not a substitute, for national mobilisation.

• Defends national programming as a prerequisite to a healthy private sector, citing Adam Smith on eighteenth-century Britain and Japan’s state-launched industrialisation under the Meiji-era samurai class.

• Argues that government must finance social overhead capital — schools, irrigation, highways, land-tenure reform — and create the macroeconomic framework within which agriculture and private enterprise can expand.

• Treats agriculture and industry as complementary rather than competing claims on scarce capital, and insists that rural growth and the freedom of the peasant are essential to modernisation.

• Rejects the once-credible proposition that Communist societies grow faster than free ones, citing 1962 GNP growth figures of 3.6% for Communist nations, 4.8% for NATO, and 5.4% for the United States.

• Concludes with an Alliance for Progress-flavoured affirmation that human freedom and economic development are compatible, and that the great humanistic tradition can be sustained with wit, faith, and persistence.