IN this lecture I propose to deal with capital accumulation and its role in the history of the theory of economic development. At first sight this might seem to be a banal theme to occupy the greater part of a lecture. In the present phase of affairs we are so used to regarding accumulation as a good thing and ample capital provision as an almost indispensable prerequisite of development, that it might be thought that, so far as history is concerned, the only thing to do is to discover the man who first said so and then to take note of non-stop applause from that date to the present day. But of course it is not so. Outside the completely authoritarian society where the creation of capital goods results simply from decrees regarding the allocation of labour and the use of existing resources, the accumulation processis a complex business involving decisions to save on the one side and decisions to create capital stocks and equipment on the other; and these decisions are not necessarily harmonious and do not necessarily involve equal benefits for development.
The history of the theory of accumulation is in fact a mixed history of approbation and disapprobation, the rights and wrongs of which have only been sorted out in our own day. And this is not just a matter of discovering the possibility of financial disharmonies involving what Robertson called savings running to waste: as we shall discover, there have been influential figures denying the desirability of real accumulation beyond a certain point, either because of its limited productivity or because of alleged disharmonies between the investment process and effective demand. I There is no· need therefore to fear shortage of material in the time available for discussion.
PRE-SMITHIAN THEORIES
I do not think that in this connection we need spend much time on eighteenth-century thought prior to Adam Smith. The theory of circulation of the Physiocrats provides some background to underconsumption theories at a later stage.2 And, as Dr Vickers has shown, there is much in the works of writers such as Barbon and Berkeley which can be interpreted as anticipating some modern propaganda in favour of spending. 3 But on the specific question of the advisability – or inadvisability – of saving and its effects on development there is not a great deal which is sufficiently precise to deserve notice in a bird’s-eye survey, such as this lecture. It is perhaps desirable, however, to say a word about the position of Bernard de Mandeville in the famous Fable of the Bees. This, you may remember, was roped in by Keynes to figure large in his scratch list of anticipations of the central propositions of the General Theory: and it is not difficult to see why, to the epatiste mood in which that list was drawn·up, the doggerel contrasts should have had especial piquancy. In the vicious hive where all sorts of evils worked together for good: ‘The root of evil, avarice, That damn’d ill natured, banefl,.tl vice, Was slave to prodigality, That noble sin: whilst luxury.
which is all very good fun, and perhaps not without some shortterm applicability to a period of deep depression. As Hayek and others have shown, there is much in Mandeville which is profound and illuminating. But this skit on saving is not much more thana vivid presentation of the eternal tradesman’s cry that spending is good for trade. It is not surprising, therefore, that Adam Smith, who in other connections took so much from Mandeville in his analysis. of the- general interconnection of self-interest and mutual benefit, should have taken nothing in this respect and indeed should have become the chief exponent of the contrary view.
