On Paul Baran’s Political Economy of Growth

This book is certainly the most important of Paul Baran’s contributions to the social sciences. I think the title is somewhat misleading because it may suggest that this is a treatise on the purely economic theory of growth.  Although the book contains elements of such a theory, this is not its main subject.  It is an analysis of the social and economic forces behind the process of development rather than a specific explanation of the mechanism of economic growth.

Not that it does not contain very valuable material in the field of economic theory in the strict sense: I find, for instance, most illuminating the treatment of innovations as the mainspring of capitalist development and the emphasis on the weakening of this development factor in the phase of monopoly capitalism.  However, the most important and original contribution of the book is certainly the characterization of various economic systems by the way in which the economic surplus is generated and utilized.

Baran distinguishes between the potential and the actual economic surplus, but he does not by any means limit the discussion to the discrepancy of these two values which makes for an underutilization of existing resources.  This focal point of the economic discussion in the last thirty years, generated by the great depression of the 1930’s, accounts for only a part of his argument.  He goes far beyond that and concentrates his attention on how the economic surplus is being utilized even if it is utilized more or less to the full.  And indeed some of the most brilliant pages of his book are devoted to the analysis of the assimilation of the New Deal ideas by monopoly capitalism.  From all alternatives of “filling the gap in effective demand” there emerges as acceptable to the ruling class only that which is most absurd and perverse: the manufacturing of the weapons of destruction as a means of keeping the economy going and enabling people to earn their livelihood.

In underdeveloped countries the appropriation of the economic surplus by foreign capital or its absorption by nonessential consumption of the parasitic upper classes is emphasized, the repercussions being a low level of investment and slow economic growth.

But whether a developed or an underdeveloped capitalist country is analyzed, the discussion is never confined to the purely economic impact of the generation and utilization of the economic surplus.  It is penetratingly shown how this basic characteristic of the economic system determines its whole social fabric.  Indeed the book is a pioneer performance in the classification of social systems and their stages of development according to this characteristic.  And as an outcome of the analysis socialism emerges as a system which makes possible a full and rational utilization of the economic surplus for the benefit of the present and future consumption of the working population.