The Political Economy of Gunnar Myrdal: An Institutional Basis for the Transformation Problem.

Sawyer, Malcolm

James Angresano. 1997. The Political Economy of Gunnar Myrdal: An Institutional Basis for the Transformation Problem. Cheltenham, UK and Lyme, USA, Edward Elgar, pp. xiii + 197.

This book has two rather distinct elements, which are only loosely linked. The first chapter and the final one are on transformation issues (in the former CEE countries), whereas the three middle chapters provide an intellectual biography of Gunnar Myrdal (and there is also an appendix with the transcripts of two interviews with Myrdal). Each of these two elements could be read and understood with little reference to the other element, though in the chapters on the transformation issues there are sections which seek to draw out on a Myrdalian perspective.

In this review, I will first discuss the three chapters on Myrdal before turning to those on the transformation issues. The author identifies three `Gunnar Myrdals', each identified with a particular period, moving from the orthodox economist through to the political and social economist in the 1930s, and emerging as an institutional economist for the half century ending with his death in 1987.

Myrdal was born in 1898, and his study of economics began in 1915. The first chapter on Mydral's life covers the period from 1915 to 1933, using the title of Shackle's famous book, The Years of `High Theory'. These were Myrdal's years as an orthodox economist, working in the neoclassical tradition, fascinated by abstract mathematical models and much influenced by Wicksell and others. There appears little in this period to suggest the latter radical social scientist, though Angresano remarks on the `rebellious, inquisitive, and brilliant mind' of Myrdal and the encouragement of criticism and open discussion by his mentors.

The next chapter covers the years from 1929 to 1938, and Myrdal's transition from the orthodox economist to the political and social economist. This transition starts in 1929 with the award of Rockefeller Fellowships for Myrdal and his wife Alva to study in the United States. In the USA, Myrdal confronted what Angresano describes as `the rising tide of institutional economics in America', and witnesses racial tension and slums for the first time and the effects of the stock market crash. These experiences transform both Myrdal and his wife: and it appears to have been transformation involving both political radicalization and a paradigmatic shift in their approach to social science.

The Stockholm School, of which Myrdal was a member, is famed for its development of the Keynesian multiplier process and the theoretical basis of macroeconomic stabilization policy. Myrdal is reported here as believing that `all substantive aspects of [Keynes's] The General Theory were familiar to the Stockholm School members' (p.50). However, Myrdal argued for the `soundness of public finances' which meant that there should be deficit spending in the recession compensated by surpluses during the boom.

Myrdal's political involvement was with the Social Democrats, who emerge as a dominant political force in Sweden in the early 1930s, and first formed a coalition government in 1932. Wigforss as the Minister of Finance was strongly influenced by the Stockholm School and deficit spending was implemented. Besides acting as a specialist advisor (cf. p.48), Myrdal was an elected member of the Swedish senate for three years.

Angresano argues that Myrdal was a social economist in terms of five propositions. The first three of these are that Myrdal strove to convert economics into political economy, emphasized an inductive approach, adopted an interdisciplinary analysis. He also argues that Myrdal sought to establish social goals for Sweden and to develop policy recommendation for efficiency and stabilization problems and also for societal transformation.

In the discussion of what the author terms Gunnar Myrdal II, covering the period 1929 to 1938, I found the omission of any substantive discussion of The Political Element in the Development of Economic Theory, first published in 1930, rather surprising. In that book, Myrdal clearly brought out the normative content of economic theories which often purport to the positive, and can be viewed as a major critique of the practice of the prevailing orthodoxy.

The third chapter on Myrdal seeks to describe his emergence as an institutional economist, and covers the last half-century of Myrdal's life from 1938 to 1987. It foregoes any detailed discussion of his major contributions (which include An American Dilemma, the study of race relations in the United States with the dilemma referring to the contradiction between egalitarian principles and prejudicial practices, and An Asian Drama). For much of this period, Myrdal was also heavily involved in administration and political activity, notably as a Minister in the Swedish government and Chair of the Swedish Post-War Economic Planning Commission, and Executive Secretary for the United Nations Economic Commission for Europe (1947-57).

A common thread which can be seen to run through most of Myrdal's theorizing is the notion of the forces of cumulative causation, starting with his work in the first period of his academic career on the Wickellsian cumulative process arising from differences between the `natural' rate of interest and the money rate. This thread continued in a rather different context and precise form in The American Dilemma, where he argued that `the principle of causation ... has a much wider application in studying social change'. It found further expression in his work on regional and international economics such as Economic Theory and Underdeveloped Regions. This thread is underplayed in this book, and given rather little attention, which I found puzzling. I would regard this notion of cumulative causation as one of Myrdal's major contributions to economic analysis, and an idea of considerable importance when considering transformation, and the roles of the market and of the State.

The major intention of the author appears to be to establish the credentials of Myrdal as a social economist and an institutional economist (p.83). The author then turns (p.87 et seq) to what he views as Myrdal's unique and heterodox method of analysis. The first element of that method is, quoting from Myrdal, `research is always and by logical necessity based on moral and political valuations, and that the researcher should be obliged to account for them explicitly.' The second is the acceptance of the need for an interdisciplinary approach. The third is a theory of social change, and one which builds in the principle of circular and cumulative causation. Finally, Myrdal's `theory of social change was shaped by his conception of the socio-economic reality, human behavior, and history. From his point of view the socio-economic order consists of a wide set of social relations' (p.91).

The discussion of the issues of transformation begins in Chapter I with `searching for a useful perspective'. A central aspect of this chapter is the formulation of performance criteria as they might be viewed by Myrdal and as they have been viewed from an IMF perspective. Angresano argues that Myrdal would have focused on criteria such as social and economic equalization, productivity, standard of living, improved institutions, social discipline and national independence and consolidation in a framework of political democracy. In contrast, the IMF criteria have focused on economic variables such as budget deficit and exchange rates.

The final chapter considers `Myrdalian contributions to transformation issues': the title of the chapter is suggestive of a number of different strands being examined which is indeed the case. The chapter ranges over matters such as `a more objective approach to social science research' through the nature of Myrdal's vision for the future of different societies to a relatively brief examination of three countries, Bulgaria, Hungary and Russia. The general perspective is described as containing `a holistic conception of societal development which is rooted in the history, philosophical currents, and con temporary socio-economic conditions of the particular country under study' (p.97).

This is a relatively short book with just over 60 pages devoted to the intellectual biography of Myrdal and around 80 pages on transformation issues (and a further 20 pages of interview transcript). This has left many interesting issues unexplored -- some I have mentioned above: another is the influences on Myrdal which caused an almost Pauline conversion from the enemy of the institutional economists to one of their key figures. It also means that an opportunity has been foregone to provide an in-depth analysis of the transformation problems facing the former CEE countries from the broader Myrdalian perspective.

Malcolm Sawyer

University of Leeds, U.K.