This paper explains how the World Bank carries out its most characteristic activity: the identification, preparation, appraisal, and supervision of projects for economic development. The paper highlights that project lending is intended to ensure that the World Bank funds are invested in sound, productive projects with the purpose of contributing both to the borrowing country’s capacity to repay and to the development of its economy. It is in the coincidence of these two purposes that the Bank’s functions as an international financial institution merge with those that it has increasingly assumed as a development institution.


This paper explains how the World Bank carries out its most characteristic activity: the identification, preparation, appraisal, and supervision of projects for economic development. The paper highlights that project lending is intended to ensure that the World Bank funds are invested in sound, productive projects with the purpose of contributing both to the borrowing country’s capacity to repay and to the development of its economy. It is in the coincidence of these two purposes that the Bank’s functions as an international financial institution merge with those that it has increasingly assumed as a development institution.

Peattie, Lisa Redfield, The View From the Barrio, Ann Arbor, Michigan, The University of Michigan Press, 1968, 147 pp., $6.95.

Along the bank of the Orinoco River where it passes the new development city of Ciudad Guayana there lies a cluster of one-story buildings known as the barrio La Laja. An American anthropologist, Lisa Red-field Peattie, went to live in this urban neighborhood of 500 souls and has produced a penetrating, beautifully written book presenting the stuff of economic development in its smallest particulars. Two features may be singled out from the rich pattern of The View From the Barrio, the people and their encounter with government.

Sucked into the mainstream of economic development from the farms and fishing villages of Venezuela and the Caribbean islands, the barrio’s people had initially been employed as unskilled laborers in the formative stages of the oil, iron ore, and steel-making industries. Before long, however, these industries passed the initial stage of construction and settled into the more capital-intensive, skilled-labor-intensive stages of production. Only a few of their original employees had gained sufficient skills to take on the new jobs. The others hang on in the barrio and in other parts of the urban landscape supported in some secondary relationship with “the company.” As shopkeepers or tradesmen, a few find it possible to use what little capital and skills they accumulated in their earlier employment to service the company-employee areas.

A great number, however, sink into a nagging dependency upon employed kinfolk—by blood or adoption—and fitfully engage in occasional low-paying labor.

While some of the barrio’s inhabitants continue the long rise from their original condition, many people slip further and further out of adjustment with the economy around them. This condition is soon communicated to their children, bringing even the future into clouded perspective. Their schooling suffers from poor facilities, but even more significantly from two other factors: an unstable home environment too weak to keep them in school and the absence of all but the unsuccessful as models for their aspirations.

There descends upon this marginal collection of souls one day the spearhead of another force in the economic development process—government investment. A host of sewer-building machines appears at the riverside site of the barrio’s bathing and laundering facilities to prepare for the effluence of the wastes of more developed areas. In the course of the barrio’s struggle with this new threat there emerges a disturbing awareness of the anonymous face of government. Who is responsible for the sewer line? Not the municipal government; the local political bosses who are the barrio people’s contacts there know nothing about its existence. Nor is it the state government, where their appearance at the governor’s charity-type audiences draws no response. Nor is it even the national government, whose Ministry of Health representative acknowledges neither cognizance nor control over the project. The responsible authority, it develops finally, is a decentralized agency of the national government charged with development in the region.

The absence of grievance procedures leads first to a protest campaign carried by the local newspapers, next in desperation to the midnight pouring of sand into the carburetors of the construction machinery, and finally, after a succession of incidents, to a strained and difficult meeting with the agency engineer who ultimately satisfies the barrio’s delegation. In this history the author finds three obstacles to communication between the people and the bureaucratic system: a lack of knowledge of the power structure or whom to complain to; inaccessibility of the power structure in terms of time, distance, and financial cost; and finally the barriers of social class or caste which separate “the people” from the administrators. In these circumstances, the author writes, “first one puts up a sign by the highway or uses the radio to direct the attention of the ‘competent authorities’ to the problem and then, if still feeling strongly, one looks for dynamite.”

For those concerned with the broader issues of investment project selection in the cause of economic development, the author queries quite rightly whether control should best be exercised through technical planning or through conventional politics or through some combination of the two. For the people of the barrio, who have slipped off the development engine into a structural unemployment lost in the aggregates, the author urges a national strategy aimed at closing the gap with the rest of the economy. For the jobless, more jobs and more training; for the children, not only schools but “homework clinics, tutoring programs and guidance counselors” and any other method which focuses on their needs. And instead of a barrio like La Laja from which all but the unsuccessful escape, the promotion of more heterogeneous residential communities in which the models of success will be visible to all.

Jonathan Levin

Sporn, Philip, Technology, Engineering, and Economics, Cambridge, Massachusetts. The M.I.T. Press, 1969, xii + 148 pp., $5.95; Gruber, William H., and Donald G. Marquis (Editors), Factors in the Transfer of Technology, Cambridge, Massachusetts, U.S.A., The M.I.T. Press, 1969, xii + 289 pp., $12.50.

Both these books try to deal with the problem of distinguishing between science, applied science, technology, and engineering. Both show that it is important to know which of these disciplines is being aimed at for a particular group of people working together. What seems to matter is not having a definition for each discipline, but knowing the required balance for a particular project between the mix of research, development, and engineering application in the work content.

Philip Sporn is a well-known expert in the field of power supply. He illustrates well how economics can form bridges between many disciplines. He is considering, however, only the branch known as “systems economics” and, as this branch is not well known to most economists, it tends to be described as not “true” economics. The author, however, makes good use of systems economics. He also gives a good account of why it is vital to examine the whole energy sector of an economy before deciding on a forecast for electricity demand. This point is reinforced by the need for an energy policy within an economy which is rather too forceably brought home by Sporn’s account of the nuclear versus conventional generating plant controversy. Undoubtedly the book should be read as an introduction by anyone not familiar with the “systems” approach to problems.

The volume edited by Gruber and Marquis is readable—but not in one reading. The main theme running through most of the papers is that technology is transferred by people rather than by papers. The volume of technological publication, which is increasing exponentially, is hardly more than a catalyst to the process of technological development. What seems to matter is “idea” men moving from one application to another, the latter often being in quite a different field. Once the idea man has moved on, the technology still advances, but slowly. The secondary theme brought out is that the idea man does not do the actual development, this being done by the practical men who have been concerned with that particular technical problem for some time.

Research and development is, of course, an important part of technological transfer. Just how this works is not quite known. Transfer of knowledge through the professions is slow. Business men are more achievement oriented, yet long established companies will normally resist the transfer if dominated by the professions. Research and development perhaps should be concentrated more in industry—e.g., it has been proven that scientists can keep up their expertise in industry by being set a proportion of problems at the limit of their knowledge. There would, however, still be problems. Scientists write in scientific journals for scientists and technologists in technical journals for technologists. (Perhaps that is why an engineer rarely finds a published article to be of much help in a particular situation.) Thus technology and science move forward with parallel networks of information, the “nodes” of each network seldom being interconnected. Researchers find it difficult to get technologists to accept anything new, while managers (who are often technologists) find it difficult to monitor research. In this process the backing (or otherwise) of government can be an important influence, in that bureaucracy tends to be impervious to the influx of most new information.

Thomas Berrie

Beaulac, Willard L., A Diplomat Looks at Aid to Latin America, Carbondale, Illinois, Southern Illinois University Press; London and Amsterdam, Feffer and Simons, Inc., 1970, ix + 148 pp., $6.95.

The United States has recently been undertaking a “grand assize” on its foreign aid and has produced two official reports: one by a task force headed by Mr. Rudolph Peterson, formerly President of the Bank of America, and a second by Mr. E. M. Korry, the U.S. Ambassador to Chile.

Now comes Mr. Willard L. Beaulac, a retired U.S. Foreign Service Officer, with long experience in Latin America in various positions, including that of Ambassador to several countries. In a well-written little volume he presents a program for modernizing U.S. aid which gives the reader the clear impression that he speaks with the voice of the man in the field rather than the man at headquarters. Like Messrs. Peterson and Korry, Ambassador Beaulac thinks the problem of U.S. aid is one of quality rather than of quantity. He feels that the United States should aid Latin American countries as a matter of policy wherever a country indicates readiness to bear the main burden. While he advises against the imposition of the donor’s pet ideas on the recipient country, he strongly advocates that U.S. “aid be directed preferentially toward private groups” since he thinks that “state enterprise, in general, does not work in Latin America-that it retards progress rather than promotes it.” Despite this stand—whose controversial quality he recognizes—he has much good to say about U.S. aid to governments. Regardless of the reader’s ideas about the respective role of aid to the private and public sectors, this book is likely to make rewarding reading.

Albert Waterston

Moggridge, D. E., The Return to Gold, 1925: The Formulation of Economic Policy and Its Critics, London, Cambridge University Press, 1969, 119 pp., 25s. in the United Kingdom or $4.50 in the United States; Lindert, Peter H., Key Currencies and Gold, 1900-1913, Princeton, New Jersey, Princeton University, 1969, 85 pp., $1.00 (paperback); Harrod, Roy, Money, London, Macmillan, 65s.; New York, St. Martin’s Press, 1969, xi + 355 pp., $9.75.

Monetary history deals most frequently with interpretations of the results of policies adopted by monetary authorities. Mr. Moggridge, however, in his monograph on the return to the gold standard by Britain in 1925, is interested largely in analyzing in detail the process of how that important decision was made.

Mr. Moggridge was one of the first scholars who has been able to make use of internal memoranda on the subject which were prepared in the Cabinet Office and Treasury and which have only recently become publicly available. It is not apparent that Bank of England documents have been so readily accessible to him. However, one of the surprises of Mr. Moggridge’s book is that he has so few surprises to reveal; he largely confirms the work of other scholars on this subject. Nevertheless, his account of how the decision was made to return to the gold standard and to fix the external value of sterling at its pre-1914 exchange rate in terms of the U.S. dollar is interesting and well done-despite his wide-eyed innocence on how small was the role of formal economic analysis in determining that policy.

His main conclusion is that the return to the gold standard in 1925 at an exchange rate of $4.86 to the pound “was ultimately an act of faith in an incompletely understood adjustment mechanism undertaken largely for moral reasons.” However, he has an all-important qualification, in that “much of the case for a return to gold … depended upon a widespread expectation of inflation.” That the authorities gambled wrongly on the change in the world’s price level is now a matter of fact; but was that because the full panoply of economic analysis was not brought to bear on this matter, or that it was not available to be taken into account so that the evolution of the world economy could not be forecast? In the last resort, the return to gold in 1925 was an international problem, and not only a national act of policy; and that lesson has only recently been learned.

In contrast to Mr. Moggridge’s book on the formulation of economic policy, Mr. Lindert is more orthodox in his monetary history in that he presents the results of his painstaking work in reconstructing, in statistical terms, the international financial environment, or system, of the period 1900-13. He is orthodox in the sense that he is concerned with the results of an untold number of decisions, both private and official, that led to the growth of the reserve currency system in what has generally been regarded as the halcyon days of the gold standard. In that respect, his book is an extremely valuable addition to the growing literature on the pre-1914 international monetary system.

His conclusions are enlightening: (1) he notes that by about 1910 the ratio of official foreign exchange reserves to gold reserves had reached about 1:4, which was as high a level as that prevailing in 1924 and 1925; (2) London’s position as the only major reserve center in the system has been exaggerated, as by 1913 the German mark had “become a more popular reserve asset on the Continent than sterling”; (3) he argues that Britain and France were generally in balance of payments deficits between 1900 and 1913, when one uses both the official settlements and liquidity concepts of balance of payments accounting; (4) he concludes that “it is not the role of long-term lender as such, but rather reserve currency status that is basic to an explanation of the deficits experienced by the foreign countries”; (5) finally, he states that this financial evolution of reserve currency status imparted a bias toward payments deficits as conventionally defined.

Mr. Lindert is not concerned mainly with the process of balance of payments adjustment in the pre-1914 period; however, he has a number of interesting points to make on this subject. Taking his analysis as a whole, one might question Mr. Lindert’s emphasis on the influence of short-term capital flows as the main element in the adjustment mechanism; but one can have only praise for his broader achievement in outlining the framework in which adjustment took place.

In his latest book. Sir Roy Harrod makes use of monetary history for illustrative purposes to great advantage. This book is based on lectures on money given at the University of Oxford over a long period of time. Like all good lectures, and this book contains some very good lecture “notes” indeed, they should be used to supplement standard textbook reading. However, very few textbooks contain such clear expositions of difficult points of monetary theory, tellingly illustrated from history and made relevant with topical comments on economic policy.

It is invidious to pick out particular parts of this exceedingly well-written book. The book reads as a whole, but the chapter on “The Keynesian Revolution” and “Growth Theory” are outstandingly interesting. In a quite different but also enlightening way, the chapter on “International Institutions” and in particular the analysis of the Fund and the new forms of multilateral surveillance as currently practiced are engrossing-even if one does not necessarily agree with the arguments as they are presented. But lectures are given not only to inform but to stimulate and to provoke; this book does all three, and does it most ably.

David Williams

Oloya, J.J., Some Aspects of Economic Development with Special Reference to East Africa, Nairobi, Kenya, East African Literature Bureau, 1968, 151 pp., K Sh 12.25.

This book deals with agriculture, the vital and basic sector of the East African economies. Its main focus is the place and the role of agriculture in the development of the East African economies, particularly on Uganda. In seven concise chapters the author discusses a number of familiar problems of development: the fluctuations in the prices of agricultural commodities and their stabilization, the problems of agricultural marketing and efficiency, and the interaction of agriculture and industry in the promotion of economic development. The treatment of these subjects is lucid but in certain cases the analyses are not sufficiently rigorous. Additionally, there is a serious shortcoming of not presenting up-to-date data; the data presented are up to 1962.

One of the main themes of Dr. Oloya’s thesis is that there is a tendency for violent fluctuations in the export prices of the major agricultural commodities. He indicates that between 1948 and 1961 the average annual percentage fluctuation in the world prices for coffee, cotton, and tea was over 10 per cent. Dr. Oloya argues that such wide amplitude in price fluctuations hampers development and introduces instability into government operations. His discussion of the ways in which export price fluctuations could be mitigated, particularly those dealing with international agreement, bilateral, and preferential marketing arrangements and agricultural diversification, is now familiar but nevertheless refreshing.

Dealing with the problems of marketing, the author emphasizes the importance of orderly and efficient marketing as a means of reducing the effects of price instability on the economy. While conceding some of the criticisms of the operations of marketing boards (common to the ex-British African countries), he demonstrates that these boards, in Uganda especially, have been very useful in mobilizing domestic savings, and in stabilizing both producer prices and incomes. But he notes that there is still a need to improve the allocation of capital mobilized in this way so as to achieve further growth and diversification of the agricultural sector.

Dr. Oloya argues persuasively that the development of agriculture and industrialization cannot be viewed as mutually exclusive in a country’s development strategy. (In fact, there is need for simultaneous development of both sectors; this fits in with the “balanced growth” approach which he espouses.) Nonetheless, one question remains unanswered: given the limited scarce resources of capital and skilled manpower, which sector should receive priority in the initial stages of development? Dr. Oloya makes the oft-omitted point that the encouragement of import-substitution as part of a country’s industrialization program need not imply the curtailment of imports but a higher reallocation of available foreign exchange to capital goods import. One can hardly controvert the author’s contention that intra-African trade—which presently is slight-could grow appreciably out of transactions arising from coordinated industrial development. On the whole, this book should prove rewarding to all students of the development process in Africa.

Edward A. Arowolo


Dam, Kenneth W., The GATT: Law and International Economic Organization, Chicago, The University of Chicago Press, 1969, xvii + 480 pp., $15.00.

Brundage, Percival Flack, The Bureau of the Budget, New York, Praeger Publishers, 1970, xviii + 327 pp., $10.00.

Chakravarty, Sukhamoy, Capital and Development Planning, Cambridge, Mass., The M.I.T. Press, 1969, xx + 344 pp., $12.50.

Hirshleifer, J., Investment, Interest and Capital, Englewood Cliffs, New Jersey, Prentice-Hall, 1970, x + 320 pp., $9.95.

OECD, Geographical Distribution of Financial Flows to Less Developed Countries, Paris, Organization for Economic Cooperation and Development, 1969, 91 pp., F 13 or $3.20 (paperback).

OECD, Agricultural Statistics, 1955-1968, Paris, 1969, 209 pp., F 21 or $4.60 (paperback).

Beltrán Saavedra, Alberto, Administracion De Personal, Ensayo Para Un Reglamento De Personal En Servicio Publico, La Paz, Bolivia, UrquizoLtda., 1969, 195 pp., US$3.00 (paperback).

Wharton, Clifton R., Jr. (Editor), Subsistence Agriculture and Economic Development, Chicago, Aldine Publishing Company, 1970, xiii + 481 pp., $12.50.

Raman, A., Central Banking in India: A Study of Recent Developments, Calcutta, Bookland Private Ltd., 1969, xiv + 363 pp., Rs25.

Hapgood, David (Editor), The Role of Popular Participation in Development, Cambridge, Mass. The M.I.T. Press, 1969, xiii +222 pp.,$5.00 (paperback).