FROM: 
 
Anne Mayhew 
1101 McClung Tower 
University of Tennessee 
Knoxville, TN 37996-0411 
PH: 615-974-1689; FAX: 615-974-3915; E-MAIL: [log in to unmask] 
 
On Wed, 19 Jul 1995 [log in to unmask] wrote 
>  
>  
>  
> I cannot believe that by encouraging consumption you create the type of  
> habits and behavior patterns that lead to investment and economic  
> development.  Since Robin Neil finds these causal connections so obvious 
I  
> an forced to admit that there are still economists like myself who think  
> that to seriously recommend such a prescription to third-world 
governments is  
> irresponsible. 
>  
> Am I correct that even devout Keynesians would not have the doctrine that 
> applied (if it applies at all) to advanced capitalist economies applied 
to  
> third-world countries?   If so, why all the fuss about the World Bank and 
> long term lending, etc? 
  
To which I respond that I don't know how devout a Keynesian I am but I do  
think that in countries where there are unused resources--as surely there  
are in third-world (and first-world countries)--then increased consumption  
is an increase in demand and if there are willing and able entrepreneurs  
(as I am told to assume exist in great plenty) then they will respond  
with production and that increased production usually requires investment.  
So, yes  
I would say that the doctrine applies equally to third and first world.   
If the question is whether such policy is sufficient, especially where  
income distribution is such that increased consumer demand may lead to a  
much larger increase in imports than in domestic consumption, and where  
there are many other problems, then the answer is of course no.  But, on  
the face of it I see no reason why the "Keynesian" policy is not highly  
appropriate in third world countries.