Many followers of Keynes (Joan Robinson, for example) cautioned against the 
application of demand stimulus policy strategies for 'lesser developed 
countries'.  The reasoning was based on the distinction between productive 
capacity and capacity utilization.  Demand stimulus in countries with 
underutilized plant and equipment and unemployed workers can lead to the 
increased utilization of this already existing productive capacity.  This 
is very different than the situation in countries that lack capacity 
itself, and in which significant portions of the population are (partially) 
engaged in subsistence activities. 
 
Nowadays, we would hope the discussion to additionally include issues 
related to culture, self-determination, environmental impact, etc.  In any 
case, it would seem that historical and institutional factors will 
influence the impact of any given policy or set of policies, i.e. the same 
policy may have quite different results in very different institutional 
settings.  This point has often been made with regard to the application of 
certain economic policies in transitional economies, as well.  (The point 
has also been made that industrialized nations and the international 
organizations they dominate force policies on transitional and developing 
economies which they don't themselves follow.) 
 
It does *not* logically follow from this, however, that neoclassical theory 
thus applies to lesser developed countries, or that there is no sense in 
which the insights of Keynes have anything to contribute to an analysis of 
LDCs, especially those relatively more industrialized and/or integrated 
into global economy via trade.  The distinction between 'expansionary' and 
'austerity' approaches to development (as made by Nell, Graziani, and 
others), Kaldor's 'polarisation thesis', and many other contributions to 
understanding LDCs have some roots in 'Keynes-ian' (in the literal sense, 
not as refers to any school) insights. 
 
___________________________________ 
 
Mathew Forstater      Department of Economics 
        Gettysburg College     Gettysburg, PA  17325 
 
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