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 tel: (717) 337-6668 fax: (717) 337-6251 e-mail: [log in to unmask]