1975 Articles

Foreign Capital, Dependence, Destabilisation and Feasibility of Transition to Socialism

Bhagwati, Jagdish N.; Grinols, Earl L.

The paper analyses the argument that external capital inflow could create dependence and thus sabotage the possibility of a successful transition to socialism. The formal model deployed is of the Harrod-Domar variety and simulation run are undertaken for five underdeveloped countries, using savings functions estimated by Weisskopf. The conclusions lend some support to radical concerns about the adverse effects of foreign aid on recipient countries.