Introduction

If economic growth actually resembled the ‘extended reproduction’ envisioned by Marx and implicit in the steady state regimes of many contemporary growth models, one would not expect growth to have major social consequences.

Of course, economic growth is something more than a mere uniform change of scale of economic magnitudes. For a host of reasons, it is in the very nature of growth to modify economic structures and, because of this, to affect social structures and so­cial relations. For instance, growth may modify the sectoral structure of an economy, leading firms in one sector to close down and firms in other sectors to be created or expand. Growth modifies the structure of prices, thus affecting the standard of living of households in a way that depends on their consumption preferences. In other cases, growth will call on some particular skills, increasing the remuneration of those endowed with those skills and also, possibly, their decision-making power within society. Finally, growth may reduce the availability of public goods like clean air or water, requiring pub­lic intervention in order to maintain the adequate supply of environmental goods. In all these cases, it is not only the economic structure - i.e., the relative importance of sec­tors, labor skills, remuneration of factors, and size of the public sector - that may be modified by growth. It is also the whole social structure - that is, the relative weight of socio-economic groups or the way in which individuals define themselves with respect to the rest of the society - that is affected. As a consequence, social relations that govern how individuals in a society interact with each other through explicit or implicit rules may also be modified by economic growth and may in turn affect the growth process itself.

Rough evidence of such changes is provided by simple comparisons of economic and social structures and institutions across countries which have reached different levels of development. At the risk of caricaturing, it is sufficient to compare poor Sub-Saharan African countries today with some highly developed countries in Europe, North Amer­ica or in the South Pacific. At one end of the spectrum, one observes largely rural societies dominated by household farms, few wage workers except in the limited urban sector, social protection ensured by an extended family system and a relatively small public sector often controlled by an unstable oligarchy. At the other end, one finds almost exclusively democratic urban societies with salaried employment and private ownership of capital as the main economic organization, with sophisticated redistribu­tion systems run by governments that are 3-4 times larger than these observed in poorer countries.

It is tempting to attribute all of these differences to economic growth and to expect that growth in the poorest countries will progressively make them comparable to de­veloped countries today. Unfortunately, matters are not so simple. In particular, it is clear that differences in economic and social structures and institutions cause differ­ences in the pace and structure of economic growth as much as they are caused by it. But it is also the case that some other factors may be influencing simultaneously both the process of economic growth and social structures and institutions. For example, a longer life expectancy due to technical advances in the field of health is likely to mod­ify social structures through the aging of the population but it is also likely to modify economic behavior and the growth process, for instance because higher saving rates are rendered necessary by the prospect of longer periods of inactivity. In turn, this effect on economic growth rates and on the level of development may affect social structures and institutions by changing the weight of particular sectors in the economy.

The effects of economic growth on social structures are more complex than suggested by the reduced form regressions found in recent literature. The relationships are likely to be nonlinear (as hypothesized, for instance, by Kuznets for income inequality) and to depend on several country characteristics, including policy and institutional variables. This chapter argues that simple statistical methods are unable to identify these forces and these interactions, and that the limited number of observations available is a seri­ous hindrance for this identification. Under these conditions, the only methodological approach able to identify the social consequences of economic growth is of a structural nature. It first requires establishing hypotheses about the channels through which eco­nomic growth may affect the social structures under analysis. These hypotheses should then be empirically tested, provided of course that the data necessary to do so are avail­able.

The purpose of this chapter is to examine, among the changes in social structures that may be observed along the growth path of a country or when comparing countries at different levels of development, those that may be considered as direct consequences of economic growth. Other changes, thus, have to be considered as autonomous or possibly caused by factors or initial conditions that may have also affected growth but that have only an indirect relation to growth. An important example of such autonomous changes would be technological progress.

As noted above, some of these direct social consequences of growth may affect the pace and the structure of future growth and thus feed back into themselves through various channels. For instance, growth may under some circumstances generate more inequality in the distribution of economic resources, and this increased inequality may in turn affect the dynamics of the economy. For analytical expediency, this chapter focuses on that part of the circular relationship that goes from growth to social structures and ignores the other side of the circle.

The social consequences of growth may be of diverse nature. A natural distinction to be made is between the consequences of growth for ‘social structures’ and the conse­quences for ‘social relations’ and ‘social institutions’. As suggested by Kuznets (1966, pp. 157-158), changes in social structures have to be understood essentially as the differential effects of economic growth on predetermined social groups. For example, urban skilled workers may benefit more from economic growth at some stage than un­skilled workers, rentiers more than farmers, men than women, or young people than older people. Growth may also affect the size of those various groups. Some substantial proportion of people migrate from the countryside to the cities under the pressure of ur­ban growth, or more people may be willing to acquire a secondary or tertiary education. In both cases, social distances between individuals are modified. Changes in social insti­tutions may result from changes in these social structures or from autonomous forces. For instance, changing the weight of specific socio-economic groups within society modifies the dominant mode of social relations, and changing the economic distance between individuals may modify the way they interact.

This chapter concentrates on the consequences of growth for social structures rather than for social institutions or relations. Its ambition is to identify the role played by economic growth in observed changes in social structures and to disentangle it from other factors. Casual comparison of social structures in developed and developing coun­tries shows obvious and enormous differences. However, just because these two country groups differ by their mean income level does not imply that observed social differences must be exclusively attributed to economic growth per se.

This chapter is organized in three parts. The first part introduces the topic by exam­ining the nature of the statistical relationships existing between several social indicators and development across countries and/or across periods. It illustrates the differences in social structures associated with differences in income, but it also shows the diffi­culty of obtaining precise estimates of the size of the ‘income effect’ from this kind of evidence and the need to rely on more structural analysis. The second part reviews theoretical models of the effect of economic growth on social structures, with an empha­sis on several dimensions of social differentiation and on economic inequality. Finally, the third part focuses on the empirical evidence in support of this structural view of the consequences of growth for social structures. It leads in particular to re-examining the evidence discussed in the first part under a different angle.

1.