Underdevelopment and development

The problem for the industrialized economies is one of an overproduction of economic surplus, for post-colonial societies the problem thus lies in their lack of access to surplus for their own economic development.

The problem not a lack of development, but an underdevelopment of the domestic economy; an undermining of its potential for development due to the appropriation of an investable surplus which could generate and sustain its growth. Baran contrasts the supposedly typical way in which the surplus is now actually utilized with the way in which it could potentially be utilized if the domestic economy were not constrained by the distorting requirements of current surplus utilization. He posits a state of "rational allocation' of the surplus, based on the present and future needs of the indigenous population. This allocation is based on: (i) a mobilization of potential surplus through an expropriation of foreign and domestic capitalists and landowners, and an elimination of the drain on current income resulting from excess consumption and capital removals abroad; (ii) the reallocation of unproductive labour; (iii) the planned development of domestic agriculture related to domestic industry based on a new mobilization of the surplus. Baran tries to show how, by changing current patterns of surplus utilization towards a planned rational allocation of the surplus based on domestic economic requirements, the pattern of underdevelopment imposed by the reproductive requirements of the industrialized economies can be overcome, and domestic development generated.