Dualism theories assume a split of economic and social structures of different sectors so that they differ in organization, level of development, and goal structures. Usually, the concept of economic dualism (BOEKE 1) differentiates between two sectors of economy:

  • the traditional subsistence sector consists of small-scale agricul
    ture, handicraft and petty trade, has a high degree of labour
    intensity but low capital intensity and little division of labour;
  • the modern sector of capital-intensive industry and plantation
    agriculture produces for the world market with a capital-intensive
    mode of production with a high division of labour.

The two sectors have little relation and interdependence and develop each according to its own pattern. The modern sector can be considered an economic enclave of industrial countries, and its multipli-cator and growth effects will benefit the industrial countries but have little effect on the internal market.

Several authors stress the dualism of specific factors. ECKHAUS (4), for instance, differentiates, in his concept of technological dualism, between labour and capital-intensive sectors. GANNAGE (7) explains regional dualism as a lack of communications and exchange between regions, the capital sometimes being an island which, in geographical terms, belongs to the developing country, in economic terms, however, to the industrialized country.

Economic, technological, and regional dualism are often the consequence of a social dualism, the absence of relationships between people of different race, religion, and language, which, in many cases, is a legacy of colonialism.

Development in dualism concepts is the suppression of the traditional sector by concentrating on and expanding the modern sector. In time, it is assumed that the trickle down effects will reduce and abolish dualism. In this line of thinking, the main problem is capital formation because its degree determines the scope and speed of expansion of the modern sector. In general, agriculture has to provide the resources, labour as well as capital, for expanding the modern sector. In details, the strategies vary. Some authors, like LEWIS (14) and FEI/RANIS (5), assumed that a reduction of the labour force in agriculture, because of the widespread disguised unemployment, would not reduce agricultural production. The productive employment of these labourers in the modern sector would increase the total production of the economy and hence priority of investment in industry is necessary. Concentration on the modern sector led to an increasing regional disparity, rural urban migration, urban unemployment, a decrease in agricultural production, and hindrance in industrial development because of a lack of purchasing power in the rural areas. The anticipated trickle-down effects hardly ever happened. In praxis, development plans following this line of thinking led to failures like the early Indian development planning. Therefore, other authors, like JORGENSON (10), LELE (12), and MELLOR (17), emphasize the important role of agriculture at the beginning of development, i.e., preceding or parallel to industrial devel-,, opment in order to provide enough internal resources for the development process.