Lewis, Arthur (1915–91)

W. ARTHUR LEWIS WAS BORN in Saint Lucia, a British territory in the Caribbean, on January 23, 1915. Having won a St. Lucia government scholarship to a British university, he enrolled at the London School of Economics in 1933, graduating in 1937, and earning a doctorate in industrial economics in 1940. Lewis notes in his Nobel Prize autobiography that he had wanted to be an engineer, but ended up going into economics because “neither the government nor the white firms would employ a black engineer.”

Lewis began his career teaching at the London School of Economics, moving to the University of Manchester in 1948. From 1963 until his retirement in 1983, he was a professor at Princeton University. In addition to his academic posts, Lewis worked for the United Nations in different capacities, was president of the University of the West Indies, and also set up the Caribbean Development Bank. He was knighted in 1963.

Lewis is known for his work in two fields: the history of the world economy since 1870 and development economics. In the first, Lewis studied how economic growth in the least developed countries was related to growth in the developed economies. It is in the second field, which can be considered an outgrowth of the first, however, where Lewis made his most lasting contributions.

Based on an article published in 1954 in The Manchester School (“Economic Development with Unlimited Supplies of Labour”) and a book published in 1955 (The Theory of Economic Growth), Lewis can be considered one of the founders of economic development as an economic field in its own right. As part of his lifelong goal of alleviating poverty in developing countries, he recognized that not all economies were like the advanced capitalist economies; some economies, such as those in Africa, Latin America and the Caribbean, and Asia, were of a different nature and should be treated as such. This meant that he had to develop a new way of looking at these economies and their interactions with the developed capitalist world.

His seminal work in this area was his introduction of the concept of a two-sector economy in poor countries in the 1954 article on economic development. In this article, in adopting a classical approach to surplus labor and wages, Lewis discarded the marginal utility approach and the neoclassical framework in an effort to assess “the fundamental forces determining the rate of economic growth.” He was interested in explaining the situation as he saw it that existed in developing countries; the model describing capitalist economies simply did not apply. Not surprisingly this approach generated much controversy.

In this 1954 article, Lewis divided the economy of a developing country into two sectors: a capitalist sector and a subsistence sector. In the subsistence sector he rejected the neoclassical assumption that the quantity of labor is fixed by positing an unlimited (infinitely elastic) supply of labor. Some of this surplus, low-wage labor then migrates to the capitalist sector (where productivity was increasing), thereby driving down wages in this sector. As a result, profits are high and rising in the capitalist sector. As these profits are reinvested, growth occurs, and economic development continues while wages remain low.

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