In economic development theories, there is a model called core investment expansion pertain to economic development as the result of employing cheap labor in the expanding sectors such as agriculture and other productive industries. Arthur Lewis who is a known as a famous economic analyst initially presents a picture of underdeveloped economies having a kind of dichotomist feature such as subsistence agriculture and the booming industrial sector.Agricultural sectors accounts for about ninety percent of economic activity partly due to the primitive structure of underdeveloped countries but industrial sector accounts for a smaller portion of production. With the expansion of urbanization and the onset of migrations from the countryside to the city, the labor force shifts from the agricultural sector to industrial sector. As a result, these changes can play a great role in industrial growth and ultimately economic development.
According to Arthur Lewis, the developed countries are the ones that could maximize their industrial activity. It means, development is equivalent to industrialization. Using the cheap labor, the capitalist class of the country can make more profit through increasing the volume of investments. This process should continue until the initial core of investment leads to a widespread phenomenon and the number of capitalist also class increase in the country. In this process, any actions taken to support the workforce such as increasing labor salaries and reducing the employer profit margins, can slows down the pace of development process in a country.
Lewis argues that the poor will always consumes their income but the capitalist will return their surplus back to the production cycle. Therefore, the governments need to prevent from the formation of strong trade unions having great bargaining power and also avoid taking heavy taxes that discourage the investors. Although Lewis’s recommendations are seen as hostile to the working class, he aims to achieve a development that more benefits the ordinary people. In the other word, breaking the bones of the working class under gears of industrial apparatus is just temporary, and so they must sacrifice for a better future. However, the Lewis’s theory was criticized by neo-Marxists. The neo-Marxists interpreted his conception about the third world country’s capitalist very naive
According to neo-Marxists, the bloodsucker bourgeoisies of the third world, instead of reinvesting their profits, they buy up luxury goods which are imported from western countries and send out their surplus income to overseas. Nevertheless, based on historical point of view, it is not clear how much the communist systems have succeeded to work for the working class. If we ignore the issue of economic inequality or class divisions in the capitalist’s countries, they have succeeded in overcoming absolute poverty.
One of the fundamental problems of communist systems is weakening of the incentives of economic investors.The abolition of private ownership and the over-reliance on work conscience cannot provide the necessary incentives for economic development in the sense of creating economic value. Economic inequality itself can be a driver.If we summarize the nature of the capitalist system in recognizing the economic inequalities originated from differences of talent and ownership of production resources is certainly a defensible phenomenon, but if the capitalist system recognizes its existence in creating inequality and affirms labor colonization it certainly cannot serve as a human model for the economies of developing countries .
One of the well-known rules in economics is the principle of declining labor force returns. It means, the same time with saving certain amount of capital, the next workers have less output than previous workers in increase of production. For example, if an employer hire more famers than the capacity of an agricultural plot which produce wheat, the share of subsequent farmers will have a declining output compared to previous farmers in wheat production, and if the employer stop hiring new farmers, the share of the last farmer may be Zero or negative in wheat production.
However, increasing the labor productivity is contradictory to the above mentioned rule. For example, if a society invests in empowerment of its workforce and creates the required conditions to support it, the share of labor force will increase in productivities. Though the workforce salaries make up a large part of commodities, but if the workforce productivity increases, the relative cost of labor will decrease as output increases. Among different countries, Japan’s development model is based on more productivity. It is said that annually Japan generate a significant sums of income through providing management services to other countries. One of the criteria for measuring productivity is the number of useful work hours an office worker does within a year; In Japan, a worker has 2420 useful work hours which is nearly fourfold of Afghanistan.
Religiously, Islam is one of the religions that pay particular importance on workers and working class. According to Islamic economists, the matter of remuneration or hiring labor force is legally permissible, but it is not is not an ideal condition. Instead of remuneration, the Islamic contracts pay more attention on labor force participation in the production process than on employment. In other words, economic justice requires that the workers equitably have shares in economic value that he or she generates with the investors. Having shares in production interests can have a great role in motivation of the workforce. As a result, the workers are considered like shareholders of employers not just his employee. Thus, the stories which have been narrated from the religious elders are more focused on the entrepreneurial workforce.