Document Database

Using a simulation model, this research examines the potential impact of a very large-scale
foreign development-assistance program (a “Global Marshall Plan”), financed largely from
reallocation of military expenditure, on the future development of the world economy. The
model’s key premise is that inequality among nations in per capita income is all or mostly due to
differentials in generalized capital stocks. Generalized capital encompasses all reproducible
primary factors of production other than raw labor power, and it includes, in addition to the value
of plant and machinery, the value of education and training inputs into the labor force, and the
value of social infrastructure capital such as roads and schools.

The program, dubbed the World
Economic Equalization Program (WEEP), would entail large-scale transfers of new generalized
capital investment from rich nations to poor nations. The benchmark simulation of the model
without such a program in operation indicates indefinite continuation of the recent trend toward
increasing world economic inequality. The benchmark simulation of the model with the program
in operation indicates a dramatic reduction in world economic inequality, at the cost of a very
minor retardation in the economic growth of the rich nations.

Sensitivity analysis demonstrates
that with certain key exceptions, the optimistic results are reasonably robust against parametric
variation. In cases of unfavorable parameter values, such that the equalizing effect of the program
is minor, the cost is mostly borne by the poor nations, in the sense that unfavorable parameter
values do not reduce the economic growth of the rich nations by a substantial amount. These
results might support the initiation of a real-world WEEP on a tentative and provisional basis,
with the intention of abandoning it if, after a fair trial period of perhaps 10-15 years, the achieved
results are disappointing.