[2] The use of "underdeveloped" and "backward" h ave a pejorative tinge to them, although "less-developed" itself implies an inferior condition. In this thesis, I normally use "less-developed" as per "less-developed countries or LDCs" to categorize countries whose per capita GNP or GDP is less than $3,0 00.

[3] See the Human Development Report 1993 published annually by the United Nations Development Program.

[4] See the World Factbook 1993 published annually by the United States Central Intelligenc e Agency.

[5] Some very rare currency was printed. Nancy Berliner notes "Cambodia has gone from picturing ancient religious sculptures and rituals on its currency during the pre-Vietnam War days to having machine gunners and rocket la unchers on the scarce riel while the country was called Kampuchea in the mid-1970's and under the rule of the murderous Khmer Rouge." (New York Times, March 5, 1995, Business Section, p. 8.)

[6] On August 11, 1863, Cambodia bec ame the first protectorate. Twenty years later, she became a full-fledged colony. For the definitive history of Cambodia, see Chandler, A History of Cambodia.

⁷ The data on education in Cambodia is taken from Cambodge. It was a dditionally corroborated in Osborne (1994). As for Khmer Republic, little of controversy is quoted.

[8] See Samphan, Cambodia's Economy and Industrial Development, (written in 1959, translated and published by Laura Sum mers in 1979).

[9] He is still their representative. Khieu Samphan attempted to exonerate himself by arguing that he was merely a figurehead. Compelling contrary evidence is presented in Stephen Heder's "Pol Pot and Khieu Samphan" (19 91). In 1992, a mob attempted to hang him when it was learned that he had arrived in Phnom Penh. He had planned to reside in the capital and become the liaison between the Khmer Rouge and the new government.

[10] Cohen and Zysman in < u>Manufacturing Matters (1987) argue that the American economy has simply diversified into manufacturing and services without really leaving agriculture at all.

[11] In an input-output model, linkages "are" the model. They produce growth akin to the Keynesian multiplier effect.

[12] Timmer, Peter C. "The Agricultural Transformation" in Bhardan et al., Handbook of Development Economics Vol. 1, p. 280.

[13] Ibid.

[ 14] Ibid., p. 282.

[15] There are numerous textbooks on economic development; the one most helpful to this chapter was Gillis et al., Economics of Development (1992). I would like to thank professor Alain de Janvry for his illuminating lectures on each of these theories. Additionally, I thank Elizabeth Sadoulet for explaining the Dual Sectors model. Without them, these theories would have otherwise seemed quite obtuse.

[16] See Roy F. Harrod, "An Essa y in Dynamic Theory," Economic Journal (1939), pp. 14-33; and Evsey Domar, "Capital Expansion, Rate of Growth, and Employment," Econometrica (1946), pp. 137-147, and "Expansion and Employment," American Economic Review 37 (1947), p. 3 4-55. As quoted in Gillis et al., 1992.

¹⁷ Although it would seem higher interest rates might in themselves produce a "win-win" situation. Savings would be high and in addition capital purchases would be disfavored lowering "k" (thus causing more labor-intensive production functions to be used). As quoted in Gillis et al., 1992.

¹⁸ Savings is wealth, but to save generates more wealth. Wealth is not directly relevant to investment, but the change in wealth ([[Delta]]w), which eq uals saving, is for our purposes here.

¹⁹ "Japan's Dangerous Post Office," The Economist, October 29, 1994, p. 20.

²⁰ See chapter 3 for graphs and discussion.

²¹ This is commonly due to a variety of factors : risk, asymmetric information, discrimination, etc.

²² An example of institutions such as these are the benevolent lending societies in San Francisco's Chinatown. These societies work on a rotational lending scheme via lottery or other meth ods. Members pitch-in by depositing a sum of money, and can borrow it at an interest rate (usually higher than from banks) determined by the group. Such cooperative lending schemes pool risk together, thus reducing individual risk. Like sharecropping, how ever, it is not first-best.

²³ Incidents rash of robberies have recently occurred in Phnom Penh. In the 1960s and early 1970s, the difficulty in withdrawing cash and/or cashing bank checks made banking a hassle for depositors. Additionally, there was no deposit insurance, which made for weary depositors.

²⁴ Caves et al., World Trade and Payments, 6th ed. (1993), pp. 520-523.

²⁵ Underemployment is defined as a situation in which workers are utilized only par t of the time or an instance in which the worker works at a low productivity relative to his/her potential.

²⁶ Gerschenkron, Economic Backwardness in Historical Perspective (1962), p. 9.

²⁷ See Akerlof and Yellen, Ef ficiency Wage Models of the Labor Market (1986). Quite simply, the worker must be made to value his/her current job more than any other that would likewise pay the value of his/her marginal revenue product (under ETW: wage > MRPL).

²⁸ See R. M. Solow "A Contribution to the Theory of Economic Growth," Quarterly Journal of Economics, Vol. 70 (February 1956), pp. 65-94. As quoted in Gillis et al., 1992.

²⁹ For instance, let net saving = sY, let net investment = nK, t hus nK = sY implies that K/Y = s/n which is to say the capital-output ratio.

³⁰ See R. M. Solow "Technical change and the Aggregate Production Function," Review of Economics and Statistics. Vol. 39 (August 1957), pp. 312-20. As quote d in Gillis et al., 1992.

³¹ More technically, [[alpha]] is the capital-output ratio K/Y. [[beta]] is the labor-output ratio, L/Y and so on.

³² Since then, economists have realized that technology is extremely important, but th at technology itself does not explain more than 30% of the residual growth.

³³ See chapter 3 on Cambodia's educational system. For instance, there were many academic centers, but few had the wherewithal to provide a great education, much les s research and development.

³⁴ See W. Arthur Lewis, The Theory of Economic Growth (Homewood, Ill.: Richard Irwin, 1955). As quoted in Gillis et al., 1992.

³⁵ This particular condition is theoretically-based, but not empi rically false. Labor in agriculture is often said to be of low productivity for that reason.

³⁶ The model does not assume a substitutability between capital and labor of neo-classical variety. Labor and capital are complements (Leontieff is oquants); which makes sense here because the relative price for the marginal product of labor is going to be less than the marginal product of capital (at least in an underemployed economy).

³⁷ This assumption is not substantiated by hard ev idence because none was available. However, it is safe to assume that chronic problems of "low productivity" are to be expected. It is interesting that Vietnamese labor was often brought into French colonial Cambodia because of the "low productivity" of K hmer workers. See chapter 3 for more with respect to Cambodia's colonial experience and the productivity of its workers.

³⁸ I am reminded of Professor de Janvry's account of an encounter with a USAID officer: "I forget what the question was, " he said. But the answer is "Technology."

³⁹ But with equal if not catastrophic treatment of agriculture as happened in the USSR under Vladimir Lenin and Joseph Stalin.

⁴⁰ See Evgeny Preobrazhensky's The New Economics ( 1965).

[41] Exclusively on the Cambodian economy before 1970, see Remy Prud'homme's L'economie du Cambodge (1969) for an incredible, prescient view. On the reason why the book was not integrated into this thesis draft, please read my preface. See also Khieu Samphan's Cambodia's Economy and Industrial Development (written in 1959, but published in 1979) dissertation, and A. Dauphin Meunier's Histoire du Cambodge (1961). Since then, Craig Etcheson's The Rise and Demise of Democratic Kampuchea (1984), Michael Vickery's Kampuchea: Politics, Economics, and Society (1986), Grant Curtis' Cambodia, A Country Profile (1990), and most recently, George Irvin's working paper "Rebuilding Cambodia's Econom y: UNTAC and Beyond" (1993). In short, contributions to the study of Cambodia's economy have been uneven. The 1970s saw virtually none.

[42] See Ben Kiernan's illuminating exposition How Pol Pot Came to Power (1985) and David P. Chandler's ground-breaking biography of Pol Pot: Brother Number One (1992) and his most recent work The Tragedy of Cambodian History (1993).

[43] Country Profile, Indochina: Vietnam, Laos, Cambodia 1993/94, p. 90.

[44] Etcheson, Democratic Kampuchea (1984), p. 229, see also Chandler, A History of Cambodia (1992), p. 101.

[45] Country Profile, Indochina: Vietnam, Laos, Cambodia 1993/94, p. 90.

< sup>46 Chandler, A History of Cambodia (1992), p. 100.

[47] Etcheson, p. 7.

[48] Although debatable, this influence has been seen in an exploitative, "neo-colonial" lens by Laura Summers (1976) and the late Malcolm Caldwell (1979), among others. They argued that French penetration into pre-capitalist Cambodia was entirely detrimental (see Khieu Samphan's dissertation). On this group of academics, see also a forthcoming undergraduate political scienc e thesis on "Who supported the Khmer Rouge?" by the same author of this thesis. Forest's Le Cambodge et la colonisation Française (1980) is notably subtitled: Histoire d'une colonisation sans heurts [trans. The story of a colon ization without hitches].

[49] Country Profile, Indochina: Vietnam, Laos, Cambodia 1993/94, p. 90.

[50] Ibid.

[51] Forest, Le Cambodge et la colonisation Française< /u>, p. 244, 200, 204. I used the actual dissertation. The bibliography references the book published by L'Harmattan, which is presumed to be more easily accessible.

[52] Ibid., p. 131.

⁵³ Etcheson, p. 7.

[54] In his review of Osborne (1994), page unnumbered.

[55] Delvert, Le Cambodge (1983), pp. 68-75.

[56] This "exploitative" relationship is one of many explained in Khieu Samphan's thesis. On the ir basis he concludes that structural measures ought to be used to switch consumption away from these unproductive goods.

[57] One of the pre-occupations for which he is infamous is movie-making. He was and is still an avid director whose passion for the big screen was criticized as too time consuming and distracting to juggle with the affairs of a State which he ran until 1970.

[58] See Osborne, Sihanouk: Prince of Light Prince of Darkness (1994).

[59] Mr. Lim came to the United States in the early to mid-1970s. He was interviewed on March 4, 1995 regarding his own experience in the Cambodian school system and the predominance of banks.

[60] Communicated to me in an interview with Mr. Peth Lim on March 4th, 1995.

[61] Dauphin-Meunier, Histoire du Cambodge (1968), p. 118. It is unclear whether Cambodia, Laos, and Vietnam considered the creation of an optimal currency area before goi ng their own independent ways. However, given its size, and the loss of monetary independence, an independent Union central bank might have alleviated the current account deficits Cambodia suffered for most of the 1950s and 1960s.

⁶² Ibid.< p> [63] See graph on BNC deposits in section entitled Application of Harrod-Domar.

⁶⁴ Dauphin-Meunier, p. 119.

⁶⁵ Ibid., p. 118.

[66] Cambodge (1970), p. 37.

[67 ] Osborne, pp. 268-269. The book, which presents Sihanouk's positives and negatives, though judges Sihanouk unfavorably with respect to his reign as Chief of State was banned from Phnom Penh bookstores.

[68] Sihanouk would fulfil l his dream, though it became a nightmare for himself and most Cambodians. First a pawn, says Osborne, then a prisoner.

⁶⁹ Osborne, pp. 268-269.

⁷⁰ Drawn from an interview with Peth Lim, March 4th, 1995.

⁷¹ Cou ntry Profile, Indochina: Vietnam, Laos, Cambodia 1993/94, p. 96.

[72] Ibid.

[73] Ibid., p. 102.

[74] Even at the nadir of the war years mid-1970s, pockets of rice production were still a plenty. Because of the war, rice which was available never made it into Phnom Penh for instance. See Jackson (1989) for more regarding this matter.

[75] Etcheson, p. 18.

[76] Another point which totally escape s discussion in this thesis is changing land use and cultivation trends which seriously undermined the Khmer peasantry. For instance, "While there was increasingly less land to go around, the number of large landholdings grew so that few had more of whatl ittle there was... in 1930, there were . . . few landless peasants . . . By 1956, some 55 percent of the Khmer peasantry owned less than one hectare . . . By 1962, 31 percent owned less than one hectare . . ." (Etcheson, p. 15.) The point is highly releva nt given its linkage to the Dual Sectors model. It is hoped that future studies will treat this important agricultural transformation with extended care.

[77] In personal communication dated October 7th, 1994, Dr. Etcheson writes, " Accurate date on the Cambodian economy simply does not exist; even the numbers used by the World Bank and IMF, in my view, are of very dubious reliability."

[78] Khieu Samphan as Minister of Commerce in 1962 tried to levy tariffs on luxury goods imported into Cambodia, but failed because of vehement opposition by the urban elite.

[79] The Marshall-Lerner condition tells us that in a devaluation, the sum of imports and exports elaticities must exceed 1 in a situa tion where the trade balance is initially zero for that trade balance to improve the following year. Given the J-curve effect of 2 to 3 years, an improvement in the trade balance should have been observed. Yet, the trade balance seems to fluctuate from 19 55 to 1959 and just gets worse from 1960 to 1962.

[80] The Mexico bail-out of 1995, after the sharp devaluation of the Peso, calls upon dramatic austerity measures. Austerity measures do not have to be so severe, if precautions vis-& agrave;-vis spending are taken ahead of time. In any case, a recession will no doubt envelop the Mexican economy as a result.

[81] The issue of taxation is one I have left glaringly untouched in this thesis. Taxes were very low in Ca mbodia because tax capacity itself was low. Taxes were notoriously difficult to collect given the cash/barter style economy. Of note was the tax on the purchase and registration of imported cars; other than that, income taxes were well under five percenta ccording to Peth Lim. Past contributions to the study of Cambodia's economy Samphan (1959), for instance, have delved more deeply into this issue. Hopefully, so too will future studies.

[82] Economically speaking, how individuals beh ave must be in any event rational. Therefore, it appears, this economic behavior too was rational. Simply put, the benefits to consuming were equal to or greater than those of saving. It was more incentive compatible to spend than to save. Although not di scussed here, Cambodia's leading commercial banks, such as the Banque du Commerce, did not have deposit insurance or branches in rural areas. There were, anecdotally speaking, innumerable drawbacks to keeping money in banks. Banking was not user-fr iendly, unless one desired to travel abroad or make foreign purchases. For instance, personal checks had to be certified or notarized (i.e., vouched for), large withdrawals were difficult, and credit without collateral was out of the question.

[83] In an open economy with a government sector, all is not lost. Cambodia was open and it did have public finance, but increased private saving would have boosted investment.

⁸⁴ Etcheson, pp. 19-20.

[85] Os borne, p. 215.

⁸⁶ Etcheson, pp. 20-21.

[87] The dual sector classical economy model (which assumes underemployment) concludes that wage repression in agriculture is necessary for intersectoral labor flows to continue wi thout real wage increases (due to inflation in the price of agricultural goods). The erosion of purchasing power might in fact be consistent with the model in that it would show that real wages were in fact not increasing.

[88] Osbo rne, p. 268.

[89] Corruption is a major point in itself, along with taxation, for which I regret not having tackled directly in this thesis. In chapter 5, I present an economic model of corruption and the conditions necessary for its minimization.

⁹⁰ World Bank STARS database, (1993).

[91] Hyperinflation, strictly defined, requires that for two consecutive months inflation be equal to or greater than 50%. 1974 data from the Banque Nationale du C ambodge indicates that such price inflation took place as shown in a graph titled "Consumption Price Index for Working Class in Phnom Penh (Base 100 in 1949)."

[92] Vickery (1986) calls it "an internal Cambodian affair" and says that "the Americans would have seen little reason to remove [Sihanouk]." (p. 20).

[93] Khmer Republic (Dec. 1972), pp. 281-283, p. 274.

⁹⁴ Ibid., p. 273.

[95] Chantrobot, La Republique K hmer (1993), p. 93.

[96] Kampuchea in the Seventies (1982), p. 12.

⁹⁷ Although no intelligence reports could have predicted the Khmer Rouge outcome in Cambodia, the bloodbath which took place in South Vietnam after its defeat could, some have argued, have been prevented or stalled had 300 million dollars in emergency aid been allocated by Congress in 1975. The emergency aid bill to South Vietnam did not, evidently, pass.

⁹⁸ Bulletin Mensuel no. 4, April 1974, p. 40.

⁹⁹ Ibid., pp. 40-41.

¹⁰⁰ Gold is a classic guardian of wealth..

¹⁰¹ Burstein, "Economic Theory and Political Strategy--Cambodia," in Resource Allocation and Economic Policy (19 76), p. 61.

¹⁰² Khmer Republic, p. 294.

¹⁰³ Ibid., p. 296.

¹⁰⁴ Bulletin Mensuel, p. 15.

¹⁰⁵ Burstein, pp. 63-64.

¹⁰⁶ As quoted in Jackson, p. 44.

¹⁰⁷ Twining , "The Economy," in Jackson (1989), pp. 114-115.

¹⁰⁸ See Haing S. Ngor, A Cambodian Odyssey, Dith Pran's Life and Death of Dith Pran, the latter was made into the academy award winning movie "The Killing Fields" and many other personal accounts.

¹⁰⁹ Jackson, p. 44.

¹¹⁰ And to the Cambodian people as "Brother Number One."

¹¹¹ Vickery, Kampuchea: Politics, Economics, and Society (1986), pp. 28-29.

¹¹² Ibid., pp. 29-30 .

¹¹³ Interestingly, the Khmer Rouge leaders were themselves de-classed petty-bourgeois. Born not to poverty, but landlord families.

¹¹⁴ Vickery, p. 31.

¹¹⁵ Jackson, p. 60.

¹¹⁶ Caldwell, Kampuchea ; Rationale for a Rural Policy (1979), pp. 29-30.

¹¹⁷ Twining, "The Economy" in Jackson, p. 117.

¹¹⁸ Ibid., pp. 120-121.

¹¹⁹ As quoted from Appendix A in Etcheson, p. 222.

¹²⁰ Caldwell, p. 31.

¹²¹ The total human toll will never quantified with great certainty. Estimates vary, but according to the Campaign to Oppose the Return of the Khmer Rouge (CORKR), 500,000 urban Khmer; 825,000 rural Khmer; 215,000 Chinese; 20,000 Vietnamese; 4 ,000 Lao; 90,000 Islamic Cham; 8,000 Thai; and 9,000 upland minorities died at the hands of the Khmer Rouge.

¹²² Szajkowski in his preface to Vickery (1986).

¹²³ Vickery, p. 148.

¹²⁴ Ibid., p. 131.

^{125 Country Profile, Indochina: Vietnam, Laos, Cambodia 1993/94, p. 97.}

¹²⁶ Vickery, p. 132.

¹²⁷Country Profile, Indochina: Vietnam, Laos, Cambodia 1993/94, p. 97.

¹²⁸ Frings, "The Failure of Agricult ural Collectivization in the People's Republic of Kampuchea (1979-1989)," p. 67.

¹²⁹ Adapted from statistics found in France's D'Souza's "Economics, Development, and Aid" in Wright, ed., Cambodia: A Matter of Survival (1989), p. 86. T he figure quoted is 700,000 hectares compared 2.4 million in the 1960s.

¹³⁰ Vickery, p. 141.

¹³¹ Ibid., p. 144.

¹³² The total rice output was simply insufficient, requiring the importation of rice from Vietnam.

¹³³ Country Profile, Indochina: Vietnam, Laos, Cambodia 1993/94, p. 102.

¹³⁴ Ibid., p. 104.

¹³⁵ Ibid., p. 102.

¹³⁶ See following chart. 1980 was an unusually bad year because of the chaos that f ollowed the Vietnamese invasion. The food crisis which occurred between 1979-1981 required the assistance of international emergency aid from UNICEF and other humanitarian agencies.

¹³⁷ Vickery, p. 147.

¹³⁸ Ibid.

^{139 For an in-depth look at the PRK economy, see Grant Curtis' Cambodia, A Country Profile (1990). Curtis offers detailed analysis of Cambodia's agriculture, trade and finance sectors.}

¹⁴⁰ World Bank STARS database, (1993).

^{14 1} Country Profile, Indochina: Vietnam, Laos, Cambodia 1993/94, p. 99.

¹⁴² Ibid., p. 108.

¹⁴³ Twining, "The Economy," in Jackson, Cambodia: 1975-1978 (1989), p. 150.

[144] Vickery, "The Cambodian Economy," in Indochina Economic Reconstruction and International Cooperation (1992), p. 48.

¹⁴⁵ Ibid.

[146] As a small aside, some of Cambodia's newspapers have vigorously attacked and exposed corrupt p oliticians and have paid dearly. The murder of journalists has alarmed the outside world. Unfortunately, instead of guaranteeing freedom of the press, that right may become irrevocably censored by a proposed Press Law.

[147] Samphan, Cambodia's Economy and Industrial Development (published in 1979), p. 100.

[148] Summers, "Translator's Introduction" in Samphan, Cambodia's Economy and Industrial Development (published in 1979), p. 5.

[149] Ibid., p. 4.

¹⁵⁰ See Summers, "Cambodia's Economy and Problems of Industrialization." Indochina Chronicle, September-November 1976, p. 25.

¹⁵¹ Osborne, p. 269.

[152] Etcheson, Table 2.3 , p. 18.