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PrefaceProfessor Arnold Leiman iv

IntroductionJosefina C. Baltodano, J.D.,

Rondi Gilbert & Marc Pizarro, Ph.D v

Introductory ConunentsChang-Lin Tien, Ph.D iRichard Ril~y, U.S. Secretary of ..

EducatIon uProfessor Genaro Padilla &

Barbara G. Davis, Ph.D iii

Volume Three

Table of Contents

Summer 1995

Section I: EconomicsThe Socioeconomic Dimensions of Remittances: A Case Study

of Five Mexican FamiliesBlanca E. De La Cruz 1

Faculty Mentor: Professor Alain de Janvry

Contextualizing Proposition 187: Macroeconomic Conditionsand a Case Study of a Southern California Hospital

Vanessa Marzan Deza 11Faculty Mentor: Professor Paul A. Ruud

Cambodia's Economic Development inHistorical Perspective (1953-1970)

Sophal Ear 25Faculty Mentor: Professor Alain de Janvry

Direct Foreign Investment from Hong Kong into GuangdongProvince: Motivations for Investing

Yimin Feng 38Faculty Mentor: Professor Michael Gerlach

AcknowledgmentsThe success of this program depends on the support of:

Our friends in the Department of Education in Washington, D.C.

Richard W. RileyThe United States Secretary of Education

David LonganeckerAssistant Secretary of Higher Education

Claudio R. PrietoDeputy Assistant Secretary for Higher Education Programs

Richard SonnergrenDirector of Student Services

Blanca Rosa RodriguezChief, Special Services Branch, Division of Student Services

Eileen BlandSenior Program Officer, Ronald E. McNair Post-Baccalaureate Program

William GarrisonRegional Grants Representative for Higher Education Programs

All the dedicated faculty members who have given their time and energies sogenerously to the program.

The McNair StaffProject Director, Josefina C. Baltodano, J.D.

Academic Coordinator, Rondi GilbertResearch Coordinator, Marc Pizarro, Ph.D.

Instructional Technology Coordinator, Thomas C. O'BrienBusiness Manager, Michelle Mattera

Program Assistants: Daud Ali, Hyo Lee,Theresa Mah, Caroline Streeter

Graduate Student InstructorsLisa Bell

Rick BrooksHerb Green

Horacio Roque-Ramirez

The Academic Achievement Division Staff members who haveplayed a crucial role in the success of the program:

Trish HowardDale Ireland

Maria Lucero PadillaMichelle SamuelTonia Williams

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14. Ibid. Goering, J. p. 112.15. 1990 CPH-L-82: Selected Population and Labor Force Characteristics, Table Iand 2.16. Bureau of Labot Statistics: Los Angeles Local Area Statistics. BLS Data. LabStat, Official Data Base on the Internet, 1995.

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Cambodia's Economic Development inHistorical Perspective (1953-1970)

Sophal Ear

Faculty Mentor: Professor Alain de Janvry

Les etudes primaires secondaires et superieures ne preparentguere qu 'a une carriere de fonctionnaire. Les agronomes, lestechniciens, les comptables, les ingenieurs, les economistes etles 'entrepreneurs' qui jouent un role important dans Iedeveloppement economique ne son guere nombreux auCambodge. [trans. Primary, secondary, and tertiary educationdo not prepare for much more than a career in civil service.The agronomists, technicians, accountants, engineers,economists, and 'entrepreneurs' who play an important role ineconomic development are too few in Cambodia.]

--Remy Prud'homme, L'economie du Cambodge (1969), pp. 55-56.

The contemporary history of Cambodia's economy has beendetailed in few major books or scholarly dissertations since the1960s.1 Most books on Cambodia are contained within the realm of

. political science and history proper. The pioneering works of such"Cambodianists" as Ben Kiernan and David Chandler have exposedthe tragedy of recent Cambodian history by shedding much light onthe Khmer Rouge movement which took control of Cambodiabetween 1975-1978.2 Economists like Remy Prud'homme andAchille Dauphin-Meunier who have focused on Cambodia'seconomy are few and far between. Prud'homme's treatise on theCambodian economy, L'economie du Cambodge (1969), glitterswith insight. Studies by Robert J. Muscat (1989), Fred Z. Brown(1993), George Irvin (1993), the Economist Intelligence Unit'shighly regarded Country Profiles and others make up most of theliterature on Cambodia's current economic situation. It is within thecontext of this literature that my analysis of the history ofCambodia's economic development from 1953 to 1970 begins.

This study will examine and apply standard theories ofeconomic growth on Cambodia in the period in which prince andhead of state Norodom Sihanouk ruled Cambodia (1953-1970).This requires, for the most part, examining Cambodia's past for

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clues about factors influencing its economic growth. In so doing,the theories themselves can be tested against historical evidence(various statistics, trends, etc.).

The Sihanoukist Period 0953-1970)As the Second World War drew to a close, the United States

urged its allies to decolonize and retire from imperialism. This wasnot an altruistic demand--freeing up colonies everywhere wouldoffer America's unscathed and booming economy access to thedomestic markets of previously closed and protected colonies. Inthe postwar years, Cambodia's economy remained strictly non­industrial: fishing, agronomy, spice cultivation, and (rubber)plantations.3 Cambodia exported rice and rubber to France, whilethe latter sent high value added goods (i.e., luxury imports) to theupper echelons of Cambodian society.4 In the aftermath of Japan'sdefeat, Prince Sihanouk began to talk of Cambodian sovereignty(for the second time; he had earlier been unsuccessful).5 The Frenchdefeat at Dien Bien Phu, Vietnam in 1954 marked the end of Frenchpresence in Indochina. However, Cambodia had already beengranted independence peacefully at the Geneva Conference of 1953.Finally, after centuries of national decline, asymmetricinterdependence and tutelage, Cambodia was allowed to governitself. In the following years, Sihanouk made a number of criticalchoices which would determine the fate of Cambodia's economicdevelopment during the 19508 and 196Os.

Hard Choices Ahead"To govern" John F. Kennedy once said, "is to choose."

Norodom Sihanouk, as will become evident, made some poorchoices for Cambodia's economy, when he did make them. But forthe most part, it seems, he failed to govern with forethought.6 Forinstance, schools proliferated under his reign, but graduates couldexpect few opportunities after their hard work;7 the number ofavailable jobs were insufficient for the growing number ofgraduates. 8 The educational scheme was simple: study at thesecondary level to become a teacher or civil servant. This was not ascheme conducive to full employment. In 1962, 44 percent ofCambodia's population was in the labor force, or 2.5 millionworkers according to Prud'homme (1969). Cambodians betweenthe ages of 15 and 60, numbered 2.8 million, or 51 percent of thetotal population. From this one could extrapolate an unemploymentrate of about 7 percent. That indicates an undesirable, though not

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Cambodia's Economic Development

intolerable rate of unemployment (normally, an unemployment ratearound 3-4 percent is considered tolerable). The level ofgovernment expenditures consumed 97 percent of Cambodia'sforeign aid. American, Chinese, and French foreign aid paid for 57percent, 23 percent and 17 percent of the first two-year planimplemented by Sihanouk.9

Cambodia's chronic trade deficits were largely caused by.Sihanouk's spendthrift morality. Had Sihanouk foreseen the chaosthat would envelop Cambodia after 1970, he might have recognizedthe need to educate more scientists and engineers first and foremost.Fiscal austerity, currency devaluation and extensive agricultural

. modernization would have aided Cambodia's economic growth fromthe 1960s onward.

Cambodia on Education 1955-1968. The growth of Cambodia's educational system between1955 and 1968 is indicative of a pattern of economic expansion andmodernization. During the French colonial period, it is apparent

•. that little was done to educate Cambodians in schools. Prud'hommewrites,

Le Protectorat, qui dans certains secteurs comme{'infrastructure a realise une oevre important, n 'amalheureusement presque rien fait pour l'enseignement auCambodge. [trans.: The Protector (France) that had otherwisesignificantly helped the infrastructure, unfortunately did next tonothing for schooling in Cambodia.IIO

There was, expectedly, much to do for the newly independentnation-state. The primary and secondary school system, whichserved the population of 5- to 18-year-olds, increased significantly

.between 1955 and 1968. The number of primary schools doubled,and their students tripled. Secondary schools increased fifteen-fold,while their students went up twenty-two-fold. Universities, thebedrock of research and development, centers of endogenousgrowth for the rest of the economy, were introduced into Cambodia.Prud'homme states that the number of primary schools more thandoubled from 1955 to 1965. The number of secondary schoolsnumbered nearly 200 by 1969. 11 Technical and professionalschools included the Ecole Nationale de Commerce (businessschool), Ecole Nationale d'Agriculture (agronomy school), andEcole Nationale des Arts et Metiers (arts and crafts school).Illiteracy, a problem in many developing countries stood at 80% for

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28

women, 30% for men in 1962. There were, in that same year, only16,100 high school graduates and 300 college graduates in a countryof about 5 million people.12

Educational Quantity Versus QualityUnderneath this facade lurked the problem of quantity versus

quality. Prud'hornrne foresaw the problem inasmuch as he could seethe opportunities that a secondary or tertiary education could bring,

In looking back at his years in power, both Sihanoukand his defenders have made much of his efforts to transformand expand the Cambodian educational system. The claiminvites debate, because there is no doubt that educationalopportunities expanded in Cambodia, particularly during the196Os. But at the same time there was an ever-growing gapbetween the numbers of pupils and students processed throughsecondary and tertiary institutions and the availability of jobsfor those who had completed their education.

The issue of education ... is given further interest bythe prince's own ambivalent attitude to formal learning...Publicly he could boast that he determined Cambodia'seconomic policies without caring 'a rap about politicaleconomy, political science or other subjects,' and withouthaving read any books on these subjects. But hand-in-handwith these views went his determination to found schools,colleges and universities... [Yet] standards in most of thesenewly established faculties were deplorably low, not leastbecause there were simply not enough trained universityteachers.IS

[II] n 'est pas normal, par exemple qu'il y aie beaucoupd'etudiants a La Faculte des Lettres et peu a /'UniversiteTechnique si Ie pays a besoin de beaucoup d'ingenieurs et depeu d'historien. [trans. : It is not normal, for example, forthere to be more students in the College of Letters than in aTechnical University if that counlry needs more engineers thanhistorians.] 16

29

Somewhat disquieting, according to Osborne, was that science wasnot singled out as a desirable field to enter, at least not whencompared to the humanities and arts. Prud'homme writes,

One student in the Mathematique et Generale Physique (MGP)major, among the more challenging and analytic majors, recalls thecost of one textbook: a month's salary for him (he described himselfas indigent). In his program were two to three hundred students,"Three Khmer professors and one French lady: all had doctor [sic]degree from France."I? There were two major universities:l'Universite Royale du Cambodge and I'Universite TechniqueRoyale." After three months," he continued, "half of themdropped[-out]. My pal and I dropped at the fourth month that year.We gave it another shot the following year [1969], but the countrywas at war. I join[ed] the Navy and my pal join[ed] the Armybecause he did not know how to swim."18 To be sure, there were

kUnder SibI SvsttoEd

He further observed that the level and subject matter in secondaryeducation left much to be desired. Furthermore, professorshipswere not prestigious nor lucrative. He writes, "il n 'y a pratiquementpersonne qui aspire a devenir professeur d' Universite [trans.: almostno one aspires to become University professor]."14 Instead,Sihanouk had achieved an increase in the number of students at alllevels of education, but at what cost and for what opportunitiesahead? Milton Osborne writes:

Les etudes primaire secondaires et superieures ne preparentguere qu 'a une carriere de fonctionnaire. Les agronomes, /estechniciens, /es comptab/es, /es ingenieurs, /es economistes et/es 'entrepreneurs' qui jouent un role important dans Iedeve/oppement economique ne son guere nombreux auCambodge. [trans.: Primary, secondary, and tertiary educationdo not prepare for much more than a career in civil service.The agronomists, technicians, accountants, engineers,economists, and 'entrepreneurs' who play an important role ineconomic development are too few in Cambodia.]l3

Source: Cambodge (1970), pp. 23, 24, 26, 28.

Table 3.1:The Cambodo

1955 1968Primary Schools 2,731 5,857Number of Students 311,000 1,025,000Secondary schools 12 180(Junior High and High Schools)Number of Students 5,300 117,000Technical and Professional Schools 5 99Number of Students 334 7,400Universities 0 9Number of Faculty 2 48Number of Students 347 10,800

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faculties in all fields imaginable, but incentives to steer students intothe more socially beneficial engineering and scientific fields weremissing.

The most disquieting claim by Osborne regarding the jobpotential of graduates was affinned by my own correspondence withstudents of that period. The same MGP student in the Faculte desScience of l' Universite Royale du Cambodge from 1968 to 1970,recalled that, "The only clean profession was teaching. My goalwas to get [a] license [equivalent to a Ph.D.] in MGP and become[a] teacher."19 Pasin Chanou, who was well-to-do, and attendedthe Faculte de Droit (Law School) hoped to "[be] prepared to takeover and expand my father's business."20 There were curiously fewopportunities in the private sector, where education was not highlyregarded. The artificial creation of both demand and supply ofstudents and faculty by the government might have worked initially.As thousands of students entered the newly built Universities,however, fewer than half could expect to be employed for the extentof their educational attainment. Worse still, corruption wasendemic, even at the universities. The 41 year-old Mr. Chanouwrites,

Corruption was everywhere. Everyone was involved, eitherreceiving or giving bribery. You have to pay a bribe to get abirth certificate for your child [or] for your driver' s license (Idid that!). Money talked, and you could get away with almostanything as long as you have it. I'm still bitter for not beingaccepted to the "Faculte de Commerce" (Business College)because 1refused to pay [sic] bribery.21

Without question, corruption worsened from 1970 onward, whenCambodia entered the Vietnam War and Sihanouk was deposed.Though not emphasized in this study, corruption was observable atnearly all levels of government. Osborne noticed it at the highestechelons, which he recounts in Before Kampuchea (1979). Evenlow-level civil servants and policemen, padded their income withbribes. Prud'homrne maintains that low salary levels which hadbeen frozen since 1955 contributed to this corruption.22 Mr.Chanou, who attended the Lycee de Battambang, recalls the worstaspect of Cambodian schools:

Students had to memorize, sometimes without understandingwhy. Lack of books, materiels [sic], equipment. Teacherswere not qualified (most high school teachers were just highschool graduates). Curriculum did not prepare students for real

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Cambodia's Economic Development

life experience. Text books were obsolete (in 1970's we werestill using French text books published in 1950' s).23

The rote learning too was criticized by Prud'homme as a Confucian... method. But still, how much quality could one expect from a

country that in 1945 had but two high schools? The Economistsums it up: "In 1960 only 31 % of those over 15 could read orwrite, a legacy of inadequate attention to education dating fromcolonial rule. Important advances were made during the 1960s, butinstruction came to a halt during the war in the early 1970s."24 Theonly advantage was its cost and availability to students: almost freeand universal.

.. EndoKenous Growth Theory25Using a factor important to the Endogenous Growth model-­

technology as derived from research, education, etc.--one can seefirsthand the disturbing effects that poor quality in education would

...have upon technology. If education in the sciences is an·endogenous growth variable, a determinant therefore of· technological change, its importance is all the more increased. Ifeducation or schooling produces human capital, then its upkeep iscritical to growth itself. As physical capital is accumulated, humancapital is necessary too for its operation. In poorer countries, argueRomer, Mankiw and Weil (1992), the lack of human capital

·becomes an impediment. Conversely, if investment in technology­producing education is inadequate, the rate of economic growthexpected in the following years will be diminished. Technology in.agriculture works to lower the cost of food, thus eliminate the needfor increases in the real wage for industry. One way in which thistechnology is implemented is via schooling in agricultural.techniques. On that issue, Prud'homme criticized the curriculum ofCambodian schools as irrelevant to Cambodia's needs. Since thesewere based on the French system of education, for civil service, notagronomy, he writes,

Le contenue de l'enseignement (programmes et methodes)devrait etre eloigne de l'exemple francais... Dans un pays quirestera encore longtemps agricole, l'ecole devrait former desagriculteurs et non comme Le dit a propos de l'Afrique M.Dumont 'representer d'abord Le moyen d'acceder a La casteprivilegiee de la fonction publique'. [trans. The curriculumshould distance itself from the French example... In a countrythat will remain agricultural, schools should teach agronomists

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and not, as Mr. Dumont says of Africa 'represent firstly amedium of acceding the privileged caste of civil service. ']26

Later, when agricultural production is examined, a murkier pictureof modernization will appear. In the last analysis, however, theabsence of an appropriate educational system was a detriment toCambodian economic growth then and for the following years.Prud'homme had prescribed as much when he wrote, "Beaucoupreste donc encore a faire dans ce domaine [d'ensseignement]essentiel pour Ie developpement economique du pays. [trans. Muchrests still on this critical [education] sector for the economicdevelopment of the country.]"27

The Keynesian Model on Cambodia28

We know that attempts to use the Keynesian model (whichemphasizes the role of government) on Cambodia were made asearly as the 1950s, but were found problematic by the early 1960s.Gourdon writes,

Les schemas keynesiens ont ete concus dalls un cadre europeenpour des pays industrialises et des societes liberales vivantsous des regimes economiques qui se reclamaient ducapitalisme. [trans. The Keynesian schemes were created in theEuropean context for industrial countries and liberal societiesthat lived under capitalist regimes.]29

The rejection of the Keynesian context does not preclude theprescriptions which such a model provides, namely governmentspending, defined as "G," creates demand and, whether directly orindirectly through investment, "I." We see that spending in the firsttwo-year plan was overwhelmingly financed by foreign aid andtargeted towards infrastructure (which meant jobs) and agriculturalproduction. Assuming these expenditures were multipliedthroughout the economy, national income would expectedly rise bymore than the amount spent.

The Two-Gap Model on Cambodia30

From Prud'homme, we know that from 1959 to 1966,Cambodia ran a budget deficit which was fmanced by loans from theBanque Nationale du Cambodge (Cambodia's central bank), foreignaid, etc. 31 This becomes critical when one considers the savingsand/or foreign-exchange gap of the Two-Gap growth model. It isclear that Cambodia depended on foreign aid during the 1950s and

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1960s, and that it is crucial to its economic design--infrastructure,schools, etc. However, there are also indications that the aid wasfar too fungible and perhaps even excessive. Cambodia becamedependent on this aid, Prud'homrne writes, "En matiere de financespubliques comme en matiere de balance des paiements, I'aideetranger comble souvent Ie trau qu'elle creuse. [trans. In matters ofpublic fmance, as in matters of balance of payments, foreign aidoverwhelms the deficit it creates.]"32 Whichever constraint boundCambodia, what is clear is that public finance would anticipateforeign aid before it had been committed. Such an arrangement,year after year, would have reduced the State's incentive to tax moreefficiently whatever capacity it already had.

The Sjbanouk Years in PerspectiveThe Sihanoukist period possessed the elements needed for

economic growth, but the 1950s and 1960s proved to bedisappointing years for Cambodia. Although the agricultural sectorproduced sufficiently to export, there was an unrelenting flow ofimports from abroad that resulted in chronic trade deficits with therest of the world. In addition, while an educational system wasbeing built from the ground-up, quite literally, quantity not qualitywas the government's goal. Jobs for graduates of the educationalsystem were scarce, and in any case, artificially created by thegovernment. Much of the prosperity gained in those decades was in

.fact illusory. The erosion of purchasing power from 1954 to 1955and 1957 through 1960 pushed the standard of living well belowthat of 1953.33

It would be easy to characterize these years as "relativelygood" given what Cambodia's economy underwent in the 1970s and1980s, but they were actually lost opportunities. In retrospect, thefailure to increase the level of saving and control consumption by theCambodian government resulted in anemic growth years. Asidefrom the everyday corruption which plagued all levels ofgovernment, the economy suffered from a spendthrift malady.Were there adequate incentives to save? With hindsight, clearly not.The factors relating to the three growth theories employed in thisstudy, which were found to be absent or scarce during these yearsinclude: (1) an emphasis on technology via the creation of aneducational system geared towards Cambodia's needs andemployment opportunities (Endogenous Growth), (2) creation ofcapacity (Keynesian Growth), and, (3) foreign exchange (viaforeign aid in the Two-Gap model). These factors, combined withothers such as (1) ineffective trade policy resulting in chronic trade

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deficits and eliminating incentives to produce at home, (2) pervasivecorruption, and (3) minimal taxation resulted in the lacklustergrowth of the economy.34

Endnotes1. For infonnation on the Cambodian economy before 1970, see Remy Prod'homme'sL'economie du Cambodge (1969) for an incredible, prescient view. See also KhieuSamphan's dissertation Cambodia's Economy and Industrial Development (written in1959, but published in 1979), Jean Delvert's colossal Le Paysan Cambodgien(1961), and A. Dauphin Meunier's Histoire du Cambodge (1961). Work after 1970includes Craig Etcheson's The Rise and Demise of Democratic Kampuchea (1984),Michael Vickery's Kampuchea: Politics, Economics, and Society (1986), GrantCurtis' Cambodia, A Country Profile (1990), and most recently, George Irvin'sworking paper "Rebuilding Cambodia's Economy: UNTAC and Beyond" (1993). Inshort, contributions to the study of Cambodia's economy have been uneven. The1970s saw virtually none.2. See Ben Kiernan's illuminating exposition How Pol Pot Came to Power (1985) andDavid P. Chandler's ground-breaking biography of Pol Pot: Brother Number One(1992) and his most recent work The Tragedy of Cambodian History (1993).3. Delvert, Le Cambodge (1983), pp. 68-75.4. This "exploitative" relationship is one of many explained in Khieu Samphan'sthesis. On their basis he concludes that structural measures ought to be used to switchconsumption away from these unproductive goods.5. On May 6, 1947, Sihanouk promulgated Cambodia's first Constitution. Article 7reads, "La propriete est sous La protection de La Lai. Nul ne peut etre prive de sapropriete que pour cause d'utilite publique, dans les cas etablis par La Lai etmoyennant une juste et prealable indemnite. [trans. Property is under the protectionof the Law. No one can be deprived of his property except for the purpose of publicuse in situations established by the Law and in in exchange for just and advancecompensation.]"6. One of the pre-occupations for which he is infamous is movie-making. He was andis still an avid director whose passion for the big screen was criticized as too timeconsuming and distracting to juggle with the affairs of a State which he ran until1970.7. See Osborne, Sihanouk: Prince of Light Prince of Darkness (1994).8. Communicated to me in an interview with Mr. Peth Lim on March 4th, 1995.9. Prod'homme, p. 171.10. Ibid, p. 54.11. Ibid., p. 181.12. Prud'homme, p. 55.13. Ibid., pp. 55-56.14. Ibid., p. 182.15. Osborne, pp. 268-269.16. Prod'homme, p. 183.17. MGP student, personal e-mail communication, 06/10/95.18. MGP student, personal e-mail communication, 07/19/95.19. Ibid.20. Chanou, personal e-mail communication, 07/17/95.21. Ibid.22. Prud'homme, p. 16.

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23. Ibid.24. Country Profile, Indochina: Vietnam, Laos, Cambodia 1993/94, p. 96.25. In this framework, technology is seen not as an exogenous variable, that is tosay unaffected by anything else, but as an endogenous one. How it comes about andcontributes to economic growth now depends on other variables such as labor andcapital. For instance, the use of computers and their manufacture thereof, cansignificantly improve productivity and knowledge in areas which go well beyond thecomputer industry. Primary and secondary schools which, for example, usecomputers can benefit. Indeed, these benefits can spread throughout the economy.Hence the logic goes, "making $1 of computer chips is better than making $1 of,potato chips". For instance, the direction of the educational system--in creating whatPrud'homme calls "fonctionnaires" or civil servants, as opposed to the economicactors needed in developing countries: compradors and scientists. For a morecomplete explanation of the model, see Kasliwal, Development Economics (1995).26. Prod'homme, p. 183.27. Ibid., p. 182.28. The Keynesian model which follows attempts to reconcile the role of governmentin creating effective demand. The notion of effective demand is not mere wantwithout the wberewithal. We should keep in mind too that the lack of demand isgenerally not what developing countries like Cambodia face or faced historically.The problem of excess capacity combined with low demand that countries likeAmerica and England faced in the depths of the Great World Depression is far removedfrom the reality of developing countries. In developing countries like Cambodia, thelack of supply or undercapacity is the problem. Despite its limitations, especiallytoward developing nations, it remains a powerful tool for development economists.Here, we have the government or public sector introduced into an aggregate demandfunction as "G". Let "C=a +bY" be private consumption and "I" be privateinvestment. The gross national product of the country is then Y (i.e., income)= a +bY+I+G. Gathering the endogenous variable (Y), we get Y-bY=a+I+G, andsimplifying we get Y=(a+I+G)/(I-b). In this demand-driven framework, the role ofgovernment is essential. Spending by the government is multiplied by an effect oflhe same name--the multiplier effect, i.e., l/(I-b)--which simply means that when,for example, the government spends $1 to pay a teacher, that teacher spends thatmoney, between consumption and saving, and in turn, someone under her in this link\Vill spend a fraction of that money, in smaller and smaller fractions. Constructionprojects, education, defense, are all considered government expenditures, and hencecan in principle help boost aggregate demand. For a complete description of themodel see Hall and Taylor, Macroeconomics (1993), Gillis, et aI., Economics ofDtvelopment (1992) and Todaro, Economic Development in the Third World (1989).29. Gourdon, p. 345.30. One particularly critical element to the national budget of developing countries isthe foreign exchange from foreign aid and exports. For this reason, we tum to theTwo-Gap model of growth so-named because of the savings gap and foreign-exchangegap which fonn its two binding constraints. Depending on which of the constraintsis stronger, a country falls in one category as opposed to the other. In order to fallinto the savings gap, a country must find itself at full employment and have netforeign exchange. That country would require relatively less foreign aid than onesuffering from a foreign-exchange gap. If foreign aid were given to that country, thatexcess foreign aid would be fretted away on luxury imports. On the other hand, aCountry finding itself at less than full employment, hence with excess productive

35h" .. ,- :'; ... '

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capacity in labor, would benefit relatively morc from foreign aid. For more on theTwo-Gap model, see Kasliwal (1995).31. Prod'homme, p. 209.32. Ibid., 210.33. The dual sector classical economy model (which assumes underemployment)concludes that wage repression in agriculture is necessary for intersectoral laborflows to continue without real wage increases (due to inflation in the price ofagricultural goods). The erosion of purchasing power might in fact be consistent withthe model in that it would show that real wages were in fact not increasing.34. Corruption is a major point in itself, along with taxation, for which I regret nothaving tackled directly in this article.

ReferencesBrown, Frederick Z., ed. Rebuilding Cambodia: Human Resources, Human Rights, and

Law. Washington: SAIS, Johns Hopkins University, 1993.Cambodge. Bound magazine published circa 1970.Chandler, David P. Brother Number One: A Political Biography of Pol Pol. Boulder,

Colo.: Westview, Press, 1992.Chandler, David P. The Tragedy of Cambodian History: Politics, War, and Revolution

Since 1945. New Haven: Yale University Press, 1991.Chanou, Pasin. Personal e-mail communication, 07/17/95.Country Profile, Indochina: Vietnam, Laos, Cambodia 1993/94. London: Economist

Intelligence Unit, 1993.Curtis, Grant. Cambodia, A Country Profile~ A Report. prepared for the Swedish

International Development Authority. Stockholm: Swedish InternationalDevelopment Authority, 1990.

Dauphin-Meunier, Achille. Histoire du Cambodge. Paris: Presses universitaires deFrance, 1961.

Delvert, Jean. Le Cambodge. Paris: Presses universitaires de France, 1983.Delvert, Jean. Le Paysan Cambodgien. Paris: Mouton, 1961.Etcheson, Craig. The Rise and Demise of Democratic Kampuchea. Boulder, Colo.:

Westview, 1984. Westview special studies on South and Southeast Asia.Gillis, Malcolm, et al. Economics of Development. New York: Norton, 1992.Gourdon, Alain. Les Finances du Cambodge: Traite Elemantaire. Phnom Penh:

Ministere des Finances, 1960s.Hall, Robert E., and John B. Taylor. Macroeconomics, 4th ed. New York: WW Norton

& Company, 1992.Irvin, George. "Rebuilding Cambodia's Economy: UNTAC and Beyond." The Hague,

Netherlands: Institute of Social Studies, May 1993. Working paper seriesNo. 149.

Kasliwal, Pari. Development Economics. Cincinnati, OH: South-Western CollegePublishing, 1995.

Khieu Samphan. Cambodia's Economy and Industrial Development; translated byLaura Summers. Ithaca, N.Y.: Southeast Asia Program, Dept. of AsianStudies, Cornell University, 1979. Data paper (Cornell University.Southeast Asia Program); no. 111.

Kiernan, Ben. How Pol Pot Came to Power: A History of Communism in Kampuchea,1930-1975. London: Verso, 1985.

Lim, Peth. Personal Interview on March 4th, 1995.MGP student. "Re: A Personal Invitation," personal e-mail communication,

06/10/95.

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MGP student. "My small contribution to your request," personal e-mailcommunication, 07/19/95.

Muscat, Robert 1. Cambodia: Post-settlement Reconstruction and Development. NewYork, NY: Columbia University, 1989. Occasional papers of the East AsianInstitute.

Osborne, Milton E. Before Kampuchea: Preludes to Tragedy. Boston: G. Allen &Unwin, 1979.

Osborne, Milton E. Sihanouk: Prince of Light, Prince of Darkness. Honolulu: HawaiiU.P., 1994.

Prod'homme, Remy. L'economie du Cambodge. Paris: Presses universitaires deFrance, 1969.

Romer, David, Mankiw N., D. Weil. "A Contribution to the Empirics of EconomicGrowth." Quarterly journal of Economics, May 1992.

Todaro, Michael P. Economic Development in the Third World, 4th ed. New York:Longman, 1989.

Vickery, Michael. Kampuchea: Politics, Economics, and Society. Boulder: L. RiennerPublishers, 1986. Marxist regimes series.

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