How London Exile Shaped Development Economics…

As I delved into my doctoral project, I found myself frequently reflecting on the  influence of London and its exilic infrastructure on shaping my research pursuits. While my conclusions continue to evolve, I have formulated the concept of the “London Moment” as a temporally bounded yet deeply interconnected environment, facilitated by the close proximity of European actors. In this dynamic microcosm, both established and emergent formal and informal meeting places played crucial roles. These venues served as hubs where exiles gathered for specialized discussions, engaged in post-war planning working groups, or simply unwound over drinks after hours. These observations reinforce the central thesis of my broader initiative, which has found support across all previous subprojects. Within this framework, innovative ideas, scientific methodologies, and concepts were explored and experimented with, laying the groundwork for post-war reconstruction efforts.

Integral to the transnational networking of European exiles were what we now identify as think tanks, many of which were established during the interwar period. Foremost among these was the Royal Institute for International Affairs (RIIA), presently recognized as Chatham House. It was within these halls that a cohort of economists from Eastern and Southeastern Europe converged, laying the groundwork for the nascent field of development economics through initiatives such as the Economic and Statistical Seminar for British and Allied Economists. This seminar, alongside numerous other working groups, played a pivotal role, potentially initially unrecognized, in shaping the early contours of development economics. Drawing upon meticulous plans for the economic rejuvenation of Eastern and Southeastern Europe, the initial efforts to standardize approaches in development economics emerged within the sheltered confines of these gatherings, culminating in a paradigm shift in economic thought.

The presumption of the necessity for the economic development of Southeastern Europe during the war requires contextualization: With the rise of National Socialism, Eastern and Southeastern Europe had come into focus as a potential economic area. The Germans viewed this region as a “natural sphere of influence,”[i] to be economically exploited and used as living space in a “continental empire.”[ii] However, non-German observers also agreed that the Central and Eastern European region was crucial for the balance of power in Europe and globally. As explained in this context by the economic historian Michele Alacevich, a British contemporary, for example, emphasized a widely held opinion when he stressed that whoever controlled Eastern Europe would ultimately control Europe and the world. Simultaneously, the Soviet Union pursued a deliberate strategy to further its interests in the region, having already established a foothold through the occupation of Eastern Poland. Alacevich argues that a robust and “developed” Eastern Europe was perceived from a Western standpoint as essential to counteract German and Soviet expansion and to foster a peaceful, non-totalitarian Europe.

The general interest in Southeastern Europe during the time in exile can additionally be attributed to two primary lines of argument: First, since the interwar period, there had been a narrative of agrarian overpopulation in Southeastern Europe, which, according to the historian Ian Innerhofer, was closely linked to anti-Semitic, anti-Slavic, and minority-hostile sentiments. This described a supposedly excessively large rural population in Southeastern Europe, which opposed industrialization and economic development in the region. During the war, this discourse was taken up by Western and Eastern Europeans, and solving this issue in London was stylized as a matter of continental peacekeeping.[iii] Eric Helleiner argues that economic and financial elites from Eastern Europe, during the war – and primarily due to the close networking in the London exile space – recognized the opportunity to advocate for industrialization and economic development of their region due to the interest of the British authorities. In Innerhofer’s sense, certainly not free from prejudices against their own rural population.[iv] At the same time, exiled policymakers acknowledged the economic potential of the region for the post-war era: Eastern European countries were envisioned to evolve into trading partners.

What significance did the Economic and Statistical Seminar hold within this apparent trend? And how did it contribute to the field of development economics?

Chatham House (formerly the Royal Institute of International Affairs, RIIA) had already established itself as a place of knowledge production in London before the Second World War. The chronicle of Chatham House began in 1919. After the First World War, the British diplomat Lionel Curtis initiated the founding of an institute for the scientific exploration of international relations with the aim of promoting mutual understanding between different nations and thereby contributing to securing peace in the future. Following these foundational principles, the Committee on Reconstruction was founded in the early years of the Second World War in 1940/41 to address all aspects of the European post-war order. Chatham House, consistent with its tradition, served as an ideal hub for international exiles and the formation of working groups. Concurrently, the creation of these groups played a significant role in shaping Chatham House into the globally oriented think tank it is today. From the Committee on Reconstruction emerged various subgroups. One of these was the Economic and Statistical Seminar. The group, from October 1943, was led by Paul Rosenstein-Rodan, a Jew born in Krakow.[v]

Photograph of Chatham House over the Jubilee weekend in 2012. Photograph by Chatham House, provided via Wikimedia Commons under a CC BY 2.0 license.

Rosenstein-Rodan had worked as a representative of the Austrian School and marginal utility theory at the University of Vienna before the rise of National Socialism. On March 12, 1938, the German Wehrmacht invaded Austria and announced the annexation of Austria by Germany. A week later, Hans Mayer, Rosenstein-Rodan’s university mentor and president of the National Economic Society, expelled all Jewish members of the association. Rosenstein-Rodan was forced to leave Austria and ultimately fled to London. He there pursued an ambitious agenda: In August 1942, Rosenstein-Rodan noticed a growing Allied interest in postwar planning discussions. He proposed the establishment of a research group consisting of British and Eastern European economists to develop detailed materials in support of these planning endeavors.”[vi] Rosenstein-Rodan succeeded in mobilizing a broad network of exiled economists and politicians with first-hand knowledge of Eastern and Southeastern Europe for the Economic and Statistical Seminar. Despite their different national backgrounds and functions, the participants had a common goal, which Rosenstein-Rodan defined as follows: “The main task of the Seminar will be to assemble some of the statistical and other factual data on which any plans of reconstruction must rest, and which only co-operation between economists of all the countries concerned can provide.”[vii] For this purpose, meetings of the group were to take place every second Friday of the month, and a “Technical Sub-Committee” was to be established.[viii] This sub-committee served as the engine oil for the group. It was divided into further subgroups on topics such as Agriculture, Mining & Heavy Industry, Engineering and Machine Industry, Chemical Industry, Timber and Paper Industry, Textile Leather and Clothing Industry, Foodstuffs, Other Light Industries, Transport, Electrical Power, Building and Housing, Building Materials, and was tasked with the data-intensive preparation for the main meetings of the committee.[ix]

Between its founding and the end of the war, the Economic and Statistical Seminar produced a vast amount of material with concrete action instructions and proposals for the industrialization of Eastern and Southeastern Europe. Unfortunately, there was never a collective publication of the material. Nevertheless, the two most famous essays by Rosenstein-Rodan resulted from the work of the group.[x] With “Problems of the Industrialisation of Eastern and South-Eastern Europe” (1943) and “The International Development of Economically Backward Areas” (1944), he not only laid the foundation for his later developed theory of the “Big Push”[xi] and the beginnings of the discipline of development economics but also summarized the discussions and evaluations of the seminar.[xii] In this context, particular emphasis should be placed on the demand for “large-scale planned industrialization,” which should encompass as many economic sectors as possible.[xiii] This would also require a large sum of foreign public capital. In summary: “The core recommendation in Rosentstein Rodan´s publications – and the seminar´s larger unpublished volume – was that the industrialization of poorer regions should be assisted by large-scale international public investment.”[xiv] For Rosenstein-Rodan, therefore, a broad-based industrialization campaign in “backward” regions was the core element for improving global living standards. The unequal distribution of wealth, for Rosenstein-Rodan (and the Economic and Statistical Seminar), in this context, was not only a moral problem: the equalization of living standards was also understood as a political instrument for international peacekeeping. People, the argument went, would be more willing to give up a peace gained if they saw no perspective in their region. In accordance with Rosenstein-Rodan’s analysis , “international action […is] required to redress the imbalance and to give the depressed areas of the world, I do not say an equal income, but equality of opportunity.”[xv] This argumentative chain was not purely altruistic in the economic-political sphere either. In particular, the Polish banker Leon Baranski repeatedly pointed out the advantages of far-reaching industrialization projects for global trade.[xvi]

While Rosenstein’s 1943 article was still entirely focused on Eastern and Southeastern Europe, as accurately analyzed by Alacevich, his subsequent article of 1944 embraced a global perspective on backwardness as a global phenomenon affecting at least ‘five vast international depression areas’ and about 80 to 90 percent of the world’s population. These areas include the Far East, especially India and China; the colonial empires, especially Africa; the Caribbean; the Middle East; and Eastern and Southeastern Europe. In a speech at Chatham House on January 4th, 1944, Rodan explained in this context: “But the fifth area, Southeast Europe, presents the most interesting problem in many respects. Both this and the last world wars began in or around Eastern Europe, and many geopolitical analysts from Bismarck to Mackinder have said that whoever controls Eastern Europe has hegemony over Europe and perhaps the world. As long as we do not solve the problem of Eastern Europe, which implies significant economic regulation, we cannot expect stable peace.”[xvii] He thus again emphasised the importance of the region and the work of the economics and statistics seminars for peace and reconstruction planning in British exile and at the same time laid the foundation for a global understanding of development economics approaches.

These approaches deriving from the work of the Economic and Statistical Seminar reflect a zeitgeist that can be discerned in many economically oriented working groups of the London exile. They draw from the planning-technocratic tendencies of the 1940s and signify a notable shift away from the isolationist-nationalist policies of the pre-war era. Moreover, these approaches offer a distinct critique of the exploitation of hypothetical economic spheres of influence by major powers, within a framework of peace agreements increasingly favoring economic resolutions. As Rosenstein-Rodan formulated it: “Although all generalizations are necessarily rough, I think one can, with only a slight distortion of the truth, say that the optimism of the 19th century was based on the belief that all economic problems would be automatically resolved as long as political problems were solved. Whereas today, we almost tend to think that most political problems would be solved if only the economic problems could be resolved.” The exile space and the meeting of Southeast European interest representatives with interested allies from Western Europe thus favoured the delineation, emergence, and merging of central economic concepts that were initially applied mainly to the Southeast European region but increasingly generalized and manifested in a new sub-discipline of economics.[xviii]

The seminar’s legacy, housed within Chatham House’s archives, therefore offers invaluable insights into the genesis of development economics. Initially focused on Eastern and Southeastern Europe, the seminar’s purview expanded, encompassing broader global regions plagued by economic backwardness. Rosenstein-Rodan’s foresight, echoed in his 1944 Chatham House address, underscored the pivotal role of economic development in securing lasting peace. A look at the London exile area thus shows the transformative potential of close transnational cooperation in (re)shaping economic thinking and generating economic ideas.

[i] Cienciala, Anna: “The Munich crisis of 1938: Plans and strategy in Warsaw in the context of western appeasement of Germany.” In: Diplomacy & Statecraft, 10,2-3 (1999), pp. 48-81, p. 68.

[ii] Alacevich, Michele: “Paul Rosenstein-Rodan and the birth of development economics,” p. 9.

[iii] See Innerhofer, Jan: “Der internationale Diskurs über die ´agrarische Überbevölkerung´ Südosteuropas vor und während des Zweiten Weltkriegs.” Vienna, 2011. See also: Lizlevicius, Vejas Gabriel: War Land on the Eastern Front. Cambridge 2009.

[iv] See Helleiner, Eric: “Forgotten Foundations of Bretton Woods. International Development and the Making of Postwar Order,” p. 236. Helleiner quotes the Polish banker Leon Baranski, who, before the Economic Group formed at Chatham House, stated that Eastern Europeans seized the opportunity for negotiations on industrialization and economic growth because they were assembled and networked in London and recognized British interest in “their” region as a potential market.

[v] See Bhagwati, Jagdish: “Development and planning: essays in honour of Paul Rosenstein-Rodan.” London, 2011; Eßlinger, Hans Ulrich: “Rosenstein-Rodan, Paul Narciß.” In: Harald Hagemann, Claus-Dieter Krohn (Eds.): “Biographisches Handbuch der deutschsprachigen wirtschaftswissenschaftlichen Emigration nach 1933.” Volume 2. Munich, 1999, pp. 581-587.

[vi] Helleiner: “Forgotten Foundations of Bretton Woods,” p. 10. Other institutions, such as the Oxford Institute of Statistics, as well as the PEP Institute, also engaged in planning for the Southeast European region but are deferred in this work due to the more difficult source situation compared to the Economic and Statistical Seminar.

[vii] RIIA 9/23, Invitation letter from RIIA to Prof. Bowley (OIS), 29.01.1943.

[viii] See ibid.

[ix] RIIA 9/22a Minutes of the Technical Sub-Committee.

[x] See also the concept of ‘thought collectives’ (Denkkollektive) according to Ludwik Fleck. Thought collectives are thus social systems that self-stabilize. They are formed and solidified by the experiences of their members, which in turn shape their perceptions. The essays resulting from group discussions can indeed be regarded as the outcome of such a thought collective.

[xi] Regarding the theory of the Big Push, see, for example, Murphy, Kevin / Shleifer, Andrei / Vishny, Robert: “Industrialization and the Big Push.” In: Journal of Political Economy, 97,5, 1989, pp. 1003-10026.

[xii] Not only contemporary economic historical contributions but also Rosenstein-Rodan’s London contemporaries acknowledged his crucial contributions to the founding of the discipline of development economics. For example, his colleague Hans Wolfgang Arndt stated that Rosenstein-Rodan had established this discipline with the works quoted above. See: Helleiner, Eric: “Forgotten Foundations of Bretton Woods,” p. 12.

[xiii] See Rosenstein-Rodan, Paul: “Problems of the Industrialisation of Eastern and South-Eastern Europe.” In: The Economic Journal, 53/210/211, 1943, pp. 202-211 and Rosenstein-Rodan, Paul: “The International Development of Economically Backward Areas.” In: International Affairs, 20,2, 1944, pp. 157-165.

[xiv] See Helleiner, Eric: “Forgotten Foundations of Bretton Woods,” p. 13

[xv] See ibid. p.13.

[xvi] See ibid. p.14.

[xvii] Speech at Chatham House by Paul Rosenstein-Rodan: “The International Development of Economically Backward Areas,” on January 4, 1944.

[xviii] Not only the Economic and Statistical Seminar dealt with the industrialization of the Southeast European region, but also the Political and Economic Planning Policy Studies Institute (PEP) published a variety of plans for this region (The associated archives are located in the London School of Economics archives). The same applies to the Oxford Institute of Statistics. Its working group resulted in a publication by the German-British economist Kurt Mandelbaum, “The Industrialization of Backward Areas,” which appeared in 1945. In addition, numerous contributions from the war years discussed these approaches within the Bulletin of the Oxford Institute of Statistics. See also: Cord, Robert (Ed.): “The Palgrave Companion to Oxford Economics.” Oxford, 2021. The Economic and Statistical Seminar highlighted here serves as an example of several similarly working groups within the London exile.

[xviii] It should be noted at this point that, of course, not all London actors supported the course characterized here. Within the scientific community, these new approaches were by no means uncontroversial. Furthermore, other working groups with a focus on Southeast Europe, which advocated rather for a socialist-communist development of the region, also emerged. Also, the official representatives of the Western Allied exile governments were naturally not uniformly interested in industrializing the Southeast European region. However, within the working groups mentioned here, there was a great deal of consensus, which was sufficient to gradually establish a new sub-discipline in the scientific discourse.

OpenEdition suggests that you cite this post as follows:
Lea Levenhagen (April 22, 2024). How London Exile Shaped Development Economics… The London Moment. Retrieved July 18, 2024 from

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