The idea of dualism arose in the 1950s, primarily from the work of Julius Boeke, a Dutch economist who had extensively studied colonial Indonesia. His insight was simple but powerful: many underdeveloped countries are not simply "backward." They are internally divided into two economies and two societies that coexist but do not merge.
On one side, the modern sector, introduced by capitalist colonialism, market-oriented and often linked to foreign countries. On the other, the traditional sector, based on subsistence agriculture, community relations, and very different economic logics. This is not a natural transition phase. It is the result of a forced overlap.
The traditional sector: stagnant by nature?
The traditional sector is predominantly rural. Subsistence agriculture, low productivity, and limited exchanges, often based on barter or reciprocity rather than money, are common. Technology is rudimentary. The goal is not to maximize profit, but to satisfy family needs and social obligations: prestige, ceremonies, and group solidarity.
For this reason, even when a little extra income arrives, it's rarely reinvested productively. The system tends to reproduce itself identically: stagnant.
The modern sector: an island
The modern sector, on the other hand, is concentrated in cities or a few enclaves. Extractive industries, light manufacturing, services, and banking operate with advanced technologies, monetary wages, and a profit-driven approach. It is often integrated into international markets and depends on external capital and technology.
But it's an island. Its ties to the rest of the country are tenuous: it buys few local raw materials, creates few jobs compared to the mass of available labor, and profits tend to be repatriated or reinvested within the same sector.
Lack of integration is the real problem
This is the crux of the dualism: there is no automatic transmission mechanism for development between the two sectors. The growth of the modern sector does not "radiate" to the traditional one. It does not create sufficient employment, does not stimulate agriculture, and does not generate a virtuous cycle.
The result is paradoxical: you can have national GDP growth while the majority of the population remains excluded or even worsens their situation.
The drama of work
A particularly painful aspect is employment. In the traditional sector, there is a huge surplus of labor (disguised underemployment). The modern sector, being capital-intensive, creates few jobs. Thus, the surplus population is squeezed into agriculture, further lowering productivity. Dualism not only fails to solve poverty, but actually solidifies it.
Dualism as a social fracture
This model also explains many political tensions: cities versus countryside, Westernized elites versus rural masses, modernity versus tradition. Dualism creates instability because it produces unbalanced and unjust development.
Economic policies designed for a single system often end up strengthening the modern part at the expense of the traditional one, worsening internal inequalities.
An implicit criticism of previous models
Dualism represents a strong criticism of the pioneering theories based on aggregate growth and the Harrod-Domar models. Those theories assumed a homogeneous economy, where investments would spread naturally. Dualism, however, shows that the economy can be deeply fractured. Applying universal recipes to dual contexts produces distorted results: islands of modernity in a sea of backwardness.
The lesson that remains
Dualism helps us understand why so many countries have experienced economic growth without truly widespread development. It reminds us that development is never uniform. It can create modernity without modernizing society as a whole.
For this reason, subsequent policies will have to address not only the issue of growth, but above all that of integrating the two worlds that coexist in the same country. Because as long as two separate economies exist, development will always remain half-baked.
