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W. Arthur Lewis’ best-known contribution to development economics was his path-breaking work on the transfer of labour from a traditional to a modern capitalist sector in conditions of unlimited supplies of labour. His article, “Development with Unlimited Supplies of Labour” (1954), contributed to the establishment of development economics as a specialized field of study. It addressed the mechanisms of transferring surplus labour from traditional activity to a modern capitalist sector under conditions of unlimited supply of labour.
 
In this model, wages in the modern capitalist sector are not determined by the productivity of labour, but by its opportunity cost. A “traditional” non-capitalist working environment—variously comprised of peasants, artisanal producers and domestic servants—augmented by population pressures and the entry of women into the labour force, provides the capitalist sector with “unlimited supplies” of labour, at a wage somewhat above the subsistence level. As the sector expands, employment and output increase and the share of profits (savings) in national income rises. Eventually, as surplus labour is exhausted, the wage rate rises. At this point, the economy crosses the boundary, from a dual to a single integrated labour market, and real wages rise with increasing productivity, in accordance with conventional growth models.

Lewis’ model showed that low wages and poverty in a labour surplus economy will persist so long as the opportunity cost of labour to the capitalist sector remains low. It also served as an argument for government-led industrialization programmes in the 1950s and 1960s, something Lewis argued throughout his association with the United Nations. Lewis advanced the case for industrialization by demonstrating the comparative advantage of labour-surplus countries in manufacturing activity. Presented in The Industrial Development of the Caribbean (1951), his argument was based on the success of “Operation Bootstrap” in Puerto Rico, where he had advocated the production of manufactured goods for domestic, regional and metropolitan markets. It was a radical position at a time when the agrarian economies of the West Indies had been historically structured to provide agricultural and other primary commodities to the colonial powers.
 
The impact of the Great Depression on the West Indies was a formative influence on Arthur Lewis. He was born in 1913 in St. Lucia, a small island in the Caribbean archipelago that also produced poet and painter Derek Walcott, a Nobel Laureate like Lewis himself. The child of a schoolteacher and a customs official in a British colony dominated by the sugar industry, Lewis completed his secondary education at the age of 14. He was too young, however, to take up the Island scholarship that had been awarded him to proceed to a British university of his choice. He spent the intervening four years as a junior clerk in the public service.
 
Lewis did not want to be a doctor or a lawyer—the two conventional routes to upward social mobility. He noted that he wanted to be an engineer, “but neither the colonial government nor the sugar plantations would hire a black engineer” (Lewis 1984:1). At age 18, he enrolled at the London School of Economics (LSE) to obtain a Bachelor of Commerce degree. There, he encountered economics, a subject he noted, neither he nor anyone in St. Lucia had ever heard of before; it seemed, however, to be a preparation for employment in business or public administration.
 
London of the 1930s and 1940s was the intellectual centre of anti-colonial struggles and the meeting ground of personalities, many of whom later would become future leaders of the newly independent nations of Africa and Asia. “In London, meeting fellow anti-imperialists from all over the world, I launched upon a systematic study of the British colonial empire and its practices—colour bars, prohibiting Africans from growing coffee in Kenya so that they were forced into the labour market to work for cash to pay their taxes, and all the rest” (Lewis 1984:13). Lewis addressed the problems of the West Indies in a number of papers and pamphlets, including a submission to the Moyne Commission, set up following the labour unrest throughout the West Indies in the late 1930s; he also developed an economic plan for Jamaica, advocating radical land reform.
 
An outstanding scholar, Lewis was appointed assistant lecturer during his tenure at LSE, the first black appointment made by the prestigious institution. He lectured the first year course on Economic Analysis. He was appointed full professor at Manchester University in 1948, at the age of 35. It was at that time that he returned to a question he had pondered since the early days of his growing up in St. Lucia: why do workers in the sugar industry work so hard for so little pay, while workers in industrial countries enjoy better working conditions and receive far higher pay?