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Classic Theories of Economic Growth and Development
Classic Theories of Economic Growth and Development
Classic Theories of Economic Growth and Development
Classic Theories of
Economic
Growth and
Development
Classic Theories of Economic Growth and Development:
FOUR APPROACHES
5 Developmental Stages:
1. Traditional Society 4. Drive to Maturity
2. Preconditions to Take-Off 5. Age of High-Mass
3. Take-Off Consumption
Traditional Society Preconditions to
Take-off
This stage is characterized
by a subsistent, Here, a society
agricultural-based begins to develop
economy with intensive manufacturing and a
labor and low levels of more
trading, and a population national/international
that does not have a —as opposed to
scientific perspective on regional—outlook.
the world and technology.
Take-Off
Rostow describes this stage as a short period of intensive growth, in
which industrialization begins to occur, and workers and institutions
become concentrated around a new industry.
Drive to Maturity
This stage takes place over a long period of time, as standards of living
rise, the use of technology increases, and the national economy grows
and diversifies.
3. Technological Progress
Increased application of new scientific
knowledge in the form of inventions
and innovations with regard to both
physical and human capital.
Neutral Technological Progress
Higher output levels achieved with the same quantity or combination of
all factor inputs
The
International-
Dependence
Revolution
Three Major Stream of Thoughts
1. Neocolonial Dependence Model
2. False-Paradigm Model
3. Dualistic-Development Thesis
The Neocolonial Dependence Model
It attributes the existence and continuance of
underdevelopment primarily to the historical evolution of
a highly unequal international capitalist system of rich-
poor country relationship.
It is dominated by such unequal power relationships
between the Center and the Periphery.
Neocolonial Viewpoint of Underdevelopment
Elites inhibit any genuine reform efforts that might
benefit the wider population, and thus leads to even
lower levels of living.
Attributes a large part to the developing world’s
continuing poverty, and the extension of the policies of
industrial countries in the less developed countries
through Comprador Groups.
Underdevelopment is seen as an externally induced
phenomenon.
Theotonio Dos Santos
Underdevelopment is a
consequence and a
particular form of capitalist
development known as
Dependent Capitalism.
Dependent Capitalism is a
conditioning situation in which
the economies of one group
of countries are conditioned
by the development and
expansion of others.
Pope John Paul II
People must denounce the
existence of economic, financial,
and social mechanisms that
accentuates the situation of
wealth for some and poverty
for the rest.
The False-Paradigm Model
Developing countries have failed to develop because their
development strategies, which are usually given to them by
Western economists, have been based on an incorrect
model of development.
The Dualistic-
Development Thesis
Dualism is the existence and persistence of substantial and
even increasing divergences between rich and poor nations
and rich and poor peoples on various levels.
1. Different sets of 3. The degrees of
conditions, of which inferiority fail to show
some are superior any signs of
and others inferiors, diminishing, but have
Four Key can coexist in a an inherent tendency
given space. to increase.
Arguments
of Dualism 2. This coexistence is 4. The existence of the
chronic and not superior elements
merely transitional. does little or nothing
to pull up the inferior
element.
Dependence, false-paradigm, and dualism theorists place
more emphasis on international power imbalances and on
needed fundamental economic, political, and institutional
reforms, both domestic and worldwide.
Developing countries should not get too entangled with
developing countries and pursue a policy of Autarky, or at
most trade only with developing countries.
Group 3
Underdevelopment results from poor resource allocation
due to incorrect pricing policies and too much state
intervention by overly active developing-nation
governments.
It argues that the developing world is underdeveloped
because of the heavy hand of the state and corruption,
inefficiency, and lack of incentives that permeate the
economies of developing nations.
Neoclassical Revolution
NEOCLASSICAL REVOLUTION
Three Component Approaches
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Conclusion and Implications
Whereas dependence theorists saw underdevelopment as an
externally induced phenomenon, neoclassical revolutionists saw the
problem as an internally induced phenomenon of developing
countries, caused by too much government intervention and bad
economic policies.
The problem with this theory is that many developing economies
are so different in structure and organization that the behavioral
assumption and policy precepts of traditional neoclassical theory
are sometimes questionable and often incorrect.
The reality of the institutional and political structure of many
developing world-economies often makes the attainment of
appropriate economic policies based either on markets or on
enlightened public intervention an exceedingly difficult
endeavor.
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