Models of Development

The concept of "development" cuts across many levels. It refers to macro issues (such as
patterns of a nation's growth), as much as it refers to meso problems (such as river-basin
plans), or to micro problems (such as local community development). All three levels are
interwoven. The conceptual understanding discussed in this paper is of macro level issues
related to Development through a dominant paradigm.

Development practice is not new. As said by Gustavo Esteva (1992); for two-third of the
people on earth, this positive meaning of the word “development” is a reminder of what they
are not. It is a reminder of an undesirable, undignified condition. To escape from it, they
need to be enslaved to other’s experiences and dreams.

Development practice dates back to the European colonies, when colonizers enforced a
"civilized," ordered, white, male, Christian ethic. Development theory, however, came along
much later, emerging as a stable, academic field of inquiry only after World War II, when
European countries were trying to keep their former colonies at arm's length.

The development field has always been highly influenced by economic thought, as
exemplified by the fact that development has been primarily measured by increases in gross
national product (GNP). According to Dennis Rondinelli, during the 1950s and 60s,
development intervention assumed that "successful methods, techniques, and ways of solving
problems and delivering services in the U.S. or other economically advanced countries would
prove equally successful in the developing nations."1 Therefore, at the very start of
development theory, there was a notion of direct transferability, or a "one size fits all" type of
development assistance. However, delivering aid was not just a technical matter; it also
involved political concerns. For example, during the Cold War, U.S. provision of aid was
largely directed to those countries that were, or could come, under Soviet influence.

The years since World War II have witnessed the political emancipation of most of the Third
World from colonisation and the birth of the UN marked the formal beginning of
development aid to Third World Countries. Concern for the plight of the people in the Third
World counties moved US President Truman to propose the 1949 Point Four Program, which
was to be the Third World version of the Marshall Plan. The philosophical consistencies
between the Marshall Plan and the Point Four program were very clear. Both aimed to
alleviate suffering and both aimed to do so via capital investment. During the period of
implementing the European Recovery Program (ERP) through funds from US as Marshall
Plan various economist and socialist critiqued the action against US, which again was never
reciprocated in the post ERP phase when these nations shared a common understanding to
support the Third World nations through modernisation strategies.

One of the paradigm emerged by the post WW II with enormous social, cultural and
economic consequences was that of modernisation. Theories and concepts that reiterated the
development of West Europe and North American nations were used to generate models of
development for the Third World. In the modernisation theories, the definition of a modern
nation resembled western industrialised nations in all areas of society, including political and

1
http://peacestudies.conflictresearch.org/essay/development_conflict_theory/?nid=1158
economic behaviour and institutions, attitudes towards technology and science, and cultural
norms. Forgetting the past of once these nations were colonised by the West.

The economic model that grounded modernisation theories was the neo-classical approach
that had served as the basis of Western economics. The dominant paradigm was mainly
concerned with economic growth as measured by GNP rates and encouragement of all factors
and institutions that accelerated and maintained high growth in areas such as capital-intensive
industrialisation, high technology, private ownership of the factors of production, free trade
and the principle of laissez-faire.2

The economic model of development was based on the following theory discussed below:

Comparative Advantage: It states that different countries have diverse factor of

endowments such as climate, skilled labour force, and natural resources which vary between
nations. Therefore some countries are better placed in the production of certain goods than
others. Economic theory predicts all countries gain if they specialise and trade the goods in
which they have a comparative advantage.

Comparative advantage was first coined by Robert Torrens in 1815. Later the concept was
explained by David Ricardo in 1817 through an example between England and Portugal. He
exemplified in Portugal it was possible to produce both wine and cloth with less work than in
England. However the relative costs of producing those two goods were different in the two
countries. In England it was very hard to produce wine, and moderately difficult to produce
cloth. In Portugal both were easy to produce. Therefore while it was cheaper to produce cloth
in Portugal than England, it was still cheaper for Portugal to produce excess wine, and trade
that for English cloth. And conversely England benefits from this trade because its cost for
producing cloth has not changed but it can now get wine at a cheaper cost, closer to the cost
of cloth.

Comparative advantage exists when a country has lower opportunity cost in the production of
a good or service. It is used to justify free trade and oppose protectionism. Comparative
advantage is based on differing opportunity costs reflecting the different factor endowments
of the countries involved. The theory assumes free trade, willingness to specialise and factor
mobility. Specialisation and trade benefits countries providing at an exchange rate between
the respective opportunity cost ratios. Countries benefit if they specialise in the production of
a good or service in which they have a comparative advantage i.e., a lower internal
opportunity cost.

Harrod-Domar Model: Harrod-Domar model was developed in the 1930s to analyse

business cycles. He suggested savings could provide funds for investment purpose through
borrowing. He stated economy's rate of growth depends on, the level of saving and the
savings ratio and significantly the productivity of investment for example the economy's
capital-output ratio.

2
It is generally understood to be a doctrine that maintains that private initiative and production are best
allowed to be free of economic interventionism and taxation by the state beyond what is necessary to maintain
individual liberty, peace, security, and property rights. (http://en.wikipedia.org/wiki/Laissez-faire)
Harrod-Domar exemplified economic growth depends on the amount of labour and capital
[NY = f (K, L)]. When developing countries have an abundant supply of labour it may lack of
physical capital that holds back economic growth hence economic development could take
place when more physical capital is generated for production. Higher income allows higher
levels of savings.

For example, if £8 worth of capital equipment produces each £1 of annual output, a capital-
output ratio of 8 to 1 exists. A 3 to 1 ratio indicates that only £3 of capital is required to
produce each £1 of output annually.

In fact, Rostow and other defined when countries that are able to save 15% to 20% of GNP
could grow at a much faster rate than those that saved less. The mechanisms of economic
growth and development, therefore, are simply a matter of increasing national savings and
investments. Growth in this manner is hypothesised as self-sustaining.

Rostow Model: Developed by W.W. Rostow in the 1950s states, the Linear-stages-of-growth
suggests that there are a series of five consecutive stages of development which all countries
must go through during the process of development. These stages are “the traditional society
(where barter system exist, output is consumed by producer), the pre-conditions for take-off
(surplus for trading emerges due to transport and entrepreneurship emergence), the take-off
(industrialization increases, workers switching from land to manufacturing but concentrated
in one or two areas), the drive to maturity (diverse growth due to innovation of technology),
and the age of high mass-consumption.

Lewis Model: Lewis Model is a structural change model that explains how labour transfers
in a dual economy. Dual economy consist mainly the traditional, overpopulated rural
subsistence sector characterised by zero marginal labour productivity and a high productivity
modern urban industrial sector.

The primary focus of the model is on both the process of labour transfer and the growth of
output and employment in the modern sector. Both labour transfer and modern sector
employment growth are brought about by output expansion in that sector. The speed with
which this expansion occurs is determined by the rate of industrial investment and capital
accumulation in the modern sector. Such investment is made possible by the excess of
modern sector profits over wages on the assumption that capitalists reinvest all their profits.
Extra incomes increase demand for domestic products while increased profits fund increase
investment. Hence rural urban migration offers self-generating growth.

Lewis assumes that urban wages would have to be at least 30% higher than average rural
income to induce workers from their home areas.

Dependency Theory: Dependency Theory was developed in the late 1950s under the
guidance of the Director of the United Nations Economic Commission for Latin America
(ECLA). It was developed out of the fact that economic growth in the advanced industrialised
countries did not lead to growth and development in poorer countries. As a result in the early
1960‟s the group of scientist from ELCA critique the Modernisation Theory and theoretically
conceptualised the approach as Dependency Theory.

Dependency refers to over reliance on another nation. Dependency theory uses political and
economic theory to explain how the process of international trade and domestic development
makes some Less Developed Countries (LDC's) even more economically dependent on
developed countries ("DC's"). It sees underdevelopment as the result of unequal power
relationships between rich developed capitalist countries and poor developing ones.

The theory was based on the Marxist Analysis of inequalities in the world system but contrast
with the view of free market (which often argue of free trade advances poor states along an
enriching path to full economic integration). In this process the poor nations were to provide
their markets accessible to wealthy nations.

Balanced Growth Theory: Also know as „Big Push‟, argues that as the large numbers of
industries grow simultaneously in all sector and regions of the economy, each would generate
a market for one another.

Balanced Growth Theory is an extension of Say‟s Law3 which states the demand for one
product is generated by the production of another. It requests investments in such sectors
which have a high relation between supply, purchasing power, and demand as in consumer
goods industry, food production, etc. It is often argued free markets were unable to deliver
the balance growth because entrepreneurs did not expect a market for additional output, when
skilled workers were required they were not willing to hire and train unskilled staff who then
leave work for rival firms, and were unable to raise finance for projects.

As a result for fair distribution of growth Government interventions are necessary through
training of labour, large-scale investment, nationalising strategic industries and undertaking
infrastructure investments (for example building roads). The real bottleneck lies in breaking
the narrow market which is seen with the shortage of capital, and, therefore, all potential
sources have to be mobilized. If capital is available, investments will be made. However, in
order to ensure the balanced growth, there is a need for investment planning by the
governments.

Development is seen here as expansion of market and an increase of production including

agriculture.

As the greater critique aroused about the development concepts and significantly when the
developing nations suffered from serious financial crisis, they could not pay their external
debts, and as a result had to adopt economic adjustment measures imposed by the
International Monetary Fund (IMF) and the World Bank in order to borrow money. Such
measures included cuts in public expenditure, and the development of a more efficient,
transparent and accountable state.

During the 90s, the IMF maintained its structural adjustment plan, while the World Bank
gained a deeper understanding of other factors that can affect economic performance. In this
process, a series of world summits organized by the United Nations was taken place to
discuss development. Environment and development was the theme of the 1992 Rio de
Janeiro summit. In 1993, a human rights conference took place in Vienna. Cairo hosted a
conference on population and development in 1994. Social development was discussed at the
Copenhagen 1995 world summit. Gender issues, especially the role of women, were

3
http://en.wikipedia.org/wiki/Say%27s_Law
discussed in 1995 in Beijing. The last conference, Habitat-II, took place in Istanbul to discuss
urban issues.

Development, when realised, consisted of innumerable variables such as economic, social,

political, gender, cultural, religious and environmental issues as a result the holistic approach
was adopted through UN. This formed an interdisciplinary field which illustrated the
Millennium Development Goals.

Today Development practice discourses are often grounded on the principles of participation
and emancipate dialogue which hypothesises a process of empowerment of the poor and
women.

Bibliography and References

1. Sen Amartya, 1984. “Resources, Values and Development”, Oxford University Press,
New Delhi.

2. Sen Amartya, 2000. “Development as Freedom”, Oxford University Press, New

Delhi.

3. Steeves, H.L and Srinivas M.R, 2001. “Communication for Development in the Third
World: Theory and Practice for Empowerment”, Sage Publications, New Delhi.

4. Todaro M.P, and Smith S.C, 2003. “Economic Development”, Pearson Education,
New Delhi.

5. http://www2.ihis.aau.dk/internationalaffairs/DIR/F%2007/Development%20theory%2
02.pdf

6. http://www.professor-frithjof-kuhnen.de/publications/causes-of-underdevelopment/1-
2-1.htm

7. http://tutor2u.net/economics/content/topics/development/development_models_introd
uction.htm

8. http://en.wikipedia.org/wiki/Marshall_Plan

9. http://www.revision-notes.co.uk/revision/619.html

10. http://www.spartacus.schoolnet.co.uk/USAmarshallP.htm