Johann Philip Sanchez

11107052

CONADEV K34
Economic development has been influenced by four different
major theories that talk about how change is best accomplished. The
theories are the Linear Stages of Growth theory, the Structural Change
theory, the Neoclassical Counter Revolution theory and the New
Growth theory.
The linear stages of growth model is something like the Marshall
Plan, which was used to rebuild the war-torn countries of Europe after
the war. This theory basically believes that industrialization is the key
to the economys prosperity and progress. Moreover, according to this
theory, industrialization can be achieved by increasing capital as much
as possible together with the community. This is their way of
developing ones economy and motherland.
The Harrod-Domar model is also a major part of this theory. It
talks about the rate of growth of a nation in a mathematical manner. It
is actually based on the savings and income of the state.
Unfortunately, this theory does not work in some instances
because it is not a sufficient condition and it focuses too much on
investing in capital.
On the other, the structural change theory mainly focuses on the
process

wherein

nations

develop

their

economy

by

drastically

urbanizing and modernizing their manufacturing and service sector. A

great example of this kind of transformation is the Lewis Theory of
Development. It explains that underdeveloped nations are divided into
two namely, traditional and modern sectors. Traditional sectors usually

have zero marginal labor productivity while modern sectors are the
opposite, which have high-level productivity. This theory generally
focuses on the method where labor is shifted and the continuous
progress of production and employment in the modern sector.
Basically, this theory revolves around how an economy can avail
and take advantage of a self-sustaining progression. Elimination of
reliance on export goods and other economies are keys to success.
However, this may be quite hard for third world countries which
continue to rely on trade with first world countries.
The dependence theory is a branch of the structuralist mindset
stated above. They both have the same concepts however the
dependency theory states that third world nations are a great factor in
the progression of the first world nations. Without their cheap labor
and services, first world countries would spend more and would not be
able to avail this kind of luxury. Sadly, first world countries try to
maintain this kind of situation to sustain power and avoid the rise of
developing nations.
Another theory stated was the neoclassical counter-revolution
theory wherein prosperous economies favored supply-focused policies
and privatization of public entities and wherein developing economies
favored free trade and removal of public entities. This theory
comprises three approaches namely, the free market approach, the
public choice approach and the market friendly approach. Free market
analysis pushes that markets are independently efficient. The public
choice theory believes that the government acts only for them and not
for the actual improvement of the nation. Lastly, the market friendly
approach states that the government is a key role to the success of the
markets in the country.

The neoclassical growth model was somehow patterned to the

Harrod-Domar formulation with the addition of labor to the equation. It
also added technology as independent variable in calculating ones
growth.

According to this model, increase in labor and capital and

improvements in technology are the sources of growth of the economy.