Development Strategies and Economic Theories

Development Strategies

Self Sufficiency Model

  • Overview: Theories on transitioning from Less Developed Countries (LDCs) to More Developed Countries (MDCs).
  • Objective: Empower countries to develop internally, avoiding reliance on external trade.
  • Key Principles:
    • Equal internal investment across all economic sectors.
    • Discourages international trade through trade barriers.

Trade Barriers

  • Types:
    • Import tariffs: Taxes on imported goods.
    • Quotas on foreign trade: Limit on quantities of specific goods that can be imported.
    • Trade licenses: Requirements for companies to engage in international trade.

Major Problems with the Self Sufficiency Model

  • Government Protection: Leads to stagnation, as industries become complacent.
  • Large Bureaucracy: Increased corruption potential.
  • Low Tax Revenues: Resulting from lack of competitive industries.

Case Studies

  • India (Post-Colonialism):

    • Used trade barriers and subsidies for inefficient companies.
    • Promoted self-production over importing.
    • Socialized essential industries.

  • Russia:

    • Government's complete subsidization led to innovation and competition gaps.

Criticisms of Self Sufficiency

  • Inefficient Industries: Government-controlled prices dampen the motivation for increased production.
  • Lack of Competition: Results in stagnation and technology deficit.
  • Corruption: Large bureaucracies foster loopholes and black markets.

International Trade Model: Theory of Modernization

  • Objective: Encourage countries to leverage unique assets in global trade.
  • Approach: Development driven by foreign trade and investments.

Rostow’s Model of Modernization

  • Core Beliefs:
    • Wealth is attainable for all countries.
    • Traditions are barriers to growth.
    • Development occurs in five stages:
    1. Traditional Society: Rural communities with limited growth due to religious and familial ties.
    2. Pre-conditions for Take Off: Educated elite identify economic strengths and government builds infrastructure.
    3. Take Off: Emergence of industries attracting global interest.
    4. Drive to Maturity: Technology diffuses across industries.
    5. High Mass Consumption: Increased living standards and consumption.

Criticisms of International Trade

  • Overly Optimistic: Not all countries' unique assets remain valuable, e.g. Zambia’s copper decline.
  • Market Stagnation: Growth in MDCs slows as demand dips.
  • Dependency on MDCs: LDCs become reliant on wealthy nations.

Dependency Theory (World Systems or Core/Periphery Model)

  • Definition: Economic development hindered by wealthy nations that exploit poor countries.
  • Wallerstein's Core-Periphery Model:
    • Attributes MDCs' success to colonialism (neocolonialism).
    • LDCs dependent on MDCs, resulting in a trade imbalance.

Countries Categorization

  1. Core Countries: Resource-rich nations that dominate the global economy.
  2. Semi-Periphery Countries: Low-income nations supporting core countries with inexpensive labor.
  3. Periphery Countries: Economically disadvantaged nations.

Criticisms of Dependency Theory

  • Pessimistic: MDCs do not intentionally obstruct LDCs' success.
  • Ignores Aid: Overlooks assistance and investments from MDCs.
  • Cultural Ignorance: Fails to consider social and cultural factors in poverty.

Inequality In Development

  • Inequality-adjusted Human Development Index (IHDI):
    • Modifies HDI to reflect inequality within nations.
    • A higher discrepancy between HDI and IHDI indicates greater inequality.

Human Development Index (HDI) Components

  • GNI per capita
  • Average years of schooling
  • Life expectancy at birth

Gender Development Index (GDI)

  • Comparison of male and female achievements using HDI indicators.
  • Limitations: Life expectancy may distort results due to differing war impacts on genders.

Gender-Inequality Index (GII)

  • Measures gender disparity across three dimensions:
    1. Reproductive Health: Maternal mortality and adolescent birth rates.
    2. Empowerment: Women's representation in government and education.
    3. Labor Market: Female participation in the labor force.
  • GII ranges from 0 (perfect equality) to 1 (maximum inequality).

Industrial Regions

  • Concentration: Industry primarily in Europe, North America, and East Asia.
  • Historical Development:
    • Europe: First to industrialize in late 19th and 20th centuries.
    • North America: Industrial spread occurred rapidly mainly in the northeastern US and eastern Canada.
    • East Asia: Industrial development focused on Japan and China, leveraging large workforces despite resource limitations.

Specific Regions

  • Core Industrial Regions:

    • Western/Central Europe
    • Eastern North America
    • Russia and Ukraine
    • Eastern Asia

  • Secondary (Semi-Periphery) Industrial Regions:

    • Southeast Asia, Northern Africa, Mexico, and Brazil.