2 main Theories of Economic Development

1. 2 main Theories of Economic Development • Dependency Theory: • Blames the international system for the backwardness of underdeveloped countries. • Indigenous economic development was subverted first through political imperialism and now through what might be called economic imperialism.  • First, the Europeans subjected the Third World to their colonial dominationand now, after independence, • Third World countries are trapped in a cycle of economic dependency. • Free trade, foreign investments, foreign aid, and MNCs work to the disadvantage of the Third World. • They keep the Third World in a permanent condition of economic neo-colonialism.

3. 2 main Theories of Economic Development • Modernization Theory • Emphasizes the internal reasons for economic backwardness.  • The Global South has itself to blame for its condition. • The societal changes needed to transform a traditional society into a modern one take time.  Modernization theory emphasizes the internal obstacles to social change.  • Traditional elites, religious values, social mores combine to make social change difficult.  During the transition period, there is a great deal of social dislocation.  Corruption and bribery may be endemic.  • Military elites may seize power and see themselves as the only force ready to save the nation from internal conflict and foreign enemies.  • Democratic values, respect for human rights, and other "modern ideas" are as yet weak and poorly established.  • The judiciary is often under political influence and does as the current regime wants.  Protectionist sentiments may be very strong. Free trade, foreign investments, foreign aid,  and multinational corporations (MNCs) are seen as positive agents of social change and modernization.

4. Other factors • Traditional Societies --> Transitional --> Modern Societies • Building infrastructure • Many Third World countries are rich in raw materials but depend on foreign investment for the technologies to exploit these resources.  • Foreign ownership of the most important resources in the Third World country often further distorts their development.  • Social development.  • The country needs to build a universal educational system.  Community health standards need upgrading.  Housing, water supply, and other infrastructures are inadequate. • While modern (European) medicine lowers death rates almost immediately, there is a considerable lag in lowering birth rates.  • The result is a massive population increase • It is difficult and time consuming to transform a from  an economy based on subsistence agriculture to a modern, industrialized economy based on manufacturing, services, and trade.  • The shift brings with it urbanization and demographic transition.

5. Other factors • Demographic Transition: • During the demographic transition, modern medicine lowers the infant mortality rate while traditional cultural values continue to encourage a very high birth rate.  • Population grows rapidly and internal social problems escalate.  • Even with economic growth, the per capita income level may actually decline.  • In many developing countries, women still have an average of six children during their child bearing age.  • Population grows by 3% per year; • it doubles every 20 years; more than half the population is under 18.  • Infant mortality rates have declined from 100/1000 live births to 7/1000 live births. • Urbanization: • This is the shift from rural to urban.  With modernization comes a shift to an urban society.  • More and more people live in cities, suburbs, and metropolitan regions.  • During the transition stage, cities are surrounded by vast urban slums providing a cheap, underemployed labor force