TU Dresden
OAZ
Economic Development and Culture
03.11.05
María Belén Garrido Cornejo
ALTERNATIVES THEORIES AND THE MEANING OF DEVELOPMENT
Todaro Michael P.

Development is a multidimensional process, where changes in the economic,
institutional, social and administration structure are necessary, as well as in popular
attitudes, customs and beliefs.
1. Economic Development Theories:
1.1 The linear Stages of growth model: 1950-1960.

Rostows Stages of Growth: See the transition from underdevelopment to development
through a series of successive stages that each country has to pass.

Harrod-Domar Growth model: + Savings → +Investments → + Growth
How much can a country grow, will depend in how productive the investments were.
In poor countries, due to low levels of savings, it is necessary foreign aid or private
foreign investments to fill this gap.
Critics:
→Savings and Investments are not a sufficient condition for development.
→The role of external forces in a complex international system is not taken
into account.
1.2 Structural Change Models: 1970

Transformation from an agriculture system into a modern industrialized system.
1.2.1. The “Two Sector Model” of Lewis: 1) traditional rural subsistence sector
2) modern urban industrial sector.
o The rural sector transfers labor force to the modern sector.
o Two constants are taken as given: 1) constant and determined wages.
2) perfect elasticity of the curve of rural
labor force.
Critics: The assumptions cannot be applied to the reality of most Third World countries.
1) Reinvestment from capital in the production.
2) The beneficiaries of the profits are the owners of the industry.
3) Assumption of surplus in rural areas and full employment in urban areas.
4) Constant labor wages.
1.2.2. The “Pattern of Development” of Chenery: 1950-1973
1) Development is an identifiable process of growth and changes whose main features
are similar in all countries.
2) Savings and investments are not sufficient to economic growth. It is necessary
interrelated changes.
3) There are domestic and international constraints, which have to be overcome. The
transition of Third World countries will be easier, since they are part of the
international system.
Critics: Does not recognize the differences among countries.
1.3 The International Dependence Revolution: 1970
Third World countries are invested by institutional, political, and economic rigidities,
both domestic and international, and caught up in a dependence and dominance
relationship to rich countries.
1.3.1
The neocolonial Dependence Model: underdevelopment→ historical
evolution of a highly unequal international capitalist system of rich and poor
countries relationships. This cause that the possibility to be self-reliant and
independent is very difficult if not impossible. The main objective of the small
ruling class is the perpetuation of the international capitalist system of inequality.
1.3.2
The False-paradigm Model: underdevelopment→ faulty and
inappropriate advice provided by well-meaning but often uninformed, international
“expert” advisers from developed country assistance agencies and multinational
donor organizations.
1.3.3
The Dualistic-Development Model: dual world: one of poor nations and
other of rich nations. Four key elements: a) coexistence of different sets of
conditions, b) a chronic coexistence, c) increase of this tendency and d)
unwillingness to do something.
1.4 The Neoclassical counter Revolution:1980

Underdevelopment → poor resource allocation, incorrect pricing policies, too much
state intervention. The problem is intern not in the international system.

Against: state intervention, governmental regulations and price distortions in factor,
product and financial markets. There is too much corruption, inefficiency and lack of
economic incentives.

Support: Free market, Free trade, welcoming of foreign investors, planning and
regulation of economic activities in developing countries, privatization of public
corporations, more foreign aid, control the growth of the population.
Critics: 1.There is not competitive markets in Third World Countries.
2. Less consumer sovereignty.
3. Produces have great power in determining market prices and quantities sold.
2. The meaning of Development:
2.1 Traditional view: In economic terms means the capacity of a national economy to
generate and sustain an annual increase in its gross national product at rates of 5% to
7% or more.
Economic development: as a planned alteration of the structure of production and
employment in the agriculture.
Development strategies: focused in rapid industrialization, often at the expense of
agriculture and rural development
2.2 The new economic view: In the 70 economic development was redefined in terms
of the reduction or elimination of poverty, inequality and unemployment within the
context of a growing economy.
→ is both a physical reality and a state of mind in which society has, through some
combination of social, economic, and institutional processes, secured the means for
obtaining a better life.
2.3 Three important values of development:
2.3.1 Life Sustenance: The ability to provide basic needs like: food, shelter, health
and protection.
2.3.2 Self-Esteem: a sense of worth, self-respect and not being used as a tool by others
for their own ends. In other words being a person.
2.3.3 Freedom: As the capacity of being able to choose; freedom from social
servitude, ignorance, misery, institutions, other people and dogmatic beliefs.
Freedom, it is seen as an expanded range of choices for societies and their members
together with the minimization of external constraints.
2.4 Three Objectives of Development:
a. More access and wider distribution of basic life- sustaining goods.
b. To raise levels of living.
c. The expansion of economic and social choices.