Tutorial Material for the Course:

Development Theories and Practices (Gads2061)

In Preparation for the First National Exit-Exam as a Requirement for

Graduation from Ethiopian Universities and University Colleges

Compiled by:
Jimma University

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 Course Introduction

Welcome to the course ‘Development Theories and Practices’ (GaDS2061). Throughout this
course, you will equip yourself with the basic knowledge of development issues. This course
observes and makes sense of the different theories and practices of development. It also
examines relationship between the different theories of development and their practices
particularly in the Third World countries like Ethiopia.

There have been continuous debates concerning the underlying causes of underdevelopment and
on the most desirable pathways to change in the more underdeveloped countries of the world,
which are referred to as developing countries or the Global South in general. Countries in this
socio-economic category were referred to as Third World Countries during the Cold War era that
span roughly from 1945 to 1989. These debates elicit different theoretical responses from social
scientist. On the one hand, there are many theories that put blame on the Third World’s political
unrest and economic backwardness, associating the causes to internal weaknesses. On the hand,
there are theories which have condemned western exploitation as the root cause of
underdevelopment. You will be exposed to these competing lines of thinking in this course.
Therefore, by learning all these and other issues, you will be able to understand what ought to be
done to solve the development problems of poor countries like Ethiopia.

The major issues and topics covered under this course include the concept of development,
indicators of development, the characteristics of underdeveloped countries, values and objectives
of development, the major issues in development, and major theories of development and
economic growth that have aimed at overcoming the development problems of poor economies
like Ethiopia. In addition, you will be introduced to some recent historical and intellectual
evolutions in scholarly thinking about how and why development does and does not take place,
the nexus between population growth and economic growth and the different policy approaches,
and the relationships between environment and development and the different policy options for
states.

The lessons in this course are covered in … units.

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 UNIT ONE
DEVELOPMENT: AN INTRODUCTION

1.1 The Concept of Development

You might have some clue about what development is because it is a term that is often used by
people especially in academic institutions. Development is multi-faceted and its understanding
presupposes the recognition that there exist several disciplines which have their own approaches
to the concept and its conceptualization. In this course, and for this program of governance and
development studies, development is all about changes and progress of a society in economy,
technology, politics, and socio-cultural organizations.

Because the term development may mean different things to different people, it is important at
the outset that we have some working definition or core perspective on its meaning. You know
that some countries are considered to be more developed than others. It is not uncommon to
come across references to the Less Developed Countries (LDC) as compared to the Developed
Countries (DCs). Similarly, within our own country, some regions are said to be more developed
than others. Clearly, development, therefore involves making relative comparisons.

Development implies an overall positive change in the physical quantity and quality of life. This
positive change for the better encompasses economic growth as well as social aspects. Therefore,
development not only calls for economic but also the equitable distribution of the gains made
from economic growth. In other words, development implies growth with justice. It means an
improvement in the quality of life through better health, education, housing and overall material
and social welfare.

1.2 Elements of Developments

The basic elements of development are the following:

 Removal of inequality and poverty

 Increase in material welfare of the people

 Increase in social well-being (education, health, housing, etc.)

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  An equitable distribution of the gains of development among different groups of
people in a region or country

 An enhancement in technology and the capacity to produce a wider range of goods

and services in the economy leading to a better quality of life.

 Building institutional structures which permit participation in decision-making at all

levels, equalization of opportunities for development and removal of disparities.

Development is a value-laden and subjective concept with different definitions as given by

different professionals. Development means basically unfolding or opening-up something, which
is latent and with people it means opening up or unfolding their potential powers. It just refers to
a change that is desirable.

But since what is desirable at a particular time, place and in a particular culture or context may
not be desirable at other places, or at other times in the same place and in the same cultural
setting, it is impossible to think of a universally acceptable definition of development. However,
at best one can define development in the given societal context as a set of desirable societal
objectives which society seeks to achieve.

For a long time, it was assumed that development depends primarily on economic growth and
would automatically occur if economic growth took place. This view of development has,
however, been criticized on the ground that it ignores the distribution of the gains from growth,
and also how the growth has been achieved and at what costs. An increase in production in a
country doesn’t automatically mean that there has been better distribution of what has been
produced. This has meant that the question of distributive justice has assumed greater
importance.

1.2 Development and Growth

It is necessary to understand the difference between the concept of economic growth and
development. Economic growth means an increase in the value of all goods and services
produced in an economy. The sum total of all goods and services in an economy is termed as the
Gross Domestic Product (GDP). Growth is, therefore a sustained expansion in the productive
capacity of an economy leading to sustained rise in its GDP. Development, on the other hand is
asustained improvement in material welfare, particularly for those who are poor and afflicted by

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poverty, illiteracy and poor health conditions. Development is therefore, a qualitative concept
involving a qualitative improvement in the general standard of living in a country or economy.

1.3 Indicators/characteristics of Development and underdevelopment

The following are some of the most important characteristics of under-development. Using these,
you should be able to roughly differentiate between developed and developing countries. Thus,
we can consider these characteristics as yardsticks or indicators or bases of measurement by
which comparisons between/among regions and countries can be made.

Most developing countries are characterized by the following conditions:

o Mass poverty-The poverty levels are very striking in the developing countries.

o Low levels of income and concentration of incomes in a few hands- Low levels of
income for large sections of the masses and high inequalities in the distribution of income
are very apparent in the developing countries due to the fact that assets are unequally
distributed. This perpetuates the problem of low incomes for the poor. The existence of
mass poverty amidst glaring inequalities is among the most important symptoms of
inadequate development in the low income counties.

o Low levels of productivity and backward technology are the other problems of the
developing countries. Increased productivity is an indication of greater efficiency.
Improvement in technology and better management and organization are necessary for
this purpose. For instance, in the agricultural sector greater use of fertilizers, improved
varieties of seeds, better ploughs, etc can lead to increase in output from the same unit of
land. Generally, crop yields per hectare in the developed world are far higher than those
in developing countries. The need to improve technology and the overall input package in
agriculture is obvious.

o High levels of unemployment and underemployment are characteristics of developing

countries. Since the level of industrialization is low and the agricultural sector cannot
absorb the entire workforce, the problem of unemployment and underemployment
continues to grow. The pressure of unemployment also perpetuates the problem of low

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 wages as employers take advantage of surplus labor and pay low wages; workers are not
able to bargain because there are thousands willing to do the same work at the prevailing
rates.

o Poor health, nutrition, illiteracy and poor housing are also characteristic features of
developing countries. The low levels of income obviously play a central role in
perpetuating these problems. As earnings are low, people aren’t able to consume a
balanced diet providing the requisite number of calories and nutrients. The most
vulnerable are the children in the developing countries. Compared to standards prevailing
in the developed countries, the death rates are still very high in the developing countries.
Similarly, there are huge gaps between the developed and developing countries in the
field of education. It is particularly striking that the major problem is with respect to
female illiteracy. As mentioned earlier, inadequate growth and low levels of income are
obviously the reasons that perpetuate such deprivations. It must be stressed; however that
public policy has to play a critical role in addressing these problems.

o Lower status of women- In underdeveloped countries, women are much more vulnerable
than their counterparts in the developed countries. On most development indicators, they
rank lower than their own country. Their health and nutrition is not at satisfactory levels
for large numbers. Female illiteracy is highly widespread. They also have to put up with
both covert and overt forms of discrimination and the barriers regarding their roles in the
society. Women are often paid lower wages even though they perform the same work.
The crudest and the most gruesome form of discrimination against women in many parts
of the world is reflected in the terrible phenomenon of what has come to be known as
‘missing women’ caused by practices such as female feticide, infanticide, etc resulting in
excessive mortality among them.

1.4 Dissatisfaction with the Conventional Indicators of Development

Traditionally, growth was taken as the most, if not the only, indicator of development. The use of
Gross National Product (GNP) or the Gross Domestic Product (GDP) as the indicator of
development has been criticized on several accounts. Development can be viewed in terms of
progress in (i) Output and income (ii) Conditions of production (iii) level of living (nutrition,

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health, housing and education, etc.), (iv) attitude toward work (v) proliferation of sound
institutions and policies.

 GNP as an average level of income (per capita) ignores the inequality in the distribution
of national income;

 It also ignores the availability and utilization of goods and services and has nothing to say
on availability or otherwise of a whole range of basic needs such as health, education,
water, shelter, etc; and

 It tends to conceal the lower than average condition of the deprived.

Given these deficiencies of GNP/GDP as an indicator, several alternative contending indicators

of development have been suggested at different juncture by social scientists.

Hence, Human Development Index (HDI) is a recently developed index to measure development
involving both economic and social key indicators. It measures the average achievements in a
country in three basic dimensions of human development.

 A long and healthy life, as measured by life expectancy at birth;

 Knowledge, as measured by the adult literacy rate and the combined primary, secondary
and tertiary gross enrollment ratio; and

 A decent standard of living as measured by GDP per capita in PPP (purchasing Power
Parity) $ USD.

The fundamental criterion of economic development is the total output/products (goods and
services) of the economy. Production function is therefore the keystone of economic growth
structure. Total output rate at a given time is (Yt) is the function of the quantities of various
inputs actually used in production and the major forces conditioning the productivity of the
production factors. Production/ productivity conditioning forces include technology, institutions
and other elements of socio-economic environment.

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There are other common socio-economic indicators of development used by many organizations
including UN organizations. Accordingly, the following are identified as some of the indicators:

 Expectation of life at birth;

 Consumption of animal protein per capita per day;

 Combined primary and secondary school enrolment;

 Average number of persons per room;

 Newspaper circulation per 1000 population;

 Agricultural production per male agricultural worker;

 Percent of adult men labor in agriculture;

 Percent of economically active population in service sector (gas, electricity, water etc);

 Percent of GDP derived from manufacturing;

 Electric consumption, kw/h Per capita;

 Steel consumption per capita;

 Percent of population in localities of 20, 000 and over, cities (urbanization level)

The view that income and wealth are not ends in themselves but instruments for other purposes
goes back at least as far as Aristotle. Amartya Sen, the 1998 Nobel laureate in economics, argues
that the “capability to function” is what really matters for status as poor or non-poor person. As
Sen puts it, “Economic growth cannot be sensibly treated as an end in itself. Development has to
be more concerned with enhancing the lives we lead and the freedoms we enjoy.”

In effect, Sen argues that poverty cannot be properly measured by income or even by utility as
conventionally understood; what matters is not the things a person has-or the feeling these
provide-but what a person is, or can be, and does, or can do. What matters for well-being is not
just the characteristics of commodities consumed, as in the utility approach, but what use the
consumer can and does make of commodities. For example, a book is of little value to an
illiterate person (except perhaps as cooking fuel or as a status symbol). Or as Sen noted, a person
with parasitic disease will be less able to extract nourishment from a given quantity of food than

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someone without parasites. Sen’s approach is valid for more developed countries as well. For
example, most of the things one could do with the personal computer one buys are never
understood or even known, let alone ever used, by anyone other than specialists. Of course,
sometimes people want more “features” just in case they might want to use them. But if we
exclude items of this kind, a computer with unused characteristics is no better than one without
these characteristics. `

1.5 Values of Development

Is it possible to define or broadly conceptualize what we mean when we talk about development
as the sustained elevation of an entire society and social system toward a “better” or “more
humane life? What constitute the good life is a question as old as philosophy and humankind,
one that must be periodically revalued and answered afresh in the changing environment of
world society.

Values are desired conditions in a society (e.g. health, fame, long life, high income, etc.). There
are at least three basic and practical guidelines for understanding the inner meaning of
development. These core values are sustenance, self-esteem, and freedom. They represent
common goals sought by all individuals and societies. They related to fundamental human needs
that find their expression in almost all societies and cultures at all times. Dear students, let us
therefore examine each in turn.

1.5.1 Sustenance: The Ability to Meet Basic Needs

All people have certain basic needs without which life would be impossible. These, life
sustaining, basic human needs include food, shelter, health and protection. When any of these is
absent or in critically short supply, a condition of “absolute underdevelopment” exists. A basic
function of all economic activity, therefore, is to provide as many people as possible with the
means of overcoming the helplessness and misery arising from a lack of food, shelter, health and
protection. To this extent, we may claim that economic development is a necessary condition for
the improvement in the quality of life that is development. Without sustained and continuous
economic progress at the individual as well as the societal level, the realization of the human
potential wouldn’t be possible. One clearly has to “have enough in order to be more.” Raising

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per capita income, elimination of absolute poverty, greater employment opportunities and
lessening income inequalities therefore constitute the necessary but not the sufficient conditions
for development.

Without improving the levels of living (life sustenance) the prospect for development is non-
existent. The first priority of moving from a chronic state of underdevelopment to one of
development must be raising people’s level of living in terms of food, shelter, clothing, footwear,
education, health, employment and social services.

1.5.2 Self-esteem: To be a person

A second universal component of the good life is self-esteem. Self-esteem is an inherent value of
human beings. Self-esteem features a sense of worth and self-respect, of not being used as a tool
by others for their own ends. It is difficult to feel self-esteem without development, which
includes better material welfare. From this natural value of human being, development is
legitimized as a goal of gaining self-esteem.

All peoples and societies seek some basic form of self-esteem, although they may call it
authenticity, identity, respect, honor, or recognition. The nature and form of this self-esteem may
vary from society to society and from culture to culture. However, with the proliferation of the
“modernizing values” of developed nations, many societies in Third World countries that have
had a profound sense of their own worth suffer from serious cultural confusion when they come
in contact with economically and technologically advanced societies. This is because national
prosperity has become an almost universal measure of worth. Due to the significance attached to
material values in developed nations, worthiness and esteem are nowadays increasingly
conferred only on countries that possess economic wealth and technological power-those that
have “developed.”

The relevant point is that underdevelopment is the lot of the majority of the world’s population.
As long as esteem or respect was dispensed on grounds other than material achievement, it was
possible to resign oneself to poverty without feeling disdained. Conversely, once the prevailing
image of the better life includes material welfare as one of its essential ingredients it becomes
difficult for the materially “underdeveloped” to feel respected or esteemed. Nowadays the Third

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World seeks development in order to gain the esteem which is denied to societies living in a state
of disgraceful “underdevelopment.” Development is legitimized as a goal because it is an
important perhaps even an indispensable, way of gaining esteem.

1.5.3 Freedom from Servitude: To be able to choose

A third and final universal value that constitute the meaning of development is the concept of
human freedom. Freedom here is to be understood in the sense of emancipation from alienating
material conditions of life and from social servitude to nature, ignorance, other men, misery
institutions and dogmatic and harmful beliefs. Freedom involves an expanded range of choices
for societies and their members together with a minimization of external constraints in the
pursuit of some social goal we call development.

W. Arthur Lewis stressed the relationship between economic growth and freedom from servitude
when he concluded that “the advantage of economic growth is not that wealth increases
happiness, but that it increases the range of human choice.” Wealth can enable people to gain
greater control over nature and the physical environment (e.g. through the production of food,
clothing and shelter) than they would if they remained poor. It also gives them freedom to
choose greater leisure, to have more goods and services, or to deny the importance of this
material wants and live a life of spiritual contemplation. The concept of human freedom should
also encompass various components of political freedom including, but not limited to personal
security, the rule of law, freedom of expression, political participation, and equality of
opportunity. Some of the most notable economic success stories of the 1970s and 1980s (Saudi
Arabia, Chile, South Korea, Singapore, Malaysia, Thailand, Indonesia, Turkey, and china,
among others) did not score highly on the 1991 Human Freedom Index compiled by the United
Nations Development Program (UNDP). Development is expected to endow people with ability
of choosing. Development in wealth increases happiness, control over nature and physical
environment.

1.6 Objectives of Development

We may conclude that development is both a physical reality and a state of mind in which
society has through some combination of social, economic and institutional processes, secured

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the means for obtaining a better life. Whatever the specific components of this better life,
development in all societies must have at least the following objectives:

 Increasing availability and widening the distribution of basic life sustaining goods and
services to members of society;

 Improved family income of an adequate level for subsistence package of food, shelter,
clothing, footwear and other expenditure;

 Providing of more jobs (employment). Job or employment in addition to its role of

distribution of income to assure consumption, it plays an important role in developing
personality of individuals;

 Improved conditions of production and work;

 Improving access to education that also serves not only to enhance material well-being,
but also to generate greater individual and national self-esteem;

 Improving social and economic equality;

 Providing or opening opportunities to the people to participate in governance at all and

grassroots level;

 Promoting cultural and humanistic values and social discipline (positive attitude to work)

 Expanding the range of economic and social choice of individuals and nations by freeing
them from servitude and dependence not only in relation to other people and nation but
also to forces of ignorance and human misery.

 Keeping-up national independence, consolidation and sovereignty without interference

from other foreign governments.

1.7 Major Issues in Development

It must be emphasized that there cannot be a single well defined path towards development.
Different countries and regions will have their own specificities into account in order to develop

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their societies. This is one reason why development has been a much debated subject. In this
section we will highlight some of the major issues, which have featured in this debate and
provide contrasting accounts for making policy priorities.

i) Growth – versus – Distribution

For a long time it was assumed that economic growth would be an engine that will lead naturally
towards development. Consequently, little or no attention was paid to the question of distributive
justice. One of the major outcomes of this situation was the ‘trickle down’ theory, which stated
that if there was sufficient growth everybody would benefit from it. However, growth by itself
doesn’t guarantee an improvement in the quality of life for the vast number of people.

ii) Agricultural Versus Industrial Development

This has been one of the most important issues at stake in the debate on development. If the
agricultural sector doesn’t grow there may be sharp increase in the prices of food-grains that will
affect the poor. On the other hand, industrial stagnation will mean that surplus labor from the
agricultural sector can’t be usefully employed. Therefore, both agriculture and industry will have
to grow so that the pace of development is fast enough to improve the living conditions of the
people.

iii) Capital versus Labor Intensive Technology and Development

Youmay have heard the term ‘technology’ being used quite often in debates pertaining to
development. Technology is a means by which goods are manufactured in an economy. Any
goods, however crude or sophisticated, can actually be manufactured by several means. The
development in technology is the process by which the manufacture of goods is made cheaper,
faster and more efficient.

You may be aware of the fact that tractors, harvesters, etc. are being used on a wider scale now
than a couple of decade’s age. They are now used to perform many of the agricultural operations,
which were hitherto performed manually using ploughs and other equipments; this change may
be termed a technological change.

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Now that you are familiar with this concept you must be able to appreciate that at any given
point of time, we may have a number of technologies to choose from in order to produce the
same goods. Cloth can be woven on traditional looms in your village or town, or it can be
manufactured in the factories located in bigger cities. The end product is more or less the same,
but the process of making it is different.

An improvement in technology calls for investment to make this change feasible. Sophisticated
technology, when it uses less labor, is termed “labor displacing technology”. On the other hand,
an improvement in technology can also be made without displacing labor and also less
expensively. This is called “labor intensive technology”. Capital intensive and labor displacing
technologies are often expensive and call for large investments. Labor intensive technologies on
the other hand have the advantage of being able to absorb the surplus labor in a developing
country.

During the 196os and the early 1970s, a new trend of thinking on technology suitable to
developing societies became popular. The question raised was that of “Appropriate
Technology”. It was said that developing countries should adopt technologies that are suitable
for their own specific needs, situations and socio-cultural framework rather than copy the
western technologies blindly. Thus it was suggested that countries like Ethiopia should use
technologies that have evolved over many decades and adapt them to make the best use of their
cost-effectiveness.

The choice between these types of technology, however, is not easy for a developing country. On
the one hand, rapid increase in output is necessary to solve the problems of the people and, on the
other; the problem of unemployment (thus created) accentuates the problem of poverty. A balance is,
therefore, required so that both technology and living conditions of the people improve.

iv) Centralization versus Decentralization

This has been another major issue in the debate on development. Generally, it is agreed that development
is a long-term phenomenon and therefore, needs to be planned. While a certain degree of centralization is
necessary to coordinate the efforts towards development, too much of centralization in the case of
decision making powers can weaken the process of popular participation. It also leads to the formulation
of programs and projects, which have limited local relevance.

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It is hoped that decentralization of the development process would also lead to greater accountability to
those who are actually involved in the decision making process. Devolution of power is very vital for
development. This ensures that the administration is brought closer to the people. Consequently, there is
greater accountability of planners towards those whom programs and policies are meant to reach.

v) Urban versus Rural Development

The vast majority of the population in Ethiopia and other developing countries live in rural areas. There is
a continuing influx of people into the cities looking for jobs as the rural economy is not been able to
provide employment to them. It needs to be pointed out that the problem of poverty, poor health and
illiteracy is widespread in both rural as well as urban areas of developing countries. The problem of rural
poverty and unemployment is the crux of the problem, without solving it, there cannot be genuine
development. Hence, rural development has come to acquire critical importance. Sustained improvement
in the quality of life in rural areas is likely to slacken the pace of large-scale migration of villagers to
cities in search of jobs.

vi) Respective roles of the State and the Market

One of the most contentious issues in Economics has been the scope and extent of government
intervention in the economy of the country. During the immediate post WWII era, there was a near
consensus among economists, for a variety of reasons, such as important developments in economic
theory around the idea of ‘market failure’ (which had several dimensions) that governments have to play
major roles in the economic sphere.

UNIT TWO
THEORIES OF DEVELOPMENT AND UNDERDEVELOPMENT

Introduction

This part of the course explores the major theories of development and underdevelopment. It
presents the recent historical and intellectual evolutions in scholarly thinking about how and why
development does and does not take place.

There have been continuous debates concerning the underlying causes of underdevelopment and
about the most desirable path ways to development. These debates elicit different theoretical
responses from social scientists. Thus, there are many theories that put blame on the Third

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World’s economic backwardness and political unrest. According to many of these theories,
economic backwardness has occurred because there is a backward local, traditional and cultural
value. In other words, these theories attributed to the underdeveloped nature of Third World
societies in internal factors. Most of these theories are within the modernization school of
thinking. On the opposite pole, there are theories which have condemned western exploitation as
the root cause of underdevelopment. Dependency theories and other neo-Marxian theories are
included in this thinking.

Accordingly, this unit is divided into five major sections. The first section discusses
modernization theory. The Marxian theory will be covered under the second section. The third
section explores the different strands of the international dependency revolution. The fourth
section analyzes the neo-liberal counterrevolution. The fifth section discusses alternative
development and post-development.

Section One: Classical Theories of economic growth and Development:

Modernization School of Thought

This section gives you a bird’s eye view of the modernization theory and its thinking on
development. The section is further divided into five sub-sections. The first sub-section will
discuss the general overview of the modernization theory. The second sub-section discusses
Walter W. Rostow’s stages of economic development. The third sub-section will explain Samuel
Huntington’s political modernization and development. In the fourth sub-section, you learn about
Talcott Parson’s pattern variables in his analysis of Structural Functionalism to explain the
dichotomies between “modern” and “traditional” societies. The last section, the fifth, will
provide the major critiques that arise against modernization theory.

Section Objectives

Upon the completion of this section, you will be able to:

 Know the theoretical underpinnings of the modernization theory.

 Explain the position of the modernization theory on development.

 Identify the different stages of economic growth propounded by W. Rostow.

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  Describe the concept of political modernization and its relation to development.

 Analyze the relationship between Parson’s structural functionalism and development.

 Identify the major critiques arisen against the modernization school of thought.

2.1.1 The Modernization Theory: A General Overview

The modernization theory has roots from the historical North-South relations. In the years since
the late 1940’s, two related, but far from being identical discourses of development theories
emerged. These were the modernization theory and the neo-liberal development doctrine (there
is a separate section on the neo-liberal doctrine). In the 1950’s and 1960’s, newly independent
states came into existence and hence the conceptualization of “modernization process” became
central. Theories of modernization are based on the assumption that societal change is a linear
process involving the transformation of traditional, agrarian societies into modern, industrial
societies.

Modernization theory was initially optimist about the prospect of development in the South. It
encompassed questions and answers of economic growth, development of social institutions,
political change, and psychological factor in the South. The theory was believed to be designed
as a problem solving theory; it is also policy-oriented towards social change and economic
growth. It offers an explanation of how and why change take place, but it is based largely on the
assumption that the capitalist model is universally applicable.

Modernization theory viewed the process of development as a series of successive stages of

economic growth through which all countries must pass. The right quantity and mixture of
saving, investment and foreign aid were all thought to be necessary to enable Third World
nations to proceed along an economic growth path that had been followed by the more developed
countries. Development thus became synonymous with rapid economic growth.

The proponents of modernization theory argue that Third World countries could and should
follow a path of political and economic development parallel to the one traveled by the advanced
western societies. To accomplish this, the theory insisted that societies of the South should create
and acquire modern cultural values and modern political and economic institutions.

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According to this theory, development in developing countries would come about and would be
engineered through the diffusion of innovations, capital, technology, modern ideas,
entrepreneurial ship, democratic institutions, and values from the developed western societies.
For this theory, the diffusion of these modernizing factors faced barriers that hampered
development in the South. These barriers are traditional, cultural values of the societies of the
South. To deal with these barriers, revolution in economic and social sphere is important.

2.1.2 Rostow’s Stages of Economic Growth: A Non-Communist Manifesto

Walter W. Rostow subscribes to some forms of evolution. All societies go through the same
stages of economic development. He wanted to come up with a generalization which is supposed
to characterize the history of the industrialization of the developed capitalist countries. His model
was based up on a detailed analysis of the economic history of a number of major industrialized
societies.

His theory was that all nations pass through the same five stages of economic development: the
traditional society, preconditions for take-off, take-off, the drive to maturity, and the stage of
mass consumption. He assumes that it is possible to identify all societies, in their economic
dimension, as lying within one of these stages. For him, technology, saving, entrepreneurialism,
and the correct political system were all key motors in moving countries along this path.

He tried to define the various stages of economic growth by certain economic and social
characteristics. This theory of five stages is practically a theory of the industrial revolution
interpreted in a particular way, in which the first two stages were seen as being preparatory to the
industrial revolution, and the last two as its results, i.e. self-sustained growth. The fact of the
industrial revolution of the take-off however can only be inferred from its results, from sustained
growth. The concept of self-sustained growth is however a misleading oversimplification. No
growth is purely self-sustaining or purely self-limiting. Now let’s dwell on the different stages
proposed by Rostow through which he expected all societies to pass.

Stage one: The Traditional Society

A traditional society is one whose structure is developed within the limited production function.
In this stage, varying degrees of manufacturing developed, but as in agriculture, the level of

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productivity was limited by the inaccessibility of modern science and its application. Because of
the limitation of productivity, these societies had to devote a very high proportion of their
resources to agriculture. Flowing from the agriculture system, there was a hierarchical social
structure with relatively narrow scope for vertical mobility. Moreover, family and clan
connections played a large role in social organizations.

In terms of history, with the phrase “traditional society”, he referred to societies like the
dynasties in China, the civilizations of the Middle East and the Mediterranean, the world of the
medieval Europe, and those current societies that remained untouched or unmoved by man’s new
capability for regularly manipulating his environment to his economic advantages.

Stage two: Precondition for Take-off

This second stage of growth embraces societies in the process of transition. The major
characteristics of the traditional society began to change such a way as to permit regular growth;
its politics, social structure, ant its values as well as its economy. However it takes time to
transform a traditional society in the ways necessary for it to exploit the fruits of modern science.
This stage initially developed, in a clear marked way, in Western Europe of the late 17 th and
early 18th Centuries as the insights of modern science began to be translated in to new production
functions in both agriculture and industry. Among the western European powers, Britain favored
by its geography, natural resources, trading possibilities, and social and political structure, was
the first to develop fully the preconditions for take-off

The factors that accelerated this stage in other societies are not endogenous, but also external
intrusions by some advanced societies. This invasion shocked the traditional society and set in
motion ideas and sentiments which initiated the process by which modern alternatives to
traditional society was constructed out of the old culture. The ideas spread not merely that
economic progress is possible, but that economic progress is a necessary condition for some
other purpose. At this stage, education expanded. New types of enterprises come forward willing
to mobilize savings and to take risks in pursuits of profit. Banks and other institutions for
mobilizing capital appeared. Investment increases, notably in transport, communication and in
raw materials. The scope of internal and external commerce widens. Here and there, modern
manufacturing enterprises appear that use the new method. But still the society is characterized

19
by traditional low productivity method, and by the old social structures and values. In any case,
the precondition for take-off is a transition between the traditional society and the take-off.

Stage three; Take-off

This is stage is the interval when the old blocks and resistances to steady growth are finally
overcome. Growth becomes its normal condition. In many societies, the proximate stimulus for
take-off is mainly technological.

During this stage, the rate of effective investment and saving rise. New industries expand rapidly
yielding profits, a large proportion of which are reinvested in a new plant. These new industries
in turn stimulate the service sector and a further expansion of urban areas. The whole process of
expansion in the modern sector yields an increase in income. The new class of entrepreneurs
expands, and it directs the enlarging flows of investment in the private sector. The economy
exploits hitherto unused natural resources and methods of production. New techniques spread in
agriculture and industry, and agriculture is commercialized. The radical change in agricultural
productivity is an essential condition for successful take-off.

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 Stage four: The Drive to Maturity

The take-off stage is followed by a long interval of sustained progress, even if fluctuating as the
now regularly growing economy drives to extend modern technology over the whole front of its
economic activity. The economy finds itself in the international economy; goods formerly
imported are produced at home, new import requirements develop, and new export commodities
are produced. The economy becomes increasingly efficient, adapting rapidly to further
technological innovations.

The economy, focused during the take-off around a relatively narrow complex of industry and
technology, has extended its range into a more refined and technologically often more complex
processes. This is a stage in which an economy demonstrates that it has the technological and the
entrepreneurial skill to produce not everything, but anything that it chooses to produce. It may
lack the raw material and other supply conditions required to produce a given type of output
economically, but its dependence is a matter of economic choice or a political priority, rather
than a technological or institutional necessity.

Stage five: The Age of High Mass Consumption

At this stage, the leading sectors shift toward durable consumers’ goods and services. Consumer
durable goods include automobiles, books, household goods (home appliances, consumer
electronics, furniture, tools, etc.), sports equipment, jewelry, medical equipment, firearms, and
toys. Real income per head rises to a point where a large number of people gain a command over
consumption which transcends basic necessities such as food, shelter and clothing. These are
nondurable goods or soft goods (consumables) which are the opposite of durable. structure of
the working force changes in a way which increases not only the proportion of urban to total
population, but also the proportion of the population working in offices or in skilled factory job.
In addition to these economic changes, societies cease to accept the further expansion of modern
technology as an over-riding objective. The emergence of welfare state is one manifestation of a
society’s moving beyond technical maturity.

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2.The Harrod–Domar model (the note on this part is a direct copy from a text)

The Harrod–Domar model is an early post-Keynesian model of economic growth. It is used in

development economics to explain an economy's growth rate in terms of the level of saving and
productivity of capital. The model assumes that Natural Growth is the growth in economy
required to maintain full employment.

The model was developed independently by Sir Roy F. Harrod in 1939 and EvseyDomar in
1946. They developed their models independently, but the assumptions and results are,
nevertheless, basically the same. They built their theory in the late 1930’s and mid 1940’swas
still present, when the memory of industrialized countries being jumped into deep recessions,
with a high unemployment rate and a sharp decline of Gross Domestic Product due to the
recession in 1929 and 1930. Harrod and Domar based their theorizing on the famous work by
Keynes who offered an explanation of why markets may fail to bring about full employment.

The early classical writers fully believed in Say’s law, stating that supply creates its own
demand. This belief was based on the assumption of the efficient working of markets, especially
factor markets, and on the speedy adjustment of prices to their equilibrium levels at which
demand equals supply. John Maynard Keynes (1936), in The General Theory of Employment,
Interest and Money, denied the frictionless functioning of this process and asserted that
unemployment of factors is even more probable in an economy than full employment. But his
emphasis was on short run implications of his theory underlining the income effect resulting
from additional investment, for example. The capacity effect, resulting from increases in the
capital stock, however, was neglected by Keynes. It is this latter effect that Harrod and Domar
integrated in their work, thus forming a Keynesian theory of economic growth.

The Harrod-Domar model considers a closed economy in which one homogenous good Y is
produced. This good may be either used as an investment good, I , or as a consumption good, C .
The use of it depends on the economic agent. Households consume and save whereas firms
produce and invest. All variables are real and the money market is absent.

The GDP which equals national income at time t, then, is given by Y (t) = C (t) + I (t).
Consumption and savings are supposed to be a linear homogenous function of national income,

22
with m c the marginal propensity to consume and m m s =1- c the marginal propensity to save: m
mC(t) = c Y(t), 0 < c <1 and m S(t) = s Y(t) . The constancy of m c and m s implies that marginal
values equal average values. In addition, an equilibrium condition is imposed assuring that
investment equals savings in every period. Another condition asserts that firms intend to realize a
certain capital-output ratio vd = Kd (t) /Y (t), where the superscript d denotes desired values.
This capital-output ratio vd reflects the notion that capital is fully employed if the desired ratio is
realized and again brings about the equivalence of marginal and average variables.

Given the Keynesian character of this model it becomes immediately clear that all variables have
to grow at the same rate. If, for example, investment is constant for all years, the level of
aggregate demand will also remain constant according to Keynesian multiplier theory. But even
a constant level of investment will steadily increase the productive capacity of the economy. This
demonstrates that there must be growth in investment in order to prevent that the growth of
demand does not fall short of the growth of the productive capacity.

The above reasoning has shown that there exists a warranted rate of growth for a Keynesian
economy. But this growth path can only be realized if firms anticipate the growth rate m s / v
and, thus, choose the correct level of investment. Besides the question of the existence of such a
path, it is worth to investigate whether the economy reaches this path if it does not start on it. Let
us assume that an economy does not start on the warranted growth path. Then the capital stock as
a percentage of investment will decline, or, equivalently, the level of investment per unit of the
capital stock will rise, if the actual capital-output ratio is below the desired one and vice versa if
it is above the desired ratio. Omitting the time argument t, this leads to the following differential
equation:

2.1.3 Samuel Huntington’s Political Modernization and Development

Modernization theory makes its philosophical tenet in the comparison between modern and
traditional society. The essential difference between the two lies in the greater control which
modern societies have over natural and social environment. This control, in turn, is based on the
expansion of scientific and technological knowledge. These differences reflect differences in
fundamental attitudes towards and expectations from the environment.

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At the intellectual level, modern society is characterized by the tremendous accumulation of
knowledge about man’s environment and by the diffusion of this knowledge through society by
means of education and mass communication. In contrast to traditional society, modern society
also involves much better health, longer life expectancy, and higher rates of occupational and
geographical mobility. It is predominantly urban than rural. Economically, there is
diversification of activity as a few simple occupations give way to many complex ones.
Agriculture declines in importance compared to commercial, industrial and other non-
agricultural activities; and commercial agriculture replaces subsistence agriculture. The
geographical scope of the economic activity is far greater in modern society than in traditional
society.

The bridge across the great dichotomy between modern and traditional societies is the grand
process of modernization. The broad outlines and characteristics of this process are described as
follows:

1. Modernization is a revolutionary process. This follows directly from the contrast

between modern and traditional society. The one differs fundamentally from the other,
and the change from tradition to modernity consequently involves a radical and total
change in pattern of human life.

2. Modernization is a complex process. It involves in changes in virtually all areas human

thought and behavior. At a minimum its components include: industrialization,
urbanization, social mobilization, differentiations, secularization, media expansion,
increasing literacy and education, and expansion of political participation.

3. Modernization is a systemic process. Changes in one factor are related to and affect
changes in the other factors.

4. Modernization is a global process. Modernization originated in the fifteenth- and

sixteenth-century Europe, but it has now become a worldwide phenomenon. This is
brought about primarily through the diffusion of modern ideas and techniques from the
European center, but also in part through the endogenous development of non-western

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 societies. In any event, all societies were at one time traditional; all societies are now
either modern or in the process of becoming modern.

5. Modernization is a lengthy process. The totality of changes which modernization

involves can only be worked out through time. Consequently, while modernization is
revolutionary in the extent of changes it brings about in traditional society, it is
evolutionally in the amount of time required to bring about those changes.

6. Modernization is a phased process. It is possible to distinguish different levels of phases

of modernization through which all societies will move. All societies will move
essentially the same stages.

7. Modernization is a homogenizing process. Many different types of traditional societies

exist. They have little in common except their lack of modernity. Modern societies, on
the other hand, share basic similarities. Modernization produces tendencies toward
convergence among societies.

8. Modernization is an irreversible process. A society which has reached certain levels of

urbanization, literacy and industrialization in one decade will not decline substantially
lower levels in the next decade. The rates of change will vary significantly from one
society to another, but the direction of change will not.

9. Modernization is a progressive process. The traumas of modernization are many and

profound, but in the long run modernization is not only inevitable, it is also desirable.
Modernization in the long run enhances human well-being.

Huntington defines development more specifically as the ability of society to cope with changes
caused by modernization, arguing that it was therefore necessary top develop institutions capable
of controlling the modernization process. This would, in certain circumstances, mean
authoritarian or totalitarian regimes are necessary for the Third World for them to achieve some
form of development. He, thus, shifted the focus of development and modernization from a
progression toward ‘democracy’ to a concern with political stability and the role of the
government in the modernization process.

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2.1.4 Talcott Parsons Structural Functionalism: Pattern Variables
Modernization theories attempt to identify the social variables which contribute to the social
progress and development of certain societies and seek to explain the details of social evolution.
French philosopher Emile Durkheim, who is considered one of the founding fathers of sociology,
developed the concept of functionalism which stresses the interdependence of the institutions of
a society and their interaction in maintaining cultural and social unity. His most famous work is
The Division of Labour in Society which described how social order was to be maintained in a
society and how "primitive" societies would make the transition to more economically advanced
industrial societies. Durkheim suggested that in a capitalist society, with the complex division of
labour, such economic regulation would be needed in order to maintain order. He stressed that
the major transition from a primitive social order to a more advanced industrial society could
bring about crisis and disorder. Furthermore, Durkheim developed the idea of social evolution
which indicates how societies and cultures develop over time-much like that of a living
organism, essentially saying that social evolution is just like biological evolution in reference to
the development of its components. Like organisms, societies progress through several stages
generally starting at a simplistic level, and then developing into a more complex level. Societies
adapt to their surrounding environments, but they interact with other societies which further
contribute to their progress and development.

A similar proposition is made by Talcott Parson. Parsons constructed a set of variables that can
be used to analyze the various systems. For him, human behavior follows two dichotomies.
These are the categorization of modes of orientation in personality systems, the value patterns of
culture, and the normative requirements in social systems. These became a way of describing and
classifying different societies, and the values and norms of that society. All of the norms, values,
roles, institutions, subsystems and even the society as a whole can be classified and examined on
the basis of these patterned variables.

For Parsons, these were necessary to make the theory of action more explicit and to develop
clearer specifications of what different contingencies and expectations actors were likely to face.
The patterned variables are set up as polar opposites that give the range of possible decisions and
modes of orientation. Any actual role or decision may be a combination of the two, between the

26
opposites. For Parsons though, these provided an ideal type of conceptual scheme that allowed
analysis of various systems of parts of systems. The five pattern variables are as follows.

i. Ascription and Achievement

Ascription refers to qualities of individuals, and often inborn qualities such as sex, ethnicity,
race, age, family status, or characteristics of the household of origin. This best characterizes the
traditional societies. Achievement, on the other hand refers to performance, and emphasizes
individual achievement. For example, we might say that someone has achieved a prestigious
position even though their ascribed status was that of poverty and disadvantage. This is,
according to Parson, typically a characteristic of modern societies.

ii. Functional Diffuseness and Functional Specificity

These refer to the nature of social contacts and how extensive or how narrow are the obligations
in any interaction. For example, in a bureaucracy, social relationships are very specific, where
we meet with or contact someone for some very particular reason associated with their status and
position, e.g. visiting a physician. Friendships and parent-child relationships are examples of
more diffuse forms of contact. We rely on friends for a broad range of types of support,
conversation, activities, and so on. While there may be limits on such contacts, these have the
potential of dealing with almost any set of interests and problems. Accordingly, in traditional
societies there is functional diffuseness. There is no strict delimitation of functions. In modern
societies, institutions and individuals have very specific functions.

iii. Affectivity and Affective Neutrality

Neutrality refers to the amount of emotion or affect that is appropriate or expected in any given
form of interaction. Again, particularism and diffuseness might often be associated with
affectivity, whereas contacts with other individuals in a bureaucracy may be devoid of emotion
and characterized by affective neutrality. Affective neutrality may refer to self-discipline and the
deferment of gratification. This is a characteristic of modern societies. In contrast, affectivity can
mean the expression of gratification of emotions, which characterizes traditional societies.

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 iv. Particularism and Universalism

These refer to the range of people that are to be considered, whereas diffuseness and specificity
deal with the range of obligations involved. The issue here is whether to react on the basis of a
general norm or reacting on the basis of someone’s particular relationship to you. A particular
relation is one that is with a specific individual. Parent-child or friendship relationships tend to
be of this sort, where the relationship is likely to be very particular, but at the same time very
diffuse. In contrast, a bureaucracy is characterized by universal forms of relationships, where
everyone is to be treated impartially and much the same. No particularism or favoritism is to be
extended to anyone, even to a close friend or family member.

v. Collectivity or Self-oriented

These emphasize the extent of self-interest as opposed to collective or shared interest associated
with any action. Each of our social actions is made within a social context, with others, and in
various types of collectivities. Where individuals pursue a collective form of action, then the
interests of the collectivity may take precedence over that of the individual. Various forms of
action such as altruism, charity, self-sacrifice (in wartime) can be included here. In contrast,
much economics and utilitarianism assumes egoism or the self-seeking individual as the primary
basis on which social analysis is to be built. In general, in modern societies behavior is
individualistic (self-oriented), it is collective in traditional societies.

The pattern variables provide a means of looking at various forms that norms and social actions
can take, and what their orientation is. These can describe the nature of societal norms, or the
basic values that guide, and form the basis for decisions in, the personality system. Perhaps these
pattern variables can be thought of as a way that people do relate to situations they face, the type
of orientation they have, and how they are likely to interpret meaning in each social action.

These variables can generally be categorized into expressive and instrumental. Parsons regards
the first half of each pair as the expressive types of characteristics and the second half of the
pattern as the instrumental types of characteristics. Expressive aspects refer to the integrative and
tension aspects. These are people, roles, and actions concerned with taking care of the common

28
task culture, how to integrate the group, and how to manage and resolve internal tensions and
conflicts. This may take many different forms but often is associated with the family, and more
specifically with the female role in the family.

The instrumental characteristics refer to the goal attainment and adaptation aspects. These are the
characteristics, people, roles, and actions associated with ideas, problem solving, getting the task
done. These tasks are often associated with male roles, public activities, the economy, or politics.

These can also be used to refer to the type of society. Social action and interaction in early forms
of society were more likely to be characterized by expressive characteristics. In contrast, in
modern societies, with a more complex division of labour and differentiation of statuses and
roles, much of social action and interaction is characterized by instrumental characteristics.

2.1.5 Critiques against the Modernization School of Thought

Although the modernization thinking has been influential in areas of academics and policy
making, it has been criticized by different theories at different times. Some of the major
criticisms waged against the modernization school are the following.

1. One of the structural problems of the modernization theory was that it has uncritically ac-
cepted the relations between the North and the South. It visualized the North as cultur-
ally, politically and economically modern. As a result, it is racist.

2. A related critic argues that modernization theory is Eurocentric. It draws too heavily on
American experience and tends to look at the world from an American point of view.

3. It was too optimistic and simplistic. The proponents of the modernization theory expected
that countries of the South can easily achieve greater economic growth, equity, democ-
racy, stability, etc… simultaneously and smoothly. As it is observed from different expe-
riences, economic growth proved to be no guarantee to democracy and other elements of
political development. This was against the expectations of the modernization theory pro-
ponents.

29
 4. Rostow’s model in particular is ahistorical. Meaning it is not really historical. His stages
of economic growth do not actually reflect the reality of a single developed capitalist so-
ciety.

5. Modernization theory made all poorer countries seem the same. But in reality, there is di-
versity within this large category.

6. Modernization theory also wrongly assumes that a process of societal change that was
open to one or more societies in the past is open to all societies in the present or future.

7. It blames only the internal conditions of societies of the South for their lack of develop -
ment. It disregarded the external factors that have continued to hamper the development
of these groups of countries.

8. The modernization theory blindly suggested that the western model of development is the
only path of development that the South should adopt. It ignored other alternative paths
to development.

9. The other criticism is related to pattern variables. The critiques argue that there is no as
such strict dichotomy as far as behavior is concerned. There may be elements of tradi-
tional behaviors in modern societies and there may also be modern behaviors in tradi-
tional societies. There is interpenetration of behaviors.

Section Two: The Marxian Concept of Development

This section will try to explore the Marxian conception of development. In this section, you will
learn how Karl Marx theorized the possibilities of development in a society. This section is
further divided into two sub-sections. First section presents the general overview of the Marxist
theory. Economic theories of Marx will be elaborated in the second sub-section. Essentially, you
will learn and will be able to discuss the different economic theories of Marx and analyze the
concept of class struggle in societal progress.

30
2.2.1 Marxism: A General Overview
In 1867, Karl Marx published Das Kapital (The Capital), the first volume in the series, and a
work that systematically and historically analyzed the capitalist system. His theories provide
much of the material for arguments that have opposed development models based on capitalism
and the laissez faire system. Marxism is the best-known strand of Structural Thought. The
ideology put forward by Karl Marx termed as Communist Ideology advocates that history
proceeds by means of a historical dialectic or clash of opposing ideas (thesis versus anti-thesis)
with a resulting new order called synthesis. Marxism also holds that the economic material order
determines political and social relationships. Thus, history, the current situation, and the future
are determined by economic struggles between classes, termed dialectical materialism. Thus, the
material dialectic was transformed from domestic class struggle into an international struggle
between bourgeois and proletariat. According to Marx, the state is a creation and tool of the rich
capitalist class and he holds that the state will no longer exist once communism is fully realized.

Focus of Marxist view of development

The Marxian view of development emphasizes the role of classes and class antagonism in
society. In this system, vested class interest can inhibit overall development of society. The
question of poverty in society is seen as the exploitation of the poor working class. Property
relations in the society create and accentuate the problem of poverty and development. Since
land and other productive assets are privately owned and concentrated in the hands of few, the
problem of inequalities remains unsolved. From a Marxist perspective, development is a process
of class struggle.

The Bourgeoisie and the Proletariat class in continuous struggle

Marx believed that just as the bourgeoisie (the capitalist middle class) had relied on
revolutionary movements to wrestle power from the nobility, so, too, could the working class,
called the "proletariat," eventually overthrow the bourgeoisie. For Marx, the eventual fall of the
bourgeoisie was not only desirable, it was inevitable. He reached this conclusion based on his
economic theory of labor. Specifically, he developed the doctrine of surplus value. At the heart
of the doctrine was the conclusion that the worker was being robbed. The worker received only a
fraction of the value of the product which his labor produced. The remainder was kept by the

31
capitalist class. This theft eventually led to an economic crisis caused by overproduction-the vast
majority of the population could not afford to consume the products that the owners of capital
produced. The capitalist's answer to this problem was the continual creation of new markets.
According to Marx, the government was a tool used by capitalists to perpetuate themselves in
power.

Marx saw capitalism as an historical necessity because it was the most productive and flexible
economic system in human history. It could move capital and labor to meet demand faster than
any of the previous systems that it had replaced.

Marx recognition of capitalism as a system

Absolutely not! Marx, however, refused to accept capitalism as the ultimate mode of production
(economic system). He believed the system was plagued with internal contradictions that would
inevitably lead to its destruction and replacement by a more advanced system.

According to Marx, the relations of production (the way people interact in a particular economic
system) create different economic classes. For example, under the feudal economic system, two
classes existed: the nobility and the peasantry. The dominant class, the nobility, created a system
to maintain its position. Religion, government, laws, and morals reflected the needs of the
dominant class and were used to perpetuate its position of power. As capitalism emerged, a new
dominant class, the bourgeoisie, began to appear. The nobles and the bourgeoisie eventually
clashed and the latter was victorious.

32
Marx theory on the inevitability of downfall of capitalism

Marx believed that the advent of capitalism set in motion its own final downfall. He reasoned as
follows. The capitalist system cannot exist without workers. As more factories are built, more
people will be forced to work in them. Thus, under capitalism, the army of workers will
continually expand. With the expansion of capitalism around the world comes the global creation
of a working class.

This system is ruthless, however. In order to survive, capitalists must continually strive to out
produce one another. But not all capitalists will be able to compete. Capital will become
concentrated in fewer hands. Those bourgeoisies that are unable to compete will be forced to join
the working class or perish. This process will continue until one day the proletariat masses will
be able to take control of the system by overthrowing the bourgeoisie, resulting in a classless
society. No new class will arise because class arises from economic differences, and capitalism
will have eliminated these differences by making everyone a proletariat.

Since the concepts of state, religion, morality, and laws were mechanisms to maintain class
differences, they, too, will disappear. Government will not be eliminated immediately, however.
A limited form of government (a proletariat dictatorship) will be put in place to prevent a
possible attack by any surviving bourgeoisie. This dictatorship will eventually become useless,
and when it does, it will "wither away." At this point, socialism will have been achieved.

For Marx economic development was tied to class struggle. Economic development could only
be achieved as a class; individual achievement was not emphasized. Trust in the government and
cooperation with its goals was also viewed as betrayals of the class struggle. The government's
involvement in social reform was nothing more than an attempt by the bourgeoisie to appease the
workers and thereby force them to abandon the struggle. Since the government reflects the will
of the dominant class, it would never enact any law benefiting the subservient class.

33
2.2.1 Economic Theories of Marx
The various economic theories he put forward are 1) The theory of work 2) The theory of self-
alienation 3) The labor theory of value and 4) the Theory of surplus value.

i. The Theory of Work

Marx believed that work is the way in which people might express their creativity. By interacting
with nature or labor individuals develop and change their own character. The essence of human
beings therefore, becomes closely related to work. To Marx, work is a form of self-creation. In
other words, the product of our labor is part of us and something of us is definitely there in the
things we produce through our work. For example, an academician gradually looks into whatever
he or she sees or experiences from an academic angle. It becomes part of the academician.

ii. The Theory of Self-alienation

Human self-alienation occurs because of three factors. First work is a form of self-creativity it
should be enjoyable. Because the capitalists squeeze every cent of profit from the workers, they
make the conditions of work intolerable. Hence instead of enjoying the work, the members of the
proletariat grow to hate the very process by which they could refine their own work.
Consequently they become alienated from their own selves. Secondly, as capitalists exploit the
workers in order to produce profit they force the workers to sell their product and then use that
product against the workers to exploit them further. This forces the workers to regard their own
product as alien and even harmful to them. Thirdly, the capitalists are criticized for mechanizing
production because this process robs laborers of their skills and reduces them to little more than
feeders of machines. This is the ultimate alienation. In the third factor, Marx claims that
socialism was the coming economic system and that it could produce even more than capitalism
which is paradoxical.

iii. The Labor Theory of Value

This theory is concerned with the intrinsic worth of an object. Value is a complex concept. The
value most modern economists are concerned with is the exchange value of an item that is the
amount of money one can get for an item in the market. Sentimental value is another kind of

34
worth. Sometimes there is sentiment attached to a product although the market value of it would
be high. Use value is the third measure of worth. Even if the sentimental value is low and the
market value is high, the product serves the purpose. Esthetic value is yet another measure. The
gracefulness of beauty of an old building may far exceed its commercial value or its usefulness.
The labor theory of value is concerned with establishing a standard for measuring intrinsic value.
It assumes that there are two kinds of value brought to the production process. Resources,
machinery, and finance are one which is termed as constant value. These when applied to the
production of an item cannot add any value greater than their own intrinsic worth. The labor is
the only variable value because only labor produces something of greater worth than itself.
Hence Marx pays tribute to the genius of human creativity. A watch can be produced by a
machine but until human creativity is there the watch will not be a good one. Therefore, the
intrinsic value of an object is determined by the amount of labor or human creativity needed to
produce it. The price of an object is determined by supply and demand. However, the value of
the project is determined by the labor time needed for its production.

iv. Theory of Surplus Value

This theory is based on the labor theory of value, which is Marx’s most important discovery.
Capitalism enslaves the proletariat because people have to work to survive while the capitalist
has a monopoly on the means of production. Hence the workers must sell their labor at whatever
price the capitalist will pay. The capitalists will pay their workers only subsistence wages just
enough to feed themselves and their families because that much is necessary to bring them back
to work the next day. Thus the capitalists pay only meager wages regardless of how much value
they may produce. The capitalists by this method force workers to produce an excess, or surplus
value, and they keep that sum for themselves as profits. Actually, this surplus value belongs to
the labors. But since it is not given to them, the capitalists are exploitative. They are parasites
that live by sucking the economic lifeblood of the proletariat and must be erased from the society
when the proletariat takes over. Marx did not oppose capital as such but he rejected the capitalist.
He did not condemn profit, he opposed private profit. He knew that capital was necessary for
production, but he rejected the notion that it should be controlled by private individuals. Capital
was created by all and it should be owned by all.

35
Marx certainly did not oppose creating surplus value to be used to invest in increased
productivity. What he argued to was that private citizens should not be allowed to monopolize
the means of production and use that power to force workers – the creators of value – to
surrender their goods in order to survive. In other words, no one should be allowed to profit from
the labor of another.

Marxism characterizes capitalism as the private ownership of the means of production and the
existence of wage labour. It believes that capitalism is driven by capitalists striving for profit and
capital accumulation in a competitive market economy. Labour has been disposed and has
become a commodity that is subject to the price mechanism. In Marx’s view these two key
characteristics of capitalism are responsible for its dynamic nature and make it the most
productive economic mechanism yet. Although its historic mission is to develop and unify the
globe, the very success of capitalism will speed up its passing. The origin, evolution, and
eventual demise of the capitalist mode of production are, according to Marx, governed by three
inevitable economic laws.

The first law, the law of disproportionality, entails a denial of Say’s law, which (in
oversimplified terms) holds that supply creates its own demand so that supply and demand will
always be, except for brief moments, in balance. Say’s law maintains that an equilibrating
process makes overproduction impossible in a capitalist or market economy. Marx, like John
Maynard Keynes, denied that this tendency toward equilibrium existed and argued that capitalist
economies tend to overproduce particular types of goods. There is, Marx argued, an inherent
contradiction in capitalism between its capacity to produce goods and the capacity of consumers
(wage earners) to purchase those goods so that the constantly recurring disproportionality
between production and consumption due to the ‘anarchy’ of the market causes periodic
depressions and economic fluctuations. He predicted that these recurring economic crises would
become increasingly severe and in time would impel the suffering proletariat to rebel against the
system.

The second law propelling the development of a capitalist system, according to Marxism, is the
law of the concentration (or accumulation) of capital. The motive force of capitalism is the drive
for profits and the consequent necessity for the individual capitalist to accumulate and invest.

36
Competition forces the capitalists to increase their efficiency and capital investment or risk
extinction.

Section Three: The International Dependency Revolution

This section will discuss the theories under the international dependence revolution. During the
1970’s, international dependence model gained increasing support especially among Third
World intellectuals as a result of a growing disappointment with the modernization theories. This
is because these are theories of underdevelopment. Within this general approach, there are three
major streams of thought. Accordingly, this section is further divided in to three sub-sections.
The dependency theory and its theoretical viewpoints on development will be explained in the
first sub-section. The second sub-section is about the false paradigm model and its views on
development. The last part is about the dualistic-development model.

2.3.1 The Dependency Theory

 Basic departures of dependency theory from modernization theory

Whereas the modernization sets itself to theorize and explain as to what make the North rich and
what the South has to do to become rich, the task of dependency theory is to give explanations as
to what made the North rich and what kept the South poor. The dependency theory tries to
analyze and explain the extent to which the political economies of the South have been exploited
and by a global economy dominated by the advanced capitalist countries. The principal tenet of
the dependency theory is that underdevelopment is not a stage on the road to a capitalist society,
but a condition or symptom of capitalist domination.

 Focuses of the dependency theory

The dependency theory focuses on the unequal economic and political exchange that takes place
between the developed capitalist countries (described as the ‘core’) and the South (described as
the ‘periphery’). Proponents of this theory strongly believe that the economies of the periphery
are conditioned by and dependent up on the development and expansion of the economies of the
core. The cause of the backwardness of the periphery is the dynamics and contradictory growth
of the world’s capitalist system. Whenever there is growth in one part of the world, it is

37
compounded by backwardness of the other. This is the contradiction in the growth of world
capitalist system. Just as development in one part of the world goes hand in hand with
underdevelopment in another, so underdevelopment in the periphery has contributed to further
development of the core.

2.3.2 Critiques of dependency theory against the modernization theory

The dependency theory challenges the most fundamental assumptions of the modernization
theory. The modernization theory believes that some people are destined to develop, whereas
others are destined to be poor. But this assumption is refuted by dependency theory in the sense
that underdevelopment does not result from some original state of affair. The same world
historical process that enabled the North to develop has also underdeveloped others.

The dependency theory also rejects the claim that the peripheries should follow the same path of
development pursued by the core. It is argued that there were particular political and economic
conditions that enabled the core to industrialize which was based on the domination and
exploitation of natural and human resources in the West colonies. Whereas, the core
development was based up on expanding resource bases in the colonies, societies of the
periphery are confined with very limited resource base for development. The process of
colonialism integrated the periphery into the world division of labor by which the major function
of the South remained in the production of raw materials for the European industries. This had
facilitated industrialization in the core at the expense of the periphery.

Assumptions shared by many dependency theorists

There are many perspectives that are included in the dependency theory. But certain ideas that
are common to the majority of the proponents of dependency theory are the following.

 Underdevelopment is closely connected with the expansion of industrialized capitalist

countries.

 Development and underdevelopment are different aspects of the same universal process.
That universal process is the expansion of industrial capitalism and the creation of the
world division of labor. In this division of labor, countries of the periphery are forced to

38
 remain in the production of primary commodities and the core to remain major producers
of manufactured commodities.

 Underdevelopment cannot be considered as the original state of affair. It is something

created by the domination and exploitation of the South by the North.

2.3.3 Relation between the core and the periphery

This has created a dependent relationship between the core and the periphery. This dependence
has three major features. These are:

1. The technological dependence: Most of the technologies required for development are
produced in the West. The countries of the North determine the price and availability of
these technologies. But most of these technologies are capital intensive and expensive.
The Third world countries have no option except to borrow financial capital to obtain
these technologies. This makes them dependent on external economic forces that are
beyond their control. This ultimately weakens the aspiration of development.

2. The South relies up on foreign investment for a number of reasons. This is to accelerate
the development process, to access new technologies and to gain new markets. These
have forced countries of the South to adopt export-led economic policies and strategies.
They are also forced to produce cheap food for export, cheap raw materials and cheap
cash crops.

3. The relation of the core and the periphery in neo-colonialism has created an international
division of labor. In this division, the core remains the major producer and exporter of
manufactured goods and the South to remain in the production and export of primary
goods. As a result, there is unequal exchange between these groups of countries. The
terms of trade, therefore always benefits the core at the expense of the periphery. This has
helped the North to become richer and richer and has made the South poorer and poorer
from time to time.

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Generally, the dependency theory attributes the existence and continuance of Third World
underdevelopment primarily to the historical evolution of highly unequal North-South
relationships. Underdevelopment is, therefore seen as an externally induced phenomenon.

2.3.4 Dependency theory solution for Third World societies

Some dependency theorists also argue that the only way for the Third World societies to break
out of the circle of underdevelopment is to pursue a policy of import substitution strategy as a
means of autonomous capitalist development. This means developing indigenous industries in
order to prevent the need import manufactured goods. However, efforts to implement a policy of
import substitution have not proved to be successful. Because of this reason, many dependency
theorists asserted that only revolutionary struggles or at least major restructuring of the world
capitalist system are therefore required to free dependent Third World nations from direct and
indirect economic control of Western industrialized nations. Some like Samir Amin advocated a
self-reliant development strategy.

a. The False Paradigm Model

This model of development attributes Third World underdevelopment to faulty and inappropriate
advices provided by well-meaning but often uniformed, biased, and ethnocentric international
expert advises from developed country assistance agencies and multinational donor
organizations. These experts offer sophisticated concepts and elegant theoretical structures that
often lead to inappropriate or incorrect policies. While in government policy discussions too
much emphasis is given to such concepts and theoretical structures, desirable institutional and
structural reforms are neglected or given only cursory attentions.

b. The Dualistic-development Thesis

Dualism is a concept that represents the existence and persistence of increasing divergences
between the rich and the poor nations and rich and the poor people on various levels.
Specifically, the concept of dualism embraces four key elements. These are:

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 i. Different sets of conditions, of which some are ‘superior’, and others ‘inferior’ can coexist
in a given space. Examples of this element of dualism include the coexistence of modern
and traditional methods of production in urban and rural sectors.

ii. This coexistence is chronic and not merely transitional. The international coexistence of
wealth and poverty is not simply a historical phenomenon that will be rectified in time.

iii.Not only do the degree of ‘superiority’ or ‘inferiority’ fail to show any signs of
diminishing, but they even have an inherent tendency to increase from time to time.

iv.The interrelations between the ‘superior’ and the ‘inferior’ elements are such that the
existence of the superior element does little of nothing to pull up the inferior element, let
alone trickle-down to it. In fact, it may actually serve to push it down to develop its
underdevelopment.

2.3.5 Critical Comments on International Dependency Revolution

The international dependency revolution has been enthusiastically by scholar of Third World.
This school of thought suggested that underdevelopment is not the fault of the least developed
countries. It is rather the problem of foreign domination and exploitation. The dependency theory
in particular helped to the redefinition of the concept of economic development to have a wider
perspective. Whereas the modernization theories focused on economic growth, the dependency
theories give emphasis to the importance of the redistribution of economic wealth and social
justice. Important pillars of the western establishments like the World Bank reoriented their
focus on growth and redistribution which has never existed in their activities.

Despite such praises, the different theories of the international dependency school of thought are
criticized. Among the dominant criticisms, the following are the major ones.

1. These theories attributed all the Third World’s problems to the external economic factors.
They have never been in-ward looking.

2. Modernization theories have always been optimists about the possibilities of development
in the South. But theories within the International dependency theory school of thought
have remained pessimists about the possibilities of development in the South. Actually

41
they have their own reasons. Andre GunderFrank for example argued that Third World
nations produce non-industrial goods and ruled by unrepresentative governments; they
are doomed to continue to be backward.

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Section Four: The Neo-Liberal Counterrevolution

This section will discuss the neo-liberal economic doctrine and assesses its relevance to the
situation of the economies of the Third World countries. It explains neo-liberal counterrevolution
as an economic theory; analyzes the influence of this theory on economies of Third World
countries; identify the policy prescriptions provided by this theory to bring about economic
development.

2.4.1 An Overview of Neo-Liberal Counterrevolution

How the neo-liberal counterrevolution doctrine came about

The establishment of neo-liberalism as the new development orthodoxy is part of a profound

shift in power in the global political economy. The economic liberalism that had become the
dominant global discourse of development after the industrial revolution was regarded with great
skepticism. The loss of faith in economic liberalism was also a crisis of capitalist hegemony, in
which the fundamentals upon which capitalism depended were challenged and denied.

After the last quarter of the 20th Century, however, liberal principles were reasserted. The re-
imposition of the liberal principles-or neo-liberal revolution was accompanied by a restructuring
of the relationship between capital and the state, and between the state and society, with the aim
of restoring the unregulated operation of the market forces.

Major argument of the neo-liberal counterrevolution

The central argument of the neo-liberal counterrevolution is that underdevelopment results from
poor resource allocation due to incorrect pricing policies and too much government intervention.
Many writers of this school of thought like Peter Bauer Deepak Lal and Ian little argue that it is
this very state intervention in economic activity that slows the pace of economic growth.
Adopting free market policies will guide efficient resource allocation and stimulate economic
development. Liberalization (opening up) of national market draws additional domestic and
foreign investment and thus increases the rate of capital accumulation, which is important for
economic development. They argue that by permitting free market to flourish, privatizing state
owned enterprises, promoting free trade and export expansion, attracting investors, and avoiding
43
the plethora of government intervention and regulation, both economic efficiency and economic
growth will be stimulated.

It was then possible by the 1990 for the World Bank to claim a consensus in favor of market-
friendly policies. This new doctrine overturns the assumptions from which development studies
emerge that domestic and international policies that worked against market forces were essential
to bring about development. It virtually abolishes the idea of development as a specific concern,
in favor of a universal set of prescriptions applied to developing and developed economies alike.

The role of the government as envisioned by the neo-liberal counterrevolution

This economic doctrine assigns governments (states) having a limited economic role. The theory
argues that the state should provide certain fundamental public goods such as police protection,
national defense, judicial and educational services, and physical infrastructures (road, railways,
airports, etc.) when only when the private capital is incapable of providing these services. The
state otherwise should have a secondary role.

The theory believes that most Third World governments injured their economies by moving far
beyond these limited roles, i.e. governments excessively intervene in the economy. Free market
forces should determine production decisions, and should set prices without government
intervention. Because of the influence this theory has, governments of the South have been
forced to liberalize their economies by deregulating the private sector, removing trade barriers,
freeing prices, reducing subsidies to consumers and privatizing state enterprises.
Moreover, the doctrine of neo-liberal counterrevolution believes in international economy and
international trade. It argues that if Third World countries opt to modernize and develop, they
have to take part in the international economy on the basis of their comparative advantage. This
neo-classical belief reaffirms the classical international political economy theory of comparative
advantage advanced by David Ricardo. By so doing, this theory advocated the pursuit of open-
door policies towards trade and investment. It is in this way that Third World countries would
receive technology, capital inputs and finance.

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2.4.2 Critiques against the Neo-liberal Counter revolution

Section Five: Evolving Perspectives of Development

2.5.1 Alternative Development

Development is an economic, social and political process which results in a cumulative rise in
the perceived standard of living for an increasing proportion of a population. The theory of
alternative development is concerned with how the living condition of the poor be improved. The
failure of other major theories of development to address poverty and improve the living
condition of the poor necessitates developing another way of thinking. That is alternative
development.

Alternative development begins from criticizing mainstream development theories, which

include the modernization theory, the dependency theory, the Marxian theory and the neo-liberal
doctrine. Most of the theories of development have failed to bring the desired change due to the
following major reasons. These are:

 their emphasis on rapid cumulative growth which was not accompanied by equity

 Most of them were urban biased because of their single-minded emphasis on

industrialization. But the majority of the poor live in rural areas.

 Because of their emphasis on industrial growth, they are not environmentally friendly.

 They emphasize on the quantities aspect of life, not the qualitative aspect of.

 They also focus on reducing the economic gap between the rich and poor countries.
Reducing the gap between the rich and poor people within the society is ignored.

Alternative development is an attempt to come up with new humanistic, people-centered, and

pro-poor development thinking as a response to these failures. Alternative development places
high emphasis on people’s autonomy, empowerment, local self-reliance, environmental
sustainability and participatory democracy. By so doing, alternative development is concerned
with improving the quality of living of the poor by empowering the poor. It is also concerned

45
with introducing alternative development practices and redefining the goals of development so
that development is geared toward improving the qualitative aspect of life.

Alternative development has a multiplicity of different approaches. These approaches have been
popular in different policy decisions and in different international organizations. These
approaches include:

 Redistribution growth

 Basic needs strategy

 Human development

 Women in development/Gender in development

 Sustainable development

i. Redistribution Growth

The World Bank was a key advocator of this approach. The Bank made an assessment that there
had been growth, rise in productivity, higher growth rate per capita GNP in underdeveloped
countries. In spite of this growth, however, poverty and inequality have not been changed. Those
who were poor remained poor and even much poorer. Because of this, the World Bank began to
advocate a redistribution growth strategy.

Redistribution growth strategy involves identification of who are the poor and where are they,
and formulation of policy packages specifically targeting the poor, particularly the rural poor.
The adoption of a policy of integrated rural development package is one manifestation of the
redistribution growth strategy.

Redistribution growth is an incremental approach dictating that resources should be diverted to

the poor by trying to increase their productive capacity so that their income would rise and by
providing socio-economic services which the poor cannot afford to buy like education.

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 ii. Basic Needs Strategy

The redistribution growth strategy was replaced by a basic needs strategy because it did not bring
about changes as expected. The basic needs approach has the idea that development has to focus
on the satisfaction of basic needs. Institutions like International Labor Organization (ILO) had
been advocating this approach. According to the ILO classification, basic needs involve two
major elements. These are:

 The satisfaction of minimum requirements of food, cloth and shelter

 The satisfaction of essential services like pure drinking water, education, health, public
transport, etc…

In addition to these elements, human rights like civil and political, and socio-economic rights
(like land ownership right) of citizens were included. There was recognition that there has to be
empowerment in decision making of groups who are socially marginalized like women.

iii. Human Development

It is an approach developed by a Pakistan economist called Muhbud Ul Haq who was once the
head of the UNDP. This approach argues that development as a practice has to focus on
increasing human capacity (potential). To measure human development, the proponents of
human development approach came up with a measurement called Human Development Index
(HDI). This measurement is based on human development indicators like life expectancy,
literacy rates and purchasing power of the people.

iv. Women in Development/Gender in Development

These approaches focus on the role of gender in socio-economic development. They argue that
the contribution of women in socio-economic development is totally ignored. Therefore, the
contributions of women in development activities have to be added in development measures.
Policy packages have to be implemented that focus on the contribution of women in
development.

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 v. Sustainable Development

Sustainable Development enters the stream of development theories by introducing concerns for
the natural environment and the future generations, advocating for environmental protection and
intergenerational equity. There is a realization that development in general and industrialization
in particular have brought about changes in the conditions of the natural environment. Production
is expensive and consumes a lot. The accelerated development of countries is damaging the
environment in one way or another. Economic growth is being promoted at the expense of the
environment and thereby affecting the future generation. By definition, sustainable development
is a development that meets the needs of the present generation without compromising the
abilities of future generations to meet their own needs (World Commission, 1987).

Nowadays, many argue that if all countries become industrialized, the planet earth does not have
the capacity to support such development. Therefore, development has to take into consideration
the environment for future generations. There should not be development at the expense of future
generations.

Generally, the strength of alternative development is its regard for local development and social
agency from grassroots groups and social movements to non-governmental organizations
(NGOs). The most important elements of alternative development are participation and
empowerment.

2.5.2 Post-Development
Post-development is a criticism of development and a development theory arising in the 1980s
that holds that all 'development' is a reflection of Western/Northern hegemony over the rest of
the world. It criticizes the idea and discourse of development. Some of the notable contributors
include but not limited to Ivan Illich, Arturo Escobar, and Gustavo Esteva.

The logic behind post-development refers to development as both on the ground development
and development theory, and follows as such that development theory is held to be generated by
academia in tandem with political ideology. It means development is both a theory and a practice
or simply a theory in action. The academic-political nature of development theory means it tends
to be policy oriented, problem driven, and efficacious relative to most social theories. On the

48
ground development is initiated by both governments and NGOs according to the advice of
development theory. But development theory needs to follow framework set in place by
government and political culture. There is then a strong socially constructed aspect to
development theory where Western interests are guiding how that knowledge is generated. This
would mean that development reflects a pattern of Western hegemony. This is what post-
development theorists seek to deconstruct.

What does this mean? Does it sound like post-development is anti-development?

Absolutely not! A post-development approach is not anti-development; rather, it is a political

acknowledgement of the injustices and unequal power relationships of the practice of
development, and a view that development cannot offer sufficient tools for transformation.
Instead, it suggests resistance to globalization provided by grassroots organizations and non-
governmental organizations, alternative forms of livelihood, and local forms of knowledge and
practice.

A number of theorists challenged the very meaning of development. According to them, the way
we understand development is rooted in colonial discourse depicting the North as advanced and
progressive and the South as backward, degenerate and primitive. They point out that a new way
of thinking about development began in 1949 when President Harry Truman declared: “The old
imperialism—exploitation for foreign profit—has no place in our plans. What we envisage is a
program of development based on the concepts of democratic fair dealings.” While claiming that
the ‘era of development’ began at this point, post-development theorists do not suggest that the
concept of development was new. What was new was to define development in terms of
escaping from underdevelopment. Since the latter referred to two-thirds of the world, this meant
that most of the world had to define themselves as having fallen into an undignified condition
called underdevelopment and to look outside their cultures for salvation. Development,
according to them, was now a euphemism used to refer to United States hegemony, and it was
ideals and programs from the perspective of the United States and its (Western) European allies
which would form the basis of development everywhere.

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Leading members of the post-development school argue that development was always unjust,
never worked, and has now clearly failed. The idea of development stands like a ruin in the
intellectual landscape and it is time to dismantle this mental structure.

To cite an example, they would point how the concept of global poverty is entirely a modern
construct. The idea that we can measure poverty at the level of entire nations and hence label
certain countries as poor on the basis of their GNP (Gross National Product) per capita is quite
new. While in pre-industrial societies, poverty applied to certain individuals and generally did
not carry any implications of personal inadequacy, with the advent of modernity entire nations
and continents were led to believe that they were poor, and in need of assistance, only because
their per capita income was below a universally established minimum.

The assumptions of the post-development thinking

Among the starting points and basic assumptions of post-development is the idea that a middle-
class, ‘Western-style’ of life and all that goes with it, is not a realistic or a desirable goal for the
majority of world’s population. In this sense, development is seen as requiring the loss of
indigenous culture, or environmentally and psychologically rich rewarding modes of life.
Formerly satisfactory ways of life become dissatisfying because development changes the self-
perception of people.

Development is also seen as a set of knowledge, interventions and worldviews (in short,
discourses) which are also powers-to intervene, transform and to rule. Related to the concept of
postcolonial criticisms, post-development is, above all, a critique of the standard assumption
about progress as to who possesses the key to it and how it may be implemented.

Post-development also challenges the notion of a single path to development and demands
acknowledgment of diversity of perspective and priorities. The politics of defining and satisfying
needs is a crucial dimension of development thought, to which the concept of agency is central.
In other words, who voices development concerns, what power relations are played out, how do
development experts’ (World Bank, IMF officials, etc.) interests rule the development priorities,
and which voices gets excluded as a result? Post-development makes an attempt to overcome
inequality by opening up spaces for the agency of non-Western peoples.

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Note that the proponents of post-development do not deny the need for change. Post-
development does not deny the need for change. What they argue is that in order for change to be
undertaken differently, it needs to be conceived literally in different terms. While social change
has probably always been part of the human experience, it was only within the European
modernity that ‘society’, i.e. the whole way of life of people, was open to empirical analysis and
made the subject of planned change. And while communities in the Third World may find that
there is a need for some sort of organized or directed change-in part to reverse the damage done
by development-this undoubtedly will not take the form of designing life or social engineering.
In this long run, this means that categories and meanings have to be redefined.

Some suggestions to be done directly

Some admit that it may be true that majority of people whose life has in fact greatly deteriorated
do want change. But the answer they suggest is not development but the “end of development.’
The end of development should not be seen as an end to the search for new possibilities of
change, for a relational world of friendship, or for genuine processes of regeneration able to give
birth to new forms of solidarity. It should also mean that the inhumane and the ultimately
destructive approach to change are to be over. It should represent a call to the good people
everywhere to think and work together.

Critics have complained that post-development is not really beyond or outside of development
discourses. Post-development is merely the latest version of a set of criticisms that have long
been evident within writing and thinking about development. Development has always been
about choices, with losers, and winners.

There are a number of more fundamental objections to post-development school. The first is that
it overstates its case. For, to reject all development, is also seen as rejection of the possibility for
material advancement and transformation. Or it is to ignore the tangible transformations, in life
chances, health and material well-being that has been evident in parts of the Third World.

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 UNIT THREE
MODELS/STRATEGIES OF ECONOMIC GROWTH
This part of the course discusses two contending models of economic growth. These are
Balanced Growth Model and Unbalanced Growth Model. Debates and theories that surround
these models have aimed at devising approaches or strategies that may help overcome the
development challenges of poor economies like that of Ethiopia. Just like a suitable strategy is
designed in the defense authorities for winning a war, in the same way development strategy is
required by the government for solving the problems of poverty, unemployment and
inequality on one hand and accelerating development on the other. Suitable development
strategy aims at effective and optimum use of available resources (human, material and natural
resources).

Accordingly, this unit is divided into two major sections. The first section elaborates the strategy
of balanced growth and its theoretical standpoint. It discusses the advantages that can be
achieved if poor countries pursue a balanced growth strategy. The second section discusses the
unbalanced growth strategy and its benefits if followed by poor countries.

Section One: Balanced Growth Model/Strategy

3.1.1 The Essence of Balanced Growth Model/strategy

Balanced growth is not a static process. It has different interpretations. In one context, balanced
growth may mean investment in the depressed sector of the economy, while in other context it
may imply harmonious development of different sectors. Planning with balanced growth
indicates that all sectors of the economy will expand in the same proportion so that consumption,
investment and income will grow at the same rates.

The development process in underdeveloped countries is very much hindered by vicious circles
of poverty. By vicious circles, Ragnar Nurkse, an Economist, means a circular assemblage of
forces tending to act and react upon one another in such a way as to keep a country in a state of
poverty. According to Nurkse, vicious circle of poverty adversely affects the accumulation of
capital. The forces responsible for deficiency of capital are small capacity to save, low level of
income and low productivity. Deficiency of capital leads to the small capacity to save and vise-

52
versa. Thus, the vicious circle is complete. The underdeveloped countries however would not
like to remain forever in the state of underdevelopment. The question is how to break the vicious
circle. This can be addressed through a series of capital investment in various industries/ sectors.
That is through balanced growth strategy.

What does balanced growth involve?

This growth strategy recognizes the significance of economic interdependence. The growth and
development of various sectors is not possible in isolation. Various segments of the economy
should grow and develop in relation to each other. This strategy aims at doing something
everywhere (i.e. in every firm/sector/region). Resources will be thinly distributed among the
different sectors of the economy. The approach is economy wide growth. It also advocates
capital widening. All sectors firms/regions will get more or less the same amount of resources.
This is done to maximize equity and social welfare and minimize social costs.

The balanced growth strategy suggests investment in diversified feeds. To the extent possible,
this investment should be inclusive so as to increase the scope of economic activities. Moreover,
it also suggests labour intensive techniques of production. This is believed to create employment
and social productivity. The strategy envisages that different firms/sectors/regions grow at
different rates, but in a union and incomplementary way. Firms/sectors/regions grow at different
rates because the return to investment is different in different sectors or locations.

The balanced growth strategy also suggests regional or spatial planning for the depressed
regions, and ethnic and economic groups. To this end, the strategy recommends that there should
be social accountability for production, consumption and distribution. The government is
responsible for increasing production, consumption and distribution.

What are the determinants of balanced growth model?

The implication of balanced growth strategy is generally determined by a variety of factors such
as availability of resources, level of technology, degree of balance prevailing among the
different sectors, socio-economic objectives of development accepted by the people and other
institutional factors. Under balanced growth a series of capital investment in different industries
is essential for breaking the vicious circle. The question is which sector or industry should be

53
given preference in the matter of investment allocation. In this context, it has been suggested that
investment should be made in the growing sector in an economy.

This would create external economies which would provide incentive to other productive
activities. The chain of continuous investment would ultimately bring out transformation in the
economy. Growth in one sector generates external economies for other sectors, with the result
that sectors will become complementary. But it should be remembered that the selection of a
growing sector is not an easy task. It is difficult to decide whether agriculture or industry, human
capital or material capital, internal trade or external trade should be given priority in investment
allocation.

Achieving complementarity in an economy

Complementarity is an essential and vital feature of balanced development. Now let us see how it
can be achieved by taking agriculture and industry in to consideration.

The economic history of industrialized countries reveals that a prosperous agriculture forms the
basis of industrialization. Agriculture provides necessary raw material for manufacturing sector.
It provides food for the growing urban population. Agricultural surpluses can be mobilized for
investment in non-agricultural sectors. The rising income of the rural population expands
demand for manufactured and durable goods. All these bring about structural transformation in
rural economy. The developing rural economy becomes capable of exporting farm products and
earns foreign exchange to meet the initial requirement of industrialization. Domestic market
expands; new methods of production, new skills, new investment opportunities and new
organizational abilities develop. All these create a favorable climate for industrial expansion.
This is how the prosperous agriculture supports and sustains the expanding industrial activities.
In other words, development of agricultural sector is an essential pre-requisite for industrial
growth.

How can the industrial sector help the development of agriculture?

It is well-known that underdeveloped countries are overpopulated and this phenomenon creates a
tremendous burden on agriculture. Growth of industrial activities helps in reducing this burden
by absorbing surplus rural population. Employment opportunities expand and income rises which

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raises the living standard of rural population. Moreover, the manufacturing sector supplies
various agricultural inputs like pumping sets, harvesters, fertilizer and agricultural machinery
which help in development of agriculture. In nutshell, agricultural improvements are possible
through industrial development, technical base and essential infrastructure. Hence, simultaneous
development of agriculture and industry is an essential pre-requisite for balanced growth. This
development should be ensured by development planning.

How to ensure balance between agriculture and industry

Agriculture and industry should be considered as integrated parts of an economy. And hence,
development planners should ensure the balance between agriculture and industry. It might be
difficult to suggest a uniform pattern for balance between agriculture and industry for all
underdeveloped countries. Yet, the following guidelines could serve as the basis for ensuring
balance between the two.

a. The planners should not concentrate resources on the development of one particular
sector. The resources should be allocated among the different sectors in a manner so as to
maximize the social welfare.

b. While drawing up the patterns of priorities, planners should take into account the local
conditions such as availability of resources, level of technological development,
institutional factors, level of development already attained and other similar factors. The
optimum combination of such factors could ensure a balance between agriculture and
industry. The experience of the developed countries should also be taken into account by
planners.

c. It is generally observed that underdeveloped countries have surplus rural population. The
transference of this surplus rural labor to the urban sector would help in the development
of manufacturing industries.

Similar consideration should be made by development planners to ensure balance between other
sectors of the economy.

Essential Conditions for Balanced Growth

55
What are the essential conditions for this balance?

In the initial stages of development, it might be difficult to bring out a balance among the
different sectors when they compete for limited resources. Yet, the following conditions are
essential for achieving and maintaining a balance among different sectors of the economy.

1. State Intervention- The logic of balanced growth cannot be given a practical shape
without state intervention. The state can enforce and maintain law and order. It can
mobilize necessary funds through taxes, borrowing, and deficit financing to meet
financial requirements of balanced growth. State can encourage and stimulate domestic
private investment. It can also regulate the economy through its fiscal, monetary and
other measures. Moreover, state can undertake and promote welfare activities for the
creation of human capital.

2. Formulation and Implementation of plans- Formulation and implementation of

development plans is another pre-requisite for achieving and maintaining consistency and
harmony among the different sectors. Planning is an instrument of realizing socio-
economic objectives of balanced growth.

3. Coordination among different departments of the government- Planning only

suggests the way for implementing the various development programs, but the actual
execution is done by the different government departments. Balanced growth requires
integration of different development policies, so that all sectors move in balance. This,
however, requires cooperation, coordination and proper understanding among various
government departments and state agencies.

4. Public cooperation-This is essential not only for political stability but also for economic
advancement. It is both the lubricating oil for planning and the petrol of economic
development; it is a dynamic force that almost makes all things possible. People should
be made partners in development. This is because every development activity would
promote the social and economic welfare of people.

Generally, the strategy of balanced growth aims at a direct attack on poverty through societal
support. In view of this, agriculture and rural development receive high priority in order to

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 benefit the largest section of the society. The entire process of development is guided by
planning machinery. Resources should be distributed fairly. That needs planning. This implies
that balanced growth is impossible without government intervention.

3.1.2 Proponents of Balanced Growth

There are numerous economists who support the strategy of balanced growth. These may
include, among others Ranger Nurkse, Arthur Lewis and François Perronx. Let us see their
economic thought turn by turn.

i. Ranger Nurkse: He believes that if countries adopt a strategy of balanced growth and if all
people participate in the growth process, the following benefits can be achieved.

 Total savings and capital accumulation rise

 No gluts (excess supply) and no shortage of goods and services exist in the
economy.

 Backward and forward linkages are fostered.

 Balanced growth can be managed with less resource. It heavily depends on the
mobilization of local resources.

 Balanced growth strategy breaks the vicious circle of poverty; because it aims at
benefiting the largest section of society.

 Development finance is fairly distributed across sectors and regions. This can lead
to widespread employment and spread of the fruits of development.

ii. Arthur Lewis: He advocated a balanced growth strategy in a manner that labour is utilized to
the maximum. If the productivity of labour is improved in agriculture, then the same work can
be done with fewer people, because the contribution of each labour is high. Then, it is only the
genuinely redundant labour can more to the modern, i.e. distress migration will not occur.
People migrate to the modern sector up on their own will. Furthermore, he advocated that all
sectors of the economy should grow simultaneously and harmoniously so as to keep a proper

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balance between agriculture and industry, between material capital and human capital, between
export and import, etc…

Does it mean all sectors grow equally?

Not necessarily! Balanced growth does not mean equal growth; it rather means proportionate
growth of different sectors dictated by their growth of demand.

3.1.3 Advantages of Balanced Growth Strategy

In addition to the arguments that support the balanced growth model, strategy is of a mixed
blessing. It has both advantages and disadvantages. Let us first see the advantages.

i. Balanced regional development: The doctrine of balanced growth implies that all sectors
of the economy should grow simultaneously and no sector should be discriminated in the
matter of resource allocation. When development of all sectors is taken up by the planning
authorities, it will pave the way for balanced regional development. Development of one or
two sectors would create tension, disharmony and disequilibrium in the various segments of
the economy.
ii. Wide extent of market: Simultaneous development of different sectors would help in the
production of various goods, which in turn would lead to the expansion of demand and the
enlargement of market. Environment of competition would prevail which would result in the
production of quality output.
iii. Division of labor: The strategy of simultaneous investment widens the extent of market.
Wide extent of market leads to a greater division of labor, higher output and quality product.
Division of labor leads to specialization which is essential for promoting export and earning
foreign exchange.
iv. External economies: Balanced growth helps in the creation of external economies, which
are considered essential for rapid economic development. External economies arise due to
interdependence of industries. Different industries support and encourage each other, which
give rise to complementarity of industries.

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 v. Creation of social over-head capital: When different industries develop simultaneously,
the governments of less developed countries would be required to provide basic facilities
(transport, credit, electricity, etc…) to encourage the process of industrialization.
vi. Innovations and researches: Balanced growth strategy encourages innovations and
researches in different sectors of the economy. When different industries develop
simultaneously, competition arises. This forces industries to undertake innovations and
researches for reducing cost of production and improving the quality of product. Low cost
of production means low price, which in turn raises the purchasing power and promotes
economic and social welfare of society.

3.1.4 Criticisms against Balanced Growth Doctrine

As it is a mixed blessing for underdeveloped countries, the doctrine of balanced growth is

criticized. The following are some of these criticisms.

1. The simultaneous development of different sectors requires the unevenness of capital and
it is difficult for less developed countries to mobilize necessary capital investment in the
early stages of development because of low savings, unfavorable balance of payment,
market imperfections, etc…

2. Not only capital is deficient, but the supply of other resources is also inadequate for the
implementation of balanced growth. The smooth functioning of this strategy requires
availability of cheap labor, cheap electricity, raw materials, transport facilities, etc…
Technocrats, engineers, and professionals are also required when different industries
develop simultaneously. But these factors are generally in short supply. Under such a
situation, all round development is not possible.

3. The doctrine of balanced growth ignores the cost reduction aspect. In the development
process, the minimization of costs is as important as the maximization of output. The
strategy of development which aims at the maximization of output and ignores the
minimization of cost cannot be considered satisfactory growth model.

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 4. The doctrine of balanced growth is also criticized that it tends to create inflation in the
initial stages of development. When simultaneous development of different sectors is
launched, capital investment expands and quantity of money increases. This increase in
money supply raises the level of effective demand. Supply of goods however, lag behind
because of structural obstacles and hence inflation is generated.

5. Balanced growth has a wrong assumption that the doctrine creates complementarity
between industries. But in reality, when new industries get going, the demand for the
products of the old industries would shrink, as the result instead of complementarity,
competition between the new and old industries would start.

6. Because of the above problems, balanced growth is considered as a luxury for

underdeveloped countries. If an underdeveloped country launches ambitious program of
balanced growth with limited resources, imbalance, tension and disequilibrium would
emerge and it might be difficult to maintain balance among different sectors.

Section Two: Unbalanced Growth Model/Strategy

3.2.1 Aspects of Unbalanced Growth Model

Historically speaking, western countries have followed the pattern of unbalanced growth. But the
concept of unbalanced growth has been interpreted in a variety of ways. According to
Hirschman, development is a chain of disequilibria that must be kept alive rather that eliminating
the disequilibrium. If the economy is to be kept moving ahead, the task of development policy is
to maintain tensions, disproportions and disequilibria. The best way to create imbalances and
tensions is to accord priority to the leading sectors in the matter of development and investment
allocations.

The strategy of unbalanced growth aims at doing everything somewhere in a concentrated

manner. This approach is selective. It also advocates capital deepening, i.e. it advocates using
resources in a concentrated and selective manner according to comparative advantage.
Furthermore, it advocates maximizing profits and gains on the principle of comparative

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advantage. Resources will be concentrated in those firms/sectors/regions where there is a
maximum return.

What does unbalanced growth suggest?

This particular growth strategy suggests that there is a need to invest in leading industries
/firms /sectors and locations so as to increase the scale of economic activities. It also suggests
capital intensive techniques of productive. In this case, employment is not an issue that it should
take care of itself. The driving force is higher profit. The strategy also envisages that different
firms/sectors/regions grow at different rates in a competitive way with the dictates of market.
Investors should have an option to invest in those sectors/firms/regions where the return in
higher.

Unlike the balanced growth strategy, unbalanced growth strategy suggests planning at a project
level (i.e. project planning). The concern here is that increasing production, consumption and
distribution will take care of themselves in accordance with the laws of the market.

Generally, the strategy of unbalanced growth aims at creating a self-financing development. To

that end, individuals and communities should finance themselves. It is the profit that should go
to re-investment. Resource allocation will be effected through market forces, where profits are
higher.

3.2.2 Arguments for Unbalanced Growth Strategy

Which sectors of the economy should be given priority in unbalanced growth strategy?

Many economists argue that for achieving rapid economic development, the planners should
concentrate on focal areas which could have the promise of rapid growth. The development of
focal areas would set in motion a chain of reactions which would gradually spread to other
segments of the economy. This obviously infers that planners should make the selection of those
sectors which are most productive. The sectors like power, fuel, transportation, communication,
education, etc…, could generate external economies and facilitate the development process. Such
sectors should be given a priority in the matter of investment allocations.

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What are the arguments for unbalanced growth?

The classical economists implicitly advocated for unbalanced growth strategy, because economic
decisions have to be based on market forces. This strategy should ultimately lead to balanced
growth. This strategy is based on the following arguments:

i. It is based on comparative advantage, i.e. the return per unit cost is higher. The approach
promotes efficiency.

ii. It is within the means, i.e. real and monetary resources will be the basis for decision. In
other words, decisions will be made within the limits of a resource capacity. It is
achievable.

iii. If we pursue this strategy, we are investing in leading firms/sectors with the greatest
locational and cost advantage, i.e. average cost is lower. It enables the societies to be
competitive on the domestic and international market.

iv. If decisions are made on the basis of market forces, real linkages between sectors and
industries will be fostered.

In addition to the above arguments, there are proponents of this strategy. Hirschman, W. W.
Rostow, and Hans Singer are the most prominent, among others. Now, let us see the arguments
of these economists turn by turn.

1. Hirschman

Why are deliberate imbalances in the economy important?

He propounded the theory of unbalanced growth as continuation to balanced growth theory. He

is of the opinion that the best way to accelerate economic development is to create deliberate
imbalances in the economy. He believed that underdeveloped countries are not capable of
developing different sectors simultaneously owing to scarcity of resources and necessary
infrastructure. He argues for unbalanced growth strategy, therefore for the simple reason that
resources are scarce. There is serious shortage of resources, shortage of skilled manpower,

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infrastructure, etc. He argues that investment should be not only political, but also based on price
signals. He contends that tensions and disproportions among sectors and groups are growth
inducting/stimulating factors. These tensions and disproportions allow the government to signal
investment opportunities or investment gaps.

Hirschman argues that investment should be made in strategic and leading sectors. The pattern of
investment would create more investment opportunities, and pave the way for further economic
development. He points out that the development of industrialized countries has been on the
pattern unbalanced growth. Development is the result of a series of investment. The divergent
series of investments are influenced by the social profitability and such investments are
undertaken by the public agencies.

2. W.W. Rostow

Growth poles

Rostow wants growth through leading sectors and industries in specific locations. This will lead
to the emergence of growth poles. Certain area will be concentrated with industries. Once these
growth poles emerge, it will spread out to other areas. Growth will benefit the surrounding
areas. If we construct an infrastructure connecting two growth poles, other areas will benefit.
With the emergence of several growth poles, supplementary and complementary investments as
well as competitive investments will take place within and outside growth poles. This ultimately
leads to balanced growth in the long run. The development of micro, small and medium
enterprises and the provision of services are instrumental to complement the development of
poles so that these growth poles will have a propelling effect.

What is the advantage of investing in leading sectors?

Furthermore, Rostow argues that the productive investment must be made for the development of
the leading sectors of the economy. The development of the leading sectors would ensure a
higher level of output and profit. The reinvestment of profit would further stimulate development
activities and process of development would gain momentum.

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According to Rostow, if we focus on big industries/sector in certain locations, this promotes
backward and forward linkages. For him, it big industries/sectors develop, intermediate
industries/sectors will emerge by way of using the output of the big industries/sectors or
producing inputs for the big industries/sectors. This will lead to the emergence of consumer
industries. Profitability is the driving force in the whole process.

3. Hans Singer

Unbalanced growth is a better strategy to concentrate available resources on types of investment

which help to make the economic system more elastic, more capable of expansion under the
stimulus of expanded market and expanding demand. He supports the strategy of unbalanced
growth for the following reasons.

i. This strategy respects market principles. It enables one to invest in areas where there are
profits and re-investable funds and in areas where economic activities are elastic
(responsive). But he advises that we should not invest lot of resources which do not
benefit society and which do not generate re-investable funds. To the extent possible, any
project should be profitable.

ii. Singer appreciates the principle of comparative advantages. But he recommends that
developing countries should import capital intensive goods at the early stage of their
development and should start profit earning industries. They should also focus on
producing exportable items. In relation to this, he believes that capital intensive techniques
of production can also be used in the competitive international market. To that end,
external loans can be used to the extent possible and as long as investments are profitable.

Why should agriculture receive the priority in the early stage ofdevelopment?

iii.The development of agriculture should receive the priority even if one pursues unbalanced
growth strategy at the early stage of development. This is because the agricultural sector
can serve as market for the industries.

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3.2.3 Advantages of Unbalanced Growth Model

The advantages that could follow from pursuing unbalanced growth pattern are discussed as
follow:

1. Creation of external economies- The strategy of unbalanced growth helps in the

creation of external economies. This pattern of development stresses on the expansion of
capital-goods industries and complementarity between them. This strategy is considered.

2. Self-reliance- The aim of development planning in underdeveloped countries is to

achieve self-reliance in the short run. This development goal can be realized through the
expansion of leading sectors and high rate of capital investment. Both these conditions
are met by the strategy of unbalanced growth.

3. Generation of economic surplus- This strategy aims at the establishment of capital-

goods industries and such industries help in the development of subsidiary industries.
This way a chain of investment takes place and this expand income, output and
employment which result in higher economic surplus. The reinvestment of economic
surplus generates momentum for development process and induces economic activities.

4. Skill Formation- The strategy of unbalanced growth aims at rapid development through
the expansion of investment. Such an investment helps in creating basic facilities like
elementary and technical education, roads, communication, housing, public health, etc…
This facilities promote skill formation, and improve the quality of manpower.

5. Short-term strategy- Unbalanced growth is a short-term strategy of development. The

advantage of this approach is that people in underdeveloped countries get the fruits of
their labor and effort in short period.

6. Practical policy- The strategy of unbalanced growth suggests pragmatic approach of

rapid development. This strategy stresses the setting up of those industries, which have
the promise of maximum total linkage.

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3.2.4 Limitations of Unbalanced Growth

Alike the balanced growth strategy, the unbalanced growth model is also a mixed blessing for
underdeveloped countries. Despite its advantages, it suffers from the following limitations.

i. This growth model does not discuss the degree of imbalance among the various
sectors.
ii. The theory of unbalanced growth suggests the setting up of capital goods industries
for achieving goals of development. But the starting of capital goods industries in the
initial stages of development may not be an easy task for underdeveloped countries
and it might create economic, social and structural obstacles. The theory does not
suggest the way out.
iii. The implementation of unbalanced growth required the availability of certain basic
facilities like raw materials, expertise, power, developed means of transport and
communication, wide extent of markets, etc…Such basic facilities are generally
lacking in less developed countries in the initial stages of development. Lack of these
facilities hampers the successful implementation of unbalanced growth strategy.
iv. It is generally observed that heavy industries have a tendency to concentrate at one
place due to availability of external economies. This creates slums, over-crowding,
health problems, and pollutes the atmosphere of surrounding localities. In this context
it has been suggested that “it is not wise to keep all your eggs in one basket.”
v. The unbalanced growth can generate inflation. The strategy can succeed when
effective measures are taken to control inflation.

3.3 Comparing Balanced and Unbalanced Growth Models

Having discussed the two strategies, it would be worthwhile to have a comparative study of
balanced and unbalanced growth. The following are some of the differences between the two
growth models.

1. Balanced growth aims at simultaneous development of all the sectors of the economy,
whereas unbalanced growth suggests the development of only leading and growing
sectors of the economy.
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 2. Balanced growth aims at harmony, consistency and balances in the growth rates of
various sectors, whereas unbalanced growth suggests the creation of disharmony,
inconsistency and imbalance in the growth rates of development parameters.

3. The implementation of balanced growth requires huge capital investment for

simultaneous development of various sectors. The implementation of unbalanced growth
requires comparatively less capital as only leading sectors are developed in the first
instance.

4. Balanced growth is a long term strategy as the development of different sectors is

possible in the long period. The objectives of balanced growth are difficult to be realized
in the short period because of stress and strain in the early stages of development. The
unbalanced growth is a short term strategy, as the development of leading sectors is
possible in the short period.

5. The doctrine of balanced growth assumes that the bottlenecks in the form of shortages are
fairly widespread in the economy and as such it suggests the policy of frontal attack for
the minimization and elimination of bottlenecks. Unbalanced growth on the other hand
assumes that bottlenecks are not widely spread in the economy.

6. The balanced growth strategy assumes that all sectors generate external economies,
whereas unbalanced growth assumes that some sectors generate external economies than
others.

3.4 Compromising Views of the Debate between Balanced and

Unbalanced Growth Strategies

The impartial and unbiased view is that there can be no end to the debate on this issue. From
purely economic point of view, there is really no reason to assume that two strategies are
alternatives. The wise approach for economic growth is to have a blend/mixture of the two
growth strategies. We should be pragmatic. Most agree that it is good to treat unbalanced growth
as a means of achieving the ultimate objective of balanced growth. The following points may be
important to consider:

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 A. The two growth strategies can be complementary than alternative strategies.
B. Complete balancing is not possible for a number of reasons: resource constraints,
lack of adequate infrastructure, shortage of capital, skilled labour, the unequal
responsiveness of the different sectors, etc... But balancing is important from the
point of view of employment creation, poverty alleviation, income distribution,
human capital development, etc...
C. At the same time, some degree of unbalancing is essential because of resource
constraints, market imperfections etc... So, we need to be selective in the allocation
of scarce resources.
D. Unbalanced growth strategy eventually leads to balanced growth through the
creation of growth poles/centers.
E. Development is not just economic growth. It is also political, social, cultural and
human. So, we cannot postpone agricultural and rural development because it is a
market for the industrial sector. Agricultural and rural development should be made
simultaneously with the development of other sectors.

UNIT FOUR
POPULATION GROWTH AND ECONOMIC DEVELOPMENT

4.1 World Population Growth through History

What is population?

The term population refers to the total human inhabitants of a specified area, such as a city,
country, or continent, at a given time. Population study as a discipline is known as demography.
It is concerned with the size, composition, and distribution of populations; their patterns of
change over time through births, deaths, and migration; and the determinants and consequences
of such changes. Population studies yield knowledge important for planning, particularly by
governments, in fields such as health, education, housing, social security, employment, and
environmental preservation. Such studies also provide information needed to formulate
government population policies, which seek to modify demographic trends in order to achieve
economic and social objectives.

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Every year, more than 93 million people are being added to the world’s population of 5.5 billion.
More than 82 million of these additional people per year will be born in Third World Countries.
These increases are unprecedented. But the problem of population growth is not simply a
problem of numbers. It is a problem of human welfare and of development. Rapid population
growth can have serious consequences for the well-being of humanity worldwide. If
development entails the improvement in people’s levels of living-their incomes, health,
education, and general well-being-and if it also encompasses their self-esteem, respect, dignity,
and freedom to choose, then the really important question about population growth is this: How
does the contemporary population situation in many Third World countries contribute to or
detract from their chances of realizing the goals of development, not only for the current
generation but also for the future generations? Conversely, how does development affect
population growth?

Throughout most of the more than 2 million years of human existence on earth, humanity’s
numbers have been few. When people first started to cultivate food through agriculture some 12,
000 years ago, the estimated world was no more than 5 million.

The reason for the sudden change in overall population trends is that for almost all of recorded
history, the rate of population change, whether up or down, had been strongly influenced by the
combined effects of famine, disease, malnutrition, plague, and war-conditions that resulted in
high and fluctuating death rates. In the twentieth century, such conditions came increasingly
under technological and economic control. As a result, human mortality (the death rate) is
currently lower than at any other point in human existence. It is this decline in mortality resulting
from rapid technological advances in modern medicine and the spread of modern sanitation
measures throughout the world, particularly within the past 50 years, that has resulted in the
unprecedented increases in world population growth, especially in Third World countries. For
example, death rates in Africa, Asia, and Latin America have fallen by as much as 50% during
the past 30 to 40 years, whereas birthrates have only recently begun to decline.

However, the population growth of developed countries is best explained by what is known as
the demographics transition. The demographic transition attempts to explain why all
contemporary developed nations have more or less passed through the same three stages of

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modern population history. Before their economic modernization, these countries for centuries
had stable or very low growing populations as a result of a combination of high birthrates and
almost equally high birth rates. This was stage 1. Stage 2 began when modernization, associated
with better public-health methods, healthier diets, higher incomes, and other improvements, led
to a marked reduction in mortality that gradually raised life expectancy from under 40 years to
over 60 years. However, the decline in death rates was not immediately accompanied by a
decline in fertility. As a result, the growing divergence between high birth rates and falling death
rates led to sharp increases in population growth compared to past centuries. Stage 2 thus marks
the beginning of the demographic transition (the transition from stable or slow-growing
populations first to rapidly increasing numbers and then to declining rates). Finally, stage 3 was
entered when the forces and influences of modernization and development caused the beginning
of a decline in fertility; eventually, falling birthrates converged with lower death rates, leaving
little or no population growth.

In short, population growth today is primarily the result of a rapid transition from a long
historical era characterized by high birth and death rates to one in which death rates have fallen
sharply but birthrates, especially in developing countries, are only just beginning to fall from
their historical high levels.

4.2 The Causes of High Fertility in Developing Countries

4.2.1 The Malthusian Model

Almost 200 years ago, the British economist Thomas Malthus put forward a theory about the
relationship between population growth and economic development that survives till today.
Robert Malthus raised an alarm about population growth in the late 18th century.

An Essay on the Principle of Population (1798) is arguably one of the most influential books
ever written. Writing in 1798 in his Essay and drawing on the concept of diminishing returns,
Malthus postulated a universal tendency for the population of a country, unless checked by
dwindling food supplies, to grow at a geometric rate, doubling every 30 or 40 years. At the same
time, because of diminishing returns to the fixed factors, land, food supplies could expand only
at a roughly arithmetic rate. Because the growth in food supplies could not keep pace with the

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burgeoning population, per capita incomes (defined in an agrarian society simply as per capita
food production) would have a tendency to fall so low as to lead to a stable population existing
barely at or slightly above the subsistence level.

Modern economists have given a name to the Malthusian idea of a population inevitably forced
to live at subsistence levels of income. They have called it the low-level equilibrium population
trap or more simply, the Malthusian population-trap.

According to the neo-Malthusians, poor nations will never be able to rise much above their
subsistence levels of per capita income unless they initiate preventive checks (birth control) on
their population growth. In the absence of such preventive checks, Malthusian positive checks
(starvation, disease, wars) on population growth will inevitably provide the restraining force.

Malthus therefore contended that the only way to avoid this condition of chronic low levels of
living or absolute poverty was for people to engage in ‘moral restraint’ and limit the number of
their children. Hence, we might regard Malthus, indirectly and inadvertently, as the father of the
modern birth control movement.

Malthus' theory of population is his best-known contribution: Passion between the sexes, unless
checked by human misery, leads to a continual growth in population. Positive checks to
population growth include "... war, disease, hunger, and whatever ... contributes to shorten the
duration of human life." Preventative checks include abstinence from sexual relations,
continence within marriage, and/or delay of marriage.

4.2.2 Criticism of the Malthusian Model

The Malthusian population trap provides a simple and in many ways appealing theory of the
relationship between population growth and economic development. Unfortunately, it is based
on a number of simplistic assumptions and hypotheses that do not stand the test of empirical
verification. We can criticize the population trap on two grounds.

First, and most important, the model assumes away or ignores the enormous impact of
technological progress in offsetting the growth-inhibiting forces of rapid population increases.
The history of modern economic growth has been closely associated with rapid technological

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progress in the form of a continuous series of scientific, technological, and social inventions and
innovations. While Malthus was basically correct in assuming a limited supply of land, he did
not-and in fairness could not at that time-anticipate the manner in which technological progress
could augment the availability of land by raising its quality (its productivity) even though its
quantity might remain roughly the same.

The second basic criticism of the trap focuses on its assumption that national rates of population
increase are directly (positively) related to the level of national per capita income. According to
this assumption, at relatively low levels of per capita income, we should expect to find
population growth rates increasing with increasing per capita income. But research on Least
Developed Countries (LDCs) indicates that there appears to be no clear correlation between
population growth rates and levels of per capita income among Third World nations. As a result
of modern medicine and public health programs, death rates have fallen rapidly and have become
less dependent on the level of per capita income. Moreover, birth rates seem to show no
definable relationship with per capita income levels.

Our conclusion, therefore, is that it is not so much the aggregate level of per capita that matters
for population growth but rather how that income is distributed. It is the level of household
income, not the level of per capita income that seems to matter most. The social and economic
institutions of a nation and its philosophy of development are probably greater determinants of
population growth rates than aggregate economic variables and simple models of
macroeconomic growth.

The Malthusian and neo-Malthusian theories is therefore rejected as applied to contemporary

Third World nations on the following grounds

 They do not take adequate account of the role and impact of technological progress

 They are based on a hypothesis about a macro relationship between population growth
and levels of per capita income that does not stand up to empirical testing

 They focus on the wrong variable, per capita income, as the principal determinants of
population growth rates. A much better and more valid approach to the question of
population and development centers on the macroeconomics of family-size decision

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 making in which individual, and not aggregate, levels of living become the principal
determinant of a family’s decision to have more or fewer children.

4.3 The Consequences of High Fertility: Some Conflicting Opinions

What are the Consequences of rapid population growth?

For many years, there has been an ongoing and lively debate among development economists
and other social scientists about the seriousness of the consequences of rapid population growth.
The following summarizes some of the main arguments for and against the idea that the
consequences of rapid population growth lead to serious development problems. It then informs
the basis for considering whether some consensus can be reached so that specific policy goals
and objectives can be postulated.

4.3.1 Population Growth Is Not a Real Problem

We can identify three general lines of argument on the part of people who assert that population
growth is not a cause for concern

 The problem is not population growth but rather other issues

 Population growth is a false issue deliberately created by dominant rich country agencies
and institutions to keep LDCs in their underdeveloped, dependent condition

 For many developing countries and regions, population growth is in fact desirable

A. Some Other Issues

Many knowledgeable people from both rich and poor nations argue that the real problem is not
population growth per se but one or all of the following four issues:

i. Underdevelopment

If correct strategies are pursued and lead to higher levels of living, greater esteem, and expanded
freedom, population will take care of itself. Eventually, it will disappear as a problem, as it has in
all of the present economically advanced nations. According to this argument, underdevelopment

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is the real problem, and development should be the only goal. With it will come economic
progress and social mechanisms that will more or less automatically regulated population growth
and distribution. As long as the vast majority of people in Third World countries remain
impoverished, uneducated and physically and psychologically weak, the large family will
constitute the only real source of social security (i.e parents will constitute to be denied the
freedom to choose a small family if they so desired). Proponents of the underdevelopment
argument then conclude that birth control programs will surely fail, as they have in the past,
when there is no motivation on the part of poor families to limit their size.

ii. World Resource Depletion and Environmental Destruction

Population can only be an economic problem in relation to the availability and utilization of
scarce natural and material resources. The fact is that developed countries with less than one-
quarter of the world’s population, consume almost 80% of the world’s resources. For example,
the average North American or European consumer uses up, directly and indirectly, almost 16
times as much of the world’s food, energy, and material resources as his or her counterpart in
Third World countries. In terms of the depletion of the world’s limited resources, therefore, the
addition of another child in the developed countries is as significant as the birth of 16 additional
children in the underdeveloped countries. According to this argument, developed nations should
curtail their excessively high consumption standards instead of asking less developed nations to
restrict their population growth. The latter’s high fertility is really due to their low levels of the
“over consumption” of the world’s scarce resources by rich nations. This combination of rising
affluence and extravagant consumption habits in rich countries and among rich people in poor
countries should be the major world concern, not population growth.

iii.Population Distribution

According to this third argument it is not the number of people per se that is causing population
problems, but their distribution in space. Many regions of the world (e.g. parts of Sub-Saharan
Africa) and many regions within countries (e.g. the northeast and Amazon regions of Brazil) are
in fact under-populated in terms of available or potential resources. Others simply have too many
people concentrated in too small an area (e.g. central Java or most urban concentrations in
LDCs). Governments should therefore strive not to moderate the rate of population growth but

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rather to reduce rural-urban migration and to bring about a more natural spatial distribution of
the population in terms of available land and other productive resources.

iv.Subordination of Women

Women often bear the disproportionate burdens of poverty, poor education, lack of jobs, and
limited social mobility. In many cases, their inferior roles, low status, and restricted access to
birth control is manifested in their high fertility. According to this argument, population growth
is a natural outcome of women’s lack of economic opportunity,

B. Deliberately Contrived False Issue

The second main line of argument denying the significance of population growth as a major
development problem is closely allied to the neocolonial dependence theory of
underdevelopment. Basically, it is argued that the frenetic over-concern in the rich nations with
the population growth of poor nations is really an attempt by the former to hold down the
development of the latter in order to maintain an international status quo that is favorable to their
self-interests. Rich nations are pressuring poor nations to adopt aggressive population control
programs even though they themselves went through a period of sizable population increase that
accelerated their own development processes.

A radical neo-Marxist version of this argument views population control efforts by rich countries
and their allied international agencies as racist or genocidal attempts to reduce the relative or
absolute size of the poor, largely nonwhite populations of the world who may someday pose a
serious threat to the welfare of the rich, predominantly white societies. Worldwide birth control
campaigns are seen as manifestations of the fears of the developed world in the face of a possible
radical challenge to the international order by the people who are its first victim.

C. Population Growth is Desirable

A more conventional economic argument is that of population growth as an essential ingredient

to stimulate economic development. Larger populations provide the needed consumer demand to
generate favorable economies of scale in production, to lower production costs, and to provide a
sufficient and low cost labor supply to achieve higher output levels. Population “revisionist”

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economists of the 1980s neoclassical counterrevolution school like Julian Simon and Nicholas
Eberstadt argue, for example, that free markets will always adjust to any scarcities created by
population pressures. Such scarcities will drive up prices and signal the need for new cost-saving
production technologies. In the end, free markets and human ingenuity (Simon’s “genius” as the
“ultimate resource”) will solve any and all problems arising from population growth. This
revisionist view point was clearly in contrast with the traditional “orthodox” argument of the
1950s to 1970s that rapid population growth had serious economic consequences that, if left
uncorrected, would slow economic development.

At the other end of the political spectrum, it has been argued by some Third World neo-Marxist
pronatalists that many rural regions in developing countries are in reality under-populated in the
sense that much unused but arable land could yield large increases in agricultural output if only
more people were available to cultivate it. Many regions of tropical Africa and Latin America
and even parts of Asia are said to be in this situation. With respect to Africa, for example, some
observers have noted that many regions had larger populations in the remote past than exist
today. Their rural depopulation resulted not only from the slave trade but also from compulsory
military service, confinement to reservations, and the forced-labor policies of former colonial
governments. For example, the sixteenth-century Congo Kingdom is said to have had a
population of approximately 2 million. But by the time of the colonial conquest, which followed
300 years of slave trade, the population of the region had fallen to less than one third of that
figure. Today’s Zaire has barely caught up to the Sixteen-century numbers. Other regions of
Western and eastern Africa provide similar examples- at least in the eyes of advocates of rapid
population growth in Africa.

In terms of ratios of population to arable land (land under cultivation, fallow land, pastures, and
forests), Africa south of the Sahara is said by these supporters of population expansion to have a
total of 1.4 billion arable hectares. Land, actually being cultivated amounts to only 170 million
hectares, or about 1 hectare per rural inhabitant. Thus only 12% of all potential arable land is
under cultivation, and this very low rural population density is viewed as a serious drawback to
raising agricultural output. Similar arguments have been expounded with regard to such Latin
American countries as Brazil and Argentina.

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Three other non-economic arguments, each found to some degree in a wide range of developing
countries, complete the “population growth is desirable” viewpoints. First, many countries claim
a need for population growth to protect currently under-populated border regions against the
expansionist intentions of neighboring nations. Second, there are many ethnic, racial, and
religious groups within less developed countries whose attitudes favoring large family size have
to be protected for both moral and political reasons. Finally, military and political powers are
often seen as dependent on a large and youthful population.

Many of these arguments have certain realism about them-if not in fact, then at least in the
perceptions of vocal and influential individuals in both the developed and the developing worlds.
Clearly, some of the arguments have greater validity for some Third World countries than others.
The important point is that they represent a considerable range of opinions and viewpoints and
therefore need to be seriously weighed against the counterarguments of theorists who believe
that rapid population growth in indeed a real and important problem for underdeveloped
countries. Dear students, let us now look at some of these counterarguments.

4.3.2 Population Growth is A Real Problem

Positions supporting the need to curtail population growth because of the negative economic,
social and environmental consequences are typically based on one or the other of the following
arguments.

A. The population “Hawk” Argument

The extreme version of the population-as-a-serious-problem position attempts to attribute almost

all of the world’s economic and social evils to excessive population growth. Unrestrained
population increase is seen as the major crisis facing humankind today. It is regarded as the
principal cause of poverty, low levels of living, malnutrition, ill health, environmental
degradation and a wide array of other social problems. Value-laden and provocative terms such
as “population bomb” or “population explosion” are tossed around at will. Indeed, dire
predictions of world food catastrophes and ecological disaster are attributed almost entirely to
the growth in world numbers. Such an extreme position leads some of its advocates to assert that
“world” (i.e. LDC) population stabilization or even decline is the most urgent contemporary task

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even if it requires severe and coercive measures such as compulsory sterilization to control
family size in some of the most populated Third World countries like India and Bangladesh.

B. The Population-Poverty Cycle Argument and the Need for Family Planning
Programs

The population-poverty cycle argument is the main stance among people who hold that too rapid
population growth yields negative economic consequences and thus should be a real concern of
Third World countries. Advocates start from the basic proposition that population growth
intensifies and exacerbates the economic, social and psychological problems associated with the
condition of underdevelopment. Population growth retards the prospect for a better life for the
already born. It also severely draws down limited government revenues simply to provide the
most rudimentary economic, health, and social services to the additional people. This in turn
further reduces the prospects for any improvement in the levels of living of the existing
generation.

If low incomes induce poor families to have more children as a source of cheap labor and old age
security then we have vicious cycle of cheap in progress. Poor people have large families partly
to compensate for their poverty, but large families mean greater population growth, higher
dependency burdens, lower savings, less investment, slower economic growth, and ultimately
greater poverty. Population growth is thus seen as both a cause and a consequence of
underdevelopment.

Because widespread absolute poverty and low levels of living are thus seen as a major cause of
large family size, and large families retard economic growth, it follows that a more egalitarian
economic and social development is a necessary condition for bringing about an eventual
slowing or cessation of population growth at low levels of fertility and mortality. But according
to this argument, it is not a sufficient condition-that is development provides people with the
intensives and motivations to limit their family size, but family planning programs are needed to
provide them with the technological means to avoid unwanted pregnancies. Even though
countries like France, Japan, the United States, Great Britain, and more recently, Taiwan and
South Korea were able to reduce their population growth rates without widespread family
planning clinics, it is argued that the provision of these services will enable other countries

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desiring to control excessive population growth to do so more rapidly than if these family
planning services were not available.

4.3.3 The Empirical Argument: Seven Negative Consequences of Population

Growth
According to the latest empirical research, the potential negative consequences of population
growth for economic development can be divided into seven categories: its impact on economic
growth, poverty and inequality, education, health, food, the environment, and international
migration.

Economic Growth: Evidence shows that rapid population growth lowers per capita income
growth in most LDCs, especially those that are already poor, dependent on agriculture, and
experiencing pressures on land and natural resources.

Poverty and Inequality: Even though aggregate statistical correlations between measures of
poverty and population growth at the national level are often inconclusive, at the household level
the evidence is strong and compelling. The negative consequences of population growth fall
most heavily on the poor because they are the ones who are made landless, suffer first from cuts
in government health and education programs, bear the brunt of environmental damage, and are
the main victims of job cuts due to the slower growth of the economy. Poor women once again
bear the greatest burden of government austerity programs, and another vicious cycle is set in
motion. To the extent that families perpetuate poverty, they also exacerbate inequality.

Education: Although the data are sometimes ambiguous on this point, it is generally agreed that
large family size and low incomes restrict the opportunities of parents to educate all their
children. At the national level, rapid population growth causes given educational expenditures to
be spread more thinly, lowering quality for the sake of quantity. This in turn feeds back on
economic growth because the stock of human capital is reduced by rapid population growth.

Health: High fertility harms the health of mothers and children. It increases the health risks of
pregnancy, and closely spaced births have been shown to reduced birth weight and increase child
mortality rates.

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Food: Feeding the world’s population is made more difficult by rapid population growth -over
90% of additional LDC food requirements are caused by population increases. New technologies
of production must be introduced more rapidly, as the best lands have already been cultivated.
International food relief programs become more widespread.

Environment: Rapid population growth contributes to environmental degradation in the form of

forest encroachment, deforestation, fuel-wood depletion, soil erosion, declining fish and animal
stocks, inadequate and unsafe water, air pollution, and urban congestion.

International Migration: Many observers consider the rapid increase in international migration,
both legal and illegal, to be one of the major consequences of developing countries’ population
growth. Though many factors cause migration, an excess of job seekers (caused by rapid
population growth) over job opportunities in the LDC economy is surely one of them

4.4 Goals, Objectives, and Policy Approaches

4.4.1 Goals and Objectives: Toward a Consensus

In spite of what may appear to be seriously conflicting arguments about the consequences of
population growth, during the 1970s and 1980s there emerged a common ground that many
people on both sides of the debate could agree on. This position is best characterized by Robert
Cassen in Population Policy: A New Consensus: After decades of controversy over the issue of
population policy, there is a new international consensus among and between industrial and
developing countries that individuals, countries, and the world at large would be better off if
population were to grow more slowly. The consequences of rapid population growth should be
neither exaggerated nor minimized. Some past expressions of alarm have been
counterproductive, alienating the very audiences they were intended to persuade: at the same
time, claims that population growth was not all that important have had the effects of
diminishing a proper concern for the subject.

The following four propositions constitute the essential components of this intermediate or
consensus opinion:

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  Population growth is not the primary cause of low levels of living, gross inequalities,
or the limited freedom of choices that characterizes much of the Third World. The
fundamental causes of these problems must be sought, rather, in the “dualistic” nature
of the domestic and international economic and social order, as well as in the failures
of many development plans to create jobs and incomes for poor families, especially
women.

 The problem of population is not simply one of numbers but involves the quality of
life and material well-being. Thus, LDC population size must be viewed in
conjunction with developed country affluence in relation to the quantity, distribution,
and utilization of world resources, not just in relation to indigenous resources of the
LDCs.

 But rapid population growth does serve to intensify problems of underdevelopment

and make prospects for development that much more remote. The momentum of
population growth (refers to the tendency of the population to continue even after
birthrates have declined substantially) means that, barring catastrophe, the population
of developing countries will increase dramatically over the coming decades, no matter
what fertility control measures are adopted now. It follows that high population
growth rates, though not the principal cause of underdevelopment are nevertheless
important contributing factors in specific countries and regions of the world.

 Many of the real problems of population arise not from its overall size but from its
concentration, especially in urban areas as a result of accelerated rural-urban
migration. A more rational and efficient spatial distribution of national populations
thus becomes an alternatives in some countries to the slowdown of overall population
growth.

In view of these four propositions, we may conclude that the following three policy goals and
objectives might be included in any realistic approach to the issues of population growth in
developing countries.

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  In countries or regions where population size, distribution and growth are viewed as
an existing or potential problem, the primary objective of any strategy to limit further
growth must deal not only with the population variable per se but also with the
underlying social and economic conditions of underdevelopment. Problems such as
absolute poverty, gross inequality, wide spread unemployment (especially among
females), limited female access to education, malnutrition, and poor health facilities
must be given high priority. Their amelioration is both a necessary concomitant of
development and a fundamental motivational basis for the expanded freedom of the
individual to choose an optimal- and, in many cases, smaller-family size.

 To bring about smaller families through development-induced motivations, family-

planning programs providing both the education and the technological means to
regulate fertility for people who wish to regulate it must be established.

 Developed countries must assist developing countries to achieve their lowered

fertility and mortality objectives not only by providing contraceptives and funding
family-planning clinics but, more important, (a) by curtailing their own excessive
depletion of nonrenewable world resources through programs designed to cut back on
the unnecessary consumption of products that intensively use such resources, (b) by
making genuine commitments to eradicating poverty, illiteracy, disease, and
malnutrition in Third World countries as well as their own; and (c) by recognizing in
both their rhetoric and their international economic and social dealings that
development is the real issue, not simply population control.

4.4.2 Some Policy Approaches

In view of these broad goals and objectives, what kind of economic and social policies might
developing and developed country governments and international assistance agencies consider to
bring about long-term reductions in the overall rate of world population growth? Three areas of
policy can have important direct and indirect influences on the well-being of present and future
world populations.

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  General and specific policies that developing country governments can initiate to
influence and perhaps even control their population growth and distribution.

 General and specific policies that developed country governments can initiate in their
own countries to lessen their disproportionate consumption of limited world resources
and promote a more equitable distribution of the benefits of global economic progress

 General and specific policies that developed country governments and international
assistance agencies can initiate to help developing countries achieve their population
objectives.

4.5 What Can the Developing Countries Do?

It is not numbers per se or parental irrationality that is at the root of the LDC “population
problem.” Rather, it is the pervasiveness of absolute poverty and low levels of living that
provides the economic rationale for large families and burgeoning populations.

Developing country governments can attempt to control fertility in six ways:

1. They can, through the media and the educational process, both formal (school system)
and informal (adult education), try to persuade people to have small families.
2. They can establish family-planning programs to provide health and contraceptive services
to encourage the desired behavior
3. They can deliberately manipulate economic incentives and disincentives for having
children-for example through the elimination or reduction of maternity leaves and benefits,
the reduction or elimination of financial incentives, and /or the imposition of financial
penalties for having children beyond a certain number, the establishment of old –age social
security provisions and minimum age child labor laws, the raising of school fees and the
elimination of heavy public subsidies for secondary and higher education and the
subsidization of smaller families through direct money payments.
4. Countries can attempt to redirect their populations away from the rapidly growing urban
areas by eliminating the current imbalance in economic and social opportunities in urban
versus rural areas.

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5. Governments can attempt to coerce people into having smaller families through the
power of state legislation and penalties.
6. Finally, no policy measures will be successful in controlling fertility unless efforts are
made to raise the social and economic status of women and hence, create conditions
favorable to delayed marriage and lower marital fertility. A crucial ingredient in any
program designed to lower fertility rates is the creation of employment for women outside
the home.

Good Luck in Your Exams!

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