THEORIES OF DEVELOPMENT

 1. THEORY OF MODERNIZATION

According to modernization theory, modern societies are more productive, children receive a better education, and the needy receive more welfare.

Modernization is a progressive process that, in the long run, is not only inevitable but also desirable.

Modernized political systems are more capable than traditional systems of dealing with the functions of national identity, legitimacy, penetration, participation, and distribution.

Modernization is a lengthy process. It is an evolutionary change, not a revolutionary one. It will take generations or even centuries to complete, and its profound impact will be felt only through time.

Assumptions are derived from European and American evolutionary theory:

• Modernization is a systematic process. The characteristic of modernity forms a cohesive whole, appearing in a cluster rather than in isolation.
• Modernization is a transformative process; for a society to move into modernity, its traditional structures and values must be replaced by a set of modern values.
• Modernization is an imminent process due to its systematic and transformative nature, which builds change into the social system.

One of the principal applications of modernization theory is in the economic field related to public policy decisions. From this perspective, it is very well known that the economic theory of modernization is based on the five stages of development from Rostow’s model.

Rostow’s Five Stages of Growth:

Walt W. Rostow published “The Stages of Economic Growth” in the late 1950s, which had a major impact on the economic development scene and generated considerable controversy. Rostow postulated that “it is possible to identify all societies, in their economic dimensions, as lying within one of five categories: the traditional society, the pre-conditions for take-off into self-sustaining growth, the take-off, the drive to maturity, and a stage of high mass consumption.

1. The traditional: Simply describes the characteristics of most traditional stages, i.e., the economy operating largely at a subsistence level. In it, the economic well-being is very much restricted, there is very little centralization of authority, and fragmentation of political authority prevails. There is relatively little economic growth, with the savings rate being very low. The traditional stage gives way to the pre-condition stage as a result of some changes in the traditional socio-economic system.
2. The precondition for take-off: There is the emergence of an elite group that is committed to the modernizing of the economy, i.e., introducing a modern economy such acts usually involves the establishment of central political authority, the elimination of trade barriers that previously existed in the system which resulted from amalgamation of politico-economic system or by the creation of appropriate transport and communication facilities to bring various systems together. There is also the establishment of social overhead capital. Such infrastructures include transport, communication, education, health facilities, etc. There is a significant expansion of agricultural production. It is evident that in the pre-condition stage, you begin to have an improvement in agriculture and a positive income growth. However, the precondition stage is marked by the existence of the traditional stage.
3. Take off:  This is a period of rapid industrialization, urbanization, and technological breakthroughs. It is the most important stage because it presents the demarcation line between a traditional economy and a modern self-sustained economy. The features of this stage include the emergence of a leading sector that grows rapidly, and it is so interlinked with other sectors of the economy. For the leading sector to contribute to economic sustenance, it has to have backward and forward linkages. The leading sector can purchase its input from other sectors (backward linkage). The forward linkage represents the sales of its output to other sectors for use as inputs, thus providing additional stimulus to these other sectors.

4. Drive to Maturity: This stage is marked by diversification of industries, investments in infrastructure, and improvements in the quality of life. The drive to maturity stage is a situation in which traditional methods of production are almost eliminated, while modern technology is applied to almost all aspects of production, and it takes up to fifty years or so before it is complete. At this time, the economic system has acquired the technological capability to produce almost all commodities.

5. Age of high mass consumption: At the time of writing, Rostow believed that Western countries, most notably the United States, occupied this last "developed" stage. Here, a country's economy flourishes in a capitalist system, characterized by mass production and consumerism. It is characterized by the existence of relatively high income per capita and the ability for the income to engage in a wide range of consumer durables -cars, refrigerators, stereo sets, air conditioners. It is associated with a relatively large amount of leisure for the working masses. It was argued that advanced countries had all passed the stage of "take-off into self-sustaining growth and the underdeveloped countries that were still in either the traditional society or the preconditions stage had only to follow a certain set of rules of development to take off in their turn into self-sustaining economic growth.

2.  DEPENDENCY THEORY:

-Dependency theory is the idea that resources flow from a "periphery" of poor and exploited states to a "core" of wealthy states, enriching the latter at the expense of the former. A central contention of dependency theory is that poor states are impoverished and rich ones enriched by the way poor states are integrated into the "world system". This theory was officially developed in the late 1960s following World War II, as scholars searched for the root issue in the lack of development in Latin America.

-The theory arose as a response to modernization theory, an earlier theory of development that claimed all societies progress through similar stages of development.

The premises of dependency theory: 

• Poor nations provide natural resources, cheap labor, a destination for obsolete technology, and markets for developed countries, without which the latter could not have the standard of living they enjoy.
• Poor nations provide natural resources, cheap labor, a destination for obsolete technology, and markets for developed countries, without which the latter could not have the standard of living they enjoy.

The major hypotheses about development in Third World countries, according to the dependency school, are the following:

1. In contrast to the development of the self-contained core nations, the development of nations in the Third World necessitates subordination to the core. Examples of this situation can be seen in Latin America, especially in those countries with a high degree of industrialization, such as São Paulo, Brazil, which Andre G. Frank uses as a case study.
2. The peripheral nations experience their greatest economic development when their ties to the core are weakest. An example of this circumstance is the industrialization process that took root in Latin America during the 1930s, when the core nations were focusing on solving the problems that resulted from the Great Depression, and the Western powers were involved in the Second World War. 
3. A third hypothesis indicates that when the core recovers from its crisis and reestablishes trade and investment ties, it fully incorporates the peripheral nations once again into the system, and the growth of industrialization in these regions is stifled.  Frank, in particular, indicates that when core countries recuperate from war or other crises that have directed their attention away from the periphery, this negatively affects the balance of payments, inflation, and political stability in Third World countries.
4. The fourth aspect refers to the fact that regions that are highly underdeveloped and still operate on a traditional, feudal system are those that in the past had the closest ties to the core.

3. WORLD SYSTEMS THEORY:

-A central element from which the theory of world-systems emerged was the different form that capitalism was taking around the world, especially since the decade of the 1960s.

-Starting in this decade, Third World countries had new conditions in which to attempt to elevate their standards of living and improve social conditions.  These new conditions were related to the fact that the international financial and trade systems began to have a more flexible character, in which national government actions had less and less influence.

-These new international economic circumstances made it possible for a group of radical researchers led by Immanuel Wallerstein to conclude that there were new activities in the capitalist world-economy which could not be explained within the confines of the dependency perspective.

-These new features were characterized mainly by the following aspects:

• East Asia (Japan, Taiwan, South Korea, Hong Kong, and Singapore) continued to experience a remarkable rate of economic growth.  It became more and more difficult to portray this East Asian economic miracle as manufacturing imperialism.
• There was a widespread crisis among the socialist states, which included the Sino-Soviet split, the failure of the Cultural Revolution, economic stagnation in the socialist states, and the gradual opening of the socialist states to capitalist investment.  This crisis signaled the decline of revolutionary Marxism.
• There was a crisis in North American capitalism which included the Vietnam War, the Watergate crisis, the oil embargo of 1975, the combination of stagnation and inflation in the late 1970s, as well as the rising sentiment of protectionism, the unprecedented governmental deficit, and the widening of the trade gap in the 1980s, all signaling the demise of American hegemony in the capitalist world-economy.

-Wallerstein and his followers recognized that there are worldwide conditions that operate as determinant forces, especially for small and underdeveloped nations, and that the nation-state level of analysis is no longer the only useful category for studying development conditions, particularly in Third World countries.  Those factors which had the greatest impact on the internal development of small countries were the new global systems of communications, the new world trade mechanisms, the international financial system, and the transference of knowledge and military links.  These factors have created their dynamic at the international level, and at the same time, these elements are interacting with the internal aspects of each country.

-Today, this is not the situation, especially when considering the significant economic role of transnational corporations, the international political climate, the interdependence affecting the governments of poor nations, and the influence of speculative investments. For the world-systems school, current economic conditions cannot be fully explained within traditional development theories. This criticism of the capitalist system has existed since its inception. Under current international conditions, there are specific characteristics of monopoly capital, its modes of transaction, and its tangible operations worldwide, which have significantly impacted international relations among nations.

4. GLOBALIZATION THEORIES:

Globalization theories seek to explain the increasing interconnectedness of economies, cultures, and societies around the globe. These theories emphasize the intensification of global social relations, where local events are increasingly influenced by distant occurrences and vice versa. Key aspects of these theories include the emergence of a globalized economy, new transnational cultural patterns, and the concept of a global culture.

The main assumptions that can be extracted from the theory of globalization can be summarized in three principal points:

• First, cultural factors are the determining aspect in every society.
• Second, it is not important, under current world conditions, to use the nation-state as the unit of analysis, since global communications and international ties are making this category less useful.
• Third, with more standardization in technological advances, more and more social sectors will be able to connect themselves with other groups around the world.  This situation will involve the dominant and non-dominant groups from each nation.

Modernization and the globalization theories align in their ethnocentric perspective. Both viewpoints emphasize that the development path is generated and must be navigated according to the US and European models. Globalization scholars contend that this situation is evident regarding the influence stemming from the web of communications and the cultural dissemination of values from more developed countries.

The globalization and world-systems theories take into account the most recent economic changes in world structure and relations that have occurred in the last couple of decades, for example:

• In March 1973, the governments of the more developed nations began to operate more flexible mechanisms in terms of exchange rate control.  This situation allowed for a faster movement of capital among the world’s financial centers, international banks, and stock markets.
• Since 1976, trade transactions base their speculations on the future value of the products, which is reinforced through the more flexible use of modern technology in information, computers, and communication system.
• The computer revolution of the 80s made it possible to carry out faster calculations and transactions regarding exchange rate values and investments, which was reinforced by the general use of the fax machine.
• During the nineties the main challenge is from the Internet which allows the achievement of more rapid and expansive communication. The Internet is increasingly creating the conditions to reinvigorate the character of the ―virtual economy in several specific markets.