THEORIES OF DEVELOPMENT AND UNDERDEVELOPMENT NOTES
Introduction
The term development is understood as a social condition within a
nation, in which the authentic needs of its population are satisfied by
the rational and sustainable use of natural resources and systems. This
utilization of natural resources is based on a technology, which
respects the cultural features of the population of a given country.
This general definition of development includes the specification that
social groups have access to organizations, basic services such as
education, housing, health services, and nutrition, and above all else,
that their cultures and traditions are respected within the social
framework of a particular country.
In economic terms, the aforementioned definition indicates that for the
population of a country, there are employment opportunities,
satisfaction -at least- of basic needs, and the achievement of a
positive rate of distribution and redistribution of national wealth. In
a political sense this definition emphasizes that governmental systems
have legitimacy not only in terms of the law, but also in terms of
providing social benefits for the majority of the population.
- Modernization Theories (Backwardness Theories)
According to modernization theories, internal factors in the countries,
such as illiteracy, traditional agrarian structure, the traditional
attitude of the population, the low division
of labor, the lack of communication and infrastructure, etc., are
responsible for underdevelopment. Differences in structure and
historical origin are considered of little importance; international
dependencies are not taken into account. Consequently, a change of these
endogenous factors is the strategy for development. The industrialized
countries are the model for economy and society, and this model will be
reached sooner or later.
There is a continuum between the least and the most developed country
and each country has its position on this line. The difference as
compared to the industrialized countries is the degree of backwardness
which has to be made up for. Suitable measures are the modernization of
the production apparatus, capital aid, transfer of know-how, so that the
developing countries can reach the stage of industrialized countries as
soon as possible. Development is seen as an increase of production and
efficiency and measured primarily by comparing the per capita income.
1.1 Dualism Theories of Development
Dualism theories assume a split of economic and social structures of different
sectors so that they differ in organization, level of development, and
goal structures. Usually, the concept of economic dualism differentiates
between two sectors of economy:
- The traditional subsistence sector consists of small-scale
agriculture, handicraft and petty trade, has a high degree of labour
intensity but low capital intensity and little division of labour; - The modern sector of capital-intensive industry and plantation
agriculture produces for the world market with a capital-intensive
mode of production with a high division of labour.
The two sectors have little relation and interdependence and develop
each according to its own pattern. The modern sector can be considered an economic
enclave of industrial countries, and its multiplicator and growth
effects will benefit the industrial countries but have little effect on
the internal market.
Several authors stress the dualism of specific factors. Eckhaus, for
instance, differentiates, in his concept of technological dualism,
between labour and capital-intensive sectors. Gannage explains regional
dualism as a lack of communications and exchange between regions, the
capital sometimes being an island which, in geographical terms, belongs
to the developing country, in economic terms, however, to the
industrialized country. Economic, technological, and regional dualism
are often the consequence of a social dualism, the absence of
relationships between people of different race, religion, and language,
which, in many cases, is a legacy of colonialism.
Development in dualism concepts is the suppression of the traditional
sector by concentrating on and expanding the modern sector. In time, it
is assumed that the trickle down effects will reduce and abolish
dualism. In this line of thinking, the main problem is capital
formation because its degree determines the scopeand speed of expansion of the modern sector. In general, agriculture has to provide the resources, labour as well as capital, for expanding the modern sector.
1.2 Strategy Theories of Development
Underdevelopment from the viewpoint of these theories is the result of
vicious circles of factors. One example is based on the fact of low real
income in developing countries which is the result of low labour
productivity. This low labour productivity, in turn, is a consequence of
capital shortage which is a result of the population’s low saving
ability. As the saving rate is determined by the low real income, the
circle is closed. The illustration below summarizes this cycle of factors
Strategy theories intend to break up this cycle at a certain point which
they consider critical and which varies according to the different
theories. Thus, they want to initiate development and transform
traditional subsistence economy into a modern market economy.
Their main emphasis is on capital formation and investment (investment
theories) and, by and large, they prescribe action for overcoming
underdevelopment while they contribute little towards explaining the
causes of underdevelopment.
1.2.1 Theory of Balanced Growth
This theory sees the main obstacles to development in the narrow market
and, thus, in the limited market opportunities. Under these
circumstances, only a bundle of complementary investments realized at
the same time has the chance of creating mutual demand. The theory
requests investments in such sectors which have a high relation between
supply, purchasing power, and demand as in consumer goods industry, food
production, etc. The real bottleneck in breaking the narrow market is
seen here in the shortage of capital, and, therefore, all potential
sources have to be mobilized. If capital is available, investments will
be made. However, in order to ensure the balanced growth, there is a
need for investment planning by the governments.
Development is seen here as expansion of market and an increase of
production including agriculture. The possibility of structural
hindrances is not included in the line of thinking, as are market
dependencies. The emphasis is on capital investment, not on the ways and
means of achieving capital formation. It is assumed that, in a
traditional society, there is ability and willingness for rational
investment decisions along the requirements of the theory. As this will
most likely be limited to small sectors of the society, it is not
unlikely that this approach will lead to super-imposing a modern sector
on the traditional economy, i.e., to economic dualism.
1.2.2 Theory of Unbalanced Growth
Contrary to the theory of balanced growth, in the opinion of this
theory, the real bottleneck is not the shortage of capital, but lack of
entrepreneurial abilities. Potential entrepreneurs are hindered in their
decision-making by institutional factors: either group considerations
play a -great role and hinder the potential entrepreneur, or
entrepreneurs aim at personal gains at the cost of others and are thus
equally detrimental to development. In view of the lack of
entrepreneurial abilities there is a need for a mechanism of incentive
and pressure which will automatically result in the required decisions.
According to the theory, not a balanced growth should be aimed at, but
rather existing imbalances— whose symptoms are profit and losses—must be
maintained. Investments should not be spread evenly but concentrated in
such projects in which they cause additional investments because of
their backward and forward linkages without being too demanding on
entrepreneurial abilities. Manufacturing industries and import
substitutions are relevant examples. These first investments initiate
further investments which are made by less qualified entrepreneurs.
Thus, the strategy overcomes the bottleneck of entrepreneurial ability.
The theory gives no hints as to how the attitude of entrepreneurs and
their institutional influence will be changed in time.
1.2.3 Theory of Stages of Growth
This theory tries to explain the long-term processes of economic
development from the point of view of economic history by describing
five ideal types of stages through which all societies pass:
- ‘Traditional Society Stage’
The ‘traditional society’ has more than 75 per cent of the
population engaged in food production, and political power is in the
hands of landowners or of a central authority supported by the army
and the civil servants. - ‘Transitional Stage’
The ‘transitional stage’ creates the preconditions for take-off by
bringing about radical changes in the non-industrial sectors. Export
of raw material gains momentum; a new class of businessmen emerges;
and the idea of economic progress coming from outside spreads
through the elite. - ‘Take-off Stage’
The ‘take-off stage’ brings a sharp increase in the rate of
investment in the per capita output. This stage of industrial
revolution is accompanied by radical changes in the production
techniques. Expansion takes place in a small group of leading
sectors at first and, on the social side, is accompanied by the
domination of the modern section of society over the traditional one. - ‘Drive to Maturity stage’
The ‘drive to maturity’ brings a spread of growth from the leading
to the other sectors and a broader application of modern technology
followed by necessary changes in the society at large. - ‘Stage of High Mass Consumption’
The ‘stage of high mass consumption’ can be reached after attaining
a certain level of national income and formulating an economic
policy giving priority to increased private consumption.
The critical phase for development is the ‘take-off stage’ during which
net investment rates have to increase from 5 to 10 per cent of the
national product and during which the political, social, and
institutional framework has to be built in order to reach a situation of
selfsustained growth. The financial resources must be accumulated
internally by higher saving rates. Income distribution favoring classes
and strata which are willing and able to use capital more productively
than others has the same effect.
1.2.4 ‘Big-push’ Theory
This theory is an investment theory which stresses the conditions of
take-off. The argumentation is quite similar to the balanced growth
theory but emphasis is put on the need for a big push. The investments
should be of a relatively high minimum in order to reap the benefits of
external economies. Only investments in big complexes will result in
social benefits exceeding social costs. High priority is given to
infrastructural development and industry, and this emphasis will lead to
governmental development planning and influence.
1.2.5 Theory of Development Poles
The promotion of regional development centers will serve as focal point
and incentive for further development. Such a regional concentration
helps to reap the benefits of technological external economies and makes
the growth centre attractive to entrepreneurs, thus initiating further
development. This theory is a sort of ‘regional unbalanced growth
theory’ which uses temporary regional imbalances to initiate
development. Little attention is given to the process which is necessary
to ensure a spread or linkage from the centers to the hinterland without
which the poles may transform the economy of the region into a dual economy.
1.2.6 Theory of Circular Causation
This theory opposes the strategy of development poles because social
systems and economic processes do not develop towards equilibrium but,
on the contrary, factors tend to cumulate to positive or negative
cycles. In principle, the theory is a negation of the monocausal
explanation of problems of developing countries by economic factors
alone. Rather, in a comprehensive way, all social relations have to be
incorporated. At national level—different stages of development between
regions—as well as international level—trade between industrialized and
developing countries—differences tend to increase because of the spread
effects in the more developed areas and modern sectors and backwash
effects in backward areas and traditional sectors. For instance,
industrial import
goods are in competition with traditional crafts; terms of trade
deteriorate; capital is being transferred, etc. The direction of
processes depends on the initial situation and the factors causing the
change. Under the conditions in developing countries, increased regional
dualism often is a consequence of such processes of circular causation.
1.3 Social-Psychological Theories of Development
In the dualism and (economic) strategy theories discussed so far,
underdevelopment and development are explained by economic factors alone
while individual or group values and motivations are neglected. The
social-psychological theories consider these very factors as main
determinants of underdevelopment and development. Thus, they add a new
component to the discussion. Because they reduce the causes to aspects
of one discipline, like economic theories, they are partial explanations
as well.
1.3.1 Sociological Explanation of Socioeconomic Change
One of the earliest and widely discussed concept is Weber’s treatise
“Protestant Ethics and the Spirit of Capitalism” in which he combines
Psychological & Sociological variables with economic development.
Because of its determination of the value systems of societies, he put
primary importance on religion. According to Weber, the Protestant
religion was a precondition for capitalistic development for two reasons:
Protestant ethics led to an ascetic life style which, instead of
advocating affluence, reinvested the proceeds. As well, it is the basis
of rationalism and goal achievement behavior. While a value system which
motivates economic development can hardly be limited to
Protestantism Weber’s stress on values and the resulting motivation
influenced later thought.
1.3.2 Theory of Social Change
Based on the assumption that a level of development is correlated with
achievement motivation, this theory attempts to explain why this
achievement motivation varies between societies and their classes and
strata. It argues that in traditional societies the status of
individuals is fixed. Children learn to act according to established
norms, and deviations (initiative!) are punished. If by external
influences a new group gains power, the status of the old elite is
challenged and weakened. The insecurity and frustration leads to changed
behavior which has consequences on the family structure. Children tend
to become dissatisfied with the society and readily accept new values.
In time, they become innovative personalities. If these persons become
dominant groups in the society, this causes economic development.
Similar phenomena may happen as far as the changing situation of
marginal groups or minorities is concerned.
2. Dependency Theories
According to dependency theories, the cause of underdevelopment is the
dependence on industrialized countries while internal factors of
developing countries are considered irrelevant or seen as symptoms and
consequences of dependence. The development of industrialized countries
and the underdevelopment of developing countries are parts of one
historical process. Developing countries are dependent countries. The
economic and political interests of industrialized countries determine
their development or underdevelopment. The goals are superimposed.
Underdevelopment is not backwardness but intentional downward
development. As to the causes of dependence, the various theories
differ, economic factors always dominating. External trade theories
concentrate on economic relations between countries. Imperialism
theories stress the politico-economic interest while dependency theories
concentrate on the deformation of internal structures by dependence
which perpetuates the situation. Dependency theories concentrate on
explanations of the genesis of underdevelopment and pay little attention
to strategies for overcoming this situation. Implicit development here
means liberation, end of structural dependence, and independence.
2.1 External Trade Theories of Development
The structure of supply and demand in industrialized and developing
countries is such that industrialized countries are able to reap the
benefits from international trade. This transfer of resources makes
development impossible, and these unequal trade relations are seen as
the reasons for underdevelopment.
2.1.1 Theories of Circular Deterioration of Terms of Trade
The structure of supply and demand is such that industrialized countries
offer industrial products and buy raw products and the developing
industries do the reverse. According to Engel’s law, the demand for raw
materials tends to be inelastic while the demand for industrialized
goods is elastic. The technological progress in the production of
industrialized goods not only makes it possible for industrial countries
to increase their incomes and thus the standard of living, but, because
of the elastic demand on the world market, also to enforce higher
prices. The situation in developing countries is the opposite:
technological progress in primary production results in lower prices
because of the inelastic demand. This mechanism leads to deteriorating
exchange relations between industrialized and developing countries (and,
as well, between the industrialized and the agricultural sector in
developing countries).
2.1.2 Theory of Immiserizing Growth
This theory follows the argumentation of the theory of circular
deterioration of terms of trade and concludes that countries, in order
to improve their balance of trade, have to increase their exports to
compensate for falling prices. This means a further deterioration of
terms of trade. The unchanged structure of supply intensifies the
structural dependency and, regardless of growth, there is no development
but only ‘immiserizing growth’- impoverishing growth. This situation is
especially pertinent for countries with agrarian monoculture. As a
consequence, the theory seeks for a speedy industrialization including
heavy industry for larger countries.
2.2 Imperialism Theories
The imperialism theories explain the domination of underdeveloped areas
by industrialized countries as the consequence of different economic and
technological levels and unequal power potential resulting from a
different economic growth. The consequence of the development of
industrial capitalistic societies is a pressure for expansion which may
lead to military or political acquisition (colonies) or to maintaining
economic dependence (developing countries). Different theories have
their own explanation of the reason for the pressure for expansion but
it is always seen as the result of the inability to cope internally with
the consequences of permanent technological innovation and their effects
on the society.
2.2.1 Classical Imperialism Theory
The desire for profit maximization causes production beyond the needs of
the internal market and leads to the establishment of new markets in
underdeveloped areas. Here, the autochthon production and markets are
being destroyed and, thus, unemployment is exported to underdeveloped
areas. Thus, capital is being exported in order to maximize profits. In
the underdeveloped areas, this capital is invested, not according to the
needs of these countries, but according to the interests of industrial
countries. The profit is transferred to the industrial countries whose
development is based on the exploitation of underdevelopment areas.
2.2.2 Modern Imperialism Theory
The thesis of classical imperialism theory has been disproved
empirically. New imperialism theories therefore, postulate the
dependency theorem with a new explanation of exploitative relations. The
new phase of relation between industrialized and developing countries
can be called technological-industrial dependence. Industrial countries
invest in the production and export of raw materials in developing
countries, influence with their potential of power the terms of trade in
their favor, and thus perpetuate the international division of labour.
While imperialism is seen as a phenomenon of capitalism and these
theories are based on Marxian concepts, the fact remains, nevertheless,
that communist countries also participate in the exploitation of
developing countries by accepting the advantages of the world market.
Towards a General Theory of Development and Underdevelopment
All the theories discussed in this chapter are only partial theories.
They explain certain aspects but do not fully explain the cause of
underdevelopment. The explanation is more adequate for certain
historical situations and specific conditions of production while they
are less relevant for others. They offer a strategy for overcoming the
prevailing situation and initiating development which may be suitable
under certain economic and social conditions but are not applicable to
others.
A general theory of development is still lacking. Drawing up such a
general theory is indeed a difficult task; it would have to include:
- an explanation of underdevelopment for different countries;
- an explanation of the development process of industrialized
countries; and - a strategy for overcoming underdevelopment in developing countries.
- all relevant disciplines and their interdependence;
- the different levels at which development takes place, from the
local to the international level; - the processes and relations between the different sectors and strata
of society and economy; and - the international dimensions of the development process
While the system theory opens up the possibility of organizing such a
vast theoretical body, the activities of different researchers hitherto
have not yet been successful. Even in the absence of a concise theory to
guide political activities, decision-makers must have some yardsticks to
measure whether their strategies and tools will achieve the goals of the
society. Here, goals play an important role. While, in detail, the
question of goals in the development process is a political question,
and difference of opinion and conflict are possible, at a high level of
abstraction, universal agreement seems to be possible.
It is widely agreed that preservation of human dignity and fulfillment
of basic needs are the foremost duties of every society. While there is
wide agreement on this goal, differences of opinion exist on the
question of the degree to which these basics should be supplied and, as
well, how they should be supplied. These differences allow for different
paths of development. From the common denominator “basic needs,” one can
deduct five basic goals of development:
- economic growth to secure food and other requirements for the
population; - social justice to reduce inequality;
- employment as means of earning an income but, as well, because of
its ethical and social value; - participation as political involvement and social sharing;
- independence as freedom from external domination
While individual societies may have different opinions on the priorities
of these goals, in the absence of a general theory of development; one
can use the criterion of fulfillment of these goals as a yardstick in
development. Development is then understood as a simultaneous progress
towards these five goals.
Root Causes of African Underdevelopment
Different researches on the causes of African underdevelopment emphasize
varieties of factors as the root causes of African underdevelopment.
Among these the most important ones can be grouped into the following
categories: (a) hostile natural environment, (b) archaic production
technology, (c) demographic factors, (d) slave trade, (e) colonialism
and its extractive institutions, and (f) political instability and
predatory states.
- Hostile Natural Environment
Most of the African landmass lies within the tropical climate; this made
the vast areas of the interior continent home to malaria and tsetse fly
which afflict humans and animals respectively. This has led some
researchers on the causes of African underdevelopment to test the
hypothesis of malaria as the dominant cause of the underdevelopment in
the continent. A significant number of recent studies tend to support
the malaria view both at the macro as well as micro level. It is an
established fact that low mortality as a result of better health
contributes to economic growth. In addition to malaria the animal
disease carrying tsetse fly, which is found all over the
continent and can incapacitate draught animals, may itself explain the
traditional low use of ploughs and other animal-drawn implements and
hence the lower productivity of the agricultural sector. - Archaic Production Technology
For centuries the African continent depended on archaic methods of
agricultural production. Even the use of ploughs and other animal drawn
implements were limited. The agricultural revolution and the use of iron
tools came to sub-Saharan Africa later than to other parts of the world
An important reason for the continent’s technological underdevelopment
is the geographical obstacles to communication both internally and with
the rest of the world. The Sahara has been a barrier in the north, and
the Atlantic coast had no contact with the rest of the world until the
first Europeans arrived around 1500. Influence from the Arab world and
India came mainly via the Nile Valley and the East African coast, and
had little spillover effect further inland. With the exception of the
Niger and the Nile, the continent’s rivers with their large waterfalls
have not provided a navigable route to the interior, in contrast to the
rivers of Europe and Asia. The problems of today’s land-locked states
illustrate the great importance of communication for economic and
cultural development
- Demographic Factors
` Africa’s demographic history has been characterized by low density of
population and continuous migration and settlement of new areas. The
continent with a massive land mass of over 30 million km2 has
inhabitants less than that of India at present. Migration has continued
right up to the present day, and there is still more migration on this
continent — including migration between urban and rural areas — than
anywhere else in the world. This continued migration may be due to a
hostile geographical environment that debilitates the livelihoods of the
population.
However, at present the demographic picture of the continent is totally
different. Rapidly growing population with limited demographic windows
of opportunity has caused further strain on the development efforts and
environmental sustainability in the continent. Rapid deforestation
following population explosion has further aggravated the environmental
problems. The rapid deforestation is fueling desertification with its
negative impacts on agricultural production in many parts of sub Saharan
Africa. Consequently, Africa is more food insecure today than the era of
wooden agricultural implements.
- The Slave Trade
The slave trade theory is one of the dominant views on the historic root
causes of the African underdevelopment. According to this view, Africa’s
engagement in slave trade caused massive depopulation of the continent
over two centuries. Furthermore, the African countries with the biggest
slave exports are by and large the countries with the lowest incomes now
(based on per capita gross domestic product in 2000). It has been shown
that slave trade prevented state development, encouraged ethnic
fractionalization and weakened legal institutions and through these
channels it affected economic development. The export of an estimated 12
million people across the Atlantic, and possibly a similar number to the
Arab world in the course of a full millennium may have been
a factor in Africa’s lower population growth compared with that of other
continents. - The Colonial Extraction System
Colonialism in Africa took different form compared to Asia. Unlike in
Asia, hostile tropical environment prevented colonizers from settling in
Africa as a result of which they erected extractive institutions in
these colonies. These colonial institutions have persisted over time and
they continue to influence the economic performance of the colonies even
long after independence. Research, shows that colonial extraction when
severe enough can cause a society to move from a high to low production
level equilibrium. Due to the stability of low level equilibrium, a
society can remain trapped in this equilibrium even after the period of
colonial extraction is
over. However, many African as well non-African scholars do not agree on
the link between colonial extraction and the current underdevelopment in
Africa. Ethiopia was never colonized but it is one of the least
development countries in the continent while many Asian countries which
have achieved development miracle since 1960s have been former European
colonies.
However, there is one crucial link between colonialism and
underdevelopment in Africa. This is the creation of a political map that
is economically irrational and dysfunctional. Colonialism created
artificial and non viable nation states that lacked legitimacy. This is
the root cause of continued ethnic conflicts and civil wars that ravage
the continent since the day of decolonization. Thus unless Africa does
away with the current artificial colonial boundaries either through
realignment of the current state boundaries wherever there are
contestations or through more regional integration similar to the
European model but not through hasty “United States of Africa” rhetoric,
the continent will never achieve sustainable development.
- Postcolonial Political Instability
The post colonial Africa has been characterized by lack of political
stability. Post independence African politics was dominated by
authoritarian regimes and kleptocracies. These rent seeking dictators
often intentionally sow seeds of ethnic conflicts by deliberate
political exclusion and marginalization of various ethnic groups that
reside within the country. Even after two decades of democratic reforms
in the continent, today about 50% of authoritarian states in the world
are found in Africa. About 24 out of 54 states in Africa are
authoritarian regimes. Only Mauritius qualifies as a full democracy in
the continent out of about 30 full democracies in the world while 6 more
countries in the continent are flawed democracies
