Professional Documents
Culture Documents
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To Marx, the survival and growth of capitalism was very
much dependent on the exploitation of human, natural
material resources of Third World.
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However, the neoliberal policies of the capitalism draws
inspiration from the classical political economy of 18th
and 19th century represented by Adam Smith (1723-
1790), Thomas Robert Malthus (1766-1834), David
Ricardo (1772-1832) and John Stuart Mill (1806-1873).
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At the same time specialisation would also increase as a result
of the competition.
4
David Ricardo: he was the first one to elaborate on the Adam
Smith’s political economy, especially on Land-rent, distribution
and the theory of comparative advantage.
Hence, the utilization of poor and poorest land would cause the
land value/rent to go up, mainly due to the farmers
competition for the better and more profitable land.
5
According to David Ricardo, this process would result in
a redistribution of national income to the benefit of
landed aristocracy and to the detriment of industrialists.
6
According to Ricardo, only technical innovation
and international trade could prevent this sad
outcome.
7
In accordance with this basic thesis, Ricardo suggested
that non-industrialised countries such as Portugal should
refrain form trying to build up industries and instead
concentrate on production of, for instance, wine.
Industrialised countries like England on the other hand
should produce and exchange products such as textile
and clothing for Portuguese.
Malthus:
◦ According to his theories, population increase faster than
resources. So countries should concentrate their efforts on
population control in order to achieve the target of growth.
8
Karl Marx (1818-1883), he took holistic view of the
development. He was interested in the totality of
the society.
9
He divided society into
Base Masses/Workers
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To him, the most important source of growth were
valorisation of and accumulation compulsion which
individual capitalist are subject to.
11
The process embodies, natural tendency on the
part of the capitalist to invest in technical
innovation in order to marginalise workers and
finally this would lead to joblessness and its growth.
Joseph Schumpeter:
According his theory growth as the gradual
extension of capitalist apparatus and increasing
production.
12
He asserted that development could occur only
when technical innovation introduced new
production techniques, new products or new means
of organising production.
13
John Maynard Keynes: in his book on the General Theory
of Employment, Interest and Money did not focus on
growth and conditions in the colonies but rather
discussed relationship between state and market.
14
It was in this context that the IMF and World Bank were
formed in 1944 with the objective to help the development
process in Europe and bring financial stability by controlling
exchange control and providing liquidity to the members
states facing problem of balance of payment.
15
Development saw the economic development in terms of
the redistribution of the growth and more so in terms of the
social development of the society.
16
They are mainly concerned with how traditional values,
attitudes, practices and traditional structures break down
and replaced with more modern one.
17
He further expanded his argument into the theory of ‘Big
Push’, according to which the backward areas were
characterised by low income and little buying power.
18
To him , for example, one of the major impediment to the
growth is the cost being incurred on the training of workers.
19
Nurkse
He further developed many of Rodan’s points.
When demand is low and market limited then there will not be
much incentive to make private investment.
20
As a result no productivity improvement occurs and income
therefore remain low.
21
To break out of this these poverty circles, according to
Nurkse, the creation of strong incentives to invest along
with increased mobilisation of investible funds.
22
Demand side
low level of
capital formation
limited market
23
Supply side
Low income
Lack of capital
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Unbalance growth and income distribution.
Hirschman and Kuznets
Unlike Rosenstein Rodan and Nurkse, Hirschman rejected the
notion that growth process could be initiated with balanced capital
investment in several sectors.
25
According to them if the country were ready to apply the
doctrine of balanced growth hen it would be
underdeveloped.
27
Subsistence sector was characterised by being based primarily on family
labour, by not using reproducible capital and by low labour productivity.
It was in the subsistence sector that the abundant labour reserves were
fond not necessarily in the shape of many unemployed but rather in the
shape of many underemployed.
28
Lewis’s answer to this central problem was that the poor in
the subsistence sector and workers in the capitalist sector
could not produce increased savings, because they were
simply too poor to save a significant proportion of their
income.
29
Rostow like Lewis, differentiated between the traditional
sector and modern capitalist sector.
30
Rostow divided the development process in the following five stages:
◦ Traditional Society.
◦ The establishment of the precondition for take off.
◦ Take off stage.
◦ The drive to maturity
◦ The epic of high mass consumption.
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