2.

Perspectives onDevelopment
CriticalAnalysis ofTheories
One of the most important skills you will need to learn as a student, whatever your discipline is the
ability to think critically and objectively about an issue and to present a well-constructed argument.
Critical and analytical-thinking skills such as these will be essential to most aspects of your study,
whether you are listening to lectures, contributing to seminars, or reading about your subject.
Argument here doesn’t mean disagreement or unpleasantness. It simply means presenting a strong
case to support a point of view. You don’t have to be an argumentative person to do this: on the
contrary, good critical writing means using reasons and evidence to support your stand point.
 Identify the focus of the assignment
 Identify your own point of view
 Consider how you’ll persuade other people of your point of view
 Find the proof
 Engage in debate
 Structure your argument

Schultz'sTransformationofTraditionalAgriculture
Less developed country has adopted the agriculture as main occupation. They adopted traditional
technology so they are getting less production and facing the problem of poverty and lack. Noble
prize laureate TW Schultz explains in his book ‘Transforming Traditional Agriculture” that
traditional technique should be changed into new technology so that the way of prosperity can be
achieved. He gave the example of India and Guatemala. Traditional agriculture system of Subsistence
cultivation system should be changed. He emphasized that less developed country are weak and poor
because of their low productivity due to traditional way of farming. For modernization of traditional
agriculture new technology and more investment is required.
Feature of traditional agriculture:
 Depend in traditional technique and resource
 Depend in monsoon
 Subsistence occupation
 Source of employment for most of ruler people
 Producer not willing to change
 Law investment
 Low productivity
 Integral part of traditional cultural
 Inefficient allocation of resource

According to Schultz three stage will come across while improving the traditional agriculture:
1. Traditional stage- Long term and stable. Balance in supply and demand.
2. Transitional stage-Called economic unstable stage. Create unbalance in production investment
and productivity.
3. Modern stage- Uses advance technology. By using cheap production material and less
investment farmer can invest minimum amount, increase productivity and help in economic
growth and development.

Criticism
a. For the transformation of agriculture system economic, social, cultural, institutional,
administrative barrier cannot be overcome by poor country. In poor country land is divided,
the production and market is uncertain so the farmer are demoralized. So only by increasing
investment and using modern technology agriculture sector cannot be modernized.
b. Inefficiency of factor allocation: Feudal system of poor country does not allow proper
allocation of all factor of agriculture.
 c. Responsibility of farmer is not mentioned: Responsibility and reward system is not mentioned
clearly.
d. Prevalence of unseen unemployment: There is huge number of hidden unemployment in
agriculture already if modern technology is used the unemployment will be rise even more.
e. Self-contradictory: He is not aware about the change in allocation of land and productivity
f. Command approach: Skultz prefer market approach rather than command approach which is
unrealistic.

Lewis’ Theory of Unlimited Supply of Labor

The Nobel Laureate, W. Arthur Lewis in the mid-1950s presented his model of unlimited supply of
labor or surplus labor economy. By surplus labor it means that part of manpower which even if is
withdrawn from the process of production there will be no fall in the amount of output. According to
his surplus supply of labor can be used for capital forming tools.

Basic Thesis of the Lewis Model:

Lewis model is a classical type model which states that the unlimited supplies of labor can be had at
the dominant subsistence earnings. The industrial and advanced modern sector can be developed on
the basis of agri. to traditional sector. This can be done by transferring the labor from traditional
sector to modern sector.
 
Lewis says that the wages in industrial sector remain constant. Though the wages have been assumed
constant, yet Lewis says that the urban wages are at least 30% higher than average rural income to
induce the workers to migrate from their home areas.Consequently, the capitalists will earn 'surplus'.
Such surplus will be re-invested in the modern sector leading to absorb the labor which are migrated
from subsistence sector. The speed with which this expansion occurs is determined by the rate of
industrial re-investment, increase in employment and capital accumulation in the modern sector.

Assumptions of the Lewis Model:

 According to Lewis, the supply of labor is perfectly elastic. In other words, the supply of
labor is greater than demand for labor.
 The production in the advanced sector is higher than the production in traditional and
backward sector.
 The subsistence sector does not make the use of 'Reproducible Capital', while the modern
sector uses the produced means of capital.
 The aim of capitalist is to acquire more profit.
 Labor cost if capitalistic sector is stable.
 Training cost for producing capable labor is stable.
 There is a duel economy i.e., the economy is characterized by a traditional, over-populated
rural subsistence sector furnished with zero MPL, and the high productivity modern urban
industrial sector.

The followings are the sources of unlimited supply of labor in UDCs.

 The high birth rate in UDCs leads to grow unemployment.
 In UDCs so many people are having temporary and part time jobs, as the shoe-shines,
loaders, porters, waiters etc. There will be no fall in the production even their number are one
halved.
 The women in UDCs do not work, but they just perform house-hold duties. Thus they also
represent unemployment.
Criticism on the Lewis Model:
 Migration is not Easy Task-The migration of labor force from subsistence to capitalist sector is not
as easy as is pointed out in the Lewis model. It has been observed that of all the commodities,
labor is difficult to transport. The laborers have so deep affection for land and homes that they
can’t think of leaving them. Higher capitalist wage will not lead to the movement of surplus labor
from subsistence sector to capitalist sector, people are so intensely attached to their family and
land and they do not want to leave their kith and kin. The differences in languages and customs
the problems of congestion, housing and high cost of living in the capitalist sector stand in the
way of mobility of labor of this sector.
 Process of Migration is Neither Smooth nor Costless: Lewis assumed that the transfer of unskilled
labor from agri. to industry is regarded as almost smooth and costless.
 Peak Harvesting and Sowing Season: Continuous flow of labor is only hypothetical. If it is made
compulsory effect negatively and reduce agricultural output
 Productivity falls with Migration of Labor-Prof. Lewis assumes that when surplus labor is
withdrawn from subsistence sector to capitalist sector, the agricultural production remains
unaffected in the subsistence sector. But the with-drawl of workers from the farms will reduce
output.
 Limited Supply of Skilled Labor- Another limitation of this model is that if we assume unlimited
supply of unskilled labor, then, the supply of skilled labor is definitely limited in underdeveloped
countries.

 Proportionality between Employment Creation and Capital Accumulation: But if the capitalists

reinvest their profits in the labor-saving capital equipment rather increasing the labor employment
the jobs will not be created and modern sector will not expand.
 Rise in Urban Wages: According to Prof. Mabro the absorption of surplus labor itself may end
pre-maturely because competitors (producers) may alter wage rates and lower the share of profit.
Moreover, the wages in industrial sector were forced up directly by unions, civil service wage
scales, minimum wage laws and MNCs (multi-national corporations) hiring practices tend to
negate the role of competitive forces in the modern sector labor market.
 Full Impact of Growing Population : Lewis model underestimates the full impact on the poor
economy of a rapidly growing population, i.e., its effects on agri. surplus, the capitalist profit
share, wage rates and overall employment opportunities. If industrial development involves more
intensive use of capital than labor, then the flow of labor from agri. to industry will simply create
more unemployment.

 Ignoring the Role of Leakages: As Lewis assumed that all of increase in profits are diverted into
savings. But the increase in profits may accompany the increase in consumption.
 Ignoring the Balanced Growth: Lewis ignored the balanced growth between agri. sector and
industrial sector.

 Unequal distribution of Income- This model is criticized on the ground that it perpetuates unequal
distribution of income. The migration of rural population to urban sector, the supply of labor
increases and the competition among the job seekers pushes the wages down which results in
widening the income gap.

 Savings are not done by Capitalist Sector Alone- It is not true to say that bulk of saving is done by
the capitalist sector alone in LDC. Lewis himself admits this particularly in case of Japan where
bulk of saving is done by the low income groups.
 Multiplier process does not operate in LDC- This model assumes that capital accumulation takes
place when the capitalist class reinvest profits. It pre-supposes the operation of investment
multiplier which is not applicable for UDC.
 Inefficient Tax Administration-Prof. Lewis’s argument that taxation will mop up increasing
income, cannot be accepted because that tax administration in underdeveloped countries is not so
efficient and developed. Thus, it hinders the proper operation for capital accumulation especially
in these countries.

 Unrealistic Assumption- The theory assumes a constant wage rate in the capitalist sector until the
supply of labor is exhausted from subsistence sector. This seems to be unrealistic because the
wage rate continuously rises over time in the industrial sector of an underdeveloped economy.
 One Sided Theory- Prof. Lewis does not consider the possibility of progress in agricultural sector,
thus, it is one sided theory. As the industrial sector develops with the transfer of surplus labor, the
demand for food and raw materials will rise, which will, in turn, lead to growth in agricultural
sector.

Rostow’s Stages of Economic Growth

The Rostow's Stages of Economic Growth model is one of the major historical models of economic
growth. It was published by American economist Walt Whitman Rostow in 1960. The model
postulates that economic growth occurs in five basic stages, of varying length:
1. Traditional society
2. Preconditions for take-off
3. Take-off
4. Drive to maturity
5. Age of High mass consumption

Rostow argued that economic take-off must initially be led by a few individual sectors. Initial
development of only one or two sectors effect over the development of all sectors equally. This
became one of the important concepts in the theory of modernization in social evolutionism.

Traditional society
 Dominance of agriculture
 Low agriculture productivity
 Traditional technique
 Unproductive expenditure
 Lack of capital formation
 Ignorance about development avenue
 Dominance of family and cast system
 Political power is in the hand of landlord
 This stage is characterized by a subsistent, agricultural based economy, with intensive labor
and low levels of trading, and a population that does not have a scientific perspective on the
world and technology.
 Characterized by subsistence agriculture or hunting and gathering; almost wholly a
"primary" sector economy
 A static or 'rigid' society: lack of class or individual economic mobility, with stability
prioritized and change seen negatively

Pre-conditions to "take-off"
It is also called transitional phase. Technology is used in agricultural and industrialization is started.
Society started jump from traditional thinking to modern one. Transportation, communication,
education is found to be developed gradually.
 Increase in investment and saving up to 5%
 There are three important dimensions to this transition: firstly, the shift from an agrarian to an
industrial or manufacturing society begins, albeit slowly.
  Secondly, trade and other commercial activities of the nation broaden the market's reach not
only to neighboring areas but also to far-flung regions, creating international markets.
 Lastly, the surplus attained should not be wasted on the conspicuous consumption of the land
owners or the state, but should be spent on the development of industries, infrastructure and
thereby prepare for self-sustained growth of the economy later on.
 Furthermore, agriculture becomes commercialized and mechanized via technological
advancement; shifts increasingly towards cash or export-oriented crops; and there is a growth
of agricultural entrepreneurship.
 Expansion and development of infrastructure
 Technological advancement
 End of conservation
 Decline in birth rate.
 Stress in the development of transport
 A society begins to develop manufacturing, and a more national/international, as opposed to
regional, outlook.
 External demand for raw materials initiates economic change;
 Development of more productive, commercial agriculture and cash crops not
consumed by producers and/or largely exported
 Widespread and enhanced investment in changes to the physical environment to
expand production (i.e. irrigation, canals, ports)

Take off
It is a conclusive stage of social development. It has fixed the sustainable, social development and
mobility and self-growth. Export, import, foreign capital attraction is started. Technological
advancement, high per capita income rate and political change are the feature of this stage.

 The rate of productive investment should rise from approximately 5% to over 10% of national
income or net national product.
 Urbanization increases, Industrialization proceeds, Technological breakthrough occurs.
 The main feature of this stage is rapid, self-sustained growth. 
 The development of one or more substantial manufacturing sectors, with a high rate of
growth.
 The "secondary" (goods-producing) sector expands and ratio of secondary vs. primary sectors
in the economy shifts quickly towards secondary
 Textiles and apparel are usually the first "take-off" industry, as happened in Great Britain's
classic "Industrial Revolution"
 Development of leading sector-primary growth sector(clothe, railway), supplementary growth
sector(iron, coal), derived growth sector(population increase so that housing increase)
 The existence or quick emergence of a political, social and institutional framework which
exploits the impulses to expansion in the modern sector and the potential external economy
effects of the take-off”. ie. the needed capital is mobilized from domestic resources and is
steered into the economy and not into domestic or state consumption.
 Rostow describes this stage as a short period of intensive growth, in which industrialization
begins to occur, and workers and institutions become concentrated around a new industry.
 After take-off, a country will generally take as long as fifty to one hundred years to reach the
mature stage according to the model, as occurred in countries that participated in the
Industrial Revolution and were established as such when Rostow developed his ideas in the
1950s.

Take off requires a large and sufficient amount of loanable funds for expansion of the industrial
sector which generally come from two sources which are:
 1. Shifts in income flows by way of taxation, implementation of land reforms and various other
fiscal measures.
2. Re-investment of profits earned from foreign trade as has been observed in many East Asian
countries.
3. The take-off also needs a group of entrepreneurs in the society who pursue innovation and
accelerate the rate of growth in the economy.
Country Take-off period
Great Britain 1783-1802
United States 1843- 1860
Germany 1850-1873
Russia 1890- 1914
Canada 1896- 1914
China 1952
India 1952

Drive to maturity
This stage takes place over a long period of time, as standards of living rise, use of technology
increases, and the national economy grows and diversifies.Diversification of the industrial base;
multiple industries expand and new ones take root quickly. Manufacturing shifts from investment-
driven (capital goods) towards consumer durables and domestic consumption.On comparing the
dates of take-off and drive to maturity these countries reached the stage of maturity in approximately
60 years.

 Rate of investment greater than 10%

 Increase in per capita income
 Increase in urban population
 Increase in wage rate
 Replacement of old technology by new technology
 Rapid development of transportation infrastructure
 Large-scale investment in social infrastructure (schools, universities, hospitals, etc.)
 Development of new leading sector
 The production of everything the society desires becomes possible,

The structural changes in the society during this stage are in three ways:
 Work force composition in agriculture shifts from 75% of the working population to 20%.
The workers acquire greater skill and their wages increase in real terms.
 The character of leadership changes significantly in the industries and a high degree of
professionalism is introduced. Relation between labor and management so that management
became more effective
 Environmental and health cost of industrialization is recognized and policy changes are thus
made.
 People feel monotonous with industrialization and started for new thing.

Country Take-off period

Great Britain 1850
United States 1900
Germany 1910
Russia 1950
Canada 1950
A prime example of a country in the Drive to Maturity stage is South Africa. It is developing a
world-class infrastructure- including a modern transport network, widely available energy, and
sophisticated telecommunications facilities. Additionally, the commercial farm sector shed 140,000
jobs, a decline of roughly 20%, in the eleven year period from 1988 to 1998.This diversity leads to
reduction in poverty rate and increasing standards of living, as the society no longer needs to
sacrifice its comfort in order to build up certain sectors.
Age of mass consumption
Life became easier and entertaining. Sustainable goods are available and the use of vehicle is
increased.
 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.
 The industrial base dominates the economy; the primary sector is of greatly
diminished weight in economy and society.
 Widespread and normative consumption of high-value consumer goods (e.g.
automobiles)
 Consumers typically (if not universally), have disposable income, beyond all basic
needs, for additional goods.
Feature
 Rate of investment greater than 20%
 Improve in life standard
 Formation of the basis of welfare state
 Near full employment situation
 Formation of labor union
 Increasing financial security
 Increase in the consumption in luxury
 Heavy increase in NI and PCI

The first generation is interested in economic development, the second in its position in society. The
third, already having money and prestige, concerns itself with the arts and music, worrying little
about those previous, earthly concerns. Historically, the United States is said to have reached this
stage first, followed by other western European nations, and then Japan in the 1950s.

Criticism of the model

1. Based on American and European history only.
2. Rostow's model does not apply to the Asian and the African countries as events in these
countries are not justified in any stage of his model.
3. The stages are not identifiable properly as the conditions of the take-off and pre take-off stage
are very similar and also overlap.
4. Invalid distinction between stage
5. Overlapping the stage
6. According to Rostow growth becomes automatic by the time it reaches the maturity stage but
Kuznets asserts that no growth can be automatic there is need for push always.
7. Difficult to proof
8. Possibility of failure not considered

StructuralTheories
………………………………………………………………………………………………………..

Marxian interpretations
Marxism is a method of socioeconomic analysis, originating from the mid-to-late 19th century
works of German philosophers Karl Marx and Friedrich Engels.
  Materialist interpretation of historical development
 Dialectical view of social transformation.
 Capitalism
 Class struggle
 Surplus value
 Bourgeoisie and proletarian
 Social revolution. Socialism
 Social ownership
 Classless, stateless, humane society

Materialistic Interpretation of History: The materialistic interpretation of history attempts to show

that all historical events are the result of a continuous economic struggle between different classes
and groups in society. The main cause of this struggle is the conflict between 'the mode of
production' and the 'relations of production’. This leads to the class struggle-the struggle between the
haves and the have-nots-which ultimately overthrows the whole social system.

Surplus Value: Marx uses his theory of surplus value as the economic basis of the 'class struggle'
under capitalism and it is on the basis of his theory of surplus value that he builds the superstructure
of his analysis of economic development. Class struggle is simply the outcome of accumulation of
surplus value in the hands of a few capitalists.If a laborer works for a ten-hour day, but it takes him
six hours' labor to produce goods to cover his subsistence, he will be paid wages equal to six hours'
labor.The difference worth 4 hours' labor goes into the capitalists pocket in the form of net profits,
rent and interest.

Capital Accumulation: According to Marx, it is surplus labor has leads to capital accumulation. This
supererogatory labor simply augments the capitalist's profits. The capitalists' main motive is to
increase the surplus value which goes to swell his profits.

Accordingly, Marx designates human history as encompassing four stages of development in

relations of production.
1. Primitive Communism: as in co-operative tribal societies.
2. Slave Society: a development of tribal to city-state; aristocracy is born.
3. Feudalism: aristocrats are the ruling class; merchants evolve into capitalists.
4. Capitalism: capitalists are the ruling class, who create and employ the proletariat.
5. Socialism or communist stage

DependencyTheory
Dependency theory originates with two papers published in 1949 – one by Hans Singer, one
by RaúlPrebisch – in which the authors observe that the terms of tradefor underdeveloped countries
relative to the developed countries had deteriorated over time: the underdeveloped countries were
able to purchase fewer and fewer manufactured goods from the developed countries in exchange for
a given quantity of their raw materials exports.

This theory propose the concept of center/core and periphery and show the dependency and as result
continuous poverty of periphery country. The theory arose as a reaction to modernization theory, an
earlier theory of development which held that all societies progress through similar stages of
development, that today's underdeveloped areas are thus in a similar situation to that of today's
developed areas at some time in the past, and that therefore the task in helping the underdeveloped
areas out of poverty is to accelerate them along this supposed common path of development, by
various means such as investment, technology transfers, and closer integration into the world market.
Dependency theory rejected this view, arguing that underdeveloped countries are not merely
primitive versions of developed countries, but have unique features and structures of their own; and,
importantly, are in the situation of being the weaker members in a world market economy.
Before 1950 theorist thought that Development of one place can positively impact other and they
also can gets the fruits of development. But it never help for the development of poor country but are
found to be suppressed and controlled by rich country and international organization. Rich country
import raw material from less developed country and sell the expensive product. So less development
country should produce the material themselves and should export instead. But they face the
following problem:
 Due to narrow market LDCs can’t produce commodities as cheap as developed country.
 Poorer country have less control over the primary products
 There is lack of political will of leadership to transform the economy,

Later, world systems theory expanded on dependency arguments. It postulates a third category of

countries, the semi-periphery, intermediate between the core and periphery.

Proposition of dependency theory

 Poor nations provide natural resources, cheap labor, a destination for obsolete technology,
and markets for developed nations, without which the latter could not have the standard of
living they enjoy.
 Wealthy nations actively perpetuate a state of dependence by various means. This influence
may be multifaceted, involving economics, media control,
politics, banking andfinance,education,culture, and sport.
 Underdevelopment is a condition fundamentally different from undevelopment.
Undevelopment is not due to non-use of resourcebut due to use of resources of poor country
by dominant country.
 Underdevelopment country are not poor due to their own reason but are poor because they are
forcefully adapted with world economic system by using their resources and cheap HR.
 The diversion of resource over time is maintain not only by the power of dominant state but
also through the power of elite in the dependent state.
 This theory suggest that poor country should use alternative use of resource rather than the
resource uses patterns imposed by the dominant state.
 Need of population should be taken as more important than the Need of government and
organization.
 This produces an unbalanced economic structure both within the peripheral societies and
between them and the centers.
 This leads to limitations on self-sustained growth in the periphery.
 This favors the appearance of specific patterns of class relations.
 Unequal exchange and trade imbalance
 Retarded development
 Raising dependency in various aspect
 Labor exploitation

Implication of this theory

 This type of relation should be break down.
 Focus on production and on equal distribution. Does not follow the policy of trickle down
policy.
 Focus on social indicator like life expectancy, infant mortality, literacy etc. rather than
economic indicator.
 Self-determination policy should be adopted rather than carrying the policy of WB, IMF etc.
Criticism
 Corruption. State-owned companies have higher rates of corruption than privately owned
companies.
 Lack of competition.
 Sustainability. Industries reliant on government support may not be sustainable for very long.
 Domestic opportunity costs. Subsidies on domestic industries come out of state coffers and
therefore represent money not spent in other ways, like development of domestic infrastructure,
seed capital or need-based social welfare programs. At the same time, the higher prices caused by
tariffs and restrictions on imports require the people either to forgo these goods altogether or buy
them at higher prices, forgoing other goods.
 With the economic growth of India and some East Asian economies, dependency theory has lost
some of its former influence. 
 South Korea and North Korea provide another example of trade-based development vs autocratic
self-sufficiency. In 2013 South Korea's per capita GDP was 18 times that of North Korea.

Strategies of d evelopment
Strategy in development refers to those major decision that go into making the development plan by
policy maker, private sector and other development agent. Thus the major element in the plan
strategy are the size of the plan, pattern of investment envisaged in the plan, the allocation of
investment among the various sector of economy, the technique of resource mobilization, the policy
mix appropriate fiscal policy, monetary policy, policy regarding controls extent of reliance on foreign
aid etc.
General Economic Development Strategies
The base of all economic development is investment. Three foundational principles on which
economic development investments should be based on: exports, productivity and sustainability. A
revenue source, tourism can be particularly changeable for a city and its hospitality industry, which is
subject to a national market of substitutes and changing tastes.
Strategy of development proposed following theory:
 Balance
 Unbalance

Balanced growth aims at harmony, consistency and equilibrium whereas unbalanced growth suggests
the creation of disharmony, inconsistency and disequilibrium. The implementation of balanced
growth requires huge amount of capital.On the other hand, unbalanced growth requires less amount
of capital, making investment in only leading sectors. Balanced growth is long term strategy because
the development of all the sectors of economy is possible only in long run period. But the unbalanced
growth is a short term strategy as the development of few leading sectors is possible in short span of
period.

Balanced(balance growth theory)

Balance growth implies that investment takes place simultaneously in all sector or industries at once,
more or less along the line of the slogan “you can’t do anything until you can do everything. It also focus
for pulling those sector which are in backward situation.

Rodan and Nurkse give the example of shoe factory and told that only shoe factory in particular place is
not beneficial but other kind of factory also should be established at that place for proper development of
all sector. The balanced growth theory is an economic theory pioneered by the economist Ragnar
Nurkse . The theory hypothesizes that the government of any underdeveloped country needs to make
large investments in a number of industries simultaneously. This will enlarge the market size,
increase productivity, and provide an incentive for the private sector to invest.

Nurkse and Paul Rodanwere in favour of attaining balanced growth in both the industrial and
agricultural sectors of the economy. He recognized that the expansion and inter-sectoral balance
between agriculture and manufacturing is necessary so that each of these sectors provides a market
for the products of the other and in turn, supplies the necessary raw materials for the development
and growth of the other.

Factor responsible in success of balance growth:

 Government can make balance amongst different sector, market, trade by positive
intervention and authentic support and policy measure
 Formation and implementation of plan
 Coordination amongst different sector of economy.
 Consensus on strategy execution for cooperation
 Infrastructure development and commitment
 Execute of different economic policy

Balance among sector:

 Balance between agriculture and industry
 Balance between Investment in human capital and production of the physical goods.
 Balance between internal and external trade
 Balance between demand and supply of factors.
 Balance between human capital and material output
 Balance between domestic and foreign trade
 Balance with in the industries
 Balance market equilibrium

Benefit of balance growth:

 Balance regional/sectoral development
 Division of labor
 Wide extension of market
 Better use of natural resources
 Promote innovation, invention and research
 Creation of social overhead capital(transportation, electricity, law and order, education)
 Expansion of market
 Creation of external economics
 Decrease foreign dependency
 Stability in prices of products and factor of production

Criticism of balance growth theory

 Beyond the reach of UDCs
 Shortage of resources
 Rise of cost of all resources
 Administrative inefficiency
 Government role ignored
 Dualistic pattern of development
 Premature theory
 Danger of inflation and deficit financing
Unbalanced (unbalance growth theory)
Unbalanced growth is a natural path of economic development. Unbalanced investment can
complement or correct existing imbalances. Once such an investment is made, a new imbalance is
likely to appear, requiring further compensating investments. Therefore, growth need not take place
in a balanced way.
The theory is generally associated with Hirschman. He presented a complete theoretical formulation
of the strategy. Underdeveloped countries display common characteristics: low levels of GNI per
capita and slow GNI per capita growth, large income inequalities and widespread poverty, low levels
of productivity, great dependence on agriculture, a backward industrial structure, a high proportion of
consumption and low savings, high rates of population growth and dependency burdens, high
unemployment and underemployment, technological backwardness and dualism. In a less-developed
country, these characteristics lead to scarce resources or inadequate infrastructure to exploit these
resources.

Hirschman contends that deliberate unbalancing of the economy according to the strategy is the best
method of development and if the economy is to be kept moving ahead, the task of development
policy is to maintain tension, disproportions and disequilibrium. Balanced growth should not be the
goal, but rather the maintenance of existing imbalances, which can be seen from profit and losses.
Therefore, the sequence that leads away from equilibrium is precisely an ideal pattern for
development. Unequal development of various sectors often generates conditions for rapid
development. More-developed industries provide undeveloped industries an incentive to grow.

Theorist like Hirchman, Rastow, Singer stressed that under developed country have the lack of
resource, capital and expert, they cannot invest and start the development in every field at a same
time so they have to focus on limited feasible sector so that it create unbalance and the complete
development will be achieved by the pressure of unbalance development.
Unbalance development can be created by:
 Unbalancing the economy through investment on direct productive activates. (lack of
infrastructure create unbalance and so that government will be pressurized for investment in
infrastructure development.
 Unbalancing the economy through investment on social overhead capital. ( then private sector
invest in productive activities)

The path of unbalanced growth is described by three phases:

1. Complementarity- Complementarity is a situation where increased production of one good or
service builds up demand for the second good or service.

2. Induced investment- Complementarity allows investment in one industry or sector to encourage

investment in others. This concept of induced investment is like a multiplier, because each
investment triggers a series of subsequent events.

3. External economies- New projects often appropriate external economies created by preceding

ventures and create external economies that may be utilized by subsequent ones. Sometimes the
project undertaken creates external economies, causing private profit to fall short of what is socially
desirable.
Advantage of Unbalance development theory:
 More realistic approach
 Skill formation
 Specialization
 Self-reliance
 Economic surplus
  External economics attracted
 Proper use of resource
 Market mechanism work independently

Weakness of Unbalance development theory:

 No discussion on degree of imbalance
 Neglect agriculture
 Neglect the resistance
 Emergence of inflationary pressure
 Inappropriate for democratic country
 More emphasis in capital formation

Critical appraisal
 It neglects agriculture.
 This theory is useful in those countries where there is significant state control.
 It pays insufficient attention to the question of the precise composition, direction and timing
of imbalances. What is the optimum degree to which imbalance should be created in order to
accelerate growth? This theory leaves too much to chance.
 There is little discussion on how to overcome discrepancies between private and social profit
abilities of development projects.

TowardsNewDevelopment Approach
An unintended consequence of our policies has been the stifling of internal markets, cities and
communities, which play a critical role in fostering productivity, innovation and entrepreneurship and
ultimately promote growth, prosperity and development.

The Planning Commission has been involved in the formulation of Perspective, Medium-term and
Annual Plans based on savings-driven approach, where growth rates are arbitrarily set and
incremental capital (investment) to output ratios are used to generate investment requirements in key
sectors of the economy.

In the new development framework, private sector should be the growth-driver in open market
environment that rewards efficiency, innovation and entrepreneurship, while the government is
facilitator that protects public interests and rights, provides public goods, enforces laws, punishes
exploitative practices, and operates with transparency and accountability.

The private sector must drive economic growth with timely implementation of market reforms, which
should promote competitiveness.Promoting innovation, human capacity building and
entrepreneurship should be the cornerstone of our government’s facilitation to private sector.

PeopleCentered DevelopmentApproach
It is an approach of putting people at first for any development activities. People are the cause and
effect (beneficiary) of development. People identify their need, they can use local natural resources,
and they have local and sustainable oriented development skill and expertise. For sustainable
development, ownership, participation and accountability thisapproach of development is most
useful.

Democratic processes are essential to people-centered development because they allow communities
to create their own development goals and influence the decisions that determine their quality of life.
Community participation and true democratic process demand that people have the means to hold
government officials and public institutions accountable. It requires that governments act as enablers
for the peoples’ agenda, creating policies that enhance citizen action.
True democratic processes can only be achieved when men and women are represented
equally. People-centered development necessitates equality in the roles of men and women, a
systemic problem in many developing nations. The rate of return on female education investment
could be higher than that of any other investment. As managers of natural resources, women are key
contributors to sustainability

People-centered development is an approach to international development that focuses on

improving local communities’ self-reliance, social justice, and participatory decision-making. It
recognizes that economic growth does not inherently contribute to human development and calls for
changes in social, political, and environmental values and practices.

Rational of people centered development/ participation:

 Development is essential for people
 People are leader, owner, expert agent of development
 Take Ownership
 It’s a bottom approach
 Development by the people instead of development for people
 Democratic process
 They know the problem
 Can Use local resource
 It help in poverty reduction
 Guaranty Sustainable development
 Good governance- accountability, decentralization, democracy, diversity, ownership,
transparency are inherent character of PCD
 Improve education skill experience and expertise of local
 People should be involve in all stage of development program. Problem identification, plan
formulation, implementation, monitoring, evaluation, profit sharing
 Incorporate social value, culture
 Reduce cost
 Positive toward system and government
 Real development can be achieved

Central themes
Sustainability- People-centered development requires the implementation of national sustainability
initiatives in order to reverse deforestation, water pollution, and other trends of environmental
degradation.

Participation
Is a prime feature of people centered development.
 It is impractical to ignore local people interest in development process
 It is morally justifiable to involve people in the control and management of the resource
 Decentralization reduce management cost
 Failure of trickle down approach from past development experience

In the context of people-centered development, central elements of participation include:

 Democratic processes
 Government accountability
 Access to relevant information
 Gender equality
Justice
In the context of people-centered development, elements of justice include:
 Local ownership
 Sovereignty of the people & government enablement
 Employment and income generation

HumanDevelopment A p p r o a c h
The Human Development Index (HDI) is an index combining measures of life expectancy, literacy,
educational attainment, and GDP per capita for countries worldwide. Developed in 1990, this
composite index introduced a new way of measuring development. The HDI approach arose partly as
a result of growing criticism of the development approach of the 1980s, which presumed a close
correlation between national economic growth and the expansion of individual human choices.

Therefore a new theoretical framework for examining development was to be introduced as part of
the broader human development approach. This approach is defined as the process of enlarging
people’s choices and enhancing human capabilities and freedoms, enabling them to live a long and
healthy life, have access to knowledge and a decent standard of living, and participate in the life of
their community and decisions affecting their lives. 

2015 marks 25 years since the first Human Development Report introduced a new approach for
advancing human wellbeing. Human development – or the human development approach - is about
expanding the richness of human life, rather than simply the richness of the economy in which
human beings live. It is an approach that is focused on people and their opportunities and choices.

People: human development focuses on improving the lives people lead rather than assuming that
economic growth will lead, automatically, to greater wellbeing for all. Income growth is seen as a
means to development, rather than an end in itself.

Opportunities: human development is about giving people more freedom to live lives they value.
The foundations for human development are to live a long, healthy and creative life, to be
knowledgeable, and to have access to resources needed for a decent standard of living.

Choice: human development is, fundamentally, about more choice. It is about providing people with
opportunities, not insisting that they make use of them. No one can guarantee human happiness, and
the choices people make are their own concern.

NewGrowthApproach