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CONTEMPORARY MODELS OF DEVELOPMENT

AND
UNDER-DEVELOPMENT

Neo-classical growth Model

The basics of the model are that capital accumulation drives economic growth in the
short run
This can be achieved through economic policy that encourages people to save more.
However, in the long run, growth rates will revert to the rate of technological
progress
Consider an economy with a given level of supply of labor and technology which is
assumed to be constant over time.
Labor works with an aggregate capital stock K. the maximum amount that can be
produced depends on K according to an aggregate production function.

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Constant returns to scale – doubling all units will lead to doubling output –
assumed in this production function
This implies that as more capital is employed, given fixed labor, its
contribution to output declines.

In this model, capital is accumulated by saving a proportion of output in each

period and investing it in new capital
The long run growth rates cannot be explained by this model.

Further increases in savings only increase the steady state level of capital and
not change output levels

Endogenous Growth Theory

•Tries to explain long run growth in terms of endogenous factor and all issues
not explained by Neo-classical but endogenously determined technological
change and human capital

•Technology is endogenous- meaning it is determined by the system of

production system itself through saving and investment in research and
development

•Investment in human capital-training and education together with experience of

learning by doing create knowledge and these increase production constantly on
long run.

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Assumptions:

•Two sectors: Goods production sector (one or all are symmetric) and Knowledge
production (R & D) sector
•Technology is non- rival/ public good
•There is constant return to scale at firm level and increasing return at aggregate
level (proportionality of change in output)
•Imperfect completion,
•There is market power and profit making causing increasing return and incentive
to invent

Versions of the model

Arrow’s Learning by Doing Model

• New capital
• Y1= A(k) F (ki, Li)
• Y = out put of firm,
Where:- Ki and Li = capital and labor stock of firm,
F= aggregate stock of capital
A= the technological factor
• It did not show sustained endogenous growth.

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Versions of the model: Arrow’s Learning by Doing Model

• Emphasizes the possibility of productivity depending on output per worker.

• This implies that technological progress can occur, though unintended, by

“learning by doing”.

• Worker’s continuous specialization in the production process increase their

productivity of input

Versions of the model: Arrow’s Learning by Doing Model

• The productivity of the factor after learning by doing – which will be higher.

• AK model, economic growth is induced by savings, capital accumulation, and

efficiency.

• Efficiency is defined as the increase in the productivity of factor inputs by

“learning by doing”

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Levhari - Sheshinki model

• Extended the Arrow’s model

• They emphasize the spillover effects of increased knowledge as the source

of knowledge

• The source of knowledge or learning by doing is each firm’s investment

• Learning by doing is effect of investment and also investment increases

level of knowledge.

Levhari - Sheshinki model

• The knowledge of a firm is a public good which other firms can have at zero cost.

• Each firm operates under constant returns to scale and the economy also be
same

• This technical growth obtained via knowledge is reflected in an upward raising of

the production function and economic growth

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King Robenson Model- learning by watching

• A sector or a firm innovates and invests to solve a problem it faces.

• The innovation in one sector has demonstration affect on the productivity of
the other sector
• The externalities resulting from learning by watching are a key to
economic growth
• Other firms and sector will adapt the innovation to their needs.
• This result economic growth with steady state path or growth follows as
innovation that increase investment are to be followed.

Romer Model of Learning by Investment

• He assumes creation of knowledge as a side product of investment.
• He takes knowledge as an input in the production function
Y = A(R) F (Ri, Ki, Li)
Where Y is aggregate output;
A is the public stock of knowledge from R and D
Ri is the stock of results from expenditure on research and development
Ki and Li are capital stock and labor stock of firm i respectively

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• Romer took three key elements in his model,

externalities,
increasing returns in the production of output and
diminishing returns in the production of new knowledge.
• The spillovers from research efforts by a firm that leads to the creation of new
knowledge by other firms
• New research technology by a firm spills-over instantly across the entire
economy.

• Knowledge is the ultimate determinant of long-run growth which

is determined by investment in research and technology
• Research technology exhibits diminishing returns
• This implies that investments in research technology will not
double knowledge
• Firm investing in research technology will not be the exclusive
beneficiary of the increase in knowledge.
• This is due to the inadequacy of patent protection and increase
their production.

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Luca’s Model
He developed an endogenous growth model based on Investment in human
capital.
He assumes that investment on education leads to production of human
capital which is the crucial determinant in the growth process
He makes distinction between the internal effects of human capital where
the individuals workers undergoing training becomes more productive,
and
external effects which spillover & increase the productivity of capital and
other workers in the economy.

It is investment in human capital rather than physical capital that has

spillover effects that increase level of technology.

A worker can acquire knowledge through learning by doing

On the job training & spillover effects involve human capital.

Thus, it is not the accumulated knowledge and experience of the firms but
the average level of skills & knowledge in the economy that are crucial for
economic growth.

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Romer’s model of Technological Changes

•Romer’s model of endogenous technical change of 1990
identifies a research sector speculation in the production of
idea.
•This sector invokes human capital along with the existing stock
of knowledge to produce idea.
–i.e. idea are more important than natural resource- Japan
few natural resource, 3rd in the world in economy development.
•Idea are essential for the growth of economy

Its Assumptions
Economic growth comes from technology change
Technological changes in Endogenous
Market incentive play all important role in making Technological
changes available to the economy.
Invention of a new design requires a specified amount of human
capital.
The Aggregate supply of human capital is fixed.
Knowledge or new design is assumed to be partially excludable and
retainable by the firm which invented the new design.
Technology is a non-rival input (Its use by one firm doesn't prevent its
use by another.)

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Criticism of endogenous Growth Theory

• The model remains dependent on a number of traditional
neoclassical model
•Assumptions that is often inappropriate for LDC economies.
•The difference between physical capital and human capital is not
clear
• It lays too much emphasis on the role of human capital and
neglects the role of institutions.

•Economic growth in developing countries is frequently impeded by in efficiency

arising from poor infrastructure, inadequate institutional structures, and
imperfect capital and goods markets.

E.g. existing theory fails to explain low rates of factory capacity utilization in
low income countries where capital is scarce.

• In fact, poor incentive structures may be as responsible for sluggish GNP growth
as low rates of saving & human capital accumulation.

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UNDERDEVELOPMENT AS A COORDINATION FAILURE

•According to this approach complementarities between several conditions are

necessary for successful development.

•In many situations investment must be undertaken by many agents so that the
outcome can produce profit for any individual agent.

•A coordination failure is a state of affairs in which agents’ inability to coordinate

their behavior (choices) leads to an outcome (equilibrium) that leaves all agents
worst off than in an alternative situation that is also equilibrium.

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• Coordination failure may occur when all agents are fully informed
about the preferred alternative equilibrium.

• They simply cannot get there because of difficulties of coordination,

sometimes because people hold different expectations,
– sometime because every one is better off waiting for some one else
to make the first move.

• When complementarities are present, an action taken by one firm,

worker, or organization, or government increases the incentives for
other agent to take similar action.

• In particular, these complementarities often involve investment

whose return depends on other investments being made by other
agents.

• In development economics, such network effects are common,

which are explained through different models including model of
the big push, in which production decisions by modern-sector
firm are mutually reinforcing, and

• the O-ring model, in which the value of upgrading skills or quality

depends on similar upgrading by other agents.

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•In developed countries too such effects are common in the analyses of
frontier technologies, in which the value of using an operating system, word-
processing, spread sheet program, instant messaging, and other software or
product standard depends on how many other users also adopt it.

•In both cases, circular causation of positive feed back is common.

•Thus, these models can be applied to the problems of least and most
developed countries, through in different ways.

• An example of complementarily is the presence of firm using specialized skill

and the availability of workers who have acquired those skills.

• Firms will not enter a market if workers do not have the skill the firms
need, and worker will not acquire the skill if there are no firms to
employ them.

• This coordination problem can lead the economy to a bad equilibrium, at a

low average income or Growth rate or with a class of citizens trapped in
extreme poverty.

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•Even though all agents would be better off if workers acquired

skills and firms and firms invested, it may not be possible to
get to this better equilibrium without the aid of government.

•The coordination problem are common in initial

industrialization as well as in upgrading skills and technologies.

•Such problem are further compounded by other market

failures particularly those affecting capital markets.

•Another example of complementarily typical of rural

developing areas relates to commercialization of agriculture.

• Specialization and fine division of labor are hallmarks of

an advanced economy.
• But we can specialize only if we can trade for other goods
and service we need.

•Producers must get their products to markets, while

convincing distant buyers of their quality.

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•Middlemen can play a key role for quality assurance of the products they sell;
they can do this because they get to know the farmers from whom they buy
as well as the products.
•For the emergence of specialized agricultural market there needs to be a
sufficient number of concentrated producer with whom a middleman can
work effectively.
•But without available middlemen to whom the farmers can sell their products
they will not available to specialize and
•- will
prefer to continue producing their staple crop or a range of goods primarily for
personal consumption or sales with in village.

•The result can be an underdevelopment trap in which the region remains stuck
in subsistence agriculture;

•Complementarities in many cases create a classic “chicken or egg” problem:

which comes first (e.g. the skill or the demand for skill?). often the answer is
that the complementary investments must come at the same time, through
coordination.

•This is especially true when there is a lag between making an investment and
realizing the return on that investment.

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•In this case all parties expect a change to a better equilibrium; they will still be
inclined to wait until other parties have made their investments.

•Thus there can be an important role for government policy in coordination

joint investment, such as between the workers who want skills those
employers can use and the employers who want equipment that workers can
use.

•Neither may be in a position to take the first step; each may be better off
waiting for the other parties to invest first.

•As another example, a new or modernizing firm using new technologies may
provide benefits to other firms that the adopting firms cannot capture,

•Although government can play important coordinating role, yet it is one of the
components of the development process that may contribute to the problem as
well as to the solution.

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•Government policy is understood as party determined by the state of economy.

•A dictator may prefer to keep his country in an underdevelopment trap, knowing

that as the economy developed he would lose power, or he may support
development, knowing that as the developed he would strengthen his power.

•Government could then concentrate its efforts on other crucial problems in

which it has as essential role like addressing health problem.

•In much of economics such complementarities are not present. for example, in
competitive markets, when there is excessive demand, there is counter
pressure for prices to rise, restoring equilibrium.

•Whenever congestion may be present, these counter- pressure are very

strong.
•The more people fishing in one lake, the more fishers try to another lake that
is less crowded.

•But in the process of economic development, joint externalities are common.

Underdevelopment begets underdevelopment, while sustainable development,
once underway, tends to stimulate further development.

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• Coordination problem can be explained by the “where- to-meet problem”.

• For example several friends know that they will meet in Dire Dawa on a
certain day but have neglected to settle a specific location of the meeting
within the city.

• Now they are out of communication and can arrive only by chance or by very
clever guessing.

• They want to meet and consider themselves better off if they can do so, there
is no incentive to cheat.

• But, the face that all gain from coordination does not solves the
“where –to-meet problem”. There are many famous places in Dire
Dawa.

• Most probably they all cannot meet on a single location.

• Similarly, it happens when farmers in a region do not know what to

specialize in.

• There may be several good products from which to choose, but the
critical is for all the farmers to choose one, so that middlemen may
profitably bring the product to market.

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STARTINGECONOMIC DEVELOPMENT:
THE BIG PUSH

THE “ BIG PUSH” THEORY

•This “big push” or large comprehensive program is needed in the

form of a high minimum amount of investment to solve the
problems of development in an underdeveloped economy and to
begin it on the path to progress.

•These is minimum level of resource and that must be devoted to

the development program.

•Launching a country with a minimum amount of investment or to

self-sustaining growth is very vital.

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•The crux of this theory is that the obstacles of development are

formidable and pervasive

•The development process by its very nature is not a smooth and

uninterrupted process.
• It involves a series of discontinuous ‘jumps’.

•Any strategy of economic development that relies basically upon the

philosophy of economic “gradualism” is bound to be frustrated

•What is needed is a “big push” to undo the initial inertia of the stagnant
economy.

• It is the only way to ensure smooth journey of economic growth to the

higher level

•Unless big initial momentum is imparted to the economy, it would fail

to achieve a self- generating and cumulative growth.

•Marginal increments in investment in unrelated individual spots of the

economy is sprinkling here and there a few drops of water in a desert.

•Sizable lump of investment injected all at once can alone make a

difference.

•The rationale for big push theory is based on the idea of external
economies

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Economies of scale:
• refer to the cost advantage experienced by a firm when it increases its level of
output
• arises due to the inverse relationship between per-unit fixed cost and the quantity
produced

External Economies of Scale

• For instance, the government wants to increase steel production. In
order to do so, the government announces that all steel producers
who employ more than 10,000 workers will be given a 20% tax break.
• Thus, firms employing less than 10,000 workers can potentially lower
their average cost of production by employing more workers.

Diseconomies of scale
Any increase in output beyond Q2 leads to a rise in
average costs. This is an example of diseconomies of
scale

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•The basic contention of the “big push” theory is that mutual

beneficial way of output expansions is not likely to occur unless
the initial obstacles are overcome

•There are “non-appropriabilities” or “indivisibilities” of different

kinds

•if not removed through a “big push” will not permit the
emergence and transmission of ‘external economies’

What is indivisibility?
• The physical inability, or economic inappropriateness, of running
a machine or some other piece of equipment at below its optimal
operational capacity. ...

Any output level below this would result in either one or

other machine, or both, being under-utilized.

Not divisible; not separable into parts; incapable of being divided

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•A ‘bit by bit’ approach to development would not enable the economy to overcome
indivisible economic obstacles

Requirements for the big push

• The hallmark of the ‘big-push’ approach lies in the reaping of external economies
• This achieved through the simultaneous installation of a host of technically
interdependent industries

• it is relevant to overcome the economic indivisibilities by moving forward by a

certain “minimum indivisible step”.
• This can be realized through the injection of an initial big dose of a certain size of
investment.

•Rodan distinguishes three kinds of indivisibilities and externalities

1. Indivisibilities in the production function, i.e., lumpiness of capital, especially in
the creation of social overhead capital.
2. Indivisibility of demand, i.e., complementarity of demand.
3. Indivisibility of savings, i.e., kink in the supply of savings.

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Indivisibility of Production Function

• It is possible to generate enormous pecuniary external economies by
overcoming the ‘indivisibilities of inputs, processes and outputs.’
• The most important case of indivisibilities and external economies on the supply
side resides in the social overhead capital
• Social overhead capital consists of all the basic industries such as transport,
power, communications, and such other public utilities.

• Moreover, these services are only indirectly productive and involve long
gestation periods.
• Besides, their “minimum feasible size” is large enough.
• Four types of indivisibilities of creating social overhead capital.
1. Indivisibility of time: The creation of social overhead capital must precede other
directly productive industries

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2. Indivisibility of durability: The overhead capital with lesser durability is either

technically not feasible or is very poor in efficiency.
3. Indivisibility of Long Gestation Periods: involve a highly protracted period of
time for their fruition as compared with investments in other
4. Indivisibility of an Irreducible Industry Mix of Public Utilities
• Social overhead capital must grow collectively.
• There is an irreducibly minimum industry mix of different public utilities that
have to be created all at one stroke.

Indivisibility of Demand function

• Indivisibility of demand generates interdependencies in investment
decisions.
• If each investment project was undertaken independently, it is in most
cases likely to flop down.
• This is because individual investment projects generally have “high risks-
uncertainty of market
• The wages of the newly employed workers would provide an additional
income to them.

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• As a result, the industry would succeed and survive.

• Therefore, the indivisibility of demand requires the
simultaneous production of a “bundle” of large number of
wage goods on which the newly employed workers could
spend their income.
• Unless there is assurance that the necessary complementary
investments will occur, any single investment project may
be considered too risky

Indivisibility in the supply of savings

• Investment cannot be undertaken without an adequate supply
of savings.
• But it is not possible to have such high volume of savings in
underdeveloped countries
• “is to have first an increase in income and to provide
mechanisms which assure that in every second stage the
marginal rate of savings will be very much higher

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Evaluation of Rosenstein’s Big Push Strategy:

• First, the main implication of the ‘big-push’ theory is State
intervention and centralized planning.
• will the prevailing circumstances of the developing countries
warrant a conclusion to the contrary?
• So, the current institutional and administrative set-up of the
government machinery of the poor developing countries the
concern

Evaluation of Rosenstein’s Big Push Strategy:

• In any comprehensive program comprising a complex set of related projects,
delays and continued revision of schedules are inevitable
• “The greater the interdependence between the different components of
the plan, the greater the repercussions
• Secondly, the chief plank on which the ‘big push’ theory is founded is the
emergence of a wide range of external economies
• International trade can provide much more external economies than domestic

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• However, the developing countries being primarily primary

producing countries
• Thirdly, the ‘big push’ theory concentrates mainly on the industrial
sector – viz., capital goods, consumer goods and social overhead
capital.
• For a balanced growth of the economy, agriculture also requires a
corresponding ‘big push’.
• Fourthly, ‘lumpy’ investments involved in the ‘all-or-nothing’
approach is called for by the ‘technical indivisibilities’ embodied in
the creation of social overhead capital.

• due to the inherent capital scarcity in the developing countries, it is really a

matter of dubious in the provision of a complete outfit of infrastructures
• The ‘big push’ theory recommends a ‘starting from scratch’ concerted action
in the creation of social overheads.
• What if there is inflation? What will happened to the investment?

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BALANCED AND UNBALANCED

GROWTH

Introduction
• In order to get rid of vicious circle of poverty, underdeveloped
countries need investment on a large-scale.
•There are two theories concerning strategy of economic
development:
1. Theory of Balanced Growth: According to Rodan, Nurkse and
Lewis, economic development these economies should make
simultaneous investment in all sectors to achieve balance
growth.
2. Theory of Unbalanced Growth :According to Hirschman, Singer,
Fleming. These economies should create a situation of unbalance
by making large investment in anyone sector.

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Balanced Growth Model

•Fredrick List was first put forward the theory of balance growth.
•According to him a balance could be established among agriculture,
industries and trade.
•In the year 1928, Arthur Young gave the concept of different
industries were mutually interdependent, then all of them should be
developed simultaneously.

• A strategy of growth with an equal emphasis on agriculture and

industry.
• Agricultural development provides the food required and releases
labor from the land to engage in industry.
• Industrial wealth stimulates markets for agricultural growth or
such is the theory.
According to Lewis
“Balance growth means that all sectors of economy should grow simultaneously
so as to keep a proper balance between industry and agriculture and between
production for home consumption and production for exports. The truth is that all
sectors should be expanded simultaneously.”

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BASIS OF THEORY OF BALANCED GROWTH

1. Supply Side
Low Income →Low Saving→ Low investment →Low
productivity→ Low Income→--------

2. Demand Side
Low Income →Low Purchasing capacity→ Low investment
→Low productivity→-------

Explanation of Nurkse’s Theory of Balance Growth

• According to Prof. Nurkse in the development of

underdeveloped countries the greatest obstacle is Vicious
Circle of Poverty.
• The Vicious Circle shows that income is low in underdeveloped
countries. Because of low income, saving is low. Therefore,
investment and output is low. Low output means low income.

▪ Complementarity of Demand
▪ Intervention by the Government
▪ External Economies
▪ Accelerated Rate of Growth

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Explanation of Lewis’s Theory of Balanced Growth

• Lewis has given the following two arguments in favor of

balanced growth:

a. In the absence of balanced growth, price in one

sector may be more than the prices in others.
b. When the economy grows then several bottlenecks
appear in different sectors.

Balance among Different Sectors

• Balance between Agriculture and Industries

• Balance between Human and Physical Capital

• Balance between Domestic Trade and Foreign Trade

• Role of Government in the Balance Growth

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Advantages of balanced growth model

• Rapid Rate of Development

• Large size of Market • Encouragement of Private
• External Economies Enterprises
• Horizontal Economies • Breaking of Vicious Circle of Poverty
• Vertical Economies • Encouragement of International
• Better Division of Labor Specialization
• Better Use of Capital • Development of Social Overhead
Costs

Limitations of balanced growth strategy

•This theory was criticized by different economists such as

Hirschman, Singe and Kurihan. The important points are:
•Lack of resource
•Application of big strategy requires huge amount of resources
•Shortage of Capital
•Breaking vicious circle of poverty is difficult in developing
countries
•In developing countries this path is problematic

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•Disproportion in factors of production

•The strategy of using labor everywhere is not possible; now a
day’s all products require high technique.
•It is wrong to assume that as the redundant workers are taken
away.

Unbalanced Growth Strategy

• Hirschman, Rostow, Fleming, Singer have propounded the
concept of unbalanced growth as a strategy of development for
the underdeveloped nations.

• Unbalanced growth is only few priority sectors will be

developed on the basis of linkages other sectors will develop.

• Unbalanced Growth is the attainments of development through

unbalancing of the economy, leading sectors promote
economic development through linkage effects (backward and
forward linkage).

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Unbalanced Growth Strategy

• The theory stresses the need for investment in strategic
sectors of the economy, rather than in the all sectors
simultaneously.
• Unbalanced growth is a situation in which the various sectors
of a given economy are not growing at a rate similar to one
another

Specific sectors of the economy will be growing at a rapid rate, while

other sectors are either stagnant or experiencing a significantly
reduced rate of growth. When economic growth patterns such as
unbalanced growth appear, the phenomenon usually indicates that major
shifts in the overall economy are about to take place.

• Hirschman states in his book, ”Strategies of Economic

Development”, that creating imbalances in the system is the best
strategy of growth.
• Accordingly , strategic sectors of the economy should get
priority in matters of investment:

❖ External Economies
❖ Complementariness
❖ Social Overhead Capital or (SOC)
❖ Direct productive Activities or (DPA)
❖ Unbalancing the Economy through (SOC)
❖ Unbalancing the Economy with direct productive Activities(DPA)

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Myrdal (1957): Cumulative causation

o the existence of "leading-lagging regions” in the process of
the spatial/regional aspect of development
o Myrdal employed the concepts of "backwash" and "spread
effects".
o Leading regions possess initial comparative advantage due to
location, infrastructure…etc.
o However, little investment moves from leading regions to
lagging regions
o Lagging regions are further inhibited from development
because of backwash factors.
o The 'backwash' effects involve the population migration, trade,
and capital movements.

Hirschman (1958): Polarization and Trickle Down

• A development strategies should concentrate on a relatively

few sectors rather than on widely dispersed projects

• growth is communicated from the leading sectors of the

economy to the followers

• the balance between favorable effects that trickle-down to the

latter from the progress of the former

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•Backward linkages and Forward linkages

Merits of the model

•Realistic Theory
•More Importance to Basic Industries
•Economies of Large Scale Production
•Encouragement to New Inventions
•Self-Reliance
•Economic Surplus

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GLOBALIZATION AND DEVELOPMENT

oDefinitions of Globalization
oTransnationalism
oTechnology and Communications
oCultural Globalization and Cultural
oHomogenization

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What is globalization?
o“Printed in Ethiopia with Australian Paper and German ink,
using Swiss technology and Japanese experts”.
oWhat does this statement convey?
oExchange or sharing of: Ideas
oInformation
oCapital (including human capital)
oTechnologies
oThis is connecting the human communities and capabilities
across national borders.

What is globalization?

o“Increasing economic interdependence of the world through

growing volume, and variety of cross- border flows of
ofinance,
oInvestment
oGoods and Services, and
oRapid and widespread diffusion of technology

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Its primary dimension concerns

othe expansion of economic activities across state borders.

oAvoiding reinventing the wheel (to waste time and effort trying to
do something that someone else has already done well).

The Globalizing World:

oGlobalization, as an international system, has now replaced
several old systems.

oIt has its own rules, logic and route that today directly or
indirectly influence the economies, politics, environment,
society, and thus lives of people of virtually every country in
the world.

oSome Consider that development brought about by

globalization is environmentally disastrous and unsustainable.

oSome consider globalization will improve chances for most

people for great opportunity, democracy, and the world after
globalization is getting flat with no disparities.

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oSome want to get the economics right.

oSome want to get the politics right.
oSome especially the Civil Society Organizations want to steer to
be people- centric.

oBut Globalization needs to be managed well through domestic

policy interventions and appropriate institutional
structures- so as to minimize the abhorrent(strongly opposed/
objectionable) effects on the poor and on their livelihoods.

oGlobalization (or Globalisation) in its literal sense is the process

of making, transformation of some things or phenomena into
global ones.

oIt can be described as a process by which the people of the

world are unified into a single society and function together.

oThis process is a combination of economic, technological,

socio-cultural and political forces.

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oGlobalization is often used to refer to economic globalization,

integration of national economies into the international
economy through trade, foreign direct investment, capital flows,
migration, and the spread of technology.

What are the Central ideas behind Globalization?

oMore trade is better for all the parties concerned.

oSome may gain more from it than others, but all would eventually
gain.

oAnd action that interferes with free flow of capital goods and
services, and technology would produce sub- optimal results.

oControls and restrictions raise the cost of domestic

production,

oA country should specialize in production and export only in

those items where it enjoys a comparative advantage.

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Determinants for Globalism

oAs had been already maintained that the country’s ‘Political
System’ also functions within the ‘World System’.

oThe boundaries of the political system are no longer

impermeable(resistant) to outside pressures and influences.

oThe world has become a single social system as a result of

growing ties of interdependence.

▪The implications of the notion of globalization are that policy-

makers must consider agenda formation and problem
definition within a global context.

▪The “policy- makers in each country share a policy context

formed by international economic cycle of

▪“Prosperity – Recession - Depression and Recovery”.

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▪In a global environment, it is possible to speak of the

convergence of concerns for which global strategies may be
formulated.

▪In a global context, more and more issues will be structured by

larger forces outside the nation’s Constitutional framework.

▪It is important for policy- makers to take account of global

issues when considering the context of policy problems in a
national setting.

▪Environment
▪Poverty and Population Growth (UNDP,WB)
▪AIDS (WHO)
▪Drugs (Producers- Thailand, Pakistan, Columbia, Peru and Bolivia.)
▪Trade and industry
▪Privatization
▪Terrorism
▪Migration, Trafficking, COVID, Vaccine politics and conspiracy, cyber security

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Transnationalism:

▪A concept often associated with ‘globalization’ is that of

‘transnationalism’.

▪For example, transnational corporations consist of complex

networks of research, production and marketing processes which
take place in more than one country at any one time.

▪For these corporations the transnationality of their activities

is a way of maximizing profits.

▪Production processes are often located where there is a

suitably skilled and cheap workforce, as well as favorable
government assistance.

▪As argued above, individual governments are often limited

in what they can do to control the movements and
activities of TNCs

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Technology and Communications

▪A key element of development approaches which view modernity as a goal, is
technology.

▪The key reason for adopting technology is to improve efficiency, so producing

more for the same effort.

▪However, we have also seen how the drive for increased productivity using more
and more advanced technologies can lead to environmental problems

❖The introduction of new technologies can also

exacerbate(worsen) existing social divisions (as with the
‘green revolution’) as only some people are able to use these
new technologies.

❖This may be because of economic inequalities, but it may also

reflect power distributions and norms such that certain
groups,

❖The concept of appropriate or intermediate technology has

been developed to address some of these issues

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❖Technological advancements, particularly in the sphere of

communications have been crucial in the creation of
globalization processes.

❖The internet, in particular, creates new possibilities for

instantaneous communication and the exchange of large
amounts of information between millions of people.

❖The possibilities which such technologies have for

development, particularly in the fields of education and
health,

Cultural Globalization and Cultural Homogenization

❖These claims of cultural homogenization have been
exacerbated by the increasing inter-connectedness of the world.

❖This is especially the case in relation to consumer culture.

❖There has been much talk of the ‘McDonaldization’ or

❖‘Coca-Colaization’ of the world as large corporations spread

both their production centers and also their sales

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oFor some, this spread of ‘Western’ consumption practices is

interpreted as a form of neo-colonialism.

o‘Nonindigenous’ music, food and clothing are promoted as

being ‘better’ and thus those people who can afford such
consumer goods are regarded as more ‘developed’ or
‘advanced’.

oThis view of global cultural processes has been criticized,

however, for failing to recognize the agency of people,
communities and governments in dealing with these flows.

oFor example, rather than obliterating existing cultural

practices, there may be a process mixing, also known as
hybridization or creolization.

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