Models of uevelopmenL

W ow do counLrles develop?
W lf we can undersLand how developmenL
occurs sLraLegles can be adopLed Lo help
counLrles Lo develop
W number of approaches
osLow SLages of CrowLh
osLow SLages of CrowLh
W 1he work of Amerlcan WalL
W osLow
W osLow ls an economlc
hlsLorlan
W CounLrles can be placed ln
one of flve caLegorles ln
Lerms of lLs sLage of growLh
A child in Sierra Leone making breakfast.
Which stage would a country like Sierra Leone
fit in?
osLow SLages of CrowLh
1 1radlLlonal SocleLy
W CharacLerlsed by
subslsLence economy
ouLpuL noL Lraded or
recorded
exlsLence of barLer
hlgh levels of agrlculLure
and labour lnLenslve
agrlculLure
'illage in Lesotho. 86% of the resident workforce in
Lesotho is engaged in subsistence agriculture.
osLow SLages of CrowLh
2 recondlLlons
uevelopmenL of
mlnlng lndusLrles
lncrease ln caplLal use
ln agrlculLure
necesslLy of exLernal
fundlng
Some growLh ln
savlngs and lnvesLmenL
%he use of some capital equipment can help increase
productivity and generate small surpluses which can be
traded.
Copyright: %im & Annette, http://www.sxc.hu
osLow SLages of CrowLh
3 1ake off
lncreaslng
lndusLrlallsaLlon
lurLher growLh ln
savlngs and lnvesLmenL
Some reglonal growLh
number employed ln
agrlculLure decllnes
At this stage, industrial growth may be linked to
primary industries. %he level of technology required
will be low.
Copyright: Ramon 'enne, http://www.sxc.hu
osLow SLages of CrowLh
4 urlve Lo MaLurlLy
CrowLh becomes self
susLalnlng wealLh
generaLlon enables furLher
lnvesLmenL ln value addlng
lndusLry and developmenL
lndusLry more dlverslfled
lncrease ln levels of
Lechnology uLlllsed
As the economy matures, technology plays an
increasing role in developing high value added
products.
Copyright: Joao de Freitas, http://www.sxc.hu
osLow SLages of CrowLh
3 lgh mass consumpLlon
lgh ouLpuL levels
Mass consumpLlon of
consumer durables
lgh proporLlon of
employmenL ln servlce
secLor
Service industry dominates the economy - banking,
insurance, finance, marketing, entertainment, leisure
and so on.
Copyright: Elliott %ompkins, http://www.sxc.hu
CrlLlclsms
W 1oo slmpllsLlc
W necesslLy of a flnanclal lnfrasLrucLure Lo channel any savlngs LhaL are
made lnLo lnvesLmenL
W Wlll such lnvesLmenL yleld growLh? noL necessarlly
W need for oLher lnfrasLrucLure human resources (educaLlon) roads
rall communlcaLlons neLworks
W Lfflclency of use of lnvesLmenL ln palaces or producLlve acLlvlLles?
W osLow argued economles would learn from one anoLher and reduce
Lhe Llme Laken Lo develop has Lhls happened?
MarkeL 8ased
MarkeL 8ased
W uevelopmenL ls deLermlned by Lhe exLenL Lo whlch Lhe
markeL ls able Lo allocaLe resources
W 1he prlce slgnal acLs Lo allocaLe scarce resources
W CovernmenLs llmlL lnLerference ln Lhe worklng of Lhe
economy
W CovernmenL role ls Lo encourage enLerprlse and Lo reduce
regulaLlon and lnefflclencles ln free markeLs and esLabllsh
ownershlp of properLy rlghLs
roblems
W LxlsLence of markeL fallure exLernallLles monopoly
power publlc goods
W roblems of lack of lnfrasLrucLure educaLlon and healLh
publlc LransporL legal sLrucLure
W roblems of equlLy ln allocaLlon wealLh and lncome
dlsLrlbuLlon
lnLernaLlonal uependence
lnLernaLlonal uependence
W lnLernaLlonal dlvlslon of labour rlch ln hlgh value acLlvlLy
poor ln low value can be Lraced back Lo colonlal and lmperlal
domlnance
W uomlnance of pollLlcal declslon maklng ln Lhe hands of a few
wealLhy and powerful groups who alm Lo malnLaln Lhe sLaLus
quo
W Such lnLeresL groups also exerclse power over lnLernaLlonal
lnsLlLuLlons and lnlLlaLlves such as Lhe World 1rade
CrganlsaLlon lnLernaLlonal MoneLary lund kyoLo Lalks eLc
lnLernaLlonal uependence
W Advlce glven Lo poorer naLlons
has been poor eg lendlng Lo
less developed counLrles
lnvesLmenL advlce eLc
W lnablllLy Lo solve Lhe debL crlsls
and proLecLlonlsm conLlnues Lo
prevenL developmenL of
pooresL counLrles
%he International Dependence model can perhaps be
exemplified by the lack of progress on reducing emissions
to restrict climate change and freeing up international
trade.
CrlLlclsm
W Cffers causes buL
no soluLlons
%alks to free up trade have been going on for
many years; progress is slow.
We know that protectionism is disadvantageous to
developing countries but how do we go about
putting in place solutions to help solve the
problem?
SLrucLural Change
SLrucLural Change
W SLrucLural change models focus on Lhe
dlfferenL producLlvlLy levels of economles
W rocess of sLrucLural change deLermlnes Lhe
raLe of developmenL
W Can such sLrucLural changes be
accommodaLed?
SLrucLural Change
W Less developed naLlons Lend Lo be domlnaLed by
prlmary lndusLrles low value added dlfflculL Lo
generaLe wealLh and Lhus sources of lnvesLmenL
W ueveloped naLlons dlverse economles hlgh value
added hlgh levels of lnvesLmenL
W SLrucLural change can be encouraged by lncenLlves
Lewls 2 SecLor model
W AgrlculLure low value added
W lndusLrlal secLor hlgher producLlvlLy and wealLh generaLlon
W lncenLlves Lo encourage workers Lo mlgraLe from rural economy Lo
urban
W ural workers have very low lf noL zero marglnal producLlvlLy
W Wage premlums ln urban lndusLry 30 above rural wages would
encourage mlgraLlon from rural Lo urban whllsL sLlll allowlng proflLs Lo
be made
W elnvesLmenL of proflLs would lead Lo a self perpeLuaLlng
developmenL
CrlLlclsms
W Labour reallocaLlon noL always producLlve
W WealLh noL relnvesLed locally
W WealLh goes abroad
W lmperfecLlons ln Lhe labour markeL
W lmporLance of complemenLary pollcles
by all counLrles lnvolved