THEORIES OF DEVELOPMENT AND UNDERDEVELOPMENT NOTES

Introduction

The term development is understood as a social condition within a nation, in which the authentic needs of its population are satisfied by the rational and sustainable use of natural resources and systems. This utilization of natural resources is based on a technology, which respects the cultural features of the population of a given country.

This general definition of development includes the specification that social groups have access to organizations, basic services such as education, housing, health services, and nutrition, and above all else, that their cultures and traditions are respected within the social
framework of a particular country.

In economic terms, the aforementioned definition indicates that for the population of a country, there are employment opportunities, satisfaction -at least- of basic needs, and the achievement of a positive rate of distribution and redistribution of national wealth. In a
political sense this definition emphasizes that governmental systems have legitimacy not only in terms of the law, but also in terms of providing social benefits for the majority of the population.

1. Modernization Theories (Backwardness Theories)
According to modernization theories, internal factors in the countries, such as illiteracy, traditional agrarian structure, the traditional attitude of the population, the low division of labor, the lack of communication and infrastructure, etc., are responsible for underdevelopment. Differences in structure and historical origin are considered of little importance; international dependencies are not taken into account. Consequently, a change of these endogenous factors is the strategy for development. The industrialized countries are the model for economy and society, and this model will be reached sooner or later.

There is a continuum between the least and the most developed country and each country has its position on this line. The difference as compared to the industrialized countries is the degree of backwardness which has to be made up for. Suitable measures are the
modernization of the production apparatus, capital aid, transfer of know-how, so that the developing countries can reach the stage of industrialized countries as soon as possible. Development is seen as an increase of production and efficiency and measured primarily by comparing the per capita income.

1.1 Dualism Theories
Dualism theories assume a split of economic and social structures of different sectors so that they differ in organization, level of development, and goal structures. Usually, the concept of economic dualism differentiates between two sectors of economy:

  1. The traditional subsistence sector consists of small-scale agriculture, handicraft and petty trade, has a high degree of labour intensity but low capital intensity and little division of labour;
  2. The modern sector of capital-intensive industry and plantation agriculture produces for the world market with a capital-intensive mode of production with a high division of labour.

The two sectors have little relation and interdependence and develop each according to its own pattern. The modern sector can be considered an economic enclave of industrial countries, and its multiplicator and growth effects will benefit the industrial countries but have little effect on the internal market.

Several authors stress the dualism of specific factors. Eckhaus, for instance, differentiates, in his concept of technological dualism, between labour and capital-intensive sectors. Gannage explains regional dualism as a lack of communications and exchange
between regions, the capital sometimes being an island which, in geographical terms, belongs to the developing country, in economic terms, however, to the industrialized country. Economic, technological, and regional dualism are often the consequence of a social
dualism, the absence of relationships between people of different race, religion, and language, which, in many cases, is a legacy of colonialism.

Development in dualism concepts is the suppression of the traditional sector by concentrating on and expanding the modern sector. In time, it is assumed that the trickle down effects will reduce and abolish dualism. In this line of thinking, the main problem is capital
formation because its degree determines the scope and speed of expansion of the modern sector. In general, agriculture has to provide the resources, labour as well as capital, for expanding the modern sector.

1.2 Strategy Theories
Underdevelopment from the viewpoint of these theories is the result of vicious circles of factors. One example is based on the fact of low real income in developing countries which is the result of low labour productivity. This low labour productivity, in turn, is a consequence of capital shortage which is a result of the population’s low saving ability. As the saving rate is determined by the low real income, the circle is closed. The illustration below summarizes this cycle of factors

Strategy theories intend to break up this cycle at a certain point which they consider critical and which varies according to the different theories. Thus, they want to initiate development and transform traditional subsistence economy into a modern market economy.
Their main emphasis is on capital formation and investment (investment theories) and, by and large, they prescribe action for overcoming underdevelopment while they contribute little towards explaining the causes of underdevelopment.

1.2.1 Theory of Balanced Growth
This theory sees the main obstacles to development in the narrow market and, thus, in the limited market opportunities. Under these circumstances, only a bundle of complementary investments realized at the same time has the chance of creating mutual demand. The theory requests investments in such sectors which have a high relation between supply, purchasing power, and demand as in consumer goods industry, food production, etc. The real bottleneck in breaking the narrow market is seen here in the shortage of
capital, and, therefore, all potential sources have to be mobilized. If capital is available, investments will be made. However, in order to ensure the balanced growth, there is a need for investment planning by the governments.

Development is seen here as expansion of market and an increase of production including agriculture. The possibility of structural hindrances is not included in the line of thinking, as are market dependencies. The emphasis is on capital investment, not on the ways
and means of achieving capital formation. It is assumed that, in a traditional society, there is ability and willingness for rational
investment decisions along the requirements of the theory. As this will most likely be limited to small sectors of the society, it is not unlikely that this approach will lead to super-imposing a modern sector on the traditional economy, i.e., to economic dualism.

1.2.2 Theory of Unbalanced Growth
Contrary to the theory of balanced growth, in the opinion of this theory, the real bottleneck is not the shortage of capital, but lack of entrepreneurial abilities. Potential entrepreneurs are hindered in their decision-making by institutional factors: either group
considerations play a -great role and hinder the potential entrepreneur, or entrepreneurs aim at personal gains at the cost of others and are thus equally detrimental to development. In view of the lack of entrepreneurial abilities there is a need for a mechanism of incentive and pressure which will automatically result in the required decisions.

According to the theory, not a balanced growth should be aimed at, but rather existing imbalances— whose symptoms are profit and losses—must be maintained. Investments should not be spread evenly but concentrated in such projects in which they cause additional
investments because of their backward and forward linkages without being too demanding on entrepreneurial abilities. Manufacturing industries and import substitutions are relevant examples. These first investments initiate further investments which are made by less qualified entrepreneurs. Thus, the strategy overcomes the bottleneck of entrepreneurial ability. The theory gives no hints as to how the attitude of entrepreneurs and their institutional influence will be changed in time.

1.2.3 Theory of Stages of Growth
This theory tries to explain the long-term processes of economic development from the point of view of economic history by describing five ideal types of stages through which all societies pass:

  1. ‘Traditional Society Stage’
    The ‘traditional society’ has more than 75 per cent of the population engaged in food production, and political power is in the hands of landowners or of a central authority supported by the army and the civil servants.
  2. ‘Transitional Stage’
    The ‘transitional stage’ creates the preconditions for take-off by bringing about radical changes in the non-industrial sectors. Export of raw material gains momentum; a new class of businessmen emerges; and the idea of economic progress coming from outside spreads through the elite.
  3. ‘Take-off Stage’
    The ‘take-off stage’ brings a sharp increase in the rate of investment in the per capita output. This stage of industrial revolution is accompanied by radical changes in the production techniques. Expansion takes place in a small group of leading sectors at first and, on the social side, is accompanied by the domination of the modern section of society over the traditional one.
  4. ‘Drive to Maturity stage’
    The ‘drive to maturity’ brings a spread of growth from the leading to the other sectors and a broader application of modern technology followed by necessary changes in the society at large.
  5. ‘Stage of High Mass Consumption’
    The ‘stage of high mass consumption’ can be reached after attaining a certain level of national income and formulating an economic policy giving priority to increased private consumption.

The critical phase for development is the ‘take-off stage’ during which net investment rates have to increase from 5 to 10 per cent of the national product and during which the political, social, and institutional framework has to be built in order to reach a situation of selfsustained growth. The financial resources must be accumulated internally by higher saving rates. Income distribution favoring classes and strata which are willing and able to use capital more productively than others has the same effect.

1.2.4 ‘Big-push’ Theory
This theory is an investment theory which stresses the conditions of take-off. The argumentation is quite similar to the balanced growth theory but emphasis is put on the need for a big push. The investments should be of a relatively high minimum in order to reap the benefits of external economies. Only investments in big complexes will result in social benefits exceeding social costs. High priority is given to infrastructural development and industry, and this emphasis will lead to governmental development planning and influence.

1.2.5 Theory of Development Poles
The promotion of regional development centers will serve as focal point and incentive for further development. Such a regional concentration helps to reap the benefits of technological external economies and makes the growth centre attractive to entrepreneurs, thus initiating further development. This theory is a sort of ‘regional unbalanced growth theory’ which uses temporary regional imbalances to initiate development. Little attention is given to the process which is necessary to ensure a spread or linkage from the centers to the hinterland without which the poles may transform the economy of the region into a dual economy.

1.2.6 Theory of Circular Causation
This theory opposes the strategy of development poles because social systems and economic processes do not develop towards equilibrium but, on the contrary, factors tend to cumulate to positive or negative cycles. In principle, the theory is a negation of the monocausal explanation of problems of developing countries by economic factors alone. Rather, in a comprehensive way, all social relations have to be incorporated. At national level—different stages of development between regions—as well as international level—trade between industrialized and developing countries—differences tend to increase because of the spread effects in the more developed areas and modern sectors and backwash effects in backward areas and traditional sectors. For instance, industrial import
goods are in competition with traditional crafts; terms of trade deteriorate; capital is being transferred, etc. The direction of processes depends on the initial situation and the factors causing the change. Under the conditions in developing countries, increased regional dualism often is a consequence of such processes of circular causation.

1.3 Social-Psychological Theories
In the dualism and (economic) strategy theories discussed so far, underdevelopment and development are explained by economic factors alone while individual or group values and motivations are neglected. The social-psychological theories consider these very factors as main determinants of underdevelopment and development. Thus, they add a new component to the discussion. Because they reduce the causes to aspects of one discipline, like economic theories, they are partial explanations as well.

1.3.1 Sociological Explanation of Socioeconomic Change
One of the earliest and widely discussed concept is Weber’s treatise “Protestant Ethics and the Spirit of Capitalism” in which he combines Psychological & Sociological variables with economic development. Because of its determination of the value systems of societies, he put primary importance on religion. According to Weber, the Protestant religion was a precondition for capitalistic development for two reasons:
Protestant ethics led to an ascetic life style which, instead of advocating affluence, reinvested the proceeds. As well, it is the basis of rationalism and goal achievement behavior. While a value system which motivates economic development can hardly be limited to
Protestantism Weber’s stress on values and the resulting motivation influenced later thought.

1.3.2 Theory of Social Change
Based on the assumption that a level of development is correlated with achievement motivation, this theory attempts to explain why this achievement motivation varies between societies and their classes and strata. It argues that in traditional societies the status of
individuals is fixed. Children learn to act according to established norms, and deviations (initiative!) are punished. If by external influences a new group gains power, the status of the old elite is challenged and weakened. The insecurity and frustration leads to changed behavior which has consequences on the family structure. Children tend to become dissatisfied with the society and readily accept new values. In time, they become innovative personalities. If these persons become dominant groups in the society, this causes economic development. Similar phenomena may happen as far as the changing situation of marginal groups or minorities is concerned.

2. Dependency Theories
According to dependency theories, the cause of underdevelopment is the dependence on industrialized countries while internal factors of developing countries are considered irrelevant or seen as symptoms and consequences of dependence. The development of
industrialized countries and the underdevelopment of developing countries are parts of one historical process. Developing countries are dependent countries. The economic and political interests of industrialized countries determine their development or underdevelopment. The goals are superimposed.

Underdevelopment is not backwardness but intentional downward development. As to the causes of dependence, the various theories differ, economic factors always dominating. External trade theories concentrate on economic relations between countries. Imperialism
theories stress the politico-economic interest while dependency theories concentrate on the deformation of internal structures by dependence which perpetuates the situation. Dependency theories concentrate on explanations of the genesis of underdevelopment and pay little attention to strategies for overcoming this situation. Implicit development here means liberation, end of structural dependence, and independence.

2.1 External Trade Theories
The structure of supply and demand in industrialized and developing countries is such that industrialized countries are able to reap the benefits from international trade. This transfer of resources makes development impossible, and these unequal trade relations are seen as the reasons for underdevelopment.

2.1.1 Theories of Circular Deterioration of Terms of Trade
The structure of supply and demand is such that industrialized countries offer industrial products and buy raw products and the developing industries do the reverse. According to Engel’s law, the demand for raw materials tends to be inelastic while the demand for industrialized goods is elastic. The technological progress in the production of industrialized goods not only makes it possible for industrial countries to increase their incomes and thus the standard of living, but, because of the elastic demand on the world market, also to enforce higher prices. The situation in developing countries is the opposite: technological progress in primary production results in lower prices because of the inelastic demand. This mechanism leads to deteriorating exchange relations between industrialized and developing countries (and, as well, between the industrialized and the agricultural sector in developing countries).

2.1.2 Theory of Immiserizing Growth
This theory follows the argumentation of the theory of circular deterioration of terms of trade and concludes that countries, in order to improve their balance of trade, have to increase their exports to compensate for falling prices. This means a further deterioration of terms of trade. The unchanged structure of supply intensifies the structural dependency and, regardless of growth, there is no development but only ‘immiserizing growth’- impoverishing growth. This situation is especially pertinent for countries with agrarian monoculture. As a consequence, the theory seeks for a speedy industrialization including heavy industry for larger countries.

2.2 Imperialism Theories
The imperialism theories explain the domination of underdeveloped areas by industrialized countries as the consequence of different economic and technological levels and unequal power potential resulting from a different economic growth. The consequence of the
development of industrial capitalistic societies is a pressure for expansion which may lead to military or political acquisition (colonies) or to maintaining economic dependence (developing countries). Different theories have their own explanation of the reason for the pressure for expansion but it is always seen as the result of the inability to cope internally with the consequences of permanent technological innovation and their effects on the society.

2.2.1 Classical Imperialism Theory
The desire for profit maximization causes production beyond the needs of the internal market and leads to the establishment of new markets in underdeveloped areas. Here, the autochthon production and markets are being destroyed and, thus, unemployment is exported to underdeveloped areas. Thus, capital is being exported in order to maximize profits. In the underdeveloped areas, this capital is invested, not according to the needs of these countries, but according to the interests of industrial countries. The profit is transferred to the industrial countries whose development is based on the exploitation of underdevelopment areas.

2.2.2 Modern Imperialism Theory
The thesis of classical imperialism theory has been disproved empirically. New imperialism theories therefore, postulate the dependency theorem with a new explanation of exploitative relations. The new phase of relation between industrialized and developing countries can be called technological-industrial dependence. Industrial countries invest in the production and export of raw materials in developing countries, influence with their potential of power the terms of trade in their favor, and thus perpetuate the international division of labour. While imperialism is seen as a phenomenon of capitalism and these theories are based on Marxian concepts, the fact remains, nevertheless, that communist countries also participate in the exploitation of developing countries by accepting the advantages of the world market.

Towards a General Theory of Development and Underdevelopment
All the theories discussed in this chapter are only partial theories. They explain certain aspects but do not fully explain the cause of underdevelopment. The explanation is more adequate for certain historical situations and specific conditions of production while they are less relevant for others. They offer a strategy for overcoming the prevailing situation and initiating development which may be suitable under certain economic and social conditions but are not applicable to others.

A general theory of development is still lacking. Drawing up such a general theory is indeed a difficult task; it would have to include:

  1. an explanation of underdevelopment for different countries;
  2. an explanation of the development process of industrialized countries; and
  3. a strategy for overcoming underdevelopment in developing countries.
  4. all relevant disciplines and their interdependence;
  5. the different levels at which development takes place, from the local to the international level;
  6. the processes and relations between the different sectors and strata of society and economy; and
  7. the international dimensions of the development process

While the system theory opens up the possibility of organizing such a vast theoretical body, the activities of different researchers hitherto have not yet been successful. Even in the absence of a concise theory to guide political activities, decision-makers must have some yardsticks to measure whether their strategies and tools will achieve the goals of the society. Here, goals play an important role. While, in detail, the question of goals in the development process is a political question, and difference of opinion and conflict are possible, at a high level of abstraction, universal agreement seems to be possible.

It is widely agreed that preservation of human dignity and fulfillment of basic needs are the foremost duties of every society. While there is wide agreement on this goal, differences of opinion exist on the question of the degree to which these basics should be supplied and, as well, how they should be supplied. These differences allow for different paths of development. From the common denominator “basic needs,” one can deduct five basic goals of development:

  1. economic growth to secure food and other requirements for the population;
  2. social justice to reduce inequality;
  3. employment as means of earning an income but, as well, because of its ethical and social value;
  4.  participation as political involvement and social sharing;
  5. independence as freedom from external domination

While individual societies may have different opinions on the priorities of these goals, in the absence of a general theory of development; one can use the criterion of fulfillment of these goals as a yardstick in development. Development is then understood as a simultaneous progress towards these five goals.

Root Causes of African Underdevelopment
Different researches on the causes of African underdevelopment emphasize varieties of factors as the root causes of African underdevelopment. Among these the most important ones can be grouped into the following categories: (a) hostile natural environment, (b) archaic production technology, (c) demographic factors, (d) slave trade, (e) colonialism and its
extractive institutions, and (f) political instability and predatory states.

1. Hostile Natural Environment
Most of the African landmass lies within the tropical climate; this made the vast areas of the interior continent home to malaria and tsetse fly which afflict humans and animals respectively. This has led some researchers on the causes of African underdevelopment to test the hypothesis of malaria as the dominant cause of the underdevelopment in the continent. A significant number of recent studies tend to support the malaria view both at the macro as well as micro level. It is an established fact that low mortality as a result of better health contributes to economic growth. In addition to malaria the animal disease carrying tsetse fly, which is found all over the
continent and can incapacitate draught animals, may itself explain the traditional low use of ploughs and other animal-drawn implements and hence the lower productivity of the agricultural sector.

2. Archaic Production Technology
For centuries the African continent depended on archaic methods of agricultural production. Even the use of ploughs and other animal drawn implements were limited. The agricultural revolution and the use of iron tools came to sub-Saharan Africa later than to other parts of the world

An important reason for the continent’s technological underdevelopment is the geographical obstacles to communication both internally and with the rest of the world. The Sahara has been a barrier in the north, and the Atlantic coast had no contact with the rest of the world until the first Europeans arrived around 1500. Influence from the Arab world and India came mainly via the Nile Valley and the East African coast, and had little spillover effect further inland. With the exception of the Niger and the Nile, the continent’s rivers with their large waterfalls have not provided a navigable route to the interior, in contrast to the rivers of Europe and Asia. The problems of today’s land-locked states illustrate the great importance of communication for economic and cultural development

3. Demographic Factors
` Africa’s demographic history has been characterized by low density of population and continuous migration and settlement of new areas. The continent with a massive land mass of over 30 million km2 has inhabitants less than that of India at present. Migration has continued right up to the present day, and there is still more migration on this continent — including migration between urban and rural areas — than anywhere else in the world. This continued migration may be due to a hostile geographical environment that debilitates the livelihoods of the population.

However, at present the demographic picture of the continent is totally different. Rapidly growing population with limited demographic windows of opportunity has caused further strain on the development efforts and environmental sustainability in the continent. Rapid deforestation following population explosion has further aggravated the environmental problems. The rapid deforestation is fueling desertification with its negative impacts on agricultural production in many parts of sub Saharan Africa. Consequently, Africa is more food insecure today than the era of wooden agricultural implements.

4. The Slave Trade
The slave trade theory is one of the dominant views on the historic root causes of the African underdevelopment. According to this view, Africa’s engagement in slave trade caused massive depopulation of the continent over two centuries. Furthermore, the African countries with the biggest slave exports are by and large the countries with the lowest incomes now (based on per capita gross domestic product in 2000). It has been shown that slave trade prevented state development, encouraged ethnic fractionalization and weakened legal institutions and through these channels it affected economic development. The export of an estimated 12 million people across the Atlantic, and possibly a similar number to the Arab world in the course of a full millennium may have been
a factor in Africa’s lower population growth compared with that of other continents.

5. The Colonial Extraction System
Colonialism in Africa took different form compared to Asia. Unlike in Asia, hostile tropical environment prevented colonizers from settling in Africa as a result of which they erected extractive institutions in these colonies. These colonial institutions have persisted over time and they continue to influence the economic performance of the colonies even long after independence. Research, shows that colonial extraction when severe enough can cause a society to move from a high to low production level equilibrium. Due to the stability of low level equilibrium, a society can remain trapped in this equilibrium even after the period of colonial extraction is
over. However, many African as well non-African scholars do not agree on the link between colonial extraction and the current underdevelopment in Africa. Ethiopia was never colonized but it is one of the least development countries in the continent while many Asian countries which have achieved development miracle since 1960s have been former European colonies.

However, there is one crucial link between colonialism and underdevelopment in Africa. This is the creation of a political map that is economically irrational and dysfunctional. Colonialism created artificial and non viable nation states that lacked legitimacy. This is the
root cause of continued ethnic conflicts and civil wars that ravage the continent since the day of decolonization. Thus unless Africa does away with the current artificial colonial boundaries either through realignment of the current state boundaries wherever there are contestations or through more regional integration similar to the European model but not through hasty “United States of Africa” rhetoric, the continent will never achieve sustainable development.

6. Postcolonial Political Instability
The post colonial Africa has been characterized by lack of political stability. Post independence African politics was dominated by authoritarian regimes and kleptocracies. These rent seeking dictators often intentionally sow seeds of ethnic conflicts by deliberate
political exclusion and marginalization of various ethnic groups that reside within the country. Even after two decades of democratic reforms in the continent, today about 50% of authoritarian states in the world are found in Africa. About 24 out of 54 states in Africa are authoritarian regimes. Only Mauritius qualifies as a full democracy in the continent out of about 30 full democracies in the world while 6 more countries in the continent are flawed democracies

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