Development: Part 2

Rostow’s 5 Stages of Development

• Rostow was an economic historian/optimist

– Wrote “Stages of Economic Growth: A Non-Communist Manifesto”

– All countries thought to move thru same stages

– Whole world eventually become “modern,” leaving “non-modern” behind

– Stages based on European Experience

– Speed depends on resources and labor efficiency

• Moving between stages requires getting “comparative advantage” to maximize surplus

• Traditional Societies

-- Agriculture-based

-- Little Savings

-- Society is static, rigidly hierarchical

• Pre-Conditions for Take-off

– Internal desires or external forces change attitudes

– A nation state forms

– Get infrastructure, export ag and mining

– National Elite and more people saving

Rostow’s 5 Stages (continued)

• Takeoff

– Manufacturing makes up 10% GDP

– Savings now re-invested

– More people migrate to cities

– Modern political and social institutions

• Drive to Maturity

– Becomes specialist in several types of manufacturing goods

– Now has resources to produce what it chooses

– Rural areas: Few farmers producing more

– Services become more important

• Maturity

– No longer worry about getting basic goods

– High mass consumption for everyone

• Eventually move beyond this not worrying about $

Rostow (cont.)

How was Rostow put into practice?

– Loans for heavy equipment or large-scale projects to help realize comparative advantage

• ports, processing plants, highways, airplanes, dams, fertilizers, mining equipment (Marshall plan stuff)

• Focus on the highly visible and large scale

• UN works on health, children’s issues

– Opening spots in prestigious Western and Soviet universities for elites from throughout the world, the create the class that would manage their economies back home

– Optimism things would get rolling on their own after that, that everyone could win

Talcott Parsons

Structural Functional Theory of Society

• Was sociological basis for much development thought

• Society in equilibrium until change comes

• New equilibrium by creating new roles and institutions, or adapting old ones, so to create a climate in which people come to willingly make choices which leads to stability of society

• Leads to greater complexity, which leads to communication, participation, competition, sophisticated division of labor & modernity

– This makes you modern

Parsons and Problems

Problems with Rostow’s Model

• No single country has actually gone thru all stages

• All stages, happen at once, in same country

• Heavy industry no longer gives high salaries

• In absence of surplus income to begin “take-off”, governments get money in loans, leading to debt

Problems with Modernization Models in General

• Under theorizes how changes (or even stability) occur within societies

– Only say they will happen, not how they will or why they did

• Generalizes from examples which occurred under specific circumstances (post-plague, imperial Europe)

• Assumes “the natural” progression will always be towards more complexity and harmony with the “environment’ (applying biological theory as metaphor for society)

Theoretical Backing

• Marginalist/Neo-Classical

– Idea that worth of good is equal to marginality

– Assumed

• Production function (capability) depended on factors of labor, capital, technical knowledge

• If there is an oversupply in any of these factors, the factor in excess supply will not be as sucessful as they good if things were more in balance

• Everything from labor to land is being used to its fullest

• Price of factor of production equals marginal productivity (price = value added)

• More available a factor, the lower it will be priced

Neo-classical (cont.)

Argued that through trade, a relative abundance of certain factor could be made into an advantage

• Best growth rate assumed by balancing the factors

• Under free competition in a country, this balancing will occur automatically

• If free trade is allowed between countries, growth rates will even out over time as capital chases cheap labor

• Under trade, it makes sense to specialize in what a country can produce most efficiently, and trade for the rest – thus everybody theoretically gets more

Problem:

• Specializing in certain products allows higher growth than others

• Assumptions C, D, and E are merely assumptions, and rarely reflect real world conditions

Neo-liberalism

• An updating of the market-centric Neo-classical approach

– Recognizes imperfect competition, that local culture (for example Islam) can play at least a limited role in determining development path, and that the state has some (though still limited) role, mostly in facilitating public, private partnerships

– Still believes free markets can have unlimited potential for growth everywhere, that mostly same economic laws apply everywhere

– Informs IMF/World Bank policy

Sustainable development

• Reaction to 1970’s increased environmental awareness

– Now includes aiding both the environment and people

• Developed measures like Human Development Index, which included education and health in measures of how well a country is doing

– However, in 1970’s it was about “limits to growth” (things we should not do); by the 1980’s it meant “growth of limits” (how can we continue to grow while doing less harm)

• Recently idea that if all environmental factors are “priced” and including in accounting, the market will learn to profit from protecting the environment

– Belief that growth of wealth is the best way to ensure environment gets protected

Development from the Periphery

• From the periphery development has been experienced as:

– Colonialism, cold war proxy battles, external control over domestic affairs, dissolution of their traditions, environmental destruction

• “Underdevelopment” as an active condition, not a natural state of affairs

– Development also as insult that culture, tradition is wrong

• Critics fall into

– Dependency Theory – The world system produces economic inequality

– Postmodern/Post-colonial Theory – There are other multiple approaches to increase well-being available from the diversity of the world that cannot necessarily be measured as economic prosperity