Lecture Notes on Economic Growth Theories

Introduction

• Topics Covered:
  • Rostow's Stages of Economic Growth
  • Wallerstein's World System Theory
  • Dependency Theory
  • Commodity Dependence
• Global Economy Context: The global economy disproportionately benefits some countries over others.

Rostow's Stages of Economic Growth

1. Traditional Society

   • Economy: Subsistent
   • Sectors: Primary (e.g., subsistence farming)
   • Characteristics: Slow economic growth, little specialization, lack of modern technology.

2. Preconditions for Takeoff

   • Characteristics: Growth in infrastructure and education, emerging industries.
   • Economic Transition: From primary to secondary sector (manufacturing, processing).

3. Takeoff

   • Characteristics: Rapid economic growth, increased urbanization, technological advancement.
   • Challenges: Exploitation by foreign states.

4. Drive to Maturity

   • Economic Activities: Specialization, global trade, shift to consumer goods.
   • Characteristics: More independence, less reliant on natural resource exportation.

5. High Mass Consumption

   • Characteristics: Fully developed economy, consumer culture.
   • Economic Shift: Jobs in tertiary sector, independence from external influences.

• Criticism: Does not account for political, social factors, colonial impact, environmental limitations.

Dependency Theory

• Core Idea: Development hindered by dependence on developed countries.
• Global Market Dynamics: Exploitation by core countries, unequal trade relationships.
• Challenges for Developing Countries: Reliance on raw material exportation, low-skilled labor.

Wallerstein's World System Theory

• Country Categories:
  • Core Countries: Economically developed, control global economy.
  • Semi-Periphery: Emerging economies, transitioning.
  • Periphery: Least developed, low standards of living.
• Economic Relationships: Core countries exploit resources of semi-periphery and periphery.
• Criticism: Fails to consider NGOs, microfinancing, and microloans.

Commodity Dependence

• Definition: Over 60% of exports are commodities (raw materials, agriculture).
• Risks: Vulnerable to commodity price changes, neglect of other economic sectors.
• Example: Venezuela's reliance on oil exports leading to economic collapse when oil prices dropped.

Conclusion

• Global Impact: Economic theories showcase the interconnectivity and imbalance in global trade.
• Call to Action: Practice questions available for further learning.