Lecture Notes: Economic Development Theories

Introduction

• Discussion on economic growth models and theories.
• Focus: Resto's Stages of Economic Growth, Wallerstein's World System Theory, and Dependency Theory.
• Observation: Global economy benefits some countries more than others.

Resto's Stages of Economic Growth

1. Traditional Society

   • Economy: Subsistence-based, primary sector jobs (e.g., subsistence farming).
   • Characteristics: Slow economic growth, little specialization, lack of modern technology.

2. Preconditions for Takeoff

   • Economy: Growth through infrastructure and education investment.
   • Characteristics: Increased productivity, emergence of new industries, more secondary sector jobs.

3. Takeoff Stage

   • Economy: Rapid economic growth.
   • Characteristics: Transition to industrial activities, increased urbanization, access to new technology.

4. Drive to Maturity

   • Economy: Specialization and global trade increase.
   • Characteristics: Economic diversification, shift to consumer goods, less dependence on natural resources.

5. High Mass Consumption

   • Economy: Fully developed, consumer-oriented.
   • Characteristics: Majority jobs in tertiary sector, development of consumer culture.

• Criticisms: Model overlooks political/social factors, impact of colonialism, and environmental limitations.

Dependency Theory

• Assertion: Countries' development hindered by dependence on developed countries.
• Characteristics:
  • Exploitation by core countries and multinational corporations.
  • Unequal trade relationships, reliance on raw material exportation.
• Challenges for less developed countries:
  • Difficulty in negotiating better trade terms due to power imbalance.

Wallerstein's World System Theory

• Concept: Hierarchical categorization of countries based on economic development.

• Categories:

  1. Core Countries: Most economically developed, control global economy, exploit resources of other countries.
  2. Semi-Periphery Countries: Emerging economies, more industrialized, serve as transition between core and periphery.
  3. Periphery Countries: Least developed, often economically dependent on core countries.

• Historical Context: Acknowledges colonialism's role in current economic systems.

• Criticisms: Overlooks role of NGOs, microfinancing, and programs supporting self-reliance.

Commodity Dependence

• Definition: Over 60% of a country's exports are commodities.

• Vulnerabilities:

  • Price fluctuations impact economy.
  • Limits diversification and development.

• Example: Venezuela's reliance on petroleum exports leading to economic collapse in 2014.

Conclusion

• Global economy is interconnected, affecting countries worldwide.
• Encouragement to practice learned concepts and explore additional resources.