Models of development Flashcards
1 of moderization
Traditional Societies: societies that are based on subsistence agriculture, with low levels of technology and pre-scientific values
Rostow’s model of development (modernization theory)
The oldest theory of development. States that there is a single way for countries to modernize and develop – by imitating what the industrial countries did.
2 of modernization
Preconditions for take-off: Societies that have started to introduce money and banking into their economy, and have a new class of entrepreneurs with scientific values.
New opportunities now offering job in secondary sector
3 of moderization
Take-off: Societies in which values that encourage economic growth are widespread and growth of certain economic sectors has become common
Urbanization
New technology has allowed for new production to occur
4 of moderization
Drive to Maturity: Societies with an economy that is diversifying and producing an increasingly large variety of goods. Standards are rising and poverty is decreasing
Specialization: diversified economy
Society is more independent less reliant on other countries
Neoliberalism
The neoliberal model of development that emerged during the 1970s endorsed the belief that for the well-being of people and the economic growth and development of a country it was best for the state to minimize its intervention and leave the market free to function on its own, setting wages and prices.
5 of moderization
High Mass Consumption: Societies in which wealth and the production and consumption of modern consumer goods are widespread
Majority of jobs have moved into the tertiary sector
Neoliberal argument and solution?
Argues that government interference almost always has negative long-term consequences on development. This is because it can create sudden economic growth that does not last, and because corrupt officials have a lot of opportunities to take money for themselves illegally.
A better solution would be to encourage free enterprise (i.e intervening in the economy as little as possible).
This would lead to healthy competition, meaning that only the strongest companies survive and grow, which in turn leads to sustainable long-term growth and development.
Development should grow from FDI rather than government investment. Furthermore, the amount the state spends on public services such as healthcare and pensions should be smaller, so that people are encouraged to work and contribute to the economy
The Washington Consensus
In the 1990s, a lighter version of the neoliberalism ideology emerged, often referred to as the Washington Consensus. It has a stronger emphasis on free market non-interventionism, strong institutions and good policies. This ideology tried to find a balance between complete deregulation and a strong and accountable government that manage the negative effects of liberalization
Pro-democracy argues that free markets can only function effectively and efficiently in an environment where the rule of law is respected and citizens are able to express their opinions.
The Washington Consensus attempts to balance deregulation with an accountable government who oversees the market
State capitalism (China, Russia)
A political system in which the state has supreme control over both production and the usage of capital and thereby utilizes the market for political advantages, protected from the ups and downs of a market system.
What does state capitalism involve?
Involves a widespread influence of the government in the economy, either by owning majority or minority equity positions in companies or by providing subsidizes credit and/or privileges to private companies
What does state capitalism do?
Governments can use various tools to exercise their control over the economic sphere
Sovereign wealth funds (SWFs), state owned enterprises and national champion firms. Many oil companies are owned by states
In China it has been a great success, with their GDP consistently growing for the past 12 years.
The Chinese government is a primary stakeholder in the top 12 companies that are state owned.
The central government exercises control over these companies through major decisions on investments and through appointments to the top posts
They are protected from competition by the state mechanism
Capability theory
based on the premise that economic development in terms of a rise in GDP does not necessarily guarantee a good quality of life for people. the quality of life can be evaluated and assessed in terms of the capability to function –
Thus, the focus of policy should be to ensure a person’s well-being and development, and to provide the freedom to live the kind of life they choose or find valuable.
This comprises a full spectrum of variables (i.e health, education and political freedom)
Martha Nussbaum argued capabilities required for a good life.
Ability to live a life of normal length
Good health, nutrition, shelter
Ability to use senses, imagine, think, reason and have the education to realize all of these
Ability to live for others and show concern for other human beings
Ability to laugh and enjoy recreation
