Development
may occur due to some deliberate action carried out by single agents or by some
authority pre-ordered to achieve improvement, to favorable circumstances in
both. Development in its basic definition means an event constituting a new
stage in a changing situation or the process of change per se. If not qualified, development is implicitly intended as
something positive or desirable (Lorenzo,
2011). Over the years, development has very rarely been considered as a
“god-given” condition of socio-economic systems, implying that policy makers at
national and international level need to undertake some specific activities or refrain
from carrying out some kinds of activities to promote positive changes. However
there have been different schools of thoughts relating to the means of achieving
development as well as the true definition of positive outcomes or changes as
the end to development. Development may be viewed in different aspects. First development may be viewed as a modernization process with emphasize on
social change which is required to produce advancements, reform social and
political processes to attain the status already attained by other developed
states. In this sense then development is subjected to the activities that produce the desired outcomes that conform to some outlined status. Secondly development
may be view as a process of attaining distributive social justice with improved
access to basic needs for all. Emphasize is on access to primary goods by all. Thirdly
development may be viewed as a product of production with emphasize on the
means and the mode of production and the endogenous and exogenous factors
impacting production processes. This approach to defining development
challenges existing modes of international division of labor, categorization of
nations into core and periphery and the impacts of the markets on the economies
and welfare of developing nations. This approach assumes that concepts of self-reliance,
dependence and freedom are often suppressed by the existing relations between
developed and developing nations and the agents that reinforce these relations.
Fourthly development may be viewed in the context of resource exploitation. Sustainable
development recognizes the finite nature of resources and the need to have
equality in access to resources between the current and the future generations.
Lastly development may be defined in the context of
the victims of development. Capability approach to development resonates with theories of justice and equality within the society.
Sunday, 16 August 2015
UNDERSTANDING HARROD-DOMAR LINEAR MODEL OF GROWTH
This
model was developed as a solution for developed countries and international
financial institutions to play a major role in the reconstruction of countries
after the Second World War and the great depression first in Europe and later
to the Asian, African and Latin American continents. The model emphasized on
savings, investments, economic growth, and capital output. Further this model
made use of the prevailing conditions in the 1940s where the war and the great
depression had created major unemployment with many countries experiencing
labor surplus.
Using
this model, economic growth was a subject of savings and investment and
therefore international financial institution were able to calculate the amount
of capital injection required by developing countries to realize a particular
level of growth. Further the model ruled out any prospects of development for
developing countries in the absence of developed countries’ support and
propagated the idea that borrowing for developing countries was the only way to
development and that debt was a good thing.
Summary of the
model
-
The
model was based on the concept of savings and capital output.
-
It
emphasized that labor in developing countries was in surplus but capital was
limited and therefore countries had to find ways of enhancing savings to make
use of the surplus labor in order to grow their economies
-
This
model emerged after the second world due to the following factors
o
Numerous
challenges facing developing countries and interest by developed countries to assist
o
The
overwhelming surplus labor in developing countries due to the disruption of the
wars and the great depression and the limited capital and savings requiring
foreign aid and capital support from developed countries meaning developing
countries cannot exist without developed countries (dependency)
o
USSR
having developed through forced savings and investment provided a justification
for the model
o
Marshall
plan which entailed support to previously communist countries which provided an
opportunity for western countries to micro manage the economies of developing
countries
Critique
- Savings
does always translate to economic growth since saving may just be a confounding
factor with other myriad of factors determining economic growth just as the
political stability of the country. More so some countries such as Thailand
recorded some substantial level of growth without any meaningful savings
records.
- The
model is too linear and simplistic indicating that savings will translate to
capital stock, which translate to investment translating to economic growth and
capital output for sustained growth. However other factors such as
technological progress now determine the pace of growth far more than savings
alone.
- Since
mechanism in developing countries to manage savings are not in place or
developed this model may only apply in developed countries only
- The
model does not differentiate between economic growth and economic development,
assuming that economic growth will translate to economic development.
- The
model assumes that heavily borrowing will automatically translate to economic
growth. however evidence has shown that developing countries characteristics of
heavily borrowing end up with run-away debt and do not necessarily develop
Subscribe to:
Posts (Atom)