CHAPTER ONE

1. Perspectives and Evolution of Development

Although we cannot be sure about when the concept originated, most people agree that
development is closely related with the evolution of capitalism and the demise of feudalism.
The concept of development is very elusive (difficult to understand in its totality).
Development has many meanings. Thus, in order to understand the various theories of
development, one must see them from the historical and contextual perspectives. The terms
"Developed", "Underdeveloped", "Undeveloped", and "Less Developed" are used to denote
the social and economic conditions of countries.

However, whoever tries to describe the term "development" should incorporate ideas in a
manner that it can be perceived as: researches

1) A condition of life,
2) A goal to be achieved, and
3) A capacity to grow and change

These three points or ideas should be bound together in all efforts to understand and deal with
the theory and practice of development.

Why Do We Need to Study and Realize Development?

i) The Everest Reason:- "Why did you climb Mount Everest?" Answer: "Because it was
there!" The developing world constitutes the vast majority of the world's territory,
hence it is not only important to correct such imbalances, but also is a must to be
worried about to understand the impacts of lack of it and find ways of its realization.
ii) Human Compassion: Approximately, 75% of the world population lives in developing
countries and in below standard and sub-standard conditions. Human compassion
dictates that understanding development and being able to apply that knowledge to help
those in such conditions is a useful endeavor.
iii) Terrorism: Recent events have brought to forefront the threats and impacts of global
terrorism and that many of those involved individuals come from the developing world.
Thus, development can be a tool in the war on terrorism.

1.1 Meaning and Dimensions of Development

Development is a very seductive term that induces interest to all. It is a term ubiquitous in our
daily language. Development has no as such single ‘proper’ meaning. People do mean by the
term “development” many different things and use it in several ways. Development has been
taken to mean different things at different times, in different places, and by different people
of different professions and organizations. While examining the various meanings and
dimensions of development, we often look into Cinderella words and concepts that are, as
Chambers (2005:186) says, the common currencies in the contemporary development
discourse. The changing words, meanings and concepts of development discourse therefore
reflect and influence what have been and/or what are being done in practice.

The dominant meanings have been those attributed by economists. Development has thus
been equated with economic development, and economic development in turn with economic
growth or simply growth. Upon economic considerations, Coffey defined development as
"sustained and irreversible economic growth, which will be characterized in quantitative
terms by an increase in real income per capita…accompanied by certain structural and social
transformations of a given country".

However, defining development on the basis of the economic growth model or approach has
shortcomings, since it doesn't show the real impact of the growth on the public life. Economic
growth is not just the same thing as development and the difference between the two has been
identified by many recent contributions to development economics. For example, Todaro
(1994) and Nelson (1970) do not agree with the equivalent meanings of economic growth and
development. They instead argue that acceleration of economic growth would make sense
only when it ensures the reduction of inequality and the eradication of absolute poverty.

Despite progress in Per Capita Income, GNP, or GDP in many developing nations, disparities
in the living conditions between rich and poor countries and between the richest and poorest
people within the developing countries continue to widen, and the absolute number of the
poor increases overtime (Rondinelli, 1993:1).

According to Des Gasper (2004:2), it is a bare fact that ‘globalization’ is generating great
wealth these days, which could be used to massively reduce poverty worldwide and to reduce
global inequality. However, the reverse is still happening in practice.
“The world’s richest 225 people have a combined wealth equal to the annual
income of the poorest 47 per cent of the world’s people. Almost one in four of the
 world’s population lives in abject poverty without access to adequate food, clean
water, sanitation, essential healthcare, or basic education services. This tells that
1.3 billion people whose lives are blighted by poverty, robbed of their dignity,
deprived of the opportunity to fulfill their potential”

For these writers, economic progress is thus an essential aspect or component of

development, not the same as development per se since the latter is not purely an economic
phenomenon. In broad sense, development must encompass more than the material and
financial side of people's lives. This in turn indicates that the meaning of development has
evolved over time to encompass many other dimensions. Scholars and practitioners provided
a new version to the concept of development that would fit into the changing approaches and
realities.

In recent years, there has come a wide consensus in that development should primarily mean,
and be measured in terms of an improvement in the general welfare situation of the people
through poverty reduction. Starting from the 1970s in particular, development came to be
redefined in terms of the reduction or elimination of poverty, inequality and
unemployment. Hence, “redistribution from growth” became a common slogan. This is a
shift away from the earlier understanding of the meaning, measurement and objective of
development.

It broadly implies social transformations involving complex economic, social, political, and
cultural changes towards positive ends. Riggs (1964) defined development as "a process of
increasing autonomy (discretion) of social systems by raising the level of diffraction. While
'discretion' is the ability to choose among alternatives, 'diffraction' refers to the degree of
differentiation and integration in a social system". Development, as Montgomery also
describes, "…is usually perceived as an aspect of ‘good’ change that is desirable, broadly
predicted or planned and administered or influenced by government action".

If development means good change; i.e. ‘societal improvement’, questions arise about what is
good and what sorts of change matter. Robert Chambers (2005:184-193) has added a new
concept for a development agenda; that, development is change with “responsible well-
being”.

According to Des Gasper (2004:14), the very idea of development as societal improvement is
value relative, which justifies the need for the study of development ethics. Development
ethics is also defined as ‘the normative or ethical assessment of the means and ends of
development’.

Galtung (1980), quoted in Gasper (2004), defined development as, “a process transforming
structures – particularly those of production-consumption and major institutions – so that
basic human needs are satisfied for an increasing number of individuals at an increasingly
high level within the framework meaning provided by culture and the outer limits provided
by nature.

In addition to improvements in productivity/outputs and incomes, it typically involves radical

changes in institutional, social, and administrative structures as well as in popular attitudes,
customs and beliefs. According to Todaro (1994:67-68), development must be conceived as a
multidimensional process involving the reorganization and reorientation of the entire
economic and social systems. Hence, development becomes to be perceived in terms of the
satisfaction of basic human needs rather than simply growth maximization.

Todaro has come also with a new concept known as the "core values'' of development, which
represent common goals sought by all individuals and societies. In his words, at least three
basic components or core values should serve as a conceptual basis and practical guideline
for understanding the inner meaning of development. These core values are: sustenance, self-
esteem, and freedom,

i) Sustenance: by sustenance, he meant the ability to meet basic needs that people invariably
have without which life would be impossible. These life-sustaining basic human needs
include food, shelter, health, and protection. When any of these is absent, or in critically
short supply, a condition of "absolute underdevelopment" exists. Here, therefore, we may
claim that economic development is a necessary condition for the improvement in the
quality of life, and that is what should be called 'development'.
ii) Self-esteem is used to denote 'to be a person", a sense of worth and self-respect, dignity,
identity, honor, recognition, of not being used as a tool by others for their own ends. The
nature and form of this self-esteem may vary from society to society and from culture to
culture. However, with the expansion of the "modern values" of developed nations, many
societies in the Third World Countries that have had profound sense of their own worth
suffer from serious cultural confusion when they establish close contact with economically
and technologically advanced societies.
iii) Freedom from servitude (from suppression or from obeying by others' interest) means to
be emancipated from alienating material conditions, or to be able to choose from an
expanded range of options available for societies together with the minimization of external
constraints in the pursuit of some social goals, which we call development. The advantage
of economic growth is not that wealth increases happiness, but that it increases the range of
human choices. Wealth can enable people to gain greater control over nature and the
physical environment than they would have if they remained poor.

1.2 Objectives of Development

Despite differences in the political and development patterns of countries, (both in the
developed and developing ones), there is a widely shared consensus among people and
leaders regarding the goals and objectives of development. Many scholars in the field of
comparative administration (development administration) agree that the two major elements
of development objectives are “nation-building and socio-economic progress”. Esman (1966)
describes nation-building as "the deliberate fashioning of an integrated political community
within the fixed geographic boundary in which the nation-state is the dominant political
institution, while economic and social progress is defined as the sustained and widely
diffused improvement of social welfare".

Therefore, the emphasis of recent arguments is on clarifying the target and purpose of
development; i.e. the well-being of all people by providing them with the opportunities to
ensure better life. In this context, Wen (1976: 355) argued, "...development will not have
moral as well as practical validity or justifications unless it is firmly subordinated
(associated) to supreme social objectives, namely, the preservation of humanity and
improvements in the quality of life of the poor". Hence, development as a process involves
integration of social and economic objectives; i.e. growth with equity.

The other dimension of explaining the objective of development is empowerment of the

underprivileged people by enabling them to control over resources and decisions affecting
their lives. For the contemporary development thinkers, the basic question related to
development is not only concerned about efficiency, but about achieving social justice
through changing society's basic values. As Jones and Inaba (1997:10) have said, the
essential components that demonstrate the ultimate purpose of development include, among
others, securing equitable distribution of income and wealth; raising the level of employment;
expanding and improving facilities for education, health, nutrition, housing and social
welfare, etc.

According to Robert Chambers (2005:189-93), the overarching end (objective) of

development is ensuring well-being for all. Well-being can be described as the experience of
good quality life. Well-being differs from wealth. Unlike wealth, well-being is open to the
whole range of human experience, social, psychological and spiritual as well as material. It
has many elements including living standards, access to basic services, security and freedom
from fear, good relations with others, peaceful mind set, fulfillment of self-being and so forth.
In contrast, wealth doesn’t serve all these values. Generally, genuine development should
serve four interrelated objectives; i.e. livelihood security, capability, equity, and
sustainability. The notions of these words/phrases are elaborated by Chambers in the
following manner.

i) Livelihood Security: Livelihood can be defined as adequate stocks and flows of food
and income to meet basic needs and to support well-being. Security refers to assured
rights, physical safety, and reliable access to resources, food and income, and basic
services.

ii) Capabilities: Are the means to the fulfillment of livelihood and well-being and their
enlargement through learning; practicing, training and education. Capabilities refer to
what people are capable of doing and being.

iii) Equity: Suggests that the poor, the weak, the vulnerable, and the exploited should come
first. Equity includes human rights, intergenerational and gender equity, and the
reversals of “putting the last first and the first last”, to be considered in all contexts.
However, the reversals are not absolute, but to balance and level.

iv) Sustainability: To be good, conditions and changes must be sustainable economically,

socially, institutionally, and environmentally. Sustainability means that long-term
perspectives should apply to all policies and actions as objectives for present and future
generations. Sustainability helps to maintain or enhance resource productivity on a
long-term basis.

When well-being is qualified by equity and sustainability, it becomes ‘responsible well-

being’, as the overarching end. Well-being is then not at the cost of equity and sustainability,
but is enhanced when it contributes to them. Responsible well-being recognizes obligations to
others. In general, the word ‘responsible’ has moral force in proportion to wealth and power.
The objective of development, then, becomes responsible well-being by all and for all.

In objective terms, as Titi and Singh (1995:9) noted, the primary objective of development
should be to overcome poverty and to protect or broaden human options. This in turn requires
the formulation of appropriate development policies. These days, almost all countries adopt
development policies in the face of a new philosophy known as “people-centered” or
“community-based” development.

1.3 Measures of Development

In the pre 1970s, development has been measured in terms of the capacity of the national
economy to show an annual increase in its GNP or the ability of the nation to expand its
output at a rate faster than the growth rate of its population. A common economic index of
development has been therefore the use of the rates of growth of income per capita or per
capita GNP. The levels and rates of growth of "real" per capita GNP (monetary growth of
GNP Per capita minus the rate of inflation) are normally used to measure the overall
economic well-being of a population. However, such measurements and assumptions of
development have had very little to do with changes in the living standards of the poor.

Social scientists tend to disagree among themselves about the characteristics of measures of
development. Economists equate it with the capacity to produce a high level of material
output or resources in relation to size of population. Such measures are translated in concrete
terms as Gross National Product (GDP), Gross Domestic Product (GDP), and Per Capita
Income (PCI). Others focus on the forms of social and economic organization as prevailed or
evidenced in developed countries. Such measures are relative or qualitative in nature, which
may include:

 Justice and equality

 Utilization of modern technology
 Criteria of rewards based on achievement rather than ascription
 Political and administrative modernization
International development agencies (like UNDP and the World Bank) often apply the Human
Development Index (HDI) as measures of development, including:
 Education, employment rate, clothing and shelter
 Infant and child mortality rate
 Life expectancy,
  Access to modern health facilities and safe drinking water
 Nutritional status as measured by calorie intake
 School attendance as percentage of school-age population
Gross Domestic product (GDP)
The total value of currently produced final goods and services that are produced within
a country's borders during a given period of time, usually one year.
The following are the points to be remembered about GDP:
 It measures current production only.
(We take newly produced final goods and services only. That means, any output produced
last year will not be counted. For instance, a chair produced last year and resold this year
will not be counted as part of this year’s total output of Ethiopia ).
 It takes final goods and services only.
 We take end products of production processes.
(Intermediate goods are not included in the calculation
 because they are Completely used up in the production of
another goods in the same period that they themselves are
produced.)
 It takes final product produced within a country's boundary or territory.
 The final product will be counted irrespective of who owns that output. i.e
nationality of the producer is not its concern. (a foreign company may
currently produce the final product in Ethiopia.
 It is owned by foreigners but it will be counted as part of the GDP of
Ethiopia
GDP vs. GNP
 Gross domestic product (GDP) is defined as the "value of all final goods and services
produced in a country in one year”.
 On the other hand, Gross National Product (GNP) is defined as the "Value of all
goods and services produced in a country in one year, plus income earned by its
citizens abroad, minus income earned by foreigners in the country".
 The key difference between the two is that
 GDP is the total output of a region, and
 GNP is the total output of all nationals of a region.
HUMAN DEVELOPMENT INDEX (HDI)
  UNDP has developed two alternatives indexes by which to compare the level of
development and the progress of a country- Human Development Index (HDI) and
Human Poverty Index (HPI).
 These indices give alternative measure of economic well-being of nations that do
not necessarily accord with the usual measure. i.e. the level of per capita income
(PCI).
 UNDP defined Human Development (HD) as “a process of enlarging people’s
choices”
 It attempts to rank all countries on a scale of ZERO (lowest HD) to ONE (highest
HD).
It is based on three goals or end products of development:
1) Longevity as measured by life expectancy at birth
2) Knowledge as measured by weighted average of adult literacy (2/3rd) and mean year of
schooling(1\3rd), and
3) Standard of living as measured by real per capita income adjusted for the differing
Purchasing Power Parity (PPP).

These all imply that the term “development” goes beyond a material conceptualization of the
common good. Moreover, pure economic measurements of development alone, which have
been conventionally used in the pre 1970s, cannot adequately demonstrate the actual living
standards of a society.

Tip
GDP is the measure of the value of goods and services produced by the national
economy over a year. To avoid double counting, only goods used for final
consumption or investment are included, not those used up in producing the final
goods. Gross National Product (GNP) adds to GDP the income that accrues to
domestic residents from investment abroad, and deducts the income earned in the
domestic economy, which is owned by people abroad. GNP per capita is therefore
the better measure of development as welfare, while GDP per capita is a better
measure of productive forces.
 1.4. Development strategies of developing countries
There are many ways in which countries try to promote growth and development.
These can be placed in two broad categories:

Those policies that rely on free markets to stimulate growth and development, and
those approaches that rely more on state intervention and central planning.

I. Market-orientated strategies

1. Trade liberalisation

Free trade has long been seen as an effective means of achieving growth and
development through what is commonly called an outward-looking approach.

Free trade means trade without any barriers or restrictions and requires countries to
specialise in goods and services for which they have a comparative cost advantage.

Removing barriers, such as tariffs, can help ‘create trade’, which can help create
employment and output.

2. Export promotion

An extension of the simple free trade approach is the push for export-led growth. This
means shifting the focus of economic policy away from growth through increased
domestic consumption or government expenditure towards targeting export markets.

Depending on the role of government, this strategy straddles both the market-led and
state-led approach to development.

Certainly, China has adopted an export led approach to developing its economy given
the relatively low purchasing power of a large proportion of its population.

However, what both approaches recognise is the importance of trade to development,

though with a very different focus on how trade is best facilitated, and the role of the
state in the process.

3. Promotion of FDI

Given the savings gap experienced by many developing economies, encouraging FDI
can help fill this gap and increase aggregate investment in an economy when domestic
saving is weak.
Direct investment refers to a situation where the resident of one economy (as an
individual or private or public organisation) acquires a lasting interest in an asset in
another economy.

FDI will affect the balance of payments, and enable technology transfer where the
recipient country benefits from access to new technology (and the skills to use it.)

There are several positive externalities associated with an inflow of FDI in terms of
human capital development and improvements in infrastructure.

However, critics point out that FDI is often associated with unregulated global
multinational companies who repatriate profits and often manage to operate complex
tax avoid strategies - denying host countries of valuable tax revenue.

4. Removal of government subsidies

Government subsidies may be considered as a limit on economic growth and

development in that government spending in this respect can crowd out the private
sector, and lead to an inefficient allocation of scarce resources.

Government subsidies can result in a series of other problems, including ‘x’

inefficiency, allocative inefficiency, and moral hazard.

For example, during the financial crisis many governments supported banks by
providing large bailouts. While this may have been necessary in the short run, bailouts
can prevent banks attempting to become more efficient, or operate more prudently.

Government involvement in a specific sector through subsidies may prevent FDI and
act as a disincentive to the private sector.

However, subsidies can also be used to encourage FDI and protect infant industries
which may allow growth in the future.

5. Floating exchange rate systems

The idea that floating exchange rates are preferable to fixed exchange rates is a long
held view associated with free market, liberal economics.

The view here is that floating exchange rates can help achieve an external equilibrium
with other countries, and that fixing exchange rates can store up problems in terms of
‘over’ or ‘under’ valuation of currencies.

6. Microfinance schemes
Microfinance relates to small scale financial schemes where investors put small
amounts of money into a bank, and where borrowers can withdraw small amounts to
develop their business ideas.

It removes the need for collateral and conventional credit rating processes, and has
been seen as a way to ‘fix’ the broken credit markets in developing countries.

7. Privatisation

Privatising is the transfer of state assets into the private sector.

II. Interventionist strategies

1. Development of human capital

Economic development depends to a great extent on the level of human capital that
exists.

Human capital is defined as the total skill, knowledge, and experience of an

economy’s labour force, especially related to the use of new technology.

Given that education and, to some extent, training are merit goods, it is likely that free
markets will fail to allocate sufficient resources to the provision of education.

Hence, the state will need to take an active role in educational provision.

The state can either provide all education, through 'public' education, or some of it in
conjunction with the private sector.

2. Protectionism

While those favouring the use of free markets to generate the right environment for
economic growth, many countries have used protection of their industries as a way of
stimulating growth.

This is often referred to as an inward-looking approach.

Import substitution (or import substitution industrialisation) was a popular strategy for
many developing countries from the 1950s, and involved governments investing in
those sectors where imports were significant.

For this to work, protectionism of industry – especially infant industries – was

regarded as essential.

3. Managed exchange rates

In contrast to the free-market approach to growth and development, which stresses the
importance of allowing markets to work, the interventionist approach considers it
important to have managed exchange rates in order to reduce exchange rate volatility.

A stable exchange rate, they argue, encourages investment as firms can predict their
imported costs and their expected revenue from sales abroad.

While most systems today allow some flexibility, managing exchange rates ultimately
means pegging one currency to the currency of the dominant export market, or indeed
scrapping individual currencies and joining a currency union.

4. Infrastructure development

Many developing countries, especially those in sub-Saharan Africa, have poor

infrastructure, including inferior road and rail networks, and a lack of modern
airports.

Many are land-locked and rely on road networks for exporting and importing key
resources. Being land-locked, as in the case of 16 African countries is a considerable
constraint on development.

Infrastructure projects are extremely costly and usually relate to public and quasi-
public goods, such as roads, bridges, tunnels, docks, and airport infrastructure.

These projects are likely to be too expensive for private firms to build on their own,
hence public money is commonly used - either on its own, or in tandem with private
finance – often through joint ventures with foreign companies.

Infrastructure creates a range of positive externalities, including reduced business

costs, savings in travelling time, and an increase in tourism revenue

5. Promoting joint ventures with global companies

As suggested, in the case of infrastructure improvements, joint ventures are a method

of improving growth and development prospects of developing and emerging
countries.

In sub-Saharan Africa, joint ventures in energy generation are also commonplace.

Governments of developing countries are often involved in facilitating joint ventures
– a strategy encouraged by the World Bank.
Countries can benefit from joint ventures in several ways. The companies are often
oligopolies, with considerable profit potential, and the joint venture ‘host’ company
can benefit from such profits. In addition to inflows of capital, technology is also
transferred from the multinational to the host.

Joint ventures are attractive to multinational because:

They require a smaller capital commitment than a wholly owned foreign enterprise.

Governments may offer tax concessions.

The partner company can deal directly with Government organisations.

Joint ventures can also provide a cultural bridge between the foreign company and the
overseas market helping to encourage the development of products suitable for local
markets.

6. Other strategies

Industrialisation:

Lewis argued that industrialisation will improve labour productivity, free-up surplus
labour and lead to rapid economic growth.

Lewis’s model if often referred to as the two-sector model, which contrasts an

inefficient rural agricultural sector which aims simply for subsistence, with a more
efficient urban industrial sector which is concerned with productivity and profits.

Lewis argued that if inefficient workers were transferred from the agricultural sector
to the industrial sector there would be a net gain in output (and economic growth).

This is because the marginal productivity of labour in the agricultural sector is

virtually zero, and there is, in effect, surplus labour available for work elsewhere.

2. Development of tourism

Tourism has long been seen as providing a solution to low development for smaller
economies, including Caribbean islands.

Tourism requires infrastructure and accommodation, and in developing this sector

wider benefits can be gained through FDI.

Tourism also has many linkages to other sectors, including energy, construction and,
education and, critically, the wider service sector.
There is also a significant positive multiplier effect from tourism.

Greater linkages generally translate into higher levels of local economic activity (and
growth), which tend to occur when tourism enterprises source their goods and
services (including labour) locally rather than from imports.

Tourism also generates considerable tax revenue to governments, which can be used
to develop human capital, infrastructure or agricultural improvements.

However, unstable exchange rates, global shocks (including the COVID-19

pandemic), increased competition for tourist revenue, and a high income elasticity of
demand for tourism means that a reliance on tourism can be risky.

Also, uncontrolled tourism can lead to environmental costs, including damage to

historic sites. Climate change may also have an impact on tourist economies over the
next 20 years.

3. Development of primary industries

While dependency on primary products has been a concern and a potential constraint
on economic growth and development, a switch to secondary industry is seen as a
sensible way forward.

However, the alternative view is that improvements in agricultural efficiency and

reform of rural economies is an importance development strategy, without which
industrialisation is not possible.

Over 75% of the world’s poorest work on small areas of land, using low grade
technology, or none at all.

A key benefit of developing agriculture is that creating a diverse economy relies on an

efficient agricultural system.

Crop yields in many developing countries, especially those of sub-Saharan Africa are
extremely low compared with more developed and emerging economies.

4. Aid

Overseas aid is also a means of promoting development.

Aid falls into one of two categories – humanitarian aid, which is provided to countries
suffering from natural disasters, or military conflict, and development aid.
Development aid can be provided by governments, or by non-governmental
organisations (NGOs). Official aid is referred to official development assistance,
ODA.

Aid can also be direct ‘bi-lateral’ aid, when the provider gives aid directly to another
country, or ‘multi-lateral’ when aid is provided by countries to NGOs, who then
distribute it according to their own plans.

While helping fill any savings gap, as well as provide a means of achieving
development, aid can be targeted to important projects, such as agricultural
improvements, clean water supplies, infrastructure projects and education.

5. Debt relief

Debt relief is also a means of promoting development.

Debt can be a considerable drain on the finances of a developing countries, meaning

that scarce financial resources are diverted away from other needs, such as
agricultural improvement.

Debts can be re-structured, or re-scheduled to enable it to be sustainable in the long

run.

6. Remittances

Finally, remittances cannot be ignored when considering factors that influence growth
and development.

Remittances arise when workers who are employed abroad send back money to their
families, and can contribute significant amounts, and outstip the importance of aid.

It is estimated that around one billion people, are involved with remittances, either by
sending them as migrant workers or by receiving them, with one in seven people
globally benefitting from these flows.

In over 70 countries, remittances contribute over 4 per cent of GDP.

In fact, they are the main source of external finance for many developing economies.
While remittances bring well established benefits in terms of growth, countries lose
labour, which offsets some of the benefits.
 CHAPTER TWO
2. Paradigms and Theories of Development

2.1 Introduction
The concept of development is essentially concerned with social changes and human progress
in developing countries, which suffered from the evils of colonialism. Colonies began to
achieve their independence following the end of the 2 nd WW. But there was another
phenomenon known as the ‘cold war’ that took place between the capitalist of the west and
the communist east. Part of this war was the struggle to acquire allies from the developing
countries. The search for such allies has in turn come to be backed by the emergences and
applications of different development theories. Radical new theories emerged under the
various schools of thoughts or paradigms, each claiming that their theory held the key to
understand development and underdevelopment.

Development paradigms provide the basic underpinnings to describe the theories and policy
approaches of development and guide the applications of such development theories and
policies into practices. Paradigms and theories are much alike in their abstractions, except
that the former is broader to encompass many such of the latter. Both use assumptions and
past experiences to argue on their respective positions and explain propositions. Theories and
paradigms are generalizations. Hence, the implications of a given paradigm and theory vary
widely from country to country since every country has unique economic, social, cultural,
and historical experiences.

What do theories try to do?

Development theories seek to explain and predict how:

 Economies develop/could develop (or not) over time,
 Barriers to development can be identified and overcome,
 Governments can induce, sustain and accelerate development with the application of
appropriate development polices,
There is no one agreed ‘model of development’. Instead, each theory gives an insight into one
or two dimensions of the complex process of development, and has its own merits and
limitations.
As paradigm is broader than theory, the various development theories could be seen under
two dominant paradigms or school of thoughts known as "Development From Above" or
"Top-Down", and "Development From Below" or "Bottom-Up" paradigms.
The two paradigms/schools of thoughts present their arguments more in the context of
"regional development". However, the term "region" could be understood broadly by dividing
the world into zones (North and South) or into continents and sub-continents, and narrowly
by dividing a single nation into regions or sub-national states. The values of society are the
ultimate standards by which development or lack of it will be judged. Thus, the validity of
development approaches will not be determined as a result of mere theoretical and
ideological debates, but also in the realm of practice.

Both paradigms are conceptual constructs, which in practice may rarely occur or be
distinguished in pure forms. Despite differences between those who espouse or advocate the
center-down paradigm and that of the bottom-up development paradigm, there are some areas
of agreement between the two approaches concerning the ways and means for alleviating
poverty. These may include:

 More attention to human resource development,

 Greater efforts to curb population growth,
 Wider and more rapid diffusion of agricultural innovation,
 Planning in terms of functional economic areas, and
 Linking functional economic areas by transportation and communication policies that
encourage not only the spatial diffusion of innovation, but also that facilitate the
movement of agricultural and light-industry outputs from rural areas to large urban
markets.
The two paradigms do have also common grounds from the "Economic Base Theory",
which will be discussed under section 2.3 later, and the “Stages of Growth Theory”.

Both schools of thoughts recognize that nations/regions will progress through different
"Stages"; evolve from lower stages to higher stages of development. According to Rostow
(1960, 1971), the transition from underdevelopment to development can be described in
terms of a series of stapes or stages through which all countries must pass (have passed).
Rostow sees national/regional development progressing in five stages, namely: traditional,
transitional, takeoff, maturity, and mass consumption. Therefore, it is possible to identify all
societies in their economic dimensions, as lying on one of the five categories.

(a) Traditional Stage (traditional society): This stage is characterized by subsistence

economic activity or limited production function; i.e. output is consumed by producers rather
than traded. Agriculture is the most important industry and production is labour intensive,
using only limited capital. A region in the traditional stage of development is one in which
there is limited availability of technology relative to other regions and there probably exists a
hierarchical social structure.

(b) Transitional Stage (precondition for takeoff): the second stage of growth embraces
societies in the process of transition; that is, the period when the preconditions for takeoff are
developed. At this stage, surpluses for trading and entrepreneurs emerge supported by an
emerging transport infrastructure. Savings and investment grow. In the second stage, the
region's economic and social structure begins to change. This occurs when leading regions
make investments in lagging regions in transportation, communication, and manufacturing
processes for the purpose of exploiting natural resources. In this stage, managers and skilled
labor are transferred to the lagging regions, and new social and political elites emerge.

(c) Takeoff: In the third stage, industrialization increases rapidly, new techniques spread in
majors sectors, with workers switching form the agriculture to manufacturing sector. During
the takeoff, the rate of effective investment and savings may raise with significant proportion
to the national income. Growth is concentrated in few regions of a country and in one or two
industries. New political and social institutions evolve to support industrialization. It occurs
when an external stimulus infuses investment by leading regions into lagging regions, and
when the new social and political order works to sustain continued national investment by
inducing private sector investment in core industries.

(d) Maturity (drive to maturity): In maturity stage, growth is diverse supported by

technological innovation in all front. In other words, the economic base of a nation/region is
diversified, and many formerly imported goods and services are produced locally. The
economy of a nation finds itself in the international economy, goods formerly imported are
produced at home, new import requirements develop, and new export commodities produced
to match the import. The economy extends its range into more refined and technologically
more complex process.
(e) High Mass consumption: The fifth stage occurs when a country/region exports many
goods and services that it formerly used to import. The leading sectors shift towards the
production durable consumers' goods and the diffusion of services on mass basis. At this
stage, the society ceased to accept the further extension of modern technology as an
overriding objective. The emergence of welfare states is one manifestation of the high mass
consumption stage, and countries allocate increased resources to social welfare and security.

Rostow's theory has many implications. Development requires substantial investment in

capital equipment; to foster growth in developing nations the right conditions for such
investment would have to be created; i.e. the economy needs to have reached stage two. For
Rostow:
 Savings and capital formation (accumulation) are central to the process of growth,
and hence development,
 The key to development is to mobilize savings to generate the investment, to set in
certain self-generating economic growth,

Rostow's model has its own limitations. For example, Rostow explains well the development
experiences western countries, but does not explain the experience of countries with different
cultures and traditions. Considerations of development from "above" or "below" are in
essence the considerations of the nature of development itself by individuals. Because, in the
ultimate sense, development is the reflection of personal values, conditioned by societal
framework in which one lives. In different national or regional situations there is undoubtedly
considerable variation in the make-up of these two schools of thoughts. Let us briefly contrast
the two paradigms (concepts) with each other.

DEVELOPMENT FROM:

ABOVE (TOP DOWN)?

BELOW (BOTOM UP)?

OR

2.1 Development From Above Paradigm

(The Top-Down/Center-Down Development Paradigm)

At least until recently, the center-down development paradigm has dominated the spatial
planning theory and practice in the context of developing countries. This school is rooted to
the traditional neoclassical economic models; in the balanced versus unbalanced growth
controversies of the 1950.

(a) Balanced growth (or the big push) theory argues that as a large number of industries
develop simultaneously, each generates a market for one another. Balanced growth
 involves the simultaneous expansion of a large number of industries in all sectors and
regions of the economy. If a large number of different manufacturing industries are
created simultaneously then markets are created for additional output. For example,
firms producing final goods can find domestic industries that can supply them with their
inputs. The benefits of growth are spread over all sectors and, ideally, over all regions.
Balanced growth theory is an extension of Say’s Law; the demand for one product is
generated by the production of others. It is argued that free markets are unable to
deliver balanced growth because entrepreneurs:
 Do not expect a market for additional output – why risk resources when sales are
uncertain?
 Require skilled workers but are not willing to hire and train unskilled staff who
may then leave to work for rival firms – employers cannot ‘internalize their
positive externalities’,
 Do not anticipate the positive externalities generated by the investment of other
firms engaged in expansion,
 Are unable to raise finance for projects
If government can coordinate simultaneous investment in many industries, one firm provides
a market for another. This requires state planning and intervention to:
 Train labor
 Plan and organize the large-scale investment program
 Mobilize the necessary finance
 Nationalize strategic industries and undertake infrastructure investments e.g. build
roads
 Protect infant industries through tariff (tax on imports) and quota (limit on quantity of
imports) policies
The strategy of balanced growth is beyond the resources of most poor countries. Balanced
growth within a closed economy rather than specialization and trade contradicts comparative
advantage. Government planning results in government failure; i.e. government intervention
in the market fails to bring about an efficient allocation of resources as it involves
bureaucratic processes. LDC’s development policies focusing on import substitution,
agricultural self-sufficiency and state control of production have yielded poor growth.
 (b) Unbalanced growth theorists argue that government cannot mobilize sufficient
resources to promote widespread and coordinated investments in all industries. They
share analysis with balanced growth theorists that free markets, alone, cannot generate
development but differ in that government planning or market intervention is required
just in strategic industries. Those with the greatest number of backward and forward
links are prioritized. A country lacks resources to finance balanced growth. Resources
should therefore be concentrated on strategic industries with:
 Significant forward linkages; i.e. firms creating essential inputs for other key firms in
the economy,
 Significant backward linkages; i.e. key firms buying industrial inputs from a large
number of domestic firms,
 Import substitution; i.e. developing domestic industries replaces imports and so
improves the balance of payments,
Government identifies strategically important areas with significant backward and forward
linkages so as to subsidize or fully own such sectors or areas. For example, state owned
development banks finance priority investment projects chosen for their contribution to
growth and development. The development-from-above school views development as
essentially emanating from the core and growth centers and trickling out to the periphery and
hinterlands. In its crudest sense, this school views regional development as starting from
worldwide demand for critical innovation that filters down to national, sub-national, urban
units, and hinterland units.

In other words, the essential position of this paradigm is that development will spread over
time from few dynamic sectors and geographic cluster to the rest spatial system. Of the
historical roots of the development from above paradigm, the unbalanced growth was given
high importance during the period of the 1950s in the highly influential works of Perroux,
Myrdal, Hirschman, and Friedmann.

(i) Perroux (1955): Growth Pole

Perroux coined the term "growth pole" with the primary concern that tended to promote
interactions among industrial sectors rather than spatial development processes. The "growth
center (or pole) and hinterland" concept distinguishes within a regional context. Growth
poles or centers are urban or extended metropolitan areas, here called "urban fields",
containing a set of expanded activities, which induce further economic development
throughout its hinterlands. A growth pole is an urban growth center from which growth
diffuses through the hinterlands. On the other hand, hinterlands are outside the urban fields.
In Perroux's growth pole concept, development in hinterlands is fueled by expanding
metropolitan centers. In this context, investment trickles out from the growth pole or growth
center to the hinterland.

According to Perroux, growth doesn’t appear everywhere at the same time; it manifests itself
in points or poles of growth, with variable intensities; it spreads by different channels and
with variable terminal effects for the economy as a whole. He emphasized on the importance
of entrepreneurial innovation in the development process, which proceeds by a succession of
dynamic sectors, or poles, through time. Perroux reflected the position of the center-down
development strategy; stresses on few dynamic sectoral clusters as well as on urban-industrial
growth as key to development.

The rationale for the growth pole strategy maintains that with limited resources, it would be
inefficient and ineffective to attempt to sprinkle developmental investments thinly over most
or all-across the national territory. Rather, key urban centers should be selected for
concentrated investment programs that would benefit from economies of scale and external
economies of agglomeration. However, empirical studies show that the innovation diffusion
process and the spread effects to the hinterlands are minimal and highly discontinuous in
spatial terms.

(ii) Myrdal (1957): Cumulative causation

Myrdal develops the theory of cumulative causation and mentioned about the existence of
"leading-lagging regions” in the process of the spatial/regional aspect of development. The
"leading-lagging concept distinguishes advanced regions from underdeveloped regions at
both the global and regional levels. To explain the results of the "leading-lagging"
relationships and develop his analysis, Myrdal employed the concepts of "backwash" and
"spread effects".

Leading regions possess initial comparative advantage due to location, infrastructure, and
other factors. Agglomeration results in ever-increasing investment in leading regions, while
little investment moves from leading regions to lagging regions. Even this little investment is
controlled by leading region elites to assure economic dominance. Hence, lagging regions are
further inhibited from development because of backwash factors. The 'backwash' effects
involve the phenomenon of population migration, trade, and capital movements.

Skilled workers, educated individuals, business leaders, and venture capital will be drawn
from the hinterlands (lagging regions) to the growth poles (leading regions) to seek higher
returns because of increased demand available at the center. Goods and services produced in
the leading regions are sold to the lagging regions at such low prices that local industries
cannot compete. Such backwash effects create the tendency of an increased inequality
between the center and the periphery.

On the other hand, though long time it may take, there is a propensity of "spread effects" that
may counter the 'backwash' effects that emerge as a result of the relationships between the
"leading and lagging regions". Because, one feature of leading regions is that they tend to
spread out into lagging regions. Besides, most lagging regions will have some comparative
advantages, principally in natural resources that result in positive investment flow. Hence,
increased outlets for the hinterland's agricultural products and raw materials and a tendency
of technical advancement to diffuse from the growth centers will be imminent. When the
spread effects become stronger than the backwash effects, cumulative causation leads to
development in the lagging regions.

(iii) Hirschman (1958): Polarization and Trickle Down

Hirschman maintained that development strategies should concentrate on a relatively few

sectors rather than on widely dispersed projects. Hirschman's polarization and trickle-down
concepts correspond closely to Myrdal's concepts of backwash and spread effects. He
argued that growth is communicated from the leading sectors of the economy to the
followers. The advantage of this approach over the "balanced growth" is that it leaves
considerable scope to induced investment decisions and economizes the scarce resource.

The actual effects of the growth points or centers on the hinterlands or the peripheries
depend on the balance between favorable effects that trickle-down to the latter from the
progress of the former and the unfavorable, or polarization, effects on the hinterlands as a
consequence of the attractiveness of the growth poles. The most important trickle-down
effects are generated by purchases and investments placed in the hinterlands by the growth
points. On the other hand, polarization may take place in a number of ways. Competition
from the growth points may depress relatively weak and insufficient manufacturing and
export activities in the hinterlands, and the growth points may produce "brain drain" rather
than creating employment opportunities in the hinterlands. Therefore, Hirschman suggests
that the essential task of government is the provision of infrastructure as the only permissive
inducement mechanism, and through which to provide the hinterlands with a continuous
economic activity in different sectors..

(iv) Friedmann (1972): Core-Periphery

Friedmann has made the first attempt to formulate a systematic and comprehensive core-
periphery development model. The "core (center)-periphery" concept distinguishes between
regions on a global scale, while regions can be composed of the entire nations or collections
of states. He argued that development is the unfolding of the creative potential of a society
through a successive series of structural transformations. This occurs through a continuous,
but cumulative, process of innovation. Development originates in a relatively small number
of "centers of change" located at the points of highest interaction.

Hence, innovation diffuses from these centers to dependent areas of lower interaction. In
general, Friedmann's theory assigns a decisive influence to the institutional and
organizational framework of society, especially to the patterns of authority and dependency.
Friedmann's theory also integrates cultural and political processes into the process of
economic development. In summary, it was observed that in the years between the 1960s and
1980s, deploring the use of Western theories and methods, based on an urban-industrial
orientation, in dealing with the problems of developing countries has been almost
fashionable.

The center-down paradigm is not simply a matter of the national economic development of
individual countries; it involves significant and highly controversial international dimensions.
It suggests the creation of multinational firms on a continental basis as a precondition for
more rapid diffusion of innovation in the developing countries. As Hansen said, the concept
of development 'from above' assumes that development, whether spontaneous or induced,
starts only in few dynamic sectors and geographical clusters, from where it will or should,
spread to the remaining sectors and geographical areas.
This 'trickle down' process is essentially supposed to start at the global level (from worldwide
demand, or world innovation centers), and then filter down and outward to national or
regional units, either through the urban hierarchy, through input-output relations, or through
the internal channels of multi-plant business organizations, or large-scale government
organizations. Its emphasis, therefore, has been on urban and industrial capital-intensive
development, the highest available technology, and maximum use of external and scale
economies. This usually involves:
 Large investment projects;
 Increasing units of functional and territorial integrations;
 Increasing scale of the private and public organizations required to transmit
development through these integrated units;
 Large redistributive mechanisms; and
 The reduction of economic, social, cultural, political and institutional 'barriers'
(including distance friction and institutional differentiation), which might hinder
transmission effects within and between these units.
The paradigm of development 'from above' is also based upon the following hypotheses:
(1) Development in its economic, social, cultural, and political dimensions can be
generated only by some very few selected agents such as entrepreneurial pioneers, the
white, the urbanite, or the intellectual;
(1) The rest of the population are considered 'incapable of initiatives in making
improvements, consequently everything must be done for them from outside, at least
temporarily;
(2) These few, agents are able and willing to allow all others to participate in the
development process within a reasonable time-span and on a reasonably equal basis;.
(3) These other groups (recipients) are able and willing to adopt the same type of
development pattern.
All these assumptions and hypothesis generally imply that the paradigm presumes an
eventually monolithic and uniform concept of development, value systems, and human
happiness, which automatically will spread over the entire world. These notions are related
very closely to the interests of the large-scale organizations, which were installed, to serve as
the "'motor' of development. In many cases, however, these have come instead to dominant
the system that we want to address; very often overruling the interests of local and regional
communities, which they were meant to serve.
This has led to a high concentration of power in few private or governmental organizations
which now dominate the greater part of the world system. At the same time such a strategy
ignores:
(1) The great diversity of value systems and aspirations created by the differences between
cultural systems.
(2) The great variations in natural conditions;
(3) The fact that, with different aspirations and cultural and natural preconditions, the
imposition of a uniform concept and measurement of development is bound to relegate
some groups to what is called 'underdevelopment', leaving them further away from
those set standards and plunging them further into the role of the disadvantaged in any
measurement;
(4) That this subsequently leads to differing levels of 'dependence'. Once such
economically disadvantaged groups start to interact more intensively with more
developed ones on the latter's terms, they are increasingly forced to adopt the same
social, cultural, political, and institutional norms in order to compete with them in
economic terms;
(5) That this entails the subordination of broader societal and cultural values to economic
determinants, which is a fact that can be observed in most highly developed countries
and those directly influenced by them today.
Critical appraisal of the center-down paradigm has further alleged that, within developing
countries, this orientation has contributed to:
1) Dependence on developed countries and multi-national corporations situated in these
countries,
2) The persistent dominance of one or few large cities, which have critical problems of
unemployment and underemployment in themselves,
3) Increasing income inequalities,
4) Persistent and growing food shortages,
5) Deteriorating material conditions in the countryside.
The relevance of these propositions varies depending on the objective conditions of
individual countries. Marxist and other critics who emphasize the issue of dependence have
done so largely on two grounds:
(i) The political dependence that tends to accompany economic dependence, and
(ii) The failure of existing institutional mechanisms to alleviate mass poverty, especially in
rural areas. However, while there are apparent shortcomings of the center-down
 paradigm, it may be wrong to dismiss this approach as altogether useless and harmful.
Whatever the merits of these objections, they don't in themselves provide an alternative
development strategy.
Worldwide investment stagnation and pressures on multinationals to invest at home are not
obviously helping developing countries. While some informed observers have become
pessimistic about the efficacy of the approach, others argue that it has not been implemented
properly as investment has been too few; planners have worked with unrealistic short-time
horizons. Thus, one may say that the center-down is not necessarily wrong; it has never been
tried. Normally, large-scale organizational linkages between areas of greatly differing levels
of development lead (due to factors such as unequal distribution of power, unequal terms of
trade, unequal distribution of scale economies) to increasing spatial divergence rather than a
convergence of living levels.

In other words, even with explicit sub-national development policies operating through large-
scale organizations, the sum of backwash effects in most cases still seems to exceed spread
effects. With a "top-down" development strategy, this can only be avoided if at the national
level there is both a strong control mechanism avoiding leakages to the exterior (a control on
commodity and factor flows) and a strong internal redistributive mechanism with broad
public participation. Hence, the alternative would be to give clear priority for economically
less developed social groups and areas to their own self-determined societal standards. This
alternative approach is that of "development from below". Indeed, some critics of the center-
down paradigm assert that rural development and bottom-up strategies are necessary for
developing countries.