Name: Bakhtawar jamil Sap ID: 70071590

Assignment: 1
1. Explain the essential distinctions among the stages-of-growth theory of development,
the structural-change models of Lewis and Chenery, and they theory of international
dependence in both its neo-Marxist and false-paradigm con- capitalizations. Which
model do you think provides the best explanation of the situation in most developing
nations? Explain your answer.

Ans: The literature on economic development is dominated by certain theories that

explain the development process of a developing nation. These theories are named as

 Stages-of-growth theory of development

 Structural-change models of Lewis and Chenery
 Theory of international dependence in both its neo-Marxist
 False-paradigm con- capitalizations
DEVELOPMENT ECONOMMICS 1
Now let us understand the basic differences in these theories

Stages of growth theory of development says that a developing country passes

through five stages of development namely Traditional society, the pre-conditions for
takeoff into self-sustaining growth, the takeoff, the drive to maturity and the age of
high mass consumption.
According to it, the developed nations have passed through many takeoff stages
whereas the under developed nations are still in the stage of being a traditional
society, thus it is important for under developed nations to save a portion of their
national income plus mobilize their savings towards generations of sufficient
investments, if it wants to achieve development at a faster pace.
The structural change theory of Lewis and Chenery is based on the hypothesis that
underdevelopment is due to underutilization of resources, in this theory, an under
developed economy consists of two sectors namely; agriculture sector and
manufacturing sector.
There is surplus labor seen in the traditional agriculture sector whose productivity is
zero. If this surplus labor is transferred to manufacturing sector, it will absorb this
labor and utilize this labor production of commodities needed by the society. This
way the productivity will give increasing returns to the labor and the producer, the
problem of unemployment and poverty would be solved, and the industrialization
would take place at a faster pace, thus we will see development in these nations.
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 Neo Marxist of international dependence believes that underdevelopment is seen in
various nations because of the perpetuation of highly unequal international capitalist
system. The developing nations were once ruled by a colonist. These people divided
the population into rich and poor class of people during that time. This process
continues even today and thus development has not been made possible in these
nations.
The false paradigm model says that nations are underdeveloped because they have
blindly accept the path of development as developed by nations without considering
the needs of their nations.
Each of these theories has some information about the cause of under development in
the nations. These reasons if reconciled would provide better solutions for
accelerating development process in various nations.

2. Explain the meaning of dualism and dual societies. Do you think that the concept of
dualism adequately portrays the development picture in most developing countries?
Explain your answer.

Ans: A dual society is defined as a society that has been divided along the lines of
social status. Dualism definitely depicts the picture of development in developing
countries mainly because they are making use of the capitalist economic system
which enriches the rich more and oppresses the poor. Dualism definitely depicts the
DEVELOPMENT
picture ECONOMMICS
of development in developing countries mainly because they are making use 2
of the capitalist economic system which enriches the rich more and oppresses the
poor. Dualism in dual societies is a concept that represents the existence and
persistence of substantial and divergences between rich and poor nations, and rich
and poor peoples on several levels. This concept involves four arguments: different
sets of conditions, coexistence is chronic and not merely transitional, degrees of
superiority and inferiority have inherent tendency to increase, and interrelations
between the superior and inferior elements are such that the existence of the superior
elements does little or nothing to pull up the inferior element. Yes, I think the concept
of dualism does a great job in portraying the economic circumstances of most
developing countries as it presents the conditions or circumstances that make a nation
rich and poor. Through this concept, one is able to understand how two opposing set
of human conditions coexist in a given space.

3. Some people claim that international dualism and domestic dualism are merely
different manifestations of the same phenomenon. What do you think they mean by
this, and is it a valid conceptualization? Explain your answer.

Ans: Dualism is a concept of disparate objects that are mutually dependent on one
another. When rich exists, poor exists too. International dualism is just on the scale of
global while domestic is on a smaller scale but the rich and poor were still applied to

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 both of them.-I think this is a not a valid conceptualization, because even the rich
country exists, the poor countries does not rely in terms of development. If we put
that on the logic of dualism, rich countries develops and poor countries does not
which is not interrelated to each other but on some factors, dualism can be applied.
The term dualism implies presence of both desirable and undesirable situations or
phenomena that are mutually exclusive to different groups of the society. For
example, traditional and modern sectors, illiteracy and high education, rich and poor,
etc. The inequality of income, education, etc., creates a gap causing dualism to hinder
economic development. The concept embraces four key arguments: Superior and
inferior conditions can co-exist in a given space at given time .The coexistence is
chronic and not transitional .The degrees of the conditions have an inherent tendency
to increase. Superior conditions serve to “develop under development the term dual
society refers to a society where two different sectors co-exist. These sectors are
divided by different levels of development, technology and patterns of demand. For
example, coexistence of rural and urban sector. The rural sector is characterized by
unskilled, illiterate and explosive population and the urban sector is full of educated
and skilled labor and less populated. The surplus labor of rural sector is absorbed by
the urban sector. In my opinion, I think that dualism concept really can portray the
development picture in the most developing countries. Where there are two different
life circumstances, one is better than others, and others are more desired than another.
It is very reasonable because everyone basically wants to stay in better environment.
DEVELOPMENT
4. ECONOMMICS
What is meant by the term neoclassical counterrevolution? What are its principal 3
arguments, and how valid do you think they are? Explain your answer.
Ans: During the 1980s, many governments of the developed would adopted a free-market theory
of economics. This viewpoint has been referred to as the Neoclassical Counterrevolution. The
theory supported freer markets, private ownership, statist planning, and government regulation of
economic activities.
In the 1980s a neoclassical (sometimes called neoliberal) counterrevolution in development
theory and policy reasserted dominance over structuralism and other schools of thought in much
of the world. The emergence of this counterrevolution coincided with the abandonment by the
developed countries of social democratic and Keynesian economic policies and, in particular, the
policy of controlling capital movements, as well as the post-World War II trading regime. Critics
have pointed out that this counterrevolution also coincided with and seemed to offer justification
and support for a wave of market-oriented interventions by the World Bank and International
Monetary Fund (IMF) and efforts to forge a unified global market regulated only by institutions
reflecting the interests of transnational capital.

The neoclassical or neoliberal perspective represents a modification and further elaboration of

modernization theory. However, in contrast to modernization theory, neoclassical theorists see
development as the outcome not of strategic state action but of the action of market forces. The

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central claim is that failure to develop is primarily the result of too much government
intervention and regulation of the economy. Neoclassical theory emphasizes the beneficial role
of free markets, open economies, and the privatization of inefficient public enterprises. Its
recommended strategy for development is to free markets from state control and regulation, so
that capital, goods, and services can have total freedom of movement and there can be greater
openness to international trade.

This is the basic blueprint for what has been termed good governance. The notion of good
governance has been elaborated, in part, through a component of the neoclassical
counterrevolution called new institutionalism. The basic premise of this perspective is that
development outcomes depend on institutions such as property rights, price and market
structures, money and financial institutions, firms and industrial organizations, and relationships
between government and markets. The essence of good governance is to ensure the existence of
these institutions and their proper role and functioning, as seen from the perspective of neoliberal
theory. According to neoliberal thought, good governance requires freeing the market from state
control and regulation; reducing government expenditures for social services like education and
health care; maintaining roads, bridges, the water supply, and so forth; and selling state-owned
enterprises, goods, and services (including banks, key industries, railroads, toll highways,
electricity, schools, and hospitals) to private investors.
5. Given the diversity of developing countries, do you think that there could ever be
a DEVELOPMENT ECONOMMICS
single, unified theory of development? Explain your answer. 4

Ans: Their process and efficacy of development is different so their can’t be a single unified
theory of development.
1. Different level of standard of living and the labor productivity
2. Different level of economic inequality and absolute poverty
3. Different size of population
4. Different Geography
5. Different level of industrialization
6. Common history of colonial exploitation and a lot of dependence of foreign aid and markets
6. Is the neoclassical, free-market theory necessarily incompatible with dependence
theory? How might these two approaches work together?
The dependence theories saw their rule in 1970s whereas neoclassical counterrevolution, free
market theories came up in 1980s. The dependence theories visualized underdevelopment as an
externally induced phenomenon whereas neoclassical revolutionists visualized under-
development as an internal problem, because state corruption and inefficiency.

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Throughout much of the 1980s, neoclassical theory prevailed. The neoclassical counterrevolution
in economic thought emphasized the beneficial role of free markets, open economies, and the
privatization of inefficient and wasteful public enterprises. Failure to develop, according to this
theory, is not due to exploitive external and internal forces as expounded by dependence
theorists. Rather, it is primarily the result of too much government intervention and regulation of
the economy.
Dependency theory repudiates the central distributive mechanism of the neoclassical model,
what is usually called "trickle-down" economics. The neoclassical model of economic growth
pays relatively little attention to the question of distribution of wealth. Its primary concern is on
efficient production and assumes that the market will allocate the rewards of efficient production
in a rational and unbiased manner. These conditions are not pervasive in the developing
economies, and dependency theorists argue that economic activity is not easily disseminated in
poor economies. For these structural reasons, dependency theorists argue that the market alone is
not a sufficient distributive mechanism.
Dependent states, therefore, should attempt to pursue policies of self-reliance.
Contrary to the neoclassical model greater integration into the global economy is not necessarily
a good choice for poor countries.
7. In what ways do developing countries depend on rich countries? In what ways is the
opposite true?
DEVELOPMENT ECONOMMICS 5
For many years, the developed world encouraged the developing world to grow, implicitly
assuming, I suppose, either that progress for developing countries would be Beneficial to all, or
that it would never be important enough to matter. For an Unfortunately long time, due to
misguided policies, growth of developing countries was indeed too slow to matter much for
world markets. But in recent years, that has ceased to be true, and many of those in developed
countries suddenly find themselves threatened, or perceived to be, by growth in the developing
world. This concern is often attributed more to “globalization” than to developing-country
growth, but in fact the two go hand in hand. Resistance to globalization in the developed world,
now that developing countries are finally themselves globalizing and growing, is bound at best to
slow down the progress that is finally being made in the developing world. Developing countries
usually sell resources or intermediate goods to rich countries, and rich countries usually sell final
goods and services to developing countries. Foreign dependency, global power structure in
which weaker countries are economically reliant on stronger countries, allowing the stronger
countries to exercise significant control over the weaker countries’ economic and political
behavior. Foreign dependency generally fosters underdevelopment in the dependent country; a
country’s adoption of policies tailored to the interests of a stronger country may inhibit the
weaker country’s domestic growth, speed environmental destruction, or create temporary growth
that precludes sustainable development and economic independence.