Question

1. Briefly discuss each of the following Structuralist Theories of economic development.

• The Rostow Stages of Growth Theory (List the stages and the development characteristics of each stage in your discussion.)
• The Balanced and Unbalanced Growth Theory
• The Dependency Theory of Economic Development
• The Lewis Dual-Sector Model of Economic Development

b. How do the above theories differ from the Classical and Keynesian theories?

Answer 1

1) The Balanced and Unbalanced Growth Theory

Both the theories are based on the theory of Big Push which advocates speculation to break the horrendous circle of destitution. The adjusted development points at the improvement of all segments at the same time but uneven development suggests that the speculation ought to be made as it were in driving segments of the economy. Underdeveloped nations have inadequately assets in men, fabric and cash for synchronous speculation in number of complementary businesses. The speculation made in chosen segments leads to unused venture openings. The point is to keep lively instead of to dispose of the disequilibrium by keeping up pressures and disproportions.Adjusted development points at concordance, consistency and balance while lopsided development proposes the creation of disharmony, irregularity and disequilibrium. The usage of adjusted development requires gigantic sum of capital.On the other hand, uneven development requires less sum of capital, making speculation in as it were driving segments. Adjusted development is long term methodology since the advancement of all the divisions of economy is conceivable as it were in long run period. But the unequal development could be a brief term methodology as the improvement of few driving segments is conceivable in brief span of period. The tenet of adjusted development and uneven development have two common issues on relating to part of state and the part of supply restrictions and supply inelasticity’s. The private undertaking is as it were unfit of taking venture choices in immature nations. Hence, adjusted development presupposes arranging. In unequal development procedure, the states play a pioneer part in empowering SOC speculations, there by making disequilibrium.On the off chance that the improvement begins by means of Venture in DPA, political weights constrain the state to embrace venture in SOC. The hypothesis of adjusted development is primarily concerned with the need of request and ignores the part of supply limitations. This isn't genuine as immature nation needs in supply of capital, abilities, foundations and other assets which are- inelastic in supply. Essentially, unequal development convention too ignores the part of supply restrictions and supply in elasticity’s. Beneath such circumstances, a judicious compromise must be made between the benefits from adjusted development and uneven growth.There's no moment conclusion that the creating nations are married to vote based system who ought to attempt to control the twin disasters of expansion and antagonistic adjust of installments amid the course of seeking after any technique of financial improvement. The require of the hour is that it should be done to form the teaching viable as a vehicle of financial advancement with included quality and vigour.

A balance economy proposes that financial development is maintainable within the long-term, and the economy is additionally developing over diverse segments – and not centered on one specific industry or area.

A balance economy has a few key features.

Low expansion – dodging an unsustainable boom and bust period of financial growth.

A adjust between sparing and utilization.– An uneven economy would devour a tall % of salary. A more adjusted economy would be sparing a critical rate of wage to fund speculation and future profitable capacity. Without adequate reserve funds and venture, long-term development will be compelled.

Exchange adjust.– A adjusted economy would have a adjust between trades and imports – a moo (or at slightest feasible) current account shortfall. On the off chance that the economy is depending on imports and running a current account shortage, usually a sign of imbalance. A expansive current account shortage would ought to be financed by capital inflows.

Housing advertise which is steady– A steady lodging advertise makes a difference to adjust the economy. A fast rise in house costs seem cause a positive riches impact and a brief rise in investing – which afterward demonstrates unsustainable. A booming lodging showcase raises fear costs may drop in future.

Feasible bank loaning. A adjusted economy needs a solid and steady fund division. Firms require get to to credit, but not at all like the credit crunch, the bank loaning should be economical and not subordinate on other bank loans.

Growth over diverse segments. An economy depending on the essential division for development is more at hazard of fluctuating product costs. An economy dependent on development in as it were administrations may battle to pick up adequate send out revenues.

Equality of dispersion. Development equally conveyed over pay spectrums and over diverse geological regions.

Sustainable levels of obligation (Government, private and corporate). In case financial development is financed by obligation, at that point this development may demonstrate unsustainable, and it may as it were demonstrate brief.

2) The Dependency Theory of Economic Development

Dependency theory got to be well known within the 1960’s as a reaction to investigate by Raul Prebisch. Prebisch found that increments within the riches of the wealthier countries showed up to be at the cost of the poorer ones. In its extraordinary frame, dependency theory is based on a Marxist see of the world, which sees globalization in terms of the spread of advertise capitalism, and the misuse of cheap work and assets in return for the out of date innovations of the created world. The dominant see of dependency scholars is that there's a overwhelming world capitalist framework that depends on a division of work between the wealthy ‘core’ nations and destitute ‘peripheral’ nations. Over time, the center nations will misuse their dominance over an progressively minimized periphery.

Dependency theory pushed an internal looking approach to improvement and an expanded part for the state in terms of forcing boundaries to exchange, making internal venture troublesome and advancing nationalization of key industries. Although still a well known hypothesis in history and human science, reliance hypothesis has vanished from the standard of financial hypothesis since the collapse of Communism within the early 1990s. The significant wasteful aspects associated with state inclusion within the economy and the development of debasement, have been significantly uncovered in nations that have taken after this see of advancement, most eminently a little number of African economies, counting Zimbabwe

The beginning of Dependency Theory came as an elective to the speculations of modernisation and improvement as defined and upheld by the Western and Marxist researchers. Actually, it includes a solid feedback of both Basic and Marxist approaches. The Dependency theory starts with a consider of the colonial affect on the innate socio-economic and political structures, at that point looks for to analyze the characteristics of the modern socio- financial structure, and at long last looks for to follow its advancement in relations to both the inner changes and advancements within the World capitalist system.

Underdevelopment as Dependency

Dependency Theory examinations the inner flow of immature nations and relates their underdevelopment to their positions within the worldwide financial framework. It too looks at the connection between the inside and outside structures. The underdevelopment of the Third World nations is clarified by it in terms of the socio- economic-politico-cultural forms which connect these nations to the created nations. The immature nations are respected as the peripheries and the created nations as the centers, and it is held that the nature of social wonders within the outskirts can be caught on and analyzed as it were with reference to the world capitalist framework, which stands overwhelmed by the created centers.

The central point within the Dependency Theory is that the nature of social marvels within the Third World nations is decided by the method of underdevelopment which characterizes these nations and which is the result of the extension of World Capitalism. Encourage, this prepare of underdevelopment is personally and indistinguishably related to their outside reliance. In reality, nearly all the reliance scholars by and large concur that underdevelopment is caused by outside reliance especially on capitalist countries

3) The Lewis Dual-Sector Model of Economic Development

In the sense of a 'laboursurplus economy,' a number of economists attempted to examine growth. The famous thesis of Nobel laureate Sir W. Arthur Lewis in 1954 owes its origins to these hypotheses. G. provides an elaborate discussion of the labour-surplus economy. Ranis and John Fei in 1961.

Sir Arthur Lewis published a paper in 1954, 'Economic Growth with Unrestricted Labor Resources' (The Manchester School), which has since been one of every contemporary economist's most widely quoted publications: its focus on a 'dual economy'small, urban, developed sectors of economic activity surrounded by a wide, agricultural, conventional market, like minute is essentially in a vast ocean.

A central topic of that article was that, work in double economies is accessible to theurban, industrialized division at a steady wage decided by least levels of presence in conventional family cultivating since of ‘disguised unemployment in horticulture, there's essentially boundless sup­ply of work and accessible of industrialisation, at slightest within the early stages of advancement. At a few afterward point within the history of double financial matters, the supply of work is depleted at that point as it were a rising wage rate will draw more work out of agriculture. With their intense fabric destitution, it is troublesome at to begin with locate to suppose how the overpopulated nations can increment their reserve funds without extraordinary hardships. On the opposite, their excess populace on the arrive appears to offer a major unused potential for development, holding up as it were for the ‘missing component’ of exterior capital to help them within the prepare

Moreover, their high population growth rates lend themselves to the estimation of the aggregate capital needs that must be made available to sustain or boost their per capita incomes. "Says Myint," All in all, the drama of developing countries living at the minimal cost of survival and the need for a large dose of global resources to crack the interlocking vicious circles that hold them down to that level does not reach its maximum tragic grandeur unless perceived against the interlocking vicious circles that hold them down to that level.

An LDC is conceived to function in two sectors:

(1) A conventional agricul­tural division,

(2) A much littler conjointly more cutting edge mechanical sector.

“Surplus labour” (or camouflaged unemployment) implies the existence of such a colossal populace within the agrarian sector that the negligible item of work is zero. So, on the off chance that a couple of specialists are evacuated from arrive, the whole item remains unchanged. The substance of the advancement handle in such an economy is “the transfer of work assets from the agrarian division, where they include nothing to generation, to the more advanced mechanical division, where they make a overflow that will be utilized for assist development and development.”

In Lewis demonstrate the change prepare or the method of basic alter begins by an independent development in request in industry as a result of changes in residential customer tastes, in government buys, or in worldwide markets.

The central point is that work (here considered homogeneous and untalented) shifts from agribusiness into industry. The supply of work from agribusiness to industry is “unlimited” (i.e., totally versatile) at the given urban wage (approximately 30 to 50% higher than the country wage), owing to the relative sire of the agrarian work strengths at the margin.

In Lewis demonstrate the change prepare or the method of basic alter begins by an independent development in request in industry as a result of changes in residential customer tastes, in government buys, or in worldwide markets.

The central point is that work (here considered homogeneous and untalented) shifts from agribusiness into industry.

The supply of work from agribusiness to industry is “unlimited” (i.e., totally versatile) at the given urban wage (approximately 30 to 50% higher than the country wage), owing to the relative sire of the agrarian work strengths at the margin.

Lewis hypothesizes the presence of a subsistence division with overflow work and he sees in this the seed for the subsistence division. One major charac­teristic of the capitalist division is that it employments reproducible capital which it produces profit.

Since there's excess work from the subsistence segment, the capitalist segment draws its work from the subsistence segment and it is expected that as a result of quick increments in populace in as of now thickly populated nations the supply of untalented work is unlimited.

So capi­talists can get indeed expanding supplies of such work at the existing wage rate, i.e., they will not need to raise compensation to pull in more work. So, the capitalist division can extend uncertainly at a steady wage rate for the untalented labour.

.The real (advertise) wage rate will be decided by profit within the subsistence segment. But ‘earnings’ here implies the normal item and not the minimal one, in subsistence segment gets an break even with share of what is produced. Lewis has expected and made the point that capitalists will got to pay a edge of around 30% over normal subsis­tence pay, since the overflow specialists require a few motivating force to move and in any case portion of the distinction is required to compensate them for the higher fetched of living in urban areas. Another point to note is that within the subsistence segment work is utilized up to the point where its minimal item is zero. Conflictingly, within the capitalist division work will as it were be utilized up to the point where its minimal item rises to the wage rate—the commonplace relationship determined from the minimal efficiency hypothesis.In the event that compensation surpass negligible produc­tivity a capitalist boss would be decreasing his overflow since he paid work more than he gotten for what was delivered.