Question

1. In nutshell, what is Ricardian economic theory? Is Ricardian classical economic theory applicable to low income countries like the Philippines?

2. Enumerate Rostow's stages of development. Choose one developed country (Japan or S. Korea, or Singapore, etc.) that Rostow said has already experienced take off. How well does Rostow's stage theory explain that country's economic growth?

3. Say something about Max's historical materialism. Which historical theory, Marx's or Rostow's -- in explaining Western development?

Answer 1

Answer 1: Ricardian Economic Theory states that countries can benefit from international trade by specializing in the production of goods for which they have a relatively lower opportunity cost in production even if they do not have an absolute advantage in the production of any particular good.

Yes, Ricardian classical economic theory applicable to low income countries like the Philippines. which can be explained as below:

For example: Philippines comparative advantage with the United States is in the form of cheap labor. Philippines workers produce simple consumer goods at a much lower opportunity cost. The United States’ comparative advantage is in specialized, capital-intensive labor. American workers produce sophisticated goods or investment opportunities at lower opportunity costs. Specializing and trading along these lines benefit each.

Answer 2: There are five stages of development in Rostow's model of economic growth:

• Traditional Society: This stage is featured by a subsistent, agricultural based economy, with intensive labor and low levels of trading, and a population that does not have a scientific perspective on the world and technology. (Limited technology & Static Society)
• Preconditions to Take-off: In this stage, society begins to develop manufacturing, and a more national/international, as opposed to regional, outlook. (Commercial exploitation of agriculyure & extractive insustry)
• Take-off: this stage as a short period of intensive growth, in which industrialization begins to occur, and workers and institutions become concentrated around a new industry. (Development of a manufacturing sector)
• Drive to Maturity: This stage takes place over a long period of time, as standards of living rise, use of technology increases, and the national economy grows and diversifies. (Development of a wider industrial and commercal base)
• Age of High Mass Consumption: At this stage western countries, occupied this last "developed" stage. Here, a country's economy flourishes in a capitalist system, characterized by mass production and consumerism. (Exploitation of comparitive advantage in international trade)

Therefore, These stages suggest that a society moves from a traditional phase which is characterized by a lack of exposure to Western society, a lack of science or technology, a dependence on agriculture, and a high level of poverty to a modernized, industrialized, and developed economy.

Singapore is one of the best examples for Rostow's stage theory explain that country's economic growth as it is grew in a way and is now a notable player in the global economy. Singapore became independent, it did not seem to have any exceptional prospects for growth. However, it industrialized early, developing profitable manufacturing and high-tech industries. Singapore is now highly urbanized, with 100% of the population considered "urban." It is one of the most sought-after trade partners in the international market, with a higher per-capita income than many European countries.

Answer 3: Max's historical materialism also known as the materialist conception of history, is a methodology used by some communist and Marxist historiographers that focuses on human societies and their development through history, arguing that history is the result of material conditions rather than ideals.

It is principally a theory of history which asserts that the material conditions of a society's mode of production or in Marxist terms, the union of a society's productive forces and relations of production, fundamentally determine society's organization and development.

Rostow's historical theory explains the Western Development.