Neo-liberals believe that government intervention distorts the natural processes of the free market. Friedman believes that free market trade can be used to help countries develop.
Organisations like the IMF and World Bank favour Neo-liberalism. They point to Newly Industrialised Countries to prove that removing tariffs and encouraging trade can lead to development.
Development Theory Foundations
Marx: said that capitalism and industrialisation were about obtaining the maximum profit. Capitalists in developed countries would exploit underdeveloped countries to get raw materials, and to get a wider markets for goods produced by capitalism. Marx thought that capitalism would give way to communism.
Durkheim: argued that societies would progress through industrialisation and that the most developed countries were those that had industrialised first. He saw the West as the most advanced society and thought underdeveloped societies could develop by taking on Western characteristics.
Weber: argued that society was becoming more rational and bureaucratic - people needed to make more choices and come up with new, scientific ideas to solve social problems like deprivation.
Disadvantages of Economic Measures
- Validity and reliabilty of data.
- GNP neglects 'visible economies'.
- Doesn't take into consideration the inequalities.
- GNI is not always correct.
- Economic measures don't tell the full story.
- 'Offical activity' - growth of food, domestic work and illegal black market activity is not counted.
Modernisation Theory - ROSTOW 1971
Modernisation theory says that all countries move towards liberal capitalism. Undeveloped countries are seen as inferior to developed countries that have achieved a higher rate or production, consumption and wealth.
Rostow suggested that all countries go through a five stage process of development:
1- Agricultural society.
2- Pre take-off - farmers produces a surplus and make money from selling cash crops.
3- Take-off - rapid growth of manufacturing, people move from rural to urban areas.
4- Drive to Maturity - lots of investments and the right social conditions for growth.
5- Mass Consumption - wealth spreads and people buy more and the service sector grows.
World Systems Theory - WALLERSTEIN 1974
Wallerstein suggested that the entire world works as one economy. It splits the world into three parts:
Core countries make full use of the global economy and can affect any other country, they have a larger global reach. These are the ones who get the most out of capitalism.
World Systems theory says that the semi-periphery countries are exploited by the core countries but they also exploit the periphery countries.
Dependency Theory - FRANK 1967
Dependency theory was a reaction against Modernisation theory.
Frank said that developed nations exploited underdeveloped nations during colonial times when they controlled them as part of an empire.
When the underdeveloped nations got political independence, they were still economically dependent on their former colonial rulers. The poor nations trading partner is also their former ruler and they then organise trading relationships in their favour by setting the prices for goods.
Dependency theory is Marxist - it argues that workers in poor countries are exploited by the ruling class. They're paid low wages so the ruling class can optimise profits. Profits from workers in satellite countries go to the ruling class in the metropolis.
Criticisms of Modernisation theory and Neo-liberal
Both theories are criticised for being too ethnocentric and critics say this leads them to distort the true history of Western involvement in developing countries.
Neo-liberals and Modernisation theorists also argue that Western methods of development are easily imitated and likely to succeed.
Three Types of Development
Economic: Generally concerned with the issues of industrialisation (or the lack of) within societies and the amount of economic growth that countries achieve. This can be measured by indicators such as Gross Domestic Product (the total economic value of goods and services produced by a country over a year). However, these measures don't always tell the full story. Capitalists agree this is the best way to measure a countries development.
Social: It was assumed that as a country grew richer, all the people in the country would benefit from the wealth - it would trickle down from the bottom to the top so everybody would be better off. However, this method is criticised, particularly by those considering the importance of 'social development' - this includes meeting the basic needs of people. This means providing shelter, food and water, education and rights to women. Social factors include Human Development Index, Human Poverty Index and Physical Quality of Life Index.
Political: The measure of political development has often been the extent to which a country has got a Western style democracy in place as a political system.