13. Development, Collapse and New Theories

Economic growth became the catch word for many countries in the postwar period, no matter their ideological preferences and political realities. New theories try to explain the laws of capital accumulation and how the process can be improved so as to ensure a balanced and sustainable trajectory. Two off-springs of Keynesianism offered competing explanations on capital accumulation, while countries in Latin America attempted to achieve it by curtailing imports and mobilizing domestic resources. In most cases, inward economic development was mired with rising indebtedness and countries ended up with heavy-handed adjustment programs and external surveillance. In other cases with a thin domestic accumulation, development was encouraged by international aid. Yet again, misallocation and abusing of foreign resources trapped many poor countries into high debt. Economic theories faced several challenges on how a debt-crisis is efficiently handled and what kind of institutions can minimize the recurrence of malpractices.