Modern Economic Development Concepts

The chapter provides a concise review of the major theoretical contribution to economic development since the Second World War. Backed by the Harrod–Domar growth model, economic development strategies in the 1940s till 1960s were much dominated by the debate between balanced growth championed by Ragnar Nurse and Rodenstein-Rodan and unbalanced growth led by Albert Hirschman. Unbalanced growth doctrine favors using the limited resources to develop identified strategic sector which will then pull and push other sectors to support and achieve overall growth. The unbalanced growth approach somewhat jived with theories based on economic dualism associated with researchers like Arthur Lewis, John Fei and Gustav Ranis. The basic dual economy theory explains how an agrarian economy with no modern industrial sector is transformed into a mature industrial economy. The idea of development as transformation from primitive traditional society to one characterized by high mass consumption was skillfully described by Rostow’s book in 1961. By the end of the 1980s, new theories that have substantive impact on economic development were propounded by academics and researchers in field of business strategies, urban planning and spatial economics. Many of these have neoclassical economics foundation and also have derived insights from increased spatial interdependence and competition attributed to globalization and availability of new communication technologies. New concepts like competitive advantage, agglomeration economies and global value chain become increasingly familiar in development economics.