Development Theories and Strategies
This domain tests your ability to explain why some countries are poorer than others and to evaluate the strategies governments have used to promote development. You should be able to apply a theory to a concrete case rather than merely name it.
Core theories
- Modernisation theory (Rostow's stages) sees development as movement from traditional to modern economies. Critics call it Eurocentric and dismissive of local institutions.
- Dependency theory (Prebisch, Frank) argues that core countries extract surplus from the periphery through trade and investment, keeping poorer countries dependent on primary exports.
- Structuralist and import-substitution approaches favour protecting local industry until it can compete.
- Neoclassical approaches emphasise markets, trade liberalisation and private investment; the Washington Consensus packaged these as stabilisation, liberalisation and privatisation.
- Sustainable human development and endogenous growth stress capabilities, institutions, knowledge and local ownership.
Strategies in practice
Import substitution, export-led industrialisation, structural adjustment programmes, poverty reduction strategy papers, industrial policy and green growth are all strategies, not theories. They can be combined.
Worked example
A country exports unprocessed copper and imports machinery. Its terms of trade fall when copper prices drop. Dependency theory explains the vulnerability: specialisation in low-value primary products. A policy response would be to add value through processing, diversify exports, invest in skills and infrastructure, and negotiate regional trade rules. Simply banning imports would protect inefficient firms and raise costs for consumers. The reasoning shows that diagnosis should shape policy.
Traps that cost marks
Caricaturing theories; assuming structural adjustment always failed or always worked; confusing a strategy with a theory; ignoring that small economies face different constraints from large ones.