CHAPTER 1
RETHINKING DEVELOPMENT: PERSPECTIVES IN DEVELOPMENT THEORY AND PRACTICE
1. INTRODUCTION
Part One of this volume provides perspectives in development theory and practices with special emphasis on developing countries. It considers the new concept of development which broadens the previous narrow view of development to include the peculiar problems of developing countries and other concerns. It also discusses the classic theories and practices of development which are shown to require a good deal of modification in order to fit the complex and varied institutional and structural realities of developing countries. Efforts made by many International Organizations and bilateral aid agencies from the late 1960's in search of alternative development concepts and practices are discussed. The Washington Consensus on the role of the state in development and the New Washington Consensus which addresses inequality and recognizes a broad eclectic role in development for government have been covered. These efforts followed the widespread disenchantment with the dominant development theories which treated economic growth as synonymous with development. It concludes with a discussion of the contribution of the author's award-winning Root-based model for sustainable community development which pioneers an alternative development approach in response to contemporary global development challenges.
SUMMARIES OF SECTIONS
The New Concept of Development
Up to the Second World War, development was mainly considered as synonymous with economic growth. However, the limitations of this narrow view of development especially for developing countries, coupled with other major concerns, led to a search for a new concept of development which has a much broader scope and addresses the peculiar problems of developing countries. This culminated in the new concept of development discussed in section 2 which, in addition to the usual concerns of efficient allocation of existing scarce productive resources with their sustained growth over time, also deals with the economic, social, political and institutional mechanisms, both public and private, necessary to provide accelerated and large-scale improvement in levels of living.
Thus, to enhance its scope, the new concept of development goes well beyond the accumulation of wealth and growth of gross national income and other income related variables to embrace a much more inclusive concept of increasing the welfare of societies.
The new concept of development has been influenced by the powerful messages of Gaulet(1971), Sen(1983, 1999) and others leading to a strong re-conceptualization in terms of components of human development encompassing human well-being beyond income and the process through which people are empowered to shape their own development priorities and to be better enabled to exercise their human rights. The new concept of development is, in essence, a multi-dimensional process involving major changes in social structures, popular attitudes, national and indigenous institutions as well as acceleration of economic growth, the reduction of inequality and the eradication of poverty. The section further describes the construction of a composite index of human development by the UNDP which draws heavily on the work of Gaulet, Sen and others and takes into account economic as well as social variables.
Classic Theories and Practices of Development
Section 3 examines the classic theories and practices of development. It chronicles the earliest capitalist strategies of economic development from Adam Smith in 1776 to Alfred Marshall in the 1890's whose huge influence largely shaped mainstream economic and development thought for the ensuing fifty years. These theories stressed the efficacy of global free trade and, in a broad sense, gave rise to the earliest capitalist strategies of economic development which envisioned little or no government restrictions on the operation of the economy. In the late 1930's John Maynard Keynes, an outstanding student of Marshall, argued that government should play a major role in economic management since; in his view, economically and socially successful economies have significant contribution from both government and private sector. The ideas of Keynes formed the basis of Keynesian economics which dominates much of present day development theory and practice. These ideas also marked a break with the laissez-faire economics of Adam Smith which held that economies function best when markets are left free of state intervention.
Section 3.2 considers the four major competing theories and approaches which have dominated the post-World War II development literature: the linear-stages-of-growth model, theories and patterns of structural change, the international dependence revolution and the neo-classical free-market counter revolution. The linear-stages-of-growth model, sometimes referred to as International Keynesianism on account of its extensive intellectual roots from Keynesian economics, includes Waltz Rostow's stages-of-growth theory and the Harrod-Domar model. This growth model envisions development as a process of capital formation which, in turn, is largely determined by levels of savings and investment especially in high growth sectors such as manufacturing industries. Growth is regarded as a uni-linear process which will endure once momentum is gained while no conceptual space is given in the model for possibilities of subsequent decline or underdevelopment.
Structural change models, which dominated much of the development literature over much of the 1950's and1960's, focus on the methods by which underdeveloped economies transform their economic structures from a heavy emphasis on traditional subsistence agriculture to a more modern, urbanized and industrially diverse manufacturing and service economy. Two notable examples of the structural change approach described in the section are the two-sector surplus labour theoretical model of W. Arthur Lewis and the patterns of development empirical analysis of Hollis B. Chenery and his co-authors.
Following the growing dissatisfaction with both the stages and the structural change models, the international-dependence model emerged with increasing support in the 1970's especially among the developing country intellectuals. This model views developing countries as beset by institutional, political and economic rigidities, both domestic and international, and caught up in a dependent and dominance relationship with rich countries. Three major streams of thought from this general approach; the neo-colonial dependence model, the false paradigm model and the dualistic-development thesis, have been discussed. These models reject the exclusive emphasis on traditional neo-classical theories which focus on the acceleration of GDP growth as the principal yardstick of development. The models not only question the validity of the Lewis-type two-sector models of modernization due to their questionable assumptions and limited impact in developing countries but also refute the claims made by Chenery and others of a well-defined empirical pattern of development that should be pursued by most poor countries. These theories rather place more emphasis on the fundamental economic, political and institutional reforms, both domestic and worldwide, that are needed to redress the international power imbalances.
The neo-classical counterrevolution, which would dominate western (and to a lesser extent developing country) theories of economic development, was a resurgence of neo-classical free market orientation in the 1980s towards development problems and policies to counter the interventionist dependence revolutions of the 1970s. It argues that underdevelopment emanate from poor resource allocation due to incorrect pricing policies and too much state intervention by developing nation governments that slows the pace of economic growth. Hence by permitting competitive free market to flourish, privatizing state-own enterprises, promoting free trade and export expansion, welcoming investors from developed countries, and eliminating the overbearing government regulations and price distortions in factor product and financial markets, both economic efficiency and economic growth will be stimulated.
Three approaches of the neo-classical counterrevolution, namely, The Free Market Approach, The Public-Choice Theory and The Market Friendly Approach as well as the Traditional Neoclassical Growth Theory and the Solow-Swan Model have been discussed.
In perspective, although dependence theorists viewed underdevelopment as externally induced phenomena, Neo-classical revisionists viewed the issue as an internally generated problem of developing countries caused by too much government intervention and bad economic policies.
The discussion supports the neo-classical counter revolution's contention that free-markets and less governments provide the basic elements for development, stressing that based on efficiency rather than equity criteria, market price allocation usually does a better job than state intervention.
However, the economies of the developing and developed worlds are so different in structure and organization that the behavioural assumptions and policy underpinnings of traditional neo-classical theory are frequently problematic and usually inaccurate.
Each of the approaches has its strengths and weaknesses which have been highlighted. Notwithstanding their varied and competing views, something positive and consequential can be extracted from each of them. The linear-stages model, for example, stresses the centrality of savings and investment in the promotion of sustainable long term growth. The structural change models focus on the processes and methods by which underdeveloped economies transform their domestic economic structures from a heavy emphasis on traditional subsistence agriculture to a modernized economy. The structural change models, unlike the stages model, recognize the fact that developing countries are part of an integrated international system that can promote or stifle development.
The International dependence theories create the awareness of the crucial role of the structure and functioning of the world economy and the variety of ways in which decisions made in the developed world can affect the lives of masses living in the developing world. The truth about their dependence and the extreme vulnerability to important decisions taken in the capitals of the global North and by the Bretton Woods institutions provides a compelling reason to take into account the intrinsic thoughts of the international dependence model. Analogous arguments can be made with respect to the dualistic structures and the role of the ruling elites in the domestic economy. Many of the arguments of the neo-classical counter revolutionaries are valid, especially those in relation to the inefficiency of state owned enterprises, the failures of development planning and the harmful effects of government induced price distortions. Certainly, the promotion of efficient production and distribution through a proper functioning price system constitutes an integral part of any successful development process.
Owing to the existence of widespread institutional complexity and severe socio-economic inequalities in developing countries, the attainment of relevant development policies based on either markets or open-minded public intervention becomes a much difficult endeavour irrespective of the ideological inclinations. Although neoclassical theory provides useful tools for the analysis of a variety of development problems, yet a good deal of modification is needed to fit the complex and varied institutional and structural realities of developing countries.
Successful development, therefore, requires a skillful and judicious balancing of market pricing and promotion where markets can exist and operate efficiently, along with intelligent and equity oriented government intervention in areas where unquestionable market forces would lead to undesirable economic and social consequences.
Developing countries need to adopt local solutions suited to their cultures and local constraints. This implies that development practitioners should be able to assess each individual country situation on a case by case basis before recommending the appropriate solutions. It again means that they should be able to distinguish between textbook theories and contemporary institutional and political realities of developing countries to be able to choose which of the concepts and models can best illuminate the key policy issues and dilemmas of development.
Alternative Development Concepts and Practices
Section 4 discusses the search for alternative development concepts and practices following the growing dissatisfaction with the mainstream development theories especially in developing countries. The real fillip for alternative development began in the early 1970's when many large International organizations such as the World Bank, ILO, UNEP, UNICEF and bilateral aid agencies got involved. Of particular note was the landmark symposium on "Patterns of Resource Use, Environment and Development Strategies" organized by the UNEP and UNCTAD in 1974 in Cocoyok, Mexico, which aimed at reformulating the alternative development agenda. The resultant Cocoyok Declaration, according to Hern (1990), marked "the birth of an alternative trend in development theory".
The section also discusses the critical issue of participation and empowerment within the alternative development tradition. Participation which entails giving people the opportunity to be involved in development policies affecting them, has often been a major end in itself. It is also a means to further human capabilities and other human objectives. Indeed, without participation we could easily have economic growth without development. Distinction between participation as a means and participation as an end has been widely used as one of the methods of identifying empowerment in participatory projects. In this connection, the useful distinction between "invited" and "claimed" spaces of participation by Cornwall (2000) has been covered. While participation as a means is closely related to operating in invited spaces, participation as an end is akin to operating in claimed spaces.
The roles of non-governmental organizations (NGO's) as key players in local and community-based development initiatives as well as the political economy of development in many countries have been discussed. The NGO's play three main roles of service delivery, advocacy on behalf of the poor and empowerment of deprived people to become their own advocates. NGO's now face the constant challenge to adopt 'best fit' approaches within the context of a particular country and existing institutions rather than import 'best practices' which may not fit or even apply to the local context.
Washington Consensus
Section 5 considers the Washington Consensus on the role of the state on development which refers to a set of broadly free market economic ideas crafted by John Williamson in 1989 and supported by prominent economists and international organizations such as the IMF, the World Bank, the EU and the US. In essence, it advocates free trade, floating exchange rates, free markets and macroeconomic stability. It contained a package of ten principles which are relatively specific policy recommendations.
Following the post-2008 financial crisis the New Washington Consensus was developed to address inequality and make global economy more inclusive. The New Consensus, though supporting the view that development must be market based, yet recognized that there are large market failures that cannot be ignored. The New Consensus reaffirmed that government must not be in the business of direct production. It nevertheless accepted that there is a broad, eclectic role for government in the areas of a) providing a stable macro environment b) infrastructure, though in fewer sectors than thought necessary in the past c) public health d) education and training e) technology transfer (and for advanced developing economies, the beginning of original R & D) f) ensuring environmentally sustainable development and ecological protection g) providing export incentives h) helping the private sector to overcome coordination failures i) ensuring 'shared growth' by acting to reduce poverty and inequality and to ensure that as the economy grows, the poor share substantially in the benefit j)prudential supervision and regulation of the financial sector k) provision of fundamental public goods, including institutions for the protection of property rights and broad access to opportunity.
Contribution of the Root-based Model to the Alternative Development Strategies.
