Economic Development Theories and Models

Question: Discuss about the Economic Development for Theories and Models. Answer: Rostows theory of the stages of economic growth is a significant historical model of economic development that was initially published in 1960. This model provides that economic growth takes place in five main stages of different lengths. These stages are traditional society, preconditions for takeoff, take-off, drive to maturity, and age of high mass consumption. Rostow argues that a few individuals must lead economic take-off at the initial stage (Ohlin, 1961). Thesis statement: While Rostows five stages of economic growth model can help economists to understand many factors affecting the economic status of some nations it overlaps with some standard models, many households do not have enough money to save, some countries has been slow to generate meaningful growth after receiving external finance, most countries that have reached developed status did so without experiencing any significant increase in their savings rate, and it does not cater for exceptions. Topic sentence: The first problem with Rostows five stages of economic growth model is that it overlaps with other models like Harrod-Domar model. The second and third stage of Rostows five stage economic growth model requires an increase in savings and investment. Stage four of this same model requires a lot of improvements in technology. The need to invest in technology can lead a significant reduction in the capital-out ration, which does not favor economic growth (Kulkarni, 2010). Topic Sentence: Another challenge with this theory is that while both stage two and three require increased savings and investment, many households often lack an adequate amount of money to save. Inflation is high, and people are forced to take care of many economic factors at ago. In many cases, the banking channel between companies and savers inadequate. Besides, the productivity of individual investments sometimes relies on complimentary investment in infrastructure. Topic Sentence: Rostows model also does not apply to all countries. Many countries in Asia and Africa have received a lot of external finance, but that has not helped them to general significant economic growth. Most of them have remained stuck in stages one or two. Whenever some of these countries receive external finance regarding loans from the developed world, they incur significant amounts of interest charges, and this has played a role in dragging their economic growth (Heynen, 2007). Topic Sentence: Some countries have reached the developed status without increasing their saving rate. Justification: Since many countries have reached this status successfully without witnessing a significant increase in their savings rate, it is clear that this model is not perfect (The Stages of Economic Development from an Opportunity Perspective, 2017). Topic Sentence: Another important observation is that this theory does not account for exceptions. It ignores to put in unique structures to cater for falling output in some countries under the communist regimes, the reversed development advances in the corrupt and failing government in Zimbabwe, the impact of increased globalization that means that the economic growth of a country does not rely solely on its internal processes. Both international competition and protectionism can prevent them from experiencing any meaningful economic growth (Heynen, 2007). Topic Sentence: Another glaring problem with this theory is that it put into consideration large countries with a significantly large population such as Japan, those endowed with natural resources like Northern European countries, or with a significantly large land mass such as Argentina and ignore many that do not fit in this category. For this reason, the theory has little or no hope to offer for small countries such as Rwanda. It leaves countries that do not have the right amount of resources, good political will, or extensive external borrowing at a place where they cannot become competitive on the global stage (Basu and Basu, 2003; Stenning, 2010). Conclusion Rostows model lays emphasis on the efficacy on the modern concepts of free trade and other principles of liberal school of economics. It contradicts arguments for the concept that economies that depend on exports of raw materials cannot diversify. Besides, this model contradicts the concept that government control over domestic development is critical, which most ardent free trade advocates do not accept. References Basu, K., Basu, K. (2003). Analytical development economics: the less developed economy revisited. Cambridge, MA: MIT. Heynen, N. (2007). Neoliberal environments: false promises and unnatural consequences. London: Routledge. Kulkarni, K. G. (2010). International economic development: theories, models amp; case studies of countries leading the change. New Delhi: Matrix . Ohlin, G. (1961). Reflections on the Rostow DoctrineThe Stages of Economic Growth: A Non-Communist Manifesto. W. W. Rostow. Economic Development and Cultural Change, 9(4, Part 1), 648-655. doi:10.1086/449931 Stenning, A. (2010). Domesticating neo-liberalism: spaces of economic practice and social reproduction in post-socialist cities. Malden, MA: Wiley-Blackwell. The Stages of Economic Development from an Opportunity Perspective: Rostow Extended. (2017, March 13). Retrieved March 12, 2017, from https://aspectediplomatice.ro/index.php?option=com_contentview=articleid=5274%3Athe-stages-of-economic-development-from-an-opportunity-perspective-rostow-extendedcatid=37%3Amodule-variationsItemid=107