There are various theories that explain economy of a country, both in national scope and international scope. These theories of economic development are responsible for the economic development, growth and changes from 1950s to date. These economic models are the linear stage, structural change, international dependence and the neo-classical theories. This paper will look at the advantages and disadvantages of the various models.
This model and theory was used between 1950s and 1960s. one advantage of this model is that it points to the significance of the accumulation of savings to achieve development. This is a necessary condition for the movement from traditionaltodeveloped societies. Linear stage also enhances investment and saving portions of incomes towards economic growth of a country. Lastly, this type of model facilitates a country to raise capital.
Some of this model’s weaknesses include;modern economic growth theories take into account a comprehensive set of growth factors in a country. This is unlike the subsistence economy that linear stage is based on. Another disadvantage of linear stage is that the analysis of this model was based on the restoration of Europe after World War II. Most developing countries do not have institutions such as those in Europe. Lastly, in the modern society, this school is not applicable as savings only is not sufficient for economic growth
This model came into existence on the 1970s. One of its advantages is that encourages transforming an economy from being agricultural based to production based. It also advocates for increased employment opportunities due to the transformation from subsistence economy to modern economy. Lastly, facilitates the co-existence of subsistence economy and modern economy.
Some disadvantages of this model are that profits may not be re-invested locally. The surplus labor may not exist in the rural economy. The modern economic sector can be labor saving instead of being employmentcreating
This model was mostly used in 1970s. Its advantages include; it advocates for international power balance and reforms, it alsoadvocates for the development of the developing countries. This enhances independence by developing countries
It has disadvantages such as it may lead to increased gaps of inequality between the rich and the poor. The global policies have proved to be a total failure. It May lead to increased rate of poverty especially to less developed countries.
This model advocates for free markets and revolution. It also advocates free markets with fair competition in the market and no government interference. Neoclassical may lead to increased production and it advocates for the use of technology in production.
This model of economic development has shortcomings such as; in case of free markets, the open economies will grow more rapid than the closed economies. Where labor productivity is low, the rate of growth of the economy will be low. Without government involvement in economic activities, it may lead to trading of illegal products to the citizens
"Classical Theories of Development." Classical Theories of Development: A Comparative Analysis (n.d.). slideshow. <web.uvic.ca>. Smith, michael P. Torado and Stephen C. Economic Development. pearson education inc, 2003. internet.
"Classical Theories of Development." Classical Theories of Development: A Comparative Analysis (n.d.). slideshow. <web.uvic.ca>.
Smith, michael P. Torado and Stephen C. Economic Development. pearson education inc, 2003. internet.
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