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International Development: Synergies with Economics?

Time and again, we see different news headlines talking about why aiding development in underdeveloped countries is paramount to betterment of the people. This begs the question, how exactly do we aid these countries? Do we spoon-feed them according to our ideologies? Or is it just monetary aid that they seek, with the government’s operational capacities competent enough to resolve it’s states issues? Also, who is going to provide this money? Will they impose strict restrictions on how to use this aid, thus facilitating a hidden propaganda? Or will it be just foreign aid from charity and philanthropic organizations? Last but not the least, who is benefitting from this, and what is the target? Is it just increasing production of material goods? Or do we also account for less tangible things such as happiness, quality of life and freedoms to pursue means to an end? These questions, and many more, are the backbone of international development.

As students of economics, we understand how the world works from (arguably) the most important lens: the monetary one. However, the buck stops there for us. What exactly happens afterwards? Where are these huge macroeconomic policies implemented? How has it affected us over the years? For eg: we talk about international trade and capital flows. But what escapes us is the fact that countries made a conscious decision to be open to the global trade frame work. What was trade like before, in a closed economy? More often than not, we consider economics to be an exact science. We have a set of theories which we base on assumptions, and use statistical tools to verify the degree of correctness and pat ourselves on the back. However, we must realize that it is as subjective as any other social science. What we interpret as important for a country’s economy (for eg: growth rate of Gross Domestic Product [GDP]) might not be true for a student of development, who might strongly believe that local representation in development programs (local contextualization) is key to reaching a high Human Development Index (HDI). There are different viewpoints coming from different disciplines, however, we can not afford to stick to one. Instead we must strive to be as holistic as possible, in our understanding of the world.

Development studies and economics have a very profound relationship. Very simply put, economics shows us theories of how money is created, and how it is used. For eg: demand and supply determine price. And based on price, a rational consumer would allocate his budget to his basket of goods. And based on this allocation, different products have different profit margins, which in turn are related to their production costs. Again, these production costs can be attributed to availability of raw materials, labor force, etc.This is just a small example of how different concepts in economics are related. Ofcourse, on a macro-economic scale, there is whole new strata of concepts, which can not be explained so simply.

On the other hand, development studies exposes us to the different actors in global development. And arguably the most primary tool for development is money. Development studies for example talks about how organizations such as the Bretton-Woods institutions, namely the World Bank and International Monetary Fund, distribute wealth to countries in need of it. However, what it also does is take a critical stand, and look at these institutions. It discusses why these institutions were created, and how they push a neo-propaganda. It also talks about different theories of development, and relates it to historical events. To put things in a clearer context, I will be talking about one such theory: Rostow’s stages of development.

Walt Whitman Rostow is one of the biggest names in the academic field of development studies. He was a strong supporter of capitalism because of the efficiency it brought to the economic system, and likewise, he was very averse to socialism. His biggest contribution to this field was his book: “The Stages of Economic Growth: A Non-Communist Manifesto”. If you still had doubts about whether development studies was related to economics, the name of one of the most influential books in development should clear that cloud of uncertainty for you.

According to Rostow, economic growth occurs in five stages:

  1. Traditional Societies

  2. Pre conditions for take off

  3. Take off

  4. Drive to maturity

  5. Age of high mass consumption

Traditional societies:

Some of the defining features of a traditional society are:

  1. High primary sector (almost 100%) share of GDP

  2. No social and political organizations such as a government or a civilized society

  3. Very primal and limited technology

Pre conditions for take off:

As a state or a society moves towards growth-oriented development, it needs to begin with the pre conditions for the same. This is marked by:

  1. Export of cash crops to facilitate economic growth

  2. General feeling of national identity

  3. Demand for raw material, either internal production or external imports

Take off:

  1. Urbanization increases, industrialization proceeds, technological break through occurs.

  2. “Secondary” (goods-producing) sector expands and ratio of secondary vs. primary sectors in the economy shifts quickly towards secondary.

  3. Textiles and apparel are usually the first “take-off” industry, as happened in Great Britain’s classic “Industrial Revolution”

  4. An Example of the Take-off phase is the Agriculture (Green) Revolution in the 1960s.

Drive to maturity:

  1. Diversification of the industrial base; multiple industries expand and new ones take root quickly

  2. Manufacturing shifts from investment-driven (capital goods) towards consumer durables and domestic consumption

  3. Rapid development of transportation infrastructure.

  4. Large-scale investment in social infrastructure (schools, universities, hospitals, etc.)

Age of Mass Consumption:

  1. the industrial base dominates the economy; the primary sector is of greatly diminished weight in economy and society

  2. widespread and normative consumption of high-value consumer goods (e.g. automobiles)

  3. consumers typically (if not universally), have disposable income, beyond all basic needs, for additional goods

  4. Urban society (a movement away from rural country sides to the cities)

As is clearly evident, the very core of Rostow’s development theory is economical, because it is expressed in the different sectors of the economy, export, import, impact of technology and other concepts integral to economics. And although the theory itself (like most of other theories in social sciences) is subjective, it throws light on some of the biggest changes in the world, which revolutionized the global economy. That is why we as economics students must delve into the field of international development studies, if we wish to gain a more holistic view of the world, and be able to understand events from more than just one perspective.


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