Economic Development Theory

A major goal for developing countries is economic development or economic growth.However, the two terms are not identical. Growth may be necessary but not sufficient for development. This chapter gives a brief background on economic development. It also explains different methods of classifying countries according to United Nations and World Bank criteria. Economic development is usually measured using Gross Domestic Product

(GDP), Human Development Index (HDI) and Purchasing Power Parity (PPP). These methods are discussed in this chapter. This chapter discusses the different theories of economic development and critically evaluates each of these theories and how they are used. It also emphasises the use of technology and ICT in economics and

Smith, Malthus, Ricardo) a concern with the heavy variables of capital population, and the objective of what Adam Smith termed the “progress of opulence” in the progressive state. But the new development economists went beyond their classical and neoclassical predecessors to consider the kind of policies that an active state and international community could adopt to accelerate a country’s rate of development (Meier and Rauch, 2005).

The post-World War II literature on economic development has been dominated by four major and some times competing strands of thought; The linear stage of growth which included Rostow’s stages of development; Theories and patterns of structural change; The international dependence revolution and new classical, and free market counter-revolution (Meier and Rauch, 2005). In addition, Todaro (1999) stated that, the emergence of a fifth approach that has been witnessed - an approach called the new or endogenous theory of economic growth. It was primarily an economic theory of development in which the right quantity and mixture of saving, investment, and foreign aid were all that was necessary to enable Third World nations to proceed along an economic growth path that historically had been followed by the more developed countries (Meier and Rauch, 2005). Therefore major strands in economic development literature

Traditional, top-down development directed by governments and financed by foreign aid be inadequate, since this approach has a very mixed track record and declining support (Todaro, 1999). The idea behind this new development model is that basic services should generally be provided by businesses - sometimes directly and sometimes in partnership with governments or networks of non-governmental organisations (NGOs). The right strategies can enable the poor to become customers and pay for the services they receive, services that will improve their quality of life and increase their productivity (Hammond, 2001; Sato,