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9 Transnat'l L. & Contemp. Probs. 93 (1999)
Competing Theories of Economic Development

handle is hein.journals/tlcp9 and id is 107 raw text is: Part One: Pursuing the Good Life: The Meaning of Development as It Relates to the World Bank and the IMF III. Competing Theories of Economic Development Ricardo Contreras In this section we are going to introduce you to four schools of economic thought that came into existence following World War II: (i) structuralism, (ii) the linear-stages-growth model, (iii) the neo-Marxist or dependency theory, and (iv) the neoclassical revival of the 1980s. These schools fall under the general rubric of development economics, a branch of economic analysis that responded to the perceived inability of classical, neo-classical, and Marxist economics to address the economic reality that plagued the poor countries of the world. By the 1950s, it was possible to divide the world into two groups of countries-the poor and the wealthy. The wealthy group was composed of most of the Western European countries, Canada and the United States. Inhabitants of these regions lived (and still live) in great affluence and consumed a large part of the world's resources. The other group-Latin America, Asia and Africa-was poor, underdeveloped, and contained almost 75 percent of the world's population. Economists and government policymakers, especially those in developing countries, began to look for reasons to explain this disparity and for ways to eliminate it. This section will provide you with a general understanding of development economics, using the four schools of thought identified above. The first part will explain how development economics has taken a multidisciplinary approach to analyzing and addressing the economic problems of developing countries, particularly chronic poverty. The second part will describe some of the main aspects regarding the structuralist school of development economics. Structuralists tried to explain how structural aspects of the domestic and international economy impeded the growth of developing countries. Their policy prescriptions called for major government intervention in the economy in order to promote industrialization. Many countries in Latin America and elsewhere adopted structuralist policies, also known as import substitution ' policies. While the early phase of such policies promoted growth, state-led development ultimately suffered serious inefficiencies, which led to market reforms in the 1980s and 1990s in Latin America and elsewhere. (In the 1970s, Asian economies abandoned import substitution in favor of export-led growth.) The third part will address the linear model of development based upon the European experience. This school focused on the lack of domestic savings and investment. In order to promote growth, policymakers had to induce higher savings and investment rates in developing countries, a proposition

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