PROF. Y.G. EALDAMA

The Theoretical Heritage and Controversial Issues in the Development ResearchSource: Martinussen, John. 1997. Society,Stateand Market: A Guide to Competing Theories of Development. Zed Books: London and New Jersey.

PROF. Y.G. EALDAMA

Development EconomicsIt appeared as a distinct area during the 1940’s and 1950’s together with the political decolonization of Asia, Middle East and Africa.Its main interest was from the outset uncover the causes for continued poverty and underdevelopment or stagnation on Third World countries. It emerged as a special perspective and later as a sub-discipline within the field of economics. its focusing on the sources and obstacles to economic growth have separated the subject area from the neo-classical mainstream which had been increasingly taken up with the short term economic equilibrium analyses and maximizing of efficiency in resource allocation. Economics in general have common roots in the so-called classical political economy of the 18th and 19th century represented primarily by Smith, Ricardo , Malthus and many others.

PROF. Y.G. EALDAMA

Theoretical Origins of Development Economics

Adam Smith(1723-1790)

Thomas Robert Malthus(1766-1834)

David Ricardo(1772-1823)

Karl Marx(1818-1883)

John Stuart Mill(1806-1873)

Neo-Marxist approaches

Alfred Marshall(1842-1924)

Joseph Schumpeter(1883-1950)

John Maynard Keynes(1883-1946)

Development economics

Neo-classical paradigm

PROF. Y.G. EALDAMA

Adam Smith(1723-1790)

Author of the book, The Wealth of Nations (1776)

In it he emphasized the role of the market mechanismsoperating as “the invisible hand” which ensured that production in society was organized in the best countries of all. Smith’s central argument basically says that there might be other producer who would sell inferior goods at higher prices, but if there will becompetition between producers they will be forced to deliver proper goods at a reasonable price. Another role of the market is that of the a growth source, according to Smith. The reason behind is that there will be an increase of demand and growth inproduction when the market expanded as a result of population growth or territorial expansion. And also, specialization, whichaccording to Smith will lead to a higher productivity per working hour, would increase. And a precondition of that is the accumulation of wealth from the rich countries which are required for investment in working capital and in more fixed capital. Andthese ideas of Smith’s have played important role in debates ever since his time.

PROF. Y.G. EALDAMA

David Ricardo(1772-1823)

He elaborated on Smith’s classical political economy, especially with a land-rent and distribution theory and with the theory of comparative advantage.

Ricardo identified two other sources of growth in addition to Smith’s capital, namely technical innovation and international trade. His analyses of these led him to conclude that continued population growth and the corresponding increase in demand for food would result in the inclusion of all land for agricultural production, including those of poor quality. He believed that there will be a squeezing of profits in to zero because the land-rent would go up with the use of poor lands and it will lead to the redistribution of income in to the benefit of the land-owners.

Theory of Comparative Advantage

-It was elaborated in continuation of the above argument in an attempt to evolve a best policy for foreign trade.

-Its basic notion is that each country should concentrate its production in areas where it has comparative advantage in relation to countries with respect to the productivity of the workers. Meaning they should focus more on the production of goods wherein they have low cost but a high level of production.

PROF. Y.G. EALDAMA

Thomas Robert Malthus(1766-1834)

He was basically known for his pessimistic theses on population growth.

-He believed that population would grow faster than food production, if it was not constrained, specially with the poor breeding faster. And this basic assertion that population will necessarily grow more rapidly than agricultural production has played a central role as a hypothesis that many researchers have taken a position of, either positively confirming or negatively dismissing it.

it would now be appropriate to mention his contribution to the formulation of an economic crisis theory, regarding population growth as a barrier to economic growth.

PROF. Y.G. EALDAMA

John Stuart Mill(1806-1873)

Author of the book, Principles of Political Economy (1848)

Common to all classical economist was a strong emphasis on generalization and abstraction. They searched for patterns, casual relationships and laws of motion regarding societal conditions in the short-term perspective, as well as regarding growth and change over long term. And this has been passed down to present-day development research.

PROF. Y.G. EALDAMA

Karl Marx(1818-1883)

He started in classical political economy, but transformed this body into a far more comprehensive and quite different analytic construction.

He was interested in the totality of society and the ways in which this totality changed over a long period of time. His focus was on how and why various forms of society emerged, changed, acted within the structural limits primarily laid down by the forces of production and the prevailing production relations.

According to Marx the most important sources of economic growth under capitalism were the valorization and accumulation compulsions which individual capitalists are subjected to. To achieve a point, capitalist must exploit labor by paying the workers less than the equivalent of the value they produce, this became a fundamental element in his labor theory of value. In addition to that, the capitalist has continuously to accumulate capital in order to survive in the competition. And these processes embodied unavoidable tendencies towards increased technical and organic composition of capital. Combined with population growth, this necessary resulted in the marginalization of large segments of the potential working population and the establishment of a large reserve army of unemployed workers.

These basic laws of motion could not be viewed in isolation of class struggles because a well-organized working class had the power to lessen the uncomfortable effects for itself, and in the long run may also be able to overthrow capitalism and introduce first socialism, and later communism.

PROF. Y.G. EALDAMA

Joseph Schumpeter(1883-1950)

A theorist on the three mainstreams of thinking.

Author of The Theory of Economic Development (1934), which have left a legacy in the shape of hypotheses and ideas that continue to be debated. He made a special distinction between ‘growth’ and ‘development’.

Growth – a gradual extension of the capital apparatus and increasing production.

Development – it could occur only when technical innovations introduced new production techniques, new products, or new means of organizing production.

The innovators were the entrepreneurs, who as a category covered more than the industrialists and capitalists and did not need to be capitalists themselves.

He broke ranks with the classical conception of capitalist savings and accumulation as being the most important sources of growth. Instead, he believed that growth was driven by technical innovations, in association with the entrepreneur’s mobilization of credit in the economic system as a whole.

At around the turn of 20th century, long-term growth was taken for granted and consequently attention was shifted to how to achieve the best possible utilization of given resources – known as allocative effectiveness and efficiency. It implied the arrival of the neo-classical paradigm.

PROF. Y.G. EALDAMA

Alfred Marshall(1842-1924)

One of the first great theorists within the neo-classical paradigm.

Author of Principles of Economics (1890) which eventually, replaced Mill’s Principles of Political Economy as the most important standard work within mainstream economics.

It should be noted that some of the central features of neo-classical economics are certain explicit assumptions about nature of the economic system and the determinants of economic behavior. And these assumptions include one which stipulates that firms will maximize profits, another is that consumers will maximize utility. And these behavior-determining factors are believed to produce an optimal allocation of production factors and, further, provide the best conditions of economic growth.

PROF. Y.G. EALDAMA

John Maynard Keynes(1883-1946)

He wrote his main contributions during the 1930’s, including The General Theory of Employment, Interest and Money (1936).

He was not particularly interested in long-term growth or in conditions in the colonies. This is the reason why he did not leave behind any elaborate theory of growth and development. Meanwhile, he placed the question of the relationship between market and state so firmly on the agenda that he thereby acquired lasting significance for ensuing development debate.

His most significant contribution to theory formation and debate concerned the question of the reasons for, and the possible solutions to, the problem of unemployment. But also left behind an important legacy with his analyses and propositions regarding institutional control of international trade and finance, and the associated proposal for establishing what was later to become the IMF and the World Bank.

He achieved a considerable indirect influence on the development strategies through the work the work of Roy Harrod and Evsy Domar, after whom the Harrod-Domar model was named. This model informed the entire way of thinking about economic planning in the Third World during both 1950’s and 1960’s.

PROF. Y.G. EALDAMA

Socio-political Development Theories

PROF. Y.G. EALDAMA

Theoretical Origins of Sociological and Political Development Theories

Auguste Comte(1789-1857)

Karl Marx(1818-1883)

Emile Durkheim(1858-1917)

Max Weber(1864-1920)

Talcott Parsons(1902-1979)

Radcliffe Brown(1881-1955)

Bronislaw Malinowski(1884-1942)

Functionalism and anthropological field

methods

Functionalism and modernization

theoryPost-Marxist

Neo-Marxist approaches

Neo-Weberians

PROF. Y.G. EALDAMA

Auguste Comte(1789-1857)

He was the first to use the term “sociology”:

to describe his vision of a new science that would discover laws of human society resembling the laws of nature by applying the methods of factual investigation that had proved so successful in the physical sciences.

PROF. Y.G. EALDAMA

Emile Durkheim(1858-1917)

He acknowledged explicitly Comte’s contribution to the establishing sociology as a scientific discipline, but asserted that Comte had not successfully achieved his objective.

He was concerned with the social change processes in the long tern. This led him to study the development of the division of labor in society as part of industrialization process. It was more important for him to study division of labor in its social consequences. He believed that division of labor would eventually come to replace religion as the most important social force of cohesion, but that the separation and specialization of labor functions and other swift social changes would also cause widespread anomie.

Anomie – a feeling of rootless ness and aimlessness which, furthermore, was characterized by a lack of moral guidelines. The breakdown of the traditional orders, which were supported by religion, would result on many people feeling that their lives had lost meaning; they would feel isolated without clear guidelines for normal behavior. This approach has clearly influenced post war modernization theory.

He also studied about the causes of suicide not by looking at the external social circumstances in which suicide occurred with a markedly higher frequency. The method of analyzing individual behavior as determined significantly by social circumstances came to influence the further development of sociological methods.

PROF. Y.G. EALDAMA

Radcliffe Brown(1881-1955)

Bronislaw Malinowski(1884-1942)

2 of the founders of modern social anthropology where it was thefirst mainstream through which theoretical heritage from Durkheim was transmitted.

Both pioneers in the evolution of fieldwork methods with well-defined conceptual frameworks. The development of these methods led to the present functionalist analysis at the micro –level, that its analyses based on the view that social conditions and events in the local community and its maintenance.

PROF. Y.G. EALDAMA

Karl Marx(1818-1883)

He is one of the founding fathers of modern social science who has left a strong impact upon both development economics and sociological and political science approaches to study of Third World development.

His analytic perspective and method at the same substantial contributions to sociology. His method implied a systematic tracing of the interactions between the basic economic structures and the processes on the hand, and the political, social and ideological relations and institutions on the other. He believed that social change is prompted primarily by economic influences.

The dynamism created by technological progress and the development of the forces of production within the framework of a particular mode of production would, in the final instance, also determine the direction and basic patterns of societal changes in the social and political spheres. This was part of the basic idea in his materialist conception of society and history.

Marx had a clear idea about technological progress and the development of the forces of production as constituting the core of the dynamics that changed society. He also held the view that social and political conflicts which really mattered all had their roots in economic inequality and conflicts of interest.

PROF. Y.G. EALDAMA

Max Weber(1864-1920)

He directly opposed Marx.

Regarding the relationship between structure and the individual actor, there a strong case of contrast between Marx and Weber. Marx believed that there is no consensus on how much of individual behavior the structures accounted for. While Weber assigned to man as an individual significantly more independence in the society. Therefore, Weber also worked on human motivation and rationality as determinants of behavior.

He worked on many type of rationality but focused on the so-called bureaucratic rationality which was described as the analytical ideal type in his studies of modern bureaucracy. He found bureaucracy and its rationality as an unconditional asset, and is useful for solving many social problems. But he emphasized that a bureaucratic system was not subject to democratic control or counterbalanced by charismatic or otherwise popular leaders, was an evil for society. His interest was to describe, interpret, and explain the emergence of the bureaucratic form of organization and the related rationality form.

He also laid foundations for the methodological principle which is known as scientific value relativism. It takes as its starting point that there is a logical gap between ‘is’ and ‘ought’- between society as it exits and the society as the researcher would like it to be.

PROF. Y.G. EALDAMA

Talcott Parsons(1902-1979)

He basically elaborated Weber into English countries. He reduced Weber’s complex and open theory to functionalism, into which he adopted elements from Durkheim.He found Marx and Weber as totally incompatible that Weber could essentially replace Marx. His interpretations was adopted by the modernization theorists of 1950’s and can be found even today among many development researchers, especially in the English-speaking countries.