Theory of Development


Theory of Development

by Garry Jacobs, Robert Macfarlane, and N. Asokan

[presented to Pacific Rim Economic Conference, Bangkok, Jan 13-18, 1998]

 

  1. Introduction
  2. Observations and Questions about Recent Development Experience
  3. Theory as a Revealer of Potentials
    1. Untapped Opportunities
    2. Barriers to Development
      1. Perceptual Walls & Apparent Dead Ends
      2. Outmoded Attitudes
      3. Anachronisms
    3. Overcoming Human Barriers
    4. Central Thesis
      1. Human Centered Approach
      2. Survival, Growth and Development
      3. Unconscious versus Conscious Development
      4. Natural versus Planned Development
      5. Green Revolution
  4. Emergence of New Activities in Society
    1. Social Preparedness for Development
      1. Awareness
      2. Aspiration
    2. Initiation -- Role of the Pioneer in Development
      1. Multiplier Effect
    3. Acceptance and Assimilation -- Organizing New Social Activities
      1. Education
      2. Organization Matures into Institution
      3. Cultural Transmission by the Family
    4. Integration of Organization with Society
    5. Power of Authority
    6. Organizations are the Skills of Society
    7. Complexity of Organization
    8. Values as the Ultimate Determinant
    9. Role of Government in Organization
  5. Infrastructure
  6. Resources
    1. The Human Resource
    2. Process of Individual Development
  7. Three Stages of Social Development
  8. Contribution of Three Components to Development
    1. The Role of Organization in the Three Stage
  9. Population and Urbanization
  10. The Role of Money in Development
    1. Money as an Organization
  11. Restatement of the Theory
  12. The Role of Knowledge in Social Organization
    1. Education
    2. Technology
    3. Internet
    4. Internet's Four-fold Infrastructure
    5. Organizational Power of the Internet
  13. Applications
  14. What are the Limits?
  15. List of principles
  16. Issues


Introduction

Despite 50 years of development experience, fundamental questions remain unanswered. The world still lacks a comprehensive theoretical framework that adequately explains such phenomenon as the accelerating velocity of development exhibited by East Asian countries, the failure of Malthusian projections, the growing contribution of non-material resources not subject to depletion, the apparent failure of market policies in the transition of Eastern Europe, and conflicting predictions about the future of work based on the contrary recent experiences of North America and Western Europe. A profusion of economic theories provide explanations for specific expressions of development, but none unite the pieces into a unified theory that adequately defines the central principles, process and stages of development. The formulation of a comprehensive theory of development would make conscious the world's experience over the past 500 years, reveal enormous untapped potentials and vastly accelerate the speed of future progress.

This paper is identifies the central principle of development and traces its expression in different fields, levels and stages of expression. Development is a function of society's capacity to organize human energies and productive resources to respond to opportunities and challenges. The paper traces the stages in the emergence of higher, more complex, more productive levels of social organization through the historical stages of nomadic hunting, rural agrarian, urban, commercial, industrial and post-industrial societies. It examines the process by which new activities are introduced by pioneers, imitated, resisted, accepted, organized, institutionalized and assimilated into the culture. Organizational development takes place on a foundation of three levels of infrastructure - physical, organizational and mental. Four types of resources contribute to development, of which only the most material are inherently limited in nature. The productivity of resources increases enormously as the level of organization and input of knowledge rises.

Historically, social development has passed through three progressive, but overlapping stages in which three different components of human consciousness served as primary engines for social advancement. The paper draws parallels between the catalytic role of population growth, urbanization, the spread of a money economy, and, most recently, Internet as accelerators of the development process.

Looking backward, the development achievements of the world over the past five decades have been unprecedented and remarkable. Looking forward into the next century, daunting developmental challenges confront humanity. Despite 50 years of intensive effort, the world is still blindly groping for adequate answers to fundamental questions about development and for effective strategies to accelerate the process. Recent accomplishments point to the possibility of converting these 50 years of experience into a conscious and consistent theoretical knowledge. Impending challenges point to the need for a comprehensive theory of social development that will lead to the formulation of more effective strategies.

Observations and Questions about Recent Development Experience

A few observations highlight some striking aspects of recent development experience that need to be theoretically understood and some perplexing questions that need to be answered to meet the opportunities and challenges of the coming years.

  1. The world has made greater progress in eradicating poverty over the past 50 years than during the previous 500: Over the past five decades, average per capita income in the world more than tripled, in spite of unprecedented population growth. In developing countries, real per capita consumption rose by 70 percent between 1965 and 1985. What have been the principle reasons for this phenomenal progress? What do these results augur for the coming decades?
  2. The pace of human development has increased dramatically and is still accelerating: It took the United Kingdom 58 years, beginning in 1780, to double its output per capita. The United States did it in 47 years, beginning in 1839. Japan accomplished the feat in only 24 years, beginning in the 1880s. But after the Second World War, Indonesia did it in 17 years and South Korea in 11. More remarkably, China has doubled in the past 10 years and is on course to double again in the next eight. During the period from 1960 to 1990, real per capita standards of living based on purchasing power parity multiplied twelve-fold in South Korea, seven-fold in Japan, more than six-fold in Egypt and Portugal, and well above five-fold in Indonesia and Thailand. These countries have demonstrated beyond doubt that much higher rates of growth are achievable than at any time in the past. What are the factors that make possible and limit this accelerated progress? What implications does it have for nations just entering the take-off stage?
  3. The rate of growth differs widely among nations and communities and the differences appear to be widening: Between 1965 and 1990, per capita GDP rose by 5.5 percent annually in high performing East Asian countries compared to less than 2 percent in South Asia and about .25 percent in Sub-Saharan Africa. Yet despite extensive efforts to draw lessons from the impressive achievements of the Asian Tigers, no formula has emerged that is generally applicable to countries faced with differing conditions and at different stages of development. What factors account for the vast differences in performance? What valid principles can be derived from the disparities in performance?
  4. Dire predictions of pending doom based on an extrapolation from past trends have been repeatedly proven wrong: Since English economist Robert Malthus first predicted 200 years ago that population growth would overtake the world's food supply leading to widespread famine, the population of the United Kingdom has grown five-fold and world population has grown nearly six-fold. Malthus failed to anticipate the gigantic strides that would be made in increasing food production. As recently as 1990 demographers were projecting that the world's population could rise above 13 billion before leveling off late in the next century. UN estimates have since been drastically revised downward to project that world population is likely to peak at 7.5 billion by 2050. At the same time, a group of Dutch researchers calculates that the earth's soil and water resources can produce sufficient food to support further growth of the world's population from six billion to 45 billion. What principle, facts or misjudgments can account for this repeated tendency to predict insurmountable obstacles and catastrophes while overlooking emerging opportunities and increasing human capacities? What lessons can we learn from errors of thinkers in the past to avoid applying the same flawed methodology to our own analysis of the future?
  5. The limits to growth appear to advance and recede before out very eyes: For decades, concerned groups of environmentalists have been predicting imminent exhaustion of the world's energy resources. At the same time new sources of energy are being discovered and commercialized, new types of materials are being created to replace scarce ones, and more efficient means of utilizing resources are being developed. What limitations will availability of natural resources play in the future development of the world in which presently 20% of the global population consumes 80% of the fuel and mineral wealth? Will today's developing countries be forced to accept lesser standards of living than those now prevalent in the West?
  6. Technological development has created unprecedented job growth during this century, yet fears persist regarding "the end of work": In 1640, King Charles I of England compelled the demolition of a newly erected mechanical sawmill because it endangered the jobs of so many people. One hundred years ago the mechanization of agriculture and rapid advancement of the industrial revolution in the USA generated widespread fear that the machine would replace human beings as the instrument of production, resulting in very high levels of chronic unemployment in society. Since then the USA has led the world in the adoption of increasingly sophisticated and automated technologies in all spheres of life, yet America has quadrupled its workforce from under 30 million people in 1890 to over 120 million employed workers today. The percentage of the American population employed is also at an all time high and expected to rise further in the coming decade. Although growth of employment in Europe out-paced progress in the USA from the early 1950s to the late 1980s, many Western Europe countries now suffer from high and still increasing levels of unemployment. Both the analysts and the general public share pessimistic visions of Europe's future. What factors account for these differences in performance? What are the prospects for restoring job growth in Europe? What is the actual relationship between technological development and employment and what does it bode for the future?
  7. Worldwide employment has increased dramatically in recent decades, but the world's population has grown even faster: Since 1950 the world economy has created over one billion new jobs. During this same period, world population has tripled. In the 1980s, China created more than 100 million new jobs. A number of Asian countries including South Korea, Taiwan, Singapore, and Hong Kong have reached full employment and now suffer from severe labor shortages. In 1991, the International Commission on Peace and Food evolved a strategy to generate 100 million new jobs in India within a decade. Since then, growth of employment in India has more than doubled from 3 million to 7 million additional jobs a year. In order to achieve global full employment, another one billion jobs needs to be created in the coming decade. Can the potential for job creation match or outpace population growth in the coming decades? Does the world possess the capacity and resources needed to support such an enormous and rapid expansion of economic activity?
  8. The transition strategies followed by most East European countries induced severe economic depressions from which these countries are only now beginning to recover: After the fall of the Berlin Wall, the breakup of the USSR and the end of COMECOM, the nations of Eastern Europe embarked on sweeping programs to transform their central-planned economies to free-market capitalism. Most of them adopted variations on a common set of policies advocated by market economists as a path to rapid economic growth. These policies included rapid deregulation of prices, privatization, introduction of convertible currencies and other policies designed to increase productivity and attract foreign investment. The actual performance of these countries during the first few years of transition was devastating. In the early 1990s, production in all 25 countries declined drastically, ranging from a minimum of 18 percent in Poland to 45 percent in Russia, 60 percent in Ukraine and 75 percent in Armenia. How is it that so few experts could foresee the disastrous results that would come? Was such a disastrous and painful transition inevitable? To what extent was it the result of inadequate knowledge of the development process among both these nations and their external advisers?
  9. Large infusions of capital do not always result in development: Since the reunification of Germany seven years ago, West Germany has pumped more than $1.1 trillion of investment into the Eastern sector, an amount equal to the entire world's all-time high military spending in 1987. Since then wage levels in the East have risen to the highest level in the world, while productivity remains at only 20 percent of the level in the West. Unemployment has grown from very low levels before reunification to higher than 25 percent, 30 percent when early and forced retirements are taken into account. What factors explain these disappointing results? What relevance does the East German experience have for other countries seeking accelerated growth? What is the true role of money in development?
  10. Evidence regarding the relationship between democracy and development is compelling: The Protestant Reformation released enormous mental energy and social resourcefulness by freeing the individual from dependence on the arbitrary authority of the church. This opened the way for the birth of modern science, the spread of democracy and the Industrial Revolution in Europe. Democracy creates a fertile field for economic development by ensuring stability and peace within countries. The transition from monarchy to democratic forms of government made possible the rapid economic advancement of Western countries over the past three centuries. The limitations of authoritarianism are evidenced by the relatively poorer performance of East European nations under state communism after World War II leading to the wholesale adoption of democratic institutions by these countries since 1990. On the other hand, much of the progress of East Asian countries has occurred under conditions in which economic freedoms were introduced at the same time that political freedoms were severely restricted by a ruling elite. China continues to lead the world in growth rates by liberalizing its economy while maintaining an authoritarian form of government. In countries such as India, the fragmentation of political parties along communal lines, the pressure on politicians to grant unaffordable subsidies to win votes, and the spread of corruption are attributed by some to the granting of democratic freedoms to heterogeneous populations with relatively low levels of education. What is the relationship between political freedom and economic development? Under what circumstances and to what extent can development proceed in the absence of democratic institutions? Does the economic collapse of East European economies after democratization foreshadow a similar outcome in China?

These observations and the questions they call to mind illustrate that in spite of fifty years of concentrated effort and unprecedented achievements by the international community, fundamental issues pertaining to development remain at best poorly understood. The world has not yet been able to derive from its experience a comprehensive knowledge of the development process. Nor is it able to formulate effective policies with