Development Theories and the Global Economy

Rostow: five stages of growth

W. W. Rostow's modernisation model (1960) says every country passes through the same ladder: traditional society (subsistence, little technology); preconditions for take-off (infrastructure, commercial agriculture, an elite that wants change); take-off (a few manufacturing sectors grow fast, urbanisation accelerates); drive to maturity (technology spreads across the whole economy, exports diversify); age of high mass consumption (services dominate, consumer goods and welfare spending rise).

Criticisms. It treats each country as a closed box and ignores colonial extraction; it assumes everyone starts at the same line; it was written from the Western experience during the Cold War as an argument against communism; it ignores resource and environmental limits; and it cannot explain countries that industrialised and then stalled.

Wallerstein and dependency

Immanuel Wallerstein's world-systems theory treats the world, not the country, as the unit. The core holds capital, research and brands; the periphery supplies raw materials and cheap labour; the semi-periphery does assembly and both exploits and is exploited, acting as a buffer that stops the system splitting in two.

Dependency theory pushes further: the periphery is not merely behind, it is kept behind. Commodity dependence exposes it to volatile prices, while the manufactured goods it imports rise steadily in price — unequal exchange. Criticisms of both: they are deterministic, downplay domestic institutions and corruption, and struggle to explain the newly industrialised economies that climbed out.

Trade and the responses to inequality

Trade blocs such as the EU, USMCA, ASEAN and MERCOSUR remove internal tariffs while keeping a common external position; the WTO polices global rules. Neoliberal structural adjustment programmes required deregulation and privatisation in return for loans.

Offshore outsourcing moves back offices and call centres to lower-wage locations. Fair trade guarantees a price floor plus a social premium to certified producer cooperatives. Microfinance lends very small sums, mostly to women, without collateral.