This chapter focuses on industrialisation experiences and industrialisation strategies in developing countries, in the period since 1945. The chapter opens with a discussion of the inward-looking industrialisation strategies of the post-war period in section 9.2. The common characteristic of such strategies was the pursuit of comprehensive industrialisation behind protective barriers. These strategies were characterised by large-scale investment, high degrees of protection and a key role for government. The strategies were based on closed conceptions of the economy.

As time passed, the shortcomings of the post-war approaches became more apparent. Section 9.3 provides an overview of the various criticisms of the dominant post-war policies. This paves the way for a discussion of alternative approaches in sections 9.4 to 9.7. These include unbalanced growth policies which provide more scope for the market, the balanced growth path approach which focuses on the relationship between major sectors of the economy, support for the small-scale and informal sector and the most important alternative: export-oriented industrialisation. In the discussion of export-oriented industrialisation, the role of multinational enterprises and the emergence of global production chains receive special attention. In section 9.8 attention is paid to the debates between proponents of neoliberal market strategies and proponents of more interventionist industry and technology policies. Outcomes of industrialisation policies are discussed in section 9.9.

Introduction

Major technological breakthroughs in textile production and the application of steam power in Great Britain in the second half of the eighteenth century made such a deep impression that in the nineteenth century the term ‘industrial revolution’ was coined to describe them.

This chapter focuses on the processes of state formation in developing countries. Until recently most economists ignored the relationships between state formation and economic development. Nevertheless, political and economic developments are closely interconnected. For example, it is of little use to discuss the economic development of Nicaragua in the 1980s without taking the war with the USA into consideration. Also, it is not much use analysing the economic development of African countries, if one does not realise that many countries on the African continent are in a state of open or latent civil strife or international conflict. At the moment of writing (2003), this applies for instance to countries such as Burundi, Congo, Côte d'Ivoire, Liberia, Nigeria, Rwanda, Sierra Leone, Somalia, the Sudan and Zimbabwe (Marshall and Gurr, 2003).

The political aspects of development will be discussed from two perspectives with which the reader will by now be familiar. In the first place, the interactions between state formation and economic development will be analysed. In this context an interesting paradox comes to the fore. The tasks and demands nowadays facing the government apparatus in developing countries are heavier and more comprehensive than ever before in economic history. At the same time, the apparatus of government is less well-equipped to fulfil these tasks.

In the second place, the characteristics of state formation and political development will be discussed as important independent aspects of development in their own right.

In this concluding chapter, we discuss the role of foreign aid in development. The central question is whether aid works. To what extent and under which conditions does aid make a positive contribution to socio-economic development?

The decision to discuss foreign aid at the end of this book is a deliberate one. After all, socio-economic development is determined by a complex of factors, including proximate sources of growth, historical experiences, natural circumstances, demographic factors, power structures and processes of state formation, institutions, attitudes and aptitudes, international economic relations and economic policies. Foreign aid is just one of many factors. At best, its contribution can be only modest. The original theories of economic aid formulated in the 1950s and the 1960s by authors such as Chenery and Strout, Rostow and Rosenstein-Rodan, recognise this explicitly. They state that under certain conditions foreign aid may contribute to an acceleration of growth and development, but it cannot transform processes of stagnation into dynamic processes of development. In the debates between the supporters and opponents of foreign aid this tends to be forgotten.

Until the 1990s, the desirability of development aid was not questioned in the political debate. In the 1980s, all donors together granted approximately 60 billion dollars per year in official development assistance. Despite the substantial resources involved, the budgets for foreign aid were exempted from expenditure cuts in most countries until the late 1980s.

Like health, education is both an end and a means. It is one of the basic human rights and a developmental goal in its own right. But, education also contributes to the realisation of other important developmental goals (UNESCO, 2002). Functions and tasks generally ascribed to education include the following:

1. Promotion of economic growth and development. Investment in the physical capital stock is not sufficient for economic development. Investment in ‘human capital’ is also required.

2. Modernisation of attitudes and mentalities in society.

3. Contributing to important developmental goals such as increased life expectancy, improved health and reduced fertility. Education of mothers, in particular, makes important contributions to better health of children and reductions in fertility. These are among the important non-economic benefits of education. These relationships have been discussed in the chapters on population and health (Chapters 5 and 6).

4. Political socialisation, promotion of a sense of civic responsibility, contributing to national integration and national political consciousness in developing countries.

5. Reducing social and gender inequality and increasing social mobility.

6. Contributing to personal growth, development and emancipation.

Immediately after World War II, expectations concerning the role of education in development were high. Expansion and improvement of education were generally considered as essential to development. Governments in developing countries were prepared to invest heavily in education. Families saw education as the main way to improve their children's chances in life.

The following three chapters focus on the various relationships between population and socio-economic development. Chapters 6 and 7 deal with health and education. In this chapter, we discuss the relationships between population growth and economic development.

The chapter opens with a discussion of global demographic trends, which indicates that in the next 150 years world population will increase by a further 4 billion people, before stabilising around 2150. Subsequently, we discuss the economic consequences of population growth and demographic change. We contrast pessimistic Malthusian perspectives which argue that population growth is a threat to sustained economic development, with more optimistic assessments which indicate that technological change has the potential to outpace the growth of population. The second half of the chapter focuses on explanations of why families in developing countries have so many children. These explanations serve as guidelines for the formulation of population policies, which form the topic of the last section of this chapter.

Introduction

As an introduction to this chapter on population and development, we distinguish eight types of relationships between demographic and economic developments, which are summarised in Box 5.1. Apart from population growth, population size and population density are also important demographic variables. Several countries in Latin America and Africa have rapid population growth, but relatively low population density. Low population density discourages large-scale investment in infrastructure. Population size influences the absolute volume of required investment and the size of domestic markets.

As discussed in the first chapters of this book, there has been long-run divergence in the world economy. In the fifteenth century disparities in per capita incomes between countries and regions were small. Since then some economies have moved ahead and others have fallen far behind. After 1820, capital accumulation and technological change accelerated. The rate at which income levels diverged increased, resulting in the wide global disparities of the present international economic order. We have also noted that the ranking of countries was not immutable. Former British colonies such as the USA, Canada and New Zealand or Asian economies such as Japan, Singapore and Korea grew so rapidly that they moved far up the income ladder. Other countries such as Argentina, the Ottoman empire or the Russian Federation slipped downward. For a better understanding of development, we are interested in why some countries or societies forge ahead in given periods, while others stagnate or fall behind (Abramovitz, 1989b). We are especially interested in the conditions under which growth and catch-up can be realised in the developing countries of today. Sections 3.1 to 3.5 of this chapter offer a brief introduction to theories of growth and stagnation. Section 3.6 presents theoretically relevant empirical information on long-run economic trends in developing countries.

What are the basic sources of growth? How do economies grow and societies become more prosperous?

Let us start with the question of what are the basic sources of growth of per capita incomes. In simplified form, these are summarised in Box 3.1.

The aim of this book is to provide a general introduction to the dynamics of socio-economic development and to the study of the problems of developing countries. It is a reflection of multidisciplinary courses on ‘development’, which I have been teaching since 1987 at the University of Groningen and the Eindhoven University of Technology. The book was written for students of universities and other institutions of higher education, who encounter the problems of developing countries in the course of their own disciplinary studies and who are in need of a general introduction to this field. It is also intended for people pursuing a professional career in developing countries and readers with a general interest in development. The text can be read as an introduction by students with no prior knowledge of development. It also can be used at a more advanced level as a handbook, providing an overview of current theoretical and empirical debates and controversies in the field of development studies. The book provides non-economists with a non-technical introduction to economic perspectives on development, while introducing economists to a broader socio-economic view of development.

The central issue in development, as approached in this book, lies in low levels of per capita income and low standards of living among the mass of the population in the so-called developing countries. The key elements in the book are trends in per capita income and changes in standards of living and welfare, and the factors that affect economic development or economic stagnation in the long term.

Health and education are important aspects of development. They belong to the basic needs every development strategy tries to meet (Deolalikar, 1988). Improving the state of health and the level of education also contributes to the realisation of other developmental objectives such as economic development, labour productivity growth, responsiveness to innovation, and future orientedness. From the perspective of economic development investment in education and health care can be regarded as an investment in human capital. In turn, economic growth and development feeds back into improvements and health, education and other indicators of human development (Ranis, Stewart and Ramirez, 2000).

In this chapter the main focus is on the discussion of health-related issues. We document trends in child mortality, average life expectancy, and patterns of morbidity and health. The factors that determine developments in health are identified. In the light of these factors, we pay attention to health policies. In Chapter 7 the focus shifts to education. The following issues will be dealt with: investment in human capital, educational enrolment, literacy and educational policies. Both chapters discuss the interactions between the various aspects of development. For example, education can contribute substantially to improvements in health.

The state of health in developing countries

Quantitative indicators of the state of health

We can distinguish three main types of indicators of the state of health (Hardiman and Midgley, 1982):

1. 1. Health service indicators, such as the number of doctors, medical staff or hospital beds, or financial resources devoted to health and health care.

2. […]

In the previous chapter, we discussed a range of development theories. Technological change was identified as one of the important sources of growth and development. This chapter singles out technological change as one of the key issues in the study of development. Two main questions will be raised: (a) to what extent is technological change really one of the driving forces in growth and development? (b) What are the consequences of accelerating global technological change for developing countries? Does technological change constitute a threat to their chances for development? Does technological change offer new opportunities for development?

The role of technology

Technology refers to the state of knowledge about how to do things, in particular how to produce valued goods and services for the satisfaction of human needs (Evenson and Westphal, 1995). Without offering a formal definition, one may say that technology stands halfway between science (abstract knowledge about the fundamental laws and regularities of the physical environment) and techniques (specific applications of technology in products or processes, singular ways of doing particular things). Prior to the twentieth century many technological advances were not based on scientific knowledge, but on practical experience, on the job tinkering and experimentation. Today more and more technology is science based.

In Chapter 1, we argued that while development is a much broader concept than economic development, growth of income per capita was one of the core dimensions of development.

This introductory chapter focuses on the concept of development. The low standard of living of the mass of the population in developing countries is singled out as the key issue in development. The development of per capita income over time and the factors that influence economic development or stagnation are important topics in this book. However, the interplay between economic and non-economic factors is of great importance for our understanding of the dynamics of socio-economic development. Economic development cannot be explained by economic factors only, and the concept of development includes more than mere changes in economic indicators.

After a discussion of problems of involvement and detachment in the study of development issues in sections 1.1 and 1.2, we examine the concept of development in sections 1.3 to 1.5. Indicators of growth and development are presented in section 1.6. Section 1.7 highlights the differences between developing countries and the variety of development experiences. The final section addresses the question of what developing countries have in common in spite of all their differences.

Approaches to development

In discussions of development issues two general approaches can be distinguished (see Myint, 1980):

1. 1. The fight against poverty This approach focuses on the problems of widespread poverty, hunger and misery in developing countries and on the question of what can be done in order to realise improvements of the situation in the short term.

2. […]

Chapter 2 introduced the concept of an international economic order. International economic orders are characterised by typical patterns of flows of goods and services, financial capital, people and knowledge. Other characteristics include the intensity of relationships between economies and the institutional structure of these relationships. In this chapter, we discuss developments in the international order and their significance for developing countries since 1945. In addition to the economic aspects of the post-war international economic order, we deal extensively with political and institutional aspects such as the international balance of power, the role of international organisations such as the United Nations, the World Bank and the IMF, and important international conventions and treaties.

This chapter identifies four stages in the development of international economic relationships. These stages are characterised by typical patterns of regional and global growth and by dominant policy orientations. Each period ends with a major system shock, which affects not only patterns of economic development, but also theoretical and practical thinking about economic policies and development strategies. The periods are: the period of liberalisation of world trade (1944–73), the rise and eclipse of the policy goal of a New International Economic Order (1960–82), the period of debt crisis and structural adjustment (1982–97) and the period since 1997, which is characterised by a revival of the intellectual debates on globalisation and liberalisation. The three major system shocks are the oil crisis of 1973, the debt crisis of 1982 and the Asian crisis of 1997, each of which affected growth trajectories and resulted in a fundamental rethinking of development strategies.