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DON MARIANO MARCOS MEMORIAL STATE UNIVERSITY

College of Graduate Studies

Reporter: Aiko R. Apostol

THEORIES OF UNDERDEVELOPMENT
World Development Report categorizes economies on the basis of income in

three categories. high income, middle income and low-income economies. Usually, high

income countries are known as developed / advanced economies while low income

countries are known as underdeveloped economies. Developed or advanced

economies are also characterized by high standard of living, universal and quality

education, better health care facilities and high life expectancy.

Underdeveloped economies showing high potential of growth in terms of their

natural, physical and human resources are often referred to as developing economies.

Economists also use the terms, first world, second world and third world for the

developed, socialist industrialist countries and underdeveloped economies respectively.

Economies cannot be classified as developed and underdeveloped economies

based on their natural resources, population and sectoral dependency. However, there

is a set of common characteristics of underdeveloped economies such as low per capita

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income, low levels of living, high rate of population growth, illiteracy, technical

backwardness, capital deficiency, dependence on backward agriculture, high level of

unemployment, unfavourable institutions and so on. It is on the basis of these

characteristics that we draw a line of distinction between developed and

underdeveloped economies.

Meaning and Definition of Underdevelopment

Underdevelopment is low level of development characterized by low real per

capita income, wide-spread poverty, lower level of literacy, low life expectancy and

underutilisation of resources etc. The state in underdeveloped economy fails to provide

acceptable levels of living to a large fraction of its population, thus resulting into misery

and material deprivations. We need to note here that underdevelopment is a relative

concept but it sustains absolute poverty.

Baran’s View on Underdevelopment

By the decade of seventies of the 20th century, the theory of the stages of

economic growth became redundant and the structural internationalist theory became

prominent. The structuralist approach looks at development in terms of the power

relationship between different nations and between different people within the nation.

There are two views regarding how dependence of under¬privileged countries

upon the fortunate ones is treated as destined in the modern approach of economic

development:

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(a) One viewpoint is that not only the rich countries desire to have their hegemony over

poor countries but also that the elite of a country, such as landlords, businessmen,

bureaucrats, trade union leaders and entrepreneurs, support the sly intention of rich

countries because they are rewarded for doing so. Todaro quotes a statement from

Theotonio Dos Santos of Latin America, which is one of the most forceful statements

regarding dependency nature of development:

(b) The other view that Todaro calls the “false paradigm” model is that the

underdevelopment of the countries of Asia, Africa and Latin America is result of the

inappropriate and faulty advice provided to them by the assisting agencies like

UNESCO, ILO, UNDP, IMF etc.

Both views of structural internationalist model emphasize that the development

would be more meaningful when the attention is drawn not only to the growth of GNP

but rather to the planning of poverty reduction and employment to all.

The theories of underdevelopment are essentially dependency theories

According to dependency theory, underdevelopment is mainly caused by the

peripheral position of affected countries in the world economy. Typically,

underdeveloped countries offer cheap labour and raw materials on the world market.

These resources are sold to advanced economies, which have the means to transform

them into finished goods. Underdeveloped countries end up purchasing the finished

products at high prices, depleting the capital they might otherwise devote to upgrading

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their own productive capacity. The result is a vicious cycle that perpetuates the division

of the world economy between a rich core and a poor periphery. While moderate

dependency theorists, such as the Brazilian sociologist Fernando Henrique Cardoso

(who served as the president of Brazil in 1995–2003), considered some level of

development to be possible within this system, more-radical scholars, such as the

German American economic historian Andre Gunder Frank, argued that the only way

out of dependency was the creation of a noncapitalist (socialist) national economy.

Characteristics of Underdeveloped Economies

Some of the common characteristics displayed by most of the underdeveloped

countries in the world are as follows:

Low Per Capita Income

Almost all underdeveloped countries of the world show low per capita income in

comparison to developed countries of the world.

Slow Growth Rate of Per Capita Income

Low per capita income and slow growth rate of per capita income are characteristics of

these countries.

Economic Inequalities

High inequality of income and wealth is another common feature of underdeveloped

countries. In these countries, large percentage of national income is shared by a small

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segment of the society while a large segment of the society gets barely enough to

survive. Economic inequality exists even in developed countries but it is not as much as

found in underdeveloped countries.

Low Level of Living

Level of living in the underdeveloped countries is low because of low per capita income.

Low level of living of the people of underdeveloped countries is also reflected in Human

Development Index prepared by the United Nation Development Programme (UNDP).

HDI of developed countries is very high whereas for underdeveloped countries it is very

low.

Backward Techniques of Production

Underdeveloped economies use outdated technology for production. Lack of capital

leads to less spending on research and development.

High Growth Rate of Population and Dependency Burden

These countries are characterised by high growth rate of population and high

dependency burden.

Low Productivity of Labour

Underdeveloped economies are characterised by low labour productivity due to low

level of skill set.

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Large Scale Unemployment

Large scale unemployment is another characteristic feature of underdeveloped

countries.

Infrastructural Backwardness

Economic infrastructure and social infrastructure are almost at their bottom level in

underdeveloped countries.

The Richest Countries in the World

GDP per capita is often considered an indicator of the standard of living of a given

country, as it reflects the average wealth of each person residing in a country. It is

therefore the standard method used to compare how poor or wealthy countries are in

relation to each other.

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*NORWAY is fueled by oil and gas exports which not only makes it extremely efficient

and stable, but also helps it to be one of the richest countries for many many more

years to come.

*Conflicts over basic resources, access and control over rich minerals and oil, and

political agendas are some of the many complex causes behind the Democratic

Republic of Congo's inability to rise among the ranks and take the title of the poorest

country in the world.

THEORY OF NATIONAL CHARACTER

National character theory involves ethnicity and races according to specific,

indomitable cultural characteristics. This is demonstrated in the case of social

Darwinism, which holds that a successful people - as demonstrated in a victory in war or

economic development - is presumed to have advanced in the evolutionary tree ahead

of a vanquished nation or those people in developing or poor countries.

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History

National character arose from a variety of approaches with Culture and

Personality, including the configurationalist approach of Edward Sapir and Ruth

Benedict, the basic personality structure developed by Ralph Linton and Abram

Kardiner, and the modal personality approach of Cora DuBois. These approaches

disagreed with each other on the exact relationship between personality and culture.

The configurationalist and basic approaches both treated personalities within a culture

as relatively homogeneous, while Cora DuBois argued that there are no common

personality traits found in every single member of a society.

THEORY OF BACKWARD EFFECT/CUMULATIVE THEORY

Cumulative theory is also known as Cumulative Causation Theory by Gunnar

Myrdal

Myrdal maintains that economic development results in a circular causation

process leading to rapid development of developed countries while the weaker

countries tend to remain behind and poor.

Cumulative Causation Theory of Economic Development

The cumulative causation action has been built upon spread effect and

backwash effects.

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The theory emphasizes that “poverty is further perpetuated by poverty” and

“affluence is further promoted by affluence”

In backwaed regions problem creates moreproblems. in developed regions

autosolutions solve all problems.

Myrdal contention is that the free play of market forces and operation of profit

motive in the capitalist system normally tends to increase inequalities between

regions rather than decrease.

When backwash effect dominates divergence will develop; periphery will remain

weak, only centre will develop and dualism in growth is promoted.

When spread effect dominates convergence will develop; periphery will develop,

there will be economic integration between centre and periphery

Cumulative Causation Theory Proves That

• market mechanism will not bring equality between regions but will increase

inequalities.

• nothing short of govt. intervention will check backwash effect from getting cumulative.

The Theory is Centre Periphery Model Because

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• the favourable effects flow from centre to periphery. periphery supplies raw material

and human power to centre.

• centre supplies finished output for consumption and input

REFERENCES
Bill Lucarelli. 2018. The three theories of underdevelopment. Retrieved from
https://www.ppesydney.net/three-theories-of-
underdevelopment/#:~:text=Underdevelopment%20is%20viewed%20as
%20an,therefore%20systemic%20and%20path%2Ddependent on September 12, 2020

National character studies. Retrieved from

Sourama Saha. Cumulative cusation theory. Retrieved from http://www.bgc.org.in/pdf/OPEN-

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