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This article provides information about the capitalist, socialist and developing world model of development:
In the post-World War II period the process of decolonialisation, the emergence and need for economic reconstruction of nation-states, and the shadow of the Cold War widely shaped the development discourse till the late 1970s.
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The industrial and political rise of the West and Southern Europe and North America on the one side, and Russia and communist states on the other, alongside the stagnation of a vast number of nations with low productivity, industrial backwardness and poverty gave rise to the First, Second and developing world models of development respectively, i.e., Capitalist, Socialist and developing world.
The capitalist model of development is characterised by provision of private ownership of property and means of production, minimum state control on economic enterprises, and a free economy regulated by competition. The developmental model also emphasises sustained growth and modernisation with massive state investment at the takeoff stage.
From the view of this perspective, “economic development would revolve around Industrialisation and the transfer of an underemployed rural labour force to the more productive occupations in the urban industrial sector. The state would have to mobilise domestic and foreign saving to create an investment pool from which it could finance a programme of directed industrial development.”
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The First World model of development, however, encountered several challenges with the expansion of the socialist model of development represented by the Second World. The socialist model was contradictory to the capitalist model of development as it propagated the abolition of ownership of private property and means of production, emphasised state ownership of means of production, state-owned public enterprise, and a state regulated economy and centralised planning by the state for economic growth. While both the capitalist and the socialist models laid primary emphasis on economic growth, the socialist model also emphasised on the equal distribution of the fruits of growth among all sections of the population.
The developing world is represented by the ex-colonial, newly independent and non-aligned countries of Asia, Africa and Latin America who are industrially backward. Indeed the developing world development perspectives are caught between the conflicting ideologies of the First and Second world. These countries represented a diverse variety in terms of their socio-cultural and political setting and historical experiences and levels of technological and economic development.
However, notwithstanding these variations these countries are economically and technologically underdeveloped, and are undergoing the process of nation-building and fast social transformation in the post-colonial era. As against these backdrops, these countries have been experimenting with diverse models of development. For example, India has followed the path of “mixed economy” by adopting a path of development in between the capitalist and socialist models.
Significantly, in the 1950s, the growth theory was visualised from social, cultural, and political terms which coincided with the modernisation perspective on development. The modernisation theory was associated with both the capitalist and socialist social and cultural orders. A vast number of developing world societies also followed the path of modernisation with varied degrees of success.
Indeed the historical experience and specific social-cultural contexts have given rise not only to diverse patterns of modernity across the globe, also they contributed towards the emergence of imbalanced economic and political relationships among the nations.
The dependency theorists argued that unequal trading relationships and capitalist development have made the countries of the southern hemisphere dependent on the northern hemisphere, especially Western Europe and North America, for capital, technology and market. To Gunder Frank, the exposures of the developing countries to the economic influence of the capitalist countries have contributed to their dependency latter.
It is important that since the 1980s there have been serious doubts on the major theories of development. “The leftist strategies of development were at least partially, if not wholly, discredited by the collapse of communism, whilst theories that advocated a development path based on the western capitalist model were also seen as having delivered few of the benefits that they have seemed to promise”. It has also been observed that developing countries have been struggling under the weight of accumulated debt to the developed countries.
The “structural adjustment programmes” have been forced on them by the West, especially the World Bank and the International Monetary Fund (IMF) with a view to creating conditions of economic growth by removing obstacles to the efficient operation of the free market. Note that the structural adjustment programme has not stimulated economic growth all over World.