Development Theory, Policy and Planning

Development Studies

Diploma Thesis, 2011

33 Pages, Grade: A



Chapter One

Chapter Two

Chapter Three

Chapter Four

Chapter Five

Chapter Six

Chapter Seven



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Chapter 1

1.1 introduction.

It is the wish of every community and every nation to move from one stage of development to another. Development is holistic approach that involves structural institutional changes and social economic transformation, in addition to increased outputs and incomes. Development also encompasses change in peoples’ customs and beliefs that are a hindrance to development programs. Economic growth involves urbanization, industrialization and increased and appropriate use of technology in all sectors of the economy. The government major role is to provide good welfare to its citizens. It is also obliged to facilitate economic players to actively participate in economic activity through provision of infrastructure. All this is done through the process of development theory, policy and planning.

Developing countries have an outstanding characteristic of high poverty levels with low national income and per capita incomes. Proper policy planning is meant to increase the national incomes of these countries. There is low savings as a result of low incomes and this has a negative effect on capital accumulation. Thus the end result has been a viscous cycle of poverty where there is low savings, low investments, low capital accumulation, and low productivity, low quality of life where there is generally misery, lack of freedom and dignity. For developing countries to come out of this precarious state, proper policy and planning must be adopted. This paper will cover the aspects of development theory, policy and planning because for sustainable development these aspects are a paramount.

1.2. Purpose of the study.

The course will enable students to;

- Identify the objectives of development planning.
- Identify the impact of policy in achieving sustainable economic growth and development.

Chapter 2

2.1 What is the theory about?

A theory is a simplified representation of reality. This can be; social, economic and political realities. Institutionally these realities have; community elements; which include the social political and economic changes at this level. Markets/business level which usually show the economic changes. The political/management of society which usually shows the political changes in terms of good and bad governance.

Theory can appear in different levels. These include.

- Conceptual theory; this shows the dimensions of the social, economic reality.
- Explanatory theories. This explains the causes and effects. For example when reducing poverty you must have an explanation to why it is rampant. For instance the trickle down theory of development
- Predictive theory. This explains what will happen in the future; given the current situation.
- The policy theory. This level refers to the policy instruments used given the current development theory.
Theory falls in any of the following categories;
- Social economic theory.
This can be a theory of social economic change. For instance the theory of poverty reduction or theory of political change. These are theories that show the relationship between social economic change and political change. This theory tries to explain the interaction between the economy and politics
- Theory of public policy making.

This is an explanation of how a policy is made or determined. It questions the key determinants of resource allocation in agriculture as well as infrastructure development among other sectors of the economy. This is more done by government donors or by the community. It may also include influence of politicians in cabinet and politicians’ parliament, the influence of the president as well as influence of civil society organizations (CSO). This theory is how the policy agenda is determined. It implies a question “Can poverty be reduced without the poor influencing the policy agenda to eradicate poverty?”

What is the relevance of approaches to policy making

There are some theories that have been driving the policy agenda in Uganda and East African countries which include among others;

- The structural adjustment theory which has been driving the economic policy management
- The basic needs theory which has been driving both the economic and social policy management.
- The human rights theory which also drives both economic and social development policy management.


Many scholars have put forward their ideas behind the forces for and against development. These schools of thought have some differences and similarities. They have however become the basis of planning for economies to achieve development. Four schools of thought dominate the literature on economic development after the Second World War when economies have been undergoing a restructuring program to overcome most of the economic setbacks. These theories include;

- The linear stages of growth model.
- Theories and patterns of structural change.
- The international dependence revolution.
- The neo-classical, free market counterrevolution.

2.2.1 The linear stages model

In this theory, a right combination of savings, investment and foreign aid were the only necessary parameters to bring about economic growth. According to this theory, development rightly meant rapid aggregate economic growth. These were theorists of the 1950’s and early 1960’s.

2.2.2 Theories and patters of structural change.

This was an improvement over the linear stages model. It emphasizes structural sustenance of economic growth. It entails the structural process an economy goes through to attain economic growth. Underdeveloped economies focus on transforming their domestic structures from heavy reliance on traditional systems of subsistence agriculture to modern industrialized and service sectors. Tools of neoclassical price and allocation theory and modern econometrics are necessary for economies transformation.

2.2.3 The international dependence revolution.

According to this theory economic growth should be attained through a political orientation. It looked at underdevelopment in terms of institutional and structural economic rigidities, proliferation of dual economies and dual societies, and international and domestic power relations across nations. Dependence theorists put more emphasis on external and internal institutional and political effects on economic growth.

It is noted that dependent theorists offer an appealing explanation of why poor countries have remained underdeveloped but do not give formal or informal techniques of how these countries can initiate and sustain development. Secondary it looks as if countries should be in autarky, restriction of interdependence of economies and only trading with the counterpart developing economies. This has been disapproved by what has existed in China and to some extent Indian economies. These economies had embarked on autarky policies but experienced stagnant growth. They eventually decided to open their economies. China opened its economy in 1978 while India opened hers after 1990. Some economies such as Taiwan and South Korea that have emphasized to exporting to developing countries have grown very strong.

2.2.4 The neo-classical, free market counterrevolution.

These neo-classic theorists put their emphasis on the role played by free markets, open economies and privatization of the inefficient enterprises. They do not attribute underdevelopment to external and internal forces as laid out by theorists. They attribute underdevelopment to too much government intervention in the economy.

According to the neoclassic counterrevolution, underdevelopment results due to poor resource allocation, incorrect pricing and too much government interference. The neoliberals argue that permitting competitive markets to flourish, privatizing state owned enterprises, promoting free trade and export expansion allowing in investors from developed countries and reducing government regulations and price distortions in factor, product and financial markets. A new wave of economic mechanisms emerged to the economies of United Kingdom when Margaret Thatcher was the Prime Minister (1979-90) and the United States economy when the President was Ronald Reagan (1981-9). They agitated for a free market as a way forward for economies. Also the Mexican president, Lopez Portulo (1976-82) hosted dignitories from the North and South for a New International Economic Order (NIEO). This was meant to bring about a sustainable development where there was going to be a vision of revised global economy and the needs and aspirations of developing economies were to be given new and greater consideration.

A debt crisis resulted as a result of recession in the industrialized nations. This began in 1982 and it led into poor terms of trade especially of the products from developing countries. African countries and Latin America had accumulated huge persistent debts externally which made these economies suffer enormous crises.

It is important to note that neoclassic approach developed by Solow, capital accumulation sustained adequate saving, increase in the working population and technical progress increases the productivity of factors and consequently a steady growth. It is however noted that the growth path is exogenously determined. New growth theory seeks to provide an endogenous explanation of growth of the economy. Technical progress is able to generate the growth process.

Governments use these theory basic concepts to do their roles towards the welfare of the nationals. The role of government in economic development includes the following;

Provision of social economic infrastructure such as schools, hospitals, roads, energy source and many other facilities so as to enhance economic productivity. This will ensure an educated, skilled and health population that is able to create wealth that is responsible for economic growth.

Government also has a noble responsibility of nursing and stabilization of the economy. This is useful to regulate the level and stability of the economy. Tools such as monetary and fiscal policies help government to influence level of prices, output, employment, investment and balance of payments.

Governments have a role of preserving and developing their natural resources in a sustainable way. This involves discovery of new resources how they are harnessed and taped with a sole responsibility of bringing about economic growth and development. This helps to improve the country’s trade, earn foreign exchange that will ultimately elevate the way of life of the citizens.

Ensuring an equitable distribution of income and is one of the great roles that governments are supposed to play. This can be done through the taxation policy and maximizing social welfare so that even the grass root people enjoy a descent way of living. This requires a good governance and promotion of fundamental human rights where every citizen enjoys his rights that include promotion of social justice. Good policies should be able to change people’s attitude that endangers development and so that they are able to develop globalization ideas of competition and elimination of racial discrimination. A culture of saving and investment need to be inculcated to the masses.

In his theory, Rostow explained economic growth in a historical perspective in different stages where capital accumulation is a driving force. These stages include; the traditional society stage, the pre- condition stage, the take off stage, the drive to maturity stage and the high mass consumption stage. These stages are in the range of subsistence to modern industrial economies.

Most economies in the developing world have consistently stayed in the precondition stage where there is low productivity that does not fetch enough foreign exchange for the country’s import needs. There is a lot of import expenditure in relation to the export receipts. On the other hand some economies are growing so fast than Rostow anticipated. Some of these include the G8 economies.

There is need for the growing economies to continue adopting new ideas so that they are able to participate in global affairs. It involves adoption of new ideas, skills and knowledge which are a pivot to economic development. There increased transfer of technology and increased use of other co operant factors of production that result into improved efficiency in domestic industries. Technological innovativeness is encouraged and this multiplies the growth of economic activity.


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Development Theory, Policy and Planning
Development Studies
( Atlantic International University )  (BUSINESS AND ECONOMICS)
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development, theory, policy, planning, studies
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Akampurira Abraham (Author), 2011, Development Theory, Policy and Planning, Munich, GRIN Verlag,


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