Application of Development Theories - Article Example

Running Header: Application of development theories Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Introduction Development theories, policies, and approaches are aimed at developing the economy of a country as well as to eradicate the poverty levels. According to Goulet (2007) a development approach must reduce unemployment, inequality, illiteracy, malnutrition and the problem of slums. The approach must lead to aggregate economic growth and at the same time it must create jobs, ensure equality in wealth distribution and exterminate poverty. Therefore, for development to be perceived as effective it should not only focus on the economic development but also on the financial and material status of the people. Japan experienced rapid economic growth after the World War II and this has made the country to form the third largest economy in the world. Moreover, Japan is second largest country with the most developed economy and this is closely associated with the blueprints it laid down during the post war period. Choucri, North and Yamakage (1992) emphasize that the Japanese government was able to transform the economy of the country from being a ‘borrower’ to becoming a global investor. This paper will explore the application of development approaches, theories and policies in the post world war II from 1960 to 1990 in Japan. Literature Review Goulet (2007) notes that the post-world war II has been dominated by four main theories of economic development that is the linear-stages-of-growth model, patterns of structural change the neo-classical free market counterrevolution and the international-dependence revolution. The linear stages required Japan to apply a mixture of investments, foreign aid and savings in order to develop economically. The pattern of structural change applies the current modern economic theory in order to determine the path that Japan had to pass so as to achieve its long term economic growth. On the other hand, the development theory emphasized the need for Japan to come up with new policies in order to diversify employment, eliminate poverty and ensure equality in income. The neo-classical theory aimed at emphasizing the advantages associated with open economy, free markets, and privatization of underperforming public corporations. The post-world war Japan could achieve economic development by maintaining shared beneficial relationships with other developed countries. The relationship would enable the country to obtain an opportunity to learn and gain critical knowledge required in order to develop economically. In addition, the relationship would facilitate the country to easily obtain grants from the developed economies. The modernization theory was aimed at developing Japans economy by upgrading its economic systems to match those of the developed countries. This theory was utilized in the development of the neo-classical theory which required Japan to simplify its economic conditions in order to develop economically. On the other hand, the dependency theory required Japan to maintain direct relationship with developed countries in order to gain economically hence this would enable it achieve economic growth. Importance, Success and value of the theories According to Goulet (2007) the stages of growth theory of development is applicable as it enabled Japan to recognize the steps involved in developing its economy. Japan was able to pass the take-off stage and this enabled it to achieve successful economic development. To enhance economic growth, the Japanese government utilized the stages of growth model in order to measure and determine the growth stage of its economy. The information obtained enabled the country to come up with strategies of enhancing its investment programs. Furthermore, the Japanese government was able to determine the factors to input in the country’s economy based on the stage at which the economy had attained. On the other hand, Japan utilized the structural changes theory to come up with mechanisms of transforming its economy from classical subsistence to modern, urbanized and industrialized economy (Goulet, 2007). This model proved to be a success especially after the World War II when there was a surplus of labour. Japan transformed its economy and this created additional employment opportunities hence reducing the surplus labour. According to Wood and Roberts (2011) Japan utilized the dependency theory in order to recover its economy after World War II. The country relied on the financial support that it received from the U.S.A so as to initially begin its economic recovering as well as to improve its economy. In addition, Japan relied on the U.S.A to provide it with market for its products. The neoclassical counter theory is important as it gives special treatment to the supply side of economic policies and theories. It was applied in Japan when the country was aiming at developing its economy. The value of this theory is that it ensured equitable resource allocation as a result of correct pricing policies and reduced government involvement in economic matters (Goulet, 2007). According to Suzuki (1991) the neo-classical economic theory was an important source of inspiration for post war economic development in Japan. According to Andersen and Taylor (2007) Japan success in achieving economic growth can be attributed to its national work ethics towards becoming modernized. This means that the country utilized the modernization theory in order to develop its economy. After the World War II, Japan relinquished its traditional values and cultural practices in order to embark on developing and adopting new technologies. The new technologies enabled the country to rapidly increase its outputs and this meant that it was able to export more hence this improved its economy. Furthermore, the new technologies enabled the country to efficiently produce differentiated and complicated products. The products were able to compete more effectively in the international markets and this was a major factor that contributed towards its rapid economic growth. The value of this theory is that it provides certainty to the developing country provided it follows the steps undertaken by the developed country. Issues Associated with the Application of the Theories According to Goulet (2007) the problem with the stages of growth theory is the low level at which capital was created in Japan while developing its economy. Moreover, the theory did not indicate the necessary conditions that could accelerate economic growth in Japan. On the other hand, the structural change theory assumes that the labour transfer rate and the rate of employment creation are equal. The theory assumes that high capital accumulation rate leads to higher growth rate hence higher levels of job creation. This is not always the case especially where capital is re-invested to purchase equipment rather than be re-invested to promote employment. Moreover the rapid rise in wages which was a common scenario in Japan during the post world war II hindered its application (Goulet, 2007). On the other hand, the dependence theory did not provide an explanation to Japan as a country on how developed countries maintain and set off their economic development. The neo-classical theory was challenged because of the fact that it did not consider the different market conditions that existed in Japan as compared to the other developed economies. In addition, the theory failed to recognize the rigidity that existed in Japan which in turn acted as a barrier towards its successful application. The modernization theory on the other hand does not consider the economic structure of the country that aims to adopt the economic development approaches of the developed country. Industrial paths to development Van, Linnemann and Verbruggen (1987) note that transforming an economy towards becoming industrialized improves the per capita income and this leads to an overall economic growth. Modernization and economic growth in Japan can be closely related to industrialization. This means that with industrialization, Japan attained the ability to manufacture for export as well as to create employment and these were important landmarks towards making it achieve economic development. In addition, industrialization enabled the country to conserve its capital by reducing imports hence this was an important factor of enhancing Japanese economic growth. The Washington Consensus The Washington consensus is aimed at promoting the essence of free market or neo-liberalism. Free market calls for governments not to interfere with the economy in order to ensure efficient and equitable distribution of resources. Through neo-liberalism firms were able to freely enter and exit the Japanese market. The free market requires economic activities to be undertaken by the private sector in order to ensure equitable competition and receptiveness to the circumstances in the market. The Washington consensus provides prescriptions necessary to ensure equitable economic development. The consensus aimed at avoiding the imperfections created as a result of government’s involvement in economic activities. Impact of Economic Growth theories Between 1940 and 1960 the theories of divergence and convergence tried to explain the reason for disparities between developed economies like Japan and underdeveloped countries (Nijkamp and Capello, 2008). Furthermore, these theories tried to explain why such disparities existed. The convergence theory had an impact in the development of the neo-classical theories while the divergence theory led to the origin of the Keynesian theories. Conclusion In conclusion, the step of growth theory, the structural changes theory, the neo-classical theory and the dependence theory were developed after World War II. These theories were applied by the Japanese government in order to make the country to achieve economic growth. The neo-classical theory was utilized by the country so as to achieve rapid technological developments. On the other hand, the Washington consensus is aimed at creating a perfect market free from government. 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