Economic Development Models Essay

Different economic development theoretical accounts have been the merchandise of speculating from assorted economic and political contexts. With respects to underdevelopment. the dependence theoretical account was chosen for treatment in this paper because the theoretical account itself was developed from the experience of developing states. The experiences of the Philippines and Venezuela were selected for comparing and contrast because of their relationship to one developed state – the United States where the former is a loyal ally and the latter is soon an ally turned review.

The Dependency Model The Dependency Model as a theory of economic development is based on the premiss that in the universe today. there exists an unequal relationship between orbiter and metropolitan states. This relationship is based on the development of an international division of labour under the universe capitalist system which dictates that the function of developing orbiter states is to supply inexpensive natural stuffs and labour necessary for industries in the metropolitan or capitalist states ( Todaro 2006: 25 ) .

This is based on the premise that economic and political laterality is held by capitalist states and leads to the phenomena of neo-colonization that is the being of dummy authoritiess subservient to the economic involvements of developed states. Dummy authoritiess are perpetuated by an elect category whose economic involvements lie in the natural stuff export-finished merchandises import orientation of domestic economic system and whose political involvements lie in protecting these category involvements ( Perkins. Radelet and Lindauer 2006:24 ) .

Some Marxist-leaning dependence theoreticians attribute these relationships to the happening of the crisis of overrun evident in imperialism where the economic endurance of metropolitan provinces mostly depends on the extra function of orbiters as markets for finished merchandises ( Perkins. Radelet and Lindauer 2006:24 ) . The dependence theory was developed to mirror the underdevelopment and widespread poorness in Latin America which was a immensely contrasting experience to the trickle-down consequence of economic wealth from capitalist states as proposed in neoclassical theoretical accounts of economic growing.

The dependence theory farther clears alternate roads in achieving development. One is through local development of industries for domestic demands in order that resources would function the involvement of the general population which at the same clip reduces the demand to import ( Todaro 2006: 401 ) . This takes into history that echt economic development is non merely based on existent domestic production but more significantly in how resources and the additions in production really profit the people.

However. this depends in portion on the political will of third-world authoritiess to consequence necessary political and economic alterations non for the elite but for the population life in poorness ( Ferraro 2006 ) . In general. the dependence theoretical account predicts a deterioration and continued poorness in satellite provinces every bit long as the dependence relationship exists.

Although there have been no existent 3rd universe experience turn outing the viability of certain methods undertaken to consequence domestic economic development. the historical and prevalent fortunes of developing states show that the lone manner out of dependence is through a alteration in the structural context in which it is rooted. Dependence in the Philippine Context The Philippines. located in Southeast Asia. has a population that is expected to hit 90.

4 million this twelvemonth and is presently sing political convulsion as evidenced in coup-de-etat efforts. allegations of large-scale corruptness in authorities and extrajudicial violent deaths allegedy perpetuated by military forces. The Philippines traces its history to Spanish colonisation which deeply changed the historical way of the feudal provinces. semi-slave and semi-communal societies that prevailed during that clip. The chiefly trading and subsistence based economic system that co-existed in the archipelago were transformed into feudal lands ruled by the Catholic Church and the Spanish bureaucratism ( Agoncillo 1980:11-16 ) .

Economic resources were used to finance Spanish wars. the galleon trade and the inordinate life style of the Spanish while the native elite were co-opted into the bureaucratism to consolidate political control over the public ( Agoncillo 1980: 18 ) . The licking of Spain led to the handover of the Philippines to U. S. auspices through the Treaty of Paris in 1898. The U. S. . so a capitalist province. put up its ain bureaucratism under the construct of benevolence assimilation and transformed the feudal leftovers of Spanish regulation into raw-material extraction for export and promoted the importing of finished merchandises ( Eviota 1992:8-9 ) .

Large-scale mines and logging operations were opened every bit good as semi-processing in the fabric and electronics industries by transnational companies. A mix of export based agricultural production and semi-processing industry under colonial political conditions was created. The locals were educated and evangelized along Protestant faiths which promoted an individualistic and extremely consumerist civilization. the beginning of the Filipino’s leaning at emulating the American life style.

The members of the in-between category were given Fullbright scholarships which provided the necessary preparation for their engagement in the assorted degrees of colonial economic system. political relations and civilization. The societal turbulences after the 2nd world-war fueled motions for independency in U. S. settlements. This was the context in which Philippine independency was granted in 1946. However. economic constructions basically remained integral with the exclusion that the elect land-owners and large business communities now made up the majority of the political bureaucratism ( Eviota 1992: 12 ) .

Economic and political force per unit area from the United States ensured the subservience of past and present Philippine authoritiess and cooperation is to a certain extent a primary determiner for a president to remain in power ( Agoncillo 1980: 65-68 ) . Although Japan and the members of the EU besides have bets in Philippine import and export. it is mostly dominated by U. S. economic involvements. At present. the dogmas of globalisation are steadfastly enshrined in economic policies of recent and current authoritiess. The large-scale denationalization of public public-service corporations involved in energy production and distribution. instruction and others are already underway.

The deregulating of the monetary values of basic trade goods such as oil and gas has been instituted since 1995. The liberalisation of trade and agribusiness has opened up these important facets of the domestic economic system to unjust competition from developing states and the first universe ( Ibon 2008 ) . Looking at present economic indexs. the Filipino gross national merchandise for the past twelvemonth stands at P7. 274. 660 million. GDP is at P6. 651. 320 million and balance of trade for 2007 is at $ -114 million ( NSCB 2008 ) . Of the GDP. 14 % is attributed to the agribusiness sector. 31 % to the industry sector and about 55 % to the service sector.

Labor force histories for 35 % in agribusiness. 49. 3 % in the service sector and 15. 1 in the industry sector ( NSCB 2008 ) . The latter involves workers in excavation and quarrying. building. electricity/gas/water and fabrication. The service sector besides includes the turning figure of Filipinos employed in call centres shooting all over the state. In add-on. abroad workers contribute about 10 % to the entire GDP and economic figures do non accurately reflect the buffering consequence of dollar remittals from these workers who leave the state because of the absence of meaningful employment in the state ( Jimenez-David 2007 ) .

Top 10 Filipino exports include gold. crude oil merchandises. coconut oil. woodcrafts and furniture. ignition wiring sets. other merchandises manufactured from stuffs imported on consignment footing. cathodes and subdivision of cathodes of refined Cu. articles of dress and vesture accoutrements. electronic merchandises. metal constituents ( NSCB 2008 ) . Manufactured goods are chiefly from export treating zones in assorted parts of the state. This reflects the semi-processed and natural stuff nature of Philippine production.

Its top 10 imports on the other manus include cereal and cereal readyings. Fe and steel. organic and inorganic chemicals. mineral fuels/lubricants and related stuffs. plastics in primary and non-primary signifiers. electronic merchandises. fabric yarn/fabrics/made-up articles and related merchandises. telecommunication equipment and electrical machinery and electrical machinery/transport equipment ( NSCB 2008 ) . The imports reflect the absence of basic fabrication industries in the state.

Although. economic growing has been posted for the fourth one-fourth of 2007 other indexs should be taken into history to find the province of economic development particularly with respects to the hapless. Simple literacy ( 2000 ) is 92. 3 % and functional literacy ( 2003 ) is 84 % ( NSCB 2008 ) . The top 10 causes of deceases include respiratory infections. TB. diarrhoeal diseases. chronic clogging pneumonic disease. perinatal conditions and bosom diseases. complaints that are easy curable and preventable in the first universe ( NSCB 2008 ) .

In footings of income. the one-year income for a household of 6 in 2006 was P173. 000. 00. but unemployment and remains high with 6. 3 % and 18. 1 % severally in 2007 ( NSCB 2008 ) . This translates to around 21 million people. In add-on. rising prices has most likely decreased buying power vis a vis the lifting costs of crude oil merchandises in the universe market that affects the monetary values of basic trade goods. If the day-to-day cost of life is P680. 00. the one-year income per household would merely give P254. 00 per twenty-four hours. Finally. the Philippines has a current $ 54.

4 billion foreign debt and continues to borrow for payment of debt involvements and embroider its one-year budget shortages ( Dumlao 2007 ) . Loans normally come with corresponding Structural Adjustment Programs while loans for public sector undertakings are normally funded through a build-operate and reassign strategy in favour of companies from the support state ( Ibon 2008 ) . In the kingdom of political relations. the Philippines has the longest running communist insurgence in the universe connoting that there is a general discontent among a part of its population ( Ibon 2008 ) .

The Filipino authorities has responded by increased military disbursement and military equipment acquisition. It has besides supported the war on Iraq by really directing members of her military for combat and allowed the entry of U. S. sing forces despite local calls sovereignty. Although “democratic” is by and large used to depict local political relations. elections are characterized by backing political relations. force. monolithic ballot purchasing and use so that merely the elite have the capacity to run for office ( Eviota 1992:12 ) .

On a casual position. current information seems to reenforce the historical developments outlined above and presents how the Philippines has come to be portion of a go oning dependence relationship that is far from altering. Dependence in the Context of the Bolivarian Republic of Venezuela Venezuela. with a population of 26. 7 million in 2005. portions the same historical experience as the Philippines in that both have been subjected to successful Spanish colonisation attempts.

Exports were chiefly cacao. cotton. beef and java until the early 1900’s ( Salazar-Carillo and Cruz 1994:33 ) . After Spain lost in the series of local rebellions against her. the political landscape was dominated by consecutive civil wars that served to throw out an existing authorities and put in another. In 1908 emerged a dictator. Juan Vicente Gomez who was elected by Congress under questionable fortunes and ruled unchallenged until 1935 with solid control over the military and presumptively foreign support ( Lieuwen 1969:50 ) .

The find of oil around that clip drastically changed Venezuela’s economic system. political relations and civilization. Necessary engineering to develop oil as an industry was undertaken mostly with the engagement of the foreign oil companies. notably Shell from Britain and subsequently the Creole Petroleum Company from the United States ( Salazar-Carillo and Cruz 1994:42 ) . Both states had friendly relationships with the Gomez absolutism because of oil involvements. Two decennaries subsequently. Venezuela has established itself as one of the of import beginnings of oil in the universe.

Royalty sharing between authorities and foreign oil companies was through a 50-50 strategy and as foreign gross increased. it enabled the state to pay its foreign debt ( Lieuwen 1969:46 ) . However. much of the wealth created was accumulated by the absolutism with its policy of well-arming the military to squelch dissent. The focal point given on the oil industry and overdependence on its grosss resulted in the disregard of other productive sectors such as agribusiness such that Venezuela started nutrient importing in the 1920’s ( Tinker-Salas 2005:1 ) .

Foreign control over the oil industry was entrenched through the publicity of a civilization among the clerisy that equated prosperity with the oil industry and that foreign oil companies are indispensable to economic development ( Tinker-Salas 2005:1 ) . This was despite the fact that a significant part of society. particularly those in the agricultural sector who still comprised the majority of labour force and the displaced peoples from the building of the oil industry substructure. were hapless.

It is in these facets that a signifier of dependence relationship between Venezuela and chiefly the U. S. . who had greater control over oil grants after the Great Depression. was developed. A different bend of events to the contrary occurred with the denationalization of the oil industry in the 1970’s. The Petroleos de Venezuela. S. A. ( PdVSA ) was established as a state-owned company that undertook the exclusive extraction. processing and exportation of domestic oil ( Tinker-Salas 2005:1 ) .

However. denationalization created a concern endeavor out of the oil industry that was virtually untouchable. Because they held ( and misused ) the majority of the country’s gross. the officicials of PdVSA had about the same political powers as the president and created a sector of managerial forces that constituted the elite in society ( Tinker-Salas 2005:1 ) . Therefore. the general position that the oil industry ne’er improved the criterions of life of most brought to fore the smouldering category tensenesss that have been existent in Venezuelan society.

The gap up one time once more of oil grants to foreign oil companies in 1992 through the Apertura Petrolera policy fueled public perceptual experience that the PdVSA worked more for foreign involvement than domestic advantages ( Tinker-Salas 2005:1 ) . This was the context in which Hugo Chavez found himself when he was elected president in 1998. Contrary to bing PdVSA pattern. he instituted reforms in the oil industry. seting more authorities control in its operations. outlining new Torahs with respects to oil resources and apportioning financess from oil gross for societal plans ( Alvarez 2006 ) .

In 2001. Venezuela had a rough oil production rate of 3. 6 million barrels a twenty-four hours where approximately 60 % of this is exported to the U. S. conversely providing an estimated 11 % of entire U. S. imports of the merchandise ( EIA 2008 ) . Though still mostly dependent on income from the oil industry. Venezuela is get downing to diversify in order to decrease the economic impacts of oil monetary value fluctuations in the universe market and lessening importing of basic nutrient materials ( Alvarez 2006 ) .

There are besides attempts to diminish trust on the U. S. oil market through market enlargement to other states in Latin America. China. Iran and India ( Alvarez 2006 ) . In add-on. Venezuela has started supplying foreign assistance from its oil grosss to its Latin American neighbours and initiated understandings for a joint venture in natural gas extraction and the refinement of petroleum oil produced in neighbouring states. solidifying its economic and political ties in the part ( Alvarez 2006 ) .

These developments have earned both citations and unfavorable judgments from the international community but by and large seem to indicate to a nation’s effort to take first universe control on local resources and industry and consequence the bringing of societal services from the wealth created as benefits for the people. With respects to how these reforms will significantly and faithfully raise the current criterion of life of Venezuelans and the Latin American part remains a topic for survey by societal scientists in the coming old ages. Its success will supply dependence theoreticians with empirical grounds of how a satellite province can interrupt away from dependence.

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