compare and contrast Nurke's theory of Viciouc Circle of Poverty and Dependency theory of underdevelopment

Question

Indicate their contribution to understanding the process of social development in Third wirld countries

Answer 1

Dependency theory is the body of social science theories by various intellectuals, both from developed and developing nations, that create a worldview which suggests that poor underdeveloped states of the periphery are exploited by wealthy developed nations of the centre, in order to sustain economic growth and remain wealthy.

Dependency theory states that the poverty of the countries in the periphery is the result of how they are integrated into the world system, whereas free market economists argue that they are not 'fully' integrated.

The premises of dependency theory are:

* Poor nations provide natural resources, cheap labor, a destination for obsolete technology, and markets to the wealthy nations, without which the latter could not have the standard of living they enjoy.
* First World nations actively, but not necessarily consciously, perpetuate a state of dependency through various policies and initiatives. This state of dependency is multifaceted, involving economics, media control, politics, banking and finance, education, sport and all aspects of human resource development.
* Attempts by the dependent nations to resist the influences of dependency often result in economic sanctions and/or military invasion and control. Many dependency theorists advocate social revolution to effect change in economic disparity.

While there are many different and conflicting ideas on how developing countries can alleviate the effects of the world system, several of the following protectionist/nationalist practices were adopted at one time or another by such countries:

* Promotion of domestic industry and manufactured goods. By subsidizing and protecting industries within the periphery nation, these third-world countries can produce their own products rather than simply export raw materials.
* Import limitations. By limiting the importation of both luxury goods and manufactured goods that can be produced within the country, supposedly, the country can reduce the amount of its capital and resources that are siphoned off.
* Forbidding foreign investment. Some governments took steps to keep foreign companies and individuals from owning or operating property that draws on the resources of the country.
* Nationalization. Some governments have forcibly taken over foreign-owned companies on behalf of the state, in order to keep profits within the country.

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The Vicious Circle of Poverty

Economists generally assume that people's willingness to save for future consumption grows with their incomes. The poorer people are, the less they can afford to plan for the future and save. The same logic applies to businesses and governments. Thus in poor countries, where most incomes have to be spent to meet current- often urgent-needs, national saving tends to be low. Low saving hinders desperately needed domestic investment in both physical capital and human capital. Without new investment, an economy's productivity cannot be increased and incomes cannot be raised. That closes the vicious circle of poverty (Figure 6.2). So are poor countries doomed to remain poor?

Recent data on gross domestic investment in East Asia suggest that the answer is no. Despite low initial GNP per capita, gross domestic saving and gross domestic investment in the region were high and growing until the 1998 financial crisis (Figure 6.3). Experts are still trying to explain this phenomenon. Generally speaking, however, many of the factors that encourage people to save and invest are well known, including political and economic stability, a reliable banking system, and favorable government policy.

In addition to domestic investment, foreign investment can help developing countries break out of the vicious circle of poverty, particularly if such investment is accompanied by transfers of advanced technology from developed countries. The opportunity to benefit from foreign investment and technology is sometimes referred to as the "advantage of backwardness," which should (at least theoretically) enable poor countries to develop faster than did today's industrial countries. However, many of the conditions needed to attract foreign investment to a country are the same as those needed to stimulate domestic investment.

A favorable investment climate includes many factors that make investing in one country more profitable and less risky than in another country. Political stability is one of the most important of these factors. Both domestic and foreign investors are discouraged by the threat of political upheaval and by the prospect of a new regime that might impose punitive taxes or expropriate capital assets. As a result a country can fall into another vicious circle, one seen historically in some Latin American countries (Figure 6.4). Political instability scares away new investments, which prevents faster economic growth and improvements in people's economic welfare, causing even more dissatisfaction with the political regime and increasing political instability. Falling into this vicious circle of political instability can seriously impede efforts to boost economic development and reduce poverty.

Answer 2

Vicious Circle Poverty

Answer 3

as we develope better methods of producing goods ,workers are displaced becoming more dependent on society to provide work . LOWERING the price and cutting profits would compete directly with banking and investment which accounts for a large percentage of domestic growth .ON paper this all looks good but in practice it is creating an under class of people . DENIED access to money which has become the working factor behind the creation of wealth you create the permenent under class .This causes many of the working people to invest in education which promotes the hiring of more educators and more proffesors at atate colleges which in turn offers little reward for the vast majority that never complete the education and are saddled with three years of debts to pay at jobs that never required a college degree in the first place . the more difficult one makes the journey the less people who actually complete it .MANY of the richest men started with nothing and worked there way to the top by running there own businesses often these men had little more then high school educations but provided america with a product it needed. MANY more jobs are in the sevices industry as america maintain's its homes and life-styles .THE newest and biggest cars t.v's computers and kitchen devices find there way into the homes of the rich but as fewer and fewer people reach these ranks the economy stagnates and begins to roll backwards as the halves begin to die off and the have nots have never attained any real wealth or security.thus you have a dependency problem of too many americans in need of basics that they use to get from working hard at a job which offered a living wage.