Development economics is a branch of economics that looks at how development works from an economic perspective in developing nations. As a field, it looks not only at traditional economic rubrics, such as GDP or per-capita income, but also looks at things like standard of living, health care, education, and equal rights opportunities. As a result, this field concerns itself a great deal with political processes and agendas, as well as with more specific economic agendas.
Although some of the patterns of thought seen in development economics have existed in the field of economics for quite some time, as a cohesive discipline, it really grew out of the post-World War II period in Europe. With nations ravaged by the war, and their economies in shambles, particularly in Eastern Europe, it became necessary to look at the best ways to industrialize those nations to maximize their economic potential while protecting the citizenry. In subsequent years, the theories developed there began to be generalized and adapted to other developing regions of the world, including Latin America, Asia, and Africa.
Early thinkers in this branch of economics included Ragnar Nurkse, who wrote Problems of Capital Formation in Underdeveloped Countries in 1953; Martin Mandelbaum, who wrote The Industrialization of Backward Areas in 1945; and Paul Rosenstein-Rodan, who wrote Problems of Industrialization in Eastern and South Eastern Europe in 1943. Much of the contemporary thinking grews from these early seminal works, although the field has since grown far beyond its early roots into a more holistic look at all the disparate elements that make up a healthy society.
One of the early theories of the economics of development was the linear-stages-of-growth model. This model, popular during the 1950s, was built as a reaction to Karl Marx’s communist ideas, which were popular in Eastern Europe at the time. The basic premise was that development and healthy growth could be achieved by pooling and holding on to masses of capital, through using savings on the domestic and international level. Although popular when first developed, this theory quickly came under fire for failing to acknowledge that there were many other necessary preconditions for healthy development besides the simple accumulation of capital.
In the 1970s, as the developing world began to gain more a global voice, international dependency theory began to rise to the fore. This theory of development economics held that many of the obstacles to development did not, in fact, originate in the developing world itself, but were in fact imposed on these countries by external forces in the developed world. Although in many ways self-evident, the formulation of this simple idea had profound repercussions on how the developed world viewed its role in aiding the developing world to grow and develop.
Largely as a reaction to international dependency theory, the 1980s saw the formulation of a neoclassical theory of development economics. This theory is essentially a free market view of development, holding that the best way to help countries develop is to remove governmental limitations and controls. Within neoclassical theory, there are differing degrees of free market fundamentalism, with both the free market approach and the public-choice theory essentially holding that the market should be entirely unregulated, and the market-friendly approach, often promulgated by the World Bank, allowing for some limited government interference, while still holding to a free market ideal.