THE RELEVANCE OF DEVELOPMENT THEORIES IN EXPLAINING THE INCOME DISPARITIES AMONG COUNTRIES

Abstract

There exists a large income disparity among countries and the disparities have widened over time. This phenomenon has caught the attention of many development economists. They are concerned over the widening income gap because it is a source of instability in the world. Many development theories have been propounded to explain why certain countries are poor. Some economists claimed that they are poor because of the shortage of crucial factors of production while other argue that it is the actions of rich countries that have maintained and exacerbated the poverty of the poor countries; there are still others who insist that it is due to the lack of government intervention that countries are poor. The objective of the academic exercise is to analyse the relevance of these theories in relation to the income disparitie5 among countries. After analysing twenty theories focus on various factors of production, I conclude that none can satisfactorily account for the income disparities among countries. A particular factor of production which can is crucial in one country may not be so in another No singer factor of production can be considered as the most crucial in economic development. The shortage of a particular factor of production may not necessarily be responsible for a country's poverty. The six theories analysed which focus on the economic structure of a country and the distribution of international power are found to be relevant only to some countries. They are unable to explain fully the income disparities among all countries. I have also analysed six theories that emphasise on the role of the government in economic development. Again, while there are countries that develop under substantial government intervention, there are still others that achieve development in the absence of government intervention but solely through laissez-faire. In fact, due to the diverse structure of Third World economies and the unique political, social and economic environment of each country, I do not expect a theory to be able to fully account for the development and underdevelopment of all the countries.