This theory basically believes that industrialization is the key to the economy’s prosperity and progress. Moreover, according to this theory, industrialization can be achieved by increasing capital as much as possible together with the community. This is their way of developing one’s economy and motherland. The Harrow-Dammar model is also a major part of this theory. It talks about the rate of growth of a nation in a mathematical manner. It is actually based on the savings and income of the state.
Unfortunately, this theory does not work in some instances because it is not a sufficient condition and it focuses too much on investing in capital. On the other, the structural change theory mainly focuses on the process wherein actions develop their economy by drastically urbanize and modernizing their manufacturing and service sector. A great example of this kind of transformation is the Lewis Theory of Development. It explains that underdeveloped nations are divided into two namely, traditional and modern sectors.
Traditional sectors usually have zero marginal labor productivity while modern sectors are the opposite, which have high-level productivity. This theory generally focuses on the method where labor is shifted and the continuous progress of production and employment in the modern
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However, this may be quite hard for third world countries which continue to rely on trade with first world countries. The dependence theory is a branch of the structuralism mindset stated above. They both have the same concepts however the dependency theory states that third world nations are a great factor in the progression of the first world nations. Without their cheap labor and services, first world countries would spend more and would to be able to avail this kind of luxury.
Sadly, first world countries try to maintain this kind of situation to sustain power and avoid the rise of developing nations. Another theory stated was the neoclassical counter-revolution theory wherein prosperous economies devoted supply-touched policies and appropriation to public entities and wherein developing economies favored free trade and removal of public entities. This theory comprises three approaches namely, the free market approach, the public choice approach and the market friendly approach. Free market analysis pushes that markets are independently efficient.
The public choice theory believes that the government acts only for them and not for the actual improvement of the nation. Lastly, the market friendly approach states that the government is a key role to the success of the markets in the country. The neoclassical growth model was somehow patterned to the Harrow-Dammar formulation with the addition of labor to the equation. It also added technology as independent variable in calculating one’s growth. According to this model, increase in labor and capital and improvements in technology are the sources of growth of the economy.