In his theory, Rostow’s focus is on the nation-state. He emphasizes the importance of capital accumulation and believes it is the engine of all change. When capital accumulation is missing, it must be replaced by foreign aid. From a modernized perspective, Rostow states that economic growth is automatic without political restrictions. He sees states converging with the existence of capital accumulation. However, Rostow overlooks the conditions of different countries. He doesn’t realize that countries cannot develop the same way because due to various resources and structure. His model is constructed purely upon Western European standards and neglects the fact that different countries have different circumstances. In addition, his concept of development is irrelevant because he disregards the cultural and political aspect of a country. He’s liberalistic view allows him to see economic development without political involvement. However, we must keep in mind that politics exists and cultural directly affects the progress of a country.
While Rostow represents the modernization theory, another theorist, Wallerstein, created a World Systems/Dependency Theory that is more applicable to the development situation of the countries today. A world-system is integrated through the market rather than a political center, in which two or more regions are interdependent with respect to necessities like food, fuel, and protection, and to or more polities compete for domination without the emergence of one single center. Wallerstein says that a world system is a “multicultural territorial division of labor in which the production and exchange of basic goods and raw materials is necessary for the everyday life of is people.” This division of labor refers to the forces and relations of production of the world economy as a whole and its leads to the existence of two interdependent regions: core and periphery. These are geographically and culturally different, one focusing on labor-intensive, and the other on capital-intensive production. The core-periphery relationship is structural. Semi-peripheral states acts as a buffer zone between core and periphery, and has a mix of the kinds of activities and institutions that exist on them.
Among the most important structures of the world-system is a power hierarchy between core and periphery, in which powerful and wealthy core societies dominate and exploit weak and poor peripheral societies. Technology is a central factor in the positioning of a region in the core or the periphery. Advanced or developed countries are the core, and the less developed are in the periphery. Peripheral countries are structurally constrained to experience a kind of development that reproduces their subordinate status. The differential strength of the multiple states within the system is crucial to maintain the system as a whole, because strong states reinforce and increase the differential flow of surplus to the core zone. Wallerstein calls this unequal exchange, the systematic transfer of surplus from peripheral countries to the high-technology, industrialized core. This leads to a process of capital accumulation at a global scale.
Politically, Wallerstein mentions that nation-states as variables. States are used by class forces to pursuer their interest, in the case of core countries. Imperialism refers to the domination of weak peripheral regions by strong core states. While hegemony refers to the existence of one core state temporarily outstripping the rest. Hegemonic powers maintain a stable balance of power and enforce free trade as long as it is to their advantage. However, hegemony is temporary due to class struggles and the diffusion of technical advantages. This is what Wallerstein considers as internal contradictions. This contradiction will eventually trigger change.
In order to move a country’s status from the periphery to the core, Wallerstein proposes import substitution as a solution. Import substitution is a phenomenon that responds to external disruption of trade by domestically producing substitutes for those goods previously imported. This is a policy that the governments in less developed countries may use to undertake industrialization and structural changes. Wallerstein’s theory is one that is contrast to Rostow. While Rostow believes that all countries have the potential to go through economic development through the five take-off stages, Wallerstein supports the core and periphery to create globalization. Wallerstein’s theory helps globalization in the international context. He believes that the rich creates the poor. Unless the poor country eventually changes it economy and accumulates its own capital, it will continue to stay in the periphery.
The third theorist, Gerschenkron, has a different approach to the development of the underdevelopment. Gerschenkron’s essay focuses on how relatively backward economies lacking the economic prerequisites for industrialization could compensate in different ways, and assumes that there was no variation in the desire to industrialize. However, Gerschenkron also recognizes that the desire to promote the institutions necessary for industrialization varies considerably across countries. Indeed, in the countries that lag the most, rather than actively promoting industrialization, political elites oppose it. For example, in the case of Austria-Hungary, the state not only failed to promote industrialization, but rather economic progress began to be viewed with great suspicion and the railroads came to be regarded, not as welcome carriers of goods and persons, but as carriers of the dreaded revolution. Then the State clearly became an obstacle to the economic development of the country. The problem of understanding why industrialization was rapid in some countries, while in others it did not get off the ground, is closely related to understanding why in some countries the state encouraged industrialization, while in others it did not.
Gerschenkron argued that industrialization process in backward countries could be curtailed, because they could exploit already made information and technologies. He defined this possibility to shortcut the industrialization process as "advantage of backwardness". He depicted some characters of the starting phase of industrialization with backwardness as: First, late industrialization process is shorter than that of forerunner countries, because late starting countries can save time and resources of technology development and capital accumulation by enjoying technology transfer and capital imports. Second, late industrialization develops heavy chemical industry in earlier stages than that of advanced countries, because backward countries are lacking in sufficient skilled labor force, they were able to set up new technology through imports, and able to establish new large-scale capital investment institution at once, while an advanced country has difficulty in scraping old facilities. In addition, big business groups or conglomerates are to occur because those large-scale capital investments require large size minimum running scale.
The industrialization is formed from the top, that is, the government, states, or industrial instruments like industrial bank or investment bank, because backward countries do not have enough number of entrepreneurs with good ability to respond to requirements of high level. Especially, rapid industrialization in heavy chemical industry needs more resources than the private sector can provide in nature. We should not overlook the significance of "advantage of backwardness" through the technology transferred from advanced countries, as his theory starts from this point. However, this advantage is not promised but merely possibility to exploit. In order to enjoy the possibility, backward countries are required autonomous abilities to imbibe advanced technologies effectively. If they cannot receive advanced technologies, but just pause at the same level, the gap between an advanced country become large, and it resulted in "backwardness because of backwardness". Gerschenkron pointed out the necessity of institutional instruments which was supposed to develop industrialization therefore, the advantage of backwardness was to be externalities to enterprises, while it should be enterprises to absorb imported technologies in practice. Accordingly, in order to realize the possibility of "advantage of backwardness", the abilities in private sector to take in the transferred technologies are indispensable.
There is another point to be noted. His theory explains the catch up process, but leaves the following process unexplained. Even if the theory could be applied to explain for example Korea, it would not tell the reason for Japanese success in becoming forerunner in the world. If Japan achieved industrialization by enjoying the advantage of backwardness, the advantage must have vanished after it catches up U.S.A. Thus, the advantage cannot account for the whole cases of industrialization.
The three different theories of development and underdevelopment play an important role in the time period that the ideals were written. It is obvious that Rostow’s theory of modernization is too simplified and cannot pertain to any developing countries. Its many loopholes undermine its potential as an option for developing countries. Wallerstein on other hand has a more explicit explanation of development. Its core-periphery model fits the model of globalization. Sadly, the theory is written in the interest of the international economy and assumes that exploitation of developing is needed. Developing countries’ only way out of the periphery is to create social change and accumulate capital or foreign investment. Gerschenkron on the other hand, brings hope to the developing countries. It persists that countries can develop through a process of catching up. Additionally, there are benefits to this catching up as mentioned above. Moreover, we understand that there are multiple paths to development (unlike Rostow). One thing that must be kept in mind is the time constraints. The process of development is taken in a course of 20-30 years.
The hope for possible successful development for any country cannot be explained under one theory. Theories are ideal types that can be used as a model. However, theories do not apply to every country. Gerschenkron understands that different countries have different conditions. This means that certain available resources, geographical location, and relations in the international economy will lead countries to develop in different ways. It is important to remember that we can only take the theories and adapt its advantages that will apply to specific countries but not assume it works for the world as a whole.