Do Good and Develop - Institutions II (Economic Development)

Having an economic development (policy) class is an exciting thing. Given the multitudes of factors and processes one might be willing to take into account (or neglect, or deny) and the level of bickering and finger pointing, one might be tempted to say: anything goes (but, lesson no. one: do no harm - not even this is easy...). In retrospect, some nice theories/creeds/schools of thought have been active.
(For those of you who know better and dislike a 'kick-and-rush' approach to science may roll their eyes upon reading the following. Apologies! But it seems like things are done this way over here).

After WWII, people wondered how to help poor nations. Given a lack of theoretical models, the experiences of the Marshall plan as well as one's own history of industrialization and development formed the basis the 'stages of growth' model by Walt Rostow: economically, there are the five stages: traditional society, pre-conditional stage for take-off, take-off, drive to maturity and the age of mass consumption/welfare. This was described as a linear development (epitomized by Harrod-Domar model, or a sort of AK model). [btw: our time: 1950/60s, big-time econ dev in the West, belief in progress and sunshie]

Some things change, some things don't. In the 1970's, a bunch of societal, political and economic disruptions have taken place.
One new model (or better: way of thinking) was talking about "structural changes" (cf. Arthur Lewis, Hollis Chenery) and commonalities in "patterns of development", i.e. structural transformation in developing countries would have several key features that are largely similar in several countries. Changes would need to take place in econ./pol./soc./institutional realms both domestically and internationally. Given the increasing interdependencies globally, internal/external factors could hinder (constraints) or promote development. Some themes: shift from agricultural to industrial production, accumulation of physical and human capital, enhanced and diversified consumer demand, urbanization and smaller families.
Unclear is whether these are the themes found, or the consequences of development or the actual causes. At least, the way of thinking led one to assume that a 'correct' approach with mixing the right policy ingredients would determine a positive development.
(btw: you may forget the two sector Lewis model with labor surplus in the agri-sector - it sounds just too funny).

Uiiih, conspiracy theories exist everywhere. In the 1970s international dependence models emerged.
First, hard-core marxist thinking contributed to the center-periphery approach in which industrialized (evil capitalists...ahem) exploit dev countries, keep them small and dependend, while a willing group of compradores (elites in dev countries) gather their perks and keep their countries from reforming. Hence, this thinking suggests an externally enforced (and internally secured) underdevelopment and looks pessimistic about future prospects. Uaaa.. luckily, history did largely run different from this grimm thinking.
Second, a bit more benign, "False paradigm" approach claims that underdevelopment is a consequence of ill-fated and faulty advice given my experts, narrow-minded and herd-behaving scholars etc. with biased/ethnocentric recommendations about how to develop, forgetting to adequately recognize differences in traditions, social structures, mentalities etc.
Third, a dualistic way of thinking is almost always applicable, same here. Superior vs inferior groups of countries can coexist, may not change, the junior may not be able to gain from the senior's nice experience, and their development may even diverge, instead of converge.
(look at South Korea, and you wonder who came up with marxist gugus; ok, look at other countries and draft your own theory blend).

After ol' Solow from the fifties, stirring a bit with neoclassical ingredients and funny AK-models, you get the 1980's resurgence of neoliberal models, (yeah, the time of Reagan, optimism and the fall of uncle USSR), the emergence of the Washington consensus (ask Williamson), and a bunch of different models with funny growth ingredients (productive public goods, Barro; human capital, supercharged etc.).
Besides the purist free-market approach, you may also want to consider the application of public-choice-thinking (basically about corrupt, vested-interests driven bureaucrats hijacking public institutions for filling their own pockets; have you heard of Rod Blagojevich and Chicago-style pay-to-play? ... multiply by 10^10 and you get a clue) in dev policy realms. Or, look at the World Bank and be "market-friendly", while recognizing that it takes a government to mend market frames, come up with nice policies to make sure there is actually a market. Market failures are common in dev countries (DC), as well as incomplete info, market power situations etc. Include externalities and you get to endogenous growth models and the conviction, that institutions matter.

Yeah, institutions. Let's ask Douglass North.