Chapter 8: Rich Above, Poor Below? Development and Inequality In International Relations

8.2: Theories of Economic Development 

Economic development is a driving force in global politics, shaping the well-being of individuals, the stability of nations, and the dynamics of international relations. It is not merely about growing economies; it is about creating opportunities, reducing poverty, and ensuring equitable access to resources and services. But development does not follow a single blueprint. Across history, nations have pursued diverse strategies, often guided by competing theories about how societies grow and what forces hinder progress. These theories help us analyze both historical successes and enduring inequalities in the world today. The film Elysium vividly dramatizes these challenges, depicting a future where development has taken a sharply unequal turn: the wealthy enjoy the fruits of advanced technologies and a pristine environment aboard a high-tech space station, while the impoverished masses on Earth are left to toil in pollution and deprivation. By applying key theories of development—such as modernization, dependency, and sustainable development—we can better understand the factors shaping progress and inequality, both in the film and in the real world.

The belief that societies progress along a linear path from tradition to modernity has long guided development policy. In this view, traditional economies marked by subsistence agriculture and limited technology evolve into industrialized, urban economies with modern infrastructure, governance, and values. Elysium starkly illustrates this divide: the space station epitomizes modernity with its sleek architecture, clean air, and cutting-edge healthcare technologies, while Earth’s inhabitants are trapped in conditions resembling a pre-modern dystopia. Modernization theory suggests that the solution for Earth’s people would be to follow the same developmental path as Elysium, adopting its technology, education systems, and political institutions. South Korea offers a real-world example of such a transformation. In the 1950s, South Korea was one of the poorest nations in the world, reliant on subsistence farming. Through industrialization, investment in education, and integration into global markets, it became a global economic powerhouse. However, modernization theory has its flaws. It assumes that all nations have equal access to the resources and opportunities needed to modernize, ignoring the systemic inequalities that hinder some countries while benefiting others. In Elysium, Earth’s people lack access to the advanced resources that fuel Elysium’s prosperity, reflecting the critique that development is often blocked by deeper structural inequalities. This brings us to a contrasting theory that focuses not on internal progress but on external exploitation.

While modernization theory emphasizes progress, another perspective argues that the global economy itself is designed to perpetuate inequality. The people of Earth in Elysium are not merely underdeveloped; they are exploited to sustain the wealth and power of the space station’s elite. This mirrors the real-world dynamics described by dependency theory, which posits that wealthy nations maintain their dominance by exploiting poorer nations for labor and resources. Historically, colonial powers extracted raw materials from colonies, sold them finished goods, and prevented local industries from developing. This cycle created dependency, locking colonized regions into a state of underdevelopment. Today, similar patterns persist in the relationship between the Global North and South. For instance, multinational corporations extract valuable minerals from African countries for use in electronics, while local populations see little of the profit and suffer from environmental degradation. In Elysium, the people on Earth work dangerous, low-paying jobs in factories that produce goods for the elite, exemplifying this unequal relationship. Dependency theory argues that breaking this cycle requires systemic change, but this is easier said than done. One historical attempt to address these inequalities involved a strategy of fostering domestic industries to reduce reliance on foreign imports.

In the face of exploitation, some nations have sought to build economic independence by fostering their own industries and reducing reliance on imports. This strategy, often referred to as import substitution, emphasizes producing goods domestically rather than importing them from abroad. In Elysium, this might look like Earth’s population developing their own technologies and industries rather than relying on scraps from the space station. Countries like Brazil and India experimented with this approach during the mid-20th century, using tariffs, subsidies, and state support to nurture their industries. Brazil, for example, developed its own automobile industry by protecting it from foreign competition. However, these policies often struggled in the long term, as industries became inefficient without external competition and lacked the innovation needed to thrive in global markets. In the world of Elysium, Earth’s residents face even steeper barriers, as they lack access to the capital, infrastructure, and education needed to foster self-reliance. This highlights a critical tension: while reducing dependency is essential, engaging with global markets through export-led strategies has often proven more effective for driving sustained growth.

Exporting goods to global markets has helped many countries achieve rapid economic development. In contrast to focusing on domestic industries, export-led growth prioritizes producing goods for international consumers, leveraging global demand to drive national prosperity. In Elysium, the factories on Earth mass-produce goods for the space station, but the benefits are siphoned off by the elite. Real-world examples, however, show how this strategy can benefit entire nations when implemented effectively. For instance, China embraced export-led growth in the late 20th century, transforming itself into the “world’s factory” by producing everything from electronics to textiles for global consumers. This approach created millions of jobs, lifted millions out of poverty, and spurred industrial modernization. However, export-led growth has its limitations. Overdependence on global markets can leave countries vulnerable to economic shocks, such as the 2008 financial crisis, which saw a sharp decline in global trade. Moreover, wealth generated by exports is often unequally distributed, benefiting corporations and elites while leaving workers with low wages and poor conditions. This imbalance reflects broader concerns about the policies promoted by international institutions like the IMF and World Bank, which have often prioritized economic liberalization over equitable development.

In the 1980s and 1990s, many developing nations found themselves grappling with spiraling debt, stagnant growth, and mounting economic crises. In response, powerful international financial institutions—most notably the International Monetary Fund (IMF) and the World Bank—began promoting a standardized set of economic reforms that came to be known as the Washington Consensus. Coined by economist John Williamson in 1989, the term referred to a group of policy prescriptions centered in Washington, D.C., where these institutions, along with the U.S. Treasury Department, were headquartered. These policies emphasized free trade, deregulation, fiscal austerity, tax reform, privatization of state-owned enterprises, and the liberalization of markets. They were presented as universal solutions for economic recovery and modernization, particularly in the wake of Latin America’s debt crisis and the global shift toward neoliberal economic models. Countries in Latin America, Sub-Saharan Africa, and Southeast Asia were often required to implement these reforms as conditions for receiving loans or debt restructuring—this process became known as structural adjustment.

On paper, the Washington Consensus aimed to restore macroeconomic stability and attract foreign direct investment by creating predictable, open, and investor-friendly environments. However, in practice, the reforms frequently produced harsh social consequences. Structural adjustment programs (SAPs) in countries like Ghana, Bolivia, and Zambia led to deep cuts in public spending, including reductions in healthcare, education, food subsidies, and employment protections. As public services deteriorated and poverty rose, vulnerable populations bore the brunt of reforms designed with macroeconomic goals in mind, not social equity. Critics argued that these policies reflected the priorities of Western economic thinking—efficiency, liberalization, and growth—without sufficient attention to local needs, historical contexts, or social safety nets. While some countries did experience temporary economic stabilization or increased investment, the long-term effects often included widening inequality, weakened state capacity, and growing public discontent. The Washington Consensus, once touted as a development blueprint, eventually became a symbol of top-down economic engineering that too often prioritized market outcomes over human well-being and democratic accountability. Its legacy continues to shape debates over global development, sparking calls for more inclusive, people-centered approaches that prioritize not just growth, but equity, resilience, and dignity.

True development must go beyond economic metrics like GDP to focus on what people can actually achieve in their lives. The Capability Approach, developed by economist Amartya Sen, emphasizes this by focusing on individuals’ real freedoms and opportunities to live the kinds of lives they value. Sen argued that development should prioritize expanding capabilities—such as access to education, healthcare, and meaningful participation in society—over arbitrary indicators like GDP. In Elysium, Earth’s residents suffer not only from poverty but from a lack of basic opportunities that restrict their freedoms, such as access to life-saving healthcare or quality education. This idea aligns with the Human Development Index (HDI), which measures life expectancy, education, and income to assess overall quality of life. Norway consistently ranks high on the HDI because it invests heavily in social welfare programs that expand individual capabilities and improve societal well-being. In contrast, nations grappling with corruption or conflict, such as Afghanistan or Haiti, struggle to provide even the most basic services, leaving their citizens trapped in cycles of deprivation. In Elysium, these disparities are starkly evident, as the elite hoard advanced medical technologies, leaving Earth’s population to die from preventable diseases. Addressing such inequalities requires a holistic approach that not only balances economic growth with social equity and environmental sustainability but also expands the real freedoms and capabilities of all individuals, as envisioned by Sen’s Capability Approach. Check out the video below to learn more about the Capability Approach.

The choices we make today will shape the opportunities available tomorrow—a truth that lies at the heart of modern development debates. Real-world examples, such as the destruction of the Amazon rainforest, the overfishing of global oceans, or the depletion of clean water sources, illustrate how pursuing short-term economic gains without regard for environmental limits can create long-term ecological and social crises. These challenges have spurred a growing recognition that development cannot be measured by GDP growth alone. In response, the concept of sustainable development emerged as a guiding framework that aims to balance economic growth, environmental protection, and social equity—often referred to as the “three pillars” of sustainability. The term gained global prominence in 1987 with the publication of the Brundtland Report, formally titled Our Common Future, produced by the United Nations World Commission on Environment and Development. This report defined sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

Since then, sustainable development has evolved into one of the major theories in international development, influencing policymaking, global cooperation, and institutional reform. It plays a central role in the United Nations Sustainable Development Goals (SDGs), a blueprint adopted in 2015 that outlines 17 goals to address global poverty, inequality, climate change, and more by the year 2030. Unlike earlier development paradigms that focused narrowly on industrialization or economic liberalization, sustainable development advocates for a holistic approach that takes into account the long-term health of both people and the planet. In practice, this includes investments in renewable energy, green infrastructure, sustainable agriculture, and education, all designed to build economies that are resilient, inclusive, and ecologically viable. Moreover, it challenges traditional development models by emphasizing intergenerational justice, urging governments, corporations, and citizens to think beyond immediate profit and consider the legacy left for future generations. As climate change, biodiversity loss, and resource scarcity intensify, sustainable development has become not just an ethical imperative but a strategic necessity for building a stable and equitable global future.

By exploring these theories of economic development—modernization, dependency, self-reliance, export-led growth, and sustainable development—we gain a deeper understanding of the forces that shape our world. Elysium provides a powerful case study, illustrating how development can both empower and exclude, creating futures that are as divided as they are advanced. These theories challenge us to think critically about what progress truly means and how we can achieve a more equitable and sustainable global system.