Models of Development

First, second and third world, developed and developing countries, global north and global south, majority and minority world, high, middle, and low earning countries, core and periphery. Why do we have so many overlapping terms to categorise countries? What do they mean, and why do they keep changing? 

Models of Development Models of Development

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Table of contents

    In this article, we are going to try to unpack some of these terms within the context of the history of international development. We will then focus on 5 models of development, namely the market, capitalist, socialist, welfare, and sustainable development models.

    Theories and models of development

    To understand the theories and models of development, it's essential to know the historic circumstances that led to their making. Let's start by unravelling the concept of development.

    The term development, in international politics, has been a cause for debate since it was introduced. It emerged in the aftermath of the Second World War, continued to evolve through the Cold War, and today, the world community is still applying modern perspectives to pursue “development”.

    Development is defined as the process of creating something new and more advanced. In international relations, this initially meant poverty reduction and improved social and political conditions. The main reason for the debates around models of development is that people and countries disagree on what they mean with development and how to make it happen. Also, the process of development rarely happens in a politically neutral environment. Instead, it's soaked with (not always transparent) political motives. Let's find out why.

    The Second World War (1939-1945), was a conflict that involved and divided the world. It was fought between the Allied Forces, headed by the US, The United Kingdom and the Soviet Union, and the Axis powers, headed by Germany and Italy.

    Following the Allied forces' victory, the ideological differences between the capitalist US and the communist Soviet Union gave way to the Cold War. This war, famous for the proliferation of both of the blocs' armies, was also “fought” by creating spheres of influence, or countries that would support either bloc.

    One of the ways to create these spheres was through “development funds”. The Marshall Plan is arguably one of these. Its main aim was to fund the re-development of war-torn Europe / However, some historians also consider it a US attempt to buy European support for its capitalist ideology and keep Communism at bay.

    At the same time, The Soviet Bloc has a similar plan in place, namely Comecon. This was a plan of mutual economic support. It was financially and politically dominated by the Soviet Union, and it served to gain and retain geopolitical power as capitalism advanced.

    The Marshall Plan was the US initiative to support the reconstruction of Europe following the end of the Second World war. The plan was linked to the Bretton Woods Institutions. These are the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (now the World Bank) which were created to promote economic (and political) integration.

    To implement the plan, the Organisation for Economic Cooperation and Development (OECD) was created in Europe. This organisation supported democracy and a market economy, two of the key features of today's western countries.

    The Soviet Union refused to accept support from the Marshall plan and prevented other eastern European countries from receiving it.

    Find out more about the Marshall Plan and the Bretton Woods institutions by checking out our explanations.

    The end of World War II also meant the beginning of the process of decolonisation.

    Decolonisation is the process through which previous colonies regained their independence from their colonisers.

    The newly independent “Third World” countries became new potential sources of support for the Cold War blocs

    According to this categorisation, the “First” world was the US and its allies, the “Second” world was the Soviet Union and its sphere of influence, and the “Third” included all the countries that weren't aligned with either.

    MOdels of Development Map of the world distinguishing between the "First" (blue), "Second" (red) and "Third" (green) world StudySmarterFig. 1 Map of the world distinguishing between the "First" (blue), "Second" (red) and "Third" (green) world

    Both the US and the Soviet Union aimed to gain the support of the newly independent countries by supporting them economically, educationally and militarily.

    For example, the Soviet Union gained a presence in Africa by

    • supporting local communist parties through economic and military aid.
    • Establishing in Moscow (1960) the Patrice Lumumba People's Friendship University, a higher education institution for students from the “Third World”.

    This is the historic background from which different models of development emerged. Their motives merge humanitarian concerns and political interests. Let's now explore them a bit further.

    Capitalist model of development

    The capitalist model of development is the main model applied by the “First World” and it's based on the modernist theory of comparative politics.

    The modernist perspective understands modernity as the goal every society is pursuing. With modernity, it means industrialisation, urbanisation and technological advancement. The modernist theory emerged from the quick progresses the world saw in the reconstruction of Western Europe, thanks to the Marshall Plan. The assumption of the modernist perspective is that all countries go through similar stages of development and that any country, given the right intervention, can go from “developing” to “developed”.

    Capitalism is a political and economic system that champions private property and the pursuit of profit.

    According to the capitalist model of development, the governments of the Third World, supported by funds from the First World, would have to financially support the growth of private industries. This would shift their economies from being mainly agricultural to industrialised and based around living in cities. After the initial government intervention, the capitalist model requires the government to take a step back. This would allow industries free rein to grow and compete, which in turn could lead to economic growth and better living standards.

    Market model of development

    The market model of development can be considered a subsection of the capitalist model. This is because it is also based on the modernist theory and shares some principles with the capitalist model.

    The principles shared by both the capitalist and the market model are private ownership and fast industrialisation.

    However, while capitalism can include a certain level of state intervention, the market model champions market forces as the leading source of growth and development.

    Market forces are the factors that affect the price, demand, and availability of goods. How much consumers want a product will raise its value, while how readily available the product is will lower its value.

    Both the capitalist and the market development models are carried out through “structural adjustment programmes” (SAPs). These, promoted by the IMF and the World Bank, involve the allocation of loans conditional on the implementation of certain policies. These policies will support the principles of capitalism, namely increased efficiency and competition.

    However, the capitalist and the market model have been criticised on the ground that they benefit the economies of the “First World” more than those of the countries they are supposed to help develop.

    Critics argue that the capitalist model of development involves First world corporations paying Third World governments to install industries in their countries to extract raw materials. The raw materials are then exported to First World countries to be processed into a finished product sold globally. This leads to the corporations and the political/industrial class of the Third World countries financially benefiting from the transactions, while the workers are poorly paid for their contributions.

    Socialist model of development

    The socialist model of development emerged in the 1960s as the Second World's response to the capitalist models and is based on the dependency theory.

    Dependency theory unfolded in opposition to modernisation theory. It critically analyses the dynamics set in place by the SAPs and introduces the concepts of “core” and “periphery”. The core is the richer countries that benefit from the resources of the periphery. According to this model, the models based on the modernist theory create a situation of dependency of the periphery on the export markets of the core countries. This dynamic has been likened to a continuation of the imperialist colonisers-colonies relationship.

    Another difference between modernisation and dependency theory is that the latter does not assume that all countries go through the same stages to get to the ideal of modernity. Instead, dependency theory recognises each country's unique features and structures.

    Models of development core-periphery model StudySmarterFig. 2 Core-periphery model

    The socialist model of development assumes that, in order for living conditions to improve, the countries in the periphery would have to get rid of private property. Instead, true to socialism, economic growth would come from a state-led economy.

    The state-led economy of the socialist model means that the state owns all the means of production (for example agricultural establishments and factories), decides what to produce, and controls the rate at which it is produced.

    Similarly to the modernisation theories, the socialist model does foresee the need for a fair amount of industrialisation. Unlike the previous models, though, it also focuses on the fair distribution of goods among all people.

    At the end of the Cold War (1991), when the Soviet Union collapsed, the socialist model of development lost credibility and momentum.

    Welfare model of development

    Welfare is a term used to group together the range of provisions a state ensures for the well-being of all its citizens.

    Welfare, or social security, implies provisions such as health care, education, sickness, and disability benefits and old-age pension.

    The welfare model of development recognises the value of industrialisation, and the economic growth that comes from having an open market. It also considers the need to regulate market forces to prevent the exploitation that is seen in the countries where the capitalist and market models were applied.

    An open market refers to countries trading with each other. This is a fairly essential element of capitalism. It differs from closed markets, often found in socialist countries. This is where the country's businesses trade within the country and not with foreign businesses.

    Another important difference between the socialist and the welfare models is their emphasis on safeguarding certain specific rights.

    Both models safeguard social and economic rights such as education and housing.

    However, the welfare model also ensures the protection of civic and political rights such as free speech and the freedom of political expression.

    Sustainable development model

    The last model we will briefly mention is the sustainable development model.

    Unlike the other models

    • It embodies the understanding of the links between economic advances, upholding human rights and environmental impact.
    • It approaches development as an issue to be tackled globally, rather than some countries imposing their version of development on others.

    Models of Development Diagram of the sustainable development model StudySmarterFig. 3 Diagram of the sustainable development model

    The sustainable development model is guided by the UN Sustainable Development Goals

    The UN Sustainable Development Goals are 17 goals set up by the United Nations General Assembly in 2015 to be achieved by 2030

    Models of Development Sustainable development goals StudySmarterFig. 4 Sustainable development goals

    For more details on sustainable development, check out our explanation.

    Models of Development - Key takeaways

    • Development implies poverty reduction and improvement of living standards.
    • The concept of development, and how to implement it, is debated and often comes with political motives.
    • Historically, the main development models have been the capitalist, market, socialist and welfare.
    • The most current development model is the sustainable development model, which attempts to address globally the need for economic development, the upholding of human rights and environmental sustainability.


    1. Fig. 3 Sustainability diagram ( by Andrew Sunray, based on "File:Sustainable development.svg" by Johann Dréo LIcensed by GNU Free Documentation License ( on Wikimedia Commons
    Frequently Asked Questions about Models of Development

    What are development theories and models?

    Development theories and models are perspectives to guide how to implement development.

    What are market based models?

    Market based models, such as the capitalist and the market models, are models that assume that market forces should be the guiding forces towards development.

    What is the capitalist model of development?

    The capitalist model of development is the model that assumes that, to achieve development, we should apply the principles of capitalism, namely private ownership of the means of production, and competition.

    What is meant by socialist model of development?

    The socialist model of development assumes that, to achieve development, we should apply the principles of socialism, namely state-controlled economy and fair distribution of resources among the population. 

    What is the difference between socialist and capitalist model of development?

    The main difference between the socialist and the capitalist models of development is the level of state intervention, which should be minimal according to the capitalist model, while the economy should be state-led according to the socialist model.

    Test your knowledge with multiple choice flashcards

    Development, in international relations, is a politically neutral concept. (T/F)

    Which models of development consider private property and economic competition essential to achieve development?

    Which development model assumes the need of a state-led economy?


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