1. Forrest Johnson
Economic development is something that in today’s globalized economy, is both due to
external and internal forces. In some of the leading theories of economic development, examples
are given where both domestic policy and international influence can have a role in aiding that state’s
economic development. W.W. Rostow’s model on the stages of growth has places where both are
influencing development. The first stage of his model depicts a traditional society with limited
technology, an economy based on subsistence. There is very little, if any economic or social
mobility. His second stage, which he labeled the “pre-condition for take-off” he listed an increased
demand for raw materials as one of the characteristics of this stage. This demand for raw materials
would need to come from other economies and this is where the international community can have
a role in aiding the development of other states. Commodity markets are an area where the
international community can cooperate in order to best develop less developed nations. World
market prices and open trading can help these resource rich states make the most of their assets
without being taken advantage of by wealthier, more developed countries. Globally recognized and
enforced market prices can also do more to make sure that the income from those resources goes
back into the economy and not into the wrong hands or towards the wrong projects. There is only
so much that international organizations can do however, as the example of Chad demonstrates.
In the first few years of the new century, a significant oil deposit was discovered in the
impoverished African nation of Chad. In what is described in a New York Times opinion piece as a
model for development projects, the World Bank guaranteed financing where commercial lenders
would not, given Chad’s relative instability. The arrangement was even structured in such a way to
ensure that the revenues from Chad’s black gold would go towards improving the lives of a state
where eighty percent of its nine million people live on less than one US dollar per day. (Margonelli
2007) Under the terms of the arrangement, Chad’s president was ordered to spend the money on

2. his people and not on weapons. After President Idriss Deby broke that deal, another was
negotiated that at least seventy percent of the oil revenue would go towards “national priorities.” In
response, Deby made national defense a priority citing instability spilling over from Darfur, thus
being able to justify his further military expenditures. On the evidence of Chad, it would seem that
without a change in domestic policy and leadership, no amount of oil money could lead to increased
economic development. Without more input and controls in place by a supernational organization
such as the World Bank, an increase in capital does not necessarily lead to an increase in economic
development. For this reason, Rostow elaborates on further conditions that must be met in order to
advance an economy from the second stage to the third. He noted that the capital gained from
exporting resources must be reinvested in infrastructure projects (which the World Bank attempted
to force but as it found out, after it (and multinational corporations) had invested the money, the
Chadian government began to reap the rewards themselves and felt no obligation to uphold their
end of the bargain. The World Bank had no legitimacy to enforce its policy.
The example of Chad shows that even with oversight from a supernational organization,
domestic policy also has a key role in development. That is not to say that there is no role for
institutions such as the World Bank, the International Monetary Fund, the United Nations, or even a
powerful state such as the United States. International organizations such as the World Bank can
continue to fund development projects in order to spur growth. Projects such as infrastructure are
specifically noted by Rostow as an important step in economic development. Again, much like
resources, there must be some level of domestic planning and accountabilitythat comes with these
projects as many African countries that have dealt with China have discovered. In order to keep up
with its growing economy and increasingly developed population, China has been looking to secure
long-term solutions to its own resource shortfalls and has been doing so in some cases by directly
building infrastructure projects rather than simply providing money. One advantage to this practice

3. is that the money is not going towards potentially destabilizing weapons and it is a model that
perhaps the World Bank and even the United States may wish to examine. However, China’s
execution of this concept has been environmentally reckless at times. It has also, in some cases,
resulted in the propping up of less than democratic regimes who have a serious disconnect between
what their people need and what the leaders would like. If this plan were enacted in a more socially
responsible manner, there could be a role for the United States and the World Bank to better
increase economic development.
Another way that international economic institutions can better influence development
moves away from the linear change models favored by Rostow and instead looks at a structural
change model. While these changes may come from inside, international organizations, highly
developed nations, and multinational corporations can play a role in helping advance this theory as
well through foreign direct investment, especially of the greenfield variety. Financing and
constructing facilities to increase economic output can help change economic structures. An
economy cannot move from agricultural to industrial without factories and factories cannot be built
without capital. That said, a new factory is not a Field of Dreams situation either. Just because it is
built, does not mean they will come. Education programs must also be developed as a factory is
only as good as it workers.
In conclusion, there is a role that domestic governments must play in order to increase
economic development. They must be amenable to either following the instructions outlined by the
World Bank or the International Monetary Fund, or developing their own responsible methods of
spending in order to better the lives of their people. Those institutions as well as the United States
have roles they can play too. Not only can they provide the capital and markets for less developed
states to help kick start their economic growth, but they can also level the playing field in some ways
to allow that growth to occur. For its part, the United States can continue to push liberal trade

4. policies and work with institutions such as the World Trade Organization to decrease formalized
trade barriers. The United States can also negotiate Bilateral Investment Treaties and Free Trade
Agreements as well in order to allow less developed countries access to the lucrative American
market.