Four Approaches to Development

III. Identify characteristic features of the development process of the country based on the four approaches to development— stages of growth, structural patterns of development, dependence, and neoclassical.

A. Stages of Growth

Based from the Rostow’s Stages of Growth, Indonesia is evidently at the take-off stage since it is considered a developing country in 2013. This stage is the period when the old blocks and resistances to steady growth are finally overcome. There are forces that come to dominate and expand the society. Growth is a normal condition for this country. Also, compound interests become built into its institutional habits and structure. The production of industrial goods that serve demand from existing primary industries is also involved in the early industrialization of this developing country. Thus, it forms some of the early secondary industries in the country. Developing countries continue to develop because they are dependent upon the willingness and ability of individuals and firms to invest; and since there is an increase in the investment of physical capital from Indonesia, the country is developing continuously.

During the 1970s, the incremental capital-output ratio (ICOR) of Indonesia averaged 2.50. By using the Harrod-Domar growth equation, the Indonesian needs a 20% saving rate to achieve an aggregate of 8 percent per annum. With the same ICOR, the growth target could be achieved 10.8% annually with a saving rate of 27 percent. The Harrod-Domar model infers the ICOR remains constant if there is a large increase in the saving rate. Therefore, an increase in the saving rate brings no effect on the ICOR.

B. Structural Patterns on Development

There is a change from traditional rural agriculture to modern urban manufacturing industry that can be observed in the transformation of economic structure in Indonesia. This transformation involves some stages of industrialization. Moreover, this country has been semi-industrialized...