Development Theory
The development theory failed during 1790s. There are several reasons or the failure of the developmental theory. These reasons include increase in the indebtedness, the return of funds to the United States immediately after second war with England, and increase in the debt in the war year. The debt has impacted the economy of the United States badly, and the purpose of economic development remained behind. The developmental theory in which the economic growth and development was emphasized, however, could not be implemented due to the poor condition of the economy. In 1790s, most of the economies have shown poor signs of growth and development (Kidner, Bucur, Mathisen, McKee & Weeks, 534).
Moreover, in 1790s, the domestic market was scattered and small; most of the economies were predominantly poor having high degree of the independence and self-sufficiency. The specialization and the division of labor were rudimentary and limited at that time. There was no expansion of the external market in order to provide the means for increasing the size of the domestic market, division of labor, spread of the specialization, and the growth of the money income. Furthermore, the production of the goods and services was not sufficient (Flynn, 164), which has also paved the way to the failure of the developmental theory. In the developmental theory, the growth and development of the economy, and a planned economy was emphasized, but due to the miserable conditions of the economy the theory remained unsuccessful.
Furthermore, the credits that are gained from the exportation of the goods and services can be analyzed from the balance of payments of the country (Taylor, 54). In 1790s low credit was earned as the balance of payments in the United States was low making the objective of economic growth unachievable. Furthermore, the demand for export was low, and the supply function of the country at that time was not an efficient one. Further, at that time no analysis was made for exploring the shifts in demand, the determinants of the demand, shifts in the supply, and the supply functions. So, the demand and supply of the products remained unpredicted that also do not allowed the developmental theory to work in an effectual manner paving the way to the failure of the theory.
In the analysis of the economic growth, supply that respond to the price plays a significant role, it is a major part of the argument related to the economic development with respect to the long price swings and other economic activity that the supply shifts as a result of the change in price, in association with the speculative behavior that go together with the later phases of the accelerated growth periods. But, the determinant of the supply and the supply function is not considered by the economists at the time. Moreover, the prices of the imports and exports that are constructed into the indices gives a measure of the terms of trade, but important movements associated with the terms of trade were ambiguous in 1790s.
In a nutshell, the developmental theory does not work when the condition of the economy is not satisfactory because the major objective of the developmental theory remained unattainable if the economy is weak. In the United States, indebtedness, frequent payment after the war, increase in the foreign debt, non-estimation of the demand and supply, lower balance of payments, ambiguous terms of trade, and lower demand for exports have lead to the failure of the developmental theory in 1790s.
References
Kidner, Frank, Maria Bucur, Ralph Mathisen, Sally McKee, and Theodore R. Weeks. Making Europe: People, Politics and Culture. Boston, MA: Houghton Mifflin, 2008. Print.
Flynn, Charles L. White Land, Black Labor: Caste and Class in Late Nineteenth-century Georgia. Baton Rouge: Louisiana State UP, 1983. Print.
Taylor, George Rogers. Hamilton and the National Debt. Boston: Wildside LLC, 1950. Print.
