Chapter 4: State-Society Relations and Economic Paths

While the conventional discussion on economic growth is concerned with the rise of productivity, technological upgrading, and innovation, inclusive economic growth accounts for the equality of distribution. Sustainability brings another dimension into the equation, whereby economic growth should account for environmental concerns. This makes inclusive and sustainable growth seek a balance between economic growth, equality, and sustainability.

In the aftermath of the Second World War and the decolonization that followed, the strive toward economic growth especially from newly established and independent starts induced the emergence of works on economic growth models that tried to suggest the means by which high economic growth could be achieved. The Roy Harrod and Evsey Domar (Harrod-Domar) model was the first remarkable model in this regard (Domar, 1946; Harrod, 1939). The works of the two theoreticians suggested that economic growth could only be achieved by capital accumulation and investment leading to this accumulation. Building on the assumptions of the Harrod-Domar model, Walt Whitman Rostow's developed his stages of growth as one of the important works on economic development (Rostow, 1960). Investment was pointed to as the main factor that causes economic growth. To move to the “take-off” stage, he estimated that a developing economy should increase investment share to about 10%, double of the investment share needed for the previous stage, the “pre-conditions for takeoff.” Countries have to either save higher shares of their national income or finance their high investments from debt or international aid. In the age of the Cold War (1945–1989) and the global ideological rivalry between the Western and the Eastern Blocs, the suggestions of Rostow's work seemed to fit the international policy agenda of the United States and its allies. Foreign aid flew to developing countries to bind them to the Western camp with hopes to copy the outstanding results of the Marshall Plan that had aided Western Europe to get over the devastation of the Second World War and regain the position of world top economies.