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Neo-Classical Theory Argues that market is responsible for growth Demand then supplyeconomy is based on market based outcomes Adam Smith with this theory has its foundations in a supply creats its own demand principle For this reason it emphasizes the monopolistic competition where each nation specializes in ceratain products to benefit greater from the economies of scale It argues that if industry is restricted to the home market it will be high cost producer due to size of the market 2Comparative advantage is a theory suggested by David Ricardo that International trade should be based on nations comparative advantages and each country should specialize on their own advantages skills or resources 3 The problem with this theory is that it sees economic growth as a phased homogenized and undirectional process It doesnt consider other parts that can contribute to the development and only see the economy as a progressive process However the major problem following the theory is that according to the theory the rich natin will become richer and poor will becom poorer 4Dependency theory is more likely a view from a 3rd worlds This argues that the building of the capitalist system in developing countries should be deffrenciated between Western Europe from other developing countries today The reason for this is because the western Europes capitalistic and industrialized econmoy came from colonization using the cheap labor and exploiting the developing countries Today there is a completely different international environmnet The 3rd world countries do not dominate the international market they cannot colonize the rest of the world the industrialized countries already control the world economic system The international market today like any capitalist market works to favour the stronger In other words the stronger the richer Third World countries profit from the already industrialized countires and their economies will be very exposed to financial fluctuations For this reason most of the 3rd world coutries inevitably after long practice of colonization find themselves participating
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