Economic Development, Creative Destruction and Urban Dynamics

This paper revisits the problem of economic development questioning the implicit premise that developing economies are nascent systems on their way to maturity. It is proposed that the developing countries should instead be viewed as mature systems in a low-welfare homeostasis reached under resource constraints. When seen as mature systems, the transformation of the existing mix of economic activity into one that can yield better lives for people takes precedence over the widely advocated objectives of growth, productivity improvement, structural transformation, specialization for export, privatization and other such agendas that will not change the tendency towards the low-welfare homeostasis. Viewing developing countries as mature economies also calls for seeking as a part of the development strategy the accelerated decay of the obsolete and irrelevant baggage that might fill the landscape, so room is created for replacing it with more appropriate infrastructure. Schumpeter’s concept of creative destruction and Forester’s Urban Dynamics model are explored as alternative frameworks for economic development. Key words: economic development, economic growth, creative destruction, urban dynamics, sustainability, development policy, system dynamics, urban renewal, economic stagnation, economic recession Page 3 of 2