1.2 STRATEGY THEORIES
Underdevelopment from the viewpoint of these theories is
the result of vicious circles of factors. One example is based
on the fact of low real income in developing countries which
is the result of low labour productivity. This low labour
productivity, in turn, is a consequence of capital shortage
which is a result of the population's low saving ability.
As the saving rate is determined by the low real income, the
circle is closed.
Strategy theories intend to break up this cycle at a certain
point which they consider critical and which varies according
to the different theories. Thus, they want to initiate development
and transform traditional subsistence economy into a modern
market economy. Their main emphasis is on capital formation
and investment (investment theories) and, by and large, they
prescribe action for overcoming underdevelop-ment while they
contribute little towards explaining the causes of underdevelopment.