WHY WE STRUGGLE WITH DEVELOPMENT?
The questions “Why we struggle with development?” and “Why can’t we rank highly in prosperity indices?” constitute one of the most fundamental and enduring debates in development economics. Given the complexity of development as a phenomenon, it is insufficient to address these questions through a reductionist, single-factor approach. Although early theories such as Ragnar Nurkse’s vicious circle of poverty provide an important framework for explaining the low income–low savings–low investment trap, contemporary scholarship emphasizes the multidimensional and interdependent nature of underdevelopment.
The problem of underdevelopment—or the inability to achieve sustained prosperity—must therefore be analyzed through a holistic framework that incorporates institutional structures, human capital, technological capacity, historical and geographical conditions, and global system dynamics. Development should not be understood merely as economic growth, but as a broader process of structural transformation shaped by improvements in institutional quality, social inclusiveness, and productive capacity.
In this context, the main reasons for persistent underdevelopment and low performance in prosperity indices can be summarized as follows:
1. Institutional Structure and Governance Quality
Modern development is a comprehensive process encompassing not only economic growth but also industrialization, technological innovation, social transformation, and improvements in living standards. The transition from traditional to modern structures involves deep structural changes in sectors such as industry, education, and agriculture, often grounded in capitalist production systems and sustainability principles.
One of the most influential explanations in the development literature is the institutional approach. The theory of institutions and development, associated with Daron Acemoğlu and James A. Robinson, argues that income disparities across countries are fundamentally rooted in the distinction between inclusive and extractive institutions.
Inclusive institutions protect property rights, uphold the rule of law, and enable broad participation in economic activities. In contrast, extractive institutions concentrate economic and political power in the hands of a narrow elite, leading to inefficient resource allocation. This reduces investment appetite, limits innovation and entrepreneurship, and weakens long-term growth potential.
Weak institutional capacity, combined with factors such as corruption, ineffective oversight and transparency mechanisms leading to unaccountability, and political instability, directly and negatively impacts the development process. Therefore, institutional quality is a prerequisite for development.
2. Human Capital and the Quality of Education
Another key determinant of development is the quality of human capital, particularly in education and health.
Gary Becker’s Human Capital Theory highlights education and health as critical investments that enhance productivity.
However, the issue is not merely access to education but its quality. Education systems that fail to foster critical thinking, analytical skills, and innovation capacity tend to reinforce low-productivity equilibria. Similarly, weak healthcare systems directly diminish labor productivity.
In countries where education systems are inadequate and health infrastructure is weak, the formation of a skilled workforce is limited, constraining technological adoption and innovation.
Moreover, the migration of skilled labor (brain drain) places additional pressure on development by both depleting existing human capital and weakening future productive capacity.
3. Technological Capacity and Productivity Dynamics
Technological progress is a fundamental driver of long-term economic growth. Robert Solow’s neoclassical growth model underscores the central role of total factor productivity (TFP).
Underdeveloped economies are typically characterized by low value-added production structures, dependence on imported technologies, and limited innovation capacity. This condition is often described as the middle-income trap. Insufficient R&D investment, weak university–industry linkages, and ineffective industrial policies further deepen this trap, hindering sustainable growth.
4. Historical Legacy and Geographical Conditions
Historical and geographical factors also play a significant role in shaping development trajectories. Scholars such as Jeffrey Sachs emphasize the impact of geography—through climate, disease burden, natural resource distribution, and transportation constraints—on economic performance.
In addition, the legacy of colonialism has profoundly influenced institutional structures in many regions, including Africa, Latin America, and parts of Asia and the Middle East. Colonial economic and administrative systems were primarily designed to extract resources rather than promote local development, resulting in exclusionary institutional frameworks.
Many of these structures persisted after independence, perpetuating structural constraints that continue to limit development. Thus, colonial legacy remains not merely a historical backdrop but an enduring structural determinant of contemporary development disparities.
5. Income Distribution and Social Inequality
High levels of income inequality are both a cause and a consequence of underdevelopment. Joseph Stiglitz argues that inequality is not only a social issue but also an economic one, as it undermines overall productivity.
Inequality restricts access to education, healthcare, and financial resources for lower-income groups, limiting human capital formation and preventing the full utilization of economic potential. It can also exacerbate social tensions and increase political instability.
6. Macroeconomic Instability and Policy Credibility
Macroeconomic stability is a critical determinant of investment behavior. High inflation, financial crises, and uncertainty regarding public debt sustainability shorten investment horizons and discourage long-term planning.
In economies where monetary policy lacks credibility and fiscal discipline is weak, risk premiums rise, increasing the cost of capital and constraining growth.
Furthermore, dependence on imported energy and intermediate goods exacerbates current account deficits, increasing economic fragility.
7. The Global System and Dependency Relationships
Dependency theory, associated with Andre Gunder Frank, argues that the global economic system generates structural inequalities through asymmetrical relationships between core and periphery countries.
Peripheral economies are typically locked into low value-added production structures, while capital accumulation and technological advancement are concentrated in core economies. This dynamic reinforces dependency, often supported by collaborations between local elites and multinational corporations.
As a result, inequalities embedded in the global trade system continue to limit development opportunities in peripheral countries.
Conclusion
Underdevelopment is a complex and multidimensional phenomenon that cannot be explained through simplistic or single-factor frameworks. Institutional weaknesses, insufficient human capital, limited technological capacity, historical legacies, and structural inequalities within the global system interact in mutually reinforcing ways.
Development should therefore be conceptualized not merely as economic growth, but as a comprehensive transformation process supported by institutional reform, high-quality education, innovation-driven production, and inclusive social policies. Without a long-term strategic vision that prioritizes sustainable welfare over short-term political gains, countries are likely to remain trapped in fragile and low-growth equilibria.
Achieving sustainable development requires not isolated policy interventions but a coherent and coordinated strategy that strengthens institutional capacity, enhances human capital, fosters innovation, and ensures social inclusion. Visionary leadership that prioritizes intergenerational well-being is essential; otherwise, economies risk remaining in a persistent development impasse characterized by low productivity, structural vulnerabilities, and limited progress.