The Process of Development

By Garry Jacobs and David Lane

It is a common place observation that development efforts - whether by governments, international organizations, or private agencies - very often do not yield the desired or anticipated results. This fact reflects a basic inadequacy in our knowledge of what development actually is. In order to evolve more effective practical development strategies, a sounder conceptual basis is essential.

The Marshall Plan after World War II demonstrated the enormous power of an infusion of capital and modern technology to revitalize the economies of war ravaged countries. Between 1948 and 1951 the U.S. lent $17 billion to Western European countries. In four years industrial production rose 44% and agricultural output rose 9% above pre-war levels, ushering Europe into an era of unparallel prosperity.

This incredible achievement led many planners to conclude that a similar infusion of capital and modern technology could promote similar results in developing countries as well. The international Bank for Reconstruction and Development, which was originally established to foster the recovery of Europe, widened its horizons to include the entire developing world. A combination of foreign aide and technical assistance became a key component of foreign policy and international relations.

With few exceptions, the impact of foreign aid in developing countries was far less dramatic than it had been in Western Europe and far below the expectations of both the lenders and the recipient countries. In retrospect we understand that planners had attributed an inordinate importance to the roles of capital and technology in development and had underestimated the contribution of non-physical factors such as economic institutions, social values and attitudes, the skills of the work force, and the aspirations of the people.

The same error which led to exaggerated expectations during the early phase of overseas development assistance in the fifties had a diametrically opposite effect on projections of economic development after 1960.

In 1960 the World Bank did a study of all developing countries and projected that no developing country would have a growth rate of more than 3 percent per annum during the following twenty years. Most of those countries, they said, would not be able to achieve even 2 or 2½ percent rates of growth. Recently, the World Bank looked back somewhat gratefully to find out that it had been wrong. Between 1960 and 1980 the majority of developing nations grew by more than 3 percent. India's growth rate was around 3½ percent.

In 1963 the FAO sent a team to study food production in India. The confidential report that they prepared and submitted at that time projected that between 1963 and 1970 total food grain production in India would increase by a maximum of 10 percent. Actually these estimates proved very wrong. Between 1965 and 1970 alone India's total grain production increased by 50 percent, five times the projections of international experts, with a 180 percent increase in wheat.


The errors generated by the predictive models in these two instances arise from fundamental mis-specification. The theorical framework assumed that growth as it had occurred in Western Europe and in developing Third World countries followed a common set of principles, when actually they were distinctly different phenomenon. In basing their projections of Third World development in the fifties on the experience of Europe after the war, planners neglected to distinguish between a reconstruction and expansion of previously existing types of economic activity in Europe and the creation of new and higher levels of activity in the Third World.

In basing their projections of Third World development after 1960 on the disappointing performance of these countries in the fifties, planners wrongly estimated the effects of changing social attitudes, political and social reforms, spread of education and productive skills, and the development of supportive institutions on the marginal productivity of capital.

Part of the difficulty stemmed from a confusion between the simple concept of economic growth and the more complex concept of economic development. Growth may be viewed as an increase in the level of an economic activity which is already present in the society, whereas development represents the establishment and spread of new activities not previously present. Growth involves only an extension of existing efforts, and therefore is easy to achieve. Development depends on the creation of new and unfamiliar forms of activity, new behaviors, new institutions, new skills and attitudes, and is therefore more complex and difficult to promote.

Growth is essentially an economic phenomenon. Development is a social process which manifests as greater activity, but which actually involves fundamental changes in the constitution of the society and its institutions. Existing economic models of input and output analysis may be more or less useful in predicting economic growth, but the process of economic development is unlikely to fit into any model which confines itself to measuring only physical variables.

There are two types of development: that which occurs naturally without conscious initiative of governments and that which is planned by government. In either case the process is the same and no essential element or stage can be omitted. Planned development is an attempt to accelerate the pace of natural development by identifying new activities that the society needs to acquire in order to pass to the next higher level of organized functioning and by taking conscious initiative to introduce these activities through creation of legislation, models, incentives, new institutions, education, etc. Natural development occurs spontaneously and moves from below upwards. From the individual pioneer it spreads to the society at large and eventually becomes integrated into the values and aspirations of the society. Planned development moves from above downwards. New activities are consciously conceived at the top by planners and steps are taken to seed the activity in the population. But in either case development actually occurs only when the population accepts and takes over the activity as its own. In India the task which the government and the people have accepted and taken upon themselves is nothing less than the rapid transformation of a pre-industrial agrarian society into a modern industrial nation. It is an attempt to cover in a few decades the course of material development which occurred in Europe and the U.S.A. over the last few centuries.

No government can develop a society. Government can effectively act only as an initiator, pioneer, and catalyst of the development process. Development is achieved by changes in human understanding, attitudes, aspirations and behaviour, which cannot be compelled or accomplished by proxy. This being true, economists and planners must be primarily concerned with ways to facilitate, stimulate and accelerate this process and obtain the maximum output from the resources available for reinvestment. In other words, the aim should be to act in a manner that will evoke the maximum response from the society for new or better activities. The key is social acceptance.


Planners can catalog long lists of instances in which developing societies and programs at all levels and in all fields have not generated and expected results. To cite a few examples from the Indian experience:

  1. In the early 1950's the government of the State of Tamil Nadu opened more than one hundred new high schools throughout the state to promote the growth of higher education. But enrollment in the schools was so poor that most of them were closed or converted into primary schools within a short time. Clearly the importance that the government placed on education was not shared by the population. Thirty years later the demand for higher education in the state is so great that all schools at all levels are overcrowded and admission to the best public high schools can cost as much as $5,000. The attitude of the population has clearly undergone a dramatic change during the interim period.
  2. In the late sixties a major irrigation scheme was established in the State of Andhra Pradesh to bring 100,000 acres of formerly dry lands under irrigated cultivation. When water was made available to the farmers through a system of canals, most of the crops grown were lost due to improper irrigation techniques. In the following year the farmers actually refused to utilize the water.
  3. Agricultural research stations have achieved significant breakthroughs in the development of high yielding varieties and improved cultivation techniques. In many instances the new practice which has been successfully demonstrated is not adopted by the nearby farmers, even though the achievement is visibly demonstrated to them. This gap between what is achieved by research or demonstration projects and normal practice by private individuals exists in all fields of economic activity, even in American agriculture. According to one American agricultural economist, less than ten percent of successful research findings are utilized by the American farmers.

These examples show that development requires more than capital and technology. The problems revealed by these examples arise from the fact that we tend to view development as a program conceived and designed by government or some other agency and introduced for the benefit of a passive recipient population rather than as a process which can be initiated by government but must be actively embraced and taken up by the society as a whole, if it is to succeed.


The development process is set in motion only when certain essential conditions are met. The process then passes through a series of identifiable stages. There are three necessary, but not sufficient, conditions for development - mental awareness, physical deprivation or opportunity, and psychological motivation. In order for development to take place, there must be an awareness in the population of the benefit which will accrue from undertaking a new activity or carrying out an existing activity in a new way. It may be the awareness of the advantages of a new technology, the untapped potential of a new market, the productive efficiency of a new system or skill, etc. It is self evident that a new activity will only spread after its benefits are understood, yet all too often planned development strategies assume that this understanding is present in a population when it really is not.

Even when a population has this awareness, it does not follow that development will inevitably occur. The second condition is that there must be an external stimulus for change in the form of physical deprivation or an unutilized opportunity. The deprivation may be the result of famine, drought or over-population. The opportunity may be the discovery of a new technology, new resource, the creation of a new institution, the opening of a new market, or a planned development program. Without the pressure of an external stimuli, societies rarely abandon habitual ways of functioning.

Even when the deprivation or opportunity is great and the population is aware, development will not take place unless the third essential condition is met - the population which is to participate in the development activity must be willing to do things in an unfamiliar way. It must be motivated by a compelling urge, a felt need, to obtain the benefits of the new activity. It is this last component which is most often ignored in planned development programs, and that is often the reason why planned investments fail to generate expected economic returns.


The instance of a development program in South India illustrates this point. Ramapuram is a small agricultural community in the state of Tamil Nadu. Prior to 1969 there was no water available for cultivation, therefore the farmers raised crops only during the three month fall monsoon season, and the average net income from lands in the village was less than ten dollars per acre per year.

In the late sixties, The Mother's Service Society, a non-governmental development agency, established a 123 acre model farm situated in the village and introduced new crops and methods of cultivation. The Society also discovered a groundwater table and set-up eight tube wells to utilize this water for irrigated cultivation. Using this water the project obtained yields upwards of $100 per acre. Despite the fact that all the labor of digging and operating the wells and cultivation of the crops came from the near-by villages, the dramatic success of the model farm did not lead to visible changes in local cultivation practices. The project clearly succeeded in creating awareness in the population of a development opportunity. Yet that awareness did not prompt the people to take-up the new activity. Obviously awareness by itself was not sufficient.

At that time, it appeared that lack of capital was the major restraint; the $700 investment required to dig a well seemed to be more than local farmers could afford. Just after the nationalization of the banks in 1969, an effort was made to provide the necessary capital for development. At the instance of the Society, the State Bank of India adopted the village of Ramapuram for development - the first time that a nationalized bank had done so in India. The bank offered term loans to all the farmers in the village. These loans offered each farmer capital to meet the entire cost of digging a well.

It was expected that development would immediately take place, because there was a productive opportunity available and a means to utilize it. However, this did not happen. The third essential condition for development had not been met. The farmers did not feel a compelling urge to take up the new activity. Their hesitation reflected their fear of the risks involved in attempting something new. The fact that the Society had already dug bore wells in the village successfully eight times was not a compelling example for them.

When the loan program failed to attract applicants, the Society approached a small farmer of low social rank in the village, who was known to be enterprising and ambitious. The Society offered to bear the financial risk if the farmer took a loan, and later found he was unable to successfully commission his well. The farmer did successfully dig the well and utilize the water to cultivate his lands. Following his example, within a short time, all fifty-four other farmers in the village applied for bank loans at their own risk and dug wells successfully. Within a few years the average agricultural income per acre in the village raised nearly ten fold.

The development of Ramapuram illustrates the crucial importance of the third condition - the psychological urge for progress. We have seen that the mere awareness of the opportunity to obtain water and the opportunity to obtain capital provided by the loan scheme were not sufficient in themselves. The farmers did not feel a compelling urge to produce more. In this instance the motivating force was social prestige rather than material ambition. So long as the development achievement was that of an outside agency unrelated to their social system, they felt no pressure to imitate it. But when the larger, more important farmers in the village saw how much attention and prestige was going to the pioneer, who suddenly became the most talked about man in the village, the social equilibrium of this traditional community was disturbed. The other farmers in the village felt compelled to dig wells in order to restore their prestige within the community - a phenomenon recognized in the west as "keeping up with the Jones".

The ultimate aim of planned development strategies is to introduce a new activity and provide suitable conditions for it to continue to grow and multiply by its own momentum. The process of development initiated in Ramapuram did not stop when it had saturated the target area. The following year 440 farmers in surrounding villages which were not covered by the adoption program managed to raise sufficient capital from traditional, non-bank sources to dig their own wells. The extension of the bore wells from Ramapuram to the surrounding areas is a strikingly successful example of a development program which had a multiplier effect. In fact the success in Ramapuram not only became a dynamic model for the surrounding villages, it also became a model for bank adoption programs all over the country. The total bank investment in Ramapuram was only $60,000. Based on the success of this program over $200,000,000 was invested by banks in India on village adoption programs over the next two years. To date more than 100,000 villages in India have been adopted by banks under similar programs.


A failure to appreciate the importance of these three conditions has resulted not only in faulty expectations but in lower than optimum returns on our investments in development. This has important implications that can greatly enhance the effectiveness of development planning and implementation.

First, in fields of activity where the population is not yet aware of an opportunity or does not fully understand the benefits it can gain by utilizing that opportunity, planned development initiatives should concentrate on education rather than implementation. In the fifties the Tamil Nadu Government should have promoted the idea that education is valuable and waited until that idea was generally accepted by the beneficiary population before investing heavily in new schools.

Second, in fields where this awareness is present but the opportunity is lacking, the effort should concentrate on establishing supportive institutions and systems to create a viable opportunity. In the sixties progressive farmers in the Punjab had very little incentive to increase agricultural productivity, because in their experience bumper crops had always resulted in falling prices and little or no increase in their net incomes. The establishment of the Food Corporation of India to market food grain surpluses in deficit areas and the establishment of a minimum floor price for wheat and rice created the opportunity which prompted them to adopt techniques to increase agricultural production.

Third, where the awareness and opportunity are present, but the psychological urge in the population is lacking, development initiatives should utilitize social or economic incentives to induce pioneers to take up the new activity. If it does not appear possible to generate a felt need in a given area, then the development funds are probably better spent in other fields.

Fourth, to the extent that a development activity is taken up by the population at large the role of the development agency should gradually be reduced. When perpetuated beyond the formative stages, institutional support for new activities all too easily becomes a bureaucratic encumbrance to further growth.


The three conditions are necessary to set development into motion. Once initiated this process passes through a number of stages which finally result in a new activity becoming integrated into the normal functioning of the society.

In the pre-development phase, society's capacities and energies are only sufficient for its survival and subsistence at the existing level of activity. By contrast, in the initial stage of development society finds it has more energy and capacity than it needs for survival, and it directs this energy to achieve greater mastery or perfection in its existing traditional activities.

In the second stage there is so much excess energy that traditional activities alone can no longer absorb it. But society has not yet found new productive avenues to express this energy. The excess energy manifests as curiosity, adventurousness, enthusiasm and entrepreneurship. Ramapuram was in this stage prior to the introduction of the development program. The excess energy manifested as a willingness to try new things.

In the third stage an enterprising pioneer undertakes a new, higher level activity. In natural development the pioneering initiative occurs spontaneously. In planned development it may be consciously induced and supported by a development agency. The Society did this in Ramapuram by assuming the financial risk for the first bore well dug by a farmer of the village. In fact one of the keys to successful planned development lies in knowing how to provide attractive incentives to stimulate pioneering initiatives.

In the fourth stage, the fresh initiative of the pioneer is imitated by several other pioneering individuals. But not all pioneering activities are imitated. When the society is not fully prepared to take up a higher level activity or when the pioneering initiative is not in tune with the general direction of the social progress, it does not attract imitators. Another component of successful development strategy is to encourage imitation of successful pioneers. This can often be done by disseminating information about new achievements and offering incentives or social support or training for similar efforts. In Ramapuram, social support for imitation of the pioneer was provided in the form of bank loans for digging wells.

In the next stage, the ability to undertake the new activity becomes widespread in the society and proliferation of the activity continues even in the absence of special supports. After all 54 eligible farmers in the target area had availed themselves of the loan program, the well-digging activity spread to ten surrounding villages where no financial scheme existed to foster it.

In the sixth stage, the activity becomes fully institutionalized in the society. Special organizations or systems evolve to maintain and propagate it. Bank lending for agricultural development, which was unheard of prior to 1969, has now become a top priority of all commercial banks in India.

In subsequent stages of the process the attitudes and skills necessary to support the activity are consciously transmitted to the next generation by the family and through formal educational institutions, until a stage is finally reached when the activity becomes an integral part of the society's culture and is successfully transmitted from generation to generation.


If we look at the evolution of entrepreneurial activity in modern India, we can trace the various stages through which the development process moves. Under the British an oppressive economic climate actively discouraged entrepreneurship and commercial initiative among the Indian population. Virtually the only outlet for individual career development was to seek a college degree and enter government service in one of the large British trading companies. An authoritarian atmosphere instilled a sense of fear in the population. There was no scope for the expression of entrepreneurial energy and skills.

In the early years after Independence, the economic climate began to change. Political freedom, social reform, and the spread of education brought in a more positive and uplifting atmosphere in which the individual was free to act, but the legacy of past fear inhibited the population from actively exploiting the economic opportunities which freedom had created. There was little or no institutional support for entrepreneurship. The legacy of an authoritarian bureaucracy continued to control and, therefore, stifles many kinds of enterprise. The banking system continued to cater primarily to the mercantile trade and the largest industrial houses. Traditional social values continued to encourage only security-oriented careers through salaried employment.

In the late fifties and into the sixties isolated signs of energy and entrepreneurial activity began to surface in various fields and parts of the country. Many dynamic individuals became highly successful entrepreneurs, despite the absence of a well-developed infrastructure and supportive economic institutions. The banking system continued to back only the larger business houses. These substantial but relatively isolated achievements created a far greater awareness in government and the educated population of the untapped commercial opportunities. As a result government began establishing new institutions to foster greater industrial activity such as the industrial research institutions, industrial finance corporations, industrial training institutes, marketing organizations, export promotion councils, etc. The banks also liberalized their loan policies to provide financial assistance to medium scale industries. But still the pace of industrialization was relatively slow.

In the seventies the pace of economic activity increased dramatically. Among the primary factors responsible was the coming of age of an educated generation which had never lived under the authoritarian rule of the British Raj, the liberalization of bank support for small industries and the cumulative. In earlier times social status accrued primarily to those born of high caste, large land owners and government employees. In the seventies success became an avenue for gaining status and prestige regardless of one's social origins. This acted as a powerful stimulus to entrepreneurial activity.

In the eighties this trend continues at an accelerated pace - not only by expanding into new fields such as high tech, but also by moving down to embrace a lower and wider section of the population. Successful small scale entrepreneurs are heralded by the community, and their achievements are quickly imitated by others. In some respects the institutional support for new economic activity is even greater in India today than it is in the United States, because of the active commitment of the government. For example the developers of a high yielding agriculture technology in California were unable to obtain a bank loan to commercially exploit the unproven technology in the United States. But when the technology was transferred to India, a government-owned development bank sanctioned $6 million for the project. The policies and operation of India's financial institutions are being remodeled to provide institutional support for large numbers of people who had no access to bank finance in the past. Recently, the Government of India has allocated $2 billion for unsecured self-employment loans.

The development of entrepreneurship is now passing into the stage where the traditional opposition of the family to entrepreneurial activity is being gradually replaced in many communities by either passive acceptance or active encouragement. But it has yet to reach the stage where entrepreneurial activity is being actively transmitted through the formal education system. The schools and colleges continue to promote traditional security-oriented values and to prepare students for salaried jobs rather than self employment.


The Green Revolution in India is frequently cited by those who view development primarily in terms of capital and technology as a consummate example of technology-driven economic growth. But in reality the Green Revolution involved far more than the introduction of high yielding varieties of food grains. Rather it is an example of a comprehensive and highly integrated strategy that met the three essential conditions for development and can serve as a clear illustration of the stages of the development process which we have enumerated.

Had the very same hybrid varieties been introduced into India in the early 1950's instead of the mid 1960's, it is very likely that the results would have been far less dramatic, and it is even possible that the strategy would have been a complete failure. But by the mid 1960's the traditional, conservative climate in many parts of India was rapidly giving way to a strong urge in the population for greater material comforts and rising expectations. In many parts of the country, especially Punjab in the North and parts of Tamil Nadu, in the South, people felt a strong desire for more and were willing to work to achieve it.

At this time when an urge for development was emerging in the population, a new opportunity presented itself in the form of the hybrid varieties. Yet it is doubtful whether the introduction of the hybrid varieties alone would have had a significant impact. The hybrids represented a technological opportunity, but not an economic one. Historically the farmer had little economic incentive to produce more than he could consume or sell to his neighbors. Bumper crops inevitably resulted in excessive supply and falling prices in the local market and therefore little or no marginal gain for the farmer.

The establishment of the Food Corporation of India and guarantee of at least a minimum floor price for all food grains transformed a technical opportunity into an economic one. Surplus grain production could now be sold for a profit by the farmer and marketed in grain deficit areas by the corporation.

Planners recognized very early that the success of the hybrids depended very much on their acceptance by the farmer. In order to create rapid and widespread awareness of the benefits of the new varieties, a massive program of public education was introduced which included the establishment of more than 100,000 demonstration plots around the country. These demonstration plots were wisely situated in the villages on private lands rather than on government operated research properties in order to bridge the psychological gap that often exists when demonstrations are executed by government or research institutes.

With all three prerequisites to initiation of the development process present to a significant extent, the new activity quickly gained acceptance and momentum. It transited the early stages of the development process within just a few years. The demonstration plots stimulated pioneering initiatives by progressive farmers, which in turn fostered widespread imitation of the pioneers in many areas.

However, in order for the process to pass beyond the pioneering stages and become a widespread activity, a variety of new institutions in addition to Food Corporation and price supports had to be established. Seed production and distribution was a serious constraint in the early years following the introduction of the hybrids. The population could not be expected to sustain the new activity without adequate supplies of hybrid seeds. Seed corporations were established by the central and state governments for this purpose. Warehousing was another major constraint. After the introduction of the hybrids, the roads of Punjab were literally lined with wheat, much of it destroyed by exposure because there were not adequate storage facilities. Warehousing corporations were established to provide storage facilities to house the surpluses. The Fertilizer Corporation of India was also established to import and later manufacture the enormous quantities of fertilizer required to obtain high yields from the new varieties.

The government's strategies also involved a restructuring of institutions responsible for agricultural research. Research activities by approximately 100 autonomous institutions were brought under a single umbrella organization, the Indian Council for Agricultural Research. In order to provide greater motivation to the scientists, the pay scales and status of agricultural researchers were upgraded to the level of other scientific disciplines, and scientists replaced bureaucrats as the heads of most research institutes.

The process continued beyond this point during the 1970's. The new activity was quickly accepted by the community and passed on to the next generation of farmers. Agricultural education was restructured and expanded. The emphasis of the curriculum also shifted from a focus on traditional food grains to new hybrid forms of other crops as well.

In a brief period of twenty years, this new activity, which many planners did not believe could ever be successfully introduced in India, has become a normal and integral activity of the Indian economy and a model for many other countries to imitate. India, which was on the verge of a severe famine in 1965, is now emerging as a major grain exporter.