Modernization theory states that underdevelopment is a condition caused by problems internal to the country (Understanding). These problems include the beliefs, attitudes and values of the people, the culture, the country's government, and its policies. A country's prosperity is dependent on its changing to a market economy, and making use of the country's resources, and ingenuity is critical to this development in promoting a competitive advantage (LDCs). Stability is attained by changing from a culture of violence, and promoting democratic reforms.
In modernization theory, problems which held back the industrialization of poor countries are related to the irrational way in which the resources are allocated in a traditional society (Modernization). Traditional societies became modern by rationalizing resource allocation and by the elimination of cultural, institutional and organizational roadblocks that prevented these countries from developing. Modernization theory identifies different stages and processes through which a society develops. Positive evolution implies that all societies need to pass through the same stages as western society has passed through to become modern societies. The stages of modernization are a) the traditional society, b) preconditions for take-off, c) take-off, d) the drive to maturity, and e) the age of high mass consumption. These stages of modernization are known as Rostow's stage theory.
Dependency Theory is a paradigm of thought that emerged out of Latin America in the 1960s and 1970s, and argued that underdevelopment of traditional societies was due to external exploitation, not isolation. It is an ongoing process caused by oppression of the country by external forces (Understanding). Unequal terms of trade arise from monopolies of manufactured goods and monopsonies of primary goods (e.g. cocoa in Ghana). The problem is that the needs of core countries always come first, implying...