New general theory of economic development: Innovative growth and distribution

• Published date: 01 May 2020
• Date: 01 May 2020
• Author: Yong‐Shik Lee
• DOI: http://doi.org/10.1111/rode.12654

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wileyonlinelibrary.com/journal/rode Rev Dev Econ. 2020;24:402–423.

© 2020 John Wiley & Sons Ltd

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INTRODUCTION

Today’s world has achieved unprecedented technological advances. Despite these advances, the gap

between the wealthy “developed” countries and economically deprived “developing world” remains

striking.1

While economically advanced countries (“developed countries”)2

offer unprecedented

Received: 9 November 2018

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Revised: 20 January 2020

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Accepted: 20 January 2020

DOI: 10.1111/rode.12654

REGULAR ARTICLE

New general theory of economic development:

Innovative growth and distribution

Yong-ShikLee

The Law and Development Institute,

Decatur, GA, USA

Correspondence

Yong-Shik Lee, The Law and Development

Institute, Decatur, GA 30033, USA.

Email: yslee@lawanddevelopment.net

Abstract

Economic development, which refers to the process of pro-

gressive transformation of an economy, is a multifaceted

term without a universal definition. This article presents the

constitutive elements of economic development: growth,

distribution, and innovation. Economic development has

been ubiquitous with the economic progress of “develop-

ing” countries, but the changing economic circumstances

of “developed” countries, such as stagnant growth, regional

economic disparity within developed countries, and deep-

ening income gaps among citizens of developed countries,

have made this term also relevant to address the economic

problems of developed countries. The mechanisms of eco-

nomic development, with respect to both developed and

developing countries, are elusive, and the existing theories

have not been able to explain these mechanisms of eco-

nomic development adequately. This article reviews the ex-

isting theories and presents a new theoretical framework to

explain the process of economic development.

KEYWORDS

distribution, economic development, growth, law and development, new

general theory

[Correction added on 10 March 2020, after

first online publication: The correspondence

section has been updated in this version.]

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LEE

economic opportunities for their population, a majority of the world population still suffers from

lack of food, shelter, and other necessities of life.3

External aid has not proved to be a permanent

solution to poverty. The conditions of poverty do not improve unless poor countries build an econ-

omy that can provide the majority of their population with resources necessary to lift their lives

beyond poverty, through “economic development.” There is no universally accepted definition for

economic development, but it can be defined as “the process of progressive transformation of an

economy leading to higher productivity and increases in income for the majority of population”

(Lee, 2019a, p. 4 fn.15).

Developing countries that have failed to achieve economic development remain poor, with

the majority of their population suffering from economic deprivations, and the countries that

have been successful in achieving economic development rose from poverty, building advanced

economies that offer higher income and employment opportunities for their population. Several

countries in East Asia, such as South Korea, Taiwan, Singapore, and Hong Kong,4

and others,

such as Spain and Chile,5

are in this category of countries that have successfully undertaken

economic development. The relief of poverty has been an important international agenda, as

demonstrated by global initiatives such as the Millennium Development Goals (MDGs) and the

Sustainable Development Goals (SDGs) promoted by the United Nations (United Nations, 2015).

Economic development is a priority for developing countries suffering from the conditions of

poverty; nonetheless, only a relatively small number of developing countries have achieved eco-

nomic development.6

Economic development has also become a concept relevant to address the economic issues of

developed countries. Today, even in developed countries with a degree of overall wealth and prosper-

ity, income gaps among their citizens and different regions within developed countries have grown

substantially. Economic growth has also stagnated to the point that a majority of their population

demanded fundamental political-economic changes, as demonstrated by the unexpected upset in the

2016 presidential election in the United States and the outcome of the referendum in the United

Kingdom supporting its exit from the European Union (Lee, 2019b, pp. 111–136; Harris, 2016;

Gabriel, 2016). These economic problems faced by developed countries resemble chronic economic

problems in developing countries; thus, economic development is a relevant concept to address these

issues (Lee, 2017a, pp. 432–435), and the term “economic development” has already been used by

central and local governments in developed countries in the context of their own economies.7

This

article proceeds with a presumption that economic development is relevant to address the economic

issues of developed countries as well as developing ones.

While the term “economic development” is widely used, its precise definition and constitutive

concepts have been debated. This article begins with a discussion of the constitutive elements of

economic development in the next section. Conventional economic theories do not adequately ex-

plain economic development. Section 3 discusses the elusive mechanisms of economic development,

examining the limits of the conventional theories in explaining economic development. To overcome

these limits, a theory has recently been advanced (Jwa, 2017). This theory, entitled “General Theory

of Economic Development,” identifies economic development as a complex, multidimensional, evo-

lutionary process and adopts innovative approaches to explain the process, but also exhibits certain

gaps and deficiencies (Lee, 2017b). This article discusses the deficiencies and presents a new theory,

in section 4, to fill the identified gaps and offer a more coherent explanation of economic develop-

ment. The new theory also explains, based on empirical cases, the process of economic development

in two stages—initiating economic development and sustaining economic development—and argues

that the conditions for initiating economic development and sustaining it are not identical. Section 5

draws conclusions.