Development Theory I: Modernisation and Dependency

Structure of the Lecture Section One: Brief Historical Introduction Section Two: Modernisation Theory Section Three: Dependency Theory Section Four: Capitalist Structuralism

Historical Introduction For ideas of development economics or development theory to make sense it necessary to recognise difference between developing and developed societies In many respects both Marxists and liberals did not recognize differences in C19th and early C20th

For Marx Imperialism was about the export of capital The expansion of capitalism led to uniformity Not that different from liberal political economy Even critics of Imperialism (Hobson) saw it as ‘developmental’

Modern Development Economics was born in Latin America in the 1930s in response to world depression The main early contributions of Development economics come under heading of the ‘structuralist’ school

The work of these early scholars was quickly dwarfed by contributions of US based liberal scholars in the early post-war period who sought to frame a comprehensive theory of development (Modernisation theory) Explicit ant-communist political agenda

1960s (in wake of the Cuban revolution) formation of a radical explanation of underdevelopment

Modernisation Theory Has cultural, political and economic component Different authors stress different aspects of the argument

Evolutionary Theory of Human History: Third World Societies are less ‘evolved’ than first world societies Policy framework to fight communism Parsons overtly uses biological metaphor

A number of levels of the analyse First and third world ‘man’ are seen as different physiologically (Oscar Lewis and David McClelland ). First world ‘man’ is individualist, rational and goal orientated. Third world ‘man’ is collective, irrational and fatalist

Second, first and third world social systems are fundamentally different in terms of levels of evolution: Parsons Ideas of evolutionary ‘universals that all societies need to evolve beyond a particular level’.

Basic: Social stratification, Cultural Legitimating Advanced: Bureaucratic Organisation, Money and the Market Complex, Generalised Universalistic Norms, and finally Democracy

Politically modernisation theorists did not simply promote liberal democracy Concerned with problems of transition (the confluence of the modern and the underdeveloped) Need mechanism of integration, depersonalisation, mediation and moderation to make democracy work

Order (anti-communism) most important Army appeared as a rational modern institution. A medium term political solution Pye, "Armies in the Process of Political Modernization” Democracy ideal in long-term

Economic Theory of Modernisation Rostow and Stages (Traditional Society, Preconditions for take-off, Take off, Drive to Maturity, Mass Consumption) Values and ideas of traditional society are a problem After this rates of investment. . Invest 10-20 per cent of national income.

Lewis. Dual Economy and Expanding Capitalist nucleus Two economies in underdeveloped state (capitalist and traditional) The key to achieving growth is expand capitalist sector

It is necessary to channel additional resources to the sector. Squeeze the peasantry Importantly there is no serious consideration of external constraints

Criticisms of Modernisation: Tradition simply becomes a residual characteristic (not seriously analysed) Theory of evolution is crude You cannot simply ignore the structures of the global economy

You cannot simply ignore the structures of the global economy The economic solutions it proposes will exasperate poverty in the medium term Political solutions questionable? Does not properly delineate between different societies All cultural explanations of growth pose problem of hitting the target (Catholicism, Confucianism etc )

Dependency Theory Marx turned on his head Focus on exchange than production Underdevelopment and development two sides of the same coin The idea of a traditional sector is nonsense The problem is how third world is integrated into the global economy

Frank Unequal Exchange: All trade is monopolist an controlled by the centre for its over benefit (source of control changes). Same systems work internally (Major cities exploit the countryside) Lumpenbourgoise: All development is simply the development of underdevelopment

The entire economy is thoroughly penetrated by global capital Although capital may lose interest in regions and periods of passive and active involution (Sub Saharan Africa example of passive involution) For Frank active involution has limits

The Amin variation Different explanation of Unequal Exchange: Wages and Dynamic Advantage Excepts that there is pre-capitalist elements in the third world

However, these elements are penetrated by and their development is shaped by capitalism Some development is possible but only extraverted development auto centric development is impossible Thus for Amin (1973: 292) there no direct correlation between underdevelopment and GDP.

Criticisms of Dependency: Hopelessly ridged (particularly Frank) Insensitive to variations within the Third World (corrected by Cardoso) Degrees of dependency. It is not Black and White Belittles the real achievements of the third world (development of underdevelopment or extraverted development) What is equal exchange?

Economic Theory of Modernisation Lewis. Dual Economy and Expanding Capitalist nucleus Two economies in underdeveloped state (capitalist and traditional) The key to achieving growth is expand capitalist sector

It is necessary to channel additional resources to the sector. Squeeze the peasantry Importantly there is no serious consideration of external constraints

Capitalist Structuralism We deal with this last because it represents a ‘middle ground’ understanding of third world states interactions with the world economy (Furtado). It primarily theory devised by economists and is not necessarily a comprehensive theory of development

Some parallels with Lewis but differences More sensitivity to external (fact you are developing in relation to the developed) Terms of Trade Emphasis on the domestic market and third world common markets Primary focus on balance of payments rather than savings constraint

Policy Instruments: Capitalist planning Trade barriers Moderate Wage Increases (expand markets and drive productivity) Tax the Rich not the peasants (the rich have a bad pattern of consumption)

Conclusion Questions for You: What do these two approaches agree upon? What can be salvaged?

Class Exercise: Election Fever There is a election in a middle income state (say Brazil). Divided into 3 groups (one representing modernisation, one dependency, one capitalist structuralism). Put forward a manifesto with main policies (and rational for these policies). Nominate a candidate who gave a brief election address.