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)

ConclusionQuestions 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.