Theories of development

World systems theory and dependency theory

• Structural

• Explain role of neocolonialism and capitalism in locking LICs in permanent state of ‘under development’

WST v DT

• WST — global system = restrictive to development of LICs

• DT — global system = prohibitive to development of LICs

Development theory

• Sees structural problems w/international capitalism the same way as Marxists do on a domestic level

3 elements of development theory

1. Capitalism

2. Colonialism

3. Neocolonialism

Capitalism

• Workers in LICs exploited by elite in both own state and internationally, entrenching systematic wealth inequalities that will always coexist with capitalism

  • Elite own means of production

  • Elite also focus on keeping workers in low pay to maximise profits (not then shared)

Colonialism

• Colonial powers embedded colonialism in states

  • Purpose of economic activity in colonial states = make colonising power richer

• Colonial states ≠ politically sovereign so underdevelopment → long-term economic disadvantage

Neocolonialism

• Persistence of colonialism despite independence

• Previously colonial states dependent on major economies

1. Exploitative extraction of natural resources

2. Reliance on FDI

3. Debt-trapped via borrowing

Dependency theory — Frank — 2 types of state

1. Periphery states

2. Core states

Flow of resources

• Periphery → core

5 features of core states

1. HICs, global N

2. Industrialised and produce wide variety of goods

3. MNCs based there

4. Pay high wages

5. Have mobile, educated skilled population

Core state example — 🇺🇸

• Extracts oil from 🇦🇴 (Angola)

  • 🇦🇴 now dependent on 🇺🇸

• MNC based in 🇺🇸 = Exon Mobil

4 features of periphery states

1. LICs, global S

2. Unindustralised

3. Have natural resources they can’t use that are needed by core states

4. Reliant on exports so vulnerable to market fluctuations

Periphery state example — DRC 🇨🇩

• HDI = 175/188

• Has coltan (natural resource)

Dependency theory example — 🇨🇳 investment in Africa and 🇱🇰

• Provides loans, investment and infrastructure in return for natural resources

Only African country that doesn’t trade with 🇨🇳 and reason

• 🇸🇿 (Eswatini)

  • Because recognises 🇹🇼 as a country

Biggest traders w/Africa

• Until 2009 — 🇺🇸

• Post-2009 (3x largest now) — 🇨🇳

2 African countries that trade most w/🇨🇳

1. 🇿🇦

2. 🇳🇬

AU HQ

• Built by 🇨🇳

  • Then bugged it!

2012 — $ 🇨🇳-Africa trading

$106bn

2017 — $ 🇨🇳-Africa trading

$117bn

World systems theory — Wallerstein

• 3rd group of states created — semi-periphery

• Difficult but not impossible to move between groups

• States work in a hierarchy to restrict development of LICs and maintain dependency on HICs

3 features of semi-periphery states

1. Between periphery and core states (duh)

2. Growing industrialisation

3. More powerful than periphery states but still dependent on core states

2 examples of semi-periphery states — NICs

• 🇧🇷

• 🇿🇦

Classical development theory/classical liberalism — Smith

• Market can self-regulate

• Laissez-faire economics is best for fair prices and wages

• Focus: division of labour to up efficiency and production

Classical development theory and poverty

• Lack of income/resources

  • Natural state of existence for human beings

• Solution: economic development because it creates wealth

FDI example

• Basically just TNCs

  • Rana Plaza collapse

Number of people that work in the garment industry in 🇧🇩

4m, mainly women

Min. wage in 🇧🇩/month (2014)

$68

Number of deaths and injuries in Rana Plaza collapse

• 1,100 deaths

• 2,500 injuries

Neoliberalism and neoclassical development theory (similar to New Right)

• I.e. Washington Consensus

  • Adopted by IMF, WTO and WB

6 key elements of neoliberalism and neoclassical development theory

1. Low gov’t spending

2. Tax reform to keep them low

3. Deregulation

4. Privatisation

5. Free trade

6. FDI

3 defences of neoliberalism

1. FMC and removal of barriers → more states having access to global markets

2. Low taxes allow more individual choice on spending and investment (incl. entrepreneurship)

3. High public spending → borrowing and/or tax rises → high budget deficit → some states unable to service debts and need to borrow from IMF and ECB (🇮🇪, 🇬🇷, 🇵🇹, 🇪🇸)

3 CRITICISMS of neoliberalism

1. Increase intra and interstate inequality, states have to intervene to stimulate growth and ensure fair distribution of income and wealth

2. Lack of regulation → 2008 → state intervention → austerity to pay for it

3. Low public spending → under-investment in healthcare or education

Keynesianism

• Multiplier effect

• Investment in infrastructure → more jobs → increase spending to stimuate demand → more jobs

Case study: 🇻🇳 — events

• 1986 Doi Moi reforms

  • Moved from centrally planned economy → socialist-oriented market economy

    • Opened up to FDI and global trade

    • Became key 🌍 player in supply chains

• Invested in education and infrastructure; reduced poverty

Case study: 🇻🇳 — consequences

• Former semi-periphery, now industralised by not fully (still has some state involvement in economy)

• Supports neo-classical development theory — liberal economic policies → growth

• State intervention → stability

• Global integration w/domestic gains

• Industrial diversification

Case study: 🇧🇼 — events

• Used 💎 resources

  • Avoided resource curse by forming 50-50 partnership with De Beers to ensure profits stayed in country

• Revenue used to invest back into country via HIV/AIDS treatment and infrastructure

Case study: 🇧🇼 — consequences

• Does have significant state control

• Supports neo-classical development theory — liberal economic policies → growth

• State intervention → stability

• Global integration w/domestic gains

• Social investments

• Strategic use of resrouces

Case study: 🇧🇷 — events

• Used state-led industrialisation to establish competitive industries — not just exporting raw materials but adding value to them

• Mercosur — leader in regional economic cooperation

Case study: 🇧🇷 — consequences

• State-led industrialisation, no reliance on FDIs/investors

• State intervention → stability

• Global integration w/domestic gains

• Industrial diversification