Chapter 10: Developing Countries
The old terms
Third World: Cold War—era classification
Global South: Latin America, Southeast Asia, and Africa
Current terminology
Developing countries: lower- and middle-income countries
Middle-income and low-income countries are both considered “developing countries”.
Countries that aren’t in “the rich countries club”.
Middle-income countries: historically less-developed countries that have experienced significant economic growth and democratization
Also known as newly industrialized countries (NICs)
Per capital GDP (PPP) between $4,000 and $13,000
Some are very comparable to developed democracies.
Lower-income countries: countries that lack significant economic development, political institutionalization, or both
Sometimes also known as less developed countries (LDCs)
Per capital GDP (PPP) below $4,000
Many differences
Economics: Some are growing and breaking out of the poverty trap, others are being left behind.
Regime type: Some are democracies, others nondemocracies.
Various cultures, state capacities, ethnic, national, or religious institutions, etc.
Many (but not all) share legacies of imperialism.
Empires: a single political authority that has under its sovereignty a large number of external regions or territories and different peoples
Imperialism: a system in which a state extends its powers to directly control territory, resources, and people beyond its borders
Dominated by European powers (1500s to 1900s)
Driven by economic, strategic, and cultural/religious motives
Imperialism often led to colonialism
Colonialism: an imperialist system of physically occupying a foreign territory using military force, businesses, or settlers.
Is a system in which a state extends its power beyond its borders to control other territories, resources, and peoples.
Was propagated by European powers from the sixteenth to the twenty-first centuries.
Is driven by economic, strategic, and religious motives.
Often led to colonialism, the physical occupation of foreign territories.
Emerged in response to technological advances
European powers extend control over
Latin America (Spain and Portugal)
Middle East (Ottomans, later France and United Kingdom)
Africa (France, Portugal, Belgium, and United Kingdom)
Asia (United Kingdom and Portugal)
Major wars end the age of imperialism
New (and often artificial) borders
Exporting bureaucratic structures
National language (often the imperial power)
Police and military
Taxation
Legal systems
Public goods: roads, schools, and hospitals
Consequences have been mixed
New infrastructure
But built mainly for resource extraction
Inequality between cities and countryside
Increased education
For some of the population (inequality)
Education → exposure to nationalism → resentment
“Institutional limbo”
Incomplete imposition
Trapped between traditional Western institutions
Ethnic and national identities
Created new categories
Colonial power structures favored certain groups
Example: Tutsi in Rwanda
Would provide basis for later independence movements; set stage for post-independence conflicts
Gender roles
Imperial gender roles imposed on colonies
Mixed impact; depends on region and imperial power
The state, as a form of political organization, was imposed on much of the world outside of Europe.
Ethnic and national identities were created where none had existed before colonization.
Gender roles from the imperial country were often imposed on colonies.
Extractive colonies: Built to extract resources from colonies and send them back to the metropole (colonizing power)
Most colonies in Africa, Asia, and the Middle East
Settler colonies: A lot of Europeans settled
US, Canada, Australia, New Zealand, South Africa
Better set up for success in the long run
Importing cash-based economies
Little free trade, tended toward mercantilism
Colonies produced primary commodities only
Finished goods sold by imperial center
Little development of local and regional industry
Limits on trade with rival empires
Business monopolies controlled economies
United East India Company (Dutch); British East India Company
Urbanization and infrastructure expansion
Traditional agricultural economies were transformed to suit the needs of the imperialist power.
Economic organization under imperialism impeded domestic development in the colonies.
Free trade was often suppressed, as colonies were forced to supply goods only to the imperial country, creating extractive economies in the colonies.
The broad goals
Build state capacity and autonomy.
Create nations and citizens.
Generate economic growth.
Some countries have done better than others at meeting these goals.
Capacity: the ability of the state to carry out basic tasks, including
Defending the country
Making and enforcing rules
Managing the economy
Collecting taxes
Building infrastructure; providing education and healthcare
Autonomy: the ability of the state to wield its power independently of the public
Absence of a professional bureaucracy
Imperial power vacuum
Politicization of bureaucracy
Clientelism, rent-seeking, and corruption
Patrimonialism
State captured and exploited
Some operate under kleptocracy: “rule by theft”
1990s: Nigerian officials steal over $1 billion
2016: U.S. government seizes $1 billion in assets stolen by people chose to Malaysian prime minister.
International pressures
More powerful state and international actors shape state’s political decisions.
Absence of professional bureaucracy (following departure of foreign imperial bureaucrats).
Clientelism, rent-seeking, and corruption in the handling of state jobs and revenue.
Sovereignty often compromised by external actors (other states, international organizations).
More criminality and corruption
Increased political and economic inequalities
Greater civil and communal conflict
Inability to respond to disasters and crises
Loss of government legitimacy
May lead to greater political instability
Challenge 1: Build a single national identity in high diverse societies.
Challenge 2: Address gender inequalities.
Causes of ethnic/religious conflicts:
Inequality in wealth
Political dominance of one group over others
Clientelism and patrimonialism → increases ethnic disparities
Examples of patrimonialism in practice
Sunni rule in Shia-majority Iraq under Saddam Hussein
Alawite monopolization of power in Syria
Ethnic and religious divisions among different groups in heterogeneous societies (often exacerbated by economic inequality).
Arbitrary political boundaries imposed by imperial powers.
The problems:
Laws favor male ownership and deny women access to land or capital.
Economic/cultural barriers to change: men fear less of their authority.
Example of reform failure: Nicaragua
Land law reforms beginning in 1980s sought to implement women’s joint ownership.
Local inheritance customs make implementation difficult.
Consequences: husbands engage in “asset violence” and property blackmail.
The causes: poverty + culture/legal traditions that favor males
Economics and laws favor male holding of resources.
Dowry tradition: girls are viewed as an economic burden.
The consequences for women:
Discrimination: less investment (such as health and education) in daughters
Gendercide: sex-selective abortions; neglect of girl babies; bride burnings; witch killings
Examples: 40 million missing girls in India; 60 million in China
Imperialism left a legacy of unsustainable economies
Focus on primary commodity production
Had to import finished goods
Many developing countries started from system of trade imbalances and debt
Neocolonialism: Indirect form of imperialism in which powerful countries overly influence the economies of less-developed nations
Two distinct mercantilist economic policies were applied throughout the developing world:
Import substitution
Export-oriented industrialization
These are also known as structural-adjustment programs.
Import substitution: a mercantilist strategy for economic growth in which a country restricts imports in order to spur demands for locally produced goods
Where implemented: Latin America, Africa, parts of Asia
Policy tools: trade protectionism and intervention
Tariffs and nontariff trade barriers
Widespread subsidies
Government-owned and parastatal companies
Complete policy feature
Problems it created
Business uncompetitive, could not function without state protection
Corruption
Poverty remained unchanged or increased
Middle-income trap: a situation where countries experience economic growth but are unable to develop at a speed necessary to catch up with developed countries
Export-oriented industrialization: a mercantilist strategy for economic growth in which a country seeks out technologies and develops industries focused specifically on the export market
Where implemented: Asia
Policy tools: strategic investment to build an export-based market
Capitalize on the product life cycle.
Strategic government subsidies
Tariffs and other trade barriers
More successful than import substitution
Some challenges
May be prone to corruption
As economy develops, this strategy becomes more expensive.
Rising labor costs undermine product life cycle advantage.
Economic dependencies are increased.
Success of domestic companies rely on international demand.
Lack of domestic markets undermines market diversity.
Structural-adjustment program: a policy of economic liberalization adopted in exchange for financial support from liberal organizations; typically includes privatizing state-run firms, ending subsidies, reducing tariff barriers, shrinking the size of the state, and welcoming foreign investment
Also called neoliberalism and Washington consensus
Where implemented: countries receiving loans from World Bank or IMF
Major goal: Minimize government intervention to allow a free market to emerge.
Privatize state-run firms, sell off state ownership in parastatals.
End subsidies.
Reduce tariff and other trade barriers.
Shrink the size of the state (including welfare spending).
Remove restrictions and pass policies to encourage foreign investment.
Its success depends on the country.
A good option in overly bureaucratic states
May undermine growth in countries struggling with human capital crises, geography challenges, or infrastructure weaknesses
Other issues
Criticized as neocolonialism
Political instability: Frustration over policy triggered anti-IMF riots in Egypt (1977) and Greece (2010-2012).
Import Substitution
Based on mercantilism
State plays a strong role in the economy.
Tariffs or nontariff barriers are used to restrict imports.
State actively promotes domestic production, sometimes creating state-owned businesses in developing industries.
Criticized for creating “hothouse economies,” with large industries reliant on the state for support and unable to compete in the international market.
Export-Oriented Industrialization
Based on mercantilism
State plays a strong role in the economy.
Tariff barriers are used to protect domestic industries.
Economic production is focused on industries that have a niche in the international market.
Seeks to integrate directly into the global economy.
Has generally led to a higher level of economic development than import substitution.
Structural Adjustment
Based on liberalism
State involvement is reduced as the economy is opened up.
Foreign involvement is encouraged.
Often follows import substitution.
Criticized as a tool of neocolonialism and for its failure in many cases to bring substantial economic development.
Major improvements
Life expectancy improving
Infant mortality dropping
Fast GDP growth
Challenges preventing growth
Ethnic conflict
Natural resources and the resource curse
Poor governance
Major goal: build good governance and improve the rule of law
Possible strategies
Reform judicial institutions, police, and civil service.
Strengthen constitutional courts.
Critics: Institutional reform should NOT be the starting point.
Argue that rule of law norms need to emerge first, and only then will real institutional change occur.
Major goal: Nurture civil society and citizen engagement.
Possible strategies
Emphasize local issues.
Expand mass media.
Critics: Political engagement does not guarantee good politics.
May instead fuel clientelism.
Promoting Economic Prosperity
The challenge of the informal economy
Informal economy: a segment of the economy that is not regulated or taxed by the state
The benefits and drawbacks of a large informal economy
Very flexible
Tends to employ women
Lack of revenues, which weakens state capacity and public goods
More difficult for firms to grow
Developing countries are a very diverse group that includes both middle- and lower-income countries.
While there are many differences between these countries, many share a common legacy of imperial rule. Imperialism has shaped these countries’ political, social, and economic institutions.
Developing countries struggle with building capacity and autonomy; these political challenges undermine economic and social stability.
Regarding social cohesion, some developing countries struggle with ethnic or religious divides. Gender inequality is also a major problem, with potential serious repercussions if left unaddressed.
Following the end of imperialism, states sought to grow their economies by pursuing one or more of the following policies: import substitution, export-oriented industrialization, or structral adjustment programs (neoliberalism/Washington Consensus).
Major goals for developing states today are creating more effective governance, developing political engagement, and promoting economic growth. There is no “one size fits all” policy to achieving any of these goals.
Colonialism - an imperialist system of physically occupying a foreign territory using military force, businesses, or settlers
Developing countries - lower- and middle-income countries
Empire - a single political authority that has under its sovereignty a large number of external regions or territories and different peoples
Export-oriented industrialization - a mercantilist strategy for economic growth in which a country seeks out technologies and develops industries focused specifically on the export market
Imperialism - a system in which a state extends its powers to directly control territory, resources, and people beyond its borders
Import substitution - a mercantilist strategy for economic growth in which a country restricts imports in order to spur demands for locally produced goods
Informal economy - a segment of the economy that is not regulated or taxed by the state
Lower-income countries - countries that lack significant economic development, political institutionalization, or both; also known as less-developed countries (LDCs)
Microedit - a system in which small loans are channeled to the poor through borrowing groups whose members jointly take responsibility for repayment
Middle-income countries - historically less-developed countries that have experienced significant economic growth and democratization; also known as newly industrializing countries (NICs)
Middle-income trap - a situation where countries experience economic growth but are unable to develop at a speed necessary to catch up with developed countries
Neocolonialism - an indirect form of imperialism in which powerful countries overly influence the economies of less-developed countries
Neoliberalism/structural adjustment programs/Washington Consensus - a policy of economic liberalization adopted in exchange for financial support from liberal organizations; typically includes privatizing state-run firms, ending subsidies, reducing tariff barriers, shrinking the size of the state, and welcoming foreign investment
The old terms
Third World: Cold War—era classification
Global South: Latin America, Southeast Asia, and Africa
Current terminology
Developing countries: lower- and middle-income countries
Middle-income and low-income countries are both considered “developing countries”.
Countries that aren’t in “the rich countries club”.
Middle-income countries: historically less-developed countries that have experienced significant economic growth and democratization
Also known as newly industrialized countries (NICs)
Per capital GDP (PPP) between $4,000 and $13,000
Some are very comparable to developed democracies.
Lower-income countries: countries that lack significant economic development, political institutionalization, or both
Sometimes also known as less developed countries (LDCs)
Per capital GDP (PPP) below $4,000
Many differences
Economics: Some are growing and breaking out of the poverty trap, others are being left behind.
Regime type: Some are democracies, others nondemocracies.
Various cultures, state capacities, ethnic, national, or religious institutions, etc.
Many (but not all) share legacies of imperialism.
Empires: a single political authority that has under its sovereignty a large number of external regions or territories and different peoples
Imperialism: a system in which a state extends its powers to directly control territory, resources, and people beyond its borders
Dominated by European powers (1500s to 1900s)
Driven by economic, strategic, and cultural/religious motives
Imperialism often led to colonialism
Colonialism: an imperialist system of physically occupying a foreign territory using military force, businesses, or settlers.
Is a system in which a state extends its power beyond its borders to control other territories, resources, and peoples.
Was propagated by European powers from the sixteenth to the twenty-first centuries.
Is driven by economic, strategic, and religious motives.
Often led to colonialism, the physical occupation of foreign territories.
Emerged in response to technological advances
European powers extend control over
Latin America (Spain and Portugal)
Middle East (Ottomans, later France and United Kingdom)
Africa (France, Portugal, Belgium, and United Kingdom)
Asia (United Kingdom and Portugal)
Major wars end the age of imperialism
New (and often artificial) borders
Exporting bureaucratic structures
National language (often the imperial power)
Police and military
Taxation
Legal systems
Public goods: roads, schools, and hospitals
Consequences have been mixed
New infrastructure
But built mainly for resource extraction
Inequality between cities and countryside
Increased education
For some of the population (inequality)
Education → exposure to nationalism → resentment
“Institutional limbo”
Incomplete imposition
Trapped between traditional Western institutions
Ethnic and national identities
Created new categories
Colonial power structures favored certain groups
Example: Tutsi in Rwanda
Would provide basis for later independence movements; set stage for post-independence conflicts
Gender roles
Imperial gender roles imposed on colonies
Mixed impact; depends on region and imperial power
The state, as a form of political organization, was imposed on much of the world outside of Europe.
Ethnic and national identities were created where none had existed before colonization.
Gender roles from the imperial country were often imposed on colonies.
Extractive colonies: Built to extract resources from colonies and send them back to the metropole (colonizing power)
Most colonies in Africa, Asia, and the Middle East
Settler colonies: A lot of Europeans settled
US, Canada, Australia, New Zealand, South Africa
Better set up for success in the long run
Importing cash-based economies
Little free trade, tended toward mercantilism
Colonies produced primary commodities only
Finished goods sold by imperial center
Little development of local and regional industry
Limits on trade with rival empires
Business monopolies controlled economies
United East India Company (Dutch); British East India Company
Urbanization and infrastructure expansion
Traditional agricultural economies were transformed to suit the needs of the imperialist power.
Economic organization under imperialism impeded domestic development in the colonies.
Free trade was often suppressed, as colonies were forced to supply goods only to the imperial country, creating extractive economies in the colonies.
The broad goals
Build state capacity and autonomy.
Create nations and citizens.
Generate economic growth.
Some countries have done better than others at meeting these goals.
Capacity: the ability of the state to carry out basic tasks, including
Defending the country
Making and enforcing rules
Managing the economy
Collecting taxes
Building infrastructure; providing education and healthcare
Autonomy: the ability of the state to wield its power independently of the public
Absence of a professional bureaucracy
Imperial power vacuum
Politicization of bureaucracy
Clientelism, rent-seeking, and corruption
Patrimonialism
State captured and exploited
Some operate under kleptocracy: “rule by theft”
1990s: Nigerian officials steal over $1 billion
2016: U.S. government seizes $1 billion in assets stolen by people chose to Malaysian prime minister.
International pressures
More powerful state and international actors shape state’s political decisions.
Absence of professional bureaucracy (following departure of foreign imperial bureaucrats).
Clientelism, rent-seeking, and corruption in the handling of state jobs and revenue.
Sovereignty often compromised by external actors (other states, international organizations).
More criminality and corruption
Increased political and economic inequalities
Greater civil and communal conflict
Inability to respond to disasters and crises
Loss of government legitimacy
May lead to greater political instability
Challenge 1: Build a single national identity in high diverse societies.
Challenge 2: Address gender inequalities.
Causes of ethnic/religious conflicts:
Inequality in wealth
Political dominance of one group over others
Clientelism and patrimonialism → increases ethnic disparities
Examples of patrimonialism in practice
Sunni rule in Shia-majority Iraq under Saddam Hussein
Alawite monopolization of power in Syria
Ethnic and religious divisions among different groups in heterogeneous societies (often exacerbated by economic inequality).
Arbitrary political boundaries imposed by imperial powers.
The problems:
Laws favor male ownership and deny women access to land or capital.
Economic/cultural barriers to change: men fear less of their authority.
Example of reform failure: Nicaragua
Land law reforms beginning in 1980s sought to implement women’s joint ownership.
Local inheritance customs make implementation difficult.
Consequences: husbands engage in “asset violence” and property blackmail.
The causes: poverty + culture/legal traditions that favor males
Economics and laws favor male holding of resources.
Dowry tradition: girls are viewed as an economic burden.
The consequences for women:
Discrimination: less investment (such as health and education) in daughters
Gendercide: sex-selective abortions; neglect of girl babies; bride burnings; witch killings
Examples: 40 million missing girls in India; 60 million in China
Imperialism left a legacy of unsustainable economies
Focus on primary commodity production
Had to import finished goods
Many developing countries started from system of trade imbalances and debt
Neocolonialism: Indirect form of imperialism in which powerful countries overly influence the economies of less-developed nations
Two distinct mercantilist economic policies were applied throughout the developing world:
Import substitution
Export-oriented industrialization
These are also known as structural-adjustment programs.
Import substitution: a mercantilist strategy for economic growth in which a country restricts imports in order to spur demands for locally produced goods
Where implemented: Latin America, Africa, parts of Asia
Policy tools: trade protectionism and intervention
Tariffs and nontariff trade barriers
Widespread subsidies
Government-owned and parastatal companies
Complete policy feature
Problems it created
Business uncompetitive, could not function without state protection
Corruption
Poverty remained unchanged or increased
Middle-income trap: a situation where countries experience economic growth but are unable to develop at a speed necessary to catch up with developed countries
Export-oriented industrialization: a mercantilist strategy for economic growth in which a country seeks out technologies and develops industries focused specifically on the export market
Where implemented: Asia
Policy tools: strategic investment to build an export-based market
Capitalize on the product life cycle.
Strategic government subsidies
Tariffs and other trade barriers
More successful than import substitution
Some challenges
May be prone to corruption
As economy develops, this strategy becomes more expensive.
Rising labor costs undermine product life cycle advantage.
Economic dependencies are increased.
Success of domestic companies rely on international demand.
Lack of domestic markets undermines market diversity.
Structural-adjustment program: a policy of economic liberalization adopted in exchange for financial support from liberal organizations; typically includes privatizing state-run firms, ending subsidies, reducing tariff barriers, shrinking the size of the state, and welcoming foreign investment
Also called neoliberalism and Washington consensus
Where implemented: countries receiving loans from World Bank or IMF
Major goal: Minimize government intervention to allow a free market to emerge.
Privatize state-run firms, sell off state ownership in parastatals.
End subsidies.
Reduce tariff and other trade barriers.
Shrink the size of the state (including welfare spending).
Remove restrictions and pass policies to encourage foreign investment.
Its success depends on the country.
A good option in overly bureaucratic states
May undermine growth in countries struggling with human capital crises, geography challenges, or infrastructure weaknesses
Other issues
Criticized as neocolonialism
Political instability: Frustration over policy triggered anti-IMF riots in Egypt (1977) and Greece (2010-2012).
Import Substitution
Based on mercantilism
State plays a strong role in the economy.
Tariffs or nontariff barriers are used to restrict imports.
State actively promotes domestic production, sometimes creating state-owned businesses in developing industries.
Criticized for creating “hothouse economies,” with large industries reliant on the state for support and unable to compete in the international market.
Export-Oriented Industrialization
Based on mercantilism
State plays a strong role in the economy.
Tariff barriers are used to protect domestic industries.
Economic production is focused on industries that have a niche in the international market.
Seeks to integrate directly into the global economy.
Has generally led to a higher level of economic development than import substitution.
Structural Adjustment
Based on liberalism
State involvement is reduced as the economy is opened up.
Foreign involvement is encouraged.
Often follows import substitution.
Criticized as a tool of neocolonialism and for its failure in many cases to bring substantial economic development.
Major improvements
Life expectancy improving
Infant mortality dropping
Fast GDP growth
Challenges preventing growth
Ethnic conflict
Natural resources and the resource curse
Poor governance
Major goal: build good governance and improve the rule of law
Possible strategies
Reform judicial institutions, police, and civil service.
Strengthen constitutional courts.
Critics: Institutional reform should NOT be the starting point.
Argue that rule of law norms need to emerge first, and only then will real institutional change occur.
Major goal: Nurture civil society and citizen engagement.
Possible strategies
Emphasize local issues.
Expand mass media.
Critics: Political engagement does not guarantee good politics.
May instead fuel clientelism.
Promoting Economic Prosperity
The challenge of the informal economy
Informal economy: a segment of the economy that is not regulated or taxed by the state
The benefits and drawbacks of a large informal economy
Very flexible
Tends to employ women
Lack of revenues, which weakens state capacity and public goods
More difficult for firms to grow
Developing countries are a very diverse group that includes both middle- and lower-income countries.
While there are many differences between these countries, many share a common legacy of imperial rule. Imperialism has shaped these countries’ political, social, and economic institutions.
Developing countries struggle with building capacity and autonomy; these political challenges undermine economic and social stability.
Regarding social cohesion, some developing countries struggle with ethnic or religious divides. Gender inequality is also a major problem, with potential serious repercussions if left unaddressed.
Following the end of imperialism, states sought to grow their economies by pursuing one or more of the following policies: import substitution, export-oriented industrialization, or structral adjustment programs (neoliberalism/Washington Consensus).
Major goals for developing states today are creating more effective governance, developing political engagement, and promoting economic growth. There is no “one size fits all” policy to achieving any of these goals.
Colonialism - an imperialist system of physically occupying a foreign territory using military force, businesses, or settlers
Developing countries - lower- and middle-income countries
Empire - a single political authority that has under its sovereignty a large number of external regions or territories and different peoples
Export-oriented industrialization - a mercantilist strategy for economic growth in which a country seeks out technologies and develops industries focused specifically on the export market
Imperialism - a system in which a state extends its powers to directly control territory, resources, and people beyond its borders
Import substitution - a mercantilist strategy for economic growth in which a country restricts imports in order to spur demands for locally produced goods
Informal economy - a segment of the economy that is not regulated or taxed by the state
Lower-income countries - countries that lack significant economic development, political institutionalization, or both; also known as less-developed countries (LDCs)
Microedit - a system in which small loans are channeled to the poor through borrowing groups whose members jointly take responsibility for repayment
Middle-income countries - historically less-developed countries that have experienced significant economic growth and democratization; also known as newly industrializing countries (NICs)
Middle-income trap - a situation where countries experience economic growth but are unable to develop at a speed necessary to catch up with developed countries
Neocolonialism - an indirect form of imperialism in which powerful countries overly influence the economies of less-developed countries
Neoliberalism/structural adjustment programs/Washington Consensus - a policy of economic liberalization adopted in exchange for financial support from liberal organizations; typically includes privatizing state-run firms, ending subsidies, reducing tariff barriers, shrinking the size of the state, and welcoming foreign investment