Slides

Week 7: Logics and Patterns of Development in the Global South

Developmental Aspirations: Mid-20th Century

  • Liberal Expectations

    • Inclusion of the South in international trading systems was expected to yield development-like experiences in the West.

    • Colonialism was not perceived as a barrier to development.

  • Harry S. Truman's Address (1949)

    • Quote: "We must embark on a bold new program for making the benefits of our scientific and industrial progress available for the improvement and growth of underdeveloped areas…"

    • Truman emphasized making scientific and technical knowledge available to aid in realizing aspirations for a better life.

    • Contextual Motives: The initiative served U.S. security interests and aimed to showcase capitalism as a superior engine of development.

Import Substitution Industrialization (ISI): Latin America

  • Historical Dynamics

    • The Cold War led to a re-establishment of colonial trade relations, characterized by:

    • Client States: Supplying raw materials and later purchasing manufactured goods from developed nations.

    • Latin America responded with ISI in the 1950s and 1960s aimed at:

    • Creating domestic manufacturing and job opportunities for local populations.

    • Providing cheaper goods domestically while also embarking on some exportation efforts.

    • Utilizing tariffs to protect domestic markets to nurture 'infant industries' against foreign competition.

    • Sometimes employing state subsidies and ownership to stimulate specific industrial growth.

Dependency Theory

  • General Overview

    • A radical response to failures of development strategies under modernization and ISI frameworks.

    • Dependency: Defined as the situation where a country's economic progress is significantly influenced by another economy’s development.

    • Dependency Theory: Argues that a dependent country's capitalist development is impeded or made impossible by the nature of international exchange relations, leading to revolutionary movements in nations like Cuba and Nicaragua.

  • Critical Rejections of Traditional Views

    • Challenges the focus on individual nation-states and cultural conflicts (tradition vs. modernity). Instead:

    • Advocates for situating nation-states in the context of a global political economy, which represents a fresh analytical level.

    • Supported by Lenin's insights regarding capitalism’s global functioning shaping national development.

  • Core-Semi-Periphery-Periphery Dynamic

    • Highlights the interconnected yet starkly unequal nature of the global capitalist system.

    • Countries at the system's core develop at the expense of others (periphery nations).

    • Core economies in the global South perpetuate similar relations with their satellites.

  • Exploitation Dynamics

    • Southern production is tailored to suit metropolitan economies instead of local needs characterized by:

    • Dependence on single-export products.

    • Disadvantageous trading terms.

    • Reliance on foreign technology.

    • Foreign ownership dominating domestic production.

    • Frank’s assertion: "the development of underdevelopment."

  • Trickle-Down Fallacy

    • Critique that capitalism benefits do not trickle down to the lower classes; the bourgeoisie may remain ineffectual and compromised, serving elite metropolitan interests.

    • Frank asserts: the further one is from global capitalism, the more developed a nation may be.

    • The dependency structure significantly matured starting in the 16th century due to colonial relations funneling resources to Western manufacturing, becoming increasingly irreversible over time due to enduring disparities in state capacities.

Developmental States

  • Differential State Typologies (Evans)

    • Identifies various state types: predatory, developmental, and intermediary.

  • Predatory States Characteristics

    • Marketization of state roles, where public power is exploited for personal acquisition:

    • Quote from Evans (p. 570): "Holding any slice of public power constitutes a veritable exchange instrument convertible into illicit acquisition of money or other goods."

    • Public spending is misallocated toward strengthening power via patronage rather than development.

    • Societal fragmentation stemming from competing groups vying for favor.

  • Developmental State Characteristics

    • Autonomous: Cohesive state bureaucracy focused on long-term goals independent of dominant societal demands.

    • Embeddedness: Well-formed networks allowing the state to understand and cater to business elite needs for economic advancement.

    • Embedded Autonomy: The ability of the state to offer guidance and resources, unlocking hidden potential for economic growth.

    • Promotes the cultivation of a bourgeois class oriented towards long-term, profit-driven investments.

Theories of State Development: Gerschenkron's Perspective

  • Emergence of Strong States

    • Strong states are necessary for successful industrialization and will emerge through:

    • Early industrializers accumulate investment capital slowly to transition to capital-heavy industries.

    • Individual entrepreneurs function without requiring institutional capital support.

    • Later industrializers are forced to accumulate capital rapidly to ensure competitiveness, necessitating innovative roles from banking and state mechanisms.

    • Later industrializers increasingly depend on state involvement and ideologies that advocate for this role.

Case Study: Developmental State - Japan (1950s-70s)

  • Japanese Economic Strategies

    • Success factors included:

    • Industrial frameworks crafted by bureaucratic entities such as the Ministry of International Trade and Industry (MITI).

    • Financial institutions enabled the redirection of savings towards productive investments.

    • Production realignment targeting both export and domestic markets.

    • Selection processes favoring specific sectors and firms termed as 'picking winners.'

    • Implementing tariffs and import restrictions to shield nascent industries from competition.

    • Provision of subsidies and low-interest loans to catalyze industrial growth.

    • Public sector assumes risks to enable private enterprises to innovate by absorbing financial losses.

State Strength and Foreign Investment: Comparative Analysis

  • Differential Conditions in East Asia vs. Latin America

    • In East Asia:

    • Strong state structures were established prior to foreign investments.

    • The aftermath of WWII and the weakness of the Japanese colonial powers allowed new political alignments favoring growth.

    • In Latin America:

    • Countries were inundated with foreign investments before states could build strength.

    • The persistence of powerful landed classes complicated political coalitions required for pro-growth agendas.

Neoliberalism: Challenges and Shifts

  • The 'Lost Decade' in Japan (1991-2001)

    • The global 'lost decades' of the 1980s and 90s featured declined export demands, plummeting prices for primary goods, and the pursuit of cheap loans leading to debt crises.

  • Structural Adjustments

    • Creditors and international financial institutions restructured debts in return for implementing structural adjustment programs which entailed:

    • Reductions in public spending, often at the expense of social safety nets.

  • Emergence of the Washington Consensus (1990s)

    • Advocated a program characterized by:

    • Liberalization, privatization, deregulation, and fiscal austerity.

    • Chang’s Critique:

    • The West touts their own path as the template while historical realities challenge its universality.

Key Alternatives to Neoliberalism

  • Leftist Responses to Washington Consensus

    • Advocated for a resurgence of developmental goals, exemplified by:

    • UN Millennium Development Goals (2000)

    • UN Sustainable Development Goals (2015)

    • Notable recent resurgence in state intervention driven by populist and progressive movements, aiming to address the needs of the populace directly.

    • Broad goals sought include:

    • Eradicating extreme poverty and hunger.

    • Improving maternal health.

    • Achieving universal primary education.

    • Promoting gender equality and empowering women.

    • Combatting diseases such as HIV/AIDS and Malaria.

    • Ensuring environmental sustainability.

    • Fostering a global partnership for development.