This is a lecture on development for an “Introduction to International Studies” course. It was last updated about 2012, so it would need to be adapted with more current materials for today’s classroom. I also haven’t provided citations. But some of this material actually draws on notes from my own undergraduate classes, so one old friend may recognize some of these points. I should also caution that I am not a development scholar, so this lecture only touches on key issues and theories. It was also first taught in an “Introduction to Latin American Studies” class, so there are more references to that region in it. But I hope that some faculty may find some inspiration here, and be able to adapt this for their own classes.
Development
Terms
Modernization Theory
Underdevelopment
Marxism
Neoliberalism
Introduction:
- one of the first things everyone learns about Latin America or Africa is that they not as economically developed as other countries
- these regions are very wealthy in some respects
- major industry, rich natural resources, critical number of engineers and technical experts in many countries
- yet large numbers of people live in extreme poverty
- why have these regions not succeeded in developing their economy as other areas have?
- why are so many people there so poor?
- wide range of theories to address this question
- today: lecture about different theories of development
- effort to explain the difference between developed countries and less developed countries
- lets look at the characteristics of the two levels of development
Developed Countries
- What are the characteristics of developed countries?
a lot of material goods
sophisticated economic system
social security: safety net for the poor
urban
advanced technology
high standard of health
education: high literacy rate
stable government
better infrastructure, ie. roads, sanitation
skilled labor
middle class
Less Developed Countries
unstable government
poor infrastructure: developed by other countries, geared towards the mother country
unpayable debts
depend on cash crops for profit
no secondary industries
unskilled labor
illiteracy
few people attend higher education
unequal wealth distribution
high rate of population growth
no social security: a weak safety net
How do we explain why some countries develop quickly while others do not?
this has been the major question of the twentieth century for political theorists
there have been a series of schools of thought on this question
Modernization Theory
modernization theorists developed by thinkers in Europe in the 1950s and 1960s
these authors were trying to understand why their nations seemed to be so successful, unlike those of LA, Africa, and Asia
developed an argument that focused on Latin America’s history
Latin America less developed because of its colonial heritage
colonial period established institutions and values that became obstacles to development
heritage of conquest
very hierarchical and rigid social structure
system of great landholding estates
inequality of landholding: reinforces social inequalities
fazenda system: reinforced creole domination
Portuguese and Spanish conquerors: brought an aristocratic ethos
scornful of commerce and labor
ideal: wealthy landlord
these kinds of attitudes/rural orientation -institutionalized
Church powerful: absorbed large amounts of capital
funds set aside to say masses for the dead, provide for monestaries and church people who do not produce any economically valuable goods
became obstacles to change
society too static
break these institutions and ideas: development
modernization theorists: blame colonial heritage for Brazil and Spanish America’s current problems
think L.A. is behind on the path to development
Presecription for Change
modernization theorists: optimists
believe that it is possible for the region to change rapidly
abandon its social and political heritage
adopt forms from modernized nations
requires foreign expertise
also foreign investment, which should be accepted without restriction
nation could quickly change
Critics of Modernization Theory
modernization theory very powerful in the 1950s and early 1960s
then it came to be criticized
seemed to argue that there was only one path to development
need to follow the path of the western powers
becoming modern means coming to look more like the United States and Europe
this seems a rather Eurocentric argument
not very attractive to Latin Americans, who were told that they would have to abandon everything that made them unique
also seems to place much of the blame for LA’s slow development on Latin Americans themselves
may not consider larger structural issues that shape how LA has developed
Latin Americans believed that Americans and Europeans bore much of the responsibility for their problems
modernization theory: seemed to be like blaming the victim for his suffering
Dependency Theory
product of Latin American scholars
also looks at colonial heritage of LA
looks more at structures than it does ideas
particularly, the relationship between Latin America and the rest of the world
colony: geared economically to the mother country
no internal trade, development of ports
exploitative relationship
colony dependent
decisions made outside the colony itself
economic relationship: impedes development
L.A. did gain its political independence in the early twentieth century
but it never became really economically independent
Spain replaced by Britain, which is in turn replace by the United States in the twentieth century
Latin America integrated as an exporter of raw materials
a neo-colonial relationship
official control by outside power no longer there
but the economic relationship between Latin America and the rest of the world looks very much the same after independence
economic and social inequalities flow from this
one final point: Latin America is attempting to industrialize in a very different environment than the path followed by the United States and Britain
Britain: not a good model for how industrialization should take place
Britain: no competitors
able to create industry with relatively small amounts of capital
this no longer true
major countries provide formidable competition to newly industrializing nations
expense of founding industrial plants has skyrocketed
no longer possible to found industry with private capital
only the state has sufficient capital to found industries now
Problems of this form of development
no denying that changes had taken place in Latin America
but dependency theorists had created the very strange notion of underdevelopment
idea that modernization or economic change could actually damage countries
numbers might show that the nation was developing
but in fact the nation was suffering from underdevelopment
that is, development was not taking place in a manner that would benefit the lives of Latin Americans
instead, development only served to increase these nation’s dependency on other powers
not enough to say that development equals modernization
ever since the 1930s Latin America has had industry
it has become increasingly urban
yet this does not seem to benefit the lives of most people
the main cause of death in Latin America is dysentery
obviously, development does not always benefit the mass of the population
for example, foreign nations might pour investment into LA countries
but this investment would not benefit the country as a whole
let us take the example of Guatemala
foreign nations invested large amounts of money in the banana industry
developed railroads and ports
but did this investment really improve the lives of most Guatemalans
was the nation developing, or suffering from underdevelopment
dependency theorists would argue that Guatemala was only becoming more dependent on outside powers
railroads developed: but they did not connect different Guatemalan cities together
instead, they tied these cities to the coast, and from there to Europe
ports developed: but they only serve to tie the nation more deeply to the international economy
banana production increases
but this makes the nation dependent on the fortunes of a single crop for its economic future
industry does not develop
nation recieves foreign loans: but these go for roads and ports that benefit foreign industries
the nation then has the trouble of paying off massive amounts of foreign debt, that only serve to benefit banks in the developed world
there are profits made from banana production
but most of these profits are exported from the country
this position of economic dependency makes the country politically instable
too reliant on outside powers
Prescription of Dependency Theory:
Latin America cannot follow the path to industrialization followed by first world nations because it is industrializing in a different environment
Latin America needs to involve the state heavily in development
state has to develop key industries like steel, and petroleum
state has to enact large tariffs
protect domestic industries from competition until they can get on their feet
restrictions on foreign investment
development must be regulated to make sure that it is in the national interest
in particular, this means encouraging industry
dependency theorists associated agriculture with mono-crop dependency
believed that if countries continued to rely on agriculture they would remain economically weak
the key was to develop the nations industry
to alter the region’s relationship with the First World
Criticism of Dependency Theory
dependency theory very popular in LA
seemed to shift the blame for economic problems away from LA
created a conveniant set of villains who could be denounced
yet some critics have argued that dependency theory is in essence a nationalist mythology
does not look at the role of LA elites in hampering development
theory has fallen out of favor in recent years
economic program of state-led development: not successful
governments favoring state-led development: have also fallen steeply into debt
inefficient industries have flourished behind tariff walls
program of state-led development did not bring the successes expected
some countries declined greatly following this model
Argentina: turn of the century had a per capita income similar to Australia and Canada
yet following since turning to populism in the 1930s, when the nation adopted many policies favored by dependency theorists, the nation entered into an economic decline
Argentina had grown wealthy based on its agricultural exports, of wheat and beef
Peron favored industrialization
changed the nation
but did not lead to rapid economic development
indeed, some countries -such as New Zealand- that continued to mainly rely on agricultural exports seemed to do quite well
how could this be explained
example of Taiwan, Korea, Singapore, and Hong Kong
these countries integrated as much as possible into the world market
yet these are the nations that have developed most rapidly
within LA, the country with the greatest economic growth has been Chile
Chile seems to be well on the path to leaving its developing status behind, uch liek the Asian tigers
yet Chile has followed the most liberal path to development
after the 1973 military coup, the army turned to the University of Chicago
a series of conservative theorists -called the Chicago boys- were welcomed to Chile
they created a program for Chile’s development that relied on the free market
longest period of sustained economic boom in twentieth century LA
this boom controversial
many problems with it: shaky banks, homelessness
not everyone has done well from this period of economic boom
inequalities have increased
yet Chile has become a model for the rest of Latin America
dependency theorists unable to explain its success
kept predicting taht its success was shortlived and doomed to crash
the crash never came
people became less certain that development necessarily equals underdevelopment
seems to make the term development meaningless
Brazil: has undergone an impressive process of modernization, which has created an economic powerhouse in São Paulo
did that make the nation weaker
Fernando Henrique Cardoso: troubled by this fact
created an idea called associated dependency
said that yes, it was possible for Third World Nations to develop while in a position of dependency
but in order to do so, the metropole would have to underdevelop the periphery
in other words, major Brazilian cities could develop only by underdeveloping the countryside
their growth repeated the neo-colonial relationship that Brazil had experienced in the past with outside powers
this argument seemed rather ridiculous to many people
Hong Kong: incredibly dependent on world trade
yet it is incredibly rich and powerful
to many people the whole concept of underdevelopment seemed meaningless
Marxism
one other theory: Marxism
has much in common with dependency theory
even more radical
in order to truly develop, LA nations must completely break with the capitalist system
Lenin: revolution had not come with industrialization as Marx had predicted
industrial powers averted revolution by exploiting the Third World
only through imperialism, had capitalism been able to continue its development
this meant, that under a capitalist world order, the nations of the Third World were doomed to be exploited
moreover, Third World elites bore part of the responsibility for their people’s poverty
they allied with international capital, to obtain their wealth
in return, they followed policies that caused immense suffering among the working class, the group which created all wealth in their countries
The Communist’s prescription
this problem could not be solved with limited programs
only a profound social and economic problem could end this system, which doomed Third World nations to suffer
working class needed to overthrow national elites
create a government of the people
break ties of dependency with capitalist powers that exploited the population
radically reform social structures that benefitted a small and wealthy social elite
create a Communist society
Problems/Criticisms of Marxism
this program was very attractive in LA in the 1960s
came to be a number of problems
several revolutionary movements tried to overthrow the existing order
lacked the power to do so
helped to inspire the authoritarian regimes of the 1960s and 1970s
in Central America, this struggle led to lengthy periods of civil war
left thousands of people dead, immense social cost
other problem: U.S.
would not tolerate a Marxist state elsewhere in L.A.
Nicaragua: underwent a social revolution, although not a strictly Marxist one
the U.S. organized an economic boycott
financed a rebel war against the government
caused immense economic and social damage
given international realities, a Communist revolution did not seem to be a realistic option in LA
other problem: Cuban model
for a brief time, Cuba seemed to be an attractive model
development on behalf of the majority of the population
major strides in literacy, public health, education
but also major problems
not the least of which: major dependence on the Soviet Union
simply replaced dependency on one power for dependency on another
Cuba: not a democracy
press censorship, persecution of writers and homosexuals
during 1980s: over 100,000 Cubans risked their lives to flee to the United States in small rafts
major economic problems
Castro blamed these problems on the United States
claimed that a U.S. blockade was devestating the country economically
proved a powerful tool for rallying support both within Cuba, and also internationally
but, there were some problems with this argument
no question that U.S. policies hurt the island economically
but the U.S. did not have a blockade, but an embargo
blockade: an act of war, in which you keep other nations from trading with your enemy by force
embargo: you refuse to trade with an enemy yourself
U.S. policy moving from embargo to blockade
but for most of the history of the revolution, Cuba has been free to trade with Canada, Europe, Asia, and Latin America
what goods does the U.S. have that Cuba cannot get from these countries
three countries in particular: Canada, Mexico, and Spain have invested large amounts of funds in Cuba
does not seem to be enough to guarantee Cuba’s economic development
particularly during the 1990s
Soviet Union collapsed: Cuba lost large infusions of cash which had kept the economy afloat
epidemic of blindness: turned out to be caused by malnutrition
problem quickly solved with vitamins
but the underlying problem could not be solved so quickly
collapse of the Soviet Union: communism lost much of its attraction
if East Germany could not make Communism work in forty years, could Latin American countries make it succeed
Communism had not proved to be a success anywhere it had been tried
even China was turning towards a market economy
in Nicaragua: the Sandinastas were voted out
not necessarily a rejection of their policies
people tired of war: electing opposition a means to end it
but the allure of Communism had faded
Cuba: before Fujimori’s coup, it was the only nation in the hemisphere that was not a democracy
Communism no longer a powerful model
need for a new vision
Neoliberalism
new theory: neoliberalism
wholesale adoption of Adam Smith
relies on the free market to develop Latin America
argues that the region must follow the path of the Asian tigers
in many respects looks a great deal like modernization theory
but it differs in that it does not say that all LA institutions and beliefs must change
little focus on structures
a belief that the market in and of itself can change what stands in the path of development
theory became popular in the 1980s
popularized by a Peruvian author named Hernando de Soto
he said that no-one could claim capitalism had failed in LA, because it had never tried
traditionally elites dominated the economy in their interest
then the government dominated the economy, and stifled private initiative with bureaucracy
state supposed to help people, but it did the opposite
to make his point, de Soto pointed to housing
dependency theorists: supposed to be concerned with the betterment of most Latin Americans lives
but in fact, government had not improved the lives of the poor he argued
the poor: could act on their own to build housing
they would find the land, get the bricks, make their houses on their own
main problem: government stood in the way
lengthy process to gain title to land
vast web of regulations concerning how a house could be built
almost impossible to get a building permit unless you were wealthy, and could afford to have friends in the planning office
for this reason, the poor found it hard to build good legal homes
they could not put much effort into their homes
hard to get legal title: they could not sell them
the government provided a disincentive for people to improve their lives
same thing held true for private businesses
difficult to get all the required permits
only the wealthy could afford a lawyer to comply with all regulations
many people forced to operate in the so-called “informal sector”
outside the realm of laws
this did not mean that they were true criminals, or that they were anti-social
this just meant that the poor lacked the resources to work according to the rules
made it hard for small businessmen to get loans, to compete
the government was a major obstacle to development
contracted vast loans for development projects
mismanaged the money
great deal of corruption, because there was no accountability
worsened the national debt
government tried to pay off the debt by printing money
drove up inflation
people could not plan financially in a rational manner in this environment of chaos
the rich sent their money out of the country to avoid this uncertainty
the government tried to persuade them to keep their money in the country by offering bonds with high interest rates
this meant that people flooded capital into government bonds rather than investing it in something productive
this money, in turn, would be mismanaged
finally, key sectors of the economy were controlled by the government, such as the phone company, the oil company, the steel industry
the government had wanted to develop these industries, for the benefit of the nation
in fact, these government industries were extremely inefficient
there was no competition to make them run better
these industries did not have to please their customers, because customers had no alternative
there was no incentive to invest in technology or modernize in these industries
often, businessmen could find the same services offered internationally at a lower price
but they could not use these services or good because of protectionist tariffs and regulations
these industries were so important that they hampered the development of the whole economy
Prescription
the problem, neo-liberals argue, is the power of the government in LA
private initiative can solve most of Latin America’s problems if it is only given a chance
there is no problem with foreign capital, provided that it is in private hands
the government tends to misuse it, because it does not have to worry about investing rationally to pay off the debt
it will simply print out more money, or raise taxes
businessmen, however, have to invest rationally or they will go out of business
the power of the government has to be stripped away
the government owned monopolies have to be privatized so that they will be efficient
government also needs to adopt an austerity program
has spent too much money in the past, which has caused fiscal crises
Criticism:
This theory was very powerful in the 1980s and 1990s
First you had the era of Thatcher and Reagan
Then the state-run economies of Eastern Europe and Soviet Union collapsed, discrediting the Marxist alternative
China adopted capitalist reforms in the 1970s, and began a sustained boom
Other regions, such as South Korea and Singapore, did very well with this model
For a time, there seemed to be a tide against government everywhere in the world
in Brazil, the major theorist of dependency theory was Fernando Henrique Cardoso
when he became president he enacted neo-liberal measures
in the 19900s Menem: ran for the presidency in Argentina as a populist
wild hair, Argentine poncho, nationalist rhetoric
came to power: began to wear a business suit
carried out a neo-liberal policy
Peru: Mario Vargas Llosa ran for the presidency
promised to adopt neo-liberal programs
people worried that he would adopt an austerity program
Llosa: member of the elites
garnered resentment from among the poor
they voted for Fujimori, a man of Japanese descent
not associated with the rich elites
he ran on a nationalist and populist program
came to power: became a neo-liberal
Rethinking Neoliberalism
- for a time, there was no powerful theoretical answer to neoliberalism
- then the financial crisis came
- countries that had stricter regulation did much better
- in the millennium decade, the conservatives had wanted to liberalize the banking system in Canada, so that it could be as successful as the United States
- but after 2008, the stodgy Canadian banking system looked good
- The financial crisis discredited the free market, which had financialized all kinds of products such as credit debt swaps and derivatives
- The strongest economy in Europe was Germany
- Germany not a neoliberal nation
- Has a strong union system, yet it dominates manufacturing
- Now makes more cars than the United States
- Neoliberals don’t like unions, which they have blamed for the decline of manufacturing in the United States
- The U.S. was only able to save its auto industry after a massive government intervention
- This intervention was very successful, and perhaps saved 1.5 million jobs
- But did not make the U.S. look good relative to Germany
- Germany is very conservative financially (credit card anecdote) yet its financial system came through quite well
- New powers rising: Brazil, China
- These are nations in which the state plays a major role in the economy
- Brazil’s last two presidents: a former union boss and an ex-Marxist guerrilla
- True, they have embraced capitalism
- But it is a carefully regulated and controlled capitalism
- These nations are greatly outperforming their competitors
- Rethinking of neoliberalism
- Some neoliberal countries, such as Chile, have a great deal of popular discontent, because goods and services –like education- are too expensive
- Other models are beginning to look attractive
- After 2008, there was a wholesale rethinking of neoliberalism
- Very few people talk of the Washington consensus in the same way
- The unregulated market, which is the ideal of neoliberalism- looks much less attractive
Questions: (note, these cover both the lecture and the reading)
How familiar were you with development theories before this lecture and the reading
Why is it so hard to come up with labels that work to describe those countries that are richer and those that are poorer: Global North/Global South; First World/Third World
How do you measure development? Should it only include economic indicators? Also health? What about happiness?
What problems do you have with particular theories?
Which of these theories seems most persuasive to you? Why?
Why do you think modernization theory was popular in the 1950s?
What would you say was the central idea of modernization theory?
Why might it have lost popularity?
What do you think of dependency theory?
Why do you think this theory was popular in the developing world?
Why might political leaders in the developing world like dependency theory?
Does this theory make some valid points? What are they?
What are the problems you see with dependency theory?
If the central idea of dependency theory is flawed, do some of its points still make sense?
Does neoliberalism hold out a better prospect of solving developing countries’ problems?
Why do you think that this ideology is so powerful today?
What are the problems with adopting a neoliberal approach to development?
Do some of these theories still have validity?
Do you think that the Grameen bank offers another alternative for how to approach development?