Development- an Introduction to International Studies lecture

Ruined palace from the mid-fourteenth century in Fez, Morocco.

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.



Modernization Theory






  • 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


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


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



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



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



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



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?


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