Download PERSPECTIVES ON DEVELOPMENT

Chapter 11
Inequality Among Nations
by Gordon Laxer
Copyright © 2004 by Nelson, a division of Thomson
Canada Limited.
1
TWO PERSPECTIVES ON
DEVELOPMENT
There are two broad perspectives on why some
countries are poor:
• The Western-centric perspective: some countries
are poor because Western capitalist institutions and
values have not penetrated them deeply enough.
• The anti-imperialist perspective: some countries
are poor because capitalism has penetrated them
too deeply and it is in the interests of rich countries
to keep them poor.
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2
THE TWO PERSPECTIVES
SUMMARIZED
Causes of
Third World
Problems
Linkages to
Western
Countries
Prediction
The Western-Centric
Perspective
The Anti-Imperialist
Perspective
Mostly Internal
Mostly External
Generally Beneficial
Generally Harmful
Optimistic
Solutions for More Western Linkages:
adopt markets, profit
Development
motive, democracy
Pessimistic
Fewer Western Linkages:
abandon capitalism, rely
on own economic and
political resources
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UNEQUAL DEVELOPMENT
AND UNEQUAL BENEFITS
•
Economists usually measure growth and
standard of living using GNP (gross national
product) or GDP (gross domestic product) –
the value of all goods and services produced
in a country in a year.
•
But increases in GNP do not necessarily
indicate an increase in material well-being for
most people since the benefits of the
increase may go only to the wealthiest.
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4
UNEQUAL DEVELOPMENT
Recent GNP growth at the global level has
been accompanied by:
• widespread poverty;
• longer working hours;
• absence of democracy;
• discrimination;
• pollution;
• poor education; and
• persistent inequality.
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5
HUMAN DEVELOPMENT
•
Human development is an alternative indicator
of well-being. It measures opportunities to:
• work and earn income;
• gain an education;
• obtain health care;
• live in a healthy environment; and
• enjoy democracy, equality, and
freedom.
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6
PEOPLE LIVING ON LESS THAN
$1 A DAY
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7
UNEQUAL BENEFITS OF
DEVELOPMENT
•
Inequalities exist not only between rich and poor
countries, but also within countries, rich and poor.
•
Among the most inegalitarian countries is Brazil,
but inequality remains substantial even in rich
countries like the United States and Canada.
•
Women in Third World countries are the hardest hit
by underdevelopment in terms of income,
workload, health, etc.
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8
THE MAJOR PLAYERS
The main actors shaping global development
include:
• transnational corporations
• powerful states, in particular the United
States and its allies
• supranational institutions, such as:
• the IMF and the World Bank
• the G7, EU, and NAFTA
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9
THE HISTORICAL RECORD I
The current division between rich and poor
countries is a recent phenomenon.
• In 1750, China and India were the largest
producers of manufactured goods (including
crafts), accounting for more than half of global
manufacturing.
• The countries that would later constitute the
Third World accounted for 73% of global
manufacturing, including crafts.
• But by 1913 the Third World accounted for
only 7.5% of global manufacturing.
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10
THE HISTORICAL RECORD II
•
Since the Industrial Revolution, dominant
states have imposed capitalism through:
• empire and unequal trade;
• the forcible capture of markets;
• the manipulation of treaties and other
special arrangements; and
• superior technology.
•
Capitalist industrialization and imperial
domination are the major forces behind
today’s inequalities between countries.
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11
PERSPECTIVES ON
DEVELOPMENT: LIBERALISM
AND NEO-LIBERALISM
•
Liberalism equates capitalism with freedom and
distrusts governments. Its core principles:
•
•
•
•
•
•
Self-interest promotes the common good.
Profits of private firms maximize innovation and
efficiency.
Freedom in the market maximizes human freedom.
Free market dynamics separate productive from
unproductive firms.
The state inhibits growth.
Poor countries advance if global markets are kept
free.
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12
VOTING POWER AT THE
WORLD BANK AND THE IMF
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13
LIBERALISM IN PRACTICE
TODAY I
•
Poor countries have been compelled to adopt
structural adjustment programs (SAPs) in
exchange for foreign loans. Requirements:
• Lower debt by cutting public expenditures
and balancing budgets.
• Encourage exports by deregulating
businesses and devalue currencies.
• Encouraging investment by allowing foreign
ownership and control.
• Sell off public enterprises and secure private
property monopolies under law.
• Allow markets to set interest rates.
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14
LIBERALISM IN PRACTICE
TODAY II
•
SAPs have not worked. In sub-Saharan Africa:
• investment fell;
• economic growth slowed;
• deficits rose as a percent of GNP;
• a larger proportion of export earnings
went to debt repayment; and
• consumption fell.
•
Why? Partly because devaluation led to fewer U.S.
dollars earned for the same level of exports.
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15
CRITIQUE OF LIBERALISM
•
Liberalism cannot explain why so few
countries have risen to First World status,
even if they followed liberal doctrine.
•
Liberalism ignores that First World
countries achieved their status without
adhering to liberal doctrine.
•
Liberalism is blind to inequalities of power
and how they affect equality of opportunity.
• Liberalism justifies the privileged position of
the already powerful.
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16
PERSPECTIVES ON
DEVELOPMENT:
MODERNIZATION
•
Modernization theory adds to liberalism the idea that
the Third World needs to adopt “modern” values in
order to prosper, such as:
•
•
•
•
protection of individual and property rights;
urbanization, literacy, and modern health care;
secularization and nuclear families;
political participation, elections, independent
mass media, and civil service operating on the merit
principle; and
• value choice, objectivity, achievement, and
future orientation over ascription.
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17
CRITIQUE OF
MODERNIZATION THEORY
•
While representing an advance over liberalism,
modernization theory naively suggests that the
Western way is the only path to development.
• However, some cases of successful
development, notably Japan, adopted many
traditional non-Western values and institutions
in their development drives.
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18
GERSCHENKRON AND
“ECONOMIC
BACKWARDNESS”
•
Gerschenkron held that only early industrialized
nations (e.g., England) could rely on free markets for
capital accumulation leading to development.
•
To compete against early industrialized nations,
“backward” countries (e.g., Germany) required
industrial investment banks.
•
Still more “backward” countries (e.g., Russia)
required state involvement to compete against
industrial nations.
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19
CRITIQUE OF
GERSCHENKRON
•
Gerschenkron ignored the capacity and
motivation of powerful industrialized
countries and transnationals to retain the
status quo.
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20
DEPENDENCY THEORY I
•
Dependency theory argues that:
• core economies produce a diversity of
goods and are productive in all sectors, and
• peripheral economies specialize in
producing few goods and are unproductive
in many sectors.
•
In peripheral economies, the export sector is
controlled by transnational corporations that
define the terms of trade.
•
This leads to unequal exchange and growing
dependency of poor countries.
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21
DEPENDENCY THEORY II
•
Consequences of dependency:
• Local needs and local markets tend to
be neglected.
• A crippling foreign debt is accumulated.
•
Marxist proponents of dependency theory
stress that it is in the interests of external
(Western) and internal (domestic) elites to keep
countries underdeveloped.
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22
THREE TYPES OF COUNTRIES
IN DEPENDENCY THEORY
Core Countries
• rich, powerful
• economically
diversified
• relatively free of
outside control
Peripheral Countries
• poor, weak
• economically
specialized
• relatively little control
over their economic
environment
Semi-Peripheral Countries
• intermediate on all dimensions listed above
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23
CRITIQUE OF
DEPENDENCY THEORY
•
Many cases add weight to dependency theory.
•
However, the theory does not see the possibility
of Third World development without revolution.
• In fact, the Third World is becoming more
differentiated. Some developing economies are
branching out into new products and enjoying a
rise in well-being.
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24
CASUALTIES DUE TO ARMED
CONFLICT BY REGION
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25
GLOBAL DISPARITIES IN
INCOME
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26
ECONOMIC BREAKTHROUGH
How did Japan, Sweden, South Korea, and a
few other late developers achieve First
World status? By means of:
• domestic economic control;
• substantial state involvement in the
economy; and
• fostering a strong national identity.
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27
DEVELOPMENT IN
THE THIRD WORLD
•
Kerala, a poor state in India, represents a different
kind of successful development.
•
Although poor materially, Kerala made great strides
in terms of life expectancy, literacy, infant mortality,
fertility control, and female labour force
participation.
•
Kerala’s gains are due to mobilized peasants and
workers pushing the state to support the public
distribution of food, fair land distribution, health
care, education, and equality for women.
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28
SUPPLEMENTARY SLIDES
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29
FOREIGN AID, DEBT, AND INTEREST
PAYMENTS OF DEVELOPING
COUNTRIES, 1992 and 1999 (IN $ U.S.
BILLIONS)
$ U.S. Billions
2572
2400
aid
interest (estimated at 5%)
debt
2000
1667
1600
1200
Aid as percent
of interest: 78.3%
Aid as percent
of interest: 37.7%
800
400
65
83
49
129
0
1992
1999
Year
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30
GROSS DOMESTIC PRODUCT PER CAPITA,
WORLD REGIONS, 1975-2000 (2000
PURCHASING POWER PARITY, $U.S.)
30000
25000
20000
15000
1975
1990
10000
2000
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High-income countries
Central & Eastern Europe and
Fromer Soviet Union
Latin America & Caribbean
Arab States
Sub-Saharan Africa
South Asia
0
East Asia & Pacific
5000
Region