Download FLC Class 2/19/2003 - Stony Brook University

FLC Class 2/19/2003
“Global Capitalism & Economic Development II”
Liberal Concept of Comparative Advantage
Developed by 19th century English economist David Ricardo. Example: Portugal producing wine
and England producing cloth
An economy should produce and export products where it has a comparative advantage
It should cease domestic production and import products from other countries where it is at a
comparative disadvantage
Myths about trade & comparative advantage
Incentives for global trade
Winners (export industry) & Losers (labor) of free trade and its political ramifications
Core Elements of Neo-Liberal Economic Concepts
Reading: Kelleher/Klein 1999
Supply & demand economy—free and open markets rule via “comparative advantage”
Privatization and private ownership
Specialization and division of labor within a global economy—Economies of scale
Free trade instead of protectionism or autarky
Laissez-faire government
Promotion of (foreign) capital investment
Overcome poverty & promote development by capitalist growth strategy
Criticism of Neo-Liberal Policies
Neglect of unequal opportunities, power and resources of LDCs
1. Continuous effects of colonialism & neo-colonialism, e.g. monoculture in agriculture,
underdevelopment, debt burden hamper efforts of industrial development strategy
2. Free trade is good among equal partners. But world is divided in poor and rich, powerless
and powerful. Example: TNCs dominate, monopolize, bribe, or blackmail developing countries,
its elites, and economies
3. WTO, IMF, World Bank are undemocratic. They promote agendas of wealthy countries &
overlook “free trade hypocrisy.” Example: Wealthy countries practice hidden trade
protectionism through subsidies for their vulnerable industries/sectors
4. Structural Adjustment Policies (SAP) cut governmental social and welfare programs and
hurt the most vulnerable groups in LDCs plus increase domestic inequality. Policies help local
and foreign businesses but not peasants and workers
Criticism of Neo-Liberal Concepts
Edward Goldsmith 2002, “It’s the Economy, Stupid. Empires without Armies”
Thesis: Global development is imperialism w/o the need for military conquest
Same goals, same aim (extract raw materials, exploit cheap labor, sell goods, see Free
Trade Zones)
The Gospel of ‘Free Trade’ to use competitive advantage of the hegemonic economy, later
replaced by colonization
Setting up a Westernized elite to impose ‘development’ aid programs that profit donor and
arms sales
Boycott or remove governments unfavourable to Western interests (‘regime change’
interventions)
Kill domestic economies of colonized countries, destroy indigenous crafts, re-orientate
production toward small range of exports, prevent export substitution through structural
adjustment program loans (SAP), transform peasantry into urban proletariat and create
cosmopolitan consumerist bourgeoisie
Lending money & create dollar dependency & debt to open country to global economy &
capital-intensive development by TNCs
Overview Globalization: The Age of Development, 1945-1979
POST-WWII Reconstruction
New institutions (e.g., U.N. 26 June 1945,
Marshall Plan 1947, NATO 1949)
Bretton Woods Agreement:
1944 Conference to construct post-war international economic system
-- Especially post WWII reconstruction of Europe
-- Created two international organizations
International Bank for Reconstruction and Development (World Bank)
International Monetary Fund
Bi-polar World-Cold War b/w the 1st and 2nd World (Churchill Speech I)
Winston Churchill’s ‘Iron Curtain’ speech,
March 5, 1946 Fulton, Missouri
“The United States stands at this time at the pinnacle of world power. It is a solemn moment
for the American democracy. For with this primacy in power is also joined an awe-inspiring
accountability to the future. As you look around you, you must feel not only the sense of duty
done, but also you must feel anxiety lest you fall below the level of achievement. Opportunity
is here now, clear and shining, for both our countries. To reject it or ignore it or fritter it away
will bring upon us all the long reproaches of the aftertime.”
What is the “Third World”?
A group of nations with tremendous variations, more defined by what they were not/are not,
rather than what they were/are
Third World - not industrialized, and not communist
Pejorative? - third and last place in world order
Exceptions:
Relative growth of oil-producing countries (Nigeria, Iran, Iraq, Saudi Arabia, Venezuela)
Newly industrializing countries like Brazil, Argentina, Korea, Thailand
Mixed character of nations like Israel, South Africa and Portugal (neither heavily
industrialized nor poor)
DCs = Developed Countries, First World, the West + Industrialized Socialist World (Second
World), the North, “Modern”
LDCs = Less Developed Countries, developing countries, underdeveloped countries, Third World,
Non-West, the South, “Tradition”
The Cold War and the Age of “Development”
“The old imperialism – exploitation for foreign profit – has no place in our plans. What we
envisage is a program of development based on the concepts of democratic fair-dealing.”
President Truman’s ‘Point Four’ 1948
Theories of Economic Growth
Poverty = Material misery, hunger
unrest
seed-beds for Communism
State intervention necessary (experts, technology, planning): Marshall Plan as model
Economic development defined as “a rise in the levels of living of the common people”
Measure: growth of per capita income
W. Rostow’s Stages of Economic Growth: A Non-Communist Manifesto (1959)
“… the most stimulating contribution to political and economic discussion made by any academic
economist since the war.’ The Economist
‘Imaginative, stimulating statement of the economic goals of technologically undeveloped nations,
and how they can be most effectively achieved without resort to Communism.’ New York
Times W. Rostow’s (1959)
Stages of Economic Growth
Traditional society
Pre take-off stage
Take-off
The road to maturity
The society of mass consumption
Modernization Theory
Makes an essential difference between ‘modern’ and ‘traditional’
Development = planned social transformation aimed at “economic growth” to alleviate “problems”
of the LDCs
Continuums in Modernization:
traditional => modern
physical capital => human capital
import substitution => export-oriented industrialization
Questionable Assumptions of Modernization & Development of Third World
Growth path of first world uncritically transposed
First world (Western capitalism and democracy) as role model
Ignorance of history and legacies of colonialism/imperialism
Ignorance of local and national cultures, traditions, economies, polities
Focus of Development Programs
Reducing Imports and Building Industry (1950s) e.g. “Import-Substitution” Programs
Building Infrastructure (Transportation, Communication, Energy)
Technological Innovations in Agriculture
e.g. “Green Revolution(s)” (1970s; current)
Export of Manufactured Goods
e.g. Export Processing Zones (1970s-present)
Building on Local Resources, e.g. Tourism and Ecotourism