Download neoliberal counterrevolution: The 1980s school of development

4 Models of development
1. The Modernization Model 1940s to 60s:
Rostow
stages of economic development
build the economy
2. Dependency Model (1970s).
Immanuel Wallerstein, a leading advocate of the approach
characterizes the world system as a set of mechanisms which
redistributes resources from the periphery to the core.
3. Neoliberal or Counterrevolution Model: (1980s)
Foreign Direct Investment with Multinational Corporations
4. Sustainable Development Model(1990s):
Development providing for the needs of the present without
diminishing future generations.
1. The
Modernization
Model
1940s to 60s
Modernization it was believed was made possible
by building:
(a) the physical infrastructure (transportation,
energy and water systems)
(b) the social
institutions
needed for
capitalism,
such as:
• taxes
• banks
• insurance
• a legal system.
• currency
• private property
Modernization Real World Strategies :
• Stages of economic growth
• Emphasis on economic production
• Technology transfer (from MDCs)
• Large-scale industrialization projects (government and
foreign investment)
• Trickle Down Economics (money works it way down to
the masses)
The World Bank, the International Monetary
Fund (IMF), and other agencies were
created to facilitate investment and
technology transfer from rich to poor
countries.
All countries would pass through a set of
stages of economic development if given
enough time. The pathway to development
was seen as the route followed by Western
Europe and North America during the
Industrial Revolution.
Following a model proposed by the US
economist Walter Rostow, it was argued that
countries would progress through five stages
Progressive stages of economic growth.
Rostow Model
Progressive stages of economic
growth.
1. Traditional Societies
During the first stage, the country’s economy
is dominated by primary activitiesproductivity, technological innovation, and
per capita incomes remain low.
2. Preconditions to take-off
In the second stage, preconditions for
economic development arise,
including the commercialization of
agriculture and increased exploitation
of raw materials
3. Take-off
In the third stage, foreign investment pours in,
jumpstarting an economy that was already
prepped for growth. An important aspect of
the third stage is that a large proportion of
foreign investment goes to infrastructure
improvements, such as building roads and
canals
In discussing the take-off, Rostow's is a noted
early adopter of the term “transition”, which is
to describe the passage of a traditional to a
modern economy.
4. Drive to Maturity
The drive to maturity refers to the need for
the economy itself to diversify. The
sectors of the economy which lead initially
begin to level off, while other sectors
begin to take off. This diversity leads to
greatly reduced rates of poverty and rising
standards of living, as the society no
longer needs to sacrifice its comfort in
order to strengthen certain sectors.
5. Age of High Mass Consumption
High per capita incomes and high levels
of mass consumption.
Strength of the Modernization model:
• Over the long term, all countries are
capable of development.
• It has proved to works for some countries:
Singapore, Hong Kong, South Korea, Taiwan
(Asian Dragons) the American South, Czech
Republic, Ireland
Weaknesses in the Modernization
model
(Rostow’s Assumptions):
Rostow’s model has also been criticized for
assuming that economies will naturally
pass through each of the four stages
consecutively.
Rostow’s model did not explicitly account for
factors such as:
• global politics, colonialism,
physical geography,
war, culture, and ethnic conflict, which may cause
countries to follow quite different economic
trajectories.
• Environmentalists and others have
criticized Rostow’s description of the
relationship between development and
consumption, claiming that development
does not necessarily equal high
consumption.
The Chinese save more
• For some of these critics, development
may mean other things like increased
social welfare or ecological sustainability.
Increased education or national parks
• Finally, the Rostow’s stages of
development model does not account for
deindustrialization.
• Many of the first development projects
were huge FAILURES!
• Examples
• oil-fired power plants create pollution
• automated factories cause a loss of jobs
• combine harvesters need fuel
• chain saws creates deforestation and
erosion
• infant formula replacement for breast milk
harmed children (using unsafe water)
Emphasis on economic production over human
welfare can lead to:
• environmental degradation
• unlivable cities
• traffic
• a poorly educated
work force.
• the creation of a
permanent
underclass
• crime
• many other social
problems.
These problems
affect everyone
in the society
and can
undermine the
economic
strength of the
country.
Why do some teachers switch from
teaching at private schools to public
schools?
Why do some teachers stay at
private schools?
Why is it good that the government
runs the schools?
What is the problem with a country’s
electricity (water, natural gas etc.)
being privately owned by a
corporation?
What is the problem with the
government running the country’s
airlines (gas stations, telephone,
etc)?
2. Dependency Model (1970s). Sees low
development levels as being a result of the
LDCs economic dependency on the MDCs.
• Developed by
Immanuel Wallerstein
The world is connected by a "worldeconomy" or “world system” with a coreand a periphery.
The core is the
developed,
industrialized,
democratic part of
the world:
• Wealthy
• Powerful
• U.S., Europe, Japan,
Australia
and the periphery is the underdeveloped raw materialsexporting, poor part of the world. Dependent upon Core
countries for:
• Military Equipment
• Technology
• Investment
• News and Entertainment
• Education
• Resources are
extracted from
the periphery
and flow
towards the
states at the
center in order
to sustain their
economic
growth and
wealth.
• A central concept is that the poverty of the countries in the
periphery is the result of the manner of their integration of the
"world system", a view to be contrasted with that of free
market economists, who argue that such states are
progressing on a path to full integration.
• This theory is based on the Marxist analysis of inequalities
within the world system, dependency argues that
underdevelopment of the Global South is a direct result of the
development in the Global North.
Is Taiwan in the core? Why or why not
It is claimed that this situation of dependence began
when many of the LEDCs were colonized, and
continues today because the MEDCs (through
transnational corporations) force them to produce
unprofitable primary products.
Single product primary exports:
Cuba (74% of whose exports are sugar),
Zambia (85% copper) , Iraq (98% oil),
bananas in Central America, coffee in
Brazil, and Kenya, copper in Chile, cocoa
in Ghana and the Ivory Coast, palm oil in
West Africa, rubber in Malaysia and
Sumatra; sugar in the Caribbean islands,
tea in Sri Lanka
palm oil in West Africa
rubber in Malaysia and Sumatra;
sugar in the Caribbean islands
tea in Sri Lanka
tin in Bolivia
bauxite in Guyana and Surinam.
Don’t need to study these for the test
The Dependency school believes this system has
created
Neocolonialism: When a previously colonized
country has become politically independent but
remains economically dependent on exporting the
same commodities (raw materials and foodstuffs)
According to Dependency theorist one of the
biggest culprits to the current system is the
Multinational corporation (MNC) or transnational
corporation (TNC): a corporation or enterprise that
manages production or delivers services in more
than one country.
Criticisms of
multinational
corporations:
• Their goal is profit
not development
• eliminate domestic firms
• undermine the world’s environment
• perpetuate world poverty through low
wages
• export jobs from MDCs
Dependency real world
strategies.
• Invest and improve human welfare
(education,
health, food, water, and shelter needs).
• redistribute capital in more even manner
(socialism)
• a bottom-up strategy
• import substitution: an LDC tries to
develop its own industries instead of
importing manufactured goods from the
MDCs
• nationalization: To convert from private to
governmental ownership and control
(natural resources)
• high import tariffs (to protect infant homegrown industries)
• Self sufficiency (economic independence)
Strength of the Dependency school of
thought
• does not assume that socioeconomic
change will occur in the same way in all
places.
• acknowledges change in the less
developed world is linked to the economic
activities of the developed world.
• shows that the world functions as a single
entity.
Weaknesses of the Dependency
school of thought
• has very little hope for economic prosperity in
regions and countries that have traditionally
been dominated by external powers.
• The long-term ramifications of investing
heavily in human welfare at the expense of
economic production are an inability to pay
for the human welfare benefits the country
desires to provide.
• Without a strong economic engine, the
country could fall behind in infrastructure
development.
• The country will lag in technology (health
and manufacturing).
• Remaining a highly agricultural society
increases the likelihood of higher
population growth.