POL101Y1 Lecture Notes - Brandt Report, Meritocracy, Industrial Technology Research Institute

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4 Apr 2012
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Outliers or Models?
Dependent Development
What is development?
o Human development health; literacy
o Equitable development distributive consequences of development
Distribution of income
Distribution of wealth
Distribution of life chances
Gender equality?
o Capacity
o Sustainable development
o Political development democracy; human rights; rule of law
o Focus on aggregate economic growth today
How to explain?
Theory used to explain, prescribe and predict
A theoretical conversation:
o (I) The cosmopolitical view
Smith - Market logic
Guiding of the invisible hand will ensure the “universal good of
the whole”
Principle of specialization; trade; etc.
Global division of labor
Theory of individualism
o (II) The Mercantilist View
Free trade desired by hegemons; they benefit most from it
List nationalist
Nations matter: not a theory about individuals
Negative-sum relationship from global capitalism
Government help necessary for development
Governments need to create, or help, create
comparative advantage
Develop industry
o (III) The Leninist View
Imperialism substitution of capitalist monopolies for
capitalist free competition
Concentration of productive means
Concentration of capital
Monopoly is the opposite of free competition
Monopoly grows out of free competition but exists alongside it
Gives rise to a number of antagonisms, frictions, conflict
Capital needs to keep growing gives rise to imperialism
In this sense, capitalism requires imperialism
Must be exploitative to survive
World Systems Theory
o Global economy inherently unequal
o Inspired by Marxist/Leninist tradition
o Global phenomenon, not a nationalist phenomenon
o Creates a certain structure to the global economy
o Immanuel Wallerstein took the characteristics of WST and
popularized the notion of the dependency school
State of global capitalist system is one that creates structural
Key points of World Systems/Dependency Theory
o Systematic view of global capitalism
o 1st world, 2nd world, 3rd world
o Assumes world system is dominated by a liberal ideological
o Monopolistic producers (MNCs)
Concerned with resource extraction; exploitation; mobility
(low wages)
o Monopsonistic purchasers (the north) purchasers have control, can
set price
o Colonial legacy
“Structure” of Global Capitalism
o Dominant “core” versus dependent “periphery”
Core first world nations: Anglo-European world
Periphery rest of world
o Structural dependency peripheral countries are dependent on the
On mono, low-value exports
On global north
The implications of global capitalism
o (I) Cosmopolitical view not about dominance
Positive-sum world
o (II) Mercantilist view preventing dominance
Negative-sum world
Nations can create their own comparative advantage
o (III) Marxist/Leninist view has to be about dominance
System based on dominance that cannot survive without it
Dependent, poor countries stay that way
No help from world system
The appeal of world systems theory
o Post-colonial moment
o Underdevelopment as empirical reality
Seemed to be explaining why poor countries stay poor
o Soviet alternative and self reliance
o Development as global “project” – Brandt Commission
But then something curious happens….
o Average GDP growth rates (1965-1980)
Taiwan - 9.8%
South Korea - 9.6%
Singapore - 10.1 %
Malaysia - 7.3%
Thailand - 7.2%
o Fastest growing economies in the world
Getting richer
o Incomes increased between 25 and 30 times from 1970-1995
The East Asian Miracle
o Rapid economic growth
o Growth with relative equity
o Industrial upgrading and diversification
o Export-led economic development
Getting the prices RIGHT
o Cheap skilled labor comparative advantage
o Infrastructure
o Stable foreign exchange rates
o Low tax rates
o Open to foreign direct investment
o Up the export value chain
o Plugging in the global economy the invisible hand of the market
Getting the prices WRONG
o Infant industry protection growing globally competitive firms
Government subsidies
Government investment
Disciplined labor
Import substitution tariffs
o Manipulate the market visible hand of government
CASE: Taiwan Semiconductor Manufacturing Corporation (TSMC)
o Leverage existing strengths
o Industrial Technology Research Institute
o Government purchase foreign technology
o Government investment in R & D
o Government investment in firm
CASE: Hyundai “Pony”
o Spun out of Hyundai construction
o International partnerships
o Innovate engine design
o Protect domestic market (1970s)
o International standards to export (1980s)