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Global Development Studies
DEVS 100
Richard Day

GLOBAL D EVELOPMENT STUDIES What is development?  The act or process of developing  Rise in standards of living  Change  Growth of society  Progress  About objective questions of poverty: income, housing, sanitation, health, education But does income=happiness, is development ‘sustainable’, who defines development?  Concept of change is recent and taken for granted. Earlier, societies were fixed (slavery and feudalism. European enlightenment spread rapidly in industrialization.  Universalism: things universally true; better to not have any disease  Relativism: subjectivity of how you decide what is appropriate; freedom of religion, gender rights, ageism (young listen to old), women’s rights in education  Description: describe the world (not necessarily agree/disagree), describe role of WB  Prescription: WB perspective – decide what’ development and find solutions  Highly contested idea –different notions of what constitutes “development” throughout history + today UNDP Human Development Report 1991 “The basic objective of human development is to enlarge the range of people’s choices to make development more democratic and participatory” (Objective view) [Choices include: decent wages and employment, opportunities, education, healthcare, clean and safe environment, ability to participate in community decision making, enjoyment of basic human, economic, and political freedoms.] (> Income per capita) Development as freedom (Amartya Sen): Development is the process of expanding the freedoms that people enjoy. Requires removing barriers to freedom, poverty, tyranny, lack of opportunity, systematic social deprivation, lack of functioning infrastructure, repression Sustainable Development (1987 Brundtland Commission Report, Our common Future) Meeting the needs of the present without compromising the ability of future generations to meet their own needs. Not fixed but a process of change in which exploitation of resources, direction of investments, orientation of technological development and institutional changes are made consistent with future + present needs Report of the South Commission, 1990 ”a process which enables human beings to realize their potential, build self-confidence, and lead lives of dignity and fulfillment. It is a process, which frees people from fear of want and exploitation. It is a movement away from political, economic, or social oppression. Through development, political independence acquires true significance. And it is a process of growth, a movement essentially springing from within the society that is developing” (less objective) Development - American, western, capitalist enterprise designed to reproduce Western capitalist accumulation and ideologies. Destructs natural environment, social relations, imposes on people. Must be replaced by communities figuring their own vision and having their own definition for development. Developed = scientific advancement, industrial progress, skill & technical knowledge (Harry Truman criteria) income, employment, improve distribution of income, education, political participation, national autonomy Mainstream Development Paradigm -Defined by Western standards of progress; income per capita, infrastructure (housing, roads), Services (healthcare, education), multi party governments, markets, modernization (highly industrialized economies) -Supported by Western Institutions; World Bank, Aid organizations, NGOs, Western States, Media, courses 1950s – Birth of Modern “Developmentalism”  End of WWII – Marshall Plan (aggressive push from Americans to South)  New Bi-polar power – Cold War - political tension + battle of communism (First world) + capitalism (second world) – US Expansionism  Rise of Multilateral Intervention (countries intervene at global level to try and create change)  Bretton Woods Institutions – World Bank + IMF 1960s-1970s – Rapid Decolonization Era (growth of countries, new countries emerging)  Expanded Multi-polar Situation – – Independent states/NIC’s/emerging markets – Satellite states – Non-aligned states  Rise of ‘alternatives’ – African & Chinese Socialism (challenging Soviet) – Capitalism emerging  Growth of Aid Agencies (becoming powerful)  Western Powers wanting to retain influence - (MNC’s)  Proxy Wars 1980s-1990s – End of Cold War and Neoliberalism, Unraveling of Soviet Union  Trend towards homogenized world (Uni-polar world) – End of first and second world designations with collapse of Soviet (fall of Berlin wall 1989) – Triumph of Capitalism in West  Hegemonic sense of ‘development’ – SAP – Financialization – Privatization 2000s onwards  Rise of multi-polarity again - (BRICs)  Decline of US and EU power  Rise of Socialism again  Rise of Sub and Supra national agencies  Rising uncertainty around meaning and methods of ‘development’ ETHICS  Recognize your relative power (class, race, gender)  Recognize your limits (language, culture, history)  Not all interventions are good  Not all ‘development’ organizations are good  Paralyzing vs. empowering Pejorative, racist and pedantic terms used: backward, primitive, undeveloped, underdeveloped, third world, developing, emerging markets, majority world, global south, newly industrialized countries. Importance of terminology: - Shaped by culturally informed assumptions and historical positions - Can appear non political but often mask practices of power (embedded with political meaning) st rd st nd rd - Can imply hierarchy (1 world > 3 world or why is there 1 /2 /3 ) - Can imply sense of fixidity (world cannot change) - Can create illusion of progressive change but leave underlying relations intact - Can imply lack of agency (cant change the way world is – if in 3 world, you are stuck) - Shapes public opinion - Shapes policy making Underdeveloped: (former) colonies are intentionally kept in a relationship of dependency (in terms of economy + infrastructure) to provide cheap labour, raw resources. Implies fixed scale of development. = Inadequate food, disease, primitive economic life, poverty (Harry Truman criteria) [First world: USA + Allies, Capitalist countries] [Second World: USSR + Eastern bloc, Communist countries] Third World: NIC’s, area of conflict between First and Second World Fourth World: least developed countries (UNCTAD), aboriginal, marginalized by Sovereign borders In 1952, Sauvy used Tiers Monde (Third World) to refer to countries outside power blocs of West and Soviet Deliberate reference to third estate (tiers etat) of French Revolution, beneath the clergy and nobility. Pan-Thirdworldism  Bought political unity in countries outside power bloc + organize Third World countries,  29 Afro-Asian countries participated in the Bandung Conference in 1955 o Birth of Non-Aligned Movement (NAM); gave non-aligned countries power to bargain and win concessions from the two superpowers  Argued that colonial rule created dependency on the First World  Used Third world to refer to ‘third way’  ‘Third World’ put quotations, indicating its problematic like its name + not used much in academia World Bank Terminology  Transition countries (from socialism to capitalism) = former Soviet-linked states e.g. Poland, Ukraine  Newly Industrialized countries = South Korea, Taiwan (Manufactured goods = 30% GDP + 50% total exports, shift in employment from agriculture to industry and per capita income of at least US$2000)  Emerging markets = BRICs  ‘Low income’ < $875  ‘Lower middle income’ = $876-$3465  ‘Upper middle income’ = $3466-$10725  ‘High income’ > $10726 World Trade Organization No definition. Members announce themselves whether they are ‘developed’ or ‘developing’ countries Majority of world’s population is in ‘third world’ and Minority of world’s population is in ‘developed’ world Global North: previous First World, mostly geographic North. Global South: previous Third World, mostly geographic South. Measuring Development  Gross National Product: total production of g + s by residents of country, no matter where they live  Gross National Income: variation on GNP, used by World Bank  Gini Coefficient: income inequality (0-1) between wealthiest and poorest 10% in a country  Purchasing Power Parity: GDP per capita by considering buying power of $ in different countries  Gross Domestic Product: total production of g + s in a country / number of people in country Problems with GDP measurement  Hides distribution of income – rich/poor, rural/urban, male/female  Hides purchasing power - $50 different in Canada and Guatemala  Hides Sources of production – could be based on single commodity (oil)  Hides environmental + social problems – oil spills increase development, boosts GDP per capita  Hides things going on at home – child care, health care  Hides black economy/non market subsistence activities – especially in South  Not all data is available as it’s impossible to collect all  Many countries don’t have capacity, its expensive and time consuming Advantages of GDP measurement  Quantifiable – by contrast ‘hard to measure happiness’  Reveals stark inequalities – within and across countries  Increasingly multifaceted – environment, gender, social indicators  Human Development Index – quantifiable and looks at more than GDP Life expectancy, Knowledge (adult literacy + enrolment ratio), Estimated earned income (GDP per capita)  Gender Development Index: measures achievements using same indicators as HDI but captures inequalities in achievement by men and women *Millennium Development Goals – (late 1990s): Eradicate extreme poverty, Achieve universal primary education, Promote gender equity and empower women, Reduce child mortality, Combat HIV/Aids, malaria and other diseases, Ensure environmental sustainability, Develop a global partnership for development Beyond mainstream indicators = measuring environmental and cultural values, happiness, freedom  Difficult to measure – value of species? Cultural strength? Happiness?  Difficult to express in words – is “happiness” same to everyone?  Not widely used or understood  Can be interpreted differently – conservative Government in UK using “happiness” indicators” Growth in GDP – increase in productivity in agriculture, natural resource extraction, industrialization Poverty is eliminated quicker if GDP growth is combined with improvements in income distribution Reasons of inequality: impacts of colonial rule or neo colonial economic relations have forged/ consolidated unequal social relations based on slavery, feudalism and land ownership that continue to influence present. Late industrialization – use of capital-intensive technology reduced employment potential of GDP growth. Inadequate/nonexistent social safety nets + regressive taxation systems prevent redistribution of national income towards the poor and middle class as occurred in developed economies after Great Depression. Absolute poverty – below the minimum level of income required for physical survival. (US $1 per day) Moderate poverty – basic needs barely met but survival not threatened. (US $2 per day) Relative poverty – does not threaten survival but individual does not have income necessary to px in society Empire: - Large political body that rules over territories outside its original physical borders – typically taken by force - Centrally controlled by dominant group – Always fragile, changing, complex, maintained by violence - Decentralized forms of rule – direct/indirect, usually local ‘collaborates’ drawn from ruling elites - ‘Settler’ colonies, - number of Europeans settled in colonies – Canada – determined by wealth and health - Result in unequal power relations between ‘core’ and ‘periphery’ - Diverse groups of people – language, religion, race (layers of hierarchy within colony) - Early empires usually state/church run, Later involved private companies to off-load costs (D&B EIC) Colonization: Political control of people and territories by foreign states, whether accompanied by significant permanent settlement or not th th Stage 1: Mercantile colonialism: late 15 to 18 century - Causes of early European expansion - Rivalry among emerging European states - Search for trade routes: gold, spices, silk - Advancement in naval and arms technology - Sense of cultural and racial superiority (White man’s burden) - Missionary zeal and church ambitions – conquest morally justified + divinely ordained (ok to trap people) - Intrinsic pressures for economic growth from emerging industrial capitalism in Europe - Europe’s control of land mass of world: 1800 – 55%, 1878 – 67%, 1914 – 85% GLOBAL EUROPEAN EMPIRES - PORTUGESE EMPIRE 1400s - First to go global south - southern Africa and Asia. Set coastal port areas. First to colonize, last to decolonize. Contemporary Brazil = Portuguese colony - SPANISH EMPIRE 1500s – focused on South Africa and north America + Canadian border. - DUTCH EMPIRE 1600s – New york, South Africa, West Africa. British kicked Dutch out of South Africa - FRENCH EMPIRE 1500s – Madagascar, South America, US, Canada, SE Asia, Lebanon (Francophone) - BRITISH EMPIRE 1500s – North America, British Guyana, India, Australia, Cairo (Anglophone Africa) - BELGIAN EMPIRE 1885-1962 – DR of Congo (Zaire), brutal and violent to those who resisted colonialism - GERMAN EMPIRE 1884 – 1919 – lost what they obtained after WWI. League of Nations stripped it off its colonial authorities. Set up colonies in South-west Africa, took away from them and gave white minority ruling leadership of South Africa. In Tanzania, Rwanda, Burundi. - Meeting in berlin (1885) – who gets what of Africa… Africa’s political reality was here decided Slave trade (c.1619 – 1807)  34 to 50 million Africans were captured and enslaved  17 – 25 million were sent to Atlantic slave traders  10 – 15 million reached the Americas or Caribbean alive  400-900k ended up in North America Impacts of European Colonialism  Colonizers came and created new inequalities and hierarchies that didn’t exist before  Colonization of America, trading posts in Asia (islands colonized)  Destroyed or distorted existing economic, social, ecological and knowledge systems  Wiped out entire civilizations (disease, genocide, Caribbean – virtually wiped out by disease)  Colonial economy; plantations and mines, forced labour locally, slave labour from Africa  Expansion of Atlantic Trade System (Triangular Trade), PREVENTED DEVELOPMENT IN 3RD WORLD *Wealth flowed to Europe. Through unequal trade relations (slavery profits, gold exports) Paris made from blood money of Colonialism, and profits from exploitation of colonies, which bought huge money flow Did colonialism contribute to the industrialization of Europe? Yes Europe was already economically and technologically ahead Facilitated by extra-European resources (colonial exploitation and profits from slave trade) No Driving forces of industrialization were within Europe Technological innovations led to it (steam engine, spinning jenny, iron furnaces) It didn’t spur industrial revolution in Spain or Portugal  Decline of feudalism and rise of capitalism were important factors (Landowners were merchant class as investors, landless people were laborers) Old/Mercantile Colonialism New/Industrial Colonialism th th th th - 15 to18 century - Late 18 to late 20 century - Extractive - Expansion at a time of severe economic depression - Logic: take what is available, buy low, sell high of 1880s - European powers did not acquire territory (except for - Rooted in changes in capitalism Spain in Americas and Portugal in Brazil) - Developmental - They built trading stations - Logic: long-term investment - Made alliance with local rulers in India, China, Japan, - Industrial revolution Indonesia, etc. - 18 century to 1860s: Textiles, Blast furnaces, Cast - Result: Economic penetration of non-European iron, Machinery regions in the 19 century - 1860s onwards: Chemicals, Pharmaceuticals, Electrical equipment, Machinery th th Stage 2: Industrial-Capitalist colonialism: late 18 to late 20 century Colonies played a new role for investment; British investment between 1885 and 1889 quadrupled, for raw materials, for cheap labour and for military bases Major impacts of colonialism:  Partition of Africa (1885 – 1914)  Reorganized the economies of the colonies to suit Europe’s needs (ex. Raw materials)  Colonies were not allowed to industrialize - Ex. Indian Cotton industry; to stop competition from Indian producers, the British banned looming in India so you could not buy Indian cotton  Prices paid for extracted raw materials was insufficient, profits went to the colonial elite which was reinvested in the home country  No benefit to colonies: India recorded no increase in per capita income in 190 years of British rule  When Belgians left Congo on 30 June 1960, it left 1 trained Congolese lawyer and no Congolese physicians or offers after years of colonial occupation  Imposed boundaries with no social, political, linguistic, or ecological integrity Justification for colonialism “The exploitation dead and the development theory has taken its place” – Sir Bernard Bourdilion, Governor of Nigeria, 1937 Imperialism European expansion from 16 century, when European countries created empires of trade in Latin America, Asia, Africa and had them under their political and colonial rule Neocolonialism “The policy of a strong nation in seeking hegemony over an independent nations or extended geographical area without necessarily reducing the subordinate nation or area to the legal status of a colony” Aboriginal not colonized – there is control/authority on groups of people by others which isn’t their choice  Ongoing Military dominance - Indirect control of another territory via military might, though not militarily ‘occupied’ South Korea & Botswana have American military presence – makes them uncomfortable - Coups and military support for dictatorships USA – Congo, Nicaragua, Indonesia, Saudi Arabia, Egypt France – Cote d’Ivoire, Togo, Chad Britain – South Africa, Rhodesia Portugal – Mozambique, Angola Economic Neocolonialism - Powerful MNC’s in North – some large companies bigger than countries - Trade policies favoring North - McDonalds/ Wal-Mart – colonial enterprise? – Have more resources than states - SAP keep South tied to certain commodities – impose conditionality’s to abide by - Powerful international financial institutions controlled by North – IMF (US & Europe) Colonization of the Mind: Controlling other nations value and perceptions through cultural means e.g. media, language, education, religion, food  social systems other than formal colonial structures - Effects are long lasting and not easily removable - Marked and masked asymmetries of power - Parties can be aware/unaware of their role as ‘colonizer’ or ‘colonized’ - Can participate in the process voluntarily or involuntarily - Often involves economic gain Resistance to Neo & Internal Colonialism  Physical resistance - East Timor, Tibet, Maori  Economic resistance - Demanding ownership of economy, Skills’ development - Infrastructure, New terms of trade  Psychological resistance - Challenging dominant knowledge systems - Reclaiming/redeveloping pre-colonial knowledge and structures e.g. Black Consciousness Movement in South Africa, American Indian Movement (AIM Internal Colonialism Indigenous – originating from a country/region + not arriving by immigration. Almost 5000 ‘indigenous’ groups in 77 countries face forms of ‘internal colonization.’ Almost 350M people (6% of world’s population) 1. Stripped off resources, Exploited economically, under dominance 2. Few fights related to indigenous cultures and economies, culturally dominated 3. Discriminated against, Left out of many anti-colonial struggles and agreements, political minority 4. Bolivia – independence long time ago – first ever indigenous president  Canada as a colonial power (Voted against the Universal Rights of indigenous peoples at UN in 2006)  Is Latin America ‘independent’? (Mostly elite colonists who fought for ‘independence’ still hold power) Is South Africa ‘independent’? (Khoi San (original) people still marginalized) Does Formal Colonialism still exist? Many European states still have direct control over former colonies - French “overseas departments” and “collectivities” -French Guiana, Guadeloupe, St Pierre - British “overseas territories” -Gibraltar (Spain), Bermuda, Falkland Island - United States “unincorporated territories” - Guam, Virgin Islands (pacific), Puerto Rico (by force) The end of colonialism:  “The colonization of each other’s minds is the price we pay for though”  Colonies gained independence, but became collectively defined as “underdeveloped” as the superpowers set out to claim territory under their respective ideologies  Many regions in the global South still depended on the global North for commodity markets Why did Decolonization happen?  Political and moral pressures in North  Growing liberalism in Europe started to say we need to decolonize (Europe threw yolks of Feudalism, fought for own individual identity and ability to speak & act freely  Threat of socialist revolution in colonies  ‘Self determination’ of new European states (After WWI new states emerged from empires. Austria-Hungarian empire dissolved and suddenly new states were created – had a voice within Europe. Core of empire decolonized/defragmented  New internationalism emerging (After WWI, League of Nations was created which collapsed and became UN after WW2) UN= forum for discussion and opportunity for voices to be heard  New Human rights codes emerging (Recognition that colonization violated)  Americans wanting to establish themselves as anti-colonial (Have independence, establish after WWI anticolonial voice, advocate/speak on your behalf) PARIS 1919 – - Conference to establish Post WWI retributions to Germany - Establishment of League of Nations - Dominated by Britain, France, USA (Paternalistic, pedantic) - “Self determination”, “racial equality” – inconsistent with Imperialism  taking over by force  Economic Pressures  Economic crises at home (War, 1930 Great depression)  Expense of running colonies (Sending troops, building infrastructure, Government officials, privatizing colonies)  Recognition that better economic gain to be made with new “independent” states (Requires time and energy for new terms of trade and institutions)  Resistance in the South  Military  Ideological  Emerging bourgeoisie – capitalists – recognized that their opportunities to become rich were limited therefore needed independence to become powerful and wealthy  (Pan) nationalism – non aligned movement – recognition that colonial boundaries were constructed by external forces – not by wishes of people from South  Not mere “victims” – sophisticated, anticolonial campaign (very effective e.g. Gandhi) Latin American Independence - Decolonized first, mostly in 1800s, some in 20 century - Largely due to Spain and Portugal collapse so colonizers became weak within Europe – found it difficult to sustain their colonies financially and politically and coordinated resistance within Latin America led to earlier independence movements North Africa + Middle East Independence - Turkey 1923, Egypt 1922, N. Africa 1950, Middle East 1930-1940 Asian Independence: China (Independence from Feudalism) - Xinhai revolution 1911 – overthrow of imperial regime  1945: Japanese defeated, 1949: Communist revolution India: Large anti-colonial rebellions from mid 1800s , Independence from Britain + partition of Pakistan 1947, Independence of Bangladesh 1971 South-east Asia Independence (Highly politicized by Cold War) - Indonesia 1945, Philippines 1946, Burma 1948 (British American presence), Vietnam 1945 (France), 1975 (USA), Malaya 1957, Singapore 1963 African Independence - Sub Saharan 1960-1970, Namibia 1990, South Africa 1910 (Britain), Southern (last) Time Lapse - colonies represented up to 85% of world’s land mass at its peak of European Colonization National Developmentalism: economic theory that states that the best way for the Third World to develop is through fostering a strong and varied internal mthket and to impose high tariffs on imported goods. - Decolonization peaked in the mid 20 century - From 1945 to 1981, UN membership increased from 51 to 156 - USA nuclear umbrella provided security for the West, European powers no longer needed colonies for military purposes - USA now dominant economically, American TNC did not like “colonies” as they were closed to them - USA supported independence movements as part of the war effort Structural constraints of countries post-independence:  Commodity dependence - Most third world economies were centered on the production/export of few commodities - For economic growth, specialization and diversification are essential  Lack of core industries - No industries to facilitate infrastructure growth; steel, machine tools, power, chemicals, construction  Underdeveloped commercial, transportation, and communication infrastructures - No developed networks of communication/transport that facilitate the movement of goods, services, capital, and labour  Severe shortage of skilled people - Colonial government spend little on education - Lack of doctors, engineers, skilled workforce (ex. In 1960, the Congo, had fewer than 20 college graduates)  Agrarian “backwardness” - Decline in productivity due to a change in land structure after colonial rule - Decline in food consumption during colonial period  Constraints of new world order - Cold War Era (tension between superpowers) - Pattern of aid is driven by cold war politics Capitalism System of production of goods and services for exchange on the market rather than the consumption by producers of the goods (to make profit or surplus.) It’s the water within which we swim and world we live in Capitalism is color blind, gender blind because there is drive of self-interest that must be unleashed. Historical forms of societal organization (can and do overlap)  Hunter-gatherer/communal – loosely organized, shared what was there  Slavery – Egyptians, Russians  Feudalism  Capitalism  Socialism Social economy of Feudalism in Europe from which contemporary Capitalism emerged (400-500 years ago)  Only ‘landed’ class could own and create wealth  Land and agriculture was the only major source of wealth generation (one was born into nobility)  Hierarchy of nobles, clergy, army – but dependent on landed class  Worldview was fixed. God(s) determined everything, life choices set at birth, and physical world doesn’t change. If born shoemaker, you die a shoemaker. Strict hierarchical god given world  No significant private sector  No real wage labour KingLordsKnightsSmith  Little mobility  Mostly scattered rural area. (Europe last to urbanize) Tensions emerge in system  Merchant capitalists begin to amass wealth – buying and selling things around world (mercantilism)  New industries emerged (not just trade)  New class of business owners – Bourgeoisie (people that own capital) Start to demand economic freedom and political right + begin to ‘enclose’ lands  Landed class seen as obstacle to change Bourgeois Revolutions: French revolution (capitalist new business class working to overthrow aristocrats as they suppressed free market) of 1789 representative of this but English political revolution took place 100 years earlier in less dramatic fashion.  Used rhetoric of ‘equality, fraternity, brotherhood’ to get peasants to join in  Created new spaces and institutions for capitalists  Bourgeoisie revolution created space for capitalism; new ideas etc Creation of waged labour class - Massive displacement of peasantry from land (technology in agriculture) – fewer people needed - Mass unemployment in rural areas - Mass migration in urban areas (whole new working class – sell them through wages) - Newly emerging wage industries in cities - Labour mobility now possible due to new laws, ideologies and institutions created by bourgeoisie - Industrial Revolution speeds this process up (1800 onwards, rapid and dramatic change in Europe. Disruption in social life) - Emergence of capitalism took place in different ways at different speeds and with different degrees of success over 100s of years in Europe and still taking place in some parts(Eastern + Southern) - Northern became capitalist earlier. - There is still changing worlds in Global South - Bourgeoisies argued – change is good and is positive. - Nobody denied the disruptive nature – millions being dislocated and working in factories - Earlier systems- slavery/feudalism were inherently unequal, didnt provided opportunities for improvement, kept poor in drudgery, didn’t allow progress (intellectually, economically, culturally) - Without rationality of liberal democracy life = “solitary, poor, nasty, brutish, short” (Thomas hobbes) Change is Possible  Rationality of “Enlightenment” provided the insights and tools to understand that the world is not fixed and we can create new and better worlds – materially and politically.  Don’t have to be shoemaker all life, can have factory or do other things  Based on new ideologies of equity opportunity and self determination – but only titled to white men Change is natural - humans are inherently insatiable (more + better) + Self interested (Adam Smith) Change is Moral - “Its not the benevolence of the butcherer, brewer or baker that we expect our dinner, but from their regard to their own interest” (Adam Smith)  It’s not bad that we are self-interested – get you out of bed to create tings for others to use. Humans are naturally driven to make money for themselves - Self interest is good if channeled correctly - Capitalist markets create outlet for creative energies driven by self interest - Competition keeps it in check - Increasing one’s own wealth creates more ‘happiness’ for society as a whole by creating a larger and ever growing army of goods and services - ‘GOODS’ is what creates ‘GOOD’ You think about good things that creates goods in life, Plato The more jobs and wealth = goodness. GDP increasing = economy better + creates happiness But can only do this by removing feudal systems and ideologies - Need law and regulations to ensure no illegal actions. Free market = misconception - State is important to keep peoples ambition in check – but how much intervention? - Notion that human beings should be unleashed with their energy of self interest is fundamental to pro market ideology To deny this change to market society is to - Fight against human nature, progress and allowing nasty brutish and short life to continue - Its immoral not to create conditions for capitalist markets and not to let markets flourish Law of Accumulation: Capitalists must continually reinvest profits back into their businesses to stay competitive, and it’s an economic and moral responsibility to do so. Also, growth potential is infinite Ricardo: Need comparative advantage to specialize in commodities they are efficient in and trade for things they are less efficient at. Two ways to measure differences in costs of production: 1. # of hours required to produce a unit of output 2. Opportunity cost of sacrificing one good for another Absolute Advantage: productivity of one person, firm, or nation in comparison to another. Producer that requires a smaller quantity of inputs to produce a good has “absolute advantage” Comparative Advantage: Compares producers of a good according to their opportunity cost Producer who has the smaller opportunity cost of producing a good is said to have a “comparative advantage” If each country specializes in the production of the good with lower opportunity costs, trade will be beneficial for both countries (also based on natural resources, skills, costs of capital and labour) Keynesianism (1920s-1970s) [welfare state liberalism]  Social Market economy  Saved capitalism from collapsing  Market is best way to create things  Responded to Great Depression and threat of Socialism  FAILURE (1980s) Markets are not self-equilibrating  State must intervene  State must know when to get out  State must know when to inject capital/own production and involve heavily  State must know when NOT to interfere  State must be moderate in effecting change (1940 – major investment by state to stimulate economy) (Africa and Asia are largely independent in Keynesian Era... 1917 = communist revolution) Modernization Theory (1950s) Key idea: Need to remove barriers to modernisation “Modernization theory emerged to theorize the preconditions for, and obstacles to, development.” 1. Modern = capitalist society but regulated 2. The modern sector can only expand by drawing in surplus labour from the traditional sector 3. ‘Traditional’ societies are oppressive but can release human potential. Need to be free from ‘backward’ systems 4. This structural shift in the economy requires “authoritative intervention” from: the State, Multilateral agencies, and International markets Walt Whitman Rostow’s purpose: to refute Marxist theory of social change (non-communist manifesto) Modernization Theory (Traditional vs. Modern) - Transition from major investment in Primary Sector to Tertiary Sector Traditional Society Modern Society - Ascribed (born into) - Achieved roles - Static society - Social mobility - Multifunctional structures - Specialised structures - Particularistic rules (customs) - Universalistic rules (Constitution, law) - Agricultural - Industrial - Lacks dynamic, yields no investible profit, - Expansive dynamic, profits reinvested, simple reproduction expanded reproduction Modernization Theory (Marx vs. Rostow) Karl Marx: History reveals the successive stages of the different modes of production by which mankind gained power over nature  Marx’s rejection of capitalism: Crisis prone system (competition, labour, technology, and raw materials = profit), also rejected on moral grounds (alienation of workers)  Marx’s theory of societal progress:  Primitive community → Slave state → Feudal state → Capitalist system → Socialist society Rostow’s Stages of Economic Development and Growth Traditional society; limited technology, static society, subsistence farming, barter trade - Transition triggered by external influence, interest, or markets Pre-conditions for take-off; commercial exploitation of agriculture and extractive industry - Installation of physical infrastructure (roads, railways, etc.) and emergence of social/political elite - Capital investment of 5% of GDP + people wanting change for ideas and institutions Take-off; development of a manufacturing sector - Reinvestment in manufacturing that exceeds 10% of national income, - Development of modern social, economic, and political institutions to support market growth The drive to maturity; development of wider industrial and commercial base - Exploitation of comparative advantages in international trade - Diversification of economy High mass consumption - Economy shirts to and dominated by service industry This theory seems too simple in the way its described as it is difficult to classify economies in stages, as every country grows at its own pace depending on the nature of its economy. Also, it was formed 50 years ago, when certain countries had benefit systems whilst some did not; therefore it is out of date. Developing countries that may fall under “traditional” societies, suffer from high levels of absolute poverty and find it difficult to escape their poverty cycle: a set of factors or events by which poverty, once started, is likely to continue for 3-4 generations in a family, unless there is outside intervention. (Garmon) Due to this, their economies find it more difficult to generate savings, which means there is little domestic investment leading to lower economic growth. These disadvantages collectively work in a circular process making it impossible for them to break the cycle. Poor countries then find it difficult to allocate resources to education so low levels of education affect health care issues where ignorance can make health care problems worse. (House) Also, where war and internal conflict exists, there is another layer of risk and vulnerability that deepens the cycle and “forces poor countries to move back and forth on their way to development”. This suggests that it is not necessary for countries to easily experience transition as they suffer from experiences beyond their control. This savings problem is then aggravated by the absence of strong institutions such as political institutions to organise decisions, financial institutions to attract foreign direct investment, court systems to penalise people, central banks to control interest rates and government offices to control tax collection – all which are the backbone of an economy. Developing countries face the issue capital flight that is net outflow of money, as domestic citizens and businesses transmit funds abroad due to the belief that value of domestic currency will fall. This may be due to the inefficiency of the local banking system and inadequacy of financial institutions. Another form of capital flight is positive net migration that is outflow of workers. Although it is beneficial to developing countries if workers abroad transmit their earnings home, (as the foreign remittances are a service export on the Balance of Payments account,) it can be a problem if the workers leaving are well educated and leave for a long time. They take with them the benefits of scarce resources spent on education, which could have been used to build the economy and aid development locally. In this case, for development to occur, it is vital for governments to ensure that more workers are being trained and retained in developing countries that are prioritising on important aspects e.g. health and education. Rostow’s theory suggests that at the “drive to maturity” stage, economies are diversified: products range across different sectors to spread their risks and gains. However some developing countries have no choice but to heavily rely on exports of a narrow range of commodity products, such as coffee and oil due to their geographical or environmental location. However, this over dependency on primary products is a threat to them as a drop in demand caused by change in environment or technology, directly affects their supply and exports die. In this case, a high degree of export earnings will make it difficult for developing countries to monitor services readily available to afford the imports coming into the country and they would also lack the sufficient infrastructure required to produce their products. Modernization is also associated with “set of ideas and strategies that guided policies toward foreign aid and trade” from developed countries. However any sort of aid requires repayment unless it is humanitarian aid. African countries such as Nigeria have borrowed too heavily on international money markets and are still paying their debts from hundreds of years ago. “Nigeria's $34,000 million external debt is acting as a stranglehold on development.” Having crippling repayments makes government unable to manage budget and therefore difficult to aim for development and growth. Also lowers the credit rating of the country and worsens their opportunity to borrow money internationally to finance their development. “…Efforts to increase country ownership have been constant since the late 1960s and the need to reduce conditionality, where aid comes with strings attached, has been recognized since the late 1970s.” This suggests that shortly after the modernization theory was formed, developed countries had benefitted from providing aid more than recipient countries due to the conditions imposed. The incentive to assist developing countries was clearly more than just to relieve poverty itself. China for instance, one of the largest trade partners of Africa, entered the Official Development Assistance (ODA) to access oil and minerals for their economy. Finally, corruption has been the most “prevalent during the most intense phases of modernization.” There is danger of aid “not achieving its goals, failing to reach the poor” because developing countries are disadvantaged by their weak rule of law, which is linked to lack of property rights; without being able to defend property rights in law, individuals and businesses are reluctant to invest. When this happens, there is likely to be corruption and where corruption is widespread, it is better to seek positions where people can receive large amounts of bribes than where there is a genuine output of goods and services. Corruption is also associated with political instability, where the government is weak. However sometimes corruption is better than instability because at least in corruption, although there is inequality, people know prices but during instability, e.g. in Greece, the Eurozone ministers keep delaying decisions having a significant impact on its residents, it is once again common to see black markets where transactions are not recorded and some output is not traded because of subsistence production. All this makes it difficult to impose and collect taxes therefore the greater the output of a country goes through formal markets, the greater will be the opportunity to tax efficiently. Otherwise it can lead to inequitable distribution of resources if only a few pay heavy taxes and there would be little for the government to spend on health, education and other sectors and move to the next stage. Development doesn’t occur as easily as modernization theory explains it. This theory is rooted in capitalism where the notion of capitalism is hegemonic. Not only are we convinced that it is impossible for some countries such as those in Sub Saharan Africa to witness growth and development, our minds have been colonized by a false top-down approach to development. The wealth trickles down only if conditions are imposed. Modernization theory suggests countries need to be free from ‘backward’ systems (Macdonald) but it requires much more than countries to just transition from “traditional” to “modern” societies. Pure growth and development will only be achieved if developing countries do it by themselves and completely disengage from the North economically as well as politically. Need to change structures Political – self-determination, private property rights, elected authorities Socio-cultural – freedom to speak mind, freedom from traditional beliefs, freedom to push for change Economic – wage labour, capitalist class But no single way to get there/no single end result, depends on history/context/resources, not predictable There are different forms of capitalism and PROGRESS can be made or lost Dependency Theory Key idea: Transform capitalist society - Modern = post-capitalist society - What is it: Your wealth is our poverty, your increase is our decrease - Argued that rich (metropolitan) powers got wealth from exploiting weaker (satellite) countries Criticisms: Too simplistic, without the support of the first-world states, they don’t have any means to develop themselves (they are depicted as victims) countries in periphery cants modernize because their economies are weak and can invest Raul Prebisch: Center periphery theses – center benefits from periphery, power imbalances Declining terms of trade – manufacturing economies have advantage, too many countries in south trying to “take off” with the same countries Import Substitution Premise:  Replace major consumer imports by promoting the mergence + expansion of domestic industries  Reduce widespread dependence on the import of expensive manufactured goods  Reduce import of cheap unprocessed goods  Protect domestic industries Method:  High protective tariff levels during ISI: Duty imposed on imports to raise their prices and make them less attractive to consumers - so protecting infant industries from foreign competition  In 1987, Uruguay’s effective protection rate was 384% higher than world market prices for imported manufactured goods Rationale:  Third World countries sought to break away from the unfair economic order, based on comparative advantage, where they specialized in exporting primary products but had to import manufactured goods from the North Role of the state:  Plan, protect, public sector Implementation:  Keynes believed that the government should step in to start the economy by stimulating demand; deficit financing  Direct tax – tax levied on individual/corporation. High direct taxes prevents investment  Indirect tax– tax levied on goods, imports/exports. High indirect taxes can contract market  Foreign aid – USA aid directed towards US strategic interest, Soviet aid is more in the form of technology and know-how Results:  Positive results during first stage  Sustained growth (1955 – 1970s); accumulation of industrial experience and capabilities, infant industries never matured [East Asia: hotly contested Africa: mostly disappointing FAILURE IN 1980s] Neoliberalism Key idea: Need to eradicate barriers to market - Modern = capitalism without regulation - 1980s onward - Functions of state: to create and preserve an institutional framework - Set of policies, system of governance for managing capitalism, - Attack on Keynesianism and revival of Classical liberalism th th - CLASSICAL LIBERALISM: late 18 -19 centuries (Adam Smith, David Ricardo) Policies: - Free market and minimal government control (State should facilitate market - steer boat not row it) - Privatization - Cuts in government spending (including welfare) – deficit fighting - De-regulation - Anti-inflation bias (tight money policy) - inflation targeting - Balanced budget - Attract FDI (Foreign Direct Investment) - Provide infrastructure to attract FDI - Prevent unions (unofficially) - Keep wages low - Lower corporate taxes - Promote “free” trade (reduce protectionism)  Phase out quotas and trade tariffs  Phase out non-tariff barriers to trade (e.g. Subsidies for local farmers, environmental and health regulations that restrict imports)  Free up capital mobility  Countries should develop their comparative advantage ‘New public management’, Partnership with private sector, Promotion of self governance, Promotion and protection of property rights, Export orientation, Market based currencies, Liberalization, Labour flexibility Critique of policies: Criticized by David Harvey, A Brief History of Neoliberalism - Not been effective in revitalizing global capital accumulation, but has created the power of the economic elite (e.g. In Russia and China) and it has resulted in poor wages for increased productivity of workers First wave Neoliberalism (late 1970s - early 1990s)  Crush unions  Full privatizations  End of subsidies  Thatcher, Reagan, Pinochet  Many governments in South – Ghana, Argentina, India  Structural Adjustment Programmes Second wave Neoliberalism (early 1990s – Now) - Modified policies e.g. PPP - More socially progressive e.g. gay rights, cultural diversity - More global outlook – global trade policies, promoting multilateral institutions - Emphasis on ‘soft’ power – ideology hegemony, expanding multilateral institutions (WTO, UN) - Tony Blair, Obama, Bill Clinton - Most states in South (South Africa, Thailand, Mexico) Structural Adjustment Programs Based on neoliberal ideals; rationality of individuals prevails over inefficiency of the state  1940s – 1970s was a period of growing state intervention in society with Keynesianism in West  Import Substitution Industrialization in many former colonial countries Neoliberalism - Structural Adjustment Programmes Structuralism - Import Substitution Industrialization - Role of the individual - Role of the state - Markets distribute resources optimally w/o interference - State must intervene to shape markets - Full integration into global markets - Protecting local markets - Free trade will lead to development - Free trade will privilege the North  1970s, many countries find themselves in a crisis situation, Neoliberals blame state intervention Reasons for the Crisis - End of post-war boom (less stable global economy) - Stagnation of industrialization projects - Drop in prices of raw materials - Oil prices rises dramatically Solution to the Crisis - Countries borrowed money - Debt-service ratio: the cost to a country of making principal and interest payments on foreign debt as a proportion of its export earnings should not exceed 20% - In 1976, Brazil and Mexico’s debt-service ratio increased by 20-25% - By 1981, interest rates hit record highs as a result of USA`s policies to overcome its own economic problems - IMF and World Bank step in to give loans to countries that agree to adopt structural adjustment programmes with strict guidelines and timelines for reform Process  Austerity: initial stabilization - Rapid cutbacks on state expenditure - Quick end to state intervention in prices - Currency devaluation - Intended to cut back imports and free up money for debt repayment - Period of “creative destruction” (Inefficient industries collapse to allow room for efficient ones)  Adjustment: medium term transformation of economy and society - Liberalization (trade and finance) - Privatization (state industries/provision of services) - De-regulation (investment rules/labour markets) Fiscal Responsibility  A pledge of governments to balance budget and ensure economic stability before other goals  Debt repayments take precedence over other expenditures Effects of Structural Adjustment - Equity concerns: who has borne the brunt of restructuring - Gender concerns: has restructuring improved the position of women - Environmental concerns: has it encouraged environmental stability - Economic concerns: has it delivered on rapid and stable growth 1950-1970, rate of Third World economic growth > First World [NICs - Asian Tigers grew at 7- 10%] Origins of the Debt Crisis (1980s): Placement of public debt “A sum of US$ 59 billion external in public debt was imposed on the newly independent States in 1960. With the additional strain of an interest rate unilaterally set at 14%, this debt increased rapidly. Before they had even had time to organize their economies and get them up and running, the new debtors were already saddled with a heavy burden of debt.” – US Sub Commission of Human Rights, Bulletin 85, Aug 2004 Change in world currency system In 1971, President Nixon abandons the Gold system for a generalized system of floating exchange rates as a response to growing US national debt, to avoid unpopular domestic macro-economic structural adjustment, and to maintain high living standards without a loss of monetary sovereignty. The Oil Crisis (1973-1974) - The (OPEC) are pegged to the dollar, and are affected by this devaluation - They form a cartel to regulate/restrict the production of oil; oil prices rise 3-4 times - OPEC countries accumulate huge amounts of foreign exchange (petrodollars) and inject large sums of currency into world banking system Role of Multinational Private Banks - Oversupply of money leads to loan pushing - Banks shift from fixed interest rate to floating rates - Between 1973 and 1982, the 7 largest USA banks’ overseas profits climbed from 22% to 60% - Third World Countries are encouraged to borrow as interest rates are low, they need money to buy foreign goods, oil (as a result of high oil prices), and as they are vulnerable to global recession and declining export commodity values (as they are mono-export commodity economies) - In 1979, the American government embarked on an anti-inflation policy and drastically raised its interest rates (3% in the mid-1970s to 17.5% in 1985) - Early 1980s, price of export commodities fell, leading to drastic decrease in revenue of the South - Banks in the North stopped their loans to the Third World - External shocks led to state of bankruptcy in Third World + debt crisis that started in Mexico in 1982 Cause of Debt Crisis in Third World; Rising global interest rates, Rising value of $ Continuing devaluation of soft currencies, Lowering values of primary commodities Odious/Illegitimate Debt: Money is often misused or lost to corrupt (often Western backed) leaders through being a “state guarantor” for personal loans, investments in large wasteful development projects, arms purchases, and irresponsibly lent by major banks. Estimates that 60% of the total debt is illegitimate and unpayable as loans were “borrowed by regimes that lacked any democratic consent, were used in ways contrary to the interests of population, and lenders knew the money would be used in irresponsible way” The Debt Trap - Many nations have paid their original debt, but compound interest made repayment impossible - Nigeria borrowed $5 billion, paid $16 billion to date and still owes over $32 billion - Africa pays $10 billion/year in debt, which is 4 times its budget for health and education - “Debt is tearing down schools, clinics, and hospitals and the effects are no less devastating than war” – - Flow of funds from North to the South, between 1982 – 1990, was $927 billion, during the same period the South remitted $1,345 billion in debt service. Therefore: $418 billion flowed to the rich countries RECAP Capitalism: - Market with capitalism is the best way to pursue development. - It’s new (several 100 years ago) and relatively new in grand scheme of history - Different from Feudal/traditional ways of living that came prior to capitalism - Offers new way of thinking around enlightenment - Individual can have their own ideas - Science and rational thought can help us understand world around us (it’s not given to us) - Natural – we are inherently self-interested + self-maximizing– need freedom to explore individually (If suppressed through feudalism/communism, we go against human nature) - No single way to manage it as there is different capitalisms in countries - Morally correct thing to do - Self-interest gets people working, motivated, active and creative individuals to produce things - In doing so – efficient use of resources which is good for development - World Bank – promotes markets for development for benefits of Capitalism - People say capitalism is problem not solution 1950-1960s Modernization As long as countries in South became market oriented and have institutions like North – they can take off and become strong market oriented economies Rostow suggests that Government can modernize along states but its dependent on free market orientation 1960-1970s Keynesian Influences (JM Keys and Prebisch influences) Colonialism created inequality, barriers to change, education system lacked, too few commodities, couldn’t diversify economy therefore needed import substitution to help domestic economy’s buildup. You need state to be involved in development because market on its own can’t. At this point, states were becoming independent from Keynesian influence and there was heavy state involvement and less free market approaches 1980s-today Neoliberalism Swing back saying Keynesians gone too far, there is too much state intervention, inefficiency in economy. Squeezed out entrepreneurs – need to get market oriented approach. Get state back in to regulate and manage and ‘steer’ the boat rather than ‘row’ it. Emphasized privatization – private company run but state must keep an eye. Marxism 1818-1883 “There are few thinkers in modern history whose thought has been so badly misrepresented, by Marxists and anti-Marxists alike.” – Hael Draper A “contribution to the critique of political economy” Marx had little to say about post capitalist society Misunderstood by anti and pro Marxists Marx lived in mid 1800s – where capitalism inherently prone to fail (it’s a critique of capitalism) Marx ‘celebrates’ Capitalism (in tune with early market oriented writers: Adam Smith, Keynes) - Overthrowing feudalism - Inherent inequalities is rid - Agrees with liberals - Product of enlightenment - End of superstition - End of landed status (born wealthy, aristocracy) - Individual freedom - Rationality - Unleashing of energy by markets - When you give people individual freedom to create wealth for themselves, independent of how they were born, - creates greater creativity, technology, end of drudgery, productivism - Insights of classical Political economy - Good and bad predefine – understand in advance of the existence of humans - Marxist said to understand how people think, behave, create ideas – need to understand how economies work, ultimately what bourgeoisie said – they wanted to create own wealth - Must understand history of where we come from and the material way we produce our lives - Historicism and materialism are vital - Inevitable step forward for humanity  Inherent inequalities of Feudalism had to explode – too unequal to sustain  Capitalism necessary for Europe, necessary in ‘backward’ regions  But violent and disruptive – has own inherent inequalities Marx – elitist in world-view of what was good and bad Capitalism is not just dependent on army to go in and take over nation – it winds over place by selling cheap commodities. China is conquering world by its cheap commodities, but at Marx’s time it was cheap commodities from Britain going in and changing way people did things in China Capitalism is not the ‘end of history’, Just the next stage of unequal systems  Inherent to the way it emerged from Feudalism  Created new ruling class (bourgeoisie) of capitalists – not working class revolution Inherently inequitable, unsustainable and self-destructive - Extraction of surplus value from labour  Real value comes from labour that goes into it and from natural resources, but overtime capitalists take most off the gains and workers get smaller share  Income inequality goes increasingly larger over time  unsustainable  Competition forces capitalists to extract ever more value from labour  Rather than competition forcing creativity and job creation (Adam Smith), it forces capitalists to drive down real wages for workers (Marx)  Forces to get cheap labour elsewhere  Rather than creating rising pool of wealth, it drives down amount of wealth for workers  Can’t compete as a capitalist if we don’t find cheapest possible labour at home/abroad  Seeks + invests in labour-replacive technology – robotic production > human labour - Extraction of value from nature - Strip resources from land - Increasingly patenting nature (ownership of nature to prevent others accessing nature) - Move globally to new sources - Avoid regulation Leads to law of diminishing rates of return: If everyone does the same thing and competing same way – all firms invest in same technique/technology, it drives down profit margins as company becomes more competitive. There is monopolization of powerful companies who can control market therefore rather than a self-regulating competition as Adam Smith argues, Marx says there’s increasingly wealth concentrated and fewer Bourgeoisie and entrepreneurs fall of in working class and can’t compete - Inherent crises of over accumulation and fewer hands (bourgeoisie) - Keynes said you get cycles of capitalism - Marx says destructive cycles than pro market theorist argue - Marx says Capitalism relies too heavily on growth regardless of impact on nature Cyclical patterns lead to regular crashes - Keynesian interventions (state ownership, state involvement, capital injection) solve things temporarily until the next crisis - Something structurally flawed about capitalist system with way people are and compete with each other and way wealth accumulates in fewer and fewer hands – shows you can intervene as much but can’t solve problem permanently - Cant fix an inherent contradiction Growth at any cost – no choice  Irrespective of ‘limits of nature’  Constantly growing economy is required - always about growth in a market oriented economy  How to hold economy steady, redistribute wealth and protect the environment 20% of world’s population in global North consumes 80% of world’s resources Development is about bringing remaining 80% of people up to the same consumption level of Global North Why did people colonize places? Capitalism made it happen. Growth of capitalism in Europe reached a point where it had saturated its own market, shipped its own resources, exploited as much labour as it could and needed to find new resources at a cheaper rate of labour (slavery system of Africa) (wage labour systems in other parts) Imperial colonial project of Europe was product of natural inevitable push of capitalism to find new places to exploit. Imperialism is a product of capitalism. Growth is inherent to capitalism and required people to go out and colonize Marx – “the need for a constantly expand market for its products chases the bourgeoisie over the entire surface of the globe” Colonialism “opened up fresh ground for the bourgeoisie” The state is biased towards financialization of economy – its not a neutral actor Many pro-market say keep the state out as it interferes with operation of market and entrepreneurism and capitalism Marx – in reality, state is created by the Bourgeoisie to support and enhance capital accumulation and state operates at intersect of bourgeoisie. State differs in interest Marx – “the executive of the modern state is nothing but a committee for managing the common affairs of the whole bourgeoisie” [Why bail out bank and not other failing industries – state is cohort with capitalists (not their enemies)] Hegemony Capitalism has relied heavily on barrel of the gun but also on non-direct violence form of convincing people with ideas – colonization of the mind Notion of capitalism being hegemonic - where we believe its common sense that entrepreneurialism produces the best things for our society - is a dominant way of thinking in most market societies Cultural and ideological means whereby dominant groups in society maintain their dominance by securing the ‘consent’ of subordinate groups  In many capitalist societies, people assume this is the best thing, even though it may not be in their best interest because Capitalists have convinced us that its good through ownership of media, producing products we think we want, infrastructure we think we need and education systems, churches and other cultural means e.g. Disney as large corporation – reproduces dominant ideas by making you feel you came to the conclusion yourself (not gun to the head) Achieved by negotiated construction of political and ideological consensus Usually done without coercion Produced largely in “civil society” (media, schools) constantly changing in form and content Shapes notion of “common sense” Action is required! “Philosophers have only interpreted the world, in various ways, the point is to change it” In Marxism – inherent to analyze Capitalism and call action to recognize what is happening and do change - Are capitalists going to be increasingly wealthy at expense of nature and expense of working class? - Is it going to be increasingly monopolistic? If so, struggle against capitalism is inevitable, same way feudalism gave birth to revolution But where is the revolution now? (100-150 years later) Working class will feel inequality the most and first Worker/child labor situation in factories of London improved but inequality shifted - to Bangladesh/China? Where working conditions there aren’t so different to 19 Century England Marx – no predetermined outcome Capitalism won’t inherently become a socialism/barbarism Depends on ability to organize Upto us to mobilize + think of things resulting from stripping land and exploiting resources from capitalism Marxist theory and revolutions have influenced Third world development Capitalism doesn’t fix itself through entrepreneurial activity and creativity – there are unfixable kinds of balance in the system, either through imbalance of savings and investment (Keynes) There are certain things inherent and unequal about capitalist economy Socialisms in South Underdevelopment theory – is a critique of modernization theory (Relations with the West just keeps underdeveloped countries poor) ---- Global capitalism forced countries into state of underdevelopment Not about developing countries in South – it’s about intentionally underdeveloping. Inherent inequality as a result of colonialism and unequal terms of trade associated with agricultural goods and manufactured goods Core (rich western/metropolitan) and Periphery (poor/dependent/underdeveloped/satellite states) Intentional and unbreakable form of dependency – needs more than aid agencies/NGO’s/Keynes approach Dependency: the vulnerable state of being exploited by core countries Linear progress: an evolutionary theory predicting how societies develop Undeveloped: the state of not being developed Underdevelopment: notion that country’s are forced backwards due to core + its relations with periphery Core-periphery structure - Development and underdevelopment are two sides of the same coin - Development in North happened because it was exploiting labour and resources in South - North developed because of dependency in countries in South (who’re in state of underdevelop) - Develop enterprise of aid agencies were either smoke screen (action to confuse) for maintaining relationships of underdevelopment/ inadequate to deal with scale of inequality - South could escape underdevelopment by not becoming like North - South better if not more capitalist - South grows when ties with North are broken/disengage with core metropolitan colonial states - When ties reestablish – it chokes development - This state of underdevelopment is needed by North – need countries to be dependent on them - Areas with the closest links to North the most underdeveloped Hallmarks of Underdevelopment 1. External oriented production; produces cash crops not food for people, exports cheap primary commodities and imports expensive manufactured goods Must develop comparative advantage, trade goods on international markets + generate export revenue “Country produces what it does not consume, consumes what it does not produce” - Produces and exports cheap low value-added products (: raw materials + food) to Periphery - Imports expensive high value added goods (industrial products) from Periphery - Extreme cases, “mono crop economy” – dependent almost entirely on one commodity Raul Prebisch – overcome this by putting up protective barriers and develops own economy internally and then engage with rest of the world. But System is entrenched and unequal so there needs disconnection 2. Unequal exchange; trade is asymmetrical (poor countries must sell their raw materials and agriculture cheaply to get the manufactured goods (at high prices) of rich countries as they are dependent on them) Countries in North benefitting in better way than South (value added in their manufactured goods) 1950 onwards NIC’s focused on limited commodities 1960 onwards NAM – NIC’s tried to break from neocolonial ties. Initiative for South-South bank so lending and financing was not dependent on banks from north or World Bank anymore. But this hasn’t taken off yet. Honduras still dependent on America for bananas 3.Trade concentration; when a country trades with just a few core countries (or one), as in the case of Latin American trade with only the USA, African on France and Britain Unequal r/s in terms of Agricultural and manufactured goods and ability to look for diverse partners Poor countries have to satisfy core-trading partners True economic independence = difficult reality Political barriers still remain 4. Investment concentration; when investment comes from just a few core countries (or one), Profits flow from poor to rich countries (ex. Honduras receiving 97.7% of investment from USA) If poor countries decide to halt investment, economic disaster could follow therefore very risky (Disaster of US if poor say NO whereas Canada’s ability to say NO is little therefore dependent on US) Interest of elites in South to maintain this relationship so must battle colonial power and elitists interests This is changing with rise of CHINA – they have become a major alternative for Africa (FDI) in industry As lending agency it has less conditionality’s than US. Lend for roads (for BRICs - alt source of investment) 5. Disarticulated economy; whose parts are not complementary (core countries have different sectors of the production well integrated, peripheral countries lack backward/forward linkage) OBAMA – a Keynesian neoliberal, ultimately believe in the market and that there are disequilibrium’s in market and state needs to be involved. Market is best way of doing things Anti-market - Market is good, pulled out of feudalism but created new set of inequalities. Must go next stage to create more equal society. Capitalism itself will reproduce the inequalities from the past. Wallerstein’s World System Theory (1970-2000) Proposed as a corrective to underdevelopment theory We need to see the global economy as a world system. Countries aren’t poor because of their own history or internal characteristics; they are poor because of position relative to others in economy World System: - Core: technologically advanced, capital-intensive products are produced and exported to the semi- periphery and periphery. Power lies here - Semi-Periphery: NIC’s, lack the power and economic dominance of the core nations (e.g. Brazil) - Periphery: economic activities less mechanized, export raw materials + agricultural goods to core and semi-periphery Why don’t the periphery countries band together? 1. Military dominance of the West: coups in Latin America sponsored by CIA(clear expression of threat) 2. Often, third world elites and first world elites have shared interest in the preservation of the system 3. The semi-periphery supports the core and prevents the periphery ganging up on the core countries 4. OPEC controlled price + restricted flow of oil to core (cartel) - major shock economically + politically Why not the same with other commodities? (Wallerstein explanation) - Unfair terms of trade make it difficult (oil is easier to control as no real substitute + limited supply) - Policy clout on the West – documentation that French + British take country aside – threatening Divide and Conquer policy making countries in South coming together to form a cartel difficult What can the periphery countries do? - They must avoid exploitive economic relations with the core - Try to nurture domestic industries (Import substitution: develop local industries to avoid importing) - Band together with other periphery countries (trade with each other, create cartels to bargain with core, start a global anti-capitalist movement) Criticisms of World Systems: Wallerstein did not see the countries shifting from core to periphery Marxist theory today:  In many ways moved from rigid analysis  Been a major resurgence of Marxism in academia  Influential in 60s + 70s, went into hiding in 80s + 90s (collapse of Soviet + triumph of Neoliberalism)  Significant Resurgence of Marxist thoughts in Europe, USA, Global South Focus on “Uneven Development”  The North is in South, the South (China and Angola) now stronger in same way  Less about north being dominant, or South being marginalized and dependent  Urban VS Rural *China and India producing most billionaires *Rwanda capital city most expensive to live in *Portugal – financial crisis *Angola buying former colonial Portugal Increased focus on non economic  Gender, ecology, culture Still largely a critique of Capitalism, Neoliberalism, Keynesianism (way to manage market), policies + actions Example 1 – End of Apartheid (caused moral injustices)  Liberal view: moral awakening on part of South Africans who said its incorrect + must end apartheid  Marxist view – end of apartheid (1970) came by growing awareness of white business class in South Africa. If they didn’t end it – capitalism itself would collapse and ending apartheid was necessary to maintain and sustain capitalism. Due to limited white consumer market that was saturated – Needed new consumers as blacks were too poor to be consumers – Sanctions shut of global market for them – Costs of policing escalated with protests – Real threat of capitalism collapsing – Capitalists and emerging black elite moved to secure market-based post apartheid future – No nationalism/no major redistribution of wealth or land – Thin Strata of elite blacks become rich – Introduction of neoliberal policies; deregulation, privatization – Income inequality worsened in South Africa after Apartheid – Capitalist realized Apartheid isn’t beneficial – But still use of rhetoric of “communism” + “socialism” Example 2 – Privatization - Marxist share with Keynesian the position that privatization leads to inequality. - Privatization in health care – where wealthy get top tier access and quality to Health care - Marxist – this is inherent to capitalism. Capital is constantly seeking ways to commodify life and turn things into money-exchange value, seeking new ways to make money, services are last terrain of commodification - Must stop privatization – mild state intervention (Keynes) - Cant do much - state ownership not enough, state is interested in capital, capital gets to markets - Commodification is inherent to Capitalism - Bourgeoisie (state ownership) is not necessarily the answer - Public ownership adequate? Or done in interests of limited people - MARXISM about ACTION Revolutions led by Proletariat Revolutionaries = working class – revolution comes from 12 hours work in plummet conditions - Working class conscious of their exploitation (lived experience, cannot ‘learn’ about it from ideas alone) But most socialist revolutions are from peasant class Peasants revolutionary force (emerging in French) – need to become a ‘capitalist’ economy first? Paris Commune 1871 – only working class revolution, brief socialism in 1871 crushed later by French Gov Soviet Union 1971 – partly working class but largely peasant movement China Revolution 1949 - Mao explicitly said we don’t have to rely on working industrial class, we can have peasant revolution to overthrow emerging Capitalist forces (foreign colonial powers) of the day. China’s emergence as a socialist state - largely driven by Maoism movement (focused on peasant movement) Cuban Revolution 1959 – Procrasto never claimed to be a Marxist/socialist (unclear) – backed into corner by Americans and taken over by Soviets. Trapped into colonial relationship with Soviet Union, which when Soviet Union collapsed (1989) – trying to recover ever since and figuring its own socialist ideology African Socialism 60s-70s: not mimicking socialist revolutions of North. Something about African identity A belief in sharing economic resources in a “traditional” African way, often involving notions of Pan Africanism e.g. Ujamaa in Tanzania – African ways of living, thinking, interacting (diff kind of socialism) Socialisms in South today Latin America – Bolivia, Venezuela, Brazil, Argentina, Cuba Asia – parts of India and China Is China Socialist? – Privatization, deregulation, new capitalist class, weak unions, celebration of wealth But – heavy state ownership, limited freedom, one party state Socialism in Venezuela emphasizes on  State ownership, Progressive taxation, Wealth redistribution, Free basic services  Alternative trade agreements [Cuba Venezuela Agreement – Cuba (doctors) Venezuela (oil)] Freedom of Speech? Efficiency? Relying on oil revenue? TOO CHARISMATIC Socialist policies in South today  Nationalization, Stronger South-South linkages, Stronger redistribution policies  Tighter trade regulations, Tighter financial regulations, But no single vision – diverse Post Development - Key idea: need to eliminate faults of western modernity - Alternative Modernity = non-capitalist/non-socialist - A rejection of all past development theories - Based on post-modernist thinking Rejection of the idea of “development”: - Development’s failure because it is a flawed idea - Labels like developed/underdeveloped make little sense (dehumanizing impact) - Loss of diversity (different ways to live) - Tendency to simplify development - Westernization = environmental destruction + socio-cultural problems (loneliness, fear, deprivations, etc.) + parasitical nature (people in the West waste resources) Alternative Modernization: - Based on an anti-neoliberal development model (in the direction of post-capitalist economy) - Projects based on communal, indigenous, and intercultural practices Pros: highlights injustice, people-centered, foregrounds local knowledge systems, and sensitive to the power of words (e.g. Developed/underdeveloped), critical of key development projects Cons: Even though modernity seen as isolating, greedy, and environmentally damaging, many in “The East” aspire to modernity, Modernity = pleasure + pain, development has changed since 1950s, ignores present diversity in how development is imagined, exaggerates links between development and imperialism, ignores how development may be empowering Post-Development Theory (Key Concepts) - Depoliticization: to remove something from political influence (the idea of development) - White Man’s Burden: responsibility of white race to provide care for their non-white subjects - Tied Aid: foreign aid that must be spent in the country providing aid Development Strategy: Industrial Sector - Implementation of Import Substitution Industrialization Development Strategy: Agricultural Sector NIC were backward in terms of agrarian development Land structure similar to feudal system in Europe; Landlords controlled everything, habitants or peasant farmers cultivated land in exchange for rent/services. Colonial state → Overlord → Landlord → Peasants Land reform: World Bank though that productivity would increase if land distribution was more equitable - Successful in South Korea, Taiwan, China, Japan, and Kerala (India) Green Revolution: - 1960s: improved high-yield wheat varieties in Mexico, India - Varieties more responsive to irrigation and petrochemical fertilizers - Worldwide cereal yield rise of 250% since 1960s as increased labour, fertilizer, pesticides, machinery Increasing Yield: technology; poor farmers move from hand tools -> animals, rich one use machinery Big farms Small farms -Are less efficient than small growers in yield/acre -Use labour more intensively -Often land left idle by large landowners (89% in Brazil) -Use space more efficiently -Big operations are fossil fuel intensive, requiring 10 calories for -More motivated for production and conservation every 1 calorie produced -Use environmentally friendly techniques Criticisms of Green Revolution: Hasn’t alleviated hunger, land controlled by few, technology benefits wealthy therefore increased inequity, Harmful impact of Agrochemicals, reduced genetic diversity, increased vulnerability to pests, soil erosion, water shortages, reduced soil fertility, soil contamination, displaced small farmers, rural impoverishment, increased tensions and conflicts Adam Smith’s Market Theory:  “Laissez-faire” peace, easy taxes and a tolerable admission of justice  Law of unintended consequences (private vice results in public virtue; Invisible Hand)  Universal opulence; specialization leads to surplus, increasing goods = decreasing prices  Functions of state: National defense, protect private property, establish legal system, promote free- trade, invest in trade promoting infrastructure  Trade: “man stands in all times in need of cooperation and assistance”. Cooperation is out of self- interest, not benevolence  Markets: “encourage every man to apply himself to a particular occupation and to cultivate and bring perfection”  Importance of International Trade: countries can buy goods cheaply, international trade will further expand markets, which will in turn cause further division of labour The Invisible Hand: Markets work without intervention  self-correcting/equilibrating, but role of state is  Help create and enforce ‘rationale’ rules and behavior of market  Manage labour and social unrest – send cops and army to control (SINGLE BIGGEST  Address market failure – education MISCONCEPTION of  State steps in if private companies aren’t efficient Capitalism: Role of state is to set rules and regulations Government Post-colonial theory and practice (terms: post structural, post modern, post colonial, post development) Mainstream development theory of how we use market and ideologies of market to promote growth, wellbeing and improve lives of people. World Bank is advocate of market as a way to advance the society. Market is a new phenomenon – individual’s rationality, choice, self-interested – who best respond to incentive that benefit us directly, lets make market work, encourage capitalism, increase GDP. Capitalism will trap poor people in poor countries – but this depends on development and underdevelopment and nations to survive as a system; depend on inequality. FOR TRUE DEVELOPMENT – need non-market system, go beyond capitalism. Post colonialism is critical of foundations of market thought + Marxism. Challenges notion of ABSOLUTE TRUTH – we are self-interested, self-maximizing people Post colonial – exists in some culture but there is no absolute truth Challenged – economics of political economy with market and anti market theories that argue that in order to understand the world around us we must understand the way the economy works. Not preordained ideas but how we make our lives to help us understand what goes around us, how economy we live in determines the kind of people we are. Marxist critique of Capitalism – its dynamic but creates inequality, creates robotic workers, and creates injustices. Its not just the way we produce our lives that shape us, there is more to life than economy around us. Role of GDP per capita as an indicator of development is ridiculous as it is better to measure happiness than progress Enlightenment – we have developed scientific + technical skills to be able to understand world around us - We can create artificial fertilizers that will enhance agriculture and help feed the world - We can figure ways to clean water - We ca
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