Development is process of qualitative social, political or economic change, people at the bank
would say it is a condition we can measure. Truman speech, development brought up.
Development is a comparative concept.
Labeling- newly industrialized, third world, global south.
Measuring Development- the GDP is a weakness, the World Bank says people with an income of
less than $1.25 a day are in absolute poverty but poverty is a multidimensional issue. Human
Development Index is a contrast to the WB, its reports deal with the actual state of development
and combines literacy rates and education, life expectancy etc.Also issues of morality and ethics
Rational Choice theory- deductive approach argues in making choices, individual political actors
behave rationally in terms of the objectives they pursue, quest for individual utility
FIVE THEORIES OF DEVELOPMENT: happens kind of in a time line
Development Economics- (1950’s) Strong hand of the state, Keynesian ideas (state intervention
in market processes, based on the idea that capitalist markets require state regulation to correct
problems that happen in free markets), states invest in the economy by ensuring Medicare,
employment, putting money back into the Robust state. Lewis contributed to the theory of
development economics with his concepts of patterns of capital and wages in developing
countries and theorized a ‘capitalist’sector develops by taking labour from a ‘non-capitalist’
subsistence (survival) sector. In the early stages of development the supply of labour from
subsistence economies is ‘unlimited’and this means the capitalist sector can expand without
raising the wages they give to those developing countries.
Modernization- (Late 1950’s) Moving from traditional to modern, the idea of external forces
having to invest in the economy to produce growth, WB and IMF are embedded with these
principles. Think that the problem is societies maintaining their traditions. The rich think it is
their role to help the poor by acquiring technologies and making them more like us, help is
viewed positively, they focus on the economy. Jeffery Sachs and Rostows 5 stages of economic
development is ethnocentric and sees the western way as the right way, doesn’t see positives in
the poorer countries, tries to make them like us and sees traditional society in a condition that is
making them poor. Ignores the role of imperialism
Traditional Society- agriculture, subsistence (survival)
Pre-Conditions Take Off- specialization, surpluses, infrastructure, GDP increasing
Take-Off- industrialization, growing investments, political change, rapid growth Maturity- technology, less reliance on imports, investments
Mass Consumption- fruits of economic growth are transferred to the population, consumer
Dependency Theory (1960s)- Critique of the Modernization theory and their basic principles
developed into the dependency theory. View imperialism as a central factor in development (or
lack thereof), studies the capitalist ‘world system’, dependency theory insists that socialism is the
only solution, sees the world economy divided between an advanced industrial ‘core’and a
largely agricultural ‘periphery’. They see the history of underdeveloped countries who had a
history of imperialism greatly impacted their lack of development, and it is the rich countries
faults and we need to leave them alone, and sees a system that is designed to promote dominance
and capitalism, not allowing growth in other countries. Prebish argued capitalism created the
center and periphery in world economy and that inequalities grow because of conventional
development.Argues the role of imperialism
Marxist (1970s)- saw capitalism as an unjust and exploitative form of society that had taken
human social production capacity to greater heights than ever. Dependency and world systems
theorists claimed to be Marxists but they focused on negative aspects of capitalism that related to
exploitation and subordination of countries, but Marxist critiqued this and said the dependency
theory underestimated the problems of the third world.
Neoliberalism (1970’s) the idea that the free market will solve all problems, redistribution,
exporting etc. This ideology dominated the global economic scene because of the third world
debt crisis in the 80’s and is opposite of Keynesian. State takes a back seat and lets the market
operate itself, not regulated by the government, politics and economics separate and operated
separately. Structural adjustment programs- series of programs promoted by the IMF and WB of
social and economic reforms following debt crisis aimed to promote economic development
through minimizing the role of the state in societies and liberating markets. Countries under
SAPS (majority of the third world countries) were forced to expand exports and low value
commodities so they could pay back the debt. Neoliberalism caused a massive transfer of capital
from the third world to first world countries and large inflated loans now.Anti-state and Pro-
market dogma, believed markets assured that each country would specialize in the economic
activity- e.g. agriculture, which it had comparative advantage. Washington Consensus
recommended the liberation of capital flows and trade, privatization of public sector and
abolition of market-restricting regulations. Hayek and Friedman associated with neoliberalism
today. Neo-Lib reforms brought economic instability, lower per capita income growth, no
poverty reduction. Developmental States (1970’s) believed that state management of the economy to increase
productivity, equality and technical upgrades. Saw the problem was free markets. State needs to
take a strong and accurate role in development, Robert Wade. This theory connected with
Marxism emphasis on social relations of production and political character of the states which
gives more progressive options.Also confirmed dependency theory- autonomy from structures
and practices of imperialism was critical for development.
Colonialism vs. Neo-Colonialism… or Colonialism vs. Imperialism
Colonialism is forced settlement by white people on land, the territorial conquest, occupation
and direct control of one country over another. Involved large-scale settlement and brought large
systems of inequalities and economic exploitation.
Neo-Colonialism is exploitative economic relationships between developed and developing
countries, despite the formal political independence of the developing country. This one is about
the economics, where the formal independent countries remain subject to control by another
(Colonialism is territory, Neo is economics)
Imperialism is the economic and political motives by the wealthy countries. It is a political and
economic system which wealthy and powerful states control political and economic life of other
societies. Long-distance commercial ties, both with or without direct political ties.
Modernization theorists don’t talk about imperialism and its role, they would argue no relevance
to the present world order, just think underdeveloped countries are ‘traditionally poor’
Dependency theorists argue imperialism caused this inequality and the underdevelopment of
countries, say it is relevant and needs to be addressed
Expanding the Empire- 1492-1776. 3 Phases of Imperialism
1. Age of Discovery: Spanish, Portuguese “going out phase”, ecological, European imperialism:
Africa andAsia incorporated. 2. British Dominance 3. Neo-Colonialism Neo-Imperialism
The search for wealth, hegemony and spiritual conversions
Dominate that world, Britain
2 views, conventional: empires in relative decline, alternative view: British imperialism didn’t
cease in the 19 century, they were world superpower, had system of economic dominance,
commercial profit. Imperialism in 19 century was exclusively British- other European powers
unable to compete and withdrew.
Some say that British empire declined, France was trying to catch up to the industrialization and
Britain did the same, they pulled back, but others say Britain used imperialism of free trade.
Imperialist Rivalries, 1878-1914 Imperial powers had 17% of worlds territory in these years, race to control people. Resurgence of
European Imperialism in last 19 century quarter was quick, explosive and competitive
Scramble for Africa
By first 20 century decade, almost all world was under control, empires complete
WEEK 4- DEBT
International lending correlates to economic cycles: economic growth expands bank credit
leading to speculation causing fraud and swindles (mania+bubbles bubble bursts=panic, crash)
Lindleberger argues economic cycles and international lending:
Period of real growth involving a rise in profits, new technology use or new
transportation/communication systems (railways etc). This is linked to rapid expansion of bank
MANIA+BUBBLES, money goes into speculation and this is linked to fraud and swindles.
International lending as banks run out of borrowers, they become desperate to lend and make
high risk foreign loans. End of mania borrowers are encouraged to take new loans to pay off the
BUBBLE BURSTS, prices fall, investors try to collect their loans. This is period of PANIC
where all the lending stops and borrowers cannot pay back old loans.And this feeds on itself
leading to CRASH because borrowers cannot repay loans and default.
Loan pushing- bankers push developing countries to take loans they don’t need and for
borrowers to live beyond their means
Government, Politics, Cold War, Debit Crisis- End of WWII brought 4 changes in global
politics and economies: Decolonization began, countries become independent, new international
intuitions created (UN, WB, IMF), major international corporations rise, nuclear weapons change
nature of war and empire.
Loans become way of achieving power after WWII, helped to prop US dictatorships, made to
burden developing countries with unpayable debts
DEBT CRISIS- 1980s- In the 1970’s period of mania and lots of loan pushing to developing
countries, the debt increased from 70 billion to 537 billion in 10 years. Re-negotiating debts
meant making new loans to repay old debts. New loans used to pay the interests from old loans-
but then there was interest charged on the interest. By 1990, developing countries debt was at 1.3
trillion. In 1983-1990 developing countries transferred 154 billion to rich countries, but total debt
increased by 550 billion. Debt couldn’t be repaid, lenders sold debts at discount. The 1996 HIPC- heavily indebted poor countries initiative- some loans and debts had to be
cancelled, this brought strict neo-liberal structural adjustment programs. (WB and IMF forced
these countries to minimize the role of the state and liberate markets and expand the exportation
of low value commodities so they could repay their debts.
Jubilee 2000 called for cancellation of unpayable debts of poorest countries, failure of this led to
multilateral debt relief initiative (MDRI)- did reduce debt payments but in the end- developing
countries are paying more money to rich countries while falling deeper into debt, poor continued
to subsidize the rich. Since the crisis in the 80s the developing countries have been struggling to
repay debts, sending more money to rich countries. Increasingly independent on international aid
from industrialized countries, who made their help conditional that the recipient country had to
have the WB and IMF programs. Another controversial condition was the poor countries need to
adopt neoliberal economic policies- structural adjustment programs.
Neoliberal economic policies- enforced debt repayment, ending import substitution
industrialization, adopting export-led growth model.
Alexander Sack- ODIOUS DEBT- if a despotic power incurs a debt not for the needs or
interests of the state, but to strengthen his despotic regime, to repress the population that fights
against it, etc., this debt is odious to the population of all the state. This debt is not an obligation
for the nation, it is a regimes debt, a personal debt of the power that has incurred it, consequently,
it falls with the fall of this power.
Jubilee Campaign argued that lenders had a responsibility in their loans, and illegitimate debt
that was improperly made should be to the liability of the lender, not the borrower.
Lender-borrower co-responsibilities, odious debt, illegitimate lending, are becoming recognized
as concepts in international law and domestic lending concepts such as unfairness and broader
obligations of lenders are being taken into account.
Western countries who are giving debt they know cant and wont be paid back because of
corruption, then the country is not held to pay it back.
GLOBALIZATION- benefits not equally shared- trade hasn’t alleviated poverty. China
exception or trend? Some say not benefitting, others say their success happened because of post
revolution changes. Weakened powers of nation-state as lost sovereignty to MNCs and Financial
institutions. Impacted governments of weaker states- loosing influence internationally and
Global is a political space where powerful and dominant seek control, no social or ecological
accountability. Rich countries benefit, concentrate exports on high-value products. 12 developing countries
participating in trade expansion, China taking most foreign direct investment flow.
WB convinced globalization is working for the poor- trends in poverty reduction are strongest in
countries that have integrated rapidly into world economy. But Sub-SaharanAfrica loosing- 40%
live less than 1$ a day, less than 1% world GDP, external debt exploded.
TRIAD- European union, North America, Japan.
World Bank- bank provides loans to developing countries, goal to reduce poverty. 5 arms
International Finance Corporation (IFC), International Bank for Reconstruction and
Development (IBRD), Multilateral investment guarantee agency (MIGA), International
DevelopmentAgency (IDA) and the International Centre for Settlement of Investment Disputes
Theories of Development with the view of Globalization
Kuznets Curve- left perceived inequality, bottom of graph is degree of development of
modernization (time)… predicted as a country economy moves towards industrialization,
inequality increases, but over time, as more of the population moves out of agriculture, the
equality eventually decreases…. Result of trickle down of benefits, share of income of the poor
rise and people are lifted out of poverty.
Washington Consensus- prescription that consisted of 10 policies, right-winged approach with
neo-conservatives, questioned the usefulness of WB and poverty-reduction programs, associated
with Neo-Liberal StructuralAdjustment Programs, debt service and restructuring seen as more
important than poverty reduction. Williamson coined the term… They are 10 specific economic
policy prescriptions considered to be the ‘standard’reform package promoted to countries who
were in debt crisis’s by the IMF and WB (based in Washington!)
Why should we reduce poverty? Streeten’s Ethical Reasons:
Productivity will increase healthy population
Fertility rates will decrease
Environmental degradation reduced
Social conflict reduction contributes to democracy and social stability
Fight against terrorism
Opposing views to ethical reasons for reducing poverty: right winged- poor have themselves to
blame for economic policies, civil war, geography and climate and foreign aid is wasteful
intervention. Left winged- poverty arises from economization of life and forced integration into
world economy and foreign aid is a capitalist tool to exploit third world. Mapping of Poverty- Sachs attempted to create map where poverty is concentrated and goal to
end extreme poverty, made specific goals but didn’t take into consideration
Four approaches to understanding poverty: IC, CA, SE, PA
Income/Consumption- it measures only one dimension of human well being (dollar-a-day
benchmark) (individualistic, fail to explain causes of poverty)
CapabilitiesApproach- HDI ranks countries level of poverty (individualistic, fail to explain
causes of poverty)
Social Exclusion- concerned with policies that eliminate discrimination and promote affirmative
action on HR grounds
ParticipatoryAssessment- approach concerned with ways of getting people to participate
themselves in decisions about what it means to be poor and bringing sustainable livelihoods
WEEK 6- THE STATE IN DEVELOPMENT
Compradorial State- sees post colonial states run by elite ‘brought out’by and/or in alliance
with foreign governments, investors, or military, or tied to local resource-owning and
internationally oriented capitalist class.AKA, ties to the state with external interests, they think
state has no autonomy or power on its own and people are pushing the state around, see the
state’s role in a negative light.
Barbarian State- the state is rationally thought out, legal, modernized with logical structure.
State is a good thing, it knows how to promote development on rational means. (Weberian)- sees
modern state guided by rational-purposeful nationalism. Colonialism can no longer prevent a
developing state from leading a government that is purposeful, rational and legitimate.
Keynesian vs. Free Marketers and Neoliberals. Keynesian state promotes development and
argues the significant role of the state in managing the economy, while Free Market Neo-
Liberalists prefer the state role to be minimal.
1960s to industrialize meant to modernize. Neo Liberals- allows for others to run things and
fix development themselves and the state shouldn’t be involved
Prebish called for regional integration to achieve efficient industrial sector (meant large-scale
projects such as building airports etc).
Rent Seeking or State Capture- STATE IS THE PROBLEM, NOT SOLUTION IN
ECONOMIC DEVELOPMENT. Rent seeking describes how states can become ‘captured’by
special interest groups in the private sector, leading to policies that benefit a privileged minority
State Captures- includes the idea that powerful private interests such as foreign corporations,
can undermine the ability of the state to pursue national policies in the collective interests and
thereby undercut democratic process. Focus of good governance targets the elimination of
corruption RENT SEEKING-STATE CAPTURE- how you think about this determines how you think
about the states role in development, if you think it is prone to rent seeking then they see the state
as problematic to development- the problem with neoliberalism is the state has too many hands
Corruption- measured by Transparency International.
Clientelism different from corruption- favoring particular groups which may be legal (unlike
corruption) but harms social interests.
Government to Government Transfers- official development assistance, foreign aid isn’t free
money, in the traditional sense it is loans with favorable rates of interests.
Governance- WB use this term to refer to concern of how well the state functions to manage
markets. To highlight the view that the crisis of the state comes from fragility of democracy and
dissatisfaction with the ability of democracies to address long-standing structural inequalities,
also means enhancing civil society’s participation in collective decision-making through state co-
DEEP ROOTS- cultural and political, are at play in the fight against corruption and clientalism,
it is a universal problem.
State Capture- idea that powerful private interests can undermine the ability of the state to pursue
national policies of collective interests, and undercutting the democratic process.
Rent Seeking is the idea that states can be ‘captured’by special interest groups in the private
sector which create policies that only benefit a minority. Both are ideas of corruption, and if you
think the state is prone to rent seeking (captured by special interest groups in private sector) you
think the state is the problem in development.
MULTILATERALAND BILATERAL INTERNATIONAL ORGANIZATIONS:
Multilateralism refers to arrangements among three or more states- purposes are peaceful and
long term, they can help governments improve standing, influence, security, or economic
advantage. BILATERAL- government to government aid. MULTILATERALAID-
organizations like WB, UN etc.
UN, WORLD BANK, FOOD ANDAGRICULTURE ORGANIATION, WORLD HEALTH
ORGANIZATION OF UN
UN- goal world peace, prosperity. Dominated by US, decolonization lead to expansion of UN,
currently not the leader in development initiatives. Optimistic of modern science and
management, view development is technical problem, view international cooperation and
FAO, promote food security, criticized working too close to global agri-business, specialized
agency of UN. Mandate- provide governments with information and policy advice on nutrition,
food, agriculture, rural development WHO- promote research and knowledge-sharing, sets standards for health practices, biological
and pharmaceutical products. Mandate- promote physical, mental, social well-being. Specialized
agency of UN, criticized for lack of transparency and responsiveness, working too closely with
UNICEF- mandate- assist child survival and development with community-based and national
programs for health, nutrition and education. Opposes SAP by IMF and WB. Focus poverty,
Arguments- UNAgencies are inefficient, too much technology, lack of production, populated by
US and European citizens, low staff morale. Influenced by Western economic corporations
MULTILATERALAGENCY OFWESTERN GOVERNMENTS:
ORGANIZATION for ECONOMIC CO-OPERATION and DEVELOPMENT (OECD)
organization of 30 rich country governments. US Led, designs for greater economic
globalization, produces analytical reports data, technical standards, policy proposals
OECD policies prepared in secret
Promoted Washington Consensus through its development assistance committee, emphasizes
EUROPEAN ORGANIZATIONS, European Commission- executive branch of EU, worlds
largest single multilateral aid donor
NON-WESTERN GOVERNMENTS- NAM- non aligned movement 118 countries, group 77
133 members, Islamic conference organization56, group of 21- BRICS
Multinational corporations are enterprises that engage in foreign direct investment, operate
across boarders and
Bilateral- government to government aid
AID DONORS- most belong to the development assistance committee (OECD), in
2008, ODA(official development assistance, term interchangeably with Foreign
Aid, is funding provided by governments with the main purpose to improve economic
or social well-being in developing countries), was equivalent to private flows (foreign
direct investment) to developing countries- US $121 BILLION
Donations orAid given by private organizations, foundations, individuals to either
directly to developing countries or through NGO’s, do not count as Official
DevelopmentAssistance. Neither does aid to countries that are not classified as
developing (Russia), this is referred to as ‘official assistance’
Most industrialized countries that provide foreign aid belong to donors club called
DevelopmentAssistance Committee- DAC, of the OECD. US donated the most ODA- official development assistance in 2008, next: Germany,
UK, France and Japan (Absolutist terms, relativist terms- Sweden, luxembourge,
Norway, Denmark, Netherlands)
Largest non-DAC donor in 2008 was SaudiArabia.
Generosity calculated by dividing ODAby GNI (gross national income), GNP
(product) or GDP (domestic product) which provide almost identical figures
IRAQ- largest ODArecipient.Afgan, Ethiopia etc.
Most dependent ODAcountries- LIBERIA.
Most generous donor in absolute terms- USA27 billion, then Germany, UK, France, Japan.
Most generous donor in relative terms- (calculated by dividing ODAby countries gdp, gnp or
gni) Sweden, luxembourge, norway, denmark, Netherlands.
Highest receiving in absolute terms- Iraq,Afghanistan, Ethiopia etc
Highest receiving in relative terms- Liberia, (sub SaharaAfrica)
Obsolete Bargaining Model- each actor- state and firm- wants to capture a greater share of
benefits of foreign investment and over time the relative streangth of the actor changes. Time of
investment, the MNC is in stronger position, over time, the initial contract over terms of
investment erodes as the state becomes more powerful.
NGO- non governmental organizations, used as strategic partner by WB and IMF to fight
poverty, a instrument of good governance- private voluntary organizations, charitable and
political, supported by governments and serve to sustain existing order.
ODA- western donors, 1. Promoting economic development and welfare of developing countries
is main objective 2.At least 25% grant element. Flows to developed countries and multilateral
Bretton Woods- IMF and WB, systems of fixed exchange rates between countries to promote
financial stability and international trade after WWII.
HEGEMONY- leadership or dominance by one country, or social group over others, at one point
in time. Indirect form of government, imperial dominance, rules subordinate states by implied
means of power, and the threat of force instead of direct military force.
Emerges when powerful actors in a given society or at the international level do not have to reply
heavily on force to get citizens to accept their visions of the good life, common good, and in the
global south the concept of development.
Post-development scholars: Hegemonic theories of development such as modernization and
neoliberalism function as discourse because they create a space which only certain things can be
said and imagined. … discourse is the process through which social reality- political, cultural,
economic, comes into being… US hegemony has advocated the approach to multinational corporations being a representative of
the home countries political and economic interests
Dani Rodrik has discovered a positive relationship- more trade exposure, bigger government
Trade has tied us together, declined but we are connected through what we wear, eat, etc.
International trade impacted our lives, interdependence through trade
Need the state to be a strong trader, he says cant just let the market go if you are a developing
country, better build government capacity then think about reducing trade barriers, first liberalize
trade, governments are bigger faster and develop faster
Role of institutions- international development agencies have focused attention on the need for
intstitutional and policy reform in the 3 world. This has brought neo-liberal policy prescription-
privatization, trade liberation (ISI-import substitution industrialization)
Increase of democratic government, focus on state has raised concerns over the connection
between 1. democracy and 2. growth and inequality. Some have argued that democratic is less
capable than authoritarian setting clear economic agendas. Other have argued democracies are
good for growth, egalitarian in nature, and reduce gap between rich and poor
Some focus less on institutions and more on human capital- education as the key to growth.
Globalization- means more people have access to cheap forms of communication and
transportation and that could mean poor people in poor countries are less satisfied with what they
have because they are able to see what wealthier people possess
Nationalism and Development
New phenomena in 20 century in south, pride in your country, self-determining your destiny as
a country. Imperialism created nationalism, challenges people sense of worth and dignity.
Imperialism forced third world into a world system- of nation states
Nationalist vs Revolutionary. Distinct differences, Nationalist- everywhere, want political rights
for all who were subjected to imperialism, Revolutionary- trying to unify an entire population
against an oppressive force- focused on local class divisions- Nelson Mandela. Strength of
nationalism is that an ideology capable of uniting an oppressed people and drawing them
together against their oppressive enemy.
Identity is important to nationalism
Nationalist movement in 1970s- Steve Biko- student leader in apartheid South Africa,
contribution to black consciousness and empowerment, his concern with pride, identity, and race
was strong in Africa, nationalism resonated strongly with their identities Is Nationalism past its expiration date? Yes- profusion of identity sources, black and white world
is over, one worldism, liberalism, globalization, world issues trump nationalism, ethnicity
No- OECD- less nationalistic, still internationally important, market nationalism, EU- anti-
Transnational- term used by United Nations, Multinational enterprise- term used by
international business, Foreign direct investment- used by economists
MNC- enterprise engages across boarders in various counties, owns or control activities. Control
most employment, invest in developed countries.
Dependency and Mercantile view MNC’s as actors structurally determined by global
distribution of power and wealth. International Business perspective views them as
differentiated actors with diverse strategies distinguished by ownership, location- specific, and
Dependency and CriticalApproaches, Marxist Inspired- views MNC’s as representatives of
global capitalist system, and negative for developing countries that they invest in. Dependency
theory sees MNC have important role in maintaining underdevelopment in the periphery.
Represent global capitalist system, negative for the host country, keep periphery underdeveloped,
make autonomous local development impossible
Exception- industrialization and development can occur in form of associated dependent
MercantileApproach, National Interest- MNC’s meant to be representatives of home country
interests- access to oil and natural resources, foster liberal policies and fund military expenses.
Rep the home country’s political interests and foreign policy objectives- overthrow of unfriendly
governments- china, Guatemala
International Business Perspective- oli perspective, four different strategies in going abroad to
find location specific assets
O, Ownership- advantages that are unique to the MNC- patents, organization ability, marketing
and management, access to resources, capital, and markets
L, Location specific- advantages from the location of the MNC in a country that gives them
political, social and economic advantages
Political- stability, political access and coverage, investment regime and protection
Social- cultural, linguistic, ethnic commonalities
Economic- market size, access, resources, workforce. I, Internalization- advantages of coordinating production in a firm instead of buying and selling
the parts needed to produce a product. By organizing the production inside the multinational,
selling and buying from themselves they determine the transfer price. This removes it from
4 STRATEGIES seeking location specific assets
Resource seeking- natural resources, agricultural goods, desirable services that can be only
access locally, with specific managerial and technical skills
Market seeking- subsidiary esta