Development theories:

1. Development theories: Liberalism, Marxism, Underdevelopment Perspectives

2. Trends in development studies: • In the late 70s and 80s, political scientists and sociologists began to focus on global poverty and inequality. Why? • Because of improvements in global communication: • North becomes aware of poverty in the South • South learns to want things that the North has • Move away from fatalistic mentality in the South • At the same time, the focus went from intra-nation inequality to inter-nation inequality. Why? • Gap between rich and poor increased • The poor in rich countries are much wealthier than those in poor countries • Dividing line not so much between rich and poor of one country, but between North and South

3. Trends in development studies: • Gilpin notes three theories that seek to explain global poverty, underdevelopment, and inequality. Why do we need theories to explain these phenomena? • Once we understand causes and mechanisms that link causes to effects, we can fix problem • What are the three theories? • Neoclassical Liberalism • Marxism • Underdevelopment

4. Liberal Perspective • What is the Liberal view of interdependence and the globalized economy? Good or bad? • GOOD • What constitutes interdependence? • Internalization of trade, aid, foreign investment and portfolio investment flows • The ideal liberal world is characterized by free trade, specialization, and international division of labor. How do these factors lead to development? • They help increase access of developing countries to markets, they promote technology and know-how transfers from North to South, they optimize global resource allocation

5. Liberal Perspective • From a liberal point of view, factors flow to places where they are scarce, so their cost is highest and they produce the highest rewards. How can this benefit developing countries? • Developing countries have labor surplus and capital deficit; if national borders open to free trade and investment, developing countries receive more capital, which accelerates growth. • While a global open economy leads to development, this process is not uniform. What are some domestic factors that hinder development, despite openness? • Inefficient government • Subsistence agriculture • Lack of technological education

6. Liberal Perspective • While there are many differences among liberal development theories, they do seem to agree on two causes of international poverty. What are those causes? • Poor integration of LDCs in the world economy • Inefficient economic policy • According to Gilpin, liberal theories of development have one important shortcoming. What is it? Absence of politics from explanations. Is this truly a shortcoming?

7. Classical Marxist perspective • What is the Marxist view of a globalized economy? Good or bad? • Good (necessary evil) • According to Marx and Engels, globalized production and imperialism lead to development. How? • The driving force of development is class conflict. Some societies (in the South) lack class conflict. Imperialism destabilizes the status quo by introducing modern technology and, therefore, planting the seed of class conflict. • Lenin adds that exporting capital and technology to the periphery will, on the one hand, develop these countries, and , on the other hand, weaken the core. • What is the ultimate goal for Marxists? Is it development or something else?

8. Classical Marxist perspective • Are there similarities between classical Marxists and liberals? • They both believe that globalization of production leads to development in the periphery • They also believe that this development is not uniform across countries • Are there differences between them? • Marxists emphasize politics, which is practically absent from liberal explanations • Marxists see the integration process as conflictual, liberals expect it to be peaceful

9. Underdevelopment perspective • What is the underdevelopment view of a globalized economy? Good or bad? • BAD • In underdevelopment arguments, the globalization of production systematically leads to underdevelopment. Gilpin focuses on two positions that seek to explain this relationship. What are the two positions? • Structuralism • Dependency theory

10. Structuralism • What aspect of the global economy is the focus of structuralists? • trade • Why is trade bad for poor countries? • Because they are trapped in a position of underdevelopment by their social, political, and economic structures. • What are some particularly bad “structures”? • Overpopulation, subsistence agriculture, low propensity to save, dependence on primary exports, inefficient governments • Do you see any similarities here with Marxism or Liberalism?

11. Structuralism • What does the world look like according to structuralists (Prebisch)? • Countries belong to either of two categories: • Core = advanced, wealthy countries of the North • Periphery = underdeveloped, poor countries of the South

12. Structuralism • Structuralists see “unbalanced exchanges” between the core and periphery as the driving force of underdevelopment. This has to do with the disadvantageous terms of trade of the periphery relative to the core. • What do we mean by terms of trade? Ratio between export prices and import prices. • Why do structuralists say that the periphery is at a disadvantage? Terms of trade are biased against the periphery because their export prices are low and import prices high. • What is the underlying cause of this disadvantage? Technological gap between core and periphery.

13. Structuralism • Is the unbalanced exchanges problem going to fix itself if we continue with the practice of free trade? NO. Why? • The structuralist solution is Import-Substitution Industrialization (ISI). How does this work? • Countries use high tariffs and other trade barriers to discourage imports and encourage domestic production. Thus they industrialize and become self-sustainable. • Do you agree or disagree with the structuralist explanation and solution?

14. Dependency theory • Globalization of economy good or bad? • BAD • What is dependency? • Situation where the economic development in one country is conditioned by economic changes in another country. The latter country is self-sustaining, while the former is dependent. • Control in the world of dependency theorists is exerted through “economic neocolonialism.” Who/what are the main instruments of domination and exploitation? • MNCs

15. Dependency theory • The three international-economic mechanisms through which dependency theorists explain underdevelopment are: • Exploitation theory: core advances at cost of periphery; not only does capitalist economy keep the periphery underdeveloped, but it also immiserates it. • Imperial neglect position: capitalism favored some developed countries over others; by not receiving trade and investment from the developed world, the ignored countries cannot progress. • Dependent development: growth can happen even with the exploitation by core capitalists, but it’s not self-sustaining and does not lead to independence. • Why is dependent development bad?

16. Dependency theory • What are the political mechanisms that explain underdevelopment? • Domestic elites ally with international capitalists. As a result, instead of protecting their country and seeking independence, periphery leaders allow the economic exploitation by international capitalists to continue.

17. Dependency theory • What is the dependency solution to the problem of underdevelopment? • REVOLUTION: • Socialist revolution replaces the corrupt elites and brings about an equitable society. • Nationalist revolution breaks the links with core countries and brings about independence.