There are many theories of development and dependency. These theories have strengths and weaknesses. One shortcoming of all of them is that they frequently give short to the role of women in economic development. By putting the theories together, however, we should be able to answer a key question facing the 85 percent of the world’s population living outside high-income countries: how can they move up in the world economy?
Market-oriented Theories of Development :
The most influential theories of global inequality advanced by British and American economists and sociologists were market-oriented theories. These theories assume that the best possible economic consequences will result if individuals are free-uninhibited by any form of government constraint-to make their own economic decisions.
Unrestricted capitalism, if it is allowed to develop fully, is said to be the avenue to economic growth. Government bureaucracy should not dictate which goods to produce, what prices to charge or how much workers should be paid. According to market-oriented theorists, governmental direction of the economics of low-income countries results in blockages to economic development. In this view, local governments should get out of the way of development.
Modernization theory :W.W. Rostow:
- Modernization theory argues that low income societies can develop economically only if they give
up their traditional ways and adopt modern economic institutions, technologies and cultural
values that emphasize savings and productive investment.
- One of the most influential early proponents of such theories was W.W. Rostow, an economic adviser to former US President John F. Kennedy, whose ideas helped shape US foreign policy towards Latin
America during the 1960s. Rostow’s explanation is one version of a market-oriented approach, termed
- According to Rostow, the traditional cultural values and social institutions of low-income countries impede their economic effectiveness. For example, many people in low-income countries, in Rostow’s view, lack a strong work ethic; they would sooner consume today than invest for the future. Large families are also seen as partly responsible for ‘economic backwardness’, since a breadwinner with many mounts to feed can hardly be expected to save money for investment purposes.
- But to modernization theorists, the problems in low-income countries run even deeper. ……The cultures of such countries, according to the theory, tend to support ‘fatalism’ – a value system that views hardship and suffering as the unavoidable plight of life. Acceptance of one’s lot in life thus discourages people from working hard and being thrifty in order to overcome their fate. In this view, then, a country’s poverty is due largely to the cultural failings of the people themselves. Such failings are reinforced by government politics that set wages and control prices and generally interfere in the operation of the economy. …….How can low-income countries break out of their poverty? Rostow viewed economic growth as going through several stages, which he likened to the journey of an aero plane:
- The traditional stage : This is the stage just described. It is characterized by low rates of savings, the supposed lack of a work ethic, and the so-called fatalistic value system. The aero plane is not yet off the ground.
- Take off to economic growth : The traditional stage, Rostow argued, can give way to a second one: economic take-off. This occurs when poor countries begin to jettison their traditional values and institutions and start to save and invest money for the future. The role of wealthy countries, like the United States, is to facilitate this growth. They can do this by financing birth control programmes or providing low-cost loans for electrification, road and airport construction, and starting new industries.
- Drive to technological maturity: According to Rostow, with the help of money and advice from highincome countries, the aeroplane of economic growth would taxi down the runway, pick up speed and become airborne. The country would then approach technological maturity. In the aeronautical metaphor, the plane would slowly climb to cruising altitude, improving its technology, reinvesting its recently acquired wealth in new industries and adopting the institutions and values of the high-income countries.
- High-mass consumption : Finally, the country would reach the phase of high mass consumption. Now people are able to enjoy the fruits of their labour by achieving a high standard of living. The aeroplane (country) cruises along on automatic pilot, having entered the ranks of high-income countries.
Rostow’s ideas remain influential today……. Indeed, perhaps the prevailing view among economists today, neo-liberalism, argues that free-market forces, achieved by minimizing governmental restrictions on business, provide the only route to economic growth. Neo-liberalism holds that global free trade will enable all countries of the world to prosper; eliminating governmental regulation is seen as necessary for economic growth to occur. Neo-liberal economists therefore call for an end to restrictions on trade and often challenge minimum wage and other labour, laws, as well as environmental restrictions on business.
…………Sociologists, on the other hand, focus on the cultural aspects of Rostow’s theory; whether and how certain beliefs and institutions hinder development (Davis). These include religious values, moral beliefs, belief in magic and folk traditions and practices. Sociologists also examine other conditions that resist change; particularly the belief local cultures have that moral decay and social unrest accompany business and trade.
Dependency Theory :
- The dependency theorists argue that the poverty of low-income countries stems from their exploitation by wealthy countries and the multinational corporation as that are based in wealthy countries. In their view, global capitalism locked their countries into a downward spiral of exploitation and poverty.
- During the 1960,s a number of theorists questioned market-oriented explanations of global inequality such as modernization theory. Many of these critics were sociologists and economists from the lowincome countries of Latin America and Africa, who drew on Marxist ideas to reject the idea that their countries’ economic underdevelopment was due to their own cultural or institutional faults. Instead, they build on the theories of Karl Marx, who argued that world capitalism would create a class of countries manipulated by more powerful countries, just as capitalism of workers.
- According to dependency theories, the exploitation began with colonialism, a politicaleconomic system under which powerful countries established, for their own profit, rule over weaker peoples or countries. Powerful nations have colonized other countries usually to procure the raw materials needed for their factories and to control markers for the products manufactured in those factories.
- Although colonialism typically involved European countries establishing colonies in North and South America, Africa and Asia, some Asian countries (such as Japan) had colonies as well. Even though colonialism ended throughout most of the world after the Second World War, the exploitation did
not: transnational corporations continued to reap enormous profits from their branches in lowincome countries.
- According to dependency theory, these global companies, often with the support of the powerful banks and governments of rich countries, established factories in poor countries, using cheap labour and raw materials to maximize production costs without governmental interference.
- ………In turn, the low prices set for labour and raw materials prevented poor countries from accumulating the profit necessary to industrialize themselves. Local businesses that might compete with foreign corporation were prevented from doing so…….. In this view, poor countries are forced to borrow from rich countries, thus increasing their economic dependency.
- Low-income countries are thus seen not as underdeveloped, but rather as mis-developed (Frank; Emmanuel). With the exception of a handful of local politicians and business people who serve the interest of the foreign corporations, people fall into poverty. Peasants are forced to choose between starvation and working at near-starvation wages on foreign-controlled plantations and in foreign-controlled mines and factories. Since dependency theorists believe that such exploitation has kept their countries from achieving economic growth, they typically call for revolutionary changes that would push foreign corporations out of their countries altogether (Frank Parkin).
- While political and military-power is usually ignored by market-oriented theorists, dependency theorists regard the exercise of power as central to enforcing unequal economic relationship. According to this theory, whenever local leaders question such unequal arrangements, their voices are quickly suppressed. Unionization is usually outlawed, and labour organizers are jailed and sometimes killed. When people elect a government opposing these policies, that government is likely to be overthrown by the country’s military, often backed by the armed forces of the industrialized countries themselves.
- ………Dependency theorists point of many examples; the role of the CIA in overthrowing the Marxist governments of Guatemala in 1954 and Chile in 1973 and in undermining support for the leftist government in Nicaragua in the 1980s…….. In the view of dependency theory, global economic inequality is thus backed up by force: economic elites in poor countries, backed by their counterparts in wealthy ones, sue police and military power to keep the local population under control.
- Brazilian sociologist Enrique Fernando Cardoso, once a prominent dependency theorist, argued more than twenty-five years ago that some degree of dependent development was nonetheless possible-that under certain circumstances, poor countries can still develop economically, although only in ways shaped by their reliance on the wealthier countries (Cardoso). IN particular, the governments of these countries could play a key role in steering a course between dependency and development.
World System Theory : Immanuel Wallerstein:
During the last quarter of a century, sociologists have increasingly seen the world as a single (although often conflict-ridden) economic system. Although dependency theories hold that individual countries are economically tied to one another ………..world-systems theory, which is strongly influenced by dependency theory, argues that the world capitalist economic system is not merely a collection of independent countries engaged in diplomatic and economic relations with one another, but must instead be understood as a single unit. The world-system approach is most closely identified with the work of Immanuel Wallerstein and his colleagues. Wallerstein showed that capitalism has long existed as a global economic system, beginning with the extension of markets and trade in Europe in the fifteenth and sixteenth centuries. The world system is seen as comprising four overlapping elements (Chase-Dunn):
- A world market for goods and labour;
- The division of the population into different economic classes, particularly capitalists and workers;
- An international system of formal and informal political relations among the most powerful countries, whose competition with one another helps shape the world economy; and
- The carving up of the world into three unequal economic zones, with the wealthier zones exploiting
the poorer ones.
World-system theorists term these three economic zones ‘core’, ‘periphery’ and ‘semi-periphery’. All countries in the world system are said to fall into one of the three categories….
- Core countries are the most advanced industrial countries, taking the lion’s share of profits in the world economic system. These include Japan, the United States and the countries of Western Europe.
- Peripheral countries comprise low-income, largely agricultural countries that are often manipulated by core countries for their own economic advantage. ,,,,,Examples of peripheral countries are found throughout Africa and to a lesser extent in Latin America and Asia. …..Natural resources, such as agricultural products, minerals and other raw materials, flow from periphery to core, in turn, sells finished goods to the periphery, also at a profits. World-system theorists argue that core countries have made themselves wealthy with this unequal trade, while at the same time limiting the economic development of peripheral countries.
- Finally, the semi-peripheral countries occupy an intermediate position; these are semiindustrialized, middle-income countries that extract profits from the more peripheral countries and in turn yield profits to the core countries. Examples of semi-peripheral countries include Mexico in North America; Brazil, Argentina and Chile in South America; and the newly industrializing economics of East Asia. The semi periphery, though to some degree controlled by the core, is thus also able to exploit the periphery. Moreover, the greater economic success of the semi-periphery holds out to the periphery the promise of similar development.
Although the world system tends to change very slowly, once-powerful countries eventually lose their economic power and others then take their place. ,,,,,,,,,, For example, some five centuries ago the Italian city-states of Venice and Genoa dominated the world capitalist economy. They were superseded by the Dutch, then the British and currently the United States. …….Today, in the view of some world-systems theorists, American dominance is giving way to a more ‘multi-polar’ world where economic power will be shared between the United States, Europe and Asia (Arrighi).
Some of the most recent explanations of successful economic development emphasize the role of state policy in promoting growth. Differing sharply from market-oriented theories, state-centred theories argue that appropriate government policies do not interfere with economic development but rather can play a key role in bringing it about. …………..A large body of research now suggests that in some regions of the world, such as East Asia, successful economic development has been state-led. Even the World Bank, long a strong proponent of free-market theories of development, has changed its thinking about the role of the state. In its 1997 report ‘The State in Changing World’, the World Bank concluded that without an effective state, ‘sustainable development, both economic and social, is impossible’.
Strong governments contributed in various ways to economic growth in the East Asian Newly Independent Countries during the 1980s and 1990s.
- East Asian governments have sometimes aggressively acted to ensure political stability, while keeping labour costs low. This has been accomplished by acts of repression, such as outlawing trade, banning strikes, jailing leaders and, in general, silencing the voices of workers. The governments of Taiwan, South Korea and Singapore in particular have engaged in such practices.
- East Asian governments have frequently sought to steer economic development in desired directions. …………For example, state agencies have often provided cheap loans and tax breaks to businesses that invest in industries favoured by the government. ……….Sometimes this strategy has backfired, resulting in bad loans held by the government (one of the causes of the region’s economic problems during the late 1990s). Some governments have prevented businesses from investing their profits in other countries, forcing them to invest in economic growth at home. Some times governments have owned and therefore controlled key industries. For example, the Japanese government ahs owned railways, the steel industry and banks; the South Korean government has owned banks; and the government of Singapore has owned airlines and the armaments and ship-repair industries.
- East Asian governments have often heavily involved in social programmes such as low-cost housing and universal education. …The world’s largest public housing system (outside socialist or formerly socialist countries) have been in Hong Kong and Singapore, where government subsidies keep rents extremely low. As a result, workers don’t require high wages to pay for their housing, so they can compete better with American and European workers in the emerging global labour market. In Singapore, which has an extremely strong central government, well-funded public education and training help to provide workers with the skills they need to compete effectively in the emerging global labour market. The Singaporean government also requires businesses and individual citizen alike to save a large percentage of their income for investment in future growth.
Evaluating theories of development
Each of the four sets of theories of global inequality just discussed has its strengths and weaknesses. Together they enable us to better understand the causes and cures for global inequality.
- Market-oriented theories commend the adoption of modern capitalist institutions of promote economic development, as the recent example of East Asia attests. They further argue that countries can develop economically only if they open their borders to trade, and they can cite evidence in support of this argument. But market-oriented theories also fail to take into account the various economic ties between poor countries and wealth ones – ties that can impede economic growth under others. They tend to blame low income countries themselves for their poverty rather than looking to the influence of outside factors, such as the business operations of more powerful nations. Market-oriented theories also ignore the ways government can work with the private sector to spur economic development. Finally, they fail to explain why some countries manage to take off economically while others remain grounded in poverty and underdevelopment.
- Dependency theories address the market-oriented theories neglect in considering poor countries’ ties with wealthy countries by focusing on how wealthy nations have economically exploited poor ones. However, while dependency theories help to account for much of the economic backwardness in Latin America and Africa, they are unable to explain the occasional success story among such low-income countries as Brazil, Argentina and Mexico or the rapidly expanding economies of East Asia. In fact, some countries, once in the low-income category, have risen economically even in the presence of the multinational corporations. Even some former colonies, such as Hong Kong and Singapore, both once dependent on Great Britain, count among the success stories.
- World-system theory sought to overcome the shortcomings of dependency theories by analyzing the world economy as a whole. Rather than beginning with individual countries, worldsystem theorists look at the complex global web of political and economic relationship that influence development and inequality in poor and rich nations alike.
- State-centred theories stress the governmental role in fostering economic growth. They thus offer a useful alternative to both the prevailing market-oriented theories, with their emphasis on states as economic hindrances, and dependency theories, which view states as allies of global business elites in exploiting poor countries. When combined with the other theories – particularly world-system theory – state-centred theories can explain the radical changes now trans-forming the world economy.