Saturday, June 30, 2018

Williamson. 1990. "What Washington Means by Policy Reform."

Williamson, John. 2002 [1990]. "What Washington Means by Policy Reform." in Latin American Adjustment: How Much Has Happened?

This is the paper in which Williamson coined the term "Washington Consensus." The Washington Consensus are 10 economic policies central to neoliberalism. Although neoliberalism is - and should be - controversial, in the U.S. it became economic orthodoxy with the election of Reagan. When I took economics in business school, I was taught the tenets of neoliberalism simply as "the truth" without being told that the version of economics I was learning was simply one school of economics, and a controversial one at that. The most my professor actually acknowledged that there were alternatives to neoliberalism or that some people disagree with neoliberalism was when she gave us a list of arguments against neoliberalism and neoliberal counterarguments for why they were wrong. One facet of neoliberalism is that it is often depolicitized and presented as simply a technocratic solution to technical economic issues, as it was in my economics class. It took quite a bit of work on my part after graduation to figure out on my own why I strongly disagree with neoliberalism. David Harvey says that neoliberalism is essentially a set of economic policies designed to give a greater share of wealth to the one percent, and the economic justifications for it are more or less bullshit. Basically, he's saying that what is sold to us as "trickle down" economics is actually "trickle up."

Williamson begins referring to the debt crisis in Latin America, and to statements being made at the time about how Latin American nations in economic turmoil needed to "set their houses in order" or "undertake policy reforms." What is meant by that? Williamson's goal is to explain what is meant by that. He has 10 "policy instruments" that he believes both politicians in Washington and technocrats in Washington could all agree to, although in a few cases he has his own suggestions for improving them.

Williamson notes that Washington does not always practice what it preaches to foreigners. This point deserves unpacking. Neoliberal economic policies are painful and often politically unpopular. In Chile they were forced upon the population by a brutal, autocratic regime. In The Shock Doctrine, Naomi Klein speculates that the only way to inflict neoliberalism on a population is through repression, and that the Thatcher and Reagan implementations of neoliberalism were watered down because neither the UK or the US combined them with the brutal tactics that Pinochet used in Chile.

Here are the 10 policy instruments of the Washington Consensus:
  1. Fiscal discipline: Avoid budget deficits. Williamson declares that Keynesians who believe in a positive role for budget deficits are "almost extinct as a species." The differences that now exist, he believes, are over whether fiscal discipline requires a balanced budget or whether limited deficit spending is acceptable.
  2. Reducing Public Expenditures: This goes hand in hand with fiscal discipline. If a nation is aiming to balance its budget or reduce its deficit, it can either increase revenues or decrease spending. Williamson traces the preference for reducing spending to the supply-side economics of the Reagan era. Within the U.S. and particularly on the political right, cutting spending is preferred over raising taxes. Internationally, he believes the debate is more over finding the correct "composition of public expenditures." Often, international technocrats believe that decisions over military spending are the right of sovereign nations and thereby off-limits for international institutions to interfere with. There are three categories where Williamson believes everyone agrees: subsidies, education and health, and public investment. Subsidies should be reduced or ideally eliminated. Education and health expenditures, on the other hand, are seen as necessary. The question is what kind of spending on education and health. In developing nations, primary schools are seen as more necessary than universities, and primary health care (especially prevention) is more necessary than state of the art hospitals in the capital city. In general, the Washington Consensus calls for education and health spending that benefit the disadvantaged. In the case of public infrastructure investment, Williamson says that the belief that the public sector tends to be too large coexists with the view that spending on public infrastructure should be large. Therefore, he says, this adds up to a general belief that public spending should involve redirecting money from subsidies to education and health and public infrastructure. Williamson says his own belief is that there are circumstances in which carefully targeted subsidies can be beneficial, so he would like to see nations keep subsidies when they can find a "convincing explicit justification" for them.
  3. Tax Reform: The other way to cut a budget deficit is through raising taxes. Although politicians in Washington as well as right-wing think tanks are averse to raising taxes, the rest of "technocratic Washington" is OK with them provided they are done in what they believe is the right way. Williamson says the consensus is that the tax base should be broad and marginal tax rates should be moderate.
  4. Interest Rates: Interest rates should be determined by the market, and real interest rates should be positive to discourage capital fight and increase savings. Williamson adds he believes interest rates should be positive but moderate.
  5. Exchange Rates: For developing countries, Williamson believes the consensus is that "the real exchange rate needs to be sufficiently competitive to promote a rate of export growth that will allow the economy to grow at the maximum rate permitted by its supply-side potential, while keeping the current account deficit to a size that can be financed on a sustainable basis." In other words, if a nation is trying to promote export growth, then it wants its goods to be inexpensive compared to other nations. That means a relatively weak currency is better. The question is, how weak is optimal. Much of the rest of what Williamson says here aims to specify exactly that: How weak should your currency be to maximize exports without actually hurting your economy? (One flipside to a weak currency is that when exports are cheaper for foreign buyers, imports are more expensive for your own people.)
  6. Import Liberalization: In short, he's calling for free trade. Let all of the imports in. Get rid of tariffs. He offers two qualifications. First, infant industries "may merit substantial but strictly temporary protection." Second, it's unreasonable to dismantle all protectionist policies overnight. Therefore, a nation adopting free trade policies may do so gradually.
  7. Foreign Direct Investment: Don't limit foreign direct investment.
  8. Privatization: Neoliberals believe that private industry is more efficient than state enterprises (businesses owned and run by the state), and therefore the state should privatize as much as possible.
  9. Deregulation: In short, deregulation is good. Williamson does not mention safety or environmental regulation here. Instead he discusses price controls, restrictions on foreign investment and remittances, import barriers, limits on firing employees, etc. To a neoliberal, all of these represent market distortions.
  10. Property Rights: The state must protect private property rights.

In conclusion, Williamson says, "The economic policies that Washington urges on the rest of the world may be summarized as prudent macroeconomic policies, outward orientation, and free-market capitalism." What I find notable here is how depoliticized and technocratic he presents neoliberal policies as, when in fact they are nothing of the sort.

Monday, June 25, 2018

Cooper and Packard, Revisited

I've already written up a summary of Cooper, Fred and Randall Packard. 1997. “Introduction” in Cooper and Packard, International development and the social sciences: essays on the history and politics of knowledge.

I'm revisiting it as I study to re-take the prelim. I'm not going to summarize the entire article this time. Instead I am focusing on the particular details pertinent to the question I will need to answer on my test.

I found this quote very powerful:

"The state in "less developed countries" and international agencies such as the World Bank each find a role by accepting each other's: the national government allocates development resources and portrays itself as the agent of modernity, while outside agencies legitimately intervene in sovereign states by defining their services as benevolent, technical, and politically neutral. Both are content with development as a process which depoliticizes and disempowers local populations; both portray poverty as "aboriginal," disconnected from the history which gave rise to unequal access to resources; both are content with an expertise-driven structure of development; both are reinforced by failure as much as success" (p. 3).

It's summarizing the ideas of Ferguson (1990) and it appears to be lobbed at neoliberalism in particular.

I also like the point that the concept of development is ambiguous "eliding in a single concept the notions of increased output and improved welfare" (p. 4).

Cooper and Packard then get into history, beginning with how Great Britain and France turned to development as an idea that would carry forward their interests in the Global South once colonialism began to be challenged.

Here is a quote I like that seems to be particularly lobbed at modernization theory and perhaps neoliberalism:

"Within particular domains the development construct has become a framework that rationalizes and naturalizes the power of advanced capitalism in progressivist terms - as the engine bringing those on the bottom "up" toward those who are already there" (p. 12).

This article also has some useful critique of dependency theory:
"While there was wide consensus on the importance of trends in the global economy, simple Marxist explanations based on the logic of global capitalism or the power of dominant classes runs into the problem that development interventions appear precisely where the logic of capitalism fails to produce results that political elites desire" (p. 20).

Much of the article focuses on how various development theories came about and gained acceptance or lost favor. While it's an interesting and useful article, that isn't what I'll need to write about on my exam.

Another interesting bit, this one on neoliberalism, says:

"The strong stress on market discipline sits rather uneasily with the other major trend among the powerful development institutions: their concern with "governance" and the imposition of political conditions - some from of democratization - on the provision of aid. Compelling as many of the critiques of government corruption, clientelism, and incompetence are, it is not clear that imposed austerity helps build political capacity" (p. 22). "The insistence on "good government" reproduces much that was previously said about the "good economy": a bland assertion that the West has defined objective standards for others to meet, a generalized set of categories (elections, multiple parties) that define those standards, irrespective of the actual debates that might be going on in specific contexts over how more people might acquire meaningful voice in their own lives" (p. 23).

I stopped reading at page 24.

Harvey, David. A Brief History of Neoliberalism.

Harvey, David. 2005. A Brief History of Neoliberalism. New York: Oxford University Press. E-book.

I've read only the introduction and first chapter of this book. I think it basically gets the point across as well as I am going to need for my exam.

Harvey's points are simple. In the post-World War II era of the 1950s and 1960s, the U.S. and European nations set up states based on 'embedded liberalism.' The state served to promote the well-being of the people through public services, regulations, and a social safety net. The government was to work toward "full employment, economic growth, and the well-being of its citizens" and it was OK for the state to intervene in the market to achieve this (p. 11).

This worked well until the 1970s, when there was unemployment and inflation, leading to fiscal crises. The Bretton Woods system of fixed exchange rates was no longer working, and the fixed exchange rates were abandoned in 1971.

Meanwhile, the wealthiest segment of society did not like that it had been losing its share of power and wealth during the decades of embedded liberalism (p. 15). Harvey says neoliberalism is essentially a class project to restore power and dominance to wealthy elites (p. 16). Insofar as it is an economic theory, it is contradictory and more or less a thinly veiled attempt to help elites consolidate money and power at the expense of everyone else.

So what is neoliberalism?

"Neoliberalism is in the first instance a theory of political economic practices that proposes that human well-being can be best advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade" (p. 2).

"We can therefore, interpret neoliberalization either as a utopian project to realize a theoretical design for the reorganization of international capitalism or as a political project to re-establish the conditions for capital accumulation [i.e. the rich getting richer] and to restore the power of economic elites" (p. 19). Harvey sees it as the latter, and says that "the neoliberal argument has... primarily worked as a system of justification and legitimization for whatever is needed to be done to achieve this goal" (p. 19).
In short, the state should do what is needed to allow markets to function unimpeded and then get out of the way. In theory, the state can never have all of the information needed to make perfect decisions the way markets can. In practice, says Harvey, neoliberalism leads to a greater share of wealth trickling up to the wealthiest people in society, and to monopolies. Therefore, the idea that getting the state out of the way will lead to perfectly competitive markets is not correct.

Neoliberals base the ideas on human dignity and freedom. They equate freedom with individual freedom to make decisions - unfettered by state interference - and personal responsibility. He cites Margaret Thatcher claiming there is no society, only individual men and women. And because there are only individuals and no collective, neoliberalism calls for the end of "all forms of social solidarity" (p. 23) like trade unions, public enterprises, and the welfare state. He writes, "All forms of social solidarity were to be dissolved in favour of individualism, private property, personal responsibility, and family values" (p. 23).

As to history, the intellectual roots of neoliberalism trace back to a small group of economists, philosophers, and others that first met in 1947. Their ideas went back to neo-classical economics and stood in opposition to the reigning Keynesianism. The first major implementation of neoliberal economics he cites occurred in Chile in 1973 after Pinochet's coup. It achieved some legitimization in the 1970s when prominent neoliberals won Nobel Prizes for economics (Hayek in 1974, Milton Friedman in 1976). Carter took some steps toward neoliberalism, but it was Thatcher, Reagan, and the 1979 Volcker shock that really catapulted it forward.

He explains the Volcker shock as follows. The 1973 OPEC embargo and oil price hike left OPEC nations awash in petrodollars. The US was secretly planning to invade in 1973 but instead it made a deal with Saudi Arabia to get them to send all of their petrodollars to U.S. investment banks (p. 27). With so much money coming in, the investment banks needed to do something with it. They looked to foreign governments, giving out loans to nations all over the global south.

In 1979, Paul Volcker, chair of the Fed, ended Keynesian policies aimed at full employment in favor of policies intended to curb inflation at all costs regardless of the consequences to employment. Doing this raised interest rates practically overnight. Many developing nations were unable to repay their debts. That is the Volcker shock.

Harvey says that under a liberal regime, a bank that made a bad loan would be stuck taking the loss. Under a neoliberal regime, "the borrowers are forced by state and international powers to take on board the cost of debt repayment no matter what the consequences for the livelihood and well-being of the local population" (p. 29).

The first "major test case" following the Volcker shock was when Mexico defaulted on its owns in 1982-4 (p. 29). The IMF made a deal with them to "roll over the debt, but did so in return for neoliberal reforms" (p. 29). This was the first of the "structural adjustment programs" (SAPs), the set of neoliberal conditions imposed on any country accepting a bail out from the IMF. The policies included are codified as "the Washington Consensus" and they generally involve privatization, deregulation, austerity, and free trade. Often public services are cut, and populations suffer when SAPs are imposed.

Harvey adds that the consolidation of power and wealth to elites in the U.S. and Europe did not just come from taking a larger share of the pie within their own countries. SAPs and neoliberalism meant they were also extracting surpluses from the Global South as well.

Sunday, June 24, 2018

“The Underdevelopment of Development Literature: The Case of Dependency Theory” by Tony Smith (1979)

Smith (1979) “The Underdevelopment of Development Literature: The Case of Dependency Theory” World Politics (a critique of Dependency Theory)

The Smith article is a critique of development theory that I partially read months ago and stopped reading because I thought it was bullshit. I now think that it's likely something I should know about for my prelim exam because I'll need to describe the critiques of dependency theory.

Smith says that what we call dependency theory is actually a body of work with disagreements and contradictions within it, but the shared feature of all dependency theoriests is their "insistence that it is not internal characteristics of particular countries so much as the structure of the international system - particularly in its economic aspect - that is the key variable to be studied in order to understand the form that development has taken in non-communist industrializing countries" (p. 248). Additionally, dependency theorists examine both political and economic forces, and "it often identifies itself as being unambiguously on the side of change in the South in order to benefit the poorest and most oppressed members of society there" (p. 248). Additionally, dependency theorists believe that "contemporary political and economic change in the South must be understood as aspects of imperialism today and yesterday" (p. 248).

Smith goes on to say that dependency theory is not just a theory - it's an ideology and a basis for political action. This is somewhat fair but not entirely. Dependency theory highlights inequality and exploitation in the world. That's all it does. However, if you believe it is an accurate theory, for most people, it would follow that they oppose inequality and exploitation. But the theory itself does not call for political action - it's simply an analysis of the world as it exists.

Smith then introduces the main subject of his paper: Ripping dependency theory a new one. And his main argument: Dependency theory overestimates the impacts of imperialism.

He states that dependency theorists believe that integration in the global economy is harmful rather than beneficial to nations in the periphery. He says they don't provide evidence, and analysis actually shows that integration into the global economy boosts a nation's economic growth. However, dependency theorists do not simply look at economic growth as a whole (for example, in terms of GDP). They analyze the relationships between the various classes and actors within a society. For example, Peter Evans in Dependent Development writes at length about the state, foreign capital, local elites, and the working class. He makes clear that dependent development tends to be a fairly profitable arrangement for foreign capital, the state, and local elites. I don't think GDP growth in a national economy proves any part of Evans' argument wrong. Foreign capital and local elites can still profit - and the nation can even industrialize - while the nation remains dependent and the working class and peasant remain poor.

Smith cites Cardoso and the idea that even when industrialization takes place in the periphery, because it is controlled by multinational corporations, it is still not a net benefit to the peripheral nation, and dependency prevents self-sustaining industrialization.

He also writes, "Too many writers of this school make the mistake of assuming that since the whole (in this case the international system is greater than the sum of its parts (the constituent states, the parts lead no significant existence separate from the whole, but operate simply in functionally specific manners as a result of their place in the greater system" (p. 252).

Smith refers to this as "the tyranny of the whole over the parts."

On p. 255, Smith uses India as an example to illustrate his point. Baran claimed that Great Britain impeded India's progress by colonizing it. Smith says he lacks evidence AND that we don't know what would have happened if Britain did NOT colonize India. Maybe they'd still be poor? I take issue with this. Yes, I will grant him, we don't know what would have happened without colonialism. However, we do know what did happen (and I'd refer anyone who is unsure of it to the book Late Victorian Holocausts by Mike Davis). Great Britain extracted wealth and raw materials from India, contributing to and worsening massive famines at the end of the 19th C (as millions of Indians were starving, England was exporting record amounts of wheat from India). They taxed Indians to finance British wars, and forced them into growing crops desired for export to England instead of growing crops for their own uses. Indians shifted from growing legumes (pulses, as they call them) to more wheat and cotton. The former fixes nitrogen in the soil and the latter pulls nitrogen out of the soil, so the shift in cropping patterns led to ecological problems.

Great Britain used India and the U.S. as sources of cotton for the textile industry in Manchester, but prevented India from developing its own industrialized textile industry. Britain used this exploitative relationship long enough to shelter its own textile industry enough that its factory-made textiles, even with the cost of shipping, could out-compete handmade textiles from India. Even the much lauded railroads built by Great Britain in India served mostly to take food away from areas with hungry people during the years of famine. There is absolutely no way to look at the mountain of evidence of Great Britain extracting wealth from India while preventing it from industrializing and conclude that anything else happened there.

While it's true that we don't know what the historical alternatives could have looked like, and if any of them might have been better or worse, it's dishonest to pretend that what happened didn't. Sociologists are concerned with the world as it exists, and in the world that exists, Great Britain colonized and exploited India in a way very accurate described by dependency theorists.

Smith then takes up the case of Japan. Japan wasn't colonized. Japan did OK. Maybe, says Smith, there is something about Japan that made it able to both avoid colonization and to industrialize (p. 257). And that is something internal to Japan, not having to do with the world system outside of it. I think it's likely that it's both factors internal to Japan was well as external ones that allowed it to avoid colonization. However, I don't think it follows that dependency theory is wrong. We still have an entire world of examples of colonized nations that ended up dependent, and if Japan was not colonized and is not dependent, I don't think that disproves dependency theory. Even if the point is valid that factors internal within nations play a role in their development, I don't think that disproves dependency theory. As a whole, I don't see how you can look at the mountain of evidence piled up showing that imperialism led to the core exploiting a dependent periphery and somehow conclude that imperialism did not play a defining role in the creation of that system.

I don't think I'm going to read any more of this article, because I feel like I've got the gist of his argument, and his argument is dumb.

Wednesday, June 20, 2018

Evans and Stephens, Revisited

I am studying to retake my Sociology of Development prelim. I'm revisiting a reading I blogged before called Development and the World Economy by Evans and Stephens (1988). Pardon me for the repeated post. It helps me comprehend and remember the material to write it up. My thoughts here are geared specifically for answering the question I will need to answer on my prelim, which is roughly how various development theories explain inequalities in the world, and then to provide critique and discussion for the validity of each.

Peter Evans is the author of Dependent Development, published in 1979, which is about dependency theory, specifically in cases where the dependent nation begins to industrialize but remains dependent (hence: dependent development). At the time, Brazil was one of only a few countries exhibiting dependent development; one could say there are more today. I will cover his work in another post, but I mention it here because his perspective is important as we consider what he says about the various theories of development he chronicles in this piece.

Modernization Theory
They begin with critiques of modernization theory:

  1. Modernization theory is a universal theory based on the experience of a single country, and that's problematic. (p. 739) "Our industrialization was taken as a model, both normatively and theoretically, and the principal issue was how the model might be extended to others with different histories, social structures, and cultural traditions" (p. 741). Parsonian structural-functionalism, based on America, was taken as a theoretical underpinning for modernization theory. See below for more.
  2. Modernization theory provided an explanation that was "actorless" - trends like urbanization and bureaucratic are not explained as being driven by interests of states, corporations, or any other social actors. (p. 739)
  3. Modernization theory ignores the possibility that 20th century development patterns were different from those of previous centuries. (p. 739)
  4. It allows for tension and conflict during the process of development.
  5. It does not consider there may be conflicts of interest between developed and developing countries.
  6. It does not consider each nation's position in the interrelationships between countries. Except for accounting for nations influencing one another via the demonstration effect, it treats each nation as existing in a vacuum, which is not accurate. For nations with a recent colonial past, this means ignoring parts of their history that have been very influential to their present day reality.

An important point in comparing modernization and dependency theory is that dependency theory turns modernization theory "on its head" (p. 740). The former claims that ties between the periphery and core are beneficial because development will be transmitted via diffusion. The latter views ties between the periphery and core as roadblocks to development in the periphery.

Why did Modernization Theory blow it in terms of its theoretical underpinnings? (p. 741) In part because they used Parsonian theory. Parsonian theory used some Weberian theory but left crucial ideas of Weber out (notably his "historical materialist" side). It used Weber's idea of increasing rationality as "the definition of movement toward modernity" but defined rationality solely as bureaucracy but left out Weber's idea of centralization of power and domination of social groups. It also left out Weber's view of the evolution of capitalism (i.e the Protestant ethic). Modernization theory also uses Durkheim's idea of the differentiation of different functions in society as a master process of development. They also believed that preservation of organic unity in society was important as industrialization occurred in the Global South, as it had been in the Global North.

Evans and Stephens say "The resultant prescription for the citizens of the underdeveloped world and those who would assist them was to find ways of inculcating the attitudes purported to prevail in advanced capitalist countries without being overwhelmed by the tensions created by such drastic value change" (p. 742). In other words, the people of the Global South needed to adopt Western attitudes and values in order to develop, and they must do so at a pace and in a way that did not tear their society apart.

Evans and Stephens say the perspective of modernization theory is an easy fit with neoclassical economics. Universalism is needed to make the market work, and people must leave their traditional ways in order to participate fully in the market. Politically, the assumption was that since the Global South was to mimic the economic system of the Global North, it should adopt the political system as well. This is where the critique that modernization theory fails to analyze class structure fits in. Evans believes that actually repressive regimes are most fitting for nations undergoing dependent development because the state needs to keep wages low to attract multinational corporations to operate in their country, and because the local elite will be wealthy, partnering with international capital and consuming luxury goods, whereas the masses will be excluded from the benefits of development, and the state requires the use of violence to maintain such a system. Furthermore, he says a parliamentary system is used to create consensus among various factions of the bourgeois and nations undergoing dependent development will have a large working class and a politically weak bourgeoisie, making parliamentary government incompatible with their needs. Evans wrote his book during the dictatorships in the Southern Cone, so perhaps a more updated analysis would find a different answer. Either way, analysis of different classes and actors vying for power is an important part of Evans' analysis and it is totally absent here. Perhaps that is where his critique of modernization theory as actorless comes from.

Evans and Stephens seem to praise it for allowing for conflict during the development process. For example, if one modernization process occurs faster than another, there may be tension between the two.

However, they are critical of it for assuming the development trajectory of all nations will follow that of the U.S. and Europe. They say modernization theory sees any deviations from that trajectory as aberrations to be corrected rather than data points that should be used to inform and revise the theory. They also criticize it as ethnocentric because unique cultures are seen as "only obstacles to be overcome" that are replaced by Western values (p. 742).

Evans and Stephens think the fix for modernization theory would be to include Marxist theory, which would examine actors with conflicting interests and examine the global political economy as a whole (since all nations coexist with one another). This is a bit of a funny critique though since Rostow, who first theorized modernization theory, set himself up as an anti-Marx. So they are saying that a bad theory that is intended to refute Marx would do better to just agree with Marx. They add that the Marxist theory available at the time wouldn't have been enough to truly fix modernization theory.

I'm skipping the next section on Comparative Historical Approaches since I don't intend to cover it on my prelim.

Dependency and the World System
Evans and Stephens cover dependency theory and world-systems theory together (p. 745). I'll be focusing on dependency theory since that's what I intend to write about in my prelim.

Dependency theory contradicted modernization theory in a few key ways. First, it's Marxist. Second, because core nations (a.k.a. developed nations, a.k.a. the Global North) already developed and built strong states and strong industrial economies, that made it impossible for the nations on the periphery to develop in the exact same way. Remember, England did it by importing raw materials (wheat, corn, cotton) from the periphery, industrializing its textile industry, and then selling the textiles to both domestic and foreign markets. A nation on the periphery can't exactly colonize England and use it as a source for raw materials and a market for its finished goods. Nations on the periphery are attempting to develop in an entirely different world than core nations industrialized in, and they aren't going to have the same route to industrialization.

Third, the roadblock to progress in the periphery is not ties to traditional values, but local elites and foreign capital who try to "defend their own power and privilege" (p. 745).

Fourth, Baran and Frank focus on interests instead of norms and values (whereas Modernization Theory focuses on norms and values). Evans and Stephens say their materialist approach may have been overdone, but they still got the theory to a better place and it could be improved from there.

Modernization theory looked at the development of the core nations and assumed that the periphery would develop in the same way. Dependency theory examines the nations of the periphery (especially Latin America) to determine how development takes place (or doesn't) in the periphery. The latter view turns out to be more accurate.

Evans and Stephens contrast dependency theory and world-systems theory by noting that dependency theory focuses on the internal dynamics within the periphery, whereas world-systems theory focuses more on the relationships between the core and the periphery. In the case of world-systems theory, they note that Wallerstein said that the positions of individual nations within the world-system may change over time but the overall world-system remains intact.

Evans and Stephens' discussion of how theory treats states and markets seems to mostly contradict neoliberalism, even though they were not writing about it. That is, they say that strong interventionist states that used state power to foster industrial development either by nationalizing the mines or protecting fledgling industries are the ones that were able to industrialize, whereas Chile and Argentina also had strong states but they allowed the "unfettered operation of the market" and that resulted in deindustrialization (p. 750). One can expect at least Evans' perspective to be compatible with dependency theory, particularly his own writing on dependent development. It appears they believe that modernization theory is similar in this way to neoliberalism - it calls for a state to protect private property rights and let the market work, and blames the state and its power for the "traditional rigidities" that prevent development (p. 749).

The second issue they discuss is development and democracy. The third is distribution. Modernization theory predicts that greater development leads to more democracy and more equal distribution of wealth. In other words, modernization theory seems to uncritically believe that development is a panacea, without a whole lot of evidence to back up such a view. Perhaps it's the backward looking perspective it takes, looking only at American and Western European development, along with its ethnocentrism. That is, it views the U.S. and Western Europe as equal and democratic, and then assumes that any other nation that develops will do so along the same trajectory and with the same results.

Evans and Stephens discussion mostly revolve around the other theories, the ones actually based in the experiences of the developing world, comparing and contrasting different nations, and examining different actors within those nations. They seem to mention modernization theory almost nominally, as if it is so obviously wrong that more discussion is not needed. They present an analysis of democratization in Europe that does not treat democracy as the natural outcome of development but instead analyzes various class factions and their alliances and power vis-a-vis each other to understand how each nation arrived at democracy and when they were instead autocratic (such as Germany, Spain, and Italy in the mid-20th C.).

As for distribution, those within dependency theory believe in the Marxist idea of capitalist accumulation, in which - as that occurs - inequality increases as the rich get richer and the gap between rich and poor grows. Or, put another way, capital is enriched and the gap between capital and labor grows (p. 754).

Evans and Stephens refute the idea that development inherently leads to greater equality by pointing out that redistribution via the welfare state is not simply arrived at through industrialization but through political struggle. Here again we see why they critique modernization theory for being "actorless."

Quite frankly, I'm skipping the rest of the reading because there is no way on earth I can remember all of this and regurgitate it in an essay on my prelim without bringing notes in with me anyway.

Monday, June 18, 2018

Rostow, Revisited

I've previously written about Rostow's book. This one is about Rostow's article, also called the Stages of Economic Growth, published in The Economic History Review, New Series, Vol. 12, No. 1 (1959), pp. 1-16. By the way, as a disclaimer, this theory is pretty much bullshit.

The Traditional Society
His first stage is "the traditional society." Simply put, this is the society that has not yet industrialized. Because they have not industrialized, there is a ceiling to their productive capacity. Also, most people must work in agriculture.

Pre-Conditions for Take-Off
Rostow traces the particulars of Britain's industrial revolution to describe why and how they met the pre-conditions for take-off. Then he provides the general recipe needed.
  • First, a good transportation system that can allow for both commerce and efficient government.
  • Second, industrialized agriculture, at least to some extent. Presumably this means some combination of fertilizer, pesticides, mechanization, and hybrid seeds.
  • Third, increased amounts of imports financed by better production and marketing of an export, mostly natural resources.

Then he offers a second set of non-economic factors: willingness to expand markets and industrialize; a group of entrepreneurs who are free to operate; a way to disseminate industrialized agriculture (honestly, this sounds like the Gates Foundation now); good trade policy; and a supportive government that keeps the peace and supports industrialization. He doesn't specify (at least in this paper) how a society will get these things. They are just supposed to get them. Maybe he says it in the book.

Then he gets into how the "demonstration effect" works. So let's say a traditional society begins to get some foreign imports that are manufactured goods, and it has some industrialization. For one thing, he says, this gives people something to strive for by showing them what's possible. If they don't know what higher crop yields or motorcycles or Coca-Cola are, they can't want them. Once they see them, they will want the advantages of longer lifespans, better living conditions, convenient technology, new things to buy, and so on. That's the carrot. The stick is that traditional societies can get their butts kicked militarily by industrialized nations, and obviously the traditional societies won't want to let that happen. It's better to develop the wealth and technology to be able to defend yourself. He argues historically this has been a factor catalyzing and spurring on national development, and he actually defends imperialism saying that it is good because it sped up global development. Clearly, in his view, the impact of the center on the development of the periphery is a positive one. One roadblock to development is when the "men" in charge don't see the need for technological development.

Take-off involves a time when a few sectors have rapid growth thanks to technological (industrial) advancement. He cites sectors that have historically done the job as textiles, railroads, and logging. What makes take-off different from pre-take-off is that suddenly industrial advancement becomes a self-sustaining process, whereas before it was not. The three main factors he cited as precursors must continue to advance (improvement in transportation, industrialized agriculture, and export-led growth), but the group of technical workers and entrepreneurs must grow, and "the sources of capital must be institutionalized" so that the economy can sustain a shock and still survive.

He says a common result of take-off is that the economy sustains an annual rate of net investment of 10 percent. In other words, the profits from the current growth in business are reinvested to grow the economy even more. Those in society who want to modernize win a "social, political, and cultural victory" over those who don't.

The Drive to Maturity
Rostow defines maturity as when a society as applied modern technology to most of its resources. In other words, as Evans and Stephens (1988) put it, it's rationalization. During the drive to maturity the industrial economy is diversified so that there isn't just one or a few main industries. New leading sectors might overtake old ones. This might occur as older industries give rise to new ones - railroads to mining to turning mining products into something, or timber to paper. He poses a number of questions about when to consider a particular nation's economy mature. He points out differences within countries either regionally or by industry, which perhaps show that it's silly to treat development as if it occurs at the unit of the nation-state.

As societies rise to maturity, their agricultural workforce declines and the share of the urban workforce that are semi-skilled and white color increases. These people have both the taste and the income to consume a lot.

The Age of High Mass Consumption
This is Rostow's pinnacle stage, exemplified by the U.S. It is achieved when there is both technological saturation and a high enough per capita income.