Development and the World

Prior to emergence of capitalism, the existence of agricultural societies with feudal property relations
resulted in very slow growth or even stagnation of output.
The advent of Industrialization and Capitalism with it, perceptibly increased the rate of growth
output.
The classical Political economy emphasized the role of trade in enabling the division and
specialization of labour and in overcoming the limitations of the internal market.
IN THIS REPORT FROM THE BOOK OF UMA KHAMBAMPATI, WE WILL DISCUSS HE THE
WIDER, MORE HOLISTIC THEORIES OF DEVELOPMENT
These theories to be discussed have highlighted different aspects of the development process (namely
as follows)
-

The role of trade and international links

Marxist theories - saw trade as beneficial
Dependency Theories - saw trade as disadvantage
The significance of the state
The role of state has been both emphasized and criticized within these
theories
The importance of class relations
The importance of socio-cultural factors (ethnicity, religion, trade, etc.)

Though these issues have been emphasized in development theories, there has been considerable
disagreement regarding their precise role (own opinion: what are the causes of disagreements
that need to be highlighted).
***Most early development theories saw development theories as linear process. Both the
Marxist and Modernization school accepted that development would follow a certain pattern within
which a stage once passed would not recur. In reality, however, as we argued, in the Introduction and
previous discussion, development is neither linear nor so straightforward. The interlinkages between
the various stages, and between the causes and consequences, are so strong that a stage theory of
development is hard to accept today.
The chapter will discuss three main school of development theorizing:
-

Marxist
Modernization theorist
Dependency School

I Marx and Development Theory

Karl Marx, was the first to explain change and development as an economic, social and political
phenomenon.
Proposition : That in every historical epoch, the prevailing mode of economic production and
exchange, and the social organization necessarily following from it, form the basis upon which is built
up, and from which alone can be explained, the political and intellectual history of that epoch
( Communist Manifesto, Marx and Engels , 1840)
As the means of production and exchange develop, the feudal relations of property become
outmoded and have to be done away with. In these periodic crises, most of the existing production
and most previously created productive forces are destroyed.
Thus, revolutionary change is built into this system. As the forces of production evolve
(through technical progress and knowledge), so competition between the oppressed and the ruling
classes becomes more intense, with the former fighting for change and the latter resisting it. This
results in social revolution, which pushes the economy on to a higher level, at which change
continues.
Marx also maintains that the history of these class struggles forms a series of evolutions in
which nowadays a stage has been reached where exploited and oppressed class- the proletariat- cannot
attain its emancipation from the sway of the exploiting and ruling class- the bourgeoisie without, at
the same time, and once and for all, emancipating society at large from all exploitation, oppression,
and class distinctions and class struggles (Marx and Engels, 1840).

Marx accepted that capitalism as the most advanced mode of production in history, and
as one that was most capable of promoting development of productive forces.
Capitalism is characterized by production for the market, Within, one class (the capitalist) owns
the means of production, and another( the proletariat) sells its labors power in exchange of wages.
Capitalist makes profit(surplus value), which they then appropriate. In order to maintain these
profits , they invest and innovate , increasing productivity of labour and creating change
and growth within the system.
Over time, however, competation exerts a downward pressure on the average rate of profits ; and in
order to avoid this capitalist begin to export to markets abroad, trade with pre-capitalist societies,
and plunder their wealth through the formation of colonies.

According to Marx . no social order ever disappears before all productive forces which there is room in
it have been developed, and new higher relations of productions never appear before the material
conditions of their existence have matured in the womb of the old society.
The capitalist system of production, in spite of its brutality, was regarded historically progressive,
and even necessary for the development of backward societies. The dynamics of capitalism and its
capacity for expansion, it was felt, could be reproduced in any society, but development would require
progression from feudalism through bourgeois capitalism or socialism.
Marx spoke in general terms of development and change
Lenin was the first who explicitly extended Marxist analysis to less developed countries to consider
the unevenness of development on a world scale.
The development of Capitalism in Russia ( Lenin 1899) was the first study of dependent development.
On his book, Imperialism: The highest stage of Capitalism (Lenin, 1982) . Lenin views on effect of
capitalism on less developed countries. He argued that once capitalism reached its monopoly phases,
competition amongst capitalist would result in what the neo-classical call oligopoly. Monopoly pricing
and profits in advanced countries would result in decreased output, slower growth, and a potential in
instability. The surpluses would accumulate, and would then be exported to less developed countries
in search of opportunities for investment. This investment abroad slows down accumulation at home,
but results in development overseas; that is imperialism has a progressive impact on recipient
economy.
Rosa Luxemburg (1951) maintained that the under-consumptionist crises in capitalist economies
would force capitalist to seek new markets in pre-capitalist regions. The penetration of merchant
capital into the colonies would compete with local industry and postpone (albeit temporarily) its
development. However, capitalism would soon spread here, and the under consumptions crisis would
occur here too. Luxemburg has been criticized for not emphasizing the increase in wages that would
occur as capitalism developed. These increased wages would increase domestic demand, and thus
delay the under consupmtionist phase
These theories propounded by Marx and his early followers viewed development as a sequence of
stages from feudalism to capitalism to socialism, with socialism being the highest form of
development .

Feudalism

Capitalism

Socialism

Modernization theories, these theories are linear ones, in which societies have to pass through
each successive stage to reach the highly developed socialist stage. The Marxist view is particularly
significant because it contributes much to later theories of development, especially the dependency and
neo-Marxist theories.

II . Modernization theories
Modernization theories are teleological and see advanced capitalist societies as models for all
developing countries. They also tend to uni-linear - all societies go through the same stages to become
developed. But unlike Marxist theories, modernization theories specifically addressed the issue of
developing countries and development.
These theories reached their economic climax in Rostows stages of growth theory.

The structure of relationships that emerged between rich and poor countries, and attempted to
analyze ways in which the poor become rich. In this sense, Modernization theories were problem
solving: how could economies progress from being traditional and poor to being modern and rich?
Modernization theories were put forward by a group of American scholars against the backdrop of
the Cold War. They provided a theoretical rationale for making economic and technological aid
available to the third world, aid which would then accomplish a political objective that of keeping
these countries non-Communist.
In constructing their account of development, Modernization Theorist drew on the distinction
between tradition and modernity.
Durkheim, was the put forward and argued that the transition from the limited economic relations
from traditional societies to the innovative and complex economic associations of modern societies
depended on a change of values, attitudes and the norms of the people; in other words, development
depended on primitive values being replaced by modern ones.
Modernization could therefore be seen as the increasing significance of economic as opposed to social,
cultural, racial or religious distinctions.
Parsons (1951) developed this

distinctions and it was further developed by theorist like McClelland

(1961), who argued that it was necessary to develop an achievement orientation amongst people.
Lerner (1964), maintained that society is defined by what it wants to become.
Analyzing the factors that make some societies modern

Weber (1930) Argued that differences in the religious and ethical beliefs of people are the key.
Calvinism, with its emphasis on frugality and hard work, was, he felt a major influence on the
development of capitalism in Western Europe.
Criticism that Modernization Theories Received in the 1960s
1. For not really defining the traditional except in relation to the modern. Traditional and
Modern are simply ideal types rather than systems existing in reality (Bernstein 1971)
2. Being Eurocentric: for seeing development as a process of change towards social, economic
and political systems that have developed in the west. Thus even admitting the possibility of
different routes, there is but one destination (Bernstein 1971). As Nettle points out, the
methodological approaches of western social and political scientistoften assume that
developing countries are infant or deviant examples of western examples and can be studies
in terms of shortfall from a norm (Nettle 1967). Such eurocentrism in modernization theories
is most obvious when modernization is seen as synonymous with Westernization.
1980s Attempts to Rethink on Modernization
1. Nash (1984), attempted to delink modernization and Westernization
2. Roxborough(1988) questioned the need for a uni-linear approach within modernization
3. Some Analyst (Apter, 1987) argued that a careful reconstruction of the modernization and
dependency approaches could result in a more coherent, comprehensive theory of
development. Roxborough (1988) make this attempt by replacing the term traditional with
the terms pre-capitalist or pre-modern societies, in an attempt to overcome objections to the
traditional-modern dichotomy.

In practical terms, Modernization theory saw modern values as being diffused through education
and technology transfers to the elites of the periphery.
Many critics felt that modernization theories had failed to grapple with the outstanding feature of the
last 100 years the emergence of the world system of social relations. Thus, Modernization theories
were criticize for ignoring the relationship between the developed and developing countries.
Dependency Theories responded to this gap in existing theories by including power relations between
the core and periphery in their theory of development.

Center-periphery Paradigm

According to the center-periphery paradigm, the world economy is composed of two sectors the center
and the periphery in which production structures are very different from each other.
In the periphery, backward sectors (with low productivity and backward techniques) coexist with
modern sectors and high productivity levels. The periphery also tends to export a small range of
products and benefit from very low linkages (horizontal or vertical linkages.
At the centre, on the other hand, production structures are modern throughout and cover a wide range
of capital, intermediate and consumer goods.

Dependency Theory
The basic argument of the dependency school was the poverty and underdevelopment in latin
America were caused by exposure (economic and political) to the advanced countries ( this is in
relation with the previous discussion made on the book about ECLA).Thus , underdevelopment was
seen as having been created as an intrinsic part of the process of western capitalist extension
( Berstein1971 and Furtado 1964).

In this sense, it was an extension, albeit critical, of the centre periphery paradigm. It also had its
foundation in two aspects of classical Marxist analysis:
1. The epidemic over-production that occurs during crises in capitalism
2. The consequent search for foreign markets
Dependency theorist rejected the basic Marxist thesis that capitalism is inherently
progressive
Baran(1957), noting the importance of geography in development, wrote that the advanced economies
gain by obtaining cheaper raw materials, and are therefore able to extract considerable surpluses.
These surpluses are largely expropriated by foreign capital and are partly squandered by local elites,
providing very little opportunity for investment for future growth.

Each models emphasize different mechanism for surplus extraction and appropriation.
These include:
1.
2.
3.
4.
5.

Cheaper raw Materials

Subsistence output and low wages
Increased demand for imports from Centre
Increasing budget deficits
Foreign investment

Baran argued that economic development in underdeveloped countries is profoundly inimical to the
dominant interest in the advanced capitalist countries . In order to stifle such development, the
advanced nations will form alliances with the pre-capitalist or feudal elites in the underdeveloped
countries. These elites (also called the comprador elites) would ally themselves with the metropolitan
centres and help transfer surplus abroad.

Many writers in Dependency paradigm rejected the generalization as well as the mechanic-formal
theorization of dependency. These writers paid particular attention in local conditions:
1. The interactions between local classes and foreign elites
2. The organization of different state forms
3. Different strategies used to cope with imperialist challenges.
They did not see dependency and industrialization as contradictory. Foreign investment occurring
through

transnational

corporations

(TNCs)

creates

conditions

for

both

dependence

and

industrialization. Though such development would redefine dependency, it would not eliminate itthere would be dependent development, as opposed to dependent underdevelopment. Investment by
TNCs at the periphery would increasingly be diverted towards manufacturing, and ever more
towards attempts to satisfy local markets. It would generally benefit the rich and increase
inequalities.

Cardosso and Faletto (1979) saw the need for political structural change, and argues that, ultimately,
only socialism would help to achieve development
Critiques of Dependency
1. For being Vague and curricular (Lall 1975): dependent countries are those which lack the
capacity for autonomous growth and they lack this because their structures are dependent
ones. This leads to a confusion between dependency and underdevelopment.
2. The characteristics generally attributed to undeveloped in dependent countries are not
exclusives to these economies but can also be found in found in non-dependent economies.
Both Dominance and dependence exist at both the Centre and periphery.
3. Franks(1966,1969), the critique of supposedly dual structure of peripheral societies is
extremely valuable, he has been criticized for using the deterministic framework of the same
model( economic) . He was criticized for displacing class relations from his analysis of
underdevelopment. His theories has been criticize for locating exploitation in the sphere of
circulation and exchange, rather than in the process of production.
4. Laclau(1971) maintain the extraction of surpluses through trade is not a defining the feature
of capitalism; it happens even in feudal economies. It is more important to know how the
surplus is produced. Which Frank failed to do.
5. The notions of dependent development put forward by Cardoso and falleto (1979) have been
criticized because development in this context is dependent on the demand of high income
consumers for the products of foreign TNCs. It also depends on the ability of strong
governments to curb unions. Such growth therefore does not lead to decreases in poverty or to
an increase in wages (Frank 1984). Instead of eliminating dependency, such development
simply redefines it.
6. Marxist, feel that capitalism has a progressive effect on poorer countries. They reject the
conclusion drawn by dependency writers that the draining of surpluses from the third world
7.

results in its underdevelopment.

Warren (1980), like the Marxist, argues that imperialism and its policies led to
industrialization and reduced dependency in the third world. He claims that capitalist
development has been taking place in these countries since WWII, and that potential
obstacles to this development have been internal rather than external.

Later development: Marginalization of the Periphery

*Amin and Emmanuel, saw low wages existing at the periphery as the root cause of dependency
Amin and Emmanuel together with other world system and equal exchange theorist

used

frameworks similar to dependency models and varying in particulars.

1. Emmanuel (1972) based his model in unequal exchange in hypothesis that whereas profit
rates are equalized between the centre and periphery, wages are not. He argued that although
labour struggles have increased wages at the centre, peripheral wages are still at its
subsistence level because labour is immobile. He also argues that since prices are determined

largely by wages , the price of the products produced at the periphery will be lower than those
produced in the centre, so that the terms of trade turn against the periphery
2. Amin(1976), argues that increases in labour productivity at the periphery can only be
translated into higher wages if workers are able to fight for them.
3. Wallerstein (1979,1984) maintsian that there are two levels of surplus expropriation: from
workers by capitalist, and from the periphery by the centre. He represents a departure from
other dependency theories in arguing the case of three regions the centre, the periphery
and the semi-periphery - . the semi-periphery comprises the intermediate countries that shift
upwards from the periphery and act as a buffer between the core and the periphery, buying
high-technology products from the former and exporting semi-manufactures to them while
importing raw materials from the periphery. The East Asian newly industrializing countries
(NICs) were seen as part of the semi-periphery. Thus, both upward and downward mobility
are possible in the world economy.

A summary
1. Underdevelopment is a historical process
2. The dominant and dependent countries together form a capitalist system.
3. Underdevelopment is an inherent consequence of the functioning of the world system.
4. Many dependency theorist also agreed on the roles of Multinational Corporation.

Conclusions
***Each of these theories either implicitly or explicitly emphasizes the roles of trade and of the
state
The roles of Trade:
-

Marxist theories are clear that trade provides opportunity for firms that are facing the limits
of their domestic market to continue to expand and earn profits (abroad). In the process, such

trade helps both developed and the developing countries.

Dependency theories, argued that trade is never mutually beneficial. Instead, it helps

the

developed countries to continue to exploit the developing countries. More recent dependency
writers dee debt and foreign direct investment also as ways in which such dependency is
reinforced.
As regard to the role of State:
-

The Marxist see the state as being central in the final stage of development- socialism. Early
centre-periphery models see a well-functioning state as necessary to avoid the negative
effects of free trade. Thus, the state can help subsidize domestic firms and protect firms and
protect them from unfair foreign competition.

***** The theories discussed formed the mainstream of discussion and debate within development
studies 1970s, even though debate surrounding them has often been virulent.
=== All of these theories are Eurocentric. They accept the notion that all countries have one goaleconomic growth- and that once Great Britain had set the scene of target by industrializing, all other
countries had, perforce, to follow if they were to survive as nation-state. Much of development
economics, sociology and political development accepts this views.
In fact Modernization theories were based on the notion that the developing world both would, and
should, follow in the footsteps of the developed world.. As we have seen, both Marxist and dependency
models are open to this criticism, assuming as they do that all the counties of the Third world wish to
grow, differing only in the reasons that they advance for their backwardness.

Hettne (1990) claims that the Marxist model is Eurocentric, because it accepts the need for countries
to move through capitalism towards Marxism. It accepts the needs for industrialization and
modernization
The dependency model is seen as a shift away from such Eurocentrism, and to some extent it was
analysing as it did the power relations between the West and the rest of the World. But it remained
within the Western evolutionary framework.
Cowen and Shenton (1996) put it, it is very hard to avoid Eurocentrism in development analysis
when the very aim of development is often defined by the first movers in Europe.
In Addition to accusations of Eurocentrism, modernization theories and Marxist and dependency
theories were all criticized for being macro theories that attempted to analyse the large issues of
growth and development at the national and sometimes in the international level, without
considering regional, local and familial distinctions. Though some attempt was made to include the
class analysis into these models, most other differences-regional, local and gender were subsumes
within the overall framework.
During the 1980s, these grand theories of development were increasingly rejected within the
Development Studies. The later dependency theories (concrete situations of Dependency) had begun
to grapple with the notion of difference, but it was left to the new approaches to Development
studies- those of gender and of the environment especially- to take further.