Politics of Developing Nations
Defining some key concepts
The Third World can be defined as the nations with a sustained history of political and economic marginalization, several shared distinctive sets of problems, and shared developmental goals.
Development refers to a state of human well-being or the actual process of changing or making a progress toward some sort of expansion, improvement and completeness in terms of economic productivity, social well-being, quality of life, and political structure.
Underdevelopment is mainly used in the sense of a group of nations being underdeveloped by some outside forces, as the result of the historical process of global capitalist development, as well as referred to as a state of dependency and marginality in the periphery nations which creates obstacles for the development of these countries.
Problems of Development
(1) Politically marginalized: these countries lack the political and economic power to play an active role in global and regional affairs, largely rely upon foreign aid and official development assistance, and are largely forced to react to global changes rather than play significant part in influencing those changes;
(2) Economically marginalized: they are usually in a disadvantageous position when they trade with the industrially developed countries, with a limited economic base and financial resources, rely heavily on agriculture, on one or two major exports, such as coffee, oil, copper, fruit, and on imported manufactured goods and machinery;
(3) Problems of econ. dev.: these countries seek economic development and modernization, but suffer from political instability, economic underdevelopment or stagnation, and other social problems;
(4) Problems of pol. dev.: these countries seek political development, facing such fundamental challenges as nation-building, state-building, participation, and distribution.
(5) Political regimes and institutions: most of these countries have weak and unstable civilian political institutions, with low levels of legitimacy and public acceptance, primarily dominated by personal rule, military dictatorships, and one-party rule; (India, Sri Lanka, Venezuela, Colombia, and Jamaica are a few exceptions) Most are undemocratic, while many are making transitions to democracy.
(6) Historical legacies: most of these countries were for a considerable period of time colonies of one of European nations, and one of colonial legacies is a weak sense of national identity among the inhabitants within a given territory, in terms of their ethnic, tribal, religious, or linguistic differences. This is mainly because their borders were laid down by competing European powers, with little regard for local differences. National identity is the minimum prerequisite for political stability and development in a country.
Contending Schools of Thought
1. Modernization theory
Major points:
(1) divides all societies into traditional and modern;
(2) emphasizes that economic development is prerequisite for democracy;
(3) emphasizes the need to enhance the capacity of political system;
(4) emphasizes the role of political culture in the transformation of traditional societies into modern societies;
(5) emphasizes the effects of economic growth in the transformation of traditional societies into modern societies;
(6) assumes that all societies will travel from tradition to modernity, and that industrial and democratic Western countries are the model for the latecomers to emulate;
(7) assumes that modernization will inevitably dissolve the traditional traits of the Third World countries, and traditional values and structures must be replaced by a set of modern ones;
(8) defines the nature of the relations between the North and the South as interdependence based upon the principles of comparative advantages and free trade;
(9) the solution or policy implication the modernization theory suggests is that the traditional and backward Third World societies should look to the modern and developed Western societies for guidance, while the Western countries should transmit more modern values, institutions, technology, financial investment to the Third World countries.
Major critics:
(1) modernization theory is criticized as biased and ethnocentric, that is, the development categories, stages, and processes involved are all derived from the Western experience rather than from the developing countries. There are other paths available to the Third World countries, and these alternatives neither have to use democratic institutions nor do LDCs need to reach a Western level of development to be considered successful.
(2) modernization theory misinterprets the role of traditional values and institutions in the economic development, social coherence, and political stability. It was often possible for a Third World country to retain their own traditional cultural attributes along with a modern economy;
(3) some radical critics even charge that modernization theory is a political ideology that is tended to promote the Western values and used to justify Western dominance and to keep the Third World in control or “in chains” by which they could resist communist appeals.
2. Dependency theory
Major points:
(1) divides the world into core and periphery countries;
(2) dependency is seen as a general process applicable to all Third World countries;
(3) dependency is understood to be an external condition, imposed by the historical experience of colonialism and the perpetuation of the unequal international division of labor;
(4) dependency is largely a result of the flow of economic surplus from Third World countries to Western capitalist countries;
(5) the political economy of the periphery had been totally restructured by Western colonialism to meet the needs of the core countries, thereby leading to the underdevelopment;
(6) dependency is regional polarization of the global economy -- underdevelopment in the periphery countries and development in the core countries are two aspects of a single process of capital accumulation;
(7) dependency is seen as incompatible with the development, although minor development can occur during periods of the de-association with the core capitalist world;
(8) defines the nature of the relations between the North and the South as dependency based upon political/economic/cultural/technological dominance of the core countries and inequality exchange between periphery and core countries;
(9) the solution or policy implication the dependency theory suggests is that peripheral countries should sever their ties with core countries and adopt a self-reliance model -- relying upon their own resources and planning their own paths of development so as to achieve independence and autonomous national development.
3. World-system theory
Major points:
(1) divides the world into core, periphery, and semi-periphery countries – the central core of industrially advanced capitalist states, a periphery of industrially undeveloped countries, and a semi-periphery of a mixture in between those of core and periphery;
(2) the world economy is not composed of individual independent national economies that happen to trade with each other, but tied together by a complex network of the capitalist world economy;
(3) the uneven development of the world capitalist system leads to an unequal international economic division of labor;
(4) the relations among core, periphery and semi-periphery countries are conditioned and shaped by an integrated single capitalist world-system.
(5) defines the nature of the relations between the North and the South as the dominance-dependence and the inequality in industrial capacity and state power. That is to say, the core countries control or dominate the economic, political and cultural life of the periphery countries on one side, while the periphery countries are subjected to the development and expansion of the core countries in the global system and lack the internal dynamic which could enable them to function as independent and autonomous entities on the other side.
(6) Therefore, the solution to the problem of economic underdevelopment can only be found in the reform of the world-system -- “an equalitarian world-system.”
Major critics:
(1) The above discussion has shown that both world-system and dependency theorists, while somewhat different from each other, share the same methodology – “looking outward” and attributing underdevelopment to its external relations in the world market and international system that are governed by the interests of dominant nations and of certain classes and groups in them. However, both dependency and world-system theorists overlook the impact of the internal constraints of the underdeveloped countries -- the economic, political, social, and cultural characteristics and structures of these countries -- upon the development of the underdeveloped areas and countries.
(2) For the policy implications under this category, breaking-up of the old system is seen as necessary before the establishment of “an equalitarian world-system;” in the meanwhile, the periphery states should cooperate to offset the power of the core. However, this involves them in a problematic relation with the global economic dynamics that underlies the change of the world-system and the possibilities in the direction of development at every occurrence of upward and downward turns in the world-economy.
Two Political Economies Compared
The nature and characteristics of the two political economies can be addressed by answering the following questions:
1. Who controls the factors of production?
2. Who determines what goods are produced?
3. Who establishes the value attached to different resources and goods?
4. Who decides how resources and goods will be distributed?
5. What is the role of the state?
Two Ideal-Type Economic Systems
Key Points / The Market Economy / The Command Economy1. Control of factors of production
2. Production decisions
3. Value established
4. Distribution decisions
5. Role of the state / Every economic actor controls own factors
Sum of all private actors’ decisions (“invisible hand” of market); demand oriented
Exchange value in the market
Choices by private actors
Generally passive; enforces rule, provide minimal protection to actors / State owns and controls all factors of production
State decisions defined in detailed plan; supply oriented
State sets values attached to all goods
State determines who will receive what products at what levels
State dominates, owns, plans, controls, and regulates all economic activities
Note: the means of production include such things as energy resources, land, raw materials, tools, machines, and factories. The means of exchange include transportation and communications facilities, wholesale and retail outlets, banking and credit institutions, etc.
Strengths and Weaknesses of Market and Command Political Economy
Strengths/Benefits
/Weaknesses/Problems
MARKET ECONOMY
CompetitionDemand orientation
No central plan / Energetic and efficient production
Goods’ cost and quality responsive to consumers’ desires
Local decision and “invisible hand” stimulate innovation, facilitate freedom / Ruthless economic interactions; huge inequalities in wealth and resources
Production for profit, not human need; creation of demand for goods that have limited social values
Severe economic cycles of boom and bust, inflation and recession
COMMAND ECONOMY
No competitionSupply orientation
Central Plan / Work for common good; relative equality of wealth and income
Production and distribution for social and individual needs
Rational use of societal resources / Little incentive for efficiency; poor-quality products; low productivity
Creation of a “shortage economy”; “soft budget constraints” of enterprises; unresponsive production
Overcentralized control; limited initiative and innovation; arbitrary decision making and rigidity
Development Strategies and Practices
1. “Import-Substitution Industrialization” (ISI) was directed at creating a national economy independent of the rest of the world, by which domestic manufacturing was built up to replace imports from Western countries, behind a protective fence of often extremely high tariffs, quantitative controls, multiple exchange rates and favored production for local consumption over production for export. Such a strategy could only be implemented by the state – state’s control of external trade and financial transactions was the key to reshaping domestic activity.
Weaknesses:
(1) The ISI strategy usually took a long time to pay off because all the machinery for industrialization, all the know-how and spare parts, and even a lot of raw materials had to be imported.
(2) The ISI tended to create an uncompetitive, inefficient and high-cost domestic industrial structure in which the economy had no comparative advantage;
(3) this in turn led to the actual protection of domestic industrial-technological backwardness, the growing recession of national economy, and massive balance-of-payments and debts problems.
2. “Export-Led Industrialization” (ELI) was directed not at creating a “balanced” domestic economy independent of the rest of the world, but at the creation of a specialized role in the world economy. This implies that only a few sectors of world production would exist in a country, which would have an “unbalanced” industrial structure. The forms of production in which the country should be specialized would be determined by its “comparative advantage” in the world system. All factors were priced relative to their scarcity in the world economy. This newer strategy is successful in some Asian NICs. Those Third World countries with very limited home markets would hope to start their industrialization with the ELI strategy. Many nations of the Third World, including those that had chosen the ISI strategy, attempted to shift to ELI. What happened in those countries is most likely to happen elsewhere sooner or later, when other Third World societies begin to be drawn into these global processes of production and distribution.
Strengths:
(1) The ELI overcame the problem of a small home market by producing for the international market;
(2) The countries adopting the ELI profited from the vast supply of cheap labor;
(3) The ELI helped these countries to earn foreign exchange;
(4) The ELI helped these countries to develop efficient industries that could compete in the world market, particularly faced with the opportunity generated by dynamic changes in the structure of the world economy and de-industrialization in the developed industrial countries in the 1960s-1980s.
Why succeed?
The success of ELI was the result of a combination of internal and external variables.
(1) Internal factors: Among the internal factors, the government played a decisive role in the process of industrialization, almost the same as that played by ISI. However, the two had different interpretations, directed and managed their economies in different ways.
(2) External factors: External factors favorable to their industrialization were due to the dynamic changes in the structure of world economy and the de-industrialization in the developed industrial countries in the era of post-industrializationism: a rapid decline in the proportion of the national manufacturing industries and products in all the developed countries, a redistribution of manufacturing capacity and manufacturing labor force in the changing structure of the world market, a decline of costs of transportation and communication, new patterns of interdependent specialization in international trade, a severe labor shortage in WEs, etc.