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 worldsystem.”
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 worldsystem;” 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.
2.
3.
4.
5.
Who controls the factors of production?
Who determines what goods are produced?
Who establishes the value attached to different resources and goods?
Who decides how resources and goods will be distributed?
What is the role of the state?
Two Ideal-Type Economic Systems
Key Points
The Market Economy
1. Control of factors of Every economic actor controls own factors
production
The Command Economy
State owns and controls all factors of
production
2. Production decisions
Sum of all private actors’ decisions (“invisible State decisions defined in detailed plan;
hand” of market); demand oriented
supply oriented
3. Value established
Exchange value in the market
4. Distribution decisions Choices by private actors
5. Role of the state
State sets values attached to all goods
State determines who will receive what
products at what levels
Generally passive; enforces rule, provide
State dominates, owns, plans, controls,
minimal protection to actors
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
Competition
Energetic and efficient production
Ruthless economic interactions; huge inequalities in wealth and
resources
Demand orientation
Goods’ cost and quality responsive to
consumers’ desires
Production for profit, not human need; creation of demand for
goods that have limited social values
No central plan
Local decision and “invisible hand”
stimulate innovation, facilitate freedom
Severe economic cycles of boom and bust, inflation and recession
No competition
Work for common good; relative equality
of wealth and income
Little incentive for efficiency; poor-quality products; low
productivity
Supply orientation
Production and distribution for social and
individual needs
Creation of a “shortage economy”; “soft budget constraints” of
enterprises; unresponsive production
Central Plan
Rational use of societal resources
Overcentralized control; limited initiative and innovation; arbitrary
decision making and rigidity
COMMAND
ECONOMY
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-ofpayments 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 deindustrialization 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.
The core inference is the systematic integration into the world economy under the direction of an active and
efficient state. Only when a combination of these internal and external variables is favorable to the integration into
the world economy, can the miracle of economic development occur in the underdeveloped countries.
(Explanations and discussions)