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Introduction to international

development
T. Forsyth, E. Green, J. Lunn
DV1171
2011

Undergraduate study in
Economics, Management,
Finance and the Social Sciences

This subject guide is for a 100 course offered as part of the University of London
International Programmes in Economics, Management, Finance and the Social Sciences.
This is equivalent to Level 4 within the Framework for Higher Education Qualifications in
England, Wales and Northern Ireland (FHEQ).
For more information about the University of London International Programmes
undergraduate study in Economics, Management, Finance and the Social Sciences, see:
www.londoninternational.ac.uk
This guide was prepared for the University of London International Programmes by:
Dr T. Forsyth, Mr E. Green and J. Lunn, Development Studies Institute, The London School of
Economics and Political Science.
This is one of a series of subject guides published by the University. We regret that due to
pressure of work the authors are unable to enter into any correspondence relating to, or aris-
ing from, the guide. If you have any comments on this subject guide, favourable or unfavour-
able, please use the form at the back of this guide.

University of London International Programmes


Publications Office
Stewart House
32 Russell Square
London WC1B 5DN
United Kingdom
www.londoninternational.ac.uk

Published by: University of London


© University of London 2011
Reprinted with minor revisions 2015
The University of London asserts copyright over all material in this subject guide except where
otherwise indicated. All rights reserved. No part of this work may be reproduced in any form,
or by any means, without permission in writing from the publisher. We make every effort to
respect copyright. If you think we have inadvertently used your copyright material, please let
us know.
Contents

Contents

Part I: A framework for the course.......................................................................... 1


Chapter 1: Introduction........................................................................................... 3
Aims and objectives........................................................................................................ 4
Learning outcomes......................................................................................................... 4
The structure of this guide.............................................................................................. 4
How to use this guide..................................................................................................... 5
Reading......................................................................................................................... 6
Online study resources.................................................................................................... 7
The learning process....................................................................................................... 8
Examination advice........................................................................................................ 9
List of acronyms........................................................................................................... 11
Useful websites............................................................................................................ 12
Part II: Theories and history of development........................................................ 15
Chapter 2: Ideas of development.......................................................................... 17
Essential reading.......................................................................................................... 17
Further reading............................................................................................................. 17
Challenging reading..................................................................................................... 18
Aim and learning outcomes.......................................................................................... 18
Introduction................................................................................................................. 19
Enlightenment origins................................................................................................... 19
Academic specialisation and colonialism....................................................................... 21
Ideas of development after 1945.................................................................................. 22
Conclusion................................................................................................................... 28
Reminder of your learning outcomes............................................................................. 28
Sample examination questions...................................................................................... 28
Chapter 3: Theories of the state and market........................................................ 29
Essential reading.......................................................................................................... 29
Further reading............................................................................................................. 29
Challenging reading..................................................................................................... 30
Aim and learning outcomes.......................................................................................... 31
Introduction................................................................................................................. 31
Founding theories of the state...................................................................................... 32
Theorisations since 1945.............................................................................................. 34
Founding theories of the market................................................................................... 37
Theorisations since 1945.............................................................................................. 39
Conclusion................................................................................................................... 42
Reminder of your learning outcomes............................................................................. 43
Sample examination questions...................................................................................... 43
Chapter 4: Theories of institutions and civil society............................................. 45
Essential reading.......................................................................................................... 45
Further reading............................................................................................................. 45
Challenging reading..................................................................................................... 46
Aim and learning outcomes.......................................................................................... 46
Introduction................................................................................................................. 46

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171 Introduction to international development

Founding theories of institutions................................................................................... 47


Recent theorisations..................................................................................................... 48
Founding theories of civil society................................................................................... 51
Theorisations since 1945.............................................................................................. 53
Conclusion................................................................................................................... 55
Reminder of your learning outcomes............................................................................. 57
Sample examination questions...................................................................................... 57
Chapter 5: The origins of capitalism and the rise of the West.............................. 59
Essential reading.......................................................................................................... 59
Further reading............................................................................................................. 59
Challenging reading..................................................................................................... 59
Aim and learning outcomes.......................................................................................... 60
Introduction................................................................................................................. 60
Why Europe?................................................................................................................ 61
The non-European world and early European imperialism.............................................. 66
The age of Empire........................................................................................................ 68
Conclusion................................................................................................................... 72
Reminder of your learning outcomes............................................................................. 73
Sample examination questions...................................................................................... 73
Chapter 6: The rise and fall of the era of national development.......................... 75
Essential reading.......................................................................................................... 75
Further reading............................................................................................................. 75
Challenging reading..................................................................................................... 76
Aim and learning outcomes.......................................................................................... 76
Introduction................................................................................................................. 77
The cold war and the long boom................................................................................... 77
Political independence and ‘Third Worldism’.................................................................. 79
The crisis of the 1970s and its consequences................................................................. 82
Conclusion................................................................................................................... 89
Reminder of your learning outcomes............................................................................. 90
Sample examination questions...................................................................................... 91
Part III: Key themes in development policy and practice...................................... 93
Chapter 7: Late development and industrial policy.............................................. 95
Essential reading.......................................................................................................... 95
Further reading............................................................................................................. 95
Challenging reading..................................................................................................... 95
Aim and learning outcomes.......................................................................................... 96
Introduction................................................................................................................. 96
Industrialisation............................................................................................................ 96
Late industrial policies................................................................................................ 102
Managing trade and investment................................................................................. 104
Conclusion................................................................................................................. 108
Reminder of your learning outcomes........................................................................... 108
Sample examination questions.................................................................................... 109
Chapter 8: Agrarian change and rural development........................................... 111
Essential reading........................................................................................................ 111
Further reading........................................................................................................... 111
Challenging reading................................................................................................... 111
Aim and learning outcomes........................................................................................ 112
Introduction............................................................................................................... 112
ii
Contents

Land reform and agrarian reform................................................................................ 113


The ‘Green Revolution’............................................................................................... 117
Newer approaches to rural development..................................................................... 118
Conclusion................................................................................................................. 125
Reminder of your learning outcomes........................................................................... 125
Sample examination questions.................................................................................... 126
Chapter 9: Governance and public policy........................................................... 127
Essential reading........................................................................................................ 127
Further reading........................................................................................................... 127
Challenging reading................................................................................................... 128
Aim and learning outcomes........................................................................................ 128
Introduction............................................................................................................... 128
Governance................................................................................................................ 128
Governance and corruption......................................................................................... 129
Understanding democracy.......................................................................................... 131
Democracy and economic growth............................................................................... 132
Democracy and poverty.............................................................................................. 134
Conclusion................................................................................................................. 137
Reminder of your learning outcomes........................................................................... 137
Sample examination questions.................................................................................... 138
Chapter 10: The international order.................................................................... 139
Essential reading........................................................................................................ 139
Further reading........................................................................................................... 139
Challenging reading................................................................................................... 139
Aim and learning outcomes........................................................................................ 140
Introduction............................................................................................................... 140
Understanding globalisation....................................................................................... 140
How old is globalisation?............................................................................................ 141
How does globalisation affect development?.............................................................. 143
Has globalisation affected poverty and inequality?...................................................... 144
Understanding the international system...................................................................... 145
Conclusion................................................................................................................. 150
Reminder of your learning outcomes........................................................................... 150
Sample examination questions.................................................................................... 150
Appendix 1: Sample examination paper............................................................. 151
Appendix 2: Advice on answering the questions in the Sample
examination paper.............................................................................................. 153
Section A.................................................................................................................... 153
Section B.................................................................................................................... 154
Appendix 3: Full list of Further reading.............................................................. 157
Appendix 4: Full list of Challenging reading....................................................... 163

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Notes

iv
Part I: A framework for the course

Part I: A framework for the course

Part I provides essential background for this course. Chapter 1 sets out
the aims and objectives of the course and the learning outcomes that we
hope students will achieve. We also outline the structure of the course as a
whole and offer study and examination advice.

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171 Introduction to international development

Notes

2
Introduction

Chapter 1: Introduction

Welcome to this course: 171 Introduction to international


development. International development refers to the processes and
policies of economic, social, and political change that affect the world
today, and which aim to address important problems such as poverty.
But the word ‘development’ is often misunderstood. Many activities
of development take place in what we call ‘developing countries’, the
‘South’ or the ‘Third World’. Processes of development, however, should
be understood as a global phenomenon. After all, the ‘developed world’
has undergone its own process of development over the last 250 years in
order to achieve this desirable state. Moreover, actions and policies of the
‘developed world’ have shaped the prospects of less developed countries.
As we shall see, developed countries have sometimes assisted ‘late
developers’ to undertake industrialisation or raise living standards. But
just as often (some would say more often!) richer countries have erected
obstacles to industrialisation or other forms of development by poorer
countries. Development may indeed be a global phenomenon, but the
interests and priorities of different countries or regions have not always
coincided.
In recent years, we have witnessed an upsurge in campaigns against world
poverty around the globe. This solidarity has often gone hand-in-hand
with a passionate critique of the alleged injustices that prevail in terms of
the relationship between the poor and rich nations of the world. At the
same time, scholars have complained that the nature of the ‘development
debate’ has often been simplistic and that, accordingly, the solutions that
arise are unlikely to work.
The authors of this course – all of whom teach (or have taught)
International Development at The London School of Economics and
Political Science – share some of this scepticism. Development is an
emotive subject on which people tend to speak about before they have
established a solid platform of understanding. For those who have chosen
to take this course, we hope that it will build your own understanding.
This course is the core introductory course for students specialising
in International Development. It does not offer quick answers to
questions such as ‘What should we do about global poverty?’, or ‘Is trade
liberalisation a good idea?’. Nor does this course offer a mass of statistics
and figures. Instead, this course focuses on ‘first principles’. We want to
provide you with the conceptual, theoretical and historical tools to put
today’s debates, or your own work as a ‘development practitioner’ or
activist, in a deeper context.
That all sounds good, but how will you know if this is happening? If there
is one phrase that indicates to us that students are beginning to acquire
the tools that they need to understand international development today, it
is when they start to ask: ‘Under what conditions?’. By inserting this as a
preamble to any question, students liberate themselves from the seductive
but flawed world of blueprints and grand generalisations.

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171 Introduction to international development

So, if by the end of the course you find yourself asking:


• ‘Under what conditions would trade liberalisation be the way forward?’
or
• ‘Under what conditions does democracy promote development?’ you
are heading in the right direction!

Aims and objectives


The specific objectives of the course are:
• to demonstrate that development is not just about the ‘South’ or the
‘Third World’ but that it should be understood as a global phenomenon
• to describe and evaluate the main intellectual traditions out of which
ideas about international development have emerged
• to show how development can only be fully understood if its historical
and political dimensions are given as much attention as its economic
and social dimensions
• to illustrate how development policy and practice has evolved over
time and why some options are seen as possible by governments,
International Financial Institutions and civil society organisations
while others are not
• to do this by looking in depth at the following key themes: ‘late’
development (i.e. industrialisation now) and industrial policy;
agrarian change and rural development; governance and public policy;
the international order.

Learning outcomes
By the end of the course and Essential readings, you should be able to:
• show why development should be understood as a global phenomenon
• discuss and critically evaluate the main intellectual traditions shaping
international development today
• use a range of historical, political, economic and social concepts and
facts in your analysis of development issues
• demonstrate a good understanding of how policy debates and practical
interventions have evolved over time in the context of a number of key
themes.

The structure of this guide


The syllabus topics covered in this course are organised as follows:

Part I: A framework for the course

Chapter 1 Introduction
Aims, objectives and learning outcomes; structure of the guide; how to use
the guide; core readings; the learning process; examination advice; list of
acronyms; useful websites.

Part II: Theories and history of development

Chapter 2 Ideas of development


Enlightenment origins; academic specialisation and colonialism; ideas of
development after 1945.
4
Introduction

Chapter 3 Theories of the state and market


Founding theories of the state; theorisations since 1945; founding theories
of the market; theorisations since 1945.

Chapter 4 Theories of institutions and civil society


Founding theories of institutions; recent theorisations; founding theories
of civil society; theorisations since 1945.

Chapter 5 The origins of capitalism and the rise of the West


Why Europe?; the non-European world and early European imperialism;
the age of Empire.

Chapter 6 The rise and fall of the era of national development


The cold war and the long boom; political independence and ‘Third
Worldism’; the crisis of the 1970s and its consequences.

Part III: Key themes in development policy and practice

Chapter 7 Late development and industrial policy


Industrialisation – meaning and early approaches; implications for other
aspects of development; late industrial policies; managing trade and
investment.

Chapter 8 Agrarian change and rural development


Land reform and agrarian reform; the ‘Green Revolution’; newer
approaches to rural development.

Chapter 9 Governance and public policy


Governance; governance and corruption; understanding democracy;
democracy and economic growth; democracy and poverty.

Chapter 10 The international order


Understanding globalisation; how old is globalisation?; how does
globalisation affect development?; has globalisation affected poverty and
inequality?; understanding the international system – the United Nations,
World Bank and International Monetary Fund.

How to use this guide


Each chapter is designed to be read in conjunction with the Essential
readings indicated and some of the suggested Further readings which are
also listed. In many cases, the further readings correspond to authors cited
during the chapter. By giving you the full details of the author’s work, we
are putting you in a position to explore their ideas in greater depth should
you wish to do so. However, where you are asked to read something
specific as part of one of the activities, please make every effort to do so.
We also identify some rather Challenging readings, which are up to you to
decide whether you want to try!
So, take the Essential readings as your starting point and then read
Further selectively, depending on the topics you are particularly interested
in and wish to revise for the examination (see below).
The best way to approach each chapter is to start by reading the Essential
readings suggested at the beginning of the chapter. You will then have
some ideas about the topic which you will be studying. You should then

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171 Introduction to international development

work through the chapter sub-section by sub-section, as far as possible


doing the other readings that are indicated, particularly for the activities.
Give yourself enough time to work through the activities.
The activities are important self-assessment exercises. Please do not skip
them, as they are valuable opportunities to gauge your progress.
The material covered in this course is roughly the equivalent of students
being taught over the course of one academic year, working for a
minimum of six hours per week. You should expect it to take you a similar
amount of time to work through the material covered in this course and do
the thinking and reading which is required. If it is at all possible, it is very
helpful to discuss the topics and debates raised by this course with other
people. This can help to clarify your own ideas. You should also look at
websites and news reports to gather up-to-date examples of development
problems; the work of international organisations such as the United
Nations Development Programme and the World Bank; and controversies.

Reading
Essential reading
The following books are Essential readings for the course as a whole:
Desai, V. and R. Potter, (eds) The Companion to Development Studies. (London:
Hodder, 2008 second edition – or the latest edition) [ISBN 9780340889145]
This is a useful overview of different themes of development in convenient
short chapters by specialists in each field. Please note that all of this book
is useful. In later chapters of the subject guide we recommend certain
sections of this book, but students will benefit from reading all of it, and
dipping into it for general background.
Todaro, M. and S. Smith Economic Development. (Harlow: Pearson
Education, 2014) twelfth edition [ISBN 9781292002972].
This is the latest edition of a classic textbook on development, and is
useful for the more economic themes of development. Please use newer
editions if they are published. (Older versions were entitled Economic
Development in the Third World and were written solely by Michael Todaro.
Use the most recent one you can find.) The book is full of useful statistics
and figures on development issues since 1945.
You are expected to have read these books by the end of the course. If you
are able to purchase them, we recommend that you do so.
You might also find this reference work useful:
Forsyth, T. (ed.) Encyclopedia of International Development. (London and New
York: Routledge, 2005) [ISBN 9780415253420]
This is a comprehensive reference work on Development Studies, including
entries by more than 200 authors.
Detailed reading references in this subject guide refer to the editions of the
set textbooks listed above. New editions of one or more of these textbooks
may have been published by the time you study this course. You can use
a more recent edition of any of the books; use the detailed chapter and
section headings and the index to identify relevant readings. Also check
the virtual learning environment (VLE) regularly for updated guidance on
readings.

6
Introduction

Further reading
As described above, each chapter also has its own list of further readings.
For ease of reference we provide a full list of these readings at the back of
the subject guide in Appendix 3.
Please note that as long as you read the Essential reading you are then free
to read around the subject area in any text, paper or online resource. You
will need to support your learning by reading as widely as possible and by
thinking about how these principles apply in the real world. To help you
read extensively, you have free access to the VLE and University of London
Online Library (see below).

Challenging reading
Certain chapters in the guide also have a category called Challenging
reading. This reading is not material that you are expected to read for this
course; it is simply there if you want to read about any of the topics in
more depth. For ease of reference we provide a full list of these readings at
the back of the subject guide in Appendix 4.

Online study resources


In addition to the subject guide and the Essential reading, it is crucial that
you take advantage of the study resources that are available online for this
course, including the VLE and the Online Library.
You can access the VLE, the Online Library and your University of London
email account via the Student Portal at:
http://my.londoninternational.ac.uk
You should have received your login details for the Student Portal with
your official offer, which was emailed to the address that you gave
on your application form. You have probably already logged in to the
Student Portal in order to register! As soon as you registered, you will
automatically have been granted access to the VLE, Online Library and
your fully functional University of London email account.
If you have forgotten these login details, please click on the ‘Forgotten
your password’ link on the login page.

The VLE
The VLE, which complements this subject guide, has been designed to
enhance your learning experience, providing additional support and a
sense of community. It forms an important part of your study experience
with the University of London and you should access it regularly.
The VLE provides a range of resources for EMFSS courses:
• Self-testing activities: Doing these allows you to test your own
understanding of subject material.
• Electronic study materials: The printed materials that you receive from
the University of London are available to download, including updated
reading lists and references.
• Past examination papers and Examiners’ commentaries: These provide
advice on how each examination question might best be answered.
• A student discussion forum: This is an open space for you to discuss
interests and experiences, seek support from your peers, work
collaboratively to solve problems and discuss subject material.

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171 Introduction to international development

• Videos: There are recorded academic introductions to the subject,


interviews and debates and, for some courses, audio-visual tutorials
and conclusions.
• Recorded lectures: For some courses, where appropriate, the sessions
from previous years’ Study Weekends have been recorded and made
available.
• Study skills: Expert advice on preparing for examinations and
developing your digital literacy skills.
• Feedback forms.
Some of these resources are available for certain courses only, but we
are expanding our provision all the time and you should check the VLE
regularly for updates.

Making use of the Online Library


The Online Library contains a huge array of journal articles and other
resources to help you read widely and extensively.
To access the majority of resources via the Online Library you will either
need to use your University of London Student Portal login details, or you
will be required to register and use an Athens login: http://tinyurl.com/
ollathens
The easiest way to locate relevant content and journal articles in the
Online Library is to use the Summon search engine.
If you are having trouble finding an article listed in a reading list, try
removing any punctuation from the title, such as single quotation marks,
question marks and colons.
For further advice, please see the online help pages: www.external.shl.lon.
ac.uk/help/index.php

The learning process


There may be times when the approach that we have taken is a challenge
for you. You need to be ready to compare and contrast arguments and
weigh them up carefully, trying to determine which you find most
plausible or convincing and why. Don’t panic if you find something difficult
– the learning process is rarely a linear one; it is much more often a kind
of spiral, with moments of slow and fast progress. At times, you may
wonder if you are really going anywhere at all! Don’t worry – you are.
Remember that there are several stages involved in your learning, and
it will take time and repeated reading and thinking in order to complete
them. The stages are:
• reading the basic readings and each chapter of the subject guide
• doing the exercises in each chapter
• analysing the material in each chapter
• identifying the different ways of thinking about the material, and
identifying which approach feels right to you
• doing additional reading, and research on the internet and from
newspapers, to add more information to these themes, and to develop
your own beliefs more, and to identify how to criticise alternative
approaches.

8
Introduction

Examination advice
Important: the information and advice given here are based on the
examination structure used at the time this guide was written. Please
note that subject guides may be used for several years. Because of this
we strongly advise you to always check both the current Regulations for
relevant information about the examination, and the VLE where you
should be advised of any forthcoming changes. You should also carefully
check the rubric/instructions on the paper you actually sit and follow
those instructions.
This course is assessed by an unseen three-hour examination, in which
you are expected to answer three questions, including at least one each
from Sections A and B. Section A of the paper corresponds to Part II of the
course; Section B of the paper corresponds to Part III.
There is no single formula for passing examinations, but one crucial
precondition is to read the instructions on the exam paper
very carefully. Make sure you answer the question. Please do not
write about other topics, because this will earn no marks. Each year, we
have students who write long essays on a subject such as ‘the state’ or
‘industrialisation’. But these long, prepared, answers do not get many
marks because they do not answer the question set because they describe
the subject in the question, rather than address the specific problem
set in the question. For example, one year students were asked to write
about the challenges of industrialisation in the twenty-first century, but
many students simply wrote about industrialisation in general, without
mentioning challenges of the twenty-first century. The best answers gave a
lot of background on industrialisation, but also discussed the problems of
industrialisation in the twenty-first century.
The style of answers is also important. Please write concise answers.
Avoid waffly (i.e. long-winded) introductions. Make sure your answer
is in the form of a well-structured argument. Do not fall into the trap of
doing a literature survey. Clear abbreviations are fine, especially when a
term is used often in your answer. Clear diagrams, properly labelled, are
also acceptable, where appropriate. There is no need to give elaborate
references to articles or books. Author (and brief title, where appropriate)
will be sufficient. Beware of repeating yourself within a question or saying
the same thing in two answers on the same paper. It is acceptable to refer
back to what you said in answering another question on the paper.
Do remember that the point of the exam is to test your knowledge and
arguments about international development. This is not the same as
simply summarising each chapter in the subject guide! We want you to be
able to show your own arguments, and back them up with a wide range of
reading, and with information and examples that are not always reported
in this guide.
Also, please do not get into the mindset of thinking that each question in
the exam corresponds to a different chapter of this guide. As you will see
when you read the guide, all the chapters have information and themes
that relate to each other. The best answers in an exam will show a broader
understanding of how the themes in each chapter relate to each other –
rather than being based on one chapter alone.
Revision for an examination involves looking back over what you have
learned and trying to relate this to the kinds of questions you will be asked
in the examination. Don’t try to revise everything. Don’t just learn lots
of material. Take time to clarify your position on what you are revising.

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171 Introduction to international development

Make sure you know what you think. Then decide what evidence you
need to use to support your argument. You will need to have knowledge of
enough topics to enable you to answer four out of nine questions. To be on
the safe side, you should aim to revise around two-thirds of the material
and to know at least half of it well.
Many of you will have strong beliefs and arguments about subjects in
international development. Some of these subjects, such as colonialism,
poverty, or the international world order are controversial! Please do
argue strongly if you wish. But please avoid being one-sided. You can
avoid being one sided by following some basic common-sense techniques
when you write essays. State your opinion. State the alternative
opinion(s). Give evidence for both sides. Review this evidence. Then make
a conclusion based on your evidence and discussion. Do not just give one
side of the story.
You are advised to look at the Sample examination questions provided
at the end of each chapter and the Sample examination paper at the
end of this guide to give you an idea about what to expect. The Sample
examination paper provides some ideas about how you could tackle
specific questions. These ideas are not ‘model answers’. They are intended
to give you tips on how to approach the types of questions you will be
asked. There is, of course, always room for you to answer the question in
a different way. As long as your answer is well argued and relevant to the
question asked, you will get good marks.
The Sample examination paper indicates the format and structure of
the examination paper from 2011 onwards. Please note that an earlier
version of this course (entitled 135 World development) was offered
from 2006 with a slightly different examination format. You will be told
about any further changes to future examination papers if they occur
on the VLE. The Examiners’ commentaries, which you should use as part
of your preparation for exams, are usually made available online from
mid-September onwards. They contain valuable information about how
to approach the examination and you are strongly advised to read them
carefully.
You should also look at the advice provided in your Student handbook on
examinations.
It is a very good idea to practise writing examination essays to a one-hour
timeframe.
When you sit down to take the examination, make sure you have carefully
read through the whole examination paper and understood what each
question requires before you select the questions you wish to answer and
beginning writing. Make sure that you allocate your time evenly over the
three questions you are required to answer.
Remember, it is important to check the VLE for:
• up-to-date information on examination and assessment arrangements
for this course
• where available, past examination papers and Examiners’ commentaries
for the course which give advice on how each question might best be
answered.

10
Introduction

List of acronyms
AIDS Acquired immunodeficiency syndrome
BJP Bharatiya Janata Party
CGIAR Consultative Group for International Agricultural Research
CIMMYT International Wheat and Maize Improvement Centre
CPI (M) Communist Party of India (Marxist)
ECOSOC Economic and Social Council
EOI Export oriented industrialisation
ERP Economic Recovery Programme
FAO Food and Agricultural Organization
FDI Foreign Direct Investment
FRELIMO Front for the Liberation of Mozambique
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
GNP Gross National Product
HDI Human Development Index
HDR Human Development Report
HIPC Highly Indebted Poor Countries programme
HIV Human immunodeficiency virus
HYV High-yielding varieties
IBRD International Bank for Reconstruction and Development
ICJ International Court of Justice
IDS Institute of Development Studies
IFAD International Fund for Agricultural Development
IMF International Monetary Fund
IRRI International Rice Research Institute
ISI Import-substituting industrialisation
JEM Justice and Equality Movement
LDC Least Developed Countries
MAI Multilateral Agreement on Investment
NIC Newly Industrialised Countries
NIE New Institutional Economics
PRSPs Poverty Reduction Strategy Papers
PPP Purchasing power parity
SAPs Structural Adjustment Programmes
SLA Sudanese Liberation Army
TNC Transnational Corporation
UN United Nations
UNDP United Nations Development Programme
UNHCR UN High Commission for Refugees
UNICEF UN International Children’s Emergency Fund (now UN Children’s Fund)

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171 Introduction to international development

UNOCHA United Nations Office of the Coordinator for Humanitarian Affairs


UK United Kingdom
US United States
USA United States of America
USSR Union of Soviet Socialist Republics
WFP World Food Programme
WTO World Trade Organization

Useful websites
You may find some of the following websites useful as you work your way
through the course. If you have access to the Internet, visit these websites
and explore what they have to offer.
Unless otherwise stated, all websites in this subject guide were accessed in
April 2011. We cannot guarantee, however, that they will stay current and
you may need to perform an internet search to find the relevant pages.

Governmental or intergovernmental websites


www.dfid.gov.uk
Website of the UK’s Department for International Development
www.imf.org
Website of the International Monetary Fund
www.oecd.org
Website of the Organization for Economic Co-operation and
Development
www.undp.org
Website of the United Nations Development Programme
www.usaid.org
Website of the United States Agency for International Development
www.worldbank.org
Website of the World Bank
www.who.org
Website of the World Health Organization

Non-governmental websites
www.actionaid.org
Website of Action Aid
www.brettonwoodsproject.org
Website of the Bretton Woods Project
www.cafod.org.uk
Website of the Catholic Agency for Overseas Development
www.odi.org.uk
Website of the UK Overseas Development Institute
www.oneworld.org
Website of One World, which links to a wide range of other useful sites
www.oxfam.org
Website of Oxfam
www.pambazuka.co.uk
Website of the Pambazuka Newsletter

12
Introduction

www.reliefweb.org
Website of Reliefweb

Academic websites
www.lse.ac.uk/internationaldevelopment/home
Website of the Department of International Development, London
School of Economics
www.ids.ac.uk
Website of the Institute of Development Studies, University of Sussex
www.sed.manchester.ac.uk/idpm/
Website of the Institute for Development Policy and Management,
University of Manchester
www.unrisd.org
Website of the United Nations Research Institute for Social
Development

13
171 Introduction to international development

Notes

14
Part II: Theories and history of development

Part II: Theories and history of


development

In Part II we look at the substantial debates about the meaning and


experience of ‘development’.
First, Chapter 2 explores how ideas of development have emerged and
evolved over the past 250 years, beginning with their origin in the
European enlightenment
Then we look at four different key concepts which have dominated
theoretical debates about development since the eighteenth century and
which are still important today. These concepts are the ‘state’ and ‘market’
(Chapter 3), and then ‘institutions’ and ‘civil society’ (Chapter 4). The state
and market have often been presented as opposite extremes around which
development strategies may be constructed. Institutions and civil society
have often been proposed as ‘missing links’ in development strategies.
Be aware, however, that all of these concepts are complex, and can
overlap. Indeed, some theorists of institutions would argue that ‘state’,
‘market’ and ‘civil society’ are all ‘institutions’. Don’t worry – all will
become clear. It is important, however, that you do not compartmentalise
your own thinking too rigidly as choices between ‘states’ and ‘markets’ etc.,
but instead see how all of these concepts might co-exist under different
contexts.
We then look at the history of how development has been applied
in different countries and around the world. The earliest ideas of
development emerged during the European Enlightenment and rise of
industrial capitalism in Britain. This was no coincidence – and many
theorists have seen development and capitalism as one and the same
thing. Indeed this belief became popular again since the collapse of
communism in 1989.
But many other theorists have seen capitalism to be part of the problem
rather than as a solution. Much development thinking, therefore, has
sought ways to restrict capitalism and market forces, including using
principles of communism.
It is therefore important to see how far ‘development’ might be related
to debates about ‘capitalism’, and on how different countries have used
capitalism, or forms of communism, to achieve ‘development’. Chapter
5 therefore looks at the nature of capitalism, and its connections with
European imperialism. Chapter 6 looks at responses to these, and
attempts to resist capitalism and the influence of ‘the West’ during the
twentieth century. This period has been called by some ‘the era of national
development’.
The end of European imperialism, global economic prosperity and the
dynamics of the cold war combined for nearly 30 years to generate a
broadly supportive environment for states actively to promote economic
growth and development. Chapter 6 ends by looking at the reasons behind
the apparent closing-off of the space for such strategies since the mid-
1970s and their possible future implications.

15
171 Introduction to international development

Notes

16
Chapter 2: Ideas of development

Chapter 2: Ideas of development

Essential reading
Desai and Potter (2008) Section 1 (especially Chapters 1.1 to 1.4), Section 2
(especially Chapters 2.1 to 2.2).

Further reading
Amsden, A. The Rise of ‘the Rest’. Challenges to the West from Late-Industrializing
Economies. (Oxford and New York: Oxford University Press, 2001)
[ISBN 0195139690].
Chambers, R. Whose Reality Counts? Putting the First Last. (London:
Intermediate Technology Productions, 1997) [ISBN 185339386X].
Cowen, M.P. and R.W. Shenton Doctrines of Development. (London: Routledge,
1996) [ISBN 0415125154].
Escobar, P. ‘Planning’ in Sachs, W. (ed.) The Development Dictionary. (London:
Zed Press, 1992) [ISBN 1856490440].
Ferguson, J. The Anti-Politics Machine. ‘Development’, Depoliticization and
Bureaucratic Power in Lesotho. (Minneapolis: University of Minnesota Press,
1994) [ISBN 0816624372].
Harriss, J. ‘The case for cross-disciplinary approaches in international
development’, World Development XX, 2002.
Johnson, C. MITI and the Japanese Miracle: The Growth of Industrial Policy,
1925–75. (Stanford: Stanford University Press, 1982) [ISBN 0804712069].
Johnson, C. Arresting Development: The Power of Knowledge for Social Change
(London: Routledge, 2008) [ISBN 0415381533]
Kabeer, N. Reversed Realities: Gender Hierarchies in Development Thought.
(London: Verso Press, 1994) [ISBN 0860915840].
Khan, M.H. ‘Corruption and Governance in Early Capitalism: World Bank
Strategies and their Limitation’ in Pincus, J. and J. Winters (eds)
Reinventing the World Bank. (Ithaca, N.Y.: Cornell University Press, 2002)
[ISBN 0801487927].
Leys, C. The Rise and Fall of Development Theory. (Oxford: James Currey, 1996)
[ISBN 0852553501] Chapter 1.
Nussbaum, M. and J. Glover (eds) Women, Culture and Development: A Study of
Human Capabilities. (Oxford: Clarendon Press, 1995) [ISBN 0198289642].
Parpart, J. ‘Post-Modernism, Gender and Development’ in Crush, J. (ed.) Power
of Development. (London: Routledge, 1995) [ISBN 0415111773].
Power, M. ‘The dissemination of development’, Environment and Planning D 16,
1998, 57798
Ravallion, M. ‘Good and Bad Growth: The Human Development Reports’, World
Development 25, 1997, pp.631–38.
Sachs, W. (ed.) The Development Dictionary. (London: Zed Press, 1992)
[ISBN 1856490440].
Schuurman, F.J. (ed.) Beyond the Impasse. New Directions in Development
Theory. (London: Zed Press, 1993) [ISBN 1856492109] especially Chapter
3 by David Booth.
Sen, A. Development as Freedom. (Oxford: Oxford University Press, 2001)
[ISBN 0198297580 (hbk); 0192893300 (pbk)] Chapters 1 and 2.
Worsley, P. The Three Worlds: Culture and World Development. (London:
Weidenfeld and Nicholson, 1986) [ISBN 0297783564].

17
171 Introduction to international development

Challenging reading
Corbridge, S, 2001 ‘Development as freedom: the spaces of Amartya Sen’
Progress in Development Studies 2(3) 2002, pp.183–217.
Cowen, M.P. and R.W. Shenton ‘The Invention of Development’ in
Crush, J. (ed.) Power of Development. (London: Routledge, 1995)
[ISBN 0415111773].
Devereaux, S. ‘Sen’s entitlement approach: critiques and counter-critiques’,
Oxford Development Studies 29, 2001, pp.245–63.
Fine, B. ‘Economics and ethics: Amartya Sen as point of departure’, The New
School Economic Review 1, 2001, pp.151–61.
Gasper, D. The Ethics of Development (Edinburgh: Edinburgh University Press,
2004) [ISBN 0748610588].
Gordon, C. (ed.) Power/Knowledge: Selected Interviews and Other Writings,
1972–77, by M. Foucault. (New York: Random House USA Inc., 1988)
[ISBN 039473954X].
Prendergast, R. ‘The concept of freedom and its relation to economic
development – A critical appreciation of the work of Amartya Sen’,
Cambridge Journal of Economics, 29, 2005, 11451170.
Wade, R.H. Governing the Market: Economic Theory and the Role of Government
in East Asian Industrialization. (Princeton: Princeton University Press, 1992)
[ISBN 0691003971] Out of print.

Classic texts
Foucault, M. Discipline and Punish. The Birth of the Prison. (Harmondsworth:
Penguin, 1991) [ISBN 014013722X].
Frank, A.G. Capitalism and Underdevelopment in Latin America.
(Harmondsworth: Penguin, 1971) [ISBN 0140213341].
List, F. The National System of Political Economy. (Philadelphia: J.B. Lippincott
and Co., 1856).
Marx, K. The Communist Manifesto. (London, 1848).
Polanyi, K. The Great Transformation: The Political and Economic Origins of our
Time. (Boston, Mass.: Beacon Press, 2001) [ISBN 080705643X].
Rawls, J. A Theory of Justice. (Oxford: Oxford University Press, 1999 – first
edition 1971) [ISBN 019825055X].
Smith, A. An Inquiry into the Nature and Cause of the Wealth of Nations.
(New York: Modern Library, 1776).

Aim and learning outcomes


The aim of this chapter is to provide a broad outline of the historical and
intellectual origins of different ideas of development.
By the end of this chapter and having completed the Essential reading and
activities, you should be able to:
• explain how ideas of development emerged during the eighteenth and
nineteenth centuries, referring to key thinkers such as Adam Smith,
Karl Marx and Frederick List
• show how the emergence of development as a discrete sphere of
thought and activity was accelerated by the impacts of academic
specialisation and colonialism in the late-nineteenth and early
twentieth centuries
• provide an account of the ways in which ideas of development have
changed over time since 1945, both reflecting and shaping world
historical and political events
• construct some preliminary arguments of your own as to what
development should be and how it is to be achieved.
18
Chapter 2: Ideas of development

Introduction
This chapter explores ideas of development. For many people, the word
may seem unproblematic – a common-sense term to describe what needs
to happen if the poor are to be raised out of poverty.
In fact, what the objectives of development should be and how they are to
be achieved has always been passionately contested and continues to be to
this day.

Box 1
Alan Thomas distinguishes three main ways in which the term ‘development’ is used:

1. As a vision, description or measure of the state of being of a desirable


society.

2. As a historical process of social change in which societies are transformed


over long periods.

3. As consisting of deliberate efforts aimed at improvement on the part of


various agencies, including governments, all kinds of organisations and
social movements.

In what follows, we briefly outline how ideas of development have


developed over the past 250 years. The ideas featured here predominantly
originated within Western traditions of thought. We make no apology for
this. While there are many important non-Western traditions of thought
worth exploring, they have not – for better or for worse – played an
equally dominant role in shaping ideas of development today.
There is a lot to absorb here. Don’t worry about understanding everything
straight away. Treat this chapter as a way of beginning to think analytically
and critically about development. But do look out for the ways in which
many ideas have emerged, dominated, disappeared and then resurfaced,
often in revised but still recognisable form, over the years. It is for this
reason that we have presented this survey as a conventional chronological
narrative. In later chapters you will have an opportunity to place these
ideas of development in a deeper theoretical and historical framework.

Enlightenment origins
Liberalism, progress and modernity
While the term ‘development’ has really only become commonly used
over the past 60 years – that is, since the end of the Second World War
in 1945 – its origins are to be found in eighteenth- and nineteenth-
century Western Europe. A generation of enlightened philosophers such
as Montesqieu, Diderot and Voltaire argued in the eighteenth century
that humanity was undertaking an evolutionary journey away from its
primitive and uncivilised past towards a better – and by definition, more
civilised – future based on the rule of reason and individual freedom.
Founding exponents of a philosophy of liberalism, they described this
journey as ‘progress’. Modernity was the final destination. It was no
coincidence, of course, that the emergence of such views occurred just as
parts of Europe were embarking on periods of revolutionary change. In
France, the monarchy was overthrown following the revolution of 1789
and a Republic was established. In Great Britain the industrial revolution
was gathering pace. To sum up, it was believed that parts of Europe were
beginning natural and predominantly spontaneous processes of social,
19
171 Introduction to international development

economic and political change at the end of which its peoples would be
both wealthier and freer. The means to these ends would be capitalism and
democracy.

Critics of liberalism
This optimistic conception of humanity’s trajectory was undoubtedly
shared by significant sections of Europe’s economic and political elites
throughout the nineteenth century. For them, the Scottish philosopher
Adam Smith (1723–90) was one of the key thinkers and his economic and
political liberalism the only viable way forward. But there were always
many dissenters. There were conservatives who viewed capitalism and
democracy as destroyers of the traditional economic, social and political
ties that had bound communities together, offering chaos and anarchy
in their place. There were also dissenting radicals. For Karl Marx (1818–
83), capitalism was a violent and brutal but nonetheless progressive
revolutionary force. However, it would inevitably have to be superseded
by another (communist) revolution if the wealth and freedom it offered
the rising middle class (or bourgeoisie) was to be enjoyed by the masses
as a whole. Advocates of change could not deny that the journey towards
modernity was indeed creating many economic casualties and social
tensions. More conscious and explicit ideas of development began to
emerge in response, reflecting the need to find non-revolutionary ways
of mitigating these crises and preserving order. Important actors in the
emergence of this idea of development as conscious intervention were the
Saint-Simonians and the positivist philosopher August Comte in France 1
On Comte and
(Cowen and Shenton in Crush (ed.), 1995).1 Saint-Simon, see also
course 21 Principles of
There was another group of radical dissenters from the mid-nineteenth Sociology.
century onwards that has come to be strongly represented within present-
day development debates and practice. These were populists such as
the Narodniki in pre-revolutionary Russia. In line with the meaning of
the word in Russian, the Narodniki advocated ‘going to the people’. Like
conservatives, they mourned the destructive impact on communities of
capitalism; unlike them, they did not wish to preserve traditional economic
or social relations but instead replace them with a world in which modern
systems of production and exchange were locally controlled. These
populists dreamt of a gentler, more co-operative process of development
than did Marx. Whereas Marx anticipated a process of modernisation
that would inevitably involve the expropriation of much of the land
controlled by the peasantry and the transformation of many peasants into
proletarians, populists envisioned a world where rural people remained on
the land and constructed viable livelihoods.
During the nineteenth century there were other commentators, often
relatively neglected at the time that they were writing, who began to see
the journey towards modernity as arising out of the combined impact
of nationalism and state power. As Comte and others had suggested,
industrial capitalism required conscious assistance from somewhere if
it was to come into being. Among these commentators was the German
Frederick List (1789–1846). He was one of the first to articulate a ‘statist’
view of development (Cowen and Shenton in Crush (ed.), 1995). It
combined subsequently in different ways with conservative and radical
philosophies. For example, Stalin espoused a highly statist model of
socialist modernisation in post-revolutionary Russia after 1917.
List directly addressed the crucial question of what has come to be called
‘late development’. In the mid-nineteenth century, he asked: will the
apparently spontaneous and free market-based policies and processes that

20
Chapter 2: Ideas of development

propelled the first country to industrialise (i.e. Great Britain) work for
countries coming afterwards? His answer was – no, at least not initially.
There would have to be a phase where the state led the way and new
industries were protected by it. This question has shaped development
theory and policy profoundly since then, although it is important to note
that for List, ‘state-led development’ was not an appropriate strategy for
the non-European world. There, free trade under the auspices of European
Empires would be the only way forward.

Box 2
Smith, Marx and List in their own words:

‘…man has almost constant occasion for the help of his brethren, and it is in
vain for him to expect it from their benevolence only. He will be more likely
to prevail if he can interest their self-love in his favour, and show them that it
is for their own advantage to do for them what he requires of them. Whoever
offers to another a bargain of any kind, proposes to do this. Give me that which
I want, and you shall have this which you want, is the meaning of every such
offer; and it is in this manner that we obtain from one another the far greater
part of those good offices which we stand in need of.’ (Smith, 1776)

‘The bourgeoisie cannot exist without constantly revolutionising the


instruments of production, and thereby the relations of production, and with
them the whole relations of society…Constant revolutionising of production,
uninterrupted disturbance of all social conditions, everlasting uncertainty and
agitation distinguish the bourgeois epoch from all earlier ones…All that is solid
melts into air, all that is holy is profaned, and man is at last compelled to face
with sober senses, his real conditions of life, and his relations with his kind.’
(Marx, 1848)

‘I found that the theorists kept always in view mankind and man, never
separate nations. It became then obvious to me that between two advanced
nations, a free competition must necessarily be advantageous to both if they
were upon the same level of industrial progress; and that a nation unhappily
far behind as to industry, commerce and navigation must above everything
put forth all its strength to sustain a struggle with nations already in advance.’
(List, 1856)

Activity 1
Write a short answer (no more than 200 words) to the following question: Based on the
above quotations, which of Smith, Marx and List do you think is most relevant to the
challenges of development today and why? If you don’t feel able to answer this question yet,
instead go and find out more about what these commentators thought about development.

Academic specialisation and colonialism


The emergence of disciplines
Whatever their divergent attitudes to the potential and value of capitalism
and liberty, Smith, Marx and List had one very important thing in
common. These eighteenth- and nineteenth-century thinkers all operated
within the framework of ‘political economy’. Academic specialisation –
that is, the entrenchment of separate disciplines such as political science,
economics, history and philosophy – was still in its early days. As Foucault
has written, ‘the “Enlightenment”, which discovered the liberties, also
invented the disciplines’ (1979, p.222). The gradual emergence of
development as a discrete sphere of thought and activity coincided with
this process of academic specialisation in the late-nineteenth and early
21
171 Introduction to international development

twentieth century. It also laid the foundations for the institutionalisation of


‘expertise’ in the sphere of development. In addition, while development
was never exclusively claimed by the discipline of economics, the status
of the discipline certainly became that of ‘first amongst equals’ (Harriss,
2002).2 2
This was the case
irrespective of the
Impact of colonialism type of economics
being advocated.
The gradual ‘economising’ of development was powerfully advanced The dominant strain
by another crucial factor: European colonialism. The period between of economics within
the two world wars, 1918–39, saw the emergence of formal ideas of academia and
‘colonial development’. This was perhaps the first systematic use of the government, inspired
by Adam Smith, came
term ‘development’ in policy and practical terms. As the credibility and
to be known as ‘neo-
legitimacy of colonial rule came under question, not least by the colonial classical economics’.
subjects themselves, it became necessary for the rulers to construct Neo-classical economics
new legitimising agendas that would perpetuate it. The assumption contained many
that colonialism would automatically lead to major improvements in differing viewpoints
the living standards of the local population had not been borne out by (and still does) over
when and how far
experience. Indeed, some British colonial officials came to see their role
free markets should
as preserving ‘traditional societies’ against the turmoil and upheaval be interfered with. The
wrought by the forces of capitalism, if left to operate unmanaged. Greater contemporary term
state intervention and public investment was viewed as essential if the ‘neo-liberal economics’,
balancing act between progress and order was to be achieved. From the which is more often
used by its critics
1940s onwards, the term ‘good government’ began to be used to describe a
than its exponents, is
political dimension to this legitimising agenda. What this meant in practice best understood as a
varied enormously from colony to colony. What is undoubtedly true is that reference to a group
this context demanded approaches to development that consciously played of economists within
down questions of politics and freedom. the broad neo-classical
tradition.

Ideas of development after 1945


A From 1945 to the mid-1970s

The cold war and state-led development


During the 1950s and 60s, development emerged as a formal and
clearly delineated objective in its own right. As the struggle for political
independence was gradually won in the former European and Japanese
colonies, new battle-lines were drawn amongst intellectual and political
elites. These battle-lines were heavily shaped by the cold war and the
conflict between capitalism and communism. Between the two blocs
emerged the ‘Third World’, which largely comprised former European
colonies that were seen as relatively undeveloped.

Box 3
The value of the term ‘Third World’ has been heavily debated over the years.
Others have preferred to use frameworks of reference such as ‘North and
South’, or ‘developing countries’. Peter Worsley (1986, p.307) describes
how ‘Third World’ was first used in 1952 by Alfred Sauvy, a demographer.
He was a supporter of the non-communist Left in France, which ‘saw
parallels between their own search for a “third way” between capitalism
and Stalinist communism and the struggles of the new wave of militant
anti-colonial movements which opposed imperialism but were by no means
pro-communist’. The political embodiment of Third Worldism was the Non-
Aligned Movement, established in 1961.

If you want to pursue this further, read pp.306–32 of Worsley (1986).

22
Chapter 2: Ideas of development

Activity 2
With the end of the cold war and the collapse of communism, has the idea of the Third
World ceased to have any value today? Produce a table giving the reasons for and
against retaining the term.

After 1945, debates about how the Third World could most successfully
pursue economic development were framed by a shared assumption that this
was essentially a matter of promoting ‘modernisation’. But beyond that, there
were many different views about what came to be known as ‘modernisation
theory’. The threat of communism moved the centre of gravity of the debate
somewhat to the left. For intellectuals like Karl Polanyi and John Maynard
Keynes, the state needed to step in to counteract capitalism’s tendency to
destroy the social fabric and generate political crises if left to itself. Polanyi
(2001), writing as the Second World War was coming to an end, saw the
rise of fascism in Europe after 1918 as a desperate response to the effects
of rampant capitalism. These views were extended in modified form to
the Third World. So while a minority continued to argue that all that was
required was to clear the ground and allow the market to do its work, the
majority countered that, whether its ideology was capitalist or socialist, the
state in the Third World needed to intervene actively – for example, through
raising the rate of saving, public works, improvement of productivity,
increased exports, better education, etc. – during the initial phases of late
development. Only in this way could Third World countries make the
essential transition from economies based on primary commodity export to
economies with a strong industrial sector. The new nationalist elites in the
Third World largely adopted this view on coming to power. Statist ideas of
development found a welcoming home in post-war ‘development economics’,
which was soon extremely influential within universities, governments
and the new multilateral institutions dedicated to development such as the
International Monetary Fund (IMF) and World Bank.

The consensus fractures


However, by the late 1960s, as the world economy slowed, widespread
optimism that state-led development would do the trick in the Third
World was beginning to fade. A polarisation of views took place. Many
economists claimed that the problem was that the state had crowded out
the market and was inefficient and corrupt. Therefore, its role needed to
be reduced. An influential group believed that this reduction should be
extremely far-reaching. They were the originators of what we know today
as ‘neo-liberalism’. For them, development involved rigid fiscal discipline,
the reorientation of public expenditure, trade and financial liberalisation,
privatisation and deregulation.
By contrast, many radicals increasingly articulated different variations
of what was called ‘dependency theory’. Some argued that the world
economy still rigged the ‘rules of the game’ so that economic surpluses were
transferred through unequal terms of trade from the ‘periphery’ (the Third
World) to the ‘core’ (the advanced capitalist countries), thereby frustrating
state-led strategies designed to overcome capitalism’s default tendency
towards uneven development. Wide-ranging reforms were needed to revive
the viability of these strategies. Many Marxists went further, claiming that
the unequal terms of trade were structurally inherent within capitalism as
a world system. The development of the core therefore depended upon
the underdevelopment of the periphery and this could not change under
capitalism. The only way out was socialist revolution. One of the best-
known exponents of this view was Andre Gunder Frank (1971). A third

23
171 Introduction to international development

group echoed the populist perspective, arguing that the best response to
the failure of the world economy since 1945 to bring development was
to focus on building systems of sustainable local production, distribution
and exchange. Ideas about culture and environmental sustainability
provided strong impetus for revived populist perspectives, which were
enthusiastically embraced by many within the emerging non-governmental
(NGO) sector. Unfortunately for radicals of all stripes, it was the neo-liberals
who were initially triumphant.

B From the mid-1970s to the present day

Globalisation and postmodernism


For some neo-liberal analysts, the defeat of ideas of state-led development
has even meant the ‘death of development’ itself, so closely were the
two concepts historically linked. The defeat of communism after 1989
provided great impetus for this view. Its advocates believe that the world
has entered a historically unprecedented era of economic, political and
cultural ‘globalisation’ in which the power and legitimacy of the state will
wither away gradually. Economic growth will come only by surrendering
to these global processes and allowing market forces to operate with
the minimum necessary regulation. These ‘hyperglobalisers’ have their
radical counterparts, who argue that globalisation must increase uneven
development and that the challenge has become how to democratise
and regulate globalisation so that the wealth generated – for example,
by transnational corporations or currency traders – operates for the benefit
of the many not the few.
The death of development has also been celebrated in recent decades by
postmodern theorists. As a form of analysis, postmodernism argues that
the philosophies of Liberalism and Marxism are ‘grand narratives’ rooted in
the modern industrial age. Postmodernists challenge the claims that both
allegedly make to objectivity and universal truth. For Pablo Escobar, the
ideas of development arising out of these traditions constitute a discourse
of power and knowledge through which the West has successfully
imposed its exploitative and oppressive agenda upon the rest of the world
(Escobar in Sachs, 1992). Others within this tradition have taken a less
conspiratorial view but have explored how Western-derived discourses of
power and knowledge have nonetheless been internalised by development
practitioners as ‘common sense’ and have defined ‘professional expertise’
in the field. This leads to situations were there are issues ‘about which it
is impossible to speak’ and predominantly non-Western actors who are
‘powerless to speak’, with damaging consequences for the effectiveness
and legitimacy of development interventions.

Box 4
One of the most important Postmodernists, although he might well repudiate the
label (or, indeed, any label), was the French philosopher Michel Foucault (1926–
84). For Foucault, a discourse comprised the words, institutions, and practices
that express a particular understanding (or knowledge) of the world and which
contribute to the enforcement of a corresponding set of power relations.

Here is an extract from Foucault (Gordon, 1988, p.82) in which he is discussing


‘subjugated knowledges’:

‘…I believe that by subjugated knowledges one should understand…a


whole set of knowledges that have been disqualified as inadequate to their
task or insufficiently elaborated: naïve knowledges, located low down on
the hierarchy, beneath the required level of cognition or scientificity. I also
24
Chapter 2: Ideas of development

believe that it is through the re-emergence of these low-ranking


knowledges, these unqualified, even directly disqualified knowledges
(such as that of the psychiatric patient, of the ill person, of the nurse, of
the doctor parallel and marginal as they are to the knowledge of medicine
– that of the delinquent, etc.), and which involve what I would call a
popular knowledge though it is far from being a general common-sense
knowledge, but is on the contrary a particular, local, regional knowledge,
a differential knowledge incapable of unanimity…that criticism performs
its work.’

Activity 3
Do you think that development policy-makers and practitioners often ignore the
experiences and opinions of women? Have things improved in this regard over the past
20 years? If you want to take this further, read Jane Parpart’s article in Crush (ed.), 1995.
What insights does she believe a postmodern feminist perspective offers into what she
calls the ‘women in development enterprise’?

Many analysts have drawn upon aspects of postmodern theory. It has


certainly played an important role in highlighting issues that development
theory and practice had neglected in the past. Contemporary radical
populists such as Robert Chambers have incorporated elements of
postmodern theory into his analysis of why ‘local knowledge’ is so often
ignored. Feminists such as Naila Kabeer (1994) have drawn upon it
in order to highlight why development has persistently been gender-
blind. Anthropologists like James Ferguson (1994) have used it to
explore how development can be depoliticised and the cultures of local
societies systematically misunderstood. But others have been hostile,
claiming that the influence of postmodernism has contributed to a
crisis of confidence amongst intellectuals and practitioners in the field.
The Marxist analyst Colin Leys has bemoaned the end of development
theory and its replacement by ‘Development Studies’. For him, this
signifies a retreat from the belief that development can and should be a
vehicle for large-scale social and economic transformation. Leys worries
that Development Studies simply describes an eclectic mix of different
disciplinary approaches – economics, political science, international
relations, anthropology, history – which are rarely woven together into
a coherent narrative or theory (Leys, 1996). Others are less pessimistic
about Development Studies, arguing that it does not necessarily close off
these possibilities (Booth in Schuurman (ed.), 1993).

Governance, democracy and institutions


Reports of the death of development have been exaggerated. The idea has
undoubtedly been under heavy attack in recent decades, despite the fact
that, as we shall see, neo-liberalism has been as interventionist in practice
as state-based strategies for development ever were. However, by the
late-1980s the neo-liberals now dominating the World Bank and the IMF
were acknowledging that reducing the size of the state was not enough by
itself and that economic liberalisation was leading to ‘shocks’ that could
destabilise many countries in the Third World. Targeted social measures
were required to absorb these shocks. They also increasingly accepted
that there was a need to intervene to ensure that the state performed
more effectively the minimal roles remaining to it. This was in order to
secure property rights, tax collection, the maintenance of order and the
rule of law. Out of this arose a revived agenda for ‘good governance’,
which it was assumed would be best secured through wider processes
25
171 Introduction to international development

of democratisation. The old idea of ‘civil society’ – first articulated in the


eighteenth and nineteenth centuries – was resurrected following the end
of the cold war as donors and multilateral institutions sought to identify
key non-state actors in democratisation processes. These changes in
approach were reflected in the rise of ‘New Institutional Economics’, which
sought to supplement liberal economic ideas with analyses of the costs and
benefits of particular social and political institutional frameworks (Harriss,
2002).

The East Asian miracle


While highly significant in policy and practice, the move towards good
governance from the late-1980s onwards involved only a relatively limited
and superficial philosophical shift in the neo-liberal attitude towards the
role of the state. Others were advocating a much more ambitious return to
state-led approaches to development, basing their arguments on the ‘East
Asian miracle’. Authors such as Chalmers Johnson looked at Japan as an
example of the ‘developmental state’, asserting that nationalism was an
essential precondition for successful state-led development. Others, like
Robert Wade (1992) and Alice Amsden (2001), focused more upon how
the dramatic development progress of South Korea and Taiwan was based
on the will and capacity of the state to ‘govern the market’. Mushtaq Khan
(2002) has drawn unexpected and controversial conclusions from the East
Asian experience regarding corruption, arguing that it can under certain
conditions be compatible with a ‘productive’ development strategy. There
have been fierce debates over the last decade about the extent to which
the East Asian experience is transferable to other regions of the world.

Rights and livelihoods


Donors and multilateral institutions have edged gradually further in the
direction of acknowledging the importance of the role of the state since
the mid-1990s. The most recent reflection of this shift – for example, in the
2005 report of the UK Government’s Commission for Africa – is the claim
that countries that wish to develop need ‘effective states’. But perhaps the
most significant shifts in recent thinking about development have been
in the direction of ‘sustainable livelihood approaches’ and ‘rights-based
approaches’ to development. Sustainable livelihood approaches reflect a
conviction that routes out of poverty must be built upon the real strategies
and assets that the poor do or can in future deploy. As might be expected,
they often have strong links to broader ideas of sustainable development.3 3
Sustainable
Rights-based approaches reflect the penetration of development theory development is generally
understood, following
and practice – despite considerable ambivalence from within the field – by
the influential 1987
ideas about human rights. Both approaches have elective affinities with Brundtland Commission
populist ideas of ‘putting the poorest first’ and ‘empowering the poor’ but report, as development
some of their advocates argue that neither are inherently incompatible that meets the needs
with a belief in a major role for the state in development. For them, it is of the present without
rather a matter of finding how each can reinforce the other in a virtuous compromising the ability
of future generations to
cycle upwards.
meet their own needs.

The return of ethics


Sustainable livelihood approaches and rights-based approaches do
not simply embody ideas of ‘what will work’. They also embody ideas
about ‘what is right, fair and just’. Values, norms and assumptions have
underpinned all ideas of development since the Enlightenment and
have never been entirely absent from debates. However, development
ethics have, over the past decade, made a comeback and are today again
being addressed directly and explicitly. The most important architect
26
Chapter 2: Ideas of development

of this revival has been Amartya Sen. Sen is a Nobel Prize-winning


economist who has gradually moved into the terrain of political and moral
philosophy. He is the inspiration behind the United Nations Development
Programme’s (UNDP) Human Development Index. He has challenged
approaches to development that measure progress purely in terms of
economic indicators such as income or Gross Domestic Product and
placed at the heart of his approach the human person. He has argued that
the focus of development should be on the human freedom ‘to lead the
kinds of lives that people have reason to value’ (Sen, 2001, p.10). This
freedom, if it is to be made real, requires the possession of the capabilities
to exercise it. For Sen, these can only fully exist under conditions of
democracy where there is respect for civil, political, social, economic and
cultural rights.
For Sen, then, freedom is not just an essential precondition for
development: it is development. It is not just poverty that constitutes
an ‘unfreedom’; extreme inequality is also incompatible with a truly free
society. He has much to say on why therefore the USA might be considered
more ‘unfree’ by this criterion than ostensibly poorer places like the
Indian state of Kerala. He claims that free markets by themselves will not
spontaneously reduce poverty or inequality. Public action by the state is
necessary.

Box 5
The Human Development Index (HDI) is a composite index that measures
the average achievements in a country in three basic dimensions of human
development:

•• a long and healthy life – as measured by life expectancy at birth

•• knowledge – as measured by the adult literacy life and the combined


gross enrolment ration for primary, secondary and tertiary schools

•• a decent standard of living – as measured by Gross Domestic Product


(GDP) per capita in purchasing power parity (PPP) US dollars.

Activity 4
Take a look at the latest version of the HDI on the website of the UNDP. Find its
definitions of GDP and PPP. What do you think some of the problems might be in
successfully measuring poverty?

Sen’s emphasis upon inequality within countries and at the global level
draws upon the thinking of liberal philosopher John Rawls on ‘justice as
fairness’. For Rawls, fairness is rooted in equality of opportunity. He does
not insist on equality of outcomes on the grounds that this is likely to
involve unacceptable infringements upon liberty (Rawls, 1971).
Sen’s explicitly value-based (or, to put it another way, normative) approach
has been criticised on a number of grounds. For some critics, it glosses
over the fact that most countries historically have developed successfully
under authoritarian governments. His approach has also been described
as misconceived because it exaggerates the degree to which growth can
be ‘bad’ (Ravallion, 1997); another critique claims that he overgeneralises
about humanity from a Western-derived cultural model. Martha Nussbaum
(1995) has challenged Sen from within a normative perspective on the
grounds that Sen’s definition of freedom is too minimalist. For example,
she argues that a ‘good human life’ cannot be achieved unless an adult has
opportunities for experiencing sexual satisfaction.

27
171 Introduction to international development

Conclusion
Before moving on to the next chapter, briefly go back to the introduction
and remind yourself of Alan Thomas’s description of the three main
senses in which the term ‘development’ has tended to be understood:
as a vision; as a historical process of social change; as deliberate efforts
aimed at improvement. If you think that development is more an outcome
of historical processes of social change, you may opt to become directly
involved in politics; if you think that development arises mainly out of
deliberate efforts aimed at improvement, you may prefer to become a
policy professional. But whichever course you choose, you still have to
decide which of the ideas of development we have surveyed in this chapter
will shape your actions. That brings us back to the importance of the
vision. So, what is your vision?

Activity 5

Write a short definition – a maximum of five sentences – of what you think the objectives of
development should be and how they can be achieved. Don’t take more than 20 minutes to do
it. Retain it so that you can review and, if you wish, revise it at the end of this course.

Reminder of your learning outcomes


Having completed this chapter, and the Essential readings and activities,
you should be able to:
• explain how ideas of development emerged during the eighteenth and
nineteenth centuries, referring to key thinkers such as Adam Smith,
Karl Marx and Frederick List
• show how the emergence of development as a discrete sphere of
thought and activity was accelerated by the impacts of academic
specialisation and colonialism in the late-nineteenth and early
twentieth centuries
• provide an account of the ways in which ideas of development have
changed over time since 1945, both reflecting and shaping world
historical and political events
• construct some preliminary arguments of your own as to what
development should be and how it is to be achieved.

Sample examination questions


1. Wolfgang Sachs has written in the following dramatic terms: ‘The idea
of development stands today like a ruin in the intellectual landscape.’
(The Development Dictionary, 1). Discuss.
2. Should we try to abandon our values and assumptions about
development and just focus on what will work?

28
Chapter 3: Theories of the state and market

Chapter 3: Theories of the state and


market

Essential reading
Desai and Potter (2008) Chapters 1.8, 2.5.
Todaro and Smith (2014) Chapters 3 and 11.

Further reading
Amsden, A. ‘Bringing Production Back In – Understanding Government’s
Economic Role in Late Industrialization’, World Development XXV(4) 1997,
pp.469–80.
Collier, P. The Bottom Billion: Why the Poorest Countries are Failing and What
Can be Done About It (Oxford: Oxford University Press, 2007) [ISBN
0195374630]
Crouch, C. ‘Markets and States’ in Nash, K. and A. Scott (eds) The Blackwell
Companion to Political Sociology. (Oxford: Blackwell Publishers Ltd, 2000)
[ISBN 0631210504].
Dunleavy, P. ‘Democratic Politics and the State’, University of London External
Programme subject guide (London: University of London Press, 2004) p.12.
Evans, P. ‘The State as Problem and Solution: Predation, Embedded Autonomy
and Structural Change’ in Haggard, S. and R. Kaufman (eds) The Politics of
Economic Adjustment. (Princeton: Princeton University Press, 1992)
[ISBN 0691003947].
Heywood, A. Politics. (Basingstoke: Palgrave Macmillan, 2002) [ISBN
0333971310] Chapter 5 on ‘The State’.
Keen, D. The Benefits of Famine: A Political Economy of Famine and Relief in
South-Western Sudan, 1983–89. (Princeton: Princeton University Press,
1994) [ISBN 0691034230].
Khan, M. ‘State Failure in Weak States: A Critique of New Institutionalist
Explanations’ in Harriss J., J. Hunter and C. Lewis (eds) The New
Institutional Economics and Third World Development. (London and New
York: Routledge, 1997) [ISBN 0415157919].
Kohli, A. State-Directed Development: Political Power and Industrialization in the
Global Periphery. (Cambridge: Cambridge University Press, 2004)
[ISBN 0521545250].
Little, D. Paradox of Wealth and Poverty: Mapping the Dilemmas of Global
Development. (Boulder, Colo.: Westview, 2003) [ISBN 0813316421]
Chapter 8.
Lockwood, M. The State They’re In. An Agenda for International Action on
Poverty in Africa. (Bourton: ITDG Publishing, 2005) [ISBN 1853396176].
Van de Walle, N. African Economies and the Politics of Permanent Crisis, 1979–
1999. (Cambridge: Cambridge University Press, 2001) [ISBN 0521008360].
Wade, R.H. Governing the Market: Economic Theory and the Role of Government
in East Asian Industrialization. (Princeton: Princeton University Press, 1992)
[ISBN 0691003971] Out of print.
Woo-Cumings, M. ‘Chalmers Johnson and the Politics of Nationalism and
Development’ in Woo-Cumings, M. (ed.) The Developmental State. (Ithaca,
N.Y.; London: Cornell University Press, 1999) [ISBN 0801485665].

29
171 Introduction to international development

Challenging reading
Bates, R. Prosperity and Violence: The Political Economy of Development. (London
and New York: W.W. Norton, 2001) [ISBN 0393050386].
Beetham, D. Max Weber and the Theory of Modern Politics. (Oxford: Blackwell
Publishers Ltd, 1985) [ISBN 0745601189].
Burki, S. Dismantling the Populist State: The Unfinished Revolution in Latin
America and the Caribbean. (Washington DC: World Bank, 1996)
[ISBN 0821336894].
Gordon, C. (ed.) Power/Knowledge: Selected Interviews and Other Writings,
1972–77, by M. Foucault. (New York: Random House USA Inc., 1988)
[ISBN 039473954X].
Harriss, J. ‘Institutions, Politics and Culture: A Polanyian Perspective on
Economic Change’, International Review of Sociology 13(2) 2003, pp.343–56.
Kozul-Wright, R. and R. Rowthorn ‘Spoilt for Choice? Multinational
Corporations and the Geography of International Production’, Oxford Review
of Economic Policy 14(2) 1998, pp.74–92.
Mackintosh, M. ‘Abstract Markets and Real Needs’ in Bernstein, H. et al. (eds)
The Food Question. Profits versus People? (London: Earthscan Publications,
1990) [ISBN 1853830631].
Mackintosh, M. et al. (eds) Economics and Changing Economies. (London: The
Open University Press and International Thomson Business Press, 1996)
[ISBN 0412628406].
Mamdani, M. Citizen and Subject. Contemporary Africa and the Legacy of
Late Colonialism. (Princeton: Princeton University Press, 1996) [ISBN
0691027935].
Reno, W. Corruption and State Politics in Sierra Leone. (Cambridge: Cambridge
University Press, 1995) [ISBN 0521471796].
Stern, N., J-J. Dethier and F.H. Rogers Growth and Empowerment. (Cambridge,
Mass.: 2005) [ISBN 0262693461].
Stiglitz, J. ‘Markets, Market Failures and Development’, American Economic
Review Papers and Proceedings 79(2) 1989, pp.197–202.
Sugden, C. ‘Spontaneous Order’, Journal of Economic Perspectives 3, 1989,
pp.85–97.
Tilly, C. ‘Reflections on the Nature of State-Making’ in Tilly, C. (ed.) The
Formation of National States in Western Europe. (Princeton: Princeton
University Press, 1975) [ISBN 0691007721].
Wade, R.H. ‘Wheels within Wheels: Rethinking the Asian Crisis and the Asian
Model’, Annual Review of Political Science 3, 2000, pp.85–115.

Classic texts
Baran, P. and P. Sweezy Monopoly capital: An essay on the American Economic
and Social Order. (New York: Monthly Review Press, 1968)
[ISBN 0853450730].
Harvey, D. The Condition of Postmodernity. (Oxford: Blackwell Publishers Ltd,
1990) [ISBN 0631162941].
Hayek, F. ‘The Use of Knowledge in Society’ in American Economic Review 35(4)
1945, pp.519–30.
Marx, K. The Communist Manifesto. (London, 1848).
Myrdal, G. Asian Drama: An Inquiry into the Poverty of Nations. (New York:
Pantheon Books, 1972) [ISBN 0394470869].
Olson, M. ‘Dictatorship, Democracy and Development’, The American Political
Science Review 87(3) 1993, pp.567–76.
Polanyi, K. The Great Transformation: The Political and Economic Origins of our
Time. (Boston Mass.: Beacon Press, 2001) [ISBN 080705643X].
Ricardo, D. The Principles of Political Economy and Taxation. (1817).
Runciman, W. (ed.) Max Weber: Selections in Translation. (Cambridge:
Cambridge University Press, 1978) [ISBN 0521292689].
30
Chapter 3: Theories of the state and market

Smith, A. An Inquiry into the Nature and Cause of the Wealth of Nations.
(New York: Modern Library, 1776).

Aim and learning outcomes


The aim of this chapter is to provide an overview of the main theories of
the state and market that inform development policy and practice today.
By the end of this chapter and having completed the Essential readings
and activities, you should be able to:
• describe and evaluate the main features of the founding theories of the
state and market – Liberal, Marxist and Legal-Rational theories
• describe and evaluate some of the ways in which these founding
theories have been adapted or extended since 1945
• use the theoretical insights gained to reflect back upon and review our
discussion about ideas of development in the preceding chapter
• anticipate some of the ways in which these theoretical insights will
assist you to make sense of later chapters of the course.

Introduction
Let us turn now to two key concepts in theories of development: state and
market. The ways in which people have thought about the state and the
market have profoundly shaped our understanding of what development
is and should be – and our subsequent actions. In earlier chapters, you
had some glimpses of how the state and the market have featured in ideas
of development over the last 250 years. The time has come to explore
theories of the state and the market in a more structured manner.

Box 1
Sample definitions of state and market:

•• The state
‘The state is a distinctively modern and western way of organising
political authority and the conduct of government. The idea of “the state”
essentially is that there should be a single, unified source of authority
in each area, drawing upon the undivided loyalties of a population,
operating in a well-organised and permanently continuing way, and
directed towards the interests of a whole society. Furthermore, a modern
assumption is that government should be organised exclusively by states
which can meet all these criteria. Indeed, very recently, the assumption
has been that the whole surface of the world (which can be occupied
by humanity) should be partitioned exclusively between one state or
another.’
(Dunleavy, 2004, p.12)

•• The market
‘A market is a system of commercial exchange that brings buyers wishing
to acquire a good or service into contact with sellers offering the same
for purchase. In all but the most simple markets, money is used as a
convenient means of exchange, rather than barter. Markets are impersonal
mechanisms in that they are regulated by price fluctuations that reflect the
balance of supply and demand, so-called market forces.’
(Heywood, 2002, p.179)

31
171 Introduction to international development

Activity 1
Either:
Spend 10 minutes reflecting upon the above definitions, making notes if you wish.
•• Do you agree with these definitions?
•• Does the state of which you are a citizen meet all of Dunleavy’s criteria? If not, does
that mean that it is not really a state?
•• How useful is Heywood’s definition of the market? Is there anything missing?
Or:
Read Chapter 22, ‘Markets and States’, by Colin Crouch in Nash and Scott (eds) (2000)
and then write a 50-word answer to each of the following questions:
•• If you are an advocate of a strong and effective state, does this mean that you must
be hostile to the market?
•• To what extent might each create and sustain the other?

Founding theories of the state


The Liberal tradition
The Liberal tradition of thinking about the state can be traced back to the
writings of seventeenth-century theorists such as John Locke (1632–1704).
Locke argued that the state had arisen out of a voluntary ‘social contract’,
in which individuals recognise that only the creation of a sovereign
authority will protect them against the insecurity and disorder of a ‘state
of nature’. A state is required to guarantee order, civilisation and freedom.
Unlike his contemporary, Thomas Hobbes, who argued that this could
only be achieved through an absolute and unlimited state (what he called
‘Leviathan’), Locke proposed a limited state whose powers should extend
only to those needed to preserve ‘life, liberty and property’. The rest of life
was a matter for individual citizens in the realm of ‘civil society’. The role
of the state was to act as an umpire between competing groups in society.
However, Locke, wary of the dangers of excessive state power, argued that
the best protection against this was representative government (Heywood,
2002, pp.88–90).
The theories of John Locke have been taken up and further elaborated
over the centuries since by many thinkers – Adam Smith, John Stuart Mill
and Friederich von Hayek, to name three of the most important. Another
term often used to describe Liberal theories of the state is ‘pluralism’. As
suggested by Locke’s thinking, the Liberal tradition has always oscillated
between a benign, or relatively optimistic, view of the state and a more
pessimistic view, in which the state has an inherent tendency to expand
beyond the minimal functions which are appropriate to it.
As we moved into the twentieth century, some liberal theorists began
to wonder whether modern industrial states, as they became more
complex and less immediately responsive to popular demands, might be
increasingly vulnerable to capture by elites. Two groups were identified as
likely culprits: big business and the state bureaucracy.

The legal-rational tradition


The most sophisticated theorist of this kind was German sociologist
Max Weber (1864–1920). While a supporter of liberal democracy and
capitalism, he took our understanding of the state into new territory. For
Weber, the dominant system of authority in the modern world is the legal-

32
Chapter 3: Theories of the state and market

rational state. This state is characterised by its monopoly over violence.


But its authority does not rest solely upon that monopoly. It is based on
clearly – and legally – defined sets of rules. It is fundamentally impersonal
in character. Weber was concerned with what gave this system of rule its
legitimacy – defined as the basis upon which the people are willing to
accept its authority. For him, legitimacy is achieved through elections and
party competition.
Weber contrasts legal-rational authority with two other types of authority.
Traditional authority is based on customs and practices transmitted from
the past. It is legitimated by the fact that it has ‘always been this way’.
By definition it is to be found within ‘traditional societies’. Charismatic
authority is based on charm or personal power. It is legitimated by feelings
of loyalty and affiliation.
Weber did see downsides to modern legal-rational authority. Above all,
he was concerned that it would seek to extend its reach into all areas of
economy and society in the interests of efficiency. The means through
which this would be achieved was the state bureaucracy. He was convinced
that this tendency would apply to all forms of the state in the modern
world, whatever their ideological values. They would increasingly come to
resemble each other. Industrial societies would be governed by a class of
managers, technocrats and public officials whose power would lie in their
technical and administrative skills (Beetham, 1985).

Box 2
Weber in his own words:
‘In its fullest development…bureaucracy specifically conforms to the
principle of “neither fear nor favour”. Its distinctive characteristics, which
make it so acceptable to capitalism, are developed all the more completely
the more it “dehumanises” itself: that is to say, the more perfectly it
succeeds in realising the distinctive characteristic which is regarded as
its chief virtue, the exclusion from the conduct of official business of all
love, all hatred, all elements of purely personal sentiment – in general,
everything which is irrational and resists calculation. In place of the
lord of older societies, who was capable of being moved by personal
sympathy, kindness, favour or gratitude, modern culture requires the
external apparatus which supports it to be manned by the expert, who is
all the more indifferent in human terms, and so all the more completely
“objective”, the more complex and specialised the culture becomes.’

Economy and Society (1922) in Runciman (ed.) (1978, p.351).

For Weber, the antidote to excessive bureaucratic power was to remain


vigilant in promoting electoral competition and ensure that power and
authority did not become overly-concentrated in any one institution.
Checks and balances between the executive, judiciary and legislature
would mitigate the impact of bureaucratic power. On these grounds, he
was much more pessimistic about the prospects for defying this trend in
communist societies, where he predicted the ‘dictatorship of the official’.
Other theorists, taking their cue from Weber, have been even less hopeful.
Inspired by the work of the theorist of political parties, Robert Michels,
they have argued that there is an ‘iron law of oligarchy’, that applies in all
modern societies. Oligarchy means domination by the few.

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171 Introduction to international development

The Marxist tradition


Marxist theories of the state reject outright any notion that the modern
state might be a neutral umpire between competing groups in society. For
Karl Marx, the founder of this tradition, the state in a capitalist society
was controlled by the bourgeoisie – those who owned the productive
wealth of that society. However, Marx was not entirely clear or consistent
in his theorisation of the capitalist state. In The Communist Manifesto
(1848) he described the state as nothing more than ‘a committee for
managing the common affairs of the whole bourgeoisie’. This was a rigidly
instrumentalist view of the state. In other writings he suggested that the
state might have a degree of ‘relative autonomy’ from the class system,
to a certain extent mediating between contesting classes in a society.
Finally, while Marx envisioned that the state would wither away under a
classless communist society, he nonetheless believed that it would serve
an important function as a vehicle for the ‘dictatorship of the proletariat’
during the transition from capitalism to communism.
Vladimir Lenin, the leader of the Russian Revolution in 1917, also adopted
a rather instrumentalist attitude to the state, arguing that it should be led
by a vanguard party and should control the economy in all its aspects.
It was he rather than Marx who created the philosophical basis for the
‘command economy’ approach that came to dominate the socialist bloc.
A less instrumentalist approach, developing Marx’s idea of ‘relative
autonomy’, was taken by the Italian Antonio Gramsci. He analysed the
ways in which ruling class power is achieved through manufacturing
consent among the subordinated classes. According to Gramsci, this
consent is a more effective and less-costly alternative to the perpetual
exercise of force and is the basis for ruling class hegemony. In this
conception, class power becomes partially internalised as a set of common
values and beliefs (Heywood, 2002, pp.90–92). If instrumentalist theories
of the state predominated in the first half of the twentieth century
amongst Marxist thinkers, those of Gramsci and other followers of the
‘relative autonomy’ approach have enjoyed the ascendancy since then.
Gramsci’s ideas about consent and hegemony also created a basis for some
convergence with Weber’s concept of legitimacy.
Many Marxists were relatively slow to engage with the theories of
bureaucratic power pioneered by Max Weber. However, as the state
showed no signs of withering away in the Soviet Union after 1917 –
indeed, its power and extent appeared to be dramatically growing under
Stalin – it became impossible to ignore the issue. Leon Trotsky developed
the most influential analysis of post-revolutionary bureaucracy during his
years of exile. For Trotsky, Russian backwardness and an authoritarian
political leadership had created conditions in which the bureaucracy could
increase its power and stall revolutionary change. His analysis created the
basis for subsequent arguments that the bureaucracy under communism
could itself become a ‘new class’.

Theorisations since 1945


Since 1945 there has been a dramatic proliferation of the ways in which
the state has been theorised, explained and described by academics and
practitioners concerned with development. Many of these variations
owe something to the main theoretical traditions that we have already
explored. In what follows, we discuss in some depth two of the most
important variations. We then briefly describe some of the other terms that
you might encounter in the course of your reading.
34
Chapter 3: Theories of the state and market

The developmental state


The originator of this term was the American political scientist Chalmers
Johnson. In the early 1980s, he analysed the characteristics of the East
Asian capitalist developmental state since 1945, focusing on the ‘brand
leader’ of the time, Japan.

Box 3
‘Chalmers Johnson laid out the characteristics of the “East Asian developmental
state”, which included:

•• economic development (meaning growth, productivity and competitiveness


rather than welfare) is a top priority for the state

•• the state is committed to private property and the market, but guides the
market with instruments formulated by an elite economic bureaucracy

•• the state consults with and coordinates the private sector through numerous
institutions, and this is an essential part of the policymaking process

•• state bureaucrats rule, politicians reign, so that the latter create the political
space for the former to act, but also require bureaucrats to respond to
groups on which the stability of the system rests

•• there is heavy and consistent investment in education.’

(Lockwood, 2005, p.35)

Chalmers Johnson placed great emphasis on the importance of there


being a cohesive ‘national project’ with regard to development. Indeed,
he wondered aloud whether development might not be a product of
nationalism. Building upon his work, others have claimed that a key factor
is that East Asian states have sought to ‘govern the market’ (Wade, 1990)
and that the state has combined both autonomy and ‘embeddedness’ in
its relationship with wider society (Evans, 1992). Kohli (2004, pp.10–11),
in an important recent book, prefers to define such states as ‘cohesive-
capitalist states’. The developmental state thesis poses a number of sharp
questions: is it a historically specific experience that cannot be replicated
or is it what we should be looking to create, say, in Africa? Others, like
Khan (1997), suggest that the developmental state thesis is often less a
theorisation than a description. For him, the key is to identify the balance
of political power (his phrase is the ‘political settlement’) between
different classes or groups in society that might lead to the emergence of
a developmental state. For his part, Kohli argues that relatively few states
in the early phases of development display strong characteristics of the
developmental state; most start out as ‘fragmented-multiclass states’.

The neopatrimonial state


This term has been extensively used by analysts to denote states that
operate on the basis of patron–client relations and personal rule. Drawing
on studies of medieval Europe, neopatrimonialism has been applied to
Latin America, South-East Asia but, above all, to Africa. African states
are often portrayed as having a facade of modern government – budgets,
laws, bureaucracy, cabinet and parliament. Real decisions and power
are located outside this formal realm and are shaped by kin, clan and
ethnic loyalties. Writing about Africa, de Walle argues against posing
things so starkly, arguing that both formal (legal-rational) and informal
(patrimonial) realms closely interact. He counters claims that these
arrangements are in some way not ‘modern’, arguing that contemporary
trends towards globalisation, by weakening the formal state, have
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171 Introduction to international development

strengthened neopatrimonial politics in Africa. While the formal state loses


its developmental capacity, it nonetheless remains important to processes
of elite accumulation of wealth and as a source of legitimacy. Statehood
and sovereignty are resources. Donors place a value on them in a world of
states. Internally, the state is also an instrument for regulating the division
of the spoils. This is, of course, an inherently unstable situation.
The value of theories of the neopatrimonial state has in turn been
criticised. For example, Mamdani accuses exponents of undertaking
analysis by analogy, importing a concept that derives from Europe into
other parts of the world where it is irrelevant. He prefers to focus on the
impact of colonialism in Africa, which in his view created a ‘bifurcated
state’ in which the urban arena was governed on a centralised, legal-
rational basis but the countryside was effectively ruled by traditional
African leaders (1996, pp.11–12). With the end of colonialism,
only the urban arena was ‘liberated’, leaving African states partially
undemocratised. Despite such criticisms, theories of the neopatrimonial
state continue to be widely applied to explain why African states have so
often been ‘anti-developmental’.

Activity 2
De Walle writes of Sierra Leone: ‘the descent to state collapse is mostly the unintentional
result of increasingly desperate leaders who have progressively sawn off the state branch
on which they based their neo-patrimonial rule’ (2001, p.185).
To what extent do you agree with de Walle’s analysis? Read pp.114–37 of de Walle and
write a 300-word assessment of the strengths and weaknesses of this interpretation.
Draw on your own country/regional experience where appropriate. If you want to take
this further, also read pp.4–23 of Mamdani.

Other variations
Some analysts have used the term ‘predatory state’ in relation to Africa
to describe situations where processes of elite accumulation and theft
have reached a particularly uncontrolled level. Reno (1995) talks of the
‘shadow state’ to describe the informal realm within which real power
is exercised in Africa. Others, including writers on Latin America, have
talked about the ‘rentier state’, referring to states where elites live off the
profits generated by their control over power and resources. Since the
1960s feminist theory has generated a range of theories about the state.
This has led some to argue that male power – or patriarchy – is no less
important than class power and that it is possible to talk in terms of the
‘patriarchal state’. Analysts have also used terms such as ‘soft’ or ‘weak
state’. For example, India has been characterised as a ‘soft state’, by which
is meant the inability of the state to insulate itself successfully from vested
interests within society (Myrdal, 1972). In the context of Latin America,
this ‘softness’ has also been expressed in the term ‘populist state’, referring
to one of the dominant political traditions in the region, in which elites
form alliances with the urban working class and are unable to insulate the
state from its welfarist demands sufficiently to achieve a developmental
trajectory (Burki, 1996). In the context of globalisation, the reduced
capacity of states to control their economies has led to descriptions of the
state as ‘hollow’ and even as irrelevant. This debate has tended to take
place in relation to developed world states rather than their counterparts
in the developing world, where effective states have sometimes never
existed (Heywood, 2002, pp.98–100).

36
Chapter 3: Theories of the state and market

Olson (1993) and Bates (2001) offer similar theorisations of state


formation that originate in the idea that the state may be in some way an
‘unintended consequence’ of elite needs in pre-modern times. For Olson,
state formation happens because the elite finds itself able to generate
wealth more effectively when it moves from being a ‘roving bandit’ (under
conditions of anarchy and arbitrary violence) to ‘a stationary bandit’
(where life is subject to at least a minimally rule-based authority). It
becomes possible overall for elites to increase their economic take when
they become stationary because, in return for moderating their predation,
their erstwhile victims feel secure enough to increase their production. For
Bates (2001), who draws on the work of Charles Tilly (1975), the indirect
incentive for state formation is the need of elites to mobilise armies for
war, which is the primary means through which wealth accumulation takes
place in pre-modern times. Benefits or protection are offered to those who
join their armies. Over time, particular sections within the elite reach the
point where they become capable of monopolising violence. At this point,
the state is born.
Finally, Michel Foucault has directly challenged us to move away entirely
from traditional approaches which seek to understand the state in terms
of who holds power and who does not, or who enjoys freedom within
a society and who does not. Instead, he views the state as an important
effect of power (or one of its vehicles). This power flows throughout the
entire social organism establishing multiple forms of subjugation, of which
the state is but one. It follows that Foucault also views the market and
civil society, amongst others, as forms of subjugation (Gordon (ed.), 1988,
pp.92–99).1 1
Foucault is difficult
to summarise briefly.
If you want to explore
Founding theories of the market his ideas on power in
more depth, perhaps the
The Liberal tradition most accessible source
is Colin Gordon’s edited
If Locke is the pioneer of political liberalism, Adam Smith is his collection of selected
counterpart in the economic sphere. For Smith, political liberty is interviews and other
inextricably linked to the existence of a market economy. Individuals bring writings (1980).
goods to a market in order to engage in a process of exchange, whether
for money or for other goods. As a contemporary economist has put it:
‘we depend for our survival on a network of exchange that in this respect
is like a living thing or an eco-system: it is highly ordered, but no one has
ordered it…The idea of spontaneous order is fundamental to economics’
(Sugden, 1989). This is a modern reworking of Smith’s idea of the market
as the ‘invisible hand’.
For Smith, as people freely trade goods on the market, there develops a
division of labour in the economy. People seek to supply goods that other
people want. Some excel at producing one or more types of good, others
excel at producing different goods.

Box 4
At the level of countries, David Ricardo (1772–1823) developed a theory of
‘comparative advantage’ that would be the basis for economic growth through
free trade. A country has a comparative advantage in the production of a good
if the opportunity cost of producing one of that good, in terms of other goods
foregone, is lower in that country than abroad.

His most famous example involved England and Portugal. In Portugal it was
possible to produce both wine and cloth with less work than it takes in England.
However, the relative costs of producing those two goods are different in the
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171 Introduction to international development

two countries. In England it is very hard to produce wine, and only moderately
difficult to produce cloth. In Portugal both are easy to produce. Therefore, while
it is cheaper to produce cloth in Portugal than England, it is cheaper still for
Portugal to produce excess wine, and trade that for English cloth. And conversely
England benefits from this trade because its cost for producing cloth has not
changed but it can now get wine at closer to the cost of cloth.2 2
See Ricardo’s The
Principles of Political
Economy and Taxation
Smith argues that if people fail to supply goods that other people want, (1817).
they will not find buyers for those goods in the marketplace. In this way,
efficiency and innovation are encouraged by the market. The animating
principle behind market exchange for Smith is individual self-interest. The
social benefits of a market system do not require any planning of these
outcomes. All that is required is that people should be free to act selfishly
on their own behalf. In the economic sphere, that means that the right of
private property should be sacrosanct. One of the roles of the state is to
guarantee that right.
Of course, the market, as a vital means of organising economic activity,
predated capitalism and also operated in some form or other in most of
the communist states of the twentieth century. However, for Smith and
others from the Liberal tradition, it is in modern capitalist society that
the virtues of the market are given their fullest expression. Indeed, the
two become virtually synonymous. Market relations penetrate all spheres
of economy and society to the point where land and labour become
commodities to be traded like any other. The relentless search for profit
drives on competition for market share, which in turn spurs further
innovation. Those who cannot compete in the market go bust.
Neither Smith nor those who followed him were unaware that the market
could sometimes fail to work as it should and that it produced losers as
well as winners. Neo-classical economists within the Liberal tradition have
expended much energy over the past 100 years or so trying to understand
the circumstances in which markets, however freely operating, do not
function well and when external intervention – for example, by the state
– might be justified. Diagnoses of the origins and extent of ‘market failure’
have differed. For some, there have been relatively few circumstances in
which external intervention is likely to improve matters. Indeed, it may be
these interventions that create the problem in the first place. For others –
such as John Maynard Keynes – the scale of the internal malfunction could
be so socially destructive that regular state intervention may be justified.
For Keynes, shaped by the experience of the 1928–33 Great Depression,
the social phenomenon that above all justified such intervention was
unemployment.
Karl Polanyi (1886–1964) was also strongly affected by the events of the
interwar years. First published in 1944, The Great Transformation (2001)
explores the dangers inherent in the utopian idea of the ‘self-regulating
market’ – that is, markets in which prices are purely based on the
unrestricted operation of the forces of supply and demand. He argues that
modern industrial society is the first human society in which markets have
been freed from social regulation and control. Under these conditions,
‘[I]nstead of economy being embedded in social relations, social relations
are embedded in the economic system’ (Polanyi, 2001, p.57). The idea of
the economy becoming ‘disembedded’ so that the market can no longer
be subject to wider social relationships that would interfere with its free
operation is central to Polanyi’s analysis. For him, the social costs of this
process can be so high that it produces a political backlash. It falls to the
modern state to mitigate these social costs.
38
Chapter 3: Theories of the state and market

Activity 3
What value does Polanyi’s analysis have in terms of thinking about development today?
If you want to take this further, read pp.72–76 of Polanyi’s The Great Transformation and
make notes on his reasons why the key elements in economic activity – labour, land and
natural resources, and money – ensure that ideas of the ‘self-regulating market’ can only
ever be utopian.

The Marxist tradition


While recognising the importance of the market and processes of
exchange, the Marxist tradition has tended to view them as a source of
mystification and ‘fetishisation’. For Marx and his followers, it is in the
ownership of production and capital accumulation that the distinctive
nature of capitalism is to be found. Class power is rooted in these spheres
and then expressed through transactions in the marketplace.
Marx argues that money and market exchange mask social relationships
between things through the ‘fetishisation of commodities’. As Harvey,
writing over 100 years later states: ‘The conditions of labour and life,
the sense of joy, anger, or frustration that lie behind the production of
commodities, the states of mind of the producers, are all hidden to us as
we exchange one object (money) for another (the commodity). We can
take our daily breakfast without a thought for the myriad people who
engaged in its production’ (Harvey, 1990, p.101).
Marx accepts that the market is a key mechanism in encouraging a highly
organised technical and social division of labour under capitalism. He
also accepts that it encourages profit-seeking and innovation. But he
argues that certain prior historical conditions are required before the fully
capitalist market can emerge. The crucial prior condition for Marx is the
predominance of wage labour. The loss of alternative means of production
by the mass of the people, often as a result of violence and coercion,
forces them into a position where they have nothing to sell on the market
but their labour. The labour market under capitalism is an unequal one,
despite the fact that employer and employee formally agree a contract
and the latter (unlike slaves or serfs) are free to leave and take a better
job elsewhere if they can find one. Capitalists can use their power to
impose all kinds of conditions on labourers and entirely possess the value
of the fruit of their efforts. The only constraints are the degree to which
those labourers will resist through class struggle and whether there is a
surplus or shortage of labour across the economy. In his view, capitalism
has a natural tendency to maintain a ‘reserve army of labour’ in order to
keep down wage levels. For Marx, then, the exploitation of labour is the
primary location where profit is generated. The market is merely a surface
reflection of this deeper phenomenon.

Theorisations since 1945


Since 1945, debates about the nature and role of the market amongst
academics and practitioners have continued to be intense. These debates
have remained heavily informed by the founding theories outlined above.
In what follows, we discuss in some depth two of the most important
recent debates.

Towards a single world market?


Debates have raged over the past 30 years about how far markets are
becoming globalised. After 1945, state intervention to prevent ‘market

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171 Introduction to international development

failure’, for example through tariffs or capital controls, was accepted as


orthodox policy. Despite this, radical theorists complained that a world
market already existed in which the ‘Third World’, or ‘South’ tended to be
in a structurally dependent relationship with the ‘First World’, or ‘North’.
In the view of many, the advent of the era of economic liberalisation
since the 1980s has deepened globalisation, in particular through the
deregulation of financial markets across the world. David Harvey (1990:
161) argues: ‘The formation of a global stock market, of global commodity
(even debt) futures markets, of currency and interest rate swaps, together
with accelerated geographical mobility of funds, meant, for the first time,
the formation of a single world market for money and credit supply’.

Box 5
For Marx, the development of a single world market would have come as
little surprise. His late-twentieth-century followers, as they came to question
dependency theory, linked this process to the crisis of Fordism in the 1960s and
1970s – a system of large-scale mass production, automated assembly lines and
hierarchically organised firms on a predominantly national basis, in which labour
is tightly disciplined, together with mass consumption, secured by welfare states
– and its gradual replacement by regimes of flexible accumulation.

Under these regimes of flexible accumulation, new ways of organising the control
of labour have emerged, for example, through self-disciplining teams, that offer
much less security to workers. Founded on the application of new information
technology, production today is now often to be found in multiple locations
around the world. Immensely powerful transnational corporations have come to
dominate the world economy. A commitment to welfarism has been replaced by
an acceptance of the inevitability of greater inequality both within and between
nations. This restructuring of capitalism is bringing about great social changes
such as the weakening of traditional class politics and the emergence of new
forms of identity politics.

Activity 4
Do you think that the revival of free market theory under globalisation has led to greater
economic inequality and insecurity? Write a short answer to this question. If you want
to take this further, read ‘From Fordism to Flexible Accumulation’, Chapter 9 of David
Harvey’s The Condition of Postmodernity, and make some notes.

While many Liberal and Marxist theorists now agree that market-based
globalisation is proceeding apace, they still tend to differ dramatically,
of course, in terms of how they interpret it. Liberal theorists are usually
positive about its overall impact for economic growth and poverty-
reduction across the world economy. Marxists tend to view it as deepening
the unevenness of economic and social development. But there are also
sceptics who do not believe that market-based globalisation is as far
advanced as has been claimed. For example, some claim that most trade
is within and between a triad of regional economic blocs – Europe, North
America and East Asia (Kozul-Wright and Rowthorn, 1998). They also
point to the fact that foreign direct investment goes mainly to advanced
capitalist countries and to a select but small number of countries in the
developing world. Finally, other observers argue that behind apparently
abstract market processes are very specific national capitalist interests.
For example, behind the growth of world financial markets is the ‘US Wall
Street-Treasury Complex’ (Wade, 2000).

40
Chapter 3: Theories of the state and market

‘Real markets’
An important debate has been taking place in recent decades about
whether the often polarised debate between the Liberal and Marxist
traditions has led us to ask the wrong questions about markets. Maureen
Mackintosh has argued that the two traditions, for all their differences,
both depend upon abstract and static models of the market. For Liberals,
the market is a benevolent arena of exchange; for Marxists, it is a
fetishised arena of exploitation. Mackintosh suggests that it might be
more useful to analyse markets as ‘different ways of buying and selling…
as they operate in the world’. She continues: ‘Markets in this sense of the
term have widely varying institutions and economic contexts, they operate
on limited information, they involve and help to create a variety of social
classes, power relations, and complex patterns of needs and responses.
All of this generates real effects in terms of people’s survival: in short, real
markets’ (1990, p.47).
She is not arguing that you do not need abstract models of the market –
simply that it is vital to test them against concrete evidence. Mackintosh
initially raised these problems in connection with food and agricultural
markets but they apply more widely. In fact, important work on ‘real
markets’ was already under way at the time she was writing, as she
acknowledged. Amartya Sen, investigating the 1974 famine in Bangladesh,
had argued that the normal working of markets can be an important factor
in the creation of hunger and famine. Increased market participation by
individuals and communities can leave them more vulnerable to drought
and pests, as they sell more of their product for cash than before. In
addition, price rises on volatile markets can price them out of the market
when they are dependent upon it to secure their food needs. He directs us
towards the ‘non-market determinants of the ability to command goods on
the market: ownership of resources and the terms on which people come
to market and which influence their ability to trade’ (Mackintosh, 1990,
pp.43–44).
Sen demonstrates that the Liberal tradition is capable of making important
contributions to our understanding of how markets ‘really work’. He is a
strong advocate of appropriate state intervention to address the insecurity
that markets will inevitably generate. Radical thinkers and Marxists
are today also undertaking valuable studies into how real markets are
structured by class and power and arguing how it may be possible to
improve the terms upon which people ‘come to the market’.
It is important not to lose sight of the fact that real markets do not always
operate ‘normally’. Indeed, analysts of civil wars and other internal
conflicts in many parts of the world have shown how powerful groups,
often armed, are able to compel the less powerful to trade in markets on
terms that directly strip the less powerful – for example, refugees and
internally displaced people – of assets and wealth. As Keen has argued in
relation to Sudan in the mid-1980s, in such situations ‘market forces’ are
replaced by ‘forced markets’ (Keen, 1994).

Activity 5
Try to identify some of the ‘real markets’ in your country or region and assess their effects
in terms of people’s livelihoods. If you want to take this further, read and make notes
on Maureen Mackintosh’s ‘Abstract Markets and Real Needs’, which is Chapter 4 of
Bernstein et al. The Food Question (1990).

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171 Introduction to international development

Conclusion
Theoretical and political arguments about the relationship between the
state and the market often seem to imply that if you are an advocate
of one you must be hostile to the other. As we have seen, there are
major elements of the Liberal and Marxist traditions that have helped to
frame the argument in such terms. The conflict between capitalism and
communism during the twentieth century also certainly encouraged such
a polarisation. Now that the cold war is over, has the time come to move
beyond this ‘either-or’ approach? Our answer to this question would be –
Yes. But this does not mean that we should swing to the other extreme and
assume that the two will always co-exist harmoniously.
Equally, we would argue that there is no single ‘right relationship’ between
state and market for countries seeking to develop. The right relationship
between the state and the market will vary between countries and
regions. To complicate things further, getting the right relationship is not
something that can be entirely engineered through implementing the ‘right
policies’. Much will depend on the balance of forces within society. We
would endorse Mackintosh’s assertion that we need to think in terms of
‘real markets’ – and, for that matter, ‘real states’.
Some of you may be wondering what the point of all this grand theory has
been if ultimately we cannot draw many concrete conclusions from it. The
point of high-order thinking of this kind is that it represents an attempt to
uncover the purest and deepest characteristics of a particular economic,
political or social phenomenon. How these phenomena operate in practice
will invariably be different – and will require what Harriss (2003) has
called ‘middle-range theorising’ – but efforts to understand the ‘real world’
will be fatally compromised if we do not take these grand theoretical
models as a key point of departure.
Let us try again to reach a concrete conclusion by asking another question
that is also important for policymakers and practitioners: which of the
state and the market is more central today to processes of getting
development started? Getting started is the most difficult part of
development. Countries and regions that have not really begun to develop
yet are struggling to ‘catch up’. They lack both resources and power.
Markets are weak and local firms often few in number. Both theory and
practice strongly suggest that the state is particularly crucial in overcoming
such initial impediments. Indeed, states are often instrumental in
creating markets and the economic actors which operate in them. To do
this, states must have the will and capacity not just to support beneficiaries
of such processes, but also to enforce unwelcome outcomes upon ‘losers’.
Foreign aid will never be sufficient by itself to promote ‘developmental’
economic and social change. This leads us to conclude that, even where
the circumstances do not particularly appear to encourage it and allowing
for the limits of what can be achieved through policy interventions, there
is no alternative but to try to build a developmental state.

42
Chapter 3: Theories of the state and market

Reminder of your learning outcomes


Having completed this chapter, and the Essential readings and activities,
you should be able to:
• describe and evaluate the main features of the founding theories of the
state and market – Liberal, Marxist and Legal-Rational theories
• describe and evaluate some of the ways in which these founding
theories have been adapted or extended since 1945
• use the theoretical insights gained to reflect back upon and review our
discussion about ideas of development in the preceding chapter
• anticipate some of the ways in which these theoretical insights will
assist you to make sense of later chapters of the course.

Sample examination questions


1. ‘Historically, the state has always been the main engine of
development; in the future, it will be too.’ Discuss.
2. ‘Market-based development is the worst type of development – apart
from all the others.’ To what extent do you agree with this statement?

43
171 Introduction to international development

Notes

44
Chapter 4: Theories of institutions and civil society

Chapter 4: Theories of institutions and


civil society

Essential reading
Desai and Potter (2008), Chapters 1.5, 2.15, 10.5 to 10.8, 10.11.
Todaro and Smith (2014), Chapters 1 and 11.

Further reading
Chandhoke, N. The Conceits of Civil Society. (New Delhi: Oxford University
Press, 2003) [ISBN 01956661958].
Chatterjee, P. The Nation and its Fragments: Colonial and Postcolonial Histories.
(Princeton: Princeton University Press, 1993) [ISBN 0691019436].
Edwards, M. Civil Society. (Cambridge: Polity Press, 2004) [ISBN 0745631339]
Chapters 1 and 5.
Goodin, R.E. ‘Institutions and their Design’ in Goodin, R.E. (ed.) The Theory of
Institutional Design. (Cambridge: Cambridge University Press, 1998) [ISBN
0521636434].
Hall, J.A. and F. Trentmann (eds) Civil Society: A Reader in History, Theory
and Global Politics. (Basingstoke: Palgrave Macmillan, 2005) [ISBN
1403915431].
Hardoy J.E. and D. Satterthwaite Squatter Citizen: Life in the Urban Third
World. (London: Earthscan, 1989) [ISBN 1853830208].
Harriss, J. Depoliticizing Development: The World Bank and Social Capital.
(London: Anthem Press, 2002) [ISBN 184331049X].
Harriss, J. ‘Institutions, Politics and Culture: A Polanyian Perspective on
Economic Change’, International Review of Sociology 13(2) 2003, pp.343–
56.
Howell, J. and J. Pearce Civil Society and Development: A Critical Exploration.
(Boulder and London: Lynne Rienner Publishers, 2001) [ISBN
1555876196].
Khan, M. ‘State Failure in Weak States: A Critique of New Institutionalist
Explanations’ in Harriss, J., J. Hunter and C. Lewis (eds) The New
Institutional Economics and Third World Development. (London and New
York: Routledge, 1997) [ISBN 0415157919].
North, D. ‘The New Institutional Economics and Third World Development’
in Harriss, J., J. Hunter and C. Lewis The New Institutional Economics and
Third World Development. (London: Routledge, 1997) [ISBN 0415157919].
Przeworski, A., M. Alvarez, J. Cheibub and F. Limongi Democracy and
Development: Political Institutions and Well-Being in the World, 1950–1980
(Cambridge: Cambridge University Press, 2000) [ISBN 0521793793].
Rodrik, D. (ed.) In Search of Prosperity. Analytic Narratives on Economic Growth.
(Princeton: Princeton University Press, 2003) [ISBN 0691092699] Read the
Introduction.
Rodrik, D., A. Subramanian, and F. Trebbi ‘Institutions rule: the primacy of
institutions over integration and geography in economic development’
Journal of Economic Growth 9(2) 2004, pp.131–65.
Rueschemeyer, D., E. Stephens and J. Stephens Capitalist Development and
Democracy. (Cambridge: Polity Press, 1992) [ISBN 0745609457].

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171 Introduction to international development

Challenging reading
Berman, B. ‘Ethnicity, Patronage and the African State: The Politics of Uncivil
Nationalism’, African Affairs 97(388) 1998, pp.305–41.
Hanlon, J. Mozambique: Who Calls the Shots? (London: James Currey, 1991)
[ISBN 0852553463].
Putnam, R. Making Democracy Work: Civic Traditions in Modern Italy.
(Princeton: Princeton University Press, 1993) [ISBN 0691037388].
Schaffer, B.B. ‘Towards Responsibility: Public Policy in Concept and Practice’
in Clay E.J. and B.B. Schaffer (eds) Room for Manoeuvre: An Exploration of
Public Policy in Agricultural and Rural Development. (London: Heinemann
Educational Books, 1984) [ISBN 0435837605].
Wade, R.H. Governing the Market: Economic Theory and the Role of Government
in East Asian Industrialization. (Princeton: Princeton University Press, 1992)
[ISBN 0691003971]

Classic texts
Marx, K. The 18th Brumaire of Louis Bonaparte. (New York, 1852).
Nowell-Smith, G. (ed.) Antonio Gramsci. Selections from The Prison Notebooks
of Antonio Gramsci. (London: Lawrence and Wishart, 1973) [ISBN
0853152802].

Aim and learning outcomes


The aim of this chapter is to provide an overview of the main theories of
institutions and civil society that inform development policy and practice
today.
By the end of this chapter and having completed the Essential readings
and activities, you should be able to:
• describe and evaluate the main features of the founding theories of
institutions and civil society
• describe and evaluate some of the ways in which these founding
theories have been adapted or extended since 1945
• use the theoretical insights gained to reflect back upon and review our
discussions about ideas of development
• anticipate some of the ways in which these theoretical insights will
assist you to make sense of later chapters of the course.

Introduction
In Chapter 3 we looked at two key concepts in theories of development:
state and market. We now turn to the two other concepts that we have
identified as warranting serious attention – namely, institutions and civil
society.
In Chapter 2 we saw that these concepts returned to the top of the
development agenda in the 1980s, as policymakers and practitioners
began to focus on governance issues. However, as with state and market,
how they should be defined, their relationship to the other key forms we
are studying here and their potential role in promoting development have
all been heavily contested.

46
Chapter 4: Theories of institutions and civil society

Activity 1
Here are sample definitions of institutions and civil society:
1. ‘Institutions are the rules of the game of a society, or, more formally, are the humanly
devised constraints that structure human interaction. They are composed of formal
rules (statute law, common law, regulations), informal constraints (conventions, norms
of behaviour and self-imposed codes of conduct), and the enforcement characteristics
of both.’
(North in Harriss et al., 1997, p.23)
Do you agree with this definition? For example, where does it leave organisations
such as the state or the firm?
2. ‘Civil society…is the totality of social institutions and associations, both formal
and informal, that are not strictly production-related nor governmental nor familial
in character. The concept includes, then, everything from the informal card-playing
groups to the parent–teacher association, from the local pub to the trade union, from
church groups to political parties.’
(Rueschemeyer et al., 1992, p.50)
Do you agree with this definition? For example, should political parties be included?
Now make some brief notes about how the two definitions overlap; where they differ.

Founding theories of institutions


Institutions have been a central concern of philosophers and thinkers
throughout human history. For example, the German philosopher Georg
Hegel sought to provide a systematic understanding of the nature of – and
relationship between – the institutions of state, market and civil society.
Smith and Marx also certainly had much to say about institutions without
deliberately using the concept. However, the conscious theorisation of
institutions really began with the emergence in the late-nineteenth century
of the different academic disciplines that today collectively constitute the
social sciences: history, political science, sociology and economics. Each
approached the phenomenon in different ways. In these early days, history
was essentially the story of the origins of political institutions – as Goodin
describes it, ‘Kings and courts, states constituted around them, and wars
between them’. Political science was mainly concerned with core political
institutions – for example, the state, legislature, judiciary and parties – in
the present. Sociology focused on ‘the ways in which collective institutions
subsume and subordinate the individual’. In economics, the emphasis was
on the ‘institutions and mechanisms – property law and the rules of the
courts enforcing them, particular exchanges and the practices governing
them, credit institutions and merchant banks, trade unions and trade
associations and so on – which create and control economic life’ (Goodin,
1998, pp.2–12). During the early twentieth century, the emerging
discipline of anthropology addressed itself to ‘cultural institutions’, mainly
in the context of ‘traditional societies’. It is important to note that, by
contrast with North’s relatively recent definition of institutions, all of the
disciplines brought organisations within their framework of reference. In
doing so, they are probably closer to the ‘common-sense assumptions’ that
most people today would have about what the term means.
Many of the best early theorists of institutions drew upon the insights
of the different disciplines. For example, Thorsten Veblen, an American
sociologist, and John Commons, an American economist, were both keen
to analyse institutions in ways that simultaneously took into account the

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171 Introduction to international development

full range of historical, political, social, economic and cultural factors


(Harriss, 2003).

Box 1
Thorsten Veblen (1857–1929), like Weber, identified tensions in contemporary
society between acquisition, display and a technocratic management. His
writings encompassed social mores, phenomenology, business structures, the
interaction of commerce and universities, and US and German imperialism. He is
best known for his 1899 Theory of the Leisure Class (responsible for introducing
‘conspicuous consumption’ into the sociological and economic literature). In his
work on technocracy, Veblen made a distinction between the owners of ‘business’
(who are focused upon profit maximisation through market manipulation,
restriction of production and other similar practices) and ‘engineers’ or other
managers in ‘industry’ (who are concerned with efficiency per se and with
production for the satisfaction of human needs).1
1
www.caslon.com.au/
biographies/veblen.htm
John Commons (1862–1945) developed an analysis of collective action by
the State, and a wide range of other institutions, which he saw as essential to
understanding economic life. John Commons was an opponent of mainstream
neo-classical economics, with its universal laws based on rational individualism.
His best known work is Institutional Economics (1934). He was also a prominent
historian of American labour.2 2
www.cooperative
individualism.org/
commonsbio.html
Writing in the present, John Harriss (2003) has defended the ‘old
institutionalism’ of Veblen and Commons against attempts over the past
two decades to resolve the tensions between institutional theory and
mainstream neo-classical economics by creating a New Institutional
Economics (NIE) that can then be used successfully to promote
development.

Activity 2
Make a list of the 10 most important political, economic, social and cultural institutions
in your own country or region that development policymakers and practitioners should
attempt to understand before they begin to implement their policies. For each of the 10
institutions, add a sentence explaining why you chose it. If you want to take this further,
read Harriss’s article.

Recent theorisations
Each of the disciplines we looked at above have created their own ‘new
institutionalisms’ in recent decades, according to Goodin (1998: pp.2–20).
How far they differ from the older versions has been much debated. Here
we focus on the ‘new’ version that has had perhaps the most direct impact
upon development theory and practice over the past 25 years – New
Institutional Economics. We then go on briefly to discuss the advances that
have been made over recent decades in theories of ‘institutional design’.
One of NIE’s leading lights is the Nobel prize-winning economist Douglas
North. He is certainly its most ambitious practitioner. For North, ‘the new
institutional economics (NIE) builds on, modifies and extends neo-classical
theory to permit it to come to grips and deal with an entire range of issues
heretofore beyond its ken’.
A central concern for North is the relationship between state and market.
He accepts that those neo-classical theorists who posit a rule-free world
based purely on voluntary individual contracts fail to recognise that
reality rarely conforms to this model. The distance between their abstract
utopia and harsh reality is particularly great in countries that are still in
48
Chapter 4: Theories of institutions and civil society

the initial phases of development. He asserts that while individuals try to


act rationally and on the basis of self-interest, ‘information is incomplete
and there is limited mental capacity by which to process information’. The
result is that people ‘impose constraints on human interaction in order to
structure exchange’. However, ‘there is no implication that the consequent
institutions are efficient’. North argues that this is because the ‘mental
models’ that people construct in order to interpret the world are in part
culturally and environmentally derived.
North goes on to argue that ‘[T]he incomplete information and limited
mental capacity by which to process information determines the cost of
transacting which underlies the formation of institutions’. These costs arise
for parties to an exchange because information is costly and not everybody
has access to the same amount or quality of information. Institutions ‘are
formed to reduce uncertainty in human exchange’ and, along with the
technology employed, determine the cost of transactions.
According to North, efficient property rights is the main institution that
will reduce transaction costs but other institutions are also required
(in particular, an effective state) if it is to do so. However, institutions are
not necessarily created because they will be efficient but because they
serve the interests of those with the power to create them. In addition,
because people suffer from incomplete information, they may also lack
the ability to change these institutions even when they wish to do so. This
leads to the problem of what North calls ‘institutional path dependence’
(North in Harriss et al., 1997, p.17).
NIE significantly modifies the ideas of ‘spontaneous order’ that are so
central to mainstream neo-classical economic thinking. It acknowledges
that processes of development, which are by definition about institutional
change – that is to say, changes in the ‘rules of the game’ – are likely to be
complex and difficult to achieve. The institutional context is often hostile.
For example, ‘traditional’ institutions may well resist the implantation and
spread of new institutional frameworks. Put another way, the transaction
costs of economic, social, political and cultural change may largely fall
upon groups in society that are in a position to block that change. Benefits
are not guaranteed and often depend on others keeping their side of the
bargain – or being forced to comply – over a prolonged period. This is the
problem of ‘collective action’.
Informal constraints will be more difficult to change than formal
rules. Formal rules that have worked in one country or region will not
necessarily work elsewhere. North concludes: ‘It is polities that shape
economic performance because they define and enforce the economic
rules of the game. Therefore the heart of development policy must be the
creation of polities that will create and enforce efficient property rights’
(North in Harriss et al., 1997, pp.23–25).
To its critics, NIE promises much more than it delivers. Harriss complains
that, although it has identified the key problem, NIE does not really
provide a theory ‘of how and why polities differ. It offers no explanation
of the fact that the same economic institutions can have very different
consequences in distinct contexts’. For Harriss, then, history, politics and
culture are still being placed at the service of economics, rather than
being treated as genuinely equal partners in the quest for understanding
(Harriss, 2003).
On a similar note, other critics have argued that many of those who
claim to be adopting an NIE approach retain general assumptions about
what the optimal institutional arrangements for development are. For

49
171 Introduction to international development

example, they often equate ‘efficient property rights’ with those in which
private ownership is wholly secure. Yet scholars have identified many
contexts where ‘efficient property rights’ have fallen short of this assumed
institutional optimum. In China today, the state has created ‘hybrid’
regimes of property rights that fall short of this standard and yet they
appear for the moment to be working well. Other assumed institutional
optima whose value in promoting development have been strongly
questioned are democracy and decentralisation (the devolution of
power by the central state to the provincial, district or community levels).
Rodrik instead proposes a bottom line on ‘institutional quality’ that is
much less prescriptive: ‘institutions that provide dependable property
rights, manage conflict, maintain law and order and align economic
incentives with social costs and benefits are the foundations of long-term
growth’ (2003, p.10).

Box 2
Mushtaq Khan has looked at NIE theories of state failure. He is highly critical of
its emphasis on ‘political transaction costs’ – for example, concessions to losers
to facilitate a process of change – and the assumption it makes that, the higher
they are, the less likely it is that institutional change that promotes development
will take place. He argues instead that it is much more useful to think in terms of
‘transition costs’ as the key variable. He writes:
‘The great danger with the NIE approach is that by ignoring transition costs it
presents what are essentially transitions as processes which can be managed
judiciously by states which have the right models or the right ‘vision’…States,
when they are involved in processes of transition, are attempting some
transitions rather than others. The justification for this must be based on a
politics that should be made explicit. Moreover, transitions which had low
transition costs in one context may not in another. The difference between
South Korea and Pakistan had little to do with the quality of their leaders or
their conflict management skills. The real difference was in the balance of
power in these societies in the 1960s.
(Khan in Harriss et al., 1997, p.85).

It follows from this that in some societies a successful transition to institutional


arrangements that promote development may involve very high political
transaction costs, even if NIE would consider these ‘inefficient’.

Activity 3
Do you agree with Khan that what matters most when trying to explain development
success or failure is ‘the balance of power’ in societies? Write a 100-word answer,
supplying evidence from at least one specific country to back up your argument. If
you want to take this further, read the Khan article. His arguments are complex and
challenging, so do not worry if you feel by the end if you have not understood everything.
Try to make as much sense of it as you can and then move on!

Khan, amongst other things, is challenging the degree to which


institutional change can be managed. In doing so, he points towards
another way in which our thinking about institutions has advanced over
recent decades, which has been in relation to theories of institutional
design. Scholars have debated the degree to which institutions emerge
or change accidentally, through evolution or through ‘intentional
intervention’ (leading to both intended and unintended consequences).
While there is general agreement that a combination of all three factors is
usually at work, there are disagreements over what are the most common
or significant ‘real world’ combinations.
50
Chapter 4: Theories of institutions and civil society

Theorists who have studied the domain of intentional intervention have


been at pains to oppose the ‘myth of the intentional designer’. Goodin
argues: ‘Typically, there is no single design or designer. There are just lots
of localised attempts at partial design cutting across one another…Thus,
even within the realm of our intentional interventions, what we should
be aiming at is not the design of institutions directly. Rather, we should be
aiming at designing schemes for designing institutions – schemes which
will pay due regard to the multiplicity of designers and to the inevitably
cross-cutting nature of their intentional interventions in the design process’
(Goodin, 1998, pp.24–28). This raises important questions about the
extent to which the entire post-1945 ‘development project’ has been based
on a poor understanding of institutional design. Is there still a default
assumption that Design A will produce Action B, leading to Outcome C?
Schaffer has illuminatingly explored what can be seen as a particularly
important dimension of institutional design. This is how organisations
seeking to promote development and their interventions are themselves
designed. He looks at how these organisations, when generating policies,
tend to adopt ways of thinking and operating that can produce only a
limited range of outcomes. A ‘pretendedly non-political’ view of policy
dominates. Processes of design and implementation are often artificially
separated out. If interventions ultimately ‘fail’, policymakers blame those
responsible for implementation, implementers blame those responsible
for design. To resolve internal tensions, ‘forces beyond the control of the
organisation’ are often invoked. Real lessons are all too rarely learnt, even
where there is an official culture of evaluating performance. Organisations
as a whole rarely take responsibility for failure. Schaffer ends with a
plea for development organisations to recognise that what they do is
profoundly political, to recognise that there are always other choices and
to take responsibility for the consequences of their interventions (Schaffer
in Clay and Schaffer, 1984, pp.142–89). Schaffer made his plea over 20
years ago. We leave it to you to reflect on how far it has been heeded.

Founding theories of civil society


As we saw in Chapter 3, the Liberal tradition of thinking about the
state also gave birth to the concept of civil society. Locke was deeply
concerned with how (propertied) men could accept the legitimacy of a
public authority over them. Part of the process of doing so was defining
the boundaries between that authority and society – in other words, how
authority should be limited. Civil society was also explored as an arena
within which the potential threat of a rampant capitalism could be tamed.
In a world dominated by profit, civil society would ensure that selfish
individualism would be translated into the public good and so secure the
freedom of all. For Hegel, the associations of civil society should mediate
between the self-centred individual and the state, which is the highest
ethical universal community. De Tocqueville, writing about American
society, saw civil society as the essential training ground for active political
and public life. Over time, ideas of civil society became increasingly
sharply distinguished from ‘political society’, ‘commercial society’ and the
family.

51
171 Introduction to international development

Box 3
The French theorist and politician Alexis de Tocqueville (1805–59) became a
convinced admirer of associational life following his travels around the United
States. In Democracy in America (1835) he explains why:

‘The most natural privilege of man, next to the right of acting for himself, is that
of combining his exertions with those of his fellow-creatures, and of acting in
common with them. I am therefore led to conclude that the right of association
is almost as inalienable as the right of personal liberty…The greater part of
Europeans look upon an association as a weapon which is to be hastily fashioned,
and immediately tried in the conflict…Such, however, is not the manner in
which the right of association is understood in the United States. In America the
citizens who form the minority associate, in order, in the first place, to show their
numerical strength, and so diminish the moral authority of the majority; and,
in the second place, to stimulate competition, and to discover those arguments
which are most fitted to act upon the majority; for they always entertain hopes
of drawing over their opponents to their own side, and of afterwards disposing
of the supreme power in their name. Political associations in the United States
are therefore peaceable in their intentions, and strictly legal in the means which
they employ; and they assent with perfect truth that they only aim at success by
lawful expedients.’
(Hall and Trentmann (eds) 2005, pp.106–07).

From the start, the idea of civil society as wholly benign and desirable
had its critics. Rousseau noted that out of the associations of men had
come extreme inequality. For him, civil society was the means by which
the wealthy sought to deal with disorder and therefore protect their
privileges. He wrote memorably: ‘The true founder of civil society was the
first man who, having enclosed a piece of land, thought of saying, “This
is mine” and came across people simple enough to believe him’ (Hall and
Trentmann (eds), 2005, p.77).
Marx followed in Rousseau’s footsteps but took his critique much further.
Instead of reconciling selfish individualism with the universal community
of the state, Marx saw civil society as the main site of class power. Civil
society was nothing more than an expression of the social relations of
production within it and, as such, could not be a means through which
individual self-interest and the public good could be reconciled.
As we shall see, Marx’s entirely negative view of civil society has been
modified by later Marxists. But it is important to recognise that he raised
a vital question for those development theorists and practitioners who
are advocates of civil society today. How do you reconcile the inequalities
that arise in market economies with the idea of equality of political
participation inherent in ideas of democracy? Poverty and inequality
inevitably affects the terms upon which an individual is able to engage in
public or political life, potentially reducing ‘citizenship’ to a hollow shell
(Howell and Pearce, 2001, pp.31–33).
Of course, democracy was in short supply around the world between the
early-nineteenth and mid-twentieth century. Civil society gradually became
more inclusive as campaigns for the franchise brought the white working
class and women the vote in advanced capitalist countries and British
dominions such as Canada, Australia and New Zealand. The non-white
subject peoples of the European colonies had to wait until after 1945. But
for many, the main motor for achieving greater inclusion was political
society (parties and the state) rather than civil society. For a long time, the
concept fell into relative disuse.

52
Chapter 4: Theories of institutions and civil society

It did not revive again until the 1970s. However, many of the arguments
that would be deployed to revive it had been articulated long before
by Antonio Gramsci (1891–1937) in the 1920s. Although a Marxist
revolutionary, Gramsci viewed Marx’s interpretation of civil society as
too reductionist. Just as he restored the state to a position of ‘relative
autonomy’ from economy and society, so he restored civil society to a
position of relative autonomy from economy and state. He was above all
concerned to understand why communist revolution had failed to take
place in advanced capitalist countries like Britain and France. For Gramsci,
the capitalist state sustained its hegemony not just through coercion but
also through consent, which it established through the institutions and
associations of civil society. But while civil society was therefore the site
of a particular, more subtle, form of domination, it was also potentially a
terrain where capitalist hegemony could be contested and overthrown.

Activity 4
Antonio Gramsci wrote his Prison Notebooks while jailed by fascist dictator Mussolini.
They were only published after his death.3 Here is a taster: 3
For an excellent edited
collection of Gramsci’s
‘In Russia the state was everything, civil society was primordial and gelatinous; in the Prison Notebooks, see
West, there was a proper relationship between state and civil society, and when the state Nowell-Smith (1973).
trembled a sturdy structure of civil society was at once revealed. The state was only an
outer ditch, behind which there stood a powerful system of fortresses and earthworks…’
(Hall and Trentmann, 2005, p.187).
What do you think Gramsci means by his description of Russian civil society as ‘primordial
and gelatinous’? Do you agree with his suggestion that a state cannot be strong unless
it is backed up by a strong civil society? Are there any implications you can see that arise
out of Gramsci’s ideas for development strategies today? Write short answers to these
three questions.

Theorisations since 1945


Gramsci’s conceptualisation of civil society has proven very attractive
to social movements since the 1970s. However, others have taken more
inspiration from older liberal currents of thought on civil society. There is a
world of difference between those who retain Gramsci’s conviction that the
point of civil society is to replace capitalism and those with more reformist
inclinations who see it as a vehicle for ‘civilising’ or taming capitalism.
For some liberal theorists, civil society was also seen as a means of
replacing communism. Their objective was to bring down communist
dictatorships in the Soviet Union and Eastern Europe, and replace them
with political systems in which individual freedoms were guaranteed.
Some were clear that this could only be achieved if a market economy was
simultaneously introduced. By pushing for an opening up of a ‘civic space’
between the individual and the state, they hoped that the state would
ultimately have to give ground on political liberty.
Radical reformists and liberals committed to a progressive politics have
found some common ground during the post-1945 period through
approaches that see ‘civil society as an arena for public deliberation,
rational dialogue and the exercise of ‘active citizenship’ in pursuit of the
common interest – in other words, as the ‘public sphere’ (Edwards, 2004:
p.viii). The most important exponent of this conception of civil society has
been Jürgen Habermas. For Habermas, a healthy civil society is one that
is ‘steered by its members through shared meanings’ that are constructed
democratically through the communications structures of the public sphere
– for example, the media (Hall and Trentmann, 2005, pp.222–26).
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171 Introduction to international development

Processes of globalisation – above all, the reduced power of the national


state and the rise of new information technologies such as the internet –
have led some analysts, such as John Keane, to argue that the conditions are
being created in the present day for the emergence of a ‘global civil society’.

Box 4
John Keane defines global civil society as ‘the contemporary thickening and
stretching of networks of socio-economic institutions across borders to all
four corners of the earth, such that the peaceful or ‘civil’ effects of these non-
governmental networks are felt everywhere, here and there, far and wide, to and
from local levels, through wider regions to the planetary level itself’.

Keane believes that we must move away from a state-centred approach to


civil society, in which it is always seen through its relationship to the state.
As the importance of the state is reduced, civil society is slipping its ‘national
moorings’ and operating less and less with reference to it. As structures and
processes of global governance develop, for example, through the UN, global civil
society will have a major role to play in democratising them. Indeed, until that
democratisation is complete, global civil society ‘is a wish that has not yet been
granted to the world’.

Keane does not see the victory of global civil society as inevitable. He writes: ‘It
is not only that the plural freedoms of global civil society are severely threatened
by a political underworld of secretive, unelected, publicly unaccountable
institutions, symbolised by bodies like the IMF and the WTO. The problem
of hubris is internal to global civil society as well: just like the domestic civil
societies that form its habitats, global civil society produces concentrations of
arrogant power that threatens its own openness and pluralism’ (all quotes from
Hall and Trentmann, 2005, pp.287–92).

With even a prominent supporter warning against hubris, it is hardly


surprising that there are many scholars and activists who are highly dubious
about the emancipatory claims often made for civil society. Such sceptics
argue that contemporary social movements should refuse to be labelled as
part of civil society precisely because it is a force for depoliticisation and
demobilisation rather than social justice. Some theorists, many of them
influenced by postmodernism, have expressed a straightforwardly hostile
attitude to the very idea of civil society, seeing it as the expression of a
continuing Western imperial hegemony over the postcolonial world.

Activity 5
Partha Chatterjee has written: ‘The institutions of civil society, in the forms in which they
had arisen in Europe…made their appearance in the colonies precisely to create a public
domain for the legitimation of colonial rule. This process was, however, fundamentally
limited by the fact that the colonial state could confer only subjecthood on the colonised;
it could not grant them citizenship…The crucial break in the history of anticolonial
nationalism comes when the colonised refuse to accept membership of this civil society
of subjects. They construct their national identities within a different narrative, that of the
community’ (Chatterjee, 1993, pp.237–39).
Do you agree with Chatterjee when he advocates the scrapping of the idea of civil society
in former European colonies and its replacement with the idea of community?
If so, why? Write a 200-word answer, drawing on the experience of your own country
or region where appropriate.

Development policymakers and practitioners have responded to the revival


of the idea of civil society since the 1970s in a range of ways. The more
54
Chapter 4: Theories of institutions and civil society

optimistic of them have viewed civil society as a counterweight to vested


interests, promoting accountability between state, market and society as a
whole. It provides services and helps to build livelihoods where states and
markets are weak and promotes trust and cooperation. It teaches people
the skills of citizenship and encourages transparency. It is the predominant
means, in its many forms, through which ordinary people make their
voice heard. It is a crucial source of ‘people power’ where societies are
seeking to throw off authoritarianism and replace it with democracy.
Donor governments and multilateral institutions have viewed these
characteristics as the distinctive contribution of civil society to the quest
for ‘good governance’.
It may turn out that the 1990s were a high watermark of enthusiasm
for the idea of civil society. Even at the height of its popularity, many
expressed doubts about it. In addition to those sceptics already described,
others explored how far the survival or renewal of ethnic, clan, religious
or communal loyalties hindered the emergence of a strong civil society
(Berman, 1998). Scholars have also argued that the historical evidence
shows that political parties and the state are far more dynamic sources
of poverty reduction than is civil society. They have also pointed to the
fact that civil society in the Third World has often been coopted by elites
or has largely been the preferred arena for those parts of the elite that
find themselves excluded from power at any particular time. Others have
wondered whether the creation of developmental states might require
a period of active state predominance over civil society (Wade, 1990).
Finally, sceptics have argued that civil society has sometimes allowed itself
to become a substitute for the state. Donor governments and multilateral
institutions have turned increasingly to civil society for the delivery of
services for a mixture of ideological and pragmatic reasons (Hanlon,
1991). Yet, despite these doubts, it is the relative eclipse of the idea of civil
society during much of the twentieth century, rather than its recent re-
emergence, that appears aberrational to most scholars today.

Conclusion
Perhaps the great unresolved question in theorising about institutions
and civil society is over where each should begin and end. Think back to
North’s definition of institutions. It appears to include virtually everything.
Certainly, it covers the ‘holy trinity’ of state, market and society. As
for civil society, recent debates have largely reproduced older debates
about it. It is as contested as ever. Edwards claims that we continue to
confuse three ways of understanding civil society: analytically, as forms of
associational life; normatively, as a model of the kind of society we wish to
see; and as the ‘public sphere’ (Edwards, 2004, p.vii). Confusion between
the analytical and normative also applies sometimes to the concept
of institution. It is remarkable how often behind apparently objective
phrases such as ‘efficient institutions’ or ‘a healthy civil society’ lie implicit
assumptions about what ‘good institutions’ or ‘the good society’ should be.
The most common example of this is the assumption that development
and democracy, that most normative of concepts, go together when the
evidence for this is weak.
Dispute or confusion over the meaning and significance of institutions
and civil society may not be ideal. But it is infinitely preferable to a
false consensus that may do more harm than good. Neera Chandhoke
has written persuasively about how concepts such as civil society
become ‘flattened out’ once they are taken into the policy domain. She

55
171 Introduction to international development

writes provocatively that ‘[T]oday wherever and whenever civil society


is invoked, most of us, submerged as we are in a mass of tiresomely
consensual acclaim, are overcome by a sleepy ennui’. Chandhoke ascribes
this process to a post-cold war ‘liberal triumphalism’ which has yoked
the concept to ‘the project of minimalist democracy’ – that is, an idea
of democracy as periodic elections and not much more. She concludes:
‘people struggling against authoritarian regimes demanded civil society,
what they got were NGOs!’ (Chandhoke, 2003). 4
We do not have the
space here to discuss
Somebody might adapt this phrase with reference to institutions to say
social capital in detail.
that people struggling to overcome poverty demanded deep-rooted change However, it is important
– what they got was public sector reform. Chandhoke argues that the to note that it overlaps
flattening out of concepts derives from the need of donors and national extensively with
elites to depoliticise (or, to be more precise, suppress radical political ideas concepts of institution
about) development. A similar case has been made against ‘social capital’, and civil society. Its
primary theorist and
which has become an equally popular concept amongst donors in recent
advocate is Robert
years (Harriss, 2002).4 Putnam, who has
We should not be naïve. Some simplification of complex theories of defined it as ‘features
of social organisation,
institutions and civil society is inevitable in policy and practical contexts.
such as trust, norms,
And as we have seen, something will usually be lost in processes of and networks, that can
‘institutional design’ – not to mention their implementation. The key is to improve the efficiency
be aware of this ‘leakage’ and devise strategies that seek to mitigate its of society by facilitating
impact. coordinated actions’.
He states: ‘voluntary
So, how important are institutions or civil society for development? cooperation is easier in
With regard to institutions, the answer might seem obvious. They are a community that has
a quintessential product of human society. Their ‘informal constraints’ inherited a substantial
(conventions, norms of behaviour and self-imposed codes of conduct), stock of social capital,
in the form of norms of
to use North’s terminology, are particularly crucial to explaining why
reciprocity and networks
‘formal rules’ so often do not work. Hardoy and Satterthwaite put it well: of civic engagement’
‘There must be something wrong with a law or code if it is broken daily (Putnam, 1993: 167).
by so many people as they go about their daily lives’ (1989: p.31). These
constraints also help to explain why changes in the ‘formal rules’, even
when they do happen, often prove to be less transformative than their
advocates expect or produce unintended consequences.5 In our view, it is
5
One powerful example
is titling schemes
through their explorations of the complex relationship between the formal
to establish legally-
and informal realms that institutionalisms – old and new – make their recognised private
biggest contribution to our understanding of development issues. property rights. Their
With regard to civil society, the answer again might seem obvious – mainly gender-blindness has
often led to women
perhaps because the power of its normative claims. After all, how many of
losing control over land.
us would enthusiastically choose to live in a society where there was little
independent associational life or the absence of an active ‘public sphere’?
Yet the historical evidence for a general causal link between a strong,
autonomous, civil society and getting development started is weak. It
is drawn mainly from an idealised interpretation of the experience of some
(but far from all) European countries. For late-developers, the evidence
suggests that the state has tended to be the dominant driver of change in
the initial stages of development. As social and economic development
progresses, a strong, autonomous civil society may then emerge – and,
6
Marx’s original words
indeed, play a crucial role in deepening and sustaining development.
are: ‘Hegel remarks
Of course, the future may well be different from the past. After all, despite somewhere that all
Marx’s famous claim to the contrary in his 1852 The 18th Brumaire of great, world-historical
facts and personages
Louis Bonapart, another lesson from history is that humanity is not always
occur, as it were, twice.
destined to repeat itself – nor need the outcomes be entirely tragic or He has forgotten to
farcical.6 add: the first time as
tragedy, the second time
as farce.’
56
Chapter 4: Theories of institutions and civil society

Reminder of your learning outcomes


Having completed this chapter, and the Essential readings and activities,
you should be able to:
• describe and evaluate the main features of the founding theories of
institutions and civil society
• describe and evaluate some of the ways in which these founding
theories have been adapted or extended since 1945
• use the theoretical insights gained to reflect back upon and review our
discussions about ideas of development
• anticipate some of the ways in which these theoretical insights will
assist you to make sense of later chapters of the course.

Sample examination questions


1. ‘ Institutional theory is so broad in its coverage that ultimately its value
for development policymakers is limited.’ Discuss.
2. S
hould donor governments and multilateral agencies prioritise
building a strong civil society in countries where states are corrupt and
ineffective?

57
171 Introduction to international development

Notes

58
Chapter 5: The origins of capitalism and the rise of the West

Chapter 5: The origins of capitalism and


the rise of the West

Essential reading
Desai and Potter (2008) Chapters 2.3 to 2.8.

Further reading
Davis, M. Late Victorian Holocausts. El Niño Famines and the Making of the Third
World. (London: Verso Books, 2001) [ISBN 1859847390] Chapters 1 and 9.
Fukuyama, F. (ed.) (2008) Falling Behind: Explaining the Development Gap
Between Latin America and the United States (Oxford: Oxford University
Press) [ISBN 0195368827]
Harris, N. National Liberation. (London: Penguin Books, 1992) [ISBN
0140125604] Chapter 11.
Landes, D. The Wealth and Poverty of Nations: why Some are so Rich and Some
are so Poor. (London: Abacus, 1999) [ISBN 0349111669] Chapters 3, 4,
12–15 and 29.
Lange, M. and J. Mahoney et al. ‘Colonialism and development: a comparative
analysis of Spanish and British colonies’, American Journal of Sociology
111(5) pp.1412–62.
Moore, B. Social Origins of Dictatorship and Democracy. (London: Penguin
Books, 1979) [ISBN 0140550860] See especially Chapter 3.
Morgan, K. Slavery, Atlantic Trade and the British Economy, 1660–1800.
(New York: Cambridge University Press, 2001) [ISBN 0521588146].
Phillips, A. The Enigma of Colonialism: British Policy in West Africa. (London:
James Currey, 1988) [ISBN 085255026X] Chapters 1 and 8.
Porter, A. European Imperialism, 1860–1914. (Basingstoke: Macmillan, 1994)
[ISBN 0333481046].
Tomlinson, B.R. ‘Economics and Empire: The Periphery and the Imperial
Economy’ in Porter, A. (ed.) The Oxford History of the British Empire.
(Oxford: Oxford University Press, 1999) Vol. 3 [ISBN 0199246785].

Challenging reading
Austin, G. The ‘reversal of fortune’ thesis and the compression of history:
perspectives from African and comparative economic history. Journal of
international development, 20(8) 2008, pp.996–1027.
Brenner, R. ‘The Origins of Capitalist Development: A Critique of Neo-Smithian
Marxism’, New Left Review 104, 1977, pp.25–92.
Burnside, M. and R. Robotham Spirits of the Passage: The Transatlantic Slave
Trade in the 17th Century. (New York: Simon and Schuster, 1997)
[ISBN 0684818191]
Hobsbawm, E. and T.O. Ranger (eds) The Invention of Tradition. (Cambridge:
Cambridge University Press, 1992) [ISBN 051437733].
Jenkins, R. ‘Where development meets history’, Commonwealth and
Comparative Politics 44 (1) 2006, pp.2–15.
Nunn, N. ‘The Importance of History for Economic Development’, Annual
Review of Economics, Vol. 1, 2009, pp.65-92.
Vail, L. ‘Mozambique’s Chartered Companies: The Rule of the Feeble’, Journal of
African History XVII, 1976.

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171 Introduction to international development

Washbrook, D. ‘Progress and Problems: South Asian Economic and Social


History, c.1720–1860’, Modern Asian Studies 22(1) 1988, pp.57–96.
Williams, R. Keywords. A Vocabulary of Culture and Society. (London: Fontana
Books, 1976) [ISBN 0006334792].

Classic texts
Bloch, M. Feudal Society. (London: Routledge and Kegan Paul, 1965) two
volumes [ISBN 0710046464 and 0710046472].
Gerschenkron, A. Economic Backwardness in Historical Perspective. A Book
of Essays. (Cambridge, Mass.: Harvard University Press, 1962) [ISBN
0674226003] Chapter 1.
Hobsbawm, E. Industry and Empire. (London: Pelican Books, 1980) [ISBN
0140203384].
Keynes, J.M. The Economic Consequences of the Peace. (London: Penguin Books,
1988) [ISBN 0140113800].

Aim and learning outcomes


The aim of this chapter is to provide a historical background to the state of
international development today by exploring the origins of capitalism and
the rise of the West.
By the end of this chapter and having completed the Essential readings
and activities, you should be able to:
• describe and evaluate the main features of intellectual debates about
the transition from feudalism to capitalism in Europe between the
sixteenth and early-twentieth centuries
• describe and evaluate the variety of pre-capitalist economic and
political arrangements that prevailed beyond Europe and the impact of
the West upon these arrangements over the same period
• describe and evaluate the motivation behind and impact of European
imperialism in its subject territories from the late-nineteenth century
through to the Second World War
• on the basis of the account provided in this chapter, place our earlier
discussions of ideas of development (especially Chapter 2) and
theories of development (especially Chapters 3 and 4) in a firmer
historical context.

Introduction
This chapter explores the origins of capitalism and the rise of ‘the West’
between 1600 and 1945. We examine why Great Britain led the way in
terms of capitalist development and how other European countries then
followed. As capitalism became a global force, we look at why and how
Europeans moved beyond their own borders, creating a world economic
system largely based on the suppression of pre-existing economic and
political arrangements in the non-European world and ultimately giving
birth to a new age of imperialism. In doing so, we look at the impact of
European imperialism on its colonies in Africa and Asia between the late-
nineteenth century and the Second World War.

60
Chapter 5: The origins of capitalism and the rise of the West

Box 1
What, or who, is ‘the West’?

In a way, this is jumping ahead to the end of our story. But it is such a commonly
used shorthand term that we think it worthwhile to try to clarify its meaning for
our purposes from the start…

David Landes, in his hugely influential The Wealth and Poverty of Nations (1999,
pp.xx–xxi), simply defines ‘the West’ as Europe. During the cold war (1947–90),
he acknowledges that it was a case of ‘East versus West’. Of course, Eastern
Europe was then part of the Communist bloc, which does not seem consistent
with Landes’ equation of the West and Europe as one and the same. He also
describes the world today as being structured on the lines of ‘the West and the
Rest’, preferring the latter term to ‘Third World’ and the entire phrase to another
popular term today, ‘North and South’. He also claims that ‘the West’ has been the
‘prime mover of development and modernity’ over the past 1,000 years.

‘The West’ lumps together countries with vastly different historical backgrounds.
Until relatively recently, some of them – for example, England and France – were
mortal enemies. However, despite these misgivings, we have retained the term. Our
preferred use of ‘the West’ is as comprising the bloc of advanced capitalist countries
that operated in alliance in the context of the cold war against the Communist bloc
between 1947 and 1990. This chapter is about the historical processes and events
that led to its emergence as a self-conscious political grouping.

Activity 1
Do you agree with Landes’ claim that the West has been the ‘prime mover’ of development
and modernity over the past 1,000 years? Write a paragraph responding to Landes.

Why Europe?
The origins of capitalism
Between the sixteenth and early-twentieth centuries, with Britain leading
the way, Europe underwent a seismic transition from feudalism to
capitalism. However, why it happened remains hotly contested.

Box 2
Working definitions of feudalism and capitalism:

•• Feudalism
Finding a simple working definition of feudalism is not easy. The word is
derived from the Latin feodalis, meaning ‘fief’, which means land held by a
subject from a lord in exchange for military service (Bloch, 1965, p.xviii).
Others have used the term much more loosely to refer to all the social,
political and economic arrangements (including absolute monarchy) that
dominated ‘pre-capitalist’ or ‘pre-modern’ European societies.

•• Capitalism
This is another much debated term. For our immediate purposes, hopefully
the following definition will suffice: Capitalism is an economic and social
system in which power is predominantly held by those persons or groups
who are able to generate profits from capital (a fund of money) through their
ownership of the means of production (land, factories and technology). For
Marxists, the main source of profit is the exploitation of the wage-labour of
the working class, or proletariat, by the class of traders, entrepreneurs and
employers that constitute the bourgeoisie (Williams, 1976, pp.42–44).

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171 Introduction to international development

This why question contains within it other unavoidable questions:


• why was Britain first and others later?
• why did different kinds of capitalism emerge in those
countries that came after Britain?
Hopefully, a moment’s reflection will be enough for you to realise how
important each of these questions remain for international development
today.
We don’t have space to explore every aspect of what has become known
as the transition debate. Instead, we propose to illuminate some of its
main features by comparing two widely divergent attempts to answer the
questions identified above.
One is the account of the transition from feudalism to capitalism in Europe
of the Marxist scholar Robert Brenner, which he produced during the
1970s and 1980s; the other is the account of David Landes, who we have
already encountered.
Robert Brenner (1977) argues that the main factor in determining
when and how European countries made the transition from feudalism
to capitalism was class struggle. The transition began, according to
Brenner, with the breaking of serfdom in Western Europe. Serfdom was
a system whereby a person was bound by personal ties of dependence
and obligation to a feudal master or lord, on whose land or in whose
armies you were required to toil, receiving a share of what was produced
or seized at the discretion of that master or lord. Serfdom only stopped
short of being slavery by virtue of the fact that the master or lord also had
codified obligations towards his serfs.
For Brenner, serfdom in Western Europe was broken because peasants
successfully resisted the attempts of feudal lords to reimpose it in the
fourteenth and fifteenth centuries following the Black Death. While
the spread of bubonic plague throughout Europe had killed millions, it
had also created conditions of labour scarcity. The peasantry in Western
Europe used this new context to loosen the bonds of control. By contrast,
in Eastern Europe, the peasantry was unable to free itself from the
constraints of serfdom during this period.
Brenner argues that, with the breaking of serfdom, all of Western Europe
achieved this essential precondition for a transition from feudalism
to capitalism. It created the basis for this part of Europe to engage in
varieties of mercantile capitalism – that is the accumulation of capital
by individuals, families and states predominantly through trade. However,
at this point, trajectories again divide. In his view, Britain was the first to
cross the next threshold into industrial capitalism because continuing
class struggle from the sixteenth century onwards produced an agrarian
economy based on tenant farmers and wage labourers. Tenant
farmers in Britain had to specialise and introduce new methods in order
to be able to make enough profit to pay the rent to rural landowners
and so retain their leasehold on the land. Peasants that were unable to
become tenant farmers over time were ultimately unable to resist their
expropriation from the land and were therefore forced into ‘free wage-
labour’ as landowners searched for greater agricultural productivity. In this
situation, Britain was able to support a much increased proportion of the
population off the land, especially in manufacturing as it began to develop
(pp.75–77).

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Chapter 5: The origins of capitalism and the rise of the West

Brenner continues:
‘At the same time, agricultural demand made possible the
emergence of a growing home market, not only for industrial
goods and products for general consumption, but also for
agricultural means of production. The latter, in turn, tended
to further increase agricultural productivity…so while much
of European export industry declined during the seventeenth
century as a result of its dependence upon pre-capitalist
agricultural “hinterlands”…English industry continued to grow
because of its construction on increasingly capitalist agricultural
foundations. It was the developing home market which
provided, by the end of the eighteenth century, an indispensable
foundation for the industrial revolution’ (p.77).

Brenner characterises Western European countries where the peasantry


remained powerful as countries where there was less pressure or incentive
to innovate. Smallholdings, in his view, made it difficult to innovate. The
state depended heavily upon the taxation of the peasantry and was more
likely to protect the peasantry from attempts to undermine it than support
such efforts. As for those countries in Eastern Europe where serfdom
had survived, ruling classes were able to exploit their continuing power
to extract the resources that they needed to sustain themselves. In such
circumstances, there was even less pressure or incentive to innovate.
Brenner does not deny the importance of other factors in understanding
the transition from feudalism to capitalism in Europe, such as the
growth of towns, the emergence of a world market or new technological
developments. However, he is looking for what Marxists sometimes call
the ‘prime mover’ of change – and finds it in class struggle.1 1
Brenner has been
accused by other
In making his argument, Brenner raises the crucial question of how far Marxists of underplaying
industrial capitalism is compatible with the existence of a large peasantry. other factors. For
Indeed, what is to be done about the peasantry has long been a pivotal example, while his
issue for theorists and practitioners of development. Brenner is fully emphasis on class
aware that the emergence of capitalism was bound eventually to have struggle corresponds to
Marx’s conception of the
a global impact. But, for him, its precise impact would depend on the
‘relations of production’,
shifting balance of forces between classes in a particular country or region. they ask why he does
Accordingly the impact might range from: not give equal weight to
‘1. the further erection of capitalist class relations; 2. merely Marx’s conception of the
‘forces of production’ –
the interconnection of capitalist with pre-capitalist forms, and
or in layperson’s terms,
indeed the strengthening of the latter; or 3. the transformation new technological
of pre-capitalist class relations, but without their substitution by developments.
fully capitalist social-productive relations of free wage labour, in
which labour power is a commodity’ (p.27).

So for Brenner, it is perfectly possible that different kinds of capitalism


will continue to exist or come into being during the age of industrial
capitalism. The destruction of the peasantry in Britain was an essential
precondition for the first transition to industrial capitalism but did not
necessarily imply its global extinction. As we shall see, this is an important
observation not just in relation to other European countries that sought to
follow Britain, but also in relation to the non-European world.
Landes’ account of the origins of capitalism in Western Europe is very
different from that of Brenner and can be summed up more briefly. He is
multi-causal in his approach. He identifies the following factors as vital in
determining where industrial capitalism first emerged:

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171 Introduction to international development

• the degree to which political rule was despotic


• the extent of growth of towns and cities
• how far the secular and religious realms became separate
• the extent of specialisation and divisions of labour in economic activity
• the scope for independent intellectual inquiry and the use of scientific
method
• the degree to which there was a permissive environment for invention
and innovation
• how far property rights, personal liberty and rights of contract were
secure.
Landes’ approach is summed up best by his claim that ‘[I]if we learn
anything from the history of economic development, it is that culture
makes all the difference’ (Landes, 1999, p.516). Landes draws heavily
upon the work of German sociologist Max Weber, one of whose main
contributions to the debate about the origins of capitalism is his 1905 essay
on ‘the protestant work ethic and the spirit of capitalism’. For Weber (and
Landes), Protestantism cultivated an ethic of everyday behaviour involving
‘hard work, honesty, seriousness, the thrifty use of money and time (both
lent us by God)’ (Landes, p.175). The absence of this work ethic was not a
fatal impediment to economic development, but could retard it seriously.
Catholicism, in general, was ‘backward’ (Landes, p.179). For Landes,
Britain was first to make the transition to industrial capitalism because it
enjoyed the most optimal combination of the factors listed above.

Activity 2
What are the strengths and weaknesses of these contrasting approaches to the origins
of capitalism? Write a 300-word answer. Your answer will be strengthened if you have
read the Brenner article and Chapters 3–4 and 13–15 of Landes. The Brenner article is a
difficult read but we think that it is worth the effort. We have already described his main
arguments in considerable detail to help you make sense of them. Landes is an altogether
easier read.

The first followers


For Landes, the industrial revolution in Britain was founded on textiles, the
factory system, the steam engine and an effective state. France, Germany
and the United States of America (USA) were among the first countries to
try to follow Britain. Tsarist Russia was also a member of this group but
ultimately failed to complete the transition to industrial capitalism.
Given that Britain had stolen a march on them, all began at a distinct
disadvantage. A range of responses emerged to try to overcome the
disadvantages of late development. Gershenkron (1962) argued that
all of these countries had to find ‘functional substitutes’ for their lack
of resources – above all, capital – in order to kick-start economic
development. These took a variety of forms, but the most important
common substitute for lack of resources was state co-ordination and
leadership. Other important substitutes were private banks, industrial
cartels and mobilising ideologies such as nationalism. All the followers,
without exception, imposed high levels of industrial protection on
their infant industries. Crucially, colonial possessions could also act as
‘functional substitutes’.
These first followers were faced with the unavoidable challenge of creating
a sufficient industrial workforce in contexts where the peasantry remained

64
Chapter 5: The origins of capitalism and the rise of the West

wholly or partially intact. Over time increasing numbers of people did


move fully into wage-labour in these countries. In the US, the tensions
between a ‘classical capitalist’ set of class relations in the north and west
and a slavery-based set of class relations in the south was resolved only
through civil war and the defeat of the south. Barrington Moore has
argued that this victory created the basis for the domination of industrial
capitalism over agrarian capitalism in the US in the long-term. The end
of slavery in the south was a by-product of this struggle. In Tsarist Russia,
the end of serfdom by royal decree in the 1861, and the setting in motion
of a struggle to ‘catch-up’, unleashed social forces that eventually led to a
socialist revolution in 1917. Barrington Moore (1979, p.153) speculates
that had the south won the civil war in the US, something similar might
have happened there: instead, it was the location of the ‘the last capitalist
revolution’. Gershenkron argues that the experience of Tsarist Russia
suggests that a ‘big bang’ approach to change is better than a gradualist
one. Gradualism simply allows more time for revolutionary challenges to
emerge from amongst the ‘losers’.

Activity 3
Read either Gershenkron (1962) or Chapter 3 of Barrington Moore (1979) and make
some notes.

The experiences of both the USA and Russia remind us of the fact that
the changes unleashed by capitalism were revolutionary in their scope
and impact. Its emergence was accompanied by dramatic processes of
state formation and collapse, many of them ushered in through war.
For example, German unification was completed in 1871, following
Prussia’s victory in a war with France in the previous year and a decade
of extraordinary industrial growth. France’s defeat in that war brought it
close to another revolution until the defeat of the Paris Commune.
By the early-twentieth century, a second wave of followers was trying
to ‘catch-up’ with Britain and the first followers. They included the
Scandinavian countries and Japan – the first non-European country on the
scene. Most adopted strategies similar to those that had been employed
in the first wave of followers while adapting them to their own political,
economic and cultural contexts. It is important to note that being a
follower was not entirely without its advantages. Britain, as the pioneering
country, inevitably began to be hamstrung by vested interests and policy
myopia. This was despite the fact that many new inventions continued 2
Scientific management
was a theory elaborated
to be British in origin. Germany and the US were able to close the gap
by F.W. Taylor in his
significantly during the ‘second industrial revolution’, which was based on 1911 The Principles of
iron, steel, chemicals and electric power, and by 1914 had either drawn Scientific Management.
level with Britain or surpassed it in terms of economic production. For He argued that it was
example, by 1913, Britain’s share of world output in the chemical industry possible to increase
stood at 11 per cent, compared with 34 per cent on the part of the US and labour productivity
by breaking down
24 per cent on the part of Germany (Hobsbawm, 1980: p.180). Britain
production processes
was being increasingly sustained by its dominance of international trade in into their component
what was at the time an unparalleled epoch of economic globalisation. The parts and organising
First World War (1914–18) sounded the death-knell not just for millions of fragmented work tasks
lives but also for British global economic pre-eminence. according to rigorous
time and motion studies.
During the period 1918–39, the US became the dominant economic power Such methods would
in the world. Its domination was based on its wholesale adoption of mass also reduce the power
production techniques (as exemplified by the Ford Motor Company) of skilled workers or
and ‘scientific management’, combined with its massive home market.2 artisans, and lower wage
costs.
However, it was also a time of great economic and political turbulence.
65
171 Introduction to international development

Attempts to reconstruct an internationally open trading system had only


limited success. Post-revolutionary Russia, renamed the Soviet Union,
entirely abandoned the market in the mid-1920s in favour of state
planning, seeking a ‘socialist road to development’ through the brutal
collectivisation of agriculture (involving the virtual liquidation of the
peasantry) and breakneck industrialisation. Germany’s defeat in the First
World War set it back economically and deprived it of its few colonies in
Africa. The peace settlement rendered it a pariah state which ultimately fell
into the hands of a National Socialist (Nazi) Party bent on revenge for past
humiliations and a resurgence of German economic and political power in
the world. Right-wing authoritarianism in the form of fascism also came to
dominate politics in countries such as Italy, Spain, Portugal and Japan.
The trigger for the Second World War was the Great Depression, which
followed the New York stock market collapse in 1929. The ‘great crash’
propelled millions of workers throughout the capitalist world out of
employment and back into poverty and hunger. Marxists predicted
imminent revolution in the context of this ‘crisis of capitalism’ but the most
significant political result was the rise of virulent fascism and militarism.
In addition to Germany, Japan and Italy followed this path. The US and
Britain survived the Great Depression as capitalist democracies. However,
whatever their political colour, all pursued degrees of demand-led growth
through increased public investment from the early-1930s as their strategy
for economic recovery. But the ‘political consequences of the peace’, to
adapt a famous phrase of the British economist John Maynard Keynes,
could not in the end be avoided.3 It was the hard-won victory of the Allies 3
Keynes wrote a famous
over fascism during the Second World War and the rapid onset of a new pamphlet criticising
the punitive terms of
‘cold war’ with a Communist bloc led by the Soviet Union that created the
the Versailles peace
basis for a new collective political identity: ‘the West’ – an alliance of the settlement after the first
non-communist world dominated by the advanced capitalist countries of world war called ‘The
Western Europe and the US. economic consequences
of the peace’, in
which he warned that
The non-European world and early European imperialism destroying the German
economy would rebound
The origins of European expansionism later on the Allies.

Europeans initially encountered the rest of the world predominantly


through trade during the age of mercantilism (the fifteenth to the
eighteenth century) that predated the rise of industrial capitalism.
England, France, Holland, Portugal and Spain competed with each
other to dominate key trade routes in minerals, luxury goods and slaves.
However, this competition and the desire to control key resources at times
led these powers to seek formal control of territories – for example, Spain
and Portugal in Latin America – so creating the first European empires.
This process rarely took place without bloody resistance on the part of
the indigenous peoples and sometimes involved the destruction of pre-
existing states or empires. In the case of Spain, Cortés and his soldiers
brought down the Inca Empire in the early-sixteenth century. The victories
of Europeans were based on naval power and superior military technology,
both of which had been originally stimulated by mercantilist competition
between the European powers themselves. Very rarely did European
victories reflect a generally higher level of economic development than
those they had conquered. Indeed, where European settlers followed their
armies it was often in the hope of escaping poverty at home.
At the same time, where trade could be dominated without formal
territorial control, the European powers were often content during this
period to operate on this basis. Two different forms of European empire
66
Chapter 5: The origins of capitalism and the rise of the West

emerged: formal empire, in which territory was formally annexed (also


called colonialism or settler-colonialism); and informal empire, in
which domination over economies and societies was exercised without
annexation – a much cheaper option. Both forms are covered by the
catch-all term ‘Imperialism’. Settler-colonialism was by far the most brutal
and intrusive of these imperial intrusions. In Australia and New Zealand,
British rule led to the virtual annihilation of the indigenous aboriginal
peoples, who were viewed not simply as inferior but as barely human,
in the eighteenth and early-nineteenth centuries. However, the most
destructive impact of European imperialism during this period did not
automatically require territorial control or European settlement. This was
the transatlantic slave trade between the late-fifteenth century and the
early-nineteenth century, whose appalling cost in terms of both lives and
legacies continues to be felt today.4 4
For a good recent
survey of the impact
Indigenous capitalisms? of the slave trade on
Britain, see Morgan
The outcomes of these increasingly unequal encounters between (2001). On the costs
Europeans and the non-European world did not, however, depend solely in terms of lives and
upon the motivations and desires of the former. The responses of the legacies, see Burnside
latter, and the nature of the economies and societies that already existed, and Robotham (1997).
profoundly shaped outcomes too. The non-European world ranged from
autonomous communities of people operating on the basis of subsistence
to states and empires in which ruling elites exacted tribute and taxed
long-distance trading.
Subsistence-based communities in the Americas, Africa and Asia did
not involve pressure to maximise production beyond what would be
needed for everyday life and often strongly depended both socially and
economically upon kinship (extended family relationships). Men tended
to engage in hunting while women did most of the heavy agricultural
work. Politics was less about centralised power – although communities
usually lived under a chief – and more about the management of
relationships. Power relations tended to privilege the old over the young
and men over women. Beliefs and rituals were often rooted in the spirit
world of the ancestors.
States and empires were usually an agglomeration into a single political
unit, ruled by a king, of a large number of subsistence communities.
Certain communities sometimes found themselves enslaved and in general
the expansion of political and economic scale brought with it greater
inequality and a waning in the previously overwhelming power of kinship.
The development of centralised political authority and the requirements
of tribute and taxation encouraged efforts to increase economic activities
so that they produced a surplus. The growth of crafts and markets was
partly a by-product of this development. With the exception of the Islamic
empires of the Middle East, North Africa and India, military and maritime
capacities remained low. On occasions, a state religion grew up alongside,
or even supplanted, ancestor worship.
Scholars have usually described all of these political, social and economic
forms of life in the non-European world as ‘pre-capitalist societies’. They
have done so because, as had been the case in feudal Europe, in none of
them was production for sale in order to accumulate wealth the dominant
mode of economic organisation. Nonetheless, there has been a passionate
debate over whether some of these societies might, if they had not been
subject to European interference, have made a relatively independent
transition – that is, a transition which is generated predominantly by their
own initiative and resources – to capitalism.

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171 Introduction to international development

For example, David Washbrook (1988) argues that South Asia (which
includes India, Pakistan, Bangladesh and Sri Lanka, as they are known
today) was developing its own indigenous capitalism by the eighteenth
century. By this time, it possessed upwards of 25 per cent of the world’s
total manufacturing capacity.
‘Marketing systems, which once were deemed disorganised
and peddler-based, have now been shown to have been highly
organised and price responsive…Discrete and alienable property
rights, once assumed barely to have existed in South Asia,
have been traced back…to the early middle ages and a brisk
market in such rights would seem to have existed in the late-
seventeenth and early-eighteenth centuries.’ (pp.60–62)
Washbrook goes on to challenge stereotypes of an agrarian economy in
South Asia that was stuck within a static subsistence framework and shows
that there was considerable internal trade within the region. Revenue
extraction by central authorities was not extreme and some of it was used
productively in public works.
Whether you agree with Washbrook or not depends, of course, on what
you consider the minimum conditions to be for considering a social and
economic system as ‘capitalist’. However, he goes on to argue that, by
the early nineteenth century, South Asia’s potential for a non-dependent
capitalism had been quashed. It was not until the early-twentieth century
that the first relatively independent capitalist economy in the non-
European world was to emerge – Japan.

Box 3
Contrasting Europe and the Tropics:
Percentage share of world manufacturing output, 1750–1900

1750 1800 1830 1860 1900


Europe 23.1 28.0 34.1 53.6 63.0
UK 1.9 4.3 9.5 19.9 18.5
Tropics 76.8 71.2 63.3 39.2 13.4
China 32.8 33.3 29.8 19.7 6.2
India 24.5 19.7 17.6 8.6 1.7
Source: Tomlinson (1999, p.69)

Activity 4
Do you agree that there existed the potential for autonomous capitalist development in
the non-European world? If so, why do you think that it never materialised? Write a 100-
word answer to these questions. If you want to take this further, read Washbrook’s article.

The age of Empire


A new map of the world
As European capitalist development moved into the industrial phase –
that is, from the late-eighteenth century onwards – a new structure of
economic relationships with the non-European world gradually became
entrenched. Above all, it was required to supply the essential raw
materials without which Western Europe’s industries could not function.
It was required to buy its manufactured goods. It was required to become
a site of investment of wealth accumulated through industrial expansion.

68
Chapter 5: The origins of capitalism and the rise of the West

And it was required to absorb further waves of settlers. To a greater extent


than before, it now became essential to undermine and often even destroy
existing economic and social arrangements in the non-European world.
This and the desire to prevent European competitors from seizing control
of resources provided a further impetus towards formal empire – as seen,
for example, in the ‘Scramble for Africa’ in the late-1880s and 1890s. Once
again, local resistance was often fierce but ultimately overcome.
In truth, the picture was much more varied than these grand
generalisations suggest. The imperial ambitions of Spain and Portugal
were progressively scaled back during the nineteenth century, hampered
by their own economic backwardness and challenged by the very settlers
that it had initially encouraged. Portugal hung on as an imperial power
into the twentieth century mainly in Africa. Their Latin American colonies
achieved their independence during the early-nineteenth century. By the
early-twentieth century, several of them – for example, Mexico – were
beginning to develop state-led development strategies of their own. France
and Germany, both rising industrial powers, expanded their empires in
the late-nineteenth century, although Germany’s ‘late arrival’ as a global
power, having only come into existence in 1871, meant that it always felt
that it was denied its ‘place in the sun’. The British Empire was by far the
largest. Although it had lost the US at the end of the eighteenth century, its 5
It is important to note
other settler-colonies (Australia, Canada, New Zealand and South Africa) that by 1914, Japan
had remained within the fold and many new territories had been seized, was also an established
including India and large parts of Africa. Not untypically of empires, it colonial power within
reached its greatest extent at precisely the time that Britain’s economic Asia, having taken
ascendancy was coming to an end. In fact, the resources of empire were control of Taiwan in
1895 and Korea in
perhaps more crucial to Britain in postponing economic decline than in its
1910. It also exercised
original take-off (Davis, 2001, p.296).5 effective control over
significant parts of
China.
Box 4
Map of the European Empires c. 1914. [©Joll, James Europe since 1870: an
international history. (Weidenfeld and Nicolson, a division of the Orion Group)].

69
171 Introduction to international development

The colonial impact


Marxists have tended to see economic motivations as the ‘prime mover’
behind the aggressive imperialism of the late-nineteenth century onwards,
arguing that capital propelled imperialism forward in the search for new
sources of profit. Lenin called imperialism the ‘highest form of capitalism’
and predicted that it would lead to war between the leading capitalist
states and revolution. Others have emphasised political rivalries and
considerations of prestige as the main motivating force behind European
imperialism. It appears in practice difficult to separate the two factors.6 6
For a useful summary
of the different
Those who have emphasised economic motivations have always faced one arguments about what
major impediment to proving their case. As the historian Anne Phillips, motivated European
writing about British rule in West Africa, puts it: ‘if colonialism was indeed imperialism, see Porter
a product of capitalist forces…then why were the interests of capital so (1994).
ill-served?’(1988, p.2). Of course, once again the picture is a mixed one.
If we take India, it is clear that colonialism was highly lucrative to Britain.
But as a general point, the argument holds. As Phillips states, it holds
particularly true of Africa, with the exception of South Africa, where there
were mineral profits in abundance. She writes:
‘Capitalism does not normally effect exploitation by dragging
down living standards…but by increasing the productive
powers of capital…But to achieve this, capital needs wage-
labour: workers who are, in Marx’s ironic term, “freed” from
the ownership of means of production, freed from control
over the production process, freed to sell their labour-power
as a commodity. Yet Africa emerged from colonialism without
this pre-condition…Colonialism did effect the transformation
of former subsistence farmers into producers of export crops,
establishing the dominance of commodity production, but
outside the areas of white settlement it did not do much more.
Through most of the continent, pre-colonial property relations
survived – at least to the extent of providing the majority of
Africans with access to land’ (1998, pp.2–3).7
7
Hopefully you may
have already picked up
You may recall that similar arguments were made by Washbrook the echoes of Brenner in
in relation to India, where colonial rule also promoted processes of Phillips’ analysis.
‘peasantisation’. Phillips concludes by arguing that colonial officials in
Africa ‘often luxuriated in what seemed anti-capitalist bias…retarding
rather than hastening change, drawing on the values of feudalism rather
than those of capitalism’ (1998, p.3). There were elements of the same
attitude even in countries like South Africa, where the mining industry was
seen as an unavoidable evil whose degrading impact on Africans was best
minimised through a system of racial segregation.
Phillips challenges those Marxists who have argued that this
‘underdevelopment’ of the colonies was a necessary precondition of
the development of the advanced capitalist countries. Profits could be
extracted more conveniently through the use of pre-capitalist forms of
exploitation, according to those who took this view. She claims that the
reason for capitalism’s failure to develop the colonies were the constraints
that existed on the colonial state, which lacked the will or capacity to
engage in the violence necessary to force its subjects to become wage-
labourers. Direct coercion would have been required but the colonial state
was far too weak to perform this task. She argues:
‘…the state which inherited this task was incomplete and
undeveloped: a political power which was in many ways a mere
facsimile of a state. Colonial rule could be sustained only

70
Chapter 5: The origins of capitalism and the rise of the West

through a complex of shifting alliances with local rulers, and


colonial officials were acutely aware of the limitations of their
control. Colonialism was necessarily makeshift.’ (1998, p.11)
Although Phillips is writing about British West Africa in particular, her
arguments have wider application. While it is certainly true that in
colonies where there was substantial European settlement – for example,
in southern Africa – the colonised were forcibly excluded from the best
land and market opportunities, even when direct coercion did occur it
fell well short of the levels required to transform the entire economy on a
capitalistic basis. While this may have suited many European settlers and
capitalists, it was nonetheless a very weak form of capitalism. Portuguese
colonialism hasn’t been characterised as the ‘rule of the feeble’ (Vail,
1976) for nothing. Phillips argues that by 1914, the colonial authorities in
British West Africa had accepted that they would be unable to transform
the region by importing private property and wage-labour wholesale and
‘affirmed the peasant road of development’. Whatever the costs, it was
hoped that this road would deliver economic growth and political stability.
From that point onwards, it was inevitable that private capital would at
best be able to operate in enclaves or niches (1998, pp.11–12).
The reliance of colonial authorities on local rulers often reinforced the
power of ‘traditional institutions’, although paradoxically this could
mean what has been called ‘the invention of tradition’ (Hobsbawm and
Ranger, 1992). European officials brought with them assumptions about
the existence since time immemorial of ‘tribes’ or of communities such as
‘Hindu’ and ‘Muslim’. In fact, their interventions often helped to bring such
identities into being, or fix them where before they had been dynamic and
fluid (Harris, 1992). New political and legal institutions emerged under
the rubric of ‘traditional law’ in Africa. Colonial assumptions about the role
of women facilitated the reinforcement of patriarchal power within local
societies.
Our focus so far on the developmental weaknesses and limits of European
8
Strikingly, some
colonialism does not mean that it was not authoritarian or often brutal.8
scholars have claimed
Davis (2001) has shown powerfully how under the ‘British Raj’ in that if we are looking
India pre-colonial strategies for preventing famine were over the years for an example of an
systematically undermined. Colonial officials during the 1876–78 famine authoritarian, brutal but
callously allowed millions to die in order to uphold the higher-good of nonetheless genuinely
laissez-faire economics, which opposed state intervention. Davis calls it a ‘developmental
colonialism’, we should
‘colonial genocide’ (2001, p.37).
study the performance
of Japan in Taiwan
Box 5 and Korea. See, for
example, EcKert, Carter
Extracts from Davis (2001): J. Offspring of empire:
‘The central government under the leadership of Queen Victoria’s favorite the Koch’ang Kims and
the colonial origins
poet, Lord Lytton, vehemently opposed efforts by Buckingham and some
of Korean capitalism,
of his district officers to stockpile grain or otherwise interfere with market 1876–1945. (Seattle:
forces…He clearly conceived himself to be standing on the shoulders of University of Washington
giants, or, at least, the sacerdotal authority of Adam Smith, who a century Press, 1991) [ISBN
earlier in The Wealth of Nations had asserted (vis-à-vis the terrible Bengal 0295975334].
drought-famine of 1770) that “famine has never arisen from any other cause
but the violence of government attempting, by improper means, to remedy
the inconvenience of dearth” (pp.28–31).
‘India…was the greatest captive market in world history, rising from third to
first place among consumers of British exports in the quarter century after
1870…India was forced to absorb Britain’s surplus of increasingly obsolescent
and noncompetitive industrial exports. By 1910 this included

71
171 Introduction to international development

two-fifths of the UK’s finished cotton goods and three-fifths of its exports of
electrical products, railway equipment, books and pharmaceuticals…But how,
in an age of famine, could the subcontinent afford to subsidise its conqueror’s
suddenly precarious commercial supremacy? In a word, it couldn’t, and
India was forced-marched into the world market…by revenue and irrigation
policies that compelled farmers to produce for foreign consumption at the
price of their own food security.’ (pp.298–99)

During the interwar years (1918–39), the limitations of the ‘peasant road
to development’ became clear in many colonies. Let us return to Phillips:
‘The independence which peasants retained may have been
partly illusory since what they produced, and when, was
determined by the market. But they continued to control their
own labour process and resisted proposals for “improved”
techniques. Colonial officials (and after them African
politicians) were convinced that the peasants were wrong;
they set up commissions on “quality control” to grapple with
the task of introducing improved methods of production. But
to enforce such improvements, they had at their disposal only
market prices and administrative decrees. They could not enter
directly into production and dictate the changes they desired…
African farmers accumulated land, employed wage labour, got
themselves into debt and generally refused to remain model
peasants. The colonial states were attempting to freeze the
development of commodity production at that utopian point
which allowed them to maintain control’ (1998, pp.12–13).
At the same time, local modernising elites were losing faith in the colonial
project and imagining a better future for their people free of colonial
chains. The conditions for a sustained challenge to European imperialism
were falling into place by the outbreak of the Second World War. The rise
of the anti-colonial movement in India during the 1920s and 30s was
indeed a harbinger of the future.

Activity 5

Write a 200-word evaluation of what you think are the strengths and
weaknesses of the arguments made by Phillips and Davis. If you want to take
this further, read Chapters 1 and 8 of Phillips (1988), or Chapters 1 and 9 of
Davis (2001) and make some notes.

Conclusion
We have covered vast expanses of time and space at breakneck speed in
this account of the origins of capitalism and the rise of the West. Inevitably,
this means that many important historical events and processes during the
period 1600–1945 have been addressed exceedingly briefly – or not at all.
Our hope is that, along the way, you have acquired some sense of why it
is important to embed your thinking about the prospects for international
development today in a broad historical context.
But our historical account is not yet complete. We have at last reached
the moment where development finally emerges as a fully conscious and
explicit ‘project’ – as a rationale for (and mode of) political action. In the
next chapter, we look at the historical processes and events which gave rise
to the ‘era of national development’ between 1945 and the mid-1970s, and
the reasons behind its subsequent eclipse.

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Chapter 5: The origins of capitalism and the rise of the West

Reminder of your learning outcomes


Having completed this chapter, and the Essential readings and activities,
you should be able to:
• describe and evaluate the main features of intellectual debates about
the transition from feudalism to capitalism in Europe between the
sixteenth and early-twentieth centuries
• describe and evaluate the varieties of pre-capitalist economic and
political arrangements that prevailed beyond Europe and the impact of
the West upon these arrangements over the same period
• describe and evaluate the motivation behind and impact of European
imperialism in its subject territories from the late-nineteenth century
through to the Second World War
• on the basis of the account provided in this chapter, place our earlier
discussions of ideas of development (especially Chapter 2) and theories
of development (especially Chapters 3 and 4) in a firmer historical
context.

Sample examination questions


1. ‘To understand development today we must understand the origins of
capitalism.’ To what extent do you agree?
2. Might we have seen the development of indigenous capitalisms in the
non-European world if the European powers had not interfered?

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171 Introduction to international development

Notes

74
Chapter 6: The rise and fall of the era of national development

Chapter 6: The rise and fall of the era of


national development

Essential reading
Desai and Potter (2008) Chapters 2.6 to 2.8.

Further reading
Amsden, A. Escape from Empire: The Developing World’s Journey Through
Heaven and Hell (MIT Press, 2008) [ISBN 0262513153]
Armstrong, P., A. Glyn and J. Harrison Capitalism since World War Two. The
Making and Break-up of the Long Boom. (London: Fontana Books, 1984)
[ISBN 0006357946].
Arrighi, G. ‘The African Crisis: World Systemic and Regional Aspects’, New Left
Review 15, 2002, pp.5–36 [ISSN 00286060].
Brett, E.A. The World Economy Since the War. The Politics of Uneven Development.
(Basingstoke: Macmillan, 1985) [ISBN 033337200X] Chapters 3 and 5.
Chatterjee, P. Nationalist Thought and the Colonial World: A Derivative Discourse.
(London: Zed Books, 1986) [ISBN 0862325528, 0862325536] especially
Chapter 5.
De Waal, A. Famine Crimes. Politics and the Disaster Relief Industry. (Oxford:
James Currey, 1997) [ISBN 0852558104].
Fukayama, F. ‘The End of History?’, The National Interest Summer 1989,
pp.3–18 [ISSN 08849382].
Glyn, A. ‘Imbalances of the Global Economy’, New Left Review 34, 2005,
pp.5–37 [ISSN 0028-6060].
Hanlon, J. Mozambique: Who Calls the Shots? (Oxford: James Currey, 1991)
[ISBN 0852553463].
Kay, C. ‘Why East Asia overtook Latin America: Agrarian Reform,
Industrialization and Development’, Third World Quarterly 23(6) 2002,
pp.1073–1102 [ISSN 0143-6597].
LaFeber, W. America, Russia and the Cold War, 1945–1992. (New York: McGraw
Hill, 1993) [ISBN 0070358532].
Lockwood, M. The State They’re In. An Agenda for International Action on
Poverty in Africa. (Bourton: ITDG Publishing, 2005) [ISBN 1853396176].
Mosley, P., J. Harrigan and J. Toye Aid and Power: the World Bank and Policy-
Based Lending. (London: Routledge, 1991) [ISBN 0415015480].
Ngugi, Wa Thiongo Decolonizing the Mind. The Politics of Language in African
Literature. (London: James Currey, 1986) [ISBN 0852555016].
Shadlen, K. ‘Debt, Finance and the IMF: Two Decades of Debt Crises in Latin
America’, The 2004 Europa Survey of South America, Central America and
the Caribbean. (London: Taylor and Francis, 2003) [ISBN 1857431847].
Van de Walle, N. African Economies and Politics of Permanent Crisis, 1979–1999.
(Cambridge: Cambridge University Press, 2001) [ISBN 0521008360].
Westad, A.O. The Global Cold War: Third World Interventions and the Making
of Our Times (Cambridge: Cambridge University Press, 2007) [ISBN
052170314X].

75
171 Introduction to international development

Challenging reading
Ansprenger, F. The Dissolution of the Colonial Empires. (London: Routledge,
1989) [ISBN 0415031435].
Chang, H-J (ed.) Rethinking Development Economics (London: Anthem, 2003)
[ISBN 1843311100].
Chang, H-J. Bad Samaritans: Rich Nations, Poor Policies and the Threat to the
Developing World, (London: Business Books, 2007) [ISBN 1905211376].
Harris, N. National Liberation. (London: Penguin Books, 1992) [ISBN
0140125604] Chapter 11.
Harvey, D. The New Imperialism. (Oxford: Oxford University Press, 2003) [ISBN
0199264317].
Pogge, T.W. and S.G. Reddy ‘Unknown: The Extent, Distribution and Trend of
Global Income Poverty’, 2003 [Paper available at www.socialanalysis.org]
Stiglitz, J. ‘The World Bank at the Millennium’ in The Economic Journal 109,
1999, pp.F577–97.
Toye, J. Dilemmas of Development. Reflections on the Counter-Revolution in
Development Theory and Policy. (Oxford: Blackwell Publishers, 1987) [ISBN
0631145710].
Wade, R. ‘The Development of a “Well Functioning Market Economy”: Where
Do the Institutional Models Come From?’, World Bank and Development
Policy Forum/DSE Workshop, Berlin, 2000, pp.1–13.
Williamson, J. ‘What Should the World Bank Think about the Washington
Consensus?’, The World Bank Research Observer 15(2) 2000, pp.251–64
[ISSN 02573032].

Classic texts
Gerschenkron, A. Economic Backwardness in Historical Perspective. A Book
of Essays. (Cambridge, Mass.: Harvard University Press, 1962) [ISBN
0674226003] Chapter 1.

Aim and learning outcomes


The aim of this chapter is to provide a historical background to the state of
international development today by exploring the rise and fall of the era of
national development since 1945.
By the end of this chapter and having completed the Essential readings
and activities, you should be able to:
• describe and evaluate the nature of the anti-colonial independence
movements that inherited political power following the end of
European imperialism
• describe and evaluate the impact of the ‘Long Boom’ and the Cold
War on both the advanced capitalist countries and the countries of the
Third World
• describe and evaluate the crisis of the 1970s and its consequences
through to the present day
• on the basis of the account provided in this chapter, place our earlier
discussions of ideas of development and theories of development in a
firmer historical context.

76
Chapter 6: The rise and fall of the era of national development

Introduction
This chapter explores the rise and fall of the era of ‘national development’.
We begin by looking at the nature of the anti-colonial independence
movements which inherited political power following the end of
European imperialism and seek to understand why a state-led approach
to development tended to come naturally to those movements. We go on
to explore how and why during the long economic boom of the 1950s
and 1960s, largely in response to the threat of communism and with
the blessing of the US as the dominant global power of the post-war
era, capitalism in the developed world took on an increasingly welfarist
character. We also look at how and why during this period Third World
governments enjoyed considerable policy autonomy from the West and the
international financial institutions that they dominated. We then examine
how, again driven by the interests of the US, this period came to an end
from the 1970s as the global economy slowed and neo-liberal political
forces came to power in the developed world. Debt crises provided a
crucial point of leverage for the West in imposing neo-liberal prescriptions
on much of the Third World through regimes of policy conditionality. Our
account ends with a brief assessment of developments since the end of the
Cold War in 1989 – which have ushered in what some have described as
a new era of economic globalisation, in which it is alleged that the scope
for autonomous national development has largely disappeared.

Activity 1
Before working your way through the chapter, spend 30 minutes reflecting on the
experience of your country or region since 1945: how much policy autonomy do you
think it has enjoyed? If the extent of that autonomy has changed over time, why has it
changed? Make some notes and then review them at the end of the chapter.

The cold war and the long boom


Before we discuss the efforts of post-colonial states during the 30 years
after 1945 to promote modernisation and development, we need first
to understand the broader global political and economic context within
which they took place: the cold war and the long boom.

Communist gains and the US response


In the immediate aftermath of the Second World War, there was optimism
that a new era of global peace and security would now emerge. The
creation of the United Nations and the ‘Bretton Woods institutions’ (named
after the place in the US where their establishment was agreed in 1944),
the International Monetary Fund and the World Bank, appeared to be
expressions of this hopeful moment.1 However, by 1947 this optimism 1
In both Bretton Woods
had been dashed as relations between the West and the Soviet Union institutions, the US
was by far the largest
deteriorated dramatically, ushering in the cold war.
shareholder. If this was
The Soviet Union moved on from 1946 to establish satellite regimes in indeed to be an era of
Eastern Europe, fearing US post-war ‘reconstruction’ initiatives that would multilateralism, the US
establish its own satellites right up to the Soviet border. Germany itself was inevitably going to
be ‘first amongst equals’
was divided into two countries. The US offer of ‘Marshall Aid’, made
in it.
initially in June 1947 to any European country that wished to accept it; in
the end was taken up only by Western European countries such as Britain,
France, West Germany and Italy.
The victory of the Communists in China in 1949, allied to the rising
communist insurgencies in Korea and Vietnam, further intensified the cold

77
171 Introduction to international development

war. The dominant motif of US foreign policy became combating the threat
of communism. In 1950, it went to war in Korea to that end. Elsewhere, it
used economic support to counter internal threats – for example, in France
and Italy, both of which had powerful Communist parties.2 2
For an excellent history
of the cold war, see
There is no doubt that Marshall Aid had a clear anti-communist purpose, LaFeber, 1993.
whatever economic benefits also flowed from it. But this was not the only
motivation. Extremely high levels of economic support to the non-communist
world by the US were also prompted by the fact that it had entered the post-
1945 period having built up vast surpluses of capital that were searching for
sources of profitable investment. In addition, the US needed trading partners
– countries that were able to buy American goods – if the threat of recession
was to be avoided (Armstrong et al., 1984, pp.106–15).
Levels of US aid under the Marshall Plan reached four per cent of Gross
National Product (GNP) at their peak.3 While most US economic support 3
Compare that with the
went to Western Europe, large quantities of aid also went to frontline level of US aid globally
in 2004 at 0.16 per cent
allies like Japan, South Korea and Israel. Latin American governments also
of GNP.
benefited as the US sought to keep its ‘backyard’ free of communist infection.
Africa and large parts of Asia were at this time essentially sideshows.

Welfare states and even development


The Soviet Union was certainly an ideological and military threat, but
economically the US was in a completely different league. Despite this,
communist advances around the world suggested that the capitalist world
order was anything but invulnerable. While it retained its faith in a free
market-based international system and wanted in the long-term to move
towards this again, a convergence of economic and ideological interests
impelled the US consciously to support what Brett (1985, p.109) has
called ‘even development’ – capitalism in which the default tendency
towards uneven development is mitigated.

Box 1
How the Marshall Plan worked:
‘As soon as the Marshall Plan – or Economic Recovery Programme (ERP)
was announced, the IMF eased its tough lending conditions. Together
with the World Bank, it lent more than $1 billion to Europe in the next
12 months…Congress finally sanctioned $13 billion Marshall Aid to be
spread over four years…Marshall Aid brought a clear shift in the form of
US aid. From 1947 loans repayable with interest dropped sharply. Non-
military grants rose accordingly. In line with this commitment to greater
support for European governments, the Americans also relaxed pressure
on them to open up their economies to US capital. Free trade hawks had
wanted to use Marshall Aid as a lever to break open the Sterling Area…
But the US government rejected this approach, recognising a prior need
to support the British and other European economies…
…They succeeded in getting unprecedented agreements with each
country “to stabilise its currency, establish or maintain a valid rate of
exchange, balance its governmental budget…create or maintain internal
financial stability”. Congress also inserted a “counterpart” provision,
requiring aid recipients to set aside a sum of domestic currency equivalent
to the aid, to be spent in ways agreed with the United States. Moreover,
although easing the pressure to liberalise trade, the Americans insisted
on a number of provisions advantageous to US business: 50 per cent of
goods financed by aid were to be shipped in American boats and covered
by American insurers; aid-financed food imports must come from

78
Chapter 6: The rise and fall of the era of national development

the United States, even if they could be bought more cheaply elsewhere; US
oil interests were also to receive preferential treatment…While Marshall Aid
aimed primarily at making Europe safe for US businesses in the long run,
there was no reason to forego short-term advantages.’

(Armstrong et al., 1984, pp.119–22)

Unrestricted free markets tend to promote winners and losers at the


individual, group or national level. Faced with increasingly powerful
labour movements at home and in order to reduce the threat of
communism internally and globally, Western governments deepened
their scope for compensating losers through state intervention. In
Western Europe and to a certain extent in the US itself, social security
provision improved markedly. Trade unions were invited into corporatist
arrangements with the state and business through which workplace
conflicts were as far as possible resolved. West European countries,
inspired by the economic ideas of John Maynard Keynes, and other
US allies were given room to create policies of industrial promotion
and protection, even when they disadvantaged individual US firms or
financial interests in the short- to medium-term. Until the late-1960s, the
focus of the IMF and World Bank was mainly on the advanced capitalist
world. Their role was to manage the post-1945 world economy so that
it remained stable while moving it gradually towards a more open and
liberal system (Brett, 1985, pp.105–110). The space to govern markets
was also extended to other parts of the world. Western aid was provided
largely on the basis of the ‘cold war’ value of particular countries.
Possession of important raw materials was an asset in this regard. So too
was location. Non-communist countries in East Asia, neighbouring both
the Soviet Union and China, were given significant latitude. Japan, South
Korea and Taiwan all undertook radical land reform programmes without
US hindrance after 1945. Of course, the project of ‘even development’ was
not applied everywhere. In Central America, US corporations and ruling
elites showed little enthusiasm for it and were not challenged to do so.
Activity 2
Write a 100-word answer to the following question: What were the strengths and
weaknesses of the system established for the post-war regulation of the world economy?
Overall, was it successful?
(Use some of the additional readings if you need help).

As for the Communist bloc, the Soviet Union and Eastern Europe were
themselves engaged in frenzied efforts to industrialise, in part so that they
could compete militarily against the West in the cold war arms race but
also to demonstrate the superiority of the socialist model to their own
captive citizens and to the world. The early part of the cold war was the
zenith of state planning and the ‘command economy’ in the Communist
bloc. Communist China followed its own turbulent and inconsistent path
during the 1950s and 1960s.4 4
We do not have space
here to address socialist
models of development
Political independence and ‘Third Worldism’ in the depth we would
like. If you want to
The Second World War gravely weakened the European imperial powers know more about this
and Japan. Two of the lesser colonial powers – Italy and the Netherlands important topic, read
– simply collapsed, the latter in South East Asia at the hands of non- Kilmister in Allen and
European Japan. By the end of the war, Indian independence seemed Thomas (2000).
almost inevitable, so debilitated was Britain by its exertions. It came
with the bloody partition of India in 1947. French authority in Indochina
79
171 Introduction to international development

(present-day Cambodia, Vietnam and Laos) was gravely weakened,


although not immediately overthrown. Anti-colonial movements quickly
began to emerge in Africa, although they were relatively weak until the
1950s.5 5
For an excellent survey
of the dissolution of the
Amongst the values enshrined in the Charter of the new United Nations, colonial empires see
established in 1945, was the right of peoples to self-determination. Both Ansprenger (1989).
the US and the Soviet Union, divided by virtually everything else, shared
a deep antipathy to European colonialism. However, their rivalry impelled
them towards their own forms of imperial leadership, often operating
through local client regimes. Eastern Europe was the paradigm case for the
Soviet Union, Central America and Vietnam for the US. Some critics called
this ‘neo-colonialism’.6 6
It should be noted that
the Soviet Union was
It was clear that the writing was on the wall for European imperialism. considered by many
By the mid-1960s, the vast majority of European colonies had achieved analysts to have its own
political independence. The main exceptions were the settler-colonies in colonial possessions
Africa – Angola, Mozambique, Rhodesia, South-West Africa and South in the ‘autonomous
soviet republics’ of the
Africa – where independence took much longer to achieve and involved
Caucasus and Central
armed struggle.In countries like Vietnam and Korea, anti-colonial struggles Asia.
were rapidly overlaid with cold war rivalries and became even more
intractable and prolonged.

The composition and ideology of independence movements


What were the characteristics of these independence movements and what
attitudes and policies did they have towards overcoming the negative
legacies of colonial rule? There were, of course, many variations. Some
espoused socialist or Marxist ideas, others were less ideologically inclined
or elaborated home-grown concepts. But there were also important points
in common. Above all, every independence movement had nationalism
as its bedrock and believed that the achievement or recovery of national
sovereignty was an essential precondition for overcoming colonial
underdevelopment (Harris, 1992, pp.1–23). Only then would nations be
in a position to craft development policies appropriate to their own needs
and circumstances rather than those of their erstwhile imperial masters.
However, these independence movements were created and dominated
by members of a (usually) small ‘national elite’. While the elite certainly
drew upon the disaffected sons and daughters of traditional authorities,
it was largely a product of the colonial need for locally-based groups that
could play a part in the administration and the provision of basic services,
such as they were. Strong national bourgeoisies had not emerged under
colonialism. Having gained relatively privileged access to the limited
educational opportunities on offer, the national elite often began as a loyal
servant of the colonial power, only gradually to become disillusioned by its
empty promises of development and equality.
Their experience of an authoritarian colonial state apparatus significantly
shaped their understanding of how political power could and should be
deployed in future. More broadly, the national elite were often not much
less distant from their fellow countrymen and women than their colonial
overlords had been. Their complaint was about the failure of colonialism
to ‘modernise’ their countries, not about the concept of modernisation
itself. Despite the fact that most anti-colonial movements were cross-
class alliances, there was often an elite disdain for tradition and a lack
of sympathy for values and habits that were deeply ingrained with the
everyday lives of ‘the masses’. Franz Fanon has written vividly of how
national elites had often ‘internalised’ colonial values. The struggle for
independence, for him and other African intellectuals, was as much about
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Chapter 6: The rise and fall of the era of national development

‘decolonising the mind’ as it was about the achievement of political and


economic sovereignty (Ngugi, 1986).
The peasantry was mobilised in the context of some anti-colonial struggles
(for example, India), but their role was largely that of foot-soldiers. There
was less elite ambivalence about the working class, but it was generally
both small and weak. However, suspicions could also arise there if its
organisations and leaders sought to cultivate too much autonomy from
the wider pro-independence movement. This was the case even within
the many movements that had adopted a socialist ideology, such as the
Chinese Communist Party, for their ‘model’ was the authoritarian vanguard
party of the Soviet Union.

Box 2
Jawaharwal Nehru, first Prime Minister of independent India said:
‘India was in my blood and there was much in her that instinctively thrilled
me. And yet, I approached her almost as an alien critic, full of dislike for the
present as well as for many of the relics of the past that I saw. To some extent
I came to her via the West and looked at her as a friendly Westerner might
have done. I was eager and anxious to change her outlook and appearance
and give her the garb of modernity. And yet doubts rose within me. Did I
know India, I who presumed to scrap much of her past heritage?’
(Quoted in Chatterjee, 1986, p.147)

Post-colonial states and national development


In the absence of a strong national bourgeoisie or working-class, these
independence movements demonstrated a marked preference for statism
and ‘revolutions from above’ in pursuit of development on taking power.
While there were many important variations, overall their strategies in
pursuit of national development shared many common features. Most
adopted strategies of ‘import-substituting industrialisation’. To do this
they sought to generate and then deploy economic surpluses through the
taxation of agriculture; to obtain foreign exchange through exports with
which to buy Western equipment for infant industries; and to obtain extra
financial assistance, whether from foreign banks or foreign governments.
Currencies were fixed in value against the US dollar. Import tariffs and
export promotion were also usually part of the package (Van de Walle,
2001, pp.141–44).
While many aspects of this development strategy have been subject
to heavy criticism over the past two decades, we would do well to ask
ourselves whether better alternatives existed at the time. After over
a century in which indigenous initiative had been undermined, if not
entirely suppressed, the prospects for relatively ‘spontaneous’ processes of
development, in which the state could take a back seat, were surely poor.
Indeed, there is much evidence to support the contention that state-led
development strategies were often highly successful. Japan, South Korea
and Taiwan (both, of course, former colonies of Japan) are held up as
examples of this, although some put this down to its combination with
a strong orientation towards export promotion. So too are some of the
oil states of the Middle East. Even in Latin America and Africa, where
hindsight has led many to suppose that current crises must be rooted
in long-running ‘state failure’, some scholars have suggested that it was
external factors that played the most important role in destroying the
‘developmental capacity’ of the state. There were a considerable number
of ‘success stories’ in these regions too, at least until the 1980s. The main

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171 Introduction to international development

problem in these regions has proven to be turning initial success into


irreversible progress (Arrighi, 2002, pp.12–17).
External factors undoubtedly played a major part in preventing this from
happening. Nonetheless, there are strong grounds for believing that even
those African countries that appeared to be doing well enough in the
1960s and 1970s had not solved the biggest dilemma for those seeking
to kick-start development: how to generate economic surpluses and
then use them productively to bring about economic and social change
that is ‘developmental’ in nature. African states squeezed the peasantry
and so generated surpluses. However, this did not produce a dynamic
industrialisation trajectory; rather, surpluses largely went towards a
static and what Arrighi (2002) has called ‘easy import-substituting
industrialisation’ – the simple processing of primary products. Plans to
move over time into higher-value manufacturing were usually badly
implemented. Too much of the surplus also went towards subsidising the
price of food for urban workers, who were an important – if subordinate
– part of the anti-colonial coalition in many countries, and into elite
‘conspicuous consumption’. The peasantry were the major losers, receiving
relatively few benefits in return. Peasants either reduced export production
or evaded state taxation. The state, ultimately, was insufficiently strong to
close off the ‘exit strategies’ of the peasantry. Arrighi calls this development
path ‘perverse growth’ (pp.10–14). By the 1970s and the collapse
in demand for African primary products, this method of generating
surplus had run out of steam. African countries came to rely more and
more exclusively upon foreign aid as their ‘functional substitute’, to use
Gerschenkron’s term again.
In Latin America, its critics have identified a subtly different kind of
failure of state-led development. They acknowledge that countries
such as Mexico, Brazil and Argentina, all of which had first attempted
industrialisation drives during the interwar years, had made significant
progress, in part thanks to active state support, by the 1960s and 1970s.
However, their industrialisation processes were not directed sufficiently
towards production for export onto world markets – in other words, they
were unable to establish industries that were internationally competitive.
When global demand slowed in the 1970s, this weakness was brutally
exposed. In addition, the kinds of goods produced did not replace
imported luxury goods, to which the elite remained addicted. Finally, Latin
American countries also developed an entrenched ‘urban bias’ and were
characterised by enormous inequalities – not least between settlers of Latin
origin and the many indigenous ‘Indian communities’. In sharp contrast
to East Asia, land reform, while regularly attempted, ultimately failed to
undermine the power and interests of the rural landlords. As such, durable
and productive means of generating economic surpluses for development
were also conspicuous by their absence in much of Latin America. Ruling
elites came to be increasingly dependent upon American power to counter
internal challenges and financial assistance from foreign private banks to
prop up their economies (Kay, 2002, pp.1073–1102).

The crisis of the 1970s and its consequences


By the late-1960s, parts of Western Europe had moved beyond post-war
recovery into a phase of sustained economic growth. Japan had also
entered the ranks of advanced capitalist countries. At the same time,
the economic costs to the US of subsidising ‘even development’ were
beginning to mount, eroding its competitive advantage within the world

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Chapter 6: The rise and fall of the era of national development

economy. It was now importing much more than it was exporting. In


addition, the bargaining power of labour movements had over time eroded
levels of profit across the advanced capitalist world. To compound matters,
victory in the cold war appeared as elusive as ever. Indeed, the momentum
appeared to remain with opponents of capitalism. The 1970s turned into a
decade of crisis for the US and the wider world.

The end of the long boom


The US dollar had been the global currency within the world economy
since 1945. Exchange rates with other currencies were fixed. Its value was
fixed against US gold reserves – what was known as the Gold Standard –
in order to maintain its value. President Richard Nixon decided in 1971
that the US could no longer afford to prioritise its role as guarantor of
global economic stability. It abandoned the Gold Standard, under which
it had converted dollars into gold on request, and announced the end of
fixed exchange rates and introduced import controls. In 1973 the world
economy was plunged into further chaos. Conflict in the Middle East
triggered an oil crisis in which the price of oil rocketed. The oil crisis
led to the final collapse of the system of fixed exchange rates that had
prevailed since 1945. The US was now in a position to allow the dollar to
devalue in order to promote the strength of its exports. In doing so, it could
unilaterally devalue the assets of other countries. The oil crisis effectively
marked the official end of the long boom. The advanced capitalist world
hit economic recession. As we shall see, this inevitably had severe knock-on
effects for the Third World. Regulation of the world economy became ad
hoc and improvisatory – in fact, a ‘non-system’ (Brett, 1985, pp.111–25).
The mid-1970s were also a period of political defeat for the West. In 1975,
the US withdrew from South Vietnam, paving the way for the unification
of the country under communist rule. Avowedly Marxist national
liberation movements took power in Angola and Mozambique, following
the collapse of Portugal’s archaic dictatorship the year before. Other
countries in Africa and Asia had adopted Marxist garb. In Latin America,
the US had sponsored the overthrow of an elected socialist government in
Chile in 1973 but insurgencies were raging in a number of other countries.
Communism seemed on the front foot. In retrospect, of course, we know
that the centrally-planned economies of the Soviet Union and its satellites
were already by this time losing economic momentum. But at the time this
was not at all clear. The West sought to regroup in the mid-1970s through
a policy of détente with the Soviet Union and China.
However, the economic and political crises of the 1970s had convinced
sections of the ruling elite in the advanced capitalist world that the
compromises inherent in the global post-war settlement had either
outlasted their usefulness or had simply failed. The era of managed
capitalism was coming to an abrupt end. Global economic recovery was
sought through a partial unstitching of the post-war settlement. There was
a dramatic electoral shift to the right, most notably the US and Britain,
from the late-1970s onwards. Trade union power also came under direct
challenge. Social security provision was cut and corporatist arrangements
downgraded. Deregulation of markets and the privatisation of state assets
rose up the political agenda. A more aggressive attitude to the Soviet
Union and the threat of communism was also part of this shift. Ironically,
few realised at the time that this shift coincided with the emergence of
what ultimately turned out to be fatal internal political and economic
weaknesses within the Communist bloc.

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171 Introduction to international development

Box 3
Mozambique: The threat of a good example?

In 1975 the Front for the Liberation of Mozambique (FRELIMO) took power in
Mozambique following the collapse of Portuguese colonial rule. FRELIMO had
adopted a Marxist ideology in the course of the anti-colonial struggle and had
received support from both the Soviet Union and (to a lesser extent) China.

It inherited a bankrupt economy. As Hanlon describes (1991, pp.9–12), Portugal


had done little to develop the country:
‘…its earnings depended almost entirely on the exploitation of peasant labour.
Widespread use of forced labour continued into the 1960s. The colony’s main
earnings came from port traffic and migrant labour for neighbouring states,
particularly South Africa, and the export of agricultural crops such as sugar and
tea which depended upon seasonal labour. British, South African, and other
non-Portuguese capital dominated…At independence, adult literacy was less
than 15 per cent…Health services were poor, limited to urban areas and a few
mission hospitals. Within a few years, FRELIMO transformed this dramatically,
nationalising all social services – health, education, legal and funeral – and
then rapidly expanding them at the most basic level. By 1980 the number of
qualified school leavers had increased fourfold in both primary and secondary
education…Special stress was put on “primary health care”…’

In terms of the economy:

•• ‘FRELIMO looked to the rapid industrialisation and social transformation


of Eastern Europe. It followed a path trod in many other countries and
tried to make a great modernising leap, putting all its money and energies
into the modern sector. In industry, the stress was on the production of
basic consumer goods for the masses rather than luxury goods, but in large
factories and ultramodern textile mills rather than the lower, decentralised
technology tried in Tanzania, India and China. In agriculture…rural
development was to be based on “socialisation of the countryside”, with
people living in new “communal villages” where it would be easier to provide
health services, education, water and agricultural extension. To increase
productivity, stress was put on mechanised state farms and cooperatives.’

But by the early-1980s, Mozambique’s new order was under pressure. While
FRELIMO’s own mistakes certainly played their full part, the hostility of the West
and – nearer to home – apartheid South Africa, as the cold war again intensified,
fuelled an economic and military campaign of ‘destabilisation’. By 1984
Mozambique’s socialist experiment had come to an end.

The US’s largely unilateral tearing up of the post-war settlement did help
it to end its competitive decline, although it did not immediately reverse
it. In the process, the world economy became more Darwinian – an arena
where the fittest would survive. The genie of uneven development was
once again let out of the bottle. What had been a stately progress towards
a more open and liberal world economic system since 1945 became more
of a dash during the 1980s.

Debt crises and structural adjustment in the Third World


Although the Third World had not been a central concern in the creation
of the post-war settlement, it had undoubtedly created space there for
national development strategies that in some cases had brought a measure
of success. Apparent ‘success stories’ were to be found not just in East Asia
and Latin America but also in Africa. But not everybody was satisfied.
Lower growth rates than hoped for led many Third World leaders and

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Chapter 6: The rise and fall of the era of national development

intellectuals to call for a ‘New International Economic Order’ in which the


legacies of imperialism were more frontally challenged. Overall rates of
poverty had not declined as much as hoped for either. But if progress was
less than some had expected, things were about to get worse rather than
better (Arrighi, 2002, pp.18–21). The 1973 oil crisis and the subsequent
world recession, which led to a dramatic rise in interest rates, had a
profoundly damaging impact on the economies of most Third World
countries. Where they existed, internal economic weaknesses could no
longer be hidden as markets for raw materials and exports dried up and oil
prices escalated. Many countries quickly became heavily dependent upon
external sources of finance in order to hold their economies together.
Two major sources of external finance were available: money could be
borrowed from the IMF and World Bank or foreign governments; or it
could be borrowed from foreign banks. The IMF and World Bank, which
had previously focused on regulating the world economic system until this
time, were both in search of a new role. They found this from the 1970s
onwards in supporting Third World countries and promoting development.
The IMF loaned money for short-term economic ‘stabilisation’ while the
World Bank concentrated on longer-term development assistance. African
and many of the poorest Asian countries predominantly borrowed from
these ‘official’ sources. ‘Middle income’ industrialising Latin American
countries were the main customers for foreign banks.7 7
Nigeria was the only
African country that
There were important differences between the two types of debt. They borrowed heavily from
produced different ‘debt crises’. Official debt was not large by international private creditors. Key
standards and, as such was not a threat to the world economic system. East Asian countries like
But it was enormous when measured against the size of the domestic South Korea and Taiwan
economies involved. This debt crisis was triggered by the oil crisis. Private borrowed little at this
time from either official
debt was a different matter. As the 1982 Latin American debt crisis
or private sources,
showed, it could be a genuine threat to world economic stability. Foreign having been particularly
banks, flush with dollars, had loaned to Latin American countries on a successful in mobilising
grand scale from the 1960s onwards at low interest rates. This debt crisis domestic savings and
was, therefore, not such a direct product of the oil crisis and the end of the recycling business profits
into new investment.
long boom (Shadlen, 2003). From the late-1970s, interest rates rocketed
upwards. Rescheduling arrangements agreed between creditors and
debtors persuaded banks to keep lending in order to get their money back.
Countries began to borrow more simply to repay debts. Latin America
began for the first time to borrow from the IMF and World Bank.
How different countries within the Third World handled the economic
crises of the 1970s onwards was crucial in defining the ‘parting of the ways’
between them – or, as others have put it, the ‘end of the Third World’. Those
countries that avoided succumbing to indebtedness tended to be those
whose national development strategies involved a strong export orientation
and which had been effectively managed – for example, South Korea and
Taiwan. As the US began to restructure its industrial base and increase its
international competitiveness, these countries were in a position to supply
the US, cheaply, with those industrial goods that its businesses no longer
found it profitable to produce. Their export markets were maintained and the
need to borrow funds on a grand scale was averted (Arrighi, 2002, pp.22–3).
Other Third World countries found themselves competing with the US on
world markets – for example, in agricultural exports. The US continued to
heavily subsidise its farmers, despite its general support for free trade.
For those that succumbed to debt, rescheduling arrangements and further
loans embroiled them from the early-1980s in regimes of IMF and World
Bank-supervised ‘conditionality’. In return for further financial assistance,
indebted Third World countries were required to adopt a set of particular
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171 Introduction to international development

policies endorsed by the Bretton Woods institutions, taking their cue


from the dominant Western powers – above all, the US. The packages
were called ‘structural adjustment’. Some form of adjustment was indeed
inevitable, but the issue was on what and whose terms. The policies
imposed upon indebted countries reflected what later came to be known
as ‘the Washington Consensus’.

Box 4
The Washington Consensus

The term was coined by academic John Williamson in 1990 to describe


the ‘lowest common denominator of policy advice being addressed by the
Washington-based institutions to Latin American countries as of 1989’. This
comprised 10 propositions:
•• fiscal discipline
•• a redirection of public expenditure priorities towards fields offering both
high economic returns and the potential to improve income distribution,
such as primary health care, primary education and infrastructure
•• tax reform
•• interest rate liberalisation
•• a competitive exchange rate
•• trade liberalisation
•• liberalisation of inflows of foreign direct investment
•• privatisation
•• deregulation
•• secure property rights.

(Williamson, 2000, pp.251–52)

Activity 3
In his article, Williamson complains that it is unfair to describe the Washington Consensus
as ‘neo-liberal’ or ‘market-fundamentalist’. Do you agree with him? Write a 100-word
answer to this question. Try to read Williamson’s article – it will improve the quality of
your answer!

Toye (1987) describes the ‘Washington Consensus’ as a ‘counter-revolution’


in development theory. As will hopefully be clear by now, the emergence
of this policy framework can only be understood in the context of the
complex global economic and political processes and events that ended
the long boom. For the Third World countries affected, the Washington
Consensus involved a significant loss of policy autonomy for their
governments, although debate continues as to whether this has often
been more apparent than real, given the difficulties that both the IMF and
World Bank experienced in enforcing compliance (Mosley et al., 1991,
pp.27–61).

Developments since the 1990s


For Africa, the 1980s and 1990s have come to be known as the ‘lost
decades’ for development. Following the end of the cold war in 1989,
an increased number of African states collapsed into civil war or became
virtually ‘fictitious’. Policies of political and economic liberalisation
regularly failed to produce the expected results. Western images of
Africa as a continent of perpetual disorder, crisis and famine became

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Chapter 6: The rise and fall of the era of national development

ever more entrenched – an impression reinforced by the rapidly escalating


AIDS crisis in East and southern Africa. Latin American countries as a rule
went backwards or stagnated economically during the 1980s and 1990s
– this during a period when many came out of dictatorship and became
‘transitional democracies’. There continued to be periodic debt crises
in Latin America, which were ‘resolved’ through further rescheduling
arrangements and new loans. Informal economies increasingly eclipsed
official economies in scale in many countries in the two regions. In
addition, breakneck urbanisation processes often brought poverty in the
major cities up to a level comparable with that in the rural areas. The
Middle East (with the exception of the Gulf States) and North Africa also
went backwards. Only in South and – most dramatically – East Asia was
there progress. Meanwhile, the IMF and World Bank steadily expanded
their mandates and their scope for intervention during the 1990s – for
example, into the sphere of ‘governance’. The World Bank began to portray
itself as a ‘knowledge Bank’ (Stiglitz, 1999, F588).
By the turn of the millennium, following two decades of externally-defined
‘structural adjustment’, the gap between those Third World countries
that had successfully negotiated the 1970s crisis and those that had not
had widened into a chasm. This is illustrated by the table below, which
shows the percentage changes in GNP per capita of different regions as a
proportion of world GNP per capita since 1960.

1960–75 1975–90 1990–9 1960–99


Sub-Saharan Africa –5 –33 –17 –47
Latin America 3 –19 2 –15
Middle East and North Africa 13 3 –6 10
South Asia –17 20 17 17
East Asia 29 89 47 257
THIRD WORLD 6 12 21 44
North America –26 44 4 10
Western Europe 27 -1 1 27
Australasia 11 -15 13 5
Japan 90 34 –2 150
FIRST WORLD 15 16 1 35

Table 1: GNP per capita


Source: Arrighi (2002, p.15)
Global poverty levels fell during the 1990s, but most of this trend was due
to the fact that populous China and India enjoyed healthy economic growth
over the course of the decade. Levels of inequality, both between regions and
within countries, markedly increased (Pogge and Reddy, 2003).
The scale of the ‘East Asian miracle’, as demonstrated by the above table,
demonstrates that economic decline or stagnation were neither universal
nor inevitable. There has been ‘room for manoeuvre’ for some regions,
in terms of independent, nationally-driven development strategies, if the
balance of domestic and international forces has been right and a sufficient
degree of political will and capacity present. At the same time, the advance
of economic globalisation in trade, production and finance, driven by the
US, has also led to a greater opening up of East Asian economies during
the 1990s, not least through the elimination of capital controls. In 1997
this contributed to a major crisis in East and South-East Asia that briefly
threatened to plunge the entire world economy into recession.

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171 Introduction to international development

Box 5
Robert Wade offers one interpretation of the Asian crisis:
‘The Asian crisis 1997–1998 provided an opportunity for the US/IMF to
apply the strategy of “coercive liberalism” to greatly weakened states…As
one Asian country after another collapsed and appealed to the US and the
IMF for rescue funds, the US Treasury drew a line in the sand. It made aid
contingent upon sweeping movement towards “sound” market institutions,
which is code for market institutions of the Anglo-American type. Above
all, it sought to institutionalise open markets for money, foreign exchange,
and securities. In place of state-encouraged large firms borrowing money
from government-influenced banking systems at concessionary rates they
wanted transparent markets for stocks and bonds. The Treasury and the
IMF also insisted on accounting reforms in the direction of best practice
(US) accounting standards, far-reaching financial deregulation, balanced
budgets, higher interest rates, and freely convertible foreign exchange
markets overseen by independent central banks…
…The US and the Fund justified the conditions by saying that sustainable
economic growth would not occur without fundamental structural reforms.
The contrast with Mexico in 1994–1995 is telling. Within 10 days of
the beginning of the Mexican crisis a massive and credible international
rescue package of $50 billion had been assembled, with almost no
conditionality and certainly no requirement for large-scale structural
reforms. The panic and contagion subsided soon after. In Asia, in contrast,
the governments had to agree to a long list of conditions as a condition of
the initial agreement to provide funds; the pledged funds were relatively
smaller; and they came in phased tranches which were smaller than the
pledges. The panic and contagion lasted far longer. Why the difference in
policy response? One plausible hypothesis is that the US national interest
was overridingly to secure quick recovery on its southern border, while
its overriding interest in Asia was to open markets, especially financial
markets. The IMF was the “honest broker” that delivered these US demands
for institutional and other policy changes.’

(Wade, 2000, pp.8–9)

The ‘Asian crisis’ threw into sharp relief just how important within the world
economy international finance had become. Specifically, it demonstrated
that the growth of ‘hot money’ – that is, funds invested by Western banks
and speculators with an extremely short time-horizon, which can be moved
in and out of economies with great speed in search of profits – contained
a potential for immense economic volatility. The movement of ‘hot money’
was not necessarily linked to national or regional economic performance
and could be prompted by perception as much by evidence. It was the rapid
outflow of ‘hot money’ that triggered the Asian crisis. The crisis prompted
8
One longstanding
official debates about creating international mechanisms to regulate the
proposal, sponsored by US
flow of ‘hot money’ but these faded once the crisis passed.8 economist James Tobin, is
By the end of the 1980s, the US appeared to have regained the economic that cross-border currency
and political initiative. Spurred on by military expenditure, its dominance transactions should be
taxed to cool down ‘hot
of new information technologies and the power of its banks within rapidly
money’ and raise funds for
globalising financial markets, its economy seemed to have recovered.9 development.
The West had ‘won’ the cold war. Eastern Europe abandoned communism 9
Harvey (2003: 134) and
in 1989 as the failings of state planning and the ‘command economy’ others have written about
became impossible to ignore and the desire for greater political freedom the emergence of a ‘Wall
overwhelming. Within two years, the Soviet Union had itself broken up Street/ Treasury complex’
into its component parts. Everywhere, economic systems based on central within the US.

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Chapter 6: The rise and fall of the era of national development

planning began a tortuous and difficult transition from socialism to


capitalism. Across Africa and Asia, radical and Marxist regimes deprived
of Soviet support abandoned the struggle and also made their peace with
capitalism (and, in some cases, forms of democracy). Even the Chinese
Communist party finally decided to let loose the entrepreneurial energies
of its people – while retaining its monopoly over political power.
The establishment of the World Trade Organization in 1995 symbolised
for some the definitive triumph of free-market capitalism on a world scale.
But it had already become clear by that time that the undeniable victory of
capitalism over communism, of the West over the East, in the cold war had
not meant the ‘end of history’, as Fukayama (1989) famously described it.
While the US has been able to restructure its economy and recover some of
its international competitiveness, not least through periodic devaluations
of the dollar to boost its exports, its revival has placed considerable strains
on the economies of some of its competitors, in particular Germany and
Japan, for whom the last decade has been one of economic stagnation.
The US economic recovery is not invulnerable. The US has long imported
much more than it exports. This trend shows no sign of reversing.
Investment levels are heavily dependent upon borrowing the savings of
other countries. Household levels of debt in the US have risen, leading
to concerns that the US economy is now dangerously dependent upon
consumer spending (Glyn, 2005, pp.5–13). The European Union has
created a single market and currency which has led some in the US to fear
that its economic pre-eminence may come under threat from a revived
Europe in the years ahead, but the Euro remains plagued by doubts about
its credibility. The rise of China and India, both of whom have enjoyed
dramatic economic growth over the past decade, has also created the
prospect in some minds of a challenge to US hegemony from new and,
until recently, unexpected quarters. Commentators have begun to imagine
what the future might look like if creditors were to withdraw their loans to
the US or if the dollar lost its position as the global currency. As happened
to Britain during the period 1890–1939, some have started to wonder if
the US’s moment of greatest imperial reach in the context of the ‘war on
terror’ has coincided with a ‘tipping point’ in terms of its economic pre-
eminence. The occupation of Iraq since 2003 is seen by some analysts as
part of a strategy to maintain US global hegemony by securing control of
the oilfields of the Middle East.10 While many of these projections may 10
For a stimulating
be alarmist or premature, it is surely significant that intimations of US analysis of the
underlying forces
mortality have increased.
at work behind
contemporary shifts in
Conclusion US policies and politics,
see Harvey (2003). See
The era of ‘national development’ between 1945 and the early-1970s was especially pp.62–86.
consistent with the interests at that time of the US; it would not have
happened had this not been the case. Its eclipse during the 1970s similarly
reflected US interests and its ability to enforce them. Of course, to talk of
end of the era of ‘national development’ does not mean that all countries
lost the power after that time to shape and direct their economic policies
as they saw fit. The increasing weight of international finance within the
world economy over the last 20 years has imposed some constraints on
the ability of advanced capitalist countries to promote growth through
state intervention and the stimulation of demand. However, the advanced
capitalist world has been able, to varying degrees, to sustain tariffs,
subsidies and other means of support to their industrialists and farmers
in the new era of economic globalisation. The WTO has so far been

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171 Introduction to international development

ineffective in challenging this. In addition, a small number of ‘Newly


Industrialising Countries’, mainly in Asia, have been able to maintain
considerable ‘developmental autonomy’. It is those (former?) Third World
countries – the majority – that fell into the abyss of chronic indebtedness
in the 1970s and 1980s which have lost much of their ‘developmental
autonomy’. The 1980s and 1990s truly marked the end of the era of
‘national development’ for them.
Can these countries reclaim their ‘developmental autonomy’ in the future?
Some might say ‘no’. But we think it might be wiser to reserve judgment.
The rise of the ‘anti-globalisation movement’, amorphous as it may appear,
suggests that opposition to the perceived injustices of the new era of
economic globalisation is growing. In 2003, China, Brazil, India and South
Africa mobilised a coalition of developing countries against further trade
liberalisation through the Doha ‘development round’ of the World Trade
Organization, although there are grounds for doubt that such coalitions
can be sustained.11 Since 2000 numerous countries in Latin America have 11
Lockwood (2005) and
seen leftist governments elected that have declared their commitment to others have noted that
China and India occupy
recovering their ‘developmental autonomy’. The government in Argentina
(and dominate) precisely
effectively defaulted on large parts of its debt in 2005 without the roof those rungs of the
falling in on its head. An overstretched US has (so far) been unable to industrial ladder (cheap
prevent this incubating in its own backyard. Within the Bretton Woods and simple industrial
institutions and amongst leading Western donors, the idea that the state products) that African
has an important role to play in development has gradually regained some countries need to climb
onto if their economic
ground – although not enough, according to their many vocal critics.
growth rates are to
If the present era of economic globalisation is itself to end, it will probably reach a point where they
be the result of a combination of growing resistance in what used to be can start seriously to
reduce poverty.
called the Third World and a deep economic crisis within the advanced
capitalist world (including the US), in the coming years. In order for these
changes to lead to a qualitative transformation of the lives of the millions
that still live in poverty in Africa, Asia and Latin America, they would also
have to be accompanied by the emergence of new ‘developmental’ political
coalitions at the regional and national levels. It is quite possible that
security or environmental factors such as climate change may play a role
in triggering such a crisis. This scenario is far from inevitable – however,
historical experience suggests that it is perfectly possible.

Activity 4
Get out your crystal ball. What do you see? How likely is the scenario for the future that
we have outlined? Is it even to be desired? Spend some time thinking about how you
would answer these questions before moving on to the next part of the course.

Reminder of your learning outcomes


Having completed this chapter, and the Essential readings and activities,
you should be able to:
• describe and evaluate the nature of the anti-colonial independence
movements that inherited political power following the end of
European imperialism
• describe and evaluate the impact of the ‘Long Boom’ and the Cold
War on both the advanced capitalist countries and the countries of the
Third World
• describe and evaluate the crisis of the 1970s and its consequences
through to the present day

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Chapter 6: The rise and fall of the era of national development

• on the basis of the account provided in this chapter, place our earlier
discussions of ideas of development and theories of development in a
firmer historical context.

Sample examination questions


1. ‘The prime movers of international development since 1945 have been
American values and interests.’ Discuss.
2. Why did some Third World countries successfully develop during the
post-war period while others did not?

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171 Introduction to international development

Notes

92
Part III: Key themes in development policy and practice

Part III: Key themes in development


policy and practice

In Part III we focus in more depth on key themes which illustrate some of
the most important current dilemmas of development faced by developing
countries today. Four themes are discussed:
• Late development and industrial policy (Chapter 7)
• Agrarian change and rural development (Chapter 8)
• Governance and public policy (Chapter 9)
• The international order (Chapter 10).
‘Late development’ – or the ability for developing countries to become
‘developed’ is a fundamental element of development policy today
(Chapter 7). Agricultural and rural development includes, for example, the
‘Green Revolution’ that has sought to relieve rural poverty and enhance
agricultural productivity since the 1950s (see Chapter 8). Politics and
international political regimes also highly influence development within
any one country (Chapters 9 and 10).
These themes have featured in earlier chapters, but they require more
attention. Part III allows you to reflect on and apply the wider historical
and theoretical insights you acquired in Part II. Of course, international
development involves many more themes than these alone, such as
environment, gender and humanitarianism. This initial course, 171
Introduction to international development does not address these
other themes in detail, but provides a platform for further courses.

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171 Introduction to international development

Notes

94
Chapter 7: Late development and industrial policy

Chapter 7: Late development and


industrial policy

Essential reading
Desai and Potter (2008) Chapters 4.3 to 4.5.
Todaro and Smith (2014) Chapters 3, 4, 14 (sections 14.1–14.3) and 15.

Further reading
Amsden, A. The Rise of ‘The Rest’. Challenges to the West from Late-Industrializing
Economies. (Oxford and New York: Oxford University Press, 2001) [ISBN
0195139690].
Chang, H-J. Kicking Away the Ladder: Development Strategies in Historical
Perspective. (London: Anthem, 2002) [ISBN 1843310279 (pbk)].
Chang, H-J. (ed.) Rethinking Development Economics (London: Anthem, 2003)
[ISBN 1843311100]
Lall, S. Learning from the Asian Tigers: Studies in Technology and Industrial
Policy. (Basingstoke: Macmillan, 1996) [ISBN 0333674111].
Mathews, J. Dragon Multinational: A New Model for Global Growth. (Oxford:
Oxford University Press, 2002) [ISBN 0195121465].
Wade, R. Governing the Market: Economic Theory and the Role of the Government
in East Asian Industrialization. (Princeton: Princeton University Press, 1992)
[ISBN 0691117292].
Woo-Cumings, M. The Developmental State. (Ithaca: Cornell University Press,
1999) [ISBN 0195170598].

Concerning trade and industrialisation


Hoekman, B., A. Mattoo and P. English (eds) Development, Trade, and the WTO:
A Handbook. (Washington: World Bank, 2002) [ISBN 082134997X].
Krueger, A. ‘Trade Policy and Economic Development’, American Economic
Review 87(1) 1997, pp.1–22.

Challenging reading
Cline, W. ‘Can the East-Asian Model of Development be Generalized?’, World
Development 10(2) 1982, pp.81–90.
Polidano, C. ‘Don’t Discard State Autonomy: Revisiting the East Asian
Experience of Development’, Political Studies 4(9) 2001, pp.513–27.
Poteete, A. ‘Is development path-dependent or political? A reinterpretation
of mineral-dependent development in Botswana’, Journal of Development
Studies 45, 2009, pp.544–71.
Sachs, J. and A. Warner, ‘The Big Push, Natural Resource Booms and Growth’,
Journal of Development Economics 59, 1999, pp.43–76.

Classic texts
Hirschman, A. The Strategy of Economic Development. (New Haven: Yale
University Press, 1958) [ISBN 0300005598].
Myrdal, G. Asian Drama: An Inquiry into the Poverty of Nations. (New York:
Pantheon Books, 1972) [ISBN 0394470869].
Rostow, W. The Stages of Economic Growth: A Non-Communist Manifesto.
(Cambridge: Cambridge University Press, 1960) [ISBN 0521409284].

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171 Introduction to international development

Aim and learning outcomes


The aim of this chapter is to provide an outline of historical approaches
to industrialisation and late development, and to outline some of the key
options for late development adopted by developing countries today.
By the end of this chapter and having completed the Essential readings
and activities, you should be able to:
• explain the meaning of late development, and its different implications
for the relative power of the state and economy, and implications for
domestic versus international investment
• describe the different approaches of import-substitution and export-
oriented industrialisation, and ways that these can be combined
• provide examples of countries that have adopted different paths to
industrialisation, including the importance of the ‘Newly Industrialised
Countries’ (or Economies) of East Asia
• explain the crucial relationship between domestic industrialisation and
international trade
• construct some preliminary arguments of your own for strategies for
late development, and ways of combining international trade with the
emergence of internationally competitive industry.

Introduction
‘Late development’ refers to deliberate attempts to achieve economic
growth and development within countries that are relatively less
developed than others. Usually, late development involves creating
industrialisation, or the growing specialisation in producing manufactured
goods. The means of achieving late development are a key concern for
many less developed countries today, particularly concerning the selection
of industrial policy. Indeed, ‘late development’ – and the changes this
brings to all sectors of society and the economy of a country – can be a
fundamental change affecting various aspects of development.
Industrialisation, and late development, however, are highly controversial
topics. In the past, economists used to believe that both would follow
from increasing exposure to capitalist growth. During the nineteenth
century, however, many industrialised countries began to argue that
industrialisation required protecting new industries from international
trade and competition, and this idea was adopted by more and more
independent countries after the Second World War. Since the 1980s,
however, protectionism has been criticised, and developing countries
have been encouraged to open their economies to trade and international
investment. These topics remain some of the most important policy issues
for international development.
This chapter summarises the key debates concerning routes to late
development through industrialisation, with implications for industrial
policy and trade.

Industrialisation
Meaning and early approaches
Industrialisation is often used interchangeably with ‘economic growth’ or
‘development’. The term industrialisation, however, specifically refers to
a shift towards industrial production by enterprises using labour, capital
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Chapter 7: Late development and industrial policy

and raw materials to add value. These units usually employ a number of
people and are based on mechanisation. Industrialisation means shifting
from the most basic level of industry – primary industry, (or the extraction
of raw materials such as minerals and logs) – towards secondary industry
(manufacturing) and tertiary industry (services). These higher levels of
industry can add more value than primary industries because they deal
in finished goods, than simply producing raw materials. Together, these
changes may result in a higher level of wealth created in a country. As
discussed in earlier chapters, many economists have defined economic
growth as lying in the gradual accumulation in the national stock of
capital – or goods that are used to make other goods, such as machinery,
factories, or infrastructure. Investment in capital goods will eventually lead
to a relative increase in the ratio of capital to labour within a country’s
productive capacity.
In the early days of development thinking in the nineteenth and early-
twentieth centuries, many policymakers believed that the best route to
economic growth and industrialisation lay in capitalist investment and
free trade. Many pro-market governments and organisations believe this
today. Indeed, there is much evidence that industrialisation and trade can
increase the dynamism of an economy. Some assumptions were made
about how industrialisation can assist in economic growth.
First, classical economists like Adam Smith and David Ricardo showed
how increased specialisation or division of labour can enhance
returns made by manufacturing. Economic returns can be increased even
further when there is technological upgrading (or the improvement of
the levels of technology and infrastructure within a country). Furthermore,
the increased level of economic activity created the multiplier effect –
the generation of financial activity as money circulates around an economy
every time it is used to purchase products or services.
In time, these assumptions led to endogenous growth theory. (The
word ‘endogenous’ refers to something that occurs from within its own
forces, rather than ‘exogenously’ through the assistance of outside forces.)
Endogenous growth theory optimistically argued that economic growth
would result simply from the actions of entrepreneurs and businesses
acting rationally within a single economy or without government
assistance. As each company invested, then economic growth and
industrialisation would occur as each investor sought the most profitable
opportunity, and the greatest chance to gain competitive advantage over
each other. It was believed this kind of investment would also generate
more income to spend on quality goods, which, in turn, would provide
more incentives for other investors to become involved in industrialisation.
A further belief was that industrialisation would, in turn, increase
agricultural productivity by absorbing excess agricultural labour, and by
providing capital goods for agriculture.
During the twentieth century, this underlying belief in industrialisation
lay beneath mainstream approaches to development or modernisation
theory (see earlier chapters). As discussed earlier, modernisation
sought to improve social and economic development through means
such as increasing economic growth, industrialisation and urbanisation.
Usually, these objectives implied that the government had to invest
widely in industry, as a way to overcome significant structural problems
in developing countries such as the so-called ‘dual economy’. This
idea, used mainly by the economist W. Arthur Lewis, was adopted widely
during the 1950s–60s, and assumed that most developing countries were
characterised by two large sectors: a modern, high-productivity sector,
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171 Introduction to international development

and a traditional, low-productivity, low wage sector (usually agriculture).


Typically, rural sectors lacked modern economic markets and infrastructure.
Rural areas were also considered to have an oversupply of labour because
of large families, and the lack of alternative employment opportunities for
family members, which meant that labour markets could not work efficiently
because there were no economic incentives either to increase or decrease time
spent on agricultural activities. (Economists call this the opportunity cost
of labour engaged in agriculture.) Under these conditions, withdrawing
labour from agriculture is unlikely to decrease productivity. But investing in
new industrial activities, especially in urban and coastal areas away from
rural hinterlands, would help draw labour away from agriculture, and help
contribute to the modern sector. Modernisation theory assumed that wealth
created by industry would ‘trickle down’ from richer people and prosperous
regions to the less rich regions and social sectors. In turn, this would also help
the transition from labour-intensive to capital-intensive forms of production.

Box 1
The ‘Big Push’ and early approaches to industrialisation

Some of the early approaches to industrialisation placed greatest responsibility


on national governments to create the means of industrialisation. One early
approach was the notion of the Big Push, which was based on the work of
the Polish-born economist, Paul N. Rosenstein-Rodan in 1943 concerning
the industrialisation of the relatively backward Eastern Europe. The concept
described the approach of the governments during the early twentieth
century, who believed that industrialisation may only take place when
demand for efficient, highly-industrialised, products and services provided
economic incentives to replace traditional forms of manufacturing such as
steel and bricks. The Big Push refers to the efforts by the state both to invest
in industrialisation, and educate and encourage citizens to buy products,
and become involved in assisting industrialisation. The government also
encouraged private investors to do the same. In this way, industrialisation was
seen to be the ‘initiator’ of economic growth in general. The concept of the
‘Big Push’ was most popular in the mid-twentieth century when international
trade and investment was much smaller than it is today, and when national
governments were considered the most effective way to undertake economic
planning and investment. In more recent analysis, the term Big Push is not
used as often, and economists believe that governments should play a more
facilitative role in allowing private investors to invest in secure economies,
rather than take the lead by investing public funds. One of the ways that the
state can now be a facilitator is through building human capital as well as
infrastructure, or physical capital. Human capital is the skills base and training
of the workforce, and its ability to use or develop new technologies. Physical
capital includes items such as roads, telecommunications and airports, which
make it more attractive for investors to construct successful industries.

A major model of industrialisation under modernisation is the concept


of ‘growth centres’ (after the work of Myrdal, 1957 and Hirschmann,
1958). This approach encouraged investment in specific locations, often
by the establishment of free trade zones or industrial districts. Manaus in
northern Brazil is one well-known example. The aim of growth centres
was to encourage wealth to ‘trickle down’ from accelerated investment
to less developed surrounding rural areas. This approach was popular in
countries with large agricultural hinterlands, where there was relatively
little industrialisation, and which were seen to be priorities for economic
growth. A similar scheme was the ‘Transmigration’ of Indonesia, which
sought to relocate some millions of poor people from central Indonesia
(and the islands of Java and Bali in particular) to outer islands such as
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Chapter 7: Late development and industrial policy

Sumatra and Kalimantan from the 1960s to the 1980s. This scheme was
primarily to address population imbalances in this large country, but the
new settlements in the outer islands were also designed to encourage
economic growth and limited forms of industrialisation.
Yet, perhaps the most typical model of the Modernisation period was the
so-called Stages of economic growth approach, which was pioneered
by the American, Walt Rostow (1960). This approach refers to the belief
that development is an evolutionary process, which undergoes successive
levels of economic productivity, efficiency and consumption. Rostow
argued that all economies could be classified within one of five categories:
the traditional society, the preconditions for take-off, the take-off, the drive
to maturity, and the age of high mass-consumption.
Rostow defined each stage of growth as follows. A traditional society
had limited production functions, based on pre-Newtonian science and
technology. The preconditions for take-off were initially developed during
Western Europe in the late seventeenth and early eighteenth centuries
as the insights of modern science were adopted in both agriculture and
industry, and by the expansion of world markets. Take-off is the watershed
that defines when industrial development as a cumulative process begins,
and when growth becomes a normal condition. In Britain, the first country
to undergo the Industrial Revolution, one important trigger for take-off
in the late eighteenth century was technological innovation following
the development of new machinery. But social and political factors also
were important, and take-off has also been linked to the emergence of a
political group of entrepreneurs prepared to take industrial modernisation
seriously, and who could influence government policy. During take-off,
the rate of effective investment and savings may rise from five per cent
of GNP to 10 per cent or more, especially where preconditions for take-
off required much initial investment in capital goods (such as claimed in
Russia and Canada). The drive to maturity is when investment rises to
some 20 per cent of GNP, and where industry makes a transition to high
levels of technological advancement, also allowing growth in production
to exceed population growth. Industry may also shift in emphasis from
coal, iron and heavy engineering industries of the railway phase, to
machine tools, chemicals and electrical equipment. Finally, the stage
of high mass-consumption was characterised by a shift in industry to
services and consumer durables, a high level of urban population, and per
capita income that easily covered basic requirements of shelter, food and
clothing.
The lesson of the stages of growth model was that countries seeking
industrialisation should see each stage as a necessary process before
reaching the final goal of ‘high mass-consumption’. Like the ‘Big Push’
approach, it required coordination from an overseeing state, and the
helping hand of much investment in key industrial sectors. These early
models, however, have been challenged by newer approaches to industrial
policy. These are discussed later in this chapter. But before this, it is
important to note various other implications of industrialisation for
overall development.

Activity 1
Make a list of the key factors underlying industrialisation in some industrialised countries
such as the United Kingdom or Germany, the USA, Russia and Eastern Europe. When did
they industrialise? How far did the national government shape industrial policy?

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171 Introduction to international development

Implications for other aspects of development


Industrialisation has therefore formed a key part of development strategies,
and has formed the usual route to ‘late development’. But there are many
other implications of industrialisation that can influence social and political
aspects of late development.
First, the success of industrialisation within any country is closely linked
to its ability to trade and to restrict trade with other countries. Trade is
important to industrialisation for various reasons. Countries undergoing
industrialisation need to have markets to sell these goods. If the goods
made are for exports, then there is a need to sell these goods (i.e. trade)
overseas. If the goods are for domestic markets, then there is a need to
ensure that customers buy these goods rather than similar goods made by
foreign exporters. Successful industrialisation therefore requires expanding
markets for one’s own exports, and restricting some foreign imports. But not
all countries can influence international trade in the ways they desire. In the
past, countries with empires (such as France and Britain) usually organised
trade so that their colonies would export raw materials to manufacturing
industries located in the mother countries. Under these conditions, most
wealth creation was achieved in the mother country, and colonies were
unlikely to develop manufacturing industry of their own. Sometimes, the
mother country placed restrictions on the growth of manufacturing industry
in colonies. Indeed, dependency theorists (see earlier chapters) argued
that these unequal terms of trade would result in a long-term withdrawal
of wealth from developing or colonised countries. As a result, dependency
theorists argued that developing countries should use trade protection
as a way to reverse the flow of profits from developing to developed (or
colonial) countries. Trade protection is usually achieved by imposing tariffs
or quotas to foreign imports. (Trade protection is defined and discussed in
more detail later in this chapter.)
Second, industrialisation also has social and political implications for
the state and society. A formal policy of state-led industrialisation, such
as the Big Push (see Box 1 on p.96), requires a strong and large state to
coordinate investment and to oversee state-owned enterprises. (These kinds
of state-industry collaborations were common in socialist countries such
as in Eastern Europe until the 1990s.) Yet, industrialisation also implies
changing society from a largely rural peasantry into two large groups: an
entrepreneurial middle class, and a larger working class to work in factories.
According to Karl Marx, this social transition under industrialisation
was a necessary and progressive transition that would end poverty and
‘idiocy’ of rural life and increase productivity. But this transition would
always be exploitative of working classes until the capitalist controllers of
industrialisation were removed and replaced with a socialist system. Many
capitalist investors or governments therefore feared that industrialisation
would lead to the social circumstances where this revolution might occur,
and hence tried to ensure that industrialisation was deliberately steered
away from situations where working classes would grow resentful. The
theorist, Walt Rostow, for example, argued that a modern capitalist
consumer state could be achieved under industrialisation (see the discussion
of ‘stages of economic growth’ above). Indeed, Rostow was also a national
security adviser for US President Johnson during the Vietnam War, where
the USA hoped its interventions would result in a pro-West, pro-trade
capitalist state, rather than a communist state. In later years, the term
developmental state has been used to describe a government that
actively seeks to achieve late development (Woo-Cumings, 1999).

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Chapter 7: Late development and industrial policy

Third, industrialisation implies diverse additional social changes.


Agricultural development may be overlooked as countries pursue
industrial growth. Cities may grow as investment and trade take place
in concentrated zones – frequently cities on the coast. Industrialisation
may therefore be associated with, and be a cause of, urbanisation.
Industrialisation may also be associated with the attraction of large female
working populations in factories, and hence industrialisation is a gendered
process. In South East Asia, for example, factories producing textiles and
electronics commonly employ large numbers of women workers. Some
have argued that women workers are attracted to factories because they
represent new employment opportunities, and hence may be a sign of
progress. Some critics, however, have suggested that women are employed
mainly because they usually earn smaller wages than men; are less likely
to form militant trade unions; and may not become entrenched in jobs
because they may leave to raise families. Indeed, industrialisation may
reinforce gender stereotypes, such as women having ‘nimble fingers’ for
textiles. The rise of a gendered, urban and industrial population has, in
turn, led to shifts in responsibilities for women, and consequently changes
in political activities, and in health risks experienced by men and women.
And fourth, industrialisation has also, of course, been associated with
industrial pollution, and rapid use of local natural resources. Some people
have argued that industrialisation must necessarily increase pollution
in the short term, but that this will decline over time as wealth becomes
available for investing in cleaner technologies. This notion is called the
environmental Kuznets curve, after the economist Paul Kuznets. But
there is relatively little evidence of this transition occurring endogenously
without government action, or pressure from environmental groups. Some
developing countries are now seeking to undertake leapfrogging, which
means undertaking industrialisation with clean technologies, which will
mean they can avoid generating high levels of pollution in the short term.

Box 2
Defining the developmental state

The developmental state has been described as a shrewd political administration


that combines the powerful potential of private-sector investment with careful
guiding from central government to ensure maximum national economic growth.
Some of the specific policies to be adopted can include:

•• the government prioritises rapid economic development largely through


export production (see discussion below)

•• the government allows private enterprise to undertake much investment


(though the government may invest in its own right); and it tries to attract
private investment in priority areas identified by the government

•• the government influences private capital through instruments such as credit


control, import protections and investment incentives

•• the government uses an administration or agency staffed with people


knowledgeable about industry and who are willing to prioritise industrial
above political objectives

•• this economic bureaucracy is linked with public–private research institutes,


science and technology innovation and business associations

•• these changes in industrial management and investment may be


accompanied by other social changes such as the decline in power of
agricultural or land-owning classes in favour of industrial groups.

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171 Introduction to international development

The strength of a developmental state comes largely from the ability of the
state to regulate both industry and competitors to political power, such as those
coming from landed agricultural classes. In turn these also encourage a high
level of technological innovation, and the ownership of these innovations by
domestic companies, rather than international investors. Ultimately a successful
developmental state may become seamlessly involved in various aspects
of social and economic change in a country as it transforms from historic
dependence on agriculture to industry. For example, in Japan, the Ministry
of Economy, Trade and Industry has been a key player in building long-term
economic competitiveness through alliances between industry and government.
In South Korea, the chaebols are large, conglomerate family-controlled firms of
South Korea characterised by strong ties with government agencies, which have
influenced rapid economic growth.

(See Polidano, 2001; Woo-Cumings, 1999)

Late industrial policies


In recent years, academics and policymakers have challenged the early
approaches to industrialisation associated with modernisation theory.
In particular, people have argued that industrialisation does not happen
spontaneously with the introduction of capitalism and trade, and
that governments need to shape investment and trade more carefully.
Moreover, there is also a need for governments to manage the process
of technological innovation as a key way to achieve competitiveness
in the global marketplace. Late development therefore needs careful
management through the use of industrial policies.
During the twentieth century, two main forms of industrial policy became
popular. Today, these models are not seen to be self-exclusive, and can
coexist. But it is worth describing each approach in detail first.

Import-substituting industrialisation (ISI)


The first main policy for late development was import-substituting
industrialisation (ISI). ISI attempted to achieve industrialisation by
developing new domestic industries to supply goods previously supplied by
imports. ISI was based on two key interventions. First, trade policies needed
to place relatively high tariffs on imports to make them more expensive than
domestic goods. Secondly, the state needed to intervene inside countries
to generate and protect new domestic industries (also known as ‘infant
industries’). ISI did not reduce trade in total, but gave more emphasis to
industrial producers for the domestic market than for export producers.
The objectives of ISI were fourfold. First, governments wanted to provide
goods for the population, and it was assumed that exports would not grow
rapidly enough to meet demand. Second, governments felt that ISI was
necessary in order to develop comparative advantage in manufacturing
industries, or else they would remain forever involved in primary production.
The third reason was to protect infant industry. The fourth was so-called
elasticity pessimism. Elasticity pessimism is the premise that (at least in the
case of primary commodities) income elasticity of demand is low, which means
that export-led production would only serve to decrease prices, and therefore
undermine commercial growth and not generate foreign exchange earnings.
ISI became popular in the mid-twentieth century, especially for some of the
larger developing countries with large domestic populations (where goods
could be sold), and with governments that were happy to adopt a position
that was relatively isolated from international trade. Unsurprisingly, some

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Chapter 7: Late development and industrial policy

of the greatest proponents of ISI were the Soviet Union, and later China,
which were socialist countries content to be protectionist against foreign
imports and to maintain many state-owned enterprises. Brazil and India
were examples of non-socialist (yet centrally planned) countries that
adopted ISI.
ISI was considered to be a successful policy until the 1970s, when
some disadvantages became clear. The emphasis on import substitution
meant that export industries were not developed. In turn, this meant
that countries were not able to generate foreign exchange in sufficient
quantities to pay for capital goods. Moreover, import-substitution polices
were soon shown to discourage export growth as producers were given
little incentive to expand capacity more rapidly than domestic demand
growth, as international prices were much lower than the prices of the
sheltered domestic market. Supporting infant industries also placed great
financial and administrative strains on the state. A further problem was
that ISI tended to slow down processes of technological innovation, and
many countries dependent on ISI – such as India or the Soviet Union –
became characterised by goods that were considered old-fashioned, or
uncompetitive with others produced in exporting economies.
By the 1980s and early 1990s, most developing countries began to tone
down their attachment to ISI, and to introduce trade liberalisation and
incentives for both import-substituting and export-producing sectors.

Export-oriented industrialisation (EOI)


Export-oriented industrialisation is usually held up as the opposite
strategy to ISI, although both have rarely been adopted in isolation. EOI
is a strategy for industrialisation based on expanding industries that are
designed to manufacture exports. It has been most famously associated
with the East Asian Newly Industrialised Countries (NICs) such as South
Korea, Taiwan, Hong Kong and Singapore (and more recently, Thailand,
Indonesia and Malaysia, and now India and China). Please note, these
countries are sometimes also called Newly-Industrialised Economies (or
NIEs), which should not be confused with the so-called ‘New Institutional
Economics’ (NIE), which is discussed in Chapter 6.
EOI emerged as a viable industrialisation strategy in the late 1960s,
and has been associated with rapid growth in income and levels of
development in these countries. Many factors account for its success.
Exporting (i.e. trading) goods allows countries to sell surplus production,
and to expand manufacturing capacity to levels larger than their own
domestic capacity. (It is worth noting that the first NICs were usually
smaller countries in physical size and population than the large ISI
countries such as India and Brazil.) Investing in manufacturing for export
also requires exports to be technologically advanced and competitive,
which means that governments had an incentive to ensure a high level
of capital investment, and consequently create industries that are more
capital intensive than labour intensive. The multiplier effects for foreign
trade are also generally high, and can therefore help general levels
of spending in an economy. Efficient and internationally competitive
manufacturing also creates ‘spillover effects’ such as the development of
a skilled workforce (human capital), competitive management, and the
production of domestic science and technology.
EOI became popular in the 1980s, especially because of changes in
international financial regulation, such as trade liberalisation and
the adoption of structural adjustment. (Structural adjustment was
a macro economic strategy aiming to reduce international debt in many
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171 Introduction to international development

developing countries, and aiming to increase the production of tradable


goods that could help countries pay off debt and achieve more financially
secure economies.) However, there are three main questions concerning
its long-term contribution to late development. First, it is not clear
how far success in economic growth was due simply to free trade and
exports, or whether the governments were more interventionist than this.
Secondly, some critics have argued that EOI alone is a form of ‘shallow
industrialisation’ because it allows countries to become specialised in
assembling manufactures, but not necessarily changing deeper social and
political structures. And thirdly, it is not clear how far industrialisation
through EOI should be based on domestic industries or foreign-owned
companies. These controversies are now discussed in more detail.

Is there an industrialisation model?


The two approaches of ISI and EOI have caused many analysts to propose
that one, rather than the other, must be better for industrialisation, or that
there is a clear ‘model’ of late development that can be copied by other
countries. Indeed, the World Bank claimed that the NICs proved that EOI
and free trade assist late development.
But, many people agree that there is no ‘one’ model for industrialisation.
First, it is clear that the dichotomy between ISI and EOI is too simplistic,
and many governments have adopted elements of each at the same time.
Secondly, the East Asian NICs did not actually engage in free trade as
much as the World Bank has suggested. Instead, governments intervened
carefully by channeling investment into key sectors (such as high value
products); and by developing human capital, such as through a highly
trained workforce. Governments also formed political coalitions with
important groups of indigenous investors, which allowed a high level of
business representation in governments. The book, Governing the Market by
Robert Wade (1990) showed that the government of Taiwan had selectively
influenced exchange rates and tariffs to produce short-term benefits
for their own industries, and invested in indigenous technological
capability and trained workforces. Thirdly, some critics also pointed
out that the most ardent proponents of free trade such as the USA have
themselves depended upon government intervention and protection of
infant industries in the past. And fourthly, it is not possible to explain
different rates of economic growth in countries such as India and Taiwan
through industrial policies alone. Other questions of culture, countries’ size,
and history are also important. For example, the proximity of South Korea
to Japan meant that Japanese investors were willing to invest in Korea more
readily. These findings contradict some of the World Bank’s statements that
EOI resulted from neo-liberal policies such as the operation of a free market,
free trade, and the absence of notable state intervention.

Activity 2
Make a list of the different characteristics and principles of EOI and ISI and record the
advantages and disadvantages of each. Try to identify examples of where there is overlap
between ISI and EOI in some countries.

Managing trade and investment


In the twentieth century, much discussion of late development focused on
how countries could achieve industrialisation, usually by encouraging their
own indigenous industries. Yet, with the rise of EOI, industrial policies are
now very closely linked to trade. Successful EOI requires governments to
place careful trade barriers around infant industries, yet avoid barriers
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Chapter 7: Late development and industrial policy

against their own goods in foreign countries. A further factor is how far
industrialisation for exports needs to involve indigenous industries, or
whether industrialisation can be achieved by allowing foreign-owned
companies to invest in your own country.
Managing trade and industrialisation has depended on various factors.
First, trade is dominated by historic patterns in the terms of trade.
The terms of trade are the extent to which each country benefits from a
trade. As discussed above, most benefit accrues to the country that adds
most value to a product by manufacturing. Countries with histories of
colonialism have usually found it hard to develop the manufacturing
industry necessary to add value to their products. Moreover, some
powerful trading nations have resisted imports from developing countries.
For example, the USA and EU continue to subsidise their own agricultural
products such as cotton and sugar, and hence it is difficult to trade in
agricultural produce with these countries. Similarly, the USA imposes
quotas and other protectionist measures on steel or high technologies.
Second, the encouragement of industrialisation and trade at the same
time may also depend on the development of competitive companies and
industries from developing countries themselves. These are increasingly
called ‘transnational corporations (TNCs) from developing economies’.
This is also controversial. Until the 1980s, many governments – including
those in Europe and North America – supported large indigenous
companies (or so-called ‘national champions’) as a crucial part of achieving
national economic success. Increasingly, however, governments see the
success of indigenous companies as less important than the attraction of
Foreign Direct Investment (FDI – i.e. investment by foreign countries
and companies in manufacturing factories and infrastructure in developing
countries). Consequently, many governments now believe that – for
particularly competitive and complicated goods – it is no longer necessary
to develop their own indigenous companies, but instead should attract
investment from foreign companies within its own national territory.
One reason for this change is that many governments realise that they
cannot compete in certain industries where other countries have achieved
competitive advantage. A further reason is that many transnational
corporations are now so internationally based that they can no longer be
seen as national.
Many TNCs from developing economies remain specialised in natural
resource industries (such as Malaysia’s Sime Darby). Some are involved
in manufacturing (such as Hyundai and Daewoo from Korea, or Proton
from Malaysia). Often they conduct business within their own regions
because of similar cultural and historical conditions and levels of economic
development – for example some TNCs from Taiwan and Korea are now
investing in China and Vietnam. Consequently, Latin American TNCs
often tend to operate mostly within Latin America, and East Asian firms
within Asia, although they are gradually becoming more prevalent in
European and North American markets. Some high-tech firms from such
NICs as Taiwan and South Korea (such as Samsung) have invested heavily
in the USA and some European countries. Many firms from developing
economies internationalise to become TNCs primarily because they serve
as subcontractors and/or suppliers in the global production networks
orchestrated by large global corporations. As these global corporations
are penetrating into emerging markets, they demand their suppliers and
subcontractors to follow them to the host economies. However, these
companies also experience pressures of rising costs, and consequently may
relocate their production facilities to nearby developing economies. For

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171 Introduction to international development

example, many Asian TNCs have relocated from the NICs into China since
the 1980s.

Activity 3
Make a list of 10 transnational corporations from developing economies and their key
specialisations. What does this tell us about who these countries trade with, and which
countries have been most successful in producing them?

Not all countries, however, have been successful in attracting FDI or in


developing their own TNCs. Many African countries, for example, remain
relatively unattractive for foreign investors, as the result of various
factors. For example, investors may be attracted to a country if it has a
large domestic market with money to spend on manufactured goods.
(Many African countries are less wealthy than Asian or Latin American
countries.) Investors want to see countries with highly skilled workforces,
or with local resources in science and technology (so-called technological
capability). Local governments should also demonstrate their willingness
to support industrialisation by providing infrastructure or political stability.
Export-led industrialisation is also encouraged when countries have clear
access to transport and markets, rather than being landlocked countries.
Clearly, for these reasons, many African countries will be less attractive to
investors than countries in Asia and Latin America. A further reason for a
failure to invest in some African countries is state failure, and even chronic
civil war.
Some statistics show the differential progress made by different regions in
recent decades. Table 1 shows that East Asian and Pacific countries have
increased the proportion of manufacturing in GDP from 25 per cent to 32
per cent over three decades, while this proportion has stagnated or fallen
in other world regions. In addition, Table 2 shows that for East Asian
and Pacific countries, the proportion of manufactures in total exports
has increased from about 32 per cent to about 83 per cent over the same
period. These statistics show the growth in terms of trade for Asia (i.e. an
ability for these countries to gain control over manufacturing industries).
But they also show the lack of progress in Africa.

1970 1980 1990 2000


East Asia & Pacific 24.54 30.55 28.47 31.79
Latin America & Caribbean 26.87 28.47 .. 20.98
Middle East & North Africa .. 8.68 12.28 ..
South Asia 13.55 15.78 16.71 15.61
Sub-Saharan Africa 16.43 15.97 17.36 14.20
Table 1: Manufacturing, value added (per cent of GDP)
Source: World Bank; World Development Indicators, Washington, 2002

1970 1980 1990 2000


East Asia & Pacific 32.09 44.75 68.46 82.74
Latin America & Caribbean 15.85 19.62 33.98 48.46
Middle East & North Africa 4.88 6.14 15.05 14.41
South Asia 48.21 53.76 71.24 ..
Sub-Saharan Africa 18.85 12.41 .. 36.13
Table 2: Manufactured exports (per cent of merchandise exports)
Source: World Bank; World Development Indicators, Washington, 2002

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Chapter 7: Late development and industrial policy

From the 1980s, the removal of trade restrictions (i.e. trade liberalisation)
became a usual expectation in economic policy, either by indigenous
governments or because of conditionalities imposed by the World Bank and
International Monetary Fund as a basis for structural adjustment. The World
Trade Organization (WTO) – the successor to the General Agreement on
Tariffs and Trade (GATT) – has also supported this. Trade liberalisation has
been encouraged because it is assumed that taxes and quota restrictions
increase the cost of manufacture; taxes on exports discourage export
earnings; and protecting manufacturing reduces opportunities for export
diversification. Many pro-market, or neo-liberal economists have urged
these principles strongly. However, other theorists have proposed that
some developing countries should continue to protect certain industries,
especially where they affect poor people.
In the late 1990s, some developed countries also proposed a Multilateral
Agreement on Investment (MAI), which was designed to generate universal
rules for investment overseas. Neo-liberal proponents of the MAI suggested
that it would accelerate global investment, and assist many developing
countries in achieving rapid growth where investment took place. Critics,
however, argued that the MAI would reduce the possibility for developing
countries to impose their own industrial policies, and hence shape the
development of their own industries against foreign domination. The MAI
was rejected at the Seattle WTO meeting in 1998, although the idea is still
being discussed.

Box 3
The World Trade Organization

The World Trade Organization (WTO) was established in 1995 as the successor
to the General Agreement on Tariffs and Trade (GATT). GATT was signed by 23
governments in 1947 and was for some decades the most important organisation
that regulated international trade in goods and services using a system of
objectives and rules laid out in agreements among member governments.
The WTO was established as a more efficient and international organisation,
encompassing a wider range of topics, and in 2005 had 148 member states.

The WTO has immense significance for late development because countries have
to agree to certain principles of free trade before they can gain accession to the
WTO. Once accepted they can benefit from higher levels of international trade,
as well as call upon the resources of the WTO to protect themselves in trade
disputes with other countries. The most important agreement is the principle
known as most-favoured-nation (MFN) treatment. This requires member
countries to show no discrimination between trading partners. Grant someone a
special favour (such as a lower customs duty rate for one of their products) and
you have to do the same for all other WTO members.

The WTO is headed by a Ministerial Conference meeting at least every two


years, as well as a variety of sub-committees that review trade principles and
disputes. Some recent disputes have been concerning the extent to which
developed countries such as the USA or the European Union can protect their
own agricultural and cotton industries by imposing high import tariffs, or how far
rapidly developing countries such as China should relax historic protection around
their own infant industries. Some critics have claimed that the WTO is effectively
a ‘club for rich countries’ which aims to increase markets for their own goods,
and which is not interested in protecting developing countries. The WTO denies
this, and points to the role it plays in helping developing countries achieve trade
justice. Certainly, recent experience has suggested that the WTO cannot easily
dictate terms to the more powerful states, and that these can resist some of its
recommendations by taking time to implement trade liberalisation. The most
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171 Introduction to international development

recent WTO meetings in Cancún (Mexico), Doha (United Arab Emirates),


and Seattle (USA) have been associated with strong disagreements between
different countries about tariffs, and international agreements have been difficult
to achieve. As a result, the WTO may not be as powerful as some critics have
suggested. Indeed, some other critics have argued that the WTO needs to be
made both more representative of poorer countries and more powerful. See WTO
website: www.wto.org/

Activity 4
Write a few sentences on how trade liberalisation can help or hinder late development.
List two or three basic reasons how late development has been easier to achieve in East
Asia than in most countries of Africa.

Conclusion
Late development is – for many developing countries – the main option
for increasing economic growth and reducing poverty. Usually this
has implied industrialisation. But during the twentieth century, it was
clear that industrialisation must also involve making decisions about
trade and international investment, often from private, rather than
public, companies. Late development is therefore intricately entwined
with important questions of which countries are allowed to enter
specific markets; how far each country can attract international private
investment; and which sectors of society are most likely to benefit first
from late development policies.
Some economic theorists like to suggest that industrialisation and late
development can result simply from opening borders to trade (so-called free
trade), and the lack of government regulation or intervention of industry.
Evidence, however, suggests that the best examples of late development, the
East Asian NICs, have used clever strategies of international trade combined
with domestic policies of building human and physical capital to encourage
long-term investment in globally competitive industries. There is no one
specific model of late development, but the combination of international/
domestic policies is the source of debate in most developing countries.

Activity 5
Write a short definition – a maximum of five sentences – of what you think are the most
important principles of late development, and how the circumstances of each country
might influence these.

Reminder of your learning outcomes


Having completed this chapter, and the Essential readings and activities,
you should be able to:
• explain the meaning of late development, and its different implications
for the relative power of the state and economy, and implications for
domestic versus international investment
• describe the different approaches of import-substitution and export-
oriented industrialisation, and ways that these can be combined
• provide examples of countries that have adopted different paths to
industrialisation, including the importance of the ‘Newly Industrialised
Countries’ (or Economies) of East Asia
• explain the crucial relationship between domestic industrialisation and
international trade

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Chapter 7: Late development and industrial policy

• construct some preliminary arguments of your own for strategies for


late development, and ways of combining international trade with the
emergence of internationally competitive industry.

Sample examination questions


1. How have approaches to industrial policy changed during the
twentieth century, and why?
2. What are the advantages and disadvantages of allowing foreign
investment to generate industrialisation?
3. Is there a transferable model for how the Newly Industrialised
Countries of East Asia achieved industrialisation?

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171 Introduction to international development

Notes

110
Chapter 8: Agrarian change and rural development

Chapter 8: Agrarian change and rural


development

Essential reading
Desai and Potter (2008) Section 3 (Chapters 3.1 to 3.8).
Todaro and Smith (2014) Chapter 9.

Further reading
Ashley, C. and S. Maxwell ‘Rethinking Rural Development’, Development Policy
Review 19(4) 2001, pp.395–425, and other papers in this special issue.
Ellis, F. Rural Livelihoods and Diversity in Developing Countries. (Oxford: Oxford
University Press, 2000) [ISBN 0198296967].

Rural development and livelihoods


Chambers, R. Rural Development: Putting the Last First. (London: Longman,
1983) [ISBN 0582644437].
Francis, E. Making a Living: Changing Livelihoods in Rural Africa. (London:
Routledge, 2000) [ISBN 0415144965].
Mosley, P. Green Revolution in Africa. (London: Routledge, 2005)
[ISBN 0415074649].
Shiva, V. The Violence of the Green Revolution: Third World Agriculture, Ecology
and Politics. (London: Zed, 1991) [ISBN 0862329655].

Land reform
Bryceson, D., C. Kay, and J. Mooij Disappearing Peasantries? Rural Labour
in Africa, Asia and Latin America. (London: ITDG Publishing, 2000)
[ISBN 1853394777].
Deininger, K. ‘Negotiated Land Reform as One Way of Land Access: Initial
Experiences from Columbia, Brazil and South Africa’ in De Janvry, A. et al.
(eds) Access to Land, Rural Poverty and Public Action. (UNU/WIDER and
Oxford University Press, 2001) [ISBN 0199242178] Chapter 13, pp.315–48.
Ghimire, K. (ed.) Land Reform and Peasant Livelihoods: the Social Dynamics of
Rural Poverty and Agrarian Reforms in Developing Countries. (London: ITDG
Publishing, 2001) [ISBN 1853395277].

Famines and food security


De Waal, A. Famine Crimes: Politics and the Disaster Relief Industry in Africa.
(Oxford: James Currey, 1997) [ISBN 0852558104].
Drèze, J. and A. Sen Hunger and Public Action. (Oxford: Clarendon Press, 1989)
[ISBN 0198283652].
Sen, A. Poverty and Famines: An Essay on Entitlement and Deprivation. (Oxford:
Clarendon Press, 1981) [ISBN 0198284268].

Challenging reading
Bebbington, A. ‘Capitals and capabilities: a framework for analyzing peasant
viability, rural livelihoods and poverty’, World Development 27(12) 1999,
pp.2021–2044.
Chenery, H., M. Ahluwalia, C. Bell, J. Duloy, and R. Jolly Redistribution with
Growth: Policies to Improve Income Distribution in Developing Countries in
the Context of Economic Growth (London: Oxford University Press and the
World Bank, 1974) [ISBN 019920070X].

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171 Introduction to international development

Das, R. ‘The Green Revolution and Poverty: A Theoretical and Empirical


Examination of the Relation between Technology and Society’, Geoforum
33(1) 2002, pp.55–72.
Goetz, A.M. and R. Sen Gupta ‘Who takes the credit?: Gender, power and
control over loan use in rural credit programmes in Bangladesh’, World
Development 24(1) 1996, pp.45–63.
Keen, D. The Benefits of Famine: A Political Economy of Famine and Relief in
South-Western Sudan, 1983–89. (Princeton: Princeton University Press,
1994) [ISBN 0691034230].

Aim and learning outcomes


The aim of this chapter is to provide an outline of the most important
general approaches to rural development and agrarian change in recent
years, and how these approaches have changed. In addition, this chapter
also introduces some debate about the origins of famine, and the social
and political factors underlying food security.
By the end of this chapter and having completed the Essential readings
and activities, you should be able to:
• explain the meaning of rural development, and how approaches to this
have changed in recent decades
• describe the difference between land reform and agrarian reform, and
how either of these can form elements of rural development
• discuss the meaning and diversity of the term ‘livelihoods’ and how
these may be affected by land and agrarian reform
• explain problems of famine and food insecurity by referring to
problems of livelihoods and social and political factors of rural
development, rather than food shortage alone
• develop your own views concerning the best routes to rural
development and food security, by seeing the social, economic and
political factors underlying rural development.

Introduction
Agrarian change and rural development are important concerns for
international development. Many countries depend on agriculture for
economic activity. Famine – one of the most serious crises affecting
developing countries – is inherently linked to agrarian problems. Many of
the world’s poorest people live in rural areas.
Agrarian change may occur for various reasons. Major transitions,
occurring over a period of years, have been called agrarian
transformations, and refer to historical shifts in production systems,
economic exchange and social relations within agriculture, often as
the result of climatic and demographic changes, or sudden political or
economic events. For example, many areas of Asia and Africa are gradually
transforming from systems of smallholder, and shifting cultivation towards
permanently cultivated industrial forms of agriculture such as oil-palm
plantations or irrigated rice fields. Agrarian change may also be induced
by the actions of governments or development agencies, through activities
such as land reform and agrarian reform. Some of these interventions
may include technological operations to change the nature of agriculture
used for food production, or socio-economic practices to allow poor
people greater ability to access rural resources and livelihoods. Changes
are occurring in farming systems (comprising transitions from small to
large farms or peasant to capitalist structures), and in the provision of
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Chapter 8: Agrarian change and rural development

agricultural inputs and access to markets (such as agricultural research,


marketing boards and technical assistance).
The combined practices known as agrarian change and rural development
have changed over time. This chapter focuses on the different ways
governments or agencies may intervene to achieve rural development, and
discusses implications for rural livelihoods, famine and food security.

Land reform and agrarian reform


Perceptions of rural development under Modernisation
For many classical development theorists, rural areas presented the most
entrenched barriers to modernisation and development. Rural areas were
commonly considered ‘backward’ or ‘undeveloped’ because of physical
remoteness, and a lack of infrastructure, education and other facilities.
Commonly, during most of the nineteenth and mid-twentieth centuries,
rural areas were also homes to ethnic minorities and diverse traditional
cultural practices, which were seen to impede modernisation.
The economist, W. Arthur Lewis, used the term ‘dual economy’ to refer to
the sharp differences that existed between the modernising industrial and
urban zones of developing countries, and the rural interiors. They argued
that rural areas suffered from a series of characteristics that made usual
economic theory impossible to apply. For example, in rural areas, normal
labour markets would not operate because of a relative oversupply of
labour. In such areas, people tended to work only on food crops designed
to feed the family; families tended to be large; and all members of a
family (including children and older parents) would work when necessary.
Cumulatively, these factors made few incentives to increase agricultural
productivity, or for agricultural labour to be sufficiently rewarded. Making
rural areas more economically efficient would therefore require various
social changes, such as transforming rural labour markets, reducing
population growth, and allowing market incentives to work.
There were also social theories about rural development. The agrarian
theorist, A.V. Chayanov, used the term, ‘drudgery’ to refer to the lack of
incentives to work for longer hours on agricultural land. This term also
indicated how rural life was considered harsh. Another writer, Daniel
Thorner, used the term ‘the depressor’ in the 1950s to refer to a ‘complex
of legal, economic and social relations uniquely typical of the Indian
countryside’ that he thought had the effect of hindering the improvement
of agricultural productivity. The ‘depressor’ referred to the strongly divided
nature of land rights, or access to resources that existed in rural India,
which has meant that a small class of landlords who performed no actual
agricultural labour came to control a very substantial share of agricultural
production. Consequently, poor farmers who actually tilled the soil had
no surplus money to invest in land or other resources, while landlords
also had no incentive to improve the productivity of land because they
achieved an income from rents alone. Rural development was therefore
closely linked to the social systems of land ownership, and the class and
caste systems associated with these.

Box 1
Intermediate classes

Intermediate classes are a grouping of people who occupy social and economic
niches between poor peasants and profit-taking capitalists. They are usually small
farmers or self-employed traders, and they occupy important (and frequently

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171 Introduction to international development

controlling) positions in supplying inputs or marketing of crops. The term was


first used by the Polish economist, Michael Kalecki in 1967 to refer to people
in Egypt and Indonesia, but it has since been applied elsewhere, and especially
India. At the time, Kalecki believed that the existence of intermediate classes
pointed optimistically to the coexistence of capitalism (or labour management)
with economic growth experienced by poor peasants. Members of the
intermediate classes make their way by combining rewards from labour and
rewards from risk-taking. However, some other scholars – notably the British
political economist, Barbara Harriss-White – have argued that intermediate
classes can form a variety of barriers to development for the poorest peasants,
or can be held in position by becoming allied with the extension of the state in
rural areas. Many members of intermediate classes can benefit from government
payments or extension of power; or can participate in black market activities
or unregulated business activities. Over time, the existence of intermediate
classes has been seen to be a crucial element of rural reform in many developing
countries, and the kinds of social and political problems that can occur alongside
challenges of increasing agricultural productivity, education and sanitation.

As a result of these kinds of problems, many early development thinkers


blamed famines or chronic poverty on the general level of backwardness, or
inefficient social practices that prevailed in rural areas. Some of the obvious
early approaches to reversing these trends were land reform, agrarian
reform and technological upgrading, such as through the Green Revolution.

Activity 1
Think of some typical developing countries and identify five ways in which levels of
rural economic development have changed during the last 100 years. Have these
changes demonstrated a transition from a ‘backward’ and remote economy to a more
industrialised and integrated economy? If so, how have these changes occurred?

Land reform
For many years, land reform was considered the most fundamental way to
address problems of entrenched poverty and lack of economic productivity
in rural areas in developing countries. Land reform implies a change in
how land ownership is distributed, recorded and administered, usually in
rural areas. Achieving land reform, however, is difficult because it usually
reduces the power and wealth of large landowners, who commonly have
close ties with local or national authorities. In Latin America, until the
mid-twentieth century, some 20 per cent of landowners possessed 80 per
cent of the land.
There is no universal definition of land reform, but it is usually assumed
that land reform redistributes property rights over land from large
landowners to peasants and/or landless rural labourers. Frequently this
involves the intervention of the state. The purpose of this redistribution
is to provide more resources to the greater proportion of the rural
population, and to reduce the control over land and agricultural
production by one small sector of society.
The causes of land reforms can differ (see Bryceson et al., 2000; Ghimire,
2001). In some countries, land reforms have been implemented because
of peasant revolts and/or major social revolutions. For example, peasants
played a key role in the Mexican revolution of 1910–17 that led to a major
land reform particularly during the populist government of President
Cárdenas in the 1930s. In several African countries like Algeria, Kenya
and Tanzania land reforms resulted from struggles for independence and
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Chapter 8: Agrarian change and rural development

decolonisation after the Second World War. Peasants were actively involved
in socialist revolutions in developing countries such as Angola, China,
Cuba, Ethiopia and Vietnam. Yet, sometimes, major land reforms were
implemented by the state without major peasant involvement. This occurred
in South Korea and Taiwan after the Second World War, where (under USA
encouragement) both governments undertook reforms in order to avoid the
kind of communist-style revolution that had occurred in China.
Two types of land reform are often discussed: distributivist or reformist,
and collectivist or radical. A distributivist land reform redistributes property
rights to families, usually within a capitalist system. Here, landlords usually
receive compensation for their expropriated assets. The beneficiaries tend to
be the tenants who already were working on the farm or sometimes other
smallholders or agricultural wageworkers. Commonly, the state subsidises
this redistribution, and beneficiaries are rarely asked to pay the full value
of the land. Examples of this type of land reform are those undertaken in
Bolivia, Ecuador and Colombia in Latin America; Egypt, Kenya and South
Africa in Africa; and South Korea, Taiwan, the Philippines, India and
Pakistan in Asia.
Collectivist land reform is more radical, and involves establishing producer
cooperatives (also known as collectives or communes), and/or state farms.
Historically, this strategy was used by socialist regimes. Usually, all land is
expropriated and landlords receive no compensation. This reform can also
target smaller, capitalist landlords, who do not own large areas of land,
but who may employ wage-labour, or engage in entrepreneurial activity.
The beneficiaries may be former tenants and rural wage-labourers and
smallholders. But under this reform, all land is collective property. Examples
of this type of land reform include those of Russia, Cuba, Chile (during the
Allende government of 1970–73) and Nicaragua (during the Sandinista
government from 1979–90) in Latin America; Algeria, Angola, Ethiopia and
Mozambique in Africa, and China, North Korea and Vietnam in Asia. Of
course, variations of these two models exist. For example, in Peru between
1969 and 1980, the military governments undertook collectivist reform,
although under a market-based economy. In Tanzania, the ‘villagisation’
program of the late 1960s may be considered another example of a mixture
of collectivisation and redistribution. Socialist countries have also recently
largely decollectivised, or reversed, their land reforms because of the general
decline in this kind of state socialism.
Property rights can differ widely between men and women, indicating
the differential access of women and men to owning, using, or gaining
from property. In largely agrarian contexts, arable land is usually the
most valued property, and can determine livelihood options, social status
and political voice. Rights in property can be defined as claims that are
legally and socially recognised and enforceable by an external legitimised
authority, such as a village-level institution or the state. Yet, differences
may exist in terms of how rights are formally expressed, and how they are
actually carried out. For example, among the Tamils of Jaffna in Sri Lanka,
a married woman needs her husband’s consent to sell land she legally
owns. Different societies may have different rules for transferring property
rights. In much of South Asia, inheritance is generally patrilineal (ancestral
property passed through the male line), whereas in southern and eastern
South Asia matriliny (ancestral property passed through the female line)
exists in Meghalaya and Kerala in India, and bilateral inheritance (property
passing through and to both sons and daughters) in Sri Lanka. Gender
relations may therefore have a strong influence on how local systems of
land ownership and access affect poverty and development opportunities.

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171 Introduction to international development

Since the 1980s, however, large-scale land reform has become less
important as a way to induce rural development. Rather than relying on
the state and large, top-down programs of redistribution, international
institutions such as the World Bank have preferred to focus on
macroeconomic structural adjustment and economic liberalisation as a
way to increase financial incentives and agricultural productivity. One
recent trend has been the ‘market-led’ form of land reform, in which
land may be redistributed via trading between buyers and sellers (see
Deininger, 2001). This has occurred in Brazil, Colombia and South Africa,
although critics have suggested that these new reforms have had little
impact on long-standing inequalities between large and small landholders.
In general, rural development now increasingly focuses on other means of
addressing poverty and productivity than land reform alone.

Agrarian reform
Agrarian reform is another key part of government initiatives to address
poverty and agricultural productivity in rural areas. Agrarian reform refers
to the supportive measures governments may introduce to make land
reform more effective, such as the supply of adequate credit, technical
assistance, marketing facilities and other supportive measures to the
reform sector farm enterprises. These measures were proposed when it
was clear that land reform alone was unable to have the redistributive, or
long-term development impacts hoped of it.
One classic example of agrarian reform is the Grameen Bank of
Bangladesh. This bank was set up in 1976 by a Bangladeshi economics
professor to assist the rural poor in Bangladesh, which had just achieved
independence from Pakistan in 1971. The bank aimed to reduce the
historic dependence of rural farmers on traditional moneylenders, by
offering them money in order to generate productive self-employment. In
this way, the bank was one of many means of overcoming the traditional
problems of the rural sector in South Asia.
The bank adopted an innovative system of lending to small groups of
five people, without the need for collateral. Each person had mutual
responsibility for the repayment of loans. Peer group pressure ensures low
transaction costs on small loans and high rates of repayment. The bank
was successful, and it was formally established as a ‘specialised financial
institution’ in 1983, with support from the government, public banks and
the International Fund for Agricultural Development (IFAD). In particular,
the bank specialised in lending to landless women to finance primarily
non-farm activities such as small-scale trading or animal rearing.
The Grameen Bank has been held up as an example of micro-credit and
finance initiatives that can make a large impact on the opportunities
for rural poor people. (The term, ‘micro-credit’, refers to the lending of
relatively small amounts of money to poor people.) But critics have also
suggested that this kind of micro-credit has displaced attention away
from the structural causes of poverty, and that it remains unavailable to
the poorest people (those with chronic poverty). Moreover, men can still
control loans made to women. It may also trap poor people into activities
that have low productivity. Despite these concerns, the Grameen Bank
is still a visible and popular example of local agrarian reform, which has
been copied elsewhere.

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Chapter 8: Agrarian change and rural development

The ‘Green Revolution’


One of the most significant development interventions linked to agrarian
reform is the so-called ‘Green Revolution’. This was the attempt to relieve
rural poverty and enhance agricultural productivity using new technologies
and mechanisation in developing countries. The ‘revolution’ started in
the 1950s, and was most apparent in the 1960s, although technological
upgrading and innovation continues today (see Mosley, 2005).
The most common technological innovation associated with the Green
Revolution was the introduction of improved seeds, commonly referred
to as high-yielding varieties (HYVs), which typically yielded twice the
amount of grain to each unit application of fertiliser and water compared
to traditional cultivars for at least the first 70kg of nitrogen fertiliser per
hectare. Other innovations included changed agronomic practices such as
means of soil preparation, planting depth and density, and new weeding
and harvesting practices. It also included using more fertilisers and other
agrochemicals (e.g. herbicides), mechanisation (such as tractors) and
enhanced irrigation. These, in turn, tended to displace traditional seeds
and cultivation practices.

Annual average per capita food production (index based on 1989–91 = 100)
1961/5 1966/70 1971/5 1976/80 1981/5 1986/90 1991/5 1996/00
Africa 109.0 108.7 106.8 99.7 94.6 97.6 100.4 103.8
Developing
countries
Asia 70.4 72.2 73.4 77.7 87.5 96.4 108.9 124.5
Developing
countries
Latin America 83.0 86.4 86.3 93.6 97.0 99.0 103.6 112.9
and Caribbean
Developing 76.8 78.8 79.5 83.3 90.3 97.1 106.8 119.4
countries total
Table 1: Per capita food production trends 1960–2000
Source of all statistics: FAO (2001). FAOSTATS [online]. Available from: http://
apps.fao.org
There is little doubt that the Green Revolution greatly increased the
capacity of the world’s farming systems to produce food. Table 1 shows
that most areas of the world have become more self-reliant in food
production since the 1960s, with the exception of Africa. Asia has
benefited the most, and some countries, such as Bangladesh, China, India,
Indonesia, Malaysia, Pakistan and the Philippines, have now become
net food exporters, rather than dependent on food aid and imports.
In particular, the increased production of food staples, such as rice,
maize (corn) and wheat increased supply of food to urban areas, and
reduced local prices of these. The Green Revolution was also associated
with the establishment of various international agricultural research
centres supported by the World Bank-based Consultative Group for
International Agricultural Research (CGIAR), such as the Wheat and
Maize Improvement Centre (CIMMYT) in Mexico, and the International
Rice Research Institute (IRRI) in the Philippines. These organisations
performed research on new seeds and farming techniques, and continue
research today.

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171 Introduction to international development

Yet, the Green Revolution has also been criticised. First, the revolution
benefited consumers of food by increasing supply and reducing prices. It
did not help food producers, who found that farm-gate prices for corn,
wheat and rice declined in real terms in every decade since 1950, reducing
income for many farmers. Secondly, the Green Revolution has not been
applied everywhere. It has been most applied in irrigated, cereal cropping
areas, but not in rain-fed agriculture or marginal, mountainous zones.
Thirdly, some have claimed the Revolution forced smallholders off the land
empowering larger and richer landowners. This fear was countered by the
fact that, as discussed, many large farmers experienced declining cereal
prices. Plus, many social changes in rural areas are not simply explained
by the Revolution alone, but instead refer to wider transitions such as
changes in land tenure following urbanisation, or political campaigns
to control land occupied by smallholders. Fourthly, the Revolution has
been blamed for being environmentally unsustainable by depending
on irrigation and inorganic agrochemicals. HYVs have narrowed the
gene pool that is cultivated, making HYV farming more vulnerable to
pests and pathogens, often encouraging farmers to increase the use of
agrochemicals. Fifthly, some – especially the Indian activist Vandana Shiva
– have claimed the Revolution has encouraged farmers to reject traditional
cultivation practices, and become more dependent on imported techniques
from developed countries.
New agricultural technologies are still sought, and remain controversial.
Undoubtedly, the new methods of the Green Revolution have increased
overall food production, with significant impacts on reducing poverty and
famine. But such interventions are not politically or socially neutral. More
recent approaches to rural development have given attention to social and
political factors rather than food production alone. These are now discussed.

Activity 2
In one developing country of your choice, make a list of recent land reforms, agrarian
reforms and new technological improvements in agricultural production. It is important
to have at last one example of a developing country’s experience of land and agrarian
reform, and to see how the specific circumstances and history of that country affect rural
development.

Newer approaches to rural development


History and meaning of ‘rural development’
The term, ‘rural development’ is now considered a more general, and
socially sensitive, approach than land reform, agrarian reform, or
technological interventions. The term began to be adopted in policy circles
in the 1970s. Rural development was then proposed to integrate more
rural people into the market economy, or to achieve both redistribution of
resources and economic growth simultaneously (see Chenery et al., 1974).
The evolution of rural development coincided with various criticisms of
previous development interventions. For example, critics claimed too
many development ‘projects’ were restricted to seeking change within
project boundaries only, rather than influencing more widespread social
or economic problems. Political analysts also argued that many state
interventions in rural economies – as, for example, through settlement
schemes or programs of ‘villagisation’ in Tanzania – have been concerned
with extending control over rural people. Unsurprisingly, rural people
commonly resisted such schemes.

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Chapter 8: Agrarian change and rural development

Another important insight was the concept of ‘urban bias’, after the
work of Michael Lipton. Urban bias is a tendency to prioritise urban areas
and people in development plans, either through allocating resources
to urban zones, or through an implicit focus on urban areas (whether
knowingly or not) by policymakers. Linked to this, Robert Chambers
identified other forms of ‘bias’ in rural development, such as the focus
upon easily accessible villages; research undertaken only in the dry
season; local political influences on projects; and the tendency to speak
only to village headmen, rather than poorer villagers, including women.
Chambers (1983) argued that development interventions should ‘put the
last first’, by deliberately seeking ways to represent poor people in the
planning process, and constantly questioning how development work
might not acknowledge vulnerable or ‘voiceless’ people. Chamber’s work
helped reorient rural development from ‘top-down planning’ towards
understanding how poor people make livelihoods.
Marxist critics, meanwhile, criticised the use of market forces in rural
areas. Commercialisation of rural economies may lock vulnerable rural
producers into poverty, especially when land ownership was concentrated
into a few hands. In the 1970s, the Indian economist Krishna Bharadwaj
pointed out that small producers are often ‘compulsively involved’ in
markets, if they have to market their produce at harvest time, in order
to repay debts and to raise further loans, when they do not have a true
surplus (above their own consumption needs) to sell. Consequently,
agrarian reform or technological interventions, which increased farmers’
involvement in trade, may reinforce traditional inequalities between social
groups. Rural development should therefore seek to isolate poor farmers
from these trade flows.
Despite these arguments, however, during the 1980s and 1990s, economic
stabilisation and structural adjustment placed new pressure on rural
economies to produce tradable, exportable goods. For neo-liberal theorists,
the introduction of market forces and the need to compete internationally
was a positive developmental impact, because it, at last, introduced
market efficiency to rural zones. (For example, in Africa, the elimination of
marketing and processing monopolies was seen to be positive because the
monopolies had been used to reduce prices to growers and provide large
rents to officials and politicians.) However, critics argued that structural
adjustment all too often led to greater impoverishment of the most
vulnerable rural people. As a consequence, the World Bank increasingly
introduced ‘safety nets’ for the rural poor, which would seek employment-
intensive growth, while also providing basic social services for poor people
and minimum social security.
Rural development has therefore transformed from a focus on state-led
land reform in the early twentieth century, to more diverse approaches.
Most rural areas are now integrated to some degree with national and
international trade and markets. But there is now greater emphasis on
agricultural extension services for new technologies and agrarian support.
At the same time, in some areas, there has been a gradual encouragement
of involving poorer rural people in the development process itself, through
so-called participatory development. As discussed in earlier chapters,
participatory development seeks to allow poor people to collaborate in the
purposes and manner of interventions. In turn, this has meant a greater
focus on rural livelihoods.

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171 Introduction to international development

Rural livelihoods
The concept of ‘livelihoods’ refers to the social means necessary to make
a living. The approach was first proposed by Robert Chambers in the
1980s, and later developed by development agencies, including the UK’s
Department for International Development. A ‘livelihoods’ approach
focuses on the social relations of economic production, as it affects poor
people. Rural livelihoods are the means by which different individuals can
gain access to livelihoods, or can diversify their livelihood strategies.
Unlike earlier approaches to agriculture and poverty in rural areas,
the livelihood approach does not focus on technology or overall food
production, but instead on the social means by which employment,
incomes, and resources are shared, allocated and accessed. In practice,
it recognises that individuals attempt to shape their livelihoods within
wider social units, including households, lineages, clans, castes, classes
and ethnic groups. In poorer countries, the assumption is that individuals
operate within a context of vulnerability. People put together multiple
livelihood strategies in order to diffuse risk and achieve a range of
different goals. These strategies are dynamic (i.e. they change over time)
and they are unlikely to be achieved in full. Moreover, some goals and
strategies will clash with one another. But a lack of livelihoods, or the
means to achieve livelihoods, effectively describes the poorest, or the
most vulnerable members of societies. It also highlights where social or
economic practices are most exclusionary, and therefore might need to be
addressed.
For example, a diverse livelihood strategy adopted by one household might
include intensive farming of land near the family home, combined with
a variety of non-agricultural activities such as local trading in goods, or
the occasional provision of services such as sewing, taxi driving or wage-
labour. Some of these activities may include short-term migration by some
members of the household to urban areas, especially during dry seasons
when agricultural work is less common. Migration of male family members
may mean that women become household heads, or become more
involved in specialised economic or agricultural activities. In Thailand,
for example, many taxi drivers in Bangkok come from the rural northeast,
where they have permanent homes and farms. They come to Bangkok to
drive taxis for a few weeks or months at a time before returning to their
farms to plant or harvest crops.
A livelihoods approach to development may often mean adopting some
of the concepts developed by Amartya Sen in describing poverty and
vulnerability. For example, people may avoid vulnerability (and hence
attain livelihoods) if they can access and enhance six sets of assets or
‘capital’ (see Bebbington, 1999). Human capital is generally considered
to include educational and practical skills, good health and the ability
to work. Natural assets consist of those resources and resource flows
– including land, water, forests and biodiversity – that help to secure
livelihoods. Physical capital refers to the basic means of production
and infrastructure, including transport, shelter and communications.
This might be poorly developed in remote rural locations. Financial
capital comprises the savings, supplies of credit, remittances, pensions,
entitlements, and so on, available to different persons. Social capital refers
to the networks and relationships of trust that are built up by membership
of groups. Cultural capital refers to those assets that provide people with
a sense of identity or self-worth, including feelings of protection, affection
and being free.

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Chapter 8: Agrarian change and rural development

An expansion of this approach is so-called ‘sustainable livelihoods’, which


means a livelihood that can withstand shocks (such as a drought or financial
crisis), and protect environmental resources for long-term development.
For example, a sustainable livelihoods approach might see three keys ways1 1
The three key
to secure livelihoods under conditions of resource scarcity, such as dryland strategies are:
rural areas, or mountainous zones. Under this approach, environmental (i) agricultural
protection is mainly aimed at preserving the economic productivity of intensificaton (such as
increasing the number
resources, rather than in keeping resources free of human impact.
of crops per year, adding
fertilizers, etc.), (ii)
Box 2 economic diversification
Sustainable livelihoods (such as getting involved
with non-agricultural
The two British development thinkers, Robert Chambers and Gordon Conway are activities as well as
generally attributed with starting the debate about livelihoods and sustainable agriculture), and
livelihoods as effective means of achieving rural development. In 1992, they (iii) limited forms of
wrote: ‘A livelihood comprises the capabilities, assets (including both material migration (such as
temporary, circular,
and social resources) and activities required for a means of living. A livelihood
migration to cities to
is sustainable when it can cope with and recover from stresses and shocks and seek work during times
maintain or enhance its capabilities and assets both now and in the future, while when agriculture is not
not undermining the natural resource base.’ The purpose of this approach is to demanding of labour).
shift thinking about rural development away from macroeconomic concerns
about food or commodity production towards the opportunities and dilemmas
faced by poor rural people. Some important concepts under this approach include
assets (which are the physical and social properties that allow people to achieve
a livelihood), capitals (defined above as various kinds of asset that can enhance
strategies for livelihoods), and capabilities (the specific ability of an individual to
achieve livelihoods). All of these can form resources for poor people, which were
not previously identified as resources. Moreover, the approach looks positively at
what is possible rather than negatively at how desperate things are.

One implication of the sustainable livelihoods approach is that it focuses upon


two meanings of the word ‘sustainable’. On one hand, this means ‘resilient’
against economic and political shocks such as war, drought or pestilence. One
the other hand, it means ‘environmentally protective’ in the sense of protecting
natural resources. Yet, this environmental meaning need not necessarily mean
defining environmental resources in the context of outsiders, but for ensuring a
long-term livelihood for local people. Under a sustainable livelihoods approach,
farmers may legitimately use resources such as forests or fisheries, on a
sustainable basis, yet in ways that some environmental policies may wish to
restrict. In other words, under a sustainable livelihoods approach, local people
are often given priority in defining which resources should be used sustainably
for which purposes. In many countries this approach is reflected in so-called
‘community forestry’, which aims to integrate holistic forest conservation
with limited use by local communities. In some countries such as Indonesia
and Thailand, this type of community forestry has been criticised by some
environmentalists for allowing too much access to forests by local people.

In principle, the sustainable livelihoods framework offers various strengths


for poverty and vulnerability policies that are lacking in its forerunners. First,
it recognises the multiple and cross-sectoral character of people’s livelihoods,
rather than seeing these as rooted in the various historic sectors of the rural 2
See Ellis (2000); plus
economy. Secondly, it is highly focused on vulnerability, and hence connects Chambers, R. and R.
Conway ‘Sustainable
with approaches from humanitarian agencies. Thirdly, it provides an excellent
Rural Livelihoods:
foundation for making connections between micro-level circumstances and Practical Concepts for
macro-level policies that are not just based on economic variables like prices and the 21st Century’, IDS
exchange rates. Fourthly, it also connects with a more locally defined form of Discussion Paper No.
environmental protection aimed at providing resources for poor people, rather 296, Brighton: Institute
than protecting landscapes for the benefit of people not living in such regions.2 of Development Studies,
1992.
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171 Introduction to international development

A livelihood approach aims to focus development interventions onto the


needs and experiences of the rural poor in ways that are relevant to poor
people. Yet, critics suggest this approach tends to overlook the larger scale,
structural causes of poverty, such as global trade patterns, or entrenched
social inequality.

Activity 3
Make a list of the various income sources available to a rural zone in a developing country
of your choice. How have these income opportunities grown in recent years? Which
farmers adopt these alternatives, and which do not? Are there differences in gender?

Famines and food security


Many of the debates concerning agrarian change and rural development
are shown by changes in how famines have been explained and
approached in recent decades. Famine refers to a relatively sudden event
involving mass mortalities from starvation within a short period. Famine
is typically distinguished from chronic hunger, understood as epidemic
nutritional deprivation on a persistent basis (as opposed to seasonal
hunger, for example).
In the past, famines were often linked to two main causes. The first was
that they were an ‘act of God’, or an uncontrollable response to short-
term crises at certain times and places as the result of population growth.
This idea was linked to the writings of Thomas Malthus about population
growth, and the tendency for population to grow geometrically (e.g. 2,
4, 8, 16, etc.), but food production only to grow arithmetically (1, 2, 3,
4, 5, etc.), thus leading inevitably to a collapse in population. The second
proposed cause was a shortage in food, leading to a rise in mortality.
Commonly, this shortage was assumed to be the result of mismanagement,
or inefficient agricultural practices in rural areas.
Both of these causes have now been questioned. Famines are now linked
with various avoidable social, economic and political factors. Plus, many
famines have occurred – paradoxically – in locations with overall food
surpluses. These new ideas have led to two key innovations in explaining
famines. First, it is necessary to understand how individuals can secure
access to food (or so-called food security). Second, we must explain
famines in terms of short- and long-term social and political factors.
The work of Amartya Sen is now considered to be seminal in defining
these new approaches to famine. Although trained as an economist, Sen
was one of the first analysts to point out that famines did not occur in
functioning democracies. Crucially, he argued that the existence of famines
should not be linked to overall national food production, but to the social
relations governing the access of individuals to food, or the resources that
allow people access to food.
Sen (1981) identified some important concepts. An ‘endowment’ is
a direct ownership of a resource, such as food, money to buy food, or
the land to grow food. An ‘entitlement’ is a more indirect means of
achieving food, such as access to a job (which might allow someone
access to money to buy food), or access to a landowner (who might
allow the person to grow food, or to be given food, etc.). Together,
this is known popularly as the ‘entitlements approach’, and it shifts the
explanation of famines from macro measurements, such as general levels
of food production, towards the social systems of vulnerability in any one
society. Sen also went on to define different types of entitlement, such as
property entitlement (which controls access to land), or trade entitlement

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Chapter 8: Agrarian change and rural development

(concerning access to commerce). The process of entitlement mapping,


or E-mapping, traces how endowments are achieved, and/or transformed
into entitlements

Which Did food Occupation of Did they lose Any Any direct Any trade
famine? availability most victims endowments? entitlement entitlement entitlement
collapse? shifts? failure? failure?

Bengal 1943 No Rural labour No Yes No Yes


Ethiopia 1973 No Farmer A little Yes Yes No
Ethiopia 1974 Yes Pastoralist Yes Yes Yes Yes
Bangladesh No Rural labour Earlier, yes Yes No Yes
1974
Table 2: Comparative analysis of four famines
Source: Sen (1981)
Table 2 shows some historic famines as analysed by Sen. This table shows
that only one of four major twentieth-century famines actually had a
decline in food availability. The origins of famine lay in transitions in
endowments, and especially entitlements. In Bengal in 1943, the events
of the war caused disruptions to trade and labour practices. In Wollo
in Ethiopia in 1973–74, food did not enter the famine-stricken region
because food prices were not in general higher in Wollo despite starvation
since purchasing power of the local population of peasants and workers
had fallen with food output decline. The power of this approach is that it
shifts attention from overall food production – as associated with earlier
state-led approaches to rural development – towards an analysis of poor
people’s vulnerability and livelihood options. In turn, this also focuses
on the social distribution of property rights, or the access of different social
groups to trade or labour opportunities.
A further change in analysing famine and food security is the role of
political analysis of the purposes of famine. Clearly, famine has occurred
around war zones in many developing countries, partly because
populations may be displaced from farming areas, or markets may fail.
Refugees generally do not have the same endowments and entitlements as
people living safely in their own homelands. But in addition, some warring
factions may use famine as a weapon of war. Armed conflict may also be
inspired by desires to gain control over markets, or to create shortages in
food production, thus raising prices of some agricultural products. The
famines in Biafra in Nigeria in the 1970s, in Sudan and Ethiopia during
the 1980s, and Darfur in Sudan in 2004–05, were caused in part by the
impacts of war, and the desire to place pressure on social or ethnic groups.
Despite the seminal influence of Sen in analysing the causes of famines,
some more recent scholars have argued that the level of political analysis
can still go further. David Keen (1994) and Alex de Waal (1997), for
example, have argued that famines may not necessarily result from the
collapse of entitlements, but in long-term political actions by governments,
warring factions, and indeed a long-term unwillingness to confront actors
who are threatening food supplies. These critical writers have pointed
to the famines in Sudan and Ethiopia during the 1980s and 1990s, and
have claimed that famine has been deliberately produced by political
actors who can gain from the use of famine against minorities or political
opponents. (Indeed, recent evidence suggests that land expropriation in
Zimbabwe has caused famine.) Consequently, explaining famines only in
terms of trading rights, macroeconomic food production, or political rights

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171 Introduction to international development

of citizens may be insufficient to address the deeper, and more common,


causes of famine. Moreover, this approach implies that donor governments
should be far more politically interventionist in addressing the causes of
famine than in providing humanitarian aid alone. Indeed, some forms of
famine may be akin to genocide – all highly controversial and contested
claims.

Box 3
Famine and war

Many orthodox explanations of famine and food insecurity have emphasised


factors such as overall food production (or food supply); or shocks to food
production such as floods and drought. In recent years, the political benefits of
famine have been emphasised.

The Sudanese region of Darfur is an example of one region that has undergone
famine in 2003–05, and where the reasons for this famine are still unclear.
Darfur is a large region of south-west Sudan in the Sahel of Africa – or the
region of land immediately south of the Sahara desert where rain is scare, and
land is dry. Frequently, the region of Darfur is more influenced by events in
neighbouring Chad and Libya than by the government of Sudan. In 2003, a
rebellion was organised by the Sudanese Liberation Army (SLA) and the Justice
and Equality Movement (JEM) against the central Sudanese government, in
order to claim more autonomy. There are also strong ethnic differences between
many inhabitants of Darfur compared to the citizens of the rest of Sudan.
According to some observers, famine and political unrest in the region is the
result of crop failure and the action of local warlords. But some other critics
allege that a local militia, known as the Janjaweed, is operating with the backing
of the Sudanese government in trying to ‘cleanse’ some areas of Darfur of black
Africans. These suggestions are yet unproven. But it is clear that the origins of
famine in this region have been influenced by the complex political history of
the Sahel and Sudan, where orthodox political representation – in the form of
democratic elections and a transparent state – are not as well developed as in
other countries. In addition, this region is hampered by many diverse legacies of
African development and physical problems of a lack of infrastructure. For many
analysts, there is a need to highlight the political causes of famine and unrest in
this region, and to place pressure on different governments and actors to stop
certain actions, rather than simply suggest that famine is inevitable in this place.

Famine and chronic food insecurity, therefore, are more politically


influenced than believed under earlier approaches to rural development.
Consequently, aid agencies have increasingly looked at the factors
underlying the vulnerability of individuals, and the politics of
humanitarian assistance to famine zones. However, some state policies
have also created major famines in the past. Agricultural collectivisation
within the Soviet Union and China during the 1930s and 1950s led to
famine because of sudden changes in both food production and local
entitlements. Rural development nowadays rarely involves such radical
intervention in economies. Successful rural development rather requires
careful integration of efforts by states and development agencies to
increase access to food and resources by poor people. This is still difficult
in areas such as the Sahel of Africa, where agricultural productivity is
relatively low, population movements are often unstable, and where some
of the various forms of capital (discussed above) are low.

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Chapter 8: Agrarian change and rural development

Activity 4
Look at the newspapers or other news media during the last year and find at least one
example of a famine in a developing country. Consider what may be the political factors
underlying this, and how these have been shown on a long- and short-term basis.
Consider what may be the best response, nationally and internationally.

Conclusion
Agrarian change and rural development are fundamental aspects of
international development, and two of its most debated policy questions.
Historically, rural areas were seen to be backward, with entrenched
problems of a lack of investment, lack of education, and inability for
economic reforms to operate. Initially, land reform – or redistribution from
larger to smaller landowners – was seen to be the key means to initiate
rural development. Over time, however, analysts have begun to focus
on the social and political factors that underlie the vulnerability of poor
people in rural areas. Rather than relying on large-scale changes such
as land reform alone, policymakers are now proposing ways to enhance
rural livelihoods, and to allow individuals greater access to markets and
resources, as the key way to achieve ‘development’ in rural areas.
Nowhere has this been witnessed more than in relation to the serious
problem of famine. Historically, these were seen as largely uncontrollable
results of weather or entrenched lack of development. Now, these are seen
to reflect general levels of social and political opportunities for individuals
in rural areas, and hence can be controlled by building rural livelihoods.
Yet, increasingly, the politics of famines are now being discussed. Rather
than these being seen to be questions of local rights and access to
resources, these are – in the worst cases – now being considered a result of
the tolerance of unethical political behaviour by conflicting parties. Famine
policy is therefore no longer potentially restricted to humanitarian relief or
long-term livelihoods, but to an ethical foreign policy. Such international
positions on famines and war, however, should not detract from the
long-term and careful work on sustainable livelihoods, and assisting poor
farmers with shrewd agrarian reforms.

Activity 5
Write a short definition – a maximum of five sentences – of what you think are the most
important principles of rural development, and how the circumstances of each country
might influence these.

Reminder of your learning outcomes


Having completed this chapter, and the Essential readings and activities,
you should be able to:
• explain the meaning of rural development, and how approaches to this
have changed in recent decades
• describe the difference between land reform and agrarian reform, and
how either of these can form elements of rural development
• discuss the meaning and diversity of the term, ‘livelihoods’ and how
these may be affected by land and agrarian reform
• explain the problems of famine and food insecurity by referring to
the problems of livelihoods and social and political factors of rural
development, rather than food shortage alone

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171 Introduction to international development

• develop your own views concerning the best routes to rural


development and food security, by seeing the social, economic and
political factors underlying rural development.

Sample examination questions


1. How is land reform linked to rural development?
2. What have been the main transitions in thinking about rural
development during the twentieth century?
3. What are the causes of famine, and what are the best means to avoid
it?

126
Chapter 9: Governance and public policy

Chapter 9: Governance and public policy

Essential reading
Desai and Potter (2008) Section 10 (especially Chapters 10.4 to 10.10).
Todaro and Smith (2014) Chapters 11, 13 and 15.

Further reading
Dahl, R. On Democracy. (London and New Haven: Yale University Press, 1998)
[ISBN 0300084552].
Dick, G.W. ‘Authoritarian versus Nonauthoritarian Approaches to Economic
Development’, The Journal of Political Economy 82(4) 1974.
Gray, C.W. and D. Kaufmann ‘Corruption and Development’, Finance and
Development, March 1998.
Harrison, G. ‘The World Bank, Governance and Theories of Political Action in
Africa’, British Journal of Politics and International Relations 7(2) 2005.
Haynes, J. ‘The State, Governance and Democracy in Africa’, The Journal of
Modern African Studies 31(3) 1993.
Khan, M.H. ‘Corruption and Governance in Early Capitalism: World Bank
Strategies and Their Limitations’ in Pincus, J. and J. Winters (eds)
Reinventing the World Bank. (Ithaca, N.Y.: Cornell University Press, 2002)
[ISBN 0801440378].
Little, D. Paradox of Wealth and Poverty: Mapping the Dilemmas of Global
Development. (Boulder, Co: Westview, 2003) [ISBN 0813316421] Chapter 8.
Minier, J. ‘Democracy and Growth: Alternative Approaches’, Journal of
Economic Growth 3(3) 1998.
Ottemoeller, D. ‘Popular Perceptions of Democracy: Elections and Attitudes in
Uganda’, Comparative Political Studies 31(1) 1998.
Przeworski, A. and F. Limongi ‘Political Regimes and Economic Growth’, Journal
of Economic Perspectives 7(3) 1993.
Sachs, J. The End of Poverty: How We Can Make It Happen in Our Lifetime.
(London: Penguin, 2005) [ISBN 1594200459; 0141018666] Chapter 16.
Scully, G.W. ‘The Institutional Framework and Economic Development’, The
Journal of Political Economy 96(3) 1988.
Sen, A. Poverty and Famines: An Essay on Entitlement and Deprivation. (Oxford:
Clarendon Press, 1981) [ISBN 0198284268(hbk); 0198284632(pbk)]
Chapters 1–3.
Sen, A. Development as Freedom. (Oxford: Oxford University Press, 1999)
[ISBN 0198297580(hbk); 0192893300(pbk)] Chapters 4, 6 and 7.
Shleifer, A. and R. Vishny ‘Corruption’, Quarterly Journal of Economics 108(3)
1993.
Srinivasan, T. N. ‘Human Development: A New Paradigm or Reinvention of the
Wheel?’, American Economic Review 84(2) 1994 [ISSN 0002-8282].
Sugden, C. ‘Spontaneous order’, Journal of Economic Perspectives 3, 1989,
pp.85–97.
Tilly, C. Democracy (Cambridge: Cambridge University Press, 2007)
[ISBN 0521701538].

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Challenging reading
Baum, M.A. and D.A. Lake ‘The Political Economy of Growth: Democracy and
Human Capital’, American Journal of Political Science 47(2) 2003.
Brown, D.S. and W. Hunter ‘Democracy and Social Spending in Latin America,
1980–1992’, American Political Science Review 93(4) 1999.
Chabal, P. ‘The Quest for Good Governance and Democracy in Africa: Is NEPAD
the Answer?’, International Affairs 78(3) 2002.
Corbridge, S., G. Williams, M. Srivastava, and R. Véron Seeing the State:
Governance and Governmentality in India, (Cambridge: Cambridge
University Press, 2005) [ISBN 0521542553].
Schumpeter, J. Capitalism, Socialism and Democracy (New York: Harper
Perennial, 2008 [1942]) [ISBN 0415567890].
Stasavage, D. ‘Democracy and Education Spending in Africa’, American Journal
of Political Science 49(2) 2005.
Sugden, R. ‘Welfare, resources and capabilities; a review of inequality re-
examined by Amartya Sen’, Journal of Economic Literature, December, 31(4)
1993, pp.1947–962.
Varshney, A. ‘Why Have Poor Democracies Not Eliminated Poverty? A
Suggestion’, Asian Survey 40(5) 2000.

Aim and learning outcomes


The aim of this chapter is to provide an outline of the debates around
democracy, development and poverty.
By the end of this chapter and having completed the Essential readings
and activities, you should be able to:
• explain the essential aspects of governance and democracy (with
special reference to Dahl and Little) and of poverty (with reference
to Sen)
• have some understanding of the complex relationship between
corruption, rent-seeking and development, as well as between
democracy and economic growth, famines and poverty.

Introduction
This chapter will examine governance in the developing world, with a
focus on democratisation and poverty reduction. It will seek to understand
governance and democracy, before attempting to explain how and when
democracy and good governance can help to reduce poverty. It will also
attempt to clarify the meaning of poverty and the various ways it can be
measured and studied.

Governance
Governance is a term that has recently become so popular in development
studies that it appears to have lost whatever meaning it originally held.
Indeed, some scholars like Patrick Chabal (2002, p.447) have rebelled
against this trend and refused to use the phrase ‘good governance’, partly
because he claims it ‘is for ever associated with Bretton Woods institutions’
political conditionalities and partly because I am not sure what it means’.
Indeed, ‘governance’ and ‘good governance’ are used quite often in regards
to the World Bank and IMF’s prescriptions for developing countries.
From the early 1990s onwards at the World Bank ‘governance referred
to reforms in the public sector which enhance the prospect for economic
growth…In essence, for the Bank, governance referred to reforms within

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the public sector which enhanced the prospect for economic growth;
it did not make any judgment concerning the democratic credentials
of a state’ (Harrison, 2005, p.241). This approach to governance led,
Harrison (2005) argues, to less of an emphasis on the role of politics
in development and more on reforming public administration from a
technocratic point of view. In this sense governance is very different from
democracy.
What about other conceptions of governance? Haynes (1993, p.537),
for instance, claims that governance should be distinguished from good
government, which:
‘refers to effective, ‘user-friendly’ rule which may be less than
fully democratic…It is purposive and development-oriented,
seeking to improve the mass of people’s quality of life…By way
of contrast, governance nearly always alludes to the necessity
for liberal democracy as a prerequisite for development…
Governance is synonymous with democracy.’

We examine the relationship between this conception of governance and


development below in the section on democracy.

Governance and corruption


To return to the World Bank conception of governance as public service
reform, can we claim that there is some relationship between governance
and development? This question has been more often rephrased in the
negative, where poor governance is seen as synonymous with corruption
(Sachs, 2005, p.311). Corruption is usually defined as ‘the sale by
government officials of government property for personal gain’ (Shleifer
and Vishny, 1993, p.599), or, more colloquially, ‘the use of public office for
private gain’ (Gray and Kaufmann, 1998, p.7).
In the academic literature corruption is also called ‘rent seeking’, which
can be confusing as the ‘rents’ involved here do not come from ‘renting’
out land or some other piece of property. Rather, the term comes from
classical economics, where Adam Smith and other early economists
considered three factors of production, namely labour, capital and land,
which roughly resulted in three types of income, namely wages, profits
and rents. Whereas the first two categories represent money people earn
through productive activities – whether working for hourly wages or
investing money – the third represents money earned from control over
a previously-acquired valuable resource and therefore does not increase
overall value in society. Neo-classical economists have expanded this
concept of rent to mean money people earn from something above which
they would normally earn or should earn if the economy were to function
properly. (One example might be a job whereby you earn £20,000 but the
next-best job pays only £15,000. Thus you are earning a rent of £5,000 –
i.e. you are earning £5,000 more than what the market would predict.)
Economists thus call the energies expended to acquire these rents ‘rent-
seeking’, which, as should be clear, are unproductive for the economy in
that it is competition for an unproductive resource.
Thus corruption is one of the rare subjects on which it seems like a
majority of people can agree in development studies, from activists and
academics in the developed world to local businessmen and farmers
in the developing world, in that everyone agrees that it is harmful to
development. Certainly no one wants money which could be used for
developmental purposes, whether it comes in the form of aid from

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donors or taxes from local citizens, to be used by an official for his/her


own purposes. Yet there is some controversy as to how much damage
corruption actually causes to development.
On the one hand, many economists like Shleifer and Vishny (1993) claim
that corruption is damaging and ‘costly to development’. They give the
example of medieval Europe, where England developed faster than the
continent due to the larger number of tolls in the latter’s case.

Box 1
Tolls and development in medieval Europe

In 1400 there were 60 independently run tolls along the Rhine. Along the
Seine there were so many tolls that for a ship to sail a good 20 miles cost as
much as its price. In contrast, rivers in England were free of such tolls, which
in part explains the ability of England to develop specialised, commercial
agriculture feeding London, the world’s centre of commerce. These examples
suggest how costly free entry into bribe collection might be to development
(Shleifer and Vishny, 1993, p.608).

Shleifer and Vishny (1993) argue that one part of the problem with
corruption is that multiple officials in government can collect them for the
same reason, as with the above example with tolls, while another problem
involves the costs involved in keeping corrupt activities secret. All of these
costs make corruption very damaging to development (see Box 2).

Box 2
The costs of corruption (Gray and Kaufmann, 1998, p.8)

•• Bribery raises transaction costs and uncertainty in an economy.


•• Bribery usually leads to inefficient economic outcomes.
•• Bribery is unfair, especially in its effects on small enterprises.
•• Corruption undermines the state’s legitimacy.

Gray and Kaufman (1998, pp.9–10) and others have argued that to
combat corruption countries need to set up anti-corruption watchdog
agencies, embrace deregulation and civil service reform, strengthen legal
and judicial systems, improve financial management, and promote a free
press, among others.
Activity 1
Recall a prominent corruption scandal in your own country or region. Come up with three
ways this scandal and similar types of corruption could have been avoided.

Yet some economists have attacked this recent focus on corruption. For
one, Sachs (2005, p.312) has shown that African countries grow slower
than other developing countries of the same level of corruption. This
takes place despite the fact that ‘Africa shows absolutely no tendency to
be more or less corrupt than other countries at the same income level’.
What is clear in Sach’s statistics, however, is that poor countries are poorly
governed (i.e. the poorer the country, the greater its corruption).
Does this mean that poor countries are poor because they are corrupt, or
that corruption takes place because they are poor? Khan (2002), claims
that, contrary to popular belief, it is more the latter than the former,
or more specifically that ‘the process of capitalist development itself
generates powerful incentives and motives for corruption’. Khan notes that
countries in East Asia that have sustained high growth rates for decades,
including China, Indonesia, South Korea and others, did not have lower
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corruption rates when growing than other countries, and that they only
saw lower corruption once they became rich. In other words, economic
growth leads to lower corruption, rather than vice versa. If Khan (2002) is
correct, then we can say that good governance, understood in terms of low
corruption, is not, in the end, a precursor to development.

Understanding democracy
Democracy, as Robert Dahl has noted, is ‘used in a staggering number of
ways’ (Dahl, 1998, p.37). It is undoubtedly one of the more difficult terms
in the social sciences to pin down, especially as people with very different
viewpoints all claim to support democracy without agreeing upon what
they mean by the term.
From Chapter 6, we can already agree that democracy is different from
civil society. But how do we define democracy? Dahl defines democracy
on the basis of equality of participation. He claims that for any
organisation to achieve this equality it must satisfy five criteria:
1. Effective participation (where each member has the opportunity to
make their views known to the other members).
2. Equality in voting (with each vote having the same weight as the others).
3. Enlightened understanding (where each member has the opportunity
to learn about a variety of policies and their consequences).
4. Control of the agenda (where policies are always open to change).
5. Inclusion of adults (where all adults have full rights to participate).
Dahl claims that if ‘any of the requirements is violated, the members will
not be politically equal (Dahl, 1998, pp.37–38).

Box 3
Differing conceptions of democracy in Uganda

In 1994 the American researcher Dan Ottemoeller did a survey among several
hundred Ugandans, asking them to define democracy. They gave three types
of answers, only the first of which would normally be considered ‘correct’ in a
political science classroom:

1. 40 per cent referred broadly to ‘popular participation in government’:


some examples of definitions include a system ‘where people should elect
their own leaders’ and ‘where there is freedom of speech, expression and
choosing a leader of one’s choice.’

2. 38 per cent preferred to describe democracy as based on certain


freedoms, especially freedom of speech; some people defined democracy
as a system where ‘people have freedom to do what they want’ or where
‘people have freedom of expression and speech’.

3. 22 per cent gave a variety of other definitions. Some claimed that


democracy is ‘people working together for the development of the
community’ or that it is ‘when people can live in peace and harmony with
other people’ (Ottemoeller, 1998, pp.105–06).

Dahl’s emphasis on equality of participation is the basis of most definitions


of democracy. For instance, Little’s definition of democracy as a set
of collective decision-making institutions through which
individuals assert themselves in the public sphere is really just
a reformulation of Dahl’s concept. However, there is still a great variety
of democracies which have different institutions and look little like each

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other from the outside. For instance, democracy can be conducted directly
by citizens, called direct democracy, or through elected representatives,
called representative democracy. The former worked to a degree in ancient
Greece when the number of citizens was small but is generally considered
to be unwieldy in countries with large populations. Nonetheless, we still
see direct democracy when countries hold referendums, as is common in
Australia, Switzerland and other countries.
Beyond having representatives, democracies also share something else in
common, namely the establishment of a constitution, whereby ‘an explicit
set of principles defines the scope of collective decision-making, including
especially the definition of a fundamental set of citizens’ rights that cannot
be overturned by democratic action’ (Little, 2003, p.221).
You will notice already that this concept seems to contradict Dahl’s fourth
criterion listed above. Indeed, this is merely the first of many controversies
about how the perfect democracy should function. We will encounter
others later in this chapter.

Activity 2
Write a short answer (no more than 300 words) to the following question: are there some
laws that citizens in developing countries should never have the right to change? If so,
what are they and why?

Democracy and economic growth


It would seem that everyone agrees that democracy is a good thing, just
like everyone wants to have economic growth. Naturally, then, people also
assume that the two must go hand in hand, especially since it would seem
that democracy would inevitably lead to growth, and vice versa.
Some scholars like William Dick and Gerald Scully have argued that
democracy will indeed lead to economic growth. Scully (1988, p.661)
claimed that ‘politically open societies, which bind themselves to the
rule of law, to private property and to the market allocation of resources,
grow at three times the rate’ of less-free societies. Dick (1974) similarly
found that non-authoritarian countries, where meaningful elections are
held and political parties exist, have the same or higher growth rates
than authoritarian countries. More recently, Minier (1998) showed that
authoritarian countries that began to democratise grew faster than those
that did not democratise.
The reasons why democratic governments tend to grow more than non-
democratic governments would seem to be straightforward, since in
democratic societies politicians who enact bad policies will be called to
account by a free press and will usually then be voted out of office. Yet
many argue the exact opposite, claiming that democracy even goes so far
as to stymie economic growth and development in two ways:
1. Democracy slows down and weakens major reforms that often need
to take place before development can take off. More specifically,
‘development requires decisive policy choice and effective policy
implementation, and authoritarian regimes are more decisive and
more effective in implementing policy’ (Little, 2003, p.232).
2. Democracy is not really important to poor people, who, ‘if given the
choice between having political freedoms and fulfilling economic
needs, will invariably choose the latter’ (Sen, 1999, p.148). Thus
people will prioritise economic growth over democracy and any
attempts to build democracy are a waste of time and distracting from

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the more urgent need of economic growth. This theory has been
recently associated with Lee Kuan Yew, the prime minister of Singapore
from 1959 to 1990, and Mahathir bin Mohammed, the prime minister
of Malaysia from 1981 to 2003. Both rulers have advocated what they
call ‘Asian-values’, where economic development is more important
than individual liberties, which are often seen as a Western imposition.
Yet there is little evidence to suggest that the first argument is correct. The
problem is that it relies upon a benevolent dictator or oligarchy who will
push through serious reforms and policies in the long-term interest of the
people. While this might have happened in a few rare cases – especially in
East and South-East Asia in the late twentieth century – most authoritarian
regimes tend to be disasters both economically and politically. In other
words, as Dick (1974, p.819) notes, ‘LDCs with authoritarian forms
of government perform either very well or very poorly’ – with more
performing poorly than well.
The second argument assumes that people generally care more about
economic growth than democracy. Sen correctly argues that this is a
fallacy, as high electoral participation and large political protests are
commonplace across the developing world, even in East Asia where,
according to Lee and Mohammed, ‘Asian values’ predominate. (Other
East Asian politicians like Lee Teng-hui, president of Taiwan from 1988
to 2000, and Kim Daejung, president of South Korea from 1998 to 2003,
have been very critical of the concept of ‘Asian values’.) It is obvious that
many people want both democracy and economic growth.
Yet, surprisingly, even after defeating these arguments that democracy
is bad for economic growth, researchers have still been stymied by the
lack of any verifiable link between democracy and growth (Przeworski
and Limongi, 1993). Why this is so is controversial – some claim that it
is because economists know very little about what political or economic
factors lead to economic growth in general, while others suggest that the
key factor is state autonomy rather than democracy.
However, even if we were to find some positive statistical relationship
between democracy and economic growth, it would still be unclear to
which degree one caused the other. This classic ‘chicken or egg’ problem –
i.e. which came first, the chicken or the egg – has to do with the difference
in statistics between correlation and causality, where the former indicates
that two variables are related while the second shows that one causes
the other. In other words, even if poor countries are not democratic and
rich ones are, it does not follow that democratising will lead to economic
growth or vice versa. As one might expect, this debate has been very
important for donors, among others, in choosing whether to allocate aid
towards increasing democracy or increasing economic growth.
Yet if there is no relationship between democracy and economic growth,
should democracy still be considered important for development? There
is a case to be made that democracy is important as it is a human right
and is thus essential for development regardless of its effects on economic
growth. Furthermore, as we shall see in a moment, there is a case to be
made that democracy is essential in combating famines and poverty, two
of the key impediments to development.

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Democracy and poverty


Democracy and famines
While democracy may not have any large effects on economic growth, it
undoubtedly has some effect on the poor. This has been most famously
articulated by Amartya Sen in his work on famines, where he has shown
that ‘there has never been a famine in a functioning multiparty democracy’
(Sen, 1999, p.178). Sen’s analysis of famines has been extremely
influential and was one of the reasons he was awarded the Nobel Prize for
Economics in 1998 (see Chapter 8).
Sen’s argument is that, contrary to popular belief, famines are not caused
by a lack of food but rather by a sudden drop in incomes among the most
vulnerable in society. There have been many cases where countries have
not seen a drop in food production and/or have exported food in the midst
of a famine, most famously during the Irish potato famine of the 1840s.
The reason why people starved, in other words, was not because there was
not enough food but because they could not afford to buy it.

Box 4
Democracy and freedom

Democracy is today considered a crucial aspect of human rights, and the two
concepts are often grouped together: for instance, the Bureau of Democracy,
Human Rights and Labour within the U.S. Department of State. Article 29,
section 2 of the Universal Declaration of Human Rights notes that:

‘In the exercise of his rights and freedoms, everyone shall be subject only to
such limitations as are determined by law solely for the purpose of securing
due recognition and respect for the rights and freedoms of others and of
meeting the just requirements of morality, public order and the general
welfare in a democratic society.’

Little (2003, p.229) claims that democracy is an essential means to


achieve human rights:
‘Democracy is a crucial aspect of human freedom. Fundamentally,
it is a good thing because it facilitates free human choice and
furthers the good of political participation. Democracy is a necessary
component of the individual’s ability to live freely and autonomously.
And democracy is a political form that pays appropriate heed to
the inherent worth and dignity of the person. Thus, democracy is
a central constituent of the individual’s ability to live freely and
autonomously as a human being. This is no less so in poor and
developing countries than it is in the North and the West.’

But what does this have to do with democracy or politics more generally?
Indeed, one need merely recall the famous statement, repeated by former
US President Ronald Reagan and former executive director of the United
Nations World Food Programme, Catherine Bertini, among others, that ‘a
hungry child knows no politics’. Yet, Sen and others argue, this is far from
true – indeed, it would be more correct, in some ways, to claim that ‘a
hungry child knows only politics’. In other words, famines are not acts of
nature – in fact, ‘famines are so easy to prevent that it is amazing that they
are allowed to occur at all’ (Sen, 1999, p.175).
The reason why non-democratic countries allow famines to take place,
then, is twofold: first, their leaders enjoy political immunity, and do not
face any criticism when famines occur, and second, their leaders often fail
to comprehend the nature of the famine itself. In the first case, one need
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merely contrast China, where a massive famine between 1958 and 1961
killed up to 30 million people but failed to dislodge Mao Tse-Tung from
power, with more democratic countries like Botswana or India, where
famines fail to occur because their governments fear what would happen
if they were to fail to provide for their citizens. Thus they take active
measures to create income for their most vulnerable citizens, who then
might vote for the ruling party in the next election.
The second reason why democracies are better at alleviating or preventing
famine is that there is greater access to information in democratic
countries. In authoritarian regimes lower level bureaucrats often lie to
their superiors about what is happening in their jurisdiction merely in
order to please them and thereby keep their jobs. However, in democracies
these bureaucrats are prevented from lying to their superiors, as a free
press provides alternative sources of information and can highlight the
government’s successes and failures. Again, one need merely examine the
details of the great Chinese famine, where officials in Beijing, who relied
upon local Communist party officials for their information, ‘mistakenly
believed that they had 100 million more metric tons of grain than they
actually did’ (Sen, 1999, p.181).
Thus it is clear that democracies are far superior to authoritarian countries
when it comes to alleviating or preventing famines. But what about their
ability to help the poor more generally? This is a crucial question, but
before we answer it we must first have some conception of what poverty
actually is and how it can be defined.

Understanding poverty
Poverty is, like democracy, a concept that seems easy to grasp until you
examine it a bit closer. Most often poverty is defined through the creation
of an income-based ‘poverty line’, whereby those who live below this
line are counted and poverty is then expressed as the percentage of poor
people out of the total population. The international standard of $1 a day
is a well-known example of this approach. Yet, as Sen (1981, p.11) has
noted, this ‘head count’ measure has two serious problems: first, it does
not measure how far away the poor are from the poverty line, and second,
it cannot take into account changes in income among the poor. This is most
striking when someone below the poverty line ends up transferring money
to someone above the line – as happens under a regressive tax system – as
both people remain in the same position as they were before the transfer.
An alternative way to measure poverty is through a ‘biological approach’
(i.e. where poverty is defined by a person’s ability to satisfy his/her
nutritional requirements). This would seem to be superior to the income-
based method, since it measures people’s nutritional needs directly. Yet,
as Sen (1981, p.12) argues, these requirements are actually ‘difficult to
define precisely’, while the price involved in meeting them can differ
enormously depending on local prices and food habits, among other
factors.
Finally, a third way to measure poverty is ‘relative deprivation’, where
the poor ‘possess less of a desired attribute, be it income, favourable
employment conditions or power, than do others’ (Sen, 1981, p.16). This
is an especially important concept of poverty when comparing people
considered poor in rich countries to those in poor countries, where the
former may appear richer on paper but have lower human development
indicators than the latter. Yet this approach also has its problems, in that it
fails in instances where a whole society becomes poorer or richer and thus
the inequality between citizens does not change.
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Activity 3
Which of the three ways of measuring poverty, discussed above, do you think best applies
to poor people in your own country or area? Write 300 words on which definition you
chose and why.

All three of these measures, then, have both positive and negative
attributes. Sen rather argues that we should adopt a ‘capability approach’,
which he borrows somewhat from Adam Smith, who wrote about certain
necessities that are ‘what ever the customs of the country renders it
indecent for creditable people, even the lowest order to be without’
(Smith, 1776, quoted in Sen, 1999, pp.73–74). These necessities generate
what Sen calls capabilities, or ‘the freedom to achieve various lifestyles’
(Sen, 1999, p.75). This is why Sen titled his book Development as Freedom,
since he sees the ultimate goal of development as achieving a set of basic
freedoms for everyone: in other words, these capabilities and not merely
income are the ultimate goal of development. Thus, as Sen puts it in the
title of one of the chapters of his book, poverty is ‘capability deprivation’,
rather than income or nutritional deprivation. Capabilities are reduced
when the state fails to provide certain basic services, especially in the
realm of health and education, for its citizens, thereby reducing their
capabilities and increasing poverty (see Chapter 2).
Despite its now wide popularity and use in the annual United Nations
Development Programme Human Development Report (HDR), Sen’s
approach has come in for criticism. Robert Sugden (1993, p.1953), for
instance, claims that Sen’s ‘capability approach’ is great in theory but poor
in practice, as it is at best difficult and at worst impossible to measure
poverty in this way. While the income-based approach to poverty is
definitely flawed, it is also one of the easiest – albeit still difficult – ways to
measure poverty, thereby allowing the researcher to move on to addressing
poverty rather than spending all of his/her time merely measuring it.
Indeed, T.N. Srinivasan (1994, pp.240–41) notes that measuring life
expectancy and literacy, which are two measures of capabilities as regards
health and education, respectively, is notoriously difficult. Thus the jury is
still out on whether Sen’s approach is the best one.

Democratisation and poverty


If democracies are better at combating famines than authoritarian
governments, then how do they perform when combating poverty, whether
it is defined through income or through capabilities? Let us examine how
democracies address each of these two types of poverty in sequence.
Addressing income poverty is not entirely different from addressing
economic growth, since both revolve around increasing the amount of
money among a given group of people. Thus, Ashutosh Varshney
(2000, p.721) argues, just as we saw with economic growth, authoritarian
regimes can often combat poverty very well or very poorly, while the
average democratic regime will do an average job. The reason why is
the same as above, namely that authoritarian governments have more
leeway than democratic ones since they do not need to answer to citizens
in regular elections and can therefore afford to take political risks that
democratic governments cannot.
Varshney claims that democratic governments do not perform very well
in alleviating income poverty since voters often want their government to
raise their living standards immediately, despite the fact that economists
generally agree that poverty alleviation can best be accomplished in a

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long-term and indirect way involving more market-oriented policies. Yet


these ‘reforms are rather difficult to push in political campaigns. The links
proposed by the indirect methods are subtle and also based on a long-run
perspective. Such indirect methods do not normally appeal to democratic
politicians’ (Varshney, 2000, p.722). Thus democratic governments often
resort to direct poverty alleviation – like giving poor people credit and food
subsidies – rather than indirect ones in order to win elections, and thereby
do not perform very well at alleviating income poverty in the long term.
As for capabilities, however, there is strong evidence that democracies
address basic service provision better than other types of government.
Both Brown and Hunter (1999) and David Stasavage (2005), for instance,
have shown that democracies spend more on social services in Latin
America and Africa, respectively, than do authoritarian governments.
They both claim that democratic governments are forced to spend more
because, by definition, they must hold elections and thereby answer
regularly to citizens. On the one hand, to stay in power, democratic
governments need to satisfy the demands of the majority or plurality of
voters, who will overwhelmingly be poor in less developed countries.
Authoritarian governments, on the other hand, do not need majority
support and only tend to worry about maintaining support among the
armed forces and urban citizens, which thereby leads to overspending on
the military and an urban bias in government policy. Thus the same reason
why democracies do not have famines is also the reason why they tend to
spend more on social services like health and education, namely the need
for governments to win elections and stay in power.
Coupled with the above discussion about the lack of a relationship
between democracy and economic growth, what can we now say about
how democracy impacts development? Baum and Lake (2003: p.333) put
it well when they wrote that, while research continues to find no direct
link between democracy and growth, this does not meant that there is
not an indirect link between the two. In other words, democracy leads
to increased social services like health care and education, which studies
have shown to lead to economic growth in the long run. Thus democracy
is indeed linked to development, albeit not as directly as one might think.

Conclusion
In this chapter we have examined conceptions of governance, corruption,
democracy and poverty. In all four cases we saw how controversial and
varied these concepts are, and how using a different definition changes the
way we view that concept’s relationship to development. In particular, we
saw how good governance and democracy do not have a straightforward
relationship with economic growth, but that democracies tend to perform
better than authoritarian countries in combating famines and poverty. This
suggests that democracy is good for economic growth, albeit indirectly,
and that, in any case, democracy is one facet of human rights that must be
at the heart of any developmental strategy.

Reminder of your learning outcomes


Having completed this chapter, and the Essential readings and activities,
you should be able to:
• explain the essential aspects of governance and democracy (with
special reference to Dahl and Little) and of poverty (with reference to
Sen)

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171 Introduction to international development

• have some understanding of the complex relationship between


corruption, rent-seeking and development as well as between
democracy and economic growth, famines and poverty.

Sample examination questions


1. Can we call some measurements of poverty better than others? Why?
2. What is the relationship between democracy and economic growth?
3. Is good governance the same thing as democracy?

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Chapter 10: The international order

Essential reading
Desai and Potter (2008) Section 10 (especially Chapters 10.11 to 10.16).
Todaro and Smith (2014) Chapters 12, 13 and 14.

Further reading
Cha, V.D. ‘Globalization and the Study of International Security’, Journal of
Peace Research 37(3) 2000.
Ehrlich, P. and J. Liu ‘Some Roots of Terrorism’, Population and Environment
24(2) 2002.
Friedman, T. ‘It’s a Flat World, After All’, New York Times, 3 April 2005.
Goesling, B. ‘Changing Income Inequalities within and between Nations: New
Evidence’, American Sociological Review 66(5) 2001.
Hardt, M. and J. Negri Empire (Cambridge, Mass.: Harvard University Press,
2001) [ISBN 0674006712].
Hardt, M. and J. Negri Multitude: War and Democracy in the age of empire.
(London: Penguin, 2006) [ISBN 014014873].
Held, D. and A. McGrew Globalization/Anti-Globalization. (Cambridge: Polity
Press, 2002) [ISBN 0745629881] Chapter 1.
Pieterse, J.N. ‘Global Inequality: Bringing Politics Back In’, Third World
Quarterly 23(6) 2002.
Pincus, J. and J. Winters (eds) Reinventing the World Bank. (Ithaca, N.Y.:
Cornell University Press, 2002) [ISBN 0801487927].
Stiglitz, J. Globalization and its Discontents. (London: Allen Lane, 2002) [ISBN
0713996641] Chapters 1–2.
Wade, R.H. ‘Is Globalization Reducing Poverty and Inequality?’, World
Development 32(4) 2004.
Wallerstein, I. ‘After Developmentalism and Globalization, What?’, Social Forces
83(3) 2005.
Walters, M. Globalization (London: Routledge, 1995) [ISBN 0415105765].
Wolf, M. (2004) Why Globalization Works, New Haven: Yale UP [ISBN
0300107773]

Challenging reading
Corbridge, S. ‘Bearing witness: the global spigot, American empire and the
colonial present’, Geopolitics 11, 2006, pp.159–80.
Kellner, D. ‘Theorizing globalization’, Sociological Theory 20(3) 2002.
Krueger, A.O. ‘Whither the World Bank and the IMF?’, Journal of Economic
Literature 36(4) 1998.
Reus-Smit, C. ‘The constitutional structure of international society and the
nature of fundamental institutions’, International Organization 51(4) 1997.
Rodrik, D. ‘Goodbye Washington consensus, hello Washington confusion: a
review of the World Bank’s Economic growth in the 1990s: Learning from a
decade of reform’, Journal of Economic Literature XLIV, 2006, pp.973–87.

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171 Introduction to international development

Aim and learning outcomes


The aim of this chapter is to provide an outline of globalisation and the
international system.
By the end of this chapter and having completed the Essential readings
and activities, you should be able to:
• explain the essential aspects of globalisation and international
institutions
• have some understanding of the ongoing debates over whether
globalisation on the one hand and international institutions like the
UN, World Bank and IMF are good or bad for development.

Introduction
This chapter will cover the interrelated topics of globalisation and the
international system. In the first instance we will examine the varying
definitions of globalisation and attempt to assess how globalisation has
affected development in the past and is likely to do so in the future.
Thereafter we will give an overview of the international system, with a
focus on three key institutions, which have a major role in promoting
development today: the UN, the World Bank and the IMF.

Understanding globalisation
Globalisation is a tricky concept as it is often used in a variety of ways to
mean a variety of things. Indeed, globalisation ‘is often used as a code
word that stands for a tremendous diversity of issues and problems and
serves as a front for a variety of theoretical and political positions’
(Kellner, 2002, p.300).
Yet we can identify some key concepts that are wrapped up with
globalisation, whether they are explicitly stated or not. One such concept
is the increase in interactions – whether economic, political, social or
otherwise – between parts of the globe that had previously little to do
with one another. More specifically, globalisation in this sense can be seen
as inevitably wrapped up with breaking down trade barriers between
countries and thereby increasing free trade.
In this sense globalisation can be defined by the shrinking or ‘flattening’ of
the globe (Friedman, 2005). Yet those who believe in globalisation differ
on which phenomena are most responsible. We can divide globalisation
theorists into two groups, the first of which credits technology while the
second rather credits capitalism itself.
The first group tends to credit technological advances that have allowed
these ‘distant communities’ to be linked, whether through telephones,
computers, the internet, television, radio or other means. In other words,
globalisation is merely the expansion of new technologies across the globe
and the resultant interconnectedness they bring, and is thus akin to what
in a previous era would have been called ‘modernisation’.
The second group of globalisation theorists credit the expansion of
capitalism across the globe. Coming from both the Left and Right,
these theorists argue that globalisation is merely the continued logic of
capital accumulation in regions and spheres of the economy where it
had heretofore not been present (Kellner, 2002, pp.288–89). Those on
the Right tend to view this expansion of capitalism as a natural process,
while those on the Left – starting with Karl Polanyi in the early twentieth
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Chapter 10: The international order

century but continuing up to people like Alex Callinicos, Noam Chomsky


and Samir Amin today – argue that not only is globalisation an imposition
of capitalism on people around the globe, it is an imposition of an extreme
version of capitalism, namely neo-liberalism. This group – which believes
that globalisation is both bad and by no means inevitable – is the core
around which the so-called ‘anti-globalisation’ protesters has been built
since the late 1990s.
In fact, a third group of theorists combine the two arguments, claiming
that ‘a critical theory of globalisation grounds globalisation in a theory
of capitalist restructuring and technological revolution’ (Kellner, 2002:
289). In this sense globalisation is thus a process of both capitalism and
technological change, both of which inevitably feed off each other.

Box 1
Defining globalisation

Globalisation:

1. ‘Denotes the expanding scale, growing magnitude, speeding up and


deepening impact of transcontinental flows and patterns of social interaction.
It refers to a shift or transformation in the scale of human organisation that
links distant communities and expands the reach of power relations across
the world’s regions and continents’ (Held and McGrew, 2002, p.1).

2. Is a ‘gradual and ongoing expansion of interaction processes, forms of


organisation, and forms of cooperation outside the traditional spaces defined
by sovereignty. Activity takes place in a less localised, less insulated way
as transcontinental and interregional patterns criss-cross and overlap one
another’ (Cha, 2000, p.392).

3. Is the ‘growing economic interdependence of countries worldwide through


increasing volume and variety of cross-border transactions in goods and
services, freer international capital flows, and more rapid and widespread
diffusion of technology’ (IMF website).

4. Is the ‘freedom and ability of individuals and firms to initiate voluntary


economic transactions with residents of other countries’ (World Bank website).

5. Is ‘a social process in which the constraints of geography on social and


cultural arrangements recede and in which people become increasingly
aware that they are receding’ (Australian Professor Emeritus of Sociology
Malcolm Waters in his book Globalization (1995)).

6. Is ‘the closer integration of the countries and peoples of the world which has
been brought about by the enormous reduction of costs of transportation
and communication, and the breaking down of artificial barriers to the flow
of goods, services, capital, knowledge and (to a lesser extent), people across
borders’ (Stiglitz, 2002, p.9).

How old is globalisation?


As Held and McGrew (2002, p.1) note, the term ‘globalisation’ originated
with Karl Marx and other nineteenth-century social scientists, but did
not start to become popular as a description for the current era until
the 1960s. Yet, one could argue, if globalisation is to refer to Held and
McGrew’s emphasis on ‘linking distant communities’, surely globalisation
began with the European age of exploration in the late fifteenth century,
specifically with Bartolomeu Dias’s voyage around the Cape of Good Hope
in southern Africa in 1487, Christopher Columbus’s arrival in America
in 1492 and Vasco da Gama’s arrival in India in 1498. The advent of
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171 Introduction to international development

colonialism and later imperialism linked various parts of the globe for the
first time, both economically and politically, in what could be called the
first phase of globalisation. Indeed, Thomas Friedman (2005) has written
about what he calls the three eras of globalisation (see Box 2).

Box 2
Thomas Friedman’s three eras of globalisation

•• Globalisation 1.0 (1492–1800) shrank the world from a size large to a


size medium, and the dynamic force in that era was countries globalising
for resources and imperial conquest.

•• Globalisation 2.0 (1800–2000) shrank the world from a size medium to a


size small, and it was spearheaded by companies globalising for markets
and labour.

•• Globalisation 3.0 (which started around 2000) is shrinking the world


from a size small to a size tiny and flattening the playing field at the same
time.

And while the dynamic force in Globalisation 1.0 was countries globalising
and the dynamic force in Globalisation 2.0 was companies globalising,
the dynamic force in Globalisation 3.0 – the thing that gives it its unique
character – is individuals and small groups globalising. Individuals must, and
can, now ask: where do I fit into the global competition and opportunities
of the day, and how can I, on my own, collaborate with others globally? But
Globalisation 3.0 not only differs from the previous eras in how it is shrinking
and flattening the world and in how it is empowering individuals. It is also
different in that Globalisation 1.0 and 2.0 were driven primarily by European
and American companies and countries. But going forward, this will be
less and less true. Globalisation 3.0 is not only going to be driven more by
individuals but also by a much more diverse – non-Western, non-white –
group of individuals. In Globalisation 3.0, you are going to see every colour
of the human rainbow take part (Friedman, 2005).

Other authors have noted that, in terms of trade, the world today is
less globalised than it was during the ‘belle époque of international
interdependence, namely the period from 1890 to 1914’ (Held and McGrew,
2002, p.3). The use of gold as an international currency standard, a global
period of relative peace up to 1914, a general belief – if not always a
practice – in low tariffs and, perhaps most importantly, the expansion of
European imperialism to all parts of the globe were all instrumental in this
first period of globalisation. In fact, as some authors have noted, the ratio of
foreign trade to GNP is about the same today as it was a century ago.
However, Cha (2000, p.392) notes that comparison between the
late-nineteenth century and the present day is:
‘not accurate because the process of change at the turn of the
twentieth century was driven by, and had as its final outcome,
nationalism and the consolidation of statehood. A century later,
statehood and notions of sovereignty are not so much under
attack by so-called “globalisation forces” as empires were,
but are being modified and re-oriented by them. In short, the
nation-state does not end; it is just less in control.’

Thus globalisation today has had the exact opposite effect as it did a
century ago, namely breaking down the power of all nation-states to
control their own destinies, while previously globalisation strengthened
some states at the expense of others.
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Chapter 10: The international order

Activity 1
Go back to the different definitions of globalisation offered above. For each one write
50–100 words about when in time you think this particular definition of globalisation
began.

How does globalisation affect development?


Some authors have been quite sceptical about globalisation and the way it
has become a trendy catchphrase. Wallerstein (2005), for instance, claims
that just as ‘development’ itself was a popular subject of study in the 1960s
and 1970s, so did globalisation become popular in the 1980s and 1990s,
with its popularity now on the way out.
Historically, Wallerstein (2005, p.1267) argues, the gap between the
richest people in the world and the poorest has never got smaller since
the advent of European colonialism 500 years ago. He asks, quite rightly,
‘what is there in the present situation that should lead us to assume that
this pattern would not continue?’ Wallerstein’s scepticism is based on his
argument that poor countries cannot become richer without lowering
income elsewhere, in turn based on his theory that all countries are
linked through what he calls the world-system. More specifically, with
the exception of items found nowhere else on the planet – i.e. minerals
like coltan, an essential part of mobile phones and laptop computers, of
which 80 per cent of the world’s supply is from the Democratic Republic
of Congo – for one country to grow rich it must produce something that is
already produced elsewhere and therefore increase the supply and thereby
lower the price for the product in question. Thus rich countries – or rather
the working class in rich countries who stand to lose their jobs to poorer
countries through globalisation – will inevitably halt this development
before it takes place.
Activity 2
Think of an example of a product produced or a service offered in a poor country today
that was recently only done in richer countries. Write 500 words on whether you think
that this development is beneficial to workers and/or consumers in one, both or neither
country.

Wallerstein is not alone in being critical of globalisation’s prospects for


the world’s poor countries. Indeed, scholars are divided on whether
globalisation is good or not for development. Some on the right, like
Thomas Friedman, claim that globalisation has a positive effect on both
economic growth and democratisation, while others argue the exact
opposite. Friedman and other optimists claim that as the world ‘flattens’,
people in the developing world begin to want the same things, like wealth
and democracy, that people in the First World enjoy, and will therefore
demand these benefits from their governments. These governments will
thus either respond to these demands and change their policies or will be
overthrown. Advocates of this point of view claim that we can see evidence
of this phenomenon in recent revolutions and changes of government in
Georgia, Lebanon, the Ukraine, Uzbekistan and elsewhere.
Some scholars on the left, like Michael Hardt and Antonio Negri in
their two books Empire (2001) and Multitude (2006), also agree that
globalisation has increased democracy, in that it strengthens global civil
society organisations. Due to the advances in technology, groups of people
can now communicate across time and space with ease and thereby
collectively organise and protest against state power and repression. One

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171 Introduction to international development

example could be the series of protests against the then planned war
against Iraq that took place across the globe on 15 February 2003, still
the largest coordinated global protest in world history. Some writers have
termed this ‘globalisation from below’ where the goal is to ‘protect the
environment, labour rights, national cultures, democratisation and other
goods from the ravages of uncontrolled capitalist globalisation’.
These globalists have ‘been promoting globalisation from below,
developing networks of solidarity and propagating oppositional ideas and
movements throughout the planet’ (Kellner, 2002, p.297).
Other scholars from the left, however, claim that globalisation has led to the
expanded dominance of the First World, especially the US, over the Third
World. Specifically, globalisation has undermined rather than strengthened
democracy, as the increased flow of global capital has meant that people in
a given country have less choice over their country’s economic policies as
in the past, as politicians are prevented from angering global capitalists for
fear of a sudden withdrawal of money from their economy as happened in
many countries in East and South-East Asia in the late 1990s.

Box 3
Globalisation and the 2004 Indian election

One recent example of the effect of global capital on national politics was
the formation of a new government in the aftermath of the Indian general
election in 2004. The Congress Party unexpectedly won the election over
the then governing Bharatiya Janata Party (BJP), and Congress leader Sonia
Gandhi was widely expected to subsequently become the country’s new prime
minister. However, another winner of the election was the Communist Party
of India (Marxist) (CPI(M)), which, in coming in third after Congress and the
BJP, picked up its largest ever share of the vote. However, when word leaked
out that Congress, CPI(M) and the Communist Party of India (which had more
than doubled its number of representatives in Parliament from the previous
election in 1999) were discussing forming a coalition government, shares on the
Bombay stock market dropped by 11 per cent in one day, its largest ever drop
since being established in 1875. The Congress Party was forced to respond by
not only refusing to join in a coalition with the two Communist parties but also
by installing Manmohan Singh, the architect of India’s economic liberalisation
reforms in the early 1990s, as prime minister. In response the Bombay stock
market rose by 8 per cent in value, its second-largest ever one-day rise.

Has globalisation affected poverty and inequality?


As with the above, it is highly controversial whether globalisation has
reduced or increased economic inequality. On the one hand Brian Goesling
(2001) has argued that globalisation has led to a decrease in inequality
between countries but an increase within them. Robert Wade (2004), on
the other hand, notes that, as cross-national data are difficult to measure
and compare, it is difficult to claim definitely that globalisation has or
has not reduced poverty and/or inequality. What is likely, Wade (2004:
p.576) claims, is that the percentage or proportion of people living in
poverty decreased between 1980 and 1999, but that the number of poor
people increased over the same period. While similar problems exist with
inequality numbers, it is clearer that globalisation has widened the gap
between the rich and the poor, especially if either China or India is left
out of the statistics as an anomaly. (One must also note that – and on this
point Goesling and Wade agree – inequality within China and India is
increasing as well.)
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Chapter 10: The international order

Similarly, Jan Pieterse (2002) refers back to one of the definitions of


globalisation listed above, namely one that emphasises free trade and
neo-liberal policies. Statistics show that the more countries liberalise
their trade policies and adopt neo-liberal policies, the greater their
resultant inequality will become. Thus, according to Wade and Pieterse,
globalisation has increased global inequality.
But so what, ask many people – why should it matter if some are getting
richer than others as long as none of us are getting any poorer? First
of all, this statement neglects the fact that, even if poorer countries are
experiencing faster economic growth than rich countries – according to
the World Bank, GDP per capita in low-income countries grew by 3.08 per
cent per year from 1999 through the end of 2003 versus only 1.68 per cent
for high-income countries over the same time period – there are always
inevitably some countries in the world – like Zimbabwe, for instance – or
some regions within countries – like northern Uganda – that are growing
poorer within this trend.
Furthermore, the political consequences of global inequality are
increasingly being recognised as a major problem, especially in the guise
of international terrorism. Many scholars like Pieterse (2002) and Ehrlich
and Liu (2002) have begun to realise that, despite the fact that terrorists
like Osama Bin Laden often come from rich families, ‘moral indignation
and grass-roots support’ for international terrorism comes from citizens
in countries which are on the receiving end of global inequality (Ehrlich
and Liu, 2002, p.187). Thus inequality has significant political effects and
cannot be ignored as a mere economic phenomenon.

Understanding the international system


We now move on to the second part of this chapter, namely the
international system and its role in promoting development. After defining
the international system, we move on to focus on three key institutions
within it, specifically the UN, the World Bank and the IMF.

What is the international system?


The international order was famously defined by Hedley Bull as ‘a pattern
of activity that sustains the elementary or primary goals of the society
of states, or international society’. These goals included ‘security, the
sanctity of agreements and the protection of territorial property rights’.
As Christian Reus-Smit puts it, to achieve these goals ‘societies of states
evolve fundamental institutions’, which they then use to deal with
problems of cooperation and coordination between themselves (Reus-
Smit, 1997, p.557). The institutions that states have created have been
varied and many, but the most famous and influential are few and worthy
of our time here, namely the United Nations, the World Bank and the
International Monetary Fund.

The United Nations


The most important international institution is, of course, the United
Nations, which was established in 1945 in San Francisco in the wake of
the Second World War. While 51 member states were original signatories
to the treaty, as the number of countries in the world has grown so has the
number of member states in the UN: with the addition of Switzerland and
East Timor in 2002, the UN now currently has 191 member states.

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171 Introduction to international development

The UN has a variety of different organs around the world; its


headquarters are in New York City, where the office of the UN’s most
senior official, the Secretary-General, is located. There are six main organs
of the UN, which comprise the United Nations System:
• General Assembly
This is the UN equivalent of a Parliament, where each member
state is represented and each has one vote. Since around two-thirds
of member states are developing countries, votes on issues in the
General Assembly tend more to reflect poorer countries’ interests
than the Security Council (see below). The General Assembly meets
regularly but often holds special sessions, as it did in 2000 to pass the
Millennium Development Goals.
• Security Council
The Security Council is the most important and powerful body in the
UN system, as it alone has the right to decide matters of peace and
war, and force member states to abide by its decisions. The Council has
15 members at any given point in time, of which five are permanent,
namely China, France, Russia (the USSR until 1991), the UK and
the US. Each of these permanent members has the right to veto any
resolution and thereby stop it from passing. The other 10 members are
elected by the General Assembly for two-year terms.
• Economic and Social Council
The Economic and Social Council (ECOSOC) has 54 members, 18 of
which are elected every year by the General Assembly for a three-year
term. It helps to coordinate the various agencies within the UN system.
• Trusteeship Council
The Trusteeship Council was created to govern non self-governing
territories like Nauru, Somalia, Tanganyika and (Western) Samoa. The
last of these, Palau, gained independence in 1991 and thereby made
the Trusteeship Council largely redundant.
• Secretariat
The UN Secretariat is led by the Secretary-General and oversees a
variety of sub-agencies, including the Office of the Coordinator for
Humanitarian Affairs (UNOCHA) and the Department of Peacekeeping
Operations, among others. Kofi Annan from Ghana was elected
Secretary-General in 1997 and is the seventh person to hold the office.
• International Court of Justice
The International Court of Justice (ICJ), or the World Court, was
created to settle legal disputes between countries. It is based in The
Hague, the Netherlands, and is composed of 15 judges elected by
the Security Council and the General Assembly. Each member of the
Security Council has always had one representative on the ICJ.
Several UN agencies are especially important in developing countries.
The agency most responsible for development is the United Nations
Development Programme (UNDP), whose administrator ranks third
after the Secretary-General and Deputy Secretary-General within the UN
hierarchy. Like the UN High Commission for Refugees (UNHCR), World
Food Programme (WFP) and others, the UNDP is funded by voluntary
contributions, with the United States and United Kingdom as its two
largest supporters. As noted in Chapter 2, the UNDP has published the
Human Development Report annually since 1990, whose rankings are
based on the Human Development Index, and has a presence in 166
countries.

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Another agency of importance is the UN Children’s Fund (UNICEF – its


original title was the UN International Children’s Emergency Fund).
UNICEF, which was awarded the Nobel Peace Prize in 1965 – other
divisions within the UN won the Peace Prize in 1954, 1981, 1988 and
2001 – has five main priorities, namely girls’ education, immunisation,
child protection, HIV/AIDS and early childhood. UNICEF has attracted
a great deal of plaudits through the years – many celebrities like David
Beckham, Jackie Chan, Audrey Hepburn, Roger Moore, Shakira and
Susan Sarandon have signed up as UNICEF Goodwill ambassadors – but
the agency has come under criticism from the Vatican that its activities
indirectly fund abortions and contraceptives.
Other UN agencies are just as important as the UNDP and UNICEF. The
WFP, which is based in Rome and whose largest donors include the US and
Japan, has as its goal to provide food aid: in 2004 it distributed 3.5 million
tons of food in 80 countries. The UNHCR exists to protect and provide
assistance to the approximately 10 million refugees around the world;
it also provides help to another 10 million internally displaced people
in places like Colombia and the Democratic Republic of Congo. As with
UNICEF, many celebrities like Giorgio Armani and Angelina Jolie serve as
UNHCR Goodwill ambassadors. Finally, the World Health Organization
helps to combat diseases, most famously and successfully in the case of
smallpox, which it declared as eradicated in 1979 – the first disease to be
deliberately eliminated by humans in world history.
These different organs of the UN indicate how the organisation has often
been accused of being unwieldy and in need of reform. The failures of the
UN have been well-documented, whether in the way the UN Peacekeepers
were catastrophically withdrawn in the midst of the 1994 Rwandan
genocide or in the inability of the organisation to come down forcefully
for or against the invasion of Iraq in 2003. These problems have led
to criticisms from both the Left and the Right that the UN is either the
servant of the US or, on the other hand, the exact opposite and rather a
servant of anti-US and anti-Israel member states.
Despite these criticisms, few (outside the US, at least) have argued for
the abolition of the UN, as critics reluctantly acknowledge that it is a vital
institution, if only for the way it allows world leaders and representatives
from all countries to interact with each other on a regular basis. This
cannot be said, however, for the World Bank or the International Monetary
Fund, which we examine next.

The World Bank


Like the UN, the World Bank and IMF were also created at the end
of the Second World War in the US, albeit in Bretton Woods, New
Hampshire rather than San Francisco. (This is why both, along with the
Bank for Settlements, are often called ‘Bretton Woods institutions’.) The
International Bank for Reconstruction and Development (IBRD), or the
World Bank, began operating in 1946 and issued its first loan in 1947 to
France for $250 million, which remains in real dollars the largest loan
ever issued by the IBRD. Various other organisations like the International
Finance Corporation and the International Development Association were
later added to what is technically known as the World Bank Group but is
better known simply as the Bank.
The Bank is based in Washington D.C. and is run by a board of 24
executive directors, all from different countries, as well as a president,
who has traditionally always been an American citizen. (The current

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171 Introduction to international development

President, Paul Wolfowitz, was most recently Deputy Secretary of Defence


in the US while his predecessor, James Wolfensohn, was born in Australia
but became a naturalised US citizen before becoming Bank President in
1995.) Voting power is disproportionately skewed towards those countries
that contribute the most money to the Bank, thereby leaving the US with
16.4 per cent of total votes (despite holding only 4.6 per cent of the
world’s population), Japan with 7.9 per cent (with 2.0 per cent of the
world’s population) and Germany with 4.5 per cent (with 1.3 per cent
of the world’s population). These disparities, plus the fact that major
decisions in the Bank require an 85 per cent super-majority – thereby
granting the US de facto veto power – have angered many people around
the world and led to calls for reforming the way the Bank operates.
As its original title suggests, the Bank was originally intended to help
countries reconstruct and develop after the destruction of the Second
World War, but it has increasingly grown in scope and size over the
decades to the point where it is now arguably the world’s largest and most
important institution devoted to development. For instance, the position
of chief economist at the Bank has been held by some of the most famous
economists in the world, including former US Secretary of the Treasury
and current President of Harvard University Lawrence Summers (1991–
93) and Nobel Prize winner Joseph Stiglitz (1997–2000), among others.
More broadly, the Bank has undergone mission creep and ‘transformed
itself in stages into a development bank, an aid agency, an anti-poverty
crusader and a leading proponent of state retrenchment under the rubric
of structural adjustment’ (Pincus and Winters, 2002, p.1). There have been
a variety of criticisms launched at the Bank in recent years. For instance,
many anti-globalisation protesters have argued that the problem with the
Bank is not necessarily its increased scope and power but rather the way
that, as noted above, decision-making power at the Bank and IMF has
remained with the US, Japan and other developed countries and has thus
not also changed over time. Pincus and Winters (2002, p.4) claim that, ‘for
the present, the United States appears content to treat the World Bank as
an extension of the US Treasury’.
Others have attacked the Bank from within, most famously Joseph Stiglitz
while he was still chief economist in the late 1990s. He claimed that
the Bank’s emphasis on loan conditionality – i.e. ‘tying the delivery of
resources to the implementation of specific policy changes in recipient
countries’ (Pincus and Winters, 2002, p.11) – and the Washington
Consensus more generally had failed to lead to poverty reduction and
increased growth in developing countries (refer back to Chapter 6 for
more on the Washington Consensus). In other words, Stiglitz argued,
the Bank needed to stop trying to impose development from above and
needed more emphasis on ‘local participation, inclusion and consensus
building’ (Pincus and Winters, 2002, p.12).
Still others have attacked the Bank not from the Left but from the Right,
most notably members of the US Congress who claim that the Bank is too
costly for US taxpayers and therefore want to scale down its operations to
that of a ‘niche’ player which only lends to the poorest and most deserving
countries.
Finally, critics from both the Left and Right go so far as to claim that the
Bank is beyond reform and should be abolished altogether. Leftists have
argued that the Bank is inevitably a tool of global capitalism and can
only hurt the world’s poor. Those on the right, on the other hand, again
see the Bank as a ‘socialist giveaway that hands out American taxpayers’

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money to foreign dictatorships’ (Pincus and Winters, 2002, pp.17–19). In


other words, both the Left and Right claim that the Bank is a tool of their
ideological opponents and therefore seek to shut it down.

The IMF
The IMF came into existence in 1945, and, as an informal quid pro quo
for always electing American presidents of the Bank, the IMF’s managing
director has always been a European. (Three directors have been French
and two Swedish; the current Director, Rodrigo Rato, is from Spain.)
The IMF claims in its statute that it is ‘an organisation of 184 countries,
working to foster global monetary cooperation, secure financial stability,
facilitate international trade, promote high employment and sustainable
economic growth, and reduce poverty’. However, like the Bank voting
powers at the IMF are decided by monetary contributions, thereby
advantaging richer countries.
As mentioned in Chapters 6 and 8, along with the Bank the IMF promoted
‘structural adjustment programmes’ (SAPs) in the 1980s and 1990s,
whereby developing countries would receive loans if they agreed to certain
conditionalities such as liberalising trade, removing and reducing price
controls and subsidies, and privatising state-owned companies. These SAPs
were unpopular to the point where they were largely replaced by Poverty
Reduction Strategy Papers (PRSPs) by the end of the 1990s, which, as
critics noted, have not been all that different from the SAPs they replaced.
Indeed, the IMF has come under very similar criticisms to the Bank, for
reasons outlined above. The most famous criticism launched at the IMF
came from the aforementioned former chief economist of the World Bank,
Joseph Stiglitz, after he won the Nobel Prize for Economics in 2001.
He claimed that the IMF had grossly overstepped its original mandate,
namely to ‘support global economic stability’, rather than its current goal
of ‘reducing poverty in developing countries’ (Stiglitz, 2002, p.34). Stiglitz
traced the beginnings of the IMF’s problems back to the era of the SAPs
in the 1980s and the then popular idea that government was the problem
rather than the solution, along with the growing ‘imperialistic view’ of
the IMF over the World Bank. These two shifts in attitude, Stiglitz claims,
led to a situation where the IMF dismantled public poverty reduction
programmes across the developing world in favour of a neo-liberal reliance
upon markets.
Stiglitz’s criticisms have been widely read and have encouraged many
anti-World Bank and IMF protestors. Some like Anne Krueger, who was
Vice-President at the World Bank from 1982 to 1986 and has been Deputy
Managing Director at the IMF since 2001, agree with some of Stiglitz’s
points, for instance his claim that the World Bank and the IMF have
changed their mandates and now cover much of the same territory. She
claims that, however, the IMF ‘and its staff have generally been viewed
as doing a satisfactory and competent job of dealing with individual
countries’ difficulties’ (Krueger, 1998, p.2011), and that the IMF therefore
‘makes a useful contribution to developing countries in supporting their
policy changes’ (Krueger, 1998, p.2016). Yet there is no doubt that, in
recent years, Stiglitz rather than Krueger has been the more influential
author, and that the pressure for reform of the two Bretton Woods
Institutions is just as strong as it is for the reform of the UN.
Along with its move away from SAPs, the IMF has responded to some of its
critics by initiating the Highly Indebted Poor Countries (HIPC) programme
in 1996, where 38 countries (32 of which were in Sub-Saharan Africa)

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171 Introduction to international development

were identified as needing debt relief. Twenty-seven of these countries


have received debt relief in the intervening decade, leading to, among
others, increased school attendance, greater access to clean water and
higher immunisation figures in such countries as Mozambique, Tanzania
and Uganda. However, the HIPC programme has come under criticism
from both Left and Right: from the Left, as with the SAPs, activists
argue that these countries have been subject to conditionalities through
the aforementioned PRSPs, and the debt relief offered under the HIPC
programme has failed to make a significant dent in improving the overall
fiscal situations of these countries. From the Right, on the other hand,
critics have complained that debt relief has allowed developing countries
to renege on their loans without consequences and thereby leads to
corruption, increased defence budgets and less poverty reduction than if
aid had rather been directed at specific projects.

Activity 3
Write 500 words about whether you think the World Bank and IMF give proper amounts
of voting powers to developing countries. If you disagree, indicate how you would
restructure each organisation.

Conclusion
In this chapter we have examined different conceptions of globalisation
and three of the most important international institutions for developing
countries. We saw how scholars continue to debate when globalisation
began and how it affects both development and global inequality.
Similarly, we examined debates about the usefulness today of the UN, the
World Bank and the IMF. As with globalisation there is much controversy
about whether these institutions are good or bad for development, both in
the way they are currently structured and, more broadly, whether there is
a need for them to exist in the first place.

Reminder of your learning outcomes


Having completed this chapter, and the Essential readings and activities,
you should be able to:
• explain the essential aspects of globalisation and international
institutions
• have some understanding of the ongoing debates over whether
globalisation on the one hand and international institutions like the
UN, World Bank and IMF are good or bad for development.

Sample examination questions


1. Is globalisation more a feature of technological advances or the spread
of capitalism?
2. Has globalisation increased global inequality? If so, why should we
care?
3. Why do so many people around the world dislike the World Bank and
IMF?

150
Appendix 1: Sample examination paper

Appendix 1: Sample examination paper

Important note: This Sample examination paper reflects the intended


examination and assessment arrangements for this course in the
academic year 2011–2012. The format and structure of the examination
may have changed since the publication of this subject guide. You can
find the most recent examination papers on the VLE where all changes
to the format of the examination are posted.

Instructions to candidates
Time allowed: three hours.
Candidates should answer THREE of the following NINE questions:
including AT LEAST ONE EACH from section A and Section B. All
questions carry equal marks.

Section A
1. How and why have our ideas of development changed over the past
two centuries?
2. ‘Theories of the state and market have often set the two up in false
opposition.’ To what extent do you agree?
3. How useful are theories of institutions and civil society for
development policy and practice?
4. Why did European imperialism so often fail to bring development to
its subject territories?
5. How important was the threat of communism in shaping the ‘era of
national development’ between 1945 and 1973?

Section B
6. How have approaches to industrial policy changed during the
twentieth century, and why?
7. How is land reform linked to rural development?
8. What is the relationship between democratisation and economic
growth?
9. How has globalisation increased over the past 30 years?
END OF PAPER

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171 Introduction to international development

Notes

152
Appendix 2: Advice on answering the questions in the Sample examination paper

Appendix 2: Advice on answering the


questions in the Sample examination
paper

Section A
1. How and why have our ideas of development changed over the
past two centuries?
This question provides you with an opportunity to consider material from
Chapter 2 of the course. However, it is highly desirable (as in all your
answers) that you also draw upon material from the rest of the course. It is
vital that you ensure that you spend enough time analysing why they have
changed. Your answer will be weaker if it is largely descriptive. One way
of making sure that your answer is sufficiently analytical is to briefly link
your arguments to world historical and political events. A strong answer
will also draw upon Thomas’s description of the three ways in which the
term ‘development’ is used today.

2. ‘Theories of the state and market have often set the two up in
false opposition.’ To what extent do you agree?
You should begin your answer with a brief description of the main theories
of the state and market, as discussed in Chapter 3 of the course. Having
done this, you should then set out why state and market have often been
placed in opposition. A good answer will bring in country or regional
‘case studies’ to illustrate the arguments you wish to make, drawing
upon material from across the course. It is crucial that, in doing so, you
adequately consider the specific challenges of late development. A strong
answer will offer some interesting observations on the implications of the
arguments you have made for future development policy and practice.

3. How useful are theories of institutions and civil society for


development policy and practice?
As with the previous question, you should begin your answer with a brief
description of the main theories of institutions and civil society over the
centuries, as discussed in Chapter 4 of the course. A good answer will
bring in country or regional ‘case studies’ to illustrate the arguments you
wish to make, drawing upon material from across the course. A strong
answer will include an evaluation of the strengths and weaknesses of
‘New Institutional Economics’ and consideration of the argument that
civil society is a ‘Western’ concept with little relevance to non-European
societies.

4. Why did European imperialism so often fail to bring development


to its subject territories?
This question invites you to assess the motivations behind European
imperialism and its impact over time. Remember to include a discussion
of early European imperialism (e.g. Spain and Portugal) as well as the
imperialism of the nineteenth and twentieth centuries. Your answer
should evaluate the arguments of authors such as Washbrook, Phillips and
Davis, as discussed in Chapter 5 of the course. Do not just describe their

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171 Introduction to international development

arguments! A strong answer will also consider what insights (if any) can
be drawn from wider debates about the origins of capitalism in Europe.

5. How important was the threat of communism in shaping the ‘era


of national development’ between 1945 and 1973?
This question requires you to discuss the relative weight of different
factors in shaping the 1945–73 era, which we discussed in Chapter 6 of the
course. In order to establish how important the threat of communism was,
you will need to review the significance of other factors – for example, the
values and policies of post-independence governments across the Third
World. A good answer will show awareness that different conclusions
may be reached for different regions within the Third World. A strong
answer will also seek to derive broader insights into the interplay between
domestic and ‘external’ factors in shaping development.

Section B
6. How have approaches to industrial policy changed during the
twentieth century, and why?
This question requires you to demonstrate your knowledge of different
approaches or models of industrialisation, and to illustrate these with
examples. This will refer to Chapter 7 of this course. You will need to
list different approaches such as state-led initiatives including the ‘Big
Push’ concept; import-substituting industrialisation, export-oriented
industrialisation, and later versions that incorporate elements of both
domestic industry development and foreign investment. You will also have
to explain the reasons why different approaches were adopted, such as the
rise of global markets, the decline in the economic investment by the state
alone, and the strategies of different countries for achieving economic
growth with international competitiveness.

7. How is land reform linked to rural development?


This question asks you to link land reform and rural development, and to
show how changes in land reform may, or may not, achieve development.
These topics were discussed in Chapter 8. Both land reform and rural
development will have to be defined in this question, and you will have
to make clear that what constitutes ‘development’ in rural areas is highly
contested, and that different forms of land reform may achieve variable
types of rural development. For example, socialist forms of land reform
may achieve a form of development that assumes that ownership of land
has to remain in the hands of people. But some market-oriented critics
of this approach have suggested that overall food production may be
increased if land reform accelerates the ability for large-scale production.
Other analysts have suggested that land reform alone is not sufficient, and
that any land reform has to be accompanied by agrarian reform, such as
the provision of credit, technology and fertilizers, in order to increase both
rural development and overall food production. A later theme has looked
instead at the creation of rural livelihoods, which incorporate access to
markets as well as security of land tenure, rather than land reform alone.
Consequently, this question requires you to describe different forms of land
reform, but also consider land reform in regard to other types of policy as
a way to achieve ‘development.’

154
Appendix 2: Advice on answering the questions in the Sample examination paper

8. What is the relationship between democratisation and economic


growth?
This question requires you to first spell out what democracy is and how
countries democratise, as laid out in Chapter 9. You should show that
you understand that different theories of democracy exist but not spend
too long on definitions – just pick one that suits you best and move on
to the heart of the question. It is important to explicitly state that, on the
one hand, scholars have found no general statistical relationship between
economic growth and democracies, but, on the other hand, there is
evidence that democracies perform better than non-democracies at certain
things: here you could bring in Sen’s analysis of democracies and famines,
or other evidence that democracies spend more on education than non-
democracies. However, even if you argue that democracies are better
for development that non-democracies, it is important to show that you
understand the arguments against democratisation, for instance, the Asian
values argument of Lee Kuan Yew and Mahathir bin Mohammed, among
others.

9. How has globalisation increased over the past 30 years?


Any question on globalisation must start with an attempt to define
globalisation. Depending on the answer you think is most appropriate,
you should then try to locate the prime mover of globalisation and
how that mover has changed over the past 30 years – i.e. if you define
globalisation as greater global integration due to lower transportation
and communication costs, you should analyse when these costs started to
reduce and to what they have actually decreased in the past 30 years, a
topic which was discussed in Chapter 10. A question like this also implies
that, in the conclusion at least, you address the future of globalisation and
whether it is likely to speed up or slow down.

155
171 Introduction to international development

Notes

156
Appendix 3: Full list of Further reading

Appendix 3: Full list of Further reading

Amsden, A. ‘Bringing Production Back In – Understanding Government’s


Economic Role in Late Industrialization’, World Development XXV(4) 1997,
pp.469–80.
Amsden, A. Escape from Empire: The Developing World’s Journey Through
Heaven and Hell. (MIT Press, 2008) [ISBN 0262513153].
Amsden, A. The Rise of ‘The Rest’. Challenges to the West from Late-Industrializing
Economies. (Oxford and New York: Oxford University Press, 2001) [ISBN
0195139690].
Armstrong, P., A. Glyn and J. Harrison Capitalism since World War Two. The
Making and Break-up of the Long Boom. (London: Fontana Books, 1984)
[ISBN 0006357946].
Arrighi, G. ‘The African Crisis: World Systemic and Regional Aspects’, New Left
Review 15, 2002, pp.5–36.
Ashley, C. and S. Maxwell ‘Rethinking Rural Development’, Development Policy
Review 19(4) 2001, pp.395–425, and other papers in this special issue.
Baran, P. and P. Sweezy Monopoly capital: An essay on the American Economic
and Social Order. (New York: Monthly Review Press, 1968)
[ISBN 0853450730].
Beetham, D. Max Weber and the Theory of Modern Politics. (Oxford: Blackwell
Publishers Ltd, 1985) [ISBN 0745601189].
Brett, E.A. The World Economy Since the War. The Politics of Uneven Development.
(Basingstoke: Macmillans, 1985) [ISBN 033337200X] Chapters 3 and 5.
Bryceson, D., C. Kay and J. Mooij Disappearing Peasantries? Rural Labour In
Africa, Asia and Latin America. (London: ITDG Publishing, 2000)
[ISBN 1853394777].
Burki, S. Dismantling the Populist State: The Unfinished Revolution in Latin
America and the Caribbean. (Washington DC: World Bank, 1996)
[ISBN 0821336894].
Cha, V.D. ‘Globalization and the Study of International Security’, Journal of
Peace Research 37(3) 2000.
Chabal, P. ‘The Quest for Good Governance and Democracy in Africa: Is NEPAD
the Answer?’, International Affairs 78(3) 2002.
Chambers, R. Rural Development: Putting the Last First. (London: Longman,
1983) [ISBN 0582644437].
Chambers, R. Whose Reality Counts? Putting the First Last. (London:
Intermediate Technology Productions, 1997) [ISBN 185339386X].
Chandhoke, N. The Conceits of Civil Society. (New Delhi: Oxford University
Press, 2003) [ISBN 01956661958].
Chang, H.J. Kicking Away the Ladder: Development Strategy in Historical
Perspective. (London: Anthem, 2002) [ISBN 1843310279 (pbk)].
Chatterjee, P. Nationalist Thought and the Colonial World: A Derivative
Discourse? (London: Zed Books, 1986) [ISBN 0816623112] especially
Chapter 5.
Chatterjee, P. The Nation and its Fragments: Colonial and Postcolonial Histories.
(Princeton: Princeton University Press, 1993) [ISBN 0691019436].
Collier, P. The Bottom Billion: Why the Poorest Countries are Failing and What
Can be Done About It (Oxford: Oxford University Press, 2007)
[ISBN 0195374630].
Cowen, M.P. and R.W. Shenton Doctrines of Development. (London: Routledge,
1996) [ISBN 0415125154].

157
171 Introduction to international development

Crouch, C. ‘Markets and States’ in Nash, K. and A. Scott (eds) The Blackwell
Companion to Political Sociology. (Oxford: Blackwell Publishers Ltd, 2000)
[ISBN 0631210504].
Dahl, R. On Democracy. (New Haven and London: Yale University Press, 1998)
[ISBN 0300084552].
Davis, M. Late Victorian Holocausts. El Niño Famines and the Making of the Third
World. (London: Verso Books, 2001) [ISBN 1859847390] Chapters 1 and 9.
De Waal, A. Famine Crimes. Politics and the Disaster Relief Industry. (Oxford:
James Currey, 1997) [ISBN 0852558104].
Deininger, K. ‘Negotiated Land Reform as One Way of Land Access: Initial
Experiences from Columbia, Brazil and South Africa’ in De Janvry, A. et al.
(eds) Access to Land, Rural Poverty and Public Action. (UNU/WIDER and
Oxford University Press, 2001) [ISBN 0199242178] Chapter 13, pp.315–48.
Dick, G.W. ‘Authoritarian versus Nonauthoritarian Approaches to Economic
Development’, The Journal of Political Economy 82(4) 1974.
Drèze, J. and A. Sen Hunger and Public Action. (Oxford: Clarendon Press, 1989)
[ISBN 0198283652].
Dunleavy, P. ‘Democratic Politics and the State’, University of London External
Programme subject guide. (London: London University Press, 2004).
EcKut, Carter J. Offspring of empire: the Koch’ang Kims and the colonial origins
of Korean capitalism, 1876–1945. (Seattle: University of Washington Press,
1991) [ISBN 0295975334].
Edwards, M. Civil Society. (Cambridge: Polity Press, 2004) [ISBN 0745631339]
Chapters 1 and 5.
Ehrlich, P. and J. Liu ‘Some Roots of Terrorism’, Population and Environment
24(2) 2002.
Ellis, F. Rural Livelihoods and Diversity in Developing Countries. (Oxford: Oxford
University Press, 2000) [ISBN 0198296967].
Escobar, P. ‘Planning’ in Sachs, W. (ed.) The Development Dictionary. (London:
Zed Press, 1992) [ISBN 1856490440].
Evans, P. ‘The State as Problem and Solution: Predation, Embedded Autonomy
and Structural Change’ in Haggard, S. and R. Kaufman (eds) The Politics of
Economic Adjustment: ‘international constraints, distributive conflicts and the
state’. (Princeton: Princeton University Press, 1992) [ISBN 0691003947;
0691043000].
Ferguson, J. The Anti-Politics Machine. ‘Development’, Depoliticization and
Bureaucratic Power in Lesotho. (Minneapolis: University of Minnesota Press,
1994) [ISBN 0816624372].
Forsyth, T. (ed.) Encyclopedia of International Development. (London and New
York: Routledge, 2005). [ISBN: 9780415253420]
Foucault, M. Discipline and Punish. The Birth of the Prison. (Harmondsworth:
Penguin, 1991) [ISBN 014013722X].
Francis, E. Making a Living: Changing Livelihoods in Rural Africa. (London:
Routledge, 2000) [ISBN 0415144965].
Friedman, T. ‘It’s a Flat World, After All’, New York Times, 3 April 2005.
Fukayama, F. ‘The End of History?’, The National Interest Summer 1989,
pp.3–18.
Fukuyama, F. (ed.) Falling Behind: Explaining the Development Gap Between
Latin America and the United States (Oxford: Oxford University Press, 2008)
[ISBN 0195368827]
Gasper, D. The Ethics of Development (Edinburgh: Edinburgh University Press,
2004) [ISBN 0748610588]
Ghimire, K. (ed.) Land Reform and Peasant Livelihoods: the Social Dynamics of
Rural Poverty and Agrarian Reforms in Developing Countries. (London: ITDG
Publishing, 2001) [ISBN 1853395277].

158
Appendix 3: Full list of Further reading

Glyn, A. ‘Imbalances of the Global Economy’, New Left Review 34, 2005,
pp.5–37.
Goesling, B. ‘Changing Income Inequalities within and between Nations: New
Evidence’, American Sociological Review 66(5) 2001.
Goodin, R.E. ‘Institutions and their Design’ in Goodin, R.E. (ed.) The Theory of
Institutional Design. (Cambridge: Cambridge University Press, 1998) [ISBN
0521636434].
Gray, C.W. and D. Kaufmann ‘Corruption and Development’, Finance and
Development March 1998.
Hall, J.A. and F. Trentmann (eds) Civil Society: A Reader in History, Theory
and Global Politics. (Basingstoke: Palgrave Macmillan, 2005) [ISBN
1403915431].
Hardoy J.E. and D. Satterthwaite Squatter Citizen: Life in the Urban Third
World. (London: Earthscan, 1989) [ISBN 1853830208].
Hardt, M. and J. Negri Empire. (Cambridge, Mass.: Harvard University Press,
2001) [ISBN 0674006712].
Hardt, M. and J. Negri Multitude; War and Democracy in the age of empire.
(London: Penguin, 2006) [ISBN 014014873].
Harrison, G. ‘The World Bank, Governance and Theories of Political Action in
Africa’, British Journal of Politics and International Relations 7(2) 2005.
Harriss, J. Depoliticizing Development: The World Bank and Social Capital.
(London: Anthem Press, 2002) [ISBN 184331049X].
Harriss, J. ‘The case for cross-disciplinary approaches in international
development’, World Development XX, 2002.
Haynes, J. ‘The State, Governance and Democracy in Africa’, The Journal of
Modern African Studies 31(3) 1993.
Held, D. and A. McGrew Globalization/Anti-Globalization. (Cambridge: Polity
Press, 2002) [ISBN 0745629881] Chapter 1.
Heywood, A. Politics. (Basingstoke: Palgrave Macmillan, 2002) [ISBN
0333971310] Chapter 5 on ‘The State’.
Hirschman, A. The Strategy of Economic Development. (New Haven: Yale
University Press, 1958) [ISBN 0300005598].
Hoekman, B., A. Mattoo and P. English (eds) Development, Trade, and the WTO:
A Handbook. (Washington: World Bank, 2002) [ISBN 082134997X].
Howell, J. and J. Pearce Civil Society and Development: A Critical Exploration.
(Boulder, Colo. and London: Lynne Rienner Publishers, 2001) [ISBN
1555876196].
Johnson, C. MITI and the Japanese Miracle: The Growth of Industrial Policy,
1925–75. (Stanford: Stanford University Press, 1982) [ISBN 0804712069].
Johnson, C. Arresting Development: The Power of Knowledge for Social Change
(London: Routledge, 2008) [ISBN 0415381533]
Kabeer, N. Reversed Realities: Gender Hierarchies in Development Thought.
(London: Verso Press, 1994) [ISBN 0860915840].
Kay, C. ‘Why East Asia overtook Latin America: Agrarian Reform,
Industrialization and Development’, Third World Quarterly 23(6) 2002
pp.1073–102.
Keen, D. Benefits of Famine: A Political Economy of Famine and Relief in South-
Western Sudan, 1983–89. (Princeton: Princeton University Press, 1994)
[ISBN 0691034230].
Khan, M. ‘State Failure in Weak States: A Critique of New Institutionalist
Explanations’ in Harriss, J., J. Hunter and C. Lewis (eds) The New
Institutional Economics and Third World Development. (London and New
York: Routledge, 1997) [ISBN 0415157919].
Khan, M.H. ‘Corruption and Governance in Early Capitalism: World Bank
Strategies and their Limitation’ in Pincus, J. and J. Winters (eds)
Reinventing the World Bank. (Ithaca, N.Y.: Cornell University Press, 2002)
[ISBN 0801487927].

159
171 Introduction to international development

Kohli, A. State-Directed Development: Political Power and Industrialization in the


Global Periphery. (Cambridge: Cambridge University Press, 2004) [ISBN
0521545250].
Kozul-Wright, R. and R. Rowthorn ‘Spoilt for Choice? Multinational
Corporations and the Geography of International Production’, Oxford Review
of Economic Policy 14(2) 1998, pp.74–92.
Krueger, A. ‘Trade Policy and Economic Development’, American Economic
Review 87(1) 1997, pp.1–22.
LaFeber, W. America, Russia and the Cold War, 1945–1992. (New York: McGraw
Hill, 1993) [ISBN 0070358532].
Lall, S. Learning from the Asian Tigers: Studies in Technology and Industrial
Policy. (Basingstoke: Macmillan, 1996) [ISBN 0333674111].
Landes, D. The Wealth and Poverty of Nations: Why Some are so Rich and Some
are so Poor. (London: Abacus, 1999) [ISBN 0349111669] Chapters 3, 4,
12–15 and 29.
Lange, M. and J. Mahoney et al. ‘Colonialism and development: a comparative
analysis of Spanish and British colonies’, American Journal of Sociology
111(5) 2006, pp.1412–62.
Leys, C. The Rise and Fall of Development Theory. (Oxford: James Currey, 1996)
[ISBN 0852553501] Chapter 1.
List, F. The National System of Political Economy. (Philadelphia: J.B. Lippincott
and Co., 1856).
Little, D. Paradox of Wealth and Poverty: Mapping the Dilemmas of Global
Development. (Boulder, Colo.: Westview, 2003) [ISBN 0813316421]
Chapter 8.
Lockwood, M. The State They’re In. An Agenda for International Action on
Poverty Africa. (Bourton: ITDG Publishing, 2005) [ISBN 1853396176].
Mathews, J. Dragon Multinational: A New Model for Global Growth. (Oxford:
Oxford University Press, 2002) [ISBN 0195121465].
Minier, J. ‘Democracy and Growth: Alternative Approaches’, Journal of
Economic Growth 3(3) 1998.
Moore, B. Social Origins of Dictatorship and Democracy Lord and Peasant in the
Modern World. (London: Penguin Books, 1979) [ISBN 0140550860] see
especially Chapter 3.
Morgan, K. Slavery, Atlantic Trade and the British Economy, 1660–1800.
(New York: Cambridge University Press, 2001) [ISBN 0521588146].
Mosley, P. Green Revolution in Africa. (London: Routledge, 2005) [ISBN
0415074649].
Mosley, P., J. Harrigan and J. Toye Aid and Power: the World Bank and Policy
Based lending. (London: Routledge, 1991) [ISBN 0415015480].
Myrdal, G. Asian Drama: An Inquiry into the Poverty of Nations (New York:
Pantheon Books, 1972) [ISBN 0394470869].
Ngugi, Wa Thiongo Decolonizing the Mind. The Politics of Language in African
Literature. (London: James Currey, 1986) [ISBN 0852555016].
North, D. ‘The New Institutional Economics and Third World Development’
in Harriss, J., J. Hunter and C. Lewis The New Institutional Economics and
Third World Development. (London: Routledge, 1995) [ISBN 0415157919].
Nowell-Smith, G. (ed.) Selections from The Prison Notebooks of Antonio Gramsci.
(London: Lawrence and Wishart, 1971) [ISBN 0853152802].
Nussbaum, M. and J. Glover (eds) Women, Culture and Development: A Study of
Human Capabilities. (Oxford: Clarendon Press, 1995) [ISBN 0198289642].
Olson, M. ‘Dictatorship, Democracy and Development’, The American Political
Science Review 87(3) 1993, pp.567–76.
Ottemoeller, D. ‘Popular Perceptions of Democracy: Elections and Attitudes in
Uganda’, Comparative Political Studies 31(1) 1998.
Parpart, J. ‘Post-Modernism, Gender and Development’ in Crush, J. (ed.) Power
of Development. (London: Routledge, 1995) [ISBN 0415111773].

160
Appendix 3: Full list of Further reading

Phillips, A. The Enigma of Colonialism: British Policy in West Africa. (London:


James Currey, 1988) [ISBN 085255026X] Chapters 1 and 8.
Pieterse, J.N. ‘Global Inequality: Bringing Politics Back In’, Third World
Quarterly 23(6) 2002.
Pincus, J. and J. Winters (eds) Reinventing the World Bank (Ithaca, N.Y.: Cornell
University Press, 2002) [ISBN 0801487927].
Porter, A. European Imperialism, 1860–1914. (Basingstoke: Macmillan, 1994)
[ISBN 0333481046].
Power, M. ‘The dissemination of development’, Environment and Planning D 16,
1998, pp.577–98
Przeworski, A. and F. Limongi ‘Political Regimes and Economic Growth’, Journal
of Economic Perspectives 7(3) 1993.
Przeworski, A., Alvarez, M, Cheibub, J. and Limongi, F. Democracy and
Development: Political Institutions and Well-Being in the World, 1950–1980
(Cambridge: Cambridge University Press, 2000) [ISBN 0521793793]
Ravallion, M. ‘Good and Bad Growth: The Human Development Reports’, World
Development 25, 1997, pp.631–38.
Rodrik, D. (ed.) In Search of Prosperity. Analytic Narratives on Economic Growth.
(Princeton: Princeton University Press, 2003) [ISBN 0691092699].
Rodrik, D., A. Subramanian and F. Trebbi,‘Institutions rule: the primacy of
institutions over integration and geography in economic development’,
Journal of Economic Growth 9(2) 2004, pp.131–65.
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171 Introduction to international development

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examined by Amartyar Sen’, Journal of Economic Literature, 31(4)
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162
Appendix 4: Full list of Challenging reading

Appendix 4: Full list of Challenging


reading

Ansprenger, F. The Dissolution of the Colonial Empires. (London: Routledge,


1989) [ISBN 0415031435].
Austin, G. The ‘reversal of fortune’ thesis and the compression of history:
perspectives from African and comparative economic history. Journal of
international development, 20(8) 2008, pp.996–1027.
Bates, R. Prosperity and Violence: The Political Economy of Development. (London
and New York: W.W. Norton, 2001) [ISBN 0393050386].
Baum, M.A. and D.A. Lake, ‘The Political Economy of Growth: Democracy and
Human Capital’, American Journal of Political Science 47(2) 2003.
Bebbington, A. ‘Capitals and capabilities: a framework for analyzing peasant
viability, rural livelihoods and poverty’, World Development 27(12) 1999,
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Berman, B. ‘Ethnicity, Patronage and the African State: The Politics of Uncivil
Nationalism’, African Affairs 97(388) 1998, pp.305–41.
Bloch, M. Feudal Society. (London: Routledge and Kegan Paul, 1965) two
volumes [ISBN 0710046464 and 0710046472].
Brenner, R. ‘The Origins of Capitalist Development: A Critique of Neo-Smithian
Marxism’, New Left Review 104, 1977, pp.25–92.
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Trade in the 17th Century. (New York: Simon and Schuster, 1997) [ISBN
0684818191].
Chang, H-J. (ed.) Rethinking Development Economics. (London: Anthem, 2003)
[ISBN 1843311100].
Chang, H-J. Bad Samaritans: Rich Nations, Poor Policies and the Threat to the
Developing World. (London: Business Books, 2007) [ISBN 1905211376].
Chenery, H., M. Ahluwalia, C. Bell, J. Duloy and R. Jolly Redistribution with
Growth: Policies to Improve Income Distribution in developing Countries in
the Context of Economic Growth. (London: Oxford University Press and the
World Bank, 1974) [ISBN 019920070X].
Cline, W. ‘Can the East-Asian Model of Development be Generalized?’, World
Development 10(2) 1982, pp.81–90.
Corbridge, S. ‘Development as freedom: the spaces of Amartya Sen’ Progress in
Development Studies 2(3) 2002, pp.183–217.
Corbridge, S. ‘Bearing witness: the global spigot, American empire and the
colonial present’, Geopolitics 11, 2006, pp.159–80.
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Governance and Governmentality in India. (Cambridge: Cambridge Univerity
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J. (ed.) Power of Development. (London: Routledge, 1995) [ISBN
0415111773].
Das, R. ‘The Green Revolution and Poverty: A Theoretical and Empirical
Examination of the Relation between Technology and Society’, Geoforum
33(1) 2002, pp.55–72.
Devereaux, S. ‘Sen’s entitlement approach: critiques and counter-critiques’,
Oxford Development Studies 29, 2001, pp.245–63.

163
171 Introduction to international development

Fine, B. ‘Economics and ethics: Amartya Sen as point of departure’, The New
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of Chile and Brazil. (Harmondsworth: Penguin, 1971) [ISBN 0140213341].
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of Essays. (Cambridge, Mass.: Harvard University Press, 1962) [ISBN
0674226003] Chapter 1.
Goetz, A.M. and R. Sen Gupta, ‘Who takes the credit?: Gender, power and
control over loan use in rural credit programmes in Bangladesh’, World
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1972–77, by M. Foucault. (New York: Random House USA Inc., 1988) [ISBN
039473954X].
Hanlon, J. Mozambique: Who Calls the Shots? (London: James Currey, 1991)
[ISBN 0852553463].
Harris, N. National Liberation. (London: Penguin Books, 1992) [ISBN
0140125604] Chapter 11.
Harriss, J. ‘Institutions, Politics and Culture: A Polanyian Perspective on
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1990) [ISBN 0631162941].
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0691027935].
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Polanyi, K. The Great Transformation: The Political and Economic Origins of our
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164
Appendix 4: Full list of Challenging reading

Polidano, C. ‘Don’t Discard State Autonomy: Revisiting the East Asian


Experience of Development’, Political Studies 4(9) 2001, pp.513–527.
Poteete, A. ‘Is development path-dependent or political? A reinterpretation
of mineral-dependent development in Botswana’, Journal of Development
Studies 45, 2009, pp.544–71.
Prendergast, R. ‘The concept of freedom and its relation to economic
development – A critical appreciation of the work of Amartya Sen’,
Cambridge Journal of Economics 29, 2005, pp.1145–1170.
Putnam, R. Making Democracy Work: Civic Traditions in Modern Italy.
(Princeton: Princeton University Press, 1993) [ISBN 0691037388].
Rawls, J. A Theory of Justice. (Oxford: Oxford University Press, 1999)
[ISBN 019825055X].
Reno, W. Corruption and State Politics in Sierra Leone. (Cambridge: Cambridge
University Press, 1995) [ISBN 0521471796].
Reus-Smit, C. ‘The Constitutional Structure of International Society and the
Nature of Fundamental Institutions’, International Organization 51(4) 1997.
Ricardo, D. The Principles of Political Economy and Taxation. (1817).
Rodrik, D. ‘Goodbye Washington consensus, hello Washington confusion: a
review of the World Bank’s Economic growth in the 1990s: Learning from a
decade of reform’, Journal of Economic Literature XLIV, 2006, pp.973–87.
Sachs, J. and A. Warner ‘The Big Push, Natural Resource Booms and Growth’,
Journal of Development Economics 59, 1999, pp.43–76.
Schaffer, B.B. ‘Towards Responsibility: Public Policy in Concept and Practice’
in Clay, E.J. and B.B. Schaffer (eds) Room for Manoeuvre: An Exploration of
Public Policy in Agricultural and Rural Development. (London: Heinemann
Educational Books, 1984) [ISBN 0435837605].
Schumpeter, J. (2008 [1942]) Capitalism, Socialism and Democracy (New York:
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Stasavage, D. ‘Democracy and Education Spending in Africa’, American Journal
of Political Science 49(2) 2005.
Stern, N., J-J. Dethier and F.H. Rogers, Growth and Empowerment. (Cambridge,
Mass, MIT Press : 2005) [ISBN 0262693461].
Stiglitz, J. ‘Markets, Market Failures and Development’, American Economic
Review Papers and Proceedings 79(2) 1989, pp.197–202.
Stiglitz, J. ‘The World Bank at the Millennium’, The Economic Journal 109,
1999, pp.F577–97.
Sugden, C. ‘Spontaneous Order’, Journal of Economic Perspectives 3, 1989,
pp.85–97.
Tilly, C. ‘Reflections on the Nature of State-Making’ in Tilly, C. (ed.) The
Formation of National States in Western Europe. (Princeton: Princeton
University Press, 1975) [ISBN 0691007721].
Toye, J. Dilemmas of Development. Reflections on the Counter-Revolution in
Development Theory and Policy. (Oxford: Blackwell Publishers, 1987) [ISBN
0631145710].
Vail, L. ‘Mozambique’s Chartered Companies: The Rule of the Feeble’, Journal of
African History XVII, 1976.
Wade, R. ‘The Development of a “Well Functioning Market Economy”: Where
Do the Institutional Models Come From?’, World Bank and Development
Policy Forum/DSE Workshop, Berlin, 2000, pp.1–13.
Wade, R.H. Governing the Market: Economic Theory and the Role of Government
in East Asian Industrialization. (Princeton: Princeton University Press, 1992)
[ISBN 0691003971]
Wade, R.H. ‘Wheels within Wheels: Rethinking the Asian Crisis and the Asian
Model’, Annual Review of Political Science 3, 2000, pp.85–115.
Washbrook, D. ‘Progress and Problems: South Asian Economic and Social
History, c.1720–1860’, Modern Asian Studies 22(1) 1988, pp.57–96.

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Williams, R. Keywords. A Vocabulary of Culture and Society. (London: Fontana


Books, 1976) [ISBN 0006334792].
Williamson, J. ‘What Should the World Bank Think about the Washington
Consensus?’, The World Bank Research Observer 15(2) 2000, pp.251–64.

166
Notes

Notes

167
171 Introduction to international development

Notes

168