Theories of development

a)      Dependency Theory

Dependency theory is a body of social science theories predicated on the notion that resources flow from a "periphery" of poor and underdeveloped states to a "core" of wealthy states, enriching the latter at the expense of the former. It is a central contention of dependency theory that poor states are impoverished and rich ones enriched by the way poor states are integrated into the "world system."

Dependency theory refers to group of theories which propose that some countries and societies are poor, not because of their traditional culture, attitudes and values but because they are nit dominated and exploited by the rich and powerful countries.  The theory has been significantly influenced by Marxist theories of imperialism and was developed to challenge modernisation theory.

The theory arose around 1970 as a reaction to modernisation theory, an earlier theory of development which held that all societies progress through similar stages of development, that today's underdeveloped areas are thus in a similar situation to that of today's developed areas at some time in the past, and that therefore the task in helping the underdeveloped areas out of poverty is to accelerate them along this supposed common path of development, by various means such as investment, technology transfers, and closer integration into the world market.

Dependency theory rejected this view, arguing that underdeveloped countries are not merely primitive versions of developed countries, but have unique features and structures of their own; and, importantly, are in the situation of being the weaker members in a world market economy, whereas the developed nations were never in an analogous position; they never had to exist in relation to a bloc of more powerful and economically advanced countries than themselves.

Dependency theorists argued, in opposition to free market economists and modernization theorists, that underdeveloped countries needed to reduce their connectedness with the world market so that they can pursue a path more in keeping with their own needs, less dictated by external pressures.

Premises of dependency theory

1. Poor nations provide natural resources, cheap labor, a destination for obsolete technology, and markets for developed nations, without which the latter could not have the standard of living they enjoy.
2. Wealthy nations actively perpetuate a state of dependence by various means. This influence may be multifaceted, involving economics, media control, politics, banking and finance, education, culture, sport, and all aspects of human resource development (including recruitment and training of workers).
3. Wealthy nations actively counter attempts by dependent nations to resist their influences by means of economic sanctions and/or the use of military force.

Criticism to dependency theory

Dependency theory has been criticized by free-market economists, who believe that the promulgation of the theory leads to:-

1.      Corruption. Free market economy hold that state-owned companies have higher rates of corruption than privately owned companies.

2.      Lack of competition. By subsidizing in-country industries and preventing outside imports, these companies may have fewer incentives to improve their products, to try to become more efficient in their processes, to customers, or to research new innovation.

3.      Sustainability. Reliance of industries on government support may not be sustainable for a very long, particularly in poorer countries and countries which largely budget out of foreign aids.

4.       Domestic opportunity costs. Subsidies on domestic industries come out of state coffers and therefore represent money not spent in other ways, like development of domestic infrastructures, seed capital and social welfare programmes.

b)      Modernization Theory

Modernization theorists often saw traditions as obstacles to economic growth. Furthermore, while modernization might deliver violent, radical change for traditional societies it was thought worth the price. Critics insist that traditional societies were often destroyed without ever gaining promised advantages if, among other things, the economic gap between advanced societies and such societies actually increased. Modernization theory proposes that some countries or societies are poor because their traditional culture attitudes and values hinder economic development. Therefore, in order for economic development to occur, traditional values and attitudes will need to be replaced by modern values and attitudes.

 The net effect of modernization for some societies was therefore the replacement of traditional poverty by a more modern form of misery, according to these critics. Others point to improvements in living standards, physical infrastructure, education and economic opportunity to refute such criticisms.

One key factor in modernization theory is the belief that development requires the assistance of developed countries to aid developing countries to learn from their development. In addition it was believed that the lesser developed countries would develop and grow faster than developed countries. Thus this theory is built upon the theory that it is possible for equal development to be reached between the developed and lesser developed countries.

Similarities between modernization and dependency theories

Since dependency theory was introduced to challenge modernization theory, many would think that were to be hardly any similarities between these two groups of theories.  It has to be noticed that both modernization and dependency theories both are political polar opposite (one liberal and the other radical), they have a surprising amount in common. 

1.      Both are essentially evolutionary, assuming that countries progress in a linear fashion and that it is capitalism which propels them from one stage to the next.

2.      Both assume that change comes from the top down; from the state; they ignore the ways in which people negotiate these changes and indeed, initiate their own.

3.      Both fundamentally deterministic and are based upon the same fundamental rationalist epistemology.

4.      Most crucially for those at the receiving end of underdevelopment, neither offers a realistic solution.

c)      World-systems theory

The world-systems theory stresses that world-systems (and not nation states) should be the basic unit of social analysis.^[1][3] World-system refers to the international division of labor, which divides the world into core countries, semi-periphery countries and the periphery countries .Core countries focus on higher skill, capital-intensive production, and the rest of the world focuses on low-skill, labor-intensive production and extraction of raw materials.

Wallerstein characterizes the world system as a set of mechanisms which redistributes resources from the periphery to the core. In his terminology, the core is the developed, industrialized part of the world, and the periphery is the "underdeveloped", typically raw materials-exporting, poor part of the world; the market being the means by which the core exploits the periphery.

Apart from these, Wallerstein defines four temporal features of the world system.  Cyclical rhythms represent the short-term fluctuation of economy, while secular trends mean deeper long run tendencies, such as general economic growth or decline. The term contradiction means a general controversy in the system, usually concerning some short term vs. long term trade-offs. For example the problem of under consumption, wherein the drive-down of wages increases the profit for the capitalists on the short-run, but considering the long run, the decreasing of wages may have a crucially harmful effect by reducing the demand for the product. The last temporal feature is the crisis: a crisis occurs, if a constellation of circumstances brings about the end of the system.

In Wallerstein's view, there have been three kinds of societies across human history: mini-systems or what anthropologists call bands, tribes, and small chiefdoms, and two types of world-systems - one that is politically unified and the other, not (single state world-empires and multi-polity world-economies).^[1][3] World-systems are larger, and ethnically diverse. Modern society, called the "modern world-system" is of the latter type, but unique in being the first and only fully capitalist world-economy to have emerged, around 1450 - 1550 and to have geographically expanded across the entire planet, by about 1900. Capitalism is a system based on competition between free producers using free labor with free commodities, 'free' meaning its available for sale and purchase on a market.

Some questions are more specific to certain subfields; for example, Marxists would concern themselves whether the world-system theory is a useful or unhelpful development of Marxist theories.

Characteristics

 Core-periphery.

World-systems analysis argues that capitalism, as a historical social system, has always integrated a variety of labor forms within a functioning division of labor (world-economy). Countries do not have economies, but are part of the world-economy. Far from being separate societies or worlds, the world-economy manifests a tripartite division of labor with core, semi-peripheral, and peripheral zones. In core zones businesses, with the support of states they operate within, monopolize the most profitable activities of the division of labor.

There are many ways to attribute a specific country to the core, semi-periphery, or periphery. Using an empirically based sharp formal definition of "domination" in a two-country relationship, Piana in 2004 defined the "core" as made up of "free countries" dominating others without being dominated, the "semi-periphery" as the countries which are dominated (usually, but not necessarily, by core countries) while at the same time dominating others (usually in the periphery), and "periphery" as the countries which are dominated. Based on 1998 data, the full list of countries in the three regions—together with a discussion of methodology—can be found.

The late 18th and early 19th centuries marked a great turning point in the development of capitalism in that capitalists achieved state-societal power in the key states which furthered the industrial revolution marking the rise of capitalism. World-systems analysis contends that capitalism as a historical system formed earlier, that countries do not "develop" in stages, but rather the system does, and these events have a different meaning as a phase in the development of historical capitalism; namely the emergence of the three ideologies of the national developmental mythology (the idea that countries can develop through stages if they pursue the right set of policies): conservatism, liberalism, and radicalism.

Proponents of world-systems analysis see the world stratification system the same way Karl Marx viewed class (ownership versus non-ownership of the means of production) and Max Weber viewed class (which, in addition to ownership, stressed occupational skill level in the production process). The core nations primarily own and control the major means of production in the world and perform the higher-level production tasks. The periphery nations own very little of the world's means of production (even when they are located in periphery nations) and provide less-skilled labor. Like a class system with a nation, class positions in the world economy result in an unequal distribution of rewards or resources. The core nations receive the greatest share of surplus production, and periphery nations receive the least. Furthermore, core nations are usually able to purchase raw materials and other goods from noncore nations at low prices, while demanding higher prices for their exports to noncore nations. Chirot (1986) lists the five most important benefits coming to core nations from their domination of periphery nations:

1. Access to a large quantity of raw material
2. Cheap labor
3. Enormous profits from direct capital investments
4. A market for exports
5. Skilled professional labor through migration of these people from the noncore to the core.

According to Wallerstein, the unique qualities of the modern world-system include its capitalistic nature, its truly global nature, and that it is a world-economy that has not become politically unified into a world-empire.

Core nations

Main article: core countries

·         The most economically diversified, wealthy, and powerful (economically and militarily)^.

·         Have strong central governments, controlling extensive bureaucracies and powerful militaries. 

·         Have more complex and stronger state institutions that help manage economic affairs internally and externally

·         Have a sufficient tax base so these state institutions can provide infrastructure for a strong economy

·         Highly industrialized; produce manufactured goods rather than raw materials for export^.

·         Increasingly tend to specialize in information, finance and service industries

·         More often in the forefront of new technologies and new industries. Examples today include high-technology electronic and biotechnology industries. Another example would be assembly-line auto production in the early 20th century.

·         Has strong bourgeois and working classes. 

·         Have significant means of influence over noncore nations

·         Relatively independent of outside control

Throughout the history of the modern world-system there has been a group of core nations competing with one another for access to the world's resources, economic dominance, and hegemony over periphery nations. Occasionally, there has been one core nation with clear dominance over others. According to Immanuel Wallerstein, a core nation is dominant over all the others when it has a lead in three forms of economic dominance over a period of time:

1. Productivity dominance allows a country to produce products of greater quality at a cheaper price compared to other countries.
2. Productivity dominance may lead to trade dominance. Now, there is a favorable balance of trade for the dominant nation since more countries are buying the products of the dominant country than it is buying from them.
3. Trade dominance may lead to financial dominance. Now, more money is coming into the country than going out. Bankers of the dominant nation tend to receive more control of the world's financial resources.

Military dominance is also likely after a nation reaches these three rankings. However, it has been posited that throughout the modern world-system, no nation has been able to use its military to gain economic dominance. Each of the past dominant nations became dominant with fairly small levels of military spending, and began to lose economic dominance with military expansion later on.

 Historically, cores were found in the north-west Europe (England, France, Holland), although later in other parts of the world (ex. the United States).

Periphery nations

 periphery countries

·         Least economically diversified

·         Have relatively weak governments.

·         Have relatively weak institutions with little tax base to support infrastructure development

·         Tend to depend on one type of economic activity, often on extracting and exporting raw materials to core nations.

·         Tend to be least industrialized.

·         Are often targets for investments from multinational (or transnational) corporations from core nations that come into the country to exploit cheap unskilled labor for export back to core nations

·         Has small bourgeois and large peasant classes.

·         Tend to have a high percentage of their people that are poor and uneducated.

·         Inequality tends to be very high because of a small upper class that owns most of the land and has profitable ties to multinational corporations

·         Tend to be extensively influenced by core nations and their multinational corporations. Many times they are forced to follow economic policies that favor core nations and harm the long-term economic prospects of periphery nations.

Historically, peripheries were found outside Europe, for example in Latin America.

Semi-periphery nations

Main article: semiperiphery countries

Semiperiphery nations are those that are midway between the core and periphery. They tend to be countries moving towards industrialization and a more diversified economy. Those regions often have relatively developed and diversified economy, but are not dominant in international trade. According to some scholars, such as Chirot, they are not as subject to outside manipulation as peripheral societies; but according to others (Barfield) they have "periperial-like" relations to the core. While in the sphere of influence of some cores semiperipheries also tend to exert their own control over some peripheries. Further, semi-peripheries acts as buffers between cores and peripheries, thus "partially deflect the political pressures which groups primarily located in peripheral areas might otherwise direct against core-states" and stabilize the world-system.

Semi-peripheries can come into existence both from developing peripheries, and from declining cores.

Historically, an example of a semi-periphery would be Spain and Portugal, who fell from their early core position, but still manage to retain influence in Latin America. Those countries imported silver and gold from its American colonies, but then had to use it to pay for manufactured goods from core countries such as England and France. In the 21st century, nations like China, India, Brazil and South Africa are usually considered semi-periphery.

External areas

External areas are those that maintain their own economic systems are not integrated with the world economy.

Interpretation of the world history

The 13th century world-system

Before the 16th century, Europe was dominated by feudal economies. European economies grew from mid-12th to 14th century, but from 14th to mid 15th century, they suffered from a major crisis. Wallerstein explains this crisis as caused by:

1. stagnation or even decline of agricultural production, increasing the burden of peasants,
2. decreased agricultural productivity caused by changing climatological conditions (Little Ice Age),
3. an increase in epidemics (Black Death),
4. Optimum level of the feudal economy has been reached in its economic cycle; the economy moved beyond it and entered a depression period.

As a response to the failure of the feudal system, Europe embraced the capitalist system. Europeans were motivated to develop technology to explore and trade around the world, using their superior military to take control of the trade routes. Europeans exploited their initial small advantages, which led to an accelerating process of accumulation of wealth and power in Europe.

Wallerstein notes that never before had an economic system encompassed that much of the world, with trade links crossing so many political boundaries. In the past, geographically large economic systems existed, but were mostly limited to spheres of domination of large empires (such as the Roman Empire); development of the capitalism enabled the world economy to extend beyond individual states. International division of labor was crucial in deciding what relationships exists between different regions, their labor conditions and political systems. For classification and comparison purposes, Wallerstein introduced the categories of core, semi-periphery, periphery, and external countries. Cores monopolized the capital-intensive production, and the rest of the world could only provide labor and raw resources. The resulting inequality reinforced existing unequal development.

According to Wallerstein, there have only been three periods in which a core nation has dominated in the modern world-system, with each lasting less than one hundred years. In the initial centuries of the rise of Europe, Northwest Europe constituted the core, Mediterranean Europe the semiperiphery, and Eastern Europe and the Western hemisphere (and parts of Asia) the periphery. Around 1450, Spain and Portugal took the early lead when conditions became right for a capitalist world-economy. They lead the way in establishing overseas colonies. However, Portugal and Spain lost their lead primarily due to becoming overextended with empire building. It became too expensive to dominate and protect many colonial territories around the world.

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