Development and the Cold War struggle between freedom,

equality, and community:

how it led to the rise of neoliberalism

Three Theories of Development…..

• Freedom: Liberal and modified Liberal Theory – Developing countries – Less Developed Countries (LDCs) – Emerging markets – Late Developers – Newly Industrializing Economies (NIEs)

• Equality – Explanation for Global inequality (Wallerstein) – Dependency Theory

– Underdeveloped Countries – Periphery and core

– The Socialist path to development

• Community – Nationalism and Economic Nationalism

Three Theories and Three Worlds

The First World: A contest of the two paths to economic growth in Europe

•in France and Italy, 25% of the people had voted for the Communists, and communists held important positions in labor unions. Europe could not be written off; its combined population exceeded that of either of the superpowers, and even in ruins it possessed one of the world's leading industrial plants. •One of the chief postwar questions was therefore the rescue of Europe, or, in practical politics, who Europe's "rescuer" would be. • only two candidates, the UUSSR and the US. •Europeans did not want to be rescued by either. •Not too many Europeans wanted Europe to be remodeled according to the economy and culture of the United States. •Dependency, even on the benefactions of the U.S., they feared as a gamble; remembering the depression of 1929, and how all Europe had gone down after the cessation of American loans, they had no desire to be dependent upon American capitalism. •Europe wanted to preserve its identity, but it was too weak to do so. •But The weak condition of the European economies became a cause for concern, because it was believed that weak economies would make these countries more susceptible to communist takeovers.

A Deadly Clash Between Capitalism and Communism…..

So the US provided Military security and economic aid to the First world

• Aid for the development of European export industries: Marshall Plan

• Encouraged European cooperation in the European Community

• Why? • Military security • Financial backing • US as generous dad pulling the chteaching the child

how to ride a bike • Took in Europe’s distressed goods

The Third World: The Drive for Independence and Rise of Nationalism

The Role of Dependency Theory

The role of dependency Theory

• Franz Fannon

• Capitalism and Imperialism

• The demand for equality and socialist ideals

Western sticks and carrots in the Cold War battle for hearts and minds

• Sticks

– Overthrow of governments

– Assignations

– War

– invasion

• Carrots

– Military aid

– Economic aid

Freedom vs. Equality and Community: Western “sticks” to defeat nationalism and socialism in

the Cold War

Maybe “carrots” are better! Liberal and Modified Liberal Theory and The accumulation of

Capital as the Key to Capitalist development

• Aid!

• Anti communist strong men

• Important in countries on the front line with communist states….

• To show them that capitalism was a better system (even if it had to be installed)

• Eventual Growth of a Middle Class with a preference for capitalism

It worked in Asia……but not like the economic liberals predicted. It failed in the Middle East and Latin America

American hegemony and the Cold War battle for hearts and minds….

Korea as a case study

From Tradition to Modern “Mass Consumption society” in 25 Years

How did Korea Do It?

“Helpful” Colonialism?

U.S. Aid and Hegemony

• US need to build up strong capitalist countries to counter communism

Land Reform

Planning and ISI

• Five year plans:

• Agricultural products and construction of domestic infrastructure for industry

• Protection of light industry….beginning of domestic consumption (textiles, footwear)

• ISI and move into heavy industry + export of light industry products and small electronics

• Export of chemicals, steel, ships

• Export of electronics…..

FDI

• Started in the mid 1960s

• Technology transfer – First in light industry, then in more sophisticated

industry

• A local bourgeois could also thrive

• An alliance between the State, the large conglomerates, and MNCs

• Korean conglomerates shared the risk

• An ever greater opening to foreign firms

Investment in High Technology and Education

Labor Repression

From export-led growth to Domestic Demand and Mass-

Consumption Society: Convenience-store culture

Korea and other Asian Tigers as a test of Development theory

…..as a test of dependency theory

• Troublesome because

– Dependent on the world economy (terms of trade worked in their favor

– Developed with massive amounts of Cold War aid

• Aid was used wisely

• Military burden carried by American taxpayers

Why Wallerstein would not like the “tigers”

• His theory is static and the “Tigers” developed dynamically

• They were able to enact land reform policies

• They developed with very little income inequality

• Their colonial legacies helped development

But why Gerschenkron would like them…….

• They conform most to his theory of “modified liberalism”

• They show that timing and technology are everything

• They show that state planning can be conducive to development

• And that the market can benefit development with institutional constraints and incentives

• But he didn’t reckon with the benefits of Cold War to Asian Development

But what about liberal theory?

• No modern country has developed according to Rostow’s “stages”

• Late developers Undermine generalizations of liberal theory

• These countries had strong, repressive, developmental states

• But they show that it is crucial to accumulate capital.

What about the role of culture? “Asian values” and community

• Did Asian “culture” make a difference?

• Does Asian culture undermine the Western laissez-faire approach to economic policy?

• Willingness to sacrifice?

• Commitment to community instead of the individual

• Authoritarian culture?