History of “development” from 1945 AI 2201 - Lecture 2

History of “development” from 1945

AI 2201 - Lecture 2

Overall Background: cold war and de-colonization

• Post-war period – gradual end of direct colonialism and– New alignment of global powers with center of

gravity in the USA and USSR – Cold war and relative ability of Third World to play

one superpower against one another– By 1960s most of the world was politically

independent from colonial rule (often after bitter struggles)

Colonisation in 1945

De-colonization

• Does political sovereignty imply economic independence?

• Fanon’s warning =>

Frantz Fanon’s warning

• The national middle class discovers its historic mission: that of intermediary. Seen through its eyes, its mission has nothing to do with transforming the nation; it consists, prosaically, of being the transmission line between the nation and a capitalism, rampant though camouflaged, which today puts on the masque of neocolonialism. The national bourgeoisie will be quite content with the role of the Western bourgeoisie’s business agent, and it will play its part without any complexes in a most dignified manner. But this same lucrative role, this cheap-jack’s function, this meanness of outlook and this absence of all ambition symbolize the incapability of the national middle class to fulfil its historic role of bourgeoisie. Here, the dynamic, pioneer aspect, the characteristics of the inventor and of the discoverer of new worlds which are found in all national bourgeoisies are lamentably absent. In the colonial countries, the spirit of indulgence is dominant at the core of the bourgeoisie; and this is because the national bourgeoisie identifies itself with the Western bourgeoisie, from whom it has learnt its lessons. . .

Post-war “development”Post-war restructuring and Bretton-Woods

1945-1950

The “Golden Years” 1950s and 1960s

Debt-led growth 1970s

The “Lost Decade”: neoliberalism phase 1, 2

1980s

The end of development?: neoliberalism phase 3 and 4

1990s-today

Post-war restructuring and Bretton Woods

• July 1944 meeting at Bretton Woods, New Hampshire.

• Objective: the laying down of new world order in anticipation of US and allies victory.

• Participants: 44 nations dominated by USA and UK. Most of countries from the South present were from LA (their main concern was with respect to commodities prices).

• Political-economic context. National: emergence of national Keynesianism as main paradigm of regulation of class relations.

Bretton Woods. cont

• Political-economic context. International: birth of 3 BW institutions– IMF– IBRD or WB– GATT

• Marshal plan• Formal end of BW and regime of fixed

exchange rates: – 1971=> suspension of $-gold convertibility; – 1973=>end of regime of fixed exchange rates– Gatt (to regulate global trade and stabilise

commodity prices) – turns into WTO 1995

The “Golden Years”

• High world growth rate (see later graph).• “Development” seen as moving from traditional

society to a modern society. • The process of transition correspond to the

movement through stages derived mostly from the history of Europe (and US/Japan)– The means through which the stages were reached

was economic growth.

Means to reach growth– S and I as source of growth (Harrod Domar model)– Development with surplus labour or rural labour as

‘cannon fodder’ for industrialization– Stages of growth towards economic ‘take-off’– ‘trickle down’ effect, where the spoils of growth

would gradually filter through to the population at large.

• Overall emphasis:– Capital accumulation– Primacy of I and GNP growth rates as key

indicators of “development”

1965-73 1973-80 1980-86 1996-97Low-income countries

3.6 2.4 4.0 2.8

Middle-Income countries

4.6 2.4 0.1 3.8

Sub-Saharan Africa

3.0 0.1 -2.8 1.2

East Asia (excl China)

5.4 4.4 6.6 5.6

South Asia 1.0 2.0 3.2 2.9Latin America and Caribbean

4.1 2.4 -1.6 2.7

High-income countries

3.5 2.2 1.9 2.2

Growth rates 1965 - 1997 (unavailable data before 1965)Source: World Development Report

Current growth ratesSource: World Development report 2006

GNP Per capitaSource: IMF 2006

The “Golden Years”. cont

• Optimism for growth dampened towards end of 1960s.

• Large scale of official flows of resources to enhance domestic savings did not materialize

• Instead, substantial increase in FDI (70% of capital flows into developing countries in the 1960s)

• ? How much of observed economic growth depended on MNC location decisions?

The “Golden Years” cont: BP problems for developing countries

• Terms of trade declined from 1951 to 1965

• 70-90% of exports from developing countries were primary commodities and 50-60% of imports were manufacturesTerms of trade: the

relative prices of one group of commodities (sold) compared with those of another (bought)

BP = (X - M) + (Km - Kx)

ISI = Import Substitution Industrialization• 1950s-1960s period of rapid industrialization for developing countries• ISI linked to the argument that new or “infant”industries need time to

develop.• ISI opposed to EOI (Export Oriented Industrialization)• ISI features

– Industry domestic or foreign owned (in which case state promotes incentives)– Producing for local/national markets– Protected by high import tariffs and/or quotas – Typical pattern: start from production of consumer goods, move to intermediate

goods, end with capital goods– Major flaws: saving on import difficult to achieve since substitution in one

department (say consumer durables) involves imports in another dept. (intermediary and capital goods)

• Main countries following ISI: China, India, Brazil, Argentina, Mexico

ISI outcomes• No “take off”, and when it happened at heavy social cost =>

increasing social struggles• Industrialization occurred at a different pace in different

countries– LA countries began to industrialize in the 1930s, and by 1960s had a

substantial industrial base, hence they look at internal markets– East Asia NICs (South Korea, Taiwan, Hong Kong, Singapore) were

building up industries based on export of mass produced goods• Note, they were also heavily subsidized by the US/West for geo-

political reasons– India, influenced by Soviet model, was developing with little FDI and high

protection– African countries with much smaller industrial bases, could not

industrialize on a large scale. • Overall shift from agriculture to manufacturing (although in different ways)

Construction and other services

agriculture industry

1960 47% 32% 21%

1997 48% 16% 36%

GDP for low and middle income countries

Disillusionment with modernization: Theoretical consequences

• 1. Among development economists=> recognition that “developed” OECD countries were a special case rather than the norm– Recognition there was no fixed models for economic

development

• 2. Radical alternative explanation of subordinate position of developing countries– Legacy of colonial state in Africa/Asia– dependency school => “underdevelopment” as historical

condition of blocked, distorted and dependent development (not due to low productivity or poverty) of the periphery vs core

– Implications: de-liking from core• Example of Cuba, China, Vietnam, Mozambique etc.• Nationalist movement and economic strategies

1970s: the discovery of “other factors”

• Shift away from “growth-at-all-costs” as a way forward – Industrial development led to a massive rural-

to-urban migration which could not be absorbed by industry (unlike assumption of Modernization theory) => social contestation

– Attention to employment-intensive technologies to min social protest

– ILO slogan => From Redistribution from growth to Redistribution with growth (ILO)

– Discovery of informal sector

1970s: Debt-Led growth• Substantial growth in indebtedness of developing

countries giving the illusion of growth. • Context:

– OPEC 1973 and 1979 oil rise => petrodollars– Low profitability in EU and USA markets (social unrest)– $$ lent to developing countries regimes

• White elephant development projects• Military spending

• Debt crisis– October 1979 Paul Volcker rise interest rates =>

neoliberalism– 1980s debt crisis– Debt crisis and neoliberal SAPs

1980s-: neoliberal globalization, some general

points• Indication of “development” => degree of marketization and,

later, “good” governance (i.e. governance facilitating enabling integration to modern global markets . . .remember Fanon’s warning about intermediary role of middle classes of the South?)

• Debt Crisis• Increase in monetary flows from the global south to the global

north (see Patrich Bond’s “looting of Africa”)• Huge increases in trade and financial flows• Growing manufacturing in the global South (EPZ),

– low wages, – anti-union policies held through repressive policing, – patterns of dispossession to make room for “development”.

Neoliberal strategy

• Phase 1 Emergence: late 1970s-mid 1980s. – Crisis of Keynesianism– Social conflict and declining capital accumulation

• Phase 2 Washington consensus: mid 1980s- mid 1990s.

• Phase 3 Post-Washington consensus: mid 1990s - 2001.

• Phase 4? Post-September 11: pushing empire and development impasse?

Growth

Source: Alan Freeman. In our lifetime: long-run growth and polarisation since financial liberalisation. 24/09/2006 For Historical Materialism conference 7-9 December 2006-11-30

Phase 1Phase 2

Phase 3

Phase 4

Average growth


Phase 1: emergence late 1970s-mid 1980s

• Emergence of neoliberal policies;• North: Restructuring, anti-union laws, anti-inflationary

policies, cuts in social spending, development of corporate welfare, capital market deregulation;

• South: beginning of debt crisis, SAP, cuts in social spending.

• First signs of social resistance, especially in the South. E.g. against WB and IMF:– Peru 1976; Egypt 1977; Ghana 1978; Jamaica, Liberia 1979;

Philippines, Zaire, Turkey 1980; Marocco, Sierra Leone 1981; Sudan, Argentina, Ecuador, Chile 1982; Bolivia, Brazil, Panama 1983; Tunisia, Dominican Republic 1984;

Phase 2: Washington Consensus. mid 1980s- mid

1990s• Consolidation Washington consensus (John Williamson 1989). • First talk of governance understood as “good governance” => as

modality of government action. governance. => IMF, WB, government institutions

• Growth of CSOs.• Consolidation and acceleration of widespread resistance in the

South => series of “IMF riots” (Walton 1994). * refers to landmarks:– Jamaica, Bolivia, Zaire, Haiti, El Salvador, Costa Rica,

Guatemala 1985; Mexico, Nigeria, Bolivia, Yugoslavia 1986; Zambia, Sierra Leone, Poland, Ghana, Ecuador, Algeria, Romania, Sudan 1987; Nigeria, Ghana, Hungary, Algeria 1988; Benin, Venezuela, Jordan, Argentina, Nigeria 1989; Ivory Coast, Niger, Nigeria, Zambia, Trinidad, Uganda, Morocco 1990; Nigeria, Iran 1991; Albania, Venezuela, India, Nepal, Zimbabwe, Nigeria 1992; India*, Russia 1993; Uganda, Mexico*, Gabon 1994.

Washington Consensus

(John Williamson, 1989)• Fiscal discipline: strict criteria for

limiting budgets;• Public expenditure priorities: away

from subsidies and administration towards ‘neglected fields with high economic returns…’;

• Tax reform: broadening the tax base and cutting marginal tax rates;

• Financial liberalisation: interest rates should be ideally market-determined;

• Exchange rates: should be managed to induce rapid growth in non-traditional exports;

• Trade liberalisation: tariffs not quotas, and declining tariffs to around 10 per cent within 10 years;

• Foreign direct investment: no barriers and ‘equality’ with domestic firms;

• Privatisation: state enterprises should be privatised;

• Deregulation: abolition of ‘regulations that impede the entry of new firms or restrict competition’…;

• Property rights: secure rights without excessive costs and available to the informal sector.

In Political Terms => three normative prescriptions:

• “(a) the state, particularly in third World countries, should withdraw from the social sector;

• (b) the market should be freed from all constraints; => neoliberal globalisation (promotion of trade and financial liberalisation) and

• (c) people and civil society should organise their own social and economic reproduction instead of depending on the state.”(Chandhoke 2002: 43).

Implications

Neoliberal policies and the growth of the “third sector”

Number of International NGOsData from Anheier and Themudo (2002: 195)

0

10000

20000

30000

40000

50000

1981 1991 2001

Civil society as “a peculiarly modern phenomenon emerges through the same historical process that generate both the modern impersonal state and the modern market system” (Chandhoke 2002: 49).

Phase 3. Emergence of post-Washington consensus. mid 1990s - 2001

• Emergence of a post-Washington consensus => Governance understood as diverse “stakeholders” management of networks– WB, IMF, OECD, EU initiatives– UN compact (2000)– Corporate citizenship/governance

• Voluntary codes• Social and environmental management

• Millennium development goals as framework and benchmarks of development• Emergence of a global political recomposition of a variety of diverse

movements. – Ecuador, Kenya, Madrid (1995); First Encuentro (1996); South Africa, first

victory of global movement: MAI shelved (1997); Emergence of worldwide coordination of protests, PGA, Jubilee 2000, etc.; Indonesia, Geneva, Rome, Birmingham (1998); Romania, Mexico, Argentina, Ecuador, Seattle* (1999); Ecuador, Costa Rica, Bolivia, Argentina*, Kenya, Zambia, South Africa, Turkey, India, Malawi, Russia, Nigeria, Paraguay, Columbia, Honduras, Bolivia*, Davos (anti-WEF), Washington, Prague (anti –G8) (2000); Angola, Ecuador, Hawaii, India, Genoa* (anti-G8), Argentina, World Social Forum (2001).

Phase 4: post-september 11

• Neoliberalism by empire’s force–Regime changes and structural adjustment: see Iraq–Social movements focus on anti-war–Anti-terror laws and social protest

• Development through rock band–2004 G8 Gleneagles meeting

• Crisis of “war on terror” strategy?–Ways forward? Next step?–Sign of hope in Latin America ?.

.. . Meanwhile China: contradicting claims on wages

Source: Andrew Glynn. Will be Marx proved Right? Historical Materialism Conference, 8-10 December 2006

“How Rising Wages Are Changing The Game In China. A labor shortage has pay soaring. That is sure to send

ripples around the globe.” Business Week title March 2006

And chinese workers

Some results of 4 decades of “development”:

Horror statistics type 1

• the wealth of the worlds richest 359 people is equal to the wealth of the poorest 2.9 billion people in the world. (United Nations)

• World's richest 1% own 40% of all wealth.• 50% of world's adults own just 1% of the

wealth • the total wealth of the 3 richest individuals in

the world combined is equal to the GDP of the 48 poorest countries.

Horror stats 1: divided worlds

World Institute for Development Economics Research (UN) http://www.wider.unu.edu/

Horror stats 1: Global apartheid


Horror Statistics: Type 2• in order to solve the problems of the world’s population in

providing its basic needs (food, water, education, medical aid) i.e., to abolish hunger, malnutrition, and all the basic diseases, what is needed is 4% of the accumulated wealth of the 255 largest fortunes.

• in order to satisfy the worlds’ need for sanitation and food, all that is required is only $13 billion. To put this into context this is equal to the total yearly expenditure of perfume in Europe. What Europeans spend on perfume in one year could solve all the worlds’ sanitation and food problems.

• About 80% of R&D of pharmaceutical industries is on “vanity drugs”

• Plus at the micro level: examples such as Zambia exporting up to 60 varieties of rose, and yet this year 30% of Zambia's 10 million people do not have enough to eat.

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History of “development” from 1945 AI 2201 - Lecture 2