MAKING SENSE OF DEVELOPMENT STUDIES (notes)
(by Róbinson Rojas Sandford)(1998)
The story of less developed societies after 1945 is the story of
geographical zones of economic and political influence where Africa
was a hunting ground for Western European capital, Latin America for
United States transnational capital, and East and South East Asia under
the "guidance" of Japanese monopolic capital. All of it parallel to the
political aim of 'encircling' the two former 'evils': Soviet Union
and satellites, and People's Republic of China and North Viet Nam.
Up to the late 1970s, this 'neo-colonization' for some or
'modernization' for others of Africa, Asia and
Latin America was achieved having the cold war as a political
background. Since the late 1980s, the world became tri-polar, with
United States, European Union and Japan as home for transnational
capital integrating every corner of the globe into a process of
globalized production of goods and services planned in the board of
gigantic international corporations.
In the 1990s, a Triad is into place: United States dominating the
external economies of Latin America, Japan the ones in South East
and East Asia, and the European Union dominating the external
economies of Africa and Central and Eastern Europe, and the three
leading members of the Triad competing among themselves to encroach
in the "spheres of influence" of each other.
MAKING ANALYTICAL SENSE
When looking at the world economy, the following economic theories are
utilized by different people:
a) free-market theory
b) international Keynesianism
c) protectionism and import-substitution
d) critical view of a), b) and c) using
either Marxist or classical economic
theory.
e) dependency theory
Less developed societies' development after 1945 has been a process
within another process: the post-war economic-political settlement,
which was characterized by the roles played by
a) the International Monetary Fund,
b) the World Bank, and
c) the General Agreement on Tariffs and Trade(GATT)
today the World Trade Organization (WTO)
That settlement produced economic-political agents, which are:
a) transnational corporations (industrial, services
and financial)
b) national monopolic/oligopolic corporations
c) governments in nation states.
The above economic-political agents created in industrial and less
developed societies "triple alliances"( international
monopoly capita, less developing societies monopoly capital, and
less developed societies state) which dominated the economic and
political development of both groups of economies.
By and large, the post-world politics had two distinct stages:
a) the cold war period 1947-1989
b) the capitalist globalization from 1989 onwards.
By the 1990s, a new economic-political settlement was in place:
a) Western Europe, Japan, and United States in
control of the world economy (The Triad)
b) United States as the political leader ( clear
globalization of American values, habits and
customs)
LESS DEVELOPED SOCIETIES AS PART OF THE ECONOMIC-POLITICAL SETTLEMENTS
The following periods, driven by economic variables, identify political
and economic processes in less developed societies:
a) the long boom period 1945-1971, which was driven
by very low oil prices, and a militarized economy
mainly in United States, to sustain wars of
containment against the expansion of communism in
the world. The main wars were the Korean War in
the early 1950s, and the Viet Nam war in the late
1960s until the United States army was defeated in
1975. Parallel to that, the financing of the
industrialization of South Korea and Taiwan in
Asia, and the reconstruction of Germany, Italy
and France, in Western Europe (Marshall Plan),
completed the dynamics of the boom.
African, Asian and Latin American societies tried
to develop through nationalistic movements which
aimed at protecting their infant industrialization
and gaining political freedom from the world
centers, especially United States, Britain and
France at the time.
b) the crisis years between 1971 and 1984, when oil
price increases by the members of the Organization
of Petroleum Exporters Countries accelerated a
generalized crisis already in the making in the
industrialized societies sending shock waves to
Third World countries economies.
African, Asian and Latin American countries were
encircled by external pressures and their
nationalist movements were destroyed one by one,
sometimes with U.S., British or French overt or
covert intervention, sometimes with sheer economic
pressure through the IMF, the World Bank or private
banks.
c) the miracles and disasters from 1984 to 1990s:
c.1 the "Asian miracle" which inaugurated
what is called "guided capitalism"
c.2 the "Latin American lost decade" in the
1980s, when negative growth created the
basis for what is called "savage capitalism"
c.3 the "African disaster", still in the making,
which was characterised by negative economic
growth of the African economies and higher
rate of profits for TNCs operating in the
continent
c.4 the "Latin American small miracle", in the
1990s, which consolidated its variant of
"savage capitalism"
By and large, this was a period of African, Asian and Latin American
societies being integrated into the quest for a globalized economy and
a globalized political system.
It was the last stage, so far, of the process of integration which can
be characterised as follows:
First stage (1945-1971): cold war economy and cold war international
policy PLUS acceptance of import-substitution
as an engine of growth. In charge of the
international economic order were the
International Monetary Fund and the World Bank,
both under management by the United States.
Second stage (1971-1984): dealing with the crisis in the center and the
crisis in the periphery:
a) oil and private banks in the center
b) oil and LDCs financial bonanza first and
debt nightmare after
c) commodity markets and debt
d) foreign direct investment and debt
Third stage (late 1980s and 1990s): Overcoming the crisis with the
old theoretical approach:
balanced budgets PLUS the rule
of market forces. There have been
a mixture of export-led booms and inequality,
poverty and further structural fragmentation
of the national productive systems, and
export-led recessions and inequality, poverty
and further structural fragmentation.
Furthermore, this third stage made clear that the system in practice
since 1945 is not sustainable because is depleting non renewable
resources at a phenomenal speed, is destroying eco-systems, is
polluting sources of water in a global scale, is polluting the
atmosphere, and is menacing the survival of all living species on planet
Earth.`
ECONOMIC FULL CIRCLE
What is happening in the 1990s, including the October 1997 crisis
engulfing stock markets in Asia, Western Europe and Latin America,
is like if the world economy was completing a full circle to the
1940s, when in Bretton Woods, U.S.A., the negotiations between United
States and British governments led to the creation of the International
Monetary Fund and the World Bank. In 1945, H. D. White, the
Northamerican architect of the IMF, in his "Preliminary draft proposal
for a United Nations Stabilisation Fund", wrote that its aim was:
-"to avoid drifting from the peace table into a period of
chaotic competition,
monetary disorders,
depressions,
political disruptions, and finally
new wars within as well as among nations".
-"conditions would have to be created which would ensure that war-torn
and impoverished nations in the rest of the world would not be driven
back into the pre-war pattern of
every country for itself,
of inevitable depression,
of possible widespread economic chaos,
with the weaker countries succumbing first under the law of the jungle
that characterised international economic practices of the pre-war
decade".
-"...a breach must be made and widened in the outmoded and disastrous
economic policy of each-country-for-itself-and-the-devil-take-the-
weakest...the absence of a high degree of economic collaboration among
leading nations will, during the coming decade, inevitably result in
economic warfare"...
In a nutshell, the aim was to change the system of national and
international competition that had prevailed in the 1930s:
1.- international trade and finance was based upon
relatively self-contained economic blocs based
around the old imperial system dominated by
the United States,
Britain,
France, and
Japan
2.- neoclassical economic theory was taken as the
only valid approach to national and international
economics, with a very simple rule to follow by
governments:
balanced budgets PLUS the rule of market forces
Out of Bretton Woods neoclassical economic theory was declared outmoded
and inexact, and it was agreed to create an international system based
upon the following principles:
a) internationally:
-multilateral cooperation ( the IMF,
the World Bank and GATT as
the enforcers )
- decolonisation of Africa and Asia, and
the incorporation of Latin America to the
world system
b) domestically:
-creating an "interventionist state" in the
industrial countries
-commitment to economic management aiming at:
full employment,
economic growth,
adequate welfare services.
(Agreement b) was abandoned in the 1980s, and agreement a) was changed
into ensuring total mobility of capital through the action of
transnational corporations, and having the IMF and the World Bank as
fire engines when bottlenecks on balance of payments or internal
markets appeared )
By the late 1950s, the landscape was pretty:
-economies had been rebuilt
-employment restored
-growth had become continous
-an international framework for the progressive
liberalisation of trade and capital flows had
been created under firm capitalist control.
Up to the early 1970s the most dynamic and extensive period of growth
the world has ever seen was at work. See Table 1
________________________________________________________________________
TABLE 1.- Average annual real growth rates
Gross Domestic Product
1950-60 1960-65 1965-70 1970-81 1980-90 1990-95
Industrial countries 4.2 5.3 4.8 3.0 3.2 2.0
Sub-Saharan Africa 3.5 5.2 4.8 3.3 1.7 1.4
M. East & North Africa 4.3 3.9 5.7 7.1 0.2 2.3
East Asia & the Pacific 5.3 5.6 8.1 8.0 7.6 10.3
South Asia 3.9 4.3 4.9 3.8 5.7 4.6
Latin America & Caribb. 4.8 5.0 6.1 5.2 1.7 3.2
Southern Europe 6.0 6.6 6.7 5.0 4.8 2.8
________________________________________________________________________
Exports of goods and services
1950-60 1960-65 1965-70 1970-81 1980-90 1990-95
Industrial countries 6.9 6.8 9.2 6.1 5.2 6.4
Sub-Saharan Africa .. 5.9 6.4 1.1 1.9 2.5
M. East & North Africa .. 1.3 6.1 1.9 .. ..
East Asia & the Pacific .. 7.2 11.7 11.7 8.8 13.9
South Asia .. 4.6 3.3 6.7 6.4 11.9
Latin America & Caribb. .. 6.1 5.0 4.3 5.4 7.0
Southern Europe 10.7 12.1 8.3 6.0 13.0 9.0
________________________________________________________________________
Gross domestic investment
1950-60 1960-65 1965-70 1970-81 1980-90 1990-95
Industrial countries 5.0 7.3 5.6 1.7 4.1 -0.2
Sub-Saharan Africa .. 7.9 6.7 7.1 -4.0 3.4
M. East & North Africa .. -3.1 9.1 12.4 .. ..
East Asia & the Pacific .. 11.1 14.7 11.0 8.5 14.4
South Asia .. 8.6 1.7 5.1 6.1 5.3
Latin America & Caribb. .. 4.5 8.0 6.0 -1.5 5.7
Southern Europe 7.4 9.3 7.7 4.4 3.0 2.0
________________________________________________________________________
source: World Bank Tables, 1980 and 1997
________________________________________________________________________
Conversely, by the 1980s and 1990s, it appeared as if the economy went
full circle to square one. There were:
-chaotic competition
-monetary disorders
-depressions
-political disruptions
-new wars within as well among nations
Economic indicators were clearly negative:
-growth stagnated
-employment declined
-inequalities increased
-monetary arrangements collapsed
-financial agreements between creditors and
debtors were increasingly undermined by
bankruptcies on a global scale.
There was also a mediocre level of theoretical explanations. There was
theoretical incoherence to explain the above political and economic
deterioration.
A COMPLEX WHOLE OF PROBLEMS
By the late 1980s, scholars from industrialized countries working at
the World Bank, International Labour Organization, Organization of
Economic Cooperation and Development and the United Nations Development
Programme drew from the main tenets of what is known collectively as
"Latin American theories of development" as published in the 1960s
mainly in Santiago, Chile, whose main representative is dependency
theory, and agreed on the following:
-economic and political problems are the outcome of a global process
which cannot be dealt with on a purely national scale;
-internationally and nationally some social classes are in a much
stronger position to influence and benefit from global events,
specially if those classes belong to strong dominant economies;
-there is enough evidence to suggest that much of the responsibility
for dramatic ups and downs in national economies lies with the
transnational corporations, industrial and financial, which dominate
both the economy in the home country and the world economy
-governments and international agencies, usually held to be responsible
for the ups and downs in national economies, actually play a secondary
role to the transnational corporations;
-any solution to the volatile behaviour of the world economy will
involve a dramatic alteration in the balance of power and wealth both
between countries and within them, and, most of all, between TNCs and
the rest of economic agents.
Thus, a complex whole of problems to solve, answering dificult
questions. For understandin development, then, theoretical approaches
were needed to attempt answer questions like the following:
1.- what are the connections between international and national
political control which are at work in the relationships between
governments, domestic economic classes, and agencies like the IMF,
the World Bank, and transnational corporations?
2.- is there any relations between the decisions taken in Washington,
Tokio and Berlin and the fate of the poorest people in the poorest
countries?
3.- to what extent does the continuous expansion in the global reach of
the TNCs intensify or ameliorate the problem of economic
deterioration and loss of political control internationally and
nationally?
4.- is it possible to produce a major transfer of wealth and power
without risking major conflicts, even endangering the survival of
entire societies?
Orthodox approach to answer the above questions will be, of course,
NEOCLASSICAL ECONOMICS and FUNCTIONALIST POLITICAL SCIENCE.
Alternative approach will be drawing from the main tenets of political
economy as posed by Adam Smith and Karl Marx and/or doing a critique
of both neoclassical economics and functionalist political science.
Some factual knowledge could help us to make theoretical sense of the
task in front of us:
-external forces constantly undermine the policies adopted to restore
full employment and welfare services:
* speculative investment creating dramatic outflows
and inflows of money affecting exchange rate,
interest rate, rates of investment and lines of
production;
* irrestricted mobility of capital creating sudden
economic voids with subsequent changes in employment,
levels of poverty, pattern of inequality, etc;
* transnational and national capital pressurizing for
decreasing rates of taxation which makes impossible
for the state to finance even rudimentary welfare
services, etc.
- transnational corporations have constantly expanded their control over
production and distribution on a global scale, thus:
* their need to maximise global profits means that they
can and must act in ways which undermine the changes
that the national and international authorities must
make in order to restore stability to the system.
The problem with finding the right solution to the problems pointed at
by the above economic and political processes is that different schools
of political and economic theory see the world from different
perspectives, they are concerned to achieve very different goals, and
prescribe very different medicines for its problems. Using professor
Robert Reich sentence "what it may be rational for a corporation is
irrational for society". Thus, neoclassical economics and
functionalistic political science will say:
a) deregulated markets PLUS minimum role of the
state will create a world where the dynamics of
competition will reward efficiency and will punish
inefficiency, thus, it follows, unemployment and
poverty will be the outcome of individual
inefficiency and not of the market structural
internal dynamics;
b) at the most, and not all the time, the state
must help inefficient individuals out of extreme
poverty or destitution.
Alternative theories will say:
a) it is in the nature of the capitalist system to
create wealth alongside poverty, to create a
dominant sector in society and a dominated sector
in society. Economic and political power
concentrated in a few individuals is the natural
outcome of the capitalist market;
b) therefore, theoretical approaches should look for
alternative economic and political arrangements,
whose rules ensure that production and political
participation aim at meeting social needs which, in
turn, are the aggregate of individual needs.
Summarizing and coming back to the Latin American theories of
development, as Cardoso and Faletto ("Dependencia y Desarrollo en
America Latina", 1969) put it:
---- we conceive the relationship between external and internal
forces as forming a complex whole whose structural links are not
based on mere external forms of exploitation and coercion, but
are rooted in coincidences of interests between local dominant
classes and international ones, and, on the other side, are
challenged by local dominated groups and classes.
---- imperialist penetration is the result of external social
forces ( multinational enterprises, foreign technology,
international financial system, embassies, foreign states and
armies, etc)...but, then, the system of domination reappears as
an "internal" force, through the social practices of local groups
and classes which try to enforce foreign interests, not precisely
because they are foreign, but because they may coincide with
values and interests that these groups pretend are their own.
And, twenty years after:
"any explanation for the crisis must necessarily take account
of all these elements, elements which include
the political and the economic,
the national and the international,
the historic and the contemporary,
and must consider them within an intellectual framework
which, while not ignoring the significance of all the major
theories that have been used to explain them, nevertheless
attempts to do so in a consistent and convincing way"
(E. A. Brett, "The World Economy since the War: the politics
of uneven development", Macmillan, 1986)
------------------------------------------------------------------------
Japan-USA alliance:
Since 1945 until the late 1980s United States governments pursued
an international policy of encirclement against the Soviet Union
first (made public with the Truman Doctrine in 1947) and the People's
Republic of China, next, since 1949.
The economic side of this international policy was the US financing
of several "miracles" in countries facing either Soviet Union or
People's Republic of China. Those miracles occured mainly in West
Germany and Japan, among the former colonial empires, and Taiwan and
Korea, among the former colonies.
In Asia, United States formed what some scholars have called an
"unholy alliance" to fight communism on two fronts: the military,
led by the US atomic muscle, and the economic, shared by both Japan
and the United States in the task of "industrialise" chosen
countries, in this case Taiwan (former province of China) and South
Korea, former component part of the Japanese Korean colony.
Furthermore, the US government was pouring grants and credits on
fourteen chosen countries encircling Soviet Union and the People's
Republic of China. The following data is illustrative:
U.S. GOVERNMENT FOREIGN GRANTS AND CREDITS
FROM 1945 TO 1965 (in US$ million)
Total for 77 countries 101,931
Japan 4,593
South Korea 6,165
Taiwan 3,948
India 5,289
Iran 1,375
Pakistan 3,281
Vietnam 3,810
Philippines 1,611
Greece 3,408
Yugoslavia 2,622
Austria 1,212
Turkey 4,315
West Germany 3,907
Italy 5,422
Total for the above 14 cts. 50,950, which is 50% of the total
given to 77 countries in
the period considered.
( The figures for France and the United Kingdom are 8,639 and
7,600 respectively )
The above is clarified even more with the following three opinions:
Opinion one:
"It can hardly be doubted that Japan's road to recovery was paved by
the coincidental developments on the international scene. With the
heightening of the cold-war psychology from about the time of the
announcement of the Truman Doctrine (March 1947), reinforced by the
demonstrably successful march of communists in China in 1948 onwards,
the US government apparently became determined to make Japan "a
bulwark against communism". The consequence was a major shift in the
US policy in Japan towards expediting the latter's economic recovery.
...What put the finishing touch on the US determination was the
eruption of the Korean War in June 1950. This, incidentally,
constituted a most significant watershed in the recovery of Japan's
postwar economy, with impetus given by special procurements in Japan
by the "United Nations Army" for the prosecution of the war".
S. Tsuru, "Japan's capitalism. Creative defeat and beyond", Cambridge
University Press, 1993
------------------------------------------------------------------------
Opinion two:
" From 1947 until 1958 the US deliberately encouraged an outflow of
dollars, and from 1950 on the United States ran a balance-of-payments
deficit which provided liquidity for the international economy...In
addition...,the United States assumed the international management
of imbalances in the system...It dealt with its own huge balance-of-
trade surplus and the European and Japanese deficits by foreign aid and
military expenditure...[It] abandoned the Bretton Woods goal of
convertibility and encouraged European and Japanese trade
protectionism and discrimination against the dollar. For example, the
United States absorbed large volumes of Japanese exports while
accepting Japanese restrictions against American exports. It supported
the European Payments Union, an intra-European clearing system which
discriminated against the dollar. And it promoted European and
Japanese exports to the United States..."
(J. Spero, "The politics of international economic relations",
Allen & Unwin, 1982)
------------------------------------------------------------------------
Opinion three:
" In Germany and Japan the combination of an undervalued exchange rate,
generous American aid, the close economic management of industrial
investment, the increase in demand created by the Korean War boom,
and the availability of a large labour surplus and correspondingly
low wages, generated economic "miracles" which would have not been
possible but for these uniquely favourable external circumstances".
(E. A. Brett, "The world economy since the war: the politics of uneven
development", Macmillan, 1986)
------------------------------------------------------------------------
After the triumph of the counter-revolution in China in 1978, the
country became the big prize for Japan and the United States competition
for dominating the world economy, and they had to dismantle the
ideological inheritance of the cold war, because the Chinese elites
have serious hostility against Japan ( rooted in the savage Japanese
colonization of China in the 1930s until 1945 ) and the United States
(rooted in the U.S. international behaviour since early XIX century).
Wang Jisi, in his "The role of the United States as a global and
Pacific power: a view from China", THE PACIFIC
REVIEW, Vol 10, No 1, 1997, writes:
"However, the fundamental assumptions in viewing the role of the United
States in world affairs, probably agreed upon by the vast majority of
the Chinese political elite, will remain for many years to come. These
assumptions include at least the following:
- the United States wants to maximize its national power and dominate
the world;
- it is easier to deal with the United States and seek its cooperation
when its power is on decline;
- Americans believe in 'the law of the jungle', seeing no other nations
as equal partners and attempting to prevent them from rising up;
- compared with other advanced capitalist countries, the United States
has a much stronger concept of racial and cultural superiority, and
tends to use ideological and cultural tools, in addition to economic
and military strenghts, to expand its influence."
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end of this notes.RR
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