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How did industiralism affect development
Gave idea that all societies can change for the better
Promised absolute and rapid increases in wealth
In Europe happened during an era of Capitalism
Capitalism - how did it re-organize society and production? (8 ways)
Private owners of capital bought the means and materials of production (land, technology, capital inputs) and the labour.
Got increased class division between owners of capital and labourers/peasants.
Product (outputs of production) was sold on the market.
Social relations were increasingly structured by market relations. Markets became less controlled by local custom and practice. (Impersonal institutions and replacement of social bonds with market relations.)
“Double-sided” - Created pockets of wealth and pockets of misery/poverty – sometimes geographically defined (uneven spread of wealth and poverty).
Capitalist (owners of production) paid workers only a fraction of the value of the product. Increase in income disparity/ inequity.
Increased production required expanding market and all societies became part of it.
Mass production -> required/created a constantly expanding world market which involves all societies.
I.e. Britain: the world’s first industrial capitalist country – had largest colonial empire + commitment to free trade (great advantage by both imperial control and world market)
3 internal problems of capitalism
- 1. widening the gap between the weak and the poor
- 2. unequal or unjust wages
- 3. market coordination is liable to break down and cause crisis that reverses increases in production
Adam Smith's Wealth of Nations
Saw industry/manufacturing as more productive than agriculture
Importance of free market and individual liberty in economic success. Ppl will use knowledge capacity to its greatest extent b/c they would be reaping all the benefits. Division of labor and specialization use resources most efficiently
if all individuals pursued narrow self interests, all of society would benefit inadvertently --> public demand will control market production and employment.
Laissez Faire Capitalism
- minimal role of state in economy. State should provide defense, protect basic rights, provide public goods (roads, ect)
- if economy is left to itself it is self regulating --> competition btw producers and laborers (for wages) will drive prices
- In economic depression, get higher unemployment and therefore drop in wages as people compete for limited jobs – low wages motivates employers to hire more people. More workers with more money means more spending and demand for goods and services – so producers produce more – hire more workers, etc….
- Expansion of markets --> greater specialization and productivity. Industrialization could generate absolute increases in welfare and all areas of society would benefit
Free trade is the dogma and ruling ideology of British supremacy
Karl Polanyi - The Great Transformation (1944) – critique of capitalism.
- Tension btw market (economic) regulation and political regulation
- Fictitious Commodities - capitalism treats land, labor (and money) as if they were commodities, produced for sale, but not
- Markets can never regulate 100% efficiently - never been the case
- Double Movement - spread of market society produces counter movements - policies and institutions put into place
Governments promoting industrial development and engineering a transformation of agriculture to support it
The Movement of Development
Finally colonies recognized as autonomous --> decolonization
- 3 massive changes produced and defined the "movement of development"
- 1. US became the most powerful (capitalist) country in the world
- 2. The Soviet Union formed after a communist revolution against Russian absolutism --> successful industrialization
- 3. Many national liberation movements demanded decolonization
Development was the product of the confrontation btw capitalism and communism
W. Arthur Lewis (1954), West Indian Economist
What concept did he come up with, explain
what is the critique of this
"Economic development wiht unlimited supplies of labor"
- Dual Economy
- Economies in underdeveloped countries are "dual" - advanced/modern sectors of the economy coexisted with traditional "backwards" sectors
– important in this sector are manufacturing industry and estate agriculture (plantations), either private or state owned.
2. Subsistence /traditional
– made up primarily of small scale agriculture (farming families), Lower per capita output than capitalist sector
- largely agrarian labour surplus societies had to industrialise, so that labour requirements in industry were high enough to make labour more scarce and promote increase in wages.
- Ideas of the process of development – growth of capitalist sector at expense of subsistence sector.
o Ultimate goal is absorption of subsistence sector by capitalist sector since most labour would come from unemployed subsistence agricultural labour.
- significant influence on development thinking in 1950s and 60s
- Critique: did not recognise importance of small scale agriculture in development process. Raising
- productivity in rural sector could be an important development objective rather than a constraint (e.g. green revolution).
argument that many regional inequalities were a prerequisite for overall growth
Gunnar Myrdal (1957), Albert Hirschman (1958):
Listian Industrialization, "Infant Industry Protection:
employed by new nation states to challenge the world (colonial) division of labor
aka “Infant industry protection” – idea that national industries may need to be protected from external competition (at least in the early stages of development), by tariffs that raises costs of products exported by other countries’ industries.
steps, obstacles to modernization
- emerged in response to failure of developing countries to achieve self-sustaining industrial growth (following only economics) – supplemented central theories of economics with theories from sociology and political science.
- - Focus was the ‘modernisation’ of
- traditional societies through diffusion of modern values and institutions.
- - Tradition: Weberian/Parsonian sociology
- 1. Traditional Society 2. Pre-conditions for takeoff 3. Takeoff 4. Drive to maturity 5. Modern
- Thinkers: Rostow and others
Walt Rostow (1960) and the Stages of Economic Growth
- Most influential theory in the 60's - combined development theory w modernization theory
- Thought that US push for economic development was caused by anti-communist stance
- His model was used to support american policy in dveloping areas in 60's (world order depended on modernization of developing areas)
- Based on key factors that led to growth in european countries and America (modeled off experience in Britain) and developed a "unilinear model of development"
Dependency Theory (1960's)
How did it look at capitalist "world system"
Who were some proponents/supporters/leaders
Concept of underdevelopment
studied capitalist world system - similar to world system theory that the capitalist world economy is the product of centuries long european capitalism dating back to 15c
- - the capitalist world economy: core vs periphery vs semi-periphery
- -the positions of individual countries change but overall strucutre stays the same
- (mirrors modernizaiton theory? - mechanisms of imperialist subjection and exploitation - surplus extraction, equal trade
- Paul Baran - imperialism is endemic/necessary to capitalism, only ended by socialism
- - Underdevelopment - product of capitalism (multinational corporations blocked industrial development and produced stagnation in the poor countires which could only be ended by socialist revolution
Peter Evans - "triple alliance" of state capital, domestic capital, foreign capital
Andre Gunder Frank - no real development was possible wihtout socialism and a delinking from the structures of world capitalism
Thought that capitalism was a matter of the social relations of production (not only exchange) and that not all forms of incorporation into the world market constituted the develpment of capitalism
(capitalist relations of production)
critiques: the understanding of the problems of the third world - opening a possibility of an end to dependency)
How did this era come about - Key players and institutions --> what action did this lead to?
slow down in the 70's --> restructuring of institutions, by the 1980's they took hostile forms of gov't
OPEC increased oil prices (end of 70's) - impact on all importing countries, greatly affect growth in 3rd world.
Institutions want to lend mony to countries, US ends monetairsm? (giving out money?) --> sharp recession, financial shock to 3rd world borrowers with higher interest payments (DEBT CRISIS)
IMF and WB tried to manage debt crisis -->
Structural Adjustment Programs (SAP's) - restricted consumption and investment in favor of production of largely primary goods for export to repay devts
--> state intervention in market. but still weak debt alleviation - 3rd world forced to expand exports of mostly primary comodities and low value industrial products to pay back debt --> this led to glutted market for these products and lower prices. Eventually made it harder for the 3rd world countries to pay back debts while the 1st world benefitted
actually engineered massive transfer of capital from 3rd to 1st world
- - Emphasized the role of government in industrial successes
- - State management of the economy to increase productivity, equality, and technologial upgrading
Ex: India or Brazil