“Modernization” and Development Pathways

- do stages of development influence political outcomes?

o Early developers: US, UK, France

o Middle developers: Germany, Japan

o Late developers: Russia, China

o Late, Late (experimental) developers: India, Mexico, South Africa, Iran

Paths of Development

“Advantage of Backwardness” (A. Gershenkron)

Early developers (US, UK in 18^th century)

- Face no international competition

- Limited state role

Middle developers (Japan, Germany in 19^th century)

- Face international competition

- Adopt technology quickly

- Greater state role

Late developers (Russia, China, 20^th c.)

- Extensive states role needed

- Face tremendous international competition

- Advantage of backwardness has declined

Late-Late developers (experimental developers)

- Post-colonial states

- Embedded in highly developed capitalist system

- Development v. dependency

Dependency Theory

- Produce commodities and extract raw materials for export (foods, minerals, oil)

- International investment is directed at extraction and commodity production

- Commodity prices are volatile, and decline over time

- Difficult to accumulate capital for investment

- Dependent on foreign markets

How to avoid dependence on developed-country markets?

Import-substitution Industrialization (ISI)

- substitute imports with domestic industries

- protect “infant industries” w/ high tariff barriers

- favor domestic producers (even if inefficient)

- resist FDI and MNCs

- Brazil, India

- Easier with large domestic market

- Some successes, some failures (e.g. Brazilian computer industry v. regional jets)

Export-led growth (ELG)

- focus on generating exports to earn capital for investment

- start w/ low level industrial products, move up the product cycle (labor intensive v. capital intensive approach)

- export industries must be protected

- innovation must be possible

- regulate FDI and MNCs

- Taiwan, Korea

- Easier with smaller economy (large external market)

Capitalist Developmental State (C. Johnson; R. Wade)

- Japan (1950-1980)

- Gov’t directs economic planning

- Japan sets rules for FDI and MNC presence

- Domestic market competition

- Protection from imports in key sectors

- ELG & ISI mixed

Newly Industrialized Economies (NIEs)

- Asian “Tigers”: South Korea, Taiwan, Hong Kong, Singapore (1980s)

- South Asian “Dragons”: Thailand, Malaysia, Philippines (1990s)

- 1997 Asian financial crises leads to debate over CDS

How to explain variations in economic success?

- Ability to pursue ELG or ISI depends on domestic institutions

· State must be able to resist political pressure from business & labor

o Authoritarianism alone is not sufficient

o State must resist “capture” by business groups

o Mexico & Brazil saw limited growth in 1970s with reform blocked by state-owned or state-linked industries