“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 18th century)

-         Face no international competition

-         Limited state role

 

Middle developers (Japan, Germany in 19th century)

-         Face international competition

-         Adopt technology quickly

-         Greater state role

 

Late developers (Russia, China, 20th 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