Tag: Dependency Theory,Development Studies

Growth pole is the concentration of technically advanced industries that stimulate economic development in associated businesses and industries. These concentrations of industries often affect the economies of geographical areas outside their immediate regions.

A third, but less knownmodel of growthwas worked out in the 1950s by the Frenchman, Fancois Perroux. Perroux divided industry as a whole into two types of sub-sector: the dynamic sub-sectors, so called ‘propellant’ industries: and the non-dynamic, ‘impelled’ industrial sectors, which had to be driven forward by the dynamic sectors. This division also had a spatial aspect in that there was a tendency to concentrate the dynamic sub-sectors in small geographical enclaves, while the others were spread out in backward regions, whose growth and development totally depended on their linkages with the growth poles.

With this emphasis on both the sector wise and the spatial concentration of growth, Perroux came to act as a kind of forerunner for the many empirical analyses that have

since been undertaken of such tendencies. It is today a conventional widespread conception that the countries in the Third World, with a few exceptions such as Singapore, Hong Kong, South Korea and Taiwan — are all characterised by concentrations of growth in certain sectors and certain geographical enclaves.

It is of great benefit to mention here that this strategy of the growth pole was one of the earliest development initiatives that Zambia implemented in its search to bring about balanced development. The specific programme under which this was implemented was known as the ‘Intensive Development Zones’. Under this programme certain areas of potential growth were identified. The idea was to pump a lot of investment in those areas so that the effects of growth from them could have spill-over effects over a certain period of time. In the long run, the entire country would come to benefit from this approach.

In contrast to Perroux’s and Hirschman’s recommendation; the concentration has rarely been optimal as seen from the perspective of the theories of unbalanced growth.

The concentrations observed in the third world do not, generally reflect strategic imbalances in Hirschman’s conception, or development-promoting growth rate poles in Perroux’s terminology. Rather, they represent isolated growth spots which may be interlinked and integrated into global networks but which, at the same time, have not induced growth in non-dynamic sectors of the surrounding backward areas.

Each of the above-mentioned theories came to influence subsequent theory formation and the international debates on development problems, but not to the same extent, or with the same intensity, as two additional contributions from the early period: those of W. Arthur Lewis, born in the British West Indies, and the American, W.W. Rostow.

These two economists, in their more elaborate and detailed analyses with respect to conceptual framework and method and also reached different conclusions. Yet they had so much in common that they cane to function as mutually supplementary theoretical frames of reference, particularly in the Western world’s development debate from the 1960s onwards. Even in the 1990s, they continue to influence some of the basic notions of economic development.

Lewis and Rostow both focused on rising per capita income as the central measure of growth; they conceived of economic development as a modernization process; they used as their starting point a model of developing countries with an abundant supply of labour in the traditional sector; they regarded the savings rate as the central determinant for the investigation rate and further for the overall growth rate; and finally they viewed the capitalist or entrepreneurial class as an important driving force behind economic growth, essential, in particular , for initiating the process (Hunt, 1989: pp. 62).

More specifically, Lewis took as his starting point a two-sector model of a closed backward economy with an unlimited supply of labour at a subsistence wage; one sector was the capitalist, the other he characterised as the subsequent sector. The capitalist sector employed wage earners, used reproducible capital and paid capitalists for the use of capital. The subsistence sector was characterised by being based primarily on family labour, by not using reproducible capital and by low labour productivity.

It was in the subsistence sector that the abundant labour reserves were found not necessarily in the shape of many unemployed, but rather in the shape of many underemployed. These underemployed workers could be transferred to the capitalist sector without bringing about a decline in the subsistence sector’s total production, and a wage which was determined by the average in the subsistence sector — not by their productivity in the capitalist sector.

Lewis’s argument in the extension of this was that the most important barrier to economic growth was the lack of accumulation of productive capital, caused, in turn, by the low rate of savings. The central problem in the theory of economic development was, therefore, to investigate under what circumstances it would be possible to increase the rate of savings and investments in a backward and stagnant economy, where these rates would typically be as low as four to five per cent of national income, up to a level of between 12 and 15 per cent or higher.

Lewis’s answer t this central problem was that the poor in the subsistence sector and the workers in the capitalist sector could not produce such increased savings, because they were simply too poor to save a significant proportion of their income. The rich in the subsistence sector could not either, because they were mostly landowners, who used their rents and other income unproductively to buy existing assets rather than to create new ones.

Therefore, the capitalists, the other component of the rich in the basic model, had to produce the necessary increase in the savings rate. According to Lewis, they were capable of doing so. On this point, he followed the classical political economics’ assumption that the capitalists’ profits would be both saved and invested.

Consequently, the central problem was transformed into a question about how the profits could be increased as a proportion of national income. This could be achieved by the capitalist sector’s inherent dynamics. Lewis asserted that as soon as a core capitalist sector was established under conditions of an unlimited supply of cheap labour, the capitalists would reinvest at least a part of their profits and in this way increase the total amount of capital available.

This would attract more workers from the subsistence sector into the capitalist sector, where their productivity would be higher than reflected in their low wages (determined primarily by the subsistence sector). As a result, a relative increase of the profits in relation to total national income would occur and thus bring about an increase in the areas of saving and investment. The final outcome would be sustained economic growth, driven forward by the capitalists. Lewis emphasized that the capitalists did not necessarily have to be private capital owners; the state could play this role too.

In the presentation of the argument so far as we have assumed a dosed economy without trade or other transactions with other economies. However, Lewis further extended his model to cove an open economy. This part of his model will not be presented in detail but it should be noted that one of Lewis’s main conclusions was that trade between developing countries and industrialised countries did not promote growth and economic progress in the former.

This was explained chiefly with reference to the fact that wages in the poor countries, according to the model, were determined by the supply (subsistence) price of labour, as described above. The increased productivity of labour as a result of transferring to the capitalist sector would therefore be passed on to consumers in the industrialised countries in the shape of lower product prices. Lewis, with this reasoning, anticipated central elements in Arghiri Emmanuel’s theory of unequal exchange.

Summing up, one can say that Lewis’s model gave reasons for optimism regarding the possibilities for sustained growth in the capitalist sector. Lewis regarded this as identical with economic development, but he stressed, at the same time, that the working population in the developing countries, the vast majority, could not count on improvements in their standard of living in the short or medium-term if the capitalist growth rate was to be maximized.

Lewis’s economic model and his associated theories have been subjected to wide-ranging criticism. However, this should not obscure the fact that his original contribution to economic development theory was both interesting and innovative. Some of the basic elements have since been taken over and amended by some of the most structuralist-oriented development economists which will be presented below. Moreover, Lewis’s model formed one of the important starting points for Rostov’s theory of stages of economic growth and modernization.

W.W. Rostow formed his basic theory during the 1950s and presented it in its totality in 1960 in the book, The Stages of Economic Growth (Rostow, 1960). Variations and extensions have since been published (Rostow, 1978, 1980). Rostow, like Lewis, distinguished between the traditional sector and the modern capitalist sector.

Further, he agreed with Lewis that a crucial precondition for lifting an economy out of low-income stagnation and into sustained growth was a significant increase in the share of savings and investment in national income. But Rostow was more interested in describing the whole process through which a society develops in different stages.

The aim was to identify strategic or critical variables that may be presumed to constitute the necessary and sufficient conditions for change and transition to a qualitatively new stage. Rostow’s stage theory was essentially unilinear and universal, and assumed irreversibility.

Rostov divided the development process into the following give stages:

• The traditional society
• The establishment of the preconditions for take off
• The take off stage
• The drive to maturity
• The époque of high mass consumption.

Each of the stages was thoroughly described in his 1960 book and illustrated with examples from the historical development of selected countries.

One of Rostow’s central points was that ail societies, sooner or later, will pass through the same sequence of five economic stages. Whether this will happen sooner or later is determined primarily by natural and economic circumstances, but Rostow’s also assigned some importance to political and cultural conditions.

The conceptualization of the five stages is not characterised by the same precision in its formulation, or the same internal consistency of reasoning as found in Lewis’s theoretical model. Rather, what we find in Rostow are somewhat loosely substantiated generalisations based mainly on experience from a few industrialised countries. This, however, did not prevent Rostow’s theory from becoming one of the most popular among decision makers, consultants, and government officials involved in economic planning in the Third World. This applies, in particular, to this propositions concerning take off into self-sustained growth.

It should be added that Rostow himself, unlike many economic planners and consultants, was quite careful about specifying a long list of preconditions for the takeoff. In fact, it is in the discussion of the preconditions for take-off that Rostov has probably delivered his most crucial contribution and on this point even influenced theorists who have not accepted his notion that all economies will pass through an identical series of stages. Therefore, a little more should be said about these preconditions.

Rostow imagined, as noted that the developing countries would follow the same development pattern as the industrialised countries, despite their being surrounded by a quite different international economic system than were the advanced countries at the time when they took the big leap forward. In this sense, Rostow adhered to a mono-economic approach and thus placed himself, in this respect, outside the mainstream of development economics. However, in other respects he set the course for this mainstream, not so much in the sense that others adopted his theories, only a few did that, but more by inspiring critical revisions and amendments to the theory’s central assumptions and hypotheses.

One of these hypotheses claimed that a markedly increased savings rate would lead to a corresponding increased investment rate, which further would cause significant industrial growth. A second, related thesis asserted that capital accumulation was the central source of growth in developing countries.

Both these claims were rejected or heavily modified in later theory formation as we shall see in the next section. But prior to that, it may be of interest to compare Rostow’s basic development thinking the concept of modernization through an irreversible process divided into stages with corresponding conceptions in more mechanistic Marxism including, especially some of the Soviet theories,

Rostow launched his theory in 1960 as ‘An anti-communist manifesto’ (the book’s subtitle) as an alternative to Karl Marx’s theory of modern history, and that is what it was in many respects. Among other things, Rostow refuted the Marxist theories of exploitation and suppression of the backward and underdeveloped areas.

He proposed a number of other interpretations and underdeveloped areas. He proposed a number of other interpretations and explanations in opposition to Marxist assertions and warned against forcing development or turning it in another direction with assistance from the communist countries. That, Rostow declared, could only lead to worse results.

At the same time, however, it is interesting to note that Rostow and many development theorists with a mechanistic interpretation of Marxism have in common the idea that all societies, with almost compelling necessity, must pass sequentially through an identical series of stages or modes of production. The Marxist stage theories emphasise other characteristics and are often more comprehensive and complex than Rostov’s theory.

Yet one cannot avoid noticing the striking similarities, especially with regard to the early, more dogmatic Soviet Marxist stage theories (Solodovnikov and Bogoslovsky, 1975). They suggested in opposition to Rostow — that the underdevelopment countries could escape or completely avoid the capitalist stage by following a special non-capitalist road to development.

However, in principle, they simply swapped Rostow’s model of a capitalist industrial country with the Soviet version of a ‘socialist’ industrial country. Thus the Soviet Marxist theory became a special form of modernisation theory.

This applied alsointhe sense that they proposed a positive evaluation of imperialism, only here it was of Soviet imperialism and not the Western industrial countries’ imperialism. One of the points to note in this context is that the non-capitalist road to development was only possible with support from the USSR and Eastern Europe.

It has to be added that these remarks on Soviet Marxist theory apply only to the earlier prevailing conceptions. The theoretical debate on the Soviet Union was already, long before the dismantling of the Eastern Bloc, much richer and more nuanced. Many researchers even raised questions about the relevance to Third World countries of the Soviet and East European development model. Furthermore, there was an emerging consensus that the backward countries were too different to follow an identical path of change.

The idea that the growth process could be initiated with balanced capital investments in several sectors at the same time was strongly criticized by, among others, Alert Hirschman (Hirschman 1958). He claimed that, on the contrary, there was a need to maintain and accentuate imbalances and disequilibria is backward economies, because there were other barriers to growth than the limited market and the lack of capital investments.

Hirschman emphasized, with inspiration from Schumpeter, that the developing countries greatest problem was rather the lack of entrepreneurship and management capacity. Hirschman stressed his point by saying that if a country were ready to apply the doctrine of unbalanced growth, then it would not be underdeveloped in the first place’.

Rather than strive for a balanced approach where the resources would be thinly spread over several sectors and managed badly, the developing countries should according to Hirschman, aim at selected key sectors which had many links backwards and forwards in the economy, and therefore could pull other parts of the economy along with it.

The debate between the followers of the two above-mentioned models of growth continued up through the 1950sand1960s. Today, however, the focus of attention has shifted from the original dichotomy to considerations concerning the circumstances in which one or the other approach appears to be the more appropriate.

Evaluated retrospectively, it is interesting to note that both models of growth operated with imbalances with regard to income distribution. It was well known as early as the 1950s that the income distribution in developing countries was generally extremely unequal, but this was not a subject that preoccupied this period’s growth theorists.

Nurkse was worried that the rich would use their savings mainly on imported luxury goods, but it did not lead him to recommend, as in the case of Myrdall, redistribution in favour of the poor, because Nurkse did not believe that the poor had the necessary ability or opportunity to save. in this regard he was in line with the predominant conception of this early period that increased savings had to come from the rich in the backward countries.

In terms of strategy, therefore, it was deemed legitimate to concentrate on income growth for the rich, who would then increase their savings and thereby create continued growth. After a while this growth, it was implicitly claimed, would trickle down to the poor in such a way that in the end everybody would be better off.

Simon Kuznets was one of the few who stated in more explicit terms his opinion on this subject . He claimed that economic growth under average circumstances would lead to increased inequality in the beginning, but that this tendency would flatten out and to some extent turn to steadily increasing equality in income distribution. More specifically, Kuznets came to the conclusion that the incomes of the poorest 40 percent of the population would normally grow more slowly than the average until income per person reached a range of US$700 to US$900. Beyond this range, the incomes of poorer groups would tend to grow faster than the average.

Several development researchers have tried, since Kuznets stated his provocative hypotheses, either to substantiate it with further data or to reject it. The Indian economists V.M. Dandekar and N. Rath have undertaken particular thoroubh studies of the problem (Dandaker and RAth, 1971). They concluded, based on evidence from India, that a higher rate of growth was better than a lower rate of growth for all social groups, rich as well as poor — with the exception of the poorest ten per cent, who did not get any benefit at all from the economic growth in the various states of India.

They added to this observation that, seen from the point of view of the poor, a fair distribution of the growth results was of great importance than a generally higher growth rate, because the poor got considerably less out of a general increase.

Dandekar and Rath, therefore, deemed it justifiable to ask how rich the rich should become before the needs of the poor were taken into consideration through political intervention and special initiatives. This question provided one of starting points for the argument that latter led to the elaboration of the basic needs strategy.

In the previous articles we have discussed development researchers whose prime aim has been to adjust, elaborate or supplement the classical dependency theories. Other researchers within the Neo-Marxist tradition, however, have rejected the whole body of dependency theories and attempted to replace them with totally different approaches. This applies to, among others, the American social scientistBillWarren, who elaborated on the Elimination of Dependency.

In his Elimination of Dependency suggested process, Warren’s main point was; certainly imperialism has led to the creation of a system characterised by inequality and exploitation, but at the same time this imperialism has created the conditions for the spreading of capitalism to the Third World. And not only that. Warren went further by claiming that he was able to prove that capitalism, since the Second World War, had actually developed both in depth and width in the Third World.

Process of Elimination of Dependency

Although the capitalist mode of production was originally grafted on to the peripheral economies from outside, by the industrialised countries, Warren argued that in the long run it would lead to elimination of dependency or to a development out of dependency. Imperialism has, in other words, laid the foundations of its own dissolution.

Warren saw the situation in the 1960s and 1970s as especially conducive to national capitalist development in the Third World. He referred in this connection to the conflict between East and West, which he believed the dependent countries in general could derive considerable benefits from. He also pointed to the competition between the different industrialised countries, and between the many transnational corporations, and argued that these forms of competition could also be exploited with a view to promoting more independent national development.

The difficulties were chiefly the internal conditions in these countries, including a very widespread tendency to pursue totally misconceived agricultural policies, which neither brought about the necessary land reforms nor linked the rural economies to the dynamic capitalist urban economies.

Warren’s theory is essentially the classical dependency theory turned on its head. To him imperialism and the world market were in no way obstacles to economic growth and progress, understood as capitalist development. On the contrary, it was from these global systems that the whole process of development would be set in motion. The fact that progress reserved for the few meant less to Warren; in contrast to Soviet Marxism, he regarded the development of capitalism, for good or evil, as an unavoidable necessity, as a stage all underdeveloped countries had to go through to reach socialism.

Warren must be credited for drawing attention, at an early stage, to the actual growth of industry and other capitalist sector sin the Third World within the framework of Marxist theory. But he did it with the eagerness and intensity that has his theory became one sided and biased, and therefore make itself most useful as a closing marginal note to the main body of Marxist theory regarding underdevelopment and dependency. On the other hand, there is, within this tradition, a pressing need for a better theory which can explain both underdevelopment and development.

Before we come to dependency theories that during the 1970s and after came to dominate large parts of the development debate, it is deemed relevant to look a little close at the role Paul Baran played in establishing the theoretical linkages backwards to classical Marxism.

Baran who emigrated to the USA from the USSR before the Second World War, wrote his most influential work in 1957. It included both an historical account of the origins of underdevelopment and an analysis on the ‘morphology’ ofcontemporaryunderdevelopment. Baran conceptualized the causes of underdevelopment in much the same way as his contemporary non-Marxist economists.

He emphasized that the backward countries were characterized bydual economies: on the one hand they comprised large agricultural sectors, where productivity was extremely low and the marginal productivity of labour close to zero; on the other hand, they had small industrial sectors with high level of productivity.

Baran further stressed that the growth and’ employment potential lay in the industrial sector, but that its expansion was constrained by the small size of the domestic markets as well as by competition from the highly industrialised countries. All these were generally accepted views in the 1950s. The important new feature in Baran’s approach and analysis was his attempt to explain this state of affairs, and, in particular, why the backward societies remained underdeveloped. In pursuit of this explanation, Baran introduced a special version of Karl Marx’s economic theories with emphasis on class relations and their impact upon the utilization of the economic surplus.

Where Marx, in his analyses of conventional capitalism, had underlined how the capital owners could expropriate an economic surplus from the working class in the form of surplus value produced by the workers (who were not paid the full value of their labour), Baran, emphasized the extraction of economic surplus in all its forms. In the backward economies, the surplus potentially available for capital formation did not only take the form of surplus value produced by wage labour, but also included the appropriation of surplus from peasants and other direct producers in the form of land rent, interest on credit, and profits from trade. Four main classes each appropriate surplus in one of these forms.

Land rent was extracted by the feudal aristocracy or other big landowners. Interest on credit accrued to the moneylenders, who were sometimes the same people as the landowners. The profit from trade was appropriate by merchants who made a living from buying cheaply and selling dearly. Finally, the surplus value from capitalist production was appropriate by the largely foreign capitalists, but also to a certain extent by the emerging groups of national industrialists.

Baran’s crucial point was that none of these four propertied and economically dominant classes had any vital interest in promoting industrialization and the accompanying transformation of the peripheral economies. The feudal landowners, moneylenders and traders, in fact, opposed this because it would threaten their access to the traditional sources of economic surplus.

The foreign and national capital owners were also against it, because a more comprehensive industrialization process would undermine their monopoly position and force them into competition with new entrepreneurs a which in turn, could threaten their extraordinarily high profits. In such circumstances capitalism was devitalized and deprived of its growth and development dynamism, the dynamism that, under other circumstances, had created impressive economic progress in the centre formations during an earlier period.

Baran, contrary to the classical structuralists and many later dependency theorists, focused mainly on the internal conditions in the backward societies. It was in these internal conditions, and more specifically in the distribution of power among the classes and control over the economic surplus, that Baran found the primary barriers which had prevented the poor countries from copying the industrialised countries and reaching a similar stage of development.

However, Baran also emphasized the international circumstances by underlining that economic development in the backward societies was profoundly inimical to the dominant interests in the advanced capitalist countries. As these countries governed the international economic system, the underdeveloped countries remained trapped in poverty (cf. Palma, 1989).

The only way Baran could see out of the misery was through extensive state interventions to promote nationally controlled industrialization. The recommended strategy markedly distinguished itself from those of the structuralists by emphasizing the establishment of state-owned heavy industries as a precondition for evolution on the other industrial sectors.

The strategy proposed by Baran, directly or indirectly, achieved some influence on economic planning in countries such as India and China, but did not otherwise play any central role in the theory formation within the Neo-Marxiit school of thought. On the other hand, Baran’s analyses of the causes of underdevelopment became an important source of inspiration for scholars like the American economist, Andre Gunder Frank, the following section will briefly review the contributions to theory formation from the Egyptian economist, Samir Amin, and the Graeco-French economist, Ashiri Emmanuel.

Frank based his original dependency theory mainly on evidence from Latin America, while Amin drew his conclusions chiefly from empirical analysis of West Africa. Emmanuel drew more widely on the developing countries, trade with the industrialised countries. In terms of analytical perspective he worked only with a few rather limited subject areas, as opposed to Frank and Amin.

After a brief examination of the earlier works on dependency, from the 1960.. and the beginning of the 1970s, we shall try to trace the main lines of thought in the debate among the Neo-Marxists during the subsequent decades. This will include, on the one hand, a discussion of what can be conceived of as attempts to further elaborate and refine the original propositions, and, on the other hand, a summary of opposing positions in the debate.

In the next article, we shall follow yet another school of thought with roots going back to Mar and Baran, i.e., theories on modes of production and social classes which focus primarily on the internal conditions in peripheral societies.

Neo-Marxism theories of underdevelopment and dependency appeared during the 1950s, partly as a reaction against the growth and modernization theories, partly as the outcome of a long-standing debate concerning the impact of imperialism. The early Neo-Marxist theories were primary known as dependency theories., They were to a large extent influenced by the Latin American structuralists and their analyses of the trade relations between the economically backward countries and the highly industrialised countries.

With respect to the theoretical heritage from the debate on imperiali5rn, it may be of interest to note that Marx had concerned himself with this issue as early as the 1850s. In articles in publications such as the New York Tribute, Marx tried to assess what would be the long-term impact on the European colonization of South Asia.

In this context, he arrived at the including local small-scale manufacturing, and set in motion a significant exploitation of the colonial areas; but on the other hand, he believed that the European penetration would at the same time remove basic obstacles to British intervention as directly promoting economic transformation. This applied especially to the building and expansion of material infrastructure, the introduction of the plantation economy monetization of commodity exchange, and the initial establishment of modern industry with its commutant wage labour (cf. Marx and Engels, 1972).

In other words, British rule implied destruction and exploitation in the short-term perspective, but construction and creation and creation of essential material preconditions for the colonial areas’ later transformation to capitalism – and thus, according to Marx, genuine societal development. It may be added that. Mar later toned down the constructive aspects of British rule in South Asia. He further asserted that the British colonization of Ireland had only destructive effects.

The interesting point in the present context is to note the wide span in Marx’s own conceptions, because this span has paved the way for very different interpretations within the Marxist research tradition. One of the theorists who has championed the view that imperialism has promoted development in the Third World is Bill Warreo.

We shall look at his main argument later in this chapter. But first we shall deal with the Neo-Marxist mainstream and focus on some of the several theorists who have vehemently rejected this interpretation and instead asserted that imperialism has actively underdeveloped the peripheral societies, or a very least obstructed their development.

These theories , most of whom may be regarded as proponents of dependency theory in one form or another, have further claimed that not only imperialism and colonialism of the past, but also contemporary forms of economic imperialism have impeded progress throughout the Third World.

They argue that economic domination, as exerted by the high industrialised countries, is a much more important development, impeding factor than all the internal conditions in the backward countries that feature so prominently in the growth and modernization theories.

Introduction

Andrea Gunder Frank, like Baran, was interested in identifying the causes of underdevelopment, but unlike his predecessor he did not lay great emphasis on the social classes and their control over the economic surplus. Rather, Frank argued that the crucial mechanism for extraction of the surplus was trade and other kinds of exchange of goods and services, not only international trade, but also exchange internally in the peripheral societies.

Frank rejected the dualist conception according to which the underdeveloped countries comprised two separate economies, one modern and capitalist and another traditional and non-capitalist. On the contrary, he claimed that capitalism permeated the whole of the periphery to such an extent that the Latin American and other peripheral societies had become integrated parts of a one-world capitalist system after the first penetration by metropolitan merchant capital. This had established capitalist exchange relations and networks that linked the poorest agricultural labourers in the periphery with the executive directors of the large corporations in the USA.

The exchange relations and the network were described by Frank as a pyramidal structure with metropoles and satellites. The agriculture,’ labourers and the small farmers in the rural regions of the periphery were satellites at the bottom. They were kinked, mainly through trade, to the landowners and local centres of capital accumulation that is local metropoles.

There is turn, were satellites in terms of regional economic elites and centres of surplus extraction. in this way the structure grew, through several links, until it reached the ruling classes and world centres of capitalism in the USA. Throughout this pyramidal structure surplus was appropriated by the centres which, in turn, were subject to the surplus extraction activities of higher level centres.

According to Frank, empirical evidence showed that the economic surplus generated in Latin America was drained away. Instead of being used for investment in the countries of origin, most of the surplus was transferred to the affluent capitalist countries, especially the USA. Frank’s basic point was that the satellites would be developed only to the extent and in the respects which were compatible with the interests of their metropoles.

And here experience showed, according to him, that neither the USA nor the other industrialized countries had any interest in genuine development of the Latin American countries. Much indicated in fact that precisely those countries and regions which had the closest links to the industrialized countries were the proportionally least developed. Therefore, the explanation of under development lay primarily in the metropole, satellite relations, which not only blocked economic progress, but also often actively underdeveloped the backward areas further (this being a process and not a state).

Frank derived from this the much debated conclusion that all countries in Latin America as well as other Third World countries, would be better off if they disassociated themselves from, or totally broke the links to, the USA and the thee industrialised countries. De-linking from the world market was the best development strategy. This presupposed the introduction of some form of socialism in the peripheral countries, because the ruling classes, the landowners and the comprador capitalists could not be expected to bring about such a de-linking and thus remove the foundation for their own surplus generation.

Frank’s conclusions, according to both contemporary and later critics, were often drawn further than the analyses warranted. However, this did not prevent his fundamental views and conceptions from winning wide dissemination and achieving considerable impact upon the development debate throughout most of the 1970s.

Frank’s position in this regard came to resemble that of Rostov in the sense that they both, for more than a decade, functioned as major reference points in the debates on dependency and economic grow respectively. Like Rostov, whose position was gradually superseded by more nuanced and empirically better substantiated theories within his research tradition, Frank eventually was replaced by more complex and differentia” attempts at explaining the reasons for underdevelopment and its dynamics. One of the earliest attempts in this direction came from Sarnir Amin.

Amin was one of the first economists from the Third World who acquired a prominent international position in the development debates, including the debates in Western Europe and North America. Two of this academic works, in particular, contributed to this prominence: Accumulation on a World Scale, and unequal development.

While Frank chiefly concerned with the conditions and relations of production. Based on thorough historical analysis of how Europe had under developed large parts of Africa in the colonial era, Amin worked out two idea-type societal models with the main emphasis on the structuring of production processes. One model described as auto-centric centre economy; the other a dependent peripheral economy.

The model of auto centric economy has features similar to those included in Rostow’s description of the industrialised countries in the epoch of high mass consumption. The auto centric reproduction structure is characterized by the manufacturing of both means of production and goods for mass consumption, Furthermore, the two sectors are interlinked so that they mutually support each other’s growth. Similarly, there is a close link between industry and agriculture. The auto centric economy is general characterised by being self-reliant.

This does not imply self-sufficiency. On the contrary, a highly developed capitalist economy typically engages in extensive foreign trade and other international exchange relations. Bur the economy is auto centric in the sense that the intra-societal linkages between the main sectors predominate and shape the basic reproduction processes. It is the internal production relations hat primarily determine the society’s development possibilities arid dynamics.

It is quite a different matter with the peripheral economy. According to Amin, this type of economy is dominated by an ‘over-developed’ export sector and a sector that produces goods for luxury consumption. There is no capital goods industry, and only a small sector manufacturing goods for mass consumption. There are no development-promoting links between agriculture and industry. The peripheral economy is not self-reliant, but heavily dependent on the world market and the links to production and centres of capital accumulation in the centre countries.

It is further part of the picture of the peripheral economy that it is composed of various modes of production. Capitalism has only penetrated limited parts of the production processes while other parts, and quantitatively greater ones, are structured by non-capitalist modes of production.

On this point, Amen’s conception is more in line with Baran’s mode of reasoning and hence, in opposition to Frank’s definition of capitalism, in terms of exchange relations. Amin endorsed the thesis that capitalist dominates the periphery within the sphere of circulation, but he asserted at the same time that pre-capitalist modes of production continue to exist and that they exert considerable influence on the total structure of reproduction.

The distorted production structure in the peripheral countries and their dependence is a result of the dominance of the centre countries. It is the centre countries who, by extracting resources and exploiting cheap labour, have inflicted on the peripheral economies the ‘over-developed’ export sector. At the same time, the centre countries have prevented the establishment of national capital goods industries and the manufacturing of goods for mass consumption. in these areas the rich countries continue to have a vital interest in selling their goods in the peripheral markets.

If the less developed countries operating under the circumstances are to initiate a development process than can lead them in the direction of an auto centric economy – if they are to achieve growth with at least a minimum of equity in social and spatial terms – then they must break their asymmetrical relationship with the centre countries. In its place they must expand regional cooperation and internally pursue a socialist development strategy.

The discussions within the Neo-Marxist research tradition have, since the 1950s, centred around the causes of underdevelopment in the Third World. Some of the theorists have identified these causes primarily within the framework of the individual society, while others have emphasized the external links and dependency relationships.

In connection with this problematique, researchers have taken different positions regarding the character and role of capitalism. According to one school of thought, decades ago, capitalism had already penetrated both the world economy and individual peripheral economies to such an extent that this provided a solid basis for understanding the whole problem of underdevelopment.

According to another school of thought, the capitalist mode of production has only permeated the centre economies and their international relations with the periphery. The periphery economies, on the other hand, have been characterised by complex articulations of different modes of production thus creating structural heterogeneity, which in itself has hindered national economic integration and development.

Regardless of their position in this debate, the conceptions presented in the previous sections have used as their point of departure individual societal formation and moved up from there to the international system. The character and the mode of functioning of this system have been seen as determined primarily by the centre formations and the interests of ‘their dominant social classes.

In opposition to this view, a competing approach instead starts with the capitalist world system itself, and moves down to analyses of the individual societies and their position within the system. This world system approach has been elaborated, first and foremost, by Immanuel Wallerstein (Wallersteln, 1974, 1979, 1980), but also to a large extent been taken over by Frank and Amin in their more recent works during the 1980s and the early 1990s.

Wallerstein’s theory did not originate from the classical dependency theories. In the present context, though, it may still be appropriate to compare Wallerstein’s considerations with the main propositions of these theories, because this will facilitate an identification of some of his core notions and propositions. Wellerstein operated with a significantly longer historical perspective that the mainstream dependency theories.

In addition, he studied not only the structures of the world economy, but also the cyclical fluctuations, the economic recessions, depressions, upswings and booms. One of his points in this connection was that major fluctuations have engrafted upon both the world economy and the international political system some specific characteristics that have been crucial for the individual nations’ development possibilities in the period concerned.

Wallerstein consistently used as his starting point the basic features of the global system. The analysis of the individual countries came second, because he assumed that their development prospects depended more on the nature of the global system than on their internal structures. The development prospects are further determined by the individual country’s position in the international economic and political system.

In this context Wallerstein worked out a detailed ranking of the countries as well as a grouping of them into three main categories: centre, semi-peripheral, and peripheral. The individual country can change its position in the global hierarchy both upwards and downwards. But the framework for such shifts is set by the structures and the prevailing conditions in the world system.

Summarized in these few sentences it is hard to get a proper impression of Wallersterin’s quite elaborate theory. Therefore, it should be added that this theory, more thoroughly than the classical dependency theories, reflects the very complicated and constantly changing structure in the international economy. It is also Wallersterin’s credit that he has related the economic analysis to investigations of the international political system and the power relations that permeate it.

Wallerstein has been criticized for focusing exclusively on international conditions and their impact upon the individual countries’ development prospects. It is correct that his domain interest lies here, but the world preconditions and prospects for development.

Wallerstein’s main point here is rather that the further down in the hierarchy a county is, the narrower are the constraints and barriers to its development established by the world system. Thus to understand stagnation and underdevelopment in the very poor and dependent countries requires particular emphasis on the global framework and conditions.

It is interesting to note that both Frank and Amin have adjusted their original theories by incorporating some of Wallersterin’s propositions, but without accepting the world system as the necessary analytical starting point for all periods in the development of capitalism.

On the contrary, Amin has argued that the world system approach has only recently become the most feasible analytical framework, the main reason being that nor the economies of the centre countries have become significantly more integrated and dependent on the global economic system. Another reason for paying more attention to his system according to Amin, is the transformation of the previously centrally planned economies and their increased world market integration (Amin, 1992a, 1992b).

In recently published works, Amin has been particularly preoccupied with what he called the new capitalist globalization (Amin, 1992). This process is characterised by a polarization and regionalization of the world economy around three poles: the USA, Japan, and the European Union. It is further characterised by a continuous

strengthening of the semi peripheral economies such as South Korean and Taiwan — but as part of regional networks, not as independent units. Parallel to these trends, many peripheral societies have been subjected to a drastic differentiation process involving relative deprivation. This has prompted Amin to talk about a Fourth World with reference to the African countries, which have fallen further behind in relation to most of the Asian and Latin American countries.

According to Amin, capital accumulation in this new global system has in reality broken down in both the periphery and what was previously known as the Second World, and the capitalist system in its present form will not be able to resolve this accumulation crisis. The main reason is not the dominance of the centre countries and their nationalbourgeoisies, as claimed by the classical dependency theories.

The explanation should rather be looked for in international financial system and the ‘wild orgy of financial speculation’, which has undermined the foundations of national production and growth-oriented policies and strategies, even in relatively strong, centre countries. Amin has sought to capture these prevailing conditions in the title of his latest book, Empire of Chaos.

While Amin may have identified unprecedented new features in the world system, it should be noted that he has not yet substantiated his recent propositions with empirical studies of the same quality as those he carried out in support of his original dependency theory.

Introduction

Dependency development is an area of dependency theory which is mainly concerned with the efforts made to export primary resources from countries which are resource-rich but industry-poor. In this articles, we shall look at selected theories that emerged within the Neo-Marxist tradition. But before that it may be useful briefly to refer to the empirical background to the criticism raised against the original mainstream theories within both traditions.

Economic Situation in Developing Countries

First, it should be mentioned that the cumulated knowledge about the economic situation in the less developed countries had uncovered such a complex and multifaceted picture that it had become increasingly difficult to use the somewhat simplified conceptual framework and analytical models. In particular, it had proved impossible to conceive of the Third World as a large group of countries with uniform economic structures, development conditions and potentials. This applied where these countries were described as underdeveloped, as dual economies, as satellites, or as peripheral societies.

Next, it should be stressed that actual changes in the less developed countries in general implied greater and greater differentiation, accentuation of existing, and emergence of new, differences between the developing countries. To illustrate, they reacted and had to react in very dissimilar ways so the so-called oil crisis in 1973 and 1979, just as they reacted very differently to the continued stagnation in the world economy at the beginning of the 1980s. Because of this process of differentiation, it became increasingly inadequate to treat the Third World as a homogenous group of countries.

One of the few common traits that persisted was that economic progress almost everywhere remained limited to small geographic enclaves, to certain narrowly limited sectors, and so small prosperous social groups. The phenomenon has been characterized as `Singaporisation’, after the city state of Singapore, which, although surrounded by backward and poor areas, experienced unusual economic progress as early as the 1960s and 1970s.

However, even a common feature like ‘Singaporisation’ created problems for the classical theories, because it signified general tendencies very different from those envisaged in the theories. ‘Singaporisation’ corresponded poorly with the expectations of the modernization theories. It was contrary to these theories that development and modernization could be encapsulated and distorted to such a degree. Neither did this fit with the experiences garnered from the industrialised countries.

Limitations of the classical Dependency Theory

At the same time, the classical dependency theories were unable to explain the extensive industrial development which in fact occurred in many Third world countries. They faced particular problems when trying to understand and explain why, in countries like South Korea and Taiwan, even relatively close links had been forged between agriculture industry, and between the various industrial sectors.

This was in direct contradiction to the main thesis on the obstructing and blocking impact on close association with the world market and the rich countries: South Korea and Taiwan were among those countries most closely liked to the global capitalist structures and the centres of accumulation in the highly industrial countries.

These and many other factors prompted many development researchers and people who were actively engaged in development work to start looking seriously for other theories and strategies. The relatively closed theories, which at the same time treated the developing countries as a homogenous group had had their day. In their place appeared a number of more open theories which also, in a systematic manner, took into account the differences between the many countries of the Third World.

Many of these theories focused on specific aspects of reality, special development problems, and selected factors. One example could be proposition regarding the role of transnational companies in Latin American countries; another could be natural resource management in Western Africa and its impact upon economic performance.

The new wave of theories appeared partly as a criticism of the classical dependency theories; others took their point of departure in the modernization theories, but elaborated these considerably further, several of the new theories had little or more intellectual relationship or affinity with either or these two earlier schools of thought.

The Brazilian social scientist, F.H. Cardoso, was one of those who took his starting point in the original Latin American dependency theories (Cardoso and Faletto, 1979). However, he rejected the notion that peripheral countries could be treated as one group of dependence economies. In addition, he rebutted the idea that the world market and other external factors should be seen as more important than intra-societal conditions and forces, as some of these theories had asserted. Cardoso claimed instead that the external factors would have very different impacts, depending on the dissimilar internal conditions.

So decisive were the internal conditions, according to-Cardoso, that he would not rule out the possibility of extensive capitalist development in some dependent economies. Indeed, he did observe, in his own thorough analyses of Brazil that significant capitalist growth had occurred, though without creating auto centric reproduction and followed by marginalization of large segments of the population. When Cardoso referred to internal conditions, attention was drawn not only to economic structures but also to the social classes, t4ie distribution of power in the society, and the role of the state. His analyses thus reflected systematic’ attempts at combining economics and political science.

In contrast to Frank Cardoso regarded the national bourgeoisies of the dependence societies as potentially powerful and capable of shaping development. These classes could be so weak that they functioned merely as an extended arm of imperialism. But the national business community and its leaders, under other circumstances, as in the case of Brazil — act so autonornous/ and effectively that national, long-term interests were taken into account and embodied in the strategies pursued by the state.

The kind of development and societal transformation that could be brought about in even the most successful peripheral societies did not col respond to the development pattern in the centre countries. The result was not auto centric reproduction, but rather development in dependency (as opposed to Frank’s development of dependency). Or as Cardoso himself characterized it: dependent, associated development — that is development dependent on, and linked to, the world market and the centre economies.

In the further characterization of dependent development, Cardoso used, to a large extent concepts and formulations that resembled those of Amin. He thus emphasized the unbalanced and distorted production structure with its greatly over-enlarged sector manufacturing luxury goods exclusively for the benefit of the bourgeoisie and the middle class. Moreover, he high=lighted the absence of a sector that produced capital goods and the resulting dependency on machinery and equipment imports from the centre countries. But in contrast to Amin, Cardoso was very careful about generating. He would rather talk specifically about Brazil than about the peripheral countries in general.

In a similar way, Cardoso was reluctant to recommend general strategies, for a large number of dependent countries. Regarding Brazil, he pointed to a democratic form of regime as the most important precondition for turning societal development in a direction which would benefit the great majority of the people. Socialism was not on the agenda, and introducing it was in any case not as unproblematic as claimed by Frank and Amin.

Parallel to Cardoso’s efforts to adjust the classical dependency theories to the more! complex reality of Brazil, a number of German development researchers, under the leadership of Dieter Senghass and Ulrich Menzel, carried out a series of extensive historical studies of both centre and peripheral societies. The result was systematic and elaborate differentiation within both categories of counties. Their point was that when the centre countries were subjected to closer investigation, it turned out that they too, like the peripheral societies, revealed very different individualized structures and patterns of transformation. There were great differences for instance, between the Nordic and France or Germany.

Based on their historical studies Senghass and Menzel arrived at dissolution of the dichotomy between centre and periphery. In its place they put a number of patterns of integration into the world economy and the resulting development trajectories.

In addition, they reached the conclusion that the international conditions by themselves could not explain why a given society managed, or did not manage, so break out of the dependency trap. Far more important were the internal socio-economic conditions and political institutions in determining whether the economy in a given country could be transformed from a dependent export economy to an auto centric, nationally integrated economy.

From a number of country studies Senghass and Menzel extracted a list of conditions which, in Europe at least, could explain the occurrence or auto centric development. The important socio-economic variables included a relatively egalitarian distribution of land and incomes; a high level of literacy; and economic policies and institutions that supported industrialization and industrial interests. The political variables included extensive mobilization of farmers and workers; effective democratization to weaken the old elites; and partnership between the bureaucracy, industrial interests and the new social movements.

Senghass and Menzel, when they initiated their ambitious research programme, essentially wanted to find out how much could be learned from the over a century and a half of European experiences that would be of relevance to understanding the basic preconditions for the transformation of dependent, peripheral economies into auto centric economies.

There is little doubt that they have produced highly adequate documentation concerning he intra societal conditions, but here is also little doubt that their approach can be further enriched by more systematically taking into consideration the basic changes in the world capitalist system which have impacted heavily upon contemporary centre, periphery relationships.

Introduction

Arghiri Emmanuel’s theory of unequal exchange, dating from the late 1960s, was in certain respects in extension of Prebisch’s and Singer’s analyses of the deteriorating terms of trade for the less developed countries, although Emmanuel himself claimed that his mode of reasoning was different. Emmanuel tried to explain the deteriorating term of trade with reference to Karl Marx’s labour theory of value. This made his theory somewhat complicated and difficult to review in a few words. The aim here is therefore just highlight a few main points.

According to Emmanuel, tie industrial countries could buy goods from the peripheral countries at prices below the costs involved in producing the same goods in the industrialized countries, due to the very low wages in the peripheral countries. Emmanuel argued that wages were so low that the workers there were paid the equivalent of only a tiny fraction of the value of the work they performed and the goods they produced.

Exploitation and unequal exchange

This fraction was considerably smaller than that paid to workers within the same branches of industry in the centre countries. In this sense, a kind of over-exploitation prevailed in the poor and dependent countries. This over-exploitation, according to Emmanuel, was a more important mechanism of surplus extraction than monopoly control over trade (as suggested by Frank). It resulted in a significant transfer of value to the industrialised countries. This transfer of value was at the same time the main explanation of the perpetuation of underdevelopment.

Emmanuel’s original theory has since been strongly criticized and reworked in several versions. Doubt has been raised about the theory’s general validity. On the other hand, his theory of unequal exchange has sown more seeds of doubt about the blessings of international trade for the underdeveloped countries, thus reinforcing the criticism put forward by the structuralist economists and others. The theory has pointed out some further weaknesses embodied in the neo-classical theory of comparative advantages and its basic thesis that trade under all circumstances will be advantageous for all parties involved.

It may be added here that in the mid-1970s an attempt was made to incorporate a special version of the theory of unequal exchange into Geoffrey Kay’s analyses of the causes of underdevelopment (Kay, 1975). Kay argued that unequal exchange was the preferred mechanism for extracting economic surplus of a particular social class, which he termed the pre-capitalist commercial bourgeoisie.

This bourgeoisie, which also existed in Europe prior to the Industrial Revolution, did not acquire its revenue (as did the industrial and capitalist commercial bourgeoisies) by appropriating the surplus value produced by labour, but on the contrary by exploiting the distortion of prices, a distortion that enabled this class of merchants to buy goods at a costs below their real value and sell them at prices above their real value.

This was possible because of an exceptional position in the buyer’s market, for example as a monopsonist, and a corresponding exceptional position in the seller’s market, for example as a monopolis. The British East India Company and other similar transnational trading companies which operated during the colonial period could be seen as organized representatives of this particular pre-capitalist commercial bourgeoisie.

The emphasis on market position distinguishedKay’s theoryfrom Emmanuel’s. In certain respects, it resembled instead the mode of reasoning proposed by Frank. The most interesting aspect of Kay’s approach, however, is that he took a first decisive step towards a systematic differentiation and, hence, a limitation of the validity of the theory of unequal exchange.

It thus followed from his consideration that he establishment of industrial capitalism in the peripheral countries would pave the way for the growth of a ‘normal’ capitalist commercial bourgeoisie which would not be dependent on price distortions, but would receive its revenue from the surplus value produced by labour in the production processes. As a result, unequal exchange would no longer be necessary.

More specifically, this implied that peripheral societies which experienced considerable industrial development, such a South Korea and Taiwan, but also India, Brazil and Mexico, at the same time would experience a reduction of the value transfers through unequal exchange. Conversely, countries like the small African ones, with very limited industrial production, would continue to be subject to the special mechanisms of surplus extraction referred to as unequal exchange.