Dominance-Dependence and World Systems Approach views of development

Alternative Views of Development Dominance – Dependence Theory World Systems Approach

Dominance – Dependence Theory or Dependency Theory (not the Domino Theory!) late 1950s Director of the UN Economic Commission for Latin America, Raul Prebisch Economic growth in industrialised countries did not necessarily lead to growth in the poorer countries – in fact it often led to serious economic problems in the poorer countries This was NOT what the traditional models eg Rostow had predicted!

Rostow (recap) time level of development The Traditional Society Pre-conditions for Take Off Take Off High Mass Consumption The Drive to Maturity Everyone wins in the end! – or do they?

Dominance – Dependence Theory Poor countries export primary commodities to the rich countries: eg rubber, iron… Rich countries manufacture products out of those commodities and sell them back to the poorer countries: eg steel-belted radial tyres, …

“ Value Added” The market value of a manufactured product is nearly always greater than the cost of the primary resources used to create the product eg the retail cost of a tyre is much greater than the value of the rubber and steel in the tyre = PROFIT

Width of arrows represents the value of exports Disparity North America Europe “ NORTH” Africa Asia South America “ SOUTH” Australia and NZ? Cars, Appliances, Machinery, Hi-tech, … Rubber, Minerals, Gems Cocoa, Coffee, …

Disparity The “poorer” countries will never be able to earn enough to pay for their imports … … or the interest on the loans they take out to “develop” (ie try to catch up with the “richer” countries)… … so there will always be Disparities between Developed and Developing countries (as long as the system continues like this!)

Solution!!? Poorer countries should embark on a programme of import substitution* so they don’t need to purchase manufactured products from the richer countries. The poorer countries would still sell their primary products on the world market and be able to compete in the market * Import Substitution: a country should attempt to reduce its foreign dependency through the local production of industrialized products. This usually involves government spending to encourage the development of local industry through direct incentives, tax breaks, duties, quotas and tariffs (all of which are today frowned upon as being “barriers to free trade”. NZ removed all of its barriers from 1984 onwards.

Unfortunately… Internal markets of the poorer countries were too small to reach the economies of scale needed to keep prices low. Poorer countries often lacked the political will, expertise or infrastructure to move from being producers of primary products to being industrial manufacturers

Unfortunately… The international commodity markets (eg for coffee) control and determine price and quantity of primary products sold Protected / nationalised industries are fertile breeding grounds for corruption and inefficiency in developed and developing countries.

Persistent poverty – why? Rostow: “poorer countries are late in coming to solid economic practices . As soon as they learn the techniques of modern economics the poverty will begin to subside.” ie catch up!

Alternative views Marxist theorists: “persistent poverty is a consequence of capitalist exploitation ”. Disparities in development are a natural product of global capitalism , which itself grew out of the age of Imperialism Marx and other socialist / communist thinkers viewed society as being engaged in an ongoing class struggle between “rich” and “poor” which would only be solved by the forced redistribution of resources (eg by revolution, war or economic upheaval).

Marxism: a class struggle Rich “ Haves” Control most factors of production (Land, Capital, Entrepreneurship) Industrialists / Bosses Landowners Bourgeoisie Upper classes Poor “ Have-nots” Control only their own labour but can’t fix their “price” (wages) as they lack power Workers Landless peasants Proletariat Working / peasant classes “ Political power grows out of the barrel of a gun” Mao Zedong, 1938 Based on the writings of Karl Marx (1818 – 1883) in “The Communist Manifesto”

Dominance – Dependence Theory Can be seen to borrow some of these ideas in that it recognises the “unfairness” of the disparities … … and that the capitalist system seems to be unable to solve these problems World Systems Approach: A more recent view which says that “ poverty is a direct consequence of the evolution of the international political economy into a fairly rigid division of labour which favours the rich and penalises the poor”.

Dominance – Dependence Theory “ [Dependency is]...an historical condition which shapes a certain structure of the world economy such that it favours some countries to the detriment of others and limits the development possibilities of the subordinate economies...a situation in which the economy of a certain group of countries is conditioned by the development and expansion of another economy, to which their own is subjected.” Theotonio Dos Santos, "The Structure of Dependence," in K.T. Fann and Donald C. Hodges, eds., Readings in U.S. Imperialism. Boston: Porter Sargent, 1971, p. 226

Two sets of states: Dominance – Dependence Theory “ Dominant” or “Centre” Countries *Periphery = out on the edges or margins #OECD = Organisation for Economic Cooperation and Development (NZ is a member) “ Dependent” or “ Periphery”* Countries Industrialised countries of OECD# low GNP per capita rely heavily on the export of a single commodity eg coffee Mainly in Latin America, Asia, and Africa

Dominance – Dependence Theory External factors are of huge significance for the periphery: “ Dependent” or “ Periphery” Countries multinational corporations international commodity markets foreign aid communications These factors dwarf the size of most “Dependent” countries’ economies

Dynamic but deep-seated relationships: Dominance – Dependence Theory “ Dependent” or “ Periphery”* Country The relationship between the two countries changes considerably over time but is still essentially of the same Dominant – Dependent nature. Some of these relationships are very deep-seated: they go back over hundreds of years eg Spain’s relationship with its former colonies of South and Central America “ Dominant” or “Centre” Country

“ Latin America is today, and has been since the sixteenth century, part of an international system dominated by the now-developed nations.... (eg Spain) Latin underdevelopment is the outcome of a particular series of relationships to the international system.” Susanne Bodenheimer, "Dependency and Imperialism: The Roots of Latin American Underdevelopment," in Fann and Hodges, Readings, op. cit., p. 157. Dominance – Dependence Theory

International capitalism is the motive force behind dependency relationships. “ ...historical research demonstrates that contemporary underdevelopment is in large part the historical product of past and continuing economic and other relations between the … underdeveloped and the now developed metropolitan countries. Furthermore, these relations are an essential part of the capitalist system on a world scale as a whole.” Andre Gunder Frank, "The Development of Underdevelopment," in James D. Cockcroft, Andre Gunder Frank, and Dale Johnson, eds., Dependence and Underdevelopment . Garden City, New York: Anchor Books, 1972, p Dominance – Dependence Theory

Capitalism has enforced a rigid international division of labour which is responsible for the underdevelopment of many areas of the world. Dependent states supply cheap minerals, agricultural commodities, and cheap labour, and also serve as the repositories (dumping grounds?) of surplus capital, obsolescent technologies, and manufactured goods. Dominance – Dependence Theory

The economies of the dependent states are geared towards the outside : money, goods, and services do flow into dependent states, but the allocation of these resources is determined by the economic interests of the dominant states, not by the economic interests of the dependent states. Dominance – Dependence Theory

Economic and political power are heavily concentrated and centralized in the dominant industrialized countries. Economic and Political power work together: dominant country governments will take whatever steps are necessary to protect private economic interests, such as those held by multinational corporations. These assumptions are shared with Marxist theories of imperialism Dominance – Dependence Theory

Underdevelopment: a situation in which resources are being used, but in a way which benefits dominant states and not the poorer periphery states in which the resources are found! Dominance – Dependence Theory Therefore…

Poor countries are not "behind" or "catching up" to the richer countries of the world. They are poor because they were “dragged” into the European economic system only as producers of raw materials or as sources of cheap labour, and were denied the opportunity to market their resources in any way that competed with dominant states. Dominance – Dependence Theory Therefore…

Patterns of resource use imposed on poor countries are wrong and should be changed eg Export Agriculture. Poor countries experience high rates of malnutrition even though they export large amounts of food (mainly cash crops eg coffee, sugar, tobacco, cocoa). Land should be used for domestic food production rather than exporting to wealthy countries. Dominance – Dependence Theory Therefore…

There exists a clear national economic interest for each country (ie their own development goals). This national interest can only be satisfied by addressing the needs of the poor within a country, rather than meeting corporate or governmental needs (especially the corporates and governments of wealthy countries). Dominance – Dependence Theory Therefore…

The system of resource use is maintained not only by the power of dominant states, but also through the power of “ elites” in the dependent states . These elites maintain a dependent relationship because their own private interests coincide with the interests of the dominant states eg politicians These elites are often educated in the dominant states and share similar values and culture with the elites in dominant states. eg France used to send the “brightest young men” in its colonies to study in French universities. They would be expected to return to rule their country in an “approved” manner – until Ho Chi Minh! Dominance – Dependence Theory Therefore…

Now if you’re really keen…

World Systems Approach Builds on Dominance – Dependence Theory Countries don’t go through stages – the “system” does Also believes that countries are poor because they are stuck on the “periphery” or edges of the world economy – and kept there by “core” countries Uses the term “Core” instead of “Centre” for the Dominant states

Late 18th / early 19th centuries marked a turning point in capitalism – capitalists achieved power in key countries which furthered the industrial revolution (eg Britain). Believes there are four types of countries Core = Centre / Dominant Semi-periphery = Cores on the way “down”, or Peripheries on the way “up”! Periphery = Dependent External = outside the world economy World Systems Approach

Core countries: The most economically diversified, wealthy, and powerful (economically and militarily) Have strong central governments, controlling extensive bureaucracies and powerful militaries Have more complex and stronger state institutions that help manage economic affairs internally and externally Have a sufficient tax base so these state institutions can provide infrastructure for a strong economy World Systems Approach

Core countries: Highly industrialized; produce manufactured goods rather than raw materials for export Increasingly tend to specialize in information, finance and service industries More often in the forefront of new technologies and new industries. Examples today include high-technology electronic and biotechnology industries. Another example would be assembly-line auto production in the early twentieth century. Has strong bourgeois and working classes Have significant means of influence over noncore nations Relatively independent of outside control World Systems Approach

Core countries: gain - Access to a large quantity of raw material Cheap labour Enormous profits from direct capital investments A market for exports Skilled professional labour through migration of these people from the periphery to the core. World Systems Approach

Core countries: Sometimes one core country or region will become a “hegemon” or “super-core” Portugal / Spain in the 16 th century North-West Europe (France, Holland, Britain) in the 18 th / 19 th centuries USA in the 20 th century World Systems Approach

Semi-periphery countries: Part way between the core and periphery. Usually countries moving towards industrialization and a more diversified economy But can come from declining cores. World Systems Approach

Semi-periphery countries: They may be dominated by core countries, but may also partially dominate periphery countries Spain and Portugal: - fell from their early core position, but still manage to retain influence in Latin America. They imported silver and gold from their colonies, but then had to use it to pay for manufactured goods from core countries such as England and France. World Systems Approach

Periphery countries: Least economically diversified Relatively weak governments Relatively weak institutions with little tax base to support infrastructure development Depend on one type of economic activity, often on extracting and exporting raw materials to core nations, cash crops etc Least industrialized World Systems Approach

Periphery countries: Targets for investments from multinational corporations. Come into the country to exploit cheap unskilled labour for export back to core nations Small bourgeois and large peasant classes High percentage of people poor and uneducated. Inequality very high - a small upper class (elite) owns most of the land and has profitable ties to multinational corporations World Systems Approach

Periphery countries: Extensively influenced by core nations and their multinational corporations. Many times they are forced to follow economic policies that favour core nations and harm the long-term economic prospects of periphery nations. Historically, peripheries were found outside Europe, for example in Latin America, Asia, Africa. World Systems Approach

World History According to the World Systems Approach 15 th century – Spain and Portugal lead the way but overextended themselves with empire building Gained huge wealth from colonies but fell behind in industrial production 17 th century – Holland with its new financial system based on global capitalism (which others copied eg Britain) Holland also had many colonies eg East Indies As the Dutch economy grew and standard of living rose its costs of production went up! Began to invest overseas eg British industry

World History According to the World Systems Approach 19 th century – Britain became the “hegemon” Highly industrialised, capitalism thriving Massive growth in colonisation eg NZ This cost a lot of money so their clear dominance ended By 1900 the old European “core” claimed 85% of the world’s territory! The only way to gain land was through war against other “core” nations – eg Germany, Japan, Italy A truly “global economy” emerging

World History According to the World Systems Approach Post World War 1 – the “American Century” – USA a “hegemon” Rapid industrialisation after the 1860’s Civil War, helped by investment from Britain, Holland After World War 2 the USA had over ½ the world’s industrial production, 2/3 of gold reserves, 1/3 of world’s exports Since the 1990’s USA “hegemony” has been eroding.

World History According to the World Systems Approach The “core” is now Europe + USA + Japan Others approaching eg South Korea, China Semi – periphery = states that have been long independent but have not yet reached Western levels of influence eg Brazil, India? NZ and Australia? Periphery = poor former Western colonies eg Southeast Asia, Africa

Dominance-Dependence and World Systems Approach views of development

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