Clearing the Decks Or Twelve Unpopular Theses on Development

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Clearing the Decks OrTwelve Unpopular Theses
on Development

• A Reconsideration of Some Fundamental Conceptual
  Issues in Development Economics
• Prof Fred Nixson

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1. What is Economic Development?

• Process through which economies, societies and
  peoples are transformed
• uneven, dialectical and contingent on time and
  place
• best viewed as
• an historical process of
• both
• quantitative and qualitative change
• the historical analytic and policy prescriptive

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• Recognition that development is not a uni-linear
  process of change or progress is important
• Why?
• it undermines utopian and highly idealised
  normative notions of development
• In reality, processes of growth and change are
• difficult, painful and destructive
• while
• at the same time raising productivity and
  incomes, creating new livelihoods and lifestyles
  and transferring and creating knowledge.
• Need to re-introduce the notion of development as
  a dialectical process.
• Both Schumpeter and Marx are important
• Allows us to raise issues of poverty and
  inequality in the developed capitalist economies.

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2. Accumulation, Growth and Development

• K. Acc physical, human and knowledge at the
  heart of the development process
• emphasised by classical economists, including
  Lewis.
• S and I are logically separate
• Savings have to be translated into productive
  investment but this will not happen
  automatically.
• Other necessary conditions must be present
• entrepreneurship (Metcalfe)
• Market economy a euphemism for a K-ist economy
• but
• there are different types of capitalism.
• Production must logically precede exchange
  (Sawyer).
• There must be a shift from mercantilist
  extraction to capitalist production.

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• Galbraith (2004, p.6).
• For this reason and because the term
  capitalism evokes a sometimes sour history, the
  name is in decline. In the reputable expression
  of economists, business spokesmen, careful
  political orators and some journalists, it is now
  the Martket System. The word Capitalism is
  still heard but not often from acute and
  articulate defenders of the system.
• A capitalist economy requires capitalist
  entrepreneurs and enterprises
• and
• a developmental state that supports and
  encourages the strengthening of capitalist
  enterprises.
• The state and the private sector should not be in
  competition with one another.
• Taking us back to early key debates in
  development economics
• eg Neo-marxist and dependency challenges to
  classical marxism, and the work of Baran,
  Gunder Frank, Amin, Warren, etc.

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3. Development and the Nation State

• Nation state must remain our unit of analysis.
• Economic development
• only understood in context of individual national
  economy
• the arena within which social classes are formed
  and fight out their conflicts (Roxburgh, 1979).
• The international economy
• the aggregation of national economies that are to
  a greater or lesser extent integrated with one
  another through
• trade, capital flows, technology flows, military
  alliances, etc.
• There is no such thing as international
  development although it is a useful umbrella
  term
• similar to development studies

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• The Global economy is neither
• a perfectly integrated system
• nor
• a loose collection of autonomously functioning
  national economies.
• Globalisation blurs or erodes the boundaries
  between the global and the national economy
• through trade liberalisation, capital account
  liberalisation, direct foreign investment flows,
  privatisation, etc.
• This paradoxically enhances the importance of the
  nation state
• is responsible for the precise manner in which
  the national economy is integrated into the
  global economy.
• It is strategic integration (UNCTAD, 1997) not
  openness per se that matters.

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• But of course countries/economies do nothing.
• It is governments, enterprises and individuals
  that do things with other governments,
  enterprises and individuals in other countries.
• It is especially important to recognise this when
  discussing trade issues.
• No one denies the vulnerable and weak position of
  LDCs in the global economy,
• nor
• their historical origins in colonialism and
  imperialism.
• Their integration into the global economy in many
  cases weakens their policy autonomy.

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• But global factors are mediated by internal
  structures
• (economic, social, institutional, the state)
• and their impact on the development process
  varies over time and across countries.
• Many developmental outcomes are possible
• they emerge as the result of the interaction
  between global and internal factors.
• In some cases, development is done to
  countries (Caribbean islands that depend on
  tourism) but these are special cases.

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• Quote from Nixson, 2006, p.975.
• The fundamental problem faced by poor
  countries, preventing sustained accumulation,
  growth and structural change, relates to their
  internal class structures, the high levels of
  inequalities in these economies and the nature of
  the regimes that hold economic and political
  power and the state structures that they create.
  The latter are, of course, in part the results of
  the ways in which these economies were
  incorporated into the global economy via
  colonialism, and post independence developments
  in these economies and continuing changes in the
  (highly unequal) global economy which further
  weakens the possibilities for even relatively
  autonomous development strategies
• Globalisation in its present forms is neither
  inevitable nor irreversible the global economy
  is highly unstable and powerful economies will
  always break the rules when it is in their
  interests to do so!

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4. The Myth of the Two Sectors

• Galbraith, 2004, pp.30-32.
• The accepted distinction between the public and
  private sectors has no meaning when seriously
  viewed. Rhetoric, not reality. A large, vital and
  expanding part of what is called the public
  sector is for all practical effect in the private
  sector.
• The public and private sectors are not separable
• except in an accounting sense.
• Government does not exist in a vacuum.
• It reflects dominant economic and political
  interests and rarely achieves the relative
  autonomy of the development state.
• Most LDCs do not have the modern bureaucratic
  state that capitalism demands (Weber Evans,
  1995).
• Politicians and civil servants, (or their
  relations) are also owners of enterprises, large
  landowners, active in the legal and medical
  professions, consultants for foreign companies,
  etc.
• The army often plays a key role in economic life
  (Pakistan, Vietnam).

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• Governments make mistakes
• but generally their actions/policies are
  rational with respect to the objectives they seek
  to achieve
• (but which may not be consistent with some
  normative notion of development).
• ISI provides a good e.g.
• We get nowhere by arguing that
• governments can kill growth (Easterly, 2001)
• or
• The Rich Have Markets, the Poor Have
  Bureaucrats (Easterly, 2006, Chapter 5).
• These are ideological slogans, not analysis.

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• Contemporary literature tends to
• substitute the rather vague and often
  contradictory notion of governance
• for
• a proper discussion of the Role of the State.
• Governance is NOT
• the same as developmental state policies aimed
  at achieving concrete objectives.
• Good governance not an issue in 19th and early
  20th century development in Europe and North
  America.
• Neither were property rights respected
• private property is not sacrosanct even in the
  USA
• We need a proper understanding of history

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5. Poverty and Inequality

• Poverty alleviation has always been a key
  component of development (Seers, 1972).
• But poverty alleviation is not the same as
  development
• the latter includes a wider range of objectives
  (eg MDGs)
• Focus on poverty is also a focus on absolute
  poverty (extreme poverty) rather than relative
  poverty
• and
• this is convenient for a number of reasons
• a global figure which can be reduced by rapid
  economic growth
• China (perhaps also India)
• WB recently announced global poverty had below 1
  bn.
• but again what is global poverty other than the
  summation of national poverty estimates?.
• Collier (2007) writes about the bottom billion
  who are concentrated in 58 countries with no hint
  of recognising inequalities within those
  countries

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• More importantly
• concept of absolute poverty diverts attention
  from inequality
• (concepts of relative poverty).
• Inequality is a political hot potato
• both bilateral and multilateral agencies avoid
  discussing it
• avoided in most (North American) academic
  discourse
• WDR 2006 has devoted space to inequality
• but some notions of pro-poor growth contradict
  concern with inequality.
• Although conceptually separate, notions of
  poverty cannot sensibly be divorced from
  inequality and rising inequality, both within and
  between countries, should be the focus of
  attention.

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6. Why Modernisation?

• Concepts of failed or fragile states are not
  useful
• No explanation as to why they are in this state.
• In part it is the failure to sustain growth,
  structural change and development thats the core
  of the problem.
• Most LDCs are not able to guarantee security,
  safety (especially to women and children),
  above-minimum sustenance and adequate amounts of
  education and health care.

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• This is a failure of development. Becoming
  Modern is discredited (as should be Colliers
  (2007, p.3) assertion that their bottom
  billion is the fourteenth century).
• What is wrong with Inghams (1995, Chapter 2)
  discussion of modernisation?
• In economic terms, it implies industrialization
  and urbanization and the technological
  transformation of agriculture. Socially, it
  involves the weakening of traditional ties, and
  the rise of achievement as the basis for personal
  advancement. Its political dimension is in the
  rationalization of authority and the growth of
  the bureaucracy. Culturally, modernization is
  represented by increased secularization of
  society arising from the growth of scientific
  knowledge

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• Thank you for your kind attention!