POSO007S7

INTERNATIONAL POLITICAL ECONOMY

2021-2022

Dr Ali Burak Güven: a.guven@bbk.ac.uk

02 December 2021

DECOLONISATION & DEPENDENCY:

STRUCTURALIST & MARXIST ANALYSES
 Thus far...
IPE and Realism
• Classical realism: key assumptions
• Neo-realism, state capabilities, regimes
• Mercantilism, neo-mercantilism, the “national interest”
Liberalism and International Trade
• Terminology (balance of payments, trade balance, current account etc.)
• Mercantilism; Slavery and the Atlantic Triangle
• Adam Smith and Classical Political Economy
• The theory of comparative advantage
• Neoclassical Theory: Hecksher-Ohlin & Stolper-Samuelson
Empire and 19th Century Globalisation
• The significance of the 19th century: Do we still live in a 19th century world?
• Crises of capitalism: 1870s/1930s/1970s/the current crisis (long cycles/waves?)
• Contrasting approaches to the “British Empire”: production/trade/finance?
• The triumph of monopoly capital & imperialism? The triumph of trade & finance?
Depression and War
• Fragile recovery of the 1920s; intense dilemmas in monetary/finance/trade
• The Great Depression: overproduction/underconsumption; collapse of int’l order
• Responses vary in each country, but on the whole a turn away from laissez faire
and toward state interventionism.
Keynes and the Post-1945 International Architecture
• British versus US hegemony; the “Golden Age of Capitalism”
• The Bretton Woods regime; myths vs. reality
• Bretton Woods Institutions: IMF & World Bank’ mandate, governance, operations
• Combination of “liberal” int’l economic order + domestic socio-political stability
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 End of Empire:
national self-determination + independence movements

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 Non-Alignment:
1955 Bandung Conference (1960, UN shift…)
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 LECTURE OUTLINE

1. Decolonisation and the “Third World”

2. “Liberal” Modernisation Theory

3. Structuralism

4. Marxism and Dependency Theory

5. 1960-75: “New International Economic Order”?

6. Conclusion:

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 1. DECOLONISATION
• Colonisation of economically less developed regions of the world had reached its
limits by WWI. Note that a great many non-Western lands were spared typical
forms of capitalist colonialism of the late 19th century (e.g. Latin America, much of
China, Iran, Turkey, Thailand etc.) although the ‘colonial logic’ and notions of
Western superiority were expressed forcefully in international politics.
• Post-WWI idealism, combined with the consolidation of democratic norms in
most countries of the West, made colonialism an ethically as well as politically
debatable policy. Already, the political position of the upcoming hegemon was
towards decolonisation---Wilson’s principle of “national self-determination”
(despite US colonisation of the Philippines and indirect rule in Cuba).
• Further countervailing factors during the interwar years, such as the Great
Depression and declining agricultural prices that make the cash-crop-based
plantation economies of most colonies less significant.
• The process began during the 1920s (e.g. Egypt, Eire), but picked up steam after
WWII. As important as the changing public and elite mood in colonial powers were
national independence movements in colonised lands, e.g. India, Algeria. (Note
also role of colonial troops, WWII)

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• Most colonies in the Middle East and Asia gained their independence in the
1940s and 1950s (Syria 1946, India-Pakistan 1947, Sudan 1956, Ghana in 1957,
kicking off decolonisation in Sub-Saharan Africa). This was followed by the UN
Declaration on the Granting of Independence to Colonial Countries and Peoples
(1960). Most major colonies in Africa achieved independence between 1960-
1965. 1974 Portugal’s wars; by 1975 only anomolus or very small territories
remained (Namibia, Rhodesia/Zimbabwe, Timor, W.Sahara).

• Decolonisation brought to the fore the question of “development”. Newly

independent countries, along with other non-Western nations without a colonial
past, were now seen in the same category = Third World.

• Scholars and policymakers became interested in two related questions:

1. How to explain underdevelopment (domestic vs. international)
2. How to overcome underdevelopment (market vs. state)

• N. B. Much of this debate occurred under conditions of Cold War politics +

“embedded liberalism”. Notion of 1st, 2nd thence “Third World”. Both political
and economic dimensions of decolonisation…
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3. An aside, the French origins of “Third World”

•Sauvy 1952, French (Tiers Etat)

•Revolutionary, positive, political metaphor
• Frantz Fanon (Martinique, b.1925, d.Algeria/US 1961…)

• “Not very long ago, the earth numbered two thousand million inhabitants: five
hundred million men, and one thousand five hundred million natives.”
Jean-Paul Sartre, preface to Fanon’s Wretched of the Earth, 1961

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 2. (LIBERAL) MODERNISATION THEORY
• The ‘modernisation’ theory was the dominant approach in the 1950s and much
of the 1960s in the US academy. DUALISM
• The main drivers of economic development are domestic
• Development is a process of social transformation including not only capital
accumulation, but also urbanisation, secularisation, education, well-functioning
government etc. as done in the “West”: development as a linear progression,
from “traditional” to “modern” society. Teleological.

TRADITIONAL SOCIETY MODERN SOCIETY

• Limited production functions; low levels of
savings and investment
• Agrarian, rural
• Pre-Newtonian science
• Narrow scope for vertical social mobility
• Weak central administration
• Passive and acquiescent
• Illiterate
• Resigned, pious
• Non-participant, designative
• Oral system of public communication
• Economic progress as a positive value; high
savings, investment and capital formation; mass
consumption
• Urban, industrial
• Scientific-technological
• Social specialization and diversification
• Strong central administration
• Enlightened, literate, rationalist-positivist
• Ambitious
• Mobile, emphatic, secular
• Participant, electoral
• Mass media as public communication
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Arthur Lewis (b.1917, St Lucia, LSE/Manchester economist)
Economic Development with Unlimited Supplies of Labour (1954)
• Dual-sector model of backward economy: capitalist vs. subsistence sectors
• How to increase savings and capital formation?
• Increase profits!
• Transfer unlimited supply of cheap labour from subsistence to capitalist sector

W.W. Rostow (b.1916, US economist and policy advisor)

The Stages of Economic Growth: A non-communist manifesto (1960)
1. Traditional Society
2. Preconditions for take-off
3. Take-off
4. The drive to maturity
5. The Age of High Mass Consumption
Evidently, US, Cold War context… Later Nat Security Advisor, Johnson 66-69)

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 3. STRUCTURALISM
• “Structuralism”, broadly defined, was the mainstream position in development
economics in the postwar decades. (In some ways Lewis could also be categorised
in this group.) Some structuralists predate modernisation theory. Compared to
modernisation, structuralist approaches also had a more European tack...
• Strong influence of Keynesian economics; very open to state economic
interventionism as key ingredient in development.
• Key idea = the existing domestic and international economic structures were not
in favour of developing countries; these structures need to be transformed, by
the hand of state domestically and through inter-state cooperation internationally.
• all share assumption that there could be a “technical fix”, via planning, resolvable

Paul Rosentein-Rodan: “Big push”-- industrialisation necessary for “take-off”

Ragnar Nurkse: Vicious poverty circles→On the demand side: low levels of capital
formation—low productivity levels—limited market—little incentive to invest. On
the supply side: low incomes—small capacity to save—lack of capital—low
productivity.
Albert O. Hirschman: Lack of entrepreneurship and management capacity
Simon Kuznets: Growth = increased inequality at first. “Trickle-down?”
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• Better known structuralist scholars shifted the focus towards the structure of the
international system and explored the linkages between domestic and external
structures. They were very well represented in UN agencies such as the ECLAC and
the UNCTAD.

• Raul Prebisch (Argentine, 1910-86) & Hans Singer (UK, UN, 1910-2006): The Third
World should industrialise because the price of raw materials had decreased
steadily while the price of manufactured goods increased, i.e. declining terms of
trade. Increased productivity is important. The industrialised countries had been
able to absorb all productivity gains in the form of higher real wages and profits. If
developing countries wished to start an industrialisation process, they had to
increase their exports very significantly in order to gain sufficiently large foreign
exchange earnings to finance the import of production equipment.

• Centre-periphery model: The first use of this term was by ECLA economist
Prebisch. Key role of the state: State interventions and comprehensive
investment planning were considered necessary means to accomplish the most
rational exploitation of scarce resources. Therefore, import substitution as the
major strategy for promoting industrial growth.

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• Gunnar Myrdal (Swedish economist: 1898-1987): ‘Circular and cumulative
causation’. Accordingly, economic development process as a whole is
characterised by a dynamic which favoured the already rich and resourceful, so to
the disadvantage of the resource-weak. Prevailing terms of trade and market
mechanisms would ‘trickle up’ the benefits of industrialised countries. Myrdal
established a theory of social stagnation and transformation, which provided a
complex conceptual framework, including societal conditions: 1. Output and
incomes; 2. Conditions of production; 3. Levels of living; 4. Attitudes toward life
and work; 5. Institutions; 6. Policies. (Asian Drama: An Inquiry into the Poverty of
Nations, published in 1968)
• The newness in Myrdal was that economically backward countries, while
promoting industrialisation, should at the same time aim at developing
agriculture, which could contribute to increasing employment. Increase the
efficiency and productivity of agriculture. He emphasized radical land reforms for
equitable distribution of lands. Thus, he also had a concern for a degree of social
equality as a precondition for sustained growth. He tried to demonstrate that the
existence of inequality and poverty also impeded growth (as confirmed much later
by IMF/WB in the 2000s!).
• Note that all major structuralist scholars were trained Keynesian economists with
varying forms of professional European / UN linkages.
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 4. MARXISM AND DEPENDENCY THEORY
• The neo-Marxist dependency theory has argued that the reason for the
development gap between nations is structural and international. The primary
cause of the income disparity between the North and the South can be found in
the structure of the international capitalist system built on a complex set of
relationships that favour rich countries at the expense of the poor.
• Underdevelopment is a historical process; it is not a condition necessarily intrinsic
to the Third World.
• The dominant and dependent countries together form a capitalist system.
• Underdevelopment is an inherent consequence of the functioning of the world
system. The periphery is plundered of its surplus: this leads to the development of
the core and the underdevelopment of the periphery.

• The main policy prescription is that underdeveloped countries should minimise or,
better, cut-off trade/economic ties with the developed world (DE-LINKING), purge
their domestic collaborative elites, and pursue autonomous industrialisation,
preferably under socialism.
• Gilpin’s characterisation is not entirely wrong: Mixture of Marxism and economic
nationalism.

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Andre Gunder Frank: The Development of Underdevelopment (1966)
• Metropolis vs. satellite countries; un-developed vs. under-developed;
underdevelopment as the historical product of the development of capitalism =
tradition does not survive capitalism; importation of stereotypes from the
metropolis will not break the cycle of underdevelopment; isolation and
independence from the metropolis as the only feasible strategy.
• Satellites would be developed to the extent and in the respects which were
compatible with the interests of their metropoles. Thus, it would be better for
underdeveloped societies to dissociate themselves from the industrialised world.

Samir Amin: Unequal Development (1976)

• Autocentric centre economy vs. dependent peripheral economy. The autocentric
economy is self-reliant, strong intra-societal linkages between agricultural and
industrial sectors. A peripheral economy, however, is dominated by an over-
developed export sector. No capital goods industry, weak manufacturing sector,
no development-provoking links between agriculture and industry. It is heavily
dependent on the world market.
• In many cases, the coexistence of various modes of production. A distorted
production structure and a dependent economy mainly due to the dominance of
centre countries.

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Fernando Enrique Cardoso: Dependent Development (1972)
(Brazil’s President ‘95-’03)
• Differences between classic imperialism and neo-imperialism: new patterns of
capital accumulation; “dependent capitalist development” in sectors integrated
into monopoly capitalism; the impact of external factors depend on dissimilar
internal conditions; the problem of national bourgeoisies; unbalanced, distorted
production structures. Democratic regime and egalitarian income distribution are
necessary. (Later became Brazilian president)

Immanuel Wallerstein (b.1930, US): The Modern World System (1974)

• The capitalist world system. The development prospects of individual countries
depend more on the nature of global system than on their internal structures.
Centre, semi-peripheral and peripheral countries. A more dynamic model, taking
into account the complex changes in the international economic system.
• Explore fluctuations, cycles, booms; countries can change position both upwards
and downwards; long-term historical model

NB: Classical Marxist critique, rejects the above…:

Bill Warren (SOAS), Imperialism Pioneer of Capitalism, 1980
Walter Rodney, How Europe Underdeveloped Africa, 1972 (SOAS, 1966)
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 5. New International Economic Order?
• The “Third World”: Cold War & non-alignment; within the UN: G77, UNCTAD 1964 (to 1969
Prebisch Sec-Gen). Economic bases of solidarity? UN votes, blocs and economic groupings (vs
BW?)
• Numerical majority of LDCs in UN facilitated the voice of the Third World in UN institutions
(compared to the governance BW institutions such as the IMF and World Bank, which
operated on the basis of voting shares).
• Commodities and terms of trade; nationalizations: OPEC et al (1960), 1973-74

• The United Nations / UNCTAD: New International Economic Order –(linked to the Non-
Aligned Movement, G77) Fail 1974-75?
>> Crises and dis-order of 1970s:
Political (Algeria, Africa & Latin America, military coups..)
Ideological changes?
Asian Tigers, Export-led growth
Oil dependency, costs and ISI failures
… new liberal revolution…

• NIEO was deemed necessary as many countries faced the following challenges:

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 --- The global division of labour: The South supplies raw and semi-processed
materials, agricultural goods, and cheap labour. The North supplies finished
products, services, and marketing. In addition, the North makes investment
decisions and allocates inputs.
--- Overreliance on few export commodities: Many developing countries rely for
their export earnings on just one or two commodities; and the prices of these
commodities fluctuates wildly, making economic planning difficult. (Botswana:
80% diamonds; Burundi: 74% coffee; Niger: 78% uranium; Nigeria: 96% oil;
Zambia: 86% copper)
--- Declining terms of trade: The trade-weighted ratio of export to import prices,
i.e. how much of an export good you have to sell to buy 1 unit of an import good.
Because raw commodity prices are declining in the long run, producing such goods
is less and less profitable.
--- Restricted market access: Some countries depend heavily on one or a few
countries to market their products.
--- Debt: Many countries are still in deep debt. Especially in the 1980s and 1990s,
debt was a major constrictive factor for allocation of public resources toward
developmental ends.

• Why did the NIEO fail ?

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 6. CONCLUSION

• For all their differences, these approaches shared a belief in the virtues of
government policy and strategy to overcome developmental problems. Causes of
economic “backwardness” might be endogenous (modernisation theory) or
exogenous (structuralism, dependency), but countries can “catch up” through a
careful mix of developmental policies and institutions. This stood in contrast with
the orthodox neoliberal wisdom of the 1980s and 1990s, i.e. the Washington
Consensus belief in market efficiency in the allocation of resources.

• The paradigm shift toward orthodox neoliberalism looked partly justified due to
the less than stellar record of development in the Third World: while some
countries managed to build significant industrial capacity and a few East Asian
economies achieved spectacular development, by the 1980s poverty and hunger,
corruption and economic mismanagement, and poor overall macroeconomic
performance remained prevalent across developing areas.

• Note, however: The North-South Gap grew only wider in the 1980s and 1990s.

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