The period between the fourteenth and eighteenth centuries witnessed an economic shift in the western world.
During this time, the market started to gain prominence and began to supersede other aspects of societies.
The influence and control of the church began to decline during this period.
Liberalism emerged in academia, advocating for individual freedoms, reason, and rationality.
The Scientific revolution, led by notable figures like Galileo, Newton, and Voltaire, sought to subject all aspects of human existence to scrutiny and reason.
The markets were still in the early stages of development during this time.
As the influence of the church diminished, the responsibilities of societies shifted from the church to the state.
The Political Economy approach in Comparative study examines the relationship between institutions and the market.
This approach focuses on studying how political institutions and economic systems interact and influence each other.
It analyzes the role of the state, government policies, and economic institutions in shaping the market and economic outcomes.
The Political Economy approach helps understand the dynamics of power, distribution of resources, and the impact of policies on economic development.
Historical Overview of Political Economy
1. Classical Liberal Economy
Time Period: 17th to mid-18th centuries
Key Scholars: Adam Smith, Thomas Malthus, David Ricardo, Nassau Senior, Jean Baptiste Say
Emphasis on the potential of the market
Combination of optimism and pessimism towards the market
Advocated laissez-faire or free market with the idea of the 'invisible hand'
Emphasized individual freedom while recognizing limitations of the market
Skepticism towards resource distribution
2. Radical Marxist Economy
Emergence in response to classical political economy
Shift from classical liberal economy to radical perspective
Adoption of Enlightenment values and critical thinking
Early radical thinkers: William Godwin, Thomas Paine, Marquis de Condorcet, Robert Owen, Charles Fourier, Henri de Saint-Simon
Criticism of private property and capitalist system
Influence of Karl Marx and Marxist ideology
Transition from capitalism to socialism through democratic political process
3. Neo-Classical Economics
Emergence as a response to ideological vacuum
Key Theorists: Carl Menger, W. Stanley Jevons, Leon Walras
Focus on behavior of individual consumers and competitive markets
Divided into trends with varying views on government intervention
Supporters of laissez-faire and supporters of positive role of government
Influence of John Maynard Keynes and his emphasis on active government policies to stimulate the market.
1. Modernization Theory of Development
Dominance in social sciences after World War II
Reinforcement of dominance with the end of the Cold War in 1991
Transformation of traditional societies into modern societies
Influences on Modernization Theory
Max Weber and Talcott Parsons' significant influence on the theory
Max Weber's description of modernization in terms of transforming traditional societies into secular, urban, and industrial societies
Walt Rostow's influential work in formalizing the modernization theory through "The Stages of Economic Growth: A Non-Communist Manifesto" (1960)
Five Stages of Economic Growth in Modernization Theory
Traditional Societies: Subsistent, agriculture-based economy with limited production functions and pre-Newtonian science and technology
Pre-condition to Takeoff: Transition from agriculture to manufacturing
Take-off: Short period of intensive growth with rapid expansion of new industries and increased income
Drive to Maturity: Long-term stage with rising standards of living, increased technology usage, and overall economic growth
Age of High Mass Consumption: Stable economic growth, social welfare, and security
Criticisms of Modernization Theory
Creation to justify the position of Western capitalist countries
Perception of establishing the superiority of the Western world
Criticized by dependency theory for exploiting resources of underdeveloped countries
Ignoring the impact of external factors on a state's underdevelopment
Seen as a threat to indigenous culture
2. Dependency Theory of Development
Emergence and Reasons for Dependency School
Andre Gunder Frank introduced the dependency school in the western world, originating from Latin America.
Three main reasons for its emergence: response to the failure of the ECLA program, crisis of orthodox Marxism, and decline of the modernization school in the United States.
The ECLA Program
Economic Commission for Latin America (ECLA) program aimed at industrialization in Latin America.
Raúl Prebisch argued that Latin America's underdevelopment was due to the one-sided international division of labor.
The program failed, leading to economic stagnation and political problems in Latin America.
Neo-Marxism emerged in Latin America, influenced by the success of the Chinese and Cuban revolutions.
Neo-Marxists criticized both the ECLA program and the modernization school.
Neo-Marxists advocated for socialist revolution in third-world countries based on their contextual needs.
Criticism of the Modernization School
Frank criticized the modernization theory's internal explanation for the backwardness of third-world countries.
Frank argued that the underdevelopment of third-world countries was not inherent but a result of colonial domination.
Dependency school thinkers exposed the premises of the modernization theory rooted in imperialism.
The world is divided into dominant and dependent countries, with an unequal relationship.
The concept of dependency was categorized into three historical forms: colonial dependence, financial-industrial dependence, and technological-industrial dependence.
1. Colonial Dependence
Occurred during the period of colonization.
Colonizers exploited colonies, draining their resources under the pretext of modernization and westernization.
Dominant countries, in alliance with the colonial state, monopolized control over land, mines, human resources, and the export of valuable goods.
2. Financial-Industrial Dependence
Emerged after the end of colonization.
Third-world countries became dependent on developed countries for financial and industrial purposes.
Dependent economies focused on exporting raw materials and agricultural products to meet the consumption demands of European countries.
3. Technological-Industrial Dependence
The third form of dependence identified by Dos Santos.
Developing countries had to rely on developed countries for technological advancements.
This form of dependence emerged after World War II when industrial development started in many underdeveloped nations.
Basic Premises of the Dependency School
Dependency school aims to analyze the general pattern of dependency in the third world throughout the history of capitalism.
External factors are emphasized to explain underdevelopment, in contrast to the internal factors highlighted by modernization theory.
Economic perspective is central to understanding the lack of development.
Development is seen as incompatible with dependency, as it entails the exploitation of one section by another.
1. Development and Underdevelopment
Development theories originated in the Western world and initially focused on the progress of developed countries.
After World War II, development became a popular concept for underdeveloped countries, but traditional development approaches failed to address poverty alleviation effectively.
The theory of underdevelopment emerged from the theoretical debate between Marxism and the experiences of development in Latin America.
2. Andre Gunder Frank and Capitalism
Frank's book "Capitalism and Underdevelopment in Latin America" argues that development and underdevelopment are results of internal contradictions in the world capitalist system.
He was influenced by Paul Baran's work on conflict and exploitation between Western Europe and the rest of the world.
Development and underdevelopment are relative to each other, and one's development often leads to the underdevelopment of others.
3. Historical Process and Colonial History
Frank emphasizes that underdevelopment in developing countries can be traced back to their colonial history.
Colonialism and foreign domination reversed the development of many advanced Third World countries and forced them into economic backwardness.
4. The Development of Underdevelopment
Frank's concept explains underdevelopment through historical colonial domination in Third World countries.
He proposes a "metropolis-satellite" model to describe the relationship between developed and underdeveloped countries.
The metropolis (developed countries) drains economic surplus from satellite (underdeveloped) countries, hindering their economic growth even after decolonization.
5. Hypotheses on Third-World Development
Frank presents hypotheses related to Third-World development within the metropolis-satellite model.
Development of subordinate metropolises is limited by their satellite statuses.
Satellites experience the greatest economic development when ties to the metropolis are weakest.
The recovery of metropolises leads to a chokehold on previous industrialization in satellite regions.
Regions closest to metropolises in the past tend to be the most underdeveloped and feudal today.
Criticism of the Theory of Underdevelopment
Focuses primarily on economic factors and neglects social, political, and cultural aspects of underdevelopment.
Criticized for its pessimistic view of capitalism.
Ignores the interconnectedness of countries in the globalized world, making isolated industrialization difficult.
4. World System Theory
1. Immanuel Wallerstein and World System Theory
Wallerstein developed world system theory as an alternative explanation to prevailing approaches of modernization and development.
Inspired by the Annales School, Marx, and the dependency school.
2. World System Defined
A world system is a social system with boundaries, structures, member groups, rules of legitimation, and coherence.
It experiences conflicting forces that hold it together or tear it apart.
It is largely self-contained, with internal dynamics of development.
3. World Economy and Division of Labor
Wallerstein describes a world system as a "world economy" integrated through the market rather than a political center.
It involves interdependence between regions for necessities like food, fuel, and protection.
Two or more polities compete for domination without a single center emerging permanently.
4. World System Theory and Modernization Theory
World system theory extends and critiques modernization theory of development.
Challenges the universal path of development offered by modernization theory.
Recognizes minimal benefits enjoyed by low-status countries in the world system.
5. Core, Periphery, Semi-Periphery, and External Areas
The international division of labor created by capitalism divides the world into four economic zones.
Core countries: Economically and militarily powerful, owners of means of production, producers of manufactured goods.
Periphery countries: Economically and militarily marginalized, exporters of raw materials, high social inequalities, exploited by core countries.
Semi-periphery countries: Intermediate countries between core and periphery, industrialized and developing, aim to transform into core countries, act as a buffer.
External areas: Areas outside the capitalist system, considered closed systems.