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UNIT-5 Approaches to Studying Comparative Politics: Political Economy Notes (CGP)


  • 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

  1. Traditional Societies: Subsistent, agriculture-based economy with limited production functions and pre-Newtonian science and technology

  2. Pre-condition to Takeoff: Transition from agriculture to manufacturing

  3. Take-off: Short period of intensive growth with rapid expansion of new industries and increased income

  4. Drive to Maturity: Long-term stage with rising standards of living, increased technology usage, and overall economic growth

  5. 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

  • 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.

  1. Core countries: Economically and militarily powerful, owners of means of production, producers of manufactured goods.

  2. Periphery countries: Economically and militarily marginalized, exporters of raw materials, high social inequalities, exploited by core countries.

  3. Semi-periphery countries: Intermediate countries between core and periphery, industrialized and developing, aim to transform into core countries, act as a buffer.

  4. External areas: Areas outside the capitalist system, considered closed systems.

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