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Table of Contents

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Introduction What is Modernization Theory? Main Concepts of Modernization Theory How it leads to poverty? Case Study- Jamaica Conclusion Bibliography Appendix 11

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Introduction
Modernization theory is a grand theory encompassing many different disciplines as it seeks to explain how society progresses, what variables affect that progress, and how societies can react to that progress. Modernization theory focuses specifically on a type of modernization thought to have originated in Europe during the 17th century, which brought social mores and technological achievements into a new era. The foundations of modernization theory go back to the Age of Enlightenment, when a number of philosophers began to look at how society changed and progressed. Theories were laid out as to how technological advancement necessarily led to social advancement, which in turn led to an examination of how different facets of advancement were connected. The basic premise of this phase of modernization theory was that humans were able to change their society within a generation, and that this change was often facilitated by advancements in technology, production, and consumption. In the modern age, modernization theory looks at how new technologies and systems are leading to a more greatly homogenized world. Modernization theory encompasses the world of globalization, where cultural mores and ideas are easily spread throughout the world, leading to a sort of universal culture that serves as a baseline for all cultures. As societies in the world modernize further technologically, some theorists within modernization theory hold that those cultures will also become more like one another. This paper seeks to examine the main concepts of modernization theory and explain how the model accounts for the unequal distribution of the worlds wealth and power. The structure of the paper is as followed: definition, history, main concepts, how it leads to poverty, case study of Jamaica and a conclusion.

What is Modernization Theory?


Modernization theory refers to the description and explanation of the processes of transformation from traditional or underdeveloped societies to modern societies. In the words of one of the major proponents, Historically, modernization is the process of change towards those types of social, economic, and political systems that have developed in Western Europe and North America from the seventeenth century to the nineteenth and have then spread to other European countries and in the nineteenth and twentieth centuries to the South American, Asian, and African continents (Eisenstadt 1966, p. 1)1. Since the 1950s, modernization theory has been one of the major perspectives in the sociology of national development and. Focus has been on ways in which past and present pre-modern societies become modern (i.e., Westernized) through processes of economic growth and change in social, political, and cultural structures. Modernization theorists are concerned with economic growth as well as development within societies, for example, by measures of gross national product (GNP), the study of cultural, social and political consequences of economic growth and the conditions that are significant for industrialization. Modernization theory takes the stand that not every society has been passionate to seek out and use new technology. Indeed, depending on the culture, some forward-looking societies have eagerly embraced technological innovation while other, more traditional peoples have severely opposed it. In modernization theory, tradition is classified as the greatest barrier to economic development. However, societies that celebrate strong family networks and reverse the ancient ways of life offer powerful guides to understanding the present and shaping the future. Predictably, tradition

Eisenstadt, S. N. 1966 Modernization: Protest and Change. Englewood Cliffs, N.J.: Prentice-Hall.

operates as a form of cultural inertia that discourages the adoption of technological advances that would improve the standard of living. The theory looks at the internal factors of a country while assuming that, with assistance, "traditional" countries can be brought to development in the same manner more developed countries have. Modernization theory attempts to identify the social variables which contribute to social progress and development of societies, and seeks to explain the process of social evolution. Its basic principles can be derived from J.B. Burys Idea of Progress2, which emerged in the 18th century Age of Enlightenment with the idea that people themselves could develop and change their society. Idea of Progress is the theory that posits that advances in technology, science, and social organization inevitably produces an improvement in the human condition. That is, people can become happier in terms of quality of life through economic development and the application of science and technology. The assumption is that the process will happen once people apply their reason and skills. Idea of Progress meant that they could also reorganize the political system to the benefit of the human condition that would benefit all mankind.

The Main Concepts of Modernization Theory


Modernization accounts for a great portion of the worlds unequal distribution of wealth and power. There are several concepts of modernization theory that may explain this. The main concepts include:

The Idea of Progress - basically this theory states that going forward in technology, science, and social organization certainly produces an

The Idea of Progress, J.B. Bury (1920)

improvement in the human condition. That is, people can become happier in terms of quality of life through economic development and the application of science and technology.

The Division of Labour in society described how social order was to be maintained and how primitive societies might make the transition to more economically advanced industrial societies. Durkheim (1986)3 suggested that in a capitalist society, a complex division of labour and economic regulation would be needed to maintain order. He stressed that the major transition from a primitive social order to a more advanced industrial society could otherwise bring crisis and disorder.

Structural functionalism is a broad perspective in sociology and anthropology which sets out to interpret society as a structure with interrelated parts. Functionalism addresses society as a whole in terms of the function of its constituent elements; namely norms, customs, traditions and institutions. The concept of functionalism stresses the interdependence of the institutions of a society and their interaction in maintaining cultural and social unity.

The concept of technological advancements and economical changes can enable changes in moral and cultural values. New technology is major source of social change. New advancements and improvements would need to keep pace with a constantly changing world. Technological processes are necessary to help give people

Emile Durkheim: An Introduction to Four Major Works. Beverly Hills, CA: Sage Publications, Inc., 1986. Pp. 24-59.]

further control over their environments, arguing that technological progress would eventually spur social progress.

Modernization Theory How it leads to Poverty


Modernization Theory maintains that it is a fact that poverty and inequality reflects the different levels of technology among societies as well as the speed and manner with which these societies can adapt to innovations and new technologies. Basing their argument on a historical point of view, these theorists proclaim that centuries ago all societies were poor. Some societies progressed and benefitted via the first mover advantage in areas such as trade exploitation, expansion of market and power. The theory also sees rich nations as being of great importance to the alleviation of poverty. It proclaims that the more developed nations can be a source by which poorer nations may acquire technology, foreign aid, investments and protection. Globalization and Trade Liberalization therefore plays a vital role through which developing countries can benefit. Opponents of this theory however would stream line a number of factors for which they believe Modernization Theory actually prolongs the extent to which poor societies remain in poverty: 1. Our first argument stems from the fact that Modernization Theory holds the status of high income countries as the ideal standard by
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which to judge the development of poorer nations. This idea is therefore ethnocentric in nature and can therefore force poor societies to focus resources in areas for which priority should not ha e been given in the first place. Culture and Consumption patterns of poorer societies tend to flow in parallel to those of rich nations and this can become a hindrance for development if the institutions and resources of the poorer societies are not yet fully developed.

2. Modernization Theory allows for LDCs to take advantage of Foreign Direct Investments. FDIs are seen as a means by which all sorts of positive spin-offs may be generated in developing nations. Some of these spin-offs may include employment, plough back profits, increases in consumption, availability of new technology, etc. However attractive as this may sound, there are shortfalls to which the sole existence of FDIs may in fact serve as a hindrance to development.

Foreign exchange earnings on both the current account and the capital account can be hampered due to the operations of Multinational Corporations. Substantial importation of intermediate products by foreign investors loses LDCs much needed foreign exchange. More so, there is no guarantee that all profits made within LDCs would remain (which would in event affect the capital account). Repatriation of profits, royalties and transfer pricing4 are key issues that would reduce the speed with which LDCs should be developing with the existence of FDIs in the first place. Tax concessions, Tariff protections and Subsidies are all instruments that foreign investors take advantage of while seeking investment opportunities in LDCs. Consequently the incidence of repaying for resources utilized and damages to the environment are borne by local businesses via their full taxes paid.

Technologies introduced through FDIs cannot always be utilized whole heartedly by LDC per se. Technologies may be specialized in nature and may require trained personnel (persons from country of origin) to run the operations. This by itself produces income disparity within the
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(a) Transfer pricing occurs when Multinational Corporations artificially inflate the price of intermediate products purchased from overseas affiliates (usually a Parent Company or a Partnership Business) to profits and as such the amount paid in taxes.

country of operations. Having close ties to the world financial markets has proven in the past to have adverse effects in times of financial depressions. The incidence of the burden is felt mainly by LDCs through a series of financial failures of closely related domestic businesses, unemployment and increases in the cost of living.

3. In the context of international trade, it is a rule of thumb (as proposed by theory of comparative advantage) that developing countries should produce the product it has comparative advantage in (mainly primary products) while allowing Developed countries to produce manufactured products. In practice however, primary products carries with them lots of irregularities that may not serve in the best interest of lesser developed countries.

4. FDIs are seen as filling gaps as it relates to savings, foreign exchange,

human capital, government revenue and other resources needed to achieve growth. For example in the Harrod Domar equation where g = s/k [with g = desired growth; k=capital output ratio and s = desired savings] If g = 7% and k = 3 then s must be equal to 21. If by any chance s 21 then FDIs would help fill that gap.

Appealing as it may seem, in reality savings and investment (i.e. investment by local businesses) can be crowded out due to failure to reinvest profits, taking advantage of tax concessions, investment allowances and tariff protection.

Local resources tend to be allocated to socially undesirable products. Products given priority are those for the rich minority as well as for exportation. This also tends to promote rural-urban migration and as such aggravate the inequality between urban and rural economic opportunities in developing countries.

Concern is often expressed that by having a considerable amount of FDIs, local assets and jobs may be taken advantage of and as such
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these may be used as a bargaining tool to exert pressure on local officials to gain favourable political decisions.

5. Foreign Aid is also a norm when it comes to Modernization Theory. The Developed world feels that it should lend assistance to LDCs not only because it believes that it is within their political will and moral codes but also it feels that it is owed to LDCs taking historical reasons into consideration. Aid (especially bilateral assistance) in some cases may have economic self-interest and may seem unrelated to development per se. Aid can be given based on political, economic and military considerations. More so, interest bearing loans (regardless of if it has helped or not) must be paid in full and have increased the debt burdens of LDCs.

Some financial assistance may also be tied/carries with it conditionalities whereby imports must come from donor countries or their affiliates. This in fact limits the opportunity for LDCs to take advantage of cheaper imports and it is contrary to the arguments supporting free trade which is by the way so highly promoted by the developed world.

Multilateral Aid can sometimes not serve in the best interest of development. Loans from agencies such as the IMF must be repaid at full interest along with conditionalities attached. These conditions in theory seek to channel the spending of poor countries in areas that ought to be given priority. In actuality however, they may sometimes have adverse effects.

One example is the devaluation of currency with the hope that LDCs would reduce imports and expand exports which would now become cheaper. But for countries that are heavily dependent on imported intermediate goods would actually see themselves choosing to either

import despite of price increases or cut importation quantities altogether and watch local industries suffer. (See Case Study #1)

CASE STUDY #1:


ECONOMIC GLOBILIZATION IN A DEVELOPING COUNTRY

fter Jamaica gained independence they were in all sorts of debt. Debt which caused it to be heavily dependent on Multinational Organizations and soon dependent on some developed countries due to the policies or conditions laid down by Multinational Organizations. This review focuses on the implications and the reasons for Jamaica opening up its market to the world and the effects of organizations such as the IMF, World Bank, WTO, etc.

The IMF gives short term loans to developing countries at full interest rates for which the country would have to follow tight restrictions on what they can spend it on, devaluation of the countrys dollar, etc. Professor Witter contends that if the government fails to repay the loan the country would be in a bind all over again for which a next loan is given with tighter restrictions. One condition that was imposed was the devaluation of the Jamaican dollar with the intention to reduce imports and increase exports. But for a country that is highly dependent on imported food and raw materials it led to more being spent on imports (mainly form the United States) - increasing the cost of living. Since the prices of raw materials went up, it reduced Jamaicas capacity to export.

The dairy industry suffered after taking a US$50 million loan from the IDB under the condition that the government: (I) abandon local subsidies to farmers and (II) lower trade barriers and compete on a level playing field. As a result there was an influx of foreign milk especially from the United States whose farmers themselves were being subsidized. 10

The banana industry suffered as a result of the pressures imposed by the United States on the WTO to sack the Lom Agreement the European Union has with ACP countries that guaranteed preferential access to EU markets. Since Jamaica couldnt compete on a level playing field with foreign companies such as Chicita, financial companies were reluctant to invest. This by itself led to a series of unemployment, crime, decline in production and exports, etc. For a country specialized in banana production, Jamaica now finds itself importing bananas from Chicita.

Free Zones were another attempt which did not shed a positive light for much of Jamaicas labour force. It was introduced in 1980 as a Caribbean Basin Initiative to create a series of low level employment. These Zones were not liable to tariffs, duties, taxes, laws of the country, etc. Being a separate entity it took advantage of Jamaicas cheap labour while products were sold at exorbitant prices in the developed countries. Again the loan provided by the World Bank must be repaid by the government.

While globalization and trade liberalization in theory leads to reduction in poverty and promotes competition, we can see that in the case of Jamaica it had led to the down fall of several industries, exploitation and debt. Of course the wide spread use of technology, competition and growth experienced by a large portion of the world could give credit to globalization and trade liberalization yet the extent to which these effects were/are experienced by certain countries and the degree with which it has helped in their overall development would certainly prove controversial to their purpose in the first place.

Cases in point: By competing on a level playing field the dairy industry was pushed to a collapse after it had to compete against subsidized milk form the United States (conditions of which were laid down by the IDB); the collapse of the banana industry due to the cancellation of the Lom agreement to ACP states (a WTO ruling); the exploitation experienced and large profits accruing to Multinational Companies due to Free Zones (a World Bank initiative); and lastly the increase in the cost of living and a reduction in the capacity for the country to export since it was highly dependent on imported products (IMF conditions to secure loans).

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At present 52cents out of every dollar earned by Jamaica goes to repaying loans. The country is therefore tied to several conditions for which it must follow in compliance with loans received in the past. Stated by Professor Witter, Jamaica is controlled by foreigners not directly but indirectly through debt.5

Conclusion
This research paper found that Modernization Theory maintains that it is a fact that poverty and inequality reflects the different levels of technology
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Live and Debt Video -Jamaica

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among societies as well as the speed and manner with which these societies can adapt to innovations and new technologies. We have seen that modernization has actually hindered the development of third world countries. It is true, that third world countries do not have the modern conveniences and attitudes that accompany developed first world countries, but in order for them to become developed, they have to leave too much of who they are traditionally behind them in the process. They have societies that have worked for them for centuries, and if developed first world countries try to modernize them, they will only bring greater problems to the global community. Third world countries will lose their natural resources through unfair trade with first world countries, and problems facing women in these countries will only be intensified. Cooperative production that is fair is the only way that will ease the struggles of third world nations. Through cooperative production between men and women, and through fair compensation for both men and women, their lives will also exist in a better balance as they are recognized as equal contributors to their respective societies. Basically, Modernization Theory is the change, of evolution of normal every day things that are adapted to better serve today or the futures life styles.

Bibliography
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Todaro,Michael P., and Stephen C. Smith. Economic Development. Pearson Press, 2009.

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