Theoretical Survey

Contemporary 1: Liberal
[Preston (1996) Ch. 9]

Legacy of Classical Liberal Thoughts

[Recap by RNA for PED Class 2009]
The Context
 Expansion of the European capitalist
system to the non-European
societies: its structural, institutional
and cultural legacies
 Colonialism of European empires:
adoption of “civilizing” the less
advanced societies and organization
of development for eventual
independence
Construction of Modernization
Theory: A Brief Sketch
 The (Economic) Growth Theory
 Factors occasion the production of the theory:
the USA influence to post-war world order,
interests of capitalist business in the 3rd World,
nationalist developmentalism amongst the
replacement elites, and the example of the
Marshall Plan in Europe
 Modernization Theory
 Robust formulation of the early material of
growth theory (as the role of the USA within the
post-war global system increased)
Growth Theory (GT):
Background
 Intellectual influence of John Maynard
Keynes (Keynesian revolution)
 The political agenda of the USA as it moves
to dominant position in the 20th century
 The Marshall Aid program and the
reconstruction of Western Europe
 The demands of nationalist
developmentalism which was the ideology
of the emergent new nations
GT: Keynesian Revolution
 Inter-war experience of the Great
Depression (as counter-evidence of the
orthodox neo-classical economics or
economic liberalism theory)
 Impact of apparent success of the planned
economy of the USSR: politically &
intellectually
 Radical overhaul of technical economic
argument effected by Keynes
GT: political agenda of the USA
 Determination of the USA to order the post-
war world in a fashion acceptable to the
demands of international business, in
particular its US-based components
 US concerns in 1943-5: disintegration of
pre-war social systems & the growth of
revolutionary movements everywhere in
the world, the problem of the Soviet Union,
and the issue of Great Britain
GT: the European recovery plan
 Marshall Plan as a form of interventionist nature of
US policy
 Mixture of political and economic concerns:
 A source of credit to war-damaged Europe and a
rebound of the American economy
 The Marshall aid program is justified domestically as
to contain communism
 Formal political event: promulgation of the Truman
Doctrine in March 1947, i.e. as a concept of
international aid based on the need to promote a
suitable rate of growth in the receiving countries
 Marshall Plan as a prototype of modern development
aid
GT: Nationalist
developmentalism
 As the colonial system collapsed, a
replacement political form was needed…
 The available idea: nation-state (!) which
was part of the nationalists’ ideology of
independence and taken for granted within
contemporary social theory.
 For the new replacement elites in the 3rd
World: a set of demands coincide:
 Demands of global capitalist system
 Demands of their own people
 Intellectual demands of available theory
GT Legacy: Authoritative
Intervention (by the State)
 An ideology of authoritative intervention oriented to
national development
 Main claims: fundamental nature of economic growth,
effective role of state planning and the rationale of aid
transfers
 Intervention as deliberate action to bring about
particular change:
 Supposition of an object
 Expectation that the object will respond and do so in
a predictable fashion
 The idea that is accomplished in a precise manner
according to a clear set of expectations,
authoritatively and not randomly or accidentally…
GT: the Work of Roy Harrod
 Extensions of Keynes work: growth economics as a
going concern on the foundations of Keynes saving
investment theory
 Basic proposition: Ga=s/v
 Ga: actual rate of growth of national income
 S: marginal propensity to save
 V: marginal capital-output ratio
 Notion of warranted growth (Gw) is introduced to
fulfill the Keynesian role of the entrepreneur
 Gn is added as the natural rate of growth flowing from
given rises in population where more people imply
more production
 At the end: Ga=Gw=Gn
GT: the Work of Arthur Lewis
 Measures of economic development:
 preconditions for progress (i.e. proper cultural
orientations)
 central role of the state
 technical matters
 the notion of planning
 terms of trade
 external sources of capital: quantity and conditionality
 Supplies of labor: unlimited…
 Proxies to economic growth: ‘effort to economize’
(experimentation, risk-taking, mobility, specialization),
increase of knowledge & its application, and increase of
the amount of capital
Modernization Theory (MT):
Background
 The political concerns of the USA in
the late 1950s and early 1960s:
 International bipolarity
 Containment policy: the resolution of the
USA to halt the spread of communism
 Aid-donor competition: key events which
change the focus of aid-donor:
 Bandung conference of 1955 & its non-
aligned movement
 Entry of aid-giving scene of the USSR
Logic of MT
 Economics of modernization:
 “New Cambridge school” in UK  Keynes
reinvented political economy
 Continued neo-classical school promoted by
scholars at Cambridge, Massachusetts  Keynes
is in line with neo-classical economy, however
absorbed into a revivified neo-classical
orthodoxy (Re: anti-Keynesian economic
liberalism of the New Right/neo-liberalism)
 Social change & modernization
 Talcott Parsons as a key resource: analysis of
fundamental logic of social action, orientation of
action, systems of action, idea of equilibrium
Criticisms of MT
 On the models of traditional and modern:
 As highly dubious descriptions
 Modern world is restrictedly universalistic as
society is fissured by class, ethnic and religious
affiliations
 The category of traditional is simply defined
negatively in relation to the modern: residual
category of traditionality
 Inbuilt bias
 Abolition of the history of 3rd World countries
(Re: A.G. Frank notes on Rostow’s stage theory)
Walt Rostow’s Stages of
Economic Growth
 Traditional society
 Limited production function
 Pre-Newtonian science & technology
 Agricultural base, clan-based polity, fatalistic mentality
 Pre-conditions for take-off into self-sustained growth
 Exemplified of western Europe in late 17th & early 18th centuries
 Possibilities of industry opened up by modern science
 Take-off economic growth, i.e. the interval when the old
blocks and resistances to steady growth are finally
overcome
 The drive to maturity, i.e. long period of progress with 10%
to 20% of national income invested in new production
capacity
 High mass consumption: the leading sectors shifts away
from heavy industries towards mass consumption products
Criticisms of Rostow
 As merely based on coffee-house sociology
and political speculation (Baran &
Hobsbawm): popular amongst policy
communities associated with the business
of development
 Highest expression of the notions of
interventionism
 Presumption of self-evidence: descriptive,
unreflective generality…