BOOK REVIEW. UNDERSTANDING DEVELOPMENT; THEORY AND PRACTICE IN THE THIRD WORLD. JOHN RAPLY
The period of reconstruction in Western Europe after World War II marked the beginning of a significant development in human history. Theories were formulated by scholars and industrialization was considered a transformation belt to meet the challenges posed in this era. This development acceleration gave people the creative capacities over their own resources. Developing nations that gained freedom and independence from their colonial masters stood their grounds to be recognized as sovereign states. This initiative did not last long after the 1970 post war boom because these developing states were slow to match up with the challenges posed by industrial development giving the fact that they lacked the structural capacities, the political will and also due to pressure exerted on them by international financial institutions. International institutions like the World Bank, the IMF and the World Trade organization are blamed for their marginalizing and protectionist’s policies influenced by political and global leadership. Scholars from different schools of thought took sides either condemning or arguing for new development policies that could reverse the trend of events.
Developing countries have been blamed for being the cause of their own plight like lack of capital and cultural values such as profit motives. Countries like Ghana, Kenya and Ivory Coast tried to come out from this dilemma but given the fact that they relied on foreign capital and because most African countries entered the post colonial age with small and poor markets weakened their ability to import substitution to take advantage of industrialization. A country like India made strides because its population offered ready markets for its products.
The post development theory that emerged in the 1990 with anti-globalization ideologies condemned development arguing that it undermined the rights of citizens with enormous state control over their lives. This new development model believed in decentralized and participatory approaches that could weaken the centralized states. The East-Asian states that adopted the new development model based on state led development ushered in a platform of argument. From this disparity it can be argued that development models are never fixed and stable but are merely made to be flexible where time and space have a greater influence over their success.
Neoclassical theories through their practical solutions instigated a shift in the development policies of third world countries that weakened the states role in the economy with emphasis on the market. To neoclassical economists, individuals were free to go in for what they desire that will benefit the society. Following their argument, this could only be achieved through free market economies. They supported their argument based on the fact that state intervention distorts prizes which discouraged production of potentially lucrative primary products that slowed down growth where industrialization occurred at the expense of agricultural development. This argument was really imminent in third world states that kept agricultural products low and farming became less and less important that led to rural-urban migration. There are examples where marketing boards in Africa were treated like tax concessions with government officials making enormous gains while peasant farmers became poorer. The Soviet example also sets in a good argument of the states failure where the economy was directed from a central planning office which over saw investment, set wages and prices and decided on which resources would be allocated for what purposes and set production targets. This operation was tried in Cuba, Mozambique, Ethiopia, Laos amongst others. But these poor states were unable to exert central planning and it all failed. Neoclassical economists supported the market ideology and by 1980 international financial institutions specifically the World Bank and the IMF applied the policy and it became a debate in intellectual circles following the collapse of the East European communism in 1989.
Structural adjustment was seen by these neoclassical economists as a weapon that will remove structural blocks and allow the efficient operation of the markets where entrepreneurs and investors will have more power and freedom to restore macroeconomic stability reducing the states presence in the economy. To get this operation moving they initiated trade liberalization, privatization, fiscal austerity, currency devaluation and the abolition of marketing boards. These initiatives was aimed at improving agricultural markets and increase the bargaining power of farmers that will enable them to obtain better prizes on their sales. The impact of this was a big blow to many countries of the third world especially African countries. The assumption that macro economies will improve growth failed. Agricultural output could not keep the pace with population growth which led to a drop in investment and a decline in per capital income. There was also a decline in manufacturing where many small firms were forced to close down. Neoclassical theorists considered trade liberalization an efficient means where an economy could realize its comparative advantage. Retrenchment and deregulation according to neoclassical theorists should improve the economic operations and financial deregulation should increase the availability of credit. Neoclassical theorists believed that devaluation could yield positive gains.
The results of these assumptions turn out to be very negative to the third world states. Neoclassical theorists had much faith in the potentials of a free market and they did not consider the fact that privatization can only be very effective within a framework of competition and effective state control regulation. Neoclassical theorists failed to understand the implications of the government’s withdrawal from the economy especially in third world economies where much was still needed in development infrastructure, credit provision and expansion. In most African countries, the private sector is not mature enough to generate sufficient investment locally. In the absence of state regulation, there is bound to be monopoly by some private enterprises and the promotion of black market operations where goods are smuggled out of the country for export earnings that benefit private individuals. For example during the 2008 food crisis in Africa most government almost loose control of the markets where smuggling became a prominent phenomenon. In the absence of this intervention development is hindered or slowed down. Governments create regulations like quotas that offer opportunities for rent and entrepreneurs pursue them.
Neoclassical theorists assume that people are consistently rational and behave in a self interested manner which is lesser than they actually are. Sociologists and anthropologists have a contrary view to this assumption as they believe that each community will develop its own rules of operation. According to them rationality is a learned behavior inculcated in western societies and what works in the west will not work exactly the same in the third world. Neoclassical theory engages in a sort of intellectual imperialism that pays little attention to the peculiarities of third world cultures and they see a fundamental similarity between the third and first world. The notion that income inequality leads to innovation and investment whereas income redistribution hinders these activities as postulated by neoclassical theorists has failed in third world countries. If income inequality worked in rich countries it appeared to have had the opposite effect in third world countries for it does not only reduce the size of the local markets but it also hinders human capital formation. Income inequality has been blamed for the failure of African states institutions for it promotes and encourages corruption and embezzlement. Rising inequality appears to be threatening the consolidation of democracy in the third world. In many countries growing marginalization and the increasingly unequal distribution of wealth has instigated ethnic conflict and the rise of Islamic militancy when benefits of a particular class outweigh others.
Neoclassical theorists began shifting to new approaches after it was evident that the market approach was more devastating especially to third world economies where almost every country that tried the structural adjustment program had its own share of strikes and riots in response to deteriorating living standards and rising unemployment. The 1997-98 Asian crises revealed the short comings of the neoclassical approach that often had criticisms from the left as having short term vision that state intervention is not necessary in market operations. The World’s Bank approval of a new approach for an increasing state role in economic development was shared by neoclassical theories. The political dimension to economic reform which depends on regime stability had often been given little consideration but the failure of the neoclassical approach created an arena where focus was on applying policies that could make a balance between the market and the state. Drawing lessons from the East Asian case that recorded remarkable growth with its centralized state approach, neoclassical theories argued that the government employed market based development interventionist’s strategies that plays a more active role in the economy more than what they have advocated. South Korea is sighted here as an example where the government owned and controlled all commercial banks and directed funds towards favored industries. It equally limited the number of firms that entered the industry, set controls on prices and capital outflow and distorted prices to favor certain industries. This distinguished and kept its development record on the right path. This growth alongside other East Asian nations brought in a new theory which became known as developmental states with more commitment to development, private property and markets, states redistribute land; guide the market against excesses, exercising strict control over investment flows. These states promoted technological change and protected selected infant industries which led to the opening of the economy to foreign competition. The Asian crisis was feared will destroy the foundation of developmental states in the region and the new reform transition of the neoclassical theory but its impact was not much felt given the timely intervention of central banks from western countries coupled with the fact that Asian countries had put in place a strong base industrial and technological development.
The new theory of developmental states which is a state led model has not been successfully applicable in third world countries because they possess bureaucracies that weaken indigenous economic and political capitalists. What prevails in the third world is a state short of power, distant from citizenry that cannot do enough to mastermind development. Extortion and instability dissuade people from entering business, poor prizes and support services discourage farmers. This was further compounded by international conditions from major financial and international trade institutions that also had to bow to pressure from their citizens to reduce budget deficits and create jobs. This significantly affected third world countries where aid budgets were slashed and trade barriers imposed .Most of these theories affected third world countries negatively because little time was given for the acceleration of these theories to materialize in a society that had been slow to meet up with new challenges where many deemed it necessary to go back to their traditional roots and enjoy the power to direct society and lead it through traumatic changes. Third world countries have naked power that lack intelligence or enlightenment and are noted for gross mismanagement.
Neoclassical theories admitted the fact that the market oriented approach without the states intervention they proposed did not yield the expected results and they expressed the need for modifications. Post development theories emerged with their own ideologies suggesting that human improvement is not the real goal of development but human control and domination is. Post development ideologies assert the view that individuals, communities and cultures should not be sacrificed in the place of development with emphasis on the participation of local people and their knowledge as a means of making them involved into development projects.
Despite the glaring proposals from post development ideologies, it is difficult to draw a winning line between the successes and failures of modernity. While some celebrate the successes of modernity arguing that it has alleviated poverty, others see it as a model that has pushed millions into more misery. It can be argued that all of the theories adopted has contributed in shaping up the world to its present state and should not be given too much negative connotation because they all reacted to situations they faced at a given moment. The author’s methodology in assessing the different theories applied is good but I expected him to go further and talk about strategies that third world states can adopt to make them more independent rather than saying that they cannot develop on their own except the tone is given by rich countries. Rich countries began as independent entities and have achieved what they have today. I have the conviction that third world states have been slow to catch up with development because of over dependence from the external world.
I think the acceleration of globalization and interconnectedness which allows goods, information and capital to flow freely around the world has created an arena where we need to take individual responsibility in our designated duties. The states position cannot be contested as far as development is concern provided our individual responsibility is considered as a measuring rode. Theories and models in most cases are experimental and are applied to see if it works or fails. If developed countries bear the expense of environmental adjustment, the economic cost of third world development and poor countries carry along rapid expansion in human capital, administrative capacity and are given access to the markets of rich countries we can be able to select the positive aspects of defined theories and make profitable use out of these theories.
Nfor Canicius Ndi
