Development

Anthony Payne, Nicola Phillips

• Publisher: Polity
• Year: 2013
• Print ISBN: 9780745630687, 9780745630670
• eBook ISBN: 9780745657356
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: International Relations
• Index: Politics & International Relations

Just about everyone is 'for' development as an assumed 'good', yet few seem to have a concrete idea of what the term actually entails. Development offers a comprehensive and wide-ranging analysis of the various ways in which this important concept has been used in social and political analysis over the past 200 years.

1

Classical Theories

Classical theories of development address that long drawn-out period of interlocking economic, political and social change, extending from the sixteenth right through to the nineteenth century, during which key parts of Europe entered the modern age of capitalism and industrialisation. Unsurprisingly, given the extent and the complexity of the transition that was unfolding, the attention of a series of highly original thinkers was engaged and a variety of readings of these momentous events was assembled. In the process, classical political economy was born. As we indicated in the Introduction, the theories that were proposed to account for these changes were not self-consciously described at the time as theories of development. But that hardly obscures the fact that they were seeking to identify the essence of the fundamental shift in the pattern of economic, political and social organisation that was gradually taking place in Europe. In the language of the present book we would say that they were all trying to explain Europe’s initial move towards what later came to be called ‘development’.

In fact, the theories that came to the fore in this period are absolutely vital to our purpose in this study, because in retrospect we can see that they set the parameters of the whole subsequent intellectual debate about development. It would not be true to say that they left nothing else to be said, but it is the case that they have reverberated through the minds of successor generations and set out the formative themes of what emerge as fundamental overarching perspectives in the study of development and indeed political economy as a whole. They fall into three categories of thinking, referred to here as classical liberal economic theory, classical historical materialism and classical economic sociology.

Classical Liberal Economic Theory

In its initial form political economy addressed the running of large family households or estates, but, as trade and commerce between nations grew and modern state structures began to be built in Europe in the seventeenth and eighteenth centuries, it came to focus centrally upon the economic and political organisation of the emergent nation-state. The earliest economic analyses of this type in the period were ‘routinely practical in orientation’ (Preston 1996: 53). In England mercantilists took the view that the gains in trade achieved by some nations represented losses for others, with success being measured by the accumulation of wealth primarily in the form of precious metals. They argued that the state should assist its merchants as much as possible in their competition with the merchants of other countries, and therefore supported the regulation of commerce via guilds and monopolies in order to cultivate a trade surplus in the national interest. They believed that the national interest would always be different from the sum of individual interests (Heckscher 1935).

In France, by contrast, the so-called physiocrats challenged the mercantilist notion that wealth was constituted by precious metals and could only be built up by achieving and sustaining a positive balance of trade. They insisted instead that agricultural production was the true foundation of economic value. The group’s leading figure, François Quesnay, writing in the 1750s, defined as productive every activity that produced a surplus over the necessary expenses of production and argued accordingly that wealth could best be maximised in France by shifting agriculture away from the predominant, but hugely inefficient, share-cropping mode of production towards larger-scale cultivation backed up by significant capital investments (‘avances primitives’). The physiocrats were, however, willing to see the policies they favoured implemented by an alliance of the French monarchy and the French landowning classes, with the result that they came quite quickly to be regarded as a conservative movement out of kilter with the spirit of the times which were increasingly being shaped by the rising political strength of commercial interests (Fox-Genovese 1976).

The turn to theoretical elucidation within political economy actually came in Scotland in the person of Adam Smith. Brought up within the scholarly tradition of the Scottish Enlightenment, which was characterised by a focus on moral philosophy and thus a perception that human beings were at heart social animals, Smith set out a fully-fledged model of an economy that developed according to the working of the market mechanism. In so doing, he set the benchmark for all subsequent liberal economic theory. Smith’s great work, An Inquiry into the Nature and Causes of the Wealth of Nations, was published in 1776. The title is significant: Smith did not speak specifically of economic development, but he very much took the view that the object of political economy was to generate a theory of the growth of national wealth. This was Smith’s sense of what development was. He defined ‘the annual produce of the land and labour of a society’ as ‘the real wealth’ (Smith 1976: Vol. 1: 12), thereby rejecting decisively mercantilist claims about the importance of the accumulation via trade of a surplus of precious metals and building instead on physiocratic notions of production. In his view, wealth was created by human labour working on natural materials with the purpose of producing useful objects. It was also therefore seen as something that could flow in a variety of directions and in that sense Smith’s definition of national wealth ‘resembles today’s GNP [gross national product] to a remarkable extent’ (Vaggi and Groenewegen 2003: 107).

For Smith the key to the growth of national wealth – which he described as the ‘natural progress of things towards improvement’ – was the emergence of a division of labour enshrined in the context of a market (Smith 1976: Vol. 1: 343). The creation of a physical surplus of subsistence goods, of food essentially, set the division of labour in motion because it enabled the initiation of manufacturing, of doing something more with the spare subsistence goods. People then began to specialise in the production of a single commodity and, by so doing, increased their productivity. Societies grew wealthier as they came to be characterised by a more complex social division of labour. This in turn facilitated a more extensive technical division of labour. Smith famously cited the example of the pin factory wherein ten workers, each specialising in an aspect of the overall production process, turned out 48,000 pins a day, thousands of times more than each could have produced on their own by carrying out themselves all the tasks required to produce a pin. In his judgement, the division of labour was not the product of human wisdom, but was rather the consequence of ‘a certain propensity in human nature … the propensity to truck, barter, and exchange one thing for another’ (Smith 1976: Vol. 1: 25). Crucially, this gave rise, in turn, to the notion of the market, an institutional structure within which buyers and sellers met and reached agreements on price that signalled to the whole emerging economy how economic behaviour should most rationally be organised. Indeed, he specifically argued that, the larger the market, the more the pin factories and other similar manufacturing enterprises would produce, the more revenue would be generated and the more the market as a whole would be opened up. In general, Smith’s vision of economic growth was extraordinarily optimistic: he saw its generation as genuinely cumulative, one part of the process leading inexorably to the next, and so on.

Markets, moreover, were deemed to be self-regulating. Smith (1976: Vol. 2: 687) discerned the existence of an ‘obvious and simple system of natural liberty’, within which – by means of a remarkable paradox – the pursuit of one’s own interests also ensured the well-being of all and a steady increase in general prosperity. In his words:

Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society. (Smith 1976: Vol. 1: 454)

This supposition operated at every level of the economy, from factory owner to labourer. For Smith noted that ‘it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity, but to their self-love’ (Smith 1976: Vol. 1: 26–7). The market not only induced individuals to consume and produce in ways that rationally adjusted their activities to their demands, but simultaneously also promoted the ‘public interest’ of increased national wealth. It did so via the operation of ‘an invisible hand’ (one of Smith’s most celebrated phrases) that somehow led the individual to contribute to an end, the collective good, ‘which was no part of his intention’ (Smith 1976: Vol. 1: 456) and thereby created order spontaneously.

Smith was arguing here for more than just the economic superiority of free market economics. In Anthony Arblaster’s neat formulation, he was ‘a moral as well as an analytical individualist’ (Arblaster 1984: 239). He believed that self-motivated free individuals led moral lives and that the pursuit of national wealth along the lines he advocated could contribute to moral perfection. Smith’s ethical stance has provoked disagreement amongst commentators, with some identifying contradictions between his moral and his economic reasoning and in effect discerning two Adam Smiths (Jones and Skinner 1992; Winch 1996). Although his views in this regard are quite complex, the extent of the clash between an altruistic Smith and a selfish Smith can easily be exaggerated. In an earlier work called The Theory of Moral Sentiments, published in 1759, he set out an ethic of individual action within a community. In his view the principle of sympathy – the ability to share to some degree the sentiments of others – dominated all other human passions and served to hold society together. A man could imagine himself as an ‘impartial spectator’, could examine the principles of his conduct accordingly, and could thereby ‘humble the arrogance of his self-love and bring it down to something that other men can go along with’ (Smith 1969: 162). This is a vision of ‘man in society’, rather than ‘man as fundamentally selfish’, and in that sense it does feed through to his subsequent economic arguments. As one analyst has put it, ‘the “invisible hand” … regulates the self-interest of free individuals in their material interaction to produce a public interest, just as the “impartial spectator” regulates the contest between passion and duty. Together, they make a self-regulating society possible’ (Doyle 2001: 1404).

For all of the force of his convictions about the efficacy of the market and his pioneering contribution to the making of early liberal economic theory, Adam Smith did not ignore the role of the state. In his view the state should do what the market could not do so well. To be precise, the state had three (but only three) duties: external defence; internal order, security and justice; and ‘erecting and maintaining those public institutions and public works, which … though most advantageous … are such that the profit could never repay the expense to any individual or small group of individuals’ (Smith 1976: Vol. 2: 723). By the latter he meant mainly the building of roads, bridges and canals, although he did also say that young people, especially those from poor backgrounds, would need the assistance of the state in acquiring some necessary education. Public goods were an appropriate call upon general taxation, although it was preferable that local revenues or charges on beneficiaries be exploited first. ‘Were the streets of London to be lighted and paved at the expense of the treasury’, he asked at one point, ‘is there any probability that they would be so well lighted and paved as they are at present, or even at so small an expense?’ (Smith 1976: Vol. 2: 730–1). He did not need to give his answer.

Smith’s theorising undoubtedly focused on the domestic constitution of economic growth, but he also had a strong sense of the international political economy and drew a direct connection between his theory of wealth and international trade. One of the early chapters of Volume 1 of The Wealth of Nations was in fact called ‘That the Division of Labour is limited by the Extent of the Market’ (Smith 1976: Vol. 1: 31). According to Smith, trade benefited economic development in three ways: it offered a chance to exchange goods that a country produced efficiently for those it did not; it created a vent for surpluses that would otherwise be wasted or would cause a glut in the domestic market; and it encouraged an even more specialised division of labour and thus greater productivity. He opposed completely the mercantilist view of trade, arguing that it made commerce ‘which ought naturally to be among nations, as among individuals, a bond of union and friendship … the most fertile source of discord and animosity’ (Smith 1976: Vol. 1: 493). In general too, he was hostile to colonies and tariffs, on the grounds that they acted to privilege certain sectors and groups within the economy at the expense of the wealth of the nation viewed as a whole. Interestingly, however, neither was totally condemned, for colonies extended the market and facilitated a more extensive division of labour, whilst tariffs might usefully be called upon to subsidise temporarily a risky new line of trade or even protect national security. Smith was not a naïve supporter of free trade. He certainly believed that foreign trade was to the mutual advantage of all trading nations, but he recognised that the gains were not likely to be equal (Myint 1977). Wealthy nations had the greatest interest in trading amongst themselves because of their rich markets; poor nations, on the other hand, did not automatically benefit, for they needed first of all to build up production to the point where it could begin to be traded.

In sum, Smith was a very wide-ranging thinker. As Andrew Gamble has argued, classical political economy always comprised three key discourses:

a practical discourse about policy, concerning the best means of regulating and promoting the creation of wealth, and maximizing revenue for the public household; a normative discourse about the ideal form which the relationship between the state and the economy should take; and a scientific discourse about the way in which a political economy conceived as a social system actually operates. (Gamble 1995: 518)

In his estimation Smith was pivotal less because of the originality of his theoretical insights than because of the fact that he managed ‘to combine all three discourses in an arresting social vision’. In good part because of Smith’s huge influence, liberal economic theory continued to display this multi-faceted identity throughout its classical period, advancing further through the writings of David Ricardo, most of which were produced between 1815 and 1823, and climaxing with the publication in 1848 of John Stuart Mill’s Principles of Political Economy.

The contributions of Ricardo and Mill are not unimportant, but from our perspective they can be more briefly reviewed. It is their views on trade and protection that bear most directly on thinking about development. Both were somewhat more purist in their liberalism than Smith. For example, Ricardo was much more hostile than Smith to the possible use of protection to promote national security or sustain domestic agriculture. He also advanced a different theory of international trade. Whereas Smith had focused on the gains from trade that derived from ‘absolute advantage’ (that is, a situation where a country produced an item of goods with less labour input per unit of output than its potential trading partner), Ricardo proposed the notion of ‘comparative advantage’, wherein a country could specialise in a line of production in which it was merely less inferior than in others in terms of relative cost differences and still trade to mutual advantage with technologically superior countries. This purported to show that a country might need to enter into international trade even if it could produce commodities at the lowest cost, for what was deemed to be crucial was not cost per se but rather the cost ratios of competing commodities (Blaug 1986). In the hypothetical example offered by Ricardo, Portugal had an advantage in both wine and cloth production over England, as it used 90 labour hours in making wine (compared with England’s 120) and 80 hours in making cloth (compared with 100 hours in England). Even though Portugal had an absolute advantage in both, it still made sense in his view for Portugal to specialise in wine production because it was relatively better than England in the production of that item. England should be left to concentrate on cloth, with both countries trading their surpluses of each and gaining through such specialisation (Ricardo 1981: 133–41).

Mill too was critical of most of the cases where Smith had partially embraced protection, especially in relation to agriculture, but he did alight on one particular situation in which he thought protectionist measures were defensible ‘on mere principles of political economy’, and that was ‘when they are imposed temporarily (especially in a young and rising nation)’. His reasoning was that an economically powerful nation might have the advantage in an industry simply because its people had acquired skills and experience by being the first producers. Mill thus originated the so-called ‘infant industry’ argument, which we will encounter in various incarnations in the coming chapters. It should be noted that he deployed it most cautiously, arguing that such protection should be ‘confined to cases in which there is a good ground of assurance that an industry which it fosters will after a time be able to dispense with it’ (Mill 1848: 487), and later reneged upon the idea of tariff protection in favour of direct grants to infant industries (Harlen 1999). Nevertheless, the general point stands: all the classical liberal economic theorists made some exceptions to their core laissez-faire principles.

Classical Historical Materialism

At this point Karl Marx enters into the story of development theory, formulating an enormously wide-ranging body of theory that has come to be known as historical materialism. Marx arrived at this core philosophical position by a complex route. He was born in the Rhineland region of Germany in 1818 and was educated in an era in which philosophy was the dominant academic discipline and the work of G.W.F. Hegel the overriding preoccupation of philosophers. Hegel’s method was idealist in character, which is to say that he placed the power of ideas at the centre of his conception of the world, arguing in effect that the whole of human history should be understood as the maturation of the human mind or spirit. He famously discerned a dialectical process of thought by which contradictions were seen to merge themselves into a higher truth, or synthesis, that both comprehended and united them. The young Marx associated with the left-wing ‘Young Hegelian’ movement in Berlin and initially shared the orthodoxy that rational criticism was all that was needed to bring about change. However, like many others in this circle, he was greatly influenced by Ludwig Feuerbach’s controversial reversal of the idealist premise of Hegel’s philosophy in favour of the argument that existence – the state of being in the material world – preceded thought. Marx retained Hegel’s dialectical means of enquiry, but he appropriated Feuerbach’s essential materialism in recognising that philosophical critique at the level of ideas had to be complemented by a more practical grasp of the material forces at work in the real world. At this point in his life Marx moved to Paris, where he not only came under the sway of French socialist ideas but also met his lifelong friend and collaborator, Friedrich Engels, who introduced him to British political economy and urged him to turn his focus on to this field. Marx took this advice and identified ‘classical political economy’ as the main intellectual target of his future work, coining the term in doing so. But, interestingly, he did not reject classical political economy as a whole, drawing on several of its key concepts and findings even as he unquestionably sought to undermine it ideologically.

In his early Paris writings Marx set out the basis of a distinctive philosophical position. The core text of this period, which was prepared during 1844 (but not actually published till 1932), has come to be called The Economic and Philosophical Manuscripts. In it Marx referred to Adam Smith as the ‘Luther of political economy’ (Marx 1964: 147) because he believed that Smith had correctly identified human labour devoted to the production of things as the source of man’s creativity and potential advancement. But, in Marx’s view, where the liberal theorists had gone wrong was in taking as natural the characteristics of the economic and political system of their day. They operated with an unhistorical notion of development which assumed that human beings were indeed the egotistical seekers after satisfaction presumed in all utilitarian political thought, never questioning whether such a characteristic might actually be an acquired attribute derived from an historically specific system of production. Marx in effect accused the classical political economists of abstracting from and generalising about the society they lived in and knew, and thus of failing to provide the essential ...

Table of contents

• Cover
• KEY CONCEPTS IN THE SOCIAL SCIENCES
• Title page
• Copyright page
• Dedication
• Preface
• Introduction
• 1 Classical Theories
• 2 Catch-up Theories
• 3 Golden Age Theories
• 4 Neoliberal and Neostatist Theories
• 5 Alternative Theories
• 6 Contemporary Theoretical Directions
• Conclusion
• Bibliography
• Index