Catching Up

The Limits of Rapid Economic Development

Vladislav Inozemtsev

• Publisher: Routledge
• Year: 2017
• Print ISBN:
  9780765808417
• eBook ISBN:
  9781351529891
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

Disparities between the economic development of nations have widened throughout the twentieth century, and they show no sign of closing. In the nineteenth century, the economic potential of developed countries was three times that of the rest of the world. Today the gap is twenty times greater, and the trend is increasing. In this provocative reexamination of theories of accelerated development, or "catching up," Vladislav L. Inozemtsev traces the evolution of thinking about how countries lagging behind can most swiftly move forward, and assesses their prospects for success in this effort.

Inozemtsev reviews the experience of the Soviet Union, as well as the recent experience of Japan, China, and Southeast Asia. He finds that those countries that have moved forward most rapidly have successfully adapted new technology to old processes. But even then, they face daunting odds, as they grapple with the need to change their population's ideas and behavior. And in the 1990s, their rates of development have noticeably declined. "Catching Up" assesses prospects for successful application of theories of accelerated development in the global economy. Inozemtsev's pessimistic conclusion is that rapid industrial progress is not achievable in the information society of the twenty-first century.

Inozemtsev reaches this conclusion after reviewing theories of accelerated development thinking from the diverse viewpoints of the 1940s and 1950s, to the more intensive ideological polarization of the 1960s. Inozemtsev believes it will be impossible for non-Western nations to "catch up" with the West because of their inability to generate or control information and knowledge.

1

The Concept of “Catching Up” Development in the Twentieth Century

The twentieth century was full of economic, social, and political revolutions. Never before had history witnessed such disparities in the economic development of countries and nations. Within decades, the image of the world changed repeatedly and radically: in the early twentieth century, the United States pushed Great Britain aside, emerging as the leading economic power; in a few years Germany came to dominate Europe and retained its position, on and off, until 1945; in the 1930s the USSR made a serious effort to become the second strongest economic player; during the Soviet-U.S. confrontation in the 1950s and 1960s, Japan made its historic breakthrough, forcing the Western powers to make way for her on the world’s markets; finally, in recent years the countries of Southeast Asia and China made their bid to become economic leaders in the twenty-first century. As a result, “catching up” development came to be regarded almost as a universal economic paradigm to be adopted by economically less developed nations.

We do not believe that the concept of “catching up” development can be described as a complete or integral theory. Rather it is the product of an extremely complex synthesis of bourgeois views devoted to the propagation of capitalist social values and of Marxist ideas preaching the advantages of “distinctive” economic development. From the outset, this concept was highly politicized: it was directly linked to the objectives of the developed Western nations that dominated the world economy, of the newly independent Third World countries and of the Soviet bloc states that sought to spread their influence to various regions across the globe. This explains why within the concept of “catching up” development, elements of universalism, promoted mostly by Western theorists, were oddly intertwined with propaganda of unique or distinctive types of economic progress—a brainchild of those national leaders who had only this uniqueness to take pride in. For these reasons, a review of the “catching up” development theories inevitably presents a somewhat eclectic picture, and emphasis on this or that study that contributed to the emergence of the concept will perforce be, to a certain extent, arbitrary.

Problems of accelerated development first became the subject of vigorous research back during the years of World War II, when the postwar global arrangements were discussed. The first major works in this field included “Problems of Industrialization of Eastern and Southeastern Europe,”¹ an article by P. Rosenstein-Rodan in the Economic Journal published in 1943, and E. Staley’s book World Economic Development: Effects on Advanced Industrial Countries² which appeared a year later. In a few years, the problems theoretically formulated in these two studies drew the attention of economists and political figures when, in 1948-1949, the U.S. government launched its large-scale program for the economic rehabilitation of Western Europe known as the Marshall Plan.

Until the early 1950s, however, problems of accelerated development were, in fact, never considered with respect to countries of the periphery. The rehabilitation of the Western European economies and even the strictly U.S.-controlled economic rebuilding of Japan were generally designed to cope with the destructive aftermath of the war. These efforts did not reflect the application of a fundamentally new economic paradigm to less developed countries which mostly remained colonial at the time. The developing economies’ actual rise, which combined theoretical and practical aspects of acceleration, began against the background of growing confrontation between the East and the West—the outbreak of hostilities first in Korea and then in Indochina and the upsurge of the liberation movements in Africa and Asia. The need for a new theory was chiefly connected with the operation of international organizations—at first the World Bank which, in 1948-1949, provided the initial major loans to Chile, Brazil, and Mexico, and then the United Nations which, in the early 1950s, set up specialized agencies to devise techniques of accelerated development for backward countries. In 1951, two expert commissions established by the U.N.—one to deal with “Measures for Economic Development of Under-Developed Countries” and the other, with “Measures for International Economic Stability”—published extensive reports that shaped the development of the new concept for the next decade.

Generally, the theory of accelerated development took shape in the 1940s and 1950s. W. Rostow lists P. Bauer, C. Clark, A. Hirschman, A. Lewis, G. Myrdal, R. Prebisch, P. Posenstein-Rodan, G. Singer, and J. Tinbergen among its founders and ideologues.³ However, these researchers can hardly be treated as a group because many of them held diametrically opposed ideological positions. In assessing the then state of the concept, one can also firmly assert that in actual fact none of the theorists of accelerated modernization regarded it as a component of overall historical development or suggested a clear-cut system of assumptions about the kind of economic change that could lead agrarian countries to a radically new stage of economic progress.

From the 1960s, the concepts of accelerated development gradually became polarized depending on the ideological preferences of their authors. Some Western theorists preferred to promote development which required acceptance of the values of industrial society based on private enterprise and a market economy, while experts from the developing countries stressed government intervention in the economy, self-sufficient operation of the traditional industries, and planned economy elements. We hold that from that moment on, different theories of development should be considered as relatively independent from one another.

Theories of Accelerated Westernization

In the 1950s and 1960s, the industrial society concept spread increasingly and, for obvious reasons, most Western researchers were under the sway of the ideas of technological determinism. In the late 1950s, W. Rostow proposed the concept of stages of economic growth and singled out five stages in the economic history of each nation—traditional society, the preconditions for take-off, the take-off, the drive to maturity and the age of high mass consumption. He also acknowledged the possible onset of a sixth stage that he described as “beyond consumption.” His definitions, however, were never made more specific.⁴ According to Rostow, traditional society’s “structure is developed within limited production functions, based on pre-Newtonian science and technology, and on pre-Newtonian attitudes toward the physical world.” He held that the foremost parameters of the principal stages—the take-off and the drive to maturity—were levels of investment activity amounting to 5 to 10 and 10 to 20 percent of national income, respectively.⁵ All other characteristics of any given stages were also strictly technological. In the 1960s, Herman Kahn, another prominent economist and futurologist, classifying societies by per capita income levels, divided the world’s countries into five groups—pre-industrial, with an average per capita income of $50 to $200; partly industrialized, with an income of $200 to $600; industrial, at a level of $600 to $1,500; mass consumption (or developed industrial) societies, with a per capita indicator of $1,500 to $4,000, and, finally, post-industrial, averaging more than $4,000.⁶ This was the technocratic approach at its purest because no other characteristics of a society except its economic development level were taken into account.

Within the context of this approach, Western theorists saw industrial development as an absolute value to which any ideological paradigm could be sacrificed. Their confidence was obviously strengthened by the fact that in the 1950s and 1960s, the Soviet Union made a tangible bid for leadership in technological progress and was quickly catching up with the United States, while Japan was emerging as a dangerous competitor and capturing traditional markets for U.S. and European goods. At that time, many experts in the West agreed that the United States and the USSR represented two models of an essentially integral industrial society, and “there was general optimism with respect to what could be accomplished by emphasizing planned investment in new physical capital utilizing reserves of surplus labor, adopting import-substitution industrialization policies… and central planning.”⁷ That was when the ideas of convergence of Western market economies and socialist-type economic systems gained popularity. All this explains why the West regarded worldwide introduction of the Western development model as both possible and desirable.

For example, R. Aron emphasized that in the modern world, “in economic and social terms, all countries of all races at all latitudes claim to see one and the same objective reflected in essentially similar values…. Industrialization is inevitable, and it seeks to become universal.”⁸ It was, in fact, maintained that the less developed countries should do their utmost to embark on the road of industrial progress and more or less follow in the footsteps of the evolution of most Western nations. This development model was usually vaguely described as “modernization.” Its adherents largely adopted the monolinear sociological theory of T. Parsons who reduced all social evolution to forward motion from a primitive and archaic state to modernity.⁹ The fullest definition of modernization was offered in the 1960s by S. Eisenstadt: “Modernization,” he said, “is a process of change toward those types of social, economic and political systems that developed in Western Europe and North America from the 17th to 19th century and then spread to other European countries and, in the 19th and twentieth centuries, to the South American, Asian and African continents.”¹⁰ A technocratic attitude is also clearly present in the views of C. Black who saw modernization as an effort to adapt traditional institutions to new functions stemming from the unprecedented growth of the role of the kind of knowledge that made it possible to control the environment. M. Levy, Jr., another researcher influenced by technocratic ideas, regarded modernization as a social revolution going as far as possible without destroying society itself.¹¹

In the 1950s and 1960s, the most important aspects of the problems of modernization were, of course, economic, sociopolitical, and cultural.

In economic terms, modernization was seen as hinging on accelerated industrial development involving the use of new technologies and efficient energy sources, greater division of labor and the advancement of commodity and monetary markets. Such accelerated development was to apply to all sectors of the economy without exception, not just to individual export-oriented industries. Back in the early 1950s, R. Nurske said that “the general level of economic activity is raised and the size of the market enlarged [by means] of a frontal attack—a wave of capital investments in a number of different industries… through the application of capital over a wide range of activities.”¹² However, the question of where such investment was to come from to assure such rapid growth remained open. Most experts held (quite properly, we believe), first, that the developing countries could not do without a significant influx of outside capital and, second, that on the way to a market economy they would have to pass through a typically early capitalist stage of acute social differentiation. The principal recommendations were therefore limited, on the one hand, to the need for a vigorous drive to attract foreign investment and, on the other, to the idea that savings had to be encouraged as much as possible, consumption was to be curtailed and ownership differences were to be accepted: as a result, a socially heterogeneous nation would be able to create its bourgeoisie.¹³ Many researchers stressed the role of the state that was to focus investment flows in priority areas and encourage business initiative so as to increase industrial output. One should note that such modernization was designed not to create a centralized planned economy but to shape a Western-type market economy in which the leading role belonged to industrial corporations, banks, and trading and financial companies. These were to be as independent as possible from political and ideological factors; as a result, economic growth would become natural and self-sustained.¹⁴

The sociopolitical aspect of modernization was linked primarily to the emergence in the developing countries of a Western social model essentially dominated by the principles of individualism and market economics. This approach appeared so self-evident that many sociologists...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• Introduction to the American Edition
• 1 The Concept of “Catching Up” Development in the Twentieth Century
• 2 Post-Industrial Trends and Prerequisites for the Crisis of the “Catching Up” Development Model
• 3 Internal Contradictions of the “Catching Up” Development Model
• 4 The Japanese Economic Miracle: A Manifest Success or a Strategic Setback?
• 5 Southeast Asia: From Boom to Crisis
• 6 China: Sharing the Fate of the Others or Going Its Distinctive Way
• 7 Russia: Pipe-Dreams and Realistic Objectives
• Index