Sociology reading quiz
47290v3o0
development_theories_1.pptxLECTURE 1B (1) Social Inequality (2) Development Theories (Modernization, Dependency and World-System Theory)
Is inequality good or bad?
Benefits of inequality: incentives
In market economies, inequality is an incentive to work hard/long and produce valuable things
Why go to medical school unless you are paid more?
Why invent new technologies if you aren’t rewarded?
Problems of extreme inequality
1. Inequality can undermine democracy
Super-rich often have disproportionate political power
Ex: large donations influence elections & policy
Recent court decisions have amplified this…
Problems of extreme inequality
2. Morally problematic to many
The new “gilded age”: concentrations of wealth that have never been seen before…
But, lots of poverty, even in wealthy societies
Also: Children of poor can’t compete with rich
Eroding “equality of opportunity”.
Problems of extreme inequality
3. Hard work? Or unfair advantages?
Easier to accept inequality if it is due to merit…
Sociological research shows enduring patterns of disadvantage & discrimination
Still strong racial discrimination in job market
Ex: white applicants more likely to get hired & promoted
Long history of discrimination in lending/credit
Harder for minorities/women to start businesses
Continuing gender gap in salary
Many of the super-rich inherited wealth… didn’t earn it
Why has US inequality gone up?
Some general things that affect inequality:
Access to education reduces inequality
If people don’t have access to schooling, their
Welfare states have less inequality
Welfare state: countries that provide health care, education, job training to citizens (at cost of high taxes)
What about US since 1980?
Saez & Piketty study: Changes in tax law
Tax rates on the rich have been lowered since 1980
Result: Rich have gotten much richer
US Inequality
Global inequality
Video: the extent of global inequality
http://www.youtube.com/watch?v=uWSxzjyMNpU
Inequality: Concluding points
1. We live in a very unequal world
2. The shift toward “free market” policies is one source of growing inequality
Shrinking of welfare states; tax laws (Saez & Piketty)
Also, some recent research suggests that capital flows and austerity increase inequality
3. Debates about inequality have inspired several key sociological theories
We’ll examine some of them now…
Main Theories: Sociology
1. Modernization theory
An optimistic view that societies will “develop” and become more prosperous
2. World System Theory (W-Sys)
Related view: “Dependency Theory”. I will lump them together, despite some differences
Building on Marx: economic exploitation will perpetuate global inequality
3. World Society Theory (W-Soc)
Also called “world polity theory”, “Institutional” or “neo-institutional” theory; related: “constructivism”
Argues that international institutions and “global culture” are reshaping the world.
Modernization Theory
Modernization theory
An evolutionary theory about how societies develop
Modernization Theory
Argument: All societies naturally pass through certain stages of development
All societies start out as “traditional” economies
Based on subsistence farming, hunting/gathering, etc
Then, they have an “industrial revolution”
Eventually, they become “modern” high-tech societies.
Example: Rostow’s 5 stages:
1. Traditional
2. Transition (adoption of science/technology)
3. Early industrialization
4. Industrialization
5. Age of mass consumption
A 6th stage? Post-industrial society?
Modernization Theory
Modernization involved multiple shifts:
Economy: Greater levels of industrialization
People: emergence of “modern” persons
Shift away from “traditional values”: belief in traditional religion, local culture
Shift toward: belief in rationality/science, focus on achievement/competition, etc
Institutions: Greater complexity
Rise of modern government, legal systems, education systems, etc.
Modernization Theory
Scholars believed that the process of modernization could be accelerated
Economy: Transfer of new technology and economic aid to poor countries.
People: Efforts to make people “modern”
Ex: Foreign aid to expand education
Inculcate “modern” values, instead of local culture
Institutions: Efforts to encourage poor countries to establish “modern” government institutions
Ex: Foreign aid to expand legal system or education
Modernization theory & inequality
What does modernization theory have to say about global inequality?
Answer: Global inequality will ultimately decline
All countries will become “developed”/modern
Prediction: Convergence… countries will become more similar, economically.
Modernization Theory
Modernization theory was based on study of European societies
It was assumed that non-European societies would have the same experience
Or modernize faster with aid & technology from the West
Problem: Non-western countries weren’t modernizing as predicted
Example: Argentina was as rich as many European countries in 1890… but hardly improved by 1960
Example: Many former colonies in Africa were stagnant, or becoming more impoverished over time.
Modernization Theory
Criticisms:
1. Modernization theory ignores globalization
Focuses on individual countries
Assumes that success/failure is due to internal factors
Overlooks competition & conflict between countries
2. It is very “Eurocentric” / Western-centric
Assumes that the West represents the ideal
The “peak” of an evolutionary process
De-values other societies, cultural traditions
3. Can’t easily explain the persistent poverty found in many developing countries.
Interlude: Global Consumer Culture
Issue: There are many critiques of global capitalism… here is one:
Not the main focus of the course, but amusing…
http://www.colbertnation.com/the-colbert-report-videos/84033/march-21-2007/benjamin-barber
World-System Theory
World-System theory explains the failure of many countries to develop
Today’s poor countries face huge disadvantages compared to Europe
1. They have a very different history: colonization
Conquered by Europe
Not allowed to develop governments, schools, industry
Colonial rulers stripped local resources
2. Now, they must compete with rich countries in global markets
Former colonies remain at a big disadvantage
Don’t have industry to compete in global trade.
World-System Theory
Argument: Europe was able to prosper by exploiting resources from other places
The great success of Europe and the failures in the non-West weren’t just a coincidence…
Europe became wealthy by maintaining economic & military dominance over other nations
Exploited nations will never “modernize” as long as they are oppressed by Western nations
Example: Latin America traded a lot with Europe… and remained underdeveloped
Whereas Japan avoided contact with Europe; did better…
World-System Theory
World-System Theory: We need to study the entire global economy as a world system
Success or failure isn’t the result of a country’s internal factors
Rather, we need to understand how it fits into the overall global system
Countries are rich or poor because of their position relative to others in the global capitalist system.
World-System Theory
World-System Theory
Key terms:
Core: the rich, developed countries
Also: west; metropolitan countries; developed world
Periphery: poor, dependent nations
Also: underdeveloped countries; dependencies
Semi-periphery: semi-industrialized nations
Dependency: The vulnerable state of being exploited by core countries
They depend on the core for trade, investment, loans, technology, etc. (related term: underdevelopment).
World-System Theory
World-System theorists criticize the idea that poor countries benefit from trade
Classical economic theory (Ricardo) predicts win/win
If you grown coffee efficiently, focus on that…
Criticism #1: Specialization in low-tech production short-term profit but long-run costs
Low tech specialization means that countries fail to develop industry and technology
… that could lead to greater profits in the future
See Rodrik: “Poor Countries in a Rich World”
Argument: In the long run, countries would be better off developing high-tech industry, rather than growing coffee…
World-System Theory
Criticism #2: trade relations are asymmetric
Rich countries don’t need coffee badly
And, they can buy coffee from many sources
But, poor countries need high-tech goods to develop
And, they can only get them from rich countries
So, poor countries are dependent on rich
The rich countries have all the leverage
Poor countries end up selling raw materials and agricultural products very cheaply
And pay high prices for manufactured goods.
World-System Theory
World-system theorists also criticize foreign direct investment & capital flows
Free-market economists see them as source of growth
1. Core countries extract profits from periphery
Profits don’t stay in poor countries
2. Foreign investment don’t benefit locals
Foreigners build plantations and mines to extract resources
Ex: roads & rail lines just connect mines & ports
Not useful to the people who actually live there!
3. Risk of currency/debt crises.
World-System Theory
More concepts:
Trade concentration: When a peripheral country trades with few (or one) country
Investment concentration: When foreign investment comes from a few (or one) country
High concentration may make peripheral countries “dependent”
If the core country decides to halt trade or investment, economic disaster would follow
Peripheral countries must please core trading partners
They lose autonomy to do what is best for their people
Investment Concentration
| Country | Concentration (%) | Partner |
| Honduras | 97.7 | U.S. |
| Swaziland | 96.6 | Britain |
| Niger | 95.7 | France |
| Chile | 91.3 | U.S. |
| Saudi Arabia | 90.4 | U.S. |
| Tanzania | 48.1 | Britain |
| Iraq | 37.5 | Britain |
| Brazil | 35.6 | U.S. |
Source: Kentor and Boswell 2003
World-System Theory
Scholars such as A. G. Frank found evidence in studies of Latin America
Key observation: Latin American economies and trade was unusual:
They mainly produced “cash crops” and raw materials
Trade was almost entirely with the U.S.
High “Trade Concentration”
Foreign investment resulted in foreign-owned plantations, not expanded industry & “development”.
World-System Theory
Research literature:
Do poor countries with more trade, investment, and concentration fare worse?
In terms of:
Economic growth
Poverty
Health and environmental well being
Democracy
Results: Mixed
No consistent evidence that trade harms countries
Mixed evidence on effects of FDI.
World-System Theory
Issue: Why don’t all the peripheral countries band together and overthrow the core?
Example: In 1970s, Oil-producing countries created “OPEC”, and restricted the flow of oil to the core
Result: High gas prices; OPEC countries got rich
Though eventually the West made friends with Saudi Arabia and others… who lowered prices.
Why doesn’t this happen all the time?
World-System Theory
Wallerstein’s explanation for stability of the world system
1. Military dominance of the West
Ex: US overthrew any Latin American governments that tried to oppose the US
2. Ideological commitment to the system
People believe capitalism is “fair”, just
Similar to Marx: false consciousness
3. The existence of the semi-periphery
Semi-periphery is doing OK, so they support the core
Prevents everyone from ganging up on the core…
World-System Theory
How does World System Theory differ from Adam Smith & Keynes?
They all agree that the economy is important
But, economists often view the world economy positively (or neutrally)
Ex: Ricardo thought trade was overall beneficial
World System Theory argues that the global economic system is inherently unfair
Economic power of core countries and MNCs is so great that the periphery will always be exploited
Consequently, the system must be substantially reorganized… or overthrown.
World-System Theory
What should peripheral nations do?
According to world-system scholars
1. Peripheral countries must avoid exploitive economic relations with the core
Beware of trade and foreign investment, which can lead to exploitation and foreign control
2. Try to nurture domestic industries
Don’t sell coffee and rely on others for high-tech
Try to develop advanced industries locally
Concept: “Import substitution” – developing local industries to avoid importing products.
World-System Theory
What should peripheral nations do?
According to world-system scholars
3. Band together with other poor nations to fight against the power of the Core…
Trade with each other
Perhaps create cartels to bargain with the Core
And some argue: start a global anti-capitalist revolution.
World-System Theory
How does World System Theory view international organizations?
Answer: They do not affect the fundamental economic positions of core and periphery
The idea that governments and international institutions can make capitalism “fair” is an illusion
Governments and international institutions (e.g., the WTO) will always reflect interests of capitalists
Most IGOs and INGOs are created/controlled by core
Example: WTO has not given big concessions to periphery
Some go as far as to claim that IGOs are “puppets”
The only thing that might help would be organizations made by peripheral countries to oppose the core!
World-System Theory
Question: Is world-system theory “right”?
W-sys is a big-T theory. There is no simple answer
1. Analysis of Latin America is generally thought to be compelling
2. Rapid industrialization in Asia (S. Korea, Taiwan, etc) is a major exception to w-sys
3. Evidence on foreign/trade investment = mixed, often contradicts world-system theory
Some studies find effects consistent with w-sys
See examples in Rodrik (“Poor Countries in a Rich World”)
But, overall, many do not (See Chirot optional reading)
World-System Theory
Criticisms of World System Theory
1. Research findings are mixed at best
The specific w-sys predictions about sources of global inequality/poverty have often been wrong
It is true that there is horrible poverty in the world…
But: Are people worse off than if there was no global economy? That is less clear.
World-System Theory
2. Reverse causality
World System Theory argues:
Countries that are dependent on the core of the world capitalist system will be trapped into a state of underdevelopment
BUT, maybe it works the other way around
Poverty produced dependent relations in the first place
Poor countries can’t produce high-tech goods, so they trade commodities (e.g., bananas)
But, this doesn’t necessarily mean that trading bananas made those countries poorer or “trapped” them into poverty.
World-System Theory
My advice: World-system theory is a useful theory that has some predictive power
Rodrik highlights some key predictions…
BUT: not the whole story
Economic relations are not always harmful
Other factors besides economy matter
Theories we will discuss in the future…
