ECOP2616

Take Home Exam A

Bethaney Debenham
230430556

The preeminence of globalisation in todays world has meant that questions of distribution have
increasingly fallen along international lines. Critically evaluated here today are modernisation and
dependency theory which each speculate about contemporary distributions of resources, skills and
profit. It will be seen that while both theories present convincing accounts of some countries
development experience, they similarly both suffer from a tendency to universalise their claims and
oversimplify the multitude of factors which constitute the development process.

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Modernisation theory, which has been championed the Washington Consensus, presupposes that
development is the key to distributing higher standards of living - politically, economically and
socially - and that development in turn occurs in tandem with stages of economic growth (Rostow:
1959). The main vehicle of such growth is international trade as heightened rates of interaction
precipitated by direct investment into a country result in spillovers in areas of capital, managerial
techniques, markets and especially technology. (Soysa & ONeal 1999: 767).. It is assumed that
injection of these factors boost what Rostow calls the preconditions of take-off essentially
facilitating a society-wide shift towards modernisation. (Rostow 1959: 4-7)

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By contrast dependency theory contends that it is a structural imperative of the capitalist system that
some nations be steeped in underdevelopment as a means of exploitation, both productive and in
terms of resources. Frank, describes international capitalism through a model of core and
satellites. (Frank 1969) Expanding Wallersteins world systems theory (1976) he extrapolates such
relations to describe domestic circumstances too, particularly the existence of dual track societies
between underdeveloped countries metropolises and urban sites. (Frank 1976: 18) In this
framework, institutions perpetuate exploitation, at the significant cost of the development of satellite

states themselves beyond a certain cap, because such externalised domestic development is not selfperpetuating. The claim of capped development throws into doubt the presumed linear nature of
the relationship between increasing international trade and higher rates of living in non-developed
and transition economies.

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Both theories trend towards assumptions and simplifications (Narula & Driffield 2012: 3).
Conceivably this may be attributed to the sheer size of available data as well as problems defining
exactly what is meant by equality. Ghose, for example makes reference to the multiple frames of
analysis available to proponents of core-satellite relations, each embedded with differing notions of
inequality (2004: 231). These are problematic in that, without unanimous agreement as to what
constitutes inequality in the first place, claims of such will be forever built on shaky foundations.

Narrula and Driffield propose that simplifications may have (disturbingly) evolved for the sake of
mathematical elegance, or to align more deftly with economic schools of thought.

There is a tendency within both theories to universalise their claims. Many critiques have been
made of modernisation theory and its practical application in the Washington Consensus one size
fits all policy which at its core, presumes away historical experiences of colonialism, conflicts and
exploitation unique to many nations.

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Dependency theory is similarly plagued by such tendencies for universalism particularly between
types of trade. There is a lack of differentiation between greenfield and brownfield investment;
different motivations for investment (market seeking, efficiency seeking, resource extraction, tariff
jumping, or as an export platform) (Balwin 2013: 13); and a failure to account for the consequential
differences of investment in different sectors constitutes a significant gap in the literature.

Accepting Ricardos theory of comparative advantage (Wu & Hsu 2012: 2124) it could stand to
reason that targeted investment may in fact play to a countrys strength and thus bolster its domestic
conditions and overall position internationally.

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In conclusion, while modernisation and dependency theorys present compelling commentaries of
the development process for some countries, both have been liable to universalise their claims and
oversimplify the complexities of the development process.

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Question 2 References

Balwin, R. (2013) The New Relevance of FDI: The GVC Perspective from Foreign Direct
Investment as a Key Driver For Trade, Growth and Prosperity, The Case for a Multilateral
Agreement on Investment, Global Agenda Council on Global Trade and FDI, World Economic
Forum, Geneva, Switzerland. pp. 13.

Frank A. G (1967), Capitalism and Underdevelopment in Latin America, Monthly Review Press,
New York and London.

Frank A. G. (1979), The Development of Underdevelopment from Rhodes. R. I. ed. Imperialism
and Underdevelopment, New York, 1970.

Ghose, A. K. (2004), Global Inequality and International Trade, Cambridge Journal of
Economics, 28, pp. 229-252

Narula, R., Driffield, N. (2012) Does FDI Cause Development? The Ambiguity of Evidence and
Why it Matters, European Journal of Development, volume 24, pp 1-7.

Rostow, R. (1959), 'The Stages if Economic Growth,' The Economic History Review, 12:1, pp.1-16

Soysa, I., Oneal J. R. (1999), Boon or Bane? Reassessing the Productivity of Foreign Direct
Investment, American Sociological Review, 64:5, pp. 766-782

Wallerstein, I. (1976) A World System Perspective on the Social Sciences, The British Journal of
Sociology, 27:3, pp. 343-352.

Wu, J. Y, Hsu, C.(2012), Foreign Direct Investment and Income Inequality: Does the relationship
vary with absorptive capacity, Economic Modelling, 29, pp. 2183-2189

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3. Modern societies are characterised by the unprecedented legitimacy of equality as an ideal

and political norm, yet they generate vast social and economic inequalities. How can we
explain this paradox?

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Contemporary society is unique in that while equality is accepted with unprecedented levels of
legitimacy as an ideal to strive for, social and economic inequality is increasingly perpetuated both
internationally and domestically. This paradox is a historical phenomenon linked inextricably with
the rise of neoliberalism and concurrently, narrowly constructed meanings of inequality; the rise
of the myth of free markets; and the delegitimisation of any alternatives.

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First, neoliberalism has prescribed an extraordinarily narrow meaning to equality as it is discussed
in political and economic circles. Equality in these circumstances has come to mean only equality
of opportunity. Central to neoliberalism is the belief that anyone can rise to the top, what De Botton
has labelled a practical belief in the innate equality of all humans and in the unlimited power of
anyone to achieve anything (de Botton 2004: 47). Thus unequal distribution of wealth is justified
on the basis of meritocracy - that anyone who possess wealth has earned it by virtue of their
abilities, effort and persistence (Callinicos 2000: 39). However, as Littler points out, meritocratic
discourse has become a mechanism for those already possessing power to perpetuate it (Littler
2013: 53). This is achieved by contending that the apportionment of talents and opportunities is an
impartial (Hayak 1976: 64), essentially disregarding institutional privilege and disadvantage that are
the manifest consequences of a variety of preferences and how these overlap (Crenshaw 1991).
Indeed what has been constructed here is a zero sum game of morality, wherein it is assumed that
liberty and equality are incompatible and one has to be chosen over the other (Goodheart 2014:
324). iek points out that this trade has even become a central point of identification. In the US for

example, when the question is posed, What am I to the Other? The answer will be free (1997:
8).

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Further neoliberalism has perpetuated a myth of free markets which has been accepted and
enacted in policy, such as seen in the Washington Consensus. Neoliberalisms free market is
presented as the most efficient vehicle for ensuring human well being. As such, interference by the
state can only have negative effects. In fact, because completely free markets have never wholly
existed, crises of capital, shocks, poverty, continued inequalities are explained away not as flaws of
free markets, but as results of interferences with those markets. Neoliberal market theory is
inherently contradictory, simultaneously holding competition at the core of its functioning, (thus
implying winner and losers) but promising everyone will win (Dean 2013: 54) Internationally this
promise is made through liberal trade theory arguing for trickle down benefits, but empirically
marred by a history of capital flight and fostered dependence (Ghose 2004). Domestically, many
traditionally state administered social functions have now become functions of the economy. Wood
points out that this results in a lack of democratic accountability (2004: 12), and fosters stereotypes
which places the populations well being entirely on themselves as individuals.

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Finally, perpetuating and increasing inequality in a context which values equality as a political and
social norm is explained by the delegitimisation of any alternatives to neoliberalism. ________
states that neoliberalism must be viewed as the triumph of an ideology, in that it excursuses
hegemony within the academy, political circles, and popular culture (Centeno & Cohen 2012: 328).
Globally it has become so dominant that alternatives are viewed almost completely as
impossibilities (Pollin 2005: 173). Markets have become normalised as natural laws which to
fight against is fundamentally futile. As such, inequality has been framed as belonging to an

unconscious yet omniscient market (Centeno & Cohen 2012: 329), again, ultimately
unaccountable to any political/social institutions.

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Thus it is clear that the paradox at the centre of contemporary society in accepting equality as a
norm while not contesting increasing rates of inequality both internationally and domestically, is
explained by the historical rise of neoliberalism and with it, narrowly constructed meanings of
inequality; the rise of the myth of free markets; and the delegitimisation of any alternatives.

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Question 3 References

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de Botton, A. (2004) Status Anxiety, Chapter 3: Equality, Expectation and Envy, Penguin, pp
45-63.

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Callinicos, A. (2000) Equality, Polity, pp.36-64.

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Centeno, M. A & Cohen, J. N. (2012) The Arc of Neoliberalism, Annual Review of Sociology,
38:3, pp. 17-14.

Crenshaw, K. (1991) Mapping the Margins: Intersectionality, Identity Politics, and Violence
against Women of Color, Stanford Law Review, 43:6, pp. 1241-1299

Dean, J. (2008) Enjoying Neoliberalism, Cultural Politics, 4:1, pp. 47-72

Fraser, N. (1995) From Redistribution to Recognition? Dilemmas of Justice in a Post-Socialist
Age, New Left Review, I/212, July-August, pp.68-93.

Ghose, A. K. (2004), Global Inequality and International Trade, Cambridge Journal of
Economics, 28, pp. 229-252

Goodheart, E. (2014) Between Liberty and Equality, Society, 51:4, pp. 324-327

Hayek, F. A. (1976) Law, Legislation and Liberty, Vol.2. The Mirage of Social Justice, University of
Chicago Press, pp.62-85.

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Littler, J. (2013) Meritocracy as Plutocracy: The Marketising of Equality Under Neoliberalism,
New formations: a journal of culture/theory/politics, 80-81, pp. 53-70

Pollin, R. 2005. Contours of Descent. London: Verso. Wood, E. L. (2003) Empire of Capital,
Chapter 1 The detachment of economic power, Verso, pp 9-25.

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iek, S. (1997) The Plague of Fantasies. London: Verso.

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