Transcript Class 13 Mod World System Theory

Sociology 2
Class 13: Modernization and
World-System Theory
Copyright © 2014 by Evan Schofer
Do not copy or distribute without
permission
Announcements
• Exam grading going along smoothly
• … a few more days…
• Today’s class
• Brief discussion of inequality
• Theories of globalization
– New topic… which we will sue to revisit issues of global
governance & global inequality...
Readings on inequality
• Cammack, Paul. 2014. ”Why are some people better off
than others?” [brief excerpt: Pp. 405-415 only] in Edkins
and Zehfuss (eds) Global Politics: A new introduction.
• Rodrik, Dani. 2011. The Globalization
Paradox: Democracy and the Future of the World
Economy. New York, NY: W. W. Norton and Co.
– Chapter 7, “Poor Countries in a Rich World.” Pp. 135-158.
• Serneau, Scott. 2006. “Class: A World of Rich and
Poor.” Pp. 7-32 (Chapter 1) in Global Problems: The
Search for Equity, Peace, and Sustainability. Boston,
MA: Pearson.
• * Furceri, Davide and Prakash Loungani. 2013. ”Who Let
the Gini Out?” Finance and Development, Dec 2013, pp.
25-27. (3 pages)
US Income inequality
•
US Inequality: change since 1979
•
Is inequality good or bad?
• Benefits of inequality:
– In market economies, inequality is an incentive
• Why go through 6 years of medical school if you aren’t
rewarded financially?
• Why invent new things if you aren’t rewarded?
• Problems with inequality
– Extreme inequality can undermine democracy
• Super-rich often have disproportionate political power
– Many see extreme inequality as morally bad
• Lots of poverty, even in wealthy societies
• Children of poor can’t compete with rich
– No more “equality of opportunity”.
Why has US inequality gone up?
• Many explanations:
• Technology, globalization, etc.
– Saez & Piketty study: Changes in taxes
• Tax rates on the rich have been lowered since 1980
• Result: Rich have gotten much richer
• Other findings in the literature:
• Welfare states have less inequality
• Countries that expand education have less inequality.
US Inequality
•
Global inequality
• We live in a VERY unequal world
• 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 a
major source of growing inequality
• Saez & Piketty
• Also, optional reading from week 6: Capital flows and
austerity increase inequality
• 3. Inequality is so important, that many
social science theories of globalization seek
to understand it…
• So, we transition to a new topic
What is theory?
• Two meanings of “theory”
1. Little “t” theory: A testable prediction about
the world
• Testable through observation or experiments
– Ex: Increased CO2 from fossil fuels causes an
increase in global temperature
– Ex: Economic law of “supply and demand”
– Claim: prices reflect equilibrium of supply and demand
– “Laws” are just theories that work pretty well
– Ex: The globalization of capital flows increases
the frequency of currency volatility and crises
What is theory?
• 2. Big “T” Theory: Big ideas or imageries
about the social world
• More like “guiding ideas” than specific predictions
• Example: Rational Choice Theory
– The view that behavior can be understood as the result of
everyone making cost/benefit decisions (given preferences)
• Example: Marxism
– Marx’s “Historical materialism”: the evolution of societies can
be understood as driven by changes in economic production
– Also, creation of new concepts: exploitation, alienation, etc.
– Not easily proven right or wrong…
– Useful for generating lots of predictions
– If predictions are consistently wrong, we’d eventually decide
that a “big-T” Theory is not useful.
Main Theories: The Economy
• General perspectives on the economy:
• Readings by Brawley, Sernau
• 1. Adam Smith: Markets as progress
• “Liberalism”, “Neo-liberalism”
• Similar to Hayek (from first half of class)
• 2. Karl Marx: Markets as a destructive force
• Cause of inequality and misery
• 3. Keynes: Markets - beneficial but unstable
• Markets need to be regulated to be stable
• Workers and vulnerable groups need protection
• In Serneau reading, discussed under the heading
“Optimal hybrid?”
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.
Main Theories: Political Science
• Covered by Brawley (and next week)
• 1. Realism
– Also called: Neo-realism, the “realist” view
• A theory emphasizing the importance of military (not
economic) power…
• 2. Institutionalism / interdependence
• WARNING: World Society Theory also sometimes
called “institutionalism”… but not the same thing
• Interdependence has lead to the creation of global
institutions. Power isn’t the only thing that matters.
Economic Development / Inequality
• Two issues to focus on
– Provide some help in evaluating theories…
– 1. Does capitalism produce prosperity?
– 2. Does capitalism perpetuate inequality?
• Will it cure poverty for all… or just make the rich even
wealthier?
• Some historical trends
• NOTE: the narrator is fairly optimistic. Look closely at
the data and decide if you agree…
• Video\Hans_Rosling_s_200_Countries_200_Years_4
_Minutes_-_The_Joy_of_Stats_-_BBC_Four.flv
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-colbertreport-videos/84033/march-212007/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
• 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 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 (See Chirot reading)
– 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: don’t become a conspiracy theorist
• It is easy to spin a story of “core country power” to
explain any set of events
• Better to make specific predictions that can be tested
with evidence…
Income Growth (alternate version)