From the NACLA Archives: Development, Unthinking the Past

Two weeks ago, leaders of all the governments of Latin America and the Caribbean (save the coup-installed president of Honduras) concluded a three-day “summit” on Mexico’s Maya Riviera with a majority commitment to move toward the formation of a new hemispheric organization, tentatively called the Community of Latin American and Caribbean States. The proposed organization, which would exclude the United States and Canada, would promote South-South political economic relations as a springboard to development. Six years ago, NACLA published an essay by economist Keith Nurse calling for a similar strategy. We re-publish it here as essential background for an understanding of the new commitment to a strengthening South-South relations in the Americas.

This article originally appeared in the November/December 2003 edition of NACLA Report on the Americas.

Keith Nurse

Report

This article originally appeared in the November/December 2003 edition of NACLA Report on the Americas.

The articulation of an alternative framework for development cannot stop with a critique of the neoliberal agenda championed in recent years by the World Bank, the International Monetary Fund and the World Trade Organization. Quite the contrary: While it is true that the institutions that shape patterns of global finance and trade must be confronted forcefully, it is also true that meaningful and sustainable alternatives to the present state of affairs must be premised upon a profound rethinking of the dominant ideas that for the past several decades have shaped the “developmentalist project.” This must involve not only a rethinking of the values and images of a preferred society, but also a reconceptualization of the goals, processes and indicators of development itself.

These ideas are based on the observation that the historical practice of development has failed to address the essence of underdevelopment: the continued leakage of capital and other assets from the developing world to the developed economies. We must remember that underdevelopment has its flipside, overdevelopment, and that to discuss one without the other is to adopt a fragmented view of the development problematic. The argument here is that modernization and the Third World development process has all too often been premised on the notion of “catching-up” to the North. A corollary of this misguided way of framing the problem is that a country can overcome the income gap by borrowing capital, close the technology gap by attracting foreign direct investment, and narrow the cultural gap by adopting western institutions and value systems.1 From the perspective of the developed, western, colonizing countries, this reinforces an ethnocentric conception of development as a “civilizing mission”—a matter of saving “the natives” from themselves.

In short, “catching up” and the “civilizing mission” are two sides of the same coin: They are co-dependent. This is essentially how ideological hegemony works. It not only needs the articulation of a particular regime or discourse from the dominant group, it also requires the subordinate group to accept, consent to and be complicit in its own subordination. This discursive hegemony accounts for the enduring power of developmentalism and, in effect, for the reproduction of underdevelopment from one historical period to another despite the vast reservoir of empirical evidence that indicates that the development project is not working.2

Within the confines of developmentalist thought, debate remains essentially focused on the differences between strategies and models—unbalanced vs. balanced growth, capitalism vs. socialism, import-substitution vs. export-orientation, state vs. market. While different camps praise one category over the other, the epistemological commonalities go largely unnoticed. The focus has been on “alternatives in means” rather than “alternatives in ends.” In this manner the cause of underdevelopment is viewed as being external to the model or strategy, rather than being part of its inherent logic.

All theories of social order and their attendant methodologies or epistemological assumptions derive their confidence from interpretations of history and the unfolding of culture. As Imanuel Wallerstein has argued, in this era of global capitalism, developmentalism acts as a key geoculture of the modern world order.3 It keeps developing countries trapped on the treadmill of rising expectations. What is even more disturbing is that most Third World countries and institutions are still trying to manage the business of imitating European traditions and conditions of industrialization.4 It is on this basis that the key imperative is for developing countries to accept greater responsibility for a radical rethinking—or unthinking—of the developmentalist project, in order to assert alternative ways to arrest underdevelopment.

This requires investment in and support for alternative ways of thinking about the nature of development itself. A central objective must be for developing countries to take greater responsibility for the transformational process, rather than being reliant on external agents. Of course, this underscores the degree to which the agenda I will articulate here is highly political. It will inevitably generate determined resistance from vested interests in developing and developed countries. For this reason, if no other, alliances, networks and partnerships among developing countries, and between them and groups with shared interests in the North, will be critical for creating policy space both internally and externally, for example, in global trade negotiations.

Structural changes in the global political economy have had profound consequences for the development agenda of the past quarter century. The Third World debt crisis of the 1980s, the Mexican Peso crisis early in the 1990s and the Japanese slowdown that struck later in the decade, the Russian Ruble crisis and the Asian meltdown of the late 1990s, and the “dot com” crash and Argentine financial crisis of more recent vintage: all these not-so-isolated events are indicative of structural imbalances typical of the profound and enduring economic downturns that are a recurrent feature in the history of modern capitalism. Coinciding with these repeated eruptions of economic distress are radically new circumstances at the geopolitical level. The end of the Cold War, the decline of state socialism, the fragmentation of Third World solidarity, the rise of Islamic fundamentalism and the growth of new social movements alongside a relative decline of U.S. hegemony, all exemplify such changed circumstances. Considered together, as they must be, these economic, societal and political phenomena have destabilized longstanding elements of both the theory and praxis of development.

These transformations are not entirely unprecedented. Rather, they point to a shift in the techno-economic, socio-political and institutional framework of global capitalist development similar in scope to the systemic transformations that accompanied the economic downturns of the 1820s, 1870s and 1930s. Recall that the last worldwide cyclical economic downturn, from 1914 to 1945, was marked by a confluence of dramatic political and economic developments: Two world wars, the rise of Russian and Chinese Communism, the Great Depression of the 1930s, the rise of fascism in Europe and Japan, the emergence of Keynesianism and state monopoly capitalism and the replacement of British by U.S. hegemony stand out as defining characteristics of that era. Similarly, the last quarter of the 19th century featured the Great Depression of the 1870s, the decline of free trade and the rise of protectionism, the ascent of Germany and the United States as rivals to British hegemony, and the rise of monopoly capitalism, classical imperialism and renewed colonialism.

Seen in this context, the convulsions in today’s global political economy no longer appear so unique. Indeed, contemporary indications of hegemonic contestation (as seen in tensions between the United States and the European Union), along with increases in protectionism and growing signs of nationalism, fascism and Third World resistance to imperial pretensions, are just a few noteworthy examples of trends that strongly resemble analogous processes in the past. Transformations of this magnitude are typical of what we have come to anticipate amid a major “crisis” or downturn in the world economy.

In addition, several generalized tendencies stand out as particularly relevant to the fortunes of Third World economies today. These include growing polarization of wealth, rising global interdependence, increasingly discriminatory regulation of economic transactions and accelerated transfer of resources from developing to wealthy economies.

According to most accounts, concentration and polarization of wealth and living standards are worsening both within and between countries—in developed and developing countries alike. It appears that marginalization of disadvantaged groups is advancing at a rate surpassed only by that of ecological despoliation. It is increasingly apparent that prevailing patterns of development and economic growth serve primarily the interests of transnational capital and associated domestic elites. In this context, developing societies and ordinary people all around the world are left to pick up the crumbs that, if they are fortunate, trickle down to the particular territory or economic sector they happen to occupy.

Inequalities are perpetuated and reinforced by the persistence of protectionist mechanisms and trading practices that discriminate against developing countries. Longstanding sources of hardship for the world’s poor, such as agricultural subsidies that protect Northern farmers and agribusiness at the expense of their counterparts in the South, coincide with new forms of protectionism in the arena of labor and environmental standards, as well as in intellectual property and competition policy. International trade negotiations, meanwhile, are premised on the absurd notion that the natural state of affairs is one of free trade, open markets, non-discrimination, reciprocity among actors and so on. Yet in the real world, markets are far from perfect, and are routinely distorted by oligopolies, state intervention and the myriad intergovernmental regimes that govern economic transactions. There is no such thing, in other words, as a “level playing field.” The term is nothing more than an epistemological construct to further the interests of corporate globalization at the expense of developing countries and of ordinary people all around the world.5

Besides greater polarization and inequality, growing interdependence between countries and regions is a defining feature of our times. This interdependence is most apparent through the deepening of transnational production networks and consumption structures, and through cultural incorporation promoted by global media and advertising. But this interdependence remains fundamentally asymmetrical. The spread of successful Western-style development to Third World countries is exceedingly rare and has been achieved nowhere outside of East Asia.

Indeed, despite isolated instances where rapid growth has been achieved for relatively brief periods, the societies most penetrated by global capital remain among the most vulnerable and dependent on outside forces. The archetypal case is that of Latin America and the Caribbean, where growth has proved to be unsustainable and highly unequal, with consequences that include interethnic and class conflict, totalitarianism and military strife in the worst cases. East Asian success stories attract considerable attention in this context. Yet while establishment observers attribute the good fortune of such places as Taiwan and South Korea to cultural traits or to a supposed adherence to free market principles, the historical record tells a very different story. Their export success and improved living standards largely result from concerted state policies in support of industrial upgrading combined with ambitious public investments in universal access to education and health care services. To be sure, one cannot discount the importance of the relocation of transnational capital nor the Cold War geopolitical context in terms of export market access and aid flows, but the point is that the Asian “newly industrialized countries” were able to seize the opportunities of the historical moment.

Today, however, the net export of capital from developing to the developed countries and the political conditionalities of structural adjustment programs inhibit the possibility of effecting such socio-economic investments in most developing countries. Nowhere is this more apparent than in Latin America and the Caribbean. And outflows of finance to cover debt service, for example, are not the only form of capital that is being transferred at scandalous rates from developing countries northward. The South is also hemorrhaging human capital, as exemplified by labor migration and the brain drain that depletes poor economies of valuable professionals, entrepreneurs, teachers and nurses, while providing this expertise to rich economies at minimal cost.

Without a doubt, such outflows are not entirely negative. The growth of a diasporic economy has contributed substantially to the balance of payments position in several labor-exporting countries.6 In much of the Caribbean and Central America financial remittances now outstrip foreign aid and investment as sources of revenue from abroad. Migration also reduces pressure on the labor market and thus decreases both unemployment and underemployment. Diasporic relations thus emerge as an important asset for developing countries, though strategies for maximizing their benefits must look beyond increasing remittances toward regional management of labor migration and the development of stronger export opportunities through networks of citizens living at home and abroad.

The post World War II model of accumulation, in which increasing levels of mass consumption provided the demand necessary for continued economic growth, is now a thing of the past. Since the early 1970s, we have been witnessing a sharp tendency for global production to outstrip global demand. Workers in the developing world are producing goods and services that they cannot afford, and that are also beyond the reach of many of their counterparts in the developed countries who are increasingly likely to be unemployed or to find themselves mired in low-end, low-wage, part-time, de-unionized jobs.7.

As this situation matures, the basis on which developing economies can assure their insertion into the world economy is becoming ever more fragile and vulnerable. It is far from clear where the new source of world demand and consumption will come from. At first glance, the countries of Latin America, the Caribbean, Africa and most of Asia, plagued as they are by external indebtedness, chronic poverty and the scourge of HIV/AIDS, would hardly seem to offer a potential source of effective demand.8

Meanwhile, the shift toward labor-saving and material-saving technologies is weakening the bargaining power of developing economies in world markets. It is also deepening the exclusion of the majority of Third World societies whose economies specialize disproportionately in low value-added industries. The latter are concentrated in the production of raw materials and commodities, processing of natural resource-based goods and exports of basic services. Yet these economies have not reduced their dependence on the importation of basic foods, medicines, equipment, parts and technologies. As a result, the dominant strategy among most developing countries is to boost exports so they earn foreign exchange to meet the demand for imports and obtain capital to pay foreign debt.

Moreover, although the overall picture is uneven, the developed countries have regained some industries that had once relocated to the Third World, and they are aggressively promoting regional trading blocs in order to consolidate their share of key commodity and product markets. For most developing societies then, the resolution of the current crisis of external indebtedness, chronic unemployment and increasing poverty cannot be achieved through exports alone. Alternative mechanisms are needed, and to be effective, these mechanisms must reflect an underlying logic—a strategy—that reverses or at least retards the structural inequalities and dependencies that are integral to the dominant development model.

In the current scenario, this would likely entail placing emphasis on the efficient use of scarce foreign exchange, rather than a relentless drive to boost export earnings in order to satisfy unbridled desires for imports. There are concrete approaches to achieving this, such as curtailing luxury imports, prioritizing hard-currency earning sectors or promoting industries designed to replace obsolete sources of foreign exchange. Similarly, such a strategy would call on developing countries to be more tactical in negotiating preferential market access for commodity exports or to secure foreign assistance packages or technology transfer agreements, all of which involve dependence on political action by the developed economies.

The point, in effect, is that developing societies must reverse their current tendency to become increasingly reliant on imported goods, services and development solutions. This is not to advocate de-linking from the world economy or the pursuit of autarchic strategies whereby individual countries would seek to go it alone. Nor does it entail “throwing the baby out with the bath water” by ignoring those economic niches in which particular developing countries have been able to thrive in recent decades. What it does mean, however, is that developing countries should respond with strategic, proactive measures to the changing global political economy. There is a need for selective social targets and political priorities that accord with domestic capabilities and draw on global networking and partnerships where these are compatible with local objectives.

An alternative strategy demands renewed emphasis on the following areas:

Industrial upgrading and deepening calls for innovation in product and production technologies and distribution methods in order to improve competitiveness in domestic markets, penetrate new export markets and increase value-added shares within global commodity chains. This must be supported by the use of appropriate technologies, domestic and imported where necessary. Some elements of the contemporary climate bode well for such efforts. The aging of the U.S. baby boomers, for example, and the emergence of conservation-minded and environment-friendly philosophies and technologies (e.g. reduce, reuse, recycle), are among the forces that may offer new and potentially beneficial export options for developing countries. The growing importance of fair trade, organic trade, ecotourism and cultural tourism illustrate the possibilities, many of which are concentrated at sub-national levels.9 To date, however, most developing economies have been slow to embrace them or to implement policies that could maximize their developmental potential.

Industrial upgrading becomes all the more important given shifts in the techno-economic paradigm and the emergence of the digital and Internet economy. These have reconfigured in fundamental ways, both the distribution of rewards to different kinds of economic activity and the potential for new entrants to participate successfully in emerging industries. E-commerce, online retailing, digital distribution, computer-aided design and manufacturing, just-in-time production and total quality management represent opportunities as well as risks for developing economies. This is all the more important to the extent that cheap, unskilled labor, which has served as the principal comparative advantage of export-oriented manufacturing in most developing economies, is growing cheaper all the time. In Latin America and the Caribbean low-cost, high-sweat labor cannot serve as a viable basis for achieving sustained economic growth or for improving the life chances of the population.

Investing more in people thus takes on unprecedented urgency. Encompassing systems devoted to health, education and other social infrastructure are investments that can broaden the universe of citizens positioned to secure decent work and to carry out economic tasks that carry with them the potential for generating reasonable income. Moreover, such investments are necessary conditions for the developing world to achieve increased equity, without which broad-based growth and political harmony are exceedingly unlikely. Given the importance of equity, reforms must also target the social structure of accumulation, ensuring effective land and market reforms and broadening access to credit and market intelligence. Nor can these objectives be achieved through exclusive adherence to any particular dogma. In some instances, the task will be to make markets truly competitive and responsive to local demands. In other cases, what is needed is greater state involvement to address market failure.

Greater South-South cooperation and solidarity has become more urgent in the contemporary global political and economic context. Developing countries must pool their sovereignty and behave as a collective actor at both regional and global levels. In so doing, they will simply be matching the efforts of developed country blocs that have managed to dictate the rules of the economic game to their own benefit.10 This is an area where developing countries can forge alliances with civil society, new social movements and Northern NGOs to win public support in the developed market economies for such objectives as making fair trade an alternative to the hegemonic concept of free trade and for demanding the democratization of institutions responsible for global economic management.

The events both inside and outside the conference rooms at the recently concluded WTO meeting in Cancún once again put both the possibilities and limitations of the struggles to democratize global governance structures into stark relief. The experience of Cancún also illustrated the nature of the transnational alliances that might begin to render the structures of the global political economy more accountable to human needs and social justice.


Keith Nurse is Senior Lecturer, Institute of International Relations, University of the West Indies, Trinidad and Tobago. He is president of the Association of Caribbean Economists.


1. See G. Aseniero, “A Reflection on Developmentalism: From Development to Transformation,” in Herb Addo, Ed., Development as Social Transformation (London: Hodder & Stoughton, 1985), pp. 48-85.

2. See Keith Nurse, “Peripheral Industrialization and the Reproduction of Underdevelopment,” Marronnage, Vol. 1, No. 1,1998, pp. 69-97.

3. Imanuel Wallerstein, Geopolitics and Geoculture: Essays on the Changing World-System(Cambridge: Cambridge University Press, 1991).

4. See Herb Addo, “Developmentalism: A Eurocentric Hoax, Delusion, Chicanery,” in S.C. Chew and R.A. Denemark, Eds. The Underdevelopment of Development: Essays in Honor of Andre Gunder Frank (California: Sage, 1996), pp. 126-146.

5. Several of these points are summarized in K. Nurse and T. Stewart, “Towards a New South Platform: A Work Programme for the South Centre,” in South Centre High Level Policy Forum(Geneva: South Centre, 2003), pp. 121-127.

6. Remittances have emerged to be the fastest growing and most stable source of capital flow and foreign exchange to developing countries in the last decade. In 2001 remittances represented 42% of total Foreign Direct Investment flows and 260% of Overseas Development Assistance. See Dilip Ratha, “Workers’ Remittances: An Important and Stable Source of External Development Finance” in Global Development Finance: Striving for Stability in Development Finance (World Bank, 2003).

7. See, especially, Keith Nurse, “The Developmental Efficacy of the Export-Oriented Clothing Industry: The Case of Jamaica,” Social and Economic Studies, Vol. 44, Nos. 2 & 3, 1995, pp. 195-227.

8. What is not captured by a focus on national-level data, however, is that alongside stagnation there has been substantial growth of a transnational middle class. Indeed, in much of the Third World this market is emerging as a crucial new engine of growth, one that has become far easier to tap with the growth of global media and the Internet economy.

9. This is explained elsewhere in this NACLA Report by Juan Pablo Pérez Sáinz and Katharine Andrade-Eekhoff, p. 40.

10. The international financial system, for example, became increasingly institutionalized in the mid-1970s through forms of cooperative self-organization among influential actors such as creditor clubs (e.g. Paris and London clubs), international financial and trade organizations (World Bank, IMF, GATT/WTO), donor agencies (USAID, CIDA, DFID, GTZ), regional development banks (IADB, ADB, ASD, CDB) and developed country governments.

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