DEVELOPMENT CONCEPTS AND THEORIES

Jakir Hossain, Institute of Bangladesh Studies, University of Rajshahi

Contents
Dilemmas of Development ................................................................................................................................ 1
Development Theories ...................................................................................................................................... 4
Neo-liberalism ................................................................................................................................................... 4
Box 2: Elements of Capitalism ....................................................................................................................... 4
Why development is not uniform? ................................................................................................................. 5
Key features of modernization....................................................................................................................... 5
Critique of the Modernisation theory ............................................................................................................. 7
Structuralism ..................................................................................................................................................... 8
Historical Origins ........................................................................................................................................... 8
Merchant Capitalism and the ‘triangular slave trade’ ..................................................................................... 8
Colonialism .................................................................................................................................................... 9
Social and Economic consequences of Colonialism ........................................................................................ 9
Neo-colonialism .......................................................................................................................................... 10
Theoretical Origins ...................................................................................................................................... 10
Marx’s theory of Capitalism and Class Conflict ............................................................................................. 10
The Leninist theory of Imperialism............................................................................................................... 10
Dependency Theory .................................................................................................................................... 11
Policy Implications ....................................................................................................................................... 11
Critique........................................................................................................................................................ 12

Dilemmas of Development
Development is a positive word that is almost synonymous with ‘progress’. The widely accepted definition of development
is however elusive. Different authors have advanced different arguments pertaining to this rather wide concept.
• Todaro (1981:56) refers to development as a multi-dimensional process involving the reorganization and
reorientation of the entire economic and social systems. He argues that development is a physical reality
and a state of mind in which society has, through some combinations of social, economic and political
process secured the way of obtaining better life.
• Perroux (1978:65), defines development as "the combination of mental and social changes among the
population which decide to increase its real and global products, cumulatively and in sustainable manner."
• Rogers (1990:30) adds "development is a long participatory process of social change in the society whose
objective is the material and social progress for the majority of population through a better understanding of
their environment"

For almost every writer, a different definition of development exists. However, two issues are
distinguishable from the definitions. First, development is either defined as a state or condition-static; or as a
process or course of change- dynamic. Second, development is not purely an economic phenomenon but rather a
multi-dimensional process involving reorganization and reorientation of entire economic and social system. For
example, Todaro’s definition indicates a process of improving the quality of all human lives with three equally
important aspects—(1) raising peoples’ living levels, i.e. incomes and consumption, levels of food, medical
services, education through relevant growth processes; (2). creating conditions conducive to the growth of
peoples’ self-esteem through the establishment of social, political and economic systems and institutions which
promote human dignity and respect; and (3) increasing peoples’ freedom to choose by enlarging the range of their
choice variables, e.g. varieties of goods and services.

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 The very word ‘development’ seems to be an idea which everyone must approve. Over the long term, it
implies increased living standards, improved health and well-being for all, and achievement of whatever is
regarded as a general good for society at large. However, it hides a number of debates. For example, what
aspects should be included when considering development, and how should it be measured? Is it primarily an
economic concept? Or should social aspects be of equal or even of greater importance? Should ideals such as
equity, political participation and so on be included in a definition of development - or regarded as additional
desirable elements which may actually be in conflict with the achievement of development itself? (See Box 1 for
an elaboration of economic well-being vs. GNP per capita).

Box 1: Economic well-being and GNP per capita

GNP: The total domestic and foreign output claimed by residents of a country’ in one year, thus a
measure of national income. GNP per capita uses market valuations, and is the measure of average
income.
• GNP tells nothing about income distribution. GNP per capita figure corresponds neither to the
low standards of the masses nor to the wealth of these few. Fails to calculate intra-household
inequality.
• GNP is a measure of production and its value is given in currency which can be freely converted
internationally. However, wage represented by the average GNP per capita in a local currency
does not have the same purchasing power for commodities. In fact, real purchasing power in
poor countries may be relatively higher.
• Well-being is not entirely a matter of purchasing power. The most obvious example of this may
be production for use (direct entitlement) by peasants or petty commodity producers.

In trying to answer the question whether development means the same thing as it has done and whether
the meaning will remain the same throughout this decade, we have to realise that there have always been such
debates - the question is whether what is debated is changing. Certain issues are being given increased
importance, and this is reflected in the way the meaning of development is debated. The debate over
environment, for example, have given rise to the concept of ‘sustainable development’ though there is yet no
consensus on how to relate this to conventional definition of development. There have been also moves to
include specific mention of the impact of changes on women in definitions of development, and more generally to
analyse development in terms of gender relations.
Despite all debates, there is some agreement on two points. First, tackling poverty is of basic
importance. The World Bank’s World Development Report 1990 comes close to a definition of development in
such terms with its view that ‘Reducing poverty is the fundamental objective of economic development’ (p24).
Second, development is a multi-faceted process with political and social as well as economic aspects.
Along with, how to recognise whether development has taken place, the question of how development
occurs is equally important. Development can be seen in two rather different ways: (1) as an historical process of
social change in which societies are transformed over long periods; and (2) as consisting of deliberate efforts
aimed at progress on the part of various agencies, including governments, all kinds of organisations and social
movements. However, as an historical process development is certainly not necessarily positive; for their part,
development efforts do not all succeed.
The two ways of looking at how development takes place are of course related. The idea of development
as historical social change does not negate the importance of ‘doing development’. Historical processes
incorporate millions of deliberate actions. One’s view of what efforts are likely to work is bound to be coloured by
one’s view of history. For example, Abdalla’s definition of the Third World embodied the view that the historical
process which resulted in the development of the industrialised world was the same process in which the Third
world did not become developed.
The Third World Guide uses the following definition by the Egyptian economist Ismail-Sabri Abdalla:
“All those nations which, during the process of formation of the existing world order, did not become rich and
industrialised …. A historical perspective is essential to understand what is the Third World, because by
definition it is the periphery of the system produced by the expansion of world capital.”

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 This definition combines recognition of these human issues of poverty with an emphasis on common
historical explanations. It relates to the Third World to the formation of the international capitalist system (a
process that occurred over several centuries of European colonialist domination of the world) rather than to the
polarised post-war world political order of the Cold War.
This definition of Abdalla implies a particular view of the world - one which has in fact informed much
thinking on how to achieve development. To put simply, in this kind of view, western capitalist industrialisation
created structures in which Third World economies were dependent and which tended to lead and maintain
underdevelopment. This is one version of a ‘dependency view’ which is in turn one of a number of views which
may be grouped under the heading of structuralism. In general, such views are concerned with underlying social
and economic structures and see development as involving changes in these structures.
An essentially different view is that of Neo-liberalism which has its emphasis on the importance of
market relations. These two competing approaches entail different views of history, of what is meant by the Third
World, of how to achieve development and who should be the agents of it.
There are also other approaches to development which fall outside these labels, however, for the
moment, the point to realise is that in an area of debate such as development, definitions and explanations are
not cut and dried. They carry implications about one’s view of the world that can lead into wide-ranging political,
moral and theoretical disputes.

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Development Theories
The notion of generality, or broad application, is important. A theory is a set of interrelated concepts, definitions,
and propositions that explain or predicts events or situations by specifying relations among variables. Thus,
theories are by their nature abstract and not content- or topic-specific. Even though various theoretical models of
development may reflect the same general ideas, each theory employs a unique vocabulary to articulate the
specific factors considered to be important.

Neo-liberalism
In the 1980s neo-liberalism (or market liberalism) became the dominant view of development, at least in the
industrialised west. Those who promote this view are the direct descendants of the proponents of ‘free enterprise’
in the 1950s and earlier, and trace their theoretical ideas back to the classical economics of Adam Smith in the late
eighteenth century - though modern neo-liberalism is perhaps more ideological rather than economic. In this
view, the purest form of capitalism is the best (see Box 2).

Box 2: Elements of Capitalism

Capitalism is a system of production of goods and services for market exchange in order to make profit. Capitalism has
certain basic elements (discussed below) as an ideal system which, taken together, distinguish it from other systems.

Ownership: Private ownership; the ownership of the means of production is private and individual. In the case of large
corporations, there are many owners, but they still hold shares as individuals. The important point is that the main form
of ownership is not collective form, and in particular is not state ownership. In practice, many prominent capitalist
countries such as Sweden, France, South Korea and other Third World capitalist countries such as Mexico have large
state sectors.

Regulation: Capitalism means regulation through market, not state planning or intervention. Regulation refers to how
decisions are made about what is produced, how much of each product, at what price and what quality, and so on. The
state might impose price controls, set quotas, and employ inspectors to check quality, under capitalism, such regulation
is effectively imposed through the mechanisms of market.

Distribution: Under capitalism the allocation of resources and distribution of welfare are done through the market
determination of wages. In principle, there is no universal provision or rationing even of basic goods and welfare
services. In capitalism, all goods and services are commoditised and can be bought. Hence, how much a person gets
depends entirely on personal income - or on how a household’s income is divided between the income earner and
dependants.
In practice, almost all countries have at least some services (particularly health and education) provided universally.

Enterprise Management: Production under capitalism is run with the aim of making a profit in order to accumulate.
Management is undertaken by or on behalf of the capitalist owners and in their interests, rather than directed primarily
towards the interests of the workers in the enterprise, or of the local community or the state.

Legitimation: Under capitalism, the idea that the system works as a whole to promote efficiency and wealth creation is
very powerful, and acts to legitimate actions which would otherwise appear simply to be favouring the interests of
capitalists themselves.

In neo-liberalism thinking, the most important of the five elements of capitalism is regulation through
market. It doesn’t really matter who the owners are; they are assumed to acting rationally in accordance with
their own material interests, which in turn is assumed to mean maximising profit or return on investment in order
to accumulate and reinvest. The important point about them is that they are viewed as individuals - and in fact
individualism is a key aspect of this way of thinking.
However, market competition is even more important. It is seen as the main force towards economic
progress - hence development. Faced with market competition, the best ways to ensure continued profits are to

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grow and innovate. These both lead to increased productivity: growth does so through economies of scale, and
innovation through capital investment in improved production processes. Thus, successful capitalists are able to
enter a positively reinforcing cycle: profit-accumulation-growth-innovation-increased productivity-increased
profits; and then can use those increased profits to continue the cycle.
The system is seen as progressive because it allows enterprising individuals to thrive, and the benefits of
their innovations and the increased productivity will eventually be benefits for all. This argument goes back to the
famous phrases of Adam Smith: the ‘hidden hand of the market’ converts individual interests into ‘the wealth of
nations’.
The economic aspects of neo-liberal theory are generally underpinned by psychological arguments about
the values, aspirations and motivations of individuals. The market presents a formal equality of opportunity to all
who enter it, and distributes reward objectively. What determines success is what individuals are able to bring in;
in other words, how well endowed (a person has a given psychological type, some individuals have what it takes
to succeed and others do not) they are before entering the competition.
Thus, in neo-liberal thinking, individual capitalist entrepreneurs linked through the market provide the
dynamic for development. In the end, these gradual changes initiated by many individuals are seen as leading to a
total process of change in social structure, political systems and culture; in other words, to modernisation as the
term was used in the 1950s and 1960s.
The most obvious distinguishing feature of those Western countries which are thoroughly modernised
and developed is that they have undergone industrial revolutions and as a result enjoy high per capita income.
Another feature claimed as equally important by many proponents of neo-liberalism is that these Western
countries are liberal democracies: they combine the prosperity associated with industrialised economies with
political systems based on parliamentary systems based on parliamentary representative democracy.

Why development is not uniform?

You might wonder why, if these processes of modernisation and capitalist development are so desirable, not all
parts of the world have developed to the same extent. Neo-liberals look for the answer to this question in idea of
obstacles such as tradition, monopoly and state regulation that prevent the proper working of the market
(see Box 3).

Box 3: Obstacles to development

Tradition: non-market social relations and systems of obligation can be seen as preventing production for own use from
being commoditized. Lazy natives were particularly prevalent under colonialism.
Lack of entrepreneurialism was mirrored by fatalism. Not having intention to change.
Monopoly: profit maximisers will tend to dominate market or monopolise. i. Monopolies of capital, i.e. industrial
monopolies, ii. Monopolies of labour, i.e. trade unions.
State regulation: in general, any kind of collective or state action, except when the state is acting purely as shareholder
like any other owner, is seen as interfering with the proper working of the market. In the neo-liberal view, the role of the
state should be a minimal one: guaranteeing political order, ensuring the conditions for capitalism (keeping a level
playing field) and policing the casualties of the competitive system.

Key features of modernization

To put it simply, the modernisation theory, attempts to do two things; to analyse the causes of backwardness and
underdevelopment, and to indicate the stages through which societies have to pass in order to develop. In
simplified terms, the following are the key characteristics found in developing and developed societies which
function as indicators of backwardness and progress.
• To some extent, Modernisation Theory was an intellectual response to the World wars and represents an
attempt to take an optimistic view.
• Early forms of Modernisation Theory had little to say about the further advancement of the already
modern, industrialised societies; it was assumed that they had ‘arrived’ and that their past was of interest
only to show the future path of those societies still on the road to modernity. Early modernisation theory

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 justified complacency (the status quo) at home and change abroad. The theory had no image of the
potentialities of modernity’s future, but only faith in the past.
• The process of modernisation is often characterised as revolutionary (a dramatic shift from traditional to
modern), complex (multiple causes), systematic, global (affecting all societies), phased, irreversible,
progressive.
• Modernisation Theory is also interdisciplinary. The theory has been used by sociologists (Spencer,
Comte, Durkheim), psychologists (Talcot Parsons, Inkles & Smith), economists (Rostow – five stages of
development- traditional society, pre-conditions for take off, take off, drive to maturity, age of high mass
consumption), Rosenstein – Rodan (1943) (the big push to modernisation), Lewis (structural change
model (1960s-70s) –dual sector (traditional/modern)(transfer of unproductive surplus rural labour to
expand urban sector).
• Underdevelopment is the fault of developing countries, failure to develop links with the industrialised
world. Socio-economic systems of the Third World create obstacles and encourage little ambition or
incentives among individuals, particularly in their work: they tend to have little interest in commercial
production and rationally planned long term enterprise. Export oriented growth strategies, and
integration with global markets will support growth and development.
• Government should be strong enough to support this process, but not dominant enough to smother it.
Free markets, limited state intervention (a myth, NIEs?). Private enterprise, and not governments, should
take the initiative in the process of industrial and economic development.
• It is assumed that diffusion of progress from North to South is possible, and development is based on
transfer of technology, capital, institutions, values, mass culture, political and legal systems. Modern
legal and organisational structures and systems are needed to support development. Capital intensive
industrial development is the path to long term economic development. Urban based, heavy industry as
the leading sector in promoting development. Capitalisation of agriculture, disappearance of subsistence
farming is inevitable. Western technology, skills and capital will be required to assist development
process.
• Progress is evolutionary and linear. Unilinear evolution is from traditional (simple) to modern (complex)
societies (see Box 4)

Box 4: Evolutionary Theory

For the 19th century writers change was seen as natural, directional, imminent, continuous, necessary and proceeding
through uniform causes. Earlier influencer, like German philosopher Friedrich Hegel had ideas similar to classical Greek
and Romans. He was idealistic (history is the result of GOD’s will) and deterministic (what happens has to happen).
French Philosopher and father of sociology, Auguste Comte systematised the evolutionary theory. Comte described
progress in terms of law of three stages through which mankind was evolving.
First stage: Theological: represented the level of society dominated by priests, ruled by the military and built upon
the family as the major social unit.
Second stage: Metaphysical: based upon the philosophical reasoning of men.
Third Stage: Scientific or Positive: which must be reached by the study of laws of nature and the use of scientific
experiments. Later in the 19th century, British philosopher and sociologist, Herbert Spencer talked about
‘survival of the fittest’ and based his theory of the evolution of society on its organisation structure.
French sociologist, Emile Durkheim saw society, as a living organism which develops from a simple primitive
stage to a complex modern one. The poor non-industrial societies were seen as representing a primitive stage of
evolution, while the industrialised countries were associated with the more complex and civilised stage. The higher
more complex societies are seen as the end points toward which the primitive societies would eventually reach. All
societies, even the advanced ones, here are seen as evolving in a progressive direction.
During the period, evolutionary theory was used to justify the behaviour of colonising societies toward their
colonies, in particular with respect to allowing them to remain in their pre-industrial stage, while using their labour and
material resources to support further industrialisation in the mother country.
The activities of colonial governments and the work of religious missions were based on the assumption that
the peoples of the less developed societies were primitive, backward and uncivilised, an thus needed to be assisted in
their development along the same unilinear evolutionary path that was experienced by their own countries.

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 • Traditional values are an impediment to progress. Modernisation Theory is based on the notion that
there is a direct causal link between five sets of variable, namely modernising institutions, modern
values, modern behaviour, modern society and economic development.

Economic
Modern development
Modern society
Modern behaviour
Modernising values
institutions

• Social issues need not be addressed directly by governments (trickle down/Residual welfare
model,1950s)

• Some direct investment in the social sector is justified (human capital theory /Incremental social welfare
model, 1960s). Formal schooling=development (human capital theory); Curative medicine rather than
PHC; Western style housing provision.
• Selective government investments in the social sector are justified (targeting)
• Better government management of macro-economic and national political issues (good governance).
The essence of the theory is that national governments should only play a supporting role in the
development process and should not generally get involved in managing the economy directly. The
private sector should be left to take the initiative, and governments should create the right policy
environment for this, including taking measures to introduce more appropriate social values and
attitudes. Prosperity in society will then allow individuals within that society to make the most
appropriate choices in the areas of health, education, housing etc. The only time that intervention can be
justified is in the event of market failure.

Critique of the Modernisation theory

• Ethnocentric theory (irrelevant to developing countries), motivated by the cold war concerns.
• Unilinearity is too simplistic, traditional-modern are false dichotomies, inventions of the west. Particular
aspects of social behaviour and the level of development of any society could not be effectively explained
solely in terms of its origins. It could not always explain social anomalies, for example, the survival of
highly traditional religious rituals in modern industrial environments.
• A third criticism of evolution was directed at its assumption of unilinearity, which was increasingly seen
as untenable. This became particularly evident with the emergence of the socialist states.
• As regard the link between the five sets of variables, the link between the first two sets of variable have
been well established in research (education and factory employment are directly related to the
acquisition of modern values). Research does not support the causal linkage between modern values and
modern behaviour. Recent research has shown that developing countries with higher exposure to
western media do not manifest higher levels of modern values or indeed, economic development
(Delacroix and Ragin, 1978). Likewise, farmers who score high in the scale of modern values do not show
higher levels of agricultural productivity (Sutcliffe 1978).
• Top down model and Little trickle down
• Ignores structural constraints (1) Internal (social class, wealth), (2) External (colonialism, neo-colonialism)

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Structuralism

The word ‘structuralism’ was first prominently mentioned in discussions on development in the work of Raul
Prebisch and others in the UN Economic Commission for Latin and America (ECLA) just after the Second World
War Here this heading is used to group several related but distinct strands of thought, of which three (Marxism,
Leninist theory and the dependency school) are set out further below.
In general, such views are concerned with underlying social and economic structures and see
development as involving changes in these structures. They differ fundamentally from neo-liberalism both in their
view of history and in their approach to capitalism. To neo-liberals, history is the sum of individuals’ actions,
including the actions of individual governments, firms and other organisations. Whereas, structuralists see history
in terms of political and economic struggles between large social groups, particularly classes, as new structures
and systems replace old ones across the globe.
Much of the structuralists’ thinking on development has in common a fundamentally critical view of
capitalism. Global capitalism is seen as having a quality of dynamism that may be necessary for economic
development, but it is regarded mainly as a system of exploitation which should in the long run be radically
altered. Of the elements of capitalism (ownership, regulation, distribution, enterprise management, and
legitimation), structuralists regard ownership and management as most important, and do not regard regulation
through the market as a defining feature. Of the five elements, distribution is also highlighted by structuralists.
Under capitalism, the allocation of resources and the distribution of welfare are done through the market
determination of wages. This is where capitalism’s fundamentally exploitative nature comes in.

Historical Origins
Merchant Capitalism and the ‘triangular slave trade’
Merchant Capitalism which began around the sixteenth century and continued to the late eighteenth century,
refers to the accumulation of capital through trade and plunder.
The slave trade, according to Marx - ‘the commercial hunting of blackskins’ was one of the most
profitable forms of merchant capitalism. The slave trade involved a three-cornered system of exchange. First,
European (mainly British) merchants exchanged goods - often inferior quality weapons and clothes - at a profit for
African slaves supplied by local chiefs mainly from the countries around the Gulf of Guinea in West Africa.
Secondly, they were then carried as cargo by ship across the Atlantic to be traded at a profit as slaves for the
plantations of the Carribean Islands and the American mainland. Finally, the merchants filled their ships with
agricultural produce - specially sugar and cotton - which had been produced by the slaves on the plantations and
sold this at a profit on their return to Europe.
The merchants took advantage of the system of local slavery that was long established in Africa and had
been in use for many years for crop production. Local African elites worked as agent of the merchant capitalist
and slaves were supplied in exchange for guns, clothes, etc.. At the same time, many of the slaves were not traded
but simply taken trough warfare, trickery, banditry or kidnapping. During the two hundred years period of
merchant capitalism, about 9 million Africans (15-35yrs) were shipped across the Atlantic and almost 2 million of
them died as a result of the harsh conditions of the voyage.

The followings are the consequences of the triangular slave trade:

• Growth of African population: The slave trade had a serious impact on the growth of the African population.
Had it not occurred the population would have grown much more quickly than it seems to have done, which
implies that population growth is an important factor encouraging social and economic development.
• Effect on the existing political and economic patterns of African society: the French traders drove a wedge
between the traditional dominant elites in West Africa and the subordinate groups, supporting the latter in
order to weaken the negotiating strength of the former. Over the years, this undermined the political
structures of the empires and fragmented the authority and trade patterns (particularly the traditional trans-
Sahara trading between African kingdom) which had been built up over the centuries.
• Gain or Fear: African eyes looked to the sea either in anticipation of gain or in fear.
• Sowed the seeds of economic weakness and dependency:

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 (1) western currency systems were introduced in African and Asian economies which undermined confidence
in the local money forms. During the subsequent colonial period, local money forms were virtually
completely displaced.
(2) encouraged the emergence of a relatively small, prosperous elite in societies that had close association
with European business.
(3) made African, Caribbean and other countries highly dependent on the export of their resources (crops and
labour) in exchange for the import of manufactured goods from capitalist society.

Colonialism
Although, there had been formal colonies established as early as the sixteenth century by the Spanish and
Portuguese in Latin America which were run as overseas feudal estates for the Spanish settlers and were granted
independence by 1830, the main period of colonial expansion was between 1850 and 1900. Colonisation during
this period was seen as valuable political instrument controlling overseas territories for the further development
of industrial capitalism in the West. France’s protectionist policies of the 1850s, which sought to defend its
markets and access to overseas resources sparked off a European race for control over lands, people and raw
materials. The process was also encouraged by the technological innovations in transport and communications,
such as the steamship, the new Suez Canal and the telegraph.
While, the period of Merchant Capitalism established the basic pattern of production in the Third world
countries and in that process Western European countries grew through profitable trading. Colonialism
potentially allowed much greater profits because it meant the introduction of more efficient system of farming
and mining, as well as greater control over the labour force.

Social and Economic consequences of Colonialism

There was some variation of social and economic consequences of the imposition of colonial rule as different
colonial powers pursued different expansionist policies. Nevertheless, the followings are a number of features of
colonialism which apply in general.
• Traditional land tenure replaced by private property.
• The monopolistic companies developed only those forms of agriculture and mineral extraction that
would have a commercial market or a productive use in Europe. The traditional crops which fed the local
population were squeezed out as rural farmers lost land to the companies interested only in the new
crops - like coffee, cocoa and tea - for export, the so-called ‘cash crops’.
• As land, crops and the labour that was employed became subject to the cash economy, the local
inhabitants found that their ability to sustain their families through their own farming efforts was
threatened. Many lost land and had to sell their labour for a wage on the company plantation or in the
mine.
• Large scale labour migration and displacement: Apart from there being little alternative because of
landlessness, many local people were additionally compelled to seek a cash paying job in order to pay the
money taxes imposed by the colonial authorities. Since much labour was needed in a very short period of
time, compulsion came in the form of forced labour, indentured labour and intimidation. Many workers
were brought great distances to work, even from other countries (Tamils of India to work on the tea
estates of Sri Lanka); thus colonialism inaugurated the first real pattern of large scale labour migration
and displacement in the world.
• Colonial powers saw their task as being the introduction of the new capitalist rigours of production as
quickly as possible without encouraging the local population to become competitors to the colonial
power by establishing their own enterprise. Although, a few indigenous structures were allowed so long
as the capitalist interests in the colony and Europe were served, it was felt that the maintenance of local
authority structures would help to check any threat from local ambition. (the British were most adept to
the system of indirect rule, ruling the colony through the local elites and chiefs. It was often the case
where colonialism gave more power to the indigenous authority, for example in India Parmanent
Settlement Act imposed by Britain made the Zamindary notables landowners thereby giving them
private property rights which they had not enjoyed previously).

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 These general features of the colonial period indicate the scale of impact colonialism had on existing
forms of production, land ownership, labour patterns and political structures. The transformation of the colonies
was geared to serve the interests of the development of European capitalism, thus disrupting the social and
economic character of the colonies.

Neo-colonialism
Neo-colonialism literally means a new form of colonialism, a form of socio-economic domination from outside
that does not rely on direct political control.

Neo-colonialism was first examined by Nkrumah, the Ghanaian President of the early 1960s, where he argued:
‘The essence of neo-colonialism is that the state which is subject to it is, in theory, independent and has all the
trappings of international sovereignty. In reality its economic system and thus its internal policy is directed
from outside.’

Nkrumah experienced the full force of this outside direction when his socialist policies were undermined by
capitalist groups in Ghana supported by foreign agencies, causing him to be deposed by military coup in 1966.
a. Political or ‘flag’ independence only
b. External control over economy (banking, foreign investment, TNCs)

Theoretical Origins

Marx’s theory of Capitalism and Class Conflict

Marx viewed capitalism as a particular type of class society, one constituted by antagonistic relations between
different social classes, of which the most important are capitalists and workers. Any class system is based on
particular relations of production, and in the capitalist system those who own the means of production have the
power to appropriate surplus, whereas those do not own means of production have to sell their labour power.
This , according to Marx is the basis for class conflict in capitalist society. The dominant class, the
capitalists, own and control the means of production and thereby exploit the subordinate working class. Thus, a
person’s material security is crucially dependent on his or her class membership, or to put it in more abstract
terms, on his or her relationship to the means of production. Within and outside work people find their lives
shaped by this relationship which creates much of the inequality in society.
Marx believed that industrial capitalism represented a massive advance in the progress of society,
particularly in the impetus it gave to the systematic application of science to methods of production. However, he
thought that in time, private ownership would begin to obstruct the further development of productive capacities.
He argued that the capitalists seek profit to accumulate capital in order to remain viable in the capitalist system to
which they are enslaved; capital is needed to generate profit to generate more capital and so on in a never ending
circle of production - the capitalist treadmill.
In the process, he argued, class conflict is inevitable and the conditions would be ripe for the over-
through of capitalism. This would not be automatic, but result from class struggle between capitalists and
workers. When workers become conscious of their exploitation and strive to stop it, a revolutionary situation
develops which according to Marx, leads to the end of capitalism and the workers would utilise the productive
capacities made available by capitalism to go on and form a different form of society, i.e. communism.

The Leninist theory of Imperialism

The political definition of imperialism (as a relationship between one dominant power and subordinate states that
fall under its political sway) is not shared by Lenin, rather, he argues that imperialism is basically an economic
phenomenon restricted to a particular phase of capitalism. Imperialism is primarily a result of the capitalist system
attempting to resolve its crisis of profitability.
Marx had said that as capitalism grew through industrialisation and mechanisation it became more and
more difficult for it to maintain its level of profit as capital investment in plant and equipment increased. The rate
of profit therefore always tended to decline. Although this could be offset by (a) reducing cost of machinery, (b)

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increasing rate of exploitation of labour, (c) cutting wages or demanding longer hours, Lenin claimed that
sustained rate of profit could be ensured through advanced capitalism expanding overseas. Such imperialism,
according to him, would allow (a) control over global market, (b) access to cheap foreign labour, and (c ) a cheap
supply of raw materials.
Lenin adopted Marx’s view that capitalism expansion would have a ‘progressive’ affect on those non-
capitalist societies it penetrated. Both believed that although it was true that capitalism would disrupt, plunder
and exploit these societies this very exploitation would lead to the development of the more productive industrial
capitalism in these ‘backward’ regions. According to this view, a lack of development is a reflection of the uneven
impact of capitalist penetration in the world.
However, a contrary development thesis got prominence in the Marxian literature after the death of
Lenin in 1924, where imperialism is considered as an obstacle to industrialisation and the development of the
productive power of capitalism. The Soviet theorists in support of the Asian socialists denied the ‘progressive’ role
of capitalist imperialism and championed the cause of peasant-based socialist struggles in agrarian societies
whereas Lenin believed that the western working class are to be the source of world revolutionary struggle.
This strategic revision was subsequently given analytical support through the theoretical work of more
recent members of the neo-Marxist school. The central tenet quickly established itself that imperialism is a block
to Third World development draining the resources or economic surplus from these societies which stagnate as
they become more underdeveloped.

Dependency Theory
• Challenge to modernisation theory: they dismissed the idea that a lack of development could be attributed
to a deficiency in appropriate modernising values and that exposure to advanced industrial countries could
only be of positive benefit to the Third World. Instead they argued that the massive and persistent poverty in
third world countries was caused by exposure to the economic and political influences of the advanced
countries. South has little autonomy, development conditioned and manipulated by the North.
• Underdevelopment is the product of western intervention, the ‘development of underdevelopment’. The
growth of the advanced industrial centres of the world today meant the simultaneous underdevelopment of
those countries whose economic surplus the West exploited. Poor societies should not be ragarded as in
some way ‘immature’ or ‘underdevelopment’ in their economic development , given time, their growth will
occur. So long as they are subject to the dominance of the economic imperialism of the West their poverty
will persist.
• The view that the impact of advanced society is progressive, whether in the form of the diffusion thesis of
modernisation theory or in the form of the imperialism thesis of the classical Marxism is rejected.

One of the major representatives of this position is A.G. Frank (1967) who is most closely associated with
the view that the persistent poverty of the Third World is a reflection of ‘dependency’. Frank argues that the
period of merchant capitalism and colonialism forced a specialisation of production on Third World countries that
was primarily export oriented, of limited range and geared to the raw material needs of the imperial powers. The
Third World elites were incorporated into this system and could do little to establish a more diverse, independent
form of economic activity. They became the mere intermediaries between the rich purchasers and the poor
(peasant) producers, and their lifestyles were more and more tied to and so heavily dependent on the activities of
the economic elites in the centre (metroplis- in Frank’s term). While the Third World elite enjoy a high standard of
living from this relationship, the masses experience chronic deprivation as their surplus production is taken from
them in the local rural region and transferred to the rich farmers and merchants in their own country and then on
abroad. Frank argues that there is a ‘chain of dependency’ running down from the highly advanced centres of the
world, a hierarchy of ‘metropolises’ with their subordinate ‘satellites’ through which the economic surplus is
passed upwards within a nation and then internationally.

Policy Implications
• Critique of international trade theory of comparative advantage.
• Underdevelopment due to dependence on primary exports.
• Import substitution industrialisation (ISI) proposed

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• State intervention to remove barriers to growth (e.g. land reform)
• Awareness of global inequities, health care, housing, social welfare,
and intermediate technology
• Reliance on indigenous knowledge
• Collective action by the south – regional economic cooperation (Mercosul, etc.)

Critique
• Few policy implications which are operationally relevant
• Lack explanatory power. A circular argument? How are countries made dependent? Mechanisms?
Frank’ thesis is of a circular argument: dependent countries are those which lack the capacity for autonomous
growth and they lack this because their structures are dependent one. By itself, this tells us very little other than
that economies are not autonomous but depend on each other for growth. There is nothing that is peculiar to
third world countries: for example Canada is very much dependent on US capital, yet it is a developed economy.

• All countries are interdependent in the global economy. The world economy is system where everyone is
dependent on each other.
• Earlier Frank’s argued that the Third World is static, as the surplus is sucked out of countries – no indigenous
development is possible. In reality, after 1970 growth has occurred in countries especially in Brazil, Mexico,
Argentina and some East Asian countries. Since then Cardeso (1979) has changed his position and believes
that capital investment does promote the development of some locally controlled manufacturing, he now
speaks not of ‘dependency’ but ‘dependent development’

Petras (1969) rejects the view that this can lead to autonomous industrial growth. Instead he suggest that a
distorted ‘enclave’ development is happening: this means that pockets of technologically advanced
manufacturing are established geared to export but which can not transfer their dynamism and productivity
to the rest of the economy.

Frank (1984) in his recent work accepts the need to account for this growth in industrial production and his
analysis no longer supports a stagnationist position, but is similar to that of Petras. He argues that the new
industrial sectors are socially and economically inherently defective and vulnerable because they depend on
the continued support of foreign MNCs, a strong handed government to curb unions, and demand from high
income consumers, and also requires a repression of wages to make profitable production and competitive
exports possible.
• An excuse for lack of internal political action to address deep-seated problem.

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