UNIT 12 DEVELOPMENT STRATEGIES

Structure

12.0 Objectives
12.1 Introduction
12.2 Meaning of Underdevelopment
12.3 Classical Capitalist Model of Development
12.4 Soviet-Style Socialism
12.5 The Chinese Strategy of Development
12.6 The Third World Strategies
12.7 Let Us Sun1 Up
12.8 Key Words
12.9 Some Useful Books
12.10 Answcrs to Check Your Progress Exercises

12.0 OBJECTIVES
Tliis unit deals with the .theory and practice of development and discusses various
strategies of development adopted by capitalist, socialist and developing countries.
Once you are able to grasp it, you could be in a position to:

Understand the phenomenon of underdevelopment as distinguished from

undevelopment;
Explain the classical capitalist method of developnlent in tl~eWest and
Japan:
Dcscribe.the Soviet style socialist model of developnient and its failure now;
Followv tb&trajectory of China's changing strategies of development; and
~eo-libcrdstrategy of devclopmcnt based on globalization and privatization

12.1 INTRODUCTION
You have already studied the nature of comparative study of politics and also the
Political Economy Approach to its study. In this unit, an attempt has been made
to explain the concept of development and underdevelopment and various
strategies of developnlent in a comparative perspective. Liberal writers emphasize
the concepts of democracy, nationalism and modernization in this context. But
radical and Marxist thinkers prefer to stress the concepts of underdevelopment,
dependency and imperialism while discussing development strategies.

12.2 MEANING OF UNDERDEVELOPMENT

Tllc theory of undcrdcvelopnlcnt was first propounded by Latin American writers
to csplain the ccononiic and political backwardness of Latin American societies,
\vhich bccamc indcpcndent from Spanish or Portuguese rule during the third
dccadc of tlic 19th century. Despite their political independence for more than 150
years. their democracy, niodcrnization and national state remained underdeveloped
and they continued as semi colonial dependencies of imperial countries suffering
from retarded economic development.,

According to Andre Gu~iderFrank, underdevelopment of Latin American countries

in the past as well as some Afro-Asian countries found themselves after their
political decolonisation.

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The fact is that underdevelopment, like development, is also a modem D e v e l o p ~ l ~ e ~Strategies
lt

phenomenon. The underdevelopment of the colonies, semi colonies and neo-

colonies and development of the metropolitan centres of imperialism are related
both as parts of the historical process and through the mutual impact they would
continue to exercise in the present as well as the future. Paul Baran has argued
that underdevelopment is organically and systematically associated with
colonisation, political dominance and exploiter-exploited relationship in the economic
sphere.

The concept of economic surplus is crucial for the study of development and
underdevelopment. Economic surplus may be defined as the actual or potential
excess of a social unit's production which may or may not be invested or
exploited. In the present context what is important is not the sacrifice of the loser
nation in terms of its actual loss of income or wealth or the absolute gain of the
recipient country but the contribution to economic surplus accruing to the
imperialist country from the colony. It is the loss of present and pomtial capital
for the colony.

While the peripheral societies are denied the development possibilities of this
capital, the metropolitan imperial country can use it for its own econanic
development. The satellite country's contribution may be great or smdl in quantity,
but the associated sacrifice in tenns of underdevelopment for the colony, semi
colony or neocolony can readily be much larger. While the imperialist gain a
pound of flesh, the dependency may lose ten or twenty times more. Thus, the
colony may lose resources, its essential irrigation systenl, or its civilization or even
its physical existence. Many Native American tribes and nationalities were wiped
out when the Europeans colonized America, through genocide. Thus development
and underdevelopment are not the sumnlation only of economic quantities. They
are their cumulation and the whole social structure and process which determines
that accumulation.

It is obvious that the incorporation of the underdeveloped countries in the

international capitalist system keeps them pemlanently underdeveloped. This
contribution of imperialism and capitalism to the underdevelopment of
underdeveloped areas continues even now. It is not so 111uch the resources that
the United State draws out of Latin America, as it is the use of her economic,
political and military power to keep the structure of underdevelopnlent in these
countries in the economic, political, social, cultural and even military spheres.

This structure of underdevelopment imposes on them mass poverty, loss of

political freedom, loss of culture, loss of current production, infant mortality,
starvation for the disadvantaged groups, disease and epidemics. The continuous
drain of potential capital plays a critical role in the economy of all satellite
countries as well as the imperialist economy. The drain of wealth from India and
other colonies by Britain promoted the growth of de-industrialization in India and
its other colonies. Tlle African slave trade benefited European traders and
pla~ltation-ownersin Anlerica but damaged the econo~lliesof many countries in
West and Central Africa. No wonder that South Asia and Sub-Saharan Africa
even now have the lowest per capita income in the whole world.

Tlle control exercised by the nlultinationals or strategic sectors plays a crucial role
in preserving the pattern of underdevelopment. One example has been the
extraction of mineral resources from underdeveloped countries. Another was
extraction of oil and its distribution. Examples may change from time to time. The
most critical sector has been that of foreign trade, which is usually controlled by
the dominant country in its dependency.

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 Socie(y Ecollolll~~lldS(a(e The domination over a sector by the bourgeois class and the state bureaucracy is
suff~cientto keep a dependency underdeveloped indefinitely and to aggravate its
underdevelopment in future. The bourgeois classes of several Afro-Asian and
Latin American countries are highly dependent on the economic power of the
multinations and political power of the governments of advanced capitalist
countries. The ruling elites of tlie underdeveloped countries, therefore, have a
vested interest in preserving indefinitely the system and pattern of
underdevelopment. Tlie supposed independence of many Afro-Asian and Latin
American nations in thus a convenient fiction.

12.3 CLASSICAL CAPITALIST MODEL OF

DEVELOPMENT
At the d a w of the 21st century, we find capitalism as the dominant model of
development which has successfully overcome challenges posed by socialism as
an alternative strategy of developnient. The industrializatio~iof England was the
first successful model of capitalist development. This was accomplished between
1760 and 1820. It was based on free enterprise within and monopophy trade in
the colonies, often accompanied by direct plunder of the colonial resources. The
other countries, which followed this model with some local variations were
France, Holland, the United States: Germany, Italy a i d later Japan.

The political history of capitalist systems has followed neither a simple nor a
linear path of development. Capitalist development reflects a contradiction
between the requirements of capital accumulation and the needs of political
legitimation. This contradiction was sought to be resolved through six different
stages of capitalist growth requiring six successive state formations.

According to Alan Wolfe, the Accumulative State corresponded to the first wave
of capitalism industrialization. It ~iiadeaccuniulation its own ~iiechanismof
legitimation. Since any means needed to achieve the accumulation of wealth was
justified: the Accuniulative State was not coliunitted to laissez faire ideologically.
It pronioted govenuiient intervention to define the parameters of the emerging
system of production, to preserve discipline aniong the workers, to adjust macro-
econoniic conditions, to fight colonial wars, to pursue capitalist interests, to provide
subsidies to capitalists, and to support niiscella~ieousecclectic activities.

When the crisis of accuniulation grc~v,Ada111 Sniith and Ricardo talked of the
Harmonious State and harmony as the essential elenie~itsof capitalist production.
Freedom of the market, they said, reconciled tlie interests of the producers with
those of the consumers and the interests of the capitalists with those of the
workers. This assu~iiptionwas illternally inconsistent, led to Social Danvinis~iiand
failed as a legitimation mechanism.

The Exparzsionist State characterized the third phase of capitalist development.

Although an i~iiperialistpolicy of expalision carried out in tlie interest of finaice
capital seented to relieve domestic pressures from the working class: expaisionism
meant the erosion of classical liberalism. The end of free trade, unrestricted
immigration aid export of capital to colonies and sem~colonies were accompanied
by indoctrination and control of workers through educatio~iand mass culture. The
World War I put an end to this phase of capitalist iniperialisni.

The Franchise State characterized the foi~rthphase of capitalist development. It

tried to regwlarise conflicts between classes and strata by delegating public power
to private bdies. This reflected a pluralist dispersal of power. The capitalist state
of 'pluralist democracy' was supposed to give away power, not to exercise it.

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This was mystification. The franchise state declined by the end of World War 11. D c v c l u p e ~ e ~ iStrntcgies
t

Private interest groups failed to regulate theniselves effectively. Econoniic planning

in Europea~icountries and military spending in the United States led these states
to assume enomlous powers.

The Dual State cali~einto existence during thc fifth stage of capitalist
development. This state created two parallcl structures, one charged with keeping
order through repression and the other with presenting a dcniocratic facade.
Capitalism at this stage functio~ledthrough a diarcliy-one anii being the niilitary
bureaucratic apparatus aid tlie other anii. liiore visible to the public eyc,
constituting the electoral parliamentaql mechanism.

The Trans-national State characterizes tlie sixtli and prescnt stage of capitalist
develop~nentwhich is dominated by the rise of nlulti~iationalcorporations. It is the
product of intenlationalizatio~~ of capital and globalization of tlie market. However,
this development did not transcend the problems of nation-state because
niultinational corporations needed government aid in a maruler not seal earlier in
tlie history of capitalist development. During this phase, the World Bank, the
International Monetary Fund and now tlie World Trade Organisation have
enierged to regulate the world economy and the \vorld market.

Neo-liberalism with its slogans of globalizations. liberalization and privatization is

the new credo of triumphant, transnational capitalism. Ho\vevcr, each of the six
stages of capitalism have failed to resolve tlie tcnsions bct\vccn tllc requircllicnts
of accu~iiulatio~i and die needs of Icgitimntion. Despite the fall of Soviet-style
socialisnl. late capitalisni has yet to prove its rationality as a world-wide strategy
for economic growth.

Check Your Progress 1

Note i) Use the space provided below each question to give your answers.
ii) Check your answer with the answer given at tlie end of the unit.

1) Distinguish between underdevelopnie~ltand undevelopment.

2) Mention any tnlo stages of capitalist devclopmcnt ,and the corresponding state
tonnation.

3) Read the following exercise carefully. Which of tllc follo\ving statements are
'

true'?

a) Underdevelopment is lack of development in quantitative tennp.

b) Colonisatio~iis the cause of undcrdevclopmcnt.
c) Germany was tlie first nlodel of capitalist dcvclopmait.

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 Society Econo~nyand State Accuniulation is tlie first and basic characteristic of tlie capitalist
d)
strategy of growth.
e) The Franchise state is not based on self-regulation by interest groups.

f) The IMF-World Bank role is significant in the strategies of deve1op:nent

adopted by the developing cou~itriestoday.
h) The drain of eco~loniicsurplus is the main cause of underdevelopnient.

12.4 SOVIET-STYLE SOCIALISM

Marxism-Leninism was the official ideology and tlie guiding strategy of
development in the former Soviet Union and other Soviet-style socialist states of
eastern and central Europe. It attempted to change the socio-economic basis of
the pre-existing system by abolishing the capitalist mode of production itself.

Marxism aimed at the destruction of the capitalist system, through a revolutionary

class struggle of the working class in alliance with the oppressed peasantry:
culminating in a socialist revolution and dictatorsllip of the proletariat led by the
Conununist Party.

However, no advanced country of tlie west succunibed to a socialist revolution of

Marx's vision. Revolution did occur in Russia which was relatively a less
developed capitalist countqvat that tinie. After the defeat of the Nazi Germany in
World War 11, Soviet-style socialism, nii~iuscollectivization of agriculture, was
imposed upon the "People's Democracies" of eastern and central Europe. China
and some neighbouring Asian countries and later Cuba also carried out their
socialist revolutions.

Socialist systcms in the Soviet U~lionand other allied countries provided for public
or state ownership of all major sectors of the economy. I~ltenlaland estenial
market was strictly controlled. The Soviet-style econoniy was based on
comprehensive planning of national resources through successive Five Year Plans.
All sectors such as industry, agriculture, trade, banking, transport and
coinmunications were brought under centralized planning.

Due to international isolation of Sovict Russia, centralized planning e~npliasizedtlie

develop~nentof heavy industry such as steel, niacliines and aniia~iie~~ts.The
pla~uiedecononly was free fro111 capitalist-style slu~npsand recessio~isaid
registered a rapid rate of cco~ioniicgrocvtli. The trade agreements were largely
restricted to the socialist bloc but after 1960, China was excluded fro111these,
which opted out from tlie Sovict block of socialist nations.

Agriculture was collectivized in the Soviet U n i o ~but

~ not in other East European
countries. It formed a s~nallersector of the econoniy but absorbed a relatively
larger labour force. The state largely controlled production and distribution of
consumer goods. Labour unions were official state agencies aiid the workers'
councils played a limited role in decision-waking.

The political systeni of socialist countries was based on deiilocratic centralis111 and
the dictatorship of a sin$ political party or an alliance of parties led by the
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Communist Party. The Marxist-Leninist Party determined the goals and strategy Developn~ent Strategies
of development. Strong one-party system dictated all interest articulation and
aggregation. Discipline and centralization were the guiding principles of industrial
management and administration.

Economic surplus was obtained for investment by denying the people necessary
consumption goods. All social strata, particularly the peasants, helped the Soviet
state to accumulate capital for rapid industrialization. World War I1 destroyed lives
and properties on a huge scale. The Soviet Union and other Socialist countries
were denied assistance by the United States under the Marshall Plan for post-war
rehabilitation. The Cold War compelled them to allocate large funds for defense.

Despite, threats of invasion from capitalist countries and destruction cawed by

war: the Soviet Union did succeed in achieving rapid economic growth both in the
Stalinist and post-Stalin periods till 1970. Planned socialist economy did enable
Soviet Russia to emerge as a second super-power in the world. Soviet style
socialism also transformed the relatively backward economies of some east
European countries into industrial societies.

Communist China also emulated the Soviet-style economic planning immediately

after its successful revolution in 1949 till 1956. Many states in the Third world .
like India under Nehru, Egypt under Nasser and lndonesia under Soekarno
experime~~ted with state capitalis~lland creation of a larger public sector mainly
under Soviet inspiration.

Though the 'Soviet strategy of economic development could avoid capitalist-style

slumps and recessions for a long time, it ultimately succumbed to the evils of
stagnation and excessive militarization. Gorbachev tried to reform the Soviet
system through glasnost (openness) and perestroika (restructuring) but paved the
way for disintegration of the Soviet Union and restoration of capitalism in Russia
and other seceding republics. Other countries of Eastern Europe also succumbed
to capitalism counter-revolution. This signified the failure of Soviet-style socialism
all over Europe.

12.5 THE CHINESE STRATEGY OF DEVELOPMENT

The Chinese model of ecollon~icgrowth is both a study in contrast and
conlparison with the Soviet-style development. The Soviet Union had a proletarian
revolution under Lenin and straightway proceeded towards socialization of its
economy through nationalization of its industry: banking, trade, transport and
communication. Agriculture wvas collectivized under Stalin. The centralized,
command economy continued, through its successive Five Year Plans, till its final
fall in 1991 with the disintegration of the Soviet Union.
Mao Zedong's revolution in China, which took place in 1949, was called 'new-
democratic'. It pernlitted national and petty-bourgeoisie classes to participate in
China's economic devclop~llenttill 1954. During this period, a radical land reform
was carried out which abolished ownership of land by feudal landlords and '
redistributed it among the tillers of the soil. Mao, thereafter, favoured a continued
revolution towards socialism. As a result, the Chinese peasants were soon
regrouped into co-operatives and collectives.

The aims of the First Five Year Plan (1953-1957) were to lay the foundations of
a comprehensive industrial structure at a rapid pace. Priority of investment funds
(over 50 percent) was given to the capital goods sector. Relatively less
inlportance was givcn to the growth of the consunler goods. Agriculture was
given only 6.2 percent and left largely for private initiative by peasants. The
Soviet Union gave the required help in technology and espertise.
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 Society- Ecollonly ~ l l dState According to Ashbook, the Chinese Communists did not start large-scale
mechanization of agriculture during the First Five Year Plan period. This was a
correct strategy. It was first necessary to expand the industrial base. By the end
of the First Five Year Plan period, China had achieved a considerable morne~ltum
in economic development.

The Great Leap Forward of 1958 and the Crisis Years of 1958-1961 saw the
creation of the Communes and the industrial policy of 'walking on two legs'
which meant the simultaneous development of small and large industry and the
simultaneous use of indigenous techniques and lnodern methods.

T l ~ e'People's Communes' were not only a new administrative unit, they were
also an esercise in agrarian socialism. They arose out of the merger of co-
operatives. 90 percent of peasant housel~oldswere grmped into Conununes by
Septe~~~bcr 1958 all over China. The Great Leap Forward, which encouraged the
establislu~~ent of stecl foundries in every town or village, proved an incorrect
strategy of economic growth. National calamities such as floods and famine whicl~
according to Amartya Sen killed millions of people, withdrawal of Soviet economic
assistance and serious organisational problems in the Communes paralysed the
Chinese economy during the Crisis Years of 1958-1961. As a result, the Chinese
economic growth slowed down considerably. Consequently, a new economic policy
was adopted by the Chinese leadership which was described as 'market-
socialism '.

The Chinese leadership recognised that the experiment of the 'People's

Co~rununes' had failcd because it was trying to skip necessary historical stages in
development. The Second Five Year Plan period was 111arked by a serious
cconon~icdcprcssion in the first threc years and a policy of readjustment during
the liest two years. Then followed three years (1963-65) of filrther readjustment.
This was regarded as a transitional phase between the Second and Third Five
Year Plans.

In 1966 China had successfi~llyreadjusted its national economy, had overcome

serious economic difficulties and had begun implementing its Third Five Year Plan.
Just then, Mao Zedong began his "Cultural Revolution". According to Deng
Xiaoping, it was not a revolution at all. It was an internal disorder tl~atdamaged
China's economic development for a decade.

Mao Zedong started the Cultural Revolution to prevent the restoration of

capitalism in China. He thought that Party leaders like Liu Shaoqi and Deng
Xiaoping were 'capitalist roaders' who wanted China to revert to the capitalist
past of development. During 1967-68, China's national economy speedily
deteriorated in the social chaos created by the Cultural Revolution.

Zliou Enlai conti~iuedas Prime Minister and was able to limit the damage to the
economy by follo\ving prag~;Iaticpolicies. Post-Mao leadership regards the Cultural
Revolution as a period when "Left" nlistakes derailed the process of economic
development. During this period: national income suffered a loss of 500 billion
Yuan, and the living standard of the people declined.

With the passing away of Mao Zedong in 1976 and the suppression of the "gang
of four", who were Mao loyalists, power passed in the hands of Deng Xiaoping
and the so called "capitalist roaders". The new leadership instituted large scale
economic reforms in the direction of what it described as "socialism with Chinese
characteristics". In practice, it meant the repudiation of Maoist strategy of
development based on early introduction of doctrinaire socialist features in China's
economy. It pushed China in the direction of neo-liberal reforms though Deng
officially stated that the new strategy of economic growth had no connection with
'bourgeois liberalization.'
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Tile governnie~itintroduced the "houscliold responsibility system" in agriculture by Develupa~rat S t r i ~ t e ~ i e s

parceling out the collectively o\\nccl land to peasants 011 a long term lease-hold
basis with provisions for the riglits of inlicritancc. This was, in effect, re-
introducing privatized agriculture in China through the back-door. However, aew
system increased agricultural production i~nnienselythough it p r o ~ t e dinequality
in rural society to sonie extent. In contrast with Soviet collectivization, family
based agriculture in China has proved more productive despite lower level of
mechanization.

In the five years between the 12th and the 13th Congress of the Communist
Party, China achieved great progress in economic reforms and the opening of the
economy to the outside world also began in a big way. Industrial re-structuring *
was acco~nplislied.Investnient in productive and profitable enterprises was
increased. Agriculture: energy, resources, transport and conlniunication were given
special support. The annual average growth ratc of tlie GNP reached 10 to 11
percent betcvecn 1990 and 1999. During this period. China's ccononiy was
liberalized and privatized at a rapid pace. T h ~ s\\!as done through \\.hat the
Chinese prefer to call "contracti~al responsibility system" that conferred lo~ig
lease-hold rights on tlie recipient of land and property.

Cliina also encouragcd invcst~iicntof foreign capital and gave favourable ternis to
all foreign investors. Fourtcen special zones wvcre created in the coastal provinces
where foreign finiis were allowed 100 percent equity. Foreign capital entered
China in a big way. The Chinese trade also flourished with various foreign
countries particularly the United States, Japan and West European countries. Hong
Kong and Macao with their capitalist structures have now become parts of China
with a guarantee that these will be maintained so for at least 50 years more.
Communist China has also promised that Taiwan's capitalist economy will be
preserved perpetually whenever it decidcs to joint the mainland.

In fact, China is rapidly marching towards systan: \vhich so~iiecritics describe

sarcastically as "capitalism \\it11 Chincsc Charactcristics'' \\?liere social ow~iersliip
and socialis~narc increasingly bcconiing nicru legal fictions. The share of the
public sector in China's cconom!- lias dccrcascd from 96 pcrcent in 1976 to just
26 pcrcent in 2001. Post-Mao dcvelopniait strategy has largely succeeded in
niaking China an industrial giant and also self-sufficient in the agricultural sphere.

The strength of the Cliincsc strategy of development consists of the following :

1) Abolition of land-lordisni. the cnd of tlie unproductive commune system,

establishment of family leasehold fanns in asriculture, peasant initiative in
rural enterprises encouraged.

2) Abolition of mass poverty, promotion of education and removal' of illiteracy,

wide-spread health services, population control with a single child norm.

3) Economic rcfonns which have alniost liberalized the economy and opencd it
up to the outside world.

4) Cliina's policies rccognizc tlic importance of market, profitabilit); conipetition

and intesration \\.it11 tllc \\,orid cconomj. but on its own tbnns.

5) Chinese leadcrsliip regards China at the priman stage of socialisni and it

niay take niorc than a ccnti~ryto coniplete the transitio~ito socialism.

6) China's developnicnt strategy should be based on pragmatic considerations.

As Deng said, the cat could be white or black, what is iniportant is that it
should be able to catch mice.
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 Society, Econolc~yund Stute According to the IMF criteria of Purchasing Power Parity (PPP), China's GDP is
second only to that of the United States, surpassing that of Japan which is in the
third place.

Check Your Progress 2

Note i) Use space provided below to give your answer.
ii) Check your answer with the answer given at the end of tlie unit.

I) State three niain features of the Soviet developnient strategy.

.......................................................................................................................

2) Post-Mao developnlent strategy in China differs from the previous one in

these respects.

12.6 THE THIRD WORLD STRATEGIES

Tlie underdeveloped countries of Asia, Africa and even Latin America tried to
follow from 1950 to 1970 what Charles Bettelheim has called tlie state capitalist
model though role of tlie state in their econoniies varied from country to countn:
The purpose was to strengthen the infrastructure and create an independelit
economic base for which private capital was not forthcoming. Tlie public sector
could be as low as 20 percent (Indonesia) or 70 per cent (Algeria).

Ho\vever. rliany developing coi~ntricsdid not follow the state capitalist strategl-
and did not create an\. sizable public sector. Most of the Latin A~i~erican
coi~ntrieslike Brazil. Argentina and Chile fo\lo\ved the capitalist model in \\rIiich
foreign capital also played a ~iiajorrole, though foreign capital was not absent in
tlie countries \\hich tried to experiment with the mixed ecoiiollly model such as
Mcsico. Sowtli-East Asian cou~ltricsalso preferred market based strategy of
economic growth. Later, South Korea, Taiwan, Hong Kong and Singapore
emerged as the Asian tigers which \yere Asian showpieces of capitalist
development.

According to Paul Baran, the development strategies of the Third World coi~ntries
show two different kinds of orientations. He maintained that an ovenvl~elming
majority of the backward countries are ruled by regi~ilesof a clearly pronounced
comprador character and their strategies are also based on what lie calls
co~ilpradorcapitalist devclopment. Secondly, he maintained that sonic
underdeveloped countries have governments which have a 'New Deal' orientation
such as India: Indonesia, and Burnla.

It thc first group. he placed tlrc oil-producing coi~~ltries

of the Middle East and ' ,
Latin A~iiericaand Afro-Asian and Latin A~i~erica~i countries produci~igvaluable
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 nlinerals and food-stuffs. Many of these countries are ruled by pro-Western
dictators who are constrained to pursue development strategy based on comprador
capitalism. Baran's characterization of such regimes as comprador is considered
dated and inapplicable now.

In the second group, Baran placed 'New-Deal' type regimes where a nationalist
bourgeoisie was in power which, in alliance with other exploited classes, was
I
trying to create an independent economic base for the country's all round
I development. As the pressure for social liberation was not great in these
countries, the governnlents there adopted the strategy of evolving an indigeneous
variety of industrial capitalisnl in which both the public and private sectors would
have a co-operative relationship.

However, the Neww Deal rcginlc is also plagued wvith certain contradictions. For
esanlple. it is unable to offend tllc landlords and cannot c a r 9 out pro-peasant
land reform. It cannot interfere \vith thc privileges of the merchants and
moneylenders. It is unable to inlprovc the living conditions of the workers, as it
cannot antagonize business. Despite its anti-imperialism, it favours foreign capital.

This regime substitutes ~llinorrefornis for radical changes, revolutionary words for
revolutio~iarydeeds. It is unable to do the battle for industrialisation and unable to
mobilize the masses for a decisive assault on the nation's backwardness, poverty,
illiteracy or ill-health. The state capitalist model may create new steel plants, set
up fertilizer plants, develop hj.dro-electric power, build oil and gas producing plants
etc in the public sector, but the government never nationalizes any private sector
industry. However. the private sector is unable to fulfill the role that is espected.
Population growth rcnlains unchecked and gcncrally ncutralizcs cconomic growth
in real tcnns.

Developn~entstrategies based on the statc capitalist niodel have now bee11

rejected aln~ostin all dcwlcloping countries. Nco-liberal cconomic reforn~s
advocated b!. thc IMF-World Bank adwliscrs arc bcing inyle~nentcdat a vanling
pace alnlost in all developing countries. Tllc statc sector is being dismantled
gradually eveq~vhereincluding India.

China, South Korea. Thailand. Singapore. Malaysia. Indonesia, Philippines and

sonle Latin American countries have achieved considerable success in
inlplementing neo-liberal refonns. In contrast, India is still debating the trickle
down effects of its refon11 programme. With the exception of South Africa, the
IMF-World Bank model of growth has not helped the African countries in any
appreciable manner. However. the slogans of liberalization, privatization and
globalisation have been universally accepted as the guidelines for developnient by
the ruling elites of all developing nations. This is basically a market-oriented,
capitalist stratcgJ1of econon~icgron-th.

Check Your Progress 3

Note i) Use space providec! below to give your answer.
ii) Check your answer with the answer given at the end of the unit.
1) Enumerate the basic features of development strategies followed by the Third
World countries.

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 Sucicty, E C O H U I IIIII~I
I~ S ~ I I ~ C
12.7 LET US SUM UP
Development is one arm of study where at the height of the neo-liberal upsurge,
it is recognized that governments have a major role to play. Underdevelopnient
nieans not just low per capita income but lack of sound structures, missing
niarkds and external constraints. Proper development strategy requires efficient
arrangement of the system of production, a human development and human rights
approach, and redistributive policies. Development strategies must be oriented
towards reduction of inequalities, across the regions within an econoniy and
across the countries in the international economy. The fall of Soviet-style socialism
has not proved the ultimate rationality of capitalist, market-oriented economy,
which still suffers froni rnaldistribution of incomes and periodical recessions.
Many cpuntries are still underdeveloped.

12.8 KEY WORDS

Underdevelopment : Perverted dcvelopnicnt caused by imperialist ~~iterve~ition
in
a dcpcndcnt economy.
Genocide : Deliberate destruction of a conquered race.
Multinationals : Companies having subsidiary operations in several countries
across tlre globe.
Capitalism : Economic system based on private ownership of the means of
production.
Socialism : Economic system based on social or state ownership of the means of
production.
Neo-liberalism : Ncw liberal approach promoting free enterprise and free trade
all over the world.
Marxism-Leninism : Tkc off~cialideology of the former Soviet Union and
Co~iimunistChina presenting a socialist model of development.
Capitalist Roaders : China's leaders 'such as Deng Xiaoping who, according to
Mao Zcdong were trying to restore capitalism in China.
Purchasing Power Parity : A method of calculating the GDP in accordance
with the purchasing capacity of a national currency.

12.9 SOME USEFUL BOOKS

Asirvatham, E. & Misra, K.K. 2001, Political Theory, Chapters 12, 13 & 14, S.
Chand & Company, New Delhi.
Baran, Paul, A.: 1973, Political Economy of Growth, Penguins, Chapters 4, 5 : 6
and 8.
.Chilcotc. Ronald H.. 1981. Theories of' Comparative Politics, Chapter 7:
Wcst\ric\\~Press, Boulder-Colorado.
Frank, Andre Gunder. 1967, Capitalism and Undedevelopment in Latin
A~nericn.Monthly Rcvicw Press, Nc\v York. :-

Kay, Geoffrey, 1975 Development and Underdevelopment -A Marxist Analy.sis,

Macmillan Press, London.

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 Misra, K.K. 1982 Marxism and Liberalism, Chapter, 24, Pragati Publishers, New
Delhi.
Misra, K.K. & Iyengar, Kalpana M., 1988 Modern Political Theory, Part I11
I Chapters, 5, 6, 12, 13, S. Chand & Company, New Delhi.
t

12.10 ANSWER TO CHECK YOUR PROGRESS

EXERCISES
t
Check Your Progress 1

1) Underdevebpment is a kind of defective development caused by capitalism

I and imperialism but undevelopment is the historical condition that existed
before industrialisatio~tin a country not exploited by imperialism. India in 1947
was underdeveloped but Japan in 1868 was undeveloped.
1 2) Any two of the following six:

1) Accumulation (Accumulative State),

1 2) Harmony (Harmonious State)
1 3) Pluralism (Franchise State), .
I 4) Expansion (Expansionist State),
5) Dualism (Dual State) and
! 6) Multinationals (Transnational Statc).
i

3) (a) False, (b) True, (c) False, (d) True, (e) False, (f) True, (g) True, (h) True

Check Your Progress 2

1) 1) Centralized Economic Planning

2) Nationalization of Industry, Trade, Banking, Transport and
Communication.
3) Collectivization of Agriculture

2) Mao's Strategy Post-Mao Strategy

Collectivization of Agriculture Family Farms
People's Communes Abolition of Communes
Dominance of State Sector Phased Privatization
Opposition to Foreign Capital Foreign Capital Welcome
Doctrinaire Socialism Neo-liberal Reforms

Check Your Progress 3

Development strategies followed by the Third World countries were not exactly
unifonn.
1) Some countries like India, Egypt and Algeria followed the state capitalism
model. and created a state sector of economy.

2) But a private sector, which coexisted with public sector, was'also

encouraged to make its contribution to economic growth.

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 Society Econonly an* State
3) Brazil, Argentina, South Korea, Singapore etc. adopted market-oriented
strategy of growth from the very beginning.

4) Foreign capital was invited in both types of the developing countries, though it
preferred to go to market-oriented econon~ies.
5) Some countries like Cambodia, North Korea and Cuba emulated a socialist
.
strategy of developme~~t
6 ) All developing countries aftcr 1970 gradually came under the influence of the
International Monetary Fund-World Bank guidelines as they faced foreign
exchange crises one after another.
7) Neo-liberal economic reforms were carried out in phases but at a varying
pace in all developing countries including China.
8) Neo-liberalism pro~notesglobalization of the Third World economies on the
basis of free trade and free enterprise as fiir as possible.
9) All developing countries are striving to combine econo~llicgrowth with huiilan
development and redistributive justice.
10) In practice, their development strategies have magnified social inequalities
with the exception of a few socialist countries like China, Viet Nam and
Cuba.

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