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Most critics of the modernization theory, namely Theotonio Dos Santos and Ivan Illich, have remained skeptical of the general claim that economic growth results in shared prosperity. Walt Rostow outlines in his work, The Stages of Economic Growth, the five essential stages of economic growth that lead to a nation’s modernization. His claims have become one of the main components of the theory of modernization for societies, and Rostow is now vastly considered the grandfather of modernization theory. Although the modernization theory has been accepted across the globe by both large and small nations, it can be seen in Dos Santos’ The Structure of Dependence and Illich’s Development as Planned Poverty that economic growth through general means of the modernization theory do not result in shared prosperity but rather hegemonic international relations and economic poverty.
While Dos Santos argues that modernization theory leads to the adverse effects of “dependent capitalism” and Illich argues that modernization theory leads to development and industrialization as “planned poverty”, libertarian scholars such as F.
A. Hayek, in his work titled Road to Serfdom, argues that individual freedom and capitalism is needed in order to achieve and preserve economic development. Similarly, Milton Friedman is yet another libertarian who also supports through his work titled Capitalism and Freedom that less government intervention in economic development processes is needed in order for economic growth to result in collective prosperity across nations. This analytical essay will examine Dos Santos’ and Illich’s skepticism regarding modernization theory, the likely responses of F.
A. Hayek and Milton Friedman to their doubtful arguments against Rostow’s and other modernization theorists’ claims, and concludes with my position on the persuasiveness of these opinions along with a proposal of the true path to economic development among previously colonial ruled countries.
Theotonio Dos Santos shows his skepticism of the general claims of modernization theory through his work titled The Structure of Dependence, where he uses the example of Latin American countries’ dependence on other more dominant and developed countries as a way to criticize the modernization theory. His main argument is that this dependency creates an international and internal structure that leads the dependent countries to further underdevelopment and aggravated societal problems (Dos Santos, 231). Dos Santos explains that there are three types of dependencies, that of “colonial dependence”, “financial-industrial dependence”, and “technological-industrial dependence”, and they result in the negative conditioning of “… the orientation of production, the forms of capital accumulation, the reproduction of the economy, and…the social and political structure [of the dependent nations]” (Dos Santos, 232).
“Colonial dependence” implies that the success of the colonial economy has everything to do with the parent or dominant country, while “financial-industrial dependence” means that private European companies have the capital to move in and exploit the natural resources of underdeveloped nations (Dos Santos, 232). A great example of this is Indian companies building mines and factories in Lagos, Nigeria to exploit their natural resources for the lucrative exportation of crude oil and precious metals, leading to a standstill or even further underdevelopment of African economies. Speaking in historical context, Dos Santos further supports this concept by saying “…a great part of the accumulated surplus was destined to be sent abroad in the form of profits, limiting not only internal consumption but also possibilities of reinvestment” (Dos Santos, 232). The last type of dependency, “technological-industrial dependence”, is said to create two types of limits on development, the limit on resources created by the export sector, and the limit of monopolies on patents, which causes firms to send machines in the form of capital opposed to buyable commodities (Dos Santos, 232).
This “new dependence”, as Dos Santos calls it, led to European companies bringing overvalued capital into regions where it is then converted into the foreign exchange. The restrictions on balance of payments in these formally colonized countries mean the dependent countries can’t import more than they sell without going into debt, while multinational corporations who have the capital are not restricted by these factors. Thus, the dependent countries do not have the necessary capital to invest domestically, and therefore the advancement of these economies is prevented, as they can’t produce surplus to later help reinvestment (Dos Santos, 233-234). In conclusion, Dos Santos argues that modernization theory, namely the case of “dependent capitalism” in his examples, “reproduces the factors that prevent it (the dependent country] from reaching a nationally and internationally advantageous situation” (Dos Santos, 235).
In Ivan Illich’s Development as Planned Poverty, he presents another skeptic view of modernization theory, generally arguing that development and modernization have led to the marginalization and increased poverty of those living in Third World countries. He first argues that the institutional development of “package deals” has led to the individual citizen becoming less effective in shaping his own environment, and thus “…the environment becomes a by product of his own consumption habits” (Illich, 95). Illich asserts that the general concept of development is defined by the rich, and therefore has little chance of benefitting the majority of people. He uses the example of “The Alliance for Progress” who has helped to modernize the consumption patterns of South American middle classes while inadvertently modernizing the objectives of this class by fixing their demands on unavailable goods (Illich, 96).
Illich argues that technological refinements of already marketed goods more often benefit the producer than the consumer (Illich, 96). In talking about the underdevelopment of Third World countries, he claims that “reification” of consumers’ imaginations has led to the underdevelopment of consciousness, he uses the example of institutions creating the human sensation of thirst into the need for a bottle of Coke to supplement his claim (Illich, 97). In Illich’s assertion that “schools [especially in Latin America) create inferiority”, he says that the “…international standard of schooling forever condemns most Latin Americans to marginality or exclusion from social life – in a word, underdevelopment” (Illich, 98). This is largely because the concept of schooling actually implies citizen’s removal from social environments, and therefore having an adverse effect on development. Lastly, Illich calls for a “profound revolution” that seeks a long-term goal of satisfying basic needs for countries with different capital structures, in addition to a “counterresearch for fundamental alternatives”, which he says must be created if we want any chance finding alternatives to “evidently necessary implements for modern life” such as cars, hospitals, schools, and numerous other “necessities” (Illich, 99-100).
Dos Santos and Illich alike have both proved to be true skeptics of the modernization theory, although in unique fashions. F. A. Hayek and Milton Friedman are two other scholars who could also be considered skeptics of the modernization theory, as they push for individualism, libertarianism, and less governmental control. Although they remain in the same boat with Dos Santos and Illich as critics of the modernization theory, it can be seen through Hayek’s The Road to Serfdom and Friedman’s Capitalism and Freedom that they hold their own unique views on how economic development takes place. Hayek argues that individual and industrial freedom, which led to the free use of knowledge, resulted in the growth and advancement of science (Hayek, 18). He goes on to oppose government planning as not only is it less efficient than free-market capitalism, but it is also a type of control based on force, and when force in implemented, freedom is inherently lost (Hayek, 22-25). Hayek goes on to agree with De Tocqueville in that democracy and socialism cannot exist together as they seek opposite ends (Hayek, 29). Based on these views of Hayek, it is safe to say that he might respond to Dos Santos and Illich by claiming that dependency and development are intrinsically good concepts as long as they are derived from individuals or groups of individuals practicing independent freedom. If the dependency and development they are referring to were stemming from a centralized institution or organization of government, Hayek would argue that they are bad due to there infraction on individual freedom and emphasis on centric order. Friedman claims that economic freedom and political freedom go hand in hand, and that economic freedom must exist for political freedom to exist (Friedman, 8-9). Although he urges for limited government control, he does admit that the government should act as an “umpire” due to the fact that “absolute freedom is impossible” (Friedman, 25). He also demands that the best way to alleviate poverty is through free trade, leading to charitable donations, in addition to the implementation of a negative income tax for those under the poverty line (Friedman, 191, 194). He states that “It establishes a system under which taxes are imposed on some to pay subsidies to others” (Friedman, 194). Considering these views of Friedman, he might respond to Dos Santos and Illich slightly different than Hayek, emphasizing more focus on welfare benefits and slightly increased actions of central government.
Rostow’s fives stages of economic growth are “the traditional society, the preconditions for take-off, the take-off, the drive to maturity, and the age of high mass-consumption” (Rostow, 4). He goes on to explain that the “take-off” stage will lead to the transformation of the general structure of the country’s economy and the social and political structure of that country’s society so that a stable growth rate can be sustained (Rostow, 8-9). In the future, Rostow claims, the country’s “drive to maturity” will help its economy find a place in the international market, along with an extension of modern technology over all of the nation’s economic industries (Rostow, 9). Lastly, he claims that “the age of high mass-consumption” will lead to a shift towards durable consumer goods and services, along with an increase in allocated resources to social welfare and stability (Rostow, 10-11). Although these historically backed results assert the modernization theory to be the path of pure positive national influence and development, Dos Santos and Illich have made compelling cases that adverse effects will in fact be the consequences of internal economic growth through modernization.
Dos Santos is primarily arguing that “…the alleged backwardness of these economies [dependent ones] is not due to the lack of integration with capitalism but that, on the contrary, the most powerful obstacles to their full development come from the way in which they are joined to this international system and its laws of development” (Dos Santos, 235). Illich ultimately claims that “There is a normal course for those who make development policies… It is to define development and to set its goals in ways with which they are familiar, which they are accustomed to use in order to satisfy their own needs, and which permit them to work through the institutions over which they have power and control” (Illich, 100). He argues that this formula has consistently failed, and that survival in Third World countries relies on the outwitting of machines through human ingenuity (Illich, 101). Libertarians such as Hayek and Friedman also remain skeptical to the modernization theory, however their views differ from Dos Santos’ and Illich’s in that they call for less government action, more individual freedom, and free-market capitalist economies. It is in my opinion that all of these arguments incorporate compelling ideologies accompanied by not so captivating components. I agree with all four authors who are skeptical of the modernization theory, however I believe that the libertarian concepts of Milton Friedman to be the closest answer to economic development, especially in previously colonized countries. His call for individual freedom of ideas and enterprise, with an umpire-like government to make sure all regulations are being followed and who protects the freedom of each citizen, along with welfare benefits for those in poverty, seems to be the most plausible way in which economic development can take place.
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