9. Development Types of World Societies (First, Second, Third World) Newly Industrializing Countries (NICs) Modernization Theory Dependency Theory Theories of the Developmental State The Rise and Decline of the Developmental State in Korea
Types of World Society First World societies Second World societies Third World societies Newly Industrializing Countries.
Classification of the World Society The World Bank and orthodox economists use the concepts of developed (advanced industrial) countries and developing (very often less developed countries, or recently, least developed), while dependency theorists prefer the use of underdeveloped. Meanwhile many social scientists and journalists commonly classify world society in terms of First, Second and Third Worlds. Probably world society has never actually been divided into three worlds. The world was always one world. But here I will use the conventional definitions of the Third World and developing countries interchangeably.
First World Societies 18 th century to the present. Based on industrial production and generally free enterprise. Majority of people live in towns and cities, a few work in rural agricultural pursuits. Major class inequalities, though less pronounced than in traditional societies. Distinct political communities or nation states, including the nations of the West, Japan, Australia and New Zealand.
Second World Societies Early twentieth century (following the Russian Revolution of 1917) to the early 1990s. Based on Industry, but the economic system is based on central planning. Small proportion of the population works in agriculture; most live in towns and cities. Major class inequalities persist. Distinct political communities or nation states Until 1989, composed of the Soviet Union and Eastern Europe.
The End of the Second World Since 1989 social and political changes transformed them into free enterprise economic systems, making some of them First World societies. Building democratic political institutions based on Western models. The rise of New Second World?
Third World Societies Eighteenth century (mostly as colonized areas) to present. Majority of the population work in agriculture, using traditional methods of production. Some agricultural produce (such as coffee and cacao) sold on world markets. Some have free enterprise systems, others (e. g. Cuba and North Korea) are centrally planned. Distinct political communities or nation states, including China, India and most African and South American nations.
Newly Industrializing Countries (NICs) 1970s to the present. Former Third World societies now based on industrial production and generally free enterprise. Majority of people live in towns and cities, a few work in agricultural pursuits. Major class inequalities, more pronounced than First World societies. Average per capita income less than First World societies. Singapore is an exception. Include South Korea, Taiwan, Singapore, Brazil and Mexico. The end of the Third World?
Korea as a NICs Korea grew from being one of the world's poorest countries to one of the richest. Since 1960s, Korea has enjoyed one of the fastest rates of prolonged economic growth in modern world history. The nation s GDP per capita has grown from only $87 in 1960 to a record-breaking $10,000 in 1995 in less than 40 years to a fully developed $20,000 in 2007. Its GDP per capita ranks 4 th in Asia, 13 th in the world. Most population works in factories and offices. Less than 8 percent of the workforce in agriculture. The most wired & wirelessly connected country in the world, having the 2nd highest broadband users worldwide.
The Question of Development Since the end of the Second World War, the decline of old European empires has stimulated great interest in the economic and political development of the post-colonial countries. The rapid expansion of work on social development resulted in academic and political arguments concerning the Third World. Most scholars accepted that there were two major theories in the debates on development sociology: Modernization Theory and Dependency Theory
Modernization Theory The Modernization theories simply assume that the process of late capitalist development should follow the development experiences of the advanced industrial economies. Walt Whitman Rostow developed the take-off model of economic growth. He argues that economic modernization occurs in five basic stages - traditional society, preconditions for take-off, take-off, drive to maturity, and high mass consumption. This became one of the important concepts in the theory of modernization in the social evolutionism.
Values of Entrepreneurial Elites Modernization theorists generally see the rational, calculative, and innovative values of entrepreneurial elites as crucial for economic development. Hence, state intervention is generally unnecessary and the role of the state is simply to serve as a handmaid of history. Modernization theories continue to direct public policy in governmental and international aid agencies, such as the World Bank, but theoretical justification tends to be sought in neoclassical economics.
Dependency Theory Since the late 1960s modernization theory has been under attack from neo-marxists and dependency theorists, and came to be regarded as an oversimplified Euro-centric model of development that lacks adequate empirical and theoretical considerations for the Third World. Dependency Theory suggests the whole pictures of the late capitalist development are very different from the historical experience of the advanced industrial countries. Dependency theorists (Frank, 1969; Emmanuel, 1972; Amin, 1974, 1976) argue that certain state policies in underdeveloped countries serve the interests of the capitalist classes that owe their position to their place in a chain between the imperial metropolis and satellite countries.
Question of National Bourgeoisie But dependency theorists rejected the view of a potential national bourgeoisie, emphasizing the comprador, dependent or auxiliary nature of the local bourgeoisie in the Third World, considering local capital as subordinate to foreign capital. Thus they develop an argument for withdrawal from the capitalist world economy through socialist revolution.
Modernization or Dependency? While modernization theory assumed somewhat optimistic development in the evolutionary sense of historical process, dependency theory postulated pessimistic views on the development of underdevelopment in the Third World. These opposite and dualistic assumptions of the two theories are invalidated by the complex and uneven nature of global transformation through capitalist industrialization In particular, the liberal trade environment provided by American hegemony after 1950 allowed the East Asian and Latin American NICs to take advantage of neo-mercantilist policies in order to change their positions in the international division of labor.
The Question of the NICs The East Asian NICs (Korea, Taiwan, Hong Kong, and Singapore) generally adopted export-oriented strategies which include tax incentives for exports, duty free importation of capital goods, wage suppression, and devaluation of the exchange rate. The East Asian NICs have developed very rapidly, and they have overtaken many developed countries on the usual indicators of national wealth, and GDP per capita. Moreover, they manufacture high technology products and components, often at the leading edge of technology, as well as traditional labor intensive goods such as textiles.
The NICs and Foreign Investment The NICs in East Asia were clear evidence of the inadequacy of the development of underdevelopment theory. Conventional dependency and neo-imperialist theories had lost their applicability by the 1980s because of the remarkable economic performance of certain East Asian and Latin American countries, some of which had relied heavily upon foreign investments and relations with transnational corporations. International trade and export-oriented industrialization are vital in the rapid economic development of all East Asian countries, and their economies have also been highly leveraged on foreign borrowing.
The Problems of the NICs It is not the case that the NICs should be seen as a vindication of modernization theory. Some of Rostow s formulations, for example, may be attributable to particular cases rather than, as he suggests, universal ones. In fact, significant industrial growth is limited to a small number of NICs among the Third World countries. Furthermore, many skeptical questions have also been raised about the choice of technique, working conditions, and labor process in these capitalist industrialization processes (Lipietz, 1987; Bello and Rosenfeld, 1990).
World-system Theory Since the 1970s, a group of social scientists headed by Immanuel Wallerstein were involved in radically extending Frank s conception of capitalism and his hypotheses about the metropolis-satellite structure to describe and explain the historical process of the capitalist world-system as a unit of analysis and the structural constants of the capitalist world economy (Wallerstein, 1974, 1980, 1988).
Regulation School The world-system theorists and the French regulation school offered analyses of significant differences among the NICs in their linkages to the world economy (Wallerstein, 1979; Fröbel et al., 1980; Lipietz, 1987). They explained the rise of the NICs in terms of the semi-periphery (Wallerstein), the new international division of labor (Fröbel). In the tradition of dependency and world-systems analysis, they tended to consider external, structural constraints as fundamental determinants of national economic performances. But these approaches often overlooked the importance of agencies, i.e. state and class, and the political dynamics between them.
Confucian Capitalism Since the 1980s, the ongoing debates on the NICs have paid much attention to the question of why some East Asian countries have grown so much faster than most developed and developing countries. Some scholars have attributed economic development in East Asia to Confucian values, neo-confucianism, or post-confucianism. The Confucian culture has been considered to be a major obstacle to economic development, as argued in Weber s thesis on Confucian China, but some scholars identified culture as one of the most important causes of East Asian economic success (see Pye, 1985; Berger and Hsiao, 1988; Fukuyama, 1995).
The Criticism of Cultural Capitalism These cultural approaches are, however, theoretically limited, relying heavily on examinations of how the Confucian principles affect a high degree of social control, harmony, or trust in these societies. In the recent debates of development studies, many scholars are more concerned with the role of markets and states in economic development rather than cultural explanations (Hamilton and Biggart, 1988). This has led to a renewal of long-standing debates with reference to the rise of the NICs in the 1980s and 1990s.
Theories of the Developmental State Chalmers Johnson argued that Japan, Korea and Taiwan maintained developmental states : market economies in which the state performs a highly interventionist role. Amsden (1989) and Wade (1990) advanced this argument in the study of the role of the state in Korea and Taiwan. The developmental state is a state which sets out to promote national development by means of institutionalized arrangements of policy intervention guided by some kind of plan or strategic goal, and which plays a central role in the process of development. Gordon White (1993) argues that developmental states in East Asia have two different forms: state socialist (China, North Korea or Vietnam) and state capitalist (Japan, South Korea and Taiwan).
Developmental State in Korea Alice Amsden (1989) formulated four characteristics of the Korean economy: (1) the central role of state intervention in markets; (2) the importance of government discipline over private firms in guaranteeing efficiency; (3) the industrial capabilities of large and diversified business groups; and finally (4) the centrality of technological learning for later industrializers. The Korean state has acted as entrepreneur, banker and architect of the industrial structure.
State-led Capitalism While Korea has a relatively small proportion of foreign direct investment in the economy, the Korean state controls most foreign capital and public and commercial loans. The economic bureaucracy (i. e. EPB) has had a very important role in industrial policies through financial control over domestic and foreign capital. Thus the Korean state was described as Korea Inc. or the senior partner, and the economic system as state-led capitalism or guided capitalism
The Asian Financial Crisis In 1997 Thailand, Malaysia, Indonesia and South Korea faced a serious financial crisis following the collapse in asset prices, the extensive financial and corporate insolvency, and the slowdown in economic growth across the region. In the wake of this, it is now evident that East Asia s banks and finance companies operated with implicit government guarantees that often distorted investment decisions, encouraging bankers to finance risky projects in the expectation that they would enjoy the profits, if any, while the government would cover serious losses (The Economist, 13 December 1997: 88).
The Post-Developmental State The post-developmental Korean state, for example, has attempted to develop state adaptability in the face of the globalization process and the economic crisis through: state adoption of globalization as national strategy; state planning for globalization; and finally state adaptation rather than conflict with globalization trends. This state adaptability suggests new ways for the states to coordinate with the increasingly globalizing business corporations.
The Transformation of State-Business Relations The growing presence of the interconnected structure between the state and social groups makes it harder for state bureaucracies to sustain coherent and cohesive state apparatuses in the Weberian sense. But the demise of state bureaucracy does not necessarily mean that organized social groups will dominate the bureaucratic states. The transitional form of state-society relations suggests a more complex transformative structure of social and political interconnectedness, rather than the repositioning of decision-making processes.
Summary Many social scientists and journalists commonly classify world society in terms of First, Second and Third Worlds, though it seems to be quite outdated. Modernization theory assumes that the process of late capitalist development should follow the development courses of the advanced industrial economies. Dependency theory argues that certain state policies in underdeveloped countries serve the interests of the capitalist classes in the advanced capitalist economies. Japan, Korea and Taiwan maintained developmental states that the state performs a highly interventionist role in the process of industrialization.