Trickle down system, a quick fix from neo-classical point of view

The whole idea of development came through the Enlightment in Europe during the late 1800's, and during a period in time clearly focused on European achievements (Potter et al, 2008; 6-7) Included in these achievements and growth of European welfare, is colonialism or rather preferred in development studies; imperialism (ibid; 47-51) Colonialism led to the division between us and them, the advanced and backwards, and came to dominate in the way we think about global policy making (ibid; 83).

Neo-classical theories expects all countries to want to follow these western footprints, undeveloped countries are undeveloped because they have not yet been reached by the western standards. This policy of industrialization by invitation believes that all countries can and wants to achieve what the western world has (ibid; 91) It equalizes development with capitalism and "westernization", and has been argued not at all to be appropriate strategy for all countries (ibid; 14). This point of view lets neo-classical theorists justify their actions in the less developed states, since they want these regions to have the same industries and the same free markets as back home, and so they ''help'' these states to become ''as developed' (ibid; 83).

There are of course different strategies to development in top-down theories, but according to neo-classicism, the liberal model seems to me to be the most popular (Potter et al, 2008; 91, 94). Here the unrestrained free market is key, the government should not intervene and try to solve the inequalities in a land, these inequalities is what capitalism feeds of (ibid; 16, 84) Neoclassical theories encourage individual empowerment through liberalizing of the economy, entrepreneurship and a competitive market (ibid; 95).
Its argued that as this free market is introduces there will of course always be inequalities, but this is the carrot for growth, it will create a sort of chain reaction and demand other sectors in a society to grow (ibid; 83-84). Government interventions to equalize capital and welfare, would only slow down the development process, which they trust is only a time-based, the spatial diffusion of industrialization and modernity will reach all in time (ibid; 87,89).
The idea that modernization will spread from urban to rural areas, from rich to poor, is called a top down paradigm of development, which means that modernization originates from the top countries and progressively reaches down to the lower ones (Potter et al,2008; 89).
So even if this theory acknowledge inequalities as unavoidable , they claim these are only in the beginning stages of development , at any geographical scale, and this differences in capital and welfare should and will steadily disappear as this capital "trickle down". This "tricke down" effect move from the top to the middle, and eventually "bottom layers" and "backward" societies will be developed (Potter el al 2008; 83-84).

It seems to me that the neoclassical strategy is to make some individuals rich in a country, and some poor, since far from everyone, even if a free market is introduced, has the same opportunities to start successful businesses. This is an idea that Myrdal stressed, he believed that even given unstrained free market capacity, the accumulation of increasing differential growth and inequalities would always be greater than the spread effects and the positive outcome of the trickle-down theory (ibid; 97) .
In neo-classical theory, growth and development is the same thing, but they can only prove this by pointing at the history of the western states. The western experience of the growth through industrialization and capitalism, that resulted in these modern standards, claims to be applicable anywhere (ibid; 91). To feed this point of view, many neo-classicist can point to several Asian countries, and say ''look, they did it!'' (ibid; 14).
Rostow's model gives every country the same chance to develop in the same way as the west has, which again is taken for granted that everyone wants (ibid; 90) Rostows stages of economic growth is often used in neo-classical development theory. He claimed that there are five stages which all countries must pass through. The first is the traditional society, which gradually then evolve into the age of mass consumption, where people cannot just mass produce but also mass consume. This model clearly favors growth through industrialization and culmination at mass-production, and is extremely subjective in my opinion (ibid; 90-91).

It seems to me that without inequalities, capitalism can't work, it needs to accumulate surplus all the time, and the only way to accumulate surplus is through cheaper and cheaper labor and production. Truth is though, with all countries in the world "developed", there could be no more growth, since production costs would equal prices, and thus no surplus.
Baran had a radical perspective of development theory; his principal idea is much like the one I just explained. He meant that economic surplus is created by inherent working of the capitalist system, and by surplus he meant the excess of production over the needs of consumption, and exists as a material quantity of goods. Once this surplus is distributed within a society, it becomes a surplus of time and energy. And those who don't have to produce their own means of subsistence thus have more free time. Part of the surplus being made can be restituted to the parasitic groups, the elite groups, the developed world, who diverts much of the economic surplus in to immoral consumption (Potter et al, 2008; 107).
According to the radical approach, the injustice and inequalities is a product of capitalism, rather than a step on the way. This perspective looks through the eyes of the others, the ''less developed'' and sees and different truth than the capitalists. First of all it is the western world who sets the bar and the standards for development and decides who is undeveloped and not, and second it's the western world who claims to have the power to help undeveloped countries out of poverty (ibid; 106).
Escobar argues that inequalities is a product of development (ibid; 17). If one equate development with economic growth and income, it's easy to say that development in the sense that we have today, isn't working. Even if people today have higher incomes, the gaps between the highest and lowest have never been bigger. Thus development in this sense, doesn't seem benefit all. Then again we have seen the average income in previously poorer countries rise, (ibid; 36) although I myself question if this is due to capital development or something else.

Frank believed that development and underdevelopment both are necessary outcomes of the contradictions of the capitalist system of development. He argued that the condition of developing countries is not based upon misfortune, climate or change, but rather an image created when trying to fit into the capitalist system, which they have been incorporated by without further consideration. Underdevelopment he stated was a direct outcome and reciprocal of a development somewhere else (ibid; 110). In other words it's a dependency theory that focuses on bottom up, which means that the bottom supports the top and not the other way around. The rich countries are dependent on the poorer ones, this distribution and division of labor is what lets some of us in the world be rich and others poor. Another prominent speaker from the dependency theory is Hettne, who noted just this, that the biggest obstacles to development is not the lack of capital or skill, but the division of labor (ibid; 112). In summary I believe one could say that the biggest difference in the sense of inequalities, between neo-classical theory of development and radical theory, is in the action of the state. Should a state decide to not have a free market, and first of all care about its own population and markets, it would likely have a radical approach, and a non-state intervention would follow neo-classical arguments.

Källförteckning:
Potter, Robert B. (2008). "Geographies of development: an introduction to development studies". 3. [revised] ed. Harlow: Pearson Prentice Hall






Anna Elfström
Hemtentamen SGEA40
901011-5989
2014-10-31