Steve Juanico

Professor Triadafilos Triadafilopoulos

International Politics 104

6 May 1999

What accounts for differences in wealth between rich and poor countries?

Use Modernization and/or Dependency theory to frame your answer.

     Pope John Paul II, the spiritual leader of the Roman Catholic Church, visited

Mexico on January 22, 1999, and there he spoke out against the unfairness of the

global economy: "The human race is facing forms of slavery which are new and

more subtle than those of the past, and for far too many people, freedom remains

a word without meaning. . . . International institutions, national governments and

the centers controlling the world economy must all undertake brave plans and

projects to insure a more just sharing of the goods of the world."1   Why does the

Roman pontiff believe that the world economy is unjust?  A few statistics on the

economic disparity between rich and poor countries may help explain why.  The

World Bank reported in 1989 that the average per capita GNP of nineteen

member countries of the Organization for Economic Cooperation and Development

was "more than twenty-three times larger" than the average per capita GNP of

      1Alessandra Stanley, "Pope is Returning to Mexico With New Target: Capitalism," 

The New York Times 22 January 1999:A1.

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of ninety-five low-and middle-income nations.2   The life expectancy for a

regular resident of a rich country was seventy-six years; on the other hand, a

typical person of a poor country could only expect to live for sixty-three

years.3   The World Bank published in 1990 a report stating that chronic

malnutrition affected "950 million of the world's 5.2 billion people," since the

diet of poor countries had  more than one-quarter fewer calories" than the

standard diet of rich states.4   How can we explain the egregious economic

inequality between rich and poor countries?  Scholars have formed two different

theories to interpret, analyze, and resolve the economic gap between rich and

poor states.  These two theories, named modernization and dependency

respectively, have defined the political debate on the development gap between

rich and poor countries: "Northern spokespersons often appeal, implicitly, to

modernization theory, which emphasizes the benefits of the South of openness to

trade and investment from the North.  Third World representatives, on the other

hand, regularly invoke dependency theory as a basis for demanding reform of an

exploitative world economic system."5   This paper will explain the differences in

wealth between rich and poor countries by using  modernization theory.

        2Thomas D. Lairson and David Skidmore, International Political Economy: The 

Struggles for Power and Wealth, (New York: Harcourt Brace College Publishers, 1993) 184.

       3Lairson and Skidmore 184.

       4Lairson and Skidmore 184.

       5Lairson and Skidmore 184.

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    Modernization theory focuses on the industrializing experience of rich

countries in their journey toward modernity.  For a country to become modern, it

has to industrialize first.  Scholars who espouse modernization theory believe

that the rich countries are wealthy today because of their success in embracing

the concept of modernity.  Modernity, for them, brings the blessings of progress

in every sphere of human life.  Modernization theorists see

        the obstacles to Third World development through the prism of the North's

        own development experience.  The North grew rich . . . not by exploiting the

        South, but by discovering the secrets of sustained economic growth.  The

        cultural values and social, political, and economic institutions that provided

        the keys to Northern development are embodied in the notion of modernity.6

In what ways do traditional societies differ from modern ones?  For one thing,

traditional societies are deeply rooted in religion while modern societies are

secular.  The secularization of society entails the separation of social, political,

and economic values from religion.  For example, England, the first nation to

industrialize, began the secularization process during the reign of Henry VIII

        6Lairson and Skidmore 186.

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(1509-47) when England broke its ties with Rome.  Although Henry had his own

vested interest in forming the Anglican Church, the main consequences of his

action were the destruction of the reactionary influence of the Roman Catholic

Church, which was one of the pillars of the feudal order, and the subjection of

ecclesiastical authority to the secular power of the king.  Another feature of

traditional societies is the predominance of rural life.  Modern societies, on the

other hand, have converted agrarian society into an urban community based on

commerce and trade.  Again, in England, the destruction of rural society was

accomplished through the enclosure movement, a process that involved the

forcible sequestration of the commons by the landed aristocracy and the landed

gentry. Consequently, the dislocated peasant, deprived from using the commons,

had no alternative but to sell his or her labor in the towns and cities.  Still

another characteristic of traditional societies is the inherent tendency of its

people to rely on customs and traditions to solve societal problems.  There is

little or no incentive for innovation and change.  Why?  Because within the

traditional person the spirit of fatalism reigns supreme.  The traditional person

believes that nature cannot be altered; therefore, it is futile to change things

that are beyond one's control.  Consequently, the traditional person loathes to

take risks and, instead, does things based on time-tested methods and practices.

The modern person, in contrast, believes in the power of reason to tame and

transform nature.  She has faith in the inevitabel triumph of progress.  Thus,

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modern societies are creative and open to change.  Also, one's place in a

traditional society is determined by the status of one's parents.  If one's parents

are peasants, then one becomes a peasant also.  Status is inherited.  Social

mobility, however, distinguishes modern societies from traditional ones.

Generally, the only factors that prevent individuals in modern societies from

improving their status are their own abilities and their tolerance for hard work.

Furthermore, modern societies resemble the civil society of the ancient Greek

polis —where citizens had equal rights and where the rule of law prevailed.  In

England, the process of establishing a civil society began when the nobility, the

church, and the urban middle class forced King John to sign the Charter of the

Magna Carta in 1215—the document that limited the king's arbitrary power to

levy taxes in the forms of scutage (money paid in lieu of military service) and

aid.  Moreover, whereas subsistence farming and feudal relationships

characterized traditional economies, capitalism and the free market ethos

dominate modern societies.  Land and human labor are commodities that

are subject to the fluctuations of the market.  Lairson and Skidmore mentioned

(1) secularization, (2) urbanization, (3) the rise of science and technology, (4)

increased social mobility, (5) a system of social rewards based upon merit rather

than inherited status, (6) the ascendance of rule by law, and (7) the development

of an extensive division of labor within society as some of the  principle elements

of modernity."7  They also acknowledged that

       7Lairson and Skidmore 187.

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        Traditional societies are dominated by religious authority, revolve around

        rural life, lack the capacity to generate scientific and technological

        discoveries, suffer from rigid social structures allowing little mobility,

        distribute social rewards based upon inherited status rather than merit,

        discourage innovation and new ideas, place few controls on the arbitrary

        exercise of political authority, and feature little social differentiation.

        The economies of traditional societies often rest upon either subsistence

        agriculture, where extended families produce only for their own needs, or

        feudal or semifeudal landholding arrangements, where relatively small

        numbers of large landowners live off of the surplus produced by an

        indentured peasantry.8

"The most critical element in the transition from a traditional society to a

modern one," Lairson and Skidmore argue, "is the emergence of a system of

rewards for innovation.  The society must not only come to expect and welcome

change and to embrace the notion of progress, but also willingly tolerate the

inequalities which result from allowing individuals to reap handsome private

     8Lairson and Skidmore 187.

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returns for innovations that have high social value."9  Modernization theory,

therefore, suggests that the rise of capitalist institutions is the key in turning

traditional societies into modern ones.10The poor countries of today are poor

because they have not discarded their "traditional ways of organizing

society."11  As a result, modern capitalist institutions cannot emerge.  As Lairson

and Skidmore explain:

        Modernization theorists suggest that before sustained and self-generating

        economic growth becomes possible in the South, Third World societies must

        undergo the same transition from traditionalism to modernity previously

        experienced by the North.  The path to development thus lies through

        emulation of the North.  The principle obstacle to modernization arises

        from the persistence of traditional cultural values and institutions in the

        South that are incompatible with economic growth and industrialization.12

        9Lairson and Skidmore 187.

       10Lairson and Skidmore 188.

       11Lairson and Skidmore 186.

       12Lairson and Skidmore 188.

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For example, in India's past no entrepreneurial class emerged because whatever

wealth an individual may have saved in his lifetime reverted to the Mogul

treasury upon his death.  Thus, ostentatious display of wealth became the norm in

Mogul India.  No surplus was generated to finance other economic ventures.  This

was also the case in France where the absolute rule of the Bourbon kings stifled

the entrepreneurial spirit by creating an atmosphere of uncertainty and fear.

The English monarchs, on the other hand, never achieved the divinely-sanctioned

absolutism of the French kings (Charles I had the temerity to try, but he lost his

head).  More importantly, the landed aristocrats, many of whom were members of

Parliament, themselves spearheaded the Industrial Revolution by destroying the

feudal order through the enclosure movement.

    Supporters of modernization theory agree that economic interdependence

between rich and poor countries is useful, not only for the exchange of material

benefits, but also "for the beneficial impact such ties have in helping to erode

and undermine the traditional social values and structures that hold back

development."13  This is the reason why the United States, the contemporary

champion of capitalism and earth's remaining hegemon, wants the poor countries

to integrate into the global economic system, so that they can receive the

bounties of trade as well as absorb modernizing values.

        13Lairson and Skidmore 188.

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    Finally, critics of modernization theory contend that the problem of

underdevelopment lies not with the inability of poor countries to break their

traditional characteristics, but with the exploitative relationship between rich

and poor states.14  They illustrate this relationship by using a center and

periphery analogy.  The center is composed of countries that have advanced

industrialization, advanced technology, high wage rates, and high living standards;

the periphery, on the other hand, is composed of countries that are the complete

opposite of the center.15  The center exploits the poor countries by buying the

periphery's cheap raw materials and selling to them their expensive industrial

products (since world market prices for raw commodities are lower than the

prices of manufactured goods).  Furthermore, multinational corporations based in

the rich countries help exploit the poor countries by bringing technology that is

of little use in the local context and by repatriating their profits back to the

home country.16  Lairson and Skidmore reveal the origin of this relationship:

        Third World countries were drawn into the capitalist world  economy

        through colonialism as well as the expansion of European  trade and

        investment.  European countries used their political domination to create

        14Lairson and Skidmore 191.

       15Lairson and Skidmore 191.

       16Lairson and Skidmore 192.

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        and enforce a division of labor which reserved the most dynamic segment of

        the world economy for themselves.  North-South trade was built around the

        movement of manufactured goods from North to South and the transfer of

        primary products . . . from South to North. . . . Colonialism left the

        economies of Southern countries geared more toward the needs of Northern

        markets than the domestic needs of their own societies. This set of economic

        relationships . . . outlived colonialism itself.17

I agree with Lairson and Skidmore's assessment.  The colonial history of my

homeland, the Philippines, which was "liberated" by the Americans from Spanish

tyranny, showed signs of this exploitative relationship.  For example, on the eve

of World War II, 81 percent of Philippine exports (sugar, mineral ores, tobacco,

coconut products, abaca) went to the United States while 84 percent of

Philippine imports came from America.18  Of the $200 million of American

investments in the Philippines before the Japanese attack on Pearl Harbor, less

than 4 percent was invested in the manufacturing sector, and mostly in the

processing of raw materials for export.  Thus, the Philippines became dependent

on the U.S. market.  When the Philippines was "granted" independence in 1946,

the U.S. Congress passed the Philippine-U.S. Trade Act that restored the colonial

free trade system for twenty-eight years.  A parity provision that gave

        17Lairson and Skidmore 191-92.

       18William J. Pomeroy, An American-Made Tragedy: Neocolonialism and Dictatorship 

in the Philippines, (New York:International Publishers, 1974) 9.

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gave American citizens absolute equality with Filipinos in the exploitation of

natural resources and in the ownership of public utilities and land was included in

the Trade Act.  This provision required an amendment to the Philippine

Constitution.  To ensure its approval, the United States threatened to withhold

war damage payments until the amendment passed.  But what I find most

regrettable, however, is the lost opportunity for change.  The United States

could have initiated genuine reforms—reforms that could have destroyed the

traditional values and structures of the country—after the war since the whole

nation was in shambles and the landed elites dislocated.  But the United States

brought back the status quo, and now the Philippines is still suffering from the

effects of colonial rule.  On the other hand, I do believe that it is a waste of

energy for poor countries to dwell on the past or to change things they do not

have the power to correct (since the rich countries have overwhelming economic

and military resources).  It is relevant to remember what the ancient Athenians

said to persuade the Melians to join them in their war against Sparta: in the real

world, ". . . you know as well as we do that . . . the standard of justice depends on

the equality of power to compel and that in fact the strong do what they have the

power to do, and the weak accept what they have to accept."19  This is my advice

to poor countries: if you can't beat them, join them.  And leave justice to God.

        19Thucydides, "The History of the Peloponnesian War," Conflict and Cooperation:

 Evolving Theories of International Relations, ed. Marc A. Genest (New York: Harcourt

Brace College Publishers, 1996) 56.