Modernization Dependency and Neoliberal Theories

Jun 18, 2020 in Comparative Essays

Modernization Dependency and Neoliberal Theories

Modernization, dependency, and neoliberal theories are referred to as the development concepts. All of the theories explain the peculiarities of the economic growth and the possible ways of changes in societies. The major developmental efforts of the international community include the attempts to reduce poverty and provide the well-being of the population as well as increase the national income of the poor countries. Despite the fact that the theories have common goals of the improvement of the life of people in the developing nations, each of the approaches has its peculiarities. Thus, in order to provide insight on whether the theories introduce a positive solution to the overcoming of the problems of the developing nations, it is necessary to analyze the similarities and differences between them. 

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The major differences between dependency, modernization, and neoliberal theories include the basic ideas of the concepts, their ideologies, and the strategies of achieving equality. Thus, modernization theory analyzes the process of the transition from traditional, rural, agrarian society to secular, urban, industrial society. The theory considers which aspects of the countries can be beneficial or which can impose obstacles to the economic development. Modernization foresees the transformations in the economic, social, political, and cultural spheres. However, the key constituents of modernization include urbanization, the application of science and technology, facilitation of the occupational specialization, bureaucratization, and the rise of the educational levels of the population (Inglehart, 2001).

Dependency theory is aimed at the analysis and understanding of underdevelopment tendencies in international relations (Sonntag, 2001). The dependency concept underlines that particular economies remain dependent on the others in terms of the buying or selling raw materials and manufactured goods. This contributes to the occurrence of the states that can be defined as “core” and “periphery nations”. In general, the core states buy materials from the periphery ones at the lower price, but the prices of the goods they sell to them are much higher. It leads to the creation of inequality between states. Moreover, according to the theory, the market principles have only worsened the situation. In particular, the economic relations between the core and periphery states create the conditions of underdevelopment and increase the gap between the developed and developing nations (Sonntag, 2001). 

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Neoliberalism foresees the establishment of free trade between nations, which will improve and maximize profit and efficiency of the countries (Conway, 2014). In order to achieve this, the countries have to remove the obstacle to free trade, including the elimination of tariffs, laws, legislation, and the regulatory measures (Conway, 2014). However, the removal of the barriers will enable the exploitation of the less developed nations. Among the other principles of neoliberalism, there are deregulation, privatization of social goods and resources, and changing the perceptions of the public and community goods to  individualism. 

The three theories in question also have a different approach to the contribution of industrialization to the development process. For instance, according to dependency theory,  inequality is also facilitated by the different role of industrialization in the core and periphery states (Sonntag, 2001). While the developed nations experience a fast pace of industrialization and they have more advanced production process, the developing countries remain mainly agricultural or mining economies with lower prices and revenues. Moreover, the developed world prevents the periphery from the introduction of the technology and its implementation. As a result, technology, as well as investment and capital, concentrates in core states, rather than periphery ones. Moreover, periphery becomes more dependent on the core states and contributes to the transition of its surplus to the core countries. On the contrary, modernization theory considers industrialization to be one of the most efficient ways of overcoming poverty and improving certain spheres of the economy, such as agriculture, in the developing world. 

While dependency theory underlines that inequality between the core and periphery states exists in not only the economic sphere but also it can be found in the political, social, and cultural file, it denies the necessity to adopt the Western values. It is determined by the fact that the Western principles are imposed on the developing nations without taking into the consideration the peculiarities of their development. Furthermore, the cooperation between the core and periphery states is not based on the mutual assistance but a reliance of the developing countries on the developed ones. According to modernization theory, the Western way of life represents one of the most successful ones in terms of the economic, political, and social development. As a result, the repeating of the Western path of development is the solution for the developing nations to overcome poverty. On the one hand, the developing countries should follow the development way of the Western countries. On the other hand, the developed states should assist the poor nations in overcoming the existing problems. 

The three theories also underline that inequality exists not only in the economic spheres but also in the political, social, and cultural spheres. Indeed, according to modernization theory, the relation between the economy, culture, and politics is mutually supportive (Inglehart, 2001). However, neoliberalism, unlike dependency and modernization theories, denies the importance of the improvement of social sphere. In particular, to facilitate development, the expenditures related to health care or education have to be reduced (Conway, 2014). 

Additionally, while modernization and neoliberal theories underline the importance of the international assistance and the crucial role of financial institutions in the elimination of inequality, dependency theory opposes the assistance of the developed nations (Sonntag, 2001). Foreign aid is considered to represent one of the main tools of enforcing the inequality between the periphery and core nations. 

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Finally, each theory provides different drivers that can improve the situation in the developing world. For instance, modernization theory states that economic behavior can be changed by the transformation of values (Inglehart, 2001). In particular, the supporters of the theory provide an example of the Protestant Ethic that played a leading role in the occurrence and establishment of capitalism. Thus, the modern economic development can take place when the traditional value systems are eliminated. Moreover, modernization requires the shift from a religion-based worldview to a rational-legal one, which enables the emergence of a capitalist economy. According to dependency theory, the core states influence the fundamental tendencies of the development in the periphery nations (Sonntag, 2001). As a result, subordinate societies experience changes and modifications in every aspect of their economic, political, and cultural spheres. Thus, to eliminate this dependency, the nations have to reject the Western principles and adopt their way of development and radical changes. Neoliberal theory determines that development can be achieved with the establishment of the free movement of goods, commodities, resources, and commercial enterprises.

Consequently, modernization and dependency theories represent opposite approaches to the concept of development. While modernization has a liberal nature, dependency theory is more radical. However, the theories have some similarities as well. In particular, they are evolutionary concepts that foresee the progress of the countries as a linear fashion. The theories also provide an explanation of the existing gap between the developed and developing nations by a considerable advancement of the wealth countries. Additionally, the concepts underline the existence of the connection between the core nations and the periphery ones.

Both modernization and neoliberal theories underline the importance of the international agents, which enable the development process, such as the International Monetary Fund and the World Bank. According to neoliberalism, financial institutions reinforce the principles of the free trade by reducing the public spending, removing subsidies on basic foods and commodities, and devaluing the local currencies (Conway, 2014). The engagement of the countries in the free trade is also facilitated by the regional institutions of the World Bank, such as the Asian Development Bank or the Inter-American Development Bank, that support the development loans. 

Furthermore, the theories agree that the change comes from top to bottom within a state. However, they do not discuss how the people accept these changes. According to Gardner and Lewis (1996), one of the similarities between the theories is the inability to offer a realistic solution for addressing the underdevelopment. For instance, while modernization underlines the necessity to implement the policies that will provide redistribution of the profit between the elites and the rest of the population, dependency theory suggests radical changes (Gardner & Lewis, 1996). Finally, according to the neoliberal approach to the free trade and the movement of capital, the wealthy nation would get access to maximizing profits and efficiency (Conway, 2014). Thus, all three solutions are either not achievable or they represent the limited improvement opportunities for the developing nations. Moreover, the scholars underline that the global problems of poverty and inequality cannot be explained by the theories of dependency or modernization. It is determined by the fact that despite the achievement of both concepts, the developing nations still experience major problems such as high illiteracy rates, malnutrition, and political instability (Gardner & Lewis, 1996). In addition, the economic growth often foresees the development process in other spheres such as education and health (Gardner & Lewis, 1996). 

Thus, modernization, development, and neoliberal theories agree that there is an existing gap between the levels of the development of the countries. Each of the theories introduces a number of measures that can eliminate the poverty in the developing nations and enhance their economies. However, there are many differences between the principles, strategies, and ideologies of each concept. For instance, each theory provides a different solution to the problem of inequality. Moreover, the theories introduce a different point of view on the role of the developed countries and international financial institutions on the improvement of the economic conditions of the periphery countries. However, all three theories are either not achievable or they provide limited opportunities for the achieving of the equality between developed and developing nations.

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