John Rapley_Development Theory in the Postwar Period_Assignment 1.pdf

Development Theory in the Postwar Period
Chapter 2 of “Understanding Development: Theory and Practice in the Third World”
(John Rapley, 2007)

1. Chapter 2 of “UnderstandingDevelopment: TheoryandPracticein theThirdWorld”
(John Rapley, 2007)
SyadzaSalsabylaTamam
(23/512474/PTK/15045)
Development Theory Assignment 1
MPWK UGM 2023
Development Theory in the Postwar Period

2. Background -History Timeline
•In the early summer of 1944, World War II was about to
come to an end.
•The Bretton Woods Conference was held in New
Hampshire, US, to lead the movement of postwar
capitalist economy by establishing a favorable
international environment for economic growth.
•International Monetary Fund (IMF) and International
Bank for Reconstruction and Development (now World
Bank) were established.
•To follow up, in 1947, General Agreement on Tariffs and
Trade (GATT) was created.
•The US dollar became the universal currency as medium
of exchange
https://www.npg.org.uk/collection
s/search/portrait/mw179585/John-
Maynard-Keynes-Baron-Keynes
John Maynard Keynes –
English economist, best
known for his economic
theories –gave important
contribution in the
Conference
Rapley, John (2007) “UnderstandingDevelopment: TheoryandPracticein theThirdWorld”

3. Classical Political Economy
(with Classical & Neoclassical Liberalism)
Free Market + Individual Liberty = Economic Success
Citizen’s Right Conception
YES
Liberties from coercion
✓To practice religion
✓To trade
✓To do economic enterprise
NO
Rights TO something, e.g.
-Employment
-Housing
-Education
“… that it is not the state's task to redistribute resources to equalize society”
Inequality
Rapley, John (2007) “UnderstandingDevelopment: TheoryandPracticein theThirdWorld”

4. Classical Political
Economy
Economic
depression cause
unemployment
Labor prices drop
Employers hire more
workers
More workers
increase demand for
goods and services
Keynes’ Approach
Economic
depression cause
unemployment
High
unemployment
persist indefinitely
Government spending
on building public goods
More demand for goods
and services
Factories need to
increase output
Factories take on more
workers
The downturn cured
Keynes’ innovation was
call on governments to
borrow,if necessary, to
pump money into the
economy
“
The Impact of
Keynes in the
First World
Rapley, John (2007) “UnderstandingDevelopment: TheoryandPracticein theThirdWorld”

5. The Third
World
Low per
capita
incomes
Most
population
engaged in
agriculture
Exports
come
mainly from
primary
sector
High
population
growth
rates
Ex-colony
of imperial
powers
The
Emergence of
the Third
World
*The First World =
Advanced Capitalist
*The Second World =
Soviet Communist
Rapley, John (2007) “UnderstandingDevelopment: TheoryandPracticein theThirdWorld”

6. Case Study:
Import Substitution
•A strategy in Latin America which
the governments created their
industrial bases to trade among
themselves.
•The governments also encouraged
private firms to produce imported
goods substitution.
•They successfully ended importing
goods and shelter themselves in
global economy.
•E.g. Chile and Mexico
In the early postwar period,
most of the world had
shaken off the bond of
colonialism
Most of the new world
countries were poor with 2
riding priorities:
Development & Independence
Industry was seen as the key to
modernity and wealth
The ability to produce finished
goods and not count on the
imports of the late colonizers
would develop the economy
Rapley, John (2007) “UnderstandingDevelopment: TheoryandPracticein theThirdWorld”

7. Development Theory After Keynes
Modernization Theory
Identify the first world’s condition that had
given rise to the development, and specify
where and why these were lacking in the
third world
Underdevelopment was an initial state
“However the West could help the
development in the third world”
The First World could guide the Third
World’s development through aid and
investment
Dependency Theory
That imperialism had drained the colonies
resources and keep them poor, by striking
alliances with the dependent bourgeoisies
which dominate the capital of the countries
“Keeping its country backward thus
preserved the wealth and privileged
position of a third-world ruling class.
Dependency of exporting primary goods
Industrialism in the third world countries
come not from themselves but emerge
from the first world.
•Prebisch-Singer Thesis : to maintain levels of imports from the first world, third-world
countries would have to export more primary commodities
→“Declining terms of trade” Syndrome →need a “big push” stimulation to break free
•Structuralism : about structural obstacles blocking third world’s path to development

8. Statism in the Third World
Import Substitution Industrialization
(ISI)
→A policy that advocates replacing
foreign import goods with domestic
production
→by imposing trade barriers—
tariffsandimportquotas
•State intervention took different forms in
the first world and the third world
→First World : welfare legislation, public
programs, nationalization of private
industries
→Third World : emerging industries and
creating public ones which had failed
by the private sector
•3 Options for development planners:
Autarky
Foreign
companies
State
Intervention
Nation Restriction
Foreign
goods
Local Manufacturers
flourish
imposes on
Rapley, John (2007) “UnderstandingDevelopment: TheoryandPracticein theThirdWorld”

9. Conclusion
Import Substitution Industrialization became one of the 20
th
century’s
bold and most widespread economic experiments
Even though it may have some holes, this strategy promised many gains
and could help the Third World to develop and bloom

10. Thank you