Юридичний вісник

Y^K 341.01

N. Yakubovska,

Doctoral Candidate at the Department of International Law and International Relations, National University “Odessa Law Academy”, Candidate of Juridical Sciences, Associate Professor

By 1950, it was possible to divide the world into two groups of countries — de­veloped and developing. The fist group consisted of the richest countries of Western Europe, Canada and the United States. The inhabitants of these regions lived (and still do) in wealth and consume most of the world’s resources. Another group of countries from Latin America, Asia and Africa, which accounted for al­most 75 percent of the world’s population, were poor and undeveloped. Economists and politicians from both groups were looking for reasons to explain such dis­parity and for ways of its elimination. The approaches to the economic problems of developing countries were influenced by the success of Marshall Plan, when the huge financial and technical assistance from the United States made possible an amazing and rapid revival of industrial Europe after World War II [1, 93, 98]. This way the development theorizing has began.

Since that time a number of develop­ment theories have been elaborated in economic, social, political and legal sci­ences. Each of them is the product of its times. What began as economic growth to eradicate poverty evolved to include sustainable development, micro-devel­opment, people-centered development, rights-based development, women-cen - tered development, endogenous develop­ment, appropriate development, “Basic Needs”, and both state and market-led development [2, 9].

As Nataliya Ponarina noted, the devel­opment theories carry out two tasks — on the one hand, they must assess the socio-economic problems of “underdevel­opment” (or backwardness) and “devel­opment”; on the other hand, they should be based on problem analysis and enable development strategies [3].

Given the fact that most of developed countries (especially the United States) — the founders of major development theo­ries — are the main violators of their own concepts today — in era of unprecedented global economic imbalances which cause financial and economic systems’ instabil­ity and slow down economic growth of each and every state — to address the true needs of development current inter­national socio-economic and legal order should be redefined and restructured and adequate comprehensive theoretical base for further development promotion should be elaborated. Such situation creates new challenges for economists, policymakers and lawyers within the international de­velopment community (not to mention domestic activists) as it remains unclear (if not doubtful) whether new develop­ment theory ever “see the light of day” or the process of development thinking, or rather rethinking, will remain at the level it had in the 1990’s.

It is not a secret that there is consid­erable amount of literature that studies development theories. For example, devel­opment theories were analyzed in works of Walt Rostow, Arthur Lewis, Samuel Huntington, Brian Tamanaha (modern­ization theories), Raul Prebisch, Andre Gunder Frank, Fernando Henrique Cardo­so, Immanuel Wallerstein (the variations of dependency theories), Deepak Lal, John Toye, John Williamson (assessment of neo-liberal theories), Rumu Sarkar, Ka­tie Willis (criticism and re-evaluation of development theorizing), etc. However, there are no papers describing the devel­opment theory that meets modern day realities.

The present article will highlight the evolution of theoretical perspectives on development. It focuses on theories of economic development as while there are an increased importance of “grassroots initiatives” and a focus on people-centered processes and definitions of development, too often these trends are shaped by a continued faith in the economy as the key factor in development.

The significance of this paper for a contemporary understanding of develop­ment lies in the way it argues that there is a great need to change the development thinking and practice. As financial stabil­ity becomes today the fundamental to the development, fist, the new theory should presuppose the redesign of the modern global financial architecture and estab­lishment of mechanisms able to address economic coordination, macroeconomic and monetary management, financial cri­sis prevention and resolution, as well as trade promotion. Second, and perhaps even more important for newly-designed development theory, it should touch the international legal aspects and substanti­ate the creation of supranational institu­tion (or system of international treaties), which would prevent the policies of some countries (United States, Japan, United Kingdom) to shift their domestic econom­ic problems on to developing countries’ shoulders, holding back the development of latter.

The early development theories were nothing but extension of the traditional economic theory, which equalized deve­lopment to economic growth and indus­trialization. As a result, a new branch in economic science — development eco­nomics — has formed to study economic development and its characteristics in the different regions of the world, in particular the issues of developing countries econo­mic growth. In fact, development econo­mics argued for new Marshall Plan — this time for developing countries.

Two areas of analysis were dominated in the post-war literature on economic de­velopment — the modernization theory and dependency theory. Another approach, linked to neo-liberalism came later. Each of these major schools is divided into separate areas, concepts, models and dif­fers in perception of development process main purpose, perspective and nature.

Modernization theory in its classical form has gained scientific and public rec­ognition in the 1950s — mid 1960s. Many theorists of those times saw the develop­ment as a natural and inevitable process that must be passed by each state. De­velopment was understood as a synonym of high economic growth, which was achieved by Western Europe and North America. “Backward” countries of Asia, Africa and Latin America were to adopt the historical experience of the modern developed states transformation from poor agricultural countries to the industrial gi­ants [4, 79]. A vague term “moderniza­tion” has combined not only economic but also political, social and cultural changes associated with industrialization, urban­ization, bureaucratization and democrati­zation in the Third World countries.

American economist, sociologist and historian Walt Rostow was the most in­fluential and prominent representative of the modernization theory. According to Rostow, all countries should pass through five stages of economic development: the traditional society, the preconditions for take-off, the take-off, the drive to matu­rity, and the age of high mass-consump - tion [5].

Another “products” of modernization theory were “Political development” and “Law and development” movements. The processes of political development was described in details by American political scientist Samuel Huntington. As Hun­tington wrote, “modernization affects all segments of society; and its political as­pects constitute political development” [6, 386-387]. He notes that there are many definitions of “political develop­ment” (or “political modernization”), but they all, with a few exceptions, share four characteristics. First, rationalization, based on the pattern variables of the Talc - ott Parson’s theory of social action. Sec­ond, nationalism and national integration, which are of especial importance in the context of the crisis of national identity and the likelihood of ethnic conflicts that threaten developing countries. The third element — democratization, which means pluralism, competitiveness, equalization of power, etc. The fourth characteristic is the mobilization and participation: “Mod­ernization means mass mobilization; mass mobilization means increased political participation; and increased political par­ticipation is the key element of political development” [6, 388].

“Law and development” movement appeared in 1960s due to the efforts of American scholars, as well as govern­mental agencies such as USAID and the Peace Corps, and funds such as the Ford Foundation and the Rockefeller Founda­tion. The ideologists of “Law and devel­opment” espoused the idea that emula­tion of the Western legal principles and institutions lays the foundation for legal development, and therefore, supports the development process in general [7, 369].

In the 1970’s, in light of the devel­oping countries failure to develop eco­nomically and because of the prolifera­tion of authoritarian and military regimes [7, 371], modernization theories and their “recipes” of economic development were challenged by scholars who emphasized the inapplicability of assumptions made by Western economic theory to the situ­ation in the Third World, which simply lacks structural, institutional and cultural conditions prevailing in post-war Europe that determined the success of the Mar­shall Plan [4, 81-82].

As a result, in late 1960s — early 1970s, the dependency theory has spread, replacing modernization theory. In con­trast to modernization theory, dependen­cy theory was elaborated in the develop­ing world, primarily by Latin American scholars. Dependency theorists, or de- pendistas, relying on elements of Marxist political economy, have critically studied the basic structures and relationships that lead to inequality in income, infrastruc­ture and quality of life between First and Third World. The main argument of de­pendency theorists — the backwardness of the Third World was the result of Euro - American expansion and the inclusion of the colonized countries into the world economy.

Dependistas have put forward various theories based on this argument. But they mostly agreed in opinion that the unequal nature of the interactions between the states has led to relationships described as a dominant/dependent, center or core/periphery, metropolitan/satellite. In general, the image projected by depen­dency theory was that the wealth of the Western core is based upon keeping the developing periphery in a state of perma­nent dependency and underdevelopment [8, 477].

The existence of the hierarchy in glob­al economic system was also a key factor in the world-system theory developed by Immanuel Wallerstein. The world-system theory is often associated with the depen­dency theory since they share many ideas, such as the exploitation of the periphery by the core, and focus on the importance of national economic development in a global context. However, unlike the de­pendency theorists, Wallerstein tried to go beyond the “dualist” models. Instead of looking at the world from the “center” and “periphery” perspective, Wallerstein proposed tree different categories: “core”, “semi-periphery” and “periphery”. The categories describe each world region’s relative position within the world econ­omy as well as certain internal political and economic characteristics. What was important is that, according to Waller­stein, over time states could move from one category into another depending on the economic situation [9].

While representatives of dependency theory have criticized the modernization theorist for being “ahistorical”, the ma­jority of their arguments were also chal­lenged, mainly by examples when periph­ery countries achieved economic growth and development being linked to indus­trialized countries, and even challenge economic superiority of the latter. The emergence of newly industrialized coun­tries in East Asia has called into question the ideas suggested by the dependency theory. By the 1980s dependency theory mostly went to the “dead end”.

Two dominant development theories (modernization and dependency) were re­placed by the ideology of neo-liberalism that emerged in the 1980s as an econom­ic strategy employed by many industrial­ized countries to get out of the financial crisis that followed the oil-induced world recession. Formulated originally as an economic strategy to open markets for the circulation of capital, neo-liberalism quickly became associated with the ide­ology of development, aimed at reducing the role played by governments and “dis­covery” of poor countries to the global capital flow.

The “Washington Consensus” is per­haps the most famous example of the neo-liberal development theory implemen­tation. It is the title of political program designed by Bretton Woods institutions, which played a key role during the 1980s and 1990s when most developing coun­tries were charring out far-reaching mar­ket reforms. There was the continued belief that market liberalization and open­ing up to international trade and finance would be key to solving the problems of developing countries by strengthening their productive capacity, raising pro­ductivity and accelerating technological upgrading [10, 41-42]. IMF and World Bank have acted both as lenders, impos­ing their policy conditionality on borrow­ing countries, and as “think tanks” with a major impact on the international policy debate [10, IV]. Due to its lending activi­ties and political support from the major industrialized countries, the IMF and the World Bank largely determined the nature and methods of the macroeconomic poli­cies of developing countries and their de­velopment policy. These policies included maintaining small budget deficits, broad­ening the tax base, ending state subsidies, allowing the market to set interest rates, liberalizing trade and foreign investment, privatizing state-owned enterprises, abol­ishing impediments to foreign direct in­vestment, and guaranteeing secure prop­erty rights [11, 8-17].

In the twenty-first century, given the increasing imbalances in the world econo­my, financial stability becomes the funda­mental to the development. This situation brought states to choose whether to make restrictive monetary and fiscal policies to limit the growth in living standards, in particular — to restrain consumer de­mand for imported goods, stimulating the development of the national production of goods and services, which will take its place on the world market, or vice versa

— to expansionary monetary and budget policy, stimulating domestic demand and, consequently, economic growth, a con­stant increase in the budget and budget assistance of external financial resources. Most developing countries, including Chi­na, some European countries, with Ger­many, Sweden, Finland, chose the first way. United States, Japan (from the sec­ond half of 2012), most European coun­tries (including France, UK, PIGS) chose the second way.

None of the development theories de­scribed above explains how to redesign the modern global financial architecture and create an institution which would pre­vent states with expansionary monetary and fiscal policies to shift their domestic economic problems on to developing coun­tries, holding back their development. The elaboration of modern development theo­rizing that would enable new development strategies remains an open question.

Keywords: development, development theory, modernization theory, dependency theory, neo-liberal theory.

The article emphasizes a fundamen­tal need in modification of development thinking and practice. The basic devel­opment theories — modernization the­ory, dependency theory and neo-liberal theory — are examined. The necessity of modern development theorizing con­tributing to the redesigning of the cur­rent global financial architecture and to the creation of an international le­gal framework capable to prevent states with expansionary monetary and fiscal policies policy to shift their domestic economic problems on to developing countries holding back their develop­ment is justified.

У статті наголошується на прин­циповій необхідності модифікації тео­рії та практики розвитку. Описано основні теорії розвитку — теорію модернізації, теорію залежності і не­оліберальну теорію. Обрунтовано не­обхідність розробки сучасної теорії розвитку, яка сприятиме перебудові сучасної глобальної фінансової архі­тектури і створенню міжнародно- правової бази, здатної перешкоджати державам з експансіоністською гро­шово-кредитною і бюджетною полі­тикою перекладати свої внутрішні економічні проблеми на країни, що роз­виваються, стримуючи їх розвиток.

В статье подчеркивается принци­пиальная необходимость в модифи­кации теории и практики развития. Описаны основные теории разви­тия — теория модернизации, теория зависимости и неолиберальная тео­рия. Обоснована необходимость раз­работки современной теории разви­тия, способствующей перестройке современной глобальной финансовой архитектуры и созданию междуна­родно-правовой основы, способной воспрепятствовать государствам с экспансионистской денежно-кредит­ной и бюджетной политикой пере­кладывать свои внутренние экономи­ческие проблемы на развивающиеся страны, сдерживая их развитие.


1. Contreras R. Competing Theories of Economic Development // Transnational Law & Contemporary Problems. — 1999. — Vol. 9. — P. 93-108.

2. Gordon R. Deconstructing Development / R. Gordon, J. Sylvester // Wisconsin

International Law Journal. — 2004. — Vol. 22, Issue 1. — P. 1—98.

3. Понарина Н. Н. «Глобализация и мо­дернизация: соотношение тенденций» // Инженерный вестник Дона. Электронный научный журнал. — 2011. — № 2. — Ре­жим доступа : Http://ivdon. ru/magazine/ archive/n2y2011/453

4. Тодаро М. П. Экономическое раз­витие : учебник / М. П. Тодаро ; пер. с англ. под ред. С. М. Яковлева, Л. З. Зеви - на. — М. : Экон. фак. МГУ, ЮНИТИ, 1997.

— 671 с.

5. Rostow W. The Stages of Economic Growth: A Non-Communist Manifesto / W. Rostow. — Cambridge : Cambridge University Press, 1960. — 191 p.

6. Huntington S. Political Development and Political Decay // World Politics. — 1965. — Vol. 17, N 3. — P. 386-430.

7. Sarkar R. Critical Essay: Theoretical Foundations in Development Law: A Reconciliation of Opposites? // Denver Journal of International Law and Policy. — 2005. — N 33. — P. 367-378.

8. Tamanaha B. The Lessons of Law-and- Development Studies // The American Journal of International Law. — 1995. — Vol. 89, N 2.

— P. 470-486.

9. Wallerstein I. The Modern World- System I: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century / I. Wallerstein.

— University of California Press, 2011. — 410 p.

10. Trade and Development Report / United Nations Conference on Trade and Development // UNCTAD/TDR/2006. — [Electronic Source]. — Available at : http:// unctad. org/en/Docs/tdr2006_en. pdf

11. Williamson J. Latin American Adjustment: How Much Has Happened / J. Williamson ; Institute for International Economics. — 1990. — 445 p.