speri.comment: the political economy blog

Models of development and models of capitalism

Political economists need to clarify what we mean by these terms and explain how we should use them in the new era

Professor Tony Payne, Director of SPERI

Tony Payne

Tony Payne

We have talked a lot in political economy over the years about models of development and models of capitalism. These phrases have been widely applied in attempts to chart and categorise the real-world efforts of countries to build distinctive and viable political economies.  It’s interesting that models have nearly always been associated with countries and I will say something at the end about whether that should necessarily still be the norm in the context of globalisation.

From the perspective of my previous post about the obsolescence of the distinction still so often drawn between ‘developing’ and ‘developed’ countries, it’s striking too that the ‘models’ literature comes from both sides of that old divide.

On the ‘developing’ side, the models of development literature goes back to studies of various state-led strategies of import-substitution industrialisation pursued in Latin America in the 1960s and 70s. Some analysts emphasised institutional variation in state/society structures as the key; others operated in the Latin American dependentista tradition, highlighting the lack of autonomy of national political economies in relation to powerful external forces.  Similar themes were then addressed in an African context (often expressed as a clash between Tanzanian socialism and Kenyan capitalism) and revived once more in relation to ‘newly industrialising countries’ in East Asia during the 1980s.

On the ‘developed’ side – where the preference was to refer to models of capitalism – there existed the same intellectual tension between a (dominant) institutionalist and a (critical) Marxist wing.  Nevertheless, there was a general recognition that ‘logics’ in societies created varying ‘social configurations’ that could be dissected and categorised by reference to  a number of variables, such as labour and management skills, systems of industrial relations, financial markets, industrial structures and political institutions.  On this basis, many analysts worked busily to draw important distinctions between models of capitalism according, broadly, to whether they were more or less market-led or trust-based.

Yet, as my Sheffield colleague, Nicola Phillips, pointed out some while ago now in her first book (which, incidentally, identified a Southern Cone model of regional capitalist development in Latin America), an awful lot of essentially ‘common ground’ characterised these two separate political economy debates.  She was right: for we can now see that this is really just one piece of terrain, both intellectually and politically.

With socialism, at least as we knew it, inoperable in a globalising world order, every country seems now to be in search of a model of capitalist development that works for it.

As you can see, I am tempted to bring these two words together and talk from now on of capitalist development, but in truth terminology no longer matters that much.  In fact, the phrases – models of development and models of capitalism – can almost be used interchangeably these days, with the former merely emphasising the desired end and the latter the adopted means.

The point is that, as political economists, we must ask exactly the same analytical questions about all models of capitalist development, no matter where they are being pursued in the world.  These questions will vary in formulation according to intellectual taste.  But they need to include some variants of the following:

  • What are the core economic attributes of the country? What can it make and sell best?
  • What is the institutional basis of its state? How does it typically act and think?
  • What mix of domestic and extra-territorial social forces bear upon the country’s governing elite?  How do they either sustain or challenge the elite?
  • What ideological claims, if any, are being made by the governing elite to promote its strategy and ambitions?
  • What are the impacts of any overarching regional arrangements within which the key economic, social and political actors of the country are enmeshed?
  • What is the position of the country’s political economy in the wider global order and what mechanisms exist to adjust and reshape that position?

Once we have convincing answers to these questions, we can describe and characterise the overall strategy of capitalist development of a country – the model, if you like, that it aspires to achieve.  Everything else – namely, its particular fiscal, monetary, industrial, education and foreign policies – should be understood as component parts of this whole.  Of course, this is often not the case in practice! Contradictory, even conflicting, policies that do not add up to a strategy are not exactly uncommon in real-world political economy….. Just look around you!

I said earlier that I would return to the question of whether only countries can pursue models of capitalist development.  I think that countries have a responsibility to do this, especially where governments enjoy a democratic mandate to service the well-being of the people.  But, in our current globalising era, it is possible and desirable that other entities should also identify and pursue models of capitalist development that appeal to them.

Market fundamentalists probably suppose that capitalist development can just take off by means of the working of the invisible hand and the sheer force of human creativity and innovation, and thereafter spread wherever its fancy takes it.  Alternatively, I tend to think that some sort of spatial zone has to be identified and that relevant actors need to possess some steering capacity by which to frame development options.

But this space no longer needs to be a country with a national government.  It could be a city like London with a mayoral authority, or a sub-region like Catalonia, or a state of a state like California; it could certainly be a defined regional apparatus like the EU, and it could even be a cross-border (or micro-regional) entity like, say, Black Sea Economic Cooperation.  It could in theory even be something called ‘Spaceship Earth’, except that unfortunately there is insufficient evidence as yet of the existence of a functional steering capacity at that level.

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