The Political Economy of Neo-modernisation

Rethinking the Dynamics of Technology, Development and Inequality

Seung Jin Baek

• Publisher: Palgrave Macmillan
• Year: 2018
• ISBN:
  9783319913940
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

Is there a limit to technological advancements? Are technological advancements creating a more equal and fair world?Starting from influential thinkers driving a never-ending evaluation of development discourse – incorporating theories of modernisation, endogenous growth, globalisation, neoliberalism and several others – Seung-Jin Baek answers these questions and sets out practical steps to create societies that are more equal in the Fourth Industrial Revolution.

This book explores why Western-centred development strategies are unlikely to bring about similar developmental paths and outcomes in developing economies. By theoretically and empirically assessing the Technology-Development-Inequality nexus, Baek explores why a distorted developmental path has been observed in recent years, with high income countries being associated with rising inequality.

This is important reading for all those seeking to understandinternational development in a twenty-first century context.

Part IMeta-Narrative on the Technology-Development-Inequality Nexus

© The Author(s) 2018

Seung Jin BaekThe Political Economy of Neo-modernisationhttps://doi.org/10.1007/978-3-319-91394-0_1

Begin Abstract

1. Uncovering Complexity in the Policy Mix for Sustainability Transitions

Seung Jin Baek¹

(1)

United Nations Economic and Social Commission for Western Asia, Beirut, Lebanon

Keywords

Economic GrowthInequalityTechnological InnovationSustainable DevelopmentStructural Transformation

End Abstract

Background to the Policy Mix

Over the past half a century, the world has experienced rapid change. Indeed, during this time, the world economy is estimated to have expanded four times, which can be translated to mean continuous annual growth of over 3 per cent.¹ But behind this trajectory, ideas about development have been in a state of constant flux, with influential thinkers² driving a never-ending evaluation of development discourse—incorporating theories of modernisation, endogenous growth, globalisation, and neo-liberalism among others.

This upward trend in aggregate economic growth has also been associated with diverse experiences (see Fig. 1.1).³ For instance, developed economies have made economic progress over the same period at about three times bigger in size. In terms of per capita gross domestic product (PCGDP), this advanced group reached US$44,074 in 2016, which is more than four times greater than that of the world average ( US$10,133). The growth contribution of developed countries to global development was at about 60 per cent in 2016, although it had shrunk by 18 percentage points from 78 per cent over the period in 1970.

Fig. 1.1

Historical improvement of economic growth: Developed versus developing countries, 1970–2016. (Source: Author’s own elaboration on the basis of the UNCTADstat (2018))

Developing countries, on the other hand, have made remarkable progress in sustaining positive growth over the last five decades while improving their performance on social indicators such as health and education. Real GDP volume increased by 655 per cent between 1970 and 2016, which is more than three times the global rate of 211 per cent. These economies are thus increasingly referred to as the new growth engine of the world as many have the tendency to grow more rapidly than high-income countries, thereby converging living standards between the two different worlds (Korotayev and Zinkina 2014). Measured by GDP volume on average, the difference between the two groups (developed versus developing countries) has decreased from 3.6 times to 1.5 times over the period 1970–2016. Such Catching-Up or Economic Convergence across countries has been observed in the trajectory of global development since the 1970s (Maddison 2008).

Development Characterised by ‘Inequitable’ Growth

Despite such tremendous expansion of economies in both groups, the neo-liberal policy platform may have seriously misfired, particularly given the persistent inequality within each country. Since the global financial crisis, many of its victims have been increasingly voicing their criticism against neo-liberal discourse.⁴ Since then, a number of advanced countries have been striving to reshape their distributive justice systems while rethinking their economic development strategies in an equable and inclusive manner. The recent phenomenon of seriously widening inequality has been observed especially in the US and the UK (Milanovic 2016).⁵

More seriously, a substantial number of developing countries have also suffered from this phenomenon of severe inequality, which raises doubts about the sustainability of their development trajectories. Despite this trend in catching-up, the level of income inequality in developing countries appears to be even more serious than that of advanced countries. Measured by a Gini coefficient over the period 2000–2009, Latin America and Africa registered 0.522 and 0.439, while Asia, North America, and Europe recorded 0.375, 0.367, and 0.325, respectively (AfDB 2012). In 2010, six out of the ten most unequal countries worldwide were in Africa (Armah et al. 2014).

Against this backdrop, the relationship between economic growth and inequality in the process of development sits at the forefront of the public policy agenda and academic debate. This debate is built largely on the work of Simon Kuznets (1955) who was the first to systematically explore inequality during the process of development in an empirical manner. His hypothesis was that there is an inverse relationship between the process of development and inequality, which became known as the Inverted U-Curve. Such prime explanations have motivated a vast amount of empirical research over the past decades, which mainly looks for that particular curve within and across countries, but this relationship still appears to be highly controversial.

The conflicting views supporting or opposing Kuznets’s hypothesis centre on four main points. The first is the existence of four competing schools of thought on the relationship between income inequality and growth performance, which is why no consensus has yet emerged for the Inequality-Growth nexus in the historical process of development (Baek 2017).

The second is the existence of different views on the direction of causality running from inequality to growth, or vice versa (Chang et al. 2018). Indeed, exploring either the positive or negative associationship is critical when analysing whether or not countries may face trade-offs or synergies between the two development outcomes. This should provide the basis for policymakers to target an effective (re)distribution of wealth to promote growth, Trickle-Down versus Trickle-Up-oriented interventions or other policy options, which depend significantly on the causal orientations. In fact, there have been few attempts made to investigate two-way causality (i.e., bi-directional causal relation) on a large set of countries, which are challenged by technical problems and, more critically, complexities behind multiple causalities.

In addition to the causalities in question, much of the literature has not taken into account the distinction between the long- and short-run associationship which would have significantly different implications in explaining the inequality and growth dynamics. The field of research on the nexus with consideration of the time dimension together with multiple causalities has, in fact, received relatively little attention (Halter et al. 2014).

Finally, the consequences of inequality for growth performance may differ depending on the size of the economy (Lee and Son 2016), which could further vary by regional heterogeneity (Rubil 2015). Although these regional (or income grouping) factors have been identified by some in the literature, no one has yet incorporated them together with the aforementioned issues in mind.

These critical challenges are studied in Chaps. 4 and 5.

Economic Growth at the Expense of the ‘Environment’

The growth pattern in the developing world, despite tremendous progress, has been neither inclusive nor environmentally sustainable. In other words, the Grow First and Redistribute/Clean Later strategy has been a dominant development paradigm and a syndrome. These problematic issues are, in turn, discussed below.

As an illustration of the lack of inclusiveness, the experience of Africa, where radical economic growth has been associated with a number of countervailing trends, is instructive. For example, in sub-Saharan Africa, nearly 70 per cent of jobs are considered vulnerable, and youth and women labour market participation is still very low (ECA et al. 2016). Besides, extreme poverty (measured at US$1.25 per day) decreased by a mere 14 per cent over the period 1990–2012, while 109 million people fell into the extremely poor group (UNSD 2016). This vulnerability in the labour market, together with persistent levels of poverty, suggests that much of the benefit of economic growth was concentrated in a small group of the population. It also implies that the majority of households were compelled to pursue agricultural business while farm sizes have been declining amid rising rural population densities. As a result, Africa has recently experienced a prolonged era of De-industrialisation, which can be evidenced by the stagnation in manufacturing value-added at around 11 per cent of GDP, while service sector value-added has increased in recent years (Armah and Baek 2015).

A dominant economic development school of thought attributed relative underdevelopment to the lack of Structural Transformation or the failure of developing countries to significantly transform their low-productivity agrarian economies into high-productivity industrial ones (e.g., Timmer 2007; McMillan and Rodrik 2011; Lin 2012). However , while structural transformation lays the foundation for high and sustained economic growth, it is likely to lead to the deterioration in environmental quality, unless deliberate action is taken to ensure environmental sustainability during the transformation process (UNCTAD 2012).

Structural transformation strategies while maintaining environmental conservation can be mirrored in the normative idea of sustainability (Castro 2004; Hull 2008). Initially pioneered by the Brundtland Commission, the concept of sustainability has emerged concerning recent environmental challenges and calls to rethink the development paradigm. Ag...

Table of contents

• Cover
• Front Matter
• Part I. Meta-Narrative on the Technology-Development-Inequality Nexus
• Part II. Growth and Inequality Interaction in the Quest for Sustainable Development
• Part III. Theory of the Developmental S-Curve in Process of Development
• Back Matter