THE POVERTY OF ECONOMIC DEVELOPMENT MODELS

PART I: The question of "Development Models" 

What are plausible models of modern economic development and to what degree do they improve people's lives"? In a globally integrated economy, is it possible for a country to pursue development that does not conform to the neoliberal policies that the IMF, World Bank, large banks and corporations, and the most advanced countries are peddling to ensure even greater global integration? Do economic growth and development alone account for human happiness with the broader meaning of the term, or is the Western materialist bourgeois society defining a value system for the entire world?

Because in the post-Communist era there is the current model of neoliberal policies under globalization that has resulted in a few hundred billionaires and multi-millionaires owning more wealth than half the world's population, the legitimate question to pose is whether a variety of economic development models even makes sense. We are now at the point that socioeconomic inequality compares with pre-revolutionary France across Europe. Another question arising from the existing egregious inequality on a world scale is whether civilization can possibly survive by pursuing the existing neoliberal model that promises prosperity, but delivers downward socioeconomic mobility, higher chronic unemployment and underemployment, famine, disease, and conflicts arising from mass demonstrations and rebellions in reaction to absence of social justice?

The mode of production, which determines the social order under capitalism, has evolved from the Commercial Revolution in the 16th century to globalization in the late 20th-early 21st century. Five hundred years after nascent capitalism's nascent stage in northwest Europe, the manner by which the system creates poverty as it simultaneously concentrates wealth and creates social inequality, unequal exchange, and uneven world development have remained the most compelling political issues of our time. At the dawn of the 21st century, the international political economic structure remains unaltered in its goals of capital concentration socially and geographically, promising greater growth and development for all who take part in it. While global economic integration under neoliberalism emphasizes the benefits of increased trade and the futility of autarky in the age of globalization, critics question whether national sovereignty is sacrificed in the process along with social justice, creating a larger greater gap between the very few rich and the multitudes of workers.

Under the world-system of capitalism, there have been different models of development in the history of capitalism, determined to a large degree by the shifts from the primary sector of production (agriculture, forestry, mining and fisheries) to the secondary sector (manufacturing) and to the tertiary (service) and high tech/biotechnology sector. Before analyzing some models of economic development, it is instructive to consider the following questions about development economics.

a) What development model best serves the needs of the people, presumably all people and not just a small percentage representing financial, political, military, and bureaucratic elites? Is the existing model of neoliberal capitalism the best and only option, or has it resulted in the downsizing of the middle class? Because people have differing views on what best serves society, that is, best serves every person equally in every respect in institutional terms, most economic models are necessarily based on what best serves interest groups within society. There are of course economic development models that claim to best serve everyone, including Socialist and Communist models, but in practice some sectors and some individuals are better served even by those models, as history has clearly demonstrated in the 20th century, than other groups in society.

b) Is it possible to separate politics from economics and speak in terms of pure economics instead of a system of political economy and social structure? If economics comes down to political decisions that result in some benefiting and others hurting in society, should politicians be hiding behind economists and organizations dealing with economic issues? Presumably, the political economy of capitalism is predicated on an expanding middle class, or at least on a steady upward socioeconomic mobility. However, does this system continue to deliver on that promise in  the Western World, or has it become an impediment to its own stated goals and only Asia will experience such growth in the next few decades?

According to the OECD,
 "In 2009 the middle class included 1.8 billion people, with Europe (664 million), Asia (525 million) North America (338 million) accounting for the highest number of people belonging to this group. ...  The size of the “global middle class” will increase from 1.8 billion in 2009 to 3.2 billion by 2020 and 4.9 billion by 2030. The bulk of this growth will come from Asia: by 2030 Asia will represent 66% of the global middle-class population and 59% of middle-class consumption, compared to 28% and 23%, respectively in 2009..."

c) Is there such a thing as "the perfect" or 'ideal' development model that can be applied perfectly in practice as it may appear in theory, whether such a system is market-based, statist, or some model based on a mixture? If economic dogmatism, especially on the part of the IMF, the World Bank, and OECD, to mention just a few of the major influential organizations dogmatically advocating neoliberalism, has not worked as it claims to make more people and more countries more prosperous, then why is the mass media, many academics, think tanks, as well as governments lining up behind such dogmatism to mold public opinion?

d) Is it possible that one development model is ideal for all countries regardless of when it is applied?   Different countries would require to adopt variations of different models depending on their natural resources, labor force, level of current development and future potential and aspirations. Can the same development model in the early 21st century work to bring about greater development and upward socioeconomic mobility for people in the US in the same manner as that model would work in Kenya or Portugal?

e) Can development models be divorced from the realities of the present with an eye on the future of a specific country? If Ukraine is currently in dire need of massive injections of liquidity to prevent an inevitable bankruptcy, would the combination of austerity, neoliberalism and external dependence that the IMF is recommending result in prosperity or deeper socioeconomic crisis as has been the case with countries of southern and Eastern Europe that adopted such policies? Divorcing development models from the realities of the "real economy" also means that one does not take into account the subterranean economy, which includes everything from "shadow banking" to narcotics trade and other illegal activities not accounted as part of the legitimate economy.

f)  Because the decision on what policies to pursue are always taken by those who command economic and political power, can economic models in force be anything other than true representations of society's elites that enjoy access to power denied to the ordinary citizen? While it is true that citizens vote, it is not true that their vote translates into policy influence. While a very rich individual will invariably have direct or indirect contact and influence in his/her government, it is simply impossible for an ordinary worker or middle class professional to enjoy the same privilege. Therefore, the worker could propose the best possible economic development model for society, but in the end the government will adopt policies to serve the privileged individuals. 

g) Should GDP growth be the sole criteria for human happiness?  In world public opinion polls the top "happiest countries" are the economically most developed with diversified institutional structures and a division of labor reflecting upward socioeconomic mobility. This is a reflection of the value system rooted in the 18th century mindset that associates societal harmony and happiness with the Industrial Revolution that in turn carries with a revolution in science and technology and presumably solves human problems. However, three centuries have passed since the Industrial Revolution began in England, we have had far reaching scientific and technological advances, but a large percentage of the world's population still lives in chronic poverty.

While human happiness is predicated on material fulfillment in Western societies that have indeed spread their value system globally, spiritual fulfillment remains a goal for many non-Western societies at the cultural level. While a government pursues economic growth and development, culturally society or at least a segment of it can reject material accumulation as the sole criterion for progress and happiness. Even psychological well being of course in a material society is itself a commodity to be purchased in the form of medication and physician care for psychological problems, among other things.

Of course, this does not mean that spiritual fulfillment by itself is a substitute for material needs, but it does suggest the bottomless pit of materialism is a value system that is itself rooted in a mind that can never be fulfilled and will remain in disharmony. Finally, I offer a caveat regarding the issue of value spiritual vs. materialistic value systems. It is true that throughout history in all civilizations the elites that are invariably materialistic have used the spiritual issue to amass wealth and to indoctrinate the masses that all they need to live on is spiritual fulfillment. In short, religion has been used by the materialistic elites as a distraction for the masses and a substitute for material needs, ranging from basic food and decent affordable housing, to medical care and education for all and not just those who can afford it.