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  1. 1. 1 Development and Underdevelopment Definitions & conceptualization: Development & Underdevelopment Development notions Since its inception in the 1950s and 1960s, the notion of development has been an equivalent term with “progress” and “modernization.” Nowadays it has become an analogue of “economic growth”. A few catch-words: Economic growth Industrialization and modernization Progress Update, up-to-date Technological advance Modern man, ”capitalist spirit”, forwardlooking “Development” denotes a movement away from something that is considered to be underdeveloped. The US president Truman was among the first who used the word “underdeveloped” in his speech on January 22, 1949 when he took office: “We must embark on a bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped area.…” Since the word “underdeveloped” was invented in comparison with the development level of the West at the end of World War II, the majority of the world population had suddenly degraded into a status of “underdevelopment.” Development defined All non-Western countries have been more or less in a process to “develop” or to “catch up.” The Petit Robert dictionary contains the following text under the general heading of “development”: “Developing country or region, whose economy has not yet reached the level of North America, Western Europe, etc.” 2 Development measurements economic growth and expansion (GDP*, GNP*) , institutionalized by WB and IMF International trade (export and import) wealth accumulation (foreign reserve, etc.) mass production and consumption. One is considered as being “developed” if it can meet these measurements. Problems of these measures 1) The number-based measures fail to give a real picture when using them for acrosscountry
  2. 2. comparisons due to the wide differences from country to country in terms of exchange rate anomalies, differentials in tariff and tax rates, as well as subsidies to consumption goods 2) these data put an emphasis on the market value of economic transaction, that is the rate at which resources are converted to commodities and consumptions together with other paid services and activities. For example, the expansion of military budgets, expenditures on prisons, wars and crime including prevention expenditures, as well as environmental costs (the destroying of forests and the toxic dumpsites) seem to make GNP and GDP data impressive; 3) they do not take account of exchange of goods and services that do not enter the market, for example, self-sufficiency, female contribution to households, elders unpaid tutoring of youth, care for the sick and elderly, voluntary work of civic societies, etc, and other social aspects, such as family and community coherence, emotional well-being, social stability New ways of thinking and measure 1) basic well-being (e.g., food, shelter, clothing, the goods for self-respect) 2) additive well-being (e.g., health, education, identity expression, culture) 3) freedom from subtractive and divisive well-being (e.g. environmental degradation, violence, crime, coercion, deception, genocide, ethnic-cleansing, lynching, slavery, psychological torture, forced displacement and migration, rape and abuse) 3 4) multiplicative well-being (e.g., ease of mobility, degree of comfort, ease and participation in creative and public life, spiritual fulfillment, confidence and growing self-respect and psychic health) Three Major Development Theories Modernization Theory Critical development theories: Dependency Theory World System Theory Critical Development Theories The latter two (dependency and world system) developed as critiques of the modernization school. Emerged as theory to find answers to development problems, but ended up more as an explanation of underdevelopment in the Third World. Modernization theory Historical origin 1. The rise of the US as a superpower and as a model to follow.
  3. 3. 2. The birth to many new nation-states in the Third World which were in search of development model. 3. The US identified the threat of communism in post-war Europe and in the Third World believing that economic recovery and modernization and moved them along the path of the US, and thus they would move away from communism. (Marshall, East Asia) 4. The economic recovery of Europe strengthened the ideology and policy of deliberate intervention. 5. American political scientists sought to identity the conditions that gave rise to development in the First World and examine why these were lacking in the Third World. 6. With the US support, an interdisciplinary modernization school was in making in the 1950s. 4 Modernization Assumptions Development is a spontaneous, irreversible process inherent in every single society. Development is regarded as an evolutionary perspective. Development and underdevelopment are differences between rich and poor nations in terms of observable economic, political, social and cultural gaps. Social change is progressive, gradual, and irreversible. Development thus implies the bridging of these gaps by means of an imitative process in which less developed countries gradually assumed the qualities of the industrialized nations. It is a phased process. Society begins with a primitive stage and move to an advanced stage. Modernization policies (a rationalization and effectivization of economic and social structures) are not only seen as elements of a development strategy, but as universal historical forces. It bears a strong resemblance to the transition from feudalism to capitalism in Western economic history. Development implies structural differentiation and functional specialization. The process of development can be divided into distinct stages showing the level of development achieved by each society. Development can be stimulated by external competition or military threat and by internal measures that support modern sectors and modernize traditional sectors. Development is seen as an universal process as well as a characteristic of human
  4. 4. societies rather than a concrete historical process taking place in specific societies during specific periods. Some approaches to modernization Functional-structural approach to society and modernization cultural approach to society and modernization The economics of development 5 Functional-structural approach to society and modernization A. Emile Durkheim (19th century). Neil Smelser, Talcott Parsons 1. Social evolution is a process of social differentiation as a result of societies becoming structurally more complex. 2. Social change is seen as a basically endogenous process (in-built). Modernization is a universal process characteristic of human societies rather than a concrete historical process taking place in specific societies during specific periods. 3. Systems are in complex exchange with their environment, which often requires internal adjustment. (division of labour and differentiation) 4. Social differentiation is defined to be the evolution from a multi-functional role structure to a specialized role structure. 5. For example, during a society’s transition from family to factory production, the division of labour increases and economic activities based on the family move to the firm. When a formal education system emerges, education and training functions provided by the family and church are now catered for by a specialized unit - the school. 6. In political sphere, the political roles in a pre-modern society are closely bound up with kinship roles, which provides the main integrative principle in such a society. When a society becomes increasingly complex and more specialized structures emerge: bureaucracies, parties, assemblies and the like. 1. Appropriate economic conditions for development, while necessary, were not of themselves sufficient. (economic rationality is not enough) 2. In addition, a capitalist spirit, a set of orientations and values, was required.
  5. 5. Cultural approach to society and modernization 6 3. Weber argues that there is causal connection existed between the spiritual and the temporal, namely the effect of religion on the development of capitalism religious spirituality was secularized when the dedication to the task of societal regeneration became linked to the generalization and multiplication of capital and when profit-making was turned into an ethos, a moral crusade. This gave birth to a socioeconomic evolution which began to function in a manner independent of religion which was marginalized by the economic logic. 4. These characteristics are depicted as unique cultural phenomena of Western civilization and as the elements behind the emergence of capitalism in Europe: 1) rationalization and creativity of economic activities. 2) rational organization of free labour (separation of productive activity from the household). 3) modern book-keeping system. 4) industrial organization. 5) organization of political and social life. 5. Market economy as an entity that combines norms, values, markets, money, and laws is an unanticipated consequence of the Protestant ethic because “people create social structures but that those structures soon take on a life of their own, over which the creators have little or no control. 6. Besides Weber, Hegel and Marx also took the culturalist perspectives to explain why occidental (Western) societies were able to achieve industrialization earlier than the rest of the world, and why the oriental (Asian) societies failed to do so. (Chinese Confucianism vs Protestant ethics) 7. They argue that traditional religions, cultures (such as Chinese Confucianism) and social patterns in oriental societies were structural barriers and were inimical to the development of capitalism. This also denotes that modernization is preconditioned by cultural capital and ideological attitude receptive to capitalism. (the decline of the Chinese empire --- the rise of East Asia since 1960s --- the financial crisis in 1997 --- the rise of China) 8. Weber’s work has generated a tremendous impact on and strengthened the culturalist approaches to the studies of Third World development. 9. Cultural aspects become one of the most important elements in development studies. 7 Cultural Modern Man
  6. 6. 1. “Modern man” is a central concept. Modern man is adaptable, independent, efficient, oriented to long-term planning, adaptable to change. Modern man is confident of the ability to bring change about and is actively interested in and eager to participate in politics. 3. On the contrary, the “traditional man” is anxious, suspicious, lacking in ambition, oriented towards immediate needs, fatalistic, conservative and clings to wellestablished procedures even when they are no longer appropriate. The economics of development Underdevelopment is a shortage issue: - Physical conditions - Capital (saving rate) - Technology W.W. Rostow, The Stages of Economic Growth, 1960 (non-communist manifesto) The best known economic contribution within the tradition of modernization theory is that of Walt Rostow, who conceived of development as a number of stages linking a state of “tradition” to “maturity”. This development process was believed to be an endogenous process. There were five stages through which all developing societies had to pass: 1. The traditional society Limited production, absence of modern science and technology; agricultural based, clan-based polity, and fatalistic mentality. 2. The pre-take-off society (many traditional characteristics removed; agricultural productivity increased; effective infrastructure created; new mentality and new class appeared.) 3. Take-off (most crucial, economic development obstacles removed; national income raised; certain sectors developed faster;) 4. The road to maturity (modern technology disseminated from the leading sector; the whole economy moves to mass consumption) 5. The mass consumption society (today) 8 Policy implications Modernization theories are not just academic theories, they were originally formulated in response to the new global leadership role of the United States after World War II. Therefore they have important policy implications. Modernization theories intend to
  7. 7. provide an implicit justification for the asymmetrical power relationship between "traditional" and "modern" societies. Since the US is modern and advanced, and the Third World is traditional and backward, the latter should look to the former for guidance. Modernization theories attempt to legitimate the US aid and intervention policies. If what is needed is more exposure to modern values and more productive investment, the US can help by sending advisers, by encouraging American business to invest abroad, by making loans and other kinds of aid. Structural theories: Dependency and World System Structuralist thought (economic structuralism) It has its origin in Marxism A historical perspective Holistic perspective Economic and political analysis Focus on the structure of the international capitalist system / mode of production Structuralism (background) Unlike European industrialization, one of the distinctive features of Third World industrialization is the fact that such a process was taking place alongside already industrialized Western countries and was therefore tied to them by various economic relations Critique to the David Recardo’s Comparative Advantage: each country is endowed with local resources, material, cultural and geographical conditions. A country’s economic development would benefit from specialization on these strengths connected with international trade. If everyone does the same, a system of specialization and trade will work to its optimum. 9 Structuralist theories: some basic assumptions 1. It is necessary to understand the global context within which states and other entities interact. 2. They stress the importance of historical analysis in comprehending the international system. 3. The rise of British (see List’s theory) and the later-comers (the US, Russia, Germany and Japan) all favored industrialization behind protective tariff barriers -- industrialization not under global
  8. 8. specialization, but under protection. 4. The global system is not a uniform marketplace with actors freely making mutually beneficial contracts, rather, it is divided into powerful central and relatively weak peripheral economies with the former playing an active role and the latter a passive/reflexive role. 5. It is assumed that particular mechanisms of domination exist that keep Third World states from developing and that contribute to worldwide uneven development. 6. They also assume that economic factors are absolutely critical in explaining the evolution and functioning of the world capitalist system and the relegation of Third World states to a subordinate position. Dependency Theory Definitions of dependency In a nutshell Historical Origin Intellectual Origin Explanations of underdevelopment Suggestions of solution Definition of Dependency …a situation in which the economy of a certain group of countries is conditioned by the development and expansion of another economy, to which their own is subjected. (Dos Santos) (Theotonio Dos Santos, "The Structure of Dependence," in K.T. Fann and Donald C. Hodges, eds., Readings in U.S. Imperialism. Boston: Porter Sargent, 1971, p. 226) 10 An explanation of the economic development of a state in terms of the external influences - political, economic, and cultural - on national development policies. (Osvaldo Sunkel) (Osvaldo Sunkel, "National Development Policy and External Dependence in Latin America," The Journal of Development Studies, Vol. 6, no. 1, October 1969, p. 23). a historical condition which shapes a certain structure of the world economy such that it favors some countries to the detriment of others and limits the development possibilities of the subordinate economics... In a nutshell “The underdevelopment of the Third World and the development of the First World are not isolated and discrete phenomena. Rather, they are organically and functionally interrelated. Underdevelopment is not a primal or original condition, to be outgrown by following the industrialized course pioneered by Western nations. The latter are overdeveloped today to the same degree the peripheral lands are underdeveloped. The states of developedness and underdevelopedness are but two sides of the same coin.” L.R. Stavrianos, Global Rift Key points:
  9. 9. _Dependency is the source of underdevelopment _Dependency is the result of the imposition of a set of external conditions on Third World development Historical and intellectual origin Dependency Theory developed in the late 1950s under the guidance of the Director of the United Nations Economic Commission for Latin America (ECLA). Economic growth in the advanced industrialized countries did not necessarily lead to growth in poorer countries. A group of Latin American intellectuals (especially economists and sociologists), in the early 1960s, began an overall critique to modernization theory. ECLA's scholars started a set of theoretical approaches that was going to be known generically as Dependency Theory. 11 It is argued that most of the foundations of the theoretical categories and development policies rooted in the modernization school have been exclusively based on the historical experience of European and North American advanced capitalist countries. Thus, these western theoretical categories are not suitable to guide our understanding of the underdevelopment problem of the Third World. Marxist tradition – combination of several traditions, Marxism, Leninism, Neo- Marxism - more sociological in outlook Associated with Marxist thinking and sets LDCs within wider socio-historical context, arguing that lesser developed nations are dominated economically & politically by, and dependent upon, outside industrial powers Fields of investigation mechanisms and processes of domination through which existing structures are maintained regarding both national and international structures. forms of dependency creating mechanism of selfperpetuation and the possibilities of change. antagonistic and non-antagonistic relations between social classes and groups. Basic assumptions 1) Historical dimensions of relations of dependence are rooted in the internationalization of capitalism. Gunder Frank: “All serious study of the problems of developed and underdeveloped and all serious intent to formulate policy for the elimination of underdevelopment and for the promotion of development must take in account, nay must begin with, the fundamental historical and structural cause of underdevelopment in capitalism” 2) The international system comprises two
  10. 10. sets of states – metropolitan centre vs peripheral satellites (buffer). 3) External forces are of singular importance to economic activities of dependent states. 4) Relations between two sets of states are dynamic because ongoing interactions tend to reinforce and intensify unequal relations and patterns. 5) Attempt to explain underdevelopment by examining patterns of interactions and argument that inequality and exploitation are intrinsic parts of those interactions. 12 6) Developing countries could not be able to follow the suit of the Western path because they have experienced the history that western countries have not experienced – colonialism 7) Third World countries are not “primitive” and “feudal” or “traditional”. It is the colonialism and foreign domination have handicapped their development course. 8. Poor countries exported primary commodities to the rich countries who then manufactured products out of those commodities and sold them back to the poorer countries. (even today) 9. The "Value Added" by manufacturing a usable product always costs more than the primary products used to create those products. (raw material vs finished products; agriculture vs manufacturing) 10. Domestic elite is in an alliance with international capital because they share the same interests. Today, “transnational elite class” Underdevelopment formula Foreign capital and surplus penetrating in the national economy Loss of economic control, wealth, distribution to foreign powers Underdevelopment and economic stagnation Samir Amin: dual sector 1. The centre and the periphery play unequal roles in the system because of unequal exchange. 2. In the periphery the ruling groups are in alliance with those of the centre create environments in the former in which peasants lack access to the quantity and quality of land needed to maintain their family's livelihood. As a result, the pool of labour available is large. (labour creation) 3. Due to the surplus of labour, the reduction in wages makes the reduction of prices of commodities produced by the periphery possible. 4. The production processes in the centre are articulated whereas those in the periphery are dis-articulated
  11. 11. 13 5. In the centre, demand and supply linkages connect the production process throughout the economy. Thus expansion of one sector has positive impacts on other sectors via these linkages. 6. In the periphery, there are few links between various sectors. The expansion of one sector has little impact via demand or supply linkages to the rest of the economy. This rules out autonomous development in the periphery. Suggestions of solution Poorer countries should embark on programs of import substitution so that they need not purchase the manufactured products from the richer countries. The poorer countries would still sell their primary products on the world market, but their foreign exchange reserves would not be used to purchase their manufactures from abroad. The only possibility of avoiding dependency is creating an alternative system of production, a non-capitalist system of production. Here, the majority of dependentist intellectuals were proposing "socialism" as alternative. Alternative Dependency thinkings Cardoso: Associated-dependecy _It is a critique to the classical dependency school’s assertion that foreign domination/dependency makes no room for national development. _It puts a focus on the new development and particularity of these activities in order to uncover the dynamics. Questions to ask and think: _The historical origin and uniqueness of a given dependency situation. _A particular dependency situation different from previous. _Can the existing dependency structures themselves generate possibilities of transformation? _What impact will a change in dependency have on the historical development of a developing country? 14 Cardoso’s arguments: 1. to some extent, internal prosperity of the dependent countries becomes compatible with multinational corporations (they have to sell products) and they promote development. 2. the basic relationship remains the same because this relationship between the developed and underdeveloped country is based on the extractive exploitation of the underdeveloped. 3. Cardoso regards the national bourgeoisies of the dependent societies as potentially powerful and capable of shaping development.
  12. 12. 4. In the case of Brazil, the military regime (bureaucratic-technocratic) state, the MNCs and the local bourgeoisie formed a political alliance to promote associated-development since 1964. O’Donnell – bureaucratic-authoritarian state (vs traditional authoritarianism) 1. Dominance of bureaucrats High government officials were those who have successful careers in bureaucratic organizations such as the arm, the public bureaucracy and large private firms. 2. Political exclusion The BA states repressed popular sectors (fx labour unions) through closing channels of political access and imposing corporatist controls. 3. Economic exclusion The BA states reduced or postpones aspirations to economic participation by the popular sectors. 4. Depoliticization Social issues were reduced to “technical” ones that can be solved by the rational planning of state bureaucrats. (China in the last two decades, economics-in command. ) 5. Capital is oriented towards: stability, predictability, discipline. (rather than democracy, human rights) Post-colonial dependency It refers to the status of a country that is no longer colonized and has regained its political independence (e.g., post-colonial Africa). In this sense, "post-colonialism" will pertain to the previous set of features (economic, political, social, etc) 15 Colonial infrastructures Conceptual definitions (democracy, rights)* A legal system (legislation, law-enforcement) A communication system (ports, roads, railways, telegraphs, etc.) An economic system (trade, production, finance, accounting, A social system (health, police, recreation) A cultural system (state and societal) Post-colonial dependency characterizes the statehood of these countries and the way they negotiate their colonial heritage – the long periods of forced dependency have a profound impact on the social and cultural fabric of these societies (the post-colonial condition), fx. Africa and Latin America. “African state” Political and cultural dependency ideological conviction (brain-wash)
  13. 13. culture of governance culture of management culture of capitalist spirit (Weber) culture of understanding society, economics and politics Pan-Africanism common identity (logo) common history common problems historical bloc leadership full independence? Revolution?* World system theory 1. Three major historical social systems: a) closed local economies b) World empires ( a core extracts tribute from peripheries; such as the Chinese empire and the Roman empire) c) World economies (a single economy with division of labour; pattern of specialization and exchange; multiple cultures; no central political authority 2. The world systems approach, argues that the present inequality and poverty is a direct consequence of the evolution of the international political economy into a fairly rigid division of labor which favored the rich and penalized the poor. 16 3. The modern world-system is a capitalist worldeconomy, which means that it is governed by the drive for the endless accumulation of capital, sometimes called the law of value. 4. This world-system came into existence in the course of the sixteenth century, and its original division of labor included in its bounds much of Europe (but not the Russian or Ottoman Empires) and parts of the Americas. 5. This world-system has been expanding over the centuries, successively incorporating other parts of the world into its division of labor. 6. The capitalist world-system is constituted by a world economy dominated by coreperipheral relations and a political structure consisting of sovereign states within the framework of an interstate system. 7. The fundamental contradictions of the capitalist system have been expressed within the systemic process by a series of cyclical rhythms, which have served to contain these contradictions. 8. The cyclical rhythms included hegemonic cycles consisting of the rise and decline of successive guarantors of global order, each one with its particular pattern of control. 9. The cyclical rhythms resulted in regular slowmoving
  14. 14. but significant geographical shifts in accumulation and power, without changing the fundamental relations of inequality within the system. 10. These cycles were never perfectly symmetrical, but rather each new cycle brought about small but significant structural shifts in particular directions that constituted the secular trends of the system. 11. The modern world-system, like all systems, is finite in duration, and will come to an end when its secular trends reach a point* such that the fluctuations of the system become sufficiently wide and erratic that they can no longer ensure the renewed viability of the system's institutions. When this point is reached, a bifurcation will occur, and via a period of (chaotic) transition the system will come to be replaced by one or several other systems. World-system in historical perspective Mini-systems (pre-agricultural era) Mini homogeneous societies in cultural and governing structures World empires (8000 B.C. – 1500 A.D.) Vast political structure encompassing a wide range of cultural patterns; the extraction of tribute or locally self-sufficient. 17 Wallerstein: (vis-s-vis culturalist explanations) - The Chinese empire The Chinese were accomplished astronomers; had invented gunpowder, printing, and paper; and had developed a sophisticated bureaucracy to manage their imperial state. The Great Wall of China is the only clear object that can be seen from the moon. (The long and durable feudal system) - Turko-Arabic empire The Arabs had pioneered much of modern mathematics including the use of Arabic numerals, zero, and algebra (the term itself is derived from Arabic). They were also accomplished chemists, having developed distillation (alcohol is another term derived from Arabic). World economies (since 1500) Uneven chains of integrated production dissected by multiply political structures; the basic logic was accumulation of surplus; wealth was unequally distributed in favour of those able to achieve monopolies; the capitalist world economies then expanded to the entire globe. (European expansion, the fall of other empires) From British to American Empire Neil Ferguson (2003) Empire: The Rise and Demise of the British World Order and the Lessons for Global Power
  15. 15. British empire the British Empire was the grand provider of five institutions for the world: 1. the triumph of capitalism as the optimal system of economic organization. 2. the Anglicization of North America and Australasia 3. the internationalization of the English language 4. the enduring influence of the Protestant version of Christianity. 5. "the survival of parliamentary institutions. Neil: American empire? that it is the United States, not Britain, that is "capable of playing an imperial role" in the world today. America's own history - freeing itself from the British Empire - has made it wary of "formal rule over subject peoples" America must face up to its imperial duties because it is "an empire in denial," an empire "that dare not speak its name." 18 other readings Chalmers Johnson (2000): Blowback: The Cost and Consequences of American Empire. Andrew J. Bacevich (2002) American Empire: The Realities and Consequences of U.S. Diplomacy. Harry Turtledove (2003) American Empire: The Victorious Opposition. The rise of European dominance As the first to develop a national capitalist economy, then expanded to the globe, then translated the economic power the into the military and technological power necessary to dominate and eventually subjugate its Islamic and Chinese rivals. The maturation of a capitalistic society gave the Europeans an edge over other powers and offered them advantages that resulted in European dominance. From these beginnings came European hegemony. World system, 1800 - World system, 1900 - World system, 2000 ? (China and East Asia) Country differentiations Competition in total production output (GNP, GDP) Specialization in particular type of production (technological level) Timing and conditions of state formation Relative successes in warfare and internal population control 19 World-system methodology A Marxist approach The essence of Marx's analysis of history is that class divisions emerge as a result of the mode of production within a society. Slavery, feudalism,, and capitalism all created class divisions, be they master/slave, noble/serf, or capitalist/worker. Human history is a history of class struggles according to Marx.
  16. 16. Wallerstein expands it to examine the entire global economy from a Marxian perspective. Applying the Marxist approach on the global level. The globe also could be arranged not on the basis of geography but on the Marxian basis of the mode of production and division of labor. Global divisions Core, “developed” Semiperiphery, “semi-developed” Periphery, “developing” or underdeveloped The core The core was the equivalent of the ruling class in traditional Marxian perspective while the periphery was the equivalent of the lower class. The core, or First World, had an economy based upon the importation of raw materials and exportation of finished goods. The periphery The periphery, or Third World, in turn provided the raw materials and a market for the finished goods made from them. The semi-periphery In between lay the semi-periphery, or Second World. The economy of the semiperiphery was a mixture of resource extraction and manufacturing but was dominated by neither. More recent formulations of the theory have expanded the semi-periphery to include the semi-core 20 World system discourses A. It rejects the nation-state as the unit of analysis: - as long as exchange takes place through a market (sale for profit), even if it is only on an international level, it is still capitalism; - wage labor is not the issue here; production for profit in a market is the issue; - agricultural capitalism began with the rise of the Western world (Marx's stages of history) B. A world division of labor in which production is exchanged through a market and in which the political units are not conterminous with the division of labor is a capitalist world-economy; if political unit is conterminous with division of labor, it is a world-empire. (The division of economic and political class; single vs multi-legitimation) C. In a world market, actors and producers attempt to avoid the normal operation of the market whenever it did not maximize their profit. They turn to non-market devices in order to ensure this--this means to the nationstate.; i.e., mercantilism; note that this can
  17. 17. mean protection (usually for those seeking to catch up) or a more positive hand to capitalists- -forcing open markets, maintaining a free trade regime D. Historically northwest Europe was better situated in the 16th century to diversify agricultural specialization and add certain industries (textiles, shipbuilding, metal wares). It traded these with E. Europe and W. Hemisphere for grain, bullion, wood, cotton, sugar. Strong states developed in the core because there was more surplus to tax and new producers wanted protection. They did not develop in the periphery because there were no surpluses to tax and large agricultural producers did not want protection (self-sufficient, self-reliance). E. Once the unequal exchange mechanism is set up, and the differences between strong and weak states are established, the situation is exacerbated. Strong states defend their markets and force open those of the periphery. F. Western liberal values (science, progress, rationality, liberty, democracy, rights) which are alleged to have been the basis of imperialism, domination and exploitation are not considered as a major cause of exploitation and domination. Rather, it was the military and economic power generated by capitalism that made European colonialism and hegemony possible. (economic and technological imperatives) 21 Capitalism vs socialism Christopher Chase-Dunn The historical development of the communist states can be explained as part of a long-run spiraling interaction between expanding capitalism and socialist counterreponses The history and developmental trajectory of the communist states can be explained that socialist movements in the semiperiphery that attempted to transform the basic logic of capitalism, but ended up using socialist ideology to mobilize industrialization for the purpose of catching up with core capitalism The spiraling interaction between capitalist development and socialist movements can be seen in the history of labor movements, socialist parties and communist states over the last 200 years: both capitalism and socialism affect one another's growth and organizational forms. Capitalism spurs socialist responses by exploiting and dominating peoples, and socialism spurs capitalism to expand its scale of production and market integration and to revolutionize technology (resilience of capitalism). Socialists were able to gain state power in certain semiperipheral states and use this power to create political mechanisms of protection against competition with core capital. This was not a wholly new phenomenon because capitalist semiperipheral states had done and were doing similar things. But, the communist states claimed a fundamentally oppositional ideology in which socialism was allegedly a superior system that would eventually replace capitalism.
  18. 18. Therefore, it is both a economic and ideological struggle. In response to socialist movement, capitalism was driven to further revolutionize technology or to improve living conditions for workers and peasants because of the demonstration effect of propinquity to a communist state. U.S. support for state-led industrialization of Japan and Korea (in contrast to U.S. policy in Latin America) was understood as a geopolitical response to the Chinese revolution. Dependency vs World-system Dependency perspective World-system perspective Unit of analysis The nation-state The world system Methodology Structural-historical: boom and bust of nation-state Historical dynamics of the World-system: cyclical rhythms and secular trends Theoretical structure Bimodal: core-periphery Trimodal: coresemiperiphery- periphery Direction of development Deterministic: dependency is generally harmful Possible upward and downward mobility in the world economy Research focus On the periphery On the periphery as well as on the core, the semiphery and the world economy World-system key position Nation’s future is shaped solely by its historical position in the world system. Strategies for growth and national policy have limited impact on development 22 The case of East Asia: yes+no Modernization East Asia Dependency (linkage –core) World-system (geopolitics, upward) Critical questions What are the conditions that give rise to East Asian developmental states? Why did it emerge in East Asia and not in Africa and Latin America? What are other factors and explanations which form the nature of state-market relations and state-society relations East Asian: a special case? The role of geopolitics - The Cold War - The role of the US (political, economic and military. The role of the state (political economy) - Authoritarian capitalism, CDS - The role of culture? American security umbrella
  19. 19. South Korea - $13 billion or $600 per capita in the period of 1945-79 - US aid accounted for five-sixths of Korean imports _ Taiwan some $5.6 billion and $425 per capita. _ Market access, investment and foreign trade Limits of East Asian model Historically specific vs culturally specific A model to be learned, but historically confined Unique conjunction with the development of capitalism (after the Second World War) Globalization vs high-speed export-oriented After the Cold War with the fall of Soviet Union communism, US needs “fair competition” The 1997 Asian financial crisis. The East Asian case is the interaction of many mutually-related external and internal factors. It is the synergy of external factors, such as the US security umbrella, favorable international environment, foreign assistance and direct investment, correlating with internal factors, such as the role of state, cheap labor, export-led development policy, the role of education and cultural aspects. Ignoring one single factor would put explanations on a fragile and uncompleted basis. ……………………………………………. Center for European Studies Working Paper Series 129 Unbalanced Growth: Why Is Economic Sociology Stronger in Theory Than in Policies?* by Carlo Trigilia Professor of Economic Sociology Faculty of Political Sciences University of Florence Via Delle Pandette, 21 50127 Firenze, Italy E-mail: Abstract The aim of this article is to discuss the relationship between economic sociology and economic policies. In the last decades, economic sociology has made significant achievements in terms of theory and research, but that its influence on policies has remained weak. While this was inevitable in earlier decades, when scholars had to concentrate most of their effort on defining the role and contribution of economic sociology, it has since become a constraint for the institutionalization and recognition of the discipline. The return to economic sociology, since the 1980s, has brought about important theoretical achievements, especially in the analysis of economic organization at the micro level in terms of social and cultural embeddedness. The role of social relations in contemporary economy has clearly emerged, but its implications for policies to promote economic development have remained more latent so far. Although a weaker institutionalization
  20. 20. and a poorer connection to policy-making certainly affect the political influence of economic sociology in comparison to economics, the paper focuses on the research perspective. A shift of the research focus from the statics to the dynamics of economic organization could be useful. In this framework, particular attention is drawn to the study of local development and innovation through a closer relationship of economic sociology with comparative political economy. A separation between these two approaches does not favor a full exploitation of the potential contribution of economic sociology to policies. *Paperprepared for the International Review of Sociology. A first version was presented at the International Conference on “Economic Sociology: Problems and Prospects,” University of Crete, Rethimno, Crete, September 8-10 2004. 2 The aim of this article is to discuss the relationship between economic sociology and economic policies. I would like to show that in the last decades economic sociology has made significant achievements in terms of theory and research, but that its influence on policies has remained weak. While this was inevitable in earlier decades, when scholars had to concentrate most of their effort on defining the role and contribution of economic sociology, it has since become a constraint for the institutionalization and recognition of the discipline. Of course, one could ask why we should care about influencing policy. It could be argued that the main goal of the discipline should be to improve knowledge of economic activities and processes from a sociological point of view. My answer is that a social science should care about its contribution to a reflexive reconstruction of society. As James Coleman wrote, "social science is not only a search for knowledge for the aesthetic pleasure of discovery or for the sake of knowing, but a search for knowledge for the reconstruction of society" (Coleman 1990, 651). I will begin by recalling that the classics, the founding fathers of economic sociology, viewed their approach as clearly oriented towards finding solutions for the reconstruction of a society increasingly destabilized by liberal capitalism. Analytical intentions and political implications were strictly related. However, after the Second World War, a process of disciplinary specialization took place. There was a decline of the classical tradition and a loss of interest in economic policies. The latter were mainly discussed in the framework provided by mainstream economics. In the ensuing part of the paper, I will try to show that a revival of economic sociology, since the 1980s, has brought about important theoretical achievements, especially in the analysis of economic organization at the micro level in terms of social and cultural embeddedness. The role of social relations in contemporary economy has clearly emerged, but its implications for policies to promote economic development have remained more latent so far. In the final section, I discuss some factors that affected this outcome and point to possible remedies to strengthen the contribution of economic sociology to policy proposals. I am aware that a weaker institutionalization and a poorer connection to policy-making certainly affect the political influence of economic sociology in comparison to economics. However, this paper concentrates on the role of the research orientation. It suggests that a shift of the research focus from the statics to the dynamics of economic organization could strengthen the policy impact of economic sociology. From this perspective, particular attention is drawn to the study of local development and innovation through a closer relationship with comparative political economy. The separation between these two approaches prevents a full exploitation of the potential contribution of economic sociology to policies. 1. The classics of economic sociology and the political reform of capitalism The founders of economic sociology did not oppose the market, but were convinced
  21. 21. that it should be properly regulated. It was mainly in Germany, with Max Weber and Werner Sombart, that economic sociology grew as an autonomous discipline. Both of them respected neoclassical economics. They took Menger's side in the methodological debate (Methodenstreit), where he opposed the historicists. They believed that analytical economic theory had a legitimate right to exist, but did not assume its empirical va 3 lidity. Weber repeatedly stated that economic behavior was actually influenced only very rarely by the motivations that neo-classical economics attributed to self-interested, atomistic actors. This is why he wanted to begin a theoretical study of the economy in its socio-cultural context. He aimed to develop a micro-foundation of economic behavior able not only to improve the understanding of capitalist development, but also to provide more sophisticated and effective policy tools than the laissez-faire kit of neo-classical economics. The worries about liberal capitalism expressed by Weber and Sombart were shared by other classics, such as Durkheim and Polanyi. For all of them the market works better when problems of fairness and trust are successfully dealt with, and this distinguishes the sociological view from neo-classical economics. Economic sociology is more interested in the problems of fairness in real markets, while economics focuses on problems of efficiency, taking it for granted that a fully competitive market will also resolve any problems of equity. If labor relations are particularly unbalanced, conflicts may emerge in bargaining relations, which risk endangering productive activities; or alternatively, workers may become less committed to their tasks, lowering productivity. In these cases, the institutions representing the collective interest of workers and introducing political regulation into the labor market, become important. Moreover, state intervention to regulate working conditions and to reduce social inequalities brought about by the market are also necessary precisely to have more efficient markets. In addition, the real operation of the economy is highly dependent on trust. Individuals are not normally well-informed or fully capable of rational calculation, and not everyone can be considered equally trustworthy. The lack of perfect information, together with the risk of moral hazard, makes market exchanges problematic, even where they have been legitimized. In addition, markets are not always fully competitive. In real societies, therefore, the market works better insofar as there are institutions that generate and reproduce trust through personal interactions (for example, those tied to families, kinship relations, local communities, etc.) or in an impersonal way, through formal institutions (such as legal sanctions applied to people who violate contracts). Therefore, what Durkheim called “non-contractual conditions of the contract” are crucial for the tradition of economic sociology. These analytical intentions of economic sociology are well known, but it is worth noticing that they were strictly related to clear political implications. The classics were convinced that social and political regulation of the market was necessary; and this conviction was strengthened by the economic and social turmoil brought about by the Great Depression and the crisis of liberal capitalism, as is very clear in Polanyi's Great Transformation. However, after the Second World War, this tradition of economic sociology as macro-sociology of capitalism, oriented towards its political reform, declined. The legacy of the classics became fragmented and economic sociology moved towards greater thematic and disciplinary specialization. New fields emerged, such as industrial and labor sociology, organizational studies and industrial relations. The original political orientations towards the reform of liberal capitalism dissolved as well. 4
  22. 22. Many factors contributed to the process of fragmentation and disciplinary specialization, but there are two reasons particularly worth mentioning. The first concerns the consequences of intense economic growth and social and political stabilization. In other words, many of the worries about the difficult relationship between the economy and society in liberal capitalism – on which the founders of economic sociology had focused their attention – seemed less important as a consequence of the “great transformation” of capitalism. This occurred particularly in the more developed countries, where Keynesian policies and “Fordist” forms of industrial organization became widespread. The second reason involves the contemporary redefinition of the boundaries between economics and sociology. On the one hand, with the “Keynesian revolution”, economics offered new and effective instruments to interpret and guide this new and intense phase of economic growth. On the other hand, the institutionalization of sociology pushed scholars towards fields that were less studied by economists, and encouraged a greater disciplinary specialization. The work of Talcott Parsons played a crucial role in the redefinition of the boundaries between economics and sociology. Parsons (1937) criticized the atomistic individualism of neo-classical economics because of its assumption that individuals define their ends independently of their mutual interaction. However, he proposed a definition of the boundaries between the two disciplines based on what he called “the analytical factor view". Economics must be conceived as the analytical theory of a factor of action based on the rational pursuit of individual interest, while sociology should be understood as an abstract analytical theory of another factor of action, one linked to “ultimate values”. While an important effect of this influential view was to favor the academic institutionalization of sociology in new fields not presided over by economics, at the same time it also meant that the interests of the sociological community shifted away from economic sociology and towards other themes. Policy implications were loose and indirect, but basically they implied interventions that could favor the social acceptance of market economy, even through redistributive policies (as is clear in Parsons and Smelser 1956). Economic organization was seen as essentially shaped by market incentives, and thus left to mainstream economics. Summing up, we could say that when the era of the classics came to a close, their commitment to a political reform of capitalism had been taken over by Keynesian economics and Fordist re-organization, until the late 1960s. Sociology was oriented towards the problem of social integration, and distanced itself from the analysis of the economy and from economic policies (Granovetter 1990). 2. The revival of economic sociology: theoretical achievements distant from policies As is known, since the 1980s there has been a return to economic sociology with the "new economic sociology", focusing mainly on the micro level. Two main factors have influenced this trend. First, there was a theoretical reaction to new economic neoinstitutionalist's attempts to analyze the growing variety of productive organization. In addition to market and hierarchy, a number of new hybrid forms were developing, based on the more or less formalized collaboration between firms (joint ventures, alli 5 ances, co-operation agreements, etc.). Although transaction-costs theory tried to redefine the traditional economic theory of action by taking into account aspects such as "bounded rationality" and "opportunism" (Williamson 1975,1985), this approach still explains organizational choices in terms of the rational search for efficiency. Thus, it has not been able to provide a satisfactory explanation for economic action under conditions of insufficient information and uncertainty.
  23. 23. In sociology, the development of neo-institutional economic theories triggered, in turn, new explanations of organizational variety that underlined the autonomous roles of social networks, cultural factors and power relations. This led to the second factor driving new economic sociology. In the 1970s and early 1980s, there was a growing dissatisfaction in sociology with Talcott Parsons’ theory of action, and the new economic sociology was particularly influenced by the criticisms developed by ethnomethodology and phenomenology (DiMaggio 1994). Thus, it shares a theory of action that is more constructivist, more contingent and more open to direct social interactions. Different approaches converge in the new economic sociology. It may be worth mentioning some differences and similarities between the structuralist and the neoinstitutional approach. In the structuralist approach, the actor’s location in the structure of social relations is crucial for understanding his actions (Granovetter 1985). It defines a peculiar “social capital” that can be used in economic transactions to provide information and trust (Coleman 1990). Important applications of the structural approach can be found in the study of labor markets, business groups and inter-firm relations, product differentiation and market competition, new high-tech activities, the stock market. In contrast, sociological neo-institutionalists take a different position, emphasizing the autonomous role played by cultural factors in motivating actors and shaping organization choice. A good example of the analytical consequences resulting from the neo-institutionalist approach is the work on “isomorphism” by Powell and Di Maggio (1991). In empirical research, this approach has stimulated numerous contributions, especially in sectors that are not affected by market competition, such as non-profit and cultural organizations, as well as financial institutions and large accounting firms. Fligstein’s work (1990) on the productive diversification of large American firms provided an interesting application. Despite these differences, both the structural approach and sociological neoinstitutionalism provide a view of the market as embedded in social structures, and try to explain the real action of economic actors in concrete markets. Both also share an explanation of organizational diversity than cannot be reduced to the mere search for efficiency by atomistic actors (individuals or firms). Under the same conditions of "asset specificity" - to use Williamson's language – different actors could rely to different degrees on the market, hierarchy or relational contracting, thus providing variable organizational choices. In fact their choice is influenced by their social relations (or social capital as intended by Coleman) and by their cognitive and normative attitudes. In this way the new economic sociology reacted to the "imperialism" of economic analysis by providing alternative explanations for the variety of economic organization. As Granovetter (1990) pointed out, this is an important difference from the "old" economic sociology, which did not trespass on the traditional boundaries between economic and sociology. 6 On the whole, this has been a significant theoretical achievement, which was favored by interesting research, and is in turn orienting new research on economic organization. However, there is in an important potential for policy-making in the new economic sociology that has not been fully exploited so far. While the shortcomings of mainstream economics, particularly in the micro-foundation of economic behavior, have been clearly shown, standard economic thought continues to greatly influence policies to promote economic development. The new economic sociology appears distant from policy debates. Engaged in reacting to the “economic imperialism” at the analytical level, it remains extremely weak in challenging the dominance of mainstream economics
  24. 24. and economic neo-institutionalism over policies. Why is it so? 3. How to strengthen the influence of economic sociology on policies Current economic policies may take the form of either laissez-faire measures or state-centered intervention. Both orientations, however, share the same attitude towards economic behavior. Economic action is about self-interested and socially isolated actors. Laissez-faire policies assume that in order to improve economic development, economic actors have to be freed from social bonds and political constraints. This is still the same old worry, since Adam Smith, that social relations and networks among economic actors would bring about collusion, and could result in the loss of efficiency. In contrast, since the “Keynesian revolution”, state-centered measures recognize that uncertainty, lack of information and trust may hinder economic activity. However, they usually provide policy solutions that are based on two main instruments: financial incentives to compensate the risks and costs coming from the backwardness of local settings, or public investments to improve infrastructure or human capital. In any case the role of social relations and social networks is not considered as a possible target for policies. On the contrary, it is often perceived as a factor that could hinder the efficient operation of markets. The reasons for the hegemony of mainstream economics over economic policies are complex. Certainly, economics provides important tools for the macro-management of contemporary economies, and this adds to a long-lasting tradition of institutionalization. and reputation. Economic research centers - both within the university system and in public or non-governmental structures - are well entrenched and tightly connected to governmental decision-making. They have a long experience in translating economic ideas into policy proposals. It is obvious that the degree of institutionalization of economic sociology and its capacity to influence policy proposals are much weaker. In addition, one should take into account that the policies shaped by mainstream economics tend to be more easily understood by politicians and representative of interest groups, although this does not mean that they are always accepted. As a matter of fact, they are usually formulated in terms of attempts at influencing the behavior of single actors, through financial incentives or regulatory measures. Policies inspired by economic sociology would be more complex because they would try to shape the relational aspects of economic activities, or the building up of social capital as a way of fostering economic development. The benefits of such policies tend to be more diffuse, rather than concentrated on specific groups, and their effective implementation usually requires a longer time than standard economic measures. 7 Therefore, there are various reasons that hinder a stronger influence of economic sociology over policies. However, in the following remarks I will concentrate on some aspects that mainly concern the research topics and the analytical perspective of the discipline. Although these factors do not directly affect the important issues of institutionalization and connection to the decision-making, my contention is that a shift of the research focus to the problem of local development and innovation, and to the relevant policies, could improve the contribution of economic sociology to more effective policies. This, in turn, would require a more intense collaboration with comparative political economy. So far the “new economic sociology” - especially in the United States - has grown mainly dealing with static problems. Basically, it has tried to provide an alternative explanation for the varieties of economic organization at the micro level. Research interests have been strongly concentrated on the attempt to show that efficiency reasons are not sufficient and can be misleading. Both the structural approach based on networks and
  25. 25. the study of isomorphism undertaken by sociological neo-institutionalism reacted to economic explanations of economic organization. While this research focus was able to show the role of social and cultural factors in the operation of the economy, it was less favorable to exploiting the analytical potential of economic sociology in terms of policies. A shift of focus towards dynamic problems – such as local development and innovation – could foster a more active contribution to policies New research might involve dynamic cities, backward areas that experience new growth, or local innovation systems such as new high tech districts. A systematic assessment of comparable cases of success and failure would allow a better understanding of the influence of social and cultural embeddedness on economic performance. What are the policy implications of the social and cultural embeddedness of economic organization? We could hypothesize that the local availability of a rich network of social relations would favor economic activity and development. It might help to tackle the problems of co-operation that are due to lack of information and trust; and it might also help to develop favorable relations among the leaders of collective actors, thus improving the provision of collective goods. If these hypotheses were reasonably confirmed, we would have important elements for new policies that go beyond the old dichotomy between state and market, by promoting cooperation among individual actors (firms, workers and firms) and collective actors (local governments and organized interests) as a way to support economic development and social quality. This could entail both technical assistance and financial incentives to cooperative projects aimed at strengthening external economies and collective goods. To make progress in this direction would require more collaboration with comparative political economy in focusing on the role of politics and policies. The themes of local development and innovation have been more extensively investigated within the comparative political economy tradition, especially in the literature related to industrial districts and local innovation systems (Trigilia 2002), but also in work on the “varieties of capitalism” (Hall and Soskice 2002). However, the social dimension is often the missing link. A closer relationship with the theoretical framework and research tools of economic sociology could improve the analysis of local development and innovation by focusing on the specific role of social networks and on their relationship with governance, and could also help to propose new and more effective policies. 8 From this perspective, I would like to draw attention to two problems. The first has to do with the specific role of social networks, which is not sufficiently clear in the political economy literature. They may favor development, or may hinder the growth of economic activities. They may lead to collusion, or to closure with regard to external stimuli (new knowledge of technology or market trends). So we must ask under what conditions social networks favor local economic development and innovation. The second problem concerns the origins of “good” networks conducive to local development and innovation. It is important to clarify whether good social capital is just rooted in the history of a particular region or city, or can be fostered through appropriate political measures. The possibility of improving policies for local development and innovation strongly relies on adequate evidence and convincing comparative accounts. But before dealing with these problems (in the final section), it is worth pointing to the increased importance of social relations in contemporary economic organization. 4. Why social relations become more important for economic development Comparative political economy implicitly suggests that social networks are more important for economic development, in the post-Fordist era: the economy tend to become
  26. 26. more “relational” (Veltz 2000, DiMaggio 2002). Fordist organization made social networks less important than in liberal capitalism. Large vertically-integrated firms were more autonomous from their environment. The non-economic factors that most influenced development were mainly of two types: the organizational capacity of the firm – the “visible hand” of the organization at the micro-level - and the Keynesian policies at the macro-level. Policies to attract large external firms by means of incentives and infrastructures were also important for backward areas. Stability was the key word for the old model, which guided the “golden age” of post-war development. In the last decades it has been increasingly substituted by two other catch-words, especially for firms in advanced countries: flexibility and quality. Flexible specialization changed the landscape and tended to give social networks a growing role. The search for flexibility and quality led not only to restructuring to increase the autonomy of the firms’ internal organization, but even more to a greater need for external co-operation, especially in sectors where the technological trajectory is uncertain or the demand is very unstable (as in biotechnologies, or in the media industry or in some parts of ICT). Networks of firms (or districts) and large networked-firms become the protagonists of contemporary economy. But they are more dependent than their predecessor of the past – the vertically-integrated large firm - on the willingness of the workers and other firms to cooperate effectively to obtain flexibility and quality. This increased the potential transaction costs and therefore the value of social capital – of the networks of social relations rooted in a certain territory – in the productive process and for innovation. However, one could object that increasing globalization of economic activities, and the improvement in communications, foster a decentralization of manufacturing towards the newly developing countries with lower costs. Thus, the role of localized social networks tends to become less important in a global market where contractual relations are continuously growing. As a matter of fact, individual firms – above all the multinationals, but also the smaller firms – can search, more easily now than in the past, for more advantageous 9 conditions by moving from one country to another and by combining in their productive process inputs from firms and local partners in different areas, through complex organized structures. The improvement of communications and information technologies help this process. All this tends to rapidly alter the localized benefits of a particular territory. Nevertheless, the empirical evidence suggests that the result is not a simple tendency towards the “de-territorialization” of productive processes, but rather a greater competition between regions in which the resource of “good” social networks between individual and collective actors is crucial. Productive growth and localization of external investments tend in fact to concentrate where the external economies and productive specialization are stronger. This affects both the newly developing countries as well as the more advanced ones. The decentralization of manufacturing to areas with lower costs is not even. It is much stronger in areas where external economies and collective goods are more widespread. The availability of “good” social networks among individual firms, and among employers and workers influence the potential for economic development. No less important is the role of collective social capital: cooperative and effective relations among private and public actors which help to increase the production of collective goods (infrastructure, services, training) for the local economy (Evans 1996). Even within the “developmental states”, in the Third World, there are strong regional differences in the ability to attract foreign investments and to sustain local initiatives.
  27. 27. In the developed countries, globalization is fueling an overall reshuffling of economic organization. While manufacturing tends to shrink, there is a shift toward the new knowledge economy. These countries are forced to pursue a “high road” based on innovation in high-tech activities more dependent on scientific advances. But this trend is producing a new “re-territorialization” of the economy around specialized areas and cities, both in Europe (Crouch et al. 2001, 2004) and in the US (Florida 2002,2005). Innovation is now more closely tied to processes of co-operation among firms in different sectors, which imply the sharing of a language, the development of “conversations” among different actors (Lester and Piore 2004); some forms of tacit knowledge that allow the better exploitation of standard technologies and codified knowledge to find out new solutions and new products. Paradoxically enough, in many innovative sectors such us bio-technologies, software activities or the media industry, the growth of new information and communication technologies increases the diffusion of codified information, but at the same time opens up a greater role for tacit knowledge and understanding, embedded in social networks, as a competitive resource. Again, it is not only the network of relations between individuals, but that between organizations, or collective actors, which is also important. A good network of relations between interest organizations, financial institutions, universities, and local governments can favor the improvement of infrastructural facilities and the efficient provision of economic and social services, as well as the influx of capital and investments of both local and external firms, and the establishment of effective cooperation among economic actors and research and training institutions. Therefore, it can be said that globalization has contradictory consequences for local development. It may weaken some areas not only as a result of higher costs, but also because these do not manage to keep up with the provision of external economies and collective goods that are necessary to increase productivity. It may however favor other 10 areas that exploit their social capital to attract external firms and to take advantage of the greater opportunities in terms of a growing market for exports that open up, as in the developing countries; or to exploit the new possibilities dependent on knowledge-based economy for developing more innovative activities, as in advanced countries. On the whole, it is to be stressed that the importance of social network seems to increase, in comparison to the past. This trend enhances the possibilities of local actors to affect the development of their region. This process does not necessarily depend on lower costs, although they remain important as competitive resource, especially in the developing countries. Both in the backward and in the advanced countries, the capacity to use social capital to develop a certain amount of knowledge and of specialization is a key resource for development. 5. Social networks, local development and policies While the political economy literature suggests that social networks may play an important role in local development, it is not sufficiently clear how they actually work, under what conditions they may favor economic development, and when they instead lead to collusion or closure to external knowledge. Another crucial problem concerns the possibility of promoting cooperative social networks that are conducive to economic development and innovation through intentional actions. A research investment by economic sociology in these issues, and a closer cooperation with comparative political economy, could improve the understanding of these processes and could help develop new policies more fine-tuned to the relational features of contemporary economy. Some examples can help to clarify these problems. Let us consider first the problem
  28. 28. of collusion with particular reference to the backward areas. The role of traditional social structures (e.g. family, kinship, community, religious, ethnic subcultures), as resources for development in backward countries has been widely discussed, reversing one of the classic assumptions of the theory of modernization. In fact, however, their relationship with economic development is more complex. While traditional resources as source of social networks are widespread, their activation as resources for development is quite uneven, as is shown, for instance, by a comparison between Latin-American and Asian countries. What makes the difference seems the combination of networks based on traditional institutions and a modernized politics, autonomous from civil society. It is the “embedded autonomy” (Evans 1995) – the autonomy of political action that is at the same time socially embedded at the local level – which can contribute in an innovative way to local development. In Latin America politics seems to have hindered the productive use of social capital linked to traditional structures, because of its lack of autonomy from social interests and the weakness of state structures. On the contrary, the Asian experiences show a polity that not only provided more strategic capabilities (developmental states), but also oriented social networks towards the economic rather than the political market. Following this perspective, one can propose the hypothesis that the composition of social capital (strong ties vs. weak ties) matters. It seems likely that an appropriate mix of the two types would favor economic growth. But an important condition has to do with the role of politics. Political settings that are more autonomous from particular 11 istic pressure seem more able to avoid the collusive use of social networks, more oriented to the political rather then to the economic market. In addition, this kind of polity seems more equipped to avoid the closure of local networks to external stimuli, and therefore more able to prevent the emergence of lock-ins. More systematic comparative studies could throw light on this crucial issue, which is obviously important for policies. Another example that shows the importance of clarifying the role of social networks concerns the sites of innovation in the most advanced countries. There is a clear link between the production of innovation in the knowledge-based economy and the cities. Richard Florida (2005) pointed out that the process is mainly influenced by some social groups with high human capital. They choose to live in cities with high degree of tolerance, and cultural and social amenities. This, in turn, attracts – or contributes to the creation of – innovative firms. This explanation raises many questions about the causal direction. However, it is certainly true that not all the large and well-equipped cities are able to trigger a virtuous circle between people and innovative activities, including the crucial contribution of university and research institutions. There is a different “absorptive” capacity of potential for innovation related to universities and research facilities, in terms of economic, cultural and social infrastructure. The comparison between Silicon Valley and route 128 in Boston (Saxenian 1994) suggests that there is an important social factor in the explanation of why certain regions or cities succeed and others do not. Again, a closer attention in comparative terms to the role of social networks and to their relations to governance could help to better understand local development, and could contribute to work out more effective policies beyond the traditional opposition between market and state-centered policies. Let us come to a second problem. It is not yet clear whether the role of social networks is merely dependent on the history of local contexts - on the way history has shaped culture and social relations of actors - or if it may also be socially and politically constructed through reflexive action. In the first case, if path-dependency prevails, there
  29. 29. is little space for policies. Local development could be predicted but hardly promoted through purposive policies in local contexts which lack certain requisites. In the other case, we could learn important lessons for new policies that work by promoting the appropriate social capital through financial incentives and technical assistance. These kind of policies that try to foster economic development by promoting social capital are growing, especially in Europe, where they are pursued by the EU, and in the developing countries through programs of international organization such as the World Bank or UNIDO, and others. Therefore, it would be crucial to select and investigate cases of local development that are based on planned interventions to improve cooperation among individual actors, as well as collective actors. These might include cases of strategic planning for cities, territorial pacts for backward areas, or projects for the growth of high tech systems. Such an analysis might encourage the creation of a new repertoire of policies for economic development that build social bridges between state and market, and take more into account the relational bases of contemporary economic organization. These examples show that there could be an important role for economic sociology in the analysis of local development and innovation. This, in turn, could strengthen the contribution of this approach to more effective policies. But this also requires that economic sociologists start to pay more attention to political processes and the role of public policies than the new economic sociology has so far. As Fligstein (2002) has 12 pointed out, this would be important because it would not only contribute to a more integrated sociology of markets, but would also help to link micro-economic sociology with macro-comparative political economy (see also Block and Evans 2005). Actually, in the main accounts of more recent achievements, economic sociology has been mainly identified with the "new economic sociology" developed in the US. This trend does not favor a closer relationship with comparative political economy. A wider conception of economic sociology that includes comparative political economy would be consistent with the classical tradition of economic sociology, which paid particular attention to the influence of the state on economic activities (Trigilia 2002). It also would help to develop the policy implications of theoretical and empirical achievements. In this way economic sociology could integrate its theoretical framework with the kind of "pluralistic applied research" that Coleman was demanding, for a richer contribution to the reflexive reconstruction of society. 13 References Block, F. and Evans, P. 2005. “The State and the Economy”, Pp.505-526 in The Handbook of Economic Sociology, edited by N.Smelser and R.Swedberg, 2nd ed.. Princeton: Princeton University Press Coleman, J. 1990. Foundations of Social Theory. Cambridge: Harvard University Press. Crouch, C., Le Galès, P., Trigilia, C., and Voelzkow H., 2001. Local production Systems in Europe: Rise or demise? Oxford: Oxford University Press. - 2004. Changing Governance of Local Economies: Responses of European Local production Systems. Oxford: Oxford University Press. DiMaggio, P.1994. “Culture and the Economy.” Pp. 27-57 in The Handbook of Economic Sociology, edited by N.Smelser and R.Swedberg. Princeton: Princeton University Press. - 2001, ed., The Twenty-First-Century Firm: Changing Organization in International Perspective, Princeton: Princeton University Press. Evans, P. 1995. Embedded Autonomy. States and Industrial Transformation. Princeton: Princeton University Press.
  30. 30. - 1996. “Government Action, Social Capital and Development : Reviewing the evidence on Synergy.” World Development 24(6): 1033-37. Florida, R. 2002, The Rise of the Creative Class, New York: Basic Books - 2005, Cities and the Creative Class, New York: Routledge. Fligstein, N. 1990. The Transformation of Corporate Control. Cambridge, MA: Cambridge University Press. - 2001. The Architecture of Markets. An Economic Sociology of Twenty-First-Century Capitalist Societies, Princeton: Princeton University Press. Granovetter, M. 1985. “Economic Action and Social Structure: The Problem of Embeddedness.” American Journal of Sociology 91: 481-510. - 1990. "The Old and New Economic Sociology: A History and an Agenda." Pp. 89-112 in Beyond the Marketplace. Rethinking Economy and Society, edited by R. Friedland and A.F. Robertson. New York: Aldine de Gruyter. Hall, P. and Soskice, D. 2002. Varieties of Capitalism. The Institutional Foundations of Comparative Advantage, Oxford: Oxford University Press. Lester, R, and Piore, M. 2004. Innovation: The Missing Dimension, Cambridge Mass.. Harvard University Press. Parsons, T. [1937] 1968. The Structure of Social Action. 2 vols. New York: Free Press. Parsons, T. and Smelser, N. 1956. Economy and Society: A Study in the Integration of Economic and Social Theory. Glencoe, Ill.: The Free Press. Powell, W. 1996. "Interorganizational Collaboration in the Biotechnology Industry." Journal of Institutional & Theoretical Economics, 12:197-215. Powell,W. and DiMaggio, P. 1991. ”Introduction.” Pp.1-38 in The New Institutionalism in Organizational Analysis, edited by W. Powell and P. DiMaggio. Chicago: University of Chicago Press. Saxenian, A. 1994. Regional Advantage: Culture and Competition in Silicon Valley and Route 128, Cambridge Mass.: Harvard University Press. Trigilia, C. 2002. Economic Sociology: State, Market and Society in Modern Capitalism, Oxford: Blackwell. Veltz, P. 2002. Le noveau monde industriel, Paris: Gallimard.
  31. 31. Beyond the 'problem of order': Elias, habit and modern sociology(1) or Hobbes was right ROBERT VAN KRIEKEN University of Sydney interaction is not simply the substructure of the "crystallisations" which make up Simmel's society, or an order detached from the social order made up of Goffman's 'solid buildings' in whose cracks 'the individual self resides'. It is what endows those entities with the only kind of existence they have. Social interaction turns out to be not only where 'most of the world's work gets done', but where 'the solid buildings of the social world' are in fact constructed. (Burns 1992: 380) Norbert Elias is rarely regarded as a significant sociological theorist, partly because he was hardly ever concerned to comment on, let alone outline or reconstruct other theorists' ideas. When he was being critical of other sociological approaches, he usually preferred to keep his critique implicit, so that only a careful 'reading between the lines' reveals the positions he was distancing himself from. Elias developed and elaborated his theoretical position primarily through his empirical studies, especially those on the significance of 'court society' (1983) and one particular long-term social process around which he felt others tended to be organized: the civilizing process (1994). Elias refrained from making the claim that he was developing a theoretical 'system' because he wanted to avoid fetishising theory, theorists and theoretical perspectives; his theory was embedded within his sociological practice rather than being self-consciously presented as such. This can give the impression that his primary strength as a sociologist lies in his empirical studies in historical sociology, not his theoretical framework. It may have been Lewis Coser's (1980) particularly bad-tempered review of the first of Elias's two explicitly theoretical books, What is Sociology? (1978)(2) which established this assessment of Elias's sociological theory. Coser insisted on his admiration for The Civilizing Process (1939) and The Court Society (1983), but proclaimed What is Sociology? a 'failure' (p. 193) , the work of 'an outsider battling what he perceives to be the establishment of sociology' (p. 192). Elias, we were told, 'tends to ram in open doors', and Coser dismissed Elias's concept of 'figuration' as adding nothing, because it covers 'a subject matter that has been the birthright of sociology since the days of Comte or Cooley' (p. 193). A central purpose of this paper is to correct this cantankerous misunderstanding, both of Elias himself and of sociological theory more generally. Rather than assume a continuity in sociological thinking from the days of Comte and Cooley to today, almost every assessment of Talcott Parsons's The Structure of Social Action (Alexander 1988; Camic 1989; Gould 1991; Levine 1989; Shils 1961: 1406), including by Coser (1977: 562) himself, has indicated Parsons's significance in having effected a powerful transformation of sociological thought, one which established a clear break with pre-Structure theory in the very process of claiming to draw out the essential features of (some) classical social theorists. Edward Shils once remarked that Structure 'precipitated the sociological outlook' and 'began the slow process of bringing into the open the latent dispositions which had underlain the growth of sociological curiosity' (1961: 1406), and no later commentator has formulation a convincing argument against this assessment. The paper will begin by identifying two persistent obsessions in sociological theory introduced by Structure - the captivation with dualisms of various types, and the fascination with the so-called 'Hobbesian problem of order' as the fulcrum of all sociology - and establishing the underlying connection between the two, using Bruno Latour's (1993) conception of the 'Constitution' of modern
  32. 32. scientific thought to explain this connection. Then I will outline Elias's sociological theory and 'way of seeing', indicating the ways in which it moves around sociology's 'Constitution' in a very particular and, I will argue, more useful way, concluding with some observations about what we might do with our theoretical 'Constitution' from this point onwards. THE DOCTRINE OF 'THE TWO SOCIOLOGIES' AND THE 'PROBLEM OF ORDER' We can begin with two observations, and then see how they are linked. First, all sociologists are by now familiar with the mode of reasoning which proceeds as follows: hitherto everyone has divided both the world itself and the way we think about it into two categories; many have tried to bridge, link, integrate or synthesise these categories, but all have failed. However, we now have a new way of thinking which truly achieves the bridging, linking, integration or synthesis, and I, dear reader, am the bearer of this delightful new theory. This is the doctrine of 'the two sociologies'. It was probably Talcott Parsons who first developed this rhetorical style in The Structure of Social Action (1937), the book which Jeffrey Alexander argues established the 'base line vocabulary for modern sociology', the modern sociologist's 'frame of reference' even as she argues against it (1988: 97). Before that, sociologists saw both themselves and all previous social and political thought as rather loose collections of competing perspectives, not as organised around any dualism or polarity in need of linkage (Shils 1961; Camic 1989). The bridging exercise never actually abolishes the oppositional dualism, indeed it preserves it. As Parsons wrote concerning his particular bridging endeavour between positivist and idealist theories of action, he wanted to 'make the best of both worlds' (Parsons 1937: 486) rather than construct a third. We need only think of what bridges do - they keep things apart as much as they provide a means of moving from one to the other. The bridge ceases to exist unless the polarity/opposition/dualism remains in place, the bridge needs the dualism, if we can use such a functionalist term. The same applies to 'links', and even integration and synthesis are less interesting once they have been completed and there is nothing left to integrate or synthesise. The net result is that every new generation of theorists can repeat the argument, organise their research, their journal articles, their monographs and their textbooks around the dualism(s) of their choice, although they may choose to rename the dualism a duality - conflict/consensus, action/structure, micro/macro, homo economicus/homo sociologicus, individualism/holism, and so on - and set about busily linking them (Holmwood & Stewart 1991; Sztompka 1994: 269-70). It gives us all something to do, these two things which need to be integrated, synthesised, bridged or linked, and something to organise our thoughts around.(3) But apparent attempts to transcend or bridge the agency/structure dualism merely reproduce it and pose it in a different form because of the continued conceptual opposition of 'action' to 'structure'. As Richard Kilminster has observed in relation to structuration theory, 'the ghost of the old dualism haunts the theory because his point of departure is action theory, which carries the dualism at its core' (1991: 98), and this is why Collins remarks that 'the result looks curiously like the Parsonian scheme that Giddens criticizes' (Collins 1992: 89). Parsons may have been the first to practice the argument of 'the two sociologies' in 1937, but it was Pamela Nixon who appears to have first named it as such sometime in the late 1960s,(4) to be disseminated in Alan Dawe's (1970) article of that title. As Dawe put it, 'there are...two sociologies: a sociology of social system and a sociology of social action' (p. 214). The first 'asserts the paramount necessity, for societal and individual well-being, of external constraint,' whereas the
  33. 33. second revolves around the concept of 'autonomous man, able to realize his full potential and to create a truly human social order only when freed from external constraint' (p. 214).(5) At this point you may be protesting that there are many dualisms in sociology - individual-society, micro-macro, etc. - and that it has become accepted practice to insist that they are not all the same. Erving Goffman, for instance, is more properly understood as a 'micro structuralist', rather than seeing him as emphasising the creativity of human action simply because of his micro focus (Burns 1992; Collins 1992: 80). 'Action' is, in principle, not supposed to be bound up with the concept of 'the individual', agency can be attributed to collective actors such as organisations. However, in practice we usually find this insistence dissolving back into something which looks remarkably like the same old individual/society dichotomy; we often begin by talking about micro-macro or agency- structure, but it rarely takes very long before we are actually talking about individuals and their relationships to social constraints (Alexander et al 1987). We seem to be unable to resist the temptation, despite all our best intentions, to mobilize our dualisms as if they were concerned with the opposition between individual and society, between free will and determinism. To the extent, then, that any dualism tends to revert back to the individual/society opposition, I will treat all of them as essentially the same, grouping individuals, agency/action and the micro-level on one side, and society, structure/social system and the macro-level on the other, gathering them together under the heading of 'the doctrine of the two sociologies'. The second observation is that sociological thought is organised around an equally persistent misinterpretation of Hobbes, the 'Hobbesian problem of order', another central feature of Parsons's The Structure of Social Action. Before explaining why it is a misinterpretation, we need to look briefly at how the problem and its centrality to sociology has been defined. The standard sociological interpretation(6) of Hobbes is the attribution to him of the view that 'in the absence of external constraint, the pursuit of private interests and desires leads inevitably to both social and individual disintegration' (Dawe 1970). Without any constraint imposed on the random pursuit of ends, wrote Parsons, 'the relations of individuals then would tend to be resolved into a struggle for power - for the means of each to realize his own ends. This would, in the absence of constraining factors, lead to a war of all against all - Hobbes's state of nature' (1982: 87). It is 'clear enough,' asserted Nisbet, that 'Hobbes is concerned with what he believes to be the natural character of the individual - his precultural, presocial, and prepolitical character' (Nisbet 1974: 138-9). Since then, we have been told with consistency and regularity that 'the thesis that sociology is centrally concerned with the problem of social order has become one of the discipline's few orthodoxies' (Dawe 1970: 207). The 'Hobbesian problem of order' is seen as central to sociology because the question of 'how is social order possible' slides over to the quite different one of 'how is society possible'. Alexander puts it in precisely this way: 'What Parsons called the Hobbesian problem can be understood in the following way: What holds society together?' (1988: 97). Parsons told us that Hobbes felt that only the coercive force of sovereign authority could in fact hold society/social order together, when in fact it was the internalisation of values which achieved this effect - the normative solution to the problem of order which retained a voluntaristic element to social action. The standard sociological interpretation of Hobbes is simply wrong, for two reasons, concerning both the problem of order itself and its solutions. First, this is not how Hobbes understood the 'state of nature' and it is not his 'problem of order'. Essentially the standard sociological intepretation rests on a very simplistic, and incorrect, reading of what Hobbes meant by the 'state of nature', revolving around a projection of its own concern to see 'nature' as opposed to society onto Hobbes's much more specific concern with explaining and preventing civil war. C.B. Macpherson remarked as early as 1962 that Hobbes's state of nature concerns the conduct of entirely socialized individuals in the
  34. 34. absence of a central authority. 'To get to the state of nature,' wrote Macpherson, 'Hobbes has set aside law, but not the socially acquired behaviour and desires of men' (1962: 22). Hobbes's state of nature 'is a deduction from the appetites and faculties not of man as such but of civilized men' (1962: 29). Hobbes did not regard human beings as psychological egoists who could only be constrained to act in a civil manner by some external authority. Like any contemporary sociologist, Hobbes took it for granted that humans are made - by discipline, education or as we would all it today, socialization - rather than born (Gert 1967; 1996). The threat to social order - the threat of civil war - came not from some presocial, egoistic human nature, which Hobbes felt never existed,(7) but from the effects of passionately held beliefs and opinions with no central authority to decide between them. Rather than not having a sense of normative order, as Parsons accuses him (1937: [89]), Hobbes's whole point was that it was precisely unregulated values and beliefs which would drive humans to civil war (Loyd 1992). We are in a state of nature, argued Hobbes, so long as 'private appetite is the measure of good and evil' (1962: 167) - in other words, as long as society is not normatively integrated, something which he felt can only be achieved via a socially-founded (not externally imposed: Lloyd 1992: 317; Shapin & Schafer 1985: 152-3) sovereign state. In Bernard Gert's words, 'all the premises about human nature....which he uses in arguing for the necessity of an unlimited sovereign, are in fact statements about the rationally required desires, and not, as most commentators have taken them, statements about the passions' (1996: 164; c.f. also Ryan 1996: 217-8 and Kraynak 1983: 93-4). Second, the 'normative' solution to the problem of order which almost everyone from Parsons onwards has suggested is specific to sociology, having eluded Hobbes, (Levine 1980: x) is actually present in Hobbes himself. Brian Barry (1970), Charles Camic (1979) and Donald Levine (1980) have made this point abundantly clear for the utilitarians generally. Barry observes that 'the victory over the 'utilitarian' schema is an empty one, because Parsons's 'utilitarians' are men of straw' (1970: 77), and Camic comments that, The ultimate irony of Parsons's discussion of the utilitarians is that they would reject the egoistic, rationalistic image of humans ...which Parsons suggests was their image for two centuries. They would in fact reject it in a more general fashion than Parsons himself does in Structure, where the Hobbesian problem of order remains central (1979: 523). Levine also remarks that 'none of the writers associated with developing the principle of utility in moral philosophy held a view of human action as determined solely by the pursuit of selfish interests through instrumentally rational means. Much of the animus of their work precisely refutes such a conception' (1980: xiii). Levine felt that Hobbes and Mandeville might be the only remaining European social philosophers who did 'reduce the elements of action to narrowly defined gratificational interests', but noted that even here there were arguments (1980: xix), and in fact all of Barry's and Camic's arguments concerning the utilitarians apply with equal force to Hobbes. Barry had pointed out that 'Hobbes held that men might be motivated by a quite refined moral code', but simply felt that this was insufficient in itself to prevent violence and civil warfare, making the state's monopolization of violence 'a necessary (though not sufficient) condition of social peace' (1970: 77). Bernard Gert had pointed out that Hobbes appealed to morality as much as he appealed to self-interest and self- preservation. Indeed, continued Gert, 'it would be exceedingly odd for Hobbes, holding that mistaken views about rights and duties were one of the causes of civil war, to come up with a theory