Fieldhouse - part IV

Here are my final thoughts on Fieldhouse.
Fieldhouse – Part IV
In the last section of his book, Fieldhouse presents a shift in the relationship between the Third World (TW) and the West after 1940s. Decolonization was one dimension of the global changes, and the so-called freedom of former colonies to choose their own political and economic paths was, as Fieldhouse claims, influenced by foreign investment (from the United States and other former empires). The third dimension affecting the Third World development was the world trade boom in which the state acted as a major agent of change. Three key ingredients for success of the Third World development, however, were lacking due to lack of capital: infrastructure, education, and manufacturing industry. Education is something that Fieldhouse does not truly focus on and could be the only way for the TW countries to free themselves from political and most certainly economic chains of the West. What Fieldhouse’s main theme describes is the West’s role in the Third World as that of a provider of resources. The sources of foreign direct investment (FDI) were capitalist enterprises in Europe or the US with subsidiaries in the TW countries. These large concerns are known as MNCs or transnational enterprises (TNEs), and what Fieldhouse sees as special about these is their “rapid expansion” in Africa and Asia after WWII (p. 229). The attraction of these two continents was two-fold: former British colonies had built up profits of their commodity marketing boards and had small overseas debts. Oil-exporting countries earned great profits from the oil they sold, money was stored in western banks, and so the credit terms offered to them were quite favorable, which explains why the West was so eager to direct the flow of its investment to such a degree to TW countries. The World Bank and the IMF were some of the main providers of ‘soft’ loans and grants, otherwise termed as ‘aid.’
Fieldhouse introduces yet another key factor which gave the former imperial powers and the US a reason to continue to provide aid – the need to “buy political support in the overseas world” which was necessary in order to counter the effects of local countries’ nationalist movements (p. 231). What was maybe deemed more necessary was to uphold the capitalist system and prevent the expansion of the communist bloc countries’ influence. Thus the character of the aid became more political. The author also investigates the degree to which the aid helped the poor countries, beyond what they alone could have achieved without it. The two stances debated were that the aid was unhelpful or harmful to TW countries (since it is given to corrupt and incompetent governments; recipients are the clients of the donors and therefore dependants of the donors), or the aid was necessary and beneficial (if linked to economic liberalization, however, it is dictated by the donors, e.g., ‘Structural Adjustment Lending’ or in other words ‘money with strings attached’). This lessening of the state’s influence in economic and social affairs was mandated too quickly, and Fieldhouse does not tackle the political consequences of these mandates by the West. Local social or financial conditions were not adequately taken into consideration. What is even more important in the story is that Fieldhouse neglects to reflect on the fact which he described in Ch. 4 that the empires themselves created the financial institutions and the successor governments. In essence the former empires were now critizicing their own creations mandating their further liberalization. Also, the same formula they desired could not possibly apply to all of the LDCs. Fieldhouse's stand regarding aid becomes clear when he overtly states that the aid worked for just a few countries and that it is possible that these few could have succeeded even without aid. However, the minimal levels of economic and social functioning have been enabled by the foreign aid, but it cannot be by any means considered charity but part of the global capitalist wheel.
The conclusion of chapter 9 on MNCs and development is that ultimately, MNCs tend to dominate the host market and thus will also increase its dependence on the West. The worst offenders according to Fieldhouse are pharmaceutical companies. A more interesting aspect of dominance is not developed further by the author, which hints about the alienation of local countries’ employees from their host culture due to the indoctrination by the “ethos of the foreign firm” (p. 270).
In the last two chapters Fieldhouse looks into the future prospects of economic development of TW countries. One positive and one negative outlook seem to be considered. The positive view suggests that due to a great flow of resources and the world commodity boom, the TW countries will prosper. The negative view sees the decline in the demand for commodity exports and of trade in general between the TW and the West. In the case of Africa the main problem is the “inability of its governments to establish and sustain viable development policies” (p.298), whether it is due to corrupt and militaristic regimes or geographic boundaries carelessly carved by the old empires which did not consider ethnic groupings. India is taken as another example which had all the ingredients, but one, for successful development, and that is “limited supplies of uncultivated land” (p. 301). India’s failure is attributed to the long-term inefficiency of the state bureaucratic system of rigid planning and control. It would be good to see Fieldhouse’s follow up on India as things have changed for India since 1999, the time of book’s publishing.
Finally, the author looks at East and South-east Asia and their economic miracles. The findings are not truly astonishing, beginning with the Asian philosophy, great work ethic, Japanese influence on high agricultural productivity, employment stability, etc. It is also possible that the four countries Fieldhouse mentions did not dwell on the role of colonial victims but took the opportunities they had to move on and foster economic growth. Most striking causes of their successful development could be considered the competence of their governments and openness to foreign technology (p. 343). Fieldhouse also concludes that it is the quality of the country’s government that helps it develop in the right direction. One more thing might be worth addind to the previous statement: as long as that government does not pose any type of a major political or economic threat to the existing powerhouses, such as the US and Europe.
[Vocab: ‘two-gap model’- “development in any country may be held back by two main shortages: of domestic savings for investment and of foreign exchange to pay for the necessary capital imports” p. 236;
‘policy dialogue’ – “the way in which aid is negotiated with recipient states,” p. 251;
‘neo-Paretian welfare paradigm’ – “the maximization of the economic welfare of the community,” p. 266;
‘transfer pricing’ – “marking up the invoices for goods brought into the host country so as to increase the accounting costs of production and so reduce local profits and taxes,” p. 269;
‘caveat emptor’ – let the buyer beware: the principle that the seller of a product cannot be held responsible for its quality unless it is guaranteed in a warranty; from Dictionary.com]

A barely related link

Last time we met I had mentioned a really great articel in The Atlantic about what is wrong with America today and what is great about America and what we need to do to make it out "alive," so to speak.

Here it is, a month after I said I would post it. It is long, but well, well worth the time.

http://www.economyprofessor.com/

Chakrabarty, Chapter 3

I found this chapter especially philosophically enlightening and somewhat existentialist/Transcendentalist. Chakrabarty reviews the writings of Indian author Nandy and questions the relevance and meaning of the term "modernity." He uses the Indian custom of sati, and criticisms thereof, as the fulcrum of his argument. He talks of "resisting enslavement to the discipline of history." We, as historians, objectify societies, for example, so that we may study them. In doing so, however, we paint them as black and white/yes or no entities. When, in essence, "beyond a certain point theory cannot see." Thus, modernity cannot really be defined because it is in the eye of the beholder. One's modernity is another's enslavement. I think this is the root of the phrase "history repeats itself." We often try to create a history as a means of predicting a seemingly uneasy future that leaves us feeling chagrined. When, in essence, we cannot know. That is why he also points out that "intelligence and knowledge are poor--in fact, dangerous--substitutes for intellect and wisdom." Looking for solutions to social, political and economic problems, among other types of problems, by peering just around the corner (finding an immediate fix) actually shuts down our thinking. In reality, the question needs "time to gather depth." Of course, this is not always a possibility. Which leads us back to the crux of the argument.

A.G. Frank Reading

Frank raises numerous interesting questions in his article "Development and Underdevelopment in the New World." He points out the economic exploitation of the present-day U.S. South and the Caribbean by the Spanish and then the British and French. These economic systems were, in essence, exploitative with slave labor. Plantation systems of these two regions dominated the economic output of the New World for a couple of centuries, without returning economic benefit to the region itself (except for the wealthy merchants and plantation owners themselves). Essentially, colonial powers received both labor and natural resources for free and profited with little overhead. Frank asks: "If the Yankees were so entrepreneurial, why did they not continue to go south" by the 17th and 18th centuries? First, I would argue that some still did. The Mayflower/Puritans, for example, originally set out for Virginia, but were blown off course and "accidentally" settled in what would become New England. Moreover, by the late 17th and 18th centuries, PA, RI, NY and even MA were, in a sense, "Freer" societies economically, socially and politically (except for the Puritan villages). A wealthy elite dominated NC, VA, and SC both socially and politically.

Britain was economically less interested in NE in the 17th c., from an exploitative standpoint, as it was not as profitable. Tobacco, grown in the South, was gold. It was the industrial revolution of the 19th c. (in machinery, factory production, transport, banking and communication) that turned the New England area into a profit-making enterprise. By that time, however, it was independent of British rule. Thus, there was a fundamental shift in international economic interaction, policy-making and demand. In the 16th-17th centuries, the focus was on cash-cropping since it was most profitable.

Furthermore, the South, following independence from British rule, remained a plantation system/semi-feudal/semi-colonial region in relation to Europe. The northern U.S., on the other hand, became part of the symbiotic trans-Atlantic trade system, benefiting the north domestically and internationally through wage labor. The Civil War was the catalyst to initiate the economic "catching-up" of the South. Even the emerging American West of the early to mid 19th c. linked itself to the international-wage-labor economic system of the north.

A random Third World Link

Here's a link to Johann Hari's blog about the effect of trading food derivatives has on actual food consumption and food prices. Fairly quick read, and very informative.

The link is here.

Imperialism (Fieldhouse and Young Parts 2 and 3)

There were several things which stood out to me as I did these readings.

The economic objection to imperialism stands out to me because I don’t really see that the colonies were as profitable as they were intended to be. Particularly when you consider the costs of wars to keep the colonies and protect their interests, they were really quite expensive to maintain.

The moral objections are the most appealing to me because they make the most sense to me. I have a hard time wrapping my mind around the fact that people can look at other groups and view themselves as superior. While many claimed to be establishing colonies to protect the people and spread Christianity… but this “moral duty” was not exactly the lily white as it was painted by some. Another reason for this objection is the fact that the morals being pushed on the colonies are European morals. This section most stood out to me because I have currently been studying the history of human rights. All people are entitled to certain rights and no matter how you look at it; imperialism took those rights away from many people.

One intriguing element of this study was the relative success of settler colonies. For one reason or others the colonies of Australia, New Zealand, and Canada were relatively more successful at becoming active in the global trading community.

Another element of this reading that stood out to me was that the negative implications of imperialism were not necessary. For this to occur, the imperialist nations would have to recognize the contributions to the global economy of their colonies and see these people as equals. I wonder what the world would be like today if rather than exploiting the natural resources and people of the “third world” if the countries had chosen to invest and improve the resources there for the betterment of the global community rather than for their financial benefit.

As we go into the future, what would the long term impact be if we were to begin to invest in these countries and make attempts to develop what was underdeveloped under imperialism.