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.