Economic Backwardness in Political Perspective

We construct a simple model where political elites may block technological and institutional development, because of a 'political replacement effect'. Innovations often erode elites' incumbency advantage, increasing the likelihood that they will be replaced. Fearing replacement, political elites are unwilling to initiate change, and may even block economic development. We show that elites are unlikely to block development when there is a high degree of political competition, or when they are highly entrenched. It is only when political competition is limited and also their power is threatened that elites will block development. We also show that such blocking is more likely to arise when political stakes are higher, and that external threats may reduce the incentives to block. We argue that this model provides an interpretation for why Britain, Germany and the U.S. industrialized during the nineteenth century, while the landed aristocracy in Russia and Austria-Hungary blocked development.

Economic Freedom and the Advantages of Backwardness

According to econometric studies, economic freedom and its improvement increase growth rates. But their effects are dominated by the effects of the level of economic development and human capital. Do these findings imply that defenders of capitalism and economic freedom exaggerate their case? Not at all.Consider the level of economic development that determines the potential advantages of backwardness. Economists usually discuss the reasons for the existence of these potential advantages: less developed economies can borrow technologies, business models, and marketing procedures from more advanced economies; and imitation may be easier and faster than innovation on which the leading economies have to rely.Plausibly, these advantages are greater at moderate levels of backwardness where the level of human capital formation permits the exploitation of the opportunities of backwardness. Or, less developed economies have more scope for reallocating labor from less productive work in agriculture to more productive work in industry or services. Or, it is probably easier to find profitable investments in developing countries -- say, in transport infrastructure -- than in highly developed economies where many of the obvious investments have already been made. I do not want to join the debate about the relative merit of these arguments. Nor do I want to add arguments from other social sciences according to which the process of economic development implies value changes that feed back to undermine prospects for later economic growth

International R&D spillovers, absorptive capacity and relative backwardness: a panel smooth transition regression model

We investigate how the country’s absorptive capacity and relative backwardness affect the impact of international R&D spillovers on domestic Total Factor Productivity (TFP). To account for nonlinearities, we adopt a Panel Smooth Transition Regression (PSTR) approach, where the country’s elasticity of TFP to foreign R&D stock is allowed to change smoothly across various identified extreme values, and this change is related to observable transition variables: human capital (capturing the country’s absorptive capacity) and relative backwardness. The results suggest that absorptive capacity is positively associated with international R&D spillovers. In addition, and in contrast with previous results, relative backwardness has a negative and significant impact on them.Absorptive capacity, International R&D spillovers, Nonlinear panel, Smooth Transition Regression, Total Factor Productivity

The modernity of backwardness

This paper revisits one of the classic debates on world capitalist development – the ‘transition to capitalism’ debate framed in Robert Brenner’s classic critique of World Systems and Dependency Theory. It was originally presented to the July 2007 conference of the International Confederation for Pluralism in Economics (ICAPE) and in a slightly modified form, to the September 2007 conference of the UK Political Studies Association. The paper argues that the 1970s discussion was founded on an deeply flawed understanding of the mechanisms by which modern capitalist production relations produce what is termed ‘backwardness’. Economics has failed to develop an adequate explanation for the most persistent phenomenon of the modern world – the polarisation of the world’s national economies, grouped within two great and remarkably geographically stable blocs. The reason, I argue in this paper, is the general equilibrium paradigm which predicts that modern capitalist production, left to its own devices, must necessarily even out national differences in productivity, wages, and profits over time. However the reverse happens, and development theory is deprived of an adequate explanation for national differentiation in terms of the ordinary mechanisms of the capitalist market. This loss is compounded by parallel failure within Marxist value theory. The paper locates the origin of this failure within the systematic replacement of this theory by an equilibrium re-interpretation of it, converting it into a variant of the very orthodoxy to which it was supposed to offer an alternative. The paper assesses the skewed character which results, in contemporary accounts (both within and outside economics) of development, dependency, inequality and imperialism. These are driven to assign inappropriate weight to ‘political and ‘cultural’ mechanisms or to classify the economic circumstances of the poor nations as in some sense exceptional or abnormal for capitalism. The idea that underdevelopment – ‘backwardness’ – is a failure to catch up or an absence of modernity, has thus become the conceptual framework for discussing the national difference produced by modernity. This is particularly clear in the evidently symbiotic and mutually conditioned development of slavery in the USA and the Industrial Revolution (with Cotton at its centre) in the UK. Antebellum slavery, once the economic mechanisms are clarified, can be understood not as a backward survival from a precapitalist era, but a product of modern capitalism itself. This principle is a general one. ‘Backwardness’, I argue, is a disguised outcome of the most modern of all economic processes – the constant technical revolutions that characterise industrial capitalism.Inequality; Development; Value Theory; Temporalism, World Systems Theory, Dependency Theory, Globalization, TSSI, General Equilibrium

Law and Institutions: two reasons for Sicilian backwardness?

Many reasons for the low level of local development in Sicily have been advanced through the years, often connected to historical and geographical explanations. More frequently the reasons of the backwardness (better low rate of development) is connected to high level of crime and of mafia phenomenon, or to structural grounds (first of all, Sicily is an island) and intra regional markets’ dimensions. Little space, instead, has been devoted to institutions and law and to the effectiveness of legislative self-government. In ours paper we will slight the constitutional profile trying, instead, to answer, with the typical approach of the economic analysis if is it possible that some reasons of the backwardness of Sicilian economic development are hidden just in this constitutional diversity of Sicily.

Colonial independence and economic backwardness in Latin America.

This paper explores the connections between independence from Spain and Portugal and economic backwardness in Latin America. The release of the fiscal burden was offset by higher costs of self-government, while opening up to the international economy represented a handmaiden of growth. Independence had a very different impact across regions and widened regional disparities. The commitment to the colonial mercantilism conditioned the new republics' performance but, on the whole, GDP per head increased in the half a century after emancipation. It appears that inherited Iberian institutions cannot be blamed for Latin America's poor performance relative to the US, especially if the scope is widened to include the post-independence performance of former European colonies in Africa and Asia. It is suggested that before jumping to the usual negative assessment of nineteenth century Latin America, a comparison of post-independence performance in other world regions will be required

Relative Backwardness and Technological Catching Up with Scale Effects

This paper theoretically and empirically analyzes the sources of the observed pattern that the levels and growth rates of technology are different across countries. The model is extended version of endogenous growth models with catching up model which is formulated by the relative backwardness hypothesis and the adoption capacity. The relative backwardness hypothesis states that the backward countries attain a high productivity growth rate because adopting advanced technologies is easier and less costly than innovation, Thus, the technologically less advanced countries tend to grow faster than technologically leading countries. A necessary condition, in order that the laggard countries might be able to take advantage of the available technology, is the well-developed capacity, ``Adoption capacity'', to adopt the superior technology. This is determined by policy variables that are conducive to technology adoption. The catching up theory states that technological catching up is strongest in countries that are not only technologically backward but also in those countries which have policy determinants conducive to technology adoption. Theoretically, it is shown that the steady state growth rate of technology is determined by population growth rate while the steady state relative backwardness depends on the adoption capacity, the productivity in the R&D sector, and the relative human capital stock. The empirical relevance of the catching up theory is investigated as well. The empirical results support the formalized catching up theory by showing the significant role which policy determinants conducive to technological adoption play. The robust role of scale effects in explaining technological catching up is also shown. Further, the speeds of technological catching up are estimated to be around 2 percent.

Imperialism, dependency, and social class

African Studies Center Working Paper No. 45INTRODUCTION: The purpose of this essay is to examine what has become known in the language of post-World War II social science as "dependency theory." Although all variants of this dependency theory are more or less nationalist and anti-imperialist, they are not uniformly socialist or Marxist. That is to say, many of those working within the broad category of dependency theory are not fundamentally anti-capitalist. Thus, they do not articulate a socialist program for breaking the constraints they see as being responsible for poverty, backwardness, stagnation, and underdevelopment. In the writings of these non-socialist or "bourgeois-nationalist" writers, the problem was seen merely as the domination of weaker economies by stronger ones. If this domination could be removed, so would be the economic backwardness that characterizes most of the Third World. The result would be capital accumulation and an independent, autonomous but nevertheless capitalist development. "Independent" or "autonomous" capitalist development should not be equated with some abstract notion of "absolute autarky." Absolute autarky is here understood to mean the complete severing of all economic links that any particular political-economic formation has that extend beyond its boundaries. It is, however, argued that some degree of autocthonous development is necessary if structural underdevelopment is to be overcome. [TRUNCATED

Economic Backwardness in Security Perspective

Modern political economies are distinguished from each other by the institutions that mediate actors’ interactions, falling somewhere along a spectrum between pure market and non-market mechanisms. But how did these institutions originally emerge? With regard to the financial sector, I argue that higher levels of national security threats in combination with economic backwardness lead to a financial system more dominated by banking relationships. To evaluate the argument, I conduct a focused comparison of Japan and Germany before WWII since they had similar political and legal institutions and were both ‘backward’, but differed with regard to the security threats they faced. Germany confronted more menacing threats from neighboring great powers as well as greater domestic unrest following unification in 1871, which led the government to direct lending to sectors vital to the nation’s security via banks. Japan, by contrast, did not face the same level of threats to its security, and consequently securities markets were more dominant.Economic History; Germany; Japan; Government; War; Finance; Financial Institutions

Why Darwin was English

A ‘late developer’ argument, common to Psychology and Economic History, can be used to explain cultural innovation. It argues that the 19th century theory of natural selection arose in England and not Germany because of – and not in spite of – England’s scientific backwardness. Measured in terms of institutions, communities, and ideas, the relative retardation of English science was precisely what enabled it to adopt German advances in novel ways