Inequality in the 21st Century

The London School of Economics & Political Science

London, UK

July 02 - 04, 2015

During the early postwar period, dependency theory and related literatures suggested that late developers faced unique challenges relative to their industrialized counterparts. More specifically, late integration into the international economy fueled a dysfunctional pattern of underdevelopment, reinforcing reliance on resource-extractive industries, inhibiting movement into higher value-added manufacturing activities and exacerbating income inequality.

Dependency theory subsequently fell out of favor as autarkic developmental strategies faltered and peripheral economies prospered using export-oriented strategies. The Nordic region has always represented a puzzle for classical dependency claims, as one of the poorest regions of Europe experienced sustained, equitably distributed growth over the course of the 20^th century. By third quarter of the century, the Nordic countries were joined by a number of East Asian economies, which developed with remarkable speed in a context of resource-poverty and close integration into the international economy. Even more surprisingly, these late developers grew by competing in an array of dynamic, high-technology industries, such as computer equipment, telecommunications and software.

This panel revisits the literature on dependency theory by examining the political economy of several late industrializers in the early 21^st century. It finds that while these countries may have exceeded the pessimistic expectations of the 1960s and 1970s, late development has influenced their political and economic systems in significant and negative ways. For example, Adnan Naseemullah illustrates how India’s growing position as a service provider in transnational production networks has increased its dependence on foreign capital and imported energy, while weakening the manufacturing sector and the state’s capacity as a strategic industrialist. Ramesh Balakrishnan develops this point by documenting the repeated failure of neo-mercantilist strategies in circuit production in a separate contribution about India.

Other papers demonstrate that even success may prove problematic. In examining Chinese investment in the Southeast Asian energy sector, Pon Souvannaseng illustrates how late developers may create new, dependent relationships as they industrialize. Meanwhile, Darius Ornston demonstrates how the Nordic countries, arguably the most successful late developers, suffer enduring disadvantages that can be traced back to the timing of industrialization. More specifically, he argues that the collective, decision-making mechanisms that enabled them to overcome the disadvantages of lateness have increased their vulnerability to policy overshooting, overinvestment and financial crises.

Peter Kingstone has agreed to draw on his expertise in the shifting political consequences of trade liberalization and investment in Latin America as chair and discussant. While late developers may not be as constrained as we feared in the 1960s and 1970s, this panel seeks to demonstrate that the timing of industrialization may continue to shape the political economy of even the most successful states in powerful and problematic ways.