The modernization theory takes its roots in the eighteenth century, during the Era of Enlightenment. The theoretical framework was created in an attempt to explain transformation and development in society, as well as define how change influenced pre-industrial and industrial development (Smith 44).
Like other transformational theories, modernization theory revealed its unique view on the final stage of the evolutionary process because it was associated with advancement meeting the needs of Western industrial society, the concept of modern society, a more developed society that significantly differs from a traditional vision on social development.
During the era of industrialization, the development process was closely associated with modernizing society and increasing its incomes. The idea of modernization derived from the principles of developing and changing societies within the state. Internal changes, therefore, should become the primary sources of economic, social, and political prosperity (Rapley 5).
Therefore, the developmental changes are premised on social evolution that expects continuity and progress of social change. As a result, increased complexity and specialization in human activities in political and social spheres are among the main stages of social transformation (Smith 44).
The school of modernism was encouraged in the second half of the past century in the United States. Different ideological wings agreed on fostering industrialization and technological advancement as a means of creating a prosperous society. Also, the modernization process influences an idealized vision on society.
The modernization theory faced a rigid criticism on the parts of the methods that do not recognize developmental stages of social evolution. Specifically, many other approaches, particularly those supporting dependency theory, did not support the view of independent, internal development using industrialization and technological advancement.
On the contrary, the dependency theory was more concerned with using the resources of the vibrant economies to accelerate the development of poor societies. Their opposition to the idea that is developing economies are primitive versions of the advanced countries was also confined to the tradition, even orthodox vision of development.
As a result of these debates, the dependency theories focused more on the development of free-market relations and places a lighter emphasis on state sovereignty. In other words, the first-class countries should be engaged in helping the third world countries cope with their financial and social problems through establishing equal market relations on the global arena (Rapley 28).
At the same, the supporters of the dependency school of though also argue that underdeveloped economies should not be subject to the external pressures. Instead, they should be less connected to the world market to adhere to their personal needs.
Concerning the above, the dependency theory is based on the idea that developing nations can provide cheap labor, natural resource for the developed countries to make use of.
All these assets are inherent attributes of developed economy progress and, as a result, they become developed at the pace of poor countries development. The means of integration into the world system identified the nature of emerging economies, but not the combination as itself.
The differences in views between modernization theory and dependency frameworks highlight the advantages of the latter over the modernization process due to some reasons. First of all, the dependency theorist was more consistent in explaining the outcomes of industrialization for society.
Second, they are more accurate while representing the term underdeveloped that “…refers to a continuing relationship of exploitation where at any one level in the chain of the full economic surplus is not available for reinvestment.” (Smith 88). The criticism of strict demarcation of societies into traditional and modern did not allow modernization theory to face the problem of colonialism.
In this respect, the dependency theory has provided a new path to establishing relationships that ignored the imperial past and to creating a new experience of maintaining exploitation by sustainable structures of capital interventions abroad.
The surplus values introduced were the primary privilege of underdeveloped economies engaged with the relationships with the prosperous economies. By rejecting the flow of resources between the rich and the poor countries, the modernization theories faced a problem of controversies based on the interconnection of development.
Understanding countries as unique structures allowed the states to move beyond the established standards and norms of development and provide alternative solutions for advancing economies and raising their incomes. Being under less influence of the limited stages of development, the dependency theories introduced a more effective way of meeting the needs of both developed and underdeveloped economies (Smith 92).
Further, dependency theory justified the structural formation of economies because the organization of weak economies is premised on the external influences, but not in internal phases of development as it is represented by the modernization theory.
In particular, modernization theories failed to take into consideration the concept of interchange of resource between countries that can place the poor countries in a specific social, economic, and political context. Placing society in a vacuum, therefore, does not allow to predict the essentials for economic development.
Nature of Neoliberalism (Neoclassical Economics) and its Partner Structure Adjustment Programs
Neoliberalism is known as a political movement supporting economic liberalization, open market, and free economy and advocating the necessity to enhance the private sector in the countries. In such a manner, the members of the movement seek to prevent the government from introducing the reforms hampering the overall development of society.
Neoliberalism tendencies in political and social development signify a shift from a public-based economy to the private sector. With people at its core, the neoliberalist movement planned to introduce an improvement to the governmental policy and create a solid basis for the national development (Lim 9).
The neoliberal state should promote private property rights of individuals, instructions of tree trade, and functioning markets. The institutional agreements guarantee freedoms for individuals and, therefore, the legal framework should protect an individual right to action, choice, expression.
Structural adjustment programs (SAPs) aim to reduce the fiscal imbalances of the borrowing countries and reduce poverty. SAPs are also concerned with developing countries and seek to change their direction into developing their market orientations. Free market program and policies also include the privatization process that should contribute to the goals of reducing trade obstacles.
The practice of borrowing money from abroad required the countries to have substantial foreign exchange researched to be able to cover borrowings. The fluctuations in the interest rates contributed to a robust financial flow, which negatively influenced the developing countries.
The tendency of borrowing has been significantly resented by the supporters of neoliberalist movement, believing that lenders should be immune to the financial losses whereas the borrowers must pay up, despite the social costs. In this respect, the theory of neoliberalism warns the lenders, but in practice, borrowers stay on the safe side.
The restrictions in the capacity to compress surpluses from underdeveloped countries exist (Harvey 74). Therefore, some losses have created an attractive option concerning debt relief because there was a higher probability for the developing countries to recover their economies and sustain further steady economic and political growth.
Taking advantage of this debt loss has brought the neoliberalist theory into a tight corner because of the approach to labor markets (Lim 10). The point is that the neoliberal state is opposed to social solidarity, which imposes limits on accumulating the capital.
The social movements and trade unions received power under the new tendency of liberalism but were suppressed because of the right to individual liberty. Increased flexibility, therefore, became a milestone of unequal distribution among people.
An individualized approach to labor market led to incredible social costs because not all social layers were able to promote their private businesses and, as a result, lack of governmental control generate more biases within this domain.
The analysis of the above-presented situations highlights the significant problems of neoliberalist reforms and structural adjustment programs oriented on the private sector. According to Rapley, “…SAPs, though positive in some respects, did not yield all their anticipated gains, and produced some unexpected and undesired consequences” (90).
At this point, though production under the central premises of structure adjustment rose dramatically, the local orientation did not allow the private owners to compete with the public markets. Another problem is confined to social losses as a result of Structural Adjustment Program implementation.
In particular, methodological pitfalls have negatively influenced social development because of the policy of devaluation, cost recovery, increase in subsidies, etc. These policies changed income distribution and excellent public provision. By alleviating poverty in Africa, SAPs failed to consider the output reduction in urban areas.
Less attention paid to the public sector had a substantial impact on the federal workers, such as teachers and doctors whose salaries reduced to almost 33 % (Rapley 90). Moreover, the devaluation process led to increased prices of imported good, uncontrolled rise o prices, absence of the essential commodities.
Health and education were under the threat of financial recession as well. The economic downturns touched upon such developing countries as Venezuela and Ghana, where the rates of GDP decreased dramatically once the structural adjustment programs were implemented. Industries in such countries tried to sustain healthy development by shifting cost by reducing workers’ wages and downsizing the labor force.
In conclusion, it should be stated that both the neoclassical economy and SAPs have imposed significant damage to the developing economies at the end of the twentieth century. Though their neoliberal reforms aimed at privatization of the national property sought to reduce poverty, further policies and strategies led to the economic disaster and financial instability.
The social welfare sector experienced significant difficulties in handling social groups and sustaining adequate economic and financial level. Nevertheless, such public spheres as health and education faced a severe financial recession.
Significant investments made into the development of the rural spheres hampered the development of the public market, leading to substantial shortage of financial resources and decline in employment in public areas. Cuts off in capital expenditures put the developing countries under the threat of economic crisis.
Harvey, David. A Brief History of Neoliberalism. UK: Oxford University Press, 2005. Print.
Lim, Timothy. Doing comparative politics: An introduction to approaches and issues, second edition. US: Lynne Rienner, 2005. Print.
Rapley, John. Understanding Development: Theory and Practice in the Third World. US: Lynne Rienner, 2007, Print.
Smith, Brian Clive. Understanding Third World Politics: Theories of Political Change and Development. US: Indiana University Press, 2003. Print.