Alternative models of development

Alternative models of development

By Sediono Tjondronegoro

BOGOR (JP): The search for alternative models of development
is inseparable from the history of nation-states from the 18th
century onwards and the creation social-economic systems known
since as liberal democracies.

The predominance of the agrarian structure gradually changed
from small into subsequently heavier industries to sustain the
former.

The demand for capital led to the creation of a banking
system. The exploitation of raw materials, coal mines in
particular, fed the growth of energy production, which long
preceded the discovery of oil and gas. Even hydroelectric power
was developed at a later stage.

Industrialization in the West, originating from Europe, has
therefore become the basic development paradigm, transforming
from agrarian-based nation-states to industrialized ones.
Historical records show clearly that the search for energy
sources started with the exploitation of coal mines. Iron ore was
the primary raw material before any other metals now used in the
industrialization process.

Gold, which has for long been considered a precious metal for
its intrinsic value, became the foundation of the banking system.
The mercantile system developed into a general banking system
based on gold bullion.

Such were the initial conditions that enabled a capitalist
system flourish across the continents.

The liberal revolution of the 18th and 19th centuries
involved, to various degrees, most of the Western European
countries -- countries such as England, Germany and France --
with the other smaller countries following in their footsteps.
There was, however, one substantial difference.

The expansion of the Western European nation-states in to
other continents, such as Asia and Africa, from the 17th to 19th
century, was certainly part of the capitalist industrialization
process.

In the colonized territories, agricultural development,
expansion of plantations, and the growth of manufacturing
industries, in essence, corresponded to the liberal model. The
presence of raw material and the exploitation of cheap labor were
conditions which allowed the industries of Western Europe to
flourish.

This course of events was repeated on the North American
continent when the industrialization of the United States and
Canada, in the 19th century, profited from the conditions in
Latin America.

The American Civil War (1860-1865) attracted thousands of
Afro-American workers to the North, but with the rapid economic
growth of the United States, many Latin-American workers also
migrated to the North. Today, Haitians, Cubans and Mexicans, who
are closest to the American border, are still eager to find
employment in the U.S. due to higher wages than in their home
countries.

The period following World War II witnessed the birth of new
nation-states, particularly in the ex-colonial territories of
Asia and Africa. Several countries in Latin America and Asia were
not colonized. However, they remained economically dependent on
Western powers. Japan was one Asian country which became an
economic and political equal of the West.

It was in this post World War II era that a differentiation in
categories of countries and also of development models emerged.
Ideologically, there was a split into the so-called free-world,
or liberal democratic countries on one hand, and
socialist/communist countries on the other.

An in between category was the welfare-state country, a form
that is basically capitalistic, but with enough public
intervention which restrained the extreme practices of
capitalism. Minimum wages and a variety of social securities were
enforced upon private companies in cooperation with trade unions
as a third partner.

For a period of almost forty years, the two major development
models, often referred to as East-West or capitalist versus
socialist, dominated the competition between the two blocks.
Because of the cold war situation, in which a stalemate occurred
between superpowers, the economic system functioned separately:
free enterprise on one side and public enterprise, with heavy
state intervention, on the other.

It is difficult to come up with a rationale that led to the
relaxation of the stalemate and the total collapse of the Eastern
Communist block in Europe. A change of course in the Soviet
economy (Perestroika and Glasnost) made other economies in the
Soviet satellite states of Eastern Europe crumble.

The five decades after World War II proved to be inadequate to
firmly establish a new economic system in Eastern Europe, and in
socialist countries on other continents.

In this period we have seen a distinction between developed
and developing nations, a distinction which cuts across political
ideologies. In other words, there are as many developed countries
in the so-called free world hemisphere, as there are in the
socialist hemisphere.

Countries like South Korea, Taiwan and Hong Kong have become
little dragons because of their successful economic performance.

Similarly, countries like the Czech Republic, Slovakia,
Romania and Hungary in Eastern Europe have also been relatively
successful in setting up their industries.

The successes registered are often ascribed to a variety of
factors, but even in the absence of inadequate raw materials, a
more decisive factor seems to be the quality of human resources.
The best examples today are Japan and Singapore in Asia, both
countries have a minimum command over raw materials, but possess
a high potency of qualified human resources.

This has been the difference that seems to have determined the
model of development in those countries. Access to and command
over technology was given priority in the race towards
modernization, against other countries who were generously
bestowed with raw materials and resources, but containing less
qualified human resources.

Progress in development has been more significant in the
former category of countries.

In cases of countries well-bestowed with natural richness, but
with a majority of unskilled labor, the most obvious development
model has been to rely on exports of those resources. Industries
thereby stimulated were those related to mining, hydroelectric
power, oil and gas exploitation, logging and exports of wood
products, agricultural produce, fishery products and so forth.
These have been the unprocessed raw materials, characteristic of
the extracting industries.

With the rise in population, unemployment could not be solved
satisfactorily within a shorter time lapse. Overexploitation of
natural resources was the effect, also due to capital investments
and insufficient access to technology. As a consequence,
encroachments upon the environment were made, and what remained,
as a problem, was the noninvolvement of millions of peasants and
unskilled laborers.

The thrust was, therefore, to expand the processing line so
that more workers could be involved; this has now been known as
the extension of the value-added process. In the logging
industry, for instance, logs can no longer be exported directly,
but have to be processed first. A timber and plywood industry
emerges to absorb more workers, and in this way, part of the
unemployment is at least eased.

Furthermore, small industries popped up once this value-added
process was accepted and implemented. Waste products can further
be utilized, for instance, by a handicraft industry or recycled
into raw materials for the production of other commodities.
Recycling of plastics is one example of the utilization of waste
products, there are many more.

Arrears in the race towards modernization have been the result
of previous imbalances in development as well as access to
technology between developed or industrialized, and developing or
nonindustrialized countries. The latter are presently in the
process of changing their agrarian structure and moving towards
an industrial one.

Despite the negative impacts the world is suffering from as a
result of previous and present development models, the trend
towards industrialization can no longer be redirected. One major
reason is the mere fact that the agricultural sector can no
longer absorb a larger population, particularly in developing
countries with a modest economic growth rate.

Meanwhile, automation with the use of robots in industrialized
countries has increased productivity. However, at the same time,
it has reduced employment opportunities at home.

With increasing social security and overhead in those
countries, unemployment has occurred in the sense of less work
without poverty reduction.

Technical assistance is one form that is meant to transfer
knowledge and software technology from developed to developing
countries. However, the difference between the two categories of
countries will remain as long as the industrial and technology
gap is not narrowed.

Efforts to narrow the gap between developed and developing
countries have unleashed new potencies -- political as well as
economic -- where the collaboration between countries seems to be
more urgent than ever.

No doubt, established power centers are not always willing to
narrow the gap voluntarily. In order to do this, there are
objective factors to move all countries in the same direction of
sharing resources and embarking upon an international system of
division of labor. In a final analysis, comparative and
competitive advantages -- as concepts of a liberal economic
growth in nation states -- should no longer exist. That is, in
essence, the substance of such warnings as "One World Only," "The
Limits To Growth" and so forth.

This is clearly an indication of the fact that we are
approaching the limit of our world's natural potencies. Only
technology and the command over it can save us from progressive
future shortcomings. New products and material have to be
invented to feed the growing population, and also to steadily
achieve welfare increments for all.

This process should simultaneously be endeavored by preserving
our world's natural resources, and also to search for alternative
energy sources and new ways of organizing productive activities.

Now that every society, and the ones to emerge, are considered
sub-societies of a global community, it becomes an increasingly
pressing necessity to also reconcile social, economic and
technological discrepancies between developed and developing
countries.

Within the limits of this 20th century world's population
there is an opportunity to witness the development models. The
free enterprise system and the guided economic system have been
demonstrated side by side.

Developing countries which followed the former path have, in
the 1990s, been more successful economically than the ones which
adopted the latter system.

Towards the end of this century, it appears that those two
alternatives have been reduced to one, and almost like the 18th
century, a liberal economic version has proved to be more
dominant.

Political and economic leaders in developing countries are now
facing multinational conglomerates full-force. There is almost no
alternative that they can offer, since locking oneself from the
world market would exclude those doing so. Autarky for any
country appears to be a sheer impossibility in the next century.

Environmental awareness and wisdom requires a mental
orientation that is no longer confined to individual nation-
states, because the world's richness is common property of all
nations as a large community.

Greater equity of opportunities for all may not only mean
leveling up the welfare line in developing countries, but also,
at the same time, somewhat restraining the affluence of developed
countries.

Are individual nations prepared to commence that way?

It appears that before development can be redirected and new
models of development can be implemented, a consensus among
nations has to be reached so that greater equity and a better
international division of labor can be created. Gradually, the
nations of a comparative advantage will be replaced by an equity
for all and a renewed division of labor among nations.

Not until this becomes a common goal will there be a
comprehensive alternative development model for our world
community.

The writer is a professor at the Bogor Agricultural Institute.