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COURSERA: The Modern World, Part Two: Global History since 1910, W5.07 The Third World (2)

W5.07 The Third World (2)

They're also of course almost all concerned about modernization, catching up, lifting their people out of poverty. This, of course, maybe gives some of them the benefit of the doubt. You can cynically write off some of these new leaders as corrupt people out for their personal enrichment, but I think a common theme among many of these countries is a desire for modernization, however they define that term. This issue of modernization is so strong. Let's dive more deeply just into that concept. If there are 80, 90 less developed countries, all trying to figure out how do we modernize, it's such a blank term. What does it mean? What choices do they have to make? Let's study that for a second. If you were the leader, or among the leaders of a new country, you're going to have to make choices about the following subjects. Finance, that is, where do I get my money? If from the private sector, who controls my big banks? To whom do the big banks give money? Do I let the banks decide that, or will my government take control of the big banks, either formally or informally, in order, to direct who gets access to credit in my country? You also have to think about what's the relationship of my government to key industries. Let's say my country, my key industries are plantations that grow certain commodities, like rubber, valued by the outside world or mines, for, say, tin or copper. Who controls those industries? Private firms, foreigners, the government? Land. Who gets the land? Are you satisfied with the current distribution of the land, or do you think you need to re-distribute the land to give poor people more land holdings? What's your approach to trade? Do you like the kind of trading system that the imperial power left you with? Do you want a freer trading system, or do you want to raise barriers to trade? Wages. Do you just let the market set the wages, or do you try to control what the wages will be? Ditto for prices. Leave them alone, try to control them. Or try to control some of them? In other words, do you let the market set the price for bread? Do you let the market set the price for gasoline? Because that'll cause a lot of problems for poor people. If you subsidize those prices, where do you get the money to do that? How do you then manage all the economics that go with that? Now I know it might seem odd to put justice down as an aspect of modernization, but, in purely economic terms, the system for administering the justice is the system that guarantees property rights to people who have property. So people who have property are going to look very hard at the justice system to decide whether they have rights they can protect. So as a leader of the new government, you have to decide how the court system is going to be run. Is it going to be truly independent? What kind of property rights will those courts protect? Now if you just take a look at this list, you can see, if you make choices under each of these headings, you sure are going to define the character of your state, the character of your economy and all kinds of political relationships and the distribution of resources, who gets what, inside your new nation. Now, there are different theories as to how to answer all those questions. For example, there would be a communist theory of how to answer it. The great example of the communist theories of modernization might be China. And of course, that theory would be, the government controls it all, all those things on that list, and then the government makes decisions as to how to help the people. Or you could look at some ideas from democratic socialism. What would be some examples for that in the late 1950s? India, might be one. Nehru regarded himself as a democratic socialist. Mexico perhaps, might be another. And you'd look at those questions and the answers would be, the state would control quite a lot of that. The state would be involved in redistributing land. The state would control key industries. But the state would allow some significant scope for private property ownership, some significant scope for market setting, wages, prices of some things. But, a very heavy government role. And then, of course, a very heavy role between the government and the people who ran those vital industries, like say, the relation between the Mexican government and the Mexican oil industry, which it had nationalized during the 1930s. Another model for modernization might be this one, import-substitution industrialization. One country that would be an illustration of that approach, in this period, might be Brazil. Now, what exactly do I mean by that? What would you do if you had I, an ISI approach? Well, for instance, what you do is, you would increase barriers to trade in order to develop your own native industries. That means, low trade. That means increased local industry. [NOISE] It means reducing local imports of foreign goods. You want to reduce your reliance on foreigners because you're not earning a whole lot of foreign exchange to use with which to buy those imports. You know, it's worth going into just a little bit of detail about some of this because this set of ideas was very intriguing to a lot of the less developed countries in the 1950s and 1960s. And that term, ISI, is worth remembering. Or, here's yet another approach you could adopt. Export-oriented industrialization. Your models might be countries like, Japan, recovering from the devastation of World War II, or South Korea, especially the South Korea of the 1960s. If you adopted this export-oriented industrialization approach, EOI, gee, what's implied by that? Well, interestingly, your barriers to imports might actually still be high, just like in the import substitution approach. You would try to keep out foreign imports as much as you could. Remember, the United States of America was a protectionist country during the period of its early industrial development in the late 1800s and early 1900s. So Americans shouldn't get on too high horse about this. But, in the same time, you want high trade, not low trade. How do you do that then? Well, you depress wages. Try to keep workers' wages low. You also depress the real value of your money, your currency. In other words, you keep your exchange rates low. Why? I want to manufacture goods cheaply. So my workers' wages are low, I keep the value of my currency low so that rich countries are going to think: That stuff that they're making is so cheap, I want to buy it. I want to buy it even though that country doesn't import many of my rich country products. I resent that, but I still would just as soon make my consumers happier by buying their cheap goods. And besides, politically, I'm willing to kind of overlook the fact that they're keeping their trade barriers high because they're my allies in an anti-communist confederation. And then you understand some of the bargain involved in American relations with Japan and South Korea. And you say, well gee, that sounds like a great idea. You have high trade. What's the problem with this? Well one problem, of course, is that you are actually keeping the wealth of your own people lower. The buying power of your people is being consciously reduced in order to increase the sales of your goods in foreign markets. Now that implies some potential political problems because, of course, the companies that are making the exports, the people running those companies are making plenty of money. But the workers actually working in the factories, well they're not making so much money. After a while, that can begin to rankle. And that also helps define some of the politics in South Korea and Japan in the 1970s and 1980s. And by the way, it helps define some of the issues of the politics of a place like China today, where the government and the big exporters are very close to each other, but a lot of the workers who are working for the exporters are increasingly unhappy. But let's suppose you don't like any of these approaches to modernization because what you'd really prefer is a more classic liberal stance, along the nineteenth century lines, and you just kind of want the government to stay out of these matters. You want the government to confine itself to a limited set of duties, keeping public order and the like, and only regulate the capitalist system to the minimum extent necessary. That would be a liberal approach. One of the downsides of this, of course, if you were opposing them, would be, well, you're not using the government to keep the foreigners out. You're not using the government to redistribute income to the people who don't have so much. So for them in practice it might seem like a liberal ideology is just the way to preserve the rights of the rich people and preserve social inequality. So you can see some of the arguments and tradeoffs you're making both ways. But finally, suppose you're just a dictator of your state, and you don't want to have to fuss with with all this complicated economic reasoning and worry so much about modernization. You just want to be an old fashioned sort of ruler. Well, then you can just fashion an old- fashioned predatory state, really just like the ones that have been around for thousands of years. And you figure out what in your country makes money, and then you grab control of it and try to squeeze as much of it as you can for yourself. And frankly, there are a number of states in the world during this period and in the world today in which the leaders essentially seize power, try to identify something that makes money, grab control of it, and siphon as much as they can for themselves. As I say, it's a very old-fashioned pattern that doesn't really require much ideology to figure it out. Okay. So now, Madame Third World Leader or Mr. Third World Leader, you've been working through your problems of how fragile you are, how you want to maintain your independence. You're working through all your theories about modernization. You then still have some problems of: How do I define my national community? Who gets what, how do I solve my distribution problems, my politics problems? And what then you get is some really careworn Third World leaders, who are having trouble holding things together. You know, take for example this portrait now of the worried, pensive, troubled Nehru in India in 1959, with, of course, the Chinese dragon beginning to plant its claw across the Himalayan mountains, eyeing his country. At least that's how Time magazine saw it. Of course, Time was always on the lookout for promising leaders in the new Third World. Here Time is spotlighting for American readers in 1953 Africa's Kwame Nkrumah in the Gold Coast. It's part of Western Africa. In the dark continent, they ask, is he dawn's early light? Or their spotlighting at the end of 1954, the new leader of communist North Vietnam, Ho Chi Minh. Or, you've already seen this cover before, in 1955, they're telling people about Premier Nasser in Egypt. Or here, in 1958, during the struggles of Algerians to free themselves from French rule, here's one of those Algerians involved in the revolutionary struggle, Ferhat Abbas. In the background, those are French paratroopers strolling the Casbah in Algiers looking for insurgents. Or take a look at this cover. It's a very interesting one of a new Kenyan leader in East Africa, Tom Mboya, in 1960. Mount Kenya in the background.



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W5.07 The Third World (2)

They're also of course almost all concerned about modernization, catching up, lifting their people out of poverty. This, of course, maybe gives some of them the benefit of the doubt. You can cynically write off some of these new leaders as corrupt people out for their personal enrichment, but I think a common theme among many of these countries is a desire for modernization, however they define that term. This issue of modernization is so strong. Let's dive more deeply just into that concept. If there are 80, 90 less developed countries, all trying to figure out how do we modernize, it's such a blank term. What does it mean? What choices do they have to make? Let's study that for a second. If you were the leader, or among the leaders of a new country, you're going to have to make choices about the following subjects. Finance, that is, where do I get my money? If from the private sector, who controls my big banks? To whom do the big banks give money? Do I let the banks decide that, or will my government take control of the big banks, either formally or informally, in order, to direct who gets access to credit in my country? You also have to think about what's the relationship of my government to key industries. Let's say my country, my key industries are plantations that grow certain commodities, like rubber, valued by the outside world or mines, for, say, tin or copper. Who controls those industries? Private firms, foreigners, the government? Land. Who gets the land? Are you satisfied with the current distribution of the land, or do you think you need to re-distribute the land to give poor people more land holdings? What's your approach to trade? Do you like the kind of trading system that the imperial power left you with? Do you want a freer trading system, or do you want to raise barriers to trade? Wages. Do you just let the market set the wages, or do you try to control what the wages will be? Ditto for prices. Leave them alone, try to control them. Or try to control some of them? In other words, do you let the market set the price for bread? Do you let the market set the price for gasoline? Because that'll cause a lot of problems for poor people. If you subsidize those prices, where do you get the money to do that? How do you then manage all the economics that go with that? Now I know it might seem odd to put justice down as an aspect of modernization, but, in purely economic terms, the system for administering the justice is the system that guarantees property rights to people who have property. So people who have property are going to look very hard at the justice system to decide whether they have rights they can protect. So as a leader of the new government, you have to decide how the court system is going to be run. Is it going to be truly independent? What kind of property rights will those courts protect? Now if you just take a look at this list, you can see, if you make choices under each of these headings, you sure are going to define the character of your state, the character of your economy and all kinds of political relationships and the distribution of resources, who gets what, inside your new nation. Now, there are different theories as to how to answer all those questions. For example, there would be a communist theory of how to answer it. The great example of the communist theories of modernization might be China. And of course, that theory would be, the government controls it all, all those things on that list, and then the government makes decisions as to how to help the people. Or you could look at some ideas from democratic socialism. What would be some examples for that in the late 1950s? India, might be one. Nehru regarded himself as a democratic socialist. Mexico perhaps, might be another. And you'd look at those questions and the answers would be, the state would control quite a lot of that. The state would be involved in redistributing land. The state would control key industries. But the state would allow some significant scope for private property ownership, some significant scope for market setting, wages, prices of some things. But, a very heavy government role. And then, of course, a very heavy role between the government and the people who ran those vital industries, like say, the relation between the Mexican government and the Mexican oil industry, which it had nationalized during the 1930s. Another model for modernization might be this one, import-substitution industrialization. One country that would be an illustration of that approach, in this period, might be Brazil. Now, what exactly do I mean by that? What would you do if you had I, an ISI approach? Well, for instance, what you do is, you would increase barriers to trade in order to develop your own native industries. That means, low trade. That means increased local industry. [NOISE] It means reducing local imports of foreign goods. You want to reduce your reliance on foreigners because you're not earning a whole lot of foreign exchange to use with which to buy those imports. You know, it's worth going into just a little bit of detail about some of this because this set of ideas was very intriguing to a lot of the less developed countries in the 1950s and 1960s. And that term, ISI, is worth remembering. Or, here's yet another approach you could adopt. Export-oriented industrialization. Your models might be countries like, Japan, recovering from the devastation of World War II, or South Korea, especially the South Korea of the 1960s. If you adopted this export-oriented industrialization approach, EOI, gee, what's implied by that? Well, interestingly, your barriers to imports might actually still be high, just like in the import substitution approach. You would try to keep out foreign imports as much as you could. Remember, the United States of America was a protectionist country during the period of its early industrial development in the late 1800s and early 1900s. So Americans shouldn't get on too high horse about this. But, in the same time, you want high trade, not low trade. How do you do that then? Well, you depress wages. Try to keep workers' wages low. You also depress the real value of your money, your currency. In other words, you keep your exchange rates low. Why? I want to manufacture goods cheaply. So my workers' wages are low, I keep the value of my currency low so that rich countries are going to think: That stuff that they're making is so cheap, I want to buy it. I want to buy it even though that country doesn't import many of my rich country products. I resent that, but I still would just as soon make my consumers happier by buying their cheap goods. And besides, politically, I'm willing to kind of overlook the fact that they're keeping their trade barriers high because they're my allies in an anti-communist confederation. And then you understand some of the bargain involved in American relations with Japan and South Korea. And you say, well gee, that sounds like a great idea. You have high trade. What's the problem with this? Well one problem, of course, is that you are actually keeping the wealth of your own people lower. The buying power of your people is being consciously reduced in order to increase the sales of your goods in foreign markets. Now that implies some potential political problems because, of course, the companies that are making the exports, the people running those companies are making plenty of money. But the workers actually working in the factories, well they're not making so much money. After a while, that can begin to rankle. And that also helps define some of the politics in South Korea and Japan in the 1970s and 1980s. And by the way, it helps define some of the issues of the politics of a place like China today, where the government and the big exporters are very close to each other, but a lot of the workers who are working for the exporters are increasingly unhappy. But let's suppose you don't like any of these approaches to modernization because what you'd really prefer is a more classic liberal stance, along the nineteenth century lines, and you just kind of want the government to stay out of these matters. You want the government to confine itself to a limited set of duties, keeping public order and the like, and only regulate the capitalist system to the minimum extent necessary. That would be a liberal approach. One of the downsides of this, of course, if you were opposing them, would be, well, you're not using the government to keep the foreigners out. You're not using the government to redistribute income to the people who don't have so much. So for them in practice it might seem like a liberal ideology is just the way to preserve the rights of the rich people and preserve social inequality. So you can see some of the arguments and tradeoffs you're making both ways. But finally, suppose you're just a dictator of your state, and you don't want to have to fuss with with all this complicated economic reasoning and worry so much about modernization. You just want to be an old fashioned sort of ruler. Well, then you can just fashion an old- fashioned predatory state, really just like the ones that have been around for thousands of years. And you figure out what in your country makes money, and then you grab control of it and try to squeeze as much of it as you can for yourself. And frankly, there are a number of states in the world during this period and in the world today in which the leaders essentially seize power, try to identify something that makes money, grab control of it, and siphon as much as they can for themselves. As I say, it's a very old-fashioned pattern that doesn't really require much ideology to figure it out. Okay. So now, Madame Third World Leader or Mr. Third World Leader, you've been working through your problems of how fragile you are, how you want to maintain your independence. You're working through all your theories about modernization. You then still have some problems of: How do I define my national community? Who gets what, how do I solve my distribution problems, my politics problems? And what then you get is some really careworn Third World leaders, who are having trouble holding things together. You know, take for example this portrait now of the worried, pensive, troubled Nehru in India in 1959, with, of course, the Chinese dragon beginning to plant its claw across the Himalayan mountains, eyeing his country. At least that's how Time magazine saw it. Of course, Time was always on the lookout for promising leaders in the new Third World. Here Time is spotlighting for American readers in 1953 Africa's Kwame Nkrumah in the Gold Coast. It's part of Western Africa. In the dark continent, they ask, is he dawn's early light? Or their spotlighting at the end of 1954, the new leader of communist North Vietnam, Ho Chi Minh. Or, you've already seen this cover before, in 1955, they're telling people about Premier Nasser in Egypt. Or here, in 1958, during the struggles of Algerians to free themselves from French rule, here's one of those Algerians involved in the revolutionary struggle, Ferhat Abbas. In the background, those are French paratroopers strolling the Casbah in Algiers looking for insurgents. Or take a look at this cover. It's a very interesting one of a new Kenyan leader in East Africa, Tom Mboya, in 1960. Mount Kenya in the background.

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