The Industrial-Capitalist Model of Development

In order to understand what Modernisation Theory is, it’s useful to have an understanding of what the ‘Industrial Capitalist’ model of development is. The United Kingdom and America, the two leading super powers in the world up throughout the last two centuries, both followed an industrial-capitalist model of development,

There are obviously two bits to ‘industrial capitalism’:

INDUSTRIAL + CAPITALISM 

The first requires more explanation….

Capitalism and Development 

Capitalism is an economic system based on the private ownership of the means of production (land, raw materials, technology, factories and offices) and where production is carried out for a profit.

Under capitalism, any individual with sufficient capital (defined as resources which are available to be invested rather than saved for emergencies or simply consumed) is free to set up a business and produce a good or a service which can then be sold for a profit in the market.

In theory, Capitalism is the most efficient way of ensuring that people get the goods and services they want at the cheapest price. The reason for this is that if a Capitalist sees someone else making a profit (selling blue widgets for example), they will see an opportunity, and start producing blue widgets themselves, wanting to profit themselves.

This creates competition between the two producers, which should have three effects – competition should drive prices down, because consumers want the cheapest product, and/ or it should also push quality up, because consumers want the best quality for the cheapest price; it should also encourage innovation, as each capitalist receives a lower profit for blue widgets, they might try making fancier or different colored widgets, thus generating new demand.

In reality, what happens is all of the above – capitalist production creates new markets in varying qualities of widgets (different for different people with differing income levels) and innovation – as more producers come in seeking profit through production.

Crucial to the capitalist mode of production is labour power – capitalists buy labour power through paying wages (on the ‘job market’) – in Marxist theory, this is an exploitative relationship as the capitalist extracts surplus value from the workers by paying them less than the value of the goods they produce, but pro-Capitalists argue that it’s a win-win situation, as under free-market Capitalism, anyone is free to sell their labour elsewhere, or set up their own business themselves.

Communism – the ‘opposite of Capitalism’ 

The opposite of pure, free-market capitalism is Communism – where there is no private property and the state owns and controls the means of production. Under state-communism in Russia during most of the 20th century, the state decided what people and society needed and dictated to factories what was to be produced in five year phases. Thus there was no role for the profit motive or entrepreneurial innovation.

Goods were effectively rationed, and distributed according to need rather than by being sold on the market place.

It follows that in ‘pure communist systems’ people had much less economic freedom than under Capitalism.

NB – the above is a very rough account!

The role of the state in ‘free-market’ capitalist systems

In most European societies today, the state (governments) regulate the ‘free-market’ – so the ‘free’ in the ‘free-market’ is a very relative concept.

For example, there are lots of laws about health and safety, and environmental protection and worker rights (the minimum wage) which restrict the freedoms of capitalists; and there is also taxation which allows the state to provide some services for free to everyone (along Communist lines) – in the UK for example we have free state provided health and education, and security (the police) – so there is a very limited ‘free-market’ in these areas.

Industrialization and Development 

Industrialization refers to the process of moving from an agricultural to a factory based economy, which in turn involved harnessing the power of coal, oil and gas to power machines in factories to produce goods rapidly and efficiently.

The best example of the industrial mode of production is Henry Ford’s Ford motor plant, in which he organised the production of cars along a conveyor belt system – where workers would stand in one ‘post’ and progressively add bits onto a car which came past them.

Industrialization went hand in hand with Capitalism, as organizing workers to work in a mechanized factory was the cheapest way to produce massive amounts of goods for sale and thus to maximize profits for individual capitalists.

Fast forward to the present day and many areas of production have been ‘industrialized’ – pretty much all forms of transport, clothing, computers, and even agriculture (thought tractors etc).

So what is the Industrial-Capitalist mode of development?

It basically refers to the past 200 years of economic development in Europe and America, which has since spread to many other parts of the world. The UK went through this phase in the 19th century, the USA in the 20th.

The industrial-capitalist mode of development consists of an economic system which allows (relatively) high amounts of freedom to capitalists to invest and make a profit – it was the Capitalist class (e.g. Henry Ford) who effectively industrialized the production of most goods for example.

This had the knock on effect of creating lots of jobs and secondary business, and eventually a surplus which the government could tax in order to provide a range of welfare benefits to populations for free.

It is this mode of development which Modernisation theory suggests developing countries should adopt in order to develop, thus following in the footsteps of the UK and the USA.

Disclaimer – I wrote this off the top of my head in 20 minutes! 

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