Spatial Issues In Trade, Economic Growth And Regional Economics

Concerning lecture’s points:

- Measuring special concentration and inequality

- Spatial issues in trade, economic growth and regional economics

In the sixties and seventies, the failures or the stagnation recorded by many countries within the context of decolonization (in Africa), of wars of national liberation, and of guerrilla wars led to the radicalization of the development economics. The notions of centre and periphery were coming to the fore. The underdevelopment was perceived as the result of external causes, as a product of imperialism and colonialism. The dependency theory and the "centre-periphery" analyse were appearing during this period.

It is possible to summarize the opposition between "centre" and "periphery" after Prebisch. The "centre" is developed whereas the "periphery" is less developed. The demand for product of the "centre" rapidly increases, while the demand for the product of less developed countries only slowly goes up. Moreover, the "centre" mainly exports manufactured articles and imports food products and raw materials. On the other hand, the "periphery" exports mainly food products and raw materials but import manufactured goods. It has been found that terms of trade over the years become favourable for developed countries, but they become unfavourable for less developed countries. Export market is monopolistic in developed countries, but is competitive in less developed countries.

The basic dependency works attempted to analyse the Latin American capitalism from the point of view of the relation between internal and external structures. Under the Marxist's influence, the dependency theory tried not only to show the mechanisms of the capitalist exploitation of the developing countries by the multinational corporations, but also to demonstrate that the system of capitalist exploitation of the economies of dominated countries was a support and a link for the capitalist and monopolistic exploitation by the multinational corporations.

During several years, the dependency theory constituted the development theorist's answer to the system of the world capitalist accumulation.

Dependency came in two branches: the radical one, influenced notably by André Gunder Frank and Samir Amin, which claimed that the growth of the "centre" came at the expense of the "periphery"; and the mild version, pioneered by Fernando Henrique Cardoso and his co-author Enzo Faletto, which maintained that under capitalism both rich and poor could grow, but need not benefit equally.

Firstly, we are going to develop the theoretic stakes and define more precisely the Frank and Amin's. Then, we will examine the validity of the radical analysis chart and to know in what extent this point of view is still topical. Finally, it will be necessary to dwell on the empirical facts and see whether some policies based on this analysis have been established.

The "father" of the dependency approach is no doubt Paul Baran. He notes the contradiction between the needs of imperialism and the process of industrialization and general economic development of the backward countries. Thus he affirms: "What is decisive is that economic development in underdeveloped countries is profoundly inimical to the dominant interests in the advanced capitalist countries" (Baran, 1957). Indeed, the aim of the advanced nations would be to extract and to maintain the extraction of the surplus from the domestic economies. That is why the advanced nations will form alliances with pre-capitalistic domestic elites, intended to inhibit such transformations. In this way, the developed nations would have easy access to domestic resources. Within this context the dependent countries would have extremely limited possibilities to grow. Foreign capital would expropriate in large part the surplus generated.

So, this inhibition gives a competitive advantage to the the advanced nations. Michael Porter proposed the theory of competitive advantage in 1990 in order to criticise and correct the comparative advantage theory of Ricardo. Competitive advantage theory suggests that states should pursue policies that create high-quality goods to sell at high prices in the market. Competitive advantage occurs when a country acquires or develops an attribute or combination of attributes that allows it to outperform its competitors. These attributes can include access to natural resources, such as high grade ores or inexpensive power, or access to highly trained and skilled personnel human resource. So developed countries take advantage of some of these attributes in less developed countries.

According to Frank (1967), inspired by the Baran's work, the only way to stop this extraction is a "revolution" of a socialist character, which would be "necessary and possible". There would be no alternative to the underdevelopment. The underdevelopment would not be a lack of development to catch up but it would result from an agreement between the advanced nations and the elites of underdeveloped countries. He asserted that "the now developed countries were never underdeveloped, thought they have been undeveloped" (Frank, 1969).

Frank's analysis of "development of underdevelopment" argues that underdevelopment arose from the way the Third World countries were incorporated since their early stages of colonial period into an international economic and political system, dominated initially by Europe and later by the United States. On that account, the countries in question have been transformed immediately and necessarily into capitalist economies. Thus, "the peripheries (satellites) are nothing but the underdeveloped regions of the world which are integrated with the world capitalist system" (Gosh, 2001). According to Frank, as early as the sixteenth century, non-developed Latin American settlements have been transformed into underdeveloped social formations by their integration to the capitalist global scale. In this way, in Frank's opinion, underdevelopment is historical and is a product of colonialism.

By extracting the surpluses from the periphery, the developing capitalist countries improve their level of development. "According to Frank, underdevelopment is not a historical stage of growth, but rather, it is the result of the historical development of the capitalist system. The relationship between the metropolis and the periphery causes underdevelopment to the periphery. The relationship obstructs development and aggravates underdevelopment in a myriad of ways" (Gosh, 2001). The domestic

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