Delinking and degrowth

One of the issues that some on the Left raise when the topic ‘degrowth’ enters the conversation relates to the sense of elitism from the wealthy nations, which can now indulge in a bit of non-material aspiration amidst the large houses, two-or-three car garages, speed boats, lycra-clad journeys to coffee shops on $10,000 bicycles designed for racing but ridden around the corner … you get the message. The criticism is that such a bourgeois ‘movement’ has no correspondence with the needs and aspirations of citizens living in poorer nations with fundamental development challenges, not the least being food security and poverty. They thus reject the idea as another ‘woke’ issue. There is some truth in what they say but it is an inadequate stance given that the global economy is operating 1.7 times over regenerative capacity and urgent changes are required. That means we have to deal with the notion of dependency between ‘North’ and ‘South’, which takes us back to the colonial relations and beyond, as an integral part of the degrowth agenda. This is where the concept of ‘delinking’ comes in. Here are some preliminary notes on all that, which arise from research I am doing for my next book on these issues (probably coming out first quarter 2025).

When I was a student I took courses in development economics as electives and was very interested in reading as widely as I could on the topic.

I was particularly attracted to the work of the German sociologist and economist – Andre Gunder Frank – who advanced the ideas of – Dependency Theory – which challenged the existing development literature in the 1970s.

The earlier expression of dependency theory came from the work of two economists in the late 1940s and became known as the – Prebisch–Singer thesis – which held that as global incomes rose, the demand for manufactured goods rose relative to the demand for primary products.

As a result, nations that were primary commodity exporters faced deteriorating terms of trade.

In other words, the poorer nations were increasingly unable to acquire manufactured goods for a given export supply of their primary commodities.

As a result the thesis held that such nations found it difficult to escape the situation of poverty and underdevelopment.

The ideas actually go back to the early Marxist literature on imperialism, particularly the work of – Rosa Luxemburg.

Dependency theory challenged the existing development economics which had been based on the idea that there is a sequential process (stages) that all nations move through from underdevelopement to development and that the poorer nations just needed the same sorts of injections (technology, capital infrastructure investment and global market integration) to move them along that path to becoming advanced nations.

Dependency theory provided a stark alternative depiction of the different national situations observed.

It had two major dimensions:

1. That the poorer nations are suppliers of natural resources and cheap labour which allow the richer nations to prosper.

2. The richer nations create institutions and mechanisms which prolong and reinforce the state of dependence and keeps the poorer nations poor.

Various prescriptions were forthcoming including import substitution growth strategies and other forms of protection to provide the ‘space’ in which growth and product diversification could occur.

The later versions of Dependency Theory were directly pitted against the mainstream – Modernisation Theory – the dominant thinking among development economists.

That theory held that societies could only develop through a process by which their institutions – governance, educational, etc – moved the nation towards embracing liberal democratic values.

The economics profession loved the theory because for them it supported their obsession with so-called ‘free markets’ and small government, with extensive deregulation, privatisation etc.

The dependency literature developed further to incorporate the increasingly global nature of financial flows which enhanced and reinforced the dependency between poor and rich nations.

The structure of global financial markets became such that the poorer nations were forced to borrow in ‘first world’ currencies and that necessity then promoted structural imbalances as the need to ‘earn’ foreign currencies rose as a prerequisite for paying back the debt.

So nations which had security in the guise of sustainable subsistence food production shifted into export-led, cash crop production, pushed hard by the likes of the World Bank and the IMF.

The development of export mining was part of that push, which supplied cheap resources to rich, manufacturing nations and leaving a trail of environmental disasters behind.

That sort of shift has not delivered on its promise.

World markets became flooded with supply, prices collapsed and the ability to repay the foreign-denominated debt declined, thus reinforcing the nations dependencies on world financial markets for further loans.

Local workers were also ‘forced’ to accept poverty wages in return for supplying highly advanced manufactured products (mostly assembly operations) to the core nations.

In effect, the poorer nations didn’t ‘develop’ but became peripheral capitalist countries, structured to maintain supply of resources to the core nations, while destroying the local indigenous solutions to scarcity.

A hierarchy of peripheral nations were identified by the work of American sociologist – Immanuel Wallerstein – who provided rich contribution to the world systems literature.

He considered there were nations that stood between the poorest and the richest nations, but which were still dependent on the rich nations.

These were countries that had achieved some form of industrialisation, typically using second-hand technology sold to them under oppressive contracts by the rich nations, and which were caught up in financial dependency through loan deals etc.

It is no surprise that the mainstream economists have been highly critical of these ideas and have just imposed their ‘one-size-fits-all’ model of development exemplified in the way the IMF treats poorer nations.

There is a lot more to the dependency literature than this – of course.

But that literature should be read in detail by those who want to participate in the degrowth debate.

And from what I see, that background knowledge is often missing from the current discussions.

However, the idea that the global economy is structured in such a way that core rich nations exploit the peripheral nations and keep them in a state of underdeveloped dependency where unequal exchanges between the two ‘levels’ results in a net wealth flow to the core nations, is a crucial aspect of the way we might construct the degrowth agenda.

The poorer nations are not just ‘poor’ versions of the rich nations, as the mainstream development theories hold.

Their underdevelopment is functionally required to advance the development of the core.

These observations relate to the critique by some on the Left of the degrowth approach.

And this is where the literature on ‘delinking’ is also relevant.

The Egyptian Marxist economist – Samir Amin – was prominent in advancing the idea of – Eurocentrism – which became an intrinsic part of the dependency literature.

He argued that mainstream development theory was amiss and that the ‘underdeveloped’ countries would never escape their dependency while participating within the global capitalist system.

The logic of that system required these nations to remain in less developed states because that status was functional in terms of the progress of the richer nations.

His answer was for the peripheral nations to ‘delink’ from the global economy by pursuing what he called ‘autocentric development’, which rejected the entire Eurocentric, colonial domination.

Autocentricity is not autarky as some have thought.

Samir Amin argued that delinking was about prioritising domestic development and setting the ‘value’ of outputs not according to first-world productivity and unit costs but rather by their contribution to society.

The examples he gave included creating a ‘National Law of Value’ such that food sovereignty would be prioritised over free trade (thus undermining the IMF’s export-led, cash crop obsessions).

Further, minimum wages that defined societal aspiration would be prioritised over so-called ‘international competitiveness’, the latter of which was just a way of funnelling maximum value of the local resource base back to the core nations.

Samir Amin also said that nations should use employment guarantees to achieve full employment as a priority, by taking work to the rural regions to forestall the shift of workers into crowded urban areas.

That last strategy underpinned the creation of India National Rural Employment Guarantee scheme.

A major problem that he saw was the way that colonialism had spawned a social class in the poorer countries which he called the – Comprador – class or ‘Comprador Bourgeoisie’, which acted to advance the interests of the foreign elements in the society (capitalists, banksters etc) in return for material advancement.

This class were manipulated by foreign capital to pressure the continued dependence of their nations of the core nations.

Accordingly, that class had to be replaced by the emergence of a ‘national bourgeoisie’ that would promote the autocentric agendas.

How that process happens is unclear.

The important point to grasp at this stage is that delinking is not about autarky.

It is rather an agenda by which the ‘South’ can reduce its dependency on the dominant world economic powers.

How?

In the first place, this requires a rejection of the structures and institutions of the ‘North’, which the likes of the IMF and the World Bank try to impose on the ‘South’.

These structures and institutions are designed to perpetuate the dependency relations and enhance the resource and wealth extraction in favour of the ‘North’.

Examples include deregulation of labour markets, free entry of foreign banks, integration into speculative financial markets, procurement contracts with the military-industrial state of the North, etc.

Rather, nations should develop their own productive systems which enhance local employment.

I recall a time when I was working in South Africa (on employment creation and minimum wage design) that one meeting focused on infrastructure creation.

The international partners (IMF, ILO etc) wanted the nation to build roads, for example, using highly mechanised techniques common in the ‘North’.

The engineers on these projects were all educated in advanced nations.

It was put to them that it would be better to use very labour intensive methods (hitting rocks into the road surface) because that would achieve high quality roads but also achieve high employment opportunities, in a nation that faced unemployment levels of around 60 per cent (conservative estimate).

The engineers were horrified – ‘You would not do that in Australia!’ – no we wouldn’t but in 70 odd years ago we did because we had lots of unemployed soldiers and lots of nation to build!

Delinking would build the roads by maximising employment for a given quality outcome irrespective of what be considered ‘best practice’ in the advanced nations.

Delinking is an important aspect of the degrowth debate because it addresses one of the key concerns that progressives have when the degrowth issue is raised.

It is clear, that if the richer countries start pursuing a degrowth strategy, which will have to involve significantly lower levels of final consumption, there will be economic damage to the poorer nations through these dependency chains.

That is where delinking becomes a crucial part of the story and where I am currently researching.

There is no definitive answer yet to the dual challenge of pursuing degrowth while at the same time reducing these dependencies through delinking.

There will have to be redistributive mechanisms from North to South, given there is a need to increase material prosperity in the latter.

How that can be achieved within the ecological limits of the planet is yet to be worked out.

But what is important is that degrowth must be integrated into a broader decolonisation strategy of which delinking will be a necessary aspect.

The elements of the Left that are critical of the degrowth agenda seem to run the line that growth in the North must continue because otherwise the dependencies (via raw material conduits etc) that hold the South in a dependent state, will punish the poorer nations.

It was exactly the same argument that the early Colonial powers used to justify their invasions.

They would say that, Yes, colonialism advances the dominant nations, but it also improves life in the colonies, a proposition that can be contested in many instances.

So, I see a degrowth agenda in the richer countries as being pursued at the same time as we help the nations of the South delink.

I have long proposed the abandonment of the World Bank and the IMF, which have outgrown their initial purpose and have been essential aspects in maintaining the dependency of the South.

Their interventions have undermined prosperity and impoverished millions of people across the world, and continue to do so.

I thus have argued to a new multilateral institution (or series of institutions) should be created to replace both the World Bank and the IMF, charged with the responsibility of ensuring that these highly disadvantaged nations can access essential real resources such as food.

There are two essential functions that that need to be served at the multilateral level:

(a) Development aid – providing funds to develop public infrastructure, education, health services and governance support.

(b) Macroeconomic stabilisation – the provision of liquidity to prevent exchange rate crises in the face of problematic balance of payments.

While these functions seem to align with those currently provided by the World Bank and IMF, a progressive approach to these problems would not resemble the operational procedures currently in place.

With regard to the provision of development aid, the starting point for a revised sustainable development strategy should be the complete cancellation of the debt hitherto incurred by (imposed upon) developing nations.

The question that must be address first though – the elephant in the room question – is can any of this be achieved within a global economic system is based on Capitalism?

The logic of Capitalism created and perpetuated the dependency relations.

How can we transcend that logic without destroying the mode of production.

Conclusion

These are questions that define some of my current research.

I will write more about this another day.

That is enough for today!

(c) Copyright 2024 William Mitchell. All Rights Reserved.