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History of Economic thought


By:

Hamzah Hussain Bhatti


Topics Covered:
a) Dependency Theory b) Washington Consensus c) Ideology by Amartiya Sen, Samin Amir, Immanuel Walerstien, Andre Frank and Joseph Stiglitz d) The System: Core, Peripherals and semi periherals e) Pakistan in Context of Dependency Theory

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Dependency theory: The dependency theory suggests that the economic activity within the richer countries results in serious economic issues within the poorer countries. The dependency theory argues that its not solely the facility of the dominant states that verify the diversion of resources. Its conjointly attributable to the facility of the elites at intervals the dependent states. Stating that the international system being a capitalist market system has an inside dynamics that reproduce those uneven center-periphery relations as a element a part of economic potency of the planet system. Widening of the income gap is, of course, the combination result, at the planet system level, of what's happening at the amount of individual economies within the industrialized countries where it's apparent that economy potency is in contradiction with social potency. Dependency theory explains how the international or external political, economic, and cultural policies influence the national development policies of the economies of the south. . Dependency theory states that the poverty of the countries at intervals the periphery is not as results of they don't seem to be integrated into the world system, but because of how they are integrated into the system. According to the speculation, the world system consists of two sets of states: dominant and dependent, center and periphery or metropolitan and satellite. The values added to the raw materials prices quite the first product that is used to make that product. Therefore, poorer countries never earn enough from their export earnings to pay money for their imports. Dependency theory states that the poverty of the countries within the periphery isn't as a result of they're not integrated into the planet system, however attributable to how they're integrated into the system. Poor are integrated into the planet financial set-up as producers of raw materials to serve the dominant market and at constant time to not compete with them The dependent states have sufficient production of agriculture even then they suffer from malnutrition. the speculation states that this national interest will solely be met by satisfying the requirements and needs of the folks at intervals the poor society instead of satisfying the requirements of company sector or the govt.

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The peripheral economies have sufficient production of agriculture even then they suffer from malnutrition (later explained in detail). the reason behind this could be that these peripheral states worth additional highly to serve the dominant states by exporting their production to them. The dependency theorists believe that there is the existence of a clear national interest. The speculation states that this national interest can solely be met by satisfying the needs and needs of the oldsters among the poor society rather than satisfying the needs of the north or the agents of that Centre. The dependency theory argues that its not solely the power of the dominant stat es that make sure the diversion of resources. Its additionally because of the power of the elites among the dependent states. These elites are trained by the dominant states and share identical values and culture with the elites in dominant states. Washington consensus: The philosophy of Washington consensus was indirectly presented by Milton Friedman in 1990s that imposed Miltons worldview on entire economic framework of assorted countries through IMF and World Bank. The thought was to impose out will but giving it a name of consensus and because of this truth its additionally observed as Washington diktat galvanized by Chicago faculty of thought. This framework has emerged from Friedman's data and he claimed whereas not these rustic will not be able to get on my feet with a developed country. This was once Soviet Union collapsed in late 1990's that the world was ready to take over the ideas and philosophy of Washington diktat. Stiglitz additional goes on to say that the Washington consensus neither presented a wrong data nor the proper one and it fully was because of blind zeal that Friedmans philosophy wasn't questioned. the most focus of the Washington Consensus includes: Fiscal policy discipline, with avoidance of huge fiscal deficits relative to GDP;

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Redirection of public spending from subsidies toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment; Tax reform, broadening the tax base and adopting moderate marginal tax rates; Interest rates that are market determined and positive in real terms; Competitive exchange rates; Trade liberalization: liberalization of imports, with specific stress on elimination of quantitative restrictions any trade protection to be provided by low and comparatively uniform tariffs; Liberalization of inward foreign direct investment; Privatization of state enterprises; Deregulation: abolition of laws that impede market entry or limit competition, aside from those justified on safety, environmental and client protection grounds, and prudential oversight of economic institutions; Legal security for property rights. The ideas of Washington Consensus result in an excellent deal of exploitation of developing countries by developed nations, generally with catastrophic and deadly results. Dependency theory is of vital use here because it helps to elucidate the main and broad contours of the Washington consensus as primarily taking part in a awfully drastic role in structuring the connection between the developed and underdeveloped countries. The aim of Washington Consensus was to assist the underdeveloped countries in times of their political, economic, social and monetary crisis through implementation of their policies and to supply monetary aid in variety of loans to those countries upon bound conditions that enabled and led the developed countries to require management over these underprivileged and underdeveloped nations and take the selections that served the interests of the developed world

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creating the developed countries additional fall into the shackles of chaos and destruction.

Development of the idea: Amartiya Sen: Wealth concentration results in bigger savings and better productivity as said by Amartya Sen. necessary purpose that Sen talks regarding is that the relation of wealth creation with savings and investments that in flip depends upon an individuals income. Sen explained that wealth concentration i.e. a sector of an economy has got to stay poor so as to make wealth within the economic structure this can be as a result of poor follow the consumption pattern whereas for wealth to extend its necessary that it rests within the hand of wealthy category that follows a lot of of the saving trends because it would result in higher investments and so a lot of wealth. This issue is additionally noted to be the positive impact of free market within the economy Andre Frank: Andre Gunder Frank was a German-American economic historian and sociologist who promoted Dependency Theory when 1970 and World Systems Theory when 1984. Andre Gunder Frank was a German-American economic historian and sociologist who promoted dependency theory once 1970 and world system theory once 1984.His main stream neo classical perspective promised to produce philosophies of economy and rich societies. each and every economy is functioning below one paradigm. South consists of Lebanon, Africa, Latin America, Pakistan etc. and it isn't that these countries haven't tried to cut back poverty or increase growth but they need seriously tried and seriously failed. He wrote a paper referred to as the development of the beneath developed. When this paper was printed, it emerged as a heart attack on the economic institution. This paper is viewed as the major work of economic thought. Andre Gunder Frank was very curiously a student of Milton Friedman at Chicago University. when

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completing his PHD beneath the steering of Friedman, he became fully alienated and out forward the disagreement with his professor. He raised the issue that whatever he had been taught was all ideologically driven and solely catered to the interests of bound classes whereas the truth on the bottom was a lot of necessary. when earning some cash, he went to Latin America and carried his analysis there. when returning he gave birth to the present paper that became an instaneous hit and also the dependency theory turned out to be an enormous gift. Andre Gunder Frank argued that the development theory or the general public policy has serious flaws. He argues that when the most stream economics is applied to underdeveloped countries, it offers flawed results. this is often as a result of it doesn't take into consideration the historical development of these societies where colonialism has played a significant role. Colonialism refers to the system of political and economic domination and control over Latin America, Africa and Asia. The foreign power invaded the economy and controlled the economic structure of these countries and stayed there for hundreds of years. Surprisingly, these agents that serve in north's interest are found in south with exception of in fact Malaysia who is fighting for the economic policies instructed by western world. In 1950's Harvard Advisory cluster came to Pakistan that came from Harvard college and created a specific structure in Pakistan's economy and influenced the full policy thrust that were imposed on Pakistan but were essentially created in either London or Washington. Furthermore, dependency theory argues that there'll be no economic development in northern countries while not ''large scale underdevelopment in South'' as a result of if one creates development in south then growth in north will collapse. Given the character of economic and political power of the planet as a result of north wishes necessary raw materials, primary merchandise, low-cost labor, agricultural production and mineral resources from the southern countries so as to continue their own industrial development (example natural minerals and human resources) and if on the alternative hand south utilizes its own resources then north's foundation would collapse.

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According to him the relationship between the colonial and colonized has to be maintained. Therefore, post colonial world means a world during which the structure of colonial power remains intact. These structures certify that the underdeveloped countries stay underdeveloped. the development and also the beneath development are two sides of the same coin. The development of Europe into advance industrial capitalist countries has its foundations rooted in colonialism. In alternative words, Europe could not be a sophisticated capitalist world while not exploiting the resources of colonized world. They used power to require away the resources from the less developed countries.

Frank says: I believe on the contrary that the full dual society thesis is faux that the policies recommendations, to that it will lead, if acted upon, serve solely to accentuate and perpetuate the really conditions of the underdevelopment they are supposedly designed to remedy........ and that i'm assured that future historical analysis will certify that the growth of the capitalist system over the past centuries effectively and fully penetrated even the apparently most isolated sectors of the underdeveloped world. Therefore, the economic, political, social, and cultural institutions and relations we tend to currently observe there are the merchandise of the historical development of the capitalist system no however are the seemingly a lot of trendy or capitalist choices of the national metropolis of those underdeveloped countries. Analogously to the relations between development and underdevelopment on the international level, the fashionable underdeveloped institutions of the so-called backward or feudal domestic areas of an underdeveloped country are not any less the merchandise of the sole historical technique of capitalist development than are so-called capitalist institutions of the supposedly a lot of progressive areas.

Another critique of this theory is that these policies specialize in export orientation that's the route to growth and development but those policies won't advocate that

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what kinds of exports need to be targeted at. thus the exports that happen don't have worth added to them as a result of it serves inside the simplest interest of north. Additionally, the dependency theory focuses on import substitution and creates worth added merchandise. On earth there are 0.5 dozen.1 billion of us. In north the figures doesn't even cross one billion mark i.e. but India. And in south there are around 5.5 billion of us so, south proves to be the world market and if the industrialization takes place in global market the northern market would return to an finish and be demolished. Additionally, raw material provide chain will break and industries will choke. Fourthly. The system of power is nearly linked with north and south i.e. the centre and peripheral and if we tend to require away this necessary link this structure of north and south will return to an finish and this link is ruling elites inside the south let it's in military, industrial category, politics. These elites ensure that this inequality remains. in British India, colonization British wasn't able to maintain its raj for long till it maintain Brown Sahibs, the ruling classes in India who gave the impression of britishers and worked and thought like them. This whole notion of brown sahibs, native elites was treated through doctrine of education, political dealings; Mohammad Ali Jinnah himself was a brown sahib. And to make positive that north and south structure remains intact. Decolonization occurred spherical 1940's, post independence and post colonization policy structure of that of five countries are similar. In economical structure of that of London, Washington and Paris are created potential through ruling elites. Samin amir: Samir Amin is one in all the foremost influential economists in todays world and has conjointly contributed towards the muse of the dependency theory. the various stages of development and wealth concentration is highlighted by the traditional approach whereas watching a developed world and states that if the peripheries follow the pathway of growth that the developed countries have followed they will conjointly develop. Consistent with the traditional economics, it's necessary to reveal the poverty within the initial stages whereas laying the whole foundation on capitalism by making few elite categories. Furthermore, it argues that as there's additional capitalism within the economy, the assembly will increase and there comes a time when the eventually the fruits of this increase in production triggers right down to the poor sector. Moreover, it states that the larger the south

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integrates its economy with the international system, the additional it'll be positioned to develop. However, Samir Amin rejects this theory on the premise of empirical proof of last a hundred years. He demonstrates that the globe is split into 2 divisions, the north i.e. the minority and also the south i.e majority. The logic here is that the north can solely develop and proceed if there are massive scale inequalities and poverty happening in south. Its not possible to believe that the north and also the south will grow aspect by aspect. Moreover, the worldwide political structure of economics states that the south has got to be absolutely exploited and then the high standards in north got to build on this exploitation. this massive differentials in inequalities in south and north will be explained by when an individual eats a meal of Mc Donalds, he/she unconsciously create 5 villagers hungry. Samir Amin highlights that this massive scale inequality differential is one in all the explanation that the absence of true democracy exists within the south's political and economical structure. Moreover, Pakistans geniality in term of democracy could be a serious threat to the worldwide system. The north's policy is to be in friendly terms with the dictatorship and confirm that they follow the policies desired by them and form the economy of south in an exceedingly approach that it satisfies the interests of the north. The economies of five billion individuals residing within the majority section of the economy are forcefully created in an exceedingly approach that they satisfy the interests of the population of one billion individuals residing within the minority section of the economy. great deal of inequitable distribution of wealth takes place through this system of policies initiated by the north. Moreover, the wage rates, salaries and value levels within the South are conjointly lower therefore it gets trapped during this vicious cycle. as an example, twenty fifth of the population receives 100% of the income within the centre and five-hitter within the periphery; five hundredth of the population receive twenty fifth of the income within the centre and 100% within the periphery and seventy fifth of the population receive five hundredth of the income within the centre and thirty third within the periphery. The north is in friendly terms with the dictatorship and make sure that they adopt the policies desired by them and shape the economy of south in such a way that it satisfies the interests of the north. The economies of 5 billion people are made in such a way that they satisfy the interests of the population of 1 billion people

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residing in the north. Large amount of inequitable distribution of wealth takes place. Wage rates, salaries and price levels in the South are lower thus it gets trapped in this vicious cycle. For example, 25% of the population receives 10% of the income in the centre and 5% in the periphery; 50% of the population receive 25% of the income in the centre and 10% in the periphery and 75% of the population receive 50% of the income in the centre and 33% in the periphery. Moreover, even the SAP, IMF, or the Washington Consensus makes sure that this inequality is kept intact. The high lifestyles of north demonstrate the global level exploitation of resources. Samir Amin argues that 75% people in north takes away more than half of the world output. Samir Amin argues that the policies sold to the south are nothing but a lie. Its clear that the centre in south exists so that the north continues to grow and grow. The more the periphery is integrated with the centre; its contribution to global economy is less. The less the periphery is integrated with centre; its contribution to global economy is more. Samir Amin says that there is only one hope and that is in the form of delinking. It implies that the south has to delink itself from the centre. This delinking is possible through alternative mode of development which is called Auto Centric Development as opposed to Extraverted Development. According to the auto centric development the policies of south are designed in such a way that primarily they serve their interests and the interests of the north become secondary. It is not possible to completely cut off with the north as the south needs the technology, intellectual skills and infrastructure etc which comes from the north. Delinking here does not mean that the south should completely cut from the globe. Instead it ensures that some self respect is maintained. Dependency writers put particular emphasis on technological dependence. Despite the increasing presence of TNCs in Latin America, for instance, there has been little technological diffusion, which has confirmed dependency theorys critique of transnational corporations as modern colonizers, this time not with the might of military state terrorism but the even stronger might of the gigantic international capital.

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Introducing The System: This can be thought-about logic of exploitation, relation and extortion of the two poles north and conjointly the south it tells the dependency theory. The southern economies got to have the potential to line up the economic structure and not solely agriculture and from past few years we've seen that agriculture economies are weak and got to be compelled to bow right all the way down to the northern policies and perspective. the basic reason and answer to that the southern countries dont grow is inside the vast notion of logic of system itself and does not slave as a notion of freedom as they cannot suppose originally. Additionally, neo colonism and imperialism exploits south those ends up in international system of exploitation as example raw materials. Fundamentally, the answer to the present is that no, they need not. South got to complain north later and their own elites initial as they are those that allows the north to use them. History of colonism tells us that these elites are imposed onto our country by north. The approach forward is to possess a political structure. Initial through changing elites and not the govt. Policies got to change the approach elites are obtainable in power. so its necessary to change the elites of the south to change the economic structure like NATO give crisis that happened recently in Pakistan. the complete structure of world system is well explained by Immanuel Wallerstein. He was the first person to work on the planet system analysis. in step with him, the planet system analysis may be a step forward that more explains the dependency theory and be used to elucidate the broader contours and descriptions of the Washington Consensus. It divides the complete planet during a certain hierarchy. World system analysis is the highest purpose within the economic education which may be helpful in analyzing and finding out the broader image of the system operating at international level. It discloses multiple pathways to understand culture, history, economics and sociology.

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Immanuel Wallerstein:

The dependency theory has borrowed tons from Karl Marx, however additionally includes the weather of the Keynesian philosophy into the idea. Dependency theory is seen because the original and conjointly the most comprehensive quite analysis. World system is that the climax of Immanuels work that presents the best level analysis at the worldwide level (broader level) that release multiple pathways towards understanding of politics, economics, social and history. In philosophy it's thought-about world-view that is capability to appear the world in broader terms. It explains the beginning of the entire series that world crisis relies on. Wallerstein says that the world we have a tendency to tend to measure in got to be seen as world system that is one economic unit and any economic analysis that doesn't structure or deem this unity it's then remarked because the shallow, fragmented and broken philosophy. One will analyze an economy in isolation however it is vital to notice that individual economy in empirical proof and in wise life is not freelance and if you see them independently it will be shallow. This phenomenon is taken into account as globalization and is galvanized by Chicago faculty of Thought. Moreover, the phenomenon of the world system mutually unit got to be kept in mind. All the queries regarding modern economy is basically economic structure that takes into account the gender, poverty, discrimination, politics etc. the moment one sees the trendy system in economic terms, then are actually seeing and considering the political and social structure of the society. this up to date or western system has been returning into being since the late sixteenth century i.e. from the last three hundred years. Furthermore, it is not doable to understand the trendy system whereas not factoring inside the notion of the world economy. and there's no totally different suggests that except one, that's that the planet economy.

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Capitalism has integrated the phenomenon of wage, production and consumption into it and this relation between employee, owner and wages has existed from a thousand years however the importance of it lies in what makes it modern capital structure. it's the firm for the first time in history i.e. the assembly by these corporations led to accumulation of capital, that forms that just about all important and driving force of the world economy. Basic purpose of accumulation of wealth is to create regenerated capital elementary raisond'etre. The thought behind this may be that notwithstanding you satisfy ones need its not enough as a result of one must regenerate additional and extra and capital. three hundred years back production mechanism was based mostly on satisfying human desires however currently it shifted towards capital accumulation. Basic rational basic happiness measurement is to provide additional {and additional and extra} and to consume additional and extra. Moreover the structure of kingship was relied on the structure of feudal however when modernity came it redefined the fundamental political, economic and human orientation. we have a tendency to tend to any or all are attentive to the particular fact that Politics and economics are the two sides of constant coin. the fundamental aim of the world economy is to create the relation between industrialists. it had been important to redefine the relation between politics and economics. New political category had to restructure and rule the economy. Politicians inside the modern world system serve solely inside the interests of the industrialists. as an example US political structure behind the election of any kind there is an outsized amount of cash involved. that is countless donations are given to standing up electors. Therefore, one got to perceive the systematic commonality and learn to ascertain through the variations. The because of analyze and deconstruct world economy is structured upon and internal structure by financial institutions. The starting point of Wallerstein is that the world-economy and the capitalist system go together. On the idea of the analysis of the planet for last 300 years, that he has conducted, he concludes that the worldwide economy is one unit. The capitalist system cannot exist inside any framework except that of a worldeconomy. There needs to be maintained a really sturdy relationship between economic producers and the holders of political power in order to achieve the maximum advantages, capitalism demands huge markets. in order to understand the economic structure of the worldwide economy, it is important to understand the

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economic structure of the core which cannot be doable without understanding the structure of periphery. Peripheries operate in two ways in which. Firstly, it moulds its policies to satisfy the core and secondly, it tries to repeat the core as it assumes that if it does so, it might become a complicated economic power. This, however, is the biggest illusion of all. This illusion has become clearer now because the core is now experiencing very deep rooted structural crisis that it has started engulfing the total of the planet economy. This crisis may maintain another twenty-five to fifty years. because the time passes by, the worldwide crisis will persevere deepening. As a result, there will be major crisis and changes going down within the world. this could provide birth to political riots, conflicts, wars, genocides etc; collapsing the structure, notably in peripheral states, and particularly within the core Over production: there is a basic tension, foundation conflict in world economy within a system. World economy has relentlessly has led to growth that is increase in profits, however there is a secret in ingredient to the logic i.e. contraction and this logical tussle is to create positive that growth wind and contraction losses. The logic of growth offers rises to contraction. This secret logic is over production happens solely in core however not in periphery. Its out of the question for such economies to expertise over production. System focuses on most accumulation of wealthy those that is no distribution and constrained getting power and constrained effective demand. Increase in accumulated capital is caused by firstly maximization of profit through wealth concentration and scale back in costs (i.e. majorly through wages) however this ends up in disparity and scale back in getting power. Moreover, reality of life is that every one economies ought to face disturbing quest of wealth distribution as stylish capitalist society offers birth to the concentration of wealth. Wealth concentration is directly related to production of poverty. Amartya Sen stated that the type of poverty one experiences recently is not endemic poverty occurring since before. Its primarily structurally created. Theres a basic tussle where poor individuals are created systematically thanks to the actual fact that wealth is targeted in some category of the society. this may be the rationale there is basic tension between potency and equality throughout a

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society. Furthermore, on one finish there are world category health institutions and every one variety of world category services and on the alternative hand there is large scale condition in society, where individuals haven't got even the essential health and shelter facilities.

The structure of the world economy is founded on number of institutions. Markets o It is considered the essential feature of a capitalist system. A market is both a concrete local structure in which individuals or firms sell and buy goods and a virtual institution across space where the same kind of exchange occurs. The virtual market exists in the world economy as a whole. : Market is native and planetary. Markets in London, Lahore and Delhi were terribly completely different 1700 years ago. fashionable market is that the single most significant issue and therefore the notion of patrons and sellers come back along on the premise of the merchandise. There are 2 ways in which to appear at the market. One is that the native, and second is that the virtual market. The native market consists of the physical and tangible merchandise, structure of rules and laws and code of behavior where patrons and sellers come back along physically. Wallerstein says, it's a traditional manner of observing it however there's a better market, that is understood because the virtual market. Virtuality consistent with Wallerstein is market like an enveloping and bypassing internet and its locality and physicality depends on globality. These markets are everywhere around the globe. Even if a person goes to a society that is cut off from the world, one will notice that the structure is pre modern there, for example, in Sub Saharan African Desert. It is observed that the consumption mechanism and pattern of the people of this region is such that it includes the consumption and use of Marlboro Cigarettes and satellite phones showing that even a minute pre-modern region also falls under the structure of the world economy. Moreover, the

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people there can be seen wearing jeans, shirts. If a market is not integrated through production, it is integrated through consumption process. Moreover, the markets determine the cultural, economic, and political proxies to the world in term of its own logic. He argues that the totally free markets function only as an ideology and are not practical in the day to day reality. This is because if the market was completely free, it would have led to the endless accumulation of capital. It is that virtual structure that has metaphysical and cosa-divine authority Firms/ Companies They are the main actors in the market and the markets are run by them. They serve as the competitors to the other firms who are operating in the same virtual market. . Monopoly is desired however not 100% therefore we have a tendency to fulfill it at most that's seventieth that results in quasie and semi-monopolistic or oligopolistic (cartels) structure and to keep up a structure there's no alternative manner however to involve state. therefore there's no free market or absolute free market and in any amount in history there is not even one example of free market as a result of entire structure can collapse, main reason being oligopolies and monopolies can come back to an finish. a lot of over in free market patrons would discount with sellers and reduce the value which might in flip result in decrease in profits and lower productivity. Hence the foundational logic is to own power through monopolies. The suttle purpose here is that corporations works with state and state serves the interests of the firm. If each don't work in collusion, world would be shattered into items and bits. Patents play a crucial role as they save the rights and interests of corporations. The methodology that takes place is that 1st a monopoly is made that results in accumulation of capital that in flip results in open market and competition to extend productivity this results in oligopoly and then invest in economies abroad. Moreover, they also conflict with the firms from whom the buy inputs and the firms to whom they sell their output.

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State this body works with market and its the market that produces the state. It is not possible to conceive any economy without the state. The strong states play an integral part in protecting the quasi-monopolies of the core-like processes. Households/ Classes: Households serve the primary socializing agency of the world-system. Classes are not only the groups within which households locate themselves. They are also members of status groups. . Household essentially includes the orientation of contemporary sociology that involves the relations and destroys the system of extended families. standing teams on the opposite hand embrace parts like race, gender, sexuality nationality etc Status groups: Status groups are ascribed labels, since we are born into them. These status groups consist of nations, ethnic groups, races, religious communities, and the genders and categories of sexual preference.

Understanding the system: Economic growth policy has two things being operated. first is that the exploitation if resources and second being the wealth concentration. As growth ways in which doesnt challenge the fundamentals of economic development theory argues that when you challenge it then solely the economy will move towards the sustainable growth and every person will fancy the fruitful sort of wealth not merely few people. Invariably we must always} always hence discard growth and consider economic development and conjointly examine GDP but its not the only real methodology and want to correlate it with various variables like health systems, women welfare and various social indicators by tough the fundaments and phenomenon of growth.

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The method out: for overwhelming majority its a world planetary jail, as results of economies do not appear to be solely financially imprisoned but conjointly intellectually imprisoned through the notion of slavery. Redefinition of the structure paradigm has to be compelled to happen. Most sustainable answer, unequal and unexploited is that south creates a 'political distance from the north'. distance means to redefine the relation with the north and to not follow the diktat totally and recommendation your own policies for betterment of the societies by creating protectionists policy like tariffs to make positive southern countries serves themselves and not north. Example when coco cola came into Pakistan the worst issue that happened was Rooh Afzah went out of the market. Industrial technology was fairly advanced but the globe production of England the largest trade was steal and second textile. Steal (used for one in each of the most industries like arms and aircrafts), even when hundred years keep the foremost necessary but no one asks the textiles and it's left for the peripheries. A monumental shift has taken place inside the economy five times have the globe productivity increased in hundred years but correlatively human population was one billion and these days (2000) its six billion in hundred years. It took lack years to attain mark of one billion but hundred years to urge to six billion. These statistics are directly co-related. On one end system is trying to travel towards growth and on totally different discreetly moving towards contraction, simultaneously. though solely currently this logic has come to become on the surface, wealth creation has direct contradiction with wealth distribution that's thought-about secondary or tertiary by the system and 1st orientation is towards wealth concentration The imparting international disaster is actually designed into the system and structure of the economy. we've a bent to treat growth as half A and contraction as half B. These two phases are noted as ''Wallerstein Kondratieff System''. System faces this half B once every around fifty years. this doesn't mean growth rate is not happening, it happens but at decreasing rate. Whenever half B comes crisis, conflicts and political opheral arise, example: 1968 revolt befell. but from last 3 decades system has maintained to urge rid of half B through varied, utterly totally different policies and programs impact demands and shopping for power remains constant as a results of wages and salaries do not increase with proportion to growth rate, it's as a results of the over production happens when supply exceeds or

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overcomes demand and shopping for power. Secondly as a results of producer is caught, trapped in serious structural crisis represented by half B and Wallerstein says this time it's decisive as seen inside the Arab spring, occupied wall street, and totally different revolts and recession of 2008 and thus caught in Profit Squeeze therefore reducing the profit margins and for this increase profit and scale back worth but the matter is that no-one has an autonomy to do to to the present that is potential through destruction of monopolies and oligopolies. He says: We have a tendency to tend to visualize a reversal of the cyclical curve of the world-economy. we have a tendency to speak of stagnation or recession within the world-economy. Rates of unemployment rise worldwide. Producers look for to scale back prices so as to keep up their share of the globe market. one in every of the mechanisms is relocation of the assembly processes to zones that have traditionally lower wages, that is, to semi peripheral countries. Systematically, there's a contraction, however bound core states and particularly bound semiperipheral states could seem to be doing quite well. There is an inherent tendency within the world economy towards enlargement. The world production in last a hundred years stands as an proof to the present. Within the last a hundred years, a monumental modification has occurred. In 1902 it absolutely was said that the globe had never faced most production. However currently it's being said that the assembly of 2012 is 5 times over in 1902. There has been five hundred per cent increase within the productivity within the last a hundred years. The whole of population in 1900 was approximately one billion and in 2010 it absolutely was six billion. It took many thousands of year to achieve the population of 1 billion and solely hundred years to achieve the population of six billion. The point to be noticed here is that there's a basic relationship between these 2 statistics. The figure of six billion of individuals wouldn't are potential while not the 5 hundred per cent increase within the production. The logic of enlargement is linked with logic, that is, the logic of contraction. On one hand, the system is continually struggling to achieve economic enlargement. On the opposite hand,

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constant logic of enlargement is taking the globe economy towards the contraction of the world economic productivity. One system offers due to another. Wallensteins position is that new economic human system could also be described as permanent as a result of internal contradiction. His position is that modernity from last four hundred years in terms of productivity has developed thus powerful that it led to 'world system'. but correlatively, as a results of this system in human system has survived forever and this method and this method can die and has reached a degree where it suffers internal crisis and this cannot be undone. but think about the day when this method will collapse. For example: System gave house to India and China to realize semi peripheral state but not core this could be done by creating tension conflicts between India and China to make internal tension. Same is that the case with Iraq but currently people is revolting like occupied Wall Street. The peripheral countries are the suffering from high deficits and inequalities and due these deficits to this account, lots of than 100 fifty countries are taking loans from IMF and additionally the globe Bank not solely this with these loans policies in variety of SAP are also implemented. These public policies that are functioning inside the underdeveloped countries serve the interests of the north and will be experienced inside the context of Washington Consensus too. The part of those policies embody are based totally on privatization, liberalization, fiscal austerity, and foreign investment. It is significant to note that these policies do have some positive impacts but the demerits attached to them cannot be ignored. But Stiglits the Washington consensus had four most problematic economical factors on that the full argument of Stiglitz relies. These four factors embody privatization, market and trade liberalization, fiscal austerity and foreign investment. Talking concerning privatization Milton says that this policy includes the selling of state owned resources and assets to the wealth investors across the world. currently was created by taking into thought the possession of public sector which contains inefficient, over staffed and over bottled instates, larger corruption and higher bureaucratic autonomy that lead to bankruptcy and weaker economies therefore the thought was to sell the state owned resources to the personal and wealth investors, investors who would bring economical and innovative management ways in which making institutions profitable and economical as a result shopping for power, employment, foreign investment would increase. Additionally it gave birth to the notion of

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golden hand shake inside that competent employees were used and additionally the over staffed workforce was created redundant. Washington consensus created people believe that it's viable to remodel your state into a high GDP country among the timeframe of one generation. However Stiglitz points out that IMF and World Bank do not differentiate between the three variations inside the general public sector. IMF urged that the economies have to be compelled to roll back the role of state if they aim at larger wealth creation. Another purpose that Washington consensus created was to impose radical privatization that wasn't doable whereas not liberalization inside that the barriers and restrictions are minimized. It forces third world countries to sell their assets at lower price; usually this can be} often the reason why eighty fifth possession across the globe is exercised by western countries. Returning to Joseph Stiglitz argument against privatization he believed that privatization doesn't work as presented by the Washington consensus. He additional justifies himself by not being an anti-privatization economist. He was of the thought that privatization can solely be useful and will solely raise the betterment of the economy by eliminating the flavor of greed or by not serving the interest of its own capitalist class.

Categorizing the core, peripherals and semi peripherals:


Core nations

The most economically diversified, wealthy, and powerful (economically and militarily) Have strong central governments, controlling extensive bureaucracies and powerful militaries Have more complex and stronger state institutions that help manage economic affairs internally and externally Have a sufficient tax base so these state institutions can provide infrastructure for a strong economy Highly industrialized; produce manufactured goods rather than raw materials for export Increasingly tend to specialize in information, finance and service industries

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More often in the forefront of new technologies and new industries. Examples today include high-technology electronic and biotechnology industries. Another example would be assembly-line auto production in the early 20th century. Has strong bourgeois and working classes Have significant means of influence over noncore nations Relatively independent of outside control

Throughout the history of the modern world-system there has been a group of core nations competing with one another for access to the world's resources, economic dominance, and hegemony over periphery nations. Occasionally, there has been one core nation with clear dominance over others. According to Immanuel Wallerstein, a core nation is dominant over all the others when it has a lead in three forms of economic dominance over a period of time: 1. Productivity dominance allows a country to produce products of greater quality at a cheaper price compared to other countries. 2. Productivity dominance may lead to trade dominance. Now, there is a favorable balance of trade for the dominant nation since more countries are buying the products of the dominant country than it is buying from them. 3. Trade dominance may lead to financial dominance. Now, more money is coming into the country than going out. Bankers of the dominant nation tend to receive more control of the world's financial resources. Military dominance is also likely after a nation reaches these three rankings. However, it has been posited that throughout the modern world-system, no nation has been able to use its military to gain economic dominance. Each of the past dominant nations became dominant with fairly small levels of military spending, and began to lose economic dominance with military expansion later on. Historically, cores were found in the north-west Europe (England, France, Holland), although later in other parts of the world (ex. the United States). Periphery nations

Least economically diversified Have relatively weak governments

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Have relatively weak institutions with little tax base to support infrastructure development Tend to depend on one type of economic activity, often on extracting and exporting raw materials to core nations Tend to be least industrialized Are often targets for investments from multinational (or transnational) corporations from core nations that come into the country to exploit cheap unskilled labor for export back to core nations Has small bourgeois and large peasant classes Tend to have a high percentage of their people that are poor and uneducated. Inequality tends to be very high because of a small upper class that owns most of the land and has profitable ties to multinational corporations Tend to be extensively influenced by core nations and their multinational corporations. Many times they are forced to follow economic policies that favor core nations and harm the long-term economic prospects of periphery nations.

Historically, peripheries were found outside Europe, for example in Latin America.

Semi periphery nations

Semi periphery nations are those that are midway between the core and periphery. They tend to be countries moving towards industrialization and a more diversified economy. Those regions often have relatively developed and diversified economy, but are not dominant in international trade. According to some scholars, such as Chirot, they are not as subject to outside manipulation as peripheral societies; but according to others (Barfield) they have "peripherals-like" relations to the core. While in the sphere of influence of some cores semi peripheries also tend to exert their own control over some peripheries. Further, semi-peripheries act as buffers between cores and peripheries, thus "partially deflect the political pressures which groups primarily located in peripheral areas might otherwise direct against corestates" and stabilize the world-system.

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Semi-peripheries can come into existence both from developing peripheries, and from declining cores. Historically, an example of a semi-periphery would be Spain and Portugal, who fell from their early core position, but still manage to retain influence in Latin America. Those countries imported silver and gold from its American colonies, but then had to use it to pay for manufactured goods from core countries such as England and France. In the 21st century, nations like China, India, Brazil and South Africa are usually considered semi-periphery.

Joseph Stiglitz states: Even if Smiths invisible hand theory were relevant for advanced industrialized countries, the desired conditions don't seem to be happy in developing countries. The market system needs clearly established property rights and therefore the courts to enforce them; however usually these are absent in developing countries. The market system needs competition and ideal info.

The under developed world: The peripheral or the underdeveloped countries are the victims of high deficits and inequalities. Attributable to the present account deficits, quite one hundred fifty countries are taking loans from IMF and also the World Bank. Beside the loans return the Structural Adjustment Programs that these countries are asked to adopt. The general public policies that are executed within the underdeveloped countries replicate the interests of the north. This could even be seen within the context of Washington Consensus. Additionally, the notion fiscal austerity of Washington consensus is biased against state intervention. The concept of fiscal austerity suggests taking loans from IMF, World Bank or any foreign government body if the revenue does not meet the expenditure. Stiglitz opposed this philosophy by making thus me extent that increasing the spending by going beyond one's suggests that may turn out a

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shortfall among the economy and indulging the economy in debt crises so being trapped among the vicious cycle. These debt crises have a devastating impact on the economy as debt servicing takes place through the reduction in public expenditure. However it's t be acknowledged that in fiscal austerity the expenditure on productive and development sector (education, health and infrastructure) is stop that leads to larger poverty through the diktat. On the alternative hand this diktat was created such some extent as results of such weak (indebt countries) are vital for world economy as they act as a offer of finance for the total world economy through borrowing of money. Another negative impact of this was that an inflationary pressure was created that led to rise in prices and unemployment among the economy. Moreover, it focuses on rise in taxes that cause the curtailment of mixture demand facet policies that income hinders the shopping for power and growth rate of the economy.

The policies that the underdeveloped countries so adopt are primarily based on privatization, liberalization, fiscal austerity, and foreign investment. These policies have advantages for the developing world however quite that it's the prices related to it. the general public policies within the south are structured in such how that they serve the north. In south, they policy of privatization results in barbarization. If the govt. is corrupt, there's somewhat proof that privatization can solve the problems of the economy. below the concept of barbarization, the bureaucrats aren't solely bribed to force the govt. to sell the set ups however additionally to sell them at low costs. An example are often seen within the case of Pakistan, where throughout Musharafs regime, Shaukat Aziz sold the steel mills to the western investors at low cost costs. Moreover, the personal enterprises don't give annuities. IMF focuses additional on macroeconomic problems, like the scale of the governments deficit, than on structural problems, like the potency and competitiveness of the trade. However, there are social prices related to unemployment, that the personal companies don't take into consideration. When the govt. of peripheral state decides to privatize a serious company, e.g. railways, nobody from among the developing nation could also be within the state

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to shop for such a giant project. This opens the doors to the western investors and bodies within the developing nations. however at constant time the staff are massively unemployed by the personal enterprises and also the value of unemployment is pretty high. These prices embody the widespread anxiety of the staff, further money burdens on members of the family, and also the withdrawal of kids from faculty to assist support the family. Example that will be given in context is of our own country Pakistan. it fully was throughout Nawaz Sharif's regime when varied necessary cities and industrial sector of Pakistan suffered from load shedding as a results of the electrical crises in Pakistan. Attributable to this World Bank has signed a traumatize Pakistan and freelance foreign power producer to provide the energy and electricity to Pakistan with the imposed pricing structure that was based on market conditions. Nawaz Sharif accepted this agreement but only one year later once the Cargill war Pakistan economy has yet again faced economic crises. IPP took utmost advantage of this case and dramatically can increase its prices where they were operating at 9.8%. the population of Pakistan weren't able to pay such an outsized worth but they were forced to as a result of it wasn't negotiable and if by any probability variations were to be created it fully was solely through a unilateral contract, it fully was solely doable once fighting for it among the international court of justice.

The policies that the underdeveloped countries adopt to beat the fiscal budget deficit even have their drawbacks. When the expenditures are reduced, they're majorly reduced on the productive sectors, such as, hospitals, schools, education etc and not on defense, military, or forms. This too results in the destruction of the economy because the infrastructure, telecommunication system etc all is left to suffer. Pakistan in the light of dependency theory: The dependence of Pakistan started within the colonial amount (before 1947), and so the social, political and economic relationship between sub continent and therefore the British government might be explained through dependency theory. Pakistan includes a vital role in world neo-colonialism. Moreover, there has been vital state paperwork of Pakistan within the colonial era.

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Pakistan serves as a very relevant example in proving the usefulness and impact of the dependency theory and Washington Consensus. Pakistan a periphery of the world economic system and thereby contributes to its own underdevelopment as a subsidiary of the world economic system. The peripherality of Pakistan can be explained primarily by associated with the role of the world economic system based on dependency theory which states that the underdeveloped situation of any country of the Third World is due to the exploitative nature of one global economic system. the management of the foreign imperialist bourgeoisie came to an finish at the time of Indian partition, however it's vital to notice that by no means that had its domination become history. Throughout the primary military government of General Ayub Khan Phenomenon of the worldwide neo-liberal capital was allowed that rendered native capital. From 1971 to 1977, when 1st popularly elected Prime Minister of Pakistan Z.A. Bhutto questioned neo-liberal capital in Pakistan and tried to demolish this structure through land reforms. As a result, he was hanged by General Zia. Moving on, Pakistan experienced the emergence of quasi- procedural or controlled democracies below the Pakistani military. History tells us that Pakistan is ruled by elites that are opted by colonizers. Moreover, Pakistan has perpetually been dependant on us for monetary aid not solely this even the budgets of Pakistan are approved within the Washington DC. Primarily aiming at serving the interests of the north, specifically maximizing the interest folks. Pakistan has repeatedly taken loans from IMF and World Bank and whereas granting these loans the recipient country is imposed with some policies through SAP that it's to follow and undoubtedly these policies serves in best interest of the north. However, these policies have led to high level of unemployment and deindustrialization in Pakistan. Moreover, these policies led to several socio-economic issues like unemployment, poverty, disparities and inequalities. . The economic as well as the social indicators is Pakistan are very poor. Majority of the population lives in the rural areas where they do not even have the access to clean water and food. People living under the poverty line die because of starvation and hunger of food. The peripherality of Pakistan has roots in the colonial period (before 1947), and therefore the political and economic relationship between colonial India and the then British government could be explained by dependency theory. Pakistan as a state has always played a very active role, enabling global neo-colonialism to hold

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its foot firmly on Pakistani soil. Moreover, there has been a strong role of the strong state bureaucracy of Pakistan in the colonial era. In Pakistan, the state managers in the shape of the civil and military bureaucracy, the power hungry politicians and the dominant classes are no more than the pawns of outside forces. However, some anti-systemic revolutionary forces, despite their limited resources, are present in the shape of civil society, and thus do have their integrity and specificity in the development of Pakistan at the periphery of the world economic system. Pakistan during this case is that the most vital example which will be presented because the case study relating to the dependency theory and Washington diktat. Pakistan is considered a periphery of the globe national economy and hence contributes to the underdevelopment as a subsidiary of the globe national economy. Pakistan, being a peripheral country is one in all the dependant nations of the globe. As mentioned earlier it's among one in alhe seven countries that possess the nuclear power, even then, its contribution to world GDP remains as low as zero.002 per cent. Since its creation, the death of a local entrepreneur class in Pakistan created a vacuum allowing the global neo-colonialist bourgeoisie to take over. At that time a very small number of non-Muslim industrial and merchant classes existed and migrated to India before the Indian sub-continents partition. Nevertheless, the direct control of the foreign imperialist bourgeoisie was ended at the time of Indian partition, but by no means had its domination become history. Pakistan has repeatedly taken loans from IMF and World Bank. This has caused them to follow the Structural Adjustment Program. Based on this, the IMF and World Bank undergo its economic structure such that it would provide a base to serve the interests of the North. The SAP has caused high level of unemployment and deindustrialization in Pakistan.

Conclusion:

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Over the time of last four hundred years, the modernity is that the only most significant force at intervals the human history. this is {often this can be} often for the first time in history that the economies as a result of their dominance is titled as a result of the globe System and unfortunately this world system too is facing internal contradictions which is able to force the world economy to collapse immensely. The study of the human history shows that there's no such issue as a system that's eternal. One system offers birth to a different system. Within the human history, no political or economic structure might be outlined as everlasting system. The history provides the proof of the very fact that a system operates for one hundred of years and then collapses as a result of the inherent contradictions. This provides birth to a brand new system. International financial Fund (IMF). Public Policies of Privatization (that is why Pakistan Steel Mill was Privatized as well) Free Markets (Government took its hand out of the market) Trade Liberalization (Pakistan began to import additional and more) Fiscal Austerity (Taxes were increase, Subsidies were removed) this entire means one and only 1 issue that's Pakistan could be a Peripheral State. Which is that the reason that yanks Congress passed a bill of liberation of Balochistan? there's no approach as for currently that Pakistan will become even Semi-Peripheral as a result of Pakistan is drowned within the pool of debt and this the vicious cycle that's created by Washington Consensus is absolutely operating in Pakistan. Primarily based on facts and analysis it's solely a matter of your time when this hardcore integration with the core rips Pakistan from the globe map. The additional Pakistan has integrated with USA the additional negative Pakistan has faced and also the solely issue which will be done to cut back is to follow what the dependency theory says that's to keep up a De-Linking. In step with Andre Gunder Frank the additional distance we tend to maintain from the core the additional we tend to progress so is what we'd like to try and do at the instant.

"[The New World Order] cannot happen without U.S. participation, as we are the most significant single component. Yes, there will be a New World Order, and it will

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force the United States to change its perceptions." Henry Kissinger, World Affairs Council Press Conference, Regent Beverly Wilshire Hotel, April 19th 1994

We shall have World Government, whether or not we like it. The only question is whether World Government will be achieved by conquest or consent." -- Statement made before the United States Senate on Feb. 7, 1950 by James Paul Warburg