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Re-embedding the economy to rethink (sustainable) development

Originally published: Developing Economics on September 8, 2022 by Juliette Alenda (more by Developing Economics)  | (Posted Sep 13, 2022)

This famous sentence from Joseph Ki-Zerbo could be translated as ‘we do not enforce development; we develop ourselves.’ However, development paradigms have been largely influenced by external views, mainly those of Western countries. “Development” is considered as a moral concept. Many people around the world suffer and don’t have access to welfare programmes that are fundamental to strive, hence the need for development, through the improvement in terms of basic needs and democratic institutions. However, development as a concept is far from having a universal definition, on how to develop and the ultimate goals of this development. Development paradigms are fundamentally linked to ideologies. In particular, the connection between the economics discipline and the dominant development paradigm is deep. Thus, rethinking development also calls for rethinking the assumptions in the economics discipline. In this blog, I summarize the main ideas of a recent paper I published (“From economic growth to the human: reviewing the history of development visions over time and moving forward”).

The holy triad of economics: ‘market-scarcity-rationality’

Karl Polanyi established two different definitions of economics: a formal one, used to justify the rise of self-regulated markets, and a substantive one, trying to show that markets are not a universal truth in the history of human exchanges. The formal definition refers to the logic of rational action and decision-making based on alternative uses of scarce resources. This formal approach has gradually become the dominant definition of (mainstream) economics, through the theory of utility value, based on the subjective utility associated with the consumption of goods and services. In this view, the primary focus is the individual, captured through the market relationships that he or she enters into. Resources, as natural resources, are allocated through market mechanisms, the main instrument of efficiency in what is called neoclassical economics. The implications of these assumptions are very important for development.

Since the process of formal decolonization began, the mainstream view of development has been founded on the assumption that post-colonial economies can develop in the same manner that Western countries did. In this sense, they are assumed to simply be at a later stage of Western economic history. In this context, economic growth is often considered an indicator of progress. This idea gained currency with modernization theories that started to dominate mainstream development discourse after the second World War, conceiving development as an imitative process, establishing from the onset a distinction between a modern sector (capitalist economy derived from the Global North) and a traditional sector (considered as a subsistence economy, that should be abolished). With the Washington consensus in the 1980s and the resulting structural adjustments, pulling developing countries towards stability, getting them as close as possible to the market ideal was the new goal for development, society becoming an auxiliary of the economy. In the 1990s, the discourse of international financial institutions evolved, as they incorporated political and social dimensions to their economic analyses to better explain the failures of the past. However, instead of challenging the fundamental assumption of this narrative, the new incorporations simply include more ways in which the developing countries need to ‘catch up’, such as through developing better institutions. We went from economic determinism to institutional determinism and not much has changed over time.

However, the mainstream view of development has been challenged from many quarters. For example, as scholars from the Global South long understood, underdevelopment and development are actually two sides of the same coin, based around the uneven accumulation of capital on a world scale. Dependency theorists, the regulation school, and post-developmentalist theorists all recognized this. Economic growth and capital accumulation in the Global North still relies on continuous patterns of colonization. Even alleged attempts to become more sustainable, as with electric cars or renewable energy, rely on continuous extraction of raw material in the Global South. It is time now for new frameworks for development thinking.

Another definition for a multiplicity of possibilities

Now, the substantive definition defines economics as the way society meets constructed material needs, showing that markets are not universal as stated previously. The assumptions supporting the formal and the substantive definitions are thus fundamentally different. In the substantive view, economics is about the relation between human beings, with their environment, and the institutions supporting these relations according to their needs. Polanyi was only one of many social scientists across the North and the South that tried to fight for an alternative vision of economics and development. Among them we have François Perroux, Albert Hirschman, Dudley Seers, Frantz Fanon, Samir Amin, Mahatma Gandhi, Joseph Ki-Zerbo, etc. But their voices were rejected for being too Marxist, too socialist, or not economics enough. However, we can observe many movements across the world and history echoing what these authors said in their time, including political movements, indigenous movements, different perspectives of organising societies as Buen Vivir, Ubuntu, Ecological Swaraj, etc., drawing the possibilities for an alternative vision of economics and development.

Therefore, I argue that there are three main tasks ahead of us if we want to develop a better and more human economics suited to address the world’s needs.

First, an important problem with the mainstream vision of economics is the separation of the economic from human history. The economy in a neoclassical perspective is an isolated phenomenon, outside social, political or cultural spheres, making non-mercantile phenomena invisible or inefficient. It considers the social order as static. This is why I argue that there is a need to re-embed the economy in other spheres, to re-define the economy as a human economy. It is therefore a question of going beyond the state/market duality, which neglects other principles, as reciprocity, and forms of community-based development with their own institutions and ways of exchanging, coming from historical heritages and identities.

Second, the fact that models in mainstream economics are generally conceived of as universal is another important issue. “Development” has been formalized as a universal concept, with economists enforcing a Eurocentric understanding of the world. In reality, across the world, there is a multiplicity of values, identities, cultures and resulting ways to organise exchanges and relationships between people and with their environment. Not all countries, communities, individuals aspire to the same goals. The multiple relationships between the three elements corresponds to a diversity of institutional models, supporting human beings’ freedom and creativity in their relationship with the environment.

Third, re-embedding the economy also means to bring justice in to any approach to development. The idea of efficient allocation in mainstream economics (the process of allocating resources to the production of different products and services) means that resources are allocated to products according to the preferences of individuals, expressed in terms of their ability to pay for goods and services. Having money is thus implying to have more power on what are the priorities for the economy and the society. In the substantive perspective, the goals of economic life would be related to freedom, emancipation and justice, and everyone’s voice should count to determine social priorities. These goals imply to rethink the structures, from the international to local levels, the conditions of production and redistribution of wealth. Besides, the substantive view leads to various interpretations of property rights and modes of governance, and requires us to go above the individual level. Franklin Obeng-Odoom shows well, in his recent book, how land is not a commodity but a social relation. In connection with a diversity of self-governance mechanisms, an alternative view of development would give more power to collectives and communities, through forms of local democracies. It is about democratising the economy too, as with cooperatives.

Collaboration and transformation

This blog post is overall a call to rethink the assumptions and discourses in the economic discipline, and their power in terms of influencing policy and development programmes. It is in line with post-development (a movement challenging the notion itself of development), explaining that changing discourses is a first step to change practices. Post-developmental theorists claim that re-orienting development is not enough, as the main paradigm behind development is the problem. Considering the deep connection between this paradigm and mainstream economics, I support this view. Besides, alternative approaches already exist, such as ecological economics, which puts the environment and well-being as the goals of the economy, rather than seeing the environment as a commodified resource for the economy. Justice and equity should be at the heart of the economic analysis, also considering the contexts behind different views of justice and equity. My argument is thus about establishing the need to rethink structures, understanding the diversity inside the structures, and going beyond the developed-developing dichotomy. In practice, to move towards a substantive view of economics and alternative approaches to development, we need to collaborate rather than compete at all levels. This is necessary to face the challenges of our world and to achieve transformative change at all scales, including international, firm-level, in academia, and social movements.

Juliette Alenda is an Assistant Professor in the chair of economic theory and policy at Radboud University. She works on (environmental) sustainability and transformative governance in sub-Saharan Africa and co-coordinates the research group Transformative sustainable change in Action.

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