A Journey in Explaining Differences in Development (part-3)

by Rizal K.

In part-1, we have chronologically discussed from classical (exogenous) to modern (endogenous) growth theories in explaining the unbalanced outcomes of economic development. In part-2, we have turned to the spatial economics and its comparable theories to explain the economic performance of spaces. This Part-3 will briefly explore the economic performance of regions from a relational perspective. That is the social and political relations between labors and capitalist that is, according this theory, inherently unequal.

Marxist economics

Another influential economic paradigm comes from Karl Marx, now known as Marxist economics. Still adopting the neoclassical economics assumptions of self-interest and profit maximizing behaviors, Marx revealed unfair relations between capital and labor in the capitalism system in which the former tends to exploit the later (Sokol 2011). Based on his observation on capitalist system, Marx devised his theory of labor by positioning labor as commodity just like other factors of production. This means that labor power can be exchanged (buy and sell) with wages as its price. Driven by profit motives to survive in harsh competition, capitalists (person who own capital and other means of production) tend to push down the labor costs (wages) as low as possible which viewed by Marx as the basis of exploitation of labor by capitalist system. Capitalism is then viewed by Marxism as an exploitative system that make the rich wealthier and the poor worse. Further, Marx also exposed the contradiction in the capitalism that he called it ‘over-accumulation’. At one point, profit maximization will lead capitalist to produce too many products that too few people can afford it for their low wages (Harvey 2006, p. 190-203). The search for profits also leads firms to look for new markets, cheaper raw materials and cheaper labor resulting in the expansion of capitalist social relations at a global scale and uneven development between countries and/or regions. These characteristics make capitalism economy inherently unstable, unequal, and prone to crisis.

Many theoretical and empirical works has been accomplished by Marxist economists and Marxism geographers. Notions such ‘spatial fix’ introduced by David Harvey (2006) and ‘spatial division’ of labors popularized by Doreen Massey (1984) are among influential works inspired by Marxism. One way to coup with the inherent crisis of capitalist system is the Harvey’s notion of spatial fix which suggests displacement of capital from overcummulated to undercummulated regions. This includes the opening of new production spaces, spatial expansion into new market, finding new sources of raw materials, or reinvestment in old places (Sokol 2011). In line with this idea, Massey’s notion of spatial division of labor suggests that spaces and regions are actually parts of broader production system and each space or region plays specific role which is determined by its relative position in the production system. Some places, for their specific characteristics, may be chosen as the places for headquarters or R&D activities that put them in relatively strategic roles compared to other places with management or operational activities. This spatial-social relation reflects the prosperities of regions on which regions with higher value-added activities such as metropolitan regions become richer than regions with lower value-added activities. Thus, this assembles the core-periphery idea, that is the different position of regions in a global division of labour. Importantly, the concept spatial division of labor applies not only at national level but also at international scale boosted up by globalization. This concept suggests that uneven spatial development should be analyzed within the broader context of capital-labor division. Factors and processes outside the region may have an impact on a region’s development path. Thus, regional development processes can be viewed as the result of region-specific histories and their links they develop to other regions.

It is important to note that many believe that we are at the early stage of what is called as knowledge-based economy (Lundvall and Johnson 1994) which raises interesting question on the capital-labors dynamics. As knowledge is now considered as crucial resources in capitalism and this knowledge owned and controlled by labor, this will likely alter the relation between both in a significant degree in the direction in favor of labors. Hodgson (1999, p. 211-15) argues that knowledge-based economy is likely to be capitalist still but with more equal relation with labor. Really?

References

Harvey, D 2006, The Limits to Capital, Verso, London.

Hodgson, G.M. 1999, Economics and Utopia: Why the Learning Economy is Not the End of History, Roudledge, London.

Lundvall, B.A. and Johnson, B. 1994, The Learning Economy, Journal of Industry Studies,  Vol. 1(2), p. 23-42.

Massey, D 1984, Spatial Division of Labour: Social Structure and the Geography of Production, Macmillan Press, London.

Sokol, M 2011, Economic Geographies of Globalization: A Short Introduction, Edward Elgar Publishing Limited, Cheltenham, UK.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s