The political economy of neo modernisation

THE POLITICAL
ECONOMY OF NEOMODERNISATION
Rethinking the Dynamics of Technology,
Development and Inequality

Seung Jin Baek


The Political Economy of Neo-modernisation
“It is of great value to complement the limitations of contemporary mainstream
economic growth discourse by exploiting the complex relations between technology, development and inequality.”
—Hak-Su Kim, Former Under-Secretary-General of the United Nations
“How will the fourth industrial revolution change the process of economic
development? Baek’s bold attempt to answer this question by integrating the
theory of the technology S-curve with various nation’s developmental processes
is arguably a novel approach.”
—Yu-Sang Chang, Chaired Professor of Gachon Centre
of Convergence Research
“The theoretical strategy to present the inter-dynamic relationship between
technological changes and inequality evolution by stages of economic development is innovative in explaining the root causes of developmental trajectories
that are different for each country.”
—Mohamed El Moctar Mohamed El Hacene, Director of the United Nations
Economic and Social Commission for Western Asia
“Baek’s book fizzes with original ideas and arguments that will resonate with
anyone struggling to reconcile the collective aspirations embodied in the SDGs
with the complex and chaotic reality of contemporary global development
dynamics.”
—James Copestake, Professor of International Development
at the University of Bath

Seung Jin Baek

The Political
Economy of
Neo-modernisation
Rethinking the Dynamics of
Technology, Development and
Inequality


Seung Jin Baek
United Nations Economic and Social Commission for Western Asia
Beirut, Lebanon

ISBN 978-3-319-91393-3    ISBN 978-3-319-91394-0 (eBook)
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Preface

Over thousands of years, humanity has prospered from with a series of
breakthrough technologies. Such technological evolution has indeed
enriched our lives in many innovative ways. For instance, we are now able
to store hundreds of years of knowledge in one tiny universal serial bus,
and through quantum computing, namely Dream of Computer, we can
experience a world in which the time it takes for a 300-digit integer to be
decomposed by an existing supercomputer may be reduced to about 30
minutes. In the near future, the cloning of human beings may lead to the
eradication of HIV/AIDS, while Albert Einstein’s Theory of (Special)
Relativity could even allow us to experience Time Travel someday.
On the other hand, fears exist due to the recent speed of technological
advancement. Indeed, there is some resistance against it. For instance,
watching AlphaGo based on artificial intelligence winning the Go match
against Sedol Lee, the 18-time world champion, many felt not just
Fascination but also Fear that artificial intelligence may have already
crossed a certain line.
Another example is Sophia, an artificial intelligence robot, who was
granted citizenship of Saudi Arabia for the first time and who was invited
as a speaker at the Future Investment Initiative conference in 2017, where
she demonstrated a sense of humour akin to that of a human being.
Furthermore, when she was asked whether there should be concern that
artificial intelligence could threaten human lives, she replied, ‘Do not
v

vi  Preface

worry. If you are nice to me, I will be nice to you’. Of course, what Sophia
said could be regarded as something remarkable or admirable about
today’s breakthrough technologies. But one could interpret her response
differently, or read the subtext to be ‘If not, then I may not be nice to
you?’
Human fear about artificial intelligence has been whirling around the
imaginations of movie directors for decades, with several blockbuster
movies depicting the catastrophic effect of taking artificial intelligence to
far, perhaps most notably in the Terminator movies.
In the contemporary world in which we are living, these Expectations
and Fears about artificial intelligence must coexist. This phenomenon can
fundamentally be converged into a debate over what level of technological development can be achieved, and the consequent uncertainty of the
extent to which our society will be changed. In other words, a debate over
whether there should be a limit to technological advances already exists
shall be our central focus. Such a debate has, in fact, been raging for a
long time, mainly in the academic sphere.
The Limitedness advocates, beginning with Thomas Robert Malthus,
have formed a popular school of thought. Their common assertions are
that natural, physiological, technological, and environmental factors can
place a limit on on-going improvement. In this regard, perhaps the best-­
known work is The Limits to Growth, published in 1972 by Donella
H.  Meadows et  al., which claims that our universe could run short of
natural and environmental resources, thereby placing a limit on growth
in the near future. Soon after, Graham Turner assessed that the shifting of
industrial production, changes in food production, and estimated pollution corresponded highly with the simulation results presented in this
book.

The Unlimitedness school of thought, on the other hand, has also presented empirical evidence to convey their beliefs and values. In particular,
most Unlimitedness advocates focus on recent evidence of respectable
technological innovation, especially over the past two decades. Their
claims indeed seem to have been gaining momentum courtesy of an
explanation of how rapidly the world has changed. In this regard, The
Singularity Is Near, published in 2005, is particularly relevant. In his
book, Futurist Ray Kurzweil popularised the idea of technological


 Preface 
  

vii

s­ingularity. Based on the concept of the law of accelerating returns, he
argued that technological innovation is progressing toward singularity to
create super-intelligence. In fact, these advocates can be seen as having
both Curiosities and Concerns about the world’s technology.
Considering this dispute of Limitedness versus Unlimitedness,
Do you believe that there is no limit to technological advancement,
or that technology will reach a limit someday?
It may be the case that many people support Unlimitedness as we are
observing various unexpected technological evolutions, which we only
expected to see in science fiction films. Furthermore, pursuing and overcoming challenges is human nature. Whichever of the above two arguments you may support, the bigger issue is ascertaining the degree to
which technological innovation has actually improved the world and
forecasting whether such innovation in the future will ensure a happier
and fairer world. This ultimately reflects the core question of this book,
Are we living in an equal and fair society,
while enjoying the benefits of technological advancement?
One might claim that technological advances have particularly

improved the lives of the poor. For instance, through technology-driven
mass production, the general public can buy a car that was formerly a
luxury that only the rich could afford. Furthermore, it has enabled even
poor rural children to obtain vast swathes of knowledge by paying a small
fee for Internet use. It is therefore the case that through the benefits of
such technological innovation, the poor have been able to increase their
productivity in a short period of time and have also been able to plan and
live a better life.
The opposite discourse is that technology is making the world unequal.
It claims that technology’s benefits tend to be reserved for those with the
most financial means. It is also true that many people have lost their jobs
and have been forced to live on the streets, after their positions were
taken over by machines, while some who can make good use of technology, such as the founders of Facebook, Amazon, and Google, have quickly


viii  Preface

become the world’s biggest conglomerates with immeasurable wealth.
With this in mind, one could suggest that society is becoming more conflicted and unequal. Silicon Valley is one of the most technologically
advanced and innovative places in the world but also one of the most
unequal regions in the US.
Given its ambivalence, technological progress has helped humanity
prosper, and many have benefited from its advancements, while at the
same time it has contributed to making societies unequal and unjust.
Today, this technology convergence can be regarded as the fourth
Industrial Revolution. Our world thus has to think about how to prepare
pre-emptively for future uncertainties, which brings us to our final question in this regard:
How can we make societies fair and equal while enjoying the benefits of
technology in the fourth Industrial Revolution?
If possible, who should then lead our societies? – Can we sorely rely on

corporations and others leading technological advancement? or Would
the regulatory role of state be taken away or enhanced?
Given these complexities, a series of these questions will be answered
via theoretical and empirical approaches. Starting from the meta-­discourse
of modernisation theory, a wide range of academic discussions are
reviewed—incorporating theories of endogenous growth, globalisation,
technology S-curve, neo-liberalism, the normative development idea of
sustainability, and some moral/philosophical thoughts on inequality and
institutionalism. Nevertheless, my ultimate goal is to help find a conceptual or practical stance from which to answer the earlier mentioned
questions.
Beirut, Lebanon

Seung Jin Baek


The book is primarily aimed at
students and researchers of social sciences, including, but not limited to,
economics, sociology, political science, jurisprudence
international development, anthropology, and history.
The main findings of the book should also be accessible to
readers with a general interest in the evolution of human society and
people seeking inspiration,
perhaps of a revolutionary mind,
who seek guiding principles in a sometimes threatening new world.

ix


Acknowledgements

I would profoundly like to thank Hak-Su Kim, Chairman of the
International Leaders Union and Former Under-Secretary General of
the United Nations, Yu-Sang Chang, Chaired Professor of Gachon
Centre of Convergence Research and Former Senior Advisor to
Founding Chairman of Samsung Group, Mohamed El Moctar
Mohamed El Hacene, Director of the United Nations Economic and
Social Commission for Western Asia and Former Minister of Petroleum
and Mines, Mauritania, and James Copestake, Professor of
International Development at the University of Bath, for their intellectual endorsement and constructive criticisms.
I am also indebted to Aurelie Charles, Professor of Global Political
Economy at the University of Bath, and Dae-Young Park, Chief of
Peacekeeping Audit Service of the United Nations, for their very
insightful comments and suggestions on the theoretical approach used
in this book. My thanks must also go to Laura Pacey, Clara Heathcock
and Dhanalakshmi Jayavel, excellent editorial and production team
at Palgrave Macmillan, and the anonymous reviewers for their invaluable comments which helped me substantially in the development of
the book.
The authorisation by the United Nations for the publication of the
book is gratefully acknowledged. It should however be noted that
xi


xii  Acknowledgements

the book is published by the author and his own capacity and not as a
representative of the United Nations.
Finally, and most importantly, I would like to thank You-Ri Lee
whose support, ­encouragement and unwavering love were undeniably
the bedrock upon which the past seven years of my life have been built.
She is my wife, best friend and mother of my daughter Harynn Baek

and my son Yoo-Joon Baek.


Contents

Part I Meta-Narrative on the Technology-Development-­
Inequality Nexus

   1

1Uncovering Complexity in the Policy Mix for Sustainability
Transitions   3
Background to the Policy Mix   3
Overarching Framework  11
Structure of the Book  17
References  22
2Reconstructing Modernisation Inclusive and Sustainable  27
Introduction  27
Modernisation Theory Revisited   30
Narrative Analysis of Sustainability, Technology,
and Inequality  42
Summary and Conclusions  56
References  57

xiii


xiv  Contents

3Comparative Perspective on Modernisation

and Institutionalism  65
Introduction  65
Varieties of Modernisation  68
Evolutionary Institutions  73
Concluding Remarks  79
References  80

Part II Growth and Inequality Interaction in the Quest for
Sustainable Development

  83

4Stylised Fact of the Changing Inequality-Growth
Landscape  85
Introduction  85
Literature Review  86
Data and Empirical Regularities   91
Econometric Modelling  94
Modelling Results  98
Framework of 11-Clusters Analysis  101
Summary and Discussion  107
References 112
5Theoretical Reshaping for the Augmented Inequality
Dynamics 119
Introduction 119
Normative Inequality for Development  124
Transformational Process and Inequality  128
Towards Better Accounts  138
Proposal for the Augmented Inequality Dynamics  143
Concluding Remarks  149

References 152


 Contents 
  

xv

6Can the SDGs Promote Structural Transformation in
Africa? An Empirical Analysis 157
Introduction 157
Methodology and Data  165
Modelling Approaches  168
Empirical Results and Discussions  172
Conclusion 181
References 183

Part III Theory of the Developmental S-Curve in Process of
Development
 189
7Limit to Improvement: Myth or Reality? 191
Introduction 191
Multiple Technology S-Curves  192
Sources of Historical Data  197
Analysis of Historical Data  199
Four Propositions  217
Policy Implications and Future Research  218
References 222
8Is the Universal Consensus on ‘Technology Drives
Development’ Analytic or Synthetic? 229

Introduction 229
Ambivalence to Technological Innovation  232
Varieties of S-Curves  237
Preliminary Assessment of Possible Regularities  246
Proposal for the Theory of the Developmental S-Curve  249
Discussion: Analytic or Synthetic?  265
References 268


xvi  Contents

9Bringing the Developmental State Back in the Age
of Exponentiality 273
Introduction 273
Evolution of Neo-Developmentalism  275
The Tetris Hypothesis  280
Transforming Uncertainty into Opportunity  284
Conclusion 298
References 301
Appendix 305
Index 339


List of Figures

Fig. 1.1 Historical improvement of economic growth: Developed ­versus
developing countries, 1970–2016
Fig. 1.2 Conceptualisation of the core model
Fig. 2.1 Sustaining innovation versus disruptive innovation
Fig. 4.1 Inequality-Income dynamics: Global, the Group of Eight and

sub-Saharan Africa
Fig. 4.2 Analysis of relationship and causality by income groups
Fig. 4.3 Analysis of relationship and causality by regional groups
Fig. 5.1 Shifting development ideas
Fig. 5.2 Conceptual framework for augmented inequality dynamics
Fig. 6.1 Proportion of population living below US$1.25 purchasing power
parity per day
Fig. 6.2 Sectoral contributions to GDP in Africa
Fig. 6.3 Carbon dioxide emissions and PCGDP growth trends in subSaharan Africa
Fig. 6.4 Carbon dioxide emissions and PCGDP growth trends globally
Fig. 6.5 Evolution of African structural transformation index
Fig. 7.1 Multiple technology S-curves
Fig. 7.2 Two types of multiple technology S-curves
Fig. 7.3 Disconnected technology S-curve in data transfer
Fig. 7.4 Progress of lighting efficacy
Fig. 7.5 Logistic curve analysis of three lighting technologies
Fig. 7.6 Evolution of means of transportation

4
12
51
93
105
106
122
148
159
160
161
161

176
194
195
196
199
201
203
xvii


xviii 

List of Figures

Fig. 7.7
Fig. 7.8
Fig. 7.9
Fig. 7.10
Fig. 7.11
Fig. 7.12
Fig. 8.1
Fig. 8.2
Fig. 8.3
Fig. 8.4

Evolution of transport (maximum speed progress)
204
Logistic curve analysis of three transport technologies
205
History of computing speed

208
Exponential growth curve analysis of computer speed
209
Logistic curve analysis of the undersea cable system
210
Exponential growth curve analysis of Internet backbone systems 211
Economic and technological performance in Silicon Valley
233
Moore’s law
236
Improvement of Measurement-While-Drilling technology
238
Market adoption S-curve: The US’ electronic market in the
twentieth century
241
Dominant design war: Gasoline car versus electric car
243
Analytical presentation for ‘Tipping Point’
244
Historical evolution for growth versus inequality in selected
advanced economies
247
Technology-driven agricultural development
253
Number of the US degree-granting postsecondary institutions:
Public versus private
256
Diffusion of social networking innovation in the US
256
Relationship between enrolment in degree-granting postsecondary institutions and unemployment rate in the US

258
Global employment concentration to large enterprises
259
Productivity growth in selected advanced economies
261
Integrated framework of the Technology-DevelopmentInequality nexus
264
Income inequality versus PCGDP and doctoral degree in the
US267
Relationship between income inequality and social mobility 291
Number of the US institutions conferring various degrees
295
Labour participation and ageing world
297

Fig. 8.5
Fig. 8.6
Fig. 8.7
Fig. 8.8
Fig. 8.9
Fig. 8.10
Fig. 8.11
Fig. 8.12
Fig. 8.13
Fig. 8.14
Fig. 8.15
Fig. 9.1
Fig. 9.2
Fig. 9.3

List of Tables

Table 4.1

Previous literature on the relationship between inequality
and growth
89
Table 6.1 Classification and variable description
169
Table 6.2 Correlation matrix
172
Table 6.3 Eigenvalues of structural transformation data set
173
Table 6.4 Factor and weight analysis
174
Table 6.5 Results (coefficients) of panel data analysis
179
Table 7.1 Summary of results from the regression analysis on lighting 202
Table 7.2 Summary of X-factor analysis on lighting
202
Table 7.3 Summary of results from the regression analysis on transport 206
Table 7.4 Summary of X-factor analysis on transport
206
Table 7.5 Summary of results from the regression analysis on information and communication
212
Table 7.6 Summary of X-factor analysis on information and communication213
Table 7.7 Summary of results from the regression
214
Table 7.8 Summary of X-factor analysis

215
Table 7.9 Summary of overall improvement rates
216
Table 7.10 Multiple S-curve grid
218
Table 8.1 Business profitability by sector: Return on equity
255
Table 9.1 Each tipping point expected to occur during the period
2018−2027281

xix


List of Boxes

Box 5.1 ‘Shifting of normative development thinking’ hypothesis
122
Box 5.2 Inequality is all about politics and human capital, not market
economy144
Box 8.1 Is technology evolving too fast?
235
Box 8.2 Does shale gas technology have the potential to change the
global energy landscape?
239
Box 9.1 Rules can change human physical performance
279
Box 9.2 Cloning technology versus inequality
288

xxi

Part I
Meta-Narrative on the TechnologyDevelopment-Inequality Nexus


1
Uncovering Complexity in the Policy
Mix for Sustainability Transitions

Background to the Policy Mix
Over the past half a century, the world has experienced rapid change.
Indeed, during this time, the world economy is estimated to have
expanded four times, which can be translated to mean continuous annual
growth of over 3 per cent.1 But behind this trajectory, ideas about development have been in a state of constant flux, with influential thinkers2
driving a never-ending evaluation of development discourse—incorporating theories of modernisation, endogenous growth, globalisation, and
neo-liberalism among others.
This upward trend in aggregate economic growth has also been associated with diverse experiences (see Fig.  1.1).3 For instance, developed
economies have made economic progress over the same period at about
three times bigger in size. In terms of per capita gross domestic product
(PCGDP), this advanced group reached US$44,074 in 2016, which is
more than four times greater than that of the world average (US$10,133).
The growth contribution of developed countries to global development
was at about 60 per cent in 2016, although it had shrunk by 18 percentage points from 78 per cent over the period in 1970.
© The Author(s) 2018
S. J. Baek, The Political Economy of Neo-modernisation,
/>
3

S. J. Baek
10.0

80

8.0

70

6.0

60

4.0

50

2.0

40

0.0

30

-2.0

10

-4.0

0

-6.0

70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94

19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16

20

Percent

90

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US trillions dollars at constant prices (2010)

4 

Developing (GDP volume, left scale)

Developed (GDP volume, left scale)

Developing (GDP growth rate, right scale)

Developed (GDP growth rate, right scale)

World (GDP growth rate, right scale)

Fig. 1.1  Historical improvement of economic growth: Developed versus developing countries, 1970–2016. (Source: Author’s own elaboration on the basis of the
UNCTADstat (2018))

Developing countries, on the other hand, have made remarkable progress in sustaining positive growth over the last five decades while improving their performance on social indicators such as health and education.
Real GDP volume increased by 655 per cent between 1970 and 2016,
which is more than three times the global rate of 211 per cent. These
economies are thus increasingly referred to as the new growth engine of
the world as many have the tendency to grow more rapidly than high-­
income countries, thereby converging living standards between the two
different worlds (Korotayev and Zinkina 2014). Measured by GDP volume on average, the difference between the two groups (developed versus
developing countries) has decreased from 3.6 times to 1.5 times over the
period 1970–2016. Such Catching-Up or Economic Convergence across
countries has been observed in the trajectory of global development since
the 1970s (Maddison 2008).

Development Characterised by ‘Inequitable’ Growth
Despite such tremendous expansion of economies in both groups, the
neo-liberal policy platform may have seriously misfired, particularly given


  Uncovering Complexity in the Policy Mix for Sustainability… 

  5

the persistent inequality within each country. Since the global financial
crisis, many of its victims have been increasingly voicing their criticism
against neo-liberal discourse.4 Since then, a number of advanced countries have been striving to reshape their distributive justice systems while
rethinking their economic development strategies in an equable and
inclusive manner. The recent phenomenon of seriously widening inequality has been observed especially in the US and the UK (Milanovic 2016).5
More seriously, a substantial number of developing countries have also
suffered from this phenomenon of severe inequality, which raises doubts
about the sustainability of their development trajectories. Despite this
trend in catching-up, the level of income inequality in developing countries appears to be even more serious than that of advanced countries.
Measured by a Gini coefficient over the period 2000–2009, Latin America
and Africa registered 0.522 and 0.439, while Asia, North America, and
Europe recorded 0.375, 0.367, and 0.325, respectively (AfDB 2012). In
2010, six out of the ten most unequal countries worldwide were in Africa
(Armah et al. 2014).
Against this backdrop, the relationship between economic growth and
inequality in the process of development sits at the forefront of the public
policy agenda and academic debate. This debate is built largely on the
work of Simon Kuznets (1955) who was the first to systematically explore
inequality during the process of development in an empirical manner.
His hypothesis was that there is an inverse relationship between the process of development and inequality, which became known as the Inverted
U-Curve. Such prime explanations have motivated a vast amount of

empirical research over the past decades, which mainly looks for that
particular curve within and across countries, but this relationship still
appears to be highly controversial.
The conflicting views supporting or opposing Kuznets’s hypothesis
centre on four main points. The first is the existence of four competing
schools of thought on the relationship between income inequality and
growth performance, which is why no consensus has yet emerged for the
Inequality-Growth nexus in the historical process of development (Baek
2017).
The second is the existence of different views on the direction of causality running from inequality to growth, or vice versa (Chang et  al.
2018). Indeed, exploring either the positive or negative associationship is


6 

S. J. Baek

critical when analysing whether or not countries may face trade-offs or
synergies between the two development outcomes. This should provide
the basis for policymakers to target an effective (re)distribution of wealth
to promote growth, Trickle-Down versus Trickle-Up-oriented interventions or other policy options, which depend significantly on the causal
orientations. In fact, there have been few attempts made to investigate
two-way causality (i.e., bi-directional causal relation) on a large set of
countries, which are challenged by technical problems and, more critically, complexities behind multiple causalities.
In addition to the causalities in question, much of the literature has
not taken into account the distinction between the long- and short-run
associationship which would have significantly different implications
in explaining the inequality and growth dynamics. The field of research
on the nexus with consideration of the time dimension together with
multiple causalities has, in fact, received relatively little attention

(Halter et al. 2014).
Finally, the consequences of inequality for growth performance may
differ depending on the size of the economy (Lee and Son 2016), which
could further vary by regional heterogeneity (Rubil 2015). Although
these regional (or income grouping) factors have been identified by some
in the literature, no one has yet incorporated them together with the
aforementioned issues in mind.
These critical challenges are studied in Chaps. 4 and 5.

Economic Growth at the Expense of the ‘Environment’
The growth pattern in the developing world, despite tremendous progress, has been neither inclusive nor environmentally sustainable. In other
words, the Grow First and Redistribute/Clean Later strategy has been a
dominant development paradigm and a syndrome. These problematic
issues are, in turn, discussed below.
As an illustration of the lack of inclusiveness, the experience of Africa,
where radical economic growth has been associated with a number of
countervailing trends, is instructive. For example, in sub-Saharan Africa,
nearly 70 per cent of jobs are considered vulnerable, and youth and


  Uncovering Complexity in the Policy Mix for Sustainability… 

  7

women labour market participation is still very low (ECA et al. 2016).
Besides, extreme poverty (measured at US$1.25 per day) decreased by a
mere 14 per cent over the period 1990–2012, while 109 million people
fell into the extremely poor group (UNSD 2016). This vulnerability in
the labour market, together with persistent levels of poverty, suggests that
much of the benefit of economic growth was concentrated in a small

group of the population. It also implies that the majority of households
were compelled to pursue agricultural business while farm sizes have been
declining amid rising rural population densities. As a result, Africa has
recently experienced a prolonged era of De-industrialisation, which can
be evidenced by the stagnation in manufacturing value-added at around
11 per cent of GDP, while service sector value-added has increased in
recent years (Armah and Baek 2015).
A dominant economic development school of thought attributed relative underdevelopment to the lack of Structural Transformation or the
failure of developing countries to significantly transform their low-­
productivity agrarian economies into high-productivity industrial ones
(e.g., Timmer 2007; McMillan and Rodrik 2011; Lin 2012). However,
while structural transformation lays the foundation for high and sustained economic growth, it is likely to lead to the deterioration in environmental quality, unless deliberate action is taken to ensure environmental
sustainability during the transformation process (UNCTAD 2012).
Structural transformation strategies while maintaining environmental
conservation can be mirrored in the normative idea of sustainability
(Castro 2004; Hull 2008). Initially pioneered by the Brundtland
Commission, the concept of sustainability has emerged concerning
recent environmental challenges and calls to rethink the development
paradigm. Agenda 21, the outcome document as a result of the Earth
Summit held in Rio de Janeiro in 1992, called for the integration of environmental and developmental concerns. Subsequently, in 2012, the Rio
+20 Conference called on UN member states to further mainstream sustainable development at all levels (UN 2012)—integrating economic,
social, and environmental aspects and recognising their interlinkages, so
as to achieve sustainable development in all its dimensions. This normative idea was later institutionalised in 2015 by the UN in its ‘2030 Agenda
for Sustainable Development’ (i.e., Sustainable Development Goals;