A new perspective on development

"Economics today resembles Catholic theology in medieval Europe: a rigid doctrine guarded by a modern priesthood who claim to possess the sole truth. Dissenters are shunned." That was the rather harsh verdict of economist Ha-Joon Chang, currently professor at the School of Oriental and African Studies, University of London, in a July 2025 article for the Financial Times. In a similar vein the book "A Modern Guide to Uneven Economic Development" tries to open new viewpoints off the beaten track of mainstream economics.

Edited by Erik S. Reinert and Ingrid Harvold Kvangraven, who both teach economics in London, the anthology aims to develop an alternative canon of economic ideas, away from the Bretton Woods consensus forged in 1944 as the Second World War came to an end and the great powers still were just that. And so they went on to reorder the world.

Bretton Woods was a watershed moment in terms of institution building (with the establishment of the International Monetary Fund and the World Bank), but also in governance by setting up a system of rules and procedures to regulate the international monetary system. One of the guiding philosophies was David Ricardo's Comparative Advantage Theory, which holds that countries should only produce what they are good at while trading everything else with other countries.

In contrast, Reinert and Kvangraven advocate an alternative economic view. The book also features post-colonial economists mostly missing from today's body of teaching, including the Egyptian author Samir Amin. It is divided into six main themes, starting with a definition of uneven development and the difference between nature-made and policy-made sources of uneven development. It goes on to explain assumptions of, and approaches to, uneven development and expands on mechanisms that create and prevent inequality.

The remaining three chapters broadly deal with successful cases of development led by state-owned enterprises, uneven development and "financialized" capitalism. Here emerging economies are subordinate to a US dollar market-based system, constraining sovereign economic policy and the unequal exchange from an ecological perspective, where the Global South bears the ecological destruction caused by pollution and extraction driven by the industrial world.

The main theme is the observation that not all industrial policy generates the same economic welfare. This may be stating the obvious. But as we can see from certain countries pushing more towards a service-based economy over industrial production (for example Kenya and India), the idea persists that "a job is a job". Reality, however, is more complicated.

As previously discussed with the economist Jostein Hauge from the University of Cambridge, jobs in industry can have a higher multiplier effect. Take the famous case of the Republic of Korea. Deviating from Ricardo's theory and ignoring stern warnings from the World Bank the country forged ahead in the 1960s to set up its own steel industry. This is turn became the basis for highly successful industrial development with a globally competitive car and ship building industry and, later, as a producer of state-of-the art electronics and microelectronics in high-tech clusters. A country that was one of the poorest in the world in 1960 has become a leading - and prosperous - industrial nation within two generations.

The key question for development theorists and practitioners therefore is: Why aren't there more Republic of Koreas in the world? This is in line with the ideas promoted by the economist Mariana Mazzucato, the leading representative of the idea of the entrepreneurial state, where the sovereign should act in similar ways to a venture capital fund, creating and investing in markets based on emerging technologies and basic research, filling the gap that risk-averse private capital is failing to close.

Mazzucato has a chapter in the book and expands on her concept. She wants the state to act as a market-making investor; one that creates the environment and the market for new technological sectors. After their successful emergence and careful fostering these green sprouts can outgrow infancy and become robust enough to attract private investors, she claims.

This is the key difference between market-making and market-fixing, where the state intervenes in dying industries (which often produces stranded assets with huge economic and social consequential costs). Mazzucato's proposal with the state sponsoring new industrial sectors is in line with the Austrian political economist Joseph Schumpeter's concept of "Creative Destruction" as a tool for capitalist progress and development.

Another aspect discussed in the essay collection are the causes of uneven development. In his Theory of Combined and Uneven Development, the Russian Marxist revolutionary Leon Trotsky argued that capitalism develops unevenly across different regions with "backward" areas forced to combine old and new forms of production in unique ways. Reinert and Kvangraven et al. disagree and claim that capitalism creates geographical unevenness through its "structured social relations," meaning that some regions become home to high-tech manufacturing, while others are stuck with extractive industries.

A classic example from my personal experience is the uneven development of Tehran, the capital of Iran, as a global city during the Pahlavi era (1925- 1979) compared to areas in Khuzestan in the southwest of the country, where oil was extracted and people were still living in poverty regardless of the region's natural wealth.

Peripheral regions are further forced into power imbalances, combining traditional economic structures, often of a feudal nature, with subordinate roles in global production. Where this happens, they are often locked into extracting raw materials or low-tech manufacturing.

Following Reinert's broader theory, countries that specialize in goods of diminishing returns such as commodities lose advantages compared to those trading in goods of increasing returns such as high-tech manufacturing. Instead of developing sophisticated production capacities, these regions can experience technological regression - losing industrial proficiency they once had or failing to develop it at all.

The subordinate position prevents them from moving up the technological ladder. This creates, as the authors claim, persistent core-periphery dynamics where the "polarizing tendencies of global capitalism" are systematically reproduced through production structures. A vicious cycle.

This is further discussed on a global scale in relation to financialized capitalism. This transformation is marked by the substantive completion of the internationalization of capital circuits, where finance takes the form of a US dollar market-based system while production is delivered through global production networks.

This transformation has increased both the size and nature of value transfer from subordinate regions, with an increasing share captured by finance through services and expropriation opportunities. Emerging (Capitalist) Economies (ECE) are cast in a subordinate position regarding the extraction, realization and deposit of value, severely constraining the agency of their public and private agents. This subordination works across three dimensions: a) in production, where ECE firms capture less value and pay more for hedging currency risks, b) in circulation, where advanced economies use debt-led consumption and hence are a consumption target market, where interventions like tariff codes and policies lead to problems of demand (which is now even a problem for advanced economies like German car manufacturers), and c) in finance, where ECEs receive predominantly short-term, yield-seeking capital inflows.

The results are chronic volatility, external vulnerability and subordination to the currencies of advanced economies, which further deepens domestic financialization (often at the expense of productive sectors). For these reasons, company incomes are often saved or deposited in global currencies in foreign or offshore accounts.

The last chapter is particularly interesting as it presents a theory of "ecologically unequal exchange", explaining asymmetric transfers of non-monetary, biophysical resources and environmental damage between countries and regions. The theory refutes approaches that define ecological degradation in purely monetary terms. It provides a review of literature on methods for empirically identifying asymmetries and testing hypotheses derived from the theory. The focus is on how market exchange, when described in terms of physical resource flows rather than monetary value, reveals systematic environmental inequalities in global development.

The book also provides examples of countries that have successfully implemented industrial policies to counter uneven development and establish successful economic growth. The basis for this is always a dedicated industrial policy by the state, diversifying from supposed "comparative advantage" and investing in manufacturing while divesting from commodities. What the book glosses over, unfortunately, is the human cost of these transformations.

Nevertheless, the collection is an important contribution to discussions on development and the widening of viewpoints and perspectives. Multilateral development banks and international financial institutions can also find inspiration in chapters on project implementation and the delivery of instruments such as blended finance.

The editors quote the German philosopher Friedrich Nietzsche: "The more eyes - different eyes - that we mobilise to observe one thing, the more complete will our concept of this thing, our objectivity, be." Having read this book, I feel we're approaching 20/20.

A Modern Guide to Uneven Economic Development

Edited by Erik S. Reinert and Ingrid Harvold Kvangraven, Elgar Modern Guides, 2023, 428 pages