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Hartmut Elsenhans

The article tracks the current crises of development theory in the understanding of the differences in political economy of developed capitalism (rising mass incomes) and underdeveloped economies (labor surplus and rent). The challenge of rents consists in spontaneous tendencies of its wasteful use for blocking development, which do, however, not exclude its possible use for the elimination of marginality.

A convoy model of globalization with world wide full employment and an underconsumptionist model are distinguished. In the convoy model, an under-developed economy reaches full employment on the basis of devaluation. In the underconsumptionist model, devaluation-driven export-oriented industrialization does because of its too small impact not lead to the scarcity of average skilled labor. Leading industrialized countries react to the new competitiveness of catching-up economies through the implementation of wage restraint and industrial policies. Rent bounces back. Establishing a convoy model requires development policies characterized by an intelligent mix of rising mass incomes, reduced rents and devaluation-driven industrialization together with state support for investment.

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Hartmut Elsenhans and Hannes Warnecke-Berger

Development NGOs arose from a crisis of the Third World development state. Unlike the state, NGOs practise “small is beautiful”, channelling resources to people incommensurate to the benefits received from the NGO. NGO- managed resources are thus rents that tend to escape control by pure economic forces. The NGO world is state-created, and NGOs employ moral arguments for autonomy using material and ideological support from other, highly legitimate, spheres of society. This struggle is essentially political, but based on economic issues. The power of NGOs arose from the image of superiority to state development assistance administration. NGOs are increasingly changing their relations vis-à-vis the state in favour of cooperation by assuming functions previously fulfilled by the state. Western NGOs became institutions for distributing government money to financially weak Southern NGOs, finding themselves torn between accountability to donors in the global North and responsiveness to target groups in the global South.