Global Stratification

Market-Oriented and State-Centered Theories

Market-Oriented Theories

Market-oriented theories assume that the best possible economic consequences will result if individuals are free to make their own economic decisions, uninhibited by governmental constraint.

Market-oriented theory emphasizes the role of the free market and the private sector. A market-oriented approach to studying global stratification takes the perspective that government intervention makes things worse. The best solutions, according to market-oriented theorists, come from the private sector. This approach is rooted in economic liberalism, a philosophy that favors free markets and limited government regulation. Economic liberalism is strongly influenced by Adam Smith's views of the free market and his support of a laissez-faire approach to the economy—letting the economy take its own course, without intervention by the government. Smith believed that if individuals made their own economic choices, they would be guided by self-interest and that these decisions would collectively produce the best results for society. Economic liberalism stresses the benefits of free markets and the drawbacks of government control of the economy. Its proponents tend to worry that any government intervention will quickly lead to the implementation of a heavily controlled economy, where individuals have little choice in their economic decisions.

Market-oriented theory emphasizes economic approaches that incentivize people to maximize resources and punish bad behavior. For example, proponents of this theory argue that if wages are too low, people will choose a different field to work in or develop new skills. This choice in labor ensures an adaptive labor force that creates new innovations to improve society. The argument is that over time, this will reduce inequality, as poor workers lift themselves up.

Features of Free Markets and Controlled Economies

The purpose of a free-market system is to maximize choice for individuals, while the purpose of a controlled economy is to provide for everyone's basic needs.

State-Centered Theory

State-centered theory argues that government can and should intervene to shape approaches to ending global poverty and stratification.

State-centered theories of global stratification stand in stark contrast to market-oriented ones. State-centered theory views governments (states) as a necessary structure to promote change and reduce inequality. In this model, state intervention is seen as constructive and democratizing. The argument is that with government regulation, the dominant social class does not have a monopoly on power. Rather, democratic regulation creates professionalization and bureaucratization, ensuring that the state remains independent. This avoids the formation of an oligarchy, a small ruling class. Professionalization creates a class of intellectuals and policy makers that can develop policy based on expert training and commitment to public service. To state-centered theorists, the state itself can inform and influence class struggles and shape society. Their view is that the primary role of the state is to protect vulnerable populations and ensure access to vital infrastructure.

State-centered theories of development gained popularity around the end of the 20th century with the rise of what was then called the Asian Tigers (South Korea, Hong Kong, Taiwan, and Singapore). Market-oriented theorists argued that the economic rise of these four countries in the late 1990s was a triumph of economic liberalism. They pointed out the industrialization strategies of these countries, led by a focus on exports, savings, and infrastructure investment. But state-centered theorists argued that apart from Hong Kong, the Asian Tigers carried out their economic development through a centralized authoritarian state.