The European dependency school formulated progressive alternatives to hegemonic paradigms in development studies and economics. The dynamics of the era ending the bipolar world would turn, however, in a different direction, which captivated dependency authors but also left of center political parties. Already in 1994, Panitch (1994: 81f.) pointed out that most mainstream center-left parties subscribed to the (neoliberal) competitiveness paradigm by advancing ‘a more progressive form’ that, however, did ‘not constitute much of an alternative’:

For a considerable period through the 1970s and well into the mid-1980s, a large part of the Left refused to acknowledge that the crisis of the Keynesian/welfare state was a structural one, pertaining to the very nature of capitalism and the contradictions it generates in our time. […] But rather than allow bourgeois economists calling the tune with their neo-liberal logic of deregulation, free markets, privatization and austerity to dictate the terms of the race, a “progressive competitiveness ” strategy is advanced by intellectuals on the Left (from social democratic to left-liberal to a good many erstwhile marxists) whereby labour and the state are urged to take the initiative and seize the hand of business in making the running toward competitive success.

This account is only partially true for the ‘European dependency school ’. As I have shown, authors form this school clearly challenged the structural crisis of capitalism in their Keynesian and neoliberal expression. They also formulated alternatives but defensively and skeptically. Since, in social science, a scientific revolution is rather consequence of a real life revolution, neoliberal counterrevolution succeeded Keynesianism and efforts of the dependency school were consequently forgotten. As for their further scientific work, the ‘era of globalization’ did not leave many of the European dependency scholars unimpressed. But this was true also among the Latin Americans.

‘Globalization’ was the name established for the ‘new’ dynamic that for many first also carried hope for progress. In this new era, a prominent member of the Latin American dependency school , Fernando Henrique Cardoso , argued, all the old theories and political concepts were useless. He broke with his critical past and entered a (successful) election campaign for the Brazilian presidency in 1994 (Fischer et al. 1999: 9). ‘Globalization’ led, however, to ‘globalization crisis’, the ‘new’ dynamic was increasingly seen critically and therefore often nicknamed ‘neoliberal globalization’ (cf. Panitch et al. 2004, a very instructive compilation of critical essays on globalization published in the Socialist Register during the 1990s). Today any euphoria is gone, ‘globalization crisis’ belongs to the past, what is left of ‘neoliberal globalization’ is (neoliberal) capitalism with inherent crises.

As far as the ‘European dependency school ’ is concerned, authors of the Binghamton network, subscribing to world-systems theory, had certainly no ‘developmentalist illusions’ and seemed better prepared to face a radicalization of the liberal paradigm in the 1990s. Scholars working with Arrighi’s network connected directly to the Binghamton network in the 1980s and theorized the paradigmatic change as ‘sudden change in the “rules of the game” [that] would play a key role in reconstituting the rattled foundations of the North-South wealth divide’ (Arrighi et al. 2003: 20). Arrighi et al. (2003: 23ff.) did not adapt to the paradigmatic changes but theorized them (cf. also Arrighi et al. 1996). ‘Structural mechanism did not operate in an ideological void’ (ibid.: 23) they argued:

Rather, they were shaped by beliefs and theories about the pursuit of national wealth in a global economy that channeled Third World development efforts in particular directions. These beliefs and theories were fundamentally contradictory because they reflected the hegemonic power’s attempt to do two incompatible things – to accommodate Third countries’ aspirations to catch up with the standards of wealth of First World countries, and to preserve standards of oligarchic wealth for itself and for its closest allies. From this point of view, the main difference between the pre-1980 and the post-1980 periods is that, while in the earlier period the need to accommodate Third World aspirations was predominant, in the latter period the need to preserve oligarchic wealth gained the upper hand. (ibid.: 23f.)

The concept of ‘oligarchic wealth’ in contrast to ‘democratic wealth’ was borrowed from Roy Harrod (1958):

Democratic wealth is the kind of command over resources that, in principle, all can attain in direct relation to the intensity and efficiency of their efforts. Oligarchic wealth, in contrast, bears no relation to the intensity and efficiency of its recipients’ efforts, and is never available to all because generalized attempts to attain it raise costs and reduce benefits for all actors involved. (Arrighi et al. 2003: 19)

The intense competition among peripheral and semiperipheral countries did prevent them from achieving similar wealth as in core countries (cf. the theoretical explanation in Chapter 3) but also undermined the industrial foundations of core countries (deindustrialization ).

Overall the research networks of the ‘European dependency school ’ seem to have discontinued their activities related to the dependency paradigm in the 1980s. Only single authors continued publishing critical accounts. I use again the two threads of the European dependency school , the more state level oriented EADI and the ‘regionalists’, in order to briefly—by using only a few examples—approximate what seems to have happened to researchers from these networks afterwards. The most prominent figure of the EADI branch of the ‘European dependency school ’, Dudley Seers , had died in 1983. He had criticized international penetration and presumably would have been also a critic of ‘globalization’. More than a decade later, in 1996, EADI was in the midst of the globalization discourse, holding its 8th conference (in Vienna) under the title: ‘Globalisation, Competitiveness and Human Security: Challenges for Development Policy and Institutional Change’. In the following year, a selection of conference papers was being published in the European Journal of Development Research which had an eminent researcher of the Latin American dependency school as an editor: Cristóbal Kay (1997, cf. 1989). Regionalism was being newly defined. In the European Dependency school , the penetrating ‘development from above’ had been perceived as either coming from the state or interregional companies against peripheral (domestic) regions, or being directed from core states into peripheral states. Neatly fitting into the globalization discourse, Björn Hettne (1997: 83) from the EADI network , now argued ‘that development theory as a state centric concern lacks relevance’. In order to regain explanatory relevance, development theory was to merge with International Political Economy (IPE). This should enable a compromise in the ‘political rationality’ between the fading Westphalian and the post-Westphalian world order in the making: ‘A “post-Westphalian” logic rests on the […] assumption that the nation state has lost its usefulness, and that solutions to emerging problems must increasingly be found in transnational structures’ (Hettne 1997: 84). ‘In terms of development principles’, Hettne sees—adapting Friedmann and Weaver (1979)—a compromise between territory and function. Hettne calls these compromises ‘new regionalism’. Many in the European dependency school had identified TNC as main actors penetrating peripheral regions or states , Friedmann and Weaver (1979: 171) saw them ‘gaining in this contest for dominion’. In the globalization discourse, however, anonymous globalization often seems to have replaced actors responsible for the fact that function prevailed over territory. The attention shifted toward global governance necessary to counter negative effects. On the regional level ‘a large number of different institutions, organizations, and movements’—and no longer states—are seen as ‘actors behind regionalist projects’ (Hettne 1997: 85). How these objectives were to be achieved, remained unexplained. Presumably drawing on his earlier work in the EADI network (cf. Hettne 1985), Hettne (1997: 85ff., 100ff.) uses elements from the European dependency school for the new regionalism such as ‘from below’ and the notion of some form of spatial closure (‘similar to mercantilism’): ‘Self-reliance is an old development goal which rarely proved viable on the national level. Yet it may be a feasible development strategy at the regional level if defined not as autarky but as coordination of production’ (Hettne 1997: 100). While these concepts originally meant to counter penetration from TNC, international institutions, and state level government with an alternative paradigm, they were now being presented as remedy against ‘globalization’. TNC could, therefore, be part of the solution, which opened the way for the ‘competitive region ’.

At the very same EADI conference, however, the ‘decentralization discourse’ that thought of the nation state as loosing importance, had been vehemently criticized by Frans Schuurman (1997): Decentralization had been put forward, he argued, as part of the attack against the Fordist state which aimed at deregulation of central governments and was spread to the periphery by what is today called Washington Consensus. However, some of the political left saw decentralization as a progressive political project (including municipal democracy and local government) which would counter negative effects of liberalism. Schuurman questions the ‘decentralization euphoria’, arguing that further fragmentation would make regions more vulnerable for international capital penetration. ‘[A]s long as the decentralization discourse contributes to hollowing out the state, and as long as there is no institutionalized social contract at the global and/or local level [as compared to the nation state], it is rather premature to parade decentralization as the Post-Fordist paradigm’ (Schuurman 1997: 166). Already a couple of years earlier, Manfred Bienefeld (1994: 107) had deconstructed left-liberal notions of globalization. Like an echo of Dudley Seers’ last book, he made the case for a ‘positive nationalism’:

Competition cannot lead to true and sustained efficiency unless it is embedded in a social and political matrix that is capable of restraining the struggle for economic efficiency sufficiently, to allow society to make genuine choices trading off economic efficiency against other objectives like environmental protection, social cohesion, political stability or the ability to maintain full employment. But such choices can only be made within political entities with sufficient sovereignty to enforce them. Such entities are termed ‘generic nation states’ for the purposes of this discussion and they are an essential prerequisite for the efficient functioning of markets.

Also in the German Development Institute (GDI), the change in discourse was being reflected in the 1990s. In a study by GDI—‘Global competition and national room for maneuver’ (Eßer et al. 1996)—one of the key researchers who had done critical studies on European peripheral states and integration in the 1970s and 1980s (e.g. Eßer 1978a, b), now discussed globalization and competition (Eßer 1996). He observed a tendency toward globalization that put pressure on national actors but by the same token he refers to the ambivalence in interpretation (e.g. that critics perceived globalization short of being a myth). Eßer (1996: 1) recognizes ‘not only a drive towards globalization. Rather, globalization, regionalization, transformation of the nation state and localization are interdependent and mutually reinforcing’. Most interesting, however, for our understanding of the remains of the European dependency school , is Eßer’s (1996: 1) following statement: ‘The national room for maneuver – to implement system alternatives to the general pattern “market economy and liberal democratic political order”, or even a fundamentally different development of societies, is shriveled, probably not even longer existing’. Consequently he explores the options of states, which he considers still the most important level in decision-making, in the global competition .

Changing the old development paradigm and the capitalist mode of production had belonged to the agenda of the European dependency school . What is striking, however, is how the prevailing paradigm was being organized into a ‘new competition paradigm’. Some elements of this new competition paradigm seem to echo dependency notions. The presentation of new concepts in international competitiveness by Hurtienne and Messner (1996) (cf. 39–59, as part of the GDI study) may help to explain why neoliberal concepts could attract heterodox economists and actors on the political left. First of all, ‘one-dimensional and static neoclassical viewpoints of factor-based competitiveness and comparative advantages’ had been given up in favor of ‘a new dynamic and integrative perspective, that explained competitiveness by specific economic, social, cultural, and institutional circumstances of a country and understood development of competitive advantages as historical process’ (Hurtienne and Messner 1996: 39). This approach was to be found in Michael Porter’s classic of the genre (‘The Competitive Advantage of Nations’, 1990), which originated in his work for US president Ronald Reagan’s ‘President’s Commission on Industrial Competitiveness ’ (1983–1985), and drew on experiences of industrial districts of the ‘Third Italy ’ (Hurtienne and Messner 1996: 39).

Secondly, increasing competition had a polarizing effect, TNC privileged some national locations, and less attractive states were confronted with disintegrative tendencies. The answer was seen in regional agglomerations and clusters , they were to create ‘virtuous circles of interaction between accumulation of physical capital, qualification of labor, technical accumulation and competitiveness of companies’ (Hurtienne and Messner 1996: 52). The national production was to be shielded from globalization processes. State policy should provide cross-links between companies in order to avoid ruinous (international) competition. With such an economics of agglomeration, small companies could provide each other with the advantages big companies used internally.

Thirdly, small and medium enterprises were seen as new dynamic actors if they used ‘economies of agglomeration’ within regional clusters or industrial districts. Some authors even heralded the end of TNC. Having said that, the state was seen unable to create such competitive structures (only companies themselves could achieve that) but it could foster general conditions. Fourthly, sociocultural, noneconomic factors became important which respected different local actors: Such a ‘cultural superstructure’ creates social cohesion and a socioeconomic milieu that allows for a productive mix of cooperation and competition , and market and regulation. In the districts, company decisions become possible that need not obey short-term profit logics, but could also follow long-term interests of a region’ (Hurtienne and Messner 1996: 58f.). In terms of industrial planning, fifthly, industrial districts were being presented as third way of regulation between market liberalism and state industrial policies. The magic concept seems to have been ‘network structures’. The state receives the role as stimulator, coordinator, and moderator in a location policy oriented on dialogue. Local actors from companies, unions, and science are included in the decision-making process in order to spread relevant information and develop visions for the region. Companies in a cluster compete and cooperate: ‘This new competition in networks is based on partnership, loyalty, common values and mutual trust, elements that seemed overcome in capitalism, but are of importance for the stabilization of flexible arrangements among companies in a cluster’ (Hurtienne and Messner 1996: 59).

The ‘regionalist’ Walter Stöhr (2001: 37ff.), however, distinguishes between clusters and networks . Also referring to Porter—seemingly for the first time in his writings—as initiator of the cluster idea, Stöhr (2001: 38) assesses clusters as further development of the growth-center theory (which formerly had belonged to the development from ‘above’ paradigm and would increase polarization). ‘Networks , in contrast, are not necessarily spatially determined’ (ibid.), Stöhr as well presents them as harmonic and cooperative. ‘Development from below ’ seems to have undergone a transformation from ‘self-reliance ’, a more self-conscious and antagonistic alternative approach from the dependency school, to networks, an allegedly harmonic version of capitalism.

Originally, ‘development from below ’ had been a broad alternative to (regional) development from above (and outside) that included competition , outside demand, and technological dependence. Selective self-reliance was seen to break existing patterns, with certain limitations as to a trade-off between sovereignty and technology and innovation—due to technological dependence (Stöhr 1981: 46).

Later Stöhr seems to have reformulated his development concepts ‘from below’, which, as he concedes, had been challenged regarding feasibility ‘under present international conditions’ (Stöhr 1990b: 22). The more radical development alternative ‘self-reliance ’ seems to have disappeared from his texts during the 1980s. But ‘endogenous development’ prevailed as the pragmatic concept when regions needed to adapt to the international restructuring crisis starting in the 1970s. National governments, the OECD and the European Commission—which in his earlier work would have represented development institutions ‘from above’, now promoted ‘endogenous development’ themselves. Most often local initiatives were employment initiatives (Stöhr 1990c: 45ff.). It goes beyond the scope of this brief delineation as to clarify where the differences in the findings of Porter (1990: 155, 422) and Stöhr (1985: 22; 1987: 174) lie, who simultaneously drew for their analysis on the same research on the industrial districts of the Third Italy . Hadjimichalis (1994: 21) from the EADI network counts Stöhr to the ‘proponents of the Third Italy model [that] follow two more or less clear political views of regional development’. Next to the neoliberal view, there is, ‘for some radicals who appreciate many of the […] neo-liberal points, a Proudhonian vision of successful craft production in SMEs providing jobs in non-hierarchical artisan groups’. Stöhr (1990a: 3), indeed, envisaged the social entrepreneur as actor for a regional resilience , as further elaborated by Johannison (1990: 61ff.) in the same volume: The social entrepreneur ‘considers the development of the community as a primary personal goal’, is perceived to belong to Friedmann’s territorial strategy and aims at sustainability using ‘economies of scope’. The ‘autonomous entrepreneur’ on the other hand ‘considers the community as a means to personal goals’, is part of the functional strategy, and aims at profitability using ‘economies of scale’. Having said that, the language is reminiscent of the ‘new regionalism’ using the competition principle on regions (competitiveness ) which was so aptly criticized by Gillian Bristow (2005, 2010). The quest for an alternative is being replaced by empowerment for self-assertion in competition. Stöhr (2001: 41) searches for ‘comparative advantages of action at the local/regional level’ (Stöhr 2001: 41). The development paradigm ‘from above ’ is now ‘central regional policy’, the development paradigm ‘from below’ is now called ‘local development action’ (Stöhr 2001: 35f.). Selective self-reliance had disappeared from his analysis. The motive (why) for production (basic needs and self-reliance) was given up in favor of the organization (how) of production. Implicitly this production is export production, a regional ‘bottom-up’ development is being supported by national or supranational agencies (Stöhr 2001: 43f.)—which in the past had been seen as triggering ‘development from above’. The key element of self-reliance, a selective spatial closure , seems now being replaced by subsidiarity, a social system structured from below:

In practice, there are at least two interpretations of this concept: one maintains that each social level should take care of what it can do best, but at the same time, in a spirit of solidarity, it can rely on help “from above” if it cannot solve a problem […]; and the other is more related to neoliberal thinking, and maintains that each individual and the lower social levels should fend for themselves, and the state and higher levels should exercise only a minimum of functions. […] In the European context, it has been derived from catholic social philosophy […]. (Stöhr 2001: 39)

The Maastricht Treaty had been criticized for being too centralist, bureaucratic, and distant from citizens, and therefore motivated widespread discussions of implementing the subsidiarity principle. Stöhr (2001: 40) seems to have sensed, however, that the EU applied the principle only where it wanted to avoid uniform standards.

Using concepts such as ‘competitiveness ’ and ‘comparative advantage’, and counting on ‘help from above’ indicates that Stöhr belonged to those who had arrived in the mainstream of regional development. Lastly, it had been an idealized version of (regional) capitalism that seems to have built the case of networks and clusters . With the benefit of hindsight, the traps of the ‘long’ globalization decade seem easy to discern. But there were authors within the discussed networks that were early aware of false promises and paradigmatic changes: next to (the already discussed) Schuurman (1997), Bienefeld (1994), Friedmann (1986), and particularly Costis Hadjimichalis should be mentioned. ‘[S]ince the mid 1980s’, Hadjimichalis and Papamichos (1990: 181, 184, and 187) argued (referring to Stöhr , Musto and others),

the combination of ‘development-from-below’ theories with certain success stories of local capitalist development, have generated widespread beliefs that alternative policies promoting indigenous local development based on SMEs would diffuse growth potentials like those in Third Italy all over southern Europe […]. ‘Local development’ thus became the new catch phrase, a new kind of development doctrine during a period of great financial difficulties on the part of the central state. As in the past with other catchy ideas, ‘local development’ has rapidly spread among technocrats, politicians and local authorities as a new doctrine of development. The emphasis, however, was still on industrialization , which now will take place via SMEs in rural areas or in small and medium towns. These ‘local areas’ will take advantage of existing local skills and networks and, if properly helped and guided, will develop following a different path from known big scale industrial projects in growth poles. In this growing euphoria, very few are interested what ‘local’ really means or how autonomous an industrial sector can be in a EC competitive framework.

Hadjimichalis and Papamichos (1990: 189, 203) are particularly critical of the widespread use of the experience of the Third Italy as a model for other Southern European regions. A criticism, Hadjimichalis (2006: 82f.) later advanced more: He was puzzled that ‘radical theorists and researchers’, who had discovered in industrial districts ‘a localized development model, which permits regions to again become global players’, did ‘succumb to the charms of grand narratives, even when they strongly argue for the need to pay attention to differences and to local processes’. Using ‘Third Italy ’ as example, his account reads as deconstruction of the industrial district as a (general) model. He puts emphasis on specific forms of workers’ expropriation (e.g. working and safety conditions, low payment, working hours, informal sector) in the industrial districts as part of the international division of labor (competition ) and global production chains (subcontracting) supported by the state (tax legislation, protectionism). What had been there in economic success deteriorated in the 2000s due to world recession (before the crisis that began 2007/8!), monetary union (which ended the option of depreciating currencies), and expiration of multi-fiber agreement (ended core protectionism in textile sector). While Italian companies shifted their production abroad, (formal and informal) immigrants took over employment in the low wage and informal sectors (cf. also Hadjimichalis and Hudson 2014). Hadjimichalis and Papamichos (1990: 204), however, early sensed the danger of an alternative development vision being turned into a liberal strategy (of a competitive region ):

Above all, local development seems to be of high priority among neo-liberals in the EC inspired by Thatcherite policies […]. [T]hey prefer “local areas” to compete freely among themselves for resources, investment, jobs and prosperity, as individual firms do in the “free” market. It seems therefore, that European integration will strengthen such views among rightist governments, and what today appears as a trivial development alternative could be developed to an offensive rightist strategy in a few years.

The neoliberal concept of the ‘competitive region ’ could therefore embed fragments of the European dependency school that in its political conclusion had envisaged a regional alternative to global/European capitalism. Lastly, such neoliberal policies also advanced the European disintegration process, as Hadjimichalis (1994: 26f.) argues: Policy-makers from Germany , the Netherlands , and the UK resisted a ‘proposal for the Integration Fund’ for ‘interregional transfer payments in order to alleviate persistent and new regional disparities. Instead, they preferred ‘local areas’ to compete freely among themselves’.