Define "Underdevelopment"

It's quite difficult to do this, since, depending on how we do it, it will have profound policy implications.

It certainly implies a kind of teleology, where some nation-states are seen as fully developed on one end of the spectrum, and other nation-states are seen as completely undeveloped on the other. Underdevelopment, according to the Marxist school, is when nations seeking to develop come into contact with Western developed countries, and hence become parasitized. Undevelopment is a scenario which results from autarky, or the absence of trade altogether. The concept of underdevelopment is more like an active process by which the global lesser-developed nations are exploited by their contact with an abusively capitalist group of already-developed nations. Not being a Marxist myself, I can sympathize with this definition still, since I believe it is rooted in the concept of the nation and of the state that some groups of people are collected referred to as "developed" and others are collectively referred to as "underdeveloped". It is actually entirely irrelevant which nation and which state they belong to, although public and private infrastructure is what generally gives rise to this misconception.

Yet taking a more optimistic outlook, and most neoliberals do this (though I'm not a neoliberal), is to see the development of nations in terms of stages of growth. Walter Rostow from Harvard wrote a "Non-Communist Manifesto" in which he described Hegelian-like stages of development. Harrod and Domar in the 1970s later came upon Rostow's work and corrected it to fit with more flexible conditions and realistic scenarios. The stages theories have several things in common: they tend to argue for liberalizing policies, and tend to explain underdevelopment in terms of stops and problems somewhere along the stages. The Marxists respond that this does not take into consideration the history of exploitation and imperialism involved. Yet I think the basic approach of the analytic modeling by the neoliberals is correct. We should think of development in terms of stages, models, and industry rotations. Marxists who respond that there are social-economic and socio-historical factors that the capitalist models ignore are certainly right.

However, explaining the problems pointed out by Marxists (which are, I admit, very very real and true) is not to deny them, but to say they are not entirely truthful. The models explained by capitalist theorists explain how economies ought to develop, and unfortunately there are governmental, political, and exploitations involved which interfere with the general tendencies laid out by capitalist models. An analogy to gravity is useful here. There is general tendency for heavenly bodies to obey the laws of gravity, however, when a force like electro-magnetism stands in the way, it gives an appearance of the body not obeying the law of gravity.

In effect, one can explain why nation-states are or are not developing while being able to also explain the reasons and factors which stand in the way of development. A more hardline Marxist approach is to say that global capitalist development is simply not possible, in that some countries necessarily exploit other countries to become more affluent. In this case, our heavenly bodies example is more like a universe where all the energy is conserved, and for one body to accelerate it must push against another body -- sending it flying in the other direction. This approach is completely mistaken analytically, since it altogether overlooks the notion of the co-arising benefits from trade due to an international division of labor. Socialist and Communist economies of scale presuppose this very idea as well. One person who trades with another does not by necessity impoverish the other person. Each one benefits by the interaction, and consequentially, the interaction would not take place otherwise.

To view international trade as a zero-sum game is to commit an age-old neo-mercantilist fallacy.