vineri, 23 noiembrie 2012

Imperialism and the Contradictions of Development

As a reflection of the direction of some socialist scholarship away from stagnationist theories of underdevelopment, Bill Warren’s article, Imperialism and Capitalist Industrialization [1] addresses an important issue. The ambiguities and lack of theoretical sophistication of such concepts as ‘underdevelopment’ and ‘dependency’ indeed beset current Marxist analyses of the world capitalist system. However, Warren’s recent contribution to this subject, rather than advancing analysis of international political economy, mystifies and misdirects it. Warren’s argument bases itself upon the proposition that some capitalist industrialization in the Third World has been realized and prospects for sustaining this process are indeed quite good. The most significant phenomenon responsible for this, Warren asserts, is the loosening of ties of dependence as national capitalisms develop in the Third World—evening out the distribution of power in the post-war capitalist world economy and promoting autonomous industrialization. Any obstacles to this industrialization process are internal to the Third World countries, no longer residing in imperialist relationships. In fact, according to Warren, ‘imperialism declines as capitalism grows’. That is, the original ‘international system of inequality and exploitation called imperialism’, has ‘created the conditions for the destruction of this system by the spread of capitalist social relations and productive forces throughout the non-capitalist world’.
To substantiate these far-reaching claims, Warren correctly warns the reader that empirical observations will be the burden of his article. Warren’s constitution of his data follow the logic of isolating, and considering in isolation, only an element of a structured whole: international capitalist economy. Indeed, Warren’s method of analysis is to isolate sectors of Third World economy considered apart from the rest of the economy, and from the political and social structure which is produced by, and reproduces, the conditions of ‘enclave growth’. Imperialist-induced fragmentation of the Third World economy is reflected in the author’s fragmented approach to studying ‘capitalist industrialization’.
The implication of Warren’s conclusion, namely, that ‘imperialism declines as capitalism grows’, is certainly, so far as the left is concerned, iconoclastic, and warrants a reply in itself. There is no theoretical justification provided for this step, and this is a serious weakness in Warren’s article. In fact, we find no adequate theoretical formulation of the phenomenon of imperialism and its relation to capitalism. The concepts employed by Warren, such as: ‘independent capitalist industrialization’, ‘national capitalism’, ‘distribution of power’, ‘independence’ and ‘dependence’, constitute a disparate collection of terms, unrelated to a theoretical framework that could inform his particular argument. The absence of a theoretical and conceptual foundation clears the way for complete empiricism—that is, the arrangement of various discrete ‘facts’, disintegrating the specific totality (in this case, world capitalist economy) and redefining it on the basis of arbitrary relationships imposed by the particular selection and presentation of those facts.
Part of our reply to Warren then will constitute an investigation of his theoretical confusion. Moreover, by drawing attention to his conceptual muddle, we can reopen the lines of inquiry, and indicate some directions for analysis of the issue of industrial expansion in the Third World. One result of Warren’s conceptual muddle is some inconsistency surrounding his thesis on capitalist industrialization in the Third World. Although he emphasizes independent (capitalist) industrialization, his essay projects a mixture of hypotheses; the Third World countries are rapidly industrializing, either independently of imperial centres, or because of imperial centres, or despite imperialist domination. In spite of Warren’s occasional suggestions to the contrary, industrial growth in the Third World is clearly not at issue—rather the problem is the character of this industrial growth, and what it expresses about international capitalist development, and the structural contradictions inherent in the process of (worldwide) capital accumulation. Nevertheless, even operating within the terms of Warren’s approach, his evidence cannot be shown to warrant his argument. Before investigating Warren’s construction of evidence, we must first examine his theoretical errors.

I Theoretical Errors

Warren’s treatment of imperialism implies that it is a temporary historical phase of capitalist expansion, which is now in decline due to ‘a major upsurge of national capitalisms’. We learn that the ‘historical mission’ of imperialism was to ‘spread the capitalist system and advance the productive forces throughout the world’, and once this process is completed, imperialism is destroyed by its progeny: ‘national capitalisms’. In this view there is universal capitalist expansion, but with the international economy fragmented into a collection of ‘national capitalisms’—thus obscuring the structural-historical process through which capitalism expands in an increasingly integrated world market. Such a view is not one to which Marx, Lenin, Luxemburg and Bukharin would lend their weight (as Warren modestly suggests), particularly as Warren misconceives the forces of destruction inherent in the imperialist system, choosing to identify the ‘gravedigger’ of imperialism as ‘nationalism’, rather than revolutionary struggle.
So, on the one hand, Warren presents us with an undifferentiated notion of ‘the advance of productive forces’, and on the other, he chooses to historicize imperialism as an expendable feature of the capitalist epoch. What is missing is any attempt to assess the process of capital accumulation that bears directly upon the character of the development of productive forces, and gives rise to imperialism as a specific form of this process at the level of international socio-economic relations. Warren points out in a descriptive and confusing aside that ‘the “historical mission” of imperialism is to spread the capitalist system and advance the productive forces throughout the world’. However, a more adequate formulation would consider imperialism as the international expression of capitalism’s historical mission to develop the forces of production, in accordance with the logic of capital accumulation, a process that is by its nature uneven and contradictory.
Warren speaks of imperialism as a ‘system’, without ever attempting an explanation of the origins or mechanisms of this system, other than to assert off handedly that it is one of ‘inequality, domination and exploitation’. Without any clue to the mainsprings of imperialism, we have no way of understanding why imperialism should appear, and then disappear. If there is no theory of imperialism, there can be no comprehension of its historical development such that its contemporary manifestations can be analysed—rather than being spirited away by Warren.
Warren’s conception of imperialism is a product of his apparent lack of a theory of capitalism. He understands ‘successful’ capitalist development ‘as that development which provides the appropriate economic, social and political conditions for the continuing reproduction of capital, as a social system representing the highest form of commodity production’. But what are the ‘appropriate’ conditions for the ‘reproduction’ of capital? No theoretical guidelines are advanced, and no historical analysis is provided, which would indicate under what conditions capital reproduces itself (ad infinitum?), and more specifically what character this reproduction imparts to the accumulation process (undifferentiated units of capital?). No investigation is made of the social relations of production that are produced and reproduced as the condition of capital accumulation—and therefore no element of conflict or contradiction is introduced. Further, there is no discussion of the location of this ‘successful capitalist development’, other than an implicit assumption that these ‘appropriate’ conditions are to be realized at the national level, specifically in the Third World. If one accepts that capitalism is a system ‘representing the highest form of commodity production’, then it is insufficient to isolate the manufacturing sector as one aspect of capitalist development, as Warren does. Such a model requires attention to the crucial importance of the transformation of rural social-economy, as a precondition of development of the internal market necessary for the realization of the highest development of the commodity form. Analysis at the level of the national unit disintegrates the structure of international capitalism, and therefore assumes away the very totality whose character determines the social relations of production and uneven sectoral configurations within each Third World country.
Such analytical disintegration of international capitalist economy gives rise to Warren’s mystified discussion of Third World ‘capitalist industrialization’—a term that subsumes a number of specific forms of industrial development, which reflect particular conditions of Third World industrial growth. At the level of Third World economies, ‘industrialization’ exists in several forms—not the ‘single’ comparable type that Warren assumes—for example: (a) assembly-plant operation; (b) low-level industrial technology (complementing technically advanced industrial processes in the imperial countries); (c) the establishment of import-substitution industries—essentially confined to the short-run; and (d) the establishment of capital-intensive industry with little positive, and sometimes negative, impact upon the size of the domestic labour-force in the long-run. At the international level, under the aegis of the multi-national corporation, the several processes involved in industrial production have been geographically fragmented: each ‘industrializing’ colony or semi-colony partakes of a part of the industrial process, but not the whole. Much of what Warren has euphemistically referred to as ‘industrialization’ has been in large part the development of ‘assembly plant’ operations. Hence to assume equivalence of capitalist industrialization within imperial centres and the Third World is to overlook essential differences in the structure of industry and levels of development of productive forces, as well as the significantly different class structures that mediate international economic relationships.

II Warren’s Evidence and Interpretation

Following his arrangement of sections we will now consider Warren’s own interpretation and evidence—in a subsequent section we will advance evidence from other sources.

Undifferentiated ‘Growth’

Warren’s argument that ‘substantial’ and ‘sustained’ progress has been made in Third World industrialization is based on absolute figures of manufacturing output over time. The exercise is essentially one of comparing: (a) manufacturing growth rates and; (b) occupational distribution (manufacturing labour force as percentage of total active population) in the Third World countries and the developed countries. Whereas the former comparison suggests to Warren a tendency for Third World manufacturing growth to outpace that in the developed countries overall, and in 29 selected Third World nations; the latter presents a less cheerful comparative picture—nevertheless, showing ‘progress made in some important Third World countries’. [2]
Such a comparative exercise assumes that Third World and developed economies, have similar historical and economic experiences subsumed under the statistical concept Gross Domestic Product.
Warren argues from his Table iii (Annual Average Rates of Growth of Manufacturing for Selected Countries) that the ‘unique feature of the post-war industrialization advance in the Third World taken as a whole, is its sustained momentum over a period longer than any previously recorded’. But time series data reveal a cyclical pattern of industrial expansion interrupted by crises. For example, growth conditions in Brazil alternated between a boom in the 1950s, stagnation in the early and mid-1960s, and boom again in the late 1960s. To average out growth conditions is to conceal the specific problems of industrial expansion in the Third World. Warren also ignores the phenomenon of ‘internal colonialism’—by citing industrial growth apart from overall growth, he fails to establish the size of the sector affected and its relationship to and impact upon the Third World economy. In Latin America for instance, the overall growth rate between the mid-1950s and mid-1960s was low, yet industry expanded. To exclude these various conditions of industrial expansion allows Warren to project quite unqualified and optimistic assertions, devoid of any direct recognition of the contradictions accompanying this phenomenon.
Warren claims from his observations of absolute growth rates that there has been a significant ‘redistribution of world industrial power’. To measure distribution of world industrial power by ‘growth rates’ of industry, which include economies starting from the barest minimum of industrial production and cover a generation, is delightful simplicity. The volume of production, the level of technology, the research capabilities, the allocation of resources, the development of education and the use of manpower, are equally or more relevant to measuring the historic capacity of a country to become a significant industrial power. Warren wishes to prove a ‘redistribution’ of industrial power, but can only scrape up a one per cent difference in the industrial growth rate between the imperial centres and the Third World: a very slender reed upon which to hang such a weighty claim!
Specifically, the growth of the proportion of industry to gdp is in part accounted for by the low-productive nature of non-manufacturing sectors in the Third World; and in the imperialist countries the expansion of highly mechanized agricultural production and skilled services account for a greater proportion of gdp. Very different conclusions would have been suggested if Warren had acknowledged these critical realities of contemporary capitalism.

Independence and Industrialization

Warren argues that the economic consequences of formal independence were that both external constraints upon and internal forces compelling industrialization were released. With respect to the latter, he claims, ‘Independence has been a direct cause (not just a permissive condition) of industrial advance in that it has stimulated popular pressures for a higher living standard where these have been a major internal influence sustaining industrialization policies’.
Once again we have an undifferentiated and misdirected characterization. ‘Independence’ by itself has not been the direct cause of ‘industrial advance’—rather industrial advance has taken place in some countries as a result of particular mass struggles, mobilizations, and national leadership. On the other hand, one could say that the Third World countries with the ‘greatest advance’ in Warren’s terms have been the countries least independent of foreign controls (for example, Brazil, Indonesia and Zaire). Moreover, if we measure industrial expansion by the nationality of the capital rather than its geographic location, then these dependent countries do not show the same ‘advances’. Contrary to Warren, ‘popular pressures’ in the high growth dependent countries has been the least effective stimulus to expansion. For instance, in the cases of Brazil, Indonesia and Zaire, the conditions for what Warren chooses to describe as ‘industrial advance’ have been massacres and repressive forms of mass control by dependent regimes. Since industrial growth is largely foreign-induced, the sine qua non of large-scale foreign involvement was reduction or elimination of popular pressure. [3] Warren, in fact, makes passing reference to the reactionary nature of the political regimes in Brazil and Iran, with their brand of ‘economic nationalism’, which he then proceeds to lump together with ‘dependence on and alliance with us imperialism’, and by doing so reveals the contradiction in his argument. Indeed Warren’s analysis of the conjunctural aspects of international and internal politico-economic forces during the Cold War period leaves a lot to be desired. The intensive political and economic integration of the international capitalist economy in this period (particularly promoted by the us) and its consequences for the internal policies of Third World states, is a context to which Warren pays minimal attention in his discussion of independence. He has amalgamated the periods of popular mobilization leading to national independence, with post-independence demobilization of these popular forces, which created the conditions for dependent industrialization—for instance, in countries such as India, Algeria, Indonesia, Indo-China, Nigeria and Kenya.

The Meaning of Dependence

Warren’s section on ‘The Meaning of Dependence’ is most peculiar. Not only is it marked by his refusal to take the concept of ‘dependence’ seriously—choosing to extend his thesis of ‘independent industrialization’, as if by ignoring the problem of dependence it will go away; but also we are treated to a strange paradox in his conclusion to the section, where Warren remarks in passing: ‘the very notion of “independent industrialization” . . . is highly ambiguous. The increase in economic interdependence within the capitalist world and the collaboration of ruling, exploitative, classes throughout the world against socialism and the masses, both mean that the issue would be more accurately posed in terms of equality between previously unequal “partners” in an increasingly interdependent relationship’.
In the course of his argument we find Warren referring to ‘pressures’ that are brought to bear on foreign capital by Third World nations, constituting the basis of his argument that political independence aids the growth of Third World ‘industrial power’, which in turn enhances ‘political power’, the conclusion being that ‘conflicts occur within a long-term framework of eventual accommodation mutually acceptable and mutually advantageous to both sides’.
Lacking clarity on the forms and mechanisms of dependence, Warren’s discussion of ‘pressures’ lacks specificity. There is no effort to analyse the social forces exerting ‘pressure’, nor their political project, let alone to specify the political direction of socio-historic forces in relation to the problem of dependence. Lacking a clear understanding of levels of dependence, Warren substitutes an inventory of aspects of the economic process, and attempts to describe (without too much success) ‘national’ control over discrete aspects of a fragmented process. Never are the social relations between different class forces in the Third World and their foreign counterparts spelled out—the notion of ‘national’ control is so mystified as to vitiate any understanding of the bonds and linkages that could lead ruling groups within nations to collaborate with external forces in the process of social and economic exploitation of the mass of people within the nation. Capital is mobilized, bargaining takes place, pressures are exerted, nationalization (of sorts) takes place by something described as the ‘underdeveloped countries’—all of them no doubt adjusting their policies to each country’s most optimal needs by some invisible hand. There is no critical assessment in this mélange of the variety of experiences in the Third World involving different class-based regimes; policies seem to be the product apparently of their ‘underdeveloped conditions’. Warren never distinguishes between ‘bargaining’ over the terms of dependence, diversification of dependence, and national development. Nor does he introduce a distinction between ameliorative ‘bargaining’ and revolutionary action. He confuses efforts by a country to alter the exchange relationships with foreign capital (much as a trade union might alter the wages and immediate conditions of labour) with the elimination of imperialist exploitation. That dependence is a variable condition subject to change according to time and context is too obvious a point to belabour.
Imperialist companies located abroad to exploit cheap labour and resources and ship profits home, are assumed to be acting for the Third World country. No evidence is provided that the export of imperialist manufacturing from the Third World has any significant effects on the development of the economy, or on the mass of people. Throughout the account, the author assumes in fact what he should be proving. Even his assumptions are mere projections of nascent tendencies occuring in limited contexts (i.e. export manufacturing); for example: foreign subsidiaries of imperialist firms exporting to imperialist markets is accounted a ‘remarkable success’ for the Third World. When Warren is not assuming imperialist capital is acting for Third World countries, he is assuming that these countries have acquired leverage over or ‘national’ control of the operations of imperialist capital. For example, he suggests that a ‘leverage potential for dealing with foreign firms’ is gained by virtue of the funding of foreign subsidiaries from local sources and/or reinvested earnings. The figures he cites to indicate the financial sources of these subsidiaries are submerged in accounting percentages for tax purposes, which have little meaning for the financial operations of internationally integrated corporations—who can decide at which point to take out profits. For international corporations, financial operations are not determined directly at the level of a particular subsidiary’s physical location, but are subject to the overall expansion policies over time of the corporation’s total ‘operations’. Warren’s treatment of the problem of ‘national’ control lacks a discussion of the mechanisms by which foreign capital uses the appearance of national participation to secure a ‘low profile’, meanwhile maintaining the predominance of external decision-making and imperialist profit-making. In Mexico, for instance, we have seen the phenomenon of national ‘front men’ who hold stocks only nominally. In Chile, under Frei, external control was secured by national stockownership without management prerogatives. Both in Bolivia and the ‘Banana’ Republics ‘national ownership’ of exploitation: (a) operates as a channel for directing compensation payments to owners, and (b) remains subordinate to processing, refining or commercial operations that are located or controlled externally. Generally, joint ventures work to integrate national ruling groups into a subordinate position, thus creating political conditions for more effective exploitation. There is no evidence that joint ventures have adversely affected imperialist profit margins; there is evidence that co-opted groups have identified with the interests of foreign-based companies. The presence of multi-nationals not only can lead to co-option, but, confronted by efforts in the direction of national control, can spur violent overthrow of governments, military intervention, massacres, subversion, economic blockades, etc (for example: Chile, Dominican Republic, Bolivia, Brazil, Iran . . . ).
With respect to technology, Warren discusses the issue of technological dependence as something that will wither away in due course with the growth of the industrial base of Third World countries. Warren tends to regard technology as a mere commodity that can be transferred, without taking cognizance of the structure of social relationships that are embodied in technology, relationships that limit the capacity of a country to break out of the imperialist orbit. Most large/medium-sized firms depend on foreign patents and licensing agreements, and are content to be dependent. Warren’s discussion of the ‘rationality’ of foreign technology is contradictory to his own argument. He writes that ‘the allegedly inappropriate technology of advanced capitalist firms to the needs of underdeveloped countries is, in many cases, actually a rational response to local conditions in these countries, rather than something imposed upon them regardless of local circumstances’. Certainly the technology adopted by capital, according to the conditions of profit maximization, is by its nature rational, but from the point of view of the Third World countries that Warren is considering—national economies whose production structures do not prefigure those of advanced capitalist economies—foreign technology does not facilitate the creation of what Warren refers to as ‘national capitalisms’.
With reference to the ‘integration policy of oil firms operating in the Middle East’, the expansion of satellite enterprises around imperial enclaves is described by Warren as ‘the spread of know-how’. Here we see various national social strata becoming progressively linked to and dependent on the foreign enclave, which thus benefits from lower costs, the provision of local services, and the creation of political allies for its resource exploitation. The proliferation of dependent services is hardly an example of ‘spreading know-how’ as it is spreading dependence. The promotion of local entrepreneurs to extend the areas of exploitation, and as agents for the transmission of an imperial ethos is hardly extending local technology, but allowing the products of imperialcontrolled technology to penetrate the local level. The circumstances of satellites (or sub-contractors) of imperial firms, the technological permeation of national firms, the lack of national research and development capacity, all suggest that no independent technological development has taken place. Technological autonomy requires funding for research centres, laboratories, scientists, etc, on the one hand, and on the other, for design, application (modelling, pilot projects, etc) testing, modification, and adaption to specific national uses. There are few, if any, of these prerequisites for technological independence in the Third World (see Argentina . . . ). Indeed, given the small percentage of national firms’ earnings going to research, the frequent closing of universities (with their small degree of national support), and the increase in royalties for licences/patents, it is clear that technological dependence is growing.

Imperialism as a World System

Warren speaks of advanced capitalist countries’ economic expansion in the 1960s and the resulting increased participation of the Third World countries in trade, particularly as evidenced by ‘the rapid expansion in their exports of manufactures’ . . . ‘from the perspective of relative national power balance in the capitalist world (this participation) is relevant’. However, if export sectors are largely in the hands of imperialist firms, the expansion and growth of trade is hardly an expression of the dynamism of Third World countries. To regain some perspective on the character of Third World economies, we shall cite Warren’s Table 15: 

As we can see, for all Warren’s hyperbolic claims on behalf of the dynamic growth of capitalist industry and the export of manufactures as of 1967–9, the colonial character of the economies was still overwhelmingly predominant, that is, 81 per cent of exports were raw materials, foodstuffs and fuels.
The reference by Warren to the improvement of the underdeveloped countries’ balance of payments also requires perspective. The phenomenon of growing foreign reserves is hardly laudable, nor is it an indication of an expanding economy. It suggests an incapacity to absorb capital, devise new projects, etc. The Third World countries with the greatest reserves are the most reactionary in terms of ‘national development’, i.e. Arab oil regimes. In some countries the accumulation of reserves is accomplished through an increasing foreign debt. In Brazil, the latter has risen twice as fast as reserves.
On the issue of debt, Warren deals with trend figures at the level of an accounting exercise. He remarks, ‘Conceptually, the existence of debt or even growing debt in absolute or relative terms (e.g. relative to export earnings) is not by itself an indication of a debt problem. Debt is credit and a debt-servicing problem depends as much, if not more, on how the credit is used as on the terms of the borrowing’. There is no attempt to complete this comment by reference to the political and socio-economic consequences that attend the problem of debt. The salience of the debt-payment problem varies from year to year, from regime to regime—in part it varies with the economic conditions in the dominant capitalist countries, as well as with political changes in the Third World. Downward shifts in the economies of imperialist countries resulting in a decline in imports, or a decline in the price of export commodities from the Third World, or a shift in political orientation of a government in the Third World (from neo-colony to nationalist regime): all have been instrumental in making them susceptible to imperialist-oriented development projects—austerity programmes, credit freezes, devaluations . . . These externally induced crises have in turn led to the bankruptcy of national firms (frequently purchased at a fraction of their value by imperialist firms), and declining standards of living. Debts, debt-servicing, and emergency funding to maintain debt payments have thus been indirectly responsible for denationalizing the economy, reducing living standards, and increasing political repression (Chile in the 1950s, Brazil 1965, Uruguay 1970, etc). The use of the debt-problem as a political weapon by the imperialist countries is well illustrated during the period of the Popular Unity government in Chile.
With respect to the issue of capital movements, Warren writes: ‘The theory of imperialism as a system for draining surplus-value from the periphery to the centre has, of course, exactly the same defect as the popular equation of debt with a debt problem—that in comparing inward capital flows with the resulting outward flow of interest and profit what exactly is done with the capital “in between”, so to speak, is ignored.’ To begin with, imperialism not only ‘drains’ capital, but it obtains a series of raw materials whose impact on the imperialist economy is multi-fold: for example, oil allows a whole series of industries to function that are essential to the imperialist economy. Foreign investment not only creates a profit, but brings materials to the home industries which in turn increase profits a hundred-fold! The loss occasioned by products integrated into the imperialist industrial network is several times any short-term marginal gain provided by foreign investment to Third World countries. Warren’s critique of the ‘capital-drainage’ thesis is as follows:
1. Drainage of capital is worth the price paid for the establishment of productive facilities—hardly an argument as it is a ‘self-evident’ truth;
2. Without foreign capital, ‘the necessary productive facilities would not have been created by indigenous businessmen or state institutions’;
3. Despite previous displacement effects, ‘foreign private capital investment since the Second World War has probably created or encouraged indigenous capitalism’. In fact, foreign capital continues to do both—it displaces profitable growth industries by its own dynamic/monopolistic superiority; it creates service satellites; and the take-over phenomenon throughout Latin America is well-known (Argentina, Brazil, Chile, etc).
In fact, the historical experience of private investment in the Third World has been the extension of imperialist penetration, and an accelerated process of capital accumulation in the imperial centres. This has increasingly forced the imperialist countries to rely on force to maintain ‘open markets’, heightening the inter-penetration of imperialist economies while nation-states compete for markets and scarce resources; meanwhile the cost of Third World imported products has increased. Inequality still persists between imperialist centres and the Third World—not at the level of specific products—but at the level of the development of the forces of production, whether this difference be between imperialist industrial exporters and Third World agro-mineral exporters, or imperialist technico-industrial exporters and Third World exporters with a portion of assembly-part manufactures. This is all that Warren’s Table 15 states—he generalizes beyond what the data will support.
Finally, Warren does not see any inconsistency between his image of world capitalism as a collection of distinct national economies rather than as a global system, and his assertion that world capitalism is nevertheless characterized by ‘changing hierarchies of uneven development’. He unfortunately does not go on to consider the possibility that world capitalism is an international economic complex that operates from the imperial metropoles of North America, Western Europe and Japan through various centres (financial, sub-imperial, military, commercial).

The Contradictions of Capitalist Industrialization

The essential argument that Warren advances in this section follows the theme: ‘if the extension of capitalism into non-capitalist areas of the world created an international system of equality and exploitation called imperialism, it simultaneously created the conditions for the destruction of this system by the spread of capitalist social relations [no mention of the events, and their significance, in China, Korea, Vietnam and Cuba?—authors] and productive forces throughout the noncapitalist world . . . there are now more powerful forces at work than ever before which are spurring capitalist industrialization, and the various elements of imperialist control which exercises a retarding influence have largely disappeared’.
The political pre-conditions for industrial growth ‘from above and outside’ have, in fact, been non-popular pro-imperialist regimes largely resting on alliances between military elites and property classes whose incapacity to mobilize internal resources for development leads them to rely on foreign capital. The device for the establishment of these externally oriented developmental regimes has been the coup carried through by military and civilian officials in large part socialized and trained by the state apparatus of the imperialist metropolis dominant in its region. The property-based political-military regime functions to create conditions that permit externally induced industrial growth without danger of ‘nationalization’, wage demands, autonomous trade unions or other forms of social pressure on profit rates. Thus the Third World countries with the highest rates of ‘fragmented’ industrialization are the ones with the highest concentration of foreign capital in modern industrial sectors, highest rates of exploitation of labour, lowest proportion of workers in autonomous class anchored social movements; most are police states; many of the influential officials came to power with aid from the imperial state apparatus; most permit easy flow of capital into as well as out of the country, exploiting cheap labour and having little or no positive impact on employment or standard of living.
We are referring to South Korea, Taiwan, Iran, Brazil, Indonesia and the other examples of rapidly growing ‘national capitalism’ that Warren so absent-mindedly cites. Lacking an elementary class analysis of this Third World the essential contradiction between imperialist-dominated industries and workers and peasants already highly visible in countries like Chile, Argentina (Cordoba especially) and earlier, Cuba, Dominican Republic, etc, makes nonsense of Warren’s statement that ‘current imperialist-periphery contradictions . . . are basically non-antagonistic’. One should read again the memorandum of ITT . . . What passes for ‘class analysis’ is a pastiche or colourful, if brief and inaccurate, inventory which evokes the origins, orientation, influence of several social strata. Having decided that the ‘petty-bourgeois’ and ‘professional classes’ ‘provide not only much the compulsion to industrialize, but also very often the social basis and personnel for industrialization of states’ we are not left with any historical examples. The impulse for externally induced industrial growth has been not from the mass of small property holders and clerks but landowners, export-importers, high military officials, etc. As has been known for 200 years the small-minded vision of the petty bourgeois has never been a vision for developing industrial societies. A casual observation of social regimes in the Third World shows that, at best, the petty bourgeois are the shock troops or functionaries of big capital. More important, the petty bourgeois has not wielded political power for any length of time (though in particular conjunctures it has some electoral clout—free elections, however, are not the norm, least of all in the rapid ‘industrializing’ countries cited by Warren) in part because it is such a heterogeneous and internally contradictory class that lacks any clear notion of class interest and class solidarity except in exceptional circumstances. In the case of Chile this ‘class consciousness’ (better ‘status’ consciousness) was used against a regime bent on national industrialization.

III Empirical Assessment of the Warren Thesis

Warren’s argument claims the support of available empirical evidence. Unfortunately his empirical analysis is as inadequate as is his theoretical discussion. Let us look more closely at his peculiar use of data and at some of the kinds of evidence that he should have included in his article.
Warren argues that an: ‘ . . . inspection of the figures for individual countries over a longish period shows that ability of many underdeveloped countries to maintain faster rates of growth of manufacturing output than the already industrialized economies.’ [4] His Table 3, ‘Annual Average Rates of Growth of Manufacturing for Selected Countries 1951—69’, is presented as evidence of this thesis. When we examine the note beneath this table we discover the source is a recent article by H. B. Chenery. Warren accurately describes the criteria used by Chenery in selecting these countries for examination: ‘Countries selected by Chenery from 75 countries for which International Bank had compiled fairly complete statistics. Chenery chose 29 of the fastest growing countries from which I have removed Israel, Greece, Japan, Yugoslavia, Bulgaria and Spain (there are no data for the Ivory Coast).’
Without any further analysis it becomes clear that Warren’s Table 3 is heavily biased in favour of the minority of underdeveloped capitalist nations that have had high rates of manufacturing growth. What kinds of countries are these?
Five of the countries listed by Warren have, according to Chenery, had high growth rates because of heavy inflows of foreign capital. They are Taiwan, Jordan, Puerto Rico (a colony), South Korea and Panama. Chenery goes on to point out that the countries that achieved ‘high growth rates using substantial amounts of external capital received support for reasons that are largely political; all these countries, except Korea, are small’. [5] When we remove these five countries from Warren’s table we are left with only 17. How can we explain their high growth rates? Nine of these countries had primary export sectors with exceptional growth rates. They include: Thailand, Trinidad and Tobago, Jamaica, Malaysia, Iran, Nicaragua and Venezuela, Iraq and Zambia. No Marxist scholar with whom we are familiar has ever argued that underdeveloped countries with rapidly developing primary export sectors cannot industrialize at least through the stage of light import substitution. (More pointed comments on the character of growth in these countries will be made below.) Subtracting these nine exceptional countries from the remaining 17 we find Warren’s thesis, that the underdeveloped capitalist world is undergoing autonomous industrial growth, is based on the experience of only 8 countries. These countries are: Mexico, Turkey, Peru, Philippines, Pakistan, Costa Rica, Singapore, and Brazil. Chenery suggests the development of these countries, with the single exception of Brazil, was the result of moderate capital inflow. It is important to note, however, that this capital inflow can only be considered moderate when compared to the extraordinary levels of aid given his ‘high capital inflow’ countries. Both in absolute terms and on a per capita basis these countries received very high levels of aid as can be seen in our Table 1. In two of these countries (Pakistan and Peru) exports have not increased at a rate nearly high enough to stabilize service payments on external debt. We doubt growth in these countries can be sustained without an increasingly heavy debt burden. Singapore and Costa Rica are both tiny countries whose industry, like that of the Philippines, is based on assembly operations. Their growth depends upon low wages. Mexico has been able to grow because of extraordinary advantages. The first is a very large and rapidly expanding tourist sector that is unique among large underdeveloped nations. The second is an agricultural export sector that, like tourism, prospers because of Mexico’s proximity to the United States. Lastly, Mexico has been able to develop a large assembly industry just south of the Texas border. Brazil’s growth has been sustained through a repressive policy involving a redistribution of income from the poor to the rich—the Brazilian case will be discussed in more detail below. We suspect the Turkish case is similar to that of Brazil.

Warren goes on to argue: ‘For the underdeveloped countries as a whole the proportion of gross domestic product accounted for by manufacturing rose from 14·5 per cent in 1950–4 to 17·9 per cent in 1960–4, while in the developed capitalist countries during 1960–4 manufacturing contributed 31·3 per cent to gdp. The proportion in underdeveloped countries is already over half that of developed ones.’ [6] (His italics). If we assume a continued rate of growth of the manufacturing sector of 23 per cent a decade (as a proportion of gdp) the underdeveloped world will catch up to the present level of the developed countries in 1990–4. But by that time, of course, the developed world will have a far higher standard of living than today.
We hope the reader, like ourselves, takes this kind of projection with a grain of salt. First, if the growth figure for the underdeveloped countries is exaggerated to only a modest extent the above projection becomes very optimistic. Warren takes the politically motivated and unreliable statistics of international agencies much too seriously. Secondly, this rate of growth was only possible because the underdeveloped world borrowed heavily. Its burden of debt is now approaching the point of crisis. (Warren, not surprisingly, uses misleading data and projections to argue the debt position of the underdeveloped world is improving. As we shall see, here, as elsewhere, his analysis is incompetent.) Lastly, when we take the differential rates of population growth of the developed and underdeveloped worlds into account the results are much less sanguine. Warren, to his credit, acknowledges this point: ‘Certainly, the growth of manufacturing output per head in the underdeveloped countries does lag behind that of the imperialist world, in part because of the unprecedented post-war rates of population growth in the former. But to take the growth of manufacturing output per head as a basis of comparison is to apply an extremely demanding criterion of performance. Similarly, the same point applies to the growth of total output per head. Clearly, from the point of view of living standards, per capita growth rates are the most relevant criterion. However, from the perspectives of the distribution of world industrial power and the growth of the market (which are more relevant to the problem at hand) total, rather than per capita, growth rates are the central issue.’ [7]
One interesting implication of this statement is that if, on a per capita basis, the manufacturing sector of the underdeveloped worlds economy catches up to the developed world (as a proportion of gdp) it will be because the growth of non-manufacturing output lags even further behind than manufacturing output!
Warren argues that the use of per capita data is an ‘extremely demanding criterion’ for comparison. We disagree. In the early post-war years, when the decline in infant and child mortality rates started the so-called population explosion, per capita growth rates were, indeed, misleading. Today a high proportion of the post-war progeny are contributing to economic growth. To impute the entire increase in national output to increases in productivity—and presumably structural change—is to ignore the substantial contribution to output of young adults. It is true that there is increasing real and disguised unemployment in the underdeveloped world, but this further tragedy of neocolonialism in no way cancels or seriously mitigates the very sombre implications of per capita data in this region.

According to United Nations sources the per capita growth rates of the less developed and more developed countries were 2·21 and 3·38 per cent respectively between 1954–8 and 1964–8 (Table 2). But this data is misleading. First, the un includes Greece and Portugal among the developed countries since they are part of non-communist Europe and includes Argentina among the less-developed countries since it is in Latin America. The un growth rates are, Simon Kuznets suggests, very optimistic for Africa and the Middle East and even for Latin America their estimates are higher than those of the oecd and Pearson Commission. Making appropriate corrections by omitting some regions and countries Kuznets (Table 2, line 2) arrives at lower per capita growth rates for both the underdeveloped and developed countries. [8] Now the per capita growth rate of the developed countries is 66 per cent rather than merely 53 per cent greater than the underdeveloped countries. Next Kuznets weighs regions by constant population so that over the period studied increased weight is not given to countries with faster growing populations (Table 2, line 3). He then controls to eliminate the greater influence that higher income countries have on aggregate growth data. (Using the standard computational practice if two countries of equal population, but with per capita incomes in the base time period of 100 and 1,000 dollars grow by 0 and 6 per cent respectively, the aggregate growth rate for both countries would be 5·45 per cent rather than a more meaningful 3 per cent.) Lastly Kuznets adjusts for the fact that ‘the ratios of prices of industrial products to those of agricultural products are generally much higher in the less developed than in the developed countries.’ [9] We now find that the per capita growth rate of the developed countries is now almost 290 per cent that of the underdeveloped countries. If we exclude Japan from the developed countries it is still 221 per cent of the former. Though one may quibble with some of Kuznets’ computational procedures and classification of countries, there is simply no doubt that relative to the developed countries the underdeveloped countries are stagnating.

The Myth of Independent Industrialization

Even if we grant Warren his premise that per capita growth rates are misleading because ‘from the perspectives of the distribution of world industrial power and the growth of the market . . . total, rather than per capita, growth rates are the central issue’ [10], we find his conclusion erroneous. As Warren himself points out, high growth rates based on very small industrial bases are delusive. We believe equal attention must be given to the kind of industrial growth. We believe, and Warren presents no persuasive data that would contradict our position, that most manufacturing growth in the Third World has been, and continues to be growth through import substitution or assembly operations. If, as Warren claims, the underdeveloped countries are developing significant heavy industry and their technology is becoming relatively sophisticated, we would expect to see this reflected in their ability to compete in the world manufacturing market. Yet when one examines the manufactured exports from the underdeveloped countries to the developed capitalist countries (Table 3) one finds the situation is not very encouraging. As late as 1968 five countries accounted for over half and only ten countries accounted for two-thirds of the exports of manufactured goods from the ‘developing’ to the advanced capitalist nations. Manufactured exports from the underdeveloped world have been and continue to be either processed foods (e.g. canned meats from Argentina) or more typically, based on assembly operations. Hong Kong (hardly a great industrial power) led the underdeveloped world in manufacturing exports with 21·5 per cent of that market! Followed by India (textiles and apparel) and Taiwan (components and assembly). Then comes Yugoslavia, a socialist country, Mexico and Korea (both components and assembly) and finally Brazil. The Brazilian industrial miracle must be looked at more closely. Brazil has been depicted by the capitalist press as a burgeoning industrial power. The impressive growth in exports of Brazilian manufactured goods is presented as proof of the Brazilian miracle. What is not pointed out is that Brazil has been able to compete for foreign markets only through a fantastically expensive and complicated ‘conglomeration of incentives, exemptions, and direct and indirect subsidies’ that have enabled Brazilian industry to sell goods abroad at an average of only one-half the domestic price. [11] This extravagant process has been financed through a rapidly growing debt financed by the United States for political purposes.

One might argue that this is an unfair comparison given the high growth rate of manufacturing in the underdeveloped world. We believe, however, that the grossly uneven character of growth in the underdeveloped world places inherent limits on manufacturing growth, and, more importantly, on manufacturing employment. Let us take Mexico as an example. Despite enormous us aid and unique circumstances which have given Mexico an extraordinarily dynamic export sector (tourism, agricultural commodities and assembly), Mexico is not becoming a significant force in the world industrial market. And Mexico’s industrial growth has not been matched by impressive increases in industrial employment in recent years. Sofia Mendez Villareal [12] estimates between 1965 and 1975 Mexico will have a net loss of industrial employment of 1,861,000 workers. Part of this decline resulting from a decline of employment in labour intensive industries (a decline due to ‘structural’ change of 294,000 workers), but most of it resulting from increasing productivity in a manufacturing sector that has not been matched by a commensurate growth in demand. The enormous inequality in income in even the most advanced of the underdeveloped countries coupled with the importation of an increasingly capital intensive technology without a truly dynamic industrial export sector guarantees that capitalist development in the Third World will not bring with it a repetition of the growth of industrial employment that occurred with capitalist development in the West.
If, as Warren claims, independent industrialization is really taking place, then one would expect that the most advanced regions in the underdeveloped world would have an increasingly favourable debt position. But the World Bank’s own data shows that it is precisely the more highly developed regions that are having the most difficulty repaying their loans. As can be seen in Table 4, throughout the 1960s the debt position of Southern Europe and the Western Hemisphere deteriorated at an alarming rate. In Latin America alone service payments on foreign capital as a percentage of exports of goods and services increased from 18·5 per cent in 1950–4 to 37 per cent in 1965–9. [13] This being the case how can we account for Warren’s optimism? 

First, Warren gives us aggregate data on the balance of payments position of the entire less developed world—his Table 12. In this way he effectively obscures underlying patterns. Next he presents similar data on international reserves—his Table 13—with like consequences. If he had looked at both tables at the same time he might have been puzzled that in the period in which the two tables overlap—1964–70—reserves increased much more rapidly than did balance of payments surpluses. How come? The simple explanation is that increased debt accounted for a large proportion of the increased reserves of the underdeveloped countries. Finally, Warren takes seriously the optimistic views of the World Bank and ‘practically every international organization’. We are more sceptical concerning the validity of such statistics.
A simple test of the validity of a series of projections is to examine them over time. To illustrate the misleading character of available data we compare in Table 5 the World Bank’s projections of external public debt for 1969 with that of 1971. Note first the enormous increase in debt outstanding over the two-year period 1969–71. The increase in only two years was almost 20 billion dollars! It is true that it did not increase any faster in this two-year period than over the previous decade—about 14 per cent annually—but 14 per cent compounded annually quickly reaches astronomical figures. Based on its current rate of growth the external public debt will reach 257 billion dollars by the end of 1981.

The World Bank, at least officially, seems undiscouraged. The 1969 figures suggest that debt service will become an increasingly heavy burden through 1971 and then begin to decline. By 1971, however, the Bank predicted that the debt picture would not begin to improve until 1973. What we have here is a political statement, not an economic analysis. Yet despite the refusal of the Bank to admit the situation will never get better its projections are increasingly pessimistic. Notice that the 1969 table predicts debt service of 2,862 billion dollars in 1980 while the 1971 table predicts debt service of 4,619 billion dollars for the same year—an increase of 61 per cent. Despite its very real limitations, a serious aggregate analysis suggests the underdeveloped world will face a balance of payments crisis within a few years unless there are dramatic changes in the world economy.
We do not see independent industrialization in the Third World. Rather, we see increasing dependence reflected in an increasing trade gap. Table 6 depicts the increasing dependence of the underdeveloped countries on the West. In every major region of the world, with the exception of the oil rich Middle East, the trade gap is increasing. This gap, and industrial growth in the Third World, has been financed by an external public debt that is increasing at a rate of 14 per cent a year. Warren believes that higher prices for primary commodities will aid the Third World. Once again aggregate data are misleading. For a handful of oil rich nations this will indeed be the case. But most underdeveloped countries will find the increased cost of imported oil and industrial goods and food imported primarily from the industrialized world an impossible burden. The Overseas Development Council has already (February 1974) predicted that about 30 poor nations with 900 million people face economic collapse unless other countries help pay for their higher food and oil bills. James P. Grant, the author of the Overseas Development Council report estimates that the poorest nations will need three billion dollars annually just to cover the increased cost of food, fertilizer and fuel.

Perhaps Warren would respond to this desperate picture by pointing out that he didn’t say all underdeveloped countries were undergoing independent capitalist development. But, as we have seen, even in a country as favoured as Mexico industrial development means at best continued industrial growth without continued growth of industrial employment.
It has been recognized for many years that development in the 20th century has been associated with increasing inequality. What has less often been acknowledged is that development has frequently been associated with a declining standard of living for a large proportion of persons in the ‘developing’ countries. In the most systematic study available on the impact of economic growth on income distribution in the developing countries Adelman and Morris conclude: ‘ . . . development is accompanied by an absolute as well as a relative decline in the average income of the very poor. Indeed, an initial spurt of dualistic growth may cause such a decline for as much as 60 per cent of the population. The absolute position of the poorest 40 per cent apparently continues to worsen as countries move toward less dualistic growth patterns unless major efforts are made to improve and expand human resources’. [14]
One might contrast this unhappy picture with the hope that major efforts will be made to improve and expand human resources. But historically such efforts have only been made where there have been strong working-class movements, such as in Mexico and Chile. In these countries the top 5 per cent of the population receive ‘only’ 28·5 and 22·6 per cent of personal income as compared with the 38·4 per cent received by Brazil’s plutocratic elite. Unfortunately working-class struggles are not always successful.
Warren writes of capitalist development as if all countries march along the same path. In Brazil today capitalist development means fascism and industrial growth fuelled by massive us loans and investments and the reconcentration of income to expand the market for consumer durables. According to the estimates made by Serra the proportion of income received by the bottom 80 per cent of the population has declined from 45·5 per cent in 1960 to 36·8 per cent in 1970. Infant mortality rates have been climbing for more than a decade and educational opportunities have been declining for 85 per cent of the population. [15] The defeat of the working-class struggle in Chile has led to a 50 per cent decline in the standard of living of workers in just six months. Recent evidence suggests capitalist development in Mexico is also being accompanied by an increasing maldistribution of income that is mute testimony to the increasing marginality of many millions of workers. Needless to say, there are few possibilities for imperialist industrial expansion in those countries where there are few natural resources or a small internal market. Capitalist development in the Third World today means dependent growth in a small proportion of countries, for the benefit of a small proportion of the population. And the character of this growth can only be understood when placed in the context of imperialism past, present and future.

[1] New Left Review 81, September/October 1973.
[2] The empirical basis for this assertion will be contested in section 3 below.
[3] See, for example, the studies on Brazil by M. C. Tavares and J. Serra, in Latin America: From Dependence to Revolution, (ed) James Petras, New York 1973.
[4] Warren, op. cit., p. 6.
[5] H. B. Chenery, ‘Growth and Structural Change’, Finance and Development, Vol. 8, No. 3, September 1971, p21.
[6] Warren, op. cit., p. 7.
[7] Warren, op. cit., p. 7.
[8] Simon Kuznets ‘Problems in Comparing Recent Growth Rates for Developed and Less Developed Countries’ Economic Development and Cultural Change, Vol. 20, No. 2, January 1972, pp. 185–209.
[9] Kuznets, op. cit., p. 202.
[10] Warren, op. cit., p. 7.
[11] J. Serra ‘The Brazil “Economic Miracle” ’ in Latin America: From Dependence to Revolution, edited by James Petras, New York, 1973.
[12] Sofia Mendez Villareal ‘La Capacidad del Sector Industrial para Generar Ocupación’ Demografia y Economica, Vol. 7, No. 1, 1973, pp. 96–105.
[13] ‘Financial Resources for Development’ Economic Bulletin for Latin America, Vol. 27, No. 1, 1972, p. 123.
[14] Irma Adelman and Cynthia Taft Morris, Economic Growth and Social Equity in Developing Countries, Stanford, 1973, p. 189. See their comparative statistics, p. 85.
[15] J. Serra, op. cit., pp. 122–5.

Philip McMichael, James Petras and Robert Rhodes

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