Industrial Colonialism in Latin America: The Third Stage (Studies in Critical Social Sciences, Volume 59 / Critical Global Studies, Volume 4) 9789004259003, 9789004259065, 9004259007

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Industrial Colonialism in Latin America

Studies in Critical Social Sciences Series Editor

David Fasenfest Wayne State University VOLUME 59

Critical Global Studies Series Editor

Richard A. Dello Buono Manhattan College, New York Editorial Board

José Bell Lara, University of Havana, Cuba Walden Bello, State University of New York at Binghamton, USA and University of the Philippines, Philippines Samuel Cohn, Texas A & M University, USA Ximena de la Barra, South American Dialogue, Chile/Spain Víctor M. Figueroa, Universidad Autónoma de Zacatecas, Mexico Marco A. Gandásegui, Jr., Universidad de Panamá, Panama Ligaya Lindio-McGovern, Indiana University-Kokomo, USA Daphne Phillips, University of West Indies, Trinidad and Tobago Jon Shefner, University of Tennessee-Knoxville, USA Teivo Teivainen, Universidad de Helsinki, Finland and Universidad Nacional Mayor de San Marcos, Peru Henry Veltmeyer, Saint Mary’s University, Nova Scotia, Canada and Universidad Autónoma de Zacatecas, Mexico Peter Waterman, Institute of Social Studies (Retired), The Hague, Netherlands VOLUME 4

The titles published in this series are listed at brill.com/scss

Industrial Colonialism in Latin America The Third Stage

By

Víctor M. Figueroa Sepúlveda

LEIDEN • BOSTON 2013

Cover illustration: Migrant workers on their way to the U.S.A. Photographed by José Alberto Donis Rodríguez and used with his kind permission. Library of Congress Cataloging-in-Publication Data Figueroa, Víctor M. Industrial colonialism in Latin America : the third stage / by Víctor M. Figueroa Sepúlveda.   pages cm. -- (Studies in critical social sciences, ISSN 1573-4234 ; volume 59)  Includes bibliographical references and index.  ISBN 978-90-04-25900-3 (hardback : alk. paper) -- ISBN 978-90-04-25906-5 (e-book) 1. Economic development--Latin America. 2. Capitalism--Latin America. 3. Neoliberalism--Latin America. I. Title.  HC125.F486 2013  338.8’888--dc23 2013029650

This publication has been typeset in the multilingual “Brill” typeface. With over 5,100 characters covering Latin, IPA, Greek, and Cyrillic, this typeface is especially suitable for use in the humanities. For more information, please see www.brill.com/brill-typeface. ISSN 1573-4234 ISBN 978-90-04-25900-3 (hardback) ISBN 978-90-04-25906-5 (e-book) Copyright 2013 by Koninklijke Brill NV, Leiden, The Netherlands. Koninklijke Brill NV incorporates the imprints Brill, Global Oriental, Hotei Publishing, IDC Publishers and Martinus Nijhoff Publishers. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Koninklijke Brill NV provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, MA 01923, USA. Fees are subject to change. This book is printed on acid-free paper.

This book is dedicated to Silvana, Manuel, Alex and Emanuel

CONTENTS Acknowledgements������������������������������������������������������������������������������������������������� ix List of Tables������������������������������������������������������������������������������������������������������������� xi Prologue by R.A. Dello Buono����������������������������������������������������������������������������xiii Introduction��������������������������������������������������������������������������������������������������������������� 1 1. Imperialism and Industrial Colonialism������������������������������������������������������ 7   Monopoly, the Role of Science and the Function of the State��������������� 7   Social Relations of Production and Foreign Trade�����������������������������������16   The Workings of Industrial Colonialism�����������������������������������������������������22   Imperialism and Nature����������������������������������������������������������������������������������27   Conclusion����������������������������������������������������������������������������������������������������������31 2. Imperialism at the Third Stage����������������������������������������������������������������������35   Key Aspects of Crisis����������������������������������������������������������������������������������������35   The “Globalization” Strategy��������������������������������������������������������������������������37   From 1995 Forward������������������������������������������������������������������������������������������49   Capital and Nature�������������������������������������������������������������������������������������������53   Conclusion����������������������������������������������������������������������������������������������������������55 3. The Pattern of Industrial Colonialism���������������������������������������������������������57   Barriers to Regional Appropriation of Scientific Knowledge  for Production�����������������������������������������������������������������������������������������������58   National Innovation Systems in Latin America����������������������������������������62   The Universities in the Region����������������������������������������������������������������������70   External Limits to Export-led Economic Growth�������������������������������������79   The Different Functional Roles Within the Region���������������������������������86   Internal Contradictions�����������������������������������������������������������������������������������89   Political Regimes at the Third Stage������������������������������������������������������������92   Climate Change in Latin America����������������������������������������������������������������99   Conclusion������������������������������������������������������������������������������������������������������� 100 4. Industrial Colonialism and Surpluses of Population��������������������������� 103   The Over-Supply of Labor-Power and Surplus-Population  Theory���������������������������������������������������������������������������������������������������������� 103   Deficits and Surpluses of Population������������������������������������������������������� 112

viii

contents

  The Surpluses of Population and Their Activities��������������������������������� 114   Relative Surpluses of Population at the Level of Goods  Production and Repairs��������������������������������������������������������������������������� 115   Relative Surpluses in the Sphere of Commodity Circulation������������ 119   Surpluses of Population Beyond Capital Valorization������������������������� 122   What About Home Labor?�������������������������������������������������������������������������� 125   The Nature of the Latin American Migrant Worker and the  Historical Record��������������������������������������������������������������������������������������� 127   Remittances and Wage Differentials��������������������������������������������������������� 130   The Indigenous Population������������������������������������������������������������������������� 133   Conclusion������������������������������������������������������������������������������������������������������� 135 5. Industrial Colonialism and Peasant Production����������������������������������� 139   The Social Character of Peasant Production������������������������������������������ 140   From Peasant Production to Infra-Subsistence Production��������������� 144   Social Impacts of Neoliberalism on the Countryside�������������������������� 151   Conclusion������������������������������������������������������������������������������������������������������� 158 Appendix: The Underlying Causes of Underdevelopment in Latin America��������������������������������������������������������������������������������������������� 161 Bibliography���������������������������������������������������������������������������������������������������������� 179 Name Index����������������������������������������������������������������������������������������������������������� 187 Subject Index�������������������������������������������������������������������������������������������������������� 189

ACKNOWLEDGEMENTS The process of building the arguments of this book was largely encouraged by discussions with successive generations of students of the Graduate Program in Political Science at the Universidad Autónoma de Zacatecas, Mexico. Their shrewd criticisms and comments were always helpful in the development of the ideas expounded here. No less important has been (and continues to be) my everyday contact with colleagues sharing similar concerns. Distinct traces of encounters with peers at various academic events will be found throughout these pages. Many diverse schools of thought have engaged in the study of Latin America’s reality and every one of them has surely made some sort of contribution. The UN Economic Commission for Latin America and the Caribbean (ECLAC) deserves special mention, regardless of its distance from the thread of the story told in this work. The service that ECLAC provides in terms of information and reflection on such an enormous variety of social issues is simply priceless. Without it, the ongoing intellectual work about Latin America and the Caribbean would be much more limited and far more convoluted than it is. R.A. Dello Buono has consistently and enthusiastically promoted the diffusion of studies on Latin America. As is well-known, he himself is a learned researcher on the region’s issues and I am infinitely grateful for his interest in my work being published. I am likewise appreciative for the assistance that David Fasenfest has provided in helping to overcome the technical difficulties involved with producing this volume. A large part of the tortuous effort to shape a legible English version from my first draft was carried out by Anna Maria D’Amore. Carmen J. Dello Buono also participated in this difficult task. The photograph that illustrates the front cover of this book was taken by José Alberto Donis Rodríguez in the course of carrying out his work in defense of the human rights of migrants. Some of the propositions found in this book are the result of an ongoing research project on “Science for Development and Democracy” funded by Mexico’s Fondo Sectorial de Investigación para la Educación. Special thanks to all who have enriched my work. Certainly, I alone am responsible for the views and any errors contained in this book. Víctor Manuel Figueroa Sepúlveda Zacatecas, Mexico

LIST OF TABLES 2.1. Objectives of R&D Funding (Percents)���������������������������������������������������41 2.2. Research and Development Funding in Selected European Countries and Japan (Percents)�����������������������������������������������������������������43 2.3. Exports and Imports of G-7, 1977 and 1987 (Percents)��������������������44 3.1. Latin American and Caribbean Commerce. Export Goods (in millions of US dollars)���������������������������������������������������������������������������82 3.2. Latin American and Caribbean Commerce. Import Goods (in millions of US dollars)���������������������������������������������������������������������������82 3.3. Latin American and Caribbean Balance of Industrial Goods (Millions of dollars)��������������������������������������������������������������������������������������83 5.1. Schematic Representation of Peasant Production at Point 1�������� 147 5.2. Schematic Representation of Peasant Production at Point 2�������� 148 5.3. International Prices Index (Base 1990 = 100)������������������������������������ 152 5.4. Productivity Differentials (1980 dollars)��������������������������������������������� 156

PROLOGUE Well into the second decade of the 21st Century, the search for an inclusive and progressive development scenario for Latin America has resulted in persistent frustration. In one sense, deepening economic crises and recurring cycles of violence confirmed the collapsing viability of neo­ liberalism as a development strategy under post-keynesian representative democracies. Indeed, the upsurge of social exclusion that yielded declining standards of living and physical displacement for large swaths of the most vulnerable sectors placed Latin America at a crossroads: either find another path or descend into a quagmire of ungovernable polarization and violence. Why did neoliberal capitalist expansion prove so unable to turn explosive peaks of economic growth into greater prosperity for the majority of Latin Americans? Why did accelerating technology driven by global capital actually lead to greater underdevelopment? And why were uncontrollable migratory flows the necessary outcome of the competitive chase for attracting inflows of foreign investment? Comprehensive answers to these and other key questions of development are provided in the present work by Víctor Figueroa. Figueroa’s pioneering work Reinterpretando el subdesarrollo: Trabajo general, clase y fuerza productiva en América Latina (1986, Siglo XXI) first grappled with many of these questions in an era when neoliberal regimes seemed dynamic and transformational. As a powerful sequel to his earlier work, this new treatise presents a fresh and insightful glimpse into the contradictory dynamics of accumulated underdevelopment in 21st Century Latin America. The essential mechanisms for harnessing technology within the context of development remains as much an enigma today as it did in earlier phases of capitalism. Mindful of this fact, Figueroa develops a novel and insightful approach to the structures of “really existing” dependent industrialization, identifying their consolidation as the third stage of industrial colonialism. His analysis masterfully returns our attention to the role of imperialism, not as some rhetorical accusation, but as a structural element of a hegemonic integration. What unfolds is a rigorous explication of the internal restructuring of production implied by underdevelopment as interconnected with the real structures of unequal partners in qualitatively asymmetrical social relations.

xiv

prologue

Distinctive in Figueroa’s approach is the angle from which his analysis of underdevelopment is approached. Rather than building out of unequal exchange as posited by conventional dependency theory, Figueroa proceeds up from the social relations of production where structural subordination results from the importation of a technological progress being created abroad. If in Marx’s Capital, we find the analytical tools to comprehend the logic of capitalist expansion, Figueroa’s critical reworking of Lenin’s thesis on imperialism offers us new elements for critically analyzing underdevelopment. The contradictory logic of industrial colonialism, conceptualized through its development in successive stages, allows Figueroa to demonstrate the crippling legacy that results from interrelations produced by the assimilation of externally developed technological innovations, the generation of surplus-populations, and the systemic export of surplus-value to developed countries. The end result is a rigorous class analysis that dissects an imperial project shown to feed upon the appropriation of technological productivity gains and the subordinated linkages that obtain between core and subordinated nations. By wrapping his analysis around a systemic approach to capitalist accumulation, Figueroa provides an anatomy of the “development of underdevelopment” that looks quite different from the scenario imagined by the dependency theorists of the 1960s. New developments such as the growing role played by pirate capital fundamentally alter the prospects of the whole region in an unfolding scenario where ecological conditions are compromised, science is templated by profit, and higher education becomes stunted and qualitatively transformed by the deepening process of underdevelopment. Figueroa’s argument poses a formidable challenge for his readers. The achievement of genuine development will only be possible by overcoming the oppressive and contradictory formation of advanced industrial colonialism. The ideological masquerade of export-led growth strategies and their enshrinement within “free trade” policies is laid bare in the social relations of technology production and the bifurcated terms of exchange that resulted in a permanent structural subordination of Latin America. In sum, it becomes clear that imperialism itself must be dismantled before real development can be achieved in the region. The Brill “Critical Global Studies” series is pleased to make Víctor Figueroa’s seminal contribution to development studies available to an English language readership. In an appendix at the end of the work, we include an entire chapter of Figueroa’s classic 1986 work Reinterpreting Underdevelopment, making it available in English for the first time.

prologuexv Readers who trace Figueroa’s analysis into the first quarter of the 21st Century will come to appreciate the new urgency for reinterpreting underdevelopment. In this sense, Figueroa’s critical analysis has returned with renewed vigor to address the challenge he first outlined over a quarter century earlier. R.A. Dello Buono, Ph.D. Professor of Sociology Manhattan College New York City, USA

INTRODUCTION The present work deals with some of the critical problems experienced by Latin America beginning from the end of the 1960s and continuing right up through the present. Special attention is paid to the living conditions of the popular sectors during this period which I designate as the third stage of industrial colonialism. My analysis is guided by an analytical framework rooted in an interpretation of imperialism that has been constructed over a long period of time. I believe that the overall understanding of imperialism will be enriched with the theoretical propositions that are developed through this study. Attempts at dealing with the international relations of domination that extend through Latin America, a region that forms part of the global “South,” are certainly not new. Theories of dependency dominated the progressive and revolutionary academic and political concerns of the 1960s and 1970s. Critical reflection on the big issues of the region gradually faded away from the literature in favor of more specific themes and case studies. Many reasons can be offered to account for this trend, including the harsh repression of popular movements and the ensuing isolation and retreat of Marxist thought. In recent years, however, the ongoing upsurge of popular struggles and a general world crisis have contributed to renewed discussion about the options for development and the optimal paths to be followed. This work seeks to contribute to the revitalization of critical thought. Under neoliberalism, it was originally expected that increasing globalization supported by free-trade policies would bring along with it certain leveling effects both inside national economies and between countries. That was the alleged natural task of a market that supposedly acts on the basis of objective data rather than the dictates of economic and political domination. Echoes of these initial arguments in support of the imperialist strategy designed to tackle the global crisis unleashed at the end of the 1960s and the beginning of 1970s can still be heard today, lending support to governments that adhere to such a depleted ideology. Reality, in turn, tells a different story, in which things proceed in the inverse direction. Inequalities both between classes and between countries have deepened in Latin America.

2

introduction

The parallel development of the concentration of wealth and the extension of misery (or “poverty” as termed in the development literature) are trends embedded in capitalist development logic. This was first brilliantly revealed in the work of Karl Marx and thus provides the starting point for any serious theoretical work around these issues. However, our concern embraces the issue of inequality between “North” and “South” and inside Latin American countries. The aim is to unveil the mechanism by which globally created misery becomes concentrated in underdeveloped countries in a context in which global riches flow into the hands of large corporations originating in the more developed countries. We are particularly interested in analyzing the social form of misery in a region where national ruling classes never called into question their subordinate position within the international economic organization. The question of how domination by some countries over others is reproduced will be tackled from both a general perspective as well as from the specificity of the third stage of industrial colonialism. Both concerns must go together in order to produce a convincing explanation. On the one hand, this is a problem related to reproduction of the social relations upon which domination rests. Or, to put it another way, following propositions which I have already advanced in previous work, it is a problem of how underdeveloped countries are prevented from advancing towards the normal labor division of capitalism and the organization of their own scientific labor. On the other hand, it can be seen that the general causes of imperialist reproduction take on particular forms at different stages of capitalism. We will review the political aspects of this issue, but, in particular, I seek to develop the discussion of the neoliberal mode of knowledge creation for material production. This will allow us to unveil the actual mechanisms for the reproduction of the economic and political relations of industrial colonialism. Since some elements of the process of industrial colonialism work spontaneously, they appear to be “normal” factors of society’s economic functioning. This actively conceals critical subjective factors such as the decisive role that local oligarchies played in the maintenance of domination between countries. From the beginning of the 19th Century, local oligarchies have prided themselves on the supposed sovereignty they had secured for their countries. What they actually did some two hun­ dred years ago was to avail themselves for a new form of colonialism. Classic colonialism, which included economic, social, political and cultural direct domination, made it possible for commercial colonialism to develop through the 19th Century. This latter form demanded the existence

introduction 3 of formally independent states that would be able to diversify their external economic relations following the changes inside the global economic center of world hegemony, i.e., Europe. It was thus through commerce, especially during the last decades of that century, that industrial colonialism would be introduced. This would provide for the functioning of an underdeveloped capitalism in the region and establish the corresponding relations of domination. The local oligarchies identified the abolition of classic colonialism with the elimination of all colonialism and that is how it became written in our textbooks. Rather than question the subordinated position of their countries in the world market, they instead conquered strategic spaces for the management of their own interests. The asymmetrical and subordinated integration of their countries within the imperialist system did not pose any problem for them. Indeed, it was in the midst of this system that they built their economic and political power. There was no reason to embark on independent ventures. The possibility existed that these oligarchies might have improved their lot even more had they proposed to challenge the imperialist system with a view to creating a more equitable relation with developed countries. Yet, the fact is that they never became committed to the building of a true nation. Their only open and determined commitment was the maintenance of the present world order. With all of the disadvantages of underdevelopment loaded on the backs of the working people, there was no real reason for their behavior to be any different. The guiding thread of the arguments that I will put forward in this work is based on the proposition that imperial domination over underdeveloped countries above all rests upon industrial colonialism. This conclusion was reached after prolonged research that resulted in a book published in 1986 entitled Reinterpretando el subdesarrollo. Trabajo general, clase y fuerza productiva en América Latina [Re-interpreting Underdevelopment: General Labor, Class and Productive Forces in Latin America] (1986). The present work seeks to further develop the implications of this general line of reasoning. Capitalist social relations of production and the division of labor are key variables to the constructs presented in the present work. Thus, capitalist “development” and “underdevelopment” take on a meaning directly linked to the division between general (or scientific) labor and immediate labor. From this perspective, Lenin’s work is re-examined and the concept of monopolies is complemented. By so doing, the impact of capital export on host countries is better revealed with a new

4

introduction

significance. The obstruction of the division of labor is linked to the corresponding emergence of underdevelopment, thereby introducing industrial colonialism. The decisive role of science in the development of productive forces leads to a new responsibility for the state which we term the “state development function.” This function becomes concentrated in the more developed countries. In the first chapter, the general workings of industrial colonialism are reviewed and we look at the relations of capital and nature due to their critical condition in the present stage of imperialism. Next we endeavor to describe the region’s relationship with the United States, the imperialist country most directly involved in Latin America. During the third stage of imperialism, this relationship coincides with a transition from crisis to crisis. As we follow the course of US globalization strategy for resolving the economic contradictions that surfaced at the end of the 1960s, special attention is paid to the state development function and some of its internal and external economic effects. This allows us to reveal in Washington’s motives for its policies towards the region. Just as we rule out a purely “financial” explanation of the present crisis, we clarify that an approach centered on production relations and “real economy” is also insufficient. As I argue in Chapter 2, capital is indeed in the midst of a conflict with itself as well as trapped in a serious contradiction with nature, thus facing new and unprecedented challenges. The third chapter deals with the actual workings of industrial colonialism in the region at the third stage. Outward-oriented growth is presented as one of the two forms of growth that can take place in Latin American countries under the conditions of industrial colonialism. It was the form to which the region was eventually forced to adjust to under the demands of the neoliberal globalization strategy. The regional implementation of the neoliberal mode of science and progress production is presented as part of the machinery for the reproduction of industrial colonialism. In this context, we review the role of universities as institutions with a limited functionality as a result of their underdeveloped economic environment. The external and internal forms of manifestation of the main underlying contradictions in Latin America are exposed as they unfolded from the region’s particular kind of integration into the imperialist system. Chapters 4 and 5 grapple with some of the main problems of industrially colonized Latin American countries: population surplus and the decline of peasant production. Many important efforts have already been

introduction 5 made to tackle the burning theoretical and practical questions that these problems pose. I attempt to show that industrial colonialism provides the most appropriate focus for explaining the causes and manifest forms of surplus population. With this aim in mind, a brief review of the main currents of thought on these issues is presented in order to expose their inconsistencies. This allows us to present our own solutions and analyze the different forms that the affected sectors of population assume vis á vis capital accumulation. The discussion of the problem begins with general propositions regarding the situation in urban centers (Chapter 4) and then moves to the surplus population in the countryside where the unfolding of the peasant economy is taken as the benchmark (Chapter 5). Earlier versions of my main arguments have been previously published in the form of articles in publications such as Problemas del Desarrollo, Revista Latinoamericana de Economía, Critical Sociology, Aportes and others. This material has been re-arranged, updated and corrected where deemed necessary.

CHAPTER ONE

IMPERIALISM AND INDUSTRIAL COLONIALISM Latin America is one of the subordinated regions of the imperialist system. Its economic, social, political and cultural processes are soundly conditioned by its position. Yet, what does this position really consist of? What are its causes and effects? How was it built? These are old questions, but they are very much open to new answers. In addition, answers to these questions are essential for providing a general theory of imperial­ ism, making it the requisite point of departure. Although this subject first attracted the attention of liberals, Marxism embraced it as one of its own and has produced many valuable studies. As is well known, one of the first and most important contributions in this field came from Vladimir I. Lenin. Many of his propositions are still valid while others call for discussion. A critical approach to Lenin’s work may well produce an appropriate framework for tackling present realities and this is what we will attempt to achieve in this chapter. Monopoly, the Role of Science and the Function of the State For Lenin, the main process that gave birth to imperialism was “the displacement of capitalist free competition by capitalist monopoly” (Lenin, 1966: 761). This is so because “If it were necessary to give the briefest possible definition of imperialism we should have to say that imperialism is the monopoly stage of capitalism” (Lenin, 1966: 762). Or, as he put it: “Imperialism, as regards its economic essence, is monopoly capital” (Lenin 1966 791). Lenin was well aware of the limits of this defi­ nition, which he himself pointed out. However, his emphasis on this point leaves no doubt about what he viewed as the principal feature of imperialism. Concentration of capital creates monopolies hence imperialism is a necessary result of capital development. This is one of the theses that distinguish Lenin’s interpretation from those worked out by liberals and social democrats. Imperialism was not created by historical circum­ stances taking place in isolation from capitalist development. For that reason, it cannot be somehow extracted from the system without harming

8

chapter one

capitalism. Rather, imperialism is one phase of a logical and historical development. However, it can already be seen that for Lenin, imperialism is a phase that arises mainly at the level of capital distribution and competition. It does not involve, therefore, the fundamental capital and wagelabor class relation and the development of labor. In Marx, the concentration and centralization of capital respond to capital’s tendency towards increasing the level of exploitation of labor. In dealing with the historical phases of capitalism, Marx goes beyond the variable level of exploitation, since these, like other categories such as “extraordinary profit,” do not account for a specific phase of capitalist development. Both in free competition and in monopoly, capitalists obtain extraordinary profit. Therefore, some other variable is required. For Marx, this variable was the relation of labor exploitation itself. In other words, every new phase in the development of capital was at the same time a new moment in the development of the capital and wagelabor relation. This is how he analyzed the transition from manufacture to large-scale industry, which he defined as the transformation of formal into real subsumption of labor. In contrast, the emergence of imperialism for Lenin is not linked to change taking place at the level of the essential relations of production and this shift in approach plays down the explan­ atory power of his propositions. In his discussion of imperialism, Lenin overestimated the importance of competition. He identified free competition with capitalism itself, as we can see in the following statement: “Free competition is the basic feature of capitalism and of commodity production generally; monopoly is the exact opposite of free competition…” (1966: 761). Since commodity production also exists in pre-capitalist societies and continues to exist under monopoly capitalism or could even exist under socialism, it is not a specific feature of some particular mode of production. Likewise, if free competition is displaced and something else is created in the devel­ opment of capital, it cannot be seen as a basic feature of capitalism, much less of commodity production. The basic feature of capitalism must embrace both free competition and monopoly and it must stand for the essential relation of production, that is, for the separation between means of production and direct producers in the case of capitalism. Lenin’s proposition could lead to confusing conclusions, some of which he himself put forward. Since monopoly is the exact opposite of free com­ petition, the basic feature of capitalism, the emergence of the former was bound to represent “the transition from capitalism to a higher system” (1966: 761). What Lenin saw as a major transformation for the relations of



imperialism and industrial colonialism9

production, was production becoming social while appropriation remains private, something which strangely calls into question the social charac­ ter of production under free competition. Marx, always cognizant of the importance of the relations of produc­ tion, did take note of an important transformation at this level, in spite of the fact that this change in capitalist society was just starting to manifest itself in his time. A new division of labor was taking place, one which separated what he called general (scientific) labor on the one hand and immediate (operational) labor on the other (Marx, 1991, Vol. III: 199). In the period of manufacture, mind and hand worked in unison, incorpo­ rated in the direct producer, whose will and intellect controlled the labor process. With the advent of large-scale industry, the worker was stripped of creative intervention in production and was pushed into the position of being an “appendix” of machinery. Most labor-power was reduced to physical capacities of execution in following the rhythm of the larger mechanical complex. At the same time, the intervention of knowl­ edge in production was growing, boosted by: a) the need for industries that were lagging behind technologically to maintain their competitive­ ness; b) the demand for new means of communication coming from industry, and c) the greed for extraordinary profits. In this way, the need for new knowledge arose out of the core of capitalist production and within all economic branches. At the same time, the knowledge required for these purposes became progressively more complex. It was therefore necessary to organize science to satisfy these productive aims. This pro­ cess was initiated in Germany and then followed closely by the United States. Ultimately it all came to drastically change the industrial mode of operation. As stated by H. Braverman: Thus at a time when British and American industry used university-trained scientists only sporadically, for help on specific problems, the German capitalist class had already created that total and integrated effort which organized, in the universities, industrial laboratories, professional societies and trade associations, and in government-sponsored research a continu­ ous scientific technological effort as the new basis for modern industry (1974: 162).

General (scientific) labor was thus created as a specific form of productive labor. Its function would be the creation of progress, i.e. the advancement of productive forces, through the continuous conception and materializa­ tion of new goods and processes. In contemporaneous literature this activity is labeled as “research and development,” where “research” refers

10

chapter one

to “systematic study oriented to reach some scientific knowledge or a more complete understanding of the subject under study.” This can be basic research, when the aim “is to improve knowledge without having in mind any specific application of it.” Or, it can be applied research, when its aim is to advance the knowledge that is required to meet a specific need. “Development” in turn refers to “the systematic use of knowledge or understanding obtained from research with a view to the production of materials, equipment, systems or processes, including design, develop­ ment and improvement of prototypes and new process. Applied research and development often appear as a single category in statistical records (AAAS, 2009). Thus, innovation and change are the main concerns of research and development, of general (scientific) labor. Product quality control, rou­ tine proofs and mass-production would remain in the hands of immedi­ ate labor. Although 19th century large-scale industry degraded the level of intervention of the worker in the labor process, part of immediate labor still contributed intellectual abilities. But science would seize the creative function of knowledge from the last decades of that period. So, if separa­ tion (of the direct producers and their means of production) is at the root of the capitalist system, it reappears in the capitalist labor process. First, control of the labor process is taken away from the worker with the advent of large-scale industry. Then, labor’s creative abilities are separated from the immediate worker’s physical abilities for mass production. This divi­ sion of labor in production would come to be followed by a division of the labor market. Labor exploitation in two differentiated spheres of labor would strengthen the power of capital over the workers. Direct producers engaged in immediate labor would now face new limits to their wage negotiations. Their skill qualification is constrained by secondary tasks they are pushed to carry out. The expansion of the industrial army and their workers’ organizations become their main support. At the same time, constant production innovation will provide the means to steadily raise the rate of relative surplus value. Scientific labor, in turn, will rest mainly on the workers level of skill qualification given the difficulties of these producers in getting organized. The state takes on a new function in this context. To its traditional tasks related to the advancement of social constant and variable capitals, the creation of general conditions for the development of scientific labor and its productive applications is now being added. These conditions mainly include:



imperialism and industrial colonialism11

• Boosting the development of science, in particular basic science. • Ensuring the socialization of knowledge. • Providing for the skilled qualification of labor for scientific work, in par­ ticular, the training of researchers. • Promoting international scientific cooperation. • Encouraging collaboration between scientific areas. These are conditions for the development of productive forces whose sat­ isfaction does not normally guarantee any direct profit. Their steady delivery configures a state development function. Under conditions of lib­ eral capitalism, this function is carried out through a close collaboration of the state with the private industrial sector. Once the importance of scientific knowledge for production is recog­ nized, capitalists would be willing to organize their own scientific advances for the innovation of their production process and products. This was especially the case as the ever-growing complexity and costs of scientific labor as well the need to keep industrial secrets eroded their reliance upon independent inventors. In this context, the part of the new scientific knowledge created by applied science would be left in the hands of pri­ vate capital. Yet, the dependency of capitalists on their state would increase as the conception and introduction of new technological appli­ cations of science required state organization of general conditions propi­ tious to this end. As the presence of science in production steadily becomes generalized, it gradually becomes evident that development can no longer be solely the work of private capitalists. For this reason, the fusion of capitalists to their state becomes ever tighter. There are several important aspects involved in this fusion. The advancement of basic science opens new opportunities for technological innovation. Innovation, in turn, provides new questions for basic research. In the same way, applied research is possible thanks to state-organized and trained personnel. But private industries signal to the state the kind of training required at any given point of capital development. Indeed, scientific labor under private capitalism is the object of a fur­ ther division between state and capitalists. The state takes on those activi­ ties which by themselves do not guarantee or yield profits and which can be considered as a general condition of scientific labor. Private capitalists, in turn, carry out the technical application of knowledge as dictated by profit considerations. This yields the basic conception of organized scien­ tific labor. The state can carry out applied research in the same way as private capitalists undertake basic science.

12

chapter one

It should be expected that the larger the quantity and the better the quality of scientific labor, the greater its impact on a country’s interna­ tional economic position. An imperialist country contending for world hegemony will probably be successful if it carries out the best possible development of its state function. A good articulation of the state with capitalist activities and the accumulated experience that results from it are important conditions in that connection. With a view to promoting the national interest, the state can also allow for foreign capitalists to partici­ pate in the development of scientific labor. When that occurs, it becomes clear that the state’s view of national interest is not confined to the inter­ ests of their own capitalists whose national concerns may be limited. If control over science-based processes and products is crucial for a country’s international position, the same is true for enterprises vis-à-vis domestic and foreign competitors. Most monopolies have reached their position thanks to the scientific labor they control. While bearing in mind that neither the technical mode of production nor its products are consid­ ered permanent, we can assert that holding a monopoly position rests upon the enterprise’s quality, the mass of scientific labor it exploits, and the consistency it shows in exploiting it. Extraordinary profit promotes technological progress. Control of prog­ ress allows for enterprises to prolong the period in which they obtain extraordinary profit. Hence, the efforts made by enterprises to protect the knowledge and abilities they control is well founded. Monopolies are big supporters of authentic copyright and industrial secrets. To that extent, they are also conservative. Normally, the success of other enterprises in their search for profits poses a threat to the conservative monopoly which becomes forced to introduce innovations. To sum up, it can be said that monopolies do not control products and markets only as a result of the mass of capital under their control. Rather, it is mainly due to the knowledge and its productive applications which they control. Apart from monopolies resting on control over exceptional natural resources, it seems clear that enterprises cannot generally hold on to a monopoly position indefinitely if they do not have control over cru­ cial elements of the knowledge that their product objectifies and/or over the processes to get that product. During the first stage of imperialism (1870–1930), enterprises focused on the productive applications of knowledge rather than on the direct con­ trol over knowledge. Monopoly was in fact large-scale capital more than anything else. This was the kind of capital required to pursue capitalist progress at that time (steel industry, international railways networks



imperialism and industrial colonialism13

and navigation, international telegraph, large ports, and the like). At the second stage (1930–1970s), monopolies displaced independent inventors and became the principal agent of patent registration. From the 1970s on (the third stage), large companies started internationalization of the research and development activity itself, especially towards the so-called “emerging” countries but also, to a much lesser extent, towards underde­ veloped countries. With the emergence and consolidation of neoliberalism, the role being played by the various agents of scientific knowledge production and its applications in production experiences significant change. In particular, the state function as a coordinator of activities aimed towards innovation gains relevance compared to its function as a key provider of basic knowl­ edge. Science workers dedicated to basic science as well as public univer­ sities are divested of part of their ability to determine their own research agenda. While their traditional links with the state’s ends are broken, they are now compelled to evolve in closer relationships with the demands of private enterprise. Enterprises become vastly empowered in terms of their ability to determine the content and rhythms of knowledge produc­ tion. The new reality of scientific labor related to production is mainly defined by these fundamental features. The implications of this fact require careful elaboration. The idea remains widespread that material development obtained from the market requires stimuli. Or better still, that these stimuli are the most adequate way to encourage development. These stimuli are sup­ posed to have brought about adjustments within the relationships among the participants in technological change, concerning both the links exist­ ing between them and their relation to knowledge production. Private enterprise, which has always played a crucial role in technological change, now becomes an even more influential agent in this process. Private enterprise has not often been recognized as the key and leading partner that it has become for the production of knowledge and its appli­ cations in material production. It therefore is often found alongside gov­ ernment and the sector of the academic-scientific community not directly concerned with profit-making activities, as is the case, for instance, in triple-helix type analyses. The point is that the aims of the new institu­ tional arrangement are the development of material production and the acquisition of profit in a context where state action is limited and private interests have been blown out of proportion. Given this arrangement, private enterprise would on the one hand increase its participation in research funding. It in fact grew consistently

14

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over recent decades although this tendency was halted during first the decade of 21st century. In the USA, the private enterprise share in R&D funding was 46.8% in 1977 and it went up to 66.6% in 2007. Inversely, the state’s contribution fell from 50.6% to 27.6% during the same period (Figueroa, 1992; RICYT, 2010). On the other hand, the fact that governmental and academic commu­ nities would now follow guidelines set by private interests was bound to leave its mark on the larger ends of science. In essence, the aims of science are always socially conditioned. The deepest level of determination comes from the core of the social relations of basic production. Within that framework, the advent of new relations between key social agents also contributes to re-defining the ends of science. In our case, neoliberalism brought with it the following implications for knowledge production: • Research intensified its concentration on the solution of concrete prob­ lems within the enterprise, whereby its concern for general, abstract problems did not become necessarily weaker, but more focused towards those areas where the probability of successful business activity was higher. • The notion of “interest of capital” was diminished. Private profit largely gets rid of considerations about the common interests of capitalists or the interests of capitalism per se. In the case of the United States, the effects of this new ideological arrangement can be appreciated in the rather sparse attention that government and enterprises have paid to researching such critical problems as the environment and energy. This has been true practically throughout the entire neoliberal period. Such a huge negligence is largely to blame for the extent of the present conflict between capital and nature as well as for the inability of the system to even attempt to provide, let alone actually provide, a response to this contradiction. The same could be said of peak-oil (Figueroa, 2010). The state, in turn, does continue to carry out and promote scientific research. However, its activity in this regard has been reduced relative to the past and at the same time re-oriented by the conviction that competi­ tiveness of both the national economy and of individual entrepreneurs demands greater attention to those scientific areas that can more imme­ diately impact upon productivity. Computers and electronics along with bio-chemicals and pharmaceuticals became priority areas and in the case



imperialism and industrial colonialism15

of the USA, hegemonic endeavors have led research in military defense to a highly privileged place. The state’s role as a coordinator of relations between the scientific community and entrepreneurs gains importance and becomes one of prime relevance. It is not only a matter of administrating already estab­ lished relations. To a large extent, the point becomes to reorganize such links with a view to better adjusting them to the larger premise that initia­ tive is under the direction of private enterprise. Within the scientific community not directly subordinated to the prevailing business logic, universities figure among the most important institutions that have been summoned into the new model of knowledge production. The activities of these institutions must be reorganized to open the way to practices more akin to a market oriented performance, something which for public universities in Latin America amounts to a huge blow to their treasured autonomy, as we will see later. Room for independent scientific projects emerging from curiosity and the eagerness to know and understand becomes ever more reduced, even while it was never accorded sufficient space in the past. It becomes forced to cede its domain to more practical uncertainties coming from the oper­ ations of business. The scientist, for whom knowledge in itself is every­ thing and who sees these new demands as illegitimate, is compelled to understand that capitalist production depends upon scientific principles and that a primary function of the state is to put science at the service of profit. For the scientist, scientific activity must now make sense in an “appli­ cation context,” that is, a context where most scientists give up their inde­ pendently determined agenda in deference to programs that make it possible for them to carry on scientific labor even as this means topics and rhythms defined from outside of their working environments and scien­ tific aspirations. At the same time, those scientific workers inclined to the more practical aspects of knowledge will find an ever more propitious terrain for themselves. Universities, especially public universities, must limit those efforts oriented to creating knowledge that may be used for everyone in need of it and instead develop new links with particular “clients” for particular­ istic purposes. The same is true with respect to their commitment to the development of basic science, now re-oriented to those areas where the demand for knowledge of private enterprises is greatest. We will later see that all this has had a profound effect on the operation of universities.

16

chapter one

Generally speaking, the role of the state during the present phase of capitalism with regard to its development function emphasizes the build­ ing of creative links between the scientific community and enterprises, and to the strengthening of the so-called National Innovation Systems (NIS). In fact, “innovation” has become the main concern in studies of technological change, thus stressing the extremely important aim of knowledge creation for current capitalism. According to the Organization for Economic Co-operation and Development (OECD): “An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or practices, workplace organization or external relations” (OECD, 2007: 394). Thus, every phase of a product’s life from its conception to its arrival in the consumer’s hands can be a particular object of innovation, even if it does not require the intervention of scientific research or the creation of new products or processes. An underdeveloped country innovates through the importa­ tion of progress, and in so doing it appears to be on the rails of develop­ ment. It follows that the relations which the state promotes between academic communities and entrepreneurs with a view to innovation will have a different meaning in developed and in underdeveloped countries. Every NIS includes the inventory of the human and material resources that participate in innovation processes. The state must not only mobilize them in pursuit of technological change, but also must continue to pro­ vide the general conditions for development in terms of advances of social constant and variable capitals and the other activities we have men­ tioned. The power that private enterprise has won is exercised mainly by large monopolies, for it is these that concentrate the R&D activities and spending, and which in turn are geographically concentrated in a limited number of countries (United States, Japan, England, Germany and France). The larger power they enjoy has not only an effect inside their respective economies, but also is bound to result in greater control by monopolies over underdeveloped economies. Social Relations of Production and Foreign Trade In Lenin’s work, the export of capital is another outstanding feature of imperialism. This refers to the placement abroad of monetary resources and the means of production, which is now added to the export of ordi­ nary commodities. This is also one of the most important means for the plunder of backward areas by advanced countries. Lenin thought that the



imperialism and industrial colonialism17

cause of the export of capital was the search for profit by monopolies. He put it this way: As long as capitalism remains what it is, surplus capital will be utilized, not for the purpose of raising the standard of living of the masses in a given country, for this would mean a decline in profits for the capitalists, but for the purpose of increasing profits by exporting capital abroad to the back­ ward countries. In these backward countries profits are usually high, for capital is scarce, the price of land is relatively low, wages are low, and raw materials are cheap. (1966: 739)

Certainly, Lenin was aware that the destination of capital exports was not only backward countries but also advanced countries. But this is not encompassed by the formula he chose. Backward countries may not offer the adequate conditions for a given production in terms of skilled labor power or, more generally, the appropriate technological environment and the adequate market conditions for the realization of the desired products. Our concern here is to describe how capital export had a decisive impact on backward countries, beyond increasing monopoly profit and providing a stimulus for capitalist world expansion. With regard to the question of the main actor of imperialism, Lenin adopted Hilferding’s notion of “financial capital,” i.e., the merging of banks with industry, and worked out the concept of the financial oligarchy that developed along with it. Whether or not other forms of big capital and their representa­ tions should be included in these concepts is a secondary matter. Lenin would probably not have objected. The financial oligarchy that emerged with concentration and monopolies is the principal promoter and benefi­ ciary of capital export. So far, imperialism is open to two sets of relations: a) those taking place between advanced countries, where financial oligarchies compete directly between themselves and b) those between these oligarchies and the backward countries. The former relations stress the analysis of a strug­ gle for world hegemony, while the latter leads directly to the problem of “empire” or domination. Certainly, domination is also part of the scenario of struggle for world hegemony. Monopolies are a product of capitalist development, indeed, a manifes­ tation of such development. This process can be thought of as inde­ pendent of external relations, at least, as far as a logical explanation is concerned. H. Magdoff, with every reason, made it clear that: “The wish and necessity to operate at world scale forms part of capitalist economy” and “Seen in this way, export of capital, just like external trade, is a normal

18

chapter one

function of the capitalist enterprise” (1977: 87–88). At the same time, monopolies are a reality in every capitalist country, either dominant or dominated. The question therefore arises: what allows for some countries to systematically dominate others where there are also monopolies and exports of capital? At first glance the reason is backwardness. Yet, what determines back­ wardness? Trade as “unequal exchange” has been put forward as one of the answers to this problem. But some countries such as Japan overcame their backwardness and others are doing so by relying on trade. We can conclude that if trade has a bearing on domination, it will do so only as a manifestation of primary causes located elsewhere, namely in production. That is, imperialist rule must be conceived in the first place at the level of the capitalist social relations of production. This perspective does not exclude unequal exchange, but it should explain it. It should also explain why the so-called backward countries can introduce modern industry and at the same time deepen their relative backwardness in comparison to advanced countries. The foregoing is not intended to argue that capital export from advanced countries did not contribute to the emergence of underdevelopment, a particular form of backwardness, and to imperialism as a stage of capitalism where some countries are condemned to a subordinated posi­ tion within the world market. In the case of Latin America, the introduction of foreign money capital and means of production in industry, mining and communications had at least two outstanding effects: 1) it largely helped the expansion of capitalism, something which Lenin stressed, and 2) it made possible the emergence of a capitalism that would proceed resting on the progress of the productive forces created by the advanced, hereafter, developed countries (Figueroa, 1986). Capital export decisively pushed forward the expan­ sion of wage-labor, but at the same time, prevented it from dividing into immediate and general (scientific) labor in relation to the mass of produc­ tive processes taking place in Latin American countries. What they imported, and have continued to import since then is capitalist progress and the ability to create it. It follows that the new capitalism created actu­ ally lacks competitive ability, which is more evidence of monopoly capi­ tal’s aversion to competition. Thus, underdevelopment is a form of capitalist production that proceeds by relying on the import of progress that is originated in developed countries. It must be said that this was not an unavoidable outcome of capital exports. Theoretically, there was the possibility that the ruling classes in



imperialism and industrial colonialism19

Latin America, instead of uncritically adopting the progress coming from abroad, might have appropriated the knowledge objectified in the imported means of production with the aim of domestically producing them at some point in time. This was the answer that Japan adopted beginning at around the second half of the 19th century. However, the local ruling classes of the Latin American region, in contrast to the Japanese, envisaged the world market as their natural fatherland, the economic environment in which they were grown. They were sons of the world market and were in no position to embark on nation-building projects (Figueroa, 1986). This point must be stressed. Imperialism in Latin America was not the mere result of capital export by the financial oligarchies of the developed countries. It was also made possible because the financial oligarchy found in the importing countries a firm collabora­ tion by a local ruling class, a class that acted as a complementary actor and which would become a subordinated social link in the imperialist chain. This lets us see the true nature of monopolies in underdeveloped coun­ tries. A large part of them are subsidiary companies of corporations of the developed countries, i.e., extended monopolies. Some of them, including a very powerful few, arose from domestic capital. Most of them, if not all, are based on externally developed technologies and foreign scientific labor. The emergence and consolidation of monopolies in the region are tied to the import or transference of technological progress. This is valid not only for large-scale capital, but also for a large part of most other industries. Capital exports, then, as far as backward countries are concerned, meant much more than the mere transference of money capital and means of production. Exports of capital implied the transference of scientific labor and made it possible for the receiving countries to rely on externally gen­ erated capitalist progress. To that extent, and with the consent of the local ruling groups, it prevented the division of labor from developing. From that point forward, they would mainly devote themselves to exploiting immediate labor and to promoting subsidiary skilled labor with an eye on ensuring the steady operation of means of production created abroad. It is precisely this fact that determined their underdeveloped character. Much earlier, commerce had spread capitalism in Europe. From the third part of the 19th century, commerce would be crucial to the forma­ tion of capitalist underdevelopment. Yet by then, commerce no longer played a predominant role with respect to productive capital in advanced countries. Thanks to the industrial revolution that started in the latter decades of the 17th century, capitalist development gave rise to the

20

chapter one

conditions in which industrial capital would come to predominate over commercial capital. In Marx’s words: Whereas before the master-weaver gradually received his wood from the merchant in small portions and worked along with his journeymen for the merchant, now the weaver buys wool or yarn himself, and sells the merchant his cloth. The elements of production go into the production pro­ cess as commodities that he has himself bought. And instead of producing for the individual merchant or for particular customers, the weaver now produces for the entire world of commerce (…) As soon as manufacture becomes somewhat stronger, and still more so large-scale industry, it creates a market for itself and uses its commodities to conquer it. Trade now becomes the servant of industrial production, for which the constant expan­ sion of the market is a condition of existence (1991: 454).

In England, the repeal of the Corn Laws and the abolition of duties on other raw materials are outstanding proofs of the hegemony of industrial capital. In this context, it can be said that industrial capital already predominated in international trade throughout a large part of the 19th century and it is well known that exports of the region were mainly oriented to serving the industrial development of advanced countries. This hegemony, however, was not directly exercised by the latter over the region but indirectly through commercial capital and banks. Local states did not oppose this subordination. What has been called the “interna­ tional division of labor” organized home production to the benefit of capi­ talist development in advanced countries and annexed it to them through commerce. England, a country still very actively involved in classical colo­ nialism in other regions, introduced in this way a more advanced form of domination in Latin America: commercial colonialism. This is the form of domination that, in the case of this region, corresponds to the period of free competition and was established precisely in the name of free trade. During the emergence and consolidation of capitalism in Latin America (roughly 1860–1930), large-scale industry was already consolidated in the developed countries and gave rise to monopolies. Relative surplus value and productivity and, hence, the constant introduction of innovations were generalized industrial methods. Latin America witnessed the intro­ duction of the second wave of technological changes that had begun in Europe and the United States. Electrical equipment, telephones, internal combustion engines, vehicles, and flotation processes were some of the technological innovations that would arrive over time. At the same time, Latin America saw how innovations would also end up obliterating the economic value of some natural resources. For example, this happened



imperialism and industrial colonialism21

with saltpeter, an important commodity for Chile, following the inven­ tion of synthetic saltpeter. So it was that capitalism was introduced in Latin America on the basis of a technical mode of production that implied a direct commitment to relative surplus labor. It did not go through any previous stage and from that point forward, the only way for local capital­ ists to stay in business was by importing progress. In short, capitalism was introduced through industrial colonialism that would become an inher­ ent condition of Latin America’s economic trajectory. The second stage (1930–1970s) includes two periods. The first took place from 1930 to 1940–45. During that period, developed countries were concentrating on challenging crises and wars and Latin America enjoyed a certain amount of autonomy. Spontaneous economic growth was reori­ ented towards domestic labor and light industry flourished. Yet, this process took place by the import of machinery and equipment that existed in developed countries. The region had an opportunity to break with its technological dependence but it did not even try to do so. Local capitalists provided a social base for imperialism regardless of whether or not they were involved in joint business with foreign monopoly capital. In the second period from 1945 to the 1970s, foreign monopolies resumed their penetration in the region with industrial growth being boosted once again. The production of durables, electrical appliances (especially major appliances), telecommunications, new vehicles, petrochemicals, and oth­ ers, grew with great dynamism. Foreign capital penetrated even deeper, merging with local capitalists as the preferred method vis-à-vis the modi­ cum of nationalist feeling that arose during the phase of populism, regula­ tions and protectionism. “Populism” coincides in Latin America with the transition from outward-oriented growth to inward-oriented growth. The third stage witnessed a region that was incorporating a wave of technological changes spearheaded by information technologies. Monop­ olies eliminated regulations in the region and took advantage of privatiza­ tions. “Globalization” and a newly reborn “free trade” became the banner of the monopolies in their quest for ever further penetration. The reliance on an externally forged development of productive forces, a crucial factor for the emergence of underdevelopment, became a con­ dition for its own reproduction. Industrial dependency would grow stronger, hand in hand with economic growth. The industry of developed countries would now exercise its hegemony directly over the underdevel­ oped countries of Latin America. Underdevelopment therefore appeared at the same time as industrial colonialism, both as a result and a condi­ tion thereof.

22

chapter one The Workings of Industrial Colonialism

Lenin wisely stated that: Colonial policy and imperialism existed before the latest stage of capital­ ism, and even before capitalism. Rome, founded on slavery, pursued a colonial policy and practiced imperialism. But “general” disquisitions, which ignore, or put into the background, the fundamental difference between socio-economic formations, inevitably turn into the most vapid banality or bragging, like the comparison: Greater Rome and Greater Britain. Even the colonial policy of previous stages of capitalism is essen­ tially different from the colonial policy of finance capital (1966: 756–757).

Accordingly, we can establish that capitalist imperialism, with regard to the relations of developed and underdeveloped countries, is above all industrial colonialism. Lenin also considered that: “Finance capital is such a great, such a decisive, you might say, force in all economic and in all international relations, that it is capable of subjecting to itself, and actually does, even states enjoying the fullest political independence” (1966: 380). But his explanation of the reasons for this situation is not satisfactory. On one hand, we have already seen that he does not go much deeper into the analysis of the monopoly-building process. On the other hand, he pays no attention to the capitalist social relations of production that emerged in colonized countries and their corresponding structures. This latter point will become crucial when dealing with domination over states that enjoy political independence such as is the case of Latin America. Developed and underdeveloped countries represent different class structures within the same capitalist socio-economic formation. Scientific labor in relation to most productive processes is not organized in under­ developed economies. Hence, they are unable to pursue by themselves the development of productive forces or self-expansion. Their internal capitalist organization and the corresponding economic growth are real­ ized as such only thanks to the link with developed countries. They are deeply and asymmetrically integrated into the developed countries. The most evident manifestation of this asymmetrical integration appears at the level of external trade, as a structural unequal exchange. We have presented it as trade where developed countries sell both the products of scientific and immediate labor and underdeveloped countries mainly sell only the products of immediate labor (Figueroa, 1986). In terms of the value composition of the product, the exchange could also be described in this way: C(i + g) + V(i + g) + S(i + g) in the case of developed



imperialism and industrial colonialism23

countries, against Ci + Vi + Si, for underdeveloped countries, where C = constant capital; V= variable capital; S = surplus value; i = immediate labor, and g = general or scientific labor. This description does not intend to suggest that underdeveloped countries do not execute any scientific labor. Rather, it indicates that with respect to external trade, this labor is negligible. Indeed, the lion’s share of it is carried out by foreign companies. The most elemental way of approaching the value of scientific labor is through intangible assets (patents, trade marks, know-how) but this method fails to fully account for the real values involved. The value of general labor is transmitted to the products of immediate labor, espe­ cially in new goods and processes. Likewise, the control over these new products allows prices to increase over their social value even if their production is already generalized in developed countries, which is typi­ cally when they are bought by underdeveloped countries. This practice responds to the law according to which the value of new means of pro­ duction must be lower than the value of the labor power they displace to get a higher rate of profit. As is well known, the value of labor power in underdeveloped countries is much lower than that which prevails in the core countries of the imperialist system. Leaving aside the margin for monopoly abuses in prices, trade between both categories of countries does not convey value transferences derived from trade itself. There is unequal exchange, not because products are not exchanged at their value, but for two different reasons: 1) because the underdeveloped country does not create a portion of the value of its prod­ uct; and 2) because the average social necessary labor for production in developed countries is lower than in underdeveloped countries, this as a result of differences in labor productivity. Unequal exchange therefore implies a value transference which is rooted in production relations. We call it investment transference since a part of the surplus value that will be used in production must be diverted to developed countries in order to acquire means of production that are not domestically produced, especially new goods and processes. For our purposes, products of immediate labor including raw materials are considered objects of a two-sided exchange. Products of scientific labor, however, are not even though we know that underdeveloped countries do produce some. As can be seen, developed countries created a permanent captive demand for a part of their own produce in underdeveloped countries, one that is complementary to their domestically disposable realization

24

chapter one

circuits. They produce more than they need for accumulation and their growth takes place partly at the expense of surplus value created beyond their frontiers, independently of foreign investment. It follows that under­ developed countries transfer a part of their own employment generating ability to developed countries, a topic that will receive the attention it deserves in a later chapter. A tendency towards deficit in the trade balance of underdeveloped countries is also rooted in their specific relations of production, some­ thing which requires no explanation at this point. A balance of trade defi­ cit, in turn, brings with it a predisposition to indebtedness and openness towards foreign investment. Remittances of interests and profits are an inevitable link in this logic. These processes are not the outcome of politi­ cal attitudes, although they can be reinforced, as they are in practice, by political inclinations. Yet we are dealing here with a dynamic that flour­ ishes from the deepest structure of underdeveloped capitalism, namely, from industrial colonialism. We can therefore affirm that relations with developed countries are constrained by a chain that begins with a value transference and ends up with another: investment transference – trade deficit – indebtedness – openness to foreign investment – remittances of interests and profits. This is a dynamic that proceeds spontaneously, independently of any form of political domination and which does not require any systematic military intervention to take place. It is in fact a dynamic that makes possible the domination of formally independent states even as they become reorga­ nized as formal democracies. Local capitalists see no reason for remorse. They buy progress as they buy raw materials or anything else. These purchases are seen as a normal and necessary part of their profit-making activities. Their social function as business people is guaranteed as they create employment and encour­ age other businesses. From the point of their emergence as capitalists, they found the excuse for ignoring tasks related to the development of the productive forces in the exports of capital. They were born structurally tied to the financial oligarchy of developed countries, “globalized” as we now say. In this way, their character was established as consumer bour­ geoisie as they renounced the economic option of building a truly inte­ grated nation. They became a mere appendix of the core countries’ ruling classes and it is clear that their socio-economic position does not corre­ spond to an international division of labor. Capitalists in a developed country would not compromise their right to the exploitation of immedi­ ate labor.



imperialism and industrial colonialism25

The state that they built therefore remained incomplete, for the devel­ opment function was not organized and the provision of material prog­ ress was left in the hands of the international market. As production can only take place in the context of subordination to developed countries, the state is inevitably accorded a subsidiary function in the absence of the development function, namely, the guarantee that the link that makes accumulation possible will not be broken since this is a condition of eco­ nomic growth. Obtaining profits falls into direct conflict with any policy that seriously threatens that relation. This means that national expropriations of foreign capital which are rejected by the financial oligarchy and states of developed countries will normally mobilize the bourgeois opposition in underdeveloped coun­ tries. Local capitalists do not need to be involved in joint ventures with affected foreign investors to act politically against their own government since expropriations jeopardize their structural ties. It should be said that expropriations by themselves cannot fully serve any national purpose. They signify the appropriation of material resources by the nation but do not convey the appropriation of the knowledge that is objectified in such resources and much less the accumulated scientific ability to produce them. A dramatic example of this could be seen in Chile during the Popular Unity government of Salvador Allende. Expropriations formed a crucial element of his national program and were contested by the United States government by means of an “invisible blockade” that brought all of the necessary means and credits for production grinding to a halt. Industry and indeed most economic activity was severely dam­ aged, with the ensuing shortages of supply, inflation and so on. The politi­ cal activity of entrepreneurs, strongly financed by Washington, stopped the forward movement of change and their influence on the armed forces would do the rest (Figueroa, 1999). Industrial colonialism therefore contains the social and political fac­ tors necessary for its own reproduction, not only outside but also inside underdeveloped countries. It really surpasses the prior scheme of colonial possessions since external open military control, already losing its impor­ tance during commercial colonialism, is now practically unnecessary under normal conditions. Political democracy becomes possible, and if it turns out to become dangerous, imperialists can resort to supporting local armed forces to whose responsibility they leave the “dirty work.” If this scenario breaks down, they still have other methods at their disposal such as the promotion of wars between countries. Direct imperialist military intervention always remains an option and the region has come to know

26

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it very well. But political control over a country by means of permanent or even long term military occupation is no longer an inevitable necessity. The defense of democracy and peace provide the best excuse for reestab­ lishing friendly governments, something which imperialists are now in a position to do. Democracy is welcome, however, only to the extent that it does not endanger the imperialist relation. Industrial colonialism gets stronger as capitalist production in under­ developed countries grows, since technological dependence becomes deeper and increasingly more extended. The implications of this depen­ dency will be treated in greater detail in another chapter. Suffice to say here that the capitalists of underdeveloped countries build their own eco­ nomic and political strength, which is, at the local level, the strength of the system as a whole. A relatively strong capitalist class reduces the need for foreign direct intervention while a weak local bourgeoisie and capital­ ist production usually appear among the factors that accompany foreign direct interventions. Stronger local capitalist classes provide better and more adequate support for the reproduction of industrial colonialism. Since the means of violence and destruction are also the product of technological applications of science, their constant development tends to remain under the control of developed countries. Underdeveloped countries are generally denied the possibility of becoming a potential military danger, except to other countries that fall in the same category. True, an underdeveloped country could produce weapons of mass destruction and, therefore, the developed countries take every care to prevent them from doing so. But it is generally true that this is very diffi­ cult for them as they are unable to reach the scale and technological development of the military industry of developed countries. Permanent technological innovation and large-scale production are the means by which developed countries try to keep their monopoly on the means of violence, in addition to coercion and blackmail. This monopoly is inher­ ent to the imperialist system. Ideological penetration, something which feeds the local military establishment’s predisposition to act as an imperialist agent, should be added to material dependence. The need to gain access to modern military equipment as well as the dependence on all sorts of technical training makes the military of underdeveloped countries more vulnerable to ideological manipulation. Diplomacy oriented towards strengthening and widening the links with local institutions and organizations in under­ developed countries also plays an important role in the large range of activities designed to keep the imperialist system in good shape.



imperialism and industrial colonialism27

All of this notwithstanding, things are changing on a world scale and these changes will probably affect the workings of industrial colonialism, particularly with regard to the modes of political control over underdevel­ oped countries, at least for some of them. Imperialism and Nature So far, we have discussed some facets of imperialism as though the sce­ nario was free of any challenges from its natural environment. As it is well known, this is no longer possible. Capitalist production has given way to an acute conflict between nature and production, a conflict to which capitalism has no ready answer. Among the pressing threats posed by global warming are: 1) rising sea levels and the reduction of coastal spaces that affects tourism, infrastruc­ ture, small fisheries and promotes migrations; 2) destruction of ozone molecules and the ozone layer, thus weakening protection against ultraviolet radiation from the sun; 3) pollution and acid rain; 4) contamination and decrease of available freshwater caused by organic and inorganic chemical elements; 5) destruction of glaciers; 6) decreased agricultural yields due to droughts and floods; and 7) deforestation and its destructive impact on the habitat of countless species and defenses against erosion and floods. We will elaborate further on this point in the next chapter. These effects on climate are the product of ordinary emissions of car­ bon dioxide, methane and nitrous oxide produced by “ordinary” capitalist activity. Capitalism has also contributed to this problematic state of the environment by other means such as the unnecessary destruction of marine biodiversity by the use of irrational fishing methods, the erosion of lands by over-grazing, and the destruction of habitats (forests, man­ groves) through pollution as a result of wars. The contradiction between economic growth and resource depletion is not new but was not posed in Lenin’s exegesis of imperialism. At the beginning of the 1970s, the Club of Rome (an organization composed of scientists, entrepreneurs, managers, civil servants and heads of state) sponsored a study that attracted much attention throughout the world, published under the title Limits to Growth. Evaluating trends of popula­ tion, industrialization, pollution, food production and resource deple­ tion, the study, reviving Malthusian predictions, concluded that growth would come to a halt at some point within the next one hundred years. However, very shortly afterwards, in 1974, the Club adopted a more

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optimistic point of view, based on a supposedly more carefully con­ structed study, and decided that most of the factors mitigating against growth were within human control. No disaster was unavoidable and business as usual prevailed. At the threshold of the present century, the practical course of things would prove this approach to be flawed. In any case, the standard capitalist rationale would not pay much attention to this sort of warning, especially after the 1973–1974 oil shock had been overcome. The socially “neutral” standpoint of this kind of study would not help much. Blaming population growth, abstract indus­ trialization and calling humanity to do its task would set the social system of production free from any relevant responsibility. Profit-seeking figures are a far higher status in the capitalist agenda than environmental protection. James O’Connor (1991) tackled the issue from a Marxist perspective. He suggests a “second contradiction” which opposes capitalism and capital­ ist conditions of production, namely constant capital. The ensuing discus­ sion has produced some very relevant postulates to the understanding of the present situation. We are not in a position in this work to give those contributions the attention they deserve. Inspired by them as well as the broader Marxist tradition, we have arrived at the following propositions. The Earth is at the same time the most general object and objective condition for labor, and, hence, for the existence of mankind (Marx, 1990: 216–217). Through production, humans transform themselves and their environment, which they control. What distinguishes human beings from other species is not labor as activity. The earth is not labor’s objective con­ dition only for them. What is specific to human production is the inter­ vention of brain faculties that allow the understanding and control of nature in order to make use of it for humanity’s own purposes. Man’s will over nature is possible because, as Engels put it: “unlike the rest of living beings, we are able to know the laws of nature and adequately apply them” (Marx & Engels, 1985: 75). An “adequate application”, i.e., a really human application of knowledge, in turn demands a particular social condition, for under capitalism the driving force of production is profit and not human needs. Engels would say: “…to carry out this control some­ thing more than simple knowledge is necessary. A revolution that com­ pletely transforms the present mode of production and the prevailing social order is necessary”. (76) Reason cannot be understood to work independently of social relations. With the development of science, the knowledge of and control over nature skyrocketed, especially with the organization of scientific labor for



imperialism and industrial colonialism29

productive aims. While science did not emerge with the capitalist mode of production, it did for the first time place itself massively and systemati­ cally at the service of production in a system based on profit. By then, people could come to see nature as an object of private appropriation, a property alien to working people who had been set free of all possessions, except for their labor power. A condition for the exploitation of labor had in this way been fulfilled. Labor at the disposal of capital includes manual and mental faculties, immediate and scientific labor. In this way, nature and the human ability to understand and transform it are capitalized, for both are now subjugated to capitalist production and profit-making. Reason, as a productive faculty and nature as a condition of production are subsumed in capital. In this case, it is not the properly rational regulation of man and that of nature which orientates human activity, but rather the exploitation of labor in the search for surplus value. This is why human abilities can come to pose a threat to nature and as such, act against humanity itself. Under different conditions of production oriented to meeting human needs, science would seek the best possible interchange between human­ ity and nature. This is clearly not the case of science when employed for profit where damage to the environment is a collateral result, regardless of how outrageous it may be. Imperialism managed to worsen things con­ siderably since competition between nations constrained even further the possibilities of science as a means for an ecologically sustainable development. Indeed, it is precisely when attacks are waged against nature that new reasons arise for inter-imperialist conflicts and the plundering of underdeveloped countries. This proposition can be readily exemplified with the case of oil, one of the most universally utilized natural resources in present-day productive structures. On the one hand, oil is a good that can be found playing different roles in production: as an object of labor provided by nature, as a raw material, as an auxiliary material, and as part of the final product itself after being processed. On the other hand, it is the base for a large number of industries in providing fuel for automo­ biles, airplanes, diesel motors, furnaces and boilers; kerosene for lighting and heating; the manufacture of pesticides, herbicides and fertilizers; paraffin for the manufacture of light bulbs and tar paper, vaseline for oint­ ments and cosmetics; asphalt for road and wall surfaces; conditioning materials to wipe and varnish; artificial colorings and perfumes; aspirin, caffeine; plastics for construction, waterproof materials and covers; synthetic fibers; manufacture of gums, balls, preservatives, toothpaste,

30

chapter one

washing powder, toothbrushes, and a very long etcetera in which we can even find explosives. There is no doubt that oil is omnipresent in ordinary material life. The unplanned use of oil as a massive combustion of fuel energy is one of the principal causes of global warming and other humanly manufac­ tured disasters. It seems almost absurd, then, that economic growth relies so heavily on oil. Yet, oil is found gratis, as nature’s gift to capital that does not need to be produced, it is a highly energetic fluid, and is easy to use, store and transport. Alternate sources of energy such as solar, bio-mass, geo-thermal and wind power energies as well as hydroelectric and nuclear energies are all more costly and cannot easily compete with oil. The same is true for durable and renewable materials such as metals, glass, paper and wood as compared to petrochemical products. The capitalist prefer­ ence for oil is thus understandable, regardless of the cost to nature. At relatively low costs, oil opened new productive branches and allowed for the further development of others for about a century and a half. But oil is a finite, non-renewable resource and tends towards deple­ tion at some particular point. There is of course general awareness of this fact. US capitalism had been warned by M. Hubbert during the second half of the 1950s that oil would peak in that country by 1970, something which indeed happened, but nothing was done before or after this to reduce the importance of oil in the economy. The imperialist response to the absence of economical alternative energy sources is war and the establishment of political-military control over countries possessing significant reserves. Iraq was recently made a victim of this logic. The United States established military bases in Iraq with the territorial aim of gaining control over the world’s richest oil reserves and to ensure a privileged access to oil in the face of its European and Asian competitors. Latin America is witnessing a similar scenario even in areas where no natural resources are involved. Washington’s decision to establish seven military bases in Colombia, a decision supported by the local government, is intended to reinforce it as a domain for response to the emergence of hard-to-manipulate popular governments. These govern­ ments in turn arose from the failure of neoliberalism, the imperialist eco­ nomic strategy to deepen industrial colonialism. Bolivarian Venezuela under Chávez, the fourth largest oil supplier to the US, is a prime target. Bolivia, a country with large natural gas reserves, also ranks high on the imperialist agenda given the MAS government of Evo Morales. Obama’s policy on Honduras, which came to legitimate a coup d’État, made it clear



imperialism and industrial colonialism31

that the United States is not going to tolerate “unfriendly” governments in the region. The expression “the limits of reason,” used by Obama to justify his war policy demonstrates how he resorts to imperialist reason. Conclusion The imperialist system arose during a period when the development of capitalist relations in some countries gave rise to a division of labor that separated it into immediate and scientific labor. Meanwhile, the emergence of this same division was obstructed in other countries. The international system supposed a different organization of the capital relation in each one of its constituent poles as well as a distinctive struc­ ture and functionality of their respective states. The subordinated pole does not carry out scientific labor for the development and functioning of most of the productive forces that it uses and its state was pushed to assume a subsidiary role, i.e., the ensuring of economic links with devel­ oped countries. The local ruling classes in underdeveloped countries actively sup­ ported the introduction of imperialism and surrendered leadership to those who controlled material progress. The reproduction of this system of domination became their immediate interest since it makes it possible for them to exist and expand. Thus, imperialism super-exploits and expands thanks to the collaboration of subordinated ruling classes. The presence of strong, pro-imperialist feelings has proven essential for main­ taining this scheme of domination. On the one hand, it precludes the search for any deal with developed countries that is oriented towards advancing an internally generated development and relatively selfsustained accumulation. On the other hand, it creates fierce social and political opposition to national interest based governments that every now and then ensue from a generally weak democratic practice. The main mechanism of domination as far as underdeveloped coun­ tries are concerned is industrial colonialism. It serves to annex their pro­ duction to those who control the creation of material progress. In this sense, imperialism bases itself on a monopoly over scientific knowledge and its technological applications. At the other pole, underdeveloped countries remain incapable of self-expansion and they must rely on devel­ oped countries to make their industrial processes possible. They are dependent on parts, inputs, and technical advisory. In general, underde­ veloped countries are a captive market for the industrial production of developed countries.

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chapter one

Accumulation in underdeveloped countries carries with it an invest­ ment transfer every time that new goods and processes are demanded. A part of the internally created value promotes in this way, without any corresponding transaction, production and employment in developed countries. The latter countries produce more than their accumulation consumes. Underdeveloped countries in turn consume more than they produce for accumulation. The investment transfer is also a transfer of resources to expand local employment. Underdeveloped countries will thus tend to create a larger surplus-population. The economic working of industrially colonized countries is tied to a chain of imbalances that include investment transfers, balance of trade deficits, indebtedness, opening to foreign investment, profits and interest remittances, which makes them very vulnerable to crisis. This spontane­ ous regularity strengthens the predisposition of ruling classes to submit to political subordination. Material, technical and ideological dependency on the military establishment of developed countries completes the pic­ ture that makes underdeveloped states ready to act as political agencies of imperialism. The emergence of popular governments that democratic elections make possible and which social unrest demands leads the state into a deep and prolonged crisis that prevents any popular solution within the capitalist system. The imperialist oligarchy’s main interest lies in the markets of devel­ oped countries. It is here where the struggle for world hegemony is waged. Control over industrially colonized countries plays a supporting role in such disputes, but the fundamental weapon that developed countries manage in order to maintain global domination is the state development function. The better this function is performed by a developed country, the stronger the position it may achieve in international competition. This does not preclude the important role that violence plays in the strug­ gle for world hegemony. While the exercise of violence and destruction is fundamentally oriented toward underdeveloped countries, it cannot prevent other developed countries from winning economic advantages that work against the economic position of the militarily dominant coun­ try. Nor does war guarantee a stable control over dominated countries. This notwithstanding, war has always played a crucial role in imperial­ ist dominance and this is no different today. The current world crisis is the result of two types of contradictions: those internal to capitalist produc­ tion, and those that oppose capitalist production and nature. The capital­ ist way out of this crisis is linked to an industrial redesign of production. Knowledge and scientific labor have not yet produced the basis for an



imperialism and industrial colonialism33

alternate economic path. Control over all remaining ordinary resources becomes crucial and should in principle become even more so as “busi­ ness as usual” proceeds. Certainly, “business as usual” is no longer possible for capitalism as an expanding production system. Capitalists will how­ ever continue to work with the resources at hand or with those that their state is supposed to provide them, whether war is necessary or not.

CHAPTER TWO

IMPERIALISM AT THE THIRD STAGE We will attempt here to describe the process that imperialism has undergone from the 1970s to date. We focus on the United States which is both the main imperialist country and the one most directly engaged in Latin America. The 1970s witnessed the transition from exhausted Keynesian policies to a globalization based on liberal principles, a new stage which for that reason would be called “neoliberal.” An imperialist country can never be fully “liberal” for it is oriented towards economic and political dominance. But the old doctrine would lend a tremendous service to the evolving imperialist strategy in Latin American underdeveloped countries. Every important period in the history of capitalism begins and ends with a crisis. The present chapter will therefore be organized around that course of things since we share the presumption that imperialism’s third stage has come to an end. The economic strategy of the United States in confronting the collapse of Keynesianism that began at the end of the 1960s will be discussed and we will explore how it ended up leading to new and deeper convulsions. First, I will begin with a summary of the theoretical approach to crisis that has guided our arguments. Key Aspects of Crisis Crises generally take place because profits fall thereby discouraging investment. One of the principal theses of Marxism is that there is an inherent tendency of the rate of profit to fall in the course of capitalist production. As such, this tendency accounts for the historical character of capitalism, but it does not explain well the periodic collapses of production, however deep they may be, nor the subsequent recovery of profit and renewed economic activity. The fall of profit as a tendency of capitalism must therefore be distinguished from its periodic tendency for temporary slumps. The specific temporary downward trends that we are concerned with here are not those that can be easily overcome by state administrative measures and the mobilization of some corrective, counteracting forces,

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chapter two

but rather those that involve the class relations of society and which mark a relevant point in history. The explanation of those, as we see it, includes the following theoretical moments: a) the rate of profit falls because surplus value drops or because surplus value cannot increase beyond the point at which the rate of profit decreases; b) in either case, the fall occurs because the economic position of labor relative to capital has improved, weakening capital’s ability to extract surplus value; c) to overcome the ensuing crisis, it is therefore necessary that the prevailing class correlation be modified.  he change in the capital-labor relation is worked out in three compleT mentary spheres: 1) the spontaneous action of the crisis creates unemployment, intensifies competition among workers, and leads to decreased wages; 2) state action is oriented to augmenting the weakness of labor, at least until profit has recovered; and 3) since labor becomes stronger in the context of a given technical relation of production, the consolidation of new levels of the exploitation of labor, by means of higher labor intensity and productivity, demands a new technical mode of producing, which in turn calls for updated state development functions. The crisis is consequently followed by a new wave of technological innovations along with the devaluation of inadequate industrial methods or their displacement to underdeveloped countries. The Great Depression of the 1930s included all of these processes: a) unemployment skyrocketed, poverty and even famine ravaged the country as misery became generalized; b) a massive destruction of accumulated capitals spread by World War II; c) a more efficient use of science and its productive applications which gave rise to a technical redesign of industry, extending the exploitation of existing resources such as oil, steel and electricity while pushing international communications to a new level; c) new forms of the organization of labor, notably Fordism, became consolidated; d) the transfer of some obsolescent industries to underdeveloped countries; e) repression of the labor movement, which continued after the war along with concessions that would pave the way to a new social deal on the basis of which the labor movement would initiate its recovery.



imperialism at the third stage37 The “Globalization” Strategy

The rate of profit of non-financial corporations in the US fell steadily during the 1960s. It averaged 8.3% during the 1961–1965 period, declined to 7.7% for 1966–70, and fell to 5.3% by 1970 (Mandel, 1980: 29). Economic recession broke out in 1967–68 and again in 1974–75, and in these cases there was no easy recovery for profit. An end to prosperity was by then affecting all developed countries. For West Germany, the annual growth rates for the years 1950–73 was 5.9% and this fell to 1.7% for the 1973–84 period. In Japan, the corresponding figures were 9.4% down to 3.8%, while for the US the decline was from 3.7% to 2.3% (Maddison, 1988). Labor productivity in the US non-farming business sector was also declining from 2.8% in 1947–1973 to 1.1% in 1973–1979 (BEA, 2009b). The policies applied in order to confront this crisis would depart from the earlier trajectory and this partially helps explain the specific course of events that took place during the third stage of imperialism. The strategy that was adopted and eventually dubbed “globalization” (though to be more precise we should say “neoliberal globalization”) was designed to cover three basic lines of action: a) labor flexibilization; b) liberalization; and c) financialization. These three component parts demanded greater deregulation and an active retreat of the state’s direct intervention within key areas of the economy. By “active retreat,” we mean to emphasize the state’s own reorganization as an economic and political agent. We will review the course of this strategy across two historical moments, namely, from the 1970s to the middle of the 1990s, and from the mid-1990s to the present. Labor flexibility became the key element of the shifting strategy. It included wage flexibility (greater empowerment of management to fix wage rates for different categories of employees), occupational flexibility (number of workers, freedom to introduce or define shifts), functional flexibility (mobility in the labor process), and organizational flexibility (outsourcing). Together, these measures of labor flexibility were designed to put an end to the old and now problematic social “contract” that prevailed during Keynesianism. Strong trade unions made it difficult for wages to be decreased and their demands for full employment hindered the introduction of innovations and the growth of productivity. The deep recession of 1974–1975 would hardly weaken the labor movement. Unemployment rose from 4.9% in 1973 to 8.5% in 1975 (BLS, 2009) and average weekly earnings fell from $331.59 in 1973 to $305.16 in 1975 (figures in 1982 constant dollars).

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chapter two

While the crisis was beginning to shift the advantage towards capital, this alone would not suffice. In describing the general situation of the labor movement, David Moberg pointed out: The working class has been on the defensive for most of the 1970s. At the beginning of the 1980s, it is hardly able even to perform an acceptable defense. Entrepreneurs almost everywhere are demanding that unions accept lower earnings, lesser protection of living standards, benefits reductions and a drastic revision of the limited control on labor conditions (Moberg, 1984: 63).

Relations between the Democratic Party and the labor movement had deteriorated but it would be Ronald Reagan who manages to fully satisfy the entrepreneurial demands for comprehensive labor flexibilization. The repression of PATCO (the air traffic controllers union) in August 1981 during the first year of this government was a clear signal of the Reagan Administration’s attitude toward the labor movement. From then on, organized labor’s debilitation would only accelerate. In 1970, 26% of US workers were affiliated with a union while by 1990, unionized workers accounted for only 16% of the total. While these figures are disputed by some, it was abundantly clear that power had shifted to the side of management during this period. Unemployment would remain at high levels during the 1980s, peaking in 1982 (9.7%) and 1983 (9.6%), creating the structural conditions for new aggressions against labor. Campaigns against unions multiplied, employers were now firing workers illegally and reinstating some of them only with lower pay. Managers could now replace workers on strike, collective bargaining was restructured and practically abandoned, lifetime job security tended towards virtual extinction, and temporary work was extended. Subcontracting and the hiring of casuals became common practice as the state cut back job training programs for the unemployed and moved more generally to dismantle the social safety net. The deregulation of labor relations took place in spite of existing legal arrangements under the auspices of labor authorities imposed by Reagan. The situation was the pure and simple product of the exercise of political power which systematically deactivated the legally recognized concessions that had been previously obtained by the labor movement. In summary, a new correlation of forces between capital and labor had been struck. As one would expect, average real weekly wages fell throughout the 1980s from $298.87 dollars in 1979 to $267.27 in 1989 and would continue to fall until 1995 where it reached $258.43 (in 1982 constant dollars). This implied value transfers from labor to capital and a deepening of the unequal income distribution. The reduction of wages relative to surplus



imperialism at the third stage39

value (relative wages) was one of the most important methods of extracting new profits. It was likewise clear that an increasingly weakened labor movement was in no position to oppose the intensification of labor or the extension of the working-day. As far as most workers are concerned, the so-called welfare state came to an end during this period. This type of state had represented the most amicable manner of treatment that capitalism had ever been able to offer the US labor movement. Out of the two main methods used to deal with workers, concession had prevailed over repression. Formerly, workers enjoyed relative job security, steadily improving earnings, and access to education, health care and housing, all of which created generally positive expectations about their quality of life. The Keynesian emphasis on consumption ultimately had facilitated this development and just as the Great Depression came to discredit liberal policies, the crisis that began at the end of the 1960s would come to disqualify Keynesianism. By 1970, systemic liberalization was under way. Ever since the Bretton Woods Agreement of 1944, the dollar had been the only currency directly convertible into gold. The fixed parity ($35 an ounce) had been sustained for a long period independently of developments in the “real economy.” Since the US dollar was vastly overrated, Washington took advantage in terms of its purchases abroad (including gold purchases) and this facilitated the international expansion of US-based corporations. This same industrial expansion abroad brought along with it additional problems with respect to the balance of payments. Early in the 1960s, the government introduced new measures oriented towards discouraging investments and loans abroad. This meant that the international monetary system created in the 1940s was now effectively putting a damper on the growth of transnational corporations. Non-financial corporations worked out their own path by relying on affiliates of US banks operating in foreign countries. According to Lichtensztejn and Bauer: These affiliates were in a position to make international loans to US corporations overcoming in this way internal credit restrictions imposed by their government to mitigate the effect of external loans on the balance of payments, already deficit running as a result of the Viet Nam War. Although in 1969, the USA imposed a minimum reserve for credits taken in international markets, it did not prevent these credits from continually expanding and gradually provoking a substantial alteration of interest rates and of reserve distribution between countries (1987: 41–42).

Speculators now found themselves with a larger operational field for business, especially through imports. External debt grew and was further aggravated by the Viet Nam War. Expectations of devaluation led to

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currency speculation and to actively postponing repatriations of profit. Regulations on currency transactions now became useless and were lifted by 1970 in the US, West Germany, Canada and Switzerland. This paved the way to a rupture with the foreign exchange system that would follow soon after the lifting of restrictions was announced by President Richard M. Nixon on August 15, 1971. Corporations in all other countries would also do their part. As HansPeter and Schumann put it: At the same time, all those countries that were still bound by regulations withstood heavy pressures from their national enterprises. Their corporations complained that they were banned from access to foreign capital at favorable interest rates. In 1979, the UK lifted the remaining restrictions. Japan followed a year after” (1999: 64).

Thus, during the 1970s, the barriers to large international capital growth fell one after another. As for the international trade of goods and services, the US adopted free trade as a motto for directing its external relations. The assumption was that corporations involved in international trade are more productive, create more jobs and pay better wages and for these reasons this would allow for a better provision of goods and services to domestic industry. This policy would damage those industries lacking competitive strength, but this was seen as a temporary situation since competition  would push industries in this situation to innovate and improve their market positions. Additionally, keeping the dollar exchange rate high would reinforce competition as stimulus for domestic industries to innovate. In 1979, the Buy American Act of 1933 that had been designed to enhance consumption of internally produced goods was repealed. It was replaced by the Trade Agreement Act that decisively expanded the range of products that could be purchased abroad. In addition, the US government was now strongly pressuring for the elimination of barriers to investment in other countries. This would allow US-based corporations to expand internationally and avail themselves of cost advantages that abounded in lower wage countries. To that extent, Washington’s strategy also sought to create conditions for US corporations to enable higher profits on the basis of higher surplus value rates. The foreign production by affiliates that was expected to be consumed in the US domestic market would improve the competitive position of corporations, reduce costs and put a check on inflation.



imperialism at the third stage41

Up to this point, the overall strategy seemed to rest heavily on two conditions: increased levels of labor exploitation and the liberalization of market forces. Yet, both conditions together were insufficient to confront the crisis. In reality, an active state development function was also necessary. This needed to be aimed at pursuing technological development and spreading it through the economy in order to further enhance existing productive forces, which in turn could guarantee productivity growth and stabilize higher levels of labor exploitation. This is exactly what the state set out to do. The most significant indicator of state involvement in development can be found in its investment in science and technology. Total Research and Development (R&D) expenditures remained relatively stable as a percentage of GDP between 1970 (2.7%) and 1988 (2.6%). In 1977, 50.6% of these investment totals came from public funding while 46.8% originated in the private sector, with the remaining 3.6% coming from other sources. In 1988, this distribution changed. Public expenditure was now at 48% and private investment reached 47.9%, leaving other sources at 4.1%. In short, the state was beginning to cut back on its contribution to R&D in relative terms while the private sector was increasing its share. Yet, the origin of funding is not as significant as the shifting distribution of expenditures according to where it was aimed. It is there that the data proves to be more impressive:

Table 2.1. Objectives of R&D Funding (%). Objectives

1976

1982

I. Earth, sea and space II. Agriculture III. Industrial Development IV. Energy V. Transport and Communication VI. Education Services VII. Socio-economic Services VIII. Environment IX. Advance of Knowledge X. Other XI. Defense

14.8 1.9 1.5 9.6 2.9 0.5 1.1 1.3 3.8 0.6 49.6

6.7 2.6 0.4 6.7 2.3 0.3 0.9 0.5 3.9 – 64.3

Source: UNESCO (1980; 1990).

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Several relevant issues are highlighted by this data. First, the expenditure in agricultural research increased, linking it to the productivity growth in this activity that remained one of the best within the economy as a whole. Second, the R&D resources aimed at industrial development fell in 1982 to a little more than one-fourth of that which was being allocated in 1976. The decline was not only in percentage terms but also in absolute terms. In 1982, less than a half of the funds allocated in 1976 was allocated for this purpose. Indeed, research funding for industry would not recover its relative levels of 1976 during the three succeeding presidential administrations that followed Reagan. Productivity in the manufacturing sector grew by just 1.8% during the 1987–1990 period and climbed to 3.5% in 1990–1995, reflecting increases that would concentrate on information technologies (IT) and some services. Third, research on essential services was cut back, reflecting the overall state retreat from important areas of social life. The same was true for the environment. Fourth, most of what was cut back from research for economic development was oriented to defense activities. Clearly, concern for defense does not interfere with the liberal doctrine of imperialist countries, but the issue contains a highly relevant implication. Neoliberals had consciously calculated that the struggle for world hegemony would be more a matter of political and military force than one of economic competition. Their emphasis on the arms race in the context of Cold War and later the Gulf War and various other military campaigns since further supports arguments in this direction. The mere reproduction of the material forces of production in the United States had been neglected well before the Reagan Administration. Social advancement of constant capital had been steadily reduced in earlier decades, decisively damaging the overall conditions of production. As P.G. Peterson (1988) points out in an excellent work, real dedicated investment in roads, bridges, and public transportation had by 1988 sunk by 75% over the preceding decades and that a large part of infrastructure was deteriorating much more quickly than it was being replaced. Peterson shows that the US did not have a new generation of technologies available for infrastructure, such as high-speed trains and underwater tunnels, precisely because it had decided not to pay for it. This same logic held true in terms of social advancements for variable capital. The situation in education had already become the butt of commentary worldwide. In Mexico, one 1991 commentator in the journal El Financiero put it this way:



imperialism at the third stage43 It goes without saying with regard to other chronic problems which Bush’s government has opted to evade, that the serious worsening of the public education system is now delivering practically illiterate generations. The result is that the US labor force is unable to compete with better qualified European and Japanese labor forces” (1991: 20).

In turn, other developed countries in Europe and Asia did not relax their efforts to pursue economic development during the 1980s. This is shown by their investments in R&D, see table 2.2 below. Between 1973–1984, the increases in productivity of these countries were as follows: West Germany 3.0%; France 3.4%; Japan 3.2%; Great Britain 2.4%, all of which were far below the gains during the period 1950–73. In the US, the rate of productivity growth was the lowest: only 1% for the same 1973–1984 period. The simple fact that the other countries allocated a larger proportion of investment to R&D contributed to their economic development and coincided with their higher productivity performance. It can be seen that the free-trade policies being adopted by Washington were not being backed by a state development function that such policies Table 2.2. R&D Funding in Selected European Countries and Japan (% GDP). Objectives*

W. Germany (1987)

France (1980)

G. Britain (1986)

Japan (1986)

I. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII.

7.1 2.2 12.8 7.2 0.6 – 2.8 2.4 3.1 46.9 1.7 13.2

9.2 3.9 9.3 7.5 2.7 – 4.2 1.3 1.1 22.2 1.8 36.5

4.4 4.3 9.7 4.1 – – 4.1 2.8 1.1 20.0 0.3 49.2

12.8 20.1 10.8 32.1 2.5 – 4.6 1.3 2.5 3.3 8.0 8.0

Source UNESCO (1990). *Objectives follow the same order as in Table 2.1.

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demanded. The US failed to embark on a coherent effort to improve its productive forces in order to effectively confront international competition, even as most of its immediate competitors did. The subsequent changes in the relative position of nations within the world market would eventually follow this new distribution of commitment to technological innovation. In 1977, the US was by far the principal supplier of goods and services on a world scale. Its exports amounted to 161% of those of West Germany, its closest competitor. In 1987, these two countries had exchanged positions. US sales abroad were equivalent to only 86% of the exports of West Germany which had managed to triple its exports. Yet, Japan’s advance in relative terms was even more impressive. By 1987, its exports grew by 372% of what it was in 1977. This re-arrangement of economic world hegemony can be better appreciated in the following table. Here, we can see the changing standings in international trade of a group of seven countries (G-7) across that period, see table 2.3 below. By the 1980s, it became clear that the flawed US liberal strategy concerning international competition would bring on new problems. The balance of trade began to deteriorate and would continue to do so from that point forward. Foreign production was taking hold of the US domestic market, damaging its industrial base. The economy was at the same time becoming ever more dependent upon external financing. At the same time, however, we must recognize that not every industry  was equally affected by this liberal strategy. On the one hand, Table 2.3. Exports and Imports of G-7, 1977 and 1987 (%’s). 1977

1987

Country

Exports

Imports

Exports

Imports

USA Canada Japan France (West) Germany Italy G. Britain

13.9 3.6 6.0 6.4 8.7

11.9 4.2 7.4 5.9 10.7

10.8 4.2 9.8 6.3 12.5

17.5 3.8 6.2 6.5 9.4

4.4 5.6

4.3 5.4

5.0 5.6

5.2 6.4

Source: IMF (1984; 1989).



imperialism at the third stage45

accumulated scientific labor and technological experience makes it quite difficult for some enterprises to be quickly displaced, even in the context of stiff state cutbacks. On the other hand, the US government was efficient in supporting innovation within some areas. The country remained the leader in information technologies (IT) which were expected to push productivity throughout the rest of the economy. Indeed, this would be the foundation of the 1990’s “new economy” that was touted prominently by its backers. Their impact, however, would prove to remain concentrated predominantly on specific services and other technologically advanced industries. As for the reaction of US administrations to the country’s declining position in international trade during the 1980s, protectionism (especially in agriculture) and a strong posture in commercial disputes (in particular with Japan) were widely observed. In addition to this, attention should be drawn to a new policy towards Latin America regarding free trade. On 27 June 1990, George Bush announced his program “The Enterprise for the Americas Initiative” whose long term aim was the creation of a hemisphere-wide free trade zone (Wooley and Peters, 1990). The basic assumption of this program was that “protectionism stifles progress and that free trade breeds prosperity.” Bush stated that the “three pillars” of the initiative were to consist of trade, investment and debt. As for free trade, the US government would actively seek to extend tariff reductions and promised to do so during the Uruguay round of world trade talks. They would enter into free trade agreements with other countries that had already stated their commitments to the aim of commercial liberalization and especially pursue bilateral agreements with countries not yet involved in free trade agreements. While the US was certainly ready for agreements of this kind, Latin American countries were in no real position to compete and so the elimination or reduction of tariffs would do nothing to improve their relative advantages. Yet, the key component of Bush’s program was that which he called “investment.” He essentially argued that the competition for capital is fierce and that the key to increased investment was to be competitive and to turn around the conditions that have discouraged both foreign and domestic investment. In this, he demanded an opening to foreign investment and privatization. The chronic need for foreign investment on the part of Latin American countries would lead them into a “fierce” bid to remove all barriers to receiving capital from abroad. To reinforce this dynamic, certain incentives would also be advanced. Bush proceeded to offer a new lending program so that nations would take significant steps

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to remove “impediments” to international investment. The World Bank could also contribute to this effort. Bush proposed the creation of a new fund for the Americas to be administered by the IDB which would provide up to US$300 million a year in grants to reward market-oriented investment reforms in favor of privatization. The third “pillar” also pointed directly to one of the weaknesses of the region. The 1980s had witnessed the worst Latin American “debt crisis” in decades and Bush seized upon it as a new opportunity to mount pressure. He proposed that the IDB add its efforts and resources to those of the International Monetary Fund and the World Bank in order to support commercial bank debt relief for Latin America and the Caribbean. Such funds should be directly linked to “economic reform.” He further manifested a rather odd concern for the hemisphere’s environmental wellbeing and announced the promotion of debt-for-nature swaps and other measures. The so-called “socialist bloc” led by the USSR had by then been demolished and the time had come for the US to turn its gaze towards its “backyard.” Apparently, the main objective was a freer and more spontaneous operation of industrial colonialism, but the real aims for the US were to deepen its penetration in Latin America and strengthen its economic ties with the region. This would undoubtedly help the US to maintain its global economic hegemony. By opening to external investment while remaining constrained by “free-trade agreements,” foreign investment in the region along with privatization would go a long way towards addressing these hegemonic aims. Since the region offers cost saving facilities, most especially cheap labor power, the expansion of US-based transnational corporations would improve their international competitive position. This in turn would allow them not only to advance in the global market but also, and perhaps above all, to recover lost ground in their own domestic market. The outward oriented growth that the region was now undertaking (from the second half of the 1970s in some countries) and which formed the core of the “structural reform” that it was being pushed to carry out, fit perfectly with Washington’s perceived strategic interests. Financialization, by which we mean here the rise to supremacy of money capital (banks, stock exchange, insurances) over industrial capital, is at the same time a condition and result of the US globalization strategy. In this sense, financialization represents the consolidation of a new correlation of forces inside the financial oligarchy where industrial capital loses the pole position that it held during the previous stage and hands it



imperialism at the third stage47

over to money capital. This implies that acquiring interest becomes more relevant than achieving productive profits and accrued income is mostly captured by the financial sector rather than by the “real economy.” Speculation has been an omnipresent phenomenon throughout the third stage of imperialism. As such, it is a practice arising from the autonomy that money capital can enjoy. The money capitalist sector certainly did support some of the key changes that inaugurated the new period, such as the new exchange system created by the Nixon Administration. But since most of the effects of speculation on production are destructive, speculative practices are neither a condition nor a sought-after result of “globalization.” As we have already suggested, the facilities offered to money capital were key to the transnational corporate expansion of the 1960s as well as to the conception of the new world order that followed in the wake of the crisis of Keynesianism as favored by the monopolies. Working through their affiliates, banks broke through the prevailing regulations and made it possible for enterprises to expand abroad. The cross-border expansion of non-financial corporations in turn created new demand for financial services abroad. As improved information and telecommunications technologies helped the financial corporations extend their presence across the globe, these corporations were instrumental in defining the path of technological change that would in turn become concentrated in information technologies and services. Global financial services skyrocketed in volume as their weight in international transactions grew relative to goods trade. Interest clearly became a more important source of income than productive profits. Yet, there was still another aspect to financialization as far as the economic operation of the economy was concerned. Since the globalization strategy implied a systematic current account deficit, it led to an endemic dependency on foreign surpluses in order to finance the domestic shortfall in payments. For a country whose currency is the standard for all foreign currencies, this should not have posed such a big problem. This was especially true if current deficits are considered a temporary evil that must stop after the adjustment of domestic industry has taken place. The dollar’s advantageous position allowed the US to contract debt in its own currency, which is precisely what it did by a variety of means. Foreign governments and the private sector retained access to many kinds of liabilities and assets, both public and private, and all of them remained dollar denominated. This inevitably implied a degree of de-nationalization in order to perfect the evolving order in view of the

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larger economic strategy. A large part of the required resources would come first from Japan and then later from China. These nations were essentially compelled to deposit their surpluses in the country issuing the major world currency since they needed dollars for their own international transactions. At the same time, investing in the United States would help them protect their own currencies from any future devaluation. The end result was their coalescence with the US and the development of common economic interests. Globalization in summary seems to have been the result of a strategy of large private capital that sought to put an end to an over-regulated economic field so that it could acquire the freedom it required for continued expansion. The glorification of markets while satirizing the state shaped the ideological assumptions being trumpeted about mankind, freedom, wellbeing and the role of competition in development. All of these ideas that spread around the globe responded to the practices and requirements of large private capital whose interests were now in the commanding role. This proposition does not however entirely define the agents of social transformation in recent decades. Liberal ideology also predominated during the 19th century and at the beginning of the 20th. Rather, this ideology became updated with a view to satisfying the historically specific demands of large capital. Liberal principles were not intended to provide rationality to an ascending bourgeois world as in the past, but instead to legitimize a counter-offensive by large-scale capital on a world scale. This counter-offensive, in turn, shaped the capitalist management of the world crisis that started in the second half of the 1960s. Private monopolies would recover their former positions in the directing society while actively carrying out the reorganization of the larger economic process. This is the real content of the process that has been given the unsuitable but convenient label of “globalization.” By the same token, the financial oligarchy found in Lenin’s approach was its own apparent social and political agent. Revisiting the process from our perspective, the conclusion is that money capital within the financial oligarchy would come to commandeer the globalization strategy. The world crisis of the 1930s and the concomitant productive, commercial and financial disorder that came along with it all worked to discredit liberal ideas and weaken the ideological position of large private capital and its ruling legitimacy. The state, in turn, reinforced its authority as a result of wars and then buoyed itself anew upon the dynamic activities contained in reconstruction tasks.



imperialism at the third stage49

The consolidation of the USSR and, therefore, the existence of an alternative to private capital were contributory factors to the generalization of concessions to workers and led to the social arrangement that would characterize post-World War II capitalism. The theoretical approach put forward by Keynes with its emphasis on demand and consumption would provide a suitable ideology for the new pattern of capital accumulation. The crisis that unfolded towards the end of the 1960s heralded the Keynesian period depletion. It was the Keynesian paradigm that collapsed at the time as large private capital prepared to withdraw its concessions and dismantle the complicated regulating system that prevailed. From 1995 Forward The economic policy regarding the creation of technological progress remained almost unchanged in subsequent years. Research within industrial technology was assigned only 0.2% of total R&D expenditure in 1990, 0.3% in 1991–1994, and about 0.6% in 1995–2000 when it reached just over one-third of its 1976 share. Energy continued to fall, from 4.5% in 1991 to 1.5% of the total in 2000. Although investment for research in defense steadily reduced its share to 53.2% in 2000, it remained over the 1976 level in relative terms. Research on health largely benefited from this new distribution of the R&D investment, reaching 20.9% of the total in 2000 (RICYT, 2009). For its part, labor productivity evolved in a rather anemic fashion. In 1995, it was at 0%; increasing to 2.5% in 1996, 1.5% in 1997, 2.0% in 1998, 2.5% in 1999, and 2.3% in the year 2000. Information technology was the leading sector that made the largest positive contribution to productivity changes because of both its impact on computer related business and on the rest of the economy. This can be better appreciated by referring to the following comparison: whereas one hour labor product in the whole manufacturing sector grew by 45% between 1990 and 2000, it increased by 426% in computer and electronic products (Houseman, 2006). Investment information technology (IT) grew very quickly and was supported by speculation. The way in which these technologies affected productivity was diverse and included a broad array of activities ranging from product design to marketing (Stiroh, 2002) and they could even have an impact on labor organization (Lynch, 2007). For most sectors, however, these technologies did not modify the direct relation between labor and the means of production, except in those cases where they assisted in

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the introduction of automation or robotics. All of this is to say that for those industries, IT does not account for an advance of productive forces. The large difference between productivity growth in IT and associated industries as compared with the rest of industries seems better explained by the concentration of technological progress in some sectors. Two underlying assumptions have supported the neoliberal management of the economy. The first certainly had to do with competitive advantages and the corresponding specialization. As of 2007, this was still a key issue for the government as can be read in that year’s Economic Report of the President: “The vast economic benefit from trade liberalization for services stems in part from our competitive advantages in services (…) When we trade our lower costs services for their lower costs goods, we and our trading partners gain from trade” (ERP, 2007: 171–173). The second assumption was that services enhanced by IT and related technologies were modeling society’s present and future. It was specialization in services that was to now preserve the leading position of the US on a world scale. The US retreat regarding the boost of productive forces development continued to create the opportunity for other countries to gain better positions in international markets. On the one hand, it transferred the production of internally necessary goods and employment abroad. On the other, it meant that investment from foreign countries with surpluses would seek to not damage their capacity to export. This meant that investment would generally not be directed to develop competing industries in the US. The tendency for the balance of trade to decline became unstoppable. From 1990–2000, the US trade deficit increased by a factor of 4.7 from US$80,864,000,000 to US$379,835,000,000. The surplus in the balance of services, which was US$30,173,000,000 in 1990, would reach US$74,855,000,000 in 2000 but this could not do much to alleviate the impact of a goods deficit of US$454,690,000,000 (BEA 2009a). Needless to say, the need for foreign financing grew at a corresponding rate. US economic growth was by then displaying a long term downwards tendency (Palley, 2007). The GDP grew 3.3% in 1992, 4.0% in 1994, 2.5% in 1995 and to a slightly higher than 4% rate between 1996 and 2000, although it fell from 4.5% to 3.7% between 1999 and 2000. The attempt to transfer income from labor to capital by means of relative wage reduction should nevertheless be considered successful over this period. Income distribution consistently deteriorated since the 1980s. In 1980, the lowest quintile of income earners obtained 5.3% of total income while the highest took home 41.1%. In 2007, the former now brought home only 4.0% while the



imperialism at the third stage51

latter now netted 48.5%. The richest 5% of the population raised its share from 14.6% to 21.8% during the same period. It can be observed that this trend was constrained in certain periods such as between 1994 and 2000 when the lowest quintile share improved slightly from 4.1% to 4.3% (US Census Bureau, 2009). A similar trend was registered for the overall share of wages. According to estimates by Buchele and Cristiansen, the labor share in total income that was tantamount to 71% at the beginning of the 1970s had fallen by 10 percentage points by 2005. But this was not a linear downward trend. It deviated, for example, in 1995 when the average weekly earnings at US$182 went up in constant dollars to US$259.38 in 1996; up again to US$265.22 in 1997; to US$271.87 in 1998; to US$274.64 in 1999 and slightly higher to US$275.62 in 2000 (LRA, 2009). In 1997, the labor cost unit in the nonfinancial sector’s gross real value added started to rise steadily until 2001, while the profit unit fell similarly. Productivity stopped growing faster than wages as the inverse relation was built up. The Commission for Labor Cooperation (CCL), created by the three members of the North American Free Trade Agreement (United States, Canada and Mexico) stated: “In turn, real wages recovered: they increased slightly more rapidly than productivity” (CCL, 2003: 156), this in spite of the fact that productivity continued to rise after 1996. Due to the fact that the largest productivity gains only favored the most technologically advanced sectors, the rate of unemployment started to retreat. In January 1994, it was at 6.6% and by the same month of 2000, it had fallen to 4% and in the last trimester of the same year, it was at 3.9% (BLS, 2009). In other words, regardless of labor’s weakness in terms of organization, its objective position in terms of employment levels improved. This was the main reason why the mechanism that allowed the nonfinancial sector to obtain profits from the distribution of income would stop working. One of the pillars of the neoliberal strategy was effectively collapsing. The context for the rate of profit to begin to fall had now been built. Dumenil and Levy (2004) using a methodology of their own determined that this fall took place from 1997–1998 for nonfinancial corporations. The Bureau of Economic Analysis, in turn, registered a fall of the total mass of profit of those corporations from US$544.1 billion to US$487.5 billion between 1998 and 2000. This is a much more sensitive indicator for capitalist corporations. In general, if the mass of profit falls, the rate will fall, unless the position of labor is seriously degraded, something that did not in fact happen during the second half of the 1990s.

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Thus, we can see that all of the basic conditions for economic crisis were operating and that crisis soon would break out. Private gross domestic investment reduced its rate of growth from 12.4% in 1997 to 5.7%. In 2000, it slumped to -2.6%. Foreign direct investment also collapsed in 2002. The GDP grew by just 0.8% in 2001 and 1.6% in 2002. Unemployment increased, soon reaching 5.7% in 2007. The crisis was now beginning to unfold. A durable solution to this economic convulsion would have demanded a profound transformation of the technical mode of producing with an eye to obtaining internally-generated increases in productivity, consolidating high levels of unemployment and improving the economy’s competitive position within the international market. However, the government opted for an intensification of its globalization strategy, stressing family and enterprise indebtedness whereby it expected to enhance the domestic market. In other words, it settled on future value creation to pursue economic growth. Interest rates would be down to near-zero. This in turn was the perfect context for a new step forward in financialization and the growth of financial capital which was ready to extend its reach on the basis of new financial instruments. New advances in deregulation would help financial capital to further expand and strengthen its autonomy. Speculation was given a new freedom to proliferate and in the short term, there were not many readily available alternatives. The government had relaxed the state development function and it did not have the means to boost a new wave of technological change. Moreover, it lacked the necessary ideological basis to do anything else. The results are now well known. The rate of labor productivity went from 2.8% in 2002–2004 to 1.4% in 2005, to 0.9% in 2006, slightly recovering in 2007 (1.3%) (OECD, 2009). Unemployment fell to 4.5% in 2006 and the workers improved their share in income. Their participation in national income went from 63.9% to 64.4% from 2006 to 2007 and even though it did not reach its 2001 level, it tended to improve. The balance of trade duplicated its deficit between 2000 and 2006. Oil prices skyrocketed, stimulated in part by speculation, while China’s export prices increased between 2006 and 2007 as a result of changes in domestic wages and a certain valuation of the Yuan. The US domestic fixed private investment, which was only able to grow 1.9% in 2006, collapsed in 2007 (-3.1%). A new and tougher series of economic convulsions now served as a cruel reminder that the deepest economic difficulties had still not been dealt with.



imperialism at the third stage53

At first, the neoliberal approach to the 2000–2002 crisis seemed to have worked. But it soon became clear that it had broadened the scope for fictitious capital and prices. Once the difficulties faced by nonfinancial capital crumbled the expectations of future income, the US Government abandoned its low interest rate policy with a view to preventing inflation from rocketing and the artificially created economic environment fell to pieces at its weakest link, the subprime mortgage loans. Capital and Nature There has been a huge amount of research reporting on the impact of torrential rains and floods that disrupted the ordinary life of large cities for hours, or victimized thousands of people who become either homeless, sickened or die. Cold spells that kill tens of thousands of animals, forest fires that destroy thousands of wildlife acres, the extension of oxygen poor areas, the displacement of species from their natural environment, the displacement of coastal human communities, and endless other disasters confirm the ecological dilemmas through these everyday events. All of these were the conclusions reached by the Intergovernmental Panel on Climate Change (IPCC, 2007). The reality of global warming itself is no longer a subject of serious debate and concern over the issue has shifted to its economic effects. In July of 2005, the British Government commissioned Sir Nicholas Stern (2006) to conduct a study which was published in October, 2006. The main conclusions of this study were: • It is necessary to act urgently in order to fight the effects of climate change. It is not possible to stop the change that will take place during the next two or three decades, but it is possible to mitigate its impact. To stabilize the situation at any point, annual emissions must be reduced by 80% from their present levels. Otherwise, 5% of annual global GDP could be lost. • The amount to be committed to mitigating the effects of climate change should be equivalent to 1% of annual global GDP. This may not suffice if innovation with a view to producing low carbon technologies is not as rapid as expected. R&D investment must duplicate and the support to the spreading of low carbon technologies should increase five times. • The cost of not taking action will be much higher. Moreover, the creation of low carbon technologies, goods and services will open new spheres for business. Economic development is possible without evading the challenges of climate change.

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• The reduction of emissions demands an improvement in energy efficiency and clean technologies in the energy, heating and transport sectors. Nonetheless, it is possible that fossil fuels will continue to represent more than 50% of the world energy supply by 2050. Carbon will be still an important component of the energy mix, as it is necessary to encourage the capture and storage of carbon. Equally necessary is the reduction of emissions from deforestation and agricultural and industrial processes. • State action is unavoidable in a large variety of tasks to confront climate change, with the regulation of carbon prices, the promotion of energy efficiency and international agreements being prominent among them (Stern, 2006). The Stern Report defines climate change as the “greatest market failure the world has ever seen,” which could be read as a desperate call to reason amidst world economic affairs. In reality, the report fails to critique the capitalist logic that unceasingly pushes towards an irrational relation of man to nature. It does however manage to at least condemn the ultraneoliberal approach that has dominated world relations over the last few decades. It is not easy to imagine that something could be produced without increasing production costs with higher water or electricity prices, even if we do not consider agriculture, estates, insurance and many other prices. Both constant and variable portions of capital are certain to increase their prices. Concern regarding the effects of global warming has been spurred by the current strategic circumstances of oil, a resource that has been the foundation for a long period of capitalist development, regardless of its necessarily cyclical course. The general conviction is that the greater part of “easy-to-exploit” oilfields has reached its peak and that production is becoming displaced from conventional sites to harder-to-exploit deposits. Non-conventional oil, apart from being more contaminating, demands more water and energy to be processed and it is more costly. Certainly, oil prices are also determined by shifting demand that further explains price oscillations, but any rate of economic growth under the present conditions would ultimately raise prices. The capitalist search for alternative energy sources has itself created new contradictions as in the case of agriculture. Bio-energetic products have expanded at the expense of a food production that is already affected by climate change. The so-called “food crisis” is in part the result of this changing emphasis in agricultural production. In addition, bio-energy



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alternatives relying on current agro-chemicals, refrigeration systems, tractors and trailers do not reduce greenhouse gas emissions from agriculture and it is still under discussion whether or not they really contribute to energy savings. Conclusion Capitalism is now called upon to pursue a new wave of technological change. This is a normal demand that comes out of any historical general crisis. Yet, the new situation is quite specific. In prior times, crises could be overcome by means of increasing the exploitation of labor and by mounting greater assaults on nature. It is now the case that a higher rate of labor exploitation must combine with the building of a new relationship between production and nature, and the new technologies to be developed must follow a path unknown to capitalism thus far. The discovery of new sources of clean, readily available and cheap energy would be a long step toward the redesigning of industrial production. Such a condition is absent, at least for the time being. It is generally recognized that there are no easily available alternative sources or any particular combination of them having anything close to the energetic density of oil. As we have argued, US capitalism did almost nothing to prepare for a profound transformation in this strategic economic sphere. Washington instead decided to maintain its dependence on existing resources and to rely on its military world supremacy in order to retain control over them. This is likely to remain the most probable course to be followed by the US for the foreseeable future. Complementary efforts to produce a certain cooling of the planet and to extend the capture and storage of carbon could accompany this path. The inevitable increase of the value of constant capital will have to be compensated for by an equivalent cheapening of labor power and the extension of poverty. The first measures adopted by the Obama administration displayed no big changes in economic policy, except for his announced new support for R&D. The emphasis was placed on financial re-ordering and a new push towards further financialization. It must be recognized that the US government was in no real position to do much more for the time being. While these policies might afford some short term positive result, they are bound, as in the past, to sooner or later end in a new and deeper economic contraction.

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International disputes around the control of resources are certain to intensify. Conflicts between world powers could be mitigated for a time by the introduction of some sort of coordination that allows them to create a new geo-strategic world order. The zones of influence will most likely have to be redefined. As for the present monetary order, the United States is not ready to abandon its advantages and will fiercely resist the pressures from other powers such as China. Similarly, the United States will try to recover the positions it has lost in Latin America due to the economic and political importance that this region holds for its hegemonic claims. The current strengthening of its military presence indicates that it will not stop short to reach its hegemonic objectives in the region. The state is again called upon to play a decisive role in the construction of a new world order and its operation. Market forces have never sufficed and much less so now can they steer the system out of its crisis. What is needed is much more than a purely Keynesian world economic restructuring. In reality, even that kind of transformation would face tough opposition. It should be expected that state authoritarianism will intensify with the prospects of maintaining order in a context of growing social unrest and criminality fed by increasing unemployment and poverty.

CHAPTER THREE

THE PATTERN OF INDUSTRIAL COLONIALISM In Latin America, accumulation is predicated upon import-based economic growth. In general, imported means of production are used for one of two basic purposes: inward-oriented growth or outward-oriented growth. In other words, economic growth can be organized to serve mainly the needs of the world market or mainly those of the domestic market. These two forms of growth are by no means mutually exclusive in absolute terms, but they do imply a significant level of contradiction. Exports must continually grow since in order to buy, it is necessary to sell. But whereas in the case of outward growth, selling abroad helps fuel the expansion of the export sector itself, more inward based growth must support both the export sector and domestic industry. In this latter case, it is expected that the growth of industry will progressively help to ease the balance of trade through import substitution. This is a model that essentially requires increasing protection for industry that cannot keep up with the rate of technological change occurring on a global scale. Import substitution, which is the normal path of inward oriented growth, encounters an absolute limit as the progressive substitution of imported progress is out of the scope of possibilities for an underdeveloped country. Export-led growth, in turn, cannot avoid the expansion of a given industry for the domestic market as a secondary characteristic. The degree to which this industry has expanded will determine the amount of resources that are to be subtracted from the export sector’s own expansion. There must always be a point at which the domestic market must be restrained from expanding. At that point, imports must be reduced. Limits to exports are also linked to its expansion, for this growth implies the modernization of the corresponding industrial sector. As this process advances, the sector enters the dynamic currents of international trade and enhances its technological sophistication which in turn increases its dependency on imported goods. The value created in the sector becomes an increasingly smaller part of the exported product which is why stimulus for its growth declines just as its general impact on the economy does.

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Capitalism in Latin America first emerged and expanded through outward-oriented growth. This was the form of growth through which industrial colonialism was introduced. The 1930s witnessed in several countries the first transition from this form of growth to the inward-oriented variety on account of two historical conditions: 1) the existence of a domestic market that spontaneously arose out of exports; and 2) the region’s relative isolation from developed countries as a result of the Great Depression and World War II. Another profound crisis that became unleashed at the end of the 1960s would provoke a second transition, this time from inward to outward-oriented economic growth. To date, large scale global crises have tended to bring with them changes in the prevalent form of growth in Latin America. “Form of growth” as a concept suggests a somewhat “neutral” kind of pattern that can permit the analysis of an underdeveloped economy’s workings independently of the prevailing form of external dominance that it experiences at a given point in history. At the same time, each form of growth implies a particular mode of integration into the world economy. We would like to emphasize however the “domination” aspect of this integration which involves not some harmonic “world economy” but in fact a world economy under the rule of imperialist countries. Viewed by this logic, every form of growth remains a pattern of industrial colonialism as far as Latin America is concerned. Any pattern of industrial colonialism, as well as any form of growth, displays in a specific manner the tendencies that correspond to underdeveloped economies. These tendencies were presented earlier in Chapter 1. It is true that they are expressed in a more transparent and violent fashion under outward-oriented growth which corresponds to the pattern of industrial colonialism that neoliberal globalization has imposed in the region. While this point will be made very clear as we proceed, it is first necessary to deal briefly with the basic question of why underdevelopment reproduces itself. Barriers to Regional Appropriation of Scientific Knowledge for Production Neoliberal theory expected free trade and competition to work in favor of “leveling out” countries. Industrial knowledge and capital are supposed to be freely available so that competition-induced improvements in productivity would work in this fashion. According to this approach, there is no need for any country to pursue the organization of its own general labor.



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Reality demonstrates, however, that neoliberal theory never worked as envisaged. The fact is that many important obstacles actively prevent underdeveloped countries from accessing knowledge and its productive applications in the ways necessary to ensure genuine development. It is well known that technology compresses generic and tacit knowledge. According to Masaru Yoshitomi (1996), the former behaves as a public good in that it is potentially an object of trade were it is found available to the public. The latter refers to the component of technology that emerges from the collective abilities and organizational routines of firms. This second element cannot be treated as something independent from the particular conditions under which it was created. For this reason, it is not available in the market. Yoshitomi thinks that this explains why differences in competitiveness between countries and firms persist in spite of the widespread diffusion of generic knowledge (1996: 58–59). He further maintains that innovations make expansion and growth possible for the enterprises that first introduce them into their business. These firms will therefore try to retain such benefits by keeping exclusive control over the innovations. This proposition in effect simply confirms a very old thesis that innovations produce extraordinary profits and this is why capitalists insist on keeping control of them for as long as possible. At the level of commodity circulation, intra-firm trade is another way in which capitalists actively protect their technological advances. This trade mainly involves goods that contain knowledge and talent found only in the particular firms that carry it out. When a producer starts marketing a new product, competitors try to build alternative designs. Once a given design is consolidated, its producer undertakes the task of introducing the changes that may be necessary in the labor process. Innovations in the labor process do not, of course, require a product innovation in order to take place since the purposes of the former are much broader. Several factors in relation to goods and process innovation are worth emphasizing. First, innovations take place in firms that have accumulated the required knowledge and talent in a context where the amount and quality of these constantly change as a result of progress itself. Therefore, only those firms which possess such knowledge and talent are able to participate in the race to impose a new design for a given product or a new product. Second, new or redesigned products will typically enter high-income markets first, that is, those of the more developed countries. Product differentiation follows a similar course. As Gustavo Burachik (2000) argues,

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the imitation-innovation ability is connected with the firms’ productive experience as well as with the learning efforts realized throughout their productive history, all of which makes entry into the innovations practice relatively difficult. Third, it is worth noting that not only product creation and diversification tend to be concentrated in developed countries but also the advantages linked to extraordinary profits. The United Nations Economic Commission for Latin America (ECLAC) has found that comparative advantages are located in the innovating country as long as the innovation constitutes a monopoly power for its creator. Later on when “technology has lost its meaning” as a means for producing extraordinary profits, it is then sent to countries that offer other sorts of advantages (CEPAL, 1990: 21). Governments in developed countries will therefore manifest great interest in expanding their national technology base. The US government shows interest in the economic success of firms only in so far as they commit themselves to the development of national technology. Those foreign enterprises that contribute to the country’s technological progress will also garner US government support. In the United States, the role of technology in politics and culture is generally stressed over and above its economic meaning (HR Committee on Science, 1998). When technology is sent to underdeveloped countries, this generally occurs only after its use has become diffused. There, it can become the object of change by capitalists with a view to overtaking competitors that share the same technology or work with a similar one. Whatever the case, this work even when it demands creativity merely complements the knowledge that is objectified in the original product or process (Katz, 1998). Since the technological effort in the region does not extend to the appropriation of the principles underlying any particular innovation, local abilities tend to remain confined to those that allow the best possible use of the imported technological package. This practice is the result, and at the same time a cause, of the low skill level of local labor power, which in time becomes a substantial barrier to the entry of advanced technology into the region. In effect, the low value of labor power constitutes a further barrier to the introduction of the latest technology in underdeveloped countries. In order to incorporate a new means of production in an already operating enterprise, it is necessary that its value be lower than the value of the labor force that it displaces. Otherwise, the unit cost of the product will not be reduced and the profit rate will decrease as costs grow. It should be



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noted that this law only applies to already functioning capital within relatively stable market conditions. The law explains the behavior of those enterprises that faced the process of economic liberalization by improving labor performance through means other than the incorporation of new technology. This was the case, according to ECLAC, of much of big capital: However, most sectors of industry achieved their labor productivity advances without significant new investments and with a fall in employment. On the whole it seems that changes related to job organization and to ‘un-embodied’ technology are taking place, that is, changes not directly linked to the incorporation of new capital goods, although they lead to complementary investments. (ECLAC, 1996: 101)

The same situation was observed by ECLAC concerning enterprises controlled by foreign capital: Effectively, in spite of the fact that transnational companies enjoy important advantages in order to achieve their restructuring as compared with national enterprises such as access to international markets, greater financing and modern technologies, their efforts aimed at gaining competitiveness are limited both by the restriction of their present plant and their corporate globalization strategy. The majority of foreign enterprise attention has been dedicated to reducing their variable costs, rationalizing their production and introducing ‘soft’ technologies without engaging in investments oriented at renewing and modernizing their production equipment. (ECLAC, 1994: 36)

The “globalization” strategy of corporations is not very useful as an explanation of this phenomenon, given that the same practice is carried out by local enterprises which lack any globalization projects. In both cases, profit is the determining factor underlying company strategies to adapt to export-oriented growth. The low value of labor power prevents firms from introducing costly new technologies. As a secondary effect, this reinforces the tendency for Latin American labor power to remain poorly skilled. So far we have drawn attention to economic barriers that prevent underdeveloped countries from appropriating current technological innovations. These barriers, in turn, should effectively encourage the organization of general labor in the region with a view to developing local abilities in order to create progress. However, two ideological obstacles oppose such a course of events. The first is a permanent one that has to do with a number of notions that underdeveloped capitalists employ when it comes to business matters. They believe that foreign technology is better by definition, since

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superior experience and knowledge are presumably located abroad. Given that fact, they believe it is economically more convenient to import technology since internal production cannot guarantee competitiveness. Their overall social commitment ends with their business success through which they deliver their main contribution to society (Faletto, 1991). This Smithian notion and ethical approach to social responsibility demonstrates that entrepreneurs lack any transcendental interest in their own nation. In short, local capitalists are not willing to socially become the subject of a national project to overcome underdevelopment. The second obstacle relates more to neo-liberal hegemonic thinking. This ideology holds that states must abstain from getting involved in a dynamic activity oriented to capitalist development. Rather, the state must retreat from economic activity and subordinate its action to the interests of transnational corporations. Neo-liberalism reinforces industrial colonialism and imperialism and this is one of the most salient effects of the so-called “free play of the market forces.” National Innovation Systems in Latin America The main features of the National Innovation Systems in Latin American countries are well known: • Investment in R&D is very low at around 0.67% of the regional GDP. Only Brazil has managed to barely surpass 1%. The United States spends around 2.66% while its per capita spending in R&D is about 28 times higher than the average for the region. • Governments have typically delivered the larger part of investment in R&D, although this situation has changed during the most recent decades. In 1990, government participation reached 72.1% of the total investment in R&D but by 2005 it had fallen to 59.9%. The private sector contribution rose from 26.8% to 43.3% during the same years. • Links between the private enterprises and the academic community have remained very weak. • Local applied research is practically absent from the creation of new industrial processes and goods. For the most part, innovation activities display an adaptive character, i.e., they remain oriented to accommodating new technologies or changes in technology or marketing methods to local conditions. Also, a large part of adaptation is carried out by corporation affiliates or is dependent upon intense foreign assistance.



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• The number of authorized patents per resident of the region is very low compared to the number granted to non-residents: 16.33% against 83.66% in 2007. During that same year, residents applied for 2.39 patents for every 100,000 inhabitants while in the United States, the same indicator for applications was 80.02. • Most of basic research takes place in isolation from its potential productive applications. There are fully documented cases of scientific findings by local scientists that are productively exploited by transnational corporations subsequent to their publication (Figueroa Delgado, 2006). It was only by the middle of the last century that some efforts toward the construction of local abilities for the operation of some industries began to take place in the region. By then, institutions created for the promotion of science and technology came to join the sparsely supported academic science that was concentrated in universities. Some large public enterprises, particularly those belonging to sectors that governments defined as strategic, in addition to national defense, together with some private enterprises, organized small research and engineering departments. In addition, affiliates of transnational corporations were by then establishing their own research facilities. About 80% of total spending in R&D was paid for by the state. At that time, a certain nationalistic spirit and a desire to reach a certain degree of technological independence was palpable in the region. Some local industries were given special attention, such as oil in Mexico and aeronautics in Brazil. Yet, the adaptive purposes generally prevailed. The Inter-American Development Bank (IDB) has intermittently carried out activity to strengthen scientific labor in the region. From the beginnings of the 1960s it promoted the growth of physical infrastructure, increasing the skills of scientific labor power and the expansion of funding sources for the development of science. Its so-called assistance to the region has been changing over the years according to the evolution of the prevailing economic models in developed countries, especially the United States. However, it was not until 2000 that it elaborated a coherent set of propositions that acquiesced to neoliberal policies. The IDB premise for its science and technology support policy in the region is put bluntly: “Economic globalization and the world technology revolution, especially in telecommunications and information technologies, define the context in which all countries will have to perform, and make technology even more important than in the past” (IDB 2001: 1).

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This fundamental guideline was intended to promote the expansion in the region of the most dynamic technologies in developed countries, especially in the United States. To erase any possible doubt, the IDB specifies: The major source of technological innovations in the region comes from the importation of capital goods and the specifications, and from the technical assistance provided by foreign purchasers, providers of licenses, and external investors. Therefore, the Bank will support policies leading to increased free trade, with particular emphasis on liberalization of commerce and elimination of barriers to the importation of technology. (IDB 2001: 20).

Certainly, the IDB policies do not aim to improve the region’s position in the world market. On the contrary, no matter what the Bank intends, its policies inevitably lead to strengthening the region’s subordinated place in the global economy. Latin America evolves by importing technological progress and practically produces no real innovations other than those required for the adaptation of imported goods and processes to local conditions. This is the normal practice of industrially colonized countries and the perpetuation of this practice is fundamental to the perpetuation of their condition. At the other pole, developed countries and transnational corporations benefit from the extension and strengthening of their control over scientific labor and its products that are implied by the IDB policies toward the region. Dependence on external progress can only get worse by extending the region’s commercial opening and expanding the facilities for the importation of technologies from developed countries. The concept of innovation as defined by the Organization for Economic Co-operation and Development (OECD) is rather lax. It refers to the “implementation” of new or improved processes, goods, services, or marketing methods, which can include or exclude any of the above, such as the invention of goods and processes. Therefore, it is only logical that the region be able to produce innovations based on imports. The resulting concept of the national innovation system will be equally lax and it can be found operating throughout the region with little regard to the enormous differences existing between the different categories of countries. We have already noted some of the characteristics of the region’s NIS and have shown how it does not even promote a more active globalization of the R&D activities of transnational corporations in the region, something which could result in an expansion of inventions in Latin America. The UN Conference on Trade and Development (UNCTAD) has discovered why:



the pattern of industrial colonialism65 The precise features of a host country that are needed to attract innovative R&D depend on the industry and activity involved. Key determinants in host developing countries for attracting innovative R&D include a large pool of scientific and technical manpower, a well functioning NIS featuring strong public research institutions, science parks and an adequate system of IPR protection, and government incentives. (UCTAD, 2005: 161)

“Innovative R&D” here refers to activities related to inventions. The indicated conditions are to be found in developed countries and the so-called “emerging” countries. The situation prevailing in Latin America corresponds to underdevelopment and to adaptive innovation, related to the mass production of a good or service, or to the setting up of an already invented process. And it focuses on the habilitation of imported technologies according to local conditions. Perhaps it might be thought that international organisms are interested in Latin American governments being involved in policies that might facilitate a transition from adaptive to innovative activities. This would be tantamount to saying that these organisms would like to see the region committed to tasks that would allow it to overcome underdevelopment. Clearly, this has not been the case. It should suffice to recall the IDB policies that reject this sort of idea. But the problem goes much further. In the context already described for R&D policies towards the region, the most emphasized measures refer to: (1) Support for research and development according to market signals, that is, according to the specific demands from enterprise. Generally, these demands fall within the routes of technological innovation defined by transnational corporations and the governments of developed countries. It is not by coincidence that the US government and the IDB have coincided on the importance of the “new economy” technologies. Local state support for the expansion of these industries in the region is at the same time a subsidy for them and for those local industries which import progress. In addition, we can see that when R&D is involved, there is not much difference if the point is the creation of new technology or its adaptation, for in both instances the scientific labor of transnationals is better qualified and equipped to carry out the tasks involved. It is not that local scientists lack any ability to participate in research activities, or even that they could not come to accomplish leading roles. The point is that generally they play a secondary and subordinated role. Henning Jensen Pennington, a well-known scholar of the region’s scientific processes, points out that scientific collaboration with developed countries takes place on the foundations of a very unequal division of tasks:

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chapter three Generally, scientists from developing countries participate during the operational phases of joint projects, but they are not equally involved in other phases such as the definition of theoretical and methodological tools, the discussion and analysis of results and the drafting and publication of results. These scientific workers tend to become more involved in data collection activities which is a very limited participation, one which will not necessarily foster local capacities (Jensen, 2007).

This is the situation that predominates and Jensen warns of the danger of “scientific colonialism” that academic collaboration under such conditions conveys. Indeed, he fully describes the operation of an active scientific colonialism. Speaking from his vantage point at the University of Costa Rica, he seemingly articulates the view of an anti-colonialist struggle that includes the basis of a political platform which demands: • An equitable participation in project design. • A shared use of information. • A joint application of results. • An equitable distribution of benefits. • Participation of local scientists in border projects. This is certainly a rather academic platform, with no considerations toward the larger economic and social implications. Scientific colonialism is merely an expression of industrial colonialism and imperialism that does not rest principally on the academic communities of either developed or underdeveloped countries but rather on Latin American oligarchies and their states. What we face is not merely a problem based upon the relations among academic communities, no matter how desirable an egalitarian practice would be, but rather a problem of the domination of one category of countries by the other. (2) Protection of copyrights. The greater the awareness of the importance scientific labor has for material production, the stronger the defense of copyrights. Given that the production of new processes, goods and services and innovations in general is concentrated in developed countries and transnational corporations, copyright protection is a typical imperialist demand. In the context of large companies and their R&D departments, the recognition of property rights for the company moreover constitutes a direct expropriation from the workers who created the given innovation, an appropriation by the company of the workers’ mental capacities at a given point in time. The same happens when corporations take advantage of their control over production and market facilities and productively exploit the scientific findings of



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scientists who lack sufficient resources to put their discoveries to work by themselves. From the standpoint of competition between capitals, intellectual property rights are necessary to ensure the acquisition of extraordinary profit and the supremacy over competitors, just as those rights are necessary to keep the supremacy of some countries over others. The national innovation systems which are organized on the basis of intellectual property rights can do nothing but perpetuate foreign domination over the region. Yet, governments which are unable to build a vision of independence for their countries give in to external pressures with a view to avoiding retaliations, such as a decline of foreign investments or blockades against obtaining external credits. (3) The promotion of links between the business and scientific communities. This policy should create a completely different environment from the one in which the region’s scientists were originally formed and later evolved. The point has been to put scientific labor at the service of an oligarchy that has in the past shown very little interest, or none at all, in the region’s scientists and their labor. Yet, the relation works in developed countries and the region must follow suit, as though no memory of regional specificity mattered. Local governments introduce financial stimuli for scientists to get in touch with entrepreneurs and make space for them in business research activities. But disadvantages of these workers in comparison to their peers are not addressed and so they are pushed to carry out subordinated functions. The fact is that they have no control over the knowledge and technologies which are strategic for the kind of enterprises that they are supposed to attend to in the context of the national innovation systems policy. The incongruity of these policies is not hard to detect. They are expected to deal with a problem whose deep causes are left untouched. The separation between scientific and business communities took root in a basic underlying fact. Local capitalists organized and developed their enterprises on the basis of externally created knowledge, giving place to a dependency that became internalized in economic operations. That process deepened with economic growth which followed the route determined by foreign technological change. For the same reason, the link that possibly could be built reserves only a subsidiary and peripheral role for local scientists. Assessing the significance of these links from his own perspective, Leonardo S. Vacarezza argues: In this way, the selection of research subjects, the methodology, timelines and opportunities are not decided by scientists but, and increasingly so, by

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chapter three network agents who look after a variety of interests concerning feasible knowledge, among which entrepreneurs, engineers, and financiers play the most relevant role (…) These network dynamics reinforce the core countries’ leadership not only due to the academic excellence of their scientists but also because of the close links between enterprises and labs. Therefore, Latin American academic research is pushed to a two-fold peripheral status: one related to its relatively marginal position within the international scientific community, and the other concerning its capacity to integrate into the ‘application context’ that international capital has defined for innovation and production (Vaccarezza, 1998).

All of this takes place in a context where governments have effectively created some of the conditions necessary to make innovation links between enterprises and scientists possible. Vaccarezza refers to the building of infrastructure and the organization of technological consulting (scientific parks, enterprise incubators), financial support for businesses, and other measures already taken during the 1990s, suggesting that there is no problem of state negligence (despite the fact that state and enterprise R&D funding is clearly insufficient). The real problem according to Vaccarezza is that such state actions “do not constitute a self-sustaining system of dynamic relations that indicate a clear orientation for R&D according to the societies and the economies in which (those actions) take place” (Vaccarezza, 1998). A system of scientific links led by private transnational corporations should not be expected to focus upon considerations regarding the needs of Latin Americans, no matter how urgent they may be. Their main concerns revolve around costs, quality, marketing, and above all, profits. The question which therefore emerges is how exactly did the promotion of the national innovation systems under neoliberalism help the development of science in Latin America? As it has already been suggested, there has been some perceptible progress in terms of infrastructure for science along with some connections being established between the local scientific community and private enterprise. It may be argued that these advances should be warmly welcomed in spite of the fact that they took place thanks to the intervention of an externally created science designed to benefit the capitalist currents of expansion determined by developed countries. Yet, the fact is that this “globalization of technology” has proven no better than the route of technological performance taken by the region during the previous stage that ended at the beginning of the 1970s. Previous state-led efforts to promote technological progress, especially during the 1950s and 1960s, were very much inspired by nationalistic



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sentiments. Although limited in scope, these efforts often translated into measures that followed a certain national interest. While it was not a generalized condition in the region, these efforts could be found present in the most prominent countries of the region across different periods and with varying intensity. Laboratories for R&D were organized in some strategic industries that desired greater independence (at least in some important industrial positions) on the basis of the development of local capacities for technological progress. Taken as a whole, it was a rather weak attempt at gaining some technological independence. This was due to both the complex context in which it took place and its ideological ambiguity. In spite of, or perhaps because of this, neoliberal globalization came to disarticulate almost all of that which was achieved throughout this period. As economies began to “open up” with trade liberalization and a general reorientation towards externally based growth, the lifting of restrictions on foreign property and economic deregulation brought about a complete redefinition of the performance conditions of locally established enterprises. Exposure to international competition clearly forced technological restructuring. The creation of more sophisticated technological means fell out of the reach of both state and private local enterprises. As explained by the IDB, the most important means for innovation was the importation of technological progress and this took on a renewed emphasis during the 1990s. On the other hand, the labs which were created to assist public enterprises became displaced by those of transnational corporations after waves of privatization set in. The affiliates of foreign corporations reduced their R&D activities on account of their integration into global markets and the standardization of products and consumer patterns, all of which reinforced their dependency on the corporate head office. In this context, any particular project oriented to the development of local technological capacities became obstructed. José Eduardo Cassiolato who is known for his prestigious work on the region’s technological issues, studied the clusters of the automotive industry in Minas Gerais, telecommunications in Sao Paulo, and tobacco in Rio Grande Do Sul (Cassiolato, 2001). This led him to conclude that the subsidiaries of multinational corporations significantly reduced their local technological and innovative activities in the 1990s. Innovative and even productive efforts within local clusters tended to decrease which in turn affected both the core capabilities of firms as well as their learning processes. His team further saw that productive and innovative networks

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were being disarticulated with little or no significant articulation taking place between the new investments and the local R&D infrastructure. The overall level of employment of specialized personnel within these clusters decreased and this has since been followed by the occupational downgrading of some of the specialists who remained employed. Over the last decade of the 20th century and the first decade of the 21st century, imports of capital goods and the knowledge they objectify have continued to grow, particularly in medium and high technology sectors. The same is true for the trade balance deficit. Thus, it becomes clear that nothing has been achieved in terms of local technological production. In the context of a world order dominated by transnational corporations where products tend towards standardization, it can be expected that the region’s possibilities of stepping forward in the construction of capacities for the creation of progress will weaken still further. In spite of its declared homogenizing aims, neoliberal globalization has done nothing but deepen global inequality. The Universities in the Region From a capitalist point of view, the university is expected to fulfill the following functions: (1) The production of knowledge and to the extent possible, the elucidation of its productive applications. The university is perceived as an important agent of the material performance of capitalism as a result of its research and lab testing activities. At the same time, it contributes to the construction of visions and desirable alternative paths for economic development. In this sense, it has also contributed to the symbolic reproduction of society. The autonomy granted to universities for the best possible fulfillment of these functions has to some extent become compressed at present. This is because governments have been driven to focus on solutions to the practical problems of enterprises. After the introduction of the new knowledge production model, applied research has gained a new dynamism as a university activity. This occurred to the point that it has come to definitively rule out some traditional but incorrect definitions of this function. For the World Bank, for example, the following definition of institutions of higher learning is still in use: “These institutions produce new scientific and technical knowledge through research and advanced training and serve as conduits for the transfer, adaptation and dissemination of knowledge generated elsewhere in the world” (World Bank, 1995: 23). Yet, relations between



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universities and enterprises now have much more direct significance. Universities no longer stop at the provision of abstract ideas or technical assistance for the solution of concrete problems in existing industries. Rather, these institutions are consolidating themselves as producers of ideas for the building of new firms. Etzkowitz and Dzisah report that: “The Association of University Technology Managers (AUTM) identifies $1.46 billion in earnings from patent licenses in the 2000 financial year and the formation of 3376 firms based on technology licensed from universities since 1980” (2010: 496). This transformation demonstrates the enormous creative potential that universities have garnered in the developed world. Yet, it also conveys some of its dangerous implications. The commodification of ideas from educational institutions, even if oriented towards funding the growth of research, infringes upon the mission of universities as providers and disseminators of knowledge with potential social use. It involves them in competitive dynamics, leading to a reformulation of relationships between them while tending towards a general correspondence of universities and private sector interests. As a result, the socialization role of universities weakens, thus preventing a large mass of capitalists from having access to a part of the productive knowledge that these institutions manage. It was precisely through their knowledge socializing function that universities made it possible for those capitalists who do not carry out scientific labor to stay in business. In that sense, universities played a role as servers of the public. The new position of the university in society is now somewhat different since the commodification of its practices has led to a partial privatization of university activity. This is a further result of the state’s retreat from its function as a guardian of capital’s general interest and the magnification of capitalist private interests. (2) To provide a professionally trained labor force. The university delivers a large array of people with the highest professional qualifications that formal education can provide. This training will continue in a permanent way by means of occupational practice due to the constant ongoing changes in technological environments. Not only has the university provided professional expertise for immediate labor in areas such as engineering, planning, controls, etc., but also for scientific labor through the training of researchers. This latter activity has increased the importance of public universities, for they are the most important trainers of researchers. Certainly, the university also provides qualified labor for services rendered through the liberal professions.

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(3) To train the cadres required for the economic, social, political and cultural leadership of a country. On this point the World Bank is much more accurate where it states: “Institutions of higher education have the main responsibility for equipping individuals with the advanced knowledge and skills required for positions of responsibility in government, business, and the professions” (1995: 23). Most of these cadres do not rise to the position of society leaders as a direct product of higher education. Rather, they generally require further developing and proving of their respective competencies. In a context of relative ideological openness, the university gives them not only professional qualifications, but also a perspective on universality and change which is necessary to create forward looking approaches and strategies. The university itself is a space for permanent discussion of possible alternative courses for the future of society as well as the causes of its periodic convulsions and constant uncertainty. (4) The production of ideology to support the legitimacy of ruling institutions and practices. Included here is all critical thinking oriented to the improvement of domination. For its part, radical, anti-capitalist criticism is not recognized by capital as a university function, but the state tolerates it out of respect for a sense of plurality and universality that institutions of higher learning cultivate. Moreover, the radical thought is tolerated since the liberal state is the strongest and most appropriate model for a society immersed in class contradictions. The university as a producer of ideas is a fundamental institution for the smooth advance of capitalism and its democracy. Totalitarian regimes remind us that from time to time, capitalism feels the necessity to rid itself of criticism (even if it is not radical) to ensure a smooth and felicitous working of society. In these cases, social stability rests directly upon the use of force and not on reason. This is when the totalitarian regime becomes an outstanding expression of social problems and amounts to an open confession that it cannot do without violence. For this reason totalitarian regimes tend to be temporary and, in general, undesirable solutions to capitalist conflicts. The Latin American university does not accomplish the first of the four functions indicated above. This is due to the fact that local oligarchies never perceived the necessity of an institution dedicated to the promotion of technological development. Local capitalists were educated in the midst of the world market and derived their specific mode of producing from this practice, i.e., by depending upon externally created progress. The university was organized in isolation from the technological needs of local capitalists. This fact is crucial to the understanding of the evolution of the region’s systems of higher education. The university essentially



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focused on the other functions. The training of a professional labor force became its main concern, especially physicians, lawyers and engineers. In this way, it simultaneously produced cadres for the leadership of society. Generally speaking, teaching was delivered by professionals who undertook education as a complementary activity, thus frequently affecting the quality of their service. Historically, university students constituted a tiny sector of the population. At the same time, the university’s scientific concerns tended to concentrate on more abstract, general postulates. During the 1950s and 1960s, things began to change significantly. For one thing the number of students grew. Although scientific research continued to be defined on the basis of intellectual curiosity, social science developed and even gave birth to important paradigms regarding the organization and functioning of Latin American society. Important currents of thought emerged and developed, among which included the ECLAC school and the prominence of the theories of dependency. In a context of democratization that was especially strong during the 1960s, the so-called critical university emerged as the cradle of political theories. It was here where even organizations of an anti-capitalist character were incubated. The Cuban Revolution further contributed to the emergence and development of a popular movement committed to the radical challenging of the prevailing social system. The university contributed to the rationalization of social discontent and through discussion and analyses, reinforced both urban and rural militancy and mobilization. The student and reform university movements in Europe would come to strengthen these trends even further. All of this tended to widen still further the already great distance that separated the university from the business world, most especially from large foreign capital. With the benefit of hindsight, it is clear that the university was developing an increasingly powerful resistance against its integration into neoliberal globalization schemes of innovation. In spite of the fracture of this resistance, it is difficult to imagine a situation much different from the one prevalent nowadays where the region’s university is very far from the reactions we have seen in developed countries with respect to their relationship to technological development. The reality is that it never had to be otherwise. Given that Latin American universities are the institutions that carry out the larger share of scientific research, even if it is limited and its relevance is mostly marginal for private enterprise, what we have already said about the region’s scientific community and its relations to technological development aptly applies to them. Some governments in the region have

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nevertheless insisted on a number of actions designed to integrate universities into the systems of innovation and this has resulted in some transformations that have changed their relation to society. It is this point that deserves some attention. It has been perceived by policy-making institutions that one of the most complex and difficult tasks for the region’s universities is to “learn how to collaborate” with the private sector (IDB, 2000: 26). With a view to tackling this task, many governments have been building new relations with universities with the expectation of bringing about a significant restructuring. Certainly, the increase in public financing would not be a device envisaged to support a relevant transformation of these institutions. In reality, a decrease in financing would. In spite of the fact that universities notably increased the number of students matriculated, budgets for higher education remained largely unchanged (under 0.9% of GDP) throughout recent decades. The majority of governments displayed no intentions of substantially increasing their support for education. In this context, if the aim was to introduce changes in university practice, the budgets should have been reorganized in order to mobilize the most determinant agent of academic practice in the desired direction, that is, to orient the practices of academic staff. Monetary incentives are probably the most efficient method easily available to reorient academic activities. This is precisely why the income of academic staff was restructured and a part of it was linked to productivity goals in terms of publications, inventions, innovations in general, number of graduates and other criteria, at least in those countries that enroll the largest number of students in the region (Brazil, Mexico, Argentina, Venezuela, Chile and Uruguay). At the same time, wage increases through collective bargaining were frozen. Productivity assessment to decide the level of economic compensation has taken place mainly on the basis of quantitative criteria with scarce application of qualitative judgments. Such a scheme promoted an expansion of theoretically and practically non- relevant work as opposed to the construction of paradigms and efforts oriented to arrive at knowledge that could be translated into the production of goods and services. Social research, which in the region used to focus on general and politically relevant issues, is now compelled to concentrate on case studies supported by officially accepted or tolerated theoretical frameworks and which rarely goes beyond the level of social mapping and description. Likewise, the so-called “competitive funding” program was established with a view to promoting improvement of academic quality on the basis



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of rewarding the most advanced segments of academy working in their respective areas and institutions, as well as those which carry some interest for governments or even, in some cases, corporations. Also relevant was the methodology used to ascertain different levels of quality that was decided by entities operating outside the institutions under evaluation. The purpose here was to reorient the development of the academic institutions. Academic staff is compelled to adopt new practices not only through direct means such as economic stimuli, but also via the restructuring of institutions. Universities became subjected to a constant monitoring and evaluation of their activity. The merits of academic staff, graduation rates, the internal organization of curricula, institutional planning and regulations, their linkages to societies, infrastructure and so on, are contrasted with indicator parameters which are in general obtained from known “best practices” and not designed to deal with the specific realities of each institution. State policies towards institutions of higher education implied a hard blow to university autonomy, something which the academic community had once treasured highly. As a consequence, those policies would generate substantial resistance within the universities. The resistance to such policies would eventually be broken through budgetary pressures against the dissident institutions, a strategy whose application can especially be found in Mexico. As an overall matter of fact, let us say that this sort of pressure became a generalized mechanism to achieve desired behaviors not only by institutions but also by countries. This poses great relevance for the relations between developed and underdeveloped countries during the neoliberal stage. It is a strategy that has been instrumental for the attainment of more than one single aim. If the budget for a given university is tied to academic merits and is results-driven, then sufficient economic support would serve to prove that the institution was moving as expected along the lines defined by the state. It would also show that a redefinition of the tasks assigned to the academic staff was taking place. Given that it is this staff alone that can demonstrate academic merits and work, report on the different institutions’ academic programs and define their planning and projected further development, execute the institution’s links with society, and so on, it is they who have become a principal agent in budgetary design and the applications for obtaining it. This work has been added to the regular workload of lecturers and researchers (each of whom in addition have been increasingly compelled to become lecturer-researchers). In some

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cases, a management function has been recognized as a regular task burden within the overall stimulus program. It follows that the work allocated to the other functions should be reduced, but all these changes take place in a context where productivity demands in research and teaching have become much more intense. The budgetary squeeze was also aimed to mobilize institutions of higher learning to search for their own financing resources. On the one hand, seeking funds should have led universities to the exploration of new links with society, especially with the larger income sector of society within which entrepreneurs are prominent. The relation between universities and enterprises would thus come to satisfy mutual needs. Yet, on the other hand, since these relations have not produced the sought after results, universities are still being forced to try alternatives other than the commodification of academic work for the benefit of enterprises. For many institutions, the introduction of tuition fees would come to alleviate their budgetary crunch. In this manner, the growth of private universities would come to put an end to free higher education throughout much of Latin America. Indeed, the privatization of universities has taken place under state control and guidance. So much so that it could be readily said that the decomposition of public higher education was a definite aim of the state. None of these fundamental transformations have helped the university to improve the accomplishment of the second function indicated above, that is, the provision of a labor force that is professionally trained to meet the current demands of industry. The economic restructuring that took place across the region, especially during the 1990s, gave way to a generalized process of technological change that unfolded with unprecedented intensity. With a view to ensuring the proper working of the new means of production, it was necessary to redefine the training of the labor force so that it could be constantly improved and allow for the re-training of those competencies that the new technologies were making redundant and useless. In addition, this redefinition had to take place over a short term. The university, with its degree programs, its vocation of comprehensive knowledge, its demands for autonomy, and its traditional separation from the needs of businesses, was far from being in the best position to meet the requirements of the new environment. At the same time, the aim to minimize state economic intervention with its effects on public spending cuts worked in opposition to any new investment in public university education. The preferred way out of the dilemma would have been



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to contemplate two parallel lines of action: the extension of higher education beyond university boundaries on the one hand and its further privatization on the other. This transformation has gradually taken place and at different times in different countries. It started first, as did many other aspects of globalization, in the Southern Cone countries while submerged under totalitarian regimes. This was especially the case in Chile, Uruguay and Argentina, although the changes would differ in depth and breadth in each of these countries. By the mid 1990s, the World Bank would refer to the case of Chile as an exemplary one to be followed concerning its “successful” reforms with little or no regard to the fact that the changes were violently imposed by one of history’s most brutal dictatorships during the 1970s and 80s. On the other hand, these neoliberal transformations in the region began to clash with new obstacles during the second half of the 1990s following the emergence of progressive governments that decided to confront globalization policies. Higher education in those countries is now taking a different course. Even so, we must affirm that neoliberal changes left a visible and significant mark on Latin American institutions of higher education. Registration in higher education grew impressively fast. The average rate of registration exceeded 30% of the population between the ages of 20–24 and while still far behind the levels that developed countries have reached, it practically doubled the rate that existed in 1994. It should be noted that this expansion has taken place in a context in which the growth of this age group has notably slowed down, probably due in large part to the rate of emigration to developed countries. By all accounts, the growth of matriculation was still real and impressive. This advance was achieved mainly due to the expansion of private higher education that now accounts for more than a half of total enrollment. Public higher education has grown as well but much more slowly than in private institutions. The growth of higher education has been mainly as a response to market signals and it was supposed that this was the correct method of adjusting education to the needs of society. The expansion of the private sector which has reached a commanding presence in higher education (García, 2007) took place within an environment where regulations and controls were practically nonexistent. This in turn was bound to translate into negligence in the area of curricular design and did in fact lend itself to a dubious quality of academic activity in many if not most of these institutions. The strongest stimulus to this expansion focused on the creation of non-university higher education institutions, most of them private. These

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institutions typically lacked autonomy, offering a limited number of short degree courses and largely oriented to addressing specific, regional problems. The expansion of evening and weekend classes made it possible for a larger number of working people to access higher education or continue their tertiary level studies. All these changes were expected to make it possible for higher education to deliver the qualified labor power that industry required for constant technological innovation. It was to support their need to adequately face the challenges ensuing from an increasingly more acute level of competition. Yet, the changes we have alluded to provided a purely quantitative response to the situation that globalization and export-oriented growth had created. Indeed, there was little room for anything else. The same causes that prevented universities from being able to closely follow the technological changes taking place in more dynamic industrial sectors of developed countries regarding the skill levels of labor power, and especially their separation from the technological processes of enterprise, also served to explain the incompetence of non-university institutions to even approximate the needs of frontier industries. It was necessary, then, to open new paths and try different methods that would allow institutions of higher education to arrive at a more efficient delivery of skilled labor power. The measure that would best fit the lines of globalization while achieving this aim was the internationalization of higher education. On the one hand, the international mobility of students would contribute to overcoming the region’s notable shortcomings in teaching. Students would have access to world class education centers, those which deal with the sort of advanced knowledge and teaching methods required by the most technologically advanced industries. Thus, they could be properly equipped to deal with the demands of foreign industries in the region. Likewise, trainers, motivated by research exchange programs, would have the opportunity to get in touch with cutting edge knowledge as well as participate in advanced research projects at least in some exceptional cases. Certainly, it is clear that this sort of measure would only partially mitigate the situation given that only small segments of the student and training population of higher education could benefit from them. It is also the case that academic mobility in the form of study abroad programs is normally designed for rather short periods of time. At the same time, the internationalization of higher education translated into a new presence of foreign institutions in Latin American countries. In addition to the collaboration that takes place between the



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countries of the region, it is worth noting that between institutions in the United States and Europe, of which 82 offered distance education, 37 offered branch-campuses and franchises as well as 114 formalized academic alliances in 2004. The most extended form of collaboration is the full-fledged academic agreement (García, 2007). Policies such as these would seem to strengthen the training function of higher education in the region of Latin America. But in fact, they merely serve to announce its incompetence and inability to properly fulfill its functional role. To resort to foreign facilities is simply not enough to overcome the system’s internal insufficiencies, just as the importation of the means of production does not supersede the inability to produce them internally. External Limits to Export-led Economic Growth Export production must ultimately confront international competition. In order to do so successfully, it must at least work with the productivity and quality levels that prevail in the world market, that is, levels determined by the most advanced corporations. Large transnational corporations exercise control over market access, what technological levels are adequate, and financial resources. Therefore, underdeveloped countries are generally in no position by themselves to embark upon exportoriented growth projects. Direct foreign investment becomes one the most important conditions for success. Under the previous pattern of industrial colonialism, foreign capital mainly penetrated into the region through fusions with local capitalists and states. Its principal aim was the region’s domestic market which had evolved under strong protections from foreign competition. Local states shared some concerns regarding the national interest and the need to prevent foreign capital from taking absolute control over particular industries. Things became very different however after the change in the form of growth. Latin American states became very actively involved in an acute competition to attract foreign capital into their countries. They offered almost everything imaginable to external investors, starting with very low tariffs, low taxation, industrial facilities, a high level of return on investments, social “peace” and property rights, and so on. During the “lost decade” of the 1980s when most Latin American countries carried out their “structural adjustment,” i.e., their transition to the new pattern of industrial colonialism (Southern Cone nations had begun

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this transition during the mid-1970s), international financial capital and institutions (IFIs) concentrated on reaping the benefits of the region’s huge external debt and on enhancing economic reorganization. During the 1990s, foreign investment steadily increased until 1999, growing from 1% of the region’s GDP in 1991 to 5.5% in 1999, and it became recognized as the principal and most stable source of external financing. Transnational enterprises had already gained control over a large part of domestic production in the region, displacing local capital. Within the biggest 500 enterprises, transnational companies controlled 43.7% of sales in 1998–1999 compared with 27.4% in 1990–1992. Private national enterprises reduced their share from 39.4% to 37.2% during those years and state holdings decreased theirs from 33.2% to 19.1%. The larger the enterprise, the heavier was the weight of foreign capital within it. Thus, the participation of transnational companies in the sales of the 200 largest enterprises rose from 30.6% in 1995 to 44.8% in 1998 and their sales abroad were growing faster than the region’s exports. As foreign investment follows the course of economic cycles very closely, it fell during 2000–2002 as would be expected, from US$79.923 million in 1979 to US$45.213 million in 2002. It later recovered by 2004, stimulated by the high prices of raw materials and it grew until 2008. This was in spite of the fact that privatizations were almost depleted as a source of foreign investment. Given that exports and outward-growth in general are directly and deeply dependent upon the foreign business cycle, this trend was bound to grind to a halt by 2009 in the context of the world economic crisis. Foreign investment had concentrated its presence in different economic sectors throughout the region. In Mexico and the Caribbean Basin, external resources were directed mainly towards manufacture. In South America, investment was oriented mainly to the exploitation of natural resources. Investment in services has been significant throughout the entire region. Brazil and Mexico are the main receivers of foreign investment. It is US investment that predominates in Mexico while European investment has a stronger presence in South America. The 1990s witnessed the consolidation of outward-oriented growth. International trade assumed a new position in the economic activity of the region. In 1960–61, exports represented 11% of the region’s GDP while imports amounted to 10.5%. A decade later, these figures remained practically unchanged: in 1970, 10% and 9.7% respectively. The trend for the balance of trade towards deficit remained under control mostly due to industrial expansion, but a current balance deficit was mostly unavoidable.­



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The export rate of growth had been 4.2% in 1960–1970 while in 1980–1990 it jumped to 7.8%, very similar to the percentage growth of the following decade, where it reached 8.6% during 2000–2007. By 1997–1999, exports already represented 18.9% of GDP and imports 20.9%. The balance of trade deficit became by itself a reason for contraction. What is to be noted here is not the new level reached by exports and imports, since this corresponds to the economic opening of these countries, but the fact that imports were growing faster than exports. This provokes a highly volatile economic scenario. During the 1990s, the business cycle in Latin America experienced a couple of years of growth with a shrinking trade surplus which then transformed itself into a growing trade deficit. After two or three years, the latter became unbearable and it had to be corrected by resorting either to recession or simply slowing down growth. The trade balance under the present pattern of industrial colonialism is more vulnerable to deficit, although underdeveloped countries can contain this tendency for periods, especially during those of prosperity generated by high prices and volume of exported natural resources. This has occurred during the last few years with the region’s exports of mining, oil and agricultural products. The evolution of the last two decades that shows manufacturing exports with technological content to have grown steadily might therefore cause confusion or create unfounded expectations. Mexico, the main exporter of the area at the beginning of the millennium, is also the representative case of this evolution. Products of medium and high technological content are concentrated in the maquila industry (i.e., enterprises located in the national territory that carry out an industrial process or service by which a good sent by a parent company from abroad is transformed, repaired or used, to make products for export). In 2001, this sector represented around 22% of the region’s exports. However, this industrialization that resulted with greater exports has taken place by following the established patterns of underdevelopment. The maquila industry relies on the imports of the means of production, imports that normally account for more than 70% of the value of the product. By 2001, the local input contribution reached its highest point since 1980, 2.7% of the value of the product. In other words, the maquila industry has not had any significant impact on the promotion of industries for import substitution (ECLAC, 2003). The value of exported manufacture is higher, much higher in this case, than the internally produced value. This means that the so-called exports of medium and high technological content are predominantly sales of products obtained with poorly skilled labor-power from the exporter country.

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It can be seen that the labor, not only of conception and design of processes and products but also a large part of the immediate labor related to the former, remains concentrated in developed countries. It is also evident, although in a rather extreme way, that not only the creation of new industries but also their operations depend upon the imports of means of production, prolonging the internal deficit of the ability for creation. The development of industry intensifies both the lack of control over production and the incapacity of underdeveloped countries to make their own economic decisions. As it is stated by UNCTAD: “The growing importance of international production networks elevated the degree of productive complementariness between developed and developing countries. This means that a major share of production and exports in developing countries becomes dependent on the decisions and performance of foreign firms and countries” (Mayer, Butkevicius & Kadri, 2002). The Latin American and the Caribbean balances of goods, broken down into their different categories, illustrate the above-mentioned trend concerning industrial deficit in the region. Table 3.1. Latin American and Caribbean Commerce. Export Goods (in millions of US dollars). Products

1987

1992

1997

2002

2004

Primary Industry based on natural resources Industry with technological intensity

46.906 51.457 85.875 93.371 145.064 20.651 32.099 52.526 52.823 72.913 23.680 60.140 132.055 182.193 218.452

Source: CEPAL (2006a) (Statistical Annex).

Table 3.2. Latin American and Caribbean Commerce. Import Goods (in millions of US dollars) Products

1987

Primary Industry based on natural resources Industry with technological intensity

14.30 13.740

1992

1997

19.999 25.772

31.115 49.386

40.180 100.237

217.245

Source: CEPAL (200a) (Statistical Annex).

2002 32.469 50.685

2004 43.981 62.415

234.499 279.506



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The Latin American trade balance rests heavily upon the exports of primary and industrial goods based on natural resources. As a whole, it shows a favorable balance between 1987 and 1991, based on the control of imports and a decline in economic growth. For the following ten years (through 2001), the balance showed a deficit. From 2003 until 2007, this situation was inverted thanks to an increase of prices and, on a smaller scale, by the volume of primary exports, especially oil, gas, copper and some farming products (sugar, banana and coffee). During each year of the period between 1987 and 2004, the balance of industrial goods was adverse. This was especially due to the deficit of medium and high technology goods. The evolution of the balance is as follows: Table 3.3. Latin American and Caribbean Balance of Industrial Goods (Millions of dollars). 1987

1992

1997

2002

2004

Total of −9.5888 −33.801 −82.051 −50.168 −50.554 industrialized goods Based on natural 6.911 6.297 3.139 2.137 10.498 resources Of low technology 2.587 −2.632 −10.154 −6.424 −5.896 Of medium −11.671 −25.098 −50.483 −30.877 −31.692 technology Of high −7.415 −12.368 −24.553 −15.005 −23.466  technology Source: Source CEPAL (2006a) (Statistical Annex).

It is evident that the region’s production of industrial goods remains far from satisfying domestic needs. Worse yet, the dependency on externally produced goods tends to grow as industrialization advances. In 1987, imports of these goods accounted for 78.5% of the total while by 2004, that contribution increased to 87.4%. Medium and high technology goods represented 49.2% of the total during the first year and by 2004 they reached 57%. Practically the whole variation was due to the increased importance of high technology goods in industrial imports, going from 13.8% to 21.5% during the period. It therefore seems clear that by means of international trade with developed countries, the region transfers resources that could be obtained internally if it were able to produce its own means of material progress. The balance of trade allows us to approximate the amount of resources with which the region helped developed

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countries to expand their own production and employment, or to estimate the extent to which the ability to accumulate is transferred to developed countries. In general, less production and more unemployment are inherent features of underdevelopment. At this point, the following digression may be appropriate. International organizations include amongst the “developing” countries East and Southeast Asian economies. The participation of this area in world exports of manufacture is already quite high. Between 1996 and 2001, these countries participated with 30% of world exports in the area of information and communication technologies, one of the most dynamic sectors of international trade. This area sells a little less than the European Union (34%), but more than the United States (17%) and Japan (15%) while the contribution from Latin American countries scarcely reached 4%. It seems that the distinction between “developed” countries and “developing” countries does not have any clear meaning at the trade level. Thus, to situate the Republic of Korea, Taiwan, the Philippines, Singapore and Thailand together with Latin America in the same category of “developing” countries only makes more difficult our understanding of the processes which the different countries are involved in. It is not that international organizations ignore the relevant differences between the aforementioned Asian countries and Latin America. For example, CEPAL points out “in contrast with the experiences of certain countries of Asia, the Mexican export sector, despite its supposed success, has not been able to create the internal economic links within the national economy.” It is further explained that: To climb the ‘technological ladder’ is difficult, especially when the chain of local inputs suppliers is not developed and, in consequence, enterprises located outside the territory provide parts and components, as well as more sophisticated services. In these cases, the services of design and engineering, research and development, and logistic and commercialization tend to be offered by parent companies, with no possibility of technological transfer (CEPAL, 2003a: 109).

What is not noticed is that the countries climbing the “technological ladder” are indeed advancing in the development of their capitalist division of labor. They are elevating the organization of their general labor and building the conditions that make it possible for them to appropriate and produce the knowledge and skills that are necessary for the process of accumulation. They did not expect the export sector to be able to create the necessary economic links. On the contrary, they undertook the task of producing technological progress as a national project, one that



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would raise their nations to a new position relative to the imperialist powers. They are countries and zones at the threshold of capitalist development. The least we can say about them is that they have already renegotiated their position in the world market. Latin America, in turn, continues to be trapped in the backyard of imperialism. This also suggests that there is no inevitability in the state of affairs that keeps the region underdeveloped. Rather, it is the political will of governments and ruling classes that befits a strategy of adaptation better than one of radical transformation. Returning back to our central argument, it now seems obvious that foreign investment serves to mitigate problems created by trade balance deficits. The same is true for credits entering from abroad. The region’s external debt is another chronic illness that was bound to be aggravated under the existing pattern of industrial colonialism. During the 1970s, the region’s external debt increased greatly. Debt grew more than seven times over between 1970 and 1980. This change was not the automatic result of export-oriented growth, but rather a consequence from abundant and cheaply available international credit, especially after 1973–74, in a context of the prevailing difficulties for economic growth. Debt increased once again during the 1990s by more than three times. A peak was reached in 2000 when the regional debt was equal to 35.2% of the region’s GDP. After 2003, indebtedness relative to GDP started to decline. By 2008, according to official data, it was 18%, thanks to an unusually long period of growth that ended in the second half of 2008. However, foreign credits and investments have their characteristic cost that is demanded in the form of interests and profits. The balance of rent deficit grew from US$20 billion to US$40 billion between 1980 and 1995 and later continued to grow to US$89 billion in 2006 and again to US$110 billion in 2008, i.e., to twice the trade balance surplus. In this same year of 2008, the current account deficit was equal to 0.6% of the region’s GDP. This drain of value created in the region must be paid for, no matter how important it had been for the cost of growth during the previous years, and will continue to take place even in the context of economic downturn. Thus, the process that began with transference of value, that is, the investment in progress created through external means rather than internally, continues to reproduce the imbalances that make it necessary for the region to resort to external financing. It ends up producing another value transfer in the form of interests and profits, thereby deepening the dependency of the underdeveloped economies on developed countries.

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From the point of view of the region’s integration into the world market, we can group together Mexico and the Caribbean Basin on one side and the South American countries on the other. It is Mexico that shows a more dynamic evolution when compared to the other countries. South America has, on the whole, followed the old exporting tradition by which it provided raw materials and foods to developed countries, thus making some savings in constant and variable capital possible for the latter. A demanding export orientation of production in terms of price and quality would lead this part of the region to a better performance of the same function. Mexico, on the other hand, appears linked to the international trade’s most dynamic sectors. Some data can suffice to illustrate this situation. Mexico increased its participation in OECD purchases from 1.26% in 1980 to 2.27% in 1996. In South America, only Chile saw its share of that market increase during that period, going from 0.23% to 0.28%. Unlike Chile, Mexico has been incorporated into the more dynamic trends of commodity circulation in the world market, notably through three industrial branches: automobiles, electronics and clothing. At the beginning of the 21st century’s first decade, manufactures contributed 90% of the country’s total exports. In South America, on the contrary, the relative weight of primary goods in total exports continued to be important. With the exception of Brazil, South American countries have not taken meaningful steps in order to overcome their dependency on products based on natural resources. As for the destinations of exports, Mexico increased its participation in US imports from 6.61% in 1992 to 11.25% in 2000. On the other hand, South America’s participation fell from 4.47% to 4.07%. US imports from Mexico grew 17.2% annually between 1992 and 1999, whilst US purchases from South America only increased by 7.1% as an annual average. Meanwhile, 88% of Mexico’s total exports went to the United States in 1999 and 74% of Mexico’s total imports came from the United States. Mexico thus had intensified its dependency on the US economic cycle. South America, in turn, diversified its trade towards the rest of the world, in particular, towards Asia. Mexico has been one of the favorite destinations for direct foreign investment in Latin America, surpassed only by Brazil. Large transnational corporations have carried out ambitious programs oriented towards the restructuring of their subsidiaries and towards the creation of new assets in Mexico. A massive transfer of advanced technology along



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with location advantages and cheap labor power has allowed enterprises to gain an edge over many competitors. It should be noted that this course of events does not follow the logic of functioning capital, where investment faces obstacles to the introduction of technological progress mainly on account of the low value of labor power in the region. Indeed, this rationality operates when decisions are based on the economic environment of a given underdeveloped country, especially in terms of technological resources, productivity, scale of production and prices. When investment decisions are made in accordance with the conditions prevailing in developed countries, things change. A corporation produces in an underdeveloped country with a view to competing with developed ones. Cheap labor diminishes production costs, thus augmenting the profit. But at the same time, corporations must be able to master and solve the host country’s technological gaps. The maquila method provides an adequate answer to this problem. The US Government’s strategy enhanced the investments of transnational corporations in Mexico with a view to recapturing the positions they were losing within their own domestic market, especially since Ronald Reagan’s rather deficient movements to boosting development in the United States. As we have already seen in Chapter 2, George Bush Sr. attempted to mitigate the effects of neo-liberal policies as applied by his predecessor without actually abandoning them but instead by means of a new deal with an eye for creating conditions for a deeper penetration of US capital in the region. Free trade agreements would go very far in this context. The United States was in no position at that time to continue supporting the General Agreement on Tariffs and Trade (GATT) multilateral approach to economic liberalization, especially since this organization insisted on reducing tariffs, which would only worsen the position of North American agribusiness and industry. Immediately after signing the Free Trade Agreement with Canada, the United States signed another treaty with Mexico. Both would enhance liberalism between these countries, so that the United States would have access to a proper means of recapturing positions in her own domestic market. This means that the mode of operation of the present pattern of industrial colonialism in Mexico directly responded to the interests of large US transnational capital. It is not very often that an economy is put at the service of another ruling one, to the benefit of competition and liberal principles. But under the present pattern of industrial colonialism, this has been a generalized aim of Washington in the region (Dello Buono and Gandásegui, Jr., 2007). In

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this context, investments by US enterprises in the region with the aim of competing in their own country also signify in practical terms the virtual annexation of foreign territory or the expansion of the US internal market. Meanwhile, constant realities such as cheap labor have justified the treatment of Mexico as a different country. This strategy was successful for a period. In the automobile industry, subsidiaries of General Motors, Ford and Daimler-Chrysler were prominent and managed to increase its production by four times throughout the 1990s. The original projects tended towards specialization but the industry was diversifying rapidly. Their production in Mexico helped displace German products to a lower relative position in the US domestic market and contributed to slowing the growth of the Japanese industry. This in turn was relegated to a secondary position by automobile production in Canada. As for electronic products, the industry located in Mexico displaced the Japanese industry from the number one position that it had occupied up until 1997 as a supplier to the US market. The same is true for the clothing industry located in Mexico but in this case, it was the Chinese who were dethroned. Thus, Mexico was successfully used by large US transnational capital in their dispute with foreign enterprises over the control of the US domestic market. As the global economy entered into the 21st Century, the emergence of more attractive destinations for investment in terms of a cheaper labor force along with fiscal concessions, especially in Asia, would weaken the force of Mexico’s new integration with the United States. But essentially the course of the process would not change. Between 2004 and 2008, it began to become evident that direct foreign investment in the region had begun to shift orientation from Mexico to South America. The internal division of labor of transnational enterprises also illustrates the degree of subordination to which Mexico was subjected in the context of the present pattern of industrial colonialism. The more complex activities, those where value creation is more intensive, are reserved for the country that creates the technology. Meanwhile, the intensive labor activities that demand unskilled labor are generally carried out in the underdeveloped country. This division of labor corresponds to the economic reality of underdevelopment in Mexico. The fact is that foreign enterprises do not find in Mexico the technological environment required for competitive production in underdeveloped countries. Moreover, this division of transnational corporate labor is not only a distinguishing feature of the present pattern of industrial colonialism. It can also be found during the entire period of inward-oriented growth, but it does take on an even more relevant role in the more recent period.



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Things have become different in recent times inasmuch as the point has become to compete, not in the domestic market, but in highly demanding developed country markets with highly sophisticated products in terms of their embedded technology. In the context of the role that Mexico has been allocated by large capital, export-oriented growth becomes even more demanding. Competitiveness is an all-determining factor, one that allows even further encroachments into the economy. For example, Mexico was forced to give up its demands in the automobile industry regarding the national content of export models being equal to 60%, and reduce them to 30%. Certainly Mexico’s lack of ability to produce high technology goods would benefit US enterprises. The renouncement of the promotion of local industry development was part of the price to be paid in order to gain competitiveness. This was not, as can be readily seen, as a quality of the country (Mexico in this case) but as a quality of the large transnational capital operating in an underdeveloped country. The maquila industry which heavily contributes to Mexico’s exports, works in such a way that local inputs only account for less than 3% of the total. Two final remarks should be made about this. First, it can already be seen that export-oriented growth as applied in Mexico should have shown a lesser ability to promote growth than anticipated in the basic conception of the pattern. Mexico’s exports increased much faster for a period than those of Latin America as a whole, reaching 20% during the 1990s compared with 8% for the rest of the region. Yet, Mexico’s gross domestic product increased more slowly than the region’s GDP, that is, 3.1% compared with 3.2% for the others during the 1990s. This situation would worsen into the new century as foreign investment fell in relation to that being received by South America, with a smaller corresponding share of the increase in exports. In fact, Mexico’s GDP grew between 2003 and 2008 much more slowly than the region’s GDP. Second, the shared production method not only has economic implications but also political effects. An underdeveloped country is likely to see its ability to manage trade imbalances reduced still further. Imports, for instance, will progressively fall under the control of transnational enterprises. Internal Contradictions Latin America’s economic performance under export-oriented growth has been more mediocre than it was during the previous stage. During the

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period from 1950 to 1980, the annual rate of growth was 5.3% while between 1991 and 2003, it reached just 2.7%. A more accentuated tendency towards trade deficit has led governments to a tighter control on imports and on economic growth. At the same time, a deeper external dependency in every sphere of economic life has transformed the region into a more vulnerable victim of financial turbulences abroad. During the present stage, the region reduced its participation in world production, from 8.7% in 1973 to 7.7% in 2006. Differences in per capita income with developed countries also heightened. From 2.5 times in relation to Europe in 1973, it jumped to 3.2 times in 2006. Differences with Europe had grown between 1950 and 1973, a period when that region was very actively engaged in economic reconstruction and expansion. It is interesting to see that the same differentiation did not take place with other advanced regions during the previous stage. According to an ECLAC report, per capita income from a group of countries including Australia, Canada, the United States and New Zealand was 3.7 times that of the region in 1950 and the difference did not grow until 1973; on the contrary, it declined slightly to 3.58 times. Yet, from 1973 to 2006, the difference in income went up to 4.64 times (CEPAL, 2008). The annual GDP growth rate per employed person between 1992 and 2003 was very low at 0.1%. It later rose to 1.9% during 2003 and 2006, for an average annual rate of 0.6% for the years 1992–2006. Such meager economic results would not bode well for employment. Before revising the data, it is important to note that there are factors inherent to this form of economic growth in addition to the slow growth that affects employment levels. On one side, export enterprises work with a higher organic composition of capital with the aim of reaching acceptable performance in terms of productivity levels as demanded by global competition. A lesser amount of labor force is required for mobilizing a unit of capital. On the other hand, protection of the industry producing for the domestic market was almost completely dismantled and it was forced to either restructure or go into bankruptcy. The ability of this industry to attract a labor force was seriously damaged. For example, the weight of personal consumer goods in total imports had fallen from 23% in 1948 to 15% in 1970, this during inward-oriented growth. The new pattern of industrial colonialism severely hampered the continuous growth of this sector and imports of consumer goods rose from 14% to 17% between 1990 and 1998. The rate of unemployment in Latin American and the Caribbean has been correspondingly high. In 1994, it was at 8.2%, increasing to 10.4% by



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2000 and hovering at 7.5% in 2008. Indeed, these figures are not far off those of many developed countries. What is more astonishing is the level of so-called “informal employment” that according to official estimates (CEPAL, 2009) constituted around 50% of total employment from 1994 to 2008. This sector includes independent workers, family and apprentices, micro-business workers and domestic service workers. We will attempt to produce a more proper account of this in the following chapter. Suffice to say for now that it is mostly made up of workers who are not directly involved in the wage-labor capitalist relation and who are therefore pushed to seek independent occupational alternatives. The very precarious labor conditions of the informally employed sector barely allow them to make a living. Just while it was assiduously expanding, Latin America had become the world’s most unequal region. Poverty intensified and eventually reached an unprecedented magnitude. Official figures registered 40.5% of the population living in the condition of poverty by 1980, growing to 48.3% in 1990, and then declining to 44% in 2002. Since then, after a six year period of continuous economic growth, poverty was reduced to 33% in 2008. Yet, as a result of the world crisis, millions are once again joining the ranks of poverty and indigence. In absolute terms, the population living in poverty rose from 135 million in 1980 to 180.4 million in 2008. As a harsher social exclusion lashed the region, political governance became much more complicated. The political sphere and social sentiments drifted ever further apart. Between 1990 and 2002, only 62% of those citizens entitled to vote actually cast their ballots and no more than 56.1% of votes were validated. In countries where voting is not compulsory, popular participation was even lower, such as in Colombia (33%) or Guatemala (36.2%). Electoral abstention tended to increase and this was the case of Mexico where it accounted for 42.3% of citizens in 1997 and 58.3% in 2003. At the beginning of the present century, only 43% of citizens professed to support democracy and no more that 20% backed existing political parties. Less than 40% had trust in the judiciary, police, heads of states and armed forces and even television had less than 50% of popular credibility (UNPD, 2002). The political and ideological institutions of Latin American capitalism were far from behaving as required for a smooth development of society. They lost much of their energy as sources of legitimization for domination. Social unrest would increasingly find new channels to express itself. Successful paths were blazed in Venezuela, Ecuador and Bolivia on the basis of leaderships which exhibited a tough stance against neoliberalism,

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mobilizing huge support from large masses of the politically excluded. That is where the end of the third stage started to work out its path, from those most excluded who emboldened a leadership no longer committed to the reproduction of traditional establishments. The outcome cannot be foretold, but export oriented growth has clearly become severely questioned. The deepening world crisis will reinforce the search for an alternative course. As R.A. Dello Buono and J. Bell Lara have put it: However resilient that system of domination may be, we believe that an insistence on imposing and prolonging neoliberal policies in the face of sharpening social contradictions will continue to produce conditions propitious for new social explosions. It is our view that under certain circumstances, these contradictory social processes can ultimately lead to different, unanticipated and possibly more transformative results (2009: 5).

Political Regimes at the Third Stage By politics, we refer to the praxis that regulates a social conflict based on class division. Politics revolves around class domination and a society without politics can only be imagined as a classless society. In class societies, the state is the main political agency. Each form of class domination conditions both the state’s organization and its activity. Within a particular historical form of the state, modes of political regulation are also linked to the society’s economic organization and condition. During the last seven decades of capitalism, we have experienced two main forms of political regulation. On the one hand, authoritarianism (where we find liberal dictatorships, totalitarian states, and presidentialism),1 and on the other, liberal democracy, which has operated under two versions: inclusive and exclusive. The two versions of the latter form are linked to the proposals for the economic organization of society that came into practice through Keynesian politics and neoliberalism respectively. Keynesian politics, based upon consumption, focuses on domestic markets, and therefore, places a certain importance on wages. This approach made room for the social contract which characterized capitalist evolution from the second post-war period (and earlier in Latin America, with the emergence of the populist state) until the early 1970s. 1 By “presidentialism” we mean a state with the following features: a strong executive power which controls the legislature and judiciary, with corporativism and elections also controlled by the executive power.



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Overall, this was a period when society witnessed a continual flow of class concessions, thanks to which large swaths of the popular sectors saw themselves enjoying the fruits of economic growth. These sectors managed to develop reasonable prospects of having a job, a place to live, and access to health and education services. The so-called “Welfare State” provided a material basis to these prospects. Political parties acted as dynamic agents promoting this steady flow of concessions. Neoliberalism put an end to these class concessions and the overall social contract that had crystallized, in favor of a new regime of policies towards the popular sectors and their social class organizations. This political shift was a key element in confronting the economic crisis that had become incubated during the 1960s and had begun to reveal its major fault lines in 1967–1968 and then again in 1974–1975. The first aim of neoliberalism was the recovery of the rate of profit and this implied that the social correlation of forces was destined to become modified. Attacks on trade unions in the US were mounted during the second part of the 1970s at a time when they had already become generalized throughout southern Latin America. The highest expression of this process would become felt during the Reagan administration when economic decline and cutbacks in state expenditures, including for technological innovations, translated into unemployment. The expansion of unemployment helped to weaken the labor movement everywhere, allowing the state to back away from the prevailing regulation of labor relations. In its place, “labor flexibility” was introduced by means of which almost unconditional power over labor was transferred to the bosses. Exclusive Democracy in Latin America In Latin America, governments seem highly vulnerable to the pressures from organizations, enterprises and governments of the advanced world. But in this region social reorganization against the labor movement adopted particularly severe characteristics. Income redistribution led to the concentration of wealth during the 1980s, a process that became consolidated during the 1990s. In Argentina, Bolivia, Brazil, Costa Rica, Ecuador, El Salvador and Nicaragua, the position of the impoverished worsened even further while the richest 10% of the population increased its share of national income. Towards 2000–2002, this latter stratum received an income equal to 19.1 times that obtained by the poorest 40% of the population. Between 1980 and 2002, the population living in poverty grew from 40.5% to 44.0% of the total. Their total number increased

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from 135.9 million in 1980 to 221.4 million in 2002. By the end of the 1990s, the number of malnourished people in the region reached 54.0 million (CEPAL, 2003b). In other words, it did not take long for neoliberal policies to substantially modify social class relations. This oligarchic income distribution was accompanied by the consolidation of a wide and growing sector of excluded people. The appeal for them to participate in electoral democracy was not supported by their economic integration. This is the main obstacle for electoral democracy: political inclusion cannot be successful if it goes hand in hand with economic exclusion. All of this was bound to have an impact upon the political workings of society and it did. The political game was abandoned by a large portion of society and its legitimating power became seriously eroded. There is no doubt that a large part of the criticism of electoral democracy comes from economically excluded people. A survey by the Centro de Estudios para un Proyecto Nacional (IFE, nd) on electoral abstentionism in Mexico came up with the following results: Electoral abstention and levels of income evolve in an inverted •  relationship. • The least educated abstain the most. • Rural abstentionism is greater than urban abstentionism. • Abstention is greater in districts with a large self-employed population. Given the extreme state of affairs, a substantial and growing layer of the population indicated in region-wide polling that it would not mind having an authoritarian government if it was able to solve their economic difficulties. In Mexico, the percentage of voters who thought this way went up from 39% to 41% between November 2002 and April 2004. However, this opinion survey should not have just a single interpretation. Each society has the image of an authoritarian government that has been built from its own experience. While in Chile and Argentina, for example, authoritarianism is linked to murder, torture, jail, exile, hunger, unemployment, open repression, “disappeared” people, and so on, Mexico’s experience under presidentialism yielded authoritarian governments that were much more moderate and which operated through a weak but long lasting social arrangement with a reasonable amount of freedom at the community, grass roots level. In the case of the South American countries, it is very doubtful that poor people or even the majority of them would be willing to support an authoritarian government.



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Current democracy in this light seemed to be waging a campaign against itself. Its internal logic appeared as an obstacle to its own development as it promoted rejection instead of support. But an important question cannot be avoided: is the behavior of the popular sectors anti-democratic? Professional politicians would be willing to think so. It must be said, however, that what popular sectors are rejecting is not democracy but rather exclusive democracy. They do not see themselves as participating in a project that does not take into account their fundamental needs and which on the contrary condemns them to misery. But it must be pointed out further that we are dealing with a project that limits itself to the recognition of political rights that cannot effectively be enjoyed from a poverty-stricken position. Electoral democracy has a cost that some are unable to pay and popular abstention ultimately reflects this situation. Additional Contradictions of Exclusive Democracy The failure of neoliberal, exclusive democracy is to be found in its own contradictions. Neoliberal globalization, conducted by large transnational capital with the aim of eliminating all regulations and concessions imposed by historical conditions in the past, has seriously reduced national agendas in the region. Not even the orientation of their economic processes is discussed internally since they are defined abroad. Neoliberals try to hide this reality by spreading the belief that economic decisions are now in the hands of markets, an entity that listens, reacts, promotes, put things in order, and whose “wise” leadership sets people free from state pursuit. But as our analysis shows, the result is the same as nations become alienated from a large part of their ability to make decisions. National fractions of the ruling block have been pushed into increasingly more subordinate positions. Institutions such as the International Monetary Fund (IMF), the World Bank (WB), the InterAmerican Development Bank and the Organization for Economic Cooperation and Development (OECD) design and deliver their “recommendations” on economic policy, health and social security or any other relevant matter. An insatiable need for credits and investment makes Latin American countries submit to an autocratic decision-making process, where the client-state limits itself to presenting the external directives as its own creation. Not only are sovereignty and democracy thus eroded, but so too are any serious possibilities for authorities to discuss a more favorable arrangement with the poor.

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Along the same lines, neoliberal globalization reduced the state’s capacity for making concessions. For that reason, the politician’s ability to alleviate social problems has also been smashed to bits. Just like the national agenda shrinkage has led to the loss of parliamentary prestige, so too has a careless neoliberal attitude towards the social problems of the popular sectors discredited politicians and their political parties. C.B. Macpherson (1982) in a brilliant analysis came to the conclusion that the role of political parties was to blur class contradictions. He would probably be annoyed about the present environment where political parties are situated in a way that does little more than further aggravate class contradictions. Political parties act in such a way because they answer to nobody. As organizations, their struggle has been to gain power for themselves as they opted for indirect popular representation, thanks to which they enjoyed considerable autonomy concerning social demands. But in so doing, political parties have moved further away from society and at best remain pigeonholed as mere state agencies. The internal life of political parties is an expression of this situation and Panebianco (1990) envisaged this as an evolution caused by the internal logic of party organizations. It also appears now to be a result of external circumstances. They have caused a drastic cut in ideas, not only outwards but also inwards, partly due to the reduction of problems that are subjected to local decisions. They have no important causes to fight for and instead of opposing the neoliberal offensive, they opted for adapting themselves to a neoliberal logic. “The best policy is to have no policy” seems to be the motto of politicians under neoliberalism. Solidarity between party members gave way to competition and costly electoral campaigns have deepened party subordination to governments, private enterprises, especially private mass media, and financing sources in general. Internal democracy could only suffer in this situation. Electoral democracy under neoliberalism cannot be maintained even conceptually. According to G. O’Donnell (2004) whose theoretical work provided a framework for empirical research by UNDP, a democratic regime is one where the main political positions (at least executive and parliamentary) are decided by means of fair elections. For an election to be fair, it must be: a) competitive; b) free; c) a single vote for each single person; d) decisive, that is, the positions for which candidates are competing must be currently occupied; e) inclusive, inasmuch as every adult that meets the nationality requirement can participate, and f) institutional, that is, it must take place in a context of regulated electoral activity so that the population is confident about elections taking place as planned.



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In addition, for an election to be free there must be freedom of expression and association and access to plural information. O’Donnell considers that this concept can be found in current applications in Western countries of the Global North but that its presuppositions (i.e., universal political and civil rights, homogenous legality throughout the national territories) are not present in Latin America. His criticisms of the Latin American reality are really very acute. He points out that the popular sectors have no real protection against public and private violence, that their access to public services is unequal, and that they suffer from continuous humiliations, etc. He also finds that states are “economically colonized” by foreign interests and for that reason they are “bureaucratically inefficient,” whereby they do not accomplish their legal function. Nor can they act as “filters and moderators” of social inequalities. On the contrary, Latin American states remain “deaf” to equity demands. Then, why does he speak of democracy in Latin America? He does so because he thinks that the political regime and the state are different entities, which, for analytical purposes, should be accepted as valid. In spite of his complex way of reasoning, it seems fair to conclude that in his opinion, the democratic regime has to do with the generalization of political rights while the state deals with social and civil rights. But the analytical distinction loses its utility very quickly. Indeed, the political regime is the external, historically conditioned, manifestation of the state and reflects the way in which the state regulates social conflicts at a given moment. The state changes its form of manifestation, but it cannot operate with­ out the latter. A comprehensive, theoretical definition of the state should not leave aside the political regime, much less so when it comes to practical experiences. We are dealing here with Latin America’s present reality and the inseparable connection between social and political rights can be seen clearly. In order to participate in a fair election, one should be aware of the different options that politicians are offering. Such a position is denied to the hungry who cannot even think of information costs. Their right to participate in a fair election, therefore, does not exist and remains a dead letter. If O’Donnell accepts, as he does, that it would not be consistent to recognize rights when the means to enjoy them do not exist, this is due to his own lack of consistency, which is not alien to the contradictions inherent in Latin American democracy. His assertion that there is no way of measuring the necessary means to enjoy political rights is no excuse. His conclusion in the final analysis should have been that there is no democracy in Latin America.

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Perhaps a more appropriate approach would not deny the existence of liberal democracy in the region, but rather focus on its mode. This would lead to a better understanding of Latin America’s present democracy. During the last few decades, we have witnessed two contradictory processes which shape the realization of democracy: on the one hand, a generalization of political rights, and, on the other, a retreat of social rights. There has been an advance in the first regard and a setback in the second. In this, the way towards the generalization of formal political rights is also its actual particularization. This is historically a new situation which cannot be grasped with the old theoretical tools. Democracy is a process, not a frozen situation. It is reasonable, then, to expect that the use of political rights could serve the aim of expanding social rights. This seems to be the experience as it continues to develop in Venezuela, Bolivia and Ecuador after progressive governments came to power. But when locked into neoliberal government proper, one fact stands out: democratization in the region looks more like an inverted process. In effect, support for parliaments has fallen, popular dissatisfaction with democracy has grown, and participation at the ballot box has diminished. This is not taking place on account of a reduction of political rights. Mexican governments during the last decade have made a worthy effort to construct a reliable electoral system. Yet, abstention, as we have already seen, increased, along with the number of people who were not satisfied with democracy. The latter reached 58% of the population in April 2004 (El Universal: 2004). This inverted process of democracy goes hand in hand with increasing poverty and inequality, which accounts for the fact that popular sectors have not been able to penetrate political institutions. Control of the state by political oligarchies and bureaucracies, with the support of mass media, does not seem to be in any great danger by means of conventional party competition under neoliberalism. This is why in some countries such as Argentina and Bolivia people resorted to their own means to protest and to fight for their demands. Yet, popular sectors cannot just ignore political institutions. Those who control the social means of violence are in a better position to successfully impose their will. For this reason, popular movements have been willing to accept reliable leaderships coming from outside the neoliberal establishment. By means of mass mobilization, they have actually been able to exert some real influence on political institutions. In the face of this, reactionary authoritarian positions are developing everywhere and political polarization is growing.



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The immediate challenge ahead consists of creating conditions that make it possible for the population to effectively enjoy political rights. This means reverting the prevailing economic orientation, paying attention to domestic markets and striking a new deal with imperialist countries with a view to overcoming the region’s subordinate integration into the world market. If successful, popular action could contain nowadays authoritarian tendencies and promote a change of the current mode of liberal democracy. If a new government cannot create a new economic and social organization of society, an inclusive democracy will simply not come into effect. Climate Change in Latin America Concern about climate change in the region has followed the calendar and the emphasis decided upon by international organizations, especially those of the IPPC. Most of the various published works on the subject share a common description of the region’s main features in this regard: • Latin America’s participation in global gas emissions is low, reaching only around 12% of global emissions. The origin is to be found mainly in changes of the use of soil, agriculture and energy consumption. The share of each one of these three sectors as a source of emission is similar, ranging around 30%. Through the third stage, energy consumption was the factor with the most dynamic growth due mainly to the expansion of industry and transport, which tripled their energy consumption (Samaniego, 2009). • Despite the low emissions, the region is extremely vulnerable to the effects of global warming, especially due to the existence of insular states, areas of low coasts, exposure to epidemics and extreme weather phenomena and a heavy dependence on the melting in the Andean area. All these conditions make global warming a particularly dangerous phenomenon for the rich biodiversity of the region. • The region is the location of enormous natural riches. It has the largest reserves of hydric resources and cultivable lands, 25% of the world’s wooded areas and five of its countries are among the few that enjoy biological mega-diversity. This richness is unevenly spread in the region and it is believed that global warming will have unequal impacts depending on its advance and on the place affected. • The region’s ability to adapt to climate change is very low and it is anticipated that the latter’s negative effects will be especially hard.

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Given that most emissions (around two-thirds) are produced by developed countries (included some of the so-called “emergent countries” such as China and India), the general conviction is that no matter what the region does to face climate change, these actions will have very little or no impact at all. For that reason, governments tend to focus on demanding deeper commitment and meaningful actions from those countries where the larger amount of emissions is produced. The largest polluters should undertake major economic internal changes and deliver support for adaptation and mitigation to those countries like those of the region which actually are less responsible for global warming. Conclusion Large local capitalists, closely tied to transnational corporations, enjoy no freedom to decide on the pattern of industrial expansion. They did not decide their previous industrial trajectory and show no major interest in or capacity to influence the coming industrial strategy. They will not be able to provide an original answer to the current problems facing development. The very “economic well-being of the nations” appears to be a strong argument for governments to authorize measures that promote climate change instead of alleviating it. The insatiable need for external resources calls for politics that stimulate foreign investment without paying much attention to their impact on eco-systems. Lax legislation and environmental controls that are practically left unenforced represent typical features of industrially colonized economies. When certain legal restrictions to industry are recognized, this is mostly due to the fact that the importing economy demands certain quality standards for their own productive or personal consumption at home. It goes without saying that production for the domestic market represents the best opportunity for the location of foreign environmentally dirty industries in underdeveloped countries. The list of reasons that prevent the region from even approaching a proper answer to the challenges that climate change represents must be expanded. We can assume that capitalism could reduce the present level of hostility against nature. Yet, a weak and peripheral science, such as that found in the region, cannot provide great initiatives related to the transition towards a greener, less contaminating capitalist economy. On the contrary, it is widely accepted that this weakness of the region represents



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a crucial obstacle for embarking on original programs to counter climate change. For instance, a work published by the United Nations Environment Program (UNEP) and the Ministry of Environment and Natural Resources (SEMARNAT) in Mexico affirms that adaptation to climate change that is not purely spontaneous demands consideration of a wide range of intervening factors among which sound scientific analysis is central. After contrasting these requirements with the region’s reality, it is concluded that: “Adaptation is nowadays a major priority for developing countries, which are twice as vulnerable to climate change, because of the latter’s physical effects on them and their technological, technical and financial inability to embark upon adaptation studies and actions to mitigate its effects” (Garibaldi & Rey, 2006: 81). Similar concerns have been presented from ECLAC. Nicolo Gligo V. elaborates on the role of science in the struggle against climate change following the “styles of development” line of thought. He stresses the negative effects of the non-critical absorption of foreign technological patterns over local eco-systems: What is really paradoxical (of this damaging absorption) is that in many cases the very region’s research centers participate in the adaptation of these technologies. Funding for research comes from advanced countries and many local researchers and centers resort to agreements with the financing sources with a view to acquiring the necessary resources for their work and as part of their survival strategy. The fabric of dependency grows stronger as a result of the lack of resources for technological research (Gligo, 2006: 42).

This is a clear example of the pressures that put local science, or segments of it, at the service of foreign capital expansion in the region. There is no room to expect an autonomous answer to the challenges that climate change poses from the local capitalists and pro-colonial governments, even if a solution was dependent on the region. Yet, developed countries are also far from leading a determined struggle against climate change. The UN Environment Program (UNEP) assessment of the actions oriented to adaptation and mitigation is, without a doubt, frustrating. It reports that “At the end of the first half of 2009, only around 3 per cent of committed green funds had been disbursed; that a big gap remains between government’s public statements and facts, and that overall, the amount allocated to renewable energy falls short of the investment needed to reduce carbon emissions and to keep the rise in global average temperature under two degrees Celsius. Some incentives, such as subsidies to the

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production and consumption of fossil fuels, are working against efforts to build a sustainable future” (UNEP, 2009: 10). In developed countries the main obstacle to the struggle against climate change is the profit-seeking drive of capitalism, the same dynamic that has produced and sustained global warming, especially in those countries where private capital has achieved the most radical dismantling of regulations, weakening the state function as guarantor of capital’s general interests. Underdeveloped countries, as we have seen, face additional obstacles. For that reason, the true fight for a humane relationship with nature, that is, one that rationally reorganizes the symbiosis of mankind to its environment, ultimately involves a radical transformation of global social relations. Nonetheless, it cannot be ignored that the present reality is posing challenges that require an urgent response. Such challenges, to the extent that they involve science, could stimulate the creative abilities of the region’s universities. There is a lot to be learned as it is necessary to develop alternative energy sources, adequate cultivation, new technologies for a more efficient use of energy, methods for the defense of biodiversity, and so on. But there are also more elementary conditions to be met. As Gligo puts it: “The scientific strategy for tackling the environmental issue must necessarily take the scientific knowledge of the territory as its point of departure, including the performance of the eco-systems and especially the territory’s biodiversity and the workings of the artificial environment” (2006: 42). The challenge is enormous and it is particularly addressed to those university faculty members most committed to the defense of the environment and to the opening of alternative technological paths. This segment of academic personnel, which is already organized in international networks, is not alone. They have important allies, notably those progressive governments interested in developing an autonomous science, oriented to the region’s specific problems; important trade unions that have agreed on the need to take action within the fight against climate change; small and medium enterprises, including small agriculture, which are very much in need of solutions to their countless difficulties, and others. Sooner or later goods and services production will have to resort to environmentally clean technologies in a generalized way. The region’s universities should participate actively and creatively in this transition while at the same time building a new social role for themselves that is more closely connected to the needs of the popular sectors.

CHAPTER FOUR

INDUSTRIAL COLONIALISM AND SURPLUSES OF POPULATION It is scarcely fashionable these days to credit natural population growth rates for their ability to explain poverty in Latin America. Indeed, the unemployed and poorly employed people appear able to offer much more solid arguments. Widespread precarious jobs are to a large extent a product of unemployment, for the latter points to the overall worsening of labor conditions. And the greater the unemployment rate, the stronger its negative pressure on labor conditions. In discussing poverty, therefore, it is important to focus on what the causes are of the over-supply of labor. The present chapter discusses the origins and manifested forms of surplus population in Latin America. It is argued that the ultimate cause of a far larger than necessary industrial reserve army, i.e., surplus population, is in fact industrial colonialism and the ensuing underdevelopment that it spawns. We will begin by briefly discussing some attempts to explain surplus population by using the Marxist theory of accumulation as our theoretical framework. In order to offer our own solutions, we attempt to address what we see as obstacles to the understanding of surplus population. They will produce the context in which we intend to categorize the manifested forms of population surpluses and their class situation. The significance of surplus-population vis-à-vis the process of accumulation of which it is a result is by no means homogeneous. In the discussion of this population’s position with respect to capital and its manifest forms, special attention will be paid to pirate capital workers and homebased domestic labor. The most general propositions that result will serve as a framework for discussing the complex problem of international migration. The Over-Supply of Labor-Power and Surplus-Population Theory A variety of theoretical perspectives have taken interest in the phenomenon of the over-supply of labor-power in order to grapple with its economic, social and political importance. Raúl Prebisch conducted one of the first efforts to tackle this problem in the context of an overall

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conception of the Latin American reality. His results in this connection figure prominently as part of the seminal views associated with the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). Prebisch believed that labor-power expelled from agriculture by the introduction of machinery was generally not attracted by the industry producing that machinery because that kind of industry simply did not exist in the region. Therefore, local investment favored employment in those countries that produced machinery, but had no positive effect internally. This was certainly an important reason for pursuing industrialization in the region (CEPAL, 1951). While Prebisch made a critical point, his theory in this regard did not find a proper place in the further evolution of ECLAC thought. Meanwhile, the dualist school played a conspicuous role in the Latin American debate while believing labor over-supply to be a constituent element of the transition to the modern economy. Perhaps it was A.W. Lewis who produced the most elaborate model regarding the form of this transition (Gersovitz et al., 1985). Both ECLAC structuralism and dualism managed to influence the prevailing approaches to a growing informality in the region’s economies. The ILO Regional Employment Program for Latin America and the Caribbean (PREALC, 1981) stood by the structuralism being touted by ECLAC while the works of Hernando de Soto (1987) and H.C.F. Mansilla (1996) were more exemplary of dualism. Alongside these schools, which certainly won an outstanding place in Latin American social thought, was Marxism and it is Karl Marx’s theoretical system that serves as a framework for the following arguments. The immediate inclination for Marxist arguments is to represent the redundant population as the industrial reserve army that results from changes in the composition of capital. The development of productive forces sets labor-power free to serve accumulation and economic growth elsewhere. In this way, production is able to proceed without the restrictions that could result from the natural increase in population. The relative magnitude of overpopulation varies with the industrial cycle that goes through periods of expansion and recession. Its modalities and rhythms are adjusted according to the historical circumstances of capital development. It is precisely such historical circumstances and especially the magnitude of the region’s surplus population that stimulated the search for explanations beyond the general theorization contained in Marx’s Capital.



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Efforts conducted by Anibal Quijano (1977) and José Nun (2000) since the end of the 1960s in this regard were especially outstanding. In reality, the arguments of both are very similar. They consider that the emergence of monopolies modifies the conditions of the production of a relative surplus population. The economy’s most advanced sectors do not require a labor-power reserve for their expansion. As a result, the ability of production to absorb labor becomes weaker, which is why a portion of the unemployed becomes permanently redundant for capital and does not act as a reserve army. This sector of the relative surplus population was named a “marginal pole” by Quijano and a “marginal mass” by Nun. A large part of Nun’s theoretical efforts were oriented to demonstrate that the marginal mass created by capitalism does not have any functional effect on capital, contrary to the “industrial reserve army”. For his part, Quijano tries to expound on the links that result in the marginal pole of the social sector becoming most severely damaged by capital’s rule. Both of them firmly reject the accusations of dualism that the idea of “marginalism” seemed to legitimate. But their discussions of the issue paid little or no attention to a more important question, namely, the problem of the causes that produce an overflowing surplus population in Latin America. This phenomenon should in turn have pointed an analysis to the question of the specific socio-economic organization of capitalist underdevelopment. In fact, for both authors, a surplus population existing side by side with the industrial reserve army is a generalized phenomenon in capitalism regardless of a country’s respective position in the world market. Some of Nun’s first propositions on extended surplus population are still relevant to this point, but a crucial turn of the author over the last few years has weakened the original explanatory power of his position. Nun abandoned his original adherence to forces that show the excessive surplus population as a necessary phenomenon of capitalism. (Nun, 2001: 31–33) Quijano, in turn, seems to swing between two possible causal routes of marginalism. He appeals to a famous passage of Capital where Marx affirms that the industrial reserve army tends to grow faster than the employed active sector of the working class whereby capital advances towards the creation of a consolidated surplus population (Marx, 1990: 798). The author explains that: “In this well-known passage, Marx considers as ‘consolidated’ the part of the relative surplus population destined, on the course of development […] to be a victim of a continuous condition as leftovers in relation to the needs of capital accumulation” (1977: 21). In fact, it would be a sector of the surplus population that does not act

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as industrial reserve army, that is to say, as labor-power that exists for the satisfaction of accumulation needs. According to Quijano: “…this is the part of the relative surplus population that has been called “marginal” in the Latin American sociological debate” (1977: 21). Marx had not worked on this sector because the conditions for its emergence in pre-monopoly capitalism did not exist, Quijano argues. However, the author does not tackle the inevitable question of how Marx arrived at the tendency towards the creation of a consolidated surplus population by analyzing only “the capitalism of his own time” with conditions of free competition. On the other hand, Quijano attempted to uncover the historical forms of the process that ultimately created a marginal pole. He affirms that the process of disintegration of pre-capitalist relations has not been completed in Latin America, a situation that continuously throws new contingents into the labor market. At the same time, monopolization and internationalization of capital have already matured, thanks to high technological levels, in enterprises where the demand for labor has been practically reduced to nil. Thus, the creation of the relative surplus population exceeds the capacity of accumulation to absorb it, making it grow beyond production needs. In Latin American countries, the situation becomes worse because the expansion of capitalism, led by imperialist capital, did not rest upon the existence of already developed local circuits. In addition, monopoly capital not only works with a higher technical composition of capital, but it also counts on production and realization facilities in the imperialist countries which moreover obstructs the region’s internal growth. That is why the process that creates a surplus population “in the whole capitalist system, at all levels, has in these countries become especially prominent and to such a point that it has created a particular sphere of social research in Latin America” (1977: 15), i.e., the sphere of marginalism. It can be seen that historical and logical paths run independently from each other. The category of the consolidated surplus population was elaborated by Marx to designate a logical result of the development of capitalism at the level of the essential relations of production. Capital represents the historicity of a mode of production as a result of analysis. It is not intended to reflect reality directly nor does this analysis have as its aim a special stage within this mode of production, but rather the analysis of capital in general (Rosdolsky, 1980). For this reason, it includes the study of the forces that generate it, develop it and produce its decomposition (Marx, 1990: 102). In addition, Marx expounded his theory of surplus



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population after the introduction of his thesis of the concentration and centralization of capital. The category of consolidated surplus population cannot lend support to Quijano’s thesis because its place in capitalist development as well as the forces that create it is different from those of his marginal pole. It is not mechanically correct to resort to general theory in order to explain concrete historical processes and much less so if historically concrete relations of production are ignored. The consolidated surplus-population is one of the elements in a process of disarticulation of the capitalist social relation of production and its contradiction with the development of the productive forces (Figueroa, 1989; 2003). The repulsion of workers tends to be greater than their attraction. At a certain point, the fall in the number of active workers can no longer be compensated for by an increase in the rate of exploitation with the desired result of preventing the fall of the rate of profit. The introduction of new means of production would do nothing but aggravate the situation still further (Marx, 1991: 355–56). Capital thus tends toward the creation of an absolutely redundant surplus-population. Marx, however, terms it relative surplus-population and so this point merits a brief discussion. Marx maintains that the capitalist accumulation produces “in the direct ratio of its own energy and extent” a relatively redundant population of laborers, a population of greater extent than suffices for the “average needs of the valorization of capital and therefore a surplus population” (Marx, 1990: 782). This overpopulation is “an industrial reserve army at the disposal of capital” and contains “for the changing needs of the valorization of capital, a mass of human material always ready for exploitation” regardless of the limits of population (1990: 784). Its relative character comes from the fact that it serves capital every time new industries are created or existing ones expand. Thus, the expression “excessive for the average needs of the valorization of capital” must be understood as referring to a surplus-population in relation to the capital in operation. The relative overpopulation in Marx is the essential human material for future capital, that is to say, for the capital that will become such after the expansion of the existing industrial branches, insofar as this expansion requires it, or in the creation of new industries. That is how the definition of the surplus population as “a condition of existence of the capitalist mode of production” becomes meaningful. To summarize Marx’s position, a relative overpopulation is a working population in excess of the needs of the working capital but necessary for capital expansion. This is why its

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magnitude increases in periods of stagnation and shrinks in periods of expansion. So, the idea of a relative overpopulation, equivalent to the industrial reserve army, appears perfectly coherent at first and merits no objection. However, it is when defining its actual forms of manifestation that a couple of difficulties arise. What Marx does in this case is effectively describe situations of his own time. Marx detects three forms existing at the time: floating refers to the workers that are sometimes repelled, sometimes attracted again by industrial production. The latent form refers to those workers expelled from production by the introduction of capital in agriculture, without the expulsion being compensated for by the attraction of those workers in the countryside. That is why their more certain destiny is emigration to the cities. Stagnant overpopulation, the third form, is less clear. According to Marx, “This forms a part of the active labor army, but with extremely irregular employment” (1990: 796). The question arises if by being a part of the active working population and involved directly in the valorization of capital, why is this population a part of the relative overpopulation? Marx upholds that the main profile of a stagnant population is domestic industry, and he adds: “It is constantly recruited from workers in large-scale industry and agriculture where handicraft is giving way to manufacture, and manufacture to machinery” (1990: 796). If its source of labor-power is the supernumeraries created by the accumulation of capital, then it could be the case that the shift of workers just represents changes in their position as members of the relative overpopulation. But this is not the case because domestic industry, according to Marx, is a sphere “in which capital conducts its exploitation against the background of large-scale industry,” that is the capitalist sphere of exploitation erected in the backyard of large industry (190: 595). It is an extension or “an external department of the factory, the manufacturing workshop or the warehouse” (1991: 591) and it is directly an object of capitalist exploitation. Therefore, those workers should be considered members, not of the relative overpopulation, but of the active labor army. Of course, we only refer here to the case in which the industry provides the means and the materials of production, while the workers only contribute their labor-power and receive a wage. In Capital a fourth group is included: “The lowest sediment of the relative surplus-population dwells in the sphere of pauperism” (1991: 797). Here, three sectors are included: a) those able to work; b) orphans and pauper children, and c) the demoralized and ragged and those unable to work. Marx’s discourse at this point is somewhat confusing. Although he



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seems more interested in the position of these sectors vis-à-vis accumulation and employment, especially concerning the two first types, the case is that we are not dealing here with categories of the relative surplus population, but rather with living conditions in the midst of the latter. Pau­ perism can exist within any category of the relative surplus-population, and, as a matter of fact, beyond this category, as we shall see later on. The case of the third group inside pauperism is somewhat distinct because pauperism is linked here to the inability to work. They are, moreover, a product of accumulation. The problem is that they do not meet any need of accumulation, neither present nor future. This sector cannot thus be considered a “condition of existence of the capitalist mode of production.” Marx himself defines them as a burden for capital, one which enters in the fraux frais of capitalist production (1991: 797), creating a diversion of resources that could otherwise be useful to the valorization of capital. In fact, they are elements of an absolute surplus-population, a sort of advance of the consolidated surplus-population that capitalism is bound to create in its higher stages of development. Generally speaking, it is certainly true that no human being is absolutely redundant. This proposition only refers to the position of a sector of proletarians in relation to the needs of capital valorization. In other words, they stand in relation to their meaning for capital and this essentially points to the scant attention that capital pays to human needs. The forms of existence of an absolute surplus population must tend to multiply and grow beyond the sphere of those who lack the means to survive such as criminals, vagabonds and the like, to include parallel forms of labor organizations, different ways to earn an income, stimulated by necessity and social imagination. Their existence or non-existence at the present time, as a result of the described logic, can be and must be an object of discussion. However, there is no doubt that this situation has not been a permanent characteristic of imperialism in developed countries. In underdeveloped countries, on the contrary, their presence is visible, but their explanation will still have to overcome some theoretical difficulties. We cannot continue without resolving the uneasiness that the concept of relative surplus-population still provokes. If it refers to a labor reserve army that is essential in order for accumulation to proceed, i.e., a condition of the capitalist mode of production, why should it be called “surplus” population, even if it is “relative”? It does not seem coherent to do so because these workers are not leftovers who are not wanted or needed but on the contrary are a necessary population for capitalism and not precisely in a relative sense.

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We think that Marx’s options in this connection are determined both by his aims and his method. He studies capitalism as a closed system where everything appears organized around the capital-wage labor relation and where this social relation is the ultimate determination of everything. In that context, the production of surplus-value, the exploitation of labor, appears as the fundamental driving force of production. This relation is constantly moving and does not stop at anything other than its own contradictions. This method, which allows him to construct the most extraordinary representation of capitalism as a mode of production, sometimes leads to proposals that are unsustainable when the point is to analyze societies in their concrete historical processes. This is the case when he suggests that the laborer who works with his own means of production, like the craftsman or the peasant, could be seen as a capitalist and as a wage-worker at the same time. If he appropriates his own surplus labor, then he should be taken as a capitalist while as a proprietor of his necessary labor, he is to be considered a wageworker. The fundamental assumption is that separation and not the unity of the direct producers and the means of production is the normal relation. In addition, he thought that the tendency of the craftsman and the peasant was to become either a capitalist or a wage-worker. So, “in considering the essential relations of capitalist production, it can therefore be assumed that the entire world of commodities, all spheres of material production – the production of material wealth – are (formally or really) subordinated to the capitalist mode of production for this is what is happening more and more completely…” (Marx, 1969: 409. Part I). In this context, it is only logical to call the sector of society that does not own means of production and that is unemployed a “surpluspopulation.” Elsewhere, Marx explains his point of view in this regard as follows: The owner of labor power “can live as a worker only in so far as he exchanges his labor capacity for that part of capital which forms the labor fund […] In different modes of social production there are different laws of the increase of population and of overpopulation; the latter identical with pauperism. These different laws can simply be reduced to the different modes of relating to the conditions of production […] The dissolution of these relations in regard to the single individual, or part of the population, places them outside the reproductive conditions of this specific basis, and hence posits them as overpopulation, and not only lacking in means but incapable of appropriating the necessaries through labor, hence as paupers” (Marx, 1977: 604). Thus, here it can be seen that other



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forms of labor organization are of no interest for the sort of study that Marx was carrying out. Those who are not actively participating in production dwell outside the relation of capital and in connection with the latter they exist as surplus-population. Once Marx introduces his theory of the industrial reserve army as presented in Capital, it can no longer be said that the surplus population, or at least a part of it, is “outside the reproductive conditions of this specific basis” in this case, the basis being capitalism. On the contrary, it is clearly a condition for it. The approach according to which all the unemployed are “surplus” population should have been abandoned. In the real process of the society of capital, the working population does not only obtain their means of subsistence through wage-labor or by charity. It also does so through non-capitalist forms of work organization and these in turn can evolve either with or without contact with the processes of capital self-expansion. In an attempt to resolve these difficulties, we will call necessary working population the sector integrated by those workers directly involved in capitalist production and by the labor reserve army. We will limit the concept of the latter to its floating and latent forms. We will term those remaining the surplus-population and will distinguish: a) a relative surplus population, to refer to the workers that, from outside the capital relation, are engaged in activities that keep some sort of relation with the accumulation process, and b) an absolute surplus population whose activities in no way assist the process of capital accumulation. Now we can return to the Marxist theory of marginalism. A relevant fact of historical evolution that does not appear properly registered in these analyses is that the process of accumulation in developed countries has proceeded for a long period bolstered by immigration. In other words, the developed countries have required not only their own labor force but also that of contingents coming from other countries. To the migratory movements that take place constantly within the different categories of countries (developed and underdeveloped) and that correspond to the changing needs of growth in different countries, the migration between the “South” and “North” is added. And in the case of Latin America, it has become consolidated since the 1950s as a practically unilateral movement, i.e., as migration from the “South” to the “North.” The International Labor Organization estimates that in 1998, migrant workers from “developing countries” reached 4.2% of the whole workforce of the OECD countries, reaching 57.8% of the total immigrant force. Moreover, the shift of workers towards the industrialized countries

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has increased during the last decades, the United States being the main receiver (81% of the new migrants), followed by Canada and Australia (11%), while France, Germany, Italy and the United Kingdom are the destination of the rest (OIT, 2004). This point is not theoretically irrelevant because it not only calls into question the existence of a marginal pole in the developed countries, but it also indicates the existence of difficulties in the operation of the law of the industrial reserve army in those countries. This is indeed a challenge for the theory of accumulation and is one that must be confronted from accumulation’s own assumptions. Deficits and Surpluses of Population According to the Marxist theory of capital accumulation, production in countries with a lower composition of capital shows a relatively greater capacity to attract labor-power. The rate of unemployment should be lower than in developed countries. We have seen, however, that in practice the opposite is the case to the point where developed countries have been unable to provide the required labor-power by themselves, while underdeveloped countries produce an overflowing surplus-population. The explanation, therefore, must reconcile logical and historical developments that at first sight appear to be in open contradiction. The cause of Latin America’s ability to create a surplus population alongside the industrial reserve army is to be found in the conjunction of two factors related to the social organization of production: its capitalist character, on one side, and the frustration of the development of the division that separates general labor (scientific labor) and immediate (operational) labor, on the other. As seen in Chapter 1, the absence of this social division of labor in relation to the great mass of industrial processes is what defines the underdeveloped character of the economies. The underdevelopment of the area is, above all, the underdevelopment of the capital relation. Historically, the penetration of capitalism in Latin America combines the processes of original accumulation (separation between the producer and his means) with the production of relative surplus value, as required by the type of industry that arrived in the region by the end of the 19th century. This combination ended up weakening the energy of capitalism to promote the separation of means and producer. In fact, it has been necessary to reorganize in a non-capitalist way large sections of the surpluspopulation, as in the case of agrarian reforms or to send millions of



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workers abroad as with the bracero program shared between Mexico and the US (1942–1964). As for the effects of the consolidation of capitalism over the working population, there is no single pattern. In a country like Mexico, for example, the relatively low capacity of accumulation to absorb labor-power together with the increasing disposal of the “free” labor force promotes a very slow evolution of capitalism in agriculture. In contrast, the huge availability of land in Argentina combined with a relatively low population favors labor immigration, extends wage-labor and promotes the introduction of capitalist techniques. In other words, the starting point in different areas can be translated into diverse circumstances of population that will have a distinct impact upon its subsequent evolution. Once capitalism is consolidated, however, inside definite territorial limits and with predominance in all the branches, production always tends to create a reserve army, whatever the average composition of capital. Alongside these general features of capitalism in Latin America we find the transfer of investment and of jobs that accompanies accumulation. Due to these reasons, underdeveloped capitalist production not only creates a reserve army but also a surplus population, that is, one that extends itself beyond the average needs of the valorization process of capital, i.e., the needs of capital, either working or latent. The inverse situation is to be found in developed capitalism. While in underdevelopment, accumulation consumes more than it produces, in developed countries accumulation produces more than it consumes. The shortage of production in one pole is satisfied with the excess of production in the other. We have already seen this inherent feature of industrial colonialism at work in the first chapter. The proposition that follows needs no greater elaboration. While in underdeveloped countries, accumulation generates an extended overpopulation, in developed countries it displays an insufficiency in the creation of its labor reserve army. The imperialist organization of production condemns certain countries to concentrate on immediate labor and also distributes in an unequal way the energy with which each pole of the system generates available labor-power. In summing up our argument, the underdevelopment of the relation of capital, i.e., the absence of the division that organizes general labor (scientific labor), as different from immediate work, conveys a transfer of the capacity of accumulation in underdeveloped countries to generate employment to the developed countries. The emergence of industrial colonialism opened novel routes to the operation of Marx’s law of population,

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unequally delivering its effects on each category of countries. Yet, the long-run tendency of developed countries remains one towards the creation of an increasingly larger surplus population. Historical development neither eliminated the law itself nor prevented its originally anticipated effects from taking place over the long run. The Surpluses of Population and Their Activities The distinction between employed army and labor reserve appears the same as the dichotomy between activity and non-activity. The idea of a reserve army that exists in order to at some point support accumulation projects the image of a sector of workers in a lull after which they will join in accumulation. In capitalist underdevelopment, things work differently and a worker could spend his entire life waiting for a job opportunity. The worker who remains outside the wage-labor relation but enjoys the freedom that society offers continues to be an owner of his laborpower. However, he knows that his capacities are useless if they cannot be consumed, through labor, to obtain the necessary means for reproduction. If his particular commodity is not realized as such, he cannot remain inactive. On the contrary, he must produce some good or service. Generally, the unemployed worker tends to develop the willingness to obtain some skill that allows him to undertake independent job initiatives. The existence of a surplus-population will strengthen this disposition as it weakens his expectations and reinforces the emergence of alternative activities and their consolidation in the occupational landscape. The unemployed find themselves forced up against two possible courses of action. On the one hand, they may enter into activities that help capital but imply a modification of capital’s theoretically formalized workings, thereby earning a redefinition of their position in society. This possibility has been fully accomplished in Latin America. On the other hand, they may undertake activities that have no relation to capital accumulation. This path also enjoys broad practice in the Latin American labor scene. No worker is necessarily bound for life to a particular relation with capital accumulation. Today, one may be an active wage-worker, tomorrow unemployed, later a shoe-shiner, and so on, and one’s labor path will tell us little or nothing about structural situations. However, the continued presence of activities that relate to accumulation in different



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ways, which also reveals the action of different agents, should in fact allow us to see where the surplus-population stands in relation to capital accumulation. As for unemployment, the situation seems to be more complicated to assess. Let us say that unemployment reaches 7% and we decide that the level that meets the needs of capital self-expansion is at best 5%. In this scenario, how can we define the excess 2% but as a useless population for capital’s valorization? Is the existence of an absolute surplus-population not thereby revealed? It consists of workers who are just entering the labor market in search for a job, or who have been expelled from the accumulation process, or for some reason, have abandoned their activities outside the direct process of accumulation. We may assume here that the unemployed worker faces a transitory situation and sooner or later will be forced to undertake some activity in order to acquire the means to survive. Relative Surpluses of Population at the Level of Goods Production and Repairs The surplus-population can productively get organized by resorting to labor relations other than capital’s specific ones. In doing so, this population can also make some sort of contribution to capital accumulation. Such cases could include: 1) supporting the global process of production. A prominent example of this in Latin America is peasant production, at least during the period in which this sort of production plays a functional role delivering cheap primary and wage-goods. 2) Competing with the capitalist organization of some particular activity whilst enhancing production in some other activity. This is the case of those who engage in construction activities normally in workers’ housing. Their work opens paths for the realization of capitalist-produced building materials. 3) Filling gaps left by capitalist production. Vehicle repair shops illustrate this case. 4) Carrying out by their own means the production of parts or the execution of some task necessary for completing the process of a particular good. The textile industry is one example, among many others. In all these cases, the workers control their means of production and do not work for profit but rather for consumption. They appear as subsidiary producers of goods and services. They do not enter the wage-labor relation yet they assist it from their particular labor positions. This is why they are considered to be relative surpluses of population.

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Among the countless labor situations of the surplus-population, there is one that calls out for special attention, due both to its economic weight and its peculiarity. Thanks to the surplus-population, wage-labor can be massively extended much beyond the field where it is necessary for a normal valorization of capital. Any capitalist will consider as “normal” the valorization that takes place on the basis of an absolute respect of his property over means and products, including the “sacred” right to the profit that results from labor exploitation. The particular case is that capital self-expansion, which starts with an investment, followed by a labor process and ending with the appropriation of surplus-labor, can take place outside the channels of normal production. This case is not a recent invention in history although during the last few decades, it has been extending dramatically. I refer here to pirate capital. We will limit ourselves here to the form of pirate capital that produces consumer goods whose main place of realization is in the streets. It was only predictable that the capitalist anxiety for profit would take the surplus-population as a means to accomplish it. Pirate reproductionoriented capital has discovered that the surplus-population is an ideal source of labor-power. The inclination to clandestine and badly paid work is based upon the absolute necessity to do something to survive. Pirate reproduction is a world phenomenon that does not limit itself to certain categories of countries and has grown to reach about 9% of world trade (WebDeHogar, 2004). Formally, it consists of the massive generation of a replica of a good and/or the unauthorized modification of a product. One important point to bear in mind is that pirate capital, as understood here, gets its means of production from the market, whether regular or not. Pedro Farré describes the operation of pirate capital in Spain’s compact disc industry as follows: “A typical network of piracy, according to our analysis, is integrated by a group of eight people working on three floors with about 25 duplicators. In this way, they can deliver 150 thousand discs to the streets monthly. The unit cost of recording is 30 Eurocents. The total profitability, without the material, the renting and the infra-wage to the employees, would be about 108 thousand Euros” (Galán & De Sandoval, 2004). The variety of goods that are the object of pirate reproduction is countless and it must be expected that the process of each good offers particularities, but we will always find these three elements: means of production, wage-labor and profit. The circular movement of any given capital, in its elementary form goes through the following steps:



industrial colonialism and surpluses of population117 M-C…P…C’-D’

The capitalist arrives in the market with his money (M) where he buys commodities (C) in the form of means of production (MP) and laborpower (LP). Then he abandons the sphere of circulation and starts a labor process (P), coming out of it with a commodity (C’) whose value is larger than the value of the original (C). Back to the market, he changes his product (C’) for an equivalent amount of money (M’) with which he can start the circuit over again in the form of an extended reproduction. With the generalized intervention of science in production, this circuit becomes more complex. The labor market has been divided into general and immediate labor markets and the same happens with the means of production, as scientific labor requires labs, instruments, and so on. The enterprises may organize their own research and development departments, or they may resort to independent workshops of technological progress, or, as generally is the case in Latin America, they might meet their needs by buying abroad. Whatever the situation, spending on products of general labor cannot be avoided. This is why the first movement of capital circuit, which was originally M-C (MP-LP) appears now as: M-C(MPg + MPi + LPg + LPi) In Latin America, investments in the means of scientific production (MPg) and in scientific labor-power (LPg) mainly take on the form of the license of industrial property (patents of invention, utility models, industrial design, registration of trademarks, names and commercial slogans, and so on). To simplify, we shall call these types of investments costs of transfer (Tr). The movement we are dealing with in the region, therefore, will be described in this way: M-C(MP + LP + Tr) For pirate capital, however, the first phase of capital movement continues to be M-C(MP + LP) where everything is reduced to immediate labor, because pirate capital appropriates, without the mediation of any legal transfer, the efforts of research, experimentation and promotion done by others. As pirate capital does not operate in a regulated market, its investments are duty-free and it can ignore regulations on labor conditions such as minimum wages, working day, and so on. When buying means of

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production, it is not forced to follow specifications of quality, thus cheapening its production costs. All of this, which is reflected in low prices, accounts for pirate capital success. Pirate reproduction introduces a serious distortion in the normal circuit of the original capital. If the latter is well-established in the market, the eruption of pirate capital will reduce its room for realization. A part of his product (M’) will not be transformed into money and the return will not equal the expected difference between D’ and D, if there is any difference at all. As the production costs of the individual commodity rise, the entrepreneur is pushed to the restructuring of his business, all the more when he realizes that his unamortized spending in research and promotion vanishes as if by magic. It is comprehensible that the situation is still worse for a capital that suffers the eruption of piracy just when it is trying to conquer a market. Pirate capital is parasitical capital in that it feeds on the creativity and the surplus-population that accompany accumulation. Capitalist society could do perfectly well without it, no matter how much it contributes to reducing the costs of other capitals, as occurs, for example, when it provides (normally inferior quality) spares at low cost. Piracy meets no immanent need of capital accumulation. On the contrary, it disturbs the working of capital which is why it is forced to operate from the shadows. Individual capitals are exposed to the dismantling of their own circuits and to the creation of uncontrolled parallel channels for the production of something similar to the commodity they created. Pirate capital shatters every provision of economic security made by society with a view to creating an adequate environment for formal investors. Concerning the inner working of capital, pirate capital is superimposed capital, superfluous capital. That is why its workers continue to appear as surplus-population, even though they are employed under capitalist conditions. The repression of piracy is not directed so much towards the workers as it is against the enterprises. The operation of this kind of capital in Latin America is considerable. In Ecuador, it has earned the reputation as a great exporter of unauthorized DVDs and CDs, and its economic weight is such that it contributed to throwing the transnational giant BLOCKBUSTER out of the market (Ayala, 2004) in a context of complaints about the quality of the latter’s services. Peru stands out in Latin America as a producer of pirate books, with three million volumes and three thousand titles (Cámara Peruana del Libro, 2003). According to the Federación Internacional de Indus­ trias  Discográficas (The International Federation of Record Industries),



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Paraguay qualifies as the major producer of pirate discs (Daporta, 2007). In Tepito, Mexico DF, pirate production has taken pride in the creativity required to make piracy work, generating technical adjustments to the Sony Play Station series, to make it work with pirate games (Wikipedia, 2007). The list goes on, as this phenomenon is omnipresent in a context where an overwhelming surplus-population favors its dynamism. Relative Surpluses in the Sphere of Commodity Circulation The organization of retail trade that is more appropriate to capitalism is the large firm that operates on the basis of wage-labor. Its workers are part of what Engels called the “commercial proletariat.” These large stores tend to settle around points of greater territorial concentration of income that provide relatively large physical spaces for development. It therefore seems that these sorts of businesses leave room available for the functioning of small enterprises downtown, as they all attempt to prosper and grow along with the expansion of cities. But this is not precisely so. Urban centers are not simply spaces that big business abandons. Large commercial enterprises also manage to appear under the guise of small operations, but with a devastating effect on conventional small business. It is calculated that in Mexico, the installation of each one of these firms (Oxxo, Extra, 7-Eleven) brings with it the ruin of five traditional small businesses (Esmas, 2006). The greater the distance from a large enterprise, the better off things tend to be for the small enterprise since this allows the latter to save the client time and the costs of urban-suburban transportation, especially when making small purchases. The retail dealer gets a part of the capitalist profit and, theoretically, he can become a capitalist businessman himself, as his business success allows him to accumulate and expand to the point to which he needs to employ wage-labor to keep his concern going. Yet, his most likely path is a different one. On the one hand, the expansion of large retail stores and the development of the means of communication are constantly eroding his advantages. On the other, the fall in the individual values of commodities that results from the growth of productivity demands more spacious installations for the business to carry on, as it is forced to work with increasing volumes of commodities. The major problem is that incomes do not grow at the pace that new investments demand. In fact, most small dealers earn an income that is just enough to survive.

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The established retail dealer, i.e., those who rely upon their own means of production (small installations, often located where the owner/proprietor lives, sometimes incorporating some means of transportation, smaller measuring and calculation instruments, etc.) and who actively contribute to the realization of products of normal accumulation, function for that reason as a subsidiary producer of services. The overall complexity of retail trade is, however, much greater. During the last few decades, the “hawker,” a figure with a long tradition in Latin America, became multiplied thousands of times over. The surpluspopulation, as it grew, rushed onto the streets and the avenues, especially in the larger cities, and crowded together into small dealer conglomerates. These conglomerates grew to become an outstanding feature of the region’s urban landscape. In general, they represent a new burden for the settled retail dealer and, at times they compete advantageously with capitalist commerce. At the same time, the multitudes that sell on the streets represent anything but a homogeneous mass. According to their relationship with capital accumulation, this surplus-population can in principle be split into two segments: 1) those that sell goods obtained directly from the capitalist producer or from the capitalist merchant, and 2) those that sell goods produced by pirate capital. The complete typology of the hawker is certainly much wider and we will return to this point later. The first fraction of street workers contains the following characteristics. Firstly, their activity is not necessary for capital self-expansion. The small subsidiary producers of services were originally in charge of the filling of accumulation vacuums in commerce. Indeed, street dealers represent commercial over-labor. Secondly, and at the same time they open new channels for commodity realization, parallel routes of selling that are in no way despised by capital. The lower prices of retail street dealers expand and accelerate the transit of a commodity from the producer to the consumer. Capitalist production has not produced more value, but a redistribution of commercial income has ultimately been made possible, thanks to the street dealer. The producer of commodities containing surplus-value needs to sell them in order for production to retain its social meaning. The realization of the product is the supreme event of his activity. He is not interested in the social condition of the buyer and the purposes that commodity has for the buyer. For the producer or for the large capitalist merchant, the hawker and the small settled dealer carry out the same functional role: both effectively place a commodity into the hands of the consumer.



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However, the situation of the hawker is specific. The established retail dealer usually enjoys a definitive control (through property) or a conditional control (through rent) of his main means of production, i.e., the installations where he operates. The hawker, on the contrary, has as his main means of production the street itself, and lacks control over it. He can be deprived of his activity through a simple territorial dislodging, something which he is threatened with at every moment. In fact, he is a surplus commercial proletarian who works irregularly for the producer or the merchant, carrying their commodities to the consumer. When the capitalist producer or merchant sends his own salesmen to the streets, he pays the latter a wage which is a part of the expected income. This situation is essentially the same as when the capitalist merchant deals with a buyer who counts upon a discounted amount of money to acquire a certain amount of commodities. When the capitalist merchant sells to this type of buyer, he reduces his prices in a proportion corresponding to the sum that he would pay to his own salesmen. Only the technical terms of the arrangement are modified. If retail street dealers working for productive and commercial capital reduce their role to the opening of alternative channels for the realization of commodities, pirate capital could not work without them. Irregular commerce is the natural form of this sort of capital at the level of commodity circulation. This is not to say that other forms of trade organization (the capitalist enterprise or the settled small dealer) do not work with pirate commodities at all, but if they do, normally this is a complementary and clandestine activity which takes place under the protection of a principal legal activity. Because of the risks involved in dealing with pirate products, producers will tend to resort to the most vulnerable and unprotected sectors of the surplus-population, those whose necessities have plunged them well into despair. But this is not always the case since the operation of some products requires a certain base of resources. This base could be significant, leading us to contemplate higher up operators of commercial pirate capital. However, we are limiting our concern here to the commercial proletarians of pirate capital. It can be seen that surplus-population leads us to tackle the real process of accumulation as something richly textured in determinations other than the process that results from the working of the simple capital relation. This, in its development, ended up introducing unforeseen modalities of capital in motion. Now the process, at least in many cases, proceeds on the back of an intervention in capital and has created

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economic relations which are different from those of capital proper in its pure and dominant form. It can also be appreciated that the intervention of the surpluspopulation is far from giving way to an idyllic combination. The highest degree of contradiction is introduced when the surplus-population is incorporated into the valorization of pirate capital. At first glance, pirate capital seems to be a simple phenomenon of capital competition, but it is in fact something qualitatively distinct. It is the introduction of plunder against a given capital as a condition for the functioning of another. Crime in this context becomes permanent and has no positive impact on capital development. The surplus population whose activities somehow link with capital accumulation is to be understood for that reason as relative surpluspopulation. Either these are subsidiary producers of goods and services, irregular and surplus commercial proletarians, or direct proletarians of pirate capital. In general, their activities are not a “condition of existence of the capitalist mode of production,” even as they effectively become so for some capitalists. Surpluses of Population Beyond Capital Valorization We have seen that the non-capitalist organization of labor can appear related to the accumulation of capital in spite of its form. So, within those limits, it is not correct to uphold that we are speaking of “non-capitalist activities.” The evidence for this relation is so overwhelming that a turn towards the other extreme, that is, towards the proposal that every noncapitalist organization of labor ultimately exists to serve the development of the dominant economy, could somehow seem reasonable. Nevertheless, activities that are “excluded from the modern economy” do exist and have a significant presence, especially if understood as the absence of links that are useful either for capitalist production or for the valorization of any particular investment of capital. In addition to the various types of street retail dealers already discussed, it is possible to distinguish others such as: a) those who sell stolen goods; b) those who collect and sell used goods (clothes, spare items, instruments, furniture); c) those who trade products that are more or less available in nature, such as fruit, medicinal plants, animals (rabbits, snakes, countryside rats); d) those who proceed to the market with products from their plot; e) those who offer non-essential or temporary services for homes; and f) those who live off the charity of others.



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a) The focus here is the small-scale sale of stolen goods. Depending whether the theft is committed against a capitalist enterprise or against an individual, then the immediate economic effect of the act is different. For the enterprise, the robbery represents a loss of capital that can negatively affect its business, while for the individual it means a forced distribution of personal income and a certain impoverishment. In both cases, a third person now has a means of living. If the person has to replace the stolen good, for example, the tire of his car, the theft might seem to favor the tire industry because a new tire must be bought, but this is not the case. Another individual will meet the same necessity of replacing his car tires at the street market, instead of doing so at the capitalist market. If the price that this second person pays allows him some saving with which to buy other capitalist goods, this only occurs because the person who has been robbed is deprived of consumption for an amount equal to the price of the stolen good. It may seem self-evident that the sale of stolen goods is an act with no positive meaning for capital valorization, but it is not necessarily so. A certain extreme functionalism suggests that theft creates the need for defense and thereby, among many other things, promotes the growth of the security goods and services industry (weapons, security mechanisms, etc.). Although those industries were perhaps not initially created as a response to the robbery of goods aimed for sale on the streets, it must be recognized that the theft in some way reinforces the need for such industries. Yet, the enterprise that spends on security to protect itself suffers an increase of its costs, just like the person robbed suffers from a reduction of his income. It is not the thief’s labor that allows one or another to finance those expenses. This would be so, even if it were the case that the thief needs a weapon to carry out his elicit work. In addition to the fact that the economic significance of this kind of spending would normally be small, the thief would probably obtain his weapons through robbery or as a result of robbery income. From another point of view, it can be seen that to the extent that robbery results from desperation in the midst of a certain degree of surpluspopulation, theft is finally a creation of capital accumulation. But, to take this as a point of departure in order to advance to the conclusion that robbery serves accumulation is too great a leap. In short, not everything that capital produces is functional to capital accumulation. b) With respect to used goods with a certain amount of ordinary wear remaining that become offered onto street markets and in popular residential districts, these goods have already realized their exchange-value in a previous transaction. While they no longer may hold a use-value for

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their original owner, their materiality has been modified by a partial wearing away and in those conditions they retain the utility for which they were originally created. So, they can still satisfy the needs of a third person. That is why they can be reinstated as commodities whose price will depend on their condition and on the demand they meet. The transfer of a used good from the original owner to the street dealer does not carry with it the transfer of an exchange-value whose realization depends upon the latter. However, the street dealer labor of gathering and offering does create a value that will be objectified as money thanks to the sale in the market. The street dealer will be compensated for his effort by condition of the existence of people in a relative state of poverty, or simply with an inclination for recycling, who are ready to buy such goods. The people who obtain these goods (for example, an article of clothing) are normally looking for savings that allow them to engage in other consumption (food, for example). Therefore, it could be admitted that the sale of used goods stimulates production in other areas. Yet, such savings were possible only because the street deal prevented the clothing industry from realizing part of its own product. This sort of trade curbs the growth of the industry in question although it may help ecologically by recycling resources. c) The same logic regarding b) applies to those who deal with products that can be freely obtained from nature. d) The countryside holding no longer fulfills the function of supplying the urban sector with cheap wage-goods and raw materials. At the same time, its own logic led to its disarticulation as provider of enough means of living for the family. The neo-liberal model that improved productivity of capitalist agriculture and promoted imports worked to accelerate this decomposition (See Chapter 5). The permanence of the worker on the plot rests on the resources obtained outside it. However, such workers continue to produce and can be found in street markets as retail dealers of agricultural and natural products (seeds, fruit, birds, cheese, sheep, goats, flowers, and so on). Their prices, when dealing with products of labor, are determined by the prices of the same products created under capitalist conditions and which appear in the same market. Their labor, therefore, is constantly degraded and their income likewise falls. To conclude with the list of activities not linked to capital accumulation, we can argue regarding e) that refers to services that are offered to homes. Here we find income earners such as the boot shiner, the car washer, the gardener, the knife sharpener, and so on; i.e., activities that families normally do by themselves, and where the value of the means of



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labor is insignificant and their use only substitutes the use of the same means by the families themselves. On the other hand, in category f) are those activities that promote public support, as in the case of a windshield cleaner at the crossroads, the juggler, the fire-eater, the clown, the musician, the caretaker of parked autos, the porter moving baggage at stations, and the beggars lining the streets. What About Home Labor? So far we have shown that accumulation in underdeveloped countries creates, in relation to itself, not only a relative surplus-population but also an absolute surplus-population. However, we cannot finish our brief overview of the relation which surplus-population shares with capital accumulation without considering the problem of domestic labor. On the one hand, it figures prominently in Latin America’s labor map. On the other, the issue is normally solved incorrectly, assigning this kind of work to the ranks of “informal labor.” This treatment simply says nothing about its economic meaning and at the same time it contributes to strengthening the prevailing, twisted images concerning the issue. Home or domestic labor covers a wide range of physical, intellectual and cultural activities. Services such as health and education are, to a large extent, provided by the state, but they are very much complemented in the household. This labor is necessary for the production and reproduction of labor-power. In most working families, this labor is carried out in the context of an historic and cultural division of labor that assigns most of domestic service to women, although men and children seem to have a growing participation. The household service work as a part of the necessary labor for the reproduction of the body is included in the value of labor-power. The fact that it is the worker who earns the necessary income for the reproduction of the family in exchange for his “labor” and not in exchange for his laborpower, i.e., a capacity that must be produced daily, projects the notion that domestic labor has no role in value production. Consequently, the relations of dependence of men to women are hidden while mercantile practices emphasize the role of the worker as the “home provider.” These images are of course alien to the person who, in addition to laboring in order to earn an income, must also pay for the work of cooking, house cleaning, clothing cleaners, and so on. In this case, it becomes crystalclear that the domestic service carries with it the spending of an energy

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that must be restored, just as the energy of the worker who pays the domestic laborer must be restored. If the worker carries out the necessary domestic labor for the reproduction of his labor power himself, the resulting saving should be taken as a result of self-paid labor. The falling value of labor-power promoted by neoliberal globalization has pushed wage-earning families to introduce new practices in their reproduction strategies. Not only women, but also children have joined the labor market in the pursuit of incomes to complement home spending. The better remunerated families, especially those where a couple is employed, are in a position to employ a third person for completing domestic tasks, or at least an important part of them. In this case, the family’s monetary income equals the amount that the couple receives less the amount they pay to the domestic worker. For all practical purposes, the remuneration of the family are not equivalent to what it is paid by the employer(s) since a part of it must go to the domestic worker. As a matter of fact, the relation between domestic workers and their employers is exposed to tensions around remuneration. But there is no relation of labor exploitation involved. The fact that the domestic worker receives a “wage” does not mean that s/he is a producer of surplus-labor, nor is the employer a capitalist just because s/he pays the wage. The meaning of the quarrel here relates to the distribution of family income and not the distribution of profits. If the employer’s labor is useful to accumulation, the same applies to domestic labor. The home worker participates in the production and reproduction of the labor-power that serves accumulation, and which, ultimately, is the source of wealth. This is why, also in capitalist society, this home worker is a member of the necessary population. This is so even if the worker does not carry out all of the domestic labor. There are many reasons for this: cultural norms in cleanliness (using cleaning as an example), practical tasks (children’s education), and so on. What is important is that the domestic worker makes it possible for others to engage in accumulation linked tasks. If the situation is looked at from the point of view of the home worker, it is possible to detect some other relevant issues. The reduction of the value of labor power has sharply affected low income families, where the head of the household is subjected to precarious labor conditions. It has become necessary for other family members to make a contribution to the family income. For a great quantity of women, domestic labor represents the best possibility of employment. Women from families in a state of poverty have also joined the labor market. The difference is that these



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women cannot at the same time free themselves up from any domestic labor in their own homes. Technological development of the means of domestic labor (washing machines, microwaves, cleaning and cooking devices, and the like) has lightened a burden that would otherwise be unbearable. In spite of that, their labor has been intensified. We have presented active workers, splitting them up into those who directly satisfy the processes of accumulation and those who do it indirectly. The former, together with the industrial reserve army, we argued, are necessary population, while the latter are to be considered part of the relative surplus population. The same division is valid for domestic labor and for domestic employment because domestic labor produces and reproduces the labor-power in its position vis-à-vis the process of accumulation. That is to say, if domestic labor contributes to the production of necessary labor power, the domestic worker is also a part of the necessary population. S/he will be a part of the relative surplus-population when the employer whom s/he works for also enters this category. By the same token, the absolute redundancy of the worker determines the absolute redundancy of the domestic labor devoted to her/his reproduction. The Nature of the Latin American Migrant Worker and the Historical Record Migration is one of the options that workers can activate in their search for a suitable means of living. We can say that their specific condition reveals another feature of international labor mobility and the nature of most migrant workers becomes clear. Generally, the worker who emigrates can be regarded as one for whom accumulation lacks a productive function in his own country, for either actual or potential production. Governments are not interested in retaining these workers at home but, on the contrary, they are inclined to support their moving due to the problems that this shift mitigates and the advantages that it creates. They are members of the surplus population, yet their situation is redefined as soon as they emigrate and are incorporated into a productive activity in the developed country that receives them. It now becomes clear that their true nature is to be a part of a labor reserve army created in one pole of the international system to serve in the other one. The growth and skill-level of this labor power costs nothing to developed countries whereas it is a waste to underdeveloped countries. This has been a prominent feature of industrial colonialism for decades as it has evolved to modify the

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operation of capital’s population law. But this nature is also historical. In the present era, this situation is not always clear since it is well known that immigrants are also joining the ranks of poverty and unemployment in developed countries (Levine, 2002). Taking as a basis the numbers of Latin American migrants in the United States, a basis that does not include undocumented people or temporary shifts, it is estimated that there were almost 14.5 million people from the Latin American region in 2000 (Pellegrino, 2003) of which almost 7.8 million originated from Mexico. Another 2.7 million were settled in Spain, Canada, the United Kingdom and Japan (CELADE, 2002). The fact that the regional emigration to developed countries has grown considerably in recent decades is challenging. The United States, the main destination, registered around 820,000 people during the 1960s. This amount increased by almost doubling during each subsequent decade, although the rates of migration growth seem to diminish in the 1980s and 1990s. This evolution might be interpreted as the response to a growing insufficiency of the developed economy to produce its own labor reserve army, which would mean that the theory of accumulation, in its more general formulation, would have to wait for some time before synchronizing with reality. This is not the case however. It is a fact that unemployment rates in developed countries have been growing over the long term (Maddison, 1988; 1996; OECD, 2003). Nobody any longer refers to 3% or even 4% as normal unemployment rates. In 2005, the rate of unemployment in OECD countries reached 6.6%; 5.1% for the United States and 8.6% for Europe. In 2002, the OECD registered 8.4 million unemployed in the United States and another 13.5 million in the European Union. Taking together the OECD countries, the total number of unemployed reached 36.4 million (OECD, 2003) in that same year. These data should be enough to demonstrate that developed capitalism can already rely on its own reserve army of labor. However, there is more to it. The participation of part-time labor in total employment has been increasing steadily. It represented 11.6% in 1994 and went up to 15.4% in 2005 in the OECD countries. It is well known that a sector of part-time workers is to be considered at the same time partially employed while remaining available for full-time work, and therefore must be taken as labor reserve. As the OECD correctly put it: “Also there is a potential supply of labor amongst the people who are unintentionally employed on partial time” (OECD, 2003: 105). Those who are able to work but who do not participate in the labor market should also be considered as a



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potentially employable labor force. Temporary labor has also grown: “Although temporary work was in general less dynamic than partial labor, its expansion generates concerns because most temporary workers would prefer permanent jobs” (OECD, 2003: 20). At the same time, the exploitation of workers has intensified so the proportion of workers that reports that “they are working at very high speed or with very close limits of time, is being increased. Those who work many hours or in an intense rhythm of work also report of a growing number of stress-related health problems and a major difficulty to reconcile work with their family life” (OECD, 2003: 20). The devaluation of jobs in supply, the greater exploitation of labor, the growing perception that employment is more and more uncertain, and all the conditions related to labor precariousness and flexibility, simply could not be possible if there was a scarcity in the labor force. Nor could the worsening of poverty be explained. In the United States, the population in situation of poverty reached 37 million in 2005, 12.6% of the total population (US Census Bureau, 2007), 5 million more than in 2001 and 6 million more than in 2000. It is estimated that 15.6 million live in extreme poverty (i.e., people receiving an income lower than half that which defines the line of poverty), the highest level known since 1975 (US Conference of Catholic Bishops, 2006). This course of events is not normal under conditions of a limited supply of labor-power. On the contrary, to set it off, the labor supply must be as broad as it actually is. Developed capitalism has already overcome its limitations for the internal creation of its labor reserve. There is no doubt that for a long time, labor migration made it possible for developed countries to respond to their limited capacity to create a labor reserve army. But the high dynamism of migration to El Norte during the last few decades, especially to the United States in the case of Latin America, was only partly due to that reason. Other causes related to the economic order created by neoliberal globalization have contributed to the explanation. Firstly, the processes of economic re-orientation in Latin America further weakened the ability of production to create employment. Commercial liberalization forced countries to improve their productivity levels, thus changing the technical and organic composition of local capital, with a view to competing abroad and with imports at the level of the domestic market. Secondly, many industries went bankrupt, as a result of their inability to carry out their re-structuring. Exports, handled by international capital, grew at high rates, but the gross domestic product increased far below the levels of the 1950s, 1960s and 1970s. As a result, Latin America saw its position decline in the world market. World

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production became still more concentrated in the developed countries, both old and emergent ones. The ILO estimates that the gap between the high and mean income countries grew from eight to fourteen times between 1975 and 2000, and that the gap between the high and low income countries grew from forty-one to sixty-six times over the same period (ILO, 2004). Thirdly, state economic activity abruptly went down everywhere, thus enhancing unemployment (ILO, 2004). So the mass of available labor-power ready to emigrate and ever more motivated to do it because of the weakening of local conditions has skyrocketed. The international relocation of workers has moreover become favored by the existence of a consolidated network of relationships that a long tradition of migration has created in support of labor mobility. In this sense, it can be said that labor migration to the global North has also been motivated by institutional conditions. Yet, this redistribution of labor that follows the redistribution of world production is not limitless, for the host countries have their own problems, as we have already seen. In fact, immigration in developed countries at the present is no longer as welcome as before, although highly qualified and temporary labor still enjoys some official measure of affection. During the 1980s, the US promoted immigration in a context of high unemployment. The reason for this was that the government was devoted to the task of introducing labor flexibility and de-regulation of labor relations. Immigration was assigned a new functional role, namely, to overload the labor market with an eye to weakening the unions and facilitating the introduction of new relations (CELADE, 2002). In other words, it was utilized as a political weapon to support Washington’s strategic goals. Remittances and Wage Differentials From the underdeveloped country’s perspective, the advantages of migration appear one after another. Not only are potential tensions avoided internally, allowing governments to better attenuate social conflicts, but also there are considerable economic advantages obtainable. The migrants, or a significant part of them, carry with them the responsibility of sustaining the family that they left behind. While the migrant works abroad, he addresses this burden by means of remittances. The money that workers send back to the region has unceasingly increased to the point of obtaining a strong dynamism in recent years. For 1990, total remittances were calculated at around US$5.8 billion and by 2005 it had



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reached an estimated US$53.5 billion. These amounts could well be distorted because of methodological issues (CEPAL, 2006b) but they are nevertheless impressive and indicative. While they represented around 2.6% of the region’s GDP in 2005, it appeared that the remittances growth curve had already begun to wind down by that year (Cortina, de la Garza and Ochoa-Reza, 2005). There is no need to explain the interest that remittances have caused in national and international public organizations and in large private economic interests, where the banks are included. With the excuse of promoting a better impact of remittances on “development,” they try every possible way within the framework of their respective interests to obtain the best possible benefit for themselves. Remittances are overwhelmingly destined towards consumption (80–85% of them) and this indicates the point to which the reproduction of the region’s labor-power is accomplished by means of value created abroad. In other words, a part of internal production, equivalent to the consumption that takes place thanks to the remittances and that is not satisfied by imports, rests upon the value created by migrant workers. It follows that the regional production of wage-goods for internal consumption is greater than the income generated internally for those purposes. Remittances take the production of wage-goods beyond the limits determined by domestic wages and to that extent therefore have a positive impact on local production and employment. Remittances have other positive effects, such as strengthening the current national reserves or increasing government income by means of taxes, or even the “reduction of poverty” at no cost to governments or employers. They can also have undesired effects such as weakening the competitiveness of export products and the promotion of imports caused by a strengthened local currency. But the disadvantages are just “collateral damage” in the context of a process of the export of labor-power which has been assumed as a big business by the region’s governments. The question of the wage differentials between the different categories of countries which makes remittances possible demands our attention in this context. The surplus-population certainly bears upon it and, according to the perspective we have been working on, one point must be clarified. According to Marx: “Taking them as a whole, the general movements of wages are exclusively regulated by the expansion and contraction of the industrial reserve army and this again corresponds to the periodic changes of the industrial cycle” (1991: 790). So, it is not the labor reserve army that regulates the general movements of wages, but accumulation.

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The latter produces a labor reserve of a magnitude that varies with the succession of phases in the process of production. In periods of expansion the surplus-population decreases, the trade union movement is strengthened, competition between workers weakens and wages tend to rise. The inverse of this therefore takes place during the contraction phase. That is to say, the functioning of capital produces different power correlations between social classes, thus creating different contexts for the negotiation of the level of wages. Now, what exactly may the situation look like in underdeveloped countries? A permanent overflowing surplus-population can only act as a constant downwards pressure on the level of wages. Indeed, the surpluspopulation is one of the main reasons behind the low value of laborpower, for it can do nothing but weaken the strength of the active army. This is not to say that the labor-power is paid beneath its value since its value itself is lower than in developed countries (Figueroa, 1986). This thesis is by itself so clear that, in fact, what must be explained is why the relative value of labor-power in Latin America is not lower than it is, or why there are periods when wages register increases. The influence of the surplus-population on the level of wages consists of two elements: one objective and the other subjective. The former is defined by the existence of the surplus-population as an element that results from the organization of the relations of production. The surpluspopulation is a burden for active labor. Its effect is negative. The subjective element appears because the surplus-population is also a highly explosive repository of discontent and unrest. It has normally been an integral part of the great social and political movements of the regions. Landless laborers, the socially marginalized, the rural unemployed, and the urban “informal workers” among others, all organize themselves to pursue their own specific demands. In certain eras, they coalesce around wider movements such as during the populist period. They have been recently at the heart of movements that culminated with progressive governments in Venezuela, Bolivia, Ecuador and Nicaragua, and constitute an important force of every significant political resistance to neoliberalism. Probably no outstanding movement that has ended with concessions to the working class registers the absence of the surplus-population. The social movement, however, also proceeds through periods of ascent and retreat. Repression which includes plenty of dramatic episodes in Latin America is as consistent as social discontent. It is the method by which capital restricts concession. Not only does it obstruct, but it eventually orients the improvement of the living conditions in



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popular sectors in an opposite direction. Political struggle is a prominent factor in the determination of the prevailing wage level and the sector made up of the surplus-population is ever an actor in this sort of conflict. Moreover, difficulties for the democratization of Latin American societies are strongly rooted in the always active opposition between discontent and repression. The relative low value of the region’s labor-power has other objective causes and two of them stand out: Firstly, there is the lower skill of laborpower required by a capital with a lower average technical composition. The so-called “educational deficiencies” as visualized from the developed countries corresponds to that situation. Secondly, there is the lower average intensity of labor that corresponds to a lower technical composition. As the worker’s energy expended in developed countries is greater, the reward that he receives must be larger. A union movement free from the burden of a surplus-population enjoys a more advantageous position to get the necessary compensation. The Indigenous Population To recognize the existence of activities that take place without any contact with accumulation would seem to be a sign of dualist inclinations. However, our focus is different. It must be recognized that dualism rests on a strong proposition, i.e., that every meaningful transition contains dual elements at the level of the modes of production. The new modes are not generated in a vacuum and before generalizing they undergo a conflicting coexistence with the old social forms. The presence of the old modes of production is the most salient expression of transition. Dualism is transitional and the transition is the disarticulation of dualism. All this is correct from the point of view of an abstract approach. Perhaps this explains the optimism latent in this school of thought. The problem for us is that the dominant economy, already established as such, proceeds by generating and extending activities whose internal organization is noncapitalist. These non-capitalist social forms of production exist not because capital has still not dissolved them but rather because capitalism is promoting them. A transition that it was necessary to study in order to understand the Latin American reality is the process by which the particular form of the capital relation arose and spread. The inherent structure and logic of capitalism is the clue to the region’s workings. The absence of the division that

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split labor into general and immediate forms in connection to most of the locally operating industry is the fundamental fact. This proposition was bound to make the explanation of the oversupply of labor and the permanence of non-capitalist relations easier. Nothing of this is intended to deny the existence of segments of the Latin American population that evolve as attached to their own traditional forms of social organization. They are not a product of capital accumulation but their persistence has a bearing on underdeveloped capitalism, just as the same causes that account for labor oversupply explain the inability of capital to dissolve pre-capitalist forms. From this perspective, the persistence of pre-capitalist relations also appears as a failure of the dualist transition. We are dealing here with the legacies of a precapitalist past and it would not be correct to simply incorporate them into the surplus population, a category of capitalism. This is why we did not discuss the indigenous population here, one which shares conditions like poverty, exclusion and vulnerability with other sectors of society, but which deserves a particular analysis. Besides, the indigenous population is not a reality everywhere in the region and certainly is not a logical condition of underdevelopment in general. It is estimated that between 33–40 million indigenous people live in Latin America. Most of them are located in Peru, Mexico, Guatemala, Bolivia and Ecuador. Their relative weight inside those countries is respectively greatest in Bolivia, Guatemala, Peru and Ecuador (Hopenhayn and Bello, 2001). According to ECLA, there are 671 indigenous pueblos recognized by Latin American states (CEPAL, 2006b). The indigenous pueblos are specific symbolic and economic spaces. They try to live in harmony with nature and are subjected to their laws as though these laws were dictated for them to abide by. They live in the forests, by the sea, the rivers and on the land. Hunting, fishing, picking fruit and organic cultivation are activities that the earth has spontaneously furnished for them to carry out reproduction while taking care of nature. Nature lives in them and the ecological characteristics of their territories influence the creation and support of their cultures and identities as pueblos. Cultural renewal has as its primary reference the care for nature in the way that nature appears in each territory. The fruits of nature can only be an object of collective appropriation and only cooperation can be the appropriate method for obtaining those fruits. That is why egalitarian feelings flow with spontaneity among these peoples. The leaders often lack motives to raise themselves above the community.



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Indigenous pueblos and capitalism represent antagonistic social orders. Although capitalism has not been able to dismantle the indigenous communities, it must be recognized that it has penetrated them to some extent and perpetrated some damage upon them, especially through land usurpation and environmental disruption. As compensation, capitalism generally offers experiences amongst the surplus population to the displaced indigenous populations, in activities that have not received the social recognition they deserve, such as home domestic labor, for example. Maybe that is why they prefer “to dream with the past while they remember the future.” The indigenous pueblos are the most solid bastion of struggle for the defense of nature. They also represent a contribution to cultural diversity. But even if they were none of those things, their way of life deserves respect because it represents the option of a conglomerate of human beings. It can be anticipated that capitalism will not give up on account of these considerations. If it has not been more aggressive, this is due to its own weakness, at least in terms of labor supply, and because it has no interest in extending an already crowded market. On their part, the indigenous people have understood that the defense of their way of life depends upon their own organization and on the struggle around social spaces that constantly grow. These are conditions that feed the hope that they will endure and advance with us for still a long time. Conclusion The overflowing labor-power supply during the last few decades in Latin America, whose immediate reason is to be found in the process of economic reorientation, has brought up to date a discussion that during the 1960s and 1970s had won an important place in the region’s sociological thought. Its object is a phenomenon that the neoliberal globalization did not create, but markedly worsened. The only reason for the discussion to concentrate on the forms of manifestation of labor oversupply is that social research had provided a questionable solution to the problem’s deepest causes. I have argued that this condition is not satisfied and I have posited some new elements with a view to contributing to the solution of this question. There will be an unsolvable conflict between general theory and historical process if the forces that capital mobilizes to counter the tendencies that restrain development and their impact on capital organization

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are ignored. For example, a number of measures such as the export of capital, colonial control, and the creation of monopolies, all aimed to fight the tendency of the rate of profit to fall and ended by giving way to imperialism, i.e., a new phase in the development of capital. Every new phase implies a change in the relation of capital. In this way, we can distinguish three larger phases: a) labor’s formal subsumption in capital (manufacture); b) real subsumption of immediate labor by capital (large industry – free competition) and c) real subsumption of immediate labor combined with formal subsumption of general labor monopoly capital – imperialism). As suggested before, underdeveloped capitalism did not go through these phases and did not organize the formal subsumption of general labor. Therefore, the workings of capital at the international level were bound to display a specific logic, one that would differ from the more abstract logic of Capital. But this is no more than the logic of a phase of the historical process of capital which sooner or later will end up coming to terms with more abstract postulates. Although some relations will find a new approach here, our main concern has been the surplus-population inside Latin America. We have recognized the presence of non-capitalist forms of production and have argued that the nature of these relations of production does not decide their relationship to capital. They may or they may not lend support to capital accumulation. At the same time, we have identified two sectors that maintain hybrid relations with accumulation (pirate capital and domestic labor) and a third whose origin and reproduction fall outside the accumulation of capital (the indigenous communities). A large surplus-population is certainly one of the explanations for the low value of labor power in underdeveloped countries. This low value, in turn, could be considered as a lever of accumulation insofar as it grants a high rate of profit. To that extent, it would not seem reasonable to speak of “absolute” surplus population, as one having no positive impact on capital accumulation. I have discarded this sort of argument for the following reasons. First of all, let us make clear that for the “low value of labor power” we understand: i) value in relation to that corresponding to labor in developed countries; ii) an average magnitude that results from the compensation of prosperity and stagnation periods. This low value of labor power does not enhance investment because the variable capital that is saved tends to be lower than the new constant capital’s value. Investing under such conditions makes the rate of profit fall instead of rise. Certainly, this rule only applies for working capital but working capital is where most



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investment applies. True, the rate of profit that a transnational corporation achieves in underdeveloped countries may be larger that the one it obtains at home, but this in itself is no guarantee of economic expansion. Domestic markets in underdeveloped countries are small, largely due to low wages, and these countries do not offer the adequate technological environment. The third stage expanded the option of producing in low wage countries with a view to selling in high income countries. One determinant that has constrained this possibility for Latin America is the absence of adequate technological conditions. All of this helps to explain why investment concentrates on developed countries and those which in addition to offering low wages pursue a dynamic state development function. We have pointed out that the worker who leaves his underdeveloped country for a country like the United States shows himself to be part of a labor reserve army created with a view to serving in the recipient country. In principle, he appeared as a member of his own country’s surplus population. Yet, this does not mean that he was necessarily unemployed. It only means that he lacked a job under stable and bearable conditions. As shown here, the surplus population is forced to do something in order to acquire an adequate means of living. This seems to support the theory according to which wage differentials and not precarious jobs and unemployment are the real cause of migration. In the same way that neoclassical theories pay no attention to structural causes, this explanation overlooks the fact that migration has done nothing to equalize wages. The international articulation of the labor market through migration is now starting to deplete itself. The development of productive forces is allowing advanced countries to create not only their own labor reserve army but also their own surplus population. The attraction of migrant labor-power is now limited to qualified segments of workers and temporary workers. This attraction should in fact continue to weaken. Correspondingly, Latin America’s surplus population will grow as well. This is its fate under capitalism. This trend might be moderated thanks to a reorientation of productions to inward-oriented growth, a path that the present world crisis is calling for, but in the final analysis, it cannot be eliminated. The propositions that we have expounded here are far from optimistic regarding the future of the surplus population, as this will continue to increase. This is the trend suggested by the dynamics of underdevelopment and capitalism in general at the present stage of development. Yet we are by no means denying the possibilities of politics in terms of

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moderation of the tendencies at work in society. A redistribution of income, oriented to reducing the present social inequalities, the negotiation of a new deal with developed countries, and the reactivation of domestic markets could all serve well to reduce the negative effects of economic development. A redefinition of the present power relations inside ruling elites would be an unavoidable condition for such a change, one that not only seems possible but which amounts to a necessity in a context where social discontent threatens large capital’s political rule. The greatest limitation is immediately obvious. Such policies are intended not to suppress but to guarantee the continuous working of a social system that rests upon the exploitation of workers and inequality as a foundation for its very existence and expansion. The present world economic crisis and the struggles between major powers are other causes that constrain opportunities for significant concessions to underdeveloped countries.

CHAPTER FIVE

INDUSTRIAL COLONIALISM AND PEASANT PRODUCTION Agrarian reforms are being updated in Latin America, both in sociopolitical thought and practice. Their promotion, of which the Agrarian Reform World Forum is an important proponent, is rooted in a reality that has proven resilient to poverty reduction and has pushed more than 20 million people to the brink of hunger, all in a context of a world food crisis that has yet to find an exit strategy. At the same time, recent agrarian reforms are being deepened and extended by progressive governments with a view to addressing legitimate popular demands. Land redistribution has been boosting peasant production and revitalizing an entire way of life based upon rural production that has been severely affected by neoliberalism. For all of these reasons, we need to trace the trajectory of the peasant economy with a view to assessing its real potential as a solution to the problems of food production and a threatened way of life being experienced by such large numbers of people. The small plot producer is one the most salient forms of activity that the surplus population adopts in the countryside. It is a result of underdevelopment and industrial colonialism that responds partially and provisionally to the needs of capital expansion. It is expected to fulfill economic functions in terms of supplying cheap means of production and consumption that it can only do, as we shall argue, under certain conditions. On the other hand, the real reason behind its persistence as a space for surplus population lies in the political sphere. The quest for social peace and control over social discontent is the main drive for government enhancement of peasant production during certain historical periods. Plot production is one of the important means by which sectors of the surplus population make their living, doing so through alternative forms of labor organization. Some segments of these producers maintain links with capital accumulation and evolve as relative surplus population while others form part of the absolute surplus population since they attain no role in the benefit of accumulation. Accumulation under industrial colonialism first produces them as overpopulation. Capital then promotes their organization as subsidiary producers only to have their expectations later shattered at a certain point of accumulation. That is to

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say, their existence is subject to dramatic shifts from one pole of the surplus population to another, a social transmutation that moves them from being subsidiary producers to being independent producers whose maintenance must ultimately be supplemented by other family members. Amidst an environment that harries them, they are forced to struggle in order to get from politics that which the economy denies them. In this chapter, we intend to develop further these propositions. First, we will discuss the social character of peasant production from the point of view of its internal organization. Our points of reference consist of the producer’s relation to the means of production and the aim of production. Next, we will explore the relations of plot production to capital accumulation, paving the way for an analysis of the dialectics of plot production. Finally, we will turn to the social transmutation that such dialectics imply. To deal with all of these issues, we will build a logical construct that emphasizes the way that peasant production tends to evolve independently from the form of economic growth and in isolation from heterogeneous peasant spaces. To close this chapter, however, we will attempt to assess the overall impact of neoliberalism on peasant production. Our approach remains squarely within the confines of political economy and no attempt will be made to encroach upon anthropological terrain. The Social Character of Peasant Production Following Engels, we can say that in principle, “By small peasant we mean here the owners or tenant—particularly the former—of a patch of land no bigger, as a rule, than he and his family can till, and no smaller than can sustain the family” (Marx & Engels, 1955 [1894]: 658).1 No attention will be paid to Engels’ suggestion that there could be medium and large-scale peasants, and it will be assumed that, alongside the peasant and other forms of the surplus population, there are only small, medium and largescale capitalists who accumulate thanks to the exploitation of wage-labor. Thus, the peasant is a small producer who: a) cultivates a plot that suffices for his and his family’s sustenance; and b) as a general rule, uses his own labor power and that of his family, but who can resort to other labor power when the family effort does not suffice. 1 This citation from the Collective Works of Marx and Engels originates from: Engels, Friedrich. The Peasant Question in France and Germany. Moscow, Foreign Languages Pub. House, 1955.



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The issue of the mode of production cannot be avoided here. The notion that this problem was resolved long ago, or the even more irresponsible stance that this is an outmoded theme, accomplishes nothing but evasion of a crucial point. The role and place of the peasantry in contemporary society as well as its evolution cannot be clarified without tackling this problem. In this regard, we adopt Marx’s point of view according to which the peasant production is a peculiar mode of production, one different than that of capitalism: The form of landed property with which we are dealing is a specific historical form, a form transformed by the intervention of capital and the capitalist mode of production, whether the original form was that of feudal landed property, or of small peasant agriculture pursued as a livelihood; in this latter case possession of the land and the soil appeared as a condition of production for the immediate producer with his ownership of the land being the most advantageous condition, the condition for his mode of production to flourish. If the capitalist mode of production always presupposes the expropriation of the workers from the conditions of labour, in agriculture it presupposes the expropriation of the rural workers from the soil and their subjection to a capitalist who pursues agriculture for the sake of profit. (1991: 751)

Thus peasant labor configures a specific mode of production whose features so far amount to: a) production for consumption; b) mainly family labor employed; and c) control (implicit both in ownership and possession) over the land which they work. Yet, few things are left uncontested in social sciences and this approach is not one of them. Hence, it is important to elaborate a bit more on this definition. The main aim of capitalism is profit through the extraction of surplus value. The purchase of labor power obeys this fundamental objective. As Marx put it: Labor-power is not purchased under this system for the purpose of satisfying, the personal needs of the buyer, either by its service of through its product. The aim of the buyer is the valorization of his capital, production of commodities which contain more labour than he paid for, and therefore contains a portion of value which costs him nothing, and is nevertheless realized through the sale of those commodities. The production of surplusvalue, or the making of profit, is the absolute law of this mode of production (1990: 769).

Thus it makes no sense to speak of capitalism if this fundamental feature is not present. A capitalist is such because he uses other people’s labor in order to obtain a profit which is nothing else but the transmuted form of surplus value.

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Not every use of other people’s labor is intended to extract surplus value. For this to happen, it is necessary that the number of workers be sufficient to transform the labor process into a valorization process: What from the outset distinguishes the labor process subsumed under capital, even when it is only formally subsumed, and what distinguishes it more and more, even on the basis of the old, traditional mode of labor, is the scale on which it is carried on, hence on the one hand the extent of the means of production advanced, and on the other hand the number of workers under the control of the same employer. What appears as a maximum on the basis of e.g. the handicraft mode of production (…) hardly even forms a minimum for the capital-relation. For in fact the latter can hardly enter the picture more than nominally unless the capitalist employs at least enough workers for the surplus value produced by them to be sufficient to serve as income for his own private consumption, and as a fund for accumulation, so that he himself is exempted from direct labor and only works now as a capitalist as the overseer and director of the process, performing as it were the function of capital engaged in its valorization process and virtually endowed with will and consciousness. (1985: 87)

This passage conveys an implication that should be made explicit, namely, that the objective of production is not determined by the producer’s will. It is of no use for an entrepreneur to aim at profit if his resources allow him only the means to survival. When surplus value is not only the aim but also the result of production and the entrepreneur is able to accumulate, we can say he has entered the sphere of capitalist production. The notion of the “nominal capitalist” has caused confusion. It does not refer to some sort of partial capitalist. In another passage of Marx’s work, its true meaning is clarified, that is, a relation that has been conferred an underserved name and which evolves outside of capitalist relations: Whereas the small capitalist, who does almost all the work himself, seems to obtain a very high profit in proportion to his capital, what happens in fact is that, if he does not employ a few workers whose surplus labour he appropriates, he actually makes no profits at all and his enterprise is only nominally a capitalist one (whether he is engaged in industry or in commerce). What distinguishes him from the wage-worker is that, because of his nominal capital he is indeed the master and owner of his own conditions of labour and consequently has no master over him; and hence he appropriates his whole labour-time himself instead of it being appropriated by someone else. What appears to be profit here, is merely the excess (of his income) over ordinary wages, an excess which results from the fact that he appropriates his own surplus labor. However, this phenomenon belongs exclusively to those spheres which have not as yet been really conquered by the capitalist mode of production. (1972 Part III: 357)



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So the “nominal capitalist” is not in fact a capitalist, either small or big. Generally the peasant cultivates his plot along with his family. Yet, he can turn to other workers for help in certain tasks. This is a common and almost unavoidable practice in order to get the peasant’s production process completed. Where community practices have not been dissolved by mercantile social relations, it is possible to see collaborative mechanisms between peasants consisting of labor exchange for certain productive tasks. Essentially this is the same relation established by a peasant who, after hiring labor force, must sell his own labor power to another peasant in order to compensate for his expenses in wages. These exchanges do not make them either capitalists who mutually exploit their labor power or proletarians who live from their wages. In fact, this is not a simple hypothetical possibility. Hubert Carton de Grammont has confirmed that labor exchange between peasants is a widespread practice in Latin America: Concerning the hiring of labor force, a final phenomenon must be added: peasant units of production are constrained to transform their traditional mutual help relations in wage relations, due to the predominance of money relations (…) In this case, the hiring of labor power is peculiar: the peasants hire among themselves and do not get mixed with wage laborers working for capitalist enterprises. (1992: 51)

So far we have shown that the peasant’s internal organization of labor does not correspond to the capital-wage labor relation, which is crucial to the understanding of its evolution. Peasant production dynamics cannot be dealt with from the point of view of the workings of accumulation. Yet, this does not mean that they evolve independently from mercantile categories. Value, commodity, socially necessary labor, market, prices and even profit (this latter is not a category specific to capitalism), all of them are necessary for an understanding of the peasant economy. In turn, specifically capitalist categories such as extraordinary profit, production and market prices, and value of labor power affect the evolution of the peasant economy. This link is already established at the level of production. On the one hand, the peasant contributes to the realization of capitalist commodities. On the other, this type of production can be incorporated into the valorization process, as occurs when peasant production contributes to the cheapening of constant and/or variable capital, or when, more directly, the peasant has engaged in production for a capitalist enterprise. This is possible because the peasant does not aim for a surplus. No doubt that while this is the case, agrarian reforms have also had economic expectations. As C. Mistral put it, the agrarian reform, “In addition to activating agriculture supply, cheapens labor power (raising the

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rate of surplus value), saves foreign currency and absorbs the growing social unrest in the countryside” (1974: 25). For peasant production to be economically functional, it is necessary that certain conditions be met, especially concerning technology and extension of the plot. However, there is a structural condition that prolongs the possibility of peasant production to lend a service to capitalist production. That is the fact that capitalist agriculture must pay a rent, raise prices and reduce technological demands on small production. Therefore, this is one more case of non-capitalist labor organization that belongs to the relative surplus population under the guise of subsidiary goods producers. Yet, this is not a permanent condition, for peasant production is far from being stable. From Peasant Production to Infra-Subsistence Production The assumption upon which the programs of agrarian reforms were generally formulated in Latin America, following Alexander Chayanov’s thesis, is that due to the family’s relatively intense labor, the peasant is able to meet his own as well as his family’s consumption needs. The required extension of land was estimated on the basis of the given conditions of soil quality and location. Of course, if Chayanov inspired some agrarian reform efforts, it is not his fault. In the end, he did not ignore the objections to his own concept of the peasant mode of production which emerged from criticism and his own observations of real processes. In effect, discussions in Russia and his studies on US agriculture and its relation to technological progress, led him to another topic, name, the projection of what he saw as advantages of peasant production for the social organization of agriculture in his own country. His proposals of cooperative organization in opposition to land nationalization and socialization transformed his peasant economy into something different, especially by introducing profitability criteria. Towards 1928–1929, he abandoned his defense of the peasant economy and in this way closed off the discussion that his own concepts had created. Chayanov’s notion of the peasant economy should not be criticized for failing to take into account a particular category of capitalist production. He thought that these categories were fully articulated into a theoretical framework and could contribute nothing to the understanding of the peasant economy. Yet, his own understanding of capitalism is not free



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from criticism. For example, he thought that the existence of a labor market (which he deemed absent from the peasant economy) made it possible to equate slavery and capitalism. But he did not stop at the peculiarities of each mode of production. The selling of labor power by his proprietor, the worker, cannot be compared to the definite selling of a whole body, even by a third party. Still, it seems to us that the principal weakness of Chayanov’s work lies elsewhere. In short, he ignored the impact of capitalist production on the peasant economy. In the work of Marx, the peasant economy is a process, or more accurately, a process of dissolution, due precisely to the dominant capitalist environment in which it evolves: … the handicraftsman or peasant who produces with his own means of production will either gradually be transformed into a small capitalist who also exploits the labour of others, or he will suffer the loss of his means of production (…) and be transformed into a wage labourer. This is the tendency in the form of society in which the capitalist mode of production predominates (1969, Part I: 409).

So, the continued reproduction of peasants is not sustainable in this context. But at the same time, the transformation of a peasant into a small capitalist or wage laborer is not a necessary outcome of industrially colonized societies, something that Marx could not have known. Other social figures are an outcome of the dissolution of peasant economy, as we will see later on. Marx detected a variety of causes which erode the weak complexion of the peasant structure, among which the following are worth pointing out: a) the progressive fading away of the domiciliary industries that com­ plement peasant production; b) the usurpation of communal property; c) the development of large-scale farming, and d) “…improvements of agriculture, which on the one hand bring about a fall in the prices of the products of the soil, and on the other require greater investments and more diversified material conditions of production, also contribute towards this end, as they did in England during the first half of the Eighteenth century” (1991: 943–944 ). Actually, the last two causes suffice to envisage the tendencies within peasant production. Family sustenance does not only depend upon what the family is able to produce. It is also linked to the realization of the peasant’s product or part of it in a market ruled by capital where production prices are constantly falling. Therefore, in order for the peasants to maintain a given consumption level, it is necessary to steadily increase their production.

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Peasants cannot limit their effort to the continuous replacement of the goods consumed the previous year. They are constrained to increase their productivity with a view to keeping constant the relation of their costs to the shifting price determined by the capitalist sector. In other words, their continuous reproduction demands the production of surplus to be invested year after year. Let us assume that the peasant is able to obtain such a surplus, which is enough to introduce the biological and mechanical supplies that make it possible for him to increase his labor productivity as in capitalist production. We can forget all the disadvantages arising from the soil’s quality and location, which so often affects the peasant’s life. Even so, an insurmountable obstacle would still remain in the dynamic of the economies linked to large-scale production which contribute to cost and price reduction. This situation is not easy to successfully confront since procurement of the means of production and supplies is increasingly oriented to favor larger scale units. For example, a peasant with a plot of about 15 hectares stands to |gain very little by purchasing a tractor designed to work 60 hectares. His production costs would rise in relation to those of a capitalist who is in a position to use the same tractor more intensively. Something similar will occur with all supplies whose price is reduced in purchases of larger quantities, or well drilling with the capacity for extensive application. In other words, peasant production cannot successfully follow the course of capitalist production. Its production costs per unit of produce are higher. But there are still additional difficulties. The distribution channels of fertilizers, which are produced mainly in developed countries, “tend to principally attend to demands from big and medium-sized producers who cultivate goods such as coffee, banana, cotton, etc.” (CEPAL, 1984: 56). The same is true for herbicides and insecticides which in addition require the use of tractors. Furthermore, chemical and biological supplies are designed in such a way that they become complementary, which hampers their acquisition by producers disposed with scarce resources. This is not all. As A. Schejtman reasoned: The peasant’s need to make the most out of his most abundant resource – labor power– (…) together with unfavorable terms of exchange for his products, lead him to reduce to a minimum the purchase of means of production and supplies. In this way the density of means of production or supplies per worker, or per unit product or per working day is generally lower than the one existing in capitalist agriculture (1980: 131).



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This is why a direct relation has been established between the use of supplies and the means of production and the size of the land exploited (CEPAL, 1986). Peasant production yields will therefore tend to increase much more slowly than those of the capitalist sector. The point is not that peasant production does not improve, but that it does so much more slowly. As a result, peasant income tends to fall. The next exercise, inspired by the labor theory of value, will allow us to illustrate such a conclusion. Let us assume the following initial situation of wheat production: Table 5.1. Schematic Representation of Peasant Production at Point 1. Kind of Production

Yield per Hectare (quintals)

Value per Quintal (dollars)

Value of the Product (dollars)

Capitalist Peasant

21 14

10 10

210 140

This situation is already pretty unequal concerning yields and we can suppose that it conveys a prior worsening of the relative position of peasant production. Whereas the different yields correspond to an actual situation at the end of the 1970s in Chilean agriculture (Rojas, 1984), prices are obviously an artificial device to facilitate our exposition. This situation is, in turn, the point of departure for further decline. The dominant capitalist economy will introduce technological improvements that will raise yields. Let us suppose that after a given period of time, production grows from 21 to 26 quintals, that is, around 25%. As the added yield resulted from changes in productivity, the total value of the product remains the same. Only the value of the product unit, in this case, the quintal, changes. Certainly, it cannot be ignored that technological progress increases labor intensity and thereby raises the value of the product.  But technological progress also brings with it a reduction of the employed labor force, especially in agriculture, which largely weakens its impact on the value of production. We can assume here that production conditions in the peasant sector do not change. In fact, according to the UN Economic Com­mission for Latin America and the Caribbean (ECLAC), “after 20 years, the average yield of corn production in smallholdings increased from around 1.000 kilograms to 1.090 kilograms per hectare” (CEPAL, 1997: 28), that is, almost nothing. So, the new situation will be as follows:

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Table 5.2. Schematic Representation of Peasant Production at Point 2. Kind of Production

Yield per Hectare (quintals)

Value per Quintal (dollars)

Value of the Product (dollars)

Capitalist Peasant

26 14

8.08 8.08

210 113

The market price is determined here by capitalist competition where given production conditions became generalized. However, since the peasant’s product satisfies a demand of society, it can occur that the capitalist sector establishes its prices over its value, obtaining in this way a super-profit, in the same way in which those capitalists who introduce technological progress obtain extraordinary profit for a period at the expense of those capitalists who lag behind technologically. However, peasant’s prices still go down. The obtaining of this super-profit is especially prevalent under conditions of inward-oriented growth and much more so when the state establishes prices with a view to guaranteeing a determined peasant income. To that point, peasant production slows down the introduction of technological progress by the capitalist sector. Yet, capitalist competition and the search for yield increases are not eliminated. Whatever its prevailing rhythm, the concentration of technological improvements in the capitalist sector negatively impacts upon the peasant sector. The longer term tendency is immutable in that the yield’s money expression declines as a result of technological change in the capitalist sector while the peasant’s amount of labor remains the same. Part of his labor is not recognized as socially necessary labor. At the same time, the part of his labor that is treated as useless by society tends to grow. The value of his unit product falls too slowly or does not fall at all, because its total produce does not increase rapidly enough, or simply does not increase. The purchasing power of the plot’s product falls year after year. This is the key to the problem of the relation of peasant production and the rest of society: an unequal exchange by which a given amount of labor is exchanged for a lesser quantity of labor. The belief that value transferences take place through the market from the peasants to the capitalist sector was correctly dismissed by J. Calva (1988) as the labor in question was not socially recognized. Yet, there is more to this point. Industrial capital is not interested in low productivity



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agriculture since, to the extent that it involves goods entering as elements that determine the labor power’s value, it does not enhance relative surplus value. Nor does it cheapen constant capital. This situation causes conflicts of interest between industrial and agricultural capitalists and also between industrialists and peasants. For the latter, the fact that their production responds to social demand provides a reason for agriculture not to adjust prices to the level of production prices, as already seen, so that the regulating price does not fall as rapidly as it should. To that extent, the labor of capitalist agriculture’s workers appears as boosted labor, which increases the rate of surplus value in this area while it relaxes pressures for technological innovation. In this manner, however, no surplus value is created for the capitalist class as a whole and much less for the industrial capitalist. With a view to tackling their own problems, peasants are forced to intensify their efforts and lengthen their labor day, expecting to compensate in this way for their shortfall in productivity. Yet they cannot do this at will. Apart from their own labor power’s physical limitations, they crash into natural barriers, such as climate, but above all the very limited means and objects of labor under their control. It will simply not help them to be ready to exploit ten hectares if they only control five. Under conditions of backward capitalist agriculture and a protected national economy, as occurred during inward-oriented growth, peasant production can accomplish a function for capital as a supplier of cheap means of production and wage-goods. This situation could even raise enthusiasm for land distribution in governments looking for a way out of real or potential conflicts created by an overpopulation of people lacking the means to ensure their survival.2 Exceptionally, this is also the moment in which some small producers could become transformed into small capitalists. This functionality of the peasantry is constantly eroded by capitalist production until it is overrun. The dismantling of the peasant economy, i.e., its depletion as a source of the means of sustenance for rural families, puts an end to the peasant condition as subsidiary producers and paves the way to their social transmutation. The capitalist environment in which they have evolved has 2 Land distribution in the region started the early phase of capitalism. In Paraguay in 1926, for example, a law was passed which explicitly acknowledged the need for land distribution, in appropriate extensions, in order to guarantee subsistence for unemployed workers and their families. The Mexican Revolution led to the same state policy years before.

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done nothing but impoverish them and ultimately forces them to take refuge in self-consumption, while maintaining rather tenuous bonds with capital accumulation. From then on, they will become independent producers, a member of the absolute surplus population. This social transmutation will initially affect those relatively smaller plots with the worst quality soils and gradually embrace all of the rest. In this way, these producers swell the ranks of those who never had the opportunity to become subsidiary producers. In order to illustrate this process, we turn to ECLAC’s typology of small producers in Mexico’s countryside. The lowest link consists of “infra-subsistence producers” (infrasubsistencia), i.e., those who have fallen outside of the confines of the peasantry. Immediately above them are subsistence producers (subsistencia) who are still peasants but those only able to satisfy their basic food needs and create no surplus  for any means of production acquisition. The next higher up there are the stationary producers (estacionarios) who generate an insufficient surplus for repositioning. At the top of the peasantry we find the sustainable producers (excedentarios) made up of those who are able to invest in order to maintain their position as peasants (CEPAL, 1986). In none of these categories does the hiring of labor power exceed 25 working days. In accordance with the interpretation we are constructing here, the lower strata of the peasant sector will tend to expand, thus creating a pyramidal social structure. Eventually an ever larger amount of producers will be pulled out of the peasant scene. This downward displacement does not necessarily follow one link after another since certain processes such as profound crises could violently transform the scenario. For example, a sustainable producer can become transformed into an infrasubsistence producer under certain conditions. Other factors such as land subdivisions by inheritance could have similar impacts on individual peasant families. Once a producer enters the infra-subsistence level or is in transition towards it, the time has come to begin searching for a new occupation, either fulltime or as a supplement to the family income. Those who succeed in their search for employment mainly enter into construction, transport or domestic service, apart from capitalist agriculture. But generally, that is when they discover that becoming a wage worker is a difficult enterprise due to already well-established barriers. In one study on the Mexican labor market using data from 1988, the following was concluded:



industrial colonialism and peasant production151 Out of workers engaged in farming, 28% were self-employed laborers; 13% appear as employers, and the remaining 58% were subordinated laborers, that is, all of them wage workers, farmhands, day laborers with no land and who work on other people’s plots. In all, they make up a population of 3,644,732. However, out of this working population, only 2.6% managed to get a job as wage workers and 21% as farmhand and pieceworkers, amounting to 1,495,597, that is, 9.5% of the active working population. If we bear in mind that 51.6% of them were contracted by ejidos and communal land individual producers and that 12.3% were hired by agriculture entrepreneurs and, finally, that 34.1% of all subordinated labor received no compensation, it becomes evident that farming activity and the rural labor market proper display very little capacity to absorb labor power (Flores, 1992: 43).

A decade earlier, the Regional Program for Employment in Latin America and the Caribbean (PREALC) identified some of the processes affecting employment in agriculture. They especially pointed to: a) a decline of permanent workers as a result of the spread of temporary employment that was a better fit for modern agriculture, and b) the elimination of traditional relations within large estates by which many types of actors that enjoyed certain rights on the farm (inquilinos, arrendires, huasipungos, and so on, according to a given part of the region) were forced to leave in search of new jobs (PREALC, 1982). There is no need to go back to the conditions of the urban market labor since that has been dealt with extensively in the previous chapter. The issue here is as follows: underdeveloped capitalism opened spaces for the peasant economy to grow, but the same relations of capitalism dictated that the peasant economy would be only provisional. Capitalist underdevelopment’s true vocation is to create an absolute surplus population as one of its specific functions within the imperialist system. Social Impacts of Neoliberalism on the Countryside Neoliberal globalization brought about particularly hard conditions for the rural surplus population. Outward-oriented growth accelerated the decomposition process of the peasant economy where part of the relative surplus population make their living, while at the same time it swelled the urban labor market with the unemployed. Commercial liberalization came to create new challenges in terms of productivity. Subsequently large masses of workers were evicted from their refuge in the peasantry. In 1970, sub-subsistence wheat and corn producers numbered 1.09 million while towards the end of the 1990s, the

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number had reached 1.4 million (CEPAL, 1999). In Central America, subsubsistence producers increased from 1.04 million to 1.14 million between 1989 and 1993 and it was expected that they would reach 1.32 million by 2000 (CEPAL, 1995). This evolution is not independent of political implications, as social unrest tends to radicalize. The revolution in Nicaragua and guerrilla war in El Salvador managed to recruit a large portion of their ranks from the poorer population in the countryside. Under different conditions, the Zapatista guerrilla movement benefited from the same disposition of the poor to armed resistance. Certainly, these sectors have also been behind the emergence of popular governments, especially in Bolivia, Ecuador, Nicaragua, Venezuela and even Brazil, a country that could not ignore popular demands for agrarian reform. Before moving forward to our conclusions, it is necessary to underline the impacts of the conflict of capital and nature on peasants, something which we have so far ignored. The evolution of prices is one of the most evident, secondary forms of manifestation of this conflict so we take it as a point of departure. The reduction of unit costs and prices as a result of productivity improvements is an established trend of capitalist production. Unit prices fall in the long run because the produce unit value falls. While this historical process can be seen above, the trend became abruptly halted during Table 5.3. International Prices* Index (Base 1990 = 100). Commodity

1980

2000

Rice Corn** Wheat Sorghum Cotton fiber Sugar Bananas Coffee Shrimp Cattle Meat Tobacco

127.4 114.9 118.9 124.0 113.2 229.2 69.1 184.0 93.9 109.1 79.9

94.3 70.1 84.0 84.7 60.8 64.5 77.2 101.3 139.8 76.0 76.1

Source: CEPAL (2001). *Dollars per ton. **Chicago.



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the first decade of the 21st century. Prices of primary goods increased, although in a general context of volatility. They increased during the export boom of 2003–2008, while in 2009 during the worst moments of the crisis, they declined. In 2010, especially during the second half of that year, they shot up again. Factors unleashed during the third stage, which we have already referred to, are to blame for this state of things. What we encounter include factors arising from capitalist production which at the same time call into question the regular operation of capitalism. They are the result and manifestation of the present crisis in the capitalist exploitation of nature. Among them, the following should be pointed out: a) The effects of climate change. It is true that we do not yet have studies that inform accurately about the impact of global warming in the region, apart from forecasts built on the basis of case scenarios. Although information exists on damage produced by climate events in some countries, it has not been proved beyond any doubt that these events are part of what has euphemistically been called climate change. Yet, academic uncertainty in this connection does not refute correlations in real life. On the one hand, rural dwellers know from experience that the principal risk for their activity is climate variability and academic observations have confirmed this. “Extreme climate events have historically been the most frequent source of price variability in agriculture”. And it has also been found that: “…the frequency of floods and droughts on the American continent has multiplied twenty times from the first half of the last century to the present 2000 decade. These climate disasters have contributed to harvest losses at the global level, thus giving place not only to swings in prices of agricultural goods but also to devastating famines in the most vulnerable regions (CEPAL/FAO/IICA, 2011: 13). b) The rise of oil prices that resulted from already discussed causes directly affects the cost of agricultural inputs and transport. According to estimates, the prices of fertilizers have increased between 90% and 150% during this century’s first ten years. Now that the epoch of cheap oil is over, and leaving aside its price volatility as a result of various historical events, it could reasonably be anticipated that prices will tend to stabilize for a period at a level higher than the one prevailing at the beginning of the 21st century’s first decade. In this way, the spike in oil prices has contributed to the disruption of the otherwise expected evolution of prices under capitalism.

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c) Bio-fuels production has affected food production. A growing part of corn harvests is being sent to ethanol distilleries, as is a growing part of vegetable oil used for the production of bio-diesel. Both products have evolved with great success during the third stage. At the same time, a new conflict around the use of soil is developing and presenting a new dilemma. The environment stands to benefit from the expansion of cleaner energies (heated discussion continues about exactly how clean these new energies are) but it would do so by way of affecting the living conditions of the poor, that is, those who cannot be blamed for climate change. Other factors explaining the price increase trend would include the fact that food demand has also grown as a result of greater consumption in Asia, especially China and India where consumption patterns have changed favoring meat and dairy products, thus enhancing the production of forage crops for cattle instead of staple crops to directly feed people. Financialization and speculation are also among the causes of price increases. The volume of market futures on staple grains has gone up sharply during the decade of 2000 and it continues to do so. However, it is not reasonable to define this financialization as a principal reason for price increases, despite the fact that US fiscal policy has reinforced dollar availability and this has in turn contributed to inflation. It was in this context that global grain reserves were bound to fall and they did. Since 1995, grain reserves have consistently become reduced at a 4% annual rate. During the 2009, 2010 and 2011 cycles, corn and wheat reserves continued to fall. In addition, some countries decided to reduce their exports with a view to ensure internal supplies. The International Monetary Fund has warned that the world may have to resign itself to dealing with more expensive foods. The implied doubt in this statement probably reflects the IMF’s hesitation to explore the causes of this phenomenon since it explains price increases by “transitory phenomena” such as climate alterations (González, 2011). It is well known that these “alterations” have become a part of the daily life of the planet and that they will remain here for a long period, at least until a profound change in production and the social reorganization of society has made it possible for a more amicable relation with nature to be developed. The question arises as to whether the peasants and small landholders in general will benefit with the rise of food prices. Or, put another way, whether the changes in the operation of capitalism could really modify the labor and living conditions of the peasantry. The impact of sustained



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price increases on the living conditions of small landholders in principle depends upon the balance of their trade with the rest of society. A rise in price of their own products could compensate for the price increase of what they buy at a given moment. Yet, even if unequal exchange was suspended for the moment, the next cycle would tend towards restoration of “business as usual” conditions. If they have little or nothing to sell, their position will inevitably be disadvantageous. Small landholders cannot efficiently increase production in order to respond to market opportunities. They lack access to credit, to technological innovation (or even to existing technologies), to production and commercial networks, and to large markets. They are not even in a position to change their own production patterns, except when they shift to less costly activities, such as when they stop producing foods in order to embark on certain forage production projects. There is actual evidence to suggest that the least protected social sectors are seeing their poverty deepen as a result of price increases. A report by ECLAC/FAO/IICA shows that in the context of price increases experienced during 2007–2008, around 20% of the poorest population of Guatemala and Peru saw their calorie consumption actually fall by 8.7% and 18.7% respectively. In both countries, “…most families, including those dedicated to agriculture, are suffering losses as a result of the increase of food prices.” Also, as should be expected “…the effect is harder upon poor families that allocate a large part of their income to food consumption” (ECLAC/FAO/IICA, 2011: 24). Small landholders will not see improvement in their standard of living as a result of the increase of food prices. In short, the increase of prices does not arrest the tendency of the peasant economy to disarticulate. Yet, it was not only the peasantry who suffered victimization by neoliberal globalization. Commercial liberalization exposed the entire sphere of national agriculture to competition with capitals producing under better conditions and in control of technological progress, or at least having easier access to it. Weaker national capitalist producers were put in a situation similar to the one that peasants were in, in relation to them. International prices, to which the region was forced to adjust to, were already lower than those of the region and continued their long term downward trend until 2003–2004. However, since the region always lags behind the productivity changes  of developed countries, it could not respond properly to this situation. A comparison of productivity between Latin America and selected more developed countries over a 20 year period shows the following results:

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Table 5.4. Productivity Differentials (1980 dollars). Productivity

Year

Europe

USA & Canada

Latin America

Per worker

1970 1990 1970 1990 1970–1990

1.904 4.747 450 577

11.571 22.561 218 317

1.058 1.588 332 428

4.7 1.3

3.4 1.9

2.1 1.3

Yield per hectare Growth (%) Per worker Per hectare Source: CEPAL (1995).3

This situation would not improve over the following two decades. On the contrary, the relative productivity of agriculture, hunting, fishing and forestry in relation to the productivity of the same sector in the United States continued to systematically fall. It represented 14.2% in 1990, 13.3% in 1998, 10.7% in 2003 and 7.0% in 2008 (ECLAC, 2010). The gap, instead of narrowing, actually expanded even though productivity growth in the US was lower than that taking place throughout most of Asia. At the same time, the region’s agricultural exports expanded and contributed to moderating the tendency towards increasing trade deficits during 2003–2008 (although the effect was not as great as that registered by the region’s mining exports). This suggests that the increase of agricultural exports rested mainly on price increases rather than on productivity advances based upon the introduction of technological progress. This is not meant to imply that technological advances were not introduced, as improvement in productivity, even though limited, would prove to the 3 Behind these figures there is a very unequal use of means of production and supplies which does not diminish. For example, in these more developed countries (Canada, United States, Belgium, Norway, France, United Kingdom and Italy) the average use of tractors for every 100 workers was 6.28 in 1970; in 1990, it increased to 13.24. In ten Latin American countries (Uruguay, Argentina, Venezuela, Chile, Brazil, Costa Rica, Mexico, Paraguay, Colombia and Guatemala) the same average figures were 0.39 in 1970 and 0.69, 20 years later. The same is true for fertilizers. The first group of countries employed 120.6 kilograms per hectare in 1970 and 136.0 in 1990. The second group of countries consumed 6.97 and 16.85 in 1970 and 1990 respectively (CEPAL, 1995). As should have been expected, agriculture competitiveness continues to fall. The region’s participation in OECD countries’ agriculture and cattle farming imports went down from 14.50% in 1980 to 6% by the end of the 1990s.



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contrary. What underlies these developments is an ever more concentrated pattern of technological innovation. As ECLAC has stated in relation to agricultural development during the third stage: The most modern and capitalized sectors were able to introduce technological innovations, raise mechanization and direct production towards more rewarding investments. On the other hand, small landholders stagnated and in many cases their situation deteriorated, this due to obstacles in obtaining credits or getting access to technology and markets and also due to their commitment to traditional crops which compete with imports (ECLAC, 2004: 76).

So if the new situation concerning prices during the first decade of the present century represented an opportunity for agricultural development, this opportunity was greatly seized upon by developed countries but only in much smaller measure by some of the region’s countries and within them, by large capitalist producers. This fact is illustrated with regard to the shift towards global grain production in 2007 (Graziano, 2009). The region as a whole continues to move backwards with respect to competitiveness within the world market. This is a necessary effect of industrial colonialism. In a context of commercial liberalization, the future for agriculture looks rather bleak, except for some products such as those utilized for bioenergy. Yet, social repercussions are also significant. In principle, the impoverishment of weaker capitalist producers is a predictable result, but for some of them this impoverishment could mean and has meant a downwards social mobility, for they have come to swell the ranks of peasant production. A large portion of small and medium capitalists in agriculture were not in a position to properly confront commercial liberalization. As a result of competition and the evolution of prices, the minimum amount of land necessary to turn a profit became modified. An ECLAC study in Mexico described this situation in the following terms: The fall of income in the traditional segment of corn producers was reflected by a tendency towards production concentration (…) Only by exploiting larger extensions could producers have been able to reach the income level they had during the early 1980s. This tendency certainly pushes many producers out of the market. Some of the farmers interviewed declared that if they had previously obtained adequate income by cultivating 100 hectares of corn, now they need to cultivate 250 hectares to obtain their previous income. Thus, corn production has become a “volume” activity. In addition, now they require strategic abilities to discern the best possible combination of supplies to be applied due to the constant changes in relative prices and they must count on their own capital to finance their activity due to the

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Therefore, globalization gave a strong boost to land and capital concentration in the countryside. Concentration of wealth and expansion of poverty are highly common processes in rural Latin America. The social meaning of these changes needs to be stressed. A whole sector of small and medium capitalists has been forced to enter the ranks of the peasantry. We have no sure way of proving that this has been a generalized process throughout the rest of the region, but we do have some information and a case study which indicates that this proposition goes beyond intuition. In Mexico, a significant decline of labor force employers took place. They amounted to 855,168 in 1988 (CEPAL, 1999) and according to the April-June 2000 national employment survey they had shrunk to only 166,557. The number of agriculture and cattle raising workers registered at the Mexico Social Security Institute (Insituto Mexicano de Seguridad Social, IMSS) declined 21% between 1982 and 1998, while the number of the self-employed increased from 1,924,854 to 2,669,355 between 1988 and 2000 (INEGI, 2000). Research carried out by I. Castro (1996) in Zacatecas, Mexico, confirmed that many entrepreneurs reduced the hiring of labor to a bare minimum and were forced to rely more upon family labor. Similarly, some of them had to give up the use of tractors and resort to animal traction to do the job. In addition, there was a certain abandonment of the use of water due to high electricity prices. For some of these producers, profit was no longer a production goal. It is certainly true that in Mexico, special conditions accelerated this social shift, including the lack of financial support for producers in particular, but the general tendency was already in place before financial difficulties flared up in 1994–1995. Conclusion We have shown that the peasant economy provided a means by which a part of the surplus population, which industrial colonialism creates, makes a living. For that reason, it is also a means to which governments resort with an eye towards attaining a certain measure of governability. In this way, peasants join in the relative surplus population for a transitional period.



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It can be concluded that industrial colonialism does not have a single linear impact on peasant production. On the one hand, capitalism effectively promotes its decomposition. At the same time, it increases the size of the peasantry with former small capitalists who are unable to successfully face the challenges of increased competition. This also places constant pressure on governments to boost land redistribution so as to manage the conditions of the surplus population. The distribution of population between urban and rural areas has significantly changed during the neoliberal period. The rural population constituted 43% of the total population in 1970 and declined to about 23% in 2010. Despite the fact that the total population increased from about 285 to 600 million, the population in rural areas remained practically unchanged at around 120 million. Rural-urban migration has transferred a large concentration of poverty to the cities. In 2008, 118 million people living in conditions of poverty were registered in urban areas against 62.1 million in the countryside (CEPAL, 2009). Yet, rural poverty is typically much more intense. 56% of the povertystricken in the countryside are living in absolute poverty, that is, they lack the elementary means for survival, compared to 30% of the poor based in urban centers. In fact, the percentage in absolute terms of those living in absolute poverty is equally distributed between urban and rural areas, as is hunger, in spite of the enormous difference in population between the two sectors. Thus, the countryside, with its millions of small plots that comprise 80% of the total land under cultivation, is both a source and a deposit of needs and surplus population. This situation will not change in spite of recent FAO efforts to revive smaller scale agricultural production in the region. That is, if the arguments we have here presented are as correct as we believe. The distribution of small plots of land only provides insufficient and temporary solutions to the longstanding structural problems of the region’s agriculture. One might think that the organization of large-scale production through cooperatives or national property could provide a more sustainable solution, yet in the final analysis, what is at stake is the overcoming of industrial colonialism which has in essence dictated the socio-economic trajectory of the region.

APPENDIX

THE UNDERLYING CAUSES OF UNDERDEVELOPMENT IN LATIN AMERICA1 So far, we have discussed the main problems related to underdevelopment’s content and form. To that extent, we have constructed a picture of what underdevelopment is, which we hope is a truthful one. Taken this picture as our reference point, we are now in a position to properly tackle the discussion of its originating causes. If underdevelopment is a relation of capital that did not give birth to general labor but still practices a real subsumption of immediate labor, then its originating causes cannot be any other than those which led capital to get organized in such a way that it rests on the general labor of more advanced countries. In our discussion, we will attempt to analyze general causes for the whole region, thus ignoring the particular history of each country that would amount to a more detailed inventory. The Two-Fold Impact of Capital Export The main objective of capital export is profit just as it is with any relevant action of capital. “…” Thus, periods of overproduction will tend to increase exports of capital given that excess capital can be used abroad to realize attractive rates of profit. As a general rule, capital export will occur to any region offering higher rates of profits than at home. Latin America offers this possibility because foreign capital can operate here with higher rates of surplus value, given the low value of labor-power. Most of capital exports to Latin America beginning from the final decades of the 19th century focused on production for exports and activities linked to export production. Its main impact was not the growth of production per se but the acceleration of the spread of capitalist social relations of production. It was in this way that Latin America’s history came to confirm Lenin’s propositions that “The export of capital influences and greatly accelerates the development of capitalism in those countries to which it is exported. Therefore, while the export of 1 This work was originally published in 1986 in Spanish as Chapter VI of Reinterpretando el subdesarrollo: Trabajo general, clase y fuerza productiva en América Latina by Víctor Figueroa, Editorial Siglo XXI, Mexico City DF, Mexico. It appears here for the first time in English with permission from the original publisher.

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capital may tend to a certain extent to arrest development in the capital exporting countries, it can only do so by expanding and deepening the further development of capitalism throughout the world” (1963: 240). Capital export was also dictated by the production needs of more developed countries. The enormous growth of production was unsustainable without an increase in the supply of raw materials. If we add to this the cheap wage goods obtained from the region, we can build a more or less complete picture of the region’s economic role concerning developed countries: a) it provides areas of exploitation under conditions of higher rates of profit; b) it provides cheap elements of constant capital for the expansion of production in developed countries; c) it offers a captive market for capital export; and d) it helps to keep the rates of profit and surplus value high in developed countries in so far as capital exports cheapen constant and variable capital at the core. Through direct investment, foreign capital promotes the development of capitalism as it increasingly resorts to wage labor. There is evidence that initially, foreign investment attempted to avoid the use of wage labor. However, the general economic advance coupled with the struggles of working people progressively forced the diffusion of labor relations that belong to capital. The type of productive forces that were imported into the region also played an important role in the transition. The railways impacted on social relations not only quantitatively but qualitatively. As a product of large industry, it eroded precapitalist relations on a variety of fronts. First, it did so directly by means of the mass employment of the labor force required for construction and maintenance. The use of some kind of forced labor represents the absence of a capitalist labor market and it vanishes with the development of the latter. Workers occupied in railway work eliminated hands for agriculture, which in turn came to promote the introduction of new technologies throughout the countryside. Second, this erosion was advanced by accelerating the decomposition of craft relations by demanding carpenters, blacksmiths, lathe operators, masons, smelters and the like. It was also encouraged by facilitating labor mobility. In this latter connection, J.F. Leal and J. Woldenberg point out: “The railways’ labor demand as compared to the wide mass of agricultural laborers was rather limited. Yet, even though railways did not represent an opportunity for mass employment, it did represent expectations for countryside workers. It was a means to migrate” (1981: 97).2 The importation of railway systems further advanced the spread of capitalist social relations by providing incentives for the expropriation of lands under control of direct producers. As the railway networks extended, the value of enclosed lands increased along with the eagerness to get control over them. The expansion of railroads spelled a risk for agricultural communities as John Coatsworth’s work clearly shows. In his analysis of fifty-five conflicts between indigenous 2 The translation of citations from Spanish texts is ours.



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settlements and the haciendas in Mexico between 1877 and 1884, the author reported that: Most incidents dealt with illegal appropriations by large-estate owners. Almost in every case some form of active resistance by peasants was involved: prolonged lawsuits; demands to government employees, violent protests or armed rebellions. In a number of maps (…) the location of these conflicts has been signaled in relation the actual or projected railways system. The result is impressive. Out of the 55 registered incidents, only 5 (9.1%) took place further than 40 kilometers from a railroad franchised by the federal government; around 60% of the cases (32 out of 55) had taken place at less than 20 kilometers from an actual or projected railroad (Coatsworth, 1984: 122). The legally protected seizures and usurpations of lands which did not clash with resistance from the communities and the privatizations of national estates also figure as methods of original accumulation, boosted by the expansion of railways. Coatsworth succinctly argued that from the point of view of its socioeconomic impact, the expansion of railways “was a process of usurpation of communal indigenous lands and public territory by the country’s ruling class and landowners” (1884: 134). The impact of the new productive forces on social relations can also be observed in the mining industry. In Mexico, the partido relation, which allowed the worker to keep a part of the product for himself as compensation, originated early during Spanish rule and had shown a stiff resistance to dissolution despite the efforts of owners to dissolve it. It lasted into the final quarter of the XIX century, at least in those tasks that demanded some skill and where the conditions of the labor process exposed the worker to a short life span. Cuauhtémoc Velasco depicted this social relation accurately: “This worker is not a wage-worker because the fundamental part of his income does not come from wages, but from the partido. This participation in mineral production involves him in the sharing of the enterprise’s product and so it follows that the struggle that took place over the elimination of the part belonging to the workers must be interpreted as part of the separation process of the workers from their means of production.” If the partido was going to be dissolved in a given workplace, the workers threatened to abandon the mines; actually they frequently abandoned the mines on account of the news of prosperity somewhere else, thus affecting production at the mines they left. Towards the end of the XIX century, a number of technological innovations reduced the need of skilled workers and labor conditions were improved. Leal and Woldenberg (1981: 22) cite Santiago Ramírez who makes this connection to steam driven machinery applied to extraction, drainage and drilling; the use of dynamite in place of common gunpowder to blast; expanding rail transport; the ventilation by compressed air at the points where the mechanic boring was established; the substitution of the hammer mill by the Chilean drag mills; and so on. We do not have sufficient information to assess the impact of

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these technological transformations on the partido relation but it is clear that they destroy the foundations on which it is based and tended to render it unnecessary. The export of capital was certainly not the only factor promoting the expansion of wage labor. The boom of export-led production actively stimulated labor mobility and wage-labor expansion. This was the case, for example, in the colonization of Southern Chile, or the production that took place based on immigrant labor in Argentina. State led activities in building infrastructure also contributed to the expansion of wage labor. It is important to stress that the transition towards wage labor so long as it takes place on the heels of big industry’s technological advances is also a transition to the real subsumption of immediate labor. The technological transformations in mining we mentioned above do nothing else but transfer a large portion of the worker’s skills to the means of production. To that extent and due to capital exports, the direct producers did not have to undergo the long period of manufacturing. The capital relation took root on the basis of a technical mode of production that was not locally created. For the same reason, the region did not have to organize its own general (scientific) labor. It follows that the export of capital not only accelerated the spread of capitalism in Latin America but it also decisively contributed to determine capitalism’s underdeveloped character in the region. This is what the two-fold impact of capital export consists of, i.e., it figures as a cause of both capitalism and underdevelopment. The conditions of emerging capitalist underdevelopment also reveal the conditions of the reproduction of underdeveloped capitalism. A country which imports machinery for the production of a given good will tend to import the improved machinery for the production of the same good. We will come back to this issue of capital export later on. What we have said so far does not completely solve our problem of explaining the origination of capitalist underdevelopment. If we observe the case of Japan, we can see that capital export does not necessarily prevent the internal organization of general labor and therefore does not inevitably pave the way towards underdevelopment. After the forced opening in 1853 which ended two hundred years of Japanese isolation, foreign technology managed to penetrate broad sectors of industry such as iron and steel industry, textiles, sugar, mining, defense, ships, and so on, while at the same time, imports managed to ruin local industry. But the course of things in Japan did not unfold in the same way that would later occur in Latin America. In Japan, the ruling class would politically channel the process in a radically different direction. Since the commercial opening was imposed on Japan, it was seen by the local oligarchy as an affront to the country’s sovereignty. As it could not be prevented, the local ruling class sought to obtain advantages or mold the new external links to the benefit of its country. As such, it focused its attention on the implementation of a clear national project. Foreign technology was not uncritically adopted but was instead transformed into the object of an ongoing and thorough analysis.



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In this way, the incipient owners of Japanese capital appropriated the scientific principles objectified in it and actively engaged in their development. The Japanese state, directly involved in this project after the “Meiji Restoration,” organized the Ministry of Industry and Technology, created an industrial infrastructure and promoted the training of technicians. Beginning in 1870, it stimulated internal production to reduce the influx of imported goods from abroad and helped decrease the nation’s trade deficit. Thus, the determined effort of Japan’s ruling class maintained its aim of bolstering national development and showed that underdevelopment was not an inevitable outcome of capital exports. This leads us to now advance to the crucial point. The Lack of Commitment to National Development by the Region’s Ruling Classes The fact that the ruling classes did not confront the penetration of foreign capital with a national project, i.e., make any political attempt to reach development or economic growth based on internally generated productive forces, is one of the few generally accepted facts about Latin America’s history. In the case of Peru, Anibal Quijano posits his conviction in this way: Imperialist capital and its agency the imperialist bourgeoisie were able to easily impose conditions for their hegemony in the country, given the weakness of the Peruvian bourgeoisie and its inability to raise itself to the position of ruling class before the imperialist invasion (…) and henceforth the concrete interest and behavior of that Peruvian bourgeoisie would strengthen those conditions and the imperialist bourgeoisie hegemony. It (Peru’s bourgeoisie) could never be, a national class, except for its Peruvian origin, it could not be nationalist and much less anti-imperialist (1977b: 124). R. Puiggrós put it in this way with respect to Argentina: Contrary to the economy of less nature gifted nations but with a diversified and inwards oriented production, Argentina’s economy was vulnerable to external changes to such a point that governments believed that their withdrawal from the prevailing ‘international division of labor’ which made of the country the ‘world’s bread basket,’ the country would go bankrupt. The notion that this international division of labor would prolong ad vitam aeternam took root among politicians and economists (…) The fast and sensational advances during the prosperity period were equivalent to a bourgeois revolution which, under the lead of British capital, concentrated on the export economy. The landowning oligarchy, which got rich under the shadow of these changes, had the features of a big rural bourgeoisie and joined forces with the commercial bourgeoisie. Both were free-traders and in consistency with their class nature they tenaciously opposed industry protection, arguing that this was ‘artificial’ and ‘anti-economic.’ Forty years

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appendix later they still insisted on hindering the integral self-development of the country in the name of a static and anachronistic conception of the world market and the Argentina’s reality (1977: 311).

Agustín Cueva reflects on Ecuador’s ruling class in the following way: Economically our bourgeoisie suffered from a premature atrophy because it was not able to overcome the agro-mercantile stage. When cocoa exports gave place to a significant capital accumulation, the surpluses were not destined to really productive activities but they were allocated to usury through an all-powerful banking system that used the state and converted the treasury into a source of private enrichment.(…) But this ruling class was a giant standing on feet of clay, for its fate depended on external trade and particularly on the possibility to put its cacao in international markets (1977: 214). It was no different in Chile where a ruling bloc of agrarian, mining and financial interests aborted the nationalistic project of President José M. Balmaceda (1886– 1891) who sought to promote the development of local industry through measures that strongly affected foreign capital’s interests (Ramírez Necochea, 1960). It should be noted that this ruling class did not stand opposed to every form of industry. The National Society of Agriculture (Sociedad Nacional de Agricultura) delivered certain support to some enterprises, but this impulse was far from any real nationalist feelings. Rather, it took place in a free trade context without calling into question foreign capital penetration but in fact promoted it. They were effectively supporting industry to complement foreign interest and erected it on the basis of the general labor of more developed countries which, for the same reason, would inevitably frustrate any real domestic effort for internal development. Generally, state measures took place following the advice of an ideology appropriate to the installation and consolidation of imperialism. Anderson depicts this process as follows: The economic role of the Latin American nation state was conceived in such a way to fix the system of which it was an integrating part. One of its main functions was to operate as a concessions donor: its policy consisted of using its power and resources to attract foreign investors and entrepreneurs. The capacity to devise the best combination of measures to attract capital into their country became the statesman’s most treasured ability. Land concessions, cession of landed property rights, exemption of tax and tariffs, state guarantees for all capital invested, complementary state investments in infrastructure, protection against ‘violations of the contract of employment’ by trade unions and against insurrections, guarantees of political stability, elimination of obstacles to foreign investment and credits, all of these mechanisms were combined once and again throughout the years with a view to create attractive conditions for foreign investment and enterprise and thus meeting the aims of the state. This enthusiastic activity



underlying causes of underdevelopment in latin america167 characterizes the career of every Latin American political figure towards the end of the XIX century and the beginning of the XX century (1974: 45).

To sum up, local ruling classes did not have in mind any sense of building economic sovereignty. As producers, they never thought of their own existence and enrichment independently of the more advanced countries, or better put, in isolation of the latter’s development upon which they believed their immediate interests rested. It was the fate of developed countries which determined the evolution of their exports and hence of their own fate. This is why their ideological horizon was trapped within the limits of the “international division of labor” and “comparative advantages” which the rent they acquired rested on. They were unable to transcend free trade notions in accordance with their position as producers of international commodities. This also is why they defined foreign capital as a natural ally to which they openly subordinated themselves. The economic evolution of advanced countries determined not only the demand of goods from the region but also the supply of goods to the region. And supply, following the development of general labor and department I of the economy was qualitatively modified, not because consumer goods are displaced but because capital goods are added. With capital export from the center, capitalist relations of production spread in their specific underdeveloped form throughout the region. Latin American capitalism therefore emerged not from a societal project but from the movement of economic forces at international level. It is as though the world economy, through its own evolution, had laid the foundations for its conversion into imperialism, including the creation of a subordinated ruling class. This indeed turned out to be the actual process. What did this process which created a ruling class lacking any national vocation actually consist of? How can a society that is dominated by a ruling class so strongly predisposed to subordination best be defined? Any serious reflection on this issue points us back to underdevelopment’s originating causes. The relevant process goes all the way back to Spanish rule and conventional colonialism. For obvious reasons, we will limit ourselves here to the presentation of some general theses. Prelude to Underdevelopment The discovery of America was mainly the work of Spanish and Genovese commercial capital as a result of the search for new routes to extent mercantile circulation. In this way, a crucial step forward was taken in the configuration of the world market, a step which in Marx’s words: “inaugurates the modern biography of capital and which coincides with first moments of the process of creation of a free proletariat. The prelude to the revolution that laid down the foundation of the capitalist mode of production was played out in the last third of the fifteen century and the first decades of the sixteenth. A mass of free and unattached

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proletarians was hurled onto the labor-market by the dissolution of the bands of feudal retainers…” (Marx, 1990: 878). The world market, in turn, would propel this social transformation. “The discovery of America and the circumnavigation of Africa created a new field of activity for the ascending bourgeoisie. The market of East Indies and China, the colonization of America, the trade with colonies, the increase of means of exchange and commodities in general gave to trade, navigation and industry an unprecedented boost and with it a fast development to the revolutionary element within the disintegrating feudal society” (Marx and Engels, 1972: 40–41). The creation of the world market, therefore, was not the work of capitalism, that is, the work of a production regime based on free labor, for this is just emerging, a process that the world market would help to develop. As capitalism grows the world market would expand on new foundations. Commercial capital does not require capitalism to exist and it grows up “in the most varied economic formations of society” (Marx, 1990: 914). At the same time, the conquest and colonization of Latin America is one of the elements of original accumulation, a process which favors capitalist development in Europe but one whose scene is the entire world market. As Marx put it: The discovery of gold and silver in America, the extirpations, enslavement and entombment in mines of the indigenous population of that continent, the beginning of the conquest and plunder of India, and the conversion of Africa into a preserve for the commercial hunting of blackskins, are all things which characterize the dawn of the era of capitalist production. These idyllic proceedings are the chief moments o primitive accumulation (Marx, 1990: 915). If original accumulation is the process which creates the capital relation and if, on the one hand, it extends throughout the world market while, on the other, has its venue in Europe where the birth of capital is actually taking place, then it seems convenient to distinguish between a subject and an object of original accumulation. The conquest and colonization undertaken by Europe thanks to its material development transformed Latin America into an object of original accumulation. In the main, the region provided the Europeans, on the one hand, world money and, on the other, an area for commodity production, that is, it contributed to the money concentration which must accompany the separation processes and to the mass production of crucial commodities for capital steady working. In principle, three factors determine the form that production assumes: a) The forms designed by the Crown according to its (feudal) image of society, b) The pre-existing socio-economic forms and more generally, all the prevailing (material, institutional, environmental) conditions of the region; and c) the mercantile purposes of the conqueror. This last one is the determinant factor, for whatever



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the result of the clash between the first two, production would end up getting organized to satisfy commercial capital’s interests. In other words, the organization of production would reflect commercial capital’s predominance, a concept first suggested by José Carlos Chiaramonte (1984) in connection with Latin America. Before carrying on with this analysis we must expound our interpretation of the predominance of commercial capital. This concept essentially includes the following points: a) Exchange between producers and merchants is submitted not to any economic law but to fraud and plunder as a generalized practice. As Marx explained: When commercial capital exchanges the products of undeveloped communities, commercial profit not only appears as defrauding and cheating but to a large extent does derive precisely from this (…) Commercial capital when it holds a dominant position, is thus in all cases a system of plunder, just as its development in the trading people of both ancient and modern times is already bound up with violent plunder, piracy, the taking of slaves and subjugation of colonies; as in Carthage and Rome, and later with the Venetians, Portuguese, Dutch, etc. (Marx, 1991: 448–449). Thus plunder and violence in Latin America are a manifestation of commercial capital’s predominance. The figure of the conqueror that arrives offering glass beads in exchange for gold is far from giving an exact image of this predominance. All that which the conqueror does not obtain from the natives by means of fraud, he gets by forcing the native to produce, making of him an object of exploitation, with no consideration about local traditions and evolution. That is why Marx states: “The Spanish conquest put immediately an end to any further independent development” (Marx and Engels, 1972: 30). b) Commercial capital predominance is linked to the backward state of material production: “…where commercial capital predominates, obsolete conditions obtain” (Marx, 1991: 444). This is not intended to signify that commercial capital predominance takes place only under pre-capitalist conditions. On the contrary, commercial capital prolongs (and deepens) its predominance under the period of capitalist manufacture precisely because it accelerates the process of original accumulation. In effect: “Today, industrial supremacy brings with it commercial supremacy. In the period of manufacture it is the reverse: commercial supremacy produces industrial predominance, hence, the preponderant role played by the colonial system at that time” (Marx, 1990: 918). c) The backward state on which commercial capital’s predominance is established is a relative backwardness. A nation’s commercial predominance and therefore commercial capital’s predominance which becomes manifest in its relations with the rest of the world, cannot be conceived of if the development of that nation is not enough to support its power in terms of fleet, weapons, among other things. Commercial predominance erected on a given state of development

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sooner or later reacts, provoking the stagnation of production. Actually, predominance of commercial capital is also predominance over industrial capital. Marx states that “The industrial capitalist is constantly faced with the world market; he compares and must compare his own cost prices not only with domestic market prices, but with those of the whole world. Previously this comparison was almost exclusively the tasks of merchants and ensured commercial capital its mastery over industrial” (1991: 455). Given that under conditions of its predominance, commercial capital is not submitted to average profit and on the contrary reduces industrial profit in proportion to its thirst for profit and its possibilities to obtain it, commercial capital’s predominance plays a negative role on industrial development. d) A nation’s commercial predominance, therefore, restrains its own industrial development and results in the driving force of development becoming displaced to another nation. In that way, commercial predominance itself is displaced until industrial development reaches a point where it is able to turn commercial capital into its own agent. This point was reached after the industrial revolution. This is why Marx writes: “The history of Holland’s decline as the dominant trading nation is the history of the subordination of commercial capital to industrial capital” (1991: 451). From this standpoint, it was precisely Holland’s commercial hegemony that prevented the industrial revolution from taking place in that country. e) The Spanish manufacturer’s decline can be explained in the same way. Commercial capital condemned Spain to be supplied and to supply its colonies in large measure with goods manufactured in the more developed countries, goods which Spain paid for, not with internal production, but with income obtained from the colonies. It follows that Latin America was not an object of original accumulation to the benefit of industrial development in Spain, but rather to the benefit of industrial development taking place in other places (mainly in Holland, France and England). f) The frustrating influence of commercial capital’s predominance over development also impacts the transition to capitalism. The merchant’s control of production “cannot bring about the overthrow of the old mode of production by itself, but rather preserves and retains it as its own precondition” (Marx, 1991: 452). In other words, commercial capital’s control over production coincides with the transition to capitalism only thanks to the intervention of other factors, mainly the development of productive forces taking place in those locations that step back from direct commercial hegemony. g) The economically reactionary influence of commercial capital’s predominance is accompanied by its politically reactionary influence. Marx asserts: In modern English history, the actual merchant estate and the trading cities also appear to be politically reactionary and in league with the landed and financial aristocracies against industrial capital. Compare for example the political role of Liverpool as against Manchester and Birmingham.



underlying causes of underdevelopment in latin america171 The complete domination of industrial capital has been acknowledged by English commercial capital and by the “moneyed interests” (financial aristocracy) only since the abolition of the corn duties…) In other words, commercial capital fought against industrial capital as this latter as the form of capital par excellence calls into question the former’s predominance (Marx, 1991: 445).

The relation of production that tends to predominate is slavery. It constitutes the operational base for large-scale, export-oriented production; it allows for the massive use of labor power compelled to work under the hardest conditions. Certainly, there is no point in ignoring the peculiarities of slavery in Latin America and the processes that determined its evolution into different forms. Our aim is to get hold of essential relations. The mita differs from classic slavery but it is still slavery. The same is valid for peonaje in relation to the legal abolition of slavery that it did not affect. The peon was not a free worker able to sell its labor power as a commodity but he was a slave tied to the hacienda (a highly self-sufficient large estate) and to the hacendado’s (owner’s) will. In this connection Marx holds: “In those nations where labor is free, legislation regulates the conditions to rescind a contract. In some countries, Mexico above all (…) slavery is veiled under the form of the peon. By means of money advances, refundable with labor and which are transferred from one generation to the next, not only the individual worker but also his family become the actual property of other people and their families” (Marx and Engels, 1972: 176). In Marx’s words “In the ancient world, the influence of trade and the development of commercial capital always produced the result of a slave economy” (1991: 449). In our case, the result of the conquest and colonization could not be the simple slave economy. Right from the onset, the conqueror’s activity was the organization of labor and production directly with a view to exchange value. This is why the result would not be a slave economy in the sense that the social relation that slavery represents would constitute the nucleus on which society would be organized and which would determine society’s own movement. On the contrary, slavery was inserted in a different logic, one that arises from a developing world market. “While the cotton industry introduced child-slavery into England, in the United States it provided the impulse for the transformation of the earlier, more or less patriarchal slavery into a system of commercial exploitation. In fact, the veiled slavery of the wage-laborers in Europe needed the unqualified slavery of the New World as its pedestal” (1991: 925). In Latin America during colonization and right up until the industrial revolution, slavery was not demanded by an already consolidated wage-labor relation leading international trade, but by an emerging and consolidating wage-labor (or capital) relation. This proposition carries some implications that we shall see later. Yet, keeping this fact in mind, production in the region was also oriented to exchange to the benefit of wage labor that flourishes beyond the borders of Latin American society, although it does this indirectly, that is, by first addressing

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commercial capital’s interests. This is why the classic colonial system is also a commercial system of exploitation, i.e., one where commercial domination is a part of the whole system and which after independence becomes commercial colonialism. In short, the classical colonial economy is organized around export production. It therefore satisfies pre-existing needs and interests developing abroad. Yet, insofar as such needs and interests condition the region’s own labor organization and evolution, they are no longer external factors, but internal factors. The region’s economy is part of the world market just as much the world market is a part of it and is subjected to commercial capital’s predominance around which society increasingly revolves. At the beginning, export production is focused on precious metals. In this way, the region helps supply money to the colonial power, facilitating money concentration and the expansion of money capital. Around mining centers, agriculture and stockbreeding develops to support the mining complex. The possibilities of export diversification remains closely linked to commercial capital’s interests. For the same reason, many of these possibilities are frustrated. In a study on Mexico, for example, Andrés Lira and Luis Muro recount the case of linen and hemp production. In principle, the Crown had authorized the production of these fibers and to instruct the native in the arts of spinning and weaving linen. However, it seems that “soon the opposition from the mainland monopolist merchants grows as they saw that their interests would be endangered with the growth of New Spain’s textile industry. As a result of these pressures, the Crown revised its initial policy” (Lira and Muro, 1981: 400). Sometimes, it is more directly the arrival of commodities produced under better conditions abroad which ruins local production. The same authors report the case of silkworm production whose processing, after an initial growth, soon declines in the wake of competition from Chinese silk production. Certainly, the production of much demanded and competitive export goods is boosted by trade with Europe as well as intercolonial trade. Such is the case of indigo, cochineal, leather, mercury, cattle, wine, sugar, and some others. It was in this manner that a local producer class developed closely tied to trade with Europe and to inter-colonial trade and therefore grew up subordinated to commercial capital for it is the latter that makes the exchange possible and which exercises a decisive influence on what is to be produced (and what is not). All through the 17th and part of the 18th Centuries, Latin America relaxed its ties to the Spanish metropolis. According to Enrique Semo, “Between 1650 and 1770, Spain enjoyed only 18 years of peace. In the beginning of this period, Spain sent merchant fleets every year to Peru. Soon after, the fleets started to come out every three or even every four years. From 1682, they did so every five or six years” (Semo, 1982: 110). Spain’s military campaigns and economic setbacks prevented it from maintaining, let alone reinforcing, its economic links with Latin America. Yet, this situation did not yield a proportional decrease of the region’s external trade, for contraband got stronger. Agustín Cué Cánovas affirms that smuggling



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“…in the XVII century became a real colonial necessity” (1982: 96). Sergio Bagú in turn stresses “At the end of the day, everybody is an accomplice (to smugglers)… the consumers who preferred the cheaper and better quality smuggled commodities and the authorities who were almost always ready to let themselves be led astray by phantoms that leave no trace” (1977: 83). In this way commercial capital actively restrained the exploitation of development local possibilities created by the relaxation of relations with the Crown. Even with all that, production diversified and local and inter-colonial trade expanded. Entrepreneurs tended to build some economic strength and take root in the region. Local administration, which at first appeared as a mere extension of the Spanish state, gains some autonomy as the colony begins to learn how to manage by itself. Yet, commercial capital’s predominance was never disturbed. In this regard, Enrique Florescano and Isabel Gil point out: However, the distribution of privileges and powers was unequal. The group located in the key sector of metropolis-colony relations (foreign trade) was the best favored one. Merchants from the consulate of Mexico, by acting as the metropolis’ agents, obtained the highest gains, because they were the only suppliers of a captive and thirsty market. The large amount of profit that they got thanks to their monopoly position constituted the capital that allowed them to control exports by controlling credits to farmers who were compelled to sell them back the totality of their harvest. Finally, the merchant’s accumulated capital allowed them to control internal trade and to become the main moneylender, along with the Church, to miners, small traders, artisans and farmers. This excessive accumulation of economic resources granted them a principal place in colonial society, second only to the place of the Church. Just like the latter, this group of merchants was a privileged corporation that counted on courts, state agencies and special rights; powers to carry out government tasks (to collect and manage taxes) and economic power to appoint and remove government employees (Florescano and Gil 1981: 483–484). Also the Church attained functions quite typical of commercial capital although it did not show much interest in using its large amount of resources to control production. Evidence of this was its reluctance to loan for productive ventures. Loans were indeed rather scarce: “While for mortgages, the predominant interest rate was around 5%, it was impossible to get a loan for investment in production with an interest rate lower than 20%” (Florescano y Gil, 1981: 178). Merchants in turn privileged export production. According to Semo, “Mexico City’s merchants or even the smaller merchants from provinces provided loans for the production of cochineal, indigo, vanilla, and the like” (Semo, 1982: 178). Thus production heavily depends on merchants and their money as does the economic wellbeing of producers who, for the same reason, position themselves at a lower level of the ruling class structure, a position they can hold on condition of producing for a market they do not know and is directly controlled by commercial capital.

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By means of the Bourbon’s reforms, Spain eventually sought to reach two aims: a) re-establish its political power over the colony, and b) re-define its economic relations to benefit its own economic development. As a result, the political positions of the Church and of the merchants were affected. The established trade monopoly of a few was drastically attacked although by no means did this result in the elimination of commercial capital. As far as we are concerned, the most relevant significance of the Bourbon reforms could be summed up as follows. The management of the colony was reaffirmed as an extension of the Spanish State. By means of administrative changes, public positions were transferred to people who the Crown trusted. Yet, at that time, not only was there a locally rooted proprietor class but also one that had at least tasted the possibility of establishing a state representing their own ruling class interests. At the same time, they have already enjoyed the advantages of commercial diversification as a result of exchange with England (which Bourbon’s reforms wanted to end) and through contraband. Thus, there was already a serious potential for conflict between the Crown and the colony. Further, the region developed its specialization as a raw materials producer. Spain had effectively sought to obtain from Latin America everything that could help its own development while acting as the main supplier of finished goods to the colony. In this way, it postulated an “international division of labor” where the role of the region was defined in accordance to its position as a colony. At the world market level, however, Spain did not have the most competitive position. It was in England where the industrial revolution was taking place that would bring about a radical change in world production and trade relations. The independence movement that successfully spread through a large part of the region at the beginning of the 19th century obtained precisely from those sectors most affected by the Bourbon’s reforms its decisive social force. People to whom the reforms closed off the channels of social mobility became transformed into particularly important agents of political and ideological agitation, as did sectors of the Church. The aggravated economic conditions among the popular sectors contributed to expanding the social forces fighting for independence. It was of course a force that would later be necessary to control after the defeat of the Crown was ensured. A nation-state did not arise following independence because an internal market did not exist to unify the economy and operate as the force sustaining solidarity among ruling class members. On the contrary, the absence of economic ties made possible greater dispersion and provincial uprisings. For the same reason, the emerging state apparatus will tend to heavily rest on military power. Weak and dispersed efforts aimed at encouraging capitalist production found no echo among those controlling economic power, for this sector had no interest in the economic development of their “fatherland.” The benefits they expected from independence were almost completely linked to external market diversification.



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It was the development of large industry at the more advanced centers, especially England whose constant condition, among other things, was to increase demand for raw materials that opened new opportunities for the region’s export production. Latin America had undergone a certain specialization which would allow it to properly respond to such a demand. This specialization, which was at first encouraged by Spain, would advance and strengthen to the benefit of England. As Marx recognized, “A new and international division of labor springs up, one suited to the requirements of the main industrial countries, and it converts one part of the globe into a chiefly agricultural field of production for supplying the other part which remains a pre-eminently industrial field” (Marx, 1990: 579–580). By “industrial production,” we do not just refer to finished consumer products; it is now necessary to add the production of capital goods as one of its main components. The fact of the predominate exchange of finished consumer goods for raw materials does not mean that advanced countries specialized in the production of the former like Latin America specializes in raw material production. Neither should we understand by the “growth of industrial production” a purely quantitative advance of accumulation. Large industry produces a constant renovation of the means of production, where every technological means is only a transitional point to new and superior means. Accumulation essentially proceeds by revolutionizing its own methods so that “industrial production” also includes the creation of technological progress. Latin America’s link with England and other industrial countries could not be reduced merely to the simple exchange of goods but rather to a structural linking with an economic core that produces technological progress. On the other hand, the importation of industrial goods weakens the necessity of producing them internally throughout the region and spoils any effort aimed at creating domestic industry. In other words, the so-called “international division of labor” relegates the task of developing the productive forces in the hands of the core countries while it places the peripheral countries in service of this task as if it were something that does not directly correspond to its structural role. In so doing, it also locates the development of scientific labor in the core countries. This is why Celso Furtado identifies among the essential features of the 19th Century’s world economy: The existence of a nucleus with a considerable advance in capitalization, that concentrates a large part of industrial activity and almost all production of machinery; a nucleus that also finances world exports of capital goods, controls the transport infrastructure for world trade and is the main global importer of primary commodities…[Moreover, it includes]…The creation of a network for the transference of technological progress as a subsidiary mechanism for the system of international division of labor facilitates capital exports and, at the same time, connects capital exports to the international division of labor which the network helps to consolidate. Given

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appendix that the capital goods industry is located in the mentioned nucleus, the creation of new production techniques also remains geographically concentrated (…) This is why the technique’s own evolution is conditioned by the system of international division of labor that emerged after the industrial revolution (Furtado, 1979: 49–50).

Had Furtado projected these historical facts in the organization of produc­ tion social relations, he would have come to the conclusion that the 19th Century process is much richer and more complex than suggested by the “international division of labor” approach. This process does not end merely in a goods specialization for Latin America and much less so in core countries; it ends in imperialism at the international level and it ends in underdevelopment in Latin America. Moreover, it was not the “international division of labor” which decided this development. Rather, that international order itself dictated specific conditions in the region to make it possible and thus explains the region’s subordination to it. Independence from Spain did not call into question the region’s economic character as a commercial system of exploitation. The productive aim of the ruling class continues to be production for exports because no internal market existed and they had no interest in developing a locally generated industry. This meant that production continued to depend on external demand. The willing assimilation of the region into the “international division of labor” reflected the domination of commercial capital whose continued importation of goods would perpetually frustrate local industrial development. However, since that time, something of great significance occurred on the global scene. The world market in which the local ruling classes remain incorporated is no longer one controlled by commercial capital but is instead one rooted is industrial capital. Commercial capital has effectively become a transmutated form and therefore, an agent of industrial capital (Marx, 1990: 431; 440–441). That is to say, commercial capital became decisively subordinated to industrial capital. This process first took place in England and later in the rest of Europe (Luxemburg, 1967). Export production from the region no longer serves the ends of commercial capital, but instead directly satisfies the interests of industrial capital and takes place in a world market based on free labor, rather than slavery. In the context of a free labor based world market, the incorporation of a commercial system of domination based on slavery represents the introduction in that market of an anomaly “The fact that we now not only call the plantation owners in America capitalists, but that they are capitalists, is based on their existence as anomalies within a world market based on free labor” (Marx, 1977: 513). Which does not impede but on the contrary, it supposes that the owners behave as non-capitalists vis á vis the labor they exploit. This anomaly inside the world market represented by Latin America will be overcome by the world market’s very own dynamics.



underlying causes of underdevelopment in latin america177

It thus follows that after the unfolding of the independence movements, the character of commercial capital’s dominance changes. Foreign commercial capital controls a large part of the region’s external trade whether directly or through its connections with local merchants. As Ciro Cardoso affirms, “…Europeans merchants located in Mexico, mainly in ports, exercised considerable control on the (legal or illegal) commercial circuits of the country, directly and through their closed connections with national merchants…” (1980: 57) Yet, even if national commercial capital had worked with its own connections abroad, either merchants or industrialists, and if no foreign capital had operated in the region, the final result would have been the same. Once the world market is controlled by the industrial capital of core countries and commercial capital becomes nothing more than its agent, local commercial capital has no option but to work for the benefit of the now dominant reign of productive capital. Therefore, what appears as commercial capital’s predominance in the region is only now comprehensible as the means by which core industrial capital exercises its domination over the region. In this context, no sooner does industrial capital’s interest in advanced capitalist countries become realized through the export of capital, does local commercial capital bury itself in capital goods trade, thus encouraging local industrialization. If this industrialization focuses on export production, it is something resulting from both the nature of Latin American society and productive capital’s interest in advanced countries. The predominance of commercial capital in the region is not only, nor mainly, based on its economic power. In effect, it is the entire nature of the Latin American society that finally determines this predominance. It cannot be otherwise because that society as it evolved historically exists for the world market and is defined in the first place, as a part of the world market rather than for itself per se. The real fatherland of the local ruling classes, the one in which they were born into and evolved as ruling classes, is the world market. To the benefit of the latter and in accordance with its degree of development at that point, they independently organized social life in spite of the conditions that had afforded different possibilities. Given that the real export boom took place during the second half of the 19th Century, it was the anemic economic period that preceded it which pushed them to aim their sites on the recently conquered “nation.” Thus, their consciousness as formed over a whole epoch afforded no real place for nationalistic feelings. This is a point that Charles Anderson nicely makes in depicting the profile of the typical member of the ruling local classes: The world he lives in and the relations he shares have little to do with the nation. Rather, he has his eyes fixed on overseas, thinking about his commercial partner or about his large estates. He thinks of himself as a citizen of the world, and surely he is, for the community he lives in goes beyond national borders. Taking advantage of free convertible currency exchange and transferability of funds, he invests or deposits his gains in the United States or in Europe; he has in his possession at home as many manufactured

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appendix goods from North America or Europe as any other citizen of London or Boston; his children have been educated abroad; he visits the cities of advanced countries more frequently that he visits his own country’s urban centers; he speaks some foreign language with proficiency. If he is from Cali, news of New Orleans matters as much to him as news of Medellin; if he is from Monterrey, he is more interested in the city of Los Angeles than Merida (Anderson, 1974: 36).

This then is the portrait of a ruling class which was prepared to embark on a path to the development of imperialism and underdevelopment in the region. Finally, it only remains to say that with the installation of imperialism, the domination of productive capital based in the advanced countries takes firm root in the very capitalist relations of production. The local ruling class appear now, strictly speaking, as capitalists as they confront the labor which they exploit, just as they continue to appear as a subordinated class in service to their masters vis á vis the larger capitalist system.

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NAME INDEX Anderson, Charles W. 166, 167, 177, 178 Ayala, Maggy 118 Bagú, Sergio 173 Bell Lara, José 92 Bello, Álvaro 134 Braverman, Harry 9 Buchele, Robert 51 Burachik, Gustavo 59 Butkevicius, Arunas 82 Calva, José Luis 148 Carton de Grammont, Hubert 143 Cassiolato, José E. 69 Castro, I. 158 Chiaramonte, José C. 169 Christiansen, Jens 51 Coatsworth, John 163 Cortina, Jerónimo 131 Cue Cánovas, Agustín 172 Cueva, Agustín 166 Daporta, Natalia 119 De la Garza, Rodolfo 131 De Soto, Hernando 104 Dello Buono, R.A. 87, 92 Díaz Alejandro, C.F. 104 Dumenil, Gerard 51 Dzisah, James 71 Engels, Frederick 28, 119, 140, 168, 169, 171 Etzkowitz, Henry 71 Faletto, Enzo 62 Farré, Pedro 116 Figueroa Delgado, Silvana 63 Figueroa, Víctor 14, 18, 19, 22, 25, 107, 132, 161 Florescano, Enrique 173 Furtado, Celso 175, 176 Gandásegui, Marco A, Jr. 87 Garibaldi, José Alberto 101 Gersovitz, Mark 104 Gil Sánchez Isabel 173 Gligo V., Nicolo 101 González Amador, Roberto 154

Hans-Peter, Martin 40 Hopenhayn, Martin 134 Houseman, Susan 49 Jennsen Pennington, Henning 65 Kadri, Ali 82 Katz, Jorge 60 Lastres, Helena 69 Lara Flores, Sara María 151 Leal, Juan F. 162, 163 Lenin, Vladimir I. 7, 8, 16, 17, 22, 161 Levine, Elaine 128 Lévy, Dominique 51 Lewis, A. W. 104 Lira, Andrés 172 Lynch, Lisa M. 49 Macpherson, C. B. 96 Maddison, Angus 37, 128 Magdoff, Harry 17 Mandel, Ernest 37 Mansilla, H.C.F. 104 Marx, Karl 9, 28, 105–107, 110, 140, 168–171, 175, 176 Mayer, Jörg, 82 Mistral, Carlos 143 Moberg, David 38 Muro, Luis 172 Nun, José 105 O´Connor, James 28 O’Donnell, Guillermo 96 Ochoa-Reza, Enrique 131 Palley, Thomas I. 50 Panebianco, Angelo 96 Pellegrino, Adela 128 Pennington, Henning Jensen 65 Peters, Gehard 42, 45 Peterson, Peter G. 42 Prebisch, Raúl 103, 104 Puiggrós, Rodolfo 165 Quijano, Aníbal 105–107, 165

188 Ramírez Necochea, Hernán 166 Ranis, G. 104 Rey Santos, Orlando 101 Rojas M., Álvaro 147 Rosdolsky, Roman 106 Rosenzweig, M.F. 104 Samaniego, José Luis 99 Schejtman, Alexander 146 Schumann, Harald 40 Semo, Enrique 172, 173

name index Stern, Nicholas 53, 54 Stiroh, Kevin 49 Vacarezza, Leonardo S. 67 Vargas, Marco A. 69 Woldenberg, José 162, 163 Wooley, John T. 45 Yoshitomi, Masaru 59 Zsapiro, Marina 69

SUBJECT INDEX 1973–1974 oil shock 28 adaptive innovation 65 Agrarian Reform World Forum 139 Argentina 74, 77, 93, 94, 98, 113, 156, 164–166 Australia 90, 112 banana 83, 146, 152 bio-fuels 154 bio-chemicals industry 14 bio-energy alternatives 54 Bolivia 30, 91, 93, 98, 132, 134, 152 bracero 113 Brazil 62, 63, 74, 80, 86, 93, 152, 156 Bretton Woods Agreement of 1944 39 business cycle in Latin America 81 Buy American Act of 1933 40 Canada 40, 44, 51, 87, 88, 90, 112, 128, 156 capital 2–5, 7–12, 14–33, 35, 36, 38–40, 42, 45–55, 58–62, 64, 67, 68, 70, 72, 73, 79, 80, 84–92, 95, 100–126, 128, 129, 132–155, 157–159, 161, 162, 164–178 capital accumulation 5, 49, 105, 111, 112, 114, 115, 120, 122–125, 134, 136, 139, 140, 150, 166 capital and wage-labor relation 18, 110, 111, 143, 164 capital distribution and competition 8 change in the capital-labor relation 36 concentration and centralization of capital 8, 107 concentration of capital 7 internationalization of capital 106 main aim of capitalism 141 nominal capitalist 142 organic composition of capital 90 pirate capital 103, 116–118, 120–122, 136 underdeveloped capitalism 3, 24, 134, 136, 151, 164 capitalism in Latin America 20, 58, 112, 113, 164 capitalist monopoly 7 carbon 27, 53–55, 101 Caribbean Basin 80, 86 Chávez, Hugo 30

Chayanov, Alexander 144, 145 Chile 21, 25, 74, 77, 86, 94, 147, 156, 163, 164, 166 China 48, 52, 56, 100, 154, 168 Club of Rome 27 coffee 83, 146, 152 collapse of Keynesianism 35 collective bargaining 38, 74 Colombia 30, 91, 156 colonialism 1–5, 20, 21, 22, 24–27, 30, 31, 46, 58, 62, 66, 67, 79, 81, 85, 87–90, 103, 113, 127, 139, 157–159, 167, 172 commercial proletariat 119 commodity 8, 21, 59, 86, 114, 117–121, 143, 152, 168, 171 commodification of ideas 71 commodity circulation 59, 86, 119, 121 commodity production 8, 168 communal land individual producers 151 competitive funding 74 competitiveness 9, 14, 59, 61, 62, 89, 131, 156, 157 consolidated surplus-population 107, 109 copper 83 copyrights 66 Costa Rica 66, 93, 156 coup d’État (in Honduras) 30 critical university 73 Cuban Revolution 73 Daimler-Chrysler 88 democracy 25, 26, 72, 91–99 exclusive democracy 93, 95 formal democracies 24 de-nationalization 47 deregulation 37, 38, 52, 69 different power correlations between social classes 132 direct imperialist military intervention 25 downward social mobility 157 dualist school 104 East and Southeast Asian economies 84 Ecuador 91, 93, 98, 118, 132, 134, 152, 166 ejidos 151 El Salvador 93, 152

190

subject index

electoral abstentionism in Mexico 94 emissions of carbon dioxide 27 Engels 28, 119, 140 ethanol 154 exhausted Keynesian policies 35 exploitation of wage-labor 140 expropriations 25 expropriations of foreign capital 25 externally developed 19 extraordinary profit 8, 9, 12, 59, 60, 67, 143, 148 finance 25, 47, 123, 157, 175 finance capital 22 financial oligarchy 17, 19, 24, 25, 46, 48 financialization 37, 46, 47, 52, 55, 154 floating form of overpopulation 104, 107, 108, 110 food crisis 54, 139 Ford 88 Fordism 36 form of growth 58, 79 free-trade policies 1, 43 General Agreement on Tariffs and Trade (GATT) 87 general labor 23, 58, 61, 84, 112, 113, 117, 136, 161, 164, 166, 167 General Motors 88 George Bush Sr. 43, 45, 46, 87 global warming 27, 30, 53, 54, 99, 100, 102, 153 globalization 1, 4, 21, 35, 37, 46–48, 52, 58, 61, 63, 64, 68–70, 73, 77, 78, 95, 96, 126, 129, 135, 151, 155, 158 globalization of technology 68 gold 39, 168, 169 Great Depression of the 1930s 36 Guatemala 91, 134, 155, 156 Hernando de Soto 104 Hilferding’s notion of “financial capital” 17 home labor 125 Honduras 30 Hubbert 30 ideological penetration 26 ILO Regional Employment Program for Latin America and the Caribbean (PREALC) 104, 151 imperialism 1, 4, 7–9, 11, 12, 16–19, 21, 22, 27, 29, 31, 35, 37, 47, 62, 66, 85, 109, 136, 166, 167, 176, 178

first stage of imperialism 12 second stage of imperialism 13 third stage of imperialism 4, 37, 47 import-based economic growth 57 India 100, 154, 168 indigenous population 133–135, 168 indigenous pueblos 134, 135 industrial army 10 industrial colonialism 1–5, 7, 21, 22, 24–27, 30, 31, 46, 57, 58, 62, 66, 79, 81, 85, 87, 88, 90, 103, 113, 127, 139, 157–159 industrial reserve army 103–108, 111, 112, 127, 131 informal employment 91 information technologies (IT) 21, 42, 45, 47, 49, 50, 63 infra-subsistence production 144 innovation 10–13, 16, 20, 26, 36, 37, 44, 45, 53, 59–62, 64–69, 73, 74, 78, 93, 149, 155, 157, 163 Intergovernmental Panel on Climate Change (IPCC) 53 inter-imperialist conflicts 29 international division of labor 20, 24, 165, 167, 174–176 international labor mobility 127 International Monetary Fund (IMF) 44, 46, 95, 154 international scientific cooperation 11 internationalization of higher education 78 intra-firm trade 59 investment transference 23, 24 inward-oriented growth 21, 57, 88, 90, 137, 148, 149 Karl Marx 2, 8, 9, 20, 104–111, 113, 131, 141, 142, 145, 167–171, 175 Korea 84 labor 2–4, 8–13, 15, 17–24, 27–29, 31, 32, 36–39, 41, 43, 45, 46, 49–52, 55, 58–61, 67, 69, 71, 73, 74, 76, 78, 79, 81, 82, 84, 87, 88, 90, 91, 93, 101, 103–117, 119, 120, 122–137, 139–151, 154, 158, 161–168, 171, 172, 174–176, 178 labor exploitation 8, 10, 41, 55, 116, 126 labor flexibility 37, 93, 130 labor flexibilization 37, 38 scientific labor 2, 10–13, 15, 19, 22, 23, 28, 29, 31, 32, 45, 63, 64–67, 71, 112, 113, 117, 175 land concentration in the countryside 158, 159



subject index191

land redistribution 139, 159 large-scale industry 8–10, 20, 108 Latin American migrant worker 127 Latin American university 72 legitimacy of ruling institutions and practices 72 Lenin 3, 7, 8, 16–18, 22, 27, 48, 161 Lewis, AW 104 liberal principles 35, 48, 87 liberalization 37, 39, 41, 45, 50, 61, 64, 69, 87, 129, 151, 155, 157 license of industrial property 117 limits to growth 27 lost decade” of the 1980s 79 Malthusian predictions 27 maquila industry 81, 89 marginal mass 105 marginal pole 105–107, 112 Marxism 7, 35, 104 Marxist theory of accumulation 103 Marxist theory of marginalism 111 medium and high technology goods 83 methane 27 Mexico 42, 51, 63, 74, 75, 80, 81, 86–89, 91, 94, 101, 113, 119, 128, 134, 150, 156–158, 161, 163, 171–173, 177 Zacatecas, Mexico 158 Mexico Social Security Institute 158 Minas Gerais 69 Ministry of Environment and Natural Resources (SEMARNAT) 101 monopolies 3, 7, 12, 13, 16–20, 21, 47, 48, 105, 136 monopolization 106 Morales, Evo 30 National Innovation Systems (NIS) 16, 62, 64–68 natural population growth 103 necessary population 109, 126, 127 necessary working population 111 neoliberal 1, 2, 4, 13, 14, 30, 35, 37, 42, 50, 51, 53, 54, 58, 59, 63, 68–70, 73, 75, 77, 91–96, 98, 126, 129, 132, 135, 139, 140, 151, 155, 159 neoliberal globalization 4, 37, 58, 69, 70, 73, 95, 96, 126, 129, 135, 151, 155 neoliberal theory 58, 59 neoliberalism 1, 13, 14, 30, 68, 91–93, 96, 98, 132, 139, 151 social impacts of neoliberalism 151 new economy” technologies 65 New Zealand 90

Nicaragua 93, 132, 152 nitrous oxide 27 Obama administration 55 Organization for Economic Co-operation and Development (OECD) 16, 52, 64, 86, 95, 111, 128, 129, 156 outward-oriented growth 4, 21, 57, 58, 80, 151 overpopulation 104, 107, 108, 110, 113, 120, 123, 124, 126, 139, 149, 155, 169 latent 107, 110, 113, 139, 149 relative 107, 108, 123, 124 stagnant 108, 124 over-supply of labor power 103 Paraguay 119, 149, 156 PATCO 38 pauperism 108–110 peak-oil 14 peasant production 4, 115, 139–141, 143–149, 157, 159 social character of peasant production 140 permanent captive demand 26 permanent technological innovation 26 Peru 118, 134, 155, 165, 172 pharmaceuticals industry 14 Philippines 84 Popular Unity government 25 population surplus 4, 103 poverty 2, 36, 55, 56, 91, 93, 95, 98, 103, 124, 126, 128, 129, 131, 134, 139, 155, 158, 159 privatization of universities 76 product quality control 10 productive forces 3, 4, 9, 11, 21, 22, 24, 31, 41, 44, 50, 104, 107, 137, 162, 163, 165, 170, 175 protectionism 21, 45, 87 public good 59 Reagan Administration 38, 42, 93 relative surplus-population 107–109, 125, 127 remittances 24, 32, 130, 131 repeal of the Corn Laws 20 research and development (R&D) 9, 10, 13, 14, 16, 41–43, 49, 53, 55, 62–66, 68–70, 84, 117 R&D funding 14, 41, 43, 68 Rio Grande Do Sul 69 role of universities 4, 71 Salvador Allende 25 Sao Paulo 69

192

subject index

self-paid 126 shrinking trade surplus 81 Singapore 84 Sir Nicholas Stern 53 small landholders 154, 155, 157 small plot producer 139 social classes 132 socialism 8 Socialist Bloc 46 socialization of knowledge 11 Southern Cone 77, 79 speculation 40, 47, 49, 52, 154 state development function 4, 11, 32, 36, 41, 43, 52, 137 Stern Report 54 structural adjustment 79 structuralism 104 subcontracting 38 subsidiary producer of services 120 subsidiary producers of goods and services 115, 122 subsistence producers 150, 152 sugar 83, 152, 164, 172 surpluses of population 115 surplus-population theory 103 absolutely redundant 107, 109 surplus value 10, 20, 23, 24, 29, 36, 40, 110, 112, 120, 141, 142, 144, 149, 161, 162 production of surplus-value 110 relative surplus value 10, 20, 112, 149 Taiwan 84 technology 41, 49, 59–65, 68, 70, 71, 83, 86, 88, 89, 144, 157, 164, 165 technological dependence 21, 26 technological independence 63, 69 technological progress 12, 19, 49, 50, 60, 64, 68, 69, 84, 87, 117, 144, 147, 148, 155, 156, 175

tendency of the rate of profit to fall 35, 136 tendency towards deficit 24 Thailand 84 theories of dependency 1, 73 totalitarian regimes 72, 77 Trade Agreement Act 40 transnational corporate expansion of the 1960s 47 transnational corporations 39, 46, 62–66, 68–70, 79, 86, 87, 100 true nature of monopolies 19 UN Conference on Trade and Development (UNCTAD) 64, 82 unequal exchange 18, 22, 23, 148, 155 United Nations Economic Commission for Latin America (ECLA) 60, 104, 134 United Nations Economic Commission for Latin America and the Caribbean (ECLAC) 60, 61, 73, 81, 90, 101, 104, 147, 155–157 United Nations Environment Program (UNEP) 101, 102 universities 4, 9, 13, 15, 63, 70, 71, z73–76, 78, 102 university autonomy 75 unplanned use of oil 30 Uruguay 45, 74, 77, 156 USSR 46, 49 valorization of capital 107–109, 116 valorization process 113, 142, 143 value of labor-power 125, 126, 132, 161 Venezuela 30, 74, 91, 98, 132, 152 wage differentials 130, 131, 137 weapons of mass destruction 26 welfare state 39, 93 Zapatista guerrilla movement 152