Postimperialism: International Capitalism and Development in the Late Twentieth Century 9781685858551

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POSTIMPERIALISM

POSTIMPERIALISM International Capitalism and Development in the Late Twentieth Century

David G. Becker • J e f f Frieden Sayre P. Schatz • Richard L. Sklar

Lynne Rienner Publishers • Boulder & London

P u b l i s h e d in t h e U n i t e d S t a l e s of A m e r i c a in 1987 by L y n n e R i e n n e r P u b l i s h e r s , Inc. 9 4 8 North Street, Boulder, C o l o r a d o 8 0 3 0 2 1

1987 by L y n n e R i e n n e r P u b l i s h e r s . Inc. All r i g h t s r e s e r v e d

Library of Congress Cataloging-in-Publication Data Poslimperialism: international capitalism and developm e n t in t h e late twentieth c e n t u r y . B i b l i o g r a p h y : p. Includes index. Contents:

Why p o s t i m p e i ialism? / David G. B e c k e r a n d

R i c h a r d L. S k l a r — P o s t i m p e r i a l i s m , a class a n a l y s i s o f m u l t i n a t i o n a l c o r p o r a t e e x p a n s i o n / R i c h a r d I,. S k l a r — D e v e l o p m e n t , d e m o c r a c y , a n d d e p e n d e n c y in L a t i n A m e r i c a ; " B o n a n z a d e v e l o p m e n t " a n d the "new b o u r g e o i s i e " / David G. Becker—[etc.] 1. I n t e r n a t i o n a l b u s i n e s s e n t e r p r i s e s — D e v e l o p i n g countries. 3. Elite

2. I n d u s t r y a n d s t a t e — D e v e l o p i n g c o u n t r i e s . (social s c i e n c e s ) — D e v e l o p i n g c o u n t r i e s .

I. B e c k e r , D a v i d G „ 1938-

II. T i t l e : Post-

imperialism. HD2932.P67

1987

338.8'881724

87-4455

I S B N 1 - 5 5 5 8 7 - 0 4 6 - 5 (lib. b d g . ) I S B N 1-55587-047-3 (pbk.)

P r i n t e d a n d b o u n d in t h e U n i t e d S t a t e s of A m e r i c a

T h e p a p e r u s e d in this p u b l i c a t i o n m e e t s t h e requirements of the American National S t a n d a r d for Permanence of Paper for Printed Library Materials Z39.48-1984.

©

Contents

1 2 3 4 5 6

7 8 9 10

Tables a n d Figures

vii

Preface

ix

Why Postimperialism? Richard L. Sklar

David G. Becker and 1

Postimperialism: A Class Analysis of Multinational C o r p o r a t e Expansion Richard L. Sklar

19

Development, Democracy, a n d D e p e n d e n c y in Latin America: A Postimperialist View David G. Becker

41

"Bonanza D e v e l o p m e n t " a n d the "New Bourgeoisie": Peru U n d e r Military Rule David G. Becker

63

Assertive P r a g m a t i s m a n d the Multinational E n t e r p r i s e Sayre P. Schatz

107

T h i r d World I n d e b t e d Industrialization: I n t e r n a t i o n a l Finance a n d State Capitalism in Mexico, Brazil, Algeria, a n d South Korea Jeff Frieden

131

Socializing A d a p t a t i o n : A Perspective on World Capitalism Sayre P. Schatz

161

International Capital a n d National D e v e l o p m e n t : C o m m e n t s on Postimperialism Jeff Frieden

179

Postimperialism a n d the Great Competition Sayre P. Schatz

193

Postimperialism: A First Q u a r t e r l y R e p o r t David G. Becker

203

Bibliography

227

A b o u t the A u t h o r s

245

Index

247

V

Tables and Figures Tables 4.1

C o n t r i b u t i o n s to Peruvian E x p o r t Value by C o m m o d i t y

71

4.2

Peruvian E x p o r t T r a d e by Destination

72

4.3

Financial P e r f o r m a n c e of G e r r o d e Pasco and Centromin-Peru

79

6.1

Net Inflow of External Resources to Latin America

132

6.2

Disbursed Debt of LDCs

135

6.3

E u r o c u r r e n c y Bank Credits to LDCs

136

6.4

Public External Debt, 1967-78: Mexico, Brazil, Algeria, South Korea, a n d All LDCs

138

Figure 2.1

S t r u c t u r e of the Worldwide C o r p o r a t e a n d Managerial Bourgeoisies

VII

31

Preface Postimperialism is an idea a b o u t the political a n d social organization of international capitalism. It is an intellectual response to two empirical findings t h a t contradict s t a n d a r d theories of capitalist imperialism. T h e First such f i n d i n g is a g r o w i n g separation of national interests f r o m the interests of d o m i n a n t classes in the industrial capitalist countries; the second is a g r o w i n g c o n g r u e n c e of national interests a n d d o m i n a n t class interests in the "third world." T h e s e findings a r e incompatible with the belief that capitalism drives nation-states to d o m i n a t e a n d exploit o n e a n o t h e r . T h e y are, however, consistent with the evident s p r e a d of industrialization to all regions of the world, a n d with the coalescence of d o m i n a n t social classes across national a n d continental frontiers. Everywhere, d o m i n a n t classes e m b r a c e s u p r a n a t i o n a l a n d global values while s u b o r d i n a t e classes a r e relatively m o r e nationalistic a n d less mobile. T h e concept of postimperialism grew out of two bodies of t h o u g h t : political theories of the m o d e r n business c o r p o r a t i o n , a n d class analyses of political p o w e r in the "third world." Along with Adolf A. Berle, postimperialist thinkers a f f i r m that business c o r p o r a t i o n s are political institutions—more precisely, "nonstatist" political institutions. As such, they rival a n d check statist political power both within national societies a n d , increasingly, in world politics. In "third world" societies, d o m i n a n t classes have arisen out of varied political a n d administrative, as well as economic, f o u n d a t i o n s . In the least industrialized societies, political organization has a f a r g r e a t e r impact on class f o r m a t i o n t h a n does economic organization. By comparison, in the m o r e industrialized "third world" societies the political a n d e c o n o m i c d e t e r m i n a n t s of class f o r m a t i o n are m o r e evenly bala n c e d . T h e s e observations u n d e r l i e an u n o r t h o d o x , power-based t h e o r y of class s t r u c t u r e . In postimperialist t h o u g h t , capitalism versus socialism is n o l o n g e r the p r i m e issue of class analysis; it yields p r i d e of place to the question of liberty versus dictatorship. Not only does postimperialism fly in the face of Marxisant d e p e n d e n c y theory; it owes little, if a n y t h i n g , to d e p e n d e n c y theory in any f o r m . Far f r o m being a reaction to d e p e n d e n c y theory, it stems directly f r o m earlier analyses of c o r p o r a t e p o w e r in the Western world a n d class f o r m a t i o n in the " t h i r d world."

ix

PREFACE

Six of the c h a p t e r s that follow were originally published between 1976 a n d 1984. In C h a p t e r 1, written f o r this volume, Becker a n d Sklar a r g u e the case f o r postimperialism as an a p p r o a c h to the study of transnational c o r p o r a t e e x p a n s i o n . C h a p t e r s 2, 3, a n d 4 were written f r o m a postimperialist s t a n d p o i n t . C h a p t e r s 5, 6, a n d 7 are by Frieden a n d Schatz, who a g r e e d to join this project because their own essays on transnational investment a n d bank lending are c o m p l e m e n t a r y to, a n d consistent with, the postimperialist a p p r o a c h . C h a p t e r s 8 a n d 9, written by Frieden a n d Schatz f o r this volume, p r e s e n t separate critiques of the Becker-Sklar thesis. In C h a p t e r 10, Becker r e s p o n d s to their concerns a n d to criticisms that have a p p e a r e d elsewhere. A c k n o w l e d g e m e n t s are d u e to the following j o u r n a l s f o r permission to r e p r i n t six articles as n o t e d in the text: Comparative Political Studies, Comparative Politics, International Organization, Third World Quarterly, a n d World Development. David G. Becker Richard L. Sklar

C H A P T E R

O N E

Why Postimperialism? DAVID G. B E C K E R and RICHARD L. SKLAR Imperialism connotes the domination of one people, nation, o r country by another. An inherently coercive relationship, imperialism nonetheless can be maintained by forms of power—notably, economic power—that originate with civil society rather than with the state's "monopoly o f legitimate force." T h e o r i e s o f capitalist imperialism locate the causes of this domination in the nature and effects o f business enterprise. Such theories postulate a need for business to expand into foreign markets in order to deflect the threatened breakdown, actual or potential, o f a domestic enterprise system. Lenin captured the spirit o f these theories in his declaration that imperialism is the "highest," o r ultimate, stage o f capitalism. 1 Yet the world capitalist system has continued to evolve and adapt to changing political conditions. During the current era o f bipolar hegemonic rivalry, the link between capitalism and imperialism has been tested by the dissolution o f colonial empires. Meanwhile, corporate forms o f enterprise, rooted in both individual and institutional shareholding, have transcended their national horizons by establishing subsidiary companies abroad. T h e magnitude o f this transnational leap by modern business is reflected in the fact that "[w]ell over onethird o f the world's industrial output comes from large business enterprises whose producing facilities are spread out over several countries." T o d a y , "any list o f the world's business leaders, ranked according to their power o r their status, would be headed mainly by the leaders o f multinational enterprises.'" 2 S o m e analysts find nothing qualitatively new in the transnational corporation. T h e y note that business firms with branches in m o r e than one national territory are contemporaneous with both the advent o f capitalism and the rise o f the nation-state; that private investors helped

1

2

D A V I D G. B E C K E R & R I C H A R D I.. SKI.AR

i m p e l t h e original o u t w a r d e x p a n s i o n of capitalism a n d w e r e involved intimately in all aspects of colonial exploitation. 3 T r a n s n a t i o n a l e n t e r prise, h o w e v e r , is a late-capitalist p h e n o m e n o n w h o s e r e s e m b l a n c e to e a r l i e r institutional f o r m s is superficial. It is c o n v e n t i o n a l l y d e f i n e d with r e f e r e n c e to t h e f o l l o w i n g criteria: 1. T h e e n t e r p r i s e is c o m p o s e d of a p a r e n t c o m p a n y a n d d a u g h t e r o r subsidiary c o m p a n i e s located in two o r m o r e c o u n t r i e s . T h e p a r e n t usually has a historical association with a m e t r o p o l i t a n c o u n t r y b u t m a y b e located e l s e w h e r e , f o r e x a m p l e , in an overseas tax h a v e n . 2. T h e subsidiaries e a r n t h e bulk of t h e i r p r o f i t s f r o m t h e p r o d u c tion of g o o d s o r services; i n t e r n a t i o n a l t r a d e is f o r t h e subsidiaries an ancillary activity. T h e p r o d u c t i v e e f f o r t s of t h e w h o l e e n t e r p r i s e a r e o r i e n t e d t o w a r d m o r e t h a n o n e national market.4 3. T h e various n a t i o n a l c o m p o n e n t s of t h e e n t e r p r i s e a r e m u t u ally s u p p o r t i v e a n d subject to c e n t r a l d i r e c t i o n . The m a n a g e r i a l a p p a r a t u s of each is d e s i g n e d to p r o m o t e t h e overall interests of t h e g r o u p as a unit. C e n t r a l d i r e c t i o n e x t e n d s b e y o n d the b r o a d c o o r d i n a t i o n of business strategies; e m b r a c e s c o o r d i n a tion o r s u p e r v i s i o n of r o u t i n e o p e r a t i o n s ; a n d d e p e n d s u p o n m o d e r n t e c h n o l o g i e s of o r g a n i z a t i o n , c o m m u n i c a t i o n s , a n d data management. 4. B e c a u s e of t h e i r d e p e n d e n c e on e l a b o r a t e m a n a g e r i a l t e c h n o l o gies, t r a n s n a t i o n a l f i r m s on t h e a v e r a g e a r e m o r e likely t h a n o t h e r s to be u n d e r effective m a n a g e r i a l control." T h e d e g r e e a n d ef ficacy of centralized d i r e c t i o n a r e w h a t principally d i s t i n g u i s h t h e t r a n s n a t i o n a l firm f r o m o l d e r f o r m s of i n t e r n a tional business e n t e r p r i s e . C e n t r a l i z e d d i r e c t i o n strives to h e a d o f f e a c h subsidiary's t e n d e n c i e s t o w a r d " s u b o p t i m i z a t i o n , " which can be d e t r i m e n t a l to t h e efficiency a n d profitability of t h e w h o l e e n t e r p r i s e . B u t t h e r e is a n o t h e r side to t h e coin—local c o n c e r n s m a y b e given s h o r t s h r i f t . If, f o r instance, t h e c o r p o r a t e g r o u p ' s overall profitability w o u l d be e n h a n c e d by t r a n s f e r r i n g a n o p e r a t i o n f r o m o n e c o u n t r y to a n o t h e r , t h e disposition to m a k e t h e shift p r o b a b l y will prevail within m a n a g e r i a l circles—particularly if t h e c o u n t e r a r g u m e n t s h e a r d by m a n a g e m e n t a r e "political," in t h e sense of b e i n g b a s e d o n c o n s i d e r a tions o t h e r t h a n t h o s e of e c o n o m i c efficiency. E v e n t h o u g h t h e e v e n tual o u t c o m e m a y d e p e n d m o r e o n b a r g a i n i n g a m o n g v a r i o u s i n t e r e s t s in t h e host c o u n t r y a n d e l s e w h e r e t h a n o n m a n a g e r i a l fiat, t h e t e n d e n c y to elevate c e n t r a l c o r p o r a t e c o n c e r n s o v e r local o n e s s e e m s to s u g g e s t d o m i n a n c e by t h e m o r e d e v e l o p e d c o u n t r y in w h i c h t h e c o r p o -

WHY POSTIMPERIALISM?

3

ration's head office is domiciled. A question then arises—if the parent company always benefits, does it not follow that transnational enterprise tends to perpetuate the domination of wealthy industrial countries, where the parents are usually headquartered, over countries that are non- or semi-industrial and relatively poor? Is not transnational enterprise a new form of imperialism, tailored to suit the postcolonial era? Let us consider three alternative responses to this question. T h e first two project varieties of the neoimperialist view; the third may be termed postimperialist. According to one neoimperialist thesis, international capital, centered in the metropolitan "core" of the world economy, imposes hierarchical, externally rooted structures of control u p o n the less developed "periphery" so that it may be more readily exploited. Exploitation consists in the extraction of surplus from the national economies of the "periphery," which cripples locally focused development. T h e less developed countries thus are compelled by economic necessity to import capital, machinery, and technology, thereby becoming d e p e n d e n t upon foreign suppliers, financial institutions, and transnational corporate managements. What is more, much of the imported technology, having been invented with a view toward the needs of the developed countries, is said to be inappropriate to those of the less developed countries. Local bourgeoisies further impoverish their "superexploited" co-nationals in o r d e r to accumulate capital of their own; they turn into privileged, "denationalized" elites whose members share few if any interests with the people at large. Elites of this kind can neither establish positions of moral-ideological leadership nor legitimize bourgeoisdemocratic regimes; the economic success of the local bourgeoisies has to be purchased at the price of political failure. "Peripheral" capitalism, therefore, takes on a characteristically anti-democratic political form in which the local "dominant" class remains in power on the strength of metropolitan economic or military backing. 6 This thesis remains popular among those Marxists and radicals for whom capitalism is the root of all the world's evils. However, Marxist thought has produced its own anti-populist critique of the "development of underdevelopment" idea, cogently expressed in Bill Warren's documentation of relatively rapid capitalist development in the "periphery" as a direct outcome of imperialism. 7 Although Warren may be said to have rediscovered early Marxist realism with regard to the "progressive character of imperialist expansion," 8 he had little to say about the changing distribution of power a m o n g nations and peoples—the heart of the question of imperialism itself. T h e grateful reception of his iconoclastic book by realists of Marxist persuasion is a measure of the depths to which "radical" scholars and movement

4

D A V I D G. B E C K E R & R I C H A R D L. S K L A R

romantics have p l u m m e t e d in their flights of revolutionary fancy. T h e second neoimperialist thesis was worked o u t by Latin Americans who knew at first h a n d that the " d e v e l o p m e n t of u n d e r d e v e l o p m e n t " thesis did not apply to the dynamically industrializing countries of their region. T h e thesis is epitomized in the writings of the "historical d e p e n d e n c y " school associated with F e r n a n d o H e n r i q u e Cardoso.' 1 C a r d o s o a n d his fellow dependencistas a g r e e with W a r r e n that capitalist d e v e l o p m e n t has led to increased industrial o u t p u t , gross national p r o d u c t , a n d a g g r e g a t e national income in many of the " p e r i p h e r a l " economies. But i n a s m u c h as these economies d o not p r o d u c e their own capital goods or technologies, they a r e "structurally incomplete" a n d must maintain a " d e p e n d e n t articulation" with a world economy dominated by transnational c o r p o r a t i o n s in o r d e r to f unction at all. U n d e r capitalism, the t r a n s n a t i o n a l are the only source of the "missing" inputs to the productive process a n d t h e r e f o r e have the monopoly power to decide what shall be p r o d u c e d , a n d how. The decisions of the transnationals result in a f o r m of local industrialization that overemphasizes the m a n u f a c t u r e of goods that, a l t h o u g h massively c o n s u m e d in the metropoli, are luxuries in the " p e r i p h e r y . " T h u s , the t r a n s n a t i o n a l ' interests are best served by economic policies that concentrate income, even at the cost of p r e c l u d i n g the advance of mass c o n s u m p t i o n levels." 1 Local bourgeois s u p r e m a c y falls into the h a n d s of a power bloc" m a d e u p of state officials a n d business executives w h o are associated closely with foreign direct investment. T h e power bloc uses its control of the local state to i m p o s e the requisite policies of income concentration. In o t h e r words, imperialist d o m i n a t i o n is t r a n s f o r m e d by the "dep e n d e n t " country's class s t r u c t u r e into an a p p a r e n t l y local d o m i n a t i o n residing largely "in the social practices of local g r o u p s a n d classes which try to e n f o r c e f o r e i g n interests, not precisely because they are foreign, but because they may coincide with values a n d interests that these g r o u p s p r e t e n d are their own." 1 2 T h e resultant political dynamic is not the simple elite-mass dichotomy implied by the " d e v e l o p m e n t of u n d e r d e v e l o p m e n t " idea; it is, C a r d o s o a n d Faletto c o n t e n d , a complex process whereby selected s u b o r d i n a t e g r o u p s are i n c o r p o r a t e d into the networks of political r e p r e s e n t a t i o n while o t h e r s are e x c l u d e d . T h e process is r i d d e n with conflict because those targeted f o r exclusion can be expected to resist their fate. C a r d o s o a n d Faletto insist that the class dynamics of " d e p e n d e n t d e v e l o p m e n t " are historically specific to each c o u n t r y a n d c a n n o t be d e d u c e d f r o m "general laws of m o t i o n of d e p e n d e n t capitalism." Nevertheless, C a r d o s o a n d Faletto's theory can be shown to h i n g e o n

WHY POSTIMPERIALISM?

5

two broad generalizations about capitalist systems in newly industrializing countries. O n e is economic—"structural incompleteness" (inability to produce capital goods) and a bias toward the production of luxuries, it is claimed, create bottlenecks and crises that interfere with the expanded reproduction of capital. Because of the narrowness of internal markets and the deficiencies of a domestic capital goods sector that is "not strong enough to ensure continuous advance of the system, in financial as well as in technological and organizational terms," 13 the difficulties can be surmounted only when the forces of metropolitan capital, acting in their own interest, intervene to restructure the model of accumulation. 14 T h e other generalization is political—however deep its domestic roots may seem to have struck, capitalism is at bottom a foreign import and responds, ultimately, to the "needs" of the international market in place of those of the country's people. T h e local bourgeoisie, consequently, is deprived of its image of industrial leadership and the local state of its ability to project plausibly "national" interests; although the state is not a mere puppet of foreign interests, neither is it fully sovereign. These circumstances essentially rule out the establishment of a stable bourgeois-democratic political order. T h e alternatives are a quasi-authoritarian populism or, increasingly, bureaucratic authoritarianism u n d e r the aegis of military officers and civilian technocrats. 1 "' Many Marxists, for whom the "development of underdevelopment" is either simplistic or unacceptably populist, have seized upon Cardoso's interpretation of "dependency," praising it for its supposedly faithful adherence both to Marx's realistic appreciation of capitalist development and to his class-analytical mode of explanation. 16 T h e praise is misplaced. Cardoso and Faletto's a r g u m e n t for "dependency" rests on a gross underestimate of newly industrializing societies' capacity for, and experience with, technological innovation and adaptation; the argument also overestimates the technological selfsufficiency of most advanced industrial economies. Cardoso and Faletto's survey of the varieties of capitalist development in Latin America, although a significant contribution to the economic historiography of the region, describes a "circulation of elites," not a conflict of classes.17 Cardoso and Faletto take intra-class conflict d u e to differences of immediate, parochial interest between nationally and internationally oriented sectors of domestic bourgeoisies as evidence of a fundamental, systemic contradiction between national concerns and those of transnational corporations. T h e portrait of bourgeois "denationalization" painted by Cardoso and Faletto is arbitrary, reflecting their apparent distaste for the cosmopolitanism embodied in transnational

6

D A V I D G. B E C K E R & R I C H A R D L. S K I . A R

e n t e r p r i s e . T h e i r s t a n d a r d f o r m e a s u r i n g the economic a n d political a t t a i n m e n t s of " p e r i p h e r a l " capitalism—total a u t o n o m y , t o g e t h e r with a state that truly e m b o d i e s a p o p u l a r will1"—is not realistic. C a r d o s o a n d the dependencistas w h o are i n d e b t e d to him have advanced beyond the i n g e n u o u s n e s s of the " d e v e l o p m e n t of u n d e r d e v e l o p m e n t " thesis. But their theoretical edifice sits a t o p a flawed f o u n d a t i o n : the e r r o n e o u s p r e m i s e that international capitalist e x p a n s i o n is necessarily a n d ineluctably imperialist. T h e third alternative thesis, postimperialism, a b a n d o n s that premise. It begins with the observation that global corporations function to p r o m o t e the integration of diverse national interests on a new transnational basis. In particular, transnational firms o f f e r the "third world" countries 1 '' access to capital resources, d e p e n d a b l e markets, essential technologies, a n d o t h e r services. T h e postimperialist viewpoint suggests that b e n e a t h the usual d i f f e r e n c e s r e g a r d i n g distribution of r e w a r d s t h e r e lies a mutuality of interest between politically a u t o n o m o u s countries at d i f f e r e n t stages of economic d e v e l o p m e n t . At the deepest level, their interests a r e not f u n d a m e n t a l l y antagonistic a n d d o not entail automatically the intensified d o m i n a t i o n of t h e less developed countries by the m o r e developed. 2 " Certainly, the leaders of "third world" countries, almost without exception a n d regardless of ideological orientation, act as if this were their i n t e r p r e t a t i o n of c u r r e n t capitalist reality. E v e r y w h e r e they evince a desire to establish stable relationships with transnational firms. A virtually universal condition f o r the existence of viable relationships is the localization, or indigenization, of both labor a n d m a n a g e m e n t . C o r p o r a t e policy moves toward full acceptance of indigenization o u t of e c o n o m i c self-interest; w h e r e c o r p o r a t e policy does not, t h e local state m u s t have, a n d typically does have, an effective policy f o r imposing indigenization. 2 1 A second, widely a f f i r m e d condition is local participation in equity ownership. Consequently, the transnational presence o f t e n takes the f o r m of j o i n t v e n t u r e s in which a local p a r t n e r , frequently an a r m of the state a p p a r a t u s , acquires a p e r c e n t a g e of t h e shares. 2 2 T h o s e two conditions abet the organizational revolutions that seem to occur as a m a t t e r of c o u r s e in "third world" countries. O r g a n i z a tional revolutions, in their t u r n , b r i n g into being new institutions a n d an entirely new social i n f r a s t r u c t u r e . In m a n y of these countries today, a m a j o r source of high-level e m p l o y m e n t is the parastatal sector of the economy. Highly b u r e a u c r a t i z e d parastatal entities employ m a n y university g r a d u a t e s . M e m b e r s of the intelligentsia so e m p l o y e d f o r m p a r t of a n elite social s t r a t u m . T h e y t e n d to e m b r a c e elitist ideologies, including the value systems of transnational business g r o u p s with which

WHY POSTIIMPERIALISM?

7

they may be associated, a n d a r e inclined to p r o m o t e the growth of private e n t e r p r i s e at h o m e . Even t h o u g h parastatal elites may begin by p r o m o t i n g local private e n t e r p r i s e f o r i n s t r u m e n t a l reasons such as perceptions of efficiency a n d limitations o n state resources, these elites o f t e n acquire a dedication to private p r o p e r t y as soon as they detect o p portunities f o r s u p p l e m e n t i n g their incomes in the private sector. I n most Latin A m e r i c a n countries, w h e r e the process of m o d e r n class f o r mation is older, the results are still m o r e far-reaching. B u r g e o n i n g technocratic-industrial elites, their class interests a n d ideological world view t r a n s f o r m e d by a t h o r o u g h indoctrination in the panoply of m o d e r n m a n a g e m e n t techniques a n d by intimate contact with the t r a n s n a t i o n a l , at last have displaced the "oligarchic" landed-financialcommercial d o m i n a n t classes of y o r e . " T o g e t h e r the state m a n a g e m e n t sector a n d the large private e n t e r prise sector that it protects a n d n u r t u r e s give rise to a new social class. Richard L. Sklar has t e r m e d this class the managerial bourgeoisie.'2'1 Let t h e r e be no misconception as to what is m e a n t here. T h e t e r m does not connote a "class" of managers or a state elite', m a n a g e r i a l bourgeoisie is not an occupational or functional concept. It is a socially c o m p r e h e n s i v e category, e n c o m p a s s i n g the e n t r e p r e n e u r i a l elite, m a n a g e r s of firms, senior state functionaries, leading politicians, m e m b e r s of the l e a r n e d professions, a n d p e r s o n s of similar s t a n d i n g in all s p h e r e s of society. It is a class because its m e m b e r s , despite the diversity of their parochial interests, s h a r e a c o m m o n situation of socioeconomic privilege a n d a c o m m o n class interest in the relations of political p o w e r a n d social control that a r e intrinsic to the capitalist m o d e of production. 2 5 T h e t e r m is used because it specifically is reminiscent of t h e businesse n t r e p r e n e u r i a l tradition; at the same time, the t e r m reflects the primary disposition of this class in many "third world" countries to m a n a g e state agencies a n d large-scale enterprises that have b e e n nationalized or created in collaboration with foreign investors. 21 ' Within a host c o u n t r y f o r foreign investment, the m a n a g e r i a l bourgeoisie consists of two distinct wings. T h e local wing is c o m p o s e d of those privileged host-country nationals w h o occupy the roles e n u m e r ated in the p r e c e d i n g p a r a g r a p h ; n o t e that the class positions a n d interests of these privileged individuals derive f r o m political a n d educational as well as e c o n o m i c sources. T h e corporate international wing is m a d e u p of f o r e i g n nationals w h o m a n a g e businesses a n d o t h e r transnational institutions. T h e local wing of t h e m a n a g e r i a l bourgeoisie is also the u p p e r s t r a t u m of a m u c h larger a n d m o r e c o m p l e x national bourgeoisie consisting of a variety of local notables whose interests a r e circumscribed m o r e closely a n d c o n f i n e d to the domestic scene. I n s o m e of the m o r e industrialized "third world" countries, domestic pri-

8

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vate c o r p o r a t e e n t e r p r i s e a l r e a d y h a s a c h i e v e d political a n d c u l t u r a l p r e e m i n e n c e a n d a d e g r e e of e c o n o m i c p o w e r t h a t a p p r o a c h e s o r e q u a l s t h a t of t h e state m a n a g e m e n t sector. T h e u p p e r s t r a t u m o f t h e local b o u r g e o i s i e h a s e v o l v e d a c a d r e of class l e a d e r s w h o a r e t h e m selves d e p e n d e n t o n t h e c o r p o r a t e f o r m of o r g a n i z a t i o n a n d w h o s e i n t e r e s t s a n d w o r l d views a r e a l r e a d y very close to t h o s e of t h e w i n g associated with i n t e r n a t i o n a l capital. D a v i d G. B e c k e r h a s i n t r o d u c e d t h e t e r m corporate national bourgeoisie t o d e s c r i b e this k i n d of locally d o m i n a n t class.' 7 M a n y r a d i c a l c o m m e n t a t o r s a r e w o n t t o i m p u g n t h e nationalist i n t e g r i t y o f t h e m a n a g e r i a l b o u r g e o i s i e , b u t t h e i r criticism is both misleading a n d u n f a i r . T h e local wing of t h e m a n a g e r i a l b o u r g e o i sie is intensely a n d p a r o c h i a l l y nationalistic, a l t h o u g h t h e intensity a n d p a r o c h i a l i s m of t h e c o r p o r a t e n a t i o n a l v a r i a n t a r e t e m p e r e d s o m e w h a t by t h e effects of a closer i n v o l v e m e n t with t r a n s n a t i o n a l c o s m o p o l i t a n i s m . M a n a g e r i a l - b o u r g e o i s n a t i o n a l i s m in " t h i r d w o r l d " c o u n t r i e s o f t e n t a k e s a p o p u l i s t i c f o r m w h e r e b y n a t i o n a l l e a d e r s p r o c l a i m t h e political u n i t y of t h e w h o l e p e o p l e a n d r e p r e s s d i s s e n t in t h e n a m e of d e f e n s e against t h e t h r e a t of f o r e i g n d o m i n a t i o n . I n t h a t c i r c u m s t a n c e , which is c o m m o n p l a c e t o d a y , t h e political v a l u e s a n d a t t i t u d e s of t h e m a n a g e rial b o u r g e o i s i e ' s local w i n g a r e likely to b e at o d d s with t h o s e of t h e c o r p o r a t e i n t e r n a t i o n a l wing. W i t h few e x c e p t i o n s , t h e political v a l u e s of t r a n s n a t i o n a l b u s i n e s s e x e c u t i v e s a r e n e i t h e r illiberal n o r statist; b u t it w o u l d b e n a i v e t o m i n i m i z e t h e political o p p o r t u n i s m of t h e s e m e n a n d w o m e n , t h e i r ability to set a s i d e i d e o l o g y f o r e x p e d i e n c y . C o n f l i c t s t e m m i n g f r o m d i s c o r d a n t political v a l u e s is less of a p r o b lem, a r g u e s David G. B e c k e r in C h a p t e r 3, w h e r e a c o r p o r a t e n a t i o n a l b o u r g e o i s i e is locally a s c e n d a n t . D e m o c r a t i c g o v e r n a n c e , o f t e n of a c o r p o r a t i s t i n s t e a d of a t r a d i t i o n a l , liberal variety, s e r v e s t h e i n t e r e s t of t h a t k i n d of d o m i n a n t class in m u c h t h e s a m e way, a n d f o r m a n y o f t h e s a m e r e a s o n s , t h a t it s e r v e s t h e class i n t e r e s t of t h e b o u r g e o i s i e s o f t h e m e t r o p o l i . I n a d d i t i o n , t h e dialectic of d e v e l o p m e n t gives rise t o b e t t e r o r g a n i z e d s u b o r d i n a t e classes w h o s e m e m b e r s insist o n political i n c o r p o r a t i o n a n d o p p o r t u n i t i e s f o r social mobility in r e t u r n f o r t h e i r acq u i e s c e n c e in capitalist s o c i o e c o n o m i c a r r a n g e m e n t s . T r a n s n a t i o n a l b u s i n e s s e x e c u t i v e s , f o r t h e i r p a r t , h a v e n o c a u s e to o b j e c t t o local d e m o c r a t i c g o v e r n a n c e , so l o n g as its p r e s e n c e is c o m p a t i b l e with t h e stable e c o n o m i c e n v i r o n m e n t t h a t c o r p o r a t e p l a n n i n g r e q u i r e s . S u c h , inc r e a s i n g l y , is t h e case. O n t h e o t h e r h a n d , t h e u s u a l c o n f l i c t s o f imm e d i a t e i n t e r e s t t h a t a r e e n d e m i c to a n y b o u r g e o i s g r o u p c a n l e a d t o f r i c t i o n a b o u t key issues of e c o n o m i c policy: t h e c o r p o r a t e n a t i o n a l b o u r g e o i s i e , m o t i v a t e d as it is by d e v e l o p m e n t a l n a t i o n a l i s m , g e n e r a l l y f a v o r s a m o r e e c o n o m i c a l l y active local s t a t e a n d a m o r e " m e r c a n t i l i s t " policy of i n d u s t r i a l p r o t e c t i o n a n d s u b s i d i z a t i o n t h a n t r a n s n a t i o n a l m a n a g e r s would prefer.

W H Y POSTIIMPERIALISM?

9

In short, transnational business relationships, w h e t h e r or not p u n c t u a t e d by divergent political values, a r e subject to r e c u r r e n t clashes between intense local nationalism a n d the cosmopolitan internationalism that is the Weltanschauung of the c o r p o r a t e international bourgeoisie. A potential f o r such conflict also is implicit in the inclination of transnational e n t e r p r i s e m a n a g e r s to s u b o r d i n a t e local interests to those of the e n t e r p r i s e or c o r p o r a t e g r o u p as a whole. T h e postimperialist thesis posits that conflict between the local a n d c o r p o r a t e international wings of the managerial bourgeoisie is mitigated regularly or resolved t h r o u g h the m e d i u m of an ideological a n d behavioral disposition of the latter, a disposition that is c a p t u r e d in the idea of the doctrine of domicile."* According to this doctrine, local subsidiaries of transnational business g r o u p s should a n d d o u n d e r t a k e to a d a p t , to ope r a t e in accordance with the policies of states in which the subsidiaries are domiciled. T h i s a d a p t a t i o n , of course, has as its chief aim a n d purpose t h e p r o m o t i o n of the interests of the whole e n t e r p r i s e or g r o u p . T h e doctrine of domicile should not be misconstrued as a g u a r a n tee of good c o r p o r a t e citizenship. 25 ' Properly u n d e r s t o o d , the d o c t r i n e is a tenet of ideological belief, a maxim of c o r p o r a t e action f o r those who plan a n d rationalize the transnational e x p a n s i o n of c o r p o r a t e enterprise. T h i s tenet of business ideology is significant mainly because it smooths the relationship between the c o r p o r a t e bourgeoisies of the industrial capitalist countries a n d the bourgeoisies of those "third world" countries that are newly developing but as yet a r e narrowly industrialized. It is also a g u i d e to the self-conceptions of transnational business m a n a g e r s . I n a s m u c h as the doctrine of domicile is c o n c e r n e d with an ideological a n d behavioral predisposition of transnational business, it draws attention to the action of societal g r o u p s whose cohesion a n d sense of c o m m o n p u r p o s e are ideologically d e t e r m i n e d . What is implied, f o r the analyst, is a social r a t h e r t h a n systemic or institutional f r a m e of r e f e r e n c e : a p r e f e r e n c e f o r looking " b e y o n d " reified systems a n d their abstract "laws of motion," but also " b e h i n d " c o r p o r a t i o n s a n d g o v e r n m e n t s , to the g r o u p a n d class bases of the actions of these institutions. David G. Becker shows, in C h a p t e r 4, how the d o c t r i n e of domicile has o p e r a t e d in the instance of n a t u r a l resource d e v e l o p m e n t in Peru. 3 0 H e n c e , the postimperialism thesis is specifically class analytic. It p r o p o u n d s the idea of transnational class f o r m a t i o n based u p o n the coalescence of d o m i n a n t class elements across national b o u n d a r i e s . T h i s conception is particularly plausible within regions consisting of countries that have broadly similar cultures. But transcultural bourgeois class coalescence, too, has b e c o m e an ever m o r e reasonable expectation. T h e processes of transnational a n d transcultural b o u r geois class coalescence a r e p r o m o t e d powerfully by the o p e r a t i o n s of

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D A V I D G. B E C K E R & R I C H A R D L. S K L A R

transnational e n t e r p r i s e s . " In this r e g a r d , the creation of p a r t n e r s h i p s between elements of the c o r p o r a t e international bourgeoisie a n d the local m a n a g e r i a l bourgeoisie is especially significant. Such p a r t n e r ships, or "marriages," a r e sanctified by the vow of good c o r p o r a t e citizenship that underlies the doctrine of domicile—an a f f i r m a t i o n of the capacity a n d intention of the transnational subsidiary to o p e r a t e as r e q u i r e d by local state policies. T h a t vow is valued highly by the leaders of "third world" countries w h o wish to f o r g e stable relationships with international business organizations. Like a real m a r r i a g e vow, it occasionally may be b r e a c h e d when e x p e d i e n c y beckons; the point is that both partners, although not always faithful, take care to avoid a divorce. N e i t h e r cultural n o r ideological b a r r i e r s have p r e v e n t e d the formation of business p a r t n e r s h i p s between d o m i n a n t class elements on a transnational basis. With increasing f r e q u e n c y , ideological reservations to collaboration with transnational corporations are set aside in d e f e r e n c e to the practical imperatives of economic policy. All "third world" countries, regardless of their ideological p r e f e r e n c e s , n e e d to i m p o r t some capital a n d technology f r o m a b r o a d , even t h o u g h in most cases local sources account f o r the bulk of capital f o r m a t i o n . "Primitive accumulation," w h e t h e r on the Soviet m o d e l or in the fashion of Dickensian E n g l a n d , entails a social a n d political price that the people of today's newly developing societies c a n n o t a n d will not pay. T h e most reliable, if not the only, sources of the capital that must be i m p o r t e d are direct a n d indirect foreign investments by transnational business firms a n d banks. Direct private foreign investment (the principal m o d e of largescale m e t r o p o l i t a n investment in the " p e r i p h e r y " f r o m the e n d of World W a r II until the surge of b a n k loans a n d indirect investments d u r i n g the 1970s) poses a d i l e m m a f o r "third world" leaders who want to i m p o r t capital a n d technology but w h o worry about a loss of t h e i r ability to exercise sovereign control of their countries' internal affairs. As Sayre P. Schatz observes in C h a p t e r 5, t h e r e has been an intense debate between the advocates of o p e n - a r m s acceptance of direct f o r e i g n investment a n d those, including m a n y Marxists, w h o favor rejection w h e n e v e r possible. But the attitudes a n d policies of "third world" leaders clearly a r e c o n v e r g i n g a r o u n d a satisfying, nonideological m i d d l e course of "assertive p r a g m a t i s m " t o w a r d direct foreign investment. Several leaders also have concluded that t h e answer to their d i l e m m a is relatively heavier reliance o n indirect investment. T h e consequences of that choice a r e e x a m i n e d in J e f f Frieden's f o u r - n a t i o n case study, which is p r e s e n t e d in C h a p t e r 6. T h e s u r g e of d e v e l o p m e n t loans to newly industrializing " t h i r d world" countries was m a d e possible by t h e transnationalization of t h e

W H Y POS I IMPERIAI.ISM?

11

metropolitan banking system as well as by the flood of OPEC "petrodollar" deposits that entered the system beginning in the early 1970s. However, these "push" factors were complemented by a "pull" factor: the borrowers' nationalist developmentalism, their determination to proceed with broadly based industrial development u n d e r local entrepreneurial control. In each of the four cases studied by Frieden, the political outcome was the reinforcement of state capitalism, but in a m a n n e r that also strengthened the private industrial bourgeoisie. T h e economic outcome in each of these cases was a major advance of industrialism—in aggregate output, in increased technological content, and in larger ratios of manufactured to total exports. Importantly, the results were independent of official ideology; much the same effects were observed, for example, in "socialist" Algeria as in "ultra-capitalist" South Korea. It would be innocent and illusory to suppose that partnership agreements with transnational corporations and banks, even when arrived at for pragmatic and instrumental reasons, are ideologically or politically neutral. These partnerships transmit capitalist values to the host countries through the alliances that are cemented with the local wing of the managerial bourgeoisie. Such partnerships also foster, as we have seen, the organizational revolutions that facilitate bourgeois class consolidation. 33 Even so, traffic in ideas and attitudes does not pass between the partners of a dominant-class alliance on a one-way street. Members of the corporate international bourgeoisie are as likely to be sensitized to the developmental values of their host country partners as the other way a r o u n d . Would it be unduly optimistic to anticipate a renewal of confidence in the ability of humankind to avert severe nationalistic and ideological strife? In addition to the transformation of imperialistic relationships between industrial and nonindustrial countries, there is a question about the impact of transnational enterprises on interstate relations within particular regions. By adhering to the doctrine of domicile, the subsidiaries of transnational corporations can survive and flourish in all but the most intemperate of political and ideological climates. How will the presence of these subsidiaries in the rival states of turbulent regions, such as Southeast Asia, southern Africa, and the Middle East, where the fabric of peace is torn by national and ideological antagonisms, affect the causes of war? Will that presence help to create outlooks and attitudes that would render the old squabbles obsolete? T h e answers to these questions carry grave implications for socialists everywhere. Ever since Marx, socialists have believed that the capitalist system is riven by a basic contradiction between the social character of production and the private, anarchic character of the regu-

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D A V I D G . B K C K E R & R I C H A R D L. S K I . A R

lation of p r o d u c t i o n . T h e y also have believed I hat t h e contradiction shortly would a p p e a r incarnate in the system's ultimate crisis. Ever since Lenin, socialists have professed to glimpse this crisis in the nationalist protest of p e r i p h e r a l regions against the d o m i n a t i o n a n d exploitation to which they have been subjected by m e t r o p o l i t a n powers. Yet the system has withstood the waves of decolonization a n d protest a n d seems even to have p r o s p e r e d f r o m t h e m . " T h i r d world" nationalism has become the ideological vehicle, not of socialism e m e r gent, but of a bourgeoisie t r i u m p h a n t . If the socialist project is to thrive instead of stagnate, socialists will have to r e e x a m i n e a n d b r i n g u p to d a t e their theories of capitalist d e v e l o p m e n t on a world scale. This is a task that Sayre P. Schatz u n d e r t a k e s in C h a p t e r 7. Schaiz accepts Marx's view of the contradiction between social production a n d directive anarchy. Schatz nonetheless avers that capitalism has evolved an adaptive process that enables it to alleviate the effects of the contradiction bef o r e they can r u p t u r e the continuity of the system. W h e n c o n f r o n t e d by a m a j o r p r o b l e m that resists resolution using customary tools a n d m e t h o d s , the system r e s p o n d s by f o r g i n g a g r e a t e r d e g r e e of conscious, centralized control. There are two key limitations: changes in the modalities of control usually are restricted to those that are minimally necessary to overcome the i m m e d i a t e manifestations of the crisis; a n d changes always lag b e h i n d the crisis in time because they are instituted only in reaction a n d never in anticipation. T h e contradiction, consequently, is never finally resolved; new crises e r u p t periodically, to be followed in each instance by partial, incremental adjustments. With the a d v e n t of postcolonial capitalism, Schatz continues, the process of "socializing a d a p t a t i o n " transcends the national political f r a m e w o r k , to which it h e r e t o f o r e has been c o n f i n e d , a n d becomes global. T h e i m p e t u s is the d i s j u n c t u r e between economic i n t e r d e p e n dence, on which the survival of all m a j o r capitalist institutions now dep e n d s , a n d the self-serving decisions of transnational c o r p o r a t i o n s a n d m e t r o p o l i t a n state authorities. W h e n such decisions d o serious d a m a g e to "third world" d e v e l o p m e n t , they e n g e n d e r a hostile reaction f r o m countries that n o longer a r e willing to e n d u r e in silence a n d that a r e both economically a n d militarily capable of inflicting telling d a m a g e in r e t u r n . Worse still, if dissatisfaction with the fruits of capitalist developm e n t becomes w i d e s p r e a d , t h e result could be to u n l e a s h political cataclysms that might in t u r n lead to "third world" defections f r o m capitalism. T h e newly e m e r g e n t global socializing a d a p t a t i o n aims to forestall these eventualities. It is characterized by g r o w i n g conscious c o o r d i n a t i o n o n a world scale a n d involves a slow b u t perceptible acc o m m o d a t i o n by the chief institutions of international capitalism to t h e most u r g e n t d e m a n d s of t h e "third world" countries. It is e n c o u r a g e d

W H Y POS I I M P K R I A L I S M ?

13

strongly by transnational class formation. For, besides sensitizing those who hold p o w e r to the need f o r adaptation, transnational class f o r m a tion has created a broadly based international class interest in undertaking the requisite adaptive measures. In this connection it is worth underscoring that postimperialism is not a theory of economic development per se. O n e can properly i n f e r f r o m it that the current global division between developed and less developed territories is fluid rather than f i x e d — b u t not that capitalism will develop the latter u n i f o r m l y . On the contrary, there is every likelihood that capitalist d e v e l o p m e n t will continue to be uneven, as in the past, although the present national boundaries may cease to serve as adequate delineations of that unevenness. T h e supersession of nationalist and ideological dissension, if it occurs, may not put an end to all quarrels about the rewards of development; the roots of discord simply may shift to a dimension other than the territorial one. Sayre P. Schatz's prediction is t hat we can look f o r w a r d to f u r t h e r cycles of s h a r p e n i n g systemic contradiction, each ameliorated f or a time, yet only f o r a time, by a new accommodation. T h i s does not resolve the issue of the prospects f o r socialism. There remains the irreducible conflict of class interest between bourgeoisie and proletariat—between those who exercise political and social control and those w h o , lacking control of the means of production, consumption, and e x c h a n g e , are compelled by economic necessity to devote the bulk of their hours to tasks selected and structured by others. Until now, capital has been f a r more mobile internationally than has labor. B u t one of the striking features of the postimperialist age is that c h a n g e now can be seen here as well. T e n d e n c i e s toward international proletarian class f o r m a t i o n can be observed in, f o r e x a m p l e , the spread of "guest w o r k e r " p r o g r a m s and other kinds of legal a n d illegal labor migration; and in the increasing p r o m i n e n c e of international workingclass organizations, r a n g i n g f r o m the I L O to the A F L - C I O ' s A m e r i c a n Institute f o r Free L a b o r Development to the Socialist International. T h e s e tendencies w a r r a n t f u r t h e r investigation. A l t h o u g h there are g r o u n d s f o r optimism about the prospects f o r bourgeois d e m o c r a c y at the national level, it must be emphasized that postimperialism is a theory of international oligarchy. Should the nation-state be increasingly o r decisively marginalized as an economic institution by " C o s m o c o r p , " 3 4 a n d should the nationalistic vendettas with which we are all too familiar be overcome, it is not certain that the result would be the Utopia f o r e s e e n by the ideologists of corporate capitalism. A world d o m i n a t e d by an international bourgeois oligarchy o f f e r s little that would appeal to progressives. Its institutions of political p o w e r and accountability might be even m o r e remote f r o m those a f f e c t e d by them

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DAVID G. BECKER & RICHARD L. SKLAR

t h a n is the case today. W h a t is m o r e , the d o m i n a n t o l i g a r c h y may resort to o p e n l y c o e r c i v e f o r m s o f social c o n t r o l if it has to f a c e a sullen o r hostile proletariat w i t h o u t t h e l e g i t i m a t i o n a f f o r d e d by n a t i o n a l i s m . P o s t i m p e r i a l i s m i m p l i e s the b e g i n n i n g o f a n e w postnationalist a g e . In this p h a s e o f social c o n s t r u c t i o n , the b o u r g e o i s i e , t r u e to its historic mission, has t a k e n t h e lead. T h e transnational c o r p o r a t i o n itself, a l o n g with t h e financial s y s t e m a n d the o t h e r institutions o f international capitalism, s h o u l d be a n a l y z e d f r o m t h e s t a n d p o i n t o f transnational class d e v e l o p m e n t . T h e y a r e the c h i e f i n s t r u m e n t a l i t i e s o f the c o r p o r a t e i n t e r n a t i o n a l b o u r g e o i s i e in the historic d r i v e by that class to t r a n s c e n d the restrictive s y s t e m o f nation-states. T o t h e e x t e n t that the d r i v e s u c c e e d s , i m p e r i a l i s m — t h e d o m i n a t i o n o f o n e p e o p l e by a n o t h e r — w i l l be (is b e i n g ) s u p e r s e d e d by transnational class d o m i n a tion o f the w o r l d as a w h o l e . T h e implications o f this t r a n s f o r m a t i v e m o v e m e n t f o r social s t r u c t u r e a n d social t h e o r y are but dimly u n d e r stood.

Notes T h e a u t h o r s wish to thank Sayre P. Schatz, whose critical reading of an earlier d r a f t of this c h a p t e r caused us to rethink a n d , we hope, to clarify several of o u r ideas. Such e r r o r s of omission a n d commission that may remain are, of course, o u r responsibility alone. 1. V.I. Lenin, Imperialism ,the HighestStage of Capitalism (New York: International Publishers, 1939). 2. Raymond V e r n o n , Storm over the Multinationals: The Real Issues (Cambridge: H a r v a r d University Press, 1977), p. 15. 3. This a p p e a r s to be the position of those who perceive a capitalist "world-economy" dating f r o m the sixteenth century or before; see, e.g., Imm a n u e l Wallerstein, The Modern World-System (New York: Academic Press, 1974). 4. A subsidiary of a transnational bank, for example, accepts deposits a n d makes loans in the c u r r e n c y of the country in which it is domiciled; it also does business with local firms a n d individuals insofar as such business is permitted. T h e transnational bank is very d i f f e r e n t f r o m an older f o r m of international financial institution, whose overseas branches existed mainly to service the foreign t r a d e of h o m e - c o u n t r y enterprises. 5. O n the concept a n d limitations of managerial control, see E d w a r d S. H e r m a n , Corporate Control, Corporate Power (Cambridge: C a m b r i d g e University Press, 1981); Maurice Zeitlin, " C o r p o r a t e O w n e r s h i p a n d Control: T h e Large C o r p o r a t i o n a n d the Capitalist Class," American Journal of Sociology 79

WHY POST1MPERIALISM?

15

(1974): 1073—1119; a n d Maurice Zeitlin a n d S a m u e l Norich, " M a n a g e m e n t Control, Exploitation, a n d Profit Maximization in t h e L a r g e C o r p o r a t i o n : An Empirical C o n f r o n t a t i o n of Managerialism a n d Class T h e o r y , " in Paul Z a r e m b k a (ed.), Research in Political Economy, vol. 2 (Greenwich, C T : J A I Press, 1979), p p . 33—62. Like these a u t h o r s , we d e n y that t h e fact of m a n a g e r i a l control constitutes m a n a g e r s as a class a p a r t f r o m t h e p r o p e r t i e d bourgeoisie. H o w e v e r , managerialism does m a k e a d i f f e r e n c e with respect to t h e n a t u r e of class f o r m a t i o n a n d the s t r u c t u r e s of political p o w e r a n d social control. 6. T h i s version of the neoimperialist thesis is f o u n d , with relatively m i n o r variations, in Paul A. B a r a n , The Political Economy of Growth (New York: Monthly Review Press, 1957); A n d r é ( » u n d e r F r a n k , Capitalism and Underdevelopment in Latin America (New York: Monthly Review Press, 1969); Samir Amin, Accumulation on a World Scale (New York: Monthly Review Press, 1974); a n d S a m i r A m i n , Unequal Development (New York: Monthly Review Press, 1976). Positions similar to theirs have been staked out by Marxists such as S t e p h e n H v m e r , " T h e Multinational C o r p o r a t i o n a n d t h e Law of U n e v e n Dev e l o p m e n t , " in Jagdish N. Bhagwati (ed.), Economics and World Order from the 1970s to the 1990s (New York: Macmillan, 1971), p p . 1 1 3 - 1 4 0 ; a n d Michael B a r r a t t - B r o w n , The Economics of Imperialism ( H a r m o n d s w o r t h , Eng.: P e n g u i n Books, 1976). T h e i r thinking also has i n f l u e n c e d non-Marxists such as Richard J. B a r n e t a n d Ronald E. Müller, Global Reach (New York: Simon & Schuster, 1974). 7. Bill W a r r e n , " I m p e r i a l i s m a n d Capitalist Industrialization," New Left Review, 81 (1973): 3—44; a n d Bill W a r r e n , Imperialism, Pioneer of Capitalism (Lond o n : New Left Books, 1980). 8. W a r r e n , Imperialism, p. 47. 9. F e r n a n d o H e n r i q u e C a r d o s o , " D e p e n d e n c y a n d D e v e l o p m e n t in Latin A m e r i c a , " New Left Revieiu, 74 (1972):83—95; also F e r n a n d o H e n r i q u e C a r d o s o a n d Enzo Faletto, Dependency and Development in Latin America (Berkeley a n d Los Angeles: University of California Press, 1979). 10. C a r d o s o a n d Faletto, Dependency and Development, p p . xx-xxii. T h e y m e n t i o n "cars, televisions, r e f r i g e r a t o r s " as e x a m p l e s of t h e sorts of g o o d s in question. A l t h o u g h t r a n s n a t i o n a l subsidiaries in newly industrializing c o u n tries i n d e e d p r e d o m i n a t e in t h e m a n u f a c t u r e of these a n d o t h e r c o n s u m e r d u r a b l e s , on t h e whole these subsidiaries o f f e r an exceedingly wide r a n g e of goods a n d services—many of which a r e m a s s - c o n s u m p t i o n items even by local standards. 11. Nicos Poulantzas, Political Power and Social Classes ( L o n d o n : New Left Books, 1973). A l t h o u g h C a r d o s o a n d Faletto d o not use t h e t e r m power bloc, it readily c a p t u r e s their m e a n i n g . 12. C a r d o s o a n d Faletto, Dependency and Development, p. xvi. " P r e t e n d " isa mistranslation of pretender in t h e original Spanish, which c o n n o t e s a sincerely stated claim o r e n d e a v o r , r a t h e r t h a n a p r e t e n s e . 13. C a r d o s o a n d Faletto, Dependency and Development, p. xxi. 14. T h e forces of m e t r o p o l i t a n capital must d o so, in C a r d o s o ' s schema, f o r t h e usual Leninist r e a s o n — " t h e imperialist e c o n o m i e s n e e d e x t e r n a l expansion f o r t h e realization of capital a c c u m u l a t i o n . " T h e y can d o so f o r t h e

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reason that their p r e e m i n e n c e in capital goods p r o d u c t i o n serves "as a f o r m of m a i n t e n a n c e of c o n t r o l " as well as "a necessary step in the process of capital a c c u m u l a t i o n " (Cardoso, " D e p e n d e n c y a n d D e v e l o p m e n t in Latin A m e r i c a , " pp. 90-91). 15. Guillermo A. O'Donnell, Modernization atul Bureautratic-Authoritarianism: Studies in South American Politics (Berkeley: Institute of I n t e r n a t i o n a l Studies, University of California, 1973); a n d G u i l l e r m o A. O ' D o n n e l l , "Reflections o n t h e Patterns of C h a n g e in t h e B u r e a u c r a t i c - A u t h o r i t a r i a n State," Latin American Research Review 13, 1 ( 1 9 7 8 ) : 3 - 3 8 . O ' D o n n e l l holds that t h e populist solution was c o m m o n d u r i n g an e a r l i e r stage of Latin A m e r i c a n industrialization, which was based o n m a s s - c o n s u m p t i o n goods a n d t h e r e f o r e b e n e f i t e d f r o m c o n t r o l l e d political i n c o r p o r a t i o n of t h e masses. In t h e next stage of industrial " d e e p e n i n g " (shifting of t h e p r o d u c t mix toward m o r e expensive d u r a b l e goods), t h e acceptance, o r active p r o m o t i o n , of income c o n c e n t r a t i o n necessitated t h e political exclusion of these same masses (see also C a r d o s o a n d Faletto, Dependency and Development, p. 163). This was t h e political service that b u r e a u c r a t i c - a u t h o r i t a r i a n i s m a p p e a r e d to p e r f o r m for t h e captains of Latin A m e r i c a n i n d u s t r y . H o w e v e r , b u r e a u c r a t i c - a u t h o r i t a r i a n i s m is p l a g u e d by i n t e r n a l tension a n d is subject to p r e s s u r e s f o r democratization, as is shown by recent events in A r g e n t i n a a n d Brazil. 16. O n t h e c o n n e c t i o n between Marxism a n d dependencismo, see Gabriel Palma, " D e p e n d e n c y : A F o r m a l Theory of U n d e r d e v e l o p m e n t o r a M e t h o d ology f o r t h e Analysis of C o n c r e t e Situations of U n d e r d e v e l o p m e n t ? " World Development 6, 7 - 8 ( 1 9 7 8 ) : 8 8 1 - 9 2 4 . 17. O f t h e 215 pages of text in Dependency and Development in Latin America, just ten r e f e r in any way to s u b o r d i n a t e g r o u p s o t h e r t h a n t h e rhiddle class. P o p u l a r e l e m e n t s , largely u n d i f f e r e n t i a t e d , a r e a c c o r d e d subjectivity only ins o f a r as they exert u n s p e c i f i e d " p r e s s u r e s " on behalf of equally v a g u e "demands." 18. C a r d o s o a n d Faletto, Dependency and Development, p p . 162, 202. T h e y look with favor on political a u t h o r i t a r i a n i s m a n d economic statism, if t h a t is t h e price to be paid f o r p r e s e r v i n g national a u t o n o m y while industrial developm e n t p r o c e e d s (see p. 162). 19. A f t e r weighing t h e options, we settled on "third world" as o u r descriptive adjective f o r societies at early o r i n t e r m e d i a t e stages of industrialization. It avoids u n w a n t e d c o n n o t a t i o n s associated with "developing" a n d "less dev e l o p e d " a n d , we h o p e , leaves n o u n c e r t a i n t y as to what c o u n t r i e s a r e m e a n t . By placing t h e t e r m within q u o t e s a n d not capitalizing it, we signal o u r disa g r e e m e n t with any e f f o r t to divide the globe into s e p a r a t e " W o r l d s " o n t h e basis of political as well as e c o n o m i c criteria. In o u r usage, " t h i r d w o r l d " e m braces C h i n a a n d o t h e r less industrialized socialist societies. 20. T h i s d o e s not signify t h a t every e x p e r i e n c e of capitalist d e v e l o p m e n t is o n balance h e l p f u l to a c o u n t r y . Much less d o e s this signify that all social classes a n d g r o u p s always benefit. But w h e r e capitalist d e v e l o p m e n t is h u r t f u l to a c o u n t r y , it is so today because of c o n t i n g e n t circumstances, not because of systemic f e a t u r e s of t h e world e c o n o m y . A l t h o u g h exposés of t h e visible, shortr u n h a r m d o n e to s u b o r d i n a t e social g r o u p s by capitalist d e v e l o p m e n t a r e b o t h

WHY POSTIMPERIALISM?

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u s e f u l a n d necessary, a t h e o r y of d e v e l o p m e n t o u g h t n o t to n e g l e c t t h e dialectics of t h e l o n g t e r m : t h e possibility t h a t d e v e l o p m e n t itself u l t i m a t e l y a r m s subo r d i n a t e g r o u p s politically, so t h a t by t h e i r o w n e f f o r t s t h e y can o b t a i n r e d r e s s f o r s o m e of t h e h a r m d o n e to t h e m e a r l i e r o n . 21. T r a n s n a t i o n a l c o r p o r a t i o n s h a v e l e a r n e d t h a t local citizens p l a c e d in s u b s i d i a r y e n t e r p r i s e s in p o s i t i o n s of t r u s t s o o n a c q u i r e t h e s a m e d e g r e e of i d e n t i f i c a t i o n with c o r p o r a t e goals as d o " h o m e " - c o u n t r y p e r s o n n e l . E v e n if t h e salaries of local citizens m a t c h t h o s e of e x p a t r i a t e s , t h e f o r m e r d o n o t d e m a n d t h e " h a r d s h i p " allowances, h o u s i n g subsidies, a n d o t h e r special b e n e f i t s that e x p a t r i a t e s receive; local citizens t h u s a r e c h e a p e r to h i r e a n d m a i n t a i n . T h e t r a n s n a t i o n a l ' r e s i d u a l r e l u c t a n c e to h i r e locals d e r i v e s f r o m c o n c e r n a b o u t t h e i r skill levels a n d t h e costs of t r a i n i n g p r o g r a m s to o v e r c o m e d e f i c i e n cies; it is in c o u n t e r i n g this r e s i d u a l r e l u c t a n c e that state i n d i g e n i z a t i o n policies h a v e m u c h of t h e i r i m p a c t . 22. A sign of t h e i m p o r t a n c e of c o r p o r a t e j o i n t v e n t u r e s to b o t h local states a n d t r a n s n a t i o n a l f i r m s is t h e c o n s i d e r a b l e variety of i m a g i n a t i v e arr a n g e m e n t s f o r c o n s t i t u t i n g s u c h p a r t n e r s h i p s at m i n i m a l o u t - o f - p o c k e t cost to t h e local p a r t n e r s : built-in " f a d e o u t " p r o v i s i o n s , a u t o m a t i c r e i n v e s t m e n t of p r o f i t s a c c r u i n g to t h e local p a r t n e r s ' a c c o u n t , a n d so f o r t h . A n o t h e r sign is t h e f r e q u e n c y with which g o v e r n m e n t of ficials t a k e t h e lead in p r o m o t i n g j o i n t v e n t u r e s t h a t link t h e state, t r a n s n a t i o n a l f i r m s , a n d , w h e r e possible, local private c apital. See, e.g., P e t e r Evans, Dependent Development ( P r i n c e t o n : P r i n c e t o n University Press, 1979). 23. T h e "oligarchic" o r d e r in Latin A m e r i c a was capitalist, n o t "semif e u d a l . " Its t r a n s f o r m a t i o n r e m i n d s us t h a t r e n e w i n g o r g a n i z a t i o n a l r e v o l u tions a r e possible within capitalism a n d can signal a t r a n s i t i o n f r o m a n early, c o m m e r c i a l capitalist p h a s e to a late-capitalist p h a s e f e a t u r i n g i n d u s t r i a l i s m , oligopoly, a n d c o r p o r a t i s m . 24. R i c h a r d L. Sklar, Corporate Power in an African State ( B e r k e l e y a n d Los A n g e l e s : University of C a l i f o r n i a Press, 1975), p p . 1 9 8 - 1 9 9 . 25. A m o d e of p r o d u c t i o n is c o m p o s e d of " t h e r e l a t i o n s of c o n t r o l , t h e m o d e s of c o o p e r a t i o n a n d t h e t e c h n o l o g y t h a t g o v e r n m a t e r i a l p r o d u c t i o n " ; R i c h a r d W. Miller, Analyzing Marx: Morality, Power and History ( P r i n c e t o n : P r i n c e t o n University Press, 1984), p p . 8 - 9 . Miller c o n t i n u e s : " S u r e l y , systems of c o n t r o l a n d t h e conflicts to which t h e y give rise a r e , in a b r o a d sense, political as well as e c o n o m i c . " 26. R i c h a r d L. Sklar, " T h e N a t u r e of Class D o m i n a t i o n in A f r i c a "Journal of Modern African Studies 1 7 , 4 ( 1 9 7 9 ) : 5 3 1 - 5 5 2 ; see p p . 5 4 6 - 5 4 7 . 27. David G. B e c k e r , The New Bourgeoisie and the Limits of Dependency ( P r i n c e t o n : P r i n c e t o n U n i v e r s i t y Press, 1983), p p . 3 3 0 - 3 3 5 . Strictly s p e a k i n g , t h e m a n a g e r i a l b o u r g e o i s i e is t h e d o m i n a n t class o f societies in w h i c h s t a t e capital plays a p a r a m o u n t role in p r o d u c t i o n b u t d o e s so in a way t h a t n u r t u r e s t h e g r o w t h a n d d e v e l o p m e n t of p r i v a t e e n t e r p r i s e . B e c k e r r e g a r d s t h e c o r p o r a t e n a t i o n a l b o u r g e o i s i e as a v a r i a n t o f t h e m a n a g e r i a l b o u r g e o i s i e ; a l t h o u g h t h e state m a n a g e m e n t a n d p r i v a t e e l e m e n t s of a c o r p o r a t e n a t i o n a l b o u r g e o i s i e a r e symbiotically r e l a t e d , t h e l a t t e r is relatively i n d e p e n d e n t of state p o w e r a n d m a y h a v e its o w n historical roots. O t h e r t y p e s a n d v a r i a n t s can b e d e f i n e d in

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a c c o r d a n c e with the evolution of a society's key e c o n o m i c institutions. For e x a m p l e , state bourgeoisie describes the d o m i n a n t class of centrally p l a n n e d e c o n o m i e s w h e r e state capital is monopolistic; entrepreneurial bourgeoisie, t h e d o m i n a n t class of m a r k e t e c o n o m i e s w h e r e state capital's role in p r o d u c t i o n is distinctly m i n o r in c o m p a r i s o n to that of private capital. 28. Sklar, Corporate Power, pp. 1 8 2 - 1 8 8 . 29. W h e r e v e r they o p e r a t e , including in the metropoli, business c o r p o r a tions a t t e m p t to evade expensive regulations i m p o s e d u p o n t h e m by t h e political authorities, if c o r p o r a t e m a n a g e m e n t s c o n c l u d e that the savings t h u s achieved o u t w e i g h t h e risks a n d penalties of discovery. T o t h e e x t e n t that gove r n m e n t a d m i n i s t r a t o r s in "third w o r l d " c o u n t r i e s a r e less capable o r e f f i c i e n t t h a n their m e t r o p o l i t a n c o h o r t s in o v e r s e e i n g c o r p o r a t e activities, they face a c o r r e s p o n d i n g l y g r e a t e r likelihood of evasion. H o w e v e r , they have risen to t h e challenge with r e m a r k a b l e rapidity—partly with t h e assistance of i n t e r n a t i o n a l institutions such as l i N C T A D , partly by m e a n s of m a n a g e r i a l e x p e r t i s e transferred to them by the transnational corporations themselves. Besides, t h e r e is m u c h evidence that t r a n s n a t i o n a l firms, d u e to their smaller n u m b e r s a n d f a r g r e a t e r visibility, a r e more law abiding, on t h e average, t h a n a r e locally o w n e d private enterprises. 30. A n o t h e r interesting case of t h e o p e r a t i o n of the d o c t r i n e of domicile in natural r e s o u r c e d e v e l o p m e n t is that of Zambia, analyzed by Sklar in Corporate Power. 31. Awaiting the r e s e a r c h e r ' s attention a r e t h e new t r a n s n a t i o n a l e n t e r prises that a r e h e a d q u a r t e r e d in "third world" c o u n t r i e s a n d that a r e c o n c e n trating, t h u s f a r , on investment in n e i g h b o r i n g c o u n t r i e s . Locally h e a d q u a r t e r e d transnationals a r e already a fact of life in Latin America, w h e r e t h e i r d e v e l o p m e n t has been stimulated by regional e c o n o m i c institutions. ( T h e s e institutions a r e backed, at t h e political level, by a b o u r g e o i s desire f o r a g r e a t e r m e a s u r e of political assertiveness in i n t e r n a t i o n a l a f f a i r s a n d by an u n d e r s t a n d i n g in t h e same q u a r t e r t h a t a regional a p p r o a c h o f f e r s a b e t t e r p r o s p e c t t h a n a national o n e f o r attaining it.) In Asia, S o u t h Korea a n d o n e o r two A S E A N c o u n t r i e s have b e g u n to spawn t r a n s n a t i o n a l e n t e r p r i s e s of t h e i r o w n . 32. Algeria is t h e exception because n o private industrial b o u r g e o i s i e existed t h e r e . H o w e v e r , private e n t r e p r e n e u r s s h a r e d in t h e b o u n t y t h r o u g h t h e b o r r o w e d capital that was c h a n n e l e d to t h e m by state d e v e l o p m e n t b a n k s . Instead of r e g a r d i n g t h e t r e m e n d o u s e x p a n s i o n of the economically active state as a t h r e a t , local e n t r e p r e n e u r s saw t h e state as a p a r t n e r a n d its g r o w t h as an alternative p r e f e r a b l e to additional t r a n s n a t i o n a l c o r p o r a t e c o m p e t i t i o n . 33. Which is not to claim that direct f o r e i g n i n v e s t m e n t is a necessary c o n d i tion f o r organizational revolution in "third w o r l d " c o u n t r i e s . 34. G e o r g e W. Ball, " C o s m o c o r p : T h e I m p o r t a n c e of Being Stateless," in C o u r t n e y C. B r o w n (ed.), World Business: Promise and Problems (New Y o r k : Macmillan, 1970), p p . 3 3 0 - 3 3 8 .

C H A P T E R

T W O

Postimperialism : A Class Analysis of Multinational Corporate Expansion RICHARD L. SKLAR New frontiers for substantive research frequently give rise to theoretical challenges. More often than not, these will in fact be old challenges revived or rediscovered in a new context. Political scientists may well discover a fertile field for research in the phenomenal expansion of multinational business enterprise. Yet the challenges they encounter may not differ in principle from those that have been presented in the past by the growth of corporate enterprise in particular nations. Indeed, the failure of political science to c o m p r e h e n d the modern business corporation is well enough known. As Grant McConnell has written, "The existence of the modern corporation does not accord with long-standing conceptions of political organization, and no theory exists by which it can be reconciled with such conceptions." 1 T h e unmistakable relevance of transnational corporations to basic issues of political development and international relations creates a new opportunity for political scientists to face challenges that have been posed but, largely and lamentably, ignored in the past. In this essay, three issues that arise f r o m the problem of corporate power in political theory are identified with reference to pioneering works on corporate power in modern industrial society. These issues, involving economic oligarchy, managerial authority, and class formation, are then transposed to the transnational plane of study. Recent works on transnational enterprise and the problems of development in nonindustrial societies indicate that these questions may now be studied on a broader scale than heretofore, at possibly deeper levels of theoretical comprehension. T h i s a r t i c l e o r i g i n a l l y a p p e a r e d in Comparative p r i n t e d with permission.

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I No challenge to political science excites a more defensive reaction than that implied by Adolf A. Berle's view that the business corporation is "essentially, a nonstatist political institution." 1 ' This idea casts doubt upon the separation of economic power f r o m political power for analytical purposes, a presupposition that is widely accepted in standard political science. 3 It also severely restricts the claim of democracy that can be made on behalf of political orders in societies that rely upon oligarchic forms of economic organization. As this observation implies, there may be an ideological basis for the characteristic attribution of economic and political power to different causes or generative activities by the vast majority of Western political scientists. Yet the pioneers of scientific political analysis did not uniformly balk, at the challenge to conceive their subject as a unified field of power. Upon that provocative premise George Catlin has proclaimed the conceptual identity of political science and sociology, envisioning f r o m that point of view a transdisciplinary domain which, as Charles Hyneman observed, might be extended to encompass much of the discipline of economics as well.4 It may not be amiss to suggest that Berle's apparent iconoclasm is, essentially, traditional common sense. T h e classic analysis of corporate power in the modern era was published by Berle and Gardiner C. Means in 1932.'' This work set forth a theory of managerial autonomy within the modern business corporation based upon the authors' debatable finding that the evolution of corporate organization entails the divorce of ownership from control and the lodgement of decisive power in the hands of managers rather than owners. By 1940, other authoritative studies had shown, contrary to Berle and Means, that large nonfinancial corporations in the United States were likely to be controlled by their leading owners." Nevertheless, the age of managerial authority, whether it be inseparable f r o m legal ownership or coexistent upon separate foundations, had been proclaimed. It was a short step f r o m there to announce the appearance of a managerial class, created by the organizational imperatives of the corporation itself. Thus, in 1941, James Burnham, recently estranged f r o m Trotskyite Marxism, declared that a managerial ruling class, nurtured by the corporation, was emerging in the United States and other industrial countries. 7 As a rule, those who conceive social class to be a function of property ownership have rejected the notion of a bureaucratic or managerial "class" in capitalist societies. 8 However, the managers of business enterprise and those who serve business in a professional capacity, in addition to their professional and social counterparts in other employ-

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ment sectors, are of ten classified with property owners to constitute the bourgeoisie as a whole.'' As a recruitment agency to the ranks of "middle management," bureaucratic organization promotes the growth of a social stratum that identifies firmly with the interests of property. Andrew Hacker has argued that the American corporation has produced a "new middle class" o fj u n i o r and senior executives. T h i s class is "large, national, and propertyless." Following William S. White, Hacker labels the species "homo Americanus," or the "Consensus American." Its mode o f social thought is cosmopolitan (within national limits) rather than narrowly sectional; its political style is passive and nonpartisan rather than earnestly participative and staunchly partisan, as the old middle class had been. 1 " A p a r t f r o m Hacker, H . H . Wilson, and a few others, political scientists have been remarkably reticent about inquiring into political aspects of the corporate presence in modern industrial societies." A m o n g the many questions that bear investigation, three issues to which I have alluded in connection with the pioneering works of Berle, Means, and B u r n h a m appear certain to capture the attention of those who study the multinational corporation. First, Berle's conception of the corporation as "a nonstatist political institution" points, as we have seen, toward oligarchy as the probable political future of the industrial capitalist societies. T h i s may be contested by those w h o visualize a significant redistribution of corporate power from managers to employees, 12 and by those who are satisfied to define democracy as a sy stem of imperfect competition between opposing groups, of politicians. 13 For Berle himself, the legal separation of corporate f r o m state power was a virtue of paramount importance, since it would allow for the perfection of libertarian institutions u n d e r m o d e r n industrial conditions. 14 A t the supranational level, the impression of oligarchy as a consequence of corporate enterprise may be intensified by the absence of an international state which might countervail oligopolistic corporate power. Richard J. B a r n e t a n d Ronald E. Miiller refer to the leading executives of multinational corporations as "World Managers." 1 5 Do the actions of multinational corporate executives serve to secure and perpetuate the domination o f some countries by others? In other words, the issue of oligarchy entails the question of imperialism. Second, at the supranational level, the old issue o f a u t o n o m o u s managerial authority becomes crucial to calculations about the potential exercise o f corporate statesmanship in world affairs. In particular, it relates directly to the often vaunted ability of corporate managers to act in accordance with broad political and social values in addition to their normal economic objectives. J o h n K. Galbraith has a r g u e d that the principled pursuit of noneconomic goals by a "mature corporation"

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is entirely consistent with its concurrent pursuit o f overriding economic and technological goals. In fact, he contends, social goals for the corporation are needed to maintain the loyalty and morale o f the many mental, as distinct from manual, workers who serve it.' 6 T h i s theme has been amplified by various expositors o f multinational enterprise. T h u s , Howard V. Perlmutter believes that the senior executives o f the leading multinational corporations are the most important "social architects" o f the new era. He postulates the "geocentric m a n " as the ideal executive for the "geocentric corporation"—a multinational enterprise whose national affiliates operate on the basis o f economic equality. 17 T h i r d , beyond the issue o f managerial autonomy, we may conceive the formation o f a transnational class comprising at its core those who manage multinational corporations. T o substantiate this thesis, it would be necessary to show that the members o f any such presumed class tend to think and act as a collective entity. Social classes are sustained and strengthened by many different generators o f vitality. A transnational ruling class would be especially difficult to overthrow inasmuch as its power would be fortified by the appropriation o f diverse resources in many countries. Its significance as a power group might transcend the conception o f imperialism. T h e s e three issues—imperialism, managerial autonomy, and transnational class d o m i n a t i o n — will be discussed in relation to the penetration o f nonindustrial countries by multinational corporations.

II T h e multinational corporation (or enterprise or firm) may be suitably defined according to these criteria: it consists o f a parent company and subsidiary companies, the latter o f which are located in a few or m o r e countries and are engaged in the performance o f basic economic, typically productive, activities in addition to trade. T h e various national components o f the enterprise are mutually supportive and subject to central direction. T h e m a n a g e m e n t o f each c o m p o n e n t is designed to promote the overall interests o f the group as a whole. , s If, for example, it should appear to be in the interest o f the enterprise as a whole to move certain productive operations from one country to a n o t h e r in quest o f c h e a p e r labor or lower taxes, the inclination to do so is likely to prevail. Inevitably, it will be suggested that the interests o f the whole normally coincide with the interests o f the controlling part. Since the parent company does have a specific national identity and since it is normally controlled by directors o f a specific nationality, or a small set o f nationalities, the spread o f multinational enterprise appears to re-

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suit in the perpetuation and intensification of hegemonic domination by the industrial capitalist powers. In short, the national and organizational loyalties of transnational business executives may be expected to fuse with imperialistic force. T h i s a r g u m e n t has been made f r o m a Marxist-Leninist standpoint as a matter of doctrine: Capital without a state is . . . unthinkable. But in the world as it is constituted today only nations have states: there is no such thing as a supranational state. . . . If, for e x a m p l e , the state o f the nation to which it b e l o n g e d were to collapse, capital would lose its indispensable protector. It would then either be incorporated into the capital o f another nation or it would cease to be capital by c o m i n g u n d e r the jurisdiction o f a revolutionary r e g i m e dedicated to the abolition o f the entire set o f relations of production o f which capital is one part. . . . [T]he historic course o f the global capitalist system is leading to one of two outcomes: world e m p i r e or world revolution. 1 "

A n empirically based demonstration of the thesis that multinational corporations promote imperialism by economic means has been presented by Stephen Hymer. 2 0 T h e basis of his argument is his insistence upon the d i f f e r i n g effects of the technological and organizational determinants of economic development. In his view, technological diffusion alone does not produce or serve to perpetuate imperialist domination. T h i s condition is plainly the result of corporate organization, which typically distributes the functions of planning, coordination, and routine operation according to the principle of hierarchy. T h e result is a proliferation of subsidiary firms, whose actions are coordinated at regional levels by higher subsidiaries of parent corporations, themselves located in the major geographic centers of corporate power and planning. 2 ' Marxists in general assume that domination (of the underindustrialized countries by the industrial capitalist countries) and exploitation go hand in h a n d — t h a t in the course o f multinational corporate expansion, relatively poor and weak countries are compelled by various means to pay for the benefits that accrue to the advanced capitalist countries. 22 Few people today would bother to challenge this assumption by resuscitating the late Victorian doctrine of beneficient, paternalistic imperialism. 23 However, another somewhat paradoxical thesis to the e f f e c t that imperialism is not only injurious to subjugated peoples but also h a r m f u l to the imperialist nations themselves—John A. Hobson's distinctive viewpoint 2 4 —has been reiterated by antiimperialists of diverse ideological orientations. T h u s , Barnet and Miiller hold that by means o f "transfer pricing" and other exploitative/ manipulative devices, multinational corporations systematically cheat, and thereby retard the economic development of, poor countries. A t

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the same time, they c o n t e n d , in the spirit of H o b s o n , that such c o r p o r a tions are directly responsible for retrogressive tendencies in their industrial " h o m e " countries, especially the United States, as shown by s y m p t o m s of economic, political, a n d social decay that are reminiscent of conditions in u n d e r d e v e l o p e d countries. A m e r i c a n workers, they state, are especially liable to s u f f e r f r o m the t r a n s f e r of productive a n d distributive o p e r a t i o n s f r o m the U n i t e d States to low wage "host" countries. 2 5 T h e s e observations suggest that the d o m i n a t i o n of o n e people or nation by a n o t h e r , which, strictly speaking, d e f i n e s the concept of imperialism, should not be conf used with the calculation of benefits a n d costs that result f r o m such d o m i n a t i o n . Benefit/cost calculations involve an assessment of o u t c o m e r a t h e r than power. Until the midtwentieth century, it was widely a s s u m e d that exploitative economic relations between countries at diff e r e n t levels of economic d e v e l o p m e n t were established a n d m a i n t a i n e d by m e a n s of imperial d o m i n a t i o n . With the a d v e n t of colonial f r e e d o m in Asia a n d Africa, a n d the e m e r g e n c e of c o m m u n i s t powers c o m p a r a b l e in strength to their capitalist adversaries, it became reasonable to expect that the causes of economic exploitation would be clearly identified a n d progressively eliminated. P r o p o n e n t s of multinational e n t e r p r i s e d o hold that this, in fact, is the direction of m o v e m e n t within the n o n c o m m u n i s t s p h e r e . R e s p o n d i n g to the c h a r g e of exploitation, they say that multinational c o r p o r a t i o n s diff use m o d e r n skills, technologies, a n d urgently n e e d e d capital resources to the n o n i n d u s t r i a l countries, that they c o n t r i b u t e h a n d s o m e l y to g o v e r n m e n t a l r e v e n u e s in such countries, a n d that they provide secure access to world m a r k e t s f o r their exports. Since t h e r e are both benefits a n d costs o n either side of all international e c o n o m i c relationships, the calculation of relative benefit a n d cost is crucial to this a r g u m e n t . If it can be shown, contrary to the case f o r transnational e n t e r p r i s e , that the economic position of given industrial nations is e n h a n c e d relative to (or at the e x p e n s e of) particular non- or lessindustrial nations, the relationships in question may be d e e m e d to p r o m o t e or p e r p e t u a t e imperialist d o m i n a t i o n . In fact, the d e b a t e a b o u t relative benefit a n d cost in relationships m e d i a t e d by multinational corporations has b e e n intense; it is also likely to be i n t e r m i n a b l e a n d inconclusive, as p o w e r f u l a r g u m e n t s a r e marshalled o n both sides. 2 " Advocates of the exploitation-imperialism thesis have h a d to ass u m e an a d d e d theoretical b u r d e n in addition to the weight of their evid e n c e on costs. T h e y need to explain the persistence of exploitation d e spite the passing of colonialism a n d o t h e r overtly imperialistic f o r m s of political control. 2 7 Obviously, it will not suffice merely to i n f e r d o m i n a tion f r o m a (usually rebuttable) d e m o n s t r a t i o n of exploitation. T o this

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author's mind, the elements of controversy about imperialist domination (whether and why it persists) have not been identified with anything like the clarity that recent studies have shed upon the question of relative benefit and cost. For want of satisfactory formulations of specific matters of controversy relating to the question of domination, the debate about imperialism in the age of multinational enterprise has not been properly joined.

Ill Whereas the benefit/cost calculation, upon which a Finding of "economic" imperialism28 depends, does not directly bear upon the bases and exercise of power, the issue of managerial authority is directly and indubitably pertinent to the study of corporate power. Managers exercise authority. But the heralds of managerial autonomy misperceived the evolving relationship between management and ownershipinterest as a case of divorcement. Recent evidence relating to the major American "global" corporations has been summarized by Barnet and Miiller thus: "in the upper reaches of America's corporations there is no 'technostructure' made up of managers with interests distinct from those of owners. Increasingly, the managers are the owners, deriving an increasing proportion of their income not from their managerial skills but from the stock they own in their own corporations."-'' Paradoxically, the thesis of managerial autonomy may be revived in connection with multinational corporate expansion mainly as a result of conditions in the nonindustrial and newly developing countries, where corporate enterprise has been established upon foundations of foreign capital. T o be sure, the detection of managerial rule in nonindustrial societies would not mark the first removal of this idea from its original setting. Heretofore, expositors of the "managerial revolution" have cited developments in socialist countries, especially the Soviet Union, to corroborate their thesis.30 Trotsky's harsh judgment, in The Revolution Betrayed," has been repeated and refined by Marxist critics of "bureaucratic" autocracy in the Soviet Union, some of whom identify a "new class," comprising a party-bureaucratic formation, 32 while others, who are equally critical, do not.33 Charles Bettelheim uses the term "state bourgeoisie" to describe and condemn the ruling stratum in the Soviet Union, holding, in a Maoist vein, that its existence actually portends nothing less than the restoration of capitalism.34 As in the socialist countries, bureaucratic cadres in the nonsocialist, newly developing countries have increasingly come to the forefront of

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public affairs. Typically, the bureaucratic elites of such countries enjoy incomes and social privileges far beyond the dreams or expectations of all but a few of their relatively impoverished compatriots. In his moving critique of social inequality and poor economic performance in newly independent African states, the French agronomist, René Dumont, observes that "a new type of bourgeoisie is forming in Africa . . . a bourgeoisie of the civil service." 35 T h e concept of a "bureaucratic bourgeoisie" as the new ruling class has been applied effectively in African studies. 36 But it does not appear to match the social realities of countries such as Nigeria, where an entrepreneurial bourgeoisie is well established; nor has this term been widely adopted by students of those Asian and Latin American societies where private enterprise is the principal economic form. As in the study of industrial societies, so also in the study of nonindustrial societies the relationship between bureaucratic and entrepreneurial class power becomes a matter of serious controversy. T h e theoretical problems are compounded by widespread uncertainty as to the approximate degree to which the private enterprise sectors of most newly developing countries are dependent upon state patronage and support. Invariably, a degree of dependence that is deemed to be either too great or too small will automatically activate theoretical defense mechanisms against the specter of an indistinct analytical boundary between the bureaucratic and entrepreneurial spheres of life. In this circumstance, a complex idea is needed to comprehend business executives, members of the learned professions, leading politicians, and u p p e r level bureaucrats as members of a single class. Perhaps the term "managerial bourgeoisie" will suggest an idea of merit. Inasmuch as this term clearly refers to the private business elite as well as to the managers of public enterprises and to high government officials, it may be preferred to either "bureaucratic" or "state" bourgeoisie. Moreover, this term, in contrast with the term "entrepreneurial bourgeoisie," reflects the apparent disposition of bourgeois elements in the nonindustrial and newly developing countries 37 to manage the production and distribution of wealth rather than to create new wealth-producing enterprises. 38 In many postcolonial and nonindustrial countries, as C.B. Macpherson has observed, the state is conceived and appraised mainly in terms of its contribution to development. 3 ' 1 Development itself is a value-laden idea, connoting progress toward the achievement of desired goals. 40 T h e political aspect of development, as distinct from those value premises that involve political goals, may be understood to signify the improvement of a society's ability to control the rate and direction of change. T h e concept of control is crucial to this definition, since it

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implies the ability to f o r m u l a t e a n d i m p l e m e n t strategies f o r solving problems a n d achieving goals. In newly d e v e l o p i n g countries, drastic changes in the organization of authority—organizational revolutions 4 1 —are f r e q u e n t l y r e q u i r e d to facilitate the effective exercise of social control. T h e s e political t r a n s f o r m a t i o n s are themselves c o n t i n g e n t u p o n the r e c r u i t m e n t of u n p r e c e d e n t e d n u m b e r s of t r a i n e d p e o p l e to staff the new and rejuvenated state agencies. T o this end, certain democratic and egalitarian devices, such as equal educational o p p o r t u n i t y , a r e useful if not indispensable. However, the new organizational m e n a n d women, taken t o g e t h e r with their i m m e d i a t e families a n d social peers, constitute a m i n o r f raction of the p o p u l a t i o n , about 5 to 10 percent. T h e organizational revolution, s p u r r e d by material incentives, is a forcing house f o r class f o r m a t i o n a n d privilege. In all societies, "revolutions f r o m above" are p r o n e to d e v e l o p deeply conservative tendencies. In newly d e v e l o p i n g countries, m o d e r n conservatism, as distinct f r o m traditionalism, normally connotes a disposition to arrest the t r a n s f o r m a t i o n of organizational revolutions into social revolutions or shifts in the class content of power. Typically, the managerial bourgeoisie, virtually b o r n (as a class) to authority, takes care to contain radicalism a n d maintain its position as the p r e d o m i n a n t class. Insecure as it is a n d not strongly c o m m i t t e d to liberal principles, this class has shown a m a r k e d disposition to take r e f u g e in various f o r m s of political m o n o p o l y , such as the o n e - p a r t y state a n d the "caesarist" military regime. Populist a n d socialist rhetoric may be " p o u r e d o n " to obscure a n d excuse this imposition of political m o n o p o l y . Normally, however, this kind of a r r a n g e m e n t serves to protect a n d consolidate the rule of the bourgeoisie. T o what extent does empirical evidence sustain the hypothesis of widespread class d o m i n a t i o n of the n o n i n d u s t r i a l countries by the managerial bourgeoisie, as herein d e f i n e d ? T h e evidence is not inconsiderable, a l t h o u g h Maurice Zeitlin has correctly n o t e d the p r e s e n t need f o r studies of " d o m i n a n t classes" in u n d e r d e v e l o p e d countries. 1:1 Regional studies would be especially valuable. In African studies, the hypothesis in question is s u p p o r t e d by a f o r m i d a b l e body of literature 4 4 ; in Asian studies, a few works on I n d i a a n d I r a n have c o r r o b o r a tive value 45 ; a n d in Latin American studies, evidence relating to Brazil is particularly relevant. 4 " It would not be correct to hold that the p r e s e n c e of a m a n a g e r i a l bourgeoisie as the d o m i n a n t class necessarily m e a n s that a given country will be receptive to capitalist principles of d e v e l o p m e n t . Anticapitalist—including Marxist—strategies of d e v e l o p m e n t may be chosen, as in the case of Tanzania. 4 7 T h u s far, however, the vast majority of such g o v e r n m e n t s have chosen to a d o p t mixed e c o n o m y strategies in

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c o n j u n c t i o n with various f o r m s of foreign investment. Increasingly, " p a r t n e r s h i p s " between state investment agencies a n d multinational c o r p o r a t i o n s serve to p r o m o t e the organizational revolution a n d , by extension, the class interests of the m a n a g e r i a l bourgeoisie. L e a d i n g m e m b e r s of the bourgeoisie are constantly t e m p t e d to imbibe the capitalistic a n d m a n a g e r i a l attitudes of their foreign business associates. Some of t h e m may aspire to careers in the wider business world. Given the obviously b o u r g e o i s life styles of individuals in this elite social s t r a t u m , they may be expected to e m b r a c e an elitist ideology. T h e i n f l u e n c e of international capitalism f u n c t i o n s to r e i n f o r c e imman e n t tendencies toward e m b o u r g e o i s m e n t of the state b u r e a u c r a t i c elite. N o o n e should a s s u m e that a policy of p a r t n e r s h i p with the agencies of international capitalism p o r t e n d s the a b a n d o n m e n t of nationalist principles o n the part of g o v e r n m e n t s in the n o n i n d u s t r i a l countries. It is the singular failing of many "radical," including Marxist, analyses of such countries to u n d e r e s t i m a t e the s t r e n g t h a n d historic i m p o r t a n c e of bourgeois class f o r m a t i o n as well as the nationalist integrity of that class. T o o o f t e n , the generic t e r m "bourgeoisie" is casually qualified with the c o n t e m p t u o u s adjective " c o m p r a d o r , " a synonym f o r " p u p p e t " — e n t i r e l y d e p e n d e n t a n d subservient.'" It is t h e r e b y suggested that the e m e r g e n t bourgeoisie is a "clientele" class that betrays the national interest of its own c o u n t r y to foreign capitalist powers. T h i s notion is f u n d a m e n t a l to the closely related doctrines of "dep e n d e n c y " a n d "neocolonialism."^' I n d e e d , these doctrines p u r p o r t to supply a theory of postcolonial d o m i n a t i o n that c a n n o t be derived f r o m the traditional economic theories of imperialism. B e h o l d e n as they a r e to Marxism, these doctrines are disabled, as is s t a n d a r d Marxism itself, by the i n a d e q u a t e conception of class u p o n which they a r e f o u n d e d . As Stanislaw Ossowski has observed, in his Marxist criticism of the Marxist conception of class, the relevant d e t e r m i n a n t s of class include relationships of the m e a n s of p r o d u c t i o n , c o n s u m p t i o n , and compulsion. 5 0 Given its control over the m e a n s of c o n s u m p t i o n a n d compulsion, the m a n a g e r i a l bourgeoisie, as herein identified, m u s t b e c o m p r e h e n d e d , contrary to the doctrines of d e p e n d e n c y a n d neocolonialism, as an a u t o n o m o u s social f o r c e — t h e veritable r u l i n g class in most of those countries that c o m p r i s e the so-called " t h i r d world." T h e identity of this class becomes m o r e firmly established with each passing year. 51 Its a r d e n t desire f o r a u t o n o m y is unmistakable. A n d it yields to n o o t h e r class in the intensity of its nationalism. I n t e n s e nationalism o n the p a r t of the m a n a g e r i a l bourgeoisie poses a n historic challenge to the leaders of international capitalism. Will they be able to h a r m o n i z e their practices with the nationalistic val-

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ues of bourgeois governments in the newly developing countries? Only, we may answer, if it is in their perceived interest to d o so. A d a m Smith taught successive generations that business executives who pursue their own interests serve the general interest as well. T h e business creed comprehends this even more plausible corollary: One who serves another benefits oneself. Is it not logical to expect the subsidiaries of a multinational business g r o u p to harmonize their policies with the interests of various host governments insofar as they seek to survive and prosper in the host countries concerned? Corporate policies of precisely this nature are described in my study of multinational mining companies that operate in the several states of central and southern Africa. In particular, I have observed that South African and American controlled mining corporations domiciled in the Republic of Zambia complied faithfully with Zambian national policies of economic disengagement from the whiteruled states of southern Africa even before the Zambian Government acquired majority ownership of those companies in 1970. They did so at considerable cost to themselves and despite the fact that the Zambian policies in question were largely inconsistent with economic values and policies espoused by the directors of the parent companies in South Africa and the United States. On the other hand, these companies m a d e no a p p a r e n t concession to the Zambian point of view in implementing their policies of equally good corporate citizenship on the part of subsidiaries domiciled in other states, including the white-dominated states of southern Africa." 2 T h e s e observations suggest a corporate doctrine of domicile, meaning that individual subsidiaries of an international business g r o u p may operate in accordance with the requirements of divergent and conflicting policies pursued by the governments of their respective host states. Ultimately, the aim of local adaptation is to promote the interests of the enterprise as a whole. Meanwhile, the policy of good corporate citizenship will appeal to the leaders of newly developing host countries who would like to establish stable relationships with international business organizations. Positing a mutuality of interest, the doctrine of domicile justifies transnational corporate expansion while it also legitimizes large-scale foreign investments in the eyes of the host country. Furthermore, it c o m m a n d s subservience to the local authority of the managerial bourgeoisie. My formulation of the doctrine of domicile as a tenet of corporate ideology is based u p o n political and logistical evidence from a turbulent and, in many ways, atypical region. It will be tested again within that region by relations between the giant corporations and the newly independent, avowedly anticapitalist governments of Angola and

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Mozambique. In southern Africa, as elsewhere, it would be far more difficult to make out a prima facie case for compliance with host country interests at the expense of corporate g r o u p interests with evidence derived f r o m routine business practices. Having surveyed the "transfer pricing" practices, "cross subsidization" strategies, and sundry exploitative devices to which multinational enterprises normally resort, Barnet and Millier conclude that comprehensive regulatory policies by the governments of the capitalist states themselves will be required to discipline and humanize the global corporations. 5 ' Other commentators, more sympathetic to multinational enterprise, have discerned a greater capacity for the exercise of corporate statesmanship in the quest for policies that will satisfy transnational corporate managers and the nationalist governments of newly developing countries at one and the same time. 54 Joint ventures, involving the transfer of substantial, even majority, ownership to agencies of host states, have become increasingly familiar. Rarely do such schemes silence the cry of exploitation; nor do they settle the question of control, since minority owners may yet retain effective control of a given venture, while the reality of self-management by the host state is contingent upon many circumstances, including the attainment of technical competence in diverse fields. Nonetheless, joint ventures do facilitate the "revolution from above," and thereby help to produce the institutional conditions and climate of opinion that enhance the authority of the bourgeoisie and promote its growth as a class.

IV Within its sphere of control—specifically, a newly developing, nonindustrial, and nonsocialist country—the managerial bourgeoisie rises above a larger, normally far larger, national bourgeoisie, the diversity and extent of which depend mainly u p o n the size of the country and its level of economic development. In ef fect, the managerial bourgeoisie is the ruling stratum of the national bourgeoisie."' 5 Its distinctive identity as a subclass is manifest behaviorally in the collective actions and attitudes of its members. T h e action which, more than any other, sets this subclass apart f r o m the bourgeoisie as a whole is its tendency to coalesce with bourgeois elements at comparable levels of control in foreign countries. T o the extent that the doctrine of domicile becomes a maxim of corporate action, it helps to reconcile the staunch nationalism of the managerial bourgeoisie with the cosmopolitan values of bourgeois leaders abroad who have global interests and perspectives. Thus, it functions to promote transnational class cohesion.

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It may be enlightening to think of the worldwide corporate and managerial bourgeoisie as a class in formation that now comprises three overlapping entities, as shown in Figure 2.1. T h e corporate bourgeoisie, based mainly in the industrial capitalist countries, includes a corporate international segment. T h e managerial bourgeoisie of the newly developing, nonsocialist countries also overlaps with the corporate international bourgeoisie. These transnational extensions of, and linkages between, comparable segments of the bourgeoisie depend upon the creation and perfection of transnational institutions. T h e multinational corporation is probably the most effective institution for this purpose. It should, therefore, be analyzed and understood in terms of transnational class development. In this process, the Figure 2.1

Structure of the Worldwide Corporate and Managerial Bourgeoisies C O R P O R A T E INTERNATIONAL

CORPORATE

BOURGEOISIE

BOURGEOISIE

MANAGERIAL

METROPOLI

*

•

NEWLY DEVELOPING COUNTRY

BOURGEOISIE

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bourgeoisie, t r u e to its e p o c h - m a k i n g tradition, has taken the lead. C o r p o r a t e internationalism is a social m o v e m e n t a n d a rising class interest. With its a d v e n t as a m a j o r social force, the w o r k i n g classes of the world c o n f r o n t a c o r p o r a t e bourgeoisie in industrial capitalist countries, a n d a managerial bourgeoisie in newly d e v e l o p i n g countries. 56 W h e r e the transition of a given d e v e l o p i n g c o u n t r y to the stage of industrial capitalism is sustained, i n d i g e n o u s e l e m e n t s of the corporate bourgeoisie will e m e r g e . In the long r u n , if capitalism in that country is preserved, the c o r p o r a t e bourgeoisie may be expected to supersede the managerial bourgeoisie as the ruling class. T h i s essay presents a s h o r t - t e r m analysis. It draws attention to the coalescent relationship between two d o m i n a n t classes—the managerial bourgeoisie a n d the c o r p o r a t e international bourgeoisie. In so doing, it seeks to m a k e the hypothesis of transnational class f o r m a t i o n credible."' 7 Wars of redistribution between rival capitalist powers, specified by Lenin as the distinctive p r o d u c t of imperialism,' 1 " may yet d i s r u p t and abort the transnational evolution of the bourgeoisie. But that d a n g e r is c o u n t e r a c t e d by the e m e r g e n c e of the m a n a g e r i a l bourgeoisie as a cohesive r u l i n g class in newly developing countries in c o n j u n c t i o n with the growth a n d s p r e a d of multinational e n t e r p r i s e . Increasingly, p o w e r in world affairs comes to be organized in accordance with class r a t h e r than national interests a n d values. Imperialism, as a stage of capitalism, gives way to c o r p o r a t e international capitalism. We may anticipate severe ideological strain between the doctrinaire liberalism of the c o r p o r a t e bourgeoisie 5 9 a n d the paternalistic a u t h o r i t a r i a n i s m of the managerial bourgeoisie. However, t h e fate of the bourgeoisie— c o r p o r a t e a n d managerial—will probably be d e t e r m i n e d by domestic struggles, not by anti-imperialist struggles that pit i n s u r g e n t nations against foreign powers.

Notes I a m g r a t e f u l to Professor William T o r d o f f for m a n y valuable discussions a n d f o r his e v e r c o n s t r u c t i v e c r i t i c i s m s o f m y w o r k d u r i n g t h e t e r m o f m y a p p o i n t m e n t as S i m o n V i s i t i n g P r o f e s s o r at t h e V i c t o r i a U n i v e r s i t y o f M a n c h e s t e r , w h e r e this essay was w r i t t e n . A c k n o w l e d g m e n t s a r e d u e also to E d w a r d M e r r o w a n d M a r t i n J. S k l a r . 1. G r a n t M c C o n n e l l , Private K n o p f , 1 9 6 6 ) , p . 129.

Power and American

Democracy

(New York:

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33

2. Adolf A. Berle, J r . , The Twentieth Century Capitalist Revolution (New York: H a r c o u r t , Brace, 1954), p. 60; a n d Power Without Property (New York: H a r c o u r t , Brace, 1959), pp. 17-24. 3. Systems theorists, in particular, normally separate the economic a n d political spheres of life for analytical purposes. See, for example, David Easton, ,4 Framework for Political Analysis (Englewood Cliffs, NJ: Prentice-Hall, 1965), p. 60; Easton, A Systems Analysis of Political Life (New York: Wiley, 1965), pp. 2 1 23; a n d Karl W. Deutsch, The Nerves of Government (New York: Free Press, 1966), pp. 119—124. For an e x a m p l e of this bent in " g r o u p theory," see David B. T r u m a n , The Governmental Process, 2d ed. (New York: Knopf, 1971), pp. 257-260. 4. George E. G o r d o n Catlin, Systematic Politics ( T o r o n t o : University of T o r o n t o Press, 1962), pp. 34—38, 4 5 - 4 7 ; a n d Charles S. H y n e m a n ' s i m p o r t a n t d e f e n s e of the "power" a p p r o a c h to political science espoused by Catlin a n d H a r o l d D. Lasswell, in H y n e m a n , The Study of Politics ( U r b a n a : University of Illinois Press, 1959), pp. 142-150. 5. Adolf A. Berle, Jr. a n d G a r d i n e r C. Means, The Modern Corporation and Private Property, rev. ed. (New York: Macmillan, 1968). 6. T h e s e studies have been reviewed by Maurice Zeitlin, " C o r p o r a t e O w n e r s h i p a n d Control: T h e Large C o r p o r a t i o n a n d the Capitalist Class," American Journal of Sociology 79, 5 (1974): 1073—1 119 (see p. 1084). A vigorous d e b a t e persists on the issue of m a n a g e m e n t - versus owner-control of large American corporations. See the e x c h a n g e between Michael Patrick Allen a n d Zeitlin in American Journal of Sociology 81, 4 (1976):885-903. 7. James B u r n h a m , The Managerial Revolution, new ed. (Bloomington: Midland Books, Indiana University Press, 1960); note esp. the author's p r e f a c e to this edition. 8. H . H . Gerth a n d C. Wright Mills, "A Marx for Managers," Ethics 52, 3 (1942):200-215. Franz L. N e u m a n n , a leading political scientist in the Marxist tradition, held that in capitalist societies economic power is translated "into social p o w e r and thence into political power." H e d o u b t e d the alleged shift of political power f r o m social g r o u p s to bureaucracies; he also distinguished bureaucratic behavior f r o m class action. N e u m a n n , " A p p r o a c h e s to the Study of Political Power," Political Science Quarterly 65, 2 (1950): 161-180. O n the "problem of bureaucracy" in Marxist social t h o u g h t , see Daniel Bell, The Coming of Post-Industrial Society (New York: Basic Books, 1973), pp. 8 0 - 9 9 . 9. T h e theoretical basis for this view is Stanislaw Ossowski's exposition of "synthetic gradation" in his Class Structure in the Social Consciousness, trans. Sheila Patterson (New York: Free Press, 1963), pp. 4 4 - 5 7 . Representative statements include L e o n a r d Reissman, Class in American Society (Glencoe, IL: Free Press, 1960), p p . 2 1 7 - 2 1 8 ; a n d Zeitlin, " C o r p o r a t e O w n e r s h i p , " p p . 1078—1079. For an alternative view, see G e r h a r d Lenski, Power and Prestige (New York: McGraw-Hill, 1966), pp. 3 5 2 - 3 6 1 . 10. A n d r e w Hacker, "Politics a n d the C o r p o r a t i o n , " in Hacker (ed.), The Corporation Take-Over (New York: H a r p e r & Row, 1964), pp. 2 3 9 - 2 6 2 . T h e similarly baleful and convincing portrait of recruits to the managerial vocation

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d r a w n by William H. W h y t e , J r . , The Organization Man (New York: Simon & Schuster, 1956), should also be cited. 11. My own a p p r e c i a t i o n of t h e n e e d f o r political studies of t h e business c o r p o r a t i o n derives f r o m t h e inspired t e a c h i n g of Professor H . H . Wilson at Princeton University in t h e mid-1950s. A m o n g t h e p i o n e e r i n g analyses of corp o r a t e p o w e r by political scientists a n d sociologists, two a r e particularly n o t e w o r t h y : C. W r i g h t Mills, The Power Elite (New York: O x f o r d University Press, 1956); a n d Earl L a t h a m , " T h e Body Politic of t h e C o r p o r a t i o n , " in Edw a r d S. Mason (ed.), The Corporation in Modern Society ( C a m b r i d g e : H a r v a r d University Press, 1959), p p . 2 1 8 - 2 3 6 . The relevant literature has been reviewed by Edwin M. Epstein, The Corporation in American Politics (Englewood Cliffs, NJ: Prentice-Hall, 1969). M o r e r e c e n t studies of particular significance include Richard J. B a r b e r , 'The American Corporation (New York: D u t t o n , 1970); a n d K a r e n O r r e n , Corporate Power and Social Change (Baltimore: Johns H o p k i n s University Press, 1974). 12. Peter B a c h r a c h , The Theoiy of Democratic Elitism (Boston: Little, B r o w n , 1967), p p . 102-105. 13. J o s e p h A. S c h u m p e t e r , Capitalism, Socialism, and Democracy, 2d ed. (New York: H a r p e r & Row, 1947), pp. 269-273, 283. 14. T h i s a p p e a r s to be t h e main basis of Berle's p r e f e r e n c e f o r the American c o r p o r a t e svstem to the Soviet system; see Berle, Power Without Property, p p . 141-158. Similarly, R a y m o n d V e r n o n , a f o r e m o s t authority on multinational e n t e r p r i s e , has d e c l a r e d : " T h e challenge in social organization is to ens u r e that t h e large units on which o u r f u t u r e societies a r e likely to be based act as c o u n t e r v a i l i n g political powers, not as mutually r e i n f o r c i n g ones." See his Sovereignty at Bay (New York: Basic Books, 1971), p. 273. 15. Richard J. B a r n e t a n d Ronald E. Miiller, Global Reach (New York: S i m o n & Schuster, 1974). 16. His original t e r m f o r this e l e m e n t is t h e " t e c h n o s t r u c t u r e . " Efficiency of o p e r a t i o n , h e c o n t e n d s , d e p e n d s u p o n t h e c o n g r u e n c e of c o r p o r a t e a n d social goals with t h e personal values of most individual m e m b e r s of t h e technos t r u c t u r e a c c o r d i n g to t h e "principle of consistency." J o h n K e n n e t h Galbraith, The New Industrial State (Boston: H o u g h t o n Mifflin, 1967), p p . 1 6 9 - 1 8 8 . 17. H o w a r d V. P e r l m u t t e r , " T h e T o r t u o u s Evolution of t h e Multinational C o r p o r a t i o n , " in C o u r t n e y C. B r o w n (ed.), World Business: Promise and Problems (New York: Macmillan, 1970), p p . 6 6 - 8 2 (see p p . 8 1 - 8 2 ) . 18. T h e s e criteria a r e d e r i v e d f r o m t h e following works, which m e n t i o n all of t h e m , b u t vary in their e m p h a s e s : J a c k N. B e h r m a n , National Interests and the Multinational Enterprise (Englewood Cliffs, NJ: Prentice-Hall, 1970), p p . I— 2; J o h n H . D u n n i n g , " T h e Multinational E n t e r p r i s e : T h e B a c k g r o u n d , " in D u n n i n g (ed.), The Multinational Enterprise ( L o n d o n : Allen & U n w i n , 1971), p p . 1 5 ^ 8 (see p p . 16-17); V e r n o n , Sovereignty at Bay, p. 4; a n d Isaiah A. Litvak a n d C h r i s t o p h e r J . Maule, " T h e Multinational F i r m : S o m e Perspectives," in Gilles P a q u e t (ed.), The Multinational Firm and the Nation State (Don Mills, O n t . : Collier-Macmillan, 1972), p. 22. S a m u e l P. H u n t i n g t o n c o n t e n d s that " t r a n s n a tional c o r p o r a t i o n " is a m o r e suitable t e r m f o r t h e business o r g a n i z a t i o n with these characteristics. His clarifying d e f i n i t i o n s of " t r a n s n a t i o n a l , " " i n t e r n a -

CI.ASS ANALYSIS OK MULTINATIONAL CORPORATE EXPANSION

tional," a n d " m u l t i n a t i o n a l " organizations should be consulted; see H u n t i n g ton, " Transnational O r g a n i z a t i o n s in World Politics," World Politics 25, 3 ( 1 9 7 3 ) : 3 3 3 - 3 6 8 (esp. p. 336). B a r n e t a n d Müller, Global Reach, pp. 17-18, prefer to use the t e r m "global c o r p o r a t i o n . " 19. Paul M. Sweezy a n d H a r r y M a g d o f f , "Notes o n the Multinational Corporation," Monthly Review 21, 5 (1969): 1 - 1 3 a n d 21, 6 (1969): 1 - 1 3 (quoted f r o m 5:9 a n d 6:13). O n e way f o r t h e polemicist to live with an a w k w a r d p h r a s e that has " c a u g h t o n " is to d e f i n e it so that it suits an a p p r o v e d p u r p o s e . " T h i r d world" is a case in point. T h i s t e r m has been provocatively (and to my m i n d sensibly) d e f i n e d by Marxist-Leninists f o r partisan p u r p o s e s to designate "that large a n d in m a n y ways diverse collection of colonies, semi-colonies, a n d neocolonies which f o r m t h e base of t h e global capitalist p y r a m i d [ibid., 5:2—3]." 20. S t e p h e n H v m e r , " The Multinational C o r p o r a t i o n and the Law of Uneven D e v e l o p m e n t , " in J a d g i s h N. Rhagwati (ed.), Economics and World Order from the 1970s to the 1990s (New York: Macmillan, 1971), pp. I 13-140. 21. A l t h o u g h H y m e r ' s s t a n d p o i n t is avowedly Marxist, his thesis on corp o r a t e organization a n d t h e location of subsidiaries is derived f r o m n o n Marxist sources and implies an u n - M a r x i a n organizational d e t e r m i n i s m . Similar views a r e set f o r t h in two significant essay s: N o r m a n Gii van, "Multinational C o r p o r a t i o n s a n d D e p e n d e n t D e v e l o p m e n t in Mineral Export Economies," Social and Economic Studies 19, 4 ( 1 9 7 0 ) : 4 9 0 - 5 2 6 ; a n d J o h a n Gallung, "A Structural Theory of Imperialism," Journal oj Peace Research 8, 2 (197 1 ):8 1 - 1 1 7. 22. See t h e excellent s u m m a t i o n of this view by Michael B a r r a t t - B r o w n , The Economics of Imperialism ( H a r m o n d s v v o r t h , Eng.: P e n g u i n Books, 1974), pp. 201-255. 23. See t h e analyses of this outlook by B e r n a r d Semmel, Imperialism and Social Reform ( C a m b r i d g e : H a r v a r d University Press, I960), p p . 53—72; a n d by Richard K o e b n e r a n d H e l m u t Dan S c h m i d t , Imperialism: The Story and Significance oj a Political Word, 1840-1960 ( C a m b r i d g e : C a m b r i d g e University Press, 1964), pp. 166—220. See also the dispassionate survey of benefits a n d costs by John Plamenatz, On Alien Rule and Self-Government ( L o n d o n : L o n g m a n s , 1960). 24. J o h n A. H o b s o n , Imperialism: A Study, rev. e d . ( L o n d o n : Allen 8c Unwin, 1938). Also see B e r n a r d Semmel's keen s u m m a t i o n of " t h e H o b s o n S c h u m p e t e r t h e o r y , " in his The Rise of Free Trade Imperialism ( C a m b r i d g e : C a m bridge University Press, 1970), pp. 2 2 2 - 2 2 6 . 25. B a r n e t a n d Müller, Global Reach; see their c h a p t e r s entitled, " T h e Latinamericanization of t h e United States," a n d " T h e Obsolescence of A m e r i can L a b o r . " See also t h e t r e n c h a n t critique of A m e r i c a n foreign investment as an alternative to domestic investment a n d f o r e i g n t r a d e , written to clarify " t h e American national interest," in Robert Gilpin, U.S. Power and the Multinational Corporation (New York: Basic Books, 1975). 26. T h e following s t a t e m e n t s e x e m p l i f y these o p p o s i n g positions. T h e case f o r exploitation is a r g u e d f r o m a Marxist s t a n d p o i n t by B a r r a t t - B r o w n , Economics of Imperialism; a n d f r o m a n o n - M a r x i s t s t a n d p o i n t by Ronald E. Müller, " T h e Multinational C o r p o r a t i o n a n d t h e U n d e r d e v e l o p m e n t of t h e T h i r d W o r l d , " in Charles K. W i l b u r (ed.), The Political Economy of Development and Underdevelopment (New York: R a n d o m H o u s e , 1973), p p . 124—151. T h e case

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against exploitation is p u t by Peter F. D r u c k e r , "Multinationals a n d D e v e l o p i n g C o u n t r i e s : Myths a n d Realities," Foreign Affairs 53, 1 ( 1974): 1 2 1 - 1 3 4 ; a n d by Mira Wilkins, w h o p r e s e n t s a succinct s u m m a r y of t h e positive effects of U.S. direct investment in less d e v e l o p e d countries, in h e r The Maturing of Multinational Enterprise ( C a m b r i d g e : H a r v a r d University Press, 1974), pp. 398—401. See also t h e caref ully balanced assessments by R a y m o n d F. Mikesell, "Conflict in Foreign I n v e s t o r - H o s t C o u n t r y Relations: A Preliminary Analysis," in Mikesell et al., Foreign Investment in the Petroleum and Mineral Industries (Baltim o r e : J o h n s H o p k i n s University Press, 1971), p p . 2 9 - 5 5 ; Paul Streeten, "Costs a n d Benefits of Multinational Enterprises," in D u n n i n g (ed.), The Multinational Enterprise, (fn. 19), p p . 240—258; a n d V e r n o n , Sovereignty at Bay. 27. T h e recent doctrines of d e p e n d e n c y a n d neocolonialism are a d d r e s s e d to this p r o b l e m . T h e y will be c o m m e n t e d u p o n at a m o r e relevant point in this essay. 28. I place t h e word "economic" in q u o t e s because I take "imperialism" to be a political c o n c e p t i o n , implying t h e d o m i n a t i o n of o n e people, n a t i o n , o r c o u n t r y by a n o t h e r . (I think that J o h n Strachey's d e f i n i t i o n is s o u n d ; see his The End of Empire [New York: R a n d o m H o u s e , ] 960], pp. 7 - 8 , 3 1 9 - 3 4 2 . ) T h i s may be ef f e c t u a t e d by various means, i n c l u d i n g buying, selling, a n d l e n d i n g , as well as by coercion a n d i n f l u e n c e . T o my m i n d , t h e institutions involved in these processes a r e "political," as is t h e resulting r e l a t i o n s h i p a m o n g p e o p l e s . See also B e n j a m i n J . C o h e n , The Question of Imperialism (New York: Basic Books, 1973), p p . 15-1 fi. 29. B a r n e t a n d Müller, Global Reach, pp. 246, 294, 458. 30. B u r n h a m , Managerial Revolution, p. vi. 31. Leon T r o t s k y , The Revolution Betrayed, trans. Max Eastman ( C a r d e n City, NY: D o u b l e d a y , 1937). 32. Milovan Djilas, The New Class (New York: P r a e g e r , 1957). 33. H e r b e r t Marcuse, Soviet Marxism (New York: R a n d o m H o u s e , 1961). 34. Paul M. Sweezy a n d C h a r l e s Bettelheim, On the Transition to Socialism (New York: Monthly Review Press, 1971), p. 43. See also Sweezy's a p p r e c i a t i v e discussion of Bettelheim's r e c e n t book a b o u t class s t r u g g l e in t h e Soviet U n i o n : Sweezy, " T h e N a t u r e of Soviet Society," Monthly Review 26, 11 (1974): 1 - 1 6; a n d 27, 1 (1975): 1—15. T h e e x t r a p o l a t i o n of class relationships f r o m t h e situation of b u r e a u c r a t i c control is, at best, tangential to t h e Marxist tradition of class analysis. Its theoretical basis is Ralf D a h r e n d o r f s d o c t r i n e to t h e e f f e c t that class relationships a r e essentially relationships of a u t h o r i t y r a t h e r t h a n of p r o p e r t y ; see his Class and Class Conflict in Industrial Society ( S t a n f o r d , CA: S t a n f o r d University Press, 1959), p p . 137, 165. 35. R e n é D u m o n t , False Start in Africa, 2d ed., rev., trans. Phyllis N a u t s O t t (New York: P r a e g e r , 1969), p. 81; also F r a n t z F a n o n , The Wretched of the Earth, trans. C o n s t a n c e F a r r i n g t o n (New York: G r o v e Press, 1963), p. 179. 36. For e x a m p l e , Ian Clegg, Workers' Self-Management in Algeria ( N e w York: Monthly Review Press, 1971). A study of similar i m p o r t is C l a u d e Meillassoux, "A Class Analysis of t h e B u r e a u c r a t i c Process in Mali,"yowma/ of Development Studies 6, 2 ( 1 9 7 0 ) : 9 7 - 1 1 0 . 37. I classify a c o u n t r y as industrial if a large p a r t of its p o p u l a t i o n — w e l l over half—is e n g a g e d in o c c u p a t i o n s that d e p e n d u p o n a n o n h u m a n a n d n o -

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nanimal power-driven machine technology. T h e basic measures of industrialization include the following: per capita consumption of standard energy units; percentage of labor force employed outside of agriculture; and possession of an engineering capacity to produce tool-making tools. According to these criteiia, countries like India and Brazil are classified as nonindustriai despite the large industrial sectors of their economies. Most Indians and Brazilians do not live and work within the industrial sectors of their countries. Among nonindustriai countries, the range of difference between the least industrialized and those that are considered to be entering the industrial stage is immense. 38. This passage is partly derived from Richard L. Sklar, Corporate Power in an African Slate (Berkeley and Los Angeles: University of California Press, 1975), p. 199, where these ideas are substantiated by a case study. See also Martin Kilson's interesting perspective on the "emergent African bourgeoisie" in his "African Political Change and the Modernization Process, "Journal of Modern African Studies 1, 4 (1963):425-440 (esp. p. 439). 39. C.B. Macpherson, The Real World of Democracy (London: O x f o r d University Press, 1966). 40. See G u n n a r Myrdal, Asian Drama (New York: Pantheon, Random House, 1968), v. 1, pp. 49-69. 41. Cf. Harold D. Lasswell and Abraham Kaplan, Power and Society (New Haven: Yale University Press, 1950), pp. 272-273. 42. Two classic expositions of this idea are Karl Marx, The Eighteenth Brumaire of Louis Bonaparte (New York: International Publishers, 1963) (Marx did not like the analogy between nineteenth century bonapartism and classical caesarism); and Fanon, Wretched of the Earth, pp. 148-205. See the keen comparison of Marx and Fanon with reference to this matter in Colin Leys, Underdevelopment in Kenya (Berkeley and Los Angeles: University of California Press, 1974), pp. 2 0 7 - 212. 43. Zeitlin, "Corporate Ownership," p. 1112. 44. Evidence pertaining to class relationships between the party political, state bureaucratic, and entrepreneurial leaders of Nigeria has been summarized by Richard L. Sklar and C.S. Whitaker, Jr., " T h e Federal Republic of Nigeria," in Gwendolen M. Carter (ed.), National Unity and Regionalism in Eight African States (Ithaca, NY: Cornell University Press, 1966), pp. 7 - 1 5 0 (see pp. 27-30, 65-67, and 110-115). See also Richard L. Sklar, Nigerian Political Parties (Princeton: Princeton University Press, 1970); and Sayre P. Schatz, Nigerian Capitalism (Berkeley and Los Angeles: University of California Press, 1977). For a penetrating class analysis of Ethiopian politics, see J o h n Markakis, Ethiopia: Anatomy of a Traditional Polity (Oxford: O x f o r d University Press, 1974). Comparable studies of other African countries include Leys, Underdevelopment in Kenya; Michael F. Lofchie, " T h e Political Origins of the Uganda Coup," Journal of African Studies 1, 4 (1974):464-496; Robert Moltenoand William T o r d o f f , " I n d e p e n d e n t Zambia: Achievements and Prospects," in William T o r d o f f (ed.), Politics in Zambia (Berkeley and Los Angeles: University of California Press, 1974), pp. 363-401; Sklar, Corporate Power, pp. 192-216; the convincing thesis on "caesarist bureaucracy" in Zaire by Jean-Claude Williame, Patrimonialism and Political Change in the Congo (Stanford, CA: Stanford University Press, 1972); Meillassoux, "A Class Analysis of the Bureaucratic Process in

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Mali"; C l e g g , Workers' Self-Management; G é r a r d C h a l i a n d a n d J u l i e t t e Minces, L'Algérie indépendante (Paris: M a s p e r o , 1972); M a n f r e d H a l p e r n , The Politics of Social Change in the Middle East and North Africa ( P r i n c e t o n : P r i n c e t o n Universitv Press, 1963), p p . 5 1 - 7 8 ; a n d A n o u a r A b d e l - M a l e k , Egypt: Military Society, t r a n s . C.L. M a r k m a n ( N e w Y o r k : R a n d o m H o u s e , 1968). T h e s e r e f e r e n c e s a r e limited to i n t e n s i v e s t u d i e s r e l e v a n t to my i d e n t i f i c a t i o n of t h e b o u r g e o i s i e as t h e d o m i n a n t class. T h e r e is also a n e x t e n s i v e l i t e r a t u r e of c o m m e n t a r y u p o n a n d s p e c u l a t i o n a b o u t class c o n f l i c t in A f r i c a , b u t it is n o t especially r e l e v a n t to t h e a r g u m e n t of this essay. 45. O n t h e c o m m i t m e n t of t h e b o u r g e o i s i e to "state c a p i t a l i s m " in I n d i a , see C h a r l e s B e t t e l h e i m , India Independent, t r a n s . W . A . Caswell ( N e w York: M o n t h l y Review Press, 1969). Similarly, Michael K i d r o n m a i n t a i n s t h a t t h e r u l e of t h e I n d i a n b o u r g e o i s i e is c o n s o l i d a t e d by m u t u a l l y s u p p o r t i v e relationships a m o n g t h e state sector, f o r e i g n e n t e r p r i s e , a n d d o m e s t i c p r i v a t e e n t e r prise; see his Foreign Imiestments in India ( L o n d o n : O x f o r d U n i v e r s i t y Press, 1965). J a m e s Bill's class analysis of I r a n , The Politics uf Iran ( C o l u m b u s , O H : Merrill, 1972), s h o u l d b e n o t e d . See also his s u g g e s t i v e essay, "Class Analysis a n d t h e Dialectics of M o d e r n i z a t i o n in t h e M i d d l e East," International Journal of Middle East Studies 3 , 4 ( 1 9 7 2 ) : 4 1 7 - 4 3 4 . M a r v i n Z o m s . The Political Elite of Iran ( P r i n c e t o n : P r i n c e t o n U n i v e r s i t y Press, 1971), is also r e l e v a n t . 46. O n t h e political a n d social i m p l i c a t i o n s of m u l t i n a t i o n a l e n t e r p r i s e as t h e p r e d o m i n a n t i n d u s t r i a l f o r c e in Brazil's e c o n o m y , see F e r n a n d o H e n r i q u e C a r d o s o , " A s s o c i a t e d - D e p e n d e n t D e v e l o p m e n t : T h e o r e t i c a l a n d Practical I m plications," in A l f r e d S t e p a n (ed.), Authoritarian Brazil ( N e w H a v e n : Yale University Press, 1973), p p . 1 4 2 - 1 7 6 . O f t h e t w e n t y largest e n t e r p r i s e s in Brazil, r a n k e d a c c o r d i n g to t h e values of t h e i r assets, f o u r t e e n a r e s t a t e - c o n t r o l l e d , five a r e c o n t r o l l e d by m u l t i n a t i o n a l c o r p o r a t i o n s , a n d o n e by Brazilian p r i v a t e i n v e s t o r s (Expresso [Lisbon], 7 J u n e 1975). V e r n o n cites i m p r e s s i v e statistics o n t h e h e a v y r e c r u i t m e n t of local m a n a g e r s by U . S . - o w n e d c o r p o r a t i o n s in Brazil a n d e l s e w h e r e in Sovereignty at Bay, p. 149. 4 7 . T h e c o n t i n u i n g a t t e m p t by n o n c o m m u n i s t l e a d e r s to build socialism in T a n z a n i a h a s b e e n extensively s t u d i e d . Michael F. L o f c h i e h a s a n a l y z e d t h e l e a d i n g issues t h a t a r i s e in several s u c h studies, in his " A g r a r i a n Socialism in t h e T h i r d W o r l d : T h e T a n z a n i a n C a s e , " Comparative Politics 8, 4 ( 1976):479— 4 9 9 . See also R e g i n a l d H e r b o l d G r e e n , "Political I n d e p e n d e n c e a n d t h e N a tional E c o n o m y : A n Essay o n t h e Political E c o n o m y of D e c o l o n i s a t i o n , " in C h r i s t o p h e r Allen a n d R . W . J o h n s o n (eds.), African Perspectives ( C a m b r i d g e : C a m b r i d g e U n i v e r s i t y Press, 1970), p p . 2 7 3 - 3 2 4 ; J o h n S. S a u l , " A f r i c a n Socialism in O n e C o u n t r y : T a n z a n i a , " in G i o v a n n i A r r i g h i a n d J o h n S. Saul (eds.), Essays on the Political Economy of Africa ( N e w Y o r k : M o n t h l y Review Press, 1973), p p . 2 3 7 - 3 3 5 ; a n d Issa G. Shivji et al., The Silent Class Struggle ( D a r es S a l a a m : T a n z a n i a P u b l i s h i n g H o u s e , 1973). 4 8 . A locus classicus is Paul A. B a r a n , The Political Economy of Growth ( N e w Y o r k : M o n t h l y Review Press, 1957), p p . 194-196. A c h a r a c t e r i s t i c e x a m p l e o f t h e g e n r e is A n d r é G u n d e r F r a n k , Lumpenbourgeoisie: Lumpendevelopment: Dependence, Class, and Politics in Latin America, t r a n s . M a r i o n Davis B e r d e c i o ( N e w Y o r k : M o n t h l y Review Press, 1973); also S a m i r A m i n , Accumulation on a World

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Scale, trans. Brian Pearce (New York: Monthly Review Press, 1974), pp. 2 0 - 2 5 , 359-394. 49. For an incisive discussion of neocolonialism that is nonetheless sympathetic to the idea itself, see Barratt-Brown, Economics of Imperialism, pp. 256— 284. For a c o m p a r a b l e discussion of the d e p e n d e n c y doctrine, see Susanne B o d e n h e i m e r , " D e p e n d e n c y a n d Imperialism: T h e Roots of Latin American U n d e r d e v e l o p m e n t , " in K.T. F a n n a n d Donald C. H o d g e s (eds.), Readings in U.S. Imperialism (Boston: Porter Sargent, 1971), pp. 155-181. T h e Chilean origins of this doctrine a n d certain of its conceptual weaknesses are shown by T h e o d o r e H. Moran, Multinational Corporations and the Politics of Dependence (Princeton: Princeton University Press, 1974). Aspects of the " d e p e n d e n c y " thesis are specifically tested by Charles T . Goodsell, American Corporations and Peruvian Politics (Cambridge: H a r v a r d University Press, 1974). For a realistic appraisal of capitalist d e v e l o p m e n t in "third world" countries—one that rebuts a basic tenet of the s t a n d a r d d e p e n d e n c y thesis f r o m a Marxist standpoint—see Bill W a r r e n , "Imperialism and Capitalist Industrialization," New Left Review, 81 (1973): 3—44. For an incisively critical appraisal of the d e p e n d e n c y doctrine, see C o h e n , The Question of Imperialism, pp. 189-227. 50. Ossowski, Class Structure, pp. 185—186. 51. In an earlier study, mainly c o n c e r n e d with the political implications of class formation in Nigeria, I used the descriptive term "new a n d rising class," d e f i n e d with r e f e r e n c e to f o u r objective criteria—high status occupation, high income, s u p e r i o r education, a n d o w n e r s h i p or control of business e n t e r p r i s e — and linked with reality by means of behavioral evidence of class action a n d incipient class consciousness. See Sklar, Nigerian Political Parties, pp. 474—505. Subsequently, I a d o p t e d the term "political class," as p r o p o s e d by G a e t a n o Mosca, to designate those persons who control the d o m i n a n t institutions of society, in my "Contradictions in the Nigerian Political System "Journal of Modern African Studies 3, 2 ( 1 9 6 5 ) : 2 0 1 - 2 1 3 (see pp. 203-204). For the reasons given in this essay a n d in Sklar, Corporate Power, pp. 198—209,1 now think that "managerial bourgeoisie" is the most a p p r o p r i a t e term for the m o d e r n ruling class of a nonindustrial and newly developing but nonsocialist country. 52. Sklar, Corporate Power, pp. 144-148, 164-178, 182-188. 53. B a r n e t a n d Müller, Global Reach, pp. 3 6 3 - 3 8 8 . 54. V e r n o n , Sovereignty at Bay, pp. 265—270; Mikesell, "Conflict in Foreign Investor-Host C o u n t r y Relations," pp. 48—51. 55. This generalization should be qualified with r e f e r e n c e to Zeitlin's call for the study of d o m i n a n t classes in u n d e r d e v e l o p e d countries (fn. 43). My sketch of a m a j o r p a t t e r n f o r ruling class d e v e l o p m e n t in nonindustrial countries must be read with the realization that every country has its own mix of bureaucratic, e n t r e p r e n e u r i a l , a n d traditionally oligarchic elements. 56. In socialist countries, the working class may well c o n f r o n t a "state bourgeoisie," as Bettelheim c o n t e n d s (fn. 34). Similarly, I m m a n u e l Wallerstein argues that, in effect if not in f o r m , t h e r e is but o n e world economic system which will remain essentially capitalistic until it is t r a n s f o r m e d as a whole. See Wallerstein, " D e p e n d e n c e in an I n t e r d e p e n d e n t World: T h e Limited Possibilities of T r a n s f o r m a t i o n within the Capitalist World Economy," African

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Studies Review 17, 1 (1974): 1 - 2 6 ; " T r e n d s in W o r l d Capitalism," Monthly Review 26, 5 (1974): 1 2 - 1 8 ; a n d " T h e Rise a n d F u t u r e Demise of t h e World Capitalist System: C o n c e p t s f o r C o m p a r a t i v e Analysis," Comparative Studies in Society and History 16, 4 (1974):387—415. 57. See also t h e suggestive c o m m e n t s by Irving Louis Horowitz, "Capitalism, C o m m u n i s m , a n d Multinationalism," in A b d u l A. Said a n d Luiz R. S i m m o n s (eds.), The Neu> Sovereigns: Multinational Corporations as World Powers (Englewood Cliffs, NJ: Prentice-Hall, 1975), p p . 1 2 0 - 1 3 8 (esp. p p . 123, 129-130). 58. See V.l. Lenin's rebuttal of Karl Kautsky's thesis of interimperialist c o o p e r a t i o n , Imperialism, the Highest Stage of Capitalism (New York: I n t e r n a tional Publishers, 1939), p p . 88—98. A p o r t i o n of Kautsky's provocative article of 1914 has been r e p u b l i s h e d in Neu' Left Review, 59 ( 1 9 7 0 ) : 4 1 - 4 6 . The cont e m p o r a r y relevance of this d e b a t e has been noted by Richard J . B a r n e t , Roots oj War (New York: A t h e n e u m , 1972), p. 229; a n d by B a r r a t t - B r o w n , Economics of Imperialism, pp. 323—325. 59. O n the ideology of c o r p o r a t e liberalism in t h e United States, see J a m e s Weinstein, The (Corporate Ideal in the Liberal State, 1900-1918 (Boston: Beacon Press, 1968); a n d Martin J. Sklar, " W o o d r o w Wilson a n d t h e Political Economy of M o d e r n United States Liberalism," in James Weinstein a n d David W. Eakins (eds.), For a New America (New York: R a n d o m House, 1970), p p . 4 6 100.

C H A P T E R

T H R E E

Development, Democracy, and Dependency in Latin America: A Postimperialist View DAVID G. BECKER D e v e l o p m e n t , today, is n o longer taken to be s y n o n y m o u s with aggregate e c o n o m i c growth. Most of us now acknowledge that the word signifies p r o g r e s s toward desired goals, h e n c e is not value-free. It is entirely a p p r o p r i a t e , then, that we think of those values in progressive, humanistic terms, with the result that the concept of d e v e l o p m e n t comes to m e a n an i m p r o v e m e n t in the quality of life a n d an enlargem e n t of the ambit of h u m a n f r e e d o m . As j u d g e d by the p r o n o u n c e m e n t s of g o v e r n m e n t s , opposition m o v e m e n t s , a n d professional stud e n t s of d e v e l o p m e n t , a g r e e m e n t on this point is widespread. O n c e d e v e l o p m e n t has been so conceived, we can d e d u c e that it is a multifaceted process e m b r a c i n g industrialization, equitable distribution of societal goods, a n d democracy. Industrialization d e n o t e s the systematic application a n d innovation of labor-saving technology in the p r o d u c t i v e process, t o g e t h e r with the implantation of social relations of p r o d u c t i o n that s p u r technology utilization. Industrialization must be c o u p l e d to an equitable scheme of distribution in o r d e r f o r people to be f r e e d of the compulsion of having ceaselessly to labor f o r their subsistence. Clearly, t h e r e is n o f r e e d o m without democracy. At a minim u m , d e m o c r a c y consists in the accountability of the g o v e r n i n g authority to t h e p e o p l e at large; in a m o r e substantive vein, it includes the right of participation in the m a k i n g of decisions that are authoritatively b i n d i n g o n t h e collectivity. A l t h o u g h the m a t t e r can be d e b a t e d , in my view d e m o c r a c y is not fully realized until all a d u l t citizens enjoy both a right of f o r m a l political participation a n d a right to associate freely, without t h e application of any ideological test, f o r nonviolent political purposes. Industrialization a n d distributional equity pertain to the material An earlier version of this paper appeared in Third (1984):411—431. Reprinted with permission. 41

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(economic) aspect of d e v e l o p m e n t . T h e r e is also an i n t e r d e p e n d e n t but conceptually distinct political aspect, consisting in "the i m p r o v e m e n t of a society's ability to control the rate a n d direction of c h a n g e " a n d entailing "the ability to f o r m u l a t e a n d i m p l e m e n t strategies f o r solving problems a n d achieving goals." 1 An awareness that d e v e l o p m e n t has a political aspect directs o u r attention to issues of power a n d control. T h e y are a m e n a b l e to a class analysis.

Capitalism a n d Democracy From a d e v e l o p m e n t a l perspective, a s u p e r i o r political o r d e r would presumably be what a p p e a r e d in the lexicography (but not in the practice) of Peru's "revolutionary" military r e g i m e (1968—80) as democracia social de participación plena: fully participatory social democracy. (In a social democracy, egalitarian public control of the institutions r e s p o n sible f o r economic growth assures that industrialization will proceed in a climate of distributional equity.) P e r h a p s a selfless, farsighted leadership, o p e r a t i n g within a social space left o p e n by an absence of intense, institutionalized class conflict, could design and i m p l e m e n t such a political o r d e r . Richard L. Sklar believes that in parts of Af rica the opp o r t u n i t y to d o so is t h e r e f o r the taking.- In Latin America, however, n o such o p p o r t u n i t y currently exists or is likely soon to present itself : class structures a n d institutions e m b o d y i n g t h e m , in all cases the p r o d ucts of lengthy sequences of historical evolution, are everywhere Firmly e m b e d d e d t h r o u g h o u t the social o r d e r . C u b a a n d Nicaragua aside, the Latin A m e r i c a n reality is o n e of solidly established capitalism tightly linked to the world economy. But "established" must not be r e a d as "static." Latin A m e r i c a n capitalism, like the international capitalism that helps s h a p e it, is a d y n a m i c o r d e r a n d has been u n d e r g o i n g m a j o r c h a n g e s f o r m a n y years. T h e n a t u r e a n d probable n e a r - t e r m c o u r s e of its p r e s e n t stage—"late" or "organizational" oligopoly capitalism—are of central concern to the analyst. Capitalism can in principle be compatible with both industrialization a n d democracy. T o be sure, capitalist democracy fails fully to g u a r a n t e e f r e e d o m ; for, in d e f i n i n g as nonpolitical key structures a n d institutions of economic p o w e r , it places t h e m arbitrarily b e y o n d t h e reach of d e m o c r a t i c n o r m s a n d , thereby, enables t h e m to go o n f u n c tioning as m e c h a n i s m s of d o m i n a t i o n , exploitation, a n d accumulation of class privilege. Nevertheless, late-capitalist democracy provides institutionally f o r some political control of economic life; the r i g h t of political association, meanwhile, allows elements of the s u b o r d i n a t e classes to acquire a u t o c h t h o n o u s l y a capacity f o r self-definition a n d p u r s u i t of their class interests. T h e i r e f f o r t s can bear f r u i t when they

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are limited to issues of i m m e d i a t e c o n c e r n . T h e reason is that a bourgeoisie whose social control is secure has m u c h to gain—inter alia, social peace a n d stability—from respecting the i n d i g e n o u s political institutions a n d a c c o m m o d a t i n g to the most u r g e n t d e m a n d s of lowerclass groups. 3 U n d e r capitalism, as u n d e r any socioeconomic o r d e r , democracy provides the only m e a n i n g f u l assurance that the question of distributional equity will be a d d r e s s e d . Equity is never the reliable p r o d u c t of the altruism of those in power. However, Latin A m e r i c a n capitalism has not previously been hospitable to democracy. Civilian governance, when it has existed, has o f t e n taken the f o r m of oligarchic exclusionisnv 4 or of populist authoritarianism. More recently the region has witnessed a spate of capitalist "developmental dictatorships" 5 led by the military a n d civilian technocrats—so-called b u r e a u c r a t i c - a u t h o r i t a r i a n i s m — t h a t have devoted themselves to a d v a n c i n g their countries' industrialization by m e a n s of strategies that deliberately bypass both equity a n d democracy." Particularly worrisome was the fact that the wave of " b u r e a u c r a tic-authoritarianism" that crested in the 1960s a n d 1970s m a n a g e d to sweep away civilian g o v e r n a n c e f r o m ("bile a n d U r u g u a y , which had long been considered Latin America's most stable democracies.

T h e Dependencista Perspective

Latin Americans have assiduously s o u g h t to elucidate these circumstances as a first step toward c h a n g i n g t h e m . T h e y have rejected p r o f f e r e d explanations that are e t h n o c e n t r i c or racist—e.g., those that emphasize the peculiarities of the "Iberic-Latin tradition" 7 or the lack of a "Protestant ethic" in the outlook of the bourgeoisie. But, p e r h a p s because they have been beguiled by the o v e r w e e n i n g U.S. p r e e m i n e n c e in the h e m i s p h e r e , they have tacitly accepted the Anglo-Saxon experience as the n o r m of capitalist d e v e l o p m e n t . T h a t is, they have a s s u m e d that t h o r o u g h g o i n g capitalist d e v e l o p m e n t m u s t be the p r o d u c t of a d y n a m i c a n d socially t r a n s f o r m a t o r y , or S c h u m p e t e r i a n , bourgeoisie." Consequently, they have d e f i n e d their p r o b l e m as arising f r o m a bourgeois "deficiency." H a v i n g p r o p e r l y r e f u s e d to blame their own culture f o r that s u p p o s e d deficiency, they have a t t r i b u t e d it to the m a n n e r of their nations' articulation with international capitalism. T h e n c e the idea of dependencismo. T h i s t e r m signifies an internally c o h e r e n t p a r a d i g m of d e p e n d e n c y that e m b r a c e s both an elucidation of economic structures of d e p e n d e n c e a n d a political e x p l a n a t i o n , c o u c h e d in t h e language of class analysis, f o r the persistence of those structures. F r o m h e r e on I shall be c o n c e r n e d primarily with the latter.

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T h e r e are two principal varieties of dependencismo. Each begins with the notion that capitalist democracy is inconceivable without an ideologically h e g e m o n i c bourgeoisie: not only o n e that is able to make the a c c o m m o d a t i o n s described earlier, but also o n e whose world view can win universal acceptance a n d t h u s p o r t r a y its class interests and privileges as incidental to the "national interest.'"' A c c o r d i n g to the first variant, local capitalism is little m o r e t h a n a hose at the e n d of a p u m p — the capitalist system of the metropolis—that sucks economic surplus o u t of the country. T h e domestic bourgeoisie is t h e r e f o r e a "compr a d o r " class (in A n d r é ( k i n d e r Frank's colorful terminology, a "lumpenbourgeoisie"), an agent of economic imperialism with n o nationally based class interests save f o r a n a r r o w p r e o c c u p a t i o n with state power, n e e d e d to k e e p it securely a t o p the social s t r u c t u r e . Such a bourgeoisie is too evidently self-serving to aspire to h e g e m o n y ; its a p p a r e n t dominance (the real d o m i n a n t class, we are forced to conclude, is the foreign bourgeoisie that controls metropolitan capital) has to be backed by raw coercion. 1 " A sub-variant, associated with the writings of I m m a n u e l Wallerstein, holds that domestic bourgeoisies of " p e r i p h e r a l " countries opt f o r coercive f o r m s of labor c o n t r o l " ; f o r that reason they are deb a r r e d f r o m legitimizing their class position by a p p e a l i n g to an ideologically p r o d u c e d societal consensus. T h i s version of dependencismo cannot any l o n g e r be sustained in the face of the facts.1'- As Bill W a r r e n saw some time ago, the facts in question include the rapid industrialization, u n d e r transnational c o r p o r a t e auspices, of many d e v e l o p i n g countries a n d the coincident s p r e a d of capitalist relations of production. 1 : 1 In Latin America as a whole, activities belonging to the m o d e r n capitalist sector ( m a n u f a c t u r i n g , public utilities, t r a n s p o r t a n d communications) have become the linchpins of t h e economy; in addition to the stimulus they provide to o t h e r sectors, they now account directly for over o n e - t h i r d of gross domestic p r o d u c t . M a n u f a c t u r i n g has also come to weigh heavily in e x p o r t t r a d e : 20 p e r c e n t of m e r c h a n d i s e e x p o r t s a r e now m a n u f a c t u r e d goods, u p f r o m an average of 10 p e r c e n t in 1 9 6 0 - 6 8 . " A r g e n t i n a , Brazil, Mexico, a n d P e r u currently derive 60, 64, 43, a n d 70 p e r c e n t of their e x p o r t earnings, respectively, f r o m sales of m a n u f a c t u r e d goods (including factory-processed mine products). Literacy rates a n d school a t t e n d a n c e ratios, which correlate closely with the e x t e n t of capitalist relations of p r o d u c t i o n , have risen dramatically in most of the c o u n tries of the region. 1 5 T h e second variant of dependencismo places less stress o n b r o a d generalizations i n f e r r e d f r o m postulated system-maintenance requisites a n d admits that capitalism in the " p e r i p h e r y " can lead to industrialization. But it holds (i) that the n a t u r e of industrial technologies

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a n d p r o d u c t s , dictated by the p r o f i t maximization strategies of t r a n s n a tional c o r p o r a t i o n s , is such as to d e m a n d a n d r e i n f o r c e a highly skewed distribution of wealth a n d income; a n d (ii) that the domestic bourgeoisie's reliance on international capital f o r technology, financing, a n d principles of e n t e r p r i s e organization saps it politically, depriving it of the hegemonic assets of an indigenous dynamism and a "nationalp o p u l a r " value orientation. H e r e , too, " p e r i p h e r a l " capitalism is said to be incapable of universalizing capitalist relations of p r o d u c t i o n t h r o u g h o u t the society; in this instance the reason given is that the capitalintensive, " i n a p p r o p r i a t e " technologies acquired f r o m the transnationa l d o not p r o v i d e e m p l o y m e n t o p p o r t u n i t i e s in p r o p o r t i o n to n e e d . O n c e again, a weak, bourgeoisie is r e g a r d e d as u n a b l e to become h e g e m o n i c , as compelled to take political shelter b e h i n d a u t h o r i t a r i a n rule."' Unlike the first version, this n e w e r a n d m o r e sophisticated variety of dependencismo c a n n o t be r e f u t e d by data on industrialization. Neither can it be negated by observations on local state assertiveness in dealings with transnational c o r p o r a t i o n s a n d international financiers; f o r the m o d e r n Marxian theory of class a n d state specifically provides f o r a state that is "relatively a u t o n o m o u s " a n d that n e e d not act in the service of s h o r t - t e r m b o u r g e o i s interests.' 7 My critique of the " d e p e n d e n t dev e l o p m e n t " school of dependencismo will consider instead its implications f o r d e v e l o p m e n t strategy a n d the accuracy of its political analysis.

Anti-Democratic Implications of Dependencismo If " d e p e n d e n t d e v e l o p m e n t " in the sense d e f i n e d above (not merely in the indisputable sense that d e v e l o p m e n t is conditioned by the world economy) is Latin America's reality, t h e n capitalist d e m o c r a c y is r u l e d out, a n d maldistribution of wealth c a n n o t be mitigated within a capitalist f r a m e w o r k . A n d dependencista class analysis, which is u n dialectical, f i n d s n o c o u n t e r f o r c e s g e n e r a t e d by " d e p e n d e n t developm e n t " that might m o d i f y its c h a r a c t e r over the long haul. 1 8 H e n c e , the conclusion can only be that real d e v e l o p m e n t will not occur until a n d unless t h e r e has b e e n a clean b r e a k with capitalism at both the national a n d international levels. But such a b r e a k c a n n o t c o m e at the h a n d s of a m a j o r i t a r i a n , classconscious, radically internationalist w o r k i n g class—Marx's revolutionary p r o l e t a r i a t — i n a s m u c h as " d e p e n d e n t d e v e l o p m e n t " p r e c l u d e s its e m e r g e n c e . As a result, the n e e d e d revolution is c o n f i n e d to a Leninist scenario: a radical m o v e m e n t of national liberation on a multiclass f o u n d a t i o n , led by an intellectual elite claiming the right to " r e p r e s e n t "

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the w o r k i n g class without consulting it.1" A f t e r sixty-five years, progressives o u g h t to have lost any r e m a i n i n g illusions a b o u t Leninism; its undeniable accomplishments in the realm of distributional equity are m o r e t h a n offset by its s e c o n d - r a t e industrialization p e r f o r m a n c e and its stultifying elitism, which, t o g e t h e r , diminish the scope of f r e e d o m instead of e n l a r g i n g it. W h a t is m o r e , dependencismo postulates r a t h e r than d e m o n s t r a t e s that the t e m p e r a m e n t of the p o p u l a r classes is potentially or actually revolutionary. T h e a s s u m p t i o n is belied by e x p e r i e n c e in Latin America a n d elsewhere; it has b e e n p r o v e n time a n d again that poverty a n d marginalization, alone, d o not a revolutionary make. Later on I will evaluate the practical political consequences of a radical ideology whose prescription f o r b r i n g i n g a b o u t c h a n g e must r e m a i n unfilled for lack of the requisite social forces. For now I shall simply suggest that, even w h e r e a revolutionary t e m p e r a m e n t exists, a u t h o r i t a r i a n socialism ranks no h i g h e r in c o m p a r i s o n to a u t h o r i t a r i a n capitalism t h a n a lesser evil. A l t h o u g h t h e r e are probably c o n j u n c t u r e s — a s in parts of Central America t o d a y — w h e r e the n a t u r e of c o n t e n d i n g class forces allows for n o o t h e r alternative, why should progressives be so quick to jettison o u r ideals a n d to g r a n t that the lesser evil is satisfactory anyiuhere in the "third world"? T h e r e is, I feel, a n o t h e r way. W e r e we firmly to a b a n d o n the teleology a n d stasis of system-maintenance ideas, along with the t e n d e n c y to d e d u c e class action f r o m axiomatic first principles, a n d were we to a t t e n d m o r e closely to an empirical study of class forces designed so as to reveal the dialectics of c h a n g e within "third world" capitalism, we might discover better alternatives—or, at t h e very least, b e c o m e m o r e t h o r o u g h l y convinced t h a n we can be at p r e s e n t that n o n e is available.

T h e Evidence Reevaluated T h e first t h i n g that empirical investigation lays b a r e is that the wave of a u t h o r i t a r i a n i s m has spent its force a n d is receding. Latin America's c u r r e n t political p a n o r a m a is the following: In Colombia, Costa Rica, Mexico, a n d Venezuela, capitalist democracy has f u n c t i o n e d without i n t e r r u p t i o n f o r ten o r m o r e years. 20 In A r g e n t i n a , Brazil, the Dominican Republic, P a n a m a , a n d P e r u , processes of transition f r o m authoritarianism to capitalist d e m o c r a c y are u n d e r way or have recently b e e n c o m p l e t e d . In Chile a n d U r u g u a y , military a u t h o r i t a r i a n i s m persists21 but is u n d e r increasing challenge f r o m a wide s p e c t r u m of forces, including m a n y m e m b e r s of the bourgeoisie a n d m i d d l e class. In El Sal-

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vador, G u a t e m a l a , Haiti, a n d Paraguay, capitalist a u t h o r i t a r i a n i s m of the traditional, a n t i d e v e l o p m e n t a l oligarchic type remains. In C u b a a n d Nicaragua, nationalist-popular rebellions have led to the implantation of a u t h o r i t a r i a n socialism (not yet consolidated in t h e latter). A n d in Bolivia, Ecuador, a n d H o n d u r a s , fragile a n d unstable capitalist democracies rest uneasily on largely backward socioeconomic u n d e r pinnings. In sum, capitalist d e m o c r a c y is e n t r e n c h e d or nascent in nine of the twenty Latin A m e r i c a n republics. T h e s e nine have a c o m b i n e d population of 290 millions a n d a c o m b i n e d land a r e a of 16.7 million square kilometers—each about 82 p e r c e n t of the regional total. T h e i r c o m b i n e d gross domestic p r o d u c t a m o u n t s to 82.2 p e r c e n t of the regional total; a n d their c o m b i n e d G D P p e r capita is $1,640 (1980 d a t u m ) , as c o m p a r e d to $ 1,060 for the rest (Cuba, which does not publish economic statistics, is excluded). M a n u f a c t u r i n g g e n e r a t e s 24 percent of their combined G1)P, c o m p a r e d with 18.5 p e r c e n t of the others'; a n d 6.6 p e r c e n t of their total e x p o r t s is accounted f o r by m a c h i n e r y a n d e q u i p m e n t , versus 4.3 p e r c e n t f o r the others. T h u s , the nine are characterized by a h i g h e r prevailing level of industrialization t h a n is f o u n d in the r e m a i n i n g countries of the region. Additionally, democratic institutions in these nine countries have u n d e r g o n e i m p o r t a n t changes. T h e last of the old-line populist leaders, Peru's Víctor Raúl Haya d e la T o r r e , d e p a r t e d the scene in 1979; t h e r e have been n o y o u n g e r replacements. Political parties have bec o m e m o r e p r o g r a m m a t i c a n d m o r e o f t e n rest on stable aggregations of interests t h a n on charisma. While o n e or two parties o f t e n p r e d o m i nate, o n e finds in all of the nine countries a multiplicity of licit parties that cover a wider ideological range than ever before. In Brazil, the military gave u p its ten-year-long e f f o r t to impose an oficialista two-party system a n d acquiesced in the restoration of the local m u l t i p a r t y tradition. In Mexico, the political m o n o p o l y of the Partido Revolucionario Institucional (PRI) has been w e a k e n e d somewhat by m e a s u r e s that allow f o r a larger n u m b e r of i n d e p e n d e n t parties a n d that g u a r a n t e e t h e m m i n i m u m r e p r e s e n t a t i o n in the national p a r l i a m e n t . In Peru, parties span the full spectrum f r o m U.S.-style conservatism to MarxismLeninism a n d Trotskyism; Marxists have been elected to m a j o r offices (including the mayoralty of Lima, the capital, a n d of A r e q u i p a a n d Cuzco, the second- a n d third-largest cities) a n d enjoy significant representation in the C h a m b e r of Deputies. In A r g e n t i n a , the recent presidential election showed that Peronism h a d lost its a p p e a l f o r the electorate. In Colombia, Costa Rica, the Dominican Republic, P a n a m a , a n d Venezuela, power has been t r a n s f e r r e d peaceably to electoral oppositions.

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I stated previously that a hallmark of capitalist democracy is tolerance of autonomous lower-class political institutions, of which the most prominent are labor unions. O n e of the classic failings of Latin American capitalist orders has been their intolerance of free labor movements: labor unions have been severely restricted by law (Peru), controlled directly by ministries of state (Brazil), or manipulated by political parties (Argentina, Mexico, and Peru to an extent). This is now changing. In Argentina, Peronist labor bosses have been steadily losing their control over the movement. In Brazil, the military regime permitted the old system of state-run labor unions to fall into disuse but was unable to prevent the rise, for the first time in the nation's history, of a truly indigenous labor movement, constructed f rom the grass roots upward by workers intent on organizing themselves to defend their common interests. A still stronger "bottom-up" labor movement has surged to the fore in Peru and has made common cause with a variety of popular struggles." Even in Mexico, sectors of labor have demonstrated increasing independence from PRI domination. Many of these labor movements regularly indulge in radical political rhetoric (although none is revolutionary in any real sense). Some of them, recognizing that the economic interests of the working class are greatly affected by inflation and the means chosen to cope with it, have engaged in general st rikes and other forms of political action intended to influence directly the orientation of government policy. Yet, the bourgeoisies of the nine countries do not seem to feel threatened by these developments, since they have staunchly supported democratic institutions and have not called for a renewed repression of organized labor. T h e legitimacy of late-capitalist democracy depends in part on the presence of state apparatuses that are strong and effective enough to restrain the most extreme abuses of corporate oligopoly power, especially—of critical importance in an age of nationalism—when such power is wielded by foreign corporations. (Restraining those abuses need not interfere with the ability to accumulate capital and can be shown to be in the long-term interest of the entire bourgeois class.) T h e record reveals that all nine of the democratic or redemocratizing countries have strong state apparatuses, which have been used to monitor and regulate the activities of both local and foreign enterprises. 23 Meaningful economic planning has become the rule rather than the exception; it almost always incorporates reliable statistical data and effective administration, the results of the increased competence and experience of state personnel. T h e newfound ability of Latin American state apparatuses to embody and project plausibly "national" interests is also seen in the area of foreign policy. On key issues of regional import (such as the Malvinas

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war, the Central A m e r i c a n a n d C a r i b b e a n crises, d e f e n s e o f the 2 0 0 mile limit o f territorial waters, investment disputes, the c a m p a i g n for a New International Economic O r d e r , protection o f the sovereign right to obtain military assistance f r o m any source), the states o f Latin A m e r i c a no longer d e f e r routinely to the p r e f e r e n c e s o f the hemisphere's h e g e m o n i c power. I n d e e d , the Organization o f A m e r i c a n States has been largely t r a n s f o r m e d f r o m an institutional expression o f U . S . h e g e m o n y to a f o r u m in which the " Y a n q u i s " can be called to account; and o n e hears f r e q u e n t mention o f the possibility that the O A S may one day be reconstituted as a purely Latin A m e r i c a n institution. Concurrently, the stock o f direct f o r e i g n investment in Latin America has increased by leaps a n d b o u n d s ; it has reached a total value in excess o f $ 4 0 billion. Over two-thirds o f the increase d u r i n g the past two d e c a d e s has involved the m a n u f a c t u r i n g sector. T r a n s n a t i o n a l corporations, often o p e r a t i n g t h r o u g h joint ventures with parastatal or private domestic enterprises, have f i g u r e d prominently in the " d e e p e n i n g " of Latin A m e r i c a n industrialization—that is, the relative shift o f the p r o d u c t mix away f r o m n o n d u r a b l e wage g o o d s a n d toward c o n s u m e r d u r a b l e s a n d p r o d u c e r ' s g o o d s : chemicals, plastics a n d synthetic fibers, basic metals, m o t o r vehicles, p r o d u c t i o n machinery, a n d so forth. As I have pointed out, not every variant of dependencismo is c o n f o u n d e d by this investment trend. However, all dependencisla p a r a d i g m s anticipate a n d predict a negative correlation between it a n d democratic capitalism. What d o the d a t a show? F r o m 1967 to 1975 (the latest year f o r which complete data could be obtained), the Latin A m e r i c a n countries which today are, or a r e on the way to becoming, capitalist d e m o c r a c i e s saw a 6 0 percent increase in direct foreign investment—a 28 percent increase in per capita terms. At the e n d o f the period their c o m b i n e d stock o f direct foreign investment a m o u n t e d to $ 1 0 3 p e r capita. T h e other countries of the region e x p e r i e n c e d a 30 percent increase, only 2 percent on a per capita basis; at the period's e n d , their c o m b i n e d stock o f direct foreign investment was worth $ 5 0 p e r capita. T h e correlation between direct f o r e i g n investment a n d the potential f o r capitalist democracy thus turns out to be positive—exactly the o p p o s i t e o f the dependencista prediction. T o raise the possibility, nowadays, that relationships between transnational enterprises a n d newly d e v e l o p i n g countries can be mutually beneficial is to be s u s p e c t e d o f apologetics in the service o f capital. T h i s is a n o t h e r s y m p t o m o f o u r habit of thinking about those relationships in system-maintenance rather than in dialectical terms. C o n s i d e r , in contrast, what a dialectical perspective m i g h t s u g g e s t : (a) T h e challenge o f economic denationalization p o s e d by the transnationals' pres-

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ence is likely to call f o r t h , s o o n e r or later, a nationalist reaction; it usually takes the f o r m of a s t r e n g t h e n i n g of the regulatory a n d economic policymaking o r g a n s of the state. 24 (b) T h e t r a n s n a t i o n a l , themselves, unwittingly h e l p to n o u r i s h the domestic m a n a g e r i a t a n d technocracy that, out of self-interest, b r i n g a b o u t the reaction; they d o it by m e a n s of staff training, technical assistance, a n d d e m o n s t r a t i o n , (c) D u e to their g r e a t e r profitability, h o m e - c o u n t r y e x p e r i e n c e , a n d political sensitivity to a foreign a n d potentially hostile e n v i r o n m e n t , transnational firms are frequently less resistant to unionization of their workers t h a n a r e domestic employers. 2 ' 1 T h e domestic bourgeoisie o f t e n views this t e n d e n c y with equanimity, at first; f o r if the transnationals a r e m a d e to pay h i g h e r wages, their competitive advantages are somewhat r e d u c e d . But the eventual o u t c o m e is usually a s t r o n g e r labor m o v e m e n t across the b o a r d , especially if better-paid workers in the transnationals' employ prove willing to tax themselves in o r d e r to subsidize the organization of their less f o r t u n a t e c o m r a d e s in the employ of local firms. T h a t d e g r e e of working-class solidarity is not u n c o m m o n in Latin America. Empirical investigation e n c o u r a g e s us to e x a m i n e t h r e e additional propositions about the role of transnational c o r p o r a t i o n s in development: 1. T h e transnationals are i n d i f f e r e n t , not antagonistic, to d e m o cratic governance. T h e y seek access to n a t u r a l resources a n d to markets; stable economic e n v i r o n m e n t s ; a n d the a d v a n t a g e of lower prevailing wages t h a n in the metropoli. T h e i r behavior indicates that, whatever the ideological predilections of their representatives o n the scene, they have rarely acted as if they believed that a particular set of (presumably, " o r t h o d o x " ) economic policies were necessary to achieve stability. In Chile, monetarist o r t h o d o x y has not attracted m u c h new f o r e i g n investment but instead has deindustrialized the economy. O n the o t h e r h a n d , transnational c o r p o r a t i o n s have invested heavily in A r g e n t i n a , Brazil, Mexico, a n d Peru despite their e c o n o m i c interventionism, e x p a n s i o n a r y policies, a n d , in Peru's case, implementation of f a r - r e a c h i n g p r o p e r t y a n d social reforms. 2 6 2. As Albert Szymanski d e m o n s t r a t e s f o r a cross-section of developing countries, the past twenty-odd years have witnessed a net influx of foreign capital in spite of p r o f i t remittances. 2 7 In any event, it is misleading to think of capital outflows via remitted profits a n d o t h e r t r a n s f e r s as a s i p h o n i n g - o f f of e c o n o m i c surplus. W h a t actually h a p p e n s is that i n c o m i n g capital investm e n t increases the size of the s u r p l u s by i n t r o d u c i n g new productive activities, a f t e r which a small p a r t of this increase is taken

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out; most of it r e m a i n s b e h i n d in the f o r m of local wages, taxes, a n d purchases. 3. While direct f o r e i g n investment is in p a r t attracted to the "third world" by the p r o m i s e of lower wages, the fact that t r a n s n a tional firms are capital-intensive m e a n s that absolute wage rates are not a crucial consideration f o r t h e m . A "pull factor" of equal or g r e a t e r significance is access to local markets, which is controlled by states a n d must be b a r g a i n e d for.'- 8 Even t h o u g h inc o m e concentration may be a viable s h o r t - t e r m strategy—if the host c o u n t r y has a large p o p u l a t i o n — f o r e x p a n d i n g the m a r k e t f o r the c o n s u m e r d u r a b l e s in which m a n y t r a n s n a t i o n a l specialize, l o n g - t e r m m a r k e t growth d e p e n d s on increasing t h e n u m b e r s a n d p u r c h a s i n g p o w e r of all participants in the cash economy. T h u s , the t r a n s n a t i o n a l ' wage concerns are partially c o u n t e r b a l a n c e d by an interest in i m p r o v i n g the p u r c h a s i n g p o w e r of their workers a n d of o t h e r s u b o r d i n a t e g r o u p s ; they may benefit f r o m land r e f o r m as well (as they have in Peru), since its t e n d e n c y to raise food prices, a n d t h e n c e wages, is offset by the fact that in the longer r u n it converts f o r m e r subsistence peasants into c o m m o d i t y f a r m e r s a n d c o n s u m e r s of m a n u f a c t u r e d goods.

Postimperialism a n d Class F o r m a t i o n Unless one's a p p r o a c h to the topic is motivated m o r e by d o c t r i n e t h a n by science, these observations call inescapably f o r a new p a r a d i g m of Latin A m e r i c a n d e v e l o p m e n t . T h e new p a r a d i g m n e e d not be a m i r r o r image of dependencismo, viewing capitalism as u n i f o r m l y progressive, nonexploitative, a n d f r e e of internal contradiction. However, it should conceptualize capitalist d o m i n a t i o n a n d exploitation in class, not national, terms. T h e s e a r e f e a t u r e s of Sklar's p a r a d i g m a t i c conception, postimperialism. 2 9 Postimperialism signifies transnational class d o m i n a t i o n o n a global scale, a stage of world capitalist evolution that is j u s t now m a k i n g its debut. Transnational enterprises are integrating the world economy, a n d their action p r o d u c e s a n d r e p r o d u c e s an international b o u r g e o i s class. T h e m e m b e r s of this " c o r p o r a t e international bourgeoisie" a r e u n i t e d by m u t u a l interests t r a n s c e n d i n g those expressed t h r o u g h the states whose passports they h a p p e n to carry; they are t r u e cosmopolitans. A l t h o u g h t r a n s n a t i o n a l m a n a g e r s a n d "home"-state authorities r e m a i n friendly with each o t h e r , the f o r m e r can n o l o n g e r c o u n t on t h e imperialist p o w e r wielded by the latter to win t h e m the "third world"

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m a r k e t s a n d investment outlets that are necessary to the e x p a n d e d rep r o d u c t i o n of capital. (I hasten to a d d that postimperialism, having rejected f u n c t i o n alism in all its guises, has n o difficulty in acknowledging the c o n t i n u e d existence of imperialism. Metropolitan states d o not set aside imperialist policies j u s t because international capital has ceased to "have n e e d " of t h e m . As J . A. H o b s o n understood, 1 " imperialism may persist because it advances the politico-military interests of a g o v e r n i n g g r o u p , aids certain economic interests that are not fully integrated into the international circuits of capital a n d that need state protection, etc.) In a postimperialist world, capital's access to the " p e r i p h e r y " is sec u r e d by ideological a n d political means. T h e international bourgeoisie is motivated by an ideological doctrine of domicilea particular manifestation of capitalism's separation of the political f r o m the economic s p h e r e . T h i s doctrine holds that t h e r e is n o innate a n t a g o n i s m between the global (and economic) interests of transnational c o r p o r a t i o n s a n d the locally focused (and chiefly political) national aspirations of newly d e v e l o p i n g host countries; it instructs c o r p o r a t e subsidiaries to behave like "good citizens" of the host c o u n t r y . (A "good citizen" obeys the law, acts in c o n f o r m i t y with local behavioral n o r m s , a n d does not work to c o n t r a v e n e well-understood national interests.) A corollary is that transnational firms can be, simultaneously, "good citizens" of every c o u n t r y , including t h e " h o m e " country, w h e r e they d o business. T h e doctrine of domicile is an e l e m e n t of the c o r p o r a t e i n t e r n a tional bourgeoisie's hegemonic world view. Like any hegemonic ideology, it "has its basis in the p e r c e p t i o n of the a p p a r e n t l y intelligible o r d e r of the social reality." T h a t is, "it works, both cognitively a n d in practice" 3 2 — w h e n c e the possibility of mutually beneficial transnational-host c o u n try relations. T h e s e relations are, of course, mutually beneficial in an institutional context; their d o m i n a t i v e a n d exploitative content is only exposed when the tool of class analysis is b r o u g h t to b e a r o n international capitalism. In contrast, all f o r m s of dependencista analysis, based as they a r e on territorial delineations ( w h e t h e r conceived as individual nations or as "core" a n d "periphery"), a r e institutional despite the use that they m a k e of class-analytical rhetoric. N o g u a r a n t e e s can be o f f e r e d that the host c o u n t r y will invariably b e n e f i t f r o m each a n d every relationship it maintains with a t r a n s n a tional f i r m . T h e local state m u s t h e l p to propitiate that o u t c o m e by a d o p t i n g a n d e n f o r c i n g an authoritative definition of "good c o r p o r a t e citizenship" which does not i m p i n g e on the transnationals' central conc e r n — t h e o p p o r t u n i t y to m a k e p r o f i t s — o r o n their world m a r k e t strategies a n d o t h e r global interests. Increasingly nationalist local

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states—sometimes the result of organizational revolutions that institutionalize nationalist tendencies, sometimes the o u t c o m e of g r a d u a l political evolution—serve the interest of postimperialist international capital (here is the o t h e r side of the relationship of m u t u a l benefit) because their p r o f o u n d c o m m i t m e n t to d e v e l o p m e n t makes it easier f o r t h e m to contain or deflect anticapitalist class action by p o p u l a r g r o u p s . M o r e o v e r , they legitimize the local p r e s e n c e of transnational e n t e r prise to the extent that they resolve ideologically the contradiction between that c o m m i t m e n t a n d global capital accumulation. Strong, capable, institutionally nationalist states arise not ex nihilo but when they a r e constructed by m e m b e r s of society w h o have the p o w e r to d o so a n d whose class interests will thereby be p r o m o t e d . T h u s , the postimperialist p a r a d i g m focuses analytical attention on the question of class f o r m a t i o n , viz., t h e process by which individuals (1) b e c o m e a w a r e that they s h a r e specific interests a n d a specific orientation t o w a r d t h e existing m e c h a n i s m s of p o w e r a n d control; (2) f o r m social b o n d s o n the basis of that [awareness]; (3) o r g a n i z e to secure . . . a d v a n t a g e s f o r t h e m selves; a n d (4) collectively employ their political assets to that end. 1 3

A chief aim of the analysis is to d e t e r m i n e how class formation processes at work in d i f f e r e n t sectors of the society affect the n a t u r e a n d actions of t h e state— particularly, its ability to m a n a g e the society's relationships with international capital. As a rule, transnational c o r p o r a t e action in newly industrializing countries t e n d s to condition a n d facilitate the e m e r g e n c e t h e r e i n of domestic bourgeois g r o u p s which, while h o l d i n g "junior m e m b e r s h i p " in the international bourgeoisie, have a class interest in broadly based industrial d e v e l o p m e n t at the national level"; indeed, this interest complements those g r o u p s ' international concerns, since it ratifies in their class practice their aspiration to full and equal membership in the international bourgeoisie. T h e national "new bourgeoisie" is a state-building class element; but its relationship to state p o w e r is dialectical, not causative—another way of saying that its f o r m a t i o n is also c o n d i t i o n e d a n d facilitated by state action. In semiindustrial societies like those of m u c h of Latin America, w h e r e the process of economic d e v e l o p m e n t relies heavily o n the c o r p o r a t e f o r m of e n t e r p r i s e (parastatal as well as private), the "new bourgeoisie" is a corporate national bourgeoisie,35 T h i s class s t r a t u m is t h e e c o n o m i c a n d political h i n g e [point] b e t w e e n local societies a n d t h e m e t r o p o l i . Yet, i n a s m u c h as [it] . . . n e e d not o p t f o r e i t h e r national o r m e t r o p o l i t a n c o n c e r n s , [it] can be nationalist a n d developmentalist without c o n t r a d i c t i n g [its] i n t e r n a t i o n a l interests. As [its]

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dominance is not narrowly self-serving, [that dominance] does not need to rest on coercive force and can be consistent with formal democracy. M

A local d o m i n a n t class of this c h a r a c t e r has a p o t e n t i a l f o r h e g e m o n y . I n s o f a r as t r a n s n a t i o n a l e n t e r p r i s e c o n t r i b u t e s to h o s t - c o u n t r y i n d u s trialization, it assists t h e c o r p o r a t e n a t i o n a l b o u r g e o i s i e to d e m o n s t r a t e its nationalist bona fides a n d , t h e r e b y , to m a i n t a i n its social c o n t r o l with t h e c o n s e n t of t h e p e o p l e at large. At t h e s a m e time, t h e c o r p o r a t e n a t i o n a l b o u r g e o i s i e is a n active class subject, n o t a m e r e systemically g e n e r a t e d object, a n d has a capacity to i n f l u e n c e t h e action of i n t e r n a t i o n a l capital even while b e i n g s h a p e d by it. T h e r e f o r e , t h e c u r r e n t i n t e r n a t i o n a l division of labor is n o t f o r e v e r fixed; a l t h o u g h w o r l d capitalist d e v e l o p m e n t is u n e v e n , s o m e " t h i r d w o r l d " c o u n t r i e s may o n e day attain m e t r o p o l i t a n status (and s o m e p r e s e n t m e t r o p o l e s m a y decay to " p e r i p h e r a l " status) without c o n t r a v e n i n g t h e f u n d a m e n t s of t h e i n t e r n a t i o n a l o r d e r . Lastly, it m u s t be r e m e m b e r e d that t h e f o r m a t i o n of a c o r p o r a t e n a t i o n a l b o u r g e o i s i e d o e s n o t t a k e place in a societal v a c u u m . Processes of p r o l e t a r i a n class f o r m a t i o n a r e also u n d e r way. ,T C o n d i t i o n e d , too, by t r a n s n a t i o n a l e n t e r p r i s e , a n e w w o r k i n g class is e m e r g i n g t h a t is technologically literate, industrially disciplined, a n d o r g a n i z a t i o n a l l y s t r o n g . U n l i k e t h e v i o l e n c e - p r o n e p r o t o p r o l e t a r i a t , easily m a n i p u l a t e d by p o p u l i s t d e m a g o g u e r y , t h a t it is r e p l a c i n g , t h e new w o r k i n g class has a c e r t a i n e c o n o m i c stake in t h e social o r d e r a n d c o n s i d e r a b l e c o n f i d e n c e in its ability to w r i n g concessions f r o m t h e state a n d t h e d o m i n a n t class. I n c o n s e q u e n c e , it is n o t i n s u r r e c t i o n a r y . T h e c o r p o r a t e n a tional b o u r g e o i s i e , f o r its p a r t , has less r e a s o n to f e a r t h e s e d e m a n d s f o r a c c o m m o d a t i o n t h a n d i d its p r e d e c e s s o r . Its i n t e r e s t in m e e t i n g t h e m c o m b i n e s with o t h e r b o u r g e o i s i n t e r e s t s to c r e a t e a political atm o s p h e r e t h a t is m u c h f r i e n d l i e r to d e m o c r a t i c g o v e r n a n c e t h a n t h a t of a p r e v i o u s e r a . ' 8

C o n c l u s i o n : P r o g r e s s i v e Praxis v e r s u s Dependencismo F a r f r o m b e i n g old liberal w i n e in new M a r x i a n bottles, as d i e h a r d dependencistas a r e w o n t to c h a r g e , p o s t i m p e r i a l i s m o f f e r s a m o r e telling c r i t i q u e of late-capitalist d o m i n a t i o n in newly d e v e l o p i n g c o u n t r i e s t h a n dependencismo c o u l d e v e r m a n a g e . It is able to b e c a u s e it d o e s n o t d i s t o r t o r wave away o b s e r v e d reality, d o e s n o t s u b s t i t u t e n a t i o n a l i s m f o r class analysis, a n d d o e s n o t fall back u p o n static, teleological e x p l a n a t i o n . It d o e s n o t p i c t u r e capitalism as u n i f o r m l y p r o g r e s s i v e ; i n s t e a d its p o r t r a i t simply i n c l u d e s t h e f a c t t h a t

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some o f w h a t is h a p p e n i n g . . . is . . . still d e v e l o p m e n t : p a i n f u l , wasteful, a n d ruthless, like early capitalism e v e r y w h e r e , but d e v e l o p m e n t n o n e t h e l e s s . . . . In the s u f f e r i n g s o f the masses . . . t h e r e is also a certain potential for a d v a n c e . T h e failure to r e c o g n i z e a n d g r a p p l e with this r e n d e r s d e p e n d e n c y t h e o r y m i s l e a d i n g a n d h e n c e i m p o t e n t in relation to t h o s e areas w h e r e the a d v a n c e has o c c u r r e d . M

Postimperialism owes n o slavish obedience to doctrine; it r e g a r d s Marx a n d o t h e r classical t h i n k e r s as intellectual p r e c u r s o r s r a t h e r t h a n Delphic oracles. But it is not blindly eclectic a n d , in fact, is m o r e f a i t h f u l t h a n are most strands of dependencista t h o u g h t to Marx's a n t i - U t o p i a n c o m p r e h e n s i o n of historically evolved social structures as limitations o n the c o u r s e of collective action. Postimperialism shares the Marxian perspective that theories of d e v e l o p m e n t are to be j u d g e d in large part according to their contribution to a progressive praxis. It insists that such a praxis must work toward the a t t a i n m e n t a n d perfection of d e m o c r a c y in addition to economic equality; a n d that all f o r m s of democracy are intrinsically m o r e favorable in the long r u n f o r popular-class interests t h a n is any f o r m of authoritarianism. Let us consider in this light the tasks c o n f r o n t i n g a progressive praxis in Latin America. T h e socioeconomic reconstruction that led to the ascent of c o r p o r a t e national bourgeoisies did not materially r e d u c e the d e p e n d e n c e of the region's local economies on the state of the world e c o n o m y . Hence, the recession that has afflicted the latter has seriously i m p a i r e d the health of the f o r m e r . It is h e a r t e n i n g — a n d a c o n f i r m a t i o n of the validity of the postimperialist viewpoint—that economic difficulties have not, thus far, b r o u g h t with t h e m a relapse into military rule. N e i t h e r have economic reverses e n c o u r a g e d nationalist or populist d e m a g o g u e r y to a n y t h i n g like the d e g r e e that they did some years ago. Still, we c a n n o t be too s a n g u i n e a b o u t the prospects f o r d e m o c r a t i c survival, given the newness a n d fragility of participatory institutions as well as the d e a r t h of n o r m s of nonexclusionary, limited g o v e r n m e n t in the political tradition. In this climate of uncertainty, the practices of politically active g r o u p s can be d e t e r m i n a n t . Progressives o u g h t not to u n d e r e s t i m a t e the repressive capabilities of the military a n d t h e i r willingness to use t h e m , with or without bourgeois s u p p o r t , if faced with a d a n g e r of social dissolution. A n d we must not overestimate the ability of the industrial proletariat, which is yet at an early stage of its f o r m a t i o n a n d which does not a p p r o a c h a societal majority, to lead a transition to socialist democracy. A counsel of revolution, the stock-int r a d e of L e f t ultranationalism, is irresponsible a n d d a n g e r o u s in the present conjuncture.

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(This analysis applies only partially, however, to Chile and U r u g u a y , w h e r e it is vital that a b r o a d political coalition c o n t i n u e its agitation f o r a military salida.4" N o r does it apply at all to the oligarchic dictatorships of Central America, w h e r e the rebellions now in progress probably r e p r e s e n t the only progressive option.) But dependencismo r e m a i n s an ideological force to be r e c k o n e d with. Paradoxical t h o u g h it may seem, in insinuating itself into t h e p o p u l a r consciousness t h r o u g h o u t Latin America, dependencismo is p e r f o r m i n g y e o m a n service in h e l p i n g to legitimize the new capitalist o r d e r . By plausibly attributing the p r e s e n t economic difficulties to an international e c o n o m y that n o Latin A m e r i c a n g o v e r n m e n t can h o p e to alter by itself, it enables the local d o m i n a n t classes to avoid being held responsible f o r t h e m . A legitimizing ideology does not have to value a n d j u s t i f y the status q u o in explicit language. Since people normally d o not desert a sociopolitical o r d e r unless they can conceive of s o m e t h i n g both better a n d attainable, ideology can accomplish its p u r p o s e surreptitiously if it u n d e r c u t s or excludes f r o m the a g e n d a a radical critique leading to a feasible strategy f o r e f f e c t i n g c h a n g e . In fact, it can be m o r e efficacious when it functions in this m a n n e r because its U t o p i a n i s m is a m o r a l critique, but only a moral critique, of the status quo. An o r d e r that can tolerate moral criticism advances a claim to eventual self-perfection. Dependencismo is Utopian because the only alternative it can propose is immediate, universal socialist revolution followed by economic autarky; a n d because it finds little to praise in political action that works within the b o u n d s of capitalist democracy or that settles f o r less t h a n absolute goals. Its critique of the c o r p o r a t e national bourgeoisie on ultranationalist g r o u n d s , if morally a p p e a l i n g to some, is otherwise u n convincing, as it has n o theory of how a n o t h e r kind of social o r d e r m i g h t resist the o v e r w h e l m i n g p o w e r of international capital. Equally u n c o n v i n c i n g is its implicit Leninist elitism, which today's m o r e sophisticated w o r k i n g classes have seen t h r o u g h a n d d o not a d m i r e . C o n sequently, dependencismo d i s a r m s p o p u l a r class action that seeks a middle way between insurrectionism a n d "economism." O f course, dependencismo is not alone in acting as an ideological p r o p f o r a social o r d e r quite d i f f e r e n t f r o m what its teachings seems to advocate. N o r t h A m e r i c a n evangelical Christian f u n d a m e n t a l i s m p e r f o r m s a similar service w h e n it puts f o r t h its moral critique of oligopoly p o w e r , c o r p o r a t e internationalism, a n d some aspects of mass cons u m e r society, a n d w h e n it posits a Utopian alternative: a r e t u r n t o a n individualist, market-capitalist, hyper-patriotic society. A n d David Shipler has recently taken note of the legitimizing role of a n a s c e n d a n t Great Russian nationalism which, t h o u g h a p p a r e n t l y critical of m a n y

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a s p e c t s o f Soviet rule, actually u p h o l d s it by o f f e r i n g in its stead n o t h i n g b e t t e r t h a n a vaguely o u t l i n e d religio-political s t a t i s m / 1 P r o g r e s s i v e s n e e d to c o n s i d e r with d u e c a r e w h e t h e r a n ideology t h a t keeps c o m p a n y such as this is w o r t h y o f o u r allegiance.

Notes An earlier version of this paper appeared in Third ( 1 9 8 4 ) : 4 1 1 - n-431. Reprinted with permission.

World Quarterly

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1. Richard L. Sklar, Corporate Power in an African State (Berkeley and Los Angeles: University o f California Press, 1975), p. 179. 2. Richard L. Sklar, "Democracy in Africa," presidential address to the Twenty-Fifth Annual Meeting of the African Studies Association, Washington, DC, 5 November 1982. 3. I assume, as is commonly the case, that such an accommodation need not wreck the mechanisms o f capital accumulation. T o the contrary, it tends to keep them humming ef ficiently for a longer period o f time, so that the shortrun decline in the absolute profit rate is compensated by a larger and more secure future cash flow. U n d e r late-capitalist conditions, where oligopolistic corporations are not rigidly constrained by market forces but can plan strategically for profit maximization, this tradeoff is an attractive one. 4. Marcelo Cavarozzi, "Elementos para una caracterización del capitalismo oligárquico," Revista Mexicana de Sociología 40, 4 (1978): 1327— 1352. 5. A. James C r e g o r , Italian Fascism and Developmental Dictatorship (Princeton: Princeton University Press, 1979). 6. Guillermo A. O'Donnell, Modernization and Bureaucratic-Authoritarianism: Studies in South American Politics (Berkeley: Institute of International Studies, University of Calif ornia, 1973). On the economic policies o f the Brazilian military regime, until its last years an archetypical "bureaucratic-authoritarianism," see T h o m a s E. Skidmore, "Politics and Economic Policy Making in Authoritarian Brazil, 1937—71," in Alfred Stepan (ed ), Authoritarian Brazil (New Haven: Yale University Press, 1973), pp. 3^16. 7. Howard J . Wiarda, " T o w a r d a Framework for the Study o f Political C h a n g e in the Iberic-Latin Tradition: T h e Corporative Model," World Politics 25, 2 (1973):206—235. Wiarda's study is blameless; it is a careful analysis o f the historical shaping of a political culture. Although the "Iberic-Latin tradition" cannot be held responsible for Latin America's late start toward democratization, it is highly relevant to questions o f the character o f ideological legitimation. 8. J o s e p h A. Schumpeter, The Theory of Economic. Development (Cambridge: Harvard University Press, 1935); and Capitalism, Socialism, and Democracy (New York: H a r p e r & Row, 1942). I consider Schumpeter's work a locus classicus o f "economism" in development theory: the systematic undervaluation o f the political dimension o f organized social life.

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9. A n t o n i o G r a m s c i , Selections from the Prison Notebooks (New Y o r k : I n t e r national P u b l i s h e r s , 1 9 7 1 ) ; a n d Letters from Prison (New Y o r k : H a r p e r & Row, 1 9 7 3 ) . T h e I n t r o d u c t i o n to t h e latter w o r k , by L y n n e L a w n e r , c o n t a i n s a useful e x p o s i t i o n o f t h e G r a m s c i a n c o n c e p t i o n o f h e g e m o n y . S e e also W a l t e r L. A d a m s o n , Hegemony and Revolution: Antonio Gramsci's Political and Cultural Theory ( B e r k e l e y a n d Los A n g e l e s : University of C a l i f o r n i a Press, 1 9 8 0 ) ; Joseph V. Femia, " T h e Gramsci P h e n o m e n o n : Some Reflections," Political Studies 2 7 , 3 ( 1 9 7 9 ) : 4 7 2 — 4 8 3 ; a n d B o b J e s s o p , The Capitalist State (New Y o r k : New Y o r k University Press, 1 9 8 2 ) , pp. 1 4 8 - 1 4 9 . 10. Paul A. B a r a n , The Political Economy of Growth (New Y o r k : M o n t h l y Review Press, 1 9 5 7 ) ; A n d r é G u n d e r F r a n k , Capitalism and Underdevelopment in Latin America (New Y o r k : M o n t h l y Review Press, 1 9 6 9 ) , a n d Lumpenbourgeoisie: Lumpendevelopment: Dependence, Class, and Politics in Latin America, trans. M a r i o n Davis B e r d e c i o (New Y o r k : M o n t h l y Review Press, 1 9 7 3 ) ; S a m i r A m i n , Accumulation on a World Scale, trans. B r i a n P e a r c e (New Y o r k : M o n t h l y Review Press, 1 9 7 4 ) , a n d Unequal Development, trans. B r i a n P e a r c e (New Y o r k : M o n t h l y Review Press, 1 9 7 6 ) . (Editorial n o t e : S i n c e t h e original publication o f this p a p e r in Third World Quarterly, it has c o m e to mv a t t e n t i o n that t h e c o i n e r o f the t e r m " l u m p e n b o u r g e o i s i e " was not Krank but B a r a n ; see Political Economy of Growth, p. 173.) Capitalist Agriculture 1 1. I m m a n u e l Wallerstein, The Modern World-System: and the Origins of the European World-Economy in the Sixteenth Century (New Y o r k : A c a d e m i c Press, 1 9 7 4 ) ; also his " D e p e n d e n c e in an I n t e r d e p e n d e n t W o r l d : T h e L i m i t e d Possibilities o f T r a n s f o r m a t i o n within t h e Capitalist W o r l d E c o n o m y , " African Studies Review 17, 1 ( 1 9 7 4 ) : 1—26; a n d his " T h e Rise a n d Fut u r e D e m i s e o f t h e W o r l d Capitalist S y s t e m : C o n c e p t s f o r C o m p a r a t i v e Analysis," Comparative Studies in Society and Histoiy 16, 4 ( 1 9 7 4 ) : 3 8 7 — 4 1 5 . W e l l t a r g e t e d critiques o f Wallerstein's thesis a n d c o n c l u s i o n s have b e e n put f o r ward by R o b e r t B r e n n e r , " T h e O r i g i n s of Capitalist D e v e l o p m e n t : A C r i t i q u e o f N e o - S m i t h i a n Marxism." New Left Review, 104 ( 1 9 7 7 ) : 2 5 - 9 2 ; a n d by T h e d a S k o c p o l , " W a l l e r s t e i n ' s W o r l d Capitalist S y s t e m : A T h e o r e t i c a l a n d Historical C r i t i q u e , " American Journal of Sociology 8 2 , 5 ( 1 9 7 7 ) : 1 0 7 5 - 1 0 9 0 . 12. Y e t a few p r o p o n e n t s s e e m u n t r o u b l e d by t h e f a i l u r e o f t h e facts to s u p p o r t t h e i r position. S e e , f o r i n s t a n c e , S a m i r A m i n , " E x p a n s i o n o r Crisis o f C a p i t a l i s m ? " Third World Quarterly 5 , 2 ( 1 9 8 3 ) : 3 6 1 - 3 8 0 . 13. Bill W a r r e n , " I m p e r i a l i s m a n d Capitalist I n d u s t r i a l i z a t i o n , " New Left Review, 81 ( 1973):3—44. R e c e n t l y , I m m a n u e l W a l l e r s t e i n , " N a t i o n a l i s m a n d t h e W o r l d T r a n s i t i o n to S o c i a l i s m : Is T h e r e a Crisis?" Third World Quarterly 5, 1 ( 1 9 8 3 ) : 9 5 - 1 0 2 , has taken a position in a g r e e m e n t with W a r r e n ' s view o f t h e s p r e a d o f industrialization a n d capitalist relations o f p r o d u c t i o n i n t o t h e " p e r i p h e r y . " It would have b e e n useful, h o w e v e r , i f h e h a d seen fit to r e c o n c i l e t h e c o n t r a d i c t i o n b e t w e e n his new p e r s p e c t i v e a n d his p r e v i o u s insistence t h a t c o e r c i v e l a b o r c o n t r o l is a key variable that d e t e r m i n e s t h e s t r u c t u r e o f t h e " w o r l d - e c o n o m y . " P e r h a p s h e is still h o l d i n g to t h e m i s c o n c e p t i o n that t h e universalization o f wage l a b o r constitutes socialism. 14. T h e s e a n d o t h e r e c o n o m i c d a t a in this p a p e r h a v e b e e n drawn f r o m various publications o f t h e I n t e r - A m e r i c a n D e v e l o p m e n t B a n k . T h e I D B ' s d a t a show that t h e 1971—78 a v e r a g e a n n u a l g r o w t h r a t e o f f o r e i g n e x c h a n g e

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e a r n i n g s f r o m Latin A m e r i c a ' s m a n u f a c t u r e d e x p o r t s was 10.7 p e r c e n t ; w h e n t r a d i t i o n a l e x p o r t s of p r o c e s s e d f o o d s t u f f s a n d n o n f e r r o u s m e t a l p r o d u c t s a r e e x c l u d e d f r o m t h e c a l c u l a t i o n , t h e r a t e rises to 14.7 p e r c e n t . B o t h c o m p u t a tions a r e b a s e d o n c o n s t a n t 1980 prices. 15. My r o u g h c o m p u t a t i o n yields a 6 0 p e r c e n t school a t t e n d a n c e r a t i o as o f 1980 f o r t h e a g e g r o u p 6 - 2 3 y e a r s a n d f o r L a t i n A m e r i c a as a w h o l e ; a n d a c o r r e s p o n d i n g r a t i o of 37 p e r c e n t f o r 1960. 16. F e r n a n d o H e n r i q u e C a r d o s o , " D e p e n d e n c y a n d D e v e l o p m e n t in Latin A m e r i c a , " New Left Review, 74 ( 1 9 7 2 ) : 8 3 - 9 5 ; a n d his "AssociatedD e p e n d e n t D e v e l o p m e n t : Theoretical a n d Practical I m p l i c a t i o n s , " in S t e p a n (ed.), Authoritarian Brazil ( f n . 6), p p . 142—176. See also F e r n a n d o H e n r i q u e C a r d o s o a n d F.nzo Faletto, Dependency and Development in Latin America, t r a n s . M a r j o r y Mattingly U r q u i d i ( B e r k e l e y a n d Los A n g e l e s ; U n i v e r s i t y of C a l i f o r nia Press, 1979). A u s e f u l discussion o f t h e r e l a t i o n s h i p b e t w e e n C a r d o s o ' s w o r k a n d o t h e r M a r x i a n c u r r e n t s of d e v e l o p m e n t analysis is c o n t a i n e d in G a b riel P a l m a , " D e p e n d e n c y : A F o r m a l T h e o r y of U n d e r d e v e l o p m e n t o r a M e t h o d o l o g y f o r t h e Analysis of C o n c r e t e S i t u a t i o n s of U n d e r d e v e l o p m e n t ? " World Development 6, 7 - 8 ( 1 9 7 8 ) : 8 8 1 - 9 2 4 . 17. R a l p h M i l i b a n d , The State in Capitalist Society ( N e w Y o r k : Basic B o o k s , 1969); Nicos P o u l a n t z a s , Political Power and Social Classes ( L o n d o n : N e w L e f t Books, 1973); David A. G o l d , C l a r e n c e Y . H . L o . a n d Eri'kOlin W r i g h t , " R e c e n t D e v e l o p m e n t s in M a r x i s t T h e o r i e s of t h e Capitalist S t a t e . " Monthly Review 27, 5 ( 1 9 7 5 ) : 2 9 - 4 3 a n d 27, 6 ( 1 9 7 5 ) : 3 6 - 5 1 . 18. D y n a m i c , ideologically h e g e m o n i c b o u r g e o i s i e s a r e as m u c h t h e products of capitalist d e v e l o p m e n t as they a r e its p r o d u c e r s . A n t h o n y B r e w e r , Marxist Theories of Imperialism ( L o n d o n : R o u t l e d g e & K e g a n Paul, 1980), a r g u e s (p. 289) t h a t t h e q u e s t i o n is w h e t h e r a n i n d e p e n d e n t n a t i o n a l b o u r g e o i s i e is e v e n t u a l l y f o r m e d : " I n d e p e n d e n c e in this s e n s e d o e s n o t r e q u i r e t h a t d e v e l o p m e n t be f i n a n c e d locally a n d u n d e r local c o n t r o l . . . . I see n o r e a s o n why a n i n d e p e n d e n t capitalist class s h o u l d n o t b e f o r m e d o n t h e basis of e x p o r t led i n d u s t r i a l i s a t i o n o r c o p y i n g of t e c h n i q u e ; in a n i n t e r d e p e n d e n t w o r l d e c o n o m y a c o n s i d e r a b l e d e g r e e of specialisation a n d l a r g e scale e x c h a n g e s of g o o d s , capital a n d t e c h n o l o g y a r e to b e e x p e c t e d . " See also Bill W a r r e n , Imperialism, Pioneer of Capitalism ( L o n d o n : N e w L e f t B o o k s , 1980), p p . 42—43; as h e p u t s it, t h e classes t h a t b e g i n t h e p r o c e s s of i n d u s t r i a l i z a t i o n " m a y t h e m s e l v e s b e i n d u s trial b o u r g e o i s i e s o r m a y b e d i s p l a c e d by t h e i n d u s t r i a l F r a n k e n s t e i n s they h a v e c r e a t e d o r they m a y b e c o m e f u s e d with t h e m . " 19. T h e claim is g r o u n d e d in ideological d e d i c a t i o n a n d in a n a s s e r t i o n t h a t t h e " m e a n i n g a n d p u r p o s e " of h i s t o r y a r e k n o w n to initiates. M a r x , of course, "inverted" rather than a b a n d o n e d the Hegelian metaphysic, that h u m a n history has a c o m p r e h e n s i b l e m e a n i n g a n d is d i r e c t e d t o w a r d a f o r e s e e able e n d p o i n t . It is t i m e , I believe, to let g o of this m e t a p h y s i c , w h i c h m o r e p r o p e r l y b e l o n g s to a n i n e t e e n t h - c e n t u r y w o r l d view. S t e p h e n J a y G o u l d ' s c r i t i q u e of t h e s a m e m e t a p h y s i c in D a r w i n i a n n a t u r a l h i s t o r y is r e l e v a n t h e r e as well; s e e G o u l d , The Panda's Thumb ( N e w Y o r k : N o r t o n , 1980). 20. T h e r e h a s a p p e a r e d d u r i n g t h e last d e c a d e o r so a c o n s i d e r a b l e literat u r e t h a t e m p h a s i z e s t h e a u t h o r i t a r i a n f e a t u r e s of Mexico's " o n e - a n d - a - h a l f p a r t y " system of " g u i d e d d e m o c r a c y . " B u t this l i t e r a t u r e also m a k e s plain t h a t

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a fair d e g r e e of p l u r a l i s m — n o t , of course, of a sort that allows all interest g r o u p s an equally effective r e p r e s e n t a t i o n — e x i s t s within t h e official party, t h e PRI ; a n d that t h e r e a r e political institutions, most notably t h e tradition of presidential c a m p a i g n i n g , that o p e r a t e to p r o v i d e a m e a s u r e of accountability. 21. Since this was originally written, in 1983, civilian g o v e r n a n c e has been reinstated in U r u g u a y . 22. Alan Angelí a n d R o s e m a r y T h o r p , " I n f l a t i o n , Stabilization a n d Att e m p t e d R e d e m o c r a t i z a t i o n in P e r u , 1975—1979," World Development 8, 11 (1980):865—886; a n d Evelyne H u b e r S t e p h e n s , " T h e P e r u v i a n Military Gove r n m e n t , L a b o r Mobilization, a n d t h e Political S t r e n g t h of t h e Left," Latin American Research Review 18, 2 (1983):57—93. See also David G. Becker, " M o d e r n Mine L a b o u r a n d Politics in Peru since 1968," Boletín de Estudios Latinoamericanos y del Caribe 32 ( 1 9 8 2 ) : 3 5 - 6 0 . 23. O n Brazil see Peter Evans, Dependent Development (Princeton: Princeton University Press, 1979). O n Peru see David G. Becker, The New Bourgeoisie and the Limits of Dependency (Princeton: Princeton University Press, 1983). 24. O n e of those w h o have recognized this r e l a t i o n s h i p is Alf red S t e p a n , The State and Society: Peru in Comparative Perspective (Princeton: Princeton University Press, 1978), p p . 2 3 5 - 2 3 6 . See also t h e discussions by Sayre P. Schatz. in chs. 5 a n d 7 of this volume. 25. A c o u n t e r a r g u m e n t is that t r a n s n a t i o n a l c o r p o r a t i o n s "super exploit" local labor by virtue of technological "deskilling" of the labor f o r c e a n d reliance o n newly d e v e l o p i n g c o u n t r i e s ' "industrial reserve a r m i e s " to k e e p wages at o r below the subsistence level. T h e a r g u m e n t is without merit a n d is in any case falsified by c o m p a r a t i v e wage d a t a within any newly d e v e l o p i n g c o u n t r y . "Deskilling" m e a n s that artisan skills, which can only be m a s t e r e d t h r o u g h long exp e r i e n c e a n d which a r e t h u s the " p r o p e r t y " of t h e w o r k e r , a r e r e p l a c e d by routinized skills which can in principle be t a u g h t to a n y o n e . But t h e mechanical skills at issue a r e still c o n s i d e r a b l e by t h e s t a n d a r d s of societies at an early stage of industrialization. For this reason, w o r k e r s who a r e skilled e n o u g h to be t r u s t e d with c o m p l e x m a c h i n e r y a r e relatively scarce in newly d e v e l o p i n g countries; w h e n they g o o n strike, as they o f t e n do, they c a n n o t be r e p l a c e d by any u n e m p l o y e d p e r s o n h a u l e d in off t h e street. 26. See J o h n F.H. Purcell's interesting discussion of t h e actions a n d attitudes of t r a n s n a t i o n a l c o r p o r a t e m a n a g e r s with respect to N i c a r a g u a ' s Sandinista r e g i m e : Purcell, " T h e Perceptions a n d Interests of U.S. Business in Relation to t h e Political Crisis in Central A m e r i c a , " in Richard E. F e i n b e r g (ed.), Central America: International Dimensions of the Crisis (New York: H o l m e s & Meier, 1982), p p . 103—123, esp. p p . 1 0 7 - 1 0 8 ; also his c o m m e n t s o n business ideology, p p . 111 — 113, a n d his description of t h e " a d a p t i v e a n d reactive" c h a r a c t e r of t r a n s n a t i o n a l firms' r e s p o n s e s to political events, p p . 117—118. 27. Albert Szymanski, "Capital A c c u m u l a t i o n o n a W o r l d Scale a n d t h e Necessity o f l m p e r i a l i s m , " The Insurgent Sociologist 7, 2 ( 1 9 7 7 ) : 3 5 - 5 3 . 28. T h e a r g u m e n t d o e s not apply in t h e case of e x p o r t - p l a t f o r m i n d u s trialization, which usually c o n c e n t r a t e s o n precisely those labor-intensive ope r a t i o n s that can n o l o n g e r be profitably p e r f o r m e d at m e t r o p o l i t a n wage rates. But industrialization of this sort, t h o u g h it exists in places (e.g., in

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Mexico's northern frontier zone), is not the n o r m in Latin America. 29. See ch. 2 of this volume. Postimperialist thought is rapidly gaining g r o u n d in African studies: see Richard L. Sklar, " T h e Nature of Class Domination in Africa, "Journal of Modern African Studies 17, 4 (1979): 531-552; also his Corporate Power; and Sayre P. Schatz, Nigerian Capitalism (Berkeley and Los Angeles: University of California Press, 1977). Colin Leys, Underdevelopment in Kenya (Berkeley and Los Angeles: University of California Press, 1974), pictured the domestic bourgeoisie in dependencista terms, as a class "auxiliary" to foreign capital; but in his "African Economic Development in Theory and Practice," Daedalus 111,2 ( 1982):99—124, he has left that position completely behind in order to embrace a postimperialist view. T o my knowledge, the first attempt at a postimperialist analysis of a case of Latin American development is Becker, New Bourgeoisie. 30. J o h n A. Hobson, Imperialism: A Study, rev. ed. (London: Allen & Unwin, 1938). 31. Sklar, Corporate Power, pp. 182-188. 32. John Mepham, " The Theory of Ideology in Capital," in J o h n Mepham and David-Hillel Ruben (eds.), Marxist Philosophy Vol. Ill: Epistemologa, Science, Ideology (London: Harvester Press, 1978), pp. 141-169; emphasis in original. 33. Becker, New Bourgeoisie, p. 15. 1 note that class formation as here defined "corresponds generally to the Marxian idea of a transition to the condition of a class für sich." On the latter see Karl Marx, The Poverty o] Philosophy (New York: International Publishers, 1963). 34. These groups constitute the "local wing" of the corporate international bourgeoisie; see Richard L. Sklar, "Postimperialism" (ch. 2 of this volume). 35. Becker, New Bourgeoisie, pp. 330—336. 36. Ibid., p. 13. 37. Colin Henfrey, "Dependency, Modes of Production, and the Class Analysis of Latin America," Latin American Perspectives 8, 3—4 (1981): 17—54, makes the argument that dependencista class analysis, despite its Marxist pretensions, has regularly neglected the proletariat and, for that reason, is more properly considered elite analysis. See also Eugene F. Sofer, "Recent T r e n d s in Latin American Labor Historiography," Latin American Research Review 15, 1 ( 1980): 167—176. 38. T h e case for a bourgeois class interest in democracy is m a d e by Bob Jessop, "Capitalism and Democracy: T h e Best Possible Political Shell?" in Gary Littlejohn et al. (eds.), Power and the State (New York: St. Martin's, 1978), pp. 10-51 ; and by Göran T h e r b o r n , " T h e Travail of Latin American Democracy," New Left Review, 113-114 ( 1979): 71—109. T h e r b o r n maintains that only u n d e r a system of pluralist participation can any bourgeois functional g r o u p be assured that its rivals within the class will not capture the ear of the state authorities and, with them, ride roughshod over its particular interests. Since the bourgeoisie is rent by internal conflict over such interests, pluralist democracy alone provides for the consensual aggregation of what will become the whole bourgeoisie's common class interest. But political democracy has its own logic; once established, it cannot be limited to the bourgeoisie and its allies.

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39. Leys, " A f r i c a n E c o n o m i c D e v e l o p m e n t , " p. 105; e m p h a s i s in o r i g i n a l . 40. See f n . 21. 41. David K. S h i p l e r , Russia: Broken Idols, Solemn Dreams ( N e w Y o r k : N e w Y o r k T i m e s B o o k s , 1983).

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"Bonanza Development" and the "New Bourgeoisie": Peru Under Military Rule DAVID G. BECKER What is the n a t u r e and political significance of transnational c o r p o r a t e action in the mineral r e s o u r c e industries o f the " t h i r d world"? Alt h o u g h waves o f nationalization have washed over the minerals industries in r e c e n t years, the question is not yet moot. S o m e nationalizations have b e e n partial; subsidiaries o f transnational r e s o u r c e firms r e m a i n , with r e d u c e d o w n e r s h i p stakes. W h e r e nationalization has b e e n complete, it is not u n c o m m o n f o r the transnationals to go on providing essential services on a fee basis. T h e products o f nationalized r e s o u r c e industries, with very few e x c e p t i o n s , are b r o u g h t to m a r k e t internationally t h r o u g h the transnationals' sales networks. In short, the role o f transnational c o r p o r a t i o n s in " t h i r d world" mineral e x p o r t developm e n t has c h a n g e d but not disappeared. It will not soon disappear, so long as " t h i r d world" g o v e r n m e n t s seek to realize the potential wealth o f their m i n e r a l reserves and to use it f o r underwriting national dev e l o p m e n t . T r a n s n a t i o n a l e n t e r p r i s e t h e r e f o r e retains a c o n s i d e r a b l e capacity f o r i n f l u e n c i n g d e v e l o p m e n t in the newly industrializing countries. T h i s c h a p t e r attempts a political analysis and interpretation o f that i n f l u e n c e . I f a newly d e v e l o p i n g c o u n t r y is able to g e n e r a t e large e x p o r t e a r n ings f r o m the minerals trade, its leaders are apt to perceive political and e c o n o m i c options that are foreclosed to c o u n t r i e s not so favored. I n particular, the flow o f e x p o r t revenues r e p r e s e n t s a " b o n a n z a , " an apparently easy s o u r c e o f d e v e l o p m e n t capital, that can seemingly help t h e m solve s o m e o f the most pressing p r o b l e m s o f early industrializat i o n — i n c l u d i n g the political problems o f legitimation and control that arise in t h e wake o f the c h a n g e s and dislocations b r o u g h t about, ineviAn earlier version of this article appeared in Comparative Political Studies 15,3 ( 1 9 8 2 ) : 2 4 3 - 2 8 8 . Used with permission. 63

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tably, by the industrialization process. W h a t results is a distinctive m o d e l , or strategy, of d e v e l o p m e n t , o n e that can be a p p r o p r i a t e l y n a m e d "bonanza d e v e l o p m e n t . " I will a r g u e that it is a viable model; a n d that both its viability a n d its u n i q u e political a n d social ramifications are closely related to its d e p e n d e n c e on transnational c o r p o r a t e participation.

T h e Class Analysis of B o n a n z a Development D e v e l o p m e n t has a political aspect, described by Richard L. Sklar as "the i m p r o v e m e n t of a society's ability to control the rate a n d direction of change. T h e concept of control is crucial to this definition, as it implies the ability to f o r m u l a t e a n d i m p l e m e n t strategies f o r solving p r o b lems a n d achieving goals."' T h e political significance of bonanza dev e l o p m e n t lies in its effect on the n a t u r e of p o w e r a n d social control. An u n d e r s t a n d i n g of this eff ect can best be attained t h r o u g h the use of a class analysis, provided that: 1. T h e analysis a p p r o a c h e s d o m i n a t i o n a n d s u b o r d i n a t i o n in t e r m s of actual class f o r m a t i o n processes a n d class practices. Class structures a n d practices c a n n o t be specified a priori on t h e basis of observations elsewhere or in a n o t h e r epoch, n o r can they be d e d u c e d in the abstract f r o m "laws of motion o f ' d e p e n d e n t ' capitalism.'" 2 2. It s u p p o r t s any claim of external d o m i n a t i o n with an analysis of actual class structures a n d practices that includes an accurate conceptualization of external class f o r m a t i o n . T h e criterion is i m p o r t a n t because, in t h e case of a newly developing, " p e r i p h e r a l " society like Peru's, the possibility that d o m i n a t i o n is effectively external—i.e., that class forces outside of Peruvian society s h a p e its d e v e l o p m e n t , foreclose a u t o c h t h o n o u s choice, a n d establish an internal system of controls a n d r e w a r d s that mostly serves external needs a n d interests—ought not to be r u l e d o u t in advance. External d o m i n a t i o n is, of course, the basis of the p o p u l a r d e p e n d e n c y p a r a d i g m . B u t it is not e n o u g h , in my view, to rest the case f o r e x t e r n a l d o m i n a t i o n o n structuralist propositions that o p e r a t e wholly in an abstract economic realm. 4 3. It deals with the f o r m a t i o n , practices, a n d relations of all significant class actors—including, specifically, the w o r k i n g class, as the latter is essential to the dialectic of capitalist c h a n g e a n d t r a n s f o r m a t i o n . An analysis of bourgeois a n d middle-class "fractions," alone, is actually an elite analysis. Elite analysis can

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65

display the inequities of capitalist d e v e l o p m e n t , b u t it conceives of p o w e r a n d control solely in t e r m s of a "circulation of elites." 5 It can n e i t h e r c o m p r e h e n d tendencies toward the amelioration of capitalist excesses that arise with t h e growth of working-class political cohesion a n d capability, n o r consider the prospects f o r bourgeois political-ideological hegemony 1 1 ; it presupposes an u n dynamic, n o n t r a n s f o r m a t o r y capitalism that must be maintained in force by political a u t h o r i t a r i a n i s m . T h e d e p e n d e n c y p a r a d i g m , despite the notable advances of recent years, has not yet succeeded in i n c o r p o r a t i n g this b r o a d e r , dialectical class analysis—in large part because it does not deal empirically with s u b o r d i n a t e class forces. 7 There is still a n o t h e r reason why the d e p e n d e n c y p a r a d i g m is not u p to the task of the political analysis of b o n a n z a d e v e l o p m e n t . T r u e , the latest advances have carried d e p e n d e n c y analysis well beyond the naive early versions that spoke of " d e v e l o p m e n t of u n d e r d e v e l o p m e n t " a n d of d o m i n a t i o n by " c o m p r a d o r " classes or " l u m p e n b o u r g e o i sies."H But these advances have all been based on the u n f o l d i n g of the import-substitution m o d e l in countries like Brazil a n d Argentina, whose e x p o r t bases a r e largely agricultural a n d are (or were) u n d e r the control of l a n d e d classes. It is the dynamics a n d bottlenecks of this model that are a d d u c e d to explain "associated-dependent development""; "technological-industrial dependency" 1 "; "national disint e g r a t i o n " " ; a n d , in the political d i m e n s i o n , "bureaucraticauthoritarianism." 1 ' 2 D e p e n d e n c y studies of mineral export-based d e v e l o p m e n t have simply not progressed m u c h f a r t h e r t h a n the formulations of Lenin a n d B a r a n : that external force is used to d e p r i v e "third world" host countries of a fair r e t u r n on their mineral wealth, t h e r e b y i m p e d i n g their d e v e l o p m e n t while u n d e r w r i t i n g m e t r o p o l i t a n economic d e v e l o p m e n t with c h e a p raw m a t e r i a l s . 1 T h e political consequences a r e held to be the encapsulation of the minerals sector in an economically disarticulated "enclave"; the r e i n f o r c e m e n t of antid e v e l o p m e n t a l a g r o - e x p o r t elites, whose control is contested only by an ineffectual p o p u l i s m ; a n d the eventual e m e r g e n c e of a p s e u d o a u t o n o m o u s state which, t h o u g h able in t h e short r u n to carry t h r o u g h a few r e f o r m s that weaken t h e grip of t h e a g r o - e x p o r t g r o u p s , lacks a societal base a n d is h e n c e incapable of institutionalizing these r e f o r m i s t tendencies. 1 4 T h e Peruvian case suggests s o m e t h i n g quite d i f f e r e n t . B o n a n z a d e v e l o p m e n t t e n d s to propitiate the f o r m a t i o n of a certain s t r a t u m or subclass of the national bourgeoisie—a g r o u p that is f r e q u e n t l y ref e r r e d to as a "new bourgeoisie"' 5 a n d t h a t aspires to b e c o m e the leading e l e m e n t of a d o m i n a n t national b o u r g e o i s class. T h e rise of t h e new

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D A V I D G. BECKER

b o u r g e o i s i e is a c o n s e q u e n c e of its association with t h e activities of t r a n s n a t i o n a l r e s o u r c e c o r p o r a t i o n s . Paradoxically, h o w e v e r , its p o w e r is e x e r t e d to c o m b a t a n d r e d u c e f o r e i g n d o m i n a t i o n . T h e new b o u r geoisie d o e s not n e e d to rely o n t h e f a v o r s of f o r e i g n interests o r raw c o e r c i o n to m a i n t a i n its p o w e r a n d privileges. I n s t e a d , it has t h e p o t e n tial to s e c u r e its d o m i n a t i o n peaceably, t h r o u g h t h e identification of its class interest in d e v e l o p m e n t with w i d e r p o p u l a r a s p i r a t i o n s — i n c l u d i n g t h o s e of an o r g a n i z e d , politically assertive w o r k i n g class in t h e m i n e s a n d s m e l t e r s . C o r r o b o r a t i n g e v i d e n c e c o m e s f r o m observations of class f o r m a t i o n a n d c o n s o l i d a t i o n of a similar sort in two o t h e r cases of m i n e r a l - e x p o r t - b a s e d d e v e l o p m e n t : Nigeria a n d Zambia. 1 7

A Replacement for

Dependency?

R i c h a r d L. Sklar's a l t e r n a t i v e p a r a d i g m a t i c c o n c e p t i o n of capitalist d e v e l o p m e n t , " p o s t i m p e r i a l i s m , " is b e t t e r suited t h a n d e p e n d e n c y to t h e analysis of b o n a n z a d e v e l o p m e n t , yet d o e s not s u r r e n d e r d e p e n d e n c y ' s p r o g r e s s i v e value o r i e n t a t i o n . 1 8 T r a n s n a t i o n a l c o r p o r a t i o n s , a r g u e s Sklar, a r e i n t e g r a t i n g t h e w o r l d e c o n o m y a n d r e d u c i n g i n t e r i m p e r i a l i s t conflict a m o n g t h e m e t r o p o l i t a n states. T h e e x p a n s i o n of c o r p o r a t e h o r i z o n s f r o m a n a t i o n a l to a global f r a m e indicates t h a t a process of i n t e r n a t i o n a l class f o r m a tion is u n d e r way. I n o t h e r w o r d s , t r a n s n a t i o n a l c o r p o r a t e action is p r o ducing an international bourgeoisie whose concerns transcend the political interests of its m e m b e r s ' h o m e states. T h i s i n t e r n a t i o n a l b o u r g e o i s i e has l e a r n e d h o w to b r i n g its global interests into h a r m o n y with t h e national a s p i r a t i o n s of " t h i r d w o r l d " c o u n t r i e s that play host to t r a n s n a t i o n a l subsidiaries. T h e stage is t h u s set f o r t h e a p p e a r a n c e in t h e s e c o u n t r i e s of d o m i n a n t classes w h o s e l e a d i n g b o u r g e o i s strata h a v e a s t r u c t u r a l i n t e r e s t in n a t i o n a l d e v e l o p m e n t b u t p a r t i c i p a t e , at t h e s a m e time, as j u n i o r p a r t n e r s in t h e i n t e r n a t i o n a l b o u r g e o i s i e . T h i s k i n d of local d o m i n a n t class has a capacity f o r h e g e m o n y . It d o e s imp o s e late-capitalist values, c u l t u r e , a n d social f o r m s o n its society, b u t in a m a n n e r quite different f r o m the d e p e n d e n c y conception: T h e leading bourgeois strata interact with both metropolitan and local societies, since they have interests in each. . . . [I]n interacting with the latter they impose metropolitan values because to do so is in their self-interest. . . . [T]he leading strata are the economic and political hinge points between local societies and the metropoli. Yet, inasmuch as these strata need no longer opt for either national or metropolitan concerns, they can be nationalistic and developmentalist without contradicting their international interests. As their dominance is not nar-

PERU UNDER M I L I T A R Y R U L E

67

rowly self-serving, it does not need to rest on coercive force and ran coexist with formal democracy.' 1 '

What emerges, Sklar contends, is a new, "postimperialist" phase o f capitalist development that leaves colonialism 2 " behind. T h e evolving structure o f the world minerals industries lends particular credence to Sklar's assertions. T h e s e industries are international oligopolies in which the internationalization o f capital and o f managerial control are already accomplished facts.' 1 Markets are highly integrated at the world level. Without doubt it is over questions o f minerals investment where "third world" host countries have become most assertive and, on the whole, most successful in their dealings with transnational firms; the transnationals, for their part, have not generally opposed host-country aims to the bitter end and have not called routinely on the power o f their home governments to redress the bargaining balance. 2 2 On the contrary, they have tacitly acknowledged that wage, taxation, concession, and ownership policies in natural resources lie within the exclusive province o f the host state, and that local subsidiaries must conform to such policy dictates like "good corporate citizens." The ability o f transnational managers to justify their subsidiaries' conformity to the local policy dictates o f host states, without perceiving a sacrifice o f their firms' global interests, has been systematized by Sklar as an element o f managerial belief, an ideological "doctrine o f domicile." 2 1

Bonanza Development

Defined

O n e o f the aims of this paper is to suggest that, in thinking about "third world" export-oriented development, it is better not to regard primary product exports, agricultural and mineral, as all o f a piece. At the economic level, mineral exports do not subject the exporting nations to the secularly declining terms o f trade that have been widely reported for agricultural exports. 2 1 As regards its social and political impact, mining is today an eminently industrial activity: it relies on typically industrial modes o f labor control, is often quite capital-intensive, and usually embraces considerable pre-export processing o f the raw ores. Consequently, my definition o f bonanza development excludes export bases that are predominantly agricultural or that depend on directly coercive (i.e., non-wage) forms o f labor control. 2 " T h e bonanza development model has these defining characteristics: 1. T h e underlying mechanism is the production for export o f mineral products, with a substantial part o f the earned surplus ear-

68

D A V I D G. B E C K E R

marked for the host government. Its share is used for its own financial support; to develop other economic sectors, some of which may be unrelated to minerals production, in a setting of an official commitment to industrial promotion; and to provide economic benefits to vocal, mobilized elements of the population so as to dissuade challenges to the existing structures of political domination and social control. Mineral production and export are valued primarily as sources of capital and scarce foreign exchange; their direct employment and linkage effects are considered secondary. 2. With minerals extraction becoming a primary generator of new industrial capital, there is an official concern with productive efficiency and surplus maximization, to the exclusion of potentially conflicting noneconomic objectives. This conduces to capitalist relations of production in minerals enterprises, irrespective of the nature and nationality of juridical ownership and, to a large degree, of regime ideology. It also conduces to a preference for capital-intensive technologies in the export sector. On the other hand, there is nothing to prevent the host government f r o m pursuing limited noneconomic objectives that do not conflict with efficiency goals. One such objective is the indigenization of enterprise management, ideologicallyjustified by nationalism or antiracialism and useful in that it seemingly increases local control. 3. T h e emphases on productive efficiency and high technology combine to encourage the continuing presence in the minerals sector of transnational firms, even in an era of rising host-country nationalism. 2 " They alone command access to the huge amounts of investment capital required to launch a major high-technology mining or drilling project. Their organizational and technical expertise is usually indispensable for setting up the project and for staffing it until local citizens can be trained to the task. If nothing else, they are needed to supply the machinery and supervise construction and installation. Finally, their specialized knowledge of international marketing is irreplaceable. 4. T h e state's capture and redistribution of a share of the economic surplus f r o m mineral production—the "bonanza"—substitutes for direct economic linkages to the rest of the domestic political economy and weakens the mineral sector's "enclave" character. T h e capture of surplus is accomplished through taxation, royalties, direct claims on profits (when the state is ajoint venturer or the sole juridical owner), or forced transfer payments. Surplus redistribution to other economic sectors takes either or both of two forms: direct investment by the state; or subventions to domestic entrepreneurs, which may include tax holidays, low-interest loans or outright grants f r o m state development banks, or price subsidies. 27 T h e distribution of largesse to mobilized

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69

a n d mobilizable societal g r o u p s — b o n a n z a d e v e l o p m e n t can be a defensive strategy d e s i g n e d to h e a d off a u t o n o m o u s p o p u l a r mobilization—takes place t h r o u g h welfare p r o g r a m s , public works construction, a n d increased state e m p l o y m e n t , all paid f o r o u t of the state's s h a r e of the "bonanza"; a n d t h r o u g h h i g h e r wages a n d g r e a t e r emp l o y m e n t creation in the private sector, e n c o u r a g e d or o r d e r e d by official policy. Passing some of the benefits o n to workers a n d middle-class staff, via h i g h e r pay a n d m o r e j o b creation t h a n justified by narrowly e c o n o m i c criteria, is a quid p r o q u o d e m a n d e d of the private sector by the state in e x c h a n g e f o r the subventions that it provides. 5. T h e state that u n d e r t a k e s b o n a n z a d e v e l o p m e n t must evidently be "relatively a u t o n o m o u s " of particular a n d s h o r t - r a n g e bourgeois interests in the private sector.-" T h e r e a r e probably several paths f r o m which such a state may e m e r g e ; a c o m p a r i s o n of the Peruvian, Zambian, a n d Nigerian cases suggests that the onset of b o n a n z a developm e n t may p r e c e d e as well as follow the a p p e a r a n c e of the initial nuclei of t h e c o r p o r a t e m a n a g e r i a t a n d organized w o r k i n g class. Bonanza d e v e l o p m e n t is a political concept. It reaches beyond the specification of a strategy of economic d e v e l o p m e n t to a d d r e s s two related issues: the social changes (with their political ramifications) w r o u g h t by the i m p l e m e n t a t i o n of the strategy itself, a n d the political e n d s overtly served by capitalist d e v e l o p m e n t of n a t u r a l resources. T h e concept of b o n a n z a d e v e l o p m e n t s u p p l e m e n t s the idea of postimperialism by specifying a domestic socioeconomic a n d political d y n a m i c that explains the a p p e a r a n c e in the host c o u n t r y of a stable capitalist o r d e r with a potential for industrialization. First of all, b o n a n z a dev e l o p m e n t allows a d o m i n a n t class to enjoy the fruits of an administratively s t r o n g a n d capable state without paying f o r t h e m out of its own pockets in h i g h e r taxes on e n t e r p r i s e profits a n d personal income. Second, u p w a r d mobility o p p o r t u n i t i e s are o p e n e d (either by industrialization, whose e x t e n t in the "third world" has b e e n d o c u m e n t e d by Warren,'"' or by the g o v e r n m e n t ' s use of the " b o n a n z a " to e x p a n d b u r e a u c r a t i c e m p l o y m e n t ) to ambitious local citizens—in their majority m e m b e r s of the m i d d l e class who, if a n g e r e d by "blocked ascent," would be capable of m o u n t i n g serious revolutionary threats to the status quo. 3 " F u r t h e r m o r e , industrial g r o w t h enables the d o m i n a n t class to seek legitimacy o n the basis of its a p p a r e n t developmentalism. W h e n a d d e d to the ideological nationalism r e n d e r e d feasible by the class's association with a stronger state, industrializing developmentalism has always been an efficacious device f o r legitimizing class d o m i n a t i o n . T h i r d , the availability of the " b o n a n z a " r e n d e r s unnecessary the initial acquisition of reinvestable surpluses f r o m an intensified squeeze

70

D A V I D G. B R O K E R

on largely agricultural producers—i.e., "primitive accumulation." Industrializing elites n o longer n e e d p r e o c c u p y themselves with the always difficult task of r e o r g a n i z i n g agriculture in the face of peasant resistance as a prerequisite to capitalist d e v e l o p m e n t . O n e result is to award the industrializers g r e a t e r f r e e d o m iti choosing class allies. T h e y can avoid a h e a d - o n c o n f r o n t a t i o n with l a n d e d elites; or, alternatively, they can s u p p o r t land r e f o r m with m u c h less concern for its effect on agricultural productivity. T h e y a r e also in a position to coopt the organized w o r k i n g class with promises of material gains, at lesser cost to their own ability to accumulate capital. The possibility of such gains, meanwhile, e n c o u r a g e s "economistic" tendencies within working-class organizations. It might be a d d e d that bonanza d e v e l o p m e n t stabilizes capitalism as a system by m a k i n g comparatively less attractive to state elites in newly d e v e l o p i n g countries the main historical alternative strategy of rapid industrial d e v e l o p m e n t : "socialist mercantilism," as practiced in the USSR u n d e r Stalin." Aspects of the bonanza d e v e l o p m e n t model may also a p p e a l to state-socialist elites who want to accelerate the pace of economic d e v e l o p m e n t without a repetition of Stalinism's excesses. r '

T h e Peruvian Version of Bonanza D e v e l o p m e n t Present-day Peru is a classic instance of b o n a n z a d e v e l o p m e n t . Metals, ores, a n d p e t r o l e u m , about 90 p e r c e n t of whose p r o d u c t i o n is exp o r t e d , account f o r the lion's s h a r e of p r i m a r y - p r o d u c t e x p o r t value (Table 4.1). Mineral e x p o r t s (including p e t r o l e u m ) increased their s h a r e of total e x p o r t value by almost 40 p e r c e n t f r o m 1960 to 1980; note also t h e c o r r e s p o n d i n g l y d r a m a t i c decline in the e x p o r t salience of agricultural commodities a n d fishmeal. T h e capitalist m o d e of production is universal in mining, a n d technologies in the p a r a m o u n t gran minería (large-scale m i n i n g subsector) are a d v a n c e d a n d capitalintensive (with o n e qualification, to be taken u p later on). I m p o r t a n t foreign investments r e m a i n in t h e sector despite e x p r o p r i a t i o n s , the constitution of new state enterprises, a n d the establishment of a state mineral e x p o r t sales m o n o p o l y (since abolished) d u r i n g the 1968—80 period of military rule. Data d o not exist that would enable us to comp u t e the a g g r e g a t e c o n t r i b u t i o n of the minerals industries to state finances, b u t it m u s t be very great. Mining firms a r e the country's biggest c o r p o r a t e taxpayers, a n d their employees, whose r e m u n e r a t i o n s at all j o b levels are f a r above the national average, pay m u c h m o r e t h a n t h e average in income a n d indirect taxes. T h e state channels a variety of

PERU UNDER MILITARY RULE

Tabic

4.1

71

C o n t r i b u t i o n s to P e r u v i a n E x p o r t V a l u e by C o m m o d i t y (columns A, percent of local value; columns B, percent of value excluding petroleum and derivatives) 1960

1970

A

B

A

B

4.3 21.9 16.9 12.0 7.6 5.0 4.1 5.6 11.0 3.9

4.5 22.8 17.7 12.5 7.9 5.2

4.7 22.5 2.6 6.0 3.2 3.5

5.8 11.5 4.0 8.1

3.7 17.6 2.0 4.7 2.5 2.7 21.9 14.8 0.3 5.0 24.8

19.0 0.4 6.4 31.7

100.0

100.0

100.0

Coffee Copper Cotton Fishmeal Iron ore Lead Petroleum Silver Sugar Zinc Other"

_JJ_

Total

100.0

SOURCE: Elaborated by the author from data provided by the National Mining Society and the Central Reserve Bank of Peru. NOTES:

a

Mostly manufactured products.

direct and indirect benefits to politically mobilized societal groups. Post-1968 policies of industrial promotion resulted in an 11.4 percent mean annual increase in industrial output between 1969 and 1975, versus a 1960—69 average of 9.7 percent starting f r o m a far lower base." Table 4.2 shows that the shift to bonanza development has coincided with a diversification of Peru's export trade outlets, especially in other non-Western regions. T h e penetration of foreign capital into critical areas of the economy is said to weaken the institutional base of the domestic bourgeoisie, thereby inhibiting its development as an independently entrepreneurial class.31 However, the evidence from Peruvian mining does not support that claim. Within the mediana minería (medium-scale mining subsector), only 15 of 71 firms are controlled by foreign interests. Among the domestic firms are seven large corporations and corporate groups each of which is fully rationalized and professionally managed, controls assets valued in millions of dollars, and employs over a thousand persons. T h r e e of these display the wide diffusion (by local standards) of shareholding and the separation of formal ownership f r o m actual control that are typical of the "mature" business corporation. 1 5 At least one has enough of an international reputation that it can maintain a sizable line of credit with a major U.S. bank. T h e mediana minería produces over half of the national

72

Table

D A V I D G. BECKER

4.2

Peruvian Export T r a d e by Destination (percent of total value except as noted)

Country (or Region)

1962

1977

United States Canada Latin America United Kingdom EEC (excluding United Kingdom)* Japan OPEC nations Soviet bloc

34.9 0.4 10.0 9.7 31.6 6.5 0.0 0.4

30.6 0.7 16.0 3.8 16.2 12.0 0.0 9.9

b

Total

100.0

100.0

Total trade value ($ millions)

539.4

1665.8

b

SOURCES: Elaborated by the author from data compiled by the International Monetary Fund and the Central Reserve Bank of Peru. NOTES: parison.

* Denmark and Ireland added to 1962 datum for sake of consistent comb

Less than 0.1%

o u t p u t of all n o n f e r r o u s metals other than c o p p e r — t h r e e fourths, in the c ase of silver. Its most rapid growth has come since 1950, which is also the period of the most rapid growth of foreign investment. As important as the mediana minería is, it no longer marks the o u t e r b o u n d of the native mining bourgeoisie. T h e addition to the gran minería of a wholly new parastatal firm in 1970, along with the nationalization of two formerly foreign companies in 1973—74, have given that class element other, larger bastions of economic s u p p o r t .

The Historical Origin s of Peruvian Bonanza Development Reliance on intensive exploitation of mineral resources for state revenues and f o r coopting politically active subordinate g r o u p s can be traced back in time to the nineteenth-century "age of guano." 3 , i T h e political use of "bonanza" revenues was the capstone of the economic policy p u r s u e d until 1968 by the ruling "oligarchy"—a policy otherwise typified by laissez-faire." Metals replaced fertilizers as the principal "bonanza" resource a f t e r 1901, with the arrival of the C e r r o d e Pasco C o r p o r a t i o n . H e a d q u a r t e r e d in New York, it was f o r m e d for the express p u r p o s e of exploiting Peru's rich, extensive c o p p e r deposits; its welcome was assured in advance by a favorable revision of the Peruvian Mining

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Code. 38 By 1914, Cerro was the largest business enterprise on Peruvian soil (a status it would keep for many years; at its demise in 1973, it was still Peru's largest private employer) and a major purveyor of copper to the industries of the United States and Europe. Before the close of the next decade, it was also producing appreciable quantities of lead, zinc, silver, and minor metals. It built smelters and refineries in the Andean town of La Oroya, on the rail line to the port of Callao. It purchased several haciendas whose owners had sued it for damages caused by smelter fumes, thereby becoming Peru's largest landowner. As such it was a de facto ally of the oligarchy; it promptly formalized the alliance by joining the National Agrarian Society, a principal institutional embodiment of oligarchic power. This close association with the politically dominant elite of the time ensured that Cerro's influence over all matters of mining policy would be preponderant; every significant piece of mining legislation from 1901 through the 1950s was adopted subject to the company's "advice and consent," and frequently at its instigation. T h e term "segmentary incorporation" has been coined to describe the process of political development in oligarchic Peru. 1 ' 1 Segmentary incorporation was a second line of defense for oligarchic power, resorted to when coercion alone could no longer bridle subordinate groups with growing aspirations. Since any real popular challenge to the system d e p e n d e d above all on the unity of diverse subordinate groups, the oligarchic counterstrategy was to divide—by selectively admitting the best organized and most cohesive of them to a measure of economic privilege and limited political participation—and conquer. Cooptation of middle-class groups took the form of expanded state employment, legal protection of white-collar employee rights, and social insurance programs. In time, organized working-class and urban underclass elements were coopted through public works programs and the gradual extension of legal protections and insurance programs. T h e availability of the "bonanza" made all this possible: it financed the cooptative benefits extended directly by the state, and it permitted the government to compensate private employers for the benefits demanded of them in lower taxes than they would have otherwise had to pay. Meanwhile, repressive force continued to be used against less cohesive, less well organized popular groups that did not yet pose a comparable threat. T h e problem with segmentary incorporation was that economic development itself, no matter how retarded by laissez-faire, gradually brought into existence ever more actual or potential popular mobilization, thus, ever more actual or potential demands on the system. Consequently, the "bonanza" had to be enlarged periodically in o r d e r to forestall systemic crisis.

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An incipient crisis point was reached in the late 1940s,"' lending urgency to a drive for "bonanza" expansion through additional foreign investment in mining. In order to attract it, in 1950 a new Mining Code was enacted; a revision of a draft prepared by Robert Koenig, Cerro's chief executive, it duplicated in Peruvian law most of the relevant provisions of the U.S. Code, including the taxation of net income rather than export value and the provision of generous deductions for depreciation and depletion. It also contained special incentives for investment in open-pit mining. In response, the Southern Peru Copper Corporation was formed by American Smelting and Refining (Asarco) to exploit the Toquepala copper deposit in the southern Andes. Constituted as a joint venture with three other transnational parents, including Cerro," and having secured its incentives with a development contract entered into with the Peruvian state under the 1950 Code, the new company brought the Toquepala mine and its smelter into production in 1960. T h e mine was an instant financial success' 2 and caused Southern to surpass Cerro as the largest firm in the gran mineria by all criteria save total employment. Another new entrant was the Marcona Mining Company, which in 1952 began the large-scale exploitation of Peruvian iron ore; it was a joint venture of the Utah Construction Company and Cyprus Mines. Both Southern and Marcona used state-ofthe-art production technologies, mining many times the volume of material that Cerro did with less than a third as many workers. Both interacted less with the domestic economy, except for their tax payments, than did Cerro. But their presence made possible the "populistic" policies of expanded state benefits and public works construction that were adopted by the authoritarian regime of Gen. Manuel Odria (1948-56). Given the open character of pre-1968 economic policy, however, the "bonanza" operated only in the political plane. Bereft of official promotion and kept subservient to the oligarchic interest in agriculture, industrialization advanced but slowly and with heavy penetration by transnational manufacturing firms. T h e formation of a domestic industrial bourgeoisie was correspondingly held back, and that class remained u n d e r the domination of oligarchic money capital. But there was a significant exception: the managerially oriented mining bourgeoisie. Its class formation was propelled forward by the 1950 Mining Code, whose taxation clauses facilitated corporate planning and helped make corporate growth independent of oligarchic investment capital. Bourgeois class formation in the mediana mineria was also spurred by Cerro. When its declining mine output ceased to match its smelter and refinery capacity, it made up the deficit with ore purchases f r o m independent medium firms. Those purchases acceler-

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ated after 1950, since Cerro management saw bigger profits from investments in smelting and refining than f r o m new mines. At about the same time, Cerro started to indigenize its managerial staff in order to reduce the expense of hiring expatriates. Hoping to enlarge the pool of local mining professionals, it made financial contributions to the National Engineering University (UNI), offered summer jobs to students, and established scholarships for engineering study abroad. In short order it became the premier on-the-job training ground for Peruvian mining professionals. It also contributed loan and equity "seed money" to the foundation of several locally owned medium firms, provided technical aid, and even sold difficult-to-obtain spare parts and equipment from its stocks." It was instrumental in reorganizing and refinancing the industry's trade association, the National Mining Society. T h e Society became more than just a political lobby; in keeping with the generally corporatist tradition of Peruvian politics,14 it enjoyed formal representation within many state institutions.

The Military Regime's Bonanza Development Content and Context

Strategies:

T h e military government of 1968—80 brought bonanza development to full fruition by adding the elements that had been missing under oligarchic rule: prioritization of industrial development, and an economically active state whose resources would be used to foster development. T h e nationalization of the banking system and establishment of the Corporación Financiera de Desarrollo (COFIDE), a state development bank, gave the government the means for accumulating capital and directing it toward industrialization projects. Restrictions were placed on the activities of transnational corporations in order to prevent industrial promotion from redounding disproportionately to their advantage. Higher education was reformed so as to stress teaching and research in areas of immediate social utility: the natural and social sciences, engineering, and management. A reform of the state administration improved policy coordination and laid the groundwork for full-scale economic planning, which was begun in 1971. T h e generals acted as if they understood f r o m the start the political value of a bonanza development strategy. They wanted their "revolution" to be a neat surgical excision of oligarchic power (i.e., an organizational revolution that would not uncap socially revolutionary pressures f r o m below), which required that segmentary incorporation be continued and extended. In particular, it would have to reach more members of the working class and urban underclass, and a start would have

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to be m a d e toward i n c o r p o r a t i n g the peasantry.^ 5 T o d o all this at once m e a n t that the "bonanza" h a d to be e n l a r g e d as never b e f o r e . T h a t the regime's m i n i n g policies would be broadly d e v e l o p m e n talist a n d dirigiste was assured by the p r e s e n c e of Gen. J o r g e F e r n á n d e z M a l d o n a d o at the helm of the new Ministry of Energy a n d Mines; the general, a devotee of Social Christian a n d dependencista ideology,'"' was at this time a close c o n f i d a n t e of the p r e s i d e n t , Gen. J u a n Velasco Alv a r a d o (1968—75)—whose own political views, to the d e g r e e that they had c o h e r e n c e , were still f a r t h e r to the left. But within the guidelines laid d o w n f r o m above, policy was s h a p e d in the main by a cadre of technocrats, with whom F e r n á n d e z Mald o n a d o e n j o y e d a close a n d mutually respectful relationship. Most h a d come to state service f r o m the ranks of the private m a n a g e r i a t . T h e y were motivated by professional stewardship, the o p p o r t u n i t y to use their expertise on behalf of the nation; by the regime's administrative r e f o r m , which h a d vastly i m p r o v e d the conditions, status, a n d r e m u nerations of state e m p l o y m e n t ; a n d by the fact that, as the Peruvian political tradition does not s h a r e the N o r t h American concern with conflict of interest, they could retain their holdings in, a n d even their salaries f r o m , private mining enterprises. Not surprisingly a n d with n o noteworthy exceptions, the policy options that attracted t h e m reflected the interests of domestic private capital in the industry. But their app r o a c h was novel in perceiving a need f o r the state to cease being el gran ausente ("the great absentee") of the m i n e r í a , to become instead an active p l a n n e r a n d investor, a n d to c o m b i n e incentives with disciplinary sanctions against foreign-owned firms that failed to c o n t r i b u t e adequately to b o n a n z a d e v e l o p m e n t . Nationalization in natural resources was never a p r i m e policy objective. It was seen as u n d u l y costly. B o n a n z a d e v e l o p m e n t d e m a n d e d accelerated foreign investment, a n d prospective investors would be scared off if existing resource firms were e x p r o p r i a t e d without compensation; but the p a y m e n t of c o m p e n s a t i o n would r e q u i r e an outflow of capital that would buy not o n e ton's worth of increased p r o d u c t i o n . Also, the technocrats were not p e r s u a d e d that resource nationalization elsewhere (they h a d studied closely the e x a m p l e s of Chile a n d the A f r i can c o p p e r p r o d u c e r s ) h a d d o n e m u c h either to increase o u t p u t or to r e d u c e d e p e n d e n c e . T i g h t e r state regulation a n d oversight of c o r p o rate operations, they felt, could accomplish as m u c h or m o r e a n d d o so less expensively. T h i s a p p r o a c h f o u n d favor, of course, with the private-sector m i n e o w n e r s a n d m a n a g e r s . As c o n t r i b u t o r s to the "bonanza," they would rise in public esteem by being directly associated with the new nationalist-developmentalist orientation of official policy; they were as-

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s u r e d that the state would not b e c o m e a m i n i n g monopolist at their expense; a n d they would not be cut off by an antagonized international m i n i n g establishment f r o m participation in the world industry's m a r kets a n d technical f o r u m s . T h e y did not o p p o s e stricter state oversight, as might have b e e n anticipated; they saw it as t e n d i n g to "sanitize" the industry politically. T h a t is to say, it spiked the g u n s of radical nationalists w h o had been accusing the industry of various a b u s e s / 7 a n d , by g u a r a n t e e i n g that laws a n d contracts would h e n c e f o r t h be written ab initio with the maximization of Peruvian interests in m i n d , placed relations with foreign capital on a m o r e equitable—and, thereby, m o r e stable—basis.

The Military Regime and Transnational

Mining

Capital

The pragmatic, nonideological orientation of sectorial policy did not rule out nationalization altogether but reserved it as the ultimate sanction to be applied against c o m p a n i e s that would not abide by the gove r n m e n t ' s authoritative definition of "good c o r p o r a t e citizenship." C e r r o a n d M a r c o n a e n d e d by b e i n g nationalized—the first because it was institutionally incapable of p e r f o r m i n g in the new role laid out f o r it, the second as a result of political infighting within high military councils." 1 S o u t h e r n P e r u C o p p e r , which did act to increase the Peruvian m i n i n g "bonanza," was allowed to r e m a i n u n d e r exclusively private, a n d f o r e i g n , o w n e r s h i p , a l t h o u g h it had to s u r r e n d e r certain traditional prerogatives. C e r r o , t h o u g h a transnational f i r m in the technical sense, was n e i t h e r a core m e m b e r of the world c o p p e r oligopoly n o r a vertically i n t e g r a t e d p r o d u c e r of n o n f e r r o u s metal p r o d u c t s in the usual m e a n ing of the phrase. 4 a All of its w o r k i n g mines but o n e , a n d all of its processing facilities, were in Peru. I n d e e d , until the early 1950s all of its o p e r a t i o n s except f o r t o p m a n a g e m e n t were located in Peru. T h e r e a f ter it used its Peruvian profits to acquire an a s s o r t m e n t of U.S. subsidiaries; but as a c o n g l o m e r a t e it was poorly i n t e g r a t e d a n d not very profitable. By the late 1960s, r e t u r n s on invested capital were too low to g e n e r a t e the cash flow n e e d e d f o r f u r t h e r acquisitions; the c o m p a n y t h e n a t t e m p t e d , without success, to a r r a n g e a "friendly" m e r g e r with a larger, cash-rich p a r t n e r . T h e c o m p a n y ' s Peruvian o p e r a t i o n s had b e c o m e technologically obsolete. Most m i n i n g was of the u n d e r g r o u n d variety, was resistant to mechanization, a n d necessitated a sizable workforce. Not only was this w o r k f o r c e very expensive to maintain a f t e r the mines were unionized in the 1940s, it was also ill-disciplined. For Cerro's workers distrusted

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and resented their employer, whose past practices, in the memory o f many still alive, included low wages (in some instances, debt peonage), coercive supervision, unhealthful working conditions, abysmally inadequate camps, and militant anti-unionism; while this "social debt" had ceased to mount up at the same rate as in the early days, neither had it been repaid."'" Profit rates were marginal—the bulk o f Peruvian returns came from Cerro's minority holding in the very profitable S o u t h e r n — a n d the firm's overall financial position did not permit the huge investments in new technologies needed to augment them. As was previously observed, the company had based its survival in the country on its ability to curry political favor with the oligarchy and the government o f the day. However, the military regime's land reform' 1 1 —the C e r r o haciendas were its first target—and the general eclipse o f oligarchic power closed o f f Cerro's traditional channels o f influence. Whatever else it might do, the military regime would not risk its nationalist bona fides by seeming to award preferential policy access to the representatives of foreign capital. From 1968 on, Cerro's ability to do business in Peru became conditioned, as with all other foreign mining enterprises, on its economic contribution. In view of what has already been said regarding the company's history and institutional limitations, it should come as no surprise that it f ailed the test. By proceeding methodically and nonideologically, government officials were able to establish a solid legal basis for a punitive expropriation, 52 to choose the most convenient moment to implement the expropriation, and to cut C e r r o o f f from its putative allies in international mining and financial circles and in the U.S. government. 5 3 Cerro's Peruvian minero-metallurgical complex was transferred to state ownership on J a n u a r y 1, 1974. For an out-of-pocket cost o f $ 2 8 . 5 million, the state obtained title to assets worth $ 1 7 5 million on books, 54 without upsetting its ongoing relationship with other mining firms or with the international financial establishment—which had already become a principal underwriter o f Peruvian development. No extranational entity opposed the settlement, and the Nixon administration gave it a formal stamp o f approval. In light o f the military regime's concern with the size o f the "bonanza," it can be argued that C e r r o might have escaped nationalization, in spite o f its limitations and deficiencies, had state technocrats believed that foreign managerial expertise were necessary to operate its installations. T h e y did not so believe, due to their confidence in their own capabilities—acquired, in many instances, with Cerro's help. Was their confidence misplaced? T a b l e 4.3 summarizes the financial perf o r m a n c e o f C e r r o and its parastatal successor, Centromin-Peru, over the 30-year period from 1950 to 1980; the performance o f the latter

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c o m p a r e s very favorably, the m o r e so c o n s i d e r i n g that between 1975 a n d 1977, parastatal m a n a g e m e n t h a d to c o n t e n d with severely depressed world metals prices. Production data, such as volume of o r e m i n e d a n d quantity of metal extracted, c o n f i r m that the parastatal entity o p e r a t e s m o r e efficiently t h a n did its private predecessor. W h a t is m o r e , C e n t r o m i n has e m b a r k e d on an ambitious p r o g r a m of capital i m p r o v e m e n t s , which include i n f r a s t r u c t u r e investments i n t e n d e d to erase the "social debt." It has been able to finance this p r o g r a m with loans, at commercial rates equivalent to what the transnationals must pay, f r o m a g r o u p of m e t r o p o l i t a n banks; they, it would seem, have c o n f i d e n c e in C e n t r o m i n ' s all-Peruvian m a n a g e m e n t team. S o u t h e r n ' s situation was quite d i f f e r e n t f r o m Cerro's. Its majority p a r e n t , Asarco, was a central oligopolist in the world n o n f e r r o u s metals industry, a n d Peruvian m i n i n g was a vital p a r t of its global strategy of oligopolistic competition f o r m a r k e t share. T h e T o q u e p a l a m i n e was but o n e of t h r e e associated orebodies, all of which the c o m p a n y held

Table

4.3

Year 1950-54 1955-59 1960-64 1965-68 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

Financial Performance of Cerro de Pasco Corporation, 1 9 6 0 - 7 3 , and C e n t r o m i n - P e r u , 1974-80 (millions of U.S. dollars; profit on sales in percent) Total Sales 46.6 59.8 78.4 135.4 162.8 165.7 133.9 149.0 264.6 315.9 271.7 303.4 328.0 304.9 566.1 724.9

Total Earnings

56.8 41.7 18.6 44.5 86.6 120.0 36.1 71.9 39.3 63.1 185.7 139.3

Net Profit

Profit on Sales

6.1 4.3 5.5 8.0 10.2 4.4 -3.8 7.9 20.7

11.1 7.2 7.0 5.9 6.3 2.6 -2.8 5.3 7.8

32.6 5.6 11.1 21.4 36.8 81.3 69.0

10.3 2.0 3.7 6.5 12.1 14.4 9.5

SOURCE: Elaborated by the author from data published in the firm's annual reports. Original data in soles, converted to dollars at the average exchange rate for the year(s). NOTE: Tabulated data for 1950-68 are annual averages over the time periods indicated.

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u n d e r concession. Asarco planned on the eventual d e v e l o p m e n t of all three, but sequentially. T h a t is, the stream o f profits f r o m T o q u e p a l a would finance the construction of the second mine, C u a j o n e , a n d their c o m b i n e d cash flows would pay for the third, Q u e l l a v e c o . T o q u e p a l a ' s infrastructure had been d e s i g n e d a n d built f o r easy e x p a n s i o n , with this plan in mind. Consequently, at stake f o r A s a r c o was not only its Peruvian operations but its entire c o r p o r a t e strategy. The C u a j o n e mine was built u n d e r the terms of a d e v e l o p m e n t contract a p p r o v e d in late 1969. Originally estimated at $ 3 5 5 million, the project's cost at completion in 1976 e x c e e d e d $ 7 0 0 million. It was financed by a veritable Who's Who o f international b a n k i n g : 34.3 percent f r o m a consortium of U.S., C a n a d i a n , E u r o p e a n , and J a p a n e s e banks, led by C h a s e Manhattan; 10.2 percent f r o m the U.S. ExportI m p o r t B a n k ; 1.4 percent f r o m the International Finance C o r p o r a t i o n (IFC), an a r m of the World B a n k ; 6.8 percent f r o m other international banks (for working capital); a n d 16.1 percent in credits a n d loans f r o m e q u i p m e n t suppliers and c o p p e r p u r c h a s e r s . Billiton N.V., a Royal Dutch/Shell metals subsidiary, b e c a m e a joint venturer in the project by contributing 3.7 percent o f the cost in the f o r m of an equity investment, and Southern's owners a d d e d 5.5 percent in new equity capital. The r e m a i n i n g 22 percent—the only part that did not r e p r e s e n t an inflow o f new capital—was drawn f r o m S o u t h e r n ' s c o r p o r a t e reserves, which, by law, had to be reinvested in Peru. All loans e x c e p t those for working capital were secured by the a d v a n c e c o m m i t m e n t o f twothirds o f Cuajone's annual o u t p u t to c o p p e r buyers s p r e a d a m o n g the countries whose banks p a r t i c i p a t e d , " for a contractual term o f fif teen years. C u a j o n e ' s financing a r r a n g e m e n t s have set u p a network o f powerful international interests with a stake in the project—an excellent "ins u r a n c e policy" against any f u t u r e move toward nationalization."' 1 B u t insurance against a d v e r s e host-government action is o n e thing, enf o r c e d policy compliance quite another: despite its impatience with Peruvian b a r g a i n i n g tactics, this international constellation o f interests never once succeeded in forcing the Peruvians to back down f r o m a policy position that mattered deeply to them." 7 Rather than increasing its d e p e n d e n c e , C u a j o n e has helped Peru by stabilizing its balance o f payments a n d allowing it a bit of b r e a t h i n g r o o m as it s t r u g g l e s to resolve the p r o b l e m o f its crushing f o r e i g n debt b u r d e n . T h e Peruvian authorities, by dint o f h a r d a n d clever b a r g a i n i n g , gained considerable " b o n a n z a " benefits f r o m C u a j o n e a n d achieved political objectives o f stellar i m p o r t a n c e to them. In g e n e r a l , they c a m e away f r o m their discussions with S o u t h e r n a n d Asarco having attained m o r e o f their ends than did the c o m p a n i e s :

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1. T a x a t i o n was h i g h e r , a n d o t h e r incentives fewer, t h a n f o r T o quepala. M o r e o v e r , the privileges received by S o u t h e r n were less than the m a x i m u m allowed by law. T h i s enabled the r e g i m e to validate the c h a r g e of entrequismo that it had levelled against its predecessors while protecting it f r o m a similar accusation. 2. T h e g o v e r n m e n t wanted a refinery included in the project in o r d e r to c a p t u r e additional local value a d d e d a n d to act as a check on the c o m p a n y ' s pricing arrangements.™ W h e n Southern a d a m a n t l y r e f u s e d , g o v e r n m e n t authorities secretly arr a n g e d to obtain financing a n d e q u i p m e n t for a state-owned refinery f r o m J a p a n . T h e y then used their political leverage to force S o u t h e r n to patronize it, at considerable cost to the company's m a r k e t i n g flexibility. Refining charges assessed to S o u t h e r n ' s account have been h i g h e r t h a n those c h a r g e d by metropolitan refineries, even t h o u g h actual processing costs are lower; the d i f f e r e n c e r e p r e s e n t s a forced t r a n s f e r p a y m e n t f r o m the c o m p a n y to the Peruvian state. 3. S o u t h e r n h a d to accept a so-called "Calvo clause" 3 ' 1 in its contract, subjecting it to the sole jurisdiction of the Peruvian courts a n d r e n o u n c i n g all right of appeal t h r o u g h diplomatic channels or to international arbitration. 4. T h e g o v e r n m e n t withdrew the Quellaveco concession. Since it is inconceivable that Quellaveco could be developed save as an integral p a r t of the S o u t h e r n complex, it will probably be constituted o n e day as a j o i n t venture, with state participation of 25 p e r c e n t or m o r e secured solely by the r e t u r n of concessionary rights (as the c u r r e n t Mining C o d e provides). Hence, without d i s t u r b i n g its existing relationship with S o u t h e r n or s p e n d i n g a single sol, the state should ultimately gain direct participation in the only r e m a i n i n g fully private e n t e r p r i s e in the gran m i n e r i a . 5. Against S o u t h e r n - A s a r c o opposition, but with the s u p p o r t of the international banks, the g o v e r n m e n t elbowed its way into the long-term c o p p e r sales a g r e e m e n t s . In so d o i n g it s t r e n g t h e n e d its control over e x p o r t sales, received a small commission the e a r n i n g of which cost it nothing, a n d g u a r a n t e e d itself the availability of feedstocks f o r its new r e f i n e r y (at governm e n t insistence, clauses w e r e written into the sales contracts to r e q u i r e local r e f i n i n g of m u c h of the metal). A n d without dist u r b i n g existing m a r k e t relationships, the g o v e r n m e n t saw to it that the disposition of C u a j o n e c o p p e r would f u r t h e r its objective of m a r k e t diversification. 6. T h e g o v e r n m e n t vetoed the p r o p o s e d equity participation of the IFC when the latter tried to compel the a b r o g a t i o n of the

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"Calvo clause" and sought to alter other provisions of the Cuajone agreements. It succeeded in this defiance of one of the central institutions of international capitalism. T h e attainment by the Peruvian government o f its principal bargaining aims, even against much powerful opposition, was due primarily to the knowledge and expertise of its negotiators and their staffs. These technocrats, with their extensive managerial experience in the private sector, were well versed in the international copper business. Moreover, the improved oversight capabilities of the state administration made it possible for them to form a clear picture of Southern's financial condition and concerns. T h e information proved to be an invaluable bargaining asset. Since the government side did not need to move the discussions off the economic plane, it did not have to resort to ideological arguments (which would have been shot down as "unrealistic"), or to the risky strategy of taking extreme positions in hopes of being able to split the dif ferences. In financial matters, such as the rates of taxation to be applied, mining ministry officials used the data at their disposal to compute for themselves what state exactions would still leave the company with a fair rate of profit; their proposals were then placed on the table 011 a take-it-or-leave-it basis. This record confirms an important point made by Stepan.™ Transnational investments may indeed weaken the short-run control capabilities of the host state. However, the sensation of its own debility poses a challenge to which the host government may rise. T h e outcome in the long run may be an overall strengthening o f the host state and a net improvement of its control capabilities—a dialectic that the dependency paradigm tends to overlook.

The Political Meaning of Transnational Corporate B ehavior Cerro's owners, in seeking to keep control of their installations, and Southern's, in planning and executing their Cuajone project, had to adapt themselves as best they could to a far more aggressively nationalist political environment than they had ever before encountered in Peru. T h e first, as we saw, failed miserably; the second succeeded. In fact, Southern's parent firms had so much faith in the outcome that they committed to Cuajone almost $68 million of new corporate funds (i.e., discretionary funds that were not legally obligated to be spent in Peru), plus over $ 5 0 0 million of borrowed capital whose repayment they alone were responsible for. (They had attempted to get the government to act as a guarantor, but their efforts were rejected out o f

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hand.) Southern's parents evidently saw no fundamental contradiction between Peruvian nationalism and their global interests. Southern's behavior was wholly in keeping with Sklar's concept o f a corporate doctrine of domicile. This self-imposed ideological standard does not require corporate altruism, of which Southern displayed none. It demands only that if a host country is willing to accept foreign resource investment at all—implying that its government will, at a minimum, allow the local subsidiary a reasonable chance to earn profits—the subsidiary should respect and voluntarily obey the government's policy decisions in regard to local issues that the latter deems important. 6 - Ideology makes such a doctrine possible: as good capitalists, transnational managers ideologically divide the political and the economic into separate spheres o f action; this mental operation enables them to leave to government the control of such political matters as affect governing elites' ability io secure their legitimacy in power. Good business sense makes the doctrine viable: there is a payoff in government's reciprocal tolerance of the business activity and its profit opportunities, which reduces political risk. Two questions arise, however. How can the concept o f the doctrine of domicile be reconciled with Cerro's manifestly "bad citizenship"? Second, how was Cerro's behavior perceived and reacted to by the Peruvian mining bourgeoisie (which had at stake a set of historically positive associations and concrete business interests)? T h e answer to the first question turns on the observation that the market situation and institutional characteristics of a mining company like Cerro are so different from those of the technologically advanced, centrally oligopolistic transnationals as to warrant a separate classification. Cerro can be labelled a "colonial company," the phrase connoting that this kind of foreign-owned resource firm arose during the colonialist phase of international capitalism when cheap labor made even labor-intensive "third world" mining operations attractive. m Since they exploited local resources, both human and material, but contributed no more to local development than they could get away with, colonial companies needed to rely on political means to secure their privileges. T h e r e was no problem, naturally, if they were based in a true colony. I f not, they could accomplish their ends by allying themselves with domestic compradors, the alliances resting on the political value to comprador dominance of the "bonanza" and supplemented as needed with more direct, personal favors. Thanks to the unionization o f labor, the exhaustion of the richest ores, and technological obsolescence, colonial companies that have not successfully "transnationalized" themselves are no longer profitable. As a result, they are unable to marshal great amounts of outside capital

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for new mining ventures. Their management methods are, today, well within the capabilities of host-country professionals, and they have long since indigenized their managerial staffs except at the very top. Thus, they have ceased to command those bonanza development assets that only foreign capital can provide. At the same time, the presence of a cadre of domestic manager-technologists in the host country signals that older, comprador ruling elites have vanished from the seats of power—or, at the least, that power is rapidly slipping f r o m their grasp. In consequence, political alliances built up by these companies in earlier times avail little today. In an era when foreign capital survives on the basis of its indispensability to development strategies pursued by nationalistic leadership groups, colonial companies are doomed. ( l ' Such considerations point to the likelihood that the private Peruvian mining bourgeoisie would have acquiesced in the nationalization of Cerro, and that is indeed what happened. Although many of the members of this class element owed their careers and personal wealth to Cerro's presence, they understood that the company had in great measure created its own economic and political problems; they had no desire to be held politically guilty by association in the minds of antiCerro nationalists within the government; they had expected far more for themselves from Cerro after the promulgation of the 1950 Mining Code and had been disappointed 1 ' 5 ; and, most of all, they drew a distinction between Cerro as a going enterprise, which was important to them, and as a foreign-owned and -managed enterprise, which was much less so—since they knew that Peruvians were equal to the task of running it. They therefore stood completely aside f r o m the issue of Cerro's future, so long as they were convinced, as they were, that the method of expropriation would not cause conflict with other extranational interests of concern to them (viz., market access and the ability to borrow abroad). It is noteworthy that the National Mining Society took no stand on the expropriation other than to applaud it mildly after the fact, even though Cerro was a founding member and major duespayer. In business, as in politics, past favors never suffice to secure current loyalties; rather, interests are determinant. T h e attitude of the mining bourgeoisie in respect to Southern is clearer. This enterprise operates in a completely different economic realm f r o m that of Peruvian mining businesses, which are not yet in a condition to consider operations on its scale. On the other hand, domestic mining capital benefits f r o m the "bonanza" and from anything that increases the salience of the industry in the national economy or generates international financial and consumer interest in Peru as a provider of metals. Thus, the only concerns of local mine operators visà-vis Cuajone were that the "bonanza" benefits to Peru be great, that

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t h e new contract be written such that later controversy over its t e r m s (which might lessen the prestige of the entire industry) be avoided, a n d that S o u t h e r n not receive privileges inordinately g r e a t e r than theirs. T h e a r r a n g e m e n t s r e a c h e d with the c o m p a n y satisfied t h e m on all counts.

The Military Regime and Domestic Mining

Capital

T h e seven years of Velasco's presidency r e p r e s e n t a radical phase of the Peruvian "revolution," m a r k e d by an e f f o r t on the p a r t of the military r e g i m e to destroy the r e m n a n t s of oligarchic power. Private businesses, some of t h e m Peruvian, were e x p r o p r i a t e d ; the state's role in the e c o n o m y was vastly e n l a r g e d a n d s t r e n g t h e n e d ; controversial enterprise r e f o r m s — m a n d a t o r y profit sharing, c o m a n a g e m e n t , "social p r o p e r t y " — w e r e introduced. 1 "' A sector of the local industrial b o u r geoisie reacted by m o u n t i n g vociferous, ideological attacks against the r e g i m e f o r having violated "the sanctity of private p r o p e r t y , " a n d by e m b a r k i n g on a virtual "investment strike."'" At least o n e analyst reg a r d s these events as p r o o f that the Peruvian state h a d b e c o m e almost totally a u t o n o m o u s f r o m domestic class forces."" It is t h e r e f o r e noteworthy that relations between the g o v e r n m e n t a n d the m i n i n g bourgeoisie never d e t e r i o r a t e d to a c o m p a r a b l e extent. T h e National Mining Society studiously r e f r a i n e d f r o m ideological c o m b a t a n d limited itself to interest r e p r e s e n t a t i o n , a f u n c t i o n in which it was quite successful w h e n e v e r t h e interests at issue were those of the domestic industry. T h e reasons f o r this reserve b e c o m e clear u p o n e x a m i n i n g the effects of the regime's b o n a n z a d e v e l o p m e n t policies on t h e interests of t h e m i n i n g bourgeoisie. T h e y were overwhelmingly positive. T h e g o v e r n m e n t established ex novo a parastatal m i n i n g e n t e r prise, M i n e r o P e r u . R a t h e r t h a n i m p i n g i n g on the interests of domestic private capital in the sector, its mission consisted in the d e v e l o p m e n t of areas of the m i n e r í a that the latter was u n a b l e to exploit. It built a n d now o p e r a t e s refineries f o r both c o p p e r a n d zinc. Its several large mining concessions w e r e idle ones that were seized f r o m their f o r m e r , exclusively foreign, o w n e r s w h e n they would not a g r e e to d e v e l o p t h e m actively. It is a firmly capitalist organization, a n d its m a n a g e m e n t has been d r a w n f r o m the private sector. M i n e r o P e r u ' s first m i n i n g project, C e r r o V e r d e , has p i o n e e r e d a radically new hydrometallurgical technology that h a d n e v e r b e f o r e b e e n used o n such a large scale or f o r the r e d u c t i o n of copper. 6 -' T h i s i m p o r t a n t technological advance has a d d e d to both the m i n i n g b o u r -

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geoisie's sense of self-importance and its claim of equality with the international bourgeoisie of the industry. What is more, technological "fallout" f r o m the project promises to be highly useful in the purification of the complex polymetallic ores that are the main product of the domestic mediana minería. In seeking to enlarge the mining "bonanza," the military regime did not overlook the domestic industry. It was favored by taxation whose burden fell lightly on locally owned firms but much more heavily on foreign-owned ones. T h e lending authority of the state mining bank, the Banco Minero, was expanded, and the bank was authorized for the first time to extend loans for new project development as well as for bailing out companies in distress. 7 " COFIDE made direct capital investments in mining ventures controlled by private Peruvian capital. Before they were applied to the mining sector, the enterprise reforms were modified so that Southern would effectively subsidize profitsharing in the mediana minería; the modifications also had the effect of greatly delaying the approach of real workers' comanagement. A new state research institute was set up to develop mining and metallurgical technologies, which are offered to the mediana minería at no cost as soon as they are proven. Reform of the state administration eliminated the formal, corporatist representation that property owners' associations, such as the National Mining Society, used to enjoy. However, that form of representation has simply been replaced by an equally effective (and equally corporatist in practice) informal working relationship between the state and the private sector, based on interests held in common. T h e National Mining Society is still consulted routinely whenever mining policy or legislation is u n d e r discussion. It also works closely with state officials in the gathering and analysis of the economic data on which the government's planning depends. T h e private sector knows that it need not fear enhanced government oversight of its operations when that oversight relies on data developed by the private sector itself. T h e cooperative nature of the relationship is attested to by the fact that all of the parastatal mining enterprises have become full voting members of the Mining Society. Under the military regime, local mining capital was strengthened and consolidated. T h e seven large, Peruvian-owned corporate groups that were mentioned previously grew enormously during the period of military rule. Between 1967 and 1975, their combined shares of the domestic industry's gross production value, net fixed assets, and paidu p capital increased, respectively, f r o m 46 to 66 percent; from 17 to 66 percent; and f r o m 43 to 66 percent. This growth was almost completely self-financed out of retained corporate reserves. Self-financing, which

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implies that p r o f i t s a r e n o t d i s t r i b u t e d as d i v i d e n d s , testifies to t h e subsidiary position of r e n t i e r capital (most of it p r o v i d e d by oligarchic r e m nants) in t h e i n d u s t r y . It also b e a r s witness to t h e fact t h a t in most years, t h e s e local e n t e r p r i s e s a r e very p r o f i t a b l e ; in fact, t h e i r e a r n i n g s p e r f o r m a n c e is fully o n a p a r with, a n d occasionally e x c e e d s , t h a t of t h e several f o r e i g n - o w n e d m e d i u m firms. T h r o u g h o u t t h e 1968—80 p e r i o d , in n o case d i d f o r m e r l y P e r u v i a n m i n i n g assets fall u n d e r f o r e i g n control, b u t in a n u m b e r of cases t h e o p p o s i t e o c c u r r e d . S e c u r e in its m a n a g e r i a l c o n t r o l of m o d e r n c o r p o r a t e e n t e r p r i s e s , in 110 way s u b s e r v i e n t to o u t s i d e m o n e y capital, a n d able to hold its o w n against f o r e i g n c o m p e t i t i o n , t h e m i n i n g - b o u r g e o i s class e l e m e n t is well placed to be part of t h e politically a n d ideologically l e a d i n g s t r a t u m of t h e national b o u r g e o i s i e . It owes this status to a policy of d e v e l o p m e n t that dissected t h e e x p o r t sector of t h e e c o n o m y i n t o its a g r o i n d u s t r i a l a n d m i n i n g c o m p o n e n t s , d i v o r c e d t h e m , a n d enlisted the latter into a new p r o - d e v e l o p m e n t coalition with a revitalized capitalist state.

The Military Regime, Bonanza Development, and the S ubordinate Classes I n s o f a r as they p r o m o t e d c o r p o r a t e rationalization, m a n a g e r i a l i s m , industrial g r o w t h , a n d t h e technical r e o r i e n t a t i o n of h i g h e r e d u c a t i o n , the regime's policies of b o n a n z a d e v e l o p m e n t f o r t i f i e d t h e m i d d l e class by a g g r a n d i z i n g it in size, salience, a n d e c o n o m i c rewards, 7 1 a n d by o p e n i n g new a v e n u e s f o r s o m e of its m e m b e r s to a s c e n d i n t o t h e b o u r geoisie p r o p e r . T h e availability of m o r e o p p o r t u n i t i e s f o r u p w a r d m o bility, a l o n g with t h e t r a n s f o r m a t i o n of t h e b o u r g e o i s i e into a class led by m a n a g e r - t e c h n o c r a t s w h o s e p o w e r is f i r m l y b a s e d o n e d u c a t i o n a n d e x p e r t i s e , wed t h e m i d d l e class m o r e solidly t h a n e v e r to t h e d o m i n a n t capitalist class. T h u s , t h e latter's exercise of m o r a l a n d ideological l e a d e r s h i p — i n G r a m s c i ' s t e r m s , its hegemony 7 ' 2 —was r e i n f o r c e d . T h i s s t r e n g t h e n i n g of t h e b o u r g e o i s i e a n d m i d d l e class d i d not c o m e at the e x p e n s e of working-class living s t a n d a r d s . W h e r e a s military industrialization strategies e l s e w h e r e h a v e e n t a i l e d a n u p w a r d shift of t h e i n c o m e d i s t r i b u t i o n in o r d e r to e n l a r g e t h e d o m e s t i c m a r k e t f o r c o n s u m e r d u r a b l e s , 7 3 t h e P e r u v i a n military's b o n a n z a d e v e l o p m e n t strategy s o u g h t to c o o p t o r g a n i z e d w o r k e r s with o f f e r s of l a r g e wage increases. O r g a n i z e d l a b o r in t h e m i n e s , a n d especially in t h e f o r e i g n o w n e d g r a n m i n e r í a , was highly e f f e c t i v e in w i n n i n g g o v e r n m e n t s u p p o r t b o t h f o r its w a g e d e m a n d s in t h e a g g r e g a t e a n d f o r a d i s t r i b u t i o n of raises that i m p r o v e d class solidarity by e r a s i n g i n v i d i o u s distinctions t h a t h a d previously existed a m o n g v a r i o u s s u b g r o u p s of w o r k e r s . M o r e

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than that, the regime, hoping to rupture what it mistakenly believed to be strong ties between the labor unions and some political parties of the old order, encouraged the formation of autonomous labor centrals. (Unlike Brazil and Argentina, Peru lacked a tradition of statecontrolled unionism, and the regime never felt secure enough to attempt the establishment of such a system.) The unforeseen outcome was the emergence o f a stronger labor movement that is less subject than before to manipulation by political elites and more responsive to its members' concerns. Working-class organizational capabilities have also been enhanced by the general expansion of the mining industry that bonanza development has brought about. T h e more that mining companies are enlarged, rationalized, and "technified," the more the working class approximates to a cohesive, class-conscious, "true" proletariat; the f arther removed it becomes from from the anarchic, violenceprone protoproletariat of Cerro's early years74; and the more its members acquire technical skills that insulate them somewhat from the downward pressure on wages otherwise exerted by the presence of a large, unskilled "industrial reserve army." Behind the radical rhetoric of its leaders, however, the working class of the mines is "economistic" in its political behavior. That is, its members show little real concern with either the seizure of state power or the reform of hierarchical structures of social control within corporate enterprise. 71 Working-class formation under bonanza development, therefore, is not of a sort that would place obstacles in the path of bourgeois hegemony—provided that the bourgeoisie goes on accommodating as best it can these "economistic" demands.™ It may be suggested that the working class's improved organizational effectiveness, though falling well short of what would be needed to institute socialism, bodes well for the preservation and extension of democratic institutions within capitalism; for this effectiveness was not achieved by subjecting the members of the class to the hierarchical control of some self-appointed "vanguard." In any event, workers ought not to be blamed—as they are by those radical populists who employ the deprecatory phrase, "labor aristocracy"—for giving primary attention to the goals whose pursuit engenders the least elite resistance. It is in regard to the peasantry that, in some ways, the effects of bonanza development are most interesting. Without the mining "bonanza," o f course, the land reform implemented after 1969 would have been unthinkable: the "bonanza" marginalized landowner interests, eroded the power o f the oligarchy, and permitted otherwise "productionist" army officers to contemplate a thoroughgoing agrarian transformation despite the likelihood of a short-term disruption of output. 77 T h e extensive literature on the Peruvian reforma agraria

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makes plain that, except for an abortive attempt to impose corporatist controls t h r o u g h SIN AMOS (the "National Social Mobilization Support System," now defunct), and except on the coastal estates (where capitalist relations of production had been implanted years ago), the r e f o r m did not materially advance the capitalization of agriculture and did not impose a new system of social control on a recalcitrant peasantry. 78 Particularly since 1975, the attitude of the military regime and its civilian successor toward the peasantry can best be described as "benign neglect." In its conception and execution, then, land reform was a political device for destroying oligarchic power and for extending cooptation to the peasantry for the first time. 79 A policy of "benign neglect" is easy to c o m p r e h e n d when it is remembered that the peasantry is in numerical decline (agriculturalists of all sorts now n u m b e r less than forty percent of the economically active population), and that peasant culture is held in low esteem even by the "cholified" (urban and Westernized) working class and underclass. "Benign neglect" will probably result in the strengthening of a petty-bourgeois smallholder agriculture, the proletarianization of some poorer peasants, and a continuing exodus from the countryside. In the interim it satisfies the age-old peasant desire to be left alone. If the train of populist, peasant-based "socialist" revolution ever came down the Peruvian track, it has passed without stopping. T h e military's land reform, made possible by bonanza development, assures that there will be no second section to the "populist express."""

Bonanza Development, New-Bourgeois Class Formation, and the Nature of Domination in Peru Class formation relates to the capacity for collective action on the part of structured social groups. An analytical perspective that concerns itself with class formation, as does the one advanced in this chapter, is consequently interested less in determinants of class that merely define a position in a socioeconomic structure than in those that create interests which are amenable to pursuit through collective political action. Furthermore, it regards political power and social control as the fundamental interests of every class, for they are the means by which other privileges and benefits are secured. We ought not to reify classes; they are analytical constructs, and their only "real" existence is that of the men and women whom the analyst consigns to them. Yet, they are relevant categories for political analysis—because their members tend to form social bonds that incorporate and illuminate their common interests. With the help of such

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b o n d s , they u n i t e a n d pool r e s o u r c e s f o r political action in p u r s u i t of t h e s e interests. A d o m i n a n t class is o n e w h o s e m e m b e r s a r e in a position to b u t t r e s s a n d e n l a r g e t h e i r base of p o w e r by r e o r g a n i z i n g struct u r e s of social a n d political a u t h o r i t y to a c c o r d with t h e i r n e e d s . Class consolidation of this sort o f t e n takes place in t h e s h e l t e r of a u t h o r i t a r i a n i s m . B u t a d o m i n a n t class truly "arrives" only w h e n it has b e c o m e h e g e m o n i c in t h e G r a m s c i a n sense: w h e n , t h r o u g h a c o m b i n a t i o n of ideological p r o j e c t i o n a n d a c c o m m o d a t i o n to m i n i m a l s u b o r d i n a t e class material d e m a n d s a n d m o d e s of o r g a n i z a t i o n , its l e a d i n g m e m b e r s feel sufficiently s e c u r e in t h e i r p o w e r to d i s p e n s e with the p r o t e c tion of aut h o r i t a r i a n rule.* 1

On the Class Character of Peru's New

Bourgeoisie

Nascent b o u r g e o i s g r o u p s in newly d e v e l o p i n g c o u n t r i e s generally a d o p t the latest o r g a n i z a t i o n a l f o r m s , m o d e s of action, a n d ideologies t h a t capitalism has to o f f e r ; they d o n o t try to r e i n s t i t u t e t h e m a r k e t capitalism of t h e i r f o r e b e a r s in W e s t e r n E u r o p e a n d N o r t h A m e r i c a n Capitalist d e v e l o p m e n t in today's " t h i r d w o r l d " is usually an a d a p t a t i o n of t h e late, o r " o r g a n i z a t i o n a l , " capitalism that evolved in t h e West in t h e p o s t w a r e r a . C h i e f a m o n g t h e b o r r o w e d late-capitalist institutions a r e t h e c o r p o r a t e f o r m of business o r g a n i z a t i o n , w e l f a r e - s t a t i s m , a n d g o v e r n m e n t p l a n n i n g of t h e m a c r o e c o n o m y . E x c e p t in avowedly statesocialist systems (and e v e n t h e r e , history may h o l d s u r p r i s e s in store), industrialization leads to t h e e c o n o m i c s u p r e m a c y of t h e c o r p o r a t e f o r m — a n d , t h e r e b y , to t h e rise of a n e w - b o u r g e o i s class e l e m e n t based in t h e c o n t r o l of c o r p o r a t e e n t e r p r i s e . T h i s new b o u r g e o i s i e is a subclass of m a n a g e r i a l p r o f e s s i o n a l s with o r g a n i z a t i o n a l a n d technical expertise. It is t y p i f i e d by a distinctive " m a n a g e r i a l i d e o l o g y " that stresses m e r i t o c r a c y ( t e c h n o c r a t i c elitism) in a c o n t e x t of p r o f e s s i o n a l values of s t e w a r d s h i p a n d service. 8 3 O n e anticipates t h a t t h e " m a n a g e r i a l ideology" will p r o v e m o r e u s e f u l f o r p r o m o t i n g class h e g e m o n y t h a n traditional liberal, individualist values, f o r they h a v e b e e n u n d e r m i n e d by b o t h t h e rise of c o r p o r a t e oligopoly a n d t h e r e v e l a t i o n t h a t t h e m a r k e t is a system of p o w e r . I n Latin A m e r i c a , m o r e o v e r , liberal i n d i v i d u a l i s m has h a d to coexist uneasily with a political c u l t u r e c o n t a i n i n g m a n y illiberal elements. 8 4 T h e n e w b o u r g e o i s i e s of t h e " t h i r d w o r l d " a r e n o t o u t to r e c o n struct society f r o m b a s e m e n t to attic. It t h e r e f o r e s e e m s pointless a n d ahistorical to stigmatize t h e m as d e f i c i e n t — o r " d e p e n d e n t " — f o r faili n g to d o w h a t t h e y a r e in any e v e n t disinclined to d o . T h e i r m e m b e r s , staid c o r p o r a t e p r o f e s s i o n a l s r a t h e r t h a n idiosyncratic individualists,

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are not Lockean democrats and do not view state power as a threat to their f r e e d o m s , although they may very much want to reorganize it and use it f o r new ends. T o the d e g r e e that those ends are affected by the social-private contradiction of capitalism, 8 "' new-bourgeois class action tries to resolve the contradiction by "technifying" (depoliticizing) the making of authoritative decisions for the collectivity. T h e clash of interests in the political a r e n a is distrusted; the methodology of administration is favored. In Peru, the new bourgeoisie is nationalist and developmentalist. Its m e m b e r s have not forgotten how colonialism reserved social and economic privilege to foreigners a n d their c o m p r a d o r allies in the oligarchy. T h e i r raison d'être, they believe, is industrial growth—especially when, as is t r u e of bonanza development, it is d e f i n e d as a j o b f o r managerial experts. Not coincidentally, industrial development adds to the class's n u m b e r s , prestige, and rewards. Yet the n o r m s that u n d e r p i n the new bourgeoisie are the most universalistic, the least culturally particularistic, of any; hence, it is the most internationally minded of all present-day classes. This is not as contradictory as it seems. By hosting and participating in international economic, scientific, and engineering f o r u m s , and by continuing to act as a junior p a r t n e r in an international m a r k e t system, the Peruvian new bourgeoisie can advance a claim to equality with the international bourgeoisie of the metropoli, even t h o u g h its ambition is still far f r o m being realized. What better way to p r o m o t e that ambition, to incorporate it into the class's national practice, than to press for a controlling role in a process of industrialization?

Transnational Resource Corporations and Local Class Formation T h e resource e x p o r t "bonanza" was t a p p e d first by ruling elites who u n d e r s t o o d its political value, even t h o u g h they were uninterested in industrial development. T h e y o p e n e d Peru to transnational resource corporations, which then played a pivotal role in the f o r m a t i o n of the country's new bourgeoisie. Its formation, in t u r n , m a d e bonanza development possible. T h i s sequence of events underscores the fact that local subsidiaries of transnational firms are effective conduits f o r transmitting the late-capitalist ethos and organizational f o r m s that they embody into host societies. T h e process of d i f f u s i o n is not, however, something that the transnationals can simply impose: t h e r e is no teaching without willing students. It goes on because domestic socioeconomic g r o u p s want it to, f o r their own reasons. T h e i r interest is proportional

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to their dependence on corporate institutions for their class position and privileges. Transnational resource corporations facilitated new-bourgeois class formation in Peru by: 1. Making feasible a strategy of development in which the "bonanza" was coupled to a drive for industrialization—a strategy that attracted important bourgeois elements and the military, separated the interests of the corporate bourgeoisie from those of the oligarchy, and created thereby a new coalition whose concern with industrialization was not compromised by dependence on labor-intensive agriculture; 2. Providing "seed money" and business opportunities that promoted the growth of domestic corporate enterprise; 3. Backing the National Mining Society and helping it to become a more effective institutional representative of mining-bourgeois interests"''; 4. Directly and indirectly encouraging the Peruvian educational system's new emphasis on scientific and technical fields, which ensures the continual renovation of the new bourgeoisie; 5. Creating staff employment opportunities that indoctrinated local citizens in the methods and values of transnational management—an indoctrination that they retained when they transferred to the staffs of domestic private or parastatal firms or to the state administration, or when they went into business for themselves. A sixth contribution of transnational enterprises was perhaps the most important of all: their mere presence set in motion a redefinition of interests that promoted class consolidation. State elites, who needed both a better working knowledge of the transnationals' modus operandi and better marketing intelligence in o r d e r to maximize Peru's share of the "bonanza," recruited into their ranks managertechnocrats f r o m the private sector who possessed the requisite expertise. By this means, and by their establishment of parastatal corporations u n d e r solidly new-bourgeois managerial control, they advanced the embourgeoisment of the state. Domestic industrialists, meanwhile, finding themselves in need of an ally to protect them against the transnationals' monopolistic tendencies, began to seek out the protection that only an economically active state could offer. T h e i r need was great enough to erode any residual ideological sympathy that they might have harbored for the oligarchic practice of laissez-faire.

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New-Bourgeois Class Consolidation In P e r u , as elsewhere, the ascent of the new bourgeoisie takes the f o r m of an organizational revolution, a r e s t r u c t u r i n g of the institutions of p o w e r a n d control that stops short of c h a n g i n g their class content. An organizational revolution may entail the displacement of an old domin a n t class s t r a t u m . Alternatively, an old d o m i n a n t s t r a t u m of m o n e y e d elites may simply be o v e r w h e l m e d a n d a b s o r b e d . T h e Peruvian new bourgeoisie has i n c o r p o r a t e d oligarchic m o n e y capital into its e n t e r prises. However, m o n e y capital is subservient to the managerial "knowledge capital" that controls c o r p o r a t e hierarchies. Since by 1968 the oligarchic aspects of Peruvian capitalism were rapidly decaying of their own accord, the full e m e r g e n c e of the new bourgeoisie r e q u i r e d no m o r e t h a n a reorganization of state authority to institutionalize its dominance. T h e military, which shared core interests and had ideological affinities with the new bourgeoisie but which in addition had the a d v a n t a g e of a p r e s e n c e within the state a p p a r a t u s , was the logical g r o u p to lead that reorganization of authority. It did so as the ally of the rising d o m i n a n t class, not as some " a u t o n o m o u s " entity s t a n d i n g outside the interplay of class forces. A l t h o u g h Peru's epoch of b o n a n z a d e v e l o p m e n t is surely over," 7 the new system of d o m i n a t i o n shows signs of being able to outlive it. In the two general elections a n d two municipal elections since the e n d of military rule in 1980, the public has d e m o n s t r a t e d its belief in the present political o r d e r a n d its rejection of non-constitutional revolutionary alternatives. T h e new bourgeoisie was p r o m i n e n t a m o n g the social forces that began pressing in the late 1970s f o r the reinstitution of civilian g o v e r n a n c e ; in t h e 1985 general election it o f f e r e d i m p o r t a n t financial s u p p o r t to the c a m p a i g n of the r e f o r m i s t alternative repr e s e n t e d by the A P R A party a n d its successful candidate, Alan Garcia Perez. 88 It would t h e r e f o r e a p p e a r that the new-bourgeois ideology of managerialism, nationalism-developmentalism, a n d the ideal of "equality of o p p o r t u n i t y " (the last operationalized as meritocracy a n d as a real increase in u p w a r d mobility chances) is efficacious in securing the h e g e m o n y of t h e d o m i n a n t class, even in the p r e s e n t p e r i o d of great economic stress. T h e recent political behavior of the new bourgeoisie suggests a self-confident d o m i n a n t class, capable of disp e n s i n g with a u t h o r i t a r i a n p r o p s . While these a r e progressive d e v e l o p m e n t s , d e d i c a t e d would d o well to r e g a r d t h e m with an e l e m e n t of reserve. nomic realm the d o m i n a n t class faces the difficult task of the country's e c o n o m i c d e v e l o p m e n t without the aid of

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"bonanza"; this will require the d e e p e n i n g of social r e f o r m s , the reactivation of agriculture, and the restructuring of the industrial economy to make it less d e p e n d e n t on imported inputs and m o r e capable of competing internationally t h r o u g h exports of manuf actured goods. In the political realm the chief uncertainty is that the new bourgeoisie's idea of democracy is not p o p u l a r participation but "democratic elitism," in which participatory f o r m s serve mainly f o r legitimation while real authority is exercised by technocratic elites. E v e n that interest is instrumental rather than moral.*' 1 T h e new bourgeoisie supports democracy only insofar as it is usef ul—a m o r e efficient and less costly means of maintaining control than political repression. Nevertheless, this study has shown that the Peruvian new bourgeoisie has u n d e r g o n e a process of class consolidation f r o m which it has e m e r g e d as a leading element of a local dominant class. T h u s , despite its manifest economic weakness, Peru cannot be described as a "depend e n t " country or a " n e o c o l o n y " in any political sense. The proof of that thesis lies in the new bourgeoisie's successf ul use of state power f o r its own chief purposes: controlling relations with foreign investors so that these p r o m o t e industrial development without p r e e m p t i n g present or foreseeable f u t u r e business opportunities that the class hopes to take advantage of; and assisting the class to secure its h e g e m o n y and maintain its social control. R e m a i n i n g to be investigated is the question of whether the f o r m of class domination that has evolved in Peru is a general product of bonanza development; or whether, on the contrary, it should be attributed to the singular features of bonanza development in this one country. It also remains to be seen how, if at all, the Peruvian f o r m of class domination d i f f e r s f r o m those p r o d u c e d by other strategies of development practiced in the "third world." A n accumulation of additional case studies should enable us to approach the answers. B u t in the interim the following proposition may be advanced with reasonable confidence: T h e a p p e a r a n c e in even a few newly developing countries of a f o r m of local class domination that is potentially hegemonic and that does not require the protection of authoritarian g o v e r n a n c e is a t h o r o u g h refutation of certain radical d e p e n d e n c y theories of class— namely, those theories which are g r o u n d e d in assumptions r e g a r d i n g systemic "laws" of international capitalism, and those which derive political d e p e n d e n c y solely f r o m the fact of economic exploitation. Notes F u n d i n g f o r the field research portion of this study was provided by a FulbrightH a y e s Dissertation R e s e a r c h A b r o a d Fellowship a w a r d e d by the U.S. Depart-

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m e n t of Health, E d u c a t i o n , a n d W e l f a r e , O f f i c e of E d u c a t i o n .

1. Richard L. Sklar, Corporate Power in an African State (Berkeley a n d Los Angeles: University of California Press, 1975), p. 175. 2. See F e r n a n d o H e n r i q u e C a r d o s o , " T h e C o n s u m p t i o n of D e p e n d e n c y T h e o r y in t h e U n i t e d States," Latin American Research Review 12, 3 ( 1 9 7 7 ) : 7 - 2 4 ; also Gabriel Palma, " D e p e n d e n c y : A F o r m a l T h e o r y of U n d e r d e v e l o p m e n t or a M e t h o d o l o g y f o r the Analysis of C o n c r e t e Situations of U n d e r d e v e l o p m e n t ? " World Development 6, 7 - 8 ( 1 9 7 8 ) : 8 8 1 - 9 2 4 . 3. T h e l i t e r a t u r e on d e p e n d e n c y is vast; to d o justice to it would r e q u i r e a f a r lengthier bibliography t h a n can be r e p r o d u c e d h e r e . T h u s , with apologies f o r incompleteness: D e p e n d e n c y ideas a r e reviewed historically by J o s e p h A. Kahl, Modernization, Exploitation, and Dependency in Latin America (New Brunswick, NJ: T r a n s a c t i o n , 1976); a n d by Palma, " D e p e n d e n c y " (which is especially u s e f u l f o r its t r e a t m e n t of t h e relationship between d e p e n d e n c y a n d Marxism). T h e highest d e v e l o p m e n t of the d e p e n d e n c y a p p r o a c h , it is o f t e n said, is f o u n d in F e r n a n d o H e n r i q u e C a r d o s o , " D e p e n d e n c y a n d D e v e l o p m e n t in Latin A m e r i c a , " New Left Review, 74 ( 1 9 7 2 ) : 8 3 - 9 5 ; also C a r d o s o a n d Enzo Faletto, Dependency and Development in Latin America, trans. M a r j o r y Mattingly U r q u i d i (Berkeley a n d Los Angeles: University of California Press, 1979), esp. t h e a u t h o r s ' p r e f a c e to the English l a n g u a g e edition, p p . vii—xxv. Critical reviews of t h e literature include J a m e s A. C a p o r a s o , " D e p e n d e n c e , D e p e n d e n c y , a n d Power in t h e Global System: A S t r u c t u r a l Analysis," International Organization 32, 1 (1978): 1 3 - 4 3 ; C a p o r a s o a n d B e h r o u z Zare, "An I n t e r p r e t a t i o n a n d Evaluation of D e p e n d e n c y T h e o r y , " in H e r a l d o M u n o z (ed.), From Dependency to Development ( B o u l d e r , C O : Westview Press, 1981), p p . 43—56; T o n y Smith, " T h e U n d e r d e v e l o p m e n t of D e v e l o p m e n t L i t e r a t u r e : T h e Case of D e p e n dency T h e o r y , " World Politics 31, 2 ( 1 9 7 9 ) : 2 4 7 - 2 8 8 ; Philip J . O ' B r i e n , "A Critique of Latin A m e r i c a n T h e o r i e s of D e p e n d e n c y , " in Ivar Oxaal, T o n y B a r n e t t , a n d David Booth (eds.), Beyond the Sociology of Development ( L o n d o n : R o u t l e d g e 8c K e g a n Paul, 1975), p p . 7 - 2 7 ; a n d A n t h o n y B r e w e r , Marxist Theories of Imperialism ( L o n d o n : R o u t l e d g e 8c K e g a n Paul, 1980), p p . 158—257, 2 7 4 - 2 9 4 . Colin H e n f r e y , " D e p e n d e n c y , Modes of P r o d u c t i o n , a n d t h e Class Analysis of Latin A m e r i c a , " Latin American Perspectives 8, 3—4 (1981): 17—54, argues that t h e d e p e n d e n c y a p p r o a c h has t h u s f a r lacked a suitable class analysis; see also M a n u e l Castells, "Class, State a n d D e p e n d e n c y in Latin A m e r i c a : S o m e T h e o r e t i c a l Guidelines," p a p e r p r e s e n t e d at t h e J o i n t M e e t i n g of t h e A f r i c a n Studies Association a n d t h e Latin A m e r i c a n Studies Association, H o u s t o n , N o v e m b e r 1977 ( m i m e o g r a p h e d ) . 4. As does, e.g., T h e o t o n i o Dos Santos, " T h e S t r u c t u r e of D e p e n d e n c e , " American Economic Review 60, 2 (1970):231-236; f o r him, d e p e n d e n c y is "a situation in which t h e e c o n o m y of certain c o u n t r i e s is c o n d i t i o n e d by t h e developm e n t a n d e x p a n s i o n of a n o t h e r e c o n o m y to which t h e f o r m e r is s u b j e c t e d " (p. 231). C a r d o s o a n d Faletto, Dependency and Development, claim to have eschewed t h a t kind of a p p r o a c h . But f o r t h e m , too, d e p e n d e n c y derives f r o m an abstract

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struc tural f e a t u r e of i n t e r n a t i o n a l capitalism: t h e i m p u t e d n e e d o f newly dev e l o p i n g c o u n t r i e s , d u e to t h e i r lack o f capital g o o d s p r o d u c t i o n a n d t e c h n o l o g i c a l capabilities, to articulate t h e i r e c o n o m i e s with t h e i n t e r n a t i o n a l system in o r d e r " t o c o m p l e t e t h e cycle o f capital r e p r o d u c t i o n " (see pp. xx— xxii). 5. Class analysis, unlike elite analysis, deals in a systematic way with t h e e x p l i c a t i o n o f political c h a n g e as an o u t c o m e o f relations o f p o w e r a n d c o n f l i c t in society. S e e J a m e s A. Bill a n d R o b e r t L. H a r d g r a v e , J r . , Comparative Politics: The Quest for Theory ( C o l u m b u s , O H : Merrill, 1 9 7 3 ) , pp! 1 9 5 - 1 9 9 ; also R i c h a r d L. S k l a r , " O n t h e C o n c e p t o f P o w e r in Political E c o n o m y , " in D a l m a s H. Nelson a n d R i c h a r d L . S k l a r (eds.), Toward a Humanistic Science of Politics: Essays in Honor of Francis Dunham Wormuth ( I . a n h a m , M D : University Press o f A m e r i c a , 1 9 8 3 ) , pp. 1 7 9 - 2 0 6 . 6. A n t o n i o G r a m s c i , Selections from the Prison Notebooks (New Y o r k : I n t e r n a t i o n a l Publishers. 1 9 7 1 ) , pp. 5 5 - 6 0 a n d passim; J o s e p h V. F e m i a , " T h e G r a m s c i P h e n o m e n o n : S o m e R e f l e c t i o n s , " Political Studies 2 7 , 3 ( 1 9 7 9 ) : 4 7 2 4 8 3 ; a n d W a l t e r L. A d a m s o n , Hegemony and Revolution : Antonio Gramsci's Political and Cultural Theory ( B e r k e l e y a n d Los A n g e l e s : University o f C a l i f o r n i a Press, 1 9 8 0 ) , pp. 1 7 0 - 1 7 9 a n d passim. 7. O n this point see E u g e n e F. S o f e r , " R e c e n t T r e n d s in Latin A m e r i c a n L a b o r H i s t o r i o g r a p h y , " Latin American Research Review 15, 1 ( 1 9 8 0 ) : 167—176; also H e n f r e y , " D e p e n d e n c y , M o d e s of P r o d u c t i o n . " 8. A n d r é G u n d e r F r a n k , " T h e D e v e l o p m e n t o f U n d e r d e v e l o p m e n t , " Monthly Review 18, 4 ( 1 9 6 6 ) : 17—31 ; Capitalism and Underdevelopment in Latin America: Historical Studies of Chile and Brazil, rev. e d . (New Y o r k : M o n t h l y R e view Press, 1 9 6 9 ) ; a n d Lumpenbourgeoisie: Lumpendevelopment: Dependence, Class, and Politics in Latin America, trans. M a r i o n Davis B e r d e c i o (New Y o r k : M o n t h l y Review Press, 1 9 7 3 ) . 9. F e r n a n d o H e n r i q u e C a r d o s o , " A s s o c i a t e d - D e p e n d e n t D e v e l o p m e n t : T h e o r e t i c a l a n d Practical I m p l i c a t i o n s , " in A l f r e d S t e p a n (ed.), Authoritarian Brazil (New H a v e n : Y a l e University Press, 1 9 7 3 ) , pp. 1 4 2 - 1 7 6 . 10. Dos S a n t o s , " T h e S t r u c t u r e o f D e p e n d e n c e . " 11. O s v a l d o S u n k e l , " T r a n s n a t i o n a l Capitalism a n d National Disintegration in Latin A m e r i c a , " Social and Economic Studies 2 2 , 1 ( 1 9 7 3 ) : 1 3 2 - 1 7 6 . 12. G u i l l e r m o A. O ' D o n n e l l , Modernization and Bureaucratic-Authoritarianism: Studies in South American Politics ( B e r k e l e y : I n s t i t u t e o f I n t e r n a t i o n a l S t u d i e s , University o f C a l i f o r n i a , 1 9 7 3 ) ; " R e f l e c t i o n s o n t h e P a t t e r n s o f C h a n g e in t h e B u r e a u c r a t i c - A u t h o r i t a r i a n S t a t e , " Latin American Research Review 13, 1 ( 1 9 7 8 ) : 3 - 3 8 ; a n d " T e n s i o n s in t h e B u r e a u c r a t i c - A u t h o r i t a r i a n S t a t e a n d t h e Q u e s t i o n o f D e m o c r a c y , " in David Collier (ed.), The New Authoritarianism in Latin America ( P r i n c e t o n : P r i n c e t o n University Press, 1 9 7 9 ) , pp. 2 8 5 - 3 1 8 . 13. V . l . L e n i n , Imperialism,

the Highest Stage of Capitalism

(New Y o r k : I n t e r -

national Publishers, 1 9 3 3 ) ; a n d Paul A. B a r a n , The Political Economy of Growth (New Y o r k : M o n t h l y Review, 1 9 5 7 ) , esp. pp. 1 7 8 - 2 0 0 . A m o n g t h e r e c e n t writings in t h e s a m e vein a r e H e r a l d o M u n o z , " T h e S t r a t e g i c D e p e n d e n c y o f t h e C e n t e r s a n d t h e I m p o r t a n c e o f t h e Latin A m e r i c a n P e r i p h e r y , " in M u n o z (ed.), From Dependency to Development (fn. 3), pp. 59—92; m a n y o f t h e c o n t r i b u t i o n s to

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A n n e S e i d m a n (ed.), Natural Resources and National Welfare: The Case of Copper (New York: P r a e g e r , 1975); N o r m a n Girvan, "Multinational C o r p o r a t i o n s a n d D e p e n d e n t U n d e r d e v e l o p m e n t in M i n e r a l - E x p o r t i n g Economies," Social and Economic Studies 19, 4 ( 1 9 7 0 ) : 4 9 0 - 5 2 6 ; a n d on P e r u , Claes B r u n d e n i u s , " T h e A n a t o m y of Imperialism: T h e Case of Multinational M i n i n g C o r p o r a t i o n s in Peru," Journal of Peace Research 9, 3 (1972): 1 8 9 - 2 0 6 . 14. See, f o r e x a m p l e , J u l i o Cotler, " S t a t e a n d Regime: C o m p a r a t i v e Notes on t h e S o u t h e r n C o n e a n d t h e 'Enclave' Societies," in Collier (ed.), New Authoritarianism (fn. 12), pp. 2 5 5 - 2 8 2 ) . 15. T h e t e r m "new bourgeoisie" has been used in Latin A m e r i c a n studies with r e f e r e n c e to e n t r e p r e n e u r i a l g r o u p s that arose in t h e 1930s on t h e basis of import-substitution industrialization a n d that later s u f f e r e d a " h e g e m o n i c crisis"; see J o s é N u n , Latin America: The Hegemonic Crisis and the Military Coup (Berkeley: Institute of I n t e r n a t i o n a l Studies, University of California, 1973). In my usage, however, t h e t e r m always r e f e r s to a class s t r a t u m whose p o w e r stems ultimately f r o m specialized k n o w l e d g e gained t h r o u g h e d u c a t i o n a n d proximately f r o m control of t h e e c o n o m i c hierarchies e m b o d i e d in m o d e r n business c o r p o r a t i o n s . It excludes " m i d d l e m a n a g e m e n t " a n d o t h e r m i d d l e class professionals, w h o lack t h e p o w e r "to f o r m u l a t e a n d i m p l e m e n t strategies f o r solving p r o b l e m s a n d achieving goals" at the level of the whole society. 16. David G. Becker, The New Bourgeoisie and the Limits of Dependency (Princeton: Princeton University Press, 1983); a n d " M o d e r n Mine L a b o u r a n d Politics in Peru since 1968," Boletín de Estudios Latinoamericanos y del Caribe, 32 ( 1 9 8 2 ) : 3 5 - 6 0 . T h e r e is n o implication in t h e f o r e g o i n g that capitalist developm e n t in Peru or elsewhere is equitable o r j u s t . Capitalism can survive a n d has, without t h e protection of coercive force, even t h o u g h it is n e i t h e r . I a m , however, calling into question t h e populist belief that socioeconomic evils would d i s a p p e a r were " f o r e i g n d o m i n a t i o n " to be b r o k e n . 17. O n the f o r m e r see Sayre P. Schatz, Nigerian Capitalism (Berkeley a n d Los Angeles: University of California Press, 1977); o n t h e latter, Sklar, Corporate Power. 18. Sklar, "Postimperialism" (ch. 2, this volume); a n d "Socialism at Bay: Class D o m i n a t i o n in Africa," p a p e r p r e s e n t e d at t h e Joint M e e t i n g of t h e African Studies Association a n d t h e Latin A m e r i c a n Studies Association, H o u s t o n , N o v e m b e r 1977 ( m i m e o g r a p h e d ) . 19. Becker, New Bourgeoisie, p. 13, e m p h a s i s in original. 20. "Colonialism," t h e d o m i n a t i o n of o n e p e o p l e o r nation by a n o t h e r , a d e q u a t e l y describes both t h e bulk of official U.S. action in Latin A m e r i c a since 1898 a n d t h e activities of certain U.S. business firms, especially in t h e p r e w a r per iod a n d in t h e agricultural sectors of t h e C e n t r a l A m e r i c a n economies. T h i s is so w h e t h e r o r not direct political control was established. I want to avoid t h e use of "neocolonialism" to distinguish these activities f r o m t h e f o r m a l colonial d o m i n a t i o n practiced by o t h e r p o w e r s — p a r t l y because t h e d i f f e r e n c e is not greatly significant, partly because t h e latter t e r m has b e e n a p p r o p r i a t e d as a quasi-synonym f o r d e p e n d e n c y . 21. Consider, e.g., t h e heavy f o r e i g n s h a r e h o l d i n g in such "U.S." resource f i r m s as A M A X , Asarco, a n d N e w m o n t Mining, t h e first two of which

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list their shares o n both t h e New York a n d L o n d o n e x c h a n g e s ; t h e a m b i g u o u s nationality of K e n n e c o t t C o p p e r , now o w n e d by British P e t r o l e u m t h r o u g h S t a n d a r d Oil of O h i o ; a n d t h e several i m p o r t a n t A f r i c a n , Asian, a n d Australian j o i n t m i n i n g v e n t u r e s that have b r o u g h t t o g e t h e r A m e r i c a n , E u r o p e a n , a n d J a p a n e s e p a r t n e r s . T h e i n t e r n a t i o n a l n o n f e r r o u s metals industries are e x a m i n e d in Becker, New Bourgeoisie, p p . 7 2 - 9 2 . 22. R a y m o n d F. Mikesell, The World Copper Industry (Baltimore: J o h n s H o p k i n s University Press, 1975), p p . 2 7 1 - 2 8 1 a n d passim; Mikesell, ' Mining A g r e e m e n t s a n d Conflict Resolution," in S a n d r o Sideri a n d S h e r i d a n J o h n s (eds.), Mining for Development in the Third World (New York: P e r g a m o n , 1980), p p . 198—209; Marian Radetzki, " L D C Policies T o w a r d s Foreign Mineral Investors," in Sideri a n d J o h n s (eds.), p p . 2 8 3 - 2 9 6 ; a n d S t e p h e n Z o r n , "Recent T r e n d s in L D C Mining A g r e e m e n t s , " in Sideri a n d J o h n s (eds.), p p . 210—228. 23. Sklar, Corporate Power, p p . 1 8 2 - 1 8 8 a n d passim. Sklar goes f u r t h e r still, c o n t e n d i n g that t h e d o c t r i n e of domicile counsels t h e subsidiary's compliance even in m a t t e r s of regional f o r e i g n policy that r u n c o u n t e r to the policies of o t h e r states in whose c o u n t r i e s the c o r p o r a t i o n does business; subsidiaries in each of those o t h e r countries, meanwhile, d e f e r to t h e policy p r e f e r ences of their host g o v e r n m e n t . 24. T h e case of p e t r o l e u m n e e d s n o c o m m e n t . In t h e case of n o n f e r r o u s metals, Peruvian t e r m s of t r a d e vary irregularly with world prices; data add u c e d by E.V.K. FitzGerald, The State andEconomic Development: Peru since 1968 ( C a m b r i d g e : C a m b r i d g e University Press, 1976), p. 14, show an i m p r o v e m e n t in Peruvian t e r m s of t r a d e between 1960 a n d 1972. (Admittedly, its t e r m s of t r a d e have since b e c o m e highly adverse, b u t t h e r e is n o reason to assume that t h e c u r r e n t d e p r e s s i o n of world n o n f e r r o u s metal prices will be p e r m a n e n t . ) O n t h e theory of declining t e r m s of t r a d e in the " t h i r d world," see Raúl Prebisch, Towards a Dynamic Development Policy for Latin America (New York: United Nations, 1963). 25. B o n a n z a d e v e l o p m e n t ' s n o n r e l i a n c e on low-cost, coerced labor raises serious questions a b o u t I m m a n u e l Wallerstein's analytical f r a m e w o r k , in which t h e prevalence of coerced labor in key economic sectors is a m a j o r criterion of " p e r i p h e r a l " status in t h e "world-system." See Wallerstein, The Modern World-System (New York: A c a d e m i c Press, 1974); a n d " T h e Rise a n d F u t u r e Demise of t h e W o r l d Capitalist System: C o n c e p t s f o r C o m p a r a t i v e Analysis," Comparative Studies in Society and History 16, 4 ( 1 9 7 4 ) : 3 8 7 - 4 1 5 . See also t h e critiques o f f e r e d by E r n e s t o Laclau, "Feudalism a n d Capitalism in Latin A m e r i c a , " New Left Review, 67 (1971): 19-38; a n d by R o b e r t B r e n n e r , " T h e O r i g i n s of Capitalist D e v e l o p m e n t : A Critique of N e o - S m i t h i a n Marxism," New Left Review, 104 (1977) : 2 5 - 9 2 . 26. Foreign i n v e s t m e n t in m i n e r a l s extraction n e e d not have o r i g i n a t e d with t h e a d o p t i o n of a strategy of b o n a n z a d e v e l o p m e n t by t h e host g o v e r n m e n t . In m a n y cases such investments were first m a d e d u r i n g an earlier colonial e p o c h , w i t h o u t r e f e r e n c e to t h e desires of t h e host. B u t once national indep e n d e n c e has b e e n attained a n d b o n a n z a d e v e l o p m e n t instituted, existing f o r e i g n i n v e s t m e n t c o m e s to serve new p u r p o s e s a n d interests. Old institutional relationships between it a n d t h e host c o u n t r y a r e t h e n m o d i f i e d accordingly.

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27. See Osvaldo Sunkel, "National Development Policy and External Dependence in Latin America," Journal of Development Studies 6, 1 (1969):23—48, esp. p. 30. 28. O n the Marxian concept of "relative autonomy," see Ralph Miliband, The State in Capitalist Society (New York: Basic books, 1969), esp. pp. 68—118; and David A. Gold, Clarence Y.H. Lo, and Erik Olin Wright, "Recent Developments in Marxist Theories of the Capitalist State," Monthly Review 27, 5 (1975):29-43, and 27, 6 (1975):36-51. 29. Bill Warren, "Imperialism and Capitalist Industrialization," Nexo Left Review, 81 (1973):3-44. 30. A l v i n W. G o u l d n e r , The Future

of Intellectuals

and the Rise of the Nexo

Class (New York: Seabury Press, 1979). 31. Richard L. Sklar, "Lectures on Socialism and Development," unpublished d r a f t , n.d. (mimeographed). 32. This may be true of post-Maoist China; it remains to be seen whether bonanza development can be adapted to socialist ends, or whether it invariably sets the nation selecting it onto the capitalist road. 33. My computation, from data in John W. Wilkie and Peter Reich (eds.), Statistical Abstract of Latin America Vol. 20 (Los Angeles: UCLA Latin American Center, 1980), p. 219. For a general discussion of the Peruvian economy since the onset of industrialization, see E.V.K. FitzGerald, The State and Economic Development;

a n d his The Political

Economy

of Peru,

1956—78

(Cambridge: Cam-

bridge University Press, 1979). 34. See, e.g., Osvaldo Sunkel, "Big Business and 'Dependencia': A Latin American View," Foreign Affairs 50, 3 ( 1972):517-531. 35. Adolf A. Berle, Jr. and Gardiner C. Means, The Modern Corporation and Private Property (New York: Macmillan, 1932). 36. Shane Hunt, "Growth and Guano in the Nineteenth Century in Peru," working paper, Woodrow Wilson School of Public and International Affairs, Princeton University, 1973 (mimeographed); Heraclio Bonilla, Guano y burguesía en el Perú (Lima: Instituto de Estudios Peruanos, 1974); Julio Cotler, Clases, Estado y nación en el Perú (Lima: Instituto de Estudios Peruanos, 1978), pp. 85-114. 37. Peru's oligarquía was a closed elite comprised of three somewhat distinct class elements: owners of coastal plantations, who were agroindustrial, export-oriented capitalists; hacendados of the interior highlands, whose economic behavior was not unlike that of a precapitalist landed class; and a Lima "plutocracy," whose considerable wealth derived mostly from rentier investm e n t . S e e F r a n ç o i s B o u r r i c a u d , Poder y sociedad

en el Perú

contemporáneo

(Buenos Aires: Editorial Sur, 1967), esp. pp. 194-203; also Magali Sarfatti Larson a n d Adele Eisen Bergen, Social Stratification in Peru (Berkeley: Institute of International Studies, University of California, 1969). 38. T h e 1901 Code extended Financial incentives (including a fifteenyear tax holiday) a n d r e f o r m e d concession tenure to accord better with the interests of capital. Previously, u n d e r g r o u n d minerals were the property of the state, in the Spanish tradition, although private individuals could obtain grants of concessionary rights. Concession tenure was contingent on regular royalty payments to the state and could be revoked at any time. T h e 1901 Code ap-

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p r o a c h e d privatization by p r o v i d i n g f o r concessions to he held in p e r p e t u i t y , subject only to p a y m e n t of a small a n n u a l g r o u n d rent. See VV.F.C. Purser, Metal-Mining in Peru, Past and Present (New York: Praeger, 1971), p p . 54—55; also Mario S a m a m é Boggio, Minería peruana: biografía y estrategia de una actividad decisiva, 2d ed., 2 vols. (Lima: Editorial Gráfica Labor, 1974), 1:202-203. 39. J u l i o Cotler, " T h e Mechanics of I n t e r n a l Domination a n d Social C h a n g e in P e r u , " in David C h a p l i n (ed.), Peruvian Nationalism (New Brunswick NJ: T r a n s a c t i o n , 1976), p p . 35—71 (esp. p p . 55—57). 40. See, e.g., J a m e s L. Payne, Labor and Politics in Peru (New H a v e n : Yale University Press, 1965), p p . 4 8 - 5 0 . 41. S o u t h e r n ' s o w n e r s h i p is today d i s t r i b u t e d as follows: Asarco, 52.3 p e r c e n t ; t h e M a r m o n G r o u p of Chicago, which in 1975 b o u g h t what was left of C e r r o , 21 p e r c e n t ; N e w m o n t Mining, 10.4 p e r c e n t ; a n d the P h e l p s - D o d g e C o r p o r a t i o n , 16.3 p e r c e n t . Billiton N.V. of the N e t h e r l a n d s , a subsidiary of Royal Dutch/Shell, owns 11.5 p e r c e n t of S o u t h e r n ' s newest mine. T h e story of S o u t h e r n ' s origins is an i n t r i g u i n g tale of c o r p o r a t e m a n e u v e r ; see Becker, New Bourgeoisie, p p . 36—38. 42. R a y m o n d F. Mikesell, Foreign Irwestment in Copper Mining: Case Studies oj Mines in Peru and Papua New Guinea (Baltimore: Johns H o p k i n s University Press, 1975), pp. 4 8 - 5 1 . 43. Several writers have i n t e r p r e t e d these business connections as m e a n ing that the Peruvian m e d i u m f i r m s were "directly or indirectly" controlled by C e r r o ; see H e n r i q u e Espinosa U r i a r t e a n d José Osorio, " D e p e n d e n c i a y p o d e r económico: caso m i n e r í a y p e s q u e r í a , " in Espinosa Uriarte et al., Dependencia económica y tecnológica: caso peruano (Lima: C e n t r o de Investigaciones Sociales, Universidad Nacional Federico Villarreal, 1971), pp. 6 9 - 2 3 0 ; a n d Brurid e n i u s , " A n a t o m y of I m p e r i a l i s m . " In Becker, New Bourgeoisie, p p . 1 7 4 - 1 7 5 , I have criticized their conclusions on t h e g r o u n d that t heir concept of control is fatally flawed. 44. A l f r e d S t e p a n , The State and Society: Peru in Comparative Perspective (Princeton: Princeton University Press, 1978), p p . 3 - 4 5 . 45. Luigi R. E i n a u d i a n d A l f r e d C. S t e p a n III, Latin American Institutional Development: Changing Military Perspectives in Brazil and Peru (Santa Monica, CA: R A N D C o r p o r a t i o n , 1971), R-586-DOS, esp. p p . 16-31; Einaudi, "Revolution f r o m Within? Military Rule in P e r u since 1968," in Chaplin (ed.), Peruvian Nationalism (fn. 39), p p . 401—427; G e o r g e Philip, " T h e Soldier as Radical: T h e Peruvian Military G o v e r n m e n t , 1 9 6 8 - 1 9 7 5 "Journal of Latin American Studies 8, 1 (1976):29—51; Liisa N o r t h a n d T a n y a Korovkin, The Peruvian Revolution and the Officers in Power, 1967-1976 (Montreal: C e n t r e f o r D e v e l o p i n g - A r e a Studies, McGill University, 1981). T h e a t t e m p t to integrate t h e long-neglected p e a s a n t r y into t h e e c o n o m i c a n d political life of the nation, f r o m which it h a d been rigidly e x c l u d e d d u r i n g t h e e n t i r e p e r i o d of oligarchic d o m i n a t i o n , is t h e sort of action t h a t justifies t h e use of t h e t e r m "organizational r e v o l u t i o n " to describe t h e c h a r a c t e r of t h e military regime. 46. His political s y m p a t h i e s h a d been f o r m e d in t h e classrooms of C A E M , t h e C e n t e r f o r H i g h e r Military Studies. O n its key role in t h e ideological f o r m a tion of Peruvian officers a n d in the "revolution" of 1968, see Einaudi a n d Stepan,

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Latin American Institutional Development', and Víctor Villanueva, El CAEM y la Revolución de la Fuerza Armada (Lima: Instituto de Estudios Peruanos, 1972). 47. Brundenius, "Anatomy of Imperialism," repeats most of these charges; see also José C. Bossio Rotundo, "Cambios en la política minerometalúrgica," in Ernst-J. Kerbusch (ed.), Cambios estructurales en el Perú (Lima: Instituto Latinoamericano d e Investigaciones Sociales, 1976), pp. 121—144, esp. p. 126. 48. According to the best available accounts, in 1974 some hard-line, Rightist army generals had gained the ear of the ailing Velasco and sought to consolidate their power by easing out the "progressives" such as Fernández Maldonado. Knowing that he had firmly opposed the nationalization of Marcona, they waited until he was on an extended tour abroad to urge that action on the president. Their aim was twofold: to tap radical nationalist support for their own rise to power, and to weaken Fernández Maldonado's position by loosening his hold over mining policy and confronting him with the choice of either repudiating his own policy or opposing the president. Upon his return to Peru he went along with the decision in public, albeit with a notable lack of enthusiasm. He later retaliated by lending his support to Velasco's ouster in 1975; however, within a year the new president, Gen. Morales Bermúdez, had forced him into retirement. Because its expropriation was so exceptional, the Marcona case will not be discussed f u r t h e r . 49. T h e company had wire, cable, and brass manufacturing subsidiaries in the United States. But there was no match between output of one stage of production and the input requirements of the next; the U.S. subsidiaries customarily purchased raw copper on the open market, while copper and other nonferrous metals produced in Peru were sold mostly to unaffiliated buyers in Europe. Cerro's share of the European market for these metals was less than five percent in every year between 1960 and 1970. 50. On Cerro's sorry record in the area of labor relations, see Heraclio Bonilla, El minero de los Andes: una aproximación a su estudio (Lima: Instituto de Estudios Peruanos, 1974); Alberto Flores Galindo, Los mineros de la Cerro de Pasco, 1900—1930 (un intento de caracterización social) (Lima: Departamento Académico de Ciencias Sociales, Pontificia Universidad Católica del Perú, 1974); and Dirk Kruijt and Menno Vellinga, Labor Relations and Multinational Corporations: The Cerro de Pasco Corporation in Peru (1902—1974) (Assen, Neth.: Van Gorcum, 1979), pp. 58-98. 51. Susan C. Bourque and David Scott Palmer, " T r a n s f o r m i n g the Rural Sector: Government Policy and Peasant Response," in Abraham F. Lowenthal (ed.), The Peruvian Experiment (Princeton: Princeton University Press, 1975), pp. 197-219; and Colin Harding, "Land Reform and Social Conflict in Peru," in Lowenthal (ed.), pp. 220-253. 52. T h a t is, one in which the company incurred fines and liabilities sufficient to offset most of what it would otherwise be owed by way of compensation. 53. For f u r t h e r detail, see Becker, Nero Bourgeoisie, pp. 148-155. 54. Cerro made a cash profit on the transaction, thanks to writeoffs on its U.S. income taxes. But any claim that it benefited f r o m the nationalization cannot be sustained. T h e truncated Cerro Corporation could not fight off an "un-

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f r i e n d l y " takeover by t h e M a r m o n G r o u p . T h e first act of t h e new o w n e r s was to oust the e n t i r e C e r r o m a n a g e m e n t t e a m , which was rightly held responsible f o r massive e r r o r s of j u d g m e n t leading u p to the e x p r o p r i a t i o n fiasco. 55. Except f o r t h e United States. American banks' investments, in Eurodollars, were m a d e solely f o r t h e interest income. 56. See T h e o d o r e H . M o r a n , " T r a n s n a t i o n a l Strategies of Protection a n d D e f e n s e by Multinational C o r p o r a t i o n s : S p r e a d i n g the Risk a n d Raising the Cost f o r Nationalization in N a t u r a l Resources," International Organization 27, 2 (1973):273—287. W h a t M o r a n shows, however, is not that this " i n s u r a n c e " can p r e v e n t nationalization but, r a t h e r , that it can compel the p a y m e n t of c o m p e n sation. 57. R u m o r s of e x t e r n a l p r e s s u r e a r e b r u i t e d by Paul S i g m u n d , Multinationals in Latin America ( M a d i s o n , W I : University of Wisconsin Press, 1980), p. 200; a n d by FitzGerald, Political Economy of Peru, p. I l l ; cf. Becker, New Bourgeoisie, pp. 1 12-122, w h e r e an analysis of h i t h e r t o secret files of the Ministry of Energy a n d Mines shows that these r u m o r s a r e without f o u n d a t i o n . 58. Prices a r e based on o p e n - m a r k e t quotations, but they apply only to r e f i n e d metals. W h e n t h e p r o d u c t is u n r e f i n e d metallic c o p p e r , t h e b u y e r ded u c t s a r e f i n i n g c h a r g e f r o m t h e o p e n - m a r k e t price. These c h a r g e s , however, a r e arrived at by private negotiation. T h u s , unless the g o v e r n m e n t has an indep e n d e n t m e a n s of verifying w h e t h e r r e p o r t e d r e f i n i n g c h a r g e s a r e fair a n d j u s t i f i e d by processing costs, t h e r e is always the possibility that t h e p r o d u c e r might m a n i p u l a t e t h e m in o r d e r to shift profits out of the c o u n t r y . 59. S i g m u n d , Multinationals, p p . 22—23. 60. S t e p a n , State and Society, p p . 230—289. 61. Also see Sayre P. Schatz's parallel discussion of b a r g a i n i n g dynamics, especially his concept of "self-fulfilling aspiration growth," in ch. 5 of this volume. 62. T h e acid test of t h e d o c t r i n e , o n e that Sklar applies in Corporate Power, is w h e t h e r t h e subsidiary complies in m a t t e r s of regional f o r e i g n policy that r u n c o u n t e r to t h e policies of o t h e r states in which the c o r p o r a t i o n has o p e r a tions (fn. 23). N o such test was possible in t h e Peruvian case, since Peru is not c u r r e n t l y e m b r o i l e d in a political conflict with a n o t h e r state in which S o u t h ern's p a r e n t s have m a j o r investments. H o w e v e r , S i g m u n d , Multinationals in Latin America, notes (pp. 7—23 a n d passim) that U.S. f o r e i g n e c o n o m i c policy has consistently f o u g h t t h e idea e m b o d i e d in the Calvo Doctrine, that f o r e i g n investment should be g o v e r n e d solely by t h e laws a n d customs of t h e host state. S o u t h e r n ' s a c c e p t a n c e of a "Calvo clause" in its C u a j o n e contract t h u s s u p p o r t s a Peruvian f o r e i g n policy objective that contradicts an objective of t h e company's h o m e g o v e r n m e n t . O n t h e o t h e r h a n d , Asarco, as a c o m p a n y with m a j o r smelting a n d r e f i n i n g o p e r a t i o n s in t h e U n i t e d States, was a m o n g t h e c o p p e r p r o d u c e r s that recently ( 1 9 8 3 - 8 4 ) petitioned the U.S. I n t e r n a t i o n a l T r a d e Commission f o r tariff p r o t e c t i o n against i m p o r t e d c o p p e r — a petition that, if it h a d b e e n a p p r o v e d , would have struck h a r d at a f u n d a m e n t a l P e r u v i a n economic interest. B u t t h e r e is n o c o n t r a d i c t i o n here. For in t h e I T C action, Asarco was also acting in a c c o r d a n c e with t h e doctrine of domicile: as a " g o o d c o r p o r a t e citizen" of t h e U n i t e d States, it has a d u t y to c o n c e r n itself (insofar as

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profitability allows) with the j o b security a n d w e l f a r e of its U.S. employees. 63. T h e appellation "colonial c o m p a n y " is p a r t i c u l a r l y j u s t i f i e d in C e r r o ' s case by its status as an hacendado. I suggest that colonial c o m p a n i e s a r e t h e real objects of B a r a n ' s bitter criticism of f o r e i g n r e s o u r c e firms in t h e "third world"; see B a r a n , Political Economy of Growth, p p . 1 9 7 - 1 9 8 . 64. It d o e s n o t follow t h a t technological prowess a n d solid finances a r e always sufficient to protect a t r a n s n a t i o n a l m i n i n g firm against e x p r o p r i a t i o n ; obviously, t h e Chilean e x a m p l e — s e e T h e o d o r e H . M o r a n , Multinational Corporations and the Politics of Dependence (Princeton; P r i n c e t o n University Press, 1974)—proves otherwise. Still, nationalization o c c u r r e d in Chile f o r t h e same reason a r g u e d h e r e : the subsidiaries were n o l o n g e r able to supply the host c o u n t r y with indispensable b o n a n z a d e v e l o p m e n t b e n e f i t s that it could not p r o v i d e f o r itself . T h e lesson seems to be that, at a suitably a d v a n c e d stage, direct t r a n s n a t i o n a l participation in b o n a n z a d e v e l o p m e n t is self-extinguishing; it is plain that t h e "bonanza" cannot be enlarged forever, a n d that in technologically stable i n d u s t r i e s like mining, f o r e i g n m a n a g e m e n t s will not always have s o m e t h i n g to teach to local citizens. Nonetheless, the b o n a n z a d e v e l o p m e n t p h a s e of capitalist d e v e l o p m e n t in t h e "third w o r l d " will r e m a i n relevant f o r years to come. O f t h e newly d e v e l o p i n g c o u n t r i e s that a p p e a r to be following b o n a n z a d e v e l o p m e n t strategies, only Mexico, which c o m b i n e s a high level of industrialization with a s t r o n g i n d i g e n o u s tradition in n a t u r a l resources exploitation, seems to be a p p r o a c h i n g t h e point of s e l f - e x t i n g u i s h m e n t . 65. P e r u v i a n m i n e o w n e r s h a d wanted C e r r o to build a zinc r e f i n e r y that m i g h t eventually p u r c h a s e zinc ores—a principal p r o d u c t of t h e m e d i a n a mine r í a — f r o m t h e m . It did so, but its p l a n n i n g was very conservative; even with later e x p a n s i o n s , t h e facility was never able to a b s o r b t h e o u t p u t of C e r r o ' s own mines. T h e l o n g - s t a n d i n g desire f o r a domestic zinc r e f i n e r y is d o c u m e n t e d by S a m a m é Boggio, Minería peruana, p p . 437—473. 66. T h e s e a n d o t h e r r e f o r m s a r e discussed by P e t e r T . Knight, "New F o r m s of E c o n o m i c O r g a n i z a t i o n in P e r u : T o w a r d W o r k e r s ' SelfM a n a g e m e n t , " in Lowenthal (ed.), The Peruvian Experiment (fn. 51), p p . 350— 401; David W. Pearson, " T h e C o m u n i d a d Industrial: Peru's E x p e r i m e n t in W o r k e r M a n a g e m e n t , " Inter-American Economic Ajfairs 2 7 , 1 (1973): 15—29; a n d Evelyne H u b e r S t e p h e n s , The Politics of Workers' Participation (New York: A c a d e m i c Press, 1980). 67. H e n r y Pease García, El ocaso del poder oligárquico (Lima: D E S C O , 1977), p p . 7 1 - 1 2 2 . T h e evidence suggests that t h e b o u r g e o i s p r o t e s t o r s were o v e r w h e l m i n g l y small m a n u f a c t u r e r s , whose businesses were personally o w n e d a n d whose o p e r a t i o n s w e r e g e a r e d to t h e d o m e s t i c m a r k e t . 68. T h o m a s B a m a t , "Relative State A u t o n o m y a n d Capitalism in Brazil a n d P e r u , " The Insurgent Sociologist 7, 2 ( 1 9 7 7 ) : 7 4 - 8 4 . But B a m a t m a i n t a i n s t h a t this a u t o n o m y served only to m a k e t h e state still m o r e d e p e n d e n t o n f o r e i g n capital. 69. T h i s a c h i e v e m e n t was wholly P e r u v i a n . F o r e i g n technology is p r e s e n t only in s o m e p u r c h a s e d e q u i p m e n t , which was b o u g h t piecemeal a n d integ r a t e d into t h e system by Peruvian e n g i n e e r s .

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70. Only domestic f i r m s may d r a w o n the resources of t h e Banco Minero. Until this extension of its f u n c t i o n s , t h e b a n k was limited to m a k i n g small loans f o r working capital. 71. FitzGerald, Political Economy of Peru, p p . 1 4 0 - 1 4 1 , shows that d u r i n g these years Peru's i n c o m e distribution s h i f t e d in favor of t h e m i d d l e deciles— s o m e t h i n g not seen in any of t h e o t h e r m a j o r c o u n t r i e s of t h e region. My data (Becker, New Bourgeoisie, p. 243) indicate that middle-class e m p l o y m e n t in [he m i n i n g sector a p p r o x i m a t e l y d o u b l e d between 1970 a n d 1978. 72. S e e f n . 6. 73. T h e a r g u m e n t has been m a d e most tellingly in the case of Brazil; see T h o m a s E. S k i d m o r e , "Politics a n d Economic Policy Making in A u t h o r i t a r i a n Brazil, 1 9 3 7 - 7 1 , " in S t e p a n (ed.), Authoritarian Brazil (fn. 9), pp. 3 - 4 6 . 74. Kruijt a n d Vellinga, Labor Relations and Multinational Corporations, pp. 5 8 - 6 6 , 164-199. 75. David G. Becker, " T h e W o r k e r s of the M o d e r n Mines in S o u t h e r n P e r u : Socio-Economic C h a n g e a n d T r a d e - U n i o n Militancy in the Rise of a Labor Elite," in T h o m a s Greaves a n d William Culver (eds.), Miners and Mining in the Americas ( M a n c h e s t e r , Eng.: University of M a n c h e s t e r Press, 1986), pp. 226-256. 76. W o r k e r s ' p u r c h a s i n g power has recently fallen drastically, t h e combined result of low world metals prices a n d a very high rate of domestic intlation. In my view, however, the system of d o m i n a t i o n s h o u l d be able to contain workers' c o m p l a i n t s so long as t h e m i n i n g c o m p a n i e s ' balance sheets d o not show g r a n d profits, a n d so long as their difficulties can plausibly be a t t r i b u t e d to e x t e r n a l conditions b e y o n d t h e control of t h e c o m p a n i e s o r of any Peruvian g o v e r n m e n t . " C o n t a i n m e n t , " in this sense, m e a n s forestalling a direct proletarian challenge to t h e existing socioeconomic a n d political o r d e r ; it d o e s not m e a n that t h e r e will be n o labor u n r e s t , o r that strikes will be u n m a r r e d by violent incidents. 77. In fact, p e r capita food p r o d u c t i o n has fallen well below t h e a l r e a d y marginally a d e q u a t e levels of t h e mid-1960s. 78. Cynthia McClintock, Peasant Cooperatives and Political Change in Peru (Princeton: Princeton University Press, 1981); a n d A d o l f o Figueroa, Capitalist Development and the Peasant Economy in Peru ( C a m b r i d g e : C a m b r i d g e University Press, 1984). 79. T h e r e f o r m was also i n t e n d e d to s p u r industrialization by e n a b l i n g t h e p e a s a n t r y at large to e n t e r t h e m o n e y e c o n o m y a n d , t h e r e b y , to b e c o m e potential c o n s u m e r s of locally m a n u f a c t u r e d goods. 80. A m o n g those left b e h i n d o n t h e p l a t f o r m a r e t h e radical populists of the S e n d e r o L u m i n o s o m o v e m e n t , who, t h o u g h capable of spilling e n o u g h blood a n d d e s t r o y i n g e n o u g h p r o p e r t y to m a k e a still-fragile o r d e r t r e m b l e , c a n n o t h o p e to b r i n g it d o w n . 81. See Sklar, "Socialism at Bay." Unlike a r u l i n g caste o r a closed, oligarchic elite, a large a n d diverse d o m i n a n t class such as t h e bourgeoisie n e e d s a political f o r m t h a t can reconcile (or m e d i a t e a m o n g ) its m e m b e r s ' various parochial interests, so that t h e l o n g - r a n g e interest of t h e class as a whole

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e m e r g e s . Every a u t h o r i t a r i a n i s m has a built-in t e n d e n c y t o w a r d partiality that t a n e n d a n g e r class cohesiveness a n d o b s c u r e this l o n g - r a n g e interest. 82. A l e x a n d e r G e r s c h e n k r o n , Economic Backwardness in Historical Perspective ( C a m b r i d g e : B e l k n a p Press, H a r v a r d University Press, 1962). 83. Magali Sarfatti Larson, The Rise of Professionalism (Berkeley a n d Los Angeles: University of California Press, 1977), p p . 2 2 0 - 2 3 2 ; a n d Koula Mellos, " D e v e l o p m e n t s in A d v a n c e d Capitalist Ideology," Canadian Journal of Political Science 11, 4 ( 1 9 7 8 ) : 8 2 9 - 8 6 0 (see esp. p p . 8 3 7 - 8 3 8 , 844ff). O n " m a n a g e r i a l ideology" in Peru, see A l b e r t o García d e R o m a n a , " C o m p o r t a m i e n t o gremial y político d e los e m p r e s a r i o s industriales, 1968—73," T a l l e r d e Estudios U r b a n o Industriales, Pontificia U n i v e r s i d a d Católica del P e r ú , 1975 ( m i m e o g r a p h e d ) . 84. H o w a r d J . W i a r d a , " T o w a r d a F r a m e w o r k f o r t h e Study of Political C h a n g e in t h e Iberic-Latin T r a d i t i o n : T h e C o r p o r a t i v e Model," World Politics 25, 2 ( 1 9 7 3 ) : 2 0 6 - 2 3 5 . 85. See Sayre P. Schatz's discussion in ch. 7 of this volume. 86. Which, as is shown by its failure to involve itself on t h e side of t h e t r a n s n a t i o n a l in their disputes with t h e g o v e r n m e n t , did not m a k e it subservient to its foreign p a t r o n s . 87. I n t e r n a t i o n a l metal a n d p e t r o l e u m prices have fallen so low that h a r d c u r r e n c y e a r n i n g s f r o m e x p o r t sales of these p r o d u c t s n o l o n g e r suffice to meet t h e c o u n t r y ' s i m p o r t d e m a n d ; no price u p t u r n is likely any time soon, n o r is t h e r e o n t h e h o r i z o n a new r e s o u r c e e x p o r t " b o n a n z a " that m i g h t m a k e u p the deficit. 88. S u f f r a g e in P e r u is universal a n d m a n d a t o r y f o r all those over eighteen years of age, i n c l u d i n g illiterates. C o n s e q u e n t l y , t h e o u t c o m e s of t h e elections since 1980—in all of which t h e total of blank a n d spoiled ballots has b e e n quite small despite a r a t h e r complicated voting p r o c e d u r e — m u s t be taken as reflecting real p o p u l a r p r e f e r e n c e s . T h e g e n e r a l election of 1985 not only resulted in a t h o r o u g h g o i n g c h a n g e f r o m F e r n a n d o B e l a ú n d e ' s neoliberalism to Garcia's nationalist r e f o r m i s m ; it also m a r k e d t h e first time since 1912 that o n e freely elected national g o v e r n m e n t succeeded a n o t h e r . 89. O n the n a t u r e of t h e m o d e r n b o u r g e o i s interest in political d e m o c racy, see Bob Jessop, "Capitalism a n d D e m o c r a c y : T h e Best Possible Political Shell?" in Gary Littlejohn et al. (eds.), Power and the State (New York: St. Martin's, 1978), p p . 1 0 - 5 1 .

C H A P T E R

F I V E

Assertive Pragmatism and the Multinational Enterprise SAYRE P. SCHATZ Given t h e s h e e r v o l u m e of w r i t i n g on m u l t i n a t i o n a l e n t e r p r i s e s ( M N E s ) , t h e wide r a n g e of o p i n i o n o n m o s t facets of t h e s u b j e c t , a n d t h e p a s s i o n with w h i c h c o n t e n d i n g p o s i t i o n s a r e a s s e r t e d , o n e feels a need for a guide t h r o u g h the embattled, and changing, terrain. This c h a p t e r p r o p o s e s a s i m p l e c o n c e p t u a l f r a m e w o r k , f o c u s i n g o n t h e imp a c t of M N E s o n d e v e l o p i n g host c o u n t r i e s ; it s u b m i t s a b r i e f f o r o n e of t h e a p p r o a c h e s d e l i n e a t e d in t h a t f r a m e w o r k ; a n d it s u g g e s t s t h a t a p r o c e s s o f c o n v e r g e n c e t o w a r d s u c h a n a p p r o a c h is u n d e r way. D e s p i t e t h e c o n s i d e r a b l e o v e r s i m p l i f i c a t i o n i n v o l v e d , it is u s e f u l to d i s t i n g u i s h t h r e e m a i n a p p r o a c h e s to M N E s . O f c o u r s e , a n y t a x o n o m y of a n e x t e n s i v e a n d o f t e n h i g h l y s o p h i s t i c a t e d l i t e r a t u r e , e v e n a m o r e h i g h l y d i f f e r e n t i a t e d o n e t h a n t h a t p r e s e n t e d h e r e , inevitably involves o v e r s i m p l i f i c a t i o n : t h e r e is c o n s i d e r a b l e diversity within e a c h of t h e t h r e e c a t e g o r i e s ; m o r e o v e r , t h e classification is not e x h a u s t i v e b e c a u s e s o m e w r i t i n g s d o not fit well i n t o a n y of t h e c a t e g o r i e s . Still, we c a n usefully d i s t i n g u i s h t h e a c c e p t a n c e , r e j e c t i o n , a n d p r a g m a t i c a p p r o a c h e s to M N E s . T h i s p a p e r will p r e s e n t only a single p r o t o t y p i c a l p o s i t i o n f o r e a c h a p p r o a c h , n o t s u g g e s t i n g t h a t it is fully r e p r e s e n t a t i v e of all w h o m a y follow t h a t a p p r o a c h . 1 T h e t h r e e a p p r o a c h e s lie a l o n g a c o n t i n u u m , w i t h o u t c l e a r - c u t d e m a r c a t i o n s b e t w e e n t h e m . T h e acceptance approach c o n c e i v e s of M N E e x p a n s i o n as e c o n o m i c a l l y r a t i o n a l , with b e n e f i t s c o n s i d e r a b l y o u t w e i g h i n g costs f o r t h e h o s t as well as t h e h o m e c o u n t r y ; c o n s i d e r s hostg o v e r n m e n t pressures on MNEs generally h a r m f u l on balance; and thus advocates a minimal or restricted role f o r g o v e r n m e n t . T o w a r d s t h e left e n d of t h e c o n t i n u u m , t h e rejection approach sees M N E activities as essentially b a l e f u l , with h a r m to h o s t c o u n t r i e s o v e r s h a d o w i n g b e n e This article originally appeared in World Development9, Reprinted with permission. 107

1 (1981):93— 105.

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fits. Rejectors believe that h o s t - g o v e r n m e n t e f f o r t s to tip the balance toward the beneficial either c a n n o t succeed or entail costs (in terms of e x p e n d i n g scarce g o v e r n m e n t capabilities) that exceed the benefits. They t h e r e f o r e p r o p o s e that g o v e r n m e n t should either reject MNEs entirely or allow t h e m a marginal role, o n e in which they accord with a n d a c c o m m o d a t e to host-country policies (which should be directed toward f u n d a m e n t a l r e s t r u c t u r i n g of the nation's economy). Between these two is the pragmatic approach, which views M N E o p e r a t i o n s as mixed in effect; which believes that feasible g o v e r n m e n t pressures on the MNEs can p r o d u c e a worthwhile i m p r o v e m e n t in the benefit-cost mix; a n d which t h e r e f o r e advocates intelligent bargaining by host countries. A particular f o r m of p r a g m a t i s m , which we call assertive p r a g m a t i s m , will be specified in this p a p e r . 1. T h e Acceptance A p p r o a c h A considerable s p e c t r u m of writers follows the acccptance a p p r o a c h , r a n g i n g f r o m s t r o n g partisans w h o can see, h e a r , or speak no evil of MNEs 2 to social scientists of the highest caliber a n d sophistication. T h e a p p r o a c h lias been persuasively articulated by R a y m o n d V e r n o n , conceivably the world's leading authority on MNEs, a n d because of his pree m i n e n t status, the prototypical acceptance position p r e s e n t e d h e r e is based upon Vernon's a r g u m e n t , although other writers are also r e f e r r e d to. V e r n o n ' s position can be p r e s e n t e d in the f o r m of six propositions': 1. T h e pervasive frictions between the world's nation-states a n d the MNEs a r e based u p o n a f u n d a m e n t a l conflict between economics a n d politics. 4 Technological progress a n d the economic processes that flow t h e r e f r o m p r o d u c e e n o r m o u s economic benefits. However, these processes also heighten world economic i n t e r d e p e n d e n c e , thereby red u c i n g national a u t o n o m y . T h i s occurs just when national governments, c o m m i t t e d to p r o m o t i n g welfare a n d d e v e l o p m e n t in an historically new way, fiercely desire to increase their a u t o n o m y a n d sense of control. G o v e r n m e n t s thus e x p e r i e n c e the f u n d a m e n t a l economicpolitical conflict as an excruciating ambivalence: a s i m u l t a n e o u s h e i g h t e n i n g of both their desire f o r the economic benefits of i n t e r d e p e n d e n c e a n d their aversion to its political constraints. 2. T h e M N E is a m a j o r manifestation a n d e m b o d i m e n t of t h e economic forces p r o m o t i n g global economic integration a n d h u m a n welfare. World-scale specialization p r o m o t e d by M N E e x p a n s i o n raises the gross world p r o d u c t a n d allows h i g h e r living s t a n d a r d s f o r all. T h e giant enterprises have the resources r e q u i r e d f o r costly research a n d d e v e l o p m e n t activities a n d can s p r e a d the costs over their worldwide

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o p e r a t i o n s . T h e y can f i n a n c e h u g e p r o d u c t i v e investments that would otherwise be neglected. T h e y increase e m p l o y m e n t a n d i n c o m e in the host c o u n t r i e s , raise the levels o f w o r k e r skills a n d m a n a g e r i a l a n d ent r e p r e n e u r i a l capability, create linkage ef fects, a n d p r o m o t e e c o n o m i c d e v e l o p m e n t in m a n y o t h e r ways. 3. In contrast, the political forces o f n a t i o n a l i s m a r e impeditive a n d costly. Host-country g o v e r n m e n t s m a y m a k e d e m a n d s that imp e d e or p r e v e n t u s e f u l investment. Within the h o s t - g o v e r n m e n t b u r e a u c r a c y , u n r e a s o n i n g hostility toward f o r e i g n investors may slow d o w n the m a n y p r o c e s s e s relating to M N E o p e r a t i o n s a n d thereby raise costs. G o v e r n m e n t s may i m p o s e u n r e a s o n a b l e a n d even conflicting req u i r e m e n t s . For e x a m p l e , Mexico has r e q u i r e d f o r e i g n - o w n e d automobile p r o d u c e r s not only to p r o d u c e c o m p o n e n t s domestically, but also to e x p o r t t h e m to o t h e r m a r k e t s / ' If such r e q u i r e m e n t s were g e n e r a l i z e d they would be impossible f o r the M N E s to meet. 4. Most political criticisms o f M N E s , particularly those e m a n a t i n g f r o m d e v e l o p i n g c o u n t r i e s , a r e e m o t i o n a l a n d irrational. They arise f r o m f r u s t r a t i o n s that a r e not validly attributable to M N E s , a n d " t h e i m p e r v i o u s n e s s of the d e b a t e to facts" arises f r o m the i m p o t e n t a n g e r g e n e r a t e d by these f r u s t r a t i o n s . T h e M N E s h a v e the m i s f o r t u n e to serve as " u n w i t t i n g a n d unwilling lightning r o d s " f o r this anger.'' C o n sider the following analyses by V e r n o n of a n t a g o n i s m t o w a r d M N E s . H e i g h t e n e d world i n t e r d e p e n d e n c e , which is c a u s e d primarily by i m p r o v e m e n t s in travel a n d c o m m u n i c a t i o n s a n d merely e p i t o m i z e d by the M N E , could be a c c o m p a n i e d by a " s e n s e of equality a n d m u t u ality," but b e c a u s e o f " t h e internal capabilities a n d s e l f - p e r c e p t i o n s o f the l e a d e r s h i p " it is likely to be e x p e r i e n c e d as " a s e n s e o f inferiority a n d d e p e n d e n c y , " particularly in d e v e l o p i n g countries. 7 All the ills a c c o m p a n y i n g industrialization t e n d to be b l a m e d on the M N E . In less d e v e l o p e d c o u n t r i e s especially, the M N E " h a s c o m e to be seen as the e m b o d i m e n t o f almost a n y t h i n g d i s c o n c e r t i n g a b o u t m o d e r n industrial society," but this is irrational. " H e g e m o n y , c o r r u p tion, inequity, pollution, a n d i n d i f f e r e n c e to c o n s u m e r interest were e n d e m i c in m a n k i n d ' s history l o n g b e f o r e the multinational e n t e r p r i s e existed."s In the industrialized societies also, the c h a r g e s m a d e against M N E s tend primarily to be m a n i f e s t a t i o n s o f " t h e real u n e a s i n e s s o f o u r times." T h e f u n d a m e n t a l c a u s e o f these c o m p l a i n t s is a " p e r v a s i v e m o o d o f a l i e n a t i o n " ( c a u s e d by factors that a r e variously i d e n t i f i e d by d i f f e r e n t social scientists).' 1 5. T h i s is not to say that t h e r e a r e no real conflicts between g o v e r n m e n t s a n d M N E s . T h e r e a r e m a n y : g o v e r n m e n t s want the capacity to control capital m o v e m e n t s but M N E s a r e c a p a b l e o f a v o i d i n g controls;

no

SAYRF. P. SCHATZ

g o v e r n m e n t s w a n t f o r e i g n e x c h a n g e stability but t h e M N E s " h a v e the p o t e n t i a l f o r c o n t r i b u t i n g substantially t o t h e instability o f c u r r e n c i e s " ; g o v e r n m e n t s w a n t t h e p o w e r to tax as t h e y wish, but " t h e c o n s e q u e n c e s o f u n i l a t e r a l [ t a x ] a c t i o n by a n y m a j o r c o u n t r y can b e q u i t e substantial"; in g e n e r a l , " [ t ] h e c a p a c i t y o f a n y g o v e r n m e n t to u n d e r t a k e a s p e c i f i e d task in s u p p o r t o f a p u b l i c p o l i c y . . . has b e e n r e d u c e d . " 1 0 G o v e r n m e n t ' s d e s i r e f o r f i r m e r p o w e r s is u n d e r s t a n d a b l e ,

but

e v e n o n m o s t o f t h e s e real issues t h e criticisms o f m u l t i n a t i o n a l s are misguided. T h e various g o v e r n m e n t s are o f t e n pursuing conflicting n a t i o n a l interests in a z e r o - s u m g a m e ; t h e g a i n o f o n e c o u n t r y is of fset by t h e loss o f a n o t h e r . Such i n t e r a c t i o n s , f u r t h e r m o r e , t h r e a t e n the spread o f b e g g a r - t h y - n e i g h b o r policies which w o u l d sharply diminish the w e l f a r e o f all." 6. Finally, as a practical m a t t e r , g o v e r n m e n t a c t i o n s p e c i f i c a l l y a i m e d at M N E s s h o u l d b e q u i t e limited. 1 ' 2 This f o l l o w s partially f r o m a pessimistic v i e w o f t h e realities o f state i n t e r v e n t i o n . S o m e public m e a sures w o u l d c l e a r l y b e w o r t h u n d e r t a k i n g if it w e r e possible to i m p l e m e n t them. For e x a m p l e , because o f the multinationality o f government

action

even

on

affairs normally

considered

MNEs,

domestic

m i g h t h a v e i n t e r n a t i o n a l r e p e r c u s s i o n s ; o n such m a t t e r s it w o u l d b e w o r t h w h i l e to s e c u r e i n t e r n a t i o n a l a g r e e m e n t a i m e d at a v o i d i n g unilateral actions i n a d v e r t e n t l y h a r m f u l to o t h e r states, a n d at a c h i e v i n g m u l t i l a t e r a l actions w h e r e c o o r d i n a t i o n is d e s i r a b l e . H o w e v e r , g i v e n t h e d o m e s t i c sensitivity o f t h e issues, w h i c h a r e subject to f i e r c e political s t r u g g l e s w i t h i n e a c h c o u n t r y , u s e f u l i n t e r n a t i o n a l a g r e e m e n t has b e e n v i r t u a l l y u n o b t a i n a b l e . I n p o i n t o f fact, t h e m e a s u r e s w h i c h a r e actually b e i n g i m p l e m e n t e d t e n d to d o m o r e h a r m t h a n g o o d . T h u s w h a t be a n d can

should

b e d o n e is m i n i m a l a n d w h a t is b e i n g d o n e t e n d s to b e

harmful.13

2. T h e R e j e c t i o n A p p r o a c h T h e r e j e c t i o n a p p r o a c h is b a s e d typically o n M a r x i a n t h e o r y o r o n quasi-Marxian d e p e n d e n c e t h e o r y , " a l t h o u g h the Rejectors include o t h e r w r i t e r s as well. 1 5 T h e f o r m u l a t i o n p r e s e n t e d in t h e n e x t p a r a g r a p h is m y o w n but is b a s e d o n M a r x i a n t h e o r y . I S T h e tensions associated w i t h t h e s p r e a d o f M N E s can b e s e e n in this f o r m u l a t i o n as m a n i f e s t a t i o n s o n a g l o b a l scale o f t h e basic M a r x i a n c o n t r a d i c t i o n o f c a p i t a l i s m : b e t w e e n t h e social o r i n t e r d e p e n d e n t nat u r e o f t h e p r o d u c t i v e system itself a n d t h e p r i v a t e n a t u r e a n d p u r p o s e o f t h e c o n t r o l o f that system. 1 7 ( P r o d u c t i o n i n v o l v e s a h i g h l y i n t e r d e -

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p e n d e n t m e s h i n g of a country's many d i f f e r e n t productive u n d e r t a k ings; it is carried on by a complex system of t h o r o u g h l y interrelated enterprises. But the p r o d u c t i v e o p e r a t i o n s a r e governed by separate c o m p a n i e s , seeking their own individual, not necessarily c o o r d i n a t e d a n d o f t e n conflicting, profit-related goals.) T h i s social-private contradiction results in poorly c o o r d i n a t e d decisions, coordination being achieved only t h r o u g h the ex post action of the m a r k e t ("anarchy of production"), a n d in decisions based on the criterion of private gain that a r e o f t e n in conflict with the criterion of the public good (e.g., divergences between private profitability a n d social benefit). T h e growth of the M N E s r e p r e s e n t s an extension of t he basic Marxist contradiction in a wider arena. T h e i n t e r d e p e n d e n c e of the productive system becomes m o r e fully international 1 8 while the m e a n s a n d p u r p o s e of control r e m a i n relatively narrow. 1 ' 1 T h u s the M N E is just o n e m o r e instrum e n t , t h o u g h a relatively new a n d i m p o r t a n t one, of an exploitative, anachronistic economic system. T h e social-private contradiction i n h e r e n t in M N E e x p a n s i o n produces or at least reinforces a n d e x t e n d s a characteristic s t r u c t u r i n g of the world economy: o n e that may be called hierarchical-geographical as well as imperialistic.'-" T h e growth of MNEs t e n d s to " p r o d u c e a hierarchical division of labor between geographical regions. . . . [It t e n d s to] centralize high-level decision-making occupations in a few key cities in the advanced countries, s u r r o u n d e d by a n u m b e r of regional subcapitals, a n d c o n f i n e the rest of the world to lower levels of activity a n d income. . . . [T]he existing p a t t e r n of inequality a n d d e p e n d e n c y . . . [is] p e r p e t u a t e d . . . . [T]he basic relationship between d i f f e r e n t countries . . . [is] o n e of s u p e r i o r a n d subordinate." 2 1 T h i s hierarchical division of the world arises f r o m the private, p r o f i t - o r i e n t e d c h a r a c t e r of the M N E s and not f r o m the basic n a t u r e of the productive forces. "It must be stressed that the d e p e n d e n c y relationship . . . should not be att r i b u t e d to technology. T h e new technology . . . implies g r e a t e r interd e p e n d e n c e but not necessarily a hierarchical structure." 2 2 U n d e r a diff e r e n t f o r m of control, an entirely d i f f e r e n t , m o r e rational, m o r e h u m a n e world economic s t r u c t u r e could emerge. 2 3 T h e rejection a p p r o a c h focuses on the h a r m f u l effects f o r the developing countries of M N E e x p a n s i o n : imperialism a n d d e p e n d e n c e , exploitative t r a n s f e r pricing, the f o r m a t i o n or r e i n f o r c e m e n t of a baleful set of class relations, an outflow of dividends, interest, royalties, a n d fees e x c e e d i n g the inflow of capital, which is viewed as a d r a i n a g e of capital, a n d many o t h e r negative consequences. 2 4 Conversely, the app r o a c h gives short shrift to host-country benefits g e n e r a t e d by the MNEs. Such benefits a r e seen as accruing primarily to a n a r r o w r u l i n g

S A Y R F . P. S C H A T Z

class o r set of elites, i n c l u d i n g p e r h a p s a small " l a b o r aristocracy" e m p l o y e d by t h e M N E s , with little o r n o t h i n g t r i c k l i n g d o w n to t h e m a s s of the population.'5 T h u s , t h e only a p p r o p r i a t e a n d ethical''" s t a n c e is e i t h e r to reject t h e M N E s m o r e o r less e n t i r e l y o r to allow t h e m a m a r g i n a l role, c o m pletely s u b o r d i n a t e to t h e g o v e r n m e n t e c o n o m i c d e v e l o p m e n t o r i e n t a tion,- 7 while g o v e r n m e n t d e v o t e s its limited capabilities to t h e f u n d a m e n t a l task of r e c o n s t r u c t i n g t h e n a t i o n ' s political e c o n o m y , p r o b a b l y o n a socialist basis.

3. (a) Assertive Pragmatism

The P r a g m a t i c A p p r o a c h Delineated

Lying between the acceptance a n d rejection approaches, the pragmatic a p p r o a c h d e c l a r e s t h e m i x e d n a t u r e of t h e M N E i m p a c t on d e v e l o p i n g host c o u n t r i e s , a n d in direct c o n t r a s t with t h e o t h e r a p p r o a c h e s ' reject i o n s of active g o v e r n m e n t i n v o l v e m e n t with M N E s , t h e p r a g m a t i c a p p r o a c h f a v o r s active h o s t - g o v e r n m e n t b a r g a i n i n g with a n d r e g u l a t i o n o f M N E s in o r d e r to i m p r o v e t h e c o s t - b e n e f i t m i x . This a p p r o a c h is in c o n s o n a n c e with t h e s t r a t e g y e m p l o y e d by most d e v e l o p i n g c o u n t r i e s a n d with t h e t h o u g h t of m a n y social scientists,' 2 '' a n d r e p r e s e n t s , I s u g g e s t , a p o s i t i o n t o w a r d s which A c c e p t o r s a n d R e j e c t o r s a r e t e n d i n g to c o n v e r g e ( m o r e o n this later). T h i s article d i s t i n g u i s h e s b e t w e e n t h e p r a g m a t i c a p p r o a c h in its m o s t g e n e r a l f o r m a n d a p a r t i c u l a r e x p r e s sion of t h e a p p r o a c h which m a y be called assertive pragmatism. The r a t i o n a l e s f o r b o t h g e n e r a l a n d assertive p r a g m a t i s m p r e s e n t e d h e r e a r e t h e w r i t e r ' s o w n a n d w o u l d s u r e l y n o t b e a c c e p t a b l e to all o t h e r p r a g m a t i s t s . F o r e x p o s i t i o n a l c o n v e n i e n c e , h o w e v e r , we will s p e a k of the p r a g m a t i c o r the assertive p r a g m a t i c a p p r o a c h . O u r r a t i o n a l e f o r p r a g m a t i s m in g e n e r a l is b a s e d u p o n a social scie n c e uncertainty principle w h i c h s i m p l y states t h a t social science is cap a b l e of p r o v i d i n g only u n c e r t a i n a n s w e r s at best. T h e i m p o r t a n t issues, p a r t i c u l a r l y in d e v e l o p i n g c o u n t r i e s , a r e e n g u l f e d by u n c e r t a i n t y . E x i s t i n g t h e o r y is i n a d e q u a t e a n d t h e r e a l - w o r l d s i t u a t i o n is i m m e r s e d in all m a n n e r of u n k n o w n s . 1 " U n c e r t a i n t y e n g u l f s a t t e m p t s at overall a p p r a i s a l of a n y m a j o r d e v e l o p m e n t . E v a l u a t i n g t h e costs a n d b e n e f i t s of a n y historical p r o c e s s r e q u i r e s a n a s s e s s m e n t of t h e a l t e r n a t i v e s f o r e g o n e , a n d such c o u n t e r f a c t u a l h y p o t h e s e s a r e u n a v o i d a b l y highly s p e c u l a t i v e . Implicit d i f f e r e n c e s in c o n c e p t i o n s of t h e a l t e r n a t i v e s f o r e g o n e largely a c c o u n t f o r t h e s e e m i n g l y e v i d e n c e - r e s i s t a n t n a t u r e of m a n y of t h e g r a n d a r g u -

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merits o v e r the i m p a c t o f the MNF.s. G i v e n these implicit dif f e r e n c e s , the antagonists c o m m o n l y talk past o n e a n o t h e r . E v e n s p e c i f y i n g the actual process is a f o r m i d a b l e u n d e r t a k i n g . O n e is h a r d put simply to i d e n t i f y the vast multiplicity of i m p o r t a n t e c o n o m i c , political, sociological, a n d o t h e r e f f e c t s o f any m a j o r d e v e l o p m e n t , let a l o n e to m e a s u r e them. It f o l l o w s f r o m the u n c e r t a i n t y p r i n c i p l e that it is m o r e c o n c r e t e l y u s e f u l to eschew g r a n d historical appraisals in f a v o r o f n a r r o w e r e v a l u a t i v e tasks. T h e f o c u s most c o n g e n i a l to the p r a g m a t i c a p p r o a c h is o n the i n q u i r y : in the e x i s t i n g real-world situation, by w h a t m e a n s can w e l f a r e — o f s o m e p a r t i c u l a r g r o u p or class, or o f s o m e c o u n t r y or g r o u p o f c o u n t r i e s o r o f the w o r l d — b e e n h a n c e d . T h i s p a p e r ' s f o c u s is o n the w e l f a r e o f the "third w o r l d " p e o p l e s . It also follows that o n e s h o u l d be skeptical o f putative, large, longt e r m gains f r o m a p r o p o s e d set o f m e a s u r e s . H i e Pragmatist places less c r e d e n c e in such p r e d i c t e d b e n e f i t s , i.e., attaches a g r e a t e r discount f o r risk, than the m o r e c o n v i n c e d analysts w h o pay little h e e d to the possibility that they m a y be w r o n g , a n d he o r she gives g r e a t e r w e i g h t than they d o to d e f i n i t e i m m e d i a t e benefits. T h e Pragmatist also t e n d s to place a h i g h e r p r e m i u m o n m e a s u r e s w h i c h are reversible a n d a g r e a t e r d i s c o u n t o n policies w h i c h entail substantial social pain. T h e a p p r o a c h is not necessarily c o n s e r v a t i v e . Proposals p r o m i s i n g d e f i n i t e , n e a r - t e r m benefits are o f t e n o p p o s e d b e c a u s e of tears o f indirect, l o n g - t e r m h a r m . T h e Pragmatist, with h e r or his g r e a t e r skepticism a b o u t r o u n d a b o u t , l o n g - t e r m e f f e c t s , is m o r e likely to f a v o r such p r o p o s a l s than the A c c e p t o r w h o d e p l o r e s u n w a r r a n t e d i n t e r f e r e n c e with the m a r k e t m e c h a n i s m o r the R e j e c t o r w h o fears d i v e r s i o n o f p o p u l a r e n e r g i e s f r o m the basic task o f f u n d a m e n t a l social r e s t r u c t u r ing. N o r is the a p p r o a c h l i n k e d only to m i n o r c h a n g e s . W h i l e it d o e s t e n d to f a v o r p i e c e m e a l decisions, a l l o w i n g e v i d e n c e a n d e x p e r i e n c e to a c c u m u l a t e b e f o r e p r o c e e d i n g f u r t h e r , e v e n p r o f o u n d social c h a n g e s c a n be a c h i e v e d o n a step-by-step basis." T u r n i n g specifically to assertive p r a g m a t i s m , o u r rationale is based also o n a s e c o n d c o n c e p t i o n — a n e x t e n s i o n o f the a l r e a d y discussed M a r x i a n c o n c e p t o f the social-private conflict. T h i s e x t e n s i o n d e p a r t s f r o m the original M a r x i a n vision; e v e n if o n e c o n s i d e r s the M a r x i a n c o n c e p t a highly u s e f u l insight, o n e n e e d n o t believe that M a r x ' s horiz o n was u n l i m i t e d . M a r x d i d n o t f o r e s e e the u n f o l d i n g o f that conflict. It c a n be a r g u e d that capitalism's viability has b e e n e x t e n d e d in the f a c e o f the social-private c o n f l i c t by the s u p e r i m p o s i t i o n o f a d e g r e e o f social m a n a g e m e n t u p o n the private c o n t r o l o f the p r o d u c t i v e system. T h i s social m a n a g e m e n t took the f o r m o f state i n t e r v e n t i o n to deal with s y s t e m - t h r e a t e n i n g p r o b l e m s ; the state u n d e r t o o k e c o n o m y - s t a b i l i z i n g

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fiscal and monetary policy, m o r e e f f e c t i v e regulation of the banks, une m p l o y m e n t insurance, social security, and all the other functions that characterize the m o d e r n mixed economic system. T h e social stewardship of the socially i n t e r d e p e n d e n t productive system curbed the most ominous domestic malfunctions of the capitalist economies. We have already suggested that the expansion of the M N E s can be seen within the Marxist p a r a d i g m as an extension of the social-privale conflict on a global scale. Productive i n t e r d e p e n d e n c e becomes more thoroughly international, but the means of state control remain national. Once again the means of control are m o r e parochial than the productive system they attempt to harness. T h i s extension of the Marxian conception depicts a problem but it also directs attention to a possible means of coping with the problem. It suggests the possibility of developing still b r o a d e r means of control, i.e., some f o r m of governmental action of transnational scope. Intellectual symmetry suggests parallelism: just as national manifestations of the social-private conflict are dealt with 011 a national governmental level, so the global manifestations should be handled on a world governmental level. But such an orientation would be visionary. It is more realistic to discuss moves toward more cosmopolitan means of control through increasing the effectiveness and scope of international agencies and international agreements, and m o r e important, t h r o u g h the implementation by individual governments of complementary policies.'' O u r extension of the M a r x i a n social-private contradiction implies that the web of i n t e r d e p e n d e n c e in the national and international political economy is loosely e n o u g h interwoven so that separate elements can be altered in a way that would i m p r o v e the functioning of the system. In contrast, systemic interrelations are considered (perhaps implicitly) m u c h m o r e tightly interwoven by Acceptors and Rejectors. For the Acceptor, g o v e r n m e n t interference with the market mechanism is likely to have broad consequences of a negative character that will outweigh a p p a r e n t improvements. F o r the Rejector, the system will compensate to preserve the privileges of the ruling class, so that improvement can only be minimal at best while energies are diverted f r o m replacing the system itself. Related to the pragmatic conceptions of loosely woven i n t e r d e p e n d e n c e and improvability is the associated j u d g m e n t that despite all their shortcomings governments can be a vehicle f o r achieving potential improvements. Assertive pragmatism—with its skepticism about soul-satisfying ideological scenarios, its p r e f e r e n c e f o r m o r e certain short-run benefits and distrust of putative long-run benefits, its predisposition toward active use of g o v e r n m e n t — i s essentially a mindset, a predisposition on

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how to p r o c e e d . Assertive Pragmatists may d i f f e r in many ways: in their d e g r e e of assertiveness (for a particular level of b a r g a i n i n g s t r e n g t h ) , in their p r e f e r e n c e s f o r capitalism or socialism, in their conceptions of t h e balance of benefits a n d dysbenefits g e n e r a t e d by M N E activities, etc. Similarly, assertive p r a g m a t i c stances may be a d o p t e d by c o u n t r i e s with d i f f e r e n t class structures, d i f f e r e n t b a r g a i n i n g positions, a n d o t h e r m a j o r d i f f e r e n c e s . T h e a p p r o a c h a d u m b r a t e s a general position, but it nevertheless leaves wide scope f o r d i s a g r e e m e n t , d o u b t , a n d indecision." Let us wind lip o u r definition of assertive p r a g m a t i s m by r e t u r n i n g briefly to Rejector criticisms: that the Pragmatist, even if assertive, is willing to settle f o r relatively small gains; that the benefits that occupy t h e Pragmatist accrue primarily to a n a r r o w ruling class or set of elites; a n d that the h a r m d o n e by MNEs—in aggravating d e p e n d e n c e , f o r m ing a n d solidifying exploitative class relations, directing economic g r o w t h a i o n g capitalist r a t h e r than socialist lines—is m o n u m e n t a l . T h e Assertive Pragmatist does not dismiss Rejector criticisms of t h e M N E lightly a n d agrees that a serious case can be m a d e that the impact of the M N E may on balance be injurious. Nevertheless, the Pragmatist (or this o n e at any rate) justifies his or h e r position by pointing out that the benefits that d o "trickle d o w n " are o f t e n too lightly dismissed 1 4 —such dismissal is only f o r the affluent' 1 3 —and by reiterating both his uncertainty-based skepticism about t r a d i n g off these benefits (or speculative benefits of a b r o a d e r n a t u r e a n d also his observation that the capitalist state has proved capable of ameliorating f u n d a m e n t a l problems." 1 T h e Pragmatist considers the rejection a p p r o a c h doct r i n a i r e . " H e also finds that the rejection a p p r o a c h exhibits a curious »historical s t r a n d that contrasts sharply with the broadly historical c h a r a c t e r of Marxist a n d d e p e n d e n c e theory. T h e m a j o r p r o b l e m s of a n y p e r i o d a r e typically characterized as i n h e r e n t in capitalism a n d ineradicable except t h r o u g h socialism. If in fact the p r o b l e m is alleviated, attention is t h e n r e f o c u s e d single-mindedly on the new p r o b l e m s that inevitably e m e r g e o u t of the modified conditions. T h e i m p r o v e m e n t s a r e i g n o r e d ; the e r r o r in calling the previous p r o b l e m i m m u t a b l e is forg o t t e n ; a n d t h e new p r o b l e m s a r e again considered ineradicable. For e x a m p l e , Marxists m a i n t a i n e d that foreign investment ineluctably thrust the less developed economies into a primary p r o d u c i n g role in the world division of labor. W h e n in fact the M N E s began investing in the industrial subsidiaries in p o o r countries, n e i t h e r the industrial p r o g r e s s m a d e n o r the e r r o r in t h e previous p r o n o u n c e m e n t s were seriously n o t e d . I n s t e a d attention shifted to the p r o b l e m s g e n e r a t e d by these subsidiaries—enterprises which used i n a p p r o p r i a t e technology a n d e m p l o y e d a small labor aristocracy to p r o d u c e i n a p p r o p r i a t e p r o d -

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ucts f o r a small elite, t h e r e b y i n c r e a s i n g u n e m p l o y m e n t , r e s t r i c t i n g local d e m a n d a n d t h u s local p r o d u c t i o n , p r e v e n t i n g t h e e m e r g e n c e of a local capital g o o d s i n d u s t r y p r o d u c i n g s i m p l e r capital g o o d s , agg r a v a t i n g t e c h n o l o g i c a l d e p e n d e n c e , g e n e r a t i n g excessive p a y m e n t s to t h e M N E s , etc. T h u s , say s o m e Marxists, i n d u s t r i a l g r o w t h u n d e r M N E a u s p i c e s " m a y p r o p e r l y b e c h a r a c t e r i z e d as ' p e r v e r s e g r o w t h ' ; t h a t is, g r o w t h w h i c h u n d e r m i n e s , r a t h e r t h a n e n h a n c e s , t h e p o t e n t i a l i t i e s of the economy for long-term growth."1"

f b) Assertive Pragmatism

I implemented

M a n y i n t e r n a t i o n a l o r g a n i z a t i o n s a n d p r o g r a m s f o r d e a l i n g with M N E s exist o r h a v e b e e n p r o p o s e d . T h e U n i t e d N a t i o n s has set u p a C e n t e r o n T r a n s n a t i o n a l C o r p o r a t i o n s . O t h e r U N b o d i e s , such as U N I D O , F A O , U N C I A D , a n d o t h e r s try to assist t h e d e v e l o p i n g c o u n tries in t h e i r r e l a t i o n s with t h e M N E s . I n t e r n a t i o n a l a g r e e m e n t s o r c o d e s h e l p f u l to less d e v e l o p e d c o u n t r i e s on p a t e n t s a n d o n t h e t r a n s f e r of t e c h n o l o g y a r e n e g o t i a t e d . T h e r e a r e p r o p o s a l s f o r a G A T T t y p e of a g r e e m e n t o n M N E s . B r o a d g r o u p i n g s such as t h e G r o u p of 77 a n d n a r r o w e r o n e s such as t h e A n d e a n Pact have c o n c e r n e d t h e m s e l v e s with M N E - d e v e l o p i n g c o u n t r y r e l a t i o n s , a n d m a n y o t h e r varied s c h e m e s f o r i n t e r n a t i o n a l c o o p e r a t i o n h a v e b e e n proposed. 1 ' 1 These i n t e r n a t i o n a l b o d i e s a n d p r o g r a m s p r o v i d e m e d i a f o r e x c h a n g e of views a n d k n o w l e d g e , f o r systematic collection a n d d i s s e m i n a t i o n of i n f o r m a t i o n , f o r u n d e r t a k i n g studies, f o r c o o r d i n a t i o n of policies a n d r e d u c t i o n of c o m p e t i t i o n b e t w e e n host c o u n t r i e s , a n d f o r t h e e s t a b l i s h m e n t of i n f o r m a l c o n t a c t s likely to facilitate c o o p e r a t i o n b e t w e e n g o v e r n m e n t s . I n t e r n a t i o n a l o r g a n i z a t i o n s m i g h t also assist d e v e l o p i n g n a t i o n s in n e g o t i a t i o n s o r o t h e r d e a l i n g s with M N E s by p r o viding foreign expertise a n d training for indigenous personnel. M o r e i m p o r t a n t than international bodies and p r o g r a m s , howe v e r , a r e t h e actions of t h e i n d i v i d u a l h o s t c o u n t r i e s . N o t l o n g a g o , t h e less d e v e l o p e d c o u n t r i e s h a d little c o n f i d e n c e in t h e i r ability to assert t h e m s e l v e s in t h e i n t e r n a t i o n a l e c o n o m y . As a f o r m e r N i g e r i a n m i n i s t e r of e c o n o m i c d e v e l o p m e n t l a m e n t e d , N i g e r i a n s m u s t a c c e p t " t h a t we shall c o n t i n u e to b e u n d e r t h e c o n t r o l of t h e i m p e r i a l i s t s a n d capitalists w h o h a v e t a k e n t h e lead in this w o r l d in e c o n o m i c d e v e l o p m e n t . " " 1 T o a s u b s t a n t i a l e x t e n t , t h e s e n s e of w e a k n e s s e x p r e s s e d in this s t a t e m e n t was j u s t i f i e d . For one thing, there are significant internal differences within m o s t of t h e d e v e l o p i n g c o u n t r i e s c o n c e r n i n g M N E s . T h e d o m i n a n t classes h a v e b e e n in a p o s i t i o n to b e n e f i t substantially f r o m t h e m ,

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t h r o u g h p o s i t i o n s , d i r e c t o r s h i p s , b r i b e s , business l i n k a g e s , a n d in o t h e r ways. T h e p o t e n t i a l p e r s o n a l g a i n s i n f l u e n c e t h e i r p e r c e p t i o n s o f t h e n a t i o n a l i n t e r e s t , o f t e n to t h e d e t r i m e n t o f t h e m a j o r i t y . T h e " l a b o r a r i s t o c r a c y , " w i t h g o o d j o b s in t h e l a r g e f o r e i g n firms, also has a d i r e c t stake in t h e M N E s . E v e n p u b l i c i n t e r e s t - m o t i v a t e d g o v e r n m e n t a g e n cies m i g h t b e partisans o f an M N E . F o r e x a m p l e , t h e W e s t e r n N i g e r i a D e v e l o p m e n t C o r p o r a t i o n successfully o p p o s e d t h e e s t a b l i s h m e n t o f a c o m p e t i n g c e m e n t c o m p a n y in W e s t e r n N i g e r i a in o r d e r to p r o t e c t t h e m o n o p o l i s t i c p r o f i t a b i l i t y o f t h e e x i s t i n g m u l t i n a t i o n a l subsidiary in w h i c h it h a d a 39 p e r c e n t h o l d i n g . " F u r t h e r m o r e , the M N E s constitute f o r m i d a b l e b a r g a i n i n g a d v e r saries. E v e n in e x t r a c t i v e i n d u s t r i e s , w h e r e the d e v e l o p i n g c o u n t r i e s a r e r e l a t i v e l y s t r o n g in n e g o t i a t i o n s , M N E n e g o t i a t i n g s t r e n g t h g e n e r ally has b e e n i m p r e s s i v e . 1 ' T h i s is p a r t i c u l a r l y t r u e in t h e least d e v e l o p e d c o u n t r i e s , w h e r e M N E c o n t r o l o f essential t e c h n o l o g y

and

m a r k e t access m a y be firmer than e l s e w h e r e . " I n m a n u f a c t u r i n g f o r e x p o r t , " t h i r d w o r l d " b a r g a i n i n g p o w e r with t h e M N E s is especially w e a k . T h e M N E s h a v e firm c o n t r o l o f t h e r e l e vant t e c h n o l o g i e s a n d o f m o s t m a r k e t i n g outlets, p a r t i c u l a r l y if t h e d e v e l o p i n g n a t i o n is p r o d u c i n g a c o m p o n e n t o f s o m e k i n d . M o r e o v e r , t h e M N E s h a v e t h e political c l o u t n e c e s s a r y t o c o m b a t h i g h

developed-

c o u n t r y t r a d e b a r r i e r s a g a i n s t m a n u f a c t u r e d i m p o r t s f r o m less d e v e l o p e d c o u n t r i e s . C o m p e t i t i o n to attract M N E e x p o r t m a n u f a c t u r i n g subsidiaries f u r t h e r w e a k e n s t h e b a r g a i n i n g p o s i t i o n o f t h e d e v e l o p i n g countries. W h e n t h e i r l e v e r a g e was slight, t h e d e v e l o p i n g c o u n t r i e s n a t u r a l l y c o n c l u d e d p o o r b a r g a i n s w i t h t h e M N E s — a p r o b l e m that was i n t e n s i f i e d by t h e i r v e r y f e e l i n g s o f w e a k n e s s , f o r o u t c o m e is p a r t i a l l y a f u n c tion o f t h e a s s u r a n c e o f t h e n e g o t i a t o r s . W h a t e v e r t h e issue, w h e t h e r a s i m p l e d i v i s i o n o f e c o n o m i c g a i n o r a b r o a d societal m a t t e r , t h e d e v e l o p i n g c o u n t r i e s w e r e a b l e to c a p t u r e o n l y a small p a r t o f t h e d i s t a n c e b e t w e e n the m í n i m u m s they w o u l d accept and the m a x i m u m s

the

M N E s might concede. I n fact, d e v e l o p i n g countries have not i n f r e q u e n t l y i n c u r r e d direct e c o n o m i c losses

in t h e i r d e a l i n g s w i t h M N E s . A p r o f i t a b l e f o r e i g n in-

v e s t m e n t can q u i t e easily r e d u c e n a t i o n a l i n c o m e . " T h e l i k e l i h o o d o f a n e t n a t i o n a l loss rises if t h e host c o u n t r y o f f e r s i n v e s t m e n t i n c e n t i v e s such as t a r i f f p r o t e c t i o n ( w h i c h i m p o s e s a transf e r f r o m d o m e s t i c c o n s u m e r s to t h e f o r e i g n investors). 4 3 F u r t h e r , w h e n d e v e l o p i n g e c o n o m y b a r g a i n i n g w e a k n e s s was c o m p o u n d e d by f o r e i g n s w i n d l i n g o r s h a r p p r a c t i c e s a n d / o r by d o m e s t i c political v e n a l i t y , m a n y j o i n t i n v e s t m e n t d e a l s h a v e b e e n m a d e w h i c h t u r n e d o u t to b e c o m p l e t e fiascos f o r t h e host n a t i o n s . " ' M o r e o v e r , s o m e t e c h n o l o g i c a l c h a n g e , f o r e x a m p l e t h e

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introduction of labor-saving technology in a labor surplus economy, may also lower host-country welfare. 1 7 O n e m a j o r study f o u n d that almost 40 p e r c e n t of the M N E m a n u f a c t u r i n g projects e x a m i n e d in developing economies had negative ef fects on host-country social income. If a developing c o u n t r y tried to m a k e t o u g h d e m a n d s in the era of generally soft bargaining, they were usually unsuccessful. T h e MNEs could a d o p t an unyielding stance a n d if necessary could usually t u r n to o t h e r potential hosts, while the recalcitrants were likely to be left empty-handed. Gradually, however, developing-country b a r g a i n i n g power has been s t r e n g t h e n e d , partially by the very process of M N E expansion that was e n c o u r a g e d by developing-country weakness. A variety of factors have been involved. O n c e the capital has actually been sunk into a project, the negotiating potency of the host country is sharply increased, particularly if significant a m o u n t s of capital are involved. In successful ventures the very profitability of the e n t e r p r i s e makes the M N E m o r e a m e n a b l e to pressures. T h e M N E c o m m i t m e n t to its overseas v e n t u r e s also tends to be h e i g h t e n e d by organizational changes institutionalizing this commitm e n t a n d by increasing reliance on foreign markets. Growing familiarity in the host country with the o p e r a t i o n s of an established subsidiary t e n d s to dispel the air of i m p e n e t r a b l e mystery a n d expertise a n d increases host-country confidence. T h e proliferation of multinationals a n d increasing competition a m o n g t h e m has been an i m p o r t a n t source of host-country stiffening, f o r these d e v e l o p m e n t s have m a d e available multiple sources of capital, technology, o t h e r know-how, a n d even m a r k e t access, including sources o t h e r than those provided by direct investment/' 1 Local capability f o r carrying o u t o p e r a t i o n s that were o n c e the exclusive purview of foreign investors has also increased.™ Developing country ability to win better t e r m s has also been e n h a n c e d by the various f o r m s of international cooperation discussed earlier. T h e s e elements of s t r e n g t h are r e i n f o r c e d by a process which we will call self-fulfilling aspiration growth. As already indicated, a feeling of b a r g a i n i n g weakness t e n d s to exacerbate that weakness. But as the negotiating position of the d e v e l o p i n g countries improves they are e n c o u r a g e d to t o u g h e n their d e m a n d s . At some point, a "critical mass" (or average level) of toughness 5 1 is r e a c h e d , by which we mean a "mass" or level which institutes the spiral process of self-fulfilling aspiration growth. T h e spiral works this way. T h e increasing d e m a n d s a n d aspirations of t h e developing nations, e m e r g i n g in a b a r g a i n i n g situation in which these nations have won relatively little, t e n d to be effective in w i n n i n g better terms. E n c o u r a g e d by this, their aspirations a n d negotiating de-

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mancls rise. So long as the settlements actually r e a c h e d fall f a r short of the m a x i m u m s that the M N E s would be willing to concede, the heighte n i n g of aspirations a n d d e m a n d s continues to be successful. A selfr e i n f o r c i n g spiral gets u n d e r way: rising aspirations b r i n g about better terms which cause f u r t h e r h e i g h t e n i n g of aspirations a n d so on. T h i s is the process of self-fulfilling aspiration growth. 5 2 Possible gains are multidimensional, a n d countries with d i f f e r e n t goals will presumably seek somewhat d i f f e r e n t sets of gains. T h o s e m o r e f a v o r e d by leftist countries, such as income equalization a n d significant reductions in u n e m p l o y m e n t , are probably m o r e difficult to bargain f o r than the m o r e c o m m o n l y sought gains, such as increases in national income or in g o v e r n m e n t r e v e n u e . T h e spiral is not an endless one, of course. As the settlements between the developing countries a n d the MNEs move f u r t h e r f r o m the d e v e l o p i n g countries' m i n i m u n i s toward the m a x i m u m s the MNEs are willing to concede, M N E resistance increases a n d tends to slow down or halt the process. T h e d e v e l o p i n g countries find that wresting f u r t h e r concessions f r o m the M N E s incurs increasing costs, particularly in the f o r m of curtailing investment with its infusion of capital, technology, o t h e r know-how, a n d m a r k e t access, so that a f t e r some point the m a r ginal costs of f u r t h e r d e m a n d s may exceed the m a r g i n a l benefits. Experience c o n f i r m s that the developing countries have been b e n e f i t i n g f r o m t o u g h e r b a r g a i n i n g with MNEs, as t h e thesis of selffulfilling aspiration growth suggests. Developing countries have been securing a m o r e favorable distribution of direct economic gains. Many investments have yielded (and prospective investments have promised) considerable quasi-rent to the MNEs, i.e., a r e t u r n b e y o n d that n e e d e d to i n d u c e the investor to continue o p e r a t i o n s or to u n d e r t a k e f u r t h e r investment. It is clear in retrospect that t h e r e had b e e n a substantial r e n t element in e a r n i n g s related to minerals a n d p e t r o l e u m , an element that the developing economies subsequently f o u n d that they could tap f o r themselves. A n d " t h e r e is growing evidence of the existence o f ' q u a s i - r e n t ' . . . in the e a r n i n g s of transnational m a n u f a c t u r i n g e n t e r p r i s e s in less developed countries as well."" T h e developing countries have been able to raise their s h a r e of such i n c o m e t h r o u g h h i g h e r taxes, royalties, participation in ownership, a n d the like without serious consequences f o r themselves. T h e developing nations have also p r e s s u r e d M N E s into actions which g e n e r a t e f u r t h e r domestic d e v e l o p m e n t . T h e y have p r o d d e d domestic subsidiaries into creating local linkages. A l t h o u g h m a n y such firms a r e disposed to secure f r o m their own worldwide c o r p o r a t e f a m ily as m a n y of their i n t e r m e d i a t e inputs as possible, u n d e r p r e s s u r e they have "seemed to be accepting the desirability—or, at any rate, the

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inevitability—of maintaining close ties with the s u r r o u n d i n g economies." 3 ' T h e less developed nations have prevailed upon reluctant M N E s to establish domestically operations they would have p r e f e r r e d to carry out elsewhere." 5 T h e y have also p r o m o t e d deliberate adoption of appropriate technology. 5 " T h e y have sometimes s p u r r e d foreign investors into a continuing e n t r e p r e n e u r i a l role.-"'7 U n d e r pressure many f o r e i g n - o w n e d m a n u f a c t u r i n g subsidiaries "have moved on to other activities: f r o m simple m a n u f a c t u r i n g processes toward complex ones; f r o m easy marketing in the local economy to difficult marketing abroad."™ Developing countries have had relatively longstanding policies of accelerating indigenization of labor and management through informal insistence and f o r m a l g o v e r n m e n t action. Indigenization of ownership, i.e., divestiture, has also been pushed, f o r e x a m p l e , in the Zambian c o p p e r mines (with neither of the two nationalized M N E s raising any objections in principle despite previous g o v e r n m e n t denials of nationalization intent), 5 ' 1 and in Nigeria through its Indigenization Decree."" Local M N E subsidiaries have even been prevailed upon to support broad international political objectives of the host country, sometimes at considerable cost to the subsidiary. For e x a m p l e , Sklar relates how the Zambian c o p p e r mining subsidiaries of A n g l o - A m e r i c a n Corporation and A M A X "cooperated fully and loyally" in Zambia's costly efforts to f r e e itself of logistical d e p e n d e n c e upon white minority-ruled Rhodesia." 1 The M N E s have generally accepted all the p r o d d i n g and pressuring. T h e y have come to expect continually escalating d e m a n d s when they are successful,' 1 ' and this is built into their initial investment calculations and decisions. In fact, in f a v o r a b l e circumstances, a "determined and stable public sector . . . can get f o r e i g n investors to accept 'unacceptable' conditions while obtaining a rising flow o f ' foreign investment."' B y now it is clear that developing countries have achieved absolute gains and that M N E s have continued to thrive in a milieu of government pressures on a n d bargaining with M N E s . T h i s of course does net disprove the cases m a d e by the Acceptors or Rejectors, but it has tended to p e r s u a d e many to m o d e r a t e their views. " T h e r e is no longer the s h a r p separation between those w h o think that what is good for G e n e r a l Motors is g o o d f o r humanity and those who see in the multinational corporations the devil incorporated.""' T h e basic orientations remain quite vigorous but there has been some d e g r e e of convergence toward the pragmatic a p p r o a c h . Many Acceptors have come to see pos-

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sible "third world" gains in a somewhat wider range of hostgovernment measures concerning MNEs, and many Rejectors have come to recognize a wider range of actual or potential host-country benefits from MNE activities. In the distribution of positions, the "standard deviation" around the pragmatic position in the center has decreased.

Notes I he a u t h o r wishes to thank Professors K. Onwuka Dike and Martin J. Kilson of Harvard University, Gerald K. Helleiner o f T o r o n t o University, J a y Mandle of T e m p l e University, and Richard L. Sklar o f the University o f California, Los Angeles, for their advice and stimulation. None, o f course, can be held at all responsible for shortcomings.

1. T h e r e are, o f course, o t h e r taxonomies. See, for e x a m p l e , the interesting sixfold classification proposed by Sanjaya Lall, "Less-Developed C o u n tries and Private Foreign Investment: A Pxview Article," World Development 2, 4 - 5 (1974):43—48. 2. For example, a G e n e r a l Motors vice-president who discussed the United Nations objective o f introducing "some form o f accountability to the international c o m m u n i t y " solely in terms o f harmonizing national laws so that M N E s could function with fewer impediments. United Nations, Summary of the Hearings Before the Croup of Eminent Persons to Study the Impact of Multinational Corporations on Development and on International Relations (New Y o r k : United Nations, 1974), ST/ESA/15, p. 8 1 . 3. W e have distilled these six propositions from his latest book: R a y m o n d V e r n o n , Storm over the Multinationals: The Real Issues (Cambridge: Harvard University Press, 1977). T h i s book is intended to be the definitive survey o f the role o f MNEs, a presentation o f " t h e real issues." 4. J o h n s o n stated this point as follows: " I n an important sense, the fundamental problem o f the future is the conflict between the political forces o f nationalism and the e c o n o m i c forces pressing for world e c o n o m i c integration. T h i s conflict currently . . . is between the national g o v e r n m e n t and the international c o r p o r a t i o n . " Harry J o h n s o n , International Economic Questions Facing Britain, the United States and Canada in the Seventies ( L o n d o n : British-North American Research Association, J u n e 1970), p. 2 4 ; quoted by R o b e r t Gilpin, U.S. Power and the Multinational Corporation (New Y o r k : Basic Books, 1975), p. 220. 5. V e r n o n , Storm over the Multinationals, pp. 2 1 2 , 2 1 5 . 6. Ibid., pp. 145, 152. 7. R a y m o n d V e r n o n , " S t o r m over the Multinationals: Problems and Prospects," Foreign Affairs 55, 2 ( 1 9 7 7 ) : 2 4 3 - 2 6 2 ; see p. 2 4 9 . ( T h i s article is based on V e r n o n ' s book, cited in fn. 3.) V e r n o n also states that the M N E s have

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aroused much "speculation and foreboding over their effects on the national economy . . . [and] much of it has been very wide of the mark." T h e sense of independence the developing countries are seeking is a "Holy Grail"; see his "Storm," pp. 245, 25S; also his Storm over the Multinationals, pp. 204, 212. 8. Vernon, Storm over the Multinationals, pp. 14, 19. 9. Ibid., pp. 137-138. And (loc. cit.): "The multinational enterprise cannot escape the consequences of the pervasive unease in the industrialized world. It is a highly visible scapegoat." 10. Ibid., pp. 123, 125, 136. 11. C. Fred Bergsten, Thomas Horst, and Theodore H. Moran speak of "the threat of investment wars—primarily between home and host countries . . . because these countries increasingly seek to tilt the benefits of foreign direct investment in their national directions." See their American Multinationals and American Interests (Washington, DC: Brookings Institution, 1978), p. 487. Investment wars are "akin to the trade wars of a past generation" (p. 494). 12. Some of those grouped here among the Acceptors are labelled by Sanjaya Lall as neo-traditionalists who "believe in the good, old-fashioned virtues of early capitalism [but] are worried by the giantism and power of the present MNE." These tend to favor some intervention by host governments. Lall, "Less-Developed Countries and Private Foreign Investment," p. 44. 13. Vernon, Storm over the Multinationals, ch. 9. See also Bergsten at al., American Multinationals, pp. 493-495. According to Bergsten, the basic thrust of their policy recommendations "is to maximize global economic welfare by maximizing the scope for foreign direct investment to respond to market forces. This requires both widespread agreement that such rules are desirable and active intervention to thwart efforts by individual countries or groups to induce deviations from the norm, through either constraints or excessive inducements." They want an "open and effective international economic system." They are akin to Lall's neo-traditionalists, however, for they also favor policies "to deal with those cases where the social costs of unfettered corporate activity would simply be too high." 14. Lall refers to dependence theory which is "not quite Marxist" but not simply nationalistic. Lall, "Less-Developed Countries and Private Foreign Investment," p. 45. 15. Perhaps the most widely known work embodying the rejection approach is Richard J. Barnet and Ronald E. Miiller, Global Reach (New York: Simon & Schuster, 1974), a book which is neither Marxist nor of the dependency school. 16. As the credo of a new Marxist journal states, there are "many Marxisms." Marxist Perspectives 1, 1 (1978):3. 17. In Marx's terms, the conflict between "the material forces of production in society" and "the existing relations of production . . . [i.e.,] the property relations." Marx sets forth this conflict in summing u p the "general conclusion" he reached in his early study of political economy "which once reached, continued to serve as the leading thread in my studies." Karl Marx, A Contribution to the Critique of Political Economy (Chicago: Charles H. Kerr, 1904), pp. 11—12.

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18. O f course, international economic i n t e r d e p e n d e n c e existed b e f o r e the spread of MNEs, but to a lesser d e g r e e . 19. A n explicit r e f e r e n c e to this social-private conflict is m a d e by H y m e r : "the M N E . . . d e m o n s t r a t e s the social n a t u r e of p r o d u c t i o n on a global scale" but it creates p r o f o u n d p r o b l e m s because "the M N E is still a private institution with a partial outlook." T h e era of the M N E "reveals once m o r e the power of social cooperation . . . [but it] also shows the shortcomings of concentrating this power in private hands." Stephen H y m e r , " T h e Multinational C o r p o r a tion and t h e Law of Uneven Development," in J a g d i s h N. Bhagwati (ed.), Economics and World Orderfrom the 1970s to the 1990s (New York: Macmillan, 1971), p p . 113—140 (see pp. 133—134). F u r t h e r on H y m e r in the next note. 20. T h i s particular f o r m u l a t i o n is that of H y m e r (fn. 19), o n e of the f o r e m o s t theorists of the rejection a p p r o a c h . H y m e r did some of the early significant work on MNEs when he was writing as a m a i n s t r e a m economist, but subsequently a d o p t e d a Marxist orientation. His hierarchical-geographical concept was, in o u r view, a significant d e v e l o p m e n t of Marxian t h o u g h t about MNEs. B a r a n a n d Sweezy had emphasized the supranational aspects of MNEs; see Paul A. B a r a n a n d Paul M. Sweezy, "Notes on the T h e o r y of Imperialism," Monthly Review 17, 10 (1966): 15-33. C o n c e r n e d with their own l o n g - r u n interests a n d oblivious of nationality, m a k i n g decisions on the basis of alternatives all over the world, the MNEs' impact on m o r e developed or less developed countries, o n h o m e or host countries, was incidental: "the decisions a n d actions of the multinational companies are taken solely with a view to p r o m o t i n g the interests of the companies themselves a n d . . . whatever effects, beneficial o r injurious, they may have on the various countries in which they o p e r a t e a r e strictly incidental" (Baran a n d Sweezy, p. 29). T h e MNEs' c o m m o n interests a n d objectives—and this is the basis of c o n t e m p o r a r y imperialism—lie in the preservation a n d extension of relatively u n f e t t e r e d capitalism. H y m e r challenges the Baran-Sweezy notion of supranationality a n d restores a geographical base f o r Marxist imperialism theory by r e n d e r i n g the hierarchical, exploitative n a t u r e of M N E operations accordant with the N o r t h - S o u t h geographical division of the world. 21. H y m e r , " T h e Multinational C o r p o r a t i o n , " p. 114; also p p . 124—125, 127. 22. Ibid., p. 126. 23. Ibid., p p . 126-127, 134-135. 24. T h e s e criticisms of M N E - g e n e r a t e d benefits are discussed f u r t h e r at the e n d of Section 3(a). 25. A distinction might be m a d e between the a r g u m e n t that the M N E s have a negative impact on d e v e l o p m e n t a n d the a r g u m e n t that whatever the p r o x i m a t e effect of M N E s they a r e h a r m f u l because they r e i n f o r c e capitalism a n d obstruct the e m e r g e n c e of socialism. 26. T h e Rejectors, like many radicals, have a s t r o n g tendency to consider those who disagree with t h e m as not only w r o n g b u t also morally tainted. 27. For example, Tanzania's "basic principle" with respect to foreign investment, says Neers0, "is that if foreign investors c a n n o t a d a p t themselves to

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the regulations considered necessary by Tanzania, she is better off without their investments." Peter Neers0, "Tanzania's Policies on Private Foreign Investment," in Carl Widstrand (ed.), Multinational Firms in Africa (New York: African Publishing, Holmes & Meier, 1975), p. 194. 28. "Multinational corporations and nations are . . . fundamentally a n d irrevocably opposed to each other. T h e logic of each, carried to its final conclusion, is to destroy the other. O r to put the point differently, the historic course of the global capitalist system is leading to o n e of two outcomes: world e m p i r e or world revolution." Paul M. Sweezy a n d Harry Magdoff, The Dynamics of U.S. Capitalistii (New York: Monthly Review Press, 1972), p. 111. Hymer is equally sure that it is necessary "to go beyond the MNC" and to replace the capitalist system, but he is not at all sure what to replace it with ("The Multinational Corporation," pp. 131—135). He favors some vaguely defined kind of "alternative system of organization in the form of national planning," with emphasis on locai "social and political control of economic decision making." (pp. 12(5—127). 29. For example, Diaz Alejandro, Helleiner, L.all, Penrose, and Streeten, all cited in this chapter. A development text with a pragmatic orientation is Michael P. T o d a r o , Development hi the Third World (London: Longmans, 1977); see esp. pp. 326-332. 30. Streeten, who discusses many areas of uncertainty regarding MNEs, remarks: "A major difficulty in assessing [the effects of MNEs] . . . is that far f r o m being able to quantify precisely these effects, we do not even know, in general, their direction." Paul Streeten, " T h e Multinational Enterprise and the Theory of Development Policy," World Development 1,10 (1973):1-13 (quoted f r o m p. 3). 31. O n e might maintain that the pragmatic approach puts ideology in its p r o p e r place. In the hurly-burly of the real world, "policy decisions are unavoidably influenced by ideology, m o r e specifically by the prevailing policy predisposition and the desired politico-economic destination." In the presence of uncertainty, "decisions are inevitably influenced by the leadership's policy predispositions, based on a mélange of attitudes, emotions, a n d prior convictions. Decisions are also colored by the related matter of the desired politicoeconomic destinations of those with power, i.e., the kind of political economy they want to establish." While such reliance upon ideology is unavoidable for any decision-maker, the uncertain Pragmatist, skeptical of grand predictions, tends to keep ideological predispositions subservient to evidence and subject to review in light of experience. Sayre P. Schatz, Nigerian Capitalism (Berkeley and Los Angeles: University of California Press, 1977), pp. 2 8 2 - 2 8 3 (with apologies for quoting myself)32. "Ultimately, the only p r o p e r response to an organization that takes a global view will be global control." In the meantime, however, "national governments will have to find ways." Streeten, " T h e Multinational Enterprise," p. 7. Vaitsos speaks of the need for "a certain degree of unity of action"; Constantine V. Vaitsos, "Power, Knowledge and Development Policy: Relations between Transnational Enterprises a n d Developing Countries," in Gerald K. Helleiner (ed.), A World Divided (Cambridge: Cambridge University Press, 1976), pp. 113-146 (quoted f r o m p. 141).

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33. F o r this r e a s o n , C a r l o s F. Diaz A l e j a n d r o r e c o m m e n d s use of policy r u l e s of t h u m b . Diaz A l e j a n d r o , " D i r e c t F o r e i g n I n v e s t m e n t in Latin A m e r i c a , " in C h a r l e s P. K i n d l e b e r g e r (ed.), The International Corporation ( C a m b r i d g e : M I T Press, 1970), p p . 3 1 9 - 3 4 4 (esp. p p . 328, 342). 34. H y m e r , f o r e x a m p l e , says: " A t m o s t , o n e - i h i i d of t h e p o p u l a t i o n can b e said to b e n e f i t in s o m e sense." ( " T h e M u l t i n a t i o n a l C o r p o r a t i o n , " p. 131). H o w e v e r , this m a y a m o u n t to h u n d r e d s of millions of p e o p l e . M o r e o v e r , H y n i e r dismisses e v e n this gain by a relativity t h a t g r a t e s in this e r a of e m p h a s i s o n a b s o l u t e p o v e r t y . T h e gain involves o n l y " a n illusion of u p w a r d mobility" b e c a u s e relative status r e m a i n s u n c h a n g e d . " I n e a c h p e r i o d s u b o r d i n a t e s a c h i e v e (in p a r t ) t h e c o n s u m p t i o n s t a n d a r d s of t h e i r s u p e r i o r s in a p r e v i o u s p e r i o d a n d a r e t h u s t o r n in two d i r e c t i o n s : if they look b a c k w a r d . . . t h i n g s seem [my e m p h a s i s ] to b e g e t t i n g b e t t e r ; if they look u p w a r d they see that t h e relative position has not c h a n g e d . T h e y r e c e i v e a c o n s o l a t i o n p r i z e . . . s o f t e n i n g t h e reality t h a t in a c o m p e t i t i v e system, f e w s u c c e e d a n d m a n y fail" (p. 125). 35. A r e c e n t s t u d y indicates that e v e n in Brazil, w h e r e t h e i n c o m e distrib u t i o n e f f e c t s of e c o n o m i c g r o w t h h a v e b e e n severely criticized, t h e absolutely p o o r m a d e c o n s i d e r a b l e gains, a l t h o u g h t h o s e slightly h i g h e r o n t h e e c o n o m i c l a d d e r d i d not f a r e so well. G a r y S. Fields, " W h o B e n e f i t s f r o m Economic: Dev e l o p m e n t ? A R e e x a m i n a t i o n of Brazilian G r o w t h in t h e 1960s," American Economic Review 67, 4 ( 1 9 7 7 ) : 5 7 0 - 5 8 2 . 36. " T h e r e l a t i o n b e t w e e n t h e M N E a n d t h e s e social objectives ['equality . . . j o b s , livelihoods a n d g e n e r a l l y m e e t i n g n e e d s of t h e masses of p o o r p e o p l e ' ] will, to a l a r g e e x t e n t , d e p e n d u p o n ...e ability a n d willingness of t h e host g o v e r n m e n t to p u r s u e t h e ' r i g h t ' policies." S t r e e t e n , "T h e M u l t i n a t i o n a l E n t e r p r i s e , " p. 2. If, h o w e v e r , t h e h o s t - c o u n t r y g o v e r n m e n t d o e s n o t c a r r y o u t policies which c a p t u r e M N E - g e n e r a t e d b e n e f i t s f o r its p e o p l e , t h e Assertive P r a g m a t i s t s t a n d s with t h e R e j e c t o r in h o l d i n g t h e M N E as well as t h e g o v e r n m e n t r e s p o n s i b l e . T h e P r a g m a t i s t basically a g r e e s with B a r a n ' s biting criticism of " t h e o b s e r v a t i o n t h a t w h a t t h e g o v e r n m e n t of a s o u r c e c o u n t r y d o e s with its r e c e i p t s f r o m f o r e i g n e n t e r p r i s e has a f t e r all n o t h i n g to d o with t h e ' p u r e l y econ o m i c ' a p p r a i s a l of t h e f o r e i g n e n t e r p r i s e ' s c o n t r i b u t i o n to . . . e c o n o m i c d e v e l o p m e n t . . . . T h i s view aff o r d s a v e r i t a b l e t e x t b o o k e x a m p l e of t h e i n h e r e n t incapability of b o u r g e o i s e c o n o m i c s t o p e n e t r a t e t h e subject m a t t e r of its invest i g a t i o n . " T h e e x i s t e n c e of f o r e i g n i n v e s t m e n t " a n d t h e e x i s t e n c e of w a s t e f u l , c o r r u p t , a n d r e a c t i o n a r y c o m p r a d o r r e g i m e s . . . a r e n o t f o r t u i t o u s coincid e n c e s b u t [are] . . . i n t e r c o n n e c t e d a s p e c t s o f ' o n e reality. P a u l A. B a r a n , The Political Economy of Growth ( N e w Y o r k : M o n t h l y Review Press, 1957), p p . 217— 2 1 8 . T h u s , S t r e e t e n asserts that if policies i n t e n d e d to c a p t u r e M N E b e n e f i t s f o r t h e h o s t - c o u n t r y p e o p l e " a r e a b s e n t o r d e f e c t i v e , o r a r e t h e m s e l v e s t h e result of t h e p r e s s u r e s of t h e M N E , t h e M N E m a y b e j u d g e d by its i m p a c t o n variables n o r m a l l y r e g a r d e d as p r o p e r d i r e c t objectives of g o v e r n m e n t policies." S t r e e t e n , " T h e M u l t i n a t i o n a l E n t e r p r i s e , " p. 2. 37. B e c a u s e of its t e n d e n c y to b e simplistic, t h e r e j e c t i o n a p p r o a c h is n o t e m b r a c e d by all Marxists. T h u s , in d i s c u s s i n g o v e r s i m p l i f i c a t i o n s r e g a r d i n g t h e i m p a c t o f f o r e i g n i n v e s t m e n t o n d e v e l o p i n g c o u n t r i e s w h i c h " m a y easily lead to a false o r t h o d o x y a n d h a v e d i s a s t r o u s c o n s e q u e n c e s in a c t u a l policy,"

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t h e H u n g a r i a n Marxist economist T a m a s Szentes takes essentially a p r a g m a t i c a p p r o a c h . H e criticizes a "one-sided critique of colonialism. T h i s version lakes into account t h e fact of t h e exploited a n d d i s a d v a n t a g e o u s position of t h e c o u n t r i e s in question in t h e i n t e r n a t i o n a l capitalist division of labour, but it neglects t h e s t r u c t u r a l b a c k g r o u n d of t h e latter as well as t h e shifts of p o w e r factors within it, a n d t h u s cavalierly suggests p r o m p t a n d c o m p l e t e d i s e n g a g e m e n t f r o m t h e i n t e r n a t i o n a l capitalist system without c o n s i d e r i n g t h e historical context, t h e conditions, a n d t h e costs of such a d i s e n g a g e m e n t . " T a m a s Szentes, "Socioeconomic Effects of T w o P a t t e r n s of Foreign Capital Investm e n t s , with Special R e f e r e n c e to East Africa," in Peter C.W. G u t k i n d and I m m a n u e l Wallerstein (eds.), The Political Economy of Contemporary Africa (Beverly Hills OA: Sage, 197(5), p p . 2 6 1 - 2 9 0 ( q u o t e d f r o m p p . 2 6 1 - 2 6 2 ) . 38. Giovanni Ar righi a n d J o h n S. Saul, "Socialism a n d Economic Dev e l o p m e n t in T r o p i c a l Africa," journal of Modern African Studies 6, 2 ( 1968): 141—169 (quoted f r o m p. 150). The a u t h o r s attribute t h e p e r v e r s e dev e l o p m e n t c o n c e p t to Sachs in a 1966 p a p e r . It is similar to Frank's concept of t h e u n d e r d e v e l o p m e n t of an e c o n o m y . See, f o r e x a m p l e , A n d r é G u n d e r F r a n k , " T h e D e v e l o p m e n t of U n d e r d e v e l o p m e n t , " Monthly Review 18, 4 (1966): 17-31. 39. See, f o r e x a m p l e . United Nations, Multinational Corporations in World Development (New York: U n i t e d Nations, 1973), ST/FX : A/190/1, p p . 8 5 - 9 5 . 40. Q u o t e d in Schatz, Nigerian Capitalism, p. 261. 41. O . O . Soleye, " T h e Politico-Economic Position of Multinational C o r p o r a t i o n s : A Nigerian E x a m p l e , " in W i d s t r a n d (ed.), Multinational Firms in Africa (fn. 27), p p . 1 9 9 - 2 0 5 . 42. S u p p l y has o f t e n o u t s t r i p p e d d e m a n d in t h e raw materials industries, a n d even t h e t h r e a t of s u r p l u s weakens t h e d e v e l o p i n g c o u n t r y b a r g a i n i n g position. In p e r i o d s of s u r p l u s t h e M N E s t e n d to place p r i m a r y reliance on "safe" sources in d e v e l o p e d c o u n t r i e s a n d in those d e v e l o p i n g c o u n t r i e s which work o u t f a v o r a b l e supply a g r e e m e n t s . Such a g r e e m e n t s , by d i f f e r e n t i a t i n g the interests of t h e d e v e l o p i n g countries, t e n d to w e a k e n their b a r g a i n i n g p o w e r . F o r a succinct discussion of this a n d o t h e r sources of MN E b a r g a i n i n g s t r e n g t h in extractive industries, see V e r n o n , Storm ox>er the Multinationals, p p . 256—258. 43. An abortive a t t e m p t by t h e g o v e r n m e n t of Zambia to diversify foreign participation in c o p p e r m i n i n g provides an illustration. T h e g o v e r n m e n t a w a r d e d p r o s p e c t i n g licenses to a J a p a n e s e - A m e r i c a n j o i n t v e n t u r e . H o w e v e r , t h e J a p a n e s e firm (Mitsui) soon lost interest, a n d t h e A m e r i c a n s c o n c e r n e d w e r e "quick to speculate" t h a t Mitsui h a d b e e n d i s s u a d e d by t h e two M N C s alr e a d y established in Z a m b i a n c o p p e r m i n i n g , A n g l o - A m e r i c a n C o r p o r a t i o n a n d AM AX, which b o t h h a d close c o n n e c t i o n s with Mitsui elsewhere. Similarly, Z a m b i a n g o v e r n m e n t a t t e m p t s to i n t e g r a t e a n d rationalize parallel p u r c h a s ing, m a r k e t i n g , a n d o t h e r o p e r a t i o n s of t h e Z a m b i a n subsidiaries of AngloA m e r i c a n a n d A M A X w e r e allegedly f r u s t r a t e d by t h e p a r e n t c o m p a n i e s , despite Z a m b i a n g o v e r n m e n t holdings of 51 p e r c e n t in b o t h subsidiaries. Each p a r e n t w a n t e d its Z a m b i a n subsidiary to deal in so f a r as possible with o t h e r affiliates within its own c o r p o r a t e family. T h e s e e x a m p l e s a r e d r a w n f r o m Richard L. Sklar, Corporate Power in an African State (Berkeley a n d Los Angeles:

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U n i v e r s i t y of C a l i f o r n i a Press, 1975), p p . 7 2 - 7 3 a n d 187. T h i s i n s i g h t f u l a n d caref ul b o o k is p e r h a p s t h e best s t u d y so f a r p u b l i s h e d o n m u l t i n a t i o n a l o p e r a tions in A f r i c a . 44. T h e d i r e c t i n c r e a s e in d o m e s t i c o u t p u t o c c a s i o n e d by t h e f o r e i g n inv e s t m e n t m a y b e small, p a r t i c u l a r l y w h e n m a n y i n t e r m e d i a t e i n p u t s a r e imp o r t e d ; this m i g h t b e partially o r m o r e t h a n fully o f f s e t by r e d u c t i o n s in p r o d u c t i o n by i n d i g e n o u s firms t h a t lose c u s t o m e r s o r scarce i n p u t s to t h e f o r e i g n i n v e s t o r s . F r o m a n y n e t i n c r e a s e in o u t p u t t h a t m a y r e m a i n , t h e f o r e i g n firm's p r o f i t s a n d f e e s m u s t t h e n b e s u b t r a c t e d to find t h e c o n t r i b u t i o n to n a t i o n a l p r o d u c t o r n a t i o n a l i n c o m e . If p r o f i t s a n d fees a r e h i g h , this c o n t r i b u t i o n m i g h t well b e n e g a t i v e . Schatz, Nigerian Capitalism, p. 2 6 2 . See also J . Ilett, " I n d u c e m e n t s f o r I n d u s t r i a l D e v e l o p m e n t : W h e n A r e T h e y W o r t h w h i l e ? " Yorkshire Bulletin of Economic and Social Research 19, 2 (1967): 105. 45. S u c h r e v e n u e s a r e lost if t h e activity w o u l d o t h e r w i s e h a v e b e e n u n d e r t a k e n by a d o m e s t i c , t a x p a y i n g firm. 46. See, f o r e x a m p l e , S a y r e P. Schatz, " C r u d e Private N e o - I m p e r i a l i s m : A N e w P a t t e r n in A f r i c a , " Journal of Modern African Studies 7 , 4 ( 1 9 6 9 ) : 6 7 7 - 6 8 8 . 47. G e r a l d K. H e l l e i n e r , " I n t e r n a t i o n a l T e c h n o l o g y Issues: S o u t h e r n N e e d s a n d N o r t h e r n R e s p o n s e s , " in J a g d i s h N. B h a g w a t i (ed.), The New Internationa! Economic Order ( C a m b r i d g e , M A : M I T Press, 1977), p p . 2 9 5 - 3 1 6 (see p. 303). 48. Paul P. S t r e e t e n a n d S a n j a y a Lall, Evaluation of Methods and Main Findings of UNCTAD Study of Private Overseas Investment in Selected Less Developed Countries ( N e w Y o r k : U n i t e d N a t i o n s , 1973), T D / b / c . 3 / 1 1 1 . W h e n o n e g o e s b e y o n d relatively n a r r o w e c o n o m i c m e a s u r e s , which a r e t h e f o c u s of this p a r a g r a p h , a n d c o n s i d e r s political a n d social c o n s e q u e n c e s , t h e costs a n d b e n e f i t s of f o r e i g n i n v e s t m e n t a r e e x t r e m e l y d i f f i c u l t to e s t i m a t e , b u t s o m e critics of MNF.s believe t h a t t h e n e g a t i v e c o n s e q u e n c e s a r e massive. 49. " T h e host c o u n t r y h a s a variety of choices. It can b o r r o w t h e capital, h i r e m a n a g e r s , a n d a c q u i r e a licence; u s e d o m e s t i c i n p u t s f o r s o m e c o m p o n e n t s of t h e ' p a c k a g e ' ; o r u s e c o n s u l t i n g services, m a n a g e m e n t c o n t r a c t s , imp o r t i n g h o u s e s o r b a n k s . " Paul S t r e e t e n , " M u l t i n a t i o n a l s Revisited," Finance and Development 1 6 , 2 ( 1 9 7 9 ) : 3 9 - 4 2 ( q u o t e d f r o m p. 41). See also G e r a l d K. H e l l e i n e r , " T r a n s n a t i o n a l E n t e r p r i s e s in t h e M a n u f a c t u r i n g S e c t o r of t h e Less Dev e l o p e d C o u n t r i e s , " World Development 3, 9 ( 1 9 7 5 ) : 6 4 1 - 6 5 0 , e s p . p. 6 4 5 : " T e c h n o l o g y m a y b e s u p p l i e d by a l a r g e f o r e i g n firm t o less d e v e l o p e d c o u n tries in a variety of ways. . . . [Besides p r o v i d i n g it t h r o u g h a w h o l l y - o w n e d s u b sidiary o r a j o i n t v e n t u r e , t h e firm m a y ] license a firm in w h i c h it h a s n o e q u i t y at all, o r sell e q u i p m e n t , m a n a g e m e n t o r t r a i n i n g p r o g r a m m e s , o r e r e c t p l a n t o n a t u r n - k e y basis, all o n a t h o r o u g h l y a r m s ' - l e n g t h basis." Besides t e c h n o l o g y , o t h e r f a c e t s of t h e u s u a l d i r e c t i n v e s t m e n t p a c k a g e m a y b e p r o v i d e d in v a r i o u s ways. 50. C o h e n c o n c l u d e d t h a t local capabilities w e r e s u f f i c i e n t to h a v e c a r r i e d o u t t h e d i r e c t f o r e i g n i n v e s t m e n t s w h i c h h e s t u d i e d in S i n g a p o r e , S o u t h K o r e a , a n d T a i w a n , with positive n a t i o n a l i n c o m e e f f e c t s at least as g r e a t as t h o s e y i e l d e d by f o r e i g n i n v e s t m e n t . B e n j a m i n J . C o h e n , Multinational Firms and Asian Exports ( N e w H a v e n : Yale U n i v e r s i t y Press, 1975), p p . 1 1 2 - 1 1 9 ; cited in

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G e r a l d K. Helleiner, " T r a n s n a t i o n a l E n t e r p r i s e , M a n u f a c t u r e d E x p o r t s and E m p l o y m e n t in Less Developed Countries,'' Economic and Political Weekly 11, 5 - 7 (1976):289. 51. A c h i e v e m e n t of this critical mass is facilitated by f a v o r a b l e circumstances, f o r e x a m p l e : e c o n o m i c p r o s p e r i t y in t h e h o m e c o u n t r y (which probably increases t h e ability a n d willingness of t h e M N E to m a k e concessions); b a l a n c e - o f - p a y m e n t s ease in t h e h o m e c o u n t r y (which might e n c o u r a g e g r e a t e r g o v e r n m e n t a l c o o p e r a t i o n with M N E concessions); t h e d e v e l o p m e n t of a world climate of o p i n i o n which is m o r e s u p p o r t i v e of p o o r c o u n t r y aspirations; a g r o w i n g n e t w o r k of mutually e n c o u r a g i n g a n d i n f o r m a t i v e international interrelations a m o n g host nations. 52. Penrose believes that "less d e v e l o p e d c o u n t r i e s o f t e n have more scope to take i n d e p e n d e n t a n d radical action with r e g a r d to m u l t i n a t i o n a l c o r p o r a lions t h a n d o g o v e r n m e n t s of t h e larger industrialized c o u n t r i e s . Retaliation is m o r e difficult. . . . [Moreover] t h e less d e v e l o p e d c o u n t r i e s a r e o f t e n less inhibited by their own altitudes a n d by respect f o r the prevailing traditions and rules of international e c o n o m i c behavior, h o l d i n g e i t h e r that those traditions a n d rules were m a d e in t h e interest of t h e industrial p o w e r s a n d have n o moral claim to international acceptance, o r that their own history justifies exceptions in their f a v o u r . " Edith Penrose, ' " O w n e r s h i p a n d C o n t r o l ' : Multinational Firms in Less Developed C o u n t r i e s , " in Gerald K. H e l l e i n e r (ed.), A World Dix'iiied, pp. 147—174 (quoted f r o m p. 151). 53. Helleiner, " T r a n s n a t i o n a l E n t e r p r i s e , " p. 641, also p. 644. 54. R a y m o n d V e r n o n , Sovereignty at Bay (New York: Basic Books, 1971), p. 54. T h e r e f e r e n c e h e r e is to f o r e i g n raw materials e n t e r p r i s e s , but the process obtains m o r e generally. See also Walter C h u d s o n , "Africa," in H . R . Hahlo, J. G r a h a m Smith, a n d Richard W. W r i g h t (eds.), Nationalism and the Multinational Enterprise (Dobbs Ferry, NY: O c e a n a , 1973), p p . 136-161 ( q u o t e d f r o m p. 148). 55. For e x a m p l e , w h e n t h e Z a m b i a n g o v e r n m e n t ' s desire to initiate local fabrication of its c o p p e r was o p p o s e d by t h e two m u l t i n a t i o n a l m i n i n g companies o p e r a t i n g t h e r e , Zambia t u r n e d to an o u t s i d e c o n s o r t i u m of t h r e e A m e r i c a n a n d Swedish firms. T h e g o v e r n m e n t u s e d this c o n s o r t i u m "as a m e a n s of leverage to m o v e t h e m i n i n g g r o u p s f r o m an obstructive to an accommodative position," a n d a f t e r complicated negotiations a f a b r i c a t i n g c o m p a n y was f o r m e d which was o w n e d by all five c o m p a n i e s a n d t h e Z a m b i a n G o v e r n m e n t . Sklar, Corporate Power, p p . 9 3 - 9 5 . 56. For use in d e v e l o p i n g countries, f o r e x a m p l e , Philips N V of t h e N e t h e r l a n d s d e v e l o p e d a small-scale p r o d u c t i o n unit which was b o t h low cost a n d m o r e labor-intensive t h a n its typical E u r o p e a n unit. T h e Italian f i r m Olt r a m a r e d e s i g n e d specifically f o r use in T a n z a n i a a highly successful m e c h a n i cal cashew n u t processing plant, which "radically i m p r o v e d t h e position of T a n z a n i a in t h e [world] cashew n u t m a r k e t . " C h u d s o n , " A f r i c a , " p p . 1 5 2 - 1 5 3 . 57. T h i s has been o n e of t h e f u n c t i o n s of Nigeria's I n d i g e n i z a t i o n Decree, which m a n d a t e d full o r partial i n d i g e n o u s o w n e r s h i p in a wide r a n g e of economic activities. T h r o u g h this d e c r e e , t h e " G o v e r n m e n t has . . . t a k e n t h e first step not necessarily t o w a r d s r e p l a c i n g multinationals b u t t o w a r d s d i r e c t i n g

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t h e m t o a r e a s w h e r e t h e y a r e m o s t n e e d e d . . . . N i g e r i a h a s b e e n c a r e f u l in t a k i n g o v e r m u l t i n a t i o n a l c o r p o r a t i o n s b e c a u s e it is b e l i e v e d t h a t t h e r e is still r o o m f o r t h e e x p e r t i s e a n d t e c h n o l o g y t h a t t h e y c a n p r o v i d e . " U n i t e d N a t i o n s , Hearings, p p . 1 5 8 - 1 5 9 . T h i s w r i t e r o b s e r v e d a s m a l l e r - s c a l e p r o c e s s of t h i s n a t u r e in T a n z a n i a in t h e late 1960s. W i t h n a t i o n a l i z a t i o n o f e x i s t i n g o p e r a t i o n s , s o m e A s i a n e n t r e p r e n e u r s w h o s t a y e d o n saw t h e i r f u t u r e in t e r m s o f c o n t i n u a l l y inn o v a t i n g n e w activities, p r o f i t i n g t h e r e b y , a n d a g a i n b e i n g n a t i o n a l i z e d at prices which included s o m e r e w a r d for successful e n t r e p r e n e u r s h i p . 58. V e r n o n , Sovereignty at Bay, p. 106. 59. S k l a r , Corporate Power, p p . 34—42. 60. S c h a t z , Nigerian Capitalism, p p . 58—61; U n i t e d N a t i o n s , Hearings, p. 162. N i c h o l a s B a l a b k i n s , o f L e h i g h U n i v e r s i t y , h a s a t h o r o u g h s t u d y u n d e r way of Nigeria's indigenization of o w n e r s h i p . T h e possibilities o f i n d i g e n i z i n g o w n e r s h i p a r e q u i t e v a r i e d ; f o r e x a m p l e , Y u g o s l a v i a r e t a i n e d f u l l o w n e r s h i p of a n M N E - e s t a b l i s h e d e n t e r p r i s e t h a t was lo p r o d u c e p a r t s a n d c o m p o n e n t s f o r t h e M N E a n d u s e d t h e s e p a r t s as p a y m e n t s for p r o d u c t i o n , training, a n d m a r k e t i n g assistance f r o m the foreign f i r m . C h u d s o n , " A f r i c a , " p. 150. 6 1 . S k l a r , Corporate Power, p p . 1 4 4 - 1 4 8 . This is r e l a t e d t o S k l a r ' s h i g h l y i n t e r e s t i n g t h e s i s o f a n M N F . " d o c t r i n e o f d o m i c i l e , " p p . 182—188. 6 2 . " T h e r e m a y h a v e b e e n a t i m e in i n t e r n a t i o n a l a f f a i r s w h e n f o r e i g n p r o d u c e r s of r a w m a t e r i a l s a n t i c i p a t e d t h a t a b a r g a i n w i t h a g o v e r n m e n t , o n c e m a d e , w o u l d n o t c o m e u n s t u c k . T o d a y t h e o p p o s i t e is g e n e r a l l y a s s u m e d . " V e r n o n , Sovereignty at Bay, p p . 178—179. 63. Diaz A l e j a n d r o , "Direct F o r e i g n I n v e s t m e n t , " p. 324. I n T a n z a n i a , f o r e x a m p l e , d e s p i t e n a t i o n a l i z a t i o n ( a c c o m p a n i e d , (o b e s u r e , by a d e q u a t e c o m p e n s a t i o n ) , f o r e i g n c o m p a n i e s c o n t i n u e d t o c o l l a b o r a t e w i t h g o v e r n m e n t in j o i n t v e n t u r e s , m a n a g e m e n t c o n t r a c t s , a n d in o t h e r ways. N e e r s 0 , " T a n z a n i a ' s Policies," p p . 1 7 8 - 1 7 9 . 6 4 . S t r e e t e n , " M u l t i n a t i o n a l s R e v i s i t e d , " p. 39.

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Third World Indebted Industrialization: International Finance and State Capitalism in Mexico, Brazil, Algeria, and South Korea JEFF FRIEDEN T h e past few years have seen an upsurge of interest in the debt owed by the less developed countries (LDCs) to commercial banks. Yet most scholars, bankers, policy-makers, and journalists have focused on only one aspect of LDC debt, its implications for the international financial system. There has been little investigation of the impact of recent trends in "third world" borrowing on the borrowing LDCs themselves—-quite unlike the post-World War II spread of multinational corporations into the LDCs, which provoked a substantial literature on the effects of foreign direct investment on developing countries. Yet LDC commercial bank debt, is not simply an accumulation of numbers on bank balance sheets, a highly sophisticated form of electronic game; it represents the most rapid, most concentrated, most massive flow of investment capital to the "third world" in history. As Table 6.1 shows in the case of Latin America, private Financial institutions have displaced multinational corporations and official aid over the last fifteen years as the most important source of foreign capital available to "third world" countries. In the 1960s, in fact, foreign direct investment accounted for some 30 percent of the total flow of external financial resources to Latin America, while bank loans and bonds provided only 10 percent. In the 1970s banks and bondholders were responsible for 57 percent of this flow—up f r o m an annual average of $214 million in the 1960s to $6.5 billion in the 1970s—while the multinationals' share had d r o p p e d to about 20 percent. Multinational corporations brought m o d e r n industrial production to the "third world" and integrated it into the international capitalist system, but they also unleashed a torrent of nationalistic economic and This paper originally appeared in International Organization 35, 3 (1981):407431, copyright by the World Peace Foundation and Massachusetts Institute of Technology. Reprinted with permission. 131

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