PROBLEMS & PARADOXES OF THE THIRD WORLD
Harrington, Michael
Let me begin this outline of the institutions of international inequity with a few definitions. That is not a matter of formalities, but it touches upon a fundamental, underlying concept:...
...The case of Brazil, then, corroborates our basic analysis...
...sociologists describe the "traditional" and "modern" spheres and speculate on how the rigidities of the former inhibit the emergence of the latter...
...The UN currently estimates that charge at between 3 and 5 billion dollars a year...
...This is not merely a sign of maldistributed wealth...
...that income and wealth are even more badly distributed in poor nations than in rich...
...They have...
...The result was not simply a personal injustice to people who, in the foreign-owned or -controlled sectors were very productive, but one more profound inhibition to economic development...
...Both Continental and Cargill are currently involved in a scandal that charges that they did, among other things, "embezzle, steal, take away and conceal by fraud with intent to convert to their own use" grain bought by India...
...Thus, I will not concentrate on sorting out the characteristics that afflict the South but will proceed toward the analysis of the structures that give the characteristics their meaning...
...The latter responded with protectionist pressure on their government...
...This heightened exploitation of the working class was one of the chief sources of the "miracle...
...The present finance minister put the issue candidly: A transfer of income from the richest 20 percent to the poorest 80 percent probably would increase the demand for food, but diminish the demand for automobiles...
...They spent their gains, not on investing in national capitalism but in importing luxury goods from the advanced economy...
...Writing on the basis of 1966 figures, Samir Amin estimated that of $35 billion in underdevelopedcountry exports, $26 billion, or just under 75 percent, came from ultramodern sectors...
...Its "prescription for economic equality is not to equalize misery, as so many of the socialist governments do, but to increase production for the eventual benefit of everyone...
...It was also a phenomenon that disturbed businessmen in the United States who favor American, not Brazilian, exploitation of Brazilian workers...
...And then, if one makes the terms of trade the prime, or sole, villain, this implies that if only "fair" prices are paid for Southern exports, then the problem of world poverty will be solved...
...In theory, the workers' pay was "indexed"—that is, regularly adjusted upward to compensate for inflation...
...That is dreamy, dogmatic nonsense...
...But Brazil is basically on the right track...
...Foreign multinationals controlled 100 percent of auto production...
...One reason was that he paid 50 cents an hour, as against a $3.50 wage in the United States...
...But the question is brilliant, and so is part of his response (as well as the explication of it by Samir Amin...
...They progress into their own inferiority, they grow into further dependency...
...that of the bottom 43 percent declined from 11 percent to 8 percent...
...on the periphery, the city and the countryside were two different nations...
...In a capitalist power during the period of industrialization, low wages were a perverse blessing...
...The poor countries, then, and even the most "middle-class" among them, like Brazil, are condemned within the present structure of the world market to a labor of Sisyphus...
...III his thesis was developed primarily in response to Latin-American history, although it applies to countries throughout the world: the upper classes in the impoverished lands often subordinate themselves, politically and culturally, to rulers of the affluent countries...
...A brand-new, highly innovative plant will have a cumulative and integrated expansionary effect in the United States: in India, or even in Brazil, it will create an enclave of modernity, and the "spread effects" will be limited...
...Through the connivance of the conservative section of its own upper class with an imperial bourgeoisie in the advanced countries, it "voluntarily" accepted an emphasis upon an export production that offered gains for some but only involved the most minimal changes in production methods...
...And between 1967 and 1972, wages advanced at a rate that was only two-thirds that of productivity increases...
...In fact, the relative poverty of the poor countries was not significantly affected by the good years in the early '70s...
...It helps to keep everyone in his "proper place...
...The superfluous workers from the Third World are forced to migrate temporarily from the periphery to the center...
...It then became a central political theme of Third World diplomats and it is the theoretical inspiration for one of their central demands, a system that would smooth out the wild fluctuations in commodity prices...
...As Ragnar Nurske described the process, on the supply side there is a low rate of capital saving, because there are low incomes because there is low productivity (throughout the entire economy but not in the modern export sector) because there is not enough capital...
...That created unemployment...
...But while the number of autos and television sets was climbing at an annual rate of 14 percent, meat and homes with electricity went up by a mere 3 percent a year...
...Three basic classes confronted one another...
...The Third World, another argument says, is composed of countries dominated by foreign capital...
...It remains dominated by foreign corporations, its policies determined by foreign creditors, and its agricultural planning has been a disaster for the rural millions...
...It is easy enough to find reasons, both good and bad, for that gap...
...The debate in Brazil, the Times reported, is not about free enterprise but over the amount of government enterprise under state capitalism...
...That is, Canning was shrewd enough to understand the truth that became so apparent after the post-World War 11 decolonizations: that national and economic independence are by no means synonymous, that political freedom can be a mask for material subjection...
...The result of a sudden redistribution would be merely to generate inflation in the food-producing sector and excess capacity in the car industry...
...So it is that these structures give rise to a vicious circle, a coherent incoherence...
...So, a Brazilian was going to take advantage of the unequal exchange that is so profitable for American multinationals...
...The point has been dramatically annotated by Amin...
...Sometimes, these definitions are actually put into the context of a dynamic theory, one that sees dualism as a necessary stage on the road to development...
...I have in mind a Sanders' outlet on Kenyatta Boulevard in Nairobi...
...Only India has a relatively low percentage of foreign investment, and is abysmally poor, while Canada leads the world as a "host" to moneys from abroad and is affluent...
...Then, as the outsiders penetrated more deeply into the economy, ruining the artisanate with cheap manufactured goods but not, as in Europe, providing new employment for those thus displaced, there was a tremendous "oversupply" of labor...
...One way of dealing with this complex process is to reduce it to one of those abstractions that classify in the guise of explaining...
...And yet, although the transformation was not planned, it had an inner logic that came from the emergent system itself...
...For instance, between 1950 and 1965, United States direct investment in Latin America amounted to $3.8 billion, and income going back to this country added up to $11.3 billion...
...In considerable measure his ability to hire people so cheaply was a function of a repressive regime, which outlawed strikes and genuine labor organizations...
...They do not add that the economic structures of some nations—the advanced capitalist powers, for the most part—are determined by their own history and therefore are structurally interrelated...
...But, then, wheat is a "primary" commodity and one of the most important American exports...
...it is also because the foreign priorities, and only they, make sense in a framework that was designed to accommodate and perpetuate them...
...At the same time, foreign domination was proceeding apace, so much so that the nationalistic right wing was as disturbed as the left...
...And on the demand side, there is no inducement to invest, because of the low buying power in the society as a result of the low productivity that derives from the lack of capital, which results from the fact that there is no inducement to invest...
...To put a complicated and crucial idea in compressed form, the social forces that dispossessed peasants were also creating a need for a working class that was recruited from their ranks...
...Moreover, it is at least possible that the post-World War II period marks a structural change in the world economy...
...This became a particularly acute problem in the '70s, when the quadrupled price of oil hit the balance-of-payments situation of the nonpetroleum poor countries harder than anyone else...
...Given the limited domestic market on the periphery, there was no basis for a vigorous internal industrialization...
...Jonathan Kendell of the New York Times commented: The phenomenal growth of Brazilian shoe exports goes to the heart of one of the most troubling economic questions in the world— that is, how can an underdeveloped nation observe the present rules of international trade and still forge new exports capable of penetrating the markets of the industrialized countries and earning the vast quantity of foreign exchange needed to fuel further economic growth...
...This has many consequences, some of which will surface in a discussion of Brazil later on in this chapter...
...On the basis of past experience, the complete success of this undertaking, involving a major increase in the meat output of Brazil, will probably be accompanied by more hunger among the Brazilian people...
...The underdeveloped society, we are told, is "dualistic...
...The United States, according to one 1973 report, owns 45 percent of Canada's manufac ture, 56 percent of its mining and smelting, and 60 percent of its oil and natural gas...
...Here again, the upper class lives in the First World, the masses live in the Third World...
...If, however, that "host" country wants to import American goods, whether they be luxuries for the ruling classes or machines for industrialization, it must pay auto-and-steak prices for them...
...From the point of view of foreign capital, the traditional and modern sectors of the underdeveloped economy are marvelously integrated...
...There were domestic industries, national-flag shipping, some of the old mines were opened up under local ownership, and so on...
...The South won in Latin America...
...So, to take another example, what differentiates American from Egyptian cotton is not the boll but the economic structure within which it is grown...
...Moreover, a point that both Marx and Lenin failed to understand, the metropolitan nation does not want an industrialized competitor on the periphery...
...When challenged on the grounds that this policy would violate basic American principles, Bergland correctly replied that the idea of an international free market is a "dream world...
...and for that reason their internal and external relationships are shaped so as to inhibit development...
...The precapitalist traditional societies were poor, stagnant, and backward, but they did not suffer from economic discontent and frustration, because "wants and activities were on the whole adapted to each other, and the people were in equilibrium with their environment...
...Therefore, there is a limited value to an inventory of the characteristics of the South...
...and if we do not mismanage our affairs sadly, she is English...
...These low-wage and high-productivity sectors are another mechanism for the transfer of wealth from the hungry to the affluent...
...So it is not industrialization per se, but its type and the nature of the economy in which it occurs that are critical...
...The phenomenon of "surplus" population in the Third World, then, does not merely mean that the First World contracts its dirty work out to the periphery...
...Here is Samir Amin's description of the contemporary result of all this: the "developed" economy constitutes an integrated whole, characterized by a flow of internal exchanges which are quite dense, while the flow of external exchanges of the atoms which compose the whole are, in the main, marginal compared to the internal exchanges...
...Spanish America," he said, "is free...
...In West Germany, they are called Gastarbeiter ("guest workers"), a euphemism if ever there was one...
...They were the source of the high profits, which were invested in development, which eventually created both a militant working class and a level of production capable of satisfying at least some of its demands...
...This thesis contains a most important truth, but it is sometimes overgeneralized...
...A nutrition expert gives an example...
...V There is an exceedingly complex theory that offers another important insight into underdevelopment...
...Because of the losses suffered through the unfavorable terms of trade and the outflow of profit and fees to the advanced economies, the Third World finds itself short of cash...
...It is based on a huge, easily accessible fact: that wages in the Third World are but a fraction of those in the advanced economies, yet about two-thirds of the exports from the poor countries are produced 385 under conditions of extremely high produc tivity...
...But the situation is quite different in the international economy, even during the heyday of Free Trade: For the labor that is thrown out may be in one country and the expansion in demand for labor, which is the effect of the accumulation of capital that results, may be in another...
...If the peasant in this sector did acquire some buying power in the process, he did not spend it on the home market, which did not exist...
...By the end of 1976, these various troubles had brought a formal end to the "miracle...
...One reason, the Times said, was that during the boom period—the "miracle" of 10 percent annual growth that ended with the oil crisis of late 1973—there was such an inflow of imports that the external-debt charges 387 mounted rapidly...
...This pattern persists to this day, but now it has a cultural, as well as an economic, dimension...
...But in the first period of this policy, which ended in 1967, the real minimum wage declined by 16 percent...
...Consumer and industrial goods were brought in at a reckless pace in a way that provided excellent documentation for Celso Furtado's description of how Latin elites behave...
...It is true that most of these societies tend to experience urbanization without industrialization and therefore produce huge slums on the edges of their cities...
...The agricultural, mining, and commercial interests wanted to keep an export-oriented structure, for the obvious reason that it would bring them profit...
...Some of its equilibrium mechanisms were grisly: cholera helped maintain a rough balance between available humans and job openings...
...It is not the presence or absence of foreign investment that is decisive but the way in which the society is organized...
...It is an economic structure that gives these "things" a perverse quality, which they do not possess in an advanced society...
...At the least, even if one denies that such a permanent shift has taken place, it is clear that the international economy has been transferring resources from the desparate to the privileged during the better part of the last generation...
...Therefore, Amin concludes, you cannot really speak of "national" economies in the poor world...
...As a result, the wage gap between center and periphery began to widen, and made an internally sustained development even more of an impossibility...
...On the other hand, UNCTAD writers sometimes argue as if this is the mechanism promoting underdevelopment...
...After all, not only Marx but also Adam Smith and David Ricardo insisted on the point—and in any case it makes good sense...
...But why does a mason who builds a suburban New York bungalow get three times as much pay as a Lebanese who builds the same house in the same way...
...In 1973, their deficit was $12 billion...
...However, it should be noted that this selfish, wasteful decision was quite rational in such a society...
...the advanced economies are not...
...Under these circumstances, the workers were able to organize and increase their wages...
...Between 1960 and 1970, according to one scholarly estimate, the share of the wealthiest 3.5 percent in the national income rose from one-fourth to one-third...
...Now, instead of importing their luxuries, they see to it that they are manufactured locally...
...Finally, it is well known that it is the superior productivity of the factories in the metropolitan centers that guarantee their advantage as against the more backward technology of the periphery...
...The point is that even then the poor countries did not escape from their inferiority, but only reinforced it...
...Meanwhile, as foreign debt rose and government intervention into the economy deepened, real wages declined steadily...
...It was carried out at the cost of great human suffering, was punctuated by rising civil wars and restorations, and was culminated in huge, dirty, disease-ridden cities...
...The British Foreign Secretary Canning put the matter with cynical candor in 1824...
...The problem is that the capital intensity of such undertakings—the technological investment per worker—is thereby determined, not by the needs of the poor society, but by the reflected priorities of the rich in the advanced countries...
...The purpose of this move, as Bergland described it, was to "shave off the peaks and valleys" of fluctuating wheat prices, i.e., to do for the First World commodity precisely what the Third World wants to do for their commodities...
...Industrialization, some believe, is the sign of a developed economy...
...One can compile almost endless lists of aspects of underdevelopment— lists that are all but worthless if the dynamic in which they function is ignored...
...The English weavers, who were replaced by the textile machinery, could (in the end and after much travail) find re-employment in England...
...The government had concentrated on cash crops for the world market, and bean production in 1976 had declined by 17 percent, in part because of bad weather, but also because the bean growers got only 1 percent of the subsidy that went to the export farmers...
...but the price of the product, when it is reimported into the United States, does not...
...Either they import luxury goods, which is an enormous drain on hard currency and channels needed resources into domestic waste and foreign profit...
...As one Brazilian economist, a former banker, described the situation in 1976, "The immediate objectives of attending to the needs of our foreign markets have made us forget the principal problem...
...So, underdevelopment cannot be defined in terms of "things"—of agriculture or industry or foreign capital or productivity...
...Two of them, Cargill and Continental, each have 25 percent of the market, and if Cargill weren't a privately held company, it would be the 27thlargest corporation among Fortune's 500 industrials, outranking Bethlehem Steel and Lockheed...
...This is not necessarily because these people have "sold out...
...it is also a mechanism for imposing the desires of that parasitic class upon the society in a way that works against development...
...while the economic structures of other nations—the poor—were determined by alien history and lack an internal coherence of their own...
...And finally, there were the British, who in this case, as in our Civil War, supported the Southerners...
...Bob Bergland proposed what might be called the Organization of Wheat Exporting Countries in 1977...
...They satisfy their desires in one of two ways, both of them profoundly antidevelopmental...
...A terrorized and exploited working class is the source of enormous gain, but businessmen in the United States want those 50-cents-an-hour factory hands subordinated to North American purposes and profits...
...94 percent of pharmaceuticals, 91 percent of tobacco, 82 percent of rubber...
...In short, they lost $5.3 billion...
...This, it should be noted, is not a demographic fact of nature but an artificial construct of the way in which development was introduced from without...
...but what of the Indian weavers who were displaced by the same improvement...
...This error is typical of academic social science, even when practiced by a genius like Kuznets...
...A second, and related, point is that foreigners control a significant share of the economic activity in the poor lands...
...Steel...
...Hyla Myint defined this insight from a mainstream economic perspective...
...American secretaries of state never weary of emphasizing that fact when they want to urge moderation on the Third World...
...Even so, a country like Argentina, Karl Deutsch notes, had a high standard of living in 1900...
...it also gave rise to profits, which would finance expansion and increase the demand for labor...
...What is critical to underdevelopment is not some physical fact but a world economic structure that perpetuates backwardness...
...The same amount of money, even an identical plant, can have a completely different effect in two different national systems...
...IIT here is a historical thesis that applies most particularly to Africa but is also relevant to the rest of the Third World: the structure of underdevelopment today results from a growth process that was induced form the outside rather than generated from within...
...And yet the wages in such countries average from 4 percent to 15 percent of those in the United States...
...He did not, of course, add that the United States has used all of its power for a generation to force the poor of the globe to observe the rules of that dream...
...John Hicks, an eminent mainstream economist, points out that innovation was often labor-saving during the Industrial Revolution...
...The advanced countries got the dynamic sectors...
...And in more recent times, the Latin ruling classes have reinforced this pattern by a cultural mimicry that had further antidevelopmental effects...
...In short, wheat functions within the American economy just like any other oligopoly product and promotes general economic growth as much as a sophisticated manufactured item...
...That business is dominated by five firms, which control 85 percent of the grain shipments abroad...
...As Hegel said of this procedure long ago, it presents the table of contents and dispenses with the book...
...There is still a hot academic debate over exactly how and why capitalism developed within feudalism, eventually replacing that system...
...That is, agriculture for the domestic market remains inefficient and expensive and has few prospects of overcoming this rut...
...As a result, food prices went up, infant mortality soared because of inferior prenatal diets, and 40 percent of the population, in the most "successful" of the developing countries, suffered from malnutrition...
...Thus, a 1972 World Bank study found that the productivity of labor and capital in some of the poor countries is higher than in the advanced economies—one more stunning refutation of the thesis that the structure of the world economy is determined by "natural" disadvantages...
...If even Brazil exhibits the mechanisms I have just described, then the overwhelming majority of the poor countries, which do not have such favorable auspices, are certainly subject to them...
...Finally, the surplus population that inhibits development in the poor countries has a byproduct that contributes to the affluence of the rich nations...
...Even a nation as richly endowed as Brazil can experience more than a decade of burgeoning national production and yet remain humiliatingly subject to political power in Washington and economic power throughout the advanced capitalist system...
...The way in which the terms of trade have transferred wealth from the impoverished to the affluent during the post-World War II years was the great discovery of the United Nations Conference on Trade and Development (UNCTAD...
...one identifies hidden empirical uniformities, sometimes showing great ingenuity in the process, but they are then assumed to be their own explanation rather than that which is to be explained...
...The subsistence farming, extended family practices, and the constant back-and-forth movement between the traditional spheres are precisely what make it possible to have such low wages in the modern sphere...
...This, in North American terms, was the Confederate, or Free Trade, party...
...And one instrument of that outrage is found in the terms of trade...
...Latin America, then, helped to lock itself into a relationship of dependency upon the major powers...
...and so on...
...That, I think, is intolerable on many grounds but does not make Canada impoverished any more than India's relative freedom from foreign investment makes it wealthy...
...What irony," a 'retired Brazilian admiral complained...
...The Mayans in Guatemala lived on corn and beans, supplemented by fruits, vegetables, and meat from wild animals...
...his point of view is, on this count, the same as that of the neo-Marxists...
...By contrast, the "underdeveloped" economy is composed of atoms which are, relatively speaking, juxtaposed, not integrated, and the density of the external exchange of these atoms is relatively greater than that of the internal exchanges...
...When this process began, the real wages at the center and at the periphery were roughly equal—that is, they were subsistence wages...
...This first theory, then, emphasizes the historical genesis of underdevelopment as a crucial factor in giving it the structure it has today...
...We are establishing Communism under the flag of anti-Communism...
...By some estimates, government manufacture already accounts for one half of total investment as compared to 15 percent at the end of World War II...
...This factor is at work to this very day...
...Next, we shall see how the resultant alien priorities are often internalized by those whom they afflict...
...For instance, Brazil increased the production of cars until it became the world's ninthranking automotive industry, with almost a million vehicles a year being produced in the '70s...
...and it is expected to stay in that latter range for the foreseeable future...
...Indeed, in 1976 there were riots in Brazil, as people fought to get scarce black beans—even though agricultural production had increased...
...Samir Amin makes the same point with regard to India: Precolonial India was a society (or societies) which was coherent, characterized by a correspondence between its various structures economic and others) and which, for this reason, could be analyzed and understood in itself...
...Typically, they worked cleaning streets, digging graves, collecting garbage and, the women among them, as chars...
...Let me begin this outline of the institutions of international inequity with a few definitions...
...They are extremely useful as a labor reserve, since they can be sent home in fairly short order when there is an economic downturn, and this saves the society the welfare cost of normal domestic unemployment...
...They were even careful to allow tilled patches of forest to lie fallow so that they could reconstitute themselves...
...One way of putting the historical point is to say that in much of Latin America, the South won the equivalent of our Civil War...
...Let's generalize this point...
...The system is now dominated by gigantic multinational corporations with an enormous ability to control prices, jump over the tariff walls of the impoverished in order to rob them of their "comparative advantage," and discover synthetic substitutions for primary commodities that weaken the latter's market position...
...It therefore lacks the reciprocal interactions that are necessary if there is to be self-sustained growth...
...It is not the cause of their prosperity, which is what Emmanuel implies...
...These structures laid the basis for an important and dramatic phenomenon of the post-World War II years: the flow of money from the poor to the rich...
...But then laissez faire came to an effective end, monopoly took over, price competition became less important, and capitalism took giant strides toward the periphery...
...If proper account is taken of the historical differences between the poor nations and the various levels of misery within the Third and Fourth Worlds, there is a common mechanism that keeps these countries in a structurally subordinate position in the global economy...
...Growth in the periphery was stimulated by the penetration of alien capital into a stagnant economy...
...President Ernesto Geisel announced a regime of austerity and projected a decline in real growth from 8 percent to 4 percent, in part because of the 2.3-billiondollar trade deficit...
...Furtado's insight was elaborated to deal with the Latin-American evidence...
...As Celso Furtado, a brilliant Latin analyst of underdevelopment, has emphasized, in these countries the living standards of the upper classes are based on those of the affluent in the richest economies...
...And it is an important fact of life throughout the Third World that the richer are richer there than in the affluent economies...
...VIF inally, Brazil presents a particularly compelling example of these trends in action...
...So, more than a decade of widely heralded progress did not change Brazil's structural inferiority...
...or, when the tactic of "import substitution" is adopted as a way of achieving internal growth, the upper class's tastes still decide what is going to be produced...
...Modern India is incomprehensible outside of its eternal relations...
...Our multinationals want that underpaid labor so much that they work to keep the Brazilians from appropriating it themselves...
...It's the system that's crucial...
...In 1970, the underdeveloped countries had a net capital inflow of $2.6 billion, but paid out $7.9 billion on foreign investments...
...As Andre Frank describes part of that event, The metropolitan powers aided their LatinAmerican junior trade partners with arms, naval blockades and, where necessary, direct military intervention and instigation of new wars, such as that against Paraguay, which lost six out of seven members of its male population in the defense of its nationally financed railroad and genuinely independent, autonomously generated development effort...
...This overlooks the fact that, during long periods in the 19th and 20th centuries, the terms of trade were favorable to the poor countries and that, as Ernest Mandel has pointed out, the corporations importing raw materials in the metropolitan countries worked hard to see that this would be so...
...There is a national economic space, but, economically speaking, not a nation...
...If the workers in those economies had been paid at the rates prevailing in advanced countries, the value would have been $57 billion...
...Indeed, that will become even more dramatically apparent when we look at financial flows in a moment...
...It should not have come as a surprise, then, that Jimmy Carter's Secretary of Agriculture From the forthcoming book The Vast Majority: A Journey to the World's Poor by Michael Harrington...
...He had to import...
...That was a clear gain of $7.5 billion for the United States over a 15-year period...
...Meanwhile, the pay in the poor countries, as Hyla Myint put it, "fossilized...
...in 1975, $45 billion...
...Therefore, labor is cheap...
...They were denied the experience of self-generating growth...
...But what the dualism notion sorely misses is any concept of the whole...
...An American employer, say a dress manufacturer or a producer of consumer electronics, ships work to Mexico or Taiwan or Hong Kong...
...Repatriated profits are, however, only the most obvious part of this perverse flow of wealth...
...This phenomenon, it should be noted, is recognized by both radical and mainstream theorists, and one anti-Marxist writer even argues that the traditionalists identified it first, with the left only belatedly picking up, and exaggerating, their finding...
...But in addition, we import these people into the wealthy societies, and thus recreate the international caste system within the very heart of those economies that like to refer to themselves as "advanced...
...Note that it is not that they have failed to produce substantial wealth...
...This system is disintegrative from the point of view of those who live in it, and integrative from the perspective of those who dominate the world...
...The 1966 exports of the Third World were worth $35 billion on the market...
...and so on...
...That concept is more than a century and a half old and even the mainstream economists use it—adding that all, including the poor low-productivity nations, benefit from this unfair exchange...
...Finally, a vicious circle is set in motion...
...For instance, it is often said that the poor countries suffer because they are agricultural and raw-material, rather than industrial, producers...
...These data must be used carefully, which is not always the case...
...This transfer, Amin very rightly emphasizes, is "marginal" for the metropolitan powers at the center...
...Only Hong Kong specializes in the low-wage production of products that are no longer profitable for the better-paid labor force and high technology of the United States...
...To be sure, the Journal adds, this dictatorship has "serious political and social shortcomings" (a euphemism for dictatorship and torture—which calls to mind the Soviet description of a quarter of a century of totalitarian terror as the "cult of the personality...
...That is often the case, of course...
...Let me translate these abstractions into a homely example...
...When it is profitable to do so, multinationals demonstrate that the people of the South can run the best machines of the North...
...And even if the government gets a portion of that subsidy, the conditions for reinvesting it are not at all favorable, since there is no proportionality between productivity and the effective ability of the society to consume, between the modern enclave and the traditional society...
...The classical economist Jevons computed that real wages in ancient Greece were roughly comparable to what an unskilled worker received in the 19th century...
...Obviously all nations, even the most powerful, are part of an interconnected world system...
...Part of the profits are siphoned off by the multinationals, by means of high prices and low wages...
...According to the International Monetary Fund and the UN's Economic Commission on Latin America, between 1951 and 1966, taking 1950 as a base year for prices and omitting Cuba from the calculation, the Latin-American countries lost $26.3 billion through a deterioration in the terms of trade...
...Within European or American capitalism, the exchange between the city and the countryside had a multiplier effect throughout the entire society...
...In 1971, there were 3 million of them in that country, mainly recruited from the impoverished Southern fringe of Europe (Spain, Portugal, Greece, Yugoslavia—Austrian, Dutch, and French workers were not juridically treated in this category...
...But once again, the merchants and landlords made an alliance with the imperial interests in the advanced economies and frustrated their own economic independence...
...But once they were "opened up," that coherence was destroyed...
...The advanced economy benefited from its technological edge...
...They cleared the ground for coffee and beef and thereby destroyed the possibility of an adequate diet...
...Between the 1820s and the 1850s, some of the newly independent Latin-American countries seemed to be heading toward a classic capitalist takeoff...
...At the same time, the Amazon is being deforested as part of a development scheme...
...In 1976, the New York Times reported that Brazil's $2 billion debt now required 40 percent of export income for servicing...
...that the most export-oriented among them tend to be specialized in one or two commodities and so are extremely vulnerable to fluctuations in just a few markets...
...For the Wall Street Journal, the difference between Brazil and Peru (before the latter abandoned its military radicalism and succumbed to the power of the international bankers) is that "Brazil has opted to tie its economic future to the market economy instead of pursuing the grail of state socialism...
...If the "demonstration effect"—that cultural mimicry of affluent waste and luxury—is at work, that charge may include hard currency paid out for the "proprietary knowledge" of how to make Colonel Sanders' Kentucky Fried Chicken...
...Economists focus upon the great differences in productivity between the sectors...
...The "dualism" within the un derdeveloped society is thus an integrating element for the world market...
...One way of summarizing the present impact of these historical trends is to say: underdeveloped societies are not internally coherent...
...But there is no doubt that it was, in the main, an internal process...
...But in the Third World enclaves of modernity, one gets sudden injections of high technology into otherwise backward, subsistence societies...
...But then, Machado's proposals were not a mere burst of angry rhetoric...
...Indeed, it was once true: only, it does not hold now...
...Because growth is induced from the outside, and not from within, the economy becomes subordinate to the foreign capital that called it into a new life...
...That means that the prices received for their exports fell, and those paid for imports rose, with a resultant gap of $26.3 billion...
...But that same transfer is of disastrous consequence for the poor...
...The research was done by scholars like Raoul Prebish, UNCTAD's first secretary general, and Celso Furtado...
...A progovernment politician, Jose Machado, argued that therefore the state must take over the import of agricultural products and all raw materials for the pharmaceutical industry, and should nationalize the biggest utility and establish a state monopoly over newly discovered ironore deposits now being jointly exploited by the government and U.S...
...In the classical theory of foreign trade, it was understood—by Ricardo as well as by Marx--that a certain unequal exchange was taking place...
...In other words, subordination to the priorities of the advanced powers in agriculture brought an increase in hunger and malnutrition...
...The Third World nations have to pay, in licensing fees and other ways, for the technology that they get from the rich...
...As a result, there were those who were thus enabled to sell these cheap goods at high prices—for the most part, the multinational corporations, which run the modern industries in poor countries...
...I will only note that there are important parts of Emannuel's answer that I think are wrong—an overly facile analogizing of Marx's theory of "prices of production" within a national economy to the world economy...
...Then there were the industrializers who, like the Union forces in the United States, stood for protectionism...
...In short, it becomes rational to be irrational— for the leadership of a poor country to voluntarily preserve the conditions of its own economic inferiority...
...So, the "miracle" was up against severe difficulties in the industrial sector, even with the fascistic exploitation of the workers...
...Copyright © 1977 by Michael Harrington...
...A Brazilian shoe manufacturer got a subsidy from the government to start a business, and he succeeded...
...Latin America had plantations, mines, and industrial enclaves...
...That can be put in a number of ways...
...But that trend was frustrated, and one of the reasons had to do with the lineup of social class forces within the countries involved...
...It is sold at levels appropriate to an automobile-buying, steak-eating economy...
...But we do have solid figures showing that, since 1953, the terms of trade have usually been turned against the starving and in favor of the affluent...
...So why invest...
...Here again, it is the structure that is decisive: low wages had a positive effect in the North, but they institutionalize underdevelopment in the South...
...That transition was hardly a harmonious, peaceful affair...
...In Kuznets's estimate, the top 5 percent in the underdeveloped nations get between 30 percent and 40 percent of before-tax cash income...
...Only part of the society was drawn into the web of monetary relations—the part that was brought to life to serve some of the specific needs of the metropolitan power...
...The wage bill drops enormously...
...There is, a neo-Marxist theory holds, a new form of exploitation that differs from this classic case...
...Then the Spaniards came...
...But on the periphery, local wealth, if it existed, tended to be land, and it was the rent collectors who benefited from the partial commercialization of agriculture...
...When United Fruit goes into Central America, Unilever into Malaysia, Firestone into Africa, they operate with the most modern methods...
...Moreover, in Europe, capitalism marked the triumph of the industrialist over the landlord, of profits (which are the reward for energetic entrepreneurs) over rents, the return to passive, parasitic landlords (of whom Ricardo contemptuously said, they grow rich in their sleep...
...Crudely put, but I think accurately, a country with very high productivity received a bonus from a country with low productivity, for the latter had to work much harder, to surrender more hours of labor time, in an exchange with the former...
...For example, Simon Kuznets, a man of enormous and genuine accomplishment in his field, summarizes the marks of underdevelopment but omits to even mention the international domination of the South, which trades mainly with the rich, who trade mainly among themselves...
...Up until the 1880s, wages in the emergent capitalist powers of Europe fluctuated around the subsistence level, too...
...The government is giving massive subsidies to multinational corporations like Anderson Clayton, Goodyear, Volkswagen, Nestle, Liquigas, Borden, Mitshubishi, and Universal Tank Ship, to turn the area into a major supplier of beef for Europe, the United States, and Japan...
...That is not a matter of formalities, but it touches upon a fundamental, underlying concept: that underdevelopment is not a "thing...
...It is the largest and potentially richest of all the underdeveloped nations...
...And when investment did take place, it was complementary to that of foreign capital, not competitive with it...
...it is manufactured by the consumers of tortillas and rice...
...Government mills produce 60 percent of the raw steel and monopolize the production of flat-steel products, rails, and heavy steel shapes...
...On the one hand, neoLeninists have sometimes used this thesis casually, without even noting that it contradicts the central assertion in Lenin's analysis: that the developed capitalisms must export capital, not, as in this case, import it...
...a tendency to see high wages in the North as the prime cause of low wages in the South, and to pit workers in those areas against one another...
...But then Hong Kong is more industrialized than the United States, since it devotes 41.4 percent of its labor force and 38 percent of its output to manufacture, while the corresponding figures for this country are 26.5 percent and 28 percent...
...Modeling himself on OPEC, Bergland proposed that the United States and Canada, which control 75 percent of the commercial wheat exports, should join together to set the world price...
...Only, the structure of the world market has, by perfectly legal means, taken billions of that wealth away from them...
...One classifies, but without illuminating the concepts that make the definitions possible...
...they were called into modern economic life by aliens...
...They received from underpaid workers a subsidy worth $22 billion in a single year...
...their progress brought malnutrition...
...What has to be explained, as the French writer A. Emmanuel puts it, is not the difference between the wage of an American metalworker who uses a million-dollar press and the wage of a Brazilian plantation worker who wields a machete...
...Wassily Leontiev's UN Commission provides a summary and stunning statistic...
...So they have to borrow...
...To translate this generality into numbers, the OECD reports that 60 percent of the people in Brazil exist at levels under the FAO caloric minimum for health...
...Consider just a few of the facts...
...Yet the process that he identified is at work in India...
...Another New York Times dispatch focused on a classic case in point...
...But the rural areas, where the bulk of the people live, are more seriously menaced by structural problems...
...It also noted that the minority with incomes more than double those of the 60 percent eat like citizens of the most affluent countries...
...However, the aspect of this reality that is particularly relevant here has to do with the export of profits from the periphery to the center...
...To be published by Simon & Schuster, a division of Gulf & Western Corporation, and printed here by permission of the publisher...
...The critical point is that the high-productivity sectors of the Third World exist within societies dominated by subsistence economy...
Vol. 24 • September 1977 • No. 4
