Dependency theory: for week 5

Adapted from an article in Workers' Liberty 28

'Dependency theory'

'Dependency' theory dates back to Paul Baran's book The Political Economy of Growth (New York, 1957). Third World countries were underdeveloped, argued Baran, mainly because of parasitism within the Third World countries and a drain of surplus to the advanced countries. The answer was for those forces seeking development in Third World countries to follow the model provided by the USSR - expropriate the parasitic old property-owning classes, centralise resources in the hands of the state, cut down economic relations with the rest of the world to a minimum.

Andre Gunder Frank, Samir Amin, Immanuel Wallerstein and others built on Baran's analysis, developing the idea that imperialism created distorted, stunted, dependent structures in Third World countries. Though heavily discredited by recent facts, such as the capitalist development of Asia's Pacific Rim, this 'dependency theory' remains very influential on the left, especially in pseudo-Trotskyist restatements.
This doctrine ('import of revenue', so to speak) had obvious differences even from the conventional interpretation of Lenin ('export of capital'), but was assimilated to it via Lenin's speculations about metropolitan capital 'growing rich by usury' or 'tribute from Asia and Africa' and by highlighting cases where a limited 'export of capital' (metropolitan investment in a poor country) produced a continuing 'import of revenue' to the metropolis without local reinvestment or new investment.
All the classical Marxists believed that capitalism tended to spread capitalist development across the world: arguments such as Kautsky's of 1907 about imperialism sustaining pre-capitalist structures were within that framework. Lenin, as we have seen, even gave credence to Hobson's far-fetched speculation about all industrial development shifting to Asia and Africa.
In Imperialism, Lenin specifically argued against the notion of a fixed division between industrialised and non-industrialised regions (a notion which, by a logic which we need not bother to go into here, was part of Kautsky's new view on imperialism). Imperialism was about seizing not only agrarian regions, but economic territory in general. Kautsky's mistake was not innocent: German imperialism, the imperialism that it was his special duty to fight, had among its prime targets for conquest the industrialised areas of Belgium and Alsace-Lorraine. Also, imperialism was not only 'a striving for annexations'. Germany's immediate aim was not so much more colonies, but economic domination in Central Europe and in the Middle East.
And Lenin stressed how the relative economic rank of nations was changing. 'Capitalism is growing with the greatest rapidity in the colonies and the overseas countries. Among the latter, new imperialist powers are emerging (e.g., Japan)'. Bukharin agreed. 'The industrialisation of the agrarian and semi-agrarian countries proceeds at an unbelievably quick tempo.'
Crucial to the 'dependency' framework is the notion that the essence of world capitalism is the relation between two relatively homogeneous blocs, centre and periphery. The focus of study is on factors keeping the hierarchy of capitalist economies fixed, keeping centres central and peripheries peripheral. The classical Marxists, on the contrary, focussed on the fluidity and changeability of the hierarchical relations between capitalist economies.
Andre Gunder Frank, developing Baran's theory with great verve, argued in his classic Capitalism and Underdevelopment in Latin America: 'External monopoly has always resulted in the expropriation (and consequent unavailability to Chile [and the same argument goes for other underdeveloped countries]) of a significant part of the economic surplus produced by Chile and its appropriation by another part of the world capitalist system... [an] exploitative relation... in chain-like fashion extends the capitalist link between the capitalist world and national metropolises to the regional centres (part of whose surplus they appropriate), and from these to local centres, and so on to large landowners or merchants who expropriate surplus from small peasants and tenants, and sometimes even from these latter to landless labourers exploited by them in turn. At each step along the way, the relatively few capitalists above exercise monopoly power over the many below...Thus at each point, the international, national, and local capitalist system generates economic development for the few and underdevelopment for the many'.
Frank presents this chain of metropolis-satellite, or centre-periphery, relations as the major defining feature of capitalism, one that shows Latin America to have been integrated into a capitalist world system since about the 16th century. Imperialism, for him, therefore, is more or less synonymous with capitalism of any sort, advanced or not, way back into the 16th century.
The image of surplus being drained by a million threads from periphery to centre is a powerful one. But it is not a very satisfactory explanation of development/underdevelopment. The capitalist/worker relation, for Frank, is an archetypal 'centre/periphery', or (the same thing in Frank's picture) capital/'many', relation. Workers are dissolved into the 'many', the specific logic of wage-labour of capital is dissolved into the general picture of the plunder of the many by the few. But the capitalist/worker relation develops both poles of itself - the capitalists to riches, the workers to concentration, education, and self-confidence - rather than 'underdeveloping'. That development, with its revolutionary potential, is obscured by Frank's analysis, in favour of the stance of a well-wisher denouncing the helpless 'underdevelopment' of the 'many'.
Put it another way. What happens to the surplus when it finally drains through to the metropolis of metropolises - some US multinational HQ? It is not simply consumed by the bosses of the multinational. No: they seek to expand their capital still further - i.e. to develop the whole web of relations that brings them the surplus. The capitalists' lust for profit, their desire and ability to siphon revenue to themselves, is no explanation for underdevelopment in Latin America. If local opportunities for investment are the best going, then lust for profit will make the most Yanqui of capitalists want to reinvest revenue in Latin America rather than holding it in the USA. Conversely, if opportunities for investment are better elsewhere, then the most national of capitalists will direct their funds to the other place rather than investing in Latin America.
In reality investment patterns are not simply determined by profit maximisation in this way. The classic case for 'drain of surplus' is where foreign interests own a plantation or a mine in the underdeveloped country. The foreign capitalists are not very interested in diversifying into other industries in the underdeveloped country; the necessary infrastructure, trained workforce etc., do not exist, and the home market in the underdeveloped country itself is small.
They are not even very interested in investing in new technology in the plantation or mine: abundant supplies of cheap labour make it unnecessary. They prefer to bring their money home to the advanced capitalist country and invest it there. When the underdeveloped country takes over the plantation or mine, however, it is likely to use the profits to build up infrastructure and heavy industry in the underdeveloped country. Here the 'drain of surplus' is what is to be explained, not the explanation. It is an important effect of 'underdevelopment', not the cause. Such a drain existed from many ex-colonial countries in the 1950s, when direct investment from the richer capitalist economies into those countries was running at low levels, and again in the first period of the great 'Third World debt crisis' which started with Mexico's default in 1982. In the 1990s, many ex-colonial countries show large net inflows of foreign capital. The 'drain' is not a fixed economic law.
Robert Brenner has summarised the political implications of the 'drain' theory. 'So long as incorporation into the world market/world division of labour is seen automatically to breed underdevelopment, the logical antidote to capitalist underdevelopment is not socialism, but autarky. So long as capitalism develops merely through squeezing dry the 'third world', the primary opponents must be core versus periphery, the cities versus the countryside - not the international proletariat, in alliance with the oppressed people of all countries, versus the bourgeoisie. In fact, the danger here is double-edged: on the one hand. a new opening to the 'national bourgeoisie'; on the other hand, a false strategy for anti-capitalist revolution... Most directly, of course, the notion of the 'development of underdevelopment' opens the way to third-worldist ideology. From the conclusion that development occurred only in the absence of links with accumulating capitalism in the metropolis, it can be only a short step to the strategy of semi-autarkic socialist development. Then the utopia of socialism in one country replaces that of the bourgeois revolution...' ('The Origins of Capitalist Development', in New Left Review 104, p.91-2).
In the periphery/centre view, nationalist-autarkic moves by the bourgeoisie of the underdeveloped countries appear as limited, initial forms of the struggle of the periphery against centre - which struggle, of course, ultimately, fully developed, is the struggle for socialism. It thus necessarily smears over class distinctions. Two Argentine Marxists have summed up the problems here:
'The theory of 'neo-colonies'... seeks to equate the financial and diplomatic dependence of politically independent countries and of semi-colonies by giving overwhelming priority to certain economic features in particular the role of direct foreign investment by transnational companies. Direct foreign investment, associated with other forms of 'penetration', is supposed to turn the different countries into semi-colonies, although it is never clear which are to be included in this definition. (Would it apply, for example, to countries like South Africa, Canada or Spain, or only to 'Third World' countries?) According to this line of reasoning, bourgeois nation states would be progressive and anti-imperialist merely by opposing foreign investment, increasing customs duties and reducing the balance of external trade, or by linking themselves economically to the 'Socialist Bloc'. Marxism, however, regards such 'anti-imperialism' and such 'defence' of the principle of national self-determination as nothing more than an attempt to cover up competitive manoeuvres by capitals of different national bases, particularly by 'weak' monopoly capitals.' (Alejandro Dabat and Luis Lorenzano, Argentina: The Malvinas and the End of Military Rule, p.8).
Frank developed his theories in passionate and angry opposition to the Latin American Communist Parties and their strategy of supporting the nationalist bourgeoisie: 'The historical mission and role of the bourgeoisie in Latin America - which was to accompany and to promote the underdevelopment of its society and of itself - is finished. In Latin America as elsewhere, the role of promoting historical progress has now fallen to the masses of the people alone... To applaud and in the name of the people even to support the bourgeoisie in its already played-out role on the stage of history is treacherous or treachery. ' (Capitalism and Underdevelopment in Latin America). Yet he feels compelled, again and again, to endorse nationalist segments of the bourgeoisie as 'progressive'. For example this comment on Brazil before the 1964 coup: 'The progressive forces, including Brazilian nationalist business interests, had offered (president) Goulart an alternative... (but) Goulart again tried to put off demands of the progressive forces'. (Underdevelopment or Revolution, p.346-7)
As Anthony Brewer points out, Frank ends up arguing for socialism in a spirit very different from Lenin - not by identifying a revolutionary class that can create it, but by indicting capitalism for its lack of capitalist development.
'The classical Marxists assumed that each country must go through successive stages of development; the capitalist stage performed the historic task of creating a proletariat and laying the material basis for the succeeding stage of socialism. Lenin and Trotsky argued that the bourgeoisie in Russia (then a relatively backward country) was too weak to carry through the political tasks of the bourgeois revolution, so that the proletariat had to take the lead and could then carry straight on to the socialist revolution. The evolution of a relatively backward country differed from that of the more advanced centres. This argument, however still presupposes the existence of a proletariat adequate to the task, and thus a certain degree of capitalist development. However, in the first half of the 20th century, there were few signs of capitalist development in underdeveloped countries, and many Marxists came to argue a position almost diametrically opposed to that of the classics. Where it had been argued that capitalist development had to create first the possibility of a socialist revolution, it was now argued that the absence of capitalist development made socialist revolution necessary. Frank is the leading exponent of this view, summed up in the title of one of his books, Latin America: Underdevelopment or Revolution. This shift of perspective entails a shift to a more voluntaristic concept of politics and to treating the peasantry or lumpen-proletariat, rather than the industrial proletariat, as the revolutionary class. This trend in political thinking was encouraged by the success of the Chinese and Cuban revolutions.' (Marxist Theories of Imperialism, p.286).