'Intelligent discontent is the mainspring of civilization.' -- Eugene V. Debs

Thursday, June 07, 2007

Looking Through a 1950s Window to See the Present: Paul Baran, Imperialism and Economic Development 

John Bellamy Foster, in a Monthly Review article recalls a groundbreaking work of Paul Baran, his 1957 book, Political Economy of Growth:

. . . Baran acknowledged the great variance in conditions in the underdeveloped world. But he argued that there were common conditions that justified viewing these countries together at a high level of abstraction. The characteristics they shared were: (1) a history of imperialist penetration, (2) low per capita incomes and low levels of economic development, and (3) similar internal and external obstacles to development resulting from the history of colonialism/imperialism. Since all of these countries were far behind the advanced capitalist states, the goal of rapidly catching up required not simply an industrial take-off but economic growth rates of 8–10 percent per annum for extended periods, as opposed to the historical average of around 3 percent. Such growth rates had occurred before, with the United States reaching an 8.6 percent rate of growth in the second half of the 1880s, Russia 8 percent in the 1890s, Japan 8.6 between 1907 and 1913, and the Soviet Union credited with double digit rates of expansion in 1928–40. The principal question was therefore how to mobilize and rationally utilize surplus to achieve the goal of catching up with the advanced capitalist countries, as opposed to falling further behind as at present.

This framework led Baran to a consideration of the class and imperial environment of underdeveloped countries governing the use and misuse of society’s potential surplus: what he called “the morphology of backwardness.” Here he concentrated on how his four major leakages to potential surplus were related to the dominant class (and intra-class) structure of underdeveloped societies, focusing on the role of (1) a semi-feudal landlord class, (2) the proliferation of mercantile interests and money lenders of all kinds, (3) the small, monopolistic industrial bourgeoisie that tended to be heavily dependent on foreign enterprise, (4) foreign capital, and the (5) state. The entire distorted class structure that emerged was prone to waste: luxury consumption by the wealthy coupled with loss of output and misallocation of surplus due to the irrational and wasteful organization of production and chronic unemployment/underemployment. The state apparatus was often distorted by these developments reflecting the parasitical class relations. “What results,” he stated, “is a political and social coalition of wealthy compradors, powerful monopolists and large landowners dedicated to the defense of the existing feudal-mercantile order.” The ruling elements in the underdeveloped countries tended to invest large parts of the surplus at their disposal abroad “as hedges against the depreciation of the domestic currency or as nest eggs assuring their owners of suitable retreats in the case of social and political upheavals at home.” The mobilization of the surplus for new investment was thus typically blocked at every turn, leading to dismal economic performance and the expansion of poverty in a vicious circle. “Just as investment,” Baran wrote, “tends to become self-propelling, so lack of investment tends to become self perpetuating.”

A crucial element was the disarticulated, outward orientation of the peripheral capitalist economies, which were geared to the requirements of foreign capital and the markets of the advanced capitalist countries more than to their own internal needs. This dependence took various forms, including: remittance of surplus abroad to foreign investors and reinvestment of some of the surplus by multinational corporations: “While there have been vast differences among underdeveloped countries,” Baran wrote, with regard to the amounts of profits plowed back in their economies or withdrawn by foreign investors, the underdeveloped world as a whole has continually shipped a large part of its economic surplus to more advanced countries on account of interest and dividends. The worst of it is, however, that it is very hard to say what has been the greater evil as far as the economic development of underdeveloped countries is concerned: the removal of their economic surplus by foreign capital or its reinvestment by foreign enterprise.

Such reinvestment was normally directed at the export economy, organized around the export of raw or semi-processed agricultural products, minerals, and other primary commodities—and tended to weaken rather than strengthen the internal development linkages of the underdeveloped country thus impeding any possible “investment snowball effect.”

Although the rate of exploitation in certain sectors of third world economies was very high, this was predicated on low wages and very high unemployment and underemployment, which meant that the internal market within the economy was virtually non-existent. The typical underdeveloped country was constituted as “an appendage of the ‘internal market’ of Western capitalism,” blocking the rational allocation or even retention of the economic surplus produced. Rapacious imperialism, moreover, robbed the land of the conditions of its reproduction on a scale exceeding the ecological destruction wrought by the advanced capitalist nations on their own environments—disregarding nature’s “lasting assets” in the pursuit of mere accumulation of capital.

The dialectic of imperialism and underdevelopment was most obvious in the case of major third world resource-exporting countries. Baran closely analyzed the case of VENEZUELA, including the U.S.-supported coup in 1948 after a decade in which the surplus produced from oil revenues had been diverted increasingly to economic and social development. “Under the reign of the present companies-supported dictatorship,” he wrote, “what is spent on economic development is considerably less than what is at its disposal, and the purposes of such spending are determined not by the best interests of the Venezuelan people but by the requirements of foreign capital.”

Those third world countries that sought to break out of this trap through the growth of an oppositional state apparatus aimed at mobilizing the potential surplus for development either on democratic or authoritarian lines were faced with direct or indirect intervention by the United States and other center capitalist states. Thus the United States, acting in the interests of the imperialist bloc frequently intervened militarily (by overt or covert means) to stop development. Moreover, it did so, Baran pointed out, whether the challenges came from democratic movements/states (such as Venezuela, Guatemala, and British Guiana), indigenous popular struggles (such as Kenya, the Philippines, and Indochina), or nationalist-authoritarian governments (such as Iran, Egypt, and Argentina). “Operation Killer” thus reinforced “Operation Strangle” in keeping the underdeveloped countries in their place. The huge waste on military expenditures in underdeveloped countries was part of the imperialist control system, aimed at facilitating comprador regimes and targeting internal populations rather than external dangers.

The tragedy of the situation,” Baran wrote, has the dimensions of a Greek drama. In Hitler’s extermination camps the victims were forced to dig their own graves before being massacred by their Nazi torturers. In the underdeveloped countries of the ‘free world,’ peoples are forced to use a large share of what would enable them to emerge from the present state of squalor and disease to maintain mercenaries whose function it is to provide cannon fodder for their imperialist overlords and to support regimes perpetuating this very state of squalor and disease.

One can only imagine what Baran would write if he were alive today. A key concept here, a concept that can be easily overlooked, is Baran's contention that the US, along with its other G-8 allies, intervenes covertly and, if necessary, militarily, to stop development within what we now call the Global South. Recall Alexander Cockburn's remark that a journalist friend told him that the need to invade Iraq in 2003 acquired greater and greater urgency precisely because the sanctions were no longer effective in hobbling the Iraqi economy. It sounded rather odd at the time, but, given the consequences of the war and occupation, it no longer does.

Or, consider Iran. With oil selling above $60 a barrel, and the prospect of nuclear power, replete with the capacity to enrich its own fuel domestically, thus releasing more of what remains of its reserves for the international market . . . well, something must be done, and, predictably, the bipartisan American political elite is insistent about the importance of stopping the Iranian nuclear program, even though Iran is a long time signatory to the Non-Proliferation Treaty, and that, to date, there is no evidence that it has violated its treaty obligations.

Or, let us look to the north, to the Russian Republic. Upon the breakup of the Soviet Union, the US, by persuading to the Russians to adopt the remorseless economic policy known as shock therapy, turned back the clock, transforming Russia into a state with the social conditions associated with the Global South, with the ultimate goal being the transfer of control of Russia's state controlled resources, especially oil and natural gas, to global transnationals through the intermediary of the oligarchs, who purchased them at fire sale prices when they were privatized. Yeltsin, the man who oversaw this corrupt process, along with the implementation of the increasingly autocratic practices required to pursue it, was, upon his recent death, hailed as a democratic reformer, while his successor, Putin, is perpetually maligned in the US as an incipient authoritarian, even though he never launched a military attack upon his own Parliament, as Yeltsin did, precisely because he has undertaken actions to reestablish Russian sovereignty and economic independence.

And, finally, there is, of course, Venezuela, which I helpfully capitalized in the quote from Bellamy's article. As it became increasingly evident that Chavez was about to assert control over the country's primary resource, oil, and use the proceeds for economic development, the Bush administration did nothing to dissuade coup plotters from going forward, and immediately recognized them as the new government in April 2002 after Chavez had been arrested, as did their friends like the editorial writers at the New York Times. The democratically elected Chavez, it was said, had "brought it on himself", an explanation aphoristically echoed throughout the opinion elite within the US media, but the explanations as to how he had done so rang hollow. By contrast, US intolerance for an alternative development approach in South America, one independent of the neoliberal constraints of US controlled global financial institutions, like the World Bank and International Monetary Fund, was a much more persuasive one, and, predictably, either ignored or deliberately concealed.

As always, we must be careful to avoid the mechanical application of reductionist doctrines to explain the patterns and practices of US imperialism, but Baran's explanation of the reasons for underdevelopment in the Global South forces us to address it in new ways, supplementing the contemporary theorization of cultural, social and economic motivations for it, as subsumed within the concept of military neoliberalism.

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