From International, Vol. 3 No. 1, Spring 1976.
The article was first published in International, Vol. 1 No. 5, 1971. [A]
Scanned and prepared for the Marxist Internet Archive by Paul Flewers.
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
In the course of the past 15 years there has been a major change in the area of investment of imperialist capital in Latin America. Although the sector producing primary materials was the traditionally favoured area, a relatively large share of imperialist capital has been invested in the manufacturing sector in recent years. This change has been so marked that by the end of 1966 investment in manufacturing industries had become the most important sector of private foreign capital in Latin America. At this time the division between different sectors of investment was as follows.
As this development has gone further since then, it is likely that by now 40 to 45 per cent of imperialist investment in Latin America is in the industrial sector and that the 50 per cent mark will be passed in the not too distant future.
The European imperialist powers – especially German imperialism – have undoubtedly played a pioneering role in this process. The big West German monopoly trusts have made a great drive to penetrate Latin America in recent years. These investments have been concentrated almost exclusively in manufacturing industries. American trusts, risking losing important positions (notably their predominance in the Latin American car industry), have been forced to react and follow the trend.
This move by American monopolies nevertheless has deeper roots than a simple reaction to the reappearance of European trusts on the Latin American market. The constant fall in prices of primary materials relative to manufactured products has provoked a relative fall in the rate of profit in numerous primary sectors. The normal reaction of capital confronted with such a fall is to switch investment from these sectors to those where the rate of profit is higher. This is particularly the case with a series of sectors of manufacturing industries, like the chemicals industry, petrochemicals, electronics, pharmaceutics, electrical appliances, etc.
To give, a few examples: in the north-east of Brazil, just in the last few years, the following imperialist firms have established subsidiaries (generally in association with Brazilian capital): General Electric, Dow Chemical, Union Carbide, Pirelli, Philips, Robert Bosch, General Foods, Fives-Lille, Société européenne d’expansion horlogère, etc.
The Capuava petrochemicals complex in Brazil has been created with the participation of not only the World Bank, but the Bank of Worms and the Banque Française du commerce exterieur. Shell of Brazil is also to contribute a plant. Badische Anilin has just taken a 60 per cent share in one of the major Brazilian chemicals companies, Suvinil. The Brazilian chemical group Maniquera has associated with the American trust FMC Corporation and the British trust Laporte Industries Limited. Pechiney is collaborating with the Brazilian ASA to establish an aluminium factory near Recife.
The ‘joint ventures’ formula has been universally extolled as the best way of ‘overcoming nationalistic resistance to foreign capital’. In fact, as expressed by the typical representative of big Brazilian capital, Roberto de Oliveira Compos, national shareholders are ‘extremely interested’ in the possibilities of such collaboration.
Comrade Vitale, in his pamphlet Y despues del Cuatro, Que? (Ediciones Prensa Latinoamericana, Santiago de Chile), quotes an impressive list of joint enterprises created in the last few years in Chile: Rockwell Standard has associated with two Chilean companies for the production of spare parts for cars; General Motors has associated with Automotora del Pacifico; Philips, RCA Victor and Electromet have invested in the Chilean electronics industry, Pfizer and Parke-Davis in pharmaceutics, and so on (p. 27). Vitale quotes an article in the review Punto Final which states that out of the 160 most important Chilean firms, more than half have foreign shareholders.
The immediate result of this change in orientation of imperialist investment has been a growth in the proportion of GNP deriving from industrial production in a whole series of Latin American countries. This is clearly not a uniform movement. It has scarcely touched the Central American countries, Paraguay or Ecuador. In Argentina it was sharply restricted. Nevertheless, in the 14 years from 1953 to 1966, there was a marked change in a whole series of cases.
It is clear that this increase of the proportion of industry in GNP, resulting from the increase in investment of foreign capital in the industrial sector, has been accompanied, not by a reduction, but by an increase in the economic dependence of these countries in relation to imperialism. This increase in dependence can be illustrated by the following phenomena.
All the machinery and a large part of the raw materials necessary to industrialisation have to be imported. Because of this, the dependence of the economy on income from exports (still essentially of primary products) [1] is accentuated, and all new deterioration in the terms of trade provokes an abrupt halt in industrialisation, with all the convulsions that follow from that.
A large part of the real resources which finance foreign investment are mobilised on the spot, thereby draining the capital market and retarding primitive accumulation of ‘national’ capital.
Under the impulse of private foreign capital, industrialisation causes not only a continual outflow of dividends, interest, etc, but also a continual influx of technicians and highly-paid directors, who in their turn accelerate the net outflow of income from these countries.
For example, in 1967/68, six Latin American countries (Brazil, Mexico, Argentina, Colombia, Venezuela and Chile), which are also the most industrialised in the continent, were paying out over 25 per cent per annum of their total income from exports as return on foreign investments and the foreign debts they had contracted (International Monetary Fund, Balance of Payments Yearbook, Vol. 20).
The Brazilian Marxist economist Theotonio Dos Santos publishes a table in his Dependencia económica y Cambio Revolucionario (Editorial Nueva Izquierda, Caracas 1970), from which he concludes that net North American investment in Latin America for the period 1957–64 reached $1,500 million, of which less than $180 million was actually exported from the United States, the rest coming either from undistributed returns (that is, from the surplus value produced by Latin American workers), or from drawing on the local capital market, and banking credits. The sum of $180 million actually going from the US to Latin America during this period should be compared with the sum of $630 million transferred in the same period from Latin America to the US in dividends, interest, etc.
‘Industrialisation’ under the impulse of foreign capital investment does not produce the classical effects of industrialisation experienced in the imperialist countries during the nineteenth century.
There is no cumulative growth, no diffusion of industrial techniques to increasingly large sectors of the economy, no major reduction in unemployment, no increase in autonomy of economic policy, and so on. The reasons for this divergence from the old historical norm are easy to understand. They are all related to the dominant context of the international imperialist economy, to the form of industrialisation, and to the growth in dependence which follows from it.
The industries introduced by foreign monopoly capital are hyper-modern industries employing relatively little labour. [2] There is no radical agrarian revolution, and therefore no large-scale reintegration of the rural population into commercial circuits, no division of labour extended into the countryside, no great expansion of the national market. The rural exodus is accelerated primarily in the form of a marginal urban population which partially replaces the marginal rural population (Theotonio Dos Santos, Dependencia económica y Cambio Revolucionario, pp. 28–29). The landless peasantry is transformed neither into rural proletariat, nor urban proletariat, but into urban lumpen-proletariat.
The considerable drain which imperialist trusts make on the internal capital market in Latin America, and the retarding of the primitive accumulation of ‘national’ capital resulting from this, hold back even more the diffusion of industrial techniques, and the process of industrialisation in breadth and depth which small and middle-sized capitalist enterprises carry out. [3]
The small size of the national market, a correlative of the absence of cumulative economic growth, therefore has a paradoxical result: foreign imperialist trusts established in Latin America in their turn become advocates of a Latin American common market. They aim by this policy, not so much to defend themselves by a common tariff against the influx of merchandise imported from the US, Japan or Western Europe, as to provide an outlet for their industrial production which becomes stifled within restrictive national frontiers as soon as the first factories have been set up. This interest on the part of foreign trusts is shared by ‘national’ capital closely associated with them, especially in the heavy industrial sector.
Traditionally the Latin American ruling class has existed in the form of a bloc, an oligarchy (landowners and comprador bourgeoisie), in alliance with imperialism. Living essentially on exports, these two forces were favourable to free-trade policy and collided with the interests of the so-called ‘national industrial’ bourgeoisie whose interests demanded protection against the influx of cheap imperialist products. The conflict between imperialism in alliance with the oligarchy, and the ‘national’ bourgeoisie, was at the same time a real conflict and a limited one. A real conflict because it was a struggle for the redistribution of surplus value (from social surplus product) produced in Latin America; the ‘national’ bourgeoisie wished to reduce the share of returns going to imperialism, with a view to increasing its own share and thus stimulating a more or less classic industrialisation process. A limited conflict because the social importance of the proletariat was increasing more rapidly so that the national bourgeoisie feared a revolutionary process might overthrow the regime of private property on which its own existence as a class depended. It was therefore necessary for it to lead a movement of reform and not a revolutionary anti-imperialist movement.
In order to succeed in this movement for reform of the classic socio-economic structures of Latin America, the ‘national’ bourgeoisie was prepared to exercise pressure on imperialism with the aid of carefully contained and channelled mass mobilisations. The regimes of Cardenas in Mexico, Perón in Argentina, and Vargas and Quadros in Brazil marked the highest achievement of which the ‘national’ bourgeoisie of Latin America was capable. The end of these regimes marked at the same time the failure and the resignation of this bourgeoisie, their fear of a revolutionary mobilisation of the masses outweighing their desire for an increased share of the profits, especially after they began to lose their grip on the mass movement.
With the economic transformation effected during the last 15 years, these traditional political structures have also been transformed. The objective basis for the alliance of ‘oligarchy and imperialism’ has been reduced. The autonomy of the ‘national’ industrial bourgeoisie disappears in the face of the imperialist manufacturing trusts. Incapable of sustaining a real struggle to compete with these trusts, ‘national’ industrial capital has a tendency to associate with them. The number of joining enterprises is continually on the increase. National legislation, moreover, pushes foreign capital into this course: the case of the car industry is typical in this respect.
So there gradually emerges a new alliance, an association of ‘imperialist capital–national industrial capital’ with an interest in weakening the oligarchic sectors – not only the big landowners and exporters, but even traditional mining capital. The joint interest of this new bloc is that of assuring even a widening of the internal market and of freeing resources and capital to finance industrialisation and the importation of equipment. The ‘industrial capital’ opposition to the ‘oligarchy’ will combine with an opposition to the old oligarchy formed by ‘industrial capital plus imperialist manufacturing trusts’ (or more precisely, ‘industrial capital dominated by imperialist manufacturing trusts’).
Comrade Hugo Blanco is therefore perfectly right when he talks of the appearance of a new oligarchy in place of the old (Rouge, 12 October 1970). However the interlocking of interests of the imperialist manufacturing sector and the ‘national’ bourgeois layers with an interest in industrialisation is such that no global anti-imperialist strategy is conceivable, even for purely tactical reasons, for this new-style ‘national’ bourgeoisie. (A wing of it, moreover, tends to become ‘bureaucratised’, to be transformed into a layer of administrators directing a nationalised sector, with the aim of stimulating simultaneously private accumulation of industrial capital in general and their own private fortune in particular.) The test of such partial anti-imperialist measures, of an effective even if small-scale reduction of the dependence of Latin American countries on imperialism, is in fact no longer to be found in the nationalisation of such a mining enterprise or plantation but in the nationalisation of manufacturing enterprises. [4] Not only is that impossible for the representatives of the ‘new oligarchy’, but the nationalisation measures they carry out are always accompanied by high compensation which allows imperialist capital to do precisely what it requires: to leave the primary materials sectors for manufacturing industry without social convulsions or violent ruptures.
The most intelligent representatives of imperialism have fully understood the political and social implications of this modification of their own interests in Latin America. If European imperialists have played a pioneering role in this field too, the most significant development is the complete recognition of these changes by American imperialism. This is expressed fully in the Rockefeller report. The significance of this recognition lies in the fact that the Rockefeller family, with its great interests concentrated in Latin American oil, once personified the classic attitude of American imperialism towards Latin America, and today represents the changes which are taking place.
One could quote the whole Rockefeller report, which is dominated from beginning to end by an awakened consciousness of the phenomenon we have described. But it will undoubtedly be enough to mention the following passage:
In the same way that the other American republics depend on the United States for their capital goods needs, the US depends on them for a vast market for our manufactured products. And as these countries regard the US as a market for their raw materials, by selling which they can buy capital goods for their own development, the US regards these raw materials as necessary to our industries, on which the employment of so many of our citizens depends.
But these forces of economic interdependence [sic] are changing and must change. A growing two-way flow of trade in industrial products must replace the present exchange of manufactured goods for raw materials. (Quality of Life in the Americas, Text of the Rockefeller Mission Report, Department of State Bulletin, 8 December 1969, our emphasis)
The law discovered by Marx, according to which it is social existence which determines consciousness, has definitely not lost its truth, if one looks at the changes in the consciousness of the American bourgeoisie concerning Latin America. It is necessary to look to this modification of imperialist interests for an explanation of the strange complacence that American imperialism had so far shown in relation to the nationalisations by General Velasco, by General Ovando, and even those being prepared by Salvador Allende. [5] ‘Pay compensation and allow reinvestment in the manufacturing sector of your country: that’s all we ask’ – implying – ‘for in this way our hold on your economy and society will be reinforced and at the same time it will be less strongly contested by the masses.’ Such is the attitude of imperialism to ‘military reformism’. [6]
It would clearly be too simple to reduce the whole problem of the attitude of imperialism to ‘military reformism’ to the single factor of immediate economic interest. There is a social interest or more exactly socio-politico-military interest, which has priority over the material interests of one section or another of the American bourgeoisie, no matter whether it is producing raw materials or manufactured goods. With the victory of the Cuban revolution Latin America entered a period of deep social convulsions. This period has not yet ended and will be prolonged through the next decade at least. The traditional oligarchy is absolutely powerless to crush or effectively to repress the social forces demanding radical change in the continent. It is therefore vital for imperialism to support and foster political forces capable of channelling potential revolutionary energies in a direction which does not lead beyond the capitalist mode of production and therefore beyond the international capitalist system.
It is no exaggeration to say that these considerations are to be found in the very text of Nelson Rockefeller’s report. Here are some of the selections of the honourable governor of the state of New York:
The dynamics of industrialisation and modernisation have stretched the fabric of the social and political structures. The situation is dominated by political and social instability, by pressure which has built up in favour of a radical solution to problems, and an increased tendency towards national independence in relation to the United States ...
The ferment of nihilism and anarchism is spreading throughout the hemisphere ...
Most of the American republics have not yet mobilised the resources necessary for a broad industrialisation of their economies. In differing degrees they need: more and better education, a more effective system for channelling national savings into capital formation and industrial investment, laws which protect the public interest while encouraging the spirit of enterprise, and expanding government services to support industrial growth ...
The dilemma of governments is the following: they know that the cooperation and participation of the United States can contribute greatly to accelerating the realisation of their goals of development, but their feeling of political legitimacy may depend on the degree of independence they are able to maintain in relation to the United States ...
Although it is not yet widely recognised, the military and the Catholic church are also among the forces today agitating for change in the other American republics. This is a new role for them ...
In many Central and South American countries, the army is the most important political grouping in society. The military are symbols of power, authority and sovereignty, as well as the focus of national pride. They have traditionally been considered the ultimate arbitrators of the good of the nation ...
In brief, a new type of military is appearing, and often becoming a major force for constructive social change [!] in the American republics. Motivated by a growing impatience with corruption, inefficiency and stagnating political order, the new military are ready to adapt their authoritarian traditions to the goals of economic and social progress. (Quality of Life in the Americas, pp. 502–05)
Military reformism – as the final stand before ‘Castroite or anarchist subversion’ – is the strategic line which American imperialism appears to have adopted since the Rockefeller report.
Contrary to the optimistic forecasts of the gradualist school, the form of industrialisation typical of Latin America in the past 15 years – industrialisation in strict association with imperialist trusts and under their direction – has brought about not a reduction but an increase in social tensions. The explosive character of the social situation is determined by the growth of unemployment and underemployment; the effects of galloping inflation on the standard of living of the masses – sometimes accompanied by a brutal reduction in real wages, as happened in Argentina and Brazil, and in Bolivia at the time of the Barrientos dictatorship – the distortions of the educational system, which produces equally massive intellectual unemployment [7], the permanent crisis of small and middling enterprises, including small and middle peasants, growing indebtedness in the countryside and so on.
This growth of social tensions implies an increasingly marked radicalisation of the masses, and not only of the vanguard sectors. The once isolated case of the mining proletariat of Bolivia has today found a powerful replica in the proletariat of Córdoba and Rosario; it is now only a question of time before phenomena of the same kind are reproduced in the proletariat of Chile, Brazil and elsewhere.
In these conditions, the attitude of ‘military reformism’ to the mass movement must differ greatly from that of the bonapartist leaders who expressed the interests of the ‘national’ industrial bourgeoisie of former times, such as Cárdenas, Perón and Vargas.
The Cárdenas, Peróns and Vargases had an interest in mobilising the workers, in so far as they were for the most part working for imperialism or for the oligarchy, and where they – the workers – and not the ‘national’ bourgeoisie, would pay the immediate price for this mobilisation. (The ‘national’ bourgeoisie could even hope later on to transform a part of this price, through various economic and financial mechanisms, into capital accumulation for ‘national’ industry.) The Velascos and their eventual imitators in Argentina, Brazil and elsewhere have no interest in bringing about such a mobilisation, for the price would be paid first of all by manufacturing industry, in which the major part of the proletariat now works.
The essential social function of the military reformist regimes is therefore not to mobilise the masses in order to modify the relationship of forces with imperialism. On the contrary, it is to contain the mass movement, in association with imperialism and with its support, offering its reforms and a vaguely anti-imperialist, socialising phraseology. The difference lies in the form of struggle against the ‘dangers of subversion’: repression and terrorism pure and simple in the case of the bourgeois ‘gorillas’; reforms, anti-imperialist demagogy and ‘muted’ repression in the case of military reformism. But ‘muted’ repression can be transformed into bloody repression from one day to the next, as soon as the mass movement goes beyond the narrow limits which the ‘enlightened’ dictatorship has set it.
That doesn’t mean that there are no conflicts of real interests among fractions of the native ruling classes, fractions of imperialism and political forces (especially military tendencies) which make an effort to become more independent of the social forces they are supposed to represent. These conflicts exist, they are important and must be integrated into our general analysis, so that we can understand the vicissitudes of the political, social and economic evolution of each specific Latin American country at a specific moment. We have simply tried to define what appears to us to be the general tendency and meaning of this evolution, without claiming thereby to resolve all the problems.
Nor does this analysis mean that the toiling masses and the revolutionary organisations should be indifferent to the precise forms worn by the exploitation and oppression they suffer. Every legal or semi-legal possibility for pursuing work of propaganda, agitation and organisation of the vanguard must be fully exploited. Every new reduction or suppression of the freedoms of workers’ organisations must be considered as a blow to the movement, and must be vigorously fought.
But it is necessary to avoid all illusions in any kind of return to constitutional regimes of classic bourgeois parliamentary democracy, in any return to an environment in which the mass movement could gradually organise and grow progressively and legally. That corresponds with neither the intentions nor the possibilities of the regimes of military reformism, nor with the interests of the ‘new oligarchy’ which supports them.
Above all, it does not correspond to the relationship of forces. The ruling classes in Latin America are too weak to be able to afford the luxury of a regime which could temporarily assure their stability at the price of a real rise in the standard of living of the masses.
The perspective which flows from this analysis is of a succession of pre-revolutionary and revolutionary convulsions, intersected by temporary defeats and by attempts on the part of the Latin American bourgeoisie to find solutions of the ‘military reformist’ type; but they will be attempts which lead, after a certain time, to new convulsions and new trials of strength. The building of an adequate revolutionary leadership of the proletariat and semi-proletariat of town and countryside is the only way out of the impasse. It is more than ever the central task. The strategy of armed struggle, closely linked and increasingly integrated with the mass movement, in which a growing penetration must be assured: this is the only way to build this revolutionary party in the present historical context of most of the Latin American countries.
A. An editorial note declares: ‘This issue was produced in a limited edition and has long been out of print. Since then the article has been widely and frequently quoted and we have received many requests for photocopies. It still remains one of the key contributions on Latin America and its central theses have been fully confirmed by subsequent studies. We reprint it here so it can receive a wider readership in the English-speaking world.’
1. There is nevertheless an important exception. The exports of manufactured products from Brazil have shown a very rapid increase in the last period. According to the Brazilian Marxist economist Ruy Mauro Marini, these exports rose from an index of 100 in 1962 to 102 in 1963, 152 in 1964, 317 in 1965 and 272 in 1966 (Subdesarrollo y revolución (Siglo Veintiuno Editores SA, México 1969), p. 115).
2. Here are two striking examples. The first concerns Brazil: from 1950 to 1960 manufacturing production increased at an average annual rate of over 9.0 per cent, the urban population at an average annual rate of 6.0 per cent, total population of the country at a rate of 3.1 per cent, and industrial employment at barely 3.0 per cent (Ruy Mauro Marini, Subdesarrollo y revolución, p. 73). That means that total underemployment has actually grown, and that urban unemployment has grown considerably. The second example is from Colombia. From 1951 to 1960 the urban population grew by 2.6 million. In the same period, industrial employment did not even increase by 100,000 (Mario Arrubla, Estudios sobre el subdesarrollo colombiano (Editorial La Oveja Negra, Medellin 1969). André Gunder Frank, in his latest book, Lumpenburguesia, Lumpendesarrollo (Editorial Nueva Izquierda, Caracas 1970), quotes the following net figures: while the share of industrial production in the gross national production of Latin America went from 11 per cent in 1925 to 19 per cent in 1950, 22 per cent in 1960 and 23 per cent in 1967, industrial employment represented only 14 per cent of the total civilian labour force in each of these years (p. 110)!
3. For example, the recent conflict in Ecuador between the Velasco Ibarra dictatorship and the banana exporters who refused to submit to a commercial, banking and monetary policy which would permit the mobilisation of the country’s social surplus production for the purpose of industrialisation.
4. Clearly this does not mean that revolutionaries should remain indifferent to such nationalisations, and that they should not give them critical support against attacks from imperialism or the oligarchy. But it lends much more weight to combined demands for nationalisation without compensation or return sale and under workers’ control. In particular, it should reorient revolutionary propaganda towards the nationalisation of the whole of foreign capital, without priority for that invested in the primary-producing sector.
5. I will allow myself to recall that we predicted this turn in the early 1960s. ‘Among the imperialist bourgeoisie the interests of those who see the industrialisation of the underdeveloped countries as the strengthening of a potential competitor come into conflict with those who see it above all as the emergence of potential clients. Usually these conflicts tend to be settled in favour of the second group, which is that of the big monopolies based mainly on the production of capitalist goods.’ (Marxist Economic Theory, Vol. 2 (Merlin Press, 1968, first published in English in 1962), p. 480)
6. If imperialism and the Chilean bourgeoisie are afraid of Allende’s government, it is not for its economic programme, but because of the dynamics of the mass struggle which it runs the risk of unleashing. The choice with which they are confronted is this. Will those struggles develop further if the Allende period takes its constitutional course, or will they go further still if there is an attempt to prevent Allende from governing?
7. During the period 1950–65, a whole series of Latin American countries experienced an annual growth of 10 per cent or more in the number of university students. This growth was notable in the cases of Venezuela, Chile, Costa Rica, Trinidad, Mexico, Nicaragua and Ecuador. Clearly the absence of outlets in industry for these intellectuals has increased the pressure for a state sector capable of increasing the number of jobs for university graduates.
Last updated on 3 October 2014