Friday, December 29, 2017

Burawoy, Michael. 1984. “The Hidden Abode of Underdevelopment: Labor Process and the State in Zambia.”

Burawoy, Michael. 1984. “The Hidden Abode of Underdevelopment: Labor Process and the State in Zambia.” In Politics and Society and The Politics of Production.

Burawoy begins by explaining his premise: He is writing about what he calls the political apparatuses of industry. By this, he is referring to the ways in which the state regulates the relations between labor and capital (generally intervening on the side of capital). For example, they "enforce compulsory arbitration, outlaw strikes, detain leaders, monitor union organization, [and] impose wage freezes" (p. 124). He states that theories of underdevelopment neglect to consider this. So, that's what he's going to do.

He begins with a lit review, noting that early theories of underdevelopment blamed nations in the Global South for their own poverty due to "inappropriate values, the force of tradition, or the scarcity of capital" (p. 124). Dependency theorists like Andre Gunder Frank reacted against this, blaming colonizing nations for "plundering" their colonies (p. 124).

I must admit that I skipped the rest of the lit review because Burawoy writes about articles I have not read and it was simply too much effort to figure out what he meant by it. But he comes to the point on p. 127-128 that since the labor process is left out of these theories, then so are the struggles over the labor process, what he calls the "politics of production."

After reviewing all of the things that are not the point, Burawoy gets to the point: "I am developing here a notion of the state that focuses on the relationship between production politics and global politics.... We examine closely the functions of the colonial and postcolonial states as they are reflected in the relations between the apparatuses of the state and those of the economy, of industry, or of agriculture..." (p. 129). He names two forms of primitive accumulation the colonial state was after. First, get "direct producers" into the labor force so they work for wages for someone else (industrial capital). Second, merchant capital extracts the surplus from precapitalist production (farming, crafts, etc) and exports it. "Thus, the colonial state was not concerned with production per se but rather with orchestrating relations among modes of production leading to the capitalist mode" (p. 129-130).

Once everything is in place for capitalism, the purpose of the colonial state "disappears" (p. 130). At this point, a new form of the state takes over, marked by the granting of "formal political independence" which he calls a "symbol" of the transition (p. 130).

Burawoy then goes into a long explanation of Marxist theory. The question seems to be - what happens to precapitalist modes of production when capitalism comes along? Burawoy says that they don't go away, they are just "recreated and restructured in accordance with the needs of the dominant capitalist mode of production" (p. 132). The postcolonial state is concerned with the regulation of expanded reproduction, not primitive accumulation.

When primitive accumulation gives way to expanded reproduction, "alternative institutions," and not the colonial state, "take over its regulation" (p. 136). Even if the state has not declared independence yet, the colonial state drops out of the equation, at this point.

Writing of the operation of a Zambian mine under colonialism, Burawoy says, "I call this form of production politics colonial despotism. It is despotic because force prevails over consent. It is colonial because one racial group dominates through political, legal, and economic rights denied to the other" (p. 142).

Burawoy describes various phases in the Zambian mines. Initially, labor is recruited and workers are controlled in a "company state" using a compound system. All of the workers live in a company compound and their lives are controlled by the company both inside and outside of work. Mostly, the colonial state and the company state leave each other alone. In fact, they are working at cross purposes. The colonial state depends on migrant labor, whereas the mine is attempting to proletarianize a stable labor force. Burawoy explains that by proletarianization, he means cutting all ties to rural life. The company state uses force and coercion to control labor.

I find his description of what happened over time in the mine easy to understand, but the point he is making from it more difficult to draw out. He describes how, with independence, the mines go through a process of Zambianization, in which (in theory) senior positions formerly held by whites are given to Zambians. In reality, when this occurred, it occurred quickly and somewhat badly. Whites in senior positions were told to select and train Zambian replacements quickly. They often did not pick very qualified people, and they also did not teach them how to do the entire job. Instead, as the Zambians were given the whites' old jobs, new, even more senior jobs were given to the whites. Many of the responsibilities of the old jobs now held by Zambians were given to the whites in new positions, and the senior jobs Zambians now held were given smaller responsibilities. One mechanism by which whites kept power was by not sufficiently training Zambians nor selecting Zambians with proper qualifications to do the jobs, making it impossible for those Zambians to truly gain power. Burawoy says, "The devaluation of supervisory authority lay in the very process of Zambianization" (p. 150).

The use of force and coercion of colonial despotism went away, and the new Zambianized structure was weaker than the previous company state. Africans were now in unions, but the bureaucratic structure was rearranged so that centers of power were now higher up in the mine's organization, making it harder for unions to find leverage to have their demands met, and requiring them to use more drastic measures, like strikes. Buroway concludes that colonial despotism gave way to a weaker and more bureaucratic administrative apparatus for the mine. Workers gained more control (p. 152).

When faced with a strike, the postcolonial state tried to reassert the bygone colonial mode of production (by claiming that the workers were better disciplined before under the colonial production relations instead of recognizing that workers past were working under a more coercive regime - p. 157). He further concludes that the postcolonial state responded by aligning with the interests of capital more than the colonial state did (p. 158).

That all makes sense, but I don't see how it proves his point that by definition, a colonial state is engaged in primitive accumulation whereas a postcolonial state focuses on expanded reproduction. Nor do I see how he is proving his point that this is a universal phenomenon in all colonies and not just Zambia. Or even not just in British colonies in Africa, or in British colonies in general, since Great Britain tended to use similar methods of governing their colonies, and the colonial state in Zambia was therefore not entirely unique.

He states that "The distinctive function of the colonial state is to organize primitive accumulation so as to maximize the transfer of surplus to the metropolis" (p. 160-161). He continues, saying, "Merchant capital requires the colonized populations to produce for the market (for example, cocoa farmers in Ghana), whereas industrial capital requires proletarianization (for example, Southern Africa). The revenues of the colonial state emerge from and thereby reproduce the forms of primitive accumulation. The economic base of the colonial state is as weak as the surpluses it helps to generate - are inaccessible to it. It is a limited state that cannot afford the costs of extensive infrastructure and urbanization. And so there is a separation of powers between the company state and the colonial state" (p. 161).

Perhaps this is where his argument lies, that by definition, the colonial state is engaged in primitive accumulation, but expanded reproductive is inaccessible to it because it's busy transferring all of its surplus back to the metropolis (the colonizing power) and not keeping any at home with which to urbanize or build the infrastructure needed for expanded reproduction. He adds that the colonial state basically works itself out of a job when "capitalist relations of production become self-reproducing" (p. 161). It is at that moment that a new state, the postcolonial state, arises to serve the new needs of expanded reproduction.

Under the new form of organization, surpluses now transfer back to the metropolis via economic mechanisms instead of political ones (p. 162). With the company state now weaker - and I suppose this is where his analysis from above becomes relevant - the postcolonial state must insert itself into the equation or else the workers themselves will gain more control.

In Burawoy's words, "Under the colonial order the development of primitive accumulation led to the insulation of production apparatuses from state apparatuses and, as a consequence, the separation of industrial struggles from political struggles. Under the constraints of late development, expanded accumulation of capital led to the interpenetration of production apparatuses and state apparatuses and the rapid transformation of industrial struggles into political struggles against the state" (p. 163).

Toward the end, Burawoy points to the one obvious scholar who did connect the production process to colonization: Wallerstein. He finds that Wallerstein's analysis does not explain "how the various structures (labor process, production apparatuses, and state apparatuses) come into being and change over time" (p. 164). Then he gets in a good insult: "Synchronic functionalist teleology is no substitute for diachronic causal analysis" (p. 164). The causal mechanism, says Burawoy, is class struggle.

All in all, while I think I can regurgitate Burawoy's ideas in a simple form on my prelim exam, I don't fully understand what he's saying here, nor am I convinced he's right.

Thursday, December 28, 2017

Babb, Sarah: “The IMF in Sociological Perspective: A Tale of Organizational Slippage”

Babb, Sarah. 2003. “The IMF in Sociological Perspective: A Tale of Organizational Slippage.” Studies in Comparative International Development. 38(2):3-27.

Babb disagrees with Stiglitz's analysis of "what went wrong" with the IMF. He traces the problem to the early 1980s. She says it started long before that.

Babb uses organizational sociology to analyze the IMF as an organization. She begins with the IMF's founding and its vague mission. It's common for a multilateral, international organization such as this to have a vague mission because it's difficult to get so many different parties to agree to something more specific. She also mentions that it's difficult to enforce international law, so countries might be hesitate to commit to something specific that cannot be enforced.

In this case, Keynes was on the British side arguing for something vastly different (Keynesian, in fact) from what the Americans wanted. While one might imagine that Keynes was arguing for his own brand of economics (as he was) simply because that's what he believed in, Babb points out that the U.S. and Great Britain had different interests, and each side was arguing for their own interests. The U.S. wanted "conditionality" and Great Britain did not. Conditionality refers to imposing conditions on nations receiving IMF loans. The resulting agreement did not mention conditionality.

Yet, conditionality became a part of the IMF's loans early on in its history. Babb looks to three possible sources of what shaped the organization given its weak and vague mission: coercive powerful outside forces, mimicking similar organizations ("mimetic isomorphism"), and the norms of the staff.

The powerful outside force she considers is the U.S. Treasury. This is an example of "asymmetric dependence." The original Bretton Woods agreement stated that all nations would peg their currencies to the dollar, and the dollar could be exchanged for gold. This eventually fell apart decades later, but the dollar continued to be important. Plus the U.S. had the most votes in the Executive Board and the only effective veto. Given that the U.S. and specifically its Treasury held more power over the IMF than the other way around, the U.S. and specifically the U.S. Treasury were an influential force in guiding IMF policy.

As for mimetic isomorphism, it was difficult for the IMF to pattern itself after similar organizations when no similar organizations existed. The IMF was simply the only IMF in the world, in all of history. However, there was a precedent of banking institutions dating back to the 19th century under the gold standard. Back then, when a nation ran into a balance of payments crisis, it was common for other nations to lend them money to resolve the crisis. Those loans came with conditions, setting a precedent for conditionality.

The last point is patterning the organization after the norms of the staff. Indeed, the leadership often deferred to the views of the staff, both because the staff would hand them already finished agreements that they had to vote yes or no on, and sending an agreement back to the drawing board would slow things down. Given that loans were often given in a crisis situation and timeliness was important, this was not ideal. Also, the staff often had expertise that the Executive Board often did not. So the Executive Board gave the staff quite a bit of freedom.

The staff were mostly economists, and they followed the norms of their profession. But that's not all. The reason why the IMF's policy resembles gold standard-era pre-Keynesian economics is because it was gold standard-era pre-Keynesian economists who staffed the IMF. At the time, the Keynesian model was new and unfamiliar. The old way had decades, if not centuries of precedent. What's more, when Keynesian economic won the day in the Great Depression, economists who still bought into pre-Keynesian economics more or less hid out in central banks. When the IMF was created, they gravitated there.

During the IMF's formative years, it was run by these economists. They basically hid out in the IMF until the rest of the world came around to their way of thinking via the Washington Consensus. Babb writes, "Indeed, we might even say that the IMF became a think tank within which the old-fashioned, deflationary thinking of the gold standard was preserved, until it was resuscitated in the 1980s as a tenet of the Washington Consensus" (p. 22).

This wouldn't be quite so problematic if pre-Keynesian Gold Standard economics and the neoliberal economics that came after it were correct and Keynes was wrong but, alas, it is the other way around.

Wednesday, December 27, 2017

Stiglitz, Joseph: Globalization and its Discontents.

Stiglitz introduces his book as an analysis of "what went wrong" with the Bretton Woods institutions, the IMF and World Bank. Quite frankly, it should be titled "All the reasons I hate the IMF." Stiglitz describes the World Bank and IMF's founding and then tells of a few key changes between then and now. Whereas they were founded with the understanding that the nations of the world must work together for global economic stability, today the U.S. has the only effective veto, giving it the power to call the shots by itself. Whereas the IMF was founded on Keynesian principles with the goal of stimulating demand when the market failed to do so on its own, today it enforces structural adjustment policies that are contractionary. Stiglitz says Keynes would be rolling over in his grave.

He traces the biggest shift to the Reagan and Thatcher era of the 1980s. During this time, the IMF was used as the vehicle to force Washington Consensus policies on poor nations who needed loans and grants. The IMF gave them an offer they could not refuse. It was in this time, the early 1980s, the two institutions, previously distinct, became more intertwined. Stiglitz blames the mistakes of the World Bank and IMF on making decisions based on ideology and politics (often using bad economics that are thinly veiled give aways to special interests) instead of based on good economics.

Stiglitz identifies one problem as the domination of both institutions by the wealthiest nations on earth, and generally by the business and finance sectors within those nations. While the institutions are making decisions that affect the entire world, and greatly affect the poorest nations, and the poorest people within those nations, they are dominated by interests of the world's wealthiest people who may have no understanding at all of poor people or poor nations. One example of how this plays out is that the poorest nations are forced to get rid of trade barriers and subsidies, but the wealthiest nations retain agricultural subsidies. He calls it "taxation without representation" and "global governance without global government" - meaning that a few powerful institutions run by elites make the rules that affect the entire world, but the rest of the world has little to no control over those institutions.

He opposes broad, general protectionist policies but supports developing nations protecting certain fledgling industries until they are globally competitive. When markets are opened to competition from abroad, these industries cannot compete - and at the same time, the nation lacks a social safety net to support those who lose their jobs as a result.

Stiglitz distinguishes between the missions and the characters of the World Bank and the IMF. The former is to eliminate poverty; the latter to promote global economic stability. He dumps on the IMF a lot, basically framing it as the real problem compared to the comparatively innocent World Bank. (Stiglitz worked at the World Bank so I am suspicious about his biases.) One good point he makes is that the World Bank has staff living in the nations around the world where the World Bank works, whereas the IMF generally has a single person in each nation living a comfortable existence in the capital, never coming face to face with the suffering the IMF's policies inflict.

A major critique he makes of the IMF is their confusion of ends with means. That is, when it believes that certain policies (such as a liberalized financial market) are crucial to economic success, it sees those policies as goals in and of themselves. Even when a country is doing OK as it is - Stiglitz gives the example of Ethiopia - and does not need the IMF's "fix" (and the IMF's "fix" will actually hurt it) - the IMF still pushes for its preferred policies as if they are an end in themselves.

To me, it's like if someone is already thin but you believe that the Atkins diet helps you lose weight, this would be like telling the already thin person they must go on the Atkins diet, as if the diet itself is the goal and not the health, fitness, and weight loss goals a person may have.

Works Cited:
Stiglitz, Joseph. 2002. Globalization and its Discontents. New York: W. W. Norton and Co.

Tuesday, December 26, 2017

Eckstein: "Dollarization and Its Discontents: Remittances and the Remaking of Cuba in the Post-Soviet Era."

Eckstein, Susan. 2004. "Dollarization and Its Discontents: Remittances and the Remaking of Cuba in the Post-Soviet Era." Comparative Politics 36(3):313-30.

Eckstein begins by pointing to remittances as a source of foreign exchange for receiving nations. She distinguishes between the effect of remittances on individuals and their effect on receiving states. It's possible for remittances to benefit individuals but not states, or to help further the goals of the individuals but not the states. Second, remittances are not a substitute for other kinds of income to individuals who receive them. Third, remittances may have unintended consequences for receiving individuals. "Effects hinge on the social con- text in which remittances become embedded" (p. 314). It's interesting that she refers to "individuals" whereas Taylor refers to households.

Unlike Taylor, Eckstein focuses on the role of the state (and the impacts of remittances on the state). For example, she notes that refugees send back less in remittances than economic migrants perhaps because refugees oppose the government they fled. She then introduces the specific case she is considering: Cuba. "Cuba should, in principle, represent a most likely case of a state able to regulate remittance inflows and the uses to which they are put" (p. 314).

Eckstein says, "After the cold war Cuba, along with other remaining Communist regimes, had no option but to reintegrate into the global market economy for trade and financing, irrespective of any efforts to regulate market features domestically" (p. 314-315).

Eckstein seems to be most concerned with how states accomplish their goals. She points out that even a strong state may not be able to control black market activity. So she's looking at how a state like Cuba might be able to control what its citizens do in order to accomplish the state's own goals. She adds that the state might not even have clear goals, or even if the top of the government does have clear goals, different agencies and institutions may have competing goals and they might undermine each other.

She writes: "Regimes often face trade-offs in setting priorities between consumption and investment, the long and short terms, and political administrative and technical economic concerns. or such reasons, official remittance-linked policies may be grounded in institutional political and not merely economic rationality, with these two types of rationality possibly colliding. Policies designed to bring remittance dollars to the government, to address fiscal and other economic exigencies, for example, may have the unintended effect of eroding state capacity to maintain law and order, if they induce the populace to seek dollars illicitly or for purposes not legally permitted" (p. 315).

Following the paper's introduction, Eckstein provides background information about the Special Period in a more detailed way than before. She brings up the impact of the U.S. embargo and adds that world sugar prices declined and that hurt Cuba as well since sugar is an important export for the island. Sugar production also declined. Cuba received little in foreign aid, investment, or bank loans. However, tourism grew (this was a specific strategy of the government's to gain income and presumably foreign exchange too). But given everything else, remittances were an extremely important part of the economy. Eckstein writes, "The state and ordinary Cubans each had reasons for courting remittances. Analytically separable, their efforts became concretely inter- meshed, sometimes mutually reinforcing, at other times not" (p. 316).

Then she gets into the meat of her analysis. During the Special Period, Cubans could obtain some of what they needed with their ration books, but it was not enough. The black market flourished, but black market prices were unaffordable compared to income (she provides examples of chicken or cheese costing a third or a fourth of someone's monthly salary). Cubans had free education and health care and inexpensive shelter, and the food one got in rations was inexpensive, so low salaries in pesos were manageable until one needed to turn to the black market for food and other necessities.

Officially, pesos and dollars were worth equal value. On the streets, dollars were worth 130 times more than pesos. Even a small amount of dollars could go a long way in purchasing black market goods. Remittances were the way to go. Cubans received remittances from family members in the U.S. in ways that defied both U.S. and Cuban law. U.S. laws were cumbersome and limited the amount one could send, so many avoided these limitations by sending money through informal channels. For example, some relied on mulas, middlemen who carried goods and money to Cuba. (Incidentally, when I arrived in Cuba, an entire set of tires were on the baggage carousel. They were somebody's checked baggage.)

"Desperate for hard currency, the Cuban government introduced measures to induce remittance-sending in ways designed to channel money to its treasury" (p. 319-320). However, the state worried that dollars would lead to individualism and materialism. Realizing that the remittances were happening anyway, the state responded to, essentially, make the best of it. The first change the state made, in 1993, was legalizing possession of dollars. Then they allowed Cubans to shop at dollar stores that were previously reserved for foreigners. Dollar stores sold goods at inflated prices, bringing more needed hard currency to the state. Third, they set up official exchange booths that exchanged dollars at the street exchange rate to "soak up dollars not spent at dollar stores" (p. 320).

With these measures in place, the unofficial exchange rate dropped down to 21 pesos to the dollar (down from 130). This was nowhere near the official rate of 1:1. This gave a better exchange rate to those with dollars than the state would have liked, but the alternative would have been people continuing to rely on the black market and the state getting no dollars at all.

Eckstein continues, listing several more measures the state took with regard to remittances to attempt to achieve its own goals. They had previously portrayed emigres negatively and had limited how much Cubans could bond with their overseas relatives. Now they had to change their tune, because they needed the emigres to visit Cuba and bring dollars with them. This was a political risk, as the emigres would bring with them negative opinions about the Castro regime that they would share with their relatives on the island. Cuba even allowed more emigration to increase the remittance-sending base living overseas.

Compared to other nations, Cuban emigres were different. Those who left decades before for political reasons sent less money than Dominicans or Salvadorians (the two nations Eckstein uses for comparison) even though they were wealthier. Cubans also had fewer relatives abroad who could send remittances. Those who emigrated after 1990 were more similar to remittance-sending relatives from other nations.

She also mentions racial disparities. Whites were more likely to oppose the Castro regime and leave, compared to Blacks. Therefore, whites in Cuba are more likely to have relatives abroad who can send them money (assuming their relatives can get over their hatred of the Castro regime and actually send it... which many did not). Remittance receiving families were also disproportionately urban. This increased inequality in Cuba, which runs counter to the government's goal of equality. Eckstein notes that in other nations, remittances counter inequality; in Cuba, it widens it.

Remittances also reduce adherence to revolutionary values. In addition to promoting materialism, it also led to corruption, rent-seeking, and theft.

On the other hand, remittances provided much needed hard currency, and it alleviated political pressure by taking the edge off of the deprivation Cubans faced in the early 1990s. But the benefits to the state are limited. Cuba imported less in 1999 than it did before the start of the Special Period, even with all of the dollars from remittances it received. And its debt increased during that time as well. The influx of dollars also eroded state control over the economy, for example, by fueling the black market. And it eroded the value of work, since jobs paid in pesos the equivalent $10-$20/mo in dollars. It encouraged people to skip out on their peso-earning job to engage in sideline activities that brought in dollars. (I bought a handmade dress in Cuba in 2010 for $15, and I was told the price was equivalent to about half a month's income.)

The influx of dollars brought a domestic brain drain as highly skilled professionals who earned only pesos turned to low skilled work (such as working in tourism and even prostitution) that gave them access to dollars.

Eckstein's greater point, that remittances may bring benefits to the families who receive them while simultaneously working against the goals of the state, is a good one. However, Cuba is such a strange and unique case compared to other nations that I find it doubtful than the specific findings from Cuba are broadly applicable to most other nations that receive remittances.

Taylor: "Remittances, Savings, and Development in Migrant-Sending Areas."

Taylor, J Edward. 2004. "Remittances, Savings, and Development in Migrant-Sending Areas." Pp. 157-73 in International Migration: Prospects and Policies in a Global Market, edited by Douglas S Massey and J. Edward Taylor.

Taylor begins by stating that other scholars are essentially incorrect in referring to remittances as a negative for local development. He says this is because they underestimate the amount of remittances (in part because it's hard to estimate the value of in-kind remittances) and don't consider how remittances boost the economy in the area that receives them, or the multiplier effect they have in the local economy in the receiving area. Taylor believes that remittances are helpful because they have an "equalizing effect" in receiving areas, since they increase the incomes of households at the bottom to middle of the economy, and can even help those households achieve economic mobility (p. 157).

Taylor then begins to attempt to quantify remittances. He makes a few significant points. First, remittances are not equally distributed around the world; some countries and areas within countries receive more of them. In some areas, remittances are greater than a quarter of the value of export revenues. Globally, they are greater than the value of official development assistance. Studies also suggest that the value of remittances is a significant percent of household income in receiving families. In short, the value of remittances is not at all trivial.

In the next section, Taylor refers to the "new economics of labor migration" (NELM). According to NELM, "migration is hypothesized to be partly an effort by households to overcome market failures that constrain local production" (p. 160). For example, if an area does not have a good insurance market, remittances provide a form of insurance against a loss of farm income because the remittance income will be there even if the crops are lost or prices crash so that the crops don't bring in the needed income.

Taylor says this is a different way to view the connection between migration and development compared to neo-classical economics and dependency theory. A major difference is that this approach connects the reasons for migration with the effects of migration to sending areas. It leads to new types of research because researchers now don't just ask about remittance income and migration, they also ask about all aspects of farm income and production. This allows for new forms of analysis compared to before.

I find it interesting that so much of the literature Taylor reviews is framed as a simple matter of markets (i.e. migration is due to "imperfections in capital markets" on p. 161), and there is no mention of social and political factors. I also find it difficult to understand all of the economics in the lit review, and suspect much of it to be bullshit. (That goes along with my general suspicion that a lot of what economists say is bullshit.)

One point that makes sense is that remittances might increase agricultural productivity by allowing receiving families to invest in their farms in ways that increase productivity. However, remittances may also be a way to reduce risk by spreading it out over diverse activities. Taylor says it could be a combination of the two, and I believe it is. Even simply being able to purchase inputs outright instead of on credit reduces the need to pay interest; or being able to purchase land instead of leasing it increases profits. That is, in the former case, to the extent that the purchased inputs actually help instead of hurting the farm, which is something I have my doubts about. (For example, see Glenn Stone's work on farming and deskilling in India.)

In citing Adams (1991), Taylor notes that policy can play a role, because policies that depress prices for agricultural output discourages investment. That is, if you aren't even going to make much money for growing something, why would you invest money into growing it (or growing more of it)?

Taylor finally sheds light on why some scholars think remittances are bad. In the first year of migration in one study, "a $1 change in remittances produces a less-than-$1 change in total incomes of remittance-receiving households" (p. 161). I can only imagine this is because the labor of the family member who migrates was worth more at home on the farm than the amount they can send in remittances. If that's not the case, then I totally don't understand how the heck this can be possible. In any case, measured 6 years later, every $! sent in remittances produces more than $1 in increased household income. Taylor later makes clear that this is because the remittance income allows the family to invest in a way that increases their ability to make money (for example, purchasing land or agricultural inputs, purchasing livestock, or buying inputs outright instead of on credit).

His point is that there is variation "across time and settings" in the effects of remittance income and "the positive effects clearly depend on the magnitude of migrant remittances and the profitability of investing in new production activities or techniques" (p. 162). He notes that this can be limited in three ways: environmental and market constraints, or policies that disadvantage agriculture. In other words, if your land is infertile in the first place, you won't get much bang for your buck by investing in a tractor or hybrid seeds, etc. Likewise, if the prices you'd get for what you produce are low either (perhaps because of policies like free trade agreements), you won't get much economic benefit by investing in agriculture. In any case, Taylor thinks this variation could account for why some studies found remittances are more harmful than beneficial.

In the next section (p. 162), Taylor states that treating each household as its own isolated economic unit is wrong because it ignores the interaction between households. Honestly, this is flipping obvious and any economist who misses it should have his or her degree revoked. When one household in a village receive money from abroad, they spend it locally, and that puts money into the hands of other families in the area. Or foreign corporations as the case may be if they are buying seeds from Monsanto or DuPont. But some of the money goes to the local agro-input dealer at least. This is freaking economics 101. The money multiplies in the local community. The agro-input dealer takes the extra income and uses it to buy whatever he or she needs too - shoes, school fees, food, medical care, etc. And whoever sells them the shoes or food, etc, turns around and spends the money to meet their own needs, and so on. Presumably the entire value of the money is not re-spent each time, because some of it may be saved. Additionally, some of it is going to distant corporations and not to local families. (For example, if a family purchases DuPont seeds at the agro-input dealer, part of the value of their purchase goes back to DuPont. But the part retained as profit stays in the community, as do the part that pays wages of the workers in the store.) So thank you Taylor for explaining elementary economics to a lot of people who should have known better.

Jumping off of this point, Taylor says that it's crucial to examine household expenditures in remittance-receiving households because that tells you how the remittances provide indirect benefits to the local economy through the multiplier effect.

Later, Taylor provides a clearer explanation based on a study in Michoacan, Mexico: "Remittances from migrants stimulated non-remittance income in the Michoacan-survey households in three ways. First, they enabled migrant households to purchase inputs (i.eg., fertilizer) that increased income in the short run. Second, they provided migrant-sending households with funds to invest in income-producing assets - particularly livestock - which created new sources of local income in the long run. Third, they created expenditure linkages in the local economy that transmitted the positive effects of remittances to other households - including those that did not have migrants in the United States" (p. 166). As a result, every $1 received resulted in $1.85 additional income in the receiving household. Within the village as a whole, every $1 in remittances increased village income by $1.60 (p. 167).

I have to admit, this article is doing a lot to reinforce my general notion that economists are idiots. Taylor's essentially explaining all of this, all of which makes perfect logical sense, because it flies in the face of what economists had accepted as truth about remittances.

Sunday, December 24, 2017

Friedmann, John. 1986. "The World City Hypothesis."

Friedmann, John. 1986. "The World City Hypothesis." Development and Change 17:69-83.

This was written in 1986, well before the other books and articles on world cities I've read. It's also written before the rise of the Internet. However, since one of the seminal works on world cities was written by Saskia Sassen in 1991, I suppose that was before the rise of the Internet too.

Friedmann traces his ideas back to works by Harvey and Castells in the 1970s linking "city forming processes to the larger historical movement of industrial capitalism" (p. 69). In the early 1980s, scholars began linking the study of cities to the study of globalization. This is Friedmann's jumping off point. He states, "My purpose in this introduction is to state, as succinctly as 1 can, the main theses that link urbanization processes to global economic forces" (p. 69).

Friedmann provides seven theses:
  1. "The form and extent of a city’s integration with the world economy, and the functions assigned to the city in the new spatial division of labour, will be decisive for any structural changes occurring within it." (p. 70)
  2. "Key cities throughout the world are used by global capital as ‘basing points’ in the spatial organization and articulation of production and markets. The resulting linkages make it possible to arrange world cities into a complex spatial hierarchy." (p. 71) Interestingly, he states that all but two world cities are in core countries (the exceptions being Sao Paolo and Singapore). More recent literature about world cities names a large number of cities in the Global South (periphery) as world cities. He suggests three sub-systems of world cities: an American one centered around New York, Chicago, and LA; an Asian one centered around Tokyo and Singapore; and a Western European one. Notably, when he was writing the USSR was still intact, Germany was divided, and China's economy had not yet taken off.
  3. "The global control functions of world cities are directly reflected in the structure and dynamics of their production sectors and employment" (p. 73). These cities are centers of finance, high level business services like advertising and accounting, and global transport and communications, as well as homes to major corporate headquarters. These cities have a "dichotomized" labor force, with highly paid professionals and many more low skilled workers.
  4. "World cities are major sites for the concentration and accumulation of international capital" (p. 73)."
  5. "World cities are points of destination for large numbers of both domestic and/or international migrants" (p. 75).
  6. "World city formation brings into focus the major contradictions of industrial capitalism - among them spatial and class polarization" (p. 76).
  7. " World city growth generates social costs at rates that tend to exceed the fiscal capacity of the state" (p. 77).

Goldman, Michael, "Speculative Urbanism and the Making of the Next World City."

Goldman, Michael. ‘Speculative Urbanism and the Making of the Next World City.’ International Journal of Urban and Regional Research 35.3 (2011): 555–581.

Goldman begins by alluding to the work of others: "Saskia Sassen, Peter Taylor and the global-city theorists emphasize how global cities, as the home for the rule-makers of global capitalism, are unique spatial configurations generating socio-spatial dynamics geared toward extending and reproducing the power and authority of transnational elite social and corporate networks" (p. 556). He will be adding to their work about global cities, but focusing on the impact on rural communities as cities expand into their formerly rural peripheries.

As he describes the geographic expansion of Bangalore in recent years, Goldman declares, "Land speculation and active dispossession inside and surrounding the city of Bangalore is the main business of its government today" (p. 557). He provides a brief history of how Bangalore became an IT hub in the 1990s, and then states:

"Ironically, it is only since the mid-1990s, through the actual process of making Bangalore into a world city, that Bangalore developed ‘mega-city problems’ rife with rapidly escalating social inequality, mass displacement and dispossession, proliferation of slum settlements, increased caste- and religious group-based violence and tensions, and epidemic public health crises due to severe water supply and sewage problems (in working-class neighborhoods). Roads are extremely congested and vehicles generate such high levels of pollution that many motorcyclists travel around with bloodshot eyes and respiratory problems." (p. 559)

In the 1990s, cities used privatization to improve or develop infrastructure. To do this, they worked closely with international financial institutions (IFIs). One example is water privatization. Instead of treating and distributing water through a public utility, a private company like Bechtel would do the job for profit. Then they decided to privatize more than just water. Most of Bangalore's city agencies are those "shaped and financed" by IFIs like the WorldBank. This reduces democracy as parastatals "depend largely upon external and project financing, and have little or no local oversight, being directly accountable only to the lenders and to the Karnataka chief minister, a party-elected official" (p. 562).

With so much at stake for wealthy private interests, local government is no longer a simple local matter. Goldman gives an example of a political position in a small village now subsumed by the growing city. Before, one leader represented 300 households of his or her neighbors. Now, the local office represents 30,000 people, and it's essentially sold to the highest bidder. Before the issues at hand effected the elected official's farming neighbors; now it affects global capital. Goldman writes: "Cumulatively, one can see a shift in the institutions of governance... For the first time, however, these world-city projects are redefining the art of government, with state–citizen relations becoming shaped by the culture of neoliberal speculation" (p. 564).

The next section provides examples of what he described above: "The international airport, which opened in May 2008, was built and is being run by a consortium led by the Unique Zurich Airport firm and Siemens, receiving highly subsidized land from the government 35 kms north of the city, extensive enough to build 2.5 Heathrow (London) airports. The IT corridor on the city’s eastern periphery is yet to be fully built, on land not yet fully acquired; planned to be 1.5 times the size of Paris, it will be subsidized by the government with the help of a Singapore-based firm. Although intended to have its own local government, it would tap into Greater Bangalore’s refinanced power and water grids." (p. 564-565).

He goes on, describing: "Following the model of regionalized expansion, the Bangalore–Mysore Infrastructure Corridor (BMIC) intends to redirect development away from Bangalore in order to alleviate urban density in the interior and expand the overall space of Greater Bangalore to include new and old townships, small cities, village clusters and agricultural land. Operated by a US-based investor, NICE (Nandi Infrastructure Corridor Enterprises, aka Bangalore–Mysore Infrastructure Corridor — BMIC), this project starts with the construction of a six-lane privately owned toll expressway between Bangalore and Karnataka’s second-largest city, Mysore. The 130 km-long expressway will become a catalyst for regional urbanization, with NICE building five new private townships and multiple industrial parks on agricultural, village and forested land." (p. 565)

The latter project will involve deforestation on a large scale, and the government is leasing the land at less than $1 an acre, making it effectively a give-away to the corporation that hopes to profit from the completed project. Goldman cynically adds that the project will include an "ecotourism center or heritage center, preserving in a museum setting the rural way of life that the thoroughfare and malls may pave over" (p. 565). The toll road will revert to government ownership after a 30 year lease, but the newly built townships along it will be privately owned and managed.

Goldman then makes the point that farmers are left with little choice but to sell their land at depressed prices to the government so that global capital can make a fortune off of it. Farmers cannot sell agricultural land for non-agricultural purposes. Instead, they are selling to the state government, which has a development board that acquires land, builds basic infrastructure upon it, and then sells or leases it to corporations. Farmers receive the depressed price that rural land is worth, not the much higher price that land in a world city is worth. Goldman explains that the rationale for paying low prices to farmers is that they are uncompetitive. But Goldman contends that their failures are not because they are bad at farming, or because farming itself is bad, but because of post-1991 liberalization that ended agricultural subsidies. "In other words," he concludes, "world-city investments depend upon the widespread disinvestment from other local economies, such as the diverse rural and the urban informal" (p. 566). In this case, the government shifted money away from agricultural subsidies and policies intended to keep a large percentage of the population employed on the land, producing enough food for the nation, to those intended to develop world cities.

For farmers who don't want to sell their land - or sell for the low prices offered - as the IT development grows around them, it makes farming increasingly difficult or impossible. For example, the lake they once relied on for irrigation is now polluted with "untreated toxic industrial and household waste" (p. 568). Some of the displaced will not be compensated at all, either because they lack legal titles to their land or because they are landless (farmworkers or tradespeople). Goldman writes:

"Land tenure relations in Karnataka reflect deeply historical, localized, multi-layered and intergenerational sets of informal agreements that have made it possible for laborers, village denizens and small producers to live (many in the most fragile way) and absentee landowners to prosper (Benjamin, 2000b; Benjamin et al., 2007). Reducing rural life to two cut-and-dried categories of landowners and non-owners, with only the former worthy of compensation arising from land acquisition for big urban projects, is to further undermine the social and cultural complexity and livelihood strategies of the rural" (p. 568).

Goldman asks readers to imagine what would happen if the displaced were offered a fair economic value based on the value their land is worth in terms of the profits that will be generated by the grand new development projects. That would spread out the increase in wealth from the new development instead of concentrating it in a few hands as is being done.

As an example of the injustice, Goldman points out that the new ten-lane highway will be serving a city in which the majority of the population does not own a vehicle other than maybe a scooter. The new highway will serve the elite few who own cars, not everyone else. And many of the new jobs coming to Bangalore, such as call center jobs, do not actually pay enough to support a family. Put another way: if there is any sort of trickle down, it's really just a trickle.

Dispossessing the poor to make way for corporations and elites is referred to as freeing up "dead capital." Goldman lays the blame at the feet of the politicians, saying that the land deals provide so much money that all three major political parties are now dependent on it. It's the government that is swindling farmers out of their land.

Goldman then turns to a discussion of the IT sector, asking if it truly has the capacity to fuel never-ending growth in Bangalore. There was a hope that the IT companies could offer their considerable services to local government. However, they charge prices that are low compared to the U.S. (which is why they attract so much business from overseas) but high compared to the local market. The local government cannot afford them. IT's main investment in India is real estate.

The IT firms lease space in "software parks" where they receive tax exempt status. They retain their tax exemption because they threaten to move if the government taxes them. In the language of world-city developers, they are converting "underutilized" space to new, better, modern uses. However, it's farmers on the periphery and religious and ethnic minorities (Tamils and Muslims) in the city who are being displaced or further marginalized. "The social effects of world-city planning in this case exacerbate already tense social divisions as public space and lands shrink in size, use and access (p. 574)."

A word Goldman uses often is speculation. Building such large scale projects is essentially speculation. They are gambling that corporations will come to Bangalore to do business and the large scale projects they've built will be profitable.

"World-city projects not only represent large-scale place-altering capital infusions (i.e. billions of dollars from Dubai, Singapore and the IFIs), they do more than merely facilitate the restructuring of governance institutions for improved access to public goods and services for international capital (i.e. privatization of township governance, special citizenship rights and privileged rules for SEZs). They also trigger new political rationalities of government and technologies of rule that emerge in situ as bureaucrats and political officials, brokering jackpot deals for external clients, generate their own rent-seeking mechanisms of world-city wealth redistribution. These politicians also have to manage the desires of the IFIs that are, paradoxically, pushing for national legislation to repeal the archaic land-acquisition laws which allow for this eminent domain strategy, and for government agencies to possibly produce massive ‘land banks’ for these world-city projects." (p. 575).

He brings up Harvey's term "Accumulation by (mass) dispossession" and also notes that what happens in Bangalore is increasingly connected to other global cities, such that "what happens in Shanghai, Singapore and Dubai matters to small producers and workers in Karnataka" (p. 576).

He concludes with a moving paragraph about the injustice of what is taking place: "During these tumultuous times, the state’s suspension of basic human and civil rights seems to be permanent (Agamben, 2005). In its determination to catch up with Shanghai and cash in on its own world city, the Indian state aggressively uses the rules of eminent domain to acquire land from the few who own land and the many who thrive off the land, and place them on the new multi-lane highway to elsewhere. Many have been reduced to ‘bare life’, no longer covered by legal or civil rights that once guaranteed them some access to the city and its resources, and yet are drowning under new legal reforms and the mobilization of old colonial land laws; these state acts have effectively stripped the majority of their rights to the public sphere, the countryside and the city. Indeed, many Bangaloreans are being actively dispossessed as part of the effort to build up a world city based on a speculative imaginary for world-city investors who may just stay away, and for world-city professionals who have yet to come" (p. 577).

Saskia Sassen: Cities in a World Economy

Sassen examines, why, with modern information technology, corporations still need cities as central hubs. Some once theorized that information technology would make cities obsolete once everyone could work from home on their computers. As IT has not made cities obsolete, Sassen asks how modern IT has changed the economic function of cities.

Sassen cites capital mobility as one of the major factors shaping today's cities. With capital mobility, manufacturing has moved to new places, and export processing centers must be created to get the goods from where they are produced to where they will be consumed. This in turn drives a need for new sectors to support it, such as IT, legal, and accounting services. Not that legal or accounting services are new, but new needs now exist to navigate international trade policy and the legal and banking systems of multiple countries.

Her main thesis is: "Since the 1980s, major transformations in the composition of the world economy, including the sharp growth of specialized services for firms and finance, have renewed the importance of major cities as sites for producing strategic global inputs. In the current phase of the world economy, it is precisely the combination of the global dispersal of factories, offices and service outlets, and global information integration - under conditions of continued concentration of economic ownership and control - that has contributed to a strategic role for certain major cities. These I call global cities." - p. 7.

She adds that global cities are:
  1. "Command points in the organization of the world economy"
  2. "Key locations and marketplaces for the leading industries of the current period - finance and specialized services for firms"
  3. "Major sites of production, including the production of innovations, for these industries." (p. 7)

Sassen argues that once we study these global cities, we can see that in some cases, a global city becomes richer even as the rest of the nation becomes poorer. Therefore, studying cities can bring to light dynamics that we miss if we study nation-states as a whole. She also points to how this leads to inequality within cities, as the rise of highly paid professional jobs bring with them demand for low paid unskilled jobs (such as delivery trucks).

The existence of international markets link these global cities together. Real estate investors can buy and sell anywhere in the world, so suddenly the price of real estate in New York is more tied to the prices of real estate in Frankfurt and London than it is to the price of real estate in the greater metro New York area (p. 10).

Works Cited:
Sassen, Saskia. 2006. Cities in a World Economy. Pine Forge Press. 3rd edition.

Saturday, December 23, 2017

Mike Davis, Planet of Slums.

Davis begins by making an extended point that the world is increasingly urbanized. It's not just more cities and bigger cities, but cities merging into one another making even larger urban areas, and rural areas increasingly urbanizing too, blurring the lines between rural and urban. Davis is not suggesting rural areas turn into metropolises, but that each geographic unit, no matter how small, is becoming larger and more urban than it was.

Davis links some urbanization in the Global South to the migration of manufacturing jobs to those countries (and specifically, to cities there). However, this is often not the case as many cities are growing even without manufacturing sectors. Furthermore, the size of a city's economy is not linked to the size of its population. Davis posits that the reason why cities grow even when their economies don't is due to neoliberal policies. Specifically, SAPs forced agricultural producers to produce commodities for the global market and those who couldn't compete were forced off the land. Former peasants move to cities, whether or not there is a job there for them.

The victims of this "agrarian crisis" flooded cities, even though cities did not have the capacity to adequately house them, educate them, or keep them healthy. Many who move to the city swell the size of the city's slums.

A review of Planet of Slums may be found here.

David Harvey, Rebel Cities

According to Flanagan (2013), Harvey makes two central points: cities are "where the most sophisticated practices of late capitalism are employed to forestall crises of the state" and cities "are sites with the potential to reinvigorate class struggle by combining the split identities of worker and citizen." Flanagan adds that the book relies heavily on transnational Marxist theory.

Rebel Cities is a book of essays, beginning with a preface calling back to Lefebvre's Right to the City. In modern times, he traces a call for the right to the city from the masses (social movements) to the World Social Forum in Porto Alegre, Brazil. Modern activists weren't citing Lefebvre, but Harvey still finds him instructive. Lefebvre believed revolution could come from the cities, which put him at odds with other Marxists who believed it would come from the proletariat. An urban movement, which is not entirely made up of factory workers, is a different class than just factory workers. It's more disorganized, fragmented, divided, and fluid. Others dismiss urban movements as reformists who deal with specific and not systemic issues, and believe they are neither revolutionary nor "authentically" class movements (p. xiv).

Harvey points out that as factories leave post-industrial nations, those nations no longer have the classical industrial working class. More work is done by "insecure, often part-time and disorganized low-paid labor" (p. xiv). He calls this the "precariat."

With the decline of the urban-rural divide as rural areas take on the same capitalist nature of cities and peasant agriculture goes away, Harvey says the claim to the right to the city is a claim to something that no longer exists. Also, the right to the city is an empty term that can be defined by those in power.

Harvey (and Lefebvre) believe the city cannot bring about revolution because the opposing forces can surround it and starve it out. However, Harvey says we should not dismiss the city as a site for birthing revolutionary ideas and movements.

In chapter 1, Harvey defines the right to the city as the right to make the city into what we collectively desire it to be. Furthermore, as we make ourselves by making our cities, the right to the city includes the right to decide who were want to be. (For example, the creation of suburbs created a new lifestyle.) This is a collective right.

He then goes into one of the themes mentioned by Flanagan. Cities are created by a surplus of a product in a particular location by a particular group of people. Therefore, capitalism and cities are linked, and urbanization is also class formation. Urbanization - literally developing new areas and rebuilding existing ones - is used to stimulate the economy in Keynesian economics. Harvey frequently alludes to a problem of disposing of capital surpluses. I think he means that capitalism requires a continually growing economy, which means to avoid a crash, we must constantly produce and then sell more than ever before. Expanding and rebuilding cities is one way to do this.

Harvey says that neoliberalism has "restored class power to rich elites" (p. 15). This gap between rich and poor is built into the physical landscape of cities. When the city is remade for the purpose of disposing of surplus capital, there's a class conflict as the needs of the rich are served at the expense of the poor. An example of this is when slums are cleared because they are located on valuable real estate.

Harvey writes, "Urbanization, we may conclude, has played a crucial role in the absorption of capital surpluses and has done so at an ever-increasing geographical scale, but at the price of burgeoning processes of creative destruction that entail the dispossession of the urban masses of any right to the city whatsoever" (p. 22).

This is a fertile ground for social movements. Harvey visualizes all of the world's movements joining together, then transitions into his proposal for what those movements should ask for. They should ask for "greater democratic control over the production and use of the surplus" (p. 22). To him, the right to the city IS democratic control over the process of urbanization. This is in direct opposition to neoliberalism, which advocates privatization of control over capital surplus. Increasingly, the right to the city is in private hands.

He says the way to unite urbanites together is by focusing on cases of "creative destruction" in which the rights of the poor are violated in order to serve the needs of the rich.

Works Cited:

R.M. Flanagan. CHOICE: Current Reviews for Academic Libraries. 50.5 (Jan. 2013) p957.
David Harvey, 2012. Rebel Cities: From the Right to the City to the Urban Revolution (Brooklyn, NY: Verso).

Monday, June 26, 2017

"Accumulation and Development: A Theoretical Model" by Samir Amin (1974)

This paper has a particularly good abstract, worth reading:
"In this article Samir Amin sets out the core of his model of the global accumulation of capital. In it he defines two distinct patterns: one applying to development at the centre, the other to dependent development in the periphery. Central development is characterised by the dominance of economic activity to satisfy mass consumer needs and the consequent demand for production goods. The power of the masses is enlisted in a social contract which allows the establishment of a limited economic viability, at a national level. owever, the internationalisation of productive capital increasingly threatens that stability. The peripheral systems are dominated by production of luxury goods and exports and the consequent lack of importance of internal mass markets. This leads to growing inequality, technological dependence, political weakness among the oppressed - in sum, marginalization. Restructuring of these econo- mies requires a break with the international economy, and self- centred development which establishes the dominance of production for mass needs, though there are particular difficulties for individual countries attempting such a break and ultimately a solution can be found only if such changes take place internationally. Policies for the difficult period of transition must first and foremost focus on the need to build the political consciousness necessary to complete this process." - p. 9

Saturday, June 24, 2017

"Feudalism, Capitalism, and the World-System in Perspective of Latin America and the Caribbean" by Stern (1988)

Steve Stern, who is, incidentally, perhaps the best professor I had in all of graduate school, traces the history that led to Wallerstein's World-System Theory. Wallerstein offers up his own version of the history of the world. Stern is a historian specializing in Latin America. (I highly recommend his trilogy on Pinochet's Chile.)

He presents Dependency Theory as a precursor of World-System Theory. Wallerstein was not the first person to look at global development and find it relevant that some parts of the world were exploiting the others; dependency theorists got there first.

One scholarly disagreement he traces is whether Latin America was "feudal" before development. Andre Gunder Frank said no, because European mercantilists brought capitalism to Latin America as they exploited the heck out of it. A worthy rebuttal came from Ernesto Laclau:
"It was obvious, observed Laclau, that mercantile exploitation used as its instrument the coercive labor relations and tributary obligations corresponding to the feudal mode of production. This was not a trivial point, since it greatly affected the explanation of Latin America's historic underdevelopment. In Laclau's scheme, underdevelopment derived not only from Europe's channeling of the colonies' economic surpluses from satellite to metropolis [periphery to core] but also from its "fixing the relations of production in an archaic mould of extra-economic coercion, which retarded any process of social differentiation and diminished the size of their internal markets."" p. 839

Stern expands the point out, including Laclau's assertion that an entire economic system could be capitalist but it could have different modes of production within it, including a feudal one. Furthermore, this feudal mode of production in Latin America means that the region was fated to underdevelopment even if Europe hadn't been appropriating all of their surpluses. Last, "material progress in twentieth-century Latin America did indeed require the break-up of the feudal socioeconomic structures that dominated many backward regions."

Then Stern puts his history hat on. Yes, it seems like Latin America is "'in but not of' the capitalist economy" but to a historian, "posing the choice as one between a "feudal" or "capitalist" economy may itself misconstrue the nature of the problem" (p. 839). He provides a description of the economy in colonial Latin America and then concludes on pp. 840-841 that "the colonial Latin American economy, though part of a European economic system in transition to capitalism, followed principles of economic evolution qualitatively distinct from those associated with a capitalist mode of production."

Stern follows with more discussion of why either label is not accurate. One point worth noting is that the regime that extorted labor from indigenous people (such as those forced to work in the mine at Potosi) and enslaved people from Africa in Latin America and the Caribbean is different from Europe's feudal system and also different from Old World slavery, so equating this with feudalism "obscures both the intensity of mercantile exploitation inherent in the colonial system and the degree to which this very intensity led to labor relations, subsistence and market patterns, and technological developments with structure and dynamics qualitatively distinct from those of pre-capitalist Europe" (p. 841).

Stern's term for being forced to choose between "feudalism" and "capitalism" is "a conceptual trap" (p. 842) since it's truly neither. He therefore agrees with Wallerstein that Laclau did not entirely get it right. He outlines four different positions that came about in Latin American scholarship prior to Wallerstein.
  1. Capitalism and feudalism are not the only modes of production. What existed in Latin America deserves its own category, like "colonial" or "colonial slavery."
  2. Latin America had "feudalism" but with particular features scholars in this camp defined, "stressing the historical context that joined colonial feudalism to international and local mercantile ventures" (p. 843)
  3. "To search for a dominant mode of production in colonial Latin America is misleading because the cornerstone of the colonial economy was precisely the dominance of commercial capitalism over production" (p. 843). This view "explore[s] the ways commercial capital organized and exploited various relations of production, none of which served as a basis for a fully constituted mode of production in Latin America."
  4. A minority view is that colonial Latin America was "capitalist" - although the scholars in this camp "went beyond the terms staked out in the initial Frank-Laclau exchange" (p. 844).
Each of the first three was critical of Frank and, by 1974, went beyond Laclau (p. 844). All three "circulated widely in Latin America but not in English translation" (p. 844).

Stern asks readers to consider Wallerstein in light of this debate that had already gone on for years by the time he published The Modern World-System in 1974. Wallerstein got a "surprisingly faint" response (p. 845) on his historiography of Latin America, and Stern contends that that is because he was, essentially, late to the game. Those debates had already been had. Additionally, "the idea of Latin America's historic dependence and manipulation by an external capitalist force, so much a part of life in Latin America, so current in the intellectual environment of the 1960s and 1970s, no longer constituted a revelation" (p. 845).

Going on, he says that "it would be a mistake to avoid a serious evaluation of Wallerstein's work from the angle of Latin American history" (p. 846). Stern commends Wallerstein on an excellent understanding of European history and a "systematic and forceful" argument on why the world-system as a whole must be analyzed together. He believes Wallerstein adds to the Frank-Laclau debate: he says "capitalism is best understood not as the replacement of coercive labor relations by free wage labor but rather as the rise of optimal combinations of free and coercive labor relations beneficial to the capitalist system as a whole" (p. 846).

Contrasting European medieval serfs with colonial Latin America, he believes its not accurate to equate European feudalism with the system in Latin America. He calls the latter "coerced cash-crop labor." He says that Latin America was capitalist, but redefines capitalism such that the core has free labor and skilled work and the periphery has coerced labor and less skilled work. (Also, there's sharecropping in the semi-periphery.)

Stern then pivots from the history of debate over "was Latin America capitalist?" to analyzing whether Wallerstein was correct based on Latin American history. He propose considering two case studies: silver mines and sugar plantations. In a fascinating and detailed explanation of labor relations in the silver mines in Potosi, he concludes that Wallerstein got it wrong. Labor relations were a mix of coerced labor, sharecropping, and wage labor. He adds:
In explanatory terms, the world-system framework also fares poorly. To explain the rise of share arrangements in terms of their utility to the world-system, or to American capitalists adapting to the international market, would miss the point entirely. The twisting of wage and forced labor in the direction of share relations greatly disturbed colonial entrepreneurs and officials, and it bolstered an Indian market of production, consumption, and speculation that developed a life of its own, one not easily molded by the preference of the colonial state, American cities, or the European world-system." - p. 855
Expanding to include other silver mines in Latin America, Stern says it would be wrong to entirely dismiss Wallerstein, as there was a colonial surplus going to enrich Europe. However, he identifies three different "motors" driving the economic system in Latin America: the world-system, "popular strategies of resistance and survival within the periphery," and "the rise in America of regional and inter-regional markets and elites whose "logic" and interests did not always coincide with those of the world-system" (pp. 857-858). Therefore, he calls Wallerstein's analysis "one-dimensional and misleading" (p. 858).

Moving on to sugar, he grants that sugar better fits the model outlined by Wallerstein. But, he asks, why African slave labor dominated in sugar production. Initially, "colonizers actually tried out several labor strategies" to produce sugar (p. 859). In Brazil, the Portuguese first "experimented seriously with five labor strategies," four of which used Indian labor (p. 861). To sum up his longer analysis, Indians died and rebelled to much. Still, the full transition to African slave labor took a century. Again, he finds that Wallerstein's world-system theory does not fully explain labor on sugar plantations in Brazil and the Caribbean. He concludes that arguments based on macro forces ignore the local elements that ultimately led to the labor systems used to produce sugar. He adds that he is not claiming that the world-system is irrelevant here: "An explanation that ignores the world-system is as limited and reductionist as one derived from the world-system" (p. 863).

It appears that the overriding argument in this piece is two-fold. First, the world-system did impact labor relations and the economic system in Latin America and the Caribbean but was not its sole determinant; and second, while the powerful international forces of the world-system played a role in determining the labor system in Latin America and the Caribbean, local forces (local elites, and popular resistance) also played roles.

Tuesday, June 13, 2017

A world-system perspective on the social sciences by Immanuel Wallerstein (1976)

After wasting the reader's time with several pages of babble backed by no data (apparently he does have data in his books, just not here), Wallerstein comes to his point. All previous theories of development assumed that each society functioned separately as its own unit. He wants to consider as a unit any system that is tied together either economically ("world-economy") or politically ("world-empire"). He calls these two "world-systems" - obnoxiously hyphenating his term that he coined. He claims that today, the entire planet is one economic unit to be analyzed together (p. 173).

Then he gets down to business:
"There are three separate intellectual questions that may be asked about this modern world-system. The first is the explanation of its genesis: how is it that the sixteenth-century European world-economy survived, unlike previous such systems. The second question is how such a system, once consolidated, operates. The third is what are the basic secular trends of a capitalist system, and therefore what will account for its eventual decline as a social system." (pp. 173-174)
He takes mercy on the reader by offering relatively short answers, given the immensity of the questions. Blah, blah, blah, development of capitalism. Then he comes to the point:
"The operation of the system, once established, revolved around two basic dichotomies. One was the dichotomy of class, bourgeois versus proletarian...
The other basic dichotomy was the spatial hierarchy of economic specialization, core versus periphery, in which there was an appropriation of surplus from the producers of low-wage (but high supervision), low-profit, low-capital intensive goods by the producers of high-wage (but low supervision), high- profit, high-capital intensive, so-called ‘unequal exchange’." (pp. 174-175)
Obviously, he got some of his ideas from Karl Marx. Next paragraph:
"The genius, if you will, of the capitalist system, is the interweaving of these two channels of exploitation which overlap but are not identical and create the cultural and political complexities (and obscurities) of the system. Among other things, it has made it possible to respond to the politico-economic pres- sures of cyclical economic crises by rearranging spatial hierarchies without significantly impairing class hierarchies.

The mechanism by which the capitalist system ultimately resolves its recurrent cyclical down-turns is expansion: outward spatially, and internally in terms of the ‘freeing’ of the market – remember the basic ambivalence about the free market, good for the buyer and bad for the seller – via the steady proletarianization of semi-proletarian labour and the steady commercialization of semi-market-oriented land." (p. 175)
... And it's all trending toward crisis and then the proletariat will rise up and we all get a socialist world-government, which we must hyphenate because Wallerstein said so.

Monday, June 12, 2017

Cooper and Packard (1997)

The following is a summary of “Introduction” in International development and the social sciences: essays on the history and politics of knowledge by Frederick Cooper and Randall Packard, published in 1997. Cooper is also the author of Africa Since 1940: The Past of the Present, a book on the end of the colonial era and the start of independence in Africa.

Main ideas:
  1. Development theories throughout the last half century are varied and diverse, although not all have achieved the same level of acceptance or influence.
  2. Development theories are linked to power. Those who pose theories differ in their level of power to be heard and to have their ideas accepted and disseminated, but also, one can use a theory or paradigm as a means of asserting power.
  3. Cooper and Packard seek to understand why development paradigms changed over time. Why did one become popular, or not; why was it accepted for a long time, or not; and why did another paradigm replace it?
Cooper and Packard introduce the idea of development as an idea relating to European colonies in the 1940s. It was an idea adopted by several different parties with different goals. For Great Britain and France, it was a way to "reinvigorate and relegitimize empire as it was being challenged by nationalist movements, labor militancy, and increased questioning of colonial rule... African political and labor leaders seized the vocabulary of state-directed change to escalate demands for wages like those of European workers, for social services on a higher standard, and for the power to direct change themselves" (p. 7). Cooper's book Africa Since 1940 provides more detail here, and this section also ties in to Mahmood Mamdani's Citizen and Subject (1996). Cooper and Packard add that the idea of development offered imperial powers a way to continue influence over ex-colonies even as they lost power over them.

After World War II, the Cold War began, the U.S. was established as a global superpower, and a number of international organizations were established (the UN, World Bank, IMF). How people lived in the Global South was no longer just a matter for the people themselves to decide (or the colonial power that ruled them), but both an international matter and the responsibility of the newly independent states. Like Rist (2002), Cooper and Packard locate Truman's Four Points speech as the moment when Truman "took development out of the colonial realm and made it a basic part of international politics" (p. 8). The creation of the FAO, WHO, UNICEF, etc, solidified this change.

Cooper and Packard also agree with Rist that the development framework was a way for Europe and the U.S. to serve their own national interests while claiming to be motivated by a desire for a "prosperous, stable world" (p. 9).

Cooper and Packard then detailed the shape this discourse took in different regions. In Latin America, they trace the roots of dependency theory initially to a "structuralist" approach by Argentinian Raul Prebisch defining a "center" of the world market that produces manufactured goods and a "periphery" that supplies raw materials. The world market did not favor the periphery (p. 10).

India "experimented with combinations of Soviet planning models and capitalist production" (p. 11). There, a debate occurred over how to be "modern" while still remaining "Indian." They emphasize that there is a lot of grey areas instead of black and white: "struggles do not neatly line up between the friends and foes of development, between "modernity" and "community," but engage differences in a more nuanced manner and involve people who have been immersed as deeply in international organizations and communication as in local social movements" (p. 12).

Africa, they write, was "least able to generate its own academic knowledge" (p. 12). Still, the continent was not without leaders and intellectuals who "pushed a distinct view of economic development, one less oriented than the conventional view toward a generic "developed economy" and more focused on the communitarian roots of African economies" (p. 12).

Cooper and Packard sum up:
"The heterodoxy of development theory in the last half century implies neither randomness nor equality: certain sets of ideas and theories have gained prominence at particular periods of time, while others have been excluded from international debates... Within particular domains the development construct has become a framework that rationalizes and naturalizes the power of advanced capitalism in progressive terms - as the engine bringing those on the bottom "up" toward those who are already there" (p. 12).

Development theory was preceded by events outside of academia. When the so-called "real world" needed development experts, universities began offering training courses - "even before they had much knowledge to offer" (p. 13). In the mid-1940s, development economists claimed a "big push" was needed to "get poor economies into a position where self-generating growth could begin" (p. 13).

One issue for academics was how to resolve their desire for universal principles and theories with the messy particulars of different parts of the world. Examining the approaches of different fields to development, Cooper and Packard write:
"One can see the tension between the contextualizing fields (history, anthropology) and the universalizing fields (economics), as well as the more profound tension inherent in the relationship of social science and policy and the fact that abstract theory and empirical research both arise in concrete situations, in relation to funding possibilities and distinct knowledge communities with their own prestige systems" (p. 16).
Later, they say of modernization theory:
"The 1950s and 1960s were the heyday of modernization theory, a social science approach that purpported to demonstrate that change in one domain of life implied conprehensive reconfiguration, leading virtually to the creation of a new sort of person - rational instead of superstitious, oriented toward achievement rather than status. Modernization theory has been effectively discredited, but the ethos behind it lies behind less comprehensive approaches to development" (p. 17).
This idea is described well by Nick Cullather in The Hungry World as he writes about how modernization theory led those behind the Green Revolution to believe that Asian peasants were irrational but purchasing seeds for "miracle rice" (and, presumably, the inputs needed to grow it) would be a first rational decision that would transform the peasants into rational economic beings.

Cooper and Packard add that "the idea of creating a new person... goes back to missionaries" (p. 17). Such an idea was "downplayed" by colonial governments in the 1920s, but the "development drive of the 1940s brought to the fore once again the possibility of reconstructing Africans or Asians in all aspects of their beings, this time in a way that was attractive to leaders of newly independent countries as it was to social scientists eager to chart the movement from tradition to modernity" (pp. 17-18). (Cullather adds that this change was also attractive to the U.S. during the Cold War, particularly after 1949 when China fell to the Communists and the USSR got the bomb. Millions of Asian peasants who could potentially turn Communist scared them.)

Cooper and Packard go on to describe a further implication - categorization of people who did not make the desired transition. Generic categories ("traditional," "indigenous," etc) "collapsed the variety and complexity of life in particular locations into a single word (p. 18). Critics as well as proponents of development interventions are guilty of this too, only they attach a positive instead of a negative connotation to words like "indigenous" or "community." Cooper and Packard write "Historically... the two sides [modern vs. traditional] are more imbricated in each other than such a dichotomous suggestion implies" (p. 18) because development projects will fail if they do not "resonate in a local context."

The restate the notion that at the end of the colonial era, development was used by both sides for their own ends - by the colonial regime to "reassert control and legitimacy" (p. 18) and by the colonized for other reasons (not stated by Cooper and Packard).

Cooper and Packard say "development is fundamentally about changing how people conduct their lives, and the very claim to technical knowledge is itself a political act" (p. 19).

The question Cooper and Packard ask is: Why do some development theories or paradigms catch on (and sometimes stick around) and not others? Or, as they put it "Complex questions arise about the ways in which economic problems are conceptualized at the interface of social science and policy and the responsiveness of leaders of states or international institutions to counterhegemonic claims" (pp. 19-20). On p. 19 they outline a number of potential explanations and why each does not work. Ultimately, they conclude "paradigm shifts... occur through complex, historically specific interactions" (p. 20).

They provide a few examples of how institutions such as the World Bank adopted development paradigms, without really explaining why they did so. They go on to say that the adoption of a paradigm by an institution does not explain why it is accepted outside the institution. "In part the ability of powerful institutions to disseminate ideas arises from their place at the center of development finance. Money talks. Yet this materialist explanation overlooks the specific networks of communications through which ideas circulate internationally" (p. 21). They add that the power of institutions changes over time. When few alternatives are available, their ideas gain power. Here, Cooper and Packard discuss alternatives not in terms of ideas but financial possibilities. That is, when countries could afford to do something else, some did. But during the credit crunch of the 1980s when that was not possible, they had little choice in what to do. "Much of the current rhetoric about structural adjustment programs is about the absence of alternatives, while critics of such policies try to get the idea of alternatives back in" (p. 22). This might be a reference to TINA: There Is No Alternative (to neoliberalism).

Another potential reason for paradigm shifts was changing politics: "The end of the Cold War narrowed development options by discrediting socialist alternatives" (p. 22). They note that both prior to and after the Cold War, developed nations pushed for "market-led development," compared to during the Cold War, when they sought more intervention due to fear of Communist expansion.

Cooper and Packard see the push for neoliberalism as running counter to the push for democratization: "Compelling as many of the critiques of government corruption, clientalism, and incompetence are, it is not clear that imposed austerity helps to build political capacity" (p. 22). They add that the Washington Consensus pushes for "good governance" and "good economy" are "a bland assertion that the West has defined objective standards for others to meet, a generalized set of categories (elections, multiple parties) that define those standards, irrespective of the actual debates that might be going on in specific contexts over how more people might acquire meaningful voice in their own lives" (p. 23).

The next section deals with how ideas might not simply disseminate from institutions but be appropriated and even changed.

They go on to suggest that language can be even "stickier" than policies, saying: "Concepts like sustainability and participation become a kind of shorthand, distilling complex and in many cases highly problematic processes" (p. 24). They constitute "template mechanisms:" "preconstructed frameworks which are used to simplify and control complex environments" (p. 24). Template mechanisms "structure options, define relevant data, and rule out alternatives" (p. 24).

Cooper and Packard are sympathetic to development efforts. They write:
"Templates, cultural paradigms, and generic representations of the "indigenous" are not about to disappear. Large-scale organizations need to simplify; funding cycles demand replicable project designs. When USAID and other organizations tried to focus on small projects to avoid the problems of giganticism for which past development efforts were rightly criticized, they needed approaches that did not demand deep situational analysis for each project. Academic social scientists should not be dismissive of such difficulties" (p. 26).
Surely, such difficulties exist for USAID in the work they do, but extending understanding to them as advocated above implies approval of both their mission and their methods. That is, it assumes that the Global South must change, that nations like the US and the development agents should change it, and that the projects of USAID are good and necessary. Surely all of the above should be questioned and not taken for granted by social scientists.

Saturday, June 10, 2017

"The Development of Underdevelopment" by Andre Gunder Frank (1966)

Frank begins by taking issue with three common ideas (most likely common to the modernization theorists of the time).
  1. First, he says it is not the case that all nations pass through the same set stages of development. He disagrees that the state of current underdeveloped countries corresponds to the past of current developed countries. He remarks that developed nations were previously undeveloped, but never underdeveloped. Prior to their development, no countries on earth were developed.
  2. Second, it's inaccurate to believe a nation's state of underdevelopment is a product of factors entirely within that country alone. Underdevelopment is a result of a history of relations between underdeveloped and developed nations.
  3. Development will not come to underdeveloped nations via diffusion of "capital, institutions, values, etc" from outside. He believes "underdeveloped countries economic development can now occur only independently of most of these relations of diffusion." (emphasis added)

Frank takes issue with an understanding of inequality in developing nations that assumes that the wealthy industrialized fraction of the society became so due to its "intimate economic relations" with the developed world, and that the poor, subsistence-based fraction of the population is separate from that relationship, constituting a "dual" society. Frank believes that both halves of these "dual" societies are products of capitalist development.

In other words, the poor backward half of a nation is not poor or backward because it was left out of development that the wealthier half benefited from; it is so because of it. The two are related as parts of the same system.

He supports this statement by reminding the reader of the history of colonial cities in Latin America, centers of mestizo life, surrounded by Indians in a "peasant hinterland." The cities and countryside and their mestizo and Indian populations, respectively, were connected by "economic and social interdependence." The cities served to "suck capital or economic surplus" from the surrounding (satellite) region and to in turn "impose and maintain" the exploitative relationship on that satellite. While that system was put in place in the distant past, Frank calls it "the principal and still surviving structural characteristics" of the Conquest of Latin America.

It appears Frank uses "metropolis" and "satellite" as other scholars use the words "core" or "center" and "periphery."

Like Cardoso and Faletto, Frank emphasizes the economic, social, and political aspects of both history and the modern day. His two main case studies are Chile and Brazil. Any development that occurred in satellites was neither "self-generating nor self-perpetuating" so as soon as an area's exported good was no longer in demand, investment in that area stopped.

Also, somewhat hilariously, Frank predicts the impending invention of a synthetic coffee substitute that will deal a death blow to Latin American coffee producers.

Frank writes that the successful industrialization within Sao Paolo, instead of enriching the rest of Brazil, has "converted them into internal colonial satellites, de-capitalized them further, and consolidated or even deepened their underdevelopment."

He restates his point that underdevelopment is not due to isolation from the world market, it is due to contact with it. He adds that Latin America did best when Europe and the U.S. left it alone because they were busy having a Depression and two World Wars, using this as evidence that the best path to development for Latin America is less contact with Europe and the U.S. He says this development gets "choked off" when the core nations recover from their crises and re-establish trade and investment ties.

Frank further hypothesizes that regions that seem the most backward today are the ones that had the closest contact with the core nations in the past.

All in all, this appears to be a rather simplistic argument that the more economic ties a developing region has with developed nations, the worse off it is, and vice versa.

Thursday, June 8, 2017

Dependency and Development in Latin America by Cardoso and Faletto (1979)

The following is a summary of a 40 page excerpt of the English translation of Dependency and Development in Latin America by Cardoso and Faletto, which includes a preface to that version. Both were sociologists, Cardoso from Brazil and Faletto from Chile, but Cardoso served as President of Brazil decades after this work was published. The book was written between 1965 and 1967. Brazil was already under military dictatorship. It was prior to the dictatorships in Argentina and Chile, and even prior to Allende's presidency. The preface to the English version was written in 1976, after the other dictatorships had started.

Main points:
  1. One cannot separate the economic from the political from the social; analysis of all three together is required.
  2. Political, economic, and social systems of today came about due to the past, so historical analysis is needed.
  3. The concepts of central vs. peripheral, dependent vs. autonomous, and underdeveloped vs. developed are distinct from one another.
  4. Dependent, developing nations must be studied in their own right and not assumed to have the same development path as the nations of Europe and the U.S.
  5. Such analysis must include external and internal factors: foreign influences from outside, and class struggle from within ("We conceive the relationship between external and internal forces as forming a complex whole whose structural links are not based on mere external forms of exploitation and coercion, but are rooted in coincidences of interests between local dominant classes and international ones, and, on the other side, are challenged by local dominated groups and classes." p. xvi)
  6. Dependency can take different forms.
  7. Capitalist development in Latin America has produced inequality, as "wages of technicians, managers, and specialized workers... are incomparably higher than those earned by peasants" (p. xxii).

The preface begins with the authors' intentions for their book, written a decade before, to "show specifically how social, political, and economic development are related in Latin America" (p. vii). The introduction consists of a review of several Latin American nations (Chile, Brazil, Argentina, Colombia, and Mexico) that seemed poised to achieve development after World War II but did not quite achieve it. Following several pages of analysis, Cardoso and Faletto conclude:
"It is not enough to replace the "economic interpretation of development with "sociological" analysis. What is needed is an analysis that makes possible a broader and more sophisticated answer to the general question of how development is possible in the Latin American Countries" (p. 7).
In other words, they find it necessary to do exactly what they set out to do, as stated in the preface.

In the next chapter, Cardoso and Faletto begin by critiquing the notion that the social structure of societies transitions from "traditional" to "modern" as the nation develops, as these two terms are useless to gain any real understanding of what is happening socially during development. Social change during development "involves a series of relations among social groups, forces, and classes through which some of them try to impose their domination over society" (p. 10).

They then reference modernization theory and note that it assumes all nations will follow the same path of development, and therefore differences in the histories of situations of underdeveloped nations are seen as irrelevant. Furthermore, changes in their economies and societies are analyzed based on the development path taken by European nations and the U.S.

Cardoso and Faletto introduce a term, demonstration effect, defining it as "the modernization of consumption patterns [in developing countries], implying some degree of income improvement for urban population" (p. 12). Modernization theory assumed the demonstration effect would "modernize" economies through consumption. Cardoso and Faletto don't necessarily agree. It could instead result in the importation of consumer goods, draining the nation of its domestic savings, which are needed for the nation's development. They add another assumption, that the demonstration effect would then change human behavior in the political and social arenas.

But Cardoso and Faletto do not accept the "demonstration effect" as a simple, causal explanation for how a society modernizes. They instead say one should "study the historical-structural contexts in which such a process is generated" (p. 13). It sounds to me like the idea of the "demonstration effect" is something like: "People buy TVs and cars and breakfast cereal ---> MAGIC ----> Development" and Cardoso and Faletto are (correctly) rejecting that as ridiculous and suggesting to instead study what is actually going on in a nation in all of its complexity if you want to understand it. In line with their earlier critique of modernization theory for ignoring the historical specificity of each nation, they are calling for scholars to go back and examine that to understand their path to development. They are also looping in not just what is going in a country itself but internationally, and within the country, they believe its necessary to understand social classes and social movements.

On pp 13-14 they present a clear case for why the social, economic, and political must be analyzed together. They propose to study "the economic factors conditioning the world market; the structure of the national production system and the kind of linkage it has developed with the external market; the historical-structural shape of such societies, with their ways of assigning and maintaining power; and above all, the political-social movements and processes that exert pressure toward change, and their respective orientations and objectives" (pp. 15-16). They add "Development always alters the social system of domination as it changes the organization of production and consumption" (p. 16).

In the next section, they define three different sets of opposing terms: developed vs. underdeveloped, center vs. periphery; and autonomous vs. dependent.
  • A society without development: those that have no "market relations with the industrialized countries" (pp. 16-17).
  • Underdeveloped: "refers to the degree of diversification of the production system without emphasizing the patterns of control of decisions on production and consumption, whether internal (socialism, capitalism, etc) or external (colonialism, periphery of the world market, etc)" (p. 18). They later define "national underdevelopment" as "a situation of objective economic subordination to outside nations and enterprises and, at the same time, of partial political attempts to cop with "national interests" through the state and social movements that try to preserve political autonomy" (p. 21).
  • Center vs. periphery: "[stresses] the functions that underdeveloped economies perform in the world market, but [overlooks] the socio-political factors involved in the situation of dependence" (p. 18).
  • Autonomous vs. Dependent: Dependence occurs when "the accumulation and expansion of capital cannot find its essential dynamic component inside the system" (p. xx). A dependent nation trying to industrialize is "in a position similar to the client who approaches a banker" (p. xxii). In an extreme case of dependence (such as in a colony) "decisions affecting the production or consumption of a given economy are taken in terms of the growth and interests of the developed economies" (p. 18).

They stress that these various concepts should not be confused with one another, and also that a previous definition of underdevelopment ("a type of economic system with a predominant primary sector, a high concentration of income, little diversification in the production system, and above all, an external market far outweighing the internal") is not sufficient (p. 17). Furthermore, it is not enough to just study what an undeveloped economy is like now, but how it got there, considering both external (how it was linked historically to the world market) and internal ("how internal social groups defined the outward-directed relations implicit in underdevelopment") processes (p. 17).

They outline the Latin American position as one of countries that began as colonies. Their political situation changes to one of autonomy following independence, but "economic links with external markets still impose limits to decisions and actions even after independence" (p. 21).
"The contradiction between the attempt to cope with the market situation in a politically autonomous way and the de facto situation of dependency characterizes what is the specific ambiguity of nations where political sovereignty is expressed by the new state and where economic subordination is reinforced by the international division of labor and by the economic control exerted by former or new imperialist centers" (p. 21).

To Cardoso and Faletto, this predicament proves that class relations in dependent nations cannot be like those of central countries during their early development. Those countries underwent development at the same time the "world market expanded, so that [they] came to occupy the leading positions in the system of international domination" (p. 23). Given this - which is a rejection of modernization theory - they content that scholars should study not how developing nations can copy the path to development of Europe and the U.S., but learn "how the relation between peripheral and central was produced" (p. 23).

They add a further rejection of modernization theory, essentially saying that the world has one economy that all nations participate in, so when the central economies went through phases such as mercantilism and industrialism, peripheral countries experienced those phases too from their place in the world market. It meant something different from then than it did for central countries. Therefore, it would be wrong to treat each nation as independent and expect each developing nation to go through its own phase of "mercantilism," etc. (p. 23)

Cardoso and Faletto also differentiate between colonies. Colonies of "settlement" (those settled by Europeans) "largely self-sufficient and using abundant labor" are different from "an exploitation colony that was more strictly exploited from the outside" (p. 25). Also, raw materials producers experiences differ if the market was competitive vs. monopolistic. Another difference is "the physical foundation of a country's economy" - i.e. land, minerals, etc. (p. 25). These differences all determine how the nation connects to the world market after it becomes independent.

They trace the history of Latin America as passing from the colonial era to a time of British dominance, and then to a time of U.S. dominance (p. 25-26). They do not blame dependency entirely on external factors - they say "internal class relations made it possible and gave it shape" (p. 26). In dependent, developing nations, internal groups who benefit from foreign influence represent foreign interests. Chapter 2 concludes with a call for studying dependent developing nations - something that apparently had not been done by those who subscribed to modernization theory, since they assumed dependent developing nations would develop along the same path as the U.S. and Europe.

Chapter 6 details the developmental paths of several Latin American countries, concluding that "attempts to maintain the rate of industrialization cannot succeed without profound political-structural changes" (p. 157). They detail a number of options for how a nation might try to industrialize while maintaining political stability. One problem is the lack of control over prices of exports, complicating efforts to use exports as a source of revenue for industrializing. Some potential routes to industrialization would profit some parts of the population and not others - obviously not a situation the poor masses would accept as an elite segment of their compatriots got rich. This would be politically unstable. But efforts to share the wealth across a broader share of the population (for example, via higher wages) would reduce the amount of money available (and needed) for industrialization, thus slowing down development.

They write: "The early phase of substitutive industrialization and consolidation of the domestic market had been one of public and private internal accumulation, which was encouraged by protectionist policies" (p. 157). Foreign capital was eager to get into these countries, and this was initially not seen as a problem. They did so by investing in the developing nations to get around the tariffs. This was not a problem to these nations until "easy import substitution ceased" (p. 159). They explain:
"In terms of diversification of production, levels of development may seem very high. But both capital flow and economic decisions are controlled from abroad. Even when production and marketing are carried out within the dependent economy, earnings go to swell capital funds available to the central economies. Investment decisions also depend in part on external considerations and pressures. Decisions taken by the parent companies, which only partly reflect the domestic market situation, significantly influence the reinvestment of profits generated in the national system." (p. 160-161)

In this phase, "local industries become dependent on foreign technology and require a continuous expansion," making it hard for the government to support older industries of the ISI period (p. 164). This adds to conflict as not only the masses are socially excluded but so are "the social strata that were economically important" in the ISI era.

It should be noted that Cardoso and Faletto are making generalizations about what occurs under the conditions above, but in the cases they are referring to, industrialization started during the Great Depression and continued during World War II, time periods when the U.S. and Europe were rather busy with their own problems and experiencing an economic situation that was drastically different from what occurred in the latter half of the 20th century. Therefore, perhaps these generalizations are accurate about any economy going through the stages described above, but perhaps the differences between the earlier ISI period and the later period where trouble arose are linked to what was occurring in Europe and the U.S. during those time periods.

(I am no great economist or historian so I cannot be more specific, but recall that the U.S. and Europe rationed during World War II and they struggled to produce enough to support the war effort. That is different from later, when their production capacity that had expanded during the war remained enlarged but no longer had a war to support. Soldiers came home to take on civilian jobs, war chemicals became agricultural pesticides, and so on. Therefore it seems like these phases of development in Latin America seem less generalizable to any era and more specific to what occurs when economic situation of the central economies unfolds as it did.)