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.)

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