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Industrial Colonialism in Latin America

Studies in
Critical Social Sciences
Series Editor

David Fasenfest
Wayne State University

Critical Global Studies

Series Editor

Richard A. Dello Buono

Manhattan College, New York
Editorial Board

Jos Bell Lara, University of Havana, Cuba

Walden Bello, State University of New York at Binghamton, USA and
University of the Philippines, Philippines
Samuel Cohn, Texas A & M University, USA
Ximena de la Barra, South American Dialogue, Chile/Spain
Vctor M. Figueroa, Universidad Autnoma de Zacatecas, Mexico
Marco A. Gandsegui, Jr., Universidad de Panam, Panama
Ligaya Lindio-McGovern, Indiana University-Kokomo, USA
Daphne Phillips, University of West Indies, Trinidad and Tobago
Jon Shefner, University of Tennessee-Knoxville, USA
Teivo Teivainen, Universidad de Helsinki, Finland and
Universidad Nacional Mayor de San Marcos, Peru
Henry Veltmeyer, Saint Marys University, Nova Scotia, Canada and
Universidad Autnoma de Zacatecas, Mexico
Peter Waterman, Institute of Social Studies (Retired),
The Hague, Netherlands

The titles published in this series are listed at

Industrial Colonialism in
Latin America
The Third Stage


Vctor M. Figueroa Seplveda


Cover illustration: Migrant workers on their way to the U.S.A. Photographed by Jos Alberto Donis
Rodrguez and used with his kind permission.
Library of Congress Cataloging-in-Publication Data
Figueroa, Vctor M.
Industrial colonialism in Latin America : the third stage / by Vctor M. Figueroa Seplveda.
pages cm. -- (Studies in critical social sciences, ISSN 1573-4234 ; volume 59)
Includes bibliographical references and index.
ISBN 978-90-04-25900-3 (hardback : alk. paper) -- ISBN 978-90-04-25906-5 (e-book) 1. Economic
development--Latin America. 2. Capitalism--Latin America. 3. Neoliberalism--Latin America.
I. Title.
HC125.F486 2013

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This book is dedicated to Silvana, Manuel, Alex and Emanuel

Acknowledgements ix
List of Tables xi
Prologue by R.A. Dello Buonoxiii
Introduction 1
1.Imperialism and Industrial Colonialism 7
Monopoly, the Role of Science and the Function of the State 7
Social Relations of Production and Foreign Trade16
The Workings of Industrial Colonialism22
Imperialism and Nature27
2.Imperialism at the Third Stage35
Key Aspects of Crisis35
The Globalization Strategy37
From 1995 Forward49
Capital and Nature53
3.The Pattern of Industrial Colonialism57
Barriers to Regional Appropriation of Scientific Knowledge
for Production58
National Innovation Systems in Latin America62
The Universities in the Region70
External Limits to Export-led Economic Growth79
The Different Functional Roles Within the Region86
Internal Contradictions89
Political Regimes at the Third Stage92
Climate Change in Latin America99
Conclusion 100
4.Industrial Colonialism and Surpluses of Population 103
The Over-Supply of Labor-Power and Surplus-Population
Theory 103
Deficits and Surpluses of Population 112



The Surpluses of Population and Their Activities 114

Relative Surpluses of Population at the Level of Goods
Production and Repairs 115
Relative Surpluses in the Sphere of Commodity Circulation 119
Surpluses of Population Beyond Capital Valorization 122
What About Home Labor? 125
The Nature of the Latin American Migrant Worker and the
Historical Record 127
Remittances and Wage Differentials 130
The Indigenous Population 133
Conclusion 135
5.Industrial Colonialism and Peasant Production 139
The Social Character of Peasant Production 140
From Peasant Production to Infra-Subsistence Production 144
Social Impacts of Neoliberalism on the Countryside 151
Conclusion 158
Appendix: The Underlying Causes of Underdevelopment
in Latin America 161
Bibliography 179
Name Index 187
Subject Index 189

The process of building the arguments of this book was largely encouraged by discussions with successive generations of students of the
Graduate Program in Political Science at the Universidad Autnoma de
Zacatecas, Mexico. Their shrewd criticisms and comments were always
helpful in the development of the ideas expounded here. No less important has been (and continues to be) my everyday contact with colleagues
sharing similar concerns. Distinct traces of encounters with peers at various academic events will be found throughout these pages.
Many diverse schools of thought have engaged in the study of Latin
Americas reality and every one of them has surely made some sort of contribution. The UN Economic Commission for Latin America and the
Caribbean (ECLAC) deserves special mention, regardless of its distance
from the thread of the story told in this work. The service that ECLAC
provides in terms of information and reflection on such an enormous
variety of social issues is simply priceless. Without it, the ongoing intellectual work about Latin America and the Caribbean would be much
more limited and far more convoluted than it is.
R.A. Dello Buono has consistently and enthusiastically promoted the
diffusion of studies on Latin America. As is well-known, he himself is a
learned researcher on the regions issues and I am infinitely grateful for
his interest in my work being published. I am likewise appreciative for the
assistance that David Fasenfest has provided in helping to overcome the
technical difficulties involved with producing this volume.
A large part of the tortuous effort to shape a legible English version
from my first draft was carried out by Anna Maria DAmore. Carmen
J. Dello Buono also participated in this difficult task.
The photograph that illustrates the front cover of this book was taken
by Jos Alberto Donis Rodrguez in the course of carrying out his work in
defense of the human rights of migrants.
Some of the propositions found in this book are the result of an ongoing research project on Science for Development and Democracy funded
by Mexicos Fondo Sectorial de Investigacin para la Educacin.
Special thanks to all who have enriched my work. Certainly, I alone am
responsible for the views and any errors contained in this book.
Vctor Manuel Figueroa Seplveda
Zacatecas, Mexico

2.1.Objectives of R&D Funding (Percents)41
2.2.Research and Development Funding in Selected European
Countries and Japan (Percents)43
2.3.Exports and Imports of G-7, 1977 and 1987 (Percents)44
3.1.Latin American and Caribbean Commerce. Export Goods
(in millions of US dollars)82
3.2.Latin American and Caribbean Commerce. Import Goods
(in millions of US dollars)82
3.3.Latin American and Caribbean Balance of Industrial Goods
(Millions of dollars)83
5.1.Schematic Representation of Peasant Production at Point 1 147
5.2.Schematic Representation of Peasant Production at Point 2 148
5.3.International Prices Index (Base 1990 = 100) 152
5.4.Productivity Differentials (1980 dollars) 156

Well into the second decade of the 21st Century, the search for an inclusive and progressive development scenario for Latin America has resulted
in persistent frustration. In one sense, deepening economic crises and
recurring cycles of violence confirmed the collapsing viability of neo
liberalism as a development strategy under post-keynesian representative democracies. Indeed, the upsurge of social exclusion that yielded
declining standards of living and physical displacement for large swaths
of the most vulnerable sectors placed Latin America at a crossroads: either
find another path or descend into a quagmire of ungovernable polarization and violence.
Why did neoliberal capitalist expansion prove so unable to turn explosive peaks of economic growth into greater prosperity for the majority of
Latin Americans? Why did accelerating technology driven by global
capital actually lead to greater underdevelopment? And why were uncontrollable migratory flows the necessary outcome of the competitive chase
for attracting inflows of foreign investment? Comprehensive answers to
these and other key questions of development are provided in the present
work by Vctor Figueroa. Figueroas pioneering work Reinterpretando el
subdesarrollo: Trabajo general, clase y fuerza productiva en Amrica Latina
(1986, Siglo XXI) first grappled with many of these questions in an era
when neoliberal regimes seemed dynamic and transformational. As a
powerful sequel to his earlier work, this new treatise presents a fresh
and insightful glimpse into the contradictory dynamics of accumulated
underdevelopment in 21st Century Latin America.
The essential mechanisms for harnessing technology within the context of development remains as much an enigma today as it did in earlier
phases of capitalism. Mindful of this fact, Figueroa develops a novel and
insightful approach to the structures of really existing dependent industrialization, identifying their consolidation as the third stage of industrial
colonialism. His analysis masterfully returns our attention to the role of
imperialism, not as some rhetorical accusation, but as a structural element of a hegemonic integration. What unfolds is a rigorous explication
of the internal restructuring of production implied by underdevelopment
as interconnected with the real structures of unequal partners in qualitatively asymmetrical social relations.



Distinctive in Figueroas approach is the angle from which his analysis

of underdevelopment is approached. Rather than building out of unequal
exchange as posited by conventional dependency theory, Figueroa proceeds up from the social relations of production where structural subordination results from the importation of a technological progress being
created abroad. If in Marxs Capital, we find the analytical tools to comprehend the logic of capitalist expansion, Figueroas critical reworking of
Lenins thesis on imperialism offers us new elements for critically analyzing underdevelopment. The contradictory logic of industrial colonialism,
conceptualized through its development in successive stages, allows
Figueroa to demonstrate the crippling legacy that results from interrelations produced by the assimilation of externally developed technological
innovations, the generation of surplus-populations, and the systemic
export of surplus-value to developed countries.
The end result is a rigorous class analysis that dissects an imperial project shown to feed upon the appropriation of technological productivity
gains and the subordinated linkages that obtain between core and subordinated nations. By wrapping his analysis around a systemic approach to
capitalist accumulation, Figueroa provides an anatomy of the development of underdevelopment that looks quite different from the scenario
imagined by the dependency theorists of the 1960s. New developments
such as the growing role played by pirate capital fundamentally alter the
prospects of the whole region in an unfolding scenario where ecological
conditions are compromised, science is templated by profit, and higher
education becomes stunted and qualitatively transformed by the deepening process of underdevelopment.
Figueroas argument poses a formidable challenge for his readers. The
achievement of genuine development will only be possible by overcoming the oppressive and contradictory formation of advanced industrial
colonialism. The ideological masquerade of export-led growth strategies
and their enshrinement within free trade policies is laid bare in the
social relations of technology production and the bifurcated terms of
exchange that resulted in a permanent structural subordination of Latin
America. In sum, it becomes clear that imperialism itself must be dismantled before real development can be achieved in the region.
The Brill Critical Global Studies series is pleased to make Vctor
Figueroas seminal contribution to development studies available to an
English language readership. In an appendix at the end of the work, we
include an entire chapter of Figueroas classic 1986 work Reinterpreting
Underdevelopment, making it available in English for the first time.

Readers who trace Figueroas analysis into the first quarter of the 21st
Century will come to appreciate the new urgency for reinterpreting
underdevelopment. In this sense, Figueroas critical analysis has returned
with renewed vigor to address the challenge he first outlined over a quarter century earlier.
R.A. Dello Buono, Ph.D.
Professor of Sociology
Manhattan College
New York City, USA

The present work deals with some of the critical problems experienced by
Latin America beginning from the end of the 1960s and continuing right
up through the present. Special attention is paid to the living conditions
of the popular sectors during this period which I designate as the third
stage of industrial colonialism. My analysis is guided by an analytical
framework rooted in an interpretation of imperialism that has been constructed over a long period of time. I believe that the overall understanding of imperialism will be enriched with the theoretical propositions that
are developed through this study.
Attempts at dealing with the international relations of domination
that extend through Latin America, a region that forms part of the global
South, are certainly not new. Theories of dependency dominated the
progressive and revolutionary academic and political concerns of the
1960s and 1970s. Critical reflection on the big issues of the region gradually
faded away from the literature in favor of more specific themes and case
studies. Many reasons can be offered to account for this trend, including
the harsh repression of popular movements and the ensuing isolation and
retreat of Marxist thought. In recent years, however, the ongoing upsurge
of popular struggles and a general world crisis have contributed to
renewed discussion about the options for development and the optimal
paths to be followed. This work seeks to contribute to the revitalization of
critical thought.
Under neoliberalism, it was originally expected that increasing globalization supported by free-trade policies would bring along with it certain
leveling effects both inside national economies and between countries.
That was the alleged natural task of a market that supposedly acts on the
basis of objective data rather than the dictates of economic and political
domination. Echoes of these initial arguments in support of the imperialist strategy designed to tackle the global crisis unleashed at the end of the
1960s and the beginning of 1970s can still be heard today, lending support
to governments that adhere to such a depleted ideology. Reality, in turn,
tells a different story, in which things proceed in the inverse direction.
Inequalities both between classes and between countries have deepened
in Latin America.


The parallel development of the concentration of wealth and the extension of misery (or poverty as termed in the development literature) are
trends embedded in capitalist development logic. This was first brilliantly
revealed in the work of Karl Marx and thus provides the starting point for
any serious theoretical work around these issues. However, our concern
embraces the issue of inequality between North and South and inside
Latin American countries. The aim is to unveil the mechanism by which
globally created misery becomes concentrated in underdeveloped countries in a context in which global riches flow into the hands of large corporations originating in the more developed countries. We are particularly
interested in analyzing the social form of misery in a region where national
ruling classes never called into question their subordinate position within
the international economic organization.
The question of how domination by some countries over others is
reproduced will be tackled from both a general perspective as well as from
the specificity of the third stage of industrial colonialism. Both concerns
must go together in order to produce a convincing explanation. On the
one hand, this is a problem related to reproduction of the social relations
upon which domination rests. Or, to put it another way, following propositions which I have already advanced in previous work, it is a problem of
how underdeveloped countries are prevented from advancing towards
the normal labor division of capitalism and the organization of their own
scientific labor. On the other hand, it can be seen that the general causes
of imperialist reproduction take on particular forms at different stages of
capitalism. We will review the political aspects of this issue, but, in particular, I seek to develop the discussion of the neoliberal mode of knowledge creation for material production. This will allow us to unveil the
actual mechanisms for the reproduction of the economic and political
relations of industrial colonialism.
Since some elements of the process of industrial colonialism work
spontaneously, they appear to be normal factors of societys economic
functioning. This actively conceals critical subjective factors such as the
decisive role that local oligarchies played in the maintenance of domination between countries. From the beginning of the 19th Century, local
oligarchies have prided themselves on the supposed sovereignty they
had secured for their countries. What they actually did some two hun
dredyears ago was to avail themselves for a new form of colonialism.
Classic colonialism, which included economic, social, political and cultural direct domination, made it possible for commercial colonialism to
develop through the 19th Century. This latter form demanded the existence

introduction 3
of formally independent states that would be able to diversify their external economic relations following the changes inside the global economic
center of world hegemony, i.e., Europe. It was thus through commerce,
especially during the last decades of that century, that industrial colonialism would be introduced. This would provide for the functioning of an
underdeveloped capitalism in the region and establish the corresponding
relations of domination.
The local oligarchies identified the abolition of classic colonialism with
the elimination of all colonialism and that is how it became written in our
textbooks. Rather than question the subordinated position of their countries in the world market, they instead conquered strategic spaces for the
management of their own interests. The asymmetrical and subordinated
integration of their countries within the imperialist system did not pose
any problem for them. Indeed, it was in the midst of this system that they
built their economic and political power. There was no reason to embark
on independent ventures.
The possibility existed that these oligarchies might have improved
their lot even more had they proposed to challenge the imperialist system
with a view to creating a more equitable relation with developed countries. Yet, the fact is that they never became committed to the building of
a true nation. Their only open and determined commitment was the
maintenance of the present world order. With all of the disadvantages of
underdevelopment loaded on the backs of the working people, there was
no real reason for their behavior to be any different.
The guiding thread of the arguments that I will put forward in this work
is based on the proposition that imperial domination over underdeveloped countries above all rests upon industrial colonialism. This conclusion was reached after prolonged research that resulted in a book published
in 1986 entitled Reinterpretando el subdesarrollo. Trabajo general, clase y
fuerza productiva en Amrica Latina [Re-interpreting Underdevelopment:
General Labor, Class and Productive Forces in Latin America] (1986). The
present work seeks to further develop the implications of this general line
of reasoning.
Capitalist social relations of production and the division of labor
are key variables to the constructs presented in the present work. Thus,
capitalist development and underdevelopment take on a meaning
directly linked to the division between general (or scientific) labor and
immediate labor. From this perspective, Lenins work is re-examined
and the concept of monopolies is complemented. By so doing, the impact
of capital export on host countries is better revealed with a new


significance. The obstruction of the division of labor is linked to the

corresponding emergence of underdevelopment, thereby introducing
industrial colonialism.
The decisive role of science in the development of productive forces
leads to a new responsibility for the state which we term the state development function. This function becomes concentrated in the more
developed countries. In the first chapter, the general workings of industrial colonialism are reviewed and we look at the relations of capital and
nature due to their critical condition in the present stage of imperialism.
Next we endeavor to describe the regions relationship with the United
States, the imperialist country most directly involved in Latin America.
During the third stage of imperialism, this relationship coincides with a
transition from crisis to crisis.
As we follow the course of US globalization strategy for resolving the
economic contradictions that surfaced at the end of the 1960s, special
attention is paid to the state development function and some of its internal and external economic effects. This allows us to reveal in Washingtons
motives for its policies towards the region. Just as we rule out a purely
financial explanation of the present crisis, we clarify that an approach
centered on production relations and real economy is also insufficient.
As I argue in Chapter 2, capital is indeed in the midst of a conflict with
itself as well as trapped in a serious contradiction with nature, thus facing
new and unprecedented challenges.
The third chapter deals with the actual workings of industrial colonialism in the region at the third stage. Outward-oriented growth is presented
as one of the two forms of growth that can take place in Latin American
countries under the conditions of industrial colonialism. It was the form
to which the region was eventually forced to adjust to under the demands
of the neoliberal globalization strategy. The regional implementation of
the neoliberal mode of science and progress production is presented as
part of the machinery for the reproduction of industrial colonialism. In
this context, we review the role of universities as institutions with a limited functionality as a result of their underdeveloped economic environment. The external and internal forms of manifestation of the main
underlying contradictions in Latin America are exposed as they unfolded
from the regions particular kind of integration into the imperialist
Chapters 4 and 5 grapple with some of the main problems of industrially colonized Latin American countries: population surplus and the
decline of peasant production. Many important efforts have already been

introduction 5
made to tackle the burning theoretical and practical questions that these
problems pose. I attempt to show that industrial colonialism provides
the most appropriate focus for explaining the causes and manifest forms
of surplus population. With this aim in mind, a brief review of the main
currents of thought on these issues is presented in order to expose their
inconsistencies. This allows us to present our own solutions and analyze
the different forms that the affected sectors of population assume vis vis
capital accumulation. The discussion of the problem begins with general
propositions regarding the situation in urban centers (Chapter 4) and
then moves to the surplus population in the countryside where the
unfolding of the peasant economy is taken as the benchmark (Chapter 5).
Earlier versions of my main arguments have been previously published
in the form of articles in publications such as Problemas del Desarrollo,
Revista Latinoamericana de Economa, Critical Sociology, Aportes and others. This material has been re-arranged, updated and corrected where
deemed necessary.



Latin America is one of the subordinated regions of the imperialist
system. Its economic, social, political and cultural processes are soundly
conditioned by its position. Yet, what does this position really consist of?
What are its causes and effects? How was it built? These are old questions,
but they are very much open to new answers. In addition, answers to
these questions are essential for providing a general theory of imperial
ism, making it the requisite point of departure.
Although this subject first attracted the attention of liberals, Marxism
embraced it as one of its own and has produced many valuable studies.
As is well known, one of the first and most important contributions in this
field came from Vladimir I. Lenin. Many of his propositions are still valid
while others call for discussion. A critical approach to Lenins work may
well produce an appropriate framework for tackling present realities and
this is what we will attempt to achieve in this chapter.
Monopoly, the Role of Science and the Function of the State
For Lenin, the main process that gave birth to imperialism was the
displacement of capitalist free competition by capitalist monopoly
(Lenin, 1966: 761). This is so because If it were necessary to give the
briefest possible definition of imperialism we should have to say that
imperialism is the monopoly stage of capitalism (Lenin, 1966: 762). Or,
as he put it: Imperialism, as regards its economic essence, is monopoly
capital (Lenin 1966 791). Lenin was well aware of the limits of this defi
nition, which he himself pointed out. However, his emphasis on this
point leaves no doubt about what he viewed as the principal feature of
Concentration of capital creates monopolies hence imperialism is a
necessary result of capital development. This is one of the theses that
distinguish Lenins interpretation from those worked out by liberals
and social democrats. Imperialism was not created by historical circum
stances taking place in isolation from capitalist development. For that
reason, it cannot be somehow extracted from the system without harming

chapter one

capitalism. Rather, imperialism is one phase of a logical and historical

development. However, it can already be seen that for Lenin, imperialism
is a phase that arises mainly at the level of capital distribution and competition. It does not involve, therefore, the fundamental capital and wagelabor class relation and the development of labor.
In Marx, the concentration and centralization of capital respond
to capitals tendency towards increasing the level of exploitation of labor.
In dealing with the historical phases of capitalism, Marx goes beyond
the variable level of exploitation, since these, like other categories such
as extraordinary profit, do not account for a specific phase of capitalist
development. Both in free competition and in monopoly, capitalists
obtain extraordinary profit. Therefore, some other variable is required.
For Marx, this variable was the relation of labor exploitation itself.
In other words, every new phase in the development of capital was at the
same time a new moment in the development of the capital and wagelabor relation. This is how he analyzed the transition from manufacture to
large-scale industry, which he defined as the transformation of formal
into real subsumption of labor. In contrast, the emergence of imperialism
for Lenin is not linked to change taking place at the level of the essential
relations of production and this shift in approach plays down the explan
atory power of his propositions.
In his discussion of imperialism, Lenin overestimated the importance
of competition. He identified free competition with capitalism itself,
as we can see in the following statement: Free competition is the basic
feature of capitalism and of commodity production generally; monopoly
is the exact opposite of free competition (1966: 761). Since commodity
production also exists in pre-capitalist societies and continues to exist
under monopoly capitalism or could even exist under socialism, it is not
a specific feature of some particular mode of production. Likewise, if
free competition is displaced and something else is created in the devel
opment of capital, it cannot be seen as a basic feature of capitalism, much
less of commodity production. The basic feature of capitalism must
embrace both free competition and monopoly and it must stand for
the essential relation of production, that is, for the separation between
means of production and direct producers in the case of capitalism.
Lenins proposition could lead to confusing conclusions, some of which
he himself put forward. Since monopoly is the exact opposite of free com
petition, the basic feature of capitalism, the emergence of the former was
bound to represent the transition from capitalism to a higher system
(1966: 761). What Lenin saw as a major transformation for the relations of

imperialism and industrial colonialism9

production, was production becoming social while appropriation remains

private, something which strangely calls into question the social charac
ter of production under free competition.
Marx, always cognizant of the importance of the relations of produc
tion, did take note of an important transformation at this level, in spite
of the fact that this change in capitalist society was just starting to
manifest itself in his time. A new division of labor was taking place, one
which separated what he called general (scientific) labor on the one hand
and immediate (operational) labor on the other (Marx, 1991, Vol. III: 199).
In the period of manufacture, mind and hand worked in unison, incorpo
rated in the direct producer, whose will and intellect controlled the
labor process. With the advent of large-scale industry, the worker was
stripped of creative intervention in production and was pushed into the
position of being an appendix of machinery. Most labor-power was
reduced to physical capacities of execution in following the rhythm of the
larger mechanical complex. At the same time, the intervention of knowl
edge in production was growing, boosted by: a) the need for industries
that were lagging behind technologically to maintain their competitive
ness; b) the demand for new means of communication coming from
industry, and c) the greed for extraordinary profits. In this way, the need
for new knowledge arose out of the core of capitalist production and
within all economic branches. At the same time, the knowledge required
for these purposes became progressively more complex. It was therefore
necessary to organize science to satisfy these productive aims. This pro
cess was initiated in Germany and then followed closely by the United
States. Ultimately it all came to drastically change the industrial mode of
As stated by H. Braverman:
Thus at a time when British and American industry used university-trained
scientists only sporadically, for help on specific problems, the German
capitalist class had already created that total and integrated effort which
organized, in the universities, industrial laboratories, professional societies
and trade associations, and in government-sponsored research a continu
ous scientific technological effort as the new basis for modern industry
(1974: 162).

General (scientific) labor was thus created as a specific form of productive

labor. Its function would be the creation of progress, i.e. the advancement
of productive forces, through the continuous conception and materializa
tion of new goods and processes. In contemporaneous literature this
activity is labeled as research and development, where research refers


chapter one

to systematic study oriented to reach some scientific knowledge or a

more complete understanding of the subject under study. This can be
basic research, when the aim is to improve knowledge without having in
mind any specific application of it. Or, it can be applied research, when its
aim is to advance the knowledge that is required to meet a specific need.
Development in turn refers to the systematic use of knowledge or
understanding obtained from research with a view to the production of
materials, equipment, systems or processes, including design, develop
ment and improvement of prototypes and new process. Applied research
and development often appear as a single category in statistical records
(AAAS, 2009).
Thus, innovation and change are the main concerns of research and
development, of general (scientific) labor. Product quality control, rou
tine proofs and mass-production would remain in the hands of immedi
ate labor. Although 19th century large-scale industry degraded the level
of intervention of the worker in the labor process, part of immediate labor
still contributed intellectual abilities. But science would seize the creative
function of knowledge from the last decades of that period. So, if separa
tion (of the direct producers and their means of production) is at the root
of the capitalist system, it reappears in the capitalist labor process. First,
control of the labor process is taken away from the worker with the advent
of large-scale industry. Then, labors creative abilities are separated from
the immediate workers physical abilities for mass production. This divi
sion of labor in production would come to be followed by a division of the
labor market.
Labor exploitation in two differentiated spheres of labor would
strengthen the power of capital over the workers. Direct producers
engaged in immediate labor would now face new limits to their wage
negotiations. Their skill qualification is constrained by secondary tasks
they are pushed to carry out. The expansion of the industrial army and
their workers organizations become their main support. At the same
time, constant production innovation will provide the means to steadily
raise the rate of relative surplus value. Scientific labor, in turn, will rest
mainly on the workers level of skill qualification given the difficulties of
these producers in getting organized.
The state takes on a new function in this context. To its traditional
tasks related to the advancement of social constant and variable capitals,
the creation of general conditions for the development of scientific labor and
its productive applications is now being added. These conditions mainly

imperialism and industrial colonialism11

Boosting the development of science, in particular basic science.

Ensuring the socialization of knowledge.
Providing for the skilled qualification of labor for scientific work, in par
ticular, the training of researchers.
Promoting international scientific cooperation.
Encouraging collaboration between scientific areas.
These are conditions for the development of productive forces whose sat
isfaction does not normally guarantee any direct profit. Their steady
delivery configures a state development function. Under conditions of lib
eral capitalism, this function is carried out through a close collaboration
of the state with the private industrial sector.
Once the importance of scientific knowledge for production is recog
nized, capitalists would be willing to organize their own scientific advances
for the innovation of their production process and products. This was
especially the case as the ever-growing complexity and costs of scientific
labor as well the need to keep industrial secrets eroded their reliance
upon independent inventors. In this context, the part of the new scientific
knowledge created by applied science would be left in the hands of pri
vate capital. Yet, the dependency of capitalists on their state would
increase as the conception and introduction of new technological appli
cations of science required state organization of general conditions propi
tious to this end. As the presence of science in production steadily
becomes generalized, it gradually becomes evident that development can
no longer be solely the work of private capitalists. For this reason, the
fusion of capitalists to their state becomes ever tighter.
There are several important aspects involved in this fusion. The
advancement of basic science opens new opportunities for technological
innovation. Innovation, in turn, provides new questions for basic research.
In the same way, applied research is possible thanks to state-organized
and trained personnel. But private industries signal to the state the kind
of training required at any given point of capital development.
Indeed, scientific labor under private capitalism is the object of a fur
ther division between state and capitalists. The state takes on those activi
ties which by themselves do not guarantee or yield profits and which can
be considered as a general condition of scientific labor. Private capitalists,
in turn, carry out the technical application of knowledge as dictated by
profit considerations. This yields the basic conception of organized scien
tific labor. The state can carry out applied research in the same way as
private capitalists undertake basic science.


chapter one

It should be expected that the larger the quantity and the better the
quality of scientific labor, the greater its impact on a countrys interna
tional economic position. An imperialist country contending for world
hegemony will probably be successful if it carries out the best possible
development of its state function. A good articulation of the state with
capitalist activities and the accumulated experience that results from it
are important conditions in that connection. With a view to promoting the
national interest, the state can also allow for foreign capitalists to partici
pate in the development of scientific labor. When that occurs, it becomes
clear that the states view of national interest is not confined to the inter
ests of their own capitalists whose national concerns may be limited.
If control over science-based processes and products is crucial for a
countrys international position, the same is true for enterprises vis--vis
domestic and foreign competitors. Most monopolies have reached their
position thanks to the scientific labor they control. While bearing in mind
that neither the technical mode of production nor its products are consid
ered permanent, we can assert that holding a monopoly position rests
upon the enterprises quality, the mass of scientific labor it exploits, and
the consistency it shows in exploiting it.
Extraordinary profit promotes technological progress. Control of prog
ress allows for enterprises to prolong the period in which they obtain
extraordinary profit. Hence, the efforts made by enterprises to protect the
knowledge and abilities they control is well founded. Monopolies are big
supporters of authentic copyright and industrial secrets. To that extent,
they are also conservative. Normally, the success of other enterprises in
their search for profits poses a threat to the conservative monopoly which
becomes forced to introduce innovations.
To sum up, it can be said that monopolies do not control products and
markets only as a result of the mass of capital under their control. Rather,
it is mainly due to the knowledge and its productive applications which
they control. Apart from monopolies resting on control over exceptional
natural resources, it seems clear that enterprises cannot generally hold on
to a monopoly position indefinitely if they do not have control over cru
cial elements of the knowledge that their product objectifies and/or over
the processes to get that product.
During the first stage of imperialism (18701930), enterprises focused
on the productive applications of knowledge rather than on the direct con
trol over knowledge. Monopoly was in fact large-scale capital more than
anything else. This was the kind of capital required to pursue capitalist
progress at that time (steel industry, international railways networks

imperialism and industrial colonialism13

and navigation, international telegraph, large ports, and the like). At the
second stage (19301970s), monopolies displaced independent inventors
and became the principal agent of patent registration. From the 1970s
on (the third stage), large companies started internationalization of the
research and development activity itself, especially towards the so-called
emerging countries but also, to a much lesser extent, towards underde
veloped countries.
With the emergence and consolidation of neoliberalism, the role being
played by the various agents of scientific knowledge production and its
applications in production experiences significant change. In particular,
the state function as a coordinator of activities aimed towards innovation
gains relevance compared to its function as a key provider of basic knowl
edge. Science workers dedicated to basic science as well as public univer
sities are divested of part of their ability to determine their own research
agenda. While their traditional links with the states ends are broken, they
are now compelled to evolve in closer relationships with the demands of
private enterprise. Enterprises become vastly empowered in terms of
their ability to determine the content and rhythms of knowledge produc
tion. The new reality of scientific labor related to production is mainly
defined by these fundamental features. The implications of this fact
require careful elaboration.
The idea remains widespread that material development obtained
from the market requires stimuli. Or better still, that these stimuli are the
most adequate way to encourage development. These stimuli are sup
posed to have brought about adjustments within the relationships among
the participants in technological change, concerning both the links exist
ing between them and their relation to knowledge production. Private
enterprise, which has always played a crucial role in technological change,
now becomes an even more influential agent in this process.
Private enterprise has not often been recognized as the key and leading
partner that it has become for the production of knowledge and its appli
cations in material production. It therefore is often found alongside gov
ernment and the sector of the academic-scientific community not directly
concerned with profit-making activities, as is the case, for instance, in
triple-helix type analyses. The point is that the aims of the new institu
tional arrangement are the development of material production and the
acquisition of profit in a context where state action is limited and private
interests have been blown out of proportion.
Given this arrangement, private enterprise would on the one hand
increase its participation in research funding. It in fact grew consistently


chapter one

over recent decades although this tendency was halted during first the
decade of 21st century. In the USA, the private enterprise share in R&D
funding was 46.8% in 1977 and it went up to 66.6% in 2007. Inversely, the
states contribution fell from 50.6% to 27.6% during the same period
(Figueroa, 1992; RICYT, 2010).
On the other hand, the fact that governmental and academic commu
nities would now follow guidelines set by private interests was bound to
leave its mark on the larger ends of science. In essence, the aims of science
are always socially conditioned. The deepest level of determination comes
from the core of the social relations of basic production. Within that
framework, the advent of new relations between key social agents also
contributes to re-defining the ends of science.
In our case, neoliberalism brought with it the following implications
for knowledge production:
Research intensified its concentration on the solution of concrete prob
lems within the enterprise, whereby its concern for general, abstract
problems did not become necessarily weaker, but more focused towards
those areas where the probability of successful business activity was
The notion of interest of capital was diminished. Private profit largely
gets rid of considerations about the common interests of capitalists
or the interests of capitalism per se. In the case of the United States,
the effects of this new ideological arrangement can be appreciated in
the rather sparse attention that government and enterprises have paid
to researching such critical problems as the environment and energy.
This has been true practically throughout the entire neoliberal period.
Such a huge negligence is largely to blame for the extent of the present
conflict between capital and nature as well as for the inability of
the system to even attempt to provide, let alone actually provide, a
response to this contradiction. The same could be said of peak-oil
(Figueroa, 2010).
The state, in turn, does continue to carry out and promote scientific
research. However, its activity in this regard has been reduced relative to
the past and at the same time re-oriented by the conviction that competi
tiveness of both the national economy and of individual entrepreneurs
demands greater attention to those scientific areas that can more imme
diately impact upon productivity. Computers and electronics along with
bio-chemicals and pharmaceuticals became priority areas and in the case

imperialism and industrial colonialism15

of the USA, hegemonic endeavors have led research in military defense to

a highly privileged place.
The states role as a coordinator of relations between the scientific
community and entrepreneurs gains importance and becomes one of
prime relevance. It is not only a matter of administrating already estab
lished relations. To a large extent, the point becomes to reorganize such
links with a view to better adjusting them to the larger premise that initia
tive is under the direction of private enterprise.
Within the scientific community not directly subordinated to the
prevailing business logic, universities figure among the most important
institutions that have been summoned into the new model of knowledge
production. The activities of these institutions must be reorganized to
open the way to practices more akin to a market oriented performance,
something which for public universities in Latin America amounts to a
huge blow to their treasured autonomy, as we will see later.
Room for independent scientific projects emerging from curiosity and
the eagerness to know and understand becomes ever more reduced, even
while it was never accorded sufficient space in the past. It becomes forced
to cede its domain to more practical uncertainties coming from the oper
ations of business. The scientist, for whom knowledge in itself is every
thing and who sees these new demands as illegitimate, is compelled to
understand that capitalist production depends upon scientific principles
and that a primary function of the state is to put science at the service of
For the scientist, scientific activity must now make sense in an appli
cation context, that is, a context where most scientists give up their inde
pendently determined agenda in deference to programs that make it
possible for them to carry on scientific labor even as this means topics and
rhythms defined from outside of their working environments and scien
tific aspirations. At the same time, those scientific workers inclined to
the more practical aspects of knowledge will find an ever more propitious
terrain for themselves.
Universities, especially public universities, must limit those efforts
oriented to creating knowledge that may be used for everyone in need
of it and instead develop new links with particular clients for particular
istic purposes. The same is true with respect to their commitment to
the development of basic science, now re-oriented to those areas where
the demand for knowledge of private enterprises is greatest. We will
later see that all this has had a profound effect on the operation of


chapter one

Generally speaking, the role of the state during the present phase of
capitalism with regard to its development function emphasizes the build
ing of creative links between the scientific community and enterprises,
and to the strengthening of the so-called National Innovation Systems
(NIS). In fact, innovation has become the main concern in studies
of technological change, thus stressing the extremely important aim of
knowledge creation for current capitalism. According to the Organization
for Economic Co-operation and Development (OECD): An innovation is
the implementation of a new or significantly improved product (good or
service), or process, a new marketing method, or practices, workplace
organization or external relations (OECD, 2007: 394). Thus, every phase
of a products life from its conception to its arrival in the consumers
hands can be a particular object of innovation, even if it does not require
the intervention of scientific research or the creation of new products or
processes. An underdeveloped country innovates through the importa
tion of progress, and in so doing it appears to be on the rails of develop
ment. It follows that the relations which the state promotes between
academic communities and entrepreneurs with a view to innovation will
have a different meaning in developed and in underdeveloped countries.
Every NIS includes the inventory of the human and material resources
that participate in innovation processes. The state must not only mobilize
them in pursuit of technological change, but also must continue to pro
vide the general conditions for development in terms of advances of social
constant and variable capitals and the other activities we have men
tioned. The power that private enterprise has won is exercised mainly by
large monopolies, for it is these that concentrate the R&D activities and
spending, and which in turn are geographically concentrated in a limited
number of countries (United States, Japan, England, Germany and
France). The larger power they enjoy has not only an effect inside their
respective economies, but also is bound to result in greater control by
monopolies over underdeveloped economies.
Social Relations of Production and Foreign Trade
In Lenins work, the export of capital is another outstanding feature of
imperialism. This refers to the placement abroad of monetary resources
and the means of production, which is now added to the export of ordi
nary commodities. This is also one of the most important means for the
plunder of backward areas by advanced countries. Lenin thought that the

imperialism and industrial colonialism17

cause of the export of capital was the search for profit by monopolies. He
put it this way:
As long as capitalism remains what it is, surplus capital will be utilized, not
for the purpose of raising the standard of living of the masses in a given
country, for this would mean a decline in profits for the capitalists, but for
the purpose of increasing profits by exporting capital abroad to the back
ward countries. In these backward countries profits are usually high, for
capital is scarce, the price of land is relatively low, wages are low, and raw
materials are cheap. (1966: 739)

Certainly, Lenin was aware that the destination of capital exports was not
only backward countries but also advanced countries. But this is not
encompassed by the formula he chose. Backward countries may not offer
the adequate conditions for a given production in terms of skilled labor
power or, more generally, the appropriate technological environment
and the adequate market conditions for the realization of the desired
Our concern here is to describe how capital export had a decisive
impact on backward countries, beyond increasing monopoly profit and
providing a stimulus for capitalist world expansion. With regard to the
question of the main actor of imperialism, Lenin adopted Hilferdings
notion of financial capital, i.e., the merging of banks with industry, and
worked out the concept of the financial oligarchy that developed along
with it. Whether or not other forms of big capital and their representa
tions should be included in these concepts is a secondary matter. Lenin
would probably not have objected. The financial oligarchy that emerged
with concentration and monopolies is the principal promoter and benefi
ciary of capital export.
So far, imperialism is open to two sets of relations: a) those taking place
between advanced countries, where financial oligarchies compete
directly between themselves and b) those between these oligarchies and
the backward countries. The former relations stress the analysis of a strug
gle for world hegemony, while the latter leads directly to the problem of
empire or domination. Certainly, domination is also part of the scenario
of struggle for world hegemony.
Monopolies are a product of capitalist development, indeed, a manifes
tation of such development. This process can be thought of as inde
pendent of external relations, at least, as far as a logical explanation is
concerned. H. Magdoff, with every reason, made it clear that: The wish
and necessity to operate at world scale forms part of capitalist economy
and Seen in this way, export of capital, just like external trade, is a normal


chapter one

function of the capitalist enterprise (1977: 8788). At the same time,

monopolies are a reality in every capitalist country, either dominant or
dominated. The question therefore arises: what allows for some countries
to systematically dominate others where there are also monopolies and
exports of capital?
At first glance the reason is backwardness. Yet, what determines back
wardness? Trade as unequal exchange has been put forward as one of
the answers to this problem. But some countries such as Japan overcame
their backwardness and others are doing so by relying on trade. We can
conclude that if trade has a bearing on domination, it will do so only as a
manifestation of primary causes located elsewhere, namely in production.
That is, imperialist rule must be conceived in the first place at the level of
the capitalist social relations of production. This perspective does not
exclude unequal exchange, but it should explain it. It should also explain
why the so-called backward countries can introduce modern industry
and at the same time deepen their relative backwardness in comparison
to advanced countries.
The foregoing is not intended to argue that capital export from
advanced countries did not contribute to the emergence of underdevelopment, a particular form of backwardness, and to imperialism as a stage of
capitalism where some countries are condemned to a subordinated posi
tion within the world market.
In the case of Latin America, the introduction of foreign money capital
and means of production in industry, mining and communications had
at least two outstanding effects: 1) it largely helped the expansion of
capitalism, something which Lenin stressed, and 2) it made possible the
emergence of a capitalism that would proceed resting on the progress
of the productive forces created by the advanced, hereafter, developed countries (Figueroa, 1986). Capital export decisively pushed forward the expan
sion of wage-labor, but at the same time, prevented it from dividing into
immediate and general (scientific) labor in relation to the mass of produc
tive processes taking place in Latin American countries. What they
imported, and have continued to import since then is capitalist progress
and the ability to create it. It follows that the new capitalism created actu
ally lacks competitive ability, which is more evidence of monopoly capi
tals aversion to competition. Thus, underdevelopment is a form of
capitalist production that proceeds by relying on the import of progress
that is originated in developed countries.
It must be said that this was not an unavoidable outcome of capital
exports. Theoretically, there was the possibility that the ruling classes in

imperialism and industrial colonialism19

Latin America, instead of uncritically adopting the progress coming from

abroad, might have appropriated the knowledge objectified in the
imported means of production with the aim of domestically producing
them at some point in time. This was the answer that Japan adopted
beginning at around the second half of the 19th century. However, the
local ruling classes of the Latin American region, in contrast to
the Japanese, envisaged the world market as their natural fatherland, the
economic environment in which they were grown. They were sons of
the world market and were in no position to embark on nation-building
projects (Figueroa, 1986). This point must be stressed. Imperialism in
Latin America was not the mere result of capital export by the financial
oligarchies of the developed countries. It was also made possible because
the financial oligarchy found in the importing countries a firm collabora
tion by a local ruling class, a class that acted as a complementary actor
and which would become a subordinated social link in the imperialist
This lets us see the true nature of monopolies in underdeveloped coun
tries. A large part of them are subsidiary companies of corporations of the
developed countries, i.e., extended monopolies. Some of them, including
a very powerful few, arose from domestic capital. Most of them, if not all,
are based on externally developed technologies and foreign scientific labor.
The emergence and consolidation of monopolies in the region are tied to
the import or transference of technological progress. This is valid not only
for large-scale capital, but also for a large part of most other industries.
Capital exports, then, as far as backward countries are concerned, meant
much more than the mere transference of money capital and means of
production. Exports of capital implied the transference of scientific labor
and made it possible for the receiving countries to rely on externally gen
erated capitalist progress. To that extent, and with the consent of the local
ruling groups, it prevented the division of labor from developing. From
that point forward, they would mainly devote themselves to exploiting
immediate labor and to promoting subsidiary skilled labor with an eye on
ensuring the steady operation of means of production created abroad.
It is precisely this fact that determined their underdeveloped character.
Much earlier, commerce had spread capitalism in Europe. From the
third part of the 19th century, commerce would be crucial to the forma
tion of capitalist underdevelopment. Yet by then, commerce no longer
played a predominant role with respect to productive capital in advanced
countries. Thanks to the industrial revolution that started in the latter
decades of the 17th century, capitalist development gave rise to the


chapter one

conditions in which industrial capital would come to predominate over

commercial capital. In Marxs words:
Whereas before the master-weaver gradually received his wood from
the merchant in small portions and worked along with his journeymen for
the merchant, now the weaver buys wool or yarn himself, and sells the
merchant his cloth. The elements of production go into the production pro
cess as commodities that he has himself bought. And instead of producing
for the individual merchant or for particular customers, the weaver now
produces for the entire world of commerce () As soon as manufacture
becomes somewhat stronger, and still more so large-scale industry, it
creates a market for itself and uses its commodities to conquer it. Trade now
becomes the servant of industrial production, for which the constant expan
sion of the market is a condition of existence (1991: 454).

In England, the repeal of the Corn Laws and the abolition of duties on
other raw materials are outstanding proofs of the hegemony of industrial
capital. In this context, it can be said that industrial capital already
predominated in international trade throughout a large part of the 19th
century and it is well known that exports of the region were mainly
oriented to serving the industrial development of advanced countries.
This hegemony, however, was not directly exercised by the latter over the
region but indirectly through commercial capital and banks. Local states
did not oppose this subordination. What has been called the interna
tional division of labor organized home production to the benefit of capi
talist development in advanced countries and annexed it to them through
commerce. England, a country still very actively involved in classical colo
nialism in other regions, introduced in this way a more advanced form of
domination in Latin America: commercial colonialism. This is the form
of domination that, in the case of this region, corresponds to the period of
free competition and was established precisely in the name of free trade.
During the emergence and consolidation of capitalism in Latin America
(roughly 18601930), large-scale industry was already consolidated in the
developed countries and gave rise to monopolies. Relative surplus value
and productivity and, hence, the constant introduction of innovations
were generalized industrial methods. Latin America witnessed the intro
duction of the second wave of technological changes that had begun in
Europe and the United States. Electrical equipment, telephones, internal
combustion engines, vehicles, and flotation processes were some of the
technological innovations that would arrive over time. At the same time,
Latin America saw how innovations would also end up obliterating the
economic value of some natural resources. For example, this happened

imperialism and industrial colonialism21

with saltpeter, an important commodity for Chile, following the inven

tion of synthetic saltpeter. So it was that capitalism was introduced in
Latin America on the basis of a technical mode of production that implied
a direct commitment to relative surplus labor. It did not go through any
previous stage and from that point forward, the only way for local capital
ists to stay in business was by importing progress. In short, capitalism was
introduced through industrial colonialism that would become an inher
ent condition of Latin Americas economic trajectory.
The second stage (19301970s) includes two periods. The first took
place from 1930 to 194045. During that period, developed countries were
concentrating on challenging crises and wars and Latin America enjoyed
a certain amount of autonomy. Spontaneous economic growth was reori
ented towards domestic labor and light industry flourished. Yet, this
process took place by the import of machinery and equipment that
existed in developed countries. The region had an opportunity to break
with its technological dependence but it did not even try to do so. Local
capitalists provided a social base for imperialism regardless of whether or
not they were involved in joint business with foreign monopoly capital. In
the second period from 1945 to the 1970s, foreign monopolies resumed
their penetration in the region with industrial growth being boosted once
again. The production of durables, electrical appliances (especially major
appliances), telecommunications, new vehicles, petrochemicals, and oth
ers, grew with great dynamism. Foreign capital penetrated even deeper,
merging with local capitalists as the preferred method vis--vis the modi
cum of nationalist feeling that arose during the phase of populism, regula
tions and protectionism. Populism coincides in Latin America with the
transition from outward-oriented growth to inward-oriented growth.
The third stage witnessed a region that was incorporating a wave of
technological changes spearheaded by information technologies. Monop
olies eliminated regulations in the region and took advantage of privatiza
tions. Globalization and a newly reborn free trade became the banner
of the monopolies in their quest for ever further penetration.
The reliance on an externally forged development of productive forces,
a crucial factor for the emergence of underdevelopment, became a con
dition for its own reproduction. Industrial dependency would grow
stronger, hand in hand with economic growth. The industry of developed
countries would now exercise its hegemony directly over the underdevel
oped countries of Latin America. Underdevelopment therefore appeared
at the same time as industrial colonialism, both as a result and a condi
tion thereof.


chapter one
The Workings of Industrial Colonialism

Lenin wisely stated that:

Colonial policy and imperialism existed before the latest stage of capital
ism, and even before capitalism. Rome, founded on slavery, pursued a
colonial policy and practiced imperialism. But general disquisitions,
which ignore, or put into the background, the fundamental difference
between socio-economic formations, inevitably turn into the most vapid
banality or bragging, like the comparison: Greater Rome and Greater
Britain. Even the colonial policy of previous stages of capitalism is essen
tially different from the colonial policy of finance capital (1966: 756757).

Accordingly, we can establish that capitalist imperialism, with regard to

the relations of developed and underdeveloped countries, is above all
industrial colonialism.
Lenin also considered that: Finance capital is such a great, such a
decisive, you might say, force in all economic and in all international
relations, that it is capable of subjecting to itself, and actually does, even
states enjoying the fullest political independence (1966: 380). But his
explanation of the reasons for this situation is not satisfactory. On one
hand, we have already seen that he does not go much deeper into the
analysis of the monopoly-building process. On the other hand, he pays
no attention to the capitalist social relations of production that emerged
in colonized countries and their corresponding structures. This latter
point will become crucial when dealing with domination over states
that enjoy political independence such as is the case of Latin America.
Developed and underdeveloped countries represent different class
structures within the same capitalist socio-economic formation. Scientific
labor in relation to most productive processes is not organized in under
developed economies. Hence, they are unable to pursue by themselves
the development of productive forces or self-expansion. Their internal
capitalist organization and the corresponding economic growth are real
ized as such only thanks to the link with developed countries. They are
deeply and asymmetrically integrated into the developed countries.
The most evident manifestation of this asymmetrical integration
appears at the level of external trade, as a structural unequal exchange.
We have presented it as trade where developed countries sell both the
products of scientific and immediate labor and underdeveloped countries
mainly sell only the products of immediate labor (Figueroa, 1986). In
terms of the value composition of the product, the exchange could also be
described in this way: C(i + g) + V(i + g) + S(i + g) in the case of developed

imperialism and industrial colonialism23

countries, against Ci + Vi + Si, for underdeveloped countries, where C =

constant capital; V= variable capital; S = surplus value; i = immediate
labor, and g = general or scientific labor. This description does not intend
to suggest that underdeveloped countries do not execute any scientific
labor. Rather, it indicates that with respect to external trade, this labor
is negligible. Indeed, the lions share of it is carried out by foreign
The most elemental way of approaching the value of scientific labor
is through intangible assets (patents, trade marks, know-how) but this
method fails to fully account for the real values involved. The value of
general labor is transmitted to the products of immediate labor, espe
cially in new goods and processes. Likewise, the control over these new
products allows prices to increase over their social value even if their
production is already generalized in developed countries, which is typi
cally when they are bought by underdeveloped countries. This practice
responds to the law according to which the value of new means of pro
duction must be lower than the value of the labor power they displace
to get a higher rate of profit. As is well known, the value of labor power
in underdeveloped countries is much lower than that which prevails in
the core countries of the imperialist system.
Leaving aside the margin for monopoly abuses in prices, trade between
both categories of countries does not convey value transferences derived
from trade itself. There is unequal exchange, not because products are not
exchanged at their value, but for two different reasons: 1) because the
underdeveloped country does not create a portion of the value of its prod
uct; and 2) because the average social necessary labor for production in
developed countries is lower than in underdeveloped countries, this as a
result of differences in labor productivity.
Unequal exchange therefore implies a value transference which is
rooted in production relations. We call it investment transference since a
part of the surplus value that will be used in production must be diverted
to developed countries in order to acquire means of production that
are not domestically produced, especially new goods and processes. For
our purposes, products of immediate labor including raw materials are
considered objects of a two-sided exchange. Products of scientific labor,
however, are not even though we know that underdeveloped countries do
produce some.
As can be seen, developed countries created a permanent captive
demand for a part of their own produce in underdeveloped countries, one
that is complementary to their domestically disposable realization


chapter one

circuits. They produce more than they need for accumulation and their
growth takes place partly at the expense of surplus value created beyond
their frontiers, independently of foreign investment. It follows that under
developed countries transfer a part of their own employment generating
ability to developed countries, a topic that will receive the attention it
deserves in a later chapter.
A tendency towards deficit in the trade balance of underdeveloped
countries is also rooted in their specific relations of production, some
thing which requires no explanation at this point. A balance of trade defi
cit, in turn, brings with it a predisposition to indebtedness and openness
towards foreign investment. Remittances of interests and profits are an
inevitable link in this logic. These processes are not the outcome of politi
cal attitudes, although they can be reinforced, as they are in practice, by
political inclinations. Yet we are dealing here with a dynamic that flour
ishes from the deepest structure of underdeveloped capitalism, namely,
from industrial colonialism.
We can therefore affirm that relations with developed countries are
constrained by a chain that begins with a value transference and ends up
with another: investment transference trade deficit indebtedness
openness to foreign investment remittances of interests and profits.
This is a dynamic that proceeds spontaneously, independently of any form
of political domination and which does not require any systematic military
intervention to take place. It is in fact a dynamic that makes possible the
domination of formally independent states even as they become reorga
nized as formal democracies.
Local capitalists see no reason for remorse. They buy progress as they
buy raw materials or anything else. These purchases are seen as a normal
and necessary part of their profit-making activities. Their social function
as business people is guaranteed as they create employment and encour
age other businesses. From the point of their emergence as capitalists,
they found the excuse for ignoring tasks related to the development of the
productive forces in the exports of capital. They were born structurally
tied to the financial oligarchy of developed countries, globalized as we
now say. In this way, their character was established as consumer bour
geoisie as they renounced the economic option of building a truly inte
grated nation. They became a mere appendix of the core countries ruling
classes and it is clear that their socio-economic position does not corre
spond to an international division of labor. Capitalists in a developed
country would not compromise their right to the exploitation of immedi
ate labor.

imperialism and industrial colonialism25

The state that they built therefore remained incomplete, for the devel
opment function was not organized and the provision of material prog
ress was left in the hands of the international market. As production can
only take place in the context of subordination to developed countries,
the state is inevitably accorded a subsidiary function in the absence of the
development function, namely, the guarantee that the link that makes
accumulation possible will not be broken since this is a condition of eco
nomic growth. Obtaining profits falls into direct conflict with any policy
that seriously threatens that relation.
This means that national expropriations of foreign capital which are
rejected by the financial oligarchy and states of developed countries will
normally mobilize the bourgeois opposition in underdeveloped coun
tries. Local capitalists do not need to be involved in joint ventures with
affected foreign investors to act politically against their own government
since expropriations jeopardize their structural ties.
It should be said that expropriations by themselves cannot fully serve
any national purpose. They signify the appropriation of material resources
by the nation but do not convey the appropriation of the knowledge that
is objectified in such resources and much less the accumulated scientific
ability to produce them. A dramatic example of this could be seen in Chile
during the Popular Unity government of Salvador Allende. Expropriations
formed a crucial element of his national program and were contested by
the United States government by means of an invisible blockade that
brought all of the necessary means and credits for production grinding to
a halt. Industry and indeed most economic activity was severely dam
aged, with the ensuing shortages of supply, inflation and so on. The politi
cal activity of entrepreneurs, strongly financed by Washington, stopped
the forward movement of change and their influence on the armed forces
would do the rest (Figueroa, 1999).
Industrial colonialism therefore contains the social and political fac
tors necessary for its own reproduction, not only outside but also inside
underdeveloped countries. It really surpasses the prior scheme of colonial
possessions since external open military control, already losing its impor
tance during commercial colonialism, is now practically unnecessary
under normal conditions. Political democracy becomes possible, and if it
turns out to become dangerous, imperialists can resort to supporting local
armed forces to whose responsibility they leave the dirty work. If this
scenario breaks down, they still have other methods at their disposal such
as the promotion of wars between countries. Direct imperialist military
intervention always remains an option and the region has come to know


chapter one

it very well. But political control over a country by means of permanent or

even long term military occupation is no longer an inevitable necessity.
The defense of democracy and peace provide the best excuse for reestab
lishing friendly governments, something which imperialists are now in a
position to do. Democracy is welcome, however, only to the extent that it
does not endanger the imperialist relation.
Industrial colonialism gets stronger as capitalist production in under
developed countries grows, since technological dependence becomes
deeper and increasingly more extended. The implications of this depen
dency will be treated in greater detail in another chapter. Suffice to say
here that the capitalists of underdeveloped countries build their own eco
nomic and political strength, which is, at the local level, the strength of
the system as a whole. A relatively strong capitalist class reduces the need
for foreign direct intervention while a weak local bourgeoisie and capital
ist production usually appear among the factors that accompany foreign
direct interventions. Stronger local capitalist classes provide better and
more adequate support for the reproduction of industrial colonialism.
Since the means of violence and destruction are also the product of
technological applications of science, their constant development tends
to remain under the control of developed countries. Underdeveloped
countries are generally denied the possibility of becoming a potential
military danger, except to other countries that fall in the same category.
True, an underdeveloped country could produce weapons of mass
destruction and, therefore, the developed countries take every care to
prevent them from doing so. But it is generally true that this is very diffi
cult for them as they are unable to reach the scale and technological
development of the military industry of developed countries. Permanent
technological innovation and large-scale production are the means by
which developed countries try to keep their monopoly on the means of
violence, in addition to coercion and blackmail. This monopoly is inher
ent to the imperialist system.
Ideological penetration, something which feeds the local military
establishments predisposition to act as an imperialist agent, should be
added to material dependence. The need to gain access to modern
military equipment as well as the dependence on all sorts of technical
training makes the military of underdeveloped countries more vulnerable
to ideological manipulation. Diplomacy oriented towards strengthening
and widening the links with local institutions and organizations in under
developed countries also plays an important role in the large range of
activities designed to keep the imperialist system in good shape.

imperialism and industrial colonialism27

All of this notwithstanding, things are changing on a world scale and

these changes will probably affect the workings of industrial colonialism,
particularly with regard to the modes of political control over underdevel
oped countries, at least for some of them.
Imperialism and Nature
So far, we have discussed some facets of imperialism as though the sce
nario was free of any challenges from its natural environment. As it is
well known, this is no longer possible. Capitalist production has given
way to an acute conflict between nature and production, a conflict to
which capitalism has no ready answer.
Among the pressing threats posed by global warming are: 1) rising sea
levels and the reduction of coastal spaces that affects tourism, infrastruc
ture, small fisheries and promotes migrations; 2) destruction of ozone
molecules and the ozone layer, thus weakening protection against ultraviolet radiation from the sun; 3) pollution and acid rain; 4) contamination
and decrease of available freshwater caused by organic and inorganic
chemical elements; 5) destruction of glaciers; 6) decreased agricultural
yields due to droughts and floods; and 7) deforestation and its destructive
impact on the habitat of countless species and defenses against erosion
and floods. We will elaborate further on this point in the next chapter.
These effects on climate are the product of ordinary emissions of car
bon dioxide, methane and nitrous oxide produced by ordinary capitalist
activity. Capitalism has also contributed to this problematic state of the
environment by other means such as the unnecessary destruction of
marine biodiversity by the use of irrational fishing methods, the erosion
of lands by over-grazing, and the destruction of habitats (forests, man
groves) through pollution as a result of wars.
The contradiction between economic growth and resource depletion is
not new but was not posed in Lenins exegesis of imperialism. At the
beginning of the 1970s, the Club of Rome (an organization composed of
scientists, entrepreneurs, managers, civil servants and heads of state)
sponsored a study that attracted much attention throughout the world,
published under the title Limits to Growth. Evaluating trends of popula
tion, industrialization, pollution, food production and resource deple
tion, the study, reviving Malthusian predictions, concluded that growth
would come to a halt at some point within the next one hundred years.
However, very shortly afterwards, in 1974, the Club adopted a more


chapter one

optimistic point of view, based on a supposedly more carefully con

structed study, and decided that most of the factors mitigating against
growth were within human control. No disaster was unavoidable and
business as usual prevailed. At the threshold of the present century, the
practical course of things would prove this approach to be flawed.
In any case, the standard capitalist rationale would not pay much
attention to this sort of warning, especially after the 19731974 oil shock
had been overcome. The socially neutral standpoint of this kind of
study would not help much. Blaming population growth, abstract indus
trialization and calling humanity to do its task would set the social
system of production free from any relevant responsibility. Profit-seeking
figures are a far higher status in the capitalist agenda than environmental
James OConnor (1991) tackled the issue from a Marxist perspective. He
suggests a second contradiction which opposes capitalism and capital
ist conditions of production, namely constant capital. The ensuing discus
sion has produced some very relevant postulates to the understanding of
the present situation. We are not in a position in this work to give those
contributions the attention they deserve. Inspired by them as well as the
broader Marxist tradition, we have arrived at the following propositions.
The Earth is at the same time the most general object and objective
condition for labor, and, hence, for the existence of mankind (Marx, 1990:
216217). Through production, humans transform themselves and their
environment, which they control. What distinguishes human beings from
other species is not labor as activity. The earth is not labors objective con
dition only for them. What is specific to human production is the inter
vention of brain faculties that allow the understanding and control of
nature in order to make use of it for humanitys own purposes. Mans will
over nature is possible because, as Engels put it: unlike the rest of living
beings, we are able to know the laws of nature and adequately apply
them (Marx & Engels, 1985: 75). An adequate application, i.e., a really
human application of knowledge, in turn demands a particular social
condition, for under capitalism the driving force of production is profit
and not human needs. Engels would say: to carry out this control some
thing more than simple knowledge is necessary. A revolution that com
pletely transforms the present mode of production and the prevailing
social order is necessary. (76) Reason cannot be understood to work
independently of social relations.
With the development of science, the knowledge of and control over
nature skyrocketed, especially with the organization of scientific labor for

imperialism and industrial colonialism29

productive aims. While science did not emerge with the capitalist mode
of production, it did for the first time place itself massively and systemati
cally at the service of production in a system based on profit. By then,
people could come to see nature as an object of private appropriation, a
property alien to working people who had been set free of all possessions,
except for their labor power. A condition for the exploitation of labor had
in this way been fulfilled. Labor at the disposal of capital includes manual
and mental faculties, immediate and scientific labor.
In this way, nature and the human ability to understand and transform
it are capitalized, for both are now subjugated to capitalist production and
profit-making. Reason, as a productive faculty and nature as a condition
of production are subsumed in capital. In this case, it is not the properly
rational regulation of man and that of nature which orientates human
activity, but rather the exploitation of labor in the search for surplus
value. This is why human abilities can come to pose a threat to nature and
as such, act against humanity itself.
Under different conditions of production oriented to meeting human
needs, science would seek the best possible interchange between human
ity and nature. This is clearly not the case of science when employed for
profit where damage to the environment is a collateral result, regardless
of how outrageous it may be. Imperialism managed to worsen things con
siderably since competition between nations constrained even further
the possibilities of science as a means for an ecologically sustainable
Indeed, it is precisely when attacks are waged against nature that
new reasons arise for inter-imperialist conflicts and the plundering of
underdeveloped countries. This proposition can be readily exemplified
with the case of oil, one of the most universally utilized natural resources
in present-day productive structures. On the one hand, oil is a good that
can be found playing different roles in production: as an object of labor
provided by nature, as a raw material, as an auxiliary material, and as part
of the final product itself after being processed. On the other hand, it is
the base for a large number of industries in providing fuel for automo
biles, airplanes, diesel motors, furnaces and boilers; kerosene for lighting
and heating; the manufacture of pesticides, herbicides and fertilizers;
paraffin for the manufacture of light bulbs and tar paper, vaseline for oint
ments and cosmetics; asphalt for road and wall surfaces; conditioning
materials to wipe and varnish; artificial colorings and perfumes; aspirin,
caffeine; plastics for construction, waterproof materials and covers;
synthetic fibers; manufacture of gums, balls, preservatives, toothpaste,


chapter one

washing powder, toothbrushes, and a very long etcetera in which we can

even find explosives. There is no doubt that oil is omnipresent in ordinary
material life.
The unplanned use of oil as a massive combustion of fuel energy is one
of the principal causes of global warming and other humanly manufac
tured disasters. It seems almost absurd, then, that economic growth relies
so heavily on oil. Yet, oil is found gratis, as natures gift to capital that does
not need to be produced, it is a highly energetic fluid, and is easy to use,
store and transport. Alternate sources of energy such as solar, bio-mass,
geo-thermal and wind power energies as well as hydroelectric and nuclear
energies are all more costly and cannot easily compete with oil. The same
is true for durable and renewable materials such as metals, glass, paper
and wood as compared to petrochemical products. The capitalist prefer
ence for oil is thus understandable, regardless of the cost to nature.
At relatively low costs, oil opened new productive branches and
allowed for the further development of others for about a century and a
half. But oil is a finite, non-renewable resource and tends towards deple
tion at some particular point. There is of course general awareness of this
fact. US capitalism had been warned by M. Hubbert during the second
half of the 1950s that oil would peak in that country by 1970, something
which indeed happened, but nothing was done before or after this to
reduce the importance of oil in the economy.
The imperialist response to the absence of economical alternative
energy sources is war and the establishment of political-military control
over countries possessing significant reserves. Iraq was recently made a
victim of this logic. The United States established military bases in Iraq
with the territorial aim of gaining control over the worlds richest oil
reserves and to ensure a privileged access to oil in the face of its European
and Asian competitors.
Latin America is witnessing a similar scenario even in areas where
no natural resources are involved. Washingtons decision to establish
seven military bases in Colombia, a decision supported by the local
government, is intended to reinforce it as a domain for response to the
emergence of hard-to-manipulate popular governments. These govern
ments in turn arose from the failure of neoliberalism, the imperialist eco
nomic strategy to deepen industrial colonialism. Bolivarian Venezuela
under Chvez, the fourth largest oil supplier to the US, is a prime target.
Bolivia, a country with large natural gas reserves, also ranks high on the
imperialist agenda given the MAS government of Evo Morales. Obamas
policy on Honduras, which came to legitimate a coup dtat, made it clear

imperialism and industrial colonialism31

that the United States is not going to tolerate unfriendly governments in

the region. The expression the limits of reason, used by Obama to justify
his war policy demonstrates how he resorts to imperialist reason.
The imperialist system arose during a period when the development
of capitalist relations in some countries gave rise to a division of labor
that separated it into immediate and scientific labor. Meanwhile, the
emergence of this same division was obstructed in other countries.
The international system supposed a different organization of the capital
relation in each one of its constituent poles as well as a distinctive struc
ture and functionality of their respective states. The subordinated pole
does not carry out scientific labor for the development and functioning
of most of the productive forces that it uses and its state was pushed to
assume a subsidiary role, i.e., the ensuring of economic links with devel
oped countries.
The local ruling classes in underdeveloped countries actively sup
ported the introduction of imperialism and surrendered leadership to
those who controlled material progress. The reproduction of this system
of domination became their immediate interest since it makes it possible
for them to exist and expand. Thus, imperialism super-exploits and
expands thanks to the collaboration of subordinated ruling classes. The
presence of strong, pro-imperialist feelings has proven essential for main
taining this scheme of domination. On the one hand, it precludes the
search for any deal with developed countries that is oriented towards
advancing an internally generated development and relatively selfsustained accumulation. On the other hand, it creates fierce social and
political opposition to national interest based governments that every
now and then ensue from a generally weak democratic practice.
The main mechanism of domination as far as underdeveloped coun
tries are concerned is industrial colonialism. It serves to annex their pro
duction to those who control the creation of material progress. In this
sense, imperialism bases itself on a monopoly over scientific knowledge
and its technological applications. At the other pole, underdeveloped
countries remain incapable of self-expansion and they must rely on devel
oped countries to make their industrial processes possible. They are
dependent on parts, inputs, and technical advisory. In general, underde
veloped countries are a captive market for the industrial production of
developed countries.


chapter one

Accumulation in underdeveloped countries carries with it an invest

ment transfer every time that new goods and processes are demanded.
A part of the internally created value promotes in this way, without any
corresponding transaction, production and employment in developed
countries. The latter countries produce more than their accumulation
consumes. Underdeveloped countries in turn consume more than they
produce for accumulation. The investment transfer is also a transfer of
resources to expand local employment. Underdeveloped countries will
thus tend to create a larger surplus-population.
The economic working of industrially colonized countries is tied to a
chain of imbalances that include investment transfers, balance of trade
deficits, indebtedness, opening to foreign investment, profits and interest
remittances, which makes them very vulnerable to crisis. This spontane
ous regularity strengthens the predisposition of ruling classes to submit to
political subordination. Material, technical and ideological dependency
on the military establishment of developed countries completes the pic
ture that makes underdeveloped states ready to act as political agencies
of imperialism. The emergence of popular governments that democratic
elections make possible and which social unrest demands leads the state
into a deep and prolonged crisis that prevents any popular solution within
the capitalist system.
The imperialist oligarchys main interest lies in the markets of devel
oped countries. It is here where the struggle for world hegemony is waged.
Control over industrially colonized countries plays a supporting role in
such disputes, but the fundamental weapon that developed countries
manage in order to maintain global domination is the state development
function. The better this function is performed by a developed country,
the stronger the position it may achieve in international competition.
This does not preclude the important role that violence plays in the strug
gle for world hegemony. While the exercise of violence and destruction
is fundamentally oriented toward underdeveloped countries, it cannot
prevent other developed countries from winning economic advantages
that work against the economic position of the militarily dominant coun
try. Nor does war guarantee a stable control over dominated countries.
This notwithstanding, war has always played a crucial role in imperial
ist dominance and this is no different today. The current world crisis is the
result of two types of contradictions: those internal to capitalist produc
tion, and those that oppose capitalist production and nature. The capital
ist way out of this crisis is linked to an industrial redesign of production.
Knowledge and scientific labor have not yet produced the basis for an

imperialism and industrial colonialism33

alternate economic path. Control over all remaining ordinary resources

becomes crucial and should in principle become even more so as busi
ness as usual proceeds. Certainly, business as usual is no longer possible
for capitalism as an expanding production system. Capitalists will how
ever continue to work with the resources at hand or with those that their
state is supposed to provide them, whether war is necessary or not.



We will attempt here to describe the process that imperialism has undergone from the 1970s to date. We focus on the United States which is
both the main imperialist country and the one most directly engaged in
Latin America. The 1970s witnessed the transition from exhausted
Keynesian policies to a globalization based on liberal principles, a new
stage which for that reason would be called neoliberal. An imperialist
country can never be fully liberal for it is oriented towards economic
and political dominance. But the old doctrine would lend a tremendous
service to the evolving imperialist strategy in Latin American underdeveloped countries.
Every important period in the history of capitalism begins and ends
with a crisis. The present chapter will therefore be organized around that
course of things since we share the presumption that imperialisms third
stage has come to an end. The economic strategy of the United States in
confronting the collapse of Keynesianism that began at the end of the
1960s will be discussed and we will explore how it ended up leading to
new and deeper convulsions. First, I will begin with a summary of the
theoretical approach to crisis that has guided our arguments.
Key Aspects of Crisis
Crises generally take place because profits fall thereby discouraging
investment. One of the principal theses of Marxism is that there is an
inherent tendency of the rate of profit to fall in the course of capitalist
production. As such, this tendency accounts for the historical character of
capitalism, but it does not explain well the periodic collapses of production, however deep they may be, nor the subsequent recovery of profit
and renewed economic activity. The fall of profit as a tendency of capitalism must therefore be distinguished from its periodic tendency for temporary slumps.
The specific temporary downward trends that we are concerned with
here are not those that can be easily overcome by state administrative
measures and the mobilization of some corrective, counteracting forces,


chapter two

but rather those that involve the class relations of society and which mark
a relevant point in history. The explanation of those, as we see it, includes
the following theoretical moments:
a)the rate of profit falls because surplus value drops or because surplus
value cannot increase beyond the point at which the rate of profit
b)in either case, the fall occurs because the economic position of labor
relative to capital has improved, weakening capitals ability to extract
surplus value;
c)to overcome the ensuing crisis, it is therefore necessary that the prevailing class correlation be modified.
The change in the capital-labor relation is worked out in three complementary spheres:
1)the spontaneous action of the crisis creates unemployment, intensifies competition among workers, and leads to decreased wages;
2)state action is oriented to augmenting the weakness of labor, at least
until profit has recovered; and
3)since labor becomes stronger in the context of a given technical relation of production, the consolidation of new levels of the exploitation
of labor, by means of higher labor intensity and productivity, demands
a new technical mode of producing, which in turn calls for updated
state development functions.
The crisis is consequently followed by a new wave of technological innovations along with the devaluation of inadequate industrial methods or
their displacement to underdeveloped countries.
The Great Depression of the 1930s included all of these processes:
a) unemployment skyrocketed, poverty and even famine ravaged the
country as misery became generalized; b) a massive destruction of accumulated capitals spread by World War II; c) a more efficient use of science
and its productive applications which gave rise to a technical redesign of
industry, extending the exploitation of existing resources such as oil, steel
and electricity while pushing international communications to a new
level; c) new forms of the organization of labor, notably Fordism, became
consolidated; d) the transfer of some obsolescent industries to underdeveloped countries; e) repression of the labor movement, which continued
after the war along with concessions that would pave the way to a new
social deal on the basis of which the labor movement would initiate its

imperialism at the third stage37

The Globalization Strategy

The rate of profit of non-financial corporations in the US fell steadily during the 1960s. It averaged 8.3% during the 19611965 period, declined to
7.7% for 196670, and fell to 5.3% by 1970 (Mandel, 1980: 29). Economic
recession broke out in 196768 and again in 197475, and in these cases
there was no easy recovery for profit. An end to prosperity was by then
affecting all developed countries. For West Germany, the annual growth
rates for the years 195073 was 5.9% and this fell to 1.7% for the 197384
period. In Japan, the corresponding figures were 9.4% down to 3.8%,
while for the US the decline was from 3.7% to 2.3% (Maddison, 1988).
Labor productivity in the US non-farming business sector was also declining from 2.8% in 19471973 to 1.1% in 19731979 (BEA, 2009b).
The policies applied in order to confront this crisis would depart from
the earlier trajectory and this partially helps explain the specific course of
events that took place during the third stage of imperialism. The strategy
that was adopted and eventually dubbed globalization (though to be
more precise we should say neoliberal globalization) was designed to
cover three basic lines of action: a) labor flexibilization; b) liberalization;
and c) financialization. These three component parts demanded greater
deregulation and an active retreat of the states direct intervention within
key areas of the economy. By active retreat, we mean to emphasize the
states own reorganization as an economic and political agent. We will
review the course of this strategy across two historical moments, namely,
from the 1970s to the middle of the 1990s, and from the mid-1990s to the
Labor flexibility became the key element of the shifting strategy. It
included wage flexibility (greater empowerment of management to fix
wage rates for different categories of employees), occupational flexibility
(number of workers, freedom to introduce or define shifts), functional
flexibility (mobility in the labor process), and organizational flexibility
(outsourcing). Together, these measures of labor flexibility were designed
to put an end to the old and now problematic social contract that prevailed during Keynesianism. Strong trade unions made it difficult for
wages to be decreased and their demands for full employment hindered
the introduction of innovations and the growth of productivity. The deep
recession of 19741975 would hardly weaken the labor movement.
Unemployment rose from 4.9% in 1973 to 8.5% in 1975 (BLS, 2009) and
average weekly earnings fell from $331.59 in 1973 to $305.16 in 1975 (figures
in 1982 constant dollars).


chapter two

While the crisis was beginning to shift the advantage towards capital,
this alone would not suffice. In describing the general situation of the
labor movement, David Moberg pointed out:
The working class has been on the defensive for most of the 1970s. At the
beginning of the 1980s, it is hardly able even to perform an acceptable
defense. Entrepreneurs almost everywhere are demanding that unions
accept lower earnings, lesser protection of living standards, benefits reductions and a drastic revision of the limited control on labor conditions
(Moberg, 1984: 63).

Relations between the Democratic Party and the labor movement had
deteriorated but it would be Ronald Reagan who manages to fully satisfy
the entrepreneurial demands for comprehensive labor flexibilization.
The repression of PATCO (the air traffic controllers union) in August 1981
during the first year of this government was a clear signal of the Reagan
Administrations attitude toward the labor movement. From then on,
organized labors debilitation would only accelerate. In 1970, 26% of US
workers were affiliated with a union while by 1990, unionized workers
accounted for only 16% of the total. While these figures are disputed by
some, it was abundantly clear that power had shifted to the side of management during this period.
Unemployment would remain at high levels during the 1980s, peaking
in 1982 (9.7%) and 1983 (9.6%), creating the structural conditions for new
aggressions against labor. Campaigns against unions multiplied, employers were now firing workers illegally and reinstating some of them only
with lower pay. Managers could now replace workers on strike, collective
bargaining was restructured and practically abandoned, lifetime job security tended towards virtual extinction, and temporary work was extended.
Subcontracting and the hiring of casuals became common practice as the
state cut back job training programs for the unemployed and moved more
generally to dismantle the social safety net. The deregulation of labor relations took place in spite of existing legal arrangements under the auspices
of labor authorities imposed by Reagan. The situation was the pure and
simple product of the exercise of political power which systematically
deactivated the legally recognized concessions that had been previously
obtained by the labor movement. In summary, a new correlation of forces
between capital and labor had been struck.
As one would expect, average real weekly wages fell throughout the
1980s from $298.87 dollars in 1979 to $267.27 in 1989 and would continue
to fall until 1995 where it reached $258.43 (in 1982 constant dollars). This
implied value transfers from labor to capital and a deepening of the
unequal income distribution. The reduction of wages relative to surplus

imperialism at the third stage39

value (relative wages) was one of the most important methods of extracting new profits. It was likewise clear that an increasingly weakened labor
movement was in no position to oppose the intensification of labor or the
extension of the working-day.
As far as most workers are concerned, the so-called welfare state came
to an end during this period. This type of state had represented the most
amicable manner of treatment that capitalism had ever been able to offer
the US labor movement. Out of the two main methods used to deal with
workers, concession had prevailed over repression. Formerly, workers
enjoyed relative job security, steadily improving earnings, and access to
education, health care and housing, all of which created generally positive expectations about their quality of life. The Keynesian emphasis on
consumption ultimately had facilitated this development and just as the
Great Depression came to discredit liberal policies, the crisis that began at
the end of the 1960s would come to disqualify Keynesianism.
By 1970, systemic liberalization was under way. Ever since the Bretton
Woods Agreement of 1944, the dollar had been the only currency directly
convertible into gold. The fixed parity ($35 an ounce) had been sustained
for a long period independently of developments in the real economy.
Since the US dollar was vastly overrated, Washington took advantage in
terms of its purchases abroad (including gold purchases) and this facilitated the international expansion of US-based corporations. This same
industrial expansion abroad brought along with it additional problems
with respect to the balance of payments. Early in the 1960s, the government introduced new measures oriented towards discouraging investments and loans abroad. This meant that the international monetary
system created in the 1940s was now effectively putting a damper on the
growth of transnational corporations. Non-financial corporations worked
out their own path by relying on affiliates of US banks operating in foreign
countries. According to Lichtensztejn and Bauer:
These affiliates were in a position to make international loans to US corporations overcoming in this way internal credit restrictions imposed by their
government to mitigate the effect of external loans on the balance of payments, already deficit running as a result of the Viet Nam War. Although in
1969, the USA imposed a minimum reserve for credits taken in international
markets, it did not prevent these credits from continually expanding and
gradually provoking a substantial alteration of interest rates and of reserve
distribution between countries (1987: 4142).

Speculators now found themselves with a larger operational field for

business, especially through imports. External debt grew and was furtheraggravated by the Viet Nam War. Expectations of devaluation led to


chapter two

currency speculation and to actively postponing repatriations of profit.

Regulations on currency transactions now became useless and were lifted
by 1970 in the US, West Germany, Canada and Switzerland. This paved the
way to a rupture with the foreign exchange system that would follow
soon after the lifting of restrictions was announced by President Richard
M. Nixon on August 15, 1971.
Corporations in all other countries would also do their part. As HansPeter and Schumann put it:
At the same time, all those countries that were still bound by regulations
withstood heavy pressures from their national enterprises. Their corporations complained that they were banned from access to foreign capital at
favorable interest rates. In 1979, the UK lifted the remaining restrictions.
Japan followed a year after (1999: 64).

Thus, during the 1970s, the barriers to large international capital growth
fell one after another.
As for the international trade of goods and services, the US adopted
free trade as a motto for directing its external relations. The assumption
was that corporations involved in international trade are more productive, create more jobs and pay better wages and for these reasons this
would allow for a better provision of goods and services to domestic
industry. This policy would damage those industries lacking competitivestrength, but this was seen as a temporary situation since competition would push industries in this situation to innovate and improve
their market positions. Additionally, keeping the dollar exchange rate
high would reinforce competition as stimulus for domestic industries to
In 1979, the Buy American Act of 1933 that had been designed to
enhance consumption of internally produced goods was repealed. It was
replaced by the Trade Agreement Act that decisively expanded the range
of products that could be purchased abroad. In addition, the US government was now strongly pressuring for the elimination of barriers to investment in other countries. This would allow US-based corporations to
expand internationally and avail themselves of cost advantages that
abounded in lower wage countries. To that extent, Washingtons strategy
also sought to create conditions for US corporations to enable higher
profits on the basis of higher surplus value rates. The foreign production
by affiliates that was expected to be consumed in the US domestic market
would improve the competitive position of corporations, reduce costs
and put a check on inflation.

imperialism at the third stage41

Up to this point, the overall strategy seemed to rest heavily on two conditions: increased levels of labor exploitation and the liberalization of
market forces. Yet, both conditions together were insufficient to confront
the crisis. In reality, an active state development function was also necessary. This needed to be aimed at pursuing technological development and
spreading it through the economy in order to further enhance existing
productive forces, which in turn could guarantee productivity growth and
stabilize higher levels of labor exploitation. This is exactly what the state
set out to do.
The most significant indicator of state involvement in development
can be found in its investment in science and technology. Total Research
and Development (R&D) expenditures remained relatively stable as a
percentage of GDP between 1970 (2.7%) and 1988 (2.6%). In 1977, 50.6% of
these investment totals came from public funding while 46.8% originated
in the private sector, with the remaining 3.6% coming from other sources.
In 1988, this distribution changed. Public expenditure was now at 48%
and private investment reached 47.9%, leaving other sources at 4.1%. In
short, the state was beginning to cut back on its contribution to R&D in
relative terms while the private sector was increasing its share. Yet, the
origin of funding is not as significant as the shifting distribution of expenditures according to where it was aimed. It is there that the data proves to
be more impressive:

Table 2.1.Objectives of R&D Funding (%).




I. Earth, sea and space

II. Agriculture
III. Industrial Development
IV. Energy
V. Transport and Communication
VI. Education Services
VII. Socio-economic Services
VIII. Environment
IX. Advance of Knowledge
X. Other
XI. Defense




Source: UNESCO (1980; 1990).


chapter two

Several relevant issues are highlighted by this data. First, the expenditure in agricultural research increased, linking it to the productivity
growth in this activity that remained one of the best within the economy
as a whole. Second, the R&D resources aimed at industrial development
fell in 1982 to a little more than one-fourth of that which was being allocated in 1976. The decline was not only in percentage terms but also in
absolute terms. In 1982, less than a half of the funds allocated in 1976
was allocated for this purpose. Indeed, research funding for industry
would not recover its relative levels of 1976 during the three succeeding
presidential administrations that followed Reagan. Productivity in the
manufacturing sector grew by just 1.8% during the 19871990 period and
climbed to 3.5% in 19901995, reflecting increases that would concentrate
on information technologies (IT) and some services. Third, research on
essential services was cut back, reflecting the overall state retreat from
important areas of social life. The same was true for the environment.
Fourth, most of what was cut back from research for economic development was oriented to defense activities.
Clearly, concern for defense does not interfere with the liberal doctrine
of imperialist countries, but the issue contains a highly relevant implication. Neoliberals had consciously calculated that the struggle for world
hegemony would be more a matter of political and military force than one
of economic competition. Their emphasis on the arms race in the context
of Cold War and later the Gulf War and various other military campaigns
since further supports arguments in this direction.
The mere reproduction of the material forces of production in the
United States had been neglected well before the Reagan Administration.
Social advancement of constant capital had been steadily reduced in earlier decades, decisively damaging the overall conditions of production. As
P.G. Peterson (1988) points out in an excellent work, real dedicated investment in roads, bridges, and public transportation had by 1988 sunk by
75% over the preceding decades and that a large part of infrastructure
was deteriorating much more quickly than it was being replaced. Peterson
shows that the US did not have a new generation of technologies available
for infrastructure, such as high-speed trains and underwater tunnels, precisely because it had decided not to pay for it.
This same logic held true in terms of social advancements for variable
capital. The situation in education had already become the butt of
commentary worldwide. In Mexico, one 1991 commentator in the journal
El Financiero put it this way:

imperialism at the third stage43

It goes without saying with regard to other chronic problems which Bushs
government has opted to evade, that the serious worsening of the public
education system is now delivering practically illiterate generations. The
result is that the US labor force is unable to compete with better qualified
European and Japanese labor forces (1991: 20).

In turn, other developed countries in Europe and Asia did not relax their
efforts to pursue economic development during the 1980s. This is shown
by their investments in R&D, see table 2.2 below.
Between 19731984, the increases in productivity of these countries
were as follows: West Germany 3.0%; France 3.4%; Japan 3.2%; Great
Britain 2.4%, all of which were far below the gains during the period
195073. In the US, the rate of productivity growth was the lowest: only 1%
for the same 19731984 period. The simple fact that the other countries
allocated a larger proportion of investment to R&D contributed to their
economic development and coincided with their higher productivity
It can be seen that the free-trade policies being adopted by Washington
were not being backed by a state development function that such policies
Table 2.2.R&D Funding in Selected European Countries and Japan
(% GDP).

W. Germany


G. Britain











Source UNESCO (1990).

*Objectives follow the same order as in Table 2.1.


chapter two

demanded. The US failed to embark on a coherent effort to improve its

productive forces in order to effectively confront international competition, even as most of its immediate competitors did. The subsequent
changes in the relative position of nations within the world market would
eventually follow this new distribution of commitment to technological
In 1977, the US was by far the principal supplier of goods and services
on a world scale. Its exports amounted to 161% of those of West Germany,
its closest competitor. In 1987, these two countries had exchanged positions. US sales abroad were equivalent to only 86% of the exports of West
Germany which had managed to triple its exports. Yet, Japans advance in
relative terms was even more impressive. By 1987, its exports grew by
372% of what it was in 1977. This re-arrangement of economic world hegemony can be better appreciated in the following table. Here, we can see
the changing standings in international trade of a group of seven countries (G-7) across that period, see table 2.3 below.
By the 1980s, it became clear that the flawed US liberal strategy concerning international competition would bring on new problems. The
balance of trade began to deteriorate and would continue to do so from
that point forward. Foreign production was taking hold of the US domestic market, damaging its industrial base. The economy was at the same
time becoming ever more dependent upon external financing.
At the same time, however, we must recognize that not every industry was equally affected by this liberal strategy. On the one hand,
Table 2.3.Exports and Imports of G-7, 1977 and 1987 (%s).







G. Britain









Source: IMF (1984; 1989).

imperialism at the third stage45

accumulated scientific labor and technological experience makes it quite

difficult for some enterprises to be quickly displaced, even in the context
of stiff state cutbacks. On the other hand, the US government was efficient
in supporting innovation within some areas. The country remained the
leader in information technologies (IT) which were expected to push productivity throughout the rest of the economy. Indeed, this would be the
foundation of the 1990s new economy that was touted prominently by
its backers. Their impact, however, would prove to remain concentrated
predominantly on specific services and other technologically advanced
As for the reaction of US administrations to the countrys declining
position in international trade during the 1980s, protectionism (especially
in agriculture) and a strong posture in commercial disputes (in particular
with Japan) were widely observed. In addition to this, attention should be
drawn to a new policy towards Latin America regarding free trade. On
27 June 1990, George Bush announced his program The Enterprise for
the Americas Initiative whose long term aim was the creation of a
hemisphere-wide free trade zone (Wooley and Peters, 1990). The basic
assumption of this program was that protectionism stifles progress and
that free trade breeds prosperity. Bush stated that the three pillars of
the initiative were to consist of trade, investment and debt.
As for free trade, the US government would actively seek to extend tariff reductions and promised to do so during the Uruguay round of world
trade talks. They would enter into free trade agreements with other countries that had already stated their commitments to the aim of commercial
liberalization and especially pursue bilateral agreements with countries
not yet involved in free trade agreements. While the US was certainly
ready for agreements of this kind, Latin American countries were in no
real position to compete and so the elimination or reduction of tariffs
would do nothing to improve their relative advantages.
Yet, the key component of Bushs program was that which he called
investment. He essentially argued that the competition for capital is
fierce and that the key to increased investment was to be competitive and
to turn around the conditions that have discouraged both foreign and
domestic investment. In this, he demanded an opening to foreign investment and privatization. The chronic need for foreign investment on the
part of Latin American countries would lead them into a fierce bid to
remove all barriers to receiving capital from abroad. To reinforce this
dynamic, certain incentives would also be advanced. Bush proceeded to
offer a new lending program so that nations would take significant steps


chapter two

to remove impediments to international investment. The World Bank

could also contribute to this effort. Bush proposed the creation of a new
fund for the Americas to be administered by the IDB which would provide
up to US$300 million a year in grants to reward market-oriented investment reforms in favor of privatization.
The third pillar also pointed directly to one of the weaknesses of the
region. The 1980s had witnessed the worst Latin American debt crisis in
decades and Bush seized upon it as a new opportunity to mount pressure.
He proposed that the IDB add its efforts and resources to those of the
International Monetary Fund and the World Bank in order to support
commercial bank debt relief for Latin America and the Caribbean. Such
funds should be directly linked to economic reform. He further manifested a rather odd concern for the hemispheres environmental wellbeing and announced the promotion of debt-for-nature swaps and other
The so-called socialist bloc led by the USSR had by then been demolished and the time had come for the US to turn its gaze towards its backyard. Apparently, the main objective was a freer and more spontaneous
operation of industrial colonialism, but the real aims for the US were to
deepen its penetration in Latin America and strengthen its economic ties
with the region. This would undoubtedly help the US to maintain its
global economic hegemony. By opening to external investment while
remaining constrained by free-trade agreements, foreign investment in
the region along with privatization would go a long way towards addressing these hegemonic aims. Since the region offers cost saving facilities,
most especially cheap labor power, the expansion of US-based transnational corporations would improve their international competitive position. This in turn would allow them not only to advance in the global
market but also, and perhaps above all, to recover lost ground in their
own domestic market. The outward oriented growth that the region was
now undertaking (from the second half of the 1970s in some countries)
and which formed the core of the structural reform that it was being
pushed to carry out, fit perfectly with Washingtons perceived strategic
Financialization, by which we mean here the rise to supremacy of
money capital (banks, stock exchange, insurances) over industrial capital,
is at the same time a condition and result of the US globalization strategy.
In this sense, financialization represents the consolidation of a new correlation of forces inside the financial oligarchy where industrial capital
loses the pole position that it held during the previous stage and hands it

imperialism at the third stage47

over to money capital. This implies that acquiring interest becomes more
relevant than achieving productive profits and accrued income is mostly
captured by the financial sector rather than by the real economy.
Speculation has been an omnipresent phenomenon throughout the
third stage of imperialism. As such, it is a practice arising from the autonomy that money capital can enjoy. The money capitalist sector certainly
did support some of the key changes that inaugurated the new period,
such as the new exchange system created by the Nixon Administration.
But since most of the effects of speculation on production are destructive,
speculative practices are neither a condition nor a sought-after result of
As we have already suggested, the facilities offered to money capital
were key to the transnational corporate expansion of the 1960s as well as
to the conception of the new world order that followed in the wake of the
crisis of Keynesianism as favored by the monopolies. Working through
their affiliates, banks broke through the prevailing regulations and made
it possible for enterprises to expand abroad. The cross-border expansion
of non-financial corporations in turn created new demand for financial
services abroad. As improved information and telecommunications technologies helped the financial corporations extend their presence across
the globe, these corporations were instrumental in defining the path of
technological change that would in turn become concentrated in information technologies and services.
Global financial services skyrocketed in volume as their weight in
international transactions grew relative to goods trade. Interest clearly
became a more important source of income than productive profits. Yet,
there was still another aspect to financialization as far as the economic
operation of the economy was concerned. Since the globalization strategy
implied a systematic current account deficit, it led to an endemic dependency on foreign surpluses in order to finance the domestic shortfall in
payments. For a country whose currency is the standard for all foreign
currencies, this should not have posed such a big problem. This was especially true if current deficits are considered a temporary evil that must
stop after the adjustment of domestic industry has taken place. The dollars advantageous position allowed the US to contract debt in its own
currency, which is precisely what it did by a variety of means.
Foreign governments and the private sector retained access to many
kinds of liabilities and assets, both public and private, and all of them
remained dollar denominated. This inevitably implied a degree of
de-nationalization in order to perfect the evolving order in view of the


chapter two

larger economic strategy. A large part of the required resources would

come first from Japan and then later from China. These nations were
essentially compelled to deposit their surpluses in the country issuing the
major world currency since they needed dollars for their own international transactions. At the same time, investing in the United States would
help them protect their own currencies from any future devaluation. The
end result was their coalescence with the US and the development of
common economic interests.
Globalization in summary seems to have been the result of a strategy of
large private capital that sought to put an end to an over-regulated economic field so that it could acquire the freedom it required for continued
expansion. The glorification of markets while satirizing the state shaped
the ideological assumptions being trumpeted about mankind, freedom,
wellbeing and the role of competition in development. All of these ideas
that spread around the globe responded to the practices and requirements of large private capital whose interests were now in the commanding role.
This proposition does not however entirely define the agents of social
transformation in recent decades. Liberal ideology also predominated
during the 19th century and at the beginning of the 20th. Rather, this ideology became updated with a view to satisfying the historically specific
demands of large capital. Liberal principles were not intended to provide
rationality to an ascending bourgeois world as in the past, but instead to
legitimize a counter-offensive by large-scale capital on a world scale. This
counter-offensive, in turn, shaped the capitalist management of the world
crisis that started in the second half of the 1960s. Private monopolies
would recover their former positions in the directing society while actively
carrying out the reorganization of the larger economic process. This is the
real content of the process that has been given the unsuitable but convenient label of globalization.
By the same token, the financial oligarchy found in Lenins approach
was its own apparent social and political agent. Revisiting the process
from our perspective, the conclusion is that money capital within the
financial oligarchy would come to commandeer the globalization strategy. The world crisis of the 1930s and the concomitant productive, commercial and financial disorder that came along with it all worked to
discredit liberal ideas and weaken the ideological position of large private
capital and its ruling legitimacy. The state, in turn, reinforced its authority
as a result of wars and then buoyed itself anew upon the dynamic activities contained in reconstruction tasks.

imperialism at the third stage49

The consolidation of the USSR and, therefore, the existence of an alternative to private capital were contributory factors to the generalization of
concessions to workers and led to the social arrangement that would
characterize post-World War II capitalism. The theoretical approach put
forward by Keynes with its emphasis on demand and consumption would
provide a suitable ideology for the new pattern of capital accumulation.
The crisis that unfolded towards the end of the 1960s heralded the
Keynesian period depletion. It was the Keynesian paradigm that collapsed
at the time as large private capital prepared to withdraw its concessions
and dismantle the complicated regulating system that prevailed.
From 1995 Forward
The economic policy regarding the creation of technological progress
remained almost unchanged in subsequent years. Research within industrial technology was assigned only 0.2% of total R&D expenditure in 1990,
0.3% in 19911994, and about 0.6% in 19952000 when it reached just over
one-third of its 1976 share. Energy continued to fall, from 4.5% in 1991 to
1.5% of the total in 2000. Although investment for research in defense
steadily reduced its share to 53.2% in 2000, it remained over the 1976 level
in relative terms. Research on health largely benefited from this new distribution of the R&D investment, reaching 20.9% of the total in 2000
(RICYT, 2009).
For its part, labor productivity evolved in a rather anemic fashion. In
1995, it was at 0%; increasing to 2.5% in 1996, 1.5% in 1997, 2.0% in 1998,
2.5% in 1999, and 2.3% in the year 2000. Information technology was the
leading sector that made the largest positive contribution to productivity
changes because of both its impact on computer related business and on
the rest of the economy. This can be better appreciated by referring to the
following comparison: whereas one hour labor product in the whole manufacturing sector grew by 45% between 1990 and 2000, it increased by
426% in computer and electronic products (Houseman, 2006).
Investment information technology (IT) grew very quickly and was
supported by speculation. The way in which these technologies affected
productivity was diverse and included a broad array of activities ranging
from product design to marketing (Stiroh, 2002) and they could even have
an impact on labor organization (Lynch, 2007). For most sectors, however, these technologies did not modify the direct relation between labor
and the means of production, except in those cases where they assisted in


chapter two

the introduction of automation or robotics. All of this is to say that for

those industries, IT does not account for an advance of productive forces.
The large difference between productivity growth in IT and associated
industries as compared with the rest of industries seems better explained
by the concentration of technological progress in some sectors.
Two underlying assumptions have supported the neoliberal management of the economy. The first certainly had to do with competitive
advantages and the corresponding specialization. As of 2007, this was still
a key issue for the government as can be read in that years Economic
Report of the President: The vast economic benefit from trade liberalization for services stems in part from our competitive advantages in
services () When we trade our lower costs services for their lower costs
goods, we and our trading partners gain from trade (ERP, 2007: 171173).
The second assumption was that services enhanced by IT and related
technologies were modeling societys present and future. It was specialization in services that was to now preserve the leading position of the US
on a world scale.
The US retreat regarding the boost of productive forces development
continued to create the opportunity for other countries to gain better
positions in international markets. On the one hand, it transferred the
production of internally necessary goods and employment abroad. On
the other, it meant that investment from foreign countries with surpluses
would seek to not damage their capacity to export. This meant that investment would generally not be directed to develop competing industries in
the US. The tendency for the balance of trade to decline became unstoppable. From 19902000, the US trade deficit increased by a factor of 4.7
from US$80,864,000,000 to US$379,835,000,000. The surplus in the balance of services, which was US$30,173,000,000 in 1990, would reach
US$74,855,000,000 in 2000 but this could not do much to alleviate the
impact of a goods deficit of US$454,690,000,000 (BEA 2009a). Needless to
say, the need for foreign financing grew at a corresponding rate.
US economic growth was by then displaying a long term downwards
tendency (Palley, 2007). The GDP grew 3.3% in 1992, 4.0% in 1994, 2.5% in
1995 and to a slightly higher than 4% rate between 1996 and 2000, although
it fell from 4.5% to 3.7% between 1999 and 2000. The attempt to transfer
income from labor to capital by means of relative wage reduction should
nevertheless be considered successful over this period. Income distribution consistently deteriorated since the 1980s. In 1980, the lowest quintile
of income earners obtained 5.3% of total income while the highest took
home 41.1%. In 2007, the former now brought home only 4.0% while the

imperialism at the third stage51

latter now netted 48.5%. The richest 5% of the population raised its share
from 14.6% to 21.8% during the same period. It can be observed that this
trend was constrained in certain periods such as between 1994 and 2000
when the lowest quintile share improved slightly from 4.1% to 4.3% (US
Census Bureau, 2009).
A similar trend was registered for the overall share of wages. According
to estimates by Buchele and Cristiansen, the labor share in total income
that was tantamount to 71% at the beginning of the 1970s had fallen by 10
percentage points by 2005. But this was not a linear downward trend. It
deviated, for example, in 1995 when the average weekly earnings at US$182
went up in constant dollars to US$259.38 in 1996; up again to US$265.22 in
1997; to US$271.87 in 1998; to US$274.64 in 1999 and slightly higher to
US$275.62 in 2000 (LRA, 2009). In 1997, the labor cost unit in the nonfinancial sectors gross real value added started to rise steadily until 2001,
while the profit unit fell similarly. Productivity stopped growing faster
than wages as the inverse relation was built up. The Commission for Labor
Cooperation (CCL), created by the three members of the North American
Free Trade Agreement (United States, Canada and Mexico) stated: In
turn, real wages recovered: they increased slightly more rapidly than productivity(CCL, 2003: 156), this in spite of the fact that productivity continued to rise after 1996.
Due to the fact that the largest productivity gains only favored the most
technologically advanced sectors, the rate of unemployment started to
retreat. In January 1994, it was at 6.6% and by the same month of 2000, it
had fallen to 4% and in the last trimester of the same year, it was at 3.9%
(BLS, 2009). In other words, regardless of labors weakness in terms of
organization, its objective position in terms of employment levels
improved. This was the main reason why the mechanism that allowed the
nonfinancial sector to obtain profits from the distribution of income
would stop working. One of the pillars of the neoliberal strategy was effectively collapsing.
The context for the rate of profit to begin to fall had now been built.
Dumenil and Levy (2004) using a methodology of their own determined
that this fall took place from 19971998 for nonfinancial corporations. The
Bureau of Economic Analysis, in turn, registered a fall of the total mass of
profit of those corporations from US$544.1 billion to US$487.5 billion
between 1998 and 2000. This is a much more sensitive indicator for capitalist corporations. In general, if the mass of profit falls, the rate will fall,
unless the position of labor is seriously degraded, something that did not
in fact happen during the second half of the 1990s.


chapter two

Thus, we can see that all of the basic conditions for economic crisis
were operating and that crisis soon would break out. Private gross domestic investment reduced its rate of growth from 12.4% in 1997 to 5.7%.
In2000, it slumped to -2.6%. Foreign direct investment also collapsed in
2002. The GDP grew by just 0.8% in 2001 and 1.6% in 2002. Unemployment
increased, soon reaching 5.7% in 2007. The crisis was now beginning
A durable solution to this economic convulsion would have demanded
a profound transformation of the technical mode of producing with an
eye to obtaining internally-generated increases in productivity, consolidating high levels of unemployment and improving the economys
competitive position within the international market. However, the government opted for an intensification of its globalization strategy, stressing
family and enterprise indebtedness whereby it expected to enhance the
domestic market. In other words, it settled on future value creation to
pursue economic growth. Interest rates would be down to near-zero. This
in turn was the perfect context for a new step forward in financialization
and the growth of financial capital which was ready to extend its reach on
the basis of new financial instruments.
New advances in deregulation would help financial capital to further
expand and strengthen its autonomy. Speculation was given a new freedom to proliferate and in the short term, there were not many readily
available alternatives. The government had relaxed the state development function and it did not have the means to boost a new wave of technological change. Moreover, it lacked the necessary ideological basis to do
anything else.
The results are now well known. The rate of labor productivity went
from 2.8% in 20022004 to 1.4% in 2005, to 0.9% in 2006, slightly recovering in 2007 (1.3%) (OECD, 2009). Unemployment fell to 4.5% in 2006 and
the workers improved their share in income. Their participation in
national income went from 63.9% to 64.4% from 2006 to 2007 and even
though it did not reach its 2001 level, it tended to improve. The balance
oftrade duplicated its deficit between 2000 and 2006. Oil prices skyrocketed, stimulated in part by speculation, while Chinas export prices
increased between 2006 and 2007 as a result of changes in domestic
wages and a certain valuation of the Yuan. The US domestic fixed private
investment, which was only able to grow 1.9% in 2006, collapsed in 2007
(-3.1%). A new and tougher series of economic convulsions now served as
a cruel reminder that the deepest economic difficulties had still not been
dealt with.

imperialism at the third stage53

At first, the neoliberal approach to the 20002002 crisis seemed to have

worked. But it soon became clear that it had broadened the scope for fictitious capital and prices. Once the difficulties faced by nonfinancial capital
crumbled the expectations of future income, the US Government abandoned its low interest rate policy with a view to preventing inflation from
rocketing and the artificially created economic environment fell to pieces
at its weakest link, the subprime mortgage loans.
Capital and Nature
There has been a huge amount of research reporting on the impact of torrential rains and floods that disrupted the ordinary life of large cities for
hours, or victimized thousands of people who become either homeless,
sickened or die. Cold spells that kill tens of thousands of animals, forest
fires that destroy thousands of wildlife acres, the extension of oxygen
poor areas, the displacement of species from their natural environment,
the displacement of coastal human communities, and endless other disasters confirm the ecological dilemmas through these everyday events. All
of these were the conclusions reached by the Intergovernmental Panel on
Climate Change (IPCC, 2007). The reality of global warming itself is no
longer a subject of serious debate and concern over the issue has shifted
to its economic effects. In July of 2005, the British Government commissioned Sir Nicholas Stern (2006) to conduct a study which was published
in October, 2006. The main conclusions of this study were:
It is necessary to act urgently in order to fight the effects of climate
change. It is not possible to stop the change that will take place during
the next two or three decades, but it is possible to mitigate its impact.
To stabilize the situation at any point, annual emissions must be
reduced by 80% from their present levels. Otherwise, 5% of annual
global GDP could be lost.
The amount to be committed to mitigating the effects of climate change
should be equivalent to 1% of annual global GDP. This may not suffice if
innovation with a view to producing low carbon technologies is not as
rapid as expected. R&D investment must duplicate and the support to
the spreading of low carbon technologies should increase five times.
The cost of not taking action will be much higher. Moreover, the creation of low carbon technologies, goods and services will open new
spheres for business. Economic development is possible without evading the challenges of climate change.


chapter two

The reduction of emissions demands an improvement in energy efficiency and clean technologies in the energy, heating and transport sectors. Nonetheless, it is possible that fossil fuels will continue to represent
more than 50% of the world energy supply by 2050. Carbon will be still an
important component of the energy mix, as it is necessary to encourage
the capture and storage of carbon. Equally necessary is the reduction of
emissions from deforestation and agricultural and industrial processes.
State action is unavoidable in a large variety of tasks to confront climate
change, with the regulation of carbon prices, the promotion of energy
efficiency and international agreements being prominent among them
(Stern, 2006).
The Stern Report defines climate change as the greatest market failure
the world has ever seen, which could be read as a desperate call to reason
amidst world economic affairs. In reality, the report fails to critique the
capitalist logic that unceasingly pushes towards an irrational relation of
man to nature. It does however manage to at least condemn the ultraneoliberal approach that has dominated world relations over the last few
It is not easy to imagine that something could be produced without
increasing production costs with higher water or electricity prices, even if
we do not consider agriculture, estates, insurance and many other prices.
Both constant and variable portions of capital are certain to increase their
Concern regarding the effects of global warming has been spurred by
the current strategic circumstances of oil, a resource that has been the
foundation for a long period of capitalist development, regardless of its
necessarily cyclical course. The general conviction is that the greater part
of easy-to-exploit oilfields has reached its peak and that production is
becoming displaced from conventional sites to harder-to-exploit deposits. Non-conventional oil, apart from being more contaminating, demands
more water and energy to be processed and it is more costly. Certainly, oil
prices are also determined by shifting demand that further explains price
oscillations, but any rate of economic growth under the present conditions would ultimately raise prices.
The capitalist search for alternative energy sources has itself created
new contradictions as in the case of agriculture. Bio-energetic products
have expanded at the expense of a food production that is already affected
by climate change. The so-called food crisis is in part the result of this
changing emphasis in agricultural production. In addition, bio-energy

imperialism at the third stage55

alternatives relying on current agro-chemicals, refrigeration systems,

tractors and trailers do not reduce greenhouse gas emissions from agriculture and it is still under discussion whether or not they really contribute
to energy savings.
Capitalism is now called upon to pursue a new wave of technological
change. This is a normal demand that comes out of any historical general
crisis. Yet, the new situation is quite specific. In prior times, crises could
be overcome by means of increasing the exploitation of labor and by
mounting greater assaults on nature. It is now the case that a higher rate
of labor exploitation must combine with the building of a new relationship between production and nature, and the new technologies to be
developed must follow a path unknown to capitalism thus far.
The discovery of new sources of clean, readily available and cheap
energy would be a long step toward the redesigning of industrial production. Such a condition is absent, at least for the time being. It is generally
recognized that there are no easily available alternative sources or any
particular combination of them having anything close to the energetic
density of oil. As we have argued, US capitalism did almost nothing to
prepare for a profound transformation in this strategic economic sphere.
Washington instead decided to maintain its dependence on existing
resources and to rely on its military world supremacy in order to retain
control over them. This is likely to remain the most probable course to be
followed by the US for the foreseeable future.
Complementary efforts to produce a certain cooling of the planet and
to extend the capture and storage of carbon could accompany this path.
The inevitable increase of the value of constant capital will have to be
compensated for by an equivalent cheapening of labor power and the
extension of poverty.
The first measures adopted by the Obama administration displayed no
big changes in economic policy, except for his announced new support
for R&D. The emphasis was placed on financial re-ordering and a new
push towards further financialization. It must be recognized that the US
government was in no real position to do much more for the time being.
While these policies might afford some short term positive result, they are
bound, as in the past, to sooner or later end in a new and deeper economic


chapter two

International disputes around the control of resources are certain to

intensify. Conflicts between world powers could be mitigated for a time
by the introduction of some sort of coordination that allows them to create a new geo-strategic world order. The zones of influence will most
likely have to be redefined.
As for the present monetary order, the United States is not ready to
abandon its advantages and will fiercely resist the pressures from other
powers such as China. Similarly, the United States will try to recover the
positions it has lost in Latin America due to the economic and political
importance that this region holds for its hegemonic claims. The current
strengthening of its military presence indicates that it will not stop short
to reach its hegemonic objectives in the region.
The state is again called upon to play a decisive role in the construction
of a new world order and its operation. Market forces have never sufficed
and much less so now can they steer the system out of its crisis. What is
needed is much more than a purely Keynesian world economic restructuring. In reality, even that kind of transformation would face
tough opposition. It should be expected that state authoritarianism will
intensify with the prospects of maintaining order in a context of growing
social unrest and criminality fed by increasing unemployment and



In Latin America, accumulation is predicated upon import-based economic growth. In general, imported means of production are used for one
of two basic purposes: inward-oriented growth or outward-oriented
growth. In other words, economic growth can be organized to serve
mainly the needs of the world market or mainly those of the domestic
These two forms of growth are by no means mutually exclusive in absolute terms, but they do imply a significant level of contradiction. Exports
must continually grow since in order to buy, it is necessary to sell. But
whereas in the case of outward growth, selling abroad helps fuel the
expansion of the export sector itself, more inward based growth must
support both the export sector and domestic industry. In this latter case,
it is expected that the growth of industry will progressively help to ease
the balance of trade through import substitution. This is a model that
essentially requires increasing protection for industry that cannot keep
up with the rate of technological change occurring on a global scale.
Import substitution, which is the normal path of inward oriented
growth, encounters an absolute limit as the progressive substitution of
imported progress is out of the scope of possibilities for an underdeveloped country. Export-led growth, in turn, cannot avoid the expansion of a
given industry for the domestic market as a secondary characteristic. The
degree to which this industry has expanded will determine the amount of
resources that are to be subtracted from the export sectors own expansion. There must always be a point at which the domestic market must be
restrained from expanding. At that point, imports must be reduced.
Limits to exports are also linked to its expansion, for this growth implies
the modernization of the corresponding industrial sector. As this process
advances, the sector enters the dynamic currents of international trade
and enhances its technological sophistication which in turn increases
its dependency on imported goods. The value created in the sector
becomes an increasingly smaller part of the exported product which is
why stimulus for its growth declines just as its general impact on the
economy does.


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Capitalism in Latin America first emerged and expanded through

outward-oriented growth. This was the form of growth through which
industrial colonialism was introduced. The 1930s witnessed in several
countries the first transition from this form of growth to the inward-oriented variety on account of two historical conditions: 1) the existence of a
domestic market that spontaneously arose out of exports; and 2) the
regions relative isolation from developed countries as a result of the
Great Depression and World War II. Another profound crisis that became
unleashed at the end of the 1960s would provoke a second transition, this
time from inward to outward-oriented economic growth. To date, large
scale global crises have tended to bring with them changes in the prevalent form of growth in Latin America.
Form of growth as a concept suggests a somewhat neutral kind of
pattern that can permit the analysis of an underdeveloped economys
workings independently of the prevailing form of external dominance
that it experiences at a given point in history. At the same time, each form
of growth implies a particular mode of integration into the world economy. We would like to emphasize however the domination aspect of
this integration which involves not some harmonic world economy but
in fact a world economy under the rule of imperialist countries. Viewed
by this logic, every form of growth remains a pattern of industrial colonialism as far as Latin America is concerned.
Any pattern of industrial colonialism, as well as any form of growth,
displays in a specific manner the tendencies that correspond to underdeveloped economies. These tendencies were presented earlier in Chapter 1.
It is true that they are expressed in a more transparent and violent fashion
under outward-oriented growth which corresponds to the pattern of
industrial colonialism that neoliberal globalization has imposed in the
region. While this point will be made very clear as we proceed, it is first
necessary to deal briefly with the basic question of why underdevelopment reproduces itself.
Barriers to Regional Appropriation of Scientific Knowledge for Production
Neoliberal theory expected free trade and competition to work in favor of
leveling out countries. Industrial knowledge and capital are supposed to
be freely available so that competition-induced improvements in productivity would work in this fashion. According to this approach, there is no
need for any country to pursue the organization of its own general labor.

the pattern of industrial colonialism59

Reality demonstrates, however, that neoliberal theory never worked as

envisaged. The fact is that many important obstacles actively prevent
underdeveloped countries from accessing knowledge and its productive
applications in the ways necessary to ensure genuine development.
It is well known that technology compresses generic and tacit knowledge. According to Masaru Yoshitomi (1996), the former behaves as a public good in that it is potentially an object of trade were it is found available
to the public. The latter refers to the component of technology that
emerges from the collective abilities and organizational routines of firms.
This second element cannot be treated as something independent from
the particular conditions under which it was created. For this reason, it is
not available in the market. Yoshitomi thinks that this explains why differences in competitiveness between countries and firms persist in spite
of the widespread diffusion of generic knowledge (1996: 5859). He further maintains that innovations make expansion and growth possible for
the enterprises that first introduce them into their business. These firms
will therefore try to retain such benefits by keeping exclusive control over
the innovations. This proposition in effect simply confirms a very old thesis that innovations produce extraordinary profits and this is why capitalists insist on keeping control of them for as long as possible.
At the level of commodity circulation, intra-firm trade is another way
in which capitalists actively protect their technological advances. This
trade mainly involves goods that contain knowledge and talent found
only in the particular firms that carry it out. When a producer starts
marketing a new product, competitors try to build alternative designs.
Once a given design is consolidated, its producer undertakes the task of
introducing the changes that may be necessary in the labor process.
Innovations in the labor process do not, of course, require a product innovation in order to take place since the purposes of the former are much
broader. Several factors in relation to goods and process innovation are
worth emphasizing.
First, innovations take place in firms that have accumulated the
required knowledge and talent in a context where the amount and quality
of these constantly change as a result of progress itself. Therefore, only
those firms which possess such knowledge and talent are able to participate in the race to impose a new design for a given product or a new
Second, new or redesigned products will typically enter high-income
markets first, that is, those of the more developed countries. Product differentiation follows a similar course. As Gustavo Burachik (2000) argues,


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the imitation-innovation ability is connected with the firms productive

experience as well as with the learning efforts realized throughout their
productive history, all of which makes entry into the innovations practice
relatively difficult.
Third, it is worth noting that not only product creation and diversification tend to be concentrated in developed countries but also the advantages linked to extraordinary profits. The United Nations Economic
Commission for Latin America (ECLAC) has found that comparative
advantages are located in the innovating country as long as the innovation constitutes a monopoly power for its creator. Later on when technology has lost its meaning as a means for producing extraordinary
profits, it is then sent to countries that offer other sorts of advantages
(CEPAL, 1990: 21).
Governments in developed countries will therefore manifest great
interest in expanding their national technology base. The US government
shows interest in the economic success of firms only in so far as they commit themselves to the development of national technology. Those foreign
enterprises that contribute to the countrys technological progress will
also garner US government support. In the United States, the role of technology in politics and culture is generally stressed over and above its economic meaning (HR Committee on Science, 1998).
When technology is sent to underdeveloped countries, this generally
occurs only after its use has become diffused. There, it can become the
object of change by capitalists with a view to overtaking competitors that
share the same technology or work with a similar one. Whatever the case,
this work even when it demands creativity merely complements the
knowledge that is objectified in the original product or process (Katz,
1998). Since the technological effort in the region does not extend to the
appropriation of the principles underlying any particular innovation,
local abilities tend to remain confined to those that allow the best possible use of the imported technological package. This practice is the result,
and at the same time a cause, of the low skill level of local labor power,
which in time becomes a substantial barrier to the entry of advanced
technology into the region.
In effect, the low value of labor power constitutes a further barrier to
the introduction of the latest technology in underdeveloped countries. In
order to incorporate a new means of production in an already operating
enterprise, it is necessary that its value be lower than the value of the
labor force that it displaces. Otherwise, the unit cost of the product will
not be reduced and the profit rate will decrease as costs grow. It should be

the pattern of industrial colonialism61

noted that this law only applies to already functioning capital within relatively stable market conditions. The law explains the behavior of those
enterprises that faced the process of economic liberalization by improving labor performance through means other than the incorporation of
new technology. This was the case, according to ECLAC, of much of big
However, most sectors of industry achieved their labor productivity
advances without significant new investments and with a fall in employment. On the whole it seems that changes related to job organization and to
un-embodied technology are taking place, that is, changes not directly
linked to the incorporation of new capital goods, although they lead to complementary investments. (ECLAC, 1996: 101)

The same situation was observed by ECLAC concerning enterprises controlled by foreign capital:
Effectively, in spite of the fact that transnational companies enjoy important advantages in order to achieve their restructuring as compared with
national enterprises such as access to international markets, greater financing and modern technologies, their efforts aimed at gaining competitiveness are limited both by the restriction of their present plant and their
corporate globalization strategy. The majority of foreign enterprise attention has been dedicated to reducing their variable costs, rationalizing their
production and introducing soft technologies without engaging in investments oriented at renewing and modernizing their production equipment.
(ECLAC, 1994: 36)

The globalization strategy of corporations is not very useful as an explanation of this phenomenon, given that the same practice is carried out by
local enterprises which lack any globalization projects. In both cases,
profit is the determining factor underlying company strategies to adapt to
export-oriented growth. The low value of labor power prevents firms from
introducing costly new technologies. As a secondary effect, this reinforces
the tendency for Latin American labor power to remain poorly skilled.
So far we have drawn attention to economic barriers that prevent
underdeveloped countries from appropriating current technological
innovations. These barriers, in turn, should effectively encourage the
organization of general labor in the region with a view to developing local
abilities in order to create progress. However, two ideological obstacles
oppose such a course of events.
The first is a permanent one that has to do with a number of notions
that underdeveloped capitalists employ when it comes to business matters. They believe that foreign technology is better by definition, since


chapter three

superior experience and knowledge are presumably located abroad.

Given that fact, they believe it is economically more convenient to import
technology since internal production cannot guarantee competitiveness.
Their overall social commitment ends with their business success through
which they deliver their main contribution to society (Faletto, 1991). This
Smithian notion and ethical approach to social responsibility demonstrates that entrepreneurs lack any transcendental interest in their own
nation. In short, local capitalists are not willing to socially become the
subject of a national project to overcome underdevelopment.
The second obstacle relates more to neo-liberal hegemonic thinking.
This ideology holds that states must abstain from getting involved in a
dynamic activity oriented to capitalist development. Rather, the state
must retreat from economic activity and subordinate its action to the
interests of transnational corporations. Neo-liberalism reinforces industrial colonialism and imperialism and this is one of the most salient effects
of the so-called free play of the market forces.
National Innovation Systems in Latin America
The main features of the National Innovation Systems in Latin American
countries are well known:
Investment in R&D is very low at around 0.67% of the regional GDP.
Only Brazil has managed to barely surpass 1%. The United States spends
around 2.66% while its per capita spending in R&D is about 28 times
higher than the average for the region.
Governments have typically delivered the larger part of investment in
R&D, although this situation has changed during the most recent
decades. In 1990, government participation reached 72.1% of the total
investment in R&D but by 2005 it had fallen to 59.9%. The private sector
contribution rose from 26.8% to 43.3% during the same years.
Links between the private enterprises and the academic community
have remained very weak.
Local applied research is practically absent from the creation of new
industrial processes and goods. For the most part, innovation activities
display an adaptive character, i.e., they remain oriented to accommodating new technologies or changes in technology or marketing methods to local conditions. Also, a large part of adaptation is carried out by
corporation affiliates or is dependent upon intense foreign assistance.

the pattern of industrial colonialism63

The number of authorized patents per resident of the region is very low
compared to the number granted to non-residents: 16.33% against
83.66% in 2007. During that same year, residents applied for 2.39 patents for every 100,000 inhabitants while in the United States, the same
indicator for applications was 80.02.
Most of basic research takes place in isolation from its potential productive applications. There are fully documented cases of scientific findings
by local scientists that are productively exploited by transnational corporations subsequent to their publication (Figueroa Delgado, 2006).
It was only by the middle of the last century that some efforts toward the
construction of local abilities for the operation of some industries began
to take place in the region. By then, institutions created for the promotion
of science and technology came to join the sparsely supported academic
science that was concentrated in universities. Some large public enterprises, particularly those belonging to sectors that governments defined
as strategic, in addition to national defense, together with some private
enterprises, organized small research and engineering departments. In
addition, affiliates of transnational corporations were by then establishing their own research facilities.
About 80% of total spending in R&D was paid for by the state. At that
time, a certain nationalistic spirit and a desire to reach a certain degree of
technological independence was palpable in the region. Some local industries were given special attention, such as oil in Mexico and aeronautics in
Brazil. Yet, the adaptive purposes generally prevailed.
The Inter-American Development Bank (IDB) has intermittently carried out activity to strengthen scientific labor in the region. From the
beginnings of the 1960s it promoted the growth of physical infrastructure,
increasing the skills of scientific labor power and the expansion of funding sources for the development of science. Its so-called assistance to the
region has been changing over the years according to the evolution of the
prevailing economic models in developed countries, especially the United
States. However, it was not until 2000 that it elaborated a coherent set of
propositions that acquiesced to neoliberal policies.
The IDB premise for its science and technology support policy in
the region is put bluntly: Economic globalization and the world technology revolution, especially in telecommunications and information
technologies, define the context in which all countries will have to perform, and make technology even more important than in the past
(IDB 2001: 1).


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This fundamental guideline was intended to promote the expansion in

the region of the most dynamic technologies in developed countries,
especially in the United States. To erase any possible doubt, the IDB
The major source of technological innovations in the region comes from the
importation of capital goods and the specifications, and from the technical
assistance provided by foreign purchasers, providers of licenses, and external investors. Therefore, the Bank will support policies leading to increased
free trade, with particular emphasis on liberalization of commerce and
elimination of barriers to the importation of technology. (IDB 2001: 20).

Certainly, the IDB policies do not aim to improve the regions position in
the world market. On the contrary, no matter what the Bank intends, its
policies inevitably lead to strengthening the regions subordinated place
in the global economy. Latin America evolves by importing technological
progress and practically produces no real innovations other than those
required for the adaptation of imported goods and processes to local conditions. This is the normal practice of industrially colonized countries and
the perpetuation of this practice is fundamental to the perpetuation of
their condition. At the other pole, developed countries and transnational
corporations benefit from the extension and strengthening of their control over scientific labor and its products that are implied by the IDB policies toward the region. Dependence on external progress can only get
worse by extending the regions commercial opening and expanding the
facilities for the importation of technologies from developed countries.
The concept of innovation as defined by the Organization for Economic
Co-operation and Development (OECD) is rather lax. It refers to the
implementation of new or improved processes, goods, services, or
marketing methods, which can include or exclude any of the above, such
as the invention of goods and processes. Therefore, it is only logical
that the region be able to produce innovations based on imports. The
resulting concept of the national innovation system will be equally lax
and it can be found operating throughout the region with little regard to
the enormous differences existing between the different categories of
We have already noted some of the characteristics of the regions NIS
and have shown how it does not even promote a more active globalization of the R&D activities of transnational corporations in the region,
something which could result in an expansion of inventions in Latin
America. The UN Conference on Trade and Development (UNCTAD) has
discovered why:

the pattern of industrial colonialism65

The precise features of a host country that are needed to attract innovative
R&D depend on the industry and activity involved. Key determinants in
host developing countries for attracting innovative R&D include a large
pool of scientific and technical manpower, a well functioning NIS featuring
strong public research institutions, science parks and an adequate system of
IPR protection, and government incentives. (UCTAD, 2005: 161)

Innovative R&D here refers to activities related to inventions. The indicated conditions are to be found in developed countries and the so-called
emerging countries. The situation prevailing in Latin America corresponds to underdevelopment and to adaptive innovation, related to the
mass production of a good or service, or to the setting up of an already
invented process. And it focuses on the habilitation of imported technologies according to local conditions.
Perhaps it might be thought that international organisms are interested in Latin American governments being involved in policies that
might facilitate a transition from adaptive to innovative activities. This
would be tantamount to saying that these organisms would like to see the
region committed to tasks that would allow it to overcome underdevelopment. Clearly, this has not been the case. It should suffice to recall the IDB
policies that reject this sort of idea. But the problem goes much further. In
the context already described for R&D policies towards the region, the
most emphasized measures refer to:
(1) Support for research and development according to market signals,
that is, according to the specific demands from enterprise. Generally,
these demands fall within the routes of technological innovation defined
by transnational corporations and the governments of developed countries. It is not by coincidence that the US government and the IDB have
coincided on the importance of the new economy technologies. Local
state support for the expansion of these industries in the region is at the
same time a subsidy for them and for those local industries which import
progress. In addition, we can see that when R&D is involved, there is not
much difference if the point is the creation of new technology or its adaptation, for in both instances the scientific labor of transnationals is better
qualified and equipped to carry out the tasks involved. It is not that local
scientists lack any ability to participate in research activities, or even that
they could not come to accomplish leading roles. The point is that generally they play a secondary and subordinated role. Henning Jensen
Pennington, a well-known scholar of the regions scientific processes,
points out that scientific collaboration with developed countries takes
place on the foundations of a very unequal division of tasks:


chapter three
Generally, scientists from developing countries participate during the operational phases of joint projects, but they are not equally involved in other
phases such as the definition of theoretical and methodological tools, the
discussion and analysis of results and the drafting and publication of results.
These scientific workers tend to become more involved in data collection
activities which is a very limited participation, one which will not necessarily foster local capacities (Jensen, 2007).

This is the situation that predominates and Jensen warns of the danger of
scientific colonialism that academic collaboration under such conditions conveys. Indeed, he fully describes the operation of an active scientific colonialism. Speaking from his vantage point at the University of
Costa Rica, he seemingly articulates the view of an anti-colonialist struggle that includes the basis of a political platform which demands:
An equitable participation in project design.
A shared use of information.
A joint application of results.
An equitable distribution of benefits.
Participation of local scientists in border projects.
This is certainly a rather academic platform, with no considerations
toward the larger economic and social implications. Scientific colonialism is merely an expression of industrial colonialism and imperialism
that does not rest principally on the academic communities of either
developed or underdeveloped countries but rather on Latin American oligarchies and their states. What we face is not merely a problem based
upon the relations among academic communities, no matter how desirable an egalitarian practice would be, but rather a problem of the domination of one category of countries by the other.
(2) Protection of copyrights. The greater the awareness of the importance
scientific labor has for material production, the stronger the defense
of copyrights. Given that the production of new processes, goods and
services and innovations in general is concentrated in developed countries and transnational corporations, copyright protection is a typical
imperialist demand. In the context of large companies and their
R&D departments, the recognition of property rights for the company
moreover constitutes a direct expropriation from the workers who created the given innovation, an appropriation by the company of the workers mental capacities at a given point in time. The same happens
when corporations take advantage of their control over production
and market facilities and productively exploit the scientific findings of

the pattern of industrial colonialism67

scientists who lack sufficient resources to put their discoveries to work by

From the standpoint of competition between capitals, intellectual
property rights are necessary to ensure the acquisition of extraordinary
profit and the supremacy over competitors, just as those rights are necessary to keep the supremacy of some countries over others. The national
innovation systems which are organized on the basis of intellectual property rights can do nothing but perpetuate foreign domination over the
region. Yet, governments which are unable to build a vision of independence for their countries give in to external pressures with a view to
avoiding retaliations, such as a decline of foreign investments or blockades against obtaining external credits.
(3) The promotion of links between the business and scientific communities. This policy should create a completely different environment from
the one in which the regions scientists were originally formed and later
evolved. The point has been to put scientific labor at the service of an
oligarchy that has in the past shown very little interest, or none at all, in
the regions scientists and their labor. Yet, the relation works in developed
countries and the region must follow suit, as though no memory of
regional specificity mattered. Local governments introduce financial
stimuli for scientists to get in touch with entrepreneurs and make space
for them in business research activities. But disadvantages of these workers in comparison to their peers are not addressed and so they are pushed
to carry out subordinated functions. The fact is that they have no control
over the knowledge and technologies which are strategic for the kind of
enterprises that they are supposed to attend to in the context of the
national innovation systems policy.
The incongruity of these policies is not hard to detect. They are
expected to deal with a problem whose deep causes are left untouched.
The separation between scientific and business communities took root in
a basic underlying fact. Local capitalists organized and developed their
enterprises on the basis of externally created knowledge, giving place to a
dependency that became internalized in economic operations. That process deepened with economic growth which followed the route determined by foreign technological change. For the same reason, the link that
possibly could be built reserves only a subsidiary and peripheral role for
local scientists. Assessing the significance of these links from his own perspective, Leonardo S. Vacarezza argues:
In this way, the selection of research subjects, the methodology, timelines
and opportunities are not decided by scientists but, and increasingly so, by


chapter three
network agents who look after a variety of interests concerning feasible
knowledge, among which entrepreneurs, engineers, and financiers play the
most relevant role () These network dynamics reinforce the core countries leadership not only due to the academic excellence of their scientists
but also because of the close links between enterprises and labs. Therefore,
Latin American academic research is pushed to a two-fold peripheral status:
one related to its relatively marginal position within the international scientific community, and the other concerning its capacity to integrate into the
application context that international capital has defined for innovation
and production (Vaccarezza, 1998).

All of this takes place in a context where governments have effectively

created some of the conditions necessary to make innovation links
between enterprises and scientists possible. Vaccarezza refers to the
building of infrastructure and the organization of technological consulting (scientific parks, enterprise incubators), financial support for businesses, and other measures already taken during the 1990s, suggesting
that there is no problem of state negligence (despite the fact that state
and enterprise R&D funding is clearly insufficient). The real problem
according to Vaccarezza is that such state actions do not constitute a
self-sustaining system of dynamic relations that indicate a clear orientation for R&D according to the societies and the economies in which (those
actions) take place (Vaccarezza, 1998). A system of scientific links led by
private transnational corporations should not be expected to focus upon
considerations regarding the needs of Latin Americans, no matter how
urgent they may be. Their main concerns revolve around costs, quality,
marketing, and above all, profits.
The question which therefore emerges is how exactly did the promotion of the national innovation systems under neoliberalism help the
development of science in Latin America? As it has already been suggested, there has been some perceptible progress in terms of infrastructure for science along with some connections being established between
the local scientific community and private enterprise. It may be argued
that these advances should be warmly welcomed in spite of the fact that
they took place thanks to the intervention of an externally created
science designed to benefit the capitalist currents of expansion determined by developed countries. Yet, the fact is that this globalization of
technology has proven no better than the route of technological performance taken by the region during the previous stage that ended at the
beginning of the 1970s.
Previous state-led efforts to promote technological progress, especially
during the 1950s and 1960s, were very much inspired by nationalistic

the pattern of industrial colonialism69

sentiments. Although limited in scope, these efforts often translated into

measures that followed a certain national interest. While it was not a generalized condition in the region, these efforts could be found present in
the most prominent countries of the region across different periods and
with varying intensity. Laboratories for R&D were organized in some strategic industries that desired greater independence (at least in some
important industrial positions) on the basis of the development of local
capacities for technological progress. Taken as a whole, it was a rather
weak attempt at gaining some technological independence. This was due
to both the complex context in which it took place and its ideological
ambiguity. In spite of, or perhaps because of this, neoliberal globalization
came to disarticulate almost all of that which was achieved throughout
this period.
As economies began to open up with trade liberalization and a general reorientation towards externally based growth, the lifting of restrictions on foreign property and economic deregulation brought about a
complete redefinition of the performance conditions of locally established enterprises. Exposure to international competition clearly forced
technological restructuring. The creation of more sophisticated technological means fell out of the reach of both state and private local enterprises. As explained by the IDB, the most important means for innovation
was the importation of technological progress and this took on a renewed
emphasis during the 1990s.
On the other hand, the labs which were created to assist public enterprises became displaced by those of transnational corporations after
waves of privatization set in. The affiliates of foreign corporations reduced
their R&D activities on account of their integration into global markets
and the standardization of products and consumer patterns, all of which
reinforced their dependency on the corporate head office. In this context,
any particular project oriented to the development of local technological
capacities became obstructed.
Jos Eduardo Cassiolato who is known for his prestigious work on the
regions technological issues, studied the clusters of the automotive
industry in Minas Gerais, telecommunications in Sao Paulo, and tobacco
in Rio Grande Do Sul (Cassiolato, 2001). This led him to conclude that the
subsidiaries of multinational corporations significantly reduced their
local technological and innovative activities in the 1990s. Innovative and
even productive efforts within local clusters tended to decrease which in
turn affected both the core capabilities of firms as well as their learning
processes. His team further saw that productive and innovative networks


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were being disarticulated with little or no significant articulation taking

place between the new investments and the local R&D infrastructure.
The overall level of employment of specialized personnel within these
clusters decreased and this has since been followed by the occupational
downgrading of some of the specialists who remained employed.
Over the last decade of the 20th century and the first decade of the 21st
century, imports of capital goods and the knowledge they objectify have
continued to grow, particularly in medium and high technology sectors.
The same is true for the trade balance deficit. Thus, it becomes clear that
nothing has been achieved in terms of local technological production. In
the context of a world order dominated by transnational corporations
where products tend towards standardization, it can be expected that the
regions possibilities of stepping forward in the construction of capacities
for the creation of progress will weaken still further. In spite of its declared
homogenizing aims, neoliberal globalization has done nothing but
deepen global inequality.
The Universities in the Region
From a capitalist point of view, the university is expected to fulfill the following functions:
(1) The production of knowledge and to the extent possible, the elucidation of
its productive applications. The university is perceived as an important
agent of the material performance of capitalism as a result of its research
and lab testing activities. At the same time, it contributes to the construction of visions and desirable alternative paths for economic development.
In this sense, it has also contributed to the symbolic reproduction of society. The autonomy granted to universities for the best possible fulfillment
of these functions has to some extent become compressed at present.
This is because governments have been driven to focus on solutions to the
practical problems of enterprises.
After the introduction of the new knowledge production model,
applied research has gained a new dynamism as a university activity. This
occurred to the point that it has come to definitively rule out some traditional but incorrect definitions of this function. For the World Bank,
for example, the following definition of institutions of higher learning is
still in use: These institutions produce new scientific and technical
knowledge through research and advanced training and serve as conduits
for the transfer, adaptation and dissemination of knowledge generated
elsewhere in the world (World Bank, 1995: 23). Yet, relations between

the pattern of industrial colonialism71

universities and enterprises now have much more direct significance.

Universities no longer stop at the provision of abstract ideas or technical
assistance for the solution of concrete problems in existing industries.
Rather, these institutions are consolidating themselves as producers of
ideas for the building of new firms. Etzkowitz and Dzisah report that: The
Association of University Technology Managers (AUTM) identifies $1.46
billion in earnings from patent licenses in the 2000 financial year and the
formation of 3376 firms based on technology licensed from universities
since 1980 (2010: 496).
This transformation demonstrates the enormous creative potential
that universities have garnered in the developed world. Yet, it also
conveys some of its dangerous implications. The commodification of
ideas from educational institutions, even if oriented towards funding
the growth of research, infringes upon the mission of universities as providers and disseminators of knowledge with potential social use. It
involves them in competitive dynamics, leading to a reformulation of
relationships between them while tending towards a general correspondence of universities and private sector interests. As a result, the socialization role of universities weakens, thus preventing a large mass of capitalists
from having access to a part of the productive knowledge that these institutions manage. It was precisely through their knowledge socializing
function that universities made it possible for those capitalists who do
not carry out scientific labor to stay in business. In that sense, universities
played a role as servers of the public. The new position of the university
in society is now somewhat different since the commodification of its
practices has led to a partial privatization of university activity. This is a
further result of the states retreat from its function as a guardian of
capitals general interest and the magnification of capitalist private
(2) To provide a professionally trained labor force. The university delivers a
large array of people with the highest professional qualifications that formal education can provide. This training will continue in a permanent
way by means of occupational practice due to the constant ongoing
changes in technological environments. Not only has the university provided professional expertise for immediate labor in areas such as engineering, planning, controls, etc., but also for scientific labor through the
training of researchers. This latter activity has increased the importance
of public universities, for they are the most important trainers of researchers. Certainly, the university also provides qualified labor for services rendered through the liberal professions.


chapter three

(3) To train the cadres required for the economic, social, political and cultural leadership of a country. On this point the World Bank is much more
accurate where it states: Institutions of higher education have the main
responsibility for equipping individuals with the advanced knowledge
and skills required for positions of responsibility in government, business,
and the professions (1995: 23). Most of these cadres do not rise to the
position of society leaders as a direct product of higher education. Rather,
they generally require further developing and proving of their respective
competencies. In a context of relative ideological openness, the university
gives them not only professional qualifications, but also a perspective on
universality and change which is necessary to create forward looking
approaches and strategies. The university itself is a space for permanent
discussion of possible alternative courses for the future of society as well
as the causes of its periodic convulsions and constant uncertainty.
(4) The production of ideology to support the legitimacy of ruling institutions and practices. Included here is all critical thinking oriented to the
improvement of domination. For its part, radical, anti-capitalist criticism
is not recognized by capital as a university function, but the state tolerates
it out of respect for a sense of plurality and universality that institutions of
higher learning cultivate. Moreover, the radical thought is tolerated since
the liberal state is the strongest and most appropriate model for a society
immersed in class contradictions. The university as a producer of ideas is
a fundamental institution for the smooth advance of capitalism and its
democracy. Totalitarian regimes remind us that from time to time, capitalism feels the necessity to rid itself of criticism (even if it is not radical)
to ensure a smooth and felicitous working of society. In these cases, social
stability rests directly upon the use of force and not on reason. This is
when the totalitarian regime becomes an outstanding expression of social
problems and amounts to an open confession that it cannot do without
violence. For this reason totalitarian regimes tend to be temporary and, in
general, undesirable solutions to capitalist conflicts.
The Latin American university does not accomplish the first of the four
functions indicated above. This is due to the fact that local oligarchies
never perceived the necessity of an institution dedicated to the promotion of technological development. Local capitalists were educated in the
midst of the world market and derived their specific mode of producing
from this practice, i.e., by depending upon externally created progress.
The university was organized in isolation from the technological needs of
local capitalists. This fact is crucial to the understanding of the evolution
of the regions systems of higher education. The university essentially

the pattern of industrial colonialism73

focused on the other functions. The training of a professional labor force

became its main concern, especially physicians, lawyers and engineers. In
this way, it simultaneously produced cadres for the leadership of society.
Generally speaking, teaching was delivered by professionals who undertook education as a complementary activity, thus frequently affecting the
quality of their service. Historically, university students constituted a tiny
sector of the population. At the same time, the universitys scientific concerns tended to concentrate on more abstract, general postulates.
During the 1950s and 1960s, things began to change significantly. For
one thing the number of students grew. Although scientific research continued to be defined on the basis of intellectual curiosity, social science
developed and even gave birth to important paradigms regarding the organization and functioning of Latin American society. Important currents of
thought emerged and developed, among which included the ECLAC
school and the prominence of the theories of dependency. In a context of
democratization that was especially strong during the 1960s, the so-called
critical university emerged as the cradle of political theories. It was here
where even organizations of an anti-capitalist character were incubated.
The Cuban Revolution further contributed to the emergence and
development of a popular movement committed to the radical challenging of the prevailing social system. The university contributed to the rationalization of social discontent and through discussion and analyses,
reinforced both urban and rural militancy and mobilization. The student
and reform university movements in Europe would come to strengthen
these trends even further.
All of this tended to widen still further the already great distance that
separated the university from the business world, most especially from
large foreign capital. With the benefit of hindsight, it is clear that the university was developing an increasingly powerful resistance against its
integration into neoliberal globalization schemes of innovation. In spite
of the fracture of this resistance, it is difficult to imagine a situation much
different from the one prevalent nowadays where the regions university
is very far from the reactions we have seen in developed countries with
respect to their relationship to technological development. The reality is
that it never had to be otherwise.
Given that Latin American universities are the institutions that carry
out the larger share of scientific research, even if it is limited and its relevance is mostly marginal for private enterprise, what we have already said
about the regions scientific community and its relations to technological
development aptly applies to them. Some governments in the region have


chapter three

nevertheless insisted on a number of actions designed to integrate universities into the systems of innovation and this has resulted in some transformations that have changed their relation to society. It is this point that
deserves some attention.
It has been perceived by policy-making institutions that one of the
most complex and difficult tasks for the regions universities is to learn
how to collaborate with the private sector (IDB, 2000: 26). With a view to
tackling this task, many governments have been building new relations
with universities with the expectation of bringing about a significant
restructuring. Certainly, the increase in public financing would not be a
device envisaged to support a relevant transformation of these institutions. In reality, a decrease in financing would.
In spite of the fact that universities notably increased the number of
students matriculated, budgets for higher education remained largely
unchanged (under 0.9% of GDP) throughout recent decades. The majority of governments displayed no intentions of substantially increasing
their support for education. In this context, if the aim was to introduce
changes in university practice, the budgets should have been reorganized
in order to mobilize the most determinant agent of academic practice in
the desired direction, that is, to orient the practices of academic staff.
Monetary incentives are probably the most efficient method easily available to reorient academic activities. This is precisely why the income of
academic staff was restructured and a part of it was linked to productivity
goals in terms of publications, inventions, innovations in general, number
of graduates and other criteria, at least in those countries that enroll the
largest number of students in the region (Brazil, Mexico, Argentina,
Venezuela, Chile and Uruguay). At the same time, wage increases through
collective bargaining were frozen.
Productivity assessment to decide the level of economic compensation
has taken place mainly on the basis of quantitative criteria with scarce
application of qualitative judgments. Such a scheme promoted an expansion of theoretically and practically non- relevant work as opposed to the
construction of paradigms and efforts oriented to arrive at knowledge
that could be translated into the production of goods and services. Social
research, which in the region used to focus on general and politically relevant issues, is now compelled to concentrate on case studies supported
by officially accepted or tolerated theoretical frameworks and which
rarely goes beyond the level of social mapping and description.
Likewise, the so-called competitive funding program was established
with a view to promoting improvement of academic quality on the basis

the pattern of industrial colonialism75

of rewarding the most advanced segments of academy working in their

respective areas and institutions, as well as those which carry some interest for governments or even, in some cases, corporations. Also relevant
was the methodology used to ascertain different levels of quality that was
decided by entities operating outside the institutions under evaluation.
The purpose here was to reorient the development of the academic
Academic staff is compelled to adopt new practices not only through
direct means such as economic stimuli, but also via the restructuring of
institutions. Universities became subjected to a constant monitoring and
evaluation of their activity. The merits of academic staff, graduation rates,
the internal organization of curricula, institutional planning and regulations, their linkages to societies, infrastructure and so on, are contrasted
with indicator parameters which are in general obtained from known
best practices and not designed to deal with the specific realities of each
State policies towards institutions of higher education implied a hard
blow to university autonomy, something which the academic community
had once treasured highly. As a consequence, those policies would generate substantial resistance within the universities. The resistance to such
policies would eventually be broken through budgetary pressures against
the dissident institutions, a strategy whose application can especially be
found in Mexico. As an overall matter of fact, let us say that this sort of
pressure became a generalized mechanism to achieve desired behaviors
not only by institutions but also by countries. This poses great relevance
for the relations between developed and underdeveloped countries during the neoliberal stage. It is a strategy that has been instrumental for the
attainment of more than one single aim.
If the budget for a given university is tied to academic merits and is
results-driven, then sufficient economic support would serve to prove
that the institution was moving as expected along the lines defined by the
state. It would also show that a redefinition of the tasks assigned to the
academic staff was taking place. Given that it is this staff alone that can
demonstrate academic merits and work, report on the different institutions academic programs and define their planning and projected further
development, execute the institutions links with society, and so on, it is
they who have become a principal agent in budgetary design and the
applications for obtaining it. This work has been added to the regular
workload of lecturers and researchers (each of whom in addition have
been increasingly compelled to become lecturer-researchers). In some


chapter three

cases, a management function has been recognized as a regular task burden within the overall stimulus program. It follows that the work allocated to the other functions should be reduced, but all these changes take
place in a context where productivity demands in research and teaching
have become much more intense.
The budgetary squeeze was also aimed to mobilize institutions of
higher learning to search for their own financing resources. On the one
hand, seeking funds should have led universities to the exploration of
new links with society, especially with the larger income sector of society
within which entrepreneurs are prominent. The relation between universities and enterprises would thus come to satisfy mutual needs. Yet, on
the other hand, since these relations have not produced the sought after
results, universities are still being forced to try alternatives other than the
commodification of academic work for the benefit of enterprises. For
many institutions, the introduction of tuition fees would come to alleviate their budgetary crunch. In this manner, the growth of private universities would come to put an end to free higher education throughout much
of Latin America. Indeed, the privatization of universities has taken place
under state control and guidance. So much so that it could be readily said
that the decomposition of public higher education was a definite aim of
the state.
None of these fundamental transformations have helped the university
to improve the accomplishment of the second function indicated above,
that is, the provision of a labor force that is professionally trained to meet
the current demands of industry. The economic restructuring that took
place across the region, especially during the 1990s, gave way to a generalized process of technological change that unfolded with unprecedented
intensity. With a view to ensuring the proper working of the new means
of production, it was necessary to redefine the training of the labor force
so that it could be constantly improved and allow for the re-training of
those competencies that the new technologies were making redundantand useless. In addition, this redefinition had to take place over a
short term.
The university, with its degree programs, its vocation of comprehensive knowledge, its demands for autonomy, and its traditional separation
from the needs of businesses, was far from being in the best position to
meet the requirements of the new environment. At the same time, the
aim to minimize state economic intervention with its effects on public
spending cuts worked in opposition to any new investment in public university education. The preferred way out of the dilemma would have been

the pattern of industrial colonialism77

to contemplate two parallel lines of action: the extension of higher education beyond university boundaries on the one hand and its further privatization on the other.
This transformation has gradually taken place and at different times in
different countries. It started first, as did many other aspects of globalization, in the Southern Cone countries while submerged under totalitarian
regimes. This was especially the case in Chile, Uruguay and Argentina,
although the changes would differ in depth and breadth in each of these
countries. By the mid 1990s, the World Bank would refer to the case of Chile
as an exemplary one to be followed concerning its successful reforms
with little or no regard to the fact that the changes were violently imposed
by one of historys most brutal dictatorships during the 1970s and 80s. On
the other hand, these neoliberal transformations in the region began to
clash with new obstacles during the second half of the 1990s following the
emergence of progressive governments that decided to confront globalization policies. Higher education in those countries is now taking a different
course. Even so, we must affirm that neoliberal changes left a visible and
significant mark on Latin American institutions of higher education.
Registration in higher education grew impressively fast. The average
rate of registration exceeded 30% of the population between the ages of
2024 and while still far behind the levels that developed countries have
reached, it practically doubled the rate that existed in 1994. It should be
noted that this expansion has taken place in a context in which the growth
of this age group has notably slowed down, probably due in large part to
the rate of emigration to developed countries. By all accounts, the growth
of matriculation was still real and impressive.
This advance was achieved mainly due to the expansion of private
higher education that now accounts for more than a half of total enrollment. Public higher education has grown as well but much more slowly
than in private institutions. The growth of higher education has been
mainly as a response to market signals and it was supposed that this was
the correct method of adjusting education to the needs of society. The
expansion of the private sector which has reached a commanding presence in higher education (Garca, 2007) took place within an environment where regulations and controls were practically nonexistent. This in
turn was bound to translate into negligence in the area of curricular
design and did in fact lend itself to a dubious quality of academic activity
in many if not most of these institutions.
The strongest stimulus to this expansion focused on the creation of
non-university higher education institutions, most of them private. These


chapter three

institutions typically lacked autonomy, offering a limited number of short

degree courses and largely oriented to addressing specific, regional problems. The expansion of evening and weekend classes made it possible for
a larger number of working people to access higher education or continue
their tertiary level studies.
All these changes were expected to make it possible for higher education to deliver the qualified labor power that industry required for constant technological innovation. It was to support their need to adequately
face the challenges ensuing from an increasingly more acute level of competition. Yet, the changes we have alluded to provided a purely quantitative response to the situation that globalization and export-oriented
growth had created. Indeed, there was little room for anything else. The
same causes that prevented universities from being able to closely follow
the technological changes taking place in more dynamic industrial sectors of developed countries regarding the skill levels of labor power, and
especially their separation from the technological processes of enterprise,
also served to explain the incompetence of non-university institutions to
even approximate the needs of frontier industries.
It was necessary, then, to open new paths and try different methods
that would allow institutions of higher education to arrive at a more efficient delivery of skilled labor power. The measure that would best fit the
lines of globalization while achieving this aim was the internationalization of higher education. On the one hand, the international mobility of
students would contribute to overcoming the regions notable shortcomings in teaching. Students would have access to world class education
centers, those which deal with the sort of advanced knowledge and teaching methods required by the most technologically advanced industries.
Thus, they could be properly equipped to deal with the demands of foreign industries in the region. Likewise, trainers, motivated by research
exchange programs, would have the opportunity to get in touch with cutting edge knowledge as well as participate in advanced research projects
at least in some exceptional cases. Certainly, it is clear that this sort of
measure would only partially mitigate the situation given that only small
segments of the student and training population of higher education
could benefit from them. It is also the case that academic mobility in the
form of study abroad programs is normally designed for rather short periods of time.
At the same time, the internationalization of higher education translated into a new presence of foreign institutions in Latin American countries. In addition to the collaboration that takes place between the

the pattern of industrial colonialism79

countries of the region, it is worth noting that between institutions in the

United States and Europe, of which 82 offered distance education,
37 offered branch-campuses and franchises as well as 114 formalized academic alliances in 2004. The most extended form of collaboration is the
full-fledged academic agreement (Garca, 2007).
Policies such as these would seem to strengthen the training function
of higher education in the region of Latin America. But in fact, they merely
serve to announce its incompetence and inability to properly fulfill its
functional role. To resort to foreign facilities is simply not enough to overcome the systems internal insufficiencies, just as the importation of the
means of production does not supersede the inability to produce them
External Limits to Export-led Economic Growth
Export production must ultimately confront international competition.
In order to do so successfully, it must at least work with the productivity
and quality levels that prevail in the world market, that is, levels determined by the most advanced corporations. Large transnational corporations exercise control over market access, what technological levels are
adequate, and financial resources. Therefore, underdeveloped countries
are generally in no position by themselves to embark upon exportoriented growth projects. Direct foreign investment becomes one the
most important conditions for success.
Under the previous pattern of industrial colonialism, foreign capital
mainly penetrated into the region through fusions with local capitalists
and states. Its principal aim was the regions domestic market which had
evolved under strong protections from foreign competition. Local states
shared some concerns regarding the national interest and the need to
prevent foreign capital from taking absolute control over particular industries. Things became very different however after the change in the form
of growth.
Latin American states became very actively involved in an acute competition to attract foreign capital into their countries. They offered almost
everything imaginable to external investors, starting with very low tariffs,
low taxation, industrial facilities, a high level of return on investments,
social peace and property rights, and so on.
During the lost decade of the 1980s when most Latin American countries carried out their structural adjustment, i.e., their transition to the
new pattern of industrial colonialism (Southern Cone nations had begun


chapter three

this transition during the mid-1970s), international financial capital and

institutions (IFIs) concentrated on reaping the benefits of the regions
huge external debt and on enhancing economic reorganization. During
the 1990s, foreign investment steadily increased until 1999, growing from
1% of the regions GDP in 1991 to 5.5% in 1999, and it became recognized
as the principal and most stable source of external financing. Transnational
enterprises had already gained control over a large part of domestic
production in the region, displacing local capital. Within the biggest 500
enterprises, transnational companies controlled 43.7% of sales in
19981999 compared with 27.4% in 19901992. Private national enterprises reduced their share from 39.4% to 37.2% during those years and
state holdings decreased theirs from 33.2% to 19.1%. The larger the enterprise, the heavier was the weight of foreign capital within it. Thus, the
participation of transnational companies in the sales of the 200 largest
enterprises rose from 30.6% in 1995 to 44.8% in 1998 and their sales
abroad were growing faster than the regions exports.
As foreign investment follows the course of economic cycles very
closely, it fell during 20002002 as would be expected, from US$79.923
million in 1979 to US$45.213 million in 2002. It later recovered by 2004,
stimulated by the high prices of raw materials and it grew until 2008. This
was in spite of the fact that privatizations were almost depleted as a
source of foreign investment. Given that exports and outward-growth in
general are directly and deeply dependent upon the foreign business
cycle, this trend was bound to grind to a halt by 2009 in the context of the
world economic crisis.
Foreign investment had concentrated its presence in different economic sectors throughout the region. In Mexico and the Caribbean Basin,
external resources were directed mainly towards manufacture. In South
America, investment was oriented mainly to the exploitation of natural
resources. Investment in services has been significant throughout the
entire region. Brazil and Mexico are the main receivers of foreign investment. It is US investment that predominates in Mexico while European
investment has a stronger presence in South America.
The 1990s witnessed the consolidation of outward-oriented growth.
International trade assumed a new position in the economic activity of
the region. In 196061, exports represented 11% of the regions GDP while
imports amounted to 10.5%. A decade later, these figures remained practically unchanged: in 1970, 10% and 9.7% respectively. The trend for the
balance of trade towards deficit remained under control mostly due to
industrial expansion, but a current balance deficit was mostly unavoidable.

the pattern of industrial colonialism81

The export rate of growth had been 4.2% in 19601970 while in 19801990
it jumped to 7.8%, very similar to the percentage growth of the following
decade, where it reached 8.6% during 20002007.
By 19971999, exports already represented 18.9% of GDP and imports
20.9%. The balance of trade deficit became by itself a reason for contraction. What is to be noted here is not the new level reached by exports and
imports, since this corresponds to the economic opening of these countries,
but the fact that imports were growing faster than exports. This provokes a
highly volatile economic scenario. During the 1990s, the business cycle in
Latin America experienced a couple of years of growth with a shrinking
trade surplus which then transformed itself into a growing trade deficit.
After two or three years, the latter became unbearable and it had to be corrected by resorting either to recession or simply slowing down growth.
The trade balance under the present pattern of industrial colonialism is
more vulnerable to deficit, although underdeveloped countries can contain this tendency for periods, especially during those of prosperity generated by high prices and volume of exported natural resources. This has
occurred during the last few years with the regions exports of mining, oil
and agricultural products. The evolution of the last two decades that
shows manufacturing exports with technological content to have grown
steadily might therefore cause confusion or create unfounded expectations. Mexico, the main exporter of the area at the beginning of the millennium, is also the representative case of this evolution. Products of medium
and high technological content are concentrated in the maquila industry
(i.e., enterprises located in the national territory that carry out an industrial process or service by which a good sent by a parent company from
abroad is transformed, repaired or used, to make products for export). In
2001, this sector represented around 22% of the regions exports. However,
this industrialization that resulted with greater exports has taken place by
following the established patterns of underdevelopment.
The maquila industry relies on the imports of the means of production,
imports that normally account for more than 70% of the value of the
product. By 2001, the local input contribution reached its highest point
since 1980, 2.7% of the value of the product. In other words, the maquila
industry has not had any significant impact on the promotion of industries for import substitution (ECLAC, 2003). The value of exported manufacture is higher, much higher in this case, than the internally produced
value. This means that the so-called exports of medium and high technological content are predominantly sales of products obtained with poorly
skilled labor-power from the exporter country.


chapter three

It can be seen that the labor, not only of conception and design of processes and products but also a large part of the immediate labor related to
the former, remains concentrated in developed countries. It is also evident, although in a rather extreme way, that not only the creation of new
industries but also their operations depend upon the imports of means of
production, prolonging the internal deficit of the ability for creation. The
development of industry intensifies both the lack of control over production and the incapacity of underdeveloped countries to make their own
economic decisions. As it is stated by UNCTAD: The growing importance
of international production networks elevated the degree of productive
complementariness between developed and developing countries. This
means that a major share of production and exports in developing countries becomes dependent on the decisions and performance of foreign
firms and countries (Mayer, Butkevicius & Kadri, 2002).
The Latin American and the Caribbean balances of goods, broken
down into their different categories, illustrate the above-mentioned trend
concerning industrial deficit in the region.
Table 3.1.Latin American and Caribbean Commerce. Export Goods
(in millions of US dollars).






Industry based on
natural resources
Industry with
technological intensity

46.906 51.457 85.875 93.371 145.064

20.651 32.099 52.526 52.823 72.913
23.680 60.140 132.055 182.193 218.452

Source: CEPAL (2006a) (Statistical Annex).

Table 3.2.Latin American and Caribbean Commerce. Import Goods

(in millions of US dollars)


Industry based on
natural resources
Industry with






40.180 100.237


Source: CEPAL (200a) (Statistical Annex).



234.499 279.506

the pattern of industrial colonialism83

The Latin American trade balance rests heavily upon the exports of primary and industrial goods based on natural resources. As a whole, it
shows a favorable balance between 1987 and 1991, based on the control of
imports and a decline in economic growth. For the following ten years
(through 2001), the balance showed a deficit. From 2003 until 2007, this
situation was inverted thanks to an increase of prices and, on a smaller
scale, by the volume of primary exports, especially oil, gas, copper and
some farming products (sugar, banana and coffee). During each year of
the period between 1987 and 2004, the balance of industrial goods was
adverse. This was especially due to the deficit of medium and high technology goods. The evolution of the balance is as follows:
Table 3.3.Latin American and Caribbean Balance of Industrial Goods
(Millions of dollars).





Total of
9.5888 33.801 82.051 50.168 50.554
Based on natural
2.137 10.498
Of low technology
2.632 10.154 6.424 5.896
Of medium
11.671 25.098 50.483 30.877 31.692
Of high
7.415 12.368 24.553 15.005 23.466
Source: Source CEPAL (2006a) (Statistical Annex).

It is evident that the regions production of industrial goods remains far

from satisfying domestic needs. Worse yet, the dependency on externally
produced goods tends to grow as industrialization advances. In 1987,
imports of these goods accounted for 78.5% of the total while by 2004,
that contribution increased to 87.4%. Medium and high technology goods
represented 49.2% of the total during the first year and by 2004 they
reached 57%. Practically the whole variation was due to the increased
importance of high technology goods in industrial imports, going from
13.8% to 21.5% during the period. It therefore seems clear that by means
of international trade with developed countries, the region transfers
resources that could be obtained internally if it were able to produce its
own means of material progress. The balance of trade allows us to approximate the amount of resources with which the region helped developed


chapter three

countries to expand their own production and employment, or to estimate the extent to which the ability to accumulate is transferred to developed countries. In general, less production and more unemployment are
inherent features of underdevelopment.
At this point, the following digression may be appropriate. International
organizations include amongst the developing countries East and
Southeast Asian economies. The participation of this area in world exports
of manufacture is already quite high. Between 1996 and 2001, these countries participated with 30% of world exports in the area of information
and communication technologies, one of the most dynamic sectors of
international trade. This area sells a little less than the European Union
(34%), but more than the United States (17%) and Japan (15%) while the
contribution from Latin American countries scarcely reached 4%. It
seems that the distinction between developed countries and developing countries does not have any clear meaning at the trade level. Thus, to
situate the Republic of Korea, Taiwan, the Philippines, Singapore and
Thailand together with Latin America in the same category of developing countries only makes more difficult our understanding of the processes which the different countries are involved in.
It is not that international organizations ignore the relevant differences
between the aforementioned Asian countries and Latin America. For
example, CEPAL points out in contrast with the experiences of certain
countries of Asia, the Mexican export sector, despite its supposed success,
has not been able to create the internal economic links within the national
economy. It is further explained that:
To climb the technological ladder is difficult, especially when the chain of
local inputs suppliers is not developed and, in consequence, enterprises
located outside the territory provide parts and components, as well as more
sophisticated services. In these cases, the services of design and engineering, research and development, and logistic and commercialization tend to
be offered by parent companies, with no possibility of technological transfer (CEPAL, 2003a: 109).

What is not noticed is that the countries climbing the technological ladder are indeed advancing in the development of their capitalist division
of labor. They are elevating the organization of their general labor and
building the conditions that make it possible for them to appropriate
and produce the knowledge and skills that are necessary for the process
of accumulation. They did not expect the export sector to be able to create the necessary economic links. On the contrary, they undertook the
task of producing technological progress as a national project, one that

the pattern of industrial colonialism85

would raise their nations to a new position relative to the imperialist

powers. They are countries and zones at the threshold of capitalist development. The least we can say about them is that they have already renegotiated their position in the world market. Latin America, in turn,
continues to be trapped in the backyard of imperialism. This also suggests
that there is no inevitability in the state of affairs that keeps the region
underdeveloped. Rather, it is the political will of governments and ruling
classes that befits a strategy of adaptation better than one of radical
Returning back to our central argument, it now seems obvious that foreign investment serves to mitigate problems created by trade balance
deficits. The same is true for credits entering from abroad. The regions
external debt is another chronic illness that was bound to be aggravated
under the existing pattern of industrial colonialism. During the 1970s, the
regions external debt increased greatly. Debt grew more than seven times
over between 1970 and 1980. This change was not the automatic result of
export-oriented growth, but rather a consequence from abundant and
cheaply available international credit, especially after 197374, in a context of the prevailing difficulties for economic growth. Debt increased
once again during the 1990s by more than three times. A peak was reached
in 2000 when the regional debt was equal to 35.2% of the regions GDP.
After 2003, indebtedness relative to GDP started to decline. By 2008,
according to official data, it was 18%, thanks to an unusually long period
of growth that ended in the second half of 2008.
However, foreign credits and investments have their characteristic cost
that is demanded in the form of interests and profits. The balance of rent
deficit grew from US$20 billion to US$40 billion between 1980 and 1995
and later continued to grow to US$89 billion in 2006 and again to US$110
billion in 2008, i.e., to twice the trade balance surplus. In this same year of
2008, the current account deficit was equal to 0.6% of the regions GDP.
This drain of value created in the region must be paid for, no matter how
important it had been for the cost of growth during the previous years,
and will continue to take place even in the context of economic
Thus, the process that began with transference of value, that is, the
investment in progress created through external means rather than internally, continues to reproduce the imbalances that make it necessary for
the region to resort to external financing. It ends up producing another
value transfer in the form of interests and profits, thereby deepening the
dependency of the underdeveloped economies on developed countries.


chapter three
The Different Functional Roles Within the Region

From the point of view of the regions integration into the world market,
we can group together Mexico and the Caribbean Basin on one side and
the South American countries on the other. It is Mexico that shows a more
dynamic evolution when compared to the other countries. South America
has, on the whole, followed the old exporting tradition by which it provided raw materials and foods to developed countries, thus making some
savings in constant and variable capital possible for the latter. A demanding export orientation of production in terms of price and quality would
lead this part of the region to a better performance of the same function.
Mexico, on the other hand, appears linked to the international trades
most dynamic sectors. Some data can suffice to illustrate this situation.
Mexico increased its participation in OECD purchases from 1.26% in
1980 to 2.27% in 1996. In South America, only Chile saw its share of that
market increase during that period, going from 0.23% to 0.28%. Unlike
Chile, Mexico has been incorporated into the more dynamic trends of
commodity circulation in the world market, notably through three industrial branches: automobiles, electronics and clothing.
At the beginning of the 21st centurys first decade, manufactures contributed 90% of the countrys total exports. In South America, on the contrary, the relative weight of primary goods in total exports continued to be
important. With the exception of Brazil, South American countries have
not taken meaningful steps in order to overcome their dependency on
products based on natural resources.
As for the destinations of exports, Mexico increased its participation in
US imports from 6.61% in 1992 to 11.25% in 2000. On the other hand, South
Americas participation fell from 4.47% to 4.07%. US imports from Mexico
grew 17.2% annually between 1992 and 1999, whilst US purchases from
South America only increased by 7.1% as an annual average. Meanwhile,
88% of Mexicos total exports went to the United States in 1999 and 74%
of Mexicos total imports came from the United States. Mexico thus had
intensified its dependency on the US economic cycle. South America, in
turn, diversified its trade towards the rest of the world, in particular,
towards Asia.
Mexico has been one of the favorite destinations for direct foreign
investment in Latin America, surpassed only by Brazil. Large transnational corporations have carried out ambitious programs oriented
towards the restructuring of their subsidiaries and towards the creation of
new assets in Mexico. A massive transfer of advanced technology along

the pattern of industrial colonialism87

with location advantages and cheap labor power has allowed enterprises
to gain an edge over many competitors. It should be noted that this course
of events does not follow the logic of functioning capital, where investment faces obstacles to the introduction of technological progress mainly
on account of the low value of labor power in the region. Indeed, this
rationality operates when decisions are based on the economic environment of a given underdeveloped country, especially in terms of technological resources, productivity, scale of production and prices. When
investment decisions are made in accordance with the conditions prevailing in developed countries, things change. A corporation produces in
an underdeveloped country with a view to competing with developed
ones. Cheap labor diminishes production costs, thus augmenting the
profit. But at the same time, corporations must be able to master and
solve the host countrys technological gaps. The maquila method provides
an adequate answer to this problem.
The US Governments strategy enhanced the investments of transnational corporations in Mexico with a view to recapturing the positions
they were losing within their own domestic market, especially since
Ronald Reagans rather deficient movements to boosting development in
the United States. As we have already seen in Chapter 2, George Bush
Sr. attempted to mitigate the effects of neo-liberal policies as applied by
his predecessor without actually abandoning them but instead by means
of a new deal with an eye for creating conditions for a deeper penetration
of US capital in the region.
Free trade agreements would go very far in this context. The United
States was in no position at that time to continue supporting the General
Agreement on Tariffs and Trade (GATT) multilateral approach to economic liberalization, especially since this organization insisted on reducing tariffs, which would only worsen the position of North American
agribusiness and industry. Immediately after signing the Free Trade
Agreement with Canada, the United States signed another treaty with
Mexico. Both would enhance liberalism between these countries, so that
the United States would have access to a proper means of recapturing
positions in her own domestic market. This means that the mode of operation of the present pattern of industrial colonialism in Mexico directly
responded to the interests of large US transnational capital.
It is not very often that an economy is put at the service of another ruling one, to the benefit of competition and liberal principles. But under the
present pattern of industrial colonialism, this has been a generalized aim
of Washington in the region (Dello Buono and Gandsegui, Jr., 2007). In


chapter three

this context, investments by US enterprises in the region with the aim of

competing in their own country also signify in practical terms the virtual
annexation of foreign territory or the expansion of the US internal market. Meanwhile, constant realities such as cheap labor have justified the
treatment of Mexico as a different country.
This strategy was successful for a period. In the automobile industry,
subsidiaries of General Motors, Ford and Daimler-Chrysler were prominent and managed to increase its production by four times throughout
the 1990s. The original projects tended towards specialization but the
industry was diversifying rapidly. Their production in Mexico helped displace German products to a lower relative position in the US domestic
market and contributed to slowing the growth of the Japanese industry.
This in turn was relegated to a secondary position by automobile production in Canada. As for electronic products, the industry located in Mexico
displaced the Japanese industry from the number one position that it had
occupied up until 1997 as a supplier to the US market. The same is true for
the clothing industry located in Mexico but in this case, it was the Chinese
who were dethroned. Thus, Mexico was successfully used by large US
transnational capital in their dispute with foreign enterprises over the
control of the US domestic market.
As the global economy entered into the 21st Century, the emergence of
more attractive destinations for investment in terms of a cheaper labor
force along with fiscal concessions, especially in Asia, would weaken the
force of Mexicos new integration with the United States. But essentially
the course of the process would not change. Between 2004 and 2008, it
began to become evident that direct foreign investment in the region had
begun to shift orientation from Mexico to South America.
The internal division of labor of transnational enterprises also illustrates the degree of subordination to which Mexico was subjected in the
context of the present pattern of industrial colonialism. The more complex activities, those where value creation is more intensive, are reserved
for the country that creates the technology. Meanwhile, the intensive
labor activities that demand unskilled labor are generally carried out in
the underdeveloped country. This division of labor corresponds to the
economic reality of underdevelopment in Mexico. The fact is that foreign
enterprises do not find in Mexico the technological environment required
for competitive production in underdeveloped countries. Moreover, this
division of transnational corporate labor is not only a distinguishing feature of the present pattern of industrial colonialism. It can also be found
during the entire period of inward-oriented growth, but it does take on an
even more relevant role in the more recent period.

the pattern of industrial colonialism89

Things have become different in recent times inasmuch as the point

has become to compete, not in the domestic market, but in highly
demanding developed country markets with highly sophisticated products in terms of their embedded technology. In the context of the role that
Mexico has been allocated by large capital, export-oriented growth
becomes even more demanding. Competitiveness is an all-determining
factor, one that allows even further encroachments into the economy. For
example, Mexico was forced to give up its demands in the automobile
industry regarding the national content of export models being equal to
60%, and reduce them to 30%. Certainly Mexicos lack of ability to produce high technology goods would benefit US enterprises. The renouncement of the promotion of local industry development was part of the
price to be paid in order to gain competitiveness. This was not, as can be
readily seen, as a quality of the country (Mexico in this case) but as a quality of the large transnational capital operating in an underdeveloped
country. The maquila industry which heavily contributes to Mexicos
exports, works in such a way that local inputs only account for less than
3% of the total.
Two final remarks should be made about this. First, it can already be
seen that export-oriented growth as applied in Mexico should have shown
a lesser ability to promote growth than anticipated in the basic conception of the pattern. Mexicos exports increased much faster for a period
than those of Latin America as a whole, reaching 20% during the 1990s
compared with 8% for the rest of the region. Yet, Mexicos gross domestic
product increased more slowly than the regions GDP, that is, 3.1% compared with 3.2% for the others during the 1990s. This situation would
worsen into the new century as foreign investment fell in relation to that
being received by South America, with a smaller corresponding share of
the increase in exports. In fact, Mexicos GDP grew between 2003 and
2008 much more slowly than the regions GDP.
Second, the shared production method not only has economic implications but also political effects. An underdeveloped country is likely to see
its ability to manage trade imbalances reduced still further. Imports, for
instance, will progressively fall under the control of transnational
Internal Contradictions
Latin Americas economic performance under export-oriented growth
has been more mediocre than it was during the previous stage. During the


chapter three

period from 1950 to 1980, the annual rate of growth was 5.3% while
between 1991 and 2003, it reached just 2.7%. A more accentuated tendency towards trade deficit has led governments to a tighter control on
imports and on economic growth. At the same time, a deeper external
dependency in every sphere of economic life has transformed the region
into a more vulnerable victim of financial turbulences abroad.
During the present stage, the region reduced its participation in world
production, from 8.7% in 1973 to 7.7% in 2006. Differences in per capita
income with developed countries also heightened. From 2.5 times in relation to Europe in 1973, it jumped to 3.2 times in 2006. Differences with
Europe had grown between 1950 and 1973, a period when that region was
very actively engaged in economic reconstruction and expansion. It is
interesting to see that the same differentiation did not take place with
other advanced regions during the previous stage. According to an ECLAC
report, per capita income from a group of countries including Australia,
Canada, the United States and New Zealand was 3.7 times that of the
region in 1950 and the difference did not grow until 1973; on the contrary,
it declined slightly to 3.58 times. Yet, from 1973 to 2006, the difference in
income went up to 4.64 times (CEPAL, 2008). The annual GDP growth
rate per employed person between 1992 and 2003 was very low at 0.1%. It
later rose to 1.9% during 2003 and 2006, for an average annual rate of 0.6%
for the years 19922006.
Such meager economic results would not bode well for employment.
Before revising the data, it is important to note that there are factors
inherent to this form of economic growth in addition to the slow growth
that affects employment levels. On one side, export enterprises work with
a higher organic composition of capital with the aim of reaching acceptable performance in terms of productivity levels as demanded by global
competition. A lesser amount of labor force is required for mobilizing a
unit of capital. On the other hand, protection of the industry producing
for the domestic market was almost completely dismantled and it was
forced to either restructure or go into bankruptcy. The ability of this
industry to attract a labor force was seriously damaged. For example, the
weight of personal consumer goods in total imports had fallen from 23%
in 1948 to 15% in 1970, this during inward-oriented growth. The new pattern of industrial colonialism severely hampered the continuous growth
of this sector and imports of consumer goods rose from 14% to 17%
between 1990 and 1998.
The rate of unemployment in Latin American and the Caribbean has
been correspondingly high. In 1994, it was at 8.2%, increasing to 10.4% by

the pattern of industrial colonialism91

2000 and hovering at 7.5% in 2008. Indeed, these figures are not far off
those of many developed countries. What is more astonishing is the level
of so-called informal employment that according to official estimates
(CEPAL, 2009) constituted around 50% of total employment from 1994 to
2008. This sector includes independent workers, family and apprentices,
micro-business workers and domestic service workers. We will attempt to
produce a more proper account of this in the following chapter. Suffice to
say for now that it is mostly made up of workers who are not directly
involved in the wage-labor capitalist relation and who are therefore
pushed to seek independent occupational alternatives.
The very precarious labor conditions of the informally employed sector
barely allow them to make a living. Just while it was assiduously expanding, Latin America had become the worlds most unequal region. Poverty
intensified and eventually reached an unprecedented magnitude. Official
figures registered 40.5% of the population living in the condition of poverty by 1980, growing to 48.3% in 1990, and then declining to 44% in 2002.
Since then, after a six year period of continuous economic growth, poverty was reduced to 33% in 2008. Yet, as a result of the world crisis, millions are once again joining the ranks of poverty and indigence. In absolute
terms, the population living in poverty rose from 135 million in 1980 to
180.4 million in 2008.
As a harsher social exclusion lashed the region, political governance
became much more complicated. The political sphere and social sentiments drifted ever further apart. Between 1990 and 2002, only 62% of
those citizens entitled to vote actually cast their ballots and no more than
56.1% of votes were validated. In countries where voting is not compulsory, popular participation was even lower, such as in Colombia (33%) or
Guatemala (36.2%). Electoral abstention tended to increase and this was
the case of Mexico where it accounted for 42.3% of citizens in 1997 and
58.3% in 2003. At the beginning of the present century, only 43% of citizens professed to support democracy and no more that 20% backed existing political parties. Less than 40% had trust in the judiciary, police, heads
of states and armed forces and even television had less than 50% of popular credibility (UNPD, 2002).
The political and ideological institutions of Latin American capitalism
were far from behaving as required for a smooth development of society.
They lost much of their energy as sources of legitimization for domination. Social unrest would increasingly find new channels to express itself.
Successful paths were blazed in Venezuela, Ecuador and Bolivia on the
basis of leaderships which exhibited a tough stance against neoliberalism,


chapter three

mobilizing huge support from large masses of the politically excluded.

That is where the end of the third stage started to work out its path, from
those most excluded who emboldened a leadership no longer committed
to the reproduction of traditional establishments. The outcome cannot be
foretold, but export oriented growth has clearly become severely questioned. The deepening world crisis will reinforce the search for an alternative course. As R.A. Dello Buono and J. Bell Lara have put it:
However resilient that system of domination may be, we believe that an
insistence on imposing and prolonging neoliberal policies in the face of
sharpening social contradictions will continue to produce conditions propitious for new social explosions. It is our view that under certain circumstances, these contradictory social processes can ultimately lead to different,
unanticipated and possibly more transformative results (2009: 5).

Political Regimes at the Third Stage

By politics, we refer to the praxis that regulates a social conflict based on
class division. Politics revolves around class domination and a society
without politics can only be imagined as a classless society. In class societies, the state is the main political agency. Each form of class domination
conditions both the states organization and its activity. Within a particular historical form of the state, modes of political regulation are also linked
to the societys economic organization and condition.
During the last seven decades of capitalism, we have experienced two
main forms of political regulation. On the one hand, authoritarianism
(where we find liberal dictatorships, totalitarian states, and presidentialism),1 and on the other, liberal democracy, which has operated under two
versions: inclusive and exclusive. The two versions of the latter form are
linked to the proposals for the economic organization of society that
came into practice through Keynesian politics and neoliberalism
Keynesian politics, based upon consumption, focuses on domestic
markets, and therefore, places a certain importance on wages. This
approach made room for the social contract which characterized capitalist evolution from the second post-war period (and earlier in Latin
America, with the emergence of the populist state) until the early 1970s.
1By presidentialism we mean a state with the following features: a strong executive
power which controls the legislature and judiciary, with corporativism and elections also
controlled by the executive power.

the pattern of industrial colonialism93

Overall, this was a period when society witnessed a continual flow of class
concessions, thanks to which large swaths of the popular sectors saw
themselves enjoying the fruits of economic growth. These sectors managed to develop reasonable prospects of having a job, a place to live, and
access to health and education services. The so-called Welfare State provided a material basis to these prospects. Political parties acted as dynamic
agents promoting this steady flow of concessions.
Neoliberalism put an end to these class concessions and the overall
social contract that had crystallized, in favor of a new regime of policies
towards the popular sectors and their social class organizations. This
political shift was a key element in confronting the economic crisis that
had become incubated during the 1960s and had begun to reveal its major
fault lines in 19671968 and then again in 19741975. The first aim of neoliberalism was the recovery of the rate of profit and this implied that the
social correlation of forces was destined to become modified. Attacks on
trade unions in the US were mounted during the second part of the 1970s
at a time when they had already become generalized throughout southern Latin America. The highest expression of this process would become
felt during the Reagan administration when economic decline and cutbacks in state expenditures, including for technological innovations,
translated into unemployment. The expansion of unemployment helped
to weaken the labor movement everywhere, allowing the state to back
away from the prevailing regulation of labor relations. In its place, labor
flexibility was introduced by means of which almost unconditional
power over labor was transferred to the bosses.
Exclusive Democracy in Latin America
In Latin America, governments seem highly vulnerable to the pressures
from organizations, enterprises and governments of the advanced world.
But in this region social reorganization against the labor movement
adopted particularly severe characteristics. Income redistribution led to
the concentration of wealth during the 1980s, a process that became consolidated during the 1990s. In Argentina, Bolivia, Brazil, Costa Rica,
Ecuador, El Salvador and Nicaragua, the position of the impoverished
worsened even further while the richest 10% of the population increased
its share of national income. Towards 20002002, this latter stratum
received an income equal to 19.1 times that obtained by the poorest 40%
of the population. Between 1980 and 2002, the population living in poverty grew from 40.5% to 44.0% of the total. Their total number increased


chapter three

from 135.9 million in 1980 to 221.4 million in 2002. By the end of the 1990s,
the number of malnourished people in the region reached 54.0 million
(CEPAL, 2003b). In other words, it did not take long for neoliberal policies
to substantially modify social class relations.
This oligarchic income distribution was accompanied by the consolidation of a wide and growing sector of excluded people. The appeal for
them to participate in electoral democracy was not supported by their
economic integration. This is the main obstacle for electoral democracy:
political inclusion cannot be successful if it goes hand in hand with
economic exclusion. All of this was bound to have an impact upon the
political workings of society and it did. The political game was abandoned
by a large portion of society and its legitimating power became seriously
There is no doubt that a large part of the criticism of electoral democracy comes from economically excluded people. A survey by the Centro de
Estudios para un Proyecto Nacional (IFE, nd) on electoral abstentionism in
Mexico came up with the following results:
Electoral abstention and levels of income evolve in an inverted

The least educated abstain the most.
Rural abstentionism is greater than urban abstentionism.
Abstention is greater in districts with a large self-employed population.
Given the extreme state of affairs, a substantial and growing layer of the
population indicated in region-wide polling that it would not mind having an authoritarian government if it was able to solve their economic
difficulties. In Mexico, the percentage of voters who thought this way
went up from 39% to 41% between November 2002 and April 2004.
However, this opinion survey should not have just a single interpretation.
Each society has the image of an authoritarian government that has been
built from its own experience. While in Chile and Argentina, for example,
authoritarianism is linked to murder, torture, jail, exile, hunger, unemployment, open repression, disappeared people, and so on, Mexicos
experience under presidentialism yielded authoritarian governments
that were much more moderate and which operated through a weak but
long lasting social arrangement with a reasonable amount of freedom at
the community, grass roots level. In the case of the South American countries, it is very doubtful that poor people or even the majority of them
would be willing to support an authoritarian government.

the pattern of industrial colonialism95

Current democracy in this light seemed to be waging a campaign

against itself. Its internal logic appeared as an obstacle to its own development as it promoted rejection instead of support. But an important question cannot be avoided: is the behavior of the popular sectors
Professional politicians would be willing to think so. It must be said,
however, that what popular sectors are rejecting is not democracy but
rather exclusive democracy. They do not see themselves as participating
in a project that does not take into account their fundamental needs and
which on the contrary condemns them to misery. But it must be pointed
out further that we are dealing with a project that limits itself to the recognition of political rights that cannot effectively be enjoyed from a poverty-stricken position. Electoral democracy has a cost that some are
unable to pay and popular abstention ultimately reflects this situation.
Additional Contradictions of Exclusive Democracy
The failure of neoliberal, exclusive democracy is to be found in its own
contradictions. Neoliberal globalization, conducted by large transnational capital with the aim of eliminating all regulations and concessions
imposed by historical conditions in the past, has seriously reduced
national agendas in the region. Not even the orientation of their economic processes is discussed internally since they are defined abroad.
Neoliberals try to hide this reality by spreading the belief that economic
decisions are now in the hands of markets, an entity that listens, reacts,
promotes, put things in order, and whose wise leadership sets people
free from state pursuit. But as our analysis shows, the result is the same as
nations become alienated from a large part of their ability to make decisions. National fractions of the ruling block have been pushed into
increasingly more subordinate positions. Institutions such as the
International Monetary Fund (IMF), the World Bank (WB), the InterAmerican Development Bank and the Organization for Economic
Cooperation and Development (OECD) design and deliver their recommendations on economic policy, health and social security or any other
relevant matter. An insatiable need for credits and investment makes
Latin American countries submit to an autocratic decision-making process, where the client-state limits itself to presenting the external directives as its own creation. Not only are sovereignty and democracy thus
eroded, but so too are any serious possibilities for authorities to discuss a
more favorable arrangement with the poor.


chapter three

Along the same lines, neoliberal globalization reduced the states

capacity for making concessions. For that reason, the politicians ability to
alleviate social problems has also been smashed to bits. Just like the
national agenda shrinkage has led to the loss of parliamentary prestige, so
too has a careless neoliberal attitude towards the social problems of the
popular sectors discredited politicians and their political parties.
C.B. Macpherson (1982) in a brilliant analysis came to the conclusion
that the role of political parties was to blur class contradictions. He would
probably be annoyed about the present environment where political parties are situated in a way that does little more than further aggravate class
contradictions. Political parties act in such a way because they answer to
nobody. As organizations, their struggle has been to gain power for themselves as they opted for indirect popular representation, thanks to which
they enjoyed considerable autonomy concerning social demands. But in
so doing, political parties have moved further away from society and at
best remain pigeonholed as mere state agencies.
The internal life of political parties is an expression of this situation
and Panebianco (1990) envisaged this as an evolution caused by the internal logic of party organizations. It also appears now to be a result of external circumstances. They have caused a drastic cut in ideas, not only
outwards but also inwards, partly due to the reduction of problems that
are subjected to local decisions. They have no important causes to fight
for and instead of opposing the neoliberal offensive, they opted for adapting themselves to a neoliberal logic. The best policy is to have no policy
seems to be the motto of politicians under neoliberalism. Solidarity
between party members gave way to competition and costly electoral
campaigns have deepened party subordination to governments, private
enterprises, especially private mass media, and financing sources in general. Internal democracy could only suffer in this situation.
Electoral democracy under neoliberalism cannot be maintained even
conceptually. According to G. ODonnell (2004) whose theoretical work
provided a framework for empirical research by UNDP, a democratic
regime is one where the main political positions (at least executive and
parliamentary) are decided by means of fair elections. For an election to
be fair, it must be: a) competitive; b) free; c) a single vote for each single
person; d) decisive, that is, the positions for which candidates are competing must be currently occupied; e) inclusive, inasmuch as every adult that
meets the nationality requirement can participate, and f) institutional,
that is, it must take place in a context of regulated electoral activity so that
the population is confident about elections taking place as planned.

the pattern of industrial colonialism97

In addition, for an election to be free there must be freedom of expression

and association and access to plural information.
ODonnell considers that this concept can be found in current applications in Western countries of the Global North but that its presuppositions
(i.e., universal political and civil rights, homogenous legality throughout
the national territories) are not present in Latin America. His criticisms of
the Latin American reality are really very acute. He points out that the
popular sectors have no real protection against public and private violence, that their access to public services is unequal, and that they suffer
from continuous humiliations, etc. He also finds that states are economically colonized by foreign interests and for that reason they are bureaucratically inefficient, whereby they do not accomplish their legal function.
Nor can they act as filters and moderators of social inequalities. On the
contrary, Latin American states remain deaf to equity demands.
Then, why does he speak of democracy in Latin America? He does so
because he thinks that the political regime and the state are different entities, which, for analytical purposes, should be accepted as valid. In spite of
his complex way of reasoning, it seems fair to conclude that in his opinion, the democratic regime has to do with the generalization of political
rights while the state deals with social and civil rights. But the analytical
distinction loses its utility very quickly. Indeed, the political regime is the
external, historically conditioned, manifestation of the state and reflects
the way in which the state regulates social conflicts at a given moment.
The state changes its form of manifestation, but it cannot operate with
outthe latter. A comprehensive, theoretical definition of the state should
not leave aside the political regime, much less so when it comes to practical experiences.
We are dealing here with Latin Americas present reality and the inseparable connection between social and political rights can be seen clearly.
In order to participate in a fair election, one should be aware of the different options that politicians are offering. Such a position is denied to the
hungry who cannot even think of information costs. Their right to participate in a fair election, therefore, does not exist and remains a dead letter.
If ODonnell accepts, as he does, that it would not be consistent to recognize rights when the means to enjoy them do not exist, this is due to his
own lack of consistency, which is not alien to the contradictions inherent
in Latin American democracy. His assertion that there is no way of measuring the necessary means to enjoy political rights is no excuse. His conclusion in the final analysis should have been that there is no democracy
in Latin America.


chapter three

Perhaps a more appropriate approach would not deny the existence of

liberal democracy in the region, but rather focus on its mode. This would
lead to a better understanding of Latin Americas present democracy.
During the last few decades, we have witnessed two contradictory processes which shape the realization of democracy: on the one hand, a generalization of political rights, and, on the other, a retreat of social rights.
There has been an advance in the first regard and a setback in the second.
In this, the way towards the generalization of formal political rights is also
its actual particularization. This is historically a new situation which cannot be grasped with the old theoretical tools.
Democracy is a process, not a frozen situation. It is reasonable, then, to
expect that the use of political rights could serve the aim of expanding
social rights. This seems to be the experience as it continues to develop in
Venezuela, Bolivia and Ecuador after progressive governments came to
power. But when locked into neoliberal government proper, one fact
stands out: democratization in the region looks more like an inverted process. In effect, support for parliaments has fallen, popular dissatisfaction
with democracy has grown, and participation at the ballot box has diminished. This is not taking place on account of a reduction of political rights.
Mexican governments during the last decade have made a worthy effort
to construct a reliable electoral system. Yet, abstention, as we have already
seen, increased, along with the number of people who were not satisfied
with democracy. The latter reached 58% of the population in April 2004
(El Universal: 2004).
This inverted process of democracy goes hand in hand with increasing
poverty and inequality, which accounts for the fact that popular
sectors have not been able to penetrate political institutions. Control of
the state by political oligarchies and bureaucracies, with the support of
mass media, does not seem to be in any great danger by means of conventional party competition under neoliberalism. This is why in some countries such as Argentina and Bolivia people resorted to their own means to
protest and to fight for their demands. Yet, popular sectors cannot just
ignore political institutions. Those who control the social means of violence are in a better position to successfully impose their will. For this
reason, popular movements have been willing to accept reliable leaderships coming from outside the neoliberal establishment. By means
of mass mobilization, they have actually been able to exert some real
influence on political institutions. In the face of this, reactionary authoritarian positions are developing everywhere and political polarization is

the pattern of industrial colonialism99

The immediate challenge ahead consists of creating conditions that

make it possible for the population to effectively enjoy political rights.
This means reverting the prevailing economic orientation, paying attention to domestic markets and striking a new deal with imperialist countries with a view to overcoming the regions subordinate integration into
the world market. If successful, popular action could contain nowadays
authoritarian tendencies and promote a change of the current mode of
liberal democracy. If a new government cannot create a new economic
and social organization of society, an inclusive democracy will simply not
come into effect.
Climate Change in Latin America
Concern about climate change in the region has followed the calendar
and the emphasis decided upon by international organizations, especially
those of the IPPC. Most of the various published works on the subject
share a common description of the regions main features in this regard:
Latin Americas participation in global gas emissions is low, reaching
only around 12% of global emissions. The origin is to be found mainly in
changes of the use of soil, agriculture and energy consumption. The
share of each one of these three sectors as a source of emission is similar, ranging around 30%. Through the third stage, energy consumption
was the factor with the most dynamic growth due mainly to the expansion of industry and transport, which tripled their energy consumption
(Samaniego, 2009).
Despite the low emissions, the region is extremely vulnerable to the
effects of global warming, especially due to the existence of insular
states, areas of low coasts, exposure to epidemics and extreme weather
phenomena and a heavy dependence on the melting in the Andean
area. All these conditions make global warming a particularly dangerous phenomenon for the rich biodiversity of the region.
The region is the location of enormous natural riches. It has the largest
reserves of hydric resources and cultivable lands, 25% of the worlds
wooded areas and five of its countries are among the few that enjoy biological mega-diversity. This richness is unevenly spread in the region
and it is believed that global warming will have unequal impacts
depending on its advance and on the place affected.
The regions ability to adapt to climate change is very low and it is anticipated that the latters negative effects will be especially hard.


chapter three

Given that most emissions (around two-thirds) are produced by developed countries (included some of the so-called emergent countries such
as China and India), the general conviction is that no matter what
the region does to face climate change, these actions will have very little
or no impact at all. For that reason, governments tend to focus on demanding deeper commitment and meaningful actions from those countries
where the larger amount of emissions is produced. The largest polluters
should undertake major economic internal changes and deliver support
for adaptation and mitigation to those countries like those of the region
which actually are less responsible for global warming.
Large local capitalists, closely tied to transnational corporations, enjoy no
freedom to decide on the pattern of industrial expansion. They did not
decide their previous industrial trajectory and show no major interest in
or capacity to influence the coming industrial strategy. They will not be
able to provide an original answer to the current problems facing
The very economic well-being of the nations appears to be a strong
argument for governments to authorize measures that promote climate
change instead of alleviating it. The insatiable need for external resources
calls for politics that stimulate foreign investment without paying
much attention to their impact on eco-systems. Lax legislation and environmental controls that are practically left unenforced represent typical
features of industrially colonized economies. When certain legal restrictions to industry are recognized, this is mostly due to the fact that the
importing economy demands certain quality standards for their own productive or personal consumption at home. It goes without saying that
production for the domestic market represents the best opportunity for
the location of foreign environmentally dirty industries in underdeveloped countries.
The list of reasons that prevent the region from even approaching a
proper answer to the challenges that climate change represents must be
expanded. We can assume that capitalism could reduce the present level
of hostility against nature. Yet, a weak and peripheral science, such as that
found in the region, cannot provide great initiatives related to the transition towards a greener, less contaminating capitalist economy. On the
contrary, it is widely accepted that this weakness of the region represents

the pattern of industrial colonialism101

a crucial obstacle for embarking on original programs to counter climate

For instance, a work published by the United Nations Environment
Program (UNEP) and the Ministry of Environment and Natural Resources
(SEMARNAT) in Mexico affirms that adaptation to climate change that is
not purely spontaneous demands consideration of a wide range of intervening factors among which sound scientific analysis is central. After contrasting these requirements with the regions reality, it is concluded that:
Adaptation is nowadays a major priority for developing countries, which
are twice as vulnerable to climate change, because of the latters physical
effects on them and their technological, technical and financial inability
to embark upon adaptation studies and actions to mitigate its effects
(Garibaldi & Rey, 2006: 81).
Similar concerns have been presented from ECLAC. Nicolo Gligo V.
elaborates on the role of science in the struggle against climate change
following the styles of development line of thought. He stresses the negative effects of the non-critical absorption of foreign technological patterns over local eco-systems:
What is really paradoxical (of this damaging absorption) is that in many
cases the very regions research centers participate in the adaptation of
these technologies. Funding for research comes from advanced countries
and many local researchers and centers resort to agreements with the
financing sources with a view to acquiring the necessary resources for their
work and as part of their survival strategy. The fabric of dependency grows
stronger as a result of the lack of resources for technological research (Gligo,
2006: 42).

This is a clear example of the pressures that put local science, or segments
of it, at the service of foreign capital expansion in the region. There is no
room to expect an autonomous answer to the challenges that climate
change poses from the local capitalists and pro-colonial governments,
even if a solution was dependent on the region. Yet, developed countries
are also far from leading a determined struggle against climate change.
The UN Environment Program (UNEP) assessment of the actions oriented
to adaptation and mitigation is, without a doubt, frustrating. It reports
that At the end of the first half of 2009, only around 3 per cent of committed green funds had been disbursed; that a big gap remains between governments public statements and facts, and that overall, the amount
allocated to renewable energy falls short of the investment needed to
reduce carbon emissions and to keep the rise in global average temperature under two degrees Celsius. Some incentives, such as subsidies to the


chapter three

production and consumption of fossil fuels, are working against efforts to

build a sustainable future (UNEP, 2009: 10).
In developed countries the main obstacle to the struggle against climate change is the profit-seeking drive of capitalism, the same dynamic
that has produced and sustained global warming, especially in those
countries where private capital has achieved the most radical dismantling
of regulations, weakening the state function as guarantor of capitals general interests. Underdeveloped countries, as we have seen, face additional
obstacles. For that reason, the true fight for a humane relationship with
nature, that is, one that rationally reorganizes the symbiosis of mankind
to its environment, ultimately involves a radical transformation of global
social relations.
Nonetheless, it cannot be ignored that the present reality is posing
challenges that require an urgent response. Such challenges, to the extent
that they involve science, could stimulate the creative abilities of the
regions universities. There is a lot to be learned as it is necessary to
develop alternative energy sources, adequate cultivation, new technologies for a more efficient use of energy, methods for the defense of biodiversity, and so on. But there are also more elementary conditions to be
met. As Gligo puts it: The scientific strategy for tackling the environmental issue must necessarily take the scientific knowledge of the territory as
its point of departure, including the performance of the eco-systems and
especially the territorys biodiversity and the workings of the artificial
environment (2006: 42).
The challenge is enormous and it is particularly addressed to those university faculty members most committed to the defense of the environment and to the opening of alternative technological paths. This segment
of academic personnel, which is already organized in international networks, is not alone. They have important allies, notably those progressive
governments interested in developing an autonomous science, oriented
to the regions specific problems; important trade unions that have agreed
on the need to take action within the fight against climate change; small
and medium enterprises, including small agriculture, which are very
much in need of solutions to their countless difficulties, and others.
Sooner or later goods and services production will have to resort to environmentally clean technologies in a generalized way. The regions universities should participate actively and creatively in this transition while at
the same time building a new social role for themselves that is more
closely connected to the needs of the popular sectors.



It is scarcely fashionable these days to credit natural population growth
rates for their ability to explain poverty in Latin America. Indeed, the
unemployed and poorly employed people appear able to offer much more
solid arguments. Widespread precarious jobs are to a large extent a product of unemployment, for the latter points to the overall worsening of
labor conditions. And the greater the unemployment rate, the stronger its
negative pressure on labor conditions. In discussing poverty, therefore, it
is important to focus on what the causes are of the over-supply of labor.
The present chapter discusses the origins and manifested forms of surplus population in Latin America. It is argued that the ultimate cause of a
far larger than necessary industrial reserve army, i.e., surplus population,
is in fact industrial colonialism and the ensuing underdevelopment that it
We will begin by briefly discussing some attempts to explain surplus
population by using the Marxist theory of accumulation as our theoretical
framework. In order to offer our own solutions, we attempt to address
what we see as obstacles to the understanding of surplus population.
They will produce the context in which we intend to categorize the
manifested forms of population surpluses and their class situation. The
significance of surplus-population vis--vis the process of accumulation
of which it is a result is by no means homogeneous. In the discussion
of this populations position with respect to capital and its manifest
forms, special attention will be paid to pirate capital workers and homebased domestic labor. The most general propositions that result will
serve as a framework for discussing the complex problem of international
The Over-Supply of Labor-Power and Surplus-Population Theory
A variety of theoretical perspectives have taken interest in the phenomenon of the over-supply of labor-power in order to grapple with its
economic, social and political importance. Ral Prebisch conducted one
of the first efforts to tackle this problem in the context of an overall


chapter four

conception of the Latin American reality. His results in this connection

figure prominently as part of the seminal views associated with the United
Nations Economic Commission for Latin America and the Caribbean
Prebisch believed that labor-power expelled from agriculture by the
introduction of machinery was generally not attracted by the industry
producing that machinery because that kind of industry simply did not
exist in the region. Therefore, local investment favored employment in
those countries that produced machinery, but had no positive effect
internally. This was certainly an important reason for pursuing industrialization in the region (CEPAL, 1951).
While Prebisch made a critical point, his theory in this regard did not
find a proper place in the further evolution of ECLAC thought. Meanwhile,
the dualist school played a conspicuous role in the Latin American debate
while believing labor over-supply to be a constituent element of the transition to the modern economy. Perhaps it was A.W. Lewis who produced
the most elaborate model regarding the form of this transition (Gersovitz
et al., 1985).
Both ECLAC structuralism and dualism managed to influence the prevailing approaches to a growing informality in the regions economies.
The ILO Regional Employment Program for Latin America and the
Caribbean (PREALC, 1981) stood by the structuralism being touted by
ECLAC while the works of Hernando de Soto (1987) and H.C.F. Mansilla
(1996) were more exemplary of dualism. Alongside these schools, which
certainly won an outstanding place in Latin American social thought, was
Marxism and it is Karl Marxs theoretical system that serves as a framework for the following arguments.
The immediate inclination for Marxist arguments is to represent the
redundant population as the industrial reserve army that results from
changes in the composition of capital. The development of productive
forces sets labor-power free to serve accumulation and economic growth
elsewhere. In this way, production is able to proceed without the restrictions that could result from the natural increase in population. The relative magnitude of overpopulation varies with the industrial cycle that
goes through periods of expansion and recession. Its modalities and
rhythms are adjusted according to the historical circumstances of capital
It is precisely such historical circumstances and especially the magnitude of the regions surplus population that stimulated the search for
explanations beyond the general theorization contained in Marxs Capital.

industrial colonialism and surpluses of population105

Efforts conducted by Anibal Quijano (1977) and Jos Nun (2000) since the
end of the 1960s in this regard were especially outstanding. In reality, the
arguments of both are very similar. They consider that the emergence of
monopolies modifies the conditions of the production of a relative surplus population. The economys most advanced sectors do not require a
labor-power reserve for their expansion. As a result, the ability of production to absorb labor becomes weaker, which is why a portion of the unemployed becomes permanently redundant for capital and does not act as a
reserve army. This sector of the relative surplus population was named a
marginal pole by Quijano and a marginal mass by Nun.
A large part of Nuns theoretical efforts were oriented to demonstrate
that the marginal mass created by capitalism does not have any functional effect on capital, contrary to the industrial reserve army. For his
part, Quijano tries to expound on the links that result in the marginal pole
of the social sector becoming most severely damaged by capitals rule.
Both of them firmly reject the accusations of dualism that the idea of
marginalism seemed to legitimate. But their discussions of the issue
paid little or no attention to a more important question, namely, the
problem of the causes that produce an overflowing surplus population in
Latin America. This phenomenon should in turn have pointed an analysis
to the question of the specific socio-economic organization of capitalist
underdevelopment. In fact, for both authors, a surplus population existing side by side with the industrial reserve army is a generalized phenomenon in capitalism regardless of a countrys respective position in the
world market. Some of Nuns first propositions on extended surplus population are still relevant to this point, but a crucial turn of the author over
the last few years has weakened the original explanatory power of his
position. Nun abandoned his original adherence to forces that show the
excessive surplus population as a necessary phenomenon of capitalism.
(Nun, 2001: 3133)
Quijano, in turn, seems to swing between two possible causal routes of
marginalism. He appeals to a famous passage of Capital where Marx
affirms that the industrial reserve army tends to grow faster than the
employed active sector of the working class whereby capital advances
towards the creation of a consolidated surplus population (Marx, 1990:
798). The author explains that: In this well-known passage, Marx considers as consolidated the part of the relative surplus population destined,
on the course of development [] to be a victim of a continuous condition as leftovers in relation to the needs of capital accumulation (1977:
21). In fact, it would be a sector of the surplus population that does not act


chapter four

as industrial reserve army, that is to say, as labor-power that exists for the
satisfaction of accumulation needs.
According to Quijano: this is the part of the relative surplus population that has been called marginal in the Latin American sociological
debate (1977: 21). Marx had not worked on this sector because the conditions for its emergence in pre-monopoly capitalism did not exist, Quijano
argues. However, the author does not tackle the inevitable question of
how Marx arrived at the tendency towards the creation of a consolidated
surplus population by analyzing only the capitalism of his own time
with conditions of free competition.
On the other hand, Quijano attempted to uncover the historical forms
of the process that ultimately created a marginal pole. He affirms that the
process of disintegration of pre-capitalist relations has not been completed in Latin America, a situation that continuously throws new contingents into the labor market. At the same time, monopolization and
internationalization of capital have already matured, thanks to high technological levels, in enterprises where the demand for labor has been practically reduced to nil. Thus, the creation of the relative surplus population
exceeds the capacity of accumulation to absorb it, making it grow beyond
production needs.
In Latin American countries, the situation becomes worse because the
expansion of capitalism, led by imperialist capital, did not rest upon the
existence of already developed local circuits. In addition, monopoly capital not only works with a higher technical composition of capital, but it
also counts on production and realization facilities in the imperialist
countries which moreover obstructs the regions internal growth. That is
why the process that creates a surplus population in the whole capitalist
system, at all levels, has in these countries become especially prominent
and to such a point that it has created a particular sphere of social research
in Latin America (1977: 15), i.e., the sphere of marginalism.
It can be seen that historical and logical paths run independently from
each other. The category of the consolidated surplus population was elaborated by Marx to designate a logical result of the development of capitalism at the level of the essential relations of production. Capital represents
the historicity of a mode of production as a result of analysis. It is not
intended to reflect reality directly nor does this analysis have as its aim a
special stage within this mode of production, but rather the analysis of
capital in general (Rosdolsky, 1980). For this reason, it includes the study
of the forces that generate it, develop it and produce its decomposition
(Marx, 1990: 102). In addition, Marx expounded his theory of surplus

industrial colonialism and surpluses of population107

population after the introduction of his thesis of the concentration and

centralization of capital.
The category of consolidated surplus population cannot lend support
to Quijanos thesis because its place in capitalist development as well as
the forces that create it is different from those of his marginal pole. It is
not mechanically correct to resort to general theory in order to explain
concrete historical processes and much less so if historically concrete
relations of production are ignored.
The consolidated surplus-population is one of the elements in a process of disarticulation of the capitalist social relation of production and its
contradiction with the development of the productive forces (Figueroa,
1989; 2003). The repulsion of workers tends to be greater than their attraction. At a certain point, the fall in the number of active workers can no
longer be compensated for by an increase in the rate of exploitation with
the desired result of preventing the fall of the rate of profit. The introduction of new means of production would do nothing but aggravate the
situation still further (Marx, 1991: 35556). Capital thus tends toward
the creation of an absolutely redundant surplus-population. Marx, however, terms it relative surplus-population and so this point merits a brief
Marx maintains that the capitalist accumulation produces in the
direct ratio of its own energy and extent a relatively redundant population of laborers, a population of greater extent than suffices for the average needs of the valorization of capital and therefore a surplus population
(Marx, 1990: 782). This overpopulation is an industrial reserve army at
the disposal of capital and contains for the changing needs of the valorization of capital, a mass of human material always ready for exploitation
regardless of the limits of population (1990: 784). Its relative character
comes from the fact that it serves capital every time new industries are
created or existing ones expand. Thus, the expression excessive for the
average needs of the valorization of capital must be understood as referring to a surplus-population in relation to the capital in operation. The
relative overpopulation in Marx is the essential human material for future
capital, that is to say, for the capital that will become such after the expansion of the existing industrial branches, insofar as this expansion requires
it, or in the creation of new industries. That is how the definition of
the surplus population as a condition of existence of the capitalist mode
of production becomes meaningful. To summarize Marxs position, a
relative overpopulation is a working population in excess of the needs of
the working capital but necessary for capital expansion. This is why its


chapter four

magnitude increases in periods of stagnation and shrinks in periods of

So, the idea of a relative overpopulation, equivalent to the industrial
reserve army, appears perfectly coherent at first and merits no objection.
However, it is when defining its actual forms of manifestation that a couple of difficulties arise. What Marx does in this case is effectively describe
situations of his own time. Marx detects three forms existing at the time:
floating refers to the workers that are sometimes repelled, sometimes
attracted again by industrial production. The latent form refers to those
workers expelled from production by the introduction of capital in agriculture, without the expulsion being compensated for by the attraction of
those workers in the countryside. That is why their more certain destiny
is emigration to the cities. Stagnant overpopulation, the third form, is less
clear. According to Marx, This forms a part of the active labor army, but
with extremely irregular employment (1990: 796).
The question arises if by being a part of the active working population
and involved directly in the valorization of capital, why is this population
a part of the relative overpopulation? Marx upholds that the main profile
of a stagnant population is domestic industry, and he adds: It is constantly recruited from workers in large-scale industry and agriculture
where handicraft is giving way to manufacture, and manufacture to
machinery (1990: 796). If its source of labor-power is the supernumeraries created by the accumulation of capital, then it could be the case that
the shift of workers just represents changes in their position as members
of the relative overpopulation. But this is not the case because domestic
industry, according to Marx, is a sphere in which capital conducts its
exploitation against the background of large-scale industry, that is the
capitalist sphere of exploitation erected in the backyard of large industry
(190: 595). It is an extension or an external department of the factory, the
manufacturing workshop or the warehouse (1991: 591) and it is directly an
object of capitalist exploitation. Therefore, those workers should be considered members, not of the relative overpopulation, but of the active
labor army. Of course, we only refer here to the case in which the industry
provides the means and the materials of production, while the workers
only contribute their labor-power and receive a wage.
In Capital a fourth group is included: The lowest sediment of the relative surplus-population dwells in the sphere of pauperism (1991: 797).
Here, three sectors are included: a) those able to work; b) orphans and
pauper children, and c) the demoralized and ragged and those unable to
work. Marxs discourse at this point is somewhat confusing. Although he

industrial colonialism and surpluses of population109

seems more interested in the position of these sectors vis--vis accumulation and employment, especially concerning the two first types, the case
is that we are not dealing here with categories of the relative surplus population, but rather with living conditions in the midst of the latter. Pau
perism can exist within any category of the relative surplus-population,
and, as a matter of fact, beyond this category, as we shall see later on.
The case of the third group inside pauperism is somewhat distinct
because pauperism is linked here to the inability to work. They are, moreover, a product of accumulation. The problem is that they do not meet
any need of accumulation, neither present nor future. This sector cannot
thus be considered a condition of existence of the capitalist mode of production. Marx himself defines them as a burden for capital, one which
enters in the fraux frais of capitalist production (1991: 797), creating a
diversion of resources that could otherwise be useful to the valorization of
capital. In fact, they are elements of an absolute surplus-population, a sort
of advance of the consolidated surplus-population that capitalism is
bound to create in its higher stages of development.
Generally speaking, it is certainly true that no human being is absolutely redundant. This proposition only refers to the position of a sector of
proletarians in relation to the needs of capital valorization. In other words,
they stand in relation to their meaning for capital and this essentially
points to the scant attention that capital pays to human needs. The forms
of existence of an absolute surplus population must tend to multiply and
grow beyond the sphere of those who lack the means to survive such as
criminals, vagabonds and the like, to include parallel forms of labor
organizations, different ways to earn an income, stimulated by necessity
and social imagination. Their existence or non-existence at the present
time, as a result of the described logic, can be and must be an object of
discussion. However, there is no doubt that this situation has not been a
permanent characteristic of imperialism in developed countries. In underdeveloped countries, on the contrary, their presence is visible, but their
explanation will still have to overcome some theoretical difficulties.
We cannot continue without resolving the uneasiness that the concept
of relative surplus-population still provokes. If it refers to a labor reserve
army that is essential in order for accumulation to proceed, i.e., a condition of the capitalist mode of production, why should it be called surplus
population, even if it is relative? It does not seem coherent to do so
because these workers are not leftovers who are not wanted or needed
but on the contrary are a necessary population for capitalism and not precisely in a relative sense.


chapter four

We think that Marxs options in this connection are determined both

by his aims and his method. He studies capitalism as a closed system
where everything appears organized around the capital-wage labor relation and where this social relation is the ultimate determination of everything. In that context, the production of surplus-value, the exploitation of
labor, appears as the fundamental driving force of production. This relation is constantly moving and does not stop at anything other than its
own contradictions. This method, which allows him to construct the most
extraordinary representation of capitalism as a mode of production,
sometimes leads to proposals that are unsustainable when the point is to
analyze societies in their concrete historical processes.
This is the case when he suggests that the laborer who works with his
own means of production, like the craftsman or the peasant, could be
seen as a capitalist and as a wage-worker at the same time. If he appropriates his own surplus labor, then he should be taken as a capitalist while
as a proprietor of his necessary labor, he is to be considered a wageworker. The fundamental assumption is that separation and not the unity
of the direct producers and the means of production is the normal
relation. In addition, he thought that the tendency of the craftsman
and the peasant was to become either a capitalist or a wage-worker.
So, in considering the essential relations of capitalist production, it can
therefore be assumed that the entire world of commodities, all spheres
of material production the production of material wealth are (formally or really) subordinated to the capitalist mode of production for
this is what is happening more and more completely (Marx, 1969: 409.
Part I). In this context, it is only logical to call the sector of society that
does not own means of production and that is unemployed a surpluspopulation.
Elsewhere, Marx explains his point of view in this regard as follows:
The owner of labor power can live as a worker only in so far as he
exchanges his labor capacity for that part of capital which forms the labor
fund [] In different modes of social production there are different laws
of the increase of population and of overpopulation; the latter identical
with pauperism. These different laws can simply be reduced to the different modes of relating to the conditions of production [] The dissolution
of these relations in regard to the single individual, or part of the population, places them outside the reproductive conditions of this specific
basis, and hence posits them as overpopulation, and not only lacking in
means but incapable of appropriating the necessaries through labor,
hence as paupers (Marx, 1977: 604). Thus, here it can be seen that other

industrial colonialism and surpluses of population111

forms of labor organization are of no interest for the sort of study that
Marx was carrying out. Those who are not actively participating in production dwell outside the relation of capital and in connection with the
latter they exist as surplus-population. Once Marx introduces his theory
of the industrial reserve army as presented in Capital, it can no longer be
said that the surplus population, or at least a part of it, is outside the
reproductive conditions of this specific basis in this case, the basis being
capitalism. On the contrary, it is clearly a condition for it. The approach
according to which all the unemployed are surplus population should
have been abandoned.
In the real process of the society of capital, the working population
does not only obtain their means of subsistence through wage-labor or by
charity. It also does so through non-capitalist forms of work organization
and these in turn can evolve either with or without contact with the processes of capital self-expansion.
In an attempt to resolve these difficulties, we will call necessary working population the sector integrated by those workers directly involved in
capitalist production and by the labor reserve army. We will limit the concept of the latter to its floating and latent forms. We will term those
remaining the surplus-population and will distinguish: a) a relative surplus
population, to refer to the workers that, from outside the capital relation,
are engaged in activities that keep some sort of relation with the accumulation process, and b) an absolute surplus population whose activities in
no way assist the process of capital accumulation.
Now we can return to the Marxist theory of marginalism. A relevant
fact of historical evolution that does not appear properly registered in
these analyses is that the process of accumulation in developed countries
has proceeded for a long period bolstered by immigration. In other words,
the developed countries have required not only their own labor force but
also that of contingents coming from other countries. To the migratory
movements that take place constantly within the different categories of
countries (developed and underdeveloped) and that correspond to the
changing needs of growth in different countries, the migration between
the South and North is added. And in the case of Latin America, it has
become consolidated since the 1950s as a practically unilateral movement, i.e., as migration from the South to the North.
The International Labor Organization estimates that in 1998, migrant
workers from developing countries reached 4.2% of the whole workforce of the OECD countries, reaching 57.8% of the total immigrant force.
Moreover, the shift of workers towards the industrialized countries


chapter four

has increased during the last decades, the United States being the main
receiver (81% of the new migrants), followed by Canada and Australia
(11%), while France, Germany, Italy and the United Kingdom are the destination of the rest (OIT, 2004). This point is not theoretically irrelevant
because it not only calls into question the existence of a marginal pole in
the developed countries, but it also indicates the existence of difficulties in
the operation of the law of the industrial reserve army in those countries.
This is indeed a challenge for the theory of accumulation and is one that
must be confronted from accumulations own assumptions.
Deficits and Surpluses of Population
According to the Marxist theory of capital accumulation, production in
countries with a lower composition of capital shows a relatively greater
capacity to attract labor-power. The rate of unemployment should be
lower than in developed countries. We have seen, however, that in practice the opposite is the case to the point where developed countries have
been unable to provide the required labor-power by themselves, while
underdeveloped countries produce an overflowing surplus-population.
The explanation, therefore, must reconcile logical and historical developments that at first sight appear to be in open contradiction.
The cause of Latin Americas ability to create a surplus population
alongside the industrial reserve army is to be found in the conjunction of
two factors related to the social organization of production: its capitalist
character, on one side, and the frustration of the development of the division that separates general labor (scientific labor) and immediate (operational) labor, on the other. As seen in Chapter 1, the absence of this social
division of labor in relation to the great mass of industrial processes is
what defines the underdeveloped character of the economies. The underdevelopment of the area is, above all, the underdevelopment of the capital relation.
Historically, the penetration of capitalism in Latin America combines
the processes of original accumulation (separation between the producer
and his means) with the production of relative surplus value, as required
by the type of industry that arrived in the region by the end of the 19th
century. This combination ended up weakening the energy of capitalism
to promote the separation of means and producer. In fact, it has been
necessary to reorganize in a non-capitalist way large sections of the surpluspopulation, as in the case of agrarian reforms or to send millions of

industrial colonialism and surpluses of population113

workers abroad as with the bracero program shared between Mexico and
the US (19421964).
As for the effects of the consolidation of capitalism over the working
population, there is no single pattern. In a country like Mexico, for example, the relatively low capacity of accumulation to absorb labor-power
together with the increasing disposal of the free labor force promotes a
very slow evolution of capitalism in agriculture. In contrast, the huge
availability of land in Argentina combined with a relatively low population favors labor immigration, extends wage-labor and promotes the
introduction of capitalist techniques. In other words, the starting point in
different areas can be translated into diverse circumstances of population
that will have a distinct impact upon its subsequent evolution. Once capitalism is consolidated, however, inside definite territorial limits and with
predominance in all the branches, production always tends to create a
reserve army, whatever the average composition of capital.
Alongside these general features of capitalism in Latin America we find
the transfer of investment and of jobs that accompanies accumulation.
Due to these reasons, underdeveloped capitalist production not only creates a reserve army but also a surplus population, that is, one that extends
itself beyond the average needs of the valorization process of capital, i.e., the
needs of capital, either working or latent.
The inverse situation is to be found in developed capitalism. While in
underdevelopment, accumulation consumes more than it produces, in
developed countries accumulation produces more than it consumes. The
shortage of production in one pole is satisfied with the excess of production in the other. We have already seen this inherent feature of industrial
colonialism at work in the first chapter. The proposition that follows
needs no greater elaboration. While in underdeveloped countries, accumulation generates an extended overpopulation, in developed countries
it displays an insufficiency in the creation of its labor reserve army. The
imperialist organization of production condemns certain countries to
concentrate on immediate labor and also distributes in an unequal way
the energy with which each pole of the system generates available
In summing up our argument, the underdevelopment of the relation of
capital, i.e., the absence of the division that organizes general labor (scientific labor), as different from immediate work, conveys a transfer of
the capacity of accumulation in underdeveloped countries to generate
employment to the developed countries. The emergence of industrial colonialism opened novel routes to the operation of Marxs law of population,


chapter four

unequally delivering its effects on each category of countries. Yet, the

long-run tendency of developed countries remains one towards the creation of an increasingly larger surplus population. Historical development
neither eliminated the law itself nor prevented its originally anticipated
effects from taking place over the long run.
The Surpluses of Population and Their Activities
The distinction between employed army and labor reserve appears the
same as the dichotomy between activity and non-activity. The idea of a
reserve army that exists in order to at some point support accumulation
projects the image of a sector of workers in a lull after which they will join
in accumulation. In capitalist underdevelopment, things work differently
and a worker could spend his entire life waiting for a job opportunity.
The worker who remains outside the wage-labor relation but enjoys
the freedom that society offers continues to be an owner of his laborpower. However, he knows that his capacities are useless if they cannot be
consumed, through labor, to obtain the necessary means for reproduction. If his particular commodity is not realized as such, he cannot remain
inactive. On the contrary, he must produce some good or service.
Generally, the unemployed worker tends to develop the willingness to
obtain some skill that allows him to undertake independent job initiatives. The existence of a surplus-population will strengthen this disposition as it weakens his expectations and reinforces the emergence of
alternative activities and their consolidation in the occupational
The unemployed find themselves forced up against two possible
courses of action. On the one hand, they may enter into activities that
help capital but imply a modification of capitals theoretically formalized
workings, thereby earning a redefinition of their position in society. This
possibility has been fully accomplished in Latin America. On the other
hand, they may undertake activities that have no relation to capital accumulation. This path also enjoys broad practice in the Latin American
labor scene.
No worker is necessarily bound for life to a particular relation with
capital accumulation. Today, one may be an active wage-worker, tomorrow unemployed, later a shoe-shiner, and so on, and ones labor path
will tell us little or nothing about structural situations. However, the
continued presence of activities that relate to accumulation in different

industrial colonialism and surpluses of population115

ways, which also reveals the action of different agents, should in fact allow
us to see where the surplus-population stands in relation to capital
As for unemployment, the situation seems to be more complicated to
assess. Let us say that unemployment reaches 7% and we decide that the
level that meets the needs of capital self-expansion is at best 5%. In this
scenario, how can we define the excess 2% but as a useless population for
capitals valorization? Is the existence of an absolute surplus-population
not thereby revealed? It consists of workers who are just entering the
labor market in search for a job, or who have been expelled from the accumulation process, or for some reason, have abandoned their activities
outside the direct process of accumulation. We may assume here that the
unemployed worker faces a transitory situation and sooner or later will be
forced to undertake some activity in order to acquire the means to
Relative Surpluses of Population at the Level of Goods
Production and Repairs
The surplus-population can productively get organized by resorting to
labor relations other than capitals specific ones. In doing so, this population can also make some sort of contribution to capital accumulation.
Such cases could include: 1) supporting the global process of production.
A prominent example of this in Latin America is peasant production, at
least during the period in which this sort of production plays a functional
role delivering cheap primary and wage-goods. 2) Competing with the
capitalist organization of some particular activity whilst enhancing production in some other activity. This is the case of those who engage in
construction activities normally in workers housing. Their work opens
paths for the realization of capitalist-produced building materials.
3) Filling gaps left by capitalist production. Vehicle repair shops illustrate
this case. 4) Carrying out by their own means the production of parts or
the execution of some task necessary for completing the process of a particular good. The textile industry is one example, among many others. In
all these cases, the workers control their means of production and do not
work for profit but rather for consumption. They appear as subsidiary producers of goods and services. They do not enter the wage-labor relation yet
they assist it from their particular labor positions. This is why they are
considered to be relative surpluses of population.


chapter four

Among the countless labor situations of the surplus-population, there

is one that calls out for special attention, due both to its economic weight
and its peculiarity. Thanks to the surplus-population, wage-labor can be
massively extended much beyond the field where it is necessary for a normal valorization of capital. Any capitalist will consider as normal the
valorization that takes place on the basis of an absolute respect of his
property over means and products, including the sacred right to the
profit that results from labor exploitation. The particular case is that capital self-expansion, which starts with an investment, followed by a labor
process and ending with the appropriation of surplus-labor, can take
place outside the channels of normal production. This case is not a recent
invention in history although during the last few decades, it has been
extending dramatically. I refer here to pirate capital. We will limit ourselves here to the form of pirate capital that produces consumer goods
whose main place of realization is in the streets.
It was only predictable that the capitalist anxiety for profit would take
the surplus-population as a means to accomplish it. Pirate reproductionoriented capital has discovered that the surplus-population is an ideal
source of labor-power. The inclination to clandestine and badly paid
work is based upon the absolute necessity to do something to survive.
Pirate reproduction is a world phenomenon that does not limit itself
to certain categories of countries and has grown to reach about 9% of
world trade (WebDeHogar, 2004). Formally, it consists of the massive generation of a replica of a good and/or the unauthorized modification of a
product. One important point to bear in mind is that pirate capital, as
understood here, gets its means of production from the market, whether
regular or not.
Pedro Farr describes the operation of pirate capital in Spains compact disc industry as follows: A typical network of piracy, according to
our analysis, is integrated by a group of eight people working on three
floors with about 25 duplicators. In this way, they can deliver 150 thousand discs to the streets monthly. The unit cost of recording is 30 Eurocents. The total profitability, without the material, the renting and the
infra-wage to the employees, would be about 108 thousand Euros (Galn
& De Sandoval, 2004). The variety of goods that are the object of pirate
reproduction is countless and it must be expected that the process of each
good offers particularities, but we will always find these three elements:
means of production, wage-labor and profit.
The circular movement of any given capital, in its elementary form
goes through the following steps:

industrial colonialism and surpluses of population117


The capitalist arrives in the market with his money (M) where he buys
commodities (C) in the form of means of production (MP) and laborpower (LP). Then he abandons the sphere of circulation and starts a labor
process (P), coming out of it with a commodity (C) whose value is larger
than the value of the original (C). Back to the market, he changes his product (C) for an equivalent amount of money (M) with which he can start
the circuit over again in the form of an extended reproduction.
With the generalized intervention of science in production, this circuit
becomes more complex. The labor market has been divided into general
and immediate labor markets and the same happens with the means of
production, as scientific labor requires labs, instruments, and so on. The
enterprises may organize their own research and development departments, or they may resort to independent workshops of technological
progress, or, as generally is the case in Latin America, they might meet
their needs by buying abroad. Whatever the situation, spending on products of general labor cannot be avoided. This is why the first movement of
capital circuit, which was originally M-C (MP-LP) appears now as:
M-C(MPg + MPi + LPg + LPi)
In Latin America, investments in the means of scientific production
(MPg) and in scientific labor-power (LPg) mainly take on the form of the
license of industrial property (patents of invention, utility models, industrial design, registration of trademarks, names and commercial slogans,
and so on). To simplify, we shall call these types of investments costs of
transfer (Tr). The movement we are dealing with in the region, therefore,
will be described in this way:
M-C(MP + LP + Tr)
For pirate capital, however, the first phase of capital movement continues
to be M-C(MP + LP) where everything is reduced to immediate labor,
because pirate capital appropriates, without the mediation of any legal
transfer, the efforts of research, experimentation and promotion done by
As pirate capital does not operate in a regulated market, its investments are duty-free and it can ignore regulations on labor conditions
such as minimum wages, working day, and so on. When buying means of


chapter four

production, it is not forced to follow specifications of quality, thus cheapening its production costs. All of this, which is reflected in low prices,
accounts for pirate capital success.
Pirate reproduction introduces a serious distortion in the normal circuit of the original capital. If the latter is well-established in the market,
the eruption of pirate capital will reduce its room for realization. A part of
his product (M) will not be transformed into money and the return will
not equal the expected difference between D and D, if there is any difference at all. As the production costs of the individual commodity rise, the
entrepreneur is pushed to the restructuring of his business, all the more
when he realizes that his unamortized spending in research and promotion vanishes as if by magic. It is comprehensible that the situation is still
worse for a capital that suffers the eruption of piracy just when it is trying
to conquer a market.
Pirate capital is parasitical capital in that it feeds on the creativity and
the surplus-population that accompany accumulation. Capitalist society
could do perfectly well without it, no matter how much it contributes to
reducing the costs of other capitals, as occurs, for example, when it provides (normally inferior quality) spares at low cost. Piracy meets no
immanent need of capital accumulation. On the contrary, it disturbs the
working of capital which is why it is forced to operate from the shadows.
Individual capitals are exposed to the dismantling of their own circuits
and to the creation of uncontrolled parallel channels for the production
of something similar to the commodity they created. Pirate capital shatters every provision of economic security made by society with a view to
creating an adequate environment for formal investors.
Concerning the inner working of capital, pirate capital is superimposed
capital, superfluous capital. That is why its workers continue to appear as
surplus-population, even though they are employed under capitalist conditions. The repression of piracy is not directed so much towards the
workers as it is against the enterprises.
The operation of this kind of capital in Latin America is considerable.
In Ecuador, it has earned the reputation as a great exporter of unauthorized DVDs and CDs, and its economic weight is such that it contributed
to throwing the transnational giant BLOCKBUSTER out of the market
(Ayala, 2004) in a context of complaints about the quality of the latters
services. Peru stands out in Latin America as a producer of pirate books,
with three million volumes and three thousand titles (Cmara Peruana
del Libro, 2003). According to the Federacin Internacional de Indus
trias Discogrficas (The International Federation of Record Industries),

industrial colonialism and surpluses of population119

Paraguay qualifies as the major producer of pirate discs (Daporta, 2007).

In Tepito, Mexico DF, pirate production has taken pride in the creativity
required to make piracy work, generating technical adjustments to the
Sony Play Station series, to make it work with pirate games (Wikipedia,
2007). The list goes on, as this phenomenon is omnipresent in a context
where an overwhelming surplus-population favors its dynamism.
Relative Surpluses in the Sphere of Commodity Circulation
The organization of retail trade that is more appropriate to capitalism is
the large firm that operates on the basis of wage-labor. Its workers are part
of what Engels called the commercial proletariat. These large stores
tend to settle around points of greater territorial concentration of income
that provide relatively large physical spaces for development. It therefore
seems that these sorts of businesses leave room available for the functioning of small enterprises downtown, as they all attempt to prosper and
grow along with the expansion of cities. But this is not precisely so. Urban
centers are not simply spaces that big business abandons. Large commercial enterprises also manage to appear under the guise of small operations, but with a devastating effect on conventional small business. It is
calculated that in Mexico, the installation of each one of these firms
(Oxxo, Extra, 7-Eleven) brings with it the ruin of five traditional small
businesses (Esmas, 2006).
The greater the distance from a large enterprise, the better off things
tend to be for the small enterprise since this allows the latter to save the
client time and the costs of urban-suburban transportation, especially
when making small purchases. The retail dealer gets a part of the capitalist profit and, theoretically, he can become a capitalist businessman himself, as his business success allows him to accumulate and expand to the
point to which he needs to employ wage-labor to keep his concern going.
Yet, his most likely path is a different one. On the one hand, the expansion
of large retail stores and the development of the means of communication are constantly eroding his advantages. On the other, the fall in the
individual values of commodities that results from the growth of productivity demands more spacious installations for the business to carry on, as
it is forced to work with increasing volumes of commodities. The major
problem is that incomes do not grow at the pace that new investments
demand. In fact, most small dealers earn an income that is just enough to


chapter four

The established retail dealer, i.e., those who rely upon their own means
of production (small installations, often located where the owner/proprietor lives, sometimes incorporating some means of transportation,
smaller measuring and calculation instruments, etc.) and who actively
contribute to the realization of products of normal accumulation, function for that reason as a subsidiary producer of services.
The overall complexity of retail trade is, however, much greater. During
the last few decades, the hawker, a figure with a long tradition in Latin
America, became multiplied thousands of times over. The surpluspopulation, as it grew, rushed onto the streets and the avenues, especially
in the larger cities, and crowded together into small dealer conglomerates. These conglomerates grew to become an outstanding feature of the
regions urban landscape. In general, they represent a new burden for the
settled retail dealer and, at times they compete advantageously with capitalist commerce.
At the same time, the multitudes that sell on the streets represent anything but a homogeneous mass. According to their relationship with capital accumulation, this surplus-population can in principle be split into
two segments: 1) those that sell goods obtained directly from the capitalist
producer or from the capitalist merchant, and 2) those that sell goods produced by pirate capital. The complete typology of the hawker is certainly
much wider and we will return to this point later.
The first fraction of street workers contains the following characteristics. Firstly, their activity is not necessary for capital self-expansion. The
small subsidiary producers of services were originally in charge of the filling of accumulation vacuums in commerce. Indeed, street dealers represent commercial over-labor. Secondly, and at the same time they open
new channels for commodity realization, parallel routes of selling that are
in no way despised by capital. The lower prices of retail street dealers
expand and accelerate the transit of a commodity from the producer to
the consumer. Capitalist production has not produced more value, but a
redistribution of commercial income has ultimately been made possible,
thanks to the street dealer.
The producer of commodities containing surplus-value needs to sell
them in order for production to retain its social meaning. The realization
of the product is the supreme event of his activity. He is not interested in
the social condition of the buyer and the purposes that commodity has for
the buyer. For the producer or for the large capitalist merchant, the
hawker and the small settled dealer carry out the same functional role:
both effectively place a commodity into the hands of the consumer.

industrial colonialism and surpluses of population121

However, the situation of the hawker is specific. The established

retail dealer usually enjoys a definitive control (through property) or a
conditional control (through rent) of his main means of production,
i.e., the installations where he operates. The hawker, on the contrary,
has as his main means of production the street itself, and lacks control
over it. He can be deprived of his activity through a simple territorial
dislodging, something which he is threatened with at every moment.
In fact, he is a surplus commercial proletarian who works irregularly
for the producer or the merchant, carrying their commodities to the
When the capitalist producer or merchant sends his own salesmen to
the streets, he pays the latter a wage which is a part of the expected income.
This situation is essentially the same as when the capitalist merchant
deals with a buyer who counts upon a discounted amount of money to
acquire a certain amount of commodities. When the capitalist merchant
sells to this type of buyer, he reduces his prices in a proportion corresponding to the sum that he would pay to his own salesmen. Only the
technical terms of the arrangement are modified.
If retail street dealers working for productive and commercial capital
reduce their role to the opening of alternative channels for the realization
of commodities, pirate capital could not work without them. Irregular
commerce is the natural form of this sort of capital at the level of commodity circulation. This is not to say that other forms of trade organization (the capitalist enterprise or the settled small dealer) do not work
with pirate commodities at all, but if they do, normally this is a complementary and clandestine activity which takes place under the protection
of a principal legal activity. Because of the risks involved in dealing with
pirate products, producers will tend to resort to the most vulnerable and
unprotected sectors of the surplus-population, those whose necessities
have plunged them well into despair. But this is not always the case since
the operation of some products requires a certain base of resources. This
base could be significant, leading us to contemplate higher up operators
of commercial pirate capital. However, we are limiting our concern here
to the commercial proletarians of pirate capital.
It can be seen that surplus-population leads us to tackle the real process of accumulation as something richly textured in determinations
other than the process that results from the working of the simple capital
relation. This, in its development, ended up introducing unforeseen
modalities of capital in motion. Now the process, at least in many
cases, proceeds on the back of an intervention in capital and has created


chapter four

economic relations which are different from those of capital proper in its
pure and dominant form.
It can also be appreciated that the intervention of the surpluspopulation is far from giving way to an idyllic combination. The highest
degree of contradiction is introduced when the surplus-population is
incorporated into the valorization of pirate capital. At first glance, pirate
capital seems to be a simple phenomenon of capital competition, but it is
in fact something qualitatively distinct. It is the introduction of plunder
against a given capital as a condition for the functioning of another. Crime
in this context becomes permanent and has no positive impact on capital
The surplus population whose activities somehow link with capital
accumulation is to be understood for that reason as relative surpluspopulation. Either these are subsidiary producers of goods and services,
irregular and surplus commercial proletarians, or direct proletarians of
pirate capital. In general, their activities are not a condition of existence
of the capitalist mode of production, even as they effectively become so
for some capitalists.
Surpluses of Population Beyond Capital Valorization
We have seen that the non-capitalist organization of labor can appear
related to the accumulation of capital in spite of its form. So, within those
limits, it is not correct to uphold that we are speaking of non-capitalist
activities. The evidence for this relation is so overwhelming that a turn
towards the other extreme, that is, towards the proposal that every noncapitalist organization of labor ultimately exists to serve the development
of the dominant economy, could somehow seem reasonable. Nevertheless,
activities that are excluded from the modern economy do exist and have
a significant presence, especially if understood as the absence of links that
are useful either for capitalist production or for the valorization of any
particular investment of capital.
In addition to the various types of street retail dealers already discussed, it is possible to distinguish others such as: a) those who sell stolen
goods; b) those who collect and sell used goods (clothes, spare items,
instruments, furniture); c) those who trade products that are more or less
available in nature, such as fruit, medicinal plants, animals (rabbits,
snakes, countryside rats); d) those who proceed to the market with products from their plot; e) those who offer non-essential or temporary services for homes; and f) those who live off the charity of others.

industrial colonialism and surpluses of population123

a) The focus here is the small-scale sale of stolen goods. Depending

whether the theft is committed against a capitalist enterprise or against
an individual, then the immediate economic effect of the act is different.
For the enterprise, the robbery represents a loss of capital that can negatively affect its business, while for the individual it means a forced distribution of personal income and a certain impoverishment. In both cases, a
third person now has a means of living.
If the person has to replace the stolen good, for example, the tire of his
car, the theft might seem to favor the tire industry because a new tire
must be bought, but this is not the case. Another individual will meet the
same necessity of replacing his car tires at the street market, instead of
doing so at the capitalist market. If the price that this second person pays
allows him some saving with which to buy other capitalist goods, this only
occurs because the person who has been robbed is deprived of consumption for an amount equal to the price of the stolen good.
It may seem self-evident that the sale of stolen goods is an act with no
positive meaning for capital valorization, but it is not necessarily so. A
certain extreme functionalism suggests that theft creates the need for
defense and thereby, among many other things, promotes the growth of
the security goods and services industry (weapons, security mechanisms,
etc.). Although those industries were perhaps not initially created as a
response to the robbery of goods aimed for sale on the streets, it must be
recognized that the theft in some way reinforces the need for such industries. Yet, the enterprise that spends on security to protect itself suffers an
increase of its costs, just like the person robbed suffers from a reduction of
his income. It is not the thiefs labor that allows one or another to finance
those expenses. This would be so, even if it were the case that the thief
needs a weapon to carry out his elicit work. In addition to the fact that the
economic significance of this kind of spending would normally be small,
the thief would probably obtain his weapons through robbery or as a
result of robbery income.
From another point of view, it can be seen that to the extent that robbery results from desperation in the midst of a certain degree of surpluspopulation, theft is finally a creation of capital accumulation. But, to take
this as a point of departure in order to advance to the conclusion that
robbery serves accumulation is too great a leap. In short, not everything
that capital produces is functional to capital accumulation.
b) With respect to used goods with a certain amount of ordinary wear
remaining that become offered onto street markets and in popular residential districts, these goods have already realized their exchange-value
in a previous transaction. While they no longer may hold a use-value for


chapter four

their original owner, their materiality has been modified by a partial

wearing away and in those conditions they retain the utility for which
they were originally created. So, they can still satisfy the needs of a third
person. That is why they can be reinstated as commodities whose price
will depend on their condition and on the demand they meet.
The transfer of a used good from the original owner to the street dealer
does not carry with it the transfer of an exchange-value whose realization
depends upon the latter. However, the street dealer labor of gathering and
offering does create a value that will be objectified as money thanks to the
sale in the market. The street dealer will be compensated for his effort by
condition of the existence of people in a relative state of poverty, or simply with an inclination for recycling, who are ready to buy such goods.
The people who obtain these goods (for example, an article of clothing)
are normally looking for savings that allow them to engage in other consumption (food, for example). Therefore, it could be admitted that the
sale of used goods stimulates production in other areas. Yet, such savings
were possible only because the street deal prevented the clothing industry from realizing part of its own product. This sort of trade curbs the
growth of the industry in question although it may help ecologically by
recycling resources.
c) The same logic regarding b) applies to those who deal with products
that can be freely obtained from nature.
d) The countryside holding no longer fulfills the function of supplying
the urban sector with cheap wage-goods and raw materials. At the same
time, its own logic led to its disarticulation as provider of enough means
of living for the family. The neo-liberal model that improved productivity
of capitalist agriculture and promoted imports worked to accelerate this
decomposition (See Chapter 5). The permanence of the worker on the
plot rests on the resources obtained outside it. However, such workers
continue to produce and can be found in street markets as retail dealers
of agricultural and natural products (seeds, fruit, birds, cheese, sheep,
goats, flowers, and so on). Their prices, when dealing with products of
labor, are determined by the prices of the same products created under
capitalist conditions and which appear in the same market. Their labor,
therefore, is constantly degraded and their income likewise falls.
To conclude with the list of activities not linked to capital accumulation, we can argue regarding e) that refers to services that are offered to
homes. Here we find income earners such as the boot shiner, the car
washer, the gardener, the knife sharpener, and so on; i.e., activities that
families normally do by themselves, and where the value of the means of

industrial colonialism and surpluses of population125

labor is insignificant and their use only substitutes the use of the same
means by the families themselves. On the other hand, in category f) are
those activities that promote public support, as in the case of a windshield
cleaner at the crossroads, the juggler, the fire-eater, the clown, the musician, the caretaker of parked autos, the porter moving baggage at stations,
and the beggars lining the streets.
What About Home Labor?
So far we have shown that accumulation in underdeveloped countries
creates, in relation to itself, not only a relative surplus-population but also
an absolute surplus-population. However, we cannot finish our brief overview of the relation which surplus-population shares with capital accumulation without considering the problem of domestic labor. On the one
hand, it figures prominently in Latin Americas labor map. On the other,
the issue is normally solved incorrectly, assigning this kind of work to the
ranks of informal labor. This treatment simply says nothing about its
economic meaning and at the same time it contributes to strengthening
the prevailing, twisted images concerning the issue.
Home or domestic labor covers a wide range of physical, intellectual
and cultural activities. Services such as health and education are, to a
large extent, provided by the state, but they are very much complemented
in the household. This labor is necessary for the production and reproduction of labor-power. In most working families, this labor is carried out in
the context of an historic and cultural division of labor that assigns most
of domestic service to women, although men and children seem to have a
growing participation.
The household service work as a part of the necessary labor for the
reproduction of the body is included in the value of labor-power. The fact
that it is the worker who earns the necessary income for the reproduction
of the family in exchange for his labor and not in exchange for his laborpower, i.e., a capacity that must be produced daily, projects the notion that
domestic labor has no role in value production. Consequently, the relations of dependence of men to women are hidden while mercantile practices emphasize the role of the worker as the home provider. These
images are of course alien to the person who, in addition to laboring in
order to earn an income, must also pay for the work of cooking, house
cleaning, clothing cleaners, and so on. In this case, it becomes crystalclear that the domestic service carries with it the spending of an energy


chapter four

that must be restored, just as the energy of the worker who pays the
domestic laborer must be restored. If the worker carries out the necessary
domestic labor for the reproduction of his labor power himself, the resulting saving should be taken as a result of self-paid labor.
The falling value of labor-power promoted by neoliberal globalization
has pushed wage-earning families to introduce new practices in their
reproduction strategies. Not only women, but also children have joined
the labor market in the pursuit of incomes to complement home spending. The better remunerated families, especially those where a couple is
employed, are in a position to employ a third person for completing
domestic tasks, or at least an important part of them. In this case, the familys monetary income equals the amount that the couple receives less the
amount they pay to the domestic worker. For all practical purposes,
the remuneration of the family are not equivalent to what it is paid by the
employer(s) since a part of it must go to the domestic worker.
As a matter of fact, the relation between domestic workers and their
employers is exposed to tensions around remuneration. But there is no
relation of labor exploitation involved. The fact that the domestic worker
receives a wage does not mean that s/he is a producer of surplus-labor,
nor is the employer a capitalist just because s/he pays the wage. The
meaning of the quarrel here relates to the distribution of family income
and not the distribution of profits.
If the employers labor is useful to accumulation, the same applies to
domestic labor. The home worker participates in the production and
reproduction of the labor-power that serves accumulation, and which,
ultimately, is the source of wealth. This is why, also in capitalist society,
this home worker is a member of the necessary population. This is so even
if the worker does not carry out all of the domestic labor. There are many
reasons for this: cultural norms in cleanliness (using cleaning as an example), practical tasks (childrens education), and so on. What is important
is that the domestic worker makes it possible for others to engage in accumulation linked tasks.
If the situation is looked at from the point of view of the home worker,
it is possible to detect some other relevant issues. The reduction of the
value of labor power has sharply affected low income families, where the
head of the household is subjected to precarious labor conditions. It has
become necessary for other family members to make a contribution to
the family income. For a great quantity of women, domestic labor represents the best possibility of employment. Women from families in a state
of poverty have also joined the labor market. The difference is that these

industrial colonialism and surpluses of population127

women cannot at the same time free themselves up from any domestic
labor in their own homes. Technological development of the means of
domestic labor (washing machines, microwaves, cleaning and cooking
devices, and the like) has lightened a burden that would otherwise be
unbearable. In spite of that, their labor has been intensified.
We have presented active workers, splitting them up into those who
directly satisfy the processes of accumulation and those who do it indirectly. The former, together with the industrial reserve army, we argued,
are necessary population, while the latter are to be considered part of the
relative surplus population. The same division is valid for domestic labor
and for domestic employment because domestic labor produces and reproduces the labor-power in its position vis--vis the process of accumulation.
That is to say, if domestic labor contributes to the production of necessary
labor power, the domestic worker is also a part of the necessary population. S/he will be a part of the relative surplus-population when the
employer whom s/he works for also enters this category. By the same
token, the absolute redundancy of the worker determines the absolute
redundancy of the domestic labor devoted to her/his reproduction.
The Nature of the Latin American Migrant Worker
and the Historical Record
Migration is one of the options that workers can activate in their search
for a suitable means of living. We can say that their specific condition
reveals another feature of international labor mobility and the nature of
most migrant workers becomes clear. Generally, the worker who emigrates can be regarded as one for whom accumulation lacks a productive
function in his own country, for either actual or potential production.
Governments are not interested in retaining these workers at home but,
on the contrary, they are inclined to support their moving due to the
problems that this shift mitigates and the advantages that it creates. They
are members of the surplus population, yet their situation is redefined as
soon as they emigrate and are incorporated into a productive activity in
the developed country that receives them. It now becomes clear that their
true nature is to be a part of a labor reserve army created in one pole of the
international system to serve in the other one. The growth and skill-level
of this labor power costs nothing to developed countries whereas it is
a waste to underdeveloped countries. This has been a prominent feature
of industrial colonialism for decades as it has evolved to modify the


chapter four

operation of capitals population law. But this nature is also historical. In

the present era, this situation is not always clear since it is well known
that immigrants are also joining the ranks of poverty and unemployment
in developed countries (Levine, 2002).
Taking as a basis the numbers of Latin American migrants in the United
States, a basis that does not include undocumented people or temporary
shifts, it is estimated that there were almost 14.5 million people from the
Latin American region in 2000 (Pellegrino, 2003) of which almost 7.8 million originated from Mexico. Another 2.7 million were settled in Spain,
Canada, the United Kingdom and Japan (CELADE, 2002).
The fact that the regional emigration to developed countries has grown
considerably in recent decades is challenging. The United States, the main
destination, registered around 820,000 people during the 1960s. This
amount increased by almost doubling during each subsequent decade,
although the rates of migration growth seem to diminish in the 1980s and
1990s. This evolution might be interpreted as the response to a growing
insufficiency of the developed economy to produce its own labor reserve
army, which would mean that the theory of accumulation, in its more
general formulation, would have to wait for some time before synchronizing with reality. This is not the case however.
It is a fact that unemployment rates in developed countries have been
growing over the long term (Maddison, 1988; 1996; OECD, 2003). Nobody
any longer refers to 3% or even 4% as normal unemployment rates. In
2005, the rate of unemployment in OECD countries reached 6.6%; 5.1%
for the United States and 8.6% for Europe. In 2002, the OECD registered
8.4 million unemployed in the United States and another 13.5 million in
the European Union. Taking together the OECD countries, the total number of unemployed reached 36.4 million (OECD, 2003) in that same year.
These data should be enough to demonstrate that developed capitalism
can already rely on its own reserve army of labor. However, there is more
to it.
The participation of part-time labor in total employment has been
increasing steadily. It represented 11.6% in 1994 and went up to 15.4% in
2005 in the OECD countries. It is well known that a sector of part-time
workers is to be considered at the same time partially employed while
remaining available for full-time work, and therefore must be taken as
labor reserve. As the OECD correctly put it: Also there is a potential
supply of labor amongst the people who are unintentionally employed
on partial time (OECD, 2003: 105). Those who are able to work but who
do not participate in the labor market should also be considered as a

industrial colonialism and surpluses of population129

potentially employable labor force. Temporary labor has also grown:

Although temporary work was in general less dynamic than partial labor,
its expansion generates concerns because most temporary workers would
prefer permanent jobs (OECD, 2003: 20).
At the same time, the exploitation of workers has intensified so the
proportion of workers that reports that they are working at very high
speed or with very close limits of time, is being increased. Those who
work many hours or in an intense rhythm of work also report of a growing
number of stress-related health problems and a major difficulty to reconcile work with their family life (OECD, 2003: 20). The devaluation of jobs
in supply, the greater exploitation of labor, the growing perception that
employment is more and more uncertain, and all the conditions related
to labor precariousness and flexibility, simply could not be possible if
there was a scarcity in the labor force. Nor could the worsening of poverty
be explained. In the United States, the population in situation of poverty
reached 37 million in 2005, 12.6% of the total population (US Census
Bureau, 2007), 5 million more than in 2001 and 6 million more than in
2000. It is estimated that 15.6 million live in extreme poverty (i.e., people
receiving an income lower than half that which defines the line of poverty), the highest level known since 1975 (US Conference of Catholic
Bishops, 2006). This course of events is not normal under conditions of a
limited supply of labor-power. On the contrary, to set it off, the labor supply must be as broad as it actually is. Developed capitalism has already
overcome its limitations for the internal creation of its labor reserve.
There is no doubt that for a long time, labor migration made it possible
for developed countries to respond to their limited capacity to create a
labor reserve army. But the high dynamism of migration to El Norte during
the last few decades, especially to the United States in the case of Latin
America, was only partly due to that reason. Other causes related to the
economic order created by neoliberal globalization have contributed to
the explanation. Firstly, the processes of economic re-orientation in Latin
America further weakened the ability of production to create employment. Commercial liberalization forced countries to improve their productivity levels, thus changing the technical and organic composition
of local capital, with a view to competing abroad and with imports at
the level of the domestic market. Secondly, many industries went bankrupt, as a result of their inability to carry out their re-structuring. Exports,
handled by international capital, grew at high rates, but the gross domestic product increased far below the levels of the 1950s, 1960s and 1970s. As
a result, Latin America saw its position decline in the world market. World


chapter four

production became still more concentrated in the developed countries,

both old and emergent ones. The ILO estimates that the gap between the
high and mean income countries grew from eight to fourteen times
between 1975 and 2000, and that the gap between the high and low
income countries grew from forty-one to sixty-six times over the same
period (ILO, 2004). Thirdly, state economic activity abruptly went down
everywhere, thus enhancing unemployment (ILO, 2004).
So the mass of available labor-power ready to emigrate and ever more
motivated to do it because of the weakening of local conditions has skyrocketed. The international relocation of workers has moreover become
favored by the existence of a consolidated network of relationships that a
long tradition of migration has created in support of labor mobility. In
this sense, it can be said that labor migration to the global North has also
been motivated by institutional conditions. Yet, this redistribution of
labor that follows the redistribution of world production is not limitless,
for the host countries have their own problems, as we have already seen.
In fact, immigration in developed countries at the present is no longer as
welcome as before, although highly qualified and temporary labor still
enjoys some official measure of affection.
During the 1980s, the US promoted immigration in a context of high
unemployment. The reason for this was that the government was devoted
to the task of introducing labor flexibility and de-regulation of labor relations. Immigration was assigned a new functional role, namely, to overload the labor market with an eye to weakening the unions and facilitating
the introduction of new relations (CELADE, 2002). In other words, it was
utilized as a political weapon to support Washingtons strategic goals.
Remittances and Wage Differentials
From the underdeveloped countrys perspective, the advantages of migration appear one after another. Not only are potential tensions avoided
internally, allowing governments to better attenuate social conflicts,
but also there are considerable economic advantages obtainable. The
migrants, or a significant part of them, carry with them the responsibility
of sustaining the family that they left behind. While the migrant works
abroad, he addresses this burden by means of remittances. The money
that workers send back to the region has unceasingly increased to the
point of obtaining a strong dynamism in recent years. For 1990, total
remittances were calculated at around US$5.8 billion and by 2005 it had

industrial colonialism and surpluses of population131

reached an estimated US$53.5 billion. These amounts could well be distorted because of methodological issues (CEPAL, 2006b) but they are nevertheless impressive and indicative. While they represented around 2.6%
of the regions GDP in 2005, it appeared that the remittances growth curve
had already begun to wind down by that year (Cortina, de la Garza and
Ochoa-Reza, 2005).
There is no need to explain the interest that remittances have caused in
national and international public organizations and in large private economic interests, where the banks are included. With the excuse of promoting a better impact of remittances on development, they try every
possible way within the framework of their respective interests to obtain
the best possible benefit for themselves. Remittances are overwhelmingly
destined towards consumption (8085% of them) and this indicates the
point to which the reproduction of the regions labor-power is accomplished by means of value created abroad. In other words, a part of internal production, equivalent to the consumption that takes place thanks to
the remittances and that is not satisfied by imports, rests upon the value
created by migrant workers. It follows that the regional production of
wage-goods for internal consumption is greater than the income generated internally for those purposes. Remittances take the production of
wage-goods beyond the limits determined by domestic wages and to that
extent therefore have a positive impact on local production and
Remittances have other positive effects, such as strengthening the current national reserves or increasing government income by means of
taxes, or even the reduction of poverty at no cost to governments or
employers. They can also have undesired effects such as weakening the
competitiveness of export products and the promotion of imports caused
by a strengthened local currency. But the disadvantages are just collateral damage in the context of a process of the export of labor-power
which has been assumed as a big business by the regions governments.
The question of the wage differentials between the different categories
of countries which makes remittances possible demands our attention in
this context. The surplus-population certainly bears upon it and, according to the perspective we have been working on, one point must be clarified. According to Marx: Taking them as a whole, the general movements
of wages are exclusively regulated by the expansion and contraction of
the industrial reserve army and this again corresponds to the periodic
changes of the industrial cycle (1991: 790). So, it is not the labor reserve
army that regulates the general movements of wages, but accumulation.


chapter four

The latter produces a labor reserve of a magnitude that varies with the
succession of phases in the process of production. In periods of expansion
the surplus-population decreases, the trade union movement is strengthened, competition between workers weakens and wages tend to rise. The
inverse of this therefore takes place during the contraction phase. That is
to say, the functioning of capital produces different power correlations
between social classes, thus creating different contexts for the negotiation
of the level of wages.
Now, what exactly may the situation look like in underdeveloped countries? A permanent overflowing surplus-population can only act as a
constant downwards pressure on the level of wages. Indeed, the surpluspopulation is one of the main reasons behind the low value of laborpower, for it can do nothing but weaken the strength of the active army.
This is not to say that the labor-power is paid beneath its value since its
value itself is lower than in developed countries (Figueroa, 1986). This
thesis is by itself so clear that, in fact, what must be explained is why the
relative value of labor-power in Latin America is not lower than it is, or
why there are periods when wages register increases.
The influence of the surplus-population on the level of wages consists
of two elements: one objective and the other subjective. The former is
defined by the existence of the surplus-population as an element that
results from the organization of the relations of production. The surpluspopulation is a burden for active labor. Its effect is negative. The subjective element appears because the surplus-population is also a highly
explosive repository of discontent and unrest. It has normally been an
integral part of the great social and political movements of the regions.
Landless laborers, the socially marginalized, the rural unemployed, and
the urban informal workers among others, all organize themselves to
pursue their own specific demands. In certain eras, they coalesce around
wider movements such as during the populist period. They have been
recently at the heart of movements that culminated with progressive governments in Venezuela, Bolivia, Ecuador and Nicaragua, and constitute
an important force of every significant political resistance to neoliberalism. Probably no outstanding movement that has ended with concessions
to the working class registers the absence of the surplus-population.
The social movement, however, also proceeds through periods of
ascent and retreat. Repression which includes plenty of dramatic episodes in Latin America is as consistent as social discontent. It is the
method by which capital restricts concession. Not only does it obstruct,
but it eventually orients the improvement of the living conditions in

industrial colonialism and surpluses of population133

popular sectors in an opposite direction. Political struggle is a prominent

factor in the determination of the prevailing wage level and the sector
made up of the surplus-population is ever an actor in this sort of conflict.
Moreover, difficulties for the democratization of Latin American societies
are strongly rooted in the always active opposition between discontent
and repression.
The relative low value of the regions labor-power has other objective
causes and two of them stand out: Firstly, there is the lower skill of laborpower required by a capital with a lower average technical composition.
The so-called educational deficiencies as visualized from the developed
countries corresponds to that situation. Secondly, there is the lower average intensity of labor that corresponds to a lower technical composition.
As the workers energy expended in developed countries is greater, the
reward that he receives must be larger. A union movement free from the
burden of a surplus-population enjoys a more advantageous position to
get the necessary compensation.
The Indigenous Population
To recognize the existence of activities that take place without any contact with accumulation would seem to be a sign of dualist inclinations.
However, our focus is different. It must be recognized that dualism rests
on a strong proposition, i.e., that every meaningful transition contains
dual elements at the level of the modes of production. The new modes are
not generated in a vacuum and before generalizing they undergo a conflicting coexistence with the old social forms. The presence of the old
modes of production is the most salient expression of transition. Dualism
is transitional and the transition is the disarticulation of dualism. All this
is correct from the point of view of an abstract approach. Perhaps this
explains the optimism latent in this school of thought. The problem for us
is that the dominant economy, already established as such, proceeds by
generating and extending activities whose internal organization is noncapitalist. These non-capitalist social forms of production exist not
because capital has still not dissolved them but rather because capitalism
is promoting them.
A transition that it was necessary to study in order to understand the
Latin American reality is the process by which the particular form of the
capital relation arose and spread. The inherent structure and logic of capitalism is the clue to the regions workings. The absence of the division that


chapter four

split labor into general and immediate forms in connection to most of the
locally operating industry is the fundamental fact. This proposition was
bound to make the explanation of the oversupply of labor and the permanence of non-capitalist relations easier.
Nothing of this is intended to deny the existence of segments of the
Latin American population that evolve as attached to their own traditional forms of social organization. They are not a product of capital
accumulation but their persistence has a bearing on underdeveloped capitalism, just as the same causes that account for labor oversupply explain
the inability of capital to dissolve pre-capitalist forms. From this perspective, the persistence of pre-capitalist relations also appears as a failure of
the dualist transition.
We are dealing here with the legacies of a precapitalist past and it
would not be correct to simply incorporate them into the surplus population, a category of capitalism. This is why we did not discuss the indigenous population here, one which shares conditions like poverty, exclusion
and vulnerability with other sectors of society, but which deserves a
particular analysis. Besides, the indigenous population is not a reality
everywhere in the region and certainly is not a logical condition of underdevelopment in general.
It is estimated that between 3340 million indigenous people live in
Latin America. Most of them are located in Peru, Mexico, Guatemala,
Bolivia and Ecuador. Their relative weight inside those countries is
respectively greatest in Bolivia, Guatemala, Peru and Ecuador (Hopenhayn
and Bello, 2001). According to ECLA, there are 671 indigenous pueblos recognized by Latin American states (CEPAL, 2006b).
The indigenous pueblos are specific symbolic and economic spaces.
They try to live in harmony with nature and are subjected to their laws as
though these laws were dictated for them to abide by. They live in the
forests, by the sea, the rivers and on the land. Hunting, fishing, picking
fruit and organic cultivation are activities that the earth has spontaneously furnished for them to carry out reproduction while taking care of
nature. Nature lives in them and the ecological characteristics of their territories influence the creation and support of their cultures and identities
as pueblos. Cultural renewal has as its primary reference the care for
nature in the way that nature appears in each territory. The fruits of
nature can only be an object of collective appropriation and only cooperation can be the appropriate method for obtaining those fruits. That is
why egalitarian feelings flow with spontaneity among these peoples. The
leaders often lack motives to raise themselves above the community.

industrial colonialism and surpluses of population135

Indigenous pueblos and capitalism represent antagonistic social orders.

Although capitalism has not been able to dismantle the indigenous communities, it must be recognized that it has penetrated them to some
extent and perpetrated some damage upon them, especially through land
usurpation and environmental disruption. As compensation, capitalism
generally offers experiences amongst the surplus population to the displaced indigenous populations, in activities that have not received the
social recognition they deserve, such as home domestic labor, for example. Maybe that is why they prefer to dream with the past while they
remember the future.
The indigenous pueblos are the most solid bastion of struggle for the
defense of nature. They also represent a contribution to cultural diversity.
But even if they were none of those things, their way of life deserves
respect because it represents the option of a conglomerate of human
beings. It can be anticipated that capitalism will not give up on account of
these considerations. If it has not been more aggressive, this is due to its
own weakness, at least in terms of labor supply, and because it has no
interest in extending an already crowded market. On their part, the indigenous people have understood that the defense of their way of life
depends upon their own organization and on the struggle around social
spaces that constantly grow. These are conditions that feed the hope that
they will endure and advance with us for still a long time.
The overflowing labor-power supply during the last few decades in Latin
America, whose immediate reason is to be found in the process of economic reorientation, has brought up to date a discussion that during the
1960s and 1970s had won an important place in the regions sociological
thought. Its object is a phenomenon that the neoliberal globalization did
not create, but markedly worsened. The only reason for the discussion to
concentrate on the forms of manifestation of labor oversupply is that
social research had provided a questionable solution to the problems
deepest causes. I have argued that this condition is not satisfied and I
have posited some new elements with a view to contributing to the solution of this question.
There will be an unsolvable conflict between general theory and historical process if the forces that capital mobilizes to counter the tendencies that restrain development and their impact on capital organization


chapter four

are ignored. For example, a number of measures such as the export of

capital, colonial control, and the creation of monopolies, all aimed to
fight the tendency of the rate of profit to fall and ended by giving way to
imperialism, i.e., a new phase in the development of capital. Every new
phase implies a change in the relation of capital. In this way, we can distinguish three larger phases: a) labors formal subsumption in capital
(manufacture); b) real subsumption of immediate labor by capital (large
industry free competition) and c) real subsumption of immediate labor
combined with formal subsumption of general labor monopoly capital
imperialism). As suggested before, underdeveloped capitalism did not go
through these phases and did not organize the formal subsumption of
general labor. Therefore, the workings of capital at the international level
were bound to display a specific logic, one that would differ from the
more abstract logic of Capital. But this is no more than the logic of a phase
of the historical process of capital which sooner or later will end up coming to terms with more abstract postulates.
Although some relations will find a new approach here, our main concern has been the surplus-population inside Latin America. We have recognized the presence of non-capitalist forms of production and have
argued that the nature of these relations of production does not decide
their relationship to capital. They may or they may not lend support to
capital accumulation. At the same time, we have identified two sectors
that maintain hybrid relations with accumulation (pirate capital and
domestic labor) and a third whose origin and reproduction fall outside
the accumulation of capital (the indigenous communities).
A large surplus-population is certainly one of the explanations for the
low value of labor power in underdeveloped countries. This low value, in
turn, could be considered as a lever of accumulation insofar as it grants a
high rate of profit. To that extent, it would not seem reasonable to speak
of absolute surplus population, as one having no positive impact on
capital accumulation. I have discarded this sort of argument for the following reasons.
First of all, let us make clear that for the low value of labor power we
understand: i) value in relation to that corresponding to labor in developed countries; ii) an average magnitude that results from the compensation of prosperity and stagnation periods. This low value of labor power
does not enhance investment because the variable capital that is saved
tends to be lower than the new constant capitals value. Investing under
such conditions makes the rate of profit fall instead of rise. Certainly, this
rule only applies for working capital but working capital is where most

industrial colonialism and surpluses of population137

investment applies. True, the rate of profit that a transnational corporation achieves in underdeveloped countries may be larger that the one it
obtains at home, but this in itself is no guarantee of economic expansion.
Domestic markets in underdeveloped countries are small, largely due to
low wages, and these countries do not offer the adequate technological
The third stage expanded the option of producing in low wage countries with a view to selling in high income countries. One determinant
that has constrained this possibility for Latin America is the absence of
adequate technological conditions. All of this helps to explain why investment concentrates on developed countries and those which in addition
to offering low wages pursue a dynamic state development function.
We have pointed out that the worker who leaves his underdeveloped
country for a country like the United States shows himself to be part of a
labor reserve army created with a view to serving in the recipient country.
In principle, he appeared as a member of his own countrys surplus population. Yet, this does not mean that he was necessarily unemployed. It
only means that he lacked a job under stable and bearable conditions. As
shown here, the surplus population is forced to do something in order to
acquire an adequate means of living. This seems to support the theory
according to which wage differentials and not precarious jobs and unemployment are the real cause of migration. In the same way that neoclassical theories pay no attention to structural causes, this explanation
overlooks the fact that migration has done nothing to equalize wages.
The international articulation of the labor market through migration is
now starting to deplete itself. The development of productive forces is
allowing advanced countries to create not only their own labor reserve
army but also their own surplus population. The attraction of migrant
labor-power is now limited to qualified segments of workers and temporary workers. This attraction should in fact continue to weaken.
Correspondingly, Latin Americas surplus population will grow as well.
This is its fate under capitalism. This trend might be moderated thanks to
a reorientation of productions to inward-oriented growth, a path that the
present world crisis is calling for, but in the final analysis, it cannot be
The propositions that we have expounded here are far from optimistic
regarding the future of the surplus population, as this will continue to
increase. This is the trend suggested by the dynamics of underdevelopment and capitalism in general at the present stage of development.
Yet we are by no means denying the possibilities of politics in terms of


chapter four

moderation of the tendencies at work in society. A redistribution of

income, oriented to reducing the present social inequalities, the negotiation of a new deal with developed countries, and the reactivation of
domestic markets could all serve well to reduce the negative effects of
economic development.
A redefinition of the present power relations inside ruling elites would
be an unavoidable condition for such a change, one that not only seems
possible but which amounts to a necessity in a context where social discontent threatens large capitals political rule. The greatest limitation is
immediately obvious. Such policies are intended not to suppress but to
guarantee the continuous working of a social system that rests upon the
exploitation of workers and inequality as a foundation for its very existence and expansion. The present world economic crisis and the struggles
between major powers are other causes that constrain opportunities for
significant concessions to underdeveloped countries.



Agrarian reforms are being updated in Latin America, both in sociopolitical thought and practice. Their promotion, of which the Agrarian
Reform World Forum is an important proponent, is rooted in a reality
that has proven resilient to poverty reduction and has pushed more than
20 million people to the brink of hunger, all in a context of a world food
crisis that has yet to find an exit strategy. At the same time, recent agrarian
reforms are being deepened and extended by progressive governments
with a view to addressing legitimate popular demands. Land redistribution has been boosting peasant production and revitalizing an entire way
of life based upon rural production that has been severely affected by neoliberalism. For all of these reasons, we need to trace the trajectory of the
peasant economy with a view to assessing its real potential as a solution to
the problems of food production and a threatened way of life being experienced by such large numbers of people.
The small plot producer is one the most salient forms of activity that
the surplus population adopts in the countryside. It is a result of underdevelopment and industrial colonialism that responds partially and provisionally to the needs of capital expansion. It is expected to fulfill economic
functions in terms of supplying cheap means of production and consumption that it can only do, as we shall argue, under certain conditions.
On the other hand, the real reason behind its persistence as a space for
surplus population lies in the political sphere. The quest for social peace
and control over social discontent is the main drive for government
enhancement of peasant production during certain historical periods.
Plot production is one of the important means by which sectors of
the surplus population make their living, doing so through alternative
forms of labor organization. Some segments of these producers maintain
links with capital accumulation and evolve as relative surplus population
while others form part of the absolute surplus population since they
attain no role in the benefit of accumulation. Accumulation under industrial colonialism first produces them as overpopulation. Capital then
promotes their organization as subsidiary producers only to have their
expectations later shattered at a certain point of accumulation. That is to


chapter five

say, their existence is subject to dramatic shifts from one pole of the surplus population to another, a social transmutation that moves them from
being subsidiary producers to being independent producers whose maintenance must ultimately be supplemented by other family members.
Amidst an environment that harries them, they are forced to struggle in
order to get from politics that which the economy denies them.
In this chapter, we intend to develop further these propositions. First,
we will discuss the social character of peasant production from the point
of view of its internal organization. Our points of reference consist of the
producers relation to the means of production and the aim of production. Next, we will explore the relations of plot production to capital
accumulation, paving the way for an analysis of the dialectics of plot
production. Finally, we will turn to the social transmutation that such dialectics imply. To deal with all of these issues, we will build a logical construct that emphasizes the way that peasant production tends to evolve
independently from the form of economic growth and in isolation from
heterogeneous peasant spaces. To close this chapter, however, we will
attempt to assess the overall impact of neoliberalism on peasant production. Our approach remains squarely within the confines of political economy and no attempt will be made to encroach upon anthropological
The Social Character of Peasant Production
Following Engels, we can say that in principle, By small peasant we mean
here the owners or tenantparticularly the formerof a patch of land
no bigger, as a rule, than he and his family can till, and no smaller than can
sustain the family (Marx & Engels, 1955 [1894]: 658).1 No attention will be
paid to Engels suggestion that there could be medium and large-scale
peasants, and it will be assumed that, alongside the peasant and other
forms of the surplus population, there are only small, medium and largescale capitalists who accumulate thanks to the exploitation of wage-labor.
Thus, the peasant is a small producer who: a) cultivates a plot that suffices
for his and his familys sustenance; and b) as a general rule, uses his own
labor power and that of his family, but who can resort to other labor power
when the family effort does not suffice.
1This citation from the Collective Works of Marx and Engels originates from: Engels,
Friedrich. The Peasant Question in France and Germany. Moscow, Foreign Languages Pub.
House, 1955.

industrial colonialism and peasant production141

The issue of the mode of production cannot be avoided here. The

notion that this problem was resolved long ago, or the even more irresponsible stance that this is an outmoded theme, accomplishes nothing
but evasion of a crucial point. The role and place of the peasantry in contemporary society as well as its evolution cannot be clarified without tackling this problem. In this regard, we adopt Marxs point of view according
to which the peasant production is a peculiar mode of production, one
different than that of capitalism:
The form of landed property with which we are dealing is a specific historical form, a form transformed by the intervention of capital and the capitalist
mode of production, whether the original form was that of feudal landed
property, or of small peasant agriculture pursued as a livelihood; in this latter case possession of the land and the soil appeared as a condition of production for the immediate producer with his ownership of the land being
the most advantageous condition, the condition for his mode of production
to flourish. If the capitalist mode of production always presupposes the
expropriation of the workers from the conditions of labour, in agriculture it
presupposes the expropriation of the rural workers from the soil and their
subjection to a capitalist who pursues agriculture for the sake of profit.
(1991: 751)

Thus peasant labor configures a specific mode of production whose features so far amount to: a) production for consumption; b) mainly family
labor employed; and c) control (implicit both in ownership and possession) over the land which they work. Yet, few things are left uncontested
in social sciences and this approach is not one of them. Hence, it is important to elaborate a bit more on this definition.
The main aim of capitalism is profit through the extraction of surplus
value. The purchase of labor power obeys this fundamental objective.
As Marx put it:
Labor-power is not purchased under this system for the purpose of satisfying, the personal needs of the buyer, either by its service of through its product. The aim of the buyer is the valorization of his capital, production of
commodities which contain more labour than he paid for, and therefore
contains a portion of value which costs him nothing, and is nevertheless
realized through the sale of those commodities. The production of surplusvalue, or the making of profit, is the absolute law of this mode of production
(1990: 769).

Thus it makes no sense to speak of capitalism if this fundamental feature

is not present. A capitalist is such because he uses other peoples labor in
order to obtain a profit which is nothing else but the transmuted form of
surplus value.


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Not every use of other peoples labor is intended to extract surplus

value. For this to happen, it is necessary that the number of workers be
sufficient to transform the labor process into a valorization process:
What from the outset distinguishes the labor process subsumed under capital, even when it is only formally subsumed, and what distinguishes it more
and more, even on the basis of the old, traditional mode of labor, is the scale
on which it is carried on, hence on the one hand the extent of the means of
production advanced, and on the other hand the number of workers under
the control of the same employer. What appears as a maximum on the basis
of e.g. the handicraft mode of production () hardly even forms a minimum
for the capital-relation. For in fact the latter can hardly enter the picture
more than nominally unless the capitalist employs at least enough workers
for the surplus value produced by them to be sufficient to serve as income
for his own private consumption, and as a fund for accumulation, so that he
himself is exempted from direct labor and only works now as a capitalist as
the overseer and director of the process, performing as it were the function
of capital engaged in its valorization process and virtually endowed with
will and consciousness. (1985: 87)

This passage conveys an implication that should be made explicit, namely,

that the objective of production is not determined by the producers will.
It is of no use for an entrepreneur to aim at profit if his resources allow
him only the means to survival. When surplus value is not only the aim
but also the result of production and the entrepreneur is able to accumulate, we can say he has entered the sphere of capitalist production.
The notion of the nominal capitalist has caused confusion. It does
notrefer to some sort of partial capitalist. In another passage of Marxs
work, its true meaning is clarified, that is, a relation that has been conferred an underserved name and which evolves outside of capitalist
Whereas the small capitalist, who does almost all the work himself, seems to
obtain a very high profit in proportion to his capital, what happens in fact is
that, if he does not employ a few workers whose surplus labour he appropriates, he actually makes no profits at all and his enterprise is only nominally a
capitalist one (whether he is engaged in industry or in commerce). What
distinguishes him from the wage-worker is that, because of his nominal
capital he is indeed the master and owner of his own conditions of labour
and consequently has no master over him; and hence he appropriates his
whole labour-time himself instead of it being appropriated by someone
else. What appears to be profit here, is merely the excess (of his income)
over ordinary wages, an excess which results from the fact that he appropriates his own surplus labor. However, this phenomenon belongs exclusively
to those spheres which have not as yet been really conquered by the capitalist mode of production. (1972 Part III: 357)

industrial colonialism and peasant production143

So the nominal capitalist is not in fact a capitalist, either small or big.

Generally the peasant cultivates his plot along with his family. Yet, he can
turn to other workers for help in certain tasks. This is a common and
almost unavoidable practice in order to get the peasants production process completed. Where community practices have not been dissolved by
mercantile social relations, it is possible to see collaborative mechanisms
between peasants consisting of labor exchange for certain productive
tasks. Essentially this is the same relation established by a peasant who,
after hiring labor force, must sell his own labor power to another peasant
in order to compensate for his expenses in wages. These exchanges do not
make them either capitalists who mutually exploit their labor power or
proletarians who live from their wages. In fact, this is not a simple hypothetical possibility. Hubert Carton de Grammont has confirmed that labor
exchange between peasants is a widespread practice in Latin America:
Concerning the hiring of labor force, a final phenomenon must be added:
peasant units of production are constrained to transform their traditional
mutual help relations in wage relations, due to the predominance of money
relations () In this case, the hiring of labor power is peculiar: the peasants
hire among themselves and do not get mixed with wage laborers working
for capitalist enterprises. (1992: 51)

So far we have shown that the peasants internal organization of labor

does not correspond to the capital-wage labor relation, which is crucial to
the understanding of its evolution. Peasant production dynamics cannot
be dealt with from the point of view of the workings of accumulation. Yet,
this does not mean that they evolve independently from mercantile categories. Value, commodity, socially necessary labor, market, prices and
even profit (this latter is not a category specific to capitalism), all of them
are necessary for an understanding of the peasant economy. In turn, specifically capitalist categories such as extraordinary profit, production and
market prices, and value of labor power affect the evolution of the peasant economy. This link is already established at the level of production.
On the one hand, the peasant contributes to the realization of capitalist commodities. On the other, this type of production can be incorporated into the valorization process, as occurs when peasant production
contributes to the cheapening of constant and/or variable capital, or
when, more directly, the peasant has engaged in production for a capitalist enterprise. This is possible because the peasant does not aim for a surplus. No doubt that while this is the case, agrarian reforms have also had
economic expectations. As C. Mistral put it, the agrarian reform, In addition to activating agriculture supply, cheapens labor power (raising the


chapter five

rate of surplus value), saves foreign currency and absorbs the growing
social unrest in the countryside (1974: 25).
For peasant production to be economically functional, it is necessary
that certain conditions be met, especially concerning technology and
extension of the plot. However, there is a structural condition that prolongs the possibility of peasant production to lend a service to capitalist
production. That is the fact that capitalist agriculture must pay a rent,
raise prices and reduce technological demands on small production.
Therefore, this is one more case of non-capitalist labor organization that
belongs to the relative surplus population under the guise of subsidiary
goods producers. Yet, this is not a permanent condition, for peasant production is far from being stable.
From Peasant Production to Infra-Subsistence Production
The assumption upon which the programs of agrarian reforms were generally formulated in Latin America, following Alexander Chayanovs thesis, is that due to the familys relatively intense labor, the peasant is able to
meet his own as well as his familys consumption needs. The required
extension of land was estimated on the basis of the given conditions of
soil quality and location.
Of course, if Chayanov inspired some agrarian reform efforts, it is not
his fault. In the end, he did not ignore the objections to his own concept
of the peasant mode of production which emerged from criticism and his
own observations of real processes. In effect, discussions in Russia and his
studies on US agriculture and its relation to technological progress, led
him to another topic, name, the projection of what he saw as advantagesof peasant production for the social organization of agriculture in
his own country. His proposals of cooperative organization in opposition
to land nationalization and socialization transformed his peasant economy into something different, especially by introducing profitability criteria. Towards 19281929, he abandoned his defense of the peasant economy
and in this way closed off the discussion that his own concepts had
Chayanovs notion of the peasant economy should not be criticized for
failing to take into account a particular category of capitalist production.
He thought that these categories were fully articulated into a theoretical
framework and could contribute nothing to the understanding of the
peasant economy. Yet, his own understanding of capitalism is not free

industrial colonialism and peasant production145

from criticism. For example, he thought that the existence of a labor market (which he deemed absent from the peasant economy) made it possible to equate slavery and capitalism. But he did not stop at the peculiarities
of each mode of production. The selling of labor power by his proprietor,
the worker, cannot be compared to the definite selling of a whole body,
even by a third party. Still, it seems to us that the principal weakness of
Chayanovs work lies elsewhere. In short, he ignored the impact of capitalist production on the peasant economy.
In the work of Marx, the peasant economy is a process, or more accurately, a process of dissolution, due precisely to the dominant capitalist
environment in which it evolves:
the handicraftsman or peasant who produces with his own means of production will either gradually be transformed into a small capitalist who also
exploits the labour of others, or he will suffer the loss of his means of production () and be transformed into a wage labourer. This is the tendency
in the form of society in which the capitalist mode of production predominates (1969, Part I: 409).

So, the continued reproduction of peasants is not sustainable in this context. But at the same time, the transformation of a peasant into a small
capitalist or wage laborer is not a necessary outcome of industrially colonized societies, something that Marx could not have known. Other social
figures are an outcome of the dissolution of peasant economy, as we will
see later on.
Marx detected a variety of causes which erode the weak complexion of
the peasant structure, among which the following are worth pointing out:
a) the progressive fading away of the domiciliary industries that com
plement peasant production; b) the usurpation of communal property;
c) the development of large-scale farming, and d) improvements of
agriculture, which on the one hand bring about a fall in the prices of the
products of the soil, and on the other require greater investments and
more diversified material conditions of production, also contribute
towards this end, as they did in England during the first half of the
Eighteenth century (1991: 943944 ). Actually, the last two causes suffice
to envisage the tendencies within peasant production.
Family sustenance does not only depend upon what the family is able
to produce. It is also linked to the realization of the peasants product or
part of it in a market ruled by capital where production prices are constantly falling. Therefore, in order for the peasants to maintain a given
consumption level, it is necessary to steadily increase their production.


chapter five

Peasants cannot limit their effort to the continuous replacement of the

goods consumed the previous year. They are constrained to increase their
productivity with a view to keeping constant the relation of their costs
to the shifting price determined by the capitalist sector. In other words,
their continuous reproduction demands the production of surplus to be
invested year after year.
Let us assume that the peasant is able to obtain such a surplus, which is
enough to introduce the biological and mechanical supplies that make it
possible for him to increase his labor productivity as in capitalist production. We can forget all the disadvantages arising from the soils quality and
location, which so often affects the peasants life. Even so, an insurmountable obstacle would still remain in the dynamic of the economies linked
to large-scale production which contribute to cost and price reduction.
This situation is not easy to successfully confront since procurement of
the means of production and supplies is increasingly oriented to favor
larger scale units.
For example, a peasant with a plot of about 15 hectares stands to
|gain very little by purchasing a tractor designed to work 60 hectares.
His production costs would rise in relation to those of a capitalist who is
in a position to use the same tractor more intensively. Something similar
will occur with all supplies whose price is reduced in purchases of larger
quantities, or well drilling with the capacity for extensive application.
In other words, peasant production cannot successfully follow the course
of capitalist production. Its production costs per unit of produce are
But there are still additional difficulties. The distribution channels of
fertilizers, which are produced mainly in developed countries, tend to
principally attend to demands from big and medium-sized producers who
cultivate goods such as coffee, banana, cotton, etc. (CEPAL, 1984: 56). The
same is true for herbicides and insecticides which in addition require
the use of tractors. Furthermore, chemical and biological supplies are
designed in such a way that they become complementary, which hampers
their acquisition by producers disposed with scarce resources.
This is not all. As A. Schejtman reasoned:
The peasants need to make the most out of his most abundant resource
labor power () together with unfavorable terms of exchange for his products, lead him to reduce to a minimum the purchase of means of production
and supplies. In this way the density of means of production or supplies per
worker, or per unit product or per working day is generally lower than the
one existing in capitalist agriculture (1980: 131).

industrial colonialism and peasant production147

This is why a direct relation has been established between the use of
supplies and the means of production and the size of the land exploited
(CEPAL, 1986). Peasant production yields will therefore tend to increase
much more slowly than those of the capitalist sector. The point is not that
peasant production does not improve, but that it does so much more
slowly. As a result, peasant income tends to fall. The next exercise, inspired
by the labor theory of value, will allow us to illustrate such a conclusion.
Let us assume the following initial situation of wheat production:
Table 5.1.Schematic Representation of Peasant Production at Point 1.
Kind of

per Hectare

per Quintal

of the Product





This situation is already pretty unequal concerning yields and we

can suppose that it conveys a prior worsening of the relative position of
peasant production. Whereas the different yields correspond to an actual
situation at the end of the 1970s in Chilean agriculture (Rojas, 1984), prices
are obviously an artificial device to facilitate our exposition. This situation is, in turn, the point of departure for further decline. The dominant
capitalist economy will introduce technological improvements that will
raise yields. Let us suppose that after a given period of time, production
grows from 21 to 26 quintals, that is, around 25%. As the added yield
resulted from changes in productivity, the total value of the product
remains the same. Only the value of the product unit, in this case, the
quintal, changes. Certainly, it cannot be ignored that technological progress increases labor intensity and thereby raises the value of the product. But technological progress also brings with it a reduction of the
employed labor force, especially in agriculture, which largely weakens
its impact on the value of production. We can assume here that production conditions in the peasant sector do not change. In fact, according to
the UN Economic Commission for Latin America and the Caribbean
(ECLAC), after 20 years, the average yield of corn production in smallholdings increased from around 1.000 kilograms to 1.090 kilograms per
hectare (CEPAL, 1997: 28), that is, almost nothing. So, the new situation
will be as follows:


chapter five

Table 5.2.Schematic Representation of Peasant Production at Point 2.

Kind of

per Hectare

per Quintal

of the Product





The market price is determined here by capitalist competition where

given production conditions became generalized. However, since the
peasants product satisfies a demand of society, it can occur that the capitalist sector establishes its prices over its value, obtaining in this way a
super-profit, in the same way in which those capitalists who introduce
technological progress obtain extraordinary profit for a period at the
expense of those capitalists who lag behind technologically. However,
peasants prices still go down. The obtaining of this super-profit is especially prevalent under conditions of inward-oriented growth and much
more so when the state establishes prices with a view to guaranteeing a
determined peasant income. To that point, peasant production slows
down the introduction of technological progress by the capitalist sector.
Yet, capitalist competition and the search for yield increases are not
Whatever its prevailing rhythm, the concentration of technological
improvements in the capitalist sector negatively impacts upon the peasant sector. The longer term tendency is immutable in that the yields
money expression declines as a result of technological change in the capitalist sector while the peasants amount of labor remains the same. Part of
his labor is not recognized as socially necessary labor. At the same time,
the part of his labor that is treated as useless by society tends to grow. The
value of his unit product falls too slowly or does not fall at all, because its
total produce does not increase rapidly enough, or simply does not
increase. The purchasing power of the plots product falls year after year.
This is the key to the problem of the relation of peasant production and
the rest of society: an unequal exchange by which a given amount of labor
is exchanged for a lesser quantity of labor.
The belief that value transferences take place through the market from
the peasants to the capitalist sector was correctly dismissed by J. Calva
(1988) as the labor in question was not socially recognized. Yet, there is
more to this point. Industrial capital is not interested in low productivity

industrial colonialism and peasant production149

agriculture since, to the extent that it involves goods entering as elements

that determine the labor powers value, it does not enhance relative surplus value. Nor does it cheapen constant capital. This situation causes
conflicts of interest between industrial and agricultural capitalists and
also between industrialists and peasants. For the latter, the fact that their
production responds to social demand provides a reason for agriculture
not to adjust prices to the level of production prices, as already seen, so
that the regulating price does not fall as rapidly as it should. To that extent,
the labor of capitalist agricultures workers appears as boosted labor,
which increases the rate of surplus value in this area while it relaxes pressures for technological innovation. In this manner, however, no surplus
value is created for the capitalist class as a whole and much less for the
industrial capitalist.
With a view to tackling their own problems, peasants are forced to
intensify their efforts and lengthen their labor day, expecting to compensate in this way for their shortfall in productivity. Yet they cannot do this
at will. Apart from their own labor powers physical limitations, they crash
into natural barriers, such as climate, but above all the very limited means
and objects of labor under their control. It will simply not help them to be
ready to exploit ten hectares if they only control five.
Under conditions of backward capitalist agriculture and a protected
national economy, as occurred during inward-oriented growth, peasant
production can accomplish a function for capital as a supplier of cheap
means of production and wage-goods. This situation could even raise
enthusiasm for land distribution in governments looking for a way out of
real or potential conflicts created by an overpopulation of people lacking
the means to ensure their survival.2 Exceptionally, this is also the moment
in which some small producers could become transformed into small
capitalists. This functionality of the peasantry is constantly eroded by
capitalist production until it is overrun.
The dismantling of the peasant economy, i.e., its depletion as a source
of the means of sustenance for rural families, puts an end to the peasant
condition as subsidiary producers and paves the way to their social transmutation. The capitalist environment in which they have evolved has
2Land distribution in the region started the early phase of capitalism. In Paraguay in
1926, for example, a law was passed which explicitly acknowledged the need for land distribution, in appropriate extensions, in order to guarantee subsistence for unemployed
workers and their families. The Mexican Revolution led to the same state policy years


chapter five

done nothing but impoverish them and ultimately forces them to take
refuge in self-consumption, while maintaining rather tenuous bonds with
capital accumulation. From then on, they will become independent producers, a member of the absolute surplus population. This social transmutation will initially affect those relatively smaller plots with the worst
quality soils and gradually embrace all of the rest. In this way, these producers swell the ranks of those who never had the opportunity to become
subsidiary producers.
In order to illustrate this process, we turn to ECLACs typology of
small producers in Mexicos countryside. The lowest link consists of
infra-subsistence producers (infrasubsistencia), i.e., those who have
fallen outside of the confines of the peasantry. Immediately above
them are subsistence producers (subsistencia) who are still peasants
but those only able to satisfy their basic food needs and create no surplus for any means of production acquisition. The next higher up
there are the stationary producers (estacionarios) who generate an insufficient surplus for repositioning. At the top of the peasantry we find the
sustainable producers (excedentarios) made up of those who are able to
invest in order to maintain their position as peasants (CEPAL, 1986).
In none of these categories does the hiring of labor power exceed
25 working days.
In accordance with the interpretation we are constructing here, the
lower strata of the peasant sector will tend to expand, thus creating a
pyramidal social structure. Eventually an ever larger amount of producers
will be pulled out of the peasant scene. This downward displacement
does not necessarily follow one link after another since certain processessuch as profound crises could violently transform the scenario. For
example, a sustainable producer can become transformed into an infrasubsistence producer under certain conditions. Other factors such as land
subdivisions by inheritance could have similar impacts on individual
peasant families.
Once a producer enters the infra-subsistence level or is in transition
towards it, the time has come to begin searching for a new occupation,
either fulltime or as a supplement to the family income. Those who
succeed in their search for employment mainly enter into construction,
transport or domestic service, apart from capitalist agriculture. But generally, that is when they discover that becoming a wage worker is a difficult
enterprise due to already well-established barriers. In one study on
the Mexican labor market using data from 1988, the following was

industrial colonialism and peasant production151

Out of workers engaged in farming, 28% were self-employed laborers; 13%
appear as employers, and the remaining 58% were subordinated laborers,
that is, all of them wage workers, farmhands, day laborers with no land
and who work on other peoples plots. In all, they make up a population
of 3,644,732. However, out of this working population, only 2.6% managed
to get a job as wage workers and 21% as farmhand and pieceworkers,
amounting to 1,495,597, that is, 9.5% of the active working population. If we
bear in mind that 51.6% of them were contracted by ejidos and communal
land individual producers and that 12.3% were hired by agriculture entrepreneurs and, finally, that 34.1% of all subordinated labor received no compensation, it becomes evident that farming activity and the rural labor
market proper display very little capacity to absorb labor power (Flores,
1992: 43).

A decade earlier, the Regional Program for Employment in Latin America

and the Caribbean (PREALC) identified some of the processes affecting
employment in agriculture. They especially pointed to: a) a decline of permanent workers as a result of the spread of temporary employment that
was a better fit for modern agriculture, and b) the elimination of traditional relations within large estates by which many types of actors that
enjoyed certain rights on the farm (inquilinos, arrendires, huasipungos,
and so on, according to a given part of the region) were forced to leave in
search of new jobs (PREALC, 1982).
There is no need to go back to the conditions of the urban market labor
since that has been dealt with extensively in the previous chapter. The
issue here is as follows: underdeveloped capitalism opened spaces for the
peasant economy to grow, but the same relations of capitalism dictated
that the peasant economy would be only provisional. Capitalist underdevelopments true vocation is to create an absolute surplus population as
one of its specific functions within the imperialist system.
Social Impacts of Neoliberalism on the Countryside
Neoliberal globalization brought about particularly hard conditions for
the rural surplus population. Outward-oriented growth accelerated the
decomposition process of the peasant economy where part of the relative
surplus population make their living, while at the same time it swelled the
urban labor market with the unemployed.
Commercial liberalization came to create new challenges in terms of
productivity. Subsequently large masses of workers were evicted from
their refuge in the peasantry. In 1970, sub-subsistence wheat and corn producers numbered 1.09 million while towards the end of the 1990s, the


chapter five

number had reached 1.4 million (CEPAL, 1999). In Central America, subsubsistence producers increased from 1.04 million to 1.14 million between
1989 and 1993 and it was expected that they would reach 1.32 million by
2000 (CEPAL, 1995).
This evolution is not independent of political implications, as social
unrest tends to radicalize. The revolution in Nicaragua and guerrilla war
in El Salvador managed to recruit a large portion of their ranks from
the poorer population in the countryside. Under different conditions, the
Zapatista guerrilla movement benefited from the same disposition of
the poor to armed resistance. Certainly, these sectors have also been
behind the emergence of popular governments, especially in Bolivia,
Ecuador, Nicaragua, Venezuela and even Brazil, a country that could not
ignore popular demands for agrarian reform.
Before moving forward to our conclusions, it is necessary to underline
the impacts of the conflict of capital and nature on peasants, something
which we have so far ignored. The evolution of prices is one of the most
evident, secondary forms of manifestation of this conflict so we take it as
a point of departure.
The reduction of unit costs and prices as a result of productivity
improvements is an established trend of capitalist production. Unit prices
fall in the long run because the produce unit value falls. While this historical process can be seen above, the trend became abruptly halted during
Table 5.3.International Prices* Index (Base 1990 = 100).



Cotton fiber
Cattle Meat



Source: CEPAL (2001).

*Dollars per ton. **Chicago.

industrial colonialism and peasant production153

the first decade of the 21st century. Prices of primary goods increased,
although in a general context of volatility. They increased during the
export boom of 20032008, while in 2009 during the worst moments of
the crisis, they declined. In 2010, especially during the second half of that
year, they shot up again.
Factors unleashed during the third stage, which we have already
referred to, are to blame for this state of things. What we encounter
include factors arising from capitalist production which at the same time
call into question the regular operation of capitalism. They are the result
and manifestation of the present crisis in the capitalist exploitation of
nature. Among them, the following should be pointed out:
a)The effects of climate change. It is true that we do not yet have studies
that inform accurately about the impact of global warming in the
region, apart from forecasts built on the basis of case scenarios.
Although information exists on damage produced by climate events in
some countries, it has not been proved beyond any doubt that these
events are part of what has euphemistically been called climate
change. Yet, academic uncertainty in this connection does not refute
correlations in real life. On the one hand, rural dwellers know from
experience that the principal risk for their activity is climate variability and academic observations have confirmed this. Extreme climate
events have historically been the most frequent source of price variability in agriculture. And it has also been found that: the frequency
of floods and droughts on the American continent has multiplied
twenty times from the first half of the last century to the present 2000
decade. These climate disasters have contributed to harvest losses at
the global level, thus giving place not only to swings in prices of agricultural goods but also to devastating famines in the most vulnerable
regions (CEPAL/FAO/IICA, 2011: 13).
b)The rise of oil prices that resulted from already discussed causes
directly affects the cost of agricultural inputs and transport. According
to estimates, the prices of fertilizers have increased between 90% and
150% during this centurys first ten years. Now that the epoch of cheap
oil is over, and leaving aside its price volatility as a result of various
historical events, it could reasonably be anticipated that prices will
tend to stabilize for a period at a level higher than the one prevailing at
the beginning of the 21st centurys first decade. In this way, the spike in
oil prices has contributed to the disruption of the otherwise expected
evolution of prices under capitalism.


chapter five

c)Bio-fuels production has affected food production. A growing part of

corn harvests is being sent to ethanol distilleries, as is a growing part of
vegetable oil used for the production of bio-diesel. Both products have
evolved with great success during the third stage. At the same time, a
new conflict around the use of soil is developing and presenting a new
dilemma. The environment stands to benefit from the expansion of
cleaner energies (heated discussion continues about exactly how
clean these new energies are) but it would do so by way of affecting the
living conditions of the poor, that is, those who cannot be blamed for
climate change.
Other factors explaining the price increase trend would include the fact
that food demand has also grown as a result of greater consumption in
Asia, especially China and India where consumption patterns have
changed favoring meat and dairy products, thus enhancing the production of forage crops for cattle instead of staple crops to directly feed people. Financialization and speculation are also among the causes of price
increases. The volume of market futures on staple grains has gone up
sharply during the decade of 2000 and it continues to do so. However, it is
not reasonable to define this financialization as a principal reason for
price increases, despite the fact that US fiscal policy has reinforced dollar
availability and this has in turn contributed to inflation. It was in this context that global grain reserves were bound to fall and they did. Since 1995,
grain reserves have consistently become reduced at a 4% annual rate.
During the 2009, 2010 and 2011 cycles, corn and wheat reserves continued
to fall. In addition, some countries decided to reduce their exports with a
view to ensure internal supplies.
The International Monetary Fund has warned that the world may
have to resign itself to dealing with more expensive foods. The implied
doubt in this statement probably reflects the IMFs hesitation to explore
the causes of this phenomenon since it explains price increases by transitory phenomena such as climate alterations (Gonzlez, 2011). It is well
known that these alterations have become a part of the daily life of the
planet and that they will remain here for a long period, at least until a
profound change in production and the social reorganization of society
has made it possible for a more amicable relation with nature to be
The question arises as to whether the peasants and small landholders
in general will benefit with the rise of food prices. Or, put another way,
whether the changes in the operation of capitalism could really modify
the labor and living conditions of the peasantry. The impact of sustained

industrial colonialism and peasant production155

price increases on the living conditions of small landholders in principle

depends upon the balance of their trade with the rest of society. A rise in
price of their own products could compensate for the price increase of
what they buy at a given moment. Yet, even if unequal exchange was suspended for the moment, the next cycle would tend towards restoration of
business as usual conditions. If they have little or nothing to sell, their
position will inevitably be disadvantageous.
Small landholders cannot efficiently increase production in order to
respond to market opportunities. They lack access to credit, to technological innovation (or even to existing technologies), to production and commercial networks, and to large markets. They are not even in a position to
change their own production patterns, except when they shift to less
costly activities, such as when they stop producing foods in order to
embark on certain forage production projects.
There is actual evidence to suggest that the least protected social sectors are seeing their poverty deepen as a result of price increases. A report
by ECLAC/FAO/IICA shows that in the context of price increases experienced during 20072008, around 20% of the poorest population of
Guatemala and Peru saw their calorie consumption actually fall by 8.7%
and 18.7% respectively. In both countries, most families, including
those dedicated to agriculture, are suffering losses as a result of the
increase of food prices. Also, as should be expected the effect is harder
upon poor families that allocate a large part of their income to food consumption (ECLAC/FAO/IICA, 2011: 24). Small landholders will not see
improvement in their standard of living as a result of the increase of food
prices. In short, the increase of prices does not arrest the tendency of the
peasant economy to disarticulate.
Yet, it was not only the peasantry who suffered victimization by neoliberal globalization. Commercial liberalization exposed the entire sphere of
national agriculture to competition with capitals producing under better
conditions and in control of technological progress, or at least having easier access to it. Weaker national capitalist producers were put in a situation similar to the one that peasants were in, in relation to them.
International prices, to which the region was forced to adjust to, were
already lower than those of the region and continued their long term
downward trend until 20032004.
However, since the region always lags behind the productivity
changes of developed countries, it could not respond properly to this
situation. A comparison of productivity between Latin America and
selected more developed countries over a 20 year period shows the following results:


chapter five

Table 5.4.Productivity Differentials (1980 dollars).




& Canada


Per worker








Yield per hectare

Growth (%)
Per worker
Per hectare
Source: CEPAL (1995).3

This situation would not improve over the following two decades. On the
contrary, the relative productivity of agriculture, hunting, fishing and forestry in relation to the productivity of the same sector in the United States
continued to systematically fall. It represented 14.2% in 1990, 13.3% in
1998, 10.7% in 2003 and 7.0% in 2008 (ECLAC, 2010). The gap, instead of
narrowing, actually expanded even though productivity growth in the US
was lower than that taking place throughout most of Asia.
At the same time, the regions agricultural exports expanded and contributed to moderating the tendency towards increasing trade deficits
during 20032008 (although the effect was not as great as that registered
by the regions mining exports). This suggests that the increase of agricultural exports rested mainly on price increases rather than on productivity
advances based upon the introduction of technological progress. This is
not meant to imply that technological advances were not introduced, as
improvement in productivity, even though limited, would prove to the
3Behind these figures there is a very unequal use of means of production and supplies
which does not diminish. For example, in these more developed countries (Canada,
United States, Belgium, Norway, France, United Kingdom and Italy) the average use of
tractors for every 100 workers was 6.28 in 1970; in 1990, it increased to 13.24. In ten Latin
American countries (Uruguay, Argentina, Venezuela, Chile, Brazil, Costa Rica, Mexico,
Paraguay, Colombia and Guatemala) the same average figures were 0.39 in 1970 and 0.69,
20 years later. The same is true for fertilizers. The first group of countries employed 120.6
kilograms per hectare in 1970 and 136.0 in 1990. The second group of countries consumed
6.97 and 16.85 in 1970 and 1990 respectively (CEPAL, 1995). As should have been expected,
agriculture competitiveness continues to fall. The regions participation in OECD countries agriculture and cattle farming imports went down from 14.50% in 1980 to 6% by the
end of the 1990s.

industrial colonialism and peasant production157

contrary. What underlies these developments is an ever more concentrated pattern of technological innovation. As ECLAC has stated in relation to agricultural development during the third stage:
The most modern and capitalized sectors were able to introduce technological innovations, raise mechanization and direct production towards
more rewarding investments. On the other hand, small landholders stagnated and in many cases their situation deteriorated, this due to obstacles in
obtaining credits or getting access to technology and markets and also due
to their commitment to traditional crops which compete with imports
(ECLAC, 2004: 76).

So if the new situation concerning prices during the first decade of the
present century represented an opportunity for agricultural development,
this opportunity was greatly seized upon by developed countries but only
in much smaller measure by some of the regions countries and within
them, by large capitalist producers. This fact is illustrated with regard to
the shift towards global grain production in 2007 (Graziano, 2009).
The region as a whole continues to move backwards with respect to
competitiveness within the world market. This is a necessary effect of
industrial colonialism. In a context of commercial liberalization, the
future for agriculture looks rather bleak, except for some products such as
those utilized for bioenergy. Yet, social repercussions are also significant.
In principle, the impoverishment of weaker capitalist producers is a predictable result, but for some of them this impoverishment could mean
and has meant a downwards social mobility, for they have come to swell the
ranks of peasant production.
A large portion of small and medium capitalists in agriculture were not
in a position to properly confront commercial liberalization. As a result of
competition and the evolution of prices, the minimum amount of land
necessary to turn a profit became modified. An ECLAC study in Mexico
described this situation in the following terms:
The fall of income in the traditional segment of corn producers was reflected
by a tendency towards production concentration () Only by exploiting
larger extensions could producers have been able to reach the income level
they had during the early 1980s. This tendency certainly pushes many producers out of the market. Some of the farmers interviewed declared that if
they had previously obtained adequate income by cultivating 100 hectares
of corn, now they need to cultivate 250 hectares to obtain their previous
income. Thus, corn production has become a volume activity. In addition,
now they require strategic abilities to discern the best possible combination
of supplies to be applied due to the constant changes in relative prices and
they must count on their own capital to finance their activity due to the


chapter five
constriction of credit. Again, only a reduced segment of producers have
these abilities and resources (CEPAL, 1999: 74).

Therefore, globalization gave a strong boost to land and capital concentration in the countryside. Concentration of wealth and expansion of
poverty are highly common processes in rural Latin America. The social
meaning of these changes needs to be stressed. A whole sector of small
and medium capitalists has been forced to enter the ranks of the peasantry. We have no sure way of proving that this has been a generalized
process throughout the rest of the region, but we do have some information and a case study which indicates that this proposition goes beyond
In Mexico, a significant decline of labor force employers took place.
They amounted to 855,168 in 1988 (CEPAL, 1999) and according to the
April-June 2000 national employment survey they had shrunk to only
166,557. The number of agriculture and cattle raising workers registered
at the Mexico Social Security Institute (Insituto Mexicano de Seguridad
Social, IMSS) declined 21% between 1982 and 1998, while the number of
the self-employed increased from 1,924,854 to 2,669,355 between 1988
and 2000 (INEGI, 2000).
Research carried out by I. Castro (1996) in Zacatecas, Mexico, confirmed that many entrepreneurs reduced the hiring of labor to a bare
minimum and were forced to rely more upon family labor. Similarly, some
of them had to give up the use of tractors and resort to animal traction to
do the job. In addition, there was a certain abandonment of the use of
water due to high electricity prices. For some of these producers, profit
was no longer a production goal. It is certainly true that in Mexico, special
conditions accelerated this social shift, including the lack of financial support for producers in particular, but the general tendency was already in
place before financial difficulties flared up in 19941995.
We have shown that the peasant economy provided a means by which a
part of the surplus population, which industrial colonialism creates,
makes a living. For that reason, it is also a means to which governments
resort with an eye towards attaining a certain measure of governability. In
this way, peasants join in the relative surplus population for a transitional

industrial colonialism and peasant production159

It can be concluded that industrial colonialism does not have a single

linear impact on peasant production. On the one hand, capitalism effectively promotes its decomposition. At the same time, it increases the size
of the peasantry with former small capitalists who are unable to successfully face the challenges of increased competition. This also places
constant pressure on governments to boost land redistribution so as to
manage the conditions of the surplus population.
The distribution of population between urban and rural areas has significantly changed during the neoliberal period. The rural population
constituted 43% of the total population in 1970 and declined to about 23%
in 2010. Despite the fact that the total population increased from about
285 to 600 million, the population in rural areas remained practically
unchanged at around 120 million. Rural-urban migration has transferred a
large concentration of poverty to the cities.
In 2008, 118 million people living in conditions of poverty were registered in urban areas against 62.1 million in the countryside (CEPAL, 2009).
Yet, rural poverty is typically much more intense. 56% of the povertystricken in the countryside are living in absolute poverty, that is, they lack
the elementary means for survival, compared to 30% of the poor based in
urban centers. In fact, the percentage in absolute terms of those living in
absolute poverty is equally distributed between urban and rural areas, as
is hunger, in spite of the enormous difference in population between the
two sectors. Thus, the countryside, with its millions of small plots that
comprise 80% of the total land under cultivation, is both a source and a
deposit of needs and surplus population. This situation will not change in
spite of recent FAO efforts to revive smaller scale agricultural production
in the region. That is, if the arguments we have here presented are as correct as we believe.
The distribution of small plots of land only provides insufficient and
temporary solutions to the longstanding structural problems of the
regions agriculture. One might think that the organization of large-scale
production through cooperatives or national property could provide a
more sustainable solution, yet in the final analysis, what is at stake is the
overcoming of industrial colonialism which has in essence dictated the
socio-economic trajectory of the region.



So far, we have discussed the main problems related to underdevelopments content and form. To that extent, we have constructed a picture of what underdevelopment is, which we hope is a truthful one. Taken this picture as our reference
point, we are now in a position to properly tackle the discussion of its originating
If underdevelopment is a relation of capital that did not give birth to general
labor but still practices a real subsumption of immediate labor, then its originating causes cannot be any other than those which led capital to get organized in
such a way that it rests on the general labor of more advanced countries. In our
discussion, we will attempt to analyze general causes for the whole region, thus
ignoring the particular history of each country that would amount to a more
detailed inventory.
The Two-Fold Impact of Capital Export
The main objective of capital export is profit just as it is with any relevant action
of capital. Thus, periods of overproduction will tend to increase exports of
capital given that excess capital can be used abroad to realize attractive rates of
profit. As a general rule, capital export will occur to any region offering higher
rates of profits than at home. Latin America offers this possibility because foreign
capital can operate here with higher rates of surplus value, given the low value of
Most of capital exports to Latin America beginning from the final decades of
the 19th century focused on production for exports and activities linked to export
production. Its main impact was not the growth of production per se but the
acceleration of the spread of capitalist social relations of production. It was in
this way that Latin Americas history came to confirm Lenins propositions that
The export of capital influences and greatly accelerates the development of capitalism in those countries to which it is exported. Therefore, while the export of
1This work was originally published in 1986 in Spanish as Chapter VI of Reinterpretando
el subdesarrollo: Trabajo general, clase y fuerza productiva en Amrica Latina by Vctor
Figueroa, Editorial Siglo XXI, Mexico City DF, Mexico. It appears here for the first time in
English with permission from the original publisher.



capital may tend to a certain extent to arrest development in the capital exporting countries, it can only do so by expanding and deepening the further development of capitalism throughout the world (1963: 240).
Capital export was also dictated by the production needs of more developed
countries. The enormous growth of production was unsustainable without an
increase in the supply of raw materials. If we add to this the cheap wage goods
obtained from the region, we can build a more or less complete picture of the
regions economic role concerning developed countries: a) it provides areas of
exploitation under conditions of higher rates of profit; b) it provides cheap elements of constant capital for the expansion of production in developed countries; c) it offers a captive market for capital export; and d) it helps to keep the
rates of profit and surplus value high in developed countries in so far as capital
exports cheapen constant and variable capital at the core.
Through direct investment, foreign capital promotes the development of capitalism as it increasingly resorts to wage labor. There is evidence that initially,
foreign investment attempted to avoid the use of wage labor. However, the general economic advance coupled with the struggles of working people progressively forced the diffusion of labor relations that belong to capital.
The type of productive forces that were imported into the region also played
an important role in the transition. The railways impacted on social relations not
only quantitatively but qualitatively. As a product of large industry, it eroded precapitalist relations on a variety of fronts. First, it did so directly by means of the
mass employment of the labor force required for construction and maintenance.
The use of some kind of forced labor represents the absence of a capitalist labor
market and it vanishes with the development of the latter. Workers occupied in
railway work eliminated hands for agriculture, which in turn came to promote
the introduction of new technologies throughout the countryside. Second, this
erosion was advanced by accelerating the decomposition of craft relations by
demanding carpenters, blacksmiths, lathe operators, masons, smelters and the
like. It was also encouraged by facilitating labor mobility. In this latter connection, J.F. Leal and J. Woldenberg point out: The railways labor demand as
compared to the wide mass of agricultural laborers was rather limited. Yet, even
though railways did not represent an opportunity for mass employment, it
did represent expectations for countryside workers. It was a means to migrate
(1981: 97).2
The importation of railway systems further advanced the spread of capitalist
social relations by providing incentives for the expropriation of lands under control of direct producers. As the railway networks extended, the value of enclosed
lands increased along with the eagerness to get control over them. The expansion
of railroads spelled a risk for agricultural communities as John Coatsworths
work clearly shows. In his analysis of fifty-five conflicts between indigenous
2The translation of citations from Spanish texts is ours.

underlying causes of underdevelopment in latin america163

settlements and the haciendas in Mexico between 1877 and 1884, the author
reported that:
Most incidents dealt with illegal appropriations by large-estate owners.
Almost in every case some form of active resistance by peasants was
involved: prolonged lawsuits; demands to government employees, violent
protests or armed rebellions. In a number of maps () the location of these
conflicts has been signaled in relation the actual or projected railways
system. The result is impressive. Out of the 55 registered incidents, only 5
(9.1%) took place further than 40 kilometers from a railroad franchised by
the federal government; around 60% of the cases (32 out of 55) had taken
place at less than 20 kilometers from an actual or projected railroad
(Coatsworth, 1984: 122).
The legally protected seizures and usurpations of lands which did not clash with
resistance from the communities and the privatizations of national estates
also figure as methods of original accumulation, boosted by the expansion of
railways. Coatsworth succinctly argued that from the point of view of its socioeconomic impact, the expansion of railways was a process of usurpation of communal indigenous lands and public territory by the countrys ruling class and
landowners (1884: 134).
The impact of the new productive forces on social relations can also be
observed in the mining industry. In Mexico, the partido relation, which allowed
the worker to keep a part of the product for himself as compensation, originated
early during Spanish rule and had shown a stiff resistance to dissolution despite
the efforts of owners to dissolve it. It lasted into the final quarter of the XIX century, at least in those tasks that demanded some skill and where the conditions of
the labor process exposed the worker to a short life span. Cuauhtmoc Velasco
depicted this social relation accurately: This worker is not a wage-worker
because the fundamental part of his income does not come from wages, but from
the partido. This participation in mineral production involves him in the sharing
of the enterprises product and so it follows that the struggle that took place over
the elimination of the part belonging to the workers must be interpreted as part
of the separation process of the workers from their means of production. If the
partido was going to be dissolved in a given workplace, the workers threatened to
abandon the mines; actually they frequently abandoned the mines on account of
the news of prosperity somewhere else, thus affecting production at the mines
they left. Towards the end of the XIX century, a number of technological innovations reduced the need of skilled workers and labor conditions were improved.
Leal and Woldenberg (1981: 22) cite Santiago Ramrez who makes this connection
to steam driven machinery applied to extraction, drainage and drilling; the use of
dynamite in place of common gunpowder to blast; expanding rail transport;
the ventilation by compressed air at the points where the mechanic boring
was established; the substitution of the hammer mill by the Chilean drag mills;
and so on. We do not have sufficient information to assess the impact of



these technological transformations on the partido relation but it is clear that

they destroy the foundations on which it is based and tended to render it
The export of capital was certainly not the only factor promoting the expansion of wage labor. The boom of export-led production actively stimulated labor
mobility and wage-labor expansion. This was the case, for example, in the colonization of Southern Chile, or the production that took place based on immigrant
labor in Argentina. State led activities in building infrastructure also contributed
to the expansion of wage labor. It is important to stress that the transition towards
wage labor so long as it takes place on the heels of big industrys technological
advances is also a transition to the real subsumption of immediate labor. The technological transformations in mining we mentioned above do nothing else but
transfer a large portion of the workers skills to the means of production. To that
extent and due to capital exports, the direct producers did not have to undergo
the long period of manufacturing. The capital relation took root on the basis of a
technical mode of production that was not locally created. For the same reason,
the region did not have to organize its own general (scientific) labor.
It follows that the export of capital not only accelerated the spread of capitalism in Latin America but it also decisively contributed to determine capitalisms
underdeveloped character in the region. This is what the two-fold impact of capital
export consists of, i.e., it figures as a cause of both capitalism and underdevelopment. The conditions of emerging capitalist underdevelopment also reveal the
conditions of the reproduction of underdeveloped capitalism. A country which
imports machinery for the production of a given good will tend to import the
improved machinery for the production of the same good. We will come back to
this issue of capital export later on.
What we have said so far does not completely solve our problem of explaining
the origination of capitalist underdevelopment. If we observe the case of Japan,
we can see that capital export does not necessarily prevent the internal organization of general labor and therefore does not inevitably pave the way towards
underdevelopment. After the forced opening in 1853 which ended two hundred
years of Japanese isolation, foreign technology managed to penetrate broad sectors of industry such as iron and steel industry, textiles, sugar, mining, defense,
ships, and so on, while at the same time, imports managed to ruin local industry.
But the course of things in Japan did not unfold in the same way that would later
occur in Latin America. In Japan, the ruling class would politically channel the
process in a radically different direction.
Since the commercial opening was imposed on Japan, it was seen by the local
oligarchy as an affront to the countrys sovereignty. As it could not be prevented,
the local ruling class sought to obtain advantages or mold the new external links
to the benefit of its country. As such, it focused its attention on the implementation of a clear national project. Foreign technology was not uncritically adopted
but was instead transformed into the object of an ongoing and thorough analysis.

underlying causes of underdevelopment in latin america165

In this way, the incipient owners of Japanese capital appropriated the scientific
principles objectified in it and actively engaged in their development. The
Japanese state, directly involved in this project after the Meiji Restoration, organized the Ministry of Industry and Technology, created an industrial infrastructure and promoted the training of technicians. Beginning in 1870, it stimulated
internal production to reduce the influx of imported goods from abroad and
helped decrease the nations trade deficit. Thus, the determined effort of Japans
ruling class maintained its aim of bolstering national development and showed
that underdevelopment was not an inevitable outcome of capital exports. This
leads us to now advance to the crucial point.
The Lack of Commitment to National Development by the Regions Ruling Classes
The fact that the ruling classes did not confront the penetration of foreign capital
with a national project, i.e., make any political attempt to reach development or
economic growth based on internally generated productive forces, is one of the
few generally accepted facts about Latin Americas history. In the case of Peru,
Anibal Quijano posits his conviction in this way:
Imperialist capital and its agency the imperialist bourgeoisie were able to
easily impose conditions for their hegemony in the country, given the
weakness of the Peruvian bourgeoisie and its inability to raise itself to
the position of ruling class before the imperialist invasion () and henceforth the concrete interest and behavior of that Peruvian bourgeoisie
would strengthen those conditions and the imperialist bourgeoisie hegemony. It (Perus bourgeoisie) could never be, a national class, except for its
Peruvian origin, it could not be nationalist and much less anti-imperialist
(1977b: 124).
R. Puiggrs put it in this way with respect to Argentina:
Contrary to the economy of less nature gifted nations but with a diversified
and inwards oriented production, Argentinas economy was vulnerable to
external changes to such a point that governments believed that their withdrawal from the prevailing international division of labor which made of
the country the worlds bread basket, the country would go bankrupt. The
notion that this international division of labor would prolong ad vitam
aeternam took root among politicians and economists () The fast and sensational advances during the prosperity period were equivalent to a bourgeois revolution which, under the lead of British capital, concentrated on
the export economy. The landowning oligarchy, which got rich under the
shadow of these changes, had the features of a big rural bourgeoisie and
joined forces with the commercial bourgeoisie. Both were free-traders and
in consistency with their class nature they tenaciously opposed industry
protection, arguing that this was artificial and anti-economic. Forty years


later they still insisted on hindering the integral self-development of the
country in the name of a static and anachronistic conception of the world
market and the Argentinas reality (1977: 311).

Agustn Cueva reflects on Ecuadors ruling class in the following way:

Economically our bourgeoisie suffered from a premature atrophy because
it was not able to overcome the agro-mercantile stage. When cocoa exports
gave place to a significant capital accumulation, the surpluses were not
destined to really productive activities but they were allocated to usury
through an all-powerful banking system that used the state and converted
the treasury into a source of private enrichment.() But this ruling class
was a giant standing on feet of clay, for its fate depended on external trade
and particularly on the possibility to put its cacao in international markets
(1977: 214).
It was no different in Chile where a ruling bloc of agrarian, mining and financial
interests aborted the nationalistic project of President Jos M. Balmaceda (1886
1891) who sought to promote the development of local industry through measures that strongly affected foreign capitals interests (Ramrez Necochea, 1960).
It should be noted that this ruling class did not stand opposed to every form of
industry. The National Society of Agriculture (Sociedad Nacional de Agricultura)
delivered certain support to some enterprises, but this impulse was far from any
real nationalist feelings. Rather, it took place in a free trade context without calling into question foreign capital penetration but in fact promoted it. They were
effectively supporting industry to complement foreign interest and erected it
on the basis of the general labor of more developed countries which, for the
same reason, would inevitably frustrate any real domestic effort for internal
Generally, state measures took place following the advice of an ideology
appropriate to the installation and consolidation of imperialism. Anderson
depicts this process as follows:
The economic role of the Latin American nation state was conceived in
such a way to fix the system of which it was an integrating part. One of its
main functions was to operate as a concessions donor: its policy consisted
of using its power and resources to attract foreign investors and entrepreneurs. The capacity to devise the best combination of measures to attract
capital into their country became the statesmans most treasured ability.
Land concessions, cession of landed property rights, exemption of tax and
tariffs, state guarantees for all capital invested, complementary state investments in infrastructure, protection against violations of the contract of
employment by trade unions and against insurrections, guarantees of political stability, elimination of obstacles to foreign investment and credits,
all of these mechanisms were combined once and again throughout the
years with a view to create attractive conditions for foreign investment and
enterprise and thus meeting the aims of the state. This enthusiastic activity

underlying causes of underdevelopment in latin america167

characterizes the career of every Latin American political figure towards the
end of the XIX century and the beginning of the XX century (1974: 45).

To sum up, local ruling classes did not have in mind any sense of building economic sovereignty. As producers, they never thought of their own existence and
enrichment independently of the more advanced countries, or better put, in isolation of the latters development upon which they believed their immediate
interests rested. It was the fate of developed countries which determined the evolution of their exports and hence of their own fate. This is why their ideological
horizon was trapped within the limits of the international division of labor and
comparative advantages which the rent they acquired rested on. They were
unable to transcend free trade notions in accordance with their position as producers of international commodities. This also is why they defined foreign capital
as a natural ally to which they openly subordinated themselves.
The economic evolution of advanced countries determined not only the
demand of goods from the region but also the supply of goods to the region. And
supply, following the development of general labor and department I of the economy was qualitatively modified, not because consumer goods are displaced but
because capital goods are added. With capital export from the center, capitalist
relations of production spread in their specific underdeveloped form throughout
the region. Latin American capitalism therefore emerged not from a societal
project but from the movement of economic forces at international level.
It is as though the world economy, through its own evolution, had laid the
foundations for its conversion into imperialism, including the creation of a subordinated ruling class. This indeed turned out to be the actual process. What did
this process which created a ruling class lacking any national vocation actually
consist of? How can a society that is dominated by a ruling class so strongly
predisposed to subordination best be defined? Any serious reflection on this
issue points us back to underdevelopments originating causes. The relevant
process goes all the way back to Spanish rule and conventional colonialism. For
obvious reasons, we will limit ourselves here to the presentation of some general theses.
Prelude to Underdevelopment
The discovery of America was mainly the work of Spanish and Genovese commercial capital as a result of the search for new routes to extent mercantile circulation. In this way, a crucial step forward was taken in the configuration of the
world market, a step which in Marxs words: inaugurates the modern biography
of capital and which coincides with first moments of the process of creation of a
free proletariat. The prelude to the revolution that laid down the foundation of
the capitalist mode of production was played out in the last third of the fifteen
century and the first decades of the sixteenth. A mass of free and unattached



proletarians was hurled onto the labor-market by the dissolution of the bands
of feudal retainers (Marx, 1990: 878). The world market, in turn, would propel
this social transformation. The discovery of America and the circumnavigation
of Africa created a new field of activity for the ascending bourgeoisie. The market
of East Indies and China, the colonization of America, the trade with colonies,
the increase of means of exchange and commodities in general gave to trade,
navigation and industry an unprecedented boost and with it a fast development
to the revolutionary element within the disintegrating feudal society (Marx and
Engels, 1972: 4041).
The creation of the world market, therefore, was not the work of capitalism,
that is, the work of a production regime based on free labor, for this is just emerging, a process that the world market would help to develop. As capitalism grows
the world market would expand on new foundations. Commercial capital does
not require capitalism to exist and it grows up in the most varied economic formations of society (Marx, 1990: 914).
At the same time, the conquest and colonization of Latin America is one of
the elements of original accumulation, a process which favors capitalist development in Europe but one whose scene is the entire world market.
As Marx put it:
The discovery of gold and silver in America, the extirpations, enslavement
and entombment in mines of the indigenous population of that continent,
the beginning of the conquest and plunder of India, and the conversion
of Africa into a preserve for the commercial hunting of blackskins, are all
things which characterize the dawn of the era of capitalist production.
These idyllic proceedings are the chief moments o primitive accumulation
(Marx, 1990: 915).
If original accumulation is the process which creates the capital relation and if,
on the one hand, it extends throughout the world market while, on the other, has
its venue in Europe where the birth of capital is actually taking place, then it
seems convenient to distinguish between a subject and an object of original accumulation. The conquest and colonization undertaken by Europe thanks to its
material development transformed Latin America into an object of original accumulation. In the main, the region provided the Europeans, on the one hand,
world money and, on the other, an area for commodity production, that is, it
contributed to the money concentration which must accompany the separation
processes and to the mass production of crucial commodities for capital steady
In principle, three factors determine the form that production assumes: a) The
forms designed by the Crown according to its (feudal) image of society, b) The
pre-existing socio-economic forms and more generally, all the prevailing (material, institutional, environmental) conditions of the region; and c) the mercantile
purposes of the conqueror. This last one is the determinant factor, for whatever

underlying causes of underdevelopment in latin america169

the result of the clash between the first two, production would end up getting
organized to satisfy commercial capitals interests. In other words, the organization of production would reflect commercial capitals predominance, a concept
first suggested by Jos Carlos Chiaramonte (1984) in connection with Latin
Before carrying on with this analysis we must expound our interpretation of
the predominance of commercial capital. This concept essentially includes the
following points:
a) Exchange between producers and merchants is submitted not to any economic law but to fraud and plunder as a generalized practice. As Marx explained:
When commercial capital exchanges the products of undeveloped communities, commercial profit not only appears as defrauding and cheating but to
a large extent does derive precisely from this () Commercial capital when
it holds a dominant position, is thus in all cases a system of plunder, just as
its development in the trading people of both ancient and modern times is
already bound up with violent plunder, piracy, the taking of slaves and subjugation of colonies; as in Carthage and Rome, and later with the Venetians,
Portuguese, Dutch, etc. (Marx, 1991: 448449).
Thus plunder and violence in Latin America are a manifestation of commercial
capitals predominance. The figure of the conqueror that arrives offering glass
beads in exchange for gold is far from giving an exact image of this predominance. All that which the conqueror does not obtain from the natives by means
of fraud, he gets by forcing the native to produce, making of him an object of
exploitation, with no consideration about local traditions and evolution. That is
why Marx states: The Spanish conquest put immediately an end to any further
independent development (Marx and Engels, 1972: 30).
b) Commercial capital predominance is linked to the backward state of material production: where commercial capital predominates, obsolete conditions
obtain (Marx, 1991: 444). This is not intended to signify that commercial capital
predominance takes place only under pre-capitalist conditions. On the contrary,
commercial capital prolongs (and deepens) its predominance under the period
of capitalist manufacture precisely because it accelerates the process of original
accumulation. In effect: Today, industrial supremacy brings with it commercial
supremacy. In the period of manufacture it is the reverse: commercial supremacy
produces industrial predominance, hence, the preponderant role played by the
colonial system at that time (Marx, 1990: 918).
c) The backward state on which commercial capitals predominance is established is a relative backwardness. A nations commercial predominance and
therefore commercial capitals predominance which becomes manifest in its
relations with the rest of the world, cannot be conceived of if the development of
that nation is not enough to support its power in terms of fleet, weapons, among
other things. Commercial predominance erected on a given state of development



sooner or later reacts, provoking the stagnation of production. Actually, predominance of commercial capital is also predominance over industrial capital. Marx
states that The industrial capitalist is constantly faced with the world market; he
compares and must compare his own cost prices not only with domestic market
prices, but with those of the whole world. Previously this comparison was almost
exclusively the tasks of merchants and ensured commercial capital its mastery
over industrial (1991: 455). Given that under conditions of its predominance,
commercial capital is not submitted to average profit and on the contrary reduces
industrial profit in proportion to its thirst for profit and its possibilities to
obtain it, commercial capitals predominance plays a negative role on industrial
d) A nations commercial predominance, therefore, restrains its own industrial development and results in the driving force of development becoming displaced to another nation. In that way, commercial predominance itself is displaced
until industrial development reaches a point where it is able to turn commercial
capital into its own agent. This point was reached after the industrial revolution.
This is why Marx writes: The history of Hollands decline as the dominant trading nation is the history of the subordination of commercial capital to industrial
capital (1991: 451). From this standpoint, it was precisely Hollands commercial
hegemony that prevented the industrial revolution from taking place in that
e) The Spanish manufacturers decline can be explained in the same way.
Commercial capital condemned Spain to be supplied and to supply its colonies
in large measure with goods manufactured in the more developed countries, goods
which Spain paid for, not with internal production, but with income obtained
from the colonies. It follows that Latin America was not an object of original
accumulation to the benefit of industrial development in Spain, but rather to the
benefit of industrial development taking place in other places (mainly in Holland,
France and England).
f) The frustrating influence of commercial capitals predominance over development also impacts the transition to capitalism. The merchants control of production cannot bring about the overthrow of the old mode of production by
itself, but rather preserves and retains it as its own precondition (Marx, 1991:
452). In other words, commercial capitals control over production coincides
with the transition to capitalism only thanks to the intervention of other factors,
mainly the development of productive forces taking place in those locations that
step back from direct commercial hegemony.
g) The economically reactionary influence of commercial capitals predominance is accompanied by its politically reactionary influence. Marx asserts:
In modern English history, the actual merchant estate and the trading cities
also appear to be politically reactionary and in league with the landed
and financial aristocracies against industrial capital. Compare for example
the political role of Liverpool as against Manchester and Birmingham.

underlying causes of underdevelopment in latin america171

The complete domination of industrial capital has been acknowledged by
English commercial capital and by the moneyed interests (financial aristocracy) only since the abolition of the corn duties) In other words, commercial capital fought against industrial capital as this latter as the form of
capital par excellence calls into question the formers predominance (Marx,
1991: 445).

The relation of production that tends to predominate is slavery. It constitutes the

operational base for large-scale, export-oriented production; it allows for the
massive use of labor power compelled to work under the hardest conditions.
Certainly, there is no point in ignoring the peculiarities of slavery in Latin
America and the processes that determined its evolution into different forms.
Our aim is to get hold of essential relations. The mita differs from classic slavery
but it is still slavery. The same is valid for peonaje in relation to the legal abolition
of slavery that it did not affect. The peon was not a free worker able to sell its labor
power as a commodity but he was a slave tied to the hacienda (a highly self-sufficient large estate) and to the hacendados (owners) will. In this connection Marx
holds: In those nations where labor is free, legislation regulates the conditions to
rescind a contract. In some countries, Mexico above all () slavery is veiled
under the form of the peon. By means of money advances, refundable with labor
and which are transferred from one generation to the next, not only the individual worker but also his family become the actual property of other people and
their families (Marx and Engels, 1972: 176).
In Marxs words In the ancient world, the influence of trade and the development of commercial capital always produced the result of a slave economy (1991:
449). In our case, the result of the conquest and colonization could not be the
simple slave economy. Right from the onset, the conquerors activity was the
organization of labor and production directly with a view to exchange value. This
is why the result would not be a slave economy in the sense that the social relation that slavery represents would constitute the nucleus on which society would
be organized and which would determine societys own movement. On the contrary, slavery was inserted in a different logic, one that arises from a developing
world market. While the cotton industry introduced child-slavery into England,
in the United States it provided the impulse for the transformation of the earlier,
more or less patriarchal slavery into a system of commercial exploitation. In fact,
the veiled slavery of the wage-laborers in Europe needed the unqualified slavery
of the New World as its pedestal (1991: 925).
In Latin America during colonization and right up until the industrial revolution, slavery was not demanded by an already consolidated wage-labor relation
leading international trade, but by an emerging and consolidating wage-labor (or
capital) relation. This proposition carries some implications that we shall see
later. Yet, keeping this fact in mind, production in the region was also oriented
to exchange to the benefit of wage labor that flourishes beyond the borders of
Latin American society, although it does this indirectly, that is, by first addressing



commercial capitals interests. This is why the classic colonial system is also a
commercial system of exploitation, i.e., one where commercial domination is a
part of the whole system and which after independence becomes commercial
colonialism. In short, the classical colonial economy is organized around export
production. It therefore satisfies pre-existing needs and interests developing
abroad. Yet, insofar as such needs and interests condition the regions own labor
organization and evolution, they are no longer external factors, but internal factors. The regions economy is part of the world market just as much the world
market is a part of it and is subjected to commercial capitals predominance
around which society increasingly revolves.
At the beginning, export production is focused on precious metals. In this way,
the region helps supply money to the colonial power, facilitating money concentration and the expansion of money capital. Around mining centers, agriculture
and stockbreeding develops to support the mining complex. The possibilities of
export diversification remains closely linked to commercial capitals interests.
For the same reason, many of these possibilities are frustrated. In a study on
Mexico, for example, Andrs Lira and Luis Muro recount the case of linen and
hemp production. In principle, the Crown had authorized the production of
these fibers and to instruct the native in the arts of spinning and weaving linen.
However, it seems that soon the opposition from the mainland monopolist merchants grows as they saw that their interests would be endangered with the
growth of New Spains textile industry. As a result of these pressures, the Crown
revised its initial policy (Lira and Muro, 1981: 400). Sometimes, it is more directly
the arrival of commodities produced under better conditions abroad which ruins
local production. The same authors report the case of silkworm production
whose processing, after an initial growth, soon declines in the wake of competition from Chinese silk production. Certainly, the production of much demanded
and competitive export goods is boosted by trade with Europe as well as intercolonial trade. Such is the case of indigo, cochineal, leather, mercury, cattle, wine,
sugar, and some others. It was in this manner that a local producer class developed closely tied to trade with Europe and to inter-colonial trade and therefore
grew up subordinated to commercial capital for it is the latter that makes the
exchange possible and which exercises a decisive influence on what is to be produced (and what is not).
All through the 17th and part of the 18th Centuries, Latin America relaxed its
ties to the Spanish metropolis. According to Enrique Semo, Between 1650 and
1770, Spain enjoyed only 18 years of peace. In the beginning of this period, Spain
sent merchant fleets every year to Peru. Soon after, the fleets started to come out
every three or even every four years. From 1682, they did so every five or six years
(Semo, 1982: 110). Spains military campaigns and economic setbacks prevented it
from maintaining, let alone reinforcing, its economic links with Latin America.
Yet, this situation did not yield a proportional decrease of the regions external
trade, for contraband got stronger. Agustn Cu Cnovas affirms that smuggling

underlying causes of underdevelopment in latin america173

in the XVII century became a real colonial necessity (1982: 96). Sergio Bag in
turn stresses At the end of the day, everybody is an accomplice (to smugglers)
the consumers who preferred the cheaper and better quality smuggled commodities and the authorities who were almost always ready to let themselves be led
astray by phantoms that leave no trace (1977: 83). In this way commercial capital
actively restrained the exploitation of development local possibilities created by
the relaxation of relations with the Crown.
Even with all that, production diversified and local and inter-colonial trade
expanded. Entrepreneurs tended to build some economic strength and take root
in the region. Local administration, which at first appeared as a mere extension
of the Spanish state, gains some autonomy as the colony begins to learn how to
manage by itself. Yet, commercial capitals predominance was never disturbed.
In this regard, Enrique Florescano and Isabel Gil point out:
However, the distribution of privileges and powers was unequal. The group
located in the key sector of metropolis-colony relations (foreign trade) was
the best favored one. Merchants from the consulate of Mexico, by acting as
the metropolis agents, obtained the highest gains, because they were the
only suppliers of a captive and thirsty market. The large amount of profit
that they got thanks to their monopoly position constituted the capital that
allowed them to control exports by controlling credits to farmers who were
compelled to sell them back the totality of their harvest. Finally, the merchants accumulated capital allowed them to control internal trade and to
become the main moneylender, along with the Church, to miners, small
traders, artisans and farmers. This excessive accumulation of economic
resources granted them a principal place in colonial society, second only to
the place of the Church. Just like the latter, this group of merchants was a
privileged corporation that counted on courts, state agencies and special
rights; powers to carry out government tasks (to collect and manage taxes)
and economic power to appoint and remove government employees
(Florescano and Gil 1981: 483484).
Also the Church attained functions quite typical of commercial capital although
it did not show much interest in using its large amount of resources to control
production. Evidence of this was its reluctance to loan for productive ventures.
Loans were indeed rather scarce: While for mortgages, the predominant interest
rate was around 5%, it was impossible to get a loan for investment in production
with an interest rate lower than 20% (Florescano y Gil, 1981: 178). Merchants in
turn privileged export production. According to Semo, Mexico Citys merchants
or even the smaller merchants from provinces provided loans for the production
of cochineal, indigo, vanilla, and the like (Semo, 1982: 178). Thus production
heavily depends on merchants and their money as does the economic wellbeing
of producers who, for the same reason, position themselves at a lower level of the
ruling class structure, a position they can hold on condition of producing for a
market they do not know and is directly controlled by commercial capital.



By means of the Bourbons reforms, Spain eventually sought to reach two

aims: a) re-establish its political power over the colony, and b) re-define its economic relations to benefit its own economic development. As a result, the political positions of the Church and of the merchants were affected. The established
trade monopoly of a few was drastically attacked although by no means did this
result in the elimination of commercial capital.
As far as we are concerned, the most relevant significance of the Bourbon
reforms could be summed up as follows. The management of the colony was reaffirmed as an extension of the Spanish State. By means of administrative changes,
public positions were transferred to people who the Crown trusted. Yet, at that
time, not only was there a locally rooted proprietor class but also one that had at
least tasted the possibility of establishing a state representing their own ruling
class interests. At the same time, they have already enjoyed the advantages of
commercial diversification as a result of exchange with England (which Bourbons
reforms wanted to end) and through contraband. Thus, there was already a serious potential for conflict between the Crown and the colony.
Further, the region developed its specialization as a raw materials producer.
Spain had effectively sought to obtain from Latin America everything that could
help its own development while acting as the main supplier of finished goods to
the colony. In this way, it postulated an international division of labor where
the role of the region was defined in accordance to its position as a colony. At the
world market level, however, Spain did not have the most competitive position.
It was in England where the industrial revolution was taking place that would
bring about a radical change in world production and trade relations.
The independence movement that successfully spread through a large part of
the region at the beginning of the 19th century obtained precisely from those sectors most affected by the Bourbons reforms its decisive social force. People to
whom the reforms closed off the channels of social mobility became transformed
into particularly important agents of political and ideological agitation, as did
sectors of the Church. The aggravated economic conditions among the popular
sectors contributed to expanding the social forces fighting for independence. It
was of course a force that would later be necessary to control after the defeat of
the Crown was ensured.
A nation-state did not arise following independence because an internal
market did not exist to unify the economy and operate as the force sustaining
solidarity among ruling class members. On the contrary, the absence of economic
ties made possible greater dispersion and provincial uprisings. For the same
reason, the emerging state apparatus will tend to heavily rest on military
power. Weak and dispersed efforts aimed at encouraging capitalist production
found no echo among those controlling economic power, for this sector had no
interest in the economic development of their fatherland. The benefits they
expected from independence were almost completely linked to external market

underlying causes of underdevelopment in latin america175

It was the development of large industry at the more advanced centers, especially England whose constant condition, among other things, was to increase
demand for raw materials that opened new opportunities for the regions export
production. Latin America had undergone a certain specialization which would
allow it to properly respond to such a demand. This specialization, which was
at first encouraged by Spain, would advance and strengthen to the benefit of
England. As Marx recognized, A new and international division of labor springs
up, one suited to the requirements of the main industrial countries, and it converts one part of the globe into a chiefly agricultural field of production for supplying the other part which remains a pre-eminently industrial field (Marx, 1990:
By industrial production, we do not just refer to finished consumer products;
it is now necessary to add the production of capital goods as one of its main components. The fact of the predominate exchange of finished consumer goods for
raw materials does not mean that advanced countries specialized in the production of the former like Latin America specializes in raw material production.
Neither should we understand by the growth of industrial production a purely
quantitative advance of accumulation. Large industry produces a constant renovation of the means of production, where every technological means is only a
transitional point to new and superior means. Accumulation essentially proceeds by revolutionizing its own methods so that industrial production also
includes the creation of technological progress.
Latin Americas link with England and other industrial countries could not be
reduced merely to the simple exchange of goods but rather to a structural linking
with an economic core that produces technological progress. On the other hand,
the importation of industrial goods weakens the necessity of producing them
internally throughout the region and spoils any effort aimed at creating domestic
industry. In other words, the so-called international division of labor relegates
the task of developing the productive forces in the hands of the core countries while
it places the peripheral countries in service of this task as if it were something that
does not directly correspond to its structural role. In so doing, it also locates the
development of scientific labor in the core countries.
This is why Celso Furtado identifies among the essential features of the 19th
Centurys world economy:
The existence of a nucleus with a considerable advance in capitalization,
that concentrates a large part of industrial activity and almost all production of machinery; a nucleus that also finances world exports of capital
goods, controls the transport infrastructure for world trade and is the main
global importer of primary commodities[Moreover, it includes]The creation of a network for the transference of technological progress as a subsidiary mechanism for the system of international division of labor facilitates
capital exports and, at the same time, connects capital exports to the international division of labor which the network helps to consolidate. Given


that the capital goods industry is located in the mentioned nucleus, the creation of new production techniques also remains geographically concentrated () This is why the techniques own evolution is conditioned by the
system of international division of labor that emerged after the industrial
revolution (Furtado, 1979: 4950).

Had Furtado projected these historical facts in the organization of produc

tionsocial relations, he would have come to the conclusion that the 19th Century
process is much richer and more complex than suggested by the international
division of labor approach. This process does not end merely in a goods specialization for Latin America and much less so in core countries; it ends in imperialism at the international level and it ends in underdevelopment in Latin America.
Moreover, it was not the international division of labor which decided this
development. Rather, that international order itself dictated specific conditions
in the region to make it possible and thus explains the regions subordination
to it.
Independence from Spain did not call into question the regions economic
character as a commercial system of exploitation. The productive aim of the ruling class continues to be production for exports because no internal market
existed and they had no interest in developing a locally generated industry. This
meant that production continued to depend on external demand. The willing
assimilation of the region into the international division of labor reflected the
domination of commercial capital whose continued importation of goods would
perpetually frustrate local industrial development.
However, since that time, something of great significance occurred on the
global scene. The world market in which the local ruling classes remain incorporated is no longer one controlled by commercial capital but is instead one rooted
is industrial capital. Commercial capital has effectively become a transmutated
form and therefore, an agent of industrial capital (Marx, 1990: 431; 440441). That
is to say, commercial capital became decisively subordinated to industrial capital. This process first took place in England and later in the rest of Europe
(Luxemburg, 1967). Export production from the region no longer serves the ends
of commercial capital, but instead directly satisfies the interests of industrial
capital and takes place in a world market based on free labor, rather than
In the context of a free labor based world market, the incorporation of a commercial system of domination based on slavery represents the introduction in
that market of an anomaly The fact that we now not only call the plantation
owners in America capitalists, but that they are capitalists, is based on their existence as anomalies within a world market based on free labor (Marx, 1977: 513).
Which does not impede but on the contrary, it supposes that the owners behave
as non-capitalists vis vis the labor they exploit. This anomaly inside the world
market represented by Latin America will be overcome by the world markets
very own dynamics.

underlying causes of underdevelopment in latin america177

It thus follows that after the unfolding of the independence movements, the
character of commercial capitals dominance changes. Foreign commercial capital controls a large part of the regions external trade whether directly or through
its connections with local merchants. As Ciro Cardoso affirms, Europeans
merchants located in Mexico, mainly in ports, exercised considerable control on
the (legal or illegal) commercial circuits of the country, directly and through their
closed connections with national merchants (1980: 57) Yet, even if national
commercial capital had worked with its own connections abroad, either merchants or industrialists, and if no foreign capital had operated in the region, the
final result would have been the same. Once the world market is controlled by
the industrial capital of core countries and commercial capital becomes nothing
more than its agent, local commercial capital has no option but to work for the
benefit of the now dominant reign of productive capital. Therefore, what appears as
commercial capitals predominance in the region is only now comprehensible as
the means by which core industrial capital exercises its domination over the region.
In this context, no sooner does industrial capitals interest in advanced capitalist countries become realized through the export of capital, does local commercial capital bury itself in capital goods trade, thus encouraging local
industrialization. If this industrialization focuses on export production, it is
something resulting from both the nature of Latin American society and productive capitals interest in advanced countries. The predominance of commercial
capital in the region is not only, nor mainly, based on its economic power. In
effect, it is the entire nature of the Latin American society that finally determines
this predominance. It cannot be otherwise because that society as it evolved historically exists for the world market and is defined in the first place, as a part of
the world market rather than for itself per se.
The real fatherland of the local ruling classes, the one in which they were born
into and evolved as ruling classes, is the world market. To the benefit of the latter
and in accordance with its degree of development at that point, they independently organized social life in spite of the conditions that had afforded different
possibilities. Given that the real export boom took place during the second half of
the 19th Century, it was the anemic economic period that preceded it which
pushed them to aim their sites on the recently conquered nation. Thus, their
consciousness as formed over a whole epoch afforded no real place for nationalistic feelings. This is a point that Charles Anderson nicely makes in depicting the
profile of the typical member of the ruling local classes:
The world he lives in and the relations he shares have little to do with the
nation. Rather, he has his eyes fixed on overseas, thinking about his commercial partner or about his large estates. He thinks of himself as a citizen of
the world, and surely he is, for the community he lives in goes beyond
national borders. Taking advantage of free convertible currency exchange
and transferability of funds, he invests or deposits his gains in the United
States or in Europe; he has in his possession at home as many manufactured


goods from North America or Europe as any other citizen of London or
Boston; his children have been educated abroad; he visits the cities of
advanced countries more frequently that he visits his own countrys urban
centers; he speaks some foreign language with proficiency. If he is from Cali,
news of New Orleans matters as much to him as news of Medellin; if he is
from Monterrey, he is more interested in the city of Los Angeles than Merida
(Anderson, 1974: 36).

This then is the portrait of a ruling class which was prepared to embark on a path
to the development of imperialism and underdevelopment in the region.
Finally, it only remains to say that with the installation of imperialism, the
domination of productive capital based in the advanced countries takes firm root
in the very capitalist relations of production. The local ruling class appear now,
strictly speaking, as capitalists as they confront the labor which they exploit, just
as they continue to appear as a subordinated class in service to their masters vis
vis the larger capitalist system.

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Anderson, Charles W.166, 167, 177, 178
Ayala, Maggy118
Bag, Sergio173
Bell Lara, Jos92
Bello, lvaro134
Braverman, Harry9
Buchele, Robert51
Burachik, Gustavo59
Butkevicius, Arunas82
Calva, Jos Luis148
Carton de Grammont, Hubert143
Cassiolato, Jos E.69
Castro, I.158
Chiaramonte, Jos C.169
Christiansen, Jens51
Coatsworth, John163
Cortina, Jernimo131
Cue Cnovas, Agustn172
Cueva, Agustn166
Daporta, Natalia119
De la Garza, Rodolfo131
De Soto, Hernando104
Dello Buono, R.A.87, 92
Daz Alejandro,C.F.104
Dumenil, Gerard51
Dzisah, James71
Engels, Frederick28, 119, 140, 168, 169, 171
Etzkowitz, Henry71
Faletto, Enzo62
Farr, Pedro116
Figueroa Delgado, Silvana63
Figueroa, Vctor14, 18, 19, 22, 25, 107,
132, 161
Florescano, Enrique173
Furtado, Celso175, 176
Gandsegui, Marco A, Jr.87
Garibaldi, Jos Alberto101
Gersovitz, Mark104
Gil Snchez Isabel173
Gligo V., Nicolo101
Gonzlez Amador, Roberto154

Hans-Peter, Martin40
Hopenhayn, Martin134
Houseman, Susan49
Jennsen Pennington, Henning65
Kadri, Ali82
Katz, Jorge60
Lastres, Helena69
Lara Flores, Sara Mara151
Leal, Juan F.162, 163
Lenin, Vladimir I.7, 8, 16, 17, 22, 161
Levine, Elaine128
Lvy, Dominique51
Lewis, A. W.104
Lira, Andrs172
Lynch, Lisa M.49
Macpherson, C. B.96
Maddison, Angus37, 128
Magdoff, Harry17
Mandel, Ernest37
Mansilla, H.C.F.104
Marx, Karl9, 28, 105107, 110,
140, 168171, 175, 176
Mayer, Jrg,82
Mistral, Carlos143
Moberg, David38
Muro, Luis172
Nun, Jos105
OConnor, James28
ODonnell, Guillermo96
Ochoa-Reza, Enrique131
Palley, Thomas I.50
Panebianco, Angelo96
Pellegrino, Adela128
Pennington, Henning Jensen65
Peters, Gehard42, 45
Peterson, PeterG. 42
Prebisch, Ral103, 104
Puiggrs, Rodolfo165
Quijano, Anbal105107, 165

Ramrez Necochea,
Ranis, G.104
Rey Santos, Orlando101
Rojas M., lvaro147
Rosdolsky, Roman106
Rosenzweig, M.F.104
Samaniego, Jos Luis99
Schejtman, Alexander146
Schumann, Harald40
Semo, Enrique172, 173

name index
Stern, Nicholas53, 54
Stiroh, Kevin49
Vacarezza, LeonardoS. 67
Vargas, Marco A.69
Woldenberg, Jos162, 163
Wooley, John T.45
Yoshitomi, Masaru59
Zsapiro, Marina69

19731974 oil shock28
adaptive innovation65
Agrarian Reform World Forum139
Argentina74, 77, 93, 94, 98, 113, 156,
Australia90, 112
banana83, 146, 152
bio-chemicals industry14
bio-energy alternatives54
Bolivia30, 91, 93, 98, 132, 134, 152
Brazil62, 63, 74, 80, 86, 93, 152, 156
Bretton Woods Agreement of 194439
business cycle in Latin America81
Buy American Act of 193340
Canada40, 44, 51, 87, 88, 90, 112, 128, 156
capital25, 712, 1433, 35, 36, 3840, 42,
4555, 5862, 64, 67, 68, 70, 72, 73, 79,
80, 8492, 95, 100126, 128, 129, 132155,
157159, 161, 162, 164178
capital accumulation5, 49, 105, 111, 112,
114, 115, 120, 122125, 134, 136, 139, 140,
150, 166
capital and wage-labor relation18, 110,
111, 143, 164
capital distribution and competition8
change in the capital-labor relation36
concentration and centralization of
capital8, 107
concentration of capital7
internationalization of capital106
main aim of capitalism141
nominal capitalist142
organic composition of capital90
pirate capital103, 116118, 120122, 136
underdeveloped capitalism3, 24, 134,
136, 151, 164
capitalism in Latin America20, 58, 112,
113, 164
capitalist monopoly7
carbon27, 5355, 101
Caribbean Basin80, 86
Chvez, Hugo30

Chayanov, Alexander144, 145

Chile21, 25, 74, 77, 86, 94, 147, 156, 163,
164, 166
China48, 52, 56, 100, 154, 168
Club of Rome27
coffee83, 146, 152
collapse of Keynesianism35
collective bargaining38, 74
Colombia30, 91, 156
colonialism15, 20, 21, 22, 2427, 30, 31,
46, 58, 62, 66, 67, 79, 81, 85, 8790, 103,
113, 127, 139, 157159, 167, 172
commercial proletariat119
commodity8, 21, 59, 86, 114, 117121, 143,
152, 168, 171
commodification of ideas71
commodity circulation59, 86, 119, 121
commodity production8, 168
communal land individual
competitive funding74
competitiveness9, 14, 59, 61, 62, 89, 131,
156, 157
consolidated surplus-population107, 109
Costa Rica66, 93, 156
coup dtat (in Honduras)30
critical university73
Cuban Revolution73
democracy25, 26, 72, 9199
exclusive democracy93, 95
formal democracies24
deregulation37, 38, 52, 69
different power correlations between
social classes132
direct imperialist military intervention25
downward social mobility157
dualist school104
East and Southeast Asian economies84
Ecuador91, 93, 98, 118, 132, 134, 152, 166
El Salvador93, 152


subject index

electoral abstentionism in Mexico94

emissions of carbon dioxide27
Engels28, 119, 140
exhausted Keynesian policies35
exploitation of wage-labor140
expropriations of foreign capital25
externally developed19
extraordinary profit8, 9, 12, 59, 60, 67,
143, 148
finance25, 47, 123, 157, 175
finance capital22
financial oligarchy17, 19, 24, 25, 46, 48
financialization37, 46, 47, 52, 55, 154
floating form of overpopulation104, 107,
108, 110
food crisis54, 139
form of growth58, 79
free-trade policies1, 43
General Agreement on Tariffs and Trade
general labor23, 58, 61, 84, 112, 113, 117, 136,
161, 164, 166, 167
General Motors88
George Bush Sr. 43, 45, 46, 87
global warming27, 30, 53, 54, 99, 100,
102, 153
globalization1, 4, 21, 35, 37, 4648, 52, 58,
61, 63, 64, 6870, 73, 77, 78, 95, 96, 126,
129, 135, 151, 155, 158
globalization of technology68
gold39, 168, 169
Great Depression of the 1930s36
Guatemala91, 134, 155, 156
Hernando de Soto104
Hilferdings notion of financial
home labor125
ideological penetration26
ILO Regional Employment Program for
Latin America and the Caribbean
(PREALC)104, 151
imperialism1, 4, 79, 11, 12, 1619, 21, 22,
27, 29, 31, 35, 37, 47, 62, 66, 85, 109, 136,
166, 167, 176, 178

first stage of imperialism12

second stage of imperialism13
third stage of imperialism4, 37, 47
import-based economic growth57
India100, 154, 168
indigenous population133135, 168
indigenous pueblos134, 135
industrial army10
industrial colonialism15, 7, 21, 22, 2427,
30, 31, 46, 57, 58, 62, 66, 79, 81, 85, 87, 88,
90, 103, 113, 127, 139, 157159
industrial reserve army103108, 111, 112,
127, 131
informal employment91
information technologies (IT)21, 42, 45,
47, 49, 50, 63
infra-subsistence production144
innovation1013, 16, 20, 26, 36, 37, 44, 45,
53, 5962, 6469, 73, 74, 78, 93, 149, 155,
157, 163
Intergovernmental Panel on Climate
Change (IPCC)53
inter-imperialist conflicts29
international division of labor20, 24,
165, 167, 174176
international labor mobility127
International Monetary Fund (IMF)44,
46, 95, 154
international scientific cooperation11
internationalization of higher
intra-firm trade59
investment transference23, 24
inward-oriented growth21, 57, 88, 90,
137, 148, 149
Karl Marx2, 8, 9, 20, 104111, 113, 131, 141,
142, 145, 167171, 175
labor24, 813, 15, 1724, 2729, 31, 32,
3639, 41, 43, 45, 46, 4952, 55, 5861,
67, 69, 71, 73, 74, 76, 78, 79, 81, 82, 84,
87, 88, 90, 91, 93, 101, 103117, 119, 120,
122137, 139151, 154, 158, 161168, 171,
172, 174176, 178
labor exploitation8, 10, 41, 55, 116, 126
labor flexibility37, 93, 130
labor flexibilization37, 38
scientific labor2, 1013, 15, 19, 22, 23,
28, 29, 31, 32, 45, 63, 6467, 71, 112, 113,
117, 175
land concentration in the
countryside158, 159

subject index191

land redistribution139, 159

large-scale industry810, 20, 108
Latin American migrant worker127
Latin American university72
legitimacy of ruling institutions and
Lenin3, 7, 8, 1618, 22, 27, 48, 161
Lewis, AW104
liberal principles35, 48, 87
liberalization37, 39, 41, 45, 50, 61, 64, 69,
87, 129, 151, 155, 157
license of industrial property117
limits to growth27
lost decade of the 1980s79
Malthusian predictions27
maquila industry81, 89
marginal mass105
marginal pole105107, 112
Marxism7, 35, 104
Marxist theory of accumulation103
Marxist theory of marginalism111
medium and high technology goods83
Mexico42, 51, 63, 74, 75, 80, 81, 8689, 91,
94, 101, 113, 119, 128, 134, 150, 156158, 161,
163, 171173, 177
Zacatecas, Mexico158
Mexico Social Security Institute158
Minas Gerais69
Ministry of Environment and Natural
Resources (SEMARNAT)101
monopolies3, 7, 12, 13, 1620, 21, 47, 48,
105, 136
Morales, Evo30
National Innovation Systems (NIS)16, 62,
natural population growth103
necessary population109, 126, 127
necessary working population111
neoliberal1, 2, 4, 13, 14, 30, 35, 37, 42, 50,
51, 53, 54, 58, 59, 63, 6870, 73, 75, 77,
9196, 98, 126, 129, 132, 135, 139, 140,
151, 155, 159
neoliberal globalization4, 37, 58, 69, 70,
73, 95, 96, 126, 129, 135, 151, 155
neoliberal theory58, 59
neoliberalism1, 13, 14, 30, 68, 9193, 96,
98, 132, 139, 151
social impacts of neoliberalism151
new economy technologies65
New Zealand90

Nicaragua93, 132, 152

nitrous oxide27
Obama administration55
Organization for Economic Co-operation
and Development (OECD)16, 52, 64,
86, 95, 111, 128, 129, 156
outward-oriented growth4, 21, 57,
58, 80, 151
overpopulation104, 107, 108, 110, 113, 120,
123, 124, 126, 139, 149, 155, 169
latent107, 110, 113, 139, 149
relative107, 108, 123, 124
stagnant108, 124
over-supply of labor power103
Paraguay119, 149, 156
peasant production4, 115, 139141,
143149, 157, 159
social character of peasant
permanent captive demand26
permanent technological innovation26
Peru118, 134, 155, 165, 172
pharmaceuticals industry14
Popular Unity government25
population surplus4, 103
poverty2, 36, 55, 56, 91, 93, 95, 98, 103, 124,
126, 128, 129, 131, 134, 139, 155, 158, 159
privatization of universities76
product quality control10
productive forces3, 4, 9, 11, 21, 22, 24, 31, 41,
44, 50, 104, 107, 137, 162, 163, 165, 170, 175
protectionism21, 45, 87
public good59
Reagan Administration38, 42, 93
relative surplus-population107109,
125, 127
remittances24, 32, 130, 131
repeal of the Corn Laws20
research and development
(R&D)9, 10, 13, 14, 16, 4143, 49, 53,
55, 6266, 6870, 84, 117
R&D funding14, 41, 43, 68
Rio Grande Do Sul69
role of universities4, 71
Salvador Allende25
Sao Paulo69


subject index

shrinking trade surplus81
Sir Nicholas Stern53
small landholders154, 155, 157
small plot producer139
social classes132
Socialist Bloc46
socialization of knowledge11
Southern Cone77, 79
speculation40, 47, 49, 52, 154
state development function4, 11, 32,
36, 41, 43, 52, 137
Stern Report54
structural adjustment79
subsidiary producer of
subsidiary producers of goods and
services115, 122
subsistence producers150, 152
sugar83, 152, 164, 172
surpluses of population115
surplus-population theory103
absolutely redundant107, 109
surplus value10, 20, 23, 24, 29,
36, 40, 110, 112, 120, 141, 142, 144,
149, 161, 162
production of surplus-value110
relative surplus value10, 20, 112, 149
technology41, 49, 5965, 68, 70, 71, 83, 86,
88, 89, 144, 157, 164, 165
technological dependence21, 26
technological independence63, 69
technological progress12, 19, 49, 50, 60,
64, 68, 69, 84, 87, 117, 144, 147, 148, 155,
156, 175

tendency of the rate of profit

to fall35, 136
tendency towards deficit24
theories of dependency1, 73
totalitarian regimes72, 77
Trade Agreement Act40
transnational corporate expansion of the
transnational corporations39, 46, 6266,
6870, 79, 86, 87, 100
true nature of monopolies19
UN Conference on Trade and
Development (UNCTAD)64, 82
unequal exchange18, 22, 23, 148, 155
United Nations Economic Commission for
Latin America (ECLA)60, 104, 134
United Nations Economic Commission for
Latin America and the Caribbean
(ECLAC)60, 61, 73, 81, 90, 101, 104, 147,
United Nations Environment Program
(UNEP)101, 102
universities4, 9, 13, 15, 63, 70, 71,
z7376, 78, 102
university autonomy75
unplanned use of oil30
Uruguay45, 74, 77, 156
USSR46, 49
valorization of capital107109, 116
valorization process113, 142, 143
value of labor-power125, 126, 132, 161
Venezuela30, 74, 91, 98, 132, 152
wage differentials130, 131, 137
weapons of mass destruction26
welfare state39, 93
Zapatista guerrilla movement152