On Mon, 29 Sep 1997, Doug Henwood wrote:
>
> Lou, it's a bit more complicated than this. South Korean and Taiwanese
> firms have become pretty formidable technically and financially and are
> themselves now investing abroad, in their poorer neighboring countries and
> also in the U.S. and Europe. Their populations have made substantial gains
> in education and health. SK itself is the host to very little direct
> investment from abroad. Inodnesia and Malaysia are more like you describe
> (and those populations haven't made much social progress) but Singapore
> certainly isn't. Overall, this part of the world is about the only one to
> close some of the income gap with the First World. That's not the only
> measure of human progress, for sure - and sometimes, given the social
> dislocations and environmental destruction it involves considerable regress
> - but there are many stories here, not simply one of immiseration and
> subordination.
>
Doug is absolutely correct. We have a thread going on PEN-L on exactly the
same topic. You can not generalize about Asia, just as you can not
generalize about "Europe". Europe includes Sweden and Albania.
In general, as a rule of thumb, countries that rely on agriculture for the
production of commodities will remain poor while countries that foster the
growth of industry with a degree of local autonomy will make some gains.
But even this generalization requires more specificity. Costa Rica and El
Salvador, both coffee exporters, have radically different records on
income distribution.
The point is that these mailing lists encourage the worst kind of
superficiliaty, especially from professional sectarians like Heartfield.
His citation of the WHO statistics are a debater's trick that he used as a
"gotcha" against Jim Blaut. These statistics on improving life expectancy
and infant mortality rates can tell us virtually nothing about the reality
of Brazil or Nigeria, two "dynamic" countries.
If you took the ideas of Living Marxism seriously, you would make an
honest attempt to describe what life is like in these places, rather than
write flabby thumb-sucking opinion pieces about the wonders of capitalism.
Ed Herman did a fairly good job:
Immiserating Growth: The Third World
By Edward S. Herman
In the early Cold War years the dominant aims of establishment
intellectuals analyzing Third World issues were, first, to counter leftist
ideas of exploitation, dependency, immiseration, and the necessity of
radical change; and, second, to rationalize the planned and ongoing
reshaping of the globe for U.S. imperial advantage. The best publicized
analysis along these lines was Walt Rostow's The Stages of Economic Growth
(1960), subtitled "A Non-Communist Manifesto," which described a sequence
of development whereby Third World countries, with judicious foreign aid
and investment, would gradually modernize their institutions and value
systems, increase their rates of investment and per capita incomes, and
take off into sustained growth. In the end they would become like us, the
obvious final product of human development (and history). The possibility
that the great powers might obstruct or skew the Third World development
process in accord with their own interests was recognized by Rostow, but
dismissed. As a model Cold Warrior, Rostow naturally found the Soviet
leadership to be "expansionist" and convinced that the rest of the world
"must ultimately be conquered," whereas the West only sought "partnership"
and encouraged Third World change that would "keep open the possibility of
progressive, democratic development."
Another influential and less blatantly ideological strand of establishment
thought arose out of the empirical work of the distinguished economist
Simon Kuznets, who found a tendency for income distribution to become less
equal during five to seven decades of rapid growth, but then to become
more equal. Such a pattern, which could be graphed as an inverted U curve,
seemed to fit a number of cases of western economic development. Although
Kuznets offered the relationship tentatively and with qualifications, it
soon became "Kuznets law." The law was simple and politically convenient:
it could explain, and implicitly justify, deteriorating income
distributions in Third World development under First World tutelage. The
masses might be miserable now, but in place of the old exhortation that
they wait for their reward in heaven, they could take solace in the
prospect that their grandchildren might benefit from a delayed
trickle-down.
At the very same time as establishment thought was giving these benign
views of presumably freely-chosen development processes in the Third
World, the U.S. -- following closely World War II and early postwar plans
for "Grand Areas" under U.S. control, with the Third World serving the
needs of the Western great powers -- was actively intervening to make sure
that oligarchic structures of control were preserved and social democratic
reforms would pose no threat to foreign investment. Kuznets classic
article appeared in 1956; Rostow's Stages of Economic Growth was published
in 1960. Meanwhile, the U.S. had put the Shah on the throne in Iran by
covert subversion in 1953, and had organized the overthrow of an elected
government in Guatemala in 1954, installing in its place a regime of
permanent state terror. The important and pace-setting Brazilian coup in
1964, which also displaced a democratic government with a military
dictatorship, was enthusiastically supported by the liberal Democrats in
power in Washington (the coup was "the single most decisive victory for
freedom in the mid-twentieth century" according to U.S. Ambassador Lincoln
Gordon, later president of Johns Hopkins University). Trujillo in the
Dominican Republic, Duvalier in Haiti, and the Somoza family in Nicaragua
had taken power following extended U.S. occupation and tutelage. The World
Bank and IMF were already in place, serving to guide Third World countries
in proper directions. In the mainstream, however, these were all
defensive, stabilizing, and apolitical efforts, in accord with accepted
ideological premises.
Kuznets Law: An Aberration
Kuznets law was built on sketchy data drawn from western experience. It
doesn't apply to Third World development, as was apparent even before the
final victories of the National Security State and the full global triumph
of the transnational corporation (TNC) and neoliberal ideology.
Furthermore, the curve of inequality has been moving upward again in the
West itself, suggesting that the earlier decline may have been transitory,
eventually to be reversed with the full maturation of a global capitalism.
Irma Adelman and Cynthia Taft Morris carried out a major test of Kuznets
law in application to the Third World in their Economic Growth and Social
Equity in Developing Countries (1973). They examined the relationship
between 31 different economic, political, and cultural variables, and
income concentration, for 44 Third World countries. Their results were
"consistent with the view of economic backwardness under colonialism held
by such political economists as Paul A. Baran, according to which very
uneven income distribution is a typical outcome of a narrowly based growth
process where natural resources are exploited for the primary benefit of a
small class of wealthy, usually expatriate, businessmen....An even more
disturbing implication of our findings is that development is accompanied
by an absolute as well as a relative decline in the average income of the
very poor. Indeed, an initial spurt of dualistic growth [where
technological improvement and income growth are confined to one sector,
while another frequently traditional sector remains small-scale, poor, and
politically powerless] may cause such a decline for as much as 60 percent
of the population. The absolute position of the poorest 40 percent
apparently continues to worsen as countries move toward less dualistic
growth patterns unless major efforts are made to improve and expand human
resources. Thus our findings strongly suggest that there is no automatic,
or even likely, trickling down of the benefits of economic growth to the
poorest segments of the population in low-income countries."
Economist David Felix also studied Kuznets law with particular application
to Mexico for the period 1885-1975 ("Income Distribution Trends in Mexico
and the Kuznets Curves," in S. Hewlett and R. Weinert, Brazil and Mexico:
Patterns in Late Development, 1982). Felix found that Mexico's high level
of income concentration failed to decline, as had those of Great Britain,
the U.S., and Germany, despite a higher growth rate over a longer period
than it took the others to produce a turnabout. (His finding for the years
1885-1975 was reinforced by the substantial further increase in Mexican
income inequality after 1975.) Felix argued that Mexico is hardly a
special case; that its leveling revolution and reformist institutional
changes of the post World War I era provided conditions more favorable to
"extensive trickling down" than in a majority of Third World states.
Durable Immiseration Factors
Why did inequality not fall in Mexico or Brazil after many decades of
growth? One reason is that the ruling oligarchies rarely projected a
national vision of independent development; they were satisfied to prosper
via export bonanzas in indigenous raw materials and produce, and they were
fearful of depleting the supply of cheap agricultural and mining labor.
Their lack of national-cultural vision and identity was also manifested in
their long aping of the styles and other cultural innovations of Europe
and the U.S. This made them object lessons in the workings of the
"international demonstration effect," whereby national surpluses of
relative poor countries were frittered away in elite purchases of
fashionable foreign consumer goods rather than being used to stimulate
domestic industry or provide investment funds for indigenous development.
In Britain, the U.S., and Japan, industrialization was closely tied in
with the development of artisan industry, which filled niches not
adequately supplied by factories and provided a technological base
important to future industrial development. Its growth, along with that of
factory industry, helped absorb labor surpluses coming out of a shrinking
or industrializing agriculture. In Brazil and Mexico, by contrast, artisan
industry declined with economic growth, as the elites, who captured
virtually all the national surplus, preferred foreign made and modern
goods; artisan industry was left to supply the poor. Its decline, and the
heavy reliance on foreign produced goods, made for technological
backwardness and technological dependency.
This form of development also helped consolidate dualism and
economic-social polarization. In Brazil, some 30-35 million of the 150
million population, or between a fifth and a quarter of the total, live in
circumstances comparable to those of the middle classes and rich in the
United States or France. They consume the great bulk of fashionable new
goods supplied by the modern sector and TNCs. Studies of Mexican
consumption patterns show that "the demand of the lowest 60 percent was
concentrated on products whose national sales were stagnating [i.e.,
traditional and artisan supplied goods], while the top 20-40 percent made
up the market for successive new goods in the dynamic growth phases of
their product cycles" (Felix). When puffers of Latin American "reform"
refer to surging new markets and sales in Mexico (or Chile, or Brazil)
they are speaking of only 20-25 percent of the population -- the people
who count for the puffers.
The remaining 75-80 percent -- the other pole of Brazil's dual society --
live in wretched conditions in huge shantytowns around Rio de Janiero and
Sao Paulo, or in numerous poor agricultural communities, and consume a
minute fraction of the hot new consumer goods. Many work small land
holdings or as part-time agricultural laborers in the countryside; those
in the shantytowns provide a reserve army available to the affluent for
household service or to the "modern" sector in factories or as employees
of subcontractors in the "informal market." A large fraction of this
Brazilian majority are without potable water or sewage facilities, have
grossly inadequate medical care, and their educational resources are
reflected in a 35 percent illiteracy rate -- the percentage of children
finishing grade school in this fairly wealthy country approximates that in
Haiti and Guinea-Bissau. It is estimated that some 8 million Brazilian
children under 14 are homeless and live as beggars, thieves, and
prostitutes. Several thousand of them are murdered each year by police
death squads, some hired by local businesses to improve the climate for
tourism.
The benefits of growth in Brazil and Mexico, both in the past and today,
have flowed almost entirely to the affluent 20-25 percent of the
population, plus, importantly, foreign TNCs and banks. The residual
majority is seen by the leadership (and by IMF and World Bank officials)
largely as a means to elite ends, and concern for its well-being almost
invariably reflects worry that it might cease to be apathetic and upset
"stability." The condition of the majority therefore constitutes a
"management problem," and considerable thought is given to token
allocations of resources, strategically placed, that will placate, divide
and immobilize them.
There have been brief interludes in which the welfare of the majority
received attention in Mexico. Felix notes that the two Mexican presidents
who tried to tilt toward equity, Adolfo Lopez Mateos (1958-64) and Luis
Echeverria (1970-76), suffered in consequence from strongly adverse
reactions by Mexican and foreign business interests, including reductions
in private investment, and they were unable to fulfill their promises.
Echeverria "left office in a major foreign exchange crisis and amidst
rumors of a military coup, a novel and portentous phenomenon in postwar
Mexico." Peter Evans and Gary Gereffi point out, in reference to
Echeverria's experience, that "Mexico, one of the richest and best-behaved
nations in the Third World, had only to stray slightly from the path of
sound business practice to end up...[suffering a shift] of TNC capital and
profit flows from a positive $179 million in the 1960 to 1969 period to a
negative $349 million in the period from 1970 to 1976. Since one can
hardly accuse Echeverria of being a radical, it would appear that the band
of acceptable policy is exceedingly narrow and that the penalties for
straying outside it are strict and swift" (Hewlett and Weinert, p. 151).
The experiences of Allende (Chile, 1973), Goulart (Brazil, 1964), Bosch
(Dominican Republic, 1963 and 1965), Arbenz (Guatemala, 1954), and the
Sandinistas (Nicaragua, 1979-90) show that military intervention,
sponsored or supported by the U.S., is a very real possibility where there
is too much "straying" beyond the boundaries of service to local and
expatriate elites. "Security" expenditures remain enormous in Latin
America; in Argentina, the military budget is three times that for
education, and more than the aggregate for education, health, culture and
justice combined. In Chile, also, "the military budget in 1989 outstripped
by $432 million the housing, health and education budgets combined"
(Joseph Collins and John Lear, Chile's Free-Market Miracle: A Second Look,
p. 9). The Chilean military budget is exempt from neoliberal "shrinking"
of government, and is the only governmental activity where salaries are
linked to the cost of living. This priority system is understandable: the
armed forces preserve the right to immiserate the majority.
The spendthrift habits of Latin elites has also been a long-standing
factor in periodic balance of payment crises: spurts of income growth and
inflows of foreign capital have led to large increases in consumer
imports, leaving little margin for adverse changes (declines in export
prices, sudden fears on the part of foreign investors!), which have
produced balance of payments deficits, panic outflows of capital, and
consequent deflationary policies and further increases in external debt.
These developments have enhanced the power of foreign lenders and the
international financial institutions like the IMF, which have forced upon
the debtor countries policies that worsen all the indigenous trends toward
inequality. That is, they enforce a primary focus on paying the foreign
debt, privatization (benefiting foreign and local elites), export
orientation (further concentrating land ownership and accelerating the
expropriation and marginalization of peasants), cutbacks in public
expenditures (except export subsidies and those for "security"), and
deflationary macro policies (increasing unemployment, but helping
creditors).
Law of Increasing Immiseration
Immiseration rests on the implementation of class power in the economy and
political arena. A surge of immiseration is usually associated with
changes in technology and markets that create opportunities for the
dominant class and interest groups. Taking advantage of these requires the
dispossession of peasants, the mobilization of a pliable and cheap labor
force, intensified exploitation, and the aggressive application of state
power to further serve business profitability.
Over extended periods of capitalist development in the technologically
advanced countries of the West, real wages rose markedly and welfare
states were put in place, although large pools of misery persisted even in
good times. This came about as a consequence of periods of relative labor
scarcity, the gradual emergence of labor unions, and painfully slow but
real gains wrested from a capitalist-dominated but not entirely closed
political system. To this important degree democracy in the West has
worked; the propertied classes, often not completely unified, were induced
to allow concessions rather than suffer more severe class conflict or take
a chance on authoritarian rule at home.
In the 1970s and thereafter, however, international competition
intensified, and the burdens of high wages and a welfare state began to
seem intolerable to the U.S. business community. New communications
technology helped make restructuring and foreign outsourcing more
practicable. The labor movement was in retreat, and the power of business
was further enhanced by the fluidity of money capital, the further
centralization of the media, and the increased importance of money in
politics. Any populist tendencies in politics could be snuffed out by
sustained media assaults, money market discipline, and the funding (and
defunding) of political campaigns. So business could hog-tie and discredit
Carter and put in place their own servant (Reagan, formerly a hired
propaganda gun of General Electric Company) to help it implement an
accelerated program of "reform" cum "immiseration."
The key factor in this renewed phase of immiserating growth, which is
taking place on a global basis, is the enhanced mobility of capital, which
has allowed an increasingly active global process of wage-tax-regulation
arbitrage (i.e., shifting between markets to take advantage of price and
other differences) and bargaining down. The TNCs have been able to tap the
vast pools of impoverished and underemployed labor in the Third World,
which provide what economists call an "elastic" supply of cheap labor --
i.e., wages do not go up as the supply is tapped, helped along by
regressive political regimes, as in Mexico, Indonesia, or China, where
strikes must be approved by the state and the dominant unions are
government-controlled. In Indonesia an estimated 30 percent of the 83
million workforce is underemployed, and another 2 million-plus enter the
work force each year, "eagerly competing for the $1.75-a-day jobs being
created in the cities" (Merrill Goozner, "Asian labor: Wages of shame,"
Chicago Tribune, Nov. 6, 1994).
Since 1979, China's "market socialism" leaders have allowed some 177,000
foreign-organized joint ventures or independent firms to set up shop in
special economic zones, tapping some 60-100 million peasants, millions of
them young women, lured by the promise of factory jobs. These workers have
been subjected to "working conditions that have not been seen since the
dawn of industrial capitalism in the early 19th century," a "killing
field" of workers (206 factory fires resulting in 10 or more deaths,
19,000 work fatalities in the first 8 months of 1994 by official
estimate), with the enforcement of law and worker protection non-existent
Attempts to create independent labor organizations to correct the severe
abuses have been met with "fierce repression" in both China and Indonesia,
and Tribune reporters put the two countries in the same class: "The
one-party regimes of nominally communist China and right-wing
authoritarian Indonesia have reacted to the labor unrest in a similar
fashion for similar reasons" -- they worry about challenges to
authoritarian rule and the demands of foreign investors (Uli Schmetzer and
Merrill Goozner, "Growing workplace fatalities dim glow of Chinese
economy," Chicago Tribune, Nov. 8, 1994).
These supply conditions disconnect wages and productivity, so that
economic growth "is not lifting all boats" in China and Indonesia, the
world's first and fourth most populous nations, and "a wave of labor
unrest has swept over both countries in the last year as the promise of a
better life from working in industry proved false for millions of uprooted
agricultural workers." The delinkage can go far, with real wages sometimes
declining while productivity soars; thus, real wages in Mexico in the
years 1980-1992 fell 32 percent while manufacturing productivity increased
by 41 percent.
Arbitrage, along with Third World labor supply conditions, necessarily
affects wages and working conditions in the high income countries, by
putting steady downward pressure on the higher wage levels. This has
weakened the relationship between productivity and wage rates in the high
wage countries as well, where real wage growth is now consistently below
the rate of productivity increase. In the U.S., between 1973 and 1992
average hourly real wages fell 1 percent, while productivity rose by more
than 15 percent. The other side of the coin, of course, was the sharp
increase in executive pay (19 percent, 1979-89) and, more important, the
enormous increase in capital income (up 65 percent, realized capital gains
up 205 percent, 1979-89), all reflected in the substantial increase in
income inequality.
These numbers show that at this juncture a very large fraction of any
global productivity advances are being captured by a small elite of local
compradors and political and military leaders, and foreign banks and TNCs.
This elite is even able, brazenly, to impose further absolute reductions
in the living standards of the already impoverished majority to sustain
elite incomes in times of difficulty -- thus Zedillo's adjustment package
to meet Mexico's current crisis centers on forcing real wages down, and
IMF imposed austerity plans consistently involve budget cuts, deflationary
macro policies, and wage restraints that put the burden of adjustment on
the impoverished. The poor majority, who do not share in the gains of
productivity growth, still must provide the fallback resources to assure
payment to those who do benefit from growth.
In sum, the technological, economic, political, and ideological
environment of the New World Order has strengthened the traditional forces
making for inequality and immiseration. TNC mobility and power in economic
life, the media, and politics, has entrenched the belief that there is no
other policy option than creating a favorable climate for investment; it
has put opposition groups into disarray and in weakened positions, and
with no obvious strategies for defense or means of regaining initiatives;
it has unleashed the forces of irrationality (immigrant threat, racism) to
help smooth the way to dismantling the welfare state; and it has led us
into a new era of renewed aggressive class warfare and unconstrained
search for global advantage. A revised "law" of the trend in inequality
seems plausible: that, given the increasing imbalance in the global power
of capital and labor, we may expect inequality and immiseration to
increase until either a new and potent resistance force emerges from the
oppressed or the now unconstrained forces of capital produce a Big Bang
(with unknown fallout effects thereafter).
(From Z Magazine, March 1995. Although I am opposed to Edward Herman's
globalization thesis, his views on third world immiseration are
unimpeachable. This should come as no surprise since they are much closer
to Marxism than LM's "hurray for capitalism" ideology. Herman is not
impressed by the outward appearances of economic growth in places like
Brazil, but asks the more fundamental question of who benefits. Rather
than citing meaningless statistics from UNESCO, he tries to get beneath
the surface and evaluate the changes that are tearing countries like
Brazil and China apart today. The only conclusion to draw is that these
changes in themselves are not progressive. The only thing that is
progressive is a socialist revolution that abolishes the private ownership
of the means of production and creates the possibility for economic
justice. This was Marx's attitude toward India in the 19th century. The
introduction of capitalist property relations in India were not in
themselves progressive. What is progressive is resistance and final
victory over foreign and domestic exploitation.)
Louis Proyect
